SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
December 13, 1999
Date of Report
(Date of Earliest Event Reported)
THE HYDROGIENE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
12335 World Trade Drive, Suite 8
San Diego, CA 92128
(Address of principal executive offices)
858/675-8033
FAX: 858/675-0380
Registrant's telephone number
DECURION CORPORATION
1504 R Street, N.W.
Washington, D.C. 20009
Former name and former address
Florida 0-26417 91-1853701
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS
THIS ADMENDMENT IS FILED TO CORRECT TYPOGRAPHICAL ERRORS
IN THE FINANCIAL STATEMENTS IN THE FORM 8-K/A FILED
ON FEBRUARY 29, 2000
THE HYDROGIENE CORPORATION AND
SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 INDEPENDENT AUDITORS' REPORT
PAGE 2-3 CONSOLIDATED BALANCE SHEETS AT
DECEMBER 31, 1998 AND 1997
PAGE 4 CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998
AND 1997 AND FOR THE PERIOD FROM
DECEMBER 28, 1995 (INCEPTION) TO
DECEMBER 31, 1998
PAGE 5 CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS'
DEFICIENCY FOR THE PERIOD FROM
DECEMBER 28, 1995 (INCEPTION) TO
DECEMBER 31, 1998
PAGES 6-7 CONSOLIDATED STATEMENTS OF CASH
FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 AND FOR
THE PERIOD FROM DECEMBER 28, 1995
(INCEPTION) TO DECEMBER 31, 1998
PAGES 8-23 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
The Hydrogiene Corporation
We have audited the accompanying consolidated balance sheets
of The Hydrogiene Corporation and Subsidiaries (a
development stage company) as of December 31, 1998 and
1997 and the related consolidated statements of operations,
changes in stockholders' deficiency and cash flows for the years
then ended and for the period from December 28, 1995
(Inception) to December 31, 1998. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly in all material respects, the financial
position of The Hydrogiene Corporation and Subsidiaries (a
development stage company) as of December 31, 1998 and
1997 and the results of its operations and its cash flows for the
years then ended and for the period from December 28, 1995
(Inception) to December 31, 1998 in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 10 to the consolidated financial
statements, the Company's recurring losses from operations,
working capital deficiency and stockholders' deficiency raise
substantial doubt about its ability to continue as a going
concern. Management's Plan in regards to these matters is also
described in Note 10. The consolidated financial statements do
not include any adjustments that might result from the outcome
of this uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
February 18, 2000
<TABLE>
THE HYDROGIENE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<CAPTION>
ASSETS
1998 1997
<S> <C> <C>
Current assets
Cash $ 41,169 $ 1,182
Accounts receivable 694 -
Prepaid expense 2,990 -
Total Assets 44,853 1,182
PROPERTY & EQUIPMENT -
NET 41,476 22,555
OTHER ASSETS
Royalty advances-
license agreement - 2,777
Total Other Assets - 2,777
TOTAL ASSETS $ 86,329 $ 26,514
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
<S> <C> <C>
Cash overdraft $ 21,505 $ -
Accounts payable 584,198 214,120
Payroll tax payable
and accrued 44,209 11,100
Accrued compensation 79,262 78,009
Interest payable 14,005 636
Loans payable - 363,480 202,701
CURRENT
Obligation under capital
lease - current 5,392 5,817
Accrued royalty fees-
related party 63,133 -
Total Current 1,175,184 512,383
Liabilities
LONG-TERM LIABILITIES
Obligation under 15,336 10,976
capital lease
Loans payable 7,925 -
Total Liabilities 1,198,445 523,359
COMMITMENTS AND
CONTINGENCIES (Note 6)
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.0001 par value,
50,000,000 shares authorized,
none issued and outstanding - -
Common stock, $.0001 par value,
50,000,000 shares authorized,
12,343,501 and 3,466,796 shares issued
and outstanding in 1998 and 1997,
respectively 1,234 347
Additional paid in capital 3,873,372 243,653
Accumulated deficit during
development stage (4,914,922) (740,845)
(1,040,316) (496,845)
Less subscriptions receivable (71,800) -
Total Stockholders'
Deficiency (1,112,116) (496,845)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY
$ 86,329 $ 26,514
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
THE HYDROGIENE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR FROM DECEMBER 28
ENDED ENDED 1995 (INCEPTION) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, 1998
1998 1997
<S> <C> <C> <C>
SALES $ 8,920 $ 5,834 $ 14,754
COST OF SALES 124,534 37,510 162,044
GROSS PROFIT (115,614) (31,676) (147,290)
OPERATING EXPENSES
Officer compen 2,287,084 79,600 2,366,684
Consulting 892,857 209,025 1,102,294
Employee comp
and taxes 185,799 32,955 218,754
Depreciation 14,459 8,278 25,111
Professional fees 220,161 37,674 264,718
Research and 36,809 - 49,764
Development
Royalty expense 112,583 8,287 120,870
Advertising 38,348 101,245 160,355
Other selling,
general admin.
