SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996, Commission file No. 0-18866
OR
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
LOCH HARRIS, INC.
-----------------
(Exact name of small business issuer as specified in its charter)
Nevada 87-0418799
----------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14205 Burnet Rd.
-----------------
(Address of principal executive offices)
Austin, Texas 78728
-------------------
(Address of previous executive offices)
(512) 328-7808
-------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $0.01 Par Value
----------------------------
(Title of Class)
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 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 past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference of Part III of this Form 10 KSB, or any amendment to
this Form 10-KSB. [X]
Registrant's revenue for the 1996 Fiscal Year: $-0-
As of April 15, 1997, the registrant had 94,564,385 shares of its $.01 par value
Common Stock outstanding. On that date approximately 47,000,000 shares were
held by non-affiliates which had a fair market value of $.12 per share.
1
<PAGE>
FORM 10-KSB
PART I
ITEM I - BUSINESS
Business Development
- ---------------------
Loch Harris, Inc. (the Company or Registrant) was incorporated under Nevada law
as Green Resources, Inc. on March 13, 1985, which merged with Innovative Health
Care Products Corporation, a Colorado corporation on June 16, 1986. The name
was changed in July of 1986 to Eclectix, which merged in 1988 with Loch Harris
Energy, Inc., a Delaware corporation involved in oil and gas operations. The
name was changed to Loch Harris, Inc. in September of 1988.
Business of Issuer
- --------------------
The initial health and medical business declined prior to the 1988 merger. The
subsequent oil and gas operations ceased by late 1989 due to unfavorable
industry conditions and the drastic fall in oil and gas prices. Loch Harris,
Inc. elected to remain inactive until restructuring efforts initiated in 1992
were completed.
In September of 1993, the Registrant acquired for common stock P.C. Sentry,
Inc., a Texas corporation, which had developed a sophisticated computer
surveillance monitoring system (Sentry 93000 Notification System). In November
1993, Registrant purchased with common stock an electronic telephone message
software program (InfoNotes).
At the end of 1996, the Registrant was attempting to raise additional capital to
continue to develop the Sentry 93000 Notification System and InfoNotes system
and was negotiating an acquisition and/or merger with an oil and gas operation
which did not materialize. Competition existed within the software industry;
however, the Registrant minimized competition by the uniqueness of its products.
The Registrant did not incur any research and development costs during the 1996
fiscal year. There are no significant effects on Company operations from
environmental regulations. At December 31, 1996, the Registrant had no
employees.
ITEM 2 - PROPERTIES
As of December 31, 1996, the Registrant did not own real property.
ITEM 3 - LEGAL PROCEEDINGS
As of December 31, 1996, there were no material pending legal proceedings.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal year 1996, there were no matters submitted
to a vote of security holders.
PART II
ITEM 5 - MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Registrant issues common stock with dividends and voting rights which is listed
for trading on the Over-the-Counter Bulletin Board (OTC:BB).
On August 8, 1996, the Company amended its articles of incorporation to increase
the number of authorized shares of common stock to 100,000,000 shares at $0.01
par value per share.
As of December 31, 1996, there were 542 shareholders of record. The Company did
not declare a cash dividend for the two fiscal years ending December 31, 1996
and 1995, or for the quarter ended March 31, 1997.
2
<PAGE>
The following table indicates the range of high and low closing bid information
for the Registrant's common stock, as obtained from National Quotation Bureau,
LLC. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.
<TABLE>
<CAPTION>
Closing Bid
-------------
<S> <C> <C>
Period Ending High Low
- -------------------- ---- ---
March 31, 1995 .02 .01
June 30, 1995 .01 .01
September 30, 1995 .01 .01
December 31, 1995 .08 .01
March 31, 1996 .10 .03
June 30, 1996 .03 .03
September 30, 1996 .06 .02
December 31, 1996 .04 .02
March 31, 1997 .12 .04
</TABLE>
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
The cash requirements of the Registrant are minimal at the present time due to
consultants agreeing to accept common stock for payment of services. To
properly provide for research and development of its software products and
expand its operations, the Company will be required to raise additional funds
during the next twelve months. The Company anticipates obtaining operating
funds through additional significant capital contributions by interested
investors.
Realizing that various software firms are emerging in the industry, the
Registrant plans to put substantial time and energy into making sure products
and programs are unique enough to minimize competition. As of December 31,
1996, there are relatively few companies with similar products. At the end of
this fiscal period, management is committed to continue the development of the
Sentry 93000 Notification System and InfoNotes system and plans to extend the
company into the acquisitions of other state-of-the-art technologies.
Management plans to position the company as an incubator of consumer need
technologies by providing research and development of various technologies.
Several subsidiary companies are planned for the year 1997.
3
<PAGE>
ITEM 7 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
<S> <C>
Report of Independent Auditors 5
Consolidated Balance Sheet as of December 31, 1996 6
Consolidated Statements of Operations for the years ended
December 31, 1996 and 1995 7
Consolidated Statements of Shareholders' Equity for Each of the
Two Years Ended December 31, 1996 8
Consolidated Statement of Cash Flows for Each of the Two Years
Ended December 31, 1996 9
Notes to Consolidated Financial Statements 10
</TABLE>
4
<PAGE>
BROWN, GRAHAM AND COMPANY, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Loch Harris, Inc.
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of Loch Harris, Inc.
(the "Company") as of December 31, 1996 and the related consolidated statements
of operations, stockholders' equity and cash flows for the years ended December
31, 1996 and 1995. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
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 misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Loch Harris, Inc. as
of December 31, 1996, and the results of their operations and cash flows for the
years ended December 31, 1996 and 1995, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered losses from
operations for the years ended December 31, 1996 and 1995, and current
liabilities exceed current assets by $92,644 at December 31, 1996, which raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
As more fully described in Note 8, subsequent to the issuance of the Company's
restated December 31, 1996, financial statements and our report thereon dated
December 23, 1998, we became aware that those financial statements did not
reflect certain adjustments as described in Note 8. In our report we expressed
an unqualified opinion on the December 31, 1996, financial statements .Our
opinion on the revised statements, as expressed herein, is unqualified
considering the effects of the fourth paragraph above.
/S/ Brown, Graham and Company, P.C.
Georgetown, Texas
January 15, 1999
5
<PAGE>
<TABLE>
<CAPTION>
LOCH HARRIS, INC.
CONSOLIDATED BALANCE SHEET (RESTATED)
DECEMBER 31, 1996
ASSETS
------
<S> <C>
Equipment, net (Note 2) $ 7,600
Other Assets: (Note 3)
Computer software and intangible assets -
-----------------
Total assets $ 7,600
=================
LIABILITIES AND SHAREHOLDER'S DEFICIT
--------------------------------------
Current liabilities:
Accounts payable $ 100,244
-----------------
Shareholder's Equity:
Common stock, $.01 par value; 100,000,000 shares
authorized; 94,564,385 shares issued and outstanding 945,644
Additional paid in capital 9,691,603
Retained deficit (10,729,891)
-----------------
Total shareholder's deficit ( 92,644)
-----------------
Total liabilities and shareholder's deficit $ 7,600
=================
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
LOCH HARRIS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 (RESTATED) AND 1995
1996 1995
------------------- -------------------
Revenues $ - $ -
------------------- -------------------
<S> <C> <C>
Operating expenses:
General and administrative 276,943 115,901
Depreciation and amortization 540,061 540,061
Impairment of long-lived assets 930,439 -
------------------- -------------------
Total operating expenses 1,747,443 655,962
------------------- -------------------
Net loss $ ( 1,747,443) $ ( 655,962)
=================== ===================
Basic and diluted net loss per share $( .03) $( .01)
=================== ===================
Basic and diluted weighted average shares outstanding 69,230,686 47,183,228
=================== ===================
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
LOCH HARRIS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1996 (RESTATED) AND 1995
Retained
Number of Additional Earnings
Shares Amount Paid In Capital (Deficit) Total
---------- --------- ----------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 43,916,055 $ 87,832 $ 10,156,560 $ ( 8,326,486) $ 1,917,906
Common stock issued for:
Services 8,328,330 16,657 93,465 - 110,122
Cash 2,640,000 5,280 1,320 - 6,600
Net loss - - - ( 655,962) ( 655,962)
---------- --------- ----------------- --------------- --------------
BALANCE AT DECEMBER 31, 1995: 54,884,385 $ 109,769 $ 10,251,345 $ ( 8,982,448) $ 1,378,666
Common stock issued for:
Services 39,601,467 79,203 181,341 - 260,544
Cash 78,533 157 432 - 589
Increase in par value of common
stock to $0.01 per share - 756,515 ( 756,515) - -
Stock options issued - - 15,000 - 15,000
Net loss - - - ( 1,747,443) (1,747,443)
---------- --------- ----------------- --------------- --------------
BALANCE AT DECEMBER 31, 1996 94,564,385 $ 945,644 $ 9,691,603 $ (10,729,891) $( 92,644)
========== ========= ================= =============== ==============
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
LOCH HARRIS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 (RESTATED) AND 1995
1996 1995
---------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,747,443) $ (655,962)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 540,061 540,061
Impairment of long-lived assets 930,439 -
Common stock issued for services 260,544 110,122
Stock options granted for services 15,000 -
Increase (decrease) in accounts payable - ( 38)
---------------- --------------
Net cash used for operating activities: ( 1,399) ( 5,817)
---------------- --------------
Cash flows from investing activities:
Acquisition of property and equipment - -
---------------- --------------
Cash flows from financing activities:
Proceeds from sale of common stock 589 6,600
---------------- --------------
Net increase (decrease) in cash ( 810) 783
Cash and cash equivalents - beginning of year 810 27
---------------- --------------
Cash and cash equivalents - end of year $ - $ 810
================ ==============
Supplemental disclosures of cash flow information
Common stock issued for services $ 260,544 $ 110,122
================ ==============
Stock options issued for services $ 15,000 $ -
================ ==============
</TABLE>
9
<PAGE>
LOCH HARRIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 (RESTATED) AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------------
NATURE OF BUSINESS AND ORGANIZATION:
Loch Harris, Inc. (the "Company") (formerly Eclectix, Inc.) was organized under
the laws of the State of Nevada on March 13, 1985. On July 31, 1988, Eclectix,
Inc. entered into an agreement and plan of reorganization with the shareholders
of Loch Harris Energy, Inc., in which Eclectix, Inc. acquired 100% of the common
stock of Loch Harris Energy, Inc. As part of the reorganization, Eclectix, Inc.
changed its name to Loch Harris, Inc.
Prior to 1990, the Company was involved in the acquisition, development, and
production of oil and gas reserves. During 1989, severe economic conditions
forced the Company to cease operations and the Company remained in a dormant
state until 1993. During the year ended December 31, 1993, the Company
purchased P.C. Sentry, Inc. which owned an advanced electronic monitoring and
notification system (Sentry 93000). Also the Company purchased an electronic
telephone message software program (InfoNotes). The Company is involved in
research and development of the intellectual properties, particularly computer
software solutions.
GOING CONCERN:
As shown in the accompanying consolidated financial statements, the Company has
incurred net losses of $1,747,443 and $655,962 for the years ended December 31,
1996 and 1995, respectively. As of December 31, 1996, the Company's current
liabilities exceeded its current assets. These factors create a substantial
doubt about the Company's ability to continue as a going concern. The ability
of the Company to continue as a going concern is dependent on the Company's
obtaining additional financing to fund the expenses related to research and
development of the software and other capital acquisitions and improvements.
During 1997, the Company received $1,500,000 from the sale of an option to
purchase products from the Company. These funds along with the issuance of
additional common stock will be used to provide operating expenses and purchase
new products that will enable the Company to produce a level of revenue
necessary to provide the Company with positive cash flow, adequate working
capital and positive earnings for the next year.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
PRINCIPLES OF CONSOLIDATION:
The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries P.C. Sentry, Inc., and Loch Harris
Energy, Inc., which are both inactive. All significant intercompany accounts
and transactions have been eliminated in consolidation.
CASH AND CASH EQUIVALENTS:
For purposes of the Statement of Cash Flows, the Company considers all
investments with maturities of three months or less when purchased to be cash
equivalents. The Company has no investments classified as cash equivalents on
December 31, 1996.
EQUIPMENT:
Equipment is recorded at cost. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets of 7 years. Ordinary
maintenance and repairs are expensed as incurred.
10
<PAGE>
LOCH HARRIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 (RESTATED) AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
- ------------------------------------------------------------------------
REVENUE RECOGNITION:
Revenues from the sale of the Company's computer software products are
recognized when persuasive evidence of an arrangement exist, delivery has
occurred, the customer fee is fixed and collection is probable. The Company
did not have any revenues during the years ending December 31, 1996 and 1995.
INCOME TAXES
The Company accounts for income taxes using the liability method as required by
Statement of Financial Accounting Standards No. 109 ("FAS 109"), Accounting for
Income Taxes. Deferred tax assets and liabilities are determined based on
differences between the financial statement and tax basis of assets and
liabilities using enacted tax rates expected to be in effect for the year in
which the differences are expected to reverse. The net change, if any, in
deferred tax asset and liabilities is reflected in the statement of operations.
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 disclosure 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 results.
NEW ACCOUNTING PRONOUNCEMENTS:
In accordance with SFAS 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be disposed of", management reviews long-lived
assets and intangible assets for impairment whenever events or changes in
circumstances indicate the carrying amount of an asset may not be fully
recoverable. As part of this assessment, management prepares an analysis of the
undiscounted cash flows for each product that has significant long-lived or
intangible asset values associated with it. This analysis for the asset values
as of December 31, 1996, indicated there has been an impairment to the carrying
value of these assets (see Note 3).
NOTE 2 - EQUIPMENT
- ---------------------
Equipment at December 31, 1996, consisted of the following:
Office equipment $ 18,524
Less accumulated depreciation 10,924
-------
Net equipment $ 7,600
=======
Depreciation expense, which is calculated on a straight-line basis, was $2,731
for each year ended December 31, 1996 and 1995, respectively.
NOTE 3 - COMPUTER SOFTWARE AND INTANGIBLE ASSETS
- -------------------------------------------------------
Computer software and intangible assets consist of an advanced electronic
monitoring and notification system and an electronic telephone message software
program in the amount of $2,671,875 acquired in 1993. Amortization of
capitalized costs is computed using the straight-line method over the remaining
estimated economic life of the product of 5 years.
11
<PAGE>
NOTE 3 - COMPUTER SOFTWARE AND INTANGIBLE ASSETS - CONTINUED
- ---------------------------------------------------------------------
Subsequent to the year ended December 31, 1996, the Company determined that
significant cash requirements for additional research and development are
required before the products would be available for sale. As a result of
limited available resources and the need for significant research and
development, Company's management made a thorough evaluation of the Company's
operations, including among other things, the carrying value of long-lived
assets. Effective December 31, 1996, management determined that based on the
current market conditions and an analysis of the projected undiscounted future
cash flows calculated in accordance with the provisions of SFAS No. 121, the
carrying amount of its computer software and intangibles may not be recoverable.
The resultant impairment of these long-lived assets necessitated a write-down of
$930,439 of the assets acquired in 1993.
The Company recorded amortization of $537,330 for each year ended December 31,
1996 and 1995, respectively.
NOTE 4 - SHAREHOLDER EQUITY
- -------------------------------
During the year ended December 31, 1996 and 1995, the Company issued 39,601,467
and 8,328,330 shares of common stock subject to Rule 144 for employee
compensation, consultants and professional fees. The common stock was recorded
as a charge to earnings as applied under APB No. 25 in the amount of $260,544
and $110,122 for the years ended December 31, 1996 and 1995, respectively.
On August 8, 1996, the Company amended its articles of incorporation to change
its authorized shares of common stock to 100,000,000 shares at $0.01 par value
per share. The change necessitated an increase in common stock and a decrease
in additional paid-in capital in the amount of $756,515.
