UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO.1-10KSB/A
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001.
Commission file number 0-30215
Safari Associates, Inc.
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Name of small business issuer in its charter
Utah Fed ID 87-9369569
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or Organization)
64 Edson Street, Amsterdam, New York 12010
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(Address of principal executive offices) (Zip)
Issuer's telephone number (518) 842-6500
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
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(Title of class)
Indicate by check mark, whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
during the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark , if disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained herein and 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 [X]
1
Revenue for the fiscal year ended December 31, 2001 is $348,460
The aggregate market value of the voting stock held by non-affiliates of the
registrant based on the closing bid price of such stock as of March 7, 2002
amounted to $1,125,005
The number of shares outstanding of each of the registrant's classes of common
stock as of December 31, 2001 was 9,331,712 shares.
DOCUMENTS INCORPORATED BY REFERENCE
None
FORM 10-KSB
FISCAL YEAR ENDED DECEMBER 31, 2001
DOCUMENTS INCORPORATED BY REFERENCE
TABLE OF CONTENTS
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Part I
Page
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Item 1. Description of Business. 3
Item 2. Description of Property. 6
Item 3. Legal Proceedings. 7
Item 4. Submission of Matters to Vote of Security Holders. 8
Part II
Item 5. Market for Common Equity and Related Stockholder Matters. 8
Item 6. Management's Discussion and Analysis or Plan of Operation. 9
Item 7. Financial Statements. 10
Item 8. Changes in and Disagreements With Accountants Accounting
And Financial Disclosure. 10
2
Part III
Item 9. Directors, Executive Officers, Promoters, and Control Persons;
Compliance with Section 16(a) of the Exchange Act. 11
Item 10. Executive Compensation. 11
Item 11. Security Ownership of Certain Beneficial Owners and Management. 11
Item 12. Certain Relationships and Related Transactions. 12
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 12
Signatures 13
PART 1
ITEM 1. DESCRIPTION OF BUSINESS
Safari Associates, Inc., (the "Company") is the successor corporation of
Mag Enterprises, Inc., a Utah corporation incorporated on July 30, 1980. Mag
Enterprises, Inc., issued a total of 600,000 shares of its $0.001 par value
common stock to its officers, directors and founders. In August, 1980, the
Company offered 2,000,000 shares of its common stock, par value $0.001, a6 $0.25
a share pursuant to an original Offering Circular having an effective date of
August 7, 1980. The Offering Circular was filed with the Utah Securities
Commission. The offer was made pursuant to a Section 3(a)(11) exemption from
registration of the Securities Act of 1933, as amended. The entire offering was
sold resulting in net proceeds to the Company of $44,000. Thereafter, on or
about July 5, 1981, the shares of common stock of the Company became eligible
for interstate trading. From on or about July 5, 1981 through December, 1986,
the Company's sole asset and business was the owning of mining leases. From 1983
until on or about April, 1988, Mag Enterprises, Inc., was listed in the Pink
Sheets of the National Quotation Bureau. From its inception in 1980 through
November, 1986, the Company was virtually dormant. In December, 1986, the
Company acquired all of the issued and outstanding common stock of American
International Airboat Company, Inc., a Florida corporation that manufactured and
sold aluminum airboats. In late 1987, American International Airboat Company,
Inc., had its assets seized and sold for unpaid federal taxes. Mag Enterprises,
Inc., reverted to being a corporation without any active business.
That on or about August 10, 1993, Mag Enterprises, Inc., entered into an
Agreement and Plan of Reorganization with the owners of all of the issued and
outstanding common stock of Safari Enterprises, Inc., a Delaware corporation. At
the time, Safari Enterprises, Inc., had two wholly owned subsidiaries; Safari
Boat Company, Inc., and Safari Lure Company, Inc., both subsidiaries organized
and existing under and pursuant to the laws of the State of New York. On the
date of the Agreement and Plan of Reorganization, Mag Enterprises, Inc., had
authorized capital of 100,000,000 common shares, $0.0001 par value of which
5,500,000 shares were issued and outstanding, fully paid and non-assessable.
Pursuant to the Agreement and Plan of Reorganization, the stockholders of Mag
Enterprises, Inc., voted their stock to effectuate a 1 for 10 reverse split and
to increase the par value per share to $0.001 so that on the date of the
closing, the total number of shares of Mag Enterprises, Inc., common stock,
issued and outstanding was 550,000, $0.001 par value. That at the closing, the
stockholders of Safari Enterprises, Inc., were issued a total of 4,950,000
restricted shares of common stock of Mag Enterprises, Inc., having a par value
of $0.001. The total number of shares of common stock, $0.001 par value, issued
and outstanding after the closing was 5,500,000 shares.
3
On September 10, 1993, Articles of Amendment to the Articles of Incorporation of
Mag Enterprises, Inc., were filed with the State of Utah, Department of
Commerce, Division of Corporations and Commercial Code to change its name from
Mag Enterprises, Inc., to Safari Associates, Inc.
By and Offering Memorandum dated December 7, 1993, the Company offered for sale
600,000 shares of its common stock, par value $0.001, at a price of $0.50 per
share. The shares were sold to a total of fifty individual investors. The
offering was made in accordance with an exemption from registration with the
United States Securities and Exchange Commission pursuant to the terms and
conditions of Regulation D, Section 230.504 of the Securities Act of 1933, as
amended.
By an Offering Memorandum dated October 14, 1994, the Company offered for sale
350,000 shares of its common stock, par value $0.001, at a price of $1.50 per
share. The total number of shares offered were sold to individual investors. The
offering was made in accordance with an exemption from registration with the
United States Securities and Exchange Commission pursuant to the terms of
Regulation D, Section 230.504 of the Securities Act of 1933, as amended.
From 1993 through 1996, the Company had two operating wholly owned subsidiaries.
These were Safari Boat Company, Inc., and Safari Lure Company, Inc. Safari Boat
Company, Inc., manufactured and distributed a fiber glass Jon Boat. Safari Lure
Company, Inc., distributed cedar wood fishing lures. By the end of 1996,
management of the Company decided that both of these subsidiaries could not
generate sufficient sales or profits to merit continuing their operations. The
operations of both wholly owned subsidiaries were discontinued by the end of
1996.
The Company now has four wholly owned operating subsidiaries., Safari Camera
Corporation, Photography For Evidence, Inc., Impact Dampening Technology, Inc.,
and Safari Target Corporation. The Company also owns all of the issued and
outstanding common stock of Safari Enterprises, Inc. and Shoothru, Inc.
Safari Camera Corporation, a New York corporation, was organized on March 2,
1998. It is in the business of reloading single-use (disposable) cameras, which
it sells to distributors, retail stores and for promotions.
Photography For Evidence, Inc., a New York corporation was organized on November
25, 1997. The Company filed a Certificate of Doing Business under the name Smith
& Wesson Cameras on December 17, 1997. Smith & Wesson Cameras has an exclusive
license from Smith & Wesson Corp., to make, use and sell single-use (disposable)
cameras and conventional film using cameras under the Smith & Wesson brand
name. Smith & Wesson Cameras markets its single-use (disposable) cameras to
federal, state and local law enforcement agencies. Effective September 1, 2000,
Safari Associates, Inc., was awarded a five year contract by the United States
General Services Administration (Contract #GS-07F-0434K) to sell these cameras
to federal and state law enforcement agencies.
