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 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 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: 15,265,465 as of March 5,
1999
Transitional Small Business disclosure Format (check one):
Yes No X
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<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:
Balance Sheet
Statements of 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 (AMC), its former subsidiary with which it merged and effected its
name change from Energy Optics Inc. to American Millennium Corporation, Inc. on
May 27, 1998. 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 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, 265,000 shares of
common stock have subsequently been canceled under the terms of the contract
termination referenced above.
2
<PAGE>
Therefore, the amount of Company common stock issued and outstanding at the
filing date of this report is approximately 11.7 million shares with just over
3.5 million shares in the public float, according to the Company's records.
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 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 2,425,500 shares, fully
diluted, with all options exercised.
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.
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
the oil and gas industry, 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.
3
<PAGE>
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. 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
AMC has various initiatives underway with oil and gas producers as well as
manufacturers of gas compressors and control panels for those compressors. AMC
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. AMC plans to market its
products and services in the international market place.
Railroad Cars
AMC 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, AMC anticipates the data to be transmitted via satellite in
the next phase. AMC 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 AMC wireless equipment.
Upon successful completion of this phase with Union Pacific, Union Pacific has
the option to place orders in increment of 100 units.
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. AMC is
co-developing with a major instrument company a new electronic analog output
device for use on refrigerated railcars. This device will use satellites to
measure the fuel level required to operate a car. This new low-cost application
will retro-fit the hard to read manual gauge.
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 100,000 chassis for
hauling the containers overland in North America. At that meeting, AMC proposed
to outfit a refrigerated container with a satellite transceiver in the next
quarter. This will monitor location and alarm functions such as door openings
and temperature. Following that test, AMC will submit a formal proposal to them
for monitoring of their container fleet. The Company believes that it can
provide a cost effective solution to that company as well as other container
companies.
4
<PAGE>
Other Business of the Company
American Millennium Corporation/McLeodUSA Co-venture
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.
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. With the advent of new protocal two
way re-flex paging. McLeod currently is evaluating the use this platform in
relation to it's current obligation with AMC.
McLeod continues to fund the current phase of it's working relationship with
AMC.
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 final specifications being submitted. According to McLeod, their
internal needs could exceed one million units.
American Mobile Satellite
AMC's 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
authorized by the FCC to provide L-band (1.5-1.6 GHz) mobile satellite service
in the U.S.
5
<PAGE>
Proprietary Technology Applications
AMC 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. 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 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.
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, PageMart and SPS Technologies
for which it is a value-added reseller, AMC has strategic partnerships with
Griffin Petroleum, Trimble Navigation, Union Pacific Railroad, Pacific Arepco,
and Hersey Measurement Company.
Summary
In its role as a developer of digital, wireline, and wireless products, AMC
provides solutions for its customers utilizing cutting edge technology in the
telecommunications industry, AMC 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 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. 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.
6
<PAGE>
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 patent pending paging technology solutions to the
telecommunications industry.
The ability to provide satellite monitoring for industries 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 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 AMC's network of subscribers.
Recent Business Activity
In recent business activity related to the above referenced initiatives, the
Company 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 AMC 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, 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 AMC's satellite monitoring
capabilities whereby such conditions as voltage output, fuel levels, flow rates,
and emissions output can be read from a webpage on the Internet.
7
<PAGE>
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, AMC 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.
(b) Managements Discussion and Analysis of Financial Condition and
Results of Operations
--------------------------------------------------------------
Sales
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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 77% 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.
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.
8
<PAGE>
Payroll, Payroll Taxes and Related Benefits
- -------------------------------------------
Payroll, payroll taxes, and related benefits were declined approximately 82% in
the six months ended January 31, 1999 as compared to January 31, 1998. This is
attributable to the fact that the Company had one employee during the prior six
months ended January 31, 1999.
General and Administrative
- --------------------------
There was an approximate 14% decrease in other selling and administrative
expenses compared to the prior six months. 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
- ---------------------------
Consulting and professional decreased 59% from $874,888 to $362,973, for the six
months ended January 31, 1999 and 1998 respectively.
Minority Interests
- ------------------
The Company discontinued all operations in 1998 in which it had a minority
interest.
Net Loss
- --------
The net loss was reduced to ($389,123) or ($.03 0 per share as compared to
($3,927,313), or ( $.32) per share, for the six months ended January 31, 1999
and 1998 respectively.
9
<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 January 31, 1998, current liabilities exceeded
current assets by $448,606.
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 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.
10
<PAGE>
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.
