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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark one)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1999 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 0-16097
BAYOU INTERNATIONAL, LTD.
(Exact name of Registrant as specified in its charter)
Delaware 98-0079697
(State or other jurisdiction of (IRS Employer
incorporation or organisation) Identification No.)
210 Kings Way, South Melbourne, Victoria, 3205, Australia
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 011 (613) 9234 1100
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange
on which registered
N/A N/A
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $.0001 per share
(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 the past 90 days.
Yes X No
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 the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part 111 of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value based on the average bid and asked price on the
over-the-counter market of the Registrant's common stock, ("Common Stock") held
by non-affiliates of the Company was A$1,083,683 (US$711,221) as at October 4,
1999.
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There were 46,941,789 outstanding shares of Common Stock as of June 30, 1999.
Subsequent to June 30, 1999, the Company completed a 1-for-20 reverse stock
split of its issued and outstanding shares such that at September 1, 1999, there
were 2,347,089 issued and outstanding shares.
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TABLE OF CONTENTS PAGE
PART I
Item 1 Business 4
Item 2 Properties 9
Item 3 Legal Proceedings 9
Item 4 Submission of Matters to a Vote of Security Holders 9
PART II
Item 5 Market for the Registrant's Common Equity and 10
Related Stockholder Matters
Item 6 Selected Financial Data 11
Item 7 Management's Discussion and Analysis of 13
Financial Condition and Results of Operations
Item 8 Not applicable 16
Item 9 Not applicable 16
PART III
Item 10 Directors and Executive Officers of the Registrant 18
Item 11 Executive Compensation 20
Item 12 Security Ownership of Certain Beneficial Owners 21
and Management
Item 13 Certain Relationships and Related Transactions 22
PART IV
Item 14 Exhibits, Financial Statement Schedules, and Reports 24
on Form 8-K
Signatures 25
Exhibit Index 27
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PART I
ITEM 1 BUSINESS
GENERAL
Bayou International, Ltd., a Delaware corporation (the "Company") is currently
primarily a holding company whose major asset is its 24% holding in the stock of
SCNV Acquisition Corp ("SCNV"), a Delaware corporation engaged in the research
and development of high efficiency, low pollution or pollution-free products and
technologies in the energy conversion and conservation fields.
Pursuant to a Stock Purchase Agreement dated as of June 5, 1998, ("the Stock
Purchase Agreement") the Company acquired 499,701 shares in SCNV, representing
approximately 24% of the issued and outstanding share capital of SCNV, in return
for the whole of the share capital of Solmecs Corporation N.V., ("Solmecs"), a
Netherlands Antilles company which was formerly a wholly owned subsidiary of the
Company.
The Company is continuing to pursue other business activities which may be in
the fields of energy conversion and conservation (such activities not being in
competition with SCNV) and/or other industries including the mineral exploration
industry.
In connection with Bayou's future business activities, it is the policy of
Bayou's Board of Directors that Bayou will not engage in any activities the
scope and nature of which would subject Bayou to registration and reporting
requirements of the Investment Company Act of 1940.
Unless otherwise indicated, all amounts in this Report are presented in
Australian Dollars ("A$"). For the convenience of the reader, the Australian
Dollar figures for the year ended June 30, 1999 have been translated into United
States Dollars ("US$) using the rate of exchange at June 30, 1999 of
A$1.00=US$0.661.
The executive offices of the Company are located at 210 Kings Way, South
Melbourne Victoria, 3205, Australia and the telephone number is +613 9234 1100
(facsimile +613 9234 1110).
The term "Company" as defined above and as used in this Report refers to Bayou
International, Ltd. and its predecessor corporation, Bayou Oil and Gas, Inc
("Bayou Oil") (described below), after giving effect to the reincorporation in
the State of Delaware (also described below).
RECENT DEVELOPMENTS
CHANGE OF NAME
The Company's major shareholder Edensor Nominees Pty Ltd ("Edensor") and certain
companies which have common Directors with the Company have indicated that they
will vote for the change of name to Baynet Ltd. An information statement
detailing the change of name is currently being prepared.
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The change of name is as a result of the company proposing to enter into an
internet business actively and believes the name "Baynet Ltd" is more
representative of this activity.
REVERSE STOCK SPLIT
Effective September 1, 1999, the Company completed a 1-for-20 reverse stock
split (the "Reverse Stock Split") of its Common Stock pursuant to which each
twenty issued and outstanding shares of Common Stock, par value $0.15 per share
were converted into one share of Common Stock, par value $.0001 per share.
The reverse stock split has reduced the number of issued and outstanding shares
of Common Stock from 46,941,789 to 2,347,089.
HISTORY OF THE COMPANY
The Company's predecessor corporation, Bayou Oil, was incorporated under the
laws of Minnesota in 1973. From 1973 through to 1981 Bayou Oil was engaged in
the design and production of athletic equipment and it also owned rights to a
line of sportswear. These business lines were ultimately discontinued and in
March 1981 Bayou Oil entered into the oil and gas exploration business by
acquiring certain rights to oil and gas leases. These rights were not profitable
and, as a result, from 1981 through to May 1986 Bayou Oil did not engage in any
meaningful business activities or operations.
On March 6, 1987 Bayou Oil was reincorporated in the State of Delaware, its name
was changed to Bayou International, Ltd, and the par value of the stock was
increased from US$0.01 to US$0.15 per share.
In 1987 the Company acquired 54% of the issued and outstanding capital stock of
Solmecs, and in January 1992 acquired the remaining 46% of the issued and
outstanding shares. At that time, therefore, Solmecs became a wholly owned
subsidiary of the Company.
On February 13, 1998, the Company acquired a 100% owned subsidiary, Bayou
Australia Pty Ltd, a corporation incorporated under the laws of Australia.
SCNV ACQUISITION CORPORATION ("SCNV")
SCNV is a Delaware corporation established in May, 1997 to select, develop and
commercially exploit proprietary technologies, in various stages of development,
invented primarily by scientists who have recently immigrated to Israel from,
and by scientists and institutions in, Russia and other countries that formerly
comprised the Soviet Union. In furtherance of this goal, SCNV has acquired
Solmecs.
THE AGREEMENT WITH SCNV
The Stock Purchase Agreement dated June 5, 1998 between the Company, SCNV and
Solmecs required the Company to deliver to SCNV all of the issued share capital
in its wholly owned subsidiary Solmecs, in return for 499,701 shares in SCNV.
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The consideration shares in SCNV represent 24% of SCNV's issued share capital as
at July 8, 1998.
Simultaneously with the closing of the Solmecs Acquisition, SCNV completed an
initial public offering of common stock and warrants which resulted in gross
proceeds of approximately US$5,900,000.
In connection with the Solmecs Acquisition, Bayou converted all inter-company
indebtedness from Solmecs to Bayou (which aggregated approximately US$5,000,000)
to a capital contribution to Solmecs.
Bayou has been granted certain demand and "piggyback" registration rights with
respect to the SCNV Shares. Notwithstanding the foregoing, Bayou has agreed not
to sell, grant options for sale of, assign or transfer any of the SCNV Shares,
for a period of 24 months from the closing of the Agreement, provided, however,
that under certain circumstances Bayou shall have the right to distribute the
SCNV Shares pro rata to its stockholders and provided further that the
recipients will take such Shares subject to the remaining term of the lock-up.
Bayou does not currently have any plans to distribute the SCNV Shares to its
stockholders.
Certain pre-conditions applied to the Agreement, including conditions relating
to the obtaining of shareholder consents, accuracy of representations and
Branover executing an Employment Agreement with SCNV.
In determining to approve the disposition of Solmecs pursuant to the Stock
Purchase Agreement the Board considered that Solmecs will require substantial
additional funds in order to complete the development and commercialisation of
the ETGAR project. The Company has been unable to obtain the necessary funding.
