U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(x)QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended December 31, 1999
( )TRANSITION REPORT PURSUANT TO SECTION 13
OR 15 (d) OF THE SECURITIES EXCHANGE ACT
COMMISSION OF 1934
For the Transition period December 31, 1999
Commission file number 0-9951
ADVANCED OXYGEN TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 91-1143622
(State of Incorporation) (IRS Employer Identification No.)
26883 Ruether Avenue, Santa Clarita, CA 91351
(Address of principal executive offices)
(661)-298-3333
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be
filled by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of common stock outstanding as of
December 31, 1999 was 29,640,252.
Transitional Small Business Disclosure Format (check one):
Yes No X
ADVANCED OXYGEN TECHNOLOGIES, INC.
INDEX
PART 1: FINANCIAL INFORMATION 3
Item I: Financial Statements for the three months ending
September 30, 1999. (Unaudited) 3
Balance Sheet, September 30, 1999 3
Income Statement 5
Statement of Cash Flow 6
Statement of Changes 8
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. 13
Item 1: Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURE 14
PART 1: FINANCIAL INFORMATION
Item I: Financial Statements for the three months ending
September 30, 1999. (Unaudited)
Balance Sheet
December 31, 1999
<TABLE>
<S> <C>
Current Assets
Cash (4,209.61)
Accounts Receivable 126,345.82
Doubtful Accounts (1,295.00)
Inventory 7,779.40
========================================
Total Current Assets 128,620.61
Property and Equipment
Furniture and Fixtures 31,869.00
Office Equipment 17,882.00
Equipment 98,858.00
Capitalized Equipment 125,352.40
Other Depreciable Property 911,391.00
Accum. Depreciation (269,280.65)
===========================================
Total Property & Equipment 916,070.86
Other Assets
Deposits 4,092.50
==========================================
Total Other Assets 4,092.50
Total Assets 1,048,783.97
Liabilities and Capital
Current Liabilities
Accounts Payable 227,334.67
Sales Tax Payable 2,669.94
Health Care Contributions 5,894.06
Due to Employees 6,374.59
Federal Payroll Taxes 56,672.59
State payroll Taxes 6,374.59
SUTA Tax (121.03)
IMA Short Term Note (4,500.00)
State Tax Payable 800.00
==========================================
Total Current Liabilities 301,160.78
Long Term Liabilities
Capital Leases 123,583.40
Note Payable, Crossfield 51,618.75
ICON Note Payable 15,000.00
Other Long Term Liabilities 11,886.00
401K T Account (94.26)
===========================================
Total Liabilities 201,993.89
Capital
Beginning Balance Equity 16,700.00
Preferred Stock 50.00
Common Stock 296,403.00
Paid-In Capital 19,898,631.00
Retained Earnings 19,533,698.82
Net Income (132,455.88)
==========================================
Total Capital 545,629.30
Total Liabilities & Capital 1,048,783.97
</TABLE>
Income Statement
For the Three Months Ending December 31, 1999
<TABLE>
<S> <C>
Revenues
Advertising Sales 5,350.00
Database Management 8,700.29
Bad Receivables (20,771.50)
Other Income 15,087.01
Finance Charge Income 15,516.23
==========================================
Total Revenues 23,882.03
Cost of Sales 2,318.40
Gross Profit 21,563.63
Expenses
Accounting Fees 287.50
Auto Expenses 701.49
Bank Charges 155.00
Credit Card Fees 26.30
Depreciation Expense 40,697.22
Cleaning Expense 22.50
Meals & Entertainment 889.42
Payroll Tax Expenses 4,129.14
Postage 676.74
Rent 12,112.50
Equipment Lease 8,636.91
Salaries 5,726.82
Employee Commission 1,559.45
Supplies 160.42
Telephone 5,942.68
Travel 2,859.49
Utilities 1,916.32
Wages 10,228.00
Other Expenses 380.70
State Tax Provision 5,859.50
=========================================
Total Expenses 100,268.50
Net Income (78,704.87)
</TABLE>
Statement of Cash Flow
For the Three Months Ended December 31, 1999
<TABLE>
<S> <C>
Cash Flows from Operations
