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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2 TO
FORM 10-KSB
ANNUAL REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the fiscal year ended Commission File Number
June 30, 1998 0-15379
POWER-CELL, INC.
(Exact name of Registrant as specified in its charter)
Colorado 84-1029701
State of Incorporation IRS Employer Identification Number
660 Preston Forest Center, Box 200
Dallas, Texas 75230
(Address and telephone number of principal executive offices)
214/373-1887
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) or 12(g) of the Act:
$.0001 par value common stock
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 and (2) has been subject to filing requirements for the
past 90 days.
Yes X No
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The aggregate market value of the voting stock held by non-affiliates of the
Registrant is approximately $342,000. This calculation is based upon the average
of the bid and asked prices of the Registrant's Common Stock on June 30, 1998.
The number of shares of the Registrant's $.0001 par value Common Stock
outstanding as of April 7, 1998, was 6,419,540.
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This Form 10-KSB/A2 is filed to amend Items 1, 2, 4, 6 and 10 and the Exhibits.
The remaining items of the Form 10-KSB previously filed are not amended hereby.
Item 1. Business
(a) General Development of Business.
On December 27, 1988, the United States Patent and Trademark
Office issued a United States' Letter Patent to Power-Cell,
Inc., a Colorado corporation (the "Company" of "PCI") relating
to certain features of the Company's replaceable low-cost
reserve battery charger unit. The patent entitles the Company
to prohibit others from making, using or selling the invention
claimed for a period of seventeen (17) years from the date of
issue. The Company filed a Divisional Patent Application on
September 19, 1988 relating to other aspects of the battery
charger unit. The Company was advised on August 22, 1989 that
certain of its claims contained in its Divisional Patent
Application are allowable by the U.S. Patent Examiner and the
patent will advance to issue. Based upon the results of a
search conducted of the United States Patent and Trademark
Office records in March 1987, it was determined that there
were no U.S. patents that would be infringed by the
manufacturing and marketing of the Product, and no patents
have subsequently come to the attention of the Company which
would be infringed. In addition, the Company has filed for
patent protection relating to the battery charger unit in
thirteen foreign countries and was advised on August 8, 1989
that its patent application in Spain, Italy, Great Britain,
Australia and Argentina has been approved for issue. There can
be no assurance that such additional patent protection can or
will be obtained.
On May 27, 1989, the Company entered into a letter of intent
(the "Letter of Intent") with Daewoo Heavy Industries, Inc.,
of Seoul, Korea ("DHI") to complete the development program
for the Company reserve battery charger unit (the "Product").
The Letter of Intent provided that DHI would bear most costs
and expenses related to development of the Product. The
Company would provide technical assistance and pay regulatory
costs. Upon satisfactory development of the Product pursuant
to the development program, the parties intended to negotiate
a definitive agreement for the manufacture and distribution of
the Product on a worldwide basis.
Negotiations pursuant to the Letter of Intent were terminated
in September, 1990. DHI informed the Company that DHI's prime
bank would not approve a loan to DHI for the Product on the
grounds of government policies to regulate the business
diversification of conglomerates in Korea. In addition, DHI
informed the Company that DHI's Board of Directors decided to
postpone indefinitely DHI's participation in the project due
to increased wage and material costs for cases and plates, the
strength of the Korean won, and the general problem of oil
price increases caused by the crises in the Persian Gulf.
Power-Cell, Inc. entered into an Agreement of Limited
Partnership on October 9, 1992, by and among Reserve Battery,
Inc., a Colorado corporation as general partner (the name of
the general partner was amended to read "Reserve Cell Limited
Liability
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Company", General Partner of Reserve Battery Cell, L.P.), and
other parties at interest.
The parties, as above, formed a limited partnership with the
name of "Reserve Battery Cell, L.P." subject to the provisions
of the Colorado Uniform Limited Partnership Act of 1981, as
amended, to develop, manufacture, market and sell the reserve
battery product lines; to obtain financing and refinancing to
accomplish the foregoing purposes and other provisions
normally required in such projects.
Power-Cell, Inc. has a participation of 7.35% percent in the
Reserve Battery Cell, L.P., that may be increased or
decreased, due to certain events pending, namely the legal
action of Reserve vs. Osmic et al. (See item 3, page 5).
