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OMB APPROVAL
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OMB Number 3235-0420
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended July 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from_____ to _____
Commission File No. 0-10841
AMERICAN MILLENNIUM CORPORATION, INC.
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(Name of small business issuer in its charter)
New Mexico 85-0273340
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
303 N. Baker St., Suite 200, Mount Dora, Florida 32757
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (352) 735-0116
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange which registered
----------------------------- --------------------------------------
Common Stock, $.001 Par Value Over-the-counter bulletin board
Securities registered pursuant to Section 12 (g) of the Act:
None
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_
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Revenues for the issuer's most recent fiscal year were $127,366.
The aggregate market value of the 17,690,922 shares held by non-affiliates of
the issuer as of November 9, 1999, computed by using the average of the ask and
bid prices on November 9, 1999, of $.2969 and $.2656 is as follows:
Average $.2813/share X 17,690,922 shares = $4,976,456
The number of shares outstanding of the Issuer's common stock as of November 9,
1999, is 17,690,922. There are approximately 787 shareholders of record as of
November 9, l999.
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
FORM 10-KSB
TABLE OF CONTENTS
PAGE
----
PART I
Item 1. Description of Business 1
Item 2. Description of Property 6
Item 3. Legal Proceedings 6
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 7
Item 6. Management's Discussion and Analysis or Plan of Operation 7
Item 7. Financial Statements 9
Item 8. Change In and Disagreements with Accountants on
Accounting and Financial Disclosure 9
PART III
Item 9. Directors, Executive Officers, Promoters, and Control Persons;
Compliance with Section 16(a) of the Exchange Act 10
Item 10. Executive Compensation 11
Item 11. Security Ownership of Certain Beneficial Owners and Management 12
Item 12. Certain Relationships and Related Transactions 13
PART IV
Item 13. Exhibits and Reports on Form 8-K 13
<PAGE>
1
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PART I
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FORWARD LOOKING INFORMATION
This Form 10-KSB contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. For this purpose any
statements contained in this Form 10-KSB that are not statements of historical
fact should be considered by you to be forward-looking statements. Words such as
"may," "will," "expect," "believe," "anticipate," "estimate" or "continue" or
comparable terminology are intended to identify forward-looking statements.
These statements by their nature involve substantial risks and uncertainties,
and actual results may differ materially depending on a variety of factors, many
of which are not within our control. These factors include but are not limited
to economic conditions generally and in the industries in which our customers
participate; competition within our industry, including competition from much
larger competitors; technological advances which could render our products less
competitive or obsolete; failure by us to successfully develop new products or
to anticipate current or prospective customers' product needs; price increases
or supply limitations for components purchased by us for use in our products;
and delays, reductions, or cancellations of orders previously placed with the
us.
During the year ended July 31, 1999, our operations were impacted by a
significant decrease in revenues. The we were unable to reduce costs to offset
the revenue decrease. In an effort to increase revenues, we are attempting to
expand its products to new market niches. Unless we are successful in the effort
to increase revenues in the future, we may be required to adjust our cost
structure to a level that could be supported by our revenues. There can be no
assurance that we will be able to develop additional markets for our products or
that revenue will remain at current levels or increase in the future.
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Item 1. DESCRIPTION OF BUSINESS
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HISTORY
American Millennium Corporation, Inc. (AMCI) is a New Mexico corporation (NASDAQ
OTCBB: AMCI, formerly EOPT) organized in 1979 under the name Energy Optics, Inc.
(Energy) to develop various proprietary and patented technologies for
industrial and consumer applications. Energy was unable to realize revenue
sufficient to maintain an active status, and was unsuccessful in securing
funding sufficient to aggressively market these devices and systems. Energy also
was unable to enlist the resources of a partner concern necessary to take
product development from the prototypical stage into production and then promote
and market its various products through distribution to the end-user.
After becoming inactive and ceasing all initiatives to pursue funding for
production and marketing, Energy was de-listed from the NASDAQ Small Cap
listing. However, as an inactive over-the-counter stock, Energy's principals
maintained the corporate books, kept Energy in good standing and retained its
status as fully reporting to the Securities and Exchange Commission.
In order to proceed with its acquisition strategy, Energy recognized that it had
to reduce its overwhelming debt. A settlement agreement was reached to eliminate
the Small Business Administration debt (including accrued interest) by a
combination of cash payments, issuance of stock and forgiveness of debt. The
remainder of the debt was extinguished by forgiveness of some debt and interest
in exchange for common stock. (Most of this debt was to directors of Energy.)
With a clean slate, Management believed that it could pursue its research and
development of products and services.
In June 1997, Management began discussions with an unincorporated business
organization (UBO) that owned certain assets and rights to purchase or assign
purchase rights of certain other assets. These discussions lead to the
acquisition in August 1997 of certain of the UBO's business assets including
real estate in Tavares, Florida, buildings, equipment and a controlling stock
interest (held by parties related to the UBO) of Lean Protein Foods, Inc. (LPF),
a specialty food company and their wholly-owned subsidiary, Wildwood Ostrich
Ranch, Inc. (WWOR) in a transaction totaling approximately $3.6 million. This
transaction was subsequently amended on October 10, 1997. Energy filed for
foreign corporation registration with the State of Florida and moved its
corporate offices from New Mexico to Tavares, Florida
In September and October 1997, Energy acquired a total of 80% of American
Millennium Corporation (AMC) and 20% of Microgravity Aviation Corporation (MAC)
from the UBO, both of which were development stage enterprises. Early in 1998,
Energy discontinued operations of LPF and on July 31, 1998, sold its interest in
LPF to LPF's minority shareholders. Management also negotiated the recessions of
both the purchase contract for a 20% stock ownership held in MAC and the
contract for purchase of the real estate in Tavares, Florida.
Under an Agreement and Plan of Merger dated May 27, 1998, Energy merged with
American Millennium Corporation, a subsidiary of which Energy owned
approximately an 80% interest, with the parent as the surviving corporation.
Upon completion of the merger, we changed our name to American Millennium
Corporation, Inc.
<PAGE>
2
Our corporate headquarters are located in Mount Dora, Florida with engineering
and operations offices based near Denver, Colorado.
PRODUCTS
Our recent activity has been focused on providing hardware and software
combinations to facilitate timely, accurate, and cost effective one-way and
two-way delivery of information. This can be achieved through a variety of
communications platforms including satellite, cellular digital packet data,
cellular, various other radio frequency protocols, and wireline. Our business
strategy includes becoming an Applications Service Provider, commonly referred
to as an ASP, that will provide high value software and additional services
through the Internet.
Through utilization of newly available two-way satellite communication, we can
monitor currently isolated facilities and equipment. We have activated over
sixty pilot systems for satellite monitoring of oil and gas production and
pipeline equipment as well as systems for monitoring and tracking rail and
highway vehicles. Assets that could not be practically served by land-based
communication systems can now utilize satellite monitoring and tracking to yield
significantly better equipment management. This results in increased production,
less product loss and increased capital efficiency for our customers.
We are a value-added reseller for ORBCOMM USA L.P. (ORBCOMM). ORBCOMM is a "low
earth orbit" satellite company that is a joint venture between Orbital Sciences,
Inc. and Teleglobe of Canada, Inc. Our contract with ORBCOMM allows us to
provide remote monitoring services to operators of oil and gas wells, intermodal
containers, and refrigerated and flatbed railcars. For example, by global
position we can determine the location of a particular refrigerated railcar as
well as the temperature inside the car, the voltage output of the generator, and
numerous other functions.
Although virtually inactive at the time, we are also value-added resellers for
PageMart and American Mobile Satellite.
HOW DOES IT WORK?
1. Status, location, malfunction or failure information is sent from the
compressor Subscriber Communicator to one of the LEOS
2. The LEOS relays the information to an ORBCOMM Gateway Earth Station. In North
America, these are always in view simultaneously.
3. The information passes through the ORBCOMM network and on to our service
center for analysis and alert communication to the operator. If the operator is
large enough to justify its own service center, we will guide its development
and the satellite data will be routed directly to it.
Depending upon the nature of a malfunction, it may be possible to implement
corrective action through communication with the compressor SC. In this case,
control information is sent to the ORBCOMM network for routing to the next
appropriate LEOS and hence to the compressor SC. If "on-the-ground" service is
required, the failure data is analyzed by the operator to determine needed spare
parts and tools. Since travel times to remote units can be measured in hours,
accurate information of this nature is of great value. We become a key and
ongoing link in the operator's value chain. We share in that value by charging
for our engineering, installation, and operating services as well as receiving a
recurring fee for the communication traffic, generated through ORBCOMM.
By way of example, two units have been contracted for by a customer and were
provisioned by us to monitor gas well compressors and the mainline station
compressor via the ORBCOMM satellite system. Our customer will receive daily
reports that the units are running or not running, as well as alarm reports
whenever the units shut down unexpectedly. We provide a secure website on the
Internet for this customer to view the operating conditions and alarms.
DATA TRANSFER TECHNOLOGY
The data transfer industry has grown exponentially with the increasing speed and
lower costs of microprocessors that are components of computers, radio towers,
radio frequency transceivers of all types, and other radio devices developed to
scan, store, and transmit data. Industry leaders such as Bill Gates and Craig
McCaw and large technology firms such as Motorola, Boeing, Loral, Lockheed
Martin, Orbital Sciences and others have made substantial financial commitments
totaling billions of dollars to design and deploy both voice telephone and data
transmission satellite systems.
There is nothing new or innovative about Global Positioning Systems (GPS). This
technology has been used by the military for decades and a handheld global
positioning device can be purchased at a sporting goods store for under $100.
However, the device only tells the operator's location. The ability to monitor
fixed and mobile assets from a remote location, with respect to location,
direction, and speed, as well as gather other pertinent data and actually
manipulate functions, is a relatively new industry. We believe that monitoring
fixed and moving assets from afar by satellite will become a significant growth
market as indicated by the early results that AMCI has seen in its first
initiatives. Moreover, billions of dollars have been committed by major high
tech companies to launch communications satellites.
<PAGE>
3
The ORBCOMM "constellation" of data transmission satellites is expected to cost
approximately $0.4 billion, or anywhere from $1.1 billion to $8.7 billion less
to build and deploy than any of its competitors. Even though ORBCOMM is a
"Little LEO" system comprised of small, low earth orbit satellites, we believe
that there are certain key competitive advantages over the larger, more costly
systems. ORBCOMM has launched all 28 of its satellites of its constellation
meaning that AMCI can solicit, demonstrate capability for proof of concept, and
sign up subscribers in the present instead of in the future. Also, certain of
the systems yet to be deployed are budgeted at billions of dollars before
allowing for possible cost overruns and time delays. We believe that the less
costly ORBCOMM system will allow for lower, more competitive monthly monitoring
charges that will have a broad appeal to more potential subscribers.
NASA has stated in various news articles that it sees the space "industry" as
trending toward less expensive hardware that is more expendable. In the event of
a lost or malfunctioning satellite, a relatively inexpensive satellite is a much
less critical financial event than is the case with a large, expensive
satellite.
We further believe that the rapid changes in technology currently underway
require a flexible approach in the design and deployment of data transfer
satellites. Various experts in the telecommunication industry have predicted
that gross revenues from the transfer of data will surpass revenues from voice
communications in the next several years. A constellation of small, inexpensive
satellites that can be upgraded to accommodate improvements in technology has,
in management's opinion, a distinct cost advantage over systems that may rely on
a few geosnychronous satellites that could become less efficient or obsolete as
technology changes.
