FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended April 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 00-18140
ADEN ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 87-0447215
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
13314 "I" Street, Omaha, Nebraska 68137
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (402) 334-5556
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(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 / / No /X/
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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 in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant as of July 20, 2000, was $7,375,678 based on
the closing price of $0.34 per share as of such date. As of such date,
317,921,396 shares of the registrant's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's reports under Form 10-Q for the quarter ended
January 31, 1996, and under Form 8-K dated June 21, 1996 and of the registrant's
Registration Statement on Form S-18 and all amendments thereto (Registration No.
33-7494-LA) (the "Registration Statement") are incorporated by reference in
Parts I and IV of this Report.
<PAGE>
PART I
ITEM 1. BUSINESS
(a) Introduction
Aden Enterprises, Inc. was incorporated in Nevada on May 22, 1986, and was
reincorporated in California effective August 12, 1988. Unless the context
otherwise requires, the term "Company" means Aden Enterprises, Inc. The original
business purpose of the Company and the circumstances surrounding its
reincorporation are more fully described in the Registration Statement.
On January 31, 1995, a group of investors based in Omaha, Nebraska,
acquired from the Company's principal shareholder 19.8% of the Company's
outstanding Common Stock and options to acquire an additional 21.8% of such
Common Stock (which options were not exercised). Concurrent with this
transaction, the selling shareholder (being the sole director of the Company at
the time) designated members of this group of investors as directors of the
Company, who thereupon assumed control of the Company. Since then, the Company
has undertaken to locate and negotiate with selected business entities for the
purpose of acquiring, or entering into business combinations, with the selected
businesses. As of the end of the fiscal year to which this report pertains, the
Company has not consummated any such acquisitions or business combinations. As a
consequence, the Company has not engaged in any material business operations.
The Company incorporates by this reference the information set forth in its
reports under Form 10-Q for the quarter ended January 31, 1996, and under Form
8-K dated June 21, 1996.
(b) Forward-Looking and Cautionary Statements
Forward-looking and Cautionary Statements: Certain statements contained
in this report may constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 ("Reform Act"). The Company
may also make forward-looking statements in other reports filed with the
Securities and Exchange Commission, in materials delivered to stockholders and
in press releases. In addition, the Company's representatives may from time to
time make oral forward-looking statements. Forward-looking statements provide
current expectations of future events based on certain assumptions and include
any statement that does not directly relate to any historical or current fact.
Words such as "anticipates," "believes, "expects," "estimates," "intends,"
"plans," "projects," and similar expressions, may identify such forward-looking
statements.
The Company's stock price is also affected by a number of other
factors, including quarterly variations in results, the competitive landscape,
general economic and market conditions and estimates and projections by the
investment community. As a result, like other technology companies, the
Company's stock price is subject to significant volatility.
Much of the future success of the Company depends on the continued
service and availability of skilled personnel, including technical, marketing
and staff positions. Experienced personnel in the information technology
industry are in high demand and competition for their talents is intense. There
can be no assurance that the Company will be able to successfully retain and
attract the key personnel it needs.
The Company expects to make acquisitions or enter into alliances from time
to time. Acquisitions and alliances present significant challenges and risks
relating to the integration of the business into the Company, and there can be
no assurances that the Company will manage acquisitions and alliances
successfully.
ITEM 2. PROPERTIES
As of December 31, 1999, the Company operated at three offices, all of
which are leased. The Company owns no real property at this time.
ITEM 3. LEGAL PROCEEDINGS
During the fiscal year ended April 30, 1996, the Company was a party to
certain legal proceedings as set forth at Note 9 to the Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a shareholder vote from April 30, 1995
through April 30, 1996.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) Market Information.
The Company's original articles of incorporation authorized the issuance of
100,000,000 shares of Common Stock. On February 25, 2000, the articles of
incorporation were amended to authorize the issuance of 750,000,000 shares of
common stock.
Until July 2, 1999, the Company's Common Stock was quoted on the OTC
Bulletin Board (trading symbol "ADEN") operated by the National Association of
Securities Dealers. As of that date, the Company's Common Stock was ineligible
for further quotation on the OTC Bulletin Board because the Company was not
current in its reports with the United States Securities and Exchange Commission
(the "SEC"). Since July 2, 1999, the Company's Common Stock has been quoted on
the so-called "pink sheets" maintained by the National Quotation Bureau. During
the fiscal year ended April 30, 1996, there was no signficant trading of the
Company's Common Stock.
(b) Holders.
As of July 20, 2000, the Company's Common Stock was held by approximately
302 holders.
<PAGE>
(c) Dividends.
The Company has never paid cash dividends on its Common Stock, and
anticipates that it will continue to retain its earnings, if any, to finance the
growth of its business.