Impact Dampening Technology, Inc., a New York corporation, was organized on
January 29, 1998. The company filed a Certificate of Doing Business under the
name Smith & Wesson Recoil Pad Company on February 10, 1998. Smith & Wesson
Recoil Pad Company has an exclusive license from Smith & Wesson Corp., to make,
use and sell recoil pads under the Smith & Wesson brand name. Effective
September I, 2000, Safari Associates, Inc., was awarded a five year contract by
the United States General Services Administration (Contract #GS-07F-0434K) to
sell its self-adhesive Smith & Wesson shoulder recoil pad to federal and state
law enforcement agencies.
Safari Target Corporation was organized under and pursuant to the laws of the
State of New York on August 2, 1999. It filed a Certificate of Doing Business
under the name Smith & Wesson Targets on August 20, 1999. Smith & Wesson
Targets has an exclusive license from Smith & Wesson Corp., to make use and
sell targets under the Smith & Wesson brand name. Smith & Wesson Targets
distributes a series of self sealing targets, intended to replace steel targets.
Effective September 1, 2000, Safari Associates, Inc., was awarded a five year
contract by the United States General Services Administration (Contract
#GS-07F-0434K) to sell the Smith & Wesson self sealing targets to federal and
state law enforcement agencies.
4
Safari Camera Corporation is in the business of reloading single-use
(disposable) cameras which it sells to distributors, retailers and for
promotions. The company purchases used (disposable) camera shells from photo
labs and others and reloads these cameras with film and if a flash camera, with
a battery. Batteries and film are purchased from battery and film manufacturers
and distributors. These reloaded single-use cameras are then placed in new
packaging and sold. Some packaging is private label for retailers, distributors
and for promotions. Other cameras are sold in generic SAFARI packaging. The raw
materials required for this business are camera shells, batteries and film. This
business is highly competitive as to pricing and purchasing single-use camera
shells. The company has limited its distribution and solicits small niche
markets so as to try to avoid the competition for camera shells and customers.
Safari Camera Corporation also reloads single-use cameras for Smith & Wesson
Cameras.
The company solicits its customers through sales representatives, direct mail
and through e-commerce. At the present time, Sierra Sales & Marketing accounts
for more than fifty percent of the company's business. If Safari Camera
Corporation were to lose Sierra Sales & Marketing as a customer, it would most
likely have to discontinue business.
The Company averages eight full time employees. These employees devote
approximately ninety (90%) percent of their time to the operations of Safari
Camera Corporation. The remainder of their time is devoted to the businesses of
the three other operating wholly owned subsidiaries. The operations of the
Company and its three wholly owned operating subsidiaries are located at 64
Edson Street, Amsterdam, New York 12010. (See Item 2. "Description of
Property").
On or about February 13, 1998, Fuji Photo Film Co., Tokyo, Japan, filed a
complaint with the United States International Trade Commission (ITC) charging
that certain Asian manufacturers and reloaders of single-use cameras and United
States importers of those cameras were infringing on fifteen United States
patents of Fujifilm that allegedly cover the manufacture of single-use cameras.
On or about April 21, 1999, the ITC ruled in favor of Fuji. The case is now on
appeal in the United States Court of Appeals for the Circuit of Washington, D.C.
The appeal has still not been argued. Should Fuji prevail, the decision would
not be binding upon United States reloaders of single-use cameras. However, the
decision would be persuasive precedent as to United States reloaders. Should
Fuji prevail on appeal and thereafter bring lawsuits for patent infringement
against United States reloaders of single-use cameras, including Safari Camera
Corporation, the company may have to discontinue it reloading operations.
Smith & Wesson Cameras is an exclusive licensee of Smith & Wesson Corp. It
distributes single-use cameras to law enforcement agencies. The cameras are
reloaded by Safari Camera Corporation. Sales are generated through direct mail
advertising, trade shows and its United States General Services Administration
contract. A royalty of five (5%) percent of gross sales is paid to Smith &
Wesson Corp. The business operations of Smith & Wesson Cameras are subject to
the same risks as set forth for Safari Camera Corporation.
Smith & Wesson Recoil Pad Company is an exclusive licensee of Smith & Wesson
Corp. It has private label recoil pads manufactured by Hartlee Systems, Inc. The
recoil pads are designed by Smith & Wesson Recoil Pad Company and the molds
necessary to manufacture the recoil pads are purchased by Smith & Wesson Recoil
Pad Company. It distributes these pads under the Smith & Wesson brand name. Two
models of recoil pads are manufactured for the company. The "Safari" model is
conventional as it is fitted to the butt of the stock of a shotgun or rifle. The
Smith & Wesson self-adhesive shoulder recoil pad is unique as it self adheres
to the outer garment being worn by the user. On September 23, 1999, Smith &
Wesson Recoil Pad Company, entered into a consulting agreement with Mark
Hendricks with regard to the design of new recoil pads. On September , 2000,
the Company entered into a consulting agreement with Jan Barani, with regard to
the development of coatings for its Smith & Wesson recoil pads. The Company now
offers the self-adhesive shoulder recoil pad to federal and state law
enforcement agencies pursuant to its contract with the United States General
Services Administration, Contract #GS-07F-0434K that became effective on
September 1, 2000. These recoil pads are still in test marketing and no decision
has been reached as to whether the company will expand its efforts beyond test
marketing at this time. Also, at this time, the Company does not have the
financial resources necessary to go beyond test marketing should it decide that
it would be in the best interest of the company to do so. Furthermore, the
company does not have any reason to believe that it will be able to raise the
capital to go beyond the test marketing phase of the business or that should it
5
raise such capital, it could do so on terms favorable to the company or that it
could compete succesfully with other companies that have been in the market for
many years.
Smith & Wesson Targets has an exclusive license from Smith & Wesson Corp., to
make, use and sell targets under the Smith & Wesson brand name. At the present
time the company is test marketing a self-sealing plastic target that is
intended to replace steel targets. Unlike steel targets, the Smith & Wesson
self-sealing targets allow a bullet to pass through when the target is struck.
The user knows that the target is struck as it moves when hit by the bullet.
With steel targets, when the target is struck by a bullet, there is a danger of
ricochet, splatter and fragmentation of the bullet, which can strike and injure
the shooter or someone in the vicinity of the shooter. With the Smith & Wesson
self-sealing targets, the bullet passes through the target into a safety zone
without any danger of injury as the bullet does not ricochet, splatter or
fragment. These targets are manufactured for Smith & Wesson Targets by Creative
Urethanes, Inc. Smith & Wesson Targets owns the molds with which the targets
are manufactured. The company is developing a line of variously shaped targets
and is still at the test marketing stage of its business. Some of the targets
are designed to knock-down and others to knock-down and spring back up when
struck by a bullet. Others wiggle when struck by a bullet. The market for these
targets now appears to be very small but may increase if their safety factor
over steel targets dictates their use. The company has not advertised these
targets for more than a year. The Company was awarded a five year contract for
these targets by the United States General Services Administration effective
September 1, 2000, for sale to federal and state law enforcement agencies. This
is part of Contract #GS-07F-0434K. Should circumstances indicate that the
company should go beyond test marketing of these targets, the company would have
to obtain capital for advertising, manufacture and inventory. At this time the
Company does not have the capital necessary for any of the foregoing and does
not know whether it will be able to raise such capital, if necessary, or
whether, if it could raise the capital, it can do so on terms favorable to the
Company that would make it feasible to risk the capital in an attempt to
increase its sales.
Shoothru, Inc., a New Jersey corporation, was acquired by the Company in March,
1998. Shoothru, Inc., developed and designed a small product line of
self-sealing targets. The operations of Shoothru, Inc., are now conducted by
Smith & Wesson Targets.
