U.S. Securities and Exchange Commission
Washington D. C. 20549
Form 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT
For the transition period from_________ to ________
Commission File No. 0-10841
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AMERICAN MILLENNIUM CORPORATION, INC.
(Exact name of small business issuer as specified in its charter)
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New Mexico 85-0273340
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
303 N. Baker St., Suite 200, Mount Dora, Florida 32757
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(Address of principal executive offices)
(352) 735-0116
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(Issuer's telephone number)
29425 County Road 561, Tavares, FL 32778
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(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: 15,408,422 as of March 17,
1999.
Transitional Small Business disclosure Format (check one):
Yes ____ No ____
<PAGE>
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PART I
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FINANCIAL INFORMATION
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Item 1. Financial Statements
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(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/A:
Balance Sheet
Statements Operations
Statements of Cash Flows
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
------------------------------------
Subsequent to the transactions and business interests of the Company outlined in
Form 10-QSB for the period ending October 31, 1998, filed January 15, 1999 and
10-KSB Filed on November 13, 1998, the company has made certain material
decisions that have narrowed the focus of the business of American Millennium
Corporation, Inc. (AMCI). Those decisions should serve to define the Company's
direction for the near future.
(a) Plan of Operation
-----------------
Organization
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
previously reported 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, 265,000
shares of common stock have subsequently been canceled under the terms of the
contract termination referenced above. As of March 17, 1999, the amount of
Company common stock issued and outstanding is approximately 15.4 million shares
with just over 3.8 million shares in the public float, according to the
Company's records.
On February 12, 1999, the Company entered into a Consulting Agreement with
Wilson, Lombard and Partner (WLP). WLP is an investor relations firm with
experience in the dissemination of information about private and public
companies to prospective investors both domestically and internationally. Under
the terms of the agreement, WLP will furnish various services to the Company
including, but not necessarily limited to, acting as liaison between the Company
and its shareholders, advisor to the Company with respect to existing and
potential market-makers, broker-dealers, underwriters, and investors, as well as
advisor to the Company and as liaison as regards the financial media, analysts,
and other such members of the financial community. The term of the consultancy
is for a period of three (3) years from the date of the contract for which WLP
is to receive remuneration for performance of these services as follows:
a. 50,000 shares of the common stock of the Company restricted from sale
for one year from the date of issuance,
b. 150,000 free trading shares of common stock, and
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c. options to purchase up to 200,000 shares of the common stock of the
Company at an exercisable price of $0.30 per share which shall be
restricted from sale for a period of one year.
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 a total of 800,000 options as a
performance bonus with an exercise price ranging from $.05 to $3.00. These
options expire December 31, 2000.
Additionally, on January 26, 1999, the Board of Directors adopted a resolution
to provide for employee stock incentives whereby the Company would issue to the
present officers, directors and other key insiders (or their assigns) certain
shares of the common stock of the Company restricted from sale for a minimum of
one year and further subject to any and all limitations on the sale and/or
transferability of the stock as per Rule 144 of the U.S. Securities and Exchange
Commission. The Board of Directors (the Board) voted to issue a total of
2,025,000 shares of the common stock of the Company as per the resolution to
those directors, officers, and employees (or their assigns) with the applicable
restrictions referenced above attached to the issuance.
As the result of the Consulting Agreement between WLP, PFI and the Company, as
well as the stock incentive plan so described above, the amount of common stock
issued and outstanding by the Company will increase by 3,225,500 shares, fully
diluted, with all options exercised.
In Form 10-QSB filed on January 15, 1999, for the period ending October 31,
1998, the Company reported the filing of Form 8-K on November 24, 1998, with the
Securities and Exchange Commission referencing certain transactions that
resulted in the Company canceling approximately 10,100,000 shares of its common
stock and the subsequent cancellation of an additional 100,000 shares of common
stock under the terms of an agreement between the Company and the president of
Grant Douglas Publishing signed on October 21, 1998. Under said agreement of
October 21, 1998, the president of Grant Douglas Publishing returned an
additional 65,000 shares of the Company's stock which was canceled by the
Company and returned to the treasury on February 9, 1999.
