<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
General Form for Registration of Securities
of Small Business Issuers Under Section 12(b)
or 12(g) of the Securities Act of 1934
American Electric Automobile Company, Inc.
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(Name of Small Business Issuer in Its Charter)
Delaware 33-0727323
- ---------------------------- -----------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
Incorporation or Organization)
4190 Bonita Rd., Suite 105, Bonita, CA 91902
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(Address of Principal Executive Offices) (ZIP Code)
(619) 479-2809
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which to be
so Registered
Each Class is to be registered
___________________________
____________________________
Securities to be Registered under Section 12(g) of the Act:
Common Stock
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PART 1
ITEM 1 DESCRIPTION OF BUSINESS
HISTORY
American Electric Automobile Company (the "Company") was chartered as a
Delaware corporation on May 9, 1996. On June 15, 1996 the Company acquired
all of the outstanding stock of California Electric Automobile Co., Inc.,
incorporated in California on November 14, 1995, ("CEAC") from the
shareholders of CEAC in an exchange for stock in the Company. The exchange
was on the basis of one share of CEAC for ten shares of the Company for a
total of 1,050,000 shares of the Company's common stock. Of the 1,050,000
shares, 900,000 were held in escrow pending the exercise of CEAC's option to
purchase the assets and business of San Diego Electric automobile Company.
On October 17, 1996 the Company exercised its option to purchase the assets
and business of San Diego Electric Automobile Company ("SDEAC"), a sole
proprietorship. The purchase price was for 900,000 shares of AEAC's common
stock. The Company is currently comprised of American Electric Automobile
Company and its subsidiary, CEAC.
BUSINESS
A. OPERATION
The Company operates business through its subsidiary, California Electric
Automobile company; through a joint venture with China Electric Auto, Ltd.;
and through a joint venture company known as American Electric Automobile
Company (ASIA), Inc. ("EVASIA") EVASIA is owned jointly by the Company (45%)
and China Electric Auto, Ltd.(55%)
B. MISSION
The mission of the Company is to create profit through the following business
activities:
1. Sale of automobiles that have been remanufactured from gasoline to electric
power.
2. License its electric conversion technology to domestic and global
manufacturers of automobiles in exchange for royalty income.
3. Seek joint venture arrangements with manufacturers of components for
electric automobiles to design, develop and distribute these components.
C. PRESENT BUSINESS ACTIVITIES
1. The Company continues to promote its conversion business.
2. The Company markets components to individuals who wish to convert their own
automobiles.
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3. The Company is active in China through EVASIA.
D. COMPETITION
Electric passenger cars have been the latest electric vehicles to emerge on
the market. Many automobile manufacturers have developed prototypes. These
manufacturers realize the need for electric vehicles in the future to reduce
air pollution and operating costs.
Late in 1996 the electric automobile industry saw at least three multi-
national automobile manufacturers introduce their first production model.
General Motors, Ford and Toyota now have new electric automobiles in showrooms
in California and other states. Nissan currently has an electric model
available in Japan.
All of the new vehicles are priced at proximately $34,000, but are normally
only available for lease. The company's remanufactured vehicles will sell at
much lower prices and are increasingly widely accepted. The emergence of the
Hybrid-Electric concept that includes an on-board gasoline powered
charger will dramatically improve the acceptance of electric passenger
vehicles. Honda and several other major manufactures have announced these
"parallel EVs". These are basicly gasoline powered automobiles with an
electric motor boost. Mileage estimates published are approximately 70 miles
per gallon.
Currently other converters of new and used automobiles include:
California Electric Cars of Seaside, CA
Electric Vehicles of America, Inc. of Maynard, MA
Electric Vehicles, Inc. of Mountain View, CA
Elfa Automotive Company of Jamestown, NY
Green Motorworks of North Hollywood, CA
Kaylor Energy Products of Boulder Creek, CA
Mike's Auto Care of San Mateo, CA
Specialty Vehicle Manufacturing Corp., Downey, CA
Solectria, Wilmington, MA
Sun Toys of Santa Cruz, CA
Suntera of Honokaa, Hawaii
TMD Worldwide Conversions of Troy, MI
E. MARKETING
Initial Marketing Goals:
1. Develop name recognition - maximize publicity with press releases, display
advertising to target markets, articles, interviews, demos, contests, auto
show booths, etc.
2. Build backlog of orders for Company's principal remanufactured models
3. Make available custom design and fabrication for the special engineered
electric automobile based on customer specifications.
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4. Develop a new 'glider' from one or more new auto manufacturers.The Company
plans to establish a dealership in an auto park such as the National City Mile
of Cars or the Chula Vista Main Street Auto Park or possibly in downtown
San Diego. Initially an arrangement with an existing automobile dealer will be
sought. Partnering sales efforts, floor space, etc. will reduce the need for
dedicated early investment in facilities.
F. CHINA JOINT VENTURE COMPANY
On February 20, 1997 the Company formed a California corporation called
American Electric Automobile Company (ASIA), Inc. This Company is a join
venture between China Electric Automobile, Ltd., a Hong Kong company,
(55% owner) and the Company (45% owners). The purpose of the joint venture is
to promote electric automobiles in Asia. The Chair of the Company, Edward F.
Myers, is the President of EVASIA.
On February 25, 1997 EVASIA signed a contract with Guangdong Vick Wei EV Co.,
Ltd. for the joint production of electric cars in Nanhai City, China. The
contract calls for the modification of present gasoline car production lines
to electric. The contract also calls for EVASIA to be a 30% joint venture
partner in these electric auto production lines. On June 5, 1998 the joint
venture completed its first prototype. This automobile has completed a years'
testing at the new China electric automobile test center in Santou, China.
The automobile, an SUV style, in July of 1999 successfully completed a years'
testing and has been licensed for use on the roads in China.
ITEM 2: MANAGEMENTS' DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The Company's business continues to be the design and conversion of
automobiles from gasoline to electric power. The company completed two
conversions in 1999. The Company continues to work through EV ASIA with its
conversions in China. The Company's conversion of an SUV model in China has
successfully completed a year of tests in Shantow, China and is now licensed
for use on the roads in China.
RESULTS OF OPERATIONS
Fiscal 1998 versus Fiscal 1997
During 1998 the Company had revenues of $25,047 compared to $36,341 for 1997.
The reduced revenues may be due to a less aggressive marketing policy in
regard toparticipation in environmental shows.
During 1998 the Company incurred $45,701 in Operating Expenses compared to
$139,809 in 1997. The decrease was mainly due to the Company's effort to
reduce reliance on consulting and other G & A expenses. In 1998 the Company
wrote down the value of an investment in China Electric Automobile, Ltd.
by $18,750.
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The Company recorded a loss of $54,404 in 1998 or $0.0191 per common share
compared to a loss of $142,622 in 1997 or $0.06 per share, a decrease of $0.04
per share or 66%.
First eleven Months of 1999 versus First Eleven Months of 1998
During this period in 1999 the Company had revenues of $3,500 compared to
$22,960 for the same period of 1998. During 1999 the Company lost its
principle marketing personnel. The Company was also not able to attend as many
trade shows. As of early 2000 the Company is just starting to rebuild its
marketing ability.
During this period in 1999 the Company had $44,601 in Operating Expenses
compared to $41,892 in the same period in 1998.
The Company recorded a loss for this eleven-month period in 1999 of $19,596
compared to $49,870 in 1998. The Company's loss per common share for the
eleven month period in 1999 was 40.01 per share compared to $0.02 per share in
1998, for a decreased loss of 50% per share.
LIQUIDITY AND CAPITAL RESOURCES - THE COMPANY
The Company has continued to reduce its expenses and reduce its annual loss.
The Company now feels that it is in a position to strongly increase marketing
and the expansion of business and revenues. The Company continues to seek
additional financing through the offering and sale of the Company's
securities. The Company has not received any indication that it will be
successful in these efforts.
ITEM 3: NATURE AND EXTENT OF ISSUER'S FACILITIES
Between 1996 and 1998 the Company rented remanufacturing facilities in
Lakeside, CA from a previous officer and employee, Mr. Ron Larrea. Mr. Larrea
lost his lease on the property in the second quarter of 1999. The Company has
leased facilities at 1055 "G" street in San Diego, CA. for its business. The
Company has a six month lease with an option to renew on the same terms for
another six months. The property has 750 square feet of industrial space and
is leased from an unaffiliated party for $3,000/Mo. This space is sufficient
for the remanufacture of two automobiles at the same time. The property also
has a large fenced area sufficient for the parking and display of up to ten
automobiles. The Company deems this sufficient for its present level of
operation.
The Company maintains its executive and sales offices at 4190 Bonita Road,
Bonita, CA
Initially the marketing functions will be carried out by telephone. The
Company plans to lease display space in an auto park as soon as financially
feasible.
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ITEM 4: SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning the common stock
ownership as of January 31, 2000, of each officer, director and others known
to the Company as management or to be the beneficial owner of more than five
percent of the Company's common stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARE PERCENTAGE
OF BENEFICIAL OWNERSHIP OWNERSHIP
OWNER
,S. <C> <C>
Edward F. Myers 2,351,000 52.3
Chairman/Director
4190 Bonita Rd.
Bonita, CA 91902
Gary G. DeGano* 218,000 4.8
President/CEO/
Director
4190 Bonita Rd.
Bonita CA 91902
Betty N. Myers 2,351,000 52.3
Security/Director
4190 Bonita Rd.
Bonita CA 91902
Gary L. Jackson 76,000 1.7
Vice President
4190 Bonita Rd.
Bonita CA 91902
</TABLE>
Percentages based on 4,471,600 shares outstanding on February 14, 2000.
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ITEM 5: DIRECTORS, EXECUTIVE OFFICER, PROMOTERS AND
CONTROL PERSONS:
The names, ages, and respective positions of the current directors and
executive officers of the Company are:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Edward F. Myers 67 Chairman/CFO
Gary G. DeGano 56 President & CEO
Director
Gary L. Jackson 52 Vice President-
Research
Dr. Edward F. Myers has been Chairman, and a Director of the Company since May
8, 1996 and President of California Electric Automobile Company, Inc. since
November 19, 1995. Between June 1970 to September 1991 he was president of
Exten Ventures, Inc., a public company. From March 1983 to December, 1995, he
was president of EFM Venture Group, Inc., a financial syndication firm. EFM
was active between 1983 and 1985 and purchased commercial real estate for
resale to partnerships which were subsequently syndicated through broker-
dealers or their general partners. Dr. Myers was a director of William Lyon
College, San Diego from 1981-1985 and Treasurer and Trustee of Beacon
College, Washington, D.C., between 1981-1983. From 1980 to 1983 he was
President of Exchange Accommodation Corporation, a company active in real
estate exchanges, and was also Chairman of the Board of Impact International,
Inc. Prior to 1980 Dr. Myers was Special Assistant to the Vice
President, Cubic Corporation; Director of Engineering, Swan Electronics, a
subsidiary of Cubic Corp; President of EFM Financial, Inc,; Director and
Chairman of the Executive Committee of Microdyne Corporation; Director of
European Operations of Informatics, Inc.; Division Manager, Computer
Applications Inc.; manager of Applications research, Stromberg-Carlson,
Division of General Dynamics Corporation.
Mr. Gary G. DeGano was elected President, CEO and a Director of the Company on
August 1, 1997. Since March of 1997 he has also been President of Incremental
Data, Inc. Between 1995 and 1996 he was in charge of investor relations for
Exten Industries, Inc. a public company. From 1986 until 1994 he was President
and CEO of Sun Harbor Financial Resources Inc.,( a publicly traded NNOTC)
Company, President and CEO of Sun Harbor Mortgage, Inc. a full service
mortgage banking firm in which he was one of the founders. Mr. DeGano has
also been President of the following corporations; American Mortgage Network,
Sea Coast, Inc., Pacific Sun Escrow Company and Sun Coast Mortgage Company.
Dr. GARY L. JACKSON has been Vice President of Research since December 6,
1999. Between December 5, 1996 and December 6, 1999 he was a Director of the
Company. He received his Phd from the University of Arizona in 1977 in
Electrical Engineering with a Physics minor and since that time has been
employed by General Atomics, San Diego, CA. He has made numerous contributions
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to the international fusion effort, particularly in the areas of plasma wall
interactions and tokamak operations, including the commissioning of a
stationary 250 ton flywheel to provide pulsed power (up to 260 MVA) for
plasma experiments. Dr. Jackson has traveled extensively both in the U.S. and
abroad including extended collaborations in England, Japan and Germany. He is
the author of 16 refereed papers, 32 conference presentations, and a
contributing author to more than 100 papers in the field of fusion plasmas. He
has also contributed several articles on electric vehicles to the Society of
Automotive Engineers (SAE), Electric Vehicle Associations of Southern
California (EVAOSC) and San Diego (EVAOSD), and has written a column, "Nuts
and Volts" for the associations' newsletters. Dr. Jackson has been active in
the field of electric vehicles for 27 years beginning with the construction of
his first electric vehicle in 1969. Since then he has operated an electric
vehicle on an almost continuous basis and has collected extensive test data on
the operation and efficiency of electric vehicles. He is active in promoting
EV's, research in the EV field, and proving EV's in a racing environment. He
was a founding member and former vice-president of the local electric vehicle
chapter (EVAOSD) and has been interviewed for numerous newspaper stories and
TV appearances. He is also owner of Little Guy Racing and Consulting. In order
to prove the efficacy and durability of electric vehicles, Dr. Jackson has
led a team to the Solar Electric 500 at the Phoenix International Raceway for
the last 6 seasons. In the 1991 inaugural event he won third place overall,
and was the first finisher using only conventional lead-acid batteries. In
1993 the team of Little Guy Racing (LGR) placed in two events: first place in
the Stock B (commercial lead acid battery) division and third in the open
completion. Beginning in 1994, a new car was added to the LGR fleet, a 1989
Geo Metro and a quick charge capability was added to the Rabbit. The Geo Metro
has consistently placed 2nd or 3rd in the APS Electric race since that time.
The Geo Metro was also entered in the Los Angles Clean Air Rally, placing
fourth in 1994 and third in 1995 competing against all types of clean air
ehicles including natural gas. Dr. Jackson is committed to electric vehicles
and their implementation in America's transportation infrastructure.