On January 1, 1998, Smith & Wesson Corp., Springfield, Massachusetts, granted
Safari Enterprises, Inc., an exclusive Trademark License to make, use and sell
single-use and conventional film using still cameras under the Smith & Wesson
brand name in the United States, its possessions and Canada. The term of the
license is from January 1, 1998 to June 30, 2001. The license agreement
provides that Safari Enterprises, Inc., will pay Smith & Wesson Corp., a
minimum royalty of $15,000 the first eighteen months; $25,000 the next twelve
months and $35,000 the final twelve months. The minimums are to be paid against
a royalty of 5% of net sales, whichever is greater. By oral agreement, the
minimum royalty had been kept at $8,664 a year during the term of the license
agreement to December 31, 2000 and $2,500 a quarter thereafter. That minimum
payment has been made and accepted during the entire life of the license
agreement. The license agreement further provides that Safari Enterprises, Inc.,
can assign the license to an affiliate company under the same control as Safari
Enterprises, Inc. On January 12, 1998, the License was amended by adding recoil
pads for firearms effective January 1, 1998. The minimum royalty was not
increased and covered both products. On May 18, 1999, the License was further
amended to include targets for firearms effective January 1, 1998. Again, the
minimum royalties were not increased and covered all three products. On November
25, 1997 the Company organized a wholly owned subsidiary, Photography For
Evidence, Inc., under the laws of the state of New York. On December 17, 1997,
Photography For Evidence, Inc., filed a Certificate of Doing Business under the
name Smith & Wesson Cameras. The License Agreement was assigned the Smith &
Wesson Cameras. On January 29, 1998, the Company organized a wholly owned
subsidiary, Impact Dampening Technologies, Inc., a New York corporation. On
February 10, 1998, Impact Dampening Technologies, Inc., filed a Certificate of
Doing Business under the name Smith & Wesson Recoil Pad Company. Safari
Enterprises, Inc., assigned its exclusive recoil pad license to Smith & Wesson
Recoil Pad Company. On August 2, 1999 the Company organized Safari Target
Corporation under the laws of the State of New York. On August 20, 1999, Safari
Target Corporation filed a Certificate of Doing Business under the name Smith &
Wesson Targets. Safari Enterprises, Inc., assigned its target license to Smith
& Wesson Targets.
6
On February 3, 2002, the Company leased a plant in Greenwood, Indiana in which
it will produce Molecuthane products. (See: Part 1, Item 2. Description of
Property). Molecuthane is a multi layered synthetic material designed by the
Company to protect individuals and objects from injury, discomfort and damage
caused by kinetic force. The material is formulated to give the ultimate
protection required for each specific application. Using molecular cross-
linking, separate layers of Molecuthane, each layer formulated to achieve a
defined result, are joined together into one unit. In effect, the unit is a
system because of the integrated action of each layer with the other layers. The
Company filed a trade mark application with the United States Patent and
Trademark Office designating the material as Molecuthane. The material's
primary use is to protect against injury and discomfort whenever kinetic force
from an impact or vibration resulting from an impact can cause injury or
discomfort to an individual or damage to property.
In November, 2001, the Company granted Archangel International, Inc., exclusive
distribution of its Moecuthane body armor inserts. The purpose of the inserts is
to prevent injury to the wearer of a bullet proof vest if struck by a bullet
that does not penetrate the vest as this can cause blunt force trauma injuries.
The distribution agreement provides in substance that commencing with the date
that the Company is in production of the Molecuthane body armor inserts,
Archangel International, Inc., will distribute $10 million in the inserts during
the first year of production with an increase of ten (10%) percent in each of
the remaining two years of the agreement. In the event that Archangel
International fails to meet its minimums, the Company has the option of
terminating the distribution agreement. The Company is not in production of its
Molecuthane body armor inserts at this time.
ITEM 2. DESCRIPTION OF PROPERTY.
The principal office and plant of the Company and its wholly owned subsidiaries
is located at 64 Edson Street, Amsterdam, New York. It is the location where
Safari Camera Corporation reloads single-use (disposable) cameras, inventories
and from which its ships the products produced and distributed by the Company
and its wholly owned subsidiaries, Smith & Wesson Targets, Smith & Wesson
Cameras and Smith & Wesson Recoil Pad Company. The entire building is occupied
by the Company and its wholly owned subsidiaries. The building had been owned by
Safari Enterprises, Inc. with a mortgage held by the Amsterdam Industrial
Development Agency, which foreclosed upon the building for non payment of the
mortgage. A foreclosure sale was held on October 26, 2000, and Safari
Associates, Inc., was the high bidder at said sale, bidding $91,968.56. On
December 22, 2000, the Company closed pursuant to the terms of its bid and
acquired title to the premises on December 22, 2000. On May 18, 2001, the
Company sold the premises to Tony Courtney and Craig Walls for $92,000 and
entered into a ten year leaseback with an option to purchase. The monthly rental
is $1,141.82 plus real estate and other taxes applicable to said premises. The
Company has an option to buy back the premises.
The premises are a two story concrete block building on approximately two acres
of land located in the Amsterdam Industrial Development Park. It has 5,000
square feet on the first floor and 1,500 square feet on the second floor.
Approximately 4,000 square feet on the first floor is used for the reloading of
cameras, assembly of targets, packaging of recoil pads and storage of inventory.
The remainder of the space on the first floor contains three offices, two
bathrooms and an entrance hall. The second floor contains an employee kitchen
and general open work and storage space.
On or about February 3, 2002, the Company leased premises No. 410 East Main
Street, Greenwood, Indiana for a term of one years at a rental of $1,000 a
month. It is at these premises that the Company is establishing its plant to
manufacture Molecuthane products. The premises are a one story building
containing approximately 2,800 square feet.
On December 31, 2001, Craig Walls, who, at the time was the sole owner of United
States Patent No. 6,003,609, bearing date December 21, 1999, did assign said
Patent to the Company. The assignment was filed with the United States Patent
and Trademark Office on or about February 26, 2002. The Patent covers a fire
safety device for controlling the spread of fire in a structure. The invention
comprises a base plate, a smoke detector, a syringe, and a cover. The syringe
has a reservoir containing a fire retardant chemical. A fuse link holder has a
melting fuse that maintains a plunger assembly in position and a spring is
7
loaded behind the plunger. The syringe also has a nozzle in open communication
with a supply line, which is in open communication to the reservoir. When a
sufficiently high ambient temperature is reached, the fuse link melts, releasing
the piston rod from the fuse link and allowing the coil spring to urge the
plunger toward the other end of the syringe and forcing the fire-retardant
chemical from the nozzle. When smoke is present, the smoke detector sounds an
audible alarm.
The Company has no policy with respect to investments in real estate or
interests in real estate and no policy with respect to investments in real
estate mortgages. Further, the Company has no policy with respect to investments
in securities of or interests in persons primarily engaged in real estate
activities.
ITEM 3. LEGAL PROCEEDINGS.
NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted during the fourth quarter of the fiscal year covered by
this report, or for the entire fiscal year, to a vote of security holders,
through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market Information
The Company's Common Stock is traded over-the-counter on the Electronic Bulletin
Board maintained the National Association of Securities Dealers under the
symbol "SAFR". There is no assurance that the Common Stock will continue to be
quoted or that any liquidity exists for the Company's shareholders.
The following table sets forth the quarterly quotes of high and low prices for
the Company's Common Stock on the OTC Bulletin Board during the fiscal years
2000 and 2001.
