UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 2003.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required) for the transition period from to .
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Commission file number: 33-22128-D
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Nexia Holdings, Inc.
(Name of Small Business Issuer in Its Charter)
Nevada 84-1062062
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
268 West 400 South, Suite 300, Salt Lake City, Utah 84101
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(Address of Principal Executive Offices) (Zip Code)
(801) 575-8073
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock ($0.001 Par Value) None
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- ----
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X].
The issuer's total consolidated revenues for the year ended December 31, 2003
were $787,585.
The aggregate market value of the registrant's common stock, $0.001 par value
(the only class of voting stock), held by non-affiliates was approximately
$260,453 based on the average closing bid and asked prices for the Common Stock
on May 12, 2004 of $0.002 per share.
On May 12, 2004, the number of shares outstanding of the registrant's common
stock, $0.001 par value was 507,586,094., the number of shares of preferred
stock, $0.001 par value was 5,100,000.
TABLE OF CONTENTS
PAGE
PART I
Item 1. Description of Business..........................................2
Item 2. Description of Property..........................................8
Item 3. Legal Proceedings...............................................12
Item 4. Submission of Matters to a Vote of Security-Holders.............13
PART II
Item 5. Market for Common Equity and Related Stockholder Matters........13
Item 6. Management's Discussion and Analysis or Plan of Operation.......16
Item 7. Financial Statements............................................23
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.............................24
Item 8A. Controls and Procedures.........................................24
PART III
Item 9. Directors and Executive Officers................................24
Item 10. Executive Compensation..........................................24
Item 11. Security Ownership of Certain Beneficial Owners and Management..25
Item 12. Certain Relationships and Related Transactions..................26
Item 13. Exhibits, List and Reports on Form 8-K..........................27
Item 14. Principal Accountant Fees and Services..........................28
Signatures..............................................29
Index to Exhibits.......................................31
1
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General.
As used herein the terms "Company" and "Nexia" refer to Nexia Holdings, Inc., a
Nevada corporation and its subsidiaries and predecessors. Nexia was incorporated
under the laws of the State of Colorado on April 20, 1987. Nexia has undergone
several name changes since its organization. The Company moved its domicile to
the State of Nevada on October 5, 2000, by merging with a Nevada corporation
established for the purpose of facilitating the change of domicile. Nexia has
been involved in several previous business activities, all of which were
discontinued in February of 1998. On August 29, 2000, the Company became a
holding company by purchasing a majority interest in Wichita Development
Corporation ("Wichita"), whose primary business function became real estate
operations. The shares held in Wichita were subsequently spun-off to Company
shareholders in January of 2001 on a pro rata basis.
On February 15, 2002 the Company entered into a Stock Purchase Agreement
("Agreement") with Axia Group, Inc., a related party ("Axia"), pursuant to which
the Company issued to Axia 255,100,000 restricted shares of the Company's common
stock in exchange for essentially all of the assets and liabilities of Axia
including a portfolio of securities, real estate holdings and publicly reporting
shell-companies. The shares issued to Axia equaled approximately 82% of the
issued and outstanding shares of the Company after the close of the transaction.
Axia on December 10, 2002 spun-off those 255,100,000 shares of the Company's
common stock to Axia's shareholders on a pro rata basis. Nexia intends to manage
the Axia interests acquired as a result of this transaction in a manner similar
to that previously followed by Axia. For more information on this transaction,
see the Company's Form 8-K filed February 27, 2002 and as amended on May 1,
2002.
On June 30, 2003, Nexia sold its interest in Wichita Development Corporation
(Wichita) and its subsidiaries Salt Lake Development Corporation and Wichita
Properties to Diversified Financial Resources Corporation ("DFRC"). The
agreement provides that Nexia transfer to DFRC 100% of all shares that Nexia
held in Wichita (86,795,794) in exchange for among other things, a promissory
note in the sum of $150,000 and 1,148,251 restricted shares of the common stock
of DFRC with a guaranteed resale value of $1.00 per share, whereby, within 36
months of the sale, DFRC is bound to issue sufficient additional shares such
that the total value at liquidation will equal $1,000,000. The Wichita common
shares transferred to DFRC were approximately 83% of the issued and outstanding
shares of Wichita. Control of Wichita included the ownership of Salt Lake
Development Corporation, a subsidiary corporation of Wichita.
Forward Looking Business Plan
The Company successfully acquired essentially all of the assets and liabilities
of Axia including a portfolio of securities, real estate holdings and publicly
reporting shell-companies on February 15, 2002. The following discussion
represents the Company's plans to operate the business acquired from Axia in the
purchase agreement previously discussed. Property descriptions, legal
discussions and similar areas are a reflection of those acquisitions from Axia
which constitute the majority of the Company's assets and operations at the
present.
Business of Issuer
Financial Consulting
The Company, through its subsidiary, Hudson Consulting Group, Inc., provides a
variety of financial consulting services to a wide range of clients.
Our business model is to provide an expanded scope of financial, business, and
investment oriented consulting services to select start-up companies and
existing public companies. Specifically, the Company helps client companies by
creating a series of infrastructure-based partnerships that take advantage of
the Company's expertise in: uncovering private placement funding sources;
strategic business planning; SEC registration documentation; "edgarization" of
SEC forms and filings; transactional document preparation; clerical and record
keeping assistance to clients; restructuring capital formation; identifying
merger and acquisition opportunities.
The Company's clients may choose to be acquired by the Company's reporting
companies and create their own public shareholder base with a self underwritten
offering or may choose to take advantage of the Company's shareholder base in a
registered spin-off, or a dividend. The self-underwritten option requires a
company to raise
2
capital before obtaining a quote, whereas a registered spin-off or dividend
enables clients to obtain a quote prior to raising any new capital.
The Company employs several methods to locate prospective clients. We advertise
directly through print media to attract both private and public corporations to
engage our services, obtain referrals from previous clients and do our own
research of various databases that profile public companies.
The Company charges clients monthly or predetermined fees which vary in both
amount and form. Acceptable payments include cash, securities of the client
corporation, other assets, or some combination of the three. This payment
arrangement allows many organizations, especially start-up ventures and those
experiencing financial difficulties, to obtain the Company's services without
draining necessary cash resources. However, accepting stock as compensation
occasionally impairs the Company's cash flow, and for this reason acceptable
payments and the size of payments the Company charges for its services vary with
the volatility of the clients' securities, the amount and nature of work
involved, and the expenses related to the services being rendered.
Entities from many different industries employ the Company's consulting
services. The decision to accept a prospective client depends on the client's
financial stability, the type of services needed, and the compensation format. A
key to the Company's success is management's ability to improve and maintain its
client base and successfully liquidate its compensation.
Real Estate Investment
The combined statements of operations, stockholders equity and cash flows for
the year ended December 31, 2003 include only the real estate operations of
Diversified Holdings - I, Inc., Golden Opportunity Development Corporation,
Downtown Development Corporation, Wasatch Capital Corporation, Kearns
Development Corporation, West Jordan Real Estate Holdings, Inc., Canton's Wild
Horse Ranch II, Inc., Oasis International Hotel & Casino, Inc., Canton
Industrial Corporation of Salt Lake City, Inc., and Canton Tire Recycling of
West Virginia, Inc. (collectively referred to as the 'entities'). Pursuant to
the recapitalization of the Company on February 15, 2002, these entities have
been treated as the acquiring entities for accounting purposes. The Company is
the surviving entity for legal purposes. Because the recapitalization involved
entities under common control, Interpretation 39 requires that there be no
adjustment to the carrying values of the assets or liabilities at the date of
the recapitalization.
Nexia's real estate operations primarily involve the acquisition, management,
lease and sale of real estate holdings. Nexia owns a variety of commercial and
residential properties in Utah and other parts of the United States. The Company
seeks to locate and acquire undervalued real estate (which is primarily
commercial) with little or no cash down. Once acquired, the Company's real
estate holdings are leased. Though the Company seeks to generate and maximize
rental income through the management and lease of the property, our primary goal
is to acquire real estate which will substantially appreciate in value and for
which we can realize a substantial gain upon disposition.
3
Organization
The following chart shows the companies currently owned by Nexia Holdings, Inc.,
including a consulting company, four holders of real estate and four companies
that no longer have operations:
[SEE ATTATCHED ORGANIZATIONAL FLOW CHART]
Nexia Holdings, Inc.
(A Holdings Company)
=
=
Diversified Holdings I, Inc.
(A Holdings Company)
=
Hudson Consulting Group, = West Jordan Real Estate
Inc.--------------------=----------- Holdings, Inc.
(A Consulting Firm) = (Real Estate)
=
=
Wasatch Capitol Corporation = Kearns Development
Corporation -----------------=----------- (Real Estate)
(Real Estate) =
=
Kearns Development Corporation = Golden Opportunity
(Real Estate) ----------------=--------- Development Corporation
= (An Inactive Corporation)
=
=
Canton Industrial Corporation = Canton's Wild Horse Ranch II,
Of Salt Lake City ------------=----------- Inc.
(An Inactive Corporaion) = (An Inactive Corporation)
=
Oasis International Hotel & = Canton Tire Recycling of West
Casino, Inc. ------------=------------ Virginia, Inc.
(An Inactive Corporation) (An Inactive Corporation)
4
The Company also has a substantial interest in approximately 14 shell companies.
The Company intends to provide assistance in finding operations for these
companies through reverse mergers with operating companies. The value of these
companies cannot be determined at this time in light of the fact that: 1) no
substantial assets are currently in the companies; 2) The Company has identified
no business opportunities for these companies; and 3) The Company's shareholding
in these entities are illiquid in light of recent rule changes on the resale of
securities in blank check companies. The Company and its president have assisted
in filing Form 10-SB's to enable these companies to become fully reporting under
the Securities Exchange Act of 1934. Each of these entities is currently
delinquent in its required filings with the Securities and Exchange Commission.
The Company's president now also holds a substantial interest in these entities.
Governmental Regulation
The Company and its facilities are subject to normal government regulation at
the federal, state and local level. The Company must comply with government
regulations regarding employment, wages, access for handicapped and disabled
persons and other laws, rules, regulations and ordinances. Although the Company
does not foresee any change in existing local, state, or federal regulations, if
changes should occur, the Company believes that it can adapt to such new
regulations and that those changes would not have any significant effect on
revenues or current operations of the Company. However, no assurance can be made
that compliance or failure to comply with future regulation will not have a
materially adverse effect on the business, operating results or financial
condition of the Company.
Competition
The Company expects to be involved in intense competition with other business
entities, many of which will have a competitive edge over the Company by virtue
of their stronger financial resources and prior experience in business. There
are numerous entities in both the real estate markets in which the Company
currently owns property and in the financial consulting area that would be in
competition with the Company, though there are no dominant operations which the
Company can identify as a continuing direct competitor to the Company's
operations. There is no assurance that the Company will be successful in
operating any business which it may acquire in the future.
Employees
The Company's subsidiaries have a total of 5 full time employees as of December
31, 2003. Management of the Company expects to use consultants, attorneys, and
accountants as necessary, and anticipates a need to engage at least two (2)
additional employees.
During the quarter ending September 30, 2003, Nexia's subsidiary, Hudson
Consulting Group, Inc., temporarily discontinued cash payments to its employees.
Consequently, Nexia has relied upon the issuance of S-8 shares to pay certain
employees and consultants. On July 21, 2003, Nexia issued 5,000,000 shares of
S-8 common stock to Jared Gold for services rendered valued at $10,000, or
$0.002 per share, the market price on the date of grant. In September, 2003
Nexia issued 17,550,000 shares of its common stock to employees under its S-8
Registration Statements for its Employee Benefit Plans. Michael Golightly, an
attorney employed by the Company was issued 7,550,000 shares as compensation for
past services to the Company and in partial settlement of obligations related to
his employment. Shane Stone, serving as accounting manager for the Company was
issued 10,000,000 shares as compensation for his services in working on
financial and quarterly reports for the Company and in partial settlement of
obligations related to his employment.
On December 4, 2003, the Company's board of directors approved the delivery of
options to purchase 1,600,000 shares of the Company's common stock to 8
employees of the Company for services rendered to the Company, the shares were
authorized pursuant to the S-8 Registration Statement of the Company. Each
employee received 200,000 shares.
On December 8, 2003, the Company's board of directors approved the delivery of
options to purchase 4,000,000 shares of the Company's common stock to 8
employees of the Company for services rendered to the Company, the shares were
authorized pursuant to the S-8 Registration Statement of the Company. Each
employee received 500,000 shares.
5
Risk Factors
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You should carefully consider the following risks before making an investment in
our Company. In addition, you should keep in mind that the risks described below
are not the only risks that Nexia faces. The risks described below are all the
risks that Nexia currently believes are material to our business. However,
additional risks not presently known to us, or risks that we currently believe
are not material, may also impair our business operations. You should also refer
to the other information set forth in this Annual Report on Form 10-KSB,
including the discussions set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business," as well as our
financial statements and the related notes.
Nexia's business, financial condition, or results of operations could be
adversely affected by any of the following risks. If we are adversely affected
by such risks, then the trading of our common stock could decline, and you could
lose all or part of your investment.
Nexia's auditor's report on our financial statements includes an explanatory
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paragraph with respect to substantial doubt existing about its ability to
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continue as a going concern.
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As of December 31, 2003, Nexia had incurred a loss from operations and had an
accumulated deficit resulting from losses in prior years. As a result, its
financial statements include a note stating that these conditions raise
substantial doubt about its ability to continue as a going concern, but the
financial statements do not include any adjustments that might result from this
uncertainty.
Nexia may face significant competition.
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There are numerous businesses, corporations, individuals and firms that are
engaged in the type of business activities that Nexia is presently engaged in.
Many of those entities are more experienced and possess significantly greater
financial and personnel resources than Nexia currently has. While Nexia intends
to be competitive with those entities, there can be no assurance that such will
be the case.
Limited ability to market services and properties.
--------------------------------------------------
Due to the limited resources available to Nexia, the sales and marketing of our
services and properties have been limited. Nexia's future success is dependent
upon our ability to market and sell our services and properties with those
limited resources.
Nexia is subject to compliance with securities law, which exposes it to
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potential liabilities, including potential rescission rights.
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Nexia has periodically offered and sold our common stock to investors pursuant
to certain exemptions from the registration requirements of the Securities Act
of 1933, as well as those of various state securities laws. The basis for
relying on such exemptions is factual; that is, the applicability of such
exemptions depends upon Nexia's conduct and that of those persons contacting
prospective investors and making the offering. Nexia has not received a legal
opinion to the effect that any of our prior offerings were exempt from
registration under any federal or state law. Instead, it has relied upon the
operative facts as the basis for such exemptions, including information provided
by investors themselves.
If any prior offering did not qualify for such exemption, an investor would have
the right to rescind its purchase of the securities if it so desired. It is
possible that if an investor should seek rescission, such investor would
succeed. A similar situation prevails under state law in those states where the
securities may be offered without registration in reliance on the partial
exemption from the registration or qualification provisions of such state
statutes under the National Securities Markets Improvement Act of 1996. If
investors were successful in seeking rescission, we would face severe financial
demands that could adversely affect our business and operations. Additionally,
if we did not in fact qualify for the exemptions upon which we have relied, we
may become subject to significant fines and penalties imposed by the SEC and
state securities agencies.
Additional Capital is Necessary to Implement Nexia's Business Plan.
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6
Nexia does not believes that it has sufficient cash, cash equivalents and
operating income to maintain its business at its existing level in 2004. Nexia
will require significant new capital in order to execute its strategic plan and
believes that this capital will only be available through an offering of shares
of its common stock. Nexia's success in raising this capital will depend upon
its ability to access equity capital markets and we may not be able to do so or
to do so on acceptable terms. If it fails to obtain funds on acceptable terms,
it will not be able to execute its strategic plan and would have to delay or
abandon some or all of its plans for growth. If it is able to obtain funds, it
believes that the terms of such arrangement will result in an offering that is
highly dilutive to existing holders of shares of our common stock because of the
price at which it would have to issue those shares and the large number of
shares it would have to issue at those prices.
Need for Additional Specialized Personnel.
------------------------------------------
Although Nexia's management is committed to the business and continued
development and growth of the business, the addition of specialized key
personnel and persons to assist management in the expansion of Nexia's
operations will be necessary. There can be no assurance that Nexia will be able
to locate and hire such specialized personnel on acceptable terms.
There is no established, stable market for Nexia's common stock.
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Nexia's common stock is quoted on the Over-the-Counter Electronic Bulletin Board
("OTCBB") and traded sporadically. A large number of shares of outstanding
common stock are restricted and are not freely-tradeable. An established public
trading market for our common stock may never develop or, if developed, it may
not be able to be sustained. The OTCBB is an unorganized, inter-dealer,
over-the-counter market that provides significantly less liquidity than other
markets. Purchasers of Nexia's common stock may therefore have difficulty
selling their shares should they desire to do so.
Volatility of Stock Price.
--------------------------
The trading price of Nexia's Common Stock has in the past and may in the future
be subject to significant fluctuations. In addition, the stock market in general
has experienced extreme price and volume fluctuations that have affected the
market price for many companies in industries similar to or related to that of
Nexia and which have been unrelated to the operating performance of these
companies. These market fluctuations may adversely affect the market price of
Nexia's Common Stock.
Penny stock regulations may impair Nexia's shareholders' ability to sell their
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stock.
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Nexia's shares of common stock is deemed a "penny stock." Penny stocks generally
are equity securities with a price of less than $5.00 per share, other than
securities registered on certain national securities exchanges. Penny stocks are
subject to rules and regulations that impose additional sales practice
requirements on broker-dealers who sell the securities to persons other than
established customers and accredited investors, and these additional
requirements may restrict the ability of broker-dealers to sell a penny stock.
Any acquisitions that Nexia undertakes could be difficult to integrate, disrupt
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its business, dilute shareholder value and significantly harm its operating
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results.
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Nexia expects to review opportunities to buy other business or technologies that
would complement its current business, expand the breadth of its markets, or
that may otherwise offer growth opportunities. If we make any future
acquisitions, we could issue stock that would dilute existing stockholders'
percentage ownership, incur substantial debt or assume contingent liabilities.
Potential acquisitions also involve numerous risks, including:
o problems assimilating the purchased operations, technologies or
products;
o unanticipated costs associated with the acquisition;
o diversion of management's attention from our core business;
o adverse effects on existing business relationships with suppliers and
customers;
o risks associated with entering markets in which we have no or limited
prior experience; and o potential loss of the purchased organization's
or our own key employees.
7
Nexia cannot assure that it would be successful in overcoming problems
encountered in connection with such acquisitions and its inability to do so
could significantly harm its business.
Nexia is subject to various risks connected to the ownership of real property.
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Nexia's investments are subject to varying degrees of risk generally incident to
the ownership of real property. Real estate values and income from Nexia's
current properties may be adversely affected by changes in national or local
economic conditions and neighborhood characteristics, changes in interest rates
and in the availability, cost and terms of mortgage funds, occupancy rates in
Nexia's properties, the impact of present or future environmental legislation
and compliance with environmental laws, the ongoing need for capital
improvements, changes in governmental rules and fiscal policies, civil unrest,
acts of God, including earthquakes and other natural disasters which may result
in uninsured losses, acts of war, adverse changes in zoning laws, and other
factors which are beyond the control of Nexia.
In addition, real estate investments are relatively illiquid. The ability of
Nexia to vary its ownership of real estate property in response to changes in
economic and other conditions is limited. If Nexia must sell an investment,
there can be no assurance that Nexia will be able to dispose of it in the time
period it desires or that the sales price of any investment will recoup the
amount of Nexia's investment.
Nexia's real property is also subject to real property taxes. The real property
taxes on the real property may increase or decrease as property tax rates change
and as the property is assessed or reassessed by taxing authorities. If property
taxes increase, Nexia's operations could be adversely affected.
Reports to Security Holders
The Company is not required to deliver an annual report to security holders and
will not voluntarily deliver a copy of the annual report to the security
holders. Should the Company choose to create an annual report, it will contain
audited financial statements. The Company will file all of its required
information with the Securities and Exchange Commission ("SEC").
The public may read and copy any materials that are filed by the Company with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. The statements
and forms filed by the Company with the SEC have been filed electronically and
are available for viewing or copy on the SEC maintained Internet site that
contains reports, proxy, and information statements, and other information
regarding issuers that file electronically with the SEC. The Internet address
for this site can be found at: http://www.sec.gov. Information is also available
on the Nexia website located at: http://www.nexiaholdings.com.
ITEM 2. DESCRIPTION OF PROPERTY
Location and Description
Nexia acquired through its purchase of the former Axia subsidiaries the
ownership or leasehold rights to industrial, commercial, warehouse, office, and
undeveloped commercial and residential real estate. This acquisition of
properties was not limited to any specific geographic area. Regardless of the
type of property, future acquisitions will not be limited to any specific
geographic area. At the end of 2003, Nexia owned, leased, or had interests in
properties in Utah and West Virginia.
Investment Policies
Nexia's policy is to actively pursue the acquisition of real estate for
investment income and appreciation in property value. During the past year,
Nexia has placed an emphasis on acquiring property which management feels is
undervalued. Rather than limiting itself to specific types of real estate,
Nexia's policy has been to focus primarily on terms of financing and potential
return on capital. Nexia generally looks for properties that can be purchased by
8
assuming the existing financing or by paying the balance of the purchase price
with a nominal cash expenditure and/or the issuance of shares of Nexia's common
stock.
Nexia has no present intention to invest in first or second mortgages, interests
in Real Estate Investment Trusts, or Real Estate Limited Partnerships. However,
Nexia's board of directors is not precluded in the future from considering or
participating in such investments.
Nexia currently has no limitations on the percentage of assets which may be
invested in any one investment or the type of securities and investments in
which it may invest. However, the board of directors in its discretion may set
policies without a vote of Nexia's securities holders regarding the percentage
of assets which may be invested in any one investment or type of investment.
Nexia's current policy is to evaluate each investment based upon its potential
capital return to Nexia on a relatively short term basis. Furthermore, Nexia
does not plan to enter into the business of originating, servicing, or
warehousing mortgages or deeds of trust except as may be incidental to its
primary purpose of acquiring real estate.
There is a risk that Nexia may lose control of its properties through
foreclosure if enough funds are not derived from the rental income for both the
financing and operation of its properties. Currently, due to expanded
acquisition activity and deficiencies in rental income from the properties
acquired, Nexia does not have sufficient rental revenues to cover the debt
service and operating costs of all properties. Nexia currently has to use
capital from other sources to fund this deficit. Although management hopes to
increase the occupancy rates, and thus increase the rental income so that such
income will cover both operations and debt service, no such assurances can be
made.