expenses 252,499 155,907 437,056
Total Operating 4,040,599 632,971 4,745,606
Expenses
LOSS FROM OPERATIONS (4,156,213) (664,647) (4,892,896)
OTHER INCOME (EXPENSE)
Interest expense (16,322) (4,242) (20,564)
Loss on abandonment
of leasehold (1,650) - (1,650)
improveents
Interest income 108 26 188
Total Other Income
(Expense) (17,864) (4,216) (22,026)
NET LOSS $(4,174,077) $ (668,863) $ (4,914,922)
Net loss per share - basic
and diluted $ (0.48) $ (0.11) $ (0.71)
Weighted average
number of shares
outstanding during
the period basic
and diluted 8,737,087 6,016,132 6,938,147
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
<CAPTION>
THE HYDROGIENE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM DECEMBER 29, 1995 (INCEPTION) TO DECEMBER 31, 1998
ADDITIONAL
COMMON STOCK PAID-IN
SHARES AMOUNT CAPITAL
__________________________________________________________________________
<S> <C> <C> <C>
Founders' stock
issued for cash 2,179, 434 $ 218 $ 802
Net loss 1996
Balance,
December 31, 1996 2,179,434 218 802
Founder's stock
issued for cash 1,025,616 103 377
Stock issued for cash 112,177 1 102,489
Stock issued
for services 149,569 15 139,985
Net loss 1997
Balance,
December 31, 1997 3,466,796 347 243,653
Stock issued for cash 5,342 1 2,499
Stock issued for
services 2,942,878 294 2,913,372
Warrants issued
for services 29,900
Stock issued for
officers accrued
salary 339,735 34 158,966
Recapitalization:
Stock issued
to High Climbers, Inc.
stockholders 2,397,750 239 17,261
Accumulated deficit
of High
Climbers, Inc. - - -
Reclassificiation of
accumulated deficit - - (17,500)
Stock issued for
accrued royalty fee 45,000 5 44,995
Stock issued in private
placement 2,946,000 294 449,706
Stock issued for
services 200,000 20 30,520
Net loss 1998 - - -
BALANCE,
DECEMBER 31, 1998 12,343,501 $ 1,234 $ 3,873,372
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
THE HYDROGIENE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM DECEMBER 29, 1995 (INCEPTION) TO DECEMBER 31, 1998
<CAPTION>
ACCUMULATED
DEFICIT DURING SUBSCRIPTIONS TOTAL
DEVELOPMENT RECEIVABLE
STAGE
<S> <C> <C> <C>
Founders' stock
issued for cash $ - $ - 1,020
Net loss 1996 (71,982) - (71,982)
Balance, December 31, 1996 (71,982) - (70,962)
Founders' stock issued
for cash - - 480
Stock issued for cash - - 102,500
Stock issued for services - - 140,000
Net loss 1997 (668,863) - (668,863)
Balance, December 31, 1997 (740,845) - (496,845)
Stock issued for cash - - 2,500
Stock issued for services - - 2,913,666
Warrants issued for services - - 29,900
Stock issued for
officers accrued salary - - 159,000
Recapitalization:
Stock issued to High
Climbers, Inc.