Fiscal 2001 High Low
March 31, 2001 $0.37 $0.14
June 30, 2001 $0.60 $0.22
September 30, 2001 $0.88 $0.45
December 31, 2001 $0.75 $0.33
Fiscal 2000 High Low
March 31, 2000 $0.437 $0.25
June 30, 2000 $0.45 $0.19
September 30, 2000 $0.43 $0.25
December 31, 2000 $0.31 $0.12
8
The source of this information is Bloomberg Quotation Services and
broker-dealers making a market in the Company's Common Stock. These prices
reflect inter-dealer prices, without retail markup, mark-down or commission and
may not represent actual transactions.
(b) Holders
As of December 31, 2001, there were approximately 250 stockholders of record of
the Company's Common Stock. The number does not include beneficial owners who
held shares at broker/dealers in "street name"
(c) Dividends
The Company has paid no cash dividends on its Common Stock and management does
not anticipate that such dividends will be paid in the foreseeable future.
(d) Recent Sales of Unregistered Securities.
During the past year, the Company sold restricted shares of its $0.001 par value
Common Stock without registering the securities under the Securities Act of
1933, as amended.
On or about February 14, 2001, the Company issued 25,000 shares of its par value
$0.001 restricted Common Stock to Jan Barani, a chemist, in consideration of a
three year consulting agreement during which the consultant is to render
services regarding the Company's development of Molecuthane products. Mr. Barini
executed an investment letter upon which the Company relied to establish that
the transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
On or about March 3, 2001, the Company sold 144,142 shares of its par value
$0.001 restricted Common Stock to Lillian Berger, Secretary-Treasurer of the
Company at a price of $0.125 a share. Mrs Berger executed an investment letter
upon which the Company relied to establish that the transaction was exempt fro
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
No broker or underwriter was involved in the transaction and no commission was
paid. The proceeds were used for working capital
On or about March 27, 2001, the Company issued 25,000 shares of its par value
$0.001 restricted Common Stock to Robert Tolve in consideration of a three year
consulting agreement during which the Consultant is to render consulting
services relating to the Company's printing and packaging requirements. Mr.
Tolve executed an investment letter upon which the Company relied to establish
that the transaction was exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933, as amended.
On or about March 31, 2001, the Company issued 25,000 shares of its par value
$0.001 restricted Common Stock to Clete Boyer in consideration of a three year
consulting agreement during which the Consultant is to render consulting servies
relating to the Company's development of Molecuthane products for use in the
sport of baseball. Mr. Boyer executed an investment letter upon which the
Company relied to establish that the transaction was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended.
On or about March 31, 2001, the Company issued 300,000 shares of its par value
$0.001 restricted Common Stock to Riverene Corporation in consideration of a
three year consulting agreement during which the Consultant is to render
services in the development of Molecuthane products. The Consultant executed an
investment letter upon which the Company relied to establish that the
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
On or about June 30, 2001, the Company issued 200,000 shares of its par value
$0.001 restricted Common Stock to Tony Courtney in payment for an option to
purchase premises 64 Edson Street, Amsterdam, NY. Mr. Courtney executed an
investment letter upon which the Company relied to establish that the
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
9
On or about July 23, 2001, the Company sold 50,000 shares of its par value
$0.001 restricted Common Stock to Morton Berger, President of the Company, at a
price of $0.20 a share. Mr. Berger executed an investment letter upon which the
Company relied to establish that the transaction was exempt from registration
pursuant to the Securities Act of 1933, as amended. No broker or underwriter was
involved in the transaction and no commission was paid. The proceeds were used
for working capital.
On or about August 6, 2001, the Company sold 40,000 shares of its par value
$0.001 restricted Common Stock to Nelson A. Fisher and Louise Fisher, his wife,
at a price of $0.25 a share. Mr. And Mrs. Executed an investment letter upon
which the Company relied to establish that the transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
No broker or underwriter was involved in the transaction and no commission was
paid. The proceeds were used for working capital.
On or about August 16, 2001, the Company sold 180,000 shares of its par value
$0.001 restricted Common Stock to John J. Bruno at a price of $0.37a share. Mr.
Bruno executed an investment letter upon which the Company relied to establish
that the transaction was exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933, as amended. No broker or underwriter was involved in
the transaction and no commission was paid. The proceeds were used for working
capital by paying a current liability of the Company owed to Mr. Bruno.
On or about August 16, 2001, the Company sold 12,000 shares of its par value
$0.001 restricted Common Stock to Joseph E. Anderson at a price of $0.25 a
share. Mr. Anderson executed an investment letter upon which the Company relied
to establish that the transaction was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended. No broker or underwriter
was involved in the transaction and no commission was paid. The proceeds were
used for working capital.
On or about September 20, 2001, the Company sold 10,000 shares of its par value
$0.001 restricted common stock to Nelson A. Fisher and Louise Fisher, his wife,
at a price of $0.25 a share. Mr. And Mrs. Fisher executed an investment letter
upon which the Company relied to establish that the transaction was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
No broker or underwriter was involved in the transaction and no commission was
paid. The proceeds were used for working capital.
On or about October 5, 2001, the Company paid Brian Van Deman for consulting
services by issuing to him 10,000 shares of its par value $0.001 restricted
Common Stock. Mr. Van Deman executed an investment letter upon which the Company
relied to establish that the transaction was exempt from registration pursuant
to Section 4(2) of the Securities Act of 1933, as amended.
On or about December 18, 2001, the Company sold 50,000 shares of its par value
$0.001 restricted Common Stock to James Dion at $.038 a share. Mr. Dion executed
an investment letter upon which the Company relied to establish that the
transaction was exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended. No broker or underwriter was involved in the
transaction and no commission was paid. The proceeds were used for working
capital.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Revenue for the year ended December 31, 2001, was $348,460, a decrease of
$421,120 or 54.7% from the year ended December 31, 2000. There were several
factors that caused the decrease including (a) loss of a major distributor of
the Company's single-use cameras, (b) another major customer no longer carries
private label single-use cameras and (c) general weakness in the economy,
especially in the travel and leisure area. Also, the Company has not invested
any resources in the production or distribution of targets and recoil pads.
Cost of sales for the year ended December 31, 2001, was 126.6% of revenue
resulting in a gross loss of 26.6%. Included in cost of sales for the year ended
December 31, 2001 was a write off of approximately $85,000 of prepaid obsolete
packaging materials. Labor costs as a percentage of sales increased by over 12%.
10
Excess workers were laid off but it was necessary for the Company to retain
certain personnel. Cost of sales for the year ended December 31, 2000 was 86.8%
resulting in a gross profit of 13.2%.
Operating expenses for the year ended December 31,2001 were $308,304 compared to
$245,437 for the year ended December 31,2000, an increase of &62,867. Selling
expenses increased by &3,256. General and administrative expenses increased by
$60,553. Major increases included $35,000 for a plant manager ,rent increased by
$7,000 and utilities increased by $5,000. On June 19,2001, the Company sold it
premises at 64 Edson Street in Amsterdam,N.Y., and leased back the property on a
month to month basis. The Company received proceed of $86,324 from the sale of
the property and recorded a loss of $72,049. In January 2001,Safari Enterprises
Inc., a subsidiary of the Company was liquidated under Chapter 7 of the Federal
Bankruptcy Code. As a ,result, the Company recorded income from the reductions
of liabilities of $103,558.
