<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
- ------------------------------------------------------------------------------
(Mark one)
XX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
- ---------- SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
- ---------- EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
- ------------------------------------------------------------------------------
Commission File Number: 33-14982-LA
BREAKTHROUGH ELECTRONICS, INC.
(Exact Name of small business issuer as specified in its charter)
Nevada 88-0226208
- ------------------------ ------------------------
(State of Incorporation) (IRS Employer ID Number)
3179 West Sahara, Suite D-21, Las Vegas, Nevada 89102
-----------------------------------------------------
(Address of principal executive offices)
(702) 368-0664
---------------------------
(Issuer's telephone number)
- ------------------------------------------------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or 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 XX
---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
710,536 Shares as of August 10, 1999.
Transitional Small Business Disclosure Format (check one): YES NO XX
---- ----
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
Form 10-QSB for the Quarter ended June 30, 1999
Table of Contents
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
----
<S> <C>
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis or Plan of Operation 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES
</TABLE>
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
From Inception
on July 31, 1986
For the Three Months For the Six Months Through
Ended June 30, Ended June 30, June 30,
---------------------------------- --------------------------------- ----------------
1999 1998 1999 1998 1999
--------------- ---------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C> <C>
REVENUE $ 0 $ 0 $ 0 $ 0 $ 78,000
--------------- ---------------- --------------- --------------- ----------------
EXPENSES 1,895 11,704 6,429 11,704 889,050
--------------- ---------------- --------------- --------------- ----------------
TOTAL EXPENSES 1,895 11,704 6,429 11,704 889,050
--------------- ---------------- --------------- --------------- ----------------
NET (LOSS) OR PROFIT $ (1,895) $ (11,704) $ (6,429) $ (11,704) $ (811,050)
--------------- ---------------- --------------- --------------- ----------------
--------------- ---------------- --------------- --------------- ----------------
BASIC LOSS PER SHARE $ 0.00 $ 0.02 $ 0.01 $ 0.02
--------------- ---------------- --------------- ---------------
WEIGHTED AVERAGE
NUMBER OF SHARES
OUTSTANDING 710,536 500,000 710,536 500,000
--------------- ---------------- --------------- ---------------
--------------- ---------------- --------------- ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<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 25 179,433
Exercise Stock Warrants
December 17, 1987 406 0 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)
------------------ ------------------- ------------------- ------------------
Balance December 31, 1991 274,440 274 611,721 (660,717)
------------------ ------------------- ------------------- ------------------
------------------ ------------------- ------------------- ------------------
Deficit 1992 (85)
------------------ ------------------- ------------------- ------------------
</TABLE>
See accountants' audit report and notes to financial statements.
4
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
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 (118,139) (118) 118
Deficit 1998 (12,340)
Balance December 31, 1998 500,000 500 795,321 (804,621)
------------------ ------------------- ------------------- ------------------
------------------ ------------------- ------------------- ------------------
Stock Issuance Services 10,536 11 (1)
Stock Sale 200,000 200 11,800
Balance June 30, 1999 710,536 $ 711 $ 807,120 $ (809,155)
------------------ ------------------- ------------------- ------------------
------------------ ------------------- ------------------- ------------------
</TABLE>
See accountants' audit report and notes to financial statements.
5
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------------------ -----------------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 5,861 $ 780
------------------------ -----------------------
------------------------ -----------------------
CURRENT LIABILITIES
Accrued Taxes 7,580 7,580
Accounts Payable 1,500 2,000
------------------------ -----------------------
TOTAL LIABILITIES 9,080 9,580
------------------------ -----------------------
------------------------ -----------------------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, Authorized 50,000,000 Shares at
$.001 Par Value, 710,536 and 500,000 Issued and
Outstanding respectively 711 500
Additional Paid In Capital 807,120 745,821
Retained Deficits (811,050) (804,621)
------------------------ -----------------------
TOTAL STOCKHOLDERS' DEFICIT (3,291) (7,580)
------------------------ -----------------------
------------------------ -----------------------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $ 5,861 $ 780
------------------------ -----------------------
------------------------ -----------------------
</TABLE>
See accountants' audit report and notes to financial statements.