Description of Real Estate and Operating Data
Below is a list of the properties owned by Nexia and/or its consolidated
subsidiaries as of December 31, 2003. Also included are any changes in the
ownership status of such properties which have occurred between the end of 2003
and the filing of this Form 10-KSB. All references to current principal balances
of encumbrances against the properties are as of December 31, 2003, only.
Commercial Properties
---------------------
Nexia's subsidiaries own interests in the four commercial properties described
below.
Wasatch Capital Corporation ("Wasatch")
Wasatch, a 76.21% owned subsidiary of Nexia, owns the Wallace-Bennett Building,
located at 55-65 West 100 South, Salt Lake City, Utah. The building is a 36,797
square foot, turn-of-the-century multi-story office building. Currently, only
the ground level is suitable for rent as retail space. The ground level
comprises 7,816 square feet or 21% of the building. During 2001, 1640 square
feet of ground floor space having the address of 61-63 West 100 South was
renovated for use as an art gallery. Total cost of the renovation was
$45,193.86. In January 2002, 3,545 square feet of ground floor space having the
address 65 West 100 South was renovated for use as a 2002 Winter Olympic
demonstration space for the Greek Ministry of Culture. Total cost of these
renovations was $94,473.56. A portion of that space is currently leased to
Wasatch CD Exchange, a retail outlet for used music compact disks, for a monthly
rental of $1,400.72 for 1,585 square feet of the space occupied during the
Olympics, the balance of the space is occupied by a retail outlet for a monthly
rental of $1,050 for the 1400 square feet utilized by the tenant.
On May 9, 2003, Wasatch refinanced the underlying loan package on the
Wallace-Bennett Building. The terms of the new loan package provide for a loan
in the total amount of $850,000, an interest rate on the loan of 7.5%, with
monthly payments of $6,848. The loan has a term of three years, resulting in a
due date of May 10, 2006. Of the loan proceeds $202,920 has been set aside for
construction or capital improvements to the buildings securing the loan. In the
event that direct benefits from improvements to the building cannot be realized
from refurbishing the building this amount will be returned to the lender to pay
down the existing loan. Wasatch intends to improve the upper floor space as
office space and increasing the available tenant parking on the site and has
recently signed agreement to have plans for this purpose developed. The balance
due on the existing note on December 31, 2003 was $ 636,291.
9
Currently, the rentable space on the ground level is 100% occupied. The rented
ground level space is leased to a restaurant (1,719 square feet ground floor,
864 square feet of basement space), two retail stores (912 square feet & 1400
square feet), a CD exchange retail outlet (1585 square feet) and an art gallery
(1,640 square feet), 561 square feet are considered to be common area and not
rentable. The tenants are responsible for all of their own utilities except
water and sewer. Tenants also pay their pro-rata share of all other operating
expenses as well as maintenance, janitorial services, insurance, and property
taxes. The average annual effective rental for the rentable ground level space
is $10.00 per square foot.
The additional stories above the ground floor cannot be used until they have
been remodeled and rehabilitated. Wasatch has moved forward to have plans
developed to remodel the second level of the east half of the building for use
as office space. The cost for the project is estimated to be $190,000. The
Company intends to fund labor costs for these improvement with shares of its
common stock under the Company's 2004 Benefit Plan and intends to utilize bank
financing for material costs.
Downtown Development, Corp. ("DDC") (f.k.a. A-Z South State, Corp.)
DDC, a 99.08% owned subsidiary of Nexia, owns a one story retail building
located at 1374 South State Street, Salt Lake City, Utah, which it purchased on
December 1, 1999 for $535,000. An all-inclusive trust deed in the amount of
$400,000 was placed on the property requiring monthly payments of $4,231.38 with
interest at 9.725% per annum. The balance owing at December 31, 2003 was
$385,535. In December of 2002 DDC obtained permanent financing with Community
First National Bank, the loan bears interest at the rate of 7.16% per annum,
with monthly payments of $3,061. The building is 7,000 square feet, one story
tall, and constructed in the late 1960's. A furniture store had a lease for
4,500 square feet leased at $3,800 per month through the end of the year 2003,
this space is currently unoccupied. A bakery currently occupies 2,500 square
feet of retail space under a lease in the building. DDC expended $34,100 through
March 31, 2004, in renovations to the property, this figure does not include
substantial improvements made by the tenant to the property. DDC has no
immediate plans to improve the non- leased space. DDC believes the property is
adequately insured. The retail space in the building competes for tenants with
other retail space on State Street which is a commercial zone for over one mile
in each direction from the property.
Kearns Development Corporation. ("Kearns")
Kearns, a 90.7% owned subsidiary of Nexia, owns one office building located on
West Sams Boulevard in Kearns, Utah (a suburb of the Greater Salt Lake area).
The building contains approximately 11,709 square feet of total floor space in a
single story. The building was purchased on November 29, 2000 for a total price
of $750,000. The purchase was financed with a $625,000 first mortgage from
Brighton Bank with an initial variable rate of 10.97% amortized over 25 years
and monthly payments of $5,632, with a balance owing at December 31, 2002 of
$615,012. The loan was personally guaranteed by Richard D. Surber, Nexia's
President and C.E.O. This property was refinanced on January 10, 2003, a new
mortgage in the sum of $660,000 was obtained from Community First Bank, an
interest rate of 7.16% applies to the loan, monthly payments are $5,223 based
upon a 20 year amortization with a balloon payment of the remaining balance due
on January 10, 2013, however, the balance due may be called on demand. The
balance owing on this loan as of December 31, 2003 was $ 645,024.
The building is leased to three major tenants occupying 100% of the office
space, and generating monthly rentals of $11,173 at an average rate of $11.45
per square foot. Kearns has no present plans to renovate or improve the
building. Management believes that the building is adequately insured. The
building competes for tenants with other office space in the Kearns area.
West Jordan Real Estate Holdings, Inc. ("West Jordan")
West Jordan, a 88.28% owned subsidiary of Nexia, operates the Glendale Plaza, a
retail shopping plaza located at 1199 South Glendale Drive, Salt Lake City,
Utah. West Jordan exercised an option to purchase the shopping plaza on June 22,
2001. The loan on the property was refinanced on June 30, 2002 for a total loan
amount of $1,072,500 at the current interest rate of 8%, the loan is due on
demand or monthly payments of $12,417 are due each month, as of December 31,
2003 the outstanding balance owed was $981,778. The sum of $69,000 has been set
aside by Imperial Bank until such time as certain tenant occupancy goals are
met.
10
The property contains 72,256 square feet of retail space and approximately 77%
is leased to tenants. A national chain retail store occupies 10,080 square feet
of the building. They are the only tenant of the Glendale Plaza which occupy
more than ten percent of the premises. The Glendale Plaza generates
approximately $207,000 in annual rental income as of December, 2003, or
approximately $2.86 per square foot. Present plans are to continue to operate
the building as a retail shopping plaza and to increase the average rental rate.
Property taxes and assessments have been paid in full on the property. West
Jordan is of the opinion that this property is adequately insured.
West Jordan has expended approximately $284,049 through March 31, 2004, in
capital improvements to the Glendale property since its purchase. Substantial
additional improvements are needed to improve rental rates which are currently
significantly below area market rates. West Jordan is in the process of
initiating such improvements. The Company has hired a contractor to begin work
on certain renovations. The contractor has agreed to accept a combination of
shares and options to purchase shares of the Company's common stock under its
2004 Benefit Plan. The material costs will be financed or covered by operating
income.
Residential Properties
----------------------
One of Nexia's subsidiaries owns a interest in the residential properties
described below.
Sale of Property Holdings Subsidiary
On June 30, 2003 Nexia sold its interest in Wichita Development Corporation
(Wichita) and its subsidiaries Salt Lake Development Corporation and Wichita
Properties to Diversified Financial Resources Corporation ("DFRC"). The
agreement provided that Nexia transfer to DFRC 100% of all shares that Nexia
held in Wichita (86,795,794) in exchange for among other things, a promissory
note in the sum of $150,000 and 1,148,251 restricted shares of the common stock
of DFRC with a guaranteed resale value of $1.00 per share, whereby, within 36
months of the sale, DFRC is bound to issue sufficient additional shares such
that the total value at liquidation will equal $1,000,000. The number of Wichita
common shares transferred to DFRC is approximately 83% of the issued and
outstanding shares of Wichita. Control of Wichita includes the ownership of Salt
Lake Development Corporation, a subsidiary corporation of Wichita.
Hudson Consulting Group, Inc. (Hudson)
Hudson, a 99.08% owned subsidiary of Nexia, owns a condominium unit located in
close proximity to Brian Head Ski Resort and the surrounding resort town in
southern Utah. Hudson acquired the condominium unit for investment purposes and
has contracted with a management firm who rents the unit on a short-term basis.
The unit is subject to a note with a current principal balance at December 31,
2003 of $29,617 and bearing an interest rate of 8.25% per annum. Monthly
payments on the unit are $301. Hudson as of the date of this filing was in the
process of marketing this unit for sale. Suit is currently pending against
Hudson for unpaid owners fees on this unit in the sum of $10,679, Hudson intends
to seek a compromise and settlement of this claim and thus cure the alleged
default.
On April 22, 2003, Hudson transferred Unit A216 of the Brian Head North
Condominiums to David Wolfson in exchange for Wolfson assuming all obligations
of the condo, including taxes, owner's fees and the mortgage payment. As of
December 31, 2003 Wolfson had ceased making payments on the property and Hudson
is seeking to have the property returned to it in order to cure all past due
obligations and return the condominium to management by Hudson.
Hudson also had an option to purchase a fourth condominium in the Brian Head
area pursuant to a lease option agreement it executed with Richard Surber,
Hudson's president, director and chief executive officer, in August, 1997. Mr.
Surber owns the condominium subject to a note on the property secured by a deed
of trust. Hudson leased the condominium for $900 per month, $671 of which is
applied to the monthly obligations on the first note. Hudson had an option to
purchase the condominium through a payment of $82,100, which was reduced monthly
by the extent to which Hudson monthly rental payments decrease the principal
balance due on the note. The lease option contained an alternative option price
in the event the unit appreciates dramatically during the term of the lease.
Hudson was also required to pay all taxes, condominium fees, maintenance and
repair expenses and other charges
11
on the property. Hudson had the right to manage, control and sell the
condominium unit during the term of lease, which by agreement of the parties
came to an end on March 31, 2003.
Industrial Property
-------------------
One of Nexia's subsidiaries owned an interest in the industrial property
described below.
Canton Tire Recycling West Virginia, Inc. ("CTR")
CTR, a 99.08% owned subsidiary of Nexia, owns the Parkersburg Terminal, located
at 516 Camden Street, Parkersburg, West Virginia. The terminal is a former fuel
transfer station. The property consists of 4.5 acres on a tributary of the Ohio
River and includes a former oil storage facility and a warehouse with office
space. There are no encumbrances on the property. The property has been vacant
and unused since its acquisition. CTR is subject to competition in finding
tenants or buyers for the property, and there is a substantial likelihood that
the property will remain vacant for some time. CTR is of the opinion that this
property is adequately covered by insurance. CTR has no present plans to
renovate or improve the property and recognized impairment expense of $29,554
and $258,788 during the years ended December 31, 2003 and 2002 respectively.
The West Virginia Division of Environmental Protection filed suit against CTR
and Axia Group, Inc. the former parent corporation of CTR, seeking the
completion of environmental clean up procedures at the site. CTR believes it has
completed all cleanup measures which will be required by the State of West
Virginia, however there can be no assurance that the State of West Virginia will
not require additional cleanup on the property. For more information on the suit
filed against CTR and Axia and for more information on Parkersburg properties,
see "Item 3, Legal Proceedings."
CTR invested approximately $150,000 in environmental cleanup of the site over
the course of its ownership of the property. All appropriate reports regarding
the cleanup have been filed with regulatory agencies. CTR, the property owner,
has not received any additional requests or responses for over eighteen months
regarding the property.
On April 9, 2004, the property was sold for $1,816.70 in unpaid property taxes
due on the property as a result of a clerical oversight. CTR will make an
attempt to reacquire the property, if possible, for the cost of the back taxes
and legal fees associated with the sale and any legal costs necessitated by that
effort. The Company recognized a loss from disposition of $29,559 during the
year ended December 31, 2003.
Undeveloped Land
----------------
Nexia, through its subsidiaries, owns approximately six (6) small parcels of
undeveloped raw land in Utah and Kansas. There are currently no plans to develop
these properties. If valid offers are received on these parcels, they may be
sold. During 2003, the Company recognized an impairment expense of $173,966 on
these parcels based on their assessed market value.
Insurance
---------
Nexia is of the opinion that each of these properties described above is
adequately insured.
ITEM 3. LEGAL PROCEEDINGS
The following cases may have a material impact on the Company:
State of West Virginia vs. Canton Tire Recycling West Virginia, Inc., Canton
----------------------------------------------------------------------------
Industrial Corporation and CyberAmerica Corporation - Suit was filed on August
---------------------------------------------------
14, 1998 in the Circuit Court of Wood County, Parkersburg, West Virginia as file
no. 98 C 354 seeking the completion of clean up procedures for property owned by
Canton Tire Recycling West Virginia, located in the city of Parkersburg. The
state requested that certain waste material present on the site and any
remaining material in the on site storage tanks be removed and that an oil/water
separator located on the property be cleaned out. The Company and the State of
West Virginia entered into a Consent Decree by which the Company agreed to
submit and complete a Remediation and Sampling Work Plan and the payment of
12
$88,000 in fines and penalties ($8,000 has been paid, $20,000 was paid prior to
May 31, 2000, similar payments were made in 2001 and 2002 and the final payment
is due May 31, 2003.) The work required by the Remediation and Sampling Work
Plan has been completed and submitted to the State. This information included
test results indicating that soil contamination testing required by the Plan
reported contamination exceeding state guidelines. The nature and cost of
further testing or clean-up as a result of that report cannot be determined at
this time. No further request for additional work or testing has been received
from the State of West Virginia. The Company made a final payment of this matter
with a $5,000 cash payment in February 2004, which the State of West Virginia
has accepted as final settlement of the court order.
Hudson Consulting Group, Inc. v. Chequemate International, Inc., dba C-3D
-------------------------------------------------------------------------
Digital, Inc. Suit was filed on November 16, 2000 in the Third Judicial
-------------
District Court, for Salt Lake County, State of Utah, Civil No. 000909325. The
Company seeks recovery of its damages as a result of the failure of Chequemate
to deliver 75,000 shares of its common stock as provided for in an Advisory
Agreement between the parties dated July 29, 1999. Damages are sought for the
highest value of these shares during the period that delivery was not made, in
late July of 2000 the shares traded at approximately $2.68 per share. Partial
delivery of shares due under the agreement was received by Hudson in June of
2000 leaving 75,000 shares due and owing. The parties have signed a settlement
agreement wherein the defendant agrees to deliver 514,000 shares of its common
stock to Hudson and agrees to include these shares in a registration statement.
The shares have been received by Hudson and the registration statement,
including the shares received by Hudson has been filed with the SEC. The
agreement further provides that in the event the sale of the shares does not
generate $90,000 in proceeds that the defendant will issue additional shares to
Hudson to cover any shortfall. Upon receipt of the share certificate a notice of
dismissal of the lawsuit was filed with the court by Hudson. On January 2, 2003
Hudson filed suit in the Third Judicial District Court, for Salt Lake County,
State of Utah, Civil No. 030900004. This cause of action seeks recovery of the
failure of C-3D to honor the terms of the settlement agreement from the prior
action, recovery of $63,965.50 is sought for the difference in sales proceeds
from the stock delivered under the settlement agreement and the agreed upon
settlement figure of $90,000. Defendant's registered agent has been served but
no answer has been filed and the court has signed a default judgment as to C-3D.
Attempts to contact officers of C-3D have failed and at present it appears that
the company is no longer operating. On May 14, 2003 the court granted a default
judgment in the sum of $74,245.50.
Hudson Consulting Group, Inc. v. Ohana Enterprises, Inc., Isaac P. Simmons,
---------------------------------------------------------------------------
Kathryn A. Christmann, Gerard Nolan, David Cronshaw, Interactive Ideas, Jonathan
--------------------------------------------------------------------------------
Thomas and Phillip Crawford. Suit was filed on March 17, 2003 in the Third
----------------------------
Judicial District Court in and for Salt Lake County, State of Utah, Case No.
030905949. Suit was filed by Hudson to seek payment under an August 27, 2002
Stock Purchase Agreement, wherein the named defendants purchased a controlling
interest in a Delaware corporation known as Torchmail Communications, Inc. which
changed its name subsequent to the transfer to Ohana Enterprises, Inc. The total
sales price was $300,000 of which only the first $100,000 has been paid. The
defendants have claimed that Hudson misrepresented the status of Ohana prior to
the transfer and are denying any further obligation to make payments. In
February of 2004 Hudson agreed to settle the litigation and all related claims
in exchange for a cash payment of $117,000, such that each party, except the
defendant Gerard Nolan, will be released from all claims, including
counterclaims and third party claims and all costs are to be paid by the party
incurring them.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this report.
Effective March 29, 2004 a majority of the issued and outstanding shares
consented to an amendment to the Company's Articles of Incorporation to increase
the number of authorized common shares to 10,000,000,000, the number of
authorized preferred shares was not changed and remains at 50,000,000. A
certificate of amendment to carry out this change was been filed with the Nevada
Secretary of State on March 29, 2004. Additional information can be found by
referring to the Schedule 14(c) information statement filed on March 5, 2004.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
13
The Company's common stock is quoted on the Electronic Bulletin Board under the
symbol, "NXIA.OB". Trading in the common stock in the over-the-counter market
has been limited and sporadic and the quotations set forth below are not
necessarily indicative of actual market conditions. Further, these prices
reflect inter-dealer prices without retail mark-up, mark-down, or commission,
and may not necessarily reflect actual transactions. The high and low bid prices
for the common stock for each quarter of the years ended December 31, 2002 and
2003 are as follows:
YEAR QUARTER ENDING HIGH LOW
-------------------------------------------- ----------- ------------
2002 March 31, 2002 $0.310 $0.040
June 30, 2002 $0.065 $0.020
-------------------------------------------- ----------- ------------
September 30, 2002 $0.022 $0.006
December 31, 2002 $0.020 $0.003
-------------------------------------------- ----------- ------------
2003 March 31, 2003 $0.015 $0.004
-------------------------------------------- ----------- ------------
June 30, 2003 $0.008 $0.0005
-------------------------------------------- ----------- ------------
September 30, 2003 $0.013 $0.001
-------------------------------------------- ----------- ------------
December 31, 2003 $0.030 $0.006
-------------------------------------------- ----------- ------------
2004 March 31, 2004 $0.015 $0.001
-------------------------------------------- ----------- ------------
Common Stock
------------
As of May 12, 2004, the number of issued and outstanding shares of the Company's
common stock was 507,586,094. The number of common stock shares authorized is
10,000,000,000.
Shareholders:
As of May 12, 2004, there were approximately 590 shareholders of record.
Dividends:
The Company has not declared a cash dividend during the fiscal years ending
December 31, 2002 and 2003.
Preferred Stock
---------------
As of April 21, 2004, the number of shares of Series A Convertible Preferred
Stock issued and outstanding is 5,100,000, Richard Surber, president of the
Company is the only holder of these preferred shares. The Series A Convertible
Preferred Shares have voting rights which equate to 100 shares of common stock
for every 1 Series A Preferred share and may be converted into $10 worth of
common stock.. A total of 10,000,000 shares have been designated and authorized
as Series A Preferred Shares of a total number of 50,000,000 authorized shares
of preferred stock.
Dividends:
The Company has not declared a cash dividend for the Series A Convertible
Preferred Stock during the fiscal year ended December 31, 2003. Rights to
dividends are granted to the Series A Convertible Preferred Stock equal to those
of the Common Stock, when, as and if declared by the Directors of Nexia, to be
paid in cash or in common stock equal to market value at the election of the
Company.
14
Conversion Rights:
Conversion rights into shares of Common Stock are given to the Series A
Convertible Preferred Stock based upon that number of shares of the Company's
Common Stock equal in market value to $10.00 at the time of conversion.
Limited Market for Common Stock.
--------------------------------
There is currently a limited trading market for our shares of common stock, and
there can be no assurance that a more substantial market will ever develop or be
maintained. Any market price for shares of common stock of Nexia is likely to be
very volatile, and numerous factors beyond our control may have a significant
adverse effect. In addition, the stock markets generally have experienced, and
continue to experience, extreme price and volume fluctuations which have
affected the market price of many small capital companies and which have often
been unrelated to the operating performance of these companies. These broad
market fluctuations, as well as general economic and political conditions, may
also adversely affect the market price of our common stock. Further, there is no
correlation between the present limited market price of our common stock and our
revenues, book value, assets or other established criteria of value. The present
limited quotations of our common stock should not be considered indicative of
the actual value of Nexia Holdings, Inc. or our common stock.
Risks of "Penny Stock".
-----------------------
Nexia Holdings Inc.'s common stock (OTC BB: NXIA) is deemed to be "penny stock"
as that term is defined in Rule 3a51-1 of the Securities and Exchange
Commission. Penny stocks are stocks (i) with a price of less than $5.00 per
share; (ii) that are not traded on a "recognized" national exchange; (iii) whose
prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed
stocks must still meet requirement (i) above); or (iv) in issuers with net
tangible assets less than $2,000,000 (if the issuer has been in continuous
operation for at least three years) or $5,000,000 (if in continuous operation
for less than three years), or with average sales of less than $6,000,000 for
the last three years. Until recently, there had been no "established public
market" for our common stock during the last five years. While our stock has
traded between $0.31 and $0.0005 per share over the past two years, there is no
assurance that this price level will continue, as there has thus far been low
volume. Section 15(g) of the Securities Exchange Act of 1934, as amended, and
Rule 15g-2 of the Securities and Exchange Commission require broker/dealers
dealing in penny stocks to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investor's account. Potential investors in our common stock are
urged to obtain and read such disclosure carefully before purchasing any shares
that are deemed to be a "penny stock."
Moreover, Rule 15g-9 of the Securities and Exchange Commission requires
broker/dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stocks to that investor.
This procedure requires the broker/dealer to (i) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (ii) reasonably determine, based on that information,
that transactions in penny stocks are suitable for the investor and that the
investor has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (iii) provide the investor
with a written statement setting forth the basis on which the broker/dealer made
the determination in (ii) above; and (iv) receive a signed and dated copy of
such statement from the investor, confirming that it accurately reflects the
investor's financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
our common stock to resell their shares to third parties or to otherwise dispose
of them.