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ITEM 6: EXECUTIVE COMPENSATION
Summary Compensation Table
</TABLE>
<TABLE>
<CAPTION>
Name & Year Salary Bonus Other Restricted Options LTIP All other
Principle ($) ($) annual stock SARs Payouts compen-
Position compen- awards ($) sation ($)
sation($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
E Myers 1996 -0- -0- -0- -0- -0- -0- -0-
Chairman/ 1997 -0- -0- -0- -0- 8333 -0- -0-
Director 1998 -0- -0- -0- -0- 8333 -0- -0-
1999 -0- -0- -0- -0- 8333 -0- -0-
G DeGano 1996 -0- -0- -0- -0- -0- -0- -0-
President/ 1997 -0- -0- -0- -0- 8333 -0- -0-
CEO/Dir 1998 -0- -0- -0- -0- 8333 -0- -0-
1999 -0- -0- -0- 1200 8333 -0- -0-
B Myers 1996 -0- -0- -0- -0- -0- -0- -0-
Secretary/ 1997 -0- -0- -0- -0- -0- -0- -0-
Director 1998 -0- -0- -0- -0- -0- -0- -0-
1999 -0- -0- -0- 5000 -0- -0- -0-
G Jackson 1996 -0- -0- -0- -0- -0- -0- -0-
Vice Pres. 1997 -0- -0- -0- -0- 8333 -0- -0-
1998 -0- -0- -0- -0- 8333 -0- -0-
1999 -0- -0- -0- 720 8333 -0- -0-
</TABLE>
Option/SAR Grants in Last Fiscal Year
(Individual Grants)
<TABLE>
<CAPTION>
Name Number of % of Total Exercise Expiration
Securities Options/SAR of Base Date
Underlying Granted to Price
Options/SAR Employees in ($/Sh)
Granted Fiscal Year
<S> <C> <C> <C> <C>
E Myers 100,000 33.3% $0.25 5/2002
Chairman/
Director
G DeGano 100,000 33.3% $0.25 5/2002
President/
CEO/Dir
G Jackson 100,000 33.3% $0.25 5/2002
Vice Pres./
Director
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year
And FY-End Option/SAR Values
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<TABLE>
<CAPTION>
Name Shares Value Number of Value of
Acquired Realized Unexercised Unexercised
On Exercise Securities In-the-Money
Underlying Options/SAR At FY-End
Options/SAR
At Year End
<S> <C> <C> <C> <C>
E Myers 0 0 33,333 N/A (See Note)
Chairman/
Director
G DeGano 0 0 33,333 N/A
President/
CEO/Dir
G Jackson 0 0 33,333 N/A
Vice Pres./
Director
ITEM 7: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
</TABLE>
On March 29, 1998 the Company sold 60,000 shares of common stock at $0.25 per
share to Mari Carmen Cedillo de Norby the wife of Director, Scott Norby. On
May 12, 1998 the company sold 28,000 shares of its common stock at $0.25 per
share for cash and exchanged 32,000 shares for an automobile valued at $8000
to Mari Carmen Cedillo de Norby, wife of Director Scott Norby.
On December 13, 1999 the Company issued 550,000 shares of the Company's common
stock to EFM Venture Group, Inc. for consulting services to the Company
between January 1, 1998 and December 13, 1999. EFM Venture Group, Inc. is
controlled by the Company's Chairman, Edward F. Myers. The Company's board
valued these shares at $0.02 per share.
On December 13, 1999 the Company issued 250,000 shares of its common stock to
Betty N. Myers for services to the Company between its organization in 1996
and December 13, 1999. Betty N. Myers is the wife of the Company's chairman,
Edward F. Myers. The board valued these shares at $0.02 per share.
On December 13, 1999 the Company issued 36,000 shares of its common stock to
Gary Jackson for services to the Company. Mr. Jackson is a past Director of
the Company. The board valued these shares at $0.02 per share.
On December 13, 1999 the Company issued 60,000 shares of its common stock to
Gary G. DeGano, the Company's president, in exchange for options which Mr.
DeGano held on 250,000 shares of the Company's common stock at $0.25 per
share. The Company valued these shares at $0.02 per share.
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ITEM 8: DESCRIPTION OF SECURITIES
The Company is authorized to issue 50,000,000 shares of Common Stock, par
value of $.0001 per share. As of January 20, 2000, the Company had outstanding
4,471,600 shares of Common Stock. There are 20,000,000 shares of preferred,
none of which is issued.
Special meetings of the Shareholders may be called by the Officers, Directors,
or upon request of holders of at least 10 Percent of the outstanding voting
shares.
Holders of common Stock are entitled to one vote at any meeting of the
shareholders for each Common share they own as of the record date fixed by the
Board of Directors.
At any meeting of Shareholders, a majority of the outstanding Common Shares of
the company entitled to vote, represented in person or by proxy, constitutes a
quorum. A vote of the majority of the Common Shares represented at a meeting
will govern, even if this is substantially less than a majority of the Common
Shares outstanding.
Subject to the rights of the preferred shareholders described below, holders
of shares are entitled to receive such dividends as may be declared by the
Board of Directors out of funds legally available therefore, and upon
liquidation are entitled to participate pro rata in a distribution of assets
available for such a distribution to shareholders. There are no conversion,
preemptive or other subscription rights or privileges with respect to any
share. Reference is made to the Certificate of Incorporation and Bylaws of the
Company as well as to the applicable statutes of the State of Delaware for a
more complete description of the rights and liabilities of holders of shares.
It should be noted that the Bylaws may be amended by the Board of Directors
without notice to the Shareholders.
The shares of the Company do not have cumulative voting rights, which means
that the holders of more than fifty percent of the Common shares voting for
election of directors may elect all the directors if they choose to do so. In
such event, the holders of the remaining shares aggregating less than fifty
percent will not be able to elect directors.
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PART II
ITEM 1 MARKET
From October 1998 the Company's common stock was traded on the OTC Bulletin
Board under the symbol "AEAM" During 1998 and the first quarter of 1999 there
were no quotes.
Quarter High Bid Low Bid
2nd quarter 1999 $0.25 $0.25
3rd quarter 1999 0.3125 0.01
Starting August 1, 1999 the Company's common stock was traded under the symbol
"AEAM" by the National Quotation Bureau, LLC.
Quarter High Closing Bid Low Closing Bid
3rd quarter 1999 $0.125 $0.10
4th quarter 1999 0.10 0.10
THE ABOVE QUOTATIONS REPRESENT PRICES BETWEEN DEALERS AND DO NOT INCLUDE
RETAIL MARKUP, MARKDOWN OR COMMISSION, AND MAY NOT REPRESENT ACTUAL
TRANSACTIONS
The Company had approximately 58 shareholders of record as of
February 14, 2000.
"Penny Stock"
The Securities and Exchange commission has adopted rule 15g-9 which
established the definition of a "penny stock", for the purposes relevant to
the Company, as any equity security that has a market price of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require: (1) that a broker or dealer approve a person's
account for transactions in penny stocks: and (ii) the broker or dealer
receive from the investor a written agreement to the transaction, setting
forth the identity and quantity of the penny stock to be purchased. In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must (i) obtain financial information and investment experience
objectives of the person; and (ii) make a reasonable determination that the
transactions in penny stocks are suitable for that person and the person has
sufficient knowledge and experience in financial matters to be capable of
evaluating the risks of transactions in penny stocks. The broker or dealer
must also deliver, prior to any transaction in a penny stock, a disclosure
schedule prepared by the Commission relating to the penny stock market,
which, in highlight form, (i) sets forth the basis on which the broker or
dealer made the suitability determination; and (ii) that the broker or dealer
received a signed, written agreement from the investor prior to the
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transaction. Disclosure also has to be made about the risks of investing in
penny stocks in both public offerings and in secondary trading and about the
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities and the rights and
remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on
the limited market in penny stocks.
ITEM 2: LEGAL PROCEEDINGS
None
ITEM 3: Changes in and disagreements with accounts
The Company has hired the firm of Weinberg & Company P.A.
to be the Company's auditors after Harlen and Boettger, LLP no longer did
audits for public companies.
There has been no disagreement with the Company's accountants.
ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES
Between October 21, 1996 and December 31, 1997 the Company sold 150,500 common
shares at $0.25 per share. The Company sold these shares under an exemption
from registration contained in Regulation D(504).
During 1997 the Company issued 100,000 common shares for radio time. These
shares were valued by the board of directors at $25,000. The Company also
issued 39,000 shares of common stock in exchange for outside consulting
services valued at $9,750 or $0.25 a share. The Company issued these shares
under an exemption from registration contained in Regulation D(504).
Between January 1, 1998 and December 31, 1998 the Company sold 8000 common
shares at $1.00 per share. The Company sold these shares under an exemption
from registration contained in Regulation D(504).
During 1998, the Company issued 32,000 restricted shares in exchange for a
1998 VW Beetle, which the Board of Directors valued at $8,000 based on the
transferer's historical cost basis. The company sold these shares under an
exemption from registration contained in Section 4(2) of the 1933 Securities
Act as amended (non- public offering).
Between April 22, 1999 and November 19, 1999 the Company sold 422,200 shares
of restricted common stock at $0.125 per share. The company sold these shares
under an exemption from registration contained in Section 4(2) of the 1933
Securities Act as amended (non- public offering).
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In July 1999 the Company issued 100,000 shares of its common stock to David
Schuil in return for preparing a business plan for the Company. The company
issued these shares under an exemption from registration contained in Section
4(2) of the 1933 Securities Act as amended (non- public offering).
During 1999 the Company issued 56,000 restricted common shares for services
valued by the board of directors at a total of $8,000. The Company issued
these shares under an exemption from registration contained in Section 4(2) of
the 1933 Securities Act as amended (non-public offering).
On December 13, 1999 the Company issued 550,000 shares of the Company's common
stock to EFM Venture Group, Inc. for consulting services to the Company
between January 1, 1998 and December 13, 1999. The Company issued these shares
under an exemption from registration contained in Section 4(2) of the 1933
Securities Act as amended (non-public offering).
On December 13, 1999 the Company issued 250,000 shares of its common stock to
Betty N. Myers for services to the Company between its organization in 1996
and December 13, 1999. The Company issued these shares under an exemption from
registration contained in Section 4(2) of the 1933 Securities Act as amended
(non-public offering).
On December 13, 1999 the Company issued 36,000 shares of its common stock to
Gary Jackson for services to the Company. The Company issued these shares
under an exemption from registration contained in Section 4(2) of the 1933
Securities Act as amended (non-public offering).
On December 13, 1999 the Company issued 60,000 shares of its common stock to
Gary G. DeGano, the Company's president, in exchange for options which Mr.
DeGano held on 250,000 shares of the Company's common stock at $0.25 per
share. The Company issued these shares under an exemption from registration
contained in Section 4(2) of the 1933 Securities Act as amended (non-public
offering).
All cash sales were made without underwriting discounts or commissions.
ITEM 5: INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation of the Company provides for indemnification
of Directors and Officers of the Company as follows:
ARTICLE IX
"The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permitted by the provisions of paragraph (7)
of subsection (b) of * 102 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented."
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ARTICLE X
"The corporation shall, to the fullest extent permitted by the provisions
of * 145 of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented indemnify any and all persons whom it shall
have power to indemnify under said section from and against any and all of the
expenses, liabilities, or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any Bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person."
PART F/S
A) Audited Financial Statements for the fiscal years ended 1997 and 1998
B) Unaudited Financial Statements for the period January 1, 1999 to
November 30, 1999.
PART III
b) 2.1 Plan of Acquisition of California Beach Couch
3.1(i) Articles of Incorporation
3.1(ii) By-Laws
4.1 Instruments defining the rights of holders
11.1 Computation of per share earnings 12/31/1997
11.2 Computation of per share earnings 11/30/1998
11.3 Computation of per share earnings 12/31/1998
11.4 Computation of per share earnings 11/30/1999
21.1 Subsidiaries of the registrant
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
A) Audited Financial Statements for the fiscal years ended 1997 and 1998
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
American Electric Automobile Company, Inc.:
We have audited the accompanying consolidated balance sheet of American
Electric Automobile Company, Inc. and subsidiary as of December 31, 1997 and
the related consolidated statements of operations, changes in stockholders'
equity (deficit), and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the consolidated financial
statements based on our audit.
Page 15
<PAGE>
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Electric Automobile Company, Inc. and subsidiary as of December 31, 1997 and
the results of their operations and their cash flows for the year then ended,
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note L to the
financial statements, the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
\\ Harlen & Bnettger \\
San Diego, California
June 5, 1998
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS May 31,1998 December 31,
(Unaudited) 1997
<S> <C> <C>
CURRENT ASSETS
Cash $ 24,876 $ 3,134
Inventory (Note B) 23,995 15,995
---------- -----------
TOTAL CURRENT ASSETS 48,871 19,129
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $9,330 and $6,413 (Note C) 25,670 28,587
INVESTMENTS (Note D) 38,613 40,500
---------- -----------
$ 113,154 $ 88,216
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable $ 9,721 $ 5,022
Notes payable - related party (Note J) 10,000 10,000
Accounts payable - related parties (Note F) 65,948 70,216
Accrued expenses (Note E) 29,275 21,787
Customer deposits 6,000 -
Income taxes payable 2,500 1,650
----------- ----------
TOTAL CURRENT LIABILITIES 123,444 108,675
----------- ----------
COMMITMENTS AND CONTINGENCIES (Notes K and L) - -
STOCKHOLDERS' DEFICIT
Preferred stock, $.0001 par value, 20,000,000
shares authorized, none issued and outstanding
at May 31, 1998 and December 31, 1997 - -
Common stock, $.0001 par value, 50,000,000
shares authorized, 2,964,000 and 2,756,000 shares
issued and outstanding at May 31, 1998 and
December 31, 1997, respectively (Note H) 297 276
Additional paid-in capital 195,124 137,145
Accumulated deficit (205,711) (157,880)
TOTAL STOCKHOLDERS' DEFICIT (10,290) (20,459)
$ 113,154 $ 88,216
========== ==========
</TABLE>
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the five
months ended For the year ended
May 31,1998 December 31, 1997
(Unaudited)
<S> <C> <C>
NET SALES $ 3,890 $ 36,341
COSTS AND EXPENSES
Cost of products sold 12,340 38,304
General and administrative expenses 15,350 75,618
Consulting - related party (Note J) 15,877 51,778
Rent - related party (Note J) 2,500 6,000
Depreciation 2,917 6,413
----------- ----------
TOTAL COSTS AND EXPENSES 48,984 178,113
----------- ----------
LOSS FROM OPERATIONS (45,094) (141,772)
OTHER EXPENSE
Losses from joint venture (1,887) -
----------- ----------
TOTAL OTHER EXPENSE (1,887) -
----------- ----------
LOSS BEFORE INCOME TAXES 46,981) (141,772)
PROVISION FOR INCOME TAXES (Note G) 850 850
---------- ----------
NET LOSS $ (47,831) $ (142,622)
=========== ===========
NET LOSS PER COMMON SHARE $ (.02) $ (.06)
=========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,795,120 2,570,416
</TABLE>
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid-in Accumulated Stockholders'
Shares Amount Capital Deficit Equity (Deficit)
<S> <C> <C> <C> <C> <C>
Balance,
12/31/1996 2,405,000 $241 $ 48,529 $ (15,258) $ 33,512
Issuance of
stock
for vehicle
(Note J) 100,000 10 24,990 - 25,000
Issuance of
stock for cash 112,000 11 28,889 - 28,900
Issuance of
stock for
services
(Note H) 139,000 14 34,737 - 34,751
Net loss - - - (142,622) (142,622)
Balance,
12/1997 2,756,000 $276 $137,145 $(157,880) $ (20,459)
Issuance of
stock for cash 176,000 18 49,982 - 50,000
Issuance of
stock for
vehicle
(Note H) 32,000 3 7,997 - 8,000
Net loss - - - (47,831) (47,831)
--------- ---- ------- --------- -----------
Balance,
3/31/1998
(Unaudited) 2,964,000 $297 $195,124 $(205,711) $ (10,290)
========= ==== ======== ========== ===========
</TABLE>
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the five For the
months ended year ended
May 31, 1998 December 31,1997
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(47,831) $(142,622)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation 2,917 6,413
Stock issued for advertising 25,000
Stock issued for services - 9,750
Write down of investment carrying value - 105
Loss on investment 1,887 -
Changes in operating assets
and liabilities:
(Increase) decrease in:
Inventory - 5,743
Increase (decrease) in:
Accounts payable 700 4,529
Accounts payable -
related parties (4,268) 59,056
Accrued expenses 7,487 3,288
Customer deposits 6,000 -
Income taxes payable 850 800
-------- ---------
NET CASH USED IN OPERATING ACTIVITIES (28,258) (27,938)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 50,000 28,900
NET CASH PROVIDED BY FINANCING ACTIVITIES 50,000 28,900
-------- ----------
NET INCREASE IN CASH 21,742 962
CASH AT BEGINNING OF PERIOD 3,134 2,172
-------- ----------
CASH AT END OF PERIOD $ 24,876 $ 3,134
========= ==========
</TABLE>
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Organization and Summary of Significant Accounting Policies:
Organization and Basis of Consolidation
American Electric Automobile Company, Inc. ("AEAC"), a Delaware corporation,
was incorporated on May 9, 1996. On June 15, 1996, AEAC acquired all of the
outstanding stock of California Electric Automobile Co., Inc., ("CEAC"), a
California corporation, incorporated on November 14, 1995 (together the
"Company"). AEAC exchanged 1,050,000 shares of its common stock, in a ratio
of ten to one, for all of the outstanding shares of CEAC. The acquisition
was accounted for as a purchase. The accompanying consolidated financial
statements include the accounts of the parent company, American Electric
Automobile Company, Inc. and its subsidiary, after elimination of significant
intercompany accounts and transactions.
