Subject to completion , 2005 A SHARE EXCHANGE PROPOSAL
Subject
to completion
,
2005
A
SHARE EXCHANGE PROPOSAL
| Azur International, Inc. | New Harvest Capital Corporation |
| 000 XX 0xx Xxxxxx, Xxxxx 0000 | 000 XX 0xx Xxxxxx, Xxxxx 0000 |
| Fort Lauderdale, Florida 33301 | Fort Lauderdale, Florida 33301 |
TO
THE STOCKHOLDERS OF AZUR INTERNATIONAL, INC.
AND
NEW HARVEST CAPITAL CORPORATION
New
Harvest Capital Corporation, a Delaware corporation (“Harvest”) and Azur
International, Inc., a Nevada corporation (“Azur”) have entered into a Plan and
Agreement to Exchange Stock (the “Share Exchange Agreement”), whereby Azur
common stockholders will receive one share of Harvest common stock for every
two
shares of Azur common stock they own (the “Share Exchange”). Upon completion of
the Share Exchange, Harvest’s name will be change to Azur International, Inc.
and Azur’s name shall be changed to “Azur 2004, Inc.” After the Share Exchange,
Harvest intends to apply to change its symbol on the OTC Bulletin Board to
“AZZR.OB.” The Boards of Directors of both corporations believe that the Share
Exchange will benefit the stockholders of both corporations.
Harvest’s
common stock is listed on the OTC Bulletin Board under the symbol “HVST” and
closed at $.0022 per share on July 15, 2005.
The
Board
of Directors of Azur and Board of Directors and stockholders of Harvest have
approved the Share Exchange Agreement and the Board of Directors of Azur
has
recommended that its stockholders approve the Share Exchange Agreement as
described in the attached materials. In addition, the Board of Directors
and
majority of the stockholders of Harvest have approved various amendments
to
Harvest’s Articles of Incorporation, which include a 1-for-1,370 reverse split
of Harvest’s common stock, which has already been effected, a change in the name
of Harvest to Azur International, Inc. after the consummation of the Share
Exchange and the elimination of liability of directors of Harvest for monetary
damages for breach of fiduciary duty as a director, with certain exceptions
and
to provide indemnification to officers and directors of Harvest to the fullest
extent permitted under Delaware law.
Azur’s
shareholders will receive a total of 24,307,185 shares of Harvest in the
Share
Exchange, and will own approximately 99.5% of the aggregate issued and
outstanding common stock of Harvest immediately following the Share Exchange.
The current shareholders of Harvest will retain approximately 0.5% of the
aggregate issued and outstanding stock on a fully-diluted basis.
Based
on
the closing prices of Harvest common stock on _________, 2005, the day before
the Share Exchange Agreement was executed, and _______ , 2005, the
date of
this Information Statement/ Proxy Statement/ Prospectus, which were $____and
$_____, respectively, and an exchange ratio of one share of Harvest for every
two shares of Azur, Azur shareholders will receive a number of shares of
Harvest
common stock with a per share value of $_____or $______, respectively, and
a
total transaction value of $_____and $_____ , respectively. As of
_______,
2005, Azur had $_________ in assets and $_________ in liabilities.
The
Board
of Directors of Harvest and Azur have recommended that their shareholders
approve the foregoing. Information concerning all of the foregoing is contained
in this Information Statement/ Proxy Statement/ Prospectus. We
urge you to read this material, including the Section describing “Risk Factors”
that begins on page [ ].
|
Xxxxxx
Xxxxxxx
|
Xxxxxx Xxxxxxx |
|
President
|
President |
|
Azur
International, Inc.
|
New Harvest Capital Corporation |
THIS
TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION (THE “SEC”) OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR THE MERITS OF
SUCH
TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
This
Information Statement/ Proxy Statement/ Prospectus is dated
[ ],
2005, and is first being mailed to Harvest and Azur stockholders on or about
[ ],
2005.
Information
Statement/Prospectus
NEW
HARVEST CAPITAL CORPORATION
0X0
XX 0xx Xxxxxx, Xxxxx 0000
Fort
Lauderdale, Florida 33301
WE
ARE
NOT ASKING YOU FOR YOUR PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
THE
ACTIONS DESCRIBED BELOW HAVE ALREADY BEEN APPROVED BY WRITTEN CONSENT OF
HOLDERS
OF A MAJORITY OF NEW HARVEST CAPITAL CORPORATION’S OUTSTANDING SHARES OF VOTING
STOCK. A VOTE OF THE REMAINING STOCKHOLDERS IS NOT NECESSARY. PLEASE DO NOT
SEND
IN ANY OF YOUR SHARE CERTIFICATES AT THIS TIME.
Pursuant
to the requirements of Section 14(c) of the Securities Exchange Act
of 1934
(the “Exchange Act”) and Section 228(d) of the General Corporation Law of
the State of Delaware (the “Delaware Corporation Law”), this information
statement is being mailed on or about________ , 2005 to holders of
record
as of _________, 2005 (the “Record Date”) of shares of common stock, par value
$0.0001 (“Common Stock”), of New Harvest Capital Corporation, a Delaware
corporation (the “Company” or “Harvest”). It is being furnished in connection
with the following:
1. The
approval of the Share Exchange Agreement
and issuance of up to 24,307,185 shares of Harvest common stock to the
stockholders of Azur International, Inc. (“Azur”) in exchange for all of the
shares of the outstanding common stock of Azur (the “Share Exchange”). As a
result of the Share Exchange, Azur will become a wholly-owned subsidiary
of
Harvest, Harvest’s Certificate of Incorporation will be amended to change the
name of the Company to Azur International, Inc. and Azur’s Articles of
Incorporation will be amended to change the name of that company to “Azur 2004,
Inc.” after the consummation of the Share Exchange.
2.
The approval of an amendment to the Certificate of
Incorporation of Harvest to eliminate the liability of directors of Harvest
for
monetary damages for breach of fiduciary duty as a director, with certain
exceptions, and to provide indemnification to officers and directors of Harvest
to the fullest extent permitted under Delaware law.
A
written
consent executed by the holders of a majority of the outstanding shares of
common stock of Harvest approving (a) the Share Exchange Agreement, (b) an
amendment to the Certificate of Incorporation of Harvest to change of name
of
Harvest to Azur International, Inc. after the consummation of the Share Exchange
and (c) an amendment to the Certificate of Incorporation of Harvest to eliminate
the liability of directors of Harvest for monetary damages for breach of
fiduciary duty as a director, with certain exceptions, and to provide
indemnification to officers and directors of Harvest to the fullest extent
permitted under Delaware law, was executed on _____________, 2005.
The
closing date of the Share Exchange Agreement is dependent upon the completion
and satisfaction of required shareholder consents and notifications.
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By
Order of the Board of Directors,
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XXXXXX
XXXXXXX
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President
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[ ],
2005
1
Azur
International, Inc.
000
XX 0xx
Xxxxxx, Xxxxx 0000
Fort
Lauderdale, Florida 33301
NOTICE
OF A SPECIAL MEETING OF STOCKHOLDERS
To
Be Held
[ ],
To
the
Stockholders of Azur International, Inc.
NOTICE
IS
HEREBY GIVEN THAT a special meeting of stockholders of Azur International,
Inc.,
will be held at
[ ]
on
[ ],
at
[ ]
local time, to consider and vote upon the following matters:
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A. To
approve and adopt the Plan and Agreement to Exchange Stock by and
between
New Harvest Capital Corporation (“Harvest”) and Azur International, Inc.
(“Azur”), dated as of _______, 2005, in accordance with the terms of the
Plan and Agreement to Exchange Stock (the “Share Exchange Agreement”) and
the transactions contemplated by the Share Exchange Agreement.
A copy of
the Share Exchange Agreement is attached as Exhibit A to
the
Information Statement/ Proxy Statement/ Prospectus. As a result
of the
Share Exchange, Azur will become a wholly-owned subsidiary of Harvest,
Harvest’s Certificate of Incorporation will be amended to change the name
of the company to Azur International, Inc. and Azur’s Articles of
Incorporation will be amended to change the name of the company
to “Azur
2004, Inc.”. The approval of the Share Exchange shall constitute the
approval of the amendment to Azur’s Articles of Incorporation to change
the name of the company to “Azur 2004, Inc.”
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B. To
transact such other business as may properly come before the special
meeting.
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The
Board
of Directors has fixed the close of business on
[ ],
2005 as the record date for determination of stockholders entitled to notice
and
to vote at the special meeting.
It
is
important that the enclosed proxy card be signed, dated and promptly returned
in
the enclosed envelope so that your shares will be represented whether or
not you
plan to attend the special meeting. Do not send your stock certificates with
your proxy card.
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By
Order of the Board of Directors,
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XXXXXX
XXXXX
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Chairman
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[ ],
2005
2
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Forward-Looking
Statements
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Page
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Questions
And Answers About The Share Exchange And Related Transactions
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4
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Summary
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5
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Risk
Factors
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8
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| Pro Forma Financial Information |
13
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| The Acquisition of Azur International, Inc. |
21
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| Recommendation of Boards of Directors and Fairness of the Share Exchange |
24
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| Background Information on New Harvest Capital Corporation |
34
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| Background Information on Azur International, Inc. |
36
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| Investment Policies and Policies with Respect to Certain Activities |
42
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| Outstanding Stock and Appraisal Rights |
64
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| Comparison of Rights of Harvest Stockholders and Azur Stockholders |
66
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| Legal Matters |
69
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| Certain Securities Laws Considerations |
72
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| Experts |
72
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| Where You Can Find More Information |
72
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| Disclosure of Commission Position on Indemnification for Securities Act Liabilities |
73
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| Harvest Financial Statements |
74
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| Azur Financial Statements |
75
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Exhibit
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A:
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Plan
and Agreement to Exchange Stock by and between Harvest and Azur
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A-1
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Exhibit
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B:
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Nevada
Appraisal Rights Statute
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B-1
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Exhibit
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C:
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Form
of Proxy
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C-1
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3
HARVEST
FILES DOCUMENTS FROM TIME TO TIME WITH THE SECURITIES AND EXCHANGE COMMISSION
THAT HAVE NOT BEEN INCLUDED IN OR DELIVERED WITH THIS DOCUMENT. THIS INFORMATION
IS AVAILABLE AT THE INTERNET WEBSITE THE SEC MAINTAINS AT HTTP://
XXX.XXX.XXX,
AS WELL
AS FROM OTHER SOURCES. SEE “WHERE YOU CAN FIND MORE INFORMATION” ON PAGE
____ .
YOU
MAY
ALSO REQUEST COPIES OF THESE DOCUMENTS FROM US, WITHOUT CHARGE, UPON WRITTEN
OR
ORAL REQUEST TO HARVEST OR AZUR AT 000 XX 0xx XXXXXX, XXXXX 0000, XXXX
XXXXXXXXXX, XXXXXXX 00000, ATTENTION: XXXXXX XXXX. IN ORDER TO RECEIVE TIMELY
DELIVERY OF THESE DOCUMENTS BEFORE THE SPECIAL MEETING, YOU MUST MAKE YOUR
REQUESTS NO LATER THAN _________ .
The
statements contained in this Information Statement/ Proxy Statement/ Prospectus
that are not historical facts are forward-looking statements under the federal
securities laws. These forward-looking statements, are not guarantees of
future
performance and involve certain risks, uncertainties and assumptions that
are
difficult to predict. Actual outcomes and results may differ materially from
what is expressed in, or implied by, such forward-looking statements. Harvest
and Azur undertake no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
Among the important factors that could cause actual results to differ materially
from those expressed in, or implied by, the forward-looking statements are
changes in general economic conditions, increased or unexpected competition,
costs related to the proposed share exchange, failure to obtain required
stockholder or regulatory approvals or the share exchange not closing for
any
other reason, failure of the combined company to retain and hire key employees,
difficulties in successfully integrating the parties’ businesses, the effects of
incurring and servicing substantial debt and other matters disclosed in
Harvest’s filings with the Securities and Exchange Commission.
4
AND
RELATED TRANSACTIONS
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Q:
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WHAT
IS THE SHARE EXCHANGE AGREEMENT?
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A:
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New
Harvest Capital Corporation will acquire Azur International, Inc.
in a
stock exchange whereby the shareholders of Azur will receive shares
of
Harvest. Azur will become a wholly owned subsidiary of Harvest
and the
Azur shareholders as a group will receive 24,307,185 shares of
Harvest
common stock, or approximately 99.5% ownership of Harvest on a
fully-diluted basis. For more information on the Share Exchange
Agreement,
see “Exhibit A: Plan and Agreement to Exchange Stock.”
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Q:
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WHY
DID HARVEST AND AZUR AGREE TO THE SHARE EXCHANGE AGREEMENT?
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A:
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New
Harvest Capital Corporation
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Harvest
has had no operations since April 30, 1991and has been seeking
acquisition
or merger candidates with operating businesses since March 1, 2002.
Harvest’s Board of Directors believes that the terms and provisions of
the
Share Exchange Agreement which provide Harvest with an opportunity
to
acquire an operating company are fair and in the best interests
of Harvest
and its stockholders.
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However,
Harvest’s shareholders are cautioned that they will suffer significant
dilution as a result of the Share Exchange (see “Risk Factors —
Current Harvest shareholders will suffer immediate and substantial
dilution under terms of the Share Exchange Agreement”). In addition,
because Xxxx’s business will become that of Harvest after the Share
Exchange, Harvest’s shareholders are urged to carefully read the
information provided in this Information Statement/ Proxy Statement/
Prospectus, including the financial statements provided herein.
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For
more information on the reasons Harvest has approved the Share
Exchange
Agreement, see “The Acquisition of Azur International, Inc. — Reasons
for the Approval of the Harvest Board.”
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Azur
International, Inc.
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Azur’s
board of directors determined that an acquisition of a controlling
interest in public company and reverse merger with such company
was the
best vehicle to position Azur in the public market. After evaluating
a
number of public companies, Azur’s board of directors agreed to acquire a
controlling interest in Harvest through a private purchase of
approximately 50.4% of the outstanding common stock of Harvest
from one
stockholder (see “the Acquisition of Azur International, Inc. - Background
of the Agreement”) with the intention of thereafter causing Harvest to
enter into a share exchange agreement with Azur on terms and conditions
which the board considers to be fair to the stockholders of both
Harvest
and Azur. The board of directors believes that the acquisition
of a
controlling interest in Harvest followed by the consummation of
the Share
Exchange Agreement, provides Azur with the least expensive and
best
opportunity to achieve its goal of reaching the public market.
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However,
Azur’s shareholders are cautioned that Harvest’s stock price may be
adversely affected because it trades on the OTC Bulletin Board
(see Risk
Factors —“Our common stock is traded on the over the counter bulletin
board and, as a result, there may be limited trading volume in
the stock,
as well as a greater spread between “bid” and “asked” prices”).
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For
more information on the reasons Azur has approved the Share Exchange,
see
“The Acquisition of Azur International, Inc. — Reasons for the
Approval of the Azur Board.”
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Q:
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WHAT
APPROVALS ARE REQUIRED?
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A:
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New
Harvest Capital Corporation
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The
approval of the Share Exchange Agreement and related transactions
required
the affirmative vote of the holders of a majority of the shares
issued,
outstanding and entitled to vote. On __________,
2005, Harvest had [100,000] shares of common stock issued and outstanding
and no shares of its authorized preferred stock issued or outstanding.
A
written consent of the holders of a majority of the outstanding
common
stock of Harvest representing 50,336 shares of the common stock,
which
approved the foregoing was executed on ________, 2005.
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5
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Azur
International, Inc.
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The
approval of the Share Exchange Agreement requires the affirmative
vote of
the holders of a majority of the shares issued, outstanding and
entitled
to vote.
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On
__________, 2005, Harvest had [100,000] shares of common stock
issued and
outstanding and no shares of its authorized preferred stock issued
or
outstanding. A written consent of the holders of a majority of
the
outstanding common stock of Harvest representing 50,336 shares
of the
common stock, which approved the foregoing was executed on ________,
2005.
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Azur
International, Inc.
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The
approval of the Share Exchange Agreement requires the affirmative
vote of
the holders of a majority of the shares issued, outstanding and
entitled
to vote.
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Q:
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WHAT
IS THE PURPOSE OF THIS INFORMATION STATEMENT/ PROXY STATEMENT/
PROSPECTUS?
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A:
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This
document serves as Harvest’s Information Statement and Prospectus and as
Azur’s Proxy Statement. As an Information Statement, this document is
being provided to Harvest’s shareholders to inform them that the holders
of shares of Harvest representing approximately 50.4% of the voting
power
of Harvest stock have delivered to Harvest a written consent approving
the
Share Exchange Agreement. Under Delaware law, the holders of a
majority of
the outstanding common stock of Harvest, acting by written consent,
can
approve the Share Exchange Agreement.
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As
a Proxy Statement, this document is being provided to Azur’ shareholders
by Azur because Azur’s Board of Directors is soliciting the Azur’s
shareholders approval for the Share Exchange Agreement. As a Prospectus,
this document is being provided by Harvest because Harvest is offering
Azur shareholders shares of Harvest common stock in exchange for
their
shares of Azur common stock if the Share Exchange is completed.
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Q:
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WHAT
DO I NEED TO DO NOW?
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A:
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New
Harvest Capital Corporation
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Shareholders
of Harvest do not need to do anything at this time. The board of
directors
and a majority of the shareholders of Harvest have already approved
the
Share Exchange and amendments to Harvest’s articles of incorporation
changing its name to Azur International, Inc. upon consummation
of the
Share Exchange and to eliminate the liability of directors of Harvest
for
monetary damages for breach of fiduciary duty as a director, with
certain
exceptions, and to provide indemnification to officers and directors
of
Harvest to the fullest extent permitted under Delaware law. However,
Harvest’s shareholders are urged to carefully read and consider the
information contained in this Information Statement/ Proxy Statement/
Prospectus.
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Azur
International, Inc.
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After
carefully reading and considering the information contained in
this
Information Statement/ Proxy Statement/ Prospectus, indicate on
your proxy
card how you want to vote and sign and mail it in the enclosed
return
envelope as soon as possible so that your shares will be represented
at
the shareholders meeting.
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The
special meeting will be at [ ]
on
[ ] at [ ]
local
time. If you are a holder of record, you may attend the special
meeting
and vote your shares in person rather than signing and mailing
your proxy.
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Q:
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WHAT
IF I DO NOT VOTE?
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A:
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Pursuant
to Section 92A.120(4) of the Nevada Revised Statutes, shareholders
of
Azur must approve the Share Exchange by a majority of the voting
power of
the stockholders of Azur. Accordingly, a failure to respond or
an
abstention will have the same effect as a vote AGAINST adoption
of the
Share Exchange Agreement. If you return your proxy signed but do
not
indicate how you want to vote, your proxy will be counted as a
vote “FOR”
the Share Exchange.
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6
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Q:
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CAN
AZUR SHAREHOLDERS CHANGE THEIR VOTE AFTER THEY HAVE MAILED THEIR
PROXY?
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A:
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Yes.
You can change your vote by sending in a later-dated, signed proxy
card
before the shareholders meeting of Azur, or by attending the meeting
in
person and voting differently. You can also revoke any proxy before
the
shareholders meeting by sending a written notice to Azur.
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Q:
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WHY
ARE HARVEST’S SHAREHOLDERS BEING PROVIDED WITH THIS INFORMATION STATEMENT?
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A:
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The
Securities and Exchange Commission and federal securities laws
require
that Harvest provide its holders of voting securities with notice
of
corporate action undertaken by written consent if proxies were
not
solicited. We are providing you with this Information Statement
because
the amendments to the Certificate of Incorporation to change the
name of
Harvest to Azur International, Inc. and to limit the liability
of
directors and the Share Exchange Agreement were approved by the
written
consent of the holders of a majority of Harvest’s stock and proxies were
not required to be solicited.
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Q:
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WHAT
RIGHTS DO I HAVE IF I OPPOSE THE SHARE EXCHANGE?
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A:
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Azur
shareholders may dissent and seek an appraisal of the fair market
value of
their shares, but only if they comply with all Nevada laws and
procedures,
as appropriate. Harvest shareholders do not have any appraisal
rights in
connection with the Share Exchange. For more information, see “Outstanding
Stock and Appraisal Rights” and “Exhibit B: Nevada Appraisal Rights
Statute.”
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Q:
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WHEN
DO YOU EXPECT THE SHARE EXCHANGE TO BE COMPLETED?
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A:
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If
all conditions to closing have been satisfied, the parties will
close the
Share Exchange as soon as possible, but not before the greater
of
20 days after this Information Statement/ Proxy Statement/
Prospectus
is mailed to the Harvest shareholders and the approval of greater
than 50%
of the Azur shareholders is received.
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Q:
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WHERE
SHOULD I SEND MY STOCK CERTIFICATE?
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A:
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Azur
shareholders should not send in their stock certificates with their
proxy.
You must keep your stock certificate until after the Share Exchange
has
been approved, at which time you will receive a letter of transmittal
describing how you may exchange your Azur stock certificate for
certificates representing shares of Harvest common stock. At that
time,
you will have to submit your Azur stock certificates to the exchange
agent
with your completed letter of transmittal. Harvest stockholders
do not
need to do anything with their stock certificates.
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Q:
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ARE
THEIR RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE
SHARE
EXCHANGE?
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A:
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Yes.
The section entitled “Risk Factors” beginning on page
[ ] of this
Information
Statement/ Proxy Statement/ Prospectus describes a number of risks
that
you should consider in connection with the Share Exchange.
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Q:
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WHY
DID HARVEST EFFECT THE REVERSE SPLIT?
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A:
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In
order to facilitate a proper exchange ratio of Harvest common stock
for
Azur common stock in the Share Exchange, during the period from
June 24,
2005 to June 28, 2005, Harvest’s Board of Directors approved an amendment
to the Company’s Certificate of Incorporation to effect a 1-for-1,370
reverse stock split of the Company’s issued outstanding Common Stock (the
“Reverse Split”). The amendment was approved in a written consent executed
by all of the directors of Harvest and Azur, the holder of a majority
of
the outstanding common stock of Harvest. Pursuant to the Reverse
Split, on
August ___ , 2005 each of the 1,370 shares of Harvest’s Common issued and
outstanding were reclassified as, and exchanged for, one share
of newly
issued Common Stock.
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Q:
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WHOM
SHOULD I CALL WITH ANY QUESTIONS:
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A:
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If
you have more questions about the Share Exchange, or you need additional
copies of this Information Statement/ Proxy Statement/ Prospectus
or the
enclosed proxy card, please contact:
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| Xxxxxx Xxxx, Esq. | Xxxxxx Xxxx, Esq. |
| Secretary | Secretary |
| Azur International, Inc. | New Harvest Capital Corporation |
| Telephone: 000-000-0000 | Telephone: 000-000-0000 |
7
SUMMARY
This
summary highlights very important information in this Information Statement/
Proxy Statement/ Prospectus and may not contain all of the information that
is
important to you. Even though we have highlighted what we believe is the
most
important information, you should carefully read the entire Information
Statement/ Proxy Statement/ Prospectus for a more complete understanding
of the
Share Exchange and related transactions, including the Exhibits and other
documents to which we have referred you. You should also review the additional
information about Harvest on file with the Securities and Exchange Commission
referred to in “Where You Can Find More Information”, which begins on page
[ ] of this Information
Statement/
Proxy Statement/ Prospectus.
The
Share Exchange
The
acquisition of Azur will be effected as a stock exchange whereby the
shareholders of Azur will receive shares of Harvest and Azur will become
a
wholly-owned subsidiary of Harvest. The shareholders of Azur will hold
approximately 99.5% of the outstanding shares of Harvest and the current
shareholders of Harvest will retain approximately .5% ownership of Harvest
on a
fully-diluted basis. The
Share Exchange Agreement is attached as Exhibit A to this Information Statement/
Proxy Statement/ Prospectus. We encourage you to read the Share Exchange
Agreement. It is the principal document governing the Share
Exchange.
See
“The Acquisition of Azur International, Inc.” and “Exhibit A: Plan and Agreement
to Exchange Stock.”
The
Companies
New Harvest Capital Corporation is a Delaware corporation with its principal
offices located at 000 XX 000 0xx
Xxxxxx,
Xxxxx 0000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000. Its telephone number is
000-000-0000. Harvest was incorporated on August 29, 1985 under the name
Harvest
Capital Corporation. On March 1, 1993 the certificate of incorporation became
inoperative due to the failure of the company to file annual reports with
the
State of Delaware and to pay franchise taxes. On August 3, 2000 the company
filed a Certificate of Renewal and Revival of its certificate of incorporation
and changed its name to New Harvest Capital Corporation.
Azur
International, Inc. is a Nevada corporation with its principal offices also
located at NE 000 0xx
Xxxxxx,
Xxxxx 0000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000. Its telephone number is
000-000-0000. Azur is a holding company which owns luxury residential, hotel
and
resort development companies, a company that manufactures safety systems
for
large construction sites and a company which is one of the United Kingdom’s
largest crane operators. Azur’s business plan consists of golf resort and
residential communities development, residential and commercial land acquisition
for development, acquisition of developable land holdings for use or future
sale, acquisition of existing resort and golf club communities and acquisition
and operation of businesses which will complement Azur’s core businesses. See
“Background Information on Azur International, Inc.”
|
Change
in Corporate Offices
|
In
June
2005, the corporate offices of Harvest were transferred to Azur’s corporate
offices. Until the closing of the Share Exchange, Azur has agreed to allow
Harvest to use Azur’s offices on a rent free basis, although the parties have
not entered into a formal agreement. Upon completion of the Share Exchange,
Harvest and Azur will share their corporate office space.
|
Change
in Senior Management
|
Currently,
Harvest has no operations. In
connection with the purchase by Azur of approximately 50.4% of the outstanding
shares of common stock of Harvest on June 1, 2005, Xxxxxx Xxxxx, the Charman
and
CEO of Azur, and Xxxxxx Xxxxxxx, the President of Azur, were appointed as
directors of Harvest and Chairman and President, respectively, of Harvest.
Xxxxxx Xxxx, the General Counsel, Secretary and a director of Azur was also
appointed as a director and the Secretary of Harvest. Upon completion of
the
Share Exchange, it is anticipated that certain additional executive officers
of
Azur shall be appointed to equivalent offices with Harvest. See “Background
Information on New Harvest Capital Corporation - Directors and
Officers.”
8
|
Change
in Board of Directors
|
Upon
completion of the Share Exchange, Xxxx Xxxxx and Xxxx Xxxxxx will be appointed
to the Board of Directors of Harvest. Following the Share Exchange, Harvest’s
Board of Directors will consist of Xxxxxx Xxxxx, Xxxxxx Xxxxxxx, Xxxx Xxxxx,
Xxxx Xxxxxx and Xxxxxx Xxxx.
|
Change
in Business
Operations
|
Upon
completion of the Share Exchange, Harvest’s operations will consist of the
operations of Azur. Azur is a holding company which owns luxury residential,
hotel and resort development companies, a company that manufactures safety
systems for large construction sites and a company which is one of the United
Kingdoms largest crane operators. Azur’s business plan consists of golf resort
and residential communities development, residential land acquisition for
development, acquisition of developable land holdings for use or future sale,
acquisition of existing resort and golf club communities and the acquisition
and
operation of businesses which will complement Azur’s core business. See
“Background Information on Azur International, Inc. — Description of
Business.”
|
Dilution
of Current Harvest
Shareholders
|
In
connection with the Share Exchange, Harvest will assign, transfer and deliver
to
the Azur shareholders 24,307,185 shares of Harvest common stock, representing
approximately 99.5% ownership of Harvest on a fully-diluted basis. After
issuance of the Harvest common stock to the shareholders of Azur, current
Harvest shareholders will hold as a group, approximately .5% of the
fully-diluted Harvest common stock.
Stock
Ownership of Officers and Directors
Harvest’s
current officers and directors beneficially own none of the Harvest common
stock
prior to the Share Exchange and 20% of the Azur common stock prior to the
Share
Exchange. Harvest’s current officers and directors will beneficially own
approximately 20% of the combined company’s common stock after the Share
Exchange.
Azur’s
current officers and directors beneficially own none of the Harvest common
stock
prior to the Share Exchange and approximately 20% of the Azur common stock
prior
to the Share Exchange. Azur’s current officers and directors will beneficially
own approximately 20% of the combined company’s common stock after the Share
Exchange.
On
______, 2005, the Harvest Board of Directors, unanimously approved the Share
Exchange Agreement and determined that the acquisition of Azur, and the
transactions contemplated thereby are in the best interests of Harvest and
its
shareholders.
9
In
reaching its decision to approve the Share Exchange Agreement, the Harvest
Board
of Directors considered a number of factors. See “The Acquisition of Azur —
Reasons for the Approval of the Harvest Board.”
Under
Section 228 of the Delaware General Corporation Law the above actions
can
be authorized, provided shareholders holding at least a majority of the
outstanding shares of Harvest entitled to vote on the matter at the Record
Date
give their written consent thereto. On _______, 2005, Azur, the majority
shareholder of Harvest, approved the Share Exchange Agreement and the other
actions. Accordingly, a vote of the remaining stockholders of Harvest is
not
necessary to complete the Share Exchange or other actions.
On
_______, 2005 the Azur Board of Directors unanimously approved the Share
Exchange Agreement and determined that Harvest’s acquisition of Azur was in the
best interest of Azur and its shareholders.
In
reaching its decision to approve the Share Exchange, the Azur Board of Directors
considered a number of factors. See “The Acquisition of Azur — Reasons for the
Approval of the Azur Board.
If
you
are an Azur shareholder, you may vote at the special meeting if you owned
shares
of Azur common stock at the close of business on ___________ , 2005.
As of
the close of business on that day, ________ shares of Azur common stock were
outstanding.
Approval
and adoption of the Share Exchange Agreement and the Share Exchange and approval
of the proposal regarding further solicitation of proxies upon adjournment
or
postponement of the special meeting requires the affirmative vote of the
holders
of at least a majority of the outstanding shares of Azur common stock.
On
__________, 2005, directors and executive officers of Azur and their affiliates
(some of whom are also directors and executive officers of Harvest) were
entitled to vote approximately 9,157,960 shares of Azur common stock, or
approximately 20% of the shares of Azur common stock outstanding on that
date.
Each of such persons has informed Azur that he or she intends to vote FOR
approval of the Share Exchange Agreement and each of the directors of Azur
has
stated that he recommends approval of the Share Exchange Agreement by the
other
stockholders of Azur.
The
interests of certain members of the Board and Management of Harvest and Azur
could be different than those of other Harvest and Azur shareholders. For
example, three of the directors (constituting all of the members of the Harvest
Board and 60% of the members of the Azur Board) were members of both boards
during a period of time when the companies were conducting their due diligence
and prior to the negotiation of the Share Exchange Agreement, and certain
officers and directors of Harvest and Azur own stock in Azur. Xxxx owns a
majority of the voting stock of Harvest. See “Risk Factors —“Various
conflicts of interest existed during the negotiation of the Share Exchange
Agreement.”
10
The
acquisition of Azur shall become effective at such time as the Conditions
Precedent for closing the Share Exchange Agreement have been either satisfied
or
waived, and the required Shareholder consents and notifications are completed.
See “Exhibit A: Plan and Agreement to Exchange Stock.”
The
Share
Exchange Agreement may be terminated by either Harvest or Azur prior to the
closing under certain circumstances. See “Exhibit A: Plan and Agreement to
Exchange Stock.”
On
the
date that the Boards of Directors of Harvest and Azur approved the Share
Exchange Agreement, ____________, 2005, Harvest had _____________ shares
of
common stock outstanding, on a fully-diluted basis, after having effected
a
1-for 1,370 reverse stock split on ____________, 2005. On such date there
were
____ holders of record of the outstanding shares of Harvest common stock,
although the respective Boards estimated that there were more than ________
beneficial owners of Harvest common stock whose shares are held in street
name.
The Boards of Directors of Azur and Harvest agreed upon a valuation of Harvest
of approximately $600,000 based on (a) the purchase price of $550,000 and
other
consideration (the issuance to a finder in the transaction of 600,000 shares
of
Azur common stock pursuant to a consulting agreement entered into between
Azur
and the finder in connection with the stock purchase and the payment
by Harvest of a $75,000 fee to such finder) that Azur paid for a
controlling interest in Harvest in a stock purchase transaction which closed
on
June 1, 2005, (b) the lack of any significant trading activity in Harvest’s
common stock, (c) that Harvest had no assets no business operations as of
____
2005, but did have a shareholder base and (d) was a reporting company under
the
Exchange Act whose common stock was quoted on the OTC Bulletin Board. As
of
____________ , 2005 Azur had a total of ___________ shares of its common
stock
issued and outstanding or reserved for issuance pursuant to agreements that
Azur
had entered into, and the Boards of Directors of Harvest and Azur had agreed
upon a valuation of Azur, based on the value of real property and businesses
that Azur then had and which it had agreements to acquire, in a range of
$___________ to $_________. In order to maintain the respective valuations,
Harvest and Azur agreed to an exchange ratio of one share of Harvest for
every
two shares of Azur.
Accordingly,
pursuant to the Share Exchange Agreement, the Azur shareholders will receive
23,333,720 shares of Harvest Common Stock constituting approximately 99.5%
of
the post exchange fully-diluted shares of Harvest Common Stock, and will
dilute
the current shareholders of Harvest Common Stock to approximately .5%
fully-diluted ownership post-exchange.
Based
on
the closing prices of Harvest common stock on _________, 2005, the day before
the Share Exchange Agreement was executed, and _______, 2005, the date of
this
Information Statement/ Proxy Statement/ Prospectus, which were $____ and
$______, respectively, and the reverse split of 1,370 to 1 for the Harvest
common stock and exchange ratio of one share of Harvest for every two shares
of
Azur, Azur shareholders will receive a number of shares of Harvest common
stock
with a per share value of $____ or
$ ,
respectively, and a total transaction value of $_________and $__________,
respectively. As of _____________, 2005, Azur had $__________ in assets and
$_____________ in liabilities.
The
acquisition of Azur and the included transactions contemplated in connection
therewith have been structured with the intent that they be tax-free to Harvest,
Azur and holders of Azur stock for federal income tax purposes. See “The
Acquisition of Azur International, Inc. — Federal Income Tax
Consequences.”
11
The
federal income tax discussion set forth above is included for general
information and may not apply to particular categories of holders of Azur
stock
or options subject to special treatment under the federal income tax laws,
such
as foreign holders and holders whose stock or options were acquired pursuant
to
the exercise of an employee stock option or otherwise as compensation. In
addition, there may be relevant foreign, state, local or other tax consequences,
which are not described above. The Azur shareholders are urged to consult
their
tax advisors to determine the specific tax consequences of the Share Exchange,
including the applicability and effect of foreign, state, local and other
tax
laws.
The transaction will be accounted for as a reverse acquisition of the fair
market value of Harvest’s stock by Azur in accordance with generally accepted
accounting principles. “See the Acquisition of Azur — Accounting
Treatment.”
Under
Delaware law, Harvest shareholders do not have the right to seek an appraisal
of
the fair market value of their shares in connection with the Share
Exchange. Under
Nevada law, Azur shareholders have the right to seek an appraisal of the
fair
market value of their shares in connection with the Share Exchange. See
“Outstanding Stock and Appraisal Rights” and “Exhibit B: Appraisal Rights
Statutes.”
Since March 22, 1986, Harvest common stock has been listed on the OTC Bulletin
Board under the symbol “HVST.”
Upon
completion of the Share Exchange, and the name change of Harvest to Azur
International, Inc., Harvest expects to obtain a new symbol for trading on
the
OTC Bulletin Board.
On
________, 2005, Harvest’s Board of Directors approved an amendment to Harvest’s
Certificate of to change the name of Harvest from New Harvest Capital
Corporation to Azur International, Inc. after consummation of the Share
Exchange.
A
written
consent has been executed by the holders of a majority of the outstanding
common
stock approving the Share Exchange and the amendment if the Share Exchange
is
consummated. An amendment to Harvest’s Certificate of Incorporation reflecting
the foregoing will be filed with the Secretary of the State of Delaware
if
the
Share Exchange is consummated.
Amendment
to Harvest’s Certificate of Incorporation to Limit Liability of Directors and
Provide Indemnification
On
________ , 2005 Harvest’s Board also approved an amendment to Harvest’s
Certificate of Incorporation to add an article which reads as
follows:
“No
director shall be liable to the Corporation or any of its stockholders for
monetary damages for breach of fiduciary duty as a director, except with
respect
to (1) a breach of the director’s duty of loyalty to the corporation or its
stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) liability
under Section 174 of the Delaware General Corporation Law or (4) a transaction
from which the director derived an improper personal benefit, it being the
intention of the foregoing provision to eliminate the liability of the
Corporation’s directors to the corporation or its stockholders to the fullest
extent permitted by Section 102 (b)(7) of the Delaware General Corporation
Law,
as amended from time to time. The Corporation shall indemnify to the fullest
extent permitted by Sections 102 (b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to time, each person that such Sections
grant the corporation the power to indemnify.”
12
Harvest
is a Delaware corporation. Section 145 of the Delaware General Corporation
Law
generally provides that a corporation is empowered to indemnify any person
who
is made a party to any threatened, pending or completed action, suit or
proceeding by reason of the fact that he is or was a director, officer, employee
or agent of the company or is or was serving, at the request of the company,
in
any of such capacities of another corporation or other enterprise, if such
director, officer, employee or agent acted in good faith and in a manner
he
reasonable believed to be in or not opposed to the best interests of the
company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. This statute describes
in
detail the right of a Delaware company, such as Harvest, to indemnify any
such
person.
The
effect of the amendment will be to provide significant protection to individuals
who serve as directors and officers of the Company and encourage individuals
possessing the skills and abilities required by the Company in conducting
its
business to accept such offices.
A
written
consent has been executed by the holders of a majority of the outstanding
common
stock approving the amendment.. An amendment to Harvest’s Certificate of
Incorporation reflecting the foregoing will be filed with the Secretary of
the
State of Delaware if the Share Exchange is consummated.
The
Share Exchange involves a high degree of risk. By approving the Share Exchange,
current Azur shareholders will be choosing to invest in Harvest Common Stock.
Additionally, as a result of the Share Exchange, current Harvest shareholders
will face dilution of their ownership interest in Harvest. In addition to
the
other information contained in this Information Statement/ Proxy Statement/
Prospectus, you should carefully consider all of the following risk factors
relating to the proposed Share Exchange, Harvest, Azur and the combined company
in deciding whether to consent for the Share Exchange and other
actions.
Azur
is in default of its reporting obligations under the U.S. federal securities
laws for the period from 1998 to 2003 and potentially has substantial liability
in such regard.
As
discussed below in “The Acquisition of Azur International, Inc. - Background of
Azur,” Azur is subject to the periodic reporting requirements of the Exchange
Act and has failed to file any reports thereunder since 1998, when a predecessor
to the company registered its stock under the Exchange Act. The current
controlling shareholders and management of Azur were unaware that Azur
was
subject to such reporting requirements when a controlling interest in Azur
was
acquired by them in January 2004. On ______ 2005 Azur filed the following
reports with the SEC: Annual Reports on Form 10-KSB for the fiscal years
ended
December 31, 2003 and 2004; Quarterly Reports on Form 10-QSB for the quarters
ended March 31, 2004, June 30, 2004 and September 30, 2004; and a Current
Report
on Form 10-QSB to report Azur’s acquisition of the Shell Landing Golf Course on
November 17, 2004. Xxxx believes that, due to its lack of financial and
other
records relating to the operations of its predecessors during the period
from
1998 to 2003, it is not in a position to make any of the required filings
for
such periods, despite Xxxx’s willingness to spend the money and employ the
resources necessary to make such filings if it were possible.
13
As
a
result of the failure by Azur and its predecessors of to file reports required
to be filed under the Securities Exchange Act of 1934, Azur and its controlling
persons may be subject to substantial civil and criminal penalties, including
fines that in the case of Azur can be up to $25 million. Azur does not
believe
that its failure to file reports involves any fraud, deceit, unjust enrichment
or deliberate disregard of regulatory requirements. These could all be
factors
to be considered in determining whether the matters should be prosecuted
and, if
prosecuted, the extent of the penalties sought or imposed. However, there
can be
no assurance that Azur will not be prosecuted for such violations or that
substantial penalties for such violations will not be imposed upon
Azur.
If
Azur
is prosecuted and sanctioned, there could be material adverse consequences
to
Azur, including the incurrence of substantial liability and damage to the
company’s reputation.
One
of
the purposes and effects of the Share Exchange is to enable Azur to terminate
the registration of its common stock under the Exchange Act and thereby
terminate Azur’s obligation to file reports with the SEC thereunder. However,
after the Share Exchange Harvest will continue to have its common stock
registered under the Exchange Act and will continue to file reports with
the
SEC, which reports shall include the operations of Azur.
Our
cash flows and capital resources may be insufficient to service our substantial
indebtedness and future indebtedness and such cash flows, and our ability
to
refinance all or a portion of our indebtedness or obtain additional financing,
depend on many factors beyond our control.
As
of
March 31, 2005, on a consolidated basis, Azur had (i) approximately $12.41
million of outstanding long-term debt (net of current portion, including
capital
lease obligations of approximately $17.53 million, including approximately
$11.25 million due to former stockholders of Airtek Safety Limited which
is
required to be paid in August 2005 to pay the deferred purchase price for
the
stock Azur acquired in February 2005) and (ii) a debt to equity ratio of
approximately 16.7:1.0.
We
also plan to incur substantial additional indebtedness in the future in order
to
make acquisitions and fund the planned development of our existing
properties.
Because
we have substantial debt, we will require significant amounts of cash from
our
operations and from borrowings and the sale of our equity and debt securities
in
order to fund our debt service obligations. Our ability to generate cash
to meet
scheduled payments or to refinance our obligations with respect to our debt
depends on our financial and operating performance which, in turn, is subject
to
prevailing economic and competitive conditions and to the following financial
and business factors, some of which may be beyond our control.
If
our
cash flow and capital resources are insufficient to fund our debt service
obligations, we could
face substantial liquidity problems and might be forced to reduce or delay
capital expenditures, dispose of material assets or operations, seek to obtain
additional equity capital, or restructure or refinance our indebtedness.
Such
alternative measures may not be successful and may not permit us to meet
our
scheduled debt service obligations. In particular, in the event that we are
required to dispose of material assets or operations to meet our debt service
obligations, we cannot be sure as to the timing of such dispositions or the
proceeds that we would realize therefrom. The value realized from such
dispositions will depend on market conditions and the availability of buyers,
and, consequently, any such disposition may not, among other things, result
in
sufficient cash proceeds to repay our indebtedness. Also, the credit facilities
which govern or will govern our credit facilities may contain covenants that
may
limit our ability to dispose of material assets or operations or to restructure
or refinance our indebtedness. Further, we cannot assure you that we will
be
able to restructure or refinance any of our indebtedness or obtain additional
financing, given the uncertainty of prevailing market conditions from time
to
time, our high levels of indebtedness and the various debt incurrence
restrictions that may imposed by our credit facilities. If we are able to
restructure or refinance our indebtedness or obtain additional financing,
the
economic terms on which such indebtedness is restructured, refinanced or
obtained may not be favorable to us.
14
We
also intend to incur additional debt in connection with future developments
and
acquisitions of properties. We may borrow new funds to develop or acquire
properties. In addition, we may incur or increase our mortgage debt by obtaining
loans secured by some or all of the real estate properties we develop or
acquire. Our substantial debt may harm our business and operating
results
by:
| • |
requiring
us to use a substantial portion of our funds from operations
to pay
interest, which reduces the amount available for distributions
or other
purposes;
|
| • |
making
us more vulnerable to economic and industry downturns and reducing
our
flexibility in responding to changing business and economic conditions;
and
|
| • |
limiting
our ability to borrow more money for operating or capital needs
or to
finance acquisitions in the future.
|
In
addition to the risks discussed above and those normally associated with
debt
financing, including the risk that our cash flow will be insufficient to
meet
required payments of principal and interest, we also are subject to the risk
that we will not be able to refinance the existing indebtedness on our
properties (which, in most cases, will not have been fully amortized at
maturity) or obtain permanent financing on development projects we financed
with
construction loans or mezzanine debt, and that the terms of any refinancing
we
could obtain would not be as favorable as the terms of our existing
indebtedness. If we are not successful in refinancing this debt when it becomes
due, we may be forced to dispose of properties on disadvantageous terms,
which
would adversely affect our ability to service other debt and meet our other
obligations.
We
expect to continue to experience rapid growth and may not be able to adapt
our
management and operational systems to respond to the integration of additional
properties without significant disruption or expense.
We
are currently in a period of rapid growth. Azur’s initial portfolio of
properties have all been acquired since January 2004. We also expect to
continue
to pursue additional acquisition and development opportunities.
As
a result of the rapid growth of our portfolio, we cannot assure you that
we will
be able to adapt our management, administrative, accounting and operational
systems or hire and retain sufficient operational staff to integrate these
properties into our portfolio and manage any future acquisitions of additional
properties without operating disruptions or unanticipated costs. As we
develop
or acquire additional properties, we will be subject to risks associated
with
managing new properties, including tenant retention and mortgage defaults.
In
addition, acquisitions or developments may cause disruptions in our operations
and divert management's attention away from day-to-day operations. In addition,
our profitability may suffer because of acquisition- related costs or
amortization costs for acquired goodwill and other intangible assets. Our
failure to successfully integrate any future properties into our portfolio
could
have a material adverse effect on our results of operations and financial
condition and our ability to make distributions to our shareholders, although
it
is not our present intention to make distributions to shareholders in the
immediately foreseeable future.
15
Our
future developments, acquisitions and investment opportunities may not
yield the
returns we expect or may result in shareholder dilution.
We
expect to develop and/or acquire a number of real estate properties in
the
future. Although we generally have described Azur’s investment and market
selection process (which will become Harvest’s processes upon consummation of
the Share Exchange) in the "Background Information on Azur International,
Inc. -
Description of Business" section below, the location or other relevant
economic
and financial data of any real properties, other assets or other companies
we
may develop or acquire in the future may not be different than described.
New
developments are subject to a number of risks, including, but not limited
to,
construction delays or cost overruns that may increase project costs, financing
risks, the failure to meet anticipated occupancy or rent levels, failure
to
receive required zoning, occupancy, land use and other governmental permits
and
authorizations and changes in applicable zoning and land use laws If any
of
these problems occur, development costs for a project will increase, and
there
may be significant costs incurred for projects that are not completed.
In
deciding whether to acquire or develop a particular property, we made certain
assumptions regarding the expected future performance of that property.
If a
number of these new properties do not perform as expected, our financial
performance will be adversely affected. In addition, if we issue equity
securities for any such acquisitions, such issuances could be substantially
dilutive to our shareholders.
Our
results of operations will be significantly influenced by the economies
of the
markets in which we operate, and the market for luxury residential and
resort
space generally.
We
are susceptible to adverse developments in the markets in which we operate,
such
as business layoffs or downsizing, industry slowdowns, relocations of
businesses, changing demographics, infrastructure quality, state budgetary
constraints and priorities, increases in real estate and other taxes, costs
of
complying with government regulations or increased regulation and other
factors.
In addition, all of our real property is currently located in either Fort
Lauderdale, Florida or Gautier, Mississippi, which exposes us to greater
economic risks than if we owned properties in numerous geographic regions.
Any
adverse economic or real estate developments in Fort Lauderdale, Florida,
Gautier, Mississippi and the surrounding regions or any of the markets
in which
we may operate, or any decrease in demand for luxury residential housing
and
hotel space resulting from the local regulatory environment, business climate
or
fiscal problems, could adversely affect our financial condition, results
of
operations, cash flow, the trading price of our common shares and our ability
to
satisfy our debt service obligations.
We
may not be successful in identifying suitable development projects or
acquisitions that meet our criteria, which may impede our
growth.
A
central part of our business strategy is expansion through development
projects
and acquisitions, which requires us to identify suitable development or
acquisition candidates or investment opportunities that meet our criteria
and
are compatible with our growth strategy. We may not be successful in identifying
suitable real estate properties or other assets that meet our development
or
acquisition criteria or in completing developments, acquisitions or investments
on satisfactory terms. Failure to identify or complete developments or
acquisitions could slow our growth, which could in turn adversely affect
our
financial condition and results of operations.
Our
performance and value are subject to risks associated with real estate
assets
and with the real estate industry.
Our
ability to make distributions to our shareholders depends on our ability
to
generate substantial revenues from our properties. Events and conditions
generally applicable to owners and operators
of real property that are beyond our control may decrease cash available
for
distribution and the value of our properties. These events include:
| • |
local
oversupply, increased competition or reduction in demand for
space;
|
| • | inability to collect rent from tenants; |
| • | vacancies or our inability to rent space on favorable terms; |
| • | inability to finance property development, tenant improvements and acquisitions on favorable terms; |
| • | increased operating costs, including insurance premiums, utilities and real estate taxes; |
| • | costs of complying with changes in governmental regulations; |
| • | the relative illiquidity of real estate investments; |
| • | changing demographics; and |
| • | changing traffic patterns. |
16
In
addition, periods of economic slowdown or recession, rising interest rates
or
declining demand for real estate, or the public perception that any of
these
events may occur, could result in a general decline in sales prices or
rents,
which would adversely affect our financial condition, results of operations,
cash flow, per share trading price of our common shares and ability to
satisfy
our debt service obligations and to make distributions to our
shareholders.
We
could incur significant costs related to government regulation and environmental
matters.
All
of our real estate properties are currently located in Florida and the
Mississippi Gulf Coast. The occurrence there of natural disasters such
as
hurricanes, floods, fires, unusually heavy or prolonged rain and droughts,
could
have a material adverse effect on our ability to develop and sell properties
or
realize income from our projects. The occurrence of natural disasters could
also
cause increases in property insurance rates and deductibles which could
reduce
demand for our properties.
Joint
venture investments could be adversely affected by our lack of sole
decision-making authority, our reliance on a co-venturer’s financial condition
and disputes between us and our co-venturers.
We
may
co-invest with third parties through partnerships, joint ventures or other
entities, acquiring non-controlling interests in or sharing responsibility
for
managing the affairs of a property, partnership, joint venture or other
entity.
In these situations, we will not be in a position to exercise sole
decision-making authority regarding the property, partnership, joint venture
or
other entity. Investments in partnerships, joint ventures or other entities
may,
under certain circumstances, involve risks not present were a third party
not
involved, including the possibility that partners or co-venturers might
become
bankrupt or fail to fund their share of required capital contributions.
Partners
or co-venturers may have economic or other business interests or goals
that are
inconsistent with our business interests or goals, and may be in a position
to
take actions contrary to our policies or objectives. Such investments may
also
have the potential risk of impasses on decisions, such as a sale, because
neither we nor the partner or co-venturer would have full control over
the
partnership or joint venture. Disputes between us and partners or co-venturers
may result in litigation or arbitration that would increase our expenses.
