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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ________________
COMMISSION FILE NUMBER: 0-24857
POWER TECHNOLOGY, INC.
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 88-0395816
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1000 WEST BONANZA ROAD, LAS VEGAS, NEVADA 89106
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
ISSUER'S TELEPHONE NUMBER: (702) 382-3385
SECURITIES REGISTERED UNDER SECTION 12(b) OF THE EXCHANGE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
N/A N/A
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE EXCHANGE ACT:
COMMON STOCK, PAR VALUE $.001
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
State issuer's revenues for its most recent fiscal year: $ -0-.
The aggregate market value of voting stock held by non-affiliates
of the registrant as of January 31, 1999:
Common stock, $.001 par value: $3,236,009
The number of shares of the registrant's common stock outstanding
as of January 31, 1999: 12,334,700 shares.
Documents incorporated by reference: None
Transitional Small Business Disclosure Format:
Yes No X
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Power Technology, Inc. (the "Company"), a Nevada corporation, was
incorporated on June 3, 1996. However, the Company did not conduct any
significant operations until March 1998 when it acquired all of the issued and
outstanding capital stock and assets of PowerTek Technology Corporation, Inc.
(formerly called Power Technology, Inc.) which is presently a wholly-owned
subsidiary of the Company. The Company changed its corporate name from "Zepplin
Production Corp." to Power Technology, Inc. during March 1998 to reflect the
change in the purposes and nature of its business.
The Company is a research and development company. It is presently
engaged in research and development activities regarding (i) batteries for
the automotive and electric car industries, (2) electronic sensors, and (3)
pipeline connection technology.
BATTERIES
GENERAL. The primary business of the Company has been to develop
advanced technology for batteries to be used in the automotive and electric
car industry, and other uses. Its battery technology has recently passed from
the "proof of principle" stage to the "preliminary prototype" stage of
development.
The goal of the Company has been the development of batteries that (i)
are substantially lighter than conventional car batteries, (ii) have a high
charge/quicker recharge rate, (iii) provide greater range, (iv) will be more
cost effective, and (v) will be more environmentally friendly.
Electric cars currently being produced have battery packs that last
between 25,000 and 30,000 miles, weight about 1,100 pounds, require a two to
three hour recharge period using a 220-volt outlet (or six to ten hours using
a 110-volt outlet) and cost about $2,000 to $2,500 to replace. These
operating and recharge statistics only apply to electric cars or batteries
operating at room temperature. At higher temperatures, like those found on
sun-soaked asphalt highways (approximately 50% of North America), battery
life of conventional batteries is drastically diminished. At lower
temperatures (the other half of North America), there is power loss in
conventional batteries. Using today's state-of-the-art technology, the 1998
electric vehicles will run on lead-acid batteries and carry two people about
50 miles on a hot day. In order to meet the demands being placed on auto
makers for electric cars, management expects significant demand for an
advanced battery that: (1) has a quicker recharge rate; (2) is lighter weight
with higher energy density; (3) is more cost effective; and (4) carries a
charge for distances longer than two hundred miles in any temperature.
The strategy of the Company has been to develop automotive battery
products that have technological advantages over available alternatives and
that are capable of being produced commercially on an economically
competitive basis. The Company intends to continue its development efforts to
be funded in part through licensees and industrial joint venture partners in
order to broaden and build upon its products and technological base.
The Company recognizes the need to protect its technology and has a
patent pending covering its battery structure and materials.
The importance of electric vehicles in the Untied States and abroad has
increased because of concerns regarding air pollution, global climatic
changes, ozone layer depletion, noise abatement and dependence on imported
oil. However, because of the costs and limited range of currently available
batteries, the production and sales of electric vehicles has been very
limited (47,000 vehicles estimated to be produced during 1998). There appears
to be substantial demand for a high power, durable, high charge/discharge
rate battery for electric cars and other hybrid electric vehicles (such as
two and three wheeled vehicles that are numerous in Europe and third world
countries) that are more cost effective, lighter and smaller.
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The Company's future business prospects are substantially dependent upon
the ability of the Company, its joint venture partners and licensees to
develop, manufacture and sell products based on the Company's battery
technologies. Additional development efforts will be required before products
based on the Company's technologies can be manufactured and sold
commercially. There can be no assurance that certain products based on the
Company's technologies can be manufactured cost effectively on a commercial
scale, that such products will gain market acceptance or that competing
products and technologies will not render products based on the Company's
technologies obsolete or noncompetitive.
In certain fields, the Company may enter into licensing or joint venture
agreements with established companies. Any revenues or profits which may be
derived by the Company from these arrangements will be substantially
dependent upon the willingness and ability of the Company's licensees and
joint venture partners to devote their financial resources and manufacturing
and marketing capabilities to commercialize products based on the Company's
technologies.
The Company's ability to compete effectively with other companies will
depend, in part, on its ability to protect and maintain the proprietary
nature of its technology. There can be no assurance that the Company's
patents or other proprietary rights will be determined to be valid or
enforceable if challenged in court or administrative proceedings or that the
Company patents or other proprietary rights, even if determined to be valid,
will be broad enough in scope to enable the Company to prevent third parties
from producing products using similar technologies or processes. There can
also be no assurance that the Company will not become involved in disputes
with respect to the patents or proprietary rights of third parties.
BATTERY TECHNOLOGY. The battery being developed by the Company is an
electrochemical battery of the type having a positive plate, a negative
plate, an electrolyte contacting and bridging the plates, and a transducer in
contact with the plate(s) to apply electronic energy to the plate(s). Each
plate is comprised of a rigid metal structure which significantly increases
the exposed surface area of the plates for the electrolyte to be in contact.
The metal structure of the plates are specially coated with an electrically
conductive metal.
Electrochemical batteries typically include a pair of oppositely charged
plates (positive and negative) with electrolyte to convey ions from one plate
to the other when the circuit is completed. This is a well developed
technology, typically utilizing a lead-acid electrolyte which is more
expensive, more volatile, and environmentally unfavorable than the Company's
battery technology.
Because the capability of a battery is directly related to the surface
area of its plates which is in contact with electrolyte, their capability is
usually enhanced by sculpting their surfaces to increase and open up their
surface areas. The technology of the Company further increases the surface
areas of the plates without compromising their strength or resistence to
vibration, erosion and loss of material. Because the Company's plates can be
placed closer together due to their rigidity, the size of the battery and the
amount of required electrolyte is significantly reduced. For this reason, it
also increases the power density for both the weight and size of the battery.
The physical movement of electrolyte at the interface of the plates is
increased which materially enhances the ion migration and transfer between
the plates. Stagnation of electrolyte at the plates of conventional batteries
is a problem because it inhibits the transfer and migration of ions between
the plates, commonly known as ion depletion.
Based upon these technologies, the batteries of the Company are smaller
and lighter weight and provide increased electrical charge/discharge, higher
power, durability, and environmental acceptability.
PROTOTYPE BATTERIES. The Company is in the process of producing
preliminary prototype versions of its battery that will be built and tested
in a variety of configurations. Preliminary testing by the Company indicates
that various configurations of the battery meet or exceed some of the
performance goals established by major governmental and industry groups for
electric vehicle batteries. The Company also believes its battery has a
number of applications other than electric vehicles, such as hybrid powered
vehicles, portable power tools, electric power management, uninterruptible
power and for starting, lighting and ignition ("SLI") batteries for
automobiles, aircraft and marine craft. The Company is designing various
prototype batteries for such applications.
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GLOSSARY OF TECHNICAL TERMS. Certain technical terms used herein have the
following meanings:
Cycle Life - the number of times a rechargeable battery can be charged
and discharged.
Electrode (battery) - the chemically active portions of a battery.
Energy Density - the amount of energy stored in a specific volume or
weight.
EV (Electric Vehicle) - a vehicle propelled exclusively by an electric
drive system powered by an electrochemical energy storage device,
typically a rechargeable battery.
HEV (Hybrid Electric Vehicle) - a vehicle that is propelled both by an
electrochemical energy storage device coupled to an electric drive and
an auxiliary power unit powered by a conventional fuel such as
reformulated gasoline, direct injection diesel or compressed natural
gas.
Hydrides - solid materials that store hydrogen.
Power Density - the amount of power a battery can delivery per unit
volume or weight.
BATTERY COMPETITION. The market for batteries and other proposed
products of the Company is highly competitive, subject to rapid change and
significantly affected by new product introductions and other market
activities of industry participants. The Company's proposed battery products
are targeted at an emerging market of electric powered automobiles and other
vehicles, and the Company's competitors offer a variety of products and
services to address this market. Further, the Company currently faces direct
and indirect competition from traditional batteries.