RECENT SALES OF UNREGISTERED SECURITIES
The Company issued no unregistered securities within the period covered by this
report which have not been previously reported on Form 10-QSB.
In March of 2003, a Stock Purchase Agreement was entered into between Nexia
Holdings, Inc. and Chen Li, an individual resident of San Diego, California,
whereby Nexia sold to Ms. Li Five Million (5,000,000) shares of restricted
common stock of Nexia as consideration for Ms. Li making a loan in the sum of
$30,000 to Nexia's subsidiary corporation, West Jordan Real Estate Holdings,
Inc. The Company issued the shares pursuant to section
15
4(2) of the Securities Act of 1933 in an isolated private transaction by the
Company which did not involve a public offering. The Company made this offering
based on the following factors: (1) The issuance was an isolated private
transaction by the Company which did not involve a public offering, being made
to a single entity; (2) there was only one offeree who was issued stock; (3) the
offeree acquired the stock with investment intent; (4) there were no subsequent
or contemporaneous public offerings of the stock; (5) the stock was not broken
down into smaller denominations; and (6) the negotiations for the issuance of
the stock took place directly between the offeree and the Company.
Subsequent Events
On January 29, 2004, the board of directors authorized the issuance of
10,000,000 shares of the Company's common stock to each of the Company's
directors, Richard Surber, Gerald Einhorn, Adrienne Bernstein and John E. Fry,
Jr. The stock was issued as compensation for the services provided by the
directors and were issued with a restrictive legend and pursuant to Section 4(2)
of the Securities Act of 1933.
On April 8, 2004, the Company's board of directors authorized the issuance of
5,000,000 shares of the Company's common stock to Ronald Friedman for services
rendered to the Company, the shares were issued with a restrictive legend and
issued pursuant to Section 4(2) of the Securities Act of 1933 in a private
transaction.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
-------
The Company's plan of operation for the coming year, as discussed above, is to
identify and acquire favorable business opportunities as well as manage the
acquired subsidiaries and operations in a manner similar to that previously used
by Axia Group, Inc.
The Company does not plan to limit its options to any particular industry, but
will evaluate each opportunity on its merits. The Company believes it can meet
its cash needs for the foreseeable future from its current assets.
Consulting
----------
Our business model is to provide an expanded scope of financial, business, and
investment oriented consulting services to select start-up companies and
existing public companies. Specifically, the Company helps client companies by
creating a series of infrastructure-based partnerships that take advantage of
the Company's expertise in: advising, uncovering private placement funding
sources, strategic business planning, SEC registration documentation,
transactional document preparation, restructuring capital information,
"edgarizing" documents for filing with the Securities and Exchange Commission,
clerical support for clients, and identifying merger and acquisition
opportunities.
The Company's clients may choose to be acquired by the Company's reporting
companies and create their own public shareholder base with a self underwritten
offering or may choose to take advantage of the Company's shareholder base in a
Securities and Exchange Commission ("SEC") registered spin-off or a dividend.
The self- underwritten option requires a company to raise capital before
obtaining a quote, whereas an SEC registered spin- off or dividend enables
clients to obtain a quote prior to raising any new capital.
The Company employs several methods to locate prospective clients. We advertise
directly through print media to attract both private and public corporations to
engage our services, obtain referrals from previous clients and do our own
research of various databases that profile public companies.
The Company charges clients monthly or predetermined fees which vary in both
amount and form. Acceptable payments include cash, securities of the client
corporation, other assets, or some combination of the three. This payment
arrangement allows many organizations, especially start-up ventures and those
experiencing financial difficulties, to obtain the Company's services without
draining necessary cash funds. However, accepting stock as compensation
occasionally impairs the Company's cash flow, and for this reason acceptable
payments and the size
16
of payments the Company charges for its services vary with the volatility of the
clients' securities, the amount and nature of work involved, and the expenses
related to the services being rendered.
Revenues from Hudson's financial consulting operations increased for the year
ended December 31, 2003. Nexia recorded $276,565 in revenues for the year ended
December 31, 2003, from its financial consulting operations as compared to
$223,387 for the same period of 2002. This increase was due to a general turn
around in consulting due to improved market conditions experienced in the latter
part of the year. As the market continues to improve, Nexia anticipates a
continuing increase in consulting activity.
Real Estate Operations
----------------------
Nexia's objective with respect to its real estate operations is to acquire,
through its subsidiaries, properties throughout the country which Nexia's
management believes to be undervalued and which a subsidiary is able to acquire
through the expenditure of limited amounts of cash. The subsidiaries attempt to
acquire such properties by assuming existing favorable financing and paying the
balance of the price with nominal cash payments or through the issuance of
shares of either Nexia's or the subsidiary's common stock, or some combination
of the two. Once such properties are acquired, the subsidiary leases them to
primarily commercial tenants. Nexia's real-estate subsidiaries also make limited
investments in improvements to the properties with the objective of increasing
occupancy and improving cash flows. Nexia believes that with minor improvements
and effective management by the subsidiaries, properties can be liquidated at a
profit within a relatively short period of time. The Company has incurred losses
during the past year from impairment write-downs of property.
Nexia recorded consolidated rental revenues of $511,020 for 2003 as compared to
$610,556 for 2002. This decrease was largely attributable to the sale of Wichita
Development Corporation and Salt Lake Development Corporation, both of these
entities generated rental revenues for the entire 12 months ending December 31,
2002 versus 7 months of rental revenue recorded in the fiscal year ended
December 31, 2003. During 2003, Nexia continued to take steps to decrease the
overall vacancy rate of its consolidated real estate holdings including
marketing its holdings to potential tenants through commissioned real estate
agents and making cost-effective improvements to the holdings to increase
occupancy.
Nexia continues its real estate operations despite the negative cash flow for
two reasons. First, Nexia is attempting to eliminate the losses by increasing
occupancy and rental income from those properties of the subsidiaries which have
a high current vacancy rate. Second, Nexia's subsidiaries purchase real estate
primarily for appreciation purposes. Thus, while Nexia seeks to minimize and
reverse its real estate cash flow deficit, its goal is to offset such deficit
with sufficient cash that will be generated upon property disposition.
17
Company Operations as a Whole
-----------------------------
Revenues
--------
Gross revenues for December 31, 2002 and 2003 were $833,943 and $787,585
respectively. The decrease in revenues is due in part to decrease in rental
revenues as a result of the sales of Wichita Development Corporation and Salt
Lake Development Corporation in July of 2003.
Losses
------
Nexia recorded an operating loss of $1,112,463 at December 31, 2003, as compared
to an operating loss of $2,991,265 at December 31, 2002. Nexia recorded a net
loss of $ 901,825 for December 31, 2003, compared to a net loss of $3,520,570
for December 31, 2002. Nexia's losses decreased as a result of reductions in the
level of real estate operations, reduced amounts of losses from sales of
securities, reductions in staff and related administrative expenses.
Nexia feels that it is positioned to take advantage of changing market
conditions as a result of changes made in the last year. Nexia anticipates
operating at a minimal loss through fiscal 2004. There can be no assurance that
Nexia will attain profitability or that its can obtain any revenue growth in the
future.
Expenses
--------
General and administrative expenses for December 31, 2003 and 2002 were $
710,304 and $1,461,603 respectively. The decrease in expenses is a direct result
of the decreases in consulting fees, accounting and audit expenses, bad debt
expense, and other general expenses.
Nexia expects expenses as a percent of revenues to remain constant or decrease
through 2004 as Nexia steps up its effort to streamline operations and eliminate
non-performing assets as well as acquire additional properties and grow its
consulting businesses.
Capital Resources and Liquidity
-------------------------------
At December 31, 2003, Nexia had current assets of $ 382,860 and total assets of
$ 3,480,505. Nexia had a net working capital deficit of $ 1,304,435 at December
31, 2003. The main factors creating the working capital deficit is the amount of
real estate obligations that are classified as current obligations and the
substantial decrease in securities available for sale due to write downs
resulting from downturns in the market.
Net stockholders' equity in Nexia was $ 44,705 as of December 31, 2003, compared
to $420,316 as of December 31, 2002.
Cash flow used in operations was $ 152,474 for the year ended December 31, 2003,
compared to cash flow used in operations of $849,030 for the year ended December
31, 2002. The decrease in cash flows used in operating activities for the year
ended December 31, 2003, is primarily attributable to the reduction in costs of
staff, real estate holdings and a decrease in impairment expense of $632,260
from the prior year.
Cash flow used by investing activities was $ 9,763 for the year ended December
31, 2003, compared to net cash provided by investing activities of $2,305,049
for the year ended December 31, 2002. The significant decrease in cash resulting
from investing activities for the year ended December 31, 2003 as, compared with
2002 is primarily a result of not having any comparable real estate sales during
the year 2003.
Cash flow provided by financing activities was $ 147,489 for the year ended
December 31, 2003, compared to net cash used of $1,642,541 for the year ended
December 31, 2002. Nexia had positive financing cash flow for the year ended
December 31, 2003, as a result of issuing long term debt, including convertible
debentures, and proceeds from the issuance of stock options.
18
Due to Nexia's acquisition of debt service on real estate holdings, willingness
to acquire properties with negative cash flow shortages, and acceptance of
non-cash assets for consulting services, Nexia experiences occasional cash flow
shortages. To satisfy its cash requirements, including the debt service on its
real estate holdings, Nexia must periodically raise funds from external sources.
This often involves Nexia conducting exempt offerings of its equity securities.
During the year ended December 31, 2003, Nexia issued a total of 33,150,000
shares for services rendered and prepaid services by employees and consultants.
Debentures
----------
On October 31, 2003 the Company issued two 18% Series A Senior Subordinated
Convertible Redeemable Debentures, with a due date of November 1, 2004. Each of
the debentures is in the face amount of $30,000 and is convertible into the
common stock of the Company at a discount of 30% from the market price on the
date of conversion. The holders of the debentures are Mr. Ronald Friedman and
Mr. John E. Fry, Jr., Mr. Fry is a director of the Company. The funds received
in exchange for the debentures were forwarded to Creative Marketing Group, Inc.
to further a proposed agreement with the Company, that agreement failed to close
and the receivable in the amount of $60,000 at 18% interest has been
acknowledged by CMG.
Stock and Options To Employees
During the quarter ending September 30, 2003, Nexia's subsidiary, Hudson
Consulting Group, Inc., temporarily discontinued cash payments to its employees.
Consequently, Nexia has relied upon the issuance of S-8 shares to pay certain
employees and consultants. On July 21, 2003, Nexia issued 5,000,000 shares of
S-8 common stock to Jared Gold for services rendered valued at $10,000, or
$0.002 per share, the market price on the date of grant. In September, 2003
Nexia issued 17,550,000 shares of its common stock to employees under its S-8
Registration Statements for its Employee Benefit Plans. Michael Golightly, an
attorney employed by the Company was issued 7,550,000 shares as compensation for
past services to the Company and in partial settlement of obligations related to
his employment. Shane Stone, serving as accounting manager for the Company was
issued 10,000,000 shares as compensation for his services in working on
financial and quarterly reports for the Company and in partial settlement of
obligations related to his employment.
On November 17, 2003, the Company's board of directors approved the issuance of
2,000,000 shares of the Company's common stock to Francis A. Zumbrowski for bona
fide services he provided to the Company.
On December 4, 2003, the Company's board of directors approved the delivery of
options to purchase 1,600,000 shares of the Company's common stock to 8
employees of the Company for services rendered to the Company, the shares were
authorized pursuant to the S-8 Registration Statement of the Company. Each
employee received 200,000 shares.
On December 8, 2003, the Company's board of directors approved the delivery of
options to purchase 4,000,000 shares of the Company's common stock to 8
employees of the Company for services rendered to the Company, the shares were
authorized pursuant to the S-8 Registration Statement of the Company. Each
employee received 500,000 shares.
Events Subsequent to End of Fiscal Year
---------------------------------------
On January 29, 2004, the Company's board of directors approved the delivery to
each director of 10,000,000 restricted shares of the Company's common stock for
services rendered to the Company as Directors. The directors receiving shares
included, Richard Surber, Gerald Einhorn, Adrienne Bernstein, and John E. Fry,
Jr. The shares were issued pursuant to Section 4(2) of the Securities Act of
1933, as compensation for services rendered to the corporation as Directors by
the named individuals.
On February 20, 2004, the Company's board of directors approved the issuance to
Richard Surber, president and chief executive and financial officer of the
Company, 5,100,000 shares of the Company's Series A Preferred Stock,
19
as an incentive to retaining Mr. Surber as an employee of the Company. As these
preferred shares have voting rights which equate to 100 shares of common stock
for every 1 Series A Preferred share and may be converted into $10 worth of
common stock. this issuance of preferred stock has the effect of diluting the
voting rights of holders of the common stock and potential dilution of the
rights of common stockholders upon liquidation or in the event of conversion of
the shares.
Stock Options and Grants to Employees and Contractors
On January 6, 2004, the Company's board of directors authorized the issuance of
2,400,000 shares of the Company's common stock to Barry Monk, a consultant to
the Company who has provided services to the Company, the shares were issued
pursuant to the S-8 Registration Statement of the Company.
On January 16, 2004, the Company's board of directors authorized the issuance of
9,100,000 shares of the Company's common stock to seven individual employees who
had provided bona fide services to the Company, the shares were authorized
pursuant to the S-8 Registration Statement of the Company.
On February 13, 2004, the Company's board of directors authorized the issuance
of 25,000,000 options for the Company's common stock to five individual
employees who had provided bona fide services to the Company, the options for
shares were authorized pursuant to the S-8 Registration Statement of the
Company, each good for the purchase of shares at an option price of $0.002 per
share.
On February 13, 2004, the Company's board of directors authorized the issuance
of 5,000,000 options for the Company's common stock to Barry Monk, an individual
who has provided bona fide services to the Company, the options for shares were
authorized pursuant to the S-8 Registration Statement of the Company, each good
for the purchase of shares at an option price of $0.002 per share.
On February 20, 2004, the Company's board of directors authorized the issuance
of 5,000,000 options for the Company's common stock to Barry Monk, an individual
who has provided bona fide services to the Company, the options for shares were
authorized pursuant to the S-8 Registration Statement of the Company each good
for the purchase of shares at an option price of $0.002 per shares.
On March 4, 2004, the Company's board of directors authorized the issuance of
6,000,000 options for the Company's common stock to Josh Vance, a real estate
professional that has provided services related to the leasing of real property
held by the Company's subsidiaries, the options for shares were authorized
pursuant to the S-8 Registration Statement of the Company, each good for the
purchase of shares at an option price of $0.002 per share.
On March 9, 2004, the Company's board of directors authorized the issuance of
13,333,334 shares of Company's common stock to Mark Low, an accountant that has
provided services for the Company, pursuant to the S-8 Registration Statement of
the Company.
On March 9, 2004, the Company's board of directors authorized the issuance of
250,000 shares of the Company's common stock, pursuant to the S-8 Registration
Statement of the Company. and 2,000,000 options for the Company's common stock
to Donald Decker, a computer specialist and web site designer, pursuant to the
S-8 Registration Statement of the Company, each good for the purchase of shares
at an option price of $0.002 per share, a lower option price of $0.001 per share
was later approved by the Board and
On March 9, 2004, the Company's board of directors authorized the issuance of
6,000,000 shares and the issuance of 12,000,000 options to Ernie Burch, an
employee of the Company and for services provided with regard to improvements
and maintenance to be performed on real estate held by Wasatch Capital
Corporation, a subsidiary of the Company, the shares and the options were
authorized pursuant to the S-8 Registration Statement of the Company, each
option is good for the purchase of shares at an option price of $0.002 per
share, a lower option price of $0.001 per shares was later approved by the
Board.
On April 8, 2004, the Company's board of directors authorized the issuance of
33,000,000 shares of the Company's common stock to 4 employees (Frank Adams,
Michael Golightly, Sandra Jorgensen and Brittany Stevens) of the
20
Company for services rendered to the Company, the shares were authorized
pursuant to the S-8 Registration Statement of the Company.
On April 8, 2004, the Company's board of directors authorized the issuance of
5,000,000 shares of the Company's common stock to Ronald Friedman for services
rendered to the Company and as additional compensation for assisting with
financing for the Company, the shares have not yet been issued but will be
issued with a restrictive legend and issued pursuant to Section 4(2) of the
Securities Act of 1933 in a private transaction.
Ability to Continue as a Going Concern
--------------------------------------
Nexia's ability to continue as a going concern is in doubt as a result of Nexia
having incurred a loss from its operations during the fiscal year ended December
31, 2003 and has had losses in prior years as well. Nexia will need to
substantially decrease its operating expenses, increase its operating income,
and raise significant additional capital, as to which there is no assurance that
the objective will be accomplished. In the event that these events do not take
place Nexia will in all probability not be able to continue as a going concern
in calendar year 2004.
Capital Expenditures
--------------------
Nexia had capital expenditures of $32,544 during the year ended 2003.
Income Tax Expense (Benefit)
----------------------------
Nexia has an income tax benefit resulting from net operating losses to offset
future operating profit of approximately $6,652,023. This is not shown on the
balance sheet as a deferred tax asset due to past history of loss years in
conjunction with profit years during the previous 10 year period as well as
specifics in the GAAP regulations regarding surety of future earnings.
Impact of Inflation
-------------------
Nexia believes that inflation has had a negligible effect on operations over the
past three years. Nexia believes that it can offset inflationary increases in
the cost of labor by increasing sales and improving operating efficiencies.
21
Known Trends, Events, or Uncertainties
--------------------------------------
General Real Estate Investment Risks
Nexia's investments are subject to varying degrees of risk generally incident to
the ownership of real property. Real estate values and income from Nexia's
current properties may be adversely affected by changes in national or local
economic conditions and neighborhood characteristics, changes in interest rates
and in the availability, cost and terms of mortgage funds, occupancy rates of
Nexia's properties, the impact of present or future environmental legislation
and compliance with environmental laws, the ongoing need for capital
improvements, changes in governmental rules and fiscal policies, civil unrest,
acts of God, including earthquakes and other natural disasters which may result
in uninsured losses, acts of war, adverse changes in zoning laws, and other
factors which are beyond the control of Nexia.
Value and Illiquidity of Real Estate
Real estate investments are relatively illiquid. The ability of Nexia to vary
its ownership of real estate property in response to changes in economic and
other conditions is limited. If Nexia must sell an investment, there can be no
assurance that Nexia will be able to dispose of it in the time period it desires
or that the sales price of any investment will recoup the amount of Nexia's
investment.
22
Property Taxes
Nexia's real property is subject to real property taxes. The real property taxes
on this property may increase or decrease as property tax rates change and as
the property is assessed or reassessed by taxing authorities. If property taxes
increase, Nexia's operations could be adversely affected.
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements for the fiscal year ended December 31, 2003,
are attached hereto as pages F-1 through F-36.