Interest expense for the year ended December 31,2001 was $47,901 compared to
$22,959 for the year ended December 31,2000, an increase of $24,942. The
increase in interest expense resulted from converting current liabilities and
deferred compensation into convertible notes.
Liquidity and Capital Resources
----------------------------------
As of December 31, 2001 current liabilities exceeded current assets by $347,684.
Approximately $30,000 of the current liabilities were paid by Lillian Berger,
Secretary-Treasurer of the Company in January, 2002 and replaced by a long term
loan. The Company has reduced monthly cash operating expenses to approximately
$9,000 per month. The Company expects to generate a gross profit from sale of
single-use cameras of approximately $3,000 a month resulting in a cash shortfall
of $72,000. The Company is pursuing several methods of financing the shortfall.
There is no assurance that the Company will be able to raise the additional
equity capital or that doing so will not create dilution to present
stockholders. Also, even if the Company is successful, there is no assurance
that the Company will be able to continue as a going concern.
ITEM 7. FINANCIAL STATEMENTS.
The information required by this item is incorporated by reference to pages F-1
through F-14 of this annual report on Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Name Age Position With Company Year First Became
---- --- ----------------------- -------------------
Director or Officer
-------------------
Morton Berger 73 President/Director 1986
Lillian Berger 71 Secretary/Director 1986
Each director serves until the next annual meeting of shareholders and until his
or her respective successor is duly elected and qualifies. Executive officers
are elected by the Board of Directors to serve at the discretion of the
directors.
11
MORTON BERGER-President/Director-He has been an officer and director of the
Company since 1986. He has been the chief operating officer of the Company since
September, 1986. Mr. Berger graduated from New York University Law School in
June, 1952. He is the husband of Lillian Berger, the Secretary/Treasurer and
Director. On May 29, 2001, Morton Berger, President of the Company sold 15, 687
shares of the Company's Common Stock pursuant to Rule 144 of the Securities Act
of 1933, as amended. On September 26, 2001, He sold 25,000 shares of the
Company's Common Stock pursuant to Rule 144 of the Securities Act of 1933, as
amended. Pursuant to Section 16(a) and 23(a) of the Securities Exchange Act of
1934, he was required to file a Form 4 with the United States Securities and
Exchange Commission as he was a control person as defined by the Act. The Form 4
sets forth and discloses changes of beneficial ownership of his Common Stock of
the Company. Morton Berger failed to make the requisite filings. The proceeds of
the sales were loaned to the Company by Morton Berger.
LILLIAN BERGER- Secretary-Treasurer- She has been an officer and director of the
Company since 1986. She graduated from Hunter College in June, 1951, Phi Beta
Kappa and Cum Laude. Her major at Hunter College was economics and she was
president of the Economics Society. She holds a Common Branches License in the
state of New York as to teach up to the eighth grade. She taught in the New
York City Public School system from September, 1952 to June, 1957 . Thereafter,
she taught in the Port Chester New York Public School system from September 1967
to June 1986. She then retired and has worked as a substitute teacher and school
aid at different times to date. She is the wife of Morton Berger, the president
of the Company.
On February 20, 2001, Lillian Berger, Secretary-Treasurer, Director and owner of
more than 10% of the Company's issued and outstanding Common Stock, sold 66,800
shares of the Company's Common Stock pursuant to Rule 144 of the Securities Act
of 1933, as amended. Pursuant to Section 16(a) and 23(a) of the Securities
Exchange Act of 1934, she was required to file a Form 4 with the United States
Securities and Exchange Commission as she is a control person as defined in the
Act. The Form 4 sets forth and discloses changes of beneficial ownership of her
Common Stock of the Company. Lillian Berger failed to make the requisite filing.
On March 3, 2001, Lillian Berger purchased 144,142 shares of the Company's
restricted Common Stock for $18,000. The purchase of said stock was exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
She failed to make the requisite filing pursuant to Section 16(a) and 23(a) of a
Form 4.
ITEM 10. EXECUTIVE COMPENSATION
No Company executive other than Morton Berger has drawn or accrued a salary.
Since April, 1994, Morton Berger has had an agreement to be paid a salary of
$1,000 a week. He has never been paid his full salary and has been accruing his
unpaid salary. From April 1, 1994 to December 31, 2000, the Company owes Morton
Berger, president of the Company, accrued salary in the amount of $377,000. On
August 9, 2001, he converted $355,000 of the accrued compensation into a
convertible note.(See note 5, financial statements.)
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of the date of this report, the stock
ownership of each person known by the Company to be the beneficial owner of five
percent or more of the Company's Common Stock, each executive officer and
director individually and all executive officers and directors of the Company as
a group. No other class of voting securities is outstanding. Each person is
believed to have sole voting and investment power over the shares except as
noted.
(a) Security ownership of certain beneficial owners
12
Title of Class Name and Address of Amount and Nature(1) Percent
-------------- ------------------- ----------------- -------
Beneficial Owner Of Beneficial Owner of Class (2)
---------------- ------------------- --------------
Common Lillian Berger(3)
13 Eastbourne Drive
Spring Valley, NY10977 4,154,142 44.5%
Common Morton Berger(4)
13 Eastbourne Drive
Spring Valley, NY 10977 286,243 3.1%
(b) Security ownership of management
Title of Class Name and Address of Amount and Nature(1) Percent
-------------- ------------------- ----------------- -------
Beneficial Owner Of Beneficial Owner of Class (2)
---------------- ------------------- --------------
Common Lillian Berger
13 Eastbourne Drive
Spring Valley, NY 10977 4,154,142 44.5%
Common Morton Berger
13 Eastbourne Drive
Spring Valley, NY 10977 286,243 3.1%
Common Includes all Officers and
Directors of the Company
As a group (2 persons) 4,440,385 47.6$%
(1) Includes the amount of shares each person or group has the right to acquire
within 60 days pursuant options, warrants, rights, conversion privileges or
similar obligations.
(2) Based upon 9,331,712 shares outstanding, plus the amount of shares each
person or group has the Right to acquire within 60 days pursuant to
options, warrants, rights, conversion privileges or similar Obligations.
(3) Lillian Berger is Secretary-Treasurer and a director of the Company.
(4) Morton Berger is President and a director of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report.
13
PAGE
----
1. Financial Statements
Report of Independent Certified Public Accountant F-2
Balance Sheet as of December 31, 2001 and 2000. F-3-
Statements of Operations for the years ended
December 31, 2001 and 2000. F-4
Statements of Changes in Stockholder' Equity
For the years ended December 31, 2001 and 2000. F-5
Statements of Cash Flows for the years ended
December 31, 2001 and 2000. F-6
Notes to Consolidated Financial Statement. F-7- F-14
(b) Exhibits
None
(c) Reports on Form 8-K
None
SIGNATURES
In Accordance with Section 13 and 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Safari Associates, Inc.
-----------------------
(Registrant)
By________________________________________
MORTON BERGER, PRESIDENT
Date: March 15, 2002
14
SAFARI ASSOCIATES, INC.
-------------------------
INDEX TO FINANCIAL STATEMENTS
--------------------------------
PAGE
----
Report of Independent Certified
Public Accountant. F-2
Consolidated Balance Sheet as of
December 31, 2001 F-3
Consolidated Statement of Operations for the
years ended December 31, 2001 and 2000. F-4
Consolidated Statement of Stockholders' (Deficit)
for the years ended December 31, 2001 and 2000. F-5
Consolidated Statement of Cash Flows for the years
Ended December 31, 2001 and 2000 F-6
Notes to Financial Statements. F-7 - F-14
F-1
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Safari Associates, Inc.
