U.S. Securities and Exchange Commission
Washington D. C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT
For the transition period from_________ to ________
Commission File No. 0-10841
-----------------------------------
AMERICAN MILLENNIUM CORPORATION, INC.
(Exact name of small business issuer as specified in its charter)
----------------------------------------------
New Mexico 85-0273340
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
303 N. Baker St., Suite 200, Mount Dora, Florida 32757
------------------------------------------------------
(Address of principal executive offices)
(352) 735-0116
(Issuer's telephone number)
29425 CR 561, Tavares, Florida 32778
------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has 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.
(l) Yes X No (2) Yes X No
--- --- --- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 13,578,422 as of December 22,
1998.
Transitional Small Business disclosure Format (check one):
Yes No X
--- ---
1
<PAGE>
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PART I
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FINANCIAL INFORMATION
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Item 1. Financial Statements
--------------------
(a) Financial Statements and Schedules
The following financial statements are included (with an index listing all such
statements) in a separate exhibit at the end of this Form 10-QSB:
Balance Sheet
Statements Operations
Statements of Cash Flows
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
------------------------------------
(a) Plan of Operation
-----------------
Organization
As noted in the Company's 10-KSB filed on November 13, 1998, the Company has
narrowed its focus to that of the business of American Millennium Corporation
(AMC), its former subsidiary with which it merged and effected its name change
to American Millennium Corporation, Inc. on May 27, 1998.
In a Form 8-K filing on November 24, 1998, with the Securities and Exchange
Commission, the Company reported a sequence of transactions including the above
referenced merger, along with two agreements to rescind contracts as well as a
contract termination. Those transactions resulted in the Company canceling
approximately 10,100,000 shares of common stock. Additionally, 100,000 shares of
common stock have subsequently been canceled under the terms of the contract
termination referenced above. Therefore, the amount of Company common stock
issued and outstanding at the filing date of this report is approximately 13.5
million shares with just over 3.5 million shares in the public float, according
to the Company's records.
Company Focus on Core Business
AMC is a provider of hardware and software solutions to the wireless and
wireline telecommunications industries. AMC has experience in a variety of
communications platforms including satellite, CDPD (cellular digital packet
data), cellular, various other radio frequency (RF) protocols, and wireline. The
business of AMC is to bring solution oriented combinations of hardware and
software to the market to facilitate timely, accurate, and cost effective
one-way and two-way delivery of information to the rapidly expanding wireless
communications industry.
-2-
<PAGE>
AMC/Orbcomm Reseller Contract
AMC is a value-added reseller for Orbcomm USA L.P. Orbcomm is a "low earth
orbit" (LEO) satellite company which is a joint venture between Orbital
Sciences, Inc. and Teleglobe of Canada, Inc. To date, Orbcomm has launched all
28 LEOs of its proposed "constellation" into orbit. Plans call for an additional
8-10 satellites to be launched later.
AMC's contract with Orbcomm allows AMC to provide remote monitoring services to
operators of oil and gas wells, intermodal containers, and refrigerated and
flatbed railcars. This means that a railroad company, for example, can determine
where a particular refrigerated railcar with a high value load is located by
global position as well as the temperature inside the car, the voltage output of
the engine, and numerous other functions.
Management believes that the rapid changes in technology currently underway
require a flexible approach in the design and deployment of data transfer
satellites. Various experts in the telecommunication industry have predicted
that gross revenues from the transfer of data will surpass revenues from voice
communications in the next several years. A constellation of small, inexpensive
satellites that can be upgraded to accommodate improvements in technology has,
in Management's opinion, a distinct cost advantage over systems that may rely on
a few geosnychronous satellites that could become less efficient or obsolete as
technology changes.
AMC management believes that the overall competitive advantage that the Company
may hold as a reseller for the Orbcomm system is most closely tied to the
competitive rates it can currently charge. The cellular telephone industry is an
example of the sharp increase in the number of subscribers who signed up for
service when cellular telephone rates fell. The demand curve trends upwards as
rates trend downward. Management is currently marketing the ability to provide
accurate, low cost monitoring to the industries defined in its reseller
contract.
Oil and Gas
AMC has various initiatives underway with oil and gas producers as well as
manufacturers of gas compressors and control panels for those compressors. The
Company will continue to market its services to those companies for deployment
of its system on a fleet basis in order to optimize upon subscriber enrollment.
AMC currently has over one dozen satellite subscriber communicators (the
industry term for transceivers) activated and in field trials. The units are
either in test mode for proof of concept or have been installed in direct
conjunction with proposals currently in place. These units are currently
monitoring a variety of assets both domestically and abroad.
A similar monitoring opportunity exists for reporting conditions and system
failures on natural gas compressors that exist throughout petroleum rich areas
in the Permian Basin (Midland/Odessa, Texas); Houston, Texas; and Oklahoma City,
Oklahoma.