23
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2003
F-1
C O N T E N T S
Independent Auditors' Report................ ............................... F-3
Consolidated Balance Sheet.................................................. F-4
Consolidated Statements of Operations and Other Comprehensive Income........ F-6
Consolidated Statements of Stockholders' Equity............................. F-8
Consolidated Statements of Cash Flows...................................... F-10
Notes to the Consolidated Financial Statements............................. F-12
F-2
HJ & Associates, LLC
50 South Main Street
Suite 1450
Salt Lake City, UT 84144
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Nexia Holdings, Inc. and Subsidiaries
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheet of Nexia Holdings,
Inc. and Subsidiaries as of December 31, 2003 and the related consolidated
statements of operations and other comprehensive income, stockholders' equity
and cash flows for the years ended December 31, 2003 and 2002. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 consolidated financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Nexia
Holdings, Inc. and Subsidiaries as of December 31, 2003 and the consolidated
results of their operations and other comprehensive income, and their cash flows
for the years ended December 31, 2003 and 2002 in conformity with accounting
principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has generated significant losses
from operations, has an accumulated deficit of $10,224,467 and has a working
capital deficit of $1,304,435 at December 31, 2003, which together raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note 2. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/
--------------------
HJ & Associates, LLC
Salt Lake City, Utah
May 10, 2004
F-3
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
ASSETS
------
December 31,
2003
------------
CURRENT ASSETS
Cash $ 94,073
Accounts receivable - trade 33,387
Related party accounts receivable 12,952
Notes receivable, net of allowance of $315,000 (Note 4) 36,949
Prepaid expenses 99
Marketable securities (Note 6) 205,400
------------
Total Current Assets 382,860
------------
FIXED ASSETS (Note 5)
Property and equipment, net 2,570,691
Land 488,895
------------
Total Fixed Assets 3,059,586
------------
OTHER ASSETS
Loan costs, net 38,059
------------
Total Other Assets 38,059
------------
TOTAL ASSETS $ 3,480,505
============
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheet (Continued)
LIABILTIES AND STOCKHOLDERS' EQUITY
-----------------------------------
December 31,
2003
------------
CURRENT LIABILITIES
Accounts payable $ 188,188
Accrued liabilities 130,524
Current portion of WVDEP liability(Note 11) 20,000
Unearned rent (Note 1) 28,455
Deferred revenue (Note 1) 8,958
Deferred gain on sale of subsidiary (Note 12) 21,770
Refundable deposit 15,541
Convertible debentures (Note 15) 60,000
Current portion long-term debt (Note 9) 1,213,859
------------
Total Current Liabilities 1,687,295
------------
LONG-TERM LIABILITIES
Long-term debt (Note 9) 1,548,740
------------
Total Long-Term Liabilities 1,548,740
------------
Total Liabilities 3,236,035
------------
MINORITY INTEREST 199,765
------------
COMMITMENTS AND CONTINGENCIES (NOTE 11)
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 50,000,000 shares authorized,
no shares issued or outstanding -
Common stock, $.001 par value, 1,000,000,000 shares authorized,
348,502,760 shares issued and outstanding 348,503
Additional paid-in capital 10,063,482
Treasury stock, 20,038,340 shares at cost (Note 10) (100,618)
Expenses prepaid with common stock (13,333)
Stock subscription receivable (Note 14) (28,000)
Other comprehensive loss (Note 6) (862)
Accumulated deficit (10,224,467)
------------
Total Stockholders' Equity 44,705
------------
TOTAL LIABILTIES AND STOCKHOLDERS' EQUITY $ 3,480,505
============
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Other Comprehensive Income (Loss)
For the Years Ended
December 31,
-----------------------------
2003 2002
-------------- -------------
REVENUE
Consulting revenue $ 226,565 $ 223,387
Consulting revenue - related party 50,000 -
Rental revenue 511,020 610,556
-------------- -------------
Total Revenue 787,585 833,943
-------------- -------------
COST OF REVENUE
Cost associated with consulting revenue 287,209 631,004
Cost associated with rental revenue 358,229 999,706
Interest expense associated with rental revenue 280,734 257,657
-------------- -------------
Total Cost of Revenue 926,172 1,888,367
-------------- -------------
GROSS (DEFICIT) (138,587) (1,054,424)
-------------- -------------
EXPENSES (INCOME)
Impairment of long-lived assets 182,974 258,788
Impairment of marketable securities 75,177 256,494
(Gain) loss on sale of marketable securities 5,421 (40,044)
Selling, general and administrative expense 710,304 1,461,603
--------------- ------------
Total Expenses (Income) 973,876 1,936,841
--------------- ------------
LOSS FROM OPERATIONS (1,112,463) (2,991,265)
--------------- ------------
OTHER INCOME (EXPENSE)
Interest income 182 474
Interest expense (15,596) -
Other (expense) income 44,841 56,531
Gain (loss) on disposal of assets (29,559) 4,159
Gain on sale of subsidiaries (Note 12) 229,268 -
--------------- ------------
Total Other Income (Expense) 229,136 61,164
--------------- ------------
LOSS BEFORE MINORITY INTEREST $ (883,327) $(2,930,101)
--------------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and
Other Comprehensive Income (Loss) (Continued)
For the Years Ended
December 31,
----------------------------
2003 2002
------------ -------------
LOSS BEFORE MINORITY INTEREST $ (883,327) $ (2,930,101)
MINORITY INTEREST IN LOSS (65,113) (100,049)
------------ -------------
NET LOSS BEFORE DISCONTINUED OPERATIONS (818,214) (2,830,052)
------------ -------------
DISCONTINUED OPERATIONS
Loss on discontinued operations (Note 16) (83,611) (690,518)
------------ -------------
NET LOSS (901,825) (3,520,570)
------------ -------------
OTHER COMPREHENSIVE INCOME (LOSS)
Change in marketable securities (1,735) 434,092
------------ -------------
TOTAL COMPREHENSIVE LOSS $ (903,560) $ (3,086,478)
============ =============
BASIC AND DILUTED LOSS PER WEIGHTED AVERAGE
COMMON SHARE:
Loss per common share before minority interest $ (0.00) $ (0.01)
Minority interest in loss per common share 0.00 0.00
------------ -------------
Net loss per common share before discontinued
operations (0.00) (0.01)
Loss per common share on discontinued operations (0.00) (0.00)
------------ -------------
Net loss per common share, basic and diluted $ (0.00) $ (0.01)
============ =============
Weighted average common shares outstanding,
basic and diluted 322,734,541 278,022,545
============ =============
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Additional Stock Expenses Other Total
Common Stock Paid-in Treasury Subscription Prepaid with Comprehensive Accumulated Stockholders'
Shares Amount Capital Stock Receivable Common Stock Income (Loss) Deficit Equity
------------ --------- ------------ ---------- ----------- ----------- ------------ ------------ -------------
Balance,
December 31,
2001 255,100,000 $ 255,101 $ 8,402,692 $ - $ - $ - $ (433,219) $(5,802,072) $ 2,422,502
Recapital-
ization 54,869,427 54,869 1,116,664 (91,792) - - - - 1,079,741
Purchase of
treasury stock - - - (15,949) - - - - (15,949)
Common stock
issued for
services 383,333 383 20,117 - - - - - 20,500
Sale of common
stock by
Subsidiary - - 107,800 - (107,800) - - - -
Adjustment for
marketable
securities - - - - - - 434,092 - 434,092
Net loss for
the year ended
December 31,
2002 - - - - - - - (3,520,570) (3,520,570)
------------ --------- ------------ ---------- ----------- ----------- ------------ ------------ -------------
Balance,
December 31,
2002 310,352,760 310,353 9,647,273 (107,741) (107,800) - 873 (9,322,642) 420,316
Common stock
issued for loan
fee 5,000,000 5,000 45,000 - - - - - 50,000
Disposition of
treasury stock
and stock
subscription
due to sale of
subsidiary - - - 7,123 107,800 - - - 114,923
Common stock
issued for
Services 8,000,000 8,000 11,000 - - - - - 19,000
Common stock
issued for
Bonus 17,550,000 17,550 210,600 - - - - - 228,150
Common stock
issued for
services and
prepaid services 2,000,000 2,000 38,000 - - (13,333) - - 26,667
Common stock
issued for stock
option exercise
to employees 5,600,000 5,600 50,400 - (28,000) - - - 28,000
----------- --------- ------------ ---------- ------------ ---------- ------------ ------------ -------------
Balance
Forward 348,502,760 $ 348,503 $ 10,002,273 $(100,618) $ (28,000) $ (13,333) $ 873 $(9,322,642) $ 887,056
----------- --------- ------------ ---------- ------------ ---------- ------------ ------------ -------------
F-8
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Additional Stock Expenses Other Total
Common Stock Paid-in Treasury Subscription Prepaid with Comprehensive Accumulated Stockholders'
Shares Amount Capital Stock Receivable Common Stock Income (Loss) Deficit Equity
----------- --------- ----------- ---------- ------------ ------------ ------------- ------------ -------------
Balance
Forward 348,502,760 $ 348,503 $10,002,273 $(100,618) $ (28,000) $ (13,333) $ 873 $ (9,322,642) $ 887,056
Intrinsic
value of stock
options issued
to employees - - 49,600 - - - - - 49,600
Beneficial
conversion
feature on
convertible
debentures - - 11,609 - - - - - 11,609
Adjustment for
marketable
Securities - - - - - - (1,735) - (1,735)
Net loss for
the year
ended December
31, 2003 - - - - - - - (901,825) (901,825)
----------- --------- ----------- ---------- ----------- ------------ ------------- ------------- -------------
Balance,
December 31,
2003 348,502,760 $ 348,503 $10,063,482 $(100,618) $ (28,000) $ (13,333) $ (862) $(10,224,467) $ 44,705
=========== ========= =========== ========== =========== ============ ============= ============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended
December 31,
-------------------------
2003 2002
----------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (901,825) $(3,520,570)
Adjustments to reconcile net loss to net cash
used in operating activities:
Gain on sale of subsidiaries (229,268) -
Loss (gain) from sale of investments 5,421 (40,044)
Loss (gain) from sale of land and real
property for sale 9,008 (4,159)
Loss on disposition of property, plant and equipment 29,559 -
Impairment of marketable securities 75,177 707,437
Impairment of long-lived assets 173,966 258,788
Change in minority interest (65,113) (100,049)
Depreciation and amortization 137,607 187,424
Intrinsic value of stock options issued 49,600 -
Amortization of beneficial conversion feature 11,609 -
Issued common stock for services 323,817 20,500
Bad debt expense 319,219 200,895
Changes in operating assets and liabilities:
Accounts and notes receivable (21,820) 106,794
Prepaid expenses 23,401 (22,530)
Other assets 7,144 371,616
Accounts payable (10,415) 173,113
Accrued liabilities 39,468 (83,213)
Deferred revenue (138,070) (357,806)
Refundable deposit 9,041 17,650
Related party payable - Axia - 1,235,124
----------- ------------
Net Cash Used In Operating Activities (152,474) (849,030)
----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash relinquished in sale of subsidiaries (15,351) -
Issuance of notes receivable (60,000) -
Proceeds from notes receivable 26,100 98,526
Proceeds from sale of marketable securities 23,032 88,772
Purchase of marketable securities - (5,003)
Proceeds on sale of real property 49,000 2,332,000
Proceeds on sale of subsidiaries - 100,000
Purchase of property, plant and equipment (32,544) (309,246)
----------- ------------
Net Cash Provided (Used) By Investing Activities (9,763) 2,305,049
----------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
For the Years Ended
December 31,
-------------------------
2003 2002
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term debt $ (134,928) $(2,012,430)
Proceeds from issuance of long-term debt 194,417 385,838
Proceeds from issuance of convertible debentures 60,000 -
Purchase of treasury stock - (15,949)
Proceeds from stock option exercise 28,000 -
----------- ------------
Net Cash Provided By (Used In) Financing
Activities 147,489 (1,642,541)
----------- ------------
Net Increase (Decrease) In Cash (14,748) (186,522)
CASH, BEGINNING OF YEAR 108,821 295,343
----------- ------------
CASH, END OF YEAR $ 94,073 $ 108,821
=========== ============
SUPPLEMENTAL DISCLOSURE OF INFORMATION
Cash paid during the year for interest $ 331,488 $ 395,435
Cash paid during the year for income taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for services $ 323,817 $ 20,500
Assets acquired through capital lease $ 19,815 $ 46,880
Common stock sold by subsidiary $ - $ 107,800
The accompanying notes are an integral part of these consolidated financial
statements.
F-11
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES
a. Organization
Nexia Holdings, Inc. (Nexia or The Company) was incorporated under the
laws of the State of Colorado on April 20, 1987 as Metropolitan
Acquisition Corporation. The name of the Company has changed several
times, most recently, to Kelly's Coffee Group, Inc. (Kelly's) on April
22, 1994, and finally to Nexia Holdings, Inc. on March 15, 2002.
Nexia became a development stage company on March 1, 1998.
On October 5, 2000, Nexia merged with a Nevada corporation with the
same name, effectively changing its state of domicile from Colorado to
Nevada and its authorized common stock from 100,000,000 shares with
$.001 par value to 1,000,000,000 shares with $.001 par value.
On February 15, 2002, the Company entered into a Stock Purchase
Agreement (Agreement) with Axia Group, Inc. (Axia), a related party,
pursuant to which the Company issued to Axia 255,100,000 restricted
shares of the Company's common stock in exchange for essentially all of
the assets and liabilities of Axia. Axia's assets included a portfolio
of securities, real estate holdings and publicly reporting
shell-companies. The shares issued to Axia equaled approximately 82%
of the issued and outstanding shares of the Company after the close of
the transaction. Immediately prior to the Agreement, the Company had
55,252,760 shares of common stock issued and outstanding. The
acquisition was accounted for as a recapitalization. Such subsidiaries
consist of Diversified Holdings I, Inc., Wichita Development
Corporation, Golden Opportunity Development Corporation, Downtown
Development Corporation, Wasatch Capital Corporation, Hudson Consulting
Group, Inc., Oasis International Hotel and Casino, Inc., Canton
Industrial Corporation of Salt Lake City Inc., Canton's Wild Horse
Ranch II, Inc., West Jordan Real Estate Holdings, Inc., Salt Lake
Development, Inc., Kearns Development Corporation and Canton Tire
Recycling of West Virginia, Inc. (together "The Accounting Acquirer").
The subsidiaries of Axia which were transferred to the Company have
been treated as the acquiring entities for accounting purposes and the
Company is the surviving entity for legal purposes. The transaction is
deemed to be an exchange of assets between entities under common
control. The President of the Company is also the President of Axia
and is also a significant shareholder in many of the subsidiaries which
were transferred to the Company. As noted by Interpretation 39, the
transfer of net assets or an exchange of shares between entities under
common control is excluded from Opinion 16 and should be accounted for
at historical cost. There was no adjustment to the carrying value of
the assets or liabilities of the transferred subsidiaries, nor was
there any adjustment to the carrying value of the net assets or
liabilities of the Company. The combined statements of operations and
other comprehensive income and cash flows for the year ended December
31, 2001 include only the activity of the accounting acquirer and
through February 5, 2002 (date of agreement) after which the statement
of operations reflect the operations of the accounting acquirer and
Nexia. The statement of stockholders equity for the year ended
December 31, 2001 has been presented to give proportionate effect to
the number of shares issued by the Company as applied to the equity
transactions of the accounting acquirer.
On June 19, 2003, in an inter-company tax free transaction, Wichita
Development Corporation exchanged its shareholdings in Kearns
Development Corporation for the
F-12
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES (Continued)
a. Organization (Continued)
Diversified Holdings 1, Inc. shareholdings in Salt Lake Development
Corporation. At the time of the exchange all parties were
subsidiaries of Nexia.
On June 20, 2003, the Company sold it's interest in Wichita
Development Corporation, and consequently, it's interest in Salt Lake
Development Corporation and Wichita Properties, Inc., to Diversified
Financial Resources Corporation (DFRC)(See Note 12).
b. Basis of Consolidation
Diversified Holdings I, Inc. (DHI), a Nevada corporation and 99% owned
subsidiary of the Company, was formed on March 22, 1996. DHI is a
holding company which has majority ownership of the following
subsidiaries:
Hudson Consulting Group, Inc. (Hudson) was incorporated in Nevada on
April 16, 1996, as Diversified Holdings XIII, Inc. for the purpose of
providing business consulting services. On March 5, 1997, its name
was changed to Hudson Consulting Group, Inc. Hudson is 100% owned by
DHI.
Oasis International Hotel & Casino, Inc. (OIHC), a Nevada corporation,
was formed on November 20, 1995 for the purpose of acquiring, owning
and managing specific property in Elko County, Nevada. OIHC is 91%
owned by DHI and currently has no real estate holdings.
Canton Industrial Corporation of Salt Lake City (CICSLC), a Utah
corporation, was incorporated on September 29, 1993 for the purpose of
acquiring, owning and managing a specific property. CICSLC sold the
property in December 1998, and currently holds a promissory note from
the purchaser, secured by a deed of trust on the property, in the
amount of $255,000, bearing interest at 8%, principal and interest due
August 10, 2002. CICSLC is 80% owned by DHI and 10% owned by Nexia.
Golden Opportunity Development Corporation (GODC), was incorporated in
Louisiana on May 7, 1997 and redomiciled to Nevada during 2000. GODC
owned and operated The General Lafayette Inn located in the downtown
area of Baton Rouge, Louisiana, and is owned 83% by DHI. The General
Lafayette Hotel was sold in January 2002.
Canton's Wild Horse Ranch II, Inc. (CWHRII), was incorporated in
Arizona on February 3, 1994, for the purpose of acquiring, owning and
managing certain unimproved raw land. The land was sold in 1999 and
currently CWHRII has minimal assets and is owned 91% by DHI.
West Jordan Real Estate Holdings, Inc. (WJREH), was formed on June 7,
1994 in Utah for the purpose of acquiring, owning and managing a
specific property. WJREH currently owns a commercially rented retail
shopping plaza in Salt Lake City, Utah. WJREH is owned 89% by DHI.
F-13
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES (Continued)
b. Basis for Consolidation (Continued)
Kearns Development Corporation (Kearns), a Nevada corporation, was
incorporated February 16, 1996 as Cyber Studio, Inc. On April 4, 2001,
it's name was changed to Kearns Development Corporation. During 2000,
Kearns purchased a commercially rented building in Kearns, Utah. Prior
to October 17, 2001, Kearns was owned 86% by DHI and on June 19, 2003
was sold back to DH1 by WHDV.
Wasatch Capital Corporation (WCC), a Utah corporation, was
incorporated on June 10, 1991. WCC owns a commercially rented building
in downtown Salt Lake City and is owned 77% by DH1.
Canton Tire Recycling of West Virginia, Inc. (CTRWV), was incorporated
by the Company on February 25, 1993, in West Virginia, for the purpose
of acquiring, owning and managing a specific property. CTRWV held
certain real property in West Virginia until 2003, and is 100% owned
by DH1.
Downtown Development Corporation (Downtown), was incorporated by the
Company on November 30, 1999 in Utah as A-Z South State Corporation.
On August 22, 2001, it's name was changed to Downtown Development
Corporation. Downtown owns a commercially rented building in Salt
Lake City, Utah, and is 100% owned DH1.
In addition to DHI, the Company has majority ownership in the
following subsidiaries:
At December 31, 2003, the Company had full or majority ownership in 14
other companies including CyberCosmetics, Inc., CyberBoy, Inc.,
CyberEye, Inc., CyberFishing, Inc., CyberLead, Inc., CyberLife, Inc.,
CyberOil, Inc., CyberSkiing, Inc., CyberSoccer, Inc., CyberTennis,
Inc.,CyberTyme, Inc., CyberWholesale, Inc., CSI Holdings, Inc.
(formerly CyberWrestling, Inc.), CyberWrite, Inc. Each of these
companies is inactive with little or no assets, liabilities or
operating activities.
c. Accounting Method
The accompanying consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the
United States of America applicable to a going concern, which
contemplates the realization of assets and the liquidation of
liabilities in the normal course of business.
d. Compensating Cash Balances
The Company's subsidiary, West Jordan Real Estate Holdings, Inc. has
signed a note payable. As part of the note, WJREH has agreed to
deposit $3,750 monthly into a bank account to be used for capital
improvements, tenant improvements and leasing commissions. The account
balance was $33,608 at December 31, 2003.
F-14
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES (Continued)
e. Provision for Taxes
Deferred taxes are provided on a liability method whereby deferred tax
assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax bases. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the
deferred tax assets will be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and
rates on the date of enactment.
Net deferred tax assets consist of the following components as of
December 31, 2003 and 2002:
2003 2002
------------- -------------
Deferred tax assets
NOL Carryover $ 2,594,290 $ 2,648,445
Capital loss 661,050 661,050
Other 33,700 2,000
Deferred tax liabilities: - -
Valuation allowance (3,289,040) (3,311,495)
------------- -------------
Net deferred tax asset $ - $ -
============= =============
The income tax provision differs from the amount of income tax
determined by applying the U.S. federal and state income tax rates of
39% to pretax income from continuing operations for the years ended
December 31, 2003 and 2002 due to the following:
2003 2002
------------- -------------
Book loss $ (351,710) $ (1,394,472)
Bad debt 124,495 120,370
Asset impairments 97,165 100,927
Other 2,345 (2,371)
Stock for services/option expense 150,160 8,000
Valuation allowance (22,455) 1,167,546
------------- -------------
$ - $ -
============= =============
At December 31, 2003, the Company had net operating loss carryforwards
of approximately $6,652,023 that may be offset against future taxable
income from the year 2003 through 2023. No tax benefit has been
reported in the December 31, 2003 consolidated financial statements
since the potential tax benefit is offset by a valuation allowance of
the same amount.
F-15
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES (Continued)
e. Provision for Taxes
Due to the change in ownership provisions of the Tax Reform Act of
1986, net operating loss carryforwards for Federal income tax
reporting purposes are subject to annual limitations. Should a change
in ownership occur, net operating loss carryforwards may be limited as
to use in the future years.
f. Depreciation
The Company's property and equipment is depreciated using the
straight-line Accounting method over the useful lives shown below for
financial reporting purposes.
Asset Useful Life
------------ ----------------
Computers 3 years
Equipment and fixtures 5 to 10 years
Buildings and improvements 20 to 39 years
g. Revenue Recognition
The Company recognizes revenue from its two main sources of revenue as
follows:
Rental Revenue
--------------
Rental revenues are recorded in the period in which they are earned in
accordance with rental agreements and lease contracts. Rent payments
are typically due by the 1st of each month. Occasionally, the Company
will receive rent payments at the end of preceding months for the
following months rent. The Company will record these as deferred
revenue until such time as the rent has been earned. Deferred rental
revenue at the December 31, 2003 was $28,455.
Consulting Revenue
------------------
The Company, through it's subsidiaries performs consulting services
which consist of financial reporting, business acquisitions, and other
public company reporting and support functions. The Company can
receive payment for these services in a variety of ways. (1) the
Company can be paid in cash; (2) the Company can be paid in restricted
securities of the client; (3) the Company can be paid in a combination
of cash and restricted securities of the client. The Company follows
the revenue recognition provisions of SAB 101 'Revenue Recognition in
Financial Statements' and 5 'Recognition and Measurement in Financial
Statements of Business Enterprises'. These statements require that
revenue not be recognized unless collectibilility is reasonably
assured with recognition of revenue acceptable only when realizable or
when assets received or held are readily convertible into known
amounts of cash or claims to cash.
F-16
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES (Continued)
g. Revenue Recognition (Continued)
Consulting Revenue (Continued)
------------------
Accordingly, when the Company is to be paid in cash, the Company will
record the revenue on an accrual basis when the services have been
performed, the amounts are readily determinable and collection is
reasonably assured. In the cases where the Company receives
restricted securities from the client as payment, revenue is deferred
until such time as the securities are sold, thereby meeting the
requirements that the assets received are readily convertible into
known amounts of cash. In the cases where the Company receives a
combination of cash and restricted securities, the Company will record
that cash as revenue as noted previously and will defer the
recognition of the revenue from the securities until the securities
are sold.
The Company records the securities received from consulting services
in accordance with SFAS 115 'Accounting for Certain Investments in
Debt and Equity Securities'. This standard requires that the Company
classify it's investments as either trading, available for sale, or
held to maturity securities. The Company typically classifies the
securities received as payment for the consulting services as
available for sale. Any unrealized gains and losses on these
securities for which the revenue has been deferred are recorded as
adjustments to the deferred revenue account until such time as the
security is sold and the Company is able to recognize the revenue from
the consulting services. The amount of deferred revenue related to
consulting services performed for which the Company received
restricted securities at December 31, 2003 was $8,958. This
represents the fair value of the portion of the available for sale
securities for which revenue had been deferred at December 31, 2003.
h. Marketable Securities
The Company follows the provisions of SFAS 115 regarding marketable
securities. The Company's securities investments that are bought and
held principally for the purpose of selling them in the near term are
classified as trading securities. Trading securities are recorded at
fair value on the balance sheet in current assets, with the change in
fair value during the period included in earnings.
Securities investments that the Company has the positive intent and
ability to hold to maturity are classified as held-to-maturity
securities and recorded at amortized cost in investments and other
assets. Securities investments not classified as either
held-to-maturity or trading securities are classifies as
available-for-sale securities. Available-for-sale securities are
recorded at fair value in investments and other assets on the balance
sheet, with the change in fair value during the period excluded from
earnings and recorded net of tax as a separate component of equity.
All marketable securities held by the Company have been classified as
available-for-sale securities.