Amsterdam, NY
I have audited the accompanying consolidated balance sheets of Safari
Associates, Inc. and Subsidiaries as of December 31, 2001 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for each of the two years in the period ended December 31, 2001. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion of these financial statements on my
audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the consolidated 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 consolidated
financial statement presentation. I believe that my audits provide a reasonable
basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Safari Associates,
Inc. and Subsidiaries at December 31, 2001 and the results of their operations
and their cash flows for each of the two years in the period ended December 31,
2001 in conformity with generally accepted accounting principles.
The accompanying Financial Statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 10 to the Financial
Statements, the Company's recurring losses from operations and limited capital
resources raise substantial doubt about the Company's ability to continue as a
going concern. Management's plan in regards to these matters is also described
in Note 10. The Financial Statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Sanford Feibusch, CPA, P.C.
Monsey, New York
March 7, 2002
F-2
SAFARI ASSOCIATES, INC.
-------------------------
CONSOLIDATED BALANCE SHEET
----------------------------
DECEMBER 31, 2001
-------------------
<TABLE>
<CAPTION>
ASSETS
------
2001
-------------
CURRENT ASSETS:
---------------
<S> <C>
Cash $ 10,257
Accounts Receivable - 12,150
Inventory 56,092
Prepaid Expenses 56,610
-------------
Total Current Assets 135,109
-------------
PROPERTY, PLANT AND EQUIPMENT:
------------------------------
Net of accumulated depreciation of $18,306 16,941
-------------
OTHER ASSETS:
-------------
Goodwill - net of amortization of $5,472 21,883
Other Assets 95,764
-------------
Total Other Assets 117,647
-------------
Total Assets $ 269,697
=============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
---------------------------------------
CURRENT LIABILITIES:
--------------------
Notes Payable $ 20,000
Accounts Payable 357,506
Payroll and Other Taxes Payable 23,710
Accrued Expenses 81,577
-------------
Total Current Liabilities 482,793
-------------
OTHER LIABILITIES:
------------------
Convertible Notes Payable 505,500
Loan -Stockholder 17,039
-------------
Total Other Liabilities 522,539
-------------
Total Liabilities 1,005,332
-------------
Commitments and Contingencies - Note 10
STOCKHOLDERS' (DEFICIT):
------------------------
Common Stock, par value $.001 authorized
100,000,000 shares, issued and
outstanding 9,331,712 shares 9,332
Additional Paid-in Capital 1,640,361
Retained (Deficit) (2,385,328))
-------------
Total Stockholders (Deficit) (735,635)
-------------
Total Liabilities and Stockholders' (Deficit) $ 269,697
=============
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-3
SAFARI ASSOCIATES, INC.
-------------------------
CONSOLIDATED STATEMENT OF OPERATIONS
---------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
------------------------------------------------------
<TABLE>
<CAPTION>
2000 2001
----------- ---------------
<S> <C> <C>
Revenue $ 348,460 $ 769,580
Cost of Sales 441,303 668.455
----------- ---------------
Gross Profit (92,843) 101,125
----------- ---------------
OPERATING EXPENSES:
-------------------
Selling Expenses 24,732 21,476
General and Administrative Expenses 284,514 223,961
Loss on Disposal of Property 72,849 -
Gain from Discontinued operations (103,558) -
Research and Development costs 29,767 -
----------- ---------------
Total Operating Expenses 308,304 245,437
----------- ---------------
Net (Loss) from Operations (401,147) (144,312)
Interest Expense (47,901) (22,959)
----------- ---------------
Net (Loss) before Provision For Income Taxes (449,048) (167,271
)
Provision for Income Taxes - -
----------- ---------------
Net (Loss) $ (449,048) $ (167,271)
=========== ===============
Net (Loss) Per Common Share (.05) (.02)
=========== ===============
Weighted Average Shares Outstanding 9,198,512 8,044,604
=========== ===============
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
--------------------------------------------------------------------------------
F-4
SAFARI ASSOCIATES, INC.
-------------------------
CONSOLIDATED STATEMENT STOCKHOLDERS' (DEFICIT)
-------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
Par Value $.001 Paid-In Retained
Shares Amount Capital (Deficit)
------------- -------- ------------
<S> <C> <C> <C> <C>
Balance-January 1,2000 7,923,770 $ 7,924 $ 1,306,538 $ (1,769,009)
--------- -------- ------------ -------------
Private Placements 300,000 300 62,200
Net(Loss)for the Year
ended December 31,2000 (167,271)
--------- -------- ------------ -------------
Balance December 31,2000 8,223,770 8,224 1,368,738 (1,936,280)
Shares issued for consulting agreements 375,000 375 92,175
Shares issued upon conversion of notes 180,000 180 65,851
Shares issued for services rendered 10,000 10 2,490
Shares issued for option to repurchase
Property 200,000 200 39,800
Shares issued by private placement 342,942 343 71,307
Net (Loss) for the year
Ended December 31,2001 (449,048)
--------- -------- ------------ -------------
Balance December 31,2001 9,331,712 $ 9,332 $ 1,640,361 $ (2,385,328)
========= ======== ============ =============
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-5
SAFARI ASSOCIATES, INC.
-------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
----------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
------------------------------------------------------
<TABLE>
<CAPTION>
2001 2000
------------ ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
-------------------------------------
<S> <C> <C>
Net Income (Loss) $ (449,048) $(167,271)
Adjustment to Reconcile Net Income (Loss)
to net cash used in operating activities:
Depreciation and Amortization 8,599 11,187
Gain from discontinued operations (103,558) - .
Loss on sale of property 72,849 -
Stock issued for services 90,000 -
Changes in Operating Assets & Liabilities:
Accounts Receivable 26,252 29,426
Inventory 15,849 5,164
Prepaid Expenses and Other Assets (3,236) (39,136)
Accounts Payable 57,858 3,303
Payroll and Other Taxes Payable - (327)
Accrued Expenses 84,054 17,218
Deferred Compensation 34,450 52,000
------------ ----------
Net Cash Used in Operating Activities (166,931) (88,436)
------------ ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
-------------------------------------
Proceeds from sale of property 86,324 -
Property, Plant and Equipment - (15,542)
------------ ----------
Net Cash Used in Investing Activities 86,324 (15,542)
------------ ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
-------------------------------------
Issuance of Common Stock 71,700 62,500
Loans Stockholder 17,039 (4,452)
Mortgage Payable (40,000) (40,000)
Notes Payable 12,000 40,000
Capital lease obligations - (63,782)
------------ ----------
Net Cash Provided by Financing Activities 60,739 74,266
------------ ----------
Net Increase (Decrease) in Cash (19,868) (29,712)
Cash - Beginning of Year 30,125 59,837
------------ ----------
Cash - End of Year $ 10,257 $ 30,125
============ ==========
</TABLE>
The accompanying notes are an integral part of these Financial Statements.
F-6
SAFARI ASSOCIATES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
DECEMBER 31, 2001
-----------------
NOTE 1 - DESCRIPTION OF BUSINESS
-------------------------------------
Safari Associates, Inc. (the "Company"), a Utah Corporation was incorporated on
July 30, 1980. Since 1997, the Company has incorporated four wholly owned
operating subsidiaries; Safari Camera Corporation, Inc., which manufactures
recycled single use disposable cameras, selling to distributors and retail
stores; Photography for Evidence, Inc., doing business under the name Smith &
Wesson Cameras, sells recycled single use cameras to law enforcement agencies;
Impact Dampening Technology, Inc., doing business under the name Smith & Wesson
Targets, to manufacture and sell targets. In March 1998, the Company acquired
Shoothru, Inc., a company that developed and designed a product line of
self-sealing reactive targets.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-----------------------------------------------------------
CONSOLIDATION
-------------
The accompanying Consolidated Financial Statements include the accounts of the
Company and all its wholly owned subsidiaries. Intercompany transactions and
balances have been eliminated in consolidation.
