As filed with the Securities and Exchange Commission on _________, 2000
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Registration No. OMB APPROVAL
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UNITED STATES OMB NUMBER:3235-0418
SECURITIES AND EXCHANGE COMMISSION ------------------------
Washington, D.C. 20549 Expires: April 30,2003
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FORM SB-2 Estimated average burden
hours per response:137.0
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REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMERICAN MILLENNIUM CORPORATION, INC.
(Name of Small Business Issuer in its Charter)
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New Mexico
(State or jurisdiction of incorporation or organization)
6211
(Primary Standard Industrial Classification Number)
85-0273340
(I.R.S. Employer Identification No.)
------------------------
1010 10TH Street, Suite 100
Golden, Colorado 80401
(303) 279-2002
(Address and telephone number of principal executive offices)
------------------------
Andrew F. Cauthen, Chief Executive Officer
and President
American Millennium Corporation, Inc.
1010 10th Street, Suite 100
Golden, CO 80401
(303) 279-2002
(Name, address and telephone number of agent for service)
------------------------
Copies to:
Matthew G. Schindel, Esq.
Annis, Mitchell, Cockey, Edwards, & Roehn, P.A.
Post Office Drawer 3433
201 N. Franklin Street, Suite 2200
Tampa, Florida 33602
Telephone: (813) 229-3321
Facsimile (813) 223-9067 APPROXIMATE DATE OF COMMENCEMENT OF
PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this
Registration Statement.
------------------------
If the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or
interest reinvestment plan, please check the following box.
[x]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, as amended, please
check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering.
[ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of Amount of Proposed Proposed Amount of
each class shares to maximum maximum registration
of be offering aggregate fee (1)
securities registered price per offering
to be share (1) price
registered
Common 3,080,001 $0.62 $1,909,600.62 $ 504.13
Stock, $.001
par value,
offered by
Selling
Shareholders
(2)
Common 3,234,001 $0.62 $2,005,080.62 $ 529.34
Stock, $.001
issuable
upon
exercise of
warrants(3)
Common 855,441 $0.62 $ 530,373.42 $ 140.02
Stock, $.001
par value,
offered by
Selling
Shareholders
(4)
Common 880,566 $0.62 $ 545,950.92 $ 144.13
Stock,
issuable
upon
exercise of
warrants(5)
Common 181,579 $0.62 $ 112,578.98 $ 29.72
Stock, $.001
par value,
offered by
Selling
Shareholders
(6)
Common 50,000 $0.62 $ 31,000.00 $ 8.18
Stock,
issuable
upon
exercise of
warrants(7)
Common 53,370 $0.62 $ 33,098.40 $ 8.74
Stock, $.001
par value,
offered by
Selling
Shareholders
(8)
Common 30,200 $0.62 $ 18,724.00 $ 4.94
Stock,
issuable
upon
exercise of
warrants(9)
Common 600,000 $0.62 $ 372,000.00 $ 98.21
Stock, $.001
par value,
offered by
Selling
Shareholder
(10)
Common 800,000 $0.62 $ 496,000.00 $ 130.94
Stock, $.001
par value,
issuable
upon
exercise of
options(11)
Common 750,000 $0.62 $ 465,000.00 $ 122.76
Stock, $.001
par value,
issuable upon
conversion of
promissory
note(12)
Common 750,000 $0.62 $ 465,000.00 $ 122.76
Stock, $.001
par value,
issuable upon
exercise of
warrants(13)
Common 75,000 $0.62 $ 46,500.00 $ 12.28
Stock, $.001
par value,
offered by
Selling
Shareholder
(14)
Common 75,000 $0.62 $ 46,500.00 $ 12.28
Stock, $.001
par value,
issuable
upon
exercise of
options(15)
---------- ------------- ----------
TOTAL 11,415,158 $0.62 $7,077,397.96 $1,868.43
(1) Calculated pursuant to Rule 457(c),(g). The closing "bid" price of the
shares of common stock being registered hereby on the over-the-counter
market through the NASD OTC Electronic Bulletin Board was $0.62 on
November 27, 2000.
(2) Includes outstanding shares issued between September, 1999 and March,
2000 pursuant to a Private Offering made in reliance on Sections 4(6),
4(2) and/or 3(b) of the Securities Act of 1933, as amended (the "Act")
and according to the Rules contained in Regulation D of the Act.
(3) Includes shares issuable upon exercise of warrants at $0.25 per share,
such warrants issued between September, 1999 and March, 2000 pursuant to
a Private Offering made in reliance on Sections 4(6), 4(2) and/or 3(b) of
the Securities Act of 1933, as amended (the "Act") and according to the
Rules contained in Regulation D of the Act, including 154,000 shares
issuable upon exercise of warrants issued to Jack Augsback and
Associates, a commissioned placement agent, at $0.25 per share.
(4) Includes outstanding shares issued upon conversion of Convertible
Promissory Notes issued between April and June of 2000.
(5) Includes shares issuable upon exercise of warrants at exercise prices
from $0.85 to $1.00 per share, such warrants issued pursuant to
Convertible Promissory Notes issued between April and June of 2000,
including 25,125 shares issuable upon exercise of warrants issued to Jack
Augsback and Associates, a commissioned placement agent, at $1.00 per
share.
(6) Includes outstanding shares issued pursuant to private
investment/warrant agreement.
(7) Includes shares issuable upon exercise of warrants issued to private
investment/warrant agreement, exercisable at $1.00 per share.
(8) Includes outstanding shares issued to consultants for services rendered,
in lieu of cash.
(9) Includes shares issuable pursuant to warrants issued to consultants for
services rendered, exercisable at $0.25 per share.
(10) Includes outstanding shares issued in conjunction with purchase of 100%
of the outstanding stock of CompuGraphics Corporation.
(11) Includes shares issuable upon exercise of options held by the Company's
investor relations firm, exercisable as follows:
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
(12) Includes shares issuable upon conversion of $675,000.00 convertible note
at conversion rate of 1 share per $0.90.
(13) Includes shares issuable upon exercise of warrant at exercise price of
$.90 per share.
(14) Includes 75,000 shares issued to private investors at purchase price of
$1.00 per share.
(15) Includes 75,000 shares issuable upon exercise of warrants at exercise
price of $1.25 per share.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
CROSS-REFERENCE
REGISTRATION STATEMENT LOCATION OR CAPTION
ITEM NUMBER AND HEADING IN PROSPECTUS
1. Front of Registration Statement and Outside
Front Cover Page of Prospectus 5
2. Inside Front and Outside Back
Cover Pages of Prospectus 7
3. Prospectus Summary Information and
Risk Factors 8
4. Use of Proceeds 16
5. Determination of Offering Price 16
6. Selling Security Holders 16
7. Plan of Distribution 19
8. Legal Proceedings 20
9. Directors, Executive Officers, Promoters
and Control Persons 20
10. Security Ownership of Certain Beneficial
Owners and Management 22
11. Description of Securities 23
12. Interests of Named Experts and Counsel 23
13. Description of Business 23
14. Management's Discussion and Analysis
or Plan of Operation 28
15. Description of Property 33
16. Certain Relationships and Related Transactions 33
17. Market for Common Equity and Related
Stockholder Matters 34
18. Executive Compensation 35
19. Financial Statements 36
20. Changes in and Disagreements of Accountants
on Accounting or Financial Disclosure 53
Part II - Information not required in Prospectus
1 Indemnification of Directors & Officers
2 Other Expenses of Issuance and Distribution
3 Recent Sales of Unregistered Securities
4 Exhibits
5 Undertakings
6 Signatures
PROSPECTUS
AMERICAN MILLENNIUM CORPORATION, INC.
11,415,158 SHARES OF COMMON STOCK
OFFERED BY CERTAIN SELLING SECURITY HOLDERS
----------------------------------
This Prospectus relates to the sale of an estimated 11,415,158 shares of
common stock, $.001 par value (the "Common Stock"), of American Millennium
Corporation, Inc. (the "Company"), including 4,845,391 shares currently issued
and outstanding, and 6,569,767 shares issuable upon exercise of warrants and
options. All such shares are or shall be offered by the holders thereof
identified as "Selling Security Holders" in this Prospectus. See "SELLING
SECURITY HOLDERS."
