<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT #1
TO
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO.: 33-14982 - LA
BREAKTHROUGH ELECTRONICS, INC.
---------------------------------------------------------
(Name of Small Business Issuer in its Charter)
NEVADA 88-0226208
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3179 West Sahara, Suite D-21
Las Vegas, Nevada 89102
- ---------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (702) 368-0664
Securities Registered Pursuant to Section 12(g) of the Act:
None
----------
Check whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934, during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [ ] No [X]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not obtained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $0.
<PAGE>
- --------------------------------------------------------------------------------
SIGNATURES
- --------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.
REGISTRANT:
BREAKTHROUGH ELECTRONICS, INC.
By /s/ Lawrence A. Sapperstein
-------------------------------------------------
Lawrence Sapperstein, Principal Executive Officer
Date: August 15, 1999
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Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
By /s/ Lawrence A. Sapperstein
-------------------------------------------------
Lawrence A. Sapperstein, President, and Principal
Executive Officer and Principal Financial Officer
Date: August 15, 1999
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By /s/ Lawrence Grobstein
-------------------------------------------------
Lawrence Grobstein, Secretary/Treasurer
Date: August 15, 1999
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18
<PAGE>
PAUL M. HEALEY
Certified Public Accountant
3170 W. Sahara, Suite D-21
Las Vegas, NV 89102
(702) 368-0664 Phone - (702) 368-1363 Fax
Independent Auditor Report
April 17, 1999
To the Board of Directors and Shareholders of
Breakthrough Electronics, Inc.
Las Vegas, NV
I have audited the accompanying balance sheets of Breakthrough Electronics,
Inc. (A Development Stage Company) as of December 31, 1998 and 1997 and the
related statements of income and retained earnings, cash flows and changes in
stockholders' equity for the years then ended, and for the period from July
31, 1986 (Inception) to December 31, 1998. These financial statements are
the responsibility of the company's management. My responsibility is to
express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
These standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from 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 audit provides a reasonable basis for my opinion.
In my opinion, the financial statements audited by me present fairly, in all
material respects, the financial position of Breakthrough Electronics, Inc.,
at December 31, 1998 and 1997, and the results of its operations and cash
flows, and changes in stockholders' equity for the years then ended, and for
the period from July 31, 1986 (Inception) to December 31, 1998, in conformity
with generally accepted accounting principles.
Paul M. Healey, CPA
F-1
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BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
<S> <C> <C>
DECEMBER 31,
-----------------------------------
1998 1997
----------------- --------------
CURRENT ASSETS
Cash $ 780 $ 0
================= ==============
CURRENT LIABILITIES
Accrued Taxes 7,580 7,580
Accounts Payable 2,000 6,000
----------------- --------------
TOTAL LIABILITIES 9,580 13,580
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, Authorized 50,000,000 Shares at
$.001 Par Value, 500,000 and 446,940 Shares Issued
and Outstanding, respectively 500 447
Additional Paid In Capital 795,321 778,254
Retained Deficits (804,621) (792,281)
----------------- ---------------
TOTAL STOCKHOLDERS' DEFICIT (8,800) (13,580)
----------------- ---------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 780 $ 0
================= ===============
</TABLE>
See accountants' audit report and notes to financial statements.
F-2
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1998, AND 1997
AND THE PERIOD FROM JULY 31, 1986 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
July 31, 1986
(Inception) to
December 31,
1998 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES $ 0 $ 0 $ 78,000
OPERATING EXPENSES
Advertising & Promotional 0 0 5,031
Engineering & Development 0 0 85,135
Insurance 0 0 4,676
Travel & Entertainment 452 0 29,315
Outside Services 0 0 127,199
Rent 0 0 22,395
Payroll 0 0 204,045
Payroll Taxes 0 0 19,679
Telephone 0 0 14,729
Office 132 0 11,169
Engineering Supplies 0 0 12,763
Other 636 0 10,551
Patent Expenses 0 0 10,380
Professional 11,120 6,000 34,909
Depreciation & Amortization 0 0 32,032
Loss on Abandonment 0 0 29,979
Bad Loan Write Off 0 0 228,634
------------ ------------ ------------
TOTAL OPERATING EXPENSES 12,340 6,000 882,621
------------ ------------ ------------
NET INCOME (LOSS) (12,340) (6,000) (804,621)
RETAINED (DEFICIT) BEGINNING OF
PERIOD (792,281) (786,281) 0
------------ ------------ ------------
RETAINED DEFICIT END OF PERIOD $(804,621) $(792,281) $ (804,621)
============ ============ ============
</TABLE>
See accountants' audit report and notes to financial statements.
F-3
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998, AND 1997
AND THE PERIOD FROM JULY 31, 1986 (INCEPTION) TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
JULY 31, 1986
(INCEPTION)
TO
DECEMBER 31,
1998 1997 1998
--------- --------- -------------
<S> <C> <C> <C>
CASH FLOWS PROVIDED BY
OPERATIONS
Net Income (Loss) $(12,340) $(6,000) $(804,621)
Increase (Decrease):
Other Assets 0 0 0
Accrued Expenses 0 0 7,580
Accounts Payable (4,000) 6,000 2,000
--------- --------- -------------
Net Cash Flow (Outlay)
From Operations (16,340) 0 (795,041)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds From:
Sale of Common Stock 53 0 500
Paid in Capital 17,067 0 795,321
--------- --------- -------------
17,120 0 795,821
--------- --------- -------------
NET INCREASE (DECREASE)
IN CASH 780 0 780
CASH AT THE BEGINNING OF
PERIOD 0 0 0
--------- --------- -------------
CASH AT END OF PERIOD $ 780 $ 0 $ 780
--------- --------- -------------
--------- --------- -------------
</TABLE>
See accountants' audit report and notes to financial statements.
F-4
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FROM THE PERIOD JULY 31, 1986 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During
--------------------------- Paid-In Development
Shares Amount Capital Stage
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Sale Stock - Insiders
July 31, 1986 11,394 $11 $22,777
Deficit 1986 (152)
---------- ---------- ---------- -----------
Balance December 31, 1986 11,394 11 22,777 (152)
Sale Stock - Insiders
April 10, 1987 7,750 8 15,492
Issuance Stock - Insiders
Technology Rights 130,000 130 (130)
Sale Stock - Public
October 2, 1987 20,150 20 201,480
Sale Stock - Public
November 2, 1987 24,500 24 179,433
Exercise Stock Warrants
December 17, 1987 406 1 6,093
Issuance Stock - Services
December 27, 1987 28,000 28 55,972
Deficit 1987 (103,524)
---------- ---------- ---------- -----------
Balance December 31, 1987 222,200 222 481,117 (103,676)
Exercise Stock Warrants
February 1, 1988 2,240 2 30,654
Deficit 1988 (188,157)
---------- ---------- ---------- -----------
Balance December 31, 1988 224,440 224 511,771 (291,833)
Deficit 1989 (359,617)
---------- ---------- ---------- -----------
Balance December 31, 1989 224,440 224 511,771 (651,450)
Issuance Stock
Debt Exchange 50,000 50 99,950
Deficit 1990 (9,108)
---------- ---------- ---------- -----------
Balance December 31, 1990 274,440 274 611,721 (660,558)
Deficit 1991 (159)
---------- ---------- ---------- -----------
</TABLE>
See accountants' audit report and notes to financial statements.
F-5
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
AND FROM THE PERIOD JULY 31, 1986 (DATE OF INCEPTION)
THROUGH DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Balance December 31, 1991 274,440 274 611,721 (660,717)
Deficit 1992 (85)
---------- ---------- ---------- -----------
Balance December 31, 1992 274,440 274 611,721 (660,802)
Issue Stock
Technology Acquisition 30,000 30 2,970
Issue Stock
Technology Acquisition 9,500 10 940
Issue Stock
Debt Exchange 50,000 50 49,092
Deficit 1993 (335)
---------- ---------- ---------- -----------
Balance December 31, 1993 363,940 364 664,723 (661,137)
Issue Stock
Technology Acquisition 30,000 30 (30)
Insider Loans Payable Forgiven 97,253
Deficit 1994 (114,047)
---------- ---------- ---------- -----------
Balance December 31, 1994 393,940 394 761,946 (775,184)
Issuance Stock
Stock Issuance
Services 53,000 53 (53)
Debt Forgiveness Insider to
Paid In Capital 16,361
Deficit 1995 (11,097)
---------- ---------- ---------- -----------
Balance December 31, 1995 446,940 447 778,254 (786,281)
Deficit 1996
---------- ---------- ---------- -----------
Balance December 31, 1996 446,940 447 778,254 (786,281)
Deficit 1997 (6,000)
---------- ---------- ---------- -----------
Balance December 31, 1997 446,940 447 778,254 (792,281)
Stock Issuance Services 171,198 171 16,949
Stock Cancellations (118,138) (118) 118
Deficit 1998 (12,340)
Balance December 31, 1998 500,000 $500 $795,321 $(804,621)
---------- ---------- ---------- -----------
---------- ---------- ---------- -----------
</TABLE>
See accountants' audit report and notes to financial statements.