Net Income (78,704.87)
Adjustments to
reconcile income
to net cash
Accum. Depreciation 40,697.22
Accounts Receivable 3,580.49
Inventory (96.60)
Accounts Payable 11,107.07
Federal Payroll Taxes 3,752.67
State Payroll Taxes 193.65
SUTA 1.88
IMA Short Term Note (1,350.00)
=========================================
Total Adjustments 57,887.28
Net Cash Provided by Operations(20,817.59)
Cash Flows from Financing
Note Payable Crossfield 46,420.00
401K T account (32,419.77)
Net Cash used in financing 14,000.23
Net increase (decrease) 6,817.36
in cash
Cash Balance at End of period 4,209.61
Beginning Cash Balance 4,905.68
Net Increase (decrease) 696.07
in Cash
</TABLE>
Statement of Changes in Financial Position
For the three months ended December 31, 1999
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Sources of Working Capital
Net Income (78,704.87)
Add Backs not requiring workingcapital
Accum. Depreciation 40,697.22
Working Capital from Operations(38,007.65)
Other Sources:
Note Payable Crossfield 46,420.00
Total Sources 8,412.35
401K T Account (32,419.77)
=========================================
Net Changes (24,007.42)
Analysis of components
Increase (decrease) in Current Assets
Cash (6,817.36)
Receivables (3,581.39)
Inventory 96.60
(Increase) decrease in CurrentLiabilities
Accounts Payable (11,107.07)
Federal Payroll Taxes (3,752.67)
State Payroll (193.65)
SUTA (1.88)
IMA Note 1,350.00
=========================================
Net Change (24,007.42)
</TABLE>
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.
On March 9, 1998, pursuant to an Agreement for Purchase
and Sale of Specified Business Assets ("Purchase Agreement"), a
Promissory Note ("Note"), and a Security Agreement ("Security
Agreement") all dated March 9, 1998, Advanced Oxygen
Technologies, Inc.(the "Company") purchased certain tangible and
intangible assets (the "Assets") including goodwill and rights under
certain contracts, from Integrated Marketing Agency, Inc., a
California Corporation ("IMA").
Pursuant to an employment agreement dated March 09,
1998 between the Company and John Teuber ("Employment
Agreement"), on September 04, 1998 the Company terminated
John Teuber for cause without relinquishing any of its rights or
remedies.
Pursuant to the Note, the Purchase Agreement, and the
Security Agreement between the Company and ("IMA"), the
Company on September 04, 1998 exercised its right of "Set Off"
of the Note, as defined therein due to IMA's breach of numerous
representations, warranties and covenants contained in the Note
and certain ancillary documents. The Company further reserved
any and all rights and remedies available to it under the Note,
Purchase Agreement and Security Agreement.
The Company entered into a two year employment
agreement ("NAG Agreement" as contained in Exhibit I of the
registrants SEC Form 10-K for the period ending June 30, 1998)
with Nancy Gaylord on March 13, 1998. On September 18, 1998,
Nancy Gaylord terminated her employment with the Company.
The NAG Agreement had no provision for this termination.
The Company entered into a lease agreement as contained
in Exhibit I of the registrants SEC Form 10-QSB for the period
ending September 30, 1998 with America-United Enterprises Inc.
on October 01, 1998 and took possession of 4,700 sf. of premises
on November 06,1998 in Santa Clarita for its CA location.
Currently, this is the only California location of the Company.
On December 9, 1998 the company delivered to IMA,
"Notification to Indemnifying Party and Demand for
Indemnification for $2,251,266." Pursuant to the Note, the
Purchase Agreement, the Security Agreement, and the Employment
Agreement (collectively the "Agreements"), the Company
demanded that IMA pay $2,251,266 or defend the Company
against the Liabilities (as defined therein) due to, among other
things, IMA's breach, representations, warranties, and violation of
the Agreements.
