EMC EMERGIES, INC.
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
[X} ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 1999.
[ ] TRANSACTION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File No. 0-5391
EMC ENERGIES, INC.
(Name of Small Business Issuer in its Charter)
WYOMING 83-0210365
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
4685 S. HIGHLAND DR, SUITE 202
SALT LAKE CITY, UT 84117
(Address of Principal Executive Offices)
Issuer's Telephone Number: (801)274-1011
Securities Registered under Section 12(b) of the Exchange Act: None.
Securities Registered under Section 12(g) of the Exchange Act: Common stock
having a par value of $.25 per share
Check whether the Issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
(1) Yes No X (2) Yes X No
--- --- --- ---
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure
will be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in
Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
State Issuer's revenues for its most recent fiscal year:
June 30, 1998 $ - 0 -
State the aggregate market value of the common voting stock held
by non-affiliates computed by reference to the price at which the stock was
sold, or the average bid and asked prices of such stock, as of a specified
date within the past 60 days:
June 30, 1998 - $488,341 There are 1,953,366 shares of common voting
stock of the Registrant held by non-affiliates. During the past five
years, there has been no "public market" for shares of common stock of
the Company, so the Company has arbitrarily valued these shares on the basis
of par value (.25) per share. There are no preferred shares authorized.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
None; Not Applicable.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the Issuer's classes of
common equity, as of the latest practicable date:
Common Voting Stock
June 30, 1999
2,423,358
Preferred Stock
June 30, 1999
0
(None authorized)
DOCUMENTS INCORPORATED BY REFERENCE
A description of "Documents Incorporated by Reference" is contained in Item
13 of this Report.
Transitional Small Business Issuer Format Yes X No
--- ---
PART I
Item 1. Description of Business.
Business Development
- --------------------
The Company was incorporated under the laws of the State of Wyoming on
June 19, 1969. Following an involuntary dissolution for failure to file an
annual report, the Company was reinstated as a Wyoming Corporation on October
14, 1999.
Prior to 1990, the Company was engaged in the business of exploring for
and producing oil and gas in the Rocky Mountain and Mid-Continent areas of the
United States. The Company liquidated substantially all of its assets in
1990, and has been dormant since that time. It has attempted to find a
suitable acquisition or merger candidate since 1990, but none have been
discovered and no agreements have been entered into as of June 30, 1999.
Business
- ---------
The Company has had no business operations since 1990. To the extent
that the Company intends to continue to seek the acquisition of assets,
property or business that may benefit the Company and its
stockholders, the Company is essentially a "blank check" company. Because
the Company has virtually no assets, conducts no business and has no
employees, management anticipates that any such acquisition would require
the Company to issue shares of its common stock as the sole consideration for
the acquisition. This may result in substantial dilution of the shares of
current stockholders. The Company's Board of Directors shall make the final
determination whether to complete any such acquisition; the approval of
stockholders will not be sought unless required by applicable laws, rules
and regulations, the Company's Articles of Incorporation or Bylaws, or
by contract. The Company makes no assurance that any future enterprise
will be profitable or successful.
The Company currently has no business operations other than seeking
the acquisition of assets, property or business that may benefit the Company
and its stockholders. As of the date hereof, the Company has not
executed any definitive, binding Plan of Reorganization and there can be no
assurance that such a Plan will ever be executed or that, if executed, such a
transaction will be completed.
Principal Products or Services and Markets
- ------------------------------------------
The Company currently offers no principal products or services and has
not been engaged in any material operations since on or before June 30, 1990.
Distribution methods of the products or services;
- -------------------------------------------------
None; not applicable.
Status of any publicly announced new product or service
- -------------------------------------------------------
None; not applicable.
Competitive business conditions and the small business issuer's competitive
position in the industry and methods of competition
- ---------------------------------------------------
None; not applicable.
Sources and availability of raw materials and the names of principal suppliers
- ---------------------------------------------------------------------------
None; not applicable.
Dependence on one or a few major customers
- ------------------------------------------
None; not applicable.
Patents, trademarks, licenses, franchises, concessions, royalty agreements
or labor contracts, including duration
- ------------------------------------------------------------------
None; not applicable.
Need for any government approval of principal products or services
- -----------------------------------------------------------------
None; not applicable.
Effect of existing or probable governmental regulations on the business
- -----------------------------------------------------------------------
None; not applicable.
Time spend during the last two fiscal years on research and development
activities
- -----------------------------------------------------------------------
None; not applicable;
Costs and effects of compliance with environmental laws
- -------------------------------------------------------
None; not applicable.
Number of total employees and number of full time employees
- -----------------------------------------------------------
None; not applicable.
Risk Factors
- -------------
In any business venture, there are substantial risks specific to
the particular enterprise and which cannot be ascertained until a
potential acquisition, reorganization or merger candidate has been
identified and a reorganization with such a candidate completed;
however, at a minimum, the Company's present and proposed business
operations will be highly speculative and subject to the same types of risks
inherent in any new or unproven venture, and will include those types of risk
factors outlined below.