Consequently, actions by or disputes with partners or co-venturers might
result
in subjecting properties owned by the partnership or joint venture to additional
risk. In addition, we may, in certain circumstances, be liable for the
actions
of our third-party partners or co-venturers.
|
Harvest
does not anticipate paying any dividends in the foreseeable
future.
|
Harvest
presently anticipates that it will retain all available funds for use
in the
operation and expansion of its business and does not anticipate paying
any
dividends in the foreseeable future. Any future payment of dividends
to its
stockholders will depend on decisions that will be made by its board
of
directors and will depend on then existing conditions, including our
financial
condition, contractual restrictions, capital requirements and business
prospects.
|
Azur
may be unable to raise additional funding to pursue our strategies
which
may harm our
business.
|
Azur
anticipates the need for additional capital as it pursues its business
strategy.
Based on Azur’s development plans for properties that it currently has under
contract, Azur will need approximately $135 million over the next
12-24 months and a total of $620 million over the next five years.
Azur
expects to raise additional capital through a combination of new debt
issuances
and equity sales, from private as well as public sources, and traditional
acquisition and development loans potentially utilizing any largely unencumbered
properties as collateral for such loans. Issuance of any convertible
debt and/or
the sale of equity will likely have a dilutive effect on Azur and its
shareholders. Implementation of Azur’s strategy and its business plans is
contingent upon the availability of such funding sources. No assurance
can be
given that Azur will be able to raise capital, at terms that are acceptable
to
Azur, or at all, in order to fund its operations as set forth above.
|
Azur’s
business plan may never be
implemented.
|
Azur’s
business plan includes the acquiring, owning, developing, managing and
selling
of parcels of undeveloped property and existing hotel and resort properties.
Xxxx has entered into agreements concerning various real property; however,
there is no assurance that any of the transactions contemplated by the
agreements will ever be completed.
17
|
Azur’s
business plan includes the acquisition of real property and/or
businesses.
|
Azur’s
business plan includes future acquisitions or investments in real property,
other companies and facilities. Azur may not realize the anticipated
benefits of
any acquisition or investment. If Azur makes any acquisitions, it will
be
required to assimilate the operations, products and personnel of the
acquired
businesses and train, retain and motivate key personnel from the acquired
businesses. Similarly, acquisitions may cause disruptions in Azur’s operations
and divert management’s attention from day-to-day operations, which could impair
Azur’s relationships with its employees, customers and strategic partners.
In
addition, Azur’s profitability may suffer because of acquisition-related costs,
amortization costs for certain intangible assets, and impairment losses
related
to goodwill.
|
Azur’s
real estate investments are relatively
illiquid.
|
Because
real estate investments are relatively illiquid, Azur’s ability to vary its
portfolio promptly in response to economic or other conditions will be limited.
The foregoing may impede the ability of Azur to respond to adverse changes
in
the performance of its investments and could have an adverse effect on the
company’s financial condition and results of operations.
|
Current
Harvest shareholders will suffer immediate and substantial dilution
under
terms of the Share Exchange
Agreement.
|
Under
the
terms of the Share Exchange Agreement, Harvest will issue shares of Harvest’s
Common Stock to the shareholders of Azur. As a result, current shareholders
of
Harvest will suffer substantial dilution. In addition, although after the
Share
Exchange less than 25 million shares of Harvest Common Stock shall be issued
and
outstanding or reserved for issuance upon exercise or conversion of outstanding
warrants, options or convertible securities, Harvest will have 300 million
authorized shares of Common Stock (300,000,000). Harvest’s ability to issue a
large number of additional shares of Common Stock after the completion of
the
Share Exchange will therefore subject current Harvest shareholders to additional
dilution.
|
No
investment banker was hired to review the fairness of the
transaction.
|
No investment banker, appraiser or other independent third party has been
consulted concerning this offering or the fairness of the terms of the Share
Exchange. Thus, you may have less protection than if an investment banker
were
involved in the transaction. For example, the consideration to be received
by
the shareholders of Harvest and Azur were determined to be fair only by the
directors of Azur and Harvest (who may have conflicts of interest), and there
has been less due diligence performed on Harvest and Azur than would have
been
the case if an investment banker were involved in the transaction. As a result,
shareholders of Harvest and Azur are cautioned to rely on their own
determination of the reasonableness of the terms of the proposed transaction
and
the consideration they will receive.
18
|
Various
conflicts of interest existed during the negotiation of the Share
Exchange
Agreement.
|
Azur acquired a controlling interest in Harvest on June 1, 2005 when Azur
purchased approximately 50.4% of the outstanding Common Stock of Harvest.
In
connection with such purchase, officers and directors of Azur were appointed
as
the directors and officers of Harvest and all persons not affiliated with
Azur
resigned as officers and directors of Harvest.
On
the
date that the Board of Directors of each company approved the Share Exchange
Agreement, the Harvest board consisted of:
|
|
•
|
Xxxxxx
Xxxxx;
|
|
|
||
|
|
•
|
Xxxxxx
Xxxxxxx; and
|
|
|
||
|
|
•
|
Xxxxxx
Xxxx,
|
and
the
Azur board consisted of:
|
|
•
|
Xxxxxx
Xxxxx;
|
|
|
||
|
|
•
|
Xxxxxx
Xxxxxxx;
|
|
•
|
Xxxxxx Xxxx; | |
|
•
|
Xxxx Xxxxx; and | |
|
•
|
Xxxx Xxxxxx |
On
that
same date, the officers of Harvest were:
|
|
•
|
Xxxxxx
Xxxxx, Chief Executive Officer;
|
|
|
||
|
|
•
|
Xxxxxx
Xxxxxxx, President; and
|
|
|
||
|
|
•
|
Xxxxxx
Xxxx, Secretary,
|
19
and
the
officers of Azur included:
|
|
•
|
Xxxxxx
Xxxxx, Chairman and Chief Executive Officer;
|
|
|
||
|
|
•
|
.Xxxxxx
Xxxxxxx, President; and
|
|
•
|
Xxxxxx Xxxx, Secretary |
Accordingly,
during the period from June 1, 2005 to the present, a period during which
the
Share Exchange Agreement was executed, Harvest and Azur were under common
control.
In addition, on the date that the Boards of Directors of Harvest and Azur
approved the Share Exchange Agreement, certain of the officers and directors
of
the companies owned stock in the other company as follows:
|
|
|
|
|
• Xxxxxx
Xxxxx.
|
|
Approximately
1.46% of the outstanding common stock of Azur
|
|
• Xxxxxx
Xxxxxxx.
|
|
Less
than 1% of the outstanding common stock of Azur
|
|
• Xxxxxx
Xxxx.
|
|
Less
than 1% of the outstanding common stock of Azur
|
The
directors of each of Harvest and Azur have an independent obligation to ensure
that the participation in the share exchange of each individual company is
fair
and equitable, considering all factors unique to each company and without
regard
to whether the share exchange is fair and equitable to the other company.
While
the directors sought to discharge faithfully this obligation to each of the
companies, you should bear in mind that all three of the directors of Harvest
were members of both boards during a period of time when the companies were
conducting their due diligence and during the negotiation of the Share Exchange
Agreement. As a result, these directors may not have had a totally independent
perspective during the negotiations of the Share Exchange Agreement, which
may
have led them to advocate positions during such negotiations different from
what
they may have advocated had they not had the same perspective and the Share
Exchange should not be viewed as being agreed upon at
“arms-length.”
|
Our
common stock is traded on the over the counter bulletin board and,
as a
result, there may be limited trading volume in the stock, as well
as a
greater spread between “bid” and “asked”
prices.
|
Our
common stock is traded on the Over-the-Counter Bulletin Board (the “OTC Bulletin
Board”). While a public market currently exists for our common stock, trading of
relatively small blocks of stock can have a significant impact on the price
at
which the stock is traded. In addition, the over the counter market has
experienced, and is likely to experience in the future, significant price
and
volume fluctuations which could adversely affect the market price of our
common
stock without regard to our operating performance.
Issuers
whose securities are traded on the OTC Bulletin Board may experience a greater
spread between the “bid” and “asked” prices of their securities compared with
securities traded on a national securities exchange or Nasdaq, and a limited
liquidity in their securities. In addition, many investors have policies
against
the purchase or holding of securities traded in the over-the-counter markets.
Trading in an over-the-counter market such as OTC Bulletin Board has, and
will
continue to, affect both the trading volume and the market value of our common
stock for the foreseeable future.
20
|
We
will be subject to the xxxxx stock rules which may adversely affect
trading in our stock.
|
Because
our common stock is not listed on any securities exchange or the Nasdaq Stock
Market and does not have a trading price of at least $5.00 per share, our
common
stock is subject to xxxxx stock regulations. As a result, the market liquidity
for the shares received in this offering could be adversely affected because
these regulations require broker-dealers to make a special suitability
determination for the purchase and to have received the purchaser’s written
consent to the transaction prior to the sale. This makes it more difficult
administratively for broker-dealers to buy and sell stock subject to the
xxxxx
stock regulations on behalf of their customers. As a result, it may be more
difficult for a broker-dealer to sell the shares received in this offering.
Assuming
the Share Exchange is completed, New Harvest Capital Corporation will be
the
legal parent of Azur International, Inc. For accounting purposes, Azur will
be
the acquirer and its financial information will be reported from the effective
date of the Share Exchange. Accordingly, the operations of Harvest will no
longer be reported and all historical financial information and results of
operations will be that of Azur International, Inc.
On
June
1, 2005 Azur acquired approximately 50.4% of the outstanding common stock
of
Harvest.
The
accompanying unaudited pro forma financial statements includes Harvest,
Azur and
proforma adjustments. The balance sheet for Harvest has been presented
as of
April 30, 2005 and
March
31, 2005 for Azur. The pro forma annual statement of operations is for
the year
ended April
30,
2005 for New Harvest and March 31, 2005 for
Azur.
The
condensed pro forma financial statements should be read in conjunction with
the
audited financial statements of Harvest and Azur.
The
unaudited pro forma consolidated balance sheet of
the Azur as of March 31, 2005 and the audited
Harvest balance sheet as of April 30, 2005 are based on historical balance
sheets. The adjustments are provided to reflect, on a pro forma basis, the
allocation of the purchase price for
the
fair market value of the acquisition, and the elimination of the subsidiary
common
stock, the pre- acquisition accumulated deficit and the acquisition
goodwill.
The
unaudited pro forma statements of operations are the historical financial
statements of Azur
and
Harvest. The pro forma information is not necessarily indicative
of the results of operations that would have been reported had such events
occurred on the
dates
indicated, nor is it indicative of the results of Registrant's future
operations.
21
|
New
Harvest Capital Corporation
|
|||||||||||||||||||||||||
|
Proforma
Consolidated Balance Sheet (unaudited)
|
|||||||||||||||||||||||||
|
April
30, 2005
|
|||||||||||||||||||||||||
|
New
|
Azur
|
Proforma
|
Proforma
|
|||||||||||||
|
Harvest
|
International
|
Acquisition
|
Consolidated
|
|||||||||||||
|
ASSETS
|
||||||||||||||||
|
CURRENT
ASSETS
|
||||||||||||||||
|
Cash
and Cash Equivalents
|
$
|
139,556
|
$
|
671,077
|
f
|
$
|
(139,556
|
)
|
$
|
671,077
|
||||||
|
Accounts
Receivable
|
-
|
2,646,354
|
2,646,354
|
|||||||||||||
|
Inventory
|
-
|
414,884
|
414,884
|
|||||||||||||
|
Prepaid
Expenses
|
-
|
901,015
|
-
|
901,015
|
||||||||||||
|
Other
Receivables
|
-
|
872,666
|
-
|
872,666
|
||||||||||||
|
.
|
||||||||||||||||
|
Total
current assets
|
139,556
|
5,505,996
|
(139,556
|
)
|
5,505,996
|
|||||||||||
|
|
||||||||||||||||
|
PROPERTY
AND EQUIPMENT
|
||||||||||||||||
|
Property
& equipment
|
-
|
18,887,469
|
-
|
18,887,469
|
||||||||||||
|
Accumulated
depreciation
|
-
|
190,850
|
190,850
|
|||||||||||||
|
Net
property & Equipment
|
-
|
18,696,619
|
-
|
18,696,619
|
||||||||||||
|
|
||||||||||||||||
|
OTHER
NON-CURRENT ASSETS
|
||||||||||||||||
|
Loan
Acquisition Costs-net
|
-
|
242,145
|
-
|
242,145
|
||||||||||||
|
Investments
in Real Estate
|
-
|
240,000
|
240,000
|
|||||||||||||
|
Goodwill
|
-
|
9,322,846
|
e
|
551,800
|
9,874,646
|
|||||||||||
|
Construction
Deposits
|
-
|
1,675,509
|
-
|
1,675,509
|
||||||||||||
|
Deposits-
Land Purchase
|
-
|
1,250,309
|
1,250,309
|
|||||||||||||
|
Security
Deposits
|
-
|
11,416
|
11,416
|
|||||||||||||
|
Total
non-current assets
|
-
|
12,742,225
|
551,800
|
13,294,025
|
||||||||||||
|
|
||||||||||||||||
|
Total
assets
|
$
|
139,556
|
$
|
36,944,840
|
$
|
412,244
|
$
|
37,496,640
|
||||||||
|
|
||||||||||||||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||||||||||
|
CURRENT
LIABILITIES
|
||||||||||||||||
|
Notes
& Mortgages Payable-Current Portion
|
$
|
1,800
|
$
|
6,048,002
|
$
|
-
|
$
|
6,049,802
|
||||||||
|
Capital
Lease Obligation-Current Portion
|
-
|
260,839
|
260,839
|
|||||||||||||
|
Accounts
Payable and Accruals
|
-
|
2,566,705
|
-
|
2,566,705
|
||||||||||||
|
Due
to Airtek Stockholders
|
-
|
11,224,000
|
11,224,000
|
|||||||||||||
|
Other
Current Liabilities
|
-
|
97,284
|
97,284
|
|||||||||||||
|
Total
current liabilities
|
1,800
|
20,196,830
|
-
|
20,198,630
|
||||||||||||
|
LONG
TERM LIABILITIES
|
||||||||||||||||
|
Notes
& Mortgages Payable-Net of Current Portion
|
-
|
11,012,270
|
-
|
11,012,270
|
||||||||||||
|
Allocated
Acquisition Debt
|
b
|
550,000
|
550,000
|
|||||||||||||
|
Capital
Lease Obligation-Net of Current Portion
|
-
|
647,634
|
-
|
647,634
|
||||||||||||
|
Liabilites
Subject to Compromise from Bankruptcy
|
-
|
752,971
|
-
|
752,971
|
||||||||||||
|
Total
long term liabilities
|
-
|
12,412,875
|
550,000
|
12,962,875
|
||||||||||||
|
OTHER
LIABILITIES
|
||||||||||||||||
|
Deposits
Held
|
-
|
2,020,000
|
-
|
2,020,000
|
||||||||||||
|
Deferred
Income Tax
|
-
|
231,840
|
-
|
231,840
|
||||||||||||
|
Total
other liabilities
|
-
|
2,251,840
|
-
|
2,251,840
|
||||||||||||
|
Total
liabilities
|
1,800
|
34,861,545
|
550,000
|
35,413,345
|
||||||||||||
|
STOCKHOLDERS'
EQUITY
|
||||||||||||||||
|
Common
stock, $0.0001 par value, 300,000,000
|
||||||||||||||||
|
shares
authorized
|
10
|
-
|
c
|
(10
|
)
|
-
|
||||||||||
|
Common
stock, 10,000,000 shares authorized
|
419,723
|
-
|
419,723
|
|||||||||||||
|
Additional
Paid In Capital
|
606,670
|
2,037,884
|
c
|
(606,670
|
)
|
2,037,884
|
||||||||||
|
(Accumulated
Deficit)
|
(468,924
|
)
|
(3,073,604
|
)
|
c
|
468,924
|
(3,073,604
|
)
|
||||||||
|
Non
Controlling Interest In Subsidiaries
|
-
|
2,736,576
|
d
|
-
|
2,736,576
|
|||||||||||
|
Accumulated
Other Comprehensive income (loss)
|
-
|
(37,284
|
)
|
|
-
|
(37,284
|
)
|
|||||||||
|
Total
Stockholders' Equity (Deficit)
|
137,756
|
2,083,295
|
(137,756
|
)
|
2,083,295
|
|||||||||||
|
Total
Liabilities and Stockholders' Equity (Deficit)
|
$
|
139,556
|
$
|
36,944,840
|
$
|
412,244
|
$
|
37,496,640
|
||||||||
22
|
New
Harvest Capital Corporation
|
|||||||||||
|
Pro
Forma Consolidated Statement of Operations
|
|||||||||||
|
For
the year April 30, 2005
|
|||||||||||
|
Unaudited
|
|||||||||||
|
New
|
Azur
|
Proforma
|
Proforma
|
|||||||||||||
|
Harvest
|
International
|
Adjustments
|
Consolidated
|
|||||||||||||
|
SALES
AND REVENUES
|
$
|
-
|
$
|
11,590,228
|
$
|
-
|
$
|
11,590,228
|
||||||||
|
COST
OF SALES
|
-
|
4,225,662
|
-
|
4,225,662
|
||||||||||||
|
Gross
Profit
|
-
|
7,364,566
|
-
|
7,364,566
|
||||||||||||
|
OPERATING
EXPENSES
|
9,470
|
7,282,484
|
-
|
7,291,954
|
||||||||||||
|
Net
income (loss) before other income (expenses) and
|
||||||||||||||||
|
provision
for income taxes
|
(9,470
|
)
|
82,082
|
-
|
72,612
|
|||||||||||
|
OTHER
INCOME (EXPENSE)
|
||||||||||||||||
|
Other
Income
|
427
|
427
|
||||||||||||||
|
Other
Expense
|
(100,767
|
)
|
(100,767
|
)
|
||||||||||||
|
Interest
income
|
798
|
1,769
|
2,567
|
|||||||||||||
|
Interest
(expense)
|
-
|
(627,860
|
)
|
b
|
(66,000
|
)
|
(693,860
|
)
|
||||||||
|
Total
other income (expense)
|
798
|
(726,431
|
)
|
(66,000
|
)
|
(791,633
|
)
|
|||||||||
|
Net
income (loss) before provision for income taxes
|
(8,672
|
)
|
(644,349
|
)
|
(66,000
|
)
|
(719,021
|
)
|
||||||||
|
Provision
for income taxes
|
-
|
323,826
|
-
|
323,826
|
||||||||||||
|
Net
income (loss) before minority share
|
(8,672
|
)
|
(968,175
|
)
|
(66,000
|
)
|
(1,042,847
|
)
|
||||||||
|
Minority
share of Income (Loss)
|
(38,563
|
)
|
(38,563
|
)
|
||||||||||||
|
Net
income (loss)
|
$
|
(8,672
|
)
|
$
|
(929,612
|
)
|
$
|
(66,000
|
)
|
$
|
(1,004,284
|
)
|
||||
|
Net
income (loss) per weighted average share
|
($0.09
|
)
|
($0.03
|
)
|
($0.04
|
)
|
||||||||||
|
Weighted
average number of shares
|
95,372
|
27,581,601
|
(95,372
|
)
|
27,581,601
|
|||||||||||
|
New
Harvest Capital Corporation
|
|||||||||||
|
Pro
Forma Adjustments
|
| a) Payment by Azur of $550,000 for the purchase of 50.4% of the common shares of New Harvest. | |||||||||||
| b) Allocation of normal working capital debt of $550,000 at 12% to fund the acquisition. Annual interest expense $66,000 | |||||||||||
| c) Elimination of New Harvest common stock and accumulated deficit. | |||||||||||
| d) Minority share of New Harvest-nil balance after acquisition costs | |||||||||||
| e) Goodwill created via acqusition of common stock for cash. | |||||||||||
| f) Estimated legal and professional costs of acquisition paid by New Harvest. | |||||||||||
23
THE
ACQUISITION OF AZUR INTERNATIONAL, INC.
Background
of Harvest
Since
its
incorporation in August 1985, except for capital raising activities and the
ownership and disposition of interests in certain companies, Harvest has
had no
business activities. For more than three years Harvest has been seeking an
appropriate acquisition or merger candidate with an operating business with
which Harvest could merge, or engage with in an acquisition transaction in
order
to obtain some value for the shareholders of Harvest.
Background
of Azur
Azur was incorporated in Nevada in June 1997 as "Union Chemical Corporation."
The company was formed to be a partner in a joint venture that was never
consummated and had no operations as Union Chemical Corporation. Its operations
commenced in June 1999, when it acquired an internet domain name
XxxXxxxxx00.xxx, and a related webmaster hosting business and other assets
in
exchange for shares of its capital stock. The company changed its name to
Xxxxxxxxx00.xxx, Inc. after the acquisition.
On
August
23, 1998 the company filed with the SEC a Registration Statement on Form
10-SB
to register its Common Stock under the Exchange Act. The registration statement
automatically became effective under Section 12(g) (1) of the Exchange Act
60
days after it was filed. However, after the registration became effective,
the
company never filed any periodic reports or made any other filings with the
SEC
as required by the Exchange Act.
On
February 6, 2001 the company filed a voluntary Chapter 7 bankruptcy petition
with the United States Bankruptcy Court for the District of Arizona. On July
24,
2003 the court ordered the case closed after the net assets of the estate
were
distributed.
On
January 15, 2004 St. Xxxxx Group Limited acquired approximately 51% of the
issued and outstanding stock of the company in a private stock purchase.
The
buyer was not aware that the company had a class of its securities registered
under the 1934 Act or that the company was delinquent in filing reports required
to be filed by registered companies. On January 23, 2004 the company changed
its
name to Azur International, Inc. and approved a 1 for 100 reverse stock split
of
its common stock pursuant to which 36,906,335 shares were reduced to 369,086
shares after the split. On February 9, 2004 Azur issued to the four stockholders
of Xxxxx Bay Development Corp. (“Xxxxx Bay ”) an aggregate of 9,050,000 shares
in exchange for all of the outstanding common stock of Xxxxx Bay, valued
at
$90,050. By virtue of the exchange, Xxxxx Bay, a Florida corporation which
was
engaged in real estate development through several subsidiaries, became a
wholly
owned subsidiary of Azur and Xxxxx Bay changed its name to Azur Development
Corp.
In
December 2004 the management of Azur learned that Azur’s common stock had been
registered under the Exchange Act in 1998, but that Azur and its predecessors
had not filed any required reports or made any other filings under the 1934
Act.
Management consulted with legal counsel and public accounting firms regarding
a
course of action to cure such filing deficiencies. Azur determined, however,
for
all periods prior to the closing of the Chapter 7 bankruptcy case, Azur lacked
the financial and other records required to prepare or file any required
reports
under the Exchange Act regarding Azur. Management of Azur was informed by
the
bankruptcy attorney for its predecessor, Xxxxxxxxx00.xxx, Inc., that in
connection with the bankruptcy case, all of the records of the company had
been
turned over to the trustee appointed for the bankruptcy estate. The trustee
further informed Xxxx that in accordance with the trustee’s records retention
policies, the trustee had destroyed all of such records six months after
the
conclusion of the case.
24
In
light
of the foregoing, counsel for Azur had discussions with members of the staff
of
the Chief Counsel’s Office and the Office of the Chief Accountant of the
Division of Corporation Finance of the Securities and Exchange Commission
regarding the possibility of Azur obtaining a waiver or some other relief
from
complying with some or all of its filing requirements for the period from
1998
to December 2003 based on its lack of records, the fact that Azur’s current
business was unrelated to the business of its predecessors during all of
the
1998-2003 period and the fact that none of Azur’s current management was
associated with the predecessor companies. However, the staff indicated that
it
was not prepared to grant any relief to Azur and that Azur should, to the
maximum extent possible, file all delinquent reports.
Without
any records, other than the financials statements of its predecessor, Union
Chemical Corporation as of December 31, 1998 and 1997 and for the years then
ended and as of April 30, 1999 and the four months then ended, as well as
the
corporate charter and by-laws of the company, certain records from the original
transfer agent of the company and several contracts to which the company
was a
party which were filed as exhibits to its Form 10-SB filed in 1998, Azur
management believes that Azur is not in a position to file any periodic reports
relating to Azur and its predecessors for all periods prior to January
2003.
As
a
result of its perceived inability to cure previous filing deficiencies, but
the
desire of management of Azur to operate as a fully reporting public company
to
provide liquidity to its stockholders, in early 2005 the management of Azur
determined to seek to acquire a reporting company into which Azur could
contribute its businesses.
Background
of the Agreement
In
February 2005 Xxxxxx Xxxxx, the Chief Executive Officer of Azur, was informed
by
Xxxxxxx Xxxxxxx, an acquaintance of Xx. Xxxxx, who represented the majority
stockholder of Harvest, that a controlling interest in Harvest might be
available for purchase. During the period from February 2005 to May 2005,
Xx.
Xxxxx negotiated the terms of a purchase of the controlling interest with
Xx.
Xxxxxxx. The negotiations focused on the purchase price for the interest
as well
as the parameters for post-acquisition transactions in which, subject to
the
approval of Harvest’s Board and shareholders, a reverse stock split of the
Harvest common stock would be effected and a share exchange transaction would
be
consummated in which Harvest would acquire all of the outstanding common
stock
of Azur in exchange for the issuance of Harvest common stock. During such
period
Xx. Xxxxxxx and Xx. Xxxxx also negotiated the terms of a consulting agreement
between Azur and a company controlled by Xx. Xxxxxxx under which shares of
Azur
common stock would be issued to the company for investment banking and
consulting services.
During
the period from March to May 2005 Azur and Harvest each conducted due diligence
investigations, including reviews by their respective legal counsel and
financial advisors. In addition legal counsel for the seller, HVST Acquisition
Corp., and Xxxx drafted a definitive stock purchase agreement relating to
the
purchase of all 68,960,000 shares of Harvest common stock (approximately
50.4%
of the outstanding shares of Harvest common stock) held by HVST Acquisition
Corp. The
stock
purchase was consummated on June 1, 2005. On such date the officers of Harvest
resigned and designees of Azur were elected as officers of Harvest to replace
them. In addition three designees of Azur were elected as directors of Harvest
and the three directors of Harvest in office prior to the stock purchase
resigned as directors effective 10 days after the filing with the SEC and
dissemination to holders of record of Harvest common stock of an Information
Statement concerning the stock purchase and the election of new directors
and
officers of Harvest which was prepared in accordance with SEC Rule 14f-1.
Such
information statement was filed with the SEC on June 23, 2005 and disseminated
to holders of record of Harvest common stock on June 24, 2005. Therefore,
the
resignations of the directors of Harvest immediately prior to the stock purchase
took effect on July 4, 2005.
25
During
the period from June 24, 2005 to June 28, 2005 the directors of Harvest
(including the three directors whose resignations took effect on July 4,
2005)
and Azur, as the majority shareholder of Harvest, approved a 1 for 1,370
reverse
stock split of the Harvest common stock. A definitive information statement
regarding such reverse stock split was filed with the SEC on July 11, 2005
and
disseminated to stockholders of Harvest commencing on such date. On August
,
2005 Harvest filed a Certificate of Amendment to its Certificate of
Incorporation to effect the reverse stock split.
During
the period from June 1, 2005 to July 18, 2005 the management of Harvest and
Azur
authorized and directed legal counsel for such companies to prepare a
registration statement relating to the proposed Share Exchange of which this
Information Statement/Proxy Statement/Prospectus comprises a part. The
preliminary registration statement was filed with the SEC on July ______
, 2005.
Certain of the terms of the Share Exchange were omitted from the registration
statement pending approval of the transaction by the Boards of Azur and
Harvest.
On
_________ , 2005, the Harvest and Azur Board of Directors held meetings to
consider the proposed agreement. Prior to the meetings, the directors were
provided with a draft of the Share Exchange Agreement and related documents.
On
that date, Harvest had ________ shares of common stock outstanding, on a
fully-diluted basis, and the most recent closing price for Harvest’s common
stock was $0.01 per share. Accordingly, the Boards of Directors of Azur and
Harvest agreed upon a valuation of Harvest of approximately $_______. Azur
had a
total of ________ shares of its common stock issued and outstanding
or
reserved for issuance pursuant to agreements that Azur had entered into,
and the
Boards of Directors of Harvest and Azur agreed upon a valuation of Azur,
based
on the value of the real property and businesses that Azur had agreements
to
purchase, in a range of $__________ to $_________. In order to maintain these
respective valuations an exchange ratio of one share of Harvest for every
two
shares of Azur.
Both the Harvest and Azur Board of Directors held separate discussions and
determined that the transactions contemplated by the Share Exchange Agreement
and related documents were advisable and in the best interest of their
respective companies and stockholders. On __________2005, both the Harvest
and
Azur Boards of Directors approved the Share Exchange Agreement, directed
their
executive officers to execute the Share Exchange Agreement and recommended
the
Share Exchange Agreement to their respective shareholders.
On
____________, 2005, the Share Exchange Agreement and related documents were
executed by the parties.
On
___________, 2005, the Share Exchange Agreement and related documents were
approved by a majority of the shareholders of Harvest by written consent.
The
Harvest Board of Directors, on __________ 2005, unanimously approved the
Share
Exchange Agreement and the transactions contemplated thereby, including the
amendments of Harvest’s Certificate of Incorporation to change its name to Azur
International, Inc. and to limit the liability of directors of the company,
and
determined that the Share Exchange, and the transactions contemplated thereby
are in the best interests of Harvest and its shareholders. On the Record
Date,
Azur held approximately 50.4% of the voting power of Harvest.
26
In
approving the Share Exchange Agreement, Harvest’s Board considered a number of
factors, including, but not limited to, the following:
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1. The
financial condition, results of operations, business and prospects
of
Harvest and concluded that Harvest’s financial condition, results of
operations, business and prospects made it very doubtful that it
was
strong enough to sustain itself, if an acquisition was not consummated.
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2. The
Share Exchange was expected to be tax free to the shareholders
of Harvest.
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3. Its
familiarity with the management and business plan of Azur.
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4. The
fact that Azur could produce audited financial statements and other
information necessary for the filing of the registration statement
of
which this Information Statement/Proxy Statement/Prospectus is
a part.
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5.
The acquisition of all of the outstanding shares of common stock
of Azur
by Harvest would enable Azur to terminate its reporting obligations
under
the Exchange Act, although Harvest would remain subject to such
obligations.
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6. The
fact that Azur had agreed to pay all fees and expenses associated
with
the
registration statement of which this Information Statement/Proxy
Statement/Prospectus is a part .
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Harvest’s
Board also considered the following possible negative factors in reaching
its
decision to approve the Share Exchange Agreement:
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1. The
significant dilution that the Harvest shareholders will suffer
as a result
of the Share Exchange.
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2. The
fact that since the exchange ratio is fixed, fluctuations in the
share
price of Harvest’s common stock could increase or decrease the value of
the consideration received by Harvest’s shareholders.
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3. The
risk that Azur would not be able to successfully implement its
business
plan.
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4. The
risk that the Share Exchange would not be completed.
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5.
The potential substantial liabilities that Azur has for its failure
to
file periodic reports required to be filed by the company under
the
Exchange Act. See “Xxxx Factors -- Azur
is in default of its reporting obligations under the U.S. federal
securities laws for the period from 1998 to 2003 and potentially
has
substantial liability in such regard.”
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6. The
risk that the interests of its officers and directors may be different
from, or in addition to, those of its shareholders generally. See
“Background Information of New Harvest Capital Corporation —
Conflicts of Interest.”
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27
The
foregoing discussion of the information and factors considered and given
weight
by Harvest’s Board is not intended to be exhaustive. Members of Harvest’s Board
evaluated these factors in light of their knowledge of Azur’s business, the
industries in which Azur operate and their business judgment. In view of
the
variety of factors considered in connection with its evaluation of the
foregoing, the Harvest Board did not find it practicable to, and did not,
quantify or otherwise assign relative weights to the specific factors considered
in reaching its determination. In addition, individual members of the Harvest
Board may have given different weights to different factors.
The
Board
of Directors of Harvest has not requested or received, and will not receive,
an
opinion of an independent investment banker as to whether the Share Exchange
is
fair from a financial point of view to Harvest and its shareholders.
The
Azur
Board of Directors, on __________ 2005, unanimously approved the Share Exchange
Agreement and the transactions contemplated thereby, including the acquisition
of Azur by Harvest, and determined that the acquisition, and the transactions
contemplated thereby are in the best interests of Azur and its shareholders.
On
the Record Date, the Board of Directors as a group held approximately 20%
of the
voting stock of Azur.
In
approving the Share Exchange Agreement, the Azur Board considered a number
of
factors, including, but not limited to, the following:
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1. That
Azur’s investors, shareholders and management have requested and desire
liquidity as soon as possible.
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2. That
Azur’s ability to implement its business plan would increase if it became
a subsidiary of a fully reporting public company.
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3. That
a reverse merger and filing of a registration statement under the
Securities Act would treat all of its shareholders equally as they
would
be able to sell their shares without the expense and paperwork
burden that
would be imposed if their stock was not fully registered.
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4. Its
familiarity with the financial condition and management of Harvest.
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5. The
fact that the Share Exchange was expected to be tax free to the
shareholders of Azur.
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Azur’s Board also considered the following possible negative factors in reaching
its decision to approve the Share Exchange Agreement:
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1. The
fact that, under the terms of the Share Exchange Agreement, the
fees and
expenses associated with the Share Exchange and the filing of this
registration statement would be borne by Azur.
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2. The
risk that the announcement of the Share Exchange and the efforts
necessary
to complete the Share Exchange and this registration statement
could
result in a disruption of the operations of Azur by, among other
things,
diverting management and other resources of Azur from their day-to-day
operations.
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3.
Harvest’s low stock price, volume and trading market.
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4. The
risk that the interests of its officers and directors may be different
from, or in addition to, those of its shareholders generally. See
“Background Information of Azur International, Inc. — Conflicts of
Interest.”
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28
The
foregoing discussion of the information and factors considered and given
weight
by Azur’s Board is not intended to be exhaustive. Members of Azur’s Board
evaluated these factors in light of their knowledge of Azur’ business, the
industries in which Azur operates and their business judgment. In view of
the
variety of factors considered in connection with its evaluation of the
foregoing, the Azur Board did not find it practicable to, and did not quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, individual members of the Azur Board
may have given different weights to different factors.
The
Board
of Directors of Azur has not requested or received, and will not receive,
an
opinion of an independent investment banker as to whether the Share Exchange
is
fair from a financial point of view to Azur and its shareholders.
The
transaction will be accounted for as a reverse acquisition of the fair market
value of Harvest’s stock by Azur in accordance with generally accepted
accounting principles. The accounting treatment applied in the reverse merger
transaction differs from the legal form of the transaction and the continuing
legal parent is Harvest.
Harvest
does not believe that any material federal or state regulatory approvals,
filings or notices are required by Harvest or Azur in connection with the
Share
Exchange other than such approvals, filings or notices required pursuant
to
federal and state securities laws. Under Delaware law, approval of the Share
Exchange and the related amendments to Harvest’s Certificate of Incorporation,
must be obtained from the shareholders of Harvest that own a majority of
the
outstanding shares. Under Nevada law, approval of the Share Exchange must
be
obtained from the shareholders of Azur that own a majority of the outstanding
shares.
The Acquisition and the included transactions contemplated in connection
therewith have been structured with the intent that they be tax-free to New
Harvest Capital Corporation, Azur International, Inc. and holders of New
Harvest
Capital Corporation stock for federal income tax purposes. Assuming that
the
Share Exchange constitutes a tax-free reorganization for federal income tax
purposes, the following are the general federal income tax consequences:
No
gain
or loss will be recognized by Harvest, current stockholders of Harvest or
Azur
in connection with the Share Exchange and the included transactions contemplated
in connection therewith.
29
The
receipt of one share of Harvest common stock for every two shares share of
Azur
common stock held by Azur shareholders on the Record Date for the Share Exchange
should not result in any taxable gain or loss to Azur stockholders for federal
income tax purposes.
In
addition, the Share Exchange may result in the limitation on the use of net
operating losses or the loss of the use of net operating losses of Harvest
under
section 382 of the Internal Revenue Code.
The
federal income tax discussion set forth above is included for general
information and may not apply to particular categories of holders of Azur
stock
or options subject to special treatment under the federal income tax laws,
such
as foreign holders and holders whose stock or options were acquired pursuant
to
the exercise of an employee stock option or otherwise as compensation. In
addition, there may be relevant foreign, state, local or other tax consequences,
which are not described above. The Azur shareholders are urged to consult
their
tax advisors to determine the specific tax consequences of the Share Exchange,
including the applicability and effect of foreign, state, local and other
tax
laws.
The
following is a summary of the material provisions of the Share Exchange
Agreement by and between Azur and Harvest. This summary does not purport
to be
complete and is qualified in its entirety by reference to the Share Exchange
Agreement, which is attached hereto as Exhibit A.
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Exchange
and Purchase of
Shares
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On
the
terms and subject to the conditions set forth in the Share Exchange Agreement,
at the closing Harvest shall assign, transfer, and deliver to the Azur
shareholders, in their pro rata percentages based upon their percentage
ownership of Azur common stock pre-closing, one (1) share of Harvest
Common
Stock for every two (2) shares of Azur common stock held by the Azur
shareholders. The pre-closing holders of Harvest Common Stock shall retain
their
shares which, immediately following the issuance of Harvest Common Stock
to the
Azur shareholders in connection with the closing of the Acquisition shall
constitute approximately .5% of the fully-diluted shares of Harvest Common
Stock
post-closing.
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Closing
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The
“Closing” shall mean the consummation of the exchange of shares of Harvest
Common Stock and shares of Azur common stock, as well as the consummation
of any
other transactions which are included in the Share Exchange Agreement and
required to occur at or before Closing. The Closing shall take place no later
than within three business days following the date upon which all of the
conditions precedent contained in the Share Exchange Agreement have occurred
and
all regulatory matters have been complied with.
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Representations
and Warranties
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The Share Exchange Agreement contains various customary representations and
warranties of the parties thereto, without limitation, representations
(a) by Harvest and Azur as to their respective corporate status,
capitalization, accuracy of financial statements, the authorization and the
enforceability of the Share Exchange Agreement against each such party, absence
of legal proceedings, the absence of certain changes or events concerning
their
respective businesses since December 31, 2004, certain tax matters, certain
employee benefit and pension plan matters, certain environmental matters,
quality of assets, certain labor matters, insurance matters and the absence
of
material adverse changes with respect to their material contracts, and
(b) by Harvest as to its compliance concerning SEC filings. The
representations and warranties contained in the Share Exchange Agreement
will
survive the Closing.
30
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Covenants
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The
Share
Exchange Agreement contains various customary covenants of the parties thereto.
A description of certain of these covenants follows.
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Conduct
of Business Prior to
Closing
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From
___________, 2005 until Closing, Azur covenants to, among other things, except
to the extent that Harvest gives written consent to the contrary:
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(a) operate
its business substantially as previously operated and only in the
regular
ordinary course;
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(b) maintain
its assets and properties in good order and condition;
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(c) pay
all accounts payable and collect all accounts receivable in accordance
with prudent business practice;
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(d) comply
with all laws applicable to the conduct of its business; and
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(e) maintain
its books and records in the usual, regular, and ordinary manner,
on a
basis consistent with past practices.
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From
____________, 2005 until Closing, Harvest covenants that unless the prior
written consent of Azur shall have been obtained, and except as otherwise
expressly contemplated in the Share Exchange Agreement, Harvest shall:
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(a) use
reasonable commercial efforts to preserve intact its business organization
and licenses; and
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(b) notify
Azur of (i) any event or circumstance which has caused or
constituted, or is reasonably likely to have a Harvest Material
Adverse
Effect (as defined in the Exchange Agreement) or would cause or
constitute, a breach of any of Harvest’s representations, warranties or
covenants contained in the Exchange Agreement; or (ii) any
material
change in the normal course of business or in the operation of
Harvest’s
assets, and of any material governmental complaints, investigations
or
hearings or communications indicating that the same may be contemplated)
or adjudicatory proceedings.
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Actions
Prior to Closing
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From
____________, 2005 until Closing, Azur covenants not to, among other things,
without prior written consent of Harvest:
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(a) take
any action that affects the ability of any party to obtain its
consents to
or perform its covenants and agreements under the Share Exchange
Agreement;
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(b) amend
any of its organizational or governing documents;
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(c) incur
any additional debt or other obligation except in the ordinary
course of
business;
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(d) repurchase,
redeem, or otherwise acquire or exchange Azur common stock or issue,
sell,
pledge or otherwise permit to become outstanding any additional
Azur
common stock;
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(e) purchase,
acquire, sell or dispose of any assets or properties, except in
the
ordinary course of business;
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(f) grant
any increase in compensation or benefits to the employees or officers
of
Azur, enter into or amend any employment contract between Azur
and any
person or entity, or adopt any new employee benefit plan or make
a
material change in or to any existing employee benefit plan;
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(g) make
any significant change in any tax or accounting methods;
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(h) commence
any litigation other than in accordance with post practice; or
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(i) modify,
amend or terminate any material contract.
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From
________, 2005 until Closing, Harvest covenants and agrees that Harvest will
not
do any of the following without the prior written consent of Azur:
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(a) take
any action which would (i) adversely affect the ability
of any party
to the Share Exchange Documents (as defined in the Exchange Agreement)
to
obtain any consents required for the transactions contemplated
thereby, or
(ii) adversely affect the ability of any party hereto to
perform its
covenants and agreements under the Share Exchange Documents;
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(b) take
any action, or omit to take any action, which would cause any of
the
representations and warranties contained in the Share Exchange
Agreement
to be untrue or incorrect.
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Supplemental
Disclosure
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From
___________, 2005 until Closing, Harvest and Azur covenant that they each
have
the continuing obligation to disclose in writing to the other party any matter
or information hereafter arising or becoming known that, if known on the
date of
execution of the Agreement, would have been required to be set forth or listed
in a Schedule thereto.
32
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Conditions
Precedent
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Harvest
and Azur shall each use its best efforts to satisfy its respective conditions
precedent for Closing.
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Other
Transactions
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Harvest
and Azur shall deal exclusively and in good faith with each other with regard
to
the transactions contemplated by the Share Exchange Agreement and will not
enter
into any agreement or understanding that would have the effect of preventing
the
consummation of the transactions contemplated by the Share Exchange Agreement.
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Conditions
Precedent to Obligations of Harvest and Azur to Consummate the
Share
Exchange Agreement
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The
obligation of Harvest and Azur to consummate the transactions as contemplated
by
the Share Exchange Agreement are subject to the fulfillment and satisfaction
at
Closing of, among others, each of the following conditions precedent, any
or all
of which may be waived in whole or in part at or prior to the Closing by
the
other party.
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(a) All
information required to be furnished by the parties pursuant to
the Share
Exchange Agreement shall have been furnished as of the Closing
Date and
such representations and warranties shall be true and correct in
all
material respects on and as of the Closing Date;
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(b) Harvest
and Azur shall have performed and complied in all material respects
with
all covenants, agreements and conditions required by the Share
Exchange
Agreement to be performed by them prior to or as of the Closing;
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(c) The
Share Exchange Agreement and all other documents and instruments
to be
delivered in connection therewith, shall have been approved by
a majority
of the Harvest and Azur shareholders; and
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(d) The
Form S-4 shall have been declared effective and no stop
order shall
have been issued and no proceedings for that purpose shall have
been
initiated or threatened.
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Termination
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The
Share
Exchange Agreement may be terminated and the exchange of stock contemplated
hereby may be abandoned at any time prior to the completion of the Closing:
(a) by mutual consent in writing of Harvest and Azur; (b) by
either
Harvest or Azur if any court of competent jurisdiction shall have issued
an
order, judgment or decree (other than a temporary restraining order)
restraining, enjoining or otherwise prohibiting the exchange of stock and
such
order, judgment or decree shall have become final and non-appealable; provided
that the right to terminate the Share Exchange Agreement on this basis shall
not
be available to any party whose failure to fulfill any obligation under the
Share Exchange Agreement has been the cause of, or resulted in, the failure
of
the Closing to occur; (c) by Harvest if there has been a material
breach of
any covenant or agreement or of a representation or warranty on the part
of Azur
which has not been cured, or adequate assurance (acceptable to Harvest in
its
sole discretion) of cure given, in either case, within 15 business days
following receipt of notice of such breach; (d) by Azur if (i) there
has been a material breach of any covenant or agreement or of a representation
or warranty on the part of Harvest which has not been cured, or adequate
assurance (acceptable to Azur in its sole discretion) of cure given, in either
case, within 15 business days following receipt of notice of such breach
or
(ii) at Closing shares of Harvest Common Stock shall not be listed
on the
Over-the-Counter Bulletin Board (OTC:BB); or (e) by either Harvest
or Azur
(and Azur Shareholders) if either of such party’s due diligence investigation
has disclosed the existence of (i) any matter relating to the other
party
or its business that is materially and adversely (to the investigating party)
at
variance with those matters theretofore disclosed to the investigating party,
or
(ii) any matter which, in the investigating party’s reasonable judgment,
(A) indicates a material adverse change in the condition, assets or
prospects of the other party, or (B) would make it inadvisable to
consummate the exchange of stock and other transactions contemplated by the
Share Exchange Agreement.
Termination
of Azur’s Reporting Obligations under Exchange Act
If
the
Share Exchange is consummated Azur will become a wholly owned subsidiary
of
Harvest. In such event Azur intends to terminate the registration of its
common
stock under the Exchange Act and thereby terminate its obligation to file
periodic reports under the Exchange Act. However, after the consummation
of the
Share Exchange Harvest will continue to have its common stock registered
under
the Exchange Act and will continue to file periodic reports under the Exchange
Act. Such reports will contain information concerning Harvest and its
subsidiaries, including Azur.
RECOMMENDATION
OF BOARDS OF DIRECTORS AND
FAIRNESS
OF THE SHARE EXCHANGE
General
The
Boards of Directors of Azur and Harvest believe that the proposed Share Exchange
is fair to the stockholders of each of Azur and Harvest and the Board of
Directors of Azur recommends that the stockholders of Azur vote for approval
of
the Share Exchange Agreement. See "The Acquisition of Azur International,
Inc. -
Reasons for Approval of the Harvest Board” and The Acquisition of Azur
International, Inc. - Reasons for Approval of the Azur Board” for information
concerning factors the respective Boards of Directors considered in approving
the Share Exchange in addition to those discussed in this section. Each Director
of Azur and Harvest is an employee of Azur.
The
principal structural element affecting the respective stockholders of Azur
and
Harvest in connection with the Share Exchange are the valuations placed on
each
company in determining the exchange ratio of common stock of Harvest to be
issued for common stock of Azur.
Except
for Azur’s purchase on June 1, 2005 of approximately 50.4% of the outstanding
common stock of Harvest for $550,000 and certain additional consideration
paid
to a finder in the transaction, no firm offer has been made by any person
during
the preceding 18 months regarding the merger or consolidation of either Azur
or
Harvest or the sale or transfer of all or any substantial part of the assets
of
either entity which would enable the holder of securities to exercise control
over such entity.
34
Fiduciary
Duties of Directors of Azur and Harvest
General
Each
Board of Directors’ fiduciary duties to the stockholders include legal
responsibilities of loyalty, care and good faith. Directors may not profit
by
any conduct or transaction in contravention of their fiduciary obligations
to
stockholders. Rights of action by or on behalf of the stockholders for any
breach of these duties are provided under the corporation laws of Delaware
and
Nevada. If a stockholder believes that the proposed Share Exchange would
constitute a breach of the fiduciary duties of the Directors of the company
whose stock is owned by him, the stockholder could institute legal action
to
enjoin the consummation of the Share Exchange or to recover damages resulting
from the consummation of the Share Exchange. In appropriate circumstances,
a
stockholder may institute a class action against the Directors on behalf
of
himself and the other similarly situated stockholders or a derivative action
against the Directors on behalf of the corporation to recover damages for
a
breach of the Directors’ fiduciary duties. A stockholder who votes to approve
the Share Exchange may not be able to assert claims for breaches of fiduciary
duty by the Directors in the absence of a claim that all facts necessary
for the
stockholder to make an informed decision were not properly disclosed. This
is a
developing area of the law, and limited partners who have questions concerning
the duties of the respective Boards of Directors should consult with their
own
legal counsel.
Conflicts
of Interest
The
Directors of Azur and Harvest have conflicts of interest with respect to
the
Share Exchange arising from, among other things:
The
Board
of Directors of each corporation determined the structure of the proposed
Share
Exchange and the exchange ratio without any independent third party representing
the stockholders of either corporation partnership. As a result, the
determination of the exchange ratio and the other terms of the Share Exchange
may not reflect the allocation of relative value that would result if the
Share
Exchange were negotiated with an unaffiliated third party in an arms length
transaction.
Officers
and directors of Azur and Harvest will continue to serve as officers and
directors of such companies after the Share Exchange. They may receive
compensation and other benefits associated with this employment as determined
by
the Board of Directors and which may be higher than their current compensation
arrangements.
Legal
counsel engaged to assist with the preparation of the documentation for the
Share Exchange, including this Information Statement/Proxy Statement/Prospectus
was engaged by Azur and Harvest and did not serve, or purport to serve, as
legal
counsel for the stockholders of either company.
No
Independent Representative or Fairness Opinion
No
independent representative of the stockholders was engaged for purposes of
negotiating the terms of the combination transactions, nor was a fairness
opinion obtained from an unaffiliated third party. The absence of these
protections was considered, but was not judged to be significant by the Boards
of Directors of Azur and Harvest, in determining the fairness of the proposed
Share Exchange to the stockholders of Azur and Harvest. The respective Boards
determined that the likelihood that such an unaffiliated representative of
the
directors or a fairness opinion would add value to the process of structuring
the combination transactions was minimal and outweighed the costs of retaining
such a representative or fairness opinion. As a result, the terms of the
Share
Exchange may not be as favorable as the terms that might have been obtained
had
an independent representative been retained or a fairness opinion
requested.
35
BACKGROUND
INFORMATION ON NEW HARVEST CAPITAL CORPORATION
You
should read the following summary financial data together with the discussion
in
“Harvest’s Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and Harvest’s consolidated financial statements and
related notes contained elsewhere in this information statement/proxy
statement/prospectus.
The
following operational data for the years ended April 30, 2005 and 2004 have
been
derived from Harvest’s audited consolidated financial statements, which are
contained elsewhere in this Information Statement/Proxy Statement/Prospectus.
Description
of Business
Development
of Business
New
Harvest Capital Corporation ("Harvest"), formerly known as Harvest Capital
Corporation, was organized under the laws of the State of Delaware on August
29,
1985. In February 1986, Harvest completed a public offering of 50,000,000
shares
of its Common Stock par value $.0001 per share (the "Harvest Common Stock").
In
October 1988, Harvest formed a wholly-owned subsidiary, Exclusives for the
Bride, Inc. ("Exclusives"). During its fiscal year ended April 30, 1991 ("Fiscal
1991"), Harvest sold substantially all of the assets of Exclusives and since
then it has had no substantial revenues.