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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 December 9, 1998,
File No. 000-10841-D)
(27) Financial Data Schedule
11
<PAGE>
SIGNATURES
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 12, 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>
<S> <C>
DATED: March 12, 1999 By: /s/ Stephen F. Watwood
---------------------------
Stephen Watwood, Director, Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
DATED: March 12, 1999 By: /s/ James C. Statham
---------------------------
James C. Statham, President, Director and Chief Operations Officer
DATED: March 12, 1999 By: /s/ Shirley M. Harmon
---------------------------
Shirley Harmon, Director
DATED: March 12, 1999 By: /s/ Thomas W. Roberts
---------------------------
Thomas Roberts, Chief Financial Officer, and Treasurer
DATED: March 12, 1999 By: /s/ Renee C. Riegler
---------------------------
Renee Riegler, Secretary, Assistant
Treasurer (Corporate Secretary)
</TABLE>
<PAGE>
CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet F-2
Income Statement F-3
Statements of Cash Flows F-4 to F-5
Notes to Financial Statements F-6 to F-12
F-1
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
(UNAUDITED)
CONSOLIDATED BALANCE SHEET
January 31, 1999
================
ASSETS
CURRENT ASSETS
Cash $ 16,974
Inventory $ 6,535
Prepaid expenses $ 535
Other Current Assets $ 3,040
------------
TOTAL CURRENT ASSETS $ 27,084
PROPERTY, PLANT AND EQUIPMENT
Equipment, furniture and fixtures $ 89,503
Transportation equipment $ 7,500
------------
TOTAL PROPERTY, PLANT AND EQUIPMENT, AT COST $ 97,003
Accumulated depreciation $ 19,269
------------
TOTAL PROPERTY, PLANT AND EQUIPMENT, NET BOOK VALUE
$ 77,734
------------
TOTAL ASSETS $ 104,818
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 109,317
Accrued expenses and other liabilities $ 202,617
Due to Others, without interest, due upon demand $ 80,010
Due to stockholders and other related parties,
without interest, due on demand $ 83,746
------------
TOTAL CURRENT LIABILITIES $ 475,690
============
STOCKHOLDERS' EQUITY (NOTES 4 AND 5)
Common stock, $.001 par value, 60,000,000 shares
authorized, 12,645,010 shares issued and
outstanding $ 12,645
Additional paid-in capital $ 10,454,862
Deficit $(10,838,379)
------------
TOTAL STOCKHOLDERS' EQUITY BEFORE MINORITY INTERESTS
Minority interests
TOTAL STOCKHOLDERS' EQUITY $ (370,872)
------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 104,818
============
SEE ACCOMPANYING NOTES.
F-2
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
(UNAUDITED)
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JANUARY 31,
1999 1998
=====================================
<S> <C> <C>
REVENUES
Sales $ 85,594 $ 110,714
Cost of sales $ 13,475 $ 59,285
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Gross margin $ 72,119 $ 51,429
Rents - Related Parties $ $ 46,014
------------ ------------
TOTAL NET REVENUES $ 72,119 $ 97,443
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consulting $ 273,831 $ 263,200
Professional $ 89,142 $ 611,688
General and administrative $ 60,559 $ 69,154
Salaries and related $ 15,220 $ 84,945
Selling $ 10,869 $ 16,753
Research and development $ 4,175 $ 12,147
Depreciation $ 6,848 $ 21,685
Interest $ 598 $ 6,473
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES $ 461,242 $ 1,086,045
------------ ------------
OTHER LOSSES $ $ 5,200
LOSS FROM CONTINUING OPERATIONS $ (389,123) $ (992,802)
------------ ------------
DISCONTINUED OPERATIONS, NET OF INCOME TAXES
Loss from discontinued operations, net of income taxes of $0 $ $ 777,411
Estimated loss on disposition, net of income taxes of $0 $ $ 2,161,522
------------ ------------
LOSS FROM DISCONTINUED OPERATIONS $ $ 2,938,933
LOSS BEFORE EXTRAORDINARY ITEMS $ (389,123) $ (3,931,735)
============ ============
(LOSS) INCOME BEFORE LOSS ATTRIBUTABLE TO MINORITY INTERESTS $ (389,123) $ (3,931,735)
LOSS ATTRIBUTABLE TO MINORITY INTERESTS $ $ 4,422
------------ ------------
NET (LOSS) INCOME $ (389,123) $ (3,927,313)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 15,087,010 12,239,814
============ ============
(PRIMARY AND FULLY DILUTED)
(LOSS) PER COMMON SHARE FROM CONTINUING OPERATIONS BEFORE LOSS FROM
DISCONTINUED OPERATIONS AND EXTRAORDINARY ITEMS
(PRIMARY AND FULLY DILUTED) $ (0.03) $ (0.08)
============ ============
(LOSS) PER COMMON SHARE BEFORE EXTRAORDINARY ITEMS
(PRIMARY AND FULLY DILUTED) $ (0.03) $ (0.32)
============ ============
(LOSS) NET INCOME PER COMMON SHARE (PRIMARY AND FULLY DILUTED) $ (0.03) $ (0.32)
============ ============
</TABLE>
SEE ACCOMPANYING NOTES
F-3
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
(UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JANUARY 31,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (389,123) $(3,927,313)
Adjustments to reconcile net income (loss) to net
cash used provided by operating activities:
general and administrative $ 6,848 $ 21,685
Loss from unconsolidated subsidiary $ -- $ 4,422
Loss from discontinued operations $ 2,350,640
Stock exchanged for payment of operating expenses $ 623,172
Loss on asset disposition $ 5,200
Forgiveness of debt
(Increase) decrease in assets: $ (152,745)
Accounts receivable $ (147,909)
Net current assets of discontinued operations $ (10,969)
Prepaid expenses $ (8,037)
