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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended April 30, 1996.
[ ] Transition report under Section 13 or 15(d)of the
Securities Exchange Act of 1934
For the transition period from to .
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Commission File No.: 0-17414
ADVANTAGE LIFE PRODUCTS, INC.
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(Name of Small Business Issuer in Its Charter)
Delaware 33-0213733
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1509 S. Florida Ave., Suite 3
Lakeland, Florida 33803
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(Address of Principal Executive Offices) (Zip Code)
13902 N. Dale Mabry Highway, Suite 119
Tampa, Florida 33618
- - ----------------------------------------------- ----------
(Former Address of Principal Executive Offices) (Zip Code)
(941) 686-2621
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of each Exchange
Title of Each Class on Which Registered
- - ------------------- ---------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
----------------
(Title of Class)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 X No
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The issuer's revenues for its most recent fiscal year were: $4,723,203.
The aggregate market value of the voting stock held by non-affiliates
of the registrant on September 6, 1996 totaled $1,491,190 (computed by reference
to the average closing bid and asked prices as of September 6, 1996 ($2.50).
The number of shares outstanding of the issuer's common stock, as of
September 9, 1996, was 596,476 shares.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS DEVELOPMENT
Advantage Life Products, Inc. ("Advantage Life", or the "Company") was
organized under Colorado law on June 19, 1986, under the name Advantage Video,
Inc. The Company changed its name on October 10, 1989 to "Advantage Life
Products, Inc." and continues to do business under that name. On July 1, 1993,
the Company acquired the assets of Lasting Cosmetics, Inc. ("Lasting
Cosmetics"), a privately held, New York based cosmetics marketing company. See
"Business of Advantage Life - Lasting Cosmetics". On August 22, 1994, the
Company reorganized as a Delaware corporation. On July 6, 1995, the Company
formed a new subsidiary, Advantage Acquisition, Inc. ("Advantage Acquisition"),
a New Jersey corporation, for the purpose of acquiring the assets of
Environmental Professionals, Inc. ("Environmental Professionals"). At the time
of the Environmental Professionals acquisition, the Company formed a new wholly
owned subsidiary for the purpose of owning, operating and managing the business
conducted by Advantage Life prior to the acquisition of Environmental
Professionals. See "Business of Advantage Life - Environmental Professionals".
Effective as of September 6, 1996, the Company acquired all of the
assets of Universal Mica Furniture, Inc. ("Universal Mica"), a retail home
furniture store located in Farmingdale, New York. The Company agreed to pay
$2,000,000 to Universal Mica for the assets of Universal Mica by agreeing to
issue 480,000 shares of the Company's common stock and the Company's promissory
note in the original principal amount of $800,000 (the "Universal Mica Note").
The shares relating to this transaction have not been issued. The entire
principal amount of the Universal Mica Note is due in one lump sum payment on
August 31, 1999. Interest at the rate of 8% per annum, is payable on a monthly
basis. The Universal Mica Note is secured by all of the assets that the Company
acquired from Universal Mica.
In September, 1996 the Company's executive offices were located at
13902 N. Dale Mabry Highway Suite 119, Tampa, Florida, 33618, and its telephone
number was (813) 969-2002.
BUSINESS OF ADVANTAGE LIFE
After the Environmental Professionals Acquisition in July 1995, the
Company was engaged in two lines of business: (a) the development and marketing
of consumer products, focusing on cosmetic, beauty and health products; and (b)
the environmental remediation and waste removal business. Refer to Note 14,
Segment Information, page F-20 of the accompaning consolidated financial
statements and footnotes. The Company is in the process of discontinuing both of
these businesses and, as a result of the Universal Mica acquisition, is now
engaged in the retail furniture business.
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LASTING COSMETICS
As a result of the Lasting Cosmetics Acquisition during the
Company's 1994 fiscal year, the Company began marketing a line of hair
products, focusing the majority of its resources on distributing Secret
HairTM through (1) direct response television via 30 minute
infomercials, (2) select beauty salons, and (3) international sales
channels. On May 9, 1994 the Company entered into a marketing and
distribution agreement with Guthy-Renker Corporation ("GRC") of Palm
Desert, California for the electronic media distribution of Secret
Hair. Pursuant to the terms of the agreement, the Company and GRC would
each receive 50% of the net profits from the sales of the Secret Hair
product. Effective January 31, 1995, due to difficulties the Company
experienced with GRC, the Company commenced airing the infomercial
itself and began selling directly to salons via direct marketing
methods. See "Legal Proceedings". GRC is a developer and distributor of
infomercials. In May 1996, the Company decided to discontinue its
"infomercial business" and is in the process of winding up the affairs
of its "infomercial business".
