UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1999
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from __________ to
________________
Commission File Number:
Micron Enviro Systems, Inc.
(Exact name of registrant as specified in its charter)
Nevada 98-0202-944
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
17920-105 Avenue, Suite 200, Edmonton, Alberta, Canada T5S 2H5
(Address of principal executive offices) (Zip Code)
(780) 414-1525
(Registrant'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 Registered:
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, Par Value $.001
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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. |X| Yes 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. |_|
State issuer's revenues for its most recent fiscal year. $0
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.)
APPLICABLE ONLY TO CORPORATE REGISTRANTS
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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of December 31, 1999, there were
7,620,000 shares of the issuer's $.001 par value common stock issued and
outstanding.
PART I
Item 1. Description of Business.
Development of the Company. The Company was originally incorporated on January
23, 1998.
The executive offices of the Company are located at 17920-105 Avenue, Suite 200,
Edmonton, Alberta, Canada T5S 2H5. The Company's telephone number is
780.414.1525.
Business of the Company. The Company was originally incorporated for the
purposes of manufacturing low cost housing in Argentina and to develop waste oil
recycling technology in Canada and the United States. After conducting its due
diligence, the Company decided to shift the focus of its business. The Company
has completed the research and development of technology designed to recycle
hydraulic oil. The Company is currently conducting a market analysis and
feasibility study regarding that technology.
On or about December 24, 1998, pursuant to a loan agreement, the Company
acquired from Tangle Creek Cattle Co., a Canadian corporation ("Tangle Creek"),
all of the assets including, but not limited to, all of the equipment and
inventory of Dustcheck Filters, Inc. ("Dustcheck"). Tangle Creek had previously
purchased those assets from a judicially appointed Receiver/Manager of
Dustcheck. By separate agreement, the Company acquired the right to technology
and intellectual property relating to a re-usable, non-mechanical electro-static
air filter ("Filter") that cleans and sanitizes circulated air at the supply
point of a building's heating, ventilating, or air conditioning system. The
Filter is comprised of a filter membrane encased in plastic and capable of
removing dust and dust particulate, molds, fungi, and bacteria that have a
particular negative impact on individuals suffering from asthma and allergies.
The Company has also researched and developed an all-purpose cleaning mitt
("Mitt").
The Company currently utilizes former staff of Dustcheck as consultants. In
conjunction with these consultants, the Company is in the process of finalizing
patent applications and developing a marketing and distribution strategy for
both the Filter and the Mitt.
The Company's Subsidiary. In or about March, 1999, the Company issued 2,000,000
shares of its $.001 par value common stock to shareholders of Pinnacle Plastics
Inc., a private corporation incorporated in the Province of Alberta, Canada
("Pinnacle"), in exchange for 2,000,000 shares of Pinnacle's common stock. The
2,000,000 shares of Pinnacle stock represented, at the time, 100% of the issued
and outstanding common stock of Pinnacle. Pinnacle is now a wholly-owned
subsidiary of the Company.
Overview of Competition. The Company currently faces significant competition
with respect to the Cold Filter and this competition may increase as new
competitors enter the market. Several of these competitors may have longer
operating histories and greater financial, marketing and other resources than
the Company. With respect to all of the Company's products, there can be no
assurance that the Company will be able to compete successfully with existing or
new entrant companies. In addition, new product introductions or enhancements by
the Company's competitors could cause a decline in sales or loss of market
acceptance of the Company's existing products. Increased competitive pressure
could also lead to intensified price-based competition resulting in lower prices
and profit margins particularly with respect to the Cold Filter. Such increased
competitive pressure, lower prices and profit margins could adversely affect the
Company's business and results of operations.
The strategy of the Company for growth is substantially dependent upon its
ability to market and distribute products successfully. Other companies,
including those with substantially greater financial, marketing and sales
resources, compete with the Company, and have the advantage of marketing
existing products with existing production and distribution facilities. There
can be no assurance that the Company will be able to market and distribute
products on acceptable terms, or at all. Failure of the Company to market its
products successfully could have a material adverse effect on the Company's
business, financial condition or results of operations.
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The strategy of the Company for growth may be substantially dependent upon its
ability to introduce successfully new products and expand into new markets.
Accordingly, the ability of the Company to compete may be dependent upon the
ability of the Company to continually enhance and improve its products. There
can be no assurance that competitors will not develop technologies or products
that render the products of the Company obsolete or less marketable. The Company
may be required to adapt to technological changes in the industry and develop
products to satisfy evolving industry or customer requirements, any of which
could require the expenditure of significant funds and resources, and the
Company does not have a source or commitment for any such funds and resources.
The Company might be required to refine and improve its products. Continued
refinement and improvement efforts remain subject to the risks inherent in new
product development, including unanticipated technical or other problems which
could result in material delays in product commercialization or significantly
increase costs.
The Company competes directly with other companies and businesses that have
developed and are in the process of developing technologies and products which
will be competitive with the products developed and offered by the Company.
There can be no assurance that other technologies or products which are
functionally equivalent or similar to the technologies and products of the
Company have not been developed or are not in development. The Company believes
that many of these competitors have greater financial and other resources, and
more experience in research and development, than the Company.
There can be no assurance that competitors have not or will not succeed in
developing technologies and products that are more effective than any which have
been or are being developed by the Company or which would render the products of
the Company obsolete and noncompetitive. Many of the competitors of the Company
have substantially greater experience, financial and technical resources and
production, marketing and development capabilities than the Company.
Product Liability. The business of the Company will expose it to potential
product liability risks that are inherent in the testing, manufacturing and
marketing of cleaning and filtration products. The Company does not currently
have product liability insurance, and there can be no assurance that the Company
will be able to obtain or maintain such insurance on acceptable terms or, if
obtained, that such insurance will provide adequate coverage against potential
liabilities. The Company faces an inherent business risk of exposure to product
liability and other claims in the event that the development or use of its
technology or products is alleged to have resulted in adverse effects to
consumers. Such risk exists even with respect to those products that are
manufactured in licensed and regulated facilities or that otherwise possess
regulatory approval for commercial sale. There can be no assurance that the
Company will avoid significant product liability exposure. There can be no
assurance that insurance coverage will be available in the future on
commercially reasonable terms, or at all, that such insurance will be adequate
to cover potential product liability claims or that a loss of insurance coverage
or the assertion of a product liability claim or claims would not materially
adversely affect the Company's business, financial condition and results of
operations. Although the Company has taken, and will continue to take, what it
believes are appropriate precautions, there can be no assurance that it will
avoid significant liability exposure. An inability to obtain product liability
insurance at acceptable cost or to otherwise protect against potential product
liability claims could prevent or inhibit the commercialization of products
developed by the Company. A product liability claim could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Employees. The Company currently has no employees; however, the Company has
entered into a letter of agreement with Mr. Kosakewich wherein Mr. Kosakewich
has agreed to provide month-to-month consulting services to the Company. The
letter of agreement anticipates the entering of a formal consulting agreement
containing the terms and conditions specified in the letter. Management of the
Company anticipates using consultants for business, accounting and engineering
services on an as-needed basis. Because the Company anticipates entering into
licensing and manufacturing agreements with third parties, the Company
anticipates that it will require very few employees during the next fiscal year.
Therefore, the Company does not anticipate any material change in the number of
employees during the next 12 months.
Item 2. Description of Property.