(d) Recent Sales of Unregistered Securities.
(i) Sales of Common Stock
During the fiscal year ended April 30, 1996, the Company issued in the
aggregated 8,761,382 shares of its Common Stock which were not registered under
the Securities Act of 1933, as amended (the "Securities Act"), as set forth in
the Statement of Stockholders' Equity.
(ii) Issuance of Warrants
During the fiscal year ended April 30, 1996, there were warrants to
purchase up to 5,619,445 shares of the Company's common stock, as set forth in
Note 6 to the Company's financial statements.
(iii) Claimed Exemption
The issuance of securities described above in this paragraph (d) of
Item 5 were deemed exempt from registration under the Securities Act in reliance
on Section 4 (2) of the Securities Act as transactions by an issuer not
involving any public offering. Such securities are subject to the restrictions
of Rule 144 under the Securities Act.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
During the five years ended April 30, 1996, the Company did not conduct any
material operations. The Company does not believe, therefore, that any
meaningful financial information can be provided in response to this item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
During the five years ended April 30, 1996, the Company did not conduct any
material operations. The Company does not believe, therefore, that any
meaningful financial information can be provided in response to this item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Aden Enterprises, Inc.
(A Development Stage Company)
Financial Statements
April 30, 1996
&
April 30, 1995
<PAGE>
/Letterhead/
Schvaneveldt & Company
Certified Public Accountant
275 East South Temple, #300
Salt Lake City, Utah 84111
(801) 521-2392
Darrell T. Schvaneveldt, C.P.A.
INDEPENDENT AUDITORS REPORT
---------------------------
Board of Directors
Aden Enterprises, Inc.
(A Development Stage Company)
I have audited the accompanying balance sheets of Aden Enterprises, Inc., (A
Development Stage Company) as of April 30, 1996 and 1995, and the related
statements of operations, stockholders' equity and cash flows for the years
ended April 30, 1996, 1995 and 1994 and for the period from May 28, 1986
(inception) to April 30, 1996. These financial statements are the responsibility
of the Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, financial position of Aden Enterprises, Inc., as of April 30,
1996 and 1995, and the results of its operations and its cash flows for the
years ending April 30, 1996, 1995 and 1994 and from May 28, 1986 (inception) to
April 30, 1996, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note #4 to the financial
statements, the Company has an accumulated deficit and a negative net worth at
April 30, 1996. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also discussed in Note #4. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/S/ Schvaneveldt & Company
Salt Lake City, Utah
October 13, 1999
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Balance Sheets
April 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Assets
Current Assets
--------------
Cash in Banks $ -0- $ 902
------------ ------------
Total Current Assets -0- 902
Other Assets
------------
Deposits -0- 500
Receivable Officer 5,137 -0-
Accounts Receivable - Related Party 237,948 -0-
------------ ------------
Total Other Assets 243,085 500
------------ ------------
Total Assets $ 243,085 $ 1,402
============ ============
</TABLE>
The accompanying notes are an integral prat of these financial statements
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Balance Sheets -Continued-
April 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Liabilities & Stockholders' Equity
Current Liabilities
-------------------
Accounts Payable $ 151,127 $ 14,970
Accrued Interest 493,932 -0-
Payroll Taxes Payable 317,161 -0-
Notes Payable 2,660,842 -0-
Judgements Payable 972,443 -0-
------------ ------------
Total Current Liabilities 4,595,505 14,970
Long Term Liabilities
---------------------
Subordinated Convertible Debenture -0- 75,000
------------ ------------
Total Liabilities 4,595,505 89,970
Stockholders' Equity
--------------------
Common Stock 100,000,000 Shares
Authorized; 9,101,982 Shares &
340,600 Shares Issued & Outstanding;
No Par Value Respectively 1,529,334 126,986
Paid In Capital Warrants 526,590 -0-
Income (Deficit) Accumulated
in the Development Stage ( 6,408,344) ( 215,554)
------------ ------------
Total Stockholders' Equity ( 4,352,420) ( 88,568)
------------ ------------