ENVIRONMENTAL PROFESSIONALS
On June 28, 1995, the Company entered into an agreement and
plan of merger (the "Environmental Professionals Merger Agreement")
under which Environmental Professionals a New Jersey-based
environmental services firm ("Environmental Professionals") was merged
into Advantage Acquisition, a newly formed acquisition subsidiary of
the Company. The merger became effective as of July 6, 1995, and
subsequent thereto the name of the surviving entity was changed to
"Environmental Professionals, Inc.".
Environmental Professionals was founded in October 1988, and
since its activation has engaged in the business of disposing of
environmentally sensitive waste. It provided various environmental
remediation services to industrial clients, major oil companies and
environmental consultants. These services consisted principally of four
categories: environmental site remediation, drummed waste management,
transportation and disposal of hazardous and non-hazardous waste
materials, and groundwater treatment service and equipment supply.
Environmental Professional's market area included New Jersey, New York,
Delaware, Maryland, and Eastern Pennsylvania. In May 1996, the Company
decided to discontinue its "environmental remediation business" and is
in the process of winding up the affairs of its "environmental
remediation business". Management is not aware of any liability that
the Company may incur as a result of the violation of any environmental
law.
UNIVERSAL MICA
In September 1996, the Company acquired the assets of
Universal Mica, a business that operates a retail home furniture store
in Farmingdale, New York and intends to open two additional locations
in the greater New York area during the next twelve months. Universal
Mica, which does business under the tradename "Universal Modern
Furniture", currently operates out of an 11,000 square foot showroom,
which it leases.
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Principal Products. The Company, through its wholly owned subsidiary
Universal Mica sells modern and traditional home furnishings.
Competition. The retail home furniture business is intensely
competitive and their are numerous competitors that have greater
resources than the Company and Universal Mica. The Company and
Universal Mica believes that it will be successful in implementing its
business plan of expanding its home furnishing business in the greater
New York area during the next twelve months.
Employees. The Company and its subsidiaries currently have (7) seven
full time employess. The Company currently has no full time employees,
and its subsidiary Universal Mica has 7 full time employees.
Proposed Expansion Plans of the Company and Universal Mica. Universal
Mica contemplates expanding its business operations by acquiring
additional retail outlets. Universal Mica's operations are currently
limited to Long Island, New York area, however, it is Universal Mica's
intention to expand by opening two additional stores in the next twelve
months.
ITEM 2. PROPERTIES
In September, 1996, the Company's principal offices were located at
13902 N. Dale Mabry Highway, Suite 119, Tampa, Florida 33618. These premises,
comprising approximately 600 square feet, were leased by the Company under a two
year lease at an annual lease rate of $7,920.
Universal Mica leases its only current retail outlet, located at 1815
Route 110, Farmingdale New York, pursuant to the terms of a five year "triple
net" lease agreement by and between Universal Mica and Josalco, Inc. The
showroom contains approximately 11,000 square feet and the monthly rental
expense is $12,600. Universal Mica has approximately three years left on this
lease. Property taxes on the leased property are approximately $13,000 per year.
Universal Mica also leases approximately 2,500 square feet of warehouse space in
Bayshore, New York. The annual rental, inclusive of property taxes, is $8,400.
This lease is also a five year lease, with approximately two years remaining on
the lease.
ITEM 3. LEGAL PROCEEDINGS
The Company and its subsidiaries are defendants in various legal
actions which arise in the normal conduct of business. In addition, the Company
is a party in the following legal proceedings:
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a. Ackerman v. Advantage Life Products, Inc., Case No. 739547, filed on
December 6, 1994, in the Orange County Superior Court. Ackerman asserted that
the Company defaulted on a note and security agreement and sought recovery of
damages and costs of approximately $360,000. . A judgment was entered against
Advantage Life in the approximate amount of $360,000 in June 1996. This judgment
was entered against Advantage Life after its counsel withdrew and Advantage Life
intends to attempt to have this judgment overturned. Additionally, Advantage
Life has begun negotiations with Mr. Ackerman's counsel to settle the judgment
at a considerable discount.
