SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A NO. 1
(Mark One)
X Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required) OR
Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For the fiscal year ended Commission File Number 0-19013
December 31, 1995
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
(Exact name of registrant as specified in charter)
New York 84-1059226
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
730 17th Street, Suite 712
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
(303) 571-5564
(Registrant's telephone number, including area code)
Stock registered pursuant to Section 12 (g):
Common Stock, $.0001 Par Value
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ADVANCED ENVIRONMENTAL SYSTEMS, INC.
(Registrant)
By: /s/ J. Daniel Bell
J. Daniel Bell, President and
Director
PART III
Item 10. Directors and Executive Officers of the Registrant
The officers and directors of the Company are as follows:
Name Age Position
J. Daniel Bell 51 President and Director
Alfred O. Brehmer 81 Secretary-Treasurer and Director
J. Daniel Bell was named President and a Director of the Company in December
1992. He has served as Chairman of the Board of Directors of IST, the
majority shareholder of the Company, since IST's inception in 1989, and
previously served as IST's Vice President and President from 1989 until
September 1993. Since September 1993, he has pursued opportunities as a
private investor. He has also served as a director of AEC since its
inception and has served as Chairman of the Board and Treasurer of AEC since
1988. Mr. Bell became a director of Incat upon AEC's acquisition of that
corporation in August 1988. From 1982 to 1989 Mr. Bell had been engaged in
independent business consultant, specializing in consulting to the energy
industry. Mr. Bell attended Texas A & M University and received a degree in
economics and marketing from LaMar University.
Alfred O. Brehmer has served as Secretary-Treasurer and a director of the
Company since its inception in 1986. Mr. Brehmer has been self-employed as
an independent accountant specializing in the preparation of income tax
returns for individuals, corporations, partnerships and fiduciaries since
1952. In 1980 Mr. Brehmer formed AAA Accounting Services, Inc., a Colorado
corporation, which offers bookkeeping services on behalf of its various
clients. Mr. Brehmer has been an officer, director and sole shareholder of
this entity since its inception.
The Company's directors serve until the next annual meeting of shareholders
or until their successors have been duly elected and qualified. The officers
of the Company are elected by the Board of Directors to serve in their
respective offices until their successors are duly elected. The Company has
no standing audit, nominating or compensation committee.
There are no current nominees to be considered for election to the Board of
Directors. The Company anticipates that it will be considering potential
nominees to restore the number of directors to three and perhaps to expand
the number of directors to five. These nominees may be from Company
management, members of IST's Board of Directors or management, or other
individuals who are not affiliated with the Company or IST.
The following table sets forth certain information with respect to persons
who have significant positions with the Company's subsidiaries.
Name Age Position
J. Daniel Bell 51 Chairman of the Board, Director and Treasurer of
AEC; and Director of Incat
Craig E. Bowman 54 President and Director of Incat
Victor L. Kearns 65 Vice President and Director of AEC;
Vice President, Treasurer and Director of Incat
Mark M. King 36 President and Director of AEC; and Director of Incat
Jan Kouri 41 Vice President and General Manager of Incat
Gary L. Schmitt 52 Director of AEC, Vice President of AEC and Incat
Craig E. Bowman has been President and a director of Incat, of which he was a
founder, since 1982. He served as a director of AEC from August 1988, the
time of the acquisition by AEC of Incat, until he resigned from this position
in February 1994. From 1980 to 1982 Mr. Bowman served first as Regional
Manager of Serv-Rigs Inc., where he was responsible for marketing and
operation of that company's drilling rig business, and then as General
Manager of Universal Engineering, an industrial service company. From 1968 to
1980 he served in a variety of capacities with Browning Ferris Industries -
Chemical Services, Inc., where his final position was as Vice President and
Manager of chemical waste systems. In addition, Mr. Bowman serves as a
director of IST and since May 1993, has been serving as President of Piping
Companies, Inc., an indirect wholly owned subsidiary of IST, which provides
specialized welding and mechanical services to chemical and petrochemical
refineries.
Victor L. Kearns has been a director, officer and employee of Incat, which he
co-founded, since 1982, except from April to August 1993, when he was an
employee of IST. He became a director of AEC in August 1988 upon AEC's
acquisition of Incat, and was elected to serve as a Vice President of AEC in
September 1988. During 1982 Mr. Kearns served as the District Manager of
Universal Engineering, an industrial service company involved in the
transportation and disposal of hazardous waste. In 1981 Mr. Kearns was
Regional Maintenance and Safety Manager of Serv-Rigs, Inc., where he was
responsible for maintenance on several projects. From 1976 to 1979 Mr. Kearns
was a District Manager of Browning Ferris Industries, Inc. where he had
responsibility for equipment, facilities and personnel.
