U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1999 Commission file number: 0-12169
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF
1934
SOLAR SATELLITE COMMUNICATION, INC.
(Name of small business issuer in its charter)
COLORADO
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(State or Other Jurisdiction of Incorporation or Organization)
84-0907644
(I.R.S. Employer Identification No.)
6300 South Syracuse Way, Suite 293,Englewood Colorado 80111
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(Address of Principal Executive Office) (Zip Code)
Issuer's telephone number: (720)529-5518/(303)721-7300
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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 No X
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment. [ ]
State issuer's revenues for its most recent fiscal year: $445,130
The aggregate market value of the voting stock held by non-affiliates shares
(3,455,801 of $.001 par value Common Stock) was $0 as of July 15, 2000. The
stock price for computation purposes was $-0-, based on the fact that there is
presently no Market for the Company's securities. This value is not intended to
be a representation as to the value or worth of the Registrant's shares of
Common Stock. The number of shares of non-affiliates of the Registrant has been
calculated by subtracting shares held by persons affiliated with the Registrant
from outstanding shares.
The number of shares outstanding of the Registrant's Common Stock as of the
latest practicable date, July 15, 2000 was 7,505,801 shares.
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SOLAR SATELLITE COMMUNICATION, INC.
INDEX TO ANNUAL REPORT
ON FORM 10-KSB Page
PART I ........................................................................1
Item 1. DESCRIPTION OF BUSINESS....................................1
Item 2. DESCRIPTION OF PROPERTY...................................11
Item 3. LEGAL PROCEEDINGS.........................................11
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......11
PART II.......................................................................11
Item 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.......................................11
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION..............................................12
Item 7. FINANCIAL STATEMENTS......................................12
Item 8. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE......................................12
PART III .....................................................................13
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
EXCHANGE ACT..............................................13
Item 10. EXECUTIVE COMPENSATION....................................14
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................14
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............15
Item 13. EXHIBITS AND REPORTS ON FORM 8-K..........................15
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PART I
The matters addressed in this report on Form 10-KSB, with the exception of
the historical information presented, contain forward-looking statements
involving risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those factors set forth in the Business
section (Item 1) and elsewhere in this report.
Item 1. DESCRIPTION OF BUSINESS
(a) History of the Company
Solar Satellite Communication, Inc. (the "Company" or the "Registrant"), is
a Colorado corporation. The principal business address is 6300 South Syracuse
Way, Suite 293,Englewood, Colorado 80111. Its phone number is (720) 529-5518
We were organized under the laws of the State of Colorado on April 6, 1983
to engage in the business of community satellite-based cable television systems.
During 1986, the Company sold substantially all of its operating assets and in
1987 sold one of its two remaining systems and terminated the contract rights on
the last system essentially ceasing operations. The Company has been inactive
since 1989.
Between May of 1984 and December of 1985, the Company sold 75,058,000
shares of its common stock in a public offering. In June of 1988, the Company
purchased 3,000,000 shares of Hydro-Seek, Inc. for $300,000 and warrants to
purchase an additional 3,000,000 shares of Hydro-Seek, Inc. for $30,000.
Hydro-Seek subsequently changed its name to Accelr8 Technology, Inc. In January
of 1989, the Company completed a reverse stock split whereby each ten shares of
common stock issued and outstanding as of the effective date of the split became
one share immediately subsequent to the split (one for ten). In approximately
1992, the Company sold 889,400 shares of the Accelr8 stock for an average price
of $0.05 per share to pay expenses of the Company. During essentially the same
period of time, many of the Company's shareholders returned their stock in the
Company to the transfer agent for cancellation in their efforts to write off
their investment for tax purposes.
In March of 1994, the Company's Management engaged in a business
transaction whereby a majority of the stock of the Company was transferred to
Rabex USA Holdings, Inc., a Japanese firm. As part of this transaction,
Management sold a total of 3,600,000 options and 675,000 shares owned by them in
exchange for $150,000. Immediately after the acquisition of the options, Rabex
exercised those options which resulted in their ownership increasing to a total
of 3,835,000 shares (approximately 51%) of the Company's issued and outstanding
common stock. As part of this transaction, the principals of Rabex were
appointed officers and directors of the Company whose only asset at that time
was its investment in Accelr8.
In January of 1996, Accelr8 engaged in a one share for four shares reverse
stock split and the value of the Accelr8 stock started increasing as its
business prospects improved. From March 1994, when Rabex first acquired
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control, through July of 1997, new Management of the Company failed to make any
progress towards commencing operations, acquiring operations of another company
or merging with an operating entity as was originally planned. Therefore, during
the summer of 1997, the former Management of the Company contacted the new
Management of the Company in Japan in an effort to insist that the new
Management take some action toward revitalizing the Company in an effort to
enhance shareholders' value. As a result of this contact, Rabex discovered that
it had lost the Accelr8 stock certificates. During this period of time the
market price of Accelr8 stock had risen from $.10 per share to as high as
approximately $28 per share. Rabex attempted but was unable to obtain a lost
instrument bond regarding the Accelr8 stock because of the cost of the bond and
because of its inability to provide a required indemnification for the bonding
company from a financially strong source. Subsequently Rabex attempted to sell
its interest in the Company which included discussions with management of
Accelr8. In approximately May of 1998, when the Accelr8 stock was selling at
approximately $15 per share, the present Management of the Company commenced
direct negotiations to reacquire the Rabex interest in the Company's common
shares through Management's limited liability company, Satellite Investment
Group, LLC ("SIG"). These negotiations resulted in a stock purchase agreement
being executed on the 22nd of May, 1998, which provided for the payment of $1.8
million to Rabex in exchange for all of the Company shares owned by Rabex.
On June 3, 1998 the Company entered into an Asset Rehabilitation Agreement
with SIG which provided for the payment of a rehabilitation fee to SIG of $2.5
million if it were able to cause the lost Accelr8 stock certificates to be
replaced and become freely saleable by the company. The Asset Rehabilitation
Agreement was approved by the Board of Directors of the Company on June 23, 1998
pursuant to a resolution that recited that the Company had been unable to
realize any value from its ownership of the Accelr8 stock because the stock
certificates had been lost; that the actions which SIG planned to take to obtain
reissuance of the lost certificates were actions which the Company did not have
the financial capability to take; and that to the knowledge of the Company,
there was no other source available to it for obtaining reissuance of the lost
certificates on a more favorable basis than that provided for in the Asset
Rehabilitation Agreement. On July 8, 1998, the sale of the Company stock by
Rabex to SIG was completed.