b. More Direct Response, Inc., a California Corporation v. Advantage
Life Products, Inc., Case No. 739343, filed December 1, 1994. This is an action
in the Orange County Superior Court by the Plaintiff alleging Breach of
Contract, Breach of the Implied Covenant of Good Faith and Fair Dealing, Breach
of Trust, Constructive Fraud, Fraud, Imposition and Enforcement of Constructive
Trust. The action asserts that Regal Best, Inc., defaulted on a marketing
agreement with Advantage Life, relative to the CigArrest product line which had
previously been assigned to Regal Best, Inc., and Advantage Life had some
ongoing obligations to More Direct Response, Inc., given Regal Best Inc.'s
default. A default judgment was entered against Advantage Life in this matter in
the amount of $458,000 in June 1996. This judgment was entered against Advantage
Life after its counsel withdrew and Advantage Life intends to attempt to have
this judgment overturned. Additionally, Advantage Life intends to settle the
judgment at a considerable discount.
c. Sherry Guimond, a pervious employee of the Company, brought an
action against Advantage Life Products, Inc., Don Danks, Parker Dale, James
Stapleton, Robert Fredericks, and George Carras, Case No. 740250, on December
21, 1994 in the Orange County Superior Court. Advantage Life settled this
lawsuit and agreed to pay Ms. Guimond $85,000, $10,000 of which has been paid as
of September, 1996. The balance is past due.
d. Advantage Life Products, Inc. v. Guthy Renker Corporation; Tri-Star
Products, Inc., Revlon Consumer Products Corporation; Revlon General Wig, Inc.,
American Telecast Corporation; First Class Marketing, Inc., case number BC127193
filed in Los Angeles Superior Court, Central District on May 4, 1995. The claims
of Advantage Life against Guthy Renker have been dismissed with prejudice.
e. Guthy Renker Corporation v. Advantage Life Products, Inc., and Don
Danks, Cross Complaint filed June 16, 1995 in Los Angeles Superior Court, for
Breach of Written Contract, Conversion, Negligent Misrepresentation, Bad Faith
Denial of the Existence of a Contract, Dissolution and Accounting, False
Designation or Origin and False Description, Rescission and Restitution,
Defamation, Declaratory Relief, and Injunctive Relief. Guthy-Renker is seeking
approximately $4,500,000 in damages and reimbursement from Advantage Life.
Advantage Life believes the facts of which it has knowledge of will enable it to
prevail on all claims from Guthy-Renker. Additionally, Advantage Life has begun
negotiations with Guthy-Renker's counsel to settle this lawsuit.
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f. There are various lawsuits against Environmental Professionals,
however, Environmental Professionals will be an inactive subsidiary of Advantage
Life and it is the opinion of management that the claims that any creditor has
against Environmental Professionals will not permit that creditor to obtain any
relief against Advantage Life. Management is not aware of any liability that the
Company may incur as a result of the violation of any environmental law.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Advantage did not submit any matters to a vote of security holders during the
fiscal year covered by this report.
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PART II
ITEM 5. MARKET FOR ADVANTAGE COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock trades on The Nasdaq Small-Cap Market under
the symbol ADVT. The following table sets forth the high and low bid prices of
the Company's common stock on The Nasdaq Small-Cap Market for each of the fiscal
quarters indicated:
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
7/31/94 10/31/94 1/31/95 4/30/95 7/31/95 10/31/95 1/31/96 4/30/96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
HIGH $1.97 $3.19 $3.63 $2.38 $ .81 $6.00 $5.38 $1.06
LOW 1.12 1.31 1.63 0.66 0.31 1.75 0.69 0.38
</TABLE>
The stock prices referenced do not reflect the 1 for 20 reverse stock
split on June 24, 1996. The stock prices referenced for fiscal quarter ended
7/31/94 does not reflect the 1 for 3 reverse stock split on October 20, 1994.
All other referenced stock prices reflect this 1 for 3 reverse stock split. The
stock prices referenced for fiscal quarters ended 7/31/94, 10/31/94, 1/31/95,
and 7/31/95 do not reflect the 1 for 20 reverse stock split and 100% stock
dividend on August 1, 1995. All other referenced stock prices reflect this 1
for 20 reverse stock split and 100% dividend.