6
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
From Inception
on July 31, 1986
For the Three Months For the Six Months Through
Ended June 30, Ended June 30, June 30,
------------------------------------- ----------------------------------- ------------------
1999 1998 1999 1998 1999
--------------- ------------------ --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS PROVIDED
BY OPERATIONS
Net Income (Loss) $ (1,895) $ (11,704) $ (6,429) $ (11,704) $ (811,050)
Increase (Decrease):
Other Assets 0 0 0 0 0
Accrued Expenses 0 0 0 0 7,580
Accounts Payable 0 (4,000) 500 (4,000) 1,500
--------------- ------------------ --------------- ---------------- ------------------
Net Cash Flow (Outlay) From
Operations (1,895) (15,704) (6,929) (15,704) (801,970)
--------------- ------------------ --------------- ---------------- ------------------
--------------- ------------------ --------------- ---------------- ------------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds From:
Sale of Common Stock 0 5 210 5 711
Paid in Capital 0 17,115 11,800 17,115 807,120
--------------- ------------------ --------------- ---------------- ------------------
0 17,120 12,010 17,120 807,831
--------------- ------------------ --------------- ---------------- ------------------
--------------- ------------------ --------------- ---------------- ------------------
NET INCREASE
(DECREASE) IN CASH (1,895) 1,416 5,081 1,416 5,861
CASH AT THE BEGINNING
OF PERIOD 7,756 0 780 0 0
--------------- ------------------ --------------- ---------------- ------------------
CASH AT END OF PERIOD $ 5,861 $ 1,416 $ 5,861 $ 1,416 $ 5,861
--------------- ------------------ --------------- ---------------- ------------------
--------------- ------------------ --------------- ---------------- ------------------
</TABLE>
See accountants' audit report and notes to financial statements.
7
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1999
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.
8
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1999
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.
9
<PAGE>
BREAKTHROUGH ELECTRONICS, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 1999
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.
10
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(1) CAUTION REGARDING FORWARD-LOOKING INFORMATION
This quarterly report contains certain forward-looking statements
and information relating to the Company that are based on the beliefs of the
Company or management as well as assumptions made by and information
currently available to the Company or management. When used in this document,
the words "anticipate," "believe," "estimate," "expect" and "intend" and
similar expressions, as they relate to the Company or its management, are
intended to identify forward-looking statements. Such statements reflect the
current view of the Company regarding future events and are subject to
certain risks, uncertainties and assumptions, including the risks and
uncertainties noted. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated, expected or intended. In each instance, forward-looking
information should be considered in light of the accompanying meaningful
cautionary statements herein.
(2) RESULTS OF OPERATIONS
Breakthrough Electronics, Inc. (Company) was incorporated as "Queens
Mining Company" on July 31, 1986 under the laws of the State of Nevada,
primarily for the purpose of exploration, development and production of
certain mining properties located in Esmeralda County, Nevada. In July, 1987,
the Company changed its name to "Breakthrough Electronics, Inc.," terminated
its activities in the mining business, and began efforts to develop and
market electronic products, including a telephone device designed to screen
telephone calls, acquired from its then President.
The Company has had no operations or significant assets or
liabilities over the past several years. Accordingly, the Company is
dependent upon management and/or significant shareholders to provide
sufficient working capital to preserve the integrity of the corporate entity
during this phase. It is the intent of management and significant
shareholders to provide sufficient working capital necessary to support and
preserve the integrity of the corporate entity.
(3) LIQUIDITY AND CAPITAL RESOURCES
The Company has no operations, and essentially no assets or
liabilities and, accordingly is fully dependent upon its controlling
shareholder for operating capital. During the period(s) presented herein, the
Company was dormant and no advances were made or expenses paid on the
Company's behalf.
The Company has no specific plans or future capital requirements due to
its dormant state. However, the Company will seek to enter into a business
acquisition or reorganization with an enterprise, as yet unidentified. At such
time as the Company enters into a transaction, of which there can be no
assurance, the Company will require additional capital.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None.
ITEM 2 - CHANGES IN SECURITIES
None.
ITEM 3 - DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has held no regularly scheduled, called or special meetings
of shareholders during the reporting period.
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
None.
12
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BREAKTHROUGH ELECTRONICS, INC.
August 14, 1999 /s/ Lawrence A. Sapperstein
----------------------------------------
Lawrence A. Sapperstein
President and Chief Accounting Officer
BREAKTHROUGH ELECTRONICS, INC.
August 14, 1999 /s/ Lawrence Grobstein
----------------------------------------
Lawrence Grobstein
Secretary/Treasurer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 5,861
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,861
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,861
<CURRENT-LIABILITIES> 9,080
<BONDS> 0
0
0
<COMMON> 711
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,895
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,895)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,895)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
