<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Amendment No. 1)
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
/X/ THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
/ / 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-22365
APOLLO INTERNATIONAL OF DELAWARE, INC.
--------------------------------------
(Exact name of Small Business Issuer specified in its charter)
Delaware 59-3285046
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6542 U.S. Highway 41, Suite 215
Apollo Beach, Florida 33572
-------------------------------
(Address of principal executive offices)
(813-645-7677)
--------------
(Issuer's telephone number)
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 .
----- -----
The number of shares of the Registrant's common stock outstanding at May 1,
1998 was 3,655,115 shares.
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PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
APOLLO INTERNATIONAL OF DELAWARE, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
ASSETS
------
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 41,447 $ 41,600
Accounts receivable 106,373 57,512
Inventory 1,116,051 1,121,870
Other assets 175,917 89,541
-------------- ---------------
TOTAL CURRENT ASSETS 1,439,788 1,310,523
DEFERRED SOFTWARE COSTS 2,639,282 2,425,583
FIXED ASSETS 216,683 207,077
OTHER ASSETS 19,239 15,492
------------- ---------------
TOTAL ASSETS $ 4,314,992 $ 3,958,675
============== ===============
</TABLE>
(CONTINUED)
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APOLLO INTERNATIONAL OF DELAWARE, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(CONTINUED)
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Overdraft $ - $ 7,047
Trade notes and accounts payable
and accrued expenses 858,693 718,550
Payroll taxes payable 18,680 55,153
Notes payable - stockholders 1,399,321 1,399,321
Current portion of notes
Payable equipment 4,721 4,871
------------ -------------
TOTAL CURRENT LIABILITIES 2,281,415 2,184,942
ACCOUNTS PAYABLE - NONCURRENT 125,000 125,000
NOTES PAYABLE - EQUIPMENT 12,160 9,720
NOTES PAYABLE - LONG-TERM 1,000,000 -
------------ -------------
TOTAL LIABILITIES 3,418,575 2,319,662
------------ -------------
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value;
authorized: 5,000,000 shares;
issued and outstanding: none
Common stock, $.01 par value;
authorized: 15,000,000 shares;
issued and outstanding: 3,655,115
as of March 31, 1998 and 3,555,115 as of
December 31, 1997 29,717 28,717
Additional paid-in capital 7,014,806 6,830,725
Common stock warrants 200,000
Deficit (6,335,857) (5,193,170)
Less prepaid rent (12,249) (27,259)
------------ -------------
TOTAL STOCKHOLDERS' EQUITY 896,417 1,639,013
------------ -------------
TOTAL LIABILITIES
AND STOCKHOLDER'S EQUITY $ 4,314,992 $ 3,958,675
============ =============
</TABLE>
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APOLLO INTERNATIONAL OF DELAWARE, INC.
AND SUBSIDIARY
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1998 1997
------------ --------------
<S> <C> <C>
SALES $ 108,964 $ 437,799
COST OF SALES (93,202) (234,525)
------------ --------------
GROSS PROFIT 15,762 203,274
------------ --------------
EXPENSES
Research and development (91,315) (106,366)
General and administrative (994,866) (394,456)
------------ --------------
TOTAL EXPENSES (1,086,181) (500,822)
------------ --------------
LOSS FROM OPERATIONS (1,070,419) (297,548)
INTEREST EXPENSE AND
AMORTIZATION OF DISCOUNT
AND DEFERRED FINANCING
COSTS (50,019) (48,787)
------------ --------------
LOSS BEFORE INCOME TAXES (1,120,438) (346,335)
INCOME TAXES - -
------------ --------------
NET LOSS $ (1,120,438) $ (346,335)
============ ==============
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,052,929 2,811,434
============ ==============
LOSS PER COMMON SHARE $ (0.37) $ (0.12)
NET LOSS $ (0.37) $ (0.12)
============ ==============
</TABLE>
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APOLLO INTERNATIONAL OF DELAWARE, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1998 1997
------------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,120,438) $ (346,335)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Amortization of discount
and deferred financing costs 8,654
Amortization of deferred software cost 90,387 39,453
Depreciation and amortization 14,205 6,928
Amortization of prepaid rent 15,010 1,667
Capitalization of software costs (141,206) (71,326)
Increase (decrease) in cash from
Accounts receivable (48,861) (379,543)
Inventory 5,820 26,720
Other current assets (90,542) 2,942
Other assets
Trade notes and accounts
Payable and accrued expenses 164,883 90,325
Payroll taxes payable (36,473) 33,687
------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (1,147,215) (586,828)
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES
Purchases of fixed assets (23,390) (15,996)
------------ -----------
</TABLE>
(CONTINUED)
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APOLLO INTERNATIONAL OF DELAWARE, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1998 1997
------------- ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common Stock $ 200,000
Proceeds from loans payable - stockholders 384,691
Proceeds from note payable - other 1,000,000 8,700
Proceeds from loans payable - line of credit 257,241
Cost of proposed public offering (36,091)
Payments of loans payable (22,500)
NET CASH PROVIDED BY FINANCING
ACTIVITIES 1,177,500 614,541
------------- -----------
INCREASE (DECREASE) IN CASH 6,895 11,717
CASH - beginning 34,552 34,099
------------- ------------
CASH - ENDING $ 41,447 $ 45,816
============= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid for interest $ 47,709 $ 9,844
============= ============
</TABLE>
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APOLLO INTERNATIONAL OF DELAWARE, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
Apollo International of Delaware, Inc. (Company) develops, manufactures and
distributes worldwide electric power protection and control products,
utilizing computer and fiber optics technologies for industry and electric
utilities.
2. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for financial statements. For further information, refer to the
audited financial statements and notes thereto for the year ended December
31, 1997.
In the opinion of the Company, all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the financial
statements have been made.
The accompanying unaudited financial statements have been prepared assuming
that the Company will continue operations on a going-concern basis, which
contemplates the realization of assets and the satisfaction of liabilities
in the normal course of business. However, the Company has incurred net
losses since inception and, as of March 31, 1998, its current liabilities
exceeded its current assets by approximately $841,627. These factors raise
doubt about the Company's ability to continue as a going concern. The
Company's ability to continue as a going concern is dependent upon
obtaining additional financing and significantly increasing its sales.
Management is seeking additional financing for working capital, however,
there is no assurance that the Company will be able to obtain additional
financing, or if such financing is obtained, attain profitable operations
and continue operations as a going concern.
3. LOSS PER SHARE
Loss per share was computed based upon the weighted average number of
common shares and common share equivalents outstanding during the three
months ended March 31, 1998 and 1997. Fully-dilutive loss per common share
has not been presented because it was anti-dilutive.
In February 1997, the FASB issued Statement No. 128, "Earnings Per Share",
which changes the calculations and disclosures of earnings per share. As
of January 1, 1997 the Company adopted Statement No. 128 without material
effect.
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4. PUBLIC OFFERING
In July 1997, the Company closed its initial public offering and sold
800,000 shares of common stock at $5.00 per share, and 920,000 warrants at
$.25 per warrant, resulting in net proceeds of approximately $3.16 million,
all of which proceeds have been utilized.
5. CONVERTIBLE NOTES PAYABLE
Through March 19, 1998, the Company borrowed an aggregate of $1,000,000,
payable in two years, with interest at 8%, per annum, payable quarterly as
to $250,000 and monthly as to $750,000. The notes are collateralized
by accounts receivable and inventory and are convertible into common stock
at $3.25 per share. In connection with the borrowing, the Company paid a
fee to a consultant of $100,000 and 325,000 warrants. Each warrant is
exercisable to purchase one share of common stock at $3.25 per share,
commencing July 11, 1999 through February 8, 2003.
6. EXERCISE OF WARRANTS
On February 28, 1998, warrants to purchase 100,000 shares of common stock
had been exercised by a consultant for a total of $200,000. The Company
lowered the exercise price from $3.00 to $2.00.
7. CONSULTING AGREEMENTS
In January, 1998, the Company entered into a business consulting agreement
through June 1999, in exchange for 300,000 common stock purchase warrants.
Each warrant is exercisable to purchase one share of common stock at $3.00
per share, commencing July 11, 1999 through January 14, 2003.
Effective January 1998, the Company entered into a business consulting
agreement with a stockholder through December 1998, in exchange for $7,813
per month.
8. SECURITIES AND EXCHANGE COMMISSION
In March 1998 the Company received an informal letter of inquiry from the
Securities and Exchange Commission ("SEC") requesting copies of certain
documentation. The letter indicated that the inquiry was confidential and
should not be regarded as an indication by the SEC that any violation of
law has occurred, or as a reflection upon the merits of the Company's
securities or upon any person or entity who effected transactions in the
Company's securities. However, although the inquiry is informal, there is
no assurance that a more formal inquiry will not follow. As a result of
the preliminary nature of the inquiry, the Company is unable to predict
whether this will result in adverse consequences to the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which represent the Company's expectations and beliefs, including, but not
limited to statements concerning the Company's expected growth. The words
"believe," "anticipate," "estimate," "project," "intend," and similar
expressions identify forward looking statements, which speak only as of the
date such statements were made. These statements by their nature involve
substantial risks and uncertainties, certain of which are beyond the Company's
control and cannot be predicted or quantified. Actual results may differ
materially depending on a variety of important factors, including, among others
referenced herein and in the Company's annual report on Form 10-KSB (File No.