The battery industry is mature, well-established and highly competitive.
The industry is characterized by a few major domestic and foreign producers
including Exide, Delphi, A.C. Delco, Johnson Controls, Inc., GNB,
Electrosource, Inc., Energy Conversion Devices, Inc., Hawker and Yuasa, all
of which have substantially greater financial resources than the Company.
Accordingly, the Company's ability to succeed in this market depends upon its
ability to demonstrate superior performance and cost attributes of its
technology. The Company has historically concentrated its activities in the
electric vehicle segment of the market with a view to demonstrating improved
energy to weight and longer battery life in comparison to traditional
lead-acid batteries. The principal competitors of the Company in the electric
vehicle market have directed their efforts to other battery types, such as
nickel-cadmium, nickel-metal hydride, nickel-iron and sodium-sulfur
batteries, rather than lead-acid formulations, although at least one major
automobile manufacturer and one major battery company are known to have
research and development projects underway to develop lead-acid batteries for
electric vehicles.
In the future, because there are relatively low barriers to entry in the
battery industry, the Company could experience additional competition from
other established or emerging companies as the market continues to develop
and expand. Many potential competitors may have well-established
relationships with the Company's potential customers, have extensive
knowledge of the industry, better name recognition and significantly greater
financial, technical, sales, marketing and other resources and are capable of
offering batteries which have multiple applications. It is also possible that
new competitors or alliances among competitors may emerge and rapidly acquire
significant market share. The Company also expects that competition will
increase as a result of industry consolidations. The Company's competitors
may be able to respond more quickly to new or emerging technologies and
changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their battery products.
Increased competition may result in price reductions, reduced gross
margins and loss of market share, any of which could adversely affect the
Company's business, financial condition or results of operations. There can
be no assurance that the Company will be able to compete successfully against
current or future competitors or that competitive pressure will not adversely
affect its business, financial condition or results of operations.
The Company believes that the principal competitive factors affecting
its market include features such as functionality, weight, adaptability, ease
of use, product reputation, quality, price, performance, customer service and
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support, effectiveness of sales and marketing efforts and company reputation.
Although the Company believes that it will compete favorably with respect to
such factors, there can be no assurance that the Company can establish a
competitive position against current and potential competitors, especially
those with greater financial, marketing, service, support, technical and
other resources than the Company.
PIPELINE CONNECTION TECHNOLOGY
The Company is conducting research and development operations regarding
its patented pipeline connection technology. The Company is developing
equipment designed to join large diameter pipe utilizing magnetic pulse
methods, a cold form method joining a metal sleeve around the ends of two
abutting pipes.
A hinged magnetic work coil developed by the Company is clamped around
the sleeve joining two pipes to produce a ringed shaped crimping force
forcing a uniform joint with uniform stress distributions. The pipes may have
annular grooved ends, grooved to approximately 1/3 of its depth, to be
gripped by the grooves of the sleeve. A pressure sensitive adhesive may be
applied to the pipe ends to improve the performance and seal of the splice.
When the magnetic pulse is applied by the equipment, it instantly crushes the
sleeve onto the pipe and into the shallow grooves milled into the pipe ends,
which improves its pullout resistence.
This pipeline connection technology is particularly useful for joining
oil and gas pipelines, oil and gas well casings, and other large pipe
connections such as those at refineries, chemical plants and other industrial
operations. Because arc welding or other forms of extreme heat are hazardous
which are avoided by the Company's technology, there are substantial
advantages in safety, avoidance of property damage, and avoidance of
microcracks that can form splits and rupture under stress. The cold magnetic
impulse method creates a uniform joint connection between pipes. The process
is significantly faster than arc welding, requires less operator skill than
welding, and avoids costly and complicated post-welding inspections. The
magnetic impulse method also has the advantage that it can be performed in
the field in any weather condition.
The Company's pipeline connection technology is based upon the principle
that whenever a rapidly changing magnetic flux cuts across a conductive
material, such as the grooved sleeve to be used by the Company, a current is
induced in the material. The current is proportional to the initial intensity
and time rate of change of the magnetic flux. The induced current creates an
associated magnetic field of such polarity as to oppose the magnetic field of
such polarity as to oppose the magnetic field producing the current, creating
very significant forces of repulsion. This effect is commonly called "Lenz's
Law of Repulsion". This repulsion force of the Company's work coil pinches
the conductive sleeve around the pipes.
The Company intends to construct a preliminary prototype of its pipeline
connection equipment during 1998, and intends to seek a joint venture partner
to further develop and market its equipment.
ALLOY SENSOR TECHNOLOGY
The Company is conducting research and development operations regarding
its patented alloy sensor technology.
The Company has been developing its alloy sensor technology as a
permanently installed water detection device to check for the presence of
water in storage tanks, fuel tanks and other systems. The alloy sensor is
mounted on a valve socket that is connected to a meter. A plug inserted into
the value permits periodic inspection and reads the meter. Only a short time
is necessary to check a number of fuel tanks, for example by the use of the
plug and single ammeter without opening a drain valve (unless it is necessary
to drain detected water out of the tank).
The alloy sensors of the Company provides positive detection of water
wherever needed and can be connected to a flow system or moisture alarms to
detect leaks.
RESEARCH AND DEVELOPMENT
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The Company has committed, and expects to continue to commit in the
future, substantial resources for the development of its products. Research
and development efforts are directed at improving the performance and
expanding the capability of its prospective products. Although the Company
expects that certain of its products will be developed internally, the
Company may, based on timing and cost considerations, acquire technology and
products from third parties or retain consultants.
The Company's future success will depend in part upon its ability to
enhance its current products and to develop and introduce new products on a
timely basis that keep pace with technological developments, emerging
industry standards and the increasingly sophisticated needs of its future
customers. There can be no assurance that the Company will be successful in
developing or marketing product enhancements or new products that respond to
technological change or evolving industry standards, that the Company will
not experience difficulties that could delay or prevent the successful
development, introduction and marketing of these products or that its new
products or enhancements will adequately meet the requirements of the
marketplace and achieve market acceptance. If the Company is unable, for
technological or other reasons, to develop and introduce new products or
enhancements, the Company's business, financial condition or results of
operations could be materially adversely affected.
PROPRIETARY RIGHTS AND LICENSING
The Company's success is heavily dependent upon proprietary technology.
The Company will rely primarily on a combination of patents, trade secrets,
confidentiality procedures and contractual provisions with its employees,
consultants and business partners and in its license agreements to protect
its proprietary rights. In addition to its patents, the Company seeks to
protect its products, documentation and other written materials under trade
secret and copyright laws, which afford only limited protection. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to reverse engineer or otherwise copy aspects of the Company's
products or to obtain and use information that the Company regards as
proprietary. While the Company is not aware that any of its products infringe
upon the proprietary rights of third parties, there can be no assurance that
third parties will not claim infringement by the Company with respect to
current or future products.
EMPLOYEES
As of January 31, 1999, the Company had seven (7) employees and
consultants. Of the total, five (5) were engaged in product research and
development, and two (2) were in finance and administration. None of the
Company's employees is represented by a labor union with respect to his or
her employment by the Company. The Company has experienced no organized work
stoppages and believes its relationship with its employees is good. The
Company believes that its future success will also depend to a significant
extent upon its ability to attract, train and retain highly skilled
technical, management, sales, marketing and consulting personnel. Competition
for such personnel in the industry in the United States is intense. There can
be no assurance that the Company will be successful in attracting or
retaining such personnel, and the failure to attract or retain such personnel
could have a material adverse effect on the Company's business or results of
operations.
BANKING ARRANGEMENTS
The Company has no banking arrangements for a line of credit or other
borrowings to finance the Company. The Company intends to rely primarily upon
equity financing and joint ventures to finance its operations.
ITEM 2. DESCRIPTION OF PROPERTY.
EXECUTIVE OFFICES. The Company currently leases its executive and
research and development facilities located at 1000 West Bonanza Road, Las
Vegas, Nevada 89106 on a month-to-month basis. The lease covers approximately
5,000 square feet at a monthly rental of approximately $2,000 per month. The
Company believes that its current facilities are adequate for its needs
through 1999, and that, should it be needed, suitable additional or
alternative space is expected to be available in the future on commercially
reasonable terms.
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ITEM 3. LEGAL PROCEEDINGS.