F-17
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES (Continued)
i. Issuance of Common Stock
The Company frequently issues shares of its common stock to acquire
assets, retire debt and pay for services. When stock is issued for
assets, debt or services, the value of the stock, related assets,
debt or services is determined by the most readily determinable value,
i.e. the value of the common stock issued or the value of the assets,
debt or services.
j. Environmental Compliance and Remediation
The Company determines potential liability on a site by site basis and
records a liability when its existence is probable and reasonably
estimable. Expenditures that do not have a future economic benefit are
expensed as incurred. Expenditures that extend the life of the related
property or mitigate or prevent future environmental contamination are
capitalized.
k. Impairment of Long-Lived Assets
The Company evaluates it's long-lived assets in accordance with
Statement of Financial Accounting Standard No. 144, "Accounting for the
Impairment or Disposal of Long Lived Assets". The Company recognizes
impairment losses as the difference between historical cost and fair
value of the asset, less costs to sell, when management determines that
events and circumstances indicate a need to assess impairment, and when
that assessment indicates that historical cost materially exceeds fair
value, less costs to sell. Impairment expense totaled $173,966 and
$258,788 for the years ended December 31, 2003 and December 31, 2002,
respectively.
l. Advertising Expense
The Company expenses advertising costs as incurred. Advertising
expense was $0 and $18,311 for the years ended December 31, 2003 and
2002, respectively.
m. Basic and Diluted Loss Per Common Share
The computation of basic and diluted loss per share of common stock is
based on the weighted average number of shares outstanding during the
period.
F-18
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES (Continued)
m. Basic and Diluted Loss Per Common Share (Continued)
For the Years Ended
December 31,
-------------------------------
2003 2002
-------------- --------------
Numerator:
Loss before minority interest $ (883,327) $ (2,930,101)
Minority interest 65,113 100,049
-------------- --------------
Net loss before discontinued
operations (818,214) (2,830,052)
Discontinued operations (83,611) (690,518)
-------------- --------------
Net loss $ (901,825) $ (3,520,570)
============== ==============
Denominator :
weighted average shares
outstanding 322,734,541 278,022,545
============== ==============
Basic and diluted loss per weighted
average
Common share:
Loss per common share before
minority interest $ (0.00) $ (0.01)
Minority interest in loss per
common share 0.00 0.00
-------------- --------------
Net loss per common share before
discontinued operations (0.00) (0.01)
Loss per common share on
discontinued operations (0.00) (0.00)
-------------- --------------
Net loss per common share, basic
and diluted $ (0.00) $ (0.01)
============== ==============
n. Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United Stated of America 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.
F-19
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES (Continued)
o. Newly Issued Accounting Pronouncements
During the year ended December 31, 2003, the Company adopted the
following accounting pronouncements:
SFAS No. 143 -- In August 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations, which established a
uniform methodology for accounting for estimated reclamation and
abandonment costs. The statement was effective for fiscal years
beginning after June 15, 2002. The adoption of SFAS No. 143 did not
have a material effect on the financial statements of the Company.
SFAS No. 145 -- On April 30, 2002, the FASB issued FASB Statement No.
145 (SFAS 145), "Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical Corrections." SFAS
145 rescinds both FASB Statement No. 4 (SFAS 4), "Reporting Gains and
Losses from Extinguishment of Debt," and the amendment to SFAS 4, FASB
Statement No. 64 (SFAS 64), "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements." Through this rescission, SFAS 145
eliminates the requirement (in both SFAS 4 and SFAS 64) that gains and
losses from the extinguishment of debt be aggregated and, if material,
classified as an extraordinary item, net of the related income tax
effect. However, an entity is not prohibited from classifying such
gains and losses as extraordinary items, so long as it meets the
criteria in paragraph 20 of Accounting Principles Board Opinion No. 30,
Reporting the Results of Operations Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions. Further, SFAS 145 amends paragraph
14(a) of FASB Statement No. 13, "Accounting for Leases", to eliminate
an inconsistency between the accounting for sale-leaseback transactions
and certain lease modifications that have economic effects that are
similar to sale-leaseback transactions. The amendment requires that a
lease modification (1) results in recognition of the gain or loss in
the 9 financial statements, (2) is subject to FASB Statement No. 66,
"Accounting for Sales of Real Estate," if the leased asset is real
estate (including integral equipment), and (3) is subject (in it's
entirety) to the sale-leaseback rules of FASB Statement No. 98,
"Accounting for Leases: Sale-Leaseback Transactions Involving Real
Estate, Sales-Type Leases of Real Estate, Definition of the Lease Term,
and Initial Direct Costs of Direct Financing Leases." Generally, FAS
145 is effective for transactions occurring after May 15, 2002. The
adoption of SFAS 145 did not have a material effect on the financial
statements of the Company.
SFAS No. 146 -- In June 2002, the FASB issued SFAS No. 146, "Accounting
for Exit or Disposal Activities" (SFAS 146). SFAS 146 addresses
significant issues regarding the recognition, measurement, and
reporting of costs that are associated with exit and disposal
activities, including restructuring activities that are currently
accounted for under EITF No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." The scope of
SFAS 146 also includes costs related to terminating a contract that is
not a capital lease and termination benefits that employees who are
involuntarily terminated receive under the terms of a one-time benefit
arrangement that is not an ongoing benefit arrangement or an individual
F-20
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES (Continued)
o. Newly Issued Accounting Pronouncements (Continued)
deferred-compensation contract. SFAS 146 will be effective for exit or
disposal activities that are initiated after December 31, 2002 and
early application is encouraged. The provisions of EITF No. 94-3 shall
continue to apply for an exit activity initiated under an exit plan
that met the criteria of EITF No. 94-3 prior to the adoption of SFAS
146. The effect on adoption of SFAS 146 will change on a prospective
basis the timing of when the restructuring charges are recorded from a
commitment date approach to when the liability is incurred. The
adoption of SFAS 146 did not have a material effect on the financial
statements of the Company.
SFAS No. 147 -- In October 2002, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 147, "Acquisitions of Certain Financial Institutions" which is
effective for acquisitions on or after October 1, 2002. This statement
provides interpretive guidance on the application of the purchase
method to acquisitions of financial institutions. Except for
transactions between two or more mutual enterprises, this Statement
removes acquisitions of financial institutions from the scope of both
SFAS 72 and Interpretation 9 and requires that those transactions be
accounted for in accordance with SFAS No. 141, "Business Combinations"
and No. 142, "Goodwill and Other Intangible Assets". The adoption of
SFAS No. 147 did not have a material effect on the financial statements
of the Company.
SFAS No. 148 -- In December 2002, the FASB issued SFAS No. 148,
"Accounting for Stock Based Compensation-Transition and Disclosure-an
amendment of FASB Statement No. 123" which is effective for financial
statements issued for fiscal years ending after December 15, 2002.
This Statement amends SFAS 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition for a
voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, this Statement amends
the disclosure requirements of SFAS 123 to require prominent
disclosures in both annual and interim financial statements about the
method of accounting for stock-based compensation and the effect of the
method used on reported results. The adoption of SFAS No. 148 did not
have a material effect on the financial statements of the Company.
SFAS No. 149 -- In April 2003, the FASB issued SFAS No. 149, "Amendment
of Statement 133 on Derivative Instruments and Hedging Activities"
which is effective for contracts entered into or modified after June
30, 2003 and for hedging relationships designated after June 30, 2003.
This statement amends and clarifies financial accounting for derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and hedging activities under SFAS 133. The adoption of
SFAS No. 149 did not have a material effect on the financial statements
of the Company.
SFAS No. 150 -- In May 2003, the FASB issued SFAS No. 150, "Accounting
for Certain Financial Instruments with Characteristics of both
Liabilities and Equity" which is effective for financial instruments
entered into or modified after May 31, 2003, and is otherwise effective
at the beginning of the first interim period
F-21
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES (Continued)
o. Newly Issued Accounting Pronouncements (Continued)
beginning after June 15, 2003. This Statement establishes standards
for how an issuer classifies and measures in it's statement of
financial position certain financial instruments with characteristics
of both liabilities and equity. It requires that an issuer classify a
financial instrument that is within it's scope as a liability (or an
asset in some circumstances) because that financial instrument embodies
an obligation of the issuer. The adoption of SFAS No. 150 did not have
a material effect on the financial statements of the Company.
FASB Interpretation No. 45 -- "Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others - an Interpretation of FASB Statements No. 5, 57
and 107". The initial recognition and initial measurement provisions
of this Interpretation are to be applied prospectively to guarantees
issued or modified after December 31, 2002. The disclosure
requirements in the Interpretation were effective for financial
statements of interim or annual periods ending after December 15, 2002.
The adoption of FASB Interpretation No. 45 did not have a material
effect on the financial statements of the Company.
FASB Interpretation No. 46 -- In January 2003, the FASB issued FASB
Interpretation No. 46 "Consolidation of Variable Interest Entities."
FIN 46 provides guidance on the identification of entities for which
control is achieved through means other than through voting rights,
variable interest entities, and how to determine when and which
business enterprises should consolidate variable interest entities.
This interpretation applies immediately to variable interest entities
created after January 31, 2003. It applies in the first fiscal year or
interim period beginning after June 15, 2003, to variable interest
entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. The adoption of FIN 46 did not have
a material impact on the Company's financial statements.
During the year ended December 31, 2003, the Company adopted the
following Emerging Issues Task Force Consensuses: EITF Issue No. 00-21
"Revenue Arrangements with Multiple Deliverables", EITF Issue No. 01 -8
"Determining Whether an Arrangement Contains a Lease", EITF Issue No.
02-3 "Issues Related to Accounting for Contracts Involved in Energy
Trading and Risk Management Activities", EITF Issue No. 02-9
"Accounting by a Reseller for Certain Consideration Received from a
Vendor", EITF Issue No. 02-17, "Recognition of Customer Relationship
Intangible Assets Acquired in a Business Combination", EITF Issue No.
02-18 "Accounting for Subsequent Investments in an Investee after
Suspension of Equity Method Loss Recognition", EITF Issue No. 03-1,
"The Meaning of Other Than Temporary and it's Application to Certain
Instruments", EITF Issue No. 03-5, "Applicability of AICPA Statement of
Position 9702, 'Software Revenue Recognition' to Non-Software
Deliverables in an Arrangement Containing More Than Incidental
Software", EITF Issue No. 03-7, "Accounting for the Settlement of the
Equity Settled Portion of a Convertible Debt Instrument That Permits or
Requires the Conversion Spread to be Settled in Stock", EITF Issue No.
03-10, "Application of EITF Issue No. 02-16 by Resellers to Sales
Incentives Offered to Consumers by Manufacturers.
F-22
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT POLICIES (Continued)
p. Stock Based Compensation
As permitted by FASB Statement 148 "Accounting for Stock Based
Compensation-Transition and Disclosure" (SFAS No. 148), the Company
elected to measure and record compensation cost relative to employee
stock option costs in accordance with Accounting Principles Board
("APB") Opinion 25, "Accounting for Stock Issued to Employees", and
related interpretations and make proforma disclosures of net income and
earning per share as if the fair value method of valuing stock options
had been applied. Under APB opinion 25, compensation cost is
recognized stock options granted to employees when the option price is
less than the market price of the underlying common stock on the date
of grant.
NOTE 2 - GOING CONCERN
The Company's consolidated financial statements are prepared using
accounting principles generally accepted in the United Stated of
America applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal
course of business. The Company has incurred cumulative operating
losses through December 31, 2003 of $10,224,467, and has a working
capital deficit of $1,304,435 at December 31, 2003 all of which raise
substantial doubt about the Company's ability to continue as a going
concern.
Primarily, revenues have not been sufficient to cover the Company's
operating costs. Management's plans to enable the Company to continue
as a going concern include the following:
o Increasing revenues from rental properties by implementing new
marketing programs
o Making certain improvements to certain rental properties in
order to make them more marketable
o Reducing negative cash flows by selling rental properties that
do not at least break even
o Refinancing high interest rate loans
o Increasing consulting revenues by focusing on procuring clients
that pay for services rendered in cash or highly liquid
securities
o Reducing expenses through consolidating or disposing of certain
subsidiary companies
o Raising additional capital through private placements of the
Company's common stock
There can be no assurance that the Company can or will be successful
in implementing any of it's plans or that they will be successful in
enabling the company to continue as a going concern. The Company's
consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
F-23
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 3 - RELATED PARTY TRANSACTIONS
In August of 1997, Canton Financial Services Corporation (CFSC), a
formerly consolidated subsidiary subsequently incorporated into Hudson,
executed a lease agreement with the Company's CEO and president
pursuant to which he is leasing an interest in a condominium to the
Company. The condominium is located in Brian Head, Utah, in close
proximity to other condominiums owned by the Company's subsidiaries.
The lease has a term of five years and expired on August 29, 2002. The
lease provided for monthly payments of $900 and an option to purchase
the condominium for $84,814. An extension was entered into through
March 31, 2003, when the lease was allowed to expire.
The Company's CEO and president has at various times been appointed to
serve as an officer or director for some clients of the Company. These
appointments have been disclosed to the disinterested members of the
board and the approval of the board of directors has been granted in
each of these cases. As payment for services provided to these
corporations, he has received securities of those corporations, and
these transactions have been disclosed to the board of directors in
each case. He holds a significant interest in approximately 20 shell
companies.
During 2002, the CEO and president of the Company, received 1,570,513
shares of Axia, a related party, as additional collateral for the
loans he personally guaranteed for the Company's subsidiary, Kearns.
Later in 2002, the Company refinanced the loan and he kept the shares
issued to him. As such, the shares have been expensed as loan fees and
were valued at $0.26 per share, the trading price for Axia, for a total
value of $408,333 and a payable to Axia was established. In 2003, the
shares were returned to Axia and the debt was forgiven. As such, the
$408,333 was treated as contributed capital to Kearns.
The Company's CEO and president has issued personal guarantees on
numerous debts of the Company in order to secure refinancing
arrangements.
During April 2003, Hudson, a subsidiary of the Company, entered into an
agreement to sell its interest in Unit A216 of the Brian Head North
Condominiums in Iron County, Utah to related party. Hudson received
$1,000 in cash and was relieved of all obligations and liabilities
relating to the property. The Company recognized a loss on sale of
$10,660.
During May 2003, Hudson entered into a one-year Consulting Agreement
with Axia Group, Inc. (Axia) a related party. The agreement calls for
Axia to issue 666,667 shares of common stock and pay $10,000 per month
or hourly billings on a monthly basis, whichever is greater. Amounts
due under this agreement have been off-set against payables to Axia
from the receipt by Hudson of $64,413 in cash from the sale of Axia
common stock. At December 31, 2003, Hudson had a net receivable of
$12,942 from Axia.
F-24
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 4 - NOTES RECEIVABLE
Notes receivable consist of the following at December 31, 2003:
Notes receivable from an individual, with interest
at 8%, due August 10, 2002, secured by the
individual's 50% interest in a building, net of full
allowance $ 255,000
Note receivable from an individual for the sale
of a vehicle with interest at 6.99%, due in 60
monthly payments of $900, secured by vehicle 36,949
Note receivable from a company, non-interest
bearing, due on demand, unsecured, net of
full allowance 60,000
Allowance (315,000)
------------
Total Notes Receivable $ 36,949
------------
At December 31, 2003, one of the notes is in default. The Company has
not taken any legal action as a result of this event.
NOTE 5 - FIXED ASSETS
Fixed assets consist of the following at December 31, 2003:
Buildings and improvements $ 3,017,267
Furniture and equipment 174,724
Vehicles 3,650
Accumulated depreciation (624,950)
------------
Total property and equipment, net 2,570,691
Land 488,895
------------
Total fixed assets $ 3,059,586
============
For the years ended December 31, 2003 and 2002, the Company recorded
depreciation expense of $137,607 and $187,424, respectively.
F-25
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 6 - INVESTMENT IN MARKETABLE EQUITY SECURITIES
The following is a summary of the Company's investment in
available-for-sale securities as of December 31, 2003:
Available-for-Sale
--------------------------------------------
Gross Gross
Unrealized Unrealized Fair
Gains Losses Value
------------ -------------- -----------
2003
--------------------------------------------
Equity securities -
free trading $ - $ 862 $ 9,127
Equity securities -
restricted - - 196,273
------------ -------------- -----------
$ - $ 862 $ 205,400
============ ============== ===========
Changes in the unrealized loss on available-for-sale securities during
the years ended December 31, 2003 and 2002 reported as a separate
component of stockholders' equity are as follows:
For the Years Ended
December 31,
--------------------------
2003 2002
------------ -----------
Beginning balance $ (873) $ 433,219
Increase in unrealized holding gains
(losses) 1,735 (434,092)
------------ -----------
Ending balance $ 862 $ (873)
============ ===========
During the years ended December 31, 2003 and 2002, the Company
recognized $75,177 and $707,437 in permanent impairment expense on
marketable securities.
NOTE 7 - PREFERRED STOCK
The Company has authorized up to 50,000,000 shares of preferred stock
with a par value of $.001 per share. The preferred stock can be issued
in various series with varying dividend rates and preferences. At
December 31, 2003, there are no issued series or shares of preferred
stock.
NOTE 8 - OUTSTANDING STOCK OPTIONS
As permitted by FASB Statement 148 "Accounting for Stock Based
Compensation - Transition and Disclosure" (SFAS No. 148), the Company
elected to measure and record compensation cost relative to employee
stock option costs in accordance with Accounting Principles Board
("APB") Opinion 25, "Accounting for Stock Issued to Employees", and
related interpretations and make proforma disclosures of net income and
earnings per share as if the fair value method of valuing stock options
had been applied. Under APB opinion 25, compensation cost is
recognized for stock options granted to employees when the option price
is less than the market price of the underlying common stock on the
date of grant.
F-26
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 8 - OUTSTANDING STOCK OPTIONS (Continued)
On April 2, 2002, the Board of Directors of the Company adopted "The
2002 Benefit Plan of Nexia Holdings, Inc.", under which the Company may
issue stock, or grant options to employees, consultants, advisors, or
other individuals. The total number of shares as to which the Company
may issue or grant options under this plan is twenty million
(20,000,000). The plan expires on the earlier of the date that is five
years from date the plan was adopted or the date on which the twenty
millionth share is issued.
In June 2002, the Company granted 500,000 stock options to an outside
consultant for services rendered. These options were issued with
exercise price of $0.025 per share. These options expired on September
13, 2002 and were unexercised.
During December 2003, the Company granted employees 5,600,000 options
to purchase common stock at a price of $0.01 per share, below the
market prices on the dates of issue, resulting in the recording of
$49,600 in compensation expense for the intrinsic value.
A summary of the status of the Company's stock option plans as of
December 31, 2003 and changes during the year is presented below:
2003 2002
------------------------ -----------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
---------- ------------ --------- ------------
Outstanding,
beginning of
year - $ - - $ -
Granted 5,600,000 0.01 500,000 0.025
Expired/Cancelled - - (500,000) 0.025
Exercised (5,600,000) 0.01 - -
----------- ------------ --------- ------------
Outstanding end
of year - $ - - $ -
=========== ============ ========= ============
Exercisable - $ - - $ -
=========== ============ ========= ============
The Company estimated the fair value of each stock option issued
during the year at the grant date by using the Black-Scholes option
pricing model based on the following assumptions:
F-27
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 8 - OUTSTANDING STOCK OPTIONS (Continued)
For the Year
Ended
December 31, 2003
---------------------
Risk free interest rate 0.00%
Expected life 0 years
Expected volatility 0.00%
Dividend yield 0.00%
NOTE 9 - LONG-TERM DEBT
On January 9, 2003, Kearns Development Corporation refinanced the
underlying debt associated with certain land and real property. The
new debt obligation is for $660,000 with an interest rate of 7.16%, is
due on demand with monthly installment payments of $5,223 through
January 9, 2003 at which time the remaining unpaid balance is due and
payable in full. This debt obligation is secured by a first trust deed
on the land and building and is personally guaranteed by the president
of the Company. Proceeds from this refinancing were used to retire the
previous debt associated with the land and real property having an
outstanding balance of $615,012 at December 31, 2002.
On January 30, 2003, West Jordan Real Estate Holdings, Inc. entered
into a capital lease for a photocopy machine. The lease has a term of
5 years, calls for a $1,056 advance payment with monthly payments of
$352 and an option to purchase the photocopy machine for fair market
value at the end of the lease. The lease has an outstanding balance of
$16,182 at December 31, 2003.
On March 14, 2003, West Jordan Real Estate Holdings, Inc. executed a
promissory note with an unrelated individual to borrow $30,000 to be
repaid on or before March 14, 2004. The obligation bears interest at a
rate of 4% and is unsecured. In connection with this debt transaction,
the Company issued to this individual 5,000,000 shares of the Company's
common stock as additional consideration for making the loan. The
shares have been valued at fair market value on the date of the
transaction, $0.10 per share or $50,000 in total. This amount has been
recognized as loan costs and is being amortized over the 12 month life
of the loan.
On May 9, 2003, Wasatch Capital Corporation refinanced the underlying
debt associated with certain land and real property. The new debt
obligation is for $850,000 with an interest rate of 7.5%, with monthly
installment payments of $6,848 through May 10, 2006 at which time the
remaining unpaid balance is due and payable in full. $647,079 of this
amount was disbursed at closing, with the remaining $202,921 held in
reserve (shown as restricted cash on the balance sheet) for purposes
of future improvements or other uses as Wasatch deems appropriate.
Interest will only accrue on the amount that has actually been
disbursed to Wasatch. This debt obligation is secured by a first trust
deed on the land and building and is personally guaranteed by the
president of the Company. Proceeds from this refinancing were used to
retire the previous debt associated with the land and real
F-28
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 9 - LONG-TERM DEBT (Continued)
property having an outstanding balance of $591,155 at March 31, 2003,
as well as property taxes owed to Salt Lake County in the amount of
$8,700.
On May 15, 2003, Hudson entered into an agreement to sell an automobile
in exchange for the assumption of the monthly payments by the buyer and
the release of Hudson of all obligations and liabilities relating to
the vehicle. The Company recognized a gain on sale of $701.
The Company's long-term debt consists of the following at December 31,
2003:
Note payable bearing interest at 8%, monthly payments
of $12,417, due on demand or in monthly payments
through July 2012, secured by first trust deed on
land and buildings $ 981,778
Note payable bearing interest at 7.16%, due on demand
or in monthly payments of $5,223 through January 2013,
secured by first trust deed on land and building,
guaranteed by the Company's president and CEO 645,024
Mortgage payable bearing interest at 7.5%, monthly
payments of $6,848 through May 2008, then lump sum
balloon payment due, secured by first trust deed
on land and building, guaranteed by the Company's
President and CEO 636,291
Note payable bearing interest at 7.16%, monthly
payments of $3,061, due on demand or in monthly
payments through December 2012, secured by deed
of trust on land and buildings 385,535
Note payable bearing interest at 6.99%, monthly
payments of $900, due November 2007, secured by
vehicle 38,172
Notes payable, bearing interest at 4%, due March
2004, unsecured 30,000
Mortgage payable bearing interest at 8.25%,
monthly payments of $301, due September 2016,
secured by first trust deed on building 29,617
Capital lease payable in monthly payments of $330
through January 2008, secured by leased equipment 16,182
Less current portion (2,762,599)
-----------
$ 1,548,740
===========
F-29
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 9 - LONG-TERM DEBT (Continued)
Scheduled principal reductions are as follows:
Year Ending December 31:
2004 $ 1,213,859
2005 133,428
2006 664,748
2007 110,735
2008 92,340
Thereafter 547,489
------------
$ 2,762,599
============
At December 31, 2003, the Company is in default on payment on it's
mortgage for a condominium totaling $29,617 at December 31, 2003. The
note holders have not taken any legal action against the Company.