From
October 31, 1990 until February 2002, the Company's assets consisted primarily
of Common Stock of JLM Couture, Inc. ("JLM"), a company registered under
the
Exchange Act which is engaged in the business of marketing bridal gowns and
bridesmaids' gowns.
On
February 1, 2002, JLM acquired these shares from the Company for $161,883.
On
March 7, 2002, Harvest conducted a private offering of 25,000,000 shares
of
Harvest common stock for an aggregate considerate of $62,500, from six
purchasers. Xxxxxxx also issued 13,860,000 shares to Xx. Xxxxxx X. Xxxxxx
in
payment of $69,300 owed to him for services rendered to Harvest. These steps
were taken to enable Harvests to implement its plan to acquire an operating
entity.
On
January 14, 2005, eight shareholders of Harvest completed the sale of their
restricted common shares of Harvest to two purchasers, Xxxx Xxxxxxx and HVST
Acquisition Corporation, a Nevada corporation, owned and controlled by Xxxxx
X.
Xxxxxxx of King of Prussia, Pennsylvania (“HVST Acquisition”). Under the
terms of purchase agreement with the selling shareholders, Xxxxxxx acquired
8,200,000 restricted common shares (approximately 6.0% of the then issued
and
outstanding shares) of Harvest and HVST Acquisition acquired 68,960,000
restricted common shares (approximately 50.4% of the then issued and outstanding
shares). In connection with the acquisition the officers and director
of
Harvest resigned and Xxxxx Xxxxxxx and two other persons were appointed as
the
directors and officers of Harvest.
On
June
1, 2005, pursuant to a Stock Purchase Agreement dated as of June 1, 2005
between
HVST Acquisition and Azur, HVST Acquisition sold to Azur 68,960,000 shares
of
common stock of Harvest, constituting approximately 50.4% of the outstanding
Harvest common stock of Harvest. The purchase
price for the Harvest common stock was $550,000 paid in cash. The source
of
funds used by Azur to purchase the Harvest Shares was the working capital
of
Azur.
By
virtue of its acquisition of a majority of the voting securities of Harvest
on
such date, Azur acquired from HVST Acquisition control of Harvest on June
1,
2005.
At June 30, 2005, Harvest had no assets (See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements elsewhere herein).
36
Property
Since
June 1, 2005 Harvest’s offices have been located at the offices of Azur at 000
XX 0xx
Xxxxxx,
Xxxxx 0000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000. Such offices have been provided
at
Harvest by Azur at no charge under an oral arrangement. Prior to the acquisition
of a controlling interest in Harvest by Azur, Harvest’s offices were located at
the offices of its former attorneys, Xxxxxxx & Xxxxxxx, 000 Xxxxx Xxxxxxxxx,
Xxxxx 000, Xxxxxxxxxxxx, Xxxxxxxx 00000 from January 18, 2005 to May 31,
2005
and Xxxxx Xxxxxx Xxxxxxxx, LLC, 000 Xxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, Xxx
Xxxx
00000xxxxx thereto.
Market
For Common Equity and Related Stockholder Matters.
The
Harvest common stock is traded in the over-the-counter market and has been
quoted on the "Electronic Bulletin Board" since March 22, 1986. There is
a very
limited public market for the Harvest common stock. As of July 18,
2005, 136,959,999 shares of common stock were outstanding.
The
following table sets forth, for the respective periods indicated, the high
and
low bid quotations for the Harvest common stock. The market quotations represent
prices between dealers, do not include retail
markup, markdown, or commissions and may not represent actual transactions.
The
quotations have not
been
adjusted for the one for 1,370 reverse stock effected on _____________,
2005.
|
Quarter
Ended
|
|
High
Bid
|
Low
Bid
|
||||
| 2004 | |||||||
|
July
31, 2003
|
.01
|
.01
|
|||||
|
October
31, 2003
|
.01
|
.01
|
|||||
|
January
31, 2004
|
.01
|
.01
|
|||||
|
April
30, 2004
|
.01
|
.01
|
|||||
| 2005 | |||||||
|
July
31, 2004
|
.01
|
.01
|
|||||
|
October
31, 2004
|
.01
|
.01
|
|||||
|
January
31, 2005
|
.01
|
.01
|
|||||
|
April
30, 2005
|
.01
|
.01
|
|||||
| 2006 | |||||||
|
Through
____, 2005
|
.01
|
.01
|
|||||
No
dividends have been paid on the Harvest common stock and Harvest does not
anticipate paying dividends in the foreseeable future.
At
___________, 2005, there were approximately 245 holders of record of Harvest's
securities. Harvest believes that it has more shareholders since many of
its
shares are held in "street" name.
Directors
and Officers
The
following sets forth information regarding Harvest’s current executive officers
and directors.
37
Xxxxxx
Xxxxx, Director, Chairman and Chief Executive Officer, Age
47
Xx.
Xxxxx
was elected as a director and Chief Executive Officer of Harvest on June
1,
2005. He has been Chairman and CEO of Azur since January 2004. Xx. Xxxxx
has
over 25 years of experience in commercial real estate investment, finance
and
development.
Xxxxxx
X. Xxxxxxx, Director and President, Age 38
Xx.
Xxxxxxx was elected a director and President of Harvest on June 1, 2005.
He has
been President and a director of Azur since January 1, 2005. From 1997 to
December 31, 2004 he held various positions with Xentel, Inc., including
Vice
President of its U.S. operations; from 1992 to 1997 he held various positions
with CD3 Storage Systems, including President. He has also served as Chairman
to
various strategic planning and client development committees.
Xxxxxx
Xxxx, Director and Secretary, Age 32
Xx.
Xxxx
was elected as a director and Secretary of Harvest on June 1, 2005. He has
been
General Counsel and Secretary of Azur since April 2004 and a director of
Azur
since January 2005. From February 2000 to April 2004, Xx. Xxxx was an associate
attorney with the law firm of Xxxxxxxx and Xxxxxxxx, P.C. in Miami, Florida.
From June 1999 to February 2000, he was an associate attorney at the law
firm of
Xxxx X. Xxxxxxx, P.A., based in Miami, Florida.
There
are
no family relationships among any of the Company’s directors and officers,
except that Xxxxxx Xxxxx and Xxxxxx Xxxxxxx are first cousins.
Ownership
of Harvest Common Stock
The
following table sets forth certain information as of June 2, 2005, with respect
to the ownership of Harvest Common Stock by each director and executive officer
of Harvest, and each person known by Harvest to be the owner of more than
five
percent of any class of Harvest's voting securities.
|
NAME
AND ADDRESS
OF
BENEFICIAL OWNER
|
AMOUNT
OF AND NATURE
OF
BENEFICIAL
OWNERSHIP
|
PERCENTAGE
OF
CLASS
|
|||||
|
Xxxxxx
Xxxxx (1)
|
0
|
0
|
|||||
|
Xxxxxx
Xxxxxxx (1)
|
0
|
0 | |||||
|
Xxxxxx
Xxxx (1)
|
0
|
0
|
|||||
|
Azur
International, Inc.
|
68,960,000
|
50.4
|
%
|
||||
|
Xxxx
Xxxxxxx
|
8,200,000
|
6.0
|
%
|
||||
|
00000
Xxxxxxxx Branch Drive,
|
|||||||
|
Houston,
Texas 77068
|
_____________________
|
(1)
|
The
address of such person is 000 XX 0xx
Xxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx
00000.
|
38
Section
16 Reporting
No
person
who, during the year ended April 30, 2005, was a director, officer or beneficial
owner of more than ten percent of the Company's Common Stock (which is the
only
class of securities of the Company registered under Section 12 of the Exchange
Act (a "Reporting Person") failed to file on a timely basis, reports required
by
Section 16 of the Exchange Act during the most recent fiscal year or prior
years. The foregoing is based solely upon a review by the Company of Forms
3 and
4 during such fiscal year as furnished to the Company under Rule 16a-3(d)
under
the Exchange Act, and Forms 5 and amendments thereto furnished to the Company
with respect to such fiscal year, and any representation received by the
Company
from any reporting person that no Form 5 is required.
Executive
Compensation
Harvest
did not pay any compensation to any of its officers and directors during
the
three fiscal years ended April 30, 2005.
Committees
of Harvest’s Board of Directors
Because
our board of directors currently consists of only three members, we do not
have
a standing nominating, compensation or audit committee. Rather, our full
board
of directors performs the functions of these committees. Also, we do not
have a
financial expert on our board of directors as that term is defined by Item
401(e)(2) of Regulation S-B. We do not believe it is necessary for our board
of
directors to appoint such committees because the volume of matters that come
before our board of directors for consideration permits each director to
give
sufficient time and attention to such matters to be involved in all decision
making. Additionally, because our Common Stock is not listed for trading
or
quotation on a national securities exchange, we are not required to have
such
committees. All of our directors are executive officers of Harvest and therefore
none of our directors are independent.
It
is the
view of the Board of Directors that it is appropriate for Harvest not to
have a
nominating committee because Harvest only has three directors and they are
the
only individuals who participate in the consideration of director nominees.
Harvest's three directors perform the functions of a nominating committee.
In
considering candidates for membership on the Board of Directors, the Board
of
Directors will take into consideration the needs of the Board of Directors
and
the candidate's qualifications. The Board will request such information
as:
The
name
and address of the proposed candidate;
The
proposed candidates resume or a listing of his or her qualifications to be
a
director of Harvest;
A
description of any relationship that could affect such person's qualifying
as an
independent director, including identifying all other public company board
and
committee memberships;
A
confirmation of such person's willingness to serve as a director if selected
by
the Board of Directors; and
Any
information about the proposed candidate that would, under the federal proxy
rules, be required to be included in Harvest's proxy statement if such person
were a nominee.
Once
a
person has been identified by the Board of Directors as a potential candidate,
the Board of Directors may collect and review publicly available information
regarding the person to assess whether the person should be considered further.
Generally, if the person expresses a willingness to be considered and to
serve
on the Board of Directors and the Board of Directors believes that the candidate
has the potential to be a good candidate, the Board of Directors would seek
to
gather information from or about the candidate, including through one or
more
interviews as appropriate and review his or her accomplishments and
qualifications generally, including in light of any other candidates that
the
Board of Directors may be considering. The Board of Director's evaluation
process does not vary based on whether the candidate is recommended by a
shareholder.
39
The
Board
of Directors will, from time to time, seek to identify potential candidates
for
director nominees and will consider potential candidates proposed by the
Board
of Directors and by management of Harvest.
Meetings
of the Harvest Board
During
its fiscal year ended April 30, 2005, Harvest’s Board of Directors held one
meeting attended by all members of the Board and on one occasion approved
resolutions by unanimous written consent in lieu of a meeting.
Stockholder
Communications with the Board of Directors of Harvest
Stockholders
may send communications to Harvest’s board of directors by writing to: New
Harvest Capital Corporation, 000 XX 0xx
Xxxxxx,
Xxxxx 0000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000, Attn.: Board of Directors or
any
specified director. Any correspondence received at the foregoing address
to the
attention of one or more directors is promptly forwarded to such director
or
directors.
Financial
Statements
You should read the following summary financial data together with the
discussion in “Harvest’s Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and Harvest’s financial statements and
related notes contained elsewhere in this Information Statement/Proxy
Statement/Prospectus.
The following operational and balance sheet data for the years ended
April 30, 2005 and 2043 have been derived from Harvest’s audited financial
statements, which are contained elsewhere in this Information Statement/Proxy
Statement/Prospectus.
|
Fiscal
Year Ended
|
|||||||
|
|
April
30, 2005
|
April
30, 2004
|
|||||
|
Statement
of Operations Data:
|
|||||||
|
Revenue
|
$
|
798
|
$
|
746
|
|||
|
Operating
expenses
|
9,470
|
38,664
|
|||||
|
Net
loss
|
(8,672
|
) |
(37,918
|
) | |||
|
|
April
30, 2005
|
April
30, 2004
|
|||||
|
Balance
Sheet Data:
|
|||||||
| Total assets |
139,556
|
149,428
|
|||||
| Total liabilities |
1,800
|
22,500
|
|||||
| Shareholders' equity |
137,756
|
126,928
|
|||||
40
Results
of Operations for the Fiscal Years Ended April 30, 2005 and April 30,
2004
Harvest
had limited operations in both years and a loss of $37,918 for the fiscal
year
ended April 30, 2004 and $8,672 for the fiscal year ended April 30, 2005.
The
losses were the result of Harvest incurring $38,664 and $9,470 in general
and
administrative expenses in the fiscal years ended April 30, 2004 and 2005,
respectively, which were only partially offset by interest revenue of $746
and
$798 in such years.
Certain
Relationships and Related Transactions
Except
for the ownership of Azur’s securities, none of the directors, executive
officers, holders of five percent of the outstanding Harvest common stock,
or
any associate or affiliate of such person, have, to the knowledge of Harvest,
had a material interest, direct or indirect, during the two fiscal years
ended
April 30, 2005 and 2004, in any transaction or proposed transaction which
may
materially affect Harvest.
No
executive officer, present director, proposed director or any member of these
individuals' immediate families or any corporation or organization with whom
any
of these individuals is an affiliate is or has been indebted to Harvest since
the beginning of its last fiscal year.
Legal
Proceedings
Xxxxxxx
is not a party to any pending legal proceedings nor is it aware that any
proceeding are threatened.
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
On
June
2, 2005, Xxxxxxx dismissed Xxxxxxxxx Xxxxx Xxxxxxx LLP as its independent
accountant. Xxxxxxxxx Xxxxx Xxxxxxx LLP had been previously engaged as the
principal auditor to audit the financial statements of Harvest. The reason
for
the termination was that Azur, which on such date acquired a controlling
interest in Harvest, requested a change in auditors.
Xxxxxxxxx
Xxxxx Xxxxxxx LLP’s reports on the financial statements of Harvest as of April
30, 2004 and 2003 and the related statements of operations, shareholders'
equity
and cash flows for each of the two years in the period ended April 30, 2004
did
not contain an adverse opinion or disclaimer of opinion, nor were they modified
as to uncertainty, audit scope, or accounting principles.
The
decision to change auditors was approved by Harvest's Board of
Directors.
During
Harvest's two most recent fiscal years, and the subsequent interim periods,
there were no disagreements with Xxxxxxxxx Xxxxx Xxxxxxx LLP on any matter
of
accounting principles or practices, financial statement disclosure, auditing
scope, or procedure, which disagreements, if not resolved to the satisfaction
of
Xxxxxxxxx Xxxxx Xxxxxxx LLP, would have caused it to make reference to the
subject matter of the disagreement in connection with its reports.
On
June
3, 2004, the Company retained Xxxx & Company, P.A. (“Xxxx”) as its new
independent accountant. Xxxx is located at 0000 Xxxxxxxxxx Xxxxx, Xxxxx Xxxxxxx,
Xxxxxxx 00000.
41
BACKGROUND
INFORMATION ON AZUR INTERNATIONAL, INC.
Azur
was incorporated in Nevada in June 1997 as "Union Chemical Corporation."
The
company was formed in order to be a partner in a joint venture that was never
consummated and had no operations as Union Chemical Corporation. Its operations
commenced in June 1999, when it acquired an internet domain name
XxxXxxxxx00.xxx, and a related webmaster hosting business and other assets
in
exchange for shares of its capital stock. The company changed its name to
Xxxxxxxxx00.xxx, Inc. after the acquisition.
On
February 6, 2001 the company filed a voluntary Chapter 7 bankruptcy petition
with the United States Bankruptcy Court for the District of Arizona. On July
24,
2003 the court ordered the case closed after the net assets of the estate
were
distributed.
On
January 15, 2004 St. Xxxxx Group Limited acquired approximately 51% of the
issued and outstanding stock of the company in a private stock purchase.
On
January 23, 2004 the company changed its name to Azur International, Inc.
and
approved a 1 for 100 reverse stock split of its common stock pursuant to
which
36,906,335 shares were reduced to 369,086 shares after the split. On February
9,
2004 Azur issued to the four stockholders of Xxxxx Bay Development Corp.
(“Xxxxx
Bay Development”) an aggregate of 9,050,000 shares in exchange for all of the
outstanding common stock of Xxxxx Bay, valued at $90,050. By virtue of the
exchange, Xxxxx Bay, a Florida corporation which was engaged in real estate
development through several subsidiaries, became a wholly owned subsidiary
of
Azur and Xxxxx Bay changed its name to Azur Development Corp.
Since
its
acquisition of Xxxxx Bay, Azur has assembled a management team, continued
to
develop and operate the properties owned by Xxxxx Bay, researched resort
and
commercial locations, completed extensive marketing research, acquired Shell
Landing Golf Course in Gautier, Mississippi and a master planned resort
community, acquired Airtek Safety Limited, a United Kingdom corporation which
designs and manufactures safety systems for the construction industry and
which
has a 50% interest in a joint venture which distributes tower construction
cranes, entered into a letter of intent to acquire A.V.I. Contractors, Inc.,
a
construction company, acquired approximately 50.4% of the outstanding common
stock of Harvest and entered into the Share Exchange Agreement with
Harvest.
Azur’s
business plan includes golf resort and residential communities development,
residential and commercial land acquisition for development, acquisition
of
developable land holdings for use or future sale, acquisition of existing
resort
and golf club communities and acquisitions of companies in complementary
industries. Through its subsidiaries, Azur currently owns:
| · |
The
Shell Landing Golf Club, a 225 acre public course located in Gautier,
Mississippi (near Biloxi) and designed by Xxxxx Xxxx XXX, the rights
to
acquire up to 1,800 acres which surround the golf course, including
Shell
Landing Resort, a master planned resort community with significant
infrastructure already in place;
|
| · |
a
3% interest in Place des Arts, a 10 unit luxury waterfront condominium
project downtown Fort Lauderdale near Los Olas
Boulevard;
|
| · |
a
63% interest in Meritage, a 16 unit luxury waterfront condominium
project
located in the Las Olas Isles area of Fort
Lauderdale;
|
| · |
a
53% interest in Rio Vista, a residential property located on North
Rio
Vista Boulevard, Fot Lauderdale, which Azur has improved and is
currently
marketing for sale;
|
| · |
Airtek
Safety Limited, a United Kingdom corporation, which designs and
manufactures safety systems for the construction industry, including
patented air bag safety systems, staircase safety systems, leading
edge
protection, vertical side netting, stairwell platforms and ladder
safety
devices; and
|
| · |
Airtek
Cranes Ltd., a United Kingdom joint venture in which Airtek Safety
Limited
has a 50% interest, which distributes a line of remote-controlled,
self-erecting tower cranes manufactured by Arcomet of Belgium,
the holder
of the other 50% interest in the joint
venture.
|
Xxxx
also
has engaged in preliminary discussions to acquire AVI Contractors Inc., a
south
Florida-based construction company which is the contractor for the Meritage
project.
42
Real
Estate Holdings
To
date,
Azur has entered into and/or closed agreements relating to the acquisition
of
interests in the following:
Shell
Landing Resort Community
Azur
acquired a 100% interest in the Shell Landing Golf Course in November 2004
when
Azur’s wholly owned subsidiary, The Grand Shell Landing, Inc., purchased the
golf course for $8,000,000. The 225 acre course designed by Xxxxx Xxxx XXX
is
located in Gautier, Mississippi approximately 13 miles east of Biloxi, which
has
become a world class entertainment and gambling center with 12 casinos. Between
Gautier and Biloxi there are more than 8,000 hotel rooms. There are more
than
18,000 hotel rooms along the Mississippi Gulf Coast and an additional 1,500
hotel rooms are under construction
Golf
Digest named Shell Landing among America’s Best New Courses in 2002. The January
2002 issue ranked the course #5 in America in the Best New Upscale Public
category, the only course in the top five located in the South. Shell Landing
includes a clubhouse with locker rooms, a restaurant and catering facilities
and
a golf shop; a driving range and practice area; a deck and a maintenance
building.
There
were 36,139 rounds of golf played on the course in 2004 and through June
30,
2005 20,391 rounds were played in 2005.
The
purchase was financed with a $6,400,000 first mortgage loan from an institution
and a $1,600,000 second mortgage from the seller. The outstanding principal
balance of the first mortgage loan accrues interest at a variable rate equal
to
prime rate of X.X Xxxxxx Xxxxx & Co. announced, quoted or published from
time to time plus 1.5% per annum. Monthly payments of principal and interest
based on a 20 year amortization of principal and a seasonal adjustment for
each
month in question commenced in January 2005 and shall continue until December
1,
2009 when all outstanding principal and interest on the promissory note
evidencing the loan shall be due. The note is secured by, among other things,
a
deed of trust, security agreement and fixture filing on the golf course property
and an assignment to the lender of leases, rents and contracts. As of June
30,
2005 the outstanding principal balance of the loan was $6,322,053.
The
second mortgage loan is evidenced by a purchase money promissory note in
the
principal amount of $1,600,000. Such note provides for interest at the rate
of
6% per annum and is due in one balloon payment on November 17, 2005. Pursuant
to
an agreement between Azur and the shareholders of the seller, a $529,188.90
credit against the note was taken in November 2004. As of June 30, 2005,
the
outstanding principal amount of the note was $1,070,811.10
Shell
Landing Resort
On
May 4,
2005 Azur Shell Landing Development II LLC (“ASLD II”), a Mississippi limited
liability company, acquired 1,200 acres of land which surrounds the Shell
Landing Golf Course for a purchase price of $7,752,000. A credit of $1,139,849
was given to ASLD II due to the sales of lots prior to closing. The
purchase price was partially financed with a $7,413,000 mortgage loan obtained
from an institutions. The outstanding principal balance of the loan accrues
interest at the rate of 14% per annum. Monthly interest payments commenced
on
June 1, 2005 and shall be paid while principal on the loan remains outstanding.
Assuming no principal is prepaid, the monthly interest payments shall be
$86,485. The entire principal amount of the loan is due on June 1, 2007.
The
land includes approximately 455 acres plus 48 completed, but unsold residential
lots ranging in size from .6 to 1.25 acres, 230 platted but undeveloped lots,
129 of which will be premier lots (larger acreage, better views) and 101
of
which will be estate lots a proposed 12.75 acre condominium site, a proposed
18.9 acre condominium site, a proposed 20.0 acre apartment site, approximately
330 acres planned for a resort village, various residential lots, town homes
and
cluster homes and approximately 61 acres of commercial land (95% of which
is
wetlands). ASLD II intends to develop such land.
ASLD
II
is wholly owned by Azur Shell Landing Resort, Inc., a Mississippi corporation.
Azur has entered into an agreement to acquire up to an 80% equity
interest
in this corporation. Azur intends to construct on the 12.75 acre site located
between the 9th
and
18th
fairways
of the golf course, a 200 unit luxury condominium project called The Islands
at
Shell Landing, consisting of 7 buildings surrounding a pool, spa and eight
tennis courts and overlooking the Shell Landing Golf Course. The units range
from 1,250 to 1,851square feet and are being offered at prices currently
ranging
from $349,625 to $527,577. As of June 24, 2005 ASLD II had received deposits
on
150 units.
A
second
phase of development on the 18.9 acre site located between the 3rd,
4th
and
5th
fairways
of the golf course contemplates construction of 253 condominium units in
11
buildings. In addition, construction of approximately 400 apartment units
is
planned for the 20.0 acre site.
Place
des
Arts
Azur
acquired a 3% interest in Place des Arts in January 2004 for a $240,000
promissory note which was converted in its entirety to 120,000 shares of
Azur
common stock in February 2004. Place des Arts is a 10 unit luxury waterfront
condominium project located in downtown Fort Lauderdale, Florida near Las
Olas
Boulevard. Each unit has luxury amenities including a private fully equipped
boat dock giving direct access to the Inter Coastal Waterway, access by elevator
to a private foyer, underground secure parking, a large balcony facing the
water, a rooftop community pool, European cabinet, slate or limestone
countertops, top of the line appliances, high speed internet access and cable
television. The size of the units range from 3,037 to 4,235 square feet and
contracts for the units have been entered into at prices ranging
from
$1,059,900 to $1,566,950. As of June 24, 2005, all of the units have been
sold.
Construction of the project is scheduled to be completed in September
2005.
43
Meritage
Azur
acquired a 63% interest in Meritage in February 2004 when its wholly owned
subsidiary, Azur Development Corp., acquired 63% of the membership interests
in
48 Xxxxxxxxx LLC, a Florida limited liability company which owns Meritage.
Subsequently, the subsidiary tranferred ownership of the interest directly
to
Azur. The purchase price for the membership interests was $2,300,000 of which
$1,000,000 was paid in cash during the period from February 2004 to January
2005
and the remaining $1,300,000 was paid by the issuance to the sellers of an
aggregate of 650,000 shares of common stock of Azur. Meritage is a 16 unit
luxury waterfront condominium project located on Xxxxxxxxx Isle of Las Olas
Boulevard between the Fort Lauderdale beach and the Las Olas shopping district.
The project consists of two 5 story buildings with eight units in each building.
All of the units have the same design plan with three bedrooms, 3-1/2 baths
and
a total of 2,458 square feet. Each building will have a private elevator
access
for each unit and a swimming pool fronting the water. The interior of the
units
will have luxury appointments, including European cabinets, granite countertops
and top-of-the-line appliances. Each unit has a corner view and an individual
boat dock with an ocean access that can handle boats up to 50 feet in length.
As
of June 24, 2005, 11 of the units have been sold for prices ranging from
$1,128,250 to $1,236,250. The project began construction in March 2005 and
is
scheduled to be completed by June 2006. A $10,685,000 18 month loan commitment
was provided by a bank to 48 Xxxxxxxxx LLC in January 2005 to fund the
construction of the project. All principal and accrued interest on loans
made
pursuant to the commitment shall be due and payable to the lender on July
5,
2006. The commitment may be extended by the borrower for an additional six
months upon the satisfaction of certain conditions, including payment of
an
extension fee equal to .25% of the then outstanding principal balance of
the
loan. Interest on the loan at the rate of the bank’s base rate plus 1.00% per
annum (but not less than 6.25% per annum) is payable monthly and at maturity.
The loan is guaranteed by certain principals of the borrower, including Xxxxxxx
Xxxxxxx and Xxxxxxxxx Xxxxxxx. As of June 30, 2005 the outstanding principal
balance of the loan was $3,815,000.
Rio
Vista
During
the period from November 2003 to February 2004 Azur acquired a 53% interest
in a
general partnership which owns a home located on North Rio Vista Boulevard,
Fort
Lauderdale, Florida. The property is held subject to two mortgages with an
aggregate outstanding principal balance of approximately $1,186,000 as of
June
30, 2005. During the period from January 2004 to December 2004 Azur rented
the
property to various tenants for total rental revenues of approximately $39,740.
Azur is currently offering the property for sale at a price of $2,995,000..
Pending the sale, Azur is providing the use of the property to its Chairman
of
the Board on a rent-free basis.
Airtek
On
February 24, 2005 Azur purchased all of the outstanding shares of Airtek
Safety
Limited, a United Kingdom corporation which designs and manufactures safety
systems for the construction industry, including air bag safety systems,
staircase safety systems, leading edge protection, vertical side netting,
stairwell platforms and ladder safety devices. Airtek also owns 50% of Airtek
Cranes, Ltd., a United Kingdom joint venture which distributes a line of
remote-controlled, self-erecting tower cranes manufactured by Arcomet of
Belgium, the holder of the other 50% interest in the joint venture.
Pursuant
to the purchase agreement with the sellers, Azur has agreed to pay the sellers
an aggregate of £6.1 million (approximately $11,224,000) on August 21, 2005. The
sellers have the option to acquire an aggregate of 3,741,333 shares of Azur
common stock in lieu of the cash consideration. The shares of Airtek purchased
by Azur are being held in escrow pending payment of the purchase
consideration.
44
Airtek’s
AirMat Safety System is comprised of a series of interlinked modular air
mattresses designed to provide “soft fall” arrest to reduce and minimize
injuries and fatalities due to falls from height on construction, civil
engineering, maintenance and refurbishment projects. The modules are
manufactured in a range of standard sizes, which with simple planning, allows
for configuration to accommodate any project. The system is patented in
the European Union and marketed throughout Europe and the United
States. Airtek also manufactures and markets related safety systems, including
a
stairsafe system designed to give workers protection while working around
open
stairwells, and a laddersafe system which is designed to prevent unauthorized
access to elevated work areas Airtek also has installed a safety barrier
system
at the British Speedway. Airtek Cranes, Ltd. markets in the United Kingdom
the
Arcomet line of pedestrian-operated remote controlled self-erecting tower
cranes. Unlike conventional cranes the Arcomet cranes arrive at the worksite
as
self-contained units and can be operable within four hours.
Airtek
also has a division which provides training services for managers and workers
in
the construction and allied industries.
Executive
Office
Since
March 1, 2005 Azur’s executive offices have been located at 000 XX 0xx
Xxxxxx,
Xxxxx 0000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000. Azur leases such premises under
a 36
month lease. The lease may be terminated by Azur after 18 months if Azur
gives
the landlord 90 days prior written notice and pays a $1,000 termination fee.
Azur currently pays a base monthly rental of $5,708 under the lease. The
base
rent shall increase by 4% on March 1 of each year during the term of the
lease.
Azur also is obligated to pay as additional rent, Azur’s proportionate share
(based on a fully occupied building) of the operating expenses of the building
in which the premises are located.
Market
For Common Equity and Related Stockholder Matters.
The
Azur
common stock has been quoted on Xxxxxxxxxx.xxx under the symbol “AZRI” since
March 2004. There is a very limited public market for the Azur common stock.
As
of July 12, 2005, 48,614,369 shares of common stock were
outstanding.
The
following table sets forth, for the respective periods indicated, the high
and
low quotations for the Azur common stock. The market quotations represent
prices
between dealers, do not include
retail
markup, markdown, or commissions and may not represent actual
transactions.
| Quarter Ended |
High
Bid
|
Low
Bid
|
|||||
|
2004
|
|||||||
|
March
31
|
3.70
|
3.10
|
|||||
|
June
30
|
3.90
|
1.30
|
|||||
|
September
30
|
5.10
|
2.80
|
|||||
|
December
31
|
3.48
|
0.90
|
|||||
|
2005
|
|||||||
|
March
31
|
2.15
|
1.06
|
|||||
|
June
30
|
1.75
|
0.78
|
45
No
dividends have been paid on the Azur common stock and Azur does not anticipate
paying dividends in the foreseeable future.
At
July
12, 2005, there were 476 holders of record of Azur's common stock.
Directors
and Officers
The
following sets forth information regarding Azur’s current executive officers and
directors.
Xxxxxx
Xxxxx, Director, Chairman and Chief Executive Officer, Age
47
Xx.
Xxxxx
was elected Chief Executive Officer of Azur in January 2004. He has been
Chairman and CEO of Harvest since June 1, 2005. Xx. Xxxxx has over 25 years
of
experience in commercial and real estate investment, finance and
development.
Xxxxxx
X. Xxxxxxx, Director and President, Age 38
Xx.
Xxxxxxx has been President and a director of Azur since January 1, 2005.
He was
elected President of Harvest on June 1, 2005. From 1997 to December 31, 2004
he
held various positions with Xentel, Inc., including Vice President of its
U.S.
operations; from 1992 to 1997 he held various positions with CD3 Storage
Systems, including President. He has also served as Chairman to various
strategic planning and client development committees.
Xxxxxxx
Xxxxx, Chief Operating Officer, Age 62
Xx.
Xxxxx
has been Chief Operating Officer of Azur since July 1, 2005. Xx. Xxxxx
was Vice
President of Development of Azur and President of its subsidiary, Azur
Development Corp., from March 2004 to June 2005. Since December
1993 he has
engaged in property development in Florida. From March 1990 to November
1993 he was Senior Vice President and Founding Partner of Regency Management,
Inc., a firm which managed over 2,500 apartment units. Prior to that he
was a
founding partner and Senior Vice President of GMD, Inc., a real estate
syndication and development firm formed in 1981, based in Washington, D.C.
GMD
owned and managed over 5,000 apartment units in North Carolina, Georgia,
Tennessee and Florida.
Xxxxxx
Xxxx, Secretary, General Counsel and Director, Age 32
Xx.
Xxxx
has been General Counsel, Secretary of Azur since April 2004 and a director
of
Azur since January 2005. He was elected as a director and Secretary
of
Harvest on June 1, 2005. From February 2000 to April 2004, Xx. Xxxx was an
associate attorney with the law firm of Xxxxxxxx and Xxxxxxxx, P.C. in Miami,
Florida. From June 1999 to February 2000, he was an associate attorney at
the
law firm of Xxxx X. Xxxxxxx, P.A., based in Miami, Florida.
Xxxx
Xxxxxxxx, Vice President of Golf Operations and President of The Grand
Shell
Landing, Inc., Age 61
Xx.
Xxxxxxxx has been Vice President of Golf Operations and the President of
Azur’s
subsidiary, The Grand Shell Landing, Inc., since Azur acquired the Shell
Landing
Golf Course in November 2004. Xx. Xxxxxxxx was a part owner of the entity
which
sold the course to Azur and has been actively involved in operations of
the golf
course since 2002. Prior thereto he was a partner in HAM Marine, Inc.,
which was
merged into Xxxxxx Xxxxxxx, Inc., a naval architect and marine engineering
company. Since July 2000 he has been the sole proprietor of GME, a firm
which
operates a manufacturing facility for medical devices.
Xxxx
Xxxxxx, Director, Age 56
Xx.
Xxxxxx has been a Director of Azur since October 2004. Xx.
Xxxxxx leads Azur’s focus on U.K. home building and commercial development and
is on the Board of Azur’s U.K. subsidiary, Airtek Safety Limited. He has
extensive experience in home building and commercial property development.
He
has held the position of chief executive officer of two large London
Stock
Exchange listed home building companies in the United Kingdom with valuations
up
to 1.6 billion pounds sterling.
Xxxx
Xxxxx, Director, Age 59
Xx.
Xxxxx
has been a director of Azur since November 30, 2004. Since June 2004 he has
been
President of Xxxx Xxxxx & Associates, LLC a private consulting firm. From
January 2002 to June 2004 he was a Special Envoy for the United States National
Security Counsel. From January 11, 2002 to June 30, 2004 he was an Assistant
Secretary of State for Western Hemisphere Affairs. Xx. Xxxxx has been Ambassador
to Venezuela, a Special Advisor to the Secretary of State and an Alternate
U.S.
Representative to the United Nations Human Rights Commission in Geneva,
Switzerland. He has spent over 30 years in hemispheric affairs, in government,
private enterprise and the U.S. military.
There
are
no family relationships among any of the Company’s directors and officers,
except that Xxxxxx Xxxxx and Xxxxxx Xxxxxxx are first cousins.
46
Ownership
of Azur Common Stock
The
following table sets forth certain information as of June 2, 2005, with respect
to the ownership of Azur Common Stock by each director and executive officer
of
Azur, and each person known by Azur to be the owner of more than five percent
of
any class of Azur's voting securities.
| NAME AND ADDRESS OF BENEFICIAL OWNER |
AMOUNT
OF AND NATURE
OF
BENEFICIAL
OWNERSHIP
|
PERCENTAGE
OF
CLASS
|
|||||
|
Xxxx
Xxxxxx
|
4,262,073(1)
|
9.25%
|
|||||
|
Xxxxx,
Xxxxxx Xxxx
|
|||||||
|
Xxxxxx-on-Thames
|
|||||||
|
Surrey
K-T121, England
|
|||||||
|
Xxxxx
Xxxx
|
4,225,000
|
9.17%
|
|
||||
|
000
Xxxxx Xxxxxxxx Xxxxxx
|
|||||||
|
Valley
Stream, New York
|
|||||||
|
Xxxx
Xxxxxxxx
|
3,493,939
|
7.58%
|
|
||||
|
0000
Xxxxx Xxxxxxx Xxxxxxxxx
|
|||||||
|
Gautier,
Mississippi 39553
|
|||||||
|
Xxxxxxx
Family L.P.
|
3,216,633
|
6.98%
|
|
||||
|
0000
Xxxx Xxxxxx, Xxxxx 000
|
|||||||
|
Coconut
Grove, Florida 33133
|
|||||||
|
Xxxxxx
Xxxxxx
|
2,901,101
|
6.30%
|
|
||||
|
One
South Court
|
|||||||
|
Bayshore,
New York 11706
|
|||||||
|
Xxxxxx
Xxxxx (2)
|
700,000(3)
|
1.52%
|
|
||||
|
Xxxxxx
Xxxxxxx (2)
|
371,666
|
.80%
|
|
||||
|
Xxxxxx
Xxxx (2)
|
175,000
|
.38%
|
|
||||
|
Xxxxxxx
Xxxxx (2)
|
100,000
|
.28%
|
|
||||
|
Xxxx
Xxxxx
|
50,000
|
.14%
|
|
||||
|
0000
00xx
Xxxxxx, X.X., Xxxxx 000
|
|||||||
|
Washington,
D.C. 20007
|
______________________________
| (1) |
Includes
1,262,073 shares held by Spread Trustee, Ltd., as trustee of the
Xxxx
Xxxxxx Settlement, a trust of which Xx. Xxxxxx and certain other
of his
family members are beneficiaries.
|
| (2) |
The
address of such person is 000 XX 0xx
Xxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx
00000.
|
| (3) |
Does
not include 80,000 shares owned by Xx. Xxxxx’x wife, as to which he
disclaims beneficial ownership.
|
47
Executive
Compensation
2004
Compensation Table
The
following table provides information relating to compensation for the fiscal
year ended December 31, 2004 for our Chief Executive Officer and compensation
payable to other highly compensated executive officers whose total salary
and
bonus (as determined pursuant to SEC rules) exceeded $100,000.
| Long Term Compensation | Awards | Payouts | ||||||||||||||||||||
|
Name
and Principal Position
|
Salary
($)
|
Bonus
($)
|
Other
Annual
Compensation
($)
|
Restricted
Stock
Award(s)
($)
|
Securities
Underlying
Options/SARs
(#)
|
LTIP
Payouts
($)
|
All
other
Compensation
($)
|
|||||||||||||||
|
Xxxxxx
Xxxxx, Chairman and
CEO
|
0
|
0
|
2,581
|
(1)
|
1,400,900
|
0
|
0
|
0
|
||||||||||||||
|
Xxxxxx
Xxxxxxx, President
|
0
|
0
|
0
|
381,710
|
0
|
0
|
0
|
|||||||||||||||
|
Xxxxxxx
Xxxxx, Vice President of Development
|
40,000
|
0
|
0
|
345,900
|
0
|
0
|
0
|
|||||||||||||||
|
Xxxxxx
Xxxx, General Counsel and
Secretary
|
80,000
|
0
|
738
|
202,950
|
0
|
0
|
0
|
|||||||||||||||
|
|
||||||||||||||||||||||
_____________________________
(1)
Commencing December 15, 2004 and pending the sale of such property, which
Azur
is currently marketing, Azur has provided to Xx. Xxxxx the rent-free use
of a 2
bedroom house located on North Rio Vista Xxxxxxxxx, Xxxx Xxxxxxxxxx, Xxxxxxx.
The property is owned by a general partnership in which Azur has a 53% interest.
Azur is carrying all costs for the property, including debt service, taxes
and
utilities. The value of the benefit to Xx. Xxxxx of living in such property
on a
rent-free basis for two weeks in 2004 is not included in the table.
Director
Compensation
Xxxx
Xxxxx was issued 50,000 shares of Azur common stock upon his election as
a
director of Azur. Xxxxxxx Xxxxxxx, who served as a director of Azur from
February 11, 2004 to December 31, 2004 was awarded 3,000,000 shares of common
stock of Azur on February 11, 2004 and 500,000 shares of common stock of
Azur on
October 27, 2004 for services to Azur.
Employment
and Consulting Agreements
Xxxxxx
Xxxxx
Xx.
Xxxxx
entered into a Consulting Agreement with Azur on February 1, 2004 for a three
year term expiring on February 1, 2007. Under the agreement Azur issued to
Xx.
Xxxxx 500,000 shares of Azur common stock in full payment of his services
for
the 12 months ended February 1, 2005, Azur is obligated to issue to Xx. Xxxxx
an
additional 500,000 shares of Azur common stock and $360,000, payable in
bi-weekly installments, for his services to Azur for the 12 months ended
February 1, 2006 and an additional 500,000 shares of Azur common stock and
$480,000, payable in bi-weekly installments, for his services to Azur for
the 12
months ended February 1, 2007. In addition, Azur provides to Xx. Xxxxx health
insurance and the use of a company automobile. The agreement terminates upon
the
death or disability of Xx. Xxxxx and may be terminated by Azur for “cause”
(defined as a material breach of the agreement by Xx. Xxxxx or if Xx. Xxxxx
commits an act of fraud, gross negligence or dishonesty which has a material
adverse effect on Azur). In such events Azur shall pay to Xx. Xxxxx all
compensation accrued through the day preceding the date of termination. The
consulting agreement was amended on March 28, 2005 to provide that Xx. Xxxxx
may
accept shares of Azur common stock or ten year warrants to purchase common
stock
in lieu of cash compensation under the agreement. The amendment specifies
how
such securities shall be valued.
Xxxxxx
Xxxxxxx
Xx.
Xxxxxxx entered into an Employment Agreement with Azur effective September
1,
2004 for a term of three years.Under the agreement Xx. Xxxxxxx is employed
as
the President of Azur commencing September 1, 2004 at salary payable at the
rate
of $240,000 per annum in bi-weekly installments. In addition, Xx. Xxxxxxx
received a signing bonus of 166,666 shares of Azur common stock and is entitled
to a $400 per month stipend for health insurance. The employment agreement
shall
be extended for additional terms of one year unless the agreement is terminated
by either party within 30 days prior to the end of the initial term or any
succeeding term. If extended, Xx. Xxxxxxx’x salary shall be increased by at
least 10% over the salary paid in the preceding term of the agreement. The
agreement may be terminated without cause by Azur or by Xx. Xxxxxxx for “good
reason” (defined to include Azur’s material violation of the agreement which is
not cured within 10 days after written notice to Azur of the violation),
in
which case Xx. Xxxxxxx’x salary shall continue only for the shorter of three
months after the date of termination or the remaining balance of the current
term of the agreement. Azur may also terminate the agreement for “cause”
(defined to include Xx. Xxxxxxx’x willful appropriation or conversion of Azur
property for his own use, a material violation of the agreement by Xx. Xxxxxxx
which is not cured within 10 days after written notice to him, substance
abuse
and/or a refusal to submit to periodic substance screening tests or if a
case is
brought against Xx. Xxxxxxx for violation of any securities or corporate
laws).
If the agreement is terminated for cause, Xx. Xxxxxxx shall receive his salary
only through the termination date. Similarly, if he dies or becomes disabled,
Xx. Xxxxxxx’x estate shall be paid his salary through the date of his death or
he will be paid through the effective date of his disability (as defined
in the
agreement).
48
Xxxxxx
Xxxx
Xx.
Xxxx
entered into an Employment Agreement with Azur effective April 15, 2004 to
be
employed as Corporate Secretary and General Counsel of Azur for a term of
three
years, which term shall be successively extended for additional one year
terms
if neither party terminates the agreement within 30 days prior to the end
of the
initial or succeeding terms. The agreement was amended on January 13, 2005,
Under the agreement, as amended, Xx. Xxxx is paid a salary at the rate of
$180,000 per annum in bi-weekly installments. In addition, Xx. Xxxx received
a
signing bonus of 50,000 shares of Azur common stock and is entitled to a
$400
per month stipend for health insurance. If the term of his agreement is
extended, Xx. Xxxx’x salary shall be increased by at least 10% over the salary
paid in the preceding term of the agreement. The agreement may be terminated
without cause by Azur or by Xx. Xxxx for “good reason” (defined to include
Azur’s material violation of the agreement which is not cured within 10 days
after written notice to Azur of the violation), in which case Xx. Xxxx’x salary
shall continue only for the shorter of three months after the date of
termination or the remaining balance of the current term of the agreement.
Azur
may also terminate the agreement for “cause” (defined to include Xx. Xxxx’x
willful appropriation or conversion of Azur property for his own use, a material
violation of the agreement by Xx. Xxxx which is not cured within 10 days
after
written notice to him, substance abuse and/or a refusal to submit to periodic
substance screening tests or if a case is brought against Xx. Xxxx for violation
of any securities or corporate laws). If the agreement is terminated for
cause,
Xx. Xxxx shall receive his salary only through the termination date. Similarly,
if he dies or becomes disabled, Xx. Xxxx’x estate shall be paid his salary
through the date of his death or he will be paid through the effective date
of
his disability (as defined in the agreement).
Xxxxxxx
Xxxxx
Xx.
Xxxxx
and Xxxx entered into a Consulting Agreement dated as of November 1, 2004
under
which Xx. Xxxxx provides consulting services on special assignments, including
on-site supervision of the projects. The term of the agreement is from November
1, 2004 to October 31, 2005. The term of the agreement shall be automatically
extended for successive one year periods if neither Xx. Xxxxx nor Azur gives
the
other written notice of termination within 30 days prior to the expiration
of
the current term of the agreement. Xx. Xxxxx is entitled under the agreement
to
receive 10% of the net profits derived by Xxxx from the projects Xx. Xxxxx
supervises which is to be paid 50% in cash and 50% in restricted stock of
Azur.
The initial cash consideration paid to Xx. Xxxxx shall be $20,000 monthly
which
shall be credited against any cash consideration owed or paid to him under
the
agreement in the future. The first project on which Xx. Xxxxx has worked
under
the agreement is the Meritage project. The agreement terminates upon the
death
or disability of Xx. Xxxxx and may be terminated by Azur for “cause” (defined as
a material breach of the agreement by Xx. Xxxxx or if Xx. Xxxxx commits an
act
of fraud, gross negligence or dishonesty which has a material adverse effect
on
Azur). In such events Azur shall pay to Xx. Xxxxx all compensation accrued
through the day preceding the date of termination.
49
Xx.
Xxxxx
has also entered into an Employment Agreement with Azur effective July 1,
2005
for a term of one year. Under the agreement, Xx. Xxxxx is employed as the
Chief
Operating Offier of Azur at a salary payable at the rate of $60,000 per annum
in
bi-weekly installments. In addition, Xx. Xxxxx received a signing bonus of
50,000 shares of Azur common stock.
The
employment agreement shall be extended for additional terms of one year unless
the agreement is terminated by either party within 30 days prior to the end
of
the initial term or any succeeding term. The agreement may be terminated
without
cause by Azur or by Xx. Xxxxx for “good reason” (defined to include Azur’s
material violation of the agreement which is not cured within 10 days after
written notice to Azur of the violation), in which case Xx. Xxxxx’x salary shall
continue only for the shorter of six months after the date of termination
or the
remaining balance of the current term of the agreement. Azur may also terminate
the agreement for “cause” (defined to include Xx. Xxxxx’x willful
appropriation or conversion of Azur property for his own use, a material
violation of the agreement by Xx. Xxxxx which is not cured within 10 days
after
written notice to him, substance abuse and/or a refusal to submit to periodic
substance screening tests or if a case is brought against Xx. Xxxxx for
violation of any securities or corporate laws). If the agreement is terminated
for cause, Xx. Xxxxx shall receive his salary only through the termination
date.
Similarly, if he dies or becomes disabled, Xx. Xxxxx’x estate shall be paid his
salary and any shares due to him through the date of his death or he will
be
paid through the effective date of his disability (as defined in the
agreement).
In
addition, Xx. Xxxxx shall receive on the first day of each month for the
term of
the Agreement $5,000 in restricted shares of Azur. The value of the shares
shall
be determined by averaging the closing price of the shares of Azur for the
trailing 21 days prior to the first of each month. Under the agreement Azur
also
has given Xx. Xxxxx the following guarantee: Under his consulting agreement
described above, Xx. Xxxxx is currently receiving compensation either directly
or through an entity controlled by him in the amount of $20,000 monthly (the
“Meritage Developer Fees”) for his services as developer of 48 Xxxxxxxxx LLC, a
Florida limited liability company, known as the “Meritage” in which Azur has a
63% interest. If Xx. Xxxxx no longer receives the Meritage Developer Fees
not
due to his actions but due to the finality of the Meritage Developer Fees
in the
normal course of business, Xxxx agrees to either increase the salary of Xx.
Xxxxx by the amount of the Meritage Developer Fees or place Xx. Xxxxx as
developer, in a project that will guarantee that Xx. Xxxxx shall continue
receiving such $20,000 monthly conpensation.
As
a
performance bonus under the employment agreement, Xx. Xxxxx shall receive
5% of
the net profits derived by Azur from any project which has been directly
originated by Xx. Xxxxx (the “Consideration”). The Consideration shall be
payable 1% in cash payments (“Cash Consideration”) and 4% shall be paid in
restricted shares of Azur (the “Share Consideration”). The Cash Consideration
and the Share Consideration shall be paid within fifteen days after Azur
actually receives and recognizes the actual net profit of the certain project.
In addition, Xx. Xxxxx shall receive 5% of the net profits derived by Azur
from
the leasing of cranes to contractors, which has been directly referred by
Xx.
Xxxxx (the “Crane Consideration”). The Crane Consideration shall be payable 1%
in cash payments (“Cash Crane Consideration”) and 4% shall be paid in restricted
shares of Azur (the “Share Crane Consideration”). The CashCrane Consideration
and the Share Crane Consideration shall be paid within fifteen days after
Azur
actually receives and recognizes the actual net profit from the leasing of
the
cranes to the contractors referred by Xx. Xxxxx.
Xxxx
Xxxxxx
Xx.
Xxxxxx entered into a Consulting Agreement with Azur on October 5, 2004
under
which he has been retained to be a director of Azur and the Chairman of
the
Board and Chief Executive Officer of Azur Development (UK) Plc, a company
currently in the planning stage, to assist that company in acquiring United
Kingdom- based home builders and other business and to assist Azur in acquiring
Airtek Safety Limited. For his services under the agreement Xx. Xxxxxx
was paid
a base fee of 3,000,000 shares of Azur common stock.
Committees
of Azur’s Board of Directors
Because
our board of directors currently consists of only five members, we do not
have a
standing nominating, compensation or audit committee. Rather, our full board
of
directors performs the functions of these committees. Also, we do not have
a
financial expert on our board of directors as that term is defined by Item
401(e)(2) of Regulation S-B. We do not believe it is necessary for our board
of
directors to appoint such committees because the volume of matters that come
before our board of directors for consideration permits each director to
give
sufficient time and attention to such matters to be involved in all decision
making. Additionally, because our Common Stock is not listed for trading
or
quotation on a national securities exchange, we are not required to have
such
committees. Xxxx Xxxxx is Azur’s sole independent director. Xxxxxx Xxxxx, Xxxxxx
Xxxxxxx and Xxxxxx Xxxx are each officers of Azur and Xxxx Xxxxxx is a
consultant to Azur.