The Company is engaged in various legal proceedings which arise in
the ordinary course of its business. In the opinion of management, the amount
of ultimate liability with respect to those proceedings will not be material
to the Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
GENERAL
The Common Stock of the Company is traded on the Electronic Bulletin
Board over-the-counter market, and is quoted under the symbol PWTC.
MARKET PRICE
When the trading price of the Company's Common Stock is below $5.00
per share, the Common Stock is considered to be "penny stocks" that are subject
to rules promulgated by the Securities and Exchange Commission (Rule 15g-1
through 15g-9) under the Securities Exchange Act of 1934. These rules impose
significant requirements on brokers under these circumstances, including: (a)
delivering to customers the Commission's standardized risk disclosure document;
(b) providing to customers current bid and offers; (c) disclosing to customers
the brokers-dealer and sales representatives compensation; and (d) providing to
customers monthly account statements.
The following table sets forth the range of high and low sale prices
per share of the Common Stock of the Company as reported by National Quotation
Bureau, L.L.C. for the periods indicated. Prior to September 1997, there was no
public market for the trading of the Common Stock of the Company.
<TABLE>
<CAPTION>
Year Ended December 31, 1997 High Bid(2) Low Bid(2)
- ----------------------------- ----------- ----------
<S> <C> <C>
4th Quarter . . . . . . . . . $3.125 $.50
Year Ended December 31, 1998
- -----------------------------
1st Quarter (1). . . . . . . $3.4375 $3.025
2nd Quarter . . . . . . . . . $5.25 $1.625
3rd Quarter . . . . . . . . . $2.50 $.625
4th Quarter . . . . . . . . . $.83 $.25
Year Ending December 31, 1999 High Bid(2) Low Bid(2)
- ----------------------------- ----------- ----------
1st Quarter . . . . . . . . . $.75 $.25
</TABLE>
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(1) During March 1998, the Company effectuated a one for five (1:5) reverse
stock split. The above prices have been revised to reflect this split.
(2) The Company is unaware of the factors which resulted in the significant
fluctuations in the prices per share during the periods being
presented, although it is aware that there is a thin market for the
Common Stock, that there are frequently few shares being traded and
that any sales activity significantly impacts the market.
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The closing prices of the Common Stock of the Company on January 31, 1999, were
$.45 bid and $.46875 asked.
DIVIDENDS
The Company has not paid any dividends on its Common Stock and does
not expect to do so in the foreseeable future. The Company intends to apply its
earnings, if any, in expanding its operations and related activities.
The payment of cash dividends in the future will be at the discretion
of the Board of Directors and will depend upon such factors as earnings levels,
capital requirements, the Company's financial condition and other factors deemed
relevant by the Board of Directors. In addition, the Company's ability to pay
dividends may become limited under future loan agreements of the Company which
may restrict or prohibit the payment of dividends.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATION.
The following discussion is intended to assist in an understanding
of the Company's consolidated financial position for its fiscal years ended
January 31, 1998 and 1999, and the results of its operations for the periods
then ended.
GENERAL
Power Technology, Inc. (the "Company"), a Nevada corporation, was
incorporated on June 3, 1996.
The Company is in the development stage of developing its batteries
and other products. The Company is in the process of building its initial
prototypes of its batteries, but has not commenced any commercial production or
sales of batteries, pipeline connection equipment or alloy sensors.
Historically, the Company has used capital contributions from various
stockholders to fund its operations. To this point, the Company has not had
adequate funds to commercially produce, market and sell its batteries, pipeline
connection equipment and alloy sensors.
There are no assurances that the Company will be able to obtain a
profitable level of operations.
RESULTS OF OPERATIONS
The following table sets forth certain operating information on the
Company:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
January 31, 1999 January 31, 1998 January 31, 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 0
General and adminis-
trative expense $ 515,588 $ 51,374 $ 139,907
Net Loss $(700,909) $ (51,574) $ (139,907)
Net Loss Per Share $ (.07) $ (.02) $ (.06)
</TABLE>
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CAPITAL EXPENDITURES, CAPITAL RESOURCES AND LIQUIDITY
The following summary table presents comparative cash flows of the
Company for the years ended January 31, 1997, 1998, and 1999.
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
January 31, 1999 January 31, 1998 January 31, 1997
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net cash used in operating
activities $ (571,207) $ 0 $ 0
Net cash used in investing
activities $ (58,294) $ 0 $ 0
Net cash provided by financing
activities $ 690,000 $ 0 $ 0
</TABLE>
CAPITAL EXPENDITURES. The Company has incurred capital expenditures
for equipment and office furniture used in its operations. Capital expenditures
during the year ended January 31, 1999, totaled $13,294.
CAPITAL RESOURCES. The Company's capital resources have been provided
by capital contributions and loans from its stockholders. The Company raised
$690,000 in capital during fiscal 1999 through a limited offering of its Common
Stock and warrants which is being used to purchase additional equipment, to
further develop its products, to establish its marketing activities, and to
provide additional working capital to fund future operations.
LIQUIDITY. The ability of the Company to satisfy its obligations will
depend in part upon its ability to successfully complete additional shares of
its Common Stock and in part upon its ability to reach a profitable level of
operations.
PLAN OF OPERATIONS
Because of the costs of development of its battery systems and other
products, and the start-up costs of its battery prototype production, the
Company expects that it will incur a loss during its fiscal year ending January
31, 2000.
The Company believes that additional equity capital will be required
to accomplish its plan of operations during the next 12 months. As a result, the
Company intends to offer and sell its Common Stock in an exempt offering under
federal and state securities laws to further capitalize the Company, and may
also borrow from banks and other financial institutions to the extent necessary
to provide liquidity for its operations, although no arrangements for any
borrowings have been made.
The Company has increased its research and development activities and
the associated costs consistent with its plan of operations in order to develop
its batteries for proposed commercial production. However, the Company expects
to continue the development of its batteries and other products to incorporate
technical changes and improvements. In addition, as the Company establishes its
marketing activities, the Company will incur additional operating and equipments
costs. The Company believes that the net proceeds of its securities offering
during fiscal 1999 will be sufficient to meet its liquidity requirements.
The Company's plan of operations provides for an expansion of its
battery business, and research and development regarding its other products. The
scope of this expansion is dependent upon the amount of additional
capitalization to be realized by the Company in its future securities offerings,
the amount of credit lines that may become available to finance such activities,
and its ability to enter into agreements with licensees, joint venture partners,
and others. To the
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extent that the operations of the Company substantially increase, it will be
necessary to make significant changes in the number of additional employees
of the Company.
UNCERTAINTIES
DEVELOPMENT STAGE COMPANY. The Company is in the development stage.
There is no assurance that the Company's activities will be profitable. The
likelihood of the success of the Company must also be considered in light of the
problems, expenses, difficulties, complications, delays and all of the inherent
risks frequently encountered in the formation and operation of a relatively new
business.
COSTS OF CONDUCTING BUSINESS. The Company will be required to incur
substantial costs for research and development and equipment, establishing
production and marketing operations, and related costs. A substantial portion of
those costs must be paid whether or not any of its batteries or other products
prove to be commercially successful on a broad scale. The ability to generate a
profit depends, among other factors, on the amount of equipment acquisition
costs incurred, the amount of revenues from the sale of batteries and other
products by the Company, and its operating costs.
COMPETITION. The battery business is highly competitive. Companies in
the industry have substantially greater financial, marketing, and technical
resources than the Company. Further, the entry into this industry does not
necessarily require a large capital expenditure and, accordingly, it can be
expected that additional competitors may enter the industry in the future. It
may be particularly difficult for a relatively small independent company to
compete with larger companies which have significantly greater resources. There
can be no assurance that the Company will be able to successfully compete if
such an environment develops.
TECHNOLOGICAL CHANGE. The Company expects that many new technologies
and products will be introduced in the battery industry over the next several
years. The Company's success will depend, among other things, on its ability to
maintain a competitive position technologically. There can be no assurance that
the Company will have access to subsequently developed technology by other
persons. Technological advances by a competitor may result in the Company's
present or future products becoming noncompetitive or obsolete. The Company
cannot be assured that competitors will not develop functionally similar or
superior batteries, which event could have an adverse effect on the Company's
business.
CONTRACTS. The Company has no current contracts for the manufacture or
sale of its batteries or other products, and has no back-log. There can be no
assurance that the Company will be able to obtain sufficient and suitable
contracts for its business plan.