Property held by the Company. As of the dates specified in the following table,
the Company held the following property:
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- --------------------------------------------------------------------------------
Property December 31, 1999 December 31, 1998
- --------------------------------------------------------------------------------
Property December 31
Cash and Equivalents $ 85,567.00 $ 0.00
- --------------------------------------------------------------------------------
Machines and Equipment $164,442.00 $ 1,783.00
- --------------------------------------------------------------------------------
Molds $ 60,363.00 $ 1,783.00
- --------------------------------------------------------------------------------
Manufacturing and $225,052.00 $ 0.00
- --------------------------------------------------------------------------------
Our Facilities. At this time, we occupy facilities provided by Tangle Creek
Cattle Co., located at 17920-105 Avenue, Suite 200, Edmonton, Alberta, Canada.
We are committed to lease the property for a period of 2 years. The future
minimum lease payments as of December 31, 1999, are $18,245.00 for the year 2000
and $3,635.00 for the year 2001.
Item 3. Legal Proceedings.
The Company is not aware of any pending litigation nor does it have any reason
to believe that any such litigation exists.
Item 4. Submission of Matters to Vote of Security Holders
Not Applicable
PART II
Item 5. Market Price for Common Equity and Related Stockholder Matters.
The Company is a reporting company with the Securities and Exchange Commission
("SEC"). The Company participates in the Over-the-Counter Bulletin Board
Quotation Service maintained by National Association of Securities Dealers, Inc.
("OTCBB"). The OTCBB is an electronic quotation medium for securities traded
outside of the Nasdaq Stock Market and prices for the Company's common stock are
published on the OTC Bulletin Board under the trading symbol "MSEV". This market
is extremely limited and the prices quoted are not a reliable indication of the
value of the Company's common stock. Such quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not represent
actual transactions. According to Yahoo!Finance over the last two and one half
months, the Company's common stock had a low bid price of $0.30 per share and a
high bid price of $0.87 per share. The bid price is currently approximately
$0.51 per share.
The Company is authorized to issue 200,000,000 shares of common stock, $.001 par
value, each share of common stock having equal rights and preferences, including
voting privileges. The shares of $.001 par value common stock of the Company
constitute equity interests in the Company entitling each shareholder to a pro
rata share of cash distributions made to shareholders, including dividend
payments. The Bylaws of the Company specify how the cash available for
distribution, whether occurring from operations or sales or refinancing, is to
be shared among the shareholders. The holders of the Company's common stock are
entitled to one vote for each share of record on all matters to be voted on by
shareholders. There is no cumulative voting with respect to the election of
directors of the Company or any other matter, with the result that the holders
of more than 50% of the shares voted for the election of those directors can
elect all of the Directors. The holders of the Company's common stock are
entitled to receive dividends when, as and if declared by the Company's Board of
Directors from funds legally available therefor; provided, however, that cash
dividends are at the sole discretion of the Company's Board of Directors. In the
event of liquidation, dissolution or winding up of the Company, the holders of
common stock are entitled to share ratably in all assets remaining available for
distribution to them after payment of liabilities of the Company and after
provision has been made for each class of stock, if any, having preference in
relation to the Company's common stock. Holders of the shares of Company's
common stock have no conversion, preemptive or other subscription rights, and
there are no redemption provisions applicable to the Company's common stock. All
of the outstanding shares of Company's common stock are duly authorized, validly
issued, fully paid and non-assessable.
Dividend Policy. The Company has never declared or paid a cash dividend on its
capital stock and does not expect to pay cash dividends on its Common Stock in
the foreseeable future. The Company currently intends to retain its earnings, if
any, for use in its business. Any dividends declared in the future will be at
the discretion of the Board of Directors and subject to any restrictions that
may be imposed by the Company's lenders
As of December 31, 1999, there were no warrants to purchase common stock
outstanding.
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Penny Stock Regulation. The Commission has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks". Penny
stocks are generally equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the Nasdaq system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, deliver a standardized
risk disclosure document prepared by the Commission, which (i) contained a
description of the nature and level of risk in the market for penny stocks in
both public offerings and secondary trading; (ii) contained a description of the
broker's or dealer's duties to the customer and of the rights and remedies
available to the customer with respect to violation to such duties or other
requirements of Securities' laws; (iii) contained a brief, clear, narrative
description of a dealer market, including "bid" and "ask" prices for penny
stocks and significance of the spread between the "bid" and "ask" price; (iv)
contains a toll-free telephone number for inquiries on disciplinary actions; (v)
defines significant terms in the disclosure document or in the conduct of
trading in penny stocks; and (vi) contains such other information and is in such
form (including language, type, size and format), as the Commission shall
require by rule or regulation. The broker-dealer also must provide, prior to
effecting any transaction in penny stock, the customer (i) with bid and offer
quotations for the penny stock; (ii) the compensation of the broker-dealer and
its salesperson in the transaction; (iii) the number of shares to which such bid
and ask prices apply, or other comparable information relating to the depth and
liquidity of the market for such stock; and (iv) month account statements
showing the market value of each penny stock held in the customer's account. In
addition, the penny stock rules require that prior to a transaction in a penny
stock not otherwise exempt from those rules; the broker-dealer must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written acknowledgment of the receipt
of a risk disclosure statement, a written agreement to transactions involving
penny stocks, and a signed and dated copy of a written suitably statement. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
If any of the Company's securities become subject to the penny stock rules,
holders of those securities may have difficulty selling those securities.
Item 6. Management's Discussion and Analysis of Financial Condition on Plan of
Operation.
The following information specifies forward-looking statements of our
management. Forward-looking statements are statements that estimate the
happening of future events and are not based on historical fact. Forward-looking
statements may be identified by the use of forward-looking terminology such as
"may", "will", "could", "expect", "estimate", "anticipate", "probable",
"possible", "should", "continue", or similar terms, variations of those terms or
the negative of those terms. Actual results may differ materially from those
contemplated by the forward-looking statements.
Results of Operations. The Company has not yet realized any revenue from
operations, nor does it expect to in the foreseeable future. The Company's only
source of liquidity in the next 12 months will be the sale of its securities.
The Company has limited cash reserves and is dependent on raising significant
funds in order to develop and commercially exploit its financial services
website. In the event the Company is unable to raise significant funds, the
Company will be unable to implement its business plan.
Plan of Operation. The Company has not received revenue from operations during
any of the three fiscal years immediately prior to the filing of this Annual
Report on Form 10KSB. The Company currently has cash reserves of $46.752.00,
which the Company believes will satisfy its cash requirements for approximately
one-hundred and twenty (120) days following the filing of this Annual Report on
Form 10KSB. The Company plans to raise additional financing through private
offerings of its $.001 par value common stock during the next year. The Company
will use the capital raised from such offering to finance the production and
marketing of the Filter, Mitt and the plastic wastewater and drainage chambers.
The Company's primary marketing focus will be on the drainage chambers produced
by Pinnacle. The Company does not anticipate seasonal fluctuations in its
business activities.
Although the Company is continuing to pursue the marketing and sale of the
Filter and Mitt, as well as the marketing of the oil recycling technology, the
Company's immediate focus will involve the production, through Pinnacle, of
plastic septic and wastewater drainage chambers.
Pinnacle acquired, from 815969 Alberta Ltd., the exclusive right to license a
patented plastics forming technology that allows forming of plastic from
reground and recycled plastic. Pinnacle is currently manufacturing patented
plastic drainage chambers for Cultec Inc. of Brookfield, Connecticut ("Cultec"),
a company which holds patents for the technology. Pinnacle is manufacturing to
direct purchase orders of Cultec.