Limited Assets; No Source of Revenue. The Company has virtually no
assets and has had no revenues since before June 30, 1990. Nor will the
Company receive any revenues until it completes an acquisition, reorganization
or merger, at the earliest. The Company can provide no assurance that any
acquired business will produce any material revenues for the Company or its
stockholders or that any such business will operate on a profitable basis.
"Going Concern" Opinion of Independent Auditor. In its
Independent Auditors' Report, on the Company's financial statements for the
years ended June 30, 1998 and 1999, the Company's independent auditor
has expressed uncertainty as to the likelihood of the Company's
continuing as a going concern. This opinion is based on the
Company's substantial accumulated losses from operations, its lack of
assets and its net working capital deficiency. See Part I, Item 7, of this
Report.
Discretionary Use of Proceeds; "Blank Check" Company. Because the
Company is not currently engaged in any substantive business activities,
as well as management's broad discretion with respect to the
acquisition of assets, property or business, the Company may be deemed to
be a "blank check" company. Although management intends to apply
substantially all of the proceeds that it may receive through the issuance
of stock or debt to a suitable acquisition, subject to the criteria
identified above, such proceeds will not otherwise be designated for any
more specific purpose. The Company can provide no assurance that any
allocation of such proceeds will allow it to achieve its business
objectives.
State Restrictions on "Blank Check" Companies. A total of 36
states prohibit or substantially restrict the registration and sale of
"blank check" companies within their borders. Additionally, 36 states
use "merit review powers" to exclude securities offerings from their
borders in an effort to screen out offerings of highly dubious quality.
See Paragraph 8221, NASAA Reports, CCH Topical Law Reports, 1990. The
Company intends to comply fully with all state securities laws, and plans to
take the steps necessary to ensure that any future offering of its
securities is limited to those states in which such offerings are allowed.
However, these legal restrictions may have a material adverse impact on
the Company's ability to raise capital because potential purchasers of
the Company's securities must be residents of states that permit the
purchase of such securities. These restrictions may also limit or prohibit
stockholders from reselling shares of the Company's common stock within
the borders of regulating states.
By regulation or policy statement, eight states (Idaho, Maryland,
Missouri, Nevada, New Mexico, Pennsylvania, Utah and Washington)
place various restrictions on the sale or resale of equity securities of
"blank check" or "blind pool" companies. These restrictions include, but
are not limited to, heightened disclosure requirements, exclusion from "manual
listing" registration exemptions for secondary trading privileges and
outright prohibition of public offerings of such companies.
Further, all states (with the exception of Alabama, Delaware,
Florida, Hawaii, Illinois, Minnesota, Nebraska and New York) have adopted
some form of the Small Corporate Offering Registration Exemption ("SCOR")
program, which permits an issuer to notify the Securities and Exchange
Commission of certain offerings registered in such states by filing a Form D
under Regulation D of the Securities and Exchange Commission. States
participating in the SCOR program also allow applications for
registration of securities by qualification by filing a Form U-7 with
the states' securities commissions. In most jurisdictions, "blank
check" and "blind pool" companies are not eligible for participation in the
SCOR program.
Management to Devote Insignificant Time to Activities of the
Company. Members of the Company's management are not required to devote
their full time to the affairs of the Company. Because of their time
commitments, as well as the fact that the Company has no business, the members
of management anticipate that they will devote an insignificant amount of
time to the activities of the Company, at least until such time as the
Company has identified a suitable acquisition target.
Capital Consulting of Utah, Inc., which is a consultant to the Company,
has been and continues to be, involved in the promotion of other entities
that may be deemed to be "blank check" companies. Additionally, it provides
financial consulting services to these companies.
Future Sales of Common Stock. As of the date of this Report, all of the
Company's stock has been beneficially owned for one year, and subject to
compliance with the applicable provisions of Rule 144 of the Securities
and Exchange Commission, shareholders may then commence to sell up to one
percent of the outstanding securities of the Company in any three month
period. Such sales could have a substantial adverse effect on any public
market that may then exist in the Company's common stock. Sales of any of
these could severely affect the ability of the Company to secure the
necessary debt or equity funding for the Company's proposed business
operations. For additional information concerning the present market for
shares of common stock of the Company, see Part III, Item 9 of this
Report.
Dilution. Any reverse or issuance of any stock will effect a "dilution"
of the holdings of the Company's stockholders. Because the Company
currently has no resources, and is unlikely to have any resources until it
has completed a merger or acquisition, management expects that any such
compensation would take the form of an issuance of the Company's stock, and
that a reverse of the existing shareholder base will be necessary; this
would further dilute the holdings of the Company's other stockholders.