FLUCTUATIONS IN OPERATING RESULTS. The Company's revenues and results
of operations may vary significantly in the future. The Company's revenues and
results of operations are difficult to forecast and could be materially
adversely affected by many factors, some of which are outside the control of the
Company, including, among others, the expected relatively long sales and
implementation cycles for the Company's products; the size and timing of
individual license transactions and joint venture arrangements; seasonality of
revenues; changes in the Company's operating expenses; changes in the mix of
products sold; timing of introduction or enhancement of products by the Company
or its competitors; market acceptance of new products; technological changes in
technology; personnel changes and difficulties in attracting and retaining
qualified sales, marketing, technical and consulting personnel; changes in
customers' budgeting cycles; quality control of products sold; and economic
conditions generally and in specific industry segments, particularly the
automotive industry.
There can be no assurance that the Company's products will achieve
broad market acceptance or that the Company will be successful in marketing its
products or enhancements thereto. In the event that the Company's current or
future competitors release new products that have more advanced features, offer
better performance or are more price competitive than the Company's products,
demand for the Company's products would decline. A decline in demand for, or
market acceptance of, the Company's batteries or other products as a result of
competition, technological change, or other factors would have a material
adverse effect on the Company's business, financial condition or results of
operations.
10
<PAGE>
MANAGEMENT OF EXPANDING OPERATIONS. The Company's business may grow
rapidly. In addition, the Company may experience significant growth in the
number of its employees, the scope of its operating and financial systems and
the geographic area of its operations, which will place a significant strain
on the Company's management. The Company's future results of operations will
depend in part on the ability of its officers and other key employees to
continue to implement and expand its operational, customer support and
financial control systems and to expand, train and manage its employee base.
In order to successfully manage its future growth, if any, the Company will
be required to hire additional general and administrative personnel and to
augment its existing financial and management systems or to implement new
such systems. There can be no assurance that the existing and new management
will be able to augment or to implement such systems efficiently or on a
timely basis, and the failure to do so could have a material adverse effect
on the Company's business, financial condition or results of operations.
There can be no assurance that the Company will be able to manage any future
expansion successfully, and any inability to do so would have a material
adverse effect on the Company's business, financial condition or results of
operations. In addition, the Company believes that its future success will
also depend to a significant extent upon its ability to attract, train and
retain highly skilled technical, management, sales, marketing and consulting
personnel. Competition for such personnel is intense, and the Company expects
that such competition will continue for the foreseeable future. There can be
no assurance that the Company will be successful in attracting or retaining
such personnel, and the failure to attract or retain such personnel could
have a material adverse effect on the Company's business, financial condition
or results of operations.
RAW MATERIALS
The basic raw materials and components for the batteries and other
products being developed by the Company are readily available. The Company
does not expect to experience any material delays in obtaining timely
delivery of its materials and components.
SEASONALITY
The Company does not expect to experience material seasonal
variations in revenues or operating costs, except that sales activity for its
batteries may increase in the summer and winter seasons which is expected to
cause the operations of the Company to increase during such periods.
ITEM 7. FINANCIAL STATEMENTS.
Information called for by this item is set forth in the Company's
Consolidated Financial Statements contained in this report. The Company's
Consolidated Financial Statements begin at page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
DIRECTORS AND OFFICERS
The directors and officers of the Company are as follows:
<TABLE>
<CAPTION>
Name(1)(2) Age Position
---------- -------- --------
<S> <C> <C>
Lee A. Balak 44 Director and President
Alvin A. Snaper 69 Director, Vice President-
Development, Secretary and Treasurer
11
<PAGE>
William E. McNerney 65 Director and Executive Vice
President
Hugo P. Pomrehn, Ph.D. 60 Director
</TABLE>
- ---------------
(1) The Company presently has no executive committee, nominating committee or
audit committee of the Board of Directors.
(2) The officers of the Company hold office until their successors are elected
and qualified, or until their death, resignation or removal.
The background and principal occupations of each director and
officer of the Company are as follows:
Mr. Balak became a director and the President of the Company during
February 1996. From 1993 to the present, Mr. Balak has been the owner and
President of No. 90 Corporate Ventures, a Canadian corporation located in
Vancouver, B.C. From 1983 to 1993, he was a corporate finance consultant.
From 1977 to 1982, he was a registered representative of Canarim Investment
Corporation (currently named Canacord Investment Corporation). While employed
by Canarim Investment Corporation, Mr. Balak was the subject of an
administrative proceeding by the British Columbia Securities Commission
regarding various alleged violations of the Securities Act, S.B.C. 1985, c.83
of British Columbia (the "Act"); and in November 1990, he undertook and
agreed that certain trading exemptions under the Act would not apply or be
available for a period of three years and that he would not be a director or
officer of any reporting issuer for a period of three years, which period was
subsequently reduced to February, 1992, by a variance order. In 1991, he was
discharged in bankruptcy by the Supreme Court of British Columbia. Mr. Balak
attended the University of Winnipeg.
Mr. Snaper became a director, Vice President-Development, Secretary
and Treasurer of the Company in March 1998; and has been a director and
President of PowerTek Technologies Corporation, Inc., a subsidiary of the
Company, since its incorporation in 1996. From 1979 to 1983, he was a
director of American Methyland Homogenized Fuels Corporation. From 1980 to
the present, he has been the Vice President of Neo-Dyne Research, Inc., a
research and development company. From 1985 to the present, he has also been
the Vice President of Inventrex Corp. Mr. Snapper was a founder of Advanced
Patent Technology, Inc., a public company now known as Alliance Gaming, and
was its Vice President and Director of Research and Development from 1968 to
1980. From 1952 to 1955, he was the chief Chemist for McGraw Colorgraph
Company, a division of the Carnation Company. From 1949 to 1951, he was
employed by the Bakelite Division of Union Carbide, where he assisted in its
development of the pilot plant for plastics manufacture. During his 30 years
of scientific research and development, Mr. Snapper's interdisciplinary
technology activities have resulted in over 600 patents, products, processes
and innovations. He has been awarded the Design News Best Patent of the year
award on three separate occasions. Mr. Snaper graduated from McGill
University with a bachelor of science degree in 1950. He is a registered
professional engineer in the State of California.
Mr. McNerney became a director and Executive Vice President of the
Company in March 1998. From 1993 to the present, he has been the owner and
Chief Executive Officer of Revolutionary Technology Industries, Inc. From
1984 to 1993, he was retired. From 1974 to 1984, Mr. McNerney owned an
operating company, Golden Exploration, Inc. From 1954 to 1976, Mr. McNerney
was a pilot employed by Northwest Airlines.
Dr. Pomrehn became a director of the Company during July 1998. He
is currently Executive Vice President of Special Projects of American
Technologies Group, Inc. ("ATG"), a public company engaged in research and
development activities. Dr. Pomrehn served as President, Chief Operating
Officer, Vice Chairman and a director of ATG from April 1995 to November
1997. He was appointed as Under Secretary of Energy by President George Bush
in 1992. He was employed by Bechtel Corporation from 1967 to 1992, and was a
Vice President and Manager of its Los Angeles regional office from 1990 to
1992. Dr. Pomrehn graduated from the University of Southern California with a
bachelor of science degree in mechanical engineering in 1960; received a
masters degree in mechanical engineering from George Washington University in
1965; received a masters degree in industrial engineering from the University
of Southern California in 1969; and received a doctorate in engineering from
the University of Southern California in 1975. Dr. Pomrehn is a member of the
American Nuclear Society and American Society of Mechanical Engineers, and is
a registered professional mechanical and nuclear engineer in the State of
California.
12
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
No executive officer or director of the Company received
compensation in excess of $100,000 during its fiscal year ended January 31,
1999. Mr. Lee A. Balak, the President of the Company, receives a salary of
$5,000 per month ($60,000 per annum).
BENEFIT PLANS
The Company does not have any pension plan, profit sharing plan,
stock option plan or similar plans for the benefit of its officers, directors
or employees. However, the Company reserves the right to establish any such
plans in the future.
