-----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, GuwV1/63V3Zl8+YdhhdL4NfBzQ4oLfdwYKesyxPueDT69vqhev+i/l/TynL56/qU glR77agb7bJE4ZNRBNTaUg== 0000950148-98-002508.txt : 19981116 0000950148-98-002508.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950148-98-002508 CONFORMED SUBMISSION TYPE: 424B3 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NUMEX CORP CENTRAL INDEX KEY: 0000318716 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 061034587 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 424B3 SEC ACT: SEC FILE NUMBER: 333-65249 FILM NUMBER: 98749071 BUSINESS ADDRESS: STREET 1: 14115 SOUTH PONTLAVOY AVENUE CITY: SANTA FE SPRINGS STATE: CA ZIP: 90670 BUSINESS PHONE: 5624047176 MAIL ADDRESS: STREET 1: 14115 S PONTLAVOY AVENUE CITY: SANTA FE SPRINGS STATE: CA ZIP: 90670 424B3 1 424(B)(3) 1 As filed pursuant to Rule 424(b)(3) under the Securities Act of 1933 Registration No. 333-65249 NUMEX CORPORATION 5,210,506 Shares of Common Stock SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS THAT YOU SHOULD CONSIDER BEFORE YOU INVEST IN THE COMMON STOCK BEING SOLD WITH THIS PROSPECTUS. This prospectus covers the resale by some of our current stockholders of some or all of the shares of our company's stock that they own. Only these stockholders will be selling shares, not the company itself. The stockholders selling their shares will receive the proceeds from any sales, not our company. Our common stock is quoted on the Nasdaq OTC Bulletin Board under the symbol NUMX. On November 12, 1998, the closing price for our stock was $0.625 per share. Our company will pay the costs of registering these shares. Neither the SEC nor state securities regulators have approved or disapproved these securities or determined if this prospectus is truthful or complete. It is illegal for any person to tell you otherwise. This prospectus is dated November 13, 1998 2 TABLE OF CONTENTS
Page ---- Where You Can Find More Information.................................................. 1 Summary.............................................................................. 2 Risk Factors......................................................................... 3 Use Of Proceeds...................................................................... 7 Market For Common Equity And Related Stockholder Matters............................. 7 Selling Stockholders................................................................. 8 Plan Of Distribution................................................................. 10 Management's Discussion And Analysis Of Financial Condition And Results Of Operation. 10 Business............................................................................. 14 Management........................................................................... 16 Executive Compensation............................................................... 17 Certain Relationships And Related Transactions....................................... 17 Security Ownership Of Certain Beneficial Owners And Management....................... 18 Legal Proceedings.................................................................... 19 Changes In And Disagreements With Accountants On Accounting and Financial Disclosure. 19 Disclosure Of Commission Position On Indemnification Of Securities Act Liabilities... 20 Legal Matters........................................................................ 20 Experts.............................................................................. 20
3 WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any document we file at the SEC's public reference rooms in Washington, D.C.; New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available on the SEC's website: http:\\www.sec.gov. The SEC allows us to "incorporate by reference" the information we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and later information that we file with the SEC will automatically update and supersede this information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934. The documents we have incorporated by reference are: Annual Report on Form 10-KSB for the fiscal year ended March 31, 1998; Quarterly Report on Form 10-QSB for the quarter ended June 30, 1998; and The description of our company's Common Stock contained in its Registration Statement on Form S-18 (Commission File No. 2-6881813), filed on August 14, 1980, including any amendments or updates. This prospectus is part of a Registration Statement on Form SB-2 that has been filed with the SEC. It does not include all of the information that is in the registration statement and the additional documents filed as exhibits with it. For more detail you should read the exhibits themselves. You should rely only on the information incorporated by reference or in this prospectus or any supplement to it. We have not authorized anyone to provide you with information that is different. You should not assume that the information in this prospectus or any supplement is accurate as of any date other than the date on its cover. 1 4 SUMMARY This summary highlights selected information from this prospectus and may not contain all of the information that is important to you. We encourage you to read the prospectus in its entirety. Numex Corporation was incorporated in Delaware in August, 1980. Beginning in January 1991, our main business became the manufacture under license and distribution of a product called Therapy Plus. Therapy Plus is a patented, non-electric, hand-held massaging device for relieving arthritis pain. The product is a series of starwheels mounted on a shaft that one rolls briskly over sore body parts for a massage-like effect. Sales of our only product, Therapy Plus, have been falling for some time. There have been no sales of Therapy Plus since June 1998. We do not expect to have any significant new sales of Therapy Plus. We do not have any other products under development and we do not have plans to develop any new products. Therefore, our future business plan depends on beginning new activities. While we will still explore marketing Therapy Plus, the main emphasis of management will be to acquire profitable businesses. We have $6,900,000 in federal tax loss carry forward and $1,600,000 tax loss for California. Under certain circumstances, these tax losses can be offset against profitable business operations. Management has been looking at profitable businesses with between $10,000,000 and $30,000,000 in annual sales. To assist us in finding acquisition candidates, we have hired a medium sized investment banking firm which specializes in private placements of securities with institutional investors. We are in discussion with several potential acquisition candidates, but we have not reached an agreement with any of them. We cannot make any prediction about the likelihood of completing any such acquisition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." The selling stockholders will be selling up to 5,210,506 shares of our company's common stock, over time on the open market or in negotiated transactions. The company is not selling any stock itself. The stockholders selling their shares will receive the proceeds from any sales, not our company. However, some stockholders may exercise options which they already have, and if they do, our company could receive up to $738,750, which it would use for general working capital. Our company will pay the costs of registering these shares. Offering these shares for sale does not guarantee that anyone will buy them. Our address is 14115 S. Pontlavoy Avenue, Santa Fe Springs, CA 90670, and our telephone number is (562) 404-7176. 2 5 RISK FACTORS Investing in our stock is very risky. You should be able to bear a complete loss of your investment. You should carefully consider the following factors, among others. Operating Losses; We have had losses from operations for an extended period of Uncertain Future time. We lost $398,670 in fiscal 1996, $512,293 in fiscal 1997 and $560,826 in fiscal 1998. Because of our sustained losses over time, we had an accumulated deficit of $11,467,014 at June 30, 1998. We do not know if we will be profitable in the future. Need for In the last three fiscal years we had inadequate cash for our Borrowings for operations, so we borrowed money to fund operations. In recent Working Capital times, our working capital has been in the form of borrowings from Jack I. Salzberg, Chairman of the Board, President and our largest shareholder, and some of his relatives. They have provided loans or have guaranteed some of our obligations. Even though Mr. Salzberg has said that he will continue to lend us the funds need for working capital, we cannot predict whether he will continue to do so in the future. If we do not receive funds for working capital from these or other sources and if we do not become profitable, we could be without adequate funds to pay our obligations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Certain Relationships and Related Transactions". No Current Sales of our only product, Therapy Plus, have been falling for Operations some time. There have been no sales of Therapy Plus since June 1998. We do not expect to have any significant new sales of Therapy Plus. We do not have any other products under development and we do not have plans to develop any new products. Therefore, our future business plan depends on beginning new activities. Among the things we are most actively considering is acquiring other businesses. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." Dependence on Our future success depends on management, especially Jack Management Salzberg. The loss of Mr. Salzberg's services could have an adverse effect on our business prospects. Even though Mr. Salzberg works on a full-time basis, we do not have an employment agreement with him. Therefore, Mr. Salzberg has the right to change his working arrangement to part-time or to stop working for us. However, Mr. Salzberg has not indicated that he will change his current working arrangement. See "Management." Control by Jack Salzberg owns approximately 12.4% of the outstanding shares Management of stock and he has options to acquire an additional 850,000 shares of stock. If he exercised these options, he would own approximately