The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Security Holders. Sales of
shares of Common Stock may be made from time to time (in
transactions which may include block transactions) by or for the
account of the Selling Security Holders in the over-the-counter
market or in negotiated transactions, or otherwise, at market
prices prevailing at the time of sale or at negotiated prices.
The Company has informed the Selling Security Holders that the
anti-manipulative rules under the Securities Exchange Act of
1934, Regulation M, may apply to their sales and has furnished
each of the Selling Stockholders with a copy of these Rules. The
Company has also informed the Selling Security Holders of the
need for delivery of copies of this Prospectus. See "SELLING
SECURITY HOLDERS" and "PLAN OF DISTRIBUTION."
------------------------
THE SECURITIES OFFERED INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS"
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
ALL OF THE 11,415,158 COMMON SHARES REGISTERED HEREIN ARE BEING OFFERED BY
SELLING SECURITY HOLDERS. THE COMPANY WILL NOT RECEIVE ANY PROCEEDS FROM THE
SALE OF SHARES BY THE SELLING SECURITY HOLDERS.
PROCEEDS TO
PROPOSED UNDERWRITI PROCEEDS THE SELLING
CLASS OF OFFERING NG TO THE SECURITY
SECURITY PRICE(1) DISCOUNTS(2) COMPANY HOLDERS
Common Stock, 3,080,001 $0 $0 $1,909,600.62
$.001 par shares @
value, offered $0.62
by Selling
Shareholders
Common Stock, 3,234,001 $0 $0 $2,005,080.62
issuable upon shares @
exercise of $0.62
warrants
Common Stock, 855,441 $0 $0 $ 530,373.42
$.001 par shares @
value, offered $0.62
by Selling
Shareholders
Common Stock, 880,566 $0 $0 $ 545,950.92
issuable upon shares @
exercise of $0.62
warrants
Common Stock, 181,579 $0 $0 $ 112,578.98
$.001 par shares @
value, offered $0.62
by Selling
Shareholders
Common Stock, 50,000 $0 $0 $ 31,000.00
issuable upon shares @
exercise of $0.62
warrants
Common Stock, 53,370 $0 $0 $ 33,098.40
$.001 par shares @
value, offered $0.62
by Selling
Shareholders
Common Stock, 30,200 $0 $0 $ 18,724.00
issuable upon shares @
exercise of $0.62
warrants
Common Stock, 600,000 $0 $0 $ 372,000.00
$.001 par shares @
value, offered $0.62
by Selling
Shareholder
Common Stock, 800,000 $0 $0 $ 496,000.00
$.001 par shares @
value, $0.62
issuable upon
exercise of
Options
Common Stock, 750,000 $0 $0 $ 465,000.00
$.001 par shares @
value, $0.62
issuable upon
conversion of
promissory
note
Common Stock, 750,000
$.001 par shares @
value, $0.62 $0 $0 $ 465,000.00
issuable upon
exercise of
warrants
Common Stock, 75,000 $0 $0 $ 46,500.00
$.001 par shares @
value, offered $0.62
by Selling
Shareholder
Common Stock, 75,000 $0 $0 $ 46,500.00
$.001 par shares @
value, $0.62
issuable upon
exercise of
options
TOTAL 11,415,158 $0 $0 $7,077,397.96
(1) Represents the anticipated sale price by the Selling Security Holders at
$0.62 per share, which was the closing bid price on November 27, 2000.
There can be no assurances, however, that the Selling Security Holders
will be able to sell their shares of Common Stock at this price, or that
a liquid market will exist for the Company's Common Stock.
(2) Does not give effect to ordinary brokerage commissions or to the costs of
sale that will be borne solely by the Selling Security Holders.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
The date of this proposed Prospectus is September, 2000.
INSIDE FRONT COVER
Available Information
The Company is subject to the reporting requirements of the Securities and
Exchange Act of 1934, as amended, and provides quarterly and annual reports to
the Securities and Exchange Commission. Our annual report for the most recent
fiscal year on Form 10-KSB, when filed, shall contain audited financial
statements. The reports and other information filed by us may be inspected and
copied at the public reference facilities of the Securities and Exchange
Commission (SEC) in Washington, D. C., and at some of its Regional Offices, and
copies of such material can be obtained from the Public Reference Section of the
SEC, Washington, DC 20549 at prescribed rates. We are an electronic filer and
the SEC maintains a Web site that contains reports, proxy and information
statements and other information regarding issuers that file electronically. The
SEC Web site address is http://www.sec.gov. The Company will provide a report to
stockholders, at least annually, which report will include audited financial
statements of the Company.
Incorporation of Documents by Reference.
All materials incorporated by reference throughout this Prospectus are available
(not including exhibits to the information that is incorporated by reference
unless the exhibits are themselves specifically incorporated by reference)
without charge from us to each person who receives a Prospectus, upon written or
oral request of such person. Any request for such material should be directed to
the Corporate Secretary, if in writing, to 1010 Tenth St, Suite 100, Golden,
Colorado 80401, or, if by phone, (303) 279-2002.
The Registrant is subject to the informational and reporting requirements of
Sections 13(a), 13(c) and 14 of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act") and in accordance therewith, files reports, proxy
statements and other information with the Securities and Exchange Commission
("SEC"). The following documents, which are on file with the SEC are
incorporated in this Registration Statement by reference:
(a) The Registrant's Securities and Exchange Commission Forms 8- K, 10-KSB,
10-QSB and SB-2, which contain, either directly or by incorporation by
reference, audited financial statements of the Registrant's latest fiscal year
for which such statements have been filed.
(b) The description of the Common Stock which is contained in registration
statements filed under the Exchange Act, including any amendment or report filed
for the purpose of updating such description.
PROSPECTUS SUMMARY
The following Summary is qualified in its entirety by other more detailed
information throughout this Registration Statement. Statements in this document
which are not purely historical facts, including statements regarding
anticipations, beliefs, expectations, hopes, intentions or strategies for the
future, may be forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended and Section 21.E of the Securities
Exchange Act of 1934, as amended. All forward-looking statements within this
document are based upon information available to us on the date of this
Registration Statement. Any forward-looking statements involve risks and
uncertainties that could cause actual events or results to differ materially
from the events or results described in the forward-looking statements,
including the timing and nature of independent test results; the nature of
changes in laws and regulations that govern various aspects of our business; the
market acceptance of our licensed technologies; retention and productivity of
key employees; the availability of acquisition candidates and proprietary
technologies at prices we believe to be fair market; the direction and success
of competitors; management retention; and unanticipated market changes. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Readers are cautioned not to place undue reliance on these forward-looking
statements.
The Company
American Millennium Corporation, Inc. (AMCI) is a New Mexico corporation (NASDAQ
OTCBB: AMCI, formerly EOPT) organized in 1979 under the name Energy Optics, Inc.
(Energy) to develop various proprietary and patented technologies for industrial
and consumer applications. Energy was unable to realize revenue sufficient to
maintain an active status, and was unsuccessful in securing funding sufficient
to aggressively market these devices and systems. Energy also was unable to
enlist the resources of a partner concern necessary to take product development
from the prototypical stage into production and then promote and market its
various products through distribution to the end-user. After becoming inactive
and ceasing all initiatives to pursue funding for production and marketing,
Energy was de-listed from the NASDAQ Small Cap listing. However, as an inactive
over-the- counter stock, Energy's principals maintained the corporate books,
kept Energy in good standing and retained its status as fully reporting to the
Securities and Exchange Commission.
In June 1997, Management began discussions with an unincorporated business
organization (UBO) that owned certain assets and rights to purchase or assign
purchase rights of certain other assets. These discussions lead to the
acquisition in August 1997 of certain of the UBO's business assets including
real estate in Tavares, Florida, buildings, equipment and a controlling stock
interest (held by parties related to the UBO) of Lean Protein Foods, Inc. (LPF),
a specialty food company and their wholly- owned subsidiary, Wildwood Ostrich
Ranch, Inc. (WWOR) in a transaction totaling approximately $3.6 million. This
transaction was subsequently amended on October 10, 1997. Energy filed for
foreign corporation registration with the State of Florida and moved its
corporate offices from New Mexico to Tavares, Florida In September and October
1997, Energy acquired a total of 80% of American Millennium Corporation (AMC)
and 20% of Microgravity Aviation Corporation (MAC) from the UBO, both of which
were development stage enterprises.
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, the Company changed its name to American
Millennium Corporation, Inc.