BOARD COMPENSATION
Directors of the Company who do not serve as officers thereof are
not currently compensated by the Company for meeting attendance or otherwise,
but are entitled to reimbursement for their travel expenses. From time to
time, directors who are not employees of the Company may receive grants of
options to purchase the Company's Common Stock. The Company does not pay
additional amounts for committee participation or special assignments of the
Board of Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The total number of shares of Common Stock of the Company
beneficially owned by each of the officers and directors, and all of such
directors and officers as a group, and their percentage ownership of the
outstanding Common Stock of the Company as of January 31, 1999, are as
follows:
<TABLE>
<CAPTION>
SHARES PERCENT OF
MANAGEMENT BENEFICIALLY COMMON
SHAREHOLDERS(1) OWNED(1) STOCK
--------------- ---------------------------
<S> <C> <C>
Lee A. Balak............................ 3,468,000 28.1%
2450 Palmerston Avenue
West Vancouver, B.C. V7V 2W3
Canada
Alvin A. Snaper......................... 1,004,155 8.1%
2800 Cameo Circle
Las Vegas, NV 89107
William E. McNerney..................... 621,415 5.0%
953 E. Sahara, #9B
Las Vegas, NV 89104
Hugo P. Pomrehn, Ph.D................... 50,000 0.4%
1017 South Mountain
Monrovia, California 91016
Directors and officers as a group
(4 persons, including the above)........ 5,143,570 41.7%
</TABLE>
- -------------------
(1) Except as otherwise noted, it is believed by the Company that all persons
have full voting and investment power with respect to the shares indicated.
Under the rules of the Securities and Exchange Commission, a person (or group
of persons) is deemed to be a "beneficial owner" of a security if he or she,
directly or indirectly, has or shares the power
13
<PAGE>
to vote or to direct the voting of such security, or the power to dispose of
or to direct the disposition of such security. Accordingly, more than one
person may be deemed to be a beneficial owner of the same security. A person
is also deemed to be a beneficial owner of any security which that person has
the right to acquire within 60 days, such as options or warrants to purchase
the Common Stock of the Company.
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the
beneficial ownership of the Company's Common Stock by each shareholder who
beneficially owns more than five percent (5%) of the Company's Common Stock,
the number of shares beneficially owned by each and the percent of
outstanding Common Stock so owned of record as of January 31, 1999. It is
believed by the Company that all persons listed have sole voting and
investment power with respect to their shares, except as otherwise indicated.
14
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENT
NAME AND ADDRESS TITLE OF OUTSTANDING BENEFICIALLY
OF BENEFICIAL OWNER CLASS COMMON STOCK OWNED
-------------------- -------- ------------ ------------
<S> <C> <C> <C>
Lee A. Balak Common Stock 3,468,000 28.1%
2450 Palmerston Avenue
West Vancouver, B.C. V7V 2W3
Canada
William E. McNerney Common Stock 621,415 5.0%
953 E. Sahara, #9B
Las Vegas, NV 89104
Alvin A. Snaper(1) Common Stock 1,004,155 8.1%
2800 Cameo Circle
Las Vegas, NV 89107
Cede & Co. Common Stock 5,875,337 47.6%
P.O. Box 222
Bowling Green Station
New York, New York 10274
</TABLE>
- ---------------------------------
(1) Cede & Co. Is depository that holds securities as nominee for
various broker-dealers and others to facilitate stock transfers.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In June 1998, the Company leased approximately 5,000 square feet of
offices and research facilities on a month-to-month basis for $2,000 per
month from Mr. Alvin A. Snaper, a director, Vice President, Secretary and
Treasurer of the Company and his partner.
In June 1998, the Company acquired its patent rights to its alloy
sensor technology from Mr. Alvin A. Snaper, a director, Vice President,
Secretary and Treasurer of the Company, in exchange for 100,000 restricted
shares of the Common Stock of the Company.
In June 1998, the Company acquired its patent rights to its
pipeline connection technology from Advanced Transmission Line ("ATL"), a
Nevada limited partnership, in exchange for 100,000 restricted shares of the
Common Stock of the Company. Mr. William E. McNerney, a director and
Executive Vice President of the Company, is a general partner of ATL; and Mr.
Alvin A. Snaper, a director, Vice President, Secretary and Treasurer of the
Company, is a special limited partner of ATL.
Mr. Lee A. Balak, the President and a director of the Company, has
loaned and advanced $181,281 to the Company as of June 30, 1998, for research
and development fees. These advances are non-interest bearing demand loans.
The research and development fees were paid by the Company to Neo-Dyne
Research, Inc. ("Aneo-Dyne"), a research and development company owned by
Alvin A. Snaper, a director and a Vice President, Secretary and Treasurer of
the Company. Neo-Dyne has conducted substantially all of the research and
development activities regarding the principal products of the Company,
including its batteries, its pipeline connection technology, and its allow
sensor technology, which provided continuity for such services.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the Registrant during its
fiscal year ended January 31, 1999.
15
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
- -------
<S> <C>
(i) Articles of Incorporation of the Registrant The Articles of Incorporation are incorporated
herein by reference to Exhibit 3(i) to the
Form 10-SB of the Registrant (File No. 0-24857)
(ii) Amendment to Articles of Incorporation The Amendment to the Articles of Incorporation
are incorporated herein by reference to Exhibit
3(ii) to the Form 10-SB of the Registrant (File
No.0-24857)
(iii) By-Laws of the Registrant The By-Laws are incorporated herein by reference to
Exhibit 3(iii) to the Form 10-SB of the Registrant
(File No. 0-24857)
10. Material Contracts
10(a) Plan of Reorganization and Acquisition dated
2/15/98 is incorporated herein by reference to
Exhibit 6(a) to the Form 10-SB of the
Registrant (File No.0-24857)
10(b) Various consulting agreements with Registrant are
incorporated herein by reference to the Form S-8
Registration Statement (File No. 333-66845) of the
Registrant
10(c) Consulting agreement with SeaWay Trading, Inc. dated
April 19, 1999.
10(d) Consulting agreement with William McNerney/RevTec of
April 1, 1999.
11. Statement re: computation of per share
earnings Reference is made to the Statements of Operations of the
Registrant for its fiscal year ended January 31, 1999,
which are incorporated by reference herein.
21. A description of the subsidiary of the
Registrant A description of the subsidiary of the Registrant is
incorporated herein by reference to Exhibit 21 of the
Form S-8 Registration Statement (0-24857) of the Registrant
23. Consent of Accountants
27. Financial Data Schedule
</TABLE>
16
<PAGE>
POWER TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Financial Statements
January 31, 1999, 1998 and 1997
<PAGE>
C O N T E N T S
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report ................................................. 3
Consolidated Balance Sheets .................................................. 4
Consolidated Statements of Operations ........................................ 5
Consolidated Statements of Stockholders' Equity............................... 6
Consolidated Statements of Cash Flows ........................................ 7
Notes to the Consolidated Financial Statements ............................... 8
</TABLE>
F-2
<PAGE>
[LETTERHEAD]
- -------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
of Power Technology, Inc.