The Board believed that in the light of the limited resources available to the
Company, it would be advisable for the Company to seek to refocus its business
towards other businesses or activities that would provide greater opportunities
for commercial development in the near term, without the same level of
investment that Solmecs will require.
SOLMECS CORPORATION N.V. ("SOLMECS")
Solmecs was established in 1980 to engage in the research, development and
commercialisation of products and technologies in the energy conversion field.
The technology, known as LMMHD Energy Conversion Technology (ECT) is in relation
to more efficient and less capital-intensive methods of power generation. If
commercially successful, the technology will enable more efficient conversion of
generator fuel to electrical energy by bypassing the interim conversion to
mechanical energy to drive a rotor. The process requires lower capital costs and
its higher efficiency will create less environmental pollution than conventional
electrical generation processes.
The specific form of LMMHD-ECT in which Solmecs is engaged is referred to as
OMACON (Optimised Magnetohydrodynamic Conversion). The patented technology for
the OMACON generator was originally developed by Professor Herman Branover
("Branover"), an astrophysicist who is the head of Ben-Gurion University's
centre for
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Magnetohydrodynamic (MHD) studies in Israel and a former Professor at the
Academy of Science in Riga, Latvia.
The following is an extract from SCNV's Form 10.Q Report for the quarter ended
March 31, 1999:
"Solmecs expects to manufacture and market certain technologies which have been
identified by Solmecs and shown to be commercially viable. Solmecs is currently
concentrating on further development and commercialization of advanced
double-sided photo-voltaic cells and silicon monocrystals, both of which are
technologies developed by Russian scientist associated with the space and
military industries of the former Soviet Union, and identified by Solmecs for
commercial exploitation. Pursuant to an arrangement with a Russian company,
Solmecs has commenced the commercial distribution of novel double-sided
bi-facial photo-voltaic cells. Additionally, Solmecs has commenced the
acquisition of materials and facilities from such Russian entities for the
purpose of developing its own manufacturing capabilities for both photo-voltaic
cells and silicon monocrystals. Management anticipates establishing production
facilities in Israel for both of such technologies by late 1999.
In February 1999, Solmecs acquired from a third party certain rights to produce,
market and distribute an electronic pocket dictionary on a world wide basis,
except for Israel. Solmecs has begun to market and distribute the Hebrew-English
electronic pocket dictionary currently manufactured by such third party.
In May 1999, Solmecs acquired 90.4% of the outstanding shares of Elecmatec
Electro-Magnetic Technologies, Inc. ("Elecmatec") an affiliated company.
Elecmatec is the owner of a patented micro-gravity casting technology which
enables the continuous casting of metallic composite materials under
gravity-free conditions. Elecmatec intends to establish a productions plant at
Kiryat-Gat a southern town of Israel, to produce alloy and bi-metal strips for
sale initially to engine bearing and other original equipment manufactures in
the automotive industry.
Solmecs further intends to offer its engineering services to industry and
research institutions in the fields of LMMHD power technology and liquid metal
engineering. Although the LMMHD power technology has been in development since
the late 1970's, it has not yet reached commercialization. In order to achieve
commercialization of such technology, Solmecs will be required to build a
commercial scale demonstration plant, which will require a significant capital
expenditure. Solmecs intends to commence building such a plant within the next
few years, provided that it will be able to obtain the necessary funds for such
project.
Solmecs is continuing in its process of identifying proprietary technologies
with potential for commercial viability. Solmecs intends to implement a
four-step process with respect to the development of such proprietary
technologies which it identifies for exploitation. Initially Solmecs, through
its scientific, engineering and administrative personnel, will identify and
analyze a number of such proposed advanced technologies. Solmecs will then
assess the costs of further research and development (including the building and
testing of prototypes, if indicated), seek to obtain intellectual property
rights in viable technologies, develop a business plan detailing the
exploitation of such technologies from the research and develop phase through
product commercialization, develop and, in some instances, implement financing
strategies to further such business plan, and suggest and, in some
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cases, assemble a team of scientists and engineers most suitable for the
implementation of such business plan. Upon completion of the business
development plan for each project, Solmecs may seek to manufacture and market
the project itself, enter into strategic alliances for such commercialization,
or sell or license the proprietary information and know-how to third parties in
consideration of technology transfer or license fees.
Completion of the commercialization of Solmec's technologies or any potential
application of such technologies will require significant additional effort,
resources and time, including funding substantially greater than is currently
available to Solmecs. Such research and development efforts remain subject to
all of the risks associated with the development of new products based on
emerging and innovative technologies, including, without limitation,
unanticipated technical or other problems and the possible insufficiency of the
funds allocated to complete such development, which could result in delay of
research or development or substantial change or abandonment of research and
development activities."
EMPLOYEES
The services of the Company's Chief Executive Officer and Chief Financial
Officer as well as clerical employees are provided to the Company on a part-time
basis pursuant to a Service Agreement dated November 25, 1988 (the "Service
Agreement") by and between the Company and A.W.I. Administration Services Pty
Limited ("AWI Admin"). AWI Admin also provides office facilities, equipment,
administration and clerical services to the Company pursuant to the Service
Agreement. The Service Agreement may be terminated by written notice from the
parties thereto.
Further detail relating to additional terms of the Service Agreement is included
in "Item 2- Properties", "Item 13- Certain Relationships and Related
Transactions" and "Item 11- Executive Compensation".
ITEM 2 PROPERTIES
The Company occupies certain executive and office facilities in Melbourne,
Victoria, Australia which are provided to it pursuant to the Service Agreement
with AWI Admin. See "Item 1- Business- Employees" and "Item 13- Certain
Relationships and Related Transactions".
The Company believes that its administrative space is adequate for its current
needs.
ITEM 3 LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party, or to
which any of its property is the subject, which the Company considers material.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant hereby incorporates by this reference the information contained
in the Registrant's Information Statement dated August 11, 1999, with respect to
the Reverse Stock Split.
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PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock is traded in the over-the-counter market. The trading for the
Common Stock has been sporadic and the market for the Common Stock can not be
classified as an established trading market.
The following table sets out the high and low bid information for the Common
Stock as reported by the National Quotation Service Bureau for each
period/quarter indicated ( in US$):
<TABLE>
<CAPTION>
CALENDAR PERIOD HIGH BID (1) LOW BID (1)
- --------------- ----------- ----------
<S> <C> <C>
1997
First Quarter ................... 3/8 3/8
Second Quarter .................. 1/4 1/4
Third Quarter ................... 1/4 1/4
Fourth Quarter .................. 1/4 1/8
1998
First Quarter ................... 1/8 1/8
Second Quarter .................. 5/32 1/8
Third Quarter ................... 3/8 3/8
Fourth Quarter .................. 1/8 1/16
1999
First Quarter ................... 1/8 1/16
Second Quarter .................. 1/8 1/16
</TABLE>
(1) The quotations set out herein reflect interdealer prices without retail
mark-up, mark-down or commission and may not necessarily reflect actual
transactions.
SHAREHOLDERS
As of September 1, 1999 the Company had approximately 300 shareholders of
record.
DIVIDEND POLICY
It is the present policy of the Board of Directors to retain earnings for use in
the Company's business. The Company has not declared any cash dividends to the
holders of its Common Stock and does not intend to declare such dividends in the
foreseeable future
TRANSFER AGENT
The United States Transfer Agent and Registrar of the Company is The Bank of New
York.
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ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data for the Company presented below for
each of the years in the five-year period ended 30 June, 1999, and the balance
sheet data at June 30, 1995, 1996, 1997, 1998 and 1999 have been derived from
the consolidated financial statements of the Company, which financial statements
have been examined by David T. Thomson PC, independent accountants, in respect
of the years June 30, 1995, 1996, 1997, 1998 and 1999. The selected financial
data should be read in conjunction with the consolidated financial statements of
the Company for each of the years in the three-year period ended June 30, 1999,
and Notes thereto, which are included elsewhere in this Annual Report and with
"Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations".