The foregoing table reflects inter-dealer prices, without retail
mark-ups, mark-downs or commissions and may not necessarily represent actual
transactions. No dividends have been declared or paid since the Company's
inception other than a stock dividend of common stock to the holders of common
stock of record as of August 1, 1995. It is not anticipated that dividends will
be paid in the foreseeable future. As of August 31, 1996, there were 522 record
holders of the Company's common stock.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL OVERVIEW
Advantage Life was organized under the laws of the State of Colorado in 1986,
and subsequently reorganized as a Delaware corporation in 1994.
In 1993, Advantage Life acquired the assets of Lasting Cosmetics, Inc. ("Lasting
Cosmetics"), a privately owned, New York based cosmetics marketing company. In
1994, Lasting Cosmetics entered into a marketing and distribution agreement with
Guthy-Renker Corporation ("GRC") for the distribution of a certain product via
infomercials. Due to difficulties with the airing of the infomercials, Advantage
Life attempted to sell the product directly to salons via direct marketing
methods in early 1995. When direct marketing failed, the Company discontinued
this operation and is currently in the process of winding up the affairs of
Lasting Cosmetics.
In July 1995, the Company acquired Environmental Professionals, Inc. ("EPI"), a
wholly owned subsidiary of Eagle Vision, Inc. In connection with the
acquisition, the Company issued 9,261,130 (46,306 shares after the 1 for 20
reverse stock split of June 24, 1996) shares of its common stock.
In May 1996, as the result of the insolvency of a major customer, and EPI's
inability to obtain other sources of funding, EPI was unable to meet its current
obligations and ceased operations. EPI had pledged vehicles on loans to a bank,
and in addition, had pledged all other assets, including its accounts receivable
and tangible and intangible assets on a line of credit to the same bank. The
bank filed an action and took possession of EPI's assets, and a Statutory
Receiver was appointed in August 1996. In light of this fact, the Company
discontinued this operation and is currently in the process of winding up the
affairs of EPI.
In September 1996, Advantage Life acquired all of the assets of Universal Mica
Furniture, Inc. ("Universal Mica"), a retail home furniture store in
Farmingdale, New York. Advantage Life agreed to pay $2,000,000 to Universal
Mica by agreeing to issue 480,000 shares of its common stock and issued its
promissory note in the amount of $800,000. These shares have not been issued.
PLAN OF OPERATIONS
With the decision of Advantage Life to begin winding down the affairs of both
Lasting Cosmetics and EPI, the Company's wholly owned subsidiary Universal Mica
is its only operating entity. It is the Company's intention to expand Universal
Mica's current business operations by acquiring other retail furniture
operations. Universal Mica's operations are currently limited to a single
location on Long Island, New York, however, it is the Company's intentions to
acquire additional retail furniture operations in the greater New York area
during the next twelve months. There can be no assurance given that the Company
will be able to successfully acquire the debt or equity funding necessary to
expand the business of Universal Mica, or if so acquired, successfully operate
them at a profitable level.
In addition to the Company's plan to acquire additional retail furniture
locations through Universal Mica, it also intends to acquire other businesses.
The Company has had numerous conversations with various business owners,
however, the Company currently has no binding commitments to make additional
acquisitions. The Company does not currently have a commitment from an
underwriter to raise capital for the Company, moreover, there can be no
assurance given that the Company will be able to successfully acquire the debt
or equity funding necessary to acquire other businesses, or if so acquired,
successfully operate such businesses at a profitable level.
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RESULTS OF OPERATIONS
Gross revenues for the year ended April 30, 1996 were $5,530,245, down 60%
compared to $13,778,762 for the year ended April 30, 1995. Returns and
allowances for the year ended April 30, 1996 were $807,042 compared to
$3,885,583 for the year ended April 30, 1995. Net revenues for the years ended
April 30, 1996 and 1995 were $4,723,203 and $9,893,179 respectively, or 52%. The
significant decrease in both gross and net revenues was a result of the
discontinuance of Lasting Cosmetics primary product, Secret Hair, which was
discontinued during the year ended April 30, 1996.