0-22365), problems commonly encountered by companies seeking to commercialize
new products such as unexpected delays in product development, production, and
marketing; sources for sufficient capital for the Company's growth and
operations; economic and political factors in nations of the Company's
international customers; changes in economic conditions; demand for the
Company's products and changes in the competitive environment.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain selected
historical operating results for the Company as a percentage of net sales.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
1998 1997
---- ----
<S> <C> <C>
Net Sales 100.0% 100.0%
Cost of Goods Sold 85.5% 53.6%
----- -----
Gross Profit 14.5% 46.4%
Operating Expenses 996.8% 114.4%
----- -----
Loss from Operations (982.3)% (68.0)%
</TABLE>
Revenues. Gross revenues for the three months ended March 31, 1998
and March 31, 1997 were $108,964 and $437,799 respectively, generating gross
profits of $15,762 and $203,274 for those same periods. The decrease in
revenues between the first quarter of 1998 as compared to 1997 is due to fewer
relays being shipped during the period. This reduction in shipments was due to
both financial constraints as well as the impact on sales by earlier problems
encountered in the field. In order to address and correct unit failures in the
field, a quality committee was formed late in 1997 to analyze all the problems
experienced in the field and to determine and correct all of the root causes
for defects. Based on this approach, changes were implemented and replacement
units have been shipped. The Company has engineered additional mechanical
features to the FPR1 feeder protection relay which the Company expects to be
completed by June 15, 1998. Subject to test results, this improved version of
the FPR1 is expected to be in production in the third quarter of 1998.
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Operating Expenses. Operating expenses for the three months ended
March 31, 1998 and 1997 were $994,866 and $394,456, respectively. This
increase of 152.2%, while extremely significant, was primarily due to the
transition undertaken by the Company in moving forward from a development stage
company with no infrastructure to an operating company. Through most of 1997,
the Company proceeded to slowly build the infrastructure, leased its own
manufacturing facility, developed sales and marketing literature, hired several
regional sales managers, and other personnel as needed. Because of the
transition from development stage company to an operating company, the increase
in operating expenses is not comparable. Some of the major increases are the
amortization of deferred software costs, payroll expenses, rent, telephone,
travel, professional fees including legal, accounting, and consulting,
manufacturing rework, and business insurance. Further, some of these increases
relate to the integration of Trans-World Powernet, Inc., an acquisition the
Company made on November 24, 1997.
When sales did not grow as expected (due to product and production
difficulties), the Company embarked on a cost reduction program in December
1997 which continued into 1998. In order to reduce its payroll and payroll
related costs, the Company terminated some employees and eliminated certain
personnel positions at the start of 1998 and combined other positions and
responsibilities as it deemed necessary. The net dollar effect of these
changes which will be realized in 1998 amounted to approximately $450,000 on an
annual basis. However, the Company has further reduced its payroll expenses in
April, 1998 which is discussed under "Subsequent Events," below.
Research and Development. Research and development expenses consist
primarily of salaries and consulting fees to support technological product
development. Costs of software to be sold and incurred after technological
feasibility has been established and available for general release are
capitalized. Salaries and other material costs are expensed. The Company
believes that continuous development will occur for new products and to enhance
and upgrade existing products to provide an extra package of protective relay
products for the Company's heavy industrial and utility customers.
For the three months ended March 31, 1998 and March 31, 1997, the
Company incurred $91,315 and $106,366 of research and development costs
respectively. The decrease of $15,051 was due primarily to less development
costs being capitalized during this comparable period.
FACTORS AFFECTING OPERATING RESULTS
As a result of the Company's limited operating history, the Company
does not have historical financial data for a significant number of periods on
which to base planned operating expenses. Additionally, the Company's expense
levels are based entirely on its expectations as to future revenues and to a
large extent are variable.
The Company anticipated that beta testing of the CMPR1, FPR2, and FPR3 products
would commence in the second quarter of 1997 and would be ready for commercial
marketing in the second and third quarter of 1997. Further, the Company
anticipated that its most advanced NOVA relays would commence beta testing in
the third quarter of 1997. However, the development, testing and
commercialization of these products were delayed beyond the control of the
Company. The Company experienced some difficulty with field units of the
CMPR2, which product is the foundation from which the CMPR1 and other motor
protection relays are derived. After various modifications and tests done
in-house by the Company, the Company
10
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<PAGE> 12
realized that a major redesign of the hardware was necessary in order to satisfy
customer demands and to enhance the product's marketability. This project,
which began in August, 1997, was completed in February 1998. The focusing of
engineering on the further enhancement of the CMPR2 caused delays in anticipated
shipments. However, the redesigned CMPR2 has been successfully shipped and
installed beginning in February, with current outstanding orders from a number
of customers for this unit. Although the Company believes that all issues
regarding the CMPR2 product have been resolved, there is no assurance that new
issues will not arise in the field which would require further modification.