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CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Year ended June 30
<TABLE>
<CAPTION>
CONV.
TRANSL.
1995 1996 1997 1998 1999 1999
A$ A$ A$ A$ A$ US$
<S> <C> <C> <C> <C> <C> <C>
Revenues -- -- -- -- -- --
-------------------------------------------------------------------
Costs and expenses (1,229) (244) (380) (544) (488) (323)
-------------------------------------------------------------------
Loss from operations (1,147) (244) (380) (544) (488) (323)
Other income (loss) 220 (550) 344 7,280 -- --
-------------------------------------------------------------------
Profit (loss) before income
taxes (927) (794) (36) 6,736 (488) (323)
Provision for income taxes -- -- -- -- -- --
-------------------------------------------------------------------
Net profit (loss) from (927) (794) (36) 6,736 (488) (323)
Continuing Operations
Net loss from (1,216) (1,224) (952) -- --
Discontinued Operations
-------------------------------------------------------------------
Net profit (loss) (927) (2,010) (1,260) 5,784 (488) (323)
-------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
A$ A$ A$ A$ A$ US$
<S> <C> <C> <C> <C> <C> <C>
Net profit (loss) per share
On continuing operations (0.03) (0.01) -- 0.14 (0.01) (0.01)
On discontinued operations -- (0.03) (0.03) (0.02) (0.00) (0.00)
---------------------------------------------------------
(0.03) (0.04) (0.03) 0.12 (0.01) (0.01)
---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
<S> <C> <C> <C> <C> <C> <C>
Weighted average number
of shares outstanding 46,942 46,942 46,942 46,942 46,942 46,942
-----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
A$ A$ A$ A$ A$ US$
<S> <C> <C> <C> <C> <C> <C>
Total assets 1,357 717 1 4,518 663 439
Total liabilities 1,542 2,344 3,507 3,814 4,302 2,844
----------------------------------------------------------------------------
Stockholders' equity
(deficiency) (185) (1,627) (3,506) 704 (3,639) (2,405)
----------------------------------------------------------------------------
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FOREIGN CURRENCY TRANSLATION
The majority of the Company's administrative operations are in Australia and, as
a result, its accounts are maintained in Australian dollars. The income and
expenses of its foreign operations are translated into Australian dollars at the
average exchange rate prevailing during the period. Assets and liabilities of
the foreign operations are translated into Australian dollars at the period-end
exchange rate. The following table shows the average rates of exchange of the
Australian dollar compared with the US dollar during the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30
<S> <C>
1995 A$1.00 = US$0.711
1996 A$1.00 = US$0.787
1997 A$1.00 = US$0.746
1998 A$1.00 = US$0.620
1999 A$1.00 = US$0.661
</TABLE>
RESULTS OF OPERATIONS
YEAR ENDED JUNE 30, 1999 VERSUS YEAR ENDED JUNE 30, 1998
The results of the Company's operations for the year were affected by the sale,
on July 8, 1998, of the main undertaking of the Company, that is, its ownership
of Solmecs. As a result, the results of operations for the years ended June 30,
1995, 1996, 1997, 1998 and 1999 are not comparable. The results of operations of
Solmecs so disposed of are presented to the consolidated financial statements as
discontinued operations. Results for previous years have been restated
accordingly.
Total costs and expenses decreased from A$544,000 for the year ended June 30,
1998 to A$488,000 (US$323,000) for the year ended June 30, 1999. The decrease
was a net result of
i) an increase in interest expense from A$290,000 to A$321,000
(US$212,000) resulting from increased borrowings by the Company;
ii) a decrease in legal, accounting and professional costs from A$145,000
to A$34,000 (US$23,000) as a result of the completion of Solmecs
reorganisation at the beginning of the financial year.
iii) an increase in general administration expenses from A$109,000 to
A$133,000 (US$88,000) which include an increase in Directors fees paid
and costs involved in the preparation and mailing of information to
shareholders on certain corporate actions of the Company.
Accordingly, the loss from operations decreased from A$544,000 for the year
ended June 30, 1998 to A$488,000 (US$323,00) for the year ended June 30, 1999.
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An unrealised foreign exchange gain of A$1,381,000 was recorded in the prior
year with no comparable amount in the current year as the foreign currency loans
were assigned as part of the Solmecs reorganisation. As a result of the disposal
of Solmecs, the Company has recorded a gain of A$5,899,000 in the prior year for
which there is no comparable amount in the current year. This gain relates to
the elimination of losses of Solmecs during the period which the Company held a
controlling interest in Solmecs, offset by the forgiveness of intercompany
borrowings to Solmecs.
As a result of the foregoing, the Company recorded a net loss from continuing
operations before income tax of A$488,000 (US$323,000) compared to a net profit
of A$6,736,000 in the year ended June 30, 1998.
The Company was not required to provide for income tax during the years ended
June 30, 1999 or 1998.
The net loss from discontinued operations being the loss attributable to the
operations of Solmecs decreased from A$952,000 for the year ended June 30, 1998
to A$nil (US$nil) for the year ended June 30, 1999.
The net loss for the year amounted to A$488,000 (US$323,000) compared to a net
profit of A$5,784,000 in the previous year. The net loss per common equivalent
share was A$0.01 (US$0.01) compared with a net profit per common equivalent
share of A$0.12 in the prior year. The number of common equivalent shares
outstanding was unchanged.
YEAR ENDED JUNE 30, 1998 VERSUS YEAR ENDED JUNE 30, 1997
The results of the Company's operations for the year were affected by the sale,
on July 8, 1998, of the main undertaking of the Company, that is, its ownership
of Solmecs. As a result, the results of operations for the years ended June 30,
1994, 1995, 1996, 1997 and 1998 are not comparable. The results of operations of
Solmecs so disposed of are presented to the consolidated financial statements as
discontinued operations. Results for previous years have been restated
accordingly.
Total costs and expenses increased from A$380,000 for the year ended June 30,
1997 to A$544,000 for the year ended June 30, 1998. The increase was a net
result of
iv) an increase in interest expense from A$256,000 to A$290,000 resulting
from increased borrowings by the Company;
v) an increase in legal, accounting and professional costs from A$33,000
to A$145,000 as a result of an increase in professional fees connected
to the Solmecs reorganisation.
vi) an increase in general administration expenses from A$91,000 to
A$109,000 connected to the additional costs incurred in regard to the
Solmecs reorganisation.
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Accordingly, the loss from operations increased from A$380,000 for the year
ended June 30, 1997 to A$544,000 for the year ended June 30, 1998.
An unrealised foreign exchange gain of A$1,381,000 was recorded for the year
ended June 30, 1998 compared with an unrealised foreign exchange gain of
A$346,000 in the prior year. As a result of the disposal of Solmecs, the Company
has recorded a gain of A$5,899,000 for which there is no comparable amount in
the prior year. This gain relates to the elimination of losses of Solmecs during
the period which the Company held a controlling interest in Solmecs, offset by
the forgiveness of intercompany borrowings to Solmecs.
As a result of the foregoing, the Company recorded a net profit from continuing
operations before income tax of A$6,736,000 compared to a loss of A$36,000 in
the year ended June 30, 1997.
The Company was not required to provide for income tax during the years ended
June 30, 1998 or 1997.
The net loss from discontinued operations being the loss attributable to the
operations of Solmecs decreased from A$1,224,000 for the year ended June 30,
1997 to A$952,000 for the year ended June 30, 1998.
The net profit for the year amounted to A$5,784,000 compared to a net loss of
A$1,260,000 in the previous year. The net profit per common equivalent share was
A$0.12 compared with a net loss per common equivalent share of A$0.03 in the
prior year. The number of common equivalent shares outstanding was unchanged.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999 the Company had the short-term obligations of A$296,000
(US$196,000) consisting of accounts payable and accrued expenses.