No Market for Common Stock; No Market for Shares. Although the
Company's common stock is listed on the OTC Bulletin Board of the National
Association of Securities Dealers, Inc. (the "NASD"), under the symbol
"EMCE", there is currently no established market for such shares; there can
be no assurance that such a market will ever develop or be maintained. Any
market price for shares of common stock of the Company is likely to be very
volatile, and numerous factors beyond the control of the Company may have a
significant effect. In addition, the stock markets generally have
experienced, and continue to experience, extreme price and volume
fluctuations which have affected the market price of many small capital
companies and which have often been unrelated to the operating
performance of these companies. These broad market fluctuations, as
well as general economic and political conditions, may adversely affect
the market price of the Company's common stock in any market that may
develop. See Part II, Item 5, of this Report.
Risks of "Penny Stock." The Company's common stock may be deemed to
be "penny stock" as that term is defined in Reg. Section 240.3a51-1
of the Securities and Exchange Commission. Penny stocks are stocks (i) with a
price of less than five dollars per share; (ii) that are not traded on a
"recognized" national exchange; (iii) whose prices are not quoted on the
NASDAQ automated quotation system (NASDAQ-listed stocks must still meet
requirement (i) above); or (iv) is an issuer with net tangible assets less
than $2,000,000 (if the issuer has been in continuous operation for at
least three years) or $5,000,000 (if in continuous operation for less than
three years), or with average revenues of less than $6,000,000 for the last
three years.
There has not been an "established public market" for the Company's
common stock for the past 8 years. The Company's common stock is
quoted on the "Electronic Bulletin Board" of the National Association of
Securities Dealers, Inc.(the "NASD"), under the symbol "EMCE".
After completing a merger or acquisition transaction the Company will
seek a securities firm to make a market in its securities. If there is
only one market maker in the Company's securities, there is a risk that market
maker will dominate the market and set prices that are not based on
competitive forces.
Section 15(g) of the Securities Exchange Act of 1934, as amended, and
Reg. Section 240.15g-2 of the Securities and Exchange Commission
require broker-dealers dealing in penny stocks to provide potential
investors with a document disclosing the risks of penny stocks and to
obtain a manually signed and dated written receipt of the document before
effecting any transaction in a penny stock for the investor's account.
Potential investors in the Company's common stock are urged to obtain and
read such disclosure carefully before purchasing any shares that are
deemed to be "penny stock."
Moreover, Reg. Section 240.15g-9 of the Securities and Exchange
Commission requires broker-dealers in penny stocks to approve the account of
any investor for transactions in such stocks before selling any penny stock to
that investor. This procedure requires the broker-dealer to (i) obtain
from the investor information concerning his or her financial situation,
investment experience and investment objectives; (ii) reasonably
determine, based on that information, that transactions in penny stocks
are suitable for the investor and that the investor has sufficient knowledge
and experience as to be reasonably capable of evaluating the risks of penny
stock transactions; (iii) provide the investor with a written statement
setting forth the basis on which the broker-dealer made the determination in
(ii) above; and (iv) receive a signed and dated copy of such statement from
the investor, confirming that it accurately reflects the investor's
financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors
in the Company's common stock to resell their shares to third parties
or to otherwise dispose of them.
Involvement in Other "Blank Check" Companies.
- ---------------------------------------------
Management does not have any other experience in the past ten years with
other "blank check" companies.
Capital Consulting of Utah, Inc., which is a consultant of the Company,
has been and continues to be, involved in the promotion of other entities
that may be deemed to be "blank check" companies. Additionally, it provides
financial consulting services to these companies.
Item 2. Description of Property.
The Company has limited property including real property located in
Estes, Colorado, two gold bars, and securities, and cash, the combined value
of which is approximately $24,000.
The Company's principal executive office address and telephone number
is the home address and number of Thomas Galles, the company's president,
which are provided at no cost. See Item 1, Part I, of this Report.
Item 3. Legal Proceedings.
The Company is not the subject of any pending legal proceedings; and to
the knowledge of management, no proceedings are presently contemplated
against the Company by any federal, state or local governmental agency.
Further, to the knowledge of management, no director or executive
officer is party to any action in which any has an interest adverse to the
Company.
Item 4. Submission of Matters to a Vote of Security Holders.
None; not applicable
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
Market Information
- ------------------
There is no "public market" for shares of common stock of the Company.
The Company is listed on the OTC Bulletin Board of the National
Association of Securities Dealers ("NASD") under the symbol "EMCE", however,
management does not expect any public market to develop unless and until the
Company completes an acquisition or merger. In any event, no assurance can be
given that any market for the Company's common stock will develop or
be maintained. If a public market ever develops in the future, the sale of
"unregistered" and "restricted" shares of common stock pursuant to Rule 144 of
the Securities and Exchange Commission by shareholders may have a substantial
adverse impact on any such public market.
Holders
- -------
The number of record holders of the Company's common stock as of June
30, 1999 was 1,072; this number does not include an indeterminate
number of stockholders whose shares are held by brokers in street name.
The number of stockholders has been substantially the same during the past
ten years.
Dividends
- ---------
There are no present material restrictions that limit the ability of
the Company to pay dividends on common stock or that are likely to do so
in the future. The Company has not paid any dividends with respect to its
common stock, and does not intend to pay dividends in the foreseeable future.
Recent Sales of Unregistered Securities
- ---------------------------------------
None; not applicable.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation
- -----------------
The Company has not engaged in any material operations in the period
ending June 30, 1999, or since in or before June 30, 1990. The Company
intends to continue to seek out the acquisition of assets, property or
business that may be beneficial to the Company and its stockholders.
The Company's foreseeable cash requirements during the next 12 months
will relate to maintaining the Company in good standing in its state of
incorporation, maintaining the Company in good standing with its transfer
agent, legal fees and accounting fees to keep its reports "current" with the
Securities and Exchange Commission, and cash requirements to effect a merger
or acquisition with a going concern company.
The Company currently has no business operations other than seeking
the acquisition of assets, property or business that may benefit the Company
and its stockholders.
As of the date hereof, the parties have not executed any
definitive, binding Plan or merger or reorganization, and there can be
no assurance that such a Plan will ever be executed or that, if executed, such
a transaction will be completed.
Results of Operations
- ---------------------
The Company has had no operations since June 30, 1990.
Liquidity
- ---------
The Company presently has no assets, cash or otherwise. It is
anticipated that the Company's expenses over the next 12 months will be
advanced through loans from either it's officers and directors or Capital
Consulting of Utah, Inc.
Item 7. Financial Statements.
For the periods ended June 30, 1998 and June 30, 1999
- -----------------------------------------------------
EMC ENERGIES, INC.
INDEPENDENT AUDITORS' REPORT
AND
FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
CONTENTS
PAGE
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
EMC ENERGIES, INC.
I have audited the balance sheets of EMC Energies, Inc. as of June 30, 1999
and 1998 and the related statements of operations, stockholders' equity and
cash flows for the years ended June 30, 1999 and 1998. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I 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. I believe that my audits provide a reasonable basis
for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EMC Energies, Inc. as of
June 30, 1999 and 1998, and the results of its operations and its cash flows
for the years ended June 30, 1999 and 1998, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 5 to the financial
statements, the Company has suffered recurring losses, and has limited
working capital which raises substantial doubt about its ability to continue
as a going concern. Management's plans regarding those matters also are
described in Note 5. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Salt Lake City, Utah
November 17, 1999
<TABLE>
EMC ENERGIES, INC.
BALANCE SHEET
JUNE 30, 1999 AND 1998
<CAPTION>
ASSETS
June 30 June 30
1999 1998
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,657 $ 3,894
Marketable Securities -
Available for sale 18,875 28,525
Other Investments 1,575 1,575
------- -------
Total Current Assets 22,107 33,994
PROPERTY AND EQUIPMENT, NET 2,500 10,500
------ ------
TOTAL ASSETS $ 24,607 $ 44,494
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES $ - $ -
_______ ________
Total Current Liabilities - -
STOCKHOLDERS' EQUITY
Common stock, $.25 par value;
10,000,000 shares authorized;
2,423,358 shares issued at
1999 and 1998 605,840 605,840
Additional paid-in capital 821,311 821,311
Retained earnings (deficit) (1,089,597) (1,079,360)
Accumulated other comprehensive
income (loss) (20,420) (10,770)
_________ _________
317,134 337,021
Less treasury stock at cost,
(353,386 shares both years) (292,527) (292,527)
_________ _________
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY $ 24,607 $ 44,494
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
EMC ENERGIES, INC.
STATEMENTS OF OPERATIONS
<CAPTION>
For the For the
Year Ended Year Ended
June 30 June 30
1999 1998
---------- ----------
<S> <C> <C>
REVENUE $ - $ -
-------- --------
EXPENSES:
General and Administrative Expenses 2,240 3,465
Asset Impairment Charge 8,000 -
------ -----
TOTAL OPERATING EXPENSES 10,240 3,465
------ -----
Net (loss) before other items (10,240) (3,465)
------ -----
OTHER INCOME (EXPENSE):
Other income 3 5
Interest income - 28
Gain (loss)on sale of
marketable securities - 2,385
----- -----
TOTAL OTHER INCOME (EXPENSE) 3 2,418
----- -----
NET (LOSS) BEFORE TAXES (10,237) (1,047)
PROVISIONS FOR INCOME TAXES - -
----- -----
NET (LOSS) $ (10,237) $(1,047)
====== ======
EARNINGS (LOSS) PER SHARE
Income (loss) from
continuing operations $ (0.00) $ (0.00)
====== ======
Net income $ (0.00) $ (0.00)
====== ======
WEIGHTED AVERAGE
SHARES OUTSTANDING 2,423,358 2,423,358
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
EMC ENERGIES, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
<CAPTION>
Accum.