Total Liabilities and
Stockholders' Equity $ 243,085 $ 1,402
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Statements of Operations
For the Years Ended April 30, 1996, 1995 and 1994
and the Period May 28, 1986 (Inception) to April 30, 1996
<TABLE>
<CAPTION>
Accumulated 1996 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income $ -0- $ -0- $ -0- $ -0-
------
Expenses
--------
Consultant Fees 626,835 469,109 57,665 9,600
Wages 9,600 -0- -0- -0-
Amortization 160 -0- -0- -0-
Depreciation 22,394 -0- 1,017 2,399
Accounting & Legal 449,794 183,158 18,046 4,000
Management Fee 15,643 -0- -0- -0-
Rent 65,908 7,200 12,900 7,200
Travel 145,903 100,047 2,084 -0-
Office & Printing 26,548 12,431 225 797
Telephone 16,182 3,342 -0- -0-
Other Expenses 14,941 ( 1,615) 4,829 -0-
Automobile 4,270 -0- -0- -0-
Interest 720,829 703,928 1,479 3,838
Taxes 321,538 321,538 -0- -0-
Loss on Investment
in Subsidiary 22,772 -0- -0- -0-
Investment Losses 3,787,140 3,787,140 -0- -0-
Warrant/Option
Expense 526,590 526,590 -0- -0-
------------- ------------- ------------- -------------
Total Expenses 6,777,047 6,112,868 98,245 27,834
------------- ------------- ------------- -------------
(Loss) from
Operations ( 6,777,047) ( 6,112,868) ( 98,245) ( 27,384)
Other (Income) Loss
-------------------
Interest ( 127,251) ( 67,262) -0- ( 6,314)
Income from Litigation
Settlement ( 159,260) 228,740 -0- -0-
Miscellaneous Income ( 82,192) ( 81,556) -0- -0-
------------- ------------- ------------- -------------
Total Other (Income)
Loss ( 368,703) 79,922 -0- ( 6,314)
------------- ------------- ------------- -------------
Net Income (Loss)
Before Taxes ($ 6,408,344) ($ 6,192,790) ($ 98,245) ($ 21,250)
Provisions for Taxes -0- -0- -0- -0-
------------- ------------- ------------- -------------
Net Income (Loss) ($ 6,408,344) ($ 6,192,790) ($ 98,245) ($ 21,520)
============= ============= ============= =============
Income (Loss) Per Common
Share ($ 1.45) ($ 0.29) ($ 0.06)
Weighted Average Shares
Outstanding 4,259,188 340,600 340,600
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity
For the Period May 22, 1986 (Inception) to April 30, 1996
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
------------------------------------------------------
<S> <C> <C> <C> <C>
Beginning Balance,
May 22, 1986 -0- $ -0- $ -0- $ -0-
Common Stock Issued for
Cash May 22, 1986 100,000 12,500
Cash Contributed by
Public Investors 14,322
Net Loss for Year Ended
April 30, 1987 ( 532)
------------------------------------------------------
Balance, April 30, 1987 100,000 26,822 -0- ( 532)
Net Loss for Year Ended
April 30, 1988 ( 20,472)
------------------------------------------------------
Balance, April 30, 1988 100,000 26,822 -0- ( 21,004)
Cash Contributed by Officer -0- 10,691
Common Stock Issued for
Cash February 28, 1989 240,600 71,428
Net Loss for Year Ended
April 30, 1989 ( 89,362)
------------------------------------------------------
Balance, April 30, 1989 340,600 108,941 -0- ( 110,366)
Net Income for Year
Ended April 30, 1990 194,573
------------------------------------------------------
Balance, April 30, 1990 340,600 108,941 -0- 84,207
Net Loss for Year Ended
April 30, 1991 ( 85,269)
------------------------------------------------------
Balance, April 30, 1991 340,600 108,941 -0- ( 1,062)
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity -Continued-
For the Period May 22, 1986 (Date of Inception) through April 30, 1996
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
------------------------------------------------------
<S> <C> <C> <C> <C>
Dividend of No Par Shares 340,600
Net Loss for Year Ended
April 30, 1992 ( 57,653)
------------------------------------------------------
Balance, April 30, 1992 681,200 108,941 -0- ( 58,715)
Reverse Split of Shares
Outstanding One for Two (340,600)
Net Loss for Year Ended
April 30, 1993 ( 37,074)
------------------------------------------------------
Balance, April 30, 1993 340,600 108,941 -0- ( 95,789)
Net Loss for Year Ended
April 30, 1994 ( 21,520)
------------------------------------------------------
Balance, April 30, 1994 340,600 108,941 -0- ( 117,309)
Capital Contributed by
Stockholder 17,917
Capital Contributed by
Default of Public Investor 128
Net Loss for Year Ended
April 30, 1995 ( 98,245)
------------------------------------------------------
Balance, April 30, 1995 340,600 126,986 -0- ( 215,554)
Shares Issued for Cash at
$0.333 Per Share 600,000 200,000
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Statements of Stockholders' Equity -Continued-