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Traditionally, Cultec products have been manufactured by thermoforming.
Thermoforming requires the use of relatively high heat and expensive machinery,
including vacuum suction equipment and high cost molds and dies. These costs are
included in the price of the product from Cultec's manufacturers. The Company
hopes that Pinnacle, by the use of a new patented process of plastic forming,
will become the low-cost manufacturer of Cultec products in North America.
Pinnacle derives its cost advantage from the new patented technology, which
allows plastic to be formed at considerably lower temperatures utilizing regrind
and recycled plastic, without expensive thermoforming equipment.
Pinnacle, as licensee, has received from the patent holders, assurance that
Pinnacle holds an exclusive right in Canada and the United States to utilize the
technology in relation to the requirements of Cultec. A number of prototypes
have already been manufactured by Pinnacle and approved by Cultec as satisfying
or exceeding its specifications.
Cultec is a primary producer of plastic septic, storm and wastewater systems.
The Company believes that its main competition will be from conventional
pipe/gravel and concrete systems. The Company believes that the unique design
and features of the Cultec systems offer it a competitive advantage over its
competition. The Company believes that the Cultec products outperform the older
methods of drainage, are less expensive to transport and install and result in
reduced labor costs. Last year Cultec sold approximately 900,000 drainage
chambers in the United States and Canada and expects to increase that output in
2000.
Pinnacle, with the financial support of the Company, completed fabrication of
its manufacturing equipment and molds and has installed the equipment in a
manufacturing facility in Edmonton, Alberta, Canada. The manufacturing facility
is located adjacent to the premises of RPC Manufacturing Inc. ("RPC"), who is
the primary supplier of plastic sheet used by Pinnacle to form and manufacture
the drainage chambers.
During the 4th Quarter of 1999, Pinnacle, at the request of Cultec, experimented
with several different recycled high-density plastic resins to form the plastic
sheet. Pursuant to purchase order from Cultec, Pinnacle produced and shipped
1,000 units of the plastic chambers to Cultec, for delivery to Cultec's network
of distributors in the United States. Cultec, utilizing the initial shipment,
exposed the product to distributors and end users and profiled the product at
major industry trade shows to determine market acceptance and the size of the
market for the product manufactured by Pinnacle.
As a result of this exposure and the industry reaction, Pinnacle was required to
make minor modifications to its production specifications and production
equipment. The Company believes that after these modifications, Cultec has
provided enough purchase orders to enable Pinnacle to commence commercial
production in the 1st Quarter of 2000 for delivery of product to Cultec in the
United States.
Pinnacle's existing manufacturing equipment has the capacity to produce 8,000
units of product on a monthly basis, and Cultec have advised Pinnacle that
Cultec has the demand in the Eastern and Central United States for Pinnacle's
full production.
The Company, in collaboration with Cultec, has initiated negotiations with a
Canadian-Northwestern United States distributor to supply the Cultec product to
the Western Canadian and Northwestern United States markets. Should those
negotiations prove successful, the Company will be required to expand Pinnacle's
production facilities and, in anticipation of this expansion, the Company has
entered into discussions with RPC to determine its ability to expand production
to satisfy the requirements of Pinnacle.
The Company, in an effort to expand Pinnacle's line of plastic products, has
retained a consultant to conduct preliminary testing of a plastic pallet design
and market analysis, which should conclude in the 1st Quarter of 2000.
Our success is materially dependent upon our ability to satisfy additional
financing requirements. We are reviewing our options to raise substantial equity
capital. We cannot estimate when we will begin to realize positive gross
revenue. In order to satisfy our requisite budget, management has held and
continues to conduct negotiations with various investors. We anticipate that
these negotiations will result in additional investment income for us. To
achieve and maintain competitiveness, we may be required to raise additional
substantial funds. We anticipate that we will need to raise significant capital
to develop, promote and conduct its operations. Such capital may be raised
through public or private financing as well as borrowing and other sources.
There can be no assurance that funding for our operations will be available
under favorable terms, if at all. If adequate funds are not available, we may be
required to curtail operations significantly or to obtain funds by entering into
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arrangements with collaborative partners or others that may require us to
relinquish rights to certain products and services that we would not otherwise
relinquish.
Risks Associated with International Operations and Expansion. A key part of the
Company's strategy is to promote and commercially exploit its services in
international markets, as the Internet is an international medium. There can be
no assurance that the Company will be able to successfully market and operate
its services in foreign markets. In addition to the uncertainty as to the
Company's ability to generate revenues from foreign operations and create an
international presence, there are certain risks inherent in doing business on an
international level, such as unexpected changes in regulatory requirements,
export restrictions, trade barriers, difficulties in staffing and managing
foreign operations, longer payment cycles, problems in collecting accounts
receivable, political instability, fluctuations in currency exchange rates,
software piracy, seasonal reductions in business activity in certain other parts
of the world and potentially adverse tax consequences, which could adversely
impact the success of the Company's international operations. There can be no
assurance that one or more of such factors will not have a material adverse
effect on the Company's potential future international operations and,
consequently, on the Company's business, operating results and financial
condition. In order to attract and retain a user base, the Company plans
significant expenditures on sales and marketing, content development, technology
and infrastructure. Many of these expenditures may be planned or committed in
advance and in anticipation of future revenues. If the Company's revenues in a
particular quarter are lower than it anticipates, it may be unable to reduce
spending in that quarter. As a result, any shortfall in revenues would likely
adversely affect the Company's quarterly operating results.
The Company may sell its services in currencies other than the United States
Dollar, which would make the management of currency fluctuations difficult and
expose the Company to risks in this regard. The Company's results of operations
are subject to fluctuations in the value of various currencies against the
United States Dollar. Although management will monitor the Company's exposure to
currency fluctuations, there can be no assurance that exchange rate fluctuations
will not have a material adverse effect on the Company's business, results of
operations or financial condition.
Liquidity and Capital Resources. The Company has been in the development stage
since January 23, 1998 (inception). As of December 31, 1999, Company has not
realized any profits from its operations. The Consolidated Statement of Cash
Flows for the year ended December 31, 1999 indicate a net loss of $327,219.00,
compared to a net loss of $35,050.00 for the period from January 23, 1998
(inception) to December 31, 1998. For the year ended December 31, 1999, the
Company's subsidiary, Pinnacle, had revenues of $38,502.00 with cost of goods
sold at $37,802.00, Pinnacle realized a gross profit of $700.00. The Company
anticipates that it will realize positive revenue sometime during the second
quarter of 2000 as Pinnacle moves to full commercial production. For the year
ended December 31, 1999, the Company had total expenses of $322,936.00. For the
period from January 23, 1998, to December 31, 1998, the Company had total
expenses of $35,050.00. The increase resulted primarily from increases in direct
costs, office expense, professional services, travel expense, research and
development and depreciation and amortization. The Company is not aware of any
trends, demands, commitments or uncertainties that will result in the Company's
liquidity decreasing or increasing in a material way. The Company does currently
hold notes payable in the amount of $491,287.00, however, those notes are
unsecured, bear no interest and are payable only upon Company's realization of
sufficient profit to repay the loans or within 36 months, whichever occurs
first. At the election of the creditors and with approval from the Company's
Board of Directors, the notes may be converted to common stock of the Company.
