<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SBA
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
Micro-ASI, Incorporated
(Name of Small Business Issuer in its charter)
TEXAS 75-2586030
(State of Incorporation) (IRS Employer Identification No.)
12655 NORTH CENTRAL EXPWY., SUITE 1000
DALLAS, TEXAS 75243
(Address of principal executive offices)
(972) 392-9636
(Issuer's telephone number)
Securities to be registered under Section 12(b) of the Act:
NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK $.001 PAR VALUE
1
<PAGE> 2
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
RESULTS OF OPERATIONS:
The Company is a development stage company and to date has had no revenue. The
primary activities to date have been limited to designing a notebook computer to
showcase emerging technologies such as MCMs and flip-chip packaging, and forming
a strategic alliance with a major electronic products distributor. Accordingly,
Management does not consider the historical results of operations to be
representative of future results of operation of the Company.
During the twelve months ended December 31, 1998 the Company sold 768,800 shares
of common stock for $766,300. During the six months ended June 30, 1998 the
Company sold 481,000 shares of common stock for $478,500. During the six months
ended June 30, 1999 the Company sold 2,145,436 shares of common stock for
$2,145,436. The proceeds from the sales of these securities were used to further
the development of the Company's notebook computer and finance daily operations.
The following financial information shows results of operations for the twelve
months ended December 31, 1998 and 1997 and for the six months ended June 30,
1999 and 1998.
<TABLE>
<CAPTION>
Twelve Months Ended Six Months Ended
----------------------------- ----------------------------
December 31, December 31, June 30, June 30,
Summary Income Statement 1998 1997 1999 1998
- ------------------------ ------------ ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest Income $ 8,649 $ 2,153 $ 7,444 $ 5,517
Research and Development (302,355) (186,500) (375,888) (188,027)
General and Administrative (516,964) (179,959) (1,331,331) (127,841)
Interest Expense (7,407) (62,511) (1,749) (3,907)
---------- --------- ----------- -----------
Net Loss $ (818,077) $(426,817) $(1,701,524) $ (314,528)
========== ========= =========== ===========
</TABLE>
14
<PAGE> 3
The increase in General and Administrative expenses for the twelve months ended
December 31, 1998 compared to the twelve months ended December 31, 1997 was
primarily attributable to increases in consulting fees, legal and professional
fees, and travel expenses.
The increase in General and Administrative expenses for the six months ended
June 30, 1999 compared to the six months ended June 30, 1998 was primarily
attributable to increases in consulting fees, legal and professional fees,
travel expenses, and a non-cash charge of $600,000 resulting from the issuance
of 600,000 shares of common stock for past services rendered. The increase in
Research and Development expenses is attributable to the Company beginning its
funding of its product development agreement with ZAE Research, Inc.
<TABLE>
<CAPTION>
December 31, December 31, June 30, June 30,
ASSETS 1998 1997 1999 1998
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Cash and short term investment $ 177,821 $ 246,545 $ 1,114,858 $ 378,504
Other Assets 5,427 13,385 238,822 8,385
----------- ----------- ----------- -----------
Total Assets $ 183,248 $ 259,930 $ 1,353,680 $ 386,889
=========== =========== =========== ===========
LIABILITIES AND SHAREHOLDERS
EQUITY (DEFICIT)
Accounts Payable $ 188,492 $ 193,305 $ 135,424 $ 179,615
Note & Interest Payable 87,812 107,904 0 84,311
Common Stock $.001 par value 16,344 15,575 18,357 16,056
Additional Capital 1,886,868 1,121,337 4,897,691 1,599,356
Deficit Accumulated during
development stage (1,996,268) (1,178,191) (3,697,792) (1,492,449)
----------- ----------- ----------- -----------
Total Liabilities & Equity
(Deficit) $ 183,248 $ 259,930 $ 1,353,680 $ 386,889
=========== =========== =========== ===========
</TABLE>
15
<PAGE> 4
The increase in cash at June 30, 1999 reflects the additional sales of shares
of common stock. All other line items, excluding Deficit Accumulated, in the
development stage, which reflects the operating loss, have remained relatively
unchanged.