stockholders - - 17,500
Accumulated deficit of High
Climbers, Inc. (17,500) - (17,500)
Reclassification of
accumulated deficit 17,500 - -
Stock issued for
accrued royalty fee - - 45,000
Stock issued in
private placement - (71,800) 378,200
Stock issued for services - - 30,540
Net loss 1998 (4,174,077) - (4,174,077)
BALANCE,
DECEMBER 31, 1998 (4,914,922) $ (71,800) $(1,112,116)
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
THE HYDROGIENE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR FROM DECEMBER 28
ENDED ENDED 1995 (INCEPTION) TO
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1998
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (4,174,077) $ (668,863) $ (4,914,922)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and amortization 14,459 8,278 25,111
Loss on abandoment of
leasehold imp. 1,650 - 1,650
Expenses incurred on issuance of
common stock 3,178,106 140,000 3,318,106
Changes in operating assets and
liabilities:
Increase (decrease) in:
Accounts receivable (694) - (694)
Prepaid expense (2,990) - (2,990)
Cash overdraft 21,505 - 21,505
Accounts payable 370,081 197,204 584,199
Payroll taxes payable and
accrued 33,109 11,100 44,209
Accrued compensation 1,253 78,009 79,262
Interest payable 13,368 637 14,005
Accrued royalty fees 65,910 (2,777) 63,133
Net cash used in
operating activities (478,320) (236,412) (767,426)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and equipment (9,369) (5,436) (23,603)
Net cash used in investing activities (9,369) (5,436) (23,603)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayment of loans (269,200) - (269,200)
Payment on capital lease
obligations (717) (2,179) (2,896)
Loan proceeds 416,893 141,479 619,594
Proceeds from issuance of
common stock 380,700 102,980 484,700
Net cash provided
by financing activities 527,676 242,280 832,198
NET INCREASE IN CASH 39,987 432 41,169
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,182 750 -
___________________ _______________ __________________
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 41,169 $ 1,182 $ 41,169
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During 1998 and 1997 the Company entered into certain capital lease agreements
(see Note 6)
See accompanying notes to consolidated financial statements
</TABLE>
THE HYDROGIENE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATMENTS
AS OF DECEMBER 31, 1998 AND 1997
NOTE 1 SUMMARY OF SIGNIFICANT ACOUNTING
POLICIES AND ORGANIZATION
(A) Organization
On December 28, 1995, Hydrogiene Corporation ("HC-Delaware"),
was incorporated in Delaware. The Hydrogiene Corporation
("HC-California") was incorporated in the State of
California on August 21, 1997.
On September 1, 1997, HC-Delaware, the predecessor, was
merged into HC-California. The merger was treated as a
combination of entities under common control and, accordingly,
recorded at historical cost. The accompanying consolidated
financial statements reflect the operations of both companies for
the periods presented. Concurrent with the merger, HC-Delaware
changed its name to Magna IV, Ltd. and was never dissolved.
Therefore, it remains as an inactive subsidiary.
On October 13, 1998, The Hydrogiene Corporation, ("THC"), a
Nevada corporation, acquired all the net assets of HC-California
by issuing one share of its common stock for each share of
HC-California common stock outstanding. HC-California was
never dissolved and remains as an inactive affiliate.
On October 14, 1998, High Climbers, Inc. ("HCI"), an inactive
shell Florida corporation quoted at that time on the NASD
OTCBB, acquired all of the outstanding stock of THC. The
merger agreement stipulated that HCI issue to the shareholders
of THC 2.1367 shares of HCI's common stock for every one
share held by THC's stockholders. As a result of the merger,
the shareholders of THC received 6,754,571 shares and became
shareholders of approximately 72% of HCI. Generally accepted
accounting principles require that the company whose
shareholders retain a majority voting interest in a combined
business be treated as the acquirer for accounting purposes. As
a result, the merger was treated as an acquisition of HCI by
THC and as a recapitalization of THC. Accordingly, the
financial statements include the following: (1) the balance sheet
consists of the THC's net assets at historical cost and HCI's net
assets at historical cost and (2) the statement of operations
includes the THC's operations for the period presented and the
operations of HCI from the date of merger. HCI changed its
name to The Hydrogiene Corporation (hereinafter referred to as
"the Company").
The Company manufactures and markets a family of personal
hygiene products similar to European cleansing, therapy and
sitz bath systems. The Company currently is in the
development stage and activities to date include fund raising,
product design and development, and establishment of markets.
(B) Principles of Consolidation
The consolidated financial statements includes the accounts of
the Company and its wholly-owned inactive subsidiaries,
Magna IV, Ltd., The Hydrogiene Corporation, a Nevada
Corporation, and Hydrogiene Corporation de Mexico, S.A. de
C.V. All intercompany balances and transactions have been
eliminated in consoidation.
(C) Use of Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and
revenues and expenses during the reported period. Actual
results could differ from those estimates.
(D) Cash and Cash Equivalents
For purposes of the cash flow statements, the Company
considers all highly liquid investments with original maturities
of three months or less at the time of purchase to be cash
equivalents.
(E) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments,"
requires disclosures of information about the fair value of
certain financial instruments for which it is practicable to
estimate the value. For purposes of this disclosure, the fair
value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between
willing parties other than in a forced sale or liquidation.