The Company also had long-term obligations of A$4,006,000 (US$2,648,000) at June
30, 1999 which were amounts owed to Chevas Pty Ltd of which Mr. J.I. Gutnick,
President of Bayou, is a Director. On October 7, 1999 the Directors of the
Company resolved to issue 4,000,000 shares in the Company to Edensor, a company
of which Mr. J. I. Gutnick, President of Bayou, is a Director and Shareholder,
in lieu of repayment of a debt of A$4,075,529 to Chevas Pty Ltd, a company of
which Mr. J. I. Gutnick is also a Director. The effect of this transaction if it
had taken effect as at June 30, 1999 is that the Company's liabilities would
have been reduced to approximately A$296,000 at that date.
The Company anticipates that it will be able to defer repayment of certain of
its short-term loan commitments until it has sufficient liquidities to enable
these loans to be repaid or other arrangements can be put in place for repayment
of these debts. Other than the arrangements noted above, the Company has not
confirmed any other arrangements for ongoing funding. As a result, the Company
may be required to raise funds by additional debt or equity offerings and or
increased revenues for operations in order to meet its cash flow requirements
during the forthcoming year of which there can be no assurance.
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CAUTIONARY "SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995.
Certain information contained in this Form 10-K are forward-looking statements
within the meaning of the Private Securities Litigation Act of 1995 ("the Act"),
which became law in December, 1995. In order to obtain the benefits of the "safe
harbor" provisions of the Act for any such forward-looking statements, the
Company wishes to caution investors and prospective investors about significant
factors which, among others, have in some cases affected the Company's actual
results and are in the future likely to affect the Company's actual results and
cause them to differ materially from those expressed in any such forward-looking
statements. This Form 10-K contains forward-looking statements relating to
future financial results. Actual results may differ as a result of factors over
which the Company has no control, including the strength of domestic and foreign
economies, slower than anticipated completion of research and development
projects, and movements in foreign exchange rates.
INFLATION
To date the Company believes that inflation has not had a material adverse
impact on its operations in Australia. In the United States the Company's
activities to date have been principally related to the exploration and
preliminary testing of certain mineral claims and, although the Company has not
operated in the United States during a period of significant inflation,
management believes that inflation would not have a material adverse effect on
such operations in this country.
SEASONALITY
Management believes that its operations are not subject to seasonal fluctuation.
IMPACT OF AUSTRALIAN TAX LAW
Australian resident corporations are subject to Australian income tax on their
non-exempt worldwide assessable income (which includes capital gains), less
allowable deductions, at the rate of 36%. Foreign tax credits are allowed where
tax has been paid on foreign source income, provided the tax credit does not
exceed 36% of the foreign source income.
Under the U.S./Australia tax treaty, a U.S. resident corporation such as the
Company is subject to Australian income tax on net profits attributable to the
carrying on of a business in Australia through a "permanent establishment" in
Australia. A "permanent establishment" is a fixed place of business through
which the business of an enterprise is carried on. The treaty limits the
Australian tax on interest and royalties paid by an Australian business to a
U.S. resident to 10% of the gross interest or royalty income unless it relates
to a permanent establishment. Although the Company considers that it does not
have a permanent establishment in Australia, it may be deemed to have such an
establishment due to the location of its administrative offices in Melbourne. In
addition the Company may receive interest or dividends from time to time.
15
<PAGE> 16
IMPACT OF AUSTRALIAN GOVERNMENTAL, ECONOMIC, MONETARY OR FISCAL POLICIES
Although Australian taxpayers are subject to substantial regulation, the Company
believes that its operations are not materially impacted by such regulations nor
is it subject to any broader regulations or governmental policies than most
Australian taxpayers.
ITEM 7A. NOT APPLICABLE
ITEM 8. SEE ITEM 14
ITEM 9. NOT APPLICABLE
16
<PAGE> 17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets out certain information in relation to each person who
held a position of Director and/or executive officer of the Company during the
year ended June 30, 1999.
NAME AGE POSITION(S) HELD
Joseph I. Gutnick 47 Chairman of the Board
President, Chief Executive Officer and Director.
David Tyrwhitt 61 Director.
Peter Lee 42 Director, Secretary, Chief Financial Officer and
Chief Accounting Officer.
David H. Simcox 54 Director
Marcus Solomon 36 Director
Ian Currie 39 Director
JOSEPH GUTNICK
Mr Gutnick has been the Chairman of the Board, President and Chief Executive
Officer of the Company since March, 1988. Mr Gutnick has been a Director of
numerous public listed companies in Australia specialising in the mining sector
since 1980, including Great Central Mines Limited ("Great Central") and Centaur
Mining and Exploration Limited ("Centaur"), (whose American Depositary Receipts
are publicly traded in the United States on NASDAQ pursuant to a sponsored ADR
program), and Johnson's Well Mining N.L. ("Johnson's Well") (whose ordinary
shares, together with Centaur's, are publicly traded in the U.S. in the
over-the-counter market).
DAVID TYRWHITT
Dr Tyrwhitt was appointed a Director of the Company in November, 1996. He is a
geologist, holding a Bachelor of Science and Phd degrees and has 39 years
experience in mineral exploration and management development and operation of
gold mines in Australia. Dr Tyrwhitt is a Director of several public listed
companies in Australia in the mining industry, including Centaur Mining and
Exploration Limited ("Centaur"), (whose American Depositary Receipts are
publicly traded in the United States on NASDAQ pursuant to a sponsored ADR
program), and Johnson's Well Mining N.L. ("Johnson's Well") (whose ordinary
shares, together with Centaur's, are publicly traded in the U.S. in the
over-the-counter market).
17
<PAGE> 18
PETER LEE
Mr Lee has been Chief Financial Officer and Chief Accounting Officer since
August, 1989 and was appointed a Director of the Company in February, 1996. Mr
Lee is a Member of the Institute of Chartered Accountants in Australia, a Fellow
of the Chartered Institute of Company Secretaries in Australia Ltd., and holds a
Bachelor of Business (Accounting) from Royal Melbourne Institute of Technology.
He has over 17 years commercial experience and is currently General Manager
Corporate and Company Secretary of several public listed companies in Australia,
including Great Central Mines Limited ("Great Central") and Centaur Mining and
Exploration Limited ("Centaur"), (whose American Depositary Receipts are
publicly traded in the United States on NASDAQ pursuant to a sponsored ADR
program), and Johnson's Well Mining N.L. ("Johnson's Well") (whose ordinary
shares, together with Centaur's, are publicly traded in the U.S. in the
over-the-counter market).
MARCUS SOLOMON
Mr Solomon is a partner of the legal firm Gadens Lawyers in Perth, Western
Australia where he was appointed partner in 1994 and currently heads the
National Gadens Lawyers Native Title Group. He holds a Bachelor of Laws with
First Class Honors from the University of Western Australia which includes an
Honor dissertation on Fiduciary obligations in Mining Joint Ventures. Mr
Solomon has extensive experience in resources law, property matters, general
commercial litigation and in particular, is recognized nationally as a leader in
Native Title law particularly as it affects resource projects.
DAVID SIMCOX
Mr Simcox has over 28 years of experience in the accounting and company
secretarial field primarily in resource based public listed companies in
Australia. Mr Simcox has had extensive experience in corporate management, being
both a Director and Secretary of a number of public listed companies in
Australia and overseas. He has a sound working knowledge of company laws of
Indonesia, Singapore, Malaysia, United States and The Netherlands. Mr Simcox has
also worked with mining and exploration joint ventures in Australia, Indonesia
and Malaysia.