PLAN OF OPERATIONS:
The Company is currently planning to complete the design and have prototype
notebook computers available in the fourth quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES:
In addition to the above stock sales, during the period July 1, 1999 through
July 31, 1999 the Company sold an additional 75,000 shares of Common Stock for
$75,000. Management believes that the proceeds from the sale of this stock
combined with the Company's current working capital will provide the Company
with needed working capital for at least ten months. As of July 31, 1999, the
Company has no debt and the only fixed obligation is the office lease rental of
$8,330 per month. However, to execute its business plan, the Company intends to
sell additional shares of common stock in the fall of 1999 to raise up to
$15,000,000. The proceeds from the sale of these securities would provide for
the following:
(1) Acquiring a facility for a research and design center
Micro-ASI will begin construction of a 60,000 square
foot Technology Integration Deployment Center
("TIDC") late in the first
16
<PAGE> 5
quarter of year 2000. The TIDC will be a "Star
Wars-like" collection of capabilities, tools and
technologies, staffed with engineers and
technologists, The TIDC and its staff is a pivotal
element of the Company's strategy to absorb, improve
and create its intellectual property and innovative
core technologies, and then to provide Micro-ASI
customers with full, systems-level solutions
leveraging these technologies.
(2) Employing additional senior level management
(3) Employing both senior and junior level design engineers
(4) Providing equipment and software tools for design engineers
(5) Continued development of current product
(6) Initiating large scale redesign programs for high volume
products
(7) Working capital for daily operations
Should the Company not raise additional capital, planned operations will be
materially adversely affected. If less than $15,000,000 is raised, the Company
would have viable alternative courses of action. First, the Technology
Integration Deployment Center could be a leased facility for an amount
substantially less than a newly constructed facility. The difference in leasing
versus construction could be as much as $6,000,000. Secondly, the Company
intends to hire personnel to work on many projects simultaneously. An
alternative, which would affect the rate of growth of the Company's revenues,
would be to reduce the number of initial projects.
17
<PAGE> 6
Micro-ASI, Inc.
(a development stage company)
Financial Statements
CONTENTS
<TABLE>
<S> <C>
Reports of Independent Auditors ............................................................... F-1
Balance Sheets as of December 31, 1998 and June 30, 1999 (unaudited) .......................... F-3
Statements of Operations for the years ended December 31, 1997 and 1998, the period from
February 1, 1995 (inception) through December 31, 1998, the six month
periods ended June 30, 1998 and 1999 (unaudited) and the period from
February 1, 1995 (inception) through June 30, 1999
(unaudited) .......................................................................... F-4
Statements of Stockholders' Equity (Deficit) for the period February 1, 1995 (inception)
through December 31, 1998 and the six months ended June 30, 1999 (unaudited) ......... F-5
Statements of Cash Flows for the years ended December 31, 1997 and 1998, the period from
February 1, 1995 (inception) through December 31, 1998, the six month
periods ended June 30, 1998 and 1999 (unaudited) and the period from
February 1, 1995 (inception) through June 30, 1999 (unaudited) ....................... F-6
Notes to Financial Statements ................................................................. F-7
</TABLE>
<PAGE> 7
Report of Independent Auditors
The Board of Directors
Micro-ASI, Inc.
We have audited the accompanying balance sheet of Micro-ASI, Inc. (a development
stage company) as of December 31, 1998, and the related statements of
operations, stockholders' equity (deficit) and cash flows for the year then
ended, and for the period February 1, 1995 (inception) through December 31,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. The financial statements as of December 31,
1997, and for the period February 1, 1995 (inception) through December 31, 1997,
were audited by other auditors whose report dated September 21, 1998 expressed
an unqualified opinion on those statements. The financial statements for the
period February 1, 1995, (inception) through December 31, 1997, include a
deficit accumulated during the development stage of $1,178,191. Our opinion on
the statements of operations, stockholders' equity (deficit), and cash flows for
the period February 1, 1995, (inception) through December 31, 1998, insofar as
it relates to amounts for prior periods through December 31, 1997, is based
solely on the report of other auditors.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Micro-ASI, Inc. as of December 31, 1998, and the
results of its operations and its cash flows for the year then ended and the
period from February 1, 1995 (inception) through December 31, 1998, in
conformity with generally accepted accounting principles.
Dallas, Texas
June 23, 1999 /s/ ERNST & YOUNG LLP
F-1
<PAGE> 8
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Micro-ASI, Inc.
(A Development Stage Company)
Dallas, Texas
We have audited the statements of operations, stockholders' equity (deficit),
and cash flows of Micro-ASI, Inc. (a development stage company) for the year
ended December 31, 1997 and for the period from inception on February 1, 1995
to December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Micro-ASI,
Inc. (a development stage company) for the year ended December 31, 1997 and
from inception on February 1, 1995 to December 31, 1997, in conformity with
generally accepted accounting principles.
