<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C 20459
-----------------------------------------------------------------------
FORM 10-KSB/A
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the four months ended: December 31, 1999
Commission File Number: 0-11419
ARMITEC, INC.
------------------------------------------------------
(Exact Name of Registrant as specified in its Charter)
DELAWARE 22-2435595
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
POST OFFICE BOX 21238, ST. SIMONS ISLAND, GEORGIA 31522-0738
------------------------------------------------- ----------
Address of Principal executive offices of Zip Code
Incorporation or organization
912-634-2584
-------------------------------------------------
Registrants telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities and Exchange Act of 1934
during the preceding 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 last 90 days.
YES [X] NO [ ]
At December 31, 1999, 3,161,702 shares of the Registrant's Common Stock were
issued and 2,006,757 shares of the Registrant's Common Stock were outstanding
and the estimated aggregate market value of the Registrant's outstanding common
stock held by non-affiliates of the Registrant was approximately $165,000.
Explanatory Note.
This Report on Form 10-KSB/A amends the disclosure contained in the Annual
Report on Form 10-K for the period ended December 31, 1999, filed by Armitec,
Inc. with the Securities and Exchange Commission on June 30, 2000. Armitec, Inc.
meets the requirements under Item 10(a) of Regulation S-B to enter and file
under the Small Business Disclosure System.
Part I
Item 1. Description of Business
(A) General.
<PAGE> 2
Armitec, Inc. (Armitec or REGISTRANT), a Delaware
corporation, was incorporated on January 20, 1983. The
Registrant was formed to provide comprehensive business
services to physicians, dentists and professional corporations
operating full service dental centers and emergency/industrial
medical centers. Armitec found this activity to be
unprofitable and it exited the business service activity in
fiscal year 1987 and became engaged in the formation,
registration, distribution and sale of developmental stage
companies. Armitec has no activities at this time.
(B) Business of Issuer:
The Registrant is currently inactive, and is seeking a
merger or business combination for itself.
(C) Employees
The Company has only one employee, William S. Bryant, who is
the President, Chief Executive Officer and Treasurer of the
Company.
Item 2. Properties
NONE
Item 3. Legal Proceedings
The Company is not engaged in any litigation, and the
officers and directors presently know of no threatened or
pending litigation in which it is contemplated that the
Company will be made a party.
Item 4. Submission of Matters to a Vote of Security Holders:
Not Applicable.
Part II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(A) Market information:
The Registrant's common stock trades in the over-the-counter
market. The Registrant's common stock was listed on the NASDAQ
National Market System, under the symbol FHSI until November
26, 1986, at which time such listing was suspended because
Armitec's assets and net worth fell below the minimum required
levels. Armitec was reinstated on NASDAQ on April 2, 1987, but
was again suspended on February 12, 1988 when its assets and
net worth fell below the NASDAQ minimum requirements. There
has not been any trading of Armitec common stock on any listed
exchange during calendar years 1995, 1996, 1997, 1998 and
1999.
(B) HOLDERS:
As of December 31, 1999, the approximate number of holders of
record of the Registrant's common stock was 568. In addition
to those who hold shares in their individual names, it is
reported to Registrant that there are 267 holder's in "street
names" for a total of 835 shareholders.
(C) DIVIDENDS:
Cash dividends have not been paid by the Registrant since it
was formed; however, Registrant has during past fiscal years
paid stock dividends in its wholly-owned subsidiaries from
1987-1988.
<PAGE> 3
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of Armitec's financial condition and results of
operations. This discussion should be read in conjunction with the Financial
Statements of Armitec appearing under Item 7 of this Report.
(a) Results of Operations
The discontinuance in 1988 of the professional administrative
marketing business decreased revenues; however, it also
decreased liabilities and the risk of potential liabilities.
The only income presently is gains and losses from sales of
stock in the marketplace. Losses from sales of stocks for the
four months ending December 31, 1999 aggregated $(37,547).
For the years ended August 31, 1999 and 1998, the Company
recognized gains on the sale of securities of $75,596 and
losses of $(26,808), respectively.
(b) Financial Condition, Liquidity and Capital Resources.
Management does not expect that the condition of Armitec can
be improved unless it can form a business relationship between
it and another going concern.
Item 7. FINANCIAL STATEMENTS:
The following data, insofar as it relates to the period September 1,
1997 to December 31, 1999 has been derived from annual financial
statements, including the balance sheets at December 31, 1999, August
31, 1999 and 1998 and the related statements of operations and cash
flows for four months ended December 31, 1999 and the years ended
August 31, 1999 and 1998 and notes thereto appearing elsewhere herein.