IAN CURRIE
Mr Currie's experience includes over 17 years in the Finance and Administration
field, including seven years in the Australian mining industry. He has worked
with KPMG as a tax adviser to the mining industry and subsequently, as a Finance
Manager with Newcrest Mining Limited from 1993 through 1995. Mr. Currie is a
Chartered Accountant and a Member of the Institute of Chartered Accountants in
Australia, a Fellow of the Tax Institute of Australia and a Member of the
Institute of Company Directors in Australia. He is a past Tax Committee member
of the Minerals Council of Australia and a current Tax Committee member of the
Association of Mining and Exploration Companies Inc. As Chief Financial Officer
of GCM (Australia's second largest gold producer) and Centaur since 1995, Mr.
Currie has had responsibility for overseeing the development of each companies
Finance Department including the fields of accounting, treasury, corporate and
project debt finance, high yield capital raising, taxation, investor, ratings
agency and banking relations and corporate administrative and compliance
matters.
18
<PAGE> 19
ITEM 11. EXECUTIVE COMPENSATION
No officer individually and no group of officers and Directors received any
compensation for their services on behalf of, or rendered to, the Company for
the fiscal year ended June 30, 1999, other than as noted below.
In accordance with the Service Agreement, the Company paid AWI Admin A$18,000
for the fiscal year ended June 30, 1999, for services rendered and facilities
provided by AWI Admin to the Company, including the services of the Company's
Chief Executive Officer and Chief Financial Officer.
For additional information about the Service Agreement and the Consulting
Agreement see "Item 1 - Business - Employees" and "Item 13 - Certain
Relationships and Related Transactions".
The Board of Directors has established a policy that the Company will not
guarantee loans to, or accept notes from, officers, Directors or employees of
the Company or any members of their families unless such loans or notes are
approved by a majority of the disinterested non-employee Directors of the
Company, who shall determine that such loans may reasonably be expected to
benefit the Company.
COMPENSATION PURSUANT TO PLANS
The Company does not directly employ any employees nor does it have any pension
or profit sharing plans and no contributions were made to any employee benefit
or health plan during the year ended June 30, 1999.
COMPENSATION TO DIRECTORS
It is the policy of the Company to reimburse Directors for reasonable travel and
lodging expenses incurred in attending Board of directors meetings.
In the year ended June 30, 1999 one of the Non-Executive Directors was paid
A$36,862 for services as a Director of the Company.
19
<PAGE> 20
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets out, to the best of the Company's knowledge, the
numbers of shares in the Company beneficially owned as at June 30, 1999 (after
giving retroactive effect to the Reverse Stock Split) by:
(i) each of the present Executive Officers and Directors of the Company,
(ii) each person (including any "group" as that term is defined in Section
13(d)(3) of the Securities Exchange Act) who beneficially owns more
than 5% of the Common Stock, and
(iii) all present Directors and officers of the Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME NUMBER OF SHARES OWNED SHARES (1)
<S> <C> <C>
Centaur 253,800 10.8%
Mamash Ltd 271,320 11.6%
AWI Admin 229,490 9.8%
Edensor Nominees Pty Ltd 1,002,311 42.7%
Joseph I Gutnick 1,053,960 (2)(3)(4)(6)(7) 44.9%
Stera M. Gutnick 1,028,311 (4)(7) 43.8%
David Tyrwhitt - (2) -
Peter Lee - (2) -
David Simcox - (2) -
Marcus Solomon - (5) -
Ian Currie - (2) -
-----------------------------------------------------
All officers and Directors
As a group 1,053,960 44.9%
-----------------------------------------------------
</TABLE>
- - Represents less than 1% of the outstanding Common Stock
20
<PAGE> 21
NOTES RELATING TO ITEM 12:
(1) Based on 2,347,089 shares outstanding
(2) Does not include:
(i) 47,083 shares of Common Stock beneficially owned by Autogen,
or
(ii) 253,800 shares of Common Stock beneficially owned by Centaur,
or
(iii) 8,950 shares of Common Stock beneficially owned Gutnick
Resources NL, or
(iv) 27,080 shares of Common Stock beneficially owned by Australian
Gold Resources Limited, or
(v) 1,919 shares of Common Stock beneficially owned by Quantum
Resources Limited, or
(vi) 229,490 shares of Common Stock beneficially owned by AWI
Admin,
of which companies Messrs Gutnick, Tyrwhitt, Lee, Currie and Simcox are
officers and/or Directors, as they disclaim beneficial ownership of
those shares.
(3) Does not include 2,500 shares of Common Stock beneficially owned by the
Company.
(4) Includes 1,002,311 shares of Common Stock owned by Edensor Nominees Pty
Ltd and 26,000 shares of Common Stock owned by Pearlway Investments
Proprietary Limited, of both of which Mr Joseph Gutnick, Stera M.
Gutnick and members of their family are officers, Directors and
principal stockholders.
(5) Does not include (i) 253,800 shares of Common Stock beneficially owned
by Centaur or (ii) 8,950 shares of Common Stock beneficially owned by
GKR or (iii) 27,080 shares of Common Stock beneficially owned by AGR,
companies of which Mr Solomon is Director however he disclaims
beneficial ownership to those shares.
(6) Joseph Gutnick is the beneficial owner of 25,650 shares of Common
Stock.
(7) Joseph Gutnick and Stera M. Gutnick are husband and wife.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In accordance with the Service Agreement AWI Admin provides the Company with the
services of the Company's Chief Executive Officer, Chief Financial Officer and
clerical employees, as well as office facilities, equipment, administrative and
clerical services. As compensation therefore, the Company pays AWI Admin for the
actual costs of such facilities plus a maximum service fee of 15%. The Company
paid AWI Admin A$74,852 in respect of the Service Agreement for the fiscal year
ended June 30, 1999. The Service Agreement may be terminated by written notice
by either party.
21
<PAGE> 22
TRANSACTIONS WITH MANAGEMENT
The Company has a policy that it will not enter into any transaction with an
officer, Director or affiliate of the Company or any member of their families
unless the transaction is approved by a majority of the disinterested Directors
of the Company and the disinterested majority determines that the terms of the
transaction are no less favourable to the Company than the terms available from
non-affiliated third parties or are otherwise deemed to be fair to the Company
at the time authorised.
22
<PAGE> 23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO
(i) The Consolidated Financial Statements and Notes thereto listed
on the Index at page 1 of this Annual Report on Form 10-K are
filed as a part of this Annual Report.
(ii) The Financial Data schedule as required by Item 601(c) of
Regulation S-K is filed as part of this Annual Report.
(iii) The consolidated balance sheet of SCNV Acquisition Corp. and
subsidiaries as at June 30, 1999 and the related consolidated
statements of operations, cash flows and changes in
shareholders' equity for the fiscal year ended June 30, 1999
and the auditor's report thereon contained in SCNV's Annual
Report on Form 10KSB for its fiscal year ended June 30, 1999
(File No. 0-29624) are incorporated herein by reference (with
the exception of the specific information and report referred
to, no part of the SCNV Annual Report on Form 10-K is deemed a
part of this Report).
(b) EXHIBITS
The Exhibits to this Annual Report on Form 10-K are listed in the
Exhibit Index at page 27 of this Annual Report.
23
<PAGE> 24
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has caused this Annual Report to be signed on its
behalf by the undersigned, thereunto duly authorised.
BAYOU INTERNATIONAL, LTD.
(Registrant)
By: /s/ Peter J. Lee
------------------------------------
Peter J Lee
Director, Secretary,
Chief Financial Officer
and Principal Financial
and Accounting Officer
Dated: October 19, 1999
24
<PAGE> 25
FORM 10-K SIGNATURE PAGE
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons in the capacities and on the
dates indicated.