-3-
<PAGE>
Railroad Cars
AMC has completed the testing phase of remote monitoring of a refrigerated
railcar under the provisions of a contract the Company has with Union Pacific
Railroad, the nation's largest rail company. The original contract called for a
prototype unit to be installed on a refrigerated railcar with cellular
capability for transmitting data with provisions for also installing a satellite
transceiver. AMC has monitored the location of a test railcar as well as the
battery voltage and refrigerated compartment temperature. The Phase One single
unit prototype test has been completed. The next phase of the contract involves
the outfitting of five refrigerated railcars with pre-production models of the
AMC satellite transceiver. Subsequent to that test, Union Pacific has indicated
that it will proceed with outfitting its refrigerated fleet in stages predicated
upon a successful test with the five units. The five cars are to be outfitted in
Denver, Colorado in early 1999.
According to railroad industry sources, there are over 1.2 million railcars in
the U.S. with over 31,000 of those being refrigerated railcars. The Company is
aware of one company which has outfitted railcars with a tracking device that
also reports impacts. Based on hardware and monthly monitoring charges to the
rail company using the service, AMC believes it can to equip a similar railcar
for one-fourth of the cost of the hardware and provide monitoring for one-third
of current monitoring fees currently being charged.
Intermodal Containers
AMC officials met with Information Technology officials at an intermodal
container corporation at their request to discuss a proposal for monitoring
their intermodal containers. That company operates some 100 vessels and 200,000
containers (of which 20,000 are refrigerated) globally and some 100,000 chassis'
for hauling the containers overland in North America. At that meeting, AMC
agreed to outfit a refrigerated container with a satellite transceiver for
location of containers and chassis'. Following that test, AMC will submit a
formal proposal to them for monitoring of their container and chassis fleet. The
Company believes that it can provide a cost effective solution to that company
as well as other container companies.
Other Business of the Company
American Millennium Corporation/McLeodUSA Co-venture
As was disclosed in a July 8, 1998 press release, AMC has entered into a
co-venture with McLeodUSA on a paging application developed by AMC. McLeodUSA
(McLeod) is a Cedar Rapids, Iowa based local and long distance telephone
provider (known as a Competitive Local Exchange Carrier or CLEC) that went
public in 1996. It now offers a full range of telecommunications services to
residential and small to medium sized business customers in fourteen Midwestern
states.
McLeod is currently dependant upon the Local Exchange Carrier (LEC) to furnish
the stutter tone, for a fee, that notifies McLeod's voice mail customers of
voice messages waiting when a customer lifts the telephone receiver and hears
the tone. According to the Senior Project Engineer at McLeod who had been in
charge of the co-venture with AMC, those charges are currently running at over
$500,000 per month and are expected to increase to millions of dollars per month
as McLeod's voice mail customer base grows.
-4-
<PAGE>
The solution, as proposed by AMC and co-developed with McLeod, called for a
small desk top paging device. When a voice message is left for a customer, the
telephone switch notifies the PageMart system (for whom AMC is a value added
reseller). The PageMart system in turn activates the pager which blinks brightly
through a portal molded into McLeod's trademarked icon, thereby bypassing the
LEC. AMC also has the capability to build in E-mail I.D.
and Caller I.D. into the same pager.
To date, AMC has delivered 150 prototype units and 50 pre-production units to
McLeod. The units, distributed among McLeod's management for testing, have
operated flawlessly, according to McLeod. AMC expects to produce the units for
McLeod upon finial specifications being submitted. According to McLeod, their
internal needs could run as high as 1.8 million units.
American Mobile Satellite
On August 28, 1998, AMC officially became a value-added reseller for Reston,
Virginia based American Mobile Satellite (AMS) (NASDAQ: SKYC). The reseller
agreement provides AMC the use of AMS's geosnychronous satellite system. AMS
provides seamless voice, data, and point-to-multipoint dispatch services to
virtually anywhere in North and Central America, the Carribean, and hundreds of
miles of surrounding waters. AMS is the only company authorized by the FCC to
provide L-band (1.5-1.6 GHz) mobile satellite service in the U.S.
Proprietary Technology Applications
AMC is also a value-added reseller for Dallas, Texas based PageMart. The Company
is currently in the process of filing for patents for certain proprietary
applications of paging technology. AMC has developed certain proprietary
technologies for the monitoring of various types of assets utilizing both the
Orbcomm LEO system as well as other Radio Frequency (RF) formats for GPS along
with functions manipulations aboard those assets. Due to the sensitive and
proprietary nature of this technology as well as the Company's intent to protect
it to the extent that is possible with patent applications, Management is unable
to disclose specific aspects of the systems. Nevertheless, Management believes
that the applications are both valuable and viable. The Company is presently in
discussion with several companies regarding licensing and/or joint venture
proposals within the scope of the technologies and their respective
applications.