On October 17, 1996, CEAC purchased San Diego Electric Automobile Company
(SDEAC) issuing 105,000 shares of CEAC's common stock, at which time, the
Company commenced operations. On this date, the operations of SDEAC
transferred to the Company. There were no assets or liabilities acquired as
a result of this transaction.
Nature of Operations
The Company has been formed around the nucleus of electric automobile
conversion technologies. The Company converts gasoline powered vehicles to
electric power. Some vehicles are designed with a "Hybrid"-Electric option,
an on-board, small gasoline powered generator that can recharge the car's
batteries, thus eliminating the fear of running out of power when away from a
recharging station.
The Company also has a relationship with a Chinese automobile manufacturer to
convert their present gasoline powered vehicles into electric cars and to
ultimately import these new vehicles for sale in North America (Note D).
Revenue Recognition
The Company recognizes revenue on each automobile conversion upon completion
of conversion. Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities, and reported amounts of revenues and
expenses. Actual results could differ from those estimates.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all
instruments purchased with an original maturity of three months or less to be
cash equivalents.
A. Organization and Summary of Significant Accounting Policies: (continued)
<PAGE>
Inventory
Inventory is valued at the lower of cost or market. Cost is determined under
the first-in, first out (FIFO) method.
Property and Equipment
Property and equipment is stated at cost and depreciated using the straight
line method over estimated useful lives of the assets which is five years.
The Company's policy is to evaluate the remaining lives of recoverability in
light of current conditions. It is at least reasonably possible that the
Company's estimates of lives and recoverability will change.
Advertising
Advertising costs are generally charged to operations in the period incurred
and totaled $0 and $25,647 for the period ended May 31, 1998 and the year
ended December 31, 1997, respectively.
Income Taxes
Income taxes are provided in accordance with Statement of Accounting
Standards No. 109 (FAS No. 109) "Accounting for Income Taxes". A deferred
tax asset or liability is recorded for temporary differences between
financial and tax reporting and net operating loss carry forwards. Deferred
tax expense (benefit) results from the net change during the year of deferred
tax assets and liabilities.
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 not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment.
Loss Per Share
Loss per share is provided in accordance with Statement of Financial
Accounting Standard No. 128 (FAS No. 128) "Earnings Per Share". Basic loss
per share is computed by dividing earnings available to common stockholders
by the weighted average number of common shares outstanding during the
period. Diluted loss per share would reflect per share amounts that would
have resulted if dilutive potential common stock had been converted to common
stock. Due to the anti dilutive effects of these common stock equivalents,
they were not included in the loss per share calculation. This results in
the same calculation for both basic and diluted loss per share.
A. Organization and Summary of Significant Accounting Policies: (continued)
Stock Options Plan
The Company has adopted a method of accounting for stock-based compensation
plans as required by Statement of Financial Accounting Standard No. 123
(FAS No. 123) "Accounting for Stock-Based Compensation". FAS No. 123 allows
for two methods of valuing stock-based compensation. The first method allows
for the continuing application of APB No. 25 in measuring stock-based
<PAGE>
compensation, while complying with the disclosure requirements of FAS No.
123. The second method uses an option pricing model to value stock
compensation and record as such within the financial statement. The Company
will continue to apply APB No. 25, while complying with FAS No. 123
disclosure requirements (see Note I).
Fair Value of Financial Instruments
The carrying value of cash, accounts payable and note payable approximates
fair value due to the short maturity of these instruments.
Investments
Investments include equity securities held per an agreement with an electric
vehicle company in Asia, and an interest in a joint venture in Asia (Note D).
These investments are accounted for differently based on the respective
ownership interests held.
The investment in equity securities is classified as available for sale and
represents a 5% ownership interest, and accordingly, is accounted for using
the cost method per FAS No. 115, Accounting for Certain Investments in Debt
and Equity Securities. This method requires recording the initial investment
at cost and adjusting the value at the financial statement date based on fair
market value of the investment. The investment in the joint venture
represents a 45% ownership interest of the outstanding stock is accounted for
using the equity method. This method involves increasing or decreasing the
investment by a proportionate share of the investee's net earnings or loss
each period.
B. Inventory:
Inventory at May 31, 1998 and December 31, 1997 are summarized as follows:
May 31, December 31,
1998 1997
(unaudited)
Work-in-process $ 8,000 $ -
Finished goods 15,995 15,995
-------- -----------
$ 23,995 $ 15,995
======== ===========
<PAGE>
C. Property and Equipment:
Property and equipment at May 31, 1998 and December 31, 1997 are summarized
as follows:
May 31 December 31,
1998 1997
(unaudited)
Electric vehicle $35,000 $35,000
Less accumulated depreciation (9,330) (6,413)
------- --------
Property and equipment, net $25,670 $28,587
======== ========
Depreciation expense was $2,917 and $6,413 for the period ended May 31, 1998
and the year ended December 31, 1997, respectively.
D. Investments:
Investments at May 31, 1998 and December 31, 1997 are as follows:
May 31, December 31,
1998 1997
(unaudited)
China Electric Auto $37,500 $37,500
Joint venture - Asia 1,113 3,000
------- -------
$38,613 $40,500
======= =======
On May 18, 1996, the Company entered into an agreement with China Electric
Automobile Company of Hong Kong, Ltd. (CEHK) in which each exchanged
approximately 5% of their outstanding common stock for the other company's
stock. The object of the relationship is the pursuit of business
opportunities and product development using the company's combined
resources.This agreement was undertaken with the intention of entering into
further business relationships as product development became more advanced.
The value of this investment was assigned based on the price of the Company's
stock at the date of the agreement. There has been no change in the value of
this investment since the acquisition date.
On February 12, 1997, the Company entered into an agreement with China
Electric Automobile Ltd. of Hong Kong (CEHK) to form a joint venture to
engage in various electric vehicle related businesses, including design,
production and trading in electric vehicles and related parts. The joint
venture, American Electric Automobile Company Asia, Inc. (AEAA), a California
corporation, has its common stock ownership interest divided fifty-five
percent to CEHK and forty-five percent to the Company.
<PAGE>
D. Investments: (continued)
To acquire their respective ownership interest in AEAA, both parties agreed
to contribute $3,000 as start up money. As of December 31, 1997, this amount
was still outstanding as no operations had yet begun. The joint venture
agreement states that CEHK was responsible for securing AEAA a profit
generating agreement with a third party, upon which they would be entitled to
an additional five-percent of the voting stock of the Company.
Effective in January 1998, AEAA began operations, incurring losses through
May 31, 1998 of which the Company must decrease the value of their investment
by 45% of the loss, or $1,887.
E. Accrued Expenses:
Accrued expenses as of May 31, 1998 and December 31, 1997 are as follows:
May 31, December 31,
1998 1997
(unaudited)
Officers salary $29,275 $18,787
Other - 3,000
------- -------
$29,275 $21,787
======= =======
F. Accounts Payable - Related Parties:
Accounts payable - related parties at May 31, 1998 and December 31, 1997 are
summarized as follows:
May 31, December 31,
1998 1997
(unaudited)
EFM Venture Group, Inc $59,256 $60,901
Ron Larrea 6,692 9,315
------- -------
$65,948 $70,216
======= =======
EFM Ventures Group, Inc. (EFM) is 1/3 owned and operated by the Company's
chairman, Edward F. Myers. The payable to EFM is made up of purchases and
expenses paid on behalf of the Company, in addition to fees outstanding from
a consulting agreement (Note K). It is the understanding of the Company
and EFM that these amounts will be paid once the Company begins substantial
operations and generates sufficient cash flow, which is expected to be in the
near term. A total of $51,000 of the payables to EFM are secured by a lein
against two vehicles owned by the Company.
The payable to Ron Larrea, an officer and director of the Company, is made up
primarily of rent expense for the operating subsidiary (Note J). The Company
intends on making payments to Ron Larrea upon the generation of sufficient
cash flows.
<PAGE>
G. Income Taxes:
The provision for income taxes for the five months ended May 31, 1998 and the
year ended December 31,
1997 consist of the $800 minimum California franchise tax for CEAC and a $50
Delaware state tax for
AEAC.
Provision for income taxes is summarized as follows:
May 31, December 31,
1998 1997
(Unaudited)
Current income taxes $850 $850
Deferred income taxes - -
---- ----
Provision for income taxes $850 $850
==== ====
As of May 31, 1998 and December 31, 1997, the net deferred tax asset recorded
and its approximate tax
effect consists of the following:
May 31, December 31,
1998 1997
(Unaudited)
Net operating loss carryforward $ 30,822 $ 23,648
Valuation allowance (30,822) (23,648)
Net deferred tax asset $ - $ -
The valuation allowance increased $7,174, and $21,394 for the period ended
May 31, 1998 and the year ended December 31, 1997.
As of May 31, 1998, the Company has state and federal net operating loss
carryforwards before any limitations which expire as follows:
Year Ending
December 31, State Federal
2001 $ 15,028 $ -
2002 142,622 -
2003 47,830 -
2011 15,028
2012 142,622
2013 47,830
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
H. Capital Stock:
The Company's Articles of Incorporation authorizes the issuance of 70,000,000
shares of capital stock; 50,000,000 shares are $0.0001 par value common stock
and 20,000,000 shares are $0.0001 par value preferred stock. The preferred
stock may be divided and issued in one or more series. As of May 31,
1998 and December 31, 1997, there were no shares of preferred stock issued or
outstanding.
Effective January 29, 1997, the Company initiated a private placement to
issue up to 200,000 shares of the Company's common stock at a price of $.25
per share. As of December 31, 1997, 112,000 shares had been sold as a result
of this offering.
Effective November 14, 1997, the Board of Directors authorized the issuance
of up to 250,000 shares of the Company's common stock at a price of $1.00 per
share to residents of New York. During 1997, no shares were issued as a
result of this offering. As of May 31, 1998, the Company had sold 8,000 of
shares, netting the Company $8,000 in additional capital.
During 1997, the Company issued 100,000 shares of its common stock, valued at
$25,000, in exchange for radio advertising to promote the stock offering
being undertaken in New York. The Company also issued 39,000 shares of
common stock in exchange for outside consulting services valued at $9,750 or
$.25 a share.
During 1998, the Company issued 32,000 shares in exchange for a 1998 VW
Beetle, which the Company has placed in inventory to be converted to electric
and sold. This vehicle was valued at $8,000 based on the transferer's
historical cost basis in the vehicle.
<PAGE>
I. Stock Options:
The Company has granted stock options pursuant to its incentive stock option
plan, each can be exercised to purchase one share of the Company's common
stock at the option price. Options that have been granted and are
outstanding generally expire 5 years from the date of grant and become fully
exercisable over a 3 year period at the rate of 33% immediately, and 33% each
additional year from the grant date. Options granted under the plan to date
have an exercise price of $.25 per share. Stock option transactions are
summarized as follows:
<TABLE>
<CAPTION>
Weighted Average
Stock Options Price Per Share
<S> <C> <C>
Outstanding, December 31, 1996 200,000 $.25
Granted 250,000 $.25
Exercised - Canceled -
-------
Outstanding, December 31, 1997 450,000 $.25
Granted 50,000 $.25
Exercised - Canceled -
Outstanding, May 31, 1998 500,000 $.25
Exercisable, December 31, 1997 216,658
Exercisable, May 31, 1998 233,345
</TABLE>
Had compensation costs for options granted been determined based on the fair
values at the grant dates, as prescribed in FAS 123, the Company's pro forma
net loss and pro forma net loss per share would have been as follows:
May 31, December 31,
1998 1997
(unaudited)
Net loss
As reported $(47,830) $(142,622)
Pro forma (51,997) (157,622)
Net loss per share
As reported $ (.02) $ (.06)
Pro forma (.02) (.06)
The above referenced calculations to estimate the fair values of the
operations were made using the Black-Scholes pricing model which required
making significant assumptions. These assumptions include the expected life
of the options, which was determined to be the vesting period, the expected
volatility, which was determined to be zero because the stock doesn't trade
on an open market, and the risk free interest rate, which was estimated using
the bond equivalent yield at December 31, 1997.
<PAGE>
J. Related Party Transactions:
In January 1997, the Company purchased a VW Cabriolet from EFM Venture Group,
Inc. (EFM) issuing a note payable for $10,000 and 100,000 shares of the
Company's common stock, valued at $.25 per share or $25,000. EFM had a
historical cost basis in the vehicle of $35,000, which transferred to the
Company. The note is non-interest bearing and was due and payable 12 months
from issuance, or January 28, 1998. As of May 31, 1998, no payment on the
note had occurred due to the Company's lack of cash flow. Both parties have
agreed to an extension of payment, but no formal agreement has been signed.
In January 1997, the Company entered into an agreement with EFM to provide
consulting services. This agreement had a term of twelve months and a rate
of $2,000 per month. As of May 31, 1998 and December 31, 1997, the Company
had payables outstanding under this agreement of $24,000 and $22,000,
respectively (Note F).
The Company rents its manufacturing/production facility from Ron Larrea, an
officer and director of the Company. The agreement calls for monthly
payments of $500 on a month to month basis. As of May 31, 1998 and December
31, 1997, the Company had payables outstanding under this agreement of $5,500
and $6,000, respectively (Note F).
K. Commitments:
As mentioned in Note J, the Company rents its manufacturing/production
facility from an officer of the Company. Rent expense related to this
agreement totaled $2,500 and $6,000 for the periods ended May 31, 1998 and
December 31, 1997, respectively.
As mentioned in Note J, the Company has a consulting agreement with EFM to
provide various services for the Company. This agreement expires January 31,
1998. Consulting expense related to this agreement was $2,000 and $22,000
for the periods ending May 31, 1998 and December 31, 1997, respectively.