50
It
is the
view of the Board of Directors that it is appropriate for Azur not to have
a
nominating committee because Azur only has five directors and they are the
only
individuals who participate in the consideration of director nominees. Azur's
five directors perform the functions of a nominating committee.
In
considering candidates for membership on the Board of Directors, the Board
of
Directors will take into consideration the needs of the Board of Directors
and
the candidate's qualifications. The Board will request such information
as:
The
name
and address of the proposed candidate;
The
proposed candidates resume or a listing of his or her qualifications to be
a
director of Azur;
A
description of any relationship that could affect such person's qualifying
as an
independent director, including identifying all other public company board
and
committee memberships;
A
confirmation of such person's willingness to serve as a director if selected
by
the Board of Directors; and
Any
information about the proposed candidate that would, under the federal proxy
rules, be required to be included in Azur's proxy statement if such person
were
a nominee.
Once
a
person has been identified by the Board of Directors as a potential candidate,
the Board of Directors may collect and review publicly available information
regarding the person to assess whether the person should be considered further.
Generally, if the person expresses a willingness to be considered and to
serve
on the Board of Directors and the Board of Directors believes that the candidate
has the potential to be a good candidate, the Board of Directors would seek
to
gather information from or about the candidate, including through one or
more
interviews as appropriate and review his or her accomplishments and
qualifications generally, including in light of any other candidates that
the
Board of Directors may be considering. The Board of Director's evaluation
process does not vary based on whether the candidate is recommended by a
shareholder.
The
Board
of Directors will, from time to time, seek to identify potential candidates
for
director nominees and will consider potential candidates proposed by the
Board
of Directors and by management of Azur.
Meetings
of the Azur Board
During
its fiscal year ended December 31, 2004, Azur’s Board of Directors held six
meetings attended by all members of the Board and on 27 occasions approved
resolutions by unanimous written consent in lieu of a meeting.
Stockholder
Communications with the Board of Directors of Azur
Stockholders
may send communications to Azur’s board of directors by writing to: Azur
International, Inc., 000 XX 0xx
Xxxxxx,
Xxxxx 0000, Xxxx Xxxxxxxxxx, Xxxxxxx 00000, Attn.: Board of Directors or
any
specified director. Any correspondence received at the foregoing address
to the
attention of one or more directors is promptly forwarded to such director
or
directors.
51
Financial
Statements
You
should read the following summary financial data together with the discussion
in
“Azur’s Management’s Discussion and Analysis of Financial Condition and Results
of Operations” and Harvest’s financial statements and related notes contained
elsewhere in this Information Statement/Proxy Statement/Prospectus.
The following operational and balance sheet data for the years ended
December 31, 2004 and 2003 have been derived from Azur’s audited financial
statements, which are contained elsewhere in this Information Statement/Proxy
Statement/Prospectus. The data for the three months ended March 31, 2005
and
2004 and the balance sheet data as of March 31, 2005 have been derived from
Azur’s accounting records and have not been audited. This interim data contains
all adjustments, consisting only of those that are of a normal recurring
nature,
necessary to present fairly the financial position and results of operation
for
the interim reporting periods. Operating results for the three months ended
March 31, 2005 are not necessarily indicative of results that may be expected
for any future periods.
52
|
Three
Months Ended
|
Fiscal
Year Ended
|
||||||||||||
|
March
31, 2005
|
March
31, 2004
|
December
31, 2004
|
December
31, 2003
|
||||||||||
|
Statement
of Operations Data:
|
|||||||||||||
|
Sales
|
$
|
1,529,855
|
--
|
$
|
229,496
|
--
|
|||||||
|
Rents
|
$
|
2,263,895
|
22,791
|
|
210,693
|
--
|
|||||||
|
Cost
of sales
|
$
|
1,391,813
|
--
|
|
33,379
|
--
|
|||||||
|
Gross
income
|
$
|
2,401,937
|
22,791
|
|
406,810
|
--
|
|||||||
|
Operating
expenses
|
$
|
2,444,032
|
219,559
|
1,830,761
|
--
|
||||||||
|
Net
loss before other income and expense
|
$ |
(42,095
|
)
|
(196,768
|
)
|
(1,423,952
|
)
|
--
|
|||||
|
Total
other income and expense
|
$ |
(213,445
|
)
|
(15,371
|
)
|
(452,695
|
)
|
--
|
|||||
|
Net
loss before adjustments for minority interest
|
$ |
(255,540
|
)
|
(212,139
|
)
|
(1,876,647
|
)
|
--
|
|||||
|
Non-controlling
interest in subsidiary
|
$ |
(34,493
|
)
|
5,121
|
|
|
150,843
|
--
|
|||||
|
Net
loss
|
$ |
(364,947
|
)
|
(207,018
|
)
|
(1,725,804
|
)
|
--
|
|||||
|
|
March
31, 2005
|
December
31, 2004
|
|||||||||||
|
Balance
Sheet Data:
|
|||||||||||||
|
Cash
and cash equivalents
|
$
|
671,077
|
$
|
611,763
|
|||||||||
|
Working
capital
|
$ |
(14,690,833
|
)
|
(2,699,473
|
)
|
||||||||
|
Total
assets
|
$
|
36,944,831
|
16,530,161
|
||||||||||
|
Long-term
debt
|
$
|
12,412,876
|
11,485,303
|
||||||||||
|
Stockholders'
Equity
|
$
|
2,083,295
|
611,820
|
||||||||||
53
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
Introduction
Azur
is a
diversified real estate development company with operations in the United
States
and the United Kingdom. Our lines of business include real estate development
and operation, and the sale and rental of capital equipment to the construction
industry. The year 2004 was effectively Azur’s initial year of significant
operations, much of which was spent on organizational and administrative
matters.
In
2004
we made initial acquisitions of interests in real estate properties and
development projects that now comprise our real estate activities. These
acquisitions, included among other things, interests in the Place des
Arts and
Meritage condominium development projects, and the Grand Shell Landing
Golf
Course.
In
February, 2005, we acquired Airtek Safety Limited, which provides us
with
diversified revenue streams related to construction, and provides us
with a U.K.
- based management team to lead planned efforts to expand our real estate
development activities to the United Kingdom and Europe.
In
the
first quarter of 2005 we commenced development activity on the Meritage
condominium project in Ft. Lauderdale, Florida.
During
the quarter ended March 31, 2004 and the year ended December 31, 2003,
Azur had
minimal operations. Accordingly, the analysis below addresses only Xxxx’s
financial results for the quarter ended March 31, 2005 and the year ended
December 31, 2004.
Quarter
Ended March 31, 2005
Results
of Operations
Revenue
and Gross Profit
For
the
quarter ended March 31, 2005, total revenue was $3,793,750 which included
approximately $1,494,000 in crane rentals and related income, approximately
$1,368,000 from the sale and rental of safety equipment and related consulting
services, and approximately $925,000 in sales from golf course
operations.
Crane
rentals are priced on a weekly basis. Additional revenues come from
transportation and set up charges, training, hire of ancillary equipment
and
operators. During the quarter ended March 31, 2005 we had 74 cranes available
for rental of which 53 cranes (71.6%) were deployed. Of the 74 cranes
available,
37 were owned by Airtek and 37 were owned by its joint venture partner,
Arcomet
of Belgium.
Safety
equipment is offered for outright sale as well as rent. Safety equipment
rentals
are priced on a day-rate basis. During the quarter ended March 31, 2005
approximately $315,000 was derived from the sale of equipment, while
approximately $1,053,000 was from rentals and other charges.
Golf
course revenues are primarily derived from daily greens fees at The Grand
Shell
Landing Golf Club. There were 9,546 paid rounds were played during
the
quarter ended March 31, 2005, yielding revenue of approximately $638,000.
Additional revenues of approximately $277,000 were derived from sales
of
clothing, equipment, food, and beverages at the retail facilities in
the Shell
Landing clubhouse.
Cost
of
Sales
Cost
of
sales for the quarter ended March 31, 2005 were $1,391,813 and were comprised
of
approximately $610,000 in costs relating to crane rentals, approximately
$688,000 in safety equipment-related production costs, and approximately
$94,000
in the cost of inventory for retail items sold at the golf course club
house.
54
In
crane
rentals, the cost of sales are comprised primarily of rental payments
to Acromet
and direct labor costs. In safety equipment the cost of sales include
the cost
of actual equipment sold, in the case of sales, and in the case of the
rental
business the costs are largely direct labor.
The
cost
of sales for the golf course business is comprised entirely of inventory
costs
for equipment, clothing, food, and beverages.
General
and Administrative
General
and administrative expenses were $2,444,032 in the quarter ended March
31, 2005
and were comprised primarily of: crane and safety equipment rental and
sales
expenses of approximately $1,163,000, golf-related expenses of approximately
$558,000, and corporate overhead and real estate-related expenses of
$723,000.
Interest
Expense
Interest
expense for the quarter ended March 31, 2005 totaled $178,193 and was
comprised
of approximately $26,000 of interest paid for leased equipment and approximately
$153,000 for real property owned.
Net
Loss
The
net
loss for the quarter ended March 31, 2005 of $364,947 reflects the early
stage
of our business operations as costs are being incurred in connection
with
acquisition activities and to create management infrastructure, and as
pre-development expenses are paid in connection with new real estate
development
projects.
Liquidity
and Capital Resources
At
March
31, 2005 we had a net working capital deficit of $14,690,833. Included
in
liabilities are notes payable totaling in excess of $17,000,000 which
come due
on or before January 1, 2006, including notes payable of $11,224,000
to former
Airtek shareholders in connection with Azur’s acquisition of Airtek which come
due in August, 2005. According to the terms of our purchase agreement,
we are
not allowed to transfer any cash from the Airtek operation to the parent
company
or to any affiliates prior to the complete satisfaction of these notes
payable.
Please refer to the schedule of maturities shown below for additional
details
regarding the maturities of our long-term debt.
Management
is currently pursuing multiple financing alternatives with respect to
satisfying
these obligations, including (a) raising additional equity capital (b)
restructuring the terms of these existing debt obligations, and (c) issuing
additional debt securities. There can be no assurance, however, that
such
additional funds will be available, or, if available, available on commercially
acceptable terms. If we are unable to raise capital and renegotiate terms
of
existing debt we may be forced into a substantial liquidation of assets,
which
may occur on terms unfavorable to Azur and may foreclose future growth
opportunities. Please refer to the more detailed schedule of our maturities
and
debt obligations shown below for information regarding obligations outstanding
and security interests that have been granted in connection with those
obligations.
There
are
other factors and risks that could impair our ability to meet current
obligations in the future. A significant portion of our expected future
cash
inflows are dependent upon successfully completing and closing sales
on the
various condominium development projects that are now planned or underway.
These
expected cash inflows will not occur until construction is complete and
we have
closed on the sales of the individual units to the purchasers. As such,
our
revenues are collected at very irregular intervals and we are required
to fund
substantial receivables during the construction period. Please refer
to the Risk
Factors section of this document for a more complete description of the
risks
attendant to our real estate development and other business
activities.
55
We
have
identified numerous real estate development opportunities, which, in
our opinion
offer attractive growth and profit potential, based on the risks involved.
However, our expectations for growth in the real estate development business
are
entirely dependent on our ability to raise additional capital. We are
currently
seeking a total of approximately $60 million in additional capital from
potential equity partners and from conventional construction lenders
to finance
the construction of The Islands at Shell Landing, a 200 unit condominium
project
located adjacent to the club house at The Grand Shell Landing Golf Course.
We
are also seeking to raise approximately $12 million in a form yet to
be
determined in order to provide necessary working capital for operations
and to
finance, among other things, the purchase of additional land adjacent
to The
Grand Shell Landing Golf Course. Currently, there remains significant
interest
in gulf coast real estate among the investment community. However, our
ability
to raise the funds we need in order to pursue these opportunities is
not assured
and may become more difficult if interest rates continue to rise, if
a major
natural disaster were to hit the area, or if investors begin to perceive
real
estate prices to have risen beyond the point where attractive future
returns are
possible. Please refer to the Risk Factors section of this document for
other
factors that could inhibit our ability to raise the capital necessary
to create
growth and sustain existing operations.
In
a
related party transaction, subsequent to March 31, 2005 we acquired from
the
Xxxxxxxx Family Limited Partnership (“CFLP”) and from the Xxxxxxx Family Limited
Partnership (“NFLP”) up to an 80% interest in approximately 1,200 acres of land
that adjoins the Grand Shell Landing Golf Course, on which we have the
opportunity to pursue significant real estate development projects well
into the
future. The purchase agreement between Azur and the sellers contains
several
conditions that require future performance on the part of Azur. In the
event
that we are unable to meet these conditions on a timely basis, the sellers
have
remedies available by contract that may cause our ownership interest
in the land
to revert back to the sellers, which will significantly reduce our future
cash
flow and profit potential.
In
connection with the above transaction we also acquired from Xxxx Xxxxxxxx
an
option to purchase for $7.5 million up to an 80% interest in an additional
568
acres adjacent to the Grand Shell Landing Golf Course. If acquired, we
believe
this land will create significant opportunity for growth and profit for
our real
estate development operations. However, as noted above, there are no
assurances
that we will be successful in raising the capital necessary to exercise
this
option.
Our
interests in these two land parcels represent substantially all of our
existing
future opportunity for growth and profit as it relates to our ownership
of The
Grand Shell Landing resort property.
Discussion
of Certain Current Assets and Liabilities
Accounts
receivable
Our
accounts receivable at March 31, 2005 amounted to $2,646,354 which was
comprised
primarily of trade receivables in the safety equipment (approximately
$1,100,000) and crane rental (approximately $1,200,000) businesses. These
accounts are generally due on the 28th
day
after invoice date.
Inventory
At
March
31, 2005, our inventory was $414,884 which consisted primarily of parts
and
components related to the rental of cranes and safety equipment, and
apparel and
equipment held in stock in our golf course occupations.
56
Prepaid
expense
At
March
31, 2005 our prepaid expenses totaled $901,015, which consisted of approximately
$422,000 in prepaid mortgage interest for the construction loan on the
Meritage
development project, approximately $94,000 in escrow for property taxes
associated with the golf course and the Rio Vista property, $42,000 of
prepaid
insurance related to the golf course, and approximately $343,000 of prepaid
expenses related to the Airtek cranes and safety equipment business.
Other
receivables
At
March
31, 2005 other receivables totaled $872,668, which consisted primarly
of loans
and other miscellaneous receivables in the crane and safety equipment
business.
Accounts
Payable
Accounts
payable and accrued expenses at March 31, 2005 were $2,566,705
and consisted primarily of $1,585,000 of trade payables and $982,000
of
accrued general and administrative expenses.
Analysis
of Cash Flow
Cash
flow
used in operations
Xxxx
used
in operations totaled $862,924, comprised primarily of our net loss of
approximately $365,000, plus an increase in accounts receivable of approximately
$262,000, and in increase in prepaid expenses of approximately $543,000.
The
increase in accounts receivable is primarily attributable beginning of
year
membership xxxxxxxx for the golf course and growth in our Airtek operations.
The
increase in prepaid expenses is primarily attributable to the prepayment
of
interest expense on the Meritage condominium debt, and general business
growth
in our Airtek operations.
Cash
flow
used in investing activities
Xxxx
used
in investing activities totaled $1,771,809. As described previously,
we are in
the beginning phases of our real estate development operations and as
such we
currently require significant amounts of cash to fund acquisitions of
property
for development. In connection with these efforts we entered a purchase
contract
for undeveloped land that adjoins the Grand Shell Landing Golf Course
which
required a cash deposit of approximately $1,250,000. Other uses of cash
in
investing activities included construction costs of approximately $246,000,
and
the acquisition of additional fixed assets, primarily equipment in our
Airtek
subsidiary, of approximately $300,000.
Cash
flow
from financing activities
Our
financing activities provided net cash of $2,694,047. This cash
was raised
principally in the form of net new debt of approximately, $2,289,000
and from
deposits received in connection with the pre-sale of condominiums. As
of March
31, 2005 we have received total condominium deposits of $2,020,000. The
total
amount of deposits reflected as a source of cash of approximately $345,000
is
limited to the amount by which total deposits received exceed the
legally-stipulated amount to be held in escrow. Below are additional
details
with respect to our debt financing at December 31, 2005.
|
DUE
IN LESS
|
DUE
|
DUE
|
||||||||
|
THAN
1
|
IN
1-3
|
AFTER
4
|
||||||||
|
OBLIGATION
|
YEAR
|
YEARS
|
YEARS
|
|||||||
|
Notes
Payable
|
$
|
17,120,642
|
$
|
6,200,422
|
||||||
|
Mortgages
|
151,360
|
3,750,828
|
1,061,020
|
|||||||
|
Total
cash obligations
|
$
|
17,272,002
|
$
|
3,750,828
|
$
|
7,261,442
|
||||
57
|
Equity
Line of credit -Loan is in the name of a partner. Interest
rate is
variable
(currently
at 6.375 %). Loan secured by Rio Vista property.
|
151,360
|
|||
|
Mortgage
Payable - First Mortgage in name of a partner. Interest is
at a variable
rate,
currently
3.250 %. Interest only is due monthly until November 1, 2012,
and the
borrower
has
the right to prepay with no penalty. Maturity date of the mortgage
is
October 1, 2027
|
1,034,822
|
|||
|
Mortgage
Payable - First mortgage secured by 48 Xxxxxxxxx property.
Bank has a
Secured
interest in rents, leases, fixed asset and profits. Interest
is variable
but can never
be
less than 5 %. Current rate is 5.5 %. Payments are interest
only
|
3,750,828
|
|
Note
Payable to finance company, monthly payments are variable,
including
interest of 6.75%, collateralized by Grand Shell Landing Golf
Course and
its assets, due November 2009
|
6,374,767
|
|||
|
Note
Payable to finance company, monthly payments of $ 278, including
imputed
interest of 7%, collateralized by equipment, due October
2006
|
5,650
|
|||
|
Note
Payable to finance company, monthly payments of $ 277, including
imputed
interest of 6.49% collateralized by equipment, due May 2007
|
6,671
|
|||
|
Note
payable to a finance company, monthly payments of $ 814, including
imputed
interest of 6.75%, collectivized by equipment, due October
2006
|
13,845
|
|||
|
Note
Payable to private investor, due January 1, 2006 with interest
payable at
12%
|
3,000,000
|
|||
|
Note
Payable to a limited liability company which is 33.3% owned
by a related
party, with maturity date of August 14, 2005.
|
700,000
|
|||
|
Notes
Payable - various installment obligations for cranes and safety
equipment.
|
951,519
|
|||
|
Note
Payable on acquisition of The Grand Shell Landing Golf Course
to former
owner. Owner has an option to purchase the Company’s stock, currently held
in escrow, in lieu of payment of the note.
|
1,070,811
|
|||
|
Obligation
Payable for acquisition of Airtek Safety Ltd. - Non-interest
bearing,
secured
by common stock held in escrow, due on August 21, 2005. At
the option
Airtek
shareholders, common stock of Azur International may be accepted
in lieu
of
cash payment.
|
11,224,000
|
|||
|
Total
|
$
|
28,284,272
|
58
Year
Ended December 31, 2004
Azur
had
minimal operations during the year ended December 31, 2003, as it commenced
operations in January 2004. Accordingly, the analysis below addresses
only
Xxxx’s financial results for the fiscal year ended December 31,
2004.
Results
of Operations
Total
Revenue and Gross Profit
For
the
year ended December 31, 2004, total revenues were $440,189, which were
comprised
primarily of rents from interests in buildings which were subsequently
demolished to make way for the new Meritage project and from a tenant
of the
house owned by the Rio Vista partnership, as well as $229,000 in revenue
from
golf course operations from November 15, 2004, the date of the acquisition
of
The Grand Shell Landing Golf Club, to December 31, 2004.
Cost
of
Sales
Cost
of
sales for the fiscal year ended December 31, 2004 were $33,379 and were
comprised entirely of inventory costs for equipment, clothing, food,
and
beverages of items sold through the retail outlets in the golf course
clubhouse.
General
and Administrative
General
and administrative expenses were $1,830,761 for the year ended December
31, 2004
and were comprised primarily of: consulting fees related to capital raising
efforts, real estate advisory, and services provided under the terms
of
consulting agreements with various members of management ($448,000),
travel and
entertainment ($325,000), salaries ($193,000) and real estate taxes
($169,000).
Net
Loss
Azur
is
substantially in the pre-revenue phase of its business plan. The net
loss for
the year ended December 31, 2004 of $1,725,804 reflects the early stage
of our
business operations as costs are being incurred in connection with acquisition
activities and to create management infrastructure, and as pre-development
expenses are paid in connection with new real estate development
projects.
Liquidity
and Capital Resources
At
December 31, 2004 we had a net working capital deficit of $2,699,473,
including
the current portions of long term debt and capital lease obligations
of
$3,174,205.
Management
is currently pursuing multiple financing alternatives with respect to
satisfying
these liabilities, including (a) raising additional equity capital (b)
restructuring the terms of these existing debt obligations, and (c) issuing
additional debt securities. There can be no assurance, however, that
such
additional funds will be available, or, if available, available on commercially
acceptable terms.
There
are
other factors and risks that could impair our ability to meet current
obligations in the future. A significant portion of our expected future
cash
inflows are dependent upon successfully completing and closing sales
on the
various condominium development projects that are now planned or underway.
Please refer to the Risk Factors section of this document for a more
complete
description of the risks attendant to our real estate development and
other
business activities.
59
Discussion
of Certain Current Assets and Liabilities
Accounts
receivable
Our
accounts receivable at December 31, 2004 amounted to $37,407 which was
comprised
primarily of membership dues and charges billed for golf course
events.
Inventory
At
December 31, 2004, our inventory was $65,441 which consisted of golf
apparel and
equipment and food and beverage stocks in the retail outlets of The Grand
Shell
Landing Golf Club.
Accounts
Payable
At
December 31, 2004 accounts payable and accrued expenses totaled $416,333
and
consisted primarily of $37,000 in trade payables, $206,000 of accrued
interest
and property taxes, $34,000 of accrued payroll and payroll taxes, and
$117,000
of accrued general and administrative expenses.
Analysis
of Cash Flow
Cash
flow
used in operations
Cash
used
in operations totaled $1,154,994, comprised primarily of our net loss
of
$1,725,804, offset by an increase of approximately $357,000 in accounts
payable,
a decrease in other current assets of approximately $182,000 and the
issuance of
common stock in lieu of cash for services provided under various consulting
agreements in the amount of approximately $213,000.
Cash
flow
used in investing activities
Cash
flow
used in investing activities of $102,808 relates to the early stage activities
in our real estate development business, including the payment of cash
deposits
on acquisitions and early-stage construction costs on our condominium
projects.
Cash
flow
from financing activities
Cash
flow
from financing activities totaled $1,869,565 during 2004. We issued a
total of
5,435,000 shares of common stock for $1,175,000 in cash. An additional
33,421,518 shares were issued in return for services provided and in
connection
with acquisitions. These were non-cash transactions and thus not reflected
in
cash flow from financing activities. Additional cash was raised through
minority
partner contributions in the Rio Vista and Meritage subsidiaries. Below
are
additional details with respect to our debt financing at December 31,
2004.
|
DUE
IN LESS
|
DUE
|
DUE
|
||||||||
|
THAN
1
|
IN
1-3
|
AFTER
4
|
||||||||
|
OBLIGATION
|
YEAR
|
YEARS
|
YEARS
|
|||||||
|
Notes
Payable
|
$
|
2,970,601
(1
|
)
|
$
|
--
|
$
|
6,260,603
|
|||
|
Mortgages
|
$
|
154,182
|
$
|
3,947,748
|
$
|
448,199
|
||||
|
Total
cash obligations
|
$
|
3,124,783
|
$
|
3,947,748
|
$
|
6,708,802
|
||||
|
(1)
|
$695,000
of this amount was repaid in three installments in January
and February,
2005 and a separate loan of $150,000 was repaid in January,
2005.
|
60
|
Note
Payable -Unsecured revolving line from finance company, with
interest
payable at 6% per annum, commencing on October 1, 2004. Principal
and
interest to be paid on January 24, 2005, unless amended in
writing. This
obligation was paid in full, in 3 installments as follows:
1/15/05 -
$295,000, 1/26/05 -$200,000 and 2/16/05 - $200,000.
|
$
|
695,000
|
||
|
Equity
Line of credit -Loan is in the name of a partner. Interest
rate is
variable (currently at 6.375 %). Loan secured by Rio Vista
property.
|
154,182
|
|||
|
Mortgage
Payable - First Mortgage in name of a partner. Interest is
at a variable
rate, currently 3.250 %. Interest only is due monthly until
November 1,
2012, and the borrower has the right to prepay with no penalty.
Maturity
date of the mortgage is October 1, 2027
|
1,034,822
|
|||
|
Mortgage
Payable - First mortgage secured by 48 Xxxxxxxxx property.
Bank has a
Secured interest in rents, leases, fixed asset and profits.
Interest is
variable but can never be less than 5 %. Current rate is 5.5
%. Payments
are interest only
|
3,361,125
|
|
Note
Payable to finance company, monthly payments are variable,
including
interest of 6.75%, collateralized by Grand Shell Landing
Golf Course, due
November 2009
|
6,400,000
|
|||
|
Note
Payable to finance company, monthly payments of $ 278, including
imputed
interest of 7%, collateralized by equipment, due October
2006
|
6,377
|
|||
|
Note
Payable to finance company, monthly payments of $ 277, including
imputed
interest of 6.49% collateralized by equipment, due May 2007
|
7,389
|
|||
|
Note
payable to a finance company, monthly payments of $ 814,
including imputed
interest of 6.75%, collateralized by equipment, due October
2006
|
16,029
|
|||
|
Note
Payable to a private investor with a term of 30 days and
interest at 12%.
This obligation was satisfied on January 25, 2005.
|
150,000
|
|
Note
Payable to private investor, due June 30, 2005 with interest
payable at
12%
|
450,000
|
|||
|
Notes
Payable to shareholders of acquired company, due January
31,
2005
|
435,598
|
|||
|
Note
Payable on acquisition of The Grand Shell Landing Golf
Course to former
owner. Owner has an option to purchase the Company’s stock, currently held
in escrow, in lieu of payment of the note .
|
1,070,811
|
|||
|
Total
obligations
|
$
|
13,781,333
|
||
|
Less:
short-term portion
|
(3,124,783
|
)
|
||
|
Long-term
maturities
|
$
|
10,656,550
|
61
Critical
Accounting Policies
Real
Estate Holdings
Real
estate investments are stated at the lower of cost or market. Acquisition
costs
are allocated to respective properties based on appraisals of the various
properties acquired in the acquisition.
Revenue
Recognition
Real
Property: Revenue is recognized under the full accrual method of accounting
upon
the completed sale of real property held for development and sale. All costs
incurred directly or indirectly in acquiring and developing the real property
are capitalized. Revenues for sales and rentals generated from The Grand
Shell
Landing, Inc. are also recognized under the full accrual method of accounting.
Cash
and
Cash Equivalents
Cash
and
cash equivalents include cash on hand; cash in banks, and
any
highly liquid investments with maturity of three months or less at the time
of
purchase. Azur and its subsidiaries
maintain
cash and cash equivalent balances at several financial institutions, which
are
insured by the Federal Deposit Insurance Corporation up to $100,000. At times,
the cash balances may exceed federally insured limits. Azur has not experienced
any losses in such accounts and believes the risk related to these deposits
is
minimal.
Property
and Equipment
Property
and equipment are carried at cost and are being depreciated over their useful
lives using straight line depreciation methods. The estimated useful lives
of
significant assets are as follows:
|
Equipment
|
5
years
|
|||
|
Land
Improvements
|
20
years
|
|||
|
Buildings
|
40
years
|
Leases
Leases
that transfer substantially all of the risks and benefits of ownership are
capital leases. Other leases are operating leases that are expensed over
the
terms of the lease using the straight line method. Capital leases are included
in property and equipment and are amortized using the same methods as used
for
depreciation of property and equipment
62
Construction
Deposits
Construction
deposits amounting to $842,500 for the purchase of units in the 48 Xxxxxxxxx
project are held in escrow with the Escrow Agent, Xxxxxx & Xxxx, P.A., as
per an Escrow Agreement dated August 25, 2004.
Allowance
for Doubtful Accounts
An
allowance for doubtful accounts is estimated and recorded based on Azur’s
historical bad debt experience. Management believes that all accounts receivable
will be collected within one year; therefore, an allowance for bad debts
is not
necessary.
Inventory
Inventory
is stated at the lower of cost or market with cost determined using the
first-in, first-out method.
Earnings/Loss
per Share
Primary
earnings per common share are computed by dividing the net income (loss)
by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the quarter and year-to-date. The number of shares used
for
the year ended December 31, 2004 was 23,462,165 and the resulting loss per
share
was $0.07.
In
February 1992, the Financial Accounting Standards Board issued Statement
on
Financial Accounting Standards 109 of "Accounting for Income Taxes." Under
Statement 109, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. The Company has net operating losses (NOL's)
of
approximately $ 2,708,657.
|
Year
ending
|
||
|
December
31, 2004
|
December
31, 2003
|
|
| Statutory federal income tax rate |
34%
|
34%
|
| Valuation allowance |
(34)
|
(34)
|
| Effective tax rate |
-%
|
-%
|
63
Recent
Accounting Pronouncements
Statement
of Financial Accounting Standards (“SFAS”) No. 149 is effective for contracts
entered into or modified after June 30, 2003 and all of its provisions should
be
applied prospectively. The changes in SFAS No. 149 improve financial reporting
by requiring that contracts with comparable characteristics be accounted
for
similarly. This statement
In
May
2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 150,
"Accounting For Certain Financial Instruments with Characteristics of both
Liabilities and Equity". SFAS No. 150 changes the accounting for certain
financial instruments with characteristics of both liabilities and equity
that,
under previous pronouncements, issuers could account for as equity. The new
accounting guidance contained in SFAS No. 150 requires that those instruments
be
classified as liabilities in the balance sheet.
SFAS
No.
150 affects the issuer's accounting for three types of freestanding financial
instruments. One type is mandatory redeemable shares, which the issuing company
is obligated to buy back in exchange for cash or other assets. A second type
includes put options and forward purchase contracts, which involves instruments
that do or may require the issuer to buy back some of its shares in exchange
for
cash or other assets. The third type of instruments that are liabilities
under
this SFAS is obligations that can be settled with shares, the monetary value
of
which is fixed, tied solely or predominantly to a variable such as a market
index, or varies inversely with the value of the issuers' shares. SFAS No.
150
does not apply to features embedded in a financial instrument that is not
a
derivative in its entirety.
Most
of
the provisions of SFAS No. 150 are consistent with the existing definition
of
liabilities in FASB Concepts Statement No. 6, "Elements of Financial
Statements". The remaining provisions of this SFAS are consistent with the
FASB's proposal to revise that definition to encompass certain obligations
that
a reporting entity can or must settle by issuing its own shares. This SFAS
is
effective for financial instruments entered into or modified after May 31,
2003
and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003, except for mandatory redeemable financial
instruments of a non-public entity, as to which the effective date is for
fiscal
periods beginning after December 15, 2004.
In
January 2003, and as revised in December 2003, the FASB issued Interpretation
No. 46, "Consolidation of Variable Interest Entities" "Interpretation No.
46"),
an interpretation of Accounting Research Bulletin ("ARB") No. 51", "Consolidated
Financial Statements". Interpretation No. 46 addresses consolidation by business
enterprises of variable interest entities, which have one or both of the
following characteristics: (i) the equity investment at risk is not sufficient
to permit the entity to finance its activities without additional subordinated
support from other parties, which is provided through another interest that
will
absorb some or all of the expected losses of the entity; (ii) the equity
investors lack one or more of the following essential characteristics of
a
controlling financial interest: the direct or indirect ability to make decisions
about the entity's activities through voting rights or similar rights; or
the
obligation to absorb the expected losses of the entity if they occur, which
makes it possible for the entity to finance its activities; the right to
receive
the expected residual returns of the entity if they occur, which is the
compensation for the risk of absorbing the expected losses.
Interpretation
No. 46, as revised, also requires expanded disclosures by the primary
beneficiary (as defined) of a variable interest entity and by an enterprise
that
holds a significant variable interest in a variable interest entity but is
not
the primary beneficiary.
Interpretation
No. 46, as revised, applies to small business issuers no later than the end
of
the first reporting period that ends after December 15, 2004. This effective
date includes those entities to which Interpretation No. 46 had previously
been
applied. However, prior to the required application of Interpretation No.
46, a
public entity that is a small business issuer shall apply Interpretation
No. 46
to those entities that are considered to be special-purpose entities no later
than as of the end of the first reporting period that ends after December
15,
2003.
Interpretation
No. 46 may be applied prospectively with a cumulative-effect adjustment as
of
the date on which it is first applied or by restating previously issued
financial statements for one or more years with a cumulative-effect adjustment
as of the beginning of the first year restated.
In
June
2003, the FASB issued an Exposure Draft for proposed SFAS entitled "Qualifying
Special Purpose Entities ("QSPE") and Isolation of Transferred Assets", an
amendment of SFAS No. 140 ("The Exposure Draft"). The Exposure Draft is a
proposal that is subject to change and as such, is not yet authoritative.
If the
proposal is enacted in its current form, it will amend and clarify SFAS 140.
The
Exposure Draft would prohibit an entity from being a QSPE if it enters into
an
agreement that obliged a transferor of financial assets, its affiliates,
or its
agents to deliver additional cash or other assets to fulfill the
special-purposes entity's obligation to beneficial interest holders.
In
November 2004, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 151, Inventory Costs, which clarifies the accounting for abnormal
amounts of idle facility expense, freight, handling costs, and wasted material.
SFAS No. 151 will be effective for inventory costs incurred during fiscal
years
beginning after June 15, 2005. We do not believe the adoption of SFAS No.
151
will have a material impact on our financial statements.
In
December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets,
which eliminates the exception for nonmonetary exchanges of similar productive
assets and replaces it with a general exception for exchanges of nonmonetary
assets that do not have commercial substance. SFAS No. 153 will be effective
for
nonmonetary asset exchanges occurring in fiscal periods beginning after
June 15,
2005. We do not believe the adoption of SFAS No. 153 will have a material
impact
on our financial statements.
In
December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment, which
establishes standards for transactions in which an entity exchanges its
equity
instruments for goods or services. This standard requires a public entity
to
measure the cost of employee services received in exchange for an award
of
equity instruments based on the grant-date fair value of the award. This
eliminates the exception to account for such awards using the intrinsic
method
previously allowable under APB Opinion No. 25. In March 2005, the Securities
and
Exchange Commission (SEC) released Staff Accounting Bulletin (SAB) 107,
Share-Based Payment, which expresses views of the SEC Staff about the
FASB.
Management
does not expect these recent pronouncements to have a material impact on
the
Company's consolidated financial position or results of operations.
64
Certain
Relationships and Related Transactions
Xxxxxx
Xxxxx and Xxxxxx Xxxxxxx are directors and executive officers of Azur and
Harvest and will continue as such after the consummation of the Share Exchange.
Xxxx Xxxxxx is currently a director of Azur and will be elected as a director
of
Harvest after the consummation of the Share Exchange. In addition, Xxxx Xxxxxxxx
and Xxxxxxx Xxxxxxx beneficially own more than 5% of the common stock of
Azur as
of June 30, 2005. The following paragraphs discuss certain transactions since
January 1, 2004 between the above persons and Azur since January 1,
2003.
Xxxxxx
Xxxxx made interest free loans to Azur of $50,000 on April 13, 2005 and $9,800
on May 18, 2005. Azur repaid such loans in full. In consideration of his
making
the $50,000 loan, Azur issued to Xx. Xxxxx 100,000 shares of common stock
of
Azur on April 14, 2005. The stock is restricted as to resale. Since
December 15, 2004 Azur has provided to Xx. Xxxxx on a rent free basis the
use of
a home located on North Rio Vista Boulevard, Fort, Lauderdale, Florida (see
“Background Information on Azur International. Inc. - Rio Vista”).
Xxxxxx
Xxxxxxx made interest free loans to Azur of $50,000 on April 14, 2005 and
$52,818.43 on May 1, 2005. In consideration of his making the $50,000 loan,
Azur
issued to Xx. Xxxxxxx 100,000 shares of common stock of Azur on April 14,
2005.
In consideration of his making the $52,818.43 loan, Azur issued to Xx. Xxxxxxx
5,282 shares of common stock of Azur on June 15, 2005. All of the foregoing
stock is restricted as to resale.
Xxxxxxx
Xxxxxxx is a partner in the Xxxxxxx Family Limited Partnership (“NFLP”). On
December 24, 2003 NFLP sold to Azur Development Corp., a wholly owned subsidiary
of Azur, 1% of the outstanding membership units in Place des Arts LLC, a
Florida
limited liability company which owns the Place des Arts condominium project
in
Fort Lauderdale, Florida (see “Background Information on Azur International.
Inc. - Place des Arts”). (Azur also purchased at such time additional units
constituting 2% of the outstanding membership interests in Place des Arts,
LLC
from other persons.) The purchase price for the interest was to be payable
in
cash 90 days after closing, but NFLP exercised an option granted in the purchase
agreement to convert such amount into 60,000 shares of common stock Azur
and
such shares were issued to NFLP on February 11, 2004. The shares are restricted
as to resale.
On
February 10, 2004 NFLP sold to Azur 48.024 Class A units of membership interests
in 48 Xxxxxxxxx LLC, a Florida limited liability company which owns the Meritage
Project (see “Background Information on Azur International. Inc. - Meritage”).
The units comprised approximately 20% of the outstanding membership interests
of
48 Xxxxxxxxx LLC. (Azur also purchased additional units constituting
approximately 43% of the outstanding membership interests from other persons.)
The purchase price for the units sold by NFLP was $318,333 which was paid
$31,833 in cash at closing and $286,500 90 days after the closing, and the
issuance to NFLP of 206,453 shares of common stock of Azur, which were issued
on
February 11, 2004 . The common stock is restricted as to resale.
On
November 26, 2003 NFLP sold to Azur a 1.5% partnership interest in a Florida
general partnership which owns a house located on North Rio Vista Boulevard,
Fort Lauderdale, Florida (see “Background Information on Azur International.
Inc. - Rio Vista”). (Azur also purchased at such time an additional 1.5%
interest from another person.) The purchase price for the interest was to
be
payable in cash 90 days after closing, but NFLP exercised an option granted
in
the purchase agreement to convert such amount into 30,000 shares of common
stock
of Azur and such shares were issued to NFLP on February 11,2004. The shares
are
restricted as to resale.
On
February 5, 2004 NFLP sold to Azur an additional 16.67% partnership interest
in
the Rio Vista partnership for a purchase price of $60,000 payable 90 days
after
closing. The full amount was paid on April 14, 2004. ”). (Azur also purchased on
February 5, 2004 an additional 33.33% interest from other persons.) In
connection with the purchase, Azur agreed to pay all carrying costs for the
real
estate owned by the partnership until the property is sold.
On
November 16, 2004 Xx. Xxxxxxxx and Xxxx entered into a Stock Exchange Agreement
in which Xx. Xxxxxxxx exchanged his 50% interest in The Grand Shell Landing,
Inc., a Mississippi corporation, for 3,393,939 restricted shares of common
stock
of Azur. Azur thereby acquired sole ownership of The Grand Shell Landing,
Inc.
on that date. The Grand Shell Landing, Inc. had entered into a purchase and
sale
agreement on June 1, 2004 with Shell Landing Golf LLC, a Mississippi limited
liability company in which Xxxx Xxxxxxxx owned an approximately 21.2% interest,
to purchase the real estate and certain other assets relating to the Shell
Landing Golf Course in Gautier, Mississippi.
On
November 17, 2004 the parties closed the purchase. The $8,000,000 purchase
price
for the real estate and assets was funded by a $6,400,000 loan from a financial
institution secured by a first deed of trust on the property and by the issuance
by The Grand Shell Landing, Inc. to Shell Landing Golf, LLC of a $1,400,000
promissory note secured by a second deed of trust on the property and personal
guarantees of Azur and Xx. Xxxxxxxx. Xx. Xxxxxxxx and Xxxx also agreed to
indemnify the lender of the $6,400,000 loan for certain claims and liabilities
arising under federal bankruptcy or state insolvency laws or similar laws
regarding creditors’ rights relating to the acquisition of the property by and
the making of the loan to The Grand Shell Landing, Inc.
65
In
connection with the November 16, 2004 Stock Exchange Agreement between Xx.
Xxxxxxxx and Azur, Xx. Xxxxxxxx and Xxxx entered into a Put Option Agreement
under which Azur granted to Xx. Xxxxxxxx certain options to put back to Azur
up
to 2,909,091 shares of the Azur Common Stock issued in the exchange for $.55
per
share during certain periods commencing nine months after the date of the
agreement and ending one year and fifteen days after the date of the agreement.
The shares subject to the put options were placed and continue to be held
in
escrow under an escrow agreement.
In
addition, on November 17, 2004 Xx. Xxxxxxxx agreed with the other members
of
Shell Landing, LLC that in exchange for the redemption of his entire interest
in
Shell Landing Golf, LLC, the $1,600,000 promissory note from The Grand Shell
Landing, Inc. be reduced by $529,188.90. Xx. Xxxxxxxx agreed to do this as
partial consideration for Azur’s agreement to enter into the stock exchange
agreement with Xx. Xxxxxxxx.
Xx.
Xxxxxxxx owns 33.33% of the membership interests in Live Oak Investments,
LLC, a
Delaware limited liability company (“Live Oak”). On February 14, 2005 Live Oak
loaned Azur $700,000. As of June 14, 2005 the entire principal amount of
the
loan together with $23,333 in interest on such loan was
outstanding.
On
April
13, 2005 Xx. Xxxxxxxx personally loaned to Azur $50,000. The loan was repaid
on
May 4, 2005. In lieu of interest on April 14, 2005 Azur issued to Xx. Xxxxxxxx
100,000 shares of common stock of Azur in consideration of the loan. The
shares
are restricted as to resale.
Xxxx
Xxxxxx is the beneficiary of a trust which was one of the shareholders who
sold
common stock of Airtek Safety Limited to Azur on February 24, 2005 (see
“Background Information on Azur International. Inc. - Airtek”). The purchase
price for the trust’s shares was £1,690,880 (approximately $3,111,219). The
purchase price is payable on August 24, 2005. The trust has the option to
acquire 1,037,073 shares of Azur common stock in lieu of receiving the cash
purchase price.
Except
as
discussed above, none of the directors, executive officers, holders of five
percent of the outstanding Azur common stock, or any associate or affiliate
of
such person, have, to the knowledge of Azur, had a material interest, direct
or
indirect, during the two fiscal years ended December 31, 2004 and
2003, in
any transaction or proposed transaction which may materially affect
Azur,
No
executive officer, present director, proposed director or any member of these
individuals' immediate families or any corporation or organization with whom
any
of these individuals is an affiliate is or has been indebted to Azur since
the
beginning of its last fiscal year.
Legal
Proceedings
Xxxx
is
not a party to any pending legal proceedings nor is it aware that any proceeding
are threatened.
INVESTMENT
POLICIES AND POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The
following is a discussion of Azur’s investment policies and Azur’s policies with
respect to certain activities, including financing matters and conflicts
of
interest. These policies may be amended or revised from time to time at the
discretion of Azur’s Board of Directors without a vote of shareholders. Any
change to any of these policies would be made by Azur’s Board of Directors,
however, only after a review and analysis of that change, in light of then
existing business and other circumstances, and then only if, in the exercise
of
their business judgment, they believe that it is advisable to do so in Azur’s
and its shareholders' best interests. We cannot assure you that such investment
objectives will be attained.
Investments
in Real Estate or Interests in Real Estate
We
intend to focus on increasing our internal growth and we expect to continue
to
pursue targeted acquisitions and development of luxury residential, resort
and
hotel properties in attractive markets with strong economic and demographic
characteristics. In evaluating future investment, we seek assets with strong
future growth potential. We will also consider future opportunities to invest
in
other properties, including commercial properties that do not meet our usual
criteria on a case-by-case basis. In evaluating future investments in properties
other than luxury residential, resort and hotel properties, we seek properties
or transactions that have unique characteristics that present a compelling
case
for investment. Examples might include waterfront or beachfront properties,
properties near ski slopes or destination locations. We currently
expect to
incur additional debt in connection with any future acquisitions of real
estate.
66
We
expect to conduct substantially all of our investment activities through
subsidiaries. Our policy is to acquire assets for development and sale as
well
as current income generation. In general, our investment objectives are:
| • |
to
increase our value through increases in the cash flows and values
of our
properties; and
|
| • |
to
achieve long-term capital appreciation, and preserve and protect
the value
of our interest in our
properties.
|
There
are no limitations on the amount or percentage of our total assets that may
be
invested in any one property. Additionally, no limits have been set on the
concentration of investments in any one location or facility type.
Investments
in Mortgages
Since
our inception we have not made any investments in mortgages and do not currently
intend to engage in such investment, although we reserve the right to engage
in
this activity in the future.
Investments
in Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities and Other Issuers
Since
our inception we have not made any investments in the securities of other
persons or entities engaged in real estate activities and do not currently
intend to engage in such investment, although we reserve the right to engage
in
this activity in the future.
We
may
invest, including investments to obtain control of, other operating businesses
that we feel are strategic investments for accomplishing the goals of our
business plan or complement our existing investments. Our acquisition of
Airtek
Safety Limited and our proposed acquisition of A.V. I. Contractors are examples
of this philosophy.
Financing
Policies
As
disclosed elsewhere in this Information Statement/Proxy Statement/Prospectus,
we
have incurred substantial debt in order to fund operations and development
and
acquisition activities. Azur had total consolidated liabilities of approximately
$34.86 million
as of March 31, 2005.
Our
Board will consider a number of factors when evaluating our level of
indebtedness and when making decisions regarding the incurrence of indebtedness,
including the purchase price of properties to be developed or acquired with
debt
financing, the estimated market value of our properties upon refinancing
and the
ability of particular properties, as well as our company as a whole, to generate
cash flow to cover expected debt service.
Generally
speaking, although we may incur any of the forms of indebtedness described
below, initially, we intend to focus primarily on financing future growth
through the incurrence of secured debt on an individual property or a portfolio
of properties. We may incur debt in the form of purchase money obligations
to
the sellers of properties, or in the form of publicly or privately placed
debt
instruments, financing from banks, institutional investors, or other lenders,
any of which may be unsecured or may be secured by mortgages or other interests
in our properties. This indebtedness may be recourse, non-recourse or
cross-collateralized and, if recourse, that recourse may include our general
assets and, if non-recourse, may be limited to the particular property to
which
the indebtedness relates. In addition, we may invest in properties subject
to
existing loans secured by mortgages or similar liens on the properties, or
may
refinance properties acquired on a leveraged basis. We may use the proceeds
from
any borrowings for working capital, to purchase additional interests in
partnerships or joint ventures in which we participate, to refinance existing
indebtedness or to finance acquisitions, expansion,
redevelopment of existing properties or development of new properties. We
also
may incur indebtedness for other purposes when, in the opinion of our Board
or
management, it is advisable to do so.
Lending
Policies
We
do not have a policy limiting our ability to make loans to other persons.
We may
consider offering purchase money financing in connection with the sale of
properties where the provision of that financing will increase the value
to be
received by us for the property sold. We may make loans to joint ventures
in
which we or they participate or may participate in the future. We have not
engaged in any significant lending activities in the past nor do we intend
to in
the future.
Equity
Capital Policies
Our
Board has the authority, without further shareholder approval, to issue or
cause
our subsidiaries to issue, additional authorized common and preferred shares
or
otherwise raise capital, including through the issuance of senior securities,
in
any manner and on those terms and for that consideration it deems appropriate,
including in exchange for property. Existing shareholders will have no
preemptive right to common or preferred shares or other securities issued
in any
offering, and any offering might cause a dilution of a shareholder's investment
in us. Although we have no current plans to do so, we may in the future issue
common stock in connection with acquisitions. We also may issue securities
in
our subsidiaries in connection with acquisitions of property.
67
OUTSTANDING
STOCK AND APPRAISAL RIGHTS
Harvest
presently has only one class of voting stock outstanding, its common stock,
which has a par value of $0.0001. As of the Record Date, there were 300,000,000
shares authorized and [100,000] shares of common stock outstanding. Azur
held
50,336 shares of Common Stock, or approximately 50.4% of Harvest’s issued and
outstanding Common Stock.
Each
holder of Common Stock would normally be entitled to one vote in person or
by
proxy for each share of Common Stock in his or her name on the books of Harvest,
as of the Record Date, on any matter submitted to the vote of stockholders.
However, under Section 228(a) of the Delaware Corporation Law, any
action
which may be taken at a stockholders’ meeting may be taken by written consent of
the requisite number of stockholders required to take such action. The approval
of the Share Exchange, which includes the amendment to the Certificate of
Incorporation of Harvest to change its name to Azur International, Inc. upon
consummation of the Share Exchange, requires the affirmative vote or written
consent of a majority of Harvest’s outstanding Common Stock. On __________,
2005, the Board of Directors and the majority of stockholders, consented
to the
Share Exchange.
This
Information Statement is being provided for your information purposes only.
Harvest shareholders do not have appraisal rights under the Delaware Corporation
Law in connection with the Share Exchange.
Azur
presently has only one class of voting stock outstanding, namely its common
stock, $.001 par value. As of the Record Date, there were 200,000,000 shares
authorized and 48,614,369 shares of common stock outstanding.
Azur
is
soliciting the written consent of a majority of the shareholders of Azur
in
favor of the Share Exchange. This Proxy Statement also constitutes your notice
of the availability to you of appraisal rights pursuant to Chapter 92A of
the
Nevada Revised Statutes (the “NRS”).
Under
Chapter 92A of the NRS, dissenters’ rights are available to a corporation’s
stockholders in connection with certain mergers, consolidations and share
exchanges. An Azur stockholder who follows the procedures specified in NRS
Sections 92A.300 through 92A.500, inclusive, is entitled to dissent from
the
Share Exchange and obtain payment of the fair value of his or her shares
of Azur
common stock in lieu of receiving Harvest common stock in the Share Exchange.
In
order to exercise dissenters’ rights, a stockholder must demand and perfect the
rights in accordance with NRS Chapter 92A. The following summarizes provisions
of Chapter 92A of the NRS regarding dissenters’ rights that would be applicable
in connection with the merger. This discussion is qualified in its entirety
by
reference to NRS Sections 92A.300 to 92A.500, inclusive. Exhibit B to this
Information Statement/Proxy Statement/Prospectus contains a copy of NRS Sections
92A.300 through 92A.500, inclusive. If you fail to take any action required
by
Nevada
law, your rights to dissent in connection with the Share Exchange will be
waived
or terminated.