AMC has retained the services of Pittenger and Smith, a Denver, Colorado based
patent, trademark, and copyright law firm, to effect these applications.
In addition to Orbcomm, American Mobile Satellite, and PageMart for which the
Company is a value-added reseller, AMC has strategic partnerships with Nabla,
Griffin Petroleum, Trimble Navigation, Union Pacific Railroad, SPS Technologies,
Pacific Arepco, Torrey Science, and Hersey Measurement Company.
-5-
<PAGE>
Summary
In its role as a developer of digital, wireline, and wireless products and
solutions to the telecommunications industry, AMC is currently presenting the
uses of its technologies with leaders in various industries. Management believes
that recent technological developments allowing the interfacing of multiple
communication platforms should position AMC to emerge as an industry leader in
the field of data transfer.
Management believes that a significant market exists for potential applications
of AMC's technology that involve remote monitoring and systems function
manipulations. Customers can monitor their equipment, production levels, and
track global position as well as control functions and have data reported from
the particular asset that can be downloaded onto a secure Internet website which
can then be accessed from anywhere in the world. AMC provides company officials,
such as oil engineers and railroad management, with the ability to obtain vital
information on a timely and current basis at any location by simply using their
laptop computers to log-on to a secure website. The reports are typically
available and can be delivered in as little as 60 seconds after an Orbcomm
satellite flies over the monitored site, reads, and transmits the data to an
Orbcomm Earth Station.
AMC will continue to market these services to the rail, intermodal container,
and oil and gas industries with its Orbcomm reseller contract. It will continue
to market its various paging technology solutions to the telecommunications
industry with developments to be announced subsequent to patent filings.
The ability to provide satellite monitoring for the industries defined within
AMC's reseller contract with Orbcomm means that the Company is able to charge a
specified rate per month for each asset being monitored. The charge can range
from a few dollars per month (similar to paging rates) to upwards of $100 per
month, or even more (similar to cable television rates with premium channels and
pay-per-view), depending on the amount of data and the frequency of reports
required by the owner of the asset being monitored.
In addition to the potential of substantial hardware sales, the Company believes
that a significant base of recurring revenues derived from monthly satellite and
paging monitoring charges will build value for the shareholders and provide a
basis for independent appraisals of AMC's network of subscribers that are
comparable with other telecommunication firms with similar "per pop" revenues.
AMC's Management also believes that building a base of monthly subscribers to
its remote monitoring and paging services will enable AMC to be valued in a
manner similar to other communications companies at substantial multiples of
revenue. Management will continue to out-source production and manufacturing and
place emphasis on capital investment into its product development and solution
resources for industries requiring data transfer and remote monitoring via
satellite, paging, or value-added, proprietary combinations thereof.
-6-
<PAGE>
(b) Managements Discussion and Analysis of Financial Condition and Results of
-------------------------------------------------------------------------
Operations
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Sales
- -----
During the three months ended October 31, 1998, sales declined approximately 35%
compared to the same period in 1997. The decline in sales is attributable to the
re-focus of the Company's business. The goal is to develop new products that
grow revenue and earnings in markets they compete in. The Company does not have
the funds to support a marketing and sales effort to further expand.
Cost of Sales
- -------------
These costs declined approximately 36% in the three-month period ended October
31, 1998, as compared to October 31, 1997. The decline in these costs can be
attributed primarily to the reduction of expenses to re-focus its business
products and cutting costs to stay competitive and the Company managed its cost
of sales more effectively.
Rent Income
- -----------
The decline in rent income was due to an Agreement to Rescind Contract for Deed
on the property in Tavares, Florida, which resulted in the Company no longer
owning the property.
Payroll, Payroll Taxes and Related Benefits
- -------------------------------------------
Payroll, payroll taxes, and related benefits were incurred compared to none in
the quarter ended October 31, 1997. This is attributable to the fact that the
Company had no employees during the prior year quarter ended October 31, 1997,
and, had employees during the quarter ended October 31, 1998.
General and Administrative
- --------------------------
There was an approximate 66% decrease in other selling and administrative
expenses compared to the prior year quarter. The general and administrative
costs decreased dramatically due to the Company's re-focus on its newly
identified core business. The focus is to perform with the new resources and
stay competitive. The Company also rescinded various long-term contracts. The
current general and administrative projections will enable the Company to take
every advantage of the cost savings and still offer quality products that are
expected to be ready to launch in the near future.
The Company did not incur any costs for rent after July 31, 1998. This was due
to the recission of a deed for sale under which it enabled the Company to
maintain office space without cost.
