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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Form 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended July 31, 2000
[ ] 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.
----------------------------------------------
(Name of small business issuer in its charter)
New Mexico 85-0273340
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1010 Tenth St., Suite 100, Golden, Colorado 80401
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (303) 279-2002
--- --- ----
Securities registered pursuant to Section 12 (b) of the Exchange Act:
Title of each class Name of each exchange which registered
----------------------------- --------------------------------------
Common Stock, $.001 Par Value None
Securities registered pursuant to Section 12 (g) of the Act:
None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. [X]Yes [ ]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 $336,824.
The aggregate market value of the 10,671,671 shares held by non-affiliates of
the issuer as of November 1, 2000, computed by using the average of the ask and
bid prices on November 1, 2000, of $.6562 and $.5938 is as follows:
Average $.6250/share X 10,671,671 shares = $6,669,794
The number of shares outstanding of the issuer's common stock as of November 1,
2000, is 21,402,284. There are approximately 802 shareholders of record as of
November 1, 2000.
<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 Management12
Item 12. Certain Relationships and Related Transactions 13
PART IV
Item 13. Exhibits and Reports on Form 8-K 13
<PAGE>
--------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------
Item 1. Description of Business.
--------------------------------------------------------------------------------
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 considered 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 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.
In July 2000, we completed our acquisition of CompuGraphics Corporation, a
Florida corporation. As a result of the acquisition, CompuGraphics Corporation
is a wholly-owned subsidiary of American Millennium Corporation, Inc.
Compugraphics Corporation sells computer hardware and software.
Our corporate headquarters are located in Golden, 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.
OVERVIEW
We are a provider of wireless and wire-line solutions for the tracking and
monitoring of mobile and fixed assets utilizing Low-Earth-Orbit Satellites
(LEO's), Geo-Stationary Satellites (GEO's) and terrestrial wireless and wireline
technologies. We have experience in most communication platforms including
satellite, CDPD, cellular, paging, wire-line, and various RF protocols.
We develop, sell, install and service satellite communication systems in the
field for tracking, monitoring, and reporting data on oil wells, natural gas
compressors, rail cars, and trucks. We are currently providing satellite-based
services to General Motors, U.S. Army Corps of Engineers, Chevron, The Hanover
Company, Compressor Systems, Inc. (CSI,) Cabot Oil & Gas, Cross Timbers Oil &
Gas, Signa Engineering, and Universal Compression, among others.
We receive revenue from hardware sales, engineering, installation, and operating
services. In addition, we generate monthly revenues from airtime sales. We are
an applications service provider (ASP,) providing data access, tracking, and
analysis packages for customers via the Internet.
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.
We are a Value Added Reseller (or VAR) for Herndon, VA based Vistar Datacom,
Inc. (www.vistardatacom.com) and its GlobalWave solution for remote monitoring
and control of fixed and mobile assets. Additionally, we are a VAR for Dulles,
VA based ORBCOMM USA, LP (www.orbcomm.com,) a LEO satellite company with 35
satellites in its current constellation.
Under the terms of the VAR agreement with Vistar Datacom, Inc., we can provide
Vistar's GlobalWave asset management and tracking solution to customers in the
energy, industrial, commercial, container, transportation, and consumer vehicle
markets throughout the 48 contiguous states and Canada.
Under the terms of the VAR agreement with ORBCOMM, we are able to offer tracking
and remote monitoring for customers in the oil and gas, rail car, and cargo
container industries, although an exception has been provided for sale of
monitoring units as well as satellite airtime by us to General Motors
Corporation.
With the establishment of the newer satellite communication networks, such as
ORBCOMM and Vistar, low cost robust transceivers have the capacity to monitor
and track remote and mobile assets virtually anywhere in the world.
We are also a VAR for Logan, Utah based Wescor, Inc.'s RDT800 mobile data
delivery terminal. Under the terms of the agreement we will market the product
throughout North America, Central America, and South America.
Currently, we have deployed hundreds of satellite transceivers being utilized to
track or monitor a variety of fixed and mobile assets for over a dozen companies
who pay monthly airtime charges for data transfer via satellite. The business of
these companies include natural gas production, overland truck shipments of
contaminated soil to disposal sites, automotive manufacturing and open pit
methane gas production, to name a few.
MISSION STATEMENT
Our mission is to become a critical and ongoing link in the development and
deployment of data capture and transmission systems for more efficient and
effective remote and mobile asset management. By providing these valuable tools
to our customers, we receive compensation for our engineering, installation,
equipment sales, and monthly airtime fees.
OBJECTIVE
To expand our growing base of monthly subscribers who recognize the economic and
human resource efficiencies of utilizing our services for more effective asset
management through the use of remote monitoring and tracking.
SERVICES AND BENEFITS
Gas wells and gas pipelines require monitoring: Oil wells, storage tanks, and
pumps are also remote critical production assets. Industrial chemical and
liquefied compressed gas storage tanks present additional opportunities.
Also, refrigerated rail cars and containers and other specialized cargo vehicles
can benefit from an onboard Satellite Transceiver (ST) and Global Position
System (GPS) unit. Complex powered vehicles such as locomotives, truck tractors,
test vehicles, as well as heavy equipment can be more effectively managed with
satellite communication. In addition to monitoring and tracking, the ST can
provide reliable messaging services for the equipment operator. The benefit to
the operator is the ability to be in touch with what conditions are like aboard
a particular asset without having to commit expensive human resources to perform
a routine check when there are no problems.
We have the ability to analyze the remote data messaging needs of operators of
the various assets referenced above, and then provide the software and firmware
solution to be installed onboard. At this point, our engineers and technicians
have thousands of hours in the field effecting the installation of hundreds of
STs on oil wells, natural gas compressors, trucks, open pit tanks at methane gas
wells and other high value assets.
APPLICATIONS
Refrigerated Cargo
Through proper programming and interface design, the ST can transmit information
vital to the successful delivery of perishable cargo. In addition to temperature
readings, the system can monitor refrigeration system fuel levels aboard
railcars and cargo containers. It can then alert for any intrusion into those
railcars or shipping containers. Also, the STs have an additional feature
installed to communicate the location of the transport. With the GPS module in
the ST, 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, thus safeguarding the shipment and profit margins.
Oil and Gas
Since much of the oil and natural gas production in the US is in remote areas,
the operating equipment is often out of reach of wireline and terrestrial based
wireless radio systems. However, these sites still require monitoring to ensure
that the various pumps, compressors, and controls onboard the equipment operate
correctly. For example, a malfunction or failure of a natural gas compressor
that goes undetected between visits by a technician can result in significant
economic loss each hour. Therefore, a satellite-based remote monitoring system
installed aboard a gas compressor provides an alarm in near real time that a
failure has occurred. This allows the operator to initiate maintenance action
immediately and, hence, minimize the down time or loss that would otherwise
occur before the malfunction was routinely discovered.
Automotive and Trucking
The automotive and trucking industries are vast markets in which our satellite
based tracking and monitoring solutions have special applications. Due to the
high mobility nature of both cars and trucks, there exists a number of functions
that can be performed using our operating systems. For example, an automobile
can not only be tracked for position, but a variety of on-board functions such
as opening a locked trunk or reporting a breakdown to a roadside assistance
operator. The ST can also collect and report engine diagnostics data and report
it back through the satellite system to a technician monitoring the performance
of that engine.
CURRENT PROJECTS
ABB
Cabot Oil and Gas (NYSE: COG)
Compressor Systems, Inc.
Cross Timbers Oil Co. (NYSE: XTO)
Dolphin Software
General Motors Corporation (NYSE: GM)
Hanover Compressor Co. (NYSE: HC)
IT Corporation (US Army Corps of Engineers)
Magellan Corp. (Owned by Orbital Sciences, Inc.)
ORBCOMM USA, L.P.
Panasonic Industrial Company
Phillips Pipeline Corporation
Signa Engineering Corp
Stellar Communications
Univeral Compression, Inc.
Union Pacific Railroad (NYSE: UPR)
Vistar Datacom
Vistar Telecommunications, Inc.
Walsh Engineering, Inc.
Wescor, Inc.
We have additional projects in the engineering, development and field-testing
stages working with several companies that require strict non-disclosure at this
time.
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.
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.
This application provides another opportunity for us. The stream of information
that flows through 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 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 use 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.