NOTE 5 - STOCK OPTIONS AND WARRANTS
- -----------------------------------------
A summary of the status of the Company's stock options as of December 31, 1996,
is presented below:
<TABLE>
<CAPTION>
<S> <C>
Options outstanding at December 31, 1995 12,000,000
Options granted 1,500,000
Options exercised -
Options canceled -
----------
Options outstanding and exercisable at December 31, 1996 13,500,000
==========
</TABLE>
The following table summarizes the information about the stock options as of
December 31, 1996:
<TABLE>
<CAPTION>
Weighted
Average Weighted Number Weighted
Range of Number Remaining Average Exercisable Average
Exercise outstanding Date Contractual Exercise Price at Exercise Price
Price at December 31 Granted Life (Total Shares) December 31 (Exer. Shares)
- ------------ -------------- --------- -------------------- ---------------- -------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
.25 4,000,000 12/18/94 5 years $ .25 4,000,000 $ .25
.25 4,000,000 6/1/95 5 years .25 4,000,000 .25
.25 4,000,000 7/1/95 5 years .25 4,000,000 .25
.01 1,000,000 7/26/96 5 years .01 1,000,000 .01
.01 500,000 7/26/96 5 years .01 500,000 .01
============ -------------- ========= ==================== ================ -------------------- ================
.01-
.25 13,500,000 5 years $ .22 13,500,000 $ .22
============ ============== ==================== ================ ==================== ================
</TABLE>
12
<PAGE>
LOCH HARRIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 (RESTATED) AND 1995
NOTE 5 - STOCK OPTIONS AND WARRANTS - CONTINUED
- -------------------------------------------------------
All options were granted to consultants for services which expire in years 1999
through 2001.
Each stock option granted can be exercised for one share of common stock.
Stock options to consultants for the year ended December 31, 1996, have been
recorded as compensation as applied under APB No. 25 in the amount of $15,000.
The market value of stock options granted during the year ended December 31,
1995, exceeded the exercise price, therefore, no compensation has been recorded
during the year ended December 31, 1995.
NOTE 6 - INCOME TAXES
- -------------------------
A reconciliation of income tax at the statutory rate to the Company's effective
rate follows:
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Computed at the expected statutory rate (credit) $( 594,000) $( 223,000)
Valuation allowance 594,000 223,000
------------- -------------
Income tax $ - $ -
============= =============
Deferred tax assets are as follows:
Net operating loss carryforward $ (3,648,163) $ (3,054,032)
Valuation allowance 3,648,163 3,054,032
------------- -------------
$ - $ -
============= =============
</TABLE>
The Company had cumulative net operating loss carryforwards of approximately
$10,700,000 and $9,000,000 at December 31, 1996 and 1995, respectively, for
federal tax reporting purposes. The net operating loss carryforwards expire in
varying amounts beginning in the year 2002 and may be limited due to the types
of business the Company may engage.
NOTE 7 - EARNINGS PER SHARE
- --------------------------------
The following data details the amounts used in computing earnings per share
(EPS) and the weighted average number of shares of dilutive potential common
stock.
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Weighted average number of common shares
issued in basic EPS 69,230,686 47,183,228
Effect of dilutive securities:
Stock options - -
---------- ----------
Weighted average number of common shares
and dilutive potential common stock used in
diluted EPS 69,230,686 47,183,228
========== ==========
</TABLE>
Stock options convertible into 13,500,000 and 12,000,000 shares of common stock
were not included in computing diluted EPS for the years ended December 31, 1996
and 1995, respectively, because their effects were antidulutive.
13
<PAGE>
LOCH HARRIS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 (RESTATED) AND 1995
NOTE 8 - RESTATED FINANCIAL STATEMENTS
- -------------------------------------------
Subsequent to filing the restated December 31, 1996, financial statements, the
Company determined that common stock authorized during the year ended December
31, 1996, was not properly recorded for services and common stock had not been
properly corrected for the increase in the par value (see Note 4). Detailed
below are the adjustments necessary to record the above corrections as included
in the accompanying financial statements:
<TABLE>
<CAPTION>
Balance as
Previously Balance as
Year Ended December 31, 1996 Reported Adjustments Adjusted
- ------------------------------------------------------ -------------------- ---------------- ------------------
<S> <C> <C> <C>
Common stock 705,644 240,000 945,644
Additional paid-in capital 9,811,603 ( 120,000) 9,691,603
Retained earnings (deficit) ( 10,609,891) ( 120,000) ( 10,729,891)
General and administrative expenses 156,943 120,000 276,943
Net loss $ ( 1,627,443) $ ( 120,000) $ ( 1,747,443)
==================== ================ ==================
Basic and diluted loss per share $( 0.03) $( 0.00) $( 0.03)
==================== ================ ==================
Basic and diluted weighted average shares outstanding 59,827,947 9,402,739 69,230,686
==================== ================ ==================
</TABLE>
14
<PAGE>
ITEM 8 - CHANGES IN/DISAGREEMENTS WITH ACCOUNTANTS
See 8K filed November 16, 1998, for change in auditors.
PART III
ITEM 9 - DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table identifies the Company's directors and executive officers as
of December 31, 1996.
<TABLE>
<CAPTION>
Periods of
Name Age Title Service
------- -------------- -----------------
<S> <C> <C> <C>
R.B. Baker 68 President 1988 to present
CEO
Treasurer
Director
Rodney Ford 45 Vice President 1990 to present
Director
Rodney A. Williams 47 Secretary 1993 to present
Director
</TABLE>
None of the above named directors hold directorships in other reporting
companies. All directors serve until the next annual meeting of stockholders
and the concurrent election of directors. All officers serve at the pleasure of
the Board of Directors.
R.B. Baker has been President and director of the Company since 1988. He has
also served as shareholder relations director since 1988. His background in
public relations, human resources, management, travel, real estate, investments
and finance equips him to serve as leader of the Company.
Rodney Ford has been an affiliated with the Company for approximately 6 years.
He is past president and co-founder of P.C. Sentry, Inc. and co-developer of the
Sentry 93000 Notification System. He has technical and managerial experience in
computer operating systems development, scientific computing, discrete event
simulation and automated manufacturing systems development. As an analyst with
IEX Corporation, Mr. Ford was involved in the development of a
telecommunications project for AT&T and network maintenance terminal for an
airborne telephone system for GTE Airfone. Mr. Ford is the former owner of
Southern Precision MFG., Inc. and was founder, president and technical director
of Radix Development Associates, a software development firm providing solutions
for the oil and gas industry.
Rodney A. Williams has served the Company since 1993. He is a highly qualified
executive in several industries with specialized skills in product development,
manufacturing, cost analysis, sales and marketing. The scope of his 18 years of
experience also encompasses financial consulting, system integration, software
and systems development and corporate mergers and acquisitions. He has
expertise in corporate personnel management, operations and corporate financial
administration. Mr. Williams held an executive position with three oil and gas
firms and two broker/dealer firms and is licensed as a NASD principal. He is
currently involved with the continued development of the Sentry 93000
Notification System.
15
<PAGE>
ITEM 10 - EXECUTIVE COMPENSATION
The following table summarizes compensation paid during the last three fiscal
years to Registrant's executive officers and directors.
<TABLE>
<CAPTION>
Name Securities
and Restricted Underlying All Other
Principal Other Annual Stock Options LTIP Compen-
Position Year Salary Bonus Compensation Awards SARs Payouts sation
- ---------------- ------------ ----------- ---------- ------------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
R.B. Baker - CEO 1996 $ - $ - $ - $ 27,000 $10,000 $ - $ -
1995 $ - $ - $ - $ 45,000 $ - $ - $ -
1994 $ - $ - $ - $ - $ - $ - $ -
</TABLE>
ITEM 11- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
<CAPTION>
Name and Amount and
address of nature of
beneficial beneficial Percent of
Title of class owner owner Class
- ---------------------------- --------------------- ---------- -----------
<S> <C> <C> <C>
Common R.B. Baker 7,200,000 7.6%
14205 Burnet Rd. shares
Austin, TX 78728
Common Harris Partners, Ltd. 39,250,000 41.5%
587 Hummingbird Ln shares
Fredericksburg, TX 78624
</TABLE>
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1996 and 1995, the Company issued common
stock to Harris Partners, Ltd. for consulting services in the amount of $225,000
and $10,000, respectively.
PART IV
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
None
16
<PAGE>