Consulting and Professional
- ---------------------------
Consulting and professional decreased 65% from $955,045 to $348,407, compared to
the prior year quarter and is attributable to the re-focus of the Company's
business.
Minority Interests
- ------------------
The Company discontinued certain operations in Lean Protein Foods, Inc. which
had minority shareholders during the prior year to dedicate its time on its core
business as a developer of digital, wireline, and wireless products.
Net Loss
- --------
As a result of the above, the net loss was reduced to $328,491 or $.03 per share
and $983,368 or $.08 per share, for the quarters ended October 31, 1998 and
1997, respectively.
-7-
<PAGE>
Liquidity and Capital Resources
- -------------------------------
As a result of the net loss incurred, the Company has used substantial working
capital in its operations. As of October 31, 1998, current liabilities exceeded
current assets by $439,099.
Conditions have existed to limit the ability of the Company to market its
products and services at amounts sufficient to recover an acceptable amount of
operating and administrative costs. However, newly instituted controls and new
products should reverse this condition. The Company chose to discontinue certain
operations in order to concentrate on new products. Such products can grow
revenue faster and earnings should accompany for a long period of time.
The Company believes that a significant base of recurring revenues derived from
monthly satellite and paging monitoring charges will build value for the
shareholders. The Company's principal marketing efforts are directed toward the
oil and gas, intermodal container, and railroad industries which have a need for
monitoring of high value assets. Marketing efforts are performed by the
Company's personnel and outside sales service providers. The Company has, and
will continue through 1999, marketed its services at industry trade shows.
The Company anticipates that in early 1999 revenues are expected to begin to
accrue from the enrollment of subscribers based in its various initiatives
underway with oil and gas producers as well as manufacturers of gas compressors
and control panels for those compressors. The Company will continue to market
its services to those companies for deployment of its system on a fleet basis in
order to optimize upon subscriber enrollment. The Company currently has over one
dozen satellite subscriber communicators (the industry term for transceivers)
activated and in field trials. The units are either in test mode for proof of
concept or have been installed in direct conjunction with proposals currently in
place. These units are currently monitoring a variety of assets both
domestically and abroad.
The Company further believes that it will realize revenues from its initiatives
in other areas including the monitoring of railcars and intermodal containers.
Additionally, the Company anticipates other sources of revenue unrelated to its
reseller contract with Orbcomm to begin as proprietary paging technology
developed by the Company is deployed. The Company is currently engaged in either
joint technology ventures or discussions with McLeodUSA and PageMart, among
others involving utilization of the Company's paging technology. Also, the
Company is presently a value-added reseller for both PageMart and American
Mobile Satellite Corporation. Currently, the Company is enjoined to strict
covenants of non-disclosure and confidentiality regarding certain uses of
technology developed by the Company. Nevertheless, the Company will make
appropriate public disclosures pertaining to the aforementioned technologies
when or if agreements are reached with the parties involved.
To satisfy its cash requirements for the next twelve months the Company is in
the process of preparing a private offering of the Company's common stock. The
offering is being made on a "best efforts" basis with the minimum required
subscription of $100,000 (100 units) and the maximum subscription of $1,500,000
(1,500 units). This offering is being made in accordance with exemptions from
registration under Regulation D, Rule 506 of the Securities Act of 1933.
The matters discussed in "Plan of Operation" above are forward-looking
statements as defined under Rule 175 of the Securities Act.
-8-
<PAGE>
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PART II
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OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
(3.1) Articles of Incorporation, as amended to date of this report
(incorporated by reference Form 8-K filed June 11, 1998, File
No. 000-10841-D)
(27) Financial Data Schedule
(99) Financial Statements
(b) Reports on Form 8-K
-------------------
The Company filed a current report on Form 8-K dated August 17,
1998 to report the finalized agreement whereby it sold its 80%
stock interest in Lean Protein Foods, Inc. on July 31, 1998. Also
reported the agreement with Harto, Ltd. to rescind the contract of
October 10, 1997 whereby the Company acquired 20% of the authorized
shares of Microgravity Aviation Corporation from Harto, Ltd. in
exchange for 1,000,000 shares of the Company's common stock. The
current report also reported on the finalized agreement with
Mali-Suisse Mining International, Ltd. (MMIL) whereby MMIL agreed
to assume certain obligations of the Company with respect to
certain short-term notes as well as notes and accrued interest
related to the Contract for Deed for the Company's original
purchase of real estate in Tavares, Florida.
-9-
<PAGE>
Pursuant to the requirement 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, hereunto duly authorized.
ENERGY OPTICS, INC.