Common Stock Add'l Accum- Other Treasury Stock
Shares Amount Paid-in ulated Comprehens. Shares Amount
Issued Paid Capital Deficit Losses Issued Paid Total
-------- ------ ------- --------- ------- ------- -------
- -----
<S><C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, June 30,1997:
2,423,358 $605,840 $821,311 $(1,078,313)$(11,157)353,286 $(292,524)$45,157
Treasury stock
acquisition 100 (3) (3)
Comprehensive income:
Net loss for the
period ended
June 30, 1998 (1,047) (1,047)
Other comprehensive
income (loss)
unrealized gain
on securities 387 387
Comprehensive income (660)
_________ _______ _______ _________ ______ _______ _______ _______
BALANCE, June 30, 1998:
2,423,358 $605,840 $821,311 $(1,079,360)$(10,770)353,386 $(292,527)$44,494
Comprehensive income:
Net loss for the
period ended
June 30, 1999 (10,237) (10,237)
Other comprehensive
income (loss)
unrealized gain (loss)
on securities (9,650) (9,650)
Comprehensive income (19,887)
_________ _______ _______ _________ ______ _______ _______ _______
BALANCE, June 30, 1999:
2,423,358 $605,840 $821,311 $(1,089,597)$(20,420)353,386 $(292,527)$24,607
========= ======== ======== =========== ======== ======= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
EMC ENERGIES, INC.
STATEMENTS OF CASH FLOWS
<CAPTION>
For the For the
Year Ended Year Ended
June 30, June 30,
1999 1998
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (10,237) $ (1,047)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Asset impairment charge 8,000 -
Gain on sale of securities - 2,386
Changes in assets & liabilities - -
----- -----
Net cash used for
operating activities (2,237) 1,339
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of securities - (501)
----- -----
Net cash used in investing
activities - (501)
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES: - -
----- -----
Net increase (decrease) in Cash (2,237) 838
CASH AT BEGINNING PERIOD 3,894 3,056
----- -----
CASH AT END OF PERIOD $1,657 $3,894
===== =====
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest expense $ - $ -
===== =====
Income taxes $ - $ -
===== =====
</TABLE>
The accompanying notes are an integral part of these financial statements.
EMC ENERGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY
EMC Energies, Inc. (the Company) was founded as an energy company. In 1990
the Company sold most of its assets in an orderly manner and paid off its
outstanding obligations. The Company has been relatively inactive since that
time. It invested its excess cash and has used the cash to file tax returns,
pay limited expenses and maintain its existence.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Accounting Method - The Company's financial statements are prepared using
the accrual method of accounting.
Property and Equipment - Property and equipment are stated at cost, less
accumulated depreciation. Maintenance and repairs are expensed as incurred.
Depreciation is determined using the straight-line method over the estimated
useful lives of the assets.
Earnings (Loss) Per Share - In February 1997, the Financial Accounting
Standards Board issued SFAS No. 128, "Earnings per Share." SFAS No. 128
simplifies the standards for computing earnings per share ("EPS") and was
effective for financial statements issued for periods ending after December
15, 1997, with earlier application not permitted. Upon adoption, all prior
EPS data was restated.
Basic EPS is determined using net income divided by the weighted average
shares outstanding during the period. Diluted EPS is computed by dividing net
income by the weighted average shares outstanding, assuming all dilutive
potential common shares were issued.
Since the Company has no common shares that are potentially issuable,
such as stock options, convertible preferred stock and warrants, basic and
diluted earnings per share are the same.
Income Taxes - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due plus
deferred income taxes related primarily to the difference between the Company
reporting marketable securities gains and loses and asset impairment for
income tax purposes as compared to financial statement purposes. Deferred
income taxes or benefit represent the future income tax consequences of those
timing differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled.
Statement of Cash Flows - The Company considers (if and when they have any)
all highly liquid investments with maturities of three months or less to be
cash equivalents. The Company had no noncash investing or financing for the
periods covered by the financial statements.
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.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Comprehensive Income - The Company adopted Statement of Financial Accounting
Standard No. 130, "Comprehensive Income"("SFAS No. 130"), which is effective
for annual periods ending after December 15, 1997. The Company elected to
early adopt SFAS No. 130 and prior year financial statements have been
reclassified to conform to SFAS No. 130 requirements. The adoption of SFAS
No. 130 had no impact on total stockholders' equity. As provided by SFAS No.
130, reclassification adjustments to prior year amounts are reported in a
separate statement of comprehensive income along with current year components
of comprehensive income.
Marketable Securities - Marketable securities consist of common stock.
Marketable securities are stated at market value as determined by the most
recently traded price of each security at the balance sheet date. All
marketable securities are defined as trading securities or available-for-sale
securities under the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities."
Management determines the appropriate classification of its investments in
marketable securities at the time of purchase and reevaluates such
determination at each balance sheet date. Securities that are brought and
held principally for the purpose of selling them in the near term are
classified as trading securities and unrealized holding gains and losses are
included in earnings. Debt securities for which the Company does not have
the intent or ability to hold to maturity and equity securities are classified
as available-for-sale. Available-for-sale securities are carried at fair
value, with the unrealized gains and losses, net of tax, reported as a
separate component of stockholders' equity in accumulated other comprehensive
income. The Company at this time has no trading securities.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
June 30, June 30,
1999 1998
---------- ----------
Land $ 10,500 $ 10,500
Proved Leasehold 250 250
Well equipment 670 670
---------- ----------
11,420 11,420
Less accumulated depletion & impairment 8,920 920
---------- ----------
$ 2,500 $ 10,500
========== ==========
Subsequent to June 30, 1999, the Company sold its land to a former officer and
director of the Company for $2,500.
NOTE 4 - STOCKHOLDERS' EQUITY
The Company has adopted SFAS 130 which requires presentation of comprehensive
income (net income plus all other changes in net assets from non owner
sources) and its components in the financial statements. The Company has
changed the format of its statements of stockholders' equity (deficit) to
present comprehensive income. Accumulated other comprehensive income or loss
shown in the statements of stockholders' equity at June 30, 1999 and 1998, is
solely comprised of the accumulated change in unrealized gains and losses on
marketable securities.
NOTE 5 - GOING CONCERN
The Company has experienced losses of $11,812 and $1,046 for the periods ended
June 30, 1999 and 1998 and has a stockholders' deficit of $1,091,172 and
$1,079,360 for the same periods. The Company also has no operations.
Subsequent to June 30, 1999 the Company sold all of its assets and used most
of the proceeds to pay consulting and professional fees. Presently the
Company has limited operating capital. In light of the above circumstances,
the ability of the Company to continue as a going concern is substantially in
doubt. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Management believes their plans will provide the corporation with the ability
to continue in existence. Management plans to merge the Company with another
Company that has operations and business activities which it hopes will
provide future operations and business activity.
NOTE 6 - INCOME TAXES
Income tax expense consists of the following components:
1999 1998
------ ------
Current $ - $ -
Deferred benefit 3,996 876
Valuation allowance (3,996) (876)
------ ------
$ - $ -
====== ======
For tax return purposes the Company has estimated net operating loss
carryforwards (NOL) of $837,909 and $835,672 at June 30, 1999 and 1998,
respectively. The $837,909 NOL expires between 2000 and 2015. A valuation
allowance of $231,755 and $284,128 for the years 1999 and 1998 respectively
have been established for those credits which are not expected to be realized.
The change in the NOL allowance in 1999 was $52,373.
NOTE 7 - RELATED PARTY TRANSACTIONS
During 1999 and 1998 the Company paid an Officer and Director $728 and $551
for services rendered to the Company. The Officer has since resigned but
subsequent to June 30, 1999, he received additional payments of $5,366 for
services rendered or provided.
NOTE 8 - MARKETABLE SECURITIES AND OTHER INVESTMENTS
Marketable Securities are carried on the balance sheet at their Fair value.
As of June 30, 1999 and 1998 the following applies to the Company's
available-for-sale securities.
1999 1998
---- ----
Cost $ 39,295 $ 39,295
======== ========
Unrealized loss $ 20,420 $ 10,770
======== ========
Market value $ 18,875 $ 28,525
======== ========
Subsequent to June 30, 1999 the Company sold all of its marketable securities
for $17,649. The Company also distributed the $1,575 of other investment to
directors as appreciation for past services.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
McGladrey & Pullen, Certified Public Accountants located in Casper, Wyoming,
audited the financial statements of EMC Energies, Inc. for the years ended
June 30, 1990 and 1989.
David T. Thomson, P.C., Certified Public Accountant located in Salt Lake City,
Utah, audited the financial statements of EMC Energies, Inc. for the year
ended June 30, 1998, and will prepare the audit of the financial statements
for the year ended June 30, 1999. Mr. Thomson was engaged by the Company in
September 1999.
There were no disagreements between the Company and McGladrey & Pullen,
whether resolved or not resolved, on any matter of accounting principles or
practices, financial statement disclosure or auditing, scope or procedure
which, if not resolved, would have caused them to make reference to the
subject matter of the disagreement in connection with their reports.
The Reports of McGladrey & Pullen for the years 1990 and 1989 did not contain
any adverse opinions or disclaimers of opinion and were not modified as to
uncertainty, audit scope or accounting principles.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
Identification of Directors and Executive Officers
- --------------------------------------------------
The following table sets forth, in alphabetical order, the names and
the nature of all positions and offices held by all directors and executive
officers of the Company for the Company year ending June 30, 1999 and to
the date hereof, and the period or periods during which each such director
or executive officer served in his or her respective positions.