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 our 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 both by 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 competition 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.
While there are many VARs for the different satellite companies competing within
the tracking and monitoring industry, few are combining the wireless telemetry
technology with data and messaging systems that we have developed and deployed.
The company is recognized within the industry as one of the most creative,
unique, and innovative solutions providers in the field. Our aggressive entry
into gas compressor monitoring, as an example, has earned it recognition and has
created enthusiasm among some of the major petroleum producers.
Our management believes that the market can market its products and services in
a competitive environment because to the number of assets in the market that
could potentially benefit from tracking and monitoring.
MANUFACTURING AND SUPPLIERS
We purchase the majority of the components for our subscriber data communicators
from ORBCOMM and Vistar; however, we believe that these components are readily
available from other suppliers at competitive prices. Airtime for satellite
monitoring is also purchased from ORBCOMM and Vistar.
GOVERNMENT REGULATIONS
As value-added resellers for Vistar, 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 November 1, 2000, we had 13 full-time personnel, four of whom are
directors or officers and one who is the spouse of a director. None of our
employees are represented by a labor union, and we consider our employee
relations to be good.
--------------------------------------------------------------------------------
Item 2. Description of Property.
--------------------------------------------------------------------------------
RENTS AND LEASES
Our corporate headquarters are located in a 4,400 square foot facility in
Golden, Colorado. Under the terms of a lease agreement dated December 8, 1999,
between the Company and Sucia Corporation, LLC, the Company is to occupy the
Golden offices for a term of 36 months beginning the first day of December 1999
with a monthly rent of $4,400. Our President and CEO operates out of an
executive suite in Houston, Texas. This lease expires in November of 2000. We
believe that our current facilities are in good condition and will be adequate
to accommodate our needs for the foreseeable future.
PROPERTY AND EQUIPMENT
The furniture, fixtures and equipment used in the conduct of our business have a
historical cost of approximately $140,000. We also own monitoring units that are
leased to various customers, as well as demonstration units with a total
historical cost of approximately $38,500.
--------------------------------------------------------------------------------
Item 3. Legal Proceedings.
--------------------------------------------------------------------------------
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 was a claim against us for the balance due and owing under the Equipment
Lease Agreement in the sum of $44,607. A settlement agreement was entered into
on February 23, 2000 for $20,000 in full satisfaction of the claim. Accordingly,
we have recorded an accrued liability of $20,000. As of July 31, 2000 we owe a
remaining balance of $8,000 on this settlement.
--------------------------------------------------------------------------------
Item 4. Submission of Matters to a Vote of Security Holders.
--------------------------------------------------------------------------------
None.
--------------------------------------------------------------------------------
PART II
--------------------------------------------------------------------------------
Item 5. Market for Common Equity and Related Stockholders Matters.
--------------------------------------------------------------------------------
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, 2000 HIGH LOW
--------- ---------
First Quarter $ .344 $.250
Second Quarter $1.344 $.203
Third Quarter $1.563 $.906
Fourth Quarter $1.063 $.625
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
HOLDERS
As of November 1, 2000, there were 807 stockholders of record and approximately
21,402,284 shares of our common stock issued and outstanding.
DIVIDEND POLICY
We have never declared nor paid cash dividends on our capital stock. We
currently intend to retain all available funds for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.
RECENT SALES OF UNREGISTERED SECURITIES
We made the following unregistered sales of common stock during the year ended
July 31, 2000:
From September 1999 through March 2000, the Company conducted a private offering
consisting of 3,080,001 shares of its unregistered common stock in the manner
and in reliance upon Regulation D, Rule 506, to total of 28 accredited
investors. The unregistered common shares were offered and sold at a purchase
price of $.25 per share for an aggregate of $770,000 in proceeds to the Company.
Each stock purchase included a warrant to purchase an equivalent number of
additional common shares of the Company for $.25 per share. The Company further
agreed to conduct a registration of the 3,080,001 issued shares and the
3,080,001 warrant shares sold in the private offering. In connection with the
private offering, Jack Augsback and Associates were issued 154,000 warrant
shares exercisable at $0.25 per share in its role as a commissioned placement
agent for the Company.
On July 31, 2000 the Company issued 50,000 shares to an individual investor for
$1.00 per share. Each of the shares issued carries a warrant to purchase one
additional share of the Company's common stock for $1.00.
In July 2000, the Company issued 600,000 unregistered common shares as partial
consideration in exchange for 100% of the issued and outstanding stock of
CompuGraphics Corporation. The Company agreed to register all of the 600,000
unregistered shares issued in connection with the acquisition of CompuGraphics.
On April 7, 2000 and July 7, 2000, the Company sold two Series 1 Convertible
Promissory Notes to a private accredited investor in the amounts of $502,500 and
$300,000 respectively, in the aggregate amount of $802,500, bearing 10 percent
interest per annum. Upon conversion of the two notes into common stock of the
company pursuant to the terms of the notes, an aggregate of 855,441 shares were
issued. The private investor also holds warrants for the purchase of up to
855,441 additional shares at exercise prices from $0.85 to $1.00 per share. In
connection with the issuance of the $502,500 convertible note, Jack Augsback and
Associates were issued 25,125 warrant shares exercisable at $1.00 per share in
its role as a commissioned placement agent for the Company.
For the year ended July 31, 2000, the Company issued 415,870 unregistered common
shares to engage consultants, to pay professionals and consultants in lieu of
cash, or as compensation for accrued, unpaid wages and salaries to corporate
officers: Karen R. Griffith 25,000 shares; Linda Claman Moore 67,500 shares; The
Charterbridge Financial Group 70,000 shares; Lindy Amyx 19,857 shares; John S.
Robinson 10,343 shares; Molesworth Associates, Inc. 23,170 shares; Renee C.
Riegler 100,000 shares; and Andrew F. Cauthen 100,000 shares. 30,200 shares
issued to consultants carried a warrant to purchase additional common shares of
the Company for $.25 per share. 10,000 warrant shares issuable upon exercise @
$1.00 per share were issued to Baker, Johnston & Wilson, LLP for legal services.
On June 8, 2000 American Millennium Corporation, Inc. entered into an option
agreement with six private investors. Pursuant to the terms of the agreement,
the investors, for consideration of $100,000, may purchase an entitlement to
purchase from the Company options and warrants exercisable up to an aggregate of
8,000,000 newly issued restricted shares (constituting approximately 25% of the
Company as of June 8, 2000 on a fully diluted basis) of the Company's common
capital stock, at exercise prices ranging from $1.00 to $5.25 per share. If the
investors were to elect to exercise such rights in full, the total proceeds to
the Company under agreement would be approximately $15,500,000 to $23,500,000
depending upon exercise periods. All share purchases pursuant to such purchase
rights, whether pursuant to options or warrants, are for unregistered securities
(i.e., governed by "Rule 144 restrictions") The shares purchased are to only be
registered by the Company if a) the investors make their purchases in increments
of $1.5 million or more, or (b) the investors purchase shares prior to the time
that the Company is otherwise filing a registration statement for other
shareholders or for "secondary offerings" (i.e., "piggy-back registration
rights"). The investors are not obligated to purchase any shares from the
Company and have the right to purchase all, or any portion of, the option
shares. The investors are required to purchase the above described option
package no later than November 22, 2000. The Company extended the initial option
purchase fee, of which only $50,000 has been paid to date. The investors have
until November 22, 2000 to pay the additional $50,000 option fee, subject to the
discretion of the Company to extend the due date for the option fee.
On December 7, 1998, the Company entered into a two-year agreement with Potter
Financial, Inc. (Potter) for the purpose of investor relations and public
promotion. Pursuant to an addendum to the contract, Potter is entitled to
purchase options in the company as follows in consideration for services
rendered in the contract:
100,000 shares @ $0.05
100,000 shares @ $0.10
100,000 shares @ $0.75
100,000 shares @ $1.00
100,000 shares @ $1.50
100,000 shares @ $2.00
100,000 shares @ $2.50
100,000 shares @ $3.00
The original option contract will lapse December 31, 2000. On July 17, 2000 the
Company's Board of Directors passed a resolution extending the exercise period
to December 31, 2002, so that the issuable shares could be registered in a
registration statement. The Company's contract with Potter expires on December
6, 2000.
--------------------------------------------------------------------------------
Item 6. Management's Discussion and Analysis or Plan of Operation.
--------------------------------------------------------------------------------
The following discussion and analysis of our financial condition and results of
operation should be read in conjunction with the "Selected Financial Data" and
our financial statements and the related notes thereto. This discussion contains
forward-looking statements that involve risks and uncertainties that could cause
actual results to differ materially from historical or anticipated results.
RESULTS OF OPERATIONS
We had a net loss of $2,725,775 (or $.15 per share) for the year ended July 31,
2000 compared to a net loss of $1,516,144(or $.11 per share) for the year ended
July 31, 1999. The increase in net loss was primarily attributable to the
increase in selling, general and administrative expenses, as described below.
Gross profit for the year ended July 31, 2000 was $128,812 (38% of sales)
compared to $76,662 (24%) for the year ended July 31, 1999. The cost of sales
for fiscal year 2000 consisted primarily of units sold and airtime sold while
costs of sales for 1999 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 were $2,611,054 for the year ended
July 31, 2000 compared to $1,544,734 for the year ended July 31, 1999. The
increase in selling, general and administrative expenses is due to stock options
issued to key officers and directors, resulting in a compensation charge of
$1,048,670 for the year ended July 31, 2000.
We earned $341,418 from sales revenue in 2000 compared to $320,685 in 1999. The
revenue was derived primarily from the sale of hardware and airtime to new and
existing customers.
As of July 31, 2000, we had available income tax operating loss carryforwards of
$8,610,987, tax credits of $21,379 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, 2000.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
We understand that cash equivalents on hand at July 31, 2000 are not adequate to
meet even our short-term capital needs. AMCI continues to have negative working
capital of $854,772 and a deficiency in assets of approximately $555,575 for
fiscal year 2000 and $801,095 for fiscal year 1999. Due to our focus on product
development, we have not been profitable since our re-organization in 1998. We
expect this to continue as we are still firmly committed to new product and
service development. Although our forward-looking business plan calls for a
continual increase in sales of developed products, we are also planning for
increased development costs that will not be offset by increased revenue in the
near future.
To fund our operations we will need to pursue additional sources of cash in the
short term. As of July 31, 2000, we had cash and cash equivalents of about
$105,000. Such funds are not sufficient to cover our current operating expenses.
Our revenues are not estimated to cover expenses until June, 2001 and in the
interim we will need an additional $2 million in capital funding. Although we
received $675,000, subsequent to July 31, 2000, from Series 1 Convertible Notes
and $284,500 in the form of unsecured notes, the availability of other sources
of cash may, or may not, materialize and thus, present a significant risk to us
that we will exhaust our financial resources in the short term, with no ability
to pay for ongoing operational expenses, before the our revenues can be
developed to adequately cover our expenses.
We purchase major components for our products from limited sources. The
continued financial viability of each of these companies will significantly
determine our future. Because our technology is dependant on our two major
suppliers, the discontinuance of operations of either one could have a
significant negative impact on the deliverability of our products. Because of
the "new" nature of this product line, each of our suppliers must also be
considered "start-up" in nature, and also subject to the volatility and risk
that comes with a start-up business.
On September 15, 2000, ORBCOMM filed for Chapter 11 bankruptcy protection. We
believe this will not materially affect our relationship with ORBCOMM. We have,
however, entered into a VAR agreement with Vistar Datacom to distribute their
satellite based products.
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.
From September 1999 through March 2000, we conducted a private offering
consisting of 3,080,001 shares of our unregistered common stock in the manner
and in reliance upon Regulation D, Rule 506, to total of 28 accredited
investors. The unregistered common shares were offered and sold at a purchase
price of $.25 per share for an aggregate of $770,000 in proceeds to the Company.
Each stock purchase included a warrant to purchase an equivalent number of
additional common shares of the Company for $.25 per share.
On July 31, 2000 the Company issued 50,000 shares to an individual investor for
$1.00 per share. Each of the shares issued carries a warrant to purchase one
additional share of the Company's common stock for $1.00.
On April 7, 2000 and July 7, 2000, the Company sold two Series 1 Convertible
Promissory Notes to a private accredited investor in the amounts of $502,500 and
$300,000 respectively, in the aggregate amount of $802,500, bearing 10 percent
interest per annum. Upon conversion of the two notes into common stock of the
company pursuant to the terms of the notes, an aggregate of 855,441 shares were
issued. The private investor also holds warrants for the purchase of up to
855,441 additional shares at exercise prices from $0.85 to $1.00 per share.
On June 8, 2000 American Millennium Corporation, Inc. entered into an option
agreement with six private investors. Pursuant to the terms of the agreement,
the investors, for consideration of $100,000, may purchase an entitlement to
purchase from the Company options and warrants exercisable up to an aggregate of
8,000,000 newly issued restricted shares (constituting approximately 25% of the
Company as of June 8, 2000 on a fully diluted basis) of the Company's common
capital stock, at exercise prices ranging from $1.00 to $5.25 per share. If the
investors were to elect to exercise such rights in full, the total proceeds to
the Company under agreement would be approximately $15,500,000 to $23,500,000
depending upon exercise periods. All share purchases pursuant to such purchase
rights, whether pursuant to options or warrants, are for unregistered securities
(i.e., governed by "Rule 144 restrictions") The shares purchased are to only be
registered by the Company if a) the investors make their purchases in increments
of $1.5 million or more, or (b) the investors purchase shares prior to the time
that the Company is otherwise filing a registration statement for other
shareholders or for "secondary offerings" (i.e., "piggy-back registration
rights"). The investors are not obligated to purchase any shares from the
Company and have the right to purchase all, or any portion of, the option
shares. The investors are required to purchase the above described option
package no later than November 22, 2000. The Company extended the initial option
purchase fee, of which only $50,000 has been paid to date. The investors have
until November 22, 2000, to pay the additional $50,000 option fee, subject to
the discretion of the Company to extend the due date for the option fee.
Net cash used in operating activities was $1,276,401 for the year ended July 31,
2000 compared to $298,574 for the year ended July 31, 1999. The increase in net
cash used in operating activities resulted primarily from increases in net loss.
Net cash used in investing activities was $307,971 for the year ended July 31,
2000 compared to $41,912 for the year ended July 31, 1999. The increase in net
cash used in investing activities resulted primarily from increased capital
expenditures for computer equipment, purchased software and office equipment.
Net cash provided by financing activities was $1,676,023 for the year ended July
31, 2000 compared to $352,546 for the year ended July 31, 1999. The increase in
net cash provided by financing activities resulted primarily from the sale of
securities to private investors pursuant to Regulation D, Rule 506.
As of November 1, 2000 officers of the Company advanced $139,500 and unrelated
outside investors advanced $145,000 to us in the form of 30 day unsecured notes
bearing interest at the rate of 11% per annum.
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. We have previously conducted an
assessment of our key computer systems and software applications to ensure that
the integrity and accuracy of our computer systems, embedded systems and
software applications that contain date sensitive operations or that involve
date processing. To date we have upgraded our accounting software (accounts
receivable, accounts payable and general ledger) to be Y2K compliant.
Based on our experience through July 31, 2000, we believe the cost of addressing
the Year 2000 has not had a material impact on our financial position or results
of operation.
<PAGE>
--------------------------------------------------------------------------------
Item 7. Financial Statements.
--------------------------------------------------------------------------------
Our consolidated financial statements in response to this item are as follows:
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REPORT F - 2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets F - 3
Consolidated Statements of Operations F - 4
Consolidated Statements of Deficiency in Assets F - 5
Consolidated Statements of Cash Flows F - 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F - 7 to F - 16
<PAGE>
[LOGO]
Dohan and Company 7700 North Kendall Drive, 204
Certified Public Accountants Miami, Florida 33156-7564
A Professional Association Telephone (305) 274-1366
Facsimile (305) 274-1368
E-mail [email protected]
Internet www.uscpa.com
INDEPENDENT AUDITOR'S REPORT
Stockholders and Board of Directors
American Millennium Corporation, Inc. and subsidiary
Golden, Colorado
We have audited the accompanying consolidated balance sheets of American
Millennium Corporation, Inc. and subsidiary as of July 31, 2000 and 1999, and
the related consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American Millennium
Corporation, Inc. and subsidiary at July 31, 2000 and 1999, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 11 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 11. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Dohan and Company, P.A.
Certified Public Accountants
Miami, Florida
September 9, 2000, except as to
Note 15, which is November 9, 2000
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 [LOGO]
F-2
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
-----------------------------------------------------------------------------
July 31, 2000 1999
-----------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents .......................... $ 105,148 $ 13,236
Accounts receivable, less allowance for doubtful
accounts of $1,564 and $640 ...................... 23,899 20,365
Inventories ........................................ 21,161 5,975
Prepaid expenses ................................... 41,514 --
Discount on issuance of debt........................ 41,875 --
-----------------------------------------------------------------------------
TOTAL CURRENT ASSETS ................................. 233,597 39,576
-----------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, NET .......................... 154,714 68,365
-----------------------------------------------------------------------------
OTHER ASSETS
Long-term portion of non-compete agreement ......... 138,639 --
Available-for-sale equity security ................. 14,390 14,390
Security deposits .................................. 7,407 2,653
Other assets ....................................... 760 --
Deferred income tax asset, less valuation
allowance of $3,385,497 and $2,928,303 ........... -- --
-----------------------------------------------------------------------------
TOTAL OTHER ASSETS ................................... 161,196 17,043
-----------------------------------------------------------------------------
TOTAL ASSETS .........................................$ 549,507 $ 124,984
=============================================================================
LIABILITIES AND DEFICIENCY IN ASSETS
CURRENT LIABILITIES
Accounts payable ....................................$ 226,792 $ 172,265
Accrued payroll and related taxes ................... 44,149 89,908
Accrued liabilities ................................. 468,827 321,667
Current portion of capitalized lease obligations .... 24,473 10,664
Notes payable to officers ........................... 210,992 91,970
Notes payable to related parties .................... 62,285 69,885
Note payable to shareholder ......................... 25,899 45,647
Advances from officers .............................. 24,952 38,665
-----------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES ............................. 1,088,369 840,671
LONG-TERM PORTION OF CAPITALIZED LEASE OBLIGATIONS .... 16,713 17,678
-----------------------------------------------------------------------------
TOTAL LIABILITIES .................................... 1,105,082 858,349
-----------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTES 3,8,11 AND 13)
DEFICIENCY IN ASSETS
Preferred stock, 10,000,000 shares authorized;
none issued -- --
Common stock, $.001 par value, 60,000,000 shares
authorized; 21,402,284 and 16,403,472 shares
issued and outstanding ........................... 21,402 16,404
Additional paid-in capital ......................... 14,099,236 11,200,669
Accumulated deficit.................................(14,687,563)(11,961,788)
Accumulated other comprehensive income ............. 11,350 11,350
-----------------------------------------------------------------------------
TOTAL DEFICIENCY IN ASSETS ........................... (555,575) (733,365)
-----------------------------------------------------------------------------
TOTAL LIABILITIES AND DEFICIENCY IN ASSETS ...........$ 549,507 $ 124,984
=============================================================================
See accompanying notes.
F-3
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------
For the Years Ended July 31, 2000 1999
------------------------------------------------------------------------------
REVENUES..............................................$ 341,418 $ 320,685
COST OF REVENUES ..................................... 212,606 244,023
------------------------------------------------------------------------------
GROSS PROFIT.......................................... 128,812 76,662
------------------------------------------------------------------------------
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Compensation to officers and directors ............. 1,273,153 966,683
Consulting - others ................................ 135,641 80,838
Professional ....................................... 184,574 269,632
Employee salaries .................................. 423,171 --
Employee benefits and payroll taxes ................ 59,855 --
Research and development ........................... 136,507 5,384
Travel ............................................. 110,315 84,765
Telephone and utilities ............................ 46,529 51,782
Depreciation and amortization ...................... 16,688 12,860
Other .............................................. 224,621 72,790
------------------------------------------------------------------------------
TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES ... 2,611,054 1,544,734
------------------------------------------------------------------------------
LOSS FROM OPERATIONS ................................. (2,482,242) (1,468,072)
------------------------------------------------------------------------------
OTHER INCOME (EXPENSES)
Litigation settlement .............................. -- (20,000)
Interest expense ................................... (148,208) ( 7,057)
Amortization of loan costs ......................... (109,647) --
Loss on disposal of property and equipment ......... (25,689) (38,707)
Miscellaneous income ............................... 40,011 6,342
------------------------------------------------------------------------------
TOTAL OTHER INCOME (EXPENSES) ........................ (243,533) (59,422)
------------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES ............................. (2,725,775) (1,527,494)
INCOME TAXES ......................................... -- --
------------------------------------------------------------------------------
NET LOSS ............................................. (2,725,775) (1,527,494)
------------------------------------------------------------------------------
OTHER COMPREHENSIVE INCOME
Unrealized gain on available-for-sale
equity security .................................. -- 11,350
------------------------------------------------------------------------------
COMPREHENSIVE LOSS ...................................$(2,725,775) $(1,516,144)
==============================================================================
BASIC AND DILUTED NET LOSS PER COMMON SHARE .......... $(0.15) $(0.11)
==============================================================================
BASIC AND DILUTED COMPREHENSIVE LOSS PER COMMON SHARE $(0.15) $(0.11)
==============================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
(BASIC AND DILUTED) ................................. 18,218,392 14,215,132
==============================================================================
See accompanying notes.
F-4
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF DEFICIENCY IN ASSETS
FOR THE YEARS ENDED JULY 31, 2000 AND 1999
--------------------------------------------------------------------------------
Accumulated
Additional Total
Common Stock Paid-in Accumulated Deficiency
Description Shares Amount Capital Deficit Other in Assets
--------------------------------------------------------------------------------
Balance -
July 31, 1998 12,329,514 $12,330 $10,157,121 $(10,434,294)$( 8,000)$ (272,843)
Common stock
exchanged 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 for
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 -- -- -- (1,527,494) -- (1,527,494)
--------------------------------------------------------------------------------
Balance -
July 31, 1999 16,403,472 16,404 11,200,669 (11,961,788) 11,350 (733,365)
Sale of
common stock 3,130,001 3,130 713,520 -- -- 716,650
Common stock
issued for
interest 25,000 25 6,225 -- -- 6,250
Common stock
issued for
compensation 200,000 200 72,300 -- -- 72,500
Common stock
exchanged for
services 165,200 165 87,365 -- -- 87,530
Common stock
exchanged for
100% ownership
in CompuGraphics
Corp. 600,000 600 -- -- -- 600
Common stock
issued for
payment of
accounts
payable 23,170 23 19,440 -- -- 19,463
Conversion of
debt to equity 855,441 855 951,646 -- -- 952,501
Stock options
issued for
services -- -- 1,048,670 -- -- 1,048,670
Net loss for
the year -- -- -- (2,725,775) -- (2,725,775)
--------------------------------------------------------------------------------
Balance -
July 31, 2000 21,402,284 $21,402 $14,099,236 $(14,687,563) $11,350 $ (555,575)
================================================================================
See accompanying notes.
F-5
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------
For the Years Ended July 31, 2000 1999
-------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ........................................$(2,725,775) $(1,527,494)
Adjustments to reconcile net (loss) to net
cash used used by operating activities:
Depreciation and amortization ................. 17,798 14,995
Amortization of loan costs..................... 109,647 --
Provision for bad debts ....................... 1,564 640
Loss on disposal of property and equipment .... 25,689 38,707
Common stock exchanged for services ........... 87,530 153,482
Common stock issued under employee stock
incentive plan .............................. -- 379,850
Stock options issued in consideration for past
services .................................... 1,048,670 --
Common stock issued for compensation .......... 72,500 312,490
Note payable issued for compensation .......... -- 15,000
(Increase) decrease in assets:
Accounts receivable ........................... (5,098) (21,005)
Inventory ..................................... (15,186) (5,975)
Prepaid expenses .............................. (6,514) 40,375
Other current assets .......................... (42,893) (14,003)
Increase (decrease) in liabilities:
Accounts payable .............................. 54,527 50,966
Accrued payroll and related taxes ............. (45,759) (76,597)
Accrued liabilities ........................... 147,160 339,995
--------------------------------------------------------------------------------
NET CASH USED BY OPERATING ACTIVITIES ................. (1,276,140) (298,574)
--------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Receipts
Proceeds from disposal of property and equipment ... 1,700 --
--------------------------------------------------------------------------------
RECEIPTS FROM INVESTING ACTIVITIES .................... 1,700 --
--------------------------------------------------------------------------------
Disbursements
Acquisition of property and equipment .............. (129,157) (41,912)
Acquisition of non-compete agreement ............... (175,000) --
Additional security deposits and other ............. ( 5,514) --
--------------------------------------------------------------------------------
DISBURSEMENTS FROM INVESTING ACTIVITIES ............... (309,671) (41,912)
--------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES ................. (307,971) (41,912)
--------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts
Proceeds from advances by officers .................. -- 38,665
Proceeds from notes payable to officers ............. 150,000 40,792
Proceeds from related parties contributed to capital -- --
Proceeds from related parties, net .................. 9,000 166,385
Proceeds from note payable stockholder .............. 200 12,000
Proceeds from issuance of common stock, net ......... 1,585,218 100,000
Proceeds from capitalized leases .................... 13,809 --
--------------------------------------------------------------------------------
RECEIPTS FROM FINANCING ACTIVITIES ..................... 1,758,227 357,842
--------------------------------------------------------------------------------
Disbursements
Payments on notes due stockholder ................... (19,948) --
Payments on notes due related parties ............... (16,600) --
Payments on advances by officers, net ............... (13,713) (5,296)
Payments on notes payable to officers ............... (30,978) --
Payments on capitalized leases ...................... (965) --
--------------------------------------------------------------------------------
DISBURSEMENTS FROM FINANCING ACTIVITIES ................ (82,204) (5,296)
--------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES .............. 1,676,023 352,546
--------------------------------------------------------------------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS .............. 91,912 12,060
CASH AND CASH EQUIVALENTS - BEGINNING .................. 13,236 1,176
--------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - ENDING .....................$ 105,148 $ 13,236
================================================================================
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Interest ..........................................$ 5,471 $ 2,039
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
Advances to officer reduced accrued liabilities ...$ 52,500 $ 65,921
Equipment was exchanged for debt reduction ........$ -- $ 6,000
Reduction of accounts payable .....................$ 19,463 $ --
================================================================================
See accompanying notes.
F-6
<PAGE>
AMERICAN MILLENNIUM CORPORATION, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 2000 AND 1999
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY 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.
BUSINESS COMBINATION A controlling interest (79.3%) of American Millennium
Corporation, a Delaware corporation, was acquired in October 1997. The remaining
interest in American Millennium Corporation 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.
NATURE OF OPERATIONS 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.
BASIS OF PRESENTATION The accompanying consolidated financial statements include
the accounts of American Millennium Corporation, Inc. (AMCI) and its
wholly-owned subsidiary, CompuGraphics Corporation (CompuGraphics). All
significant intercompany accounts and transactions of American Millennium
Corporation, Inc., and Subsidiary (the Company) for the periods presented have
been eliminated in consolidation.
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.
INVENTORIES Inventories consist of Subscriber Communicators and related parts.
Inventories are stated at the lower of cost, determined on the first-in,
first-out (FIFO) method, or market.
PROPERTY AND EQUIPMENT Property and equipment is 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 EQUITY 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 that 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. Current and deferred
taxes are allocated to members of the consolidated group by applying FASB
Statement No. 109 to each member as if it were a separate taxpayer.
INCOME TAX CREDITS Income tax credits will be recognized as a reduction of the
provision for income taxes in the year in which utilized.
AMORTIZATION OF LOAN COSTS Loan costs incurred in the acquisition of
indebtedness is amortized using the straight-line method over term of the
respective debt instrument.
CONCENTRATIONS OF CREDIT RISK AND ECONOMIC DEPENDENCE Concentrations of credit
risk with respect to receivables results from the fact that approximately 56% of
accounts receivable at July 31, 2000, was due from two customers. Further,
approximately 62% of revenues from the sale of products and services are to
three customers.
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), which has
filed for protection under Chapter 11 of the Federal Bankruptcy Act, and Vistar
Datacom, for whom it is a value-added reseller. ORBCOMM and Vistar both provide
satellite service for the Company's monitoring devices and are also the
suppliers for the main component of the Company's Subscriber Communicators.
F-7
<PAGE>
NOTE 1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES The process of preparing financial statements in conformity
with generally accepted accounting principles requires the use of estimates and
assumptions regarding certain types of assets, liabilities, revenues, and
expenses. Such estimates primarily relate to unsettled transactions and events
as of the date of the financial statements. Accordingly, upon settlement, actual
results may differ from estimated amounts.
RECLASSIFICATIONS Certain amounts in the prior year financial statements have
been reclassified for comparative purposes to conform with the presentation in
the 2000 financial statements.
RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as
incurred.
ADVERTISING Advertising costs are expensed as incurred.
COMPUTER SOFTWARE DEVELOPED FOR INTERNAL USE Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," ("SOP 98-1") issued by the American Institute of Certified Public
Accountants is effective for financial statements beginning after December 15,
1998, SOP 98-1 requires that costs incurred in the preliminary stage of a
development project be expensed as incurred, and that subsequent costs be
capitalized or expensed, depending on criteria defined within SOP 98-1
Capitalized costs should be amortized on a straight-line basis unless another
systematic basis is more representative of the software's use.
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
31,2000, were anti-dilutive and not considered common stock equivalents for
purposes of computing loss per common share.
IMPAIRMENT OF LONG-LIVED ASSETS The Company follows 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.
COMPREHENSIVE INCOME The Company has previously 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 shareholders' equity.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Company has adopted 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
consolidated financial statements.
FAIR VALUE OF FINANCIAL INSTRUMENTS Cash, receivables, accounts payable, debt,
accrued expenses and other liabilities are carried at amounts which reasonably
approximate their fair value due to the short-term nature of these amounts or
due to variable rates of interest which are consistent with current market
rates.
RECLASSIFICATIONS Certain amounts in the prior year financial statements have
been reclassified for comparative purposes to conform with the presentation of
the current year consolidated financial statements. Additionally, retroactive
effect has been given to the merger for purposes of comparative consolidated
financial statement presentation.
F-8
<PAGE>
NOTE 2. RELATED PARTY TRANSACTIONS
ADVANCES Notes payable to officers at July 31, 2000 and 1999, were $235,944 and
$130,635, respectively. These notes are unsecured, due at various dates through
July 31, 2001, and provide for annual interest at 6%. For the year ended July
31, 2000, officers of the Company advanced funds to the Company totaling
$150,000.
Notes payable to parties related by virtue of common control at July 31, 2000
and July 31, 1999 were $62,285 and $69,885, respectively. These notes are
unsecured, due at various dates through July 31, 2001, and provide for annual
interest at 6%. For the year ended July 31, 2000, related parties of the Company
advanced funds to the Company totaling $9,000.
STOCK FOR SERVICES Common stock issued to related parties are shares that 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.
On August 13, 1999, the Board of Directors authorized the issuance of 165,000
shares of S8 free trading common stock. 100,000 shares of were given to one
officer of the company for services to be rendered, and 65,000 shares were paid
to a consultant in settlement of an outstanding liability in the amount of
$13,000. The stock was valued at $33,000.
Effective February 29, 2000 the corporate secretary resigned. The Board of
Directors authorized the issuance of 100,000 shares of restricted common stock
of the company valued at $52,500 and a cash payment of $17,500 in settlement of
accrued compensation and out-of-pocket expenses.
NOTE 3. BUSINESS COMBINATION
On July 18, 2000, the Company completed a merger with CompuGraphics Corporation
by exchanging 600,000 shares of its common stock for all of the common stock of
CompuGraphics. The merger has been accounted for as a pooling of interests and
accordingly all prior period consolidated financial statements have been
restated to include the combined results of operations, financial position and
cash flows of CompuGraphics.
Prior to the merger CompuGraphics' fiscal year ended on December 31. In
recording the business combination, CompuGraphics prior period financial
statements have been restated to conform with the Company's year end. The
effects of conforming CompuGraphics accounting policies to those of the Company
were not material.
NOTE 4. SEGMENTS AND RELATED INFORMATION
During the current year, the Company adopted FASB Statement No. 131 (SFAS No.
131), "Disclosures about Segments of an Enterprise and Related Information,"
which changes the way the Company reports information about its operating
segments.
The Company's two business segments have separate management teams and
infrastructures that offer different services. They are managed separately
because each business segment provides different unrelated services. The
Company's two business segments are:
(1) AMCI providing hardware and software combinations to facilitate timely,
accurate and cost effective one-way and two-way monitoring of information
(2) CompuGraphics becoming an Applications Service Provider, referred to as an
ASP, that will provide high value software and additional services through
the Internet.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies. All intersegment sales prices are
market based. The Company evaluates performance based on operating earnings of
the respective business units.
F-9
<PAGE>
The following segment information includes allocations of certain costs,
including overhead and shared services which are allocated based on revenues,
payroll and other factors. These agreed-upon amounts between the segments may
differ from amounts that would be negotiated in an arms-length transaction.
Year ended July 31, 2000 AMCI Compugraphics Total
-------------------------------------------------------------------------------
Revenues earned -
External customers $ 118,322 $ 223,096 $ 341,418
Intersegment $ - $ - $ -
-------------------------------------------------------------------------------
Total revenues earned $ 118,322 $ 223,096 $ 341,418
===============================================================================
Gross margins $( 10,103) $ 138,915 $ 128,812
===============================================================================
Operating (loss) income $(2,743,817) $ 18,042 $(2,725,775)
===============================================================================
Depreciation and
amortization $ 14,290 $ 3,508 $ 17,798
===============================================================================
Interest expense $ 134,922 $ 10,390 $ 145,312
===============================================================================
Total assets $ 531,909 $ 17,598 $ 549,507
===============================================================================
Capital expenditures $ 127,817 $ 1,340 $ 129,157
===============================================================================
Year ended July 31, 1999 AMCI Compugraphics Total
-------------------------------------------------------------------------------
Revenues earned -
External customers $ 127,366 $ 193,319 $ 320,685
Intersegment $ - $ - $ -
-------------------------------------------------------------------------------
Total revenues earned $ 127,366 $ 193,319 $ 320,685
===============================================================================
Gross margins $ 29,186 $ 47,476 $ 76,662
===============================================================================
Operating (loss) $(1,508,915) $ (18,579) $(1,527,494)
===============================================================================
Depreciation and
amortization $ 11,204 $ 1,850 $ 13,054
===============================================================================
Interest expense $ 3,204 $ 3,853 $ 7,057
===============================================================================
Total assets $ 100,010 $ 24,974 $ 124,984
===============================================================================
Capital expenditures $ 26,148 $ 15,764 $ 41,912
===============================================================================
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
2000 1999
-----------------------------------------------------------------------------
Office furniture and equipment $ 139,059 $ 62,429
Demonstrator Subscriber Communicators 30,754 15,379
Subscriber Communicators leased to customer 7,768 7,768
Transportation equipment -- --
-----------------------------------------------------------------------------
177,581 85,576
Accumulated depreciation ( 22,867) ( 17,211)
-----------------------------------------------------------------------------
Property and equipment, net $ 154,714 $ 68,365
=============================================================================
Depreciation expense for the years ending July 31, 2000 and 1999, amounted to
$15,419 and $15,188, respectively. Of these amounts, $14,309 and $14,994 are
included in other selling, general and administrative expenses for July 31, 2000
and 1999, respectively; and $1,109 and $194 are included in cost of revenues for
July 31, 2000 and July 31, 1999, respectively.
F-10
<PAGE>
NOTE 6. 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.
NOTE 7. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued liabilities consisted of the following:
2000 1999
-----------------------------------------------------------------------------
Professional fees $ 133,874 $ 42,910
Consulting - officers 326,953 252,894
Royalties -- 5,862
Settlement 8,000 20,000
-----------------------------------------------------------------------------
$ 468,827 $ 321,666
=============================================================================
NOTE 8. COMMON STOCK
STOCK ISSUED FOR SERVICES During the year ended July 31, 2000, the Company
issued 123,370 shares of unregistered 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. 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.
On April 27, 2000, the Company entered into an agreement with The Charterbridge
Financial Group, Inc. for consultation services in connection with new business
opportunities and promotion of the Company to the public. The agreement calls
for the issuance of 70,000 unregistered shares of the Company's common stock
each quarter along with a monthly cash payment of $4,500. In April of 2000,
70,000 unregistered shares of the Company's common stock valued at $70,000 were
issued to various employees of the Charterbridge Financial Group, under the
Consultant Services Plan. In October of 2000, the Company terminated the
services to be provided by that company. 70,000 shares of the Company's
unregistered common stock and a cash payment of $13,500 are to be paid by the
Company in settlement of the agreement.
During fiscal year 2000, the Company issued a total of 53,370 unregistered
shares of common stock under the Consultant Services Plan as compensation for
services to various consultants valued at $23,993.
In an April 7, 2000 Resolution, the Board approved the issuance to Baker,
Johnston & Wilson LLP, for professional services rendered as transaction counsel
for the Series 1 Convertible Notes, a Common Stock Purchase Warrant to acquire
up to 10,000 shares of the Common Stock of the Company for an exercise price of
$1.00 per share.
See Note 3 for stock issued for services to related parties.
SALE OF COMMON STOCK On February 1, 2000, the Board of Directors authorized the
issuance of 100,000 shares of restricted common stock to one investor pursuant
to a private offering made in accordance with the exemption from registration
under Regulation D, Rule 506 of the Securities Act of 1933. The Company received
net proceeds of $22,220 from the sale of these shares after issuance costs of
$2,780.
On February 14, 2000, the Board of Directors authorized the issuance of 500,000
shares of restricted common stock to two investors pursuant to a private
offering made in accordance with the exemption from registration under
Regulation D, Rule 506 of the Securities Act of 1933. The Company received net
proceeds of $100,922 from the sale of these shares after issuance costs of
$24,078.
F-11
<PAGE>
NOTE 8. COMMON STOCK (CONTINUED)
On February 14, 2000, the Board of Directors authorized the issuance of 868,001
shares of restricted common stock to eight investors pursuant to a private
offering made in accordance with the exemption from registration under
Regulation D, Rule 506 of the Securities Act of 1933. The Company received net
proceeds of $201,200 from the sale of these shares after issuance costs of
$15,800.
On February 25, 2000, the Board of Directors authorized the issuance of 553,000
shares of restricted common stock to six investors pursuant to a private
offering made in accordance with the exemption from registration under
Regulation D, Rule 506 of the Securities Act of 1933. The Company received net
proceeds of $112,325.25 from the sale of these shares after issuance costs of
$25,925.
On March 10, 2000, the Board of Directors authorized the issuance of 429,000
shares of restricted common stock to four investors pursuant to a private
offering made in accordance with the exemption from registration under
Regulation D, Rule 506 of the Securities Act of 1933. The Company received net
proceeds of $92,902.50 from the sale of these shares after issuance costs of
$14,347.50.
On April 7, 2000 the Board of Directors authorized the issuance of 280,000
shares of restricted common stock to five investors pursuant to a private
offering made in accordance with the exemption from registration under
Regulation D, Rule 506 of the Securities Act of 1933. The Company received net
proceeds of $59,570 from the sale of these shares after issuance costs of
$10,430.
The Company issued a total of 3,080,000 shares of stock pursuant to the
Regulation D, Rule 506 offering. Each of these shares issued carries a warrant
to purchase one additional share of the Company's common stock for $.25 per
share. The warrants expire 5 years from the date of the purchase of the original
shares.
On July 31, 2000 the Company issued 50,000 shares to an individual investor for
$1.00 per share. Each of the shares issued carries a warrant to purchase one
additional share of the Company's common stock for $1.00.
STOCK OPTIONS On July 18, 2000, the Board of Directors granted to various
officers and directors of the Company stock options in consideration for past
services to the Company. At July 31, 2000, there were 1,821,875 shares under
option at an exercise price of $.19 per share which expire on January 14, 2004.
The options vest immediately upon grant and shall be exercisable commencing
January 15, 2001. Compensation expense of $1,048,671 has been recognized in the
current fiscal year relating to the granting of these options.
Pursuant to employment agreements entered into during fiscal year 2000, certain
employees were granted options to purchase the Company's common stock at $1.00
per share, which was less than 100% of the market price on the dates the options
were granted. Accordingly, no compensation expense has been recorded in the
current fiscal year relating to these options. The options vest after one year
of service and have a maximum term of 3 years. At July 31, 2000, 1,045,000
shares were reserved for future issuance under the plan.