The Company has an employment agreement with Ron Larrea, an officer and
director of the Company, to provide services related to the conversion of
electric vehicles through November 1998. The expense associated with the
agreement for the period ended May 31, 1998 and the year ended December 31,
1997 was $9,000 and $14,400, respectively. During 1997, the Company did not
make payments on this agreement beyond April 1997 due to a lack of adequate
cash flow, and therefore, accrued the balance payable of $20,400 and $14,400
at May 31, 1998 and December 31, 1997, respectively.
K. Commitments: (continued)
The Company entered into an employment agreement with Gary DeGano to become
the Company's President as of August 1, 1997. The agreement calls for
payments of $1,500 per month once the Company has completed a private
placement. In addition, the agreement grants 100,000 options to
purchase the Company's common stock at $.25 per share, and an additional
10,000 options at $.25 per share for each month of employment. Further, the
agreement states that within sixty days of raising $250,000 through the sale
of common stock, compensation will increase to $5,000 per month as a full
time officer and employee. The agreement also contains bonus clauses
<PAGE>
granting additional stock options if certain criteria are met. Once the
Company's common stock is publicly traded at $1.00 or more for more than 30
consecutive days, Mr. DeGano has the option to purchase 200,000shares of
common stock at $.25 per share. Additionally, once the Company becomes a
reporting company, Mr. DeGano can purchase an additional 100,000 shares at
$.25 per share, at which time, the monthly compensation will switch from
$5,000 to 5,000 shares of common stock. The expense relatedto this agreement
for the period ended May 31, 1998 and the year ended December 31, 1997 was
$4,388 and $4,387, respectively.
L. Going Concern:
As shown in the accompanying financial statements, the Company incurred net
losses of $47,830 and $142,622 for the period ended May 31, 1998 and the year
ended December 31, 1997, respectively. Additionally, current liabilities
exceeded current assets by $74,573 and $89,546 at May 31, 1998 and December
31, 1997, respectively. Those factors, as well as the uncertain conditions
the Company faces regarding generating cash flow, create an uncertainty about
the Company's ability to continue as a going concern. Management plans to
generate revenue and cash flow through ongoing operations and the joint
venture agreement (Note D). Additionally, management plans to generate
additional cash flow from private placement offerings and other common stock
sales. The ability of the Company to continue as a going concern is
dependent upon success of operations, the joint venture and common stock
offerings. The financial statements do not include any adjustments that
might be necessary if the Company is unable to continue as a going concern.
M. Supplemental Disclosure of Cash Flow Information:
Cash paid for interest and income taxes during the periods ended May 31, 1998
and the year ended December 31, 1997 was $0 and $0, respectively.
Non - cash investing and financing activities:
As mentioned in Note H the Company acquired a vehicle in exchange for stock
amounting to $8,000 during the five month period ended May 31, 1998.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
Independent Auditor's Report 2
Consolidated Financial Statements:
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statement of Changes in Stockholders' Equity (Deficit) 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7 - 16
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONTENTS
PAGE 1 - INDEPENDENT AUDITOR'S REPORT
PAGE 2 - CONSOLIDATED BALANCE SHEET AS OF
DECEMBER 31, 1998
PAGE 3 - CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
PAGE 4 - CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIENCY) FOR THE
YEAR ENDED DECEMBER 31, 1998
PAGE 5 - CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
PAGE 6 - 17 - NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
INDEPENDENT AUDITORS' REPORT 1998
To the Board of Directors of:
American Electric Automobile
Company, Inc. and Subsidiary
<PAGE>
We have audited the accompanying consolidated balance sheet of American
Electric Automobile Company, Inc. and Subsidiary as of December 31, 1998 and
the related consolidated statements of operations, changes in stockholders'
equity (deficiency) and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conduct our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatements. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the financial position of American
Electric Automobile Company, Inc. and Subsidiary as of December 31, 1998 and
the results of their operations and their cash flows for the year ended, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 15 to the
financial statements, the Company's operating losses and working capital
deficiency of $60,290 raise substantial doubt about its ability to continue as
a going concern. Management's plans in regards to these matters are also
described in Note 15. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
WEINBERG & COMPANY, P.A.
\\ Weinberg & Company PA \\
Boca Raton, Florida
November 3, 1999
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 753
Accounts receivable - related party 5,987
Payroll tax refund receivable 450
Inventory 32,194
-----------
Total Current Assets 39,384
-----------
PROPERTY AND EQUIPMENT, NET 24,677
-----------
OTHER ASSETS
Investments 18,750
-----------
Total Other Assets 18,750
-----------
TOTAL ASSETS $ 82,811
===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable $ 1,334
Income tax payable 2,400
Accrued expenses 17,429
Accounts payable - related parties 50,702
Notes payable - related party 27,809
-----------
Total Current Liabilities 99,674
-----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock, 20,000,000 shares authorized
par value $.0001, none issued or outstanding -
Common stock, authorized 50,000,000 shares,
par value $.0001, 2,964,000 shares issued
and outstanding 296
Additional paid-in capital 195,125
Accumulated deficit (212,284)
-----------
Total Stockholders' Equity (Deficiency) (16,863)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $ 82,811
===========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
NET REVENUES $ 25,047
COST OF REVENUES 9,657
-----------
GROSS MARGIN 15,390
-----------
OPERATING EXPENSES
Salaries and wages 8,295
Payroll taxes 1,531
Depreciation expense 7,772
Rent expense 6,000
Administration expense 4,388
Office supplies and expense 4,236
Legal and professional fees 3,814
Advertising and fundraising fees 2,855
Travel 2,093
Consulting fees 2,000
Telephone 1,314
Insurance and licenses 1,172
Repairs and maintenance 231
-----------
Total Operating Expenses 45,701
-----------
LOSS FROM OPERATIONS (30,311)
-----------
OTHER EXPENSES
Interest expense 1,069
Loss on investment 18,750
Loss of investee 3,474
-----------
Total Other Expenses 23,293
-----------
LOSS BEFORE PROVISION FOR
INCOME TAXES (53,604)
Provision for income taxes 800
-----------
NET LOSS $ (54,404)
===========
Net loss per common share -
basic and diluted $ ( .0191)
===========
Weighted average common shares
outstanding - basic and diluted 2,847,984
===========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 2,756,000 $ 275 $137,145 $(157,880) $(20,460)
Issuance of common shares
in exchange for vehicle 32,000 3 7,997 8,000
Issuance of common shares
for cash 176,000 18 49,983 - 50,001
Net loss for the year ended
December 31, 1998 - - - ( 54,404) (54,404)
--------- ------ ------- ---------- ----------
BALANCE, DECEMBER 31, 1998 2,964,000 $ 296 $195,125 $(212,284) $(16,863)
========= ====== ======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (54,404)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 7,772
Loss from investee 3,474
Loss on investment 18,750
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable ( 6,461)
Payroll tax refund receivable ( 450)
Inventory ( 8,199)
Increase (decrease) in:
Income taxes payable 750
Accounts payable - related parties ( 1,705)
Accounts payable and accrued expenses ( 8,047)
--------
Net cash used in operating activities (48,520)
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ( 3,862)
--------
Net cash used in investing activities ( 3,862)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 50,001
--------
Net cash provided by financing activities 50,001
--------
DECREASE IN CASH AND CASH EQUIVALENTS ( 2,381)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 3,134
--------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 753
============
Cash paid during year for:
Interest $ -
------------
Income taxes $ 50
============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In January 1998, the Company converted an account payable to a related party
To a note payable to the same related party in the amount of $17,809
(See Note 9)
In June 1998, the Company issued 32,000 common shares in exchange for a
vehicle, which the Company intends to convert to an electric automobile. The
shares were valued at $8,000, or $0.25 per share, based upon other shares
issued for cash during the same period. The cost of the vehicle is included
in inventory at December 31, 1998.
See accompanying notes to consolidated financial statements
5
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Description of Business
American Electric Automobile Company, Inc. ("AEAC"), a Delaware
corporation, was incorporated on May 9, 1996. On June 15, 1996, AEAC
acquired all of the outstanding stock of California Electric Automobile
Co., Inc. ("CEAC"), a California corporation, incorporated on November 14,
1995 (together the "Company"). AEAC exchanged 1,050,000 shares of its
common stock, in a ratio of ten to one, for all of the outstanding shares
of CEAC. The acquisition was accounted for using the purchase method of
accounting. Under this method, the assets were recorded at their fair
market value. The excess of the value of the stock issued over the fair
market value of the assets acquired of $95 was written off as goodwill
since it was considered de minimis.
On October 17, 1996, CEAC purchased the net assets of San Diego Electric
Automobile Company ("SDEAC") issuing 105,000 shares of CEAC's common
stock, at which time, the Company commenced operations. On this date, the
operations of SDEAC transferred to the Company. There were no assets or
liabilities recorded or acquired as a result of this transaction.
The Company's mission is to provide environmentally sensitive, quality and
cost effective electric automotive transportation domestically with
cooperative structuring of opportunities with global partners.
The Company also has a relationship with a Chinese automobile manufacturer
to convert their present gasoline powered vehicles into electric cars and
to ultimately import these new vehicles for sale in North America (See
Note 6).
(B) Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All significant intercompany balances
and transactions have been eliminated in consolidation.
(C) Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities.
This includes the disclosure of contingent assets and liabilities at the
date of the financial statements and revenues and expenses during the
reported period. Actual results could differ from those estimates.
(D) Cash and Cash Equivalents
For the purpose of the cash flows statement, the Company considers all
highly liquid investments with original maturities of three months or less
at time of purchase to be cash equivalents.
6
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(E) Inventory
Inventory is valued at the lower of cost or market. Cost is determined
under the first-in, first-out ("FIFO") method.
(F) Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Expenditures from maintenance and repairs are charged to expense as
incurred. Depreciation is provided using the double declining method over
the estimated useful life of the assets from 5 to 7 years.
(G) Investments
The Company accounts for investments in non-marketable equity securities
in accordance with Accounting Principles Board Opinion No. 18 ("APB 18")
and related interpretations. Under APB 18, investments in corporate joint
ventures and other common stock of less than 20% are generally accounted
for using the cost method while investments between 20% and 50% are
generally accounted for using the equity method.
Under the cost method, investments are recorded and reported at original
cost until they are partially or entirely disposed of or the original cost
value has been impaired. Under the equity method, the investment is
recorded at original cost and periodically increased (decreased) by the
investor's proportionate share of earnings (losses) of the investee and
decreased by all dividends received from the investor by the investee.
(H) Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts, which, at times,
may exceed federally insured limits. The Company has not experienced any
losses in such accounts and believes it is not exposed to any significant
credit risk or cash and cash equivalents.
(I) Revenue Recognition
The Company recognizes revenue on each automobile conversion when the
completed conversion is billed and delivered to the respective customer.
(J) New Accounting Pronouncements
The Financial Accounting Standards Board has recently issued several new
accounting pronouncements. Statement No. 130, "Reporting Comprehensive
Income" establishes standards for reporting and display of comprehensive
income and its components, and is effective for fiscal years beginning
after December 15,1997. Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information" establishes standards for the way
7
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(J) New Accounting Pronouncements - Cont'd
that public business enterprises report information about operating
segments in annual financial statements and requires that those
enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers, and is effective for financial statements for
periods beginning after December 15, 1997. Statement No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" revises
employers' disclosure requirements about pension and other postretirement
benefit plans and is effective for fiscal years beginning after December
15, 1997. Statement No. 133, "Accounting for Derivative Instruments and
Hedging Activities" as amended by Statement No. 137 establishes accounting
and reporting standards for derivative instruments and related contracts
and hedging activities. This statement is effective for all fiscal
quarters and fiscal years beginning after June 15, 2000. The Company
believes that its adoption of these pronouncements will not have a
material effect on the Company's financial position or results or
operations.
(K) Loss Per Share
Loss per share is provided in accordance with Statement of Financial
Accounting Standard No. 128 (FAS No. 128) "Earnings Per Share". Basic
loss per share is computed by dividing earnings available to common
stockholders by the weighted average number of common shares outstanding
during the period. Diluted loss per share would reflect per share amounts
that would have resulted if dilutive potential common stock had been
converted to common stock. Due to the anti-dilutive effects of these
common stock equivalents, they were not included in the loss per share
calculation. This results in the same calculation for both basic and
diluted loss per share.
(L) Stock Options
In accordance with Statement of Financial Accounting Standards No. 123
(FAS No. 123), the Company has elected to account for stock options issued
to employees under Accounting Principles Board Opinion No. 25 ("APB
Opinion No. 25") and related interpretations (See Note 10(C)).
(M) Income taxes
The Company accounts for income taxes under the Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("Statement No.109"). Under Statement No.
109, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
8
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONT'D
(M) Income taxes - Cont'd
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the enactment
date.
NOTE 2 - ACCOUNTS RECEIVABLE - RELATED PARTY
Accounts receivable were as follows at December 31, 1998:
Accounts receivable - AEAA (See Note 6) $ 5,987
Allowance for doubtful accounts -
-------
$ 5,987
=======
NOTE 3 - PAYROLL TAXES RECEIVABLE
During 1998 the Company overpaid $450 in payroll taxes for the fourth
quarter of 1998. Such amounts were recorded in payroll taxes receivable
at December 31, 1998.
NOTE 4 - INVENTORY
Inventory at December 31, 1998 is summarized as follows:
Work-in-process - vehicles $16,199
Finished goods - vehicle (See Note 8) 15,995
--------
$32,194
========
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 consisted of the following:
Electric demonstration vehicle
(See Notes 8 and 9) $ 38,862
Less accumulated depreciation (14,185)
---------
$ 24,677
=========
Depreciation expense for the year ended December 31, 1998 was $7,772.
9
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 6 - INVESTMENTS
Investments at December 31, 1998 are as follows:
China Electric Automobile Company
of Hong Kong, Ltd. $ 18,750
American Electric Automobile Company
(ASIA), Inc. -
---------
$ 18,750
=========
On May 18, 1996, the Company entered into an agreement with China Electric
Automobile Company of Hong Kong, Ltd. ("CEHK") in which each exchanged
approximately 5% of their outstanding common stock for the other company's
stock. The object of the relationship is the pursuit of business
opportunities and product development using the company's combined resources.
This agreement was undertaken with the intention of entering into further
business relationships as product development became more advanced. The value
of this investment was assigned based on the Company's cash offering price,
$0.25 per share, for its common stock near the date of the agreement. In
accordance with APB 18 and related interpretations, the investment was
originally recorded at $37,500, using the cost method, and has been adjusted
to its fair market value at December 31, 1998.
On February 12, 1997, the Company entered into an agreement with CEHK to form
a joint venture to engage in various electric vehicle related businesses,
including design, production and trading in electric vehicles and related
parts. The joint venture, American Electric Automobile Company (Asia), Inc.
("AEAA"), a California corporation, has its common stock ownership divided
fifty-five percent to CEHK and forty-five percent to the Company. The
Company's original contribution to the joint venture was $3,000. The joint
venture agreement states that CEHK is responsible for securing AEAA a profit
generating agreement with a third party, upon which they would be entitled to
an additional five-percent of the voting stock of the Company. In accordance
with APB 18 and related interpretations, the investment is accounted for under
the equity method. Effective January, 1998, AEAA began operations, incurring
losses through December 31, 1998 of which the Company must decrease the value
of their investment by 45% of the loss, or $3,474. The value of the
investment at December 31, 1997 was $3,000. Under the equity method, the
Company cannot reduce the value of the investment below zero, therefore, the
remaining $474 reduced the amount of the receivable due from AEAA
(See Note 2).
NOTE 7 - ACCRUED EXPENSES
Accrued expenses at December 31, 1998 consisted of the following:
Wages payable per employment agreements
(See Note 13(B)) $16,360
Interest payable on note (See Note 9) 1,069
--------
$17,429
========
10
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 8 - ACCOUNTS PAYABLE - RELATED PARTIES
Accounts payable - related parties at December 31, 1998 are summarized as
follows:
EFM Venture Group, Inc. $31,187
Payable to officer and director 12,415
Other directors 7,100
-------
$50,702
EFM Ventures Group, Inc. ("EFM") is one-third owned and operated by the
Company's chairman. The payable to EFM consists of purchases and expenses
paid on behalf of the Company, in addition to fees outstanding from a
consulting agreement (See Note 12). EFM has agreed to defer payment of
these amounts until the Company begins substantial operations and generates
sufficient cash flow, which management expects to be in the near term. The
payables to EFM are secured by a lien against two completed vehicles owned by
the Company, one of which is included in inventory and the other in property
and equipment (See Notes 4 and 5).
The $12,145 payable to an officer and director of the Company, consists
primarily of rent expense for the operating subsidiary (See Note 12). The
Company intends on making payments to the officer and director upon the
generation of sufficient cash flows.
NOTE 9 - NOTES PAYABLE - RELATED PARTY
In January 1997, the board approved the purchase of an automobile from a
corporation, which is one-third owned by a director of the Company. The
consideration for this purchase was 100,000 shares of the Company's common
stock, valued at $0.25 per share and a note for $10,000. There is no formal
agreement between the parties and the note is secured by the automobile. The
note was originally due and payable 12 months from issuance, or
January 28, 1998. As of December 31, 1998, there has been no payment on the
note and payment has been deferred until there is sufficient cash flow. The
acquired automobile was modified to an electric vehicle and is currently being
used as a demonstration vehicle (See Note 5).
During 1997, the corporation referred in the previous paragraph advanced the
Company funds and also paid for certain expenses on behalf of the Company. The
amount totaled $17,809 and was recorded as an accounts payable - related party
at December 31, 1997. In January 1998, the Company signed a promissory note
payable to the corporation for the $17,809. The amount is due on demand with
interest of 6% beginning January 1998. As of December 31, 1998, $1,069 in
accrued interest is included in accrued expenses.
11
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 10 - STOCKHOLDERS' EQUITY (DEFICIENCY)
(A) Common Stock
The Company is authorized to issue 50,000,000 shares of common stock at
$.0001 par value. During May 1998 the Company issued 32,000 shares at
$0.25 per share, based upon prior issuances for cash, in exchange for an
automobile. The Company also issued 176,000 shares during 1998 for cash
proceeds of $50,001.
(B) Preferred Stock
The Company is authorized to issue 20,000,000 shares of preferred stock at
$.0001 par value, with such designations, preferences, limitations and
relative rights as may be determined by the Board of Directors. No
preferred stock has been issued as of December 31, 1998.
(C) Stock Options
The Company applies APB Opinion No. 25 and related interpretations in
accounting for stock options issued to employees. Accordingly, no
compensation cost has been recognized for options issued to employees as
of December 31, 1998. Had compensation cost for the Company's stock-based
compensation been determined on the fair value method at the grant dates
for awards, consistent with Statement of Accounting Standards No 123,
"Accounting for Stock Based Compensation" (Statement No. 123) the
Company's net loss for the year ended December 31, 1998 would have been
increased to the pro-forma amounts indicated below.
Net loss As reported ( 54,404)
Pro forma ( 63,225)
Net loss per share As reported ( .0191)
Pro forma ( .0222)
The effect of applying Statement No. 123 is not likely to be
representative of the effects on reported net loss for future years due
to, among other things, the effects of vesting.
The stock options term is five years from the grant date. Stock options
issued vest over a three-year period.
For financial statement disclosure purposes, the fair market value of each
stock option grant is estimated on the date of grant using the minimum
value method in accordance with Statement No. 123 using the following
weighted-average assumptions: expected dividend yield 0%, risk-free
interest rate of 6.0%, and expected term of three years.
A summary of the Company's Plan as of December 31, 1998 and changes during
the year is presented below:
12
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 10 - STOCKHOLDERS' EQUITY (DEFICIENCY) - CONT'D
(C) Stock Options - Cont'd
<TABLE>
<CAPTION>
Weighted-
Number of Average
Shares Exercise Price
<S> <C> <C>
Stock Options
Balance at beginning of period 340,000 $0.25
Granted 320,000 $0.25
Exercised - -
Forfeited - -
------- ------
Balance at end of period 660,000 $0.25
======= ======
Options exercisable at end
of period 400,000 $0.25
Weighted average fair value
of options granted during
the period $0.04
</TABLE>
The following table summarizes information about options outstanding at
December 31, 1998.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
<S> <C> <C> <C> <C> <C>
Weighted-
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at December Contractual Exercise At December Exercise
Price 31, 1998 Life Price 31, 1998 Price
----- -------- ---- ----- -------- -----
$ 0.25 660,000 Years 4.13 $ 0.25 400,000 $0.25
</TABLE>
Through the date of this report, outstanding stock options totaled
660,000.
NOTE 11 - INCOME TAXES
The provision for income taxes for the year ended December 31, 1998
consists of the $800 minimum California franchise tax for CEAC.
Provision for income taxes is summarized as follows:
Current income taxes $ 800
Deferred income taxes -
---------
$ 800
=========
The Company's tax expense differs from the "expected" tax expense
(benefit) for the year ended December 31, 1998 (computed by applying the
Federal corporate tax rate of 34 percent to loss before taxes as follows:
13
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 11 - INCOME TAXES - CONT'D
Computed "expected" tax (benefit) $(11,850)
State income tax 800
Change in valuation allowance 11,850
---------
$ 800
========
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1998 are
as follows:
Deferred tax assets:
Net operating loss carry-forward $ 31,808
---------
Total gross deferred tax assets 31,808
Less valuation allowance 31,808
---------
Net deferred tax asset $ -
=========
At January 1, 1998, the valuation allowance was $17,146. The net change
in the valuation allowance during the year ended December 31, 1998 was an
increase of $11,850. As of December 31, 1998, the Company has state and
federal net operating loss carryforwards before any limitations, which
expire as follows:
<TABLE>
<CAPTION>
Year Ending
December 31, State Federal
<S> <C> <C>
2001 $ 15,028 $ -
2002 142,622 -
2003 47,830 -
2004 54,404 -
2011 - 15,028
2012 - 142,622
2013 - 47,830
2018 - 54,404
</TABLE>
NOTE 12 - RELATED PARTIES
In January 1997, the Company entered into a consulting agreement with a
corporation that is one-third owned by a director of the Company. The
agreement had a twelve-month term at a rate of $2,000 per month. As of
December 31, 1998, the Company owed the corporation $24,000 under this
agreement (See Note 8).
The Company also purchased an automobile from the above corporation in
exchange for shares of the Company's stock (See Notes 9 and 10).
The Company rents its facility from an officer and director of the company.
The agreement calls for monthly payments of $500 on a month to month basis.
As of December 31, 1998, the Company owed the individual $12,000 under this
agreement (See Note 8).
14
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 13 - COMMITMENTS AND CONTINGENCIES
(A) Year 2000 Issue
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium ("year 2000") approaches. The
year 2000 problem is pervasive and complex as virtually every computer
operation will be affected in some way by the rollover of the two-digit
year to 00. The issue is whether computer systems will properly recognize
date-sensitive information when the year changes to 2000. Systems that do
not properly recognize such information could generate erroneous data or
cause a system to fail.
Although management believes that none of the Company's systems are
affected by this problem, the Company could be impacted by the failure of
other companies to timely correct their computer systems. The Company's
operations are dependent on the world wide telecommunications networks
including computer systems, telephone systems, and delivery systems. If
any of these systems become inoperational, the Company will be directly
and significantly affected. Management has not assessed the potential
effect on the Company's earnings.
(B) Employment Agreements
The Company entered into an employment agreement with an officer and
director of the Company to provide services related to the conversion of
electric vehicles through November 1998. The expense associated with the
agreement for the year ended December 31, 1998 was $6,570. The Company
did not make payments on this agreement due to a lack of adequate cash
flow and there was a remaining balance owed to the individual from 1997 of
$1,015. The total accrued balance due to the individual at December 31,
1998 was $7,585 (See Note 7).
The Company entered into an employment agreement with an individual to
become the Company's President as of August 1, 1997. The agreement calls
for payments of $1,500 per month for part-time services once the Company
has completed a private placement. In addition, the agreement grants
100,000 options to purchase the Company's common stock at $0.25 per share,
and an additional 10,000 options at $0.25 per share for each month of
employment. Further, the agreement states that within 60 days of raising
$250,000 through the sale of common stock, compensation will increase to
$5,000 per month as a full time officer and employee. The agreement also
contains bonus clauses granting additional stock options if certain
criteria are met. The expense related to this agreement for the year
ended December 31, 1998 was $4,388. The Company has not made any payments
on the employment agreement due to inadequate cash flow. The total
accrued balance for 1998 and 1997 payable to the individual at December
31, 1998 was $8,775 (See Note 7).
15
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 13 - COMMITMENTS AND CONTINGENCIES - CONT'D
(C) Operating Lease Agreement
As discussed in Note 12, the Company rents its facility from an officer of
the Company. The agreement calls for monthly payments of $500 on a month-
to-month basis.
NOTE 14 - SUBSEQUENT EVENTS
(A) Settlement Agreements
On July 23, 1999, the Company entered into a "Settlement and Mutual
Release Agreement" ("The Agreement") with an officer and director of the
Company. The Agreement was made in order to settle a dispute that arose
with respect to the Employment Agreement the Company had with the officer
and director (See Note 13(B)). The Agreement stipulates that the officer
and director place in escrow 850,000 of the 900,000 common shares that
were issued to him, limit his sale of the remaining shares to a maximum of
10,000 shares in any one calendar month, submit his resignation as an
officer and director, and return all the Company's equipment, drawings,
tools etc. In addition, the Agreement cancels the non-compete obligation
in the employment agreement. In exchange, the Company will either pay the
individual $20,000 representing $12,415 of accounts payable - related
party (See Note 8) and $7,585 of accrued wages (See Note 7) or arrange for
the purchase by third parties of the common stock placed in escrow.
Subsequent to the agreement date the common stock placed in escrow was
purchased by third parties. Accordingly no cash payment was made by the
Company and all of the Company's liabilities to the officer and director
were considered settled pursuant to the agreement.
On October 27, 1999, the Company entered into a "Settlement Agreement"
(the Settlement") with the President of the Company to settle and
compromise disputed claims between the Company and the individual. The
Settlement stipulates that the Company issue 48,000 shares of its common
stock at $0.125 per share to fully pay all amounts owed to said individual
at October 1, 1999 (See Note 13(B)).
(B) Offering Circular
On January 1, 1999, the Company issued an offering circular pursuant to an
exemption with the United States Securities and Exchange Commission
contained in Regulation D, Rule 504. The offering calls for 500,000 common
shares at an offering price of $1.00 per share with a minimum subscription
of $1,000. No shares have been issued pursuant to this offering circular
through the date of this report and the offering was cancelled.
(C) Consulting Agreement
In January 1999, the Company hired a consultant to prepare a professional
business plan in exchange for 100,000 shares of stock at $0.125 per share
16
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1998
NOTE 14 - SUBSEQUENT EVENTS - CONT'D
(C) Consulting Agreement - Cont'd
based upon the price of a concurrent offering (see Note 14(D)). The
Company recorded a consulting expense of $12,500 pursuant to SFAS 123.
The business plan was completed in June 1999 and the shares were issued to
the individual in July 1999 for services rendered.
(D) Share Offering
On January 18, 1999, the Board agreed to offer up to 500,000 shares of
common stock, pursuant to Section 4(2) of the Securities Act of 1933, as
amended, at a $0.125 per share offering price. As of the date of this
report, 418,600 shares have been issued under this offering.
NOTE 15 - GOING CONCERN
The Company's financial statements for the year ended December 31, 1998
have been prepared on a going concern basis which contemplates the
realization of assets and the settlement of liabilities and commitments in
the normal course of business. The Company incurred a net loss of $54,404
and has an accumulated deficit of $212,284 for the years ended December
31, 1998. The Company's working capital deficiency of $60,290 at December
31, 1998 may not enable it to meet such objectives as presently
structured.
In January 1999, the Board offered 500,000 shares of common stock at
$0.125 per share (See Note 14(D)). As of the date of this report, 418,600
shares have been purchased for net proceeds of approximately $52,550. In
addition, during 1999 the Company settled a portion of the current
liabilities owed to the President of the Company by issuing 48,000 shares
of common stock at $0.125 per share (See Note 14(A)).
The ability of the Company to continue as a going concern is dependent
upon the Company's ability to raise additional capital and implement its
business plan. Management's plans include a seeking an equity investment
in the sum of $1,000,000, which will be used to expand operations. The
expanded operations include establishment of the following: a San Diego
retail and manufacturing facilities, three retail/fleet dealers,
commencement of importation of Chinese sports utility vehicles, and an
inventory of vehicles. At the end of the initial period, estimated to be
12 months, an additional $2,000,000 will be sought. At that time the
Company will utilize the funds to expand inventory, product line, dealer
network, foreign markets, establish franchise manufacturers, and establish
strategic agreements with major automobile companies.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
17
<PAGE>
B) Unaudited Financial Statements for the period January 1, 1999 to
November 30, 1999.
American Electric Automobile Company, Inc. and Subsidiary
Consolidated Balance Sheet
<TABLE>
<CAPTION>
November 30, December 31
1999, 1998
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 2,716 $ 753
Accounts receivable - related party 6,887 5,987
Payroll tax refund receivable - 450
Receivables 1,363 -
Prepaid expenses 350 -
Inventory 42,451 32,194
----------- ---------
Total Current Assets 53,767 39,384
----------- ---------
Property and Equipment 25,494 24,677
----------- ---------
OTHER ASSETS
Investments 18,750 18,750
----------- ----------
Total Other Assets 18,750 18,750
----------- ---------
TOTAL ASSETS $ 98,011 $ 82,811
=========== ==========
CURRENT LIABILITIES
Accounts Payable $ 1,321 $ 1,334
Income Tax Payable 3,200 2,400
Accrued Expenses - 17,429
Accounts Payable-Related Parties 33,995 50,702
Notes Payable-Related Parties 18,878 27,809
----------- ----------
Total Current Liabilities 57,394 99,674
----------- ----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common Stock 354 296
Additional Paid in Capital 272,143 195,125
Accumulated Deficit (231,880) (212,284)
----------- -----------
Total Stockholders' Equity (Deficiency) 40,617 (16,863)
----------- ----------
Total Liabilities & Stockholders Equity $ 98,011 $ 82,811
=========== ============
</TABLE>
<PAGE>
American Electric Automobile Company, Inc. and Subsidiary
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Eleven Months Ended
November 30, November 30,
1999 1998
<S> <C> <C>
Net Revenues $ 3,500 $ 22,960
Cost of Revenues 1,670 8,852
--------- ----------
Gross Margin 1,830 14,108
--------- ----------
OPERATING EXPENSES
Salaries and wages - 7,604
Depreciation expense - 7,124
Rent expense 1,000 5,500
Other sales and administrative 43,601 21,664
--------- ---------
Total Operating Expenses 44,601 41,892
--------- ------
Loss from Operations $ (42,771) $ (27,784)
--------------- ---------
OTHER EXPENSES
Interest expense
1,531 8,295 $ - $ 980
Loss on investment - 17,188
Loss on investee - 3,185
Gain on debt forgiveness 23,975 -
--------------- --------------
Total Other Expenses 23,975 21,352
--------------- ---------------
Loss Before Provision for
Income Taxes (18,796) (49,136)
Provision for Income Taxes 800 733
-------------- --------------
Net Loss $ (19,596) $ (49,870)
-------------- --------
Net loss per share-basic $ 0.01 $ 0.02
and diluted
Weighted average-basic $ 3,013,890 $ 2,841,362
and diluted
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
American Electric Automobile Company, Inc. and Subsidiary
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Eleven Months Ended
November 30, November 30,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (19,596) $ (49,870)
Adjustments to Reconcile Net Loss to
Net Cash Flow
Gain on debt forgiven (23,975) -
Depreciation - 7,772
Loss from Investee - 3,474
Loss on Investment - 18,750
Professional Services 19,500
Changes in Assets & Liabilities
(Increase) decrease in:
Accounts Receivable - (5,962)
Payroll Tax Refund Receivable (1,813) (413)
Prepaids (350) -
Inventory (10,257) (5,516)
Increase (decrease) in:
Income Taxes Payable - -
Accounts Payable - related parties - (8,248)
Accounts Payable & Accrued Expenses (19,505) (7,388)
---------------- -----------------
Net Cash Used in Operating Activities $ (55,996) $ (47,401)
------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property & Equipment $ (817) $ (5,044)
------------ ------------
Net Cash Used in Investing Activities $ (817) $ (5,044)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from inssuance of common stock $ 58,776 $ 50,001
------------ ------------
Net Cash Provided by
Financing Activities $ 58,776 $ 50,001
------------ ------------
INCREASE/DECREASE IN CASH AND
CASH EQUIVALENTS $ 1,963 $ (2,444)
CASH & CASH EQUIVALENTS-BEG OF YEAR $ 753 $ 3,134
----------- -----------
CASH & CASH EQUIVALENTS-END OF YEAR $ 753 $ 690
- ------------------------------------------============ ============
Cash Paid During Year for:
Interest - -
============ ============
Income Taxes - 50
============ ============
</TABLE>
<PAGE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
In January 1998, the Company converted an account payable to a related party
to a note payable to the same related party in the amount of $17,809.
In June 1998, the Company issued 32,000 common shares in exchange for a
vehicle,which the Company intends to convert to an electric automobile. The
shares werevalued at $8,000, or $0.25 per share, based upon other shares
issued for cash during the same period. The cost of the vehicle is included
in inventory at December 31, 1998.
See accompanying notes to consolidated financial statements
American Electric Automobile Company, Inc. and Subsidiary
Notes to Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been repared
in accordance with generally accepted accounting principles, and the rules and
regulations of the Securities and Exchange Commission for interim financial
information. Accordingly, they do not include all the information and
footnotes necessary for the comprehensive presentation of financial position
and results of operations.
It is management's opinion, however that all material adjustments (consisting
of normal recurring adjustments) have been made which are necessary for the
fair financial statements presentation. The results for the interim period
are not necessary indicative of the results to be expected for the year.
For further information, refer to the consolidated financial statements and
footnotes included in the company's Form 10-SB for the year ended
December 31, 1998.
NOTE 2 - STOCKHOLDERS' EQUITY
During the eleven months ended November 30, 1999, the Company issued 418,600
shares of common stock for $58,776 cash. In addition, 48,000 shares of common
stock, valued at $4,800 based on the quoted trading price of the common stock,
were issued in exchange for $8,775 of debt to an unrelated party. A gain on
the extinquishment of debt was recorded in the amount of $3,975 for the
difference between the fair market value and the actual liability. The
Company issued 108,000 shares of common stock for services valued at $13,500
based upon the quoted trading price of the common stock on the grant date.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Company has duly caused this disclosure statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC.
Dated: 2/14/2000
\\GARY G. DeGANO\\
President
<PAGE>
b. 2.1 Plan of Acquisition
AGREEMENT OF REORGANIZATION
By and Between
American Electric Automobile Company, INC.
A Delaware Corporation,
and
EFM Venture Group and Ronald Larrea,
As SHAREHOLDERS
and
CALIFORNIA ELECTRIC AUTOMOBILE COMPANY, INC.
A California Corporation
<PAGE>
AGREEMENT OF REORGANIZATION
THIS AGREEMENT is made effective June 15, 1996, at San Diego, California, by
and between AMERICAN ELECTRIC AUTOMOBILE COMPANY INC., a Delaware Corporation
(hereinafter referred to as "American Electric Automobile Company"), Ronald
Larrea, EFM Venture Group (hereinafter collectively referred to as
"SHAREHOLDERS"), and CALIFORNIA ELECTRIC AUTOMOBILE COMPANY, INC. a California
Corporation (hereinafter referred to as the "CORPORATION").
WHEREAS, the SHAREHOLDERS have represented that they own all of the
outstanding stock of the CORPORATION, and
WHEREAS, American Electric Automobile Company desires to acquire from the
SHAREHOLDERS and the SHAREHOLDERS desire to exchange stock with American
Electric Automobile, 100% of the outstanding stock of the CORPORATION ("the
shares"), and
WHEREAS, the CORPORATION desires that this transaction be consummated.
NOW, THEREFORE, in consideration of the mutual covenants, promises,
conditions, agreements, representations and warranties contained in this
Agreement, setting aside all previous agreements both oral and written the
parties agree as follows:
1. PURCHASE AND SALE OF SHARES
1.1. The parties hereto adopt this Agreement as a Type B tax-free plan of
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code.
1.2. Subject to the terms and conditions set forth in this Agreement, on the
closing, SHAREHOLDERS will transfer and convey to American Electric Automobile
Company, 105,000 shares of common stock in the CORPORATION which represents
100% of the issued and outstanding shares of stock in the CORPORATION.
1.3. As consideration for the transfer of the shares by SHAREHOLDERS,
American Electric Automobile Company shall deliver at the closing,
certificates representing 1,050,000 shares of American Electric Automobile's
common stock.
1.4. The 1,050,000 shares of American Electric Automobile Company' common
stock shall be issued in the amount following each SHAREHOLDER'S name in
Schedule "A".
2. REPRESENTATIONS AND WARRANTIES OF THE PARTIES
2.1. The SHAREHOLDERS represent and warrant that the SHAREHOLDERS are owners,
beneficially and of record, of all the shares free and clear of liens,
encumbrances, security agreements, equities, options, claims charges, and
restrictions, other than any restriction set forth by the California
Commissioner of Corporations. SHAREHOLDERS have full power to transfer the
shares to American Electric Automobile Company without obtaining the consent
or approval of any other person, governmental authority or the Corporation.
<PAGE>
2.2. The SHAREHOLDERS and the CORPORATION to the best of their knowledge,
represent and warrant as ollows:
a. CORPORATION is a corporation duly organized validly existing, and in
good standing under the laws of California and has all necessary corporate
powers to own its properties and to operate its business as now owned and
operated by it.
b. The authorized capital stock of the CORPORATION consists of 1,000,000
shares of common stock, having no par value, of which 105,000 shares (the
shares) are issued and outstanding. All the shares are validly issued, fully
paid, and non-Assessable, and such shares have been so issued in full
compliance with all federal and state securities laws. There are no
outstanding subscriptions, options, rights, warrants, convertible securities,
or other agreements or commitments obligating the CORPORATION to issue or to
transfer from treasury any additional shares of its capital stock of any
class.
c. That there is no suit, action, arbitration, or legal administrative,
or other proceeding, to the best knowledge of CORPORATION; against or
effecting CORPORATION or any other business, assets, or financial condition.
d. The financial statements in Exhibit B have been prepared in accordance
with generally accepted accounting principles consistently followed by the
CORPORATION as of the respective dates of said financial statements, and the
results of its operation for the respective periods indicated.
e. That there has not been since the date of the attached financial
statements any material change in the financial condition, liabilities,
assets, business or prospects of the CORPORATION.
f. Since November 19, 1995, that within the times and in the manner
prescribed by law, the CORPORATION has filed all federal, state, and local tax
returns required by law and has paid all taxes assessments, and penalties due
and payable. There are not present disputes as to taxes of any nature payable
by the CORPORATION.
g.The CORPORATION is in possession of all premises leased to it from
others.
h. Neither the SHAREHOLDERS, nor any officer, director, or employee of
the CORPORATION, nor any spouse, child, or other relative of any of these
persons, owns, or has any interest, directly or indirectly, in any of the real
or personal property owned by or leased to the CORPORATION. That the
CORPORATION does not occupy any real property in violation of any law,
regulation, or decree.
i. The execution and delivery of this Agreement by the CORPORATION, and
the performance of its covenants and obligations under it, shall have been
duly authorized by all necessary corporate action, and the CORPORATION shall
have received copies of all resolutions pertaining to that authorization,
certified by the secretary of the CORPORATION.
<PAGE>
k. Each SHAREHOLDER is acquiring the stock of the CORPORATION as an
investment and not with a view to distribution, and each hereby consents that
the shares of the CORPORATION, may be legended to the effect that such shares
are not registered under the Securities Act of 1933.
l. The CORPORATION has given no options or other rights to purchase or
subscribe for any shares of stock of the CORPORATION in favor of any person,
firm or corporation. Stockholders do not have preemptive rights.
m. The CORPORATION has no assets or business other than those shown in
these financial statements.
n. The CORPORATION is not party to any employment agreements.
2.3 American Electric Automobile Company represents and warrants as follows:
a. American Electric Automobile Company is a corporation duly organized,
validly existing, and in good standing under the laws of Delaware and has all
necessary corporate powers to own its properties and to operate its business
as now owned and operated by it; and neither the ownership of its properties
nor the nature of its business requires American Electric Automobile Company
to be qualified in any jurisdiction other than the state of its incorporation.
b. The authorized capital stock of American Electric Automobile Company
consists of 70,000,000 shares, of which 50,000,000 shares are common stock,
having a par value of $0.0001 each, and 20,000,000 are preferred stock, having
a par value of $0.0001 each, 2,450,000 of which are issued fully paid, and
nonassessable, and such shares have been so issued full compliance with all
federal and state securities laws. There are no outstanding subscriptions,
options, rights, warrants, convertible securities, or other agreements or
commitments obligating American Electric Automobile Company to issue or to
transfer from treasury any class of stock.
c. The financial statements in Exhibit A have been prepared in
accordance with generally accepted accounting principles consistently followed
by American Electric Automobile Company throughout the periods indicated and
fairly present the financial position of American Electric Automobile Company
as of the respective dates of said financial Statements, and the results of
its operations for the respective periods indicated.
d. That there has not been since the date of the attached financial
statements any material change in the financial condition, liabilities,
assets, business or prospects of American Electric Automobile Company.
e. That American Electric Automobile Company does not have any debt,
iability, or obligation of any nature, whether accrued, absolute, contingent,
or otherwise, and whether due or to become due, that is not reflected in the
financial statements or set forth in Exhibit A to this Agreement, and that all
debts, liabilities, and obligations incurred after that date were incurred in
the ordinary course of business, and are usual and normal in amount both
individually and in the Agreement.
f. That the total liabilities on the part of American Electric Automobile
Company does not exceed the approximate amount of 1,000.00.
<PAGE>
g. That within the times and in the manner prescribed by law, American
Electric Automobile Company has filed all federal, state, and local tax
returns required by law and has paid all taxes, assessments, and penalties
which in American Electric Automobile Company's opinion are due and payable
and has made all filings required by all applicable state and federal laws.
h. That American Electric Automobile Company has good and marketable
title to all of its respective assets and interests in assets, whether real,
personal, mixed, tangible, and intangible, which constitute all the assets and
interests in assets that are used in the business of American Electric
Automobile Company. All these assets are free and clear of restrictions on or
conditions to transfer or assignment, and free and clear of mortgages, liens,
pledges, charges, encumbrances, equities, claims, easements, rights of way,
covenants, conditions or restrictions, except for (i) these disclosed in
American Electric Automobile Company financial statements in Exhibit A to this
Agreement; (ii) the lien of current taxes not yet due and payable; and (iii)
possible minor matters that in the aggregate, are not substantial in amount
and do not materially detract from or interfere with the present or intended
use of any of these assets, nor materially impair business operations. All
real property and tangible personal property of American Electric Automobile
Company is in good operating condition and repair, ordinary wear and
tearexcepted. American Electric Automobile Company is in possession of all
premises leased to it from others.
i. That there is no suit, action, arbitration, or legal administrative,
or other proceeding, or governmental investigation pending or, to the best
knowledge American Electric Automobile Company threatened, against or
affecting AmericanElectric Automobile Company, or any of its business, assets,
or financial condition.
j. The execution and delivery of this Agreement by American Electric
Automobile Company and the performance of its covenants and obligations under
it, shall have been duly authorized by all necessary corporate action, and
SHAREHOLDERS have received copies of all resolutions pertaining to that
authorization, certified by the secretary of American Electric Automobile
Company.
k. That they have had an opportunity to review the financial statements
in Exhibits B to this Agreement and based upon such financial statements they
have entered into this Agreement.
3. DOCUMENTATION, DELIVERY AND COOPERATION
3.1. The CORPORATION will furnish to American Electric Automobile Company for
its examination (i) copies of the Article of Incorporation and By-Laws of the
CORPORATION; (ii) the minute books of the CORPORATION containing all records
required to be set forth of all proceedings, consents, actions, and meetings
of the SHAREHOLDERS and Boards of Directors of the CORPORATION; (iii) all
permits, orders, and consents issued with Respect to corporation, or any
security, and all applications for such permits, orders, and consents; and
(iv) the stock transfer books of the CORPORATION setting forth all transfers
of any capital stock.
<PAGE>
3.2. At the closing, the SHAREHOLDERS shall deliver to American Electric
Automobile Company the following instruments, in form and substance
satisfactory to American Electric Automobile Company and its counsel:
a. A certificate or certificates representing the shares, registered in
the names of the SHAREHOLDERS, duly endorsed by the SHAREHOLDERS transfer or
accompanied by an assignment of the shares duly executed by the SHAREHOLDERS.
On submission of that certificate or certificates to the CORPORATION for
transfer, the CORPORATION shall issue to American Electric Automobile Company
a certificate representing the shares, registered in the name of American
Electric Automobile Company.
b. The stock books, stock ledgers, minute books, and corporate seals of
the CORPORATION, and
3.3. At the closing, American Electric Automobile Company shall deliver to
SHAREHOLDERS the following instruments and documents:
a. The share certificates as set forth in paragraph1.3.
3.4. All of the parties further agree that they will do all things necessary
and reasonable to accomplish and facilitate the transfer of the shares in
conformance with any and all governmental bodies and regulatory agencies, and
that they will sign and execute any and all documents necessary to bring about
and perfect the purposes of the Agreement.
4.1. The obligations of the SHAREHOLDERS hereunder are, at the option of the
SHAREHOLDERS, subject to the conditions that on or before the Closing:
a. The SHAREHOLDERS shall not have discovered any material error, or
misstatement or omission in the representations, and warranties made by
American Electric Automobile Company, herein, and all the terms and conditions
of this Agreement to be complied with and performed by American Electric
Automobile Company at or before the Closing shall have been complied with and
performed in all material respects.
b. The representations and warranties made by American Electric
Automobile Company in this Agreement shall be correct in all material respects
at and as of the Closing.
c. The Commissioner of Corporations of the State of California has
issued, if necessary, the appropriate permit or permits pursuant to the
California Corporations Code the qualification of the securities which are the
subject of this Agreement.
4.2. The obligations of American Electric Automobile Company hereunder are,
at the option of American Electric Automobile Company, subject to the
conditions that on or before the Closing:
a. American Electric Automobile-Company shall not have discovered any
material error, misstatement or omission in the presentations and warranties
made by the SHAREHOLDERS of the CORPORATION, and all the terms and conditions
of this Agreement to be complied with and performed by the SHAREHOLDERS and
the CORPORATION on or before the Closing shall have been complied with and
performed in all material respects.
<PAGE>
b. The representations and warranties made by the SHAREHOLDERS and the
CORPORATION in this Agreement shall be correct in all material respects at and
as of the Closing.
c. The Commissioner of Corporations of the State of California has, if
necessary, issued the appropriate permit or permits pursuant to the California
Corporations Code for the qualification of the securities which are the
subject of this Agreement.
4.3. The Closing under this Agreement shall take place at the law offices of
Carmine Bua, 3838 Camino Del Rio North Ste. 333, San Diego, CA 92108, or at
such place, time or date, as may be agreed upon by the parties.
This Agreement may be signed in one or more counterparts.
American Electric California Electric
Automobile Company, Inc Automobile Company, Inc.
(a Delaware Corporation) (a California Corporation)
\\ Edward F. Myers \\ \\ Edward F. Myers \\
STOCKHOLDERS
\\ Edward F. Myers \\
- --------------------------
EFM Venture Group
\\ Ronald Larrea \\
- --------------------------
Ronald Larrea
<PAGE>
Exhibit B
SELECTED FINANCIAL INFORMATION
SUMMARY BALANCE SHEET DATA: September 1, 1996
Current Assets:
Cash in Bank $ 200.00
Note Receivable $ 1,000.00
Electric Auto $ 35,000.00
Total Assets: $ 36,200.00
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Note on Electric Auto $ 35,000.00
Stockholder's Equity $ 200.00
Total Liabilites
& Stockholder's Equity $ 36,200.00
SUMMARY STATEMENT OF OPERATIONS DATA:
(for six months ending June 30, 96)
Total Income $ 0
Net Loss $ 0
Net Loss Per Share: $ 0
EXHIBIT A
SELECTED FINANCIAL INFORMATION
SUMMARY BALANCE SHEET DATA: September 1, 1996
Current Assets: $ 0.00
Other Assets: $ 0.00
Total Assets: $ 0.00
Total Liabilities: $ 0.00
Shareholders Equity $ 0.00
SUMMARY STATEMENT OF OPERATIONS DATA:
(for six months ending June 30, 96)
Total Income $ 0
Net Loss $ 0
Net Loss Per Share: $ 0
<PAGE>
Schedule A
Shareholders Stock Aquired by American Stock Issued
Electric Automobile Co. in Exchange
EFM Venture Group 10,000 shares 100,000 shares
Ronald Larrea 95,000 shares 950,000 shares
b. 3.(i) Articles of Incorporation
State of Delaware
Office of the Secretary of State
I, EDWARD j, FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A
TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "AMERICAN ELECTRIC
AUTOMOBILE COMPANY,
INC.", FILED IN THIS OFFICE ON THE NINTH DAY OF MAY, A.D. 1996, AT 9 O'CLOCK
A.M.
\\Edward J. Freel\\
Edward J. Freel, Secretary of State
2616646 8100 AUTHENTICATION: 7940383
981215147 DATE: 05-09-96
CERTIFICATE OF INCORPORATION
OF
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC.
--------------------------------------------------------
FIRST. The name of this corporation shall be:
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC.
SECOND. Its registered office in the State of Delaware is to be located at
1013 Centre Road, in the City of Wilmington, County of New Castle and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
<PAGE>
Seventy Million (70,000,000) shares of which Fifty Million (50,000,000) shares
with a par value of $.0001 pr share amounting to Five Thousand Dollars
($5,000.00) are Common Stock and Twenty Million (20,000,000) shares with a par
value of $.0001 per share amounting to Two Thousand Dollars ($2,000.00)
are Preferred Stock.
Subject to the provisions of Section 151 of the General Corporation Law of the
State of Delaware, authority is expressly granted to the Board of directors of
the corporation to issue the Preferred shares of the corporation, from time to
time, in one or more series and to fix the number of shares to e included in
each series, the distinctive serial designation, the rate or rates of
preferential cumulative, non-participating dividends payable in cash annually,
semi-annually, or quarterly, the times of payment of and the dates from which
such dividends shall be cumulative, the price or prices at which the same may
be redeemed, which shall be not less than the par value thereof, plus
arrearages, if any, the notice of redemption, the amount or terms of any
sinking or purchase fund, if any, for the purchase or redemption thereof,
provided such sinking fund is payable only out of funds legally available
therefor, the terms, conditions, rights, privileges, and other provisions, if
any, respecting the conversion of any or all series of Preferred shares into
Common shares, and the preferential amount or amounts which shall be paid to
the holders thereof in the event of a liquidation, dissolution, or winding up
of the corporation, whether voluntary or involuntary, which shall be not less
than par value thereof, plus arrearages, if any.
Each issued and outstanding Common share shall entitle the holder thereof to
full voting power. Except as any provisions of law may otherwise require, no
share of any series of Preferred shares shall entitle the holder thereof to
any voting power, to participate in any meeting of stockholders, or to have
notice of any meeting of stockholders.
FIFTH. The name and address of the incorporator shall be as follows:
Maryann Martone Corporation Service Company 1013 Centre Road Wilmington,
DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or repeal
the by-laws.
SEVENTH. No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
directors as a director. Notwithstanding the foregoing sentence, a director
shall be liable to the extend provided by applicable law, (i) for breach of
the director's duty of loyalty to the Corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the
Delaware General Corporation Law or (iv) for any transaction from which the
director derived an improper personal benefit. No amendment to or repeal of
this Article Seventh shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to
any acts or omissions of such director occurring prior to such amendment.
<PAGE>
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, has executed, signed and acknowledged this certificate of
incorporation this eighth day of May, A.D. 1996.
\\Maryann Martone\\
_________________
Incorporator
<PAGE>
BYLAWS
OF
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC.
( a Delaware corporation)
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Certificates representing stock in the
corporation shall be signed by, or in the name of, the corporation by the
Chairperson or Vice-Chairperson of the Board of Directors, if any, or by the
President or a Vice-President and by the Treasurer or an Assistant Treasurer
or the Secretary or an Assistant Secretary of the corporation. Any or all the
signatures on any such certificate may be a facsimile. In case any officer,
transfer agent, or registrar who has signed or whose facsimile signature has
been placed upon a certificate shall have ceased to be such officer, transfer
agent, or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if such person were such officer, transfer
agent, or registrar at the date of issue.
Whenever the corporation shall be authorized to issue more than one class of
stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock or uncertificated shares
in place of any certificate theretofore issued by it, alleged to have been
lost, stolen, or destroyed, and the Board of Directors may require the owner
of the lost, stolen, or destroyed certificate, or such owner's legal
representative, to give the corporation a bond sufficient to indemnify the
corporation against any claim that may be made against it on account of the
alleged loss, theft, or destruction of any such certificate or the issuance of
any such new certificate or uncertificated shares.
2. UNCERTIFICATED SHARES. Subject to any conditions imposed by the General
Corporation Law, the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
the stock of the corporation shall be uncertificated shares. Within a
<PAGE>
reasonable time after the issuance or transfer of any uncertificated shares,
the corporation shall send to the registered owner thereof any written notice
prescribed by the General Corporation Law.
3. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be
required to, issue fractions of a share. If the corporation does not issue
fractions of a share, it shall (1) arrange for the disposition of fractional
interests by those entitled thereto, (2) pay in cash the fair value of
fractions of a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in registered form
(either represented by a certificate or uncertificated) or bearer form
(represented by a certificate) which shall entitle the holder to receive a
full share upon the surrender of such scrip or warrants aggregating a full
share. A certificate for a fractional share or an uncertificated fractional
share shall, but scrip or warrants shall not unless otherwise provided
therein, entitle the holder to exercise voting rights, to receive dividends
thereon, and to participate in any of the assets of the corporation in the
event of liquidation. The Board of Directors may cause scrip or warrants to
be issued subject to the conditions that they shall become void if not
exchanged for certificates representing the full shares or uncertificated full
shares before a specified date, or subject to the conditions that the shares
for which scrip or warrants are exchangeable may be sold by the corporation
and the proceeds thereof distributed to the holders of scrip or warrants, or
subject to any other conditions which the Board of Directors may impose.
4. STOCK TRANSFERS. Upon compliance with provisions restricting the transfer
or registration of transfer of shares of stock, if any, transfers or
registration of transfers of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof,
or by the registered holder's attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the corporation or with
a transfer agent or a registrar, if any, and, in the case of shares
represented by certificates, on surrender of the certificate or certificates
for such shares of stock properly endorsed and the payment of all taxes due
thereon.
5. RECORD DATE FOR STOCKHOLDERS. In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, the Board of Directors may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Directors, and
which record date shall not be more than sixty nor less than ten days before
the date of such meeting. If no record date is fixed by the Board of
Directors, the record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting. In order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten days after the date upon which the resolution
<PAGE>
fixing the record date is adopted by the Board of Directors. If no record
date has been fixed by the Board of Directors, the record date for determining
the stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by the
General Corporation Law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the corporation by delivery to its registered office in the State of Delaware,
its principal place of business, or an officer or agent of the corporation
having custody of the book in which proceedings of meetings of stockholders
are recorded. Delivery made to the corporation's registered office shall be
by hand or by certified or registered mail, return receipt requested. If no
record date has been fixed by the Board of Directors and prior action by the
Board of Directors is required by the General Corporation Law, the record date
for determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action.
In order that the corporation may determine the stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights or the stockholders entitled to exercise any rights in respect of any
change, conversion, or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
6. MEANING OF CERTAIN TERMS. As used herein in respect of the right to
notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such
rights notwithstanding that the certificate of incorporation may provide
for more than one class or series of shares of stock, one or more of which are
limited or denied such rights thereunder; provided, however, that no such
right shall vest in the event of an increase or a decrease in the authorized
number of shares of stock of any class or series which is otherwise denied
voting rights under the provisions of the certificate of incorporation, except
as any provision of law may otherwise require.
7. STOCKHOLDER MEETINGS.
- - TIME. The annual meeting shall be held on the date and at the time fixed,
from time to time, by the directors, provided, that the first annual meeting
shall be held on a date within thirteen months after the organization of the
corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
<PAGE>
- - PLACE. Annual meetings and special meetings shall be held at such place,
within or without the State of Delaware, as the directors may, from time to
time, fix. Whenever the directors shall fail to fix such place, the meeting
shall be held at the registered office of the corporation in the State of
Delaware.
- - CALL. Annual meetings and special meetings may be called by the directors
or by any officer instructed by the directors to call the meeting.
- - NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given,
stating the place, date, and hour of the meeting and stating the place within
the city or other municipality or community at which the list of stockholders
of the corporation may be examined. The notice of an annual meeting shall
state that the meeting is called for the election of directors and for the
transaction of other business which may properly come before the meeting, and
shall (if any other action which could be taken at a special meeting is to be
taken at such annual meeting) state the purpose or purposes. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. The notice of any meeting shall also include, or be
accompanied by, any additional statements, information, or documents
prescribed by the General Corporation Law. Except as otherwise provided by
the General Corporation Law, a copy of the notice of any meeting shall be
given, personally or by mail, not less than ten days nor more than sixty days
before the date of the meeting, unless the lapse of the prescribed period of
time shall have been waived, and directed to each stockholder at such
stockholder's record address or at such other address which such stockholder
may have furnished by request in writing to the Secretary of the corporation.
Notice by mail shall be deemed to be given when deposited, with postage
thereon prepaid, in the United States Mail. If a meeting is adjourned to
another time, not more than thirty days hence, and/or to another place, and if
an announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the
directors, after adjournment, fix a new record date for the adjourned meeting.
Notice need not be given to any stockholder who submits a written waiver of
notice signed by such stockholder before or after the time stated therein.
Attendance of a stockholder at a meeting of stockholders shall constitute a
waiver of notice of such meeting, except when the stockholder attends the
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called
or convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any
written waiver of notice.
- - STOCKHOLDER LIST. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city or other municipality or community
where the meeting is to be held, which place shall be specified in the notice
of the meeting, or if not so specified, at the place where the meeting is to
be held. The list shall also be produced and kept at the time and place of
<PAGE>
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list
required by this section or the books of the corporation, or to vote at any
meeting of stockholders.
- - CONDUCT OF MEETING. Meetings of the stockholders shall be presided over by
one of the following officers in the order of seniority and if present and
acting - the Chairperson of the Board, if any, the Vice-Chairperson of the
Board, if any, the President, a Vice-President, or, if none of the foregoing
is in office and present and acting, by a chairperson to be chosen by the
stockholders. The Secretary of the corporation, or in such Secretary's
absence, an Assistant Secretary, shall act as secretary of every meeting, but
if neither the Secretary nor an Assistant Secretary is present the chairperson
of the meeting shall appoint a secretary of the meeting.
- - PROXY REPRESENTATION. Every stockholder may authorize another person or
persons to act for such stockholder by proxy in all matters in which a
stockholder is entitled to participate, whether by waiving notice of any
meeting, voting or participating at a meeting, or expressing consent or
dissent without a meeting. Every proxy must be signed by the stockholder or
by such stockholder's attorney-in-fact. No proxy shall be voted or acted upon
after three years from its date unless such proxy provides for a longer
period. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and, if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally.
- - INSPECTORS. The directors, in advance of any meeting, may, but need not,
appoint one or more inspectors of election to act at the meeting or any
adjournment thereof. If an inspector or inspectors are not appointed, the
person presiding at the meeting may, but need not, appoint one or more
inspectors. In case any person who may be appointed as an inspector fails to
appear or act, the vacancy may be filled by appointment made by the directors
in advance of the meeting or at the meeting by the person presiding thereat.
Each inspector, if any, before entering upon the discharge of duties of
inspector, shall take and sign an oath faithfully to execute the duties of
inspector at such meeting with strict impartiality and according to the best
of such inspector's ability. The inspectors, if any, shall determine the
number of shares of stock outstanding and the voting power of each, the shares
of stock represented at the meeting, the existence of a quorum, the validity
and effect of proxies, and shall receive votes, ballots, or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots, or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the person presiding at the
meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question, or matter determined by such inspector or
inspectors and execute a certificate of any fact found by such inspector or
inspectors. Except as may otherwise be required by subsection (e) of Section
231 of the General Corporation Law, the provisions of that Section shall not
apply to the corporation.
<PAGE>
- - QUORUM. The holders of a majority of the outstanding shares of stock shall
constitute a quorum at a meeting of stockholders for the transaction of any
business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
- - VOTING. Each share of stock shall entitle the holder thereof to one vote.
Directors shall be elected by a plurality of the votes of the shares present
in person or represented by proxy at the meeting and entitled to vote on the
election of directors. Any other action shall be authorized by a majority of
the votes cast except where the General Corporation Law prescribes a different
percentage of votes and/or a different exercise of voting power, and except as
may be otherwise prescribed by the provisions of the certificate of
incorporation and these Bylaws. In the election of directors, and for any
other action, voting need not be by ballot.
8. STOCKHOLDER ACTION WITHOUT MEETINGS. Except as any provision of the
General Corporation Law may otherwise require, any action required by the
General Corporation Law to be taken at any annual or special meeting of
stockholders, or any action which may be taken at any annual or special
meeting of stockholders, may be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent shall be given to
those stockholders who have not consented in writing. Action taken pursuant
to this paragraph shall be subject to the provisions of Section 228 of the
General Corporation Law.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITION. The business and affairs of the corporation
shall be managed by or under the direction of the Board of Directors of the
corporation. The Board of Directors shall have the authority to fix the
compensation of the members thereof. The use of the phrase "whole board"
herein refers to the total number of directors which the corporation would
have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder, a
citizen of the United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of 7 persons. Thereafter the
number of directors constituting the whole board shall be at least one.
Subject to the foregoing limitation and except for the first Board of
Directors, such number may be fixed from time to time by action of the
stockholders or of the directors, or, if the number is not fixed, the number
shall be 7 . The number of directors may be increased or decreased by
action of the stockholders or of the directors.
3. ELECTION AND TERM. The first Board of Directors, unless the members
thereof shall have been named in the certificate of incorporation, shall be
<PAGE>
elected by the incorporator or incorporators and shall hold office until the
first annual meeting of stockholders and until their successors are elected
and qualified or until their earlier resignation or removal. Any director may
resign at any time upon written notice to the corporation. Thereafter,
directors who are elected at an annual meeting of stockholders, and directors
who are elected in the interim to fill vacancies and newly created
directorships, shall hold office until the next annual meeting of stockholders
and until their successors are elected and qualified or until their earlier
resignation or removal. Except as the General Corporation Law may otherwise
require, in the interim between annual meetings of stockholders
or of special meetings of stockholders called for the election of directors
and/or for the removal of one or more directors and for the filling of any
vacancy in that connection, newly created directorships and any vacancies in
the Board of Directors, including unfilled vacancies resulting from the
removal of directors for cause or without cause, may be filled by the vote of
a majority of the remaining directors then in office, although less than a
quorum, or by the sole remaining director.
4. MEETINGS.
- - TIME. Meetings shall be held at such time as the Board shall fix, except
that the first meeting of a newly elected Board shall be held as soon after
its election as the directors may conveniently assemble.
- - PLACE. Meetings shall be held at such place within or without the State of
Delaware as shall be fixed by the Board.
- - CALL. No call shall be required for regular meetings for which the time and
place have been fixed. Special meetings may be called by or at the direction
of the Chairperson of the Board, if any, the Vice-Chairperson of the Board, if
any, of the President, or of a majority of the directors in office.
- - NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for
regular meetings for which the time and place have been fixed. Written, oral,
or any other mode of notice of the time and place shall be given for special
meetings in sufficient time for the convenient assembly of the directors
thereat. Notice need not be given to any director or to any member of a
committee of directors who submits a written waiver of notice signed by such
director or member before or after the time stated therein. Attendance of any
such person at a meeting shall constitute a waiver of notice of such meeting,
except when such person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
directors need be specified in any written waiver of notice.
- - QUORUM AND ACTION. A majority of the whole Board shall constitute a quorum
except when a vacancy or vacancies prevents such majority, whereupon a
majority of the directors in office shall constitute a quorum, provided, that
such majority shall constitute at least one-third of the whole Board. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as herein otherwise
provided, and except as otherwise provided by the General Corporation Law, the
vote of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board. The quorum and voting provisions
<PAGE>
herein stated shall not be construed as conflicting with any provisions of the
General Corporation Law and these Bylaws which govern a meeting of directors
held to fill vacancies and newly created directorships in the Board or action
of disinterested directors.
Any member or members of the Board of Directors or of any committee designated
by the Board, may participate in a meeting of the Board, or any such
committee, as the case may be, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
- - CHAIRPERSON OF THE MEETING. The Chairperson of the Board, if any and if
present and acting, shall preside at all meetings. Otherwise, the
Vice-Chairperson of the Board, if any and if present and acting, or the
President, if present and acting, or any other director chosen by the Board,
shall preside.
5. REMOVAL OF DIRECTORS. Except as may otherwise be provided by the General
Corporation Law, any director or the entire Board of Directors may be removed,
with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
6. COMMITTEES. The Board of Directors may designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The Board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting
of the committee. In the absence or disqualification of any member of any
such committee or committees, the member or members thereof present at any
meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the corporation with the exception of any power or authority the
delegation of which is prohibited by Section 141 of the General Corporation
Law, and may authorize the seal of the corporation to be affixed to all papers
which may require it.
7. WRITTEN ACTION. Any action required or permitted to be taken at any
meeting of the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board or committee, as the case may
be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
ARTICLE III
OFFICERS
The officers of the corporation shall consist of a President, a Secretary, a
Treasurer, and, if deemed necessary, expedient, or desirable by the Board of
Directors, a Chairperson of the Board, a Vice-Chairperson of the Board, an
Executive Vice-President, one or more other Vice-Presidents, one or more
<PAGE>
Assistant Secretaries, one or more Assistant Treasurers, and such other
Officers with such titles as the resolution of the Board of Directors choosing
them shall designate. Except as may otherwise be provided in the resolution
of the Board of Directors choosing such officer, no officer other than the
Chairperson or Vice-Chairperson of the Board, if any, need be a director. Any
number of offices may be held by the same person, as the directors may
determine.
Unless otherwise provided in the resolution choosing such officer, each
officer shall be chosen for a term which shall continue until the meeting of
the Board of Directors following the next annual meeting of stockholders and
until such officer's successor shall have been chosen and qualified.
All officers of the corporation shall have such authority and perform such
duties in the management and operation of the corporation as shall be
prescribed in the resolutions of the Board of Directors designating and
choosing such officers and prescribing their authority and duties, and shall
have such additional authority and duties as are incident to their office
except to the extent that such resolutions may be inconsistent therewith. The
Secretary or an Assistant Secretary of the corporation shall record all of the
proceedings of all meetings and actions in writing of stockholders, directors,
and committees of directors, and shall exercise such additional authority and
perform such additional duties as the Board shall assign to such Secretary or
Assistant Secretary. Any officer may be removed, with or without cause, by
the Board of Directors. Any vacancy in any office may be filled by the Board
of Directors.
ARTICLE IV
CORPORATE SEAL
The corporate seal shall be in such form as the Board of Directors shall
prescribe.
ARTICLE V
FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject to
change, by the Board of
Directors.
ARTICLE VI
CONTROL OVER BYLAWS
Subject to the provisions of the certificate of incorporation and the
provisions of the General Corporation Law, the power to amend, alter, or
repeal these Bylaws and to adopt new Bylaws may be exercised by the Board of
Directors or by the stockholders.
I HEREBY CERTIFY that the foregoing is a full, true, and correct copy of the
Bylaws of American Electric Automobile Company, Inc. , a Delaware corporation,
as in effect on the date hereof.
<PAGE>
Dated: June 1, 1996
\\ Betty N. Myers \\
_____________________________________
Betty N. Myers Secretary of
American Electric Automobile Company, Inc.
(SEAL)
b. 4.1 Instruments defining the rights of holders
(4) INSTRUMENT DEFINING THE RIGHTS OF STOCKHOLDERS
The only instrument are the Ariicles and Bylaws of the Company which are filed
as exhibits (b)(3)(i) and (B)(3iiII)
b) 11.1 Computation of per share earnings
American Electric Automobile Company, Inc.
Weighted Average Shares Outstanding
December 31, 1997
<TABLE>
<CAPTION>
Number of Months Weighted
Description Shares Outstanding Shares
<S> <C> <C> <C>
Beginning Balance 2,405,000 12 2,405,000
Stock for Vehicle 100,000 11 91,667
Stock for Cash 24,000 9 18,000
Stock for Services 9,000 7 5,250
Stock for Cash 1,000 7 583
Stock for Radio Time 100,000 4 38,333
Stock for Cash 34,900 2 5,817
Stock for Services 20,000 2 3,333
Stock for Services 10,000 1 833
Stock for Cash 25,000 1 2,033
Stock for Cash 27,100 2 4,517
--------- -- ----------
Total Shares 2,732,000 81 2,540,416
</TABLE>
Net Loss 142,622
Net Loss Per Share $ (142,622 / 2,540,416 = $ (0.056)
b) 11.2 Computation of per share earnings
American Electric Automobile Company, Inc.
Weighted Average Shares Outstanding
December 31, 1998
<TABLE>
<CAPTION>
Original Days
Date Issuance Cumulative Outstanding Total
<S> <C> <C> <C> <C>
12/31/97 2,756,000 2,756,000 31 85,436,000
01/31/98 1,000 2,757,000 11 30,327,000
02/11/98 5,000 2,762,000 46 127,052,000
03/29/98 60,000 2,822,000 2 5,644,000
03/31/98 2,000 2,824,000 79 223,096,000
06/18/98 60,000 2,884,000 145 418,180,000
11/10/98 80.000 2,964,000 51 150,909,000
11/30/98 0 0 0
2,964,000 365 1,103,514,000
365
---
Weighted Average Shares 2,847,984
---------
Net Loss (57,404.00)
---------
Net Loss Per Share (0.0191)
</TABLE>
b) 11.3 Computation of per share earnings
American Electric Automobile Company, Inc.
Weighted Average Shares Outstanding
November 30, 1998
<TABLE>
<CAPTION>
Original Days
Date Issuance Cumulative Outstanding Total
<S> <C> <C> <C> <C>
12/31/97 2,756,000 2,756,000 31 85,436,000
01/31/98 1,000 2,757,000 11 30,327,000
02/11/98 5,000 2,762,000 46 127,052,000
03/29/98 60,000 2,822,000 2 5,644,000
03/31/98 2,000 2,824,000 79 223,096,000
06/18/98 60,000 2,884,000 145 418,180,000
11/10/98 80.000 2,964,000 20 59,280,000
11/30/98 0 0 0
2,964,000 334 949,015,000
334
---
Weighted Average Shares 2,841,362
---------
Net Loss (49,870.00)
---------
Net Loss Per Share (0.0175)
</TABLE>
b) 11.4 Computation of per share earnings
American Electric Automobile Company, Inc.
Weighted Average Shares Outstanding
November 30, 1999
<TABLE>
<CAPTION>
Original Days
Date Issuance Cumulative Outstanding Total
<S> <C> <C> <C> <C>
12/31/98 2,964,000 2,964,000 305 904,020,000
11/01/99 574,600 3,538,600 29 102,619,400
11/30/99 0 0 0
3,538,600 334 1,006,639,400
334
---
Weighted Average Shares 3,013,890
---------
Net Loss (30,571.00)
---------
Net Loss Per Share (0.0101)
</TABLE>
b) 21.1 SUBSIDIARIES OF THE REGISTRAINT
The Company has one subsidiary, CALIFORNIA ELECTRIC AUTOMOBILE COMPANY, INC.,
which is incorporated in the State of California.
The Subsidiary does business under the name
"California Electric Automobile Company, Inc."
Page 1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
b) 27.1 Financial Data Schedule
THIS SCHEDULE CONTAINS SUMARY FINANCIAL INFORMATION EXTRACTED FRON THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AS OF AND FOR THE TWELVE MONTHS ENDING
DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIREETY BY FREFERENCE TO
FINANCIAL STATMENTS INCLUDED IN THIS FILING
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<PERIOD-TYPE> 12-MOS
<CASH> 3,134
<SECURITIES> 40,500
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 15,995
<CURRENT-ASSETS> 19,129
<PP&E> 35,000
<DEPRECIATION> 6,413
<TOTAL-ASSETS> 88,216
<CURRENT-LIABILITIES> 108,675
<BONDS> 0
0
0
<COMMON> 276
<OTHER-SE> 137,145
<TOTAL-LIABILITY-AND-EQUITY> 88,216
<SALES> 36,341
<TOTAL-REVENUES> 36,341
<CGS> 178,113
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (141,772)
<INCOME-TAX> 850
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (142,622)
<EPS-BASIC> (.06)
<EPS-DILUTED> 2,570,416
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
b) 27.2 Financial Data Schedule
THIS SCHEDULE CONTAINS SUMARY FINANCIAL INFORMATION EXTRACTED FRON THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AS OF AND FOR THE TWELVE MONTHS ENDING
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIREETY BY FREFERENCE TO
FINANCIAL STATMENTS INCLUDED IN THIS FILING
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<PERIOD-TYPE> 12-MOS
<CASH> 753
<SECURITIES> 18,750
<RECEIVABLES> 6,437
<ALLOWANCES> 0
<INVENTORY> 32,194
<CURRENT-ASSETS> 39,384
<PP&E> 38,862
<DEPRECIATION> 14,185
<TOTAL-ASSETS> 82,811
<CURRENT-LIABILITIES> 99,674
<BONDS> 0
0
0
<COMMON> 296
<OTHER-SE> 195,125
<TOTAL-LIABILITY-AND-EQUITY> 99,674
<SALES> 25,047
<TOTAL-REVENUES> 25,047
<CGS> 9,657
<TOTAL-COSTS> 45,710
<OTHER-EXPENSES> 23,293
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (53,604)
<INCOME-TAX> 800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (54,404)
<EPS-BASIC> (.0191)
<EPS-DILUTED> 2,847,984
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
b) 27.3 Financial Data Schedule
THIS SCHEDULE CONTAINS SUMARY FINANCIAL INFORMATION EXTRACTED FRON THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AS OF AND FOR THE TWELVE MONTHS ENDING
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIREETY BY FREFERENCE TO
FINANCIAL STATMENTS INCLUDED IN THIS FILING
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> NOV-30-1999
<PERIOD-TYPE> 11-mos
<CASH> 2,716
<SECURITIES> 8,250
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 42,451
<CURRENT-ASSETS> 53,767
<PP&E> 25,494
<DEPRECIATION> 0
<TOTAL-ASSETS> 98,011
<CURRENT-LIABILITIES> 57,394
<BONDS> 0
0
0
<COMMON> 354
<OTHER-SE> 272,143
<TOTAL-LIABILITY-AND-EQUITY> 98,011
<SALES> 3,500
<TOTAL-REVENUES> 3,500
<CGS> 1,670
<TOTAL-COSTS> 1,830
<OTHER-EXPENSES> 44,601
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (18,796)
<INCOME-TAX> 800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,596)
<EPS-BASIC> (.001)
<EPS-DILUTED> 3,013,890
</TABLE>