Other assets $ (309,600)
Net other assets of discontinued operations
Increase (decrease) in liabilities: $ (28,317) $ 130,748
Accounts payable $ $ 309,260
Net current liabilities of discontinued operations $ 113,229 $ 35,055
Accrued expenses and other liabilities
$ (297,363) $(1,076,391)
=========== ===========
NET CASH USED BY OPERATING ACTIVITIES
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) $ (68,812)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock $ 292,490 $ 70,740
Sale of common stock to minority interests $ 394,059
Capital lease for equipment $ $ 37,933
Proceeds from others $ 8,000 $ 14,591
Proceeds from related parties $ $ 628,440
RECEIPTS FROM FINANCING ACTIVITIES $ 300,490 $ 1,131,173
----------- -----------
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 $ 300,490 $ 1,115,084
=========== ===========
Table continued next page
F-4
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
(UNAUDITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
NET INCREASE IN CASH AND EQUIVALENTS $ 127 ($ 22,082)
CASH AND EQUIVALENTS - BEGINNING $ 16,847 $ 536
CASH AND EQUIVALENTS (BANK OVERDRAFT) - ENDING $ 16,974 ($ 21,546)
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 $ $ 1,529,815
Common stock issued for acquisition of 20% owned
subsidiary $ $ 49,215
Common stock issued in exchange for note payable to
officer/director $ $ 55,170
Common stock issued for settlement of debt to Small
Business Administration $ $ 40,000
Note payable issued in exchange for real estate $ $ 258,900
Interest paid $ $ 6,473
</TABLE>
SEE ACCOMPANYING NOTES.
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
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, 1998 has
been prepared from the books and records without audit. Financial information as
of July 31, 1998 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.
F-6
<PAGE>
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.
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.
F-7
<PAGE>
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
F-8
<PAGE>
NOTE 2. ACCRUED EXPENSES
Accrued expenses and other liabilities consisted of the following:
Professional fees $ 34,362
Consulting services $168,255
--------
$202,617
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, 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 January 31,
1999 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%.
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 Securities 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.
F-9
<PAGE>
On December 8, 1998, the Board of Directors approved the issuance of 50,000
additional shares of the Company's common stock to be issued under the
Consultant Service Plan as compensation for consultation services. Included in
the shares issued are fifty thousand (50,000) shares to be issued to Brenda Lee
Hamilton.
On January 12, 1999, the Board of Directors approved the issuance of 200,000
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 two hundred thousand (200,000) shares to be issued to
Brenda Lee Hamilton for services in 1999.
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, 1998,
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
The Company reached an agreement with Eco-Max Systems, Inc. (Eco-Max) for an
investment of $100,000 by Eco-Max to fund a joint technology development
agreement. Eco-Max is a developer and manufacturer of rotary powered generators,
agricultural pumps, and marine propulsion systems that utilize proprietary
design features.
F-10
<PAGE>
NOTE 5. STOCK OPTIONS (CONTINUED)
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. Upon full execution of all options an additional $600,000
in revenue would be invested into the Company.
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
$389,123 and $992,802 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 $448,606.
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 CONTINGENCIES
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.
F-11
<PAGE>
NOTE 7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
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.
F-12
<PAGE>
NOTE 7. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
James C. Statham filed a personal Chapter 7 bankruptcy jointly with his wife in
April of 1997. The matter was discharged in federal court in January of 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. The joint filing
referenced above by Mr. Statham and his wife was of strictly a personal nature
and not in any way involved in the operation of a business or its management.
NOTE 8. SUBSEQUENT EVENTS
No options have been exercised.
F-13
<PAGE>
INDEX TO EXHIBITS
EXHIBITS
27 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> 6-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 16,974
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 6535
<CURRENT-ASSETS> 27,084
<PP&E> 97,003
<DEPRECIATION> (19,269)
<TOTAL-ASSETS> 104,818
<CURRENT-LIABILITIES> 475,690
<BONDS> 0
0
0
<COMMON> 12,645
<OTHER-SE> (370,872)
<TOTAL-LIABILITY-AND-EQUITY> 104,818
<SALES> 85,594
<TOTAL-REVENUES> 72,119
<CGS> 13,475
<TOTAL-COSTS> 461,242
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (389,123)
<INCOME-TAX> 0
<INCOME-CONTINUING> (389,123)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (389,123)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