/s/ JONES, JENSEN & COMPANY L.L.C.
Jones, Jensen & Company
Salt Lake City, Utah
September 21, 1998
F-2
<PAGE> 9
Micro-ASI, Inc.
(a development stage company)
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1998 1999
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 177,821 $ 614,285
Short-term investments -- 500,573
----------- -----------
Total current assets 177,821 1,114,858
Property and equipment, net 5,427 62,112
Other assets -- 176,710
=========== ===========
Total assets $ 183,248 $ 1,353,680
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 188,492 $ 135,424
Accrued interest 17,812 --
----------- -----------
Total current liabilities 206,304 135,424
Note payable 70,000 --
----------- -----------
Total liabilities 276,304 135,424
Stockholders' equity (deficit):
Preferred stock, $.01 par value:
Authorized shares - 1,000,000 -- --
Common stock, $.001 par value:
Authorized shares - 20,000,000
Issued and outstanding shares - 16,343,800 at December
31, 1998 and 18,356,636 at June 30, 1999 (unaudited) 16,344 18,357
Additional capital 1,886,868 4,897,691
Deficit accumulated during the development stage (1,996,268) (3,697,792)
----------- -----------
Total stockholders' equity (deficit) (93,056) 1,218,256
----------- -----------
Total liabilities and stockholders' equity (deficit) $ 183,248 $ 1,353,680
=========== ===========
</TABLE>
See accompanying notes.
F-3
<PAGE> 10
Micro-ASI, Inc.
(a development stage company)
Statements of Operations
<TABLE>
<CAPTION>
YEARS ENDED CUMULATIVE FROM
----------------------------- FEBRUARY 1, 1995
DECEMBER 31, DECEMBER 31, (INCEPTION) THROUGH
1997 1998 DECEMBER 31, 1998
------------ ------------ -------------------
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
Expenses:
Research and development 186,500 302,355 532,615
General and administrative 179,959 516,964 1,376,132
------------ ------------ ------------
Total Expenses 366,459 819,319 1,908,747
------------ ------------ ------------
Operating loss (366,459) (819,319) (1,908,747)
Other income (expense):
Interest income 2,153 8,649 10,802
Interest expense (62,511) (7,407) (98,323)
------------ ------------ ------------
(60,358) 1,242 (87,521)
------------ ------------ ------------
Net loss $ (426,817) $ (818,077) $ (1,996,268)
============ ============ ============
Basic and diluted net loss per share $ (.03) $ (0.05)
============ ============
Weighted average shares outstanding 13,259,000 15,957,781
============ ============
<CAPTION>
CUMULATIVE FROM
SIX MONTHS SIX MONTHS FEBRUARY 1, 1995
ENDED JUNE 30, ENDED JUNE 30, (INCEPTION) THROUGH
1998 1999 JUNE 30, 1999
--------------- -------------- -------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
Expenses:
Research and development 188,027 375,888 908,503
General and administrative 127,841 1,331,331 2,707,463
------------ ------------ ------------
Total Expenses 315,868 1,707,219 3,615,966
------------ ------------ ------------
Operating loss (315,868) (1,707,219) (3,615,966)
Other income (expense):
Interest income 5,517 7,444 18,246
Interest expense (3,907) (1,749) (100,072)
------------ ------------ ------------
1,610 5,695 (81,826)
------------ ------------ ------------
Net loss $ (314,258) $ (1,701,524) $ (3,697,792)
============ ============ ============
Basic and diluted net loss per share $ (0.02) $ (0.10)
============ ============
Weighted average shares outstanding 15,814,000 17,169,822
============ ============
</TABLE>
See accompanying notes.
F-4
<PAGE> 11
Micro-ASI, Inc.