(AMCI)
AMCI is currently a provider of wireless and wire-line solutions for tracking
and monitoring of mobile and fixed assets utilizing Low-Earth-Orbit Satellites
(LEOs), Geo-Stationary Satellites (GEOs), and terrestrial wireless and wireline
technologies. AMCI has experience in most communication platforms including
satellite, CDPD, cellular, paging, wire-line, and various RF protocols.
AMCI develops, sells, installs and services satellite communication systems in
the field for tracking, monitoring, and reporting data on oil wells, natural gas
compressors, rail cars, and trucks. AMCI is 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, among others.
AMCI receives revenue from hardware sales, engineering, installation, and
operating services. In addition, AMCI generates monthly revenues from airtime
sales. AMCI is an applications service provider (ASP,) providing data access,
tracking, and analysis packages for customers via the Internet.
AMCI is 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, the company is 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 between AMCI and Vistar Datacom, Inc., the
company 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 company's VAR contract with ORBCOMM, AMCI is 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 AMCI 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.
American Millennium Corporation, Inc. is a VAR for Logan, Utah based Wescor,
Inc.'s RDT800 mobile data delivery terminal. Under the terms of the agreement
AMCI will market the product throughout North America, Central America, and
South America.
Currently, AMCI has 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.
The Company's principal executive offices are located at 1010 Tenth Street,
Suite 100, Golden, Colorado 80401, telephone: 303- 279-2002.
THE OFFERING
Securities This Prospectus relates to
the sale of 11,415,158 shares
of Common Stock by the holders
hereof, identified as "Selling
Security Holders" in this
Prospectus. See "SELLING
SECURITY HOLDERS."
The 11,415,158 shares of Common Stock
offered by the Selling Security Holders consist
of 4,845,391 shares outstanding, as well as
6,569,767 shares issuable upon the exercise of
outstanding warrants and options. The shares
may be offered for sale from time to time by
the holders in regular brokerage transactions,
either directly or through brokers or to
dealers, in private sales or negotiated
transactions, or otherwise, at prices related
to then prevailing market prices.
The Company will not receive any proceeds
from the sale of shares of Common Stock by the
Selling Security Holders. All expenses of the
registration of such securities are, however,
being borne by the Company.
The Selling Security Holders, and not the
Company, will pay or assume such brokerage
commissions as may be incurred in the sale of
their securities.
The Company's Common Stock is traded on
the over-the- counter market through the NASD
OTC Bulletin Board under the symbol "AMCI". On
November 27, 2000, the closing bid price was
$0.62.
Total number of shares of
Common Stock 21,402,284
Outstanding
Total number of shares of 11,415,158
Common Stock being
Offered by Selling
Security Holders
Risk Factors The Common Stock offered
hereby involves a high degree
of risk and prospective
investors should consider
carefully the factors specified
under "Risk Factors" before
electing to invest. See "Risk
Factors."
Trading Symbol "AMCI"
RISK FACTORS
The securities offered hereby involve a high degree of risk and each prospective
investor should consider certain risks and speculative features inherent in and
affecting the business of the Company before purchasing any of the securities
offered hereby. In considering the following risk and speculative factors, a
prospective purchaser should realize that there is a substantial risk of losing
his entire investment. Among these speculative factors which management
considers pose the greatest risk to prospective investors include the following:
Risks relating to the Company's uncertainty as a going concern.
Immediate and future cash need; lack of recent and future profit from
operations. Due to Management's focus on product development, the Company has
not been profitable since its re- organization in 1998. Although the Company's
current forward- looking business plan calls for a continual increase in sales
of developed products, Management is also planning for increased development
costs that will not be offset by increased revenue in the near future.
To fund operations the Company will need to pursue additional sources of cash in
the short term. As of November 27, 2000, the Company had working capital of
about $140,000. Such funds are not sufficient to cover current operating
expenses. The Company's revenues are not estimated to cover its operating
expenses until June, 2001 and in the interim the Company will need an estimated
additional $2 million in capital funding. The availability of other sources of
cash may, or may not, materialize and thus, present a significant risk to the
investor that the Company will exhaust its financial resources in the short
term, with no ability to pay for ongoing operational expenses, before the
Company's revenues can be developed to adequately cover its expenses. The
Company's recurring losses from operations, significant working capital
deficiency, and deficiency in assets raise substantial doubt as to the Company's
ability to continue as a going concern. (See also, the Independent Auditor's
Report and Financial Statements).
Risks Relating to the Offering
Limited public trading market for the Company's common shares. Our shares began
trading through the NASD OTC Electronic Bulletin Board under the symbol AMCI
during June 1998. Accordingly, there can be no assurance that a trading market
will continue. Each purchaser should view their investment in these securities
for long-range investment purposes only and not with a view to resell or
otherwise dispose of their shares in the near future. When a registration
statement becomes effective relating to the shares sold herein, purchasers who
desire to liquidate their shares may have difficulty selling them considering
the early stage nature of our public market, should any such market develop.
Accordingly, shares should only be purchased as a long-term investment.
Nasdaq Stock Market and Market Illiquidity. The Company's Common Stock does not
meet the current Nasdaq listing requirements for the SmallCap(r) Market. If the
Company is unable to satisfy Nasdaq's requirements for listing, trading, if any,
the Common Stock will continue to be conducted on the NASD's OTC Bulletin Board,
established for securities that do not meet the Nasdaq SmallCap(r) Market
listing requirements. Consequently, the liquidity of the Company's securities
could be impaired, not only in the number of securities which could be bought
and sold, but also through delays in the timing of transactions, reduction in
security analysts' and the news media's coverage of the Company, and lower
prices for the Company's securities than might otherwise be attained.
Risks of Low-Priced Stocks; Penny Stock Regulations. Until such time, if any,
that the Company's securities are listed on the Nasdaq SmallCap(r) Market or a
registered U.S. securities exchange, they will continue to be subject to Rule
15g-9 under the 1934 Act, which imposes additional sales practice requirements
on broker-deals which sell such securities to persons other than established
customers and institutional accredited investors. For transactions covered by
this rule, a broker-dealer must make a special suitability determination for the
purchaser and have received the purchaser's written consent to the transaction
prior to sale. Consequently, the Rule may affect the ability of broker- dealers
to sell the Company's Common Stock and may affect the ability of purchasers in
this Offering to sell any of the Common Stock acquired pursuant to this
Memorandum in the secondary market. ; The Commissions regulations define a
"penny stock" to be any equity security that has a market price (as therein
defined) less than $5.00 per share or with an exercise price of less than $5.00
per share, subject to certain exceptions. The penny stock restrictions will not
apply to the Company's Common Stock if the Common Stock is listed on the Nasdaq
SmallCap(r) Market and has certain price and volume information provided on a
current and continuing basis, or meets certain minimum net tangible assets and
other criteria. There can be no assurance that the Company's securities will
qualify for exemption from these restrictions. If the Company's Common Stock
continues to be subject to the rules on penny stocks, the market liquidity for
the Common Stock could be severely adversely affected.
Historically low trading volume for the Company's common shares. Because of the
relatively low volume of trading that has historically taken place with our
common stock, if could be difficult to sell shares in large volume. We have
calculated the average weekly trading volume to be near 175,500 shares for the
last six months which does not allow for large blocks of stock to be sold. A
large block trade order could have an adverse effect on the stock price.
Shares eligible for future sale may adversely affect the market. Should the
Company be successful in the registration of the shares described herein, such
an event may have a depressive effect on the then trading price of our common
shares. In the future, the Company intends to enter into licensing and other
agreements which may provide for an exchange of our common shares. Accordingly,
there is the possibility that sales of common shares issued in such a manner,
may, in the future, have a depressive effect on the price of our common stock in
any market which may develop.
Risks Relating to the Company
Recent Organization. The Company re-organized during 1998 and should be
considered as still in the development and promotional stage. We have not relied
upon anything other than the opinion of management in developing the business
plan. We are, therefore, subject to all the risks inherent in any start-up
venture, many of which are beyond the control of management.