If
an
Azur stockholder elects to exercise his or her dissenters’ rights, the
stockholder must:
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•
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file
with Azur, prior to the vote seeking approval of the Share Exchange
Agreement, a written notice of the stockholder’s intent to demand payment
for his or her shares if the Share Exchange is effectuated; and
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|
•
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not
vote in favor of approving the Share Exchange Agreement.
|
A
beneficial stockholder of Azur stock may assert dissenters’ rights as to shares
held on the stockholder’s behalf only if the stockholder submits to Azur the
written consent of the stockholder of record to the dissent not later than
the
time the beneficial stockholder asserts dissenters’ rights and the beneficial
stockholder does so with respect to all shares of which he or she is the
beneficial stockholder or over which he or she has the power to direct the
vote.
A stockholder of record may assert dissenters’ rights as to fewer than all of
the shares registered in his or her name only if the stockholder dissents
with
respect to all shares beneficially owned by any one person and notifies Azur
in
writing of the name and address of each person on whose behalf the stockholder
of record asserts dissenters’ rights. The rights of a partial dissenter
under NRS Chapter 92A are determined as if the Azur shares as to which the
stockholder of record dissents and such stockholder’s other Azur shares were
registered in the names of different stockholders.
68
An
Azur
stockholder who satisfies the requirements of the two preceding paragraphs
is
referred to as a “dissenter.”
All notices of intent to demand dissenters’ rights should be addressed to Azur,
Attn: Corporate Secretary at 000 XX 0xx
Xxxxxx,
Xxxx Xxxxxxxxxx, Xxxxxxx 00000, before the vote is taken on the Share Exchange
Agreement at the special meeting of stockholders of Azur and should be executed
by, or on behalf of, the holder of record. Such demand reasonably must inform
Xxxx of the identity of the stockholder and that such stockholder intends
to
demand appraisal of such stockholder’s shares of Azur common stock. After the
effective time of the Share Exchange, any notices or demands relating to
dissenters’ rights should continue to be sent to Azur, Attn: Corporate Secretary
at 000 XX 0xx
Xxxxxx,
Xxxx Xxxxxxxxxx, Xxxxxxx 00000. Within 10 days after the effective time of
the
Share Exchange, the Azur will send notice of the effective time of the Share
Exchange and the availability of dissenters’ rights to each dissenter.
The notice will:
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•
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state
where the demand for payment must be sent and where and when certificates
for Azur shares are to be deposited;
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•
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supply
a form for demanding payment;
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•
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set
a date by which Azur must receive the demand for payment, which
may not be
less than 30 nor more than 60 days after the date the notice is
delivered;
and
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•
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be
accompanied by a copy of NRS Sections 92A.300 through 92A.500,
inclusive.
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•
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demand
payment;
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•
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certify
whether the stockholder or the beneficial owner on whose behalf
the
stockholder is dissenting, as the case may be, acquired beneficial
ownership of the shares before the date of the first announcement
to the
news media or to the stockholders of the terms of the Share Exchange;
and
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•
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deposit
his or her certificates in accordance with the terms of the dissenter’s
notice.
|
Azur
stockholders who do not demand payment or deposit their certificates where
required, each by the date set forth in the dissenter’s
notice, will not be entitled to demand payment for their shares under
Nevada
law governing dissenters’ rights.
Within
30
days after receipt of a demand for payment, Xxxx will pay each dissenter
who complied with NRS Section 92A.440 the amount that Azur estimates to be
the
fair value of the shares, plus accrued interest. The payment will be accompanied
by:
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•
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Azur’s
balance sheet as of the end of a fiscal year ending not more than
16
months before the date of payment, a statement of income for that
fiscal
year, a statement of changes in stockholders’ equity for that fiscal year
and the latest available interim financial statements, if any;
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•
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a
statement of Xxxx’s estimate of the fair value of the shares;
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•
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an
explanation of how the interest was calculated;
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•
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a
statement of the dissenter’s
rights to demand payment under NRS Section 92A.480; and
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•
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a
copy of NRS Sections 92A.300 through 92A.500, inclusive.
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69
Azur
may
elect to withhold payment from a dissenting stockholder if such stockholder
became the beneficial owner of the shares on or after the date of the first
announcement to the news media or to the stockholders of the proposed terms
of
the merger. To the extent Azur elects to withhold payment, after effectuating
the merger, it will estimate the fair value of the shares,
plus accrued
interest, and will offer to pay this amount to each dissenter
who agrees to accept it in full satisfaction of the stockholder’s demand. Azur
will send with its offer:
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•
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a
statement of Xxxx’s estimate of the fair value of the shares;
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•
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an
explanation of how the interest was calculated; and
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•
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a
statement of dissenters’ rights to demand payment pursuant to NRS Section
92A.480.
|
A
dissenter
may notify Azur in writing of the dissenter’s
own estimate of the fair value of the shares and interest due, and demand
payment of his or her estimate, less Azur’s fair value payment, or, in the case
where payment to an after-acquiring dissenter
has been withheld, reject the offer for payment made by the Azur and demand
payment of the fair value of the dissenter’s
shares and interest due if the dissenter
believes that the amount paid or offered is less than the fair value of the
dissenter’s
shares or that the interest due is incorrectly calculated. A dissenter
waives his right to demand such payment unless the dissenter
notifies Azur of his demand in writing within 30 days after Xxxx made or
offered
payment for the dissenter’s
shares.
If
a
demand for payment remains unsettled, Azur will commence a proceeding within
60
days after receiving the demand for payment and petition the court of proper
jurisdiction to determine the fair value of the shares of Azur common stock
and
accrued interest. If Azur does not commence the proceeding within the 60-day
period, it will be required to pay each dissenter
whose demand remains unsettled the amount demanded.
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•
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for
the amount, if any, by which the court finds the fair value of
the
dissenter’s
shares, plus interest, exceeds the amount paid by Xxxx; or
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•
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for
the fair value, plus accrued interest, of the dissenter’s
after-acquired shares for which Xxxx elected to withhold payment
pursuant
to Nevada
law.
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Under
NRS
Chapter 92A, the fair value of a dissenter’s
shares of Azur common stock means the value of the shares immediately before
the
consummation of the Share Exchange, excluding any appreciation or depreciation
in value in anticipation of the Share Exchange, unless excluding such
appreciation or depreciation would be inequitable.
The
court
will determine all of the costs of the proceeding, including the reasonable
compensation and expenses of any appraisers appointed by the court. The court
will assess the costs against Xxxx, except that the court may assess costs
against all or some of the dissenters, in the amounts the court finds equitable,
to the extent that the court finds the dissenters acted arbitrarily, vexatiously
or not in good faith in demanding payment. The court may also assess the
fees
and expenses of the counsel and experts for the respective parties, in amounts
the court finds equitable:
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•
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against
Xxxx and in favor of all dissenters if the court finds Xxxx did
not
substantially comply with NRS Sections 92A.300 through 92A.500,
inclusive;
or
|
If
the
court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that
the
fees for those services should not be assessed against Azur, the court may
award
to those counsel reasonable fees to be paid out of the amounts awarded to
the
dissenters who were benefited.
70
If
a
proceeding is commenced because Xxxx did not pay each dissenter
who complied with the procedures described by the Nevada
dissenters’ rights statute the amount Azur estimated to be the fair value of the
shares, plus accrued interest, within 30 days after receipt of a valid demand
for payment, the court may assess costs against Azur, except that the court
may
assess costs against all or some of the dissenters who are parties to the
proceeding, in amounts the court finds equitable, to the extent the court
finds
that such parties did not act in good faith in instituting the proceeding.
The
assessment of costs and fees, if any, may also be affected by Nevada
law governing offers of judgment.
The
foregoing summary of the rights of dissenting Azur stockholders does not
purport
to be a complete statement of such rights and the procedures to be followed
by
stockholders desiring to exercise any available dissenters’ rights. The
preservation and exercise of dissenters’ rights require strict adherence to NRS
Sections 92A.300 through 92A.500, inclusive, a copy of which is attached
as
Exhibit B to this Information Statement/Proxy Statement/Prospectus.
After
the
Share Exchange, Azur shareholders will become Harvest shareholders. The
following summary, which is not a complete statement of all differences between
right of the holders of Azur common stock and Harvest common stock, discusses
differences between Harvest’s Certificate of Incorporation, as amended, and
Bylaws and Azur’s Amended and Restated Articles of Incorporation and Bylaws, as
well as differences between the Delaware General Corporation Law and Chapter
78
of the Nevada Revised Statutes.
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Azur
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Harvest
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Capitalization
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The
authorized capital stock of Azur consists of:
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The
authorized capital stock of Harvest consists of:
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• 200,000,000
shares of common stock, par value $.0001
per share
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• 300,000,000
shares of Common Stock, par value $.0001;
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• 50,000,000
shares of preferred stock, par value $.0001 per share.
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• 5,000,000
shares of preferred stock, par value $0.0001.
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• No
shares of preferred stock have been designated. Series A
Convertible
Preferred Stock.
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• No
shares of preferred stock have been Designated.
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• 500,000
shares have been designated Series D Convertible Preferred
Stock.
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Azur
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Harvest
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Dividends
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• Azur
common stock is entitled to dividend rights pursuant to NRS 78.195
under
which the board of directors may determine in whole or in part,
the
preferences, limitations, and relative rights of each class or
series of
shares.
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• Except
for and subject to the dividend rights of the Preferred Stock,
Common
Stock is entitled to dividends (i) when, as and if declared
by the
Board of Directors, and (ii) ratably on assets and funds
of Harvest
in the event of a distribution upon liquidation, dissolution or
winding
up.
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• The
articles of incorporation permit the Azur board to issue at any
time and
from time to time one or more classes of preferred stock and to
determine
the designations, preferences conversion or other rights, voting
powers,
restrictions, limitations as to dividends, qualifications, or terms
and
conditions of redemption relating to the shares of each such series.
At
present no Azur preferred stock has been designated.
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• At
present no Harvest preferred stock has been
designated.
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71
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Azur
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Harvest
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Liquidation
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• In
the event of a voluntary or involuntary liquidation offAzur, all
assets
and funds of Azur remaining after the payment to holders of preferred
stock of the full amounts to which they are entitled, shall be
divided and
distributed among the holders of common stock according to their
respective shares
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• Subject
to the preferences, powers and rights of the holders of preferred
stock,
the holders of Harvest common stock shall be entitled, on a pro
rata
basis, to receive all remaining assets of Harvest in the event
of a
liquidation, dissolution or winding up of Harvest.
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Conversion
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| §Not applicable. | § Not applicable. | |
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Redemption
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• Not
applicable.
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•
Not applicable
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Power
To Call Shareholders/Stockholders Meetings
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• Special
meetings of the shareholders may be called by the President or
Secretary
at the request in writing of a majority of the directors or of
the
shareholders entitled to vote.
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• Special
meetings of the stockholders may be called by the Chairman of the
Board,
the President or the Board of Directors, or in their absence or
disability, by a Vice President and shall be immediately called
by the
President, or in his absence or disability by a Vice President
or the
Secretary, at the written request of the holders of not less than
one-tenth of the shares entitled to vote at the meeting.
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Board
Of Directors
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• The
number of directors shall be as fixed from time to time by resolution
of
the Board of Directors or stockholders.
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• The
number of directors constituting the Board of Directors shall be
not less
than three nor more than nine. Within such limits the number of
directors
shall be determined by resolution of the Board of Directors or
the
stockholders at the annual meeting.
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72
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Voting
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||
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• Each
holder of Azur common stock is entitled to one (1) vote
for each
share of stock held by such shareholder on each matter submitted
to vote
at a meeting of the shareholders.
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• Each
holder of record of Harvest common stock is entitled to one (1) vote
for each share of stock held by such shareholder on each matter
submitted
to vote at a meeting of the shareholders.
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Shareholders/Stockholders
Quorum
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• The
holders of record of a majority of the stock of Azur entitled to
vote
shall constitute a quorum.
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• The
holders of one-third of the voting power of all outstanding stock
entitled
to vote shall constitute a quorum.
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Action
By Written Consent Of
Shareholders/Stockholders
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• Any
action permitted or required to be taken at a meeting of the shareholders
may be taken without a meeting if a consent or consents in writing
shall
be signed by all of the shareholders of the capital stock entitled
to
vote.
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• Any
action may be taken without a meeting if a consent or consents
in writing
shall be signed by the holders of the outstanding stock having
not less
than the minimum number of votes that would be necessary to authorize
such
action.
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Shareholder
Approval of Certain Business Combinations
Under
Delaware and Nevada law, “business combinations” or “combinations” by
corporations with “interested shareholders” are subject to a moratorium of three
years unless specified conditions are met. The prohibited transactions include
a
merger with, disposition of assets to, or the issuance of stock to, the
interested shareholder, or specified transactions that have the effect of
increasing the proportionate amount of the outstanding securities held by
the
interested shareholders and in the case of Nevada law, the adoption of a
plan or
proposal for the liquidation or dissolution of the corporation. Under Delaware
and Nevada law, interested shareholders are those shareholders who own 15%
and
10% of the voting stock of a corporation, respectively. Interested shareholders
may avoid the prohibitions against significant transactions with corporations
in
Delaware and Nevada under the following circumstances:
|
Delaware
|
Nevada
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• Prior
to becoming an interested stockholder, the board of directors approves
the
transaction or transactions by which the stockholder becomes an
interested
stockholder;
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• Prior
to becoming an interested shareholder, the board of directors approves
the
transaction or transactions by which the shareholder becomes an
interested
shareholder.
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• the
interested shareholder owns at least 85% of the voting stock, excluding
specified shares, upon consummation of the transaction that results
in the
stockholder becoming an interested stockholder; or
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• if
at, or subsequent to, the time the stockholder becomes an interested
stockholder, the board of directors and at least 66 2/3%
of the
stockholders, excluding shares held by the interested stockholder,
approve
the transaction.
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73
The
validity of the common stock to be issued in the Share Exchange will be passed
upon by Xxxxx Ofsink, LLC, New York, New York.
CERTAIN
SECURITIES LAWS CONSIDERATIONS
The common stock to be issued in the Share Exchange will be registered under
the
Securities Act of 1933, as amended (the “Securities Act”). However, any person
who received Harvest or Azur shares in a private transaction during a period
of
time when such company was considered a “non-operating, blank-check” company
will not be able to sell their shares without an effective registration
statement covering the resale of those shares. If and when it is determined
that, over a designated period of time, Azur would have been considered a
“non-operating company, blank check,” Harvest has agreed to register those
shares purchased or received shares during that period of time.
Shares that were issued when Azur was not a “non-operating, blank check” company
will be freely transferable under the Securities Act, except for common stock
issued to any person who is deemed to be an affiliate of Azur. Persons who
may
be deemed to be affiliates include individuals or entities that control,
are
controlled by, or are under common control with Azur and include officers
and
directors, as well as principal stockholders.
Azur’s affiliates may not sell their Harvest common stock acquired in the Share
Exchange, except pursuant to:
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•
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an
effective registration statement under the Securities Act covering
the
resale of those shares;
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||
|
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•
|
under
paragraph (d) of Rule 145 under the Securities Act;
or
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||
|
•
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other
applicable exemption under the Securities
Act.
|
EXPERTS
The audited consolidated balance sheet of New Harvest Capital Corporation
as of
April 30, 2005 and the related consolidated statement of operations,
changes in stockholders’ equity, and cash flows for the year ended April 30,
2005 included in this Information Statement/ Proxy Statement/ Prospectus
and
elsewhere in the registration statement have been audited by Xxxx Xxxx &
Co., P.A., independent auditors as indicated in their report with respect
thereto, and are included herein in reliance upon the authority of said firm
as
experts in giving such reports.
The audited consolidated balance sheet of New Harvest Capital Corporation
as of
April 30, 2004 and the related consolidated statement of operations,
changes in stockholders’ equity, and cash flows for the year ended April 30,
2004 included in this Information Statement/ Proxy Statement/ Prospectus
and
elsewhere in the registration statement have been audited by Xxxxxxxxx, Xxxxx
Xxxxxxx LLP, independent certified public accountants as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving such reports.
The audited balance sheet of Azur International, Inc. as of December 31,
2004, and the related statements of operations and comprehensive loss, changes
in stockholders’ equity and cash flows for the years ended December 31, 2004 and
2003 included in this Information Statement/ Proxy Statement/ Prospectus
have
been audited by Xxxx Xxxx & Co., P.A., independent auditors, as stated in
their report appearing herein, and are included in reliance upon the authority
of said firm as experts in accounting and auditing.
Harvest files annual, quarterly and special reports, proxy statements and
other
information with the Securities and Exchanges Commission. You may read and
copy
any reports, statements or other information that we file with the Commission
at
the Public Reference Room of the SEC, 000 Xxxxx Xxxxxx, X.X., Xxxxxxxxxx,
X.X.
00000 or by calling the SEC at (800) SEC-0330. These Commission filings
are
also available to the public from commercial document retrieval services
and at
the Internet World Wide Web site. The address of the SEC Website is xxxx://xxx.xxx.xxx.
74
Harvest has filed a registration statement on Form S-4 under the Securities Act with the Securities and Exchange Commission with respect to Harvest’s common stock to be issued to Azur shareholders in the Share Exchange. This Information Statement/ Proxy Statement/ Prospectus constitutes the prospectus of Harvest filed as part of the registration statement. This Information Statement/ Proxy Statement/ Prospectus does not contain all of the information set forth in the registration statement because certain parts of the registration statement are omitted in accordance with the rules and regulations of the SEC. For further information, we refer you to the registration statement, including its exhibits and schedules. Statements contained in this Information Statement/ Proxy Statement/ Prospectus and any accompanying supplement about the provisions or contents of any contract, agreement or document referred to are not necessarily complete. For each of these contracts, agreements or documents filed as an exhibit to the registration statement, we refer you to the actual exhibit for a more complete description of the matters involved. You should not assume that the information in this Information Statement/ Proxy Statement/ Prospectus is accurate as of any date other than the date on the front of those documents. We do not intend to distribute annual reports or audited financial statements to our shareholders. This information may be found in our filings with the Securities and Exchange Commission.
THIS INFORMATION STATEMENT/ PROXY STATEMENT/ PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES
OFFERED BY THIS INFORMATION STATEMENT/ PROXY STATEMENT/ PROSPECTUS IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO
MAKE
SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS INFORMATION
STATEMENT/ PROXY STATEMENT/ PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
PURSUANT TO THIS INFORMATION STATEMENT/ PROXY STATEMENT/ PROSPECTUS SHALL,
UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THERE HAS BEEN NO CHANGE
IN THE
INFORMATION SET FORTH OR INCORPORATED INTO THIS INFORMATION STATEMENT/
PROXY STATEMENT/ PROSPECTUS BY REFERENCE OR IN OUR AFFAIRS SINCE THE DATE
OF
THIS INFORMATION STATEMENT/ PROXY STATEMENT/ PROSPECTUS.
FOR
SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
may
be permitted to directors, officers and controlling persons of Harvest pursuant
to the foregoing provisions or otherwise, Harvest has been advised that,
in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in such act, and is therefore unenforceable.
75
HARVEST
FINANCIAL STATEMENTS
TABLE
OF CONTENTS
|
Page
|
||||
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-1
|
|||
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-2
|
|||
|
BALANCE
SHEET
|
F-3
|
|||
|
STATEMENTS
OF OPERATIONS
|
F-4
|
|||
|
STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY
|
F-5
|
|||
|
STATEMENTS
OF CASH FLOWS
|
F-6
|
|||
|
NOTES
TO FINANCIAL STATEMENTS
|
F-7
|
|||
76
REPORT
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
XXXX
& COMPANY, P.A.
Certified
Public Accountants
0000
Xxxxxxxxxx Xxxxx, Xxxxx 000
Coral
Springs, Florida 33071
Board
of
Directors and Stockholders
New
Harvest Capital Corporation
We
have
audited the accompanying balance sheet of New Harvest Capital Corporation
as of
April 30, 2005 and the related statements of operations, stockholders' equity
(deficit) and cash flows for the year than 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 audits. The financial
statements of New Harvest Capital Corporation as of April 30, 2004, were
audited
by other auditors whose report dated August 6, 2004, expressed an unqualified
opinion on those statements.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the
overall financial statement presentation. We believe that our audits provide
a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of New Harvest Capital Corporation
as
of April 30, 2005 and the results of their operations and their cash flows
for
the year than ended, in conformity with U.S. generally accepted accounting
principles.
/s/
XXXX
& COMPANY, P.A.
Coral
Springs, Florida
July
12,
2005
F-1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the
Board of Directors
New
Harvest Capital Corporation
We
have
audited the accompanying statements of operations, shareholders' equity and
cash
flows for the year ended April 30, 2004. 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 standards of the Public Company
Accounting Oversight Board (United States). 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 results of operations and cash flows of New Harvest
Capital Corporation for the year ended April 30, 2004 in conformity
with
United States generally accepted accounting principles.
/s/
XXXXXXXXX XXXXX XXXXXXX LLP
XXXXXXXXX
XXXXX XXXXXXX LLP
New
York,
New York
August
6,
2004
F-2
|
NEW
HARVEST CAPITAL CORPORATION
|
|||||
|
BALANCE
SHEET
|
|||||
|
April
30, 2005
|
|
ASSETS
|
||||
|
Current
Assets
|
||||
|
Cash
and Cash Equivalents
|
$
|
139,556
|
||
|
TOTAL
ASSETS
|
$
|
139,556
|
||
|
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||
|
Current
Liabilities
|
||||
|
Accounts
Payable and Accrued Expenses
|
$
|
1,800
|
||
|
Total
Current Liabilities
|
1,800
|
|||
|
Stockholders'
Equity
|
||||
|
Preferred
Stock - $.0001 par value, 5,000,000 shares
|
||||
|
authorized;
no shares issued and outstanding
|
-
|
|||
|
Common
Stock - $.0001 par value, 300,000,000 shares
|
||||
|
authorized;
shares issued and outstanding 136,959,999
|
13,696
|
|||
|
Additional
Paid in Capital
|
592,984
|
|||
|
Accumulated
Deficit
|
(468,924
|
)
|
||
|
Total
Stockholders' Equity
|
137,756
|
|||
|
TOTAL
LIABILITIES & STOCKHOLDERS' EQUITY
|
$
|
139,556
|
||
|
The
accompanying notes are an integral part of the financial
statements.
|
||||
F-3
|
NEW
HARVEST CAPITAL CORPORATION
|
|||||||
|
STATEMENTS
OF OPERATIONS
|
|||||||
|
For
the Years Ended April 30, 2005 and
2004
|
|
2005
|
2004
|
||||||
|
(Audited)
|
(Audited)
|
||||||
|
Revenues
|
|||||||
|
Interest
|
$
|
798
|
$
|
746
|
|||
|
Operating
Expenses
|
|||||||
|
General
& Administrative Expenses
|
9,470
|
38,664
|
|||||
|
Total
Operating Expenses
|
9,470
|
38,664
|
|||||
|
Net
Income (Loss)
|
$
|
(8,672
|
)
|
$
|
(37,918
|
)
|
|
|
Net
loss per weighted average number of
|
|||||||
|
Common
Shares
|
$
|
-
|
$
|
-
|
|||
|
Weighted
average number
|
|||||||
|
of
Common Shares outstanding
|
130,659,999
|
128,559,999
|
|||||
|
The
accompanying notes are an integral part of the financial
statements.
|
|||||||
F-4
|
NEW
HARVEST CAPITAL CORPORATION
|
|||||||
|
STATEMENTS
OF CHANGES IN STOCKHOLDERS' EQUITY
|
|||||||
|
For
the years ended April 30, 2005 and 2004
|
|||||||
|
Preferred
|
Preferred
|
Common
|
Common
|
Additional
|
Accumulated
|
||||||||||||||
|
Shares
|
Stock
|
Shares
|
Stock
|
Paid-In
Capital
|
Deficit
|
||||||||||||||
|
Balance
at May 1, 2003
|
-
|
$
|
-
|
128,559,999
|
$
|
12,856
|
$
|
574,324
|
$
|
(422,334
|
)
|
||||||||
|
Net
Loss for the Year
|
(37,918
|
)
|
|||||||||||||||||
|
Balance
at April 30, 2004
|
-
|
-
|
128,559,999
|
12,856
|
574,324
|
(460,252
|
)
|
||||||||||||
|
Issuance
of Common Stock for Services
|
8,400,000
|
840
|
18,660
|
||||||||||||||||
|
Net
Loss for the Year
|
(8,672
|
)
|
|||||||||||||||||
|
Balance
at April 30, 2005
|
-
|
$
|
-
|
136,959,999
|
$
|
13,696
|
$
|
592,984
|
$
|
(468,924
|
)
|
||||||||
|
The
accompanying notes are an integral part of the financial
statements.
|
|||||||||||||||||||
F-5
|
NEW
HARVEST CAPITAL CORPORATION
|
|||||||||
|
STATEMENT
OF CASH FLOWS
|
|||||||||
|
For
the Years Ended April 30, 2005 and 2004
|
|||||||||
|
2005
|
2004
|
||||||
|
(Audited)
|
(Audited)
|
||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
|
Net Loss
|
$
|
(8,672
|
)
|
$
|
(37,918
|
)
|
|
|
Adjustments
to Reconcile Net Loss to Net Cash
|
|||||||
|
Used
for Operating Activities:
|
|||||||
|
Increase
(Decrease) in Accounts Payable & Accruals
|
(1,200
|
)
|
16,285
|
||||
|
Net
Cash Used for Operations
|
(9,872
|
)
|
(21,633
|
)
|
|||
|
Net Decrease
in Cash
|
(9,872
|
)
|
(21,633
|
)
|
|||
|
Cash
at Beginning of Year
|
149,428
|
171,061
|
|||||
|
Cash
at End of Year
|
$
|
139,556
|
$
|
149,428
|
|||
|
SCHEDULE
OF NONCASH ACTIVITIES:
|
|||||||
|
Common
Stock Issued for Services
|
$
|
19,500
|
|||||
|
The
accompanying notes are an integral part of the financial
statements.
|
|||||||
F-6
NEW
HARVEST CAPITAL CORPORATION
NOTES
TO FINANCIAL
STATEMENTS
April
30, 2005 and 2004
NOTE
1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
New
Harvest Capital Corporation was organized under the laws of the state of
Delaware on August 29, 1985. The Company is currently engaged in the activity
of
searching for and investigating business opportunities (see Note 2-Subsequent
Events).
Basis
of Accounting
The
Company utilizes the accrual method of accounting, whereby revenue is recognized
when earned and expenses when incurred.
Use
of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Concentration
of Risk
The
cash
balances are currently in excess of Federal insured limits of $ 100,000.
The
Company has not experienced any losses in such accounts and the risk is believed
to be minimal.
Income
Taxes
The
Company accounts for income taxes under the accrual method established by
Statement of Financial Accounting Standards (SFAS) No. 109, which requires
recognition of deferred tax assets and liabilities for the expected future
tax
consequences and events that have been included in the financial statements
or
tax returns. Under this method, deferred tax assets and liabilities are
determined based on assets and liabilities using enacted rates for the year
in
which the differences are expected to reverse.
Stock
Based Compensation
The
Company has issued shares of its common stock for services rendered and valued
at estimated fair market value.
Earnings
Per Share
Statement
of Financial Accounting Standards No. 128, “Earnings Per Share”, which the
Company adopted effective November 1, 1998, establishes standards for computing
and presenting earnings per share. The standard requires the presentation
of
basic EPS and diluted EPS. Basic EPS is calculated by dividing income available
to common shareholders by the weighted average number of common shares
outstanding during the period.
Accounting
Pronouncements
Management
does not believe that any of the recently issued accounting pronouncements
will
be applicable to the Company.
NOTE
2
SUBSEQUENT EVENTS
On
June
1, 2005, pursuant to a Stock Purchase Agreement, Azur International, Inc.
acquired 68,960,000 shares of the Company’s common stock. This constituted
approximately 50.4% of the Company’s total issued and outstanding common
shares.
F-7
AZUR
FINANCIAL STATEMENTS
TABLE
OF CONTENTS
|
Page
|
||||
|
INDEPENDENT
AUDITOR’S REPORT
|
F-8
|
|||
|
CONSOLIDATED
BALANCE SHEET
|
F-9
|
|||
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
F-11
|
|||
|
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
|
F-12
|
|||
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
F-13
|
|||
|
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
|
F-15
|
|||
|
CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 2005 (UNAUDITED)
|
F-23
|
|||
|
CONSOLIDATED
STATEMENTS OF OPERATIONS FOR THREE MONTHS ENDED MARCH 31, 2005
AND MARCH
31, 2004 (UNAUDITED)
|
F-25
|
|||
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31,
2005 AND
MARCH 31, 2004 (UNAUDITED)
|
F-26
|
|||
|
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
|
F-28
|
|||
75
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
XXXX
& COMPANY, P.A.
Certified
Public Accountants
0000
Xxxxxxxxxx Xxxxx, Xxxxx 000
Coral
Springs, Florida 33071
Board
of
Directors and Stockholders
Azur
International, Inc. and subsidiaries
Fort
Lauderdale, Florida
We
have
audited the accompanying consolidated balance sheet of Azur International,
Inc.
and subsidiaries as of December 31, 2004 and the related consolidated statements
of operations, stockholders' equity (deficit) and cash flows for the years
ended
December 31, 2004 and 2003. These financial statements are the responsibility
of
the Company's management. Our responsibility is to express an opinion on
these
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that
we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a
test basis, evidence supporting the amounts and disclosures in the consolidated
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the
overall financial statement presentation. We believe that our audits provide
a
reasonable basis for our opinion.
In
our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Azur International, Inc. and
subsidiaries as of December 31, 2004 and the results of their operations
and
their cash flows for the years ended December 31, 2004 and 2003, in conformity
with U.S. generally accepted accounting principles.
/s/ XXXX
& COMPANY, P.A.
Coral
Springs, Florida
April
22,
2005
F-8
AZUR INTERNATIONAL, INC. &
SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 2004
|
ASSETS
|
||||
|
Current
Assets
|
||||
|
Cash
and Cash Equivalents
|
$
|
611,763
|
||
|
Accounts
Receivable
|
37,407
|
|||
|
Inventory
|
65,441
|
|||
|
Prepaid
Expenses
|
135,451
|
|||
|
Other
Receivables
|
41,003
|
|||
|
Total
Current Assets
|
891,065
|
|||
|
Property,
Plant & Equipment (net of accumulated depreciation of
$30,432)
|
14,151,198
|
|||
|
Other
Assets
|
||||
|
Loan
Acquisition Costs (net of amortization of $61,743.93)
|
253,226
|
|||
|
Investments
in Real Estate
|
240,000
|
|||
|
Construction
Deposits
|
842,500
|
|||
|
Goodwill
|
152,172
|
|||
|
Total
Other Assets
|
1,487,898
|
|||
|
TOTAL
ASSETS
|
$
|
16,530,161
|
||
F-9
AZUR
INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
December
31, 2004
|
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||
|
Current
Liabilities
|
||||
|
Accounts
Payable and Accrued Expenses
|
$
|
416,333
|
||
|
Current
Portion-Notes and Mortgages Payable
|
3,124,783
|
|||
|
Current
Portion-Capital Lease Obligation
|
49,422
|
|||
|
Total
Current Liabilities
|
3,590,538
|
|||
|
Long-Term
Debt
|
||||
|
Notes
and Mortgages Payable
|
10,656,549
|
|||
|
Capital
Lease Obligations
|
75,783
|
|||
|
Liabilities
Subject to Compromise from Bankruptcy
|
752,971
|
|||
|
Total
Long-Term Debt
|
11,485,303
|
|||
|
Other
Liabilities
|
||||
|
Real
Estate Deposits Held
|
842,500
|
|||
|
Total
Other Liabilities
|
842,500
|
|||
|
Total
Liabilities
|
15,918,341
|
|||
|
Stockholders'
Equity
|
||||
|
Common
Stock - $.01 par value, 200,000,000 shares authorized;
shares issued and outstanding 39,225,600
|
392,256 | |||
|
Non
Controlling Interest in Subsidiary
|
890,337
|
|||
|
Additional
Paid in Capital
|
2,037,884
|
|||
|
Accumulated
Deficit
|
(2,708,657
|
)
|
||
|
Total
Stockholders' Equity
|
611,820
|
|||
|
TOTAL
LIABILITIES & STOCKHOLDERS' EQUITY
|
$
|
16,530,161
|
||
|
|
||||
The
accompanying notes are an integral part of the consolidated financial
statements.
F-10
AZUR
INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
For
the
Years Ended December 31, 2004 and 2003
|
2004
|
2003
|
||||||
|
Revenues
|
|
||||||
|
Sales
|
$
|
229,496
|
$
|
-
|
|||
|
Rents
|
210,693
|
-
|
|||||
|
Total
Revenue
|
440,189
|
-
|
|||||
|
|
|||||||
|
Cost
of Sales
|
33,379
|
-
|
|||||
|
Gross
Income
|
406,810
|
-
|
|||||
|
|
|||||||
|
Operating
Expenses
|
|
||||||
|
General
& Administrative Expenses
|
1,830,761
|
-
|
|||||
|
Total
Operating Expenses
|
1,830,761
|
-
|
|||||
|
|
|||||||
|
Net
Income (Loss) Before
|
|
||||||
|
Other
Income/(Expense)
|
(1,423,952
|
)
|
-
|
||||
|
|
|||||||
|
Other
Income and (Expense)
|
|
||||||
|
Other
Income
|
230
|
-
|
|||||
|
Other
Expense
|
(452,925
|
)
|
-
|
||||
|
Total
Other Income and (Expense)
|
(452,695
|
)
|
-
|
||||
|
|
|||||||
|
Net
Income (Loss) from Continuing Operations
|
(1,876,647
|
)
|
-
|
||||
|
|
|||||||
|
Net
Income (Loss) before adjustments for minority interest
|
(1,876,647
|
)
|
-
|
||||
|
|
|||||||
|
Non
Controlling Interest in Subsidiary
|
(150,843
|
)
|
-
|
||||
|
|
|||||||
|
Income
(Loss) before Provision for Income Taxes
|
(1,735,804
|
)
|
-
|
||||
|
|
|||||||
|
Provision
for Income Taxes
|
-
|
-
|
|||||
|
|
|||||||
|
Net
Income (Loss)
|
$
|
(1,725,804
|
)
|
$
|
-
|
||
The accompanying notes are an integral part of the consolidated financial statements.
F-11
AZUR
INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
As
of
December 31, 2004
|
Common
|
Common
|
Additional
|
Accumulated
|
||||||||||
|
Shares
|
Stock
|
Paid-In
Capital
|
Deficit
|
||||||||||
|
Balance
at 12/31/03
|
369,086
|
$
|
3,691
|
$
|
226,191
|
$
|
(982,853
|
)
|
|||||
|
Net
Loss for
|
|||||||||||||
|
the
Year Ended 12/31/04
|
(1,725,804
|
)
|
|||||||||||
|
Issuance
of Common Stock for Cash
|
5,435,000
|
54,350
|
1,120,650
|
||||||||||
|
Issuance
of Common Stock for Services
|
21,305,841
|
213,058
|
|||||||||||
|
Issuance
of Common Stock for Acquisitions
|
12,115,677
|
121,157
|
691,043
|
||||||||||
|
Balance
12/31/04
|
39,225,604
|
$
|
392,256
|
$
|
2,037,884
|
$
|
(2,708,657
|
)
|
|||||
The
accompanying notes are an integral part of the consolidated financial
statements.
F-12
AZUR
INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
For
the
Years Ended December 31, 2004 and 2003
|
2004
|
2003
|
||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
|
Net
Income (Loss)
|
$
|
(1,725,804
|
)
|
$
|
-
|
||
|
Adjustments
to Reconcile Income (Loss) to Net Cash
|
|||||||
|
Provided
(Used) for Operating Activities:
|
|||||||
|
Depreciation
and Amortization
|
80,759
|
-
|
|||||
|
Services
paid by Isuance of Common Stock
|
213,058
|
-
|
|||||
|
Minority
Shareholder Loss
|
(150,843
|
)
|
|||||
|
Changes
in Assets and Liabilities:
|
|||||||
|
(Increase)
Decrease in Accounts Receivable
|
(37,406
|
)
|
-
|
||||
|
(Increase)
Decrease in Inventory
|
11,102
|
-
|
|||||
|
(Increase)
Decrease in Prepaid Expenses
|
(61,157
|
)
|
-
|
||||
|
(Increase)
Decrease in Other Assets
|
182,828
|
-
|
|||||
|
Increase
(Decrease) in Other Current Liabilities
|
(24,957
|
)
|
-
|
||||
|
Increase
(Decrease) in Accounts Payable & Accruals
|
357,426
|
-
|
|||||
|
Net
Cash Provided (Used) In Operations
|
(1,154,994
|
)
|
$
|
-
|
|||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
|
(Increase)
in Building in Progress
|
(43,688
|
)
|
-
|
||||
|
(Increase)
in Real Estate Holdings
|
(10,775
|
)
|
-
|
||||
|
(Increase)
in Real Estate Deposits
|
(50,000
|
)
|
-
|
||||
|
(Purchase)
of Fixed Assets
|
(2,252
|
)
|
-
|
||||
|
Cash
acquired on Acquisitions
|
3,907
|
-
|
|||||
|
Net
Cash Provided (Used) in Investing Activities:
|
(102,808
|
)
|
-
|
||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
|
Proceeds
from Sale of Common Stock
|
1,175,000
|
-
|
|||||
|
Minority
Shareholder Contributions
|
541,527
|
||||||
|
Proceeds
From Notes and LoansPayable
|
1,295,000
|
-
|
|||||
|
Payments
on Capital Leases
|
(4,319
|
)
|
-
|
||||
|
Payment
of Notes and Loans Payable
|
(1,137,643
|
)
|
-
|
||||
|
Net
Cash Provided (Used) in Financing Activities:
|
1,869,565
|
-
|
|||||
|
Net
Increae (Decrease) in Cash
|
611,763
|
-
|
|||||
|
Beginning
Cash
|
-
|
-
|
|||||
|
Ending
Cash
|
$
|
611,763
|
$
|
-
|
|||
F-13
AZUR
INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
For
the
Years Ended December 31, 2004 and 2003
|
SCHEDULE
OF NONCASH ACTIVITIES:
|
|||||||
|
Common
Stock Issued for Services
|
$
|
213,058
|
-
|
||||
|
Common
Stock Issued for Acquisitions
|
812,200
|
-
|
|||||
|
Property
& equipment valued at $ 8,329,282 was acquired through
|
|||||||
|
issuance
of debt and the assumption of capital leases and notes
payable
|
|||||||
|
of
$ 8,329,282.
|
|||||||
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|||||||
|
Interest
Expense Paid
|
389,368
|
-
|
|||||
|
Income
Taxes Paid
|
-
|
-
|
The
accompanying notes are an integral part of the consolidated financial
statements.
F-14
AZUR
INTERNATIONAL, INC. &
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2004 and 2003
NOTE
1 -
SIGNIFICANT ACCOUNTING POLICIES
A.
BACKGROUND
The
Company was originally incorporated in the State of Nevada in June 1997 under
the name of Union Chemical Corporation in order to be a partner in a joint
venture that was never consummated. In June 1999, the Company changed its
name
to Xxxxxxxxx00.xxx, Inc. as it acquired an Arizona corporation, Xxxxxxxxx00.xxx.
The Company subsequently changed its name to the current name of Azur
International, Inc.
In
November of 2001 the Company entered bankruptcy under chapter 7 of the
bankruptcy laws in the United States Bankruptcy Court for the district of
Arizona. It emerged from bankruptcy in July 2003.
On
February 9, 2004 Azur International, Inc. acquired Azur Development Corp.
(formally known as Xxxxx Bay Development Corp) in a stock for stock
transaction.
The
Company is in the business of developing and marketing luxury residential
and
resort properties. A subsidiary, The Grand Shell Landing, Inc. operates an
18-hole golf course, pro shop and restaurant. At the present time, The Grand
Shell Landing, Inc. generates golf-related revenues only; there is no real
estate activity.
B.
PRINCIPLES OF CONSOLIDATION
The
consolidated financial statements include accounts of Azur International,
Inc.
and its wholly-owned subsidiaries. All material transactions have been
eliminated. The following is a list of subsidiaries and their respective
controlling interests:
Rio
Vista - 53%
48
Xxxxxxxxx. LLC - 63%
Azur
Development Corp. - 100%
The
Grand
Shell Landing, Inc. - 100%
C.
REAL
ESTATE HOLDINGS
Real
estate investments are stated at the lower of cost or market. Acquisition
costs
are allocated to respective properties based on appraisals of the various
properties acquired in the acquisition.
D.
REVENUE RECOGNITION
Real
Property: Revenue is recognized under the full accrual method of accounting
upon
the completed sale of real property held for development and sale. All costs
incurred directly or indirectly in acquiring and developing the real property
are capitalized. Revenues for sales and rentals generated from The Grand
Shell
Landing, Inc. are also recognized under the full accrual method of
accounting.
E.
USE OF
ESTIMATES
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements
and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
F-15
AZUR
INTERNATIONAL, INC. &
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2004 and 2003
F.
CASH
AND CASH EQUIVALENTS
Cash
and
cash equivalents include cash on hand; cash in banks, and any highly liquid
investments with maturity of three months or less at the time of purchase.
The
Company and its subsidiaries maintain cash and cash equivalent balances at
several financial institutions, which are insured by the Federal Deposit
Insurance Corporation up to $100,000. At times, the cash balances may exceed
federally insured limits. We have not experienced any losses in such accounts
and we believe the risk related to these deposits is minimal.
G.
PROPERTY AND EQUIPMENT
Property
and equipment are carried at cost and are being depreciated over their useful
lives using straight line depreciation methods.
The
estimated useful lives of significant assets are as follows:
| Equipment | 5 years | |
| Land Improvements | 20 years | |
| Buildings | 40 years |
H.
LEASES
Leases
that transfer substantially all of the risks and benefits of ownership are
accounted for as capital leases. Other leases are operating leases that are
expensed over the terms of the lease using the straight line method. Capital
leases are included in property and equipment and are amortized using the
same
methods as used for depreciation of property and equipment
I.
CONSTRUCTION DEPOSITS
Construction
deposits amounting to $842,500 for the purchase of units in the 48 Xxxxxxxxx
project are held in escrow with the Escrow Agent, Xxxxxx & Xxxx, P.A., as
per Escrow Agreement dated August 25, 2004.
J.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
An
allowance for doubtful accounts is estimated and recorded based on the Company’s
historical bad debt experience. Management believes that all accounts receivable
will be collected within one year; therefore, an allowance for doubtful accounts
is not necessary.
K.
INVENTORY
Inventory
is stated at the lower of cost or market with cost determined using the
first-in, first-out method.
L.
EARNINGS/LOSS PER SHARE
Primary
earnings per common share are computed by dividing the net income (loss)
by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the quarter and year-to-date. The number of shares used
for
the year ended December 31, 2004 was 23,462,165 and the resulting loss per
share
was $0.07.
M.
INCOME
TAXES
In
February 1992, the Financial Accounting Standards Board issued Statement
on
Financial Accounting Standards 109 of "Accounting for Income Taxes." Under
Statement 109, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. The Company has net operating losses (NOL's)
of
approximately $ 2,708,657.
|
Year
ending
|
||
|
December
31, 2004
|
December
31, 2003
|
|
| Statutory federal income tax rate |
34%
|
34%
|
| Valuation allowance |
(34)
|
(34)
|
| Effective tax rate |
-%
|
-%
|
F-16
AZUR
INTERNATIONAL, INC. &
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2004 and 2003
NOTE
2 -
RELATED PARTY TRANSACTIONS
Rio
Vista, a subsidiary of Azur Development Corp. has mortgages with banks
on
property owned that were financed in the individual name of a principal of
the
company. There are also bank accounts that are titled in the name of the
same
principal that belong to Rio Vista.
A
major
shareholder of Azur International is also a minority owner in both Rio Vista
and
48 Xxxxxxxxx, LLC.
An
officer of the company is currently using a property owned by the corporation
personally.
NOTE
3 -
EMPLOYMENT/CONSULTING AGREEMENTS
The
following employment and consulting agreements are in effect as of December
31st,
2004:
| A. |
The
Chief Executive Officer, who also serves as the chairman of the
Board of
Directors of the Company, has a consulting agreement with a 36
month term,
commencing on February 1, 2004. His compensation for the duration
of the
agreement is as follows:
|
Year
1 -
500,000 restricted shares of Azur International common stock at
$.01.
Year
2 -
$360,000 per year, plus 500,000 restricted shares of Azur International common
stock at $.01.
Year
3 -
$480,000 per year, plus 500,000 restricted shares of Azur International stock
at
$.01.
Under
this Consulting Agreement, the Corporation provides said executive with an
automobile.
| B. |
The
President of the Company, who also serves on the Board of Directors,
has
an employment agreement with a term of 3 years, commencing on September
1,
2004. His compensation, beginning on January 1, 2005, is $240,000
per
annum. He also received a signing bonus in the form of 166,666
restricted
shares of the Company’s common stock valued at $3.00 per share. The
Signing Bonus was paid sixty days from the effective date of the
contract,
which was September 1, 2004.
|
| C. |
The
Vice President of Operations of the Company has an employment agreement
with a term of 3 years, commencing on September 1, 2004. His compensation,
beginning on January 1, 2005, is $120,000 per annum. He also received
a
signing bonus in the form of 50,000 restricted shares of the Company’s
common stock valued at $3.00 per share. The Signing Bonus was paid
sixty
days from the effective date of the contract, which was September
1,
2004.
|
| D. |
The
General Counsel & Corporate Secretary has and Employment Agreement
with a term of 1 year, commencing on April 15, 2004. After the
initial
term, the agreement shall renew automatically for additional 1
year
periods, unless terminated by either party. His compensation is
$120,000
per annum, to be increased at a rate of no less than 10% per
annum.
|
| E. |
The
Vice President of Development, who is also the President of the
Azur
Development subsidiary, has a Consulting Agreement with a term
of 12
months, commencing on November 1, 2004. After the initial term,
the
agreement shall renew automatically for additional 12 month terms,
unless
terminated by either party. His compensation is 10% of the net
profits of
any developments that he initiates. He shall be paid 50% in cash
payment,
and 50% in restricted common shares of Azur at $.01.
|
| F. |
The
CEO of Azur Development UK, who has been engaged to develop
home building
and commercial
development projects, as well as oversee any European projects,
has a
Consulting agreement
with a term of 3 years, commencing on October 5, 2004. His
compensation is
a base fee
of 3,000,000 of shares of common stock at
$.01.
|
F-17
AZUR
INTERNATIONAL, INC. &
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2004 and 2003
NOTE
3 -
EMPLOYMENT/CONSULTING AGREEMENTS (continued)
| G. |
An
international consulting company has a Consulting Agreement focusing
on
developing business in the European market, commencing on March
10, 2004,
for a term of 12 months. Compensation is composed of a listing
fee of
$12,500 for listing application at a German Stock Exchange, and
an
engagement fee of 400,000 shares of common stock at $.01, paid
on March
10, 2004.
|
| H. |
An
advisory agreement is in effect between the Company and another
consulting
firm for services related to the acquisition of new companies and
the
listing of shares on the American Stock Exchange and other foreign
exchanges. The agreement commences on August 1, 2004, for a term
of 2
years, ending on August 1, 2006. The compensation is 2,000,000
shares of
common stock at $.01, plus 10% of the acquisition price of new
companies
identified by the consulting company. The 10% shall be paid in
shares of
common stock valued at the previous day’s bid
price.
|
NOTE
4 -
CAPITAL TRANSACTIONS
In
February 2004 the Company issued 9,050,000 shares of its common stock for
the
acquisition of Azur Development Corp. Also as part of the overall transaction
the Company issued 4,330,000 shares of its common stock pursuant to a
“Membership Interest Agreement” in 48 Xxxxxxxxx, LLC and 10,197,649 shares of
common stock to various individuals for their efforts, cooperation and/or
services performed on behalf of the Company. All shares were valued at
$.01.
In
February 2004 the Company sold 4,000,000 common shares for $200,000 in an
exempt
transaction.
In
April
2004 the Company cancelled two certificates for an aggregate of 3,500,000
common
shares at $.01 per share.
In
April
2004 the Company issued 230,769 shares of common stock at $.01 in consideration
of the acquisition of a 100% interest in a Commercial Agreement relating
to a
property in Ft. Lauderdale, Florida.
In
April
2004 the Company issued 606,250 shares of common stock for fees, at $.01
per
share.
In
April
2004 the Company issued 1,791,250 shares of common stock for stock subscriptions
for a value of $975,000.
In
June
2004, the Company entered into an agreement with a European company to exchange
stock for the Company, at which time 6,050,000 shares were issued at $.01.
The
agreement was rescinded on September 30, 2004 and the Company is to receive
and
cancel all shares issued in the transaction.
In
July
2004 the Company issued 761,101 shares of common stock for services rendered
at
$.01 per share.
In
August
2004 the Company issued 20,000 shares of common stock as additional
consideration for loans at $.01 per share.
In
September 2004 the Company issued 5,000,000 shares of common stock, at .01
per
share, for services rendered, at $.01 per share.
In
October 2004 the Company issued 1,216,666 shares of common stock as additional
compensation for executives signing employment contracts, at $.01 per
share.
F-18
AZUR
INTERNATIONAL, INC. &
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2004 and 2003
NOTE
4 -
CAPITAL TRANSACTIONS (continued)
In
November 2004, 3,393,939 shares of common stock were issued for a value of
$2,000,000 in consideration of the acquisition of The Grand Shell Landing.;
1,447,010 of these shares are outstanding. The remaining 1,946,929 shares
were
issued in escrow towards payment of the balance of $1,070,811 on the purchase
of
the Grand Shell Landing, at the discretion of the seller.
In
November 2004, the Company also issued 1,443,734 shares of common stock in
partial consideration of the acquisition of a United Kingdom Company, Airtek
Ltd. This stock is being held in escrow pending consummation of the terms
of the
acquisition.
In
November 2004, 24,000 shares of common stock were issued in consideration
of an
extension on an existing agreement, valued at $.01 per share, 50,000 shares
at
$.01 were issued in consideration of a loan agreement, 25,000 shares were
issued
at $.01 per share for services, 10,000 shares valued at $.01 per share, as
a
bonus to a corporate officer.
In
December 2004, the company cancelled 4,350,000 of the subscriptions, valued
at
$.01 per share, as part of the cancellation of the agreement entered into
in
June 2004, with the European company.
NOTE
5 -
ACCOUNTS RECEIVABLE
Accounts
receivable consist of the following amount as of December 31, 2004:
|
Golf
Membership
|
$
|
16,106
|
||
|
Special
Events
|
21,300
|
|||
|
$
|
37,406
|
NOTE
6 -
PROPERTY AND EQUIPMENT
Property
and equipment consist of the following as of December 31, 2004:
|
Land
and Improvements
|
$
|
11,495,704
|
||
|
Less
accumulated depreciation
|
(19,182
|
)
|
||
|
Net
Land and Improvements
|
$
|
11,476,522
|
||
|
Buildings
|
$
|
2,295,616
|
||
|
Less
accumulated depreciation
|
(4,782
|
)
|
||
|
Net
buildings
|
$
|
2,290,833
|
||
|
Equipment
& Fixtures
|
$
|
359,878
|
||
|
Less
accumulated depreciation
|
(6,468
|
)
|
||
|
Net
Equipment & Fixtures
|
$
|
383,843
|
||
|
Total
Property & Equipment
|
$
|
14,151,198
|
*
Total
Depreciation Expense for the year ended December 31, 2004 was
$30,432.