The carrying amounts of the Company's accounts payable,
accrued liabilities, and loans payable approximates fair value
due to the relatively short period to maturity for these
instruments.
(F) Stock Options and Warrants
In accordance with Statement of Financial Accounting
Standards No. 123, ("SFAS 123") the Company has elected to
account for Stock Options and Warrants issued to employees
under Accounting Principles Board Opinion No. 25 ("APB
Opinion No. 25") and related interpretations. The Company
accounts for stock options and warrants issued to nonemployees
for services under the fair value method of SFAS 123.
(G) Property and Equipment
Property and equipment are stated at cost and depreciated using
the double-declining balance method over the estimated
economic useful lives of 3 to 7 years. Expenditures for
maintenance and repairs are charged to expense as incurred.
Major improvements are capitalized.
(H) Revenue Recognition and Cost of Goods Sold
The Company recognizes revenue upon shipment of products.
Cost of goods sold in 1998 and 1997 includes the cost of
impaired inventory disposed of.
(I) Income Taxes
The Company accounts for income taxes under the Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("Statement
109"). Under Statement 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered
or settled. Under Statement 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(J) Advertising Costs
In accordance with the Accounting Standards Executive
Committee Statement of Position 93-7 ("SOP 93-7"), costs
incurred for producing and communicating advertising of the
Company are charged to operations.
(K) Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts,
which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts and
believes it is not exposed to any significant credit risk on cash
and cash equivalents.
(L) Loss Per Share
Basic and diluted net loss per common share for the years ended
December 31, 1998 and 1997 is computed based upon the
weighted average common shares outstanding as defined by
Financial Accounting Standards No. 128, "Earnings Per Share".
In accordance with the Securities and Exchange Commission
Staff Accounting Bulletin Topic 4(D), for purposes of
computing loss per share, a nominal issuance of 1,025,616
common shares in 1997 and 2.777.641 common shares in 1998
has been treated as outstanding for all reported periods in the
accompanying consolidated financial statements. Common
stock equivalents have not been included in the computation of
diluted loss per share since the effect would be anti-dilutive. At
December 31, 1998 there were 550,505 warrants issued and
outstanding that could potentially dilute earnings per share in
future periods.
(M) Business Segments
The Company applies Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information." The Company operates in
one segment and therefore segment information is not
presented.
(N) Recent Accounting Pronouncements
The Financial Accounting Standards Board has recently issued
several new accounting pronouncements. Statement No. 133,
"Accounting for Derivative Instruments and Hedging
Activities", as amended by Statement No. 137, establishes
accounting and reporting standards for derivative instruments
and related contracts and hedging activities. This statement is
effective for all fiscal quarters and fiscal years beginning after
June 15, 2000. The Company believes that its adoption of
pronouncement No. 133, as amended by No. 137, will not have
a material effect on the Company's financial position or results
of operations.
NOTE 2 STOCK SUBSCRIPTION RECEIVABLE
Pursuant to a Regulation D, Rule 504 private offering in 1998,
the Company issued 2,946,000 shares of common stock to
investors for proceeds of $450,000 (See Note 7(C)). As of
December 31, 1998 the Company received $378,200 in cash
and recorded a stock subscription receivable of $71,800. The
Company received the $71,800 in 1999.
NOTE 3 PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at
December 31:
1998 1997
Computer software $ 6,117 $6,117
Furniture and fixtures 3,029 3,029
Office equipment 10,089 5,089
Equipment under capital lease 23,623 18,973
Automobile 16,012 -
Leasehold improvements 7,718 -
Less: Accumulated depreciation (25,112) (10,653)
Property and equipment - net $ 41,476 $22,555
NOTE 4 ACCRUED COMPENSATION
The Company has employment agreements with two individuals
to serve as the Chief Executive Officer and Vice President-
Communications of the Company (See Note 6(C). The
individuals agreed to defer payment of the amounts owed to
them pursuant to the agreements due to the Company's lack of
funds. During 1998, $74,600 of accrued compensation from
1997 and $85,000 from 1998, totaling $159,000, was converted
to common stock at $1.00 per share. Additional compensation
expense of $1.00 per share or $159,000 was recognized on the
conversion date based on a recent cash offering price of $2.00
per share. The Company owed the individuals $79,262 and
$74,600 at December 31, 1998 and 1997, respectively, which is
included in accrued compensation in the balance sheets.