We believe our overall competitive advantage as a reseller for the ORBCOMM
system is most closely tied to the competitive rates we can currently charge.
The cellular telephone industry is an example of the sharp increase in the
number of subscribers who signed up for service when cellular telephone rates
fell. The demand curve trends upwards as rates trend downward. As a result, we
are currently marketing the ability to provide accurate, low cost monitoring to
the industries defined in our reseller contract.
OIL AND GAS CUSTOMERS
We have various initiatives underway with oil and gas producers as well as
manufacturers of gas compressors and control panels for those compressors. We
currently have several Subscriber Communicators (the industry term for
transceivers, including those that receive and transmit to and from satellites)
activated and in field trials. These units are currently monitoring a variety of
assets in the United States. As an example, on May 4, 1999, Hanover Compressor
Co. accepted our proposal to provide satellite monitoring of twenty natural gas
compressors installed on gas wells and pipeline stations. We had been monitoring
two remote gas well compressors for Hanover since March 3, 1999. Current plans
call for the installation of equipment to monitor an additional eighteen
compressors at various sites selected by Hanover. The eighteen compressors are
being monitored for Chevron Corp. We also plan to market our products and
services in the international market place.
Much of oil and natural gas production occurs in largely remote areas far beyond
the economic range of wired or terrestrially based wireless communication. Key
to the operation of these production sites are enormous compressors used to
extract, collect, and transfer the oil and gas to transmission pipelines. The
malfunction or failure of one of these compressors is a red-alert event for the
production operator. The economic loss can be measured in thousands of dollars
per hour of down time, resulting in a high value to reducing the duration of an
outage.
To create this value, we can program a commercially available Subscriber
Communicator to relay the vital signs of the compressor to the ORBCOMM LEOS.
This information will include the status of all important components as well as
the flow and pressure data for the pipeline. Since there is a considerable
variation of compressor package designs and installation details, each
installation requires customized programming and interfacing expertise to
capture the critical information.
CUSTOMERS TRANSPORTING OF HIGH VALUE PRODUCTS
Through proper programming and interface design, a Subscriber Communicator can
transmit information vital to the successful delivery of perishable cargo. In
addition to temperature readings, it can monitor refrigeration system fuel
levels and alert for any intrusion into a railcar or container. Importantly, the
SCs have an additional feature installed to communicate the location of the
transport. With a GPS (Global Positioning System) module in the SC, the position
of the railcar or container can be constantly monitored. In addition to
providing accurate logistical information to the shipper, this information is
key to the timely repair of a failing refrigerator and protection of its cargo.
The failing unit can be intercepted at the next maintenance location on its
route and be repaired or have its cargo transferred to a working refrigeration
unit.
<PAGE>
4
This application provides another opportunity for us. The stream of information
that flows through the our service center must be properly integrated into the
transporter's existing Information Technology system. Failure information must
be sent to the appropriate maintenance location and the transport service center
for supervision. Position data should be available to the shipper at all times.
Intrusion information must alert security services. All this data should arrive
in correct formats at the right IT server. Further, if communication back to the
Subscriber Communicator is needed, transport personnel should be able to use
their existing applications to initiate it. We have an opportunity to configure
and supervise the installation of off-the-shelf software packages that can
manage this routing and formatting. Further, we can operate such routing
servers, consolidating the needs of smaller customers.
CUSTOMERS USING RAILROAD CARS
We have completed a testing phase of remote monitoring of a refrigerated railcar
under the provisions of a contract 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, we anticipate the data will be transmitted via satellite in the next
phase. We have monitored, via satellite and cellular, the location of a test
railcar as well as the battery voltage and refrigerated compartment temperature.
We have installed the second generation of equipment on the railcar which
exceeds the performance of the first generation equipment and allows us to move
toward the next phase.
The next phase of the contract involves the outfitting of five refrigerated
railcars with pre-production models of the our wireless equipment. Upon
successful completion of this phase, Union Pacific has the option to place
orders in increment of 100 units.
INTERMODAL CONTAINER CUSTOMERS
We have held discussions with an intermodal container corporation regarding
outfitting a refrigerated container with a Subscriber Communicator to monitor
location and alarm functions such as door openings and temperature. Following
such a test, we will submit a formal proposal for the monitoring of the
corporation's container fleet.
OTHER APPLICATIONS
The above applications are examples of a large variety of related needs. In
addition to gas wells, pipelines also require monitoring. Oil wells, storage
tanks and pumps are remote, critical production assets. Industrial chemical and
compressed gas storage tanks present another opportunity. In addition,
refrigerated railcars, refrigerated containers and other special cargo vehicles
benefit from an onboard Subscriber Communicator and GPS unit. Complex powered
vehicles such as locomotives, truck tractors, test vehicles and heavy equipment
can be better managed with LEOS communication. Here, in addition to monitoring
and tracking, the Subscriber Communicator can provide reliable messaging
services for the equipment operator.
There are further benefits from LEOS systems in many industries that have
worldwide operations. A system designed for North American operation can be
deployed for assets throughout the world. ORBCOMM is franchising the
installation of ground stations in all continents and developing "roaming"
arrangements that will yield a seamless worldwide network. New levels of
enterprise asset management and operational efficiency are sure to emerge from
this platform. Thus, even with a North American focus, AMCI can create value
worldwide.
In our role as a developer of digital, wireline, and wireless products and
solutions to the telecommunications industry, we are currently presenting the
uses of its technologies with leaders in various industries. We believe that
recent technological developments allowing the interfacing of multiple
communication platforms should position us to emerge as an industry leader in
the field of data transfer.
We believe that a significant market exists for potential applications of our
technology that involve remote monitoring and systems function manipulations.
Customers can monitor their equipment, production levels, and track global
position as well as control functions and have data reported from the particular
asset that can be downloaded onto a secure Internet website which can then be
accessed from anywhere in the world. We provide company officials, such as oil
engineers and railroad management, with the ability to obtain vital information
on a timely and current basis at any location by simply using their laptop
computers to log-on to a secure website. The reports can be available in less
than sixty seconds after an ORBCOMM satellite flies over the monitored site,
reads, and transmits the data to an ORBCOMM Earth Station.
<PAGE>
5
We will continue to market these services to the rail, intermodal container, and
oil and gas industries with its ORBCOMM reseller contract. We will continue to
market our various paging technology solutions to the telecommunications
industry with developments to be announced subsequent to patent filings.
The ability to provide satellite monitoring for the industries defined within
our reseller contract with ORBCOMM means that we are able to charge a specified
rate per month for each asset being monitored. The charge can range from a few
dollars per month (similar to paging rates) to $100 per month, or even more
(similar to cable television rates with premium channels and pay-per-view),
depending on the amount of data and the frequency of reports required by the
owner of the asset being monitored.
AMERICAN MOBILE SATELLITE
On August 28, 1998, we became a value-added reseller for Reston, Virginia based
American Mobile Satellite (NASDAQ: SKYC) and its geosnychronous satellite
system. They provide 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. They are the only company authorized by
the FCC to provide L-band (1.5-1.6 GHz) mobile satellite service in the U.S.
We have received a legal opinion that contracting to become a reseller of theses
services does not represent a conflict of interest with ORBCOMM, which prohibits
the us from reselling the services of any other satellite service that operates
on 1 GHz or lower in radio frequency.
PROPRIETARY TECHNOLOGY APPLICATIONS
We believe that we have now developed certain proprietary technologies for the
monitoring of various types of assets utilizing the ORBCOMM LEO system. In
addition to monitoring of data communications, we have the ability to remotely
control functions at the asset location. Due to the sensitive and proprietary
nature of this technology as well as our intent to protect us to the extent that
is possible with patent applications, we are unable to disclose specific aspects
of the systems. Nevertheless, we believe that the applications are both valuable
and viable. We are presently in discussion with several companies regarding
licensing and/or joint venture proposals within the scope of the technologies
and their respective applications.
We have retained the services of Pittenger and Smith, a Denver, Colorado based
patent, trademark, and copyright law firm, to effect these applications.
MARKETING
We believe that a significant base of recurring revenues derived from monthly
satellite and paging monitoring charges will build AMCI's value. Our 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. Our
personnel work with management and engineers in the industries discussed above
in order to determine their technological needs, cost objectives and to develop
solutions for their individualized asset monitoring requirements. Marketing
efforts are performed by both our personnel and outside sales service providers.
We have and will continue through the year 2000, to market our services at
industry trade shows.
COMPETITION
There are numerous competitors to ORBCOMM's Low Earth Orbit satellite based data
and messaging service. However, we are confident that there does not exist, at
present, any competiton of an immediate or formidable nature for several
reasons. First, geostationary systems and terrestrial based wireless networks
are regional, not global, in coverage. Secondly, the big Low Earth Orbit systems
such as Iridium and Globalstar must focus on voice telephony to build rapid
revenues to service the multi-billion dollar capitalization costs associated
with their deployment. Also, their electronic architecture makes it expensive to
send data and the end-user equipment is expensive.
Additionally, the majority of the satellite systems in development exist only on
paper and have either not obtained financing or licensing or both. We do not
believe that any system either deployed or in development can compete with the
ORBCOMM/AMCI ability to provide the low cost service for data transfer, the
small, inexpensive communicators, or the ability to provide global near
real-time two-way communications.
There is potential competition from other ORBCOMM resellers who are licensed by
ORBCOMM to market services within the same industries as we have focused. Also,
ORBCOMM itself is marketing its own services to virtually all industries via
in-house resellers and employed sales personnel.
We believe that the market is vast and we are protected with mutual agreements
of non-disclosure and non-circumvent with ORBCOMM on any initiatives brought
forward by us.
<PAGE>
6
MANUFACTURING AND SUPPLIERS
We purchase the majority of the components for our subscriber data communicators
from ORBCOMM; however, we believe that these components are readily available
from more than one source of supply at competitive prices. Airtime for satellite
monitoring is also purchased from ORBCOMM.
GOVERNMENT REGULATIONS
As value-added resellers for ORBCOMM, PageMart, and American Mobile Satellite,
our services and products are subject to the rules and regulations of the
Federal Communications Commission. We anticipate no problems in obtaining the
necessary certifications in a timely manner as required.
PERSONNEL
As of July 31, 1999, we had six full time people all of whom are directors or
officers except for one who is the spouse of a director. None of our personnel
are covered by collective bargaining agreements. Relations with our personnel
are considered good.
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Item 2. DESCRIPTION OF PROPERTY
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Our corporate offices occupy approximately 1,400 square feet and are located at
303 North Baker Street, Suite 200, Mount Dora, Florida. The office facilities
were rented in December 1998, under a 10-month sublease rental agreement from an
unrelated party at a rental rate of $1,450, plus sales tax, per month, that
expired September 30, 1999. The Company is in the process of negotiating a
three-year rental agreement with the property owner, Dream Merchants, Inc., at
the same monthly rate. The Company will continue to occupy the facility on a
month-to-month basis until the lease is executed.
Our engineering and operations facility near Denver, Colorado temporarily
occupies an office consisting of approximately 180 square feet. The furnished
office is leased on a month-to-month basis for $150 per month from Downtown
Radio of Denver, Inc. The lessor also provides general office facilities and
services which approximate $300 per month.