INVENTORY
---------
Inventory is stated at the lower of cost, using the first-in, first-out basis or
market.
PROPERTY AND EQUIPMENT
------------------------
Property and equipment are recorded at cost and depreciated using the
straight-line method over their estimated useful lives. The cost of maintenance
and repairs is charged to operations as incurred.
INTANGIBLES
-----------
Goodwill represents the excess of the cost of companies acquired over the fair
value of their net assets at the dates of acquisition and was being amortized
using the straight-line method over 15 years. Effective to the issuance of FASB
No. 142, the Company discontinued amortizing goodwill.
The Company follows Statement of Financial Accounting Standard No.
121,Impairment of Long-lived Assets,by reviewing such assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.
INCOME TAXES
-------------
The Company records deferred income taxes using the liability method. Under the
liability method, deferred tax assets and liabilities are recognized for the
expected future tax consequences of temporary differences between the financial
statement and income tax basis of the Company's assets and liabilities. An
allowance is recorded, based on currently available information, when it is more
likely than not that any or all of a deferred tax asset will not be realized.
The provision for income taxes include taxes currently payable, if any, plus the
net change during the period presented in deferred tax assets and liabilities
recorded by the Company
F-7
SAFARI ASSOCIATES, INC.
-----------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 2001
-----------------
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
---------------------------------------------------------------------
PER SHARE DATA
----------------
The Company has adopted the standards set by the Financial Accounting Standards
Board and computes earnings per share data in accordance with SFAS No. 128
"Earning per Share." The basic per share data has been computed on the loss for
the period divided by the historic weighted average number of shares of common
stock outstanding. All potentially dilutive securities have been excluded from
the compilation since they would be antidilutive.
ESTIMATES AND ASSUMPTIONS
Preparing financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that effect
the reported amounts of assets,liabilities,revenue,and expenses at the balance
sheet date and for the period then ended.Actual results could differ from these
estimates
NOTE 3 - OTHER ASSETS
-------------------------
Other assets includes the following assets:
Prepaid consulting $ 52,709
Option to repurchase property 40,000
Trademarks 650
Security deposits 2,405
---------
Total $ 95.764
=========
Prepaid consulting expense arose from the issuance of 300,000 restricted shares
of the Company's common stock valued at $75,000 which is being amortized over
the life of the contract. The shares issued were fully vested upon the execution
of the contract.
NOTE 4 - DEFERRED COMPENSATION
----------------------------------
On April 1, 1994, the Company entered into an employment agreement with Mr.
Morton Berger, President and Director of the Company. The agreement called for a
base annual salary of $52,000. As of August 9, 2001, the Company owed Mr. Berger
$354,500. On August 9, 2001, the Company and Mr. Berger agreed that the total
liability would be converted into a convertible note (see note 5).
F-8
SAFARI ASSOCIATES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
DECEMBER 31, 2001
-------------------
NOTE 5 - INCOME TAXES
-------------------------
There is no provision for federal or state income taxes for the years ended
December 31, 2001 and 2000 since the Company has incurred operating losses.
Additionally, the Company has reserved fully for any potential future tax
benefits resulting from its carryforward operating losses. Deferred tax assets
at Dectember 30, 2001 and 2000 consist of the following:
2001 2000
-------- --------
Allowance for doubtful accounts $ - $ 9,600
Net Operating Loss Carryforward 777,000 683,600
Property and Equipment 3,000 10,000
-------- --------
780,000 634,600
Valuation Allowance 780,000 634,600
-------- --------
-0- $ -0-
======== ========
As of December 31, 2001, the Company has net unused operating loss carryforwards
of approximately $2,100,000, which expire in various years from 2002 through
2017.
NOTE 6 - NOTES PAYABLE
--------------------------
CONVERTIBLE NOTES PAYABLE
---------------------------
In 1996, the Company issued convertible notes to several individual investors
all except one which had been previously converted into restricted share of
common stock in the Company. On August 2, 2001, the remaining $15,000
convertible note plus all accrued interest on that note was converted into
restricted shares of common stock in the Company.
On December 20, 2000, one of the creditors of the Company agreed to receive a
note from the Company in the amount of $45,000 payable on December 19, 2002,
together with interest thereon at the rate of 8% per annum. Commencing one year
from the date of the note, the creditor may convert any portion of the note into
restricted share of common stock in the Company at a conversion rate of $.15
per share.
On August 9, 2001 the Company and three individuals agreed to convert a total of
$460,000 of accrued expenses, deferred compensation, and loan payable
stockholder into convertible notes. The convertible notes are for a two year
period with interest at the rate of 8% per annum, payable quarterly commencing
December 1, 2001 until they mature on August 9, 2003.The notes are convertible
into restricted shares of common stock at a conversion rate of $.15 per share.
F-9
SAFARI ASSOCIATES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
DECEMBER 31, 2001
-------------------
NOTES PAYABLE
--------------
In January, 2000, the Company borrowed a total of $25,000 from two individual
investors. The notes were for a term of four months with interest to be accrued
at the rate of 10% per annum. The notes have been extended on a month to month
basis. In November, 2000, the Company borrowed a total of $15,000 from three
individual investors. The term of the notes are on a month to month basis with
interest accrued at the rate of 10% per annum. In April 2001, the Company
borrowed an additional $12,000 from one of its investors on a month to month
basis at the rate of 10% per annum .On August 2, 2001 one of the noteholders
converted $32,000 in notes plus accrued interest into restricted shares of the
Company's common stock.
NOTE 7 SALE OF PROPERTY
---------------------------
On June 19, 2001, the Company sold its premises at 64 Edson Street in Amsterdam
N.Y. for $91,000 and recorded a loss on the sale of $72,849. The mortgage of
$95,000 was extinguished, $40,000 being repaid and the remaining portion of
$55,000 was converted into a loan from Mrs. Lillian Berger, the majority
shareholder and Secretary/Director in the Company.
NOTE 8 - LOAN STOCKHOLDER
-----------------------------
As of June 30, 2001,Mrs Lillian Berger, the major stockholder and
Secretary/Director in the Company was owed a total of $55,527. On August 9,
2001, Mrs. Berger converted the loan plus all accrued interest on the loan into
a convertible note (see Note5.) In October and December 2001, Mr. Morton Berger
loaned to the Company a total of $17,039.
NOTE 9 - COMMON STOCK
-------------------------
In January 2000, the Company issued a total of 50,000 restricted shares of
common stock to two individual investors at a price of $.25 per share with the
Company receiving net proceeds of $ 12,500.
In September 2000,the Company issued 250,000 restricted shares of common stock
to an individual investor at a price of $.20 per share with the Company
receiving net proceeds of $50,000.
On March 3,2001 the Company issued 144,142 shares of restricted common stock to
Mrs. Lillian Berger in exchange for $18,000 that she had loaned to the Company.