Subsequently, a lost security bond was issued by a surety company in
consideration for a premium of $137,189 and in consideration for an
indemnification of the surety company from an individual with a substantial net
worth who was paid an indemnification fee by SIG of $1,600,000. Thereafter,
replacement certificates for the Accelr8 stock were issued and a restrictive
Rule 144 legend which has been on the lost certificates was removed. Between
July of 1998 and January of 1999, the Company liquidated all 527,650 shares of
Accelr8 stock at an average price of $7.02 per share for total consideration of
$3,704,103, paid the asset rehabilitation fee and reimbursed the entity which
paid the bond fee (but did not reimburse the indemnity fee). (See: Item 12.
"Certain Relationships and Related Transactions.")
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(b) Current Operations
Our current operations consist solely of seeking merger candidates.
We will attempt to locate and negotiate with a business entity for the
merger of that target company into the Company or a wholly owned subsidiary of
the Company formed for the purpose of such a merger. In certain instances, a
target company may wish to become a subsidiary of the Company or may wish to
contribute assets to the Company rather than merge. No assurances can be given
that the Company will be successful in locating or negotiating a transaction
with any target company.
We have attempted to provide a method for a foreign or domestic private
company to become a reporting ("public") company whose securities are qualified
for trading in the United States secondary market.
We believe there are certain perceived benefits to being a reporting
company with a class of publicly-traded securities. These are commonly thought
to include the following:
* the ability to use registered securities to make acquisition of assets
or businesses;
* increased visibility;
* the facilitation of borrowing from financial institutions;
* improved trading efficiency;
* shareholder liquidity;
* greater ease in subsequently raising capital;
* compensation of key employees through stock options;
* enhanced corporate image;
* a presence in the United States capital market.
A business entity, if any, which may be interested in a business
combination with the Company may include the following:
* a company for whom a primary purpose of becoming public is the use of
its securities for the acquisition of assets or businesses;
* a company which is unable to find an underwriter of its securities or
is unable to find an underwriter of securities on terms acceptable to
it;
* a company which wishes to become public with less dilution of its
common stock than would occur upon an underwriting;
* a company which believes that it will be able obtain investment
capital on more favorable terms after it has become public;
* a foreign company which may wish an initial entry into the United
States securities market;
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* a special situation company, such as a company seeking a public market
to satisfy redemption requirements under a qualified Employee Stock
Option Plan;
* a company seeking one or more of the other perceived benefits of
becoming a public company.
A business combination with a target company may involve the transfer to
the target company of the majority of the issued and outstanding common stock of
the Company, and the substitution by the target business of its own management
and board of directors.
The proposed business activities described herein classify the Company as a
"blank check" company. The Securities and Exchange Commission and many states
have enacted statutes, rules and regulations limiting the sale of securities of
blank check companies. At the present time there is no market for the Company's
securities.
(C) Risks Related to the Plan of Operation
The Company's business is subject to numerous risk factors, including the
following:
WE HAVE NO RECENT OPERATING HISTORY, OPERATING REVENUE AND WE HAVE MINIMAL
ASSETS. The Company has had no operations since approximately 1987. The Company
has only limited assets and financial resources. The Company will, in all
likelihood, sustain operating expenses without corresponding revenues, at least
until the consummation of a business combination. This may result in the Company
incurring a net operating loss which will increase continuously until the
Company can consummate a business combination with a target company. There is no
assurance that the Company can identify such a target company and consummate
such a business combination.
THE SPECULATIVE NATURE OF OUR PROPOSED OPERATIONS. The success of the
Company's proposed plan of operation will depend to a great extent on the
operations, financial condition and management of the identified target company.
While Management intends to seek business combinations with entities having
established operating histories, there can be no assurance that the Company will
be successful in locating candidates meeting such criteria. In the event the
Company completes a business combination, of which there can be no assurance,
the success of the Company's operations may be dependent upon management of the
target company and numerous other factors beyond the Company's control.
THERE IS A SCARCITY OF AND COMPETITION FOR BUSINESS OPPORTUNITIES AND
COMBINATIONS. The Company is and will continue to be an insignificant
participant in the business of seeking mergers with and acquisitions of business
entities. A large number of established and well-financed entities, including
venture capital firms, are active in mergers and acquisitions of companies which
may be merger or acquisition target candidates for the Company. Nearly all such
entities have significantly greater financial resources and technical expertise
than the Company and, consequently, the Company may be at a competitive
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disadvantage in identifying possible business opportunities and successfully
completing a business combination.
WE HAVE NO AGREEMENT FOR BUSINESS COMBINATION OR OTHER TRANSACTION. The
Company has no arrangement, agreement or understanding with respect to engaging
in a merger with or acquisition of a business entity. There can be no assurance
the Company will be successful in identifying and evaluating suitable business
opportunities or in concluding a business combination. Management has not
identified any particular industry or specific business within an industry for
evaluation by the Company. There is no assurance the Company will be able to
negotiate a business combination on terms favorable to the Company. The Company
has not established a specific length of operating history or a specified level
of earnings, assets, net worth or other criteria which it will require a target
business opportunity to have achieved, or without which the Company would not
consider a business combination with such business entity. Accordingly, the
Company may enter into a business combination with a business entity having no
significant operating history, losses, limited or no potential for earnings,
limited assets, negative net worth or other negative characteristics.
OUR MANAGEMENT HAS ONLY A LIMITED TIME COMMITMENT TO THE COMPANY. Our
Officers and Directors have several business interests and will devote their
efforts only part time to the Company's business. While seeking a business
combination, Management anticipates devoting a limited number of hours each
month to the business of the Company. The Company's officers have not entered
into written employment agreements with the Company and they are not expected to
do so in the foreseeable future. We have not obtained key man life insurance on
its officer or director. Notwithstanding the combined limited experience and
time commitment of Management, loss of the services of this individual would
adversely affect development of the Company's business and its likelihood of
continuing operations.
OUR OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTEREST WITH THE BUSINESS
OF OUR COMPANY. The Company's officers and directors participate in other
business ventures which may result in conflicts of interest and non-arms length
transactions arising in the future. Management has adopted a policy that the
Company will not seek a merger with, or acquisition of, any entity in which any
member of Management serves as officer, director or partner, or in which they or
their family members own or hold any ownership interest.
BEING A REPORTING COMPANY COMPLICATES AND COULD DELAY AN ACQUISITION.
Section 13 of the Securities Exchange Act of 1934 (the "Exchange Act") requires
us to provide certain information about significant acquisitions including
certified financial statements for the company acquired covering one or two
years, depending on the relative size of the acquisition. The time and
additional costs that may be incurred by some target companies to prepare such
statements may significantly delay or essentially preclude consummation of an
otherwise desirable acquisition by the Company. Acquisition prospects that do
not have or are unable to obtain the required audited statements may not be
appropriate for acquisition so long as the reporting requirements of the
Exchange Act are applicable.
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WE HAVE A LACK OF MARKET RESEARCH AND NO MARKETING ORGANIZATION. We have
neither conducted, nor have others made available to us, results of market
research indicating that market demand exists for the transactions contemplated
by the Company. Moreover, the Company does not have, and does not plan to
establish, a marketing organization. Even in the event demand is identified for
a merger or acquisition contemplated by the Company, there is no assurance the
Company will be successful in completing any such business combination.
CERTAIN REGULATIONS MAY APPLY TO OUR OPERATIONS. Although the Company will
be subject to regulation under the Exchange Act, Management believes the Company
will not be subject to regulation under the Investment Company Act of 1940,
insofar as the Company will not be engaged in the business of investing or
trading in securities. In the event the Company engages in business combinations
which result in the Company holding passive investment interests in a number of
entities, the Company could be subject to regulation under the Investment
Company Act of 1940. In such event, the Company would be required to register as
an investment company and could be expected to incur significant registration
and compliance costs. We have not obtained a formal determination from the
Securities and Exchange Commission as to the status of the Company under the
Investment Company Act of 1940. If we inadvertently violate such Act, we could
be subjected to material adverse consequences.
THERE WILL BE A CHANGE IN MANAGEMENT. A business combination involving the
issuance of the Company's common stock will, in all likelihood, result in
shareholders of a target company obtaining a controlling interest in the
Company. Any such business combination may require our Management to sell or
transfer all or a portion of the Company's common stock held by them, and to
resign as directors and officers of the Company. The resulting change in control
of the Company will likely result in removal of the present officer and director
of the Company and a corresponding reduction in or elimination of his
participation in the future affairs of the Company.
THE PLAN OF OPERATION PROVIDES FOR SUBSTANTIAL DILUTION TO OUR EXISTING
SHAREHOLDERS AS A RESULT OF A MERGER. Our plan of operation is based upon a
business combination with a business entity which, in all likelihood, will
result in the Company issuing securities to shareholders of such business
entity. The issuance of previously authorized and unissued common stock of the
Company would result in reduction in percentage of shares owned by the present
shareholders of the Company and would most likely result in a change in control
or management of the Company.
WE MAY NOT BE ABLE TO ENGAGE IN A TAX FREE ACQUISITION. We intend to
structure any business combination so as to minimize the federal and state tax
consequences to both the Company and the target company; however, there can be
no assurance that such business combination will meet the statutory requirements
of a tax-free reorganization or that the parties will obtain the intended
tax-free treatment upon a transfer of stock or assets. A non- qualifying
reorganization could result in the imposition of both federal and state taxes
which may have an adverse effect on the parties to the transaction and therefore
the transaction.
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THE REQUIREMENT OF AUDITED FINANCIAL STATEMENTS MAY DISQUALIFY BUSINESS
OPPORTUNITIES. We will require that any potential business opportunity provide
audited financial statements. One or more attractive business opportunities may
choose to forego the possibility of a business combination with the Company
rather than incur the expenses associated with preparing audited financial
statements.
Such audited financial statements may not be immediately available. In such
case, the Company intends to obtain certain assurances as to the target
company's assets, liabilities, revenues and expenses prior to consummating a
business combination, with further assurances that an audited financial
statement would be provided after closing of such a transaction. Closing
documents relative thereto will include representations that the audited
financial statements will not materially differ from the representations
included in such closing documents.
(d) Plan of Operation
We intend to merge with or acquire a business entity in exchange for our
securities. We have no particular acquisition in mind and have not entered into
any negotiations regarding such an acquisition.
We anticipate seeking out a target business through solicitation. Such
solicitation may include newspaper or magazine advertisements, mailings and
other distributions to law firms, accounting firms, investment bankers,
financial advisors and similar persons, the use of one or more World Wide Web
sites and similar methods. No estimate can be made as to the number of persons
who will be contacted or solicited. Such persons will have no relationship to
Management.
We have no full time employees. The Company's Management has agreed to
allocate a portion of their time to the activities of the Company as
consultants. The president anticipates that the business plan of the Company can
be implemented by his devoting approximately 20 hours per month to the business
affairs of the Company and, consequently, conflicts of interest may arise with
respect to the limited time commitment by such officer.
The Company's officers and directors expect, in the future, to become
involved with other companies which have a business purpose similar to that of
the Company. A conflict may arise in the event that another blank check company
with which Management is affiliated is formed and actively seeks a target
business. Management anticipates that target businesses will be located for the
Company and other blank check companies in chronological order of the date of
formation of such blank check companies. However, other blank check companies
that may be formed may differ from the Company in certain items such as place of
incorporation, number of shares and shareholders, working capital, types of
authorized securities, or other items. It may be that a target business may be
more suitable for or may prefer a certain blank check company formed after the
Company. In such case, a business combination might be negotiated on behalf of
the more suitable or preferred blank check company regardless of date of
formation.
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The Certificate of Incorporation of the Company provides that the Company
may indemnify officers and/or directors of the Company for liabilities, which
can include liabilities arising under the securities laws. Therefore, assets of
the Company could be used or attached to satisfy any liabilities subject to such
indemnification.
Our plan is to seek, investigate and, if such investigation warrants,
acquire an interest in a business entity which desires to seek the perceived
advantages of a corporation which has a class of securities registered under the
Exchange Act. The Company will not restrict its search to any specific business,
industry, or geographical location and the Company may participate in a business
venture of virtually any kind or nature. This discussion of the proposed
business is not meant to be restrictive of the Company's virtually unlimited
discretion to search for and enter into potential business opportunities.
We may seek a business opportunity with entities which have recently
commenced operations, or which wish to utilize the public marketplace in order
to raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. The Company
may acquire assets and establish wholly-owned subsidiaries in various businesses
or acquire existing businesses as subsidiaries.
We anticipate that the selection of a business opportunity in which to
participate may be complex and extremely risky. Due to general economic
conditions, rapid technological advances being made in some industries and
shortages of available capital, Management believes that there are numerous
firms seeking the perceived benefits of a publicly registered corporation. Such
perceived benefits may include facilitating or improving the terms on which
additional equity financing may be sought, providing liquidity for incentive
stock options or similar benefits to key employees, and providing liquidity for
shareholders and other factors. Business opportunities may be available in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
opportunities difficult and complex.
The Company has, and will continue to have, only limited capital with which
to provide the owners of business opportunities with any cash or other assets.
However, we believe the Company will be able to offer owners of acquisition
candidates the opportunity to acquire a controlling ownership interest in a
publicly registered company without incurring the cost and time required to
conduct an initial public offering. Management has not conducted market research
and is not aware of statistical data to support the perceived benefits of a
merger or acquisition transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under
the supervision of Company Management who are not professional business
analysts. In analyzing prospective business opportunities, Management will
consider such matters as the available technical, financial and managerial
resources; working capital and other financial requirements; history of
operations, if any; prospects for the future; nature of present and expected
competition; the quality and experience of Management services which may be
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available and the depth of that Management; the potential for further research,
development, or exploration; specific risk factors not now foreseeable but which
then may be anticipated to impact the proposed activities of the Company; the
potential for growth or expansion; the potential for profit; the perceived
public recognition or acceptance of products, services, or trades; name
identification; and other relevant factors. Management will meet personally with
Management and key personnel of the business opportunity as part of their
investigation. To the extent possible, the Company intends to utilize written
reports and personal investigation to evaluate the above factors. The Exchange
Act requires that any merger or acquisition candidate comply with certain
reporting requirements, which include providing audited financial statements to
be included in the filings made under the Exchange Act. The Company will not
acquire or merge with any company for which audited financial statements cannot
be obtained at or within a reasonable period of time after closing of the
proposed transaction.
We will in all likelihood not be experienced in matters relating to the
business of a target company but will rely upon outside consultants or advisors
to assist us in the search for and analysis of qualified target companies.
The Company will not restrict its search for any specific kind of firms,
but may acquire a venture which is in its preliminary or development stage, one
which is already in operation, or in a more mature stage of its corporate
existence. The acquired business may need to seek additional capital, may desire
to have its shares publicly traded, or may seek other perceived advantages which
the Company may offer. However, the Company does not intend to raise additional
funds to finance the operation of any acquired business opportunity until such
time as the Company has successfully consummated the merger or acquisition
transaction.
MANNER OF ACQUISITION
In implementing a structure for a particular business acquisition, we may
become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. We also could acquire
stock or assets of an existing business. On the consummation of a transaction,
it is probable that the present Management and shareholders of the Company will
no longer be in control of the Company. In addition, some or all of our
directors, as part of the terms of the acquisition transaction, likely will be
required to resign and be replaced by one or more new directors without a vote
of our shareholders.
It is anticipated that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of its transaction, the Company may agree to register all or
a part of such securities immediately after the transaction is consummated or at
specified times thereafter. If such registration occurs, of which there can be
no assurance, it will be undertaken by the surviving entity after the Company
has entered into an agreement for a business combination or has consummated a
business combination and the Company is no longer considered a blank check
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company. Until such time as this occurs, the Company will not attempt to
register any additional securities. The issuance of substantial additional
securities and their potential sale into any trading market which may develop in
the Company's securities may have a depressive effect on that market.
While the actual terms of a transaction to which the Company may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a "tax-free" reorganization under Sections
351 or 368 of the Internal Revenue Code of 1986, as amended.
With respect to any merger or acquisition, negotiations with target company
management is expected to focus on the percentage of the Company which target
company shareholders would acquire in exchange for all of their shareholdings in
the target company. Depending upon, among other things, the target company's
assets and liabilities, the Company's shareholders will in all likelihood hold a
substantially lesser percentage ownership interest in the Company following any
merger or acquisition. The percentage ownership may be subject to significant
reduction in the event the Company acquires a target company with substantial
assets. Any merger or acquisition effected by the Company can be expected to
have a significant dilutive effect on the percentage of shares held by the
Company's shareholders at such time.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require certain
representations and warranties of the parties thereto, will specify certain
events of default, will detail the terms of closing and the conditions which
must be satisfied by the parties prior to and after such closing, will outline
the manner of bearing costs, including costs associated with the Company's
attorneys and accountants, and will include miscellaneous other terms.
We are presently subject to all of the reporting requirements included in
the Exchange Act. Included in these requirements is the duty of the Company to
file audited financial statements as part of its Form 8-K to be filed with the
Securities and Exchange Commission upon consummation of a merger or acquisition,
as well as the Company's audited financial statements included in its annual
report on Form 10-K (or 10-KSB, as applicable). If such audited financial
statements are not available at closing, or within time parameters necessary to
insure the Company's compliance with the requirements of the Exchange Act, or if
the audited financial statements provided do not conform to the representations
made by the target company, the closing documents may provide that the proposed
transaction will be voidable at the discretion of the present Management of the
Company.
The Company has adopted a policy that the Company will not seek an
acquisition or merger with any entity in which the Company's officers,
directors, and controlling shareholders or any affiliate or associate serves as
an officer or director or holds any ownership interest.
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COMPETITION
The Company will remain an insignificant participant among the firms which
engage in the acquisition of business opportunities. There are many established
venture capital and financial concerns which have significantly greater
financial and personnel resources and technical expertise than the Company. In
view of the Company's limited financial resources and limited management
availability, the Company may be at a competitive disadvantage compared to the
Company's competitors.
Item 2. DESCRIPTION OF PROPERTY
The Company utilizes the offices of its officers and directors without
change consisting of approximately 2,500 square feet located at 6300 South
Syracuse Way, Suite 293,Englewood, Colorado 80111.
Item 3. LEGAL PROCEEDINGS
No legal proceedings to which the Company is a party were pending during
the reporting period, and the Company knows of no legal proceedings of a
material nature, pending or threatened, or judgments entered against any
director or officer of the Company in his capacity as such.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matter to a vote of security holders through
solicitation of proxies or otherwise during the fourth quarter of the fiscal
year covered by this report.
PART II
Item 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Principal Market or Markets. The Company's stock has not traded since
1987 and at the present time it has no trading symbol.
(b) Approximate Number of Holders of Common Stock. The number of holders of
record of the Company's Common Stock at July 2000, was approximately 1,100.
(c) Dividends. Holders of common stock are entitled to receive such
dividends as may be declared by the Company's Board of Directors. No dividends
on the common stock were paid by the Company during the periods reported herein
nor does the Company anticipate paying dividends in the foreseeable future.
(d) Recent Sales of Unregistered Securities.
NOT APPLICABLE
- 11 -
<PAGE>
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements
Certain statements contained in this annual report on Form 10KSB including
without limitation, statements containing the words "believes," "anticipates,"
"estimates," "expects," and words of similar import, constitute "forward-looking
statements." You should not place undue reliance on these forward-looking
statements. Our actual results and the structure of transactions which may occur
in the future could differ materially from those described in these
forward-looking statements for many reasons, including those set forth in the
risk factors included herein and for other reasons including the demands of the
specific business entity with which the company may elect to engage in a
transaction.
Plan of Operation
See Part I, Item 1., "Business-Plan of Operation."
Liquidity and Capital Resources
At October 31, 1999, the Company's fiscal year end, the Company had cash
and cash equivalents of $660,143.00, an increase of $654,797.00 from October 31,
1998. The increase is entirely a result of the cash generated by the sale of the
Accelr8 stock previously held for investment. While the Company has no
foreseeable capital commitments, it also has no present expectations of
generating any cash flow from operations until such time as it may successfully
complete the acquisition of a business, operations, or assets of an operating
entity. At present time, Management has no plans to raise additional funds
through borrowings or the issuance of debt or equity.
We believe that our current cash and equivalents will satisfy our expected
working capital requirements through fiscal 2000 and thereafter until an
acquisition is consummated.
Item 7. FINANCIAL STATEMENTS
The report of the independent auditors on the financial statements appears
at Page F-2 and the financial statements and their accompanying footnotes appear
at Pages F-3 through F-11 hereof. These financial statements and related
financial information required to be filed hereunder are incorporated herein by
reference.
Item 8. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company did not have any disagreements on accounting and financial
disclosures with its present accounting firm during the reporting period.
- 12 -
<PAGE>
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
(a) Directors and Executive Officers. The names and ages of the Directors
and executive officers of the Company are as follows:
Name Age Position Since
Robert J. Guerra 45 Director, Chief Executive July 1998
Officer and President
Craig A. Kleinman 44 Director, Vice President July 1998
and Treasurer
Stephen A. Maguire 49 Director and Secretary July 1998
The Director serves until the next annual meeting of shareholders, and
until his successor is elected and qualified.
The following sets forth information concerning the principal occupations
and business experience of the current Officers and Directors of the Company:
Robert J. Guerra, has served as a director, Chief Executive Officer and
President of the Company since July 1998. Mr. Guerra has been a shareholder and
co-founder of Kleinman, Guerra & Co., P.C., a certified public accounting firm
since 1988. From 1985 to 1988 Mr. Guerra served as the President and director of
Beaumont Properties, a full service real estate development and management
company. Mr. Guerra received a B.S. degree in accounting from Fairleigh
Dickinsen University and a Masters degree in taxation form Denver University
School of Law
Craig A. Kleinman, has served as a director, Vice President and Treasurer
of the Company since July 1998. Mr. Kleinman has been a shareholder and
co-founder of Kleinman, Guerra & Co., P.C., a certified public accounting firm
since 1988. From April 1993 to April 1996 Mr. Kleinman served as the Chief
Financial Officer and currently is a director and corporate secretary of 4Front
Technologies, Inc. Mr. Kleinman received a B.S. degree in business from the
University of Colorado.
Stephen A. Maguire, has served as a director and Secretary since July 1998.
Mr. Maguire has been a partner of Maguire and Rabum, LLC, a law practice devoted
to business, real estate and finance, since 1993. In 1992, Mr. Maguire was an
Associate Attorney with Schied & Horlbeck, P.C. Mr. Maguire is also the
President of St. Charles Investment Company. Mr. Maguire received a B. A. from
the University of Notre Dame, a M. A. in Librarianship for the University of
Denver and a J.D. for the University of Colorado.
- 13 -
<PAGE>
Item 10. EXECUTIVE COMPENSATION
No officer or director of the Company directly received compensation except
as disclosed in Item 12 Certain Relationships and related Transactions.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The registrant's securities are recorded on the books of its transfer agent
in registered form. A substantial portion of the shares are, however, registered
in the name of intermediaries such as brokerage houses and clearing houses on
behalf of their respective clients. Management does not have knowledge of the
beneficial owners thereof.
The following table sets forth information regarding beneficial ownership
as of July 15, 2000, of the Company's common stock by any person who is known by
the Company to be the beneficial owner of more than five percent (5%) of the
Company's voting securities, and by each Director of the Registrant, and by
officers and Directors of the Registrant as a group. As of July 15, 2000, there
were 7,505,801 common shares issued and outstanding.
All ownership is beneficial and on record and all beneficial owners listed
below have sole voting and investment power with respect to the shares shown,
unless otherwise indicated.
Title of Name and Address Number of Percent of
-------- ---------------- --------- ----------
Class Shares Class
----- ------ -----
Common Stock Satellite Investment (1) 3,825,000 50.96%
Group, LLC
6300 South Syracuse Way
Suite 293
Englewood, CO 80111
Common Stock Robert J. Guerra (1)(2) 3,937,500 52.46%
Common Stock Craig A. Kleinman (1)(2) 3,937,500 52.46%
Common Stock Stephen A. Maguire (1) 3,825,000 50.96%
Common Stock Officers and Directors as 4,050,000 53.96%
a group (3 people)
(1) Satellite Investment Group's members are Robert J. Guerra, Craig A.
Kleinman and Stephen A. Maguire. Each member has a membership interest
of 33.33%.
(2) Mr. Guerra indirectly owns 112,500 shares which are registered in the
name of Craig A. Kleinman.
- 14 -
<PAGE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the purchase of control of the Company by Satellite
Investment Group, LLC, a limited liability company, whose members are Robert J.
Guerra, Craig A. Kleinman and Stephen A. Maguire, the directors and management
of the Company, in June 1998 at a time when the market value of the Accelr8
stock was approximately $8 million the Company entered into an Asset
Rehabilitation Agreement with Satellite Investment Group, LLC pursuant to which
the Company agreed to pay Satellite Investment Group, LLC a Rehabilitation Fee
of $2,500,000 if it were able to cause the Accelr8 stock certificates to be
replaced and to become freely saleable by the Company. In approving the Asset
Rehabilitation Agreement and the Rehabilitation Fee the board of directors of
the company acknowledged that the Company had been unable to realize any value
from its ownership of the Accelr8 stock because the stock certificates had been
lost and the company had no source funding available to it to obtain reissuance
of the lost certificates on a more favorable basis than that provided for in the
Asset Rehabilitation Agreement. Once Satellite Investment Group LLC obtained the
Asset Rehabilitation Agreement, it purchased 50.96% of the Company stock from
the prior management and the board of directors and management of the company
changed. Satellite Investment Group, LLC then paid $137,189 to Seaboard Surety
Company for issuing a bond for the replacement of the lost certificates. This
payment was subsequently reimbursed by the Company. To obtain the required bond,
Satellite Investment Group, LLC also was required to provide an unlimited
indemnification to Seaboard Surety Company from a substantial indemnitor. The
fee of the indemnitor for the indemnity to Seaboard Surety Company was paid by
Satellite Investment Group, LLC. The Rehabilitation Fee and the cost of the bond
were added to the cost basis of the Accelr8 stock. Thereafter, replacements
certificates for the Accelr8 stock were sold between July 1998 and January 1999
at an average price of $7.02 per share for a total consideration of $3,704,103.
No shares of Acceler8 are currently owned by the Company.
The Company paid $32,050 and $69,259 of professional fees during the years
ended October 31, 1998 and 1999, respectively to Belaire Business Group, a
partnership whose partners are Craig A. Kleinman and Robert J. Guerra, members
of Satellite Investment Group, LLC, and directors and management of the Company.
The Company paid $5,610 of legal fees to a law firm, whose principal is
Stephen A. Magurie, a member of Satellite Investment Group, LLC, and a director
and manager of the Company.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following financial information is filed as part of this report:
1) Financial Statements
2) Schedules
- 15 -
<PAGE>
3) Exhibits. The following exhibits are furnished as part of this report:
Item 601
Exhibit No. Description
3.1 Articles of Incorporation (filed herewith).
3.2 Articles of Amendment to the Articles of Incorporation of Solar
Satellite Communications dated June 7, 1983 (filed herewith).
3.3 Articles of Amendment to the Articles of Incorporation of Solar
Satellite Communications dated September 22, 1983 (filed
herewith).
3.4 Articles of Amendment to the Articles of Incorporation of Solar
Satellite Communications dated November 29, 1988 (filed
herewith).
3.5 Articles of Amendment to the Articles of Incorporation of Solar
Satellite Communications dated January 17, 1989 (filed
herewith).
3.6 Bylaws (filed herewith).
10.1 Stock Purchase Agreement by and between SIG and Tamiya Wantanabe
dated May 21, 1998 (previously filed as exhibit (a) on
registrant's current report on Form 8-K dated July 23, 1998
(File No.000-12169) incorporated herein by reference).
10.2 Asset Rehabilitation Agreement dated June 3, 1998 (previously
filed as exhibit (b) on registrant's current report on Form 8-K
dated July 23, 1998 (File No. 000- 12169) incorporated herein by
reference).
10.3 Pledge and Security Agreement dated July 8, 1998 (filed
herewith).
10.4 Indemnity and Restriction Agreement dated July 8, 1998 (filed
herewith).
10.5 Recission and Reimbursement Agreement dated April , 2000
(filed herewith).
27 Financial Data Schedule (filed herewith).
Reports on Form 8-K
(b) Reports on Form 8-K filed during the fourth quarter of 1999 -
None.
- 16 -
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report F-2
Financial Statements:
Balance Sheets F-3
Statements of Operations F-4
Statement of Changes in Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7
<PAGE>
AJ. ROBBINS, PC
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
3033 EAST 1ST AVENUE
SUITE 201
DENVER, COLORADO 80206
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
Solar Satellite Communication, Inc.
Englewood, Colorado
We have audited the accompanying balance sheets of Solar Satellite
Communication, Inc. as of October 31, 1999 and 1998 and the related statements
of operations, stockholders' equity 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Solar Satellite Communication,
Inc. as of October 31, 1999 and 1998 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.
AJ. ROBBINS, PC
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS
Denver, Colorado
December 21, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
SOLAR SATELLITE COMMUNICATION, INC.
BALANCE SHEETS
==============
ASSETS
October 31,
1999 1998
----------- -----------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 660,143 $ 5,346
Marketable securities - trading -- 590,374
Amount due from directors 292,166 --
Accrued interest receivable, directors 360 --
Deferred tax asset -- 207,000
----------- -----------
$ 952,669 $ 802,720
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES $ -- $ --
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 1,000,000 shares
authorized, none issued or outstanding -- --
Common stock, $.001 par value, 25,000,000 shares
authorized; 7,505,801 shares issued and
outstanding 7,506 7,506
Additional paid-in capital 2,775,986 2,775,986
Accumulated (deficit) (1,830,823) (1,980,772)
----------- -----------
Total Stockholders' Equity 952,669 802,720
----------- -----------
$ 952,669 $ 802,720
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-3
<PAGE>
SOLAR SATELLITE COMMUNICATION, INC.
STATEMENTS OF OPERATIONS
========================
Years Ended October 31,
--------------------------
1999 1998
----------- ------------
REVENUES:
Realized gain on sale of marketable securities $ 406,244 $ 1,044,219
Unrealized (loss) on marketable securities -- (384,262)
Interest and dividend income 23,077 990
Interest income, directors 15,809 --
----------- ------------
Total Revenues 445,130 660,947
----------- ------------
COSTS AND EXPENSES:
General and administrative 88,181 48,446
Interest expense -- 2,984
----------- ------------
Total Expenses 88,181 51,430
----------- ------------
INCOME BEFORE INCOME TAX PROVISION (BENEFIT) 356,949 609,517
INCOME TAX PROVISION (BENEFIT) 207,000 (207,000)
----------- ------------
NET INCOME $ 149,949 $ 816,517
=========== ============
NET INCOME PER COMMON SHARE BASIC AND
DILUTED $ .02 $ .11
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANING 7,505,801 7,505,801
=========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-4
<PAGE>
<TABLE>
<CAPTION>
SOLAR SATELLITE COMMUNICATION, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED OCTOBER 31, 1999 AND 1998
=============================================
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital (Deficit) Total
------ ------ ------- --------- -----
<S> <C> <C> <C> <C> <C>
Balances at October 31, 1997 7,505,801 $ 7,506 $ 2,775,986 $(2,797,289) $ (13,797)
Net income for the year ended -- -- -- 816,517 816,517
October 31, 1998 ---------- ----------- ----------- ----------- -----------
Balances at October 31, 1998 7,505,801 7,506 2,775,986 (1,980,772) 802,720
Net income for the year ended -- -- -- 149,949 149,949
October 31, 1999 ----------- ----------- ----------- ----------- -----------
Balances at October 31, 1999 7,505,801 $ 7,506 $ 2,775,986 $(1,830,823) $ 952,669
=========== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-5
<PAGE>
<TABLE>
<CAPTION>
SOLAR SATELLITE COMMUNICATION, INC.
STATEMENTS OF CASH FLOWS
========================
Years Ended October 31,
----------------------------
1999 1998
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 149,949 $ 816,517
Adjustments to reconcile net income to net cash
provided by operating activities:
Unrealized loss on marketable securities -- 384,262
Proceeds from sales of marketable securities 996,618 2,896,773
Purchases of marketable securities -- (190,000)
Realized gain on marketable securities (406,244) (1,044,219)
Asset rehabilitation fee -- (2,637,189)
Deferred taxes 207,000 (207,000)
(Increase) decrease in amount due from directors (292,166) --
(Increase) decrease in accrued interest receivable,
directors (360) --
Increase (decrease) in accounts payable -- (13,798)
----------- -----------
Net Cash Provided by Operating Activities 654,797 5,346
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES -- --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES -- --
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 654,797 5,346
CASH AND CASH EQUIVALENTS, beginning of year 5,346 --
----------- -----------
CASH AND CASH EQUIVALENTS, end of year $ 660,143 $ 5,346
=========== ===========
Supplemental Cash Flow Information:
See Note 5
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-6
<PAGE>
SOLAR SATELLITE COMMUNICATION, INC.
NOTES TO FINANCIAL STATEMENTS
=============================
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
------------------
Solar Satellite Communication, Inc. (the Company) was organized under the laws
of the State of Colorado on April 6, 1983. The Company has not had any
significant operating activities since 1989.
During 1994, Rabex USA Holdings, Inc., a Colorado corporation purchased 225,000
shares of common stock and 3,600,000 stock options from the former directors.
Upon exercise of the stock options Rabex USA Holdings, Inc. became a 50.96%
shareholder and the board of directors and management changed at that time. The
principal asset of the Company at this time was shares of Accelr8 Technology
Corporation (Accelr8). Subsequently, certificates for the Accelr8 shares were
lost.
In July 1998, Satellite Investment Group, LLC, a Colorado limited liability
company purchased 3,825,000 shares of common stock from Rabex Holdings, Inc.
Satellite Investment Company, LLC became a 50.96% shareholder and the board of
directors and management changed at that time.
Subsequent to the acquisition of control of the Company by Satellite Investment
Group, LLC, it obtained for the benefit of the Company a lost security bond for
the lost Accelr8 certificates and also provided a required indemnity to the
bonding company. Thereafter all Accelr8 shares were sold between July 1998 and
January 1999.
Cash and Cash equivalents
-------------------------
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with a maturity at the date of purchase of three months or
less as cash equivalents.
Investments
-----------
The Company has adopted Statement No. 115, Accounting for Certain Investments in
Debt and Equity Securities, issued by the Financial Accounting Standards Board.
In accordance with Statement No. 115, the Company's investments in debt and
equity securities, have been classified as trading securities held principally
for resale in the near term. Consequently, the investments are carried at fair
value, with unrealized gains and losses included in earnings in the period they
arise. Realized gains and losses are computed by using the cost of marketable
securities on a first-in, first-out basis.
Income Taxes
------------
Deferred income taxes are recorded to reflect the tax consequences in future
years of temporary differences between the tax basis of the assets and
liabilities and their financial statement amounts at the end of each reporting
period. Valuation allowances are established when necessary to reduce deferred
tax assets to the amount expected to be realized. Income tax expense is the tax
payable for the current period and the change during the period in deferred tax
assets and liabilities. Deferred tax assets and liabilities have been netted to
reflect the tax impact of temporary differences.
F-7
<PAGE>
SOLAR SATELLITE COMMUNICATION, INC.
NOTES TO FINANCIAL STATEMENTS
=============================
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings (Loss) Per Share
-------------------------
The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 128, Earnings Per Share ("SFAS 128"). Under the standards
established by SFAS 128, earnings per share is measured at two levels: basic
earnings per share and diluted earnings per share. Basic earnings per share is
computed by dividing net income by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is computed by dividing
net income by the weighted average number of common shares after considering the
additional dilution related to preferred stock, options and warrants. During the
years ended October 31, 1999 and 1998, there was no dilution from preferred
stock, options or warrants outstanding to be considered in calculating diluted
earnings per share.
Fair Value of Financial Instruments
-----------------------------------
The carrying value of cash and cash equivalents and accrued expenses approximate
fair value because of the short maturity of these items. The carrying amount of
marketable securities - trading are recorded at fair value in accordance with
generally accepted accounting principles.
Year 2000 Issues
----------------
Many existing computer programs use only two digits to identify a year in the
date field, with the result that data referring to year 2000 and subsequent
years may be misinterpreted by these programs. If present in the computer
applications of the Company, or its suppliers and customers, and not corrected,
this problem could cause computer applications to fail or to create erroneous
results and could cause a disruption in operations and have a short-term adverse
effect on the Company's business and results of operations. Management does not
believe the year 2000 problem will have a material adverse effect on the
Company.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - INVESTMENT IN ACCELR8 TECHNOLOGY CORPORATION (Also see Note 4)
In 1988, the Company acquired 3,000,000 shares, or 20%, of Accelr8 Technology
Corporation, a publicly traded company. Accelr8 is in the business of developing
and marketing proprietary computer software for the mini-super computer market.
The Company sold 150,000 shares during 1991 and another 150,000 shares during
1992, thereby reducing its investment to 2,700,000 shares or 12% of the investee
company. Again in 1993, the Company sold 369,700 shares, reducing its investment
to 2,330,300 shares or 11%, of the investee company. In February 1993, an
officer, who is also a director and shareholder of the Company, resigned as
F-8
<PAGE>
SOLAR SATELLITE COMMUNICATION, INC.
NOTES TO FINANCIAL STATEMENTS
=============================
NOTE 2 - INVESTMENT IN ACCELR8 TECHNOLOGY CORPORATION
(Continued)
director of the investee company. As of 1993 the Company discontinued its use of
the equity method because it no longer had significant influence over the
operating and financial operations of the investee company.
During 1994 the Company sold an additional 219,700 shares reducing the
investment to 2,110,600 shares of the investee company. In 1996 Accelr8 enacted
a one for four reverse stock split thus bringing the number of shares held by
the Company to 527,650 shares of the investee company.