We have audited the accompanying consolidated balance sheets of Power
Technology, Inc. (a development stage company) as of January 31, 1999, 1998
and 1997 and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended and from inception on January
19, 1996 through January 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statement 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 included 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 Power
Technology, Inc. (a development stage company) as of January 31, 1999, 1998
and 1997 and the results of its operations and cash flows for the years then
ended and from inception on January 19, 1996 through January 31, 1999 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 2 to the financial statements, the Company has had recurring operating
losses for the past several years. These factors raise substantial doubt
about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ CROUCH, BIERWOLF & CHISHOLM
Salt Lake City, Utah
April 19, 1999
F-3
<PAGE>
POWER TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
January 31,
--------------------------------------------------
1999 1998 1997
------------ ------------- --------------
<S> <C> <C> <C>
Current Assets
Cash $ 60,499 $ - $ -
Accounts Receivable 2,500 - -
------------- -------------- ---------------
Total Current Assets 62,999 - -
------------- -------------- ---------------
Property & Equipment, Net (Note 2) 11,384 - -
------------- -------------- ---------------
Other Assets
Prepaid Expenses 20,000 - -
Organizational Costs (Note 1) 10,000 15,000 20,000
Patents (Note 7) 65,000 - -
------------- -------------- ---------------
Total Other Assets 95,000 15,000 20,000
------------- -------------- ---------------
TOTAL ASSETS $ 169,383 $ 15,000 $ 20,000
------------- -------------- ---------------
------------- -------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 10,492 $ - $ -
Accounts payable - related
party (Note 6) 164,685 181,281 134,907
Accrued expenses 16,469 - -
------------- -------------- ---------------
Total Liabilities 191,646 181,281 134,907
------------- -------------- ---------------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value;
25,000,000 shares authorized;
12,534,700, 2,500,000 and 2,500,000
shares issued and outstanding,
respectively 12,535 2,500 2,500
Additional paid-in capital 857,392 22,500 22,500
Deficit Accumulated during the
development stage (892,190) (191,281) (139,907)
------------- -------------- ---------------
Total Stockholders' Equity (22,263) (166,281) (114,907)
------------- -------------- ---------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 169,383 $ 15,000 $ 20,000
------------- -------------- ---------------
------------- -------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE>
POWER TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
From
For the Years Ended Inception on
January 31, January 19, 1996
---------------------------------------------- to January 31,
1999 1998 1997 1999
--------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
REVENUES $ - $ - $ - $ 1,663
--------------- ------------- ------------- ----------------
EXPENSES
General & Administrative 515,588 51,374 139,907 708,532
Research & Development 166,936 - - 166,936
--------------- ------------- ------------- ----------------
TOTAL EXPENSES 682,524 51,374 139,907 875,468
--------------- ------------- ------------- ----------------
NET OPERATING LOSS (682,524) (51,374) (139,907) (873,805)
OTHER (EXPENSE):
Interest Expense (16,469) - - (16,469)
Loss on Foreign currency
translation (1,916) - - (1,916)
--------------- ------------- ------------- ----------------
NET LOSS $ (700,909) $ (51,374) $ (139,907) $ (892,190)
--------------- ------------- ------------- ----------------
--------------- ------------- ------------- ----------------
LOSS PER SHARE $ (.07) $ (.02) $ (.06) $ (.18)
--------------- ------------- ------------- ----------------
--------------- ------------- ------------- ----------------
WEIGHTED AVERAGE SHARES
OUTSTANDING 9,667,208 2,500,000 2,500,000 4,854,570
--------------- ------------- ------------- ----------------
--------------- ------------- ------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
POWER TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
From Inception on January 19, 1996 through January 31, 1999
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
---------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE
--------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Balance January 19, 1996 2,500,000 $ 2,500 $ 22,500 $ -
Net (loss) from inception to January 31, 1997 - - - (139,907)
---------- --------- ---------- -----------
Balance - January 31, 1997 2,500,000 2,500 22,500 (139,907)
Net (loss) for the year ended January 31, 1998 - - - (51,374)
---------- --------- ---------- -----------
Balance - January 31, 1998 2,500,000 2,500 22,500 (191,281)
Reorganization of Company, Reverse
acquisition of Zepplin, Inc. 2,800,000 2,800 (2,573) -
Common stock issued for cash 6,900,000 6,900 683,100 -
Common stock issued for patents 200,000 200 19,800 -
Common stock issued for services 134,700 135 134,565 -
Net (loss) for the year ended January 31, 1999 - - - (700,909)
---------- --------- ---------- -----------
Balance - January 31, 1999 12,534,700 $ 12,535 $ 857,392 $ (892,190)
---------- --------- ---------- -----------
---------- --------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
POWER TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
FROM
INCEPTION ON
FOR THE YEARS ENDED JANUARY 19, 1996
JANUARY 31, THROUGH
--------------------------------------- JANUARY 31,
1999 1998 1997 1999
----------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $ (700,909) $ (51,374) $ (139,907) $ (892,190)
Less non-cash items:
Amortization & Depreciation Expense 7,137 5,000 5,000 17,137
(Increase) decrease in accounts receivable (2,500) - - (2,500)
(Increase) decrease in prepaid expenses (20,000) - - (20,000)
Increase (decrease) in accounts payable (6,104) 46,374 134,907 175,177
Increase (decrease) in accrued expenses 16,469 - - 16,469
Common stock issued for services 134,700 - - 134,700
----------- ---------- ---------- -----------
Net Cash Provided (Used) by
Operating Activities (571,207) - - (571,207)
----------- ---------- ---------- -----------
Cash Flows from Investing Activities
Purchase of Equipment (13,294) - - (13,294)
Cash paid for patent (45,000) - - (45,000)
----------- ---------- ---------- -----------
Net Cash Provided (Used) by
Investing Activities (58,294) - - (58,294)
----------- ---------- ---------- -----------
Cash Flows from Financing Activities
Cash from stock issuances 690,000 - - 690,000
----------- ---------- ---------- -----------
Net Cash Provided (Used) by
Financing Activities 690,000 - - 690,000
----------- ---------- ---------- -----------
Increase in Cash 60,499 - - 60,499
Cash and Cash Equivalents at
Beginning of Period - - - -
----------- ---------- ---------- -----------
Cash and Cash Equivalents at
End of Period $ 60,499 $ - $ - $ 60,499
----------- ---------- ---------- -----------
----------- ---------- ---------- -----------
Supplemental Non-Cash Financing Transactions:
Cash paid for:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
POWER TECHNOLOGY, INC.
(A Development Stage Company)
Notes to the Financial Statements
January 31, 1999, 1998 and 1997
NOTE 1 - Summary Of Significant Accounting Policies
a. Organization
The Company was incorporated under the name of Zeppelin
Production Corporation on June 3, 1996 under the laws of the State
of Nevada. The Company was organized to provide aerial photography
and advertising promotion through the use of helium filled remote
control blimp, however operations were never secured.
Pursuant to a plan of reorganization and acquisition agreement,
dated February 15, 1998, the Company acquired Powertek Technology,
Inc. (Powertek) and changed it's name to Power Technology, Inc.
Because the management and operations of Powertek became the
management and operations of Zeppelin, this business combination has
been recorded as a reverse acquisition, thus Powertek is the
surviving accounting entity presented on the financial statements.
The historical information provided in these financial statements
prior to the acquisition are those of Powertek.
Powertek was incorporated under the laws of the State of Nevada
on January 19, 1996. The Company was organized primarily for the
purpose of developing an advanced battery technology for use in the
growing electric car industry. As of the date of these statements,
the Company has been able to advance the battery technology to a
Aproof of principle@ stage and is currently seeking additional
capital to finance the development of the technology to a
preliminary prototype stage.
b. Recognition of Revenue
The Company recognizes income and expense on the accrual
basis of accounting.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based
on the weighted average number of shares outstanding at the date of
the financial statements.
d. Cash and Cash Equivalents
The company considers all highly liquid investments with
maturities of three months or less to be cash equivalents.
F-8
<PAGE>
POWER TECHNOLOGY, INC.
(A Development Stage Company)
Notes to the Financial Statements
January 31, 1999, 1998 and 1997
NOTE 1 - Summary Of Significant Accounting Policies (continued)
e. Provision for Income Taxes
No provision for income taxes have been recorded due to net
operating loss carryforwards totalling approximately $892,190 that
will be offset against future taxable income. These NOL
carryforwards will begin to expire in the year 2012. No tax benefit
has been reported in the financial statements because the Company
believes there is a 50% or greater chance the carryforward will
expire unused.
Deferred tax asset and the valuation account is as follows:
<TABLE>
<CAPTION>
January 31,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Deferred tax asset:
NOL carryforward $ 303,345 $ 65,036 $ 47,568
Valuation allowance (303,345) (65,036) (47,568)
----------- ----------- -----------
$ - $ - $ -
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
f. Organization Costs
Organization expenses are recorded at cost and are being
amortized on a straight-line basis over five years. The expenses
represent pre-incorporation cost to establish the entity and develop
various sales venues.
g. Principles of Consolidation
These financial statements include the books of Power
Technology, Inc (formerly Zeppelin) and its wholly owned subsidiary
Powertek Technologies, Inc. All intercompany transactions and
balances have been eliminated in the consolidation.
h. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements and expenses during the reporting
period. In these financial statements, assets, liabilities and
expenses involve extensive reliance on management's estimates.
Actual results could differ from those estimates.
F-9
<PAGE>
POWER TECHNOLOGY, INC.
(A Development Stage Company)
Notes to the Financial Statements
January 31, 1999, 1998 and 1997
NOTE 2 - Going Concern
The accompanying financial statements have been prepared
assuming that the company will continue as a going concern. The
company has no assets and has had recurring operating losses for the
past several years and is dependent upon financing to continue
operations. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
NOTE 3 - Property and Equipment
Property and equipment consists of the following at January 31, 1999,
1998 and 1997:
<TABLE>
<CAPTION>
January 31,
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Office Equipment $ 8,863 $ - $ -
Manufacturing Equipment 2,267 - -
Leasehold Improvements 2,164 - -
----------- ----------- -----------
13,294 - -
Less Accumulated Depreciation (1,910) - -
----------- ----------- -----------
Total Property & Equipment $ 11,384 $ - $ -
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
Depreciation expense for the period ended January 31, 1999,
1998 and 1997 is $1,910, $0 and $0, respectively.
NOTE 4 - Capitalization
Prior to the reverse acquisition of Power Technology, Inc.