For the Period May 22, 1986 (Date of Inception) through April 30, 1996
<TABLE>
<CAPTION>
Common Stock Paid In Accumulated
Shares Amount Capital Deficit
------------------------------------------------------
<S> <C> <C> <C> <C>
Shares Issued for Note
Receivable $0.291 Per Share 1,082,143 315,000
Shares Issued for Cash at
$0.486 Per Share 300,000 146,000
Shares Issued for Cash
at $0.50 Per Share 1,100,000 550,000
Shares Issued for Services
at $0.35 Per Share 100,000 35,000
Shares Issued for Services
at $0.162 Per Share 460,845 75,000
Shares Issued for Debt
Reduction 197,505 32,140
Shares Issued for Cash
$0.001 Per Share 3,900,889 39,008
Shares Returned to Company
for Contribution at $0.01
Per Share ( 90,000) ( 900)
Shares Issued for Service
at $0.01 Per Share 1,110,000 11,100
Warrants Issued 526,590
Net Loss for Year Ended
April 30, 1996 ( 6,192,790)
------------------------------------------------------
Balance, April 30, 1996 9,101,982 $ 1,529,334 $ 526,590 ($6,408,344)
======================================================
</TABLE>
The accompanying notes are an integral part of these financial statemetns
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Statements of Cash Flows
For the Years Ended April 30, 1996, 1995 and 1994
and the Period May 28, 1986 (Inception) to April 30, 1996
<TABLE>
<CAPTION>
Accumulated 1996 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash flows from
Operating Activities
--------------------
Net Income (Loss) ($ 6,408,344) ($ 6,192,790) ($ 98,245) ($ 21,520)
Adjustments to reconcile net
income (loss) to net cash
provided:
Amortization 160 -0- -0- -0-
Depreciation 22,394 -0- 1,017 2,399
Non Cash Expenses:
Warrant Option Fee 526,596 526,596 -0- -0-
Consulting Fees 121,100 121,100 -0- -0-
(Increase) Decrease in
Prepaid Expenses -0- -0- -0- -0-
(Increase) Decrease in
Deposits -0- 500 ( 500) -0-
Decrease (Increase) in
Note Receivable 71,719 71,915 -0- 66,826
Increase (Decrease) in
Accounts Payable 151,127 136,157 4,142 ( 3,109)
Increase (Decrease) in
Accrued Expenses 493,932 493,932 -0- -0-
Increase (Decrease) in
Payroll Taxes 317,161 317,161 -0- -0-
------------- ------------- ------------- -------------
Net Cash Used in
Operating Activities ( 4,704,155) ( 4,525,429) ( 93,586) 44,596
Cash Flows from
Investing Activities
--------------------
Purchase of Furniture ( 6,795) -0- -0- -0-
Purchase of Automobile ( 17,035) -0- -0- -0-
Organization Costs ( 160) -0- -0- -0-
------------- ------------- ------------- -------------
Net Cash Used in
Investing Activities ( 23,990) -0- -0- -0-
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Statements of Cash Flows -Continued-
For the Years Ended April 30, 1996, 1995 and 1994
and the Period May 28, 1986 (Inception) to April 30, 1996
<TABLE>
<CAPTION>
Accumulated 1996 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash Flows from
Financing Activities
--------------------
Increase (Decrease) in Note
- Related Party -0- -0- -0- ( 44,663)
Increase in Notes Payable 3,633,285 3,558,285 75,000 -0-
Cash Received by Default
of Public Investor 128 -0- -0- -0-
Proceeds from Sale of
Common Stock 1,075,379 966,242 -0- -0-
Cash Proceeds of
Contributed Capital 19,353 -0- 19,353 -0-
------------- ------------- ------------- -------------
Net Cash Used by
Financing Activities 4,728,145 4,524,527 94,353 ( 44,663)
------------- ------------- ------------- -------------
Net Increase (Decrease)
in Cash -0- ( 902) 767 ( 67)
Cash at Beginning
of Period -0- 902 135 202
------------- ------------- ------------- -------------
Cash at End of Period $ -0- $ -0- $ 902 $ 135
============= ============= ============= =============
Other Disclosures
-----------------
Interest Paid $ 720,829 $ 703,928 $ 1,479 $ 3,838
Taxes -0- -0- -0- -0-
Significant Non Cash
Expenditures
---------------------
1,082,143 Shares Issued to
Acquire Note Receivable 315,000 315,000 -0- -0-
1,670,845 Shares Issued for
Consulting Fees 121,100 121,100 -0- -0-
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
NOTE #1 - Corporate History
---------------------------
Organization of Business
The Company was organized on May 22, 1986 under the laws of the state of
Nevada. During August 1988, the Company merged with Aden Enterprises,
Inc., a California Corporation, changing the Company's corporate domicile
to the state of California.
The Company has not commenced planned principal operations and is
considered to be a development stage enterprise. The Company's principal
business activity is investing in all forms of investments or lawful
business activities.