SIGNATURE TITLE DATE
/s/ Joseph I. Gutnick
1.--------------------- Chairman of the Board,
Joseph I. Gutnick President and Chief Executive
Officer (Principal Executive
Officer), and Director. October 19, 1999
/s/ David Tyrwhitt
2.--------------------- Director. October 19, 1999
David Tyrwhitt
/s/ Marcus Solomon
3.--------------------- Director. October 19, 1999
Marcus Solomon
/s/ Peter Lee
4.--------------------- Director, Secretary,
Peter Lee Chief Financial Officer and
Principal Financial and
Accounting Officer. October 19, 1999
/s/ David Simcox
5.--------------------- Director. October 19, 1999
David Simcox
/s/ Ian Currie
6.--------------------- Director. October 19, 1999
Ian Currie
25
<PAGE> 26
EXHIBIT INDEX
INCORPORATED BY EXHIBIT
REFERENCE TO: NO EXHIBIT
(1) Exhibit 3.1 3.1 Certificate of Incorporation of the Registrant.
(1) Exhibit 3.2 3.2 By-laws of the Registrant.
(2) Exhibit B 3.3 Amendment to Certificate of Incorporation
(5) Exhibit A 3.4 Amendment to Certificate of Incorporation
(3) Exhibit 10.5 10.4 Service Agreement dated November 25, 1988,
by and between the Registrant and AWI
Administration Services Pty Limited.
(4) Exhibit 10.5 10.5 Form of Stock Purchase Agreement among Bayou,
Solmecs and SCNV.
Exhibit 21 * List of Subsidiaries as at June 30, 1999.
Exhibit 99 * Reports of other Accountants upon whom the
Principal Accountant is relying.
_ Filed herewith
FINANCIAL STATEMENTS FOR THE YEARS
ENDED JUNE 30, 1998 AND 1999.
Bayou International, Ltd
Audited Consolidated
Financial Statements for
the Company and its
Subsidiaries for the year
ended June 30, 1998 and
audited Financial
Statements for the Company
for the year ended June 30,
1999.
(1) Registrant's Registration Statement on Form S-1 (File No. 33-14784).
(2) [Registrant's Definitive Information Statement dated June 5, 1998].
(3) [Registrant's Annual Report on Form 10-K for the fiscal year ended June
27, 1989.]
(4) [Registrant's Form 8-K filed on July 21, 1998]
(5) [Registrant's Definitive Information Statement dated August 11, 1999]
26
<PAGE> 1
EXHIBIT 21
List of Subsidiaries as at June 30, 1999
Bayou Australia Pty Ltd
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
CONSOLIDATED FINANCIAL STATEMENTS AT JUNE 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-K
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> AUSTRALIAN DOLLAR
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 0.661
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 663
<CURRENT-LIABILITIES> 296
<BONDS> 4,006
0
0
<COMMON> 9,338
<OTHER-SE> (13,027)
<TOTAL-LIABILITY-AND-EQUITY> 663
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 167
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 321
<INCOME-PRETAX> (488)
<INCOME-TAX> 0
<INCOME-CONTINUING> (488)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (488)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
<PAGE> 1
BAYOU INTERNATIONAL, LTD AND SUBSIDIARY
Consolidated Financial Statements
June 30, 1999 and 1998
(with Independent Auditor's Report)
<PAGE> 2
CONTENTS
Page
Report of Independent Auditor 1
Consolidated Balance Sheets 2
Consolidated Statements of Operations 3
Consolidated Statements of Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-13
<PAGE> 3
DAVID T. THOMSON P.C. CERTIFIED PUBLIC ACCOUNTANT
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of Bayou International, Ltd
I have audited the accompanying consolidated balance sheets of Bayou
International, Ltd (a Delaware corporation) and Subsidiary at June 30, 1999 and
1998 and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the years in the three year period ended June 30,
1999. These consolidated financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
consolidated financial statements based on my audits. I did not audit the
financial statements of Solmecs Corporation, N.V., a subsidiary of Bayou
International, Ltd., which statements reflect total assets of A$359,024 and
A$166,151 as of June 30, 1998 and 1997 respectively and total revenues of
A$82,870 and A$76,744 respectively, for the years then ended. Those statements
were audited by other auditors whose reports have been furnished to me, and my
opinion, insofar as it relates to the amounts included for Solmecs Corporation,
N.V., is based solely on the reports of the other auditors.
I conducted my audits 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 and the reports of other auditors provide a reasonable
basis for my opinion.
In my opinion, based on my audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Bayou International, Ltd. And
Subsidiary at June 30, 1999 and 1998 and the results of its operations and its
cash flows for each of three years in the period ended June 30, 1999, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company and its subsidiary will continue as going concerns. As
discussed in Note (8) to the consolidated financial statements, the Company and
its subsidiary have suffered recurring losses from operations, have no net
working capital and have stockholders' deficits. These factors raise substantial
doubt as to the consolidated entities, ability to continue as going concerns.
Management's plans in regard to these matters are discussed in Note (8). The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Salt Lake City, Utah
September 22, 1999 (except as to Subsequent Event note which is as of October 7,
1999)
P.O. Box 571605, Murry, Utah 84157 (801) 966 9481
<PAGE> 4
BAYOU INTERNATIONAL, LTD. AND SUBSIDARY
Consolidated Balance Sheets
June 30, 1999 and 1998
<TABLE>
<CAPTION>
Australian Dollars Convenience
-------------------- Translation
A$000's A$000's US$000's
1998 1999 1999
------- ------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash 1 1 1
Accounts Receivable, net -- -- --
Investments -- -- --
---------------------------------
Total Current Assets 1 1 1
---------------------------------
Other Assets:
Investments 4,516 661 437
Property and Equipment, net -- -- --
Organisational Costs, net 1 1 1
---------------------------------
Total Other Assets 4,517 662 438
---------------------------------
Total Assets 4,518 663 439
=================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses 229 296 196
---------------------------------
Total Current Liabilities 229 296 196
Long-Term Debt 3,585 4,006 2,648
Net Liabilities of Discontinued Operations -- -- --
---------------------------------
Total Liabilities 3,814 4,302 2,844
---------------------------------
Stockholders' Equity (Deficit):
Common stock: $0.20 par value
100,000,000 shares authorised,
46,941,789 shares issued and outstanding 9,388 9,388 6,205
Less Treasury Stock, at Cost, 50,000 shares (20) (20) (13)
Additional Paid-in-Capital 11,592 11,592 7,662
Retained Deficits (18,267) (18,755) (12,398)
Accumulated Other Comprehensive Loss (1,989) (5,844) (3,861)
---------------------------------
Total Stockholders' Equity (Deficit) 704 (3,639) (2,405)
---------------------------------
Total Liabilities and Stockholders' Equity 4,518 663 439
=================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
2
<PAGE> 5
BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
Consolidated Statements of Operations
For the years ended June 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Convenience
Translation
A$000's A$000's A$000's US$000's
1997 1998 1999 1999
------- ------- ------- -----------
<S> <C> <C> <C> <C>
Revenues -- -- -- --
----------------------------------------------
Cost and expenses
Interest Expense 256 290 321 212
Legal, Accounting & Professional 33 145 34 23
Administrative 91 109 133 88
----------------------------------------------
380 544 488 323
----------------------------------------------
Loss from Operations (380) (544) (488) (323)
----------------------------------------------
Gain (Loss) on Disposition of Assets (2) -- -- --
Foreign Currency Exchange Gain (Loss) 346 1,381 -- --
Gain on disposal of Subsidiary -- 5,899 -- --
----------------------------------------------
344 7,280 -- --
----------------------------------------------
Profit (Loss) before Income Tax (36) 6,736 (488) (323)
Provision for Income Tax -- -- -- --
----------------------------------------------
Net Profit (Loss) from Continuing Operations (36) 6,736 (488) (323)
Discontinued Operations
Net Loss from Discontinued Operations (1,224) (952) -- --
----------------------------------------------
Net Profit (Loss) (1,260) 5,784 (488) (323)
==============================================
Earnings (Loss) per Common Equivalent Shares
From Continuing Operations (.00) 0.14 (.01) (.01)
From Discontinued Operations (.03) (.02) (.00) (.00)