A change in control and management of the Company occurred in 1994 at which time
the Accelr8 Technology Corporation common stock certificates (the certificates)
were handed over. Subsequent to the change in control and management in 1994 the
Company remained inactive and the certificates were lost. The Company was unable
to pay the cost and provide the financial indemnity required for a lost security
bond for reissuance of the lost certificates. Subsequently in 1998 when the
Accelr8 certificates remained lost, Satellite Investment Group, LLC entered into
a contract to purchase control of the Company from Rabex USA Holdings, Inc.
In connection with the sale of control of the Company to Satellite Investment
Group, LLC, in June 1998 at a time when the market value of the Accelr8 stock
was approximately $8 million the Company entered into an Asset Rehabilitation
Agreement with Satellite Investment Group, LLC, a related party, pursuant to
which the Company agreed to pay Satellite Investment Group, LLC a Rehabilitation
fee of $2,500,000 if it were able to cause the Accelr8 stock certificates to be
replaced and to become freely saleable by the Company. In approving the Asset
Rehabilitation Agreement and the Rehabilitation Fee the board of directors of
the Company acknowledged that the Company had been unable to realize any value
from its ownership of the Accelr8 stock because of the lost certificates and
that there was no other source available to it for obtaining reissuance of the
lost certificates on a more favorable basis than that provided for in the Asset
Rehabilitation Agreement. Satellite Investment Group, LLC purchased 50.96% of
the Company stock and the board of directors and management of the Company
changed. Satellite Investment Group, LLC then paid $137,189 to Seaboard Surety
Company for issuing a bond for the replacement of the lost certificates, which
payment was reimbursed by the Company, and Satellite Investment Group, LLC
obtained for Seaboard Surety Company a required indemnity from a substantial
indemnitor. The fee of the indemnitor for the indemnity to Seaboard Surety
Company was paid by Satellite Investment Group, LLC and Satellite Investment
Group, LLC agreed to indemnify the indemnitor. The Rehabilitation fee and the
cost of the bond were added to the cost basis of the Accelr8 stock. Thereafter,
replacement certificates for the Accelr8 stock were sold between July 1998 and
January 1999 at an average price of $7.02 per share for a total consideration of
$3,704,103. No shares of Accelr8 are currently owned by the Company.
F-9
<PAGE>
SOLAR SATELLITE COMMUNICATION, INC.
NOTES TO FINANCIAL STATEMENTS
=============================
NOTE 3 - INCOME TAXES
The components of deferred tax assets and (liabilities) is as follows:
1999 1998
--------- ---------
Total deferred tax assets $ 273,000 $ 401,000
Less valuation allowance (273,000) --
--------- ---------
-- 401,000
Total deferred tax (liabilities) -- (194,000)
--------- ---------
Net deferred tax asset (liability) $ -- $ 207,000
========= =========
The tax effects of temporary differences that give rise to deferred tax assets
and (liabilities) are as follows:
1999 1998
--------- ---------
Marketable securities $ -- $(194,000)
Net operating loss carryover 273,000 401,000
Valuation allowance (273,000) --
--------- ---------
$ -- $ 207,000
========= =========
The provision (benefit) for income taxes consists of the following:
1999 1998
--------- ---------
Current $ -- $ --
Deferred 207,000 (207,000)
--------- ---------
$ 207,000 $(207,000)
========= =========
The components of deferred income tax expense (benefit) is as follows:
1999 1998
--------- ---------
Marketable securities $(194,000) $ 194,000
Net operating loss carryover 128,000 (401,000)
Valuation allowance 273,000 --
--------- ---------
$ 207,000 $(207,000)
========= =========
F-10
<PAGE>
SOLAR SATELLITE COMMUNICATION, INC.
NOTES TO FINANCIAL STATEMENTS
=============================
NOTE 3 - INCOME TAXES (Continued)
Following is a reconciliation of the amount of income tax expense (benefit) that
would result from applying the statutory funded income tax rates to pre-tax
income and the reported amount of income tax expense:
1999 1998
--------- ---------
Tax expense at federal statutory rates $ 121,000 $ 207,000
Net operating loss carryforward (117,000) (185,000)
Change in valuation on marketable securities -- (355,000)
Change in unrealized gain/loss -- 131,000
Change in deferred income taxes (66,000) --
Change in valuation allowance 273,000 --
Other (4,000) (5,000)
--------- ---------
$ 207,000 $(207,000)
========= =========
The Company has a net operating loss carryforward of approximately $733,000,
which will expire beginning in 2002.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company paid $2,500,000 during the year ended October 31, 1998 to Satellite
Investment Group, LLC, a limited liability company, whose members are the
directors and management of the Company (See Note 2).
The Company paid $32,050 and $69,259 of professional fees during the years ended
October 31, 1998 and 1999, respectively to Belaire Business Group, a partnership
whose partners are members of Satellite Investment Group, LLC, and directors and
management of the Company.
The Company paid $5,610 of legal fees to a law firm, whose principal is a member
of Satellite Investment Group, LLC, and is a director and manager of the
Company.
During 1999 the Company purchased and held certain securities. Subsequently, the
Company entered into a Recission and Reimbursement Agreement with its directors
to revoke and rescind ab initio the Company's acquisition of such securities and
to provide for the restoration by the directors of the Company to a position no
less favorable than they would have been as of the date of reimbursement if the
securities had not been purchased. The reimbursable costs of the securities were
recorded on the Company's financial statements as amount due from directors.
Interest is being accrued at the rate of 4.5% at October 31, 1999. All dividends
and interest paid with respect to the securities and proceeds from all sales of
the securities have been used to reduce the outstanding balance of principal and
accrued interest on the amount due from directors. The remaining balance of the
amount due from directors is due April 30, 2000.
F-11
<PAGE>
SOLAR SATELLITE COMMUNICATION, INC.
NOTES TO FINANCIAL STATEMENTS
=============================
NOTE 5 - SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS AND NON-CASH
INVESTING AND FINANCING ACTIVITIES
1999 1998
------------- ------------
Cash paid for interest $ - $ 2,984
Cash paid for income taxes - -
F-12
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Solar Satellite Communications, Inc.
Date: July 20, 2000 By: /s/ Robert Guerra
---------------------------------
Robert Guerra
President
In accordance with the Echange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the date indicated.
By: /s/ Robert Guerra Date: July 20, 2000
-------------------------------------
Robert Guerra
President, Chief
Executive Officer
and Director
/s/ Graig A. Kleinman Date: July 20, 2000
-------------------------------------
Graig A. Kleinman
Director, Vice President
and Treasurer
/s/ Stephen A. Maguire Date: July 20, 2000
-------------------------------------
Stephen A. Maguire
Director and Secretary
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