Should Reserve prevail in this matter, the 5.34% interest of
Osmic in the limited partnership will be canceled and
re-allocated on a pro rata basis between Reserve, Power-Cell,
Inc. and the international rights holders. Further, the right
to participate in 41% of the Power-Cell, Inc. domestic
royalties should also be canceled. The three year option of
Osmic to acquire 200 thousand PCI common shares at $1.00 per
share expired on March 5, 1995. (originally 20 million shares
at a one cent per share cost, adjusted for a 100/1 reverse
split of the common shares effective November 21, 1994). In
addition, PCI will receive royalty payments on all units
produced and sold in the United States and its possessions.
Royalty payments on international sales of the unit will be
paid to individual international rights holders or their
designees, some of which are affiliates of PCI, and all of
which are limited partners in the partnership, on the
following basis: one-third (33 1/3%) to J. C. Rambin;
one-third (33 1/3%) to Rudy Marich; seventy-five percent of
one-third to Howard Farkas (75% of 1/3) and twenty-five
percent of one-third to Burt Kanter (25% of 1/3).
The Company was advised by Reserve Battery, Inc. on June 30,
1997 that litigation had been settled between Reserve and
OSMIC, Inc. and furnished with a copy of the assignments.
OSMIC, Inc. has assigned to Reserve Battery, Inc. the above
cited limited partnership interest and the license royalty
interest of Power-Cell, Inc./OSMIC, Inc. The Company is
currently reviewing the release and assignment to determine
the adequacy of the legal conveyance of the royalty of (41%)
of its domestic royalty provision; and its pro rata portion of
the 34% OSMIC interest in the limited partnership to
Power-Cell, Inc.
Power-Cell, Inc. entered into a License Agreement on October
9, 1992, by and among Reserve Battery Cell, L.P., a Colorado
limited partnership (Reserve), the International Rights
Holders and other parties at interest. The license agreement
granted to Reserve included the rights to the patents,
technology and the Domestic and International Rights, to
develop, produce, market and sell the product.
The separate license royalty agreement between the Company and
the Partnership provides that the Company will receive royalty
payments on all Power Cell units produced and sold in the
United States and its territories from 5% to 20% of annual
gross per unit. Royalty payments on international sales of
Power Cell units will be paid to individual international
rights holders, some of which are affiliates of the
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Company (director and/or significant shareholders), and all of
which are limited partners in the Partnership.
Around March 1997, the Company was informed that all
activities and operations of Reserve Battery Cell, L.P. had
ceased due to lack of funding. As a result, at such time, for
all practical purposes the operations of the Company ceased.
(b) Financial Information About Industry Segments.
Not applicable.
(c) Narrative Description of Business.
The Company was organized in April 1986 to seek out and
evaluate potential business opportunities. It received
$360,000 in net proceeds, before offering expenses of
approximately $44,000, from its initial public offering of
400,000 Units of its Common Stock and Class A Warrants
("Units") that closed in December 1986. From the close of that
offering until the Spring of 1987, the Company evaluated
various business opportunities. In May 1987, the Company and
Balzac Investments, Inc. ("Balzac") entered into a Merger
Agreement. The merger was completed on February 19, 1988 after
the declaration of effectiveness of the Company's Post
Effective Amendment Number 6 to its Registration Statement on
Form S-18. Upon consummation of the merger, the Company
changed its name to Power-Cell, Inc. The reason for this name
change was that the primary business of the Company was the
development for eventual manufacture and marketing of the
Product.
In January 1987, Balzac purchased the rights to a battery
charger product (the "Product"). As a result of the merger,
the rights to manufacture, market and distribute the Product
and all related technology in the United States and its
territories now belong to the Company. Other individuals and
entities who are all former shareholders of Balzac, own all
the international rights to the Product. The Product is a
reserve battery approximately 6 inches by 8 inches encased in
hard form plastic that is designed to be carried in a car and
used to charge a "dead" automotive battery. The Product
utilizes a lead acid cell commonly used in marine batteries.
Marine batteries have been reported to have retained full
capacity after storage for up to nine years. Approximately 12
minutes after plugging the Product into the cigarette lighter
of a car, the Product is designed to transfer enough energy to
the "dead" battery to allow a normal restart. The Product is
designed to be used once and then be replaced. The Company
does not consider the Product to be hazardous.