The Company also experienced some difficulty with the FPR1, a feeder
protection relay in the Company's Solaris family of products. A team of
engineers was established as a "quality circle" to identify and correct the
root causes for each reported problem. Although the FPR1 was marketable in its
present form, the Company has undertaken to redesign the unit in order to
improve its performance and to make manufacturing the product easier by
significantly reducing the production labor content of each unit. The Company
recently completed the engineering phase and expects to commence testing during
the second quarter of 1998. Depending on test results, it is anticipated that
marketing and production will commence in the third quarter of this year.
Although the Company believes that it has resolved functional and
quality control issues with its commercialized CMPR2 and FPR1 products, there
is no assurance that new issues regarding these or other products will not
arise in the future. Any delays in production and marketing as a result of new
problems with existing products or products in development may demand more
financial and other resources than available to the Company which will have a
material adverse effect on the Company and its operations.
The Company, being cognizant of the fact that its product development
schedules have been delayed, has entered into an agreement with a foreign
protective relay manufacturer that will provide the Company with additional
products to sell that are the functional equivalent of the Company's more
advanced Solaris products that the Company planned to develop. The Company and
its European counterpart are currently having translated into English the
product software, documentation and spec sheets, which is expected to be
accomplished during the second quarter of 1998. This will enable the Company
to market this proven technology in the third quarter of 1998 while continuing
to develop strategically positioned advanced products.
The Company expects to experience significant fluctuations to future
quarterly operating results that may be caused by many factors, including demand
for the Company's products, introduction of new technological developments, the
introduction, enhancement, and market acceptance of new and existing products,
the introduction of competing products, and general economic conditions.
Further, the Company's products have long sales cycles. As a result, the
Company believes that period to period comparisons of its results of operations
will not necessarily be meaningful and should not be relied upon as any
indication of future performance.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of capital have been the sales of its
equity securities in the form of an initial public offering of common stock
which occurred on July 16, 1997, proceeds from stockholders loans, proceeds
from the Company's line of credit, and the proceeds from other loans payable.
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The Company's negative cash flow from operating activities was
$1,147,215 in the first quarter of 1998 as compared to $586,828 in the first
quarter of 1997. The decrease in cash from operating activities between the
comparable periods resulted primarily from the net loss sustained due to lower
sales and higher costs, reflective of the need to build an infrastructure and
transition from a development stage company to an operating company. Also
contributing to the negative cash flow from operating activities was an
increase in capitalization of software costs.
The Company received $1,177,500 net cash provided by financing
activities for the quarter ended March 31, 1998 as compared to $614,541 in the
first quarter of 1997. Proceeds from loans in the amount of $1,000,000 and the
conversion of warrants in the amount of $200,000 accounted for the net cash
provided by financing activities.
As is typical of Company's which seek to develop new technologies or
introduce products to a new market, delays in development and production of the
Company's products have occurred, resulting in decreased revenues which the
Company had otherwise anticipated would be available. The Company's learning
curve and production problems encountered in the past resulted in higher costs
than anticipated, which will be reflected in a higher cost of sales and
continued pressure on gross profit margins for the products the Company
delivers during 1998. Thus, the Company may not show profitability during 1998
and could show losses at the end of the 1998 fiscal year. Further, as
indicated in Note 2 in the Notes to Financial Statements accompanying this
Report, the Company has incurred net losses since inception and, as of March
31, 1998, its current liabilities exceeded its current assets by approximately
$841,627. These factors raise doubt about the Company's ability to continue as
a going concern. The Company's ability to continue as a going concern is
dependent upon its ability to obtain additional financing and significantly
increase sales. The Company is in the process of seeking immediate additional
financing for operations and to further fund product development and expansion
through marketing existing products during the next six months. Such
additional capital may be accomplished through equity or debt financings.
However, there is no assurance that any additional financing will be available
to the Company on acceptable terms, or at all. To the extent that the Company's
available cash resources are insufficient to allow the Company to engage in
operations sufficient to generate meaningful revenues or achieve profitable
operations, the inability to obtain additional financing will have a material
adverse effect on the Company and the Company may have to curtail its
operations. Additional equity financing may involve substantial dilution to
the interests of the Company's existing shareholders.
SUBSEQUENT EVENTS
On April 24, 1998, Steven D. Smith, the Company's Executive Vice
President, Operations and a Director resigned both his position as an executive
of the Company as well as his position as a member of the Company's Board of
Directors. The resignation was accepted by the Company.
On April 8, 1998, and again on April 10, 1998, the Company entered
into a 30 day loan agreement with Robert K. Swatland, Vice President of Sales
for a combined total of $120,000. The terms of the notes called for interest
to be paid in the amount of $12,000 for use of the funds during the loan
period.
In April 1998, the Company reassessed its staffing needs for the
immediate future and instituted an overall plan to further streamline costs and
maximize its personnel resources. In
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<PAGE> 14
that regard, the Company reduced the salary of David W. Clarke, the Company's
President and Chief Executive Officer, to $100,000 from $150,000. Further the
Company instituted staff reductions and salary reductions, while restructuring
the responsibilities of others to eliminate overlapping job duties. The Company
estimates the annual savings of these changes to be approximately $900,000.