The Company's subsidiary, Pinnacle Plastics, Inc., a Canadian corporation
("Pinnacle"), has qualified and obtained a loan for a principal balance of
$172,500 from the Canadian Federal Government. The Canadian Federal Government
has guaranteed 85% of the loan and the directors of the Company have personally
guaranteed 25% of the loan. The loan bears a floating interest rate of prime
plus 2.5% and has a 5-year term. The loan is payable in monthly installments of
$2,884.00 per month plus interest accrued. The Company believes it will be able
to meet its payment obligations with its current cash resources until revenue is
produced.
Currently, the Company's only source of liquidity is through the sale of its
common stock and through loans. However, as discussed above, the Company
believes it will begin realizing revenue from its and Pinnacle's operations in
or around the second quarter of 2000. The Company believes that such revenue
will enable it to maintain and improve its short-term liquidity. Moreover, the
Company believes it has the technology, equipment and personnel in place to
maintain its long-term liquidity.
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Company's Plan of Operations For Next 12 Months. The Company believes that its
current cash resources are sufficient to complete the Company's start-up
operations. However, should the Company's current cash resources prove to be
insufficient, it may be required to raise additional funds or arrange for
additional financing during the next 12 months to adhere to its development
schedule. Such additional capital may be received from additional public or
private financings, as well as borrowings and other resources. If adequate cash
is not available, the Company may be required to curtail its operations
significantly or to obtain funds by entering into arrangements with
collaborative partners or others that may require the Company to relinquish
rights that the Company would not otherwise relinquish. No assurance can be
given, however, that the Company will have access to additional cash in the
future, or that funds will be available on acceptable terms to satisfy the cash
requirements of the Company.
Item 7. Financial Statements
Copies of Financial Statements specified in Regulation 228.310 (Item 310) are
filed with this Annual Report on Form 10-KSB.
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Board of Directors
Micron Enviro Systems, Inc.
Edmonton, Alberta
Canada
Independent Auditor's Report
We have audited the accompanying consolidated balance sheets of Micron Enviro
Systems, Inc. (a development stage company) and subsidiary as of December 31,
1999 and 1998, and the related consolidated statements of operations and
comprehensive loss, stockholder's equity (deficit), and cash flows for the years
then ended and for the period from January 23, 1998 (inception) to December 31,
1999. 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 audits. We did not audit the
financial statements of Pinnacle Plastics, Inc., a wholly owned subsidiary,
which statements reflect total assets of $395,058 as of December 31, 1999, and
total revenues of $38,502 for the year then ended. Those statements were audited
by other auditors whose report has been furnished to us, and our opinion,
insofar as it relates to the amounts included for Pinnacle Plastics, Inc., is
based solely on the report of the other auditors.
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and the report of
other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Micron Enviro Systems, Inc. and
subsidiary as of December 31, 1999 and 1998, and the results of its operations
and cash flows for the years then ended and for the period from January 16, 1998
(inception) to December 31, 1999 in conformity with generally accepted
accounting principles.
As discussed in Note 2 to the financial statements, the Company has been in the
development stage since its inception on January 23, 1998. Realization of a
major portion of the assets is dependent upon the Company's ability to meet its
future financing requirements, and the success of future operations.
Management's plans regarding those matters also are described in Note 2. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
As discussed in Note 9 to the financial statements, certain errors resulting in
understatement of previously reported accounts payable as of December 31, 1998
were discovered by management of the Company during the current year.
Accordingly, an adjustment has been made to net loss and retained earnings as of
December 31, 1998, to correct the error.
Williams & Webster, P.S.
Spokane, Washington
April 10, 2000
<PAGE>
MICRON ENVIRO SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from Period from
Year January 23, January 23,1998
Ended (Inception) to (Inception) to
December 31, December 31, December 31,
1999 1998 1999
------------ -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(327,219) $ (35,050) $(362,269)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 41,072 375 41,447
(Increase) decrease in accounts receivable (38,815) -- (38,815)
(Increase) decrease in prepaid expenses (1,194) -- (1,194)
(Increase)decrease in inventory (124,332) -- (124,332)
(Increase)decrease in notes receivable (286,618) -- (286,618)
Increase(decrease) in accounts payable 55,645 26,354 81,999
Increase(decrease) in loans payable 14,547 -- 14,547
Expenses paid by Note Payable -- 821 821
--------- --------- ---------
Net cash used in operating activities (666,915) (7,500) (674,414)
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Organizational Costs 2,125 (2,500) (375)
Equipment (221,239) -- (221,239)
Manufacturing and technical licenses (25,052) -- (25,052)
--------- --------- ---------
Net cash used in investing activities (244,166) (2,500) (246,666)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in related party note payable 296,430 -- 296,430
Issuance of long-term debt 172,065 -- 172,065
Payment on long-term debt (5,768) -- (5,768)
Increase(decrease) in notes payable 417,927 -- 417,927
Proceeds from sale of common stock 75,848 10,000 85,848
--------- --------- ---------
Net cash used in financing activities 956,502 10,000 966,502
--------- --------- ---------
Change in cash 45,421 -- 45,421
Adjustment for foreign currency 1,331 -- 1,331
Cash, beginning of period -- -- --
--------- --------- ---------
Cash, end of period $ 46,752 $ -- 46,752
========= ========= =========
Interest paid $ -- $ -- $ --
========= ========= =========
Income taxes paid $ -- $ -- $ --
========= ========= =========
NON-CASH TRANSACTIONS
Stock exchanged for manfacturing and technical licenses
of subsidiary $ 200,000 $ -- $ 200,000
In December 1998, the Company acquired the technology and
product lines being developed from another party as part of the
following non-cash transaction:
Note issued for purchase of property and equipment -- 18,654 18,654
Inventory -- 13,018 13,018
Property, plant and equipment -- 3,567 3,567
Intangible assets -- 1,248 1,248
Accounting and legal charged to operations -- 821 821
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
MICRON ENVIRO SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
<TABLE>
<CAPTION>
Period from Period from
January 23, 1998 January 23, 1998
Year Ended (Inception) to (Inception) to
December 31, December 31, December 31,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $ 38,502 $ -- $ 38,502
COST OF GOODS SOLD 37,802 37,802 --
----------- ----------- -----------
GROSS PROFIT 700 -- 700
----------- ----------- -----------
E X P E N S E S
Direct costs 24,120 -- 24,120
Legal and accounting 27,209 22,663 49,872
Office expense 54,912 451 55,363
Professional services 87,904 10,294 98,198
Travel expense 21,422 1,267 22,689
Research and development 66,297 -- 66,297
Depreciation and amortization 41,072 375 41,447
----------- ----------- -----------
TOTAL EXPENSES 322,936 35,050 357,986
OTHER INCOME AND EXPENSE
Interest expense (4,983) -- (4,983)
----------- ----------- -----------
LOSS FROM OPERATIONS (327,219) (35,050) (362,269)
INCOME TAX -- -- --
----------- ----------- -----------
NET LOSS (327,219) (35,050) (362,269)
OTHER COMPREHENSIVE LOSS
Foreign currency translation
gain (loss) (1,321) -- (1,321)
----------- ----------- -----------
NET COMPREHENSIVE LOSS $ (328,540) $ (35,050) $ (363,590)
=========== =========== ===========
BASIC AND DILUTED
NET LOSS PER COMMON SHARE $ (0.05) $ (0.01) $ (0.06)
=========== =========== ===========
BASIC AND DILUTED
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING 6,965,000 5,000,000 5,982,500
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
MICRON ENVIRO SYSTEMS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Accumulated
Common Stock Deficit Total
-------------------------- Additional During Other Stockholders'
Number Paid in Development Comprehensive Equity
of Shares Amount Capital Stage Income (Deficit)
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 23, 1998 (Inception) -- $ -- $ -- $ -- $ -- $ --
Issuance of common stock
for cash at $.001 per share 10,000,000 10,000 -- -- -- 10,000
Loss for period ending, December 31, 1998 -- -- -- (35,050) -- (35,050)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 10,000,000 $ 10,000 $ -- $ (35,050) $ -- $ (25,050)
Reverse stock split 1:2 (5,000,000) (5,000) 5,000 -- -- --
Issuance of common stock for cash
at $.10 per share 620,000 620 61,380 -- -- 62,000
Issuance of common stock for acquisition
of subsidiary 2,000,000 2,000 198,000 -- -- 200,000
Net loss for year ended December 31, 1999 -- -- -- (327,219) -- (327,219)
Foreign currency translation loss -- -- -- -- (1,321) (1,321)
----------- ----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 7,620,000 $ 7,620 $ 264,380 $ (362,269) $ (1,321) $ (91,590)
=========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
MICRON ENVIRO SYSTEMS, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Micron Enviro Systems, Inc., formerly Strathcona Capital Corp (hereinafter "the
Company"), was incorporated in January 1998 under the laws of the State of
Nevada primarily for the purpose of owning and operating a low cost housing
project and acquiring technology related to the recycling of waste oil. While
maintaining a contractual interest in a waste oil recycling venture, the Company
has redirected its assets to acquiring an existing high tech manufacturing
business. In December 1998, the Company acquired the inventory and equipment of
a company in receivership (Dustcheck Filters, Inc.). The Company is currently
developing marketing and manufacturing plans for the products acquired. The
Company plans to sell an advanced cleaning mitt and a reusable non-mechanical
electrostatic air filter. The name change to Micron Enviro Systems, Inc. was
effective on January 22, 1999. The Company maintains an office in Edmonton,
Alberta, Canada.
On March 11, 1999, the Company acquired Pinnacle Plastics, Inc. as a wholly
owned subsidiary. Pinnacle Plastics Inc. (PPI) was incorporated in February 1999
under the Business Corporations Act of Alberta and commenced operations in the
month of February 1999. PPI will manufacture plastic storm and wastewater
recharging chamber systems. PPI has exclusive and enduring rights to technology
for the forming of the plastic chamber systems and has developed machinery to
make use of the new technology.
As of December 31, 1999, the Company was still in the development stage and had
not commenced full commercial production, although its subsidiary had minimal
revenues.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Micron Enviro Systems, Inc.
is presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of the Company's management
which is responsible for their integrity and objectivity. These accounting
policies conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
Development Stage Activities
The Company has been in the development stage since its formation in January
1998. It is primarily engaged in developing and marketing a re-usable,
non-mechanical electro-static air filter and a cleaning mitt for household
purposes. The Company's subsidiary, PPI has been in the development stage since
its formation in February 1999. It will manufacture plastic storm and waste
water recharging chamber systems.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
6
<PAGE>
MICRON ENVIRO SYSTEMS, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Loss Per share
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number of
shares was calculated by taking the number of shares outstanding and weighting
them by the amount of time that they were outstanding. Diluted loss per share is
the same as basic loss per share, as there are no common stock equivalents
outstanding.
Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
As shown in the accompanying financial statements, the Company incurred a net
loss of $327,219 and $35,050 for 1999 and 1998, respectively. At December 31,
1999, the company has negative working capital and negative net worth. The
Company, being a developmental stage enterprise, is currently putting technology
in place which will, if successful, mitigate these factors which raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
Management is currently exploring a number of opportunities for development of
its current product lines. Management registered this Company with the
Securities and Exchange Commission in 1999. Management plans to extend the
market for its products and to expand and diversify production during the year
2000. Also, management will explore additional equity investments and debt
financing in 2000.
Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting.
Use of Estimates
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
Inventories
Inventories of raw materials are valued at the lower of cost (first-in,
first-out method) or replacement cost. Inventories of work in process and
finished goods are valued at the lower of cost (including appropriate overhead)
or net realizable value less normal profit margin.
7
<PAGE>
MICRON ENVIRO SYSTEMS, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Impaired Asset Policy
In March 1995, the Financial Accounting Standards Board issued a statement
titled "Accounting for Impairment of Long-lived Assets." In complying with this
standard, the Company will review its long-lived assets quarterly to determine
if any events or changes in circumstances have transpired which indicate that
the carrying value of its assets may not be recoverable. The Company determines
impairment by comparing the undiscounted future cash flows estimated to be
generated by these assets to their respective carrying amounts. The Company does
not believe any adjustments are needed to the carrying value of its assets at
December 31, 1999.
Translation of Foreign Currency
Monetary assets and liabilities denominated in foreign currencies are translated
into United States dollars at rates of exchange in effect at the balance sheet
date. Gains or losses are included in income for the year, except gains or
losses relating to long-term debt which are deferred and amortized over the
remaining term of the debt. Non-monetary assets and liabilities and items
recorded in income arising from transactions denominated in foreign currencies
are translated at rates of exchange in effect at the date of the transaction.
Research and Development
Research costs are expensed as incurred. Development costs are also expensed
unless they meet specific criteria related to technical, market and financial
feasibility, in which case they are deferred and amortized to operations over a
maximum period of three years from the date of completion of the project. Costs
are reduced by government grants and investment tax credits where applicable.
Year 2000 Issues
Like other companies, Micon Enviro Systems, Inc. could be adversely affected if
the computer systems the Company, its suppliers or customers use do not properly
process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as the "Year
2000" issue. Additionally, this issue could impact non-computer systems and
devices such as production equipment and elevators, etc. At this time, the
Company does not have any evidence of problems associated with the year 2000
issue. Any expenses associated with the year 2000 issue are expensed as
incurred.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions and balances have
been eliminated in the consolidation.
Segment Reporting
The Company does not utilize segment information at this time as defined by SFAS
131. Currently, the company is operating as a holding company with one operating
subsidiary all located in Canada.
8
<PAGE>
MICRON ENVIRO SYSTEMS, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
provided using the straight line method over the estimated useful lives of the
assets. The useful lives of property, plant and equipment for purposes of
computing depreciation is as follows:
Equipment 5 - 10 years
Trailers 4 years
Molds and dies 3 - 4 years
Small tools 2 years
NOTE 4 - INTANGIBLE ASSETS
During the period ended December 31, 1998, Micron Enviro Systems, Inc. incurred
organization costs of $2,500. These organization costs were being amortized over
the useful life of sixty months beginning April 1, 1998. During the period
ending December 31, 1998, $375 was recorded as amortization of organization
costs. In accordance with SOP 98-5 (effective for fiscal years beginning after
December 15, 1998), the Company has written off its organization costs in the
year ending December 31, 1999, thereby incurring a charge of $2,125.
During the period ended December 31, 1998, Micron Enviro Systems, Inc. purchased
pre-patent rights of $1248 from Dust Check Filters, Inc. These pre-patent rights
are being amortized over a useful life of ten years. During the period ending
December 31, 1999 and 1998, the Company recorded amortization of $125 and $0,
respectively.
Manufacturing and technical licenses were purchased for $225,052 during the year
ended December 31, 1999. These licenses are being amortized over a useful life
of ten years. Amortization of $22,505 was expensed in the year ended December
31, 1999. (See Note 10).