On January 29, 1999, pursuant to the Purchase Agreement
of 1/28/99, Advanced Oxygen Technologies, Inc. ("AOXY")
purchased 1,670,000 shares of convertible preferred stock of
Advanced Oxygen Technologies, Inc. ("STOCK") and a $550,000
promissory note issued by Advanced Oxygen Technologies, Inc
("Note") from Integrated Marketing Agency, Inc.("IMA"). The
terms of the Purchase Agreement were: AOXY payed $15,000 to
IMA, assumed a Citicorp Computer Equipment Lease,
#010-0031648-001 from IMA, delivered to IMA certain tangible
business property (as listed in Exhibit A of the Purchase
Agreement), executed a one year $5,000 promissory note with
IMA, and delivered to IMA a Request For Dismissal of case
#PS003684 (restraining order) filed in Los Angeles county superior
court. IMA sold, transferred, and delivered to AOXY the Stock
and the Note. IMA sold, transferred, assigned and delivered the
Note and the Stock to AOXY, executed documents with Citicorp
Leasing, Inc. to effectuate an express assumption by AOXY of the
obligation under lease #010-0031648-001 in the amount of
$44,811.26, executed a UCC2 filing releasing UCC-1 filing
#9807560696 filed by IMA on March 13, 1998, and delivered such
documents as required. In addition, both IMA and AOXY
provided mutual liability releases for the other.
The location in Santa Clarita, CA is the location for operations.
The Company currently has four areas of concentration: CD-ROM
production/sales, event sales, database management and marketing.
The Company produces and sells educational CD-ROMS.
The content of the CD-ROMS is derived from conferences, held by
clients of the Company. AOXY produces a CD-ROM of the
conferences including the audio, video, graphics and/or verbatim
transcripts of the conference. AOXY sells CD's direct to the
client and public, and/or sells advertisement space on the CD's and
produces the CD at no cost to the conference organizer. All CD's
are in HTML format and are directly linked to the Internet sites of
AOXY and the Client. The sales efforts are conducted on the
Internet and in the Santa Clarita CA location. In addition, the
Company began selling event registrations for conferences where
AOXY is producing CD-ROMS. The Company sells the events
through fax broadcasting, direct mail, and telemarketing from Santa
Clarita CA.
Database management includes managing client databases,
assisting clients in effective marketing with databases, providing
database information to clients, list rentals, and utilizing and
structuring databases for fax broadcasting. Currently the Company
has the ability to fax broadcast or email broadcast to a large
number of contacts.
The Company has a database management contract with
Dunn and Bradstreet, and Walter Karl, Inc., a division of
InfoUSA, Inc. whereby, Walter Karl, Inc. will broker the
company's database .
During this period, the Company completed delivery of the
CD's for the Interactive Music Expo, Health, the Healthy Living
and Holistic Health Expo, and Independent Insurance Association
of Indiana. The last quarter of the calendar year has been the
slowest production time for the Company due to the decrease
in the client's seminar schedule.
The Company continues it efforts to raise capital to support
operations and growth, and is actively searching acquisition or
merger with another company that would compliment AOXY or
increase its earnings potential. The Company continues its effort
to increase the CD-ROM production and associated sales. The
Company expects difficulty in financing the growth of the
increased business and has been concentrating on raising capital or
obtaining a line of credit.
Y2K (Year 2000 Problem)
Y2K, or the Year 2000 Problem is a potential problem for
computers whereby the system would not recognize the date 2000
as year 2000 but instead as 1900 due to the fact that the computer
industry standard for dating was a 2 digit system and not 4 digits.
Each date represented was the last two digits of the year, i.e.: 1998
was 98. This problem could render important computer and
communication systems inoperable which could have a significant
effect on the Company's operations. The Company's current
exposure to potential Y2K systems that could be affected include
(but not limited to): computers, telephones, all forms of electronic
communications, switches, routers, software, accounting software,
banking, electricity, credit card processors, electronic data
exchange, security systems, fax broadcasting software and
hardware, database software, archives, data, records, and others.