The Company believes the potential market for the Product
includes every operator of a car, truck or boat that uses a
battery for starting purposes. The Company intends to develop,
manufacture and market the Product through one or more
third-party companies specializing in the manufacture and
national distribution of batteries. Prior to the Merger,
Balzac executed a royalty agreement with its shareholders and
assigned the international rights to the Product to certain of
its shareholders, both of which were conditions precedent to
the Merger. The Company is not entitled to international
rights to the Product and, therefore, has no right to
manufacture, market
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or distribute the Product outside the United States and its
territories. The Company is also obligated to pay the expenses
incurred in filing foreign patent applications for the Product
which expenses will be reimbursed out of a royalty interest
granted to the shareholders of Balzac prior to the Merger.
These international rights are currently owned by four
individuals and entities, all of which are principal
shareholders of the Company.
Management intends that the Product, if marketed and
distributed, will compete with many other products including
batteries, battery chargers and jumper cables. Many
manufacturers of these products are established, well-financed
entities with greater financial resources than the Company,
well-established products, existing markets, customer lists
and established distribution centers.
Around March 1997, the Company was informed that all
activities and operations of Reserve Battery Cell, L.P. had
ceased due to lack of funding. As a result, at such time, for
all practical purposes, the operations of the Company ceased.
The Company has no full-time or part-time employees but uses
one consultant, who devotes substantially all of his time to
the Company's business.
(d) Financial Information About Foreign and Domestic Operations
and Export Sales.
Not applicable.
Item 2. Properties
The Company has a nominal amount of office space, which is
located at the residence of James C. Rambin. Mr. Rambin
provides such space on an informal basis and free of charge.
There are no other offices or properties of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
A special meeting (the "Special Meeting") of the shareholders
of Power-Cell, Inc., a Colorado corporation (the "Company"),
was held at the offices of the Zisman Law Firm, A Professional
Corporation, Fourth Floor Conference Room, 2626 Cole Avenue,
Suite 400, Dallas, Texas, 75204, at 11:00 A.M., Dallas, Texas
time, on December 4, 1997 for the follow purpose:
To consider the proposals of James C. Rambin to (a)
remove, without cause, Howard L. Farkas and Burton W.
Kanter as Directors of the Company, (b) elect H. Don
Gill and E. Brewer Newton as Directors of the
Company, and (c) re-elect James C. Rambin as a
Director of the Company. The proposals were approved,
ratified and adopted.
The results of the vote of the shareholders at the
meeting are set forth below with respect to the
proposals presented:
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(i) Removal of Howard L. Farkas as a director of
the Company: Shares of the Company's Common
Stock with respect to such removal were
voted as follows: the number of votes cast
for his removal was 3,800,801, the number of
votes cast against his removal was 4,900,
and the number of votes abstaining was
10,355.
(ii) Removal of Burton W. Kanter as a director of
the Company: Shares of the Company's Common
Stock with respect to such removal were
voted as follows: the number of votes cast
for his removal was 3,801,351, the number of
votes cast against his removal was 4,550,
and the number of votes abstaining was
10,155.
(iii) Messrs. Gill and Newton were the nominees to
fill the vacancies of Messrs. Farkas and
Kanter. Shares of the Company's Common Stock
were voted as follows: with respect to Mr.
Gill, the number of votes cast for his
election was 3,801,976, the number of votes
cast against his election was 3,925, and the
number of votes abstaining was 10,155; with
respect to Mr. Newton, the number of votes
cast for his election was 3,800,806, the
number of votes cast against his election
was 4,845, and the number of votes
abstaining was 10,405.