Mark M. King served as President and subsequently as Executive Vice-President
of IST from 1989 until September 1993. He has served continuously as a
director of IST since its inception in 1989. He has served as President and
a director of AEC since June 1988. He was elected a director of Incat in
1988 upon AEC's acquisition of Incat. Mr. King previously served as a
consultant to Van Allan Capital Corp., an investment banking firm involved in
financing private placement investments. He was a founder and managing
director of Telephone Asset Management Corporation, a private company
specializing in leverage acquisitions. In 1987, Mr. King co-founded the
Cadmus Group, Ltd., a New York based merchant banking firm specializing in
leveraged acquisitions of middle market companies; however, Mr. King
resigned his position as managing partner in December 1987. Mr. King served
as a Vice President for LM Capital Corporation, an investment firm, from
September 1994 until he resigned in January 1996. He has subsequently
formed and is now Managing Director of KR Capital Corporation, a
merchant banking firm specializing in leveraged acquisitions of middle
market companies.
Jan Kouri has served as a Vice President and General Manager of Incat since
February 1995. Mr. Kouri originally joined Incat in June 1983. In June
1987, Mr. Kouri became a Regional manager of Los Angeles and then
Vice President of Operations in April 1992 .
Gary L. Schmitt became the President of IST in 1993, having served as its
Vice President - Chief Financial Officer and a director since 1990. He was
elected as Vice President of each of AEC and Incat in December 1992 and a
director of AEC in June 1991. For the two years prior to joining IST in 1990,
he was Chief Executive Officer and Executive Vice President of Finance of
Van Schaak & Company, a real estate and financial services company. For the
two years prior thereto, he was the Chief Financial Officer of U. S. Recycling
Industries, Inc., a large international recycling joint venture. From 1966
to 1984, Mr. Schmitt was in public accounting and was an audit partner of
Touche Ross & Company in Denver, Colorado.
Messrs. Bowman and Kearns were originally elected directors of AEC in
accordance with the provisions of the Stock Purchase Agreement among AEC
and all the shareholders of Incat. Messrs. Bell and King were elected
directors of Incat also pursuant to the Stock Purchase Agreement. The Stock
Purchase Agreement provided that the Boards of Directors of Incat and AEC
would each consist of five persons, of whom two would be designated by AEC,
two would be designated by the former shareholders of Incat and one would be
designated by AEC and approved by the former shareholders of Incat. Mr.
Bowman resigned as a director of AEC in February, 1994. None of the
individuals named above has an employment agreement with the Company.
There are no family relationships among the directors, officers and
significant employees of the Company except that J. Daniel Bell and Mark M.
King are brothers-in-law.
Item 11. Executive Compensation
Cash Compensation
The following table sets forth information concerning the compensation paid
by the Company and its subsidiaries during the Company's fiscal years ended
December 31, 1995 and 1994, and the nine month period ended December 31, 1993
to the chief executive officers of the Company and Incat, its sole operating
subsidiary. Because Mr. Bowman divides his time between Incat and an
affiliated entity, optional supplemental information regarding the
compensation paid to Jan Kouri for the years ended December 31, 1995 and 1994
and to Robert E. Stroup for the nine months ended December 31, 1993 is
provided. Mr. Stroup resigned as Vice President and General Manager in June
1994.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation:
(a) (b) (c) (d) (e)
Name and
Principal Period Other Annual
Position Ended Salary Bonus Compensation
($) ($) ($)
<S> <C> <C> <C> <C>
J. Daniel Bell 12/95 -0- -0- -0-
President of 12/94 -0- -0- -0-
the Company 12/93 -0- -0- -0-
Craig E. Bowman 12/95 $ 36,000 $ 409 -0-
President of 12/94 $ 36,000 -0- -0-
Incat 12/93 $ 45,728 -0- -0-
Supplemental Information (3):
Jan Kouri 12/95 $ 83,853 $1,025 -0-
Vice President 12/94 $ 77,450 -0- -0-
of Incat N/A --- --- ---
Robert Stroup N/A --- --- ---
Vice President 12/94 $ 83,000 -0- -0-
of Incat 12/93 $ 63,888 -0- -0-
</TABLE>
<TABLE>
Long Term Compensation:
<CAPTION>
Awards Payouts
(a) (b) (f) (g) (h) (i)
Name and Restricted All
Principal Period Stock Options/ LTIP Other
Position Ended Award(s) SARS Payouts Compensation
($) (#) ($) ($)
<S> <C> <C> <C> <C> <C>
J. Daniel Bell 12/95 -0- -0- -0- -0-
President of the 12/94 -0- -0- -0- -0-
Company 12/93 -0- -0- -0- $20,000(1)
Craig E. Bowman 12/95 -0- -0- -0- -0-
President of 12/94 -0- -0- -0- -0-
Incat 12/93 -0- -0- -0- $ 3,000(2)
Supplemental Information (3):
Jan Kouri 12/95 -0- -0- -0- $ 5,950(2)
Vice President 12/94 -0- -0- -0- -0-
of Incat N/A --- --- --- ---
Robert Stroup N/A --- --- --- ---
Vice President 12/94 -0- -0- -0- 3,888(2)
of Incat 12/93 -0- -0- -0- $ 1,002(2)
(1) During the nine months ended December 31, 1993, Mr. Bell received a
guarantee fee of $20,000 payable in form of 5,000,000 restricted shares of
common stock of the Company. The stock was valued at $.004 per share by
the Board of Directors, based on an average of quotations supplied by the
National Daily Quotation Service. Except for the guarantee fee, Mr. Bell
receives no compensation from the Company or its subsidiaries. He is
compensated through a management agreement with IST, which receives
management fees from Incat and other operating subsidiaries of IST. These
management fees paid by Incat and these other subsidiaries are used to
pay IST's operating expenses. The monthly management fee paid by
Incat to IST was $8,000 for the nine months ended December 31, 1993
and the year ended December 31, 1994. Effective October 1995, Incat's
monthly management fee to IST increased from $8,000 to $12,000.
(2) Each of Mr. Bowman, Mr. Kouri and Mr. Stroup has received a
vehicle allowance per year in each of the periods shown, except that the
allowance was discontinued for Mr. Bowman in July 1993. In addition,
each of Mr. Bowman, Mr. Kouri, and Mr. Stroup has been included in
employee benefit plans which provide health insurance to employees
on the same terms and conditions as other employees, except that Mr.
Bowman's coverage in these plans was discontinued in July 1993.
Pursuant to Incat's agreements with FINOVA Capital Corporation ("FINOVA"),
formerly Greyhound Financial Corporation ("Greyhound"), Incat carried
$500,000 of key man life insurance on Mr. Bowman, the proceeds of which
were assigned to FINOVA. Effective April 1, 1995, FINOVA released the
Company from the requirement and an affiliated entity now maintains the policy.
(3) The supplemental information is not required to be disclosed pursuant to
this item because Mr. Bowman, President of Incat, serves as Incat's Chief
Executive Officer. No employee of the Company earned compensation in
excess of $100,000 in 1995.
</TABLE>
Since July 1, 1993, Mr. Brehmer has been entitled to receive $500 per month
for services as an officer and director of the Company. These amounts are
accrued by AES as there are restrictions on Incat's ability to provide funds
to AES. At December 31, 1995, $15,000 was owed by AES pursuant to this
entitlement. Also, in July 1993, the Board of Directors of the Company
approved the issuance of 2,000,000 restricted shares of the Company's common
stock to Mr. Brehmer for services rendered in 1993. These shares were
valued at $.004 per share based on an average of the quotations supplied
by the National Daily Quotation Service.
There are no employment agreements between the officers and directors of
AES or AEC and these corporations. The officers and directors of these
corporations dedicate only such time to these corporations as is necessary
for the conduct of their businesses. During the year ended December 31,
1995, the officers and directors of AES and AEC devoted less than 10% of
their time to its affairs.
During the nine months ended December 31, 1993, Mr. Bowman became an employee
both of Incat and of Piping Companies, Inc. ("Piping"), a wholly owned
indirect subsidiary of IST. Incat pays Mr. Bowman only for the time devoted
to the business of Incat. Mr. Bowman is presently devoting approximately 25
percent of his time to Incat, and receives from Incat a salary at an annual
rate of $36,000. Mr. Bowman no longer receives an automobile allowance from
Incat and is no longer covered by the Company's medical plans. He continues
to participate in the Company's 401(k) Plan, pursuant to which he received
contributions from Incat of $810 for the fiscal year ended December 31, 1994,
and $3,000 for the nine months ended December 31, 1993. No contributions
were made to the 401(k) Plan from Incat for the year ended December 31, 1995.
Option/SAR Grants in Last Fiscal Year; Aggregated Option/SAR Exercises in
Last Fiscal Year; and Fiscal Year End SAR Values; Long-Term Incentive Plan
Awards Table; Defined Benefit Plan Disclosure
Tables for (a) Aggregated Option/Stock Appreciation Rights (SAR) Exercises
in Last Fiscal Year, (b) Fiscal Year End SAR Values, (c) Long-Term Incentive
Plan (LTIP) Awards, (d) Defined Benefit Pension Plans and (e) Ten-Year
Option/SAR Repricing are omitted as no information is reportable thereunder
for any persons listed in the Summary Compensation Table. No stock options
have been granted by the Company since 1991. See "1988 Stock Option Plan"
set forth below in this item.
Compensation Committee Interlocks and Insider Participation
All compensation matters of the Company are reviewed by the entire board of
directors of the Company. Mr. Bell serves as an officer of AEC and Incat at
no salary. Mr. Brehmer is entitled to receive $500 per month for serving as
a director and officer. The salaries of Mr. Bowman and Mr. Kouri are
determined by the entire board of directors of Incat, consisting of Messrs.
Bell, King, Bowman and Kearns. Mr. Schmitt, who is employed and compensated
by IST, serves as a member of the compensation committee of IST, and he and
each of Messes. Bell, King and Bowman are directors of IST. Mr. Schmitt is
compensated directly by IST. Mr. King is compensated through the same
IST agreement as Mr. Bell. See item 13.
Board Compensation Committee Report on Executive Compensation
As indicated above, none of AES, AEC or Incat has a compensation committee
and all such functions are performed by their respective boards of directors.
The directors and officers of AES and AEC received no compensation for
serving as such in 1995 except Mr. Brehmer. The Board of Directors of AES
determined that commencing July 1, 1993 Mr. Brehmer would be paid $500
per month for services to the Company in capacity as officer and director.
The monthly fee was determined on the basis of the amount of time he spends
on the business of the Company. The amount has been accrued as there are
restrictions on Incat's ability to provide funds to AES. In addition, in
July 1993, the Board of Directors approved the issuance of 2,000,000
restricted shares of the Company's common stock to Mr. Brehmer for his
services from April 1, 1993 through the date of the approval and the issuance
of 5,000,000 shares of restricted stock to each of Mr. Bell and Mr. King as
compensation for their agreement to continue the guaranties of the First
Interstate loan for the period April 1, 1993 to July 31, 1993. For the
purposes of these issuances, the Board of Directors valued each share of the
Company's common stock at $.004. Mr. Bell is compensated through a
management arrangement with IST, to which Incat paid IST a monthly management
fee of $8,000. Effective September 1995, Incat's monthly management fee to
IST increased from $8,000 to $12,000. See Item 13.
The salaries of Mr. Kouri and Mr. Bowman are determined by the Board of
Directors of Incat, which considers a variety of factors in an effort to
accomplish several goals. These goals are to provide long and short term
financial security and incentives based on performance for executives on whom
the success of Incat may depend. Base salary is determined in part by the
skills and experience of the individual and the amounts which the individual
could command in the market place.
Performance Table
The following table compares the yearly percentage change in the book value
per share and in the price per share of the Company's common stock in the
years ended December 31, 1995 and 1994, nine months ended December 31, 1993
and the fiscal year ended March 31, 1993 to the changes for the same period
in the CRSP Total Return Index for (i) the U.S. NASDAQ Stock Market and (ii)
the NASDAQ Truck/Transportation Index, which is the published NASDAQ sub
index most closely related to the Company's business. These periods are the
periods during which the Company's common stock has been registered under the
provisions of the Securities Exchange Act of 1934 (the "1934 Act").
The table is required to be included in this Annual Report under rules and
regulations promulgated by the Securities and Exchange Commission (the "SEC")
pursuant to the 1934 Act which require a comparison between market
performance in general and the market price of the shares of the Company's
common stock. Because trading in the Company's common stock is sporadic and
prices for the stock are highly volatile and based on interdealer quotations,
without retail mark-up, mark-down or commission, and are not necessarily
representative of actual transactions, the prices for the shares of the
Company's common stock used in the preparation of the table are based on
the average of the high and low bid for the last quarter of each of the
applicable periods. Also because of the sporadic nature of trading in shares
of the Company's common stock and other factors, such as the declining number
of market makers, the Company has included a comparison based on book value
as the Company believes that this comparison may provide other information
about the Company's performance.
The returns shown for the NASDAQ indices assume the reinvestment of all
quarterly dividends at the average of the closing stock prices at the
beginning and end of the quarter as required by SEC rules. There were no
dividends paid on shares of the Company's common stock. The book value of a
share of the Company's common stock was computed on the basis of the
Company's common and other stockholders' equity, after restatement to exclude
the Series A Preferred Stock and after also excluding the liquidation
preference attributable to the shares of the Company's Series B Preferred
Stock, which was $200,000 at December 31, 1993, December 31, 1994 and
December 31, 1995.
<TABLE>
PERCENTAGE CHANGE IN CUMULATIVE SHAREHOLDER RETURN
AMONG US NASDAQ INDEX, NASDAQ TRUCK AND TRANSPORTATION INDEX,
AES BOOK VALUE OF COMPANY'S COMMON STOCK, AND
AES PRICE OF COMPANY'S STOCK
<CAPTION>
NASDAQ AES
AES TRUCK AND US BOOK VALUE
MEASUREMENT PERIOD PRICE OF TRANSPORTATION NASDAQ OF COMPANY'S
(Fiscal Year Covered) COMMON STOCK INDEX INDEX COMMON STOCK
<S> <C> <C> <C> <C>
March 1992 100% 100% 100% 100%
March 1993 68% 115% 115% 117%
December 1993 72% 130% 129% 79%
December 1994 48% 118% 126% 116%
December 1995 56% 137% 182% 63%
(*)Based on an average of high and low bid price for the last fiscal quarter
of the years ended December 31, 1995 and 1994, nine months ended December 31,
1993 and each fiscal year ended March 31, 1993 and 1992. The Company
believes a comparison based only on the trading price of shares of the
Company's common stock may not be a meaningful measure of the Company's
performance for a variety of reasons, including but not limited to, the
sporadic market for the shares.
</TABLE>
1988 Stock Option Plan.
The Company adopted the 1988 Stock Option Plan on October 31, 1988
(the "Stock Option Plan"). The Stock Option Plan is designed to provide
incentives for certain key employees of the Company and its subsidiaries by
providing up to 25,000,000 shares of the Company's common stock issuable
pursuant to grants. The Stock Option Plan allows for the grant of both
incentive stock options and non-qualified stock options. Incentive stock
options may be granted solely to key employees, whereas non-qualified stock
options may be granted to any employee. The Stock Option Plan is administered
by an option committee composed of the Board of Directors of the Company or
at least three members of the Board; provided, however, that with respect to
options to employees who are also directors of the Company, the Stock Option
Plan will be administered by a committee selected by the Board which shall
consist of two or more Directors, each of whom shall not have received
options under the Stock Option Plan or any other discretionary stock plan of
the Company within one year prior to his appointment to the Committee. The
option committee is authorized, within the limits of the Stock Option Plan,
to determine the individuals to whom, and the time or times at which, options
will be granted, the number of shares to be subject to each grant, and the
applicable restriction period. In addition, the option committee may
determine the purchase price for the shares subject to the option and
specify such other terms and provisions of any grants of options under the
Stock Option Plan as it deems necessary or advisable. The term of any option
granted under the Stock Option Plan may not be greater than ten years and no
option may be exercised for a six month period following the date of its
grant. The option committee may determine whether an option will be
exercisable in installments and, if it so decides, the number of installments
and the percentage of the options exercisable at each installment date. The
Company granted options with respect to an aggregate of 18,261,013 shares
during the fiscal year ended March 31, 1991. There have been no subsequent
grants of options pursuant to the Stock Option Plan.
All the options granted in fiscal 1991 were granted at a price of $.015 per
share and become exercisable as to one-fifth of the options on a cumulative
basis on each successive yearly anniversary date of the date of grant. The
options expire seven years from the date of grant. In 1995, the Board of
Directors contemplated that the Company would offer employees holding
the outstanding options an opportunity to accept a reduction in the exercise
price to $.008 which price continued to exceed the fair market value of the
Company's common stock based on the prices at which it had been trading;
however, the Company did not and does not now anticipate effecting a
price reduction. At December 31, 1995, 7,028,594 options had been
forfeited by persons whose employment terminated. None of the options
granted by the Company were granted to officers or directors of AES,
AEC or Incat with the exception of options with respect to 1,979,350
and 1,522,096 shares granted to Victor L. Kearns and Jan Kouri, respectively,
who holds the positions indicated in Item 10.
Item 12. Security Ownership of Certain Beneficial Owners and Management;
Changes in Control.
Set forth in the following table is information as of March 18, 1996 with
respect to the beneficial shareholdings of all directors, individually, all
officers and directors of AES as a group, and beneficial owners of more
than five percent of AES's common and preferred stock. Information
is also provided for Mr. Bowman, Mr. King and Mr. Schmitt, who
hold the positions indicated in item 10, each of whom is also a director
of IST. In addition to its common stock, the Company has Series A
Preferred Shares and Series B Preferred Shares, all of which have a par
value of $.0001 per share and are owned by IST.
<TABLE>
<CAPTION>
PREFERRED STOCK
COMMON STOCK
Amount Percent
Beneficially of
Name and Address Owned(7) Class
<S> <C> <C>
Alfred O. Brehmer 4,468,126(1) .8%
14141 W. 59th Ave.
Arvada, CO 80005
J. Daniel Bell 333,199,280(2) 63.2%
370 17th St.#2300
Denver, Co 80202
All Officers and 337,667,406(2) 62.7%
Directors as a
Group (2 persons)(3)
Craig E. Bowman 329,297,421(4) 61.9%
4313 FM 2351
Friendswood, TX 77546
Mark M. King 335,191,009(6) 63.0%
370 17th St.,#2300
Denver, CO 80202
Gary L. Schmitt 328,199,280(5) 61.7%
370 17th St.,#2300
Denver, CO 80202
Industrial 328,199,280(7) 61.7%
Services
Technologies,Inc.
370 17th St.,#2300
Denver, CO 80202
</TABLE>
<TABLE>
PREFERRED STOCK
SERIES A SERIES B
Amount Percent Amount Percent
Beneficially of Beneficially of
Owned Class Owned Class
Name and Adress
<S> <C> <C> <C> <C>
Alfred O. Brehmer --- --- --- ---
14141 W. 59th Ave
Arvada, CO 80005
J. Daniel Bell 27,107,697(4) 100% 24,591,170(4) 100%
370 17th St., #2300
Denver, CO 80202
All Officers and --- --- --- ---
Directors as a
Group (2 persons)3
Craig E. Bowman 27,107,697 100% 24,591,170 100%
4313 FM 2351
Friendswood, TX 77546
Mark M. King 27,107,697(6) 100% 24,591,170 100%
370 17th St., #2300
Denver, CO 80202
Gary L. Schmitt 27,107,697(5) 100% 24,591,170(5) 100%
370 17th St., #2300
Denver, CO 80202
Industrial 27,107,697(7) 100% 24,591,170(7) 100%
Services
Technologies, Inc.
370 17th St., #2300
_______________
(1) Includes 4,265,000 shares of the Company's common stock owned of record
and in trust for Mr. Brehmer. Also includes 100,000 shares held in the name
of AAA Accounting Services, Inc., of which Mr. Brehmer is the sole
shareholder. Mr. Brehmer is the secretary-treasurer, director and ten
percent shareholder of International Marketing Visions, Inc. ("IMV"), a
corporation which owns 1,031,262 shares of common stock of the Company. Mr.
Brehmer disclaims any beneficial ownership of 928,136 shares or 90 percent of
the common stock held by IMV.
(2) Includes 328,199,280 shares of common stock and the Series A and B
Preferred shares owned by IST. Mr. Bell is a director, officer and principal
shareholder of IST and may, therefore, be deemed to be a beneficial owner of
the shares owned by IST. Mr. Bell disclaims any benefical ownership to
2,954,892 shares owned by his father.
(3) Because Mr. Bowman is not an officer or director of AES, and
is serving on only a part time basis as President of Incat, the 830,000 shares
have not been included in the total for all officers and directors. If these
shares were included, the total would be 338,497,406 or 63.7%.
(4) Includes 830,000 common shares held in trust for by Mr. Bowman and also
the common and Series A and B Preferred shares owned by IST. Mr. Bowman is a
director of IST and may, therefore, be deemed to be a beneficial owner of the
shares owned by IST. In addition, Mr. Bowman owns warrants to purchase
.7% of the common shares of AES owned by IST.
(5) Mr. Schmitt is an officer and director of IST, and may, therefore, be
deemed to be a beneficial owner of the common and the Series A and B
Preferred shares owned by IST.
(6) Includes 1,991,729 of common shares owned by Mr. King, 2,000,000 shares
owned by Mr. King's wife, 1,500,000 shares held in trust for Mr. King and
1,500,000 held in trust for Mr. King's wife, and also the shares owned by
IST. Mr. King is a director, officer and principal shareholder of IST and
may, therefore, be deemed to be a beneficial owner of the common and Series A
and B preferred shares owned by IST.
(7) Does not include the shares of common stock into which the Series A and B
Preferred Shares are convertible on a one-for-one basis. Assuming conversion
of all the Series A and B Preferred Shares, IST would own an aggregate of
379,898,147 shares or 65.1% of the 583,366,381 shares of common stock that
would be issued and outstanding after the conversion.
During 1993 and 1994 a wholly owned direct subsidiary of IST issued notes
totaling $1,000,000, which notes were guaranteed by IST. IST pledged
299,053,596 shares of common stock and its shares of Series B Preferred Stock
of AES as security for its guarantee. The majority of the note holders are
individuals and entities controlled by persons who serve on the Board of
Directors or are in key management positions with IST's wholly owned
subsidiaries. These individuals constitute a majority of the Board of
Directors of IST at the time of issuance. However, due to some of these
individuals resigning, there are only four individuals which now constitute
50% of the Board of Directors of IST. The notes provide that they were due
in October 1995; However,the notes repayment terms were renegotiated. On
February 15, 1996, 25% of the $1,000,000 was due and paid. An additional 25%
of the notes is due on September 15, 1996 and the remaining 50% is due
January 10, 1997. In the event that IST defaults on its obligations under
its guarantee, the note holders could, pursuant to the Pledge Agreement,
foreclose on the pledged shares.
</TABLE>
Set forth in the following table is information as of March 1, 1996 with
respect to the beneficial shareholdings of all directors, individually, and
all officers and directors of AES as a group of the common stock, $.01 par
value per share, of IST. As of March 1, 1996, there were 21,426,167
shares of common stock and 4,821,000 shares of preferred stock of IST
issued and outstanding. Each share of IST's common stock has one vote.
The percentages shown in column (B) in the following table do not include
the voting rights of the holders of IST's preferred stock or which the
holders of certain warrants issued in conjunction with institutional debt and
subordinated notes or stock options would have if they exercised their
warrants and options. Each share of preferred stock has a number of votes
based on the number of common shares into which it would be converted.
If the convertible preferred shares were converted into common stock, the
number of common shares outstanding would be approximately 29,257,000.
Accordingly, including the effect of the voting rights of holders of preferred,
the percentage of voting rights held by each individual indicated would be
set forth in column (C). Additionally, if all the outstanding warrants
issued in conjunction with institutional debt and subordinated notes and
all outstanding stock options were exercised, the number of IST common
shares outstanding would be approximately 45,886,000. However, none
of the warrants or options have been exercised and their holders presently
have no voting rights. The formulas regarding the computations of the
number of shares into which the preferred stock are convertible and for
which the warrants and stock options are exercisible are complex and
interrelated. Certain factors used in determining common stock equivalents
are currently the subject of negotiations. Accordingly the foregoing
numbers and percentage amounts in column (C) are estimates only
and subject to change. None of the persons listed in the table below
owned any of the Preferred Stock, warrants or options of IST except
Mr. Bowman who has warrants to purchase approximately .7% of IST
common stock on a fully diluted basis.
<TABLE>
<CAPTION>
COLUMN (A) COLUMN (B) COLUMN (C)
Amount of Class Percent of
Name and Address Beneficially Owned Percent of Class voting rights
including Preferred
<S> <C> <C> <C>
Alfred O. Brehmer
14141 W. 59th Ave.
Arvada, CO 80005 40,000 .2% .1%
J. Daniel Bell(1)(3)
370 17th St., Ste. 2300
Denver, CO 80202 5,912,800 27.5% 20.2%
All Officers and
Directors as a Group
(2 persons)(5) 5,952,800 27.7% 20.3%
Carylyn K. Bell(1)
370 17th St., Ste. 2350
Denver, CO 80202 5,912,800 27.5% 20.2%
Craig E. Bowman (4)
607 Oak Drive
Friendswood, TX 77546 895,000 4.2% 3.1%
Mark M. King(2)(3)
370 17th St., Ste. 2300
Denver, CO 80202 4,382,534 20.4% 15.0%
Gary L. Schmitt
370 17th St., Ste. 2300
Denver, CO 80202 83,283 .4% .3%
______________
(1) The 5,912,800 shares shown for J. Daniel Bell include 4,878,000 shares
owned of record by Carylyn K. Bell, the wife of Mr. Bell, 134,800 shares
owned by W. Maury Bell, the adult son of Mr. Bell, and an aggregate of
900,000 shares by six minor children of J. Daniel Bell, four of whom also are
the children of Ms. Bell. Ms. Bell serves as the custodian with respect to
the 900,000 shares owned by the minor children and may be deemed to be the
beneficial owner of the shares.
(2) The shares shown for Mark M. King include 1,000,000 shares owned of
record and held in trust for Mr. King, 1,000,000 owned by Brenda K. King, the
wife of Mr. King and 258,117 shares owned by Sally K. Rogers, the adult
sister of Mr. King. Mr. King disclaims beneficial ownership of Ms. Rogers'
shares.
(3) J. Daniel Bell and Mark M. King are brothers-in-law. The aggregate
number of shares of IST common stock voted by J. Daniel Bell and Mark M. King
is 8,255,917, which constitutes approximately 38.5% of the issued and
outstanding shares of common stock of IST.
(4) The 895,000 shares shown for Craig E. Bowman are owned of record and held
in trust for Mr. Bowman.
(5) Does not include shares owned by Mr. Bowman, as Mr. Bowman is not an
officer or director of the Company and serves as President of Incat on a part
time basis. If Mr. Bowman's shares were included, the total would be
6,847,800 or 31.9%.
</TABLE>
Item 13. Certain Relationships and Related Transactions
In connection with AEC's acquisition of Incat, AEC issued promissory notes to
the selling shareholders of Incat in an aggregate amount of $980,000. The
AEC Notes issued to Messrs. Bowman and Kearns were for $557,632 and $190,020,
respectively. The AEC Notes paid interest on the unpaid principal balances
outstanding from time to time at the annual rate of one percent above the
Prime Rate, but in no event less than ten percent. The Company retired the
AEC notes during fiscal 1994 by paying in full the outstanding $207,000
principal balance carried from December 31, 1993. See Item 1 "AEC Notes".
In the fiscal year of the Company ended March 31, 1990, the Company borrowed
$15,000 and $45,000, respectively, from McGregor Investments Corp.
("McGregor") and IST. At the time of the loans, Messrs. Bell and King were
the sole owners of IST and the principal stockholders of McGregor. During
the year ended December 31, 1995, the notes to McGregor and IST were paid in
full.
In April 1990, AES borrowed $500,000 from IST. The $500,000 amount loaned by
IST to the Company was borrowed by IST from FINOVA. The Company had
attempted to borrow the funds directly from FINOVA; however, FINOVA was
unwilling to make the loan. The proceeds of the loan were paid by AES to AEC
as additional capital. AEC then loaned the proceeds to Incat. FINOVA
required, pursuant to the provisions of the loan agreement for the Original
Greyhound Loan, that Incat issue the Incat Note, and Incat grant a security
interest in all its assets to AEC and that AEC assign to FINOVA its interests
in the promissory note made by Incat and in the collateral. The repayment
terms of the Incat Note provide that principal and interest is payable in 55
monthly installments of $12,242 each commencing May 1, 1993. At December
31, 1995, the outstanding balances of the IST and Incat notes were
approximately $235,000. See Item 1; "Loans from IST, Recapitalization
and Preferred Stock".
The loan from IST to AES was evidenced by the convertible promissory note of
AES and was converted into 61,538,550 shares of Series A Preferred Shares.
The Series A Preferred Shares pay cumulative cash dividends at the rate of
$.0011368 per share per annum, payable in 12 monthly installments of
$.000094733 each, and have a liquidation preference of $.008133 per share.
The cumulative amount paid with respect to the Series A Preferred stock
since its issuance is $397,570 of which approximately $251,235 has been
applied to the redemption of 30,890,856 Series A Preferred shares. As of
December 31, 1995, approximately 30,648,000 Series A Preferred shares
were outstanding. See Items 1 and 2.
In each of fiscal 1991 and 1992 AES issued to IST 12,295,585 shares of its
Series B Preferred Shares for $100,000 in each year. The Series B Preferred
Shares pay an annual dividend of $.0011368 per share, payable quarterly, and
have a liquidation preference of $.008133 per share. As of December 31,
1995 the Company owed IST approximately $122,000 for cumulative
and unpaid dividends with respect to the Series B Preferred Stock,
none of which has been paid as of the time of this Report.