Reliance on forward looking statements. Statements in this document which are
not purely historical facts, including statements regarding anticipations,
beliefs, expectations, hopes, intentions or strategies for the future, may be
forward looking statements within the meaning of section 27A of the Securities
Act of 1933, as amended and Section 21.E of the Securities Exchange Act of 1934,
as amended. All forward-looking statements within this document are based upon
information available to us on the date of this release. Any forward looking
statements involve risks and uncertainties that could cause actual events or
results to differ materially from the events or results described in the
forward-looking statements, including the timing and nature of independent test
results; the nature of changes in laws and regulations that govern various
aspects of our business; the market acceptance of our licensed technologies;
retention and productivity of key employees; the availability of acquisition
candidates and proprietary technologies at prices we believe to be fair market;
the direction and success of competitors; management retention; and
unanticipated market changes. We undertake no obligation to publicly update or
revise any forward- looking statements, whether as a result of new information,
future events or otherwise. Readers are cautioned not to place undue reliance on
these forward-looking statements.
Risks involving contingent liabilities for securities offering
On or about September 13, 1999, AMCI commenced a private offering of the
Company's common stock at a purchase price of $0.25 per share, which offering
was intended to conform with available exemptions from the registration of the
securities, including Sections 4(2) and 4(6), and safe harbor Rule 506 of
Regulation D, of the Securities Act of 1933, as amended (the "Act"). The Company
proceeded with the raising of funds under its private offering through a selling
agent, accumulating aggregate gross proceeds totaling $770,000.00 as of the
close of the offering on September 13, 2000. In the course of the offering, the
Company raised $12,500.00 in Alabama, $30,000.00 in Colorado, $13,000.00 in
Georgia, $50,000.00 in Illinois, $39,000.00 in Kentucky and $1,250.00 in Texas.
In August, 2000, the Company determined that a Form D NOTICE OF SALE OF
SECURITIES had not been forwarded to the Securities and Exchange Commission
within 15 days of the first sale of securities under the September 13, 1999
offering, and that similarly, the appropriate notice filings and fees had not
been forwarded to regulatory agencies in the states of Alabama, Colorado,
Georgia, Illinois, Kentucky and Texas. Upon discovering this inadvertent
deficiency, the Company, in an abundance of caution and in good faith, with a
view toward full compliance with applicable federal and state laws, immediately
prepared the Forms D, cover letters, uniform consents, and filing fees, as
necessary, and filed them with the SEC and with the appropriate state regulatory
agencies on September 9, 2000.
The Company is uncertain whether any of the administrative agencies of the
above-listed states will accept the Company's tardy notice filings as curative
for purposes of preserving the Rule 506 exemption in any such state(s). The
Company believes alternative self-executing transactional exemptions are
available in the states of Colorado and Illinois in connection with the
Company's offering, due primarily to the private nature of the offering,
relatively small number of qualified, accredited purchasers, and aggregate
amount of dollars raised in each state. The Company believes, however, that no
similar alternative exemptions are available for the Company's sale of
securities resulting in $12,500.00 in offering proceeds in Alabama, $13,000.00
in Georgia, $39,000.00 in Kentucky, and $1,250.00 in Texas.
In the event the state securities regulatory agency or agencies of Alabama,
Georgia, Kentucky and/or Texas determine that a violation has defeated the
available Rule 506 exemption and that no alternative exemption exists, such
agency or agencies may elect to proceed against the Company for injunctive
relief and administrative/civil penalties, including but not limited to
disgorgement of the above-described offering proceeds. The unregistered sale of
securities in Alabama, Georgia, Kentucky and/or Texas without the benefit of an
exemption from registration could also give rise to civil actions against the
company by purchaser(s) in the offering in such states, who may be entitled to
rescission and refund of the purchase price with interest.
As of the date of this registration statement, the Company has not been
contacted by any state administrative agency concerning its untimely notice
filings in connection with its September 1999 private offering, and has not been
served with, or received any form of notice or demand concerning, a civil action
for rescission by any investor in connection with the offering.
Risks relating to the Company's proposed operations
Reliance on future licensing agreements and acquisitions. Our long-term growth
strategy envisions licensing agreements, joint ventures, and/or acquisitions in
order to achieve a continual flow of products, processes and/or devices which
are derived from patents or other similarly protected intellectual properties.
Accordingly, once a particular acquisition is identified or patent-use is
determined, we must negotiate an acquisition or license agreement on terms and
under conditions which are favorable to profitable operations. In the course of
such activities, a number of factors can contribute to a lack of success,
including a lack of availability of patents, inability of management to
successfully negotiate a favorable license or, if negotiated, an inability to
profitably deliver the intended device or process to the market. Further, until
such time as we obtain sufficient assets to offset any potential loss, the
failure of any one of the Company's technologies could result in an inability to
continue as a going concern. Except in the case of the acquisition of an
operating entity, our business strategy is equivalent to a continual cycle of
operating start-up or development stage entities with all the risks inherent to
any start-up or development stage entity. Accordingly, there can be no assurance
that we can initially accomplish our business objectives or, if accomplished,
that we can continue profitable operations.
Competition and no formal feasibility or marketing studies. Numerous firms,
located throughout the United States, compete or may compete vigorously with us
for the licensing of patented or other intellectually protected processes and
devices, and for acquisitions. We will be at a competitive disadvantage in the
pursuit of possible target acquisitions or licensing agreements because of the
inexperience of the Company. No independent feasibility or marketing studies
have been performed to determine the demand for the Company's products and
services. Accordingly, there can be no assurance that a substantial market
exists or will develop for our products and services or, if any market does
develop, there can be no assurance that we can successfully complete our
business purpose.
Vulnerability to fluctuation in economy. Demand for technologies to be
commercialized by us is dependent upon, among other things, general economic
conditions which are historically cyclical in nature. Prolonged periods of
recession may be damaging to the Company.
No assurance of commercial success. Even if we are successful in conducting our
affairs in the manner described herein as it relates to our products and
services, market acceptance and the ability to expand market penetration of
these products and related services is driven by the demand for such products or
services. As such, there can be no assurance our product/service lines will
either achieve initial market acceptance or, if achieved, will maintain
sufficient market share to conduct profitable operations.
Dependence upon key personnel. Our continued success will be heavily dependent
upon the services of key personnel, including key employees, officers and the
Board of Directors. These key personnel are expected to remain with the Company;
however the loss of one or more of these individuals could have an adverse
effect on the operations of the Company until a suitable replacement can be
found. As we expand, the continued success of the business will increasingly
depend on our ability to retain and add to the existing management team. At
present, there can be no assurance given that our current officers, directors
and management employees will continue to serve in their respective roles.
Limited liability of Officers and Directors. Our Certificate of Incorporation
and by-laws provide that a Director's liability to the Company for monetary
damages will be limited. In addition, we are obligated under the Articles of
Incorporation and by-laws to indemnify the Company's Directors and Officers
against certain liabilities incurred in the course of their service in such
capacities. We may in the future execute more broad indemnification agreements
which will indemnify each Director and Officer against certain liabilities which
they may incur. Each of these measures could reduce the legal remedies available
to the Company and to the shareholders against such individuals.
Supplier Instability. 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.
USE OF PROCEEDS
We will not realize any proceeds from the sale of shares of Common Stock by
the Selling Security Holders. See "SELLING SECURITY HOLDERS".
DETERMINATION OF OFFERING PRICE
The offering price of the securities described herein was calculated
pursuant to Rule 457(c)and/or(g) of the Act and was not computed based on the
assets, historical operating performance or other conventional means and should
not be construed to indicate any relationship thereto. In establishing the
offering price, the company relied on the closing "bid" price as reflected in
the over-the-counter (OTC) marketplace. In May, 1998, our Common Shares were
cleared for trading through the OTC under the symbol AMCI. Since that date, our
Common Shares have traded at prices ranging from $.19-$2.125. On November 27,
2000, the closing "bid" price of the Company's securities was $0.62.
SELLING SECURITY HOLDERS
The shares of Common Stock of the Company offered by this Prospectus are
being sold for the account of the Selling Security Holders identified in the
table indicated below (the "Selling Security Holders"). The Selling Security
Holders are offering for sale an aggregate of 11,415,158 shares of the Company's
Common Stock, of which 4,845,391 are outstanding and 6,569,767 shares are
issuable upon the exercise of outstanding warrants and options held by the
Security Holders. The subject shares will be offered at market prices as
reflected on the Electronic Bulletin Board. It is anticipated that registered
broker-dealers will be allowed the commissions which are usual and customary in
open market transactions. There are no other understandings or arrangements with
respect to the distribution of the Common Stock.