Company Focus on Core Business
AMCI is a provider of hardware and software solutions to the wireless and
wireline telecommunications industries. AMCI 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 AMCI 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.
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AMCI/ORBCOMM Reseller Contract
AMCI 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.
AMCI's contract with ORBCOMM allows AMCI to provide remote monitoring services
to the oil and gas industry, intermodal containers, and the U.S. rail industry
with the exception of railcars used exclusively for the transportation of
automobiles and trucks. 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.
AMCI 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. Management is currently marketing the
ability to provide accurate, low cost monitoring to the above industries defined
in its reseller contract. This will provide the Company with recurring revenues
on a monthly basis.
Oil and Gas
AMCI has various initiatives underway with oil and gas producers as well as
manufacturers of gas compressors and control panels for those compressors AMCI
currently has several satellite subscriber communicators (the industry term for
transceivers) activated and in field trials. These units are currently
monitoring a variety of assets in the United States. AMCI plans to market its
products and services in the international market place.
Railroad Cars
AMCI has completed a 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, AMCI anticipates the data to be transmitted
via satellite in the next phase. AMCI has monitored via satellite and cellular
the location of a test railcar as well as the battery voltage and refrigerated
compartment temperature. The next phase of the contract involves the outfitting
of five refrigerated railcars with pre-production models of the AMCI wireless
equipment. Upon successful completion of this phase with Union Pacific, Union
Pacific has the option to place orders in increment of 100 units.
Intermodal Containers
AMCI has held discussions with an intermodal container corporation regarding
AMCI's proposal to outfit a refrigerated container with a satellite transceiver
to monitor location and alarm functions such as door openings and temperature.
Following such a test, AMCI would submit a formal proposal for the monitoring of
the corporation's container fleet.
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Other Business of the Company
American Mobile Satellite
AMCI's a value-added reseller for Reston, Virginia based American Mobile
Satellite (AMS) (NASDAQ: SKYC). The reseller agreement provides AMCI 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 Caribbean, and hundreds of miles of surrounding waters. AMS is
authorized by the FCC to provide L-band (1.5-1.6 GHz) mobile satellite service
in the U.S.
Proprietary Technology Applications
AMCI is also a value-added reseller for Dallas, Texas based PageMart. The
Company is expected to file a patent for certain proprietary applications of
paging technology. AMCI 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 functional
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.
AMCI 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, PageMart and SPS Technologies
for which it is a value-added reseller, AMCI has business relationships with
Griffin Petroleum, Trimble Navigation, Union Pacific Railroad, Pacific Arepco,
and Hersey Measurement Company.
American Millennium Corporation, Inc./McLeodUSA Co-venture
AMCI has entered into a co-venture with McLeodUSA on a paging application
developed by AMCI. 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.
McLeod is currently dependent upon the Local Exchange Carrier (LEC) to furnish
the stutter tone, for a fee, which notifies McLeod's voice mail customers of
voice messages waiting when a customer lifts the telephone receiver and hears
the tone. The solution, as proposed by AMCI and co-developed with McLeod, called
for a small desktop paging device. When a voice message is left for a customer,
the telephone switch notifies the PageMart system (for whom AMCI is a
value-added reseller). The PageMart system in turn activates the pager that
blinks brightly through a portal molded into McLeod's trademarked icon, thereby
bypassing the LEC. AMCI also has the capability to build in E-mail I.D. and
Caller I.D. into the same pager. To date, AMCI has delivered 150 prototype units
and 50 pre-production units to McLeod.
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<PAGE>
Summary
In its role as a developer of digital, wireline, and wireless products, AMCI
provides solutions for its customers utilizing cutting edge technology in the
telecommunications industry, AMCI is currently presenting the uses of its
technologies to leaders in various industries. Management believes its unique
approach to recent technological developments allowing the interfacing of
multiple communication platforms should position AMCI to emerge as an industry
leader in the field of data transfer.
Management believes that a significant market exists for potential applications
of AMCI's technology that involve remote monitoring and systems function
manipulations. Corporate management 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. The reports are
typically available and can be delivered in as little as 60 seconds after an
ORBCOMM satellite flies over the monitored asset, reads, and transmits the data
to an ORBCOMM Earth Station.