These savings are in addition to the payroll cost reductions implemented in
January 1998. The Company believes that the remaining staff will be sufficient
for its immediate and near term needs. The Company will assess its staffing
needs periodically as it grows its business.
On April 24, 1998, the Company entered into a 60 day loan agreement
with Rainfest, Ltd. in the amount of $50,000. The loan is to be secured by
accounts receivable of Trans-World Powernet, Inc., a subsidiary of Apollo, and
personal guarantees by David W. Clarke, President, and Christine Clewes, Vice
President of Marketing. In lieu of interest, Rainfest, Ltd. will receive
20,000 shares of the Company's Common Stock, subject to underwriter's lock-up.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company's subsidiary, Trans-World, and certain of
Trans-World's employees, and Chihkai John Tang, President of Trans-World and a
director of the Company, are defendants in a suit instituted by Tasnet, Inc.
("Tasnet") in or about May 1997 in the Circuit Court for the 6th Judicial
District of Pinellas County, Florida. The plaintiff's complaint seeks
injunctive relief and unspecified damages against certain employees of
Trans-World based upon their alleged violations of covenants not to compete and
against Trans-World and Mr. Tang for tortious interference with contractual
relationships between Tasnet and the defendant-employees, and seeking to enjoin
Trans-World from marketing its products and disgorgement of profits from sale of
its products. Trans-World an the other defendants have denied liability. Mr.
Tang and the other selling shareholders of Trans-World have agreed to indemnify
the Company against any losses incurred in connection with this litigation and
plan to vigorously defend the lawsuit. Trans-World and the Company believe that
the lawsuit is without merit. However, there can be no assurance as to the
outcome of the litigation. A result adverse to Trans-World would have a
material adverse impact on the Company's business.
The Company is involved in other litigation relating to claims
arising out of its operations in the normal course of business, none of which
claims exceed ten percent of the Company's current assets. The Company does
not believe that the adverse outcome of any such litigation would have a
material adverse effect on the Company's operations.
ITEM 2. CHANGES IN SECURITIES.
On February 28, 1998, 100,000 common stock purchase warrants
were exercised by a consultant (Perryman Corporation, N.V.) for a total
purchase price of $200,000. The original exercise price of $3.00 per share was
reduced to $2.00 per share with respect to that exercise. The consultant has
remaining 300,000 warrants exercisable at $3.00 per share. A total of 100,000
restricted shares of Common Stock were issued in respect of the exercise in
reliance on Section 4(2) of the Securities Act of 1933, as amended (the "1933
Act") because the transaction did not involve a public offering and the shares
were acquired by an accredited investor with investment intent and the share
certificate shall bear a restrictive legend accordingly.
During the first fiscal quarter of 1998, the Company borrowed
an aggregate of $1,000,000 from individual lenders on the following dates:
$750,000 (March 19, 1998); $100,000 (January 28, 1998); $100,000 (February 5,
1998); and $50,000 (February 10, 1998). In respect thereof the Company issued
secured convertible promissory notes in such amounts. The notes accrue
interest at 8% per annum, payable quarterly on $250,000 of such loans and
monthly on $750,000, commencing March 31, 1998. At the option of the holders,
the notes are convertible into the Company's Common Stock commencing 90 days
from the date of issuance of the respective notes. The conversion rate is $3.25
per share (divided into the then outstanding principal balance plus accrued and
unpaid interest on the date of conversion). The Common Stock issuable upon
conversion of the notes is subject to a lock-up until July 11, 1999 pursuant to
which the shares may not be sold or otherwise transferred without the consent
of the Company's underwriter. Holders of the notes have piggy-back registration
rights as well as a one-time demand registration right with respect to the
Common Stock commencing July 11, 1999;
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<PAGE> 16
however, the demand right is available only upon request of the holders of 50%
of the Common Stock issuable upon conversion of the notes. The notes were
issued in reliance on Section 4(2) of the 1933 Act because the transactions did
not involve a public offering, and in accordance with the loan agreement, the
investors were provided information about the Company and afforded an
opportunity to ask questions about the information received, the notes were
acquired with investment intent and neither the notes nor the underlying Common
Stock may be sold or otherwise transferred except in accordance with
registration or exemption therefrom under the 1933 Act.
In connection with the forgoing $1,000,000 aggregate loan, on February
9, 1998, the Company issued to East Jet, Inc., a business consultant, a common
stock purchase warrant for 325,000 shares of the Company's Common Stock,
exercisable at $3.25 per share commencing July 11, 1999 and expiring February
8, 2003. The warrant was issued in reliance on Section 4(2) of the 1933 Act
because the transaction did not involve a public offering, the consultant was
provided information about the Company and afforded an opportunity to ask
questions about the information received, the warrant was acquired with
investment intent and it bears a legend accordingly. Also in connection with
the foregoing loan, Imagine Holdings Corp. was paid a consulting fee of
$100,000 by the Company.