DATED: January 15, 1999 By: /s/ James C. Statham
-------------------------
James C. Statham, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S> <C>
DATED: January 15, 1999 By: /s/ Stephen F. Watwood
------------------------------------
Stephen Watwood, Director, Chairman of
the Board and Chief Executive Officer
(Principal Executive Officer)
DATED: January 15, 1999 By: /s/ James C. Statham
-----------------------------------------
James C. Statham, President, Director
and Chief Operations Officer
DATED: January 15, 1999 By: /s/ Shirley M. Harmon
-----------------------------------
Shirley Harmon, Director
DATED: January 15, 1999 By: /s/ Thomas W. Roberts
-----------------------------------------
Thomas Roberts, Chief Financial Officer,
and Treasurer
DATED: January 15, 1999 By: /s/ Renee C. Riegler
----------------------------------------------
Renee Riegler, Secretary, Assistant
Treasurer (Corporate Secretary)
</TABLE>
-10-
<PAGE>
CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet F-2
Statements of Operations F-3
Statements of Cash Flows F-4
Notes to Financial Statements F-5 to F-9
F-1
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
(UNAUDITED)
BALANCE SHEET
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
October 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 28,940
Employee advances 835
Prepaid expenses 25,435
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TOTAL CURRENT ASSETS 55,210
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PROPERTY AND EQUIPMENT
Equipment, furniture and fixtures 89,503
Transportation equipment 7,500
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TOTAL PROPERTY, PLANT AND EQUIPMENT, AT COST 97,003
Accumulated depreciation (15,845)
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TOTAL PROPERTY, PLANT AND EQUIPMENT, NET BOOK VALUE 81,158
- ---------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS 3,040
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TOTAL ASSETS $ 139,408
===========================================================================================================================
LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Accounts payable $ 105,279
Accrued payroll and related taxes 75,489
Accrued expenses and other liabilities (Note 2) 196,975
Advances from officer (Note 3) 52,446
Advances from related party (Note 3) 64,120
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TOTAL CURRENT LIABILITIES 494,309
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LONG-TERM NOTE PAYABLE TO OFFICER (NOTE 3) 20,500
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TOTAL LIABILITIES 514,809
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COMMITMENTS AND CONTINGENCIES (NOTE 7)
DEFICIENCY IN ASSETS (NOTE 6)
Preferred stock, 10,000,000 shares authorized;
none issued and outstanding -
Common stock, $.001 par value, 60,000,000 shares authorized,
12,545,014 shares issued and outstanding 12,545
Additional paid-in capital 10,349,296
Deficit (10,737,242)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL DEFICIENCY IN ASSETS (375,401)
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND DEFICIENCY IN ASSETS $ 139,408
===========================================================================================================================
See accompanying notes.
</TABLE>
F-2
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
(UNAUDITED)
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
(Restated - Note 1)
For the three months ended October 31, 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
REVENUES
Sales $ 85,594 $ 130,699
Cost of Sales 24,314 38,283
- ---------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT (LOSS) ON SALES 61,280 92,416
- ---------------------------------------------------------------------------------------------------------------------------
Rents - 27,009
Other - 3,500
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL NET REVENUES 61,280 122,925
- ---------------------------------------------------------------------------------------------------------------------------
-
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consulting - Officers 184,225 620,172
Consulting - Others 94,528 -
Professional 69,654 334,873
Salaries 14,220 -
Selling, general and administrative - other 29,309 162,804
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 391,936 1,117,849
- ---------------------------------------------------------------------------------------------------------------------------
OTHER INCOME 2,165 -
- ---------------------------------------------------------------------------------------------------------------------------
LOSS BEFORE LOSS ATTRIBUTABLE TO MINORITY INTERESTS (328,491) (994,924)
LOSS ATTRIBUTABLE TO MINORITY INTERESTS - 11,556
- ---------------------------------------------------------------------------------------------------------------------------
NET LOSS $ (328,491) $ (983,368)
===========================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
(PRIMARY AND FULLY DILUTED) 12,500,728 12,289,814
===========================================================================================================================
BASIC NET LOSS PER COMMON SHARE (PRIMARY AND FULLY DILUTED) (0.03) (0.08)
===========================================================================================================================
See accompanying notes.
</TABLE>
F-3
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
(UNAUDITED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
(Restated - Note 1)
For the three months ended October 31, 1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (328,491) $ (983,368)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization, included in cost of sales - 22,579
Depreciation and amortization, included in selling, general and
administrative 3,424 10,682
Stock exchanged for services, included in selling, general and
administrative 200,490 623,172
(Increase) decrease in assets:
Accounts receivable - (29,108)
Inventory - (526,580)
Employee advances (835) -
Prepaid expenses 14,940 (6,099)
Increase (decrease) in liabilities:
Accounts payable (16,020) 168,029
Accrued payroll and related taxes (91,016) -
Accrued expenses and other liabilities 116,963 599
- ------------------------------------------------------------------------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES (100,545) (720,094)
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disbursements
Purchase of property, plant and equipment (3,000) (52,738)
Other - (6,394)
- ------------------------------------------------------------------------------------------------------------------
DISBURSEMENTS FROM INVESTING ACTIVITIES (3,000) (59,132)
- ------------------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (3,000) (59,132)
- ------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts
Proceeds from advances to officers 65,921 -
Proceeds from advances by officer 1,268 -
Sale of common stock - 464,799
Capital lease for equipment - 37,933
Proceeds from related parties 64,120 329,378
- ------------------------------------------------------------------------------------------------------------------
RECEIPTS FROM FINANCING ACTIVITIES 131,309 832,110
- ------------------------------------------------------------------------------------------------------------------
Disbursements
Payments on capital lease for equipment - (14,589)
Payments on notes payable to stockholders/officers - (1,500)
- ------------------------------------------------------------------------------------------------------------------
DISBURSEMENTS FROM FINANCING ACTIVITIES - (16,089)
- ------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 131,309 816,021
- ------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND EQUIVALENTS 27,764 36,795
CASH AND EQUIVALENTS - BEGINNING 1,176 536
- ------------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS - ENDING $ 28,940 $ 37,331
==================================================================================================================
SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for: $ - $ -
Interest $ - $ -
Income taxes $ - $ -
==================================================================================================================
See accompanying notes.
</TABLE>
F-4
<PAGE>
American Millennium Corporation, Inc.
f/k/a Energy Optics, Inc.
Notes to Financial Statements
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
- --------
American Millennium Corporation, Inc. f/k/a Energy Optics, Inc. (Company), a New
Mexico corporation, was organized in 1979 and has provided engineering services
relating to research and development activities for outside parties as well as
internal product development.
A controlling interest (79.3%) of American Millennium Corporation, a Delaware
corporation, was acquired in October 1997. The remaining interest in AMC was
acquired under an Agreement and Plan of Merger dated May 27, 1998, and the
companies merged, with the parent as the surviving corporation. Upon completion
of the merger, the Company changed its name to American Millennium Corporation,
Inc.
Since the merger, operations have been focused primarily on digital, wireless
and wireline communications business.
Basis of Presentation
- ---------------------
The financial information presented as of any date other than July 31 has been
prepared from the books and records without audit. Financial information as of
July 31 has been derived from the audited financial statements of the Company,
but does not include all disclosures required by generally accepted accounting
principles. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
information for the periods indicated, have been included.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid debt instruments with an original
maturity of three months or less at the date of purchase to be cash equivalents.
Property and Equipment
- ----------------------
Equipment and leasehold improvements are stated at cost. Depreciation of
equipment and leasehold improvements are provided over estimated useful lives
ranging from five years to seven years, using the straight-line method.
Expenditures for maintenance and repairs are charged to expense as incurred.
Major improvements are capitalized.
Income Taxes
- ------------
Income taxes are computed under the provisions of the Financial Accounting
Standards Board (FASB) Statement 109 No. (SFAS 109), Accounting for Income
Taxes. SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of the difference in events that have been recognized in the Company's financial
statements compared to the tax returns.
Investment Tax and Research Tax Credits
- ---------------------------------------
Investment tax and research tax credits will be recognized as a reduction of the
provision for income taxes in the year in which utilized.
Concentrations of Credit Risk and Economic Dependence
- -----------------------------------------------------
The Company operates in the continental United States. The Company's ability to
collect the amounts due from customers may be affected by economic fluctuations.
The Company is economically dependent on Orbcomm USA, L.P. (Orbcomm) for whom it
is a value-added reseller. Orbcomm provides satellite service for the Company's
tracking devices.
F-5
<PAGE>
American Millennium Corporation, Inc.
f/k/a Energy Optics, Inc.
Notes to Financial Statements
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates
- ----------------
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the date
of the financial statements. Accordingly, upon settlement, actual results may
differ from estimated amounts.
Reclassifications and Restatements
- ----------------------------------
Amounts in the prior year financial statements have been reclassified for
comparative purposes to conform with the presentation of the current year
financial statements. Additionally, retroactive effect has been given to the
merger for purposes of comparative financial statement presentation.
Research and Development Costs
- ------------------------------
Research and development costs are expensed as incurred.
Advertising costs
- -----------------
Advertising costs are expensed as incurred.
Basic Net Loss Per Common Share
- -------------------------------
Basic net loss per common share is computed by dividing the net loss by the
average number of common shares outstanding during each period. Available stock
options at October 31,1998, were anti-dilutive and not considered common stock
equivalents for purposes of computing loss per common share.