The Company has paid IST a monthly management fee of $8,000
until September 1995. Effective September 1995, the Company's
management fee is $12,000 a month. Pursuant to the provisions of
the FINOVA loan agreement, management fees paid and changes
in amount of fees paid to IST require approval of the financial
institution. Currently, the Company is limited to $15,000 in monthly
management fees to IST.
The Company's casualty program is a combined lines Incurred Loss
Retrospective Rating Program and is underwritten by the AIG companies,
consolidating coverage for IST's subsidiaries including Incat. Included
as combined lines are the Workers Compensation/Employees Liability,
Auto Liability and General Liability. The retro program is a loss
sensitive program. Premium payments are based on the minimum pay-in
calculation by the insurance company plus expected losses. Final
premium calculations are done after the policy period by audit and retro
adjustment. A pay-in allocation for each subsidiary is prepared by
taking the rating basis provided by each IST subsidiary and calculating
the pay-in on a percentage basis from the information provided by each
subsidiary. The coverage is purchased on a consolidated basis which
leverages the subsidiaries' combined buying power which results in
lower costs and more coverage options. In addition, due to the
increased buying power the combined IST companies can
qualify for types of insurance plans that would not be available
if buying separately.
The Company has retained Corporate Stock Transfer, Inc. ("CST") as transfer
agent. Carylyn K. Bell, a principal shareholder of IST and the spouse of
J. Daniel Bell, is the President and a principal shareholder of CST. Alfred
Brehmer, a director and officer of the Company, is an officer and director of
CST. The amounts paid by the Company to CST are not significant and are
believed by management to be commercially reasonable.
Incat entered into a Lease Agreement with Teton Properties, Inc., an entity
of which Messrs. Bell, King, Bowman and Kearns are significant shareholders.
Pursuant to the Lease Agreement, Incat is required to pay a base monthly
rental of approximately $3,000 through the lease expiration date in January,
1997. Incat has the option to renew the lease for three additional
twelve-month periods with rent increases to be the lesser of actual cost
increases or the increase in the Cost of Living Index. Incat is required to
maintain the non-structural portions of the building and pay all utility
charges.
On July 1, 1993, Mr. Bowman became an employee of both Incat and of Piping,
a wholly-owned subsidiary of IST. Each of Incat and Piping compensates
Mr. Bowman directly for his services. The amounts paid by each corporation
are based on the amount of time devoted to that corporation by Mr. Bowman.
Mr. Bowman spends approximately 25 percent of his time on the business of
Incat, and Incat is paying Mr. Bowman at an annual rate of approximately
$36,400. See Item 11.
In July 1993, the Company authorized the issuance of shares of the Company's
common stock, valued at $.004 per share by the Board of Directors, to the
following: Mr. Bell, 5,000,000; Mr. King, 5,000,000 and Mr. Brehmer,
2,000,000. The shares issued to each of Mr. Bell and Mr. King were in
payment for their guaranties of the First Interstate loan for the period
April 1, 1993 through July 31, 1993. The shares issued to Mr. Brehmer were
in payment for his services from April 1, 1993 to the July, 1993 date of the
determination to issue the shares.
In July, 1993, Carylyn K. Bell loaned to the Company $5,000. The loan, which
bore interest at an annual rate of 14%, was for an original term of 90 days.
The Note was not paid at the expiration of the original term and Ms. Bell
agreed to extend the loan at the Company's option. The loan was paid in full
at December 31, 1995.
Management believes the terms and conditions of the transactions disclosed
above in this Item 13 are as favorable to the Company as may have been
attainable from unrelated parties.
For the year ended December 31, 1995, the Company used other IST
subsidiaries as sub-contractors in the ordinary course of business.
The amount of sub-contractor labor from other IST subsidiaries
was approximately $421,000 for the year ended December 31, 1995.
IST owns a majority of the common stock of AES and all the Series A and
Series B Preferred Stock of AES. See Item 12. The owner of each share of
common stock and of the Series A and Series B Preferred stock has one vote
per share. As a result of IST's ownership of stock of AES, the approval of
IST would be required in order for AES to effect an extraordinary transaction
under the corporate laws of the State of New York, the state of incorporation
of AES. Certain agreements between IST and its security holders contain
certain restrictions which provide that the consent of a majority of IST's
holders of preferred stock and other securities must be obtained before IST
may approve an extraordinary transaction involving AES.
Also, pursuant to a guarantee made by IST of certain notes made by its
direct wholly owned subsidiary, certain shares of AES stock owned by
IST have been pledged to a group which at the time of issuance included
individuals and entities controlled by individuals who comprised a
majority of the Board of Directors of IST. However, due to certain
resignations of some of these individuals, the Board of Directors of IST
is now only comprised of four individuals which contitute 50% of the Board.
See Item 12. Certain of these individuals also own directly or
indirectly shares of IST's preferred stock and other securities.