NOTE 10- TREASURY STOCK
The Company accounts for its treasury stock at cost. Treasury stock
includes all shares of the Company owned by the Company and it's
subsidiaries. During the year ended December 31, 2003 the Company sold
it's subsidiary WHDV and accordingly, WHDV's treasury stock valued at
$7,123. At December 31, 2003, there were 20,038,340 shares of common
stock reflected as treasury stock at a cost of $100,618.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
Suit was filed by Hudson Consulting Group, Inc. on October 10, 2001
against Technical Ventures, Inc. in the Third Judicial District Court
of Salt Lake County, State of Utah. Hudson has filed suit seeking
recovery of fees owed to it arising from an Advisory Agreement entered
into in July of 1999. The suit alleged that 575,000 shares of
Technical Ventures, Inc. common stock has not been delivered to Hudson
as required by the agreement. During 2003, the parties mutually
agreed to a dismissal and release of all claims.
F-30
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 11 - COMMITMENTS AND CONTINGENCIES (Continued)
Suit was filed on August 14, 1998 in the Circuit Court of Wood County,
Parkersburg, West Virginia seeking the completion of clean up
procedures for property owned by Canton Tire Recycling West Virginia,
located in the city of Parkersburg. The state requested that certain
waste material present on the site and any remaining material in the
on site storage tanks be removed and that an oil/water separator
located on the property be cleaned out. The Company and the State of
West Virginia entered into a Consent Decree by which the Company
agreed to submit and complete a Remediation and Sampling Work Plan and
the payments of $88,000 in fines and penalties. As of December 31,
2003, the Company had paid $68,000 related to this obligation with the
remaining $20,000 included in accrued liabilities in the accompanying
consolidated financial statements. The work required by the
Remediation and Sampling Work Plan has been completed and submitted to
the State. This information included test results indicating that
soil contamination testing required by the Plan reported contamination
exceeding state guidelines. The nature and cost of further testing or
clean-up as a result of that report cannot be determined at this time.
No further request for additional work or testing has been received
from the State of West Virginia. During 2004, the amount due was
compromised and settled for a $5,000 payment.
The Company and various subsidiary companies have filed suit seeking
recovery of assets and other redress relating to the sale of assets,
subsidiary companies or the performance of consulting services. The
ultimate outcome of these various actions and their potential impact,
if any, on the Company's consolidated financial statements is not
presently determinable.
NOTE 12 - SIGNIFICANT EVENTS
Disposition and Impairment of Assets
------------------------------------
During March 2004, the buildings and land of the Company's subsidiary
CTRWV in Parkersburg, West Virginia were sold in a trust deed sale for
back property taxes from 2001. As such, the Company wrote-off the
remaining net book value of $29,559 to loss on disposal of assets at
December 31, 2003.
During December 2003, land on the books at a value of $195,511 was
determined to be permanently impaired in value and written down by
$173,966 to its fair value of $21,545.
During June 2003, the Company's subsidiary, Hudson, sold two
condominiums in Brian Head, Utah, one to a related party (See Note 3)
for a loss of $10,660. The other condominium was sold to a third
party for $48,000. The net book value of $43,500, plus sale expenses
of $3,549, resulted in a gain on sale of $951.
During June 2003, the Company's subsidiary, Hudson, sold a vehicle to
an unrelated party for a note payable of $40,549, resulting in a gain
of $701.
F-31
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 12 - SIGNIFICANT EVENTS (Continued)
Disposition of Subsidiary
On August 27, 2002, the Company's subsidiary, Hudson, entered into a
Stock Purchase Agreement (Agreement) for the sale of its' 79.77%
ownership in Torchmail Communications, Inc. (Torchmail) to seven
unrelated parties. The terms of the sale were that Hudson would
transfer its' 79.77% ownership in Torchmail for $300,000. The
purchase price was to be paid $100,000 at closing, $100,000 120 days
following closing and $100,000 180 days following closing. Payment of
the $200,000 due following closing was to be secured by 1,874,601
shares of common stock which was two/thirds of the 79.77% owned by
Hudson and by 9,384,543 shares of Torchmail to be issued and sold in a
separate transaction. The sale of Torchmail resulted in a gain of
$343,102. Since execution of the Agreement, the Company has received
$100,000 paid at closing and a second $100,000 payment in February
2004. The remaining $100,000 has not yet been received and is the
subject of litigation. Since the Company does not know the ultimate
outcome of the remaining receivable, the remining portion of the gain
on sale of $21,770 is being presented as deferred. At such time as
the litigation is resolved, the Company will recognize the resulting
net effect of the sale.
On June 19, 2003, in an inter-company tax free transaction, WHDV, a
subsidiary of the Company, exchanged it's shareholdings in Kearns for
the DHI shareholdings in SLD. DHI, Kearns and SLD were all
subsidiaries of Nexia at the time of the restructuring.
On June 30, 2003, the Company sold its interest in WHDV to DFRC. The
terms of the agreement are as follows:
a) WHDV assigns to DH1 a promissory note in the amount of $14,056;
b) WHDV waives the $112,517 receivable owed to it by Kearns;
c) Nexia waives the $1,565 receivable owed to it by WHDV, and DH1
waives the $407,854 receivable owed to it by SLD;
d) Wichita issues to DH1 a promissory note in the amount of $150,000;
e) DFRC transfers to DH1 1,148,251 shares of it's restricted common
stock with a guaranteed liquidation value of not less than $1 per
share. Although DFRC shares currently have a market price of
approximately $2.70/share, the shares have been assigned a value of
$0.19/share due to concerns about the liquidity of the DFRC shares.
Subsequently, it was determined that the receivable from WHDV was
impaired, with the full allowance applied against the gain on sale.
The Company recognized a net gain on sale of $129,268.
F-32
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 13 - SEGMENT INFORMATION
Using the guidelines set forth in SFAS No. 131, Information
"Disclosures about Segments of an Enterprise and Related Information,"
the Company has identified two reportable segments in which it
operates based on the services it provides. The reportable segments
are as follows: Real estate operations ("Real Estate"), which
primarily purchases, sells and rents commercial real estate; and
Consulting and other operations ("Consulting and other"), which
primarily provides merger and acquisition structuring services and
also capital restructuring, general corporate problem solving and
shareholder relations services.
Common overhead costs are included in the Consulting and other segment
as other expenses.
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies.
Summarized financial information concerning reportable segments is
shown in the following table:
For the
Year
Ended Consulting Real
December 31, and Other Estate Total
------------ ------------ ------------ ------------
Revenues 2003 $ 276,565 $ 511,020 $ 787,585
2002 223,387 610,556 833,943
Cost of revenues 2003 (287,209) (650,121) (937,330)
2002 (631,004) (990,705) (1,621,709)
Expenses 2003 (252,648) (694,788) (947,436)
2002 (1,842,012) (311,310) (2,153,322)
Interest income 2003 182 - 182
2002 10,987 - 10,987
Interest expense 2003 - (15,596) (15,596)
2002 - - -
Gain on sale of
subsidiaries 2003 229,268 - 229,268
2002 - - -
Minority share of loss 2003 65,113 - 65,113
2002 100,049 - 100,049
Income tax expense (benefit) 2003 - (83,611) (83,611)
Discontinued operations 2002 - (690,518) (690,518)
Net income (loss) applicable
to segment 2003 31,271 (933,096) (901,825)
2002 (2,138,593) (1,381,977) (3,520,570)
F-33
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 13 - SEGMENT INFORMATION (Continued)
Total assets
(net of intercompany accounts) 2003 $ 62,472 $ 3,418,033 $ 3,480,505
Property and equipment
acquisitions 2003 - 52,359 52,359
Depreciation and amortization 2003 - 148,764 148,764
2002 - 187,424 187,424
NOTE 14 - STOCK SUBSCRIPTION RECEIVABLE
During 2002, the Company, through it's subsidiary WHDV, sold shares of
common stock to unaffiliated third party investors at $0.22 per share
for promissory notes totaling $107,800. This receivable was sold as
part of the sale of WHDV on June 30, 2003 (See Note 12).
NOTE 15 - CONVERTIBLE DEBENTURES
On October 31, 2003, the Company issued two convertible debentures for
$30,000 each. The debentures accrue interest at 18% per annum, are
due November 1, 2004 and are convertible at any time after 45 days
into common stock at a price equal to 70% of the average closing bid
price of the common stock for the three trading days immediately
proceeding the date of election. The Company recognized a beneficial
conversion feature debt discount of $11,609 which was fully amortized
to interest expense by December 31, 2003.
NOTE 16 - DISCONTINUED OPERATIONS
On June 20, 2003, the Company sold it's interest in Wichita
Development Corporation, and consequently, it's interest in Salt Lake
Development Corporation and Wichita Properties, Inc., to Diversified
Financial Resources Corporation.
The following is summary of the loss from discontinued operations:
For the Years Ended
December 31,
-----------------------
2003 2002
---------- ----------
REVENUE
Rental revenue $ 82,005 $ 304,492
---------- ----------
COST OF REVENUE
Cost associated with rental revenue 94,572 242,645
Interest expense associated with rental
revenue 50,860 141,157
---------- ----------
Total Cost of Revenue 145,432 383,802
---------- ----------
F-34
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 16 - DISCONTINUED OPERATIONS (Continued)
For the Years Ended
December 31,
-----------------------
2003 2002
---------- ----------
GROSS MARGIN (DEFICIT) $ (63,427) $ (79,310)
---------- ----------
EXPENSES
Impairment of marketable securities - 450,943
Selling, general and administrative
expense 22,156 170,778
---------- ----------
Total Expenses 22,156 621,721
---------- ----------
LOSS FROM OPERATIONS (85,583) (701,031)
---------- ----------
OTHER INCOME (EXPENSE)
Interest income 407 10,513
Other income 1,565 -
---------- ----------
Total Other Income (Expense) 1,972 10,513
---------- ----------
LOSS BEFORE MINORITY INTEREST (83,611) (690,518)
MINORITY INTEREST - -
---------- ----------
NET LOSS $ (83,611) $(690,518)
========== ==========
No income tax benefit has been attributed to the loss from
discontinued operations.
NOTE 17 - SUBSEQUENT EVENTS
On January 6, 2004, the Company's board of directors authorized the
issuance of 2,400,000 shares of the Company's common stock for
services rendered.
On January 16, 2004, the Company's board of directors authorized the
issuance of 9,100,000 shares of common stock to seven employees for
services rendered.
On January 29, 2004, the Company's board of directors approved the
delivery to each director of 10,000,000 restricted shares of the
Company's common stock for services rendered to the Company as
directors.
On January 29, 2004, the Company accepted 9,100,012 shares of it's own
common stock held by Axia, a related party, in satisfaction of all
amounts due as a result of its consulting agreement (see Note 3).
On February 13, 2004, the Company's board of directors authorized the
issuance of 5,000,000 options to purchase the Company's common stock
for services rendered. The options were exercised immediately at an
option price of $0.002 per share.
F-35
NEXIA HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003 and 2002
NOTE 17 - SUBSEQUENT EVENTS (Continued)
On February 13, 2004, the Company's board of directors authorized the
issuance of 25,000,000 options to purchase common stock to five
employees for services rendered. The options were exercised
immediately at an option price of $0.002 per share.
On February 20, 2004, the Company's board of directors authorized the
issuance of 5,000,000 options to purchase the Company's common stock
for services rendered. The options were exercised immediately at an
option price of $0.002 per shares.
On February 20, 2004, the Company's board of directors approved the
issuance to the Company's President and Chief Executive and Financial
Officer, 5,100,000 shares of the Company's Series A Preferred Stock as
an incentive to retaining Mr. Surber as an employee of the Company.
These preferred shares have voting rights which equate to 100 shares
of common stock for every 1 Series A Preferred share and may be
converted into $10 worth of common stock at any time at the option of
the holder.
On March 4, 2004, the Company's board of directors authorized the
issuance of 6,000,000 options to purchase common stock for services
related to the leasing of real property held by the Company's
subsidiaries. The options were exercised immediately at an option
price of $0.002 per share.
On March 9, 2004, the Company's board of directors authorized the
issuance of 13,333,334 options to purchase the Company's common stock
for accounting services. The options were exercised immediately at an
option price of $0.002 per share.
On March 9, 2004, the Company's board of directors authorized the
issuance of 2,000,000 options to purchase the Company's common stock
and 250,000 shares of common stock for computer services at an option
price of $0.002 per share. Subsequently, a lower option price of
$0.001 per share was later approved by the board and the options were
exercised.
On March 9, 2004, the Company's board of directors authorized the
issuance of 6,000,000 shares and the issuance of 12,000,000 options at
an option price of $0.002 per share to an employee for services
provided with regard to improvements and maintenance on real estate
held by a subsidiary of the Company. Subsequently, a lower option
price of $0.001 per share was later approved by the board and the
options were exercised.
On April 8, 2004, the Company's board of directors authorized the
issuance of 33,000,000 shares of the Company's common stock to four
employees of the Company for services rendered.
On April 8, 2004, the Company's board of directors authorized the
issuance of 5,000,000 shares of the Company's common stock for
services rendered as compensation for assisting with obtaining
financing for the Company.
F-36
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
On March 28, 2003, the Company filed a Form 8K disclosing the dismissal of
Tanner + Co. as the Company's independent auditors. (See Form 8-K filed March
28, 2003, and incorporated herein by reference.) That same filing disclosed that
the Company had retained HJ & Associates, LLC as the new independent auditors
for the Company.
ITEM 8A. CONTROLS AND PROCEDURES
The Company's president acts both as the Company's chief executive officer and
chief financial officer ("Certifying Officer") and is responsible for
establishing and maintaining disclosure controls and procedures for the Company.
The Certifying Officer has concluded (based on his evaluation of these controls
and procedures as of a date within 90 days of the filing of this report) that
the design and operation of the Company's disclosure controls and procedures (as
defined in Rule 13a-14(c) under the Securities Exchange Act of 1934) are
effective. No significant changes were made in the Company's internal controls
or in other factors that could significantly affect those controls subsequent to
the date of the evaluation, including any corrective actions with regard to
slight deficiencies and material weaknesses. Due to the Certifying Officer's
dual role as chief executive officer and chief financial officer, the Company
has no segregation of duties related to internal controls.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Name Age Position(s) and Office(s)
---- --- -------------------------
Richard Surber 31 President and Director
Gerald Einhorn 63 Vice President, Secretary
and Director
Adrienne Bernstein 57 Director
John E. Fry, Jr. 69 Director
Richard D. Surber, 31, graduated from the University of Utah with a Bachelor of
Science degree in Finance and then with a Juris Doctorate with an emphasis in
corporate law, including securities, taxation, and bankruptcy. He has served as
President and Director of the Company since May of 1999. He also serves as an
officer and director of the Company's former parent corporation, Axia Group,
Inc., (president and director from 1992 to the present). He has been an officer
and director of several public companies, including: Wichita Development
Corporation, owner of an office building in Wichita, Kansas (president and
director December 15, 1999 to November, 12, 2001); and Golden Opportunity
Development Corporation ("GODC"), a majority owned subsidiary of Nexia,
(president and director from September 1999 to December 19, 2001). GODC's
operations (until January 4, 2002), consisted of operating a 134 room motel in
Baton Rouge, Louisiana. Mr. Surber is also the president and a director of
several reporting and non-reporting shell companies in which Nexia has ownership
interests.
Gerald Einhorn, 63 was appointed to the board in June of 2002 as a Director,
Vice-President and Secretary of Nexia. He has been employed by Hudson Consulting
Group, Inc. (currently a subsidiary of Nexia) in its legal department since
February 1996 as an attorney working in the areas of real estate, corporate, and
securities matters. Prior to that time Mr. Einhorn was self employed for more
than 20 years in Long Island, New York as a wholesale distributor of fresh
produce and frozen foods to retail and institutional end users. He is a member
of the New York Bar and practiced law in New York State for a period of 10 years
before entering the food distribution business.
24
Adrienne Bernstein, 57, was appointed to the Board of Directors in June 2002.
Ms. Bernstein had previously been a director of Axia Group, Inc. from 1999
through 2001. From 1988 to 1994, Ms. Bernstein was the Assistant Director of
Human Resources for the Love Stores, a chain of retail health and beauty stores.
In this capacity, Ms. Bernstein was responsible for hiring and training all
employees and for preparing management and employee seminars. Prior to her
position with the Love Stores, Ms. Bernstein served as a Vice President for
Leucadia National Corporation, a publicly traded company specializing in
finance, insurance, and manufacturing. In this capacity, Ms. Bernstein's primary
emphasis involved real estate management and sales activities.
John E. Fry, Jr., 69, was appointed to the Board of Directors in June 2002. He
had served as a director for Axia Group, Inc. for a period of four years ending
in June of 2002. He worked for Firestone Tire Company for over 35 years,
retiring from a position as a Vice President. He currently works as a business
consultant and as a director for various other corporations.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of Forms 3, 4 and 5 furnished to the Company, the
Company is aware of no person who during the period ended December 31, 2003 was
a director, officer, or beneficial owner of more than ten percent of the Common
Stock of the Company, and who failed to file, on a timely basis, reports
required by Section 16(a) of the Securities Exchange Act of 1934.
Code of Ethics
--------------
The Company is presently working to prepare and adopt a code of ethics that
applies to the Company's chief executive officer, chief financial officer,
principal accounting officer and controller, or persons performing similar
functions. A draft of the "Code of Ethics" is attached hereto as Exhibit 14.1.
The Code of Ethics is being designed with the intent to deter wrongdoing, and to
promote the following:
1. Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships.
2. Full, fair, accurate, timely and understandable disclosure in
reports and documents that a small business issuer files with, or
submits to, the Securities and Exchange Commission and in other public
communications made by the Company.
3. Compliance with applicable governmental laws, rules and regulations.
4. The prompt internal reporting of violations of the Code of Ethics to
an appropriate person or persons identified in the code.
5. Accountability for adherence to the Code of Ethics.
ITEM 10. EXECUTIVE COMPENSATION
Except as set forth below, no compensation in excess of $100,000 was awarded to,
earned by, or paid to any executive officer of the Company during the years
2003, 2002, and 2001. The following table and the accompanying notes provide
summary information for each of the last three fiscal years concerning cash and
non-cash compensation paid or accrued by Richard Surber, the Company's chief
executive officer for the past three years.
24
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
Awards Payouts
Restricted Securities
Name and Other Annual Stock Underlying LTIP All Other
Principal Year Salary Bonus Compensation Award(s) Options payouts Compensation
Position ($) ($) ($) ($) SARs(#) ($) ($)
------------ --------- ---------- ------------ ---------------- ------------ ------------- ---------- -------------
Richard 2003 $51,000(1)(2)
Surber, 2002 - $32,248 $48,833(1) - - - -
President 2001 - - - - - - -
(1) During the years 2002 and 2003, Mr. Surber was paid a salary by Hudson
Consulting Group, Inc. acquired as a subsidiary by the Company in February 2002.
(2) Of this amount $39,231 represents salary paid and $11,769 is accrued but
unpaid salary due to Mr. Surber.
Compensation of Directors
On January 29, 2004, the Company approved the delivery to each director of
10,000,000 restricted shares of the Company's common stock for services rendered
to the Company as Directors. The directors receiving shares included, Richard
Surber, Gerald Einhorn, Adrienne Bernstein, and John E. Fry, Jr. The shares were
issued pursuant to Section 4(2) of the Securities Act of 1933, as compensation
for services rendered to the corporation as Directors by the named individuals.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information concerning the ownership of
the Company's common stock as of May 12, 2004, with respect to: (i) each person
known to the Company to be the beneficial owner of more than five percent of the
Company's common stock; (ii) all directors; and (iii) directors and executive
officers of the Company as a group. The notes accompanying the information in
the table below are necessary for a complete understanding of the figures
provided below. As of May12, 2004, there were 507,586,094 shares of common stock
issued and outstanding.
TITLE OF NAME AND ADDRESS OF NATURE OF PERCENT
CLASS BENEFICIAL OWNER BENEFICIAL OF CLASS
OWNERSHIP
------------------------ --------------------------------------------- --------------------------- ----------------
Common Stock Richard Surber, President & Director 94,023,147 Direct 25.1%
($0.001 par value) 268 West 400 South, Suite 306 33,151,802 Indirect(1)
Salt Lake City, Utah 84101
Common Stock Axia Group, Inc. 13,113,462(2) 2.58%
($0.001 par value) 268 West 400 South ,Suite 300
Salt Lake City, Utah 84101(3)
Common Stock John E. Fry, Jr., Director 23,008,840 4.53%
($0.001 par value) 3619 Lakeview Road
Carson City, Nevada 89703
Common Stock Gerald Einhorn, VP & Director 13,300,000 2.62%
($0.001 par value) 268 West 400 South, #300
Salt Lake City, Utah 84101
25
Carson City, Nevada 89703
Common Stock Adrienne Bernstein, Director 12,956,304 2.55%
($0.001 par value) 268 West 400 South, #300
Salt Lake City, Utah 84101
Common Stock Oasis International Hotel & Casino, Inc. 2,654,271(2) 0.52%
($0.001 par value) 268 West 400 South, #300
Salt Lake City, Utah 84101
Common Stock Hudson Consulting Group, Inc. 802,693(2) 0.16%
($0.001 par value) 268 West 400 South, #300
Salt Lake City, Utah 84101
Common Stock Directors and Executive Officers as a 176,440,093 34.76%
($0.001) par value Group
(1) The shares owned by Hudson Consulting Group, Inc., Oasis International Hotel
& Casino, Inc., and Axia Group, Inc. are attributed beneficially to Richard D.
Surber due to his position as an officer and director in each of the said
corporations.