NOTE 5 NOTES AND LOANS PAYABLE
The following schedule reflects notes and loans payable at
December 31:
1998 1997
Note payable, interest at 20.27%
per annum,$308 due monthly
until August 2002,secured by
an automobilewith a book value
of $12,810 $ 9,806 $ -
Loan payable, non-interest
bearing, due on demand,
unsecured 56,000 90,650
Loan payable, non-interest
bearing, due on demand,
unsecured 20,000 10,000
Loan payable, non-interest
bearing, due on demand,
unsecured 5,000 5,000
Loan payable, non-interest
bearing, due on demand,
unsecured 60,000 25,000
Loan payable, non-interest
bearing, due on demand,
unsecured 110,798 10,000
Loan payable, non-interest
bearing, due on demand,
unsecured - 20,000
Loan payable, non-interest
bearing, due on demand,
unsecured 30,000 20,000
Loan payable, non-interest
bearing, due on demand,
unsecured 5,000 5,000
Loan payable, non-interest
bearing, due on demand,
unsecured 1,700 1,700
Loan payable, non-interest
bearing, due on demand,
unsecured 2,851 2,851
Loan payable, non-interest
bearing, due on demand,
unsecured 12,500 12,500
Loan payable, non-interest
bearing, due on demand,
unsecured 2,500 -
Loan payable, non-interest
bearing, due on demand,
unsecured 49,250 -
Loan payable, non-interest
bearing, due on demand,
unsecured 1,000 -
Loan payable, non-interest
bearing, due on demand,
unsecured 5,000 -
371,405 202,701
Less current portion 363,480 202,701
$ 7,925 $ 0
NOTE 6 COMMITMENTS AND
CONTINGENCIES
(A) Capital Lease Agreements
The Company leases office equipment under non-cancelable
capital lease agreements.
Future minimum lease payments under capital leases are as
follows at December 31, 1998
1998 $ -
1999 12,344
2000 7,333
2001 5,650
2002 2,012
2003 507
Total 27,846
Less interest 7,118
20,728
Less current portion 5,392
$ 15,336
(B) Operating Leases
The Company leases corporate office space under operating
leases. These leases have remaining terms varying from the
years 2003 through 2004.
Future minimum lease payments under operating leases are as
follows at December 31, 1998.
1999 71,400
2000 73,200
2001 75,100
2002 77,200
2003 56,400
$ 353,300
Rent expense under operating leases for the years ended
December 31, 1998 and 1997 was $27,800 and $13,127,
respectively.
(C) Employment Agreements
The Company entered into an employment agreement with a
principal stockholder effective on August 21, 1997. The
agreement calls for the individual to become the Chief
Executive Officer of the Company at an annual salary of
$144,000 expiring on August 21, 2002. The agreement
automatically renews for succeeding terms of three years each
unless notice is received by either party prior to the expiration.
The agreement also calls for medical coverage, life insurance
and the use of two company provided vehicles.
The Company entered into an employment agreement with a
stockholder effective August 21, 1997. The agreement calls for
the individual to become the Vice-President of Communications
for the Company at an annual salary of $75,000 expiring on
August 20, 2002. The agreement automatically renews for
succeeding terms of three years each unless notice is received
by either party prior to the expiration. The agreement also calls
for medical coverage, life insurance and the use of one company
vehicle.
(D) Consulting Agreements
On August 12, 1997, the Company entered into a consulting
agreement to provide start-up financing. The agreement called
for the consultant to provide a loan of $25,000 upon execution
of the agreement. The agreement calls for a fee of $5,000 per
month for 12 months. The $25,000 was received by the
Company in 1997 and reflected as loans payable at December
31, 1998 and 1997. Additionally, the balance of the fee due
under the agreement was added to the loan payable, increasing it
to $60,000 as of December 31, 19987. (See Note 5).
Subsequently, in July 1999 the Company satisfied this loan by
issuance of 180,000 restricted common shares.
On March 7, 1998, the Company entered into an agreement with
a consultant to provide advisory servicess and assist the
Company in an offering to raise $2,000,000 in equity. The
Agreement called for a monthly fee of $10,000 beginning the
first month after the Company has received the initial $500,000
from the Offering. The cash payments were never made. Total
funds raised were $450,000. The final compensation issued to
he consultant was 320,000 common stock warrants and all toher
consideration was cancelled purusant to a settlement agreement.