The following table sets forth the number of issued and outstanding, as
well as issuable, Shares being held of record or beneficially (to the extent
known by the Company) by such Selling Security Holders and provides (by footnote
reference) any material relationship between the Company and such Selling
Security Holders, all of which is based upon information currently available to
the Company.
Number
Number of
of Shares Number Number
Shares Issuable of of
of Upon Shares Shares
Issued Exercise Percenta of of
Name Common of ge Common Common
Stock Warrants Before Stock to Stock
Before / Offering be sold After
Offering (1) in Offering
Options Offering
(1) (1)
BMJ Partners (2) 100,000 100,000 * 200,000 0
Gary, Pamela and 120,000 120,000 1.1214% 240,000 0
Andrew McKean (2)
Stanley E. Adams (2) 50,000 50,000 * 100,000 0
Atlanta Commodity 40,000 40,000 * 80,000 0
Corporation Profit
Sharing Plan & Trust
(2)
Albert L. Simpson (2) 40,000 40,000 * 80,000 0
Chelverton Fund LTD (2) 500,000 500,000 4.6724% 1,000,000 0
Anglo Irish Nominees 100,000 100,000 * 200,000 0
(Trusts) Limited (2)
Greg Bigham (2) 66,667 66,667 * 133,334 0
Roy D. Bigham (2) 66,667 66,667 * 133,334 0
Donald Bigham (2) 66,667 66,667 * 133,334 0
Dr. Robert Chin (2) 200,000 200,000 1.869% 400,000 0
Roland Mueller (2) 500,000 500,000 4.672% 1,000,000 0
Robert C. Pelphrey (2) 56,000 56,000 * 112,000 0
Terry H. Thomas (2) 12,000 12,000 * 24,000 0
John Martin Preston (2) 100,000 100,000 * 200,000 0
John S. Robinson (2) 48,000 48,000 * 96,000 0
Brigit Klimischka (2) 100,000 100,000 * 200,000 0
Wayne Philpott (2) 3,000 3,000 * 6,000 0
Mary Thornton (2) 2,000 2,000 * 4,000 0
Paul Lathigee and 200,000 200,000 1.869% 400,000 0
Steve Zadra (2)
Anthony Kuschak (2) 109,000 109,000 1.019% 218,000 0
Research Equity Fund(2) 200,000 200,000 1.896% 400,000 0
Paul Lathigee (2) 20,000 20,000 * 40,000 0
574080 BC Ltd, dba 140,000 140,000 1.308% 280,000 0
Performance Capital
Group (2)
Sudun DeWitt Capital 200,000 200,000 1.896% 400,000 0
Corp. (2)
Mark and Carolyn Stys(2) 20,000 20,000 * 40,000 0
JoAnn Augsback (2) 10,000 10,000 * 20,000 0
Beverly Lewis (2) 10,000 10,000 * 20,000 0
John M. Lockhart II (3) 50,000 50,000 * 100,000 0
Robert E. Buntin (5) 600,000 0 3.738% 600,000 0
Molesworth Associates(4) 23,170 0 * 23,170 0
AlphaCom, Inc. (3) 87,719 0 * 87,719 0
Doug Chalmers, MD (3) 43,860 0 * 43,860 0
Lindy J. Amyx (4) 19,857 19,857 * 39,714 0
John S. Robinson (4) 10,343 10,343 * 20,686 0
Options Unlimited, 1,605,441 1,605,441 15.000% 3,210,882 0
Inc. (6)
Augsback and 0 179,125 * 179,125 0
Associates, Inc. (8)
Potter Financial, 0 800,000 3.738% 800,000 0
Inc. (7)
Peter A. Jankowski (9) 50,000 50,000 * 100,000 0
Patrick Galvin (9) 25,000 25,000 * 50,000 0
Total 4,845,391 6,569,767 52.627% 11,415,158 0
* Represents less than One Percent (1%) of the issued and outstanding
stock.
(1) Includes an additional 6,569,767 currently unissued shares covered by
this registration statement which may or may not be issued and/or sold,
dependent upon exercise of warrants and options and payment of full
purchase price for such additional shares by the Security Holders, such
warrant or option shares described in the following notes and in this
prospectus.
(2) Shares issued pursuant to coordinated private offering made in reliance
upon Sections 4(6), 4(2) and/or 3(b) of the Act and according to
Regulation D. Each such Selling Security Holder also holds a warrant
exercisable for the purchase of an equivalent number of additional shares
at an exercise price of $0.25 per share (aggregate 3,080,001 warrant
shares).
(3) Shares issued pursuant to private purchasers in reliance upon Section
4(2) of the Act. John M. Lockhart II additionally holds a warrant for the
purchase of an additional 50,000 (warrant) shares at an exercise price of
$1.00 per share.
(4) Shares issued in lieu of cash as compensation for business consulting
services. Amyx holds a warrant exercisable for an additional 19,857
(warrant) shares at $0.25 per share. Robinson holds a warrant exercisable
for an additional 10,343 (warrant) shares at $0.25 per share.
(5) Shares acquired in exchange for 100% of the stock of
CompuGraphics Corporation.
(6) Shares acquired upon exercise of conversion of two (2) convertible
promissory notes dated April 7, 2000 for $502,500 and June 7, 2000 for
$300,000, respectively. Security Holder also holds warrants for the
purchase of 502,500 additional shares at $1.00 per share, and 352,941
additional shares at $0.85 per share. Total includes an additional
750,000 shares issuable upon conversion of $675,000 promissory note and
warrant for the purchase of 750,000 shares at a purchase price of $0.90
per share.
(7) Includes shares issuable upon exercise of options held by
Potter Financial, Inc., the Company's investor relations firm,
exercisable as follows:
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
As of the date of this registration, Potter Financial has not exercised
any of the options and is not a holder of any issued shares. Potter
Financial is the beneficial owner of 800,000 shares issuable upon
exercise of these options.
(8) Includes shares issuable upon exercise by Augsback at prices ranging from
$0.25 to $1.00 per share. Augsback has no issued and outstanding common
stock however, Augsback is the beneficial owner of 179,125 shares
issuable upon exercise of warrants issued to Augsback as a commissioned
placement agent for the Company.
(9) Includes a total of 75,000 shares issued pursuant to Option Purchase
Agreement for purchase price of $1.00 per share, in addition to warrants
for an additional 75,000 shares at a purchase price of $1.25 per share.
PLAN OF DISTRIBUTION
Selling Security Holders
The Selling Security Holders are offering shares of Common Stock for their
own account and not for the account of the Company. The Company will not receive
any proceeds from the sale of the shares of Common Stock by the Selling Security
Holders.
Each Selling Security Holder will, prior to any sales, agree (a) not
to effect any offers or sales of the Common Stock in any manner other than as
specified in this Prospectus, (b) to inform the Company of any sale of Common
Stock at least one business day prior to such sale and (c) not to purchase or
induce others to purchase Common Stock in violation of Regulation M under the
Exchange Act.
The shares of Common Stock may be sold from time to time to purchasers
directly by any of the Selling Security Holders acting as principals for their
own accounts in one or more transactions in the over-the-counter market or in
negotiated transactions at market prices prevailing at the time of sale or at
prices otherwise negotiated. Alternatively, the shares of Common Stock may be
offered from time to time through agents, brokers, dealers or underwriters
designated from time to time, and such agents, brokers, dealers or underwriters
may receive compensation in the form of commissions or concessions from the
Selling Security Holders or the purchasers of the Common Stock.
Under the Exchange Act, and the regulations thereunder, any person engaged
in a distribution of the shares of Common Stock of the Company offered by this
Prospectus may not simultaneously engage in market making activities with
respect to the Common Stock of the Company during the applicable "cooling off"
periods prior to the commencement of such distribution. In addition, and without
limiting the foregoing, each Selling Security Holder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of Common Stock by the Selling Security
Holder. There are possible limitations upon trading activities and restrictions
upon broker-dealers effecting transactions in certain securities which may also
materially affect the value of, and an investor's ability to dispose of, the
Company's securities.
The Company will use its best efforts to file, during any period in which
offers or sales are being made, one or more post- effective amendments to the
Registration Statement, of which this Prospectus is a part, to describe any
material information with respect to the plan of distribution not previously
disclosed in this Prospectus or any material change to such information in this
Prospectus.