The furniture, fixtures and equipment used in the conduct of our business have a
historical cost of approximately $40,000. The majority of the furniture,
fixtures and equipment was acquired used, but in good condition. We also own
monitoring units which are leased to various customers, as well as demonstration
units with a total historical cost of approximately $23,000.
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Item 3. LEGAL PROCEEDINGS
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In August 1997, we issued 400,000 restricted shares of common stock to each of
two individuals as part of a Stock and Asset Purchase Agreement. 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 for the return of the original shares in
exchange for issuance of the appropriate number of shares. The original shares
were not returned and upon the expiration of the restriction period, the
individuals sought to have the restriction removed to enable them to sell the
shares. Since we believe the shares were issued in error, we sought an
injunction in the Circuit Court of the Fifth Judicial Circuit, in Lake County,
Florida to prevent the sale of these shares. A temporary injunction was granted
on October 27, 1998, upon the filing of a surety bond in the amount of $150,000
by us. The individuals have not responded to the summonses and a motion for
default will be filed. Legal counsel believes the likelihood of a successful
outcome is high.
In October 1997, we issued common stock totaling 500,000 shares to two
individuals under a Consultant Services Plan as compensation for marketing
services We then decided to discontinue relations based on our dissatisfaction
with the quality of service, lack of service and other business reasons. When
requested that the stock be returned, we discovered that the stock had been
sold. We retained legal counsel to pursue the matter. Legal counsel believes
that there is a strong likelihood that we will obtain a successful verdict,
however, collectibility of any verdict or judgement is unknown at this time.
On November 25, 1997, we executed an Equipment Lease Agreement with AT&T Capital
Leasing Services, Inc.(AT&T). The term of the agreement was 60 months. We made
only three payments and on October 20, 1998, AT&T repossessed the equipment.
There is a claim against us for the balance due and owing under the Equipment
Lease Agreement in the sum of $44,607. Based upon the negotiations, an equitable
and favorable outcome for us appears likely. Accordingly, we have recorded an
accrued liability of $20,000 in settlement of this claim.
<PAGE>
7
We are also a party to a pending administrative proceeding initiated by the
Securities and Exchange Commission. The Commission alleged various violations of
the Securities Act of 1933 and the Securities Exchange Act of 1934 against the
Company, but has not filed suit. An informal settlement has been reached in the
matter, which, if approved by the Commission, will not require any payments.
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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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None.
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PART II
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Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
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Our common stock is traded on the NASDAQ over-the-counter market. Since May of
1986, it has been listed in the "pink sheets" and is currently listed on the
National Association of Securities Dealers' Electronic Bulletin Board under the
symbol "AMCI," formerly EOPT. Individual systems may add other symbols for
access. Listed below are the high and low bid for each of the last eight
quarters after giving retroactive effect to the one-for-ten reverse stock split
on August 27, 1998. The quotations reflect inter-dealer prices, without retail
mark-ups, markdowns or commissions and may not represent actual transactions
FISCAL YEAR ENDED JULY 31, 1999 HIGH LOW
---- ---
First Quarter $ 1.170 $ .350
Second Quarter $ .700 $ .109
Third Quarter $ .580 $ .250
Fourth Quarter $ .530 $ .200
FISCAL YEAR ENDED JULY 31, 1998 HIGH LOW
---- ---
First Quarter $ 2.625 $ 2.313
Second Quarter $ 1.375 $ .700
Third Quarter $ 1.450 $ 1.350
Fourth Quarter $ 1.290 $ 1.220
At November 9, 1999, we had 787 shareholders. We have not paid dividends on our
common stock and do not expect to pay cash dividends in the foreseeable future.
- --------------------------------------------------------------------------------
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
It is anticipated that revenues from sales, leases and installation of
subscriber communicators and airtime for these units will significantly increase
based on ongoing contract negotiations and proposals. Since the end of the
fiscal year, we have more than doubled the number of Subscriber Communicator
units in the field.
For the last two years, our time and efforts have been primarily dedicated to
research and development. We have recently entered the deployment stage.
Applications that were being developed and modified have now reached deployment.
We have entered into an agreement with a company in Midland, Texas to provide
two Subscriber Communicator units as well as airtime for wireless remote
monitoring of a mainline station and a natural gas well located in the Permian
Basin of West Texas. That company is one of the nation's largest single source
providers of sales, leasing, engineering, fabrication, and operator of gas
compression equipment. They operate through 13 regional sales offices and with
over 120 technical service representatives located throughout the U.S.
General Motors Corp. recently purchased ten of our Subscriber Communicators for
testing purposes. The units are able to report a vehicle's global position as
well as send and receive e-mail to the vehicle's occupants. GM's Truck
Engineering Group has been running trials using the units to track the test
vehicles across the U.S. over the Internet. We are currently working on
additional software applications to meet the needs of GM's engineers for remote
communication with the vehicle itself.
On July 22, 1999, we signed a joint marketing agreement with a multinational
marketing firm. That firm will market our radio frequency and Subscriber
Communicator technology in data and voice delivery. Some of the current
application tests underway include radio frequency wireless reservation services
for a hotel chain, high value asset location and tracking, monitoring trucks and
autos for an insurance company and wireless Internet access. Other applications
being tested will include testing redundant home security systems and remote
monitoring and development of wireless Local Area Networks. Most of the activity
is in Central America and the Caribbean. We subsequently reported on September
1, 1999, that this South and Central American representative marketing our
<PAGE>
8
satellite technology, would be jointly demonstrating, with us, the applications
of our new SatAlarm (TM) device as a watchdog over home security systems at the
ISC International Safety Communications Show in New York City. The SatAlarm (TM)
can be installed in homes to detect whenever phone lines are cut or a loss of
power occurs in conjunction with an unauthorized entry.
We have completed engineering for remote interfacing with the Frick RWB II Plus
Control Panels. The panels are manufactured by Frick Controls, Group, Frick
Company, a division of York International Corp. The Subscriber Communicator with
the custom application software permits communication with the control panel
using the panel's native ACSII protocol.
A hospital service group based in Findlay, Ohio recently purchased 26 of our
Subscriber Communicators as well as airtime over the ORBCOMM satellite system.
All but one of the communicators are being utilized to track the transport of
contaminated waste inroute to disposal sites.
We have been working under a cooperative arrangement with Altronic Controls
(Garland, TX), a wholely-owned subsidiary of Altronic, Inc. (Girard, OH) to
create an ORBCOMM-enabled link to Altronic's new DE-2000 digitial annunciator.
The DE2000 is the central control unit for Altronic's new generation of natural
gas compressor control panels. This project has passed from the development
stage to pilot testing with the advent of two field installations in October,
1999. One of these pilot sites is on a compressor near Ft. Stockton, TX. The
product is comprised of an Subscriber Communicator with application software
that enables it to pass communication commands and responses to and from the
DE2000 via the ORBCOMM system. Using a website created by United Controls
Corporation (Huntsville, AL), live status information for the compressor is
polled on a regular basis and is available via the Internet using only a
standard web browser. A demand poll for current or historical information can be
initiated from the website with the results displayed thereon. 'Alarm Shutdown'
events are communicated to the website as they occur and simultaneously to our
call center for notification of operator field personnel. The system has been
received very positively by current users and prospective customers. Marketing
plans call for the product to be co-marketed by Altronic controls, United
Controls and us.
RESULTS OF OPERATIONS
Revenues decreased $178,043 (58%) during the fiscal year ended July 31, 1999 and
increased $306,409 (306%) during the fiscal year ended July 31, 1998. Fiscal
year 1998 was the first year in recent years in which AMCI has had revenue and
included primarily revenues received from joint product development, whereas
fiscal year 1999 included primarily revenues from the sale and lease of
subscriber communicators and very little from joint product development.
Gross profit for the year ended July 31, 1999 was $23,802 (19% of sales)
compared to $205,504 (67%) for the year ended July 31, 1998. The cost of sales
for fiscal year 1999 consisted primarily of units sold and airtime sold while
costs of sales for 1998 were attributable to the costs of joint product
development that were not necessarily a true indication of the cost of the
product sold.
Selling, general, and administrative expenses decreased by $2,481,538 for the
fiscal year ended July 31, 1999 and increased by $3,707,092 for the fiscal year
ended July 31, 1998. During the fiscal year 1998, significant expenditures were
made to outside consultants for the promotion and marketing efforts of our
Company and its various acquisitions. During fiscal year 1999, efforts were
focused on the marketing of the products. This marketing was performed primarily
by the directors and officers.
Losses from discontinued operations and disposal of discontinued subsidiary and
equity investment was $2,238,670 for the fiscal year ended July 31, 1998. These
losses resulted from the discontinued operations and disposal of Lean Protein
Foods, Inc. and from the disposal of its equity investment in Microgravity
Aviation Corporation.
As of July 31, 1999, we had available income tax operating loss carryforwards of
$7,048,300, tax credits of $22,466 and capital loss carryforwards of $2,328,670
that can be used to offset future taxable income, subject to certain
restrictions based on significant ownership changes.
EFFECTS OF INFLATION
We believe that our revenues and results of operations have not been
significantly affected by inflation during the three years ended July 31, 1999.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
We understand that cash equivalents on hand at July 31, 1999, are not adequate
to meet even our short-term capital needs. AMCI continues to have negative
working capital and a deficiency in assets of approximately $689,343 for fiscal
year 1999 and $247,400 for fiscal year 1998. Working capital for the past two
years has been primarily from loans from related parties. The directors and
officers have been forced to temporary forego a portion of their compensation
because of the poor financial condition of AMCI.
<PAGE>
9
During the year we sold 100,000 shares of our common stock and options for the
purchase of an additional 400,000 shares of our common stock. Total proceeds
were $100,000. We also issued stock for compensation of services rendered under
various consultants' agreements.
On September 24, 1999, we accepted a bridge loan of $50,000 and authorized the
issuance of 25,000 shares of restricted common stock in payment of interest on
the loan from an individual.
To satisfy cash requirements for the short to mid-term operations we have made a
private offering of AMCI common stock in accordance with exemptions from
registration under Regulation D, Rule 506, Securities Act of 1933. The offering
was made on a "best efforts" basis with a maximum of 2,800,000 shares and an
equal number of warrants offered for sale at $.25 per share/warrant. Since the
end of our fiscal year we have received stock subscriptions for 2,400,000 shares
of stock with a total subscription price of $600,000. To date $100,000 has been
received and the balance is scheduled to be received on November 19, 1999. To
date expenses of this offering total approximately $20,490. Additional expenses
upon final funding are expected to be approximately $30,000.
We have no material commitments for capital expenditures and expect no
significant changes in the number of employees. We will continue to out-source
production and manufacturing and major marketing efforts will be performed by
the officers and directors in their capacity as consultants.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997 the Financial Accounting Standards Board (FASB) issued SFAS 130
"Reporting Comprehensive Income" effective for fiscal years beginning after
December 15, 1997, with earlier application permitted. SFAS 130 establishes
standards for reporting and display of comprehensive income and its components
(revenues, expenses, gains, losses) in a full set of general-purpose financial
statements and requires that all items required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. SFAS 130 requires an enterprise to classify items of other
comprehensive income by their nature in a financial statement and to display the
accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. Our adoption of SFAS 130 by us in fiscal 1999 had no inpact
on net income or stockholders' equity.