3 6 18.5% of the outstanding shares of stock. Therefore, Mr. Salzberg has significant influence over the outcome of all matters submitted to the stockholders, including the election of directors of the company. See "Selling Stockholders." Possibility of The stockholders who will be selling their shares of stock in this Change of offering include all our directors and officers and many of our Control largest stockholders. Many of these people are relatives of Jack Salzberg. These selling stockholders will be selling most or all of their shares, including shares that would be issued to them if they convert options which they now hold. These selling stockholders will not necessarily be selling their shares, but if they do sell all or most of their shares, there will be a change in control of our company. See "Selling Stockholders." Conflicts of Dealings with officers, directors and large stockholders often Interest involve conflicts of interest. In particular, before January 1, 1998, we borrowed money from Jack Salzberg and he has exchanged this debt into shares of common stock. Since January 1, 1998, we borrowed $578,414 from Mr. Salzberg's relatives. Because of the nature of these relationships, we did not conduct arms' length negotiations for these borrowings. Therefore, it is possible that we could have borrowed money on better terms from unaffiliated people. See "Certain Relationships and Related Transactions". Resolution of Delaware law provides that an agreement that a corporation Conflicts of enters into with its officers, directors, or certain other people Interest (including their relatives) is not void or voidable under certain circumstances. If the material facts of an agreement are known to the Board of Directors, the directors who do not have an interest in the agreement may act in good faith and approve it. Delaware law also provides that such an agreement is not void or voidable if the agreement is fair to the corporation at the time the Board of Directors approves it. We currently permit these types of agreements so long as they are permitted under Delaware law. We ensure that the disinterested directors are aware of all the necessary facts so that they can make the appropriate decision. Future We are looking to acquire other profitable businesses in the Acquisitions future. Our ability to complete such a transaction will depend on many factors, including: - finding a suitable business - negotiating acceptable terms - our own financial condition - obtaining financing to acquire the business
4 7 - general economic and business conditions At present, we do not know if we will be able to engage in any such transactions, because of the reasons indicated. Business Risks of Acquisitions involve numerous business risks and these risks could Acquisitions have a material negative effect on our own results of operations and financial condition. Some of these risks include - entering a market in which we have no or limited experience - integrating a new business - incorporating new personnel - costs associated with lay-offs of redundant personnel Need for Our ability to acquire another business may depend on obtaining Financing To financing from outside sources. If we are not successful in Acquire obtaining financing, we would be unable to complete any Businesses acquisitions. Even if we can obtain outside financing, there are risks. For example, if the performance of the acquired business does not meet our expectations, the cost of servicing the debt could have a material negative effect on our results of operations and financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Possible Dilution Our ability to acquire another business may depend on issuing In Acquisition shares of our stock. The issuance of stock could dilute the percentage ownership that the current stockholders have in our company. We are authorized to issue 20,000,000 shares of Common Stock. A total of 11,286,756 shares are currently issued and outstanding and an additional 1,185,000 shares have been reserved for issuance in connection with the exercise of options and warrants that are currently outstanding. Therefore, 7,528,244 shares of Common Stock are available to be issued without stockholder approval in the future. If these shares are issued to acquire businesses, raise money for our company or for any other reason, the current stockholders would own a much smaller percentage of our company's stock. Effect of Debt Our ability to acquire another business may depend on issuing Used to Acquire debt instruments, such as a promissory note. The issuance of debt Businesses would result in increased costs to service that obligation, which could have a material negative effect on our profitability. If we did not have adequate resources to service the debt, we could default in our obligations. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
5 8 Volatile Stock The market price for our stock has been highly volatile. Factors Price such as our operating results and other announcements by us have had a significant impact on our stock price, and these factors may continue to have such an effect in the future. See "Market for Common Equity and Related Stockholder Matters." Effect of OTC Our stock is currently quoted on the Nasdaq OTC Bulletin Board, Bulletin Board which was established for securities that do not meet Nasdaq Quotation SmallCap Market listing requirements. Lower market prices and larger spreads in bid and asked quotes are typical of securities quoted on the OTC Bulletin Board. See "Market for Common Equity and Related Stockholder Matters." Penny Stock The SEC's regulations define a "penny stock" to be any equity Regulations security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. The penny stock regulations will not apply to our stock so long as it is quoted on the OTC Bulletin Board, and we provide certain information on a current and continuing basis or meet required minimum net tangible assets or average revenue criteria. We cannot assure you that our shares will continue to qualify for exemption from these restrictions. If our stock were subject to the penny stock rules, the market liquidity for our stock could be adversely affected. No Dividends We do not pay dividends on our stock and it is not likely that we will pay dividends in the foreseeable future. We have not paid any dividends in the past. See "Market for Common Equity and Related Stockholder Matters." Shares Eligible As of September 23, 1998, we had 11,286,756 shares of Common for Future Sales Stock outstanding. Of this amount, 4,025,506 shares are "restricted securities" as the Securities and Exchange Commission has defined that term under Rule 144, and all of those shares are being registered in this offering. It is likely that market sales of large numbers of shares under this offering will depress the price of our stock. However, we cannot predict the exact effect such sales will have on the prevailing market price of our shares. A depressed price for our stock could impair our ability to raise capital through the sale of stock in the future. Possible Negative We are authorized to issue 10,000,000 shares of Preferred Stock Effect of Preferred on terms that can be set by the Board of Directors without Stock Issuances stockholder approval. Since the terms of Preferred Stock could provide priority for the payment of dividends, special voting rights or preferences if our company is liquidated, the issuance of any Preferred Stock in the future could have a negative effect the rights of holders of Common Stock. In addition, the issuance of Preferred Stock could make any takeover of the
6 9 company by another party more difficult or discourage them from even trying to do so. It could also make it harder for present management to be removed. We have no current plans to issue Preferred Stock. USE OF PROCEEDS The stockholders selling their shares will receive the proceeds from any sales, not our company. However, some stockholders may exercise options which they already have, and if they do, our company could receive up to $738,750, which it will use for general working capital purposes. See "Selling Stockholders." MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Our stock is quoted on the Nasdaq OTC Bulletin Board under the symbol "NUMX." The closing bid price on November 12, 1998 was $0.625. This table shows the closing high and low bid and ask quotes as reported by the National Quotation Bureau, Inc. for each quarter of our last two fiscal years and the first two quarters of the current fiscal year. These quotes are for dealer transactions and do not include retail markup, markdown or commissions. They do not represent actual sale prices.
Fiscal Year Ended Closing Bid/Ask Quotes High Low March 31, 1997 Bid Ask Bid Ask - -------------- --- --- --- --- Quarter Ended June 30, 1996 $.625 $.938 $.438 $.688 Quarter Ended September 30, 1996 .625 .938 .375 .562 Quarter Ended December 31, 1996 .50 .75 .375 .625 Quarter Ended March 31, 1997 .594 .688 .375 .625 March 31, 1998 Quarter Ended June 30, 1997 .469 .625 .375 .50 Quarter Ended September 30, 1997 .50 .594 .312 .438 Quarter Ended December 31, 1997 1.469 1.531 .375 .46 Quarter Ended March 31, 1998 3.625 3.875 1.062 1.312 March 31, 1999 Quarter Ended June 30, 1998 1.25 .75 1.375 1.00 Quarter Ended September 30, 1998 1.00 1.00 .625 .625
On September 23, 1998, there were about 416 holders of record of our common stock. This number does not include about 1000 stockholders holding stock in "street name" accounts. We do not pay dividends on our stock and it is not likely that we will pay dividends in the 7 10 foreseeable future. We have not paid any dividends in the past. SELLING STOCKHOLDERS This table shows the names of the selling stockholders, how many shares they own, the maximum number of shares they plan to sell in this offering, how many shares they will own if they sell all the shares they own, and the percentage of the total number of shares they will own before and after their sales. With the exception of one person, all the shares held by the selling stockholders are being registered. Therefore, with that one exception, if the selling stockholders sell all the shares registered in this offering, they will own none. 8 11