This financial data should be read in conjunction with the financial
statements of the Company and the related notes thereto attached to
this Annual Report.
<TABLE>
<CAPTION>
Four months ended Year ended August 31,
December 31, -------------------------
1999 1999 1998
----------- --------- --------
<S> <C> <C> <C>
Operating revenues $ Nil $ Nil $ Nil
Net income (loss) $(57,505) $ 60,821 $(57,333)
Net income (loss) per share $(0.0287) $ 0.0303 $(0.0286)
</TABLE>
<TABLE>
<CAPTION>
August 31,
December 31, -------------------------
1999 1999 1998
----------- -------- --------
<S> <C> <C> <C>
Current assets $140,832 $169,451 $165,488
Working Capital $ 78,599 $ 34,665 $163,495
Total Assets $225,719 $300,749 $187,163
Stockholders' equity $163,486 $220,991 $160,170
</TABLE>
The following documents are filed as part of this report:
<TABLE>
<S> <C>
(1) Report of Independent Certified Public Accountants F-1
(2) Financial statements:
Balance Sheets as of December 31, 1999, August 31, 1999 and 1998 F-2
Statements of operations for the four months ended December
31, 1999, and years ended August 31, 1999 and 1998 F-3
Statements of Stockholders' Equity for four months ended
December 31, 1999, and years ended August 31, 1999 and 1998 F-4
Statements of cash flows for the four months ended December 31,
1999, and years ended August 31, 1999 and 1998 F-5
Notes to Financial Statements F-6
</TABLE>
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or other notes herein.
<PAGE> 4
Item 8. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL MATTERS
NONE
Part III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth all the directors, executive officers
and significant employees of the Registrant as of December 31, 1999. In
the years prior to December 31, 1999, various officers, directors and
control persons have failed to timely report under section 16(a) of the
Exchange Act
--------------------------------------------------------------------------------
NAME AGE POSITION
--------------------------------------------------------------------------------
William S. Bryant 79 President, CEO, Treasurer,
and Director
--------------------------------------------------------------------------------
Donald C. Carman 70 Director
--------------------------------------------------------------------------------
William S. Bryant became a Director of the Company in 1988 and was
elected President of the Company in 1991. He graduated from IAS in
Chicago, Illinois, in 1948 with a B.A. in accounting and has served in
various positions in the public and private sector.
Donald C. Carman became a Director and was elected President, Treasurer
and Chief Executive Officer of the Company in 1985. He served as
President and Chief Executive Officer until 1991, when he was replaced
by William S. Bryant. He graduated from West Liberty College in 1952
with a degree in Pre-Law and from West Virginia College of Law in 1954
with a J.D. He is a former Tax Commissioner of West Virginia and is an
attorney and entrepreneur. He was President of White Ash Mining Corp.
and has served in various executive positions.
Directors hold office until the next annual meeting of shareholders.
Officers are elected by the Board of Directors following the Annual
meeting of stockholders.
Item 10. EXECUTIVE COMPENSATION
Cash compensation. The following table sets forth the actual cash
compensation of any officer or director of the Registrant who received
in excess of $60,000 in the four months ended December 31, 1999 and the
years ended August 31, 1999 and 1998, and the actual cash compensation
of all officers and directors of the Registrant as a group for said
fiscal year.
Officer or Director NONE
All Officers or Directors as a group NONE
Compensation of Directors:
During the Registrant's fiscal year ended December 31, 1987, the
Registrant passed a resolution that all officers and directors who
attended meetings of the Board of Directors or Shareholders and who
<PAGE> 5
were not on other salary with Armitec, would receive restricted shares
of stock of Armitec, equal to $500 per day. The number of shares to be
determined by the bid price of the stock on the meeting date. Directors
were not paid any stock under the foregoing resolution during the
previous fiscal year.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER AND MANAGEMENT
The following table sets forth information regarding ownership of the
Registrant's common stock by all persons who are known by the
Registrant to own more than 5% of the total outstanding shares and by
all officers and directors of the Company as of December 31, 1999.
Except as otherwise indicated in the table, the address of the
stockholders listed below is that of the Company's principal executive
office. Directors not included in the table below do not hold Company
securities.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
AS OF DECEMBER 31, 1999
NAME AND ADDRESS NUMBER PERCENT
<S> <C> <C>
William S. Bryant, President 30,000 1.5
E.L. Carman 907,875 45.1
110 St. Andrews
St. Simons Island, Georgia 31522
Donald C. Carman 204,000 10.3
</TABLE>
Changes in Control:
Registrant is not aware of any arrangement which may result in a change
of control of Registrant at present.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Certain Business Relationships.
During the four months ended December 31, 1999, the Company advanced $5,000 to
Colonial Corporation, a company owned 100% by Donald C. Carmen.
Indebtedness of Management
NONE
Item 13. OTHER
Exhibit 27 - Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date 11/27/00 /s/ WILLIAM S. BRYANT
--------------------------------------
WILLIAM S. BRYANT, Director,
Chairman of the Board, President,
Chief Executive Officer,
Chief Financial and Accounting Officer
Treasurer
<PAGE> 6
EXHIBITS
FINANCIAL INFORMATION
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Armitec, Inc.
St. Simons Island, Georgia
We have audited the accompanying balance sheets of Armitec, Inc. (formerly
Family Health Systems, Inc.) as of December 31, 1999 and August 31, 1999, and
the related statements of operations, stockholders' equity, and cash flows for
the four months ended December 31, 1999 and the years ended August 31, 1999 and
1998. 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 overall accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Armitec, Inc. (formerly Family
Health Systems, Inc.) as of December 31, 1999 and August 31, 1999, and the
results of its operations and its cash flows for the four months ended December
31, 1999 and years ended August 31, 1999 and 1998 in conformity with generally
accepted accounting principles.
MOORE STEPHENS TILLER LLC
Brunswick, Georgia
May 23, 2000
<PAGE> 7
ARMITEC,INC.
(FORMERLY FAMILY HEALTH SYSTEMS,INC.)
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, AUGUST 31,
1999 1999
----------- -----------
<S> <C> <C>
ASSETS
CURRENT:
Cash $ 41,758 $ 2,718
Accounts receivable -- 688
Marketable securities (Note 5) 99,074 166,045
----------- -----------
TOTAL CURRENT ASSETS 140,832 169,451
Other receivables (Note 3) 60,512 114,423
Investment in closely-held company, at cost (Note 5) 24,375 16,875
----------- -----------
$ 225,719 $ 300,749
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft - Investment margin account $ 23,333 $ 54,758
Accounts payable 13,900 --
Amount payable to an individual (Note 8) 25,000 25,000
----------- -----------
TOTAL CURRENT LIABILITIES 62,233 79,758
----------- -----------
STOCKHOLDERS' EQUITY
Common stock; no par value; 25,000,000 share authorized; 3,161,702 shares
issued; 2,006,757 and 2,006,757 shares
outstanding 3,351 3,351
Paid in capital 2,673,705 2,673,705
Deficit (2,513,570) (2,456,065)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 163,486 220,991
----------- -----------
$ 225,719 $ 300,749
=========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE> 8
ARMITEC,INC.
(FORMERLY FAMILY HEALTH SYSTEMS,INC.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOUR MONTHS
ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, AUGUST 31, AUGUST 31,
1999 1999 1998
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES $ -- $ -- $ --
----------- ----------- -----------
EXPENSES:
Bad debt expense -- -- 18,100
Professional fees 17,900 3,000 1,968
Other administrative 2,058 11,775 6,740
----------- ----------- -----------
19,958 14,775 26,808
----------- ----------- -----------
OPERATING INCOME (LOSS) (19,958) (14,775) (26,808)
OTHER INCOME (EXPENSE)
Dividends -- -- 826
Gains (losses) on sales of securities (37,547) 75,596 (31,351)
----------- ----------- -----------
NET INCOME (LOSS) $ (57,505) $ 60,821 $ (57,333)
=========== =========== ===========
Net income (loss) per share:
Basic and diluted $ (0.03) $ 0.03 $ (0.03)
=========== =========== ===========
Weighted average shares outstanding 2,006,757 2,006,757 2,006,757
=========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<PAGE> 9
ARMITEC,INC.
(FORMERLY FAMILY HEALTH SYSTEMS,INC.)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
------------------ Paid-In
Shares Amount Capital (Deficit) Total
--------- ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Balance, August 31, 1997 as previously reported 2,006,757 $3,351 $2,673,705 $(2,434,553) $ 242,503
Adjustment applicable to re-establishment of
note payable for liability written off -- -- -- (25,000) (25,000)
--------- ------ ---------- ----------- ---------
Balance, August 31, 1997, as restated 2,006,757 3,351 2,673,705 (2,459,553) 217,503
Net loss for year ended August 31, 1998 -- -- -- (57,333) (57,333)
--------- ------ ---------- ----------- ---------
Balance, August 31, 1998 2,006,757 3,351 2,673,705 (2,516,886) 160,170
Net income for year ended August 31, 1999 -- -- -- 60,821 60,821
--------- ------ ---------- ----------- ---------
Balance, August 31, 1999 2,006,757 3,351 2,673,705 (2,456,065) 220,991
Net loss for four months ended December 31, 1999 -- -- -- (57,505) (57,505)
--------- ------ ---------- ----------- ---------
Balance, December 31, 1999 2,006,757 $3,351 $2,673,705 $(2,513,570) $ 163,486
========= ====== ========== =========== =========
</TABLE>
See Notes to Financial Statements.