IMPACT OF THE YEAR 2000 ON OUR INFORMATION TECHNOLOGY SYSTEMS
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. AMCI has conducted a preliminary
assessment of its key computer systems and software applications to ensure that
the integrity and accuracy of its computer systems, embedded systems and
software applications that contain date sensitive operations or that involve
date processing. To date AMCI has upgraded its accounting software (accounts
receivable, accounts payable and general ledger) to be Y2K compliant.
We are 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 and have. We have been advised by ORBCOMM that they
are addressing all of the Year 2000 issue and that they expect timely
achievement of Year 2000 readiness.
Based on the initial assessment, we believe the cost of addressing the Year 2000
issue should not have a material impact on our financial position or results of
operations.
- --------------------------------------------------------------------------------
Item 7. FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Our financial statements are included (with an index listing all such
statements) in a separate financial section at the end of this Annual Report on
Form 10-KSB.
- --------------------------------------------------------------------------------
Item 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- --------------------------------------------------------------------------------
None.
<PAGE>
10
- --------------------------------------------------------------------------------
PART III
- --------------------------------------------------------------------------------
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
- --------------------------------------------------------------------------------
EXECUTIVE OFFICERS OF THE COMPANY
Our executive officers, some of whom are also our directors are as follows:
Name Title/Position Age
Andrew F. Cauthen Chief Executive Officer, President, Director 57
Stephen F. Watwood Vice President of Business Development, Director,
Chairman of the Board 51
Bruce R. Bacon Vice President of Engineering, Chief Technology
Officer, Director 41
James C. Statham Chief Operations Officer and Director 46
Shirley M. Harmon Director 53
Renee C. Riegler Secretary 46
Thomas W. Roberts Treasurer 50
Andrew F. Cauthen, 57, President/Chief Executive Officer/Director. Mr. Cauthen's
background includes 10 years operating experience as president/CEO for Century
Capital Property Management Corp. With over one billion in assets, Century
Capital had over 200 employees and approximately 45 commercial properties under
management throughout the United States. Following his association with Century
Capital, Mr. Cauthen was president of Mac Haik Development of Houston, Texas. He
has been in an executive capacity of several companies, most recently as
president and CEO of ZapCom International, Inc., a division of Imagitel, Inc.
Mr. Cauthen has broad-based experience in strategic planning, organization
design and management. He has consulted to businesses in real estate finance,
acquisition, development, joint venture financing, telecommunications, computer
services, consumer products, and marketing. His duties include the oversight of
growth areas of corporate operations, focusing on financing, financial services,
budgets, information services, customer support and administration.
Stephen F. Watwood, 51, Vice President of Business Development/Chairman of the
Board/Director. Mr. Watwood owned and operated a successful commercial and
residential construction company for 24 years where he was directly responsible
for project development, business planning, and management. During that period,
he owned a solar power technology company and was an early pioneer in designing
and installing photo-voltaic systems into remote locations. He is considered by
certain of his peers to be an expert in this technology and, to date, his early
efforts serve as the basis for the status-quo development of this technology in
Northwest Colorado. The duties of Mr. Watwood include development of new
business, project management for ongoing initiatives, and creating technical
solutions for Subscriber Communicator systems.
Bruce R. Bacon, 41, Chief Technology Officer (CTO)/Vice President of
Engineering/ Director. Mr. Bacon holds a degree in Electrical Engineering from
Montana State University where he was also a graduate research assistant in the
field of semiconductor laser frequency stability and linewidth reduction. His
most recent experience is that of lead design engineer at RadiSys Corporation
where he was responsible for electrical system architecture design, writing
specifications, digital and analog circuit design, prototype debug, design
validation, and production release. He has broad experience in field service,
customer technical support, in-house technical training, new product
development, and manufacturing operations. Mr. Bacon's duties include oversight
of manufacturing, field engineer for development ofSubscriber Communicator, and
senior project engineer for our initiative with satellite monitoring of rail,
container, and petroleum assets in industry.
James C. Statham, 46, Chief Operations Officer (COO)/Director. Mr. Statham has
been an independent businessman for over 20 years. He completed the Hotel and
Restaurant administration curriculum at Florida State University and Leysin,
Switzerland and subsequently owned and operated a restaurant from 1978 until
1989. In 1989, he formed S&H Foods, Inc., a specialty food company that operated
a food processing plant that produced a gourmet specialty product sold to
grocery chains, wholesale buying clubs, restaurants, and foodservice suppliers.
In 1993, Mr. Statham was hired to assist in capital formation for various
General Partnerships and Limited Liability Companies involved in a number of
projects including wireless telecommunications, agribusiness, and food
processing. Mr. Statham's duties include responsibility for public filings with
the U.S. Securities and Exchange Commission, shareholder relation management,
and acting as liaison between our Company and the broker/dealer community.
Shirley M. Harmon, 53, Director. Ms. Harmon retired from the United States
Department of Navy in 1995. She was a civilian employee with 28 years in the
financial division. She has held various positions and titles during this
employment, which include the following: Budget Analyst, and Management and
Analyst for the Ship Parts Control Center, financial evaluating and executing
various budget programs. Additional responsibilities included establishing and
maintaining payroll records for over 7,000 government employees throughout the
United States and overseas. After leaving the Department of Navy, Ms. Harmon
<PAGE>
11
took a position with a private trust. Her responsibilities included the
establishment and maintenance of the trust's financial records.
Renee C. Riegler, 46, Secretary. Ms. Riegler has over 20 years of diverse
experience in business, securities, law, journalism, and administration;
specializing in the management of large volumes of information and documentation
and the creation/organization of new positions, departments, and companies. She
was employed for over seven years as a paralegal specializing in civil
litigation. Ms. Riegler has over six years of experience in the financial
industry specializing in tax advantages investments. As a registered principal
with the NASD, Ms. Riegler was the vice president and designated compliance
officer for an investment banking firm with brokerage and investment advisory
subsidiaries. She holds a Bachelors of Art degree from the University of Central
Florida. Ms. Riegler's duties include that of general oversight of corporate
administration issues, securities filings, media communications, and responding
to investor queries.
Thomas W. Roberts, 50, Treasurer. Mr. Roberts is licensed as an Attorney at Law
in Ohio. From 1985 through 1996, he operated as sole practitioner of a general
law practice in the greater Cincinnati, Ohio market. His experience included
assistance to clients in commercial law, financing for business start-ups, and
contract assistance in all phases of commercial practice. During that period, he
also served on the Board of Directors of Intense Limited of Cincinnati, Ohio,
and equipment leasing company, where he assisted in normal operations including
pricing and contract decisions. Additionally, Mr. Roberts is a Certified Public
Accountant in Ohio where, during the same period, he was the owner and President
of Thomas W. Roberts, C.P.A., P.S.C., an accounting firm that specialized in
financial statement preparation, governmental audits and tax reporting,
financial analysis for business financing, project management, and investment
analysis. Mr. Roberts has served as Independent Corporate Counsel for us since
September of 1997. He was appointed to the position of Treasurer in December of
1997. Mr. Roberts assists us in various legal and accounting matters.
- --------------------------------------------------------------------------------
Item 10. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
The following table summarizes the compensation earned or paid for services
rendered for the fiscal years ended July 31, 1999, 1998 and 1997:
Employee
Stock
Name of Officer or Director Fiscal Base Incentive Total
Capacity Which Served Year Comp(1) Bonus(2) Plan (1)(2) Comp
- --------------------------------------------------------------------------------
Andrew F. Cauthen
President 1999 $ 15,000 $ -- $ -- $ 15,000
Chief Executive Officer
Director
Stephen F. Watwood
VP Business Development 1999 98,001 80,000 106,500 284,501
Chairman of the Board 1998 78,000 -- -- 78,000
Director 1997 78,000 -- -- 78,000
Bruce R. Bacon
VP of Engineering 1999 96,000 -- 106,500 202,500
Chief Technology Officer 1998 43,298 -- -- 43,298
Director
James C. Statham 1999 98,001 119,750 106,500 324,251
Chief Operations Officer 1998 92,667 -- -- 92,667
Director 1997 -- -- -- --
(1) Includes accrued compensation and the value of common stock issued
for services
(2) Includes the value of restricted common stock issued
EMPLOYMENT CONTRACTS
Directors and officers who are active in the management of AMCI are compensated
as consultants under a Contract for Services, the effective date which coincides
with our fiscal year end. These contracts are approved annually by the Board of
Directors. Contracts in effect at July 31, 1999 and 1998, respectively, provided
for annual compensation as follows:
1999 1998
-------- ---------
Stephen F. Watwood $ 96,000 $ 104,000
James C. Statham $ 96,000 $ 104,000
Bruce R. Bacon $ 96,000 $ 96,000
Renee C. Riegler $ 58,000 $ 58,400
Phyllis Watwood $ 25,500 $ 30,000
On July 31, 1999, the above contracts were extended. The extensions run through
July 31, 2000.
<PAGE>
12
Andrew Cauthen became President and Chief Executive Officer on April 13, 1999.
His two-year Employment Contract was approved by the Board of Directors
subsequent to year-end and commenced on August 15, 1999. The contract provides
for annual compensation of $120,000 for the first year. Compensation for the
second year will consist of $180,000, 250,000 shares of restricted common stock
and 250,000 stock options exercisable at $1.00 per share for a two-year period.
On August 5, 1999, we issued 100,000 shares of common stock for services
provided but not covered under this contract.
On August 30, 1999, we authorized that, based upon funding, the accrued
compensation of our officers, directors, and employees could be taken in our
restricted common stock in lieu of cash at the individual's preference.
EMPLOYEE STOCK INCENTIVE PLAN
In January 1999, the Board of Directors approved an outline for an Employee
Stock Incentive Plan (ESIP). The plan provides for 8,100,000 shares of AMCI
restricted common stock to be issued as incentive compensation. The plan calls
for twenty-five (25%) of the shares available to each participant to be issued
when the participant has concluded six months of service. An additional
twenty-five (25%) of the available stock is to be issued when the participant
has concluded one year of service. The balance of the available stock is to be
issued upon completion of one and one-half years of service.
Although the plan was approved by the Board of Directors and the first increment
of initial of stock issuances has been made, this plan has not yet been
formalized. At the request of the Board of Directors, the issuance was waived of
restricted shares vested under the ESIP due and owing after April 13, 1999,
until further review at a Board meeting on or about January 2000. Incentive
compensation has not been accrued for these shares because the value, which is
based on the price of stock at the date of issue, cannot yet be determined.
- --------------------------------------------------------------------------------
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- --------------------------------------------------------------------------------
The following table sets forth information as of November 9, 1999, regarding
ownership control of our common stock by each person who beneficially owns 5% or
more of the our common stock, by each of our directors, and by all the officers
and directors as a group.