Shares Beneficially Shares Beneficially Owned Owned Prior to Offering Number of Shares After Offering -------------------------- to be Sold -------------------- Number(1) Percent in Offering Number Percent --------- ------- ----------- ------ ------- Gerald A. Bagg 150,000(2) 1.3% 150,000(2) 0 -- Dafna Breines 324,361 2.9% 324,361 0 -- David Breines 343,888 3.0% 43,888 300,000 2.7% Costa Oro Realty, Inc. Defined Benefit Plan 42,015(3) * 42,015(3) 0 -- Bruce Falborn 8,381(5) * 8,381(5) 0 -- Adira Hulkower 193,865 1.7% 193,865 0 -- Judah Hulkower 100,000 * 100,000 0 -- Regina and Benjamin Hulkower 250,000(4) 2.2% 250,000(4) 0 -- Ira Koplin 8,403(5) * 8,403(5) 0 -- Esther Kozienicki 665,760 5.9% 665,760 0 -- Malka Livne 327,289 2.9% 327,289 0 * Ron Livne 134,889 1.2% 134,889 0 * Manatt, Phelps & Phillips 140,000 1.2% 140,000 0 -- Leonard Marmor 8,381(5) * 8,381(5) 0 -- Frank M. Naft 84,326(6) * 84,326(6) 0 -- Randy Naft 8,381(5) * 8,381(5) 0 -- Bram Roos 42,048(3) * 42,048(3) 0 -- Isaac S. Salzberg and Susan S. Salzberg 246,500(7) 2.2% 246,500(7) 0 -- Jack I. Salzberg and Anna S. Salzberg 2,247,831(8) 18.5% 2,247,831(8) 0 -- Stonepine Holdings, Limited 100,000(9) * 100,000(9) 0 -- Tony Tanashian 84,188(6) * 84,188(6) 0 -- All executive officers and directors as a group (4 persons) 2,744,331 22.2% 2,744,331 0 --
* Less than 1% (1) Percentage of ownership for each holder is based on 11,116,756 shares of common stock and 170,000 shares of preferred stock (convertible into 170,000 shares of common stock) outstanding on September 23, 1998, together with applicable options and warrants for each stockholder. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes shares over which the holder has voting or investment power, subject to community property laws. Shares of common stock subject to options or 9 12 warrants that are currently exercisable or exercisable within 60 days are deemed to be beneficially owned by the person holding the options or warrants for computing such person's percentage, but are not treated as outstanding for computing the percentage of any other person. (2) Includes options to purchase 150,000 shares of common stock at a current exercise price of $1.00 per share. (3) Includes warrants to purchase 12,500 shares of common stock at a current exercise price of $0.75 per share. (4) Includes 100,000 shares held by Regina Hulkower as custodian for Shoshana Hulkower under the Uniform Gift to Minors Act. Also includes 150,000 shares held by Benjamin and Regina Hulkower as trustees of the Jack and Anna Salzberg 1989 Grandchildrens Trust for the benefit of Adam Salzberg (50,000 shares), Matthew Salzberg (50,000 shares), and Jacob Salzberg (50,000 shares). (5) Includes warrants to purchase 2,500 shares of common stock at a current exercise price of $0.75 per share. (6) Includes warrants to purchase 25,000 shares of common stock at a current exercise price of $0.75 per share. (7) Includes 40,500 shares held as custodian under the Uniform Gift to Minors Act for the benefit of Jacob Salzberg, 60,500 shares held as custodian under the Uniform Gift to Minors Act for the benefit of Adam D. Salzberg, and 60,500 shares held as custodian under the Uniform Gift to Minors Act for the benefit of Matthew A. Salzberg; and 85,000 shares held as trustees of the Isaac S. Salzberg and Susan S. Salzberg Living Trust. (8) Includes options issued to Jack I. Salzberg to purchase 850,000 shares of common stock at an exercise price of $0.50 per share and 1,397,831 shares held as trustees of the Jack I. Salzberg and Anna S. Salzberg Family Trust. (9) Includes options to purchase 100,000 shares of common stock at a current exercise price of $1.00 per share. Mr. Fabregas, a director of our company, is the director, president and principal shareholder of Stonepine Holdings, Limited. PLAN OF DISTRIBUTION The selling stockholders will be selling their stock over time through dealers on the Nasdaq Bulletin Board at quoted prices or directly to buyers at negotiated prices, or both. 10 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following discussion contains forward-looking statements within the meaning of Federal securities laws. Such statements can be identified by the use of such words as "may," "will," "expect," "anticipate," "estimate" or other similar words. Forward-looking statements discuss future expectations, contain projections of results of operations or financial condition or state other forward-looking information. When considering such forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Prospectus. Management believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions. However, there are certain factors, such as our ability to acquire other businesses, obtain financing for such acquisitions or for general corporate needs, market and general economic conditions, that might cause a difference between actual results and those forward-looking statements. This discussion should be read in conjunction with our consolidated financial statements and the notes included in this Prospectus beginning on page F-1. This statement applies to all forward-looking statements that appear anywhere in this Prospectus. Results of Operations Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997 Net sales for the three months ended June 30, 1998 were $2,000, compared to $30,000 for the same period in 1997. The decrease in sales is because sales of our product, Therapy Plus, have ended. Selling, general and administrative expenses for the three months ended June 30, 1998 were $71,000, compared to $55,000 for the same period in 1997. This increase was largely because of increases in legal fees and fees paid to outside consultants, as well as a decrease in sublease rental income that offset part of our rent expense. Interest expense for the three months ended June 30, 1998 was $5,500, compared to $44,800 for the same period in 1997. This decrease is because of the conversion into shares of common stock of loans previously made to us by certain individuals. Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31, 1997 Net sales for fiscal 1998 were $176,000, or 41% less than net sales of $296,00 in fiscal 1997. Cost of sales as a percentage of net sales decreased from 52% in fiscal 1997 to 47% in fiscal 1998. This reflects a decrease in cost of production because of a more efficient tooling used in the manufacture of Therapy Plus. Selling, general and administrative expenses for fiscal 1998 were $654,000, compared to $653,000 for fiscal 1997. However, for fiscal 1998, this amount includes $362,000 in 11 14 legal expenses relating to an acquisition which did not close. Not including such expense results in selling, general and administrative expenses for fiscal 1998 in the amount of $292,000, a 55% decrease compared to fiscal 1997. This decrease is the result of continued cost-savings measures which we have undertaken. As a result of the conversion of debt to equity by certain individuals, our interests expense decreased by 37% in fiscal 1998 compared to fiscal 1997. Other income in fiscal 1998 in the amount of $357,000 reflects the reversal of the prior year's accrual on royalty payments. Other expense in fiscal 1998 in the amount of $300,000 reflects compensation for Jack Salzberg. Fiscal Year Ended June 30, 1997 Compared to Fiscal Year Ended June 30, 1996 Net sales for fiscal 1997 were $296,000, compared to $1,023,000 in fiscal 1996. The amount for fiscal 1996 includes four months' operations of ViaStar Marketing, Inc. (ViaStar) in the amount of $601,000. In comparing the net difference of $422,000 for fiscal 1996 with fiscal 1997, the 30% decrease in net sales reflects a significant decrease in wholesale sales in the amount of $150,000, partially offset by a small increase in direct infomercial sales to consumers in the amount of $24,000. Cost of sales as a percentage of net sales increased from 45% in fiscal 1996 to 52% in fiscal 1997. The increase was mainly due to write-offs of slow-moving inventories. ViaStar's portion for fiscal 1996 was $365,000. Selling, general and administrative expenses for fiscal 1997 were $653,000, compared to $864,000 in fiscal 1996. Of this amount, $422,000 was allocated to ViaStar for fiscal 1996. Expenses in fiscal 1997 consisted of 20% video production costs, 19% royalty payment requirements and 61% regular operating expenses. The 52% overall increase in these expenses was mainly due to the costs of new video production and royalty expenses. Regular operating expenses of $398,000 for fiscal 1997 reflect a 10% decrease over operating expenses of $442,000 for fiscal 1996, because of cost-cutting measures. In August 1992, we signed a consent order with the Federal Trade Commission which prohibited us from making or using certain claims or endorsements in connection with our advertising of Therapy Plus. After a three-year clinical study, the U.S. Food and Drug Administration gave us permission to market Therapy Plus using only a limited number of the original claims and endorsements. In 1996, we produced new revised infomercials using the limited claims and endorsements allowed by the FDA. However, the infomercial tested below expectations and we discontinued media testing. This in turn took away our sales momentum. Ultimately, the FDA approval became moot for the following reasons: 12 15 - Momentum had been lost - The cost of media airtime during the interim had gone up dramatically, which resulted in our abandoning the testing of new infomercials in November and December 1996. The license agreement between us and the German inventor of Therapy Plus contains a provision that if our operations are halted by any government agency, the minimum license fee of $125,000 does not have to be paid. Management believes that the $125,000 minimum license fee does