(a development stage company)
Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
COMMON STOCK
ISSUANCE ------------------------ ADDITIONAL
PRICE SHARES AMOUNT CAPITAL
-------- ----------- --------- -------------
<S> <C> <C> <C> <C>
1995
Issuance for notes $ 0.001 9,000,000 $ 9,000 $ (7,500)
Net loss for year ended December 31, 1995 - - -
----------- --------- -------------
Balance at December 31, 1995 9,000,000 9,000 (7,500)
1996
Issuance for forgiveness of debt 0.167 3,000,000 3,000 497,000
Contribution of interest payable to additional
capital - - 28,405
Net loss for year ended December 31, 1996 - - -
----------- --------- -------------
Balance at December 31, 1996 12,000,000 12,000 517,905
1997
Sale of common stock 0.100 2,775,000 2,775 274,725
Sale of common stock 0.333 600,000 600 199,400
Sale of common stock 0.500 200,000 200 99,800
Contributed capital - - 29,507
Net loss for year ended December 31, 1997 - - -
----------- --------- -------------
Balance at December 31, 1997 15,575,000 15,575 1,121,337
1998
Sale of common stock .993 324,500 325 321,675
Sale of common stock 1.000 444,300 444 443,856
Net loss for year ended December 31, 1998 - - -
----------- --------- -------------
Balance at December 31, 1998 16,343,800 16,344 1,886,868
1999
Sale of common stock (unaudited) 1.000 2,145,436 2,145 2,143,291
Issuance for services (unaudited) 1.000 867,400 868 866,532
Return of stock (unaudited) 0.001 (1,000,000) (1,000) 1,000
Net loss for the period ended June 30, 1999
(unaudited) - - -
----------- --------- -------------
Balance at June 30, 1999 (unaudited) 18,356,636 $ 18,357 $ 4,897,691
=========== ========= =============
<CAPTION>
DEFICIT ACCUMULATED
DURING THE DEVELOPMENT TOTAL STOCKHOLDERS'
STAGE EQUITY (DEFICIT)
---------------------- -------------------
<S> <C> <C>
1995
Issuance for notes $ - $ 1,500
Net loss for year ended December 31, 1995 (610,757) (610,757)
-------------- --------------
Balance at December 31, 1995 (610,757) (609,257)
1996
Issuance for forgiveness of debt - 500,000
Contribution of interest payable to additional
capital - 28,405
Net loss for year ended December 31, 1996 (140,617) (140,617)
-------------- --------------
Balance at December 31, 1996 (751,374) (221,469)
1997
Sale of common stock - 277,500
Sale of common stock - 200,000
Sale of common stock - 100,000
Contributed capital - 29,507
Net loss for year ended December 31, 1997 (426,817) (426,817)
-------------- --------------
Balance at December 31, 1997 (1,178,191) (41,279)
1998
Sale of common stock - 322,000
Sale of common stock - 444,300
Net loss for year ended December 31, 1998 (818,077) (818,077)
-------------- --------------
Balance at December 31, 1998 (1,996,268) (93,056)
1999
Sale of common stock (unaudited) - 2,145,436
Issuance for services (unaudited) - 867,400
Return of stock (unaudited) - -
Net loss for the period ended June 30, 1999
(unaudited) (1,701,524) (1,701,524)
-------------- --------------
Balance at June 30, 1999 (unaudited) $ (3,697,792) $ 1,218,256
============== ==============
</TABLE>
See accompanying notes.
F-5
<PAGE> 12
Micro-ASI, Inc.
(a development stage company)
Statements of Cash Flows
<TABLE>
<CAPTION>
YEARS ENDED CUMULATIVE FROM
---------------------------- FEBRUARY 1, 1995
DECEMBER 31, DECEMBER 31, (INCEPTION) THROUGH
1997 1998 DECEMBER 31, 1998
----------- ------------ ------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (426,817) $ (818,077) $(1,996,268)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 4,908 14,471 25,626
Common stock issued to incorporators -- -- 1,500
Common stock issued for services -- -- --
Changes in operating assets and liabilities:
Accounts payable (46,457) (4,813) 188,492
Accrued interest 12,904 4,908 17,812
Other assets -- -- --
----------- ----------- -----------
Net cash used in operating activities (455,462) (803,511) (1,762,838)
INVESTING ACTIVITIES
Capital expenditures -- (6,513) (31,053)
Purchase of short-term investment -- -- --
----------- ----------- -----------
Net cash used in investing activities -- (6,513) (31,053)
FINANCING ACTIVITIES
Proceeds from issuance of notes -- -- 595,000
Sales of common stock 577,500 766,300 1,343,800
Contributed capital 29,507 -- 57,912
Principal payments on notes 95,000 (25,000) (25,000)
----------- ----------- -----------
Net cash provided by financing activities 702,007 741,300 1,971,712
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 246,545 (68,724) 177,821
Cash and cash equivalents at beginning of period -- 246,545 --
----------- ----------- -----------
Cash and cash equivalents at end of period $ 246,545 $ 177,821 $ 177,821
=========== =========== ===========
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 47,492 $ 7,407 $ 54,899
=========== =========== ===========
<CAPTION>
CUMULATIVE FROM
SIX MONTHS SIX MONTHS FEBRUARY 1, 1995