In an effort to minimize the Company's exposure to the
potential Y2K problem, the Company has contacted each of our
vendors to assess how Y2K will affect our operations. Although
some vendors make verbal assurances of Y2K compliance, there
can be no certainty that the systems that the Company use will not
be affected. AOXY continues to examine the risks associated with
its most reasonable worst case Year 2000 scenarios. Scenarios
might include a possible but presently unforeseen failure of key
supplier or customer business, processes, or systems. These
situations could conceivably persist for some months after the
millennium transition and could lead to possible revenue losses.
The Company also may not have the applicable capital resources to
correct or replace certain systems to be compliant with Y2K. The
Company may be able to replace or correct the Y2K problem
within the organization, and still be affected by outside utilities
and/or vendors.
The Company may not directly experience any effect from
the Y2K problem, but the suppliers, vendors, clients or other
associates of the Company, may be affected and could cause the
Company harm by loss of clients, loss of contracts, inability to
receive supplies, etc. The Y2K element alone could significantly
alter the Company's operations and profitability.
Forward Looking Statements
Certain statements contained in this report, including statements
concerning the Company's future and financing requirements, the
Company's ability to obtain market acceptance of its products and
the competitive market for sales of small production business' and
other statements contained herein regarding matters that are not
historical facts, are forward looking statements; actual results may
differ materially from those set forth in the forward looking
statements, which statements involve risks and uncertainties,
including without limitation to those risks and uncertainties set
forth in any of the Company's Registration Statement's under the
heading "Risk Factors" or any other such heading. In addition,
historical performance of the Company should not be considered
as an indicator for future performance, and as such, the future
performance of the Company may differ significantly from
historical performance.
PART II
Item 1: Legal Proceedings
On April 30, 1999 NEC America Filed suit against Advanced
Oxygen Technologies, Inc. In the Los Angeles Superior Court,
North Valley Branch, Case Number PC 023087X alleging default
of the Lease Agreement of November, 1998 in the amount of
$57,167.28. A judgement was entered on October 5, 1999 against
the Company.
Item 6. Exhibits and Reports on Form 8-K
A report on Form 8-K was filed on February 16, 1999 and
reported under Item 2 the Purchase of Specified Assets from
Integrated Marketing Agency, Inc. The assets purchased consisted
a promissory note of $550,000 payable to IMA and issued by
Advanced Oxygen Technologies date March 09, 1998 and
1,670,000 Preferred Shares of Advanced Oxygen Technologies.
IMA, and Advanced Oxygen Technologies, Inc. provided each
other a mutual release of liability. Exhibit 1, contained therein
defined the terms and conditions of the transaction.
SIGNATURE
In accordance with the requirements of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: February 02, 2000
/s/ Robert E. Wolfe/s/
Robert E. Wolfe, Chairman of the Board and
Chief Executive Officer and Principal
Financial Officer
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> DEC-31-1999
<CASH> (4,209)
<SECURITIES> 0
<RECEIVABLES> 126,345
<ALLOWANCES> (1,295)
<INVENTORY> 7,779
<CURRENT-ASSETS> 128,620
<PP&E> 1,174,245
<DEPRECIATION> (269,280)
<TOTAL-ASSETS> 916,070
<CURRENT-LIABILITIES> 301,160
<BONDS> 78,504
0
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<COMMON> 296,403
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,048,783
<SALES> 23,882
<TOTAL-REVENUES> 23,882
<CGS> 2,318
<TOTAL-COSTS> 2,318
<OTHER-EXPENSES> 100,268
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (78,704)
<INCOME-TAX> 0
<INCOME-CONTINUING> (78,704)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (78,704)
<EPS-BASIC> (0.002)
<EPS-DILUTED> (0.002)
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