9
<PAGE>
MICRON ENVIRO SYSTEMS, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 5 - SHORT-TERM DEBT
Short-term notes payable consists of the following:
December December
31, 31,
1999 1998
-------- --------
Notes Payable to Related Parties:
S. A. Resources Management Ltd. $ 40,159 $ --
Ideal Management Inc. 40,159 --
Tangle Creek 86,876 18,654
Pinnacle Quality Transportation Accessories Ltd. 14,547 --
-------- --------
Subtotal 181,741 18,654
Notes Payable:
Great Plains, Inc. 309,546 --
-------- --------
Total of short-term notes payable $491,287 $ 18,654
======== ========
The note to S.A. Resources Management Ltd., bears no interest or specified terms
of repayment, is secured by inventory, accounts receivable and a General
Security Agreement covering property and equipment. (See Note 8).
The notes payable for Ideal Management Inc., Tangle Creek, and Great Plains,
Inc. are unsecured, bear no interest and will be payable contingent on the
company making sufficient profit from operations and upon the resolution of its
board of directors. It is anticipated that no payments will be made in the next
year. Tangle Creek Cattle Co. is a related party. (See Note 8). In March 2000,
the Company exchanged 799,948 shares of common stock for the note payable to
Great Plains, Inc. and 256,696 shares for the note payable to Tangle Creek.
The note with Pinnacle Quality Transportation Accessories Ltd. was created in
the normal course of operations, which is the amount of consideration
established and agreed to by the related parties.
As of December 31, 1999, Micron was owed $272,770 by PPI for inter-company
borrowings which were eliminated in the consolidation.
10
<PAGE>
MICRON ENVIRO SYSTEMS, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 6 - LONG-TERM DEBT
Pinnacle Plastics Inc. has a Small Business Loan secured by a general security
agreement covering inventory and equipment, assignment of insurance proceeds,
and the limited personal guarantees of two directors. The loan is payable in
monthly installments of $2,884 plus interest at prime plus 2.5% per annum, with
a maturity date of October 2004 and a principal balance of $166,297
Principal repayments of long-term debt over the next five years as of December
31, 1999 are as follows:
2000 $34,606
2001 $34,606
2002 $34,606
2003 $34,606
2004 $27,873
NOTE 7 - COMMON STOCK
Upon incorporation, 10,000,000 shares of common stock were sold at $.001 per
share, under Regulation D, Rule 504. On January 22, 1999, the Company completed
a reverse stock split of one share of common stock for every two shares held,
reducing the Company's outstanding common stock to 5,000,000 shares. For the
year ended December 31, 1998, the consolidated balance sheets and statements of
operations and comprehensive loss have been restated reflecting the reverse
stock split.
During the year ended December 31, 1999, the Company issued 620,000 common stock
shares for cash at $.10 per share. Common stock shares were, also, issued for
the acquisition of subsidiary (PPI). A total of 2,000,000 shares were issued for
the acquisition valued at $.10 per share. (See Note 10).
NOTE 8 - RELATED PARTIES
The President of the Company is also the president and stockholder of Tangle
Creek Cattle Co. and Ideal Management, Inc., both of which have, subsequent to
1998, advanced funds to the Company. Tangle Creek Cattle Co. advanced funds to
acquire the inventory and equipment for the Company in return for a note
payable. The Company occupies office space provided by Tangle Creek Cattle Co.
(See Note 5).
S. A. Resources Management Ltd. is a company in which the President of PPI has a
significant interest, but less than majority. (See Note 5).
Pinnacle Quality Transportation Accessories Ltd. is a company in which a
director of PPI has a significant interest, but less than majority. (See Note
5).
11
<PAGE>
MICRON ENVIRO SYSTEMS, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 9 - PRIOR PERIOD CORRECTION
The accompanying financial statements for 1998 have been restated to correct
unreported expenses of professional fees and miscellaneous expenses not
accounted for in accounts payable that pertain to the year ended December 31,
1998. The effect of the restatement was to increase net loss by $26,354 ($.005
per share).
NOTE 10 - ACQUISITION OF PINNACLE PLASTICS, INC.
In March 1999, the Company acquired all of the outstanding common stock of the
recently formed Pinnacle Plastics, Inc. (PPI) in exchange for 2,000,000 shares
of its common stock valued at $.10 per share. PPI had no significant operations
at the time of the combination, nor had it recognized any sales, revenues or
earnings prior to the combination. The combination was accounted for as a
purchase with the $200,000 value of the common stock being assigned to the
manufacturing rights and licenses held by PPI. These rights grant PPI the
exclusive license to manufacture and distribute in the U. S. and Canada a
product known as Septic and Storm Water Chambers. Management has determined that
the value of this manufacturing and licensing agreement is to be amortized over
ten years.
NOTE 11 - INCOME TAXES
At December 31, 1999 the Company had net operating loss carryforwards of
approximately $325,000 that may be offset against future taxable income. No tax
benefit has been reported in the financial statements, as the Company believes
there is a 50% or greater chance that the net operating loss carryforwards will
expire unused. Accordingly, the potential tax benefits of the net operating loss
carryforwards are offset by a valuation allowance of the same amount. The
Company's Canadian subsidiary's losses of approximately $165,000, included in
the above amount, may result in tax benefits in Canada.
NOTE 12 - COMMITMENTS AND CONTINGENCIES
The Company has entered into agreements to lease real property for a period of 2
years expiring in 2001. The future minimum lease payments as of December 31,
1999 are as follows:
2000 $18,245
2001 3,635
-------
$21,880
=======
In addition to the above, the Company is also committed to pay its pro rata
share of operating expenses related to the lease.
12
<PAGE>
MICRON ENVIRO SYSTEMS, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
NOTE 13 - SUBSEQUENT EVENTS
In March 2000, the Company exchanged 799,948 shares of common stock for the note
payable to Great Plains, Inc. and 256,696 shares for the note payable to Tangle
Creek.
Also, in March 2000 the Company exchanged 41,936 shares of common stock for
subsidiary debt of $21,604 less credit for a note receivable of $11,078 on the
Company's books.
13
<PAGE>
Item 8. Changes in and Disagreements with Accountants.
There have been no changes in or disagreements with the Company's accountants
since the formation of the Company required to be disclosed pursuant to Item 304
of Regulation S-B.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons.
Executive Officers and Directors. We are dependent on the efforts and abilities
of certain of our senior management. The interruption of the services of key
management could have a material adverse effect on our operations, profits and
future development, if suitable replacements are not promptly obtained. We
anticipate that we will enter into employment agreements with each of our key
executives; however, no assurance can be given that each executive will remain
with us during or after the term of his or her employment agreement. In
addition, our success depends, in part, upon our ability to attract and retain
other talented personnel. Although we believe that our relations with our
personnel are good and that we will continue to be successful in attracting and
retaining qualified personnel, there can be no assurance that we will be able to
continue to do so. All officers and directors of the Company will hold office
until their resignation or removal.