The Company lost $4,365,682 and $1,705,211 from operations during the years
ended April 30, 1996 and 1995 respectively, or a 61% increase. This increase in
due primarily to the discontinuance of Secret Hair. For the same periods, the
Company's net loss was $6,466,374 and $1,665,114 respective. The significant
increase for the year ended April 30, 1996 was a result of management's decision
to (1) write-off $1,000,000 of goodwill due to impairment as determined by its
estimation of the non-recoverability of the goodwill through projected
undiscounted cash flows, and (2) write-off $1,077,271 of EPI's intangible assets
determined to be valueless.
FINANCIAL CONDITION AND LIQUIDITY
The Company has sought to raise capital to expand its business operations by the
sale of its common stock. To that end the Company has sold a total of 5,400,000
shares of its common stock (adjusted, in part, to give effect to the Company's
reverse stock split declared on June 24, 1996) for $5,500,000. To date, the
Company has received cash consideration of $325,000 and has been relieved of
liabilities totaling $175,000. The balance of the purchase price was paid by the
delivery of the purchaser's promissory notes totaling $5,000,000 (the "Notes").
The Company agreed to extend the maturity date of two of the Notes with a total
principal balance of $2,600,000, for an additional year, until August 31, 1997.
In consideration for granting the extension, the holders of the Notes agreed to
pledge additional collateral for the payment of the amounts due under the Notes
pursuant to the terms of stock pledge agreements between the Company and the
holders of the Notes. The additional collateral pledged by the holders of the
Notes included 300,000 shares of the common stock of Prentice Capital Inc.
("Prentice Capital"), a corporation whose engaged in the business of owning and
operating podiatry practices and intends to engage in the business of owning and
operating gaming vessels and whose common stock is traded on the NASDAQ OTC
Bulletin Board; and 300,000 shares of the common stock of Med-Vax Technologies,
Inc. ("Med-Vex"), a corporation that plans to engage in the business of selling
medical equipment for the treatment of back pain to doctors, hospitals and other
health care providers, and intends to offer its stock to the public in an
offering during the fourth quarter of 1996. Mr. Alan S. Lipstein, the Company's
Chairman, President and Chief Executive Office holds similar position with both
Prentice Capital and Med-Vax. The remaining promissory note, in the amount of
$2,400,000 also matures on August 31, 1997. The Company believes that it will
collect the principal amounts due under the promissory notes prior to their
respective maturity dates. If that assumption is accurate, the Company should
have sufficient working capital to conduct its affairs during the next twelve
months, however, there can be no assurance that the Company will successfully
collect amounts due under the promissory notes on or before there maturity
dates.
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ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The independent auditors report, consolidated financial statements and
schedules listed in the accompanying index are filed as part of this report. See
Index to Financial Statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company's independent accountants for its fiscal year ended April
30, 1995, Corbin & Wertz, resigned on July 16, 1996. The Company's 1995 fiscal
year financial statements contained a "going concern" opinion. The decision to
resign was made by Corbin & Wertz. There were no disagreements with the former
accountants on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure. The Company retained the
firm of Guida & Jimenez, P.A. as the Company's independent accountants on July
30, 1996.
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PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS
The following individuals are the Directors and Officers of the
Company. All Directors are elected annually by the shareholders to serve until
the next annual meeting of shareholders and until their successors are duly
elected and qualified. Officers are elected annually by the Board of Directors
to serve at the pleasure of the Board.
<TABLE>
<CAPTION>
NAME POSITION AGE
---- -------- ---
<S> <C> <C>
Alan S. Lipstein Chairman of the Board and 48
Director, President and Chief
Executive Officer
Gerard Norton Secretary and Director 60
</TABLE>
Alan S. Lipstein, age 48, is the President, Chief Executive Officer, Chief
Financial Officer and Chairman of the Board of Directors of the Company. Mr.
Lipstein became a director of the Company and its Chief Executive Officer on
July 6, 1995, positions he resigned on January 22, 1996. Mr. Lipstein was
reappointed to the Company's Board of Directors on May 30, 1996, at which time
he resumed the positions of Chief Executive Officer, Chief Financial Officer and
Chairman of the Board of Directors, positions Mr. Lipstein continues to hold.
Mr. Lipstein is also the President, Chief Executive Officer and Chairman of the
Board of Directors of Prentice Capital, Inc., a corporation whose stock is
traded on the NASDAQ OTC Bulletin Board. Mr. Lipstein has served in such
capacity since August 1994. Prentice Capital is engaged in the business of
owning and operating podiatry practices in Tampa, Florida and intends to engