<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB/A2
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.
------------------------------------------
(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
- -----------------------------------------------------------------------
(Address of Principal Executive Offices) (ZIP Code)
(619) 479-2809
----------------------------------------------------------------------
(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
PAGE 1
<PAGE>
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.
Page2
<PAGE>
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.
Page 3
<PAGE>
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 to participation 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.
Page 4
<PAGE>
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%.
Fiscal 1999 versus Fiscal 1998
During 1999 the Company had revenues of $3,500 compared to
$25,047 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 1999 the Company had $79,037 in Operating Expenses
compared to $45,701 in the same period in 1998.
The Company recorded a loss for the 1999 fiscal year of $85,898
compared to $54,404 in 1998. The Company's loss per common share for the
Fiscal year in 1999 was $0.12 per share compared to $0.02 per share in
1998.
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.
Page 5
<PAGE>
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.
Page 6
<PAGE>
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
Page 6
<PAGE>
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.
Page 8
<PAGE>
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
Page 9
<PAGE>
<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.
Page 10
<PAGE>
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.
Page 11
<PAGE>
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
1st quarter 2000 $1.05 $0.10
THE ABOVE QUOTATIONS REPRESENT PRICES BETWEEN DEALERS AND DO NOT INCLUDE
RETAIL MARKUP, MARKDOWN OR COMMISSION, AND MAY NOT REPRESENT ACTUAL
TRANSACTIONS
On March 20, 2000 the Company's shareholders voted to consolidate the common
shares on a one for three exchange.
The Company's "new" common stock was assigned a new CUSIP number and a new
trading symbol "AEAC". Trading of the "new" shares started on April 5, 2000.
The Company had approximately 62 shareholders of record as of
March 10, 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
Page 12
<PAGE>
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).
Page 13
<PAGE>
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).
On December 13, 1999 the Company's board of Directors approved an offering
of 3,000,000 common shares at a price of $0,125 per share. The Company filed
a Form D for a 504 offering on February 15, 2000. The sales were to be made
only to acredited investors residing in the states of, PA. MN and TX.
During February and March 2000, the Company issued 690,000 shares of its common
stock for cash at $0.125 per share.
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."
Page 14
<PAGE>
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 1998 and 1999
PART III
b) 2.1 Plan of Acquisition of California Electric Automobile
Company, Inc.*
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 12/31/1998*
11.2 Computation of per share earnings 12/31/1999
21.1 Subsidiaries of the registrant*
* Filed by reference to a Form 10SB filed on February 23, 2000.
A) Audited Financial Statements for the fiscal years ended 1998 and 1999
INDEPENDENT AUDITOR'S REPORT
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC.
AND SUBSIDIARY
CONTENTS
PAGE 1 INDEPENDENT AUDITORS' REPORT
PAGE 2 CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31,
1999
PAGE 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
YEARS ENDED DECEMBER 31, 1999 AND 1998
PAGE 4 CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY (DEFICIENCY) FOR THE YEARS
ENDED DECEMBER 31, 1999 AND 1998
PAGE 5 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE YEARS ENDED DECEMBER 31, 1999 AND 1998
PAGES 6 - 16 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
American Electric Automobile Company, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of American
Electric Automobile Company, Inc. and subsidiary as of December 31, 1999 and
the related consolidated statements of operations, changes in stockholders'
deficiency and cash flows for the years ended December 31, 1999 and 1998.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our 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, 1999, and
the results of their operations and their cash flows for the years ended
December 31, 1999 and 1998, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 13 to
the consolidated financial statements, the Company's continuing operating
losses and working capital deficiency of $58,055 raise substantial doubt about
its ability to continue as a going concern. Management's plans concerning his
matter are also described in Note 13. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
//WEINBERG & COMPANY, P.A.//
Boca Raton, Florida
March 28, 2000
1
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,941
Due from related party 7,212
Inventories 15,995
--------
TOTAL CURRENT ASSETS 25,148
--------
PROPERTY & EQUIPMENT - NET 35,593
--------
OTHER ASSETS
Investments 18,750
--------
TOTAL OTHER ASSETS 18,750
--------
TOTAL ASSETS $ 79,491
- ------------ ---------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 9,910
Income tax payable 4,340
Accrued expenses 2,138
Accounts payable - related parties 39,006
Notes payable - related party 27,809
---------
TOTAL CURRENT LIABILITIES 83,203
---------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.0001 par value,
20,000,000 shares authorized,
none issued and outstanding -
Common stock, $.0001 par value,
50,000,000 shares authorized,
3,575,600 shares issued and outstanding 357
Additional paid-in capital 298,113
Accumulated deficit (298,182)
---------
288
Less subscription receivable (4,000)
---------
TOTAL STOCKHOLDERS' DEFICIENCY (3,712)
---------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 79,491
- ---------------------------------------------- ----------
See accompanying notes to consolidated financial statements
2
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
-------- --------
NET REVENUES $ 3,500 $ 25,047
COST OF REVENUES (7,352) 9,657
-------- ---------
GROSS MARGIN (3,852) 15,390
--------- ---------
OPERATING EXPENSES
Consulting 16,000 2,000
Legal and professional fees 37,440 3,814
General and administrative 25,597 39,887
-------- --------
TOTAL OPERATING EXPENSES 79,037 45,701
-------- --------
LOSS FROM OPERATIONS (82,889) (30,311)
OTHER EXPENSES
Interest expense 1,069 1,069
Loss on investment - 18,750
Loss of investee - 3,474
--------- --------
TOTAL OTHER EXPENSES 1,069 23,293
LOSS BEFORE INCOME TAXES (83,958) (53,604)
FEDERAL AND STATE INCOME TAXES 1,940 800
-------- ---------
NET LOSS $(85,898) $(54,404)
========= =========
Net loss per common share - basic and diluted $ (.1195) $ (.0191)
========= =========
Basic and diluted weighted average number of
common shares outstanding 718,589 2,847,984
======== =========
See accompanying notes to consolidated financial statements
3
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED SUBSCRIPTIONS
SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE TOTAL
------ ------ ---------- ----------- ------------- --------
<S> <C> <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, 1998 - - - (54,404) - (54,404)
--------- ----- -------- ---------- ------- ---------
BALANCE,
DECEMBER 31,
1998 2,964,000 296 195,125 (212,284) - (16,863)
Issuance of
common stock
for cash 455,600 45 56,729 - (4,000) 52,774
Issuance of
shares in
exchange
for debt 48,000 5 8,770 - - 8,775
Issuance of
common stock
for services 108,000 11 14,489 - - 14,500
Forgiveness of
debt of
related party - - 23,000 - - 23,000
Net loss, 1999 - - - (85,898) - (85,898)
--------- ----- -------- ---------- ------- ---------
BALANCE,
DECEMBER 31,
1999 3,575,600 $357 $298,113 $(298,182) (4,000) $ (3,712)
========= ==== ======== ========= ======= =========
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
AMERICAN ELECTRIC AUTOMOBILE COMPANY, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
1999 1998
-------- --------
Cash flows from operating activities
Net loss $(85,898) $(54,404)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation 7,772 7,772
Loss from investee - 3,474
Loss on investment - 18,750
Stock issued for services 14,500 -
(Increase) decrease in:
Accounts and loans receivable (1,225) (6,461)
Inventory 16,199 (8,199)
Payroll tax refund receivable 450 (450)
Increase (decrease) in:
Accounts payable and accrued expenses 9,645 (8,047)
Accounts payable - related parties 3,718 (1,705)
Income taxes payable 1,940 750
-------- ---------
Net cash used in operating activities (32,899) (48,520)
-------- --------
Cash flows from investing activities
Purchase of property and equipment (18,688) (3,862)
-------- --------
Net cash used in investing activities (18,688) (3,862)
-------- --------
Cash flows from financing activities
Proceeds from stock issuance 52,775 50,001
-------- --------
Net cash provided by financing activities 52,775 50,001
-------- --------
NET INCREASE (DECREASE) IN CASH 1,188 (2,381)
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 753 3,134
- ---------------------------------------------- -------- ---------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 1,941 $ 753
- --------------------------------------- ======== =========
Cash paid during the year for:
Interest $ - $ -
======== =========
Income Taxes $ - $ 50
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
- -----------------------------------------------------------------------
During 1999 the Company issued 48,000 shares of its common stock to settle
$8,775 of accrued expenses payable to an individual (See Note 12(A)(ii)).
In addition, an individual forgave $23,000 that the Company owed him
pursuant to a settlement agreement (See Note 7)
During November 1999, the company issued 32,000 shares of its common stock for
a stock subscription receivable of $4,000.
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, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Organization and 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 5).
(B) Principles of Consolidation
-------------------------------
The consolidated financial statements include the accounts of the
Company and its 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
and 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 purposes of the cash flow statements, 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>
(E) Inventory
-------------
Inventory consists of vehicles held for sale, including finished goods
as well as work in process. Inventory is valued at the lower of cost or
market with cost determined under the first-in, first-out method.
(F) Property and Equipment
--------------------------
Property and equipment are stated at cost, less accumulated
depreciation. Expenditures for maintenance and repairs are charged to
expense as incurred. Depreciation is provided using the double declining
balance method over the estimated useful lives of the assets from five
to ten 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) Stock Options
-----------------
In accordance with Statement of Financial Accounting Standards No. 123
("SFAS 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 and accounts for
options issued to non-employees for services under SFAS 123
(See Note 9(C)).
(I) 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.
(J) Revenue Recognition
-----------------------
The Company recognizes revenue on each automobile conversion when the
completed conversion is billed and delivered to the respective customer.
7
<PAGE>
(K) 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 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.
(L) Recent Accounting Pronouncements
------------------------------------
The Financial Accounting Standards Board has recently issued several new
accounting pronouncements. 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 of operations.
(M) 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. At December 31, 1999, there were 460,000
common stock options outstanding that could potentially dilute future
earnings per share.
(N) Reclassification
--------------------
Certain 1998 balances have been reclassified to conform to the 1999
presentation.
NOTE 2 DUE FROM RELATED PARTY
- ------ ----------------------
Accounts receivable - related party consists of advances made in 1999
and 1998 to AEAA for operating expenses totaling $7,212, net of equity
method losses (See Note 5) at December 31, 1999.
8
<PAGE>
NOTE 3 INVENTORY
- ------- ---------
Inventory at December 31, 1999 consists of the following:
Finished goods - vehicle (See Note 7) $ 15,995
----------
$ 15,995
=========
NOTE 4 PROPERTY AND EQUIPMENT
- ------- ----------------------
Property and equipment at December 31, 1999 consists of the following:
Electronic demonstration vehicles (See Notes 7 & 8) $ 57,550
Less: accumulated depreciation (21,957)
----------
Total property and equipment - net $ 35,593
=========
Depreciation expense was $7,772 for each of the years ended
December 31, 1999 and 1998.
NOTE 5 INVESTMENTS
- ------- -----------
Investments at December 31, 1999 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 (See Note 1(G)), the investment was originally recorded
at $37,500, using the cost method, and was subsequently adjusted in 1998
to its net realizable value of $18,750.
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
9
<PAGE>
and related interpretations (See Note 1(G)), the investment is accounted
or under the equity method. During 1998 the Company decreased the value
of their investment in AEAA to zero and reduced a portion of the
receivable from AEAA after accounting for their portion of the investee's
loss under the equity method. AEAA had no revenues or expenses during
1999; therefore, no additional equity method adjustments were made to the
investment or the receivable from AEAA (See Note 2) during 1999.
During 2000, CEHK secured a contract for AEAA to produce electric
vehicles in China to be used as taxicabs.
NOTE 6 ACCRUED EXPENSES
- ------- ----------------
Accrued expenses at December 31, 1999 consists of the following:
Interest payable on related party note (See Note 8) $ 2,138
----------
$ 2,138
=========
NOTE 7 ACCOUNTS PAYABLE - RELATED PARTY
- ------- ---------------------------------
Accounts payable - related parties at December 31, 1999 are summarized as
follows:
EFM Venture Group, Inc. $ 30,206
Other directors 8,800
--------
$ 39,006
==========
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 of $9,206 paid on behalf of the Company and fees of $21,000
outstanding from a consulting agreement (See Note 11). 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 3 and 4).
At December 31, 1998 the Company owed $12,415 to an officer and director
of the Company, consisting primarily of rent expense for the operating
subsidiary. The Company also incurred $3,000 in additional rent during
1999 payable to this individual. On July 23, 1999, the Company entered
into a "Settlement and Mutual Release Agreement" ("The Agreement") with
the same officer and director. 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 12(A)(i)). The Agreement
stipulated that the officer and director place in escrow 800,000 of the
900,000 common shares that were previously 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
canceled the non-compete obligation in the employment agreement. In
exchange, the Company would either pay the individual $20,000 or arrange
for the purchase by third parties of the common stock placed in escrow.
Subsequent to the agreement date the 560,000 shares of the common stock
placed in
10
<PAGE>
escrow was purchased by the Company's chairman who is a principal
shareholder. In addition, other directors of the Company purchased
80,000 shares and unrelated parties purchased 160,000 shares.
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 and recorded as additional paid in capital of
$23,000 from the forgiveness of debt (consisting of $15,145 in rent and
$7,585 in wages (See Note 12(A)(1)).
NOTE 8 NOTES PAYABLE - RELATED PARTY
- ------- -----------------------------
(A) 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, 1999, 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 4).
(B) During 1997, a corporation, which is one-third owned by a director of
--- the Company, 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. No payments were made on this
note during 1999 and 1998. As of December 31, 1999, $2,138 in accrued
interest on the note is included in accrued expenses (See Note 6).
NOTE 9 STOCKHOLDERS' DEFICIENCY
- ------- ------------------------
(A) Preferred stock
--- ---------------
The Company is authorized to issue 20,000,000 shares of preferred
stock with a par value of $.0001 per share, 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, 1999.
(B) Common stock
--- ------------
The Company is authorized to issue 50,000,000 shares of common stock
with a par value of $.0001 per share. At December 31, 1999 and 1998,
there were 3,575,600 and 2,964,000 shares of common stock issued and
outstanding, respectively.
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 called
for 500,000ommon shares at an offering price of $1.00 per share with a
minimum subscription of
11
<PAGE>
$1,000. No shares were issued pursuant to this offering circular
through the date of this report and the offering was cancelled.
In 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. No offering
document was prepared and no shares were issued under this offering.
During May to December 1999, the Company issued 455,600 shares of
common stock pursuant to Section 4(2) of the Securities Act of 1933,
as amended, at $0.125 per share for total proceeds of $56,775.
On December 13, 1999, the Board agreed to offer up to 3,000,000 shares
of common stock, pursuant to section 4(2) of the Securities Act of
1933, as amended, at $0.125 per share. No shares were issued under
this offering in 1999 and 690,000 shares have been issued through the
date of this report.
(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, 1999 and 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 years ended December
31, 1999 and 1998 would have been increased to the pro-forma amounts
indicated below.
1999 1998
--------- --------
Net loss As reported $(85,898) $(54,404)
Pro forma $(87,769) $(63,225)
Net loss per
Share As reported $(0.1195) $(0.0191)
Pro forma $(0.1221) $(0.0222)
The effect of applying Statement No. 123 is not likely to be
representative of the effects on reported net income (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
eachstock option grant is estimated on the date of grant using the
minimum value method, which did not differ from the fair market value
computed using the Black-Scholes 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.
12
<PAGE>
A summary of the Company's outstanding common stock options as of
December 31,1999 and changes during the year is presented below:
Weighted -
Number Average
of shares Exercise Price
--------- --------------
Stock Options
-------------
Balance at beginning of period 660,000 $ 0.25
Granted - -
Exercised - -
Forfeited 460,000 0.25
-------- ------------
Balance at end of period 200,000 $ 0.25
======== ============
Options exercisable at end of period 133,333 $ 0.25
======== ============
Weighted average fair value of options
granted during the period $ -
============
The following table summarizes information about options outstanding
at December 31, 1999.
Options Outstanding Options exercisable
------------------- -----------------
Weighted
Average Weighted Number Weighted
Range of Number Remaining Average Exercisa Average
Exercisable Outstanding Contractual Exercise ble At Exercise
Price At Year End Life Price Year End Price
----------- ----------- ----------- --------- -------- --------
$ 0.25 200,000 Years 1.78 $ 0.25 335,000 $ 0.25
NOTE 10 INCOME TAXES
- -------- ------------
The provision for income taxes for the years ended December 31, 1999
and 1998 consists of the minimum California franchise tax expense for
CEAC of $1,940 in 1999 and $800 in 1998. Provision for income taxes is
summarized as follows:
1999 1998
--------- --------
Current income taxes $ 1,940 $ 800
Deferred income taxes - -
--------- -------
$ 1,940 $ 800
========== ========
The Company's tax expense differs from the "expected" tax expense
(benefit) for the years ended December 31, 1999 and 1998 (computed by
applying the applicable Federal corporate tax rate to loss before
taxes) as follows:
1999 1998
--------- --------
Computed "expected" tax (benefit) $ (12,885) $(11,850)
State income tax 1,940 800
Effect of net operating loss 12,885 11,850
--------- -------
$ 1,940 $ 800
========== ========
13
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at December 31, 1999
and 1998 are as follows:
1999 1998
--------- --------
Deferred tax assets:
Net operating loss carry-forward ) $ 44,693 $31,808
--------- -------
Total gross assets 44,693 31,808
Less valuation allowance (44,693) (31,808)
--------- -------
Net deferred tax asset $ - -
========== ========
At January 1, 1999, the valuation allowance was $31,808. The net
change in the valuation allowance during the year ended December 31,
1999 was an increase of $12,885.
As of December 31, 1999, 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 54,404 -
2004 85,898 -
2011 - 15,028
2012 - 142,622
2018 - 54,404
2019 - 85,898
NOTE 11 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. During 1999 the Company paid $14,000 toward the amount
owed. The Company has accrued an additional $11,000 in consulting fees
payable to this corporation for services rendered in 1999. The Company
owes this corporation a total of $21,000 in consulting fees at December
31, 1999 (See Note 7).
See Notes 2, 5, 6, 7, 8, and 12 for additional related party
transactions.
NOTE 12 COMMITMENTS AND CONTINGENCIES
- -------- -----------------------------
(A) Employment Agreements
--- ---------------------
(i) 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
Company did not make
14
<PAGE>
payments on this agreement due to a lack of
adequate cash flow and there was a remaining balance owed to
the individual at December 31, 1998 of $7,585. During 1999, the
payable to this officer and director was settled pursuant to a
"Settlement and Mutual Release Agreement" (See Note 7).
(ii) The Company entered into an employment agreement with an
individual to become the Company's President as of August 1, 1997.
The agreement called for payments of $1,500 per month for part-
time services once the Company completed a private placement. In
addition, the agreement granted 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 stated that within 60 days of raising
$250,000 through the sale of common stock, compensation would
increase to $5,000 per month as a full time officer and employee.
The agreement also contained bonus clauses granting additional
stock options if certain criteria were met. The Company made no
cash payments on the employment agreement due to inadequate cash
flow. The total accrued balance payable to the individual at
December 31, 1998 was $8,775 for services rendered through
May 1998.
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 stipulated that the Company issue
48,000 shares of its common stock valued for financial reporting
purposes at its fair market value based upon recent cash issuances
to fully pay all amounts owed to said individual at October 1,
The stock was issued in December 1999 and the liability of
$8,775 was settled at that time.
(B) Consulting Agreement
--- --------------------
In January 1999, the Company hired a consultant to prepare a
professional business plan in exchange for 100,000 shares of stock
valued for financial reporting purposes at $0.125 per share based upon
the price of a concurrent offering (see Note 12(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.
NOTE 13 GOING CONCERN
- ------- -------------
The Company's financial statements for the year ended December 31, 1999 have
been prepared on a going concern basis which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal ourse
of business. The Company incurred a net loss of $85,898 for the year ended
December 31, 1999 and has accumulated losses since inception of $298,182.
In addition, the Company's working capital deficiency of $58,055 at December
31, 1999 may not enable it to meet such objectives as presently structured.
15
<PAGE>
The ability of the Company to continue as a going concern is dependent upon
the Company's ability to attain a satisfactory level of profitability and
obtain suitable, adequate financing. Management's plans include seeking an
equity investment as detailed in Note 12(D)(ii). The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
NOTE 14 SUBSEQUENT EVENTS
- ------- -----------------
(A) Stock Issuances
--- ---------------
(i) During January 2000, the Company issued 550,000 shares of its
common stock at $0.02 per share to a corporation in partial
payment of amounts owed to the corporation (See Notes 7 and 11).
(ii) During January 2000, the Company issued 250,000 shares of its
common stock at $0.02 per share to a related party as payment for
services rendered through December 31, 1999. The $5,000 of
consulting fees is included in accounts payable - related party
at December 31, 1999.
(iii) During January 2000, the Company issued 96,000 shares of its
common stock at $0.02 per share to individuals for services
rendered in 2000.
(iv) During February and March 2000, the Company issued 690,000 shares
of its common stock for cash at $0.125 per share pursuant to an
offering under Section 4(2) of the Securities Act of 1933, as
amended (See Note 12(D)(ii)).
(B) Operating Lease
--- ---------------
During February 2000, the Company entered into a lease agreement commencing
March 1, 2000 and terminating August 31, 2000 at $3,000 per month. The
lease contains an option to renew for a six-month period at the same monthly
rate.
16
<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: 4/20/2000
\\GARY G. DeGANO\\
<PAGE> 1
b) 11.2 Computation of per share earnings
American Electric Automobile Company, Inc.
Weighted Average Shares Outstanding
December 31, 1999
Net Loss $ 85,898
Net Loss Per Share $ (85,898 / 718,812 = $ (0.1195)