LEGAL PROCEEDINGS
We are not subject to any legal proceedings. We are unaware of any governmental
authority that is contemplating any procedure to which we are a participant.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
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
Bruce R. Bacon Vice President of Engineering, Chief 41
Technology Officer, Director
Shirley M. Harmon Director, 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. Mr. Cauthen has served on the board since 1999 and
his term expires July 31, 2001.
Stephen F. Watwood, 51, Vice President of Business Development/Chairman of
the Board/Director.
Mr. Watwood owned and operated a 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 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. Mr. Watwood has served on the Board since 1997. His term expires
July 31, 2001.
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. Mr. Bacon has served on the Board since 1998. His term
expires July 31, 2001.
Shirley M. Harmon, 53, Director, Secretary.
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. Ms. Harmon has been a Director since 1997. Her term expires
July 31, 2001.
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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company currently has 21,533,863 shares of its common stock issued and
outstanding. The following table sets forth information as of November 15, 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.
Percent
Amount of Shares of Ownership
Name and Address of Beneficial Common Stock, par of Class
Owner value .001, Owned
Beneficially
Andrew F. Cauthen 1,275,385(1) 5.92%
1600 Eldridge
Suite 808
Houston, Texas 77041
Stephen F. Watwood 1,518,333(2) 7.05%
17835 RCR 29
Oak Creek, Colorado 80467
Harto Ltd. 2,157,495 10.02%
Victoria House
P.O. Box 1090
The Valley, Anguilla
BWI
Global Investments Ltd., 2,700,000 12.54%
Trustee
Victoria House
P.O. Box 1066
The Valley, Anguilla
BWI
Mali-Suisse Mining Holdings, 1,500,000 6.97%
S.A.
28 Old Brompton Road
Suite 1119
London, England SW7 3DL
All Officers and Directors as 4,136,118(3) 19.21%
a Group (5 persons)
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 acting
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 acting 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.
DESCRIPTION OF SECURITIES
The Company, in accordance with its Articles of Incorporation and
Amendments thereto, is authorized to issue up to 50,000,000 shares of Common
Stock, par value $.001 per share, and 10,000,000 shares of Preferred Stock, par
value $1.00 per share. As of the date hereof, none of the Preferred Shares were
outstanding and there were 21,533,863 shares of Common Stock outstanding.
At the conclusion of this Offering, of the 21,533,863 Common Shares
currently issued and outstanding, 9,003,391 Common Shares are unregistered
securities, and, in the future, said unregistered shares may only be sold upon
compliance with Rule 144, promulgated under the Securities Act of 1933. In
Securities and Exchange Commission (SEC) Release No. 33-7390, Revision of
Holding Period Requirements in Rules 144 and 145, the SEC amended the holding
period contained in Rule 144 to permit the resale of limited amounts of
restricted securities by qualified persons after a one-year, rather than a
two-year, holding period. Also, the amendments permit unlimited resales of
restricted securities held by non-affiliates of the Company after a holding
period of two years, rather than three years. There are no promoters,
underwriters or persons or firms acting in any similar capacity associated with
the Company.
Holders of Common Shares are entitled to one vote per Common Share on all
matters to be voted on by Shareholders. The Common Shares do not have preemptive
rights or cumulative voting rights. A majority vote is sufficient for most
actions requiring the vote or concurrence of Shareholders. The Company's
Officers and Directors as a group (5 persons) own directly and control the votes
of approximately 11.62% of the Issuer's capital stock, and beneficially own,
including stock options not yet exercised, 19.21% of the common stock.
All Shares are entitled to share equally in dividends when and if declared
by the Board of Directors out of funds legally available therefore. It is
anticipated that the Company will not pay cash dividends on its Shares in the
foreseeable future. In the event of liquidation or dissolution of the Company,
whether voluntary or involuntary, holders of the Shares are entitled to share
equally in all assets of the Company legally available for distribution to
Shareholders. The holders of Shares have no preemptive or other subscription
rights to acquire authorized but unissued capital stock of the Company, and
there are no conversion rights or redemption or sinking fund provisions with
respect to such Shares. All of the outstanding Shares and those Shares issued in
accordance with this offering will be fully paid and non-assessable.
INTERESTS OF NAMED EXPERTS AND COUNSEL
No such interests.
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 concern necessary to take product development
from the prototypical stage into production and then promote and market its
various products through distribution to the end-user. After becoming inactive
and ceasing all initiatives to pursue funding for production and marketing,
Energy was de-listed from the NASDAQ Small Cap listing. However, as an inactive
over-the- counter stock, Energy's principals maintained the corporate books,
kept Energy in good standing and retained its status as fully reporting to the
Securities and Exchange Commission.
In order to proceed with its acquisition strategy, Energy recognized that it had
to reduce its overwhelming debt. A settlement agreement was reached to eliminate
the Small Business Administration debt (including accrued interest) by a
combination of cash payments, issuance of stock and forgiveness of debt. The
remainder of the debt was extinguished by forgiveness of some debt and interest
in exchange for common stock. (Most of this debt was to directors of Energy.)
With a clean slate, Management believed that it could pursue its research and
development of products and services.
In June 1997, Management began discussions with an unincorporated business
organization (UBO) that owned certain assets and rights to purchase or assign
purchase rights of certain other assets. These discussions lead to the
acquisition in August 1997 of certain of the UBO's business assets including
real estate in Tavares, Florida, buildings, equipment and a controlling stock
interest (held by parties related to the UBO) of Lean Protein Foods, Inc. (LPF),
a specialty food company and their wholly- owned subsidiary, Wildwood Ostrich
Ranch, Inc. (WWOR) in a transaction totaling approximately $3.6 million. This
transaction was subsequently amended on October 10, 1997. Energy filed for
foreign corporation registration with the State of Florida and moved its
corporate offices from New Mexico to Tavares, Florida In September and October
1997, Energy acquired a total of 80% of American Millennium Corporation (AMC)
and 20% of Microgravity Aviation Corporation (MAC) from the UBO, both of which
were development stage enterprises. Early in 1998, Energy discontinued
operations of LPF and on July 31, 1998, sold its interest in LPF to LPF's
minority shareholders. Management also negotiated the recessions of both the
purchase contract for a 20% stock ownership held in MAC and the contract for
purchase of the real estate in Tavares, Florida.
Under an Agreement and Plan of Merger dated May 27, 1998, Energy merged with
American Millennium Corporation, a subsidiary of which Energy owned
approximately an 80% interest, with the parent as the surviving corporation.
Upon completion of the merger, we changed our name to American Millennium
Corporation, Inc. 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.
We are a value-added reseller for ORBCOMM USA L.P. (ORBCOMM). ORBCOMM is a "low
earth orbit" satellite company that is a joint venture between Orbital Sciences,
Inc. and Teleglobe of Canada, Inc. Our contract with ORBCOMM allows us to
provide remote monitoring services to operators of oil and gas wells, intermodal
containers, and refrigerated and flatbed railcars. For example, by global
position we can determine the location of a particular refrigerated railcar as
well as the temperature inside the car, the voltage output of the generator, and
numerous other functions. Although virtually inactive at the time, we are also
value-added resellers for PageMart and American Mobile Satellite.
HOW DOES IT WORK?
(10) Status, location, malfunction or failure information is sent
from the compressor Subscriber Communicator to one of the LEOS
(11) The LEOS relays the information to an ORBCOMM Gateway Earth Station. In
North America, these are always in view simultaneously.
(12) 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.
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. 4 This
application provides another opportunity for us. The stream of information that
flows through the our service center must be properly integrated into the
transporter's existing Information Technology system. Failure information must
be sent to the appropriate maintenance location and the transport service center
for supervision. Position data should be available to the shipper at all times.
Intrusion information must alert security services. All this data should arrive
in correct formats at the right IT server. Further, if communication back to the
Subscriber Communicator is needed, transport personnel should be able to use
their existing applications to initiate it. We have an opportunity to configure
and supervise the installation of off- the-shelf software packages that can
manage this routing and formatting. Further, we can operate such routing
servers, consolidating the needs of smaller customers.
CUSTOMERS USING RAILROAD CARS. We have completed a testing phase of remote
monitoring of a refrigerated railcar under the provisions of a contract with
Union Pacific Railroad, the nation's largest rail company. The original contract
called for a prototype unit to be installed on a refrigerated railcar with
cellular capability for transmitting data, we anticipate the data will be
transmitted via satellite in the next phase. We have monitored, via satellite
and cellular, the location of a test railcar as well as the battery voltage and
refrigerated compartment temperature. We have installed the second generation of
equipment on the railcar which exceeds the performance of the first generation
equipment and allows us to move toward the next phase. The next phase of the
contract involves the outfitting of five refrigerated railcars with
pre-production models of 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.
PROPRIETARY TECHNOLOGY APPLICATIONS. We believe that we have now developed
certain proprietary technologies for the monitoring of various types of assets
utilizing the ORBCOMM LEO system. In addition to monitoring of data
communications, we have the ability to remotely control functions at the asset
location. Due to the sensitive and proprietary nature of this technology as well
as our intent to protect us to the extent that is possible with patent
applications, we are unable to disclose specific aspects of the systems.
Nevertheless, we believe that the applications are both valuable and viable. We
are presently in discussion with several companies regarding licensing and/or
joint venture proposals within the scope of the technologies and their
respective applications. We have retained the services of Pittenger and Smith, a
Denver, Colorado based patent, trademark, and copyright law firm, to effect
these applications.
MARKETING. We believe that a significant base of recurring revenues derived from
monthly satellite and paging monitoring charges will build AMCI's value. Our
principal marketing efforts are directed toward the oil and gas, intermodal
container, and railroad industries which have a need for monitoring of high
value assets. Our personnel work with management and engineers in the industries
discussed above in order to determine their technological needs, cost objectives
and to develop solutions for their individualized asset monitoring requirements.
Marketing efforts are performed by both our personnel and outside sales service
providers. We have and will continue through the year 2000, to market our
services at industry trade shows.
COMPETITION. There are numerous competitors to ORBCOMM's Low Earth Orbit
satellite based data and messaging service. However, we are confident that there
does not exist, at present, any 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.
MANUFACTURING AND SUPPLIERS. We purchase the majority of the components for our
subscriber data communicators from ORBCOMM; however, we believe that these
components are readily available from more than one source of supply at
competitive prices. Airtime for satellite monitoring is also purchased from
ORBCOMM.
GOVERNMENT REGULATIONS. As value-added resellers for Vistar, ORBCOMM, Wescor,
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 October 9, 2000, we had fifteen full time
employees, four of whom are directors or officers. None of our
personnel are covered by collective bargaining agreements.
Relations with our personnel are considered good.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis should be read in conjunction with the
financial statements and related notes, as well as the discussion in the Form
10-KSB/A, which provide additional information concerning the Company's
financial activities and condition.
COMPANY OVERVIEW AND PLAN OF OPERATION
American Millennium Corporation, Inc. (AMCI) is a provider of wireless and
wire-line solutions for tracking and monitoring of mobile and fixed assets
utilizing Low-Earth-Orbit Satellites (LEOs), Geo-Stationary Satellites (GEOs),
and terrestrial wireless and wireline technologies. AMCI has experience in most
communication platforms including satellite, CDPD, cellular, paging, wire-line,
and various RF protocols.
AMCI develops, sells, installs and services satellite communication systems in
the field for tracking, monitoring, and reporting data on oil wells, natural gas
compressors, rail cars, and trucks. AMCI is 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, among others.
AMCI receives revenue from hardware sales, engineering, installation, and
operating services. In addition, AMCI generates monthly revenues from airtime
sales. AMCI is an applications service provider (ASP,) providing data access,
tracking, and analysis packages for customers via the Internet.
AMCI is 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, the company is 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 between AMCI and Vistar Datacom, Inc., the
company 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 company's VAR contract with ORBCOMM, AMCI is 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 AMCI 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.
American Millennium Corporation, Inc. is a VAR for Logan, Utah based Wescor,
Inc.'s RDT800 mobile data delivery terminal. Under the terms of the agreement
AMCI will market the product throughout North America, Central America, and
South America.
Currently, AMCI has 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
AMCI's 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 its customers, AMCI receives compensation for its engineering, installation,
equipment sales, and monthly airtime fees.
OBJECTIVE
To expand the company's growing base of monthly subscribers who recognize the
economic and human resource efficiencies of utilizing AMCI's 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.
AMCI has 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, the Company's 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 AMCI's
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 the AMCI 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.
COMPETITION
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 AMCI has developed and deployed.
The company is recognized within the industry as one of the most creative,
unique, and innovative solutions providers in the field. AMCI's aggressive entry
into gas compressor monitoring, as an example, has earned it recognition and has
created enthusiasm among some of the major petroleum producers.
AMCI 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.
AMCI's CURRENT PROJECTS
ABB
American Red Cross
Cabot Oil and Gas (NYSE: COG)
Columbia University
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
Union Pacific Railroad (NYSE: UPR)
Universal Compression, Inc.
Vistar Datacom
Vistar Telecommunications, Inc.
Walsh Engineering, Inc.
Wescor, Inc.
AMCI has additional projects in the engineering, development and field-testing
stages working with several companies that require strict non-disclosure at this
time.
FINANCIAL CONDITION: NEED FOR ADDITIONAL FUNDING
Lack of recent, and future, profit from operations. 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. Our forward-looking business plan does not project positive cash
flow prior to depletion of our current cash position. The availability of other
sources of cash may, or may not, materialize and thus, present a significant
risk to the investor that the Company will exhaust its financial resources in
the short term, with no ability to pay for ongoing operational expenses, before
the Company's revenues can be developed to adequately cover its expenses.
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 (37% of sales)
compared to $76,662 (25%) 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 $1,554,734 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
$1,048,671 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.
Liquidity and Capital Resources
Net cash used in operating activities was $1,276,140 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, office equipment and
the non-compete agreement associated with the acquisition of Compugraphics
Corporation.
Net cash provided by financing activities was $1,758,227 for the year ended July
31, 2000 compared to $357,842 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.
Safe Harbor Statement
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain "forward- looking statements" as defined
in the Private Securities Litigation Reform Act of 1995. Such statements are
based on management's estimates, assumptions, and projections. Major factors
that could cause results to differ materially from those expected by management
include, but are not limited to: the timing and nature of independent test
results; the nature of changes in laws and regulations that govern various
aspects of the Company's business; retention and productivity of key employees;
the availability of acquisition candidates and proprietary technologies at
purchase prices the Company believes to be a fair market; the direction and
success of competitors; management retention; and unanticipated market changes.
DESCRIPTION OF PROPERTY
Our headquarters are a leased facility which occupies approximately 4,400
(four thousand, four hundred) square-feet, located at 1010 10th Street, Suite
100, Golden, CO.
We do not invest in real estate or real estate mortgages, nor do we invest
in the securities of or interests in persons primarily engaged in real estate
activities.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Promoters.
On April 27, 2000, the Company entered into a one-year agreement with Charter
Bridge Financial ("Charter Bridge") for the purpose of investor relations and
public promotion. The agreement called for the Company to pay Charter Bridge
$10,000.00 initially and a monthly fee of $4,500.00 thereafter. Additionally, we
agreed to issue to Charter Bridge 70,000 unregistered shares of our common stock
upon execution of the agreement and three additional installments of 70,000
unregistered shares, on 8/1/2000, 11/1/2000, and finally on 2/1/2001. On
September 27, 2000 the Company terminated Charter Bridge pursuant to the terms
of the agreement, for unsatisfactory or non-performance. To date, Charter Bridge
has received $19,000 and 140,000 shares in fees for services.
In July 1999, the Company engaged Jack Augsback and Associates, a Florida
licensed broker, ("Augsback") to serve as its exclusive agent for placement
opportunities. We agreed to pay Augsback commissions equal to ten percent of the
gross proceeds from placement offerings, with an additional one percent non-
accountable expense allowance also in cash. Additionally, we granted Augsback
warrants equal to five percent of the gross proceeds from placement offerings.
On July 6, 2000, the Company cancelled its placement agent contract with
Augsback. As of the termination date, The Company had paid Augsback a total of
$128,146.35 in commissions and costs.
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 this
registration statement. The Company's contract with Potter expires on December
6, 2000.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since May 27, 1998, our shares have been traded through the
over-the-counter market through the NASD OTC Electronic Bulletin Board ("OTCBB")
marketplace under the symbol AMCI. Since that date, our shares have traded on
the Bulletin Board at prices ranging from $.19 to $2.125; however, there can be
no assurance that our shares will continue to trade within this range, given the
effect of the shares being registered hereby. 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
As of September 30, 2000, the Company had 785 Shareholders of Record.