NOTE #2 - Significant Accounting Policies
-----------------------------------------
A. The Company uses the accrual method of accounting.
B. Revenues and directly related expenses are recognized in the period
when the services are performed for the customer.
C. The Company considers all short term, highly liquid investments that
are readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.
D. Primary Earnings Per Share amounts are based on the weighted average
number of shares outstanding at the dates of the financial statements.
Fully Diluted Earnings Per Shares shall be shown on stock options and
other convertible issues that may be exercised within ten years of the
financial statement dates.
E. Inventories: Inventories are stated at the lower of cost, determined
by the FIFO method or market.
F. Depreciation: The cost of property and equipment is depreciated over
the estimated useful lives of the related assets. The cost of
leasehold improvements is depreciated (amortized) over the lesser of
the length of the related assets or the estimated lives of the assets.
Depreciation is computed on the straight line method for reporting
purposes and for tax purposes.
I. Estimates: The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #3 - Long Term Debt
------------------------
Long term debt at April 30, 1995, consists of the following:
Subordinated Convertible Debenture;
Due December 31, 1996; Unsecured;
Interest at 10% Per Annum. $ 75,000
Subordination
Payment of the principal and interest on this debenture is expressly
subordinated to the payment of all indebtedness (and all extensions and
renewals thereof), both principal and interest, of obligor incurred or
created before, on or after the issue date hereof, to any bank,
institutional lender, savings and loan association, finance company or
other financial institution unless such indebtedness is, by its terms,
expressly made junior to or on a parity with, in right of payment, this
debenture.
Conversion
At any time after the issue date hereof and on or before the due date, or
such earlier date as the principal amount due hereunder may be paid, the
registered owner is entitled to convert all, but not less than all, of the
unpaid principal amount of this debenture into fully paid and non-
assessable shares of its common stock of Aden Enterprises, Inc., at the
applicable conversion price, or at such conversion price as may be adjusted
from time to time. The conversion price represents the principal amount of
this debenture which may be converted into a share of common stock. The
conversion price is equal to 70% of the fair market value of each share of
common stock, subject to the following limitations.
1. If the debenture is converted within 90 days following the issue
date, inclusive, the conversion price will be $1.00 per share.
2. If the debenture is converted at any time after the 90 day
period, but on or before the first anniversary of the issue date,
the conversion price shall not exceed $1.50 per share.
3. The conversion price shall in no event be less that $0.70 per
share.
NOTE #4 - Going Concern
-----------------------
As disclosed in the Independent Auditors Report letter there is
considerable doubt concerning the Company's ability to continue as a going
concern. The Company currently seeks to raise capital for additional
business opportunity through the issuance of additional common stock.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #5 - Notes Payable
-----------------------
<TABLE>
<CAPTION>
Short Term:
The Company has notes payable to a commercial bank and individual lenders as follows:
1996
------------
<S> <C> <C>
Commercial Bank, Due Date August 21, 1995,
Interest Rate 10.5% $ 167,582
Individual #1, Due Date August 12, 1996,
Interest Rate 15.0% 100,000
Due Date February 13, 1996, Interest Rate 15% 200,000 300,000
Individual #2, Due Date October 13, 1996, ------------
Interest Rate 15% 200,000
Individual #3, Due Date January 5, 1996,
Interest Rate 15% 50,000
Due Date January 6, 1996, Interest Rate 15% 50,000
Due Date December 15, 1996, Interest Rate 15% 45,000 145,000
Individual #4, Due Date April 15, 1997, ------------
Interest Rate 22.% 245,000
Individual #5, Due Date December 22, 1995,
Interest Rate 15% 10,000
Individual #6, Judgement Granted 50,000
Individual #7, Due on Demand, Interest Rate 12.5% 90,467
Individual #8, Due on Demand, Interest Rate 12.5% 82,200
Individual #9, Due on Demand, Interest Rate 12.5% 7,100
Individual #10, Due on Demand, Interest Rate 15% 10,000
Individual #11, Due Date May 29, 1996,
Interest Rate 10% 150,000
Due Date March 9, 1996, Interest Rate 15% 137,500 287,500
Individual #12, Due on Demand, Interest Rate 10% ------------ 350,000
Individual #13, Due on Demand, Interest Rate 12% 100,000
Individual #14, Due on Demand, Interest Rate 10% 75,000
Individual #15, Due on Demand, Interest Rate 12% 120,000
Individual #16, Due on Demand, Interest Rate 10% 420,993
------------
Total Notes Payable $ 2,660,842
============
</TABLE>
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #6 - Warrants and Options Outstanding
------------------------------------------
The Company has issued warrants to various individuals and firms as per the
following schedules.