F-10
SAFARI ASSOCIATES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
DECEMBER 31, 2001
-------------------
NOTE 9-COMMON STOCK(CONTINUED
-------------------------------
On March 27, 2001, the Company entered into a two year consulting agreement with
a Mr. Robert Tolve. As compensation Mr. Tolve received 25,000 restricted shares
of common stock valued at $.20 per share for a total compensation of $5,000.
During the period ended March 31, 2001, the Company issued a total of 50,000
shares of restricted stock for consulting services valued at $.25 per share for
a total compensation of $12,500.
On June 15, 2001, Mr. Morton Berger, President of the Company, acquired 50,000
restricted shares of common stock in the Company at $.20 per share or $10,000.
On June 19, 2001, in connection with the sale of the premises at 64 Edson Street
in Amsterdam N.Y., the Company issued 200,000 restricted shares of common stock
valued at $.20 per share or $40,000 for the option to reacquire the premises for
$92,000 during the three year period ending June 19, 2004.
On June 30, 2001, the Company issued 16,800 restricted shares of common stock to
three individuals for a total consideration of $4,200 or $.25 per share.
On June 19,2001, the Company entered into a consulting agreement with Riverene
Corporation to provide consulting services for a period of five years from the
date of the agreement. In consideration for the consulting services, the Company
issued 300,000 restricted shares of common stock valued at $.25 per share or a
total of $75,000. An additional 200,000 restricted shares of common stock will
be issued eight months after the date of this agreement.
On August 2, 2001, the Company issued 180,000 shares of restricted common stock
for the cancellation of notes payable, convertible notes and accrued interest
totaling $66,031.
During the period ended September 30, 2001,the Company issued a total of 132,000
restricted shares of common stock to five individuals at $.25 per share of
common stock Total proceeds to the Company was $39,500.
F-11
SAFARI ASSOCIATES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
DECEMBER 31, 2001
-------------------
NOTE 10+ - COMMITMENTS & CONTINGENCIES
-------------------------------------------
EMPLOYMENT AGREEMENT
---------------------
On April 1, 1994, the Company entered into an employment agreement with Mr.
Morton Berger, President of the Company. The term of the agreement was for five
years and, thereafter, continues on a year to year basis. Compensation shall be
paid at the rate of $52,000 per year.
LICENSE AGREEMENT
------------------
On January 1, 1998, Smith & Wesson Corp., Springfield, Massachusetts, granted
Safari Enterprises, Inc., an exclusive Trademark License to make, use and sell
single-use and conventional film using still cameras under the Smith & Wesson
brand name in the United States, its possessions and Canada. The term of the
License is from January 1, 1998 to January 30, 2001. The license agreement
provides that Safari Enterprises, Inc. will pay Smith & Wesson Corp. a minimum
royalty of $15,000 the first eighteen months; $25,000 the next twelve months and
$35,000 the final twelve months. The minimums are to be paid against a royalty
of 5% of net sales, whichever is greater. The license further provides that
Safari Enterprises, Inc. can assign the license to an affiliate company under
the same control as Safari Enterprises, Inc. On January 12, 1998, the License
was amended by adding recoil pads for firearms, effective January 1, 1998.
The minimum royalties were not increased and covered both products. On May 18,
1999, the license was further amended to include targets for firearms effective
January 1, 1998. Again the minimum royalties were not increased. On November 25,
1997 the Company organized a wholly owned subsidiary, Photography for Evidence,
Inc., under the laws of the State of New York. On December 17, 1997 Photography
for Evidence, Inc., filed a Certificate of Doing Business under the name Smith &
Wesson Cameras. The license agreement was assigned to Smith & Wesson Cameras.
On January 29, 1998 the Company organized a wholly owned subsidiary, Impact
Dampening Technologies, Inc., a New York Corporation. On February 10, 1998,
Impact Dampening Technologies, Inc., filed a Certificate of Doing Business under
the name Smith & Wesson Recoil Pad Company. Safari Enterprises, Inc., assigned
its exclusive recoil pad License to Smith & Wesson Recoil Pad Company. On August
2, the Company organized Safari Target Corporation, a New York Corporation. On
August 20, 1999, Safari Target Corporation filed a Certificate of Doing Business
as Smith & Wesson Target Company. Safari Enterprises, Inc., assigned its target
license to Smith & Wesson Target Company.
F-12
SAFARI ASSOCIATES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
DECEMBER 31, 2001
-------------------
The original license which expired on January 30, 2001 has been extended for an
additional three years and the minimum annual royalty for all three licenses is
now $10,000 per year.
LEASE
-----
In June 19, 2001 the Company entered into an oral month to month lease of the
facilities at 64 Edson Street in Amsterdam, New York. The lease requires the
Company to pay a monthly rental of $1,057.82 plus all real estate taxes,
insurance, and maintenance costs on the premises.
NOTE 10 - GOING CONCERN
---------------------------
The Company has experienced operating loss since inception and has a retained
deficit as of December 31, 2001 of $1,936,000. Approximately $1,155,000 of the
losses occurred prior to 1997, and is a direct result of discontinued
operations. Additional losses of approximately $275,000 were incurred during the
development stage in the production of and recycling of single use cameras.
Additionally, the Company has funded research and development cost that have
gone into the design and production of a line of self sealing reactive targets
and recoil pads.
The Company has reduced its monthly cash operating expenses to approximately $
9,000 per month and reduced its work force to a minimum .It expects the sale of
single use cameras to generate a monthly gross profit of approximately $ 3,000
per month reducing its monthly deficit to $ 6,000 per month or $72,000 on an
annual basis based upon current production. The Company is pursuing several
methods of financing this shortfall including additional equity financing.
Even if the Company is capable of generating a profit in fiscal 2001, the
Company may be required to raise additional equity to reduce outstanding
liabilities, finance expansion, and introduce new product lines. There is no
assurance that the Company will be able to raise the capital that it may require
for the aforementioned purposes, or if it is able to raise such capital, that it
can do so on terms favorable to the Company.
NOTE 11 - SUPPLEMENTAL DISCLOSURES TO CASH FLOW STATEMENT
-----------------------------------------------------------------
2001 2000
--------- ---------
Cash Paid During the Period For:
Interest $ 9,732 $ 8,255
Income Taxes $ - $ -
F-13
SAFARI ASSOCIATES, INC.
-------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------
DECEMBER 31, 2001
-------------------
NOTE 12 -SUBSEQUENT EVENTS
-----------------------------
On January 23, 2002 the Company signed a Consulting and Marketing Licensing
Agreement with Mr. Mark Neuhaus. The agreement provides for Mr. Neuhaus to
promote and develop a market for the Company's products and services. The
agreement gives Mr. Neuhaus a nonexclusive license to use the licensed
trademarks of the Company on the consultants racing car, racing equipment and
clothing .In accordance with the Consulting and Marketing licensing Agreement,
which included a stock option plan ,the Company filed an S-8 Registration
Statement on January 30,2002 registering 4,000,000 shares 0f Common Stock into
which the stock options could be exercised for an exercise price of $0.15 per
share , or at the lowest sales price 30 days prior to exercising the option. In
February,2002 Mr. Neuhaus exercised an option for 333,333 shares of common
stock and paid the Company $50,000.
On January 30,2002, the Company filed a Form S-8 Registration Statement in
connection with a newly established Consultants Compensation Plan. The Company
registered a total of 750,000 shares of its Common Stock, which, in accordance
with the Plan, may be issued upon authorization of the Board of Directors and
Plan administrator to eligible consultants.In February, the Company issued a
total of 180,000 shares of Common Stock pursuant to the Plan, valued at $0.32
per share, to a consultant in exchange for legal services.
F-14