<PAGE> 10
ARMITEC,INC.
(FORMERLY FAMILY HEALTH SYSTEMS,INC.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOUR MONTHS
ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, AUGUST 31, AUGUST 31,
1999 1999 1998
--------- --------- -----------
<S> <C> <C> <C>
CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES:
Net income (loss) $ (57,505) $ 60,821 $ (57,333)
Adjustments to reconcile net income (loss) to
cash (used in) operating activities
(Gain) loss on sale of investments 37,547 (75,596) 31,351
Cash provided by (used for):
Increase (decrease) in accounts payable 13,900 -- (17,550)
(Increase) decrease in trade receivables 688 (688) 6,500
--------- --------- -----------
Cash (used in) operating activities (5,370) (15,463) (37,032)
--------- --------- -----------
CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES:
Proceeds from sale of investments 124,979 514,325 1,346,849
Purchase of investments (95,554) (491,090) (1,371,082)
Advances (repayments) on investment margin account (31,425) 52,765 1,993
Advances made to drilling company (9,090) (134,373) (4,800)
Repayment of advances by drilling company 63,000 24,750 --
Advances on notes receivable -- -- (40,079)
Repayment of note receivable -- 34,155 5,924
Investment in closely-held company (7,500) -- (16,875)
--------- --------- -----------
Cash (used in) provided by investing activities 44,410 532 (78,070)
--------- --------- -----------
Net increase (decrease) in cash and cash equivalents 39,040 (14,931) (115,102)
Cash, beginning of period 2,718 17,649 132,751
--------- --------- -----------
Cash, end of period $ 41,758 $ 2,718 $ 17,649
========= ========= ===========
</TABLE>
See Notes to Financial Statements.
<PAGE> 11
ARMITEC,INC.
(FORMERLY FAMILY HEALTH SYSTEMS,INC.)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - Armitec, Inc. (Company) was organized to provide
comprehensive administrative, marketing and consulting services to
group dental and medical practices and began operations on May 1, 1983.
Effective in October 1987, all administrative and marketing agreements
had been terminated and the Corporation has been inactive since that
time.
BASIS OF ACCOUNTING - The Company's policy is to prepare its financial
statements on the accrual basis of accounting.
NET INCOME (LOSS) PER SHARE - Basic and diluted net income (loss) per
share has been computed using the weighted average number of shares of
common stock outstanding during the applicable period. The Company does
not have any stock option plans. There are no outstanding warrants or
options and therefore no potential dilution to earnings per share for
the periods presented.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include all
highly liquid investments with initial maturity dates of no more than
three months.
ESTIMATES - The process of preparing financial statements in conformity
with generally accepted accounting principles requires the use of
management's 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.
2. CHANGE IN ACCOUNTING YEAR
The Company has elected to change its accounting year from a fiscal
year ending August 31 to a calendar year ending December 31. The change
results in a short accounting year of four months ended December 31,
1999.
3. OTHER RECEIVABLES
During 1999, the Company advanced funds to an entity involved in
pumping water into otherwise non-productive or low production oil wells
and extracting the raw crude oil. These advances are non-interest
bearing with no stated method of repayment and are not evidenced by a
note. Advances made during the four months ended December 31, 1999 and
the year ended August 31, 1999 aggregated $2,800 and $112,323,
respectively. Repayments of advances in the amount of $63,000 and
$24,750 were made during the four months ended December 31, 1999 and
the year ended August 31, 1999, respectively. At December 31, 1999 and
August 31, 1999 the balance advanced was $29,372 and $92,372,
respectively.
In addition, the Company made advances during the year ending August
31, 1999 in connection with a natural gas drilling operation in West
Virginia. The drilling operations are on acreage adjoining a producing
natural gas field. Advances made by the Company during the four months
ended December 31, 1999 was $2,090. No repayments have been received.
At December 31, 1999 and August 31, 1999 the balance advanced was
$24,140 and $22,049, respectively.
Advances were also made to a formerly dormant corporation during the
four months ended December 31, 1999. This advance is not evidenced by a
note and bears no rate of interest or method of repayment. The amount
<PAGE> 12
advanced during the four months ended December 31, 1999 aggregated
$5,000. At December 31, 1999 the balance advanced was $5,000.
Additionally, advances of $2,000 were made to another going concern in
the oil and gas industry. At December 31, 1999 the balance advanced was
$2,000.
4. NOTES RECEIVABLE
An advance was made to the majority stockholder of the Company during
1998. This advance was evidenced by a note receivable in the amount of
$15,079. The balance outstanding at August 31, 1998 was $9,155. This
note was repaid during the year ended August 31, 1999.
5. INVESTMENTS
The Company's investments in marketable equity securities are held for
an indefinite period and thus are classified as available for sale.
Available for sale securities are recorded at fair value in investments
on the balance sheet, with the change in fair value during the period
excluded from earnings and recorded in the equity section of the
balance sheet. There were no unrealized holding gains or losses at
December 31, 1999 or August 31, 1999 due to all unrealized losses being
realized in the write-down to cost.
At December 31, 1999 and August 31, 1999 investments were written down
to their estimated realizable values, because in the opinion of
management, the decline in market value of those securities is
considered to be other than temporary.
Investments in securities are summarized below:
<TABLE>
<CAPTION>
Unrealized Unrealized Fair
Description Gain Loss Value
----------- ---------- ---------- ------
<S> <C> <C> <C>
December 31, 1999:
Available-for-sale securities:
Common Stock $ -- $ -- $ 99,074
------- ------- --------
August 31, 1999:
Available-for-sale securities:
Common Stock $ -- $ -- $166,045
------- ------- --------
</TABLE>
During the year ended August 31, 1999 and the four months ended
December 31, 1999, the Company invested $16,875 and $7,500,
respectively in a closely-held corporation. This corporation is
involved in the waste management industry. The minority interest in
this investment of $24,375 is carried at cost and management of the
Company believes that the carrying value is recoverable.
6. INCOME TAXES
As of December 31, 1999, the Company has net operating loss
carryforwards of approximately $1,350,000 which expire under current
law from 2000 through 2013. These net operating losses expire as
follows: $1,236,000 in 2001; $61,000 in 2002; and $53,000 thereafter.
Temporary differences giving rise to the deferred tax accounts consist
primarily of the net operating loss carryforwards, capital loss
carryforwards and investment tax credit carryforwards.
The deferred tax benefit and deferred tax liability comprised the
following at December 31, 1999 and August 31, 1999:
<PAGE> 13
<TABLE>
<CAPTION>
December 31, August 31,
1999 1999
--------- ---------
<S> <C> <C>
Deferred tax benefit:
Net operating loss carryforwards $ 579,848 $ 783,367
Capital loss carryforwards 17,070 4,304
Write down of marketable securities -- --
Investment tax credit carryforwards 11,190 22,332
Value allowance (608,108) (810,003)
--------- ---------
Net deferred tax benefit $ -- $ --
========= =========
</TABLE>
The change in valuation allowance for the four months ended December
31, 1999 aggregated $201,895 largely due to expiration of tax
carryforwards.
During the year ended August 31, 1999, the company had taxable income
of approximately $61,000. The income tax expense attributable to this
income was approximately $12,200. The company offset this expense by
utilizing $61,000 of its net operating loss carryforward and
recognizing a $12,200 income tax benefit.
7. CONCENTRATIONS OF CREDIT RISK
The Company has outstanding receivables from companies in oil and gas
exploration industry which are considered speculative industries.
Therefore, the Company has an industry concentration of credit risk in
the oil and gas industry. At December 31, 1999 the company considers
these receivables to be valued at recoverable value and no valuation
allowance is necessary.
8. PRIOR PERIOD ADJUSTMENT
The Company discovered during a review of old records a liability
determined to be valid which had been written off in a prior year. The
liability was re-established through a prior period adjustment charged
to retained earnings at August 31, 1997. The amount of the liability
was $25,000 and has been settled subsequent to December 31, 1999
through the issuance of 18,000 shares of the Company's common stock and
a cash payment of $5,000.
9. SUBSEQUENT EVENT
During the first quarter of 2000, the company invested in certain
traded options and realized a loss of approximately $161,000 as the
options expired in March 2000.
10. CONTINGENCY
As disclosed in Note 1, the Company has been inactive in its operating
business since 1987. As a result, several Forms 10-K and 10-Q have not
been filed. The Company has since filed a notification of late filing
with the Securities and Exchange Commission for reports 10-K and 10-Q
due to be filed for the period August 31, 1997 to December 31, 1999 and
is currently filing all late filings. Any liability resulting from the
late filing is undetermined and is not reflected in these financial
statements.