On June 8, 2000, the Company entered into an option agreement with six private
investors. Pursuant to the terms of the agreement, the investors will have
rights to purchase from the Company options and warrants up to an aggregate of
8,000,000 newly issued shares of the Company's common capital stock, at prices
ranging from $1.00 to $5.25 per share. The option agreement originally expired
on August 8, 2000, and has been extended three times until November 22, 2000.
On June 12, 2000, a convertible note of approximately $802,500 was converted
into unregistered common shares of the Company. 502,00 shares were converted at
$1.00 per share and 352,941 shares were converted at $.85 per share. Each of the
shares converted carried a warrant to purchase one additional share of common
stock at the respective conversion price. The warrants expire 3 years from the
date of the purchase of the original shares.
NOTE 9. 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. On
January 12, 2000, the Board of Directors rescinded the ESIP and no further
restricted common stock of the company will be issued under the provisions of
the plan.
F-12
<PAGE>
NOTE 10. INCOME TAXES
Deferred income taxes and benefits for 2000 and 1999 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
1999 Changes 2000
-----------------------------------------------------------------------------
Deferred tax assets:
Accrued officers' compensation $ 88,513 $ 25,923 $ 114,436
Excess tax depreciation
over book depreciation -- -- --
Net operating loss carryforwards 2,466,905 546,940 3,013,845
Capital loss carryforwards 815,035 - 815,035
-----------------------------------------------------------------------------
2,905,420 465,033 3,943,316
Investment credit carryforwards 4,923 (1,087) 3,836
Research credit carryforwards 17,543 -- 17,543
-----------------------------------------------------------------------------
3,392,919 464,616 3,964,695
Valuation allowance (3,385,497) (457,194) (3,950,273)
-----------------------------------------------------------------------------
Deferred tax asset $ 7,422 $ -- $ 14,422
-----------------------------------------------------------------------------
Deferred tax liabilities:
Unrealized gain on
available-for-sale security $ 3,973 $ -- $ 3,973
Excess book depreciation over
tax depreciation 3,499 7,000 10,449
-----------------------------------------------------------------------------
Deferred tax liability 7,422 -- 14,422
-----------------------------------------------------------------------------
Net deferred tax asset (liability) $ - $ -- $ --
=============================================================================
For the year ended July 31, 2000, a $???NONE net operating loss expired, while
the Company generated, for U.S. income tax purposes, a net operating loss of
approximately $1,562,687, resulting in a total loss carryforward of $8,610,987.
Capital loss carryforwards at July 31, 2000, 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, 2000, tax credits of $1,087 expired. Remaining tax
credits total $21,379 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 11. 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 $2,723,022 and $1,519,450 for the years ending July 31, 2000 and 1999,
respectively.
In addition, the Company has used substantial working capital in its operations.
As of July 31, 2000 and 1999, current liabilities exceed current assets by
$716,136 and $801,294, respectively. Cash used by operations for the years ended
July 31, 2000 and 1999, amounted to $1,439,490 and $298,574, respectively.
Sales are expected to fund day-to-day operations and marketing activities
related to digital, wireless and wireline communications endeavors. Management
plans to raise additional capital by further issuance of the Company's common
stock through the private offering of stock under Regulation D, Rule 506, an
additional offering to the public under Form SB-2 and other capital instruments.
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 12. NOTES PAYABLE
On April 7, 2000 the Company entered into the Series 1 Convertible Note Purchase
Agreement (the "Agreement"). The agreement calls for the issuance of $1,000,000
of convertible notes. The notes are convertible after 120 days following the
closing into 1,000,000 shares of the Company's common stock, at a conversion
price of $1.00 per share.
In connection with this indebtedness agreement, the Company issued a detachable
warrant with permits the holder to purchase 1,000,000 shares of the Company's
common stock for $1.00 per share. The term of this warrant is for a period of 3
years from the date of grant.
The first closing of the convertible notes occurred on April 10, 2000 in the
amount of $502,500. The borrowings bear interest at the rate of 10%, payable
quarterly commencing July 10, 2000. The company received net proceeds of
$430,160 after issuance costs of $72,340.
On June 6, 2000 the company entered into the second closing of the Series 1
Convertible Note Purchase Agreement in the amount of $300,000. The borrowings
bear interest at the rate of 10%, payable quarterly commencing September 6,
2000. The company received net proceeds of $261,772 after issuance costs of
$38,228.
The Agreement was subsequently amended on June 12, 2000 to permit early
conversion (See Note 8).
NOTE 13. COMMITMENTS AND CONTINGENCIES
LITIGATION 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 returned
on February 11, 2000 and the appropriate number of shares were issued on the
same date.
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 was a claim against the Company for the balance
due and owing under the Equipment Lease Agreement in the sum of $44,607. A
settlement agreement was entered into on February 23, 2000 for $20,000 in full
satisfaction of the claim. Accordingly, the Company has recorded an accrued
liability of $20,000. As of July 31, 2000 the Company owes a remaining balance
of $8,000 on this settlement.
OPERATING LEASES The Company's corporate headquarters are located in a 4,400
square foot facility in Golden, Colorado. Under the terms of a lease agreement
dated December 8, 1999, the Company is to occupy the Golden offices for a term
of 36 months beginning the first day of December 1999, with a monthly rent of
$4,400. The Company's President and CEO operates out of an executive suite in
Houston, Texas. This lease expires in November of 2000.
The Company also leases office equipment under non-cancelable lease expiring
March 2003, with a monthly payment of $121.
F-14
<PAGE>
NOTE 13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Future minimum lease payments under all operating leases for years subsequent to
July 31 are as follows:
2000 $ 55,947
2001 54,225
2002 18,447
----------
$ 128,619
==========
Total rent expense was $46,335 and $15,762 for the years ended July 31, 2000 and
1999, respectively.
CAPITAL LEASES The Company leases certain computer and office equipment. The
leases include options for renewal or purchase and contain clauses for payment
of property taxes and insurance. In most cases, management expects that in the
normal course of business, leases will be renewed or replaced by other leases.
Capital lease obligations consisted of the following:
2000 1999
----------- ---------
Lease payments, payable in monthly installments
totaling $2,789 and $1,118, respectively,
inclusive of imputed interest at a rate
of 11.6%, maturing at various dates
through July 2004. $ 41,186 $ 28,342
Current obligations under capital leases ( 24,473) ( 10,664)
--------- ---------
Long-term obligations under capital leases $ 16,713 $ 17,678
========= =========
Future minimum lease payments under capital leases for years subsequent to
July 31, are as follows:
2000 $ 27,813
2001 10,471
2002 4,583
2003 4,201
----------
$ 47,068
Amount representing interest ( 5,882)
----------
Present value of future minimum lease payments $ 41,186
==========
SELF-INSURANCE The Company carries a $100,000 policy for general liability and
property insurance. The Company has not obtained product liability insurance to
date due to the cost of such insurance. ORBCOMM and Vistar provide one-year
warranties 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 previously conducted an
assessment of its key computer systems and software applications to ensure that
the integrity and accuracy of our 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.
Based on its experience through July 31, 2000, the Company believes the cost of
addressing the Year 2000 has not had a material impact on the Company's
financial position or results of operation.
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.
F-15
<PAGE>
NOTE 14. SUBSEQUENT EVENTS - ADVANCES
During August, September and October of 2000, officers of the Company advanced
$139,500 to the Company in the form of 30 day unsecured notes bearing interest
at the rate of 11% per annum. During the same period, unrelated outside
investors advanced $145,000 to the Company in the form of 30 day unsecured notes
bearing interest at the rate of 11% per annum.
NOTE 15. SUBSEQUENT EVENTS - CONVERTIBLE NOTES
Subsequent to July 31, 2000, the Company entered into a Series 1 Convertible
Note Purchase Agreement providing for the offer, sale, issuance, and delivery of
up to $675,000 in principal amount of Series 1 Convertible Notes with Purchase
Warrants. In connection with the Closing under the Agreement, the Company shall
issue $675,000 principal amount of Convertible Notes convertible into 750,000
shares of Common Stock of the Company at $.90 per share. With such Convertible
Notes the Company will issue Purchase Warrants entitling the holder to purchase
up to 750,000 shares of the Common Stock of the Company at an exercise price of
$.90 per share.
Additionally, until May 9, 2001, the purchaser will have an option to
purchase an additional Convertible Note under the same terms and conditions
contained herein, except that the Company shall issue $600,000 principal
amount of Convertible Notes convertible into 666,667 shares of Common Stock
of the Company at $.90 per share. With such Convertible Notes the Company
will issue Purchase Warrants entitling the holder thereof to purchase up to
666,667 shares of the Common Stock of the Company at an exercise price of
$.90 per share.
On October 26, 2000, $25,000 was received, while $50,000 was received on October
30, 2000, and on November 9, 2000, the Company received $600,000 pursuant to
this agreement.
F-16
<PAGE>
--------------------------------------------------------------------------------
Item 8. Changes in and Disagreements With Accountants On Accounting and
Financial Disclosure.
--------------------------------------------------------------------------------
None.
--------------------------------------------------------------------------------
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, 57
Director
Stephen F. Watwood Vice President of Business 51
Development, Director, Chairman of
the Board of Directors
Bruce R. Bacon Vice President of Engineering, Chief 41
Technology Officer, Director
James C. Statham Chief Operations Officers, Director 46
Shirley M. Harmon Secretary 53
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 of Subscriber 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
he 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
took a position with a private trust. Her responsibilities included the
establishment and maintenance of the trust's financial records.
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 tables summarize the executive compensation earned or paid for
services rendered for the fiscal years ended July 31, 2000, 1999 and 1998:
Other Compensation Total
Fiscal Year Bonus (1),(2) (2)
Name and Principal Position Salary
Andrew F. Cauthen 2000 120,000 -- 14,500 134,500
President 1999 15,000 -- -- 15,000
Chief Executive Officer 1998 -- -- -- --
Director
Steve Watwood 2000 96,000 -- -- 96,000
VP Business Development 1999 98,001 -- 186,500 284,501
Chairman of the Board 1998 78,000 -- -- 78,000
Director
Bruce Bacon 2000 96,000 -- -- 96,000
VP of Engineering 1999 96,000 -- 106,500 202,500
Chief Technology Officer1998 43,298 -- -- 43,298
Director
Shirley Harmon 2000 -- -- -- --
Secretary 1999 -- -- 13,313 13,313
Director 1998 -- -- -- --
James Statham 2000 96,000 -- -- 96,000
Chief Operations Officer1999 98,001 -- 226,250 324,251
Director 1998 92,667 -- -- 92,667
All Executives as a Group 2000 408,000 -- 14,500 422,500
1999 307,002 -- 532,563 839,565
1998 213,965 -- -- 213,965
1. Includes the value of restricted common stock issued
2. Does not include the value of long-term compensation in the form of options
issued to officers, included in the OPTIONS/SAR GRANTS table below.
Any increase in Officer compensation would be predicated on prevailing industry
standards and the existing financial situation of the Company. The Board of
Directors may authorize an increase in the compensation of the Company's
executive officers without a vote of Shareholders.
We did not make any bonus cash payments to our executive officers; however, the
Company may, in the future, develop programs which may include bonus payments.
The Company does not compensate its Directors for their participation. The
Company does not provide for agreements with any of its executive officers.
However, the Company may, in the future, need to compete for the services of its
executive officers, at which time, the Board of Directors may adopt and require
its executive officers to execute employment agreements.
OPTIONS/SAR GRANTS TABLE
The following options table reflects long-term compensation in the form of
individual grants of stock options of the Company made during the last completed
fiscal year to each of the named executive officers:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
----------------- ------------------ ------------------- ----------- -----------
Percent of Total
Number of Options/SARs
Securities Granted to Exercise of
Underlying Options Employees in Fiscal Base Price
Officer Granted (#) Year ($/Sh) Exp Date
----------------- ------------------ ------------------- ----------- -----------
Andrew F. Cauthen 1,200,000 65.87% $.19 1-14-2004
Shirley Harmon 50,000 2.74% $.19 1-14-2004
----------------- ------------------ ------------------- ----------- -----------
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, 2000 and 1999, respectively, provided
for annual compensation as follows:
2000 1999
------ ------
Andrew F. Cauthen $120,000 --
Stephen F. Watwood $ 96,000 $96,000
James C. Statham $ 96,000 $96,000
Bruce R. Bacon $ 96,000 $96,000
Phyllis Watwood $ 24,000 $25,500
On July 31, 2000, the above contracts were extended. The extensions run through
July 31, 2001.
Andrew Cauthen became President and Chief Executive Officer on April 13, 1999.
His two-year Employment Contract was approved by the Board of Directors on
August 15, 1999. The contract provides for annual compensation of $120,000 for
the first year and $180,000 for the second year. 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, the Board of Directors 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.
--------------------------------------------------------------------------------
Item 11. Security Ownership of Certain Beneficial Owners and Management.
--------------------------------------------------------------------------------
The following table sets forth certain information known to the Company as of
July 31, 2000, 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.
Amount of Shares Percent Ownership of
Name and Address of of Common Stock, Class
Beneficial Owner par value .001, Owned Beneficially
Andrew F. Cauthen 1,275,385(1) 5.96%
1600 Eldridge
Suite 808
Houston, TX 77041
Stephen F. Watwood 1,805,333(2) 8.07%
17835 RCR 29
Oak Creek, CO 80467
Bruce R. Bacon 457,500 2.14%
1001 8th Street
Golden, CO 80401
James R. Statham 754,400 3.52%
PO Box 181
Cedar Key, FL 32625
Shirley M. Harmon 80,500 *
1947 NW 102nd Blvd.
Wildwood, FL 34785
Harto Ltd. 2,157,495 10.08%
Victoria House
P.O. Box 1090
The Valley, Anguilla
BWI
Global Investments Ltd., Trustee 2,700,000 12.62%
Victoria House
P.O. Box 1066
The Valley, Anguilla
BWI
Mali-Suisse Mining Holdings, S.A. 1,500,000 7.01%
28 Old Brompton Road
Suite 1119
London, England SW7 3DL
All Officers and Directors
as a Group (5 persons) 4,373,118(3) 20.43%
* Represents beneficial ownership of less than 1% of the outstanding shares of
common stock.
1. Includes an option for the purchase of 1,200,000 shares at a purchase price
of $0.19 per share. Mr. Cauthen is the President, CEO, and a director of the
Company.
2. Includes an option to Mr. Watwood's wife Phyllis Watwood for the purchase of
383,333 shares at a purchase price of $0.19 per share. Mr. Watwood is the Vice
President of Business Development and the Chairman of the Board of Directors.
3. Includes options held by such officers and directors for the purchase of an
aggregate of 1,633,333 shares at a purchase price of $0.19 per share.
--------------------------------------------------------------------------------
Item 12. Certain Relationships and Related Transactions.
--------------------------------------------------------------------------------
See footnote 3 of the 2000 Financial Statements included in this report.
--------------------------------------------------------------------------------
Item 13. Exhibits and Reports On Form 8-K.
--------------------------------------------------------------------------------
(A) 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, 2000.
--------------------------------------------------------------
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
American Millennium Corporation, Inc.
DATED: October 15, 2000 By: /s/ Andrew F. Cauthen
----------------------------------
Andrew F. Cauthen,President
(Chief Executive Officer)
In accordance with the Exchange Act, 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: October 15, 2000 By: /s/ Andrew F. Cauthen
---------------------------------
Andrew F. Cauthen, Director,
President, Chief Executive Officer,
(Chief Executive Officer)
DATED: October 15, 2000 By: /s/ Bruce R. Bacon
----------------------------------
Bruce R. Bacon, Director, Chief
Technology Officer, Vice President
of Engineering
DATED: October 15, 2000 By: /s/ Shirley Harmon
----------------------------------
Shirley Harmon, Director
(Corporate Secretary)
DATED: October 15, 2000 By: /s/ James C. Statham
----------------------------------
James C. Statham,
Director and Chief Operations Officer
DATED: October 15, 2000 By: /s/ Stephen F. Watwood
----------------------------------
Stephen F. Watwood, Director,Chairman
of the Board, Vice President of
Business Development
DATED: October 15, 2000 By: /s/ Thomas W. Roberts
----------------------------------
Thomas W. Roberts, Treasurer
(Principal Financial Officer)