On January 15, 1998, the Company issued a restricted common stock
purchase warrant to East Jet, Inc. for business consulting services. The
warrant is exercisable for 300,000 shares of the Company's Common Stock at an
exercise price of $3.00 per share commencing July 11, 1999 and expiring January
14, 2003. The warrant was issued in reliance on Section 4(2) of the 1933 Act
because the transaction did not involve a public offering, the consultant was
provided information about the Company and afforded an opportunity to ask
questions about the information received, and the warrant was acquired with
investment intent and it bears a legend accordingly.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
15
<PAGE> 17
ITEM 6. EXHIBITS AND FORM 8-K.
Reports on Form 8-K: An amendment to Current Report on Form 8-K
dated November 24, 1998 was filed on February 6, 1998 and contained audited
financial statements of Trans-World Powernet, Inc. and pro forma consolidated
financial statements of the Company (giving effect to the acquisition of
Trans-World Powernet, Inc.).
Exhibits:
<TABLE>
<CAPTION>
EXHIBIT FILING-STATUS-INCORPORATED
NUMBER EXHIBIT DESCRIPTION BY REFERENCE TO
- ------ ------------------- -----------------------------------------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation Exhibit 3.1 to Form SB-2 Registration
Statement, filed on December 17, 1997,
File No. 333-18071
3.2 Amended and Restated ByLaws Exhibit 3.2 to Form SB-2 Registration
Statement, filed on December 17, 1996,
File No. 333-18071
3.2.1 Amendment to ByLaws Exhibit 3.2.1 to Amendment No. 2 to Form
SB-2 Registration Statement, filed on
April 29, 1996, File No. 333-18071
4.1 Specimen of Common Stock Certificate Exhibit 4.1 to Amendment No. 2 to Form
SB-2 Registration Statement, filed on
April 29, 1997, File No. 333-18071
4.2 Specimen of Warrant Certificate Exhibit 4.2 to Report on Form 10-QSB,
filed on August 14, 1997, File No.
0-22365
4.3 Warrant Agreement between the Company and American Exhibit 4.3 to Report on Form 10-QSB,
Stock Transfer & Trust Company, as Warrant Agent, filed on August 14, 1997, File No.
dated July 16, 1997 0-22365
10.1 Form of Warrant issued to investors in the Exhibit 4.4 to Form SB-2 Registration
Company's private placement, dated August 5, 1996 Statement, filed on December 17, 1996,
through November 14, 1996 File No. 333-18071
10.2 Warrant dated September 26, 1996 in favor of Exhibit 4.5 to Form SB-2 Registration
Steven D. Smith, as amended Statement, filed on December 17, 1996,
File No. 333-18071
10.3 Warrant dated September 26, 1996 in favor of Don Exhibit 4.6 to Form SB-2 Registration
P. Louw, as amended Statement, filed on December 17, 1996,
File No. 333-18071
10.4 Amended Warrant dated October 29, 1996 in favor of Exhibit 10.4 to Form 10-QSB filed on
Perryman Corporation N.V. August 14, 1997, File No. 0-22365
</TABLE>
16
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT FILING-STATUS-INCORPORATED
NUMBER EXHIBIT DESCRIPTION BY REFERENCE TO
- ------ ------------------- ----------------------------------------
<S> <C> <C>
10.5 Warrant dated June 25, 1996 in favor of Imagine Exhibit 4.10 to Form SB-2 Registration
Holdings Statement filed on December 17, 1996,
File No. 333-18071
10.6 Warrant dated December 15, 1996 in favor of Exhibit 4.11 to Amendment No. 1 to Form
Matthias E. Lukens, Jr. SB-2 filed on March 6, 1997, File No.