<TABLE>
<CAPTION>
Number of Exercise Date of Date of
Warrants Price Issue Expiration
------------ ----------- ------------- -------------
<C> <C> <C> <C>
100,000 $ 0.01 01/12/95 10/31/98
60,000 0.01 06/21/95 06/30/98
150,000 0.01 08/01/95 08/30/98
75,000 0.01 09/01/95 08/30/98
2,100,000 0.01 09/20/95 08/30/98
1,100,000 0.01 09/21/95 06/30/98
200,000 0.01 11/07/95 10/31/98
100,000 0.01 11/08/95 10/31/98
200,000 0.01 11/13/95 10/31/98
75,000 0.01 11/15/95 10/31/98
50,000 0.01 11/16/95 11/30/98
50,000 0.01 12/06/95 11/30/98
50,000 0.01 12/06/95 11/30/98
250,000 0.01 01/30/96 11/30/98
211,111 0.01 03/12/96 11/30/98
116,667 0.01 03/21/96 11/30/98
731,667 0.01 03/21/96 11/30/98
------------ ----------- ------------- -------------
5,619,445
============
The warrants outstanding when audited to the weighted average shares
outstanding would be 14,721,427 shares issued or committed to be issued.
To present loss per share based upon the shares issued and warrants issued
would be antidilutive. Therefore, no presentation is made other than the
basic loss per share based upon the actual shares issued.
NOTE #7 - Related Party Transactions
------------------------------------
The Company paid to its former President $7,200 as consulting fees during
the years ended April 30, 1995.
<PAGE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #8 - Federal Income Taxes
------------------------------
The Company has net operating loss carryforwards for income tax purposes as
follows:
</TABLE>
<TABLE>
<CAPTION>
Expiration
Year of Loss Amount Date
------------------------------------------------
<S> <C> <C>
April 30, 1991 $ 1,062 2006
April 30, 1992 57,653 2007
April 30, 1993 36,917 2008
April 30, 1994 21,520 2009
April 30, 1995 98,520 2010
April 30, 1996 6,112,868 2011
</TABLE>
The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issues that create timing differences that would mandate
deferred tax expenses. Net operating losses would create possible tax
assets in future years. Due to the uncertainty as to the utilization of
net operating loss carryforwards an evaluation allowance has been made to
the extent of any tax benefit that net operating losses may generate.
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Current Tax Asset Value of Net Operating Loss
Carryforwards at Current Prevailing Federal
Tax Rate $ 2,178,837 $ 67,316 $ 29,000
Evaluation Allowance ( 2,178,837) ( 67,316) ( 29,000)
----------- ----------- -----------
Net Income Tax Benefit -0- -0- -0-
Current Income Tax Expense -0- -0- -0-
Deferred Income Tax Benefit -0- -0- -0-
</TABLE>
Aden Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements -Continued-
NOTE #9- Litigation
-------------------
The Company is not currently subject to any material legal proceedings.
The Company has been a defendant in legal proceedings at various times in
the past and has outstanding balances as follows;
<TABLE>
<CAPTION>
1996
-------------
<S> <C>
Judgment in the United States District Court of Nebraska, Douglas
County, Doc. #959 No. 864, Russell Barger Plaintiff vs., Aden
Enterprises, Inc., Et. Al., Petition Filed April 2, 1997 110,930
Judgment in the United States District Court of Nebraska, Douglas
County, Doc. #956, No. 36, Matthew A. Gohd Plaintiff vs., Aden
Enterprises, Inc., Et. Al., Petition Filed November 27, 1996,
Judgment includes Accrued Interest of $41,891 200,000
Judgment in the United States District Court of Nebraska, Douglas
County, Doc., 958, No. 177, Value Partners LTD., Plaintiff vs.,
Aden Enterprises, Inc., Et. Al., Petition Filed February 12, 1997 482,773
Judgment in the United States Eighteenth Judicial Circuit, County of
Du Page State of Illinois, Doc., 0256, Primary Resources, Inc.,
Plaintiff vs. Aden Enterprises, Inc., Et. Al., Filed March 8, 1996 178,740
-------------
Total $ 972,443
=============
</TABLE>
NOTE #10 - Contingencies
------------------------
The Company entered into an agreement with Data Duplicating Corporation and
its shareholders on July 31, 1996, for the Company to acquire 80% of the
outstanding stock of Data Duplicating Corporation in exchange for common
stock of Aden Enterprises, Inc. In addition, the Company was to contribute
a total of $250,000.00 as additional capital in Data Duplicating
Corporation. Also, the Company agreed to cause certain shareholders of
Data Duplicating Corporation to be relieved of their personal liability for
sums due by DDC to Nebraska State Bank and Mid City Bank, Omaha, Nebraska.