ENDED JUNE 30, ENDED JUNE 30, (INCEPTION) THROUGH
1998 1999 JUNE 30, 1999
--------------- --------------- ------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (314,258) $(1,701,524) $(3,697,792)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 5,000 4,737 30,363
Common stock issued to incorporators -- -- 1,500
Common stock issued for services -- 647,400 647,400
Changes in operating assets and liabilities:
Accounts payable (13,690) (53,068) 135,424
Accrued interest 1,407 (17,812) --
Other assets -- (26,710) (26,710)
----------- ----------- -----------
Net cash used in operating activities (321,541) (1,146,977) (2,909,815)
INVESTING ACTIVITIES
Capital expenditures -- (61,422) (92,475)
Purchase of short-term investments -- (500,573) (500,573)
----------- ----------- -----------
Net cash used in investing activities -- (561,995) (593,048)
FINANCING ACTIVITIES
Proceeds from issuance of notes -- -- 595,000
Sales of common stock 478,500 2,145,436 3,489,236
Contributed capital -- -- 57,912
Principal payments on notes (25,000) -- (25,000)
----------- ----------- -----------
Net cash provided by financing activities 453,500 2,145,436 4,117,148
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 131,959 436,464 614,285
Cash and cash equivalents at beginning of period 246,545 177,821 --
----------- ----------- -----------
Cash and cash equivalents at end of period $ 378,504 $ 614,285 $ 614,285
=========== =========== ===========
SUPPLEMENTAL INFORMATION
Cash paid for interest $ -- $ 1,749 $ 56,648
=========== =========== ===========
</TABLE>
See accompanying notes.
F-6
<PAGE> 13
Micro-ASI, Inc.
(a development stage company)
Notes to Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTS POLICIES
ORGANIZATION
Micro-ASI, Inc. (the Company) is a development stage company incorporated on
February 1, 1995, for the purpose of designing, developing, manufacturing and
marketing advanced-technology packaging systems called multi-chip modules
("MCMs"). The Company's intended initial application of this technology is in
notebook computers.
DEVELOPMENT STAGE COMPANY
The Company will continue to be a development stage company as defined in
Statement of Financial Accounting Standards No. 7, "Accounting and Reporting by
Development Stage Enterprises," until it generates significant revenue from its
MCMs. Successful development of a development stage company, particularly
advanced technology related companies, is costly and highly competitive. The
Company's growth and ultimate success depends on the timely development and
market acceptance of new products and its ability to raise needed capital. A
development stage company involves risks and uncertainties, and there are no
assurances that the Company will be successful in its efforts.
INTERIM FINANCIAL STATEMENTS
The unaudited financial statements as of June 30, 1999 and for the six months
in the periods ended June 30, 1999 and 1998 reflect all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation of the
financial position and results of operations for such periods. The results for
the six months in the period ended June 30, 1999 are not necessarily
indicative of the results to be expected for the full year.
CONCENTRATION OF CREDIT RISK
At December 31, 1998, the Company's cash equivalents consisted principally of
money market accounts.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
SHORT-TERM INVESTMENTS
The Company's short-term investments consist of United States Government agency
securities.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated using the
straight-line method based on the estimated useful lives of the related assets.
F-7
<PAGE> 14
Micro-ASI, Inc.
(a development stage company)
Notes to Financial Statements (continued)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTS POLICIES (CONTINUED)
INCOME TAXES
Deferred income taxes are determined using the liability method, which gives
consideration to the future tax consequences associated with differences between
the financial accounting and tax basis of assets and liabilities. This method
also gives immediate effect to changes in income tax laws.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
NET LOSS PER SHARE
Basic and diluted net loss per share is computed using the Company's net loss
for each period presented divided by the average common shares outstanding. The
Company had no other equity instruments outstanding during any of the periods
presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting Standards Board
Statement No. 130 (Statement 130), Reporting Comprehensive Income. Statement 130
establishes new rules for the adopting and display of comprehensive income and
its components; however, the adoption of this Statement has no impact on the
Company's results of operations or stockholders' equity as the Company has no
other elements of other comprehensive income.