Name Position and background
- ---- -----------------------
Thomas Galles President & Director in excess of ten years; has been the
managing partner of Four G Oil Company, a family-held oil
and gas exploration and production company, as his
principal occupation for past eight years
Susan Galles Secretary since July 1994; has assisted Thomas Galles as
managing partner of Four G Oil Company, a family-held oil
and gas exploration and production company, as her
principal occupation for past eight years
Donald Galles Director in excess of ten years; has been a partner in The
Hawks Company, a partnership in oil and gas exploration and
production, as his principal occupation for past eight years
David Oline Director in excess of ten years; has been owner of Just for
You Embroidery, a wholesale embroidery service provider, as
his principal occupation for past eight years
Term of Office
- --------------
The term of office of the current directors shall continue until new
directors are elected or appointed.
Family Relationships
- --------------------
Thomas and Susan Galles are husband and wife; Donald Galles is Thomas'
father.
Involvement in Certain Legal Proceedings
- ----------------------------------------
Except as indicated below and to the knowledge of management, during
the past five years, no present or former director, person nominated to
become a director, executive officer, promoter or control person of the Company:
(1) Was a general partner or executive officer of any business by
or against which any bankruptcy petition was filed, whether at the time of
such filing or two years prior thereto;
(2) Was convicted in a criminal proceeding or named the subject of
a pending criminal proceeding (excluding traffic violations and other
minor offenses);
(3) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or
banking activities; and
(4) Was the subject of any order, judgment or decree, not
subsequently reversed, suspended or vacated, of any federal or state
authority barring, suspending or otherwise limiting for more than 60 days the
right of such person to engage in any activity described above under this
Item, or to be associated with persons engaged in any such activity;
(5) Was found by a court of competent jurisdiction (in a civil action),
the Commission or the Commodity Futures Trading Commission to have
violated a federal or state securities or commodities law, and the judgment
has not been reversed, suspended, or vacated.
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
No director, executive officer or 10% shareholder of the Company
has effected any transactions in the Company's securities for the dates
covered by this report since the date of filing their respective Form 3
reports.
Item 10. Executive Compensation.
Cash Compensation
- -----------------
The following table sets forth the aggregate compensation paid by
the Company for services rendered during the periods indicated:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long Term Compensation
Annual Compensation Awards Payouts
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Years or Other Restr- Option/ LTIP All
Principal Periods $ $ Annual icted SAR's Payouts Other
Position Ended Salary Bonus Compen- Stock (#) ($) Compen-
1997, sation($) Awards sation($)
1998 &
1999
Thomas
Galles 0 0 0 0 0 0 0 0
President, 0 0 0 0 0 0 0 0
Director 0 0 0 0 0 0 0 0
Donald 0 0 0 0 0 0 0 0
Galles 0 0 0 0 0 0 0 0
Director 0 0 0 0 0 0 0 0
David 0 0 0 0 0 0 0 0
Oline 0 0 0 0 0 0 0 0
Director 0 0 0 0 0 0 0 0
Susan 0 0 0 0 0 0 0 0
Galles 0 0 0 0 0 0 0 0
Secretary 0 0 0 0 0 0 0 0
</TABLE>
No cash compensation, deferred compensation or long-term incentive
plan awards were issued or granted to the Company's management during the
Company's years ending June 30, 1997, 1998 or 1999, or the period ending on
the date of this Report. Further, no member of the Company's management has
been granted any option or stock appreciation right; accordingly, no tables
relating to such items have been included within this Item. See the Summary
Compensation Table of this Item.
Compensation of Directors
- -------------------------
There are no standard arrangements pursuant to which the
Company's directors are compensated for any services provided as director. No
additional amounts are payable to the Company's directors for committee
participation or special assignments.
There are no arrangements pursuant to which any of the Company's
directors was compensated during the Company's last completed fiscal year or
the previous two fiscal years for any service provided as director. See
the Summary Compensation Table of this Item.
Termination of Employment and Change of Control Arrangement
- -----------------------------------------------------------
There are no compensatory plans or arrangements, including payments to
be received from the Company, with respect to any person named in the
Summary Compensation Table set out above which would in any way result in
payments to any such person because of his or her resignation,
retirement or other termination of such person's employment with the Company
or its subsidiaries, or any change in control of the Company, or a
change in the person's responsibilities following a change in control of the
Company.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Certain Beneficial Owners
- -----------------------------------------------
The following table sets forth the shareholdings of those persons who
own more than five percent of the Company's common stock as of the date hereof:
<TABLE>
<CAPTION>
Number and Percentage
of Shares Beneficially Owned
----------------------------
Name and Address # of Shares % of Class
- ---------------- ---------------- ---------
<S> <C> <C>
Donald G Galles 266,872 11.0%
Thomas A Galles 133,532 (1) 5.5%
Jeff Hawks 125,643 5.2%
(1) Includes direct and indirect ownership.
Security Ownership of Management
- ------------------------------------------
The following table sets forth the shareholdings of the Company's
directors and executive officers as the date hereof:
</TABLE>
<TABLE>
<CAPTION>
Number and Percentage
of Shares Beneficially Owned
----------------------------
# of Shares
Name and Address Direct Indirect % of Class
- ---------------- -------------- ------------- ----------
<S> <C> <C> <C>
Donald G Galles 266,872 11.0%
Susan L Galles 23,457 48,000 (1) 1.2%
Thomas A Galles 104,914 28,618 (1) 5.5%
David M Oline 41,331 1.7%
- ------------------- ------- ------ ------
All directors and
executives officers
as a group (3) 436,574 33,418 19.4%
=================== ======= ====== =====
</TABLE>
(1) Indirect beneficial ownership includes shares, if any, held in the name of
the spouse, minor children or other relatives living in the person's house.
Changes in Control
- ------------------
None; not applicable
Item 12. Certain Relationships and Related Transactions.
Transactions with Management and Others
- ---------------------------------------
There were no material transactions, or series of similar
transactions, during the Company's last three fiscal years, or any
currently proposed transactions, or series of similar transactions, to which
the Company or any of its subsidiaries was or is to be a party, in which the
amount involved exceeded $60,000 and in which any director, executive
officer or any security holder who is known to the Company to own of record or
beneficially more than five percent of any class of the Company's common
stock, or any member of the immediate family of any of the foregoing persons,
had an interest.
Certain Business Relationships
- ------------------------------
There were no material transactions, or series of similar transactions,
during the Company's last three fiscal years, or any currently proposed
transactions, or series of similar transactions, to which it or any of
its subsidiaries was or is to be a party, in which the amount involved
exceeded $60,000 and in which any director, executive officer or any security
holder who is known to the Company to own of record or beneficially more than
five percent of any class of its common stock, or any member of the immediate
family of any of the foregoing persons, had an interest.
Indebtedness of Management
- --------------------------
Except as indicated in Part I, Item I, "Business Development," and
under the heading, "Transactions with Management and Others", there were no
material transactions, or series of similar transactions, during the Company's
last three fiscal years, or any currently proposed transactions, or series
of similar transactions, to which it or any of its subsidiaries was or is to be
a party, in which the amount involved exceeded $60,000 and in which any
director, executive officer or any security holder who is known to the
Company to own of record or beneficially more than five percent of any class
of its common stock, or any member of the immediate family of any of the
foregoing persons, had any Transactions with Promoters
- ---------------------------
Except as indicated in Part I, Item 1, "Business Development", and
under the heading, "Transactions with Management and Others", there were no
material transactions, or series of similar transactions, during the Company's
last three fiscal years, or any currently proposed transactions, or series
of similar transactions, to which it or any of its subsidiaries was or is to
be a party, in which the amount involved exceeded $60,000 and in which any
promoter or founder or any member of the immediate family of any of the
foregoing persons, had an interest.
Item 13. Exhibits and Reports on Form 8-K.
Reports on Form 8-K
- -------------------
None; Not Applicable.
<TABLE>
<CAPTION>
Exhibit Number Description
- -------------- -----------
<S> <C>
EX-16 Letter re change of certifying accountant
EX-27 Financial Date Schedule.
</TABLE>
* Summaries of all exhibits contained within this Report are modified
in their entirety by reference to these Exhibits.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
EMC Energies, Inc.
Date: 12-3-99 By /s/ Thomas A Galles
--------------------
Thomas A Galles
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated:
EMC Energies, Inc.
Date: 12-3-99 By /s/ Thomas A Galles
---------------------
President, Director
Date: 12-3-99 By /s/ Susan L Galles
-------------------
Secretary
McGladrey & Pullen
Casper, Wyoming
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
We were previously the independent accountants for EMC Energies, Inc. and on
September 26, 1990 we reported on the financial statements of EMC Energies,
Inc. as of and for the years ended June 30, 1990 and 1989. We have not
preformed any audit services for EMC Energies, Inc. since 1990. On November
29, 1999, we were notified that other auditors were engaged as independent
accountants of EMC Energies, Inc. for 1998 and 1999. We have read EMC
Energies, Inc's statements included under Item 8 of its Form 10-KSB for June
30, 1998 and we agree with such statements.
Casper, Wyoming
December 3, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 1,657
<SECURITIES> 18,875
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,107
<PP&E> 2,500
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,607
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 605,840
<OTHER-SE> (288,706)
<TOTAL-LIABILITY-AND-EQUITY> 24,607
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 10,240
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10,237)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,237)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,237)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>