(iv) Mr. Rambin was nominated for re-election to
the Board of Directors. Shares of the
Company's Common Stock were voted as
follows: the number of votes cast for his
election was 3,777,226, the number of votes
cast against his election was 28,665, and
the number of votes abstaining was 8,065.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations Liquidity and Capital Resources
On October 21, 1992, the Company entered into a limited partnership
agreement (see General Development of Business section for outline of
various contract terms and conditions) with several other limited
partners and a sole general partner to provide for management, funding,
manufacturing and marketing of the Power Cell reserve battery unit on a
worldwide basis. The company initially owned an 11% interest in the
limited partnership, which may increase or decrease due to the
occurrence of certain events. The interest decreased to 7.35% during
fiscal 1996 due to the addition of outside investors, resulting in a
pro rata dilution. In addition, a separate license royalty agreement
between the Company and the limited partnership provides that the
Company will receive royalty payments on all Power Cell units produced
and sold in the United States and its territories. Royalty payments on
international
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sales of Power Cell units will be paid to individual international
rights holders, or their designees, some of which are affiliates of the
Company, and all of which are limited partners in the partnership, as
follows: one-third (33 1/3%) to J. C. Rambin; one-third (33 1/3%) to
Rudy Marich; seventy-five percent of one-third to Howard Farkas (75% of
1/3) and twenty-five percent of one-third to Burt Kanter (25% of 1/3).
The contract agreement has no provision for direct funding of
Power-Cell, Inc. Its earnings, if any, will be derived from an interest
in the limited partnership together with royalties, if any, from the
license royalty agreement.
On July 1, 1996, Reserve Battery Cell, L.P. (Reserve Battery) announced
initial market release in select cities of the Power Cell Reserve
Battery unit. According to Reserve Battery, the product will plug into
a cigarette lighter or attach directly to battery terminals and
recharge a battery even in extreme weather conditions (-10 degrees F to
100 degrees F) in a matter of minutes. Also, these small units can be
stored for years, do not need to be recharged and never lose their
power prior to activation. The Power Cell has the strength to recharge
a battery more than once for a few weeks after it has been activated.
It is a powerful 5 amp Hour battery and, with the additional purchase
of a Power Inverter, will operate small household and other electronic
appliances for hours during a power outage or emergency situation.
Power-Cell, Inc. has received information from Reserve Battery that, as
of June 30, 1996, funds in excess of $4,288,000 had been expended on
product development, capital equipment, operating capital, and
marketing activities.
The Company has been informed by Reserve Battery, Inc. that all
marketing and operations activities have ceased as a result of its
inability to source sufficient capital to sustain operations.
Plan of Operation
When the activities and operations of Reserve Battery Cell,
L.P., ceased in the spring of 1997, at such time, for all practical
purposes, the operations of the Company ceased. The Company has had
virtually no revenue from operations for the last two fiscal years.
After reviewing the Company's prospects, management believed that it
would be possible to develop a strategy for the Company to enter into a
business combination with a privately held company as a reasonable
alternative for such company to the more traditional initial public
offering or, "IPO", and would provide the shareholders of the Company a
reasonable opportunity to recover some value on their investment. The
Company also considered raising capital by means of a public or private
debt or equity offering in order to continue operations. However, such
alternative did not appear feasible on the basis that the Company has
virtually no assets or resources.
The Company believes that it is an attractive business partner
for an entity seeking a strategic combination with a publicly-held
company. Company management and the Board of Directors believe that
such a combination will serve the interests of the Company's
shareholders better than a liquidation of the Company. The Company's
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plan of operation for the next twelve months is to continue to seek a
business combination that may benefit the Company's shareholders.
Foreseeable cash requirements relating to maintenance of the Company in
good standing and expenses associated with receiving and investigating
a potential business combination will be met by personal funds advanced
from Mr. Rambin. Because the Company has no revenues or cash resources,
management anticipates that to achieve any such combination, the
Company plans to issue shares of Company Common Stock as the sole
consideration for such combination. However, the consummation of any
such combination may require the Company to obtain debt or equity
financing. The Company has no current plan to obtain additional
financing and no assurance can be given that such financing will be
available to enter into a particular business combination.
Results of Operations
The company has been engaged in organizational and capital raising
activities since inception through June 30, 1998. It has not incurred
major operational expenditures. The losses incurred since inception
primarily reflect legal, accounting, and administrative expenses
associated with the preparation of the merger documents and
registration statement, product development and arranging for the
manufacture of its battery charger product for test marketing purposes.
Year 2000
The Company currently has virtually no active business
operations. The issues associated with computing difficulties that may
affect existing computer systems as a result of programming code
malfunctions in distinguishing 21st century dates from 20th century
dates are known as the "Year 2000" issue. The Year 2000 issue is a
pervasive problem affecting many information technology systems and
embedded technologies in all industries. The Company has determined
that the consequences of its Year 2000 issues will not have a material
effect on the Company's business, results of operations, or financial
condition.