(formerly Zepplin Production Corp.) and Powertek Technology, Inc.
(Powertek) the Company was authorized 2,500,000 shares at a par
value of $.01 and had 2,500,000 issued and outstanding. The par
value in these financial statements have been retroactively restated
to show the new par value.
In the reverse acquisition the 2,500,000 shares of Powertek
were exchanged for 5,000,000 shares of Power Technology, Inc.
(formerly Zepplin Production Corp.). The total number of
post-acquisition shares authorized are 25,000,000 at a par value of
$.001. Total number of post-acquisition shares issued and
outstanding are 5,300,000 shares.
During June 1998, the Company issued 200,000 shares of common
stock for patents valued at $20,000.
During the year ended January 31, 1999, the Company issued
6,900,000 shares of common stock for cash of $690,000.
During November 1998, the Company issued 134,700 shares of
common stock in exchange for services valued at $134,700.
F-10
<PAGE>
POWER TECHNOLOGY, INC.
(A Development Stage Company)
Notes to the Financial Statements
January 31, 1999, 1998 and 1997
NOTE 5 - Development Stage Company
The Company is a development stage company as defined in
Financial Accounting Standards Board Statement No. 7. It is
concentrating substantially all of its efforts in raising capital,
in order to generate significant operations.
NOTE 6 - Accounts Payable - Related Party
The Company had $164,685 of research and development fees paid
for by a majority shareholder. The balance was non-interest bearing
through January 31, 1998. For the year ending January 31, 1999, the
balance was interest bearing at 10% per annum. The Company intends
to repay the balance within one year.
NOTE 7 - Patents
On June 9, 1998, the Company acquired patent number 4,107,997
issued by the U.S. Patent office in 1978. The Company paid $45,000
and 100,000 shares of common stock valued at $10,000 for the patent.
The patent is for an alloy sensor which generates a current when in
contact with water or other aqueous composition.
Also during 1998, the Company acquired patent number 5,442,846
for 100,000 shares of common stock valued at $10,000. This patent is
a procedure and apparatus for cold joining of metallic pipes.
NOTE 8 - Commitments
In connection with the acquisition of patent number 5,442,846,
the Company is committed to a 3% royalty on Gross Sales.
F-11
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange
Act, the registrant caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
POWER TECHNOLOGY, INC.
Date: July 8, 1999
<TABLE>
<CAPTION>
<S> <C>
By: /s/ Lee A. Balak
--------------------------------------------
Lee A. Balak
Director, President, Chief Financial Officer
and Principal Accounting Officer
/s/ Hugo P. Pomrehn /s/ William E. McNerney
-------------------------------------------- ------------------------------------------
Hugo P. Pomrehn William E. McNerney
Director Director and Executive Vice President
</TABLE>
<PAGE>
EXHIBIT 10(c)
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is entered into on April
19, 1999, by and between Power Technology, Inc., a Nevada corporation and its
subsidiaries or affiliates (the "Company"), and SeaWay Trading, Inc., a Delaware
corporation (the "Consultant").
WHEREAS, the Company desires to expand, develop, and market its
products and technology including, but not limited to: development,
marketing, and sales of their products. In addition, the Company
warrants that their proprietary technology has been realized into a
working prototype.
In addition, the Company desires to expand its marketing into the
international arena, and secure overseas protection of its proprietary
technology; as well as maintain a corporate representative office within the
World Trade Center in Long Beach to achieve the aforementioned goals, subject to
the Board of Directors approval.
WHEREAS, the Company recognizes that the Consultant can contribute to
the marketing, patenting, management, and development, of the Company.
WHEREAS, the Company believes it to be important both to the future
prosperity of the business and to the Company's general interest, to retain
Consultant as consultant to the Company and have Consultant available to the
Company, for consulting services in the manner and subject to the terms,
covenants, and conditions, set forth herein;
WHEREAS, in order to accomplish the foregoing, the Company and
Consultant desire to enter into this Agreement, effective on April 19, 1999, to
provide certain assurances as set forth herein.
NOW THEREFORE, in view of the foregoing and in consideration of the
premises and mutual representations, warranties, covenants, and promises,
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. RETENTION. The Company hereby retains the Consultant during the Consulting
Period (as defined in Section 2 below), and Consultant hereby agrees to be so
retained by the Company, all subject to the terms and provisions of this
Agreement.
2. CONSULTING PERIOD. The Consulting Period shall commence on Monday, April 19,
1999, and terminate no earlier than April 30, 2001.
3. DUTIES OF CONSULTANT. During the Consulting Period, the Consultant shall use
reasonable and best efforts, to perform those actions and responsibilities
necessary to organize the marketing program via strategic alliances, on behalf
of the Company and its subsidiaries and to assist in protecting the proprietary
technology held by the Company, and international candidates for the
<PAGE>
marketing of the aforementioned product for the Company overseas (the
"Services").
Consultant shall render such services diligently and to the best of its
ability. Consultant shall report to Mr. Lee Balak, President. Consultant shall
present various opportunities to the Company, and the Company shall be under no
obligation, to accept such opportunities.
4. OTHER ACTIVITIES OF CONSULTANT. The Company recognizes that Consultant shall
perform only those services that are reasonably required to accomplish the goals
and objectives set forth herein. The Consultant shall provide services to other
businesses and entities, other than the Company. Consultant shall be free to
directly or indirectly, own, manage, operate, control, finance, acquire, invest,
or participate, in the ownership, management, or otherwise with (collectively,
be "Affiliated" with), any business or enterprise, engaged in any business
including, but not limited to any business that is the same as, substantially
similar to, or otherwise competitive with, adverse or otherwise, related to the
Company. Consultant may be Affiliated with any entity, which may provide
services to the Company. In the event Consultant is Affiliated with any entity
which proposes to deal with the Company, Consultant shall disclose the nature of
such relationship to the Company, prior to the Company making any decision, and
shall obtain the approval of the Company, which approval shall be conclusively
deemed granted upon written notice from Mr. Lee Balak, or his, or the Company's,
designated representative. The Company hereby waives any conflict of interest
that may arise from a relationship between Consultant and any entity, which
Consultant is affiliated with. This Agreement may be assigned by Consultant to
an entity designated by Consultant, whether Affiliated or not Affiliated with
Consultant and wherever located.
5. COMPENSATION. In consideration for Consultant entering into this Agreement,
the Company shall compensate consultant as follows:
a. MONTHLY FEES AND BENEFITS.
i. RETAINER. The Company shall pay to Consultant, a
non-refundable, monthly retainer of USD $15,000: Such fee
shall be paid monthly by the Company on the first of the
month.
ii. EXPENSES. The Company shall pay all such expenses
reasonably incurred during the Consulting Period by the
Consultant, for business purposes related to, or in the
furtherance of; the goals and objectives of the Company
and/or, the provision of the Services (collectively, "Company
Purposes"), including, expenses reasonably incurred with
respect to the Consultant's travel (including Business Class
travel for flights), meals, entertainment, and other customary
and reasonable expenses, for Company Purposes. The Company
shall pay such expenses directly, or upon submission of bills,
receipts, and/or vouchers by the Consultant, by direct
reimbursement, to the Consultant. All expenses shall be
pre-approved by the Company prior to their occurrence or such
non-approved expenses are not required to be paid by the
Company to the Consultant.
b. ACQUISITION AND DISPOSITION FEES. The Company shall pay to
Consultant the following fees for the acquisition of merger candidates
or other entities, introduced through
<PAGE>
the efforts of Consultant, resulting in a merger or acquisition, in
each year during the Consulting Period. Fees may be paid in cash or
Common Stock, at the closing of each transaction:
i. Six percent (6%) of the first USD $3,000,000 of gross asset
value price or sale price, whichever is higher, in each year;
ii. Five percent (5%) of the next USD $6,000,000 of gross
asset value price or sale price, whichever is higher, in each
year;
iii. Four percent (4%) of the next USD $9,000,000 of gross asset
value price or sale price, whichever is higher, in each year;
iv. Three percent (3%) of the next USD $12,000,000 of gross
asset value price or sale price, whichever is higher, in each
year;
v. Two percent (2%) of the next USD $15,000,000 of gross
asset value price or sale price, whichever is higher, in each
year;
vi. One percent (1%) of the aggregate gross purchase and sales
prices, whichever is higher, in each year, during the Consulting
Period, in excess of USD$25,000,000.00, on any one year.