The Company contributed the sum of $100,000.00, but failed to contribute
the additional $150,000.00 committed under the referenced agreement and
failed to remove the shareholders of DDC's guarantees of DDC's indebtedness
to Mid City Bank and Nebraska State Bank. As a result of the foregoing,
the transaction has not been consummated.
Aden has guaranteed a Promissory Note of ITS International, Inc., to
Nebraska State Bank which note has a current balance of $177,079.56. The
note is in default as of this date. The Company has made provision of
$167,582 for this note on its books at April 30, 1996.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information concerning the age, current
positions with the Company, and term of office as a director and period of
service as such, for all of the directors of the Company, as of April 30, 2000:
<TABLE>
<CAPTION>
Year
Became a
Name Age Director Office and Title
---- --- -------- ----------------
<S> <C> <C> <C>
Michael S. Luther 41 1995 Chairman of the Board of
Directors; Chief
Executive Officer
Judith E. Sundberg 58 1998 Director; Secretary
Donald E. Rokusek 62 1998 Director
</TABLE>
All of the directors hold their office until the next annual meeting of
the shareholders and their respective successors shall qualify.
Michael S. Luther has been associated with the Company as its Chief
Executive Officer since February 1995. From August, 1993 to November, 1994, Mr.
Luther was a registered representative of the investment banking firm of
Kirkpatrick, Pettis, Smith & Polian, Inc. of Omaha, Nebraska. Mr. Luther is a
graduate of the University of Maryland with a Bachelor of Science degree in
accounting and he is a certified public accountant. Mr. Luther is a director of
Synergy Media, Inc. Mr. Luther and his brother, Mark Luther, were named as
defendants in an action brought in the United States District Court for the
District of Nebraska by the United States Secretary of Labor on March 17, 1999,
captioned Alexis M. Herman, Secretary of Labor, United States Department of
Labor, Plaintiff, v. Michael S. Luther, Mark E. Luther, and SmartPay Processing,
Inc. 401(k) Profit Sharing Plan, Defendants, Civil Action No. 8:99-CV-00093. The
complaint alleged that the defendants failed to exercise their responsibilities
as fiduciaries of the SmartPay Processing, Inc. 401(k) Profit Sharing Plan (the
"Plan"). On September 9, 1999, a consent judgment was entered against the
defendants which ordered and adjudged that (1) Messrs. Luther, their agents,
servants, employees, and attorneys and those persons (having notice of such
order) in active concert or participation with them be permanently enjoined and
restrained from violating the provisions of Sections 403-406, inclusive, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and (2)
Messrs. Luther be permanently enjoined and restrained from (a) exercising any
discretionary authority or discretionary control respecting management of any
ERISA-covered pension or welfare benefit plan or exercising any authority or
control respecting management or disposition of any such plan's assets and (b)
having any discretionary authority or discretionary responsibility in the
administration of any such plans. Messrs. Luther were further ordered to pay the
sum of $23,500 to the independent trustee of the Plan within thirty (30) days of
the entry of the judgment for distribution to the Plan's participants and/or
beneficiaries. The Company has made this payment on behalf of Mr. Luther. Mr.
Luther does not currently exercise any discretionary authority or responsibility
respecting any ERISA-covered pension or welfare benefit plan pertaining to the
Company.
Judith E. Sundberg has been associated with the Company since November
1995. Mrs. Sundberg has no experience in the management of a public company.
Mrs. Sundberg is also a director of Synergy Media, Inc.
<PAGE>
Donald E. Rokusek has been associated with the Company since 1997. Mr.
Rokusek has also been associated with (1) Concepts, Inc. from 1980 to date as
its vice president, (2) Digital Products Corporation from 1997 to date as its
director of contracts administration, and (3) Sewing Concepts from 1985 to 1997
as its operations and financial manager. Mr. Rokusek has no experience in the
management of a public company.
During the fiscal year ended April 30, 1996, the Board of Directors
included, in addition to Mr. Luther, Dennis Blackman and Brian A. Barger. Mr.
Blackman resigned from the Board of Directors in or about July, 1996. Mr. Barger
resigned from the Board of Directors on October 30, 1996.
ITEM 11. EXECUTIVE COMPENSATION.
During the three years ended April 30, 1996, no current executive officer
of the Company received any compensation. However, the Company paid to its
former President $7,200 as consulting fees during the years ended April 30,
1995.
The Company has no retirement, pension, profit-sharing, insurance, or
medical reimbursement plan covering its officers or employees. The Company has
not entered into any employment agreements with any of the named executive
officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners.
As of July 20, 2000, there were 317,921,396 shares of the Company's common
stock outstanding. The following table sets forth information regarding the
beneficial ownership of the Company's common shares by shareholders holding or
controlling five percent (5%) or more of its outstanding voting securities.