----------------------------------------------
Total (.03) .12 (.01) (.01)
==============================================
Weighted Number of Common Equivalent
Shares Outstanding 46,942 46,942 46,942 46,942
==============================================
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE> 6
BAYOU INTERNATIONAL, LTD AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
June 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Common Treasury Retained Accumulated
Additional Stock Stock, at Paid-in Earnings Other
Shares Amount Cost Capital (Deficit) Comprehensive Loss
---------- -------- --------- --------- ---------- ------------------
A$000's A$000's A$000's A$000's A$000's A$000's
<S> <C> <C> <C> <C> <C> <C>
Balance June 30, 1996 46,942 9,388 -- 11,592 (22,791) (70)
Net Loss -- -- -- -- (1,260) --
Foreign Currency
Translation -- -- -- -- -- (365)
---------- -------- --------- --------- ---------- ------------
Balance June 30, 1997 46,942 9,388 -- 11,592 (24,051) (435)
Net Profit -- -- -- -- 5,784 --
Foreign Currency
Translation -- -- -- -- -- (1,554)
Acquisition of Treasury Stock,
at Cost,
50,000 shares -- -- (20) -- -- --
---------- -------- --------- --------- ---------- ------------
Balance June 30, 1998 46,942 9,388 (20) 11,592 (18,267) (1,989)
Net Loss -- -- -- -- (488) --
Net unrealised loss on
marketable securities -- -- -- -- -- (3,855)
---------- -------- --------- --------- ---------- ------------
Balance June 30, 1999 46,942 9,388 (20) 11,592 (18,755) (5,844)
========== ======== ========= ========= ========== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE> 7
BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Years Ended June 30, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Convenience
Translation
A$000's A$000's A$000's US$000's
1997 1998 1999 1999
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) from Continuing Operations (36) 6,736 (488) (323)
Adjustments
Foreign Currency Translation (365) (1,554) -- --
Depreciation & Amortisation -- -- -- --
(Gain) Loss on Disposal of Assets 2 (5,899) -- --
Net Change In :
Accounts Receivable -- -- -- --
A/P & Accrued Expenses 51 89 67 45
---------- ---------- ---------- ----------
Net Cash Used in Continuing Operations (348) (628) (421) (278)
Net Cash (used in) Discontinued Operations (654) 63 -- --
---------- ---------- ---------- ----------
Net Cash (used in) Operating Activities (1,002) (565) (421) (278)
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in Treasury Stock -- (20) -- --
Investments in Subsidiary -- (1) -- --
Net Proceeds from Investments -- -- -- --
---------- ---------- ---------- ----------
Net Cash Provided by (Used in) Investing Activities -- (21) -- --
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowing From Affiliates 1,002 586 421 278
New Borrowing -- -- -- --
---------- ---------- ---------- ----------
Net Cash Provided by (Used in) Financing Activities 1,002 586 421 278
---------- ---------- ---------- ----------
Net Increase (Decrease) in Cash -- -- -- --
Cash at Beginning of Year 1 1 1 1
========== ========== ========== ==========
Cash at End of Year 1 1 1 1
========== ========== ========== ==========
Supplemental Disclosures
Common Stock Issued in Lieu of Debt Repayment -- -- -- --
Interest Paid (Net Capitalised) 256 290 321 212
Income Taxes Paid -- -- -- --
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
<PAGE> 8
BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(1) ORGANIZATION
Bayou International, Ltd. ("Bayou") is incorporated in the State of
Delaware. The principal shareholder of Bayou is Edensor Nominees
Proprietary Limited ("Edensor"), an Australian corporation. Edensor
owned 42.7% of Bayou as of June 30, 1999.
Bayou's acquired a controlling interest on September 3, 1987 in former
subsidiary, Solmecs Corporation N.V. ("Solmecs") and 100% ownership on
January 2, 1992. Bayou sold its interest in Solmecs effective June 5,
1998.
During fiscal 1998, Bayou incorporated a further subsidiary, Bayou
Australia Pty Ltd, under the laws of Australia. Bayou Australia Pty Ltd
has not traded since incorporation.
(2) ACCOUNTING POLICIES
The following is a summary of the significant accounting policies
followed in connection with the preparation of the consolidated
financial statements.
(a) Consolidation
The consolidated financial statements include the accounts of
Bayou and the 100% interest it holds in Bayou Australia Pty
Ltd. It also includes the interest in Solmecs Corporation N.V.
until the date of disposal.
All significant intercompany transactions and balances have
been eliminated in consolidation.
(b) Revenue Recognition
Research grants and contracts are recognised at the time
granted and commercial sales through Bayou's subsidiary are
recognised on an accrual basis.
(c) Foreign Currency Translation
The majority of Bayou's administrative operations are in
Australia and as a result its accounts are maintained in
Australian dollars. The income and expenses of its foreign
operations are translated into Australian dollars at the
average exchange rate prevailing during the period. Assets and
liabilities of the foreign operations are translated into
Australian dollars at the period-end exchange rate.
6
<PAGE> 9
BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(2) ACCOUNTING POLICIES (Continued)
(d) Financial Instruments
The following methods and assumptions were used by Bayou to
estimate the fair values of financial instruments as disclosed
herein:
(i) Cash and Equivalents - The carrying amount
approximates fair value because of the short period
to maturity of the instruments.
(ii) Investment Securities - For both trading securities
and available-for-sale securities, the carrying
amounts approximate fair value which is based on
quoted market prices.
(iii) Long-term Debt - The fair value of long-term debt is
estimated based on interest rates for the same or
similar debt offered to Bayou having the same or
similar remaining maturities and collateral
requirements.
(e) Investment Securities
Management determines the appropriate classification of
investment securities at the time they are acquired and
evaluates the appropriateness of such classification at each
balance sheet date. The classification of these securities and
the related accounting policies are as follows:
(i) Trading securities are held for resale in
anticipation of short-term fluctuations in market
prices. Trading securities consisting primarily of
actively traded marketable equity securities are
stated at fair value. Realised and unrealised gains
and losses are included in income.
(ii) Available-for-sale securities consist of marketable
equity securities not classified as trading
securities. Available-for-sale are stated at fair
value and unrealised holding gains and losses net of
the related deferred tax effect, are reported as a
separate component of stockholders' equity.
(iii) Dividends on marketable equity securities are
recognised in income when declared. Realised gains
and losses are included in income. Realised gains and
losses are determined on the actual cost of the
securities sold.
(f) Cash and Cash Equivalents
Bayou considers all highly liquid investments with a maturity
of three months or less at the time of purchase to be cash
equivalents. For the periods presented there were no cash
equivalents. There were no non-cash investing or financing
activities.
7
<PAGE> 10
BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(2) ACCOUNTING POLICIES (Continued)
(g) Property and Equipment
Property and equipment is stated at the lower of historical
cost or market or in the case of acquisitions from related
parties at the lower of historical cost to the related party
or market. Depreciation is computed over a period covering the
estimated useful life of the applicable property and
equipment.
(h) Income Tax
Income taxes are provided on financial statement income. For
the periods presented there was no taxable income. There are
no deferred income taxes resulting from timing differences in
reporting certain income and expense items for income tax and
financial accounting purposes. Bayou at this time is not aware
of any net operating losses which are expected to be realised.
(i) Earnings (loss) per share
Primary (loss) per share is computed based on the weighted
average number of common shares and common share equivalents
outstanding during the period.
(j) Goodwill
Goodwill principally from the acquisition of Solmecs in 1987
and 1992 represents the excess of cost over fair value of net
assets acquired and is being amortised over ten years using
the straight-line method.