F-19
AZUR
INTERNATIONAL, INC. &
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2004 and 2003
NOTE
7 -
CAPITAL LEASES
Property
held under capital Leases, included with property and equipment at December
31,
2004 consists of the following:
|
Equipment
|
$
|
256,027
|
||
|
Less:
Accumulated depreciation
|
(4,267
|
)
|
||
|
Equipment
capital lease-net
|
$
|
251,760
|
Capital
lease obligations consist of the following at December 31, 2004:
|
Non-cancelable
leases, through 2008, Secured
by equipment
|
$
|
125,205
|
||
|
Less:
current portion of lease obligations
|
(49,422
|
)
|
||
|
Long-term
capital lease obligations
|
$
|
75,783
|
The
following is a schedule of future lease payments under capital leases for
years
ending December 31:
|
2005
|
$
|
49,422
|
||
|
2006
|
43,757
|
|||
|
2007
|
42,813
|
|||
|
2008
|
1,830
|
|||
|
Thereafter
|
0
|
|||
|
Total
minimum lease payment
|
137,822
|
|||
|
Less:
Interest imputed at various rates
|
(12,617
|
)
|
||
|
Present
value of minimum lease payments
|
$
|
125,205
|
NOTE
8-
LONG TERM DEBT
Long
term
debt consists of the following
|
Note
Payable -Unsecured revolving line from finance company, with interest
payable at 6% per annum, commencing on October 1, 2004. Principal
and
interest to be paid on January 24, 2005, unless amended in writing.
This
obligation was paid in full, in 3 installments as follows: 1/15/05
-
$295,000, 1/26/05 -$200,000 and 2/16/05 - $200,000.
|
$
|
695,000
|
||
|
Equity
Line of credit -Loan is in the name of shareholder. Interest rate
is
variable (currently
at 6.375 %). Loan secured by Rio Vista property.
|
154,182
|
|||
|
Mortgage
Payable - First Mortgage secured by Rio Vista property in name
of
shareholder. Interest is at a variable rate, currently 3.250 %.
Interest
only is due monthly until November 1, 2012, and the borrower has
the right
to prepay with no penalty. Maturity date of the mortgage is October
1,
2027
|
1,034,822
|
|||
|
Mortgage
Payable - First mortgage secured by 48 Xxxxxxxxx property. Bank
has a
Secured
interest in rents, leases, fixed asset and profits. Interest is
variable
but can never be less than 5 %. Current rate is 5.5 %. Payments
are
interest only
|
3,361,125
|
|||
F-20
AZUR
INTERNATIONAL, INC. &
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2004 and 2003
NOTE
8-
LONG TERM DEBT (continued)
|
Note
Payable to finance company, monthly payments are variable, including
interest of 6.75%,
collateralized by Grand Shell Landing golf course property, due
November
2009
|
6,400,000
|
|||
|
Note
Payable to finance company, monthly payments of $ 278, including
imputed
interest of 7%, collateralized by equipment, due October
2006
|
6,377
|
|||
|
Note
Payable to finance company, monthly payments of $ 277, including
imputed
interest of 6.49% collateralized by equipment, due May 2007
|
7,389
|
|||
|
Note
payable to a finance company, monthly payments of $ 814, including
imputed
interest of 6.75%, collectivized by equipment, due October
2006
|
16,029
|
|||
|
Note
Payable to a private investor with a term of 30 days and interest
at 12%.
This obligation was satisfied on January 25, 2005.
|
150,000
|
|||
|
Note
Payable to private investor, due June 30, 2005 with interest payable
at
12%, subsequently extended to January 2006
|
450,000
|
|||
|
Notes
Payable to shareholders of acquired company, due January 31,
2005
|
435,598
|
|||
|
Note
Payable bearing interest at 6% on acquisition of The Grand Shell
Landing
Golf Course to former owner. Owner has an option to purchase
1,946,929 shares of Company’s common stock, currently held in escrow, in
lieu of payment of the note due on November 16, 2005
|
1,070,811
|
|||
|
Total
obligations
|
$
|
13,781,333
|
||
|
Less:
short-term portion
|
(3,124,783
|
)
|
||
|
Long-term
maturities
|
$
|
10,656,550
|
Maturities
on the long-term obligations:
|
2005
|
$
|
3,124,783
|
||
|
2006
|
3,553,487
|
|||
|
2007
|
191,500
|
|||
|
2008
|
202,761
|
|||
|
Thereafter
|
6,708,802
|
NOTE
9 -
LOAN ACQUISITION COSTS
Loan
acquisition costs consist of the following:
|
The
Grand Shell Landing
|
$
|
180,038
|
||
|
Rio
Vista, LLC mortgage
|
10,350
|
|||
|
48
Xxxxxxxxx, LLC
|
124,582
|
|||
|
|
314,970
|
|||
|
Less
Accumulated Amortization
|
(61,744
|
)
|
||
|
Total
Loan Acquisition Costs
|
$
|
253,226
|
F-21
AZUR
INTERNATIONAL, INC. &
SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
December
31, 2004 and 2003
NOTE
9 -
LOAN ACQUISITION COSTS (continued)
Loan
costs are amortized as follows:
|
The
Grand Shell Landing
|
60
months
|
|||
|
Rio
Vista, LLC
|
120
months
|
|||
|
48
Xxxxxxxxx, LLC
|
35
months
|
|||
Amortization
Expense for the year ended December 31st,
2004
totaled $50,327
NOTE
10 - COMMITMENTS & SUBSEQUENT EVENTS
| A. |
Current
portion of Long-Term Debt with payment due dates through March
31, 2004
have been paid or extended. See Footnote 8 - Long term
debt.
|
| B. |
The
Company has a commitment for $3,000,000 in loans from an investor,
of
which $450,000 was received through December 31, 2004. The balance
of
$2,550,000 was received during
2005.
|
| C. |
The
$3,361,125 Mortgage secured by property held by 48 Xxxxxxxxx, LLC
was
consolidated during January 2005, bringing the loan balance to
$10,000,000.
|
| D. |
The
Company entered into an agreement to acquire up to 80% of the
entity which
owns 100% of the land surrounding Grand Shell Landing Golf Course
in
Mississippi.
|
| E. | Acquisition of Airtek Safety Limited. On February 24, 2005, the Company acquired 100% of the outstanding shares of Airtek Safety Limited (a United Kingdom corporation). Pursuant to the purchase agreement with the shareholders of Airtek, Azur has agreed to pay 6.1 million pounds (approximately $11,224,000) on August 21, 2005. The shareholders have the option to acquire an aggregate of 3,741,333 shares of common stock in lieu of cash payment due. The shares of Airtek are being held in escrow pending payment of the purchase consideration. In the event that the company defaults on its obligation, the agreement will be recinded and the escrowed shares will be returned to the Airtek shareholders. |
F-22
AZUR
INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
March
31, 2005
|
ASSETS
|
Unaudited
|
|||
|
Current
Assets
|
||||
|
Cash
and Cash Equivalents
|
$
|
671,077
|
||
|
Accounts
Receivable
|
2,646,354
|
|||
|
Inventory
|
414,884
|
|||
|
Prepaid
Expenses
|
901,015
|
|||
|
Other
Receivables
|
872,668
|
|||
|
Total
Current Assets
|
5,505,997
|
|||
|
Property,
Plant & Equipment (net of accumulated depreciation of
$190,850)
|
18,696,619
|
|||
|
Other
Assets
|
||||
|
Loan
Acquisition Costs (net of amortization of $72,825.39)
|
242,145
|
|||
|
Investments
in Real Estate
|
240,000
|
|||
|
Construction
Deposits
|
1,675,509
|
|||
|
Deposits
- Land Purchase
|
1,250,309
|
|||
|
Security
Deposits
|
11,416
|
|||
|
Goodwill
|
9,322,846
|
|||
|
Total
Other Assets
|
12,742,225
|
|||
|
TOTAL
ASSETS
|
$
|
36,944,841
|
||
F-23
AZUR
INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED
BALANCE SHEET
March
31, 2005
|
LIABILITIES
& STOCKHOLDERS' EQUITY
|
Unaudited
|
|||
|
Current
Liabilities
|
||||
|
Accounts
Payable and Accrued Expenses
|
$
|
2,566,705
|
||
|
Current
Portion-Notes and Mortgages Payable
|
17,272,002
|
|||
|
Current
Portion-Capital Lease Obligation
|
260,839
|
|||
|
Other
Current Liabilities
|
97,284
|
|||
|
Total
Current Liabilities
|
20,196,830
|
|||
|
Long-Term
Debt
|
||||
|
Notes
and Mortgages Payable
|
11,012,270
|
|||
|
Capital
Lease Obligations
|
647,634
|
|||
|
Liabilities
Subject to Compromise from Bankruptcy
|
752,971
|
|||
|
Total
Long-Term Debt
|
12,412,876
|
|||
|
Other
Liabilities
|
||||
|
Real
Estate Deposits Held
|
2,020,000
|
|||
|
Deferred
Income Taxes
|
231,840
|
|||
|
Total
Other Liabilities
|
2,251,840
|
|||
|
Total
Liabilities
|
34,861,546
|
|||
|
Stockholders'
Equity
|
||||
|
Common
Stock - $.01 par value, 200,000,000 shares
|
||||
|
authorized;
shares issued and outstanding 41,972,266
|
419,723
|
|||
|
Non
Controlling Interest in Subsidiaries
|
2,736,576
|
|||
|
Additional
Paid in Capital
|
2,037,884
|
|||
|
Accumulated
Deficit
|
(3,073,604
|
)
|
||
|
Accumulated
Other Comprehensive Loss
|
(37,284
|
)
|
||
|
Total
Stockholders' Equity
|
2,083,295
|
|||
|
TOTAL
LIABILITIES & STOCKHOLDERS' EQUITY
|
$
|
36,944,841
|
||
The
accompanying notes are an integral part of the consolidated financial
statements.
F-24
AZUR
INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
For
the Three Months Ended March 31, 2005 and 2004
|
2005
|
2004
|
||||||
|
(Unaudited)
|
(Unaudited)
|
||||||
|
Revenues
|
|||||||
|
Sales
|
$
|
1,529,855
|
$
|
-
|
|||
|
Rents
|
2,263,895
|
22,791
|
|||||
|
Total
Revenue
|
3,793,750
|
22,791
|
|||||
|
Cost
of Sales
|
1,391,813
|
-
|
|||||
|
Gross
Income
|
2,401,937
|
22,791
|
|||||
|
Operating
Expenses
|
|||||||
|
General
& Administrative Expenses
|
2,444,032
|
219,559
|
|||||
|
Total
Operating Expenses
|
2,444,032
|
219,559
|
|||||
|
Net
Income (Loss) Before
|
|||||||
|
Other
Income and Expense
|
(42,095
|
)
|
(196,768
|
)
|
|||
|
Other
Income and (Expense)
|
|||||||
|
Interest
Income
|
1,739
|
2
|
|||||
|
Other
Income
|
219
|
-
|
|||||
|
Interest
Expense
|
(178,193
|
)
|
(15,373
|
)
|
|||
|
Other
Expense
|
(37,210
|
)
|
-
|
||||
|
Total
Other Income and (Expense)
|
(213,445
|
)
|
(15,371
|
)
|
|||
|
Net
Income (Loss) from Continuing Operations
|
(255,540
|
)
|
(212,139
|
)
|
|||
|
Net
Income (Loss) before adjustment for non-controlling interests
in
subsidiary
|
(255,540
|
)
|
(212,139
|
)
|
|||
|
Non
Controlling Interest in Subsidiary
|
(34,493
|
)
|
(5,121
|
)
|
|||
|
Income
(Loss) before Provision for Income Taxes
|
(290,033
|
)
|
(207,018
|
)
|
|||
|
Provision
for Income Taxes
|
(74,914
|
)
|
-
|
||||
|
Net
Income (Loss)
|
$
|
(364,947
|
)
|
$
|
(207,018
|
)
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
F-25
AZUR
INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
For
the
Three Months Ended March 31, 2005 and 2004
|
2005
|
2004
|
||||||
|
(Unaudited)
|
(Unaudited)
|
||||||
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|||||||
|
Net
Income (Loss)
|
$
|
(364,947
|
)
|
$
|
(207,018
|
)
|
|
|
Adjustments
to Reconcile Income (Loss) to Net Cash
|
|||||||
|
Provided
(Used) for Operating Activities:
|
|||||||
|
Depreciation
and Amortization
|
289,026
|
7,388
|
|||||
|
Services
and Interest paid by Isuance of Common Stock
|
6,000
|
139,998
|
|||||
|
Deposit
for Acquisition paid by Issuance of Common Stock
|
21,467
|
-
|
|||||
|
Changes
in Assets and Liabilities:
|
|||||||
|
Increase
in Accounts Receivable
|
(262,810
|
)
|
-
|
||||
|
Increase
in Inventory
|
(36,168
|
)
|
-
|
||||
|
Increase
in Prepaid Expenses
|
(542,646
|
)
|
-
|
||||
|
Increase
in Other Assets
|
(86,150
|
)
|
-
|
||||
|
Decrease
in Deferred Taxes
|
(33,387
|
)
|
|||||
|
Increase in
Other Current Liabilities
|
97,284
|
-
|
|||||
|
Increase
in Accounts Payable & Accruals
|
49,407
|
-
|
|||||
|
Net
Cash Provided (Used) In Operations
|
(862,924
|
)
|
$
|
(59,632
|
)
|
||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|||||||
|
(Increase)
in Building in Progress
|
(245,889
|
)
|
(5,020
|
)
|
|||
|
(Increase)
in Real Estate Holdings
|
(10,876
|
)
|
|||||
|
(Increase)
in Real Estate Deposits
|
(1,250,309
|
)
|
(50,000
|
)
|
|||
|
(Purchase)
of Fixed Assets
|
(299,739
|
)
|
-
|
||||
|
Cash
acquired on Acquisitions
|
24,128
|
3,206
|
|||||
|
Net
Cash Provided (Used) in Investing Activities:
|
(1,771,809
|
)
|
(62,690
|
)
|
|||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|||||||
|
Proceeds
from Sale of Common Stock
|
200,000
|
||||||
|
Proceeds
From Stock Subscriptions
|
320,000
|
||||||
|
Proceeds
From Notes and Loans Payable
|
3,314,131
|
6,297
|
|||||
|
Proceeds
From Customer Deposit Escrows
|
344,491
|
||||||
|
Minority
Shareholder Contributions
|
131,723
|
-
|
|||||
|
Payments
on Capital Leases
|
(71,043
|
)
|
-
|
||||
|
Payment
of Notes and Loans Payable
|
(1,025,255
|
)
|
(97,708
|
)
|
|||
|
Net
Cash Provided (Used) in Financing Activities:
|
2,694,047
|
428,589
|
|||||
|
Net
Increase in Cash
|
59,314
|
306,267
|
|||||
|
Beginning
Cash
|
611,763
|
-
|
|||||
|
Ending
Cash
|
$
|
671,077
|
$
|
306,267
|
|||
F-26
AZUR
INTERNATIONAL, INC. & SUBSIDIARIES
CONSOLIDATED
STATEMENT OF CASH FLOWS
For
the
Three Months Ended March 31, 2005 and
2004
|
SCHEDULE
OF NONCASH ACTIVITIES:
|
|||||||
|
Common
Stock Issued for Services and Interest
|
$
|
6,000
|
139,998
|
||||
|
Common
Stock Issued for Deposit on Acquisition
|
21,467
|
98,800
|
|||||
|
Property
and equipment valued at $ 11,224,000 were
|
|||||||
|
acquired
through the issuance of an obligation payable
in
|
|||||||
|
the
amount of $ 11, 224,000.
|
11, 224,000 | ||||||
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
|||||||
|
Interest
Expense Paid
|
53,977
|
$
|
15,371
|
||||
|
Income
Taxes Paid
|
-
|
-
|
The
accompanying notes are an integral part of the
consolidated financial statements.
F-27
AZUR
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS
March
31, 2005 and 2004
NOTE
1 -
SIGNIFICANT ACCOUNTING POLICIES
A.
BACKGROUND
The
Company was originally incorporated in the State of Nevada in June 1997 under
the name of Union Chemical Corporation in order to be a partner in a joint
venture that was never consummated. In June 1999, the Company changed its
name
to Xxxxxxxxx00.xxx, Inc. as it acquired an Arizona corporation, Xxxxxxxxx00.xxx.
The Company subsequently changed its name to the current name of Azur
International, Inc.
In
November of 2001 the Company entered bankruptcy under chapter 7 of the
bankruptcy laws in the United States Bankruptcy Court for the district of
Arizona. It emerged from bankruptcy in July 2003.
On
February 9, 2004 Azur International, Inc. acquired Azur Development Corp.
(formally known as Xxxxx Bay Development Corp) in a stock for stock
transaction.
In
November of 2004, the company acquired The Grand Shell Landing, Inc., which
operates an 18-hole golf course, pro shop and restaurant in Mississippi.
At the
present time, The Grand Shell Landing, Inc. generates golf-related revenues
only; there is no real estate activity
On
February 24, 2005 the Company purchased Airtek Safety Limited, a British
company
which derives income from the rental of cranes and equipment and services
to the
construction industry. The purchase, which was effective January 1, 2005,
was a
cash transaction whereby the sellers have the option of taking stock in lieu
of
cash.
Azur
International, Inc. is in the business of developing and marketing luxury
residential and resort properties.
B.
PRINCIPLES OF CONSOLIDATION
The
consolidated financial statements include accounts of Azur International,
Inc.
and its wholly-owned subsidiaries its wholly owned subsidiaries. All material
inter-company transactions have been eliminated. The following is a list
of
subsidiaries and their respective controlling interests:
Rio
Vista
- 53%
48
Xxxxxxxxx. LLC - 63%
Azur
Development Corp. - 100%
The
Grand
Shell Landing, Inc. - 100%
Airtek
Safety Limited - 100%
Azur
Shell Landing Development LLC - 100%
C.
REAL
ESTATE HOLDINGS
Real
estate investments are stated at the lower of cost or market. Acquisition
costs
are allocated to respective properties based on appraisals of the various
properties acquired in the acquisition.
D.
REVENUE RECOGNITION
Real
Property: Revenue is recognized under the full accrual method of accounting
upon
the completed sale of real property held for development and sale. All costs
incurred directly or indirectly in acquiring and developing the real property
are capitalized. Revenues for sales and rentals generated from The Grand
Shell
Landing, Inc. are also recognized under the full accrual method of accounting.
Airtek Safety Limited reports under the historical cost convention and in
accordance with the Financial Reporting for Smaller Entities (effective June
2002).
F-28
AZUR
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS
March
31, 2005 and 2004
E.
USE OF
ESTIMATES
The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements
and
the reported amounts of revenues and expenses during the period. Actual results
could differ from those estimates.
F.
CASH
AND CASH EQUIVALENTS
Cash
and
cash equivalents include cash on hand; cash in banks, and any highly liquid
investments with maturity of three months or less at the time of purchase.
The
Company and its subsidiaries maintain cash and cash equivalent balances at
several financial institutions, which are insured by the Federal Deposit
Insurance Corporation up to $100,000. At times, the cash balances may exceed
federally insured limits. We have not experienced any losses in such accounts
and we believe the risk related to these deposits is minimal.
G.
PROPERTY AND EQUIPMENT
Property
and equipment are carried at cost and are being depreciated over their useful
lives using straight line depreciation methods.
The
estimated useful lives of significant assets are as follows:
Equipment
5
years
Land
Improvements 20
years
Buildings 40
years
Hire
Equipment 12
years
H.
LEASES
Leases
that transfer substantially all of the risks and benefits of ownership are
accounted for as capital leases. Other leases are operating leases that are
expensed over the terms of the lease using the straight line method. Capital
leases are included in property and equipment and are amortized using the
same
methods as used for depreciation of property and equipment
I.
CONSTRUCTION DEPOSITS
Construction
deposits amounting to $2,020,000 for the purchase of units in the 48 Xxxxxxxxx
project have been collected and deposited in an escrow account with the escrow
agent, Xxxxxx & Xxxx, P.A., as per our Escrow Agreement dated August 25,
2004. As per said agreement, the first $1,117,500 deposited, which represent
10%
of the purchase price due at signing, must remain in the escrow account at
all
times. The second 10% deposit, due at the start of construction, may be used
to
towards hard construction costs only. At March 31, 2005, the balance in the
escrow account is $1,675,509.
J.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
An
allowance for doubtful accounts is estimated and recorded based on the Company’s
historical bad debt experience. Management believes that all accounts receivable
will be collected within one year; therefore, an allowance for doubtful accounts
is not necessary.
K.
INVENTORY
Inventory
is stated at the lower of cost or market with cost determined using the
first-in, first-out method.
F-29
AZUR
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS
March
31, 2005 and 2004
L.
EARNINGS/LOSS PER SHARE
Primary
earnings per common share are computed by dividing the net income (loss)
by the
weighted average number of shares of common stock and common stock equivalents
outstanding during the quarter and year-to-date. The number of shares used
for
the three months ended March 31, 2005 was 42,693,500 and the resulting loss
per
share was $0.008 per share.
M.
INCOME
TAXES
In
February 1992, the Financial Accounting Standards Board issued Statement
on
Financial Accounting Standards 109 of "Accounting for Income Taxes." Under
Statement 109, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. The Company has net operating losses (NOL's)
of
approximately $ 3,039,242
|
Statutory
federal income tax rate
|
34
|
%
|
||
|
Valuation
allowance
|
(34
|
)
|
||
|
Effective
Tax Rate
|
--
|
%
|
The
provision for British income taxes for Airtek Safety Limited, the British
subsidiary, is equal to $231,840.
NOTE
2 -
RELATED PARTY TRANSACTIONS
Rio
Vista
LLC, a subsidiary of Azur Development Corp. has mortgages with banks on property
owned that were financed in the individual name of a principal of the company.
There are also bank accounts that are titled in the name of the same principal
that belong to Rio Vista, LLC.
A
major
shareholder of Azur International is also a minority owner in both Rio Vista,
LLC and 48 Xxxxxxxxx, LLC.
An
officer of the company is currently using a property owned by the corporation
personally.
NOTE
3 -
EMPLOYMENT/CONSULTING AGREEMENTS
The
following employment and consulting agreements are in effect as of March
31,
2005:
A.
The
Chief Executive Officer, who also serves as the chairman of the Board of
Directors of the Company, has a consulting agreement with a 36 month term,
commencing on February 1, 2004. His compensation for the duration of the
agreement is as follows:
Year
1 -
500,000 restricted shares of Azur International common stock at
$.01.
Year
2 -
$360,000 per year, plus 500,000 restricted shares of Azur International common
stock at $.01.
Year
3 -
$480,000 per year, plus 500,000 restricted shares of Azur International common
stock at $.01.
Under
this Consulting Agreement, the Company provides said executive with an
automobile.
B.
The
President of the Company, who also serves on the Board of Directors, has
an
employment agreement with a term of 3 years, commencing on September 1, 2004.
His compensation, beginning on January 1, 2005, is $240,000 per annum. He
also
received a signing bonus in the form of 166,666 restricted shares of the
Company’s common stock valued at $3.00 per share. The signing bonus was paid
sixty days from the effective date of the contract, which was September 1,
2004.
C.
The
Vice President of Operations of the Company’s has an employment agreement with a
term of 3 years, commencing on September 1, 2004. His compensation, beginning
on
January 1st,
2005,
is $120,000 per annum. He also received a signing bonus in the form of 50,000
restricted shares of the Company’s common stock at $3.00 per share. The Signing
Bonus was paid sixty days from the effective date of the contract, which
was
September 1, 2004.
F-30
AZUR
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS
March
31, 2005 and 2004
NOTE
3 -
EMPLOYMENT/CONSULTING AGREEMENTS (continued)
D.
The
General Counsel & Corporate Secretary has an employment agreement with a
term of one year, commencing on April 15, 2004. After the initial term, the
agreement shall renew automatically for additional one year periods, unless
terminated by either party. His compensation is $120,000 per annum, to be
increased at a rate of no less than 10% per annum.
E.
The
Vice President of Development, who is also the President of the Azur Development
subsidiary, has a Consulting Agreement with a term of twelve months, commencing
on November 1, 2004. After the initial term, the agreement shall renew
automatically for additional twelve month term, unless terminated by either
party. His compensation is 10% of the net profits of any developments that
he
initiates. He shall be paid 50% in cash payment, and 50% in restricted common
shares at $.01.
F.
The
CEO of Azur Development UK, who has been engaged to develop home building
and
commercial
development projects, as well as oversee any European projects, has a Consulting
agreement
with a term of three years, commencing on October 5, 2004. His compensation
is a
base
fee
of 3,000,000 of shares of common stock at $.01.
G.
An
international consulting company has a consulting agreement focusing on
developing business in the European market, commencing on March 10, 2004,
for a
term of twelve months. Compensation is composed of a listing fee of $12,500
for
listing application at a German Stock Exchange, and an engagement fee of
400,000
shares of stock at $.01, paid on March 10, 2004.
H.
An
advisory agreement is in effect between the Company and another consulting
firm
for services related to the acquisition of new companies and the listing
of
shares on the American Stock Exchange and other foreign exchanges. The agreement
commences on August 1st,
2004,
for a term of 2 years, ending on August 1st,
2006.
The compensation is 2,000,000 shares of common stock at $.01, plus 10% of
the
acquisition price of new companies identified by the consulting company.
The 10%
shall be paid in shares of common stock valued at the previous day’s bid
price.
NOTE
4 -
CAPITAL TRANSACTIONS
In
February 2004 the Company issued 9,050,000 shares of its common stock for
the
acquisition of Azur Development Corp. Also as part of the overall transaction
the Company issued 4,330,000 shares of its common stock pursuant to a
“Membership Interest Agreement” in 48 Xxxxxxxxx, LLC and 10,197,649 shares of
common stock to various individuals for their efforts, cooperation and/or
services performed on behalf of the Company. All shares were valued at
$.01.
In
February 2004 the Company sold 4,000,000 common shares for $200,000
in an
exempt transaction.
In
April
2004 the Company cancelled two certificates for an aggregate of 3,500,000
common
shares at $.01 per share.
In
April
2004 the Company issued 230,769 shares of common stock at $.01 in consideration
of the acquisition of a 100% interest in a Commercial Agreement relating
to a
property in Ft. Lauderdale, Florida.
In
April
2004 the Company issued 606,250 shares of common stock for fees, at $.01
per
share.
In
April
2004 the Company issued 1,791,250 shares of common stock for stock subscriptions
for a value of $975,000.
F-31
AZUR
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS
March
31, 2005 and 2004
NOTE
4 -
CAPITAL TRANSACTIONS (continued)
In
June
2004, the Company entered into an agreement with a European company to exchange
stock for the Company, at which time 6,050,000 shares were issued at $.01.
The
agreement was rescinded on September 30, 2004 and the Company is to receive
and
cancel all shares issued in the transaction.
In
July
2004 the Company issued 761,101 shares of common stock for services rendered
at
$.01 per share.
In
August
2004 the Company issued 20,000 shares of common stock as additional
consideration for loans at $.01 per share.
In
September 2004 the Company issued 5,000,000 shares of common stock, at .01
per
share, for services rendered, at $.01 per share.
In
October 2004 the Company issued 1,216,666 shares of common stock as additional
compensation for executives signing employment contracts, at $.01 per
share.
In
November 2004, 3,393,939 shares of common stock were issued for a value of
$2,000,000 in consideration of the acquisition of The Grand Shell Landing.;
1,447,010 of these shares are outstanding. The remaining 1,946,929 shares
were
issued in escrow towards payment of the balance of $1,070,811 on the purchase
of
the Grand Shell Landing, at the discretion of the seller.
In
November 2004 and January 2005, the Company issued 1,443,734 and 2,146,666
shares of common stock, respectively, in consideration of the acquisition
of Airtek Safety Ltd., (a United Kingdom company). This stock of Azur
is
being held in escrow pending consummation of the terms of the acquisition.
This
consideration is due on August 21, 2005.
In
November 2004, 24,000 shares of common stock were issued in consideration
of an
extension on an existing agreement, valued at $.01 per share, 50,000 shares
at
$.01 were issued in consideration of a loan agreement, 25,000 shares were
issued
at $.01 per share for services, 10,000 shares valued at $.01 per share, as
a
bonus to a corporate officer.
In
December 2004, the Company cancelled 4,350,000 of the subscriptions, valued
at
$.01 per share, as part of the cancellation of the agreement entered into
in
June 2004, with the European company.
In
January 2005 the Company issued 50,000 shares to corporate attorney in
consideration of an employment contract.
In
January 2005 the Company issued 50,000 shares to a director in consideration
of
directors fees.
NOTE
5 -
ACCOUNTS RECEIVABLE
Accounts
receivable consist of the following amount as of March 31, 2005:
|
Golf
Membership & Events
|
$
|
369,161
|
||
|
Trade
Receivables
|
2,277,193
|
|||
|
$
|
2,646,354
|
F-32
AZUR
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS
March
31, 2005 and 2004
NOTE
6 -
PROPERTY AND EQUIPMENT
Property
and equipment consist of the following as of March 31, 2005:
|
Land
and Improvements
|
$
|
11,757,847
|
||
|
Less
accumulated depreciation
|
(132,070
|
)
|
||
|
Net
Land and Improvements
|
$
|
11,625,777
|
||
|
Buildings
|
$
|
2,305,892
|
||
|
Less
accumulated depreciation
|
(19,399
|
)
|
||
|
Net
buildings
|
$
|
2,286,493
|
||
|
Equipment
& Fixtures
|
$
|
4,823,730
|
||
|
Less
accumulated depreciation
|
(39,381
|
)
|
||
|
Net
Equipment & Fixtures
|
$
|
4,784,349
|
||
|
Total
Property & Equipment
|
$
|
18,696,619
|
*
Total
Depreciation Expense for the three months ended March 31, 2005 was $
190,850.
NOTE
7 -
CAPITAL LEASES
Property
held under capital Leases, included with property and equipment at March
31,
2005 consists of the following:
|
Equipment
|
$
|
256,027
|
||
|
Less:
Accumulated depreciation
|
(25,312
|
)
|
||
|
Equipment
capital lease-net
|
$
|
230,715
|
Capital
lease obligations consist of the following at March 31, 2005:
| Non-cancelable leases, through 2008, Secured by equipment | $ | 114,354 | ||
|
Less:
current portion of lease obligations
|
(49,422
|
)
|
||
|
Long-term
capital lease obligations
|
$
|
64,932
|
The
following is a schedule of future lease payments under capital leases for
years
ending December 31:
|
2005
|
$
|
38,571
|
||
|
2006
|
43,757
|
|||
|
2007
|
42,813
|
|||
|
2008
|
1,830
|
|||
|
Thereafter
|
0
|
|||
|
Total
minimum lease payment
|
126,971
|
|||
|
Less:
Interest imputed at various rates
|
(12,617
|
)
|
||
|
Present
value of minimum lease payments
|
$
|
114,354
|
F-33
AZUR
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS
March
31, 2005 and 2004
NOTE
8-
LONG TERM DEBT
Long
term
debt consists of the following:
|
Equity
Line of credit -Loan is in the name of a partner. Interest rate
is
variable (currently
at 6.375 %). Loan secured by Rio Vista property.
|
151,360
|
|||
|
Mortgage
Payable - First Mortgage in name of a partner. Interest is at a
variable
rate, currently
3.250 %. Interest only is due monthly until November 1, 2012, and
the
borrower has
the right to prepay with no penalty. Maturity date of the mortgage
is
October 1, 2027
|
1,034,822
|
|||
|
Mortgage
Payable - First mortgage secured by 48 Xxxxxxxxx property. Bank
has a
Secured
interest in rents, leases, fixed asset and profits. Interest is
variable
but can never e
less than 5 %. Current rate is 5.5 %. Payments are interest
only
|
3,750,828
|
|
Note
Payable to finance company, monthly payments are variable, including
interest of 6.75%,
collateralized by Grand Shell Landing golf course property, due
November
2009
|
6,374,767
|
|||
|
Note
Payable to finance company, monthly payments of $ 278, including
imputed
interest of 7%, collateralized by equipment, due October
2006
|
5,650
|
|||
|
Note
Payable to finance company, monthly payments of $ 277, including
imputed
interest of 6.49% collateralized by equipment, due May 2007
|
6,671
|
|||
|
Note
payable to a finance company, monthly payments of $ 814, including
imputed
interest of 6.75%, collectivized by equipment, due October
2006
|
13,845
|
|||
|
Note
Payable to private investor, due January 1, 2006 with interest
payable at
12%
|
3,000,000
|
|||
| Notes Payable to private investor with maturity date of August 14, 2005. | 700,000 | |||
|
Notes
Payable - Various installment obligations for cranes and safety
equipment
|
951,519
|
|||
|
Note
Payable bearing interest at 6% on acquisition of The Grand Shell
Landing
Golf Course to former owner. Owner has an option to purchase the
Company’s
stock, currently held in escrow, in lieu of payment of the note
due on
November 16, 2005.
|
1,070,811
|
|||
|
Obligation
payable for acquisition of Airtek Safety Ltd., non-interest bearing,
secured by common stock held in escrow, due on August 21, 2005.
Shareholders of Airtek can choose to accept common stock of Azur
in lieu
of cash payment.
|
11,224,000
|
|||
|
Total
obligations
|
$
|
28,284,272
|
||
|
Less:
short-term portion
|
(17,272,002
|
)
|
||
|
Long-term
maturities
|
$
|
11,012,270
|
||
Maturities
on the long-term obligations:
|
2005
|
$
|
17,272,002
|
||
|
2006
|
3,553,487
|
|||
|
2007
|
191,500
|
|||
|
2008
|
202,761
|
|||
|
Thereafter
|
7,064,522
|
F-34
AZUR
INTERNATIONAL INC. AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL
STATEMENTS
March
31, 2005 and 2004
NOTE
9 -
LOAN ACQUISITION COSTS
Loan
acquisition costs consist of the following:
|
The
Grand Shell Landing, Inc.
|
$
|
180,038
|
||
|
Rio
Vista mortgage
|
10,350
|
|||
|
48
Xxxxxxxxx, LLC
|
124,582
|
|||
|
|
314,970
|
|||
|
Less
Accumulated Amortization
|
(72,825
|
)
|
||
|
Total
Loan Acquisition Costs
|
$
|
242,145
|
Loan
costs are amortized as follows:
|
The
Grand Shell Landing, Inc.
|
60
months
|
|||
|
Rio
Vista
|
120
months
|
|||
|
48
Xxxxxxxxx, LLC
|
35
months
|
Amortization
Expense for the three months ended March 31, 2005 totaled $ 78,825
NOTE
10 -
COMMITMENTS & SUBSEQUENT EVENTS
A.The
construction loan agreement secured by property held by 48 Xxxxxxxxx, LLC
has a
credit line of $10,685,000. The current balance on the loan is
$3,361,125.
B.
The
Company entered into an agreement to acquire up to 80% of the entity which
owns
100% of the land surrounding Grand Shell Landing Golf Course in Mississippi.
NOTE
11 - ACQUISITION OF AIRTEK SAFETY LTD.
On
February 24, 2005, the Company acquired 100% of the
outstanding shares of Airtek Safety Limited (a United Kingdom company). Pursuant
to the purchase agreement witht the shareholders of Airtek, Azur has agreed
to
pay 6.1 million pounds (approximately $11,224,000) on August 21, 2005. The
shareholders have the option to acquire an aggregate of 3,741,533
shares of
common stock in lieu of cash payment due. The shares of Airtek are being
held in
escrow pending payment of the purchase consideration. In the event that the
Company defaults on its obligation, the agreement will be recinded and the
escrowed shares will be returned to the Airtek shareholders.
F-35
EXHIBIT
A
PLAN
AND
AGREEMENT TO EXCHANGE STOCK
by
and
among
NEW
HARVEST CAPITAL CORPORATION,
and
AZUR
INTERNATIONAL, INC.
Dated
as
of ______, 2005
PLAN
AND
AGREEMENT TO EXCHANGE STOCK
THIS
PLAN
AND AGREEMENT TO EXCHANGE STOCK (this "Agreement") is made and entered
into as
of ______ , 2005, by and among NEW HARVEST CAPITAL CORPORATION,
a Delaware
corporation ("Harvest"), and AZUR INTERNATIONAL, INC., a Nevada corporation
("Azur").
WHEREAS,
Azur and Harvest intend to effect a reorganization pursuant to Section
368(a)(1)(B) of the Code (as hereinafter defined) whereby Harvest will
acquire
all of the outstanding shares of stock of Azur from the shareholders of
Azur
(the “Azur Shareholders”) in exchange for newly issued shares of common stock of
Harvest.
NOW,
THEREFORE, for and in consideration of these premises and the mutual covenants,
promises, agreements, representations and warranties set forth herein,
and other
good and valuable consideration, the receipt and sufficiency of which is
hereby
acknowledged, Harvest and Azur hereby agree as follows:
ARTICLE
I
THE
SHARE
EXCHANGE
SECTION
1.01 The
Share Exchange.
Upon
the terms and subject to the conditions set forth in this Agreement, and
in
accordance with Chapters 78 and 92A of the Nevada Revised Statutes (the
“NRS”)
and the General Corporation Law of the State of Delaware ("GCDL"), Harvest
will
acquire all of the outstanding shares of stock of Azur from the Azur
Shareholders in exchange for validly issued, fully paid and nonassessable
shares
of common stock of Harvest, and, after giving effect to all of the transactions
contemplated by this Agreement, (a) the Harvest shareholders and the Azur
Shareholders will jointly own all of the issued and outstanding shares
of
Harvest and (b) Azur will be a wholly-owned subsidiary of Harvest (the
"Share
Exchange").
SECTION
1.02 Time
and Place of Closing.
The
"Closing" shall mean the consummation of the exchange of Harvest Shares
and the
Azur Shares, as set forth in Article III, as well as the consummation of
any
other transactions which are contemplated by this Agreement to occur at
Closing.
Closing shall take place within three business days following the date
upon
which all of the conditions precedent contained in Articles VIII and IX
of this
Agreement have occurred and all regulatory matters have been complied with,
at
10:00 a.m., local time, at the offices of Guzov Ofsink, LLC, 000 Xxxxxxx
Xxxxxx,
00xx
Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, or at such other time and place as the parties
may
agree in writing. The date the Closing actually occurs is the "Closing
Date."
A-1
SECTION
1.03 Effective
Time.
Subject
to the provisions of this Agreement, the parties shall file Articles of
Exchange
in such form as is required by, and executed in accordance with, the relevant
provisions of NRS 92A.200, and shall make all other filings required as
soon as
practicable on or after the Closing Date. The Share Exchange and other
transactions contemplated by this Agreement shall become effective on the
date
and at the time the Articles of Share Exchange reflecting the Share Exchange
is
duly filed with the Secretary of State of the State of Nevada, or at such
other
time and date as Azur, Harvest, and the Azur Shareholders shall agree and
as
specified in the Articles of Share Exchange
(the "Effective Time").
SECTION
1.04 Reverse
Stock Split; Amendments
to the Certificate of Incorporation of Harvest and Azur.
(a)
Prior to the Closing, Harvest will effect a 1-for-1,370 reverse split of
its
authorized and outstanding common stock so that Harvest will have approximately
100,000 shares of authorized common stock after the reverse split (the
"Reverse
Split"). Harvest shall use its best efforts to obtain the written consent
of
shareholders owning a majority of the shares of common stock of Harvest
entitled
to vote in favor of the Reverse Split, and shall timely comply with all
applicable state and federal laws in connection with the shareholder consent,
including the filing and mailing of a Schedule 14C pursuant to the Exchange
Act
to all shareholders as of the record date that did not provide Harvest
with
their written consent to the Reverse Split.
(b)
At
the Effective Time or as soon as practicable thereafter Harvest shall amend
its
Certificate of Incorporation to (i) change the name of Harvest to “Azur
International, Inc.” and (ii) add the following provision:
“No
director shall be liable to the Corporation or any of its stockholders
for
monetary damages for breach of fiduciary duty as a director, except with
respect
to (1) a breach of the director’s duty of loyalty to the corporation or its
stockholders, (2) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) liability
under Section 174 of the Delaware General Corporation Law or (4) a transaction
from which the director derived an improper personal benefit, it being
the
intention of the foregoing provision to eliminate the liability of the
Corporation’s directors to the corporation or its stockholders to the fullest
extent permitted by Section 102 (b)(7) of the Delaware General Corporation
Law,
as amended from time to time. The Corporation shall indemnify to the fullest
extent permitted by Sections 102 (b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to time, each person that such Sections
grant the corporation the power to indemnify.”
Harvest
shall use its best efforts to obtain the written consent of shareholders
owning
a majority of the shares of common stock of Harvest entitled to vote in
favor of
the foregoing amendments, and shall timely comply with all applicable state
and
federal laws in connection with the shareholder consent, including the
filing
and mailing of a Schedule 14C pursuant to the Exchange Act to all shareholders
as of the record date that did not provide Harvest with their written consent
to
such amendments. Such information statement may be the Information
Statement/Proxy Statement/Prospectus to be contained in the Registration
Statement on Form S-4 that Harvest shall file with the Securities and Exchange
Commission (the “SEC”) in connection with the issuance of Harvest Common Stock
pursuant to the Share Exchange.
A-2
(c)
At
the Effective Time or as soon as practicable thereafter Azur shall amend
its
Articles of Incorporation to change the name of Harvest to “Azur 2004,
Inc.”
ARTICLE
II
MANNER
OF
CONVERTING SHARES
SECTION
2.01 Share
Exchange Consideration.
Upon
the terms and subject to the conditions of this Agreement, the Azur Shareholders
shall receive, as consideration for the Share Exchange of all of the issued
and
outstanding shares of Azur's Common Stock, par value $.001 per share ("Azur
Common Stock"), shares of the Common Stock, par value $.0001, of Harvest
("Harvest Common Stock"), such shares of Harvest Common Stock to be issuable
at
the Closing in accordance with the terms of this Agreement. At the Effective
Time, all such shares of Harvest Common Stock shall be duly and validly
issued,
fully paid and nonassessable.
SECTION
2.02 Conversion
of Shares.
Subject
to the provisions of this Article II, at the Effective Time, by virtue
of the
Share Exchange and without any action on the part of the parties hereto
or the
shareholders of any of the parties, each share of Azur Common Stock issued
and
outstanding at the Effective Time shall, by virtue of the Share Exchange
and
without any action on the part of the holder thereof, automatically be
converted
into .5 of a share of Harvest Common (the Exchange Ratio”). The Exchange Ratio
shall not change as a result of fluctuations in the market price of Harvest
Common Stock between the date of this Agreement and the Effective Time.
The
aggregate number of shares of Harvest Common Stock issued pursuant to this
Section 2.02 shall be referred to as "Share Exchange Shares."
SECTION
2.03 Adjustments
of Exchange Ratio.
The
Exchange Ratio shall be equitably adjusted to reflect fully the effect
of any
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Harvest Common Stock or Azur
Common
Stock), reorganization, recapitalization or other like change with respect
to
Harvest Common Stock or Azur Common Stock occurring after the date of this
Agreement and prior to the Effective Time. Any such change for which a
record
date is established shall be deemed for the purposes of this Section 2.03
to
have occurred on the record date. Notwithstanding the foregoing, the Exchange
Ratio shall not be adjusted for any effects that the Reverse Split shall
have on
the Harvest Common Stock.
A-3
SECTION
2.04 Shares
Held By Azur.
Each
share of Azur Common Stock held in treasury by Azur, shall be canceled
and
retired at the Effective Time, and no consideration shall be issued in
exchange
therefor.
SECTION
2.05 Fractional
Shares.
No
certificates representing fractional shares of Harvest Common Stock will
be
issued as a result of the Share Exchange. Any fractional share interest
to which
an Exchanging Shareholder would otherwise be entitled to receive shall
be
rounded up to the nearest whole share.
ARTICLE
III
EXCHANGE
OF SHARES
SECTION
3.01 Exchange
Agent.
Xxxxxxx's transfer agent shall serve as the exchange agent (the "Exchange
Agent") in the Share Exchange.
SECTION
3.02 Instructions
to Exchange Agent.
At or
prior to the Effective Time, Harvest shall give instructions to the Exchange
Agent concerning the issuance of such certificates representing the aggregate
number of shares of Harvest Common Stock issuable pursuant to Section 2.02
in
exchange for outstanding shares of Azur Common Stock.
SECTION
3.03 Exchange
Procedures.
Upon
surrender of a certificate for cancellation to the Exchange Agent, together
with
a letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such certificate
shall be entitled to receive in exchange therefor, a Harvest certificate
representing that number of whole shares of Harvest Common Stock that such
holder has the right to receive pursuant to the provisions of this Article
III,
and the certificate so surrendered shall forthwith be cancelled. Until
surrendered as contemplated by this Section 3.03, each certificate shall
be
deemed at any time after the Effective Time to represent only the right
to
receive upon such surrender the number of shares of Harvest Common Stock
that
the holder thereof has right to receive pursuant to the provisions of this
Article III. No interest will be paid or will accrue on any cash payable
to
holders of certificates pursuant to the provisions of this Article.
Harvest
shall not be obligated to deliver any Harvest Shares to any Azur Shareholder
as
a result of the Share Exchange until such Azur Shareholder surrenders his
or her
certificate or certificates representing the shares of Azur Common Stock
for
exchange
as provided in this Article III or such holder provides an appropriate
affidavit
regarding loss of such certificate and an agreement of indemnification
in favor
of Harvest pursuant to Section 3.07 hereof.
A-4
SECTION
3.04 Rights
of Former Azur Owners.
At the
Effective Time, the stock transfer books of Azur shall be closed and no
transfer
of Azur Common Stock by any such holder shall thereafter be made or recognized.
Until surrendered in accordance with the provisions of Section 3.03 of
this
Agreement, each certificate theretofore representing shares of Azur Common
Stock
(other than shares to be canceled pursuant to Section 2.04 of this Agreement)
shall from and after the Effective Time represent for all purposes only
the
right to receive the consideration provided in Section 2.01 of this Agreement
in
exchange therefor.
SECTION
3.05 No
Further Ownership Rights in Azur Stock
All
shares of Harvest Common Stock issued upon the surrender for exchange of
shares
of Azur Common Stock in accordance with the terms hereof shall be deemed
to have
been issued in full satisfaction of all rights pertaining to such shares
of Azur
Common Stock, and there shall be no further registration of transfers on
the
records of Azur of shares of Azur Common Stock which were outstanding
immediately prior to the Effective Time.
SECTION
3.06 No
Liability.
None of
Harvest, Azur, the Exchange Agent or any party hereto shall be liable to
any
Person in respect of any shares of Harvest Common Stock properly delivered
to a
public official pursuant to any applicable abandoned property, escheat
or
similar law.
SECTION
3.07 Lost
Certificates.
If any
certificate representing Azur Common Stock shall have been lost, stolen
or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such certificate to be lost, stolen or destroyed and, if required by Harvest,
the posting by such Person of a bond in such reasonable amount as Harvest
may
direct as indemnity against any claim that may be made against either of
them
with respect to such certificate, the transfer agent will issue in exchange
for
such lost, stolen or destroyed certificate the number of shares of Harvest
Common Stock and unpaid dividends and distributions on shares of Harvest
Common
Stock deliverable in respect thereof, in each case pursuant to this
Agreement.
SECTION
3.08 Withholding
Rights.
Harvest
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Harvest Common
Stock such amounts as it is required to deduct and withhold with respect
to the
making of such payment under the Code and the rules and regulations promulgated
thereunder, or any provision of state, local or foreign tax law. To the
extent
that amounts are so withheld by Harvest such withheld amounts shall be
treated
for all purposes of this Agreement as having been paid to the holder of
the
shares of Azur Common Stock in respect of which such deduction and withholding
was made by Harvest.
SECTION
3.09 Further
Assurances.
At and
after the Effective Time, the officers and directors of Harvest shall be
authorized to execute and deliver, in the name and on behalf of Azur, any
deeds,
bills of sale, assignments or assurances and to take and do, in the name
and on
behalf of Azur, any other actions and things to vest, perfect or confirm
of
record or otherwise in Azur, any and all right, title and interest in,
to and
under any of the rights, properties or assets acquired or to be acquired
by Azur
as a result of, or in connection with, the Share Exchange.
A-5
SECTION
3.10 No
Fractional Shares.
No
certificates or scrip representing fractional shares of Harvest Common
Stock
shall be issued upon the surrender for exchange of certificates, no dividend
or
distribution of Harvest Common Stock shall relate to such fractional share
interests and such fractional share interests will not entitle the owner
thereof
to vote or to any rights as a stockholder of Harvest. The procedure with
respect
to fractional shares is set forth in Section 2.05 hereof.
ARTICLE
IV
FURTHER
TERMS AND COVENANTS
SECTION
4.01 Azur
Shareholder Approval.
Azur
shall (a) take all steps required by Chapter 78 of the NRS to obtain the
approval of this Agreement by its shareholders at a special meeting of
shareholders to be held as soon as reasonably practicable, (b) take all
action
required under the NRS with respect to the holders of Dissenting Shares,
if any,
and (c) in cooperation with Harvest mail to its shareholders a transmittal
letter to be used by such shareholders in forwarding their certificates
for
surrender and exchange.
SECTION
4.02 Harvest
Stockholder Approval.
Harvest
shall take all steps required by the Delaware General Corporation Law and
the
federal securities laws to obtain the of a majority of its shareholders
in favor
of this Agreement and the amendment of the Certificate of Incorporation
of
Harvest to change the name of the company to Azur International, Inc. upon
consummation of the Share Exchange (the “Amendment”) and to notify the remaining
shareholders of the approval of this Agreement and the Amendment.
ARTICLE
V
REPRESENTATIONS
AND WARRANTIES OF AZUR
Azur
represents and warrants the following to Harvest:
SECTION
5.01 Organization,
Authority and Capacity.
Azur is
a corporation, duly organized, validly existing, and in good standing under
the
laws of the State of Nevada, and has the full corporate power and authority
necessary to (a) execute, deliver and perform its obligations under this
Agreement and the other documents and instruments to be executed and delivered
by Azur pursuant to this Agreement (collectively, the "Share Exchange
Documents") and (b) carry on its business as it has been and is now being
conducted and to own and lease the properties and assets which it now owns
or
leases. Azur is duly qualified to do business and is in good standing in
the
jurisdictions set forth in Schedule 5.01, which includes, to its knowledge,
every state of the United States in which the conduct of the business and
the
ownership of such properties and assets requires it to be so
qualified.