(See Note 7(E))
(E) License and Royalty Agreements
(i) License Agreement-Related Party
On August 21, 1997, the Company entered into a Licensing
Agreement with its principal stockholder to continue
development, manufacturing and marketing of the predecessor's
personal hygiene products. This Agreement calls for a royalty
payment of 3% of gross sales of all Hyrdogiene products. The
Agreement calls for a minimum royalty payment of $100,000 in
year one, $250,000 in year two, and $300,000 for each
subsequent year. The Agreement was effective the first month
the Company began sales to customers, which was December
1997. Royalty expense was $112,583 and $8,287 in 1998 and
1997, respectively. (See Note 7(D)).
(ii) Royalty Agreements
During 1998 and 1997 the Company entered into royalty
agreements with various individuals who paid monies to the
Company in exchange for stipulated royalties based on sales
volume. Due to the minimal sales during 1998 and 1997, in
1999 the Company agreed to cancel all the royal agreements,
consider all amounts paid to the Company as loans and then
convert certain of these loans to common stock of the Company
(see Note 11). Accordingly, all amounts are reflected as loans
at December 31, 1998 and 1997 (see Note 5).
(F) Indemnification
The Board of Directors has authorized the indemnification of its
officers, directors, agents, fiduciaries or employees against any
claim, liability or expense arising against or incurred by such
person acting on behalf of the Company. As of December 31,
1998 and 1997 the Company had not obtained any insurance
policy providing such indemnification. During 1999 the
Company incurred approximately $17,000 in legal fees on
behalf of its Chairman of the Board/CEO. (see Note 6 (G)(iii).
(G) Litigation, Claims, and Assessments
(i) Litigation with Creditors
The Company is party to various lawsuites, some of
which have been reduced to judgements. These lawsuits and /or
judgements agggregate $34,6226 and are reflected in accounts
payable as of December 31, 1998.
(ii) Other Significant Claims
The Company is in process of negotiating the settlement of
approximately thirty two separate claims against it, primarily
from vendors and services providers, aggregating approximately
$185,000 as of the date of this report. All amounts relating to
1998 and 1997 have been expensed and accrued as accounts
payable at December 31, 1998 and 1997, respectively.
(iii) Litigation Relating to Officers and Directors
On August 23, 1999, the City of San Diego filed a criminal
complaint against The Hydrogiene Corporation, it Chief
Executive Officer and director, and another director of the
Company, for 120 counts of misleading statements regarding
the health benefits of the Company's products and publishing a
general announcement of a securities offering that did not
conform to the California Corporations Code. All counts were
misdemeanors. Subsequently, the court dismissed the charges
against the Company and the other director and accepted the
Chief Executive Officer's no contest plea. The Chief Executive
Officer was sentenced to a 3-year probation on the condition
that he violate no laws, perform community service and pay a
$10,000 fine and $200 in restitution. Based upon the
indemnification discussed in Note 6(G) above, the Company
will incur the cost of the $10,000 fine.
NOTE 7 STOCKHOLDERS' EQUITY
(A) Retroactive Restatement of Capital
Pursuant to the mergers, acquisitions and recapitalizations
discussed in Note 1(A), all share quantities, amounts and par
value in the accompanying consolidated financial statements
have been retroactively restated.
(B) Preferred Stock
The Company authorized 50,000,000 shares of preferred stock
at $0.0001 par value to be issued in one or more series with
such rights, preferences, and restrictions as determined by the
Board of Directors at the time of authorization of issuance. At
December 31, 1998 and 1997 there were none issued and
outstanding.
(C) Stock Issued for Cash
In January 1996 the Company issued 2,179,434 shares of
common stock to its founders for $1,020.
In August 1997 the Company issued 1,025,616 shares of
common stock to its founders for $480.
In December 1997 the Company issued 106,835 shares of
common stock for $100,000, and 5,342 shares for $2,500 in
reliance on an exemption from the registration under the
Securities Act of 1933, as amended.
During the period of January to June 1998 the Company issued
another 5,342 shares of common stock for cash of $2,500.
During 1998 the Company issued 2,946,000 shares of common
stock for $450,000 in reliance on a Regulation D, Rule 504
exemption from registration under the Securities Act of 1933, as
amended.
(D) Stock Issued for Services
In December 1997 the Company issued 149,569 common shares
for services valued for financial accounting purposes at
$140,000 based upon the then recent cash offering price of the
material cash issuance of 106,835 shares discussed above.
During the period from January to September 1998 the
Company issued 2,942,878 common shares for services
performed in 1998 to employees, officers, directors and third
parties. The shares were valued for financial accounting
purposes based upon the then most recent cash offering price of
the material cash issuance of 106,835 shares discussed above.
Accordingly, compensation expense of $2,754,666 was
recognized.