333-18071
10.7 Form of Registration Rights Agreement between the Exhibit 4.12 to Form SB-2 Registration
Company and private placement investors dated Statement filed on December 17, 1996,
August 5, 1996 through November 14, 1996 File No. 333-18071
10.8 Form of Registration Rights Agreement between the Exhibit 4.13 to Form SB-2 Registration
Company and certain investors dated in May, 1996 Statement filed on December 17, 1996,
File No. 333-18071
10.9 Warrant dated June 30, 1996 in favor of Imagine Exhibit 4.14 to Amendment No. 1 Form SB-
Holdings 2 Registration Statement filed on March
6, 1996, File No. 333-18071
10.10 Warrant dated November 1, 1996 in favor of Robert Exhibit 4.15 to Amendment No. 1 to Form
Swatland SB-2 Registration Statement filed on
March 6, 1997, File No. 333-18071
10.11 Underwriters' Warrant dated July 16, 1997 Exhibit 10.11 to Form 10-QSB filed on
August 14, 1997, File No. 0-22365
10.12 1996 Stock Option Plan Exhibit 10.1 to Form SB-2 Registration
Statement filed on December 17, 1996,
File No. 333-18071
10.13 Stock Purchase Agreement between the Company and Exhibit 10.2 to Form SB-2 Registration
Christine Clewes, dated June 13, 1996 Statement filed on December 17, 1996,
File No. 333-18071
10.14 Stock Purchase Agreement between the Company and Exhibit 10.3 to Form SB-2 Registration
Frank Mancini, dated June 24, 1996 Statement filed on December 17, 1996,
File No. 333-18071
10.15 Stock Purchase Agreement between the Company and Exhibit 10.4 to Form SB-2 Registration
Framan, a business entity, dated June 24, 1996 Statement filed on December 17, 1996,
File No. 333-18071
10.16 Consulting Agreement between the Company and Exhibit 10.5 to Form SB-2 Registration
Perryman Corporation, N.V., dated May 10, 1996 Statement filed on December 17, 1996,
File No. 333-18071
10.17 Amended and Restated Consulting Agreement between Exhibit 10.6 to Form SB-2 Registration
the Company and Imagine Holdings, dated June 1, Statement filed on December 17, 1996,
1996 File No. 333-18071
</TABLE>
17
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT FILING-STATUS-INCORPORATED
NUMBER EXHIBIT DESCRIPTION BY REFERENCE TO
- ------ -------------------
<S> <C> <C>
10.18 Lease between the Company and South Hillsborough Exhibit 10.7 to Amendment No. 1 to Form
Community Bank Office/Complex, Richard L. Phagan, SB-2 Registration Statement, filed on
dated October 31, 1995 March 6, 1997, File No. 333-18071
10.18.1 Lease between the Company and South Hillsborough Exhibit 10.7.1 to Form SB-2 Registration
Community Bank Office/Complex, dated October 24, Statement filed on December 17, 1996,
1996 File No. 333-18071
10.19 Amended and Restated Consulting Agreement between Exhibit 10.8 to Form SB-2 Registration
the Company and Matthias E. Lukens, Jr. dated Statement filed on December 17, 1996,
November 30, 1996 File No. 333-18071
10.20 Consulting Agreement between the Company and Frank Exhibit 10.9 to Form SB-2 Registration
J. Mancini dated December 20, 1996 Statement filed on December 17, 1996,
File No. 333-18071
10.21 Agreement between the Company and Phasetronics, Exhibit 10.10 to Form SB-2 Registration
Inc. dated January 31, 1996 Statement filed on December 17, 1996,
File No. 333-18071
10.22 Agreement between the Company and Phasetronics, Exhibit 10.11 to Form SB-2 Registration
Inc. dated January 31, 1996 Statement filed on December 17, 1996,
File No. 333-18071
10.23 Sale of Accounts Receivable Agreement between the Exhibit 10.12 to Form SB-2 Registration
Company and Queensbury, Inc. dated October 31, Statement filed on December 17, 1996,
1996 File No. 333-18071
10.24 Cash Advance and Security Agreement and amendment Exhibit 10.13 to Form SB-2 Registration
thereto between Frank J. Mancini and the Company Statement filed on December 17, 1996,
File No. 333-18071
10.24.1 Second Amendment to Cash Advance and Security Exhibit 10.13.1 to Form SB-2 Registration
Agreement dated May 19, 1997 Statement filed on December 17, 1996,
File No. 333-18071
10.24.2 Third Amendment to Cash Advance and Security Exhibit 10.13.2 to Form SB-2 Registration
Agreement dated May 27, 1997 Statement filed on December 17, 1996,
File No. 333-18071
10.25 Form of Indemnification Agreement for directors Exhibit 10.14 to Form SB-2 Registration
and officers Statement filed on December 17, 1996,
File No. 333-18071
10.26 Revolving Line of Credit Agreement between the Exhibit 10.15 to Form SB-2 Registration
Company and Queensbury, Inc. Statement filed on December 17, 1996,
File No. 333-18071
10.27 Amended and Restated License Agreement between the Exhibit 10.16 to Form SB-2 Registration
Company and Matthias E. Lukens, Jr., d/b/a WHR Statement filed on December 17, 1996,
Partners, dated December 16, 1997 File No. 333-18071
</TABLE>
18
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT FILING-STATUS-INCORPORATED
NUMBER EXHIBIT DESCRIPTION BY REFERENCE TO
- ------ -------------------
<S> <C> <C>
10.28 Stock Purchase Agreement between the Company and Exhibit 10.17 to Form SB-2 Registration
Matthias E. Lukens, Jr., d/b/a WHR Partners dated Statement filed on December 17, 1996,
December 16, 1997 File No. 333-18071
10.29 Executive Employment Agreement between the Company Exhibit 10.18 to Form SB-2 Registration
and David W. Clarke Statement filed on December 17, 1996,
File No. 333-18071
10.30 Executive Employment Agreement between the Company Exhibit 10.19 to Form SB-2 Registration
and Christine Clewes Statement filed on December 17, 1996,
File No. 333-18071
10.31 Executive Employment Agreement between the Company Exhibit 10.20 to Form SB-2 Registration
and Donald P. Louw Statement filed on December 17, 1996,
File No. 333-18071
10.32 Executive Employment Agreement between the Company Exhibit 10.21 to Form SB-2 Registration
and Steven D. Smith Statement filed on December 17, 1996,
File No. 333-18071
10.33 Executive Employment Agreement between the Company Exhibit 10.22 to Form SB-2 Registration
and Robert Swatland Statement filed on December 17, 1996,
File No. 333-18071
10.34 Financial Advisor and Investment Banking Agreement Exhibit 10.23 to Amendment No. 1 to Form
between the Company and May Davis Group, Inc. SB-2 Registration Statement filed on
dated July 16, 1997 March 6, 1997, File No. 333-18071.