Impairment of Long-Lived Assets
- -------------------------------
During the fiscal year ended July 31, 1998, the Company adopted FASB Statement
No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of". SFAS 121 requires that impairment losses
are to be recorded when long-lived assets to be held and used are reviewed for
impairment whenever events or changes in circumstances indicate that the related
carrying amount may not be recoverable. When required, impairment losses on
assets to be held and used are recognized based on the fair value of the asset.
Long-lived assets to be disposed of, if any, are reported at the lower of
carrying amount or fair value less cost to sell.
NOTE 2. ACCRUED EXPENSES
Accrued expenses and other liabilities consisted of the following:
Professional fees $ 87,000
Consulting services - officer 97,003
Consulting services - other 7,110
Royalties 5,862
---------------
$ 196,975
===============
F-6
<PAGE>
American Millennium Corporation, Inc.
f/k/a Energy Optics, Inc.
Notes to Financial Statements
NOTE 3. RELATED PARTY TRANSACTIONS
An officer of the Company advanced funds to the Company and paid expenses on
behalf of the Company. The balance due to this officer at October 31, 1998, was
$52,446.
Parties related by virtue of common control made advances to, and paid expenses
on behalf, of the Company. The balance due to this related party at October 31,
1998, was $64,120.
The long-term note payable to an officer in the amount of $20,500, is unsecured,
due on June 23, 2000, and provides for annual interest at 8%.
Stock Issued for Services
- -------------------------
The Board of Directors approved the issuance of 313,000 additional shares of the
Company's common stock to be issued under the Consultant Services Plan as
compensation for consultation services. Included in the shares issued are
150,000 shares issued to the Chairman of the Board and Chief Executive Officer
and 150,000 shares issued to the President and Chief Operating Officer. These
shares were granted by the Board of Directors in payment of services during this
quarter beyond the scope of the normal duties of these officers. The 300,000
shares issued were valued at $.53 each and were accepted by the officers as
payment in full for these services. 10,000 shares were issued to the Vice
President of Engineering in lieu of normal compensation and were valued at the
average of market price on the date of issuance, totaling $11,300.
NOTE 4. COMMON STOCK
Stock Issued for Services
- -------------------------
During the period, the Company issued common stock pursuant to a Consultant
Services Plan. The Plan is not subject to any of the provisions of the Employee
Retirement Income Security Act of 1974 and is not qualified under Sec. 401 of
the Internal Revenue Code of 1986, as amended. Forms S-8 have been filed with
the Securites and Exchange Commission relative to such issuances of stock.
Shares have been recorded using the lower of the average price on the date
issued or maximum offering price unless otherwise stated.
On August 4, 1998, the Board of Directors approved the issuance of 313,000
additional shares of the Company's common stock to be issued under the
Consultant Services Plan as compensation for consultation services. Included in
the shares issued are 150,000 shares to be issued to the Chairman of the Board
and Chief Executive Officer, 150,000 shares to be issued to the President and
Chief Operating Officer, and 10,000 shares to be issued to the Vice President of
Engineering. (See Note 2.)
In August 1998, 200,000 additional shares of the Company' s common stock were
issued to a president of a publishing company under the Consultant Services
Plan, as compensation for consultation services in connection with new business
oportunities and promotion of the Company to the public, Subsequent to the
issuance of stock, the Company terminated the services of the publishing company
and negotiated, on October 21, 1998, for the return of 297,500 shares of the
total 425,000 shares issued. Retroactive effect has been given to the return of
these shares.
NOTE 5. STOCK OPTIONS
The Company had granted to Edward N. Laughlin, former president, director and
majority shareholder, stock options in return for advancing working capital to
the Company and providing prior year bank loan guarantees. At October 31, 1998,
there were 16,500 shares under option at an exercise price of $2.50 per share
which expire April 5, 1999.
F-7
<PAGE>
American Millennium Corporation, Inc.
f/k/a Energy Optics, Inc.
Notes to Financial Statements
NOTE 6. OPERATING AND ECONOMIC CONDITIONS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, conditions have limited the ability of the
Company to market its products and services at amounts sufficient to recover its
operating and administrative costs. The Company has incurred operating losses of
$328,491 and $983,368 for the periods ending October 31, 1998 and 1997,
respectively.
In addition, the Company has used substantial working capital in its operations.
As of October 31, 1998, current liabilities exceed current assets by $439,099.
Management plans to raise capital through a private offering of stock as
discussed in Note 6 and sales to be used to fund operations and marketing
activities related to digital, wireless and wireline communications endeavors.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts or
classifications of liabilities that might be necessary in the event the Company
cannot continue in existence.
NOTE 7. COMMITMENTS AND CONTENGENCIES
Litigation
- ----------
In October 1997, The Company issued its common stock to two individuals totaling
500,000 shares under a Consultant Services Plan as compensation in connection
with promotion of the Company to the public and professionals. At the time of
issuance the shares were trading between $2.50 and $3.00 per share. The Company
sought to discontinue relations based on their dissatisfaction with the quality
of service, lack of service and other business reasons. The Company requested
that the previously issued stock be returned at which time they discovered that
the stock had been sold. The Company has retained legal counsel who has
initiated litigation against the individuals.