Name and Address of Shares Beneficially Percent
Beneficial Owner Owned of Class
Andrew F. Cauthen 95,385 .539%
6125 W. Sam Houston Parkway North
Suite 504
Houston, Texas 77041
Stephen F. Watwood 1,398,841 8.330%
17835 RCR 29
Oak Creek, Colorado 80467
Bruce R. Bacon 555,555 3.383%
PMB #338
601 16th Street, #C
Golden, Colorado 80401
James C. Statham 995,000 6.066%
P.O. Box 211
Cedar Key, Florida 32625
Harto Ltd. 2,657,495 16.201%
Victoria House, P.O. Box 1090
The Valley, Anguilla, BWI
Global Investments Ltd., Trustee 3,400,000 20.727%
Victoria House P.O. Box 1066
The Valley, Anguilla BWI
Mali-Suisse Mining Holdings, S.A. 2,340,000 14.265%
28 Old Brompton Road, Suite 1119
London, England SW7 3DL
All Officers, Directors and 5%
Shareholders as a Group (9 persons) 11,629,221 65.552%
<PAGE>
13
- --------------------------------------------------------------------------------
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
See footnote 5 of the 1999 Financial Statements included in this report.
- --------------------------------------------------------------------------------
PART IV
- --------------------------------------------------------------------------------
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(A) Financial Statements and Schedules
The following financial statements and schedules are filed with and as part of
this Annual Report on Form 10-KSB:
Independent Auditors Report
Balance Sheets
Statements of Operations
Statements of Deficiency in Assets
Statements of Cash Flows
Notes to Financial Statements
(b) Exhibits
The following exhibits are filed with this report:
(3.1) Articles of Incorporation and Bylaws, as amended to date of this report
(incorporated by reference Form 8-K filed June 11, 1998, File No. 000-10841-D)
(3.2) Agreement and Plan of Merger dated May 27, 1998 (incorporated by reference
Form 8-K filed June 11, 1998, File No. 000-10841-D)
(27) Financial Data Schedule
(B) No reports were filed on Form 8-K for the quarter ended July 31, 1999.
- -------------------------------------------------------------------------------
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: November 12, 1999 By: /s/Andrew F. Cauthen
----------------------------------
Andrew F. Cauthen, President
(Chief Executive Officer)
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: November 12, 1999 By: /s/ Andrew F. Cauthen
----------------------------------
Andrew F. Cauthen, Director,
President,Chief Executive Officer,
(Chief Executive Officer)
DATED: November 12, 1999 By: /s/ Bruce R. Bacon
----------------------------------
Bruce R. Bacon, Director, Chief
Technology Officer, Vice President
of Engineering
DATED: November 12, 1999 By: /s/ Shirley Harmon
----------------------------------
Shirley Harmon, Director
DATED: November 12, 1999 By: /s/ James C. Statham
----------------------------------
James C. Statham, Director and
Chief Operations Officer
DATED: November 12, 1999 By: /s/ Stephen F. Wateood
----------------------------------
Stephen F. Watwood, Director,
Chairman of the Board, Vice
President of Business Development
DATED: November 12, 1999 By: /s/ Renee C. Riegler
----------------------------------
Renee C. Riegler, Secretary
(Corporate Secretary)
DATED: November 12, 1999 By: /s/ Thomas W. Roberts
----------------------------------
Thomas W. Roberts, Treasurer
(Principal Financial Officer)
<PAGE>
INDEX TO FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT F - 2
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets F - 3
Statements of Operations F - 4
Statements of Deficiency in Assets F - 5
Statements of Cash Flows F - 6
Notes to Financial Statements F - 7 to F - 18
F-1
<PAGE>
Dohan and Company 7700 North Kendall Drive, #204
Certified Public Accountants Miami, Florida 33156-7564
A Professional Association Telephone: (305) 274-1366
Facsimile: (305) 274-1366
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors of
American Millennium Corporation, Inc.
Mount Dora, Florida
We have audited the accompanying balance sheets of American Millennium
Corporation, Inc. at July 31, 1999 and 1998, and the related statements of
operations, deficiency in assets and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Millennium
Corporation, Inc. as of July 31, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 10 to the
financial statements, the Company has suffered recurring losses from operations,
has a working capital deficiency and has a deficiency in assets that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 10. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
As more fully described in Note 5, American Millennium Corporation, Inc. had
entered into asset purchase, sales and recession contracts with Harto, Ltd.,
American Global Equity Services (a trust), Mali-Suisse Mining International,
Ltd. (all entities subject to common control with and of the Company), and
officers of the Company.
/s/Dohan and Company, PA
Miami, Florida
October 22, 1999
Member:
Florida Institute of Certified Public Accountants
American Institute of Certified Public Accountants - Private Companies and SEC
Practice Sections
SC International - Offices in Principal Cities World-Wide
F-2
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
BALANCE SHEETS
===============================================================================
July 31, 1999 1998
- -------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents ...................... $ 6,961 $ 1,176
Accounts receivable, less allowance of $640 .... 20,365 -
Inventory ...................................... 5,975 -
Advances to officers ........................... - 65,921
Prepaid expenses ............................... - 40,375
- -------------------------------------------------------------------------------
TOTAL CURRENT ASSETS ...................... 33,301 107,472
- -------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT ........................... 51,819 81,582
OTHER ASSETS
Available-for-sale equity security ............. 14,390 3,040
Security deposits .............................. 500 -
Deferred tax asset, less valuation allowance of
$3,385,497 and $2,928,303..................... - -
- -------------------------------------------------------------------------------
TOTAL ASSETS ..................................... $ 100,010 $ 192,094
===============================================================================
LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Accounts payable ............................... $ 165,259 $ 121,299
Accrued payroll and related taxes .............. 89,908 166,505
Accrued expenses and other liabilities ......... 321,666 80,012
Notes payable to officers ...................... 91,970 51,178
Notes payable to related parties ............... 69,885 -
Note payable to shareholder .................... 12,000 -
Advances from officers ......................... 38,665 -
- -------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES ........................ 789,353 418,994
- -------------------------------------------------------------------------------
LONG-TERM NOTE PAYABLE TO OFFICER ................ - 20,500
- -------------------------------------------------------------------------------
TOTAL LIABILITIES ................................ $ 789,353 $ 439,494
- -------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 11)
DEFICIENCY IN ASSETS
Preferred stock, 10,000,000 shares authorized; none issued
Common stock, $.001 par value, 60,000,000 shares
authorized;16,403,472 and 12,329,514 shares
issued and outstanding ....................... 16,404 12,330
Additional paid-in capital ..................... 11,200,570 10,157,022
Accumulated deficit ............................ (11,917,667) (10,408,752)
Accumulated other comprehensive income ......... 11,350 -
Treasury stock ................................. - (8,000)
- -------------------------------------------------------------------------------
TOTAL DEFICIENCY IN ASSETS ....................... (689,343) (247,400)
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND DEFICIENCY IN ASSETS ....... 100,010 192,094
===============================================================================
See accompanying notes
F-3
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC
STATEMENTS OF OPERATIONS
===============================================================================
For the Years Ended July 31, 1999 1998
===============================================================================
REVENUES ........................................ $ 127,366 $ 306,409
COST OF REVENUES ................................ 103,564 100,905
---------- ----------
GROSS PROFIT ................................ 23,802 205,504
---------- ----------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consulting - officers and directors............ 933,363 132,770
Consulting - others ........................... 78,695 2,967,004
Professional .................................. 253,575 297,513
Salaries ...................................... 32,470 200,357
Travel ........................................ 68,607 47,088
Telephone and utilities ....................... 33,453 20,000
Depreciation .................................. 11,010 14,412
Other ......................................... 69,179 282,746
---------- ----------
TOTAL SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES 1,480,352 3,961,890
---------- -----------
LOSS FROM OPERATIONS ............................ (1,456,550) (3,756,386)
---------- -----------
OTHER INCOME (EXPENSES)
Litigation settlement ......................... (20,000) -
Loss on sale and disposal of assets ........... (38,707) (13,134
Other miscellaneous income .................... 6,342 520
---------- ----------
TOTAL OTHER INCOME (EXPENSES) ................ (52,365) (12,614)
---------- ----------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (1,508,915) (3,769,000)
INCOME TAXES...................................... - -
---------- ----------
LOSS FROM CONTINUING OPERATIONS .................. (1,508,915) (3,769,000)
---------- ----------
DISCONTINUED OPERATIONS
Loss from operations of 80% owned discontinued
subsidiary.................................... - (162,617)
Loss on disposal of 80% owned discontinued
subsidiar..................................... - (1,905,053)
Loss on disposal of 20% owned equity investment. - (261,000
---------- ----------
LOSS ON DISCONTINUED OPERATIONS,
NET OF INCOME TAXES........................ - (2,328,670)
---------- ----------
NET LOSS ........................................ (1,508,915) (6,097,670)
OTHER COMPREHENSIVE INCOME
Unrealized gain on available-for-sale
equity security............................... 11,350 -
---------- -----------
COMPREHENSIVE LOSS ............................... $(1,497,565) $(6,097,670)
=========== ===========
BASIC AND DILUTED NET LOSS PER COMMON SHARE BEFORE
DISCONTINUED OPERATIONS ......................... ($0.11) ($0.40)
===============================================================================
BASIC AND DILUTED NET LOSS PER COMMON SHARE ...... ($0.11) ($0.64)
===============================================================================
BASIC AND DILUTED COMPREHENSIVE INCOME
PER COMMON SHARE .............................. $0.00 -
===============================================================================
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (BASIC AND DILUTED) ........ 14,215,132 9,528,448
===============================================================================
See accompanying notes.
F-4
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
STATEMENTS OF DEFICIENCY IN ASSETS
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Accumulated
Additional Other Total
Common Stock Paid-in Accumulated Subscription Comprehensive Treasury Deficiency
Description .............................. Shares Amount Capital Deficit Receivable Income Stock in Assets
- ------------------------------------------------------------------------------------------------------------------------------------
Balance July 31, 1997 ........................ 877,869 $ 878 $ 4,122,784 $ (4,311,082) (6,500) $ -- $ -- (193,920)
Common stock exchanged for 80%
ownership of Lean Protein
Foods, Inc. (Note 5) ....................... 2,387,495 2,387 2,085,456 -- -- -- -- 2,087,843
Common stock issued for services ........... 1,369,000 1,369 3,099,395 -- 6,500 -- -- 3,107,264
Common stock exchanged for purchase of assets 234,650 235 88,480 -- -- -- -- 88,715
Exchange of common stock in merger .......... 7,190,500 7,191 62,054 -- -- -- (8,000) 61,245
Automobiles contributed ..................... -- -- 19,575 -- -- -- -- 19,575
Capitalization of related party debt ........ -- -- 409,548 -- -- -- -- 409,548
Common stock issued in settlement of
Microaviation Gravity, Inc. claims ......... 270,000 270 269,730 -- -- -- -- 270,000
Net loss for the year ended July 31, 1998 ... -- -- -- (6,097,670) -- -- -- (6,097,670)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance July 31, 1998 ....................... 12,329,514 12,330 10,157,022 (10,408,752) -- -- 8,000) (247,400)
Common stock issued for services ........... 174,958 175 153,307 -- -- -- -- 153,482
Common stock issued under employee stock
incentive plan ............................. 1,775,000 1,775 378,075 -- -- -- -- 379,850
Cancellation of treasury stock .............. -- -- (8,000) -- -- -- 8,000 --
Common stock assigned from Global
Investments for debt reduction ............. 591,000 591 (591) -- -- -- -- --
Common stock issued as compensation ......... 1,033,000 1,033 311,457 -- -- -- -- 312,490
Sale of common stock ........................ 200,000 200 99,800 -- -- -- -- 100,000
Common stock issued for loan repayment ...... 300,000 300 109,500 -- -- -- -- 109,800
Other comprehensive income:
Change in unrealized gain on security
available-for-sale, net of tax ............. -- -- -- -- -- 11,350 -- 11,350
Net loss for the year ended July 31, 1999 ... -- -- -- (1,508,915) -- -- -- (1,508,915)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance July 31, 1999 .......................16,403,472 $16,404 $11,200,570 $(11,917,667) $ -- $ 11,350 $ -- $(689,343)
====================================================================================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC.
STATEMENTS OF CASH FLOWS
===============================================================================
For the Years Ended July 31, 1999 1998
- -------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,508,915) $(6,097,670)
Adjustments to reconcile net (loss) to net
cash used by operating activities:
Depreciation ................................. 11,204 14,412
Provision for bad debts ...................... 640 --
Loss on disposal of property and equipment ... 38,707 13,134
Common stock issued and loss from
discontinued operations .................... -- 2,328,670
Common stock exchanged for services .......... 153,482 3,100,764
Stock issued under employee stock
incentive plan as compensation ............. 379,850 --
Stock issued as compensation ................. 312,490 --
Note payable issued as compensation .......... 15,000 --
(Increase) decrease in assets:
Accounts receivable .......................... (21,005) --
Inventory .................................... (5,975) --
Prepaid expenses ............................. 40,375 (40,375)
Other assets ................................. (500) (3,040)
Increase (decrease) in liabilities:
Accounts payable ............................. 43,960 121,299
Accrued payroll and related taxes ............ (76,597) 166,505
Accrued expenses and other liabilities ....... 307,575 27,116
Customer deposit ............................. -- (75,000)
----------- ----------
NET CASH USED BY OPERATING ACTIVITIES .......... (309,709) (444,185)
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts
Proceeds from disposal of property and equipment -- 2,600
----------- ----------
RECEIPTS FROM INVESTING ACTIVITIES ........... -- 2,600
----------- ----------
Disbursements
Acquisition of property and equipment .......... (26,148) (3,445)
----------- ----------
DISBURSEMENTS FROM INVESTING ACTIVITIES ...... (26,148) (3,445)
----------- ----------
NET CASH USED BY INVESTING ACTIVITIES ..... (26,148) (845)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts
Proceeds from advances by officers ............. 38,665 51,178
Proceeds from notes payable to officers ........ 29,888 20,500
Proceeds from related parties contributed
to capital ................................... -- 353,843
Proceeds from related parties, net ............. 166,385 49,030
Proceeds from note payable stockholder ......... 12,000 --
Proeeds from issuance of common stock .......... 100,000 15,000
----------- ----------
RECEIPTS FROM FINANCING ACTIVITIES ........... 346,938 489,551
----------- ----------
Disbursements
Advances to officers ........................... -- (65,921)
Payments on advances by officer, net ........... (5,296) --
Payments on note payables to officers .......... -- (1,500)
----------- ----------
DISBURSEMENTS FROM FINANCING ACTIVITIES ...... (5,296) (67,421)
----------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES . 341,642 422,130
----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,785 (22,900)
CASH AND CASH EQUIVALENTS - BEGINNING ........... 1,176 24,076
----------- ----------
CASH AND CASH EQUIVALENTS - ENDING .............. $ 6,961 $ 1,176
=========== ==========
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Interest ..................................... $ 2,039 $ 417
Income taxes ................................. $ -- $ --
In addition to amounts reflected above,
common stock was issued for:
Notes payable to related parties ............. $ 96,500 $ --
Note payable to officer ...................... $ 19,300 $ --
Acquisition of property and equipment ........ $ -- $ 88,715
Advances to officer reduced accrued liabilities $ 65,921 $ --
Equipment was exchanged for debt reduction ..... $ 6,000 $ --
===============================================================================
See accompanying notes
F-6
<PAGE>
American Millennium Corporation, Inc.
Notes to Financial Statements
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
American Millennium Corporation, 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. The Company has developed various proprietary and patented
technologies for industrial and consumer application.
A controlling interest (79.3%) of American Millennium Corporation (AMC), 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, when
the companies merged, with the parent as the surviving corporation. Upon
completion of the merger, the Company changed its name from Energy Optics, Inc.
to American Millennium Corporation, Inc.
Since the merger, operations have been focused primarily on hardware and
software combinations to facilitate timely, accurate and cost effective one-way
and two-way monitoring of information. This is achieved through a variety of
platforms including satellite, cellular, various radio frequency protocols and
wireline.
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.
Inventory
Inventory consists of Subscriber Communicators. Inventory is stated at the lower
of cost, determined on the first-in, first-out (FIFO) method, or market.
Property and Equipment
Property and equipment are stated at cost. Depreciation of equipment is 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. Gains and losses on
disposition of property and equipment are included in income as realized.
Available-for-Sale Securities
The Company accounts for marketable securities in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity securities." This statement requires securities which are
available for sale to be carried at fair value, with unrealized gains and
losses, net of tax, reported as a separate component of stockholders' equity.
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.
Income Tax Credits
Income tax credits will be recognized as a reduction of the provision for income
taxes in the year in which utilized.
F-7
<PAGE>
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations of Credit Risk and Economic Dependence
Concentrations of credit risk with respect to receivables results from the fact
that approximately 58% of accounts receivable at July 31, 1999, was due from two
customers. Further, approximately 62% of revenues from the sale of products and
services are to three customers, while approximately 75% of revenues from joint
development are derived from one customer. Risks associated with industry
concentrations are limited due to the wide variety of customers and markets into
which the Company's products and services are provided, as well as their
dispersion across many different geographic areas. 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 monitoring devices and is
also the supplier for the main component of the Company's Subscriber
Communicators.
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
Certain amounts in the prior year financial statements have been reclassified
for comparative purposes to conform with the presentation in the 1999 financial
statements.
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 before discontinued operations and extraordinary
items is computed by dividing the loss before discontinued operations and
extraordinary items by the weighted average number of common shares outstanding
during each period. Basic net loss per common share is computed by dividing the
net loss by the weighted average number of common shares outstanding during each
period. Available stock options at July 31,1999, were anti-dilutive and not
considered common stock equivalents for purposes of computing loss per common
share.
Recent Accounting Pronouncements
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 the
carrying amount or the fair value less cost to sell.
F-8
<PAGE>
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
During fiscal year 1999, the Company adopted FASB Statement No. 130 (SFAS 130)
"Reporting Comprehensive Income". This statement establishes standards for
reporting of comprehensive income and its components (revenues, expenses, gains,
losses) in financial statements and requires that all items required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income consists of the unrealized gain
on marketable securities and is presented in the Statements of Deficiency in
Assets. The adoption of SFAS 130 had no impact on the Company's net income or
total stockholders' equity.
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instruments
and Hedging Activities". This Statement requires companies to record derivatives
on the balance sheet as assets and liabilities, measured at fair value. Gains or
losses resulting from changes in the value of those derivatives would be
accounted for depending on the use of the derivatives and whether it qualifies
for hedge accounting. This statement is not expected to have a material impact
on the Company's financial statements. This statement is effective for fiscal
years beginning after June 15, 1999, with earlier adoption encouraged.
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
1999 1998
-------- --------
Office furniture and equipment $ 39,963 $ 86,503
Demonstrator Subscriber Communicators 15,379 --
Subscriber Communicators leased to customers 7,768 --
Transportation equipment -- 7,500
-------- --------
63,110 94,003
Accumulated depreciation ( 11,291) ( 12,421)
-------- --------
Property and equipment, less accumulated depreciation $ 51,819 $ 81,582
======== ========
Depreciation expense for the years ending July 31, 1999 and 1998, amounted to
$11,204 and $14,412, respectively. Of these amounts, $11,010 and $14,412 are
included in other selling, general and administrative expenses for July 31, 1999
and 1998, respectively; and $194 is included in cost of revenues for July 31,
1999.
NOTE 3. AVAILABLE-FOR-SALE EQUITY SECURITY
Archibald Brothers Fine Beverages, Inc. (Archibald) is a closely-held company in
which the Company owns 30,400 shares of common stock. The security is classified
as available-for-sale and shares are held in escrow pursuant to an agreement
providing for the sale of shares under an option to a third party. Under this
agreement the J.M. Smucker Company (a minority shareholder) has the option to
acquire all remaining shares of Archibald at a predetermined formula price at
the earlier of three years or upon sales reaching $28 million. Estimated Gross
Unrealized
Fair Value Gain Historical Cost
---------- ---------- ---------------
3,040 common shares
Archibald Brothers
Fine Beverages, Inc. $ 14,390 $ 11,350 $ 3,040
In addition to the 30,400 shares of Archibald's common stock already owned, the
Company has options to purchase up to 69,600 shares of common stock at $1 on or
before October 31, 2001.
F-9
<PAGE>
NOTE 3. AVAILABLE-FOR-SALE EQUITY SECURITY (CONTINUED)
The change in net unrealized holding gain on securities available for sale that
has been included as a separate component of stockholders' equity for the year
ended July 31, 1999, was $11,350.
NOTE 4. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities consisted of the following:
1999 1998
-------- --------
Professional fees $ 42,910 $ 42,000
Consulting - officers 252,894 32,150
Royalties 5,862 5,862
Settlement 20,000 -
-------- --------
$321,666 $ 80,012
======== ========
NOTE 5. RELATED PARTY TRANSACTIONS
Notes payable to officers at July 31, 1999 and 1998, were $91,970 and $51,178,
respectively. These notes are unsecured, due at various dates through
July 31, 2000, and provide for annual interest at 6%. For the year ended July
31, 1999, officers of the Company advanced funds to the Company and paid
expenses on behalf of the Company totaling $38,665.
In April 1999, the Board of Directors authorized the issuance of 50,000
restricted shares of its common stock in settlement of a note payable to an
officer/director in the amount of $19,300.
For the years ended July 31,1999, the Company received advances from parties
related by virtue of common control totaling $166,385. In April 1999, the Board
of Directors authorized the issuance of 250,000 restricted shares of common
stock to related parties in payment of $90,500 of outstanding notes payable
leaving a balance of $69,885. Similar advances of $395,148 was assumed by
Mali-Suisse Mining International, Ltd. (Mali-Suisse), a stockholder in the
Company under an Agreement to Rescind Contract for Deed, dated July 31, 1998.
During the year ended July 31, 1999, the Company sold various equipment with a
net book value of $29,600 to a party related by virtue of common control. The
sales price of $6,000 was recorded as a reduction of the balance due to the
related party.
In a separate transaction the Company sold a vehicle, in poor condition and need
of repair, to a director of the Company for $1.
Stock for Services
Common stock issued to related parties are shares have been recorded using the
lower of the average price on the date issued or maximum offering price unless a
value was otherwise stated, subject to a certain discounts.
During the year ended July 31, 1999, the Board of Directors approved the
issuance of 710,000 shares of the Company's common stock to be issued under the
Consultant Services Plan (see Note 9) as compensation for consultation services
to officers and directors valued at $256,100.
On May 18, 1999, the Company authorized the issuance to two officers of the
Company, 250,000 shares and 50,000 restricted shares of its common stock for
services rendered beyond the normal course of business as officers of the
Company. This stock was valued at $47,700.
During the year ended July 31, 1998, the Company issued 10,000 shares of its
common stock under the Consultant Services Plan as compensation for consultation
services to an officer valued at $12,000.
F-10
<PAGE>
NOTE 5. RELATED PARTY TRANSACTIONS (CONTINUED)
Stock and Asset Purchase
Pursuant to a Stock and Asset Purchase Agreement, dated August 20, 1997, as
amended on October 10, 1997, the Company acquired assets from ABAC Services,
Inc., a Nevada corporation (ABAC), American Global Equity Services (Ages), an
unincorporated business trust located in Tavares, Florida, and three individual
holders (Holders) of common stock of Lean Protein Foods, Inc., a Delaware
corporation (LPF), in exchange for the issuance of 5,263,145 shares of the
Company's common stock.
The assets were comprised of the following:
1. Real estate valued at $1,700,000, originally conveyed by Ages to ABAC on
August 1, 1997, in connection with an agreement for deed signed on that date.
The agreement for deed provided for Ages to transfer certain real estate in Lake
County, Florida in fee simple, once ABAC provided 1,591,000 shares of the
Company (Energy Optics, Inc.) as a down payment and satisfies a promissory note
in the original principal amount of $258,900, with interest payable quarterly at
ten percent (10%) per annum. Principal payments of $64,725 were payable in
annual installments on December 31st of each calendar year. The note was without
recourse to any individual and was secured solely by the assets of ABAC.
However, in the event of default, clear title to the property could not be
obtained. The Company issued the 1,591,000 shares of its common stock to Global
Investments Ltd., Trustee, as instructed by Ages, and agreed to accept the
assignment and the financial responsibility to satisfy the note payable. The
assets were valued based upon an independent valuation for the real estate.
2. Property and equipment valued at $88,708 was conveyed by ABAC. As instructed
by ABAC, the Company issued 634,550 shares of its common stock to the three
shareholders, officers and directors of ABAC, who were immediately named
officers and directors of the Company (two of which subsequently resigned). The
shares issued included compensation for finding and acquiring the other
properties.
3. A transfer of 2,800,000 shares of LPF, amounting to an 80% interest. The
total value of LPF was estimated at $2,609,800, resulting in a value of
approximately $2,087,840 being conveyed by the Holders. The assets were valued
at a negotiated amount in the case of the common stock of LPF, whose principal
asset is its wholly-owned subsidiary, Wildwood Ostrich Ranches, Inc. The Company
issued 3,037,495 shares of its common stock to the Holders or their assigns as a
result of this portion of the acquisition.
No affiliated relationships existed among the management or affiliates of the
Company and the management or affiliates of Ages, ABAC or the LPF Holders at the
time of acquisition.
As a result of the issuance of the 5,263,145 shares of the Company's common
stock to purchase the assets, a change in control occurred. After the closing of
the acquisition of the assets, the original stockholders of the Company owned
877,869 shares (i.e., approximately 14% of the total issued and outstanding
shares), and Global Investments, Ltd. (and its assigns), ABAC and the LPF
Holders collectively owned 5,263,145 shares (representing approximately 86% of
the total issued and outstanding shares). Also, upon closing the acquisition of
the assets, the original Board of Directors of the Company appointed the new
members to the Board of Directors, then resigned. As a result of the change in
control and acquisition of the facility, the executive offices of the Company
were moved from Las Cruces, New Mexico to Tavares, Florida.
Agreement to Rescind Contract for Deed
Under an Agreement to Rescind Contract for Deed, dated July 31, 1998, a portion
of the Stock and Asset Purchase Agreement described above was rescinded. Under
an assignment of rights, the real estate reverted to Mali-Suisse Mining
International, Ltd. (Mali), an affiliate of the original real estate owner and a
stockholder of the Company. The contract required that Mali return 1,000,000
shares of the Company's common stock and assume liability for approximately
$395,148 owed by the Company to a party related by virtue of common ownership,
as well as the promissory note in the amount of $258,900 plus unpaid interest in
exchange for retaining 591,000 shares of the original stock issued. Mali assumed
any claims for unpaid rent totaling $14,400 which would have accrued resulting
from their use of the real estate to house the corporate offices in Tavares,
Florida.
F-11
<PAGE>
NOTE 5. RELATED PARTY TRANSACTIONS (CONTINUED)
Discontinued Operations and Stock Sale
On January 5, 1998, Lean Protein Foods, Inc. adopted a plan to discontinue its
operations in the specialty foods business which focused on the processing and
marketing of ostrich meat. As part of this plan, immediate arrangements were
made to sell its equipment. Also, on January 5, 1998, LPF's subsidiary, Wildwood
Ostrich Ranch, Inc. adopted a plan to discontinue its operations as an ostrich
ranch. Immediate plans were made to begin disposal of the assets of the
Corporation including equipment and the ostrich herd. The loss of the
discontinued operation for the year ended July 31, 1998, is $162,617 as
reflected on the statements of operations under Discontinued Operations.
Under a Stock Sale Contract dated July 31, 1998, the Company agreed to sell its
stock interest in LPF to the minority shareholders of LPF (one of whom is a
director of the Company and the remainder are shareholders of the Company) in
exchange for one-third of the gross sales proceeds for a period of six months
from the date of the agreement, a release from all liabilities of LPF and 30,400
shares of Archibald Brothers, Inc. Fine Beverages, Inc., valued at approximately
$3,040. These shares represent less than 1% ownership interest in that
closely-held corporation. The loss on the disposal of the discontinued
operations of LPF and its subsidiary for the year ended July 31, 1998, is
$1,905,053 and is reflected on the statements of operations under Discontinued
Operations.
Acquisition of American Millennium Corporation
On October 9, 1997, the Company purchased, primarily from Global Investments,
Ltd., a 30% shareholder of the Company, 8,000,000 shares (valued at
approximately $3,500,000) representing approximately 80% of the issued and
outstanding stock of American Millennium Corporation (AMC), a Delaware
corporation, in exchange for 5,100,000 shares of the Company's common stock. As
the acquisition of AMC was from related parties, it was accounted for as if it
were a pooling of interests. Assets and liabilities were reflected at the
related parties' historical cost. Subsequently, the Company acquired the
remaining interest and merged with AMC.
Acquisition of Microgravity Aviation Company, Inc.
On October 10, 1997, the Company negotiated a contract to acquire 2,000,000
shares (valued at approximately $531,160) representing a 20% interest in
Microgravity Aviation Company (MAC) from Harto Ltd., (Harto) a 39% shareholder
of the Company at that time, in exchange for 1,000,000 shares of the Company's
common stock. MAC, a Florida corporation, was scheduled to operate the flight
portion of a three-day high-adventure space-flight experience package. MAC also
planned to offer the use of the DC-9 aircraft to the film and movie production
community as a flying film studio for producing weightless scenes for use in
movies, commercials, and corporate videos. The MAC aircraft could also have been
used for conducting microgravity research performed by universities and research
companies. The executive management and consulting staff of MAC was comprised of
highly credentialed professionals including former NASA astronauts as well as
former airline, Federal Aviation Administration, and NASA executives. The
management of MAC planned to lease a specially equipped NASA aircraft and the
effective operation of that company was predicated upon MAC's ability to take
possession of this aircraft.
After further study and deliberation, the Company decided not to fund further
operations of MAC. Under an Agreement to Rescind Contract, dated July 31, 1998,
Harto agreed to rescind the transaction in exchange for 270,000 shares of common
stock in consideration for certain funds in excess of $270,000 which had been
advanced on behalf of MAC. The contract further provided that this stock is
restricted for a minimum of one year. The original 1,000,000 shares of common
stock issued to Harto were to be canceled and 270,000 shares issued.
NOTE 6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the Company's financial assets and liabilities at July
31, 1999, approximate fair value due to the short maturity of the instruments.
F-12
<PAGE>
NOTE 7. INCOME TAXES
Deferred income taxes and benefits for 1999 and 1998 are provided for certain
income and expenses which are recognized in different periods for tax and
financial reporting purposes. The tax effects (computed at 35%) of these
temporary differences and carryforwards that give rise to significant portions
of deferred tax assets and liabilities consist of the following:
Current
Period
1998 Changes 1999
---------- -------- ----------
Deferred tax assets:
Accrued officers' compensation . $ 42,574 $ 45,939 $ 88,513
Excess tax depreciation over book depreciation 677 ( 677) --
Net operating loss carryforwards 2,047,134 419,771 2,466,905
Capital loss carryforwards 815,035 -- 815,035
---------- -------- ----------
2,905,420 465,033 3,370,453
Investment credit carryforwards 5,340 ( 417) 4,923
Research credit carryforwards 17,543 -- 17,543
---------- -------- ----------
2,928,303 464,616 3,392,919
Valuation allowance (2,928,303) ( 457,194) (3,385,497)
---------- -------- ----------
Deferred tax asset $ -- $ 7,422 $ 7422
---------- -------- ----------
Deferred tax liabilities:
Unrealized gain on available-for-sale
security $ -- $ 3,973 $ 3,973
Excess book depreciation over tax
depreciation -- 3,449 3.449
---------- -------- ----------
Deferred tax liability -- 7,422 7,422
---------- -------- ----------
Net deferred tax asset (liability) $ -- $ -- $ --
========== ======== ==========
For the year ended July 31, 1999, a $149,587 net operating loss expired, while
the Company generated, for U.S. income tax purposes, a net operating loss of
approximately $1,348,934, resulting in a total loss carryforward of $7,048,300.
Capital loss carryforwards at July 31, 1999, were $2,328,670. These loss
carryforwards expire at various dates through the year 2019.
A valuation allowance must be established to reduce deferred income tax benefits
if it is more likely than not that a portion of the deferred income tax benefits
will not be realized. It is Management's opinion that it is more likely than not
that the entire deferred tax benefit may not be recognized in future years
because the utilization of the remaining carryforwards is dependent on the
Company's ability to generate sufficient taxable income during the carryforward
periods and no further significant changes in ownership. Therefore, a valuation
allowance equal to the deferred tax benefit has been established, resulting in
no deferred tax assets as of the balance sheet dates.
During the year ended July 31, 1998, there were significant ownership changes in
the Company as defined in Section 382 of the Internal Revenue Code. As a result
of these changes, the Company's ability to utilize net operating losses
available before the ownership change is restricted to a total of approximately
$1,775,483 per year (approximately 5.33% of the market value of the Company at
the time of the ownership change). Therefore, substantial net operating loss
carryforwards will, in all likelihood, be eliminated in future years due to the
change in ownership.
For the year ended July 31, 1999, tax credits of $417 expired. Remaining tax
credits total $22,466 which expire at various dates through 2005. As a result of
significant changes in ownership as defined in Section 383 of the Internal
Revenue Code, the Company's ability to utilize tax credits available before the
ownership change will be limited.
F-13
<PAGE>
NOTE 8. DEFICIENCY IN ASSETS
On August 18, 1997, the Board of Directors authorized a 1 for 10 reverse stock
split for all of the issued and outstanding shares of the Company's common
stock. As a result of the reverse stock split, the Companys issued and
outstanding shares of common stock were reduced from 8,779,000 to 877,900. All
shares issued during the fiscal year 1998 were issued subsequent to the split.
On May 27, 1998, the shareholders of the Company approved the increase of the
Company's authorized common stock from 25,000,000 shares to 60,000,000 shares.
Additionally, they approved the issuance 10,000,000 shares of preferred stock
and authorized the Board of Directors to establish the rights at a future date.
To date those rights and preferences have not been established.
The Company has paid no dividends on their common stock and has no plans to do
so.
Stock Issued for Services
During the year ended July 31, 1999, the Company issued 1,355,500 shares of
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 a value
was otherwise stated.
In August 1998, 200,000 shares of the Company's common stock valued at $172,000
were issued to the president of Grant Douglas Publishing, Inc., under the
Consultant Services Plan, as compensation for consultation services in
connection with new business opportunities and promotion of the Company to the
public. Subsequent to the issuance of stock, the Company terminated the services
of to be provided by that company and negotiated, on October 21, 1998, for the
return of 297,500 shares of the total 425,000 shares issued. There are 32,500 of
the 297,500 shares which have not yet been returned.
On December 9, 1998, 50,000 shares of the Company's common stock were issued to
the Company's legal counsel under the Consultant Services Plan for legal
services. This stock was valued at $12,000. In January 1999, 200,000 shares of
the Company's common stock were issued to the Company's legal counsel under the
Consultant Services Plan for legal services. The agreement calls for shares to
be released in increments totaling approximately $6,000 per month. These shares
were issued during the year for a total value of approximately $109,719.
During fiscal year 1999, the Company issued a total of 195,500 shares of common
stock under the Consultant Services Plan as compensation for services to various
consultants valued at $67,903. Of these shares 150,000 shares were returned
under a mutual consent to cancel the agreement for services. Shares returned
were valued at $53,250.
During fiscal year 1998, the Company issued a total of 1,189,500 shares of
common stock under the Consultant Services Plan as compensation for services to
various consultants valued at $3,029,004.
In April 1998, 72,000 shares of the Company's common stock were issued to the
Company's legal counsel under the Consultant Services Plan for legal services.
The agreement called for 6,000 shares to be released each month for twelve
months. The issuance has been recorded at $.83 per share but may be adjusted in
accordance with certain fluctuations of the market price. The unexpended portion
of these services was recorded as prepaid expenses. This stock was valued at
$59,760.
See Note 8 for stock issued for services for related parties.
Sale of Common Stock
On December 24, 1998, the Company sold 200,000 shares of common stock at $.20
per share and 400,000 restricted options to purchase common stock at $.15 for a
total of $100,000. (See Stock Options below.)
F-14
<PAGE>
NOTE 8. DEFICIENCY IN ASSETS (CONTINUED)
Stock Issued under Employee Stock Incentive Plan
On February 18, 1999, the Company issued 1,775,000 shares of the Company's
common stock under Employee Stock Incentive Plan adopted January 26, 1999. This
stock was valued at $379,850. Shares have been recorded using the lower of the
average price on the date issued or maximum offering price unless a value was
otherwise stated, subject to certain discounts.
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 July 31, 1998,
there were 16,500 shares under option at an exercise price of $2.50 per share
which expired April 5, 1999.
The Company sold 400,000 restricted share options to purchase common stock at a
cost of $60,000 on December 24, 1998. The options are for a period of 24 months.
The exercise prices are $1.00 for 200,000 shares and $2.00 for the remaining
200,000. At July 31, 1999, none of the options had been exercised.
NOTE 9. BUSINESS COMBINATION
Under an Agreement and Plan of Merger dated May 27, 1998, the Company merged
with American Millennium Corporation, a subsidiary of which the Company owned
approximately an 80% interest, with the parent as the surviving corporation.
Upon completion of the merger, the Company changed its name to American
Millennium Corporation, Inc. The merger was accomplished by a one-for-one
exchange of stock between the two companies. The exchange has been accounted
for, in accordance with Accounting Principles Board Opinion No. 16, at
historical cost in a manner similar to that in pooling-of-interest accounting.
The 8,000,000 shares of the subsidiary's stock owned by the Company were
exchanged for the Company's own stock which was returned to the treasury and are
reflected on the balance sheet using the par value method for the year ended
July 31, 1998. During the current year, the treasury stock was retired.
NOTE 10. 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 and the Company realized substantial losses
on discontinued operations. As a result, the Company has incurred operating
losses of $1,508,915 and $3,769,000 for the years ending July 31, 1999 and 1998,
respectively, in addition to losses from discontinued operations of $2,328,670
for the year ended July 31, 1998.
In addition, the Company has used substantial working capital in its operations.
As of July 31, 1999 and 1998, current liabilities exceed current assets by
$756,052 and $311,522, respectively. Cash used by operations for the years ended
July 31, 1999 and 1998, amounted to $309,709 and $444,185, respectively.
Management anticipates that revenues from sales, leases and installation of
Subscriber Communicators and airtime for these units will significantly increase
based on ongoing contract negotiations and proposals. Since the end of the
fiscal year, the number of Subscriber Communicators in the field has more than
doubled.
On September 24, 1999, the Company accepted a bridge loan of $50,000 and
authorized the issuance of 25,000 shares of the restricted common stock in
payment of interest on the loan from an individual.
F-15
<PAGE>
NOTE 10. OPERATING AND ECONOMIC CONDITIONS (CONTINUED)
To satisfy cash requirements for the short to mid-term operations the Company is
making a private offering of common stock in accordance with exemptions from
registration under Regulation D, Rule 506, Securities Act of 1933. The offering
is made on a "best efforts" basis with a maximum of 2,800,000 shares and an
equal number of warrants offered for sale at $.25 per share/warrant. Since the
end of the fiscal year, the Company has received stock subscriptions for
2,400,000 shares of stock with a total subscription price of $600,000. To date
$100,000 has been received and the balance is scheduled to be received on
November 19, 1999. To date expenses of this offering total approximately
$20,490. Additional expenses upon final funding are expected to be approximately
$30,000.
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 11. COMMITMENTS AND CONTINGENCIES
Litigation
In October 1997, the Company issued common stock totaling 500,000 shares to two
individuals under a Consultant Services Plan as compensation for marketing
services. The Company then decided to discontinue relations based on
dissatisfaction with the quality of service, lack of service and other business
reasons. When requested that the stock be returned, they discovered that the
stock had been sold. The Company retained legal counsel to pursue the matter.
Legal counsel believes that there is a strong likelihood that the Company will
obtain a successful verdict, however, collectibility of any verdict or judgment
is unknown at this time.
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 common 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 individuals have not responded to the summonses and a motion for
default will be filed. Legal counsel believes the likelihood of a successful
outcome is high.
Rents and Leases
The Company occupied office facilities in Tavares, Florida under a
month-to-month rental agreement with a related party until November 30, 1998.
The Company then subleased its office facilities in Mount Dora, Florida under an
operating lease that expired September 30, 1999. The Company is in the process
of negotiating a three-year rental agreement with the property owner, Dream
Merchants, Inc., at the same monthly rate. The Company will continue to occupy
the facility on a month-to-month basis until the lease is executed.
Total rent expense was $15,762 and $14,400 for the years ended July 31, 1999 and
1998, respectively.
On November 25, 1997, the Company executed an Equipment Lease Agreement with
AT&T Capital Leasing Services, Inc.(AT&T). The term of the agreement was 60
months. The Company made only three payments and on October 20, 1998, AT&T
repossessed the equipment. There is a claim against the Company for the balance
due and owing under the Equipment Lease Agreement in the sum of $44,607. Based
upon the negotiations, an equitable and favorable outcome for the Company is
likley. Accordingly, we have recorded an accrued liability of $20,000 in
settlement of this claim.
F-16
<PAGE>
NOTE 11. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Self-insurance
The Company is self-insured for general liability and property insurance.
Additionally, the Company has not obtained product liability insurance to date
due to the cost of such insurance. ORBCOMM provides a one year warranty on the
Subscriber Communicators which is passed along to the customer. Management
presently believes that there is no material risk of loss to the Company from
product liability claims against the Company as a distributor.
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 an assessment
of its key computer systems and software applications to ensure that the
integrity and accuracy of its computer systems, embedded systems and software
applications that contain date sensitive operations or that involve date
processing. To date the Company has upgraded its accounting software (accounts
receivable, accounts payable and general ledger) to be Y2K 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 and have. The Company has been advised by ORBCOMM
that they are addressing all of the year 2000 issue and that they expect timely
achievement of year 2000 readiness.
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.
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.
Employee Stock Incentive Plan
In January 1999, the Board of Directors approved an outline for an Employee
Stock Incentive Plan (ESIP). The plan provides for 8,100,000 shares of the
Company's restricted common stock to be issued as incentive compensation. The
plan calls for twenty-five (25%) of the shares available to each participant to
be issued when the participant has concluded six months of service. An
additional twenty-five (25%) of the available stock is to be issued when the
participant has concluded one year of service. The balance of the available
stock is to be issued upon completion of one and one-half years of service.
Although the plan was approved by the Board of Directors and the first increment
of stock issuances has been made, this plan has not yet been formalized. At the
request of the Board of Directors, issuance was waived of restricted shares
vested under the ESIP due and owing after April 13, 1999, until further review
at a Board meeting on or about January 2000. Incentive compensation has not been
accrued for these shares because the value, which is based on the price of stock
at the date of issue, cannot yet be determined.
F-17
<PAGE>
NOTE 12. SUBSEQUENT EVENTS
On August 12, 1999, the Company announced that it had reached an agreement with
Brasil Wireless Systems Company, SA to jointly solicit sales and engineering
support and to market communications technology within South American markets.
The agreement calls for a joint effort between the two companies to share
hardware, software and engineering resources for product deployment within the
designated markets.
The Company announced on August 18, 1999, that it had entered into an agreement
for financial consulting with Jack Augsback and Company, LLC, an investment
banking firm located in West Palm Beach, Florida. That company is a full service
investment banking firm specializing in financial consulting as well as capital
formation via private placements, secondary offerings, initial public offerings,
and venture financing. The Company, on September 10, 1999, accepted the
investment memorandum as prepared by Jack Augsback & Company for the private
offering being made in accordance with the exemption from registration under
Regulation D, Rule 506 fo the Securities Act of 1933 (See Note 10). On October
21, 1999, the Board of Directors authorized the issuance of 350,000 shares of
restricted common stock to five investors pursuant to this offering.
In August 1999, the Company issued 100,000 shares of common stock to its
President and Chief Executive Officer and 65,000 shares of common stock to a
consultant for services under its Consultant Services Plan (see Note 8).
On August 24, 1999, the Company accepted and approved a preliminary outline of
an agreement with Lindy Amyx for services to be rendered in securing additional
funding.
F-18
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS FOR THE YEARS ENDED JULY 31, 1999 AND 1998, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 6,961
<SECURITIES> 0
<RECEIVABLES> 21,005
<ALLOWANCES> 640
<INVENTORY> 5,975
<CURRENT-ASSETS> 33,301
<PP&E> 51,819
<DEPRECIATION> 11,010
<TOTAL-ASSETS> 100,010
<CURRENT-LIABILITIES> 789,353
<BONDS> 0
0
0
<COMMON> 16,404
<OTHER-SE> (705,747)
<TOTAL-LIABILITY-AND-EQUITY> 100,010
<SALES> 127,366
<TOTAL-REVENUES> 127,366
<CGS> 103,564
<TOTAL-COSTS> 103,564
<OTHER-EXPENSES> 1,480,352
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,508,915)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,508,915)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,508,915)
<EPS-BASIC> (.11)
<EPS-DILUTED> (.11)
</TABLE>