During the period from January to June 1998 the Company
issued 309,821 common shares and in October 1998 issued
29,914 common shares to officers for $159,000 in accrued
salaries. The difference between the exchange price and the fair
market value based upon the most recent cash offering price of
the material cash issuance of 106,835 shares discussed above
aggregating $159,000 was recognized as additional
compensation expense at the issuance date. (See Note 4)
On October 13 and October 14, 1998 the Company recapitalized
through a reincorporation and merger, respectively. (See Note
1(A))
On November 18, 1998 the Company issued 45,000 common
shares for accrued royalty fees due to a related party of $45,000.
The difference between the $1.00 per share price and recent
cash offering price under the private placement (see Note 7(C))
was recorded as additional paid-in capital.
During the period from October 14, 1998 to December 31, 1998
the Company issued 200,000 common shares for services
performed in 1998 valued for financial accounting purposes at
the then recent cash offering price under the private placement
of $0.1527. Compensation expense of $30,540 was recognized
on the grant date.
(E) Common Stock Warrants
The Company issued 320,505 warrants during 1998, at an
exercise price of $0.25 per share as consideration for assistance
with the $450,000 cash offering. The fair market value of the
warrants, aggregating $ 41,665, was estimated on the grant date
using the Black-Scholes option pricing model as required under
SFAS 123 with the following weighted average assumptions:
expected dividend yield 0%, volatility 0%, risk-free interest rate
5.0%, expected option life 1 year. The value of the warrants is a
direct offering expense and accordingly, has been charged to
equity in 1998.
The Company issued 230,000 warrants during 1998, at an
exercise price of $0.25 per share to a 1998 advertising service
provider. The fair market value of the warrants, aggregating $
29,900, was estimated on the grant date using the Black-Scholes
option pricing model as required under SFAS 123 with the
following weighted average assumptions: expected dividend
yield 0%, volatility 0%, risk-free interest rate 5.0%, expected
option life 1 year. The $29,900 was charged to 1998 selling,
general and administrative expense at the grant date.
NOTE 8 INCOME TAXES
Income tax expense (benefit) for the years ended December 31,
1998 and 1997 is summarized as follows:
1998 1997
Current:
Federal $ - $ -
State - -
Deferred-Federal and State 1,192,403 202,309
Change in Valuation
Allowance (1,192,403) (202,309)
Income tax expense (benefit) $ - $ -
The Company's tax expense differs from the "expected" tax
expense for the years ended December 31, 1998 and 1997, as
follows:
1998 1997
U.S. Federal income tax
provision (benefit) $(1,419,186) (227,413)
Nondeductible stock based
compensation 1,080,556 47,600
Effect of net operating loss
carryforward 338,630 179,813
$ - $ -
The tax effects of temporary differences that gave rise to
significant portions of deferred tax assets and liabilities at
December 31, are as follows:
1998 1997
Deferred tax assets:
Net operating loss carryforward $ 338,630 $179,813
Stock based compensation 1,080,556 47,600
Total gross deferred tax
assets 1,419,186 227,413
Less valuation allowance 1,419,186 227,413
Net deferred tax assets $ - $ -
At December 31, 1998, the Company had net operating loss
carryforwards of approximately $996,000 for U.S. federal
income tax purposes available to offset future taxable income
expiring on various dates beginning in 2016 through 2018.
The valuation allowance at January 1, 1998 was $227,413. The
net change in the valuation allowance during the year ended
December 31, 1998 was an increase of $1,191,773.
NOTE 9 RELATED PARTIES
Accrued compensation to officers was exchanged for common
stock (see Note 4)).
The Company has a license agreement with its principal
stockholder whereby royalties are paid to that stockholder based
on product sales and stipulated minimum payments (see Note 6
(E)).
Accrued royalty fees to a principal stockholder were exchanged
for common stock (see Note 7(D)).
The Company has an employment agreement with its principal
stockholder (see Note 6 (C)).
During 1998 and 1997, the Company paid $5000 each year of
expenses on behalf of an affiliate owned by the Chief Executive
Officer. These amounts were charged against loans and accrued
salaries due to that officer, in each respective year.
The Company indemnifies its officers and directors. (See Note
6(F)).
NOTE 10 GOING CONCERN
As reflected in the accompanying financial statements, the
Company has had continuing losses and at December 31, 1998,
has a working capital deficiency and stockholders' deficiency of
$1,130,331 and $1,112,116, respectively. The Company has
continuing losses during 1999 and 2000. The ability of the
Company to continue as a going concern is dependent on the
Company's ability to raise additional capital and implement its
business plan. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern.