<TABLE>
<CAPTION>
Amount of
Beneficial
Ownership of
Common Stock as Percent of
Name and Address of 07/20/2000 Total
---------------- ------------ -----
<S> <C> <C>
Michael S. Luther (1) 45,702,629 14.38%
1611 So. 91st Avenue
Omaha, Nebraska 68124
Daniel A. Koch (2) 56,509,357 17.77%
12905 Lafayette Ave
Omaha, Nebraska 68154
MercExchange, LLC(3) 58,000,000 18.24%
8408 Washington Avenue
Alexandria, VA 22309
</TABLE>
<PAGE>
(b)Security Ownership of Management.
The following table sets forth information regarding the beneficial
ownership of the Company's common shares by its directors, the Company's Chief
Executive Officer and the Company's only other executive officer, and the
directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount of
Beneficial
Ownership of
Common Stock as Percent of
Name and Address of 07/20/2000 Total
---------------- ------------- -----
<S> <C> <C>
Michael S. Luther (1) 45,702,629 14.38%
Chairman and Chief Executive Officer
1611 So. 91st Avenue
Omaha, Nebraska 68124
Judith E. Sundberg 1,771,853 0.56%
Director
c/o 13314 "I" Street
Omaha, Nebraska 68137
Donald E. Rokusek 1,142,857 0.36%
Director
c/o 13314 "I" Street
Omaha, Nebraska 68137
Directors and Executive Officers 48,617,339 15.30%
as a group (3 individuals)
</TABLE>
(1) In order to issue shares of Common Stock with respect to certain commitments
made to various third parties, the Company redeemed 38,438,316 shares of its
Common Stock from Mr. Luther. The Company committed to reissue such shares to
Mr. Luther subject to the approval of the amendment to Article IV of its
Articles of Incorporation. The amendment to the articles of incorporation was
effective February 25, 2000. Furthermore, on September 21, 1999, the Company
agreed to issue a warrant to Mr. Luther which grants him the right to purchase
50,000,000 shares of Common Stock at an exercise price of $0.15 per share. This
warrant expires on September 21, 2001. At the time this warrant was issued, the
fair market value of each share of Common Stock was determined by the Company's
board of directors to be $0.038.
(2) In order to issue shares of Common Stock with respect to certain commitments
made to various third parties, the Company redeemed 13,366,188 shares of its
Common Stock from Mr. Koch. The Company committed to reissue such shares to Mr.
Koch subject to the approval of the amendment to Article IV of its Articles of
Incorporation. The amendment to the articles of incorporation was effective
February 25, 2000. On November 15, 1998, the Company agreed to issue a warrant
to Mr. Koch which grants him the right to purchase 43,000,000 shares of Common
Stock at an exercise price of $0.001 per share. At the time this warrant was
issued, the fair market value of each share of Common Stock was determined by
the Company's board of directors to be $0.011. This warrant expires on November
14, 2000. On September 21, 1999, the Company agreed to issue a warrant to Mr.
Koch which grants him the right to purchase 50,000,000 shares of common stock at
an exercise price of $0.15 per share. At the time this warrant was issued, the
fair market value of each share of Common Stock was determined by the Company's
board of directors to be $0.038. This warrant expires on September 21, 2001.
<PAGE>
(3) MercExchange, LLC is a Virginia limited liability company owned and
controlled by Thomas Woolston, the Company's former Chief Technology Officer.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company paid to its former President $7,200 as consulting fees during
the three years ended April 30, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
The financial statements as set forth under Item 8 of this report on
Form 10-K are incorporated herein by reference.
Financial statement schedules have been omitted since they are either
not required, not applicable, or the information is otherwise included.
(b) Reports on Form 8-K
The following reports on Form 8-K were filed during the Company's fiscal
year ending April 30, 1996:
None.
(c) Exhibit Listing
EXHIBIT
NUMBER DESCRIPTION
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
27.1 Financial Data Schedule
(1) Incorporated by reference to Registration Statement under Form S-18 (No.
33-7494-LA).
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF OMAHA,
STATE OF NEBRASKA, ON JULY 21, 2000.
ADEN ENTERPRISES, INC.
By: /s/ Michael S. Luther
Michael S. Luther
Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON JULY 21, 2000.
SIGNATURE TITLE
/s/ Michael S. Luther Chairman of the Board of Directors and
-------------------------------------- Chief Executive Officer
Michael S. Luther
/s/ Judith E. Sundberg Director; Secretary
--------------------------------------
Judith E. Sundberg
/s/ Donald. E. Rokusek Director
--------------------------------------
Donald. E. Rokusek
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
27.1 Financial Data Schedule
(1) Incorporated by reference to the Company's Registration Statement under
Form S-18 (No. 33-7494-LA).