Holders of the Company's Common Stock are entitled to dividends when, as
and if declared by the Board of Directors, out of funds legally available
therefore. The Company does not anticipate the declaration or payment of any
dividends in the foreseeable future, and has not paid dividends at any time in
the past.
The Company intends to retain earnings, if any, to finance the development
and expansion of its business. Future dividend policy will be subject to the
discretion of the Board of Directors and will be contingent upon future
earnings, if any, the Company's financial condition, capital requirements,
general business conditions and other factors. Therefore, there can be no
assurance that any dividends of any kind will ever be paid.
The Company's stock registrar and transfer agent is Securities
Transfer Corporation.
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
Fiscal Compensation Total
Name and Principal Year Salary Bonus on (1),(2) (2)
Position
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 Officer 1998 43,298 -- -- 43,298
Director
Shirley Harmon 2000 -- -- -- --
Secretary 1999 -- -- 13,313 13,313
Director 1998 -- -- -- --
James Statham (3) 2000 96,000 -- -- 96,000
Chief Operations Officer 1999 98,001 -- 226,250 324,251
Director 1998 92,667 -- -- 92,667
All Executives as a 2000 408,000 -- 14,500 422,500
Group 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.
(3) Resigned as an officer and director effective September 30,
2000.
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
Number of Total
Securities Options/SAR Exercis
Underlying s Granted e of
Options to Base
Granted (#) Employees Price Expirati
Officer in Fiscal ($/Sh) on Date
Year
Andrew F. Cauthen 1,200,000 65.87% $.19 1-14-2004
Shirley Harmon 50,000 2.74% $.19 1-14-2004
<PAGE>
FINANCIAL STATEMENTS
Our financial statements are included below (with an index listing all such
statements) in response to this item.
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
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
At no time has the Company had any such disagreements with its accountants.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Article XII of the Company's Articles of Incorporation and Article X of
the Company's By-laws provide that the Company shall have the power to, and
shall, indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration Fees under the Securities Act of 1933
$1868.43
Printing and Engraving(1) $3000.00
Legal Fees(1) $15,000.00
Accounting/Auditing Fees(1)$5,000.00
(1)Estimated
RECENT SALES OF UNREGISTERED SECURITIES
The Company has issued "unregistered" securities to various persons and
firms as specified below and all such securities were acquired directly from the
Company in transactions not involving any public offering. These transactions
are more thoroughly described in the Company's Forms 10-K and 10-QSB for the
fiscal year ended July 31, 2000. All such securities may only be resold upon
compliance with Rule 144, adopted under the Securities Act of 1933, as amended,
unless registered. All securities were sold in reliance upon Sections 4(2), 4(6)
and/or 3(b) of the Act, and/or pursuant to Regulation D, Rule 506, as indicated
below. All purchasers were either "accredited" or "sophisticated". All
purchasers executed a Subscription Agreement indicating they had such knowledge
and experience in financial and business matters that, either alone or with a
purchaser representative, they were capable of evaluating the merits and risks
of the investment. All purchasers were provided with access to information about
the Company.
From September 1999 through September 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, and the various alternative
exemptions cited above, 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 and all persons participating therein are included as a part of
the registration to which this Prospects is related. All purchasers in the
private offering executed a subscription agreement indicating (i) they meet the
definition of "Accredited Investor" as the term is specified in Regulation D,
Rule 502, and; (ii) they have such knowledge and experience in financial and
business matters that either alone or with a purchasers representative, are
capable or evaluating the merits and risks of the investment. 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.
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
Ausback 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.
From November 1998 to September 2000, the Company issued 3,836,370
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: Brenda Lee Hamilton 322,000 shares; Roy Meadows
127,500 shares; Jose McClinton 65,500 shares; Gloria Blundell 12,500 shares;
Terry Wigton 50,000 shares; William K. Parker 10,000 shares; Brusse N. Bevers
2,500 shares; Lynn D. Crawford 2,500 shares; James A. Belknap 5,000 shares;
Karen R. Griffith 25,000 shares; Linda Claman Moore 67,500 shares; Richard
Walker 38,336 shares; Robert Sullivan 27,988 shares; Eric Horton 26,812 shares;
Stuart Smith 17,522 shares; Todd Smith 6,942 shares; Justin Quis Quis 7,000
shares; The Charterbridge Financial Group 15,400 shares; Lindy Amyx 19,857
shares; John S. Robinson 10,343 shares; Molesworth Associates, Inc. 23,170
shares; James C. Statham 1,150,000 shares; Steve Watwood 700,000 shares; Bruce
R. Bacon 583,000 shares; Renee C. Riegler 325,000 shares; Shirley M. Harmon
62,500 shares; Phyllis Watwood 32,500 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.
From November 1998 to September 2000, the Company issued 450,000
unregistered common shares to repay cash loans that had previously been made, to
include: Eco-Max Systems, Inc. 250,000 shares; and Savitar Farms, LLC 200,000
shares.
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 were required to purchase the above
described option package no later than June 21, 2000. The Company extended the
deadline for payment of the initial option purchase fee, of which only $75,000
has been paid to date, and in its discretion, issued 75,000 shares at $1.00 per
share to the private individuals who partially funded the option fee, along with
warrants to purchase and additional 75,000 shares at a purchase price of $1.25
per share (See, Selling Security Holders).
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 this
registration statement. The Company's contract with Potter expires on December
6, 2000.
In November, 2000, the Company, pursuant to a Series 1 Convertible Note Purchase
Agreement, obtained from a foreign corporation $675,000.00 U.S. in funding, less
expenses, in exchange for a promissory note convertible into 750,000 shares of
common stock at a conversion rate of $0.90 per share. The Note Purchase
Agreement provided for a Purchase Warrant for an additional 750,000 shares at a
purchase price of $0.90 per share. The Note Purchase Agreement also provided for
an option, exercisable until May 9, 2001, to purchase an additional 750,000
shares at an option exercise price of $0.90 per share.
EXHIBITS
Table of Exhibits
The following Exhibits are a part of this registration:
EX-3(i) Articles of Incorporation
EX-3(ii) Amendment to Articles of Incorporation, dated August 25, 1980 EX-3(iii)
Amendment to Articles of Incorporation, dated August 19, 1997
EX-3(iv) Amendment to Articles of Incorporation, dated May 27, 1998
EX-3(v) By-laws
EX-5(i) Opinion re Legality
EX-10(i) VISTAR VAR Agreement
EX-10(ii) CompuGraphics Stock Purchase Agreement
EX-10(iii) Lease Agreement
EX-23 Auditor's Consent
UNDERTAKINGS
The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which the Selling Security Holders offer or
sell securities, a post-effective amendment to this registration
statement, as necessary, to:
1. Include any prospectus required by Section 10(a)(3) of the
Securities Act;
2. Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement; and notwithstanding
the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b), if, in the aggregate, the changes in the
volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
3. Include any additional or changed material information on
the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to
be the initial bona fide offering.
(3) File a post effective amendment to remove registration any of the
securities that remain unsold at the end of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Company pursuant to the
foregoing provisions, or otherwise, the company has been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the undersigned of expenses incurred or paid by a director, officer or
controlling person of the undersigned in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
the undersigned will, unless in the opinion of its counsel that matter
has been settled by controlling precedent, submit to a court of
approximate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
SIGNATURES
AMERICAN MILLENNIUM
CORPORATION, INC.
Dated: November __, 2000 By: /s/ Andrew F. Cauthen
Andrew F. Cauthen, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of this Registrant and
in the capacities and on the dates indicated.
Dated: November __, 2000 By: /s/ Andrew F. Cauthen
Andrew F. Cauthen, Director,
Chief Executive Officer,
President,(Principal
Executive Officer)
Dated: November __, 2000 By: /s/ Bruce R. Bacon
Bruce R. Bacon, Director,
Vice President of
Engineering, Chief
Technology Officer
Dated: November __, 2000 By: /s/ Shirley M. Harmon
Shirley M. Harmon, Director
Corporate Secretary
Dated: November __, 2000 By: /s/ Stephen F. Watwood
Stephen F. Watwood, Director,
Chairman of the Board, Vice
President of Business Development
Dated: November __, 2000 By: /s/ Thomas W. Roberts
Thomas W. Roberts, Treasurer
(Principal Financial Officer)
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