10.35 Lease Agreement dated September 1, 1997 Exhibit 10.35 to Form 10QSB filed on
November 18, 1997, File No. 0-22365
10.36 Agreement and Plan of Merger Exhibit 10.1 to Form 8-K filed on
December 9, 1997, File 0-22365
10.37 Executive Employment Agreement between Trans-World Exhibit 10.2 to Form 8-K filed on
and Chihkai J. Tang December 9, 1997, File 0-22365
10.38 Shareholder's Voting Agreement dated November 24, Exhibit 10.3 to Form 8-K filed on
1997 December 9, 1997, File 0-22365
10.39 Form of Loan and Security Agreement Exhibit 10.39 to Form 10-KSB filed on
May 15, 1998, File 0-22364
10.40 Secured Convertible Note for $750,000 Exhibit 10.40 to Form 10-KSB filed on
May 15, 1998, File 0-22364
10.41 Secured Convertible Note for $100,000 Exhibit 10.41 to Form 10-KSB filed on
May 15, 1998, File 0-22364
10.42 Secured Convertible Note for $100,000 Exhibit 10.42 to Form 10-KSB filed on
May 15, 1998, File 0-22364
</TABLE>
19
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT FILING-STATUS-INCORPORATED
NUMBER EXHIBIT DESCRIPTION BY REFERENCE TO
- ------ -------------------
<S> <C> <C>
10.43 Secured Convertible Note for $50,000 Exhibit 10.43 to Form 10-KSB filed on
May 15, 1998, File 0-22364
10.44 Form of Registration Rights Agreement Exhibit 10.44 to Form 10-KSB filed on
May 15, 1998, File 0-22364
10.45 Consolidated Promissory Note for $750,000 Exhibit 10.45 to Form 10-KSB filed on
May 15, 1998, File 0-22364
10.46 Warrant in favor of Polynos Investments, N.V. Exhibit 10.45 to Form 10-KSB filed on
May 15, 1998, File 0-22364
10.47 Warrant in favor of East Jet, Inc. Exhibit 10.47 to Form 10-QSB filed on
May 20, 1998, File 0-22365
10.48 Warrant in favor of East Jet, Inc. Exhibit 10.48 to Form 10-QSB filed on
May 20, 1998, File 0-22365
27 Financial Data Schedule Filed herewith
99.1 Form of domestic distribution agreement Exhibit 99.3 to Amendment No. 1 to Form
SB-2 Registration Statement filed on
March 6, 1997, File No. 333-18071
99.2 Form of international distribution agreement Exhibit 99.4 to Amendment No. 1 to Form
SB-2 Registration Statement filed on
March 6, 1997, File No. 333-18071
</TABLE>
20
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 22, 1998. APOLLO INTERNATIONAL OF
DELAWARE, INC.
By: /s/ David W. Clarke
--------------------------------
David W. Clarke
President and Chief
Executive Officer
By: /s/ Stuart Frank
--------------------------------
Stuart Frank
Chief Financial Officer
21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 41,447
<SECURITIES> 0
<RECEIVABLES> 106,373
<ALLOWANCES> 0
<INVENTORY> 1,116,051
<CURRENT-ASSETS> 1,439,788
<PP&E> 289,454
<DEPRECIATION> (72,772)
<TOTAL-ASSETS> 4,314,992
<CURRENT-LIABILITIES> 2,281,414
<BONDS> 0
0
0
<COMMON> 29,717
<OTHER-SE> 866,701
<TOTAL-LIABILITY-AND-EQUITY> 4,314,992
<SALES> 108,964
<TOTAL-REVENUES> 108,964
<CGS> 93,202
<TOTAL-COSTS> 1,086,181
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 50,019
<INCOME-PRETAX> (1,120,438)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,120,438)
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<NET-INCOME> (1,120,438)
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