Our directors and principal executive officers are as specified on the following
table:
- --------------------------------------------------------------------------------
Name and Address Age Position
- --------------------------------------------------------------------------------
Rodney M. Hope 58 President, Chief Executive Officer,
Treasurer and Director
- --------------------------------------------------------------------------------
Rabin Mendis Secretary
- --------------------------------------------------------------------------------
Stan K. Schellenberger 52 Director
- --------------------------------------------------------------------------------
Dr. Wayne Minion Director
- --------------------------------------------------------------------------------
Rodney M. Hope is the President, Chief Executive Officer, Treasurer and a
director of the Company. Mr. Hope graduated in 1964 from the University of
Saskatchewan with a Bachelor of Arts and Science (Economics). In 1969, he also
received from the University of Saskatchewan a Bachelor of Law degree. He held
an associate lawyer's position from 1970 to 1972 at the law firm of
McLennan-Ross, Hansen Joyce Law Firms and thereafter went into private practice
from 1972 to 1977. He was a partner in the firm of Hope, Thom and Johnson from
1978 to 1985, specializing in commercial and corporate law. From 1986 to 1988,
Mr. Hope was the Chief Executive Officer and Legal Counsel to Sawridge
Enterprises Ltd. From 1988 to 1990, Mr. Hope was the manager of the Hong Kong
branch of Mountain Properties Ltd., a private corporation, syndicating
investment capital and managing due diligence and business development of
investment capital in China and Russia. From 1990 until 1994, Mr. Hope held the
positions of President and Operations Manager of Superior Investment
Corporation, a private corporation managing investment capital in the province
of Saskatchewan.
From 1993 to 1995, Mr. Hope served as President and Chief Executive Officer of
Hytec Enviro Services Ltd., an operating company contracted to Calgary Overseas
Ltd. and Luke Oil Subsidiary, Russia. In 1994, he became Chief Executive Officer
and Chairman of the Board of Directors of Hytec Hydrocarbons Reclamation Ltd., a
private corporation operating a business utilizing equipment to reclaim
carbon-contaminated soils and solutions in the oil drilling industry. From 1994
to 1998, Mr. Hope was the President and Chief Operating Officer of S.A. Resource
Management Ltd., a private corporation involved in business development and
corporate, project and political due diligence for acquisition of oil and gas
concessions in South and Central America. From 1990 to the present, Mr. Hope has
been the President and Chief Operating Officer of Ideal Investment Corporation,
a private venture capital corporation managing investment in various small
business ventures. From 1986 to 1998, Mr. Hope also consulted to small
businesses on restructuring, refinancing and efficiency evolution.
Dr. Wayne Minion is currently a director of the Company. He is a professor of
English and earned a Bachelor of Science, Civil Engineering from the University
of Alberta in 1950 and a Master of Science, Sloan Fellow, from the Massachusetts
Institute of Technology in 1960. From 1964 to 1969, Mr. Minion was the Assistant
Chief Engineer at the British Columbia Hydro & Power Authority. In 1970, he
worked as a Director of Light Servis de Electricsdade of Rio de Janeiro, Brazil,
the largest electric company in South America with over 4.5 million customers.
In 1974, he was a Founding Member and Chairman of the Alberta Petroleum
Marketing Commission in the Province of Alberta, a position he held until 1984.
From 1984 to 1994, Mr. Minion was the Chairman of Northridge Canada Inc.,
(listed on the Alberta Stock Exchange) a Calgary based company marketing crude
oil, natural gas, and petroleum products with annual sales of C$3 billion. From
1985 to 1995, he was also a Director of Entech, Montana, the non-regulated
subsidiary of the Montana Power Co (listed on NYMEX). From 1997 to the present
time, Mr. Minion has been the Chairman of Tikal Resources Co. (listed on the
Toronto Stock Exchange), a company involved in petroleum and natural gas
exploration with activities in Canada, the United States and the United Kingdom.
Stan K. Schellenberger is currently a director of the Company. He graduated from
the University of Alberta with a Bachelor of Science degree in Agriculture.
Beginning in 1972 and continuing into 1988, Mr. Schellenberger was the regional
manager for Bell and Sons Premix. From 1988 to 1990, he was the Chairman and
Planning Secretariat of Alberta Agriculture. Beginning in 1990 and continuing
into 1993, Mr. Schellenberger was the Assistant Deputy Minister of the Policy
and Planning Division of Alberta Economic Development and Tourism, where he
organized and produced the government of Alberta's "Toward 2000 Together"
initiative that lead to the writing of Seizing Opportunity, Alberta's economic
strategy. Mr. Schellenberger has been Assistant Deputy Minister of Industry for
the Technology and Research Division of Alberta Economic Development and Tourism
since February 1993, where he established the Project Management System to help
employees focus on goals and objectives, managed a significant budget, and
identified substantial development and investment opportunities for the
province. Currently, he is the President and owner of (i) Mattstan Consulting
Ltd.; (ii) Tradeseas Corporation; and (iii) Pinnacle Transportation Accessories.
Mr. Schellenberger is part owner and an officer of (i) Latitude Logistics
(Alberta) Ltd.; (ii) Canada Overseas Trade Corp.; and (iii) 780174 Alberta Ltd.
He also has privatized Alberta Intermodel Services for the government. During
his career, Mr. Schellenberger has been (i) a member of the Board of Directors
of Centre of Engineering Research, Prince Rupert Grain Ltd. and Institute of
Pharmco-Economics; (ii) Chairman of the Board of Directors of Alberta Intermodel
Services Ltd.; and (iii) an Alberta government representative on the Program
Review Committee-Westaim. In addition, he has (i) received The Distinguished
Professional Achievement Award from the Faculty of Agriculture and Forestry at
the University of Alberta; (ii) been named Parliamentary Secretary of both the
Federal Minister of Indian and Northern Affairs and Western Diversification and
the Federal Minister of Health; and (iii) been named Honorary Chief of the Four
Nations Hobbema.
9
<PAGE>
There is no family relationship between any of the officers and directors of the
Company. Other than the officers, there are no significant employees expected by
the Company to make a significant contribution to the business of the Company.
There are no orders, judgments or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any officer or director of the Company from engaging in or
continuing any conduct, practice or employment in connection with the purchase
or sale of securities, or convicting such person of any felony or misdemeanor
involving a security, or any aspect of the securities business or of theft or of
any felony, nor are any officer or director of the Company so enjoined.
Section 16(a) Beneficial Ownership Reporting Compliance. The Company does not
presently have knowledge as to whether all of its officers, directors, and
principal shareholders have filed all reports required to be filed by those
persons on, respectively, Form 3 (Initial Statement of Beneficial Ownership of
Securities), a Form 4 (Statement of Changes of Beneficial Ownership of
Securities), or a Form 5 (Annual Statement of Beneficial Ownership of
Securities).
Item 10. Executive Compensation
Any compensation received by our officers, directors, and management personnel
will be determined from time to time by our Board of Directors. Our officers,
directors, and management personnel will be reimbursed for any out-of-pocket
expenses incurred on our behalf.
Summary Compensation Table. The table set forth below summarizes the annual and
long-term compensation for services in all capacities to the Company payable to
our Chief Executive Officer and our other executive officers whose total annual
salary and bonus is anticipated to exceed $50,000 during the year ending
December 31, 2000. Our Board of Directors may adopt an incentive stock option
plan for our executive officers which would result in additional compensation.
- --------------------------------------------------------------------------------
Name and Year Annual Salary Bonus($) Other Annual All Other
Principal $) Compensation($) Compensation
Position
- --------------------------------------------------------------------------------
None 2000 None None None None
- --------------------------------------------------------------------------------
Compensation of Directors. Our directors who are also employees receive no extra
compensation for their service on our Board of Directors.
Employment Contracts. We have not entered into any employment contracts.
Specified below, in tabular form, is the aggregate annual remuneration of the
Company's Chief Executive Officer and the four (4) most highly compensated
executive officers other than the Chief Executive Officer who were serving as
executive officers at the end of our last completed fiscal year.