F-8
<PAGE> 15
Micro-ASI, Inc.
(a development stage company)
Notes to Financial Statements (continued)
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL DECEMBER 31, June 30,
LIFE 1998 1999
--------- ------------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Computer equipment 3 $ 6,513 $ 13,390
Furniture and fixtures 5 -- 23,216
Leasehold improvements 1 -- 31,329
Less accumulated depreciation (1,086) (5,823)
------------- ----------
$ 5,427 $ 61,112
============= ==========
</TABLE>
3. NOTE PAYABLE
The $70,000 note payable to an original promoter of the Company at December 31,
1998, is due on demand with interest accruing on the unpaid balance at a rate of
10%, compounding semi-annually and payable annually in arrears. In April 1999,
this note payable was exchanged for 100,000 shares of the Company's common
stock.
4. INCOME TAXES
At December 31, 1998, the Company's net deferred tax assets of approximately
$675,000 relate primarily from net operating loss carryforwards for federal
income tax purposes which begin expiring in 2011. The tax benefit of the net
operating loss carryforwards is fully offset by a valuation allowance due to
uncertainty related to future taxable income. Accordingly, no tax benefit has
been recognized in the accompanying financial statements. No other significant
reconciling items exist between the actual effective tax and the expected
effective tax rate for 1997 and 1998.
5. RELATED PARTY TRANSACTIONS
The Company has a consulting agreement with a firm owned by the Company's
Chairman for the design, development and marketing of MCMs. Fees and expenses
paid totaled $135,000, $330,000, $150,000, and $150,000 for the years ended
December 31, 1997 and 1998 and for the six months in the period ended June 30,
1999 and 1998 (unaudited), respectively.
F-9
<PAGE> 16
Micro-ASI, Inc.
(a development stage company)
Notes to Financial Statements (continued)
5. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company had a consulting agreement with a firm owned by the Company's
President and Chief Executive Officer for administrative and financial
management. Fees and expenses paid totaled $40,000, $95,000, and $35,000 for the
years ended December 31, 1997 and 1998 and for the six months in the period
ended June 30, 1998 (unaudited), respectively. This agreement ended in December
1998 when the President joined the Company full time.
The Company paid approximately $10,000, $100,000, $27,000, and $221,600 to other
related parties for development related activities and expense reimbursements in
1997 and 1998 and for the six months in the period ended June 30, 1998 and
1999 (unaudited), respectively.
6. YEAR 2000 (UNAUDITED)
The Company's assessment of its year 2000 problem indicates that its exposure is
very limited currently as the Company has no operations. Computer hardware and
software used in the business are recently acquired and are believed to be year
2000 compliant. As the Company continues to explore product development
arrangements (both internally and with third parties), management will use its
best judgment to assess the year 2000 implications, if any, these arrangements
present. The Company believes the year 2000 issue will not pose significant
operational problems and its costs, if any, will be nominal.
7. SUBSEQUENT EVENTS
OPERATING LEASES
In May 1999, the Company entered into a non-cancelable operating lease for
office space with future minimum rental payments of $66,637 for 1999 and $33,318
for 2000.
INVESTMENT IN ZAE
On March 25, 1999, the Company entered into an agreement with ZAE Research, Inc.
(ZAE), whereby, the Company will invest up to $1,000,000 in ZAE. In return, the
Company will receive a 50% ownership interest in one of ZAE's subsidiaries and a
10.5% royalty paid on all consolidated gross revenue of ZAE and its
subsidiaries, excluding the subsidiary with the aforementioned 50% interest. As
of June 30, 1999, the Company had invested approximately $134,000 in ZAE and has
not recorded any revenues from royalties. The Company's funding has been used
for product development by ZAE and accordingly has been expensed by the Company.
COMMON STOCK
In April 1999, the Company and one of its original promoters finalized an
agreement whereby 1,000,000 shares of stock previously issued to the promoter,
on the condition that he join the Company as a full time employee, were returned
as it was agreed that the promoter will not join the Company as a full-time
employee.
F-10
<PAGE> 17
Micro-ASI, Inc.