The Company has continued its product design and
development oefforts to increase the marketability of its
products. In addition, the Company has settled various loans
payables and other liabilities during 1999 through the issuance
of its common stock. (See Note 11) The company intends to
file a Form SB-2 with the Securities and Exchange Commission
during the year 2000 to raise additional equity capital.
Management believes that actions presently taken to obtain
additional funding provide the opportunity for the Company to
continue as a going concern.
NOTE 11 SUBSEQUENT EVENTS
(A) Merger
Pursuant to an Agreement and plan of Reorganization (the
"Acquisition Agreement") effective December 13, 1999, the
Company acquired all the outstanding shares of common stock
of Decurion Corporation ("Decurion"), a Delaware corporation,
from the shareholders thereof in exchange for an aggregate
1,500,000 shares of common stock of the Company (the
"Acquisition").
The Acquisition was approved by the unanimous consent of the
Board of Directors of the Company on November 29, 1999.
The Acquisition is intended to qualify as a reorganization within
the meaning of Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended. For financial accounting purposes
the acquisition wil be accounted for using the purchase methods
of accounting.
Upon effectiveness of the Acquisition, pursuant to Rule 12g-3(a)
of the General Rules and Regulations of the Securities and
Exchange Commission, the Company elected to become the
successor issuer to Decurion Corporation for reporting purposes
under the Securities Exchange Act of 1934 and elects to report
under the Act effective December 13, 1999.
(B) Private Placement and Other Stock and Option
Issuances
During 1999 the Company issued 13,600,000 common shares
for cash of $596,000 under Regulation D of the Securities Act
of 1933, as amended.
During 1999 the Company issued 6,850,000 common shares for
accrued royalties. The shares were valued at their fair market
value of $960,000 for financial reporting purposes based on the
quoted market price of the stock on the grant dates. The
difference between the accrued royalties at the grant dates and
the fair market value was charged to royalties expense.
During 1999 the Company issued 4,494,054 common shares for
consulting services. The shares were valued at their fair market
value aggregating $1,947,470 for financial reporting purposes
based on the quoted market price of the stock on the grant dates.
The value was charged to consulting expense in 1999 since all
services were performed in that year.
During 1999 the Company issued 1,701,666 common shares to
officers and employees for services. The shares were valued at
their fair market value aggregating $1,115,791 for financial
reporting purposes based on the quoted market price of the
stock on the grant dates. The value was charged to
compensation expense in 1999 since all services were
performed in that year.
During 1999 the Company issued 446,400 common shares for
debt of $80,000. The shares were valued at their fair market
value aggregating $97,434 for financial reporting purposes
based on the quoted market price of the stock on the grant dates.
The Company recognized a loss on debt extinguishment of
$14,434 at the exchange dates.
During 1999 the Company granted approximately 75,000
common stock options at an exercise price of $.80 per share and
6,000,000 common stock opotions at an exercise priice of $0.15
per share to employees and nonemployees. Compensation expense
based on the option values was recognized on the grant dates
pursuant to APB 25 for employees and SFAS 123 for nonemployees.
(C) Consulting Agreements
In 1999, the Company entered into a one year agreement with a
consultant to provide strategic planning services. The
agreement calls for the consultant to receive an annual payment
of $100,000 or 500,000 shares of common stock. The
agreement expires on June 6, 2000. The 500,000 shares were
issued in 1999 and valued for financial accounting purposes at
the fair market value of the common stock on the grant date.
The consulting expenses will be recognized over the contract
life.
(D) Subsequent Borrowings
During 1999 the Company borrowed $32,000 from an
individual which was coverted into common stock during 2000.
(E) Subsequent Operations
The Company has had continuing losses through the date of this
report. (See Note 10).
Exhibits:
*2.1 Agreement and Plan of Reorganization and amendment
thereto between The Hydrogiene corporation and Decurion
Corporation, dated December 13, 1999.
**EX-3.(i) Articles of Incorporation of The Hydrogiene
Corporation, as amended.
**EX-3.(ii) By-Laws of The Hydrogiene Corporation, as
amended.
**EX-27 Financial Data Schedule.
__________________
*Incorporated by reference from the Form 8-K filed by the
Company December 13, 1999.
**Submitted with Form 8-K/A filed by the Company on February
29, 2000.
SIGNATURES
Pursuant to the requirements of the securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
The Hydrogiene Corporation
Dated: February 25, 2000 Charles Kallmann
Charles Kallmann