A-6
SECTION
5.02 Authorization
and Validity.
The
execution, delivery and performance of the Share Exchange Documents to
be
executed and delivered by Azur have been duly authorized by all necessary
corporate action on the part of Azur. The Share Exchange Documents to be
executed and delivered by Azur have been or will be, as the case may be,
duly
executed and delivered by Azur and constitute or will constitute the legal,
valid and binding obligations of Azur, enforceable in accordance with their
respective terms, except as may be limited by bankruptcy, insolvency, or
other
laws affecting creditors' rights generally, or as may be modified by a
court of
equity.
SECTION
5.03 Absence
of Conflicting Agreements or Required Consents.
Except
as set forth on Schedule 5.03, the execution, delivery and performance
by Azur
of the Share Exchange Documents to be executed and delivered by Azur: (a)
do not
require the consent of or notice to any Authority or any other third party;
(b)
do not conflict with any provision of Azur's articles or certificate of
incorporation or bylaws; (c) do not violate any law, ordinance, regulation,
ruling, judgment, order or injunction of any court or governmental
instrumentality to which Azur is subject or by which Azur or any of its
respective properties are bound; (d) do not conflict with, constitute grounds
for termination of, result in a breach of, or constitute a default under
the
terms of any agreement, instrument, license or permit to which Azur is
a party
or by which Azur or any of its properties are bound; and (e) will not create
any
lien, encumbrance or restriction upon any of the assets or properties of
Azur.
SECTION
5.04 Governing
Documents of Azur.
True
and correct copies of the organizational documents of Azur and all amendments
thereto in effect on the date hereof have been or will be provided to Harvest.
Harvest has been or will be provided with access to the minutes of Azur,
and
such minutes accurately reflect all proceedings of the board of directors
of
Azur (and all committees thereof) required to be reflected in such records
through the date hereof.
SECTION
5.05 Capitalization
of Azur.
All
authorized and outstanding shares of Azur Common Stock are accurately described
on Schedule 5.05. All outstanding shares of Azur Common Stock are listed
and
held of record as indicated on Schedule 5.05 and all shares of outstanding
Azur
Common Stock have been duly and validly issued, and are fully paid and
nonassessable. No shares of Azur Common Stock were issued in violation
of
preemptive rights of any past or present holder of any Azur Common Stock.
Except
as set forth on Schedule 5.05, there are no outstanding warrants, options,
rights, calls or other commitments of any nature relating to Azur Common
Stock
and there are no outstanding securities of Azur convertible into or exchangeable
for any Azur Common Stock. Except as set forth on Schedule 5.05, Azur is
not
obligated to issue or repurchase any Azur Common Stock for any reason and
no
person or entity has any right or privilege (whether preemptive or contractual)
for the purchase, subscription or issuance of any unissued Azur Common
Stock.
A-7
SECTION
5.06 Financial
Statements.
Attached hereto as Schedule 5.06(a), is the audited consolidated financial
statements of Azur and its subsidiaries as of December 31, 2004 and for
the year
then ended, which reflect the results of operation and financial condition
of
Azur for such period and at such date (the "Azur Financial Statements").
Except
as disclosed in Schedule 5.06(b), to the best of Azur's or the Azur
Shareholders' knowledge, as of their respective dates (or if amended or
superseded by a subsequent report created prior to the date of this Agreement,
then as of the date of such subsequent report), the Azur Financial Statements
did not contain any untrue statement of a material fact or omit to state
a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as disclosed in Schedule 5.06(b), to the best of Azur's
or
the Azur Shareholders' knowledge, the Azur Financial Statements present
fairly
the financial position of Azur as of the dates indicated and present fairly
the
results of operations of Azur for the periods then ended, and are in accordance
with the books and records of Azur, which are complete and correct in all
material respects.
SECTION
5.07 Absence
of Changes.
Since
December 31, 2004, Xxxx has conducted its business only in the ordinary
course
and has not, except as set forth in Schedule 5.07
(a)
suffered any material adverse change in its working capital, condition
(financial or otherwise), assets, liabilities, reserves, business or
operations;
(b)
paid,
discharged or satisfied any material liability other than in the ordinary
course
of business;
(c)
written off as uncollectible any account receivable other than in the ordinary
course of business or suffered an impairment of any other asset (or is
aware of
any facts that would result in such write-off or impairment);
(d)
compromised any debts, claims or rights or disposed of any of its properties
or
assets other than in the ordinary course of business;
(e)
entered into any commitments or transactions not in the ordinary course
of
business involving aggregate value in excess of $25,000 or made aggregate
capital expenditures or commitments in excess of $25,000;
(f)
made
any material change in any method of accounting or accounting
practice;
(g)
subjected any of its assets, tangible or intangible, to any Lien, encumbrance
or
restriction of any nature whatsoever, except for liens for current property
taxes not yet due and payable;
(h)
hired, committed to hire or terminated any employee other than in the ordinary
course of business;
A-8
(i)
except for payments, dividends or distributions consistent with past practices
for prior periods, declared, set aside or made any payment, dividend or
other
distribution to any holder of Azur Common Stock or purchased, redeemed
or
otherwise acquired, directly or indirectly, any Azur Common Stock;
(j)
terminated or amended any material contract, license or other instrument
to
which Azur is a party or suffered any loss or termination or threatened
loss or
termination of any existing business arrangement or material supplier,
the
termination or loss of which, in the aggregate, would have an Azur Material
Adverse Effect;
(k)
effected any change in its capital structure;
(l)
(i)
incurred, assumed or refinanced any Indebtedness other than in the ordinary
course of business consistent with past practice, or (ii) made any loans,
advances or capital contributions to, or investments in, any Person other
than
an Azur Subsidiary or any employee or officer, as a cash advance, in each
case
in the ordinary course of business and consistent with past
practice;
(m)
paid,
discharged or satisfied any liability, obligation, or Lien other than payment,
discharge or satisfaction of (i) Indebtedness as it matures and become
due and
payable or (ii) liabilities, obligations or Liens in the ordinary course
of
business consistent with past practice;
(n)
changed any of the accounting or tax principles, practices or methods used
by
Azur, except as required by changes in applicable Tax Laws or changed reserve
amounts or policies;
(o)
(i)
entered into any employment contract or other arrangement or made any change
in
the compensation payable or to become payable to any of the officers of
Azur or
Persons acting in a similar capacity or Affiliates in the ordinary course
consistent with past practice, (ii) terminated or entered into or amended
any
employment, severance, consulting, termination or other agreement or employee
benefit plan, and except for cash advances made in the ordinary course
of
business consistent with past practice, (iii) paid
any
bonuses payable or to become payable to any of the officers of Azur or
Persons
acting in a similar capacity or (iv) made any change in its existing borrowing
or lending arrangements for or on behalf of any of such Persons pursuant
to an
employee benefit plan or otherwise;
(p)
(i)
paid or made any accrual or arrangement for payment of any pension, retirement
allowance or other employee benefit pursuant to any existing plan, agreement
or
arrangement to any Affiliate, officer, employee or Person acting in a similar
capacity, or paid or agreed to pay or made any accrual or arrangement for
payment to any Affiliate, officers, employees or Persons acting in a similar
capacity of any amount relating to unused vacation days, except payments
and
accruals made in the ordinary course consistent with past practice, (ii)
granted, issued, accelerated or accrued salary or other payments or benefits
pursuant to any pension, profit-sharing, bonus, extra compensation, incentive,
deferred compensation, stock purchase, stock option, stock appreciation
right,
group insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or any employment or consulting agreement with
or for
the benefit of any Affiliate, officer, employee, agent or consultant or
Person
acting in a similar capacity, whether past or present or (iii) amended
in any
material respect any such existing plan, agreement or arrangement to effect
any
of the foregoing;
A-9
(q)
made
any payments (other than regular compensation and cash advances payable
to
officers and employees or Persons acting in a similar capacity of Azur
in the
ordinary course consistent with past practice), loans, advances or other
distributions, or enter into any transaction, agreement or arrangement
with, the
Azur Shareholders, any Azur Affiliates, officers, employees, agents, consultants
or Persons acting in a similar capacity, stockholders of their Affiliates,
associates or family members;
(r)
settled or compromised any Tax liability or agreed to any adjustment of
any Tax
attribute or made any election with respect to Taxes;
(s)
(i)
made any change in its working capital practices generally, including
accelerating any collections of cash or accounts receivable or deferring
payments or (ii) failed to make timely accruals, including with respect
to
accounts payable and liabilities incurred in the ordinary course of
business;
(t)
failed to renew (at levels consistent with presently existing levels),
terminated or amended or failed to perform any of its obligations or permitted
any material default to exist or caused any material breach under, or entered
into (except for renewals in the ordinary course of business consistent
with
past practice), any policy of insurance;
(u)
except in the ordinary course of business consistent with past practice
pursuant
to appropriate confidentiality agreements, and except as required by any
Law or
any existing agreements set forth on Schedule 5.19 or as may be reasonably
necessary to secure or protect intellectual or other property rights of
Azur,
provided any confidential information to any Person other than Harvest;
or
(v)
agreed, whether in writing or otherwise, to take any action described in
this
Section 5.07.
SECTION
5.08. No
Undisclosed Liabilities.
To the
best of Azur's knowledge, Azur does not have any liabilities, other than
those
liabilities which have been adequately reflected in or provided for in
the Azur
Financial Statements or as shown on Schedule 5.08 hereto.
SECTION
5.09. Litigtion.
Except
as listed on Schedule 5.09 hereto and except for matters that are covered
by
Azur's insurance (taking into account any applicable limits on coverage),
(a)
there are no claims, lawsuits, actions, arbitrations, administrative or
other
proceedings pending (a "Claim") against Azur, or to the knowledge of Azur,
no
such matter is threatened, and there is no basis for any such action, (b)
to the
knowledge of Azur, there are no governmental or administrative investigations
or
inquiries pending that involve Azur, (c) there are no judgments against
or
consent decrees binding on Azur or its assets or which may have an adverse
effect on, the business or goodwill of Azur; and (d) all Claims have been
reported to the appropriate insurance carrier and, to the knowledge of
Azur,
Azur has not received a notice of denial of coverage or a reservation of
rights.
A list of all outstanding Claims against Azur is set forth on Schedule
5.15.
A-10
SECTION
5.10. No
Violation of Law.
Azur
has not been or is not currently in violation of any applicable local,
state or
federal law, ordinance, regulation, order, injunction or decree, or any
other
requirement of any governmental body, agency or authority or court binding
on
it, or relating to its property or business or its advertising, sales or
pricing
practices, except for any such violations as would not individually or
in the
aggregate have an Azur Material Adverse Effect.
SECTION
5.11. Real
and Personal Property.
(a)
Schedule 5.11(a) sets forth a list of all items of material personal and
mixed,
tangible and intangible property, rights and assets owned or leased by
Azur.
Except as set forth on Schedule 5.11(a), Azur (i) has good and valid title
to
all of the personal and mixed, tangible and intangible property, rights
and
assets which it purports to own, including all the personal property and
assets
reflected in the Azur Financial Statements; and (ii) owns such rights,
assets
and personal property free and clear of all Liens, encumbrances or restrictions
of any nature whatsoever (except for current year ad valorem
taxes).
(b)
Schedule 5.11(b) contains a true and correct description of all real property
owned or leased by Azur, including all improvements located thereon. Except
as
set forth on Schedule 5.11(b), Azur has good and marketable title to all
real
property owned by it, free and clear of any Liens, encumbrances or restrictions
of any nature whatsoever. Harvest has been furnished with true, correct
and
complete copies of all leases, deeds, easements and other documents and
instruments concerning the matters listed on Schedule 5.11(b). No condemnation
or similar actions are currently in effect or pending against any part
of any
real property owned or leased by Azur or, to the knowledge of Azur, no
such
action is threatened against any such real property. There are no encroachments,
leases, easements, covenants, restrictions, reservations or other burdens
of any
nature which might impair in any material respect the use of any owned
or leased
real property in a manner consistent with past practices nor does any part
of
any building structure or any other improvement thereon encroach on any
other
property.
(c)
The
assets owned or leased by Azur (including all buildings and improvements
in
connection therewith) are in good operating condition and repair, ordinary
wear
and tear excepted, and such assets (together with any assets leased by
Azur)
include all rights, properties, interests in properties, and assets necessary
to
permit Azur to carry on its business as presently conducted following the
Share
Exchange.
A-11
SECTION
5.12. Contracts
and Commitments.
(a)
Schedule 5.12 contains a complete and accurate list of all contracts,
agreements, commitments, instruments and obligations (whether written or
oral,
contingent or otherwise) of Azur of or concerning the following matters
which
involve (i) payments by or to Azur in excess of $25,000, (ii) performance
by or
for Azur of services or obligations the value of which is in excess of
$25,000,
or (iii) performance by or for Azur of services or obligations for greater
than
90 days (the "Azur Agreements"):
(i)
the
lease (as lessee or lessor) or license (as licensee or licensor) of any
real or
personal property (tangible or intangible);
(ii)
the
employment or engagement of any officer, director, employee, consultant
or
agent;
(iii)
any
relationship with any Azur Shareholder, or any person or entity affiliated
with
or related to any Azur Shareholder or any officer, director, employee,
consultant or agent of Azur;
(iv)
any
arrangement limiting the freedom of Azur to compete in any manner in any
line of
business;
(v)
any
arrangement that could reasonably be anticipated to have an Azur Material
Adverse Effect;
(vi)
any
arrangement not in the ordinary course of business;
(vii)
any
power of attorney, whether limited or general, granted by or to
Azur;
(viii)
any agreements relating to the making of any loan or advance by
Azur;
(ix)
any
agreements providing for the indemnification by Azur of any Person;
(x)
any
agreements with any Authority except those entered into in the ordinary
course
of business which are not material to Azur;
(xi)
any
broker, distributor, dealer or representative or agency agreements pursuant
to
which Azur made payments in excess of $25,000 during the preceding fiscal
year;
A-12
(xii)
any
agreements (including settlement agreements) currently in effect pursuant
to
which Azur licenses the right to use any Intellectual Property to any Person
or
from any Person (other than license agreements related to off-the-shelf
software
products);
(xiii)
any confidentiality agreements entered into by Azur during the period commencing
three years prior to the date hereof pursuant to which confidential information
has been provided to a third party or by which Azur was restricted from
providing information to third parties, other than confidentiality agreements
entered into in the normal course of business;
(xiv)
any
voting trust or similar agreements relating to any of the ownership interests
in
Azur to which any of the Azur Shareholders or Azur is a party;
(xv)
any
joint venture, partnership or similar documents or agreements; and
(xvi)
any
agreement that materially limits or purports to materially limit the ability
of
Azur to own, operate, sell, transfer, pledge or otherwise dispose of
any
assets.
(b)
Azur
has delivered or will deliver to Harvest true and complete copies of all
Azur
Agreements. Except as indicated on Schedule 5.12, the Azur Agreements are
valid
and enforceable in accordance with their terms (except to the extent limited
by
equitable principles or bankruptcy, insolvency, reorganization or similar
laws
affecting creditors' rights generally) and there is not under any of such
contracts (i) any existing or claimed default by Azur or event which with
the
notice or lapse of time, or both, would constitute a default by Azur or
(ii) to
the knowledge of Azur, any existing or claimed default by any other party
or
event which with notice or lapse of time, or both, would constitute a default
by
any such party. Except as indicated on Schedule 5.12, the continuation
validity
and enforceability of the Azur Agreements will not be affected by the Share
Exchange and the Share Exchange will not result in a breach of, or default
under, or require the consent of any other party to any of the Azur Agreements.
Except as set forth on Schedule 5.12, there is no actual or, to the knowledge
of
Azur, threatened, termination, cancellation or limitation of any Azur Agreements
that would have an Azur Material Adverse Effect. To the knowledge of Azur,
there
is no pending or threatened bankruptcy, insolvency or similar proceeding
with
respect to any other party to the Azur Agreements.
SECTION
5.13. Employment
and Labor Matters.
(a)
Schedule 5.13(a) sets forth (i) the number of full-time and part-time employees
of Azur and (ii) the name and compensation paid to each employee of or
consultant to Azur who currently receives or has received salary, benefits
and
bonuses for the two most recently ended fiscal years in excess of
$50,000.
A-13
(b)
To
the best of its knowledge, Azur is in compliance in all material respects
with
all applicable laws respecting employment and employment practices,terms
and
conditions of employment, wages and hours, occupational safety and health,
including the National Labor Relations Act, the Immigration Reform and
Control
Act of 1986, Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of
1991, 42 U.S.C. Section 1981, the Americans With Disabilities Act, the
Fair
Labor Standards Act, ERISA, the Occupational Safety and Health Act, the
Family
Medical Leave Act, and any other law, ordinance or regulation respecting
the
terms and conditions of employment, including authorization to work in
the
United States, equal employment opportunity (including prohibitions against
discrimination, harassment, and retaliation), payment of wages, hours of
work,
occupational safety and health, and labor practices.
(c)
Except as disclosed on Schedule 5.13(c),
(i)
there
are no charges, governmental audits, investigations, administrative proceedings
or complaints concerning Azur's employment practices pending or, to the
knowledge of Azur, threatened before any federal, state or local agency
or
court, and, to the knowledge of Azur, no basis for any such matter
exists;
(ii)
Azur
is not a party to any union or collective bargaining agreement, and, to
the
knowledge of Azur, no union attempts to organize the employees of Azur
have been
made, nor are any such attempts now threatened; and
(iii)
there are no pending or, to the knowledge of Azur, threatened, material
claims
by any current or former employee of Azur or any employment-related claims
or
investigations by any Authority, including any charges to the Equal Employment
Opportunity Commission or state employment practice agency, investigations
regarding compliance with federal, state or local wage and hour laws, audits
by
the Office of Federal Contractor Compliance Programs, complaints of sexual
harassment or any other form of unlawful harassment, discrimination, or
retaliation.
SECTION
5.14. Employee
Benefit Matters.
Schedule 5.14 attached hereto sets forth a description of all "Employee
Welfare
Benefit Plans" and "Employee Pension Benefit Plans" (as defined in Sections
3(1)
and 3(2), respectively, of the Employee Retirement Income Security Act
of 1974,
as amended ("ERISA")) existing on the date hereof that are or have been
maintained or contributed to by Azur. Except as listed on Schedule 5.14,
Azur
does not maintain any retirement or deferred compensation plan, savings,
incentive, stock option or stock purchase plan, unemployment compensation
plan,
vacation pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangement for any
employee, consultant or agent of Azur, whether pursuant to contract,
arrangement, custom or informal understanding, which do not constitute
an
"Employee Benefit Plan" (as defined in Section 3(3) of ERISA), for which
Azur
may
have any ongoing material liability after Closing. Azur does not maintain
nor
has it ever contributed to any Multi-Employer Plan as defined by Section
3(37)
of ERISA. Azur does not currently maintain any Employee Pension Benefit
Plan
subject to Title IV of ERISA. There have been no "prohibited transactions"
(as
described in Section 406 of ERISA or Section 4975 of the Code) with respect
to
any Employee Pension Benefit Plan or Employee Welfare Benefit Plan maintained
by
Azur as to which Azur has been a party. As to any employee pension benefit
plan
listed on Schedule 5.14 and subject to Title IV of ERISA, there have been
no
reportable events (as such term is defined in Section 4043 of
ERISA).
A-14
SECTION
5.15. Insurance
Policies.
Attached hereto as Schedule 5.15 is a list of all insurance policies of
Azur
setting forth with respect to each policy the name of the insurer, a description
of the policy, the dollar amount of coverage, the amount of the premium,
the
date through which all premiums have been paid, and the expiration date.
Each
insurance policy relating to the insurance referred to in Schedule 5.15
is in
full force and effect, is valid and enforceable, and Azur is not in breach
of or
in default under any such policy. All policies listed on Schedule 5.15
will be
outstanding and duly in force at
the
Closing Date, the premiums payable in respect of such policies have been
paid or
will be paid in full prior to the closing date, and none of such policies
provide for any retrospective premium adjustment or other experience based
liability on the part of Azur. Azur has not received any notice of or any
reason
to believe that there is or has been any actual, threatened, or contemplated
termination or cancellation of any insurance policy relating to the said
insurance. Azur has not since inception (a) been denied or had revoked,
canceled
or rescinded any policy of insurance, or (b) self insured against any risk
ordinarily insured against by similar businesses. Schedule 5.15 contains
a true,
correct and complete list and summary of all claims which have been made
under
each insurance policy relating to the said insurance. Azur has not failed
to
give any notice or to present any claim under any insurance policy in a
due and
timely fashion, and to the best of its knowledge, all insurable risks are
adequately covered by insurance except for any exposure occasioned by lack
of
Directors' and Officers' insurance coverage.
SECTION
5.16. Taxes.
Except
as set forth on Schedule 5.16, Azur has filed or obtained filing extensions
for
all tax returns, federal, state, county, and local, including payroll taxes,
required to be filed by it, and Azur has paid or established adequate reserves
(in accordance with generally accepted accounting principles) for the payment
of
all taxes shown to be due by such returns as well as all other taxes,
assessments, and governmental charges which have become due or payable,
including, without limitation, all taxes which Azur is obligated to withhold
from amounts owing to employees, creditors, and third parties. The federal
income tax returns of Azur have never been audited by the Internal Revenue
Service and no state income or sales tax returns of Azur have been audited.
No
deficiency assessment with respect to or proposed adjustment of
Azur's
federal, state, county, or local taxes, including payroll taxes, is pending
or,
to the best of Azur's knowledge, threatened. There is no tax lien, whether
imposed by any federal, state, county, or local taxing authority, outstanding
against the assets, properties, or business of Azur (other than liens for
taxes
not yet due and payable). Neither Azur nor any of its shareholders have
ever
filed a consent pertaining to Azur pursuant to Section 341(f) of the IRC
(as
hereinafter defined), relating to collapsible corporations.
SECTION
5.17. Interested
Transactions.
Except
as provided on Schedule 5.17, Azur is not a party to any contract, loan
or other
transaction with any Azur Shareholder nor does Azur have any direct or
indirect
interest in or affiliation with any Azur Shareholder to any such contract,
loan
or other transaction. No Azur Shareholder is an employee, consultant, partner,
principal, director or owner of, or has any other direct or indirect interest
in
or affiliation with, any person or business entity that is engaged in a
business
that competes with or is similar to the business of Azur.
A-15
SECTION
5.18. Intellectual
Property.
(a)
Attached hereto as Schedule 5.18 is a true, correct and complete list of
all of
Azur's patents, trademarks, trade names, or trademark or trade name
registrations, domain name registrations, service marks, and copyrights
or
copyright registrations (the "Proprietary Rights"). All of Azur's Proprietary
Rights are valid, enforceable, in full force and effect and free and clear
of
any and all security interests, liens, pledges and encumbrances of any
nature or
kind. Azur has not infringed upon and are not infringing upon any patent,
trademark, trade name, or trademark or trade name registration, service
mark,
copyright, or copyright registration of any other Person.
(b)
No
trade secret or confidential know-how material to the business of Azur
as
currently operated has been disclosed or authorized to be disclosed to
any third
party, other than pursuant to a non-disclosure agreement that protects
Azur's
proprietary interests in and to such trade secrets and confidential know-how,
and other than disclosures to employees, officers, directors, agents, attorneys,
accountants, consultants, independent contractors or other representatives
of
Azur, each of whom is obligated (by contract, employment policy, cannons
of
ethics or the like) to maintain the confidentiality of such
information.
(c)
The
consummation of the transactions contemplated hereby will not result in
the loss
or impairment of the right of Harvest or any of its successors to own,
use,
license or sublicense any of the Intellectual Property currently owned,
used,
licensed or sublicensed by Azur nor will it require the consent of any
Authority
or third party in respect of any such Intellectual Property and no present
or
former employee, or officer of Azur has any right, title or interest, directly
or indirectly, in whole or in part, in any Intellectual Property.
SECTION
5.19. Brokerage.
Except
as disclosed on Schedule 5.19, neither Azur, nor any Exchanging Shareholder
has
employed any broker, finder, advisor, consultant or other intermediary
in
connection with this Agreement or the transactions contemplated by this
Agreement who is or might be entitled to any fee, commission or other
compensation from Azur, or from Harvest or its Affiliates, upon or as a
result
of the execution of this Agreement or the consummation of the transactions
contemplated hereby. Such fee shall be borne by the Azur Shareholders and
not by
Azur or Harvest.
SECTION
5.20. Statements
True and Correct.
No
representation or warranty made herein by Azur nor in any statement, certificate
or instrument to be furnished to Harvest by Azur pursuant to any Share
Exchange
Document, contains or will contain any untrue statement of material fact
or
omits or will omit to state a material fact necessary, in light of the
circumstances under which it was made, to make these statements contained
herein
and therein not misleading.
A-16
ARTICLE
VI
REPRESENTATIONS
AND WARRANTIES OF HARVEST
Harvest
hereby represents and warrants to Azur as follows:
SECTION
6.01. Organization,
Authority and Capicity.
Harvest
is a corporation duly organized, validly existing and in good standing
under the
laws of the State of Delaware. Harvest has the full power and authority
necessary to (a) execute, deliver and perform its obligations under the
Share
Exchange Documents to be executed and delivered by it, and (b) carry on
its
business as it has been and is now being conducted and to own and lease
the
properties and assets which it now owns or leases. Harvest is duly qualified
to
do business and is in good standing in the jurisdictions set forth on Schedule
6.01, which includes, to its knowledge, every state of the United States
in
which the conduct of the business and the ownership of such properties
and
assets requires it to be so qualified.
SECTION
6.02. Authorization
and Validity.
The
execution, delivery and performance of the Share Exchange Documents to
be
executed and delivered by Harvest
have been duly authorized by all necessary corporate action by Harvest.
The
Share Exchange Documents to be executed and delivered by Harvest have been
or
will be, as the case may be, duly executed and delivered by Harvest and
constitute or will constitute the legal, valid and binding obligations
of
Harvest, enforceable in accordance with their respective terms, except
as may be
limited by bankruptcy, insolvency, or other laws affecting creditors' rights
generally, or as may be modified by a court of equity.
SECTION
6.03. Absence
of Conflicting Agreements or Required Consents.
Except
as set forth on Schedule 6.03, the execution, delivery and performance
by
Harvest of the Share Exchange Documents to be executed and delivered by
it: (a)
do not require the consent of or notice to any Authority or any other third
party; (b) will not conflict with any provision of Harvest's articles or
certificate of incorporation or bylaws; (c) do not conflict with or result
in a
violation of any law, ordinance, regulation, ruling, judgment, order or
injunction of any court or governmental instrumentality to which Harvest
is a
party or by which Harvest or any of its respective properties are bound;
(d) do
not conflict with, constitute grounds for termination of, result in a breach
of,
constitute a default
under, require any notice under, or accelerate or permit the acceleration
of any
performance required by the terms of any Harvest Material Agreement; and
(e)
will not create any lien, encumbrance or restriction upon any of the assets
or
properties of Harvest.
SECTION
6.04. Governing
Documents.
True
and correct copies of the organizational documents and all amendments thereto
of
Harvest and copies of the bylaws of Harvest have been provided to Azur.
Xxxx has
previously been provided with access to Harvest's minutes, and such minutes
accurately reflect all proceedings of the shareholders and board of directors
of
Harvest (and all committees thereof).
A-17
SECTION
6.05. Capitalization.
The
authorized capital stock of Harvest consists of 300,000,000 shares of Harvest
Common Stock and 5,000,000 shares of Harvest Preferred Stock. As of the
date of
this Agreement, Harvest has __________ shares of Harvest Common Stock and
no
shares of Preferred Stock issued and outstanding. All issued and outstanding
shares of Harvest Common Stock have been duly and validly issued, and are
fully
paid and non-assessable. Except as set forth in Schedule 6.05, there are
no
outstanding warrants, options, rights, calls or other commitments of any
nature
relating to shares of capital stock of Harvest, no outstanding securities
convertible into or exchangeable for shares of capital stock of Harvest,
and,
Harvest is not obligated to issue or repurchase any of its shares of capital
stock for any reason and no person or entity has any right or privilege
(whether
preemptive or contractual) for the purchase, subscription or issuance of
any
unissued shares of capital stock of Harvest. Except as set forth in Schedule
6.05 or the Certificate of Incorporation, as amended, of Harvest, Harvest
has no
obligation or right (contingent or other) to purchase, redeem, or otherwise
acquire any of its equity securities or any interests therein or to pay
any
dividend or make any other distribution in respect thereof. Except as set
forth
in Schedule 6.05, there are no voting trusts or agreements nor any preemptive
rights relating to any outstanding securities of Harvest (whether or not
Harvest
is a party thereto). No shares of Harvest Common Stock are held in Harvest's
treasury. All outstanding securities of Harvest were issued in compliance
with
all applicable federal and state securities laws. All Harvest Common Stock
to be
issued in connection with the Share Exchange will be duly and validly issued,
fully paid and nonassessable.
SECTION
6.06. Reports and Finanial Statements. Prior to the closing,
Harvest
shall complete, file and make available to Azur (including through the
SEC's
XXXXX system) true and complete copies of Harvest's Annual Report on
Form
10-KSB filed with the SEC for the fiscal year ended April 30, 2005 (the
“Harvest
2005 10-KSB”). To the best of Harvest's knowledge, the audited consolidated
financial statements included in the Harvest 2005 10-KSB (including any
related
notes and schedules) complied as to form, as of their respective dates
of filing
with the SEC, in all material respects with all applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with GAAP consistently applied during
the
periods involved (except as otherwise disclosed in the notes thereto) and
fairly
presented the financial position of Harvest as of the dates thereof and
the
results of operations and cash flows for the periods or as of the dates
then
ended.
SECTION
6.07. Absence
of Changes.
Since
April 30, 2005, Harvest has conducted its business only in the ordinary
course
and has not, except as set forth in the 2005 10-KSB or Schedule
6.07:
(a)
suffered any material adverse change in its working capital, condition
(financial or otherwise), assets, liabilities, reserves, business or
operations;
A-18
(b)
paid,
discharged or satisfied any material liability other than in the ordinary
course
of business;
(c)
written off as uncollectible any account receivable other than in the ordinary
course of business or suffered an impairment of any other asset (or is
aware of
any facts that would result in such write-off or impairment);
(d)
compromised any debts, claims or rights or disposed of any of its properties
or
assets other than in the ordinary course of business;
(e)
entered into any commitments or transactions not in the ordinary course
of
business involving aggregate value in excess of $25,000 or made aggregate
capital expenditures or commitments in excess of $25,000;
(f)
made
any material change in any method of accounting or accounting
practice;
(g)
subjected any of its assets, tangible or intangible, to any Lien, encumbrance
or
restriction of any nature whatsoever, except for liens for current property
taxes not yet due and payable;
(h)
hired, committed to hire or terminated any employee other than in the ordinary
course of business;
(i)
except for payments, dividends or distributions consistent with past practices
for prior periods, declared, set aside or made any payment, dividend or
other
distribution to any holder of Harvest Common Stock or purchased, redeemed
or
otherwise acquired, directly or indirectly, any Harvest Common
Stock;
(j)
terminated or amended any material contract, license or other instrument
to
which Harvest is a party or suffered any loss or termination or threatened
loss
or termination of any existing business arrangement or material supplier,
the
termination or loss of which, in the aggregate, would have a Harvest Material
Adverse Effect;
(k)
effected any change in its capital structure;
(l)
(i)
incurred, assumed or refinanced any Indebtedness other than in the ordinary
course of business consistent with past practice, or (ii) made any loans,
advances or capital contributions to, or investments in, any Person other
than
an Harvest Subsidiary or any employee or officer as a cash advance, in
each case
in the ordinary course of business and consistent with past
practice;
(m)
paid,
discharged or satisfied any liability, obligation, or Lien other than payment,
discharge or satisfaction of (i) Indebtedness as it matures and becomes
due and
payable or (ii) liabilities, obligations or Liens in the ordinary course
of
business consistent with past practice;
A-19
(n)
changed any of the accounting or tax principles, practices or methods used
by
Harvest, except as required by changes in applicable Tax Laws or changed
reserve
amounts or policies;
(o)
(i)
entered into any employment contract or other arrangement or made any change
in
the compensation payable or to become payable to any of the officers of
Harvest
or Persons acting in a similar capacity or Affiliates in the ordinary course
consistent with past practice, (ii) terminated or entered into or amended
any
employment, severance, consulting, termination or other agreement or employee
benefit plan, and except for cash advances made in the ordinary course
of
business consistent with past practice, (iii) paid any bonuses payable
or to
become payable to any of the officers of Harvest or Persons acting in a
similar
capacity or (iv) made any change in its existing borrowing or lending
arrangements for or on behalf of any of such Persons pursuant to an employee
benefit plan or otherwise;
(p)
(i)
paid or made any accrual or arrangement for payment of any pension, retirement
allowance or other employee benefit pursuant to any existing plan, agreement
or
arrangement to any Affiliate, officer, employee or Person acting in a similar
capacity, or paid or agreed to pay or made any accrual or arrangement for
payment to any Affiliate, officers, employees or Persons acting in a similar
capacity of any amount relating to unused vacation days, except payments
and
accruals made in the ordinary course consistent with past practice, (ii)
granted, issued, accelerated or accrued salary or other payments or benefits
pursuant to any pension, profit-sharing, bonus, extra compensation, incentive,
deferred compensation, stock purchase, stock option, stock appreciation
right,
group insurance, severance pay, retirement or other employee benefit plan,
agreement or arrangement, or any employment or consulting agreement with
or for
the benefit of any Affiliate, officer, employee, agent or consultant or
Person
acting in a similar capacity, whether past or present or (iii) amended
in any
material respect any such existing plan, agreement or arrangement to effect
any
of the foregoing;
(q)
made
any payments (other than regular compensation and cash advances payable
to
officers and employees or Persons acting in a similar capacity of Harvest
in the
ordinary course consistent with past practice), loans, advances or other
distributions, or enter into any transaction, agreement or arrangement
with, the
Harvest Shareholders, any Harvest Affiliates, officers, employees, agents,
consultants or Persons acting in a similar capacity, stockholders of their
Affiliates, associates or family members;
(r)
settled or compromised any Tax liability or agreed to any adjustment of
any Tax
attribute or made any election with respect to Taxes;
(s)
(i)
made any change in its working capital practices generally, including
accelerating any collections of cash or accounts receivable or deferring
payments or (ii) failed to make timely accruals, including with respect
to
accounts payable and liabilities incurred in the ordinary course of
business;
A-20
(t)
failed to renew (at levels consistent with presently existing levels),
terminated or amended or failed to perform any of its obligations or permitted
any material default to exist or caused any material breach under, or entered
into (except for renewals in the ordinary course of business consistent
with
past practice), any policy of insurance;
(u)
except in the ordinary course of business consistent with past practice
pursuant
to appropriate confidentiality agreements, and except as required by any
Law or
as may be reasonably necessary to secure or protect intellectual or other
property rights of Harvest, provided any confidential information to any
Person
other than Harvest; or
(v)
agreed, whether in writing or otherwise, to take any action described in
this
Section 6.07.
SECTION
6.08. No
Undisclosed Liabiities.
To the
best of Harvest's knowledge, Harvest does not have any Liabilities or
obligations of any nature, whether or not accrued, contingent or otherwise,
except (a) Liabilities or obligations reflected in the 2005 10-KSB, (b)
Liabilities incurred in the ordinary course of business since April 30,
2005, or
(c) Liabilities or obligations that would not, individually or in the aggregate,
have a Harvest Material Adverse Effect.
SECTION
6.09. Litigation.
Except
as listed on Schedule 6.09 hereto and except for matters that are covered
by
Harvest's insurance (taking into account any applicable limits on coverage),
(a)
there are no claims, lawsuits, actions, arbitrations, administrative or
other
proceedings pending (a "Claim") against Harvest, or to the knowledge of
Harvest,
no such matter is threatened, and there is no basis for any such action,
(b) to
the knowledge of Harvest, there are no governmental or administrative
investigations or inquiries pending that involve Harvest, (c) there are
no
judgments against or consent decrees binding on Harvest or its assets or
which
may have an adverse effect on, the business or goodwill of Harvest; and
(d) all
Claims have been reported to the appropriate insurance carrier and, to
the
knowledge of Harvest, Harvest has not received a notice of denial of coverage
or
a reservation of rights. A list of all outstanding Claims against Harvest
is set
forth on Schedule 6.15.
SECTION
6.10. No
Violation of Law.
The
business of Harvest has not been and is not currently in violation of any
local,
state or federal law, ordinance, regulation, order, injunction or decree,
or any
other requirement of any governmental body
except
(a) as described in the 2005 10-KSB and (b) for violations that would not,
individually or in the aggregate, have a Harvest Material Adverse
Effect.
A-21
SECTION
6.11. Real
and Personal Property.
(a)
Schedule 6.11(a) sets forth a list of all items of material personal and
mixed,
tangible and intangible property, rights and assets owned or leased by
Harvest.
Except as set forth on Schedule 6.11(a), Harvest (i) has good and valid
title to
all of the personal and mixed, tangible and intangible property, rights
and
assets which it purports to own, including all the personal property and
assets
reflected in the Harvest Financial Statements; and (ii) owns such rights,
assets
and personal property free and clear of all Liens, encumbrances or restrictions
of any nature whatsoever (except for current year ad valorem
taxes).
(b)
Schedule 6.11(b) contains a true and correct description of all real property
owned or leased by Harvest, including all improvements located thereon.
Except
as set forth on Schedule 6.11(b), Harvest has good and marketable title
to all
real property owned by it, free and clear of any Liens, encumbrances or
restrictions of any nature whatsoever. Azur has been furnished with true,
correct and complete copies of all leases, deeds, easements and other documents
and instruments concerning the matters listed on Schedule 6.11(b). No
condemnation or similar actions are currently in effect or pending against
any
part of any real property owned or leased by Harvest or, to the knowledge
of
Harvest, no such action is threatened against any such real property. There
are
no encroachments, leases, easements, covenants, restrictions, reservations
or
other burdens of any nature which might impair in any material respect
the use
of any owned or leased
real property in a manner consistent with past practices nor does any part
of
any building structure or any other improvement thereon encroach on any
other
property.
(c)
The
assets owned or leased by Harvest (including all buildings and improvements
in
connection therewith) are in good operating condition and repair, ordinary
wear
and tear excepted, and such assets (together with any assets leased by
Harvest)
include all rights, properties, interests in properties, and assets necessary
to
permit Harvest to carry on its business as presently conducted following
the
Share Exchange.
SECTION
6.12. Contracts
and Commitments.
(a)
Schedule 6.12 contains a complete and accurate list of all contracts,
agreements, commitments, instruments and obligations (whether written or
oral,
contingent or otherwise) of Harvest of or concerning the following matters
which
involve (i) payments by or to Harvest in excess of $25,000, (ii) performance
by
or for Harvest of services or obligations the value of which is in excess
of
$25,000, or (iii) performance by or for Harvest of services or obligations
for
greater than 90 days (the "Harvest Agreements"):
(i)
the
lease (as lessee or lessor) or license (as licensee or licensor) of any
real or
personal property (tangible or intangible);
(ii)
the
employment or engagement of any officer, director, employee, consultant
or
agent;
A-22
(iii)
any
relationship with any Harvest Shareholder, or any person or entity affiliated
with or related to any Harvest Shareholder or any officer, director, employee,
consultant or agent of Harvest;
(iv)
any
arrangement limiting the freedom of Harvest to compete in any manner in
any line
of business;
(v)
any
arrangement that could reasonably be anticipated to have a Harvest Material
Adverse Effect;
(vi)
any
arrangement not in the ordinary course of business;
(vii)
any
power of attorney, whether limited or general, granted by or to
Harvest;
(viii)
any agreements relating to the making of any loan or advance by
Harvest;
(ix)
any
agreements providing for the indemnification by Harvest of any
Person;
(x)
any
agreements with any Authority except those entered into in the ordinary
course
of business which are not material to Harvest;
(xi)
any
broker, distributor, dealer or representative or agency agreements pursuant
to
which Harvest made payments in excess of $25,000 during the preceding fiscal
year;
(xii)
any
agreements (including settlement agreements) currently in effect pursuant
to
which Harvest licenses the right to use any Intellectual Property to
any
Person
or
from any Person (other than license agreements related to off-the-shelf
software
products);
(xiii)
any confidentiality agreements entered into by Harvest during the period
commencing three years prior to the date hereof pursuant to which confidential
information has been provided to a third party or by which Harvest was
restricted from providing information to third parties, other than
confidentiality agreements entered into in the normal course of
business;
(xiv)
any
voting trust or similar agreements relating to any of the ownership interests
in
Harvest to which any of the Harvest Shareholders or Harvest is a
party;
(xv)
any
joint venture, partnership or similar documents or agreements; and
A-23
(xvi)
any
agreement that materially limits or purports to materially limit the ability
of
Harvest to own, operate, sell, transfer, pledge or otherwise dispose of
any
assets.
(b)
Harvest has delivered or will deliver to Azur true and complete copies
of all
Harvest Agreements. Except as indicated on Schedule 6.12, the Harvest Agreements
are valid and enforceable in accordance with their terms (except to the
extent
limited by equitable principles or bankruptcy, insolvency, reorganization
or
similar laws affecting
creditors' rights generally) and there is not under any of such contracts
(i)
any existing or claimed default by Harvest or event which with the notice
or
lapse of time, or both, would constitute a default by Harvest or (ii) to
the
knowledge of Harvest, any existing or claimed default by any other party
or
event which with notice or lapse of time, or both, would constitute a default
by
any such party. Except as indicated on Schedule 6.12, the continuation,
validity
and enforceability of the Harvest Agreements will not be affected by the
Share
Exchange and the Share Exchange will not result in a breach of, or default
under, or require the consent of any other party to any of the Harvest
Agreements. Except as set forth on Schedule 6.12, there is no actual or,
to the
knowledge of Harvest, threatened termination, cancellation or limitation
of any
Harvest Agreements that would have a Harvest Material Adverse Effect. To
the
knowledge of Harvest, there is no pending or threatened bankruptcy, insolvency
or similar proceeding with respect to any other party to the Harvest
Agreements.
SECTION
6.13. Employment
and Labor Matters.
(a)
Schedule 6.13(a) sets forth (i) the number of full-time and part-time employees
of Harvest and (ii) the name and compensation paid to each employee of
or
consultant to Harvest who currently receives or has received salary, benefits
and bonuses for the two most recently ended fiscal years in excess of
$50,000.
(b)
To
the best of its knowledge, Harvest is in compliance in all material respects
with all applicable laws respecting employment and employment practices,
terms
and conditions of employment, wages and hours, occupational safety and
health,
including the National Labor Relations Act, the Immigration Reform and
Control
Act of 1986, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, 42 U.S.C. Section 1981,
the
Americans With Disabilities Act, the Fair Labor Standards Act, ERISA, the
Occupational Safety and Health Act, the Family Medical Leave Act, and any
other
law, ordinance or regulation respecting the terms and conditions of employment,
including authorization to work in the United States, equal employment
opportunity (including prohibitions against discrimination, harassment,
and
retaliation), payment of wages, hours of work, occupational safety and
health,
and labor practices.
(c)
Except as disclosed on Schedule 6.13(c),
(i)
there
are no charges, governmental audits, investigations, administrative proceedings
or complaints concerning Harvest's employment practices pending or, to
the
knowledge of Harvest, threatened before any federal, state or local agency
or
court, and, to the knowledge of Harvest, no basis for any such matter
exists;
A-24
(ii)
Harvest is not a party to any union or collective bargaining agreement,
and, to
the knowledge of Harvest, no union attempts to organize the employees of
Harvest
have been made, nor are any such attempts now threatened; and
(iii)
there are no pending or, to the knowledge of Harvest, threatened material
claims
by any current or former employee of Harvest or any employment-related
claims or
investigations by any Authority, including any charges to the Equal Employment
Opportunity Commission or state employment practice agency, investigations
regarding compliance with federal, state or local wage and hour laws, audits
by
the Office of Federal Contractor Compliance Programs, complaints of sexual
harassment or any other form of unlawful harassment, discrimination, or
retaliation.
SECTION
6.14. Employee
Benefit Matters.
There
are no "Employee Welfare Benefit Plans" or "Employee Pension Benefit Plans"
(as
defined in Sections 3(1) and 3(2), respectively, of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) existing on the date
hereof
that are or have been maintained or contributed to
by
Harvest. Harvest does not maintain any retirement or deferred compensation
plan,
savings, incentive, stock option or stock purchase plan, unemployment
compensation plan, vacation pay, severance pay, bonus or benefit arrangement,
insurance or hospitalization program or any other fringe benefit arrangement
for
any employee, consultant or agent of Harvest, whether pursuant to contract,
arrangement, custom or informal understanding, which do not constitute
an
"Employee Benefit Plan" (as defined in Section 3(3) of ERISA), for which
Harvest
may have any ongoing material liability after Closing. Harvest does not
maintain
nor has it ever contributed to any
Multi-Employer Plan as defined by Section 3(37) of ERISA. Harvest does
not
currently
maintain any Employee Pension Benefit Plan subject to Title IV of ERISA.
SECTION
6.15. Insurance
Policies.
Attached hereto as Schedule 6.15 is a list of all insurance policies of
Harvest
setting forth with respect to each policy the name of the insurer, a description
of the policy, the dollar amount of coverage, the amount of the premium,
the
date through which all premiums have been paid, and the expiration date.
Each
insurance policy relating to the insurance referred to in Schedule 6.15
is in
full force and effect, is valid and enforceable, and Harvest is not in
breach of
or in default under any such policy. All policies listed on Schedule 6.15
will
be outstanding and duly in force at the Closing Date, the premiums payable
in
respect of such policies have been paid or will be paid in full prior to
the
closing date, and none of such policies provide for any retrospective premium
adjustment or other experience based liability on the part of Harvest.
Harvest
has not received any notice of or any reason to believe that there is or
has
been any actual, threatened, or contemplated termination or cancellation
of any
insurance policy relating to the said insurance. Harvest has not since
inception
(a) been denied or had revoked, canceled or rescinded any policy of insurance,
or (b) self insured against any risk ordinarily insured against by similar
businesses. Schedule 6.15 contains a true, correct and complete list and
summary
of all claims which have been made under each insurance policy relating
to the
said insurance. Harvest has not failed to give any notice or to present
any
claim under any insurance policy in a due and timely fashion, and to the
best of
its knowledge, all insurable risks are adequately covered by insurance
except
for any exposure occasioned by lack of Directors' and Officers' insurance
coverage.
A-25
SECTION
6.16. Taxes.
Except
as set forth on Schedule 6.16, Harvest has filed or obtained filing extensions
for all tax returns, federal, state, county, and local, including payroll
taxes,
required to be filed by it, and Harvest has paid or established adequate
reserves (in accordance with generally accepted accounting principles)
for the
payment of all taxes shown to be due by such returns as well as all other
taxes,
assessments, and governmental charges which have become due or payable,
including, without limitation, all taxes which Harvest is obligated to
withhold
from amounts owing to employees, creditors, and third parties. The federal
income tax returns of Harvest have never been audited
by the Internal Revenue Service and no state income or sales tax returns
of
Harvest have been audited. No deficiency assessment with respect to or
proposed
adjustment of Harvest's federal, state, county, or local taxes, including
payroll taxes, is pending or, to the best of Harvest's knowledge, threatened.
There is no tax lien, whether imposed by any federal, state, county, or
local
taxing authority, outstanding against the assets, properties, or business
of
Harvest (other than liens for taxes not yet due and payable). Neither Harvest
nor any of its shareholders have ever filed a consent pertaining to Harvest
pursuant to Section 341(f) of the IRC (as hereinafter defined), relating
to
collapsible corporations.
SECTION
6.17. Interested
Transactions.
Except
as provided on Schedule 6.17, Harvest is not a party to any contract, loan
or
other transaction with any Harvest Shareholder nor does Harvest have any
direct
or indirect interest in or affiliation with any Harvest Shareholder to
any such
contract, loan or other transaction. No Harvest Shareholder is an employee,
consultant, partner, principal, director or owner of, or has any other
direct or
indirect interest in or affiliation with, any person or business entity
that is
engaged in a business that competes with or is similar to the business
of
Harvest.
SECTION
6.18. Intellectual
Property.
(a)
Attached hereto as Schedule 6.18 is a true, correct and complete list of
all of
Harvest's patents, trademarks, trade names, or trademark or trade name
registrations, domain name registrations, service marks, and copyrights
or
copyright registrations (the "Proprietary Rights"). All of Harvest's Proprietary
Rights are valid, enforceable, in full force and effect and free and clear
of
any and all security interests, liens, pledges and encumbrances of any
nature or
kind. Harvest has not infringed upon and are not infringing upon any patent,
trademark, trade name, or trademark or trade name registration, service
mark,
copyright, or copyright registration of any other Person.
(b)
No
trade secret or confidential know-how material to the business of Harvest
as
currently operated has been disclosed or authorized to be disclosed to
any third
party, other than pursuant to a non-disclosure agreement that protects
Harvest's
proprietary interests in and to such trade secrets and confidential know-how,
and other than disclosures to employees, officers, directors, agents, attorneys,
accountants, consultants, independent contractors or other representatives
of
Harvest, each of whom is obligated (by contract, employment policy, cannons
of
ethics or the like) to maintain the confidentiality of such
information.
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(c)
The
consummation of the transactions contemplated hereby will not result in
the loss
or impairment of the right of Harvest or any of its successors to own,
use,
license or sublicense any of the Intellectual Property currently owned,
used,
licensed or sublicensed by Harvest nor will it require the consent of any
Authority or third party in respect of any such Intellectual Property and
no
present or former employee, or officer of Harvest has any right, title
or
interest, directly or indirectly, in whole or in part, in any Intellectual
Property.
SECTION
6.19. Brokerage.
Except
as disclosed on Schedule 6.20, Harvest has not employed any broker, finder,
advisor, consultant or other intermediary in connection with this Agreement
or
the transactions contemplated by this Agreement who is or might be entitled
to
any fee, commission or other compensation from Harvest, or from Azur or
its
Affiliates, upon or as a result of the execution of this Agreement or the
consummation of the transactions contemplated hereby. Such fee shall be
borne by
Harvest.
SECTION
6.20. Subsidiaries.
Harvest
does not have any subsidiaries and does not, directly or indirectly, own
a
controlling interest in any corporation, partnership, joint venture or
other
entity.
SECTION
6.21. Statements
True and Correct.
No
representation or warranty made herein by Harvest, nor in any statement,
certificate or instrument to be furnished to Azur or the Azur Shareholders
by
Harvest pursuant to any Share Exchange Document, contains or will contain
any
untrue statement of material fact or omits or will omit to state a material
fact
necessary, in light of the circumstances under which it was made, to make
these
statements contained herein and therein not misleading.
ARTICLE
VII
ADDITIONAL
AGREEMENTS
SECTION
7.01. Access
to Information.