not have to be paid because it is an outcome of the same government agency action causing us to abandon our marketing program. Management believes that the liabilities related to actual sales should be the only ones recognized, in the amount of $115,000. Net loss from operations in fiscal 1997 was $512,000, compared to $399,000 for fiscal 1996. For fiscal 1996, our loss was $213,000 and ViaStar's loss was $186,000. Net interest expense in fiscal 1997 was $204,000, compared to $183,000 for fiscal 1996. For fiscal 1996, our interest expense was $2,000 and ViaStar's was $181,000. The increase in our interest expense in fiscal 1997 is because of our increased borrowings to fund operations. Other income in fiscal 1997 was $41,000, compared to $219,000 in fiscal 1996. The amount for fiscal 1997 reflects a $30,000 refund for product liability insurance and cost recoveries, and $11,000 for reversal of accrued expenses. Liquidity and Capital Resources Cash used in the three month period ended June 30, 1998 was $91,000. This was offset by a net increase in debt incurred of $137,000, resulting in an increase of $46,000 in our cash position. Net cash used for operating activities in fiscal 1998 was $562,000. We funded this amount from borrowings we made from various private lenders, including Jack Salzberg and certain of his relatives. During 1997, Jack Salzberg converted $143,916 of debt owed to him, plus accrued interest, into shares of common stock, at $.50 per share. An additional $1,708,000 of debt owed to various relatives of Mr. Salzberg was also converted into common stock at the same conversion rate. On May 29, 1988, Jack Salzberg converted accrued compensation of $300,000 into 240,000 shares of common stock at $1.25 per share. The bid price of our stock at the time of the conversion was $.875 per share. Legal fees of $172,000 and $280,000 of loans from three relatives of Mr. Salzberg were also converted into shares of common stock at $1.25 per share. After the end of fiscal 1998, we reached a settlement of our litigation with former 13 16 employees of ViaStar. This resulted in an extraordinary gain in the amount of $337,500. Because of the current low sales volume, we plan to continue to rely on outside financing sources to meet cash requirements of our operations. In recent years, our working capital has come from Jack Salzberg and some of his relatives. They have provided loans or have guaranteed some of our obligations. In the last four years, Mr. Salzberg has provided or arranged for over $3,000,000 in working capital. The majority of this amount was converted into shares of common stock. Because our operating expenses are now significantly lower than before, Mr. Salzberg has informed the Board of Directors that he will continue to provide funds for working capital needs until an acquisition is completed or another financing has been conducted. Current Plans While we will still explore marketing Therapy Plus, the main emphasis of management will be to acquire profitable businesses. We have $6,900,000 in federal tax loss carry forward and $1,600,000 tax loss for California. Under certain circumstances, these tax losses can be offset against profitable business operations. Management has been looking at profitable businesses with between $10,000,000 and $30,000,000 in annual sales. To assist us in finding acquisition candidates, we have hired a medium sized investment banking firm which specializes in private placements of securities with institutional investors. We are in discussion with several potential acquisition candidates, but we have not reached an agreement with any of them. We cannot make any prediction about the likelihood of completing any such acquisition. Inflation and Changing Prices We do not foresee any adverse effects on our earnings as a result of inflation or changing prices. Year 2000 Issues We have not completed our review of Year 2000 compliance at this time. BUSINESS Numex Corporation was incorporated in Delaware on August 1, 1980. Since January 1991, our main business had been to manufacture through subcontractors and distribute a product called Therapy Plus, a patented, non-electric, hand-held massaging device for relieving arthritis pain. The product is a series of starwheels mounted on a shaft that a person rolls briskly over sore body parts for a massage-like effect. In order to obtain a license to manufacture the product, we paid the patent owner a one-time fee of $120,000 in June 1992 and agreed to pay royalties at a rate ranging from $.65 to $1.20 per 14 17 unit, depending upon how we distributed the product. We treated the fee as an intangible asset on our balance sheet and wrote off the remaining value of the fee and related expenses in March 1997. We believe that we do not have to pay royalties because the U.S. government interfered with our marketing of the product. We also believe that we have no liability of any kind under the license agreement. We base this conclusion on our interpretation of the agreement's language, the passing of time to file suit against us over the agreement, and the fact that the inventor has moved to Cyprus and has not communicated with our company since February 1998. Accordingly, in March 1998 we adjusted the prior year's accrual on royalty estimates to the licensor. See "Management's Discussion Analysis of Financial Condition and Results of Operations" and "Changes in and Disagreements with Accountants on Accounting and Financial Disclosure." From January 1991, when we obtained the license to sell the product, until August 1992, we engaged in a major marketing campaign, selling the product through an infomercial on television. An infomercial is a paid commercial program broadcast on television in order to sell particular products. The Federal Trade Commission forced our company to stop airing the infomercial in 1992. The FTC claimed that, among other things, the infomercial contained claims about the product that were not backed with sufficient scientific evidence. In response, we sponsored a clinical study of the product by an independent hospital. In February 1996, the FTC told us that the product could be marketed for "temporary relief of minor muscular pain associated with arthritis." We produced a new infomercial between late July and November 1996 and began media tests using the newly accepted claims regarding arthritis pain. However, this new marketing strategy failed because of high costs of producing the infomercial. From October 1997 through February 1998 we worked with QVC, Inc., a cable shopping network, to promote the product. While sales were high enough, many of the products that had been sold were returned, and we decided to stop selling the product through QVC. We also marketed the product through wholesale and export distributors. International sales through export distributors accounted for most of the sales of the product. Sales of our only product, Therapy Plus, have been falling for some time. There have been no sales of Therapy Plus since June 1998. We do not expect to have any significant new sales of Therapy Plus. We do not have any other products under development and we do not have plans to develop any new products. Therefore, our future business plan depends on beginning new activities. Among the things we are most actively considering is acquiring other businesses. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." In June 1994 we acquired ViaStar. Viastar marketed celebrity owned or endorsed products. ViaStar was not profitable and used up the capital provided by our company. ViaStar made an assignment for benefit of creditors in July 1995 and was dissolved on March 28, 1997. Our company moved into its current offices on February 1, 1995, under a three-year lease which expired on January 31, 1998. The monthly rental was $5,732 plus taxes, insurance and other maintenance costs. We extended the lease for one year, and the new rent is $6,335 a month, plus taxes, insurance and maintenance costs. We also subleased part of the space for $2,250 per month 15 18 from July 1997 through January 1998, and for $4,900 a month since then, leaving us with a net cost of the space of $1,455 per month. The facility measures 12,460 square feet. MANAGEMENT This table lists our directors and executive officers.
Name Age Current Position with Company ---- --- ----------------------------- Gerald A. Bagg 46 Director J. Robert Fabregas 53 Director Isaac S. Salzberg 46 Vice President, Secretary and Director Jack I. Salzberg 75 Chairman of the Board, President, and Chief Executive Officer
The business experience of the individuals named above for at least the past five years is described below. Other than what is described here, none of these people is related to any of the others in any way. None of them has been involved in significant legal proceedings. GERALD A. BAGG was President, Chief Operating Officer, and a director of our company from March 20, 1992 and as Chief Executive Officer from December 30, 1992. In February 1996, Mr. Bagg resigned as President and CEO but remains a director. He is Senior Vice President of Account Management and Marketing with Williams Worldwide, a major television media buying firm. From at least 1988, Mr. Bagg served as President of Brentwood Marketing, a marketing and strategic planning firm located in Los Angeles, California. Brentwood Marketing has launched numerous entrepreneurial consumer products, including Epilady. J. ROBERT FABREGAS has been a director of our company since March 11, 1998. From June, 1988 to the present, Mr. Fabregas has been the President of Stonepine Holdings, Limited, a California corporation, an investment banking firm. He has 25 years experience in corporate finance and commercial lending with major domestic and foreign banks, one of the largest U.S. savings and loans, a Fortune 500 manufacturing company, and privately held investment banking firms. He has been a Member of Management in the Los Angeles office of Credit Suisse, a major Swiss financial institution. ISAAC S. SALZBERG has been a director of our company since March, 1989. He had been President and Chief Executive Officer of our company from March, 1989 to March, 1992. He has been a director of First Charter Bank since 1988 and an officer since 1989. Mr. Salzberg left the bank and all positions in October 1996. Mr. Salzberg is an investment broker with Prudential Securities. Mr. Salzberg is the son of Jack I. Salzberg, the Chairman of the Board, Chief Executive Officer and President of our company. JACK I. SALZBERG has been Chairman of the Board since January, 1985, Chief Executive Officer of our company since March, 1992 and has been President since February 1996. He had 16 19 been Chairman of the Board from 1983 and Chief Executive Officer from June, 1989 of First Charter Bank, N.A., a national bank which operates two branch offices in the Los Angeles area, and of which he was also a major stockholder. Mr. Salzberg retired from all positions with First Charter Bank and sold or gave away all his stock in the bank in September 1995. Mr. Salzberg is the father of Isaac S. Salzberg, a director of our company. EXECUTIVE COMPENSATION This table shows all of the compensation given to the Chief Executive Officer and all other officers who were paid more than $100,000 during the fiscal years ended March 31, 1998, 1997 and 1996. SUMMARY COMPENSATION TABLE