The Company does not currently have any significant
information technology ("IT") systems, including computer hardware
systems or software.
The Company's assessment of the Year 2000 issue does not
necessitate a review of non-information technology ("non-IT" systems)
(systems that contain embedded technology in process control equipment
containing microprocessors or other similar circuitry), because the
Company has no internal equipment and facilities.
Item 10. Executive Compensation
During the fiscal year ended June 30, 1998, no officer or
director of the Company received any compensation for their services as
such. However, in fiscal 1998, Mr. Rambin requested a bonus of
approximately $607,000 for services rendered as President of the
Company. The Board of Directors approved such request on the condition
that such bonus would be payable by the Company only if Mr. Rambin was
able to successfully negotiate the payment of the bonus, or a portion
thereof, in the context of a business combination with another company,
including, without limitation, by way of an acquisition of the Company
or a merger with the Company.
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SIGNATURE
In accordance with Section 13 or 15(d) of the Exchange Act, the Company
caused this amendment to report to be signed on its behalf by the undersigned,
thereunto duly authorized.
POWER-CELL, INC.
(Registrant)
By: /s/ James C. Rambin
-----------------------------
James C. Rambin, President
and Chief Executive Officer
Date: August 4, 1999
-----------------------------
In accordance with the Exchange Act, this amendment to report has been
signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
By: /s/ James C. Rambin
-----------------------------
James C. Rambin, President
and Chief Executive Officer,
Director
Date: August 4, 1999
-----------------------------
By: /s/ Brewer Newton
-----------------------------
Brewer Newton, Director
Date: August 4, 1999
-----------------------------
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<S> <C>
3.1.1 (1) Articles of Incorporation and Amendment to Articles of Incorporation
3.1.2 (2) Articles of Amendment to Articles of Incorporation
3.2 (3) Bylaws
</TABLE>
(1) Incorporated herein by reference to Exhibit 3(a) in the Company's
Registration Statement on Form S-18 filed on August 8, 1986 with the
Securities and Exchange Commission.
(2) Filed herewith.
(3) Incorporated herein by reference to Exhibit 3(b) in the Company's
Registration Statement on Form S-18 filed on August 8, 1986 with the
Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 3.1.2
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
MAGELLAN CORPORATION
Pursuant to the provisions of the Colorado Corporation Code, Magellan
Corporation adopts the following Articles of Amendment to its Articles of
Incorporation:
FIRST: The name of the Corporation is Magellan Corporation.
SECOND: The following Amendment to the Articles of Incorporation of the
Corporation was adopted by resolution of the shareholders at a meeting duly held
on June 1, 1987 in the manner prescribed by the Colorado Corporation Code:
ARTICLE I of the Articles of Incorporation of the Corporation is hereby
repealed and amended by substitution of the following:
ARTICLE I NAME
1.1 The name of the Corporation is: Power-Cell, Inc.
THIRD: The number of shares voted for the Amendment to Article I was
sufficient for approval.
FIFTH: The Amendment does not provide for an exchange, reclassification
or cancellation of issued shares.
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SIXTH: The Amendment does not effect a change in the amount of stated
capital.
DATED: February 18, 1988
MAGELLAN CORPORATION
By: /s/ Darrel McCullough
---------------------------------
Darrel McCullough, President
ATTEST:
/s/ Carylyn K. Bell
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Carylyn K. Bell, Secretary
State of Colorado )
)
City and County of Denver )
I, Gloria C. Mowery , a notary public in the aforesaid county and
state, certify that Darrel McCullough and Carylyn K. Bell were personally known
to me to be the persons whose names are subscribed to the foregoing Amendment to
the Articles of Incorporation of Magellan Corporation, and appeared before me
this date in person and acknowledged that they signed, sealed and delivered said
instrument in writing as their true and voluntary act and deed for the purposes
and uses therein set forth.
GIVEN under my hand and seal this 18th day of February, 1988.
[Seal]
/s/ Gloria C. Mowery
------------------------------------
Notary Public
My commission expires: 12-2-90
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