(k) Convenience Translation to US$
The consolidated financial statements at June 30, 1999 have
been translated into United States dollars using the rate of
exchange of the United States dollar at June 30, 1999 (AUS
$1.00=US $0.6610). The translation was made solely for the
convenience of readers in the United States.
(l) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could
differ from those estimates.
(m) Research and Development
Research and development costs are charged to operations as
incurred.
8
<PAGE> 11
BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
<TABLE>
<CAPTION>
A$000's A$000's
1998 1999
------- -------
<S> <C> <C>
(3) ACCOUNTS RECEIVABLE
Accounts Receivable at June 30, 1998 and 1999 includes:
Miscellaneous Receivables -- --
Less Allowance for Doubtful Account -- --
------- -------
Net -- --
======= =======
(4) INVESTMENT SECURITIES The following is a summary of Investment
Securities, 1998 and 1999:
Investment, Cost method 4,516 4,516
Available for Sale Securities
Marketable Equity Securities, at cost -- --
Gross Unrealised Gains -- --
Gross Unrealised Losses -- (3,855)
------- -------
Marketable Equity Securities,
at fair value 4,516 661
------- -------
The investment using this cost method is carried at cost.
Dividends received from the investment carried at cost are
included in other income. Dividends received in excess of the
Company's proportionate share of accumulated earnings ("return
of capital dividend") are applied as a reduction of the cost
of the investment.
(5) PROPERTY
Property at June 30, 1998 and 1999 includes:
Office Furniture & Equipment -- --
Motor Vehicles -- --
------- -------
-- --
Less Accumulated Depreciation -- --
------- -------
-- --
======= =======
</TABLE>
9
<PAGE> 12
BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
<TABLE>
<CAPTION>
A$000's A$000's
1998 1999
------- -------
<S> <C> <C>
(6) SHORT TERM AND LONG-TERM DEBT
The following is a summary of Bayou's borrowing arrangements
as of June 30, 1998 and 1999
Long Term
Loan from corporations affiliated with the President
of Bayou. Interest accrues at the ANZ Banking Group
Limited rate +1% for overdrafts over $100,000.
Repayment of loan not required before June 30, 2000. 3,585 4,006
Short-Term
Overdraft arrangement with balance
Accruing interest -- --
Notes Payable - Affiliates -- --
-----------------------
Total 3,585 4,006
=======================
</TABLE>
(7) AFFILIATE TRANSACTIONS
Bayou advances to and receives advances from various affiliates. All
advances between consolidated affiliates are eliminated on
consolidation. At June 30, 1999 Bayou had no outstanding advances to or
from unconsolidated affiliated companies. $168,000 and $275,000 of
accounts payable for the years shown is due to an affiliated management
company.
(8) GOING CONCERN
The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles, which
contemplates continuation of Bayou as a going concern. However, Bayou
has sustained recurring losses. In addition, Bayou has a net working
capital deficiency which raises substantial doubts as to its ability to
continue as going concerns.
10
<PAGE> 13
BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(8) GOING CONCERN (Continued)
Bayou anticipates that it will be able to defer repayment of certain of
its short term loan commitments until it has sufficient liquidity to
enable these loans to be repaid or other arrangements to be put in
place.
In addition Bayou has historically relied on loans and advances from
corporations affiliated with the President of Bayou. Based on
discussions with these affiliate companies, Bayou believes this source
of funding will continue to be available.
Other than the arrangements noted above, Bayou has not confirmed any
other arrangement for ongoing funding. As a result Bayou may be
required to raise funds by additional debt or equity offerings in order
to meet its cash flow requirements during the forthcoming year.
(9) SALE OF SOLMECS
Pursuant to a stock purchase agreement dated as of June 5, 1998, the
Company acquired 499,701 shares in SCNV Acquisition Corp ("SCNV"),
representing approximately 24% of the issued and outstanding share
capital of SCNV, in return for the whole of the share capital of
Solmecs Corporation N.V, a Netherlands Antilles company which prior to
the exchange was formerly a wholly owned subsidiary of the Company. The
499,701 shares has been valued at US$2,800,000 or A$4,516,000 and will
be accounted for using the cost method because the Company does not
exercise significant influences over SCNV's operating and financial
activities (see note 4). The sale resulted in a gain of $5,899,000
which is included in other income.
SCNV is a Delaware corporation established May 1997 to select, develop
and commercially exploit proprietary technologies, in various stages of
development, invented primary by scientists who have been recently
immigrated to Israel from and by scientists and institutions in Russia
and other countries that formerly comprised the Soviet Union.
Simultaneously with the SCNV stock acquisition by the Company, SCNV
completed an initial public offering of common stock and warrants which
resulted in gross proceeds of approximately US$5,900,000.
The Company has been granted certain demand and "piggyback"
registration rights with respect to the SCNV shares. Notwithstanding
the foregoing, the Company has agreed not to sell, grant options for
sale of assign or transfer any of the SCNV shares, for a period of 24
months from the closing of the ("Lock-up") agreement, provided,
however, that under certain circumstances, the Company shall have the
right to distribute the SCNV shares pro rata to its stockholders and
provide further that the
11
<PAGE> 14
BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(9) SALE OF SOLMECS (Continued)
recipients will take such shares subject to the remaining term of the
lock-up. The Company does not currently have any plans to distribute
the SCNV shares to its stockholders. Certain pre-conditions apply to
the agreement, including conditions relating to the obtaining of
shareholder consents, accuracy of representations and etc. See the
agreement for details.
The sale of Solmecs Corporation N.V. has been accounted for in the
consolidated financial statements as discontinued operations for all
periods presented. The assets and liabilities of discontinued
operations as of June 30, 1997 and 1998 have been combined and
reflected in the accompanying balance sheet as net liabilities of
discontinued operations.
The following is a summary of net assets and results of operations of
Solmecs Corporation N.V. as of June 30, 1997 and 1998 and for the years
then ended.
<TABLE>
<CAPTION>
A$000 A$000's
June 30, June 30,
1997 1998
<S> <C> <C>
Cash $ 53 $ 7
Accounts receivable 62 167
Property and equipment, net 51 185
------------------------
Total assets 166 359
------------------------
Accounts payable and Accrued Expenses 265 1,399
Long-term Debt 6,956 8,521
------------------------
Net Assets (7,055) (9,561)
========================
Sales 77 83
Cost and Expenses 1,301 1,035
------------------------
Loss before Income Tax (1,224) (952)
Income Taxes - -
------------------------
Net Profit (Loss) (1,224) (952)
========================
</TABLE>
(10) INCOME TAXES
Bayou files its income tax returns on an accrual basis. Bayou has carry
forward losses of approximately US$14 million as of June 30, 1999 which
expire in the years 1999 through 2012. Due to the uncertainty as to
realization of these losses, a valuation allowance of US$4.7 million
has been recorded to offset the tax benefit of the carry forward
losses.
12
<PAGE> 15
BAYOU INTERNATIONAL, LTD. AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1999 and 1998
(11) SUBSEQUENT EVENTS
On July 17, 1999 Bayou amended its Articles of Incorporation to reduce
the $0.15 par value common stock to $0.0001 par value and authorise the
issuance of a total of twenty-five million (25,000,000) shares of
common stock, no par value per share.
At the same time Bayou adopted a resolution to effect a one for twenty
reverse stock split. Each of Bayou's $0.0001 issued and outstanding
shares of common stock, par value $0.15 (A$0.20) as of July 17, 1999
shall be converted and reclassified into one twentieth (1/20) of a
share of common stock, no par value. This reverse stock split became
effective September 1, 1999.
On October 7, 1999 Bayou authorised the issuance of 4,000,000 shares of
its previously unissued stock to a company of which the President of
Bayou is a director and shareholder, in lieu of repayment of the debt
described in note (6). Balance due at the stock issuance was
approximately A$4,076,000.
13