Long Term Compensation Awards Restricted Securities Underlying Name and Principal Position Year Salary Stock Award(s) - --------------------------- ---- ------ -------------- Jack I. Salzberg 1998 $300,000 (1) 850,000 Chairman of the Board, 1997 $0 0 President, CEO 1996 $0 0
(1) Compensation awarded by the Directors to Jack I. Salzberg on December 18, 1997 because he served for six years of service without compensation. On April 30, 1998, the Board authorized the conversion of this accrued liability into common stock at $1.25 per share, which was then converted on May 1998. OPTION/SAR GRANTS IN LAST FISCAL YEAR
Number of Percent of Total Securities Options/ SARs Underlying Granted to Exercise Options/SARs Employees Price Expiration Name Granted (#) in Fiscal Year ($/sh) Date - ---- ----------- -------------- ------ ---- Jack I. Salzberg 850,000 (2) 100% $.50 none
(2) Option granted by the Board of Directors on November 21, 1997 to Jack I. Salzberg. Arrangements with Directors J. Robert Fabregas was appointed to the Board of Directors on March 11, 1998. During the fiscal year 1998, he received a total of $34,500 as compensation through his company, Stonepine Holdings, Limited. Mr. Fabregas' company provided services to our company unrelated to his services and duties as a director of our company. See "Certain Relationships and Related Transactions." 17 20 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS In July and December 1997, our Board of Directors decided to eliminate most of our company's debt. In connection with that decision, the following individuals who had loaned money to us agreed to convert this debt into shares of our common stock. Jack I. Salzberg Jack I. Salzberg converted all of the debt he was owed, plus accrued interest, in the amount of $143,916 into 287,831 shares of common stock at $.50 per share. Last year, he converted his 2 1/2 year note for $300,000 into 300,000 shares of common stock at $1.00 per share. See "Selling Stockholders." Esther Kozienicki Esther Kozienicki is the sister of Jack I. Salzberg. At March 31, 1997, we owed her $566,000. In addition, we issued new demand notes payable for operating cash received in an aggregate amount of $227,000 during fiscal 1998. She converted $779,880 of this amount and accrued interest through December 1997 into 1,559,760 shares of common stock at $.50 per share. Ms. Kozienicki has provided our company with operating cash funds since 1993. On May 29, 1998, Ms. Kozienicki converted $160,000 of the debt she was owed into 128,000 shares of common stock at $1.25 per share. See "Selling Stockholders." Malka Livne Malka Livne is the sister in law of Jack I. Salzberg. We issued demand notes payable to her in an aggregate amount of $149,000 for operating cash received during fiscal 1998. At March 31, 1997 we owed her $350,000. During the year, she converted $463,995 of this amount and accrued interest through December 1997 into 927,990 shares of common stock at $.50 per share. Ms. Livne has provided our company with operating cash funds since 1994. See "Selling Stockholders". In September 1998, we granted to Stonepine Holdings, Limited options to purchase 100,000 shares of Common Stock at an exercise price of $1.00 per share. Mr. Fabregas, a director of our company, and is the principal shareholder, director and president of Stonepine Holdings, Limited. See "Selling Stockholders". SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT This table provides information about the stock ownership of our company on September 30, 1998. It shows the holdings of each director, each person we know to hold more than 5% of our stock, and all of our directors and officers as a group. 18 21 Amount and Nature of Beneficial Ownership
Name of Beneficial Number of Percent of Owner Title Shares Class - ----- ----- ------ ----- Gerald A. Bagg Director 150,000 (1) 1.3% J. Robert Fabregas Director 100,000 (2) 0.9% Isaac S. Salzberg Secretary and Director 246,500 (3) 2.2% Jack I. Salzberg Chairman of the Board & President 2,247,831 (4) 18.5% Esther Kozienicki (5) 665,760 5.9% All Directors and Officers as a group (four persons) 2,744,331 22.2%
(1) Includes options to purchase 150,000 shares of Common Stock at a current exercise price of $1.00 per share. (2) Consists of options to purchase 100,000 shares of Common Stock at a current exercise price of $1.00 per share held by Stonepine Holdings, Limited. Mr. Fabregas is the principal shareholder, director and president of Stonepine Holdings, Limited. (3) Includes 40,500 shares held as custodian under the Uniform Gift to Minors Act for the benefit of Jacob Salzberg, 60,500 shares held as custodian under the Uniform Gift to Minors Act for the benefit of Adam D. Salzberg, and 60,500 shares held as custodian under the Uniform Gift to Minors Act for the benefit of Matthew A. Salzberg; and 85,000 shares held as trustees of the Isaac S. Salzberg and Susan S. Salzberg Living Trust. (4) Includes options issued to Jack I. Salzberg to purchase 850,000 shares of Common Stock at an exercise price of $0.50 per share and 1,397,831 shares held as trustees of the Jack I. Salzberg and Anna S. Salzberg Family Trust. (5) Ms. Kozienicki is the sister of Jack I. Salzberg and the aunt of Isaac S. Salzberg. Messrs. Salzberg disclaim beneficial ownership of any of the shares owned by Ms. Kozienicki. LEGAL PROCEEDINGS On February 11, 1998, our company filed a Complaint and Motion for Temporary Injunction and Request against William Lovell, Robert Circosta, George Simone and Ben White in the Fifteenth Judicial Circuit, covering Palm Beach, Florida. The case number of the suit is 98-001276-AD. The suit relates to our acquisition of ViaStar, when we agreed to issue to the defendants 500,000 shares of our restricted common stock. The parties have signed a settlement agreement and filed it with the court. The defendants will return 300,000 shares of our common stock to us, and they will keep 200,000 shares of our common stock without restriction. 19 22 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Singer, Lewak, Greenbaum & Goldstein, LLP resigned as independent public accountants for our company on April 30, 1998. Because we wanted to eliminate the royalty accrued on our company's financial statements on the grounds that we were not legally or contractually obligated to pay it, the Singer, Lewak firm asked us when they were deciding whether to renew their engagement as our auditors for the new fiscal year, to provide either a verification of our potential liability under the Therapy Plus license agreement or a legal opinion on the subject. We decided, for reasons unrelated to the audit, not to get a verification, but we did try to obtain a legal opinion. Our lawyers, the accountants and we were discussing the language of the opinion, but had not completed the discussions when the accountants resigned. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The report of these accountants on our financial statements for the fiscal years ended March 31, 1995, 1996 and 1997 did not contain an adverse opinion, disclaimer of opinion, or any qualification or modification as to audit, scope, accounting principles, or uncertainty. It did, however, include an explanatory paragraph relating to going concern considerations for those three years. There were not any disagreements in the past two years that would have caused the accountants to refer to the disagreements in their reports if the issues were not resolved to the accountants' satisfaction. Singer, Lewak, Greenbaum & Goldstein LLP did not audit or review our financial statements for any period after the fiscal year ended March 31, 1997. On May 18, 1998, our board of directors named Stonefield Josephson, Inc., as our new independent public accountants. DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION OF SECURITIES ACT LIABILITIES Our certificate of incorporation allows us to indemnify our officers and directors to the maximum extent allowed under Delaware law. The SEC takes the position that any indemnification for securities law violations is against public policy and is unenforceable. LEGAL MATTERS The law firm of Richman, Lawrence, Mann, Chizever & Phillips, of Beverly Hills, California, will determine the validity of the securities offered by this prospectus. 20 23 EXPERTS The financial statements in this prospectus are incorporated from our Annual Report on Form 10-KSB in reliance on the report of Stonefield, Josephson, Inc., independent certified public accountants, who are experts in auditing and accounting. 21 24 NUMEX CORPORATION AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 1998 CONTENTS
Page ---- INDEPENDENT AUDITORS' REPORT F-2 FINANCIAL STATEMENTS: Consolidated Balance Sheet F-3 Consolidated Statement of Operations F-4 Consolidated Statement of Stockholders' Deficiency F-5 Consolidated Statement of Cash Flows F-6 Notes to Consolidated Financial Statements F-7