- --------------------------------------------------------------------------------
Name of individual Capacities in which Aggregate remuneration
or Identity of Group remuneration was received
- --------------------------------------------------------------------------------
All Executive Officers None None
- --------------------------------------------------------------------------------
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth certain information regarding the beneficial
ownership of our common stock as of December 31, 1999 by (i) each person or
entity known by us to be the beneficial owner of more than 5% of the outstanding
shares of common stock, (ii) each of our directors and named executive officers,
and (iii) all of our directors and executive officers as a group.
10
<PAGE>
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Owner
- ---------------------- --------------------------------- ----------------------------------- ------------------------
<S> <C> <C> <C>
$.001 Par Value Common KAS Holdings Ltd. 425,000 5.5%
Stock c/o Max J. Wandinger Professional
Corp.
630, 840-6th Ave., S.W.
Calgary, Alberta, Canada
T3E 6W3
$.001 Par Value Common Rahn and Bodmer 425,000 5.5%
Stock 630, 840-6th Ave., S.W.
Calgary, Alberta, Canada
T3B 4M3
$.001 Par Value Common Rodney M. Hope 25,000 .3%
Stock 14016-90A Ave.
Edmonton, Alberta, Canada President, Chief Executive
T5R 4X5 Officer and Director
$.001 Par Value Stan Schellenberger 291,667(1) 3.8%
Common Stock RR 01 Spruce Grove
Alberta, Canada T7X 2T4 Director
All officers and directors 316,667 4.1%
as a group
</TABLE>
(1) Includes 25,000 shares of the Company's $.001 par value common stock owned
by Stan Schellenberger and 266,667 shares of the Company's common stock owned by
Mattstan Consulting Ltd., a company controlled by Stan Schellenberger.
Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect to
securities. In accordance with Commission rules, shares of our common stock
which may be acquired upon exercise of stock options or warrants which are
currently exercisable or which become exercisable within 60 days of the date of
the table are deemed beneficially owned by the optionees. Subject to community
property laws, where applicable, the persons or entities named in the table
above have sole voting and investment power with respect to all shares of our
common stock indicated as beneficially owned by them.
Changes in Control. Management of the Company is not aware of any arrangements
which may result in "changes in control" as that term is defined by the
provisions of Item 403 of Regulation S-B.
Item 12. Certain Relationships and Related Transactions.
Transactions with Promoters. There were no transactions with promoters.
Related Party Transactions. There have been no related party transactions which
would be required to be disclosed pursuant to Item 404 of Regulation S-B, except
for the following:
As specified above, on or about December 24, 1998, pursuant to a loan agreement,
the Company conditionally acquired from Tangle Creek all of the assets,
including, but not limited to, all of the equipment and inventory of Dustcheck.
Tangle Creek had previously purchased those assets from the judicially appointed
Receiver/Manager of Dustcheck. As specified above, by separate agreement, the
Company acquired the right to the technology and intellectual property of the
Filter.
11
<PAGE>
At the time of the transaction with Tangle Creek, Rodney M. Hope, President,
Chief Executive Officer, Treasurer and a director of the Company was, and still
is, the President and 100% shareholder of Tangle Creek; therefore, the
transaction was not conducted at arms-length. The Company's obligation to Tangle
Creek is evidenced by a short-term note payable in the amount of CDN$18,654,
unsecured, bearing no interest and due and payable on or before June 24, 1999,
without notice and upon demand. Mr. Hope is also the current President and Chief
Operating Officer of Ideal Management, Inc., a Canadian corporation, which
provides business management services to the Company and is paid CDN$3,500 per
month for these services. As of December 31, 1999, the Company owed Tangle Creek
$86,876.00 for various loans made to the Company by Tangle Creek. The notes
payable are unsecured, bear no interest and will be payable contingent on the
Company earning sufficient revenue.
The Company holds a note payable to S.A. Resources Management Ltd. in the amount
of $40,159.00, which bears no interest or specified terms of repayment. The note
to S.A. Resources Management Ltd. is secured by inventory, accounts receivable
and a General Security Agreement covering property and equipment. The President
of Pinnacle, the Company's subsidiary, has a significant interest in S.A.
Resources Management Ltd.
The Company holds a note payable to Ideal Management, Inc. in the amount of
$40,159.00. The note to Ideal Management, Inc. is unsecured, bears no interest
and will be payable upon the Company realizing sufficient profit and upon the
resolution of the Board. The President of the Company is also the President and
a stockholder of Ideal Management, Inc.
The Company holds a note payable to Pinnacle Quality Transportation Accessories
Ltd. in the amount of $14,547.00. The note was created in the usual course of
operations, which is the amount of consideration established and agreed to by
the related parties.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No.
3.1 Articles of Incorporation
(Charter Document)*
3.2 Amendment to Articles of Incorporation*
3.3 Bylaws*
4. Instruments Defining the Rights of Holders (Not
Applicable)
9. Voting Trust Agreement (Not Applicable)
10.1 Agreement Between the Company and Tangle
Creek Cattle Co.
(Material Contract)*
10.2 Agreement Between the Company and Ideal
Management Inc.
(Material Contract)*
10.3 Consulting Agreement Between Darrell Kosakewich
and the Company
(Material Contract)*
10.4 Agreement Between Pinnacle Plastics, Inc.
and the Company
(Material Contract)*
10.5 Agreement Between Pinnacle Plastics, Inc. and
RPC Manufacturing Inc.
(Material Contract)*
12
<PAGE>
11. Statement Re: Computation of Per Share
Earnings (Loss)**
16. Letter on change in certifying accountant
(Not Applicable)
18. Letter on Change in Accounting Principles
(Not Applicable)
21. Subsidiaries of the Registrant**
22. Published Report Regarding Matters Submitted
to Vote (Not Applicable)
23.1 Consent of Auditors
23.2 Consent of Counsel (Not Applicable)
24. Power of Attorney (Not Applicable)
27. Financial Data Schedule*
99. Additional Exhibits (Not Applicable)
* Previously Filed as Exhibits to Registration Statement on Form 10-SB,
Amendments to Form 10-SB and Quarterly Reports on Form 10QSB.
** Included in consolidated financial statements filed herewith.
(b) Reports on Form 8-K
The Company has not filed any reports on Form 8-K
with the Commission.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated April __, 2000 MICRON ENVIRO SYSTEMS, INC.,
By: /s/ Rodney Hope
-------------------------------
Rodney Hope
Its: President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 46,752 0
<SECURITIES> 0 0
<RECEIVABLES> 38,815 0
<ALLOWANCES> 0 0
<INVENTORY> 137,351 13,018
<CURRENT-ASSETS> 237,960 13,018
<PP&E> 224,805 3,567
<DEPRECIATION> (18,442) 0
<TOTAL-ASSETS> 647,993 19,958
<CURRENT-LIABILITIES> 607,892 45,008
<BONDS> 0 0
0 0
0 0
<COMMON> 7,620 5,000
<OTHER-SE> (99,210) (30,050)
<TOTAL-LIABILITY-AND-EQUITY> 647,993 19,958
<SALES> 38,502 0
<TOTAL-REVENUES> 38,502 0
<CGS> 37,802 0
<TOTAL-COSTS> 37,802 0
<OTHER-EXPENSES> 323,557 35,050
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,983 0
<INCOME-PRETAX> (328,540) (35,050)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (328,540) (35,050)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (328,540) (35,050)
<EPS-BASIC> (.05) (.01)
<EPS-DILUTED> (.05) (.01)
</TABLE>