F-6
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
NOTE 1 -- ACCOUNTING POLICIES
Organization of the Company
Breakthrough Electronics, Inc., formerly Golden Queens Mining Company, was
incorporated on July 31, 1986 under the laws of the' State of Nevada. The
Company changed its name to Breakthrough Electronics, Inc. on June 10, 1987.
The change was in response to the Company's new business focus of developing an
electronic telephone screening device then known as "Phoneguard". Phoneguard
was acquired through the issuance of common stock with no acquisition cost
assigned. The Company is still in the development stage, as it has virtually no
revenue to date.
The Company is authorized to issue up to 50,000,000 shares of common stock,
$.001 par value. Over the years, the Company has raised capital under both
public offerings as well as private stock sales. The Company intended to
utilize capital raised to complete the research and development of Phoneguard,
and then implement a marketing plan thereafter. As of the reporting date, the
Company has expended all of the capital raised, without completing the intended
task. As of the reporting date, the Company has ceased any and all operations,
and its technology has rapidly become outdated. Currently, the Company's sole
business focus, is the contemplation of acquiring, or being acquired by, an
existing company via either purchase or merger. The Company has begun
preliminary discussions with potential candidate companies, but has not as of
the date of this report come to any contractual arrangement.
The financial statements reflect certain capital equipment items which have
been fully expensed either from previous depreciation expense or loss on asset
abandonment. The total original expenditures for all capital equipment has been
included in losses to date, and is not segregated in the statement of cash
flows.
F-7
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1998 and 1997
NOTE 2 -- COMMON STOCK PUBLIC OFFERING
On October 2 and November 2, 1987 the Company completed a public offering
which raised $201,500 and $245,000 through the sale of 503,750 and 612,500 units
respectively. Each unit consisted of 4 shares of common stock and 1 warrant to
purchase common stock. on December 17, 1987, 162,500 warrants were exercised to
purchase 40,625 shares of common stock for a total of $ 6,094. Four warrants
entitled the shareholders to purchase 1 share of common stock at $.15 per share.
The Company incurred approximately $ 65,000 in costs related to this offering.
On December 28, 1987 the Company issued a Notice of Call of Warrants to the
shareholders. The call price of the warrant was $.001 per warrant. All
warrants which were not exercised or tendered back to the Company by February 1,
1988 expired.
On February 1, 1988, 895,976 warrants were exercised to purchase 223,994
shares of common stock for $30,656.
NOTE 3 -- INCOME TAXES
The company has the following net operating loss and research credit
carryforwards expiring as follows:
<TABLE>
<CAPTION>
Net Operating Loss Research Credit
<S> <C> <C>
December 31, 2001 $ 152 $
2002 105,804
2003 196,227 8,730
2004 114,047
</TABLE>
The company has filed annual corporate tax returns through the tax year
1993 only.
F-8
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998 and 1997
NOTE 4 GENERAL INFORMATION
The company entered into an agreement with Cipher Voice, Inc.,(CVI) whereby
it granted CVI an exclusive license to the use of the Company's Phoneguard
technology. The license agreement provided for a profit sharing arrangement
based on anticipated future sales of the Phoneguard. CVI also raised capital
through a public offering during 1994. The intent of CVI was to attempt to
complete the research and development of Phoneguard. As was the case with the
Company, CVI never completed its intended task, and expended all of its capital
and has ceased operations as of the reporting date. CVI has subsequently been
purchased by a third party unrelated company. Both the Company and CVI were
founded by Barry Rose, who at one time served as President of both CVI and the
Company.
It is uncertain, as of the issuance date of these financial statements, as
to the marketability or value of the research and development efforts of the
Company or CVI. Management has indicated that it feels that given the rapid
advancements ongoing in the technology field, as well as the passage of time,
that there is limited or no value to the technology. If the Company were to be
acquired by another entity, consideration should be given to any residual value
of the research and development to date.
During 1995, the company and Barry Rose agreed to an arrangement whereby
Rose returned 11,813,850 shares of common stock to the company in the form of
Treasury Stock.
During August 1998, the Company obtained consents from a majority of
stockholders authorizing a reverse split of the Company's Common Stock, on a
1 for 100 basis. The split became effective during February 1999. All
references to shares outstanding and earnings per share have been adjusted to
reflect the effect of the reverse split on a retroactive basis.
F-9