(a development stage company)
Notes to Financial Statements (continued)
7. SUBSEQUENT EVENTS (CONTINUED)
In June 1999, the Company granted 150,000 shares to its outside investment
banking firm for future services covering a six month period ending December
1999. The fair value of these shares, $150,000 will be expensed over the
remaining service period. The fair value of these shares will be remeasured at
each reporting date and any increase or decrease in the fair value of the shares
will be adjusted through a cumulative effect adjustment. Additionally, the
Company granted 600,000 shares to this firm for services performed in connection
with investor relation activities.
On June 23, 1999, the Company raised approximately $860,000 through the sale of
its common stock at $1.00 per share.
During July and August 1999 the Company sold 432,600 shares of common stock for
$432,600 and issued an additional 9,375 shares of common stock for services
rendered valued at $9,375.
F-11
<PAGE> 18
PART III
ITEM 1 INDEX TO EXHIBITS:
The following documents are filed as exhibits to this Form 10SBA:
(6) Material Contracts:
Exhibit 27.1 Financial Data Schedule for the Six
Month Period Ended June 30, 1999
Exhibit 27.2 Financial Data Schedules for (a) the
Period February 1, 1995 (Inception) through June 30,
1999, (b) the Period February 1, 1995 (Inception)
through December 31, 1998, (c) the Year Ended
December 31, 1998, (d) the Six Month Period Ended
June 30, 1998, and (e) the Year Ended December 31,
1997
37
<PAGE> 19
ITEM 2 DESCRIPTION OF EXHIBITS:
The Exhibits listed in Item 1 of this Part III are filed herewith.
38
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the issuer has duly caused this document to be signed on its behalf by the
undersigned, thereunto duly authorized.
Issuer:
Micro-ASI, Incorporated
Date:
August 12, 1999 /s/ JOEL E. CLAYBROOK
-----------------------------------------
By: Joel E. Claybrook, President
39
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
27.1 Financial Data Schedule for the Six Month Period Ended
June 30, 1999
27.2 Financial Data Schedules for (a) the Period February 1,
1995 (Inception) through June 30, 1999, (b) the Period
February 1, 1995 (Inception) through December 31, 1998,
(c) the Year Ended December 31, 1998, (d) the Six Month
Period Ended June 30, 1998, and (e) the Year Ended
December 31, 1997
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 614,285
<SECURITIES> 500,573
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,114,858
<PP&E> 62,112
<DEPRECIATION> 4,737
<TOTAL-ASSETS> 1,353,680
<CURRENT-LIABILITIES> 135,424
<BONDS> 0
0
0
<COMMON> 18,357
<OTHER-SE> 1,199,899
<TOTAL-LIABILITY-AND-EQUITY> 1,353,680
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,707,219
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (5,695)
<INCOME-PRETAX> (1,701,524)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,701,524)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> OTHER OTHER YEAR 3-MOS YEAR
<FISCAL-YEAR-END> JUN-30-1999 DEC-31-1998 DEC-31-1998 JUN-30-1998 DEC-31-1997
<PERIOD-START> FEB-01-1995 FEB-01-1995 JAN-01-1998 JAN-01-1998 JAN-01-1997
<PERIOD-END> JUN-30-1999 DEC-31-1998 DEC-31-1998 JUN-30-1998 DEC-31-1997
<CASH> 0 0 177,821 0 0
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 0 0 0 0 0
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 0 0 0 0 0
<CURRENT-ASSETS> 0 0 177,821 0 0
<PP&E> 0 0 5,427 0 0
<DEPRECIATION> 0 0 14,471 0 0
<TOTAL-ASSETS> 0 0 183,248 0 0
<CURRENT-LIABILITIES> 0 0 206,304 0 0
<BONDS> 0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 0 0 16,344 0 0
<OTHER-SE> 0 0 (109,400) 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 0 183,248 0 0
<SALES> 0 0 0 0 0
<TOTAL-REVENUES> 0 0 0 0 0
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 0 0 0 0 0
<OTHER-EXPENSES> 3,615,966 1,908,747 819,319 315,868 366,459
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 81,826 87,521 (1,242) (1,610) 60,358
<INCOME-PRETAX> (3,697,792) (1,996,268) (818,077) (314,258) (426,817)
<INCOME-TAX> 0 0 0 0 0
<INCOME-CONTINUING> 0 0 0 0 0
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> (3,697,792) (1,996,268) (818,077) (314,258) (426,817)
<EPS-BASIC> 0 0 0.05 (0.02) (0.03)
<EPS-DILUTED> 0 0 0.05 (0.02) (0.03)
</TABLE>