AMCI 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 patent pending paging technology solutions to the
telecommunications industry.
The ability to provide satellite monitoring for industries within AMCI'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 to upwards of $100 per month, 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, a
strong growth of recurring revenues is a goal of the Company, these revenues
derived from monthly satellite and paging monitoring revenues will build value
for the shareholders and provide a basis for independent appraisals of AMCI's
network of subscribers.
Recent Business Activity
In recent business activity related to the above referenced initiatives, on
January 14, 1999, the Company announced that it had entered into an agreement
with Compressor Systems, Inc. (CSI) in Midland, Texas to provide two satellite
transceiver units as well as air time for wireless remote monitoring of a
mainline station and a natural gas well located in the Permian Basin of West
Texas. CSI is one of the nation's largest single source providers of sales,
leasing, engineering, fabrication, and operator of gas compression equipment.
CSI operates through 13 regional sales offices and with over 120 technical
service representatives located throughout the U.S.
The two units contracted for by CSI were provisioned by AMCI to monitor the gas
well compressors and the mainline station compressor via the ORBCOMM satellite
system. CSI will receive daily reports that the units are running or not
running, as well as alarm reports whenever the units shut down unexpectedly. The
Company will provide a secure website on the Internet for CSI to view the
operating conditions and alarms.
Additionally, on January 12, 1999, the Company reached an agreement with Eco-Max
Systems, Inc. (Eco-Max) for an investment by Eco-Max to fund a joint technology
investment between the two companies. Eco-Max is a developer and manufacturer of
rotary powered generators, agricultural pumps, and marine propulsion systems
that utilize proprietary design features. The $100,000 investment is intended to
fund development of specialized applications of AMCI's satellite
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monitoring capabilities whereby such conditions as voltage output, fuel levels,
flow rates, and emissions output can be read from a webpage on the Internet.
The investment is for 200,000 shares of the Company's common stock, restricted
from sale for a minimum, of one year along with options for Eco-Max to purchase
an additional 400,000 shares of restricted stock at prices ranging from one to
two dollars per share.
The Company recently implemented the use of an enhanced notification service as
a value-added feature to its satellite monitoring service. By outsourcing the
use of a call center, AMCI can offer its customers the added security of being
notified by a telephone call, fax, or pager message of the status or change in
conditions of the asset being monitored. The enhanced service is performed by
operators on duty 24 hours a day, seven days a week who notify the customer in a
manner customized to the customer's needs. Management believes that this feature
will expand the use of its monitoring service by making data and information
available without the use of a computer.
The Company recently announced that it is marketing the new GSC 100 from
Magellan. The handheld device allows a user to chart his/her position anywhere
in the world, send and receive e-mail, save up to 100 messages, and store up to
150 addresses, according to Magellan. To send e-mail to any Internet address,
the user simply keys in the message and destination address on the back-lit key
pad and then sends the message up to one of 28 orbiting ORBCOMM satellites. To
receive e-mail, the user powers the unit up in order to "ask the satellite" for
messages, and an ORBCOMM satellite transmits the messages directly to the GSC
100.
On March 2, 1999, the Company was listed for trading on the Berlin Stock
Exchange in Germany, Berliner Wertpapierborse. The Company's stock number is
919284 under the ticker symbol ARU. According to information published by the
exchange on its website, over 2,800 international companies are listed on the
exchange, including more than 1,000 U.S. companies. The Berlin Exchange is known
for showcasing young, innovative, high-tech companies, according to a company
spokesman.
(b) Managements Discussion and Analysis of Financial Condition and Results of
Operations
Sales
- -----
During the six months ended January 31, 1999, sales declined approximately 29%
compared to the same period in 1998. 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 81% in the six-month period ended January 31,
1999, as compared to January 31, 1998. 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.
Payroll, Payroll Taxes and Related Benefits
- -------------------------------------------
Payroll, payroll taxes, and related benefits declined approximately 64% in
the six months ended January 31, 1999, as compared to January 31, 1998. This is
attributable to the fact that the Company had two employees during the prior six
months ended January 31, 1999.
General and Administrative
- --------------------------
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There was an approximate 33% decrease in other selling and administrative
expenses compared to the six-month period a year ago. The general and
administrative costs decreased 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 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.
Consulting and Professional
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Consulting and professional decreased 83% from $3,077,880 to $511,160, for the
six months ended January 31, 1999 and 1998, respectively. The large decrease is
primarily from the fact that the Company decreased its consulting and
professional services.
Minority Interests
- ------------------
The Company discontinued all operations in 1998 in which it had a minority
interest.
Net Loss
- --------
The net loss was reduced to $545,780 or $.04 per share as compared to
$5,905,881, or $.29 per share, for the six months ended January 31, 1999 and
1998 respectively. Net loss was reduced largely due to the discontinued
operations of the subsidiary, Lean Protein Foods, Inc., which was discontinued,
in the prior year, because of the Company re-focusing its business on digital,
wireless and wireline telecomminications business.
Liquidity and Capital Resources
- -------------------------------
As a result of the net loss incurred, the Company has used substantial working
capital in its operations. As of January 31, 1999, current liabilities exceeded
current assets by $518,798.
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 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 during 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
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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 (a) and (b) above contain forward-looking statements as
defined under Rule 175 of the Securities Act and many factors could cause actual
results to differ materially from those in the forward looking statements.
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PART II
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OTHER INFORMATION
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Item 1. Legal Proceedings
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In April, 1997, James C. Statham filed a personal Chapter 7 bankruptcy which was
discharged in January, 1998. The bankruptcy filing did not involve the
operations of a corporation or any other business entity whereby any debts
discharged involved employees or any tax issues related to employee federal or
state withholding taxes.
On November 18, 1998 Terry G. Wigton was appointed to the Company's Board of
Directors. Mr. Wigton was also appointed to the position of Chief Financial
Officer. Mr. Wigton is a party to a Commodities Futures Trading Corporation
investigation that has not been concluded. The Company is not involved in the
investigation.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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(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 November 19, 1998 to report on the cancellation of 8,000,000
shares, which were in the treasury. The cancellation of 2,000,000
shares which were returned as per the Agreement to Rescind Contract
for Deed, as reported in the Company's Form 10-KSB filed on November
13, 1998. Also reported was the termination of a Consultant Services
Plan between the Company and the president of Grant Douglas Publishing
on October 21, 1998. The negotiated agreement provided for the return
of 297,000 shares of stock out of the total 425,000 shares issued.
These events resulted in the cancellation of 10,100,000 shares.
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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.
AMERICAN MILLENNIUM CORPORATION, INC.
DATED: March 17, 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.
DATED: March 17, 1999 By: /s/ Stephen F. Watwood
--------------------------------
Stephen Watwood, Director,
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
DATED: March 17, 1999 By: /s/ James C. Statham
--------------------------------
James C. Statham, Director,
President and Chief
Operations Officer
DATED: March 17, 1999 By: /s/ Shirley M. Harmon
--------------------------------
Shirley Harmon, Director
DATED: March 17, 1999 By: /s/ Bruce R. Bacon
--------------------------------
Bruce R. Bacon, Director,
Vice President of Engineering,
Chief Technology Officer
DATED: March 17, 1999 By: /s/ Terry G. Wigton
--------------------------------
Terry G. Wigton, Director,
Chief Financial Officer
(Principal Financial Officer)
DATED: March 17, 1999 By: /s/ Thomas W. Roberts
--------------------------------
Thomas W. Roberts, Treasurer
DATED: March 17, 1999 By: /s/ Renee C. Riegler
--------------------------------
Renee C. Riegler, Secretary,
Assistant Treasurer
(Corporate Secretary)
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CONTENTS
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-10
F-1
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
(UNAUDITED)
BALANCE SHEET
================================================================================
January 31, 1999
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ASSETS
CURRENT ASSETS
Cash $ 9,945
Inventory 6,535
Prepaid expenses 10,437
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TOTAL CURRENT ASSETS 26,917
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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 (19,269)
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TOTAL PROPERTY, PLANT AND EQUIPMENT, NET BOOK VALUE 77,734
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OTHER ASSETS 3,540
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TOTAL ASSETS $ 108,191
================================================================================
LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Accounts payable $ 109,321
Accrued payroll and related taxes 84,282
Accrued expenses and other liabilities (Note 2) 214,866
Advances from officer (Note 3) 63,246
Advances from related party (Note 3) 74,000
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TOTAL CURRENT LIABILITIES 545,715
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LONG-TERM NOTE PAYABLE TO OFFICER (NOTE 3) 20,500
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TOTAL LIABILITIES 566,215
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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,
13,419,347 shares issued and outstanding 13,419
Additional paid-in capital 10,483,089
Deficit (10,954,532)
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TOTAL DEFICIENCY IN ASSETS (458,024)
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TOTAL LIABILITIES AND DEFICIENCY IN ASSETS $108,191
================================================================================
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
AMERICAN MILLENNIUM CORPORATION, INC.
(UNAUDITED)
STATEMENTS OF OPERATIONS RESTATED
===============================================================================================================================
For the quarter For the six For the quarter For the six
ended months ended ended months ended
January 31, 1999 January 31, 1999 January 31, 1998 January 31, 1998
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<S> <C> <C> <C> <C>
REVENUES
Sales $ 13,900 $ 99,494 $ 109,002 $ 140,181
Cost of sales 7,911 13,475 31,121 71,432
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Gross margin 5,989 86,019 77,881 68,749
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SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
Consulting 92,844 357,472 349,782 2,844,767
Professional 69,652 153,688 57,182 233,113
General and administrative 38,718 75,466 24,802 64,038
Salaries and related 13,187 30,780 42,883 84,945
Selling 7,934 24,769 63,046 85,753
Depreciation 3,424 6,848 3,567 6,812
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TOTAL SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 225,759 649,023 541,262 3,319,428
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OTHER INCOME (LOSS) 3,500 17,224 (5,200) (5,200)
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LOSS FROM CONTINUING OPERATIONS (216,270) (545,780) (468,581) (3,255,879)
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DISCONTINUED OPERATIONS, NET OF INCOME
TAXES
Loss from discontinued operations,
net of income taxes of $0 -- -- 255,251 255,251
Loss on disposal of 20% owned
equity investment -- -- -- 261,000
Estimated loss on disposition,
net of income taxes of $0 -- -- 2,161,522 2,161,522
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LOSS FROM DISCONTINUED OPERATIONS -- -- 2,416,773 2,677,773
- -------------------------------------------------------------------------------------------------------------------------------
(LOSS) INCOME BEFORE LOSS ATTRIBUTABLE
TO MINORITY INTERESTS (216,270) (545,780) (2,885,354) (5,933,652)
LOSS ATTRIBUTABLE TO MINORITY INTERESTS -- -- 23,939 27,771
- -------------------------------------------------------------------------------------------------------------------------------
NET LOSS $ (216,270) $ (545,780) $ (2,861,415) $(5,905,881)
===============================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING
(PRIMARY AND FULLY DILUTED) 13,277,681 12,810,681 11,034,814 9,918,814
===============================================================================================================================
LOSS PER COMMON SHARE FROM CONTINUING
OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS AND
EXTRAORDINARY ITEMS
(PRIMARY AND FULLY DILUTED) (0.02) (0.04) (0.04) (0.33)
===============================================================================================================================
LOSS PER COMMON SHARE
(PRIMARY AND FULLY DILUTED) (0.02) (0.04) (0.26) (0.60)
===============================================================================================================================
</TABLE>
See accompanying notes
F-3
<PAGE>
<TABLE>
<CAPTION>
AMERICAN MILLENNIUM CORPORATION, INC.
(UNAUDITED)
STATEMENTS OF CASH FLOWS RESTATED
===================================================================================================================
For the six months ended January 31, 1999 1998
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (545,780) $(5,905,881)
Adjustments to reconcile
net loss to net cash
used by operating activities:
Depreciation and amortization 6,848 6,812
Loss attributable to minority interest -- (27,771)
Loss from discontinued operations -- 2,572,874
Stock exchanged for compensation
and services provided 235,156 2,899,164
Loss on asset disposition -- 5,200
(Increase) decrease in assets:
Accounts receivable -- (113,438)
Inventory (6,535) --
Net current assets of discontinued
operations -- (147,909)
Prepaid expenses 29,938 (10,969)
Advances to officers 65,921 --
Other assets (500) (8,037)
Net other assets of discontinued
operations -- (309,600)
Increase (decrease) in liabilities:
Accounts payable (11,979) 130,748
Net current liabilities of discontinued
operations -- 309,260
Accrued expenses and other liabilities 52,631 112,506
- -------------------------------------------------------------------------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES (174,300) (487,041)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disbursements
Purchase of property, plant and equipment (3,000) (52,738)
Other -- (8,037)
- -------------------------------------------------------------------------------------------------------------------
DISBURSEMENTS FROM INVESTING ACTIVITIES (3,000) (60,775)
- -------------------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (3,000) (60,775)
- -------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts
Sale of common stock 100,000 70,740
Sale of common stock to minority interests -- 394,059
Capital lease for equipment -- 37,933
Proceeds from others -- 14,591
Proceeds from advances from officer, net 12,069 --
Proceeds from related parties 74,000 19,100
- -------------------------------------------------------------------------------------------------------------------
RECEIPTS FROM FINANCING ACTIVITIES 186,069 536,423
- -------------------------------------------------------------------------------------------------------------------
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 186,069 520,334
- -------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH AND EQUIVALENTS 8,769 (27,482)
CASH AND EQUIVALENTS - BEGINNING 1,176 536
- -------------------------------------------------------------------------------------------------------------------
CASH AND EQUIVALENTS (BANK OVERDRAFT) - ENDING 9,945 $ (26,946)
===================================================================================================================
SUPPLEMENTAL DISCLOSURES:
Common stock issued for acquisition of net assets of consolidated subsidiaries $ -- $ 1,454,778
Common stock issued for acquisition of property, plant and equipment $ -- $ 88,715
Common stock issued for acquisition of 20% owned subsidiary $ -- $ 49,215
===================================================================================================================
</TABLE>
See accompanying notes.
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 AMCI 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 has been prepared from the books and records
without audit. 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 January 31,1999, 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 $ 34,362
Consulting services - officers 180,504
-----------
$ 214,866
===========
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 January 31, 1999, was
$63,246.
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 January 31,
1999, was $74,000.
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%. No interest has
been accrued on this note.
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.
In January 1999, the Company reached and agreement with Eco-Max Systems, Inc.
(Eco-Max) to fund a joint technology investment. Eco-Max received 200,000 shares
of the Company's restricted common stock and 400,000 restricted share options at
an exercise price ranging from $1.00 to $2.00 (See Note 5). Eco-Max invested
$100,000 for the purchase of the Company's shares and options.
Employee Stock Incentive Plan
- -----------------------------
On January 26, 1999, the Company adopted an Employee Stock Incentive Plan,
whereby a total of 8,100,000 shares may be issued after one year of service for
officers, employees, and directors. The stock will be issued in the following
manner:
1. Twenty-five percent (25%) of the proposed stock incentive should be
issued when the Employee, Officer and or Director has concluded six
months of service.
2. Twenty-five percent (25%) of the proposed stock incentive should be
issued when the Employee, Officer and or Director has concluded an
additional six months of service from the date of Item #1 above.
3. The balance of the proposed stock incentive should be issued when the
Employee, Officer and or Director has concluded an additional six
months of service from the date of Item #2 above.
F-7
<PAGE>
American Millennium Corporation, Inc.
f/k/a Energy Optics, Inc.
Notes to Financial Statements
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 January 31, 1999,
there were 16,500 shares under option at an exercise price of $2.50 per share,
which expire April 5, 1999.
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.
In December 1998, the Company granted to Eco-Max 400,000 restricted share
options for a period of 24 months. The strike price is $1.00 for 200,000
restricted shares and $2.00 for the other 200,000 restricted shares.
On February 12, 1999, the Company entered into a Consulting Agreement with
Wilson, Lombard and Partner (WLP). Under the terms of the agreement, WLP is to
receive remuneration for performance of services including options to purchase
up to 200,000 shares of the common stock of the Company at an exercisable price
of $.30 per share which shall be restricted from sale for a period of one year.