From
the date of this Agreement through the Closing Date, Azur will afford the
officers and authorized representatives of Harvest access during regular
business hours and upon reasonable notice to Azur's properties, books and
records that may relate to or concern the Share Exchange and will furnish
such
parties with such additional financial, operating and other information
as to
the business and properties of Azur as such parties may from time to time
reasonably request. Such parties shall also be allowed access, upon reasonable
notice, to consult with the officers, employees, accountants, counsel and
agents
of Azur in connection with such investigation of the properties and business
of
Azur. In addition, from the date of this Agreement through the Closing
Date,
Harvest will afford the officers and authorized representatives of Azur
access
during regular business hours and upon reasonable notice to all of Harvest's
properties, books and records that may relate to or concern the Share Exchange
and will furnish such parties with such additional financial, operating
and
other information as to the business and properties of Harvest as such
parties
may from time to time reasonably request. Such parties shall also be allowed
access, upon reasonable notice, to consult with the officers, employees,
accountants, counsel and agents of Harvest in connection with such investigation
of the properties and business of Harvest. In each case, such access or
investigation shall be subject to Section 7.07.
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SECTION
7.02. Sale
of Shares.
(a)
The
Harvest Common Stock to be issued in the Share Exchange will be issued
by
Harvest pursuant to an effective registration statement under the Securities
Act.
SECTION
7.03. Affirmative
Covenants of Azur.
From
the date hereof until the earlier of the Effective Time or the termination
of
this Agreement, Azur covenants and agrees that, unless the prior written
consent
of Harvest shall have been obtained, and except as otherwise expressly
contemplated herein, Azur shall:
(a)
operate its business only in the usual, regular, and ordinary course of
business, consistent with past practices;
(b)
use
reasonable commercial efforts to preserve intact its business organization,
licenses, permits, government programs, private programs and
customers;
(c)
use
reasonable commercial efforts to retain the services of its employees,
agents
and consultants on terms and conditions not less favorable than those existing
prior to the date hereof and to ensure that there are no material or adverse
changes to employee relations;
(d)
keep
and maintain its assets in their present condition, repair and working
order,
except for normal depreciation and wear and tear, and maintain its insurance,
rights and licenses;
(e)
pay
all accounts payable of Azur in accordance with past practice and collect
all
accounts receivable in accordance with past practice;
(f)
consult with Harvest prior to undertaking any new business opportunity
outside
the ordinary course of business and not undertake such new business opportunity
without the prior written consent of Harvest;
A-28
(g)
perform in all material respects all obligations under agreements relating
to or
affecting its assets, properties or rights;
(h)
keep
in full force and effect present insurance policies or other comparable
insurance coverage; and
(i)
notify Harvest of (i) any event or circumstance which has caused or constituted,
or is reasonably likely to have an Azur Material Adverse Effect or would
cause
or constitute, a breach of any of the representations, warranties or covenants
contained herein by Azur or the Azur Shareholders; or (ii) any material
change
in the normal course of business or in the operation of the assets, and
of any
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), adjudicatory proceedings,
budget
meetings or submissions involving Azur or any material property of Azur.
Xxxx
agrees to keep Harvest fully informed of such events and to permit Harvest's
representatives prompt access to all materials prepared in connection
therewith.
SECTION
7.04. Negative
Covenants of Azur.
From
the date hereof until the earlier of the Effective Time or the termination
of
this Agreement, Azur covenants and agrees that it will not do any of the
following without the prior written consent of Harvest:
(a)
take
any action which would (i) adversely affect the ability of any party to
the
Share Exchange Documents to obtain any consents required for the transactions
contemplated thereby, or (ii) adversely affect the ability of any party
hereto
to perform its covenants
and agreements under the Share Exchange Documents;
(b)
amend
any of its organizational or governing documents;
(c)
incur
any additional debt obligation or other obligation for borrowed money,
except in
the ordinary course of the business of Azur consistent with past practices,
or
impose, or suffer the imposition, on any asset of Azur of any lien or permit
any
such lien to exist;
(d)
repurchase, redeem, or otherwise acquire or exchange, directly or indirectly,
any Azur Common Stock, or declare or pay any dividend or make any other
distribution in respect of Azur Common Stock;
(e)
other
than pursuant to the Share Exchange Documents, issue, sell, pledge, encumber,
authorize the issuance of, enter into any contract to issue, sell, pledge,
encumber, or authorize the issuance of, or otherwise permit to become
outstanding, any additional Azur Common Stock or any rights with respect
to any
Azur Common Stock;
(f)
purchase or acquire any assets or properties, whether real or personal,
tangible
or intangible, or sell or dispose of any assets or properties, whether
real or
personal, tangible or intangible, except in the ordinary course of business
and
consistent with past practices;
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(g)
adjust, split, combine or reclassify any Azur Common Stock or issue or
authorize
the issuance of any other securities in respect of or in substitution for
Azur
Common Stock, or sell, lease, mortgage or otherwise dispose of or otherwise
encumber any asset having a book value in excess of $50,000 other than
in the
ordinary course of
business
for reasonable and adequate consideration;
(h)
take
any action, or omit to take any action, which would cause any of the
representations and warranties contained in Article V to be untrue or incorrect;
and
(i)
shall
not agree, in writing or otherwise, to take any of the foregoing actions
or take
any action that would result in any of the conditions to the Share Exchange
not
being satisfied, or, except as otherwise allowed hereunder, that could
reasonably be expected to prevent, impede, interfere with or significantly
delay
the transactions contemplated hereby.
SECTION
7.05. Affirmative
Covenants of Harvest.
From
the date hereof until the earlier of the Effective Time or the termination
of
this Agreement, Harvest covenants and agrees that, unless the prior written
consent of Azur shall have been obtained, and except as otherwise expressly
contemplated herein, Harvest shall:
(a)
use
reasonable commercial efforts to preserve intact its business organization,
licenses, permits, government programs, private programs and customers;
and
(b)
notify Azur of (i) any event or circumstance which has caused or constituted,
or
is reasonably likely to have a Harvest Material Adverse Effect or would
cause or
constitute, a breach of any of Harvest's representations, warranties or
covenants contained herein; or (ii) any material change in the normal course
of
business or in the operation of Harvest's assets, and of any material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated) or adjudicatory
proceedings.
SECTION
7.06. Negative
Covenants of Harvest.
From
the date hereof until the earlier of the Effective Time or the termination
of
this Agreement, Harvest covenants and agrees that Harvest, will not do
any of
the following without the prior written consent of Azur:
(a)
take
any action which would (i) adversely affect the ability of any party to
the
Share Exchange Documents to obtain any consents required for the transactions
contemplated thereby, or (ii) adversely affect the ability of any party
hereto
to perform its covenants and agreements under the Share Exchange
Documents;
(b)
take
any action, or omit to take any action, which would cause any of the
representations and warranties contained in Article VI to be untrue or
incorrect.
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SECTION
7.07. Confidentiality.
Harvest
and Azur agree that each shall hold in confidence any confidential information
about the other that it has received, or hereafter receives, pursuant to
any
provision of this Agreement under circumstances indicating the confidentiality
of such information unless (a) such information shall have been publicly
disclosed other than as a result of any wrongful action by the recipient
of such
information or (b) the recipient of such information independently develops
or
is aware of such information.
SECTION
7.08. Public
Announcements.
Harvest
and Azur will consult with each other before issuing any press releases
or
otherwise making any public statements or filings with governmental entities
with respect to this Agreement or the transactions contemplated hereby
and shall
not issue any press releases or make any public statements or filings with
governmental entities prior to such consultation and shall modify any portion
thereof if the other party objects thereto, unless the same may be required
by
applicable
law.
SECTION
7.09. Filings
With State Offices.
Upon
the terms and subject to the conditions of this Agreement, Azur and Harvest
shall execute and file Articles
of Exchange with the Secretary of State of the State of Nevada in connection
with the Closing.
SECTION
7.10. Conditions
to Closing.
Azur
and Harvest agree to use their commercially reasonable best efforts to
satisfy
the closing conditions set forth in Articles VIII and IX of this Agreement
within three (3) business days after all regulatory matters have been complied
with.
ARTICLE
VIII
CONDITIONS
TO OBLIGATIONS OF HARVEST
The
obligation of Harvest to consummate the Share Exchange is subject to the
satisfaction or written waiver, at or prior to Closing, of each of the
following
conditions:
SECTION
8.01. Representations
and Warranties.
The
representations and warranties of Azur set forth in this Agreement, or
any
document or instrument delivered to Harvest hereunder, shall be true and
correct
in all material respects as of the Effective Time with the same force and
effect
as if such representations and warranties had been made at and as of the
Effective Time, except with respect to any of such representations and
warranties referring to a state of facts existing on a specified date prior
to
the
Closing Date, it shall be sufficient if at the Effective Time such
representation and warranty continues to describe accurately the state
of facts
existing on the date so specified; provided,
however,
that
Azur shall have five days to cure any such material breach of a representation
or warranty (it being agreed that such five day period shall commence as
to such
breach upon Harvest becoming aware thereof and that disclosure of a matter
subsequent to the date hereof shall not constitute a cure).
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SECTION
8.02. Performance;
Covenants.
All of
the terms, covenants and conditions of the Share Exchange Documents to
be
complied with or performed by Azur at or prior to Closing shall have been
complied with and performed in all material respects including, but not
limited
to, the delivery of the following documents:
(a)
A
good standing certificate regarding Azur, certified by the Secretary of
State of
Nevada and the respective Secretaries of State of all states where Xxxx
is
qualified to do business, dated within 30 business days of the
Closing;
(b)
A
certificate dated as of the Closing Date signed by the duly authorized
officers
of Azur certifying that the representations and warranties of Azur set
forth
herein are true and correct in all material respects as of the Effective
Time
and that Azur and each of the Azur Shareholders have fulfilled all of the
conditions of this Article VIII;
(c)
Written consents of all third parties necessary for the consummation of
the
transactions contemplated by the Share Exchange Documents;
(d)
Resolutions duly adopted by Azur’s Board of Directors approving the execution,
delivery and performance of this Agreement and the consummation of the
Share
Exchange, certified by an appropriate officer of Azur; and
(e)
All
books and records of Azur, including all corporate and other records, minute
books, stock record books, stock registers, books of accounts, contracts,
agreements and such other documents or certificates as shall be reasonably
requested by Harvest, which the parties acknowledge will at the Closing
be
located at the corporate offices of Azur.
SECTION
8.03. Necessary
Consents and Approvals.
Harvest
and Azur shall have obtained all licenses, consents and permits, provided
all
notices, and all waiting periods required by Law, shall have expired, necessary
in order for Harvest and Azur to consummate the Share Exchange.
SECTION
8.04. No
Material Adverse Change.
There
shall not have occurred an Azur Material Adverse Effect between the date
hereof
and the Effective Time or a material change in the financial condition
of Azur
as represented in the Azur Financial Statements and the Schedules attached
to
this Agreement.
SECTION
8.05. No
Injuction, etc.
No
action, proceeding, investigation or legislation shall have been instituted,
threatened or proposed before any court, governmental agency, or legislative
body to enjoin, restrain, prohibit or obtain substantial damages in respect
of,
or which is related to, arises out of, this Agreement or the consummation
of the
Share Exchange, or which is related to or arises out of the business or
operations of Azur, if such action, proceeding, investigation or legislation,
in
the reasonable judgment of Harvest or its counsel, would make it inadvisable
to
consummate such transactions. In the event any order, decree or injunction
shall
have been issued, each party shall use its reasonable efforts to remove
any such
order, decree or injunction.
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SECTION
8.06. Azur
Shareholder Approval.
This
Agreement and all other documents and instruments to be delivered in connection
herewith, shall have been approved by the Azur Shareholders.
SECTION
8.07. Articles
of Exchange.
Azur
shall have executed and delivered to Harvest the Articles of Exchange to
be
filed with the Secretary of State of the State of Nevada in connection
with the
Share Exchange.
SECTION
8.08. Tax-Free
Share Exchange.
The
Parties are reasonably satisfied that as of the Closing Date, the transactions
contemplated by the Share Exchange will qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Code.
SECTION
8.09. Registration
Statement Effective.
The
Registration Statement on Form S-4 covering the issuance of the Harvest
Common
Stock to be issued to the Azur Shareholders in the Share Exchange shall
have
been declared effective by the SEC and the effectiveness of such registration
statement shall not have been suspended.
ARTICLE
IX
CONDITIONS
TO OBLIGATIONS OF AZUR AND AZUR SHAREHOLDERS
The
obligations of Azur and the Azur Shareholders to close the Share Exchange
are
subject to the satisfaction or waiver, at or prior to Closing, of each
of the
following conditions:
SECTION
9.01. Representations
and Warranties.
The
representations and warranties of Harvest set forth in this Agreement,
or any
document or instrument delivered to any party hereunder, shall be true
and
correct in all material respects as of the Effective Time with the same
force
and effect as if such representations and warranties had been made at and
as of
the Effective Time, except with respect to any of such representations
and
warranties referring to a state of facts existing at a specified date prior
to
the Closing Date, it shall be sufficient if at the Effective Time such
representation and warranty continues to describe accurately in all material
respects the state of facts existing on the date so specified; provided,
however,
that
Harvest shall have five days to cure any such material breach of a
representation or warranty (it being agreed that such five day period shall
commence as to such breach upon Azur becoming aware thereof and that disclosure
of a matter subsequent to the date hereof shall not constitute a
cure).
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SECTION
9.02. Performance;
Covenants.
All of
the terms, covenants and conditions of this Agreement to be complied with
or
performed by Harvest at or prior to the Closing shall have been complied
with
and performed in all material respects, including, but not limited to delivery
of the following documents:
(a)
A
good standing certificate regarding Harvest certified by the Secretary
of State
of the State of Delaware, dated within 30 days prior to Closing;
(b)
A
certificate dated as of the Closing Date signed by a duly authorized officer
of
Harvest certifying that the representations and warranties of Harvest set
forth
herein are true and correct in all material respects as of the Effective
Time
and that Harvest has fulfilled all of the conditions of this Article;
and
(c)
Resolutions duly adopted by the Board of Directors of Harvest approving
the
execution, delivery and performance of this Agreement and the consummation
of
the Share Exchange, certified by an appropriate officer of Harvest;
SECTION
9.03. Necessary
Consents and Approvals. Harvest
and Azur
shall have obtained all licenses, consents and permits, provided all notices,
and all waiting periods required by Law, shall have expired, necessary
in order
for Harvest and Azur to consummate the Share Exchange.
SECTION
9.04. No
Material Adverse Change.
There
shall not have occurred a Harvest Material Adverse Effect between the date
hereof and the Effective Time.
SECTION
9.05. No
Injunction, etc.
No
action, proceeding, investigation or legislation shall have been instituted,
threatened or proposed before any court, governmental agency, or legislative
body to enjoin, restrain, prohibit or obtain substantial damages in respect
of,
or which is related to, arises out of, this Agreement or the consummation
of the
Share Exchange, or which is related to or arises out of the business or
operations of Harvest, if such action, proceeding, investigation or legislation,
in the reasonable judgment of Azur or its counsel, would make it inadvisable
to
consummate such transactions. In the event any order, decree or injunction
shall
have been issued, each party shall use its reasonable efforts to remove
any such
order, decree or injunction.
SECTION
9.06. Articles
of Exchange.
Harvest
shall have executed and delivered to Azur the articles of exchange to be
filed
with the Secretary of State of the State of Nevada in connection with the
Share
Exchange.
SECTION
9.07. Tax-Free
Share Exchange.
The
Parties are reasonably satisfied that as of the Closing Date, the transactions
contemplated by the Share Exchange will qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Code.
SECTION
9.08. Harvest
Shareholder Approval.
Harvest
shall have taken all steps required by the GCDL and the federal securities
laws
to obtain the consent of a majority of its shareholders in favor of the
Amendment and to notify the remaining shareholders of the
Amendment.
SECTION
9.09. Registration
Statement Effective.
The
Registration Statement on Form S-4 covering the issuance of the Harvest
Common
Stock to be issued to the Azur Shareholders in the Share Exchange shall
have
been declared effective by the SEC and the effectiveness of such registration
statement shall not have been suspended.
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ARTICLE
X
TERMINATION
SECTION
10.01. Right
of Termination.
This
Agreement and the Share Exchange may be terminated at any time prior to
the
Closing Date:
(a)
By
the mutual written consent of Harvest and Azur.
(b)
by
either Harvest or Azur if any court of competent jurisdiction in the United
States or any State shall have issued an order, judgment or decree (other
than a
temporary restraining order) restraining, enjoining or otherwise prohibiting
the
exchange of stock and such order, judgment or decree shall have become
final and
nonappealable; provided that the right to terminate this Agreement under
this
Section 10.01(b) shall not be available to any party whose failure to fulfill
any obligation under this Agreement has been the cause of, or resulted
in, the
failure of the completion of the Closing to occur on or before such date;
or
(c)
by
Harvest if there has been (i) a material breach of any covenant or agreement
or
of a representation or warranty herein on the part of Azur which has not
been
cured, or adequate assurance (acceptable to Harvest in its sole discretion)
of
cure given, in either case, within fifteen (15) business days following
receipt
of notice of such breach; or
(d)
by
Azur if (i) there has been a material breach of any covenant or agreement
or of
a representation or warranty herein on the part of Harvest which has not
been
cured, or adequate assurance (acceptable to Azur in its sole discretion)
of cure
given, in either case, within fifteen (15) business days following receipt
of
notice of such breach or (ii) at Closing Harvest shall not be listed on
the
Over-the-Counter Bulletin Board; or
(e)
by
either Harvest or Azur (and the Azur Shareholders) if either of such party's
due
diligence investigation has disclosed the existence of (i) any matter relating
to the other party or its business that is materially and adversely (to
the
investigating party) at variance with those matters theretofore disclosed
to the
investigating party, or (ii) any matter which, in the investigating party's
reasonable judgment, (A) indicates a material adverse change in the condition,
assets or prospects of the other party, or (B) would make it inadvisable
to
consummate the exchange of stock and other transactions contemplated by
this
Agreement.
SECTION
10.02. Effect
of Termination.
In the
event of termination in accordance with this Article X, this Agreement
shall
become void and of no further force or effect, without any liability on
the part
of any of the parties hereto or their respective owners, directors, officers
or
employees, except the obligations of each party to preserve the confidentiality
of documents, certificates and information furnished to such party pursuant
thereto and for any obligation or liability of any party based on or arising
from any breach or default by any such party with respect to his or its
particular representations, warranties, covenants or agreements, as to
his or
its particular actions or
inactions,
contained in the Share Exchange Documents.
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ARTICLE
XI
SURVIVAL
OF TERMS; INDEMNIFICATION
SECTION
11.01. INDEMNIFICATION BY HARVEST. Harvest shall defend, indemnify and
hold
harmless Azur and the Azur Shareholders and their respective heirs, personal
and
legal representatives, guardians, successors and assigns, from and against
any
and all claims, threats, liabilities, taxes, interest, fines, penalties,
suits,
actions, proceedings, demands, damages, losses, costs and expenses (including
attorneys' and experts' fees and court costs) of every kind and nature
arising
out of, resulting from or in connection with any misrepresentation or omission
or breach by Harvest of any representation or warranty contained in this
Agreement.
SECTION
11.02. Indemnification
by Azur.
Azur
shall defend, indemnify and hold harmless Harvest and its respective
representatives, successors and assigns, from and against any and all claims,
threats, liabilities, taxes, interest, fines, penalties, suits, actions,
proceedings, demands, damages, losses, costs and expenses (including attorneys'
and experts' fees and court costs) of every kind and nature arising out
of,
resulting from, or in connection with any misrepresentation or omission
or
breach by Azur of any representation or warranty contained in this
Agreement.
ARTICLE
XII
MISCELLANEOUS
PROVISIONS
SECTION
12.01. Notices.
(a)
Any
notice sent in accordance with the provisions of this Section 12.01 shall
be
deemed to have been received (even if delivery is refused or unclaimed)
on the
date which is: (i) the date of proper posting, if sent by certified U.S.
mail or
by express U.S. mail or private overnight courier; or (ii) the date on
which
sent, if sent by facsimile transmission, with confirmation and with the
original
to be sent by certified U.S. mail, addressed as follows:
|
If
to Azur:
|
Azur International, Inc. |
| 000 XX 0xx Xxxxxx, Xxxxx 0000 | |
| Fort Lauderdale, Florida 33301 | |
| Attention: Xxxxxx Xxxx, Esq. | |
| Facsimile: 000-000-0000 |
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|
If
to Harvest:
|
New Harvest Capital Corporation |
| 000 XX 0xx Xxxxxx, Xxxxx 0000 | |
| Fort Lauderdale, Florida 33301 | |
| Attention: Xxxxxx Xxxxxxx | |
| Facsimile: 000-000-0000 | |
(b)
Any
party hereto may change its address specified for notices herein by designating
a new address by notice in accordance with this Section
12.01.
SECTION
12.02. Expenses.
Each of
the parties hereto shall bear and pay all costs and expenses incurred by
it or
on its behalf in connection with the transactions contemplated hereunder,
including any fees of brokers, finders investment bankers or other agents
or
incurred to obtain a fairness opinion.
SECTION
12.03. Further
Assurances.
Each
party covenants that at any time, and from time to time, after the Closing,
it
will execute such additional instruments and take such actions as may be
reasonably requested by the other parties to confirm or perfect or otherwise
to
carry out the intent and purposes of this Agreement.
SECTION
12.04. Waiver.
Any
failure on the part of any party to comply with any of its obligations,
agreements or conditions hereunder may be waived by any other party to
whom such
compliance is owed. No waiver of any provision of this Agreement shall
be
deemed, or shall constitute, a waiver of any other provision, whether or
not
similar, nor shall any waiver constitute a continuing waiver.
SECTION
12.05. Assignment.
Neither
this Agreement nor any of the rights, interests or obligations hereunder
shall
be assigned by any of the parties hereto without the prior written consent
of
all other parties.
SECTION
12.06. Binding
Effect.
This
Agreement shall be binding upon and inure to the benefit of the parties
hereto
and their respective heirs, legal representatives, executors, administrators,
successors and permitted assigns. This Agreement shall survive the Closing
and
not be merged therein.
SECTION
12.07. Headings.
The
headings contained in this Agreement are for reference purposes only and
shall
not affect in any way the meaning or interpretation of this
Agreement.
SECTION
12.08. Entire
Agreement.
This
Agreement and the Exhibits, Schedules, certificates and other documents
delivered pursuant hereto or incorporated herein by reference, contain
and
constitute the entire agreement among the parties and supersede and cancel
any
prior agreements, representations, warranties, or communications, whether
oral
or written, among the parties relating to the transactions contemplated
by this
Agreement. Neither this Agreement nor any provision hereof may be changed,
waived, discharged or terminated orally, but only by an agreement in writing
signed by the party against whom or which the enforcement of such change,
waiver, discharge or termination is sought.
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SECTION
12.09. Governing
Law; Severability.
This
Agreement shall be governed by and construed in accordance with the Laws
of the
State of Florida, without regard to any applicable conflicts of Laws, except
that all matters concerning corporate governance and the procedure for
and
effect of the Share Exchnage shall be governed by the laws of the States
of
Nevada, in the case of Azur, and Delaware, in the case of Harvest. The
Agreement
are severable and the invalidity of one or more of the provisions herein
shall
not have any effect upon the validity or enforceability of any other
provision.
SECTION
12.10. Counterparts.
This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and
the same
instrument.
SECTION
12.11. Brokers
and Finders.
Except
as set forth on Schedule 12.11, neither Azur, on the one hand, nor Harvest,
on
the other hand, has employed or otherwise incurred in any manner any liability
for any brokerage fees, agents commissions or finder's fees concerning
the
transactions contemplated hereby.
SECTION
12.12. Schedules
and Exhibits.
All
Schedules and Exhibits attached to this Agreement are by reference made
a part
hereof. All Schedules will be attached to this Agreement prior to the Closing.
All Exhibits will be attached to this Agreement within five (5) after this
Agreement is signed by all parties.
SECTION
12.13. Enforcement
of Agreement.
Except
as otherwise provided herein, any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other
remedy.
Azur hereby agrees that money damages or other remedy at law would not
be
sufficient or adequate remedy for any breach or violation of, or a default
under, this Agreement by it and that in addition to all other remedies
available
to Harvest, Harvest shall be entitled to the fullest extent permitted by
law to
an injunction restraining such breach, violation or default or threatened
breach, violation or default and to any other equitable relief, including,
without limitation, specific performance, without bond or other security
being
required.
ARTICLE
XIII
CERTAIN
DEFINITIONS
Except
as
otherwise provided herein, the capitalized terms set forth below
shall have the following meanings:
"Affiliate"
shall mean, with regard to any Person, (a) any Person, directly or indirectly,
controlled by, under common control of, or controlling such Person, (b)
any
Person, directly or indirectly, in which such Person holds, of record or
beneficially, five percent or more of the equity or voting securities,
(c) any
Person that holds, of record or beneficially, five percent or more of the
equity
or voting securities of such Person, (d) any Person that, through Contract,
relationship or otherwise, exerts a substantial influence on the management
of
such Person's affairs, (e) any Person that, through Contract, relationship
or
otherwise, is influenced substantially in the management of their affairs
by
such Person, or (f) any director, officer, partner or individual holding
a
similar position in respect of such Person.
A-38
"Agreement"
shall mean this Plan and Agreement to Exchange Stock.
"Authority"
shall mean any governmental, regulatory or administrative body, agency,
arbitrator or authority, any court or judicial authority, any public, private
or
industry regulatory agency, arbitrator authority, whether international,
national, federal, state or local.
"Claim"
shall have the meaning set forth in Section 5.09.
"Closing
Date" shall have the meaning set forth in Section 1.02.
"Closing"
shall mean the meaning set forth in Section 1.02.
"Code"
shall mean the Internal Revenue Code of 1986, as amended.
"GCDL"
shall mean the General Corporation Law of the State of Delaware.
"Effective
Time" shall have the meaning set forth in Section 1.03.
"ERISA"
shall mean the Employee Retirement Security Act of 1974, as amended.
"Exchange
Agent" shall have the meaning set forth in Section 3.01.
"Exchange
Ratio" shall have the meaning set forth in Section 2.02.
"Intellectual
Property" shall mean all letters patent, patent applications, inventions
upon
which patent applications have not yet been filed, trade names, trademarks,
trademark registrations and applications, service marks, service mark
registrations and applications, copyrights and copyright registrations
and
applications, both domestic and foreign, owned, possessed or used by a
Party.
"Knowledge"
or "known," "to the knowledge of," or similar references shall mean the
actual
knowledge of any of the directors, officers or managerial personnel of
Azur with
respect to the matter in question, and such knowledge as any of the directors,
officers or managerial personnel of Azur reasonably should have obtained
upon
diligent investigation and inquiry into the matter in question.
A-39
"Lien"
shall mean any mortgage, deed of trust, pledge, hypothecation, assignment,
deposit arrangement, encumbrance (including, without limitation, any easement,
right-of-way, zoning or similar restriction or title defect), lien (statutory
or
other) or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation,
any
conditional sale or other title retention agreement, any financing lease
having
substantially the same economic effect as any of the foregoing and the
filing of
any financing statement under the UCC or comparable law of any
jurisdiction).
"Azur"
shall mean Azur International, Inc., a Nevada corporation.
"Azur
Agreements" shall have the meaning set forth in Section 5.12.
"Azur
Common Stock" shall mean the Common Stock, par value $.001 per share, of
Azur.
"Azur
Material Adverse Effect" shall have mean a material adverse effect on (a)
Azur's
ability to perform its obligations under the Share Exchange Documents to
be
executed and delivered by it or (b) the assets, results of operations or
prospects of Azur taken as a whole.
"Person"
shall mean any corporation, partnership, joint venture, Azur, syndicate,
organization, association, trust, entity, joint stock Azur, unincorporated
organization, Authority or natural person.
"Harvest"
shall mean New Harvest Capital Corporation, a Delaware corporation.
"Harvest
Common Stock" shall mean the common stock, $.0001 par value, of
Harvest.
"Harvest
Material Adverse Effect" shall mean a material adverse effect on (a) Harvest's
ability to perform its obligations under the Share Exchange Documents to
be
executed and delivered by it or, (b) the assets, results of operations
or
prospects of Harvest and its Subsidiaries taken as a whole.
"SEC"
shall mean the Securities and Exchange Commission.
"Securities
Act" shall mean the Securities Act of 1933, as amended.
"Share
Exchange" shall have the meaning set forth in Section 1.01.
"Share
Exchange Documents" shall have the meaning set forth in Section 5.01.
A-40
"Shareholders"
shall mean all of the holders of Azur Common Stock.
"Subsidiary"
shall mean any Person of which a majority of the outstanding voting securities
or other voting equity interests are owned, directly or indirectly.
"Tax
Return" means any return, declaration, report, claim for refund or information
return or statement relating to Taxes, including any schedule or attachment
thereto and including any amendment thereof.
"Tax"
shall mean any Federal, state, local or foreign income, gross receipts,
license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including taxes under Section 59A of the Code),
customs
duties, capital stock, franchise, profits, withholding, social security
(or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax of any kind whatsoever, including any interest,
penalty
or addition thereto, whether disputed or not, and "Taxes" means any or
all of
the foregoing collectively.
Any
singular term in this Agreement shall be deemed to include the plural,
and any
plural term the singular. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed followed by
the
words "without limitation."
IN
WITNESS WHEREOF, each of the Parties has caused this Plan and Agreement
to
Exchange Stock to be executed on its behalf and its corporate seal to be
hereunto
affixed and attested by officers thereunto as of the day and year first
above
written.
| NEW HARVEST CAPITAL CORPORATION | |
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| AZUR INTERNATIONAL, INC. | |
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A-41
EXHIBIT
B
NEVADA
APPRAISAL RIGHTS STATUTE
NRS
92A.300 DEFINITIONS. As used in NRS 92A.300 to 92A.500, inclusive, unless
the
context otherwise requires, the words and terms defined in NRS 92A.305
to
92A.335, inclusive, have the meanings ascribed to them in those sections.
NRS
92A.305 "BENEFICIAL STOCKHOLDER" DEFINED. "Beneficial stockholder" means
a
person who is a beneficial owner of shares held in a voting trust or by
a
nominee as the stockholder of record.
NRS
92A.310 "CORPORATE ACTION"DEFINED. "Corporate action" means the action
of a
domestic corporation.
NRS
92A.315 "DISSENTER" DEFINED. "Dissenter" means a stockholder who is entitled
to
dissent from a domestic corporation's action under NRS 92A.380 and who
exercises
that right when and in the manner required by NRS 92A.400 to 92A.480,
inclusive.
NRS
92A.320 "FAIR VALUE" DEFINED. "Fair value," with respect to a dissenter's
shares, means the value of the shares immediately before the effectuation
of the
corporate action to which he objects, excluding any appreciation or depreciation
in anticipation of the corporate action unless exclusion would be
inequitable.
NRS
92A.325 "STOCKHOLDER" DEFINED. "Stockholder" means a stockholder of record
or a
beneficial stockholder of a domestic corporation.
NRS
92A.330 "STOCKHOLDER OF RECORD" DEFINED. "Stockholder of record" means
the
person in whose name shares are registered in the records of a domestic
corporation or the beneficial owner of shares to the extent of the rights
granted by a nominee's certificate on file with the domestic
corporation.
NRS
92A.335 "SUBJECT CORPORATION" DEFINED. "Subject corporation" means the
domestic
corporation which is the issuer of the shares held by a dissenter before
the
corporate action creating the dissenter's rights becomes effective or the
surviving or acquiring entity of that issuer after the corporate action
becomes
effective.
B-1
NRS
92A.340 COMPUTATION OF INTEREST. Interest payable pursuant to NRS 92A.300
to
92A.500, inclusive, must be computed from the effective date of the action
until
the date of payment, at the average rate currently paid by the entity on
its
principal bank loans or, if it has no bank loans, at a rate that is fair
and
equitable under all of the circumstances.
NRS
92A.350 RIGHTS OF DISSENTING PARTNER OF DOMESTIC LIMITED PARTNERSHIP. A
partnership agreement of a domestic limited partnership or, unless otherwise
provided in the partnership agreement, an agreement of merger
or
exchange, may provide that contractual rights with respect to the partnership
interest of a dissenting general or limited partner of a domestic limited
partnership are available for any class or group of partnership interests
in
connection with any
merger
or exchange in which the domestic limited partnership is a constituent
entity.
NRS
92A.360 RIGHTS OF DISSENTING MEMBER OF DOMESTIC LIMITED-LIABILITY COMPANY.
The
articles of organization or operating agreement of a domestic limited-liability
company or, unless otherwise provided in the articles of organization or
operating agreement, an agreement of merger
or
exchange, may provide that contractual rights with respect to the interest
of a
dissenting member are available in connection with any merger
or
exchange in which the domestic limited-liability company is a constituent
entity.
NRS
92A.370 RIGHTS OF DISSENTING MEMBER OF DOMESTIC NONPROFIT
CORPORATION.
1.
Except
as otherwise provided in subsection 2, and unless otherwise provided in
the
articles or bylaws, any member of any constituent domestic nonprofit corporation
who voted against the merger
may, without prior notice, but within 30 days after the effective date
of the
merger,
resign from membership and is thereby excused from all contractual obligations
to the constituent or surviving corporations which did not occur before
his
resignation and is thereby entitled to those rights, if any, which would
have
existed if there had been no merger
and the membership had been terminated or the member had been
expelled.
B-2
NRS
92A.380 RIGHT OF STOCKHOLDER TO DISSENT FROM CERTAIN CORPORATE ACTIONS
AND TO
OBTAIN PAYMENT FOR SHARES.
1.
Except
as otherwise provided in NRS 92A.370 and 92A.390, any stockholder is entitled
to
dissent from, and obtain payment of the fair value of his shares in the
event of
any of the following corporate actions:
(a)
Consummation of a conversion or plan of merger
to
which the domestic corporation is a constituent entity:
(1)
If
approval by the stockholders is required for the conversion or merger
by
NRS 92A.120 to 92A.160, inclusive, or the articles of incorporation, regardless
of whether the stockholder is entitled to vote on the conversion or plan
of
merger;
or
(2)
If
the domestic corporation is a subsidiary and is merged with its parent
pursuant
to NRS 92A.180.
(b)
Consummation of a plan of exchange to which the domestic corporation is
a
constituent entity as the corporation whose subject owner's interests will
be
acquired, if his shares are to be acquired in the plan of exchange.
(c)
Any
corporate action taken pursuant to a vote of the stockholders to the extent
that
the articles of incorporation, bylaws or a resolution of the board of directors
provides that voting or nonvoting stockholders are entitled to dissent
and
obtain payment for their shares.
2.
A
stockholder who is entitled to dissent and obtain payment pursuant to NRS
92A.300 to 92A.500, inclusive, may not challenge the corporate action creating
his entitlement unless the action is unlawful or fraudulent with respect
to him
or the domestic corporation.
NRS
92A.390 LIMITATIONS ON RIGHT OF DISSENT: STOCKHOLDERS OF CERTAIN CLASSES
OR
SERIES; ACTION OF STOCKHOLDERS NOT REQUIRED FOR PLAN OF MERGER.
1.
There
is no right of dissent with respect to a plan of merger
or
exchange in favor of stockholders of any class or series which, at the
record
date fixed to determine the stockholders entitled to receive notice of
and to
vote at the meeting at which the plan of merger
or
exchange is to be acted on, were either listed on a national securities
exchange, included in the national market system by the National Association
of
Securities Dealers, Inc., or held by at least 2,000 stockholders of record,
unless:
(a)
The
articles of incorporation of the corporation issuing the shares provide
otherwise; or
B-3
(b)
The
holders of the class or series are required under the plan of
merger
or exchange to accept for the shares anything except:
(1)
Xxxx,
owner's interests or owner's interests and cash in lieu of fractional owner's
interests of:
(I)
The
surviving or acquiring entity; or
(II)
Any
other entity which, at the effective date of the plan of merger
or
exchange, were either listed on a national securities exchange, included
in the
national market system by the National Association of Securities Dealers,
Inc.,
or held of record by a least 2,000 holders of owner's interests of record;
or
(2)
A
combination of cash and owner's interests of the kind described in
sub-subparagraphs (I) and (II) of subparagraph (1) of paragraph (b).
2.
There
is no right of dissent for any holders of stock of the surviving domestic
corporation if the plan of merger
does not require action of the stockholders of the surviving domestic
corporation under NRS 92A.130.
NRS
92A.400 LIMITATIONS ON RIGHT OF DISSENT: ASSERTION AS TO PORTIONS ONLY
TO SHARES
REGISTERED TO STOCKHOLDER; ASSERTION BY BENEFICIAL STOCKHOLDER.
1.
A
stockholder of record may assert dissenter's rights as to fewer than all
of the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the subject corporation
in
writing of the name and address of each person on whose behalf he asserts
dissenter's rights. The rights of a partial dissenter under this subsection
are
determined as if the shares as to which he dissents and his other shares
were
registered in the names of different stockholders.
2.
A
beneficial stockholder may assert dissenter's rights as to shares held
on his
behalf only if:
(a)
He
submits to the subject corporation the written consent of the stockholder
of
record to the dissent not later than the time the beneficial stockholder
asserts
dissenter's rights; and
(b)
He
does so with respect to all shares of which he is the beneficial stockholder
or
over which he has power to direct the vote.
B-4
NRS
92A.410 NOTIFICATION OF STOCKHOLDERS REGARDING RIGHT OF DISSENT.
1.
If a
proposed corporate action creating dissenters' rights is submitted to a
vote at
a stockholders' meeting, the notice of the meeting must state that stockholders
are or may be entitled to assert dissenters' rights under NRS 92A.300 to
92A.500, inclusive, and be accompanied by a copy of those sections.
2.
If the
corporate action creating dissenters' rights is taken by written consent
of the
stockholders or without a vote of the stockholders, the domestic corporation
shall notify in writing all stockholders entitled to assert dissenters'
rights
that the action was taken and send them the dissenter's notice described
in NRS
92A.430.
NRS
92A.420 PREREQUISITES TO DEMAND FOR PAYMENT FOR SHARES.
1.
If a
proposed corporate action creating dissenters' rights is submitted to a
vote at
a stockholders' meeting, a stockholder who wishes to assert dissenter's
rights:
(a)
Must
deliver to the subject corporation, before the vote is taken, written notice
of
his intent to demand payment for his shares if the proposed action is
effectuated; and
(b)
Must
not vote his shares in favor of the proposed action.
2.
A
stockholder who does not satisfy the requirements of subsection 1 and NRS
92A.400 is not entitled to payment for his shares under this
chapter.
NRS
92A.430 DISSENTER'S NOTICE: DELIVERY TO STOCKHOLDERS ENTITLED TO ASSERT
RIGHTS;
CONTENTS.
1.
If a
proposed corporate action creating dissenters' rights is authorized at
a
stockholders' meeting, the subject corporation shall deliver a written
dissenter's notice to all stockholders who satisfied the requirements to
assert
those rights.
2.
The
dissenter's notice must be sent no later than 10 days after the effectuation
of
the corporate action, and must:
(a)
State
where the demand for payment must be sent and where and when certificates,
if
any, for shares must be deposited;
(b)
Inform the holders of shares not represented by certificates to what extent
the
transfer of the shares will be restricted after the demand for payment
is
received;
(c)
Supply a form for demanding payment that includes the date of the first
announcement to the news media or to the stockholders of the terms of the
proposed action and requires that the person asserting dissenter's rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
B-5
(d)
Set a
date by which the subject corporation must receive the demand for payment,
which
may not be less than 30 nor more than 60 days after the date the notice
is
delivered; and
(e)
Be
accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.
NRS
92A.440 DEMAND FOR PAYMENT AND DEPOSIT OF CERTIFICATES; RETENTION OF RIGHTS
OF
STOCKHOLDER.
1.
A
stockholder to whom a dissenter's notice is sent must:
(a)
Demand payment;
(b)
Certify whether he or the beneficial owner on whose behalf he is dissenting,
as
the case may be, acquired beneficial ownership of the shares before the
date
required to be set forth in the dissenter's notice for this certification;
and
(c)
Deposit his certificates, if any, in accordance with the terms of the
notice.
2.
The
stockholder who demands payment and deposits his certificates, if any,
before
the proposed corporate action is taken retains all other rights of a stockholder
until those rights are cancelled or modified by the taking of the proposed
corporate action.
B-6
3.
The
stockholder who does not demand payment or deposit his certificates where
required, each by the date set forth in the dissenter's notice, is not
entitled
to payment for his shares under this chapter.
NRS
92A.450 UNCERTIFICATED SHARES: AUTHORITY TO RESTRICT TRANSFER AFTER DEMAND
FOR
PAYMENT; RETENTION OF RIGHTS OF STOCKHOLDER.
1.
The
subject corporation may restrict the transfer of shares not represented
by a
certificate from the date the demand for their payment is received.
2.
The
person for whom dissenter's rights are asserted as to shares not represented
by
a certificate retains all other rights of a stockholder until those rights
are
cancelled or modified by the taking of the proposed corporate
action.
B-7
NRS
92A.460 PAYMENT FOR SHARES: GENERAL REQUIREMENTS.
1.
Except
as otherwise provided in NRS 92A.470, within 30 days after receipt of a
demand
for payment, the subject corporation shall pay each dissenter who complied
with
NRS 92A.440 the amount the subject corporation estimates to be the fair
value of
his shares, plus accrued interest. The obligation of the subject corporation
under this subsection may be enforced by the district court:
(a)
Of
the county where the corporation's registered office is located; or
(b)
At
the election of any dissenter residing or having its registered office
in this
state, of the county where the dissenter resides or has its registered
office.
The court shall dispose of the complaint promptly.
2.
The
payment must be accompanied by:
(a)
The
subject corporation's balance sheet as of the end of a fiscal year ending
not
more than 16 months before the date of payment, a statement of income for
that
year, a statement of changes in the stockholders' equity for that year
and the
latest available interim financial statements, if any;
(b)
A
statement of the subject corporation's estimate of the fair value of the
shares;
(c)An
explanation of how the interest was calculated;
(d)
A
statement of the dissenter's rights to demand payment under NRS 92A.480;
and
(e)
A
copy of NRS 92A.300 to 92A.500, inclusive.
NRS
92A.470 PAYMENT FOR SHARES: SHARES ACQUIRED ON OR AFTER DATE OF DISSENTER'S
NOTICE.
1.
A
subject corporation may elect to withhold payment from a dissenter unless
he was
the beneficial owner of the shares before the date set forth in the dissenter's
notice as the date of the first announcement to the news media or to the
stockholders of the terms of the proposed action.
2.
To the
extent the subject corporation elects to withhold payment, after taking
the
proposed action, it shall estimate the fair value of the shares, plus accrued
interest, and shall offer to pay this amount to each dissenter who agrees
to
accept it in full satisfaction of his demand. The subject corporation shall
send
with its offer a statement of its estimate of the fair value of the shares,
an
explanation of how the interest was calculated, and a statement of the
dissenters' right to demand payment pursuant to NRS 92A.480.
B-8
NRS
92A.480 DISSENTER'S ESTIMATE OF FAIR VALUE: NOTIFICATION OF SUBJECT CORPORATION;
DEMAND FOR PAYMENT OF ESTIMATE.
1.
A
dissenter may notify the subject corporation in writing of his own estimate
of
the fair value of his shares and the amount of interest due, and demand
payment
of his estimate, less any payment pursuant to NRS 92A.460, or reject the
offer
pursuant to NRS 92A.470 and demand payment of the fair value of his shares
and
interest due, if he believes that the amount paid pursuant to NRS 92A.460
or
offered pursuant to NRS 92A.470 is less than the fair value of his shares
or
that the interest due is incorrectly calculated.
2.
A
dissenter waives his right to demand payment pursuant to this section unless
he
notifies the subject corporation of his demand in writing within 30 days
after
the subject corporation made or offered payment for his shares.
NRS
92A.490 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: DUTIES OF SUBJECT CORPORATION;
POWERS OF COURT; RIGHTS OF DISSENTER.
1.
If a
demand for payment remains unsettled, the subject corporation shall commence
a
proceeding within 60 days after receiving the demand and petition the court
to
determine the fair value of the shares and accrued interest. If the subject
corporation does not commence the proceeding within the 60-day period,
it shall
pay each dissenter whose demand remains unsettled the amount
demanded.
2.
A
subject corporation shall commence the proceeding in the district court
of the
county where its registered office is located. If the subject corporation
is a
foreign entity without a resident agent in the state, it shall commence
the
proceeding in the county where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign entity was
located.
3.
The
subject corporation shall make all dissenters, whether or not residents
of
Nevada,
whose demands remain unsettled, parties to the proceeding as in an action
against their shares. All parties must be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by publication
as
provided by law.
4.
The
jurisdiction of the court in which the proceeding is commenced under subsection
2 is plenary and exclusive. The court may appoint one or more persons as
appraisers to receive evidence and recommend a decision on the question
of fair
value. The appraisers have the powers described in the order appointing
them, or
any amendment thereto. The dissenters are entitled to the same discovery
rights
as parties in other civil proceedings.
B-9
5.
Each
dissenter who is made a party to the proceeding is entitled to a
judgment:
(a)
For
the amount, if any, by which the court finds the fair value of his shares,
plus
interest, exceeds the amount paid by the subject corporation; or
(b)
For
the fair value, plus accrued interest, of his after-acquired shares for
which
the subject corporation elected to withhold payment pursuant to NRS
92A.470.
NRS
92A.500 LEGAL PROCEEDING TO DETERMINE FAIR VALUE: ASSESSMENT OF COSTS AND
FEES.
1.
The
court in a proceeding to determine fair value shall determine all of the
costs
of the proceeding, including the reasonable compensation and expenses of
any
appraisers appointed by the court. The court shall assess the costs against
the
subject corporation, except that the court may assess costs against all
or some
of the dissenters, in amounts the court finds equitable, to the extent
the court
finds the dissenters acted arbitrarily, vexatiously or not in good faith
in
demanding payment.
2.
The
court may also assess the fees and expenses of the counsel and experts
for the
respective parties, in amounts the court finds equitable:
(a)
Against the subject corporation and in favor of all dissenters if the court
finds the subject corporation did not substantially comply with the requirements
of NRS 92A.300 to 92A.500, inclusive; or
(b)
Against either the subject corporation or a dissenter in favor of any other
party, if the court finds that the party against whom the fees and expenses
are
assessed acted arbitrarily, vexatiously or not in good faith with respect
to the
rights provided by NRS 92A.300 to 92A.500, inclusive.
3.
If the
court finds that the services of counsel for any dissenter were of substantial
benefit to other dissenters similarly situated, and that the fees for those
services should not be assessed against the subject corporation, the court
may
award to those counsel reasonable fees to be paid out of the amounts awarded
to
the dissenters who were benefited.
4.
In a
proceeding commenced pursuant to NRS 92A.460, the court may assess the
costs
against the subject corporation, except that the court may assess costs
against
all or some of the dissenters who are parties to the proceeding, in amounts
the
court finds equitable, to the extent the court finds that such parties
did not
act in good faith in instituting the proceeding.
5.
This section does not preclude any party in a
proceeding commenced pursuant to NRS 92A.460 or 92A.490 from applying the
provisions of N.R.C.P. 68 or NRS 17.115.
B-10
Exhibit
C
[FORM
OF
PROXY FOR HOLDERS OF AZUR COMMON STOCK]
AZUR
INTERNATIONAL, INC.
PROXY
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR
THE
SPECIAL MEETING OF STOCKHOLDERS
TO
BE
HELD ON , 2005
THE
UNDERSIGNED HEREBY APPOINTS [ ] AND [ ], EACH WITH POWER TO
ACT
WITHOUT THE OTHER AND WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION,
AS
PROXIES TO VOTE, AS DESIGNATED HEREIN, ALL STOCK OF AZUR INTERNATIONAL,
INC.
OWNED BY THE UNDERSIGNED AT THE SPECIAL MEETING OF STOCKHOLDERS TO BE HELD
AT
______________________________ ON
,
, 2005, AT A.M.,
LOCAL TIME, AND AT ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF, UPON
THE
MATTER SET FORTH ON THE REVERSE SIDE OF THIS PROXY, AS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT/PROSPECTUS, AND ANY SUCH OTHER BUSINESS AS
MAY
PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT
THEREOF.
YOU
ARE
ENCOURAGED TO SPECIFY YOUR CHOICE BY MARKING THE APPROPRIATE BOX. SEE REVERSE
SIDE. YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN ACCORDANCE WITH
THE BOARD
OF DIRECTORS' RECOMMENDATION. THE PROXIES CANNOT VOTE YOUR SHARES UNLESS
YOU
SIGN AND RETURN THIS CARD.
(CONTINUED
AND TO BE SIGNED AND DATED ON REVERSE SIDE)
AZUR
INTERNATIONAL, INC.
PLEASE
MARK VOTE IN THE BOX IN THE FOLLOWING MANNER USING DARK INK ONLY.
THE
BOARD
OF DIRECTORS RECOMMENDS VOTING FOR THE FOLLOWING PROPOSAL:
| 1. | To adopt the Plan and Agreement to |
For
|
Against
|
Abstain
|
| Exchange Stock by and between New Harvest Capital Corporation |
o
|
o
|
o
|
|
|
and
Azur International, Inc., dated as of ____________,
and
|
||||
| approve the transaction contemplated thereby in which all of | ||||
| the outstanding shares of Azur common stock will be | ||||
| converted into the right to receive a number of shares of | ||||
| New Harvest common stock based on the exchange ratio of one | ||||
| shares of New Harvest common stock for each two shares of | ||||
| Azur common stock | ||||
UNLESS
OTHERWISE MARKED, THIS PROXY WILL BE VOTED FOR THE ADOPTION OF THE SHARE
EXCHANGE AGREEMENT AND APPROVAL OF THE SHARE EXCHANGE AND, IN THE DISCRETION
OF
THE PROXY HOLDERS, ON ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
SPECIAL
MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
C-1
YOUR
VOTE
IS IMPORTANT. PLEASE SIGN AND RETURN THIS PROXY CARD PROMPTLY.
If
you
plan to attend the Special Meeting, please mark this box: o
| Date: | ||
| _______________________________, 2005 | ||
| ____________________________________ | ||
| (SIGNATURE) | ||
| ____________________________________ | ||
| (SIGNATURE) | ||
Please
sign exactly as your name appears hereon and mail this proxy in the enclosed
envelope. Joint owners should each sign. When signing as attorney,
administrator, executor, guardian or trustee, please give your full title
as
such. If executed by a corporation, the proxy should be signed by a duly
authorized officer. If executed by a partnership, please sign in the partnership
name by an authorized person.
TO
VOTE
BY MAIL:
– Xxxx,
sign and date your proxy card.
–
Return
your proxy card in the postage-paid envelope provided.
YOUR
VOTE
IS IMPORTANT. THANK YOU FOR VOTING.
C-2