All fee earned herein shall be due and payable in stock, based upon the
bid price, on the day of execution, of this Agreement.
c. PAYMENT DATE.
i. All fees under section 5(b) shall be payable quarterly,
when earned.
6. TERMINATION. Subject to the cure provisions contained herein, the Company may
terminate the Consulting Period upon written notice. Termination shall not occur
for a period of one year except for cause. Cause shall be defined as the
Consultant fails to perform the duties outlined in this agreement in good faith
and fails to properly service the Company's needs as reasonably expected under
the implied "good faith" provisions herein 30 days written notice shall be given
to the Consultant with the opportunity to cure within 30 days. Such Notice of
Termination shall state specifically the facts and circumstances claimed as the
basis for said Termination for the Consulting Agreement. Such notice has to be
approved by a majority of the Board of Directors of the Company
a. Not less than 15 days after receipt of the Notice of
Intended Termination, Consultant shall have the opportunity to
a full, complete, and fair hearing, in the presence of the
majority of the Board of Directors. The Board shall present to
Consultant, its reasons for the termination, including the
specific actions, in action's, omissions, or other facts
relied upon by the Board in making its determination that the
Consultant shall have the right to rebut any evidence or
allegations of wrongdoing and shall have the right to be
represented by counsel of Consultant's choice, at such
hearing. After such hearing, should the Board determine that
this Agreement shall be terminated for Cause, it shall issue a
written Final Notice of Termination to Consultant, approved by
a majority of the Board of Directors, set forth in detail, the
specific facts, conclusions, and findings of the Board, in
<PAGE>
determining that Cause exists for the termination of this
Agreement. The Final Notice of Termination shall be effective
30 days from the original Notice of Termination unless
otherwise ordered by a majority of the Board of Directors of
the Company
7. NOTICE. Any notice required, permitted, or desired to be given,
pursuant to any of the provisions of this Agreement, shall be deemed to have
been sufficiently given or served for all purposes, if delivered in person,
or sent via Certified mail, return receipt requested, postage and fees
prepaid, or by national overnight delivery prepaid service, to the parties at
their addresses, set forth above. Copies of notices to Consultant shall be
sent to the attention of the parties, at the below address. Notice to
Consultant shall be sent to Consultant at the below address. Any party hereto
may at any time and from time to time hereafter, change the address to which
notice shall be sent hereunder, by notice to the other party given under this
paragraph. The date of the giving of any notice sent via mail, shall be the
day two days after the posting of the mail, except that notice of an address
change shall be deemed given when received. The addresses of the parties are
as follows:
TO CONSULTANT: TO THE COMPANY:
SEAWAY TRADING, INC. POWER TECHNOLOGY, INC.
One World Trade Center suite 800 1000 W. Bonanza Rd
Long Beach, California 90831 Las Vegas, Nevada 89106
Telephone: 562-983-8106 Telephone: 702-386-9144
Fax: 562-983-8124 Fax: 702-386-9144
8. WAIVER. No course of dealing, nor, any delay on the part of either
party in exercising any rights hereunder, will operate as a waiver of any
rights of such party. No waiver of any default or breach of this Agreement or
application of any term, covenant, or provision, hereof, shall be deemed a
continuing waiver, or a waiver of any other breach, default, or the waiver of
any other application of any term, covenant, or provision.
9. SUCCESSORS: BINDING AGREEMENTS. Prior to the effectiveness of any
succession (whether direct or indirect, by purchase, merger, consolidation,
or otherwise), to all, or substantially all, of the business and/or assets of
the Company, the Company will require the successor, to expressly assume and
agree to perform this Agreement in the same manner, and to the same extent,
that the Company would be required to perform it, if no such succession had
occurred. As used in this agreement, "Company" shall mean the Company has
defined above and any successor to its business and/or assets, which executes
and delivers the Agreement, provided for in this Section 9, or which
otherwise becomes bound by all the terms and provisions of this Agreement, by
operation of law. This agreement is not transferable by Consultant since it
requires the specific services of Consultant without the prior written
approval of the Board of Directors and the President of the Company
10. SURVIVAL OF TERMS. Notwithstanding the termination of this Agreement for
whatever reason, the provisions hereof, shall survive such termination, unless,
the context requires otherwise.
<PAGE>
11. COUNTERPARTS. This agreement may be executed in two or more
counterparts, each of which, shall be deemed to be an original, but all of
which together, shall constitute one and the same instrument. Any signature
by facsimile, shall be valid and binding, as if an original signature were
delivered.
12. CAPTIONS. The caption headings in this Agreement are for convenience of
reference only, and are not intended, and shall not be construed, as having any
substantive effect.
13. GOVERNING LAW. This Agreement shall be governed, interpreted, and
construed, in accordance with the laws of the state of California, applicable
to agreements entered into and to be performed entirely therein. Any suit,
action, or proceeding, with respect to this Agreement, shall be brought
exclusively in the state courts of the state of Nevada, or in the federal
courts of the United States, which are located in Los Angeles, California.
The parties hereto, hereby agree to submit to the jurisdiction and venue of
such courts, for the purposes hereof. Each party agrees that to the extent
permitted by law, the losing party in a suit, action, or proceeding in
connection herewith, shall pay the prevailing party, its reasonable
attorney's fees, incurred in connection therewith.
14. ENTIRE AGREEMENT MODIFICATIONS. This Agreement constitutes the entire
agreement between the parties and supersedes all prior understandings and
agreements, whether oral or written, regarding Consultant's retention by the
Company. This Agreement shall not be altered or modified, except in writing,
duly executed by the parties hereto.
15. WARRANTY. The Company and Consultant each hereby warrant and agree, that
each is free to enter into this Agreement, that the parties signing below are
duly authorized and directed to execute this agreement, and that this Agreement
is valid, binding, and enforceable, against the parties hereto. The parties
further agree that they shall both use good faith efforts in their performance
of the covenants, conditions and obligations stated herein and any failure to do
so is a material breech of this Agreement.
16. SEVERABILITY. If any term, covenant, provision, or any part thereof, is
found by any court of competent jurisdiction to be invalid, illegal, or
unenforceable in any respect, the same shall not affect the remainder of such
term, covenant, provision, any other terms, covenants or provisions, or any
subsequent application of such term, covenant or provision, or portion thereof.
In lieu of any such invalid, illegal, or unenforceable provision, the parties
hereto intend that there shall be added, as part of this Agreement, a term,
covenant, or provision, as similar in terms, to such invalid, illegal, or
unenforceable term, covenant of provision, or part thereof, as may be possible
and be valid, legal, and enforceable.
IN WITNESS HEREOF, the parties hereto have duly executed and delivered
this Agreement, as of the day an year first written above.
<PAGE>
SEAWAY TRADING POWER TECHNOLOGY, INC.
By: By:
--------------------------------- -------------------------------
Sardi Carrano- President Lee Balak - President
<PAGE>
EXHIBIT 10(d)
CONSULTING AGREEMENT BETWEEN POWER TECHNOLOGY, INC.
AND WILLIAM MCNERNEY AND/OR REV-TECH
Effective April 1, 1999 and for a period of one year subject to review after
that time.
Power Technology, Inc. will pay a consulting fee in the amount of $5,000.00
per month. Payment to be made in the form of restricted stock of Power
Technology (PWTC).
The stock shall be issued on a quarterly basis and issued within ten days
after the quarter end.
The value of the stock shall be computed at a dollar value equal to 85% of
the lowest bid trading price during the calendar quarter.
Power Technology, Inc
By: /s/ LEE A. BALAK
-----------------------------
Lee A. Balak, President
/s/ WILLIAM MCNERNEY
- --------------------------------
William McNerney and/or RevTec
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to use in the Form 10-KSB of our report dated
April 19, 1999 relating to the financial statements of Power Technology,
Inc., which is contained therein.
/s/ Crouch, Bierwolf & Chisholm
Crouch, Bierwolf & Chisholm
July 7, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 60,499
<SECURITIES> 0
<RECEIVABLES> 2,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 62,999
<PP&E> 11,384
<DEPRECIATION> (1,910)
<TOTAL-ASSETS> 169,383
<CURRENT-LIABILITIES> 191,646
<BONDS> 0
0
0
<COMMON> 12,535
<OTHER-SE> (34,798)
<TOTAL-LIABILITY-AND-EQUITY> 169,383
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 682,524
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,469
<INCOME-PRETAX> (700,909)
<INCOME-TAX> 0
<INCOME-CONTINUING> (700,909)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (700,909)
<EPS-BASIC> (.07)
<EPS-DILUTED> (.07)
</TABLE>