(See Note 8.)
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
$545,780 and $5,905,881 for the periods ending January 31, 1999 and 1998,
respectively.
In addition, the Company has used substantial working capital in its operations.
As of January 31, 1999, current liabilities exceed current assets by $518,798.
Management plans to raise capital through a private offering of stock as
discussed in Note 7. Sales are to be used to fund day to day 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.
F-8
<PAGE>
American Millennium Corporation, Inc.
f/k/a Energy Optics, Inc.
Notes to Financial Statements
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 rescission 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.
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.
F-9
<PAGE>
American Millennium Corporation, Inc.
f/k/a Energy Optics, Inc.
Notes to Financial Statements
NOTE 8. SUBSEQUENT EVENTS
On November 18, 1998 Bruce R. Bacon and Terry G. Wigton were appointed to the
Company's Board of Directors. Mr. Bacon was also appointed to the positions of
Chief Technology Officer and Vice President of Engineering. Mr. Wigton was also
appointed to the position of Chief Financial Officer. Mr. Wigton is a party to a
Commodities Futures Trading Corporation investigation that has not been
concluded. The Company is not involved in the investigation.
On February 12, 1999, the Company authorized the issuance of 150,000 shares of
common stock to Karl Kotowski for compensation for consulting services pursuant
to the Consulting Agreement executed by the Company and Mr. Kotowski.
On February 12, 1999, the Company entered into a Consulting Agreement with
Wilson, Lombard and Partner (WLP). WLP is an investor relations firm with
experience in the dissemination of information about private and public
companies to prospective investors both domestically and internationally. Under
the terms of the agreement, WLP will furnish various services to the Company
including, but not necessarily limited to, acting as liaison between the Company
and its shareholders, advisor to the Company with respect to existing and
potential market-makers, broker-dealers, underwriters, and investors, as well as
advisor to the Company and as liaison as regards the financial media, analysts,
and other such members of the financial community. The term of the consultancy
is for a period of three (3) years from the date of the contract for which WLP
is to receive remuneration for performance of these services as follows: 50,000
shares of the common stock of the Company restricted from sale for one year from
the date of issuance, 150,000 free trading shares of common stock, and options
to purchase up to 200,000 shares of the common stock of the Company at an
exercisable price of $0.30 per share which shall be restricted from sale for a
period of one year.
In February 1999, the Company authorized the issuance of 1,275,000 shares of
common stock to officers and employees of the Company as per the Employee Stock
Incentive Plan adopted on January 26, 1999. These shares will bear a legend
restricting the sale of said stock for a period of one year from issuance.
On March 2, 1999, the Company was listed for trading on the Berlin Stock
Exchange in Germany, Berliner Wertpapierborse. The Company's stock number is
919284 under the ticker symbol ARU. According to information published by the
exchange on its website, over 2,800 international companies are listed on the
exchange, including more than 1,000 U.S. companies. The Berlin Exchange is known
for showcasing young, innovative, high-tech companies, according to a company
spokesman.
In March 1999, the Company authorized the issuance of 500,000 shares of common
stock to an officer of the Company as per the Employee Stock Incentive Plan
adopted on January 26, 1999. These shares will bear a legend restricting the
sale of said stock for a period of one year from issuance.
F-10
<PAGE>
INDEX TO 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 SIX MONTHS ENDED JANUARY 31, 1999 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 9,945
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 6,535
<CURRENT-ASSETS> 26,917
<PP&E> 97,003
<DEPRECIATION> (19,269)
<TOTAL-ASSETS> 108,191
<CURRENT-LIABILITIES> 545,715
<BONDS> 0
0
0
<COMMON> 13,419
<OTHER-SE> (471,443)
<TOTAL-LIABILITY-AND-EQUITY> (458,024)
<SALES> 99,494
<TOTAL-REVENUES> 99,494
<CGS> 13,475
<TOTAL-COSTS> 13,475
<OTHER-EXPENSES> 649,023
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (545,780)
<INCOME-TAX> 0
<INCOME-CONTINUING> (545,780)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (545,780)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