(2) Richard Surber may be deemed a beneficial owner of 33,151,802 shares of the
Company's common stock by virtue of his position as an officer and director of
Hudson Consulting Group, Inc. (802,693 shares), Axia Group, Inc. (13,113,462
shares), and Oasis International Hotel & Casino, Inc. (2,654,271 shares). Mr.
Surber personally owns 94,023,147 shares.
(3) Axia Group, Inc. holds 4,013,438 shares of the Company's common stock as a
trustee for Axia shareholders entitled to these shares in the December 2002
distribution by Axia but for which shareholders a valid and current address
could not be located.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The related party receivable at December 31, 2003 of $12,942 from Axia was
settled subsequent to the end of year as further described in subsequent events.
The Company has entered into the following related party transactions:
In August of 1997, Hudson Consulting Group, Inc. (Hudson), executed a lease
agreement with the Company's CEO and president pursuant to which he is leasing
an interest in a condominium to the Company. The condominium is located in Brian
Head, Utah, in close proximity to other condominiums owned by the Company's
subsidiaries. The lease expired on August 29, 2003. The lease provides for
monthly payments of $900. Hudson had an option to purchase the condominium for
$84,814, reduced monthly by a portion of the payment attributable to principal.
In the event that the value of the condominium appreciates and Hudson had
arranged a sale of the condominium prior to exercise of the option, the option
price shall be $84,814 plus 10% of the amount by which the total sales price
exceeds $84,814. This agreement has expired and Hudson has no further claim or
right to the described property.
During 2002, the CEO and president of the Company, received 1,570,513 shares of
Axia, a related party, as additional collateral for the loans he personally
guaranteed for the Company's subsidiary. Later in 2002, the Company refinanced
the loan and he kept the shares issued to him. The shares have been expensed as
loan fees and were valued at $0.26 per share which was the trading price for
Axia for a total value of $408,333 and is considered a payable to Axia. The
shares were later returned for cancellation.
In the first quarter of 2002, the Company entered into a Stock Purchase
Agreement ("Agreement") with Axia Group, Inc. ("Axia"), pursuant to which the
Company issued to Axia 255,100,000 restricted shares of the Company's common
stock in exchange for essentially all of the assets and liabilities of Axia
including a portfolio of securities, real estate holdings and publicly reporting
shell-companies. The shares issued to Axia equaled approximately 82% of the
issued and outstanding shares of the Company after the close of the transaction.
Axia on December 10, 2002 spun-off those 255,100,000 shares of the Company's
common stock to Axia's shareholders on a pro rata basis. This transaction was
first reported in the Company's Form 8-K filed on February 26, 2002.
26
The Company has entered into discussions with Richard Surber, the President of
the Company, with regard to providing compensation and security to Mr. Surber
for acting as a personal guarantor for loans to several of the Company's
subsidiaries. The package will most likely consist of common stock issued by the
Company and/or other investment securities and cash compensation.
Surber has at various times been appointed to serve as an officer or director
for some clients of Nexia. These appointments have been disclosed to the
disinterested members of the board and the approval of the board of directors
has been granted in each of these cases. As payment for services provided to
these corporations, Surber has received securities of those corporations, and
these transactions have been disclosed to the board of directors in each case.
Surber holds a significant interest in approximately 14 shell companies. Mr
Surber is licenced to practice law in the State of California and occasionally
represents corporate clients on various corporate matters. Mr Surber has
disclosed the fact that he on occasion does act as counsel to several companies
for which he receives fees for the legal services provided.
Subsequent Events:
On January 29, 2004 the Company, and/or its subsidiaries entered the following
agreements to settle debts and obligations with Axia Group, Inc., a related
party of which Richard Surber, President of the Company also serves as an
officer and director:
1. Diversified Holdings I, Inc. accepted the assignment of
certain rights to securities with a stated value of $50,000
due in the settlement of Axia's litigation claim against
America West Securities and Robert Kay.
2. Diversified Holdings, I, Inc. also accepted an assignment of
Axia's rights (presently being litigated) against Kevin Sheff
for the recovery of 10,000 post-split shares of Axia Group,
Inc's common stock.
3. As settlement of compensation due under a May 2, 2003
Consultant Agreement with Hudson Consulting Group, Inc., Axia
Group Inc. transferred 9,100,012 shares of Nexia common stock
to Hudson.
4. Signed a full release and settlement of all claims against
Axia Group, Inc. of all claims held by, Nexia Holdings, Inc.,
Wasatch Capital, Inc., Hudson Consulting Group, Inc. and West
Jordan Real Estate Holdings, Inc.
The end result of the agreements was to resolve and settle all claims against
Axia Group, Inc. held by the named entities, all subsidiaries of Nexia Holdings,
Inc. Richard Surber, President of the Company, is also an officer and director
of Axia Group, Inc. The purpose of the above described transaction was to settle
the various claims and resolve the debts and obligations that existed between
Axia and the Company and its subsidiaries.
On February 26, 2004, the Company's board of directors approved the issuance of
5,100,000 shares of its Series A Preferred Stock to Richard Surber, president of
the Company, to retain his services as president, CEO, CFO and as a director of
the Company.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. Exhibits required to be attached by Item 601 of Regulation
S-B are listed in the Index to Exhibits beginning on page 31 of this
Form 10-KSB, which is incorporated herein by reference.
(b) Reports on Form 8-K.
(1) On March 28, 2003, the Company filed a Form 8-K disclosing the
dismissal of Tanner+Co. and disclosing the retention of HJ &
Associations, LLC. as the new independent auditors for the
Company.
(2) On April 4, 2003, the Company filed a Form 8-K announcing that
it had abandoned its
27
efforts to acquire Industrial Maintenance and Machine Inc. the
subject of a March 5, 2003 press release.
(3) On July 18, 2003, the Company filed a Form 8-K reporting that
it had transferred to Diversified Financial Resources
Corporation 86,795,794 shares of the common stock of Wichita
Development Corporation or majority control of that
corporation, including its subsidiary corporation, Salt Lake
Development Corporation, in exchange for a promissory note in
the amount of $150,000 and 1,000,000 restricted shares of the
common stock of Diversified Financial Resources Corporation.
(4) On July 30, 2003, the Company filed an amended 8-K to clarify
statements made regarding the dismissal of Tanner + Co. as the
independent auditor of the Company.
(5) On November 10, 2003, the Company filed a Form 8-K announcing
the filing of a certificate of determination, setting forth
the rights of Series A Convertible Preferred Stock of the
Company.
Subsequent filing to December 31, 2003:
(1) On February 26, 2004, the Company filed a Form 8-K announcing
that the Company had approved the issuance of 5,100,000 shares
of its Series A Preferred Stock to Richard Surber, president
of the Company, to retain his services as the president and a
director of the Company.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company's principal independent accountants for the performance of our audit
for the years ended December 31, 2002 and for the full fiscal year ended
December 31, 2003 were HJ & Associates, LLC. The Company's previous independent
accountants, Tanner + Co., performed the reviews of the Company's financial
statements for the three quarters ended March 31, 2002, June 30, 2002, and
September 30, 2002. Fees incurred for 2003 and 2002 include services performed
and fees charged by both firms.
(i) Audit Fees. For the fiscal years ended December 31, 2002 and
2003, the aggregate fees billed for services rendered for the
audits of the annual financial statements and the review of
the financial statement included in the quarterly reports of
Form 10-QSB and the services provided in connection with the
statutory and regulatory filings or engagements for those
fiscal years were $ 60,500, for 2003 and $ 76,304 for 2002.
(ii) Audit-Related Fees. For the fiscal years ended December 31,
2003 and 2002, there were no fees billed for the audit or
review of the financial statements that are not reported above
under Audit Fees.
(iii) Tax Fee. For the fiscal years ended December 31, 2003 and
2002, there were no fees billed for tax compliance services
and there was no tax-planning advice provided.
(iv) Other Fees. For the fiscal years ended December 31, 2003 and
2002, there were no fees billed for services other than
services described above.
Pre-approved Policy for Audit and Non-Audit Services
The Company does not have a standing audit committee and the full board of
directors performs all functions of an audit committee, including the
pre-approval of all audit and non-audit services prior to Nexia engaging an
accountant. All of the services rendered for Nexia by HJ & Associates, LLC, were
pre-approved by the board of directors of Nexia.
28
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, there unto
duly authorized, this day of May, 2004.
Nexia Holdings, Inc.
/s/
------------------------------------------------------
Richard Surber, President, Chief Financial Officer and
Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ /s/
---------------------------------------- -------------------------------------
Richard D. Surber May 17, 2004 Gerald Einhorn May 17,2004
President Chief Executive Officer, Chief Director
Financial Officer, and Director
/s/ /s/
---------------------------------------- -------------------------------------
Adrienne Bernstein May 17, 2004 John Fry, Jr. May 17, 2004
Director Director
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
3(i) * Articles of Incorporation of the Company
(incorporated herein by reference from Exhibit No.
3(i) to the Company's Form S-18 as filed with the
Securities and Exchange Commission on September 16,
1988 ).
3(ii) * Articles of Incorporation of Kelly's Coffee
Group, Inc. filed with the Secretary of State of
Nevada on August 3, 2000 (incorporated herein by
reference from Exhibit No. 3(i) to the Company's
Form 10KSB as filed with the Securities and
Exchange Commission on March 26, 2001 ).
3(iii) * Articles of Merger merging Kelly's Coffee Group,
Inc., a Colorado Corporation into Kelly's Coffee
Group, Inc., a Nevada Corporation, filed with the
Secretary of State of Colorado on September 22,
2000, and with the Secretary of State of Nevada on
October 5, 2000 (incorporated herein by reference
from Exhibit No. 3(i) to the Company's Form 10KSB
as filed with the Securities and Exchange
29
Commission on March 26, 2001).
3(iv) * Bylaws of the Company, as amended (incorporated
herein by reference from Exhibit 3(ii) of the
Company's Form S-18 as filed with the Securities
and Exchange Commission on September 16, 1988).
3(v) * Amendment to the Articles of Incorporation
changing the Company's name from Kelly's Coffee
Group, Inc. to Nexia Holdings, Inc. (incorporated
herein by reference as filed in the Company's
Definitive 14(c) as filed with the Securities and
Exchange Commission on February 27, 2002).
3(vi) * Amendment to the Articles of Incorporation
changing the number of authorized shares of common
stock of the Company to 10,000,000,000
(incorporated herein by reference as filed in the
Company's Definitive 14(c) as filed with the
Securities and Exchange Commission on March 5,
2004.
4(a) * Form of certificate evidencing shares of "Common
Stock" in the Company (incorporated from Exhibit
4(a) to the Company's Form S-18 as filed with the
Securities and Exchange Commission on September 16,
1988 ).
10(iii) * Asset purchase agreement with Axia Group, Inc., and
Kelly's Coffee Group, Inc., dated February 14,
2002, for purchase of essentially all of Axia's
assets and subsidiaries in exchange for issuance of
255,100,000 restricted shares of the Company's
common stock. (Incorporated by reference as filed
with the Company's Form 8-K on February 26, 2002).
10(iv) 34 February 1, 2004 Stock Option Agreement between
Nexia Holdings, Inc. (the "Company") and Frank
Adams issuing 1,300,000 shares of Company common
stock, par value $0.001 at a price of $0.006 per
option.
10(v) 36 February 1, 2004 Stock Option Agreement between the
Company and Ernie Burch issuing 1,300,000 shares of
Company common stock, par value $0.001 at a price
of $0.006 per option.
10(vi) 38 February 1, 2004 Stock Option Agreement between the
Company and Jared Gold issuing 1,300,000 shares of
Company common stock, par value $0.001 at the price
of $0.006 per option.
10(vii) 40 February 1, 2004 Stock Option Agreement between the
Company and Michael Golightly issuing 1,300,000
shares of Company common stock, par value $0.001 at
a price of $0.006 per option.
10(viii) 42 February 1, 2004 Stock Option Agreement between the
Company and Sandra Jorgensen issuing 1,300,000
shares of Company common stock, par value $0.001 at
the price of $0.006 per option.
10(ix) 44 February 1, 2004 Stock Option Agreement between the
Company and Jose R. Prado issuing 1,300,000 shares
of Company common stock, par value $0.001 at the
price of $0.006 per option.
10(x) 46 February 1, 2004 Stock Option Agreement between the
Company and David Witesman issuing 1,300,000 shares
of Company common stock, par value $0.001 at the
price of $0.006 per option.
10(xi) 48 February 13, 2004 Stock Option Agreement between
the Company and Frank Adams issuing 5,000,000
shares of Company common stock, par value $0.001
30
at a price of $0.002 per option.
10(xii) 50 February 13, 2004 Stock Option Agreement between
the Company and Ernie Burch issuing 5,000,000
shares of Company common stock, par value $0.001 at
a price of $0.002 per option.
10(xiii) 52 February 13, 2004 Stock Option Agreement between
the Company and Michael Golightly issuing 5,000,000
shares of Company common stock, par value $0.001 at
the price of $0.002 per option.
10(xiv) 54 February 13, 2004 Stock Option Agreement between
the Company and Sandra Jorgensen issuing 5,000,000
shares of Company common stock, par value $0.001 at
the price of $0.002 per option.
10(xv) 56 February 13, 2004 Stock Option Agreement between
the Company and Barry Monk issuing 10,000,000
shares of Company common stock, par value $0.001
at the price of $0.002 per option.
10(xvi) 58 February 13, 2004 Stock Option Agreement between
the Company and Jose R. Prado issuing 5,000,000
shares of Company common stock, par value $0.001 at
the price of $0.002 per option.
10(xvii) 60 March 9, 2004 Stock Option Agreement between the
Company and Ernie Burch issuing 12,000,000 shares
of Company common stock, par value $0.001 at a
price of $0.001 per option.
10(xviii) 62 March 9, 2004 Stock Option Agreement between the
Company and Donald Decker issuing 2,000,000 shares
of Company common stock, par value $0.001 at a
price of $0.001 per option.
10(xix) 64 March 9, 2004 Stock Option Agreement between the
Company and Josh Vance issuing 6,000,000 shares of
Company common stock, par value $0.001 at the
price of $0.002 per option.
14.1 66 Draft of Code of Ethics for Nexia Holdings, Inc.
16(i) * Letter from Tanner + Co. stating that it has
reviewed the disclosures in the Form 8-K and has no
objection to the statement made within it
(incorporated herein by reference from Form 8-K
filed March 28, 2003).
31.1 32 Certification Pursuant to 18 U.S.C. SECTION 1350,
as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 33 Certification Pursuant to 18 U.S.C. Section 1350,
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
* Incorporated by reference from previous filings of the Company.
31
Exhibit 31(i)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Richard Surber., certify that:
1. I have reviewed this annual Report on Form 10-KSB of Nexia Holdings,
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
(a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
(c) Presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
Date: May 17, 2004
/s/
------------------------------
Richard Surber, Chief Executive and Financial Officer
(principal financial and accounting officer)
32
Exhibit 32(i)
CERTIFICATION PURSUANT TO 18 U.S.C. ss.1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Nexia Holdings, Inc. on Form 10-KSB for
the period ending December 31, 2003, as filed with the Securities and Exchange
Commission on the date hereof, I Richard Surber, Chief Executive and Financial
Officer of Nexia Holdings, Inc. Certify, pursuant to 18 U.S.C. ss.1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the
best of my knowledge and belief:
(1) the Form 10-KSB fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934;
and
(2) the information contained in the Form 10-KSB fairly presents,
in all material respects, the financial condition and result
of operations of the Company.
/s/
-------------------------------------
Richard Surber
Chief Executive and Financial Officer
May 17, 2004
33
Exhibit 10(iv)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 1st day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Frank Adams, a consultant of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of One Million Three Hundred Thousand (1,300,000),
shares of the Company's common stock, par value $0.001 at a
price of $0.006 per option, to be issued pursuant to a Form
S-8 under the Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.006 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
4. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 1, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described One Million Three Hundred Thousand
(1,300,000) shares of Common Stock, on the terms and
conditions set forth herein and subject to the provisions
of the Stock Option Plan in exchange for services provided
by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or
in part, at any time but before one (1) Year has elapsed
from the date of this Option. All rights to exercise this
option end with the termination of employment with the
Company, for any reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in
this Option and the Stock Option Plan, by delivery of a
notice of exercise a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference,
setting forth the number of Options along with a signed
letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or
as otherwise specified at the time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to
take into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the
Stock Option Plan.
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part,
34
until such listing, registration, or qualification shall have
been obtained free of any conditions not acceptable to the
board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
---------------------- -------------------------
Frank Adams, Optionee Richard Surber, President
35
Exhibit 10(v)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 1st day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Ernie Burch, a consultant of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of One Million Three Hundred Thousand (1,300,000),
shares of the Company's common stock, par value $0.001 at a
price of $0.006 per option, to be issued pursuant to a Form
S-8 under the Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.006 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
4. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 1, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described One Million Three Hundred Thousand
(1,300,000) shares of Common Stock, on the terms and
conditions set forth herein and subject to the provisions
of the Stock Option Plan in exchange for services provided
by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or
in part, at any time but before one (1) Year has elapsed
from the date of this Option. All rights to exercise this
option end with the termination of employment with the
Company, for any reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in
this Option and the Stock Option Plan, by delivery of a
notice of exercise a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference,
setting forth the number of Options along with a signed
letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or
as otherwise specified at the time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to
take into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the
Stock Option Plan.
36
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
---------------------- -------------------------
Ernie Burch, Optionee Richard Surber, President
37
Exhibit 10(vi)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 1st day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Jared Gold, a consultant of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of One Million Three Hundred Thousand (1,300,000),
shares of the Company's common stock, par value $0.001 at a
price of $0.006 per option, to be issued pursuant to a Form
S-8 under the Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.006 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
4. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 1, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described One Million Three Hundred Thousand
(1,300,000) shares of Common Stock, on the terms and
conditions set forth herein and subject to the provisions
of the Stock Option Plan in exchange for services provided
by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or
in part, at any time but before one (1) Year has elapsed
from the date of this Option. All rights to exercise this
option end with the termination of employment with the
Company, for any reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in
this Option and the Stock Option Plan, by delivery of a
notice of exercise a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference,
setting forth the number of Options along with a signed
letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or
as otherwise specified at the time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
38
recapitalization of the Common Stock as provided in the Stock
Option Plan.
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
--------------------- -------------------------
Jared Gold, Optionee Richard Surber, President
39
Exhibit 10(vii)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 1st day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Michael Golightly, a consultant of the Company ("Optionee") and a Utah
resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of One Million Three Hundred Thousand (1,300,000),
shares of the Company's common stock, par value $0.001 at a
price of $0.006 per option, to be issued pursuant to a Form
S-8 under the Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.006 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
4. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 1, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described One Million Three Hundred Thousand
(1,300,000) shares of Common Stock, on the terms and
conditions set forth herein and subject to the provisions
of the Stock Option Plan in exchange for services provided
by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or
in part, at any time but before one (1) Year has elapsed
from the date of this Option. All rights to exercise this
option end with the termination of employment with the
Company, for any reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in
this Option and the Stock Option Plan, by delivery of a
notice of exercise a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference,
setting forth the number of Options along with a signed
letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or
as otherwise specified at the time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
40
recapitalization of the Common Stock as provided in the Stock
Option Plan.
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
---------------------------- -------------------------
Michael Golightly, Optionee Richard Surber, President
41
Exhibit 10(viii)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 1st day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Sandra Jorgensen, a consultant of the Company ("Optionee") and a Utah
resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of One Million Three Hundred Thousand (1,300,000),
shares of the Company's common stock, par value $0.001 at a
price of $0.006 per option, to be issued pursuant to a Form
S-8 under the Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.006 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
4. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 1, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described One Million Three Hundred Thousand
(1,300,000) shares of Common Stock, on the terms and
conditions set forth herein and subject to the provisions
of the Stock Option Plan in exchange for services provided
by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or
in part, at any time but before one (1) Year has elapsed
from the date of this Option. All rights to exercise this
option end with the termination of employment with the
Company, for any reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in
this Option and the Stock Option Plan, by delivery of a
notice of exercise a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference,
setting forth the number of Options along with a signed
letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or
as otherwise specified at the time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
42
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
--------------------------- -------------------------
Sandra Jorgensen, Optionee Richard Surber, President
43
Exhibit 10(ix)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 1st day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Jose R. Prado, a consultant of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of One Million Three Hundred Thousand (1,300,000),
shares of the Company's common stock, par value $0.001 at a
price of $0.006 per option, to be issued pursuant to a Form
S-8 under the Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.006 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
4. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 1, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described One Million Three Hundred Thousand
(1,300,000) shares of Common Stock, on the terms and
conditions set forth herein and subject to the provisions
of the Stock Option Plan in exchange for services provided
by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or
in part, at any time but before one (1) Year has elapsed
from the date of this Option. All rights to exercise this
option end with the termination of employment with the
Company, for any reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in
this Option and the Stock Option Plan, by delivery of a
notice of exercise a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference,
setting forth the number of Options along with a signed
letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or
as otherwise specified at the time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
44
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
------------------------ -------------------------
Jose R. Prado, Optionee Richard Surber, President
45
Exhibit 10(x)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 1st day of February 2004 by Nexia Holdings, Inc. (the "Company")
to David Witesman, a consultant of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of One Million Three Hundred Thousand (1,300,000),
shares of the Company's common stock, par value $0.001 at a
price of $0.006 per option, to be issued pursuant to a Form
S-8 under the Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.006 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
4. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 1, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described One Million Three Hundred Thousand
(1,300,000) shares of Common Stock, on the terms and
conditions set forth herein and subject to the provisions of
the Stock Option Plan in exchange for services provided by
Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or in
part, at any time but before one (1) Year has elapsed from the
date of this Option. All rights to exercise this option end
with the termination of employment with the Company, for any
reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in this
Option and the Stock Option Plan, by delivery of a notice of
exercise a form of which is attached hereto as Exhibit "A" and
incorporated herein by this reference, setting forth the
number of Options along with a signed letter of instruction to
the stock broker Optionee will employ in selling the shares
indicating that the specified exercise price shall be paid
within 10 days of the sale or as otherwise specified at the
time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
46
recapitalization of the Common Stock as provided in the Stock
Option Plan.
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
------------------------- -------------------------
David Witesman, Optionee Richard Surber, President
47
Exhibit 10(xi)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 13th day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Frank Adams, a consultant of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of Five Million (5,000,000), shares of the Company's
common stock, par value $0.001 at a price of $0.002 per
option, to be issued pursuant to a Form S-8 under the
Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.002 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
4. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 13, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described Five Million (5,000,000) shares of Common
Stock, on the terms and conditions set forth herein and
subject to the provisions of the Stock Option Plan in exchange
for services provided by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or in
part, at any time but before one (1) Year has elapsed from the
date of this Option. All rights to exercise this option end
with the termination of employment with the Company, for any
reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in this
Option and the Stock Option Plan, by delivery of a notice of
exercise a form of which is attached hereto as Exhibit "A" and
incorporated herein by this reference, setting forth the
number of Options along with a signed letter of instruction to
the stock broker Optionee will employ in selling the shares
indicating that the specified exercise price shall be paid
within 10 days of the sale or as otherwise specified at the
time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock
48
issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
---------------------- ---------------------------
Frank Adams, Optionee Richard Surber, President
49
Exhibit 10(xii)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 13th day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Ernie Burch, a consultant of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of Five Million (5,000,000), shares of the Company's
common stock, par value $0.001 at a price of $0.002 per
option, to be issued pursuant to a Form S-8 under the
Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.002 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
4. This Option Agreement supercedes and replaces any unexercised
options under and prior option agreement to February 13, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described Five Million (5,000,000) shares of
Common Stock, on the terms and conditions set forth herein
and subject to the provisions of the Stock Option Plan in
exchange for services provided by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or
in part, at any time but before one (1) Year has elapsed
from the date of this Option. All rights to exercise this
option end with the termination of employment with the
Company, for any reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in
this Option and the Stock Option Plan, by delivery of a
notice of exercise a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference,
setting forth the number of Options along with a signed
letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or
as otherwise specified at the time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
50
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
---------------------- -------------------------
Ernie Burch, Optionee Richard Surber, President
51
Exhibit 10(xiii)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 13th day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Michael Golightly, a consultant of the Company ("Optionee") and a Utah
resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of Five Million(5,000,000), shares of the Company's
common stock, par value $0.001 at a price of $0.002 per
option, to be issued pursuant to a Form S-8 under the
Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.002 per
share.
C.. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
4. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 13, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described Five Million (5,000,000) shares of Common
Stock, on the terms and conditions set forth herein and
subject to the provisions of the Stock Option Plan in exchange
for services provided by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or in
part, at any time but before one (1) Year has elapsed from the
date of this Option. All rights to exercise this option end
with the termination of employment with the Company, for any
reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in this
Option and the Stock Option Plan, by delivery of a notice of
exercise a form of which is attached hereto as Exhibit "A" and
incorporated herein by this reference, setting forth the
number of Options along with a signed letter of instruction to
the stock broker Optionee will employ in selling the shares
indicating that the specified exercise price shall be paid
within 10 days of the sale or as otherwise specified at the
time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that he is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as
52
amended (the "Securities Act"), or any state securities
statutes. The shares of Common Stock issuable on exercise of
the Option will be qualified for registration under a Form S-8
Registration Statement filed with the Securities and Exchange
Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
---------------------------- -------------------------
Michael Golightly, Optionee Richard Surber, President
53
Exhibit 10(xiv)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 13th day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Sandra Jorgensen, a consultant of the Company ("Optionee") and a Utah
resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of Five Million (5,000,000), shares of the Company's
common stock, par value $0.001 at a price of $0.002 per
option, to be issued pursuant to a Form S-8 under the
Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.002 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
4. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 13, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase
all of the above described Five Million (5,000,000)
shares of Common Stock, on the terms and conditions set
forth herein and subject to the provisions of the Stock
Option Plan in exchange for services provided by
Employee to the Company.
2. Term of Option. This Option may be exercised, in whole
or in part, at any time but before one (1) Year has
elapsed from the date of this Option. All rights to
exercise this option end with the termination of
employment with the Company, for any reason and by any
party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth
in this Option and the Stock Option Plan, by delivery
of a notice of exercise a form of which is attached
hereto as Exhibit "A" and incorporated herein by this
reference, setting forth the number of Options along
with a signed letter of instruction to the stock broker
Optionee will employ in selling the shares indicating
that the specified exercise price shall be paid within
10 days of the sale or as otherwise specified at the
time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that she is not an affiliate of
the Company as that term is defined in Rule 144(a)(1)
under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
54
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
--------------------------- -------------------------
Sandra Jorgensen, Optionee Richard Surber, President
55
Exhibit 10(xv)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 13th day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Barry Monk, a consultant of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of Ten Million (10,000,000), shares of the Company's
common stock, par value $0.001 at a price of $0.002 per
option, to be issued pursuant to a Form S-8 under the
Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.002 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
D. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 13, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described Ten Million (10,000,000) shares of
Common Stock, on the terms and conditions set forth herein
and subject to the provisions of the Stock Option Plan in
exchange for services provided by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or
in part, at any time but before one (1) Year have elapsed
from the date of this Option. All rights to exercise this
option end with the termination of employment with the
Company, for any reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in
this Option and the Stock Option Plan, by delivery of a
notice of exercise a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference,
setting forth the number of Options along with a signed
letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or
as otherwise specified at the time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
56
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
--------------------- -------------------------
Barry Monk, Optionee Richard Surber, President
57
Exhibit 10(xvi)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 13th day of February 2004 by Nexia Holdings, Inc. (the "Company")
to Jose R. Prado, an employee of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of Five Million (5,000,000), shares of the Company's
common stock, par value $0.001 at a price of $0.002 per
option, to be issued pursuant to a Form S-8 under the
Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.002 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
D. This Option Agreement supercedes and replaces any unexercised
options under any prior option agreement to February 13, 2004
between the Company and the Optionee.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described Five Million (5,000,000) shares of Common
Stock, on the terms and conditions set forth herein and
subject to the provisions of the Stock Option Plan in exchange
for services provided by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or in
part, at any time but before one (1) Year has elapsed from the
date of this Option. All rights to exercise this option end
with the termination of employment with the Company, for any
reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in this
Option and the Stock Option Plan, by delivery of a notice of
exercise a form of which is attached hereto as Exhibit "A" and
incorporated herein by this reference, setting forth the
number of Options along with a signed letter of instruction to
the stock broker Optionee will employ in selling the shares
indicating that the specified exercise price shall be paid
within 10 days of the sale or as otherwise specified at the
time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that he is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
58
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part, until such listing,
registration, or qualification shall have been obtained free
of any conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
------------------------ -------------------------
Jose R. Prado, Optionee Richard Surber, President
59
Exhibit 10(xvii)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 9th day of March 2004 by Nexia Holdings, Inc. (the "Company") to
Ernie Burch, a consultant of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of Twelve Million (12,000,000), shares of the Company's
common stock, par value $0.001 at a price of $0.002 per
option, to be issued pursuant to a Form S-8 under the
Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.002 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described Twelve Million (12,000,000) shares of
Common Stock, on the terms and conditions set forth herein
and subject to the provisions of the Stock Option Plan in
exchange for services provided by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or
in part, at any time but before one (1) Year has elapsed
from the date of this Option. All rights to exercise this
option end with the termination of employment with the
Company, for any reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in
this Option and the Stock Option Plan, by delivery of a
notice of exercise a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference,
setting forth the number of Options along with a signed
letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or
as otherwise specified at the time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common Stock under any state or federal law, this Option may
not be exercised, in whole or part,
60
until such listing, registration, or qualification shall have
been obtained free of any conditions not acceptable to the
board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
---------------------- -------------------------
Ernie Burch, Optionee Richard Surber, President
61
Exhibit 10(xviii)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 9th day of March 2004 by Nexia Holdings, Inc. (the "Company") to
Donald Decker, an advisor of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of Two Million (2,000,000), shares of the Company's
common stock, par value $0.001 at a price of $0.002 per
option, to be issued pursuant to a Form S-8 under the
Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.002 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described Two Million (2,000,000) shares of Common
Stock, on the terms and conditions set forth herein and
subject to the provisions of the Stock Option Plan in exchange
for services provided by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or in
part, at any time but before one (1) Year has elapsed from the
date of this Option. All rights to exercise this option end
with the termination of employment with the Company, for any
reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in this
Option and the Stock Option Plan, by delivery of a notice of
exercise a form of which is attached hereto as Exhibit "A" and
incorporated herein by this reference, setting forth the
number of Options along with a signed letter of instruction to
the stock broker Optionee will employ in selling the shares
indicating that the specified exercise price shall be paid
within 10 days of the sale or as otherwise specified at the
time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that he is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common
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Stock under any state or federal law, this Option may not be
exercised, in whole or part, until such listing, registration,
or qualification shall have been obtained free of any
conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
------------------------ -------------------------
Donald Decker, Optionee Richard Surber, President
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Exhibit 10(xix)
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Stock Option Agreement") is granted
effective this 9th day of March 2004 by Nexia Holdings, Inc. (the "Company") to
Josh Vance, a consultant of the Company ("Optionee") and a Utah resident.
PREMISES
A. The Company has received valuable services from Optionee in
the past and desires to compensate Optionee for these services
by issuing Optionee an option (the "Option") to purchase a
total of six million (6,000,000), shares of the Company's
common stock, par value $0.001 at a price of $0.002 per
option, to be issued pursuant to a Form S-8 under the
Securities Act of 1933 as amended ("Form S-8").
B. The exercise price of the Common Stock issuable on exercise of
the options at the date of this grant shall be $0.002 per
share.
C. These Options are being granted pursuant to the Stock Option
Plan, which is incorporated herein by this reference.
GRANT
1. Grant of Options. The Company hereby irrevocably grants
Optionee the right and option ("Option") to purchase all of
the above described six million (6,000,000) shares of
Common Stock, on the terms and conditions set forth herein
and subject to the provisions of the Stock Option Plan in
exchange for services provided by Employee to the Company.
2. Term of Option. This Option may be exercised, in whole or
in part, at any time but before one (1) Year have elapsed
from the date of this Option. All rights to exercise this
option end with the termination of employment with the
Company, for any reason and by any party.
3. Method of Exercising. This Option may be exercised in
accordance with all the terms and conditions set forth in
this Option and the Stock Option Plan, by delivery of a
notice of exercise a form of which is attached hereto as
Exhibit "A" and incorporated herein by this reference,
setting forth the number of Options along with a signed
letter of instruction to the stock broker Optionee will
employ in selling the shares indicating that the specified
exercise price shall be paid within 10 days of the sale or
as otherwise specified at the time of exercise.
4. Optionee Not an Affiliate. Optionee hereby represents,
warrants and covenants that it is not an affiliate of the
Company as that term is defined in Rule 144(a)(1) under the
Securities Act of 1933.
5. Availability of Shares. During the term of this Option, the
Company shall reserve for issuance the number of shares of
Common Stock required to satisfy this Option.
6. Adjustments to Number of Shares. The number of shares of
Common Stock subject to this Option shall be adjusted to take
into account any stock splits, stock dividends,
recapitalization of the Common Stock as provided in the Stock
Option Plan.
7. Limitation on Exercise. If the board of directors of the
Company, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the
Common
64
Stock under any state or federal law, this Option may not be
exercised, in whole or part, until such listing, registration,
or qualification shall have been obtained free of any
conditions not acceptable to the board of directors.
8. Restrictions on Transfer. The Option has not been registered
under the Securities Act of 1933, as amended (the "Securities
Act"), or any state securities statutes. The shares of Common
Stock issuable on exercise of the Option will be qualified for
registration under a Form S-8 Registration Statement filed
with the Securities and Exchange Commission.
9. Record Owner. The Company may deem the Optionee as the
absolute owner of this Option for all purposes. This Option is
exercisable only by the Optionee, or by the Optionee's duly
designated appointed representative. This Option is not
assignable.
10. Shareholder's Rights. The Optionee shall have shareholder
rights with respect to the Option shares only when Optionee
has exercised this Option to purchase those shares and
provided the Company with the letter of instruction specified
in Section 4 of this Option.
11. Validity and Construction. The validity and construction of
this Agreement shall be governed by the laws of the State of
Utah.
IN WITNESS WHEREOF, the below signatures evidence the execution of this
Option by the parties on the date first appearing herein.
OPTIONEE Nexia Holdings, Inc.
/s/ /s/
--------------------- -------------------------
Josh Vance, Optionee Richard Surber, President
65
Exhibit 14.1 - Code of Ethics
CODE OF ETHICS
OF
NEXIA HOLDINGS, INC.
I. Objectives
Nexia Holdings, Inc. (Nexia) is committed to the highest level of ethical
behavior. Nexia's business success depends upon the reputation of Nexia and its
directors, officers and employees to perform with the highest level of integrity
and principled business conduct.
This Code of Ethics ("Code") applies to all directors, officers and employees of
Nexia, including Nexia's chief executive officer and chief financial officer,
(collectively, the "Covered Persons"). This Code is designed to deter wrongdoing
and to promote all of the following:
honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships; full, fair, accurate, timely, and understandable
disclosure in reports and documents that Nexia files with, or submits
to, the Securities and Exchange Commission (the "Commission"), and in
other public communications made by Nexia; compliance with applicable
governmental laws, rules and regulations; the prompt internal reporting
to an appropriate person or persons identified herein for receiving
violations of this Code; and accountability for adherence to this Code.
Each Covered Person must conduct himself or herself in accordance with this
Code, and must seek to avoid even the appearance of improper behavior.
This Code is not intended to cover every applicable law, or to provide answers
to all questions that might arise; for such, Nexia relies on each person's sense
of what is right, including a sense of when it is appropriate to seek guidance
from others on an appropriate course of conduct.
II. Honest and Ethical Conduct
Each Covered Person must always conduct himself or herself in an honest and
ethical manner. Each Covered Person must act with the highest standards of
personal and professional integrity and must not tolerate others who attempt to
deceive or evade responsibility for actions. Honest and ethical conduct must be
a driving force in every decision made by a Covered Person while performing his
or her duties for Nexia. When in doubt as to whether an action is honest and
ethical, each Covered Person shall seek advice from her or his immediate
supervisor or senior management, as appropriate.
III. Conflict of Interest
The term "conflict of interest" refers to any circumstance that would cast doubt
on a Covered Person's ability to act objectively when representing Nexia's
interests. Covered Persons should not use their position or association with
Nexia for their own or their family's gain, and should avoid situations in which
their personal interests (or those of their family) conflict or overlap, or
appear to conflict or overlap, with Nexia's best interests.
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The following are examples of activities that give rise to a conflict of
interest. These examples do not in any way limit the scope of Nexia's policy
regarding conflicts of interest.
Where a Covered Person's association with (or financial interest in)
another person or entity would reasonably be expected to interfere with
the Covered Person's independent judgment in Nexia's best interest,
that association or financial interest creates a conflict of interest.
The holding of a financial interest by a Covered Person in any present
or potential competitor, customer, supplier, or contractor of Nexia
creates a conflict of interest, except where the business or enterprise
in which the Covered Person holds a financial interest is publicly
owned, and the financial interest of the Covered Person in such public
entity constitutes less than one percent (1%) of the ownership of that
business or enterprise.
The acceptance by a Covered Person of a membership on the board of
directors, or serving as a consultant or advisor to any board or any
management, of a business that is a present or potential competitor,
customer, supplier, or contractor of Nexia, creates a conflict of
interest, unless such relationship is pre-approved, in writing, by the
chief executive officer of Nexia or the board of directors in the event
the Covered Person is the chief executive officer.
Engaging in any transaction involving Nexia, from which the Covered
Person can benefit financially or otherwise, apart from the usual
compensation received in the ordinary course of business, creates a
conflict of interest. Such transactions include lending or borrowing
money, guaranteeing debts, or accepting gifts, entertainment, or favors
from a present or potential competitor, customer, supplier, or
contractor of Nexia.
The use or disclosure of any unpublished information regarding Nexia,
obtained by a Covered Person in connection with his or her employment
for personal benefit creates a conflict of interest.
It is Nexia's policy and it is expected that all Covered Persons should endeavor
to avoid all situations that present an actual or apparent conflict of interest.
All actual or apparent conflicts of interest must be handled honestly and
ethically. If a Covered Person suspects that he or she may have a conflict of
interest, that Covered Person is required to report the situation to, and to
seek guidance from, her or his immediate supervisor or senior management as
appropriate. For purposes of this Code, directors, the chief executive officer,
and the chief financial officer shall report any such conflict or potential
conflict to the chairman of the audit committee, if one is later created, and in
the absence of an audit committee, to the chairman of the board of directors.
Officers (other that the chief executive and chief financial officers) and
employees of Nexia shall report any such situations to their immediate
supervisor. It is the responsibility of the audit committee chairman or the
chairman of the board of directors, as applicable, to determine if a conflict of
interest exists or whether such situation is likely to impair the Covered
Person's ability to perform his or her assigned duties with Nexia, and if such
situation is determined to present a conflict, to determine the necessary
resolution.
Loans are expressly prohibited from Nexia to all directors and executive
officers.
IV. Compliance with Applicable Laws, Rules and Regulations
Full compliance with the letter and the spirit of all applicable governmental
laws, rules and
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regulation, and applicable rules and listing standards of any national
securities exchange on which Nexia's securities may be listed, is one of the
foundations on which Nexia ethical policies are built. All directors and
executive officers of Nexia must understand and take responsibility for Nexia's
compliance with the applicable governmental laws, rules and regulations of the
cities, states and countries in which Nexia operates, and for complying with the
applicable rules and listing standards of any national securities exchange on
which Nexia's securities may be listed.
V. Rules to Promote Full, Fair, Accurate, Timely and Understandable Disclosure
As a public company, Nexia has a responsibility to report financial information
to security holders so that they are provided with accurate information in all
material respects about Nexia's financial condition and results of operations.
It is the policy of Nexia to fully and fairly disclose the financial condition
of Nexia in compliance with applicable accounting principles, laws, rules and
regulations. Further, it is Nexia's policy to promote full, fair, accurate,
timely and understandable disclosure in all Nexia reports required to be filed
with or submitted to the Commission, as required by applicable laws, rules and
regulations then in effect, and in other public communications made by Nexia.
Covered Persons may be called upon to provide or prepare necessary information
to ensure that Nexia's public reports are complete, fair and understandable.
Nexia expects Covered Persons to take this responsibility seriously and to
provide accurate information related to Nexia's public disclosure requirements.
All books and records of Nexia shall fully and fairly reflect all Nexia
transactions in accordance with accounting principles generally accepted in the
United States of America, and any other financial reporting or accounting
regulations to which Nexia is subject. No entries to Nexia's books and records
shall be made or omitted to intentionally conceal or disguise the true nature of
any transaction. Covered Persons shall maintain all Nexia books and records in
accordance with Nexia's established disclosure controls and procedures and
internal controls for financial reporting, as such controls may be amended from
time to time.
All Covered Persons must report any questionable accounting or auditing matters
that may come to their attention. This applies to all operating reports or
records prepared for internal or external purposes. If any Covered Person has
concerns or complaints regarding questionable accounting or auditing matters of
Nexia, Covered Person shall report such matters to his or her immediate
supervisor. If the immediate supervisor is involved in the questionable
accounting or auditing matter, or does not timely resolve the Covered Person's
concern, the Covered Person should submit their concerns to the chief executive
officer or the chief financial officer. If the chief executive officer and the
chief financial officer are involved in the questionable accounting or auditing
matter, or do not timely resolve the Covered Person's concerns, the Covered
Person should submit his or her concern directly to the audit committee, if one
be established, or to the board of directors in the absence of a designated
audit committee. The reporting of any such matter may be done on a confidential
basis, at the election of the Covered Person making the report.
VI. Corporate Opportunities
Directors and employees are prohibited from taking for themselves opportunities
that are discovered through the use of Nexia property, information,, or
position, or using Nexia property, information or position for personal gain.
Directors and employees have a duty to Nexia to advance its legitimate interest
when the opportunity to do so arises.
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VII. Confidentiality
Directors and employees must maintain the confidentiality of non-public,
proprietary information regarding Nexia, its customers or its suppliers, and
shall use that information only to further the business interests of Nexia,
except where disclosure or other use is authorized by Nexia or legally mandated.
This includes information disseminated to employees in an effort to keep them
informed or in connection with their work activities, but with the instruction,
confidential labeling, or reasonable expectation that the information be kept
confidential.
VIII. Trading on Inside Information
Inside information includes any non-public information, whether favorable or
unfavorable, that investors generally consider important in making investment
decisions. Examples include, financial results not yet publicly released,
imminent regulatory approval/disapproval of any proposed corporate action or
other significant matter such as the purchase or sale of a business unit,
subsidiary or significant assets, threatened litigation, or other significant
facts about Nexia's business. No information obtained as the result of
employment at, or a director's service on the board of, Nexia may be used for
personal profit or as the basis for a "tip" to others, unless such information
is first made generally available to the public.
IX. Protection and Proper Use of Nexia's Assets
Directors and employee should protect Nexia's assets and ensure their efficient
use. Theft, carelessness and waste have an adverse impact on Nexia and its
profitability. Nexia assets may only be used for legitimate company business
purposes.
X. Intellectual Property
Nexia expends a great deal of time, effort and money to protect its intellectual
property. The company is sensitive to issues regarding the improper use of our
intellectual property and avoiding the improper use of intellectual property of
others, including but not limited to copyrights, trademarks, trade secrets and
patents. In fulfillment of Nexia's legal obligations with respect to
intellectual property rights, Nexia adheres to copyright laws, including the
application of those laws to copyrights work in print, video, music, computer
software or other electronic formats. Employees must not make any unauthorized
reproduction of any copyrighted work.
XI. Reporting Violations of the Code.
Any Covered Person who becomes aware of any violation of this Code must promptly
bring the violation to the attention of the appropriate party as follows:
directors, Nexia's chief executive officer and the chief financial officer shall
report on a confidential basis any violations to the chairman of the audit
committee, if one be created, and in the absence of any audit committee, to the
chairman of the board of directors of Nexia; Executive officers and employees of
Nexia shall report any violations to Nexia's chief executive officer or chief
financial officer; all other Covered Persons or employees shall report any such
violation to their immediate supervisor.
XII. Compliance With the Code
All issues of non-compliance with this Code will be reviewed and evaluated
according to the circumstances and severity of the problem. Senior management
will take such actions as it deems appropriate, which can include disciplinary
action up to and including termination of employment,
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legal action, and other measures.
XIII. Waiver of the Code
Any waiver of this Code may be made only by the independent directors on the
board of directors, or by an authorized committee of the board of directors
comprised solely of independent directors, and will be disclosed as required by
law, Commission regulations, or the rules and listing standards of any national
securities exchange on which Nexia's securities may be listed.
Adopted this seventeenth day of May, 2004 by the board of directors of Nexia
Holdings, Inc.
John E. Fry, Jr., Director Richard Surber, Director
Gerald Einhorn, Director Adrienne Bernstein, Director
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