F-1 25 [STONEFIELD JOSEPHSON, INC. LETTERHEAD] INDEPENDENT AUDITORS' REPORT Board of Directors and Stockholders Numex Corporation Santa Fe Springs, California We have audited the accompanying consolidated balance sheet of Numex Corporation and subsidiary as of March 31, 1998 and the related consolidated statements of operations, stockholders' deficiency, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Numex Corporation and subsidiary as of March 31, 1998, and the consolidated results of their operations and their consolidated cash flows for the year ended March 31, 1998, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company has incurred net losses from operations, has negative cash flows from operations, and has a net capital deficiency. These factors, among others as discussed in Note 1 to the financial statements, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ STONEFIELD JOSEPHSON, INC. CERTIFIED PUBLIC ACCOUNTANTS Santa Monica, California May 29, 1998 F-2 26 NUMEX CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEET
ASSETS June 30, March 31, 1998 1998 ------------ ------------ (unaudited) CURRENT ASSETS: Cash $ 73,262 $ 27,218 Inventory 7,149 10,230 Prepaid expenses 496 -- ------------ ------------ Total current assets 80,907 37,448 PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization 15,765 17,046 DEPOSITS 7,158 7,158 ------------ ------------ $ 103,830 $ 61,652 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 57,911 $ 77,210 Notes payable 180,789 -- Current maturities of notes payable, others -- 45,039 Current maturities of notes payable, related parties -- 58,750 ------------ ------------ Total current liabilities 238,700 180,999 ------------ ------------ LOAN PAYABLE, other -- 171,930 ------------ ------------ LOAN PAYABLE, officer-stockholder -- 300,000 ------------ ------------ NOTES PAYABLE, RELATED PARTIES, less current maturities -- 246,250 ------------ ------------ STOCKHOLDERS' DEFICIENCY: Preferred stock; $1.00 par value, 10,000,000 shares authorized, 170,000 shares issued and outstanding 170,000 170,000 Common stock; $.10 par value, 20,000,000 shares authorized, 11,189,219 issued and 10,564,219 shares outstanding 1,118,922 1,118,922 Treasury stock, at cost, 625,000 shares -- (705,824) Additional paid-in capital 10,043,222 9,970,866 Deficiency (11,467,014) (11,391,491) ------------ ------------ Total stockholders' deficiency (134,870) (837,527) ------------ ------------ $ 103,830 $ 61,652 ============ ============
See accompanying independent auditors' report and notes to consolidated financial statements. F-3 27 NUMEX CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENT OF OPERATIONS
Three months Three months ended ended Year ended June 30, 1998 June 30, 1997 March 31, 1998 ------------- ------------- -------------- (unaudited) (unaudited) NET SALES $ 2,084 $ 30,414 $ 176,513 COST OF SALES 626 12,450 83,605 ------------ ------------ ------------ GROSS PROFIT 1,458 17,964 92,908 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 71,505 55,269 653,734 ------------ ------------ ------------ LOSS FROM OPERATIONS (70,047) (37,305) (560,826) ------------ ------------ ------------ OTHER INCOME (EXPENSE): Officer-stockholder compensation -- -- (300,000) Interest expense, net (5,476) (44,760) (128,572) Other income -- -- -- Adjustment of the prior years accruals on royalty estimates -- -- 356,600 Loss on intangible assets in excess of net present value -- -- -- ------------ ------------ ------------ Total other expense (5,476) (44,760) (71,972) ------------ ------------ ------------ LOSS BEFORE PROVISION FOR INCOME TAXES (75,523) (82,065) (632,798) PROVISION FOR INCOME TAXES -- -- 800 ------------ ------------ ------------ NET LOSS $ (75,523) $ (82,065) $ (633,598) ============ ============ ============ NET LOSS PER SHARE (.01) (.01) (.08) ============ ============ ============ WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING USED TO CALCULATE LOSS PER SHARE 10,783,999 5,967,750 7,601,295 ============ ============ ============
See accompanying independent auditors' report and notes to consolidated financial statements. F-4 28 NUMEX CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY FOR THE YEAR ENDED MARCH 31, 1998
Preferred stock Common stock Treasury stock at cost ------------------- ---------------------- ---------------------- Shares Amount Shares Amount Shares Amount ------ ------ ------ ------ ------ ------ Balance at March 31, 1997 170,000 $170,000 6,592,750 $659,275 625,000 ($705,824) Common stock issued for conversion of debt 4,596,469 459,647 Net loss ------- -------- ---------- ---------- -------- ---------- Balance at March 31, 1998 170,000 170,000 11,189,219 1,118,922 625,000 (705,824) Treasury stock issued for conversion of debt and services rendered (625,000) 705,824 Net loss for the three months ended June 30, 1998 (unaudited) ------- -------- ---------- ---------- -------- ---------- 170,000 $170,000 11,189,219 $1,118,922 -- -- ======= ======== ========== ========== ======== ==========
Unearned portion of restricted Additional paid in Accumulated stock issued capital deficit Total ------------ ------- ------- ----- Balance at March 31, 1997 -- $8,132,280 ($10,757,893) ($2,502,162) Common stock issued for conversion of debt 1,838,586 2,298,233 Net loss (633,598) (633,598) --------- --------------- ------------- ----------- Balance at March 31, 1998 -- 9,970,866 (11,391,491) (837,527) Treasury stock issued for conversion of debt and services rendered 72,356 778,180 Net loss for the three months (75,523) (75,523) ended June 30, 1998 (unaudited) --------- --------------- ------------- ----------- -- $10,043,222 ($11,467,014) ($134,870) ========= =============== ============= ===========
See accompanying independent auditors' report and notes to consolidated financial statements. F-5 29 NUMEX CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Three months Year ended ended June 30, March 31, 1998 -------------- -------------- 1998 1997 ---- ---- (unaudited) (unaudited) CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES: Net loss $ (75,523) $ (82,065) $(633,598) ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES: Depreciation and amortization 1,281 1,316 5,916 Adjustment of the prior years accruals on royalty estimates -- -- (356,600) Legal fees and interest expense accrued as loan payable, other -- -- 171,930 Officer-stockholder compensation accrued as loan payable, officer-stockholder -- -- 300,000 CHANGES IN ASSETS AND LIABILITIES: (INCREASE) DECREASE IN ASSETS: Accounts receivable (139) 7,964 9,058 Inventory 3,081 (1,935) (1,406) Prepaid expenses and other current assets (496) (2,427) -- Restricted cash -- 4,756 -- Deposits -- -- 5,233 INCREASE (DECREASE) IN LIABILITIES: Accounts payable and accrued expenses (19,160) 3,421 (62,583) Customer deposits -- (28,000) -- --------- --------- --------- Total adjustments (15,433) (14,905) 71,548 --------- --------- --------- Net cash used for operating activities (90,956) (96,970) (562,050) --------- --------- --------- CASH FLOWS USED FOR INVESTING ACTIVITIES - payments to acquire property and equipment -- -- (4,051) CASH FLOWS PROVIDED BY (USED FOR) FINANCING ACTIVITIES: Cash restricted -- -- 5,775 Proceeds from loans and notes payable, net 137,000 83,500 572,563 Proceeds from issuance of preferred stock -- -- -- Offering costs -- -- -- --------- --------- --------- Net cash provided by financing activities 137,000 83,500 578,338 --------- --------- --------- NET INCREASE (DECREASE) IN CASH 46,044 (13,470) 12,237 CASH AND CASH EQUIVALENTS, beginning of year 27,218 14,981 14,981 --------- --------- --------- CASH AND CASH EQUIVALENTS, end of year $ 73,262 $ 1,511 $ 27,218 ========= ========= =========
See Note (16) for supplemental disclosures of non-cash investing and financing activities. See accompanying independent auditors' report and notes to consolidated financial statements. F-6 30 NUMEX CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEAR ENDED MARCH 31, 1998 (1) ORGANIZATION AND MANAGEMENT'S PLANS: Numex Corporation (the "Company") was incorporated in the state of Delaware in August 1980. The Company is engaged in the business of manufacturing and distributing a hand-held mechanical patterned coetaneous nerve stimulator (the "Product"), which the Company markets under the name "Therapy Plus." The Product was sold primarily through an infomercial (the "Infomercial") on television from March 1991 through August 1992. An Infomercial is a one-half hour paid commercial program broadcast on television, the primary purpose of which is to sell one or more products. In September 1992, the Company voluntarily discontinued the airing of the Infomercial as a result of an investigation by the United States Federal Trade Commission (the "FTC"). The FTC concluded that the Infomercial contained certain advertising claims which were not supported by reliable scientific evidence. In October 1992, the Company signed an agreement with the FTC consenting to refrain from making certain advertising claims concerning the Product, the signing of which did not constitute an admission of a law violation. Since the discontinuance of the airing of the Infomercial in September 1992, the Company has sold the Product primarily to distributors and has not been engaged in any television marketing campaign to sell the Product. In October 1993, the Company completed a controlled clinical study to serve as the basis for the Food and Drug Administration ("FDA") authorization to make certain claims relative to the efficacy of the Product in relieving pain due to arthritis and to comply with the FTC's requirements. In November 1993, the Company submitted a 501(k) notification to the FDA advising the agency of the Company's intention to add the word "arthritis" to its labeling claims. In February 1996, the Company received a FDA notification that the Product could be marketed as a "temporary relief of minor muscular pain associated with arthritis." In June 1994, a subsidiary of the Company acquired ViaStar Marketing, Inc. ("ViaStar"). ViaStar was in the business of outbound telemarketing of celebrity-owned or endorsed products. The purchase price was 1,000,000 shares of the common stock of the Company in exchange for all of the issued and outstanding shares of ViaStar. Subject to ViaStar's achieving certain earnings goals, 500,000 of the shares issued were held in escrow (the "Escrow Shares"). The value of those shares, in the amount of $562,500, was shown as a reduction of the stockholders' equity as of March 31, 1996. Insofar as ViaStar is no longer in business, the 500,000 shares held in escrow were released back to the Company, and the Company placed the shares, at cost, in Treasury stock as of March 31, 1997. On August 2, 1995, ViaStar filed, and was granted, a petition commencing an assignment for the benefit of creditors, pursuant to Chapter 727 of the Florida State Statutes. The book value of the assets in the amount of $399,352 was assigned to the trustee for the benefit of the creditors and was charged to earnings. As a result of the petition, the Company determined that there had been a permanent impairment in the carrying value of goodwill, and the remaining unamortized balance of $533,474 was charged to earnings for the year ended March 31, 1996. On March 28, 1997, the shareholders of ViaStar dissolved the corporation under Delaware State law. See accompanying independent auditors' report. F-7 31 NUMEX CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 1998 (1) ORGANIZATION AND MANAGEMENT'S PLANS, CONTINUED: The Company's consolidated financial statements have been presented on the basis that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred net losses during 1997 after airing a new infomercial, and has a net capital deficiency as presented on the balance sheet. Also, during the fiscal years 1998 and 1997, the Company experienced insufficient cash flows from operations, and funds for operations were obtained through the issuances of notes payable and preferred stock. These factors raise substantial doubt about the Company's ability to continue as a going concern. The Company's continued existence is dependent upon its ability to achieve a new operating plan and its success of selling Therapy Plus through wholesale distributors. Management's plans in connection with this uncertainty are as follow: The Company plans to continue marketing Therapy Plus through wholesale distributors and exporters. Management has been aggressively pursuing several profitable businesses as acquisition candidates. In anticipation of possible acquisitions, the Company has established a relationship with a medium-size investment banking house which specializes in private placements of securities and notes with institutional investors. Included in selling, general and administrative expenses for the year ended March 31, 1998, are approximately $362,000 related to accounting, legal and financing costs associated with an acquisition target. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its subsidiary. All intercompany accounts and transactions have been eliminated. CASH AND CASH EQUIVALENTS: Equivalents For purposes of the statement of cash flows, cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations. The carrying amounts of these assets approximate fair value due to the short maturity of the instruments. See accompanying independent auditors' report. F-8 32 NUMEX CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 1998 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED: CASH AND CASH EQUIVALENTS, CONTINUED: Concentration The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any such losses in such accounts. INVENTORIES: Inventories are stated at the lower of cost or market value. Cost is determined using the first-in, first-out ("FIFO") method. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred, whereas, additions, renewals, and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets. IMPAIRMENT OF LONG-LIVED ASSETS: In 1997, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS No. 121 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts of such assets may not be recoverable. Impairment losses would be recognized if the carrying amounts of the assets exceed the fair value of the asset. The impact of such adoption resulted in the write-off of $392,398 for the purchased intangibles and the costs of obtaining a licensing agreement from the patent holder of the Product during the year ended March 31, 1997 (see Note 1). See accompanying independent auditors' report. F-9 33 NUMEX CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 1998 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED: ADVERTISING: The Company expenses the cost of advertising the first time the advertising takes place, except for direct-response advertising. Direct-response advertising consists primarily of the cost to produce a television infomercial. The cost of direct-response advertising is deferred and amortized over the expected revenue stream of approximately six to twelve months. REVENUE RECOGNITION: Sales and related cost of sales are recorded upon shipment of the Product. The Company has an unconditional money-back guarantee policy under which the full sale price is returned to retail customers if the Product is returned within 30 days from the date of sale. The Company has estimated a provision for future returns for sales to retail customers. STOCK OPTION PLANS: The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25), and related interpretations in accounting for the employee stock options, rather than adopt the alternative fair value accounting provided under The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." INCOME TAXES: The Company uses the liability method of accounting for income taxes pursuant to SFAS No. 109, "Accounting for Income Taxes." Deferred income tax assets result from temporary differences when certain amounts are deducted for financial statement purposes and when they are deducted for income tax purposes. NET LOSS PER SHARE: The Company has adopted Statement of Financial Accounting Standard No. 128, Earnings per Share ("SFAS No. 128"), which is effective for annual and interim financial statements issued for periods ending after December 15, 1997. SFAS No. 128 was issued to simplify the standards for calculating earnings per share ("EPS") previously in APB No. 15, Earnings Per Share. SFAS No. 128 replaces the presentation of primary EPS with a presentation of basic EPS. The new rules also require dual presentation of basic and diluted EPS on the face of the statement of operations. Common equivalent shares, consisting of outstanding stock options, are not included, since they are anti-dilutive. Net loss per common share is computed based on the weighted average number of common shares outstanding. See accompanying independent auditors' report. F-10 34 NUMEX CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 1998 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED: FAIR VALUE OF FINANCIAL INSTRUMENTS: The Company measures its financial assets and liabilities in accordance with generally accepted accounting principles. Certain of the Company's financial instruments, including cash, accounts receivable, accounts payable, and accrued expenses, the carrying amounts approximate fair value due to their short maturities. The amounts shown for debt also approximate fair value because current interest rates offered to the Company for debt of similar maturities are substantially the same. USE OF ESTIMATES: In preparing financial statements in conformity with generally accepted accounting principles, management makes 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, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INTERIM FINANCIAL STATEMENTS (UNAUDITED): The accompanying unaudited condensed financial statements for the interim periods ended June 30, 1998 and 1997 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Regulation SB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ending March 31, 1999. (3) CASH: The Company had $56 of restricted cash to serve as collateral for a credit card reserve, as of March 31, 1998. (4) MAJOR CUSTOMERS: During the year ended March 31, 1998, the Company did business with two customers whose sales comprised approximately 22% and 65% of net sales, respectively. See accompanying independent auditors' report. F-11 35 NUMEX CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 1998 (5) INVENTORY: A summary is as follows: Finished goods $ 7,731 Supplies and packaging 2,499 -------------- $ 10,230 ============== (6) PROPERTY AND EQUIPMENT: A summary is as follows: Furniture and fixtures $ 37,620 Office and computer equipment 144,937 Tools and dies 38,259 -------------- 220,816 Less accumulated depreciation 203,770 -------------- $ 17,046 ============== (7) ACCOUNTS PAYABLE AND ACCRUED EXPENSES: A summary is as follows: Accounts payable $ 36,354 Accrued interest 3,441 Other 37,415 -------------- $ 77,210 ==============
During the year ended March 31, 1998, approximately $76,176 of the Company's purchases were made from two vendors. No amounts were due to these vendors as of March 31, 1998. See accompanying independent auditors' report. F-12 36 NUMEX CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 1998 (8) LOAN PAYABLE, OTHER: During the year ended March 31, 1998, the Company received legal services related to an acquisition target. Subsequent to the year ended March 31, 1998 the board of directors of the Company approved and issued 140,000 shares of its treasury stock, at approximately $1.23, to this vendor for legal services rendered in the amount of $ 171,930 (see Note 17). (9) LOAN PAYABLE, OFFICER-STOCKHOLDER: During the year ended March 31, 1998, the board of directors of the Company approved a bonus in the amount of $300,000 to an officer-stockholder, payable at such time as funds became available and would not be detrimental to the financial position of the Company. Subsequent to the year ended March 31, 1998, the board of directors of the Company approved and issued 240,000 shares of its treasury stock, at $1.25, to convert the accrued officer-stockholder compensation obligation of $300,000 (see Note 17). (10) NOTES PAYABLE, OTHERS: A summary is as follows:
1998 ---- Promissory note, at prime plus 2% (10.5% at March 31, 1998), payable in monthly principal payments of $2,000 plus interest, due on December 18, 1995. $ 23,000 Promissory note, non-interest bearing, due on January 11, 1999. This note may be converted at the holder's option into shares of $0.10 par value common stock on or before due date at the rate of $0.50 per share. 22,039 -------------- 45,039 Less current maturities 45,039 -------------- $ -- ==============
See accompanying independent auditors' report. F-13 37 NUMEX CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 1998 (11) NOTES PAYABLE, RELATED PARTIES: A summary is as follows:
1998 ---- Promissory note, bearing interest at 8%, unsecured and due on demand. $ 25,000 Promissory note, bearing interest at 8%, unsecured and due on demand (see Note 17). 60,000 Promissory notes, bearing interest at 8%, unsecured and due on demand (see Note 17). 105,000 Promissory note, bearing interest at 8%, unsecured and due on demand (see Note 17). 115,000 -------------- 305,000 Less current maturities 58,750 -------------- $ 246,250 ==============
Subsequent to March 31, 1998, the board of directors of the Company approved and issued 197,000 shares of its treasury stock, at $1.25 per share, to convert certain notes payable, related parties in the amount of $246,250 into equity (see Note 17). (12) INCOME TAXES: The current provision for income taxes in fiscal year 1998 is related to the minimum corporate state income taxes. As of March 31, 1998, the Company had net federal operating loss carryforwards and net state operating loss carryforwards totaling approximately $6,900,000 and $1,600,000, respectively. The net federal operating loss carryforwards expire in various years through 2013 and net state operating loss carryforwards expire in various years through 2003. The primary components of temporary differences which give rise to the Company's net deferred tax asset at March 31, approximate as follows: Deferred tax asset (liability): Net operating losses $ 2,500,000 Valuation allowance (2,500,000) -------------- Net deferred tax asset (liability) $ -- ==============
The valuation allowance increased by approximately $250,000 in 1998. See accompanying independent auditors' report. F-14 38 NUMEX CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 1998 (13) STOCK OPTION PLANS: On September 30, 1992, the stockholders approved a non-qualified stock option plan and an incentive stock option plan, pursuant to which a maximum aggregate of 1,000,000 shares of common stock have been reserved for grant to officers and key employees. Under both plans, the option price may not be less than the fair market value of the common stock on the date of grant. Options are exercisable over a five-year period beginning one year after the date of grant, and the option exercise period is not to exceed ten years from that date. As of March 31, 1998, the Company had 1,000,000 options granted under the non-qualified option plan to the Company's Chairman of the Board and a former officer, of which 970,000 options were fully vested and unexercised. These options may be exercised at prices ranging from $0.50 to $1.00 per share. Proforma information regarding net income and earnings per share under the fair value method has not been presented, as the amounts are immaterial. (14) RELATED PARTY TRANSACTIONS: During the year ended March 31, 1998, certain notes payable, related parties, in the amount of $1,672,290, were converted to 3,344,581 shares of restricted and unrestricted common stock. Interest expense to related parties was approximately $83,954 for the year ended March 31, 1998. (15) COMMITMENTS AND CONTINGENCIES: The inventor of the Product obtained a United States patent for the Product in February 1991. The Company and the patent owner entered into a license agreement (the "License Agreement") as of January 1, 1992. The License Agreement grants the Company an exclusive license to market, manufacture, and sell the Product in the United States and its possessions and territories for the remaining life of the patent which is currently twelve years. Thereafter, the design of the Product will be in the public domain, and the Company, as well as other companies, will have the right to market, manufacture, and sell the Product. The License Agreement also provides for royalties at rates ranging from $.50 per unit to $1.20 per unit depending on the method of distribution used. However, a minimum royalty of $125,000 is required to be paid during each calendar year of the term of the License Agreement whether or not the Company sells any units of the Product. See accompanying independent auditors' report. F-15 39 NUMEX CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 1998 (15) COMMITMENTS AND CONTINGENCIES, CONTINUED: At March 31, 1998, the Company owed the patent owner an aggregate of $356,600 in accrued royalties. Pursuant to the agreement, the obligations of the Company to pay royalty shall be stayed pending such period of governmental prohibition and as such, management made an adjustment of the prior year accruals on royalty estimates and recognized a gain as of March 31, 1998 in the amount of $356,600. The Company has obtained legal advice in support of the defenses available to them regarding the royalty estimate adjustment. (16) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Supplemental cash flow information for the year ended March 31 are as follows:
Three months Year ended ended June 30, March 31, 1998 -------------- -------------- 1998 1997 ---- ---- (unaudited) (unaudited) Cash paid for interest $ 590 $ 10,025 $ 43,610 Cash paid for income taxes -- -- 800
Non-cash financing activities for the year ended March 31 were as follows:
Three months Year ended ended June 30, March 31, 1998 -------------- -------------- 1998 1997 ---- ---- (unaudited) (unaudited) Conversion of promissory notes payable, related party, to 3,344,581 and 300,000 shares of common stock, respectively. $ -- $ -- $ 1,672,290 Conversion of promissory notes payable, others, to 1,251,888 shares of common stock. -- -- 625,943 Conversion of accounts payable to 22,150 shares of common stock -- -- -- Issuance of common stock in payment of legal services at $1.23 per share 171,930 -- -- Conversion of accrued compensation of a related party into common stock at $1.25 per share 300,000 -- -- Conversion of notes payable into shares of common stock at $1.25 per share 306,250 -- --
See accompanying independent auditors' report. F-16 40 NUMEX CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) YEAR ENDED MARCH 31, 1998 (17) SUBSEQUENT EVENTS: The Company has entered into an agreement with the original owners and an independent consultant (prior to acquisition by Numex Corporation) of ViaStar Marketing, Inc., to reacquire 300,000 shares, at cost, of the Company's common stock outstanding as of March 31, 1998. The Company had originally presented the issuance of restricted common stock as goodwill purchased in excess of fair market value from the acquisition of ViaStar Marketing, Inc. The unamortized carrying value of purchased goodwill (see Note 1) was charged against earnings for the year ended March 31, 1996. The board of directors of the Company approved and issued 140,000 shares of its treasury stock, at approximately $1.23, to a vendor for legal services rendered related to an acquisition target in the amount of $171,930 (see Note 8). The board of directors of the Company approved and issued 240,000 shares of its treasury stock, at $1.25, to convert the accrued officer-stockholder compensation obligation of $300,000 (see Note 9). The board of directors of the Company approved and issued 197,000 shares of its treasury stock, at $1.25 per share, to convert $246,250 of notes payable, related parties, as presented in the balance sheet, into equity (see Note 11). The Company also issued 48,000 shares of treasury stock, at $1.25 per share, to convert $60,000 of additional notes payable, related parties issued after March 31, 1998. See accompanying independent auditors' report. F-17 41 We have not authorized any dealer, salesperson or other person to give any information or represent anything not contained in this Prospectus. You must not rely on any unauthorized information. This Prospectus does not offer to sell any shares in any jurisdiction where it is unlawful. The information in this prospectus is current as of November 13, 1998. TABLE OF CONTENTS
Page ---- Where You Can Find More Information ..... 1 Summary ................................. 2 Risk Factors ............................ 3 Use Of Proceeds ......................... 7 Market For Common Equity And Related Stockholder Matters ............. 7 Selling Stockholders .................... 8 Plan Of Distribution .................... 10 Management's Discussion And Analysis Of Financial Condition And Results Of Operation .................... 10 Business ................................ 14 Management .............................. 16 Executive Compensation .................. 17 Certain Relationships And Related Transactions .................... 17 Security Ownership Of Certain Beneficial Owners And Management ........... 18 Legal Proceedings ....................... 19 Changes In And Disagreements With Accountants On Accounting and Financial Disclosure ............ 19 Disclosure Of Commission Position On Indemnification Of Securities Act Liabilities ..................... 20 Legal Matters ........................... 20 Experts ................................. 20
UNTIL DECEMBER 8, 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE THESE SECURITIES MAY BE REQUIRED TO DELIVER A PROSPECTUS. 5,210,506 Shares of Common Stock NUMEX CORPORATION - -------------------------------------------------------------------------------- PROSPECTUS NOVEMBER 13, 1998 - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----