In August, 1997, as part of a Stock and Asset Purchase Agreement, the Company
issued 400,000 restricted shares of common stock to each of two individuals. The
agreement was amended in October, 1997, to reflect a lower valuation of the
assets to be acquired in exchange for the stock issued. Accordingly, it was
necessary to reduce the number of shares to which these two individuals were
entitled to 117,275 shares each. A letter was sent to the individuals requesting
the return of the original shares in exchange for issuance of the appropriate
number of shares. The original shares were never returned and upon the
expiration of their restriction period, the individuals sought to have the
restriction removed to enable them to sell the shares. Since the Company
believes the shares were issued in error, the Company sought an injunction to
prevent the sale of these shares. A temporary injunction was issued on October
27, 1998, upon the filing of a surety bond in the amount of $150,000 by the
Company. The case will be heard at a later date.
Rents and Leases
- ----------------
After recission of the contract for deed, the Company occupied office facilities
in Tavares, Florida under a month-to-month agreement, without rent, with a
related party. The Company moved their executive offices to Mount Dora, Florida
in December 1998.
A former officer of the Company leased a copy machine on behalf of the Company
in December 1997. Her successor determined that the Board of Directors had not
approved the lease and sought to have it nullified. In October 1998, the Company
received a demand letter from the lessor declaring the lease in default and
demanded all future, current and past due payments totaling $44,652. In late
October 1998 , the copier was repossessed. No contingent liability has been
recorded for this amount because management believes that they will ultimately
be successful in having the contract rescinded.
F-8
<PAGE>
American Millennium Corporation, Inc.
f/k/a Energy Optics, Inc.
Notes to Financial Statements
NOTE 7. COMMITMENTS AND CONTENGENCIES (CONTINUED)
Year 2000
- ---------
The year 2000 issue results from certain computer systems and software
applications that use only two digits (rather than four) to define the
applicable year. As a result, such systems and applications may recognize a date
of "00" as 1900 instead of the intended year 2000, which could result in data
miscalculations and software failures. The Company has conducted a preliminary
assessment of its key computer systems and software application and believes
they are Year 2000 compliant. The Company is in the process of communicating
with all key suppliers, financial institutions and customers to identify and
coordinate the resolution of any Year 2000 issues that might arise. Based on the
initial assessment, the Company believes the cost of addressing the Year 2000
issue should not have a material impact on the Company's financial position or
results of operations.
Private Offering
- ----------------
The Company is in the process of preparing a private offering of the Company's
common stock. The offering is to be made on a "best efforts" basis with the
minimum required subscription of $100,000 (100 units) and the maximum
subscription of $1,500,000 (1500 units). This offering is being made in
accordance with the exemptions from registration under Regulation D, Rule 506 of
the Securities Act of 1933.
Securities and Exchange Commission Proceeding
- ---------------------------------------------
The Company is a party to a pending administrative proceeding initiated by the
Securities and Exchange Commission. Although, the Commission alleged various
violations of the Securities Act of 1933 and the Securities Exchange Act of 1934
against the Company, to date the Commission has not filed suit. An informal
settlement has been reached in the matter, which, if approved by the Commission,
will not require payment of civil fees.
NOTE 8. SUBSEQUENT EVENTS
On December 7, 1998, the Company executed a two-year agreement with Potter
Financial, Inc. (PFI) to provide to the Company financial and investor relations
services, public relations services and direct marketing services. The agreement
provided for the Company to grant PFI the following options as a performance
bonus:
100,000 shares @ $.05
100,000 shares @ $.10
100,000 shares @ $.75
100,000 shares @ $1.00
100,000 shares @ $1.50
100,000 shares @ $2.00
100,000 shares @ $2.50
100,000 shares @ $3.00
All options expire December 31, 2000.
No options have been exercised.
F-9
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED OCTOBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> OCT-31-1998
<CASH> 28,940
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 55,210
<PP&E> 97,003
<DEPRECIATION> (15,845)
<TOTAL-ASSETS> 139,408
<CURRENT-LIABILITIES> 494,309
<BONDS> 0
0
0
<COMMON> 12,545
<OTHER-SE> (387,946)
<TOTAL-LIABILITY-AND-EQUITY> (375,401)
<SALES> 85,594
<TOTAL-REVENUES> 85,594
<CGS> 24,314
<TOTAL-COSTS> 24,314
<OTHER-EXPENSES> 391,936
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (328,491)
<INCOME-TAX> 0
<INCOME-CONTINUING> (328,491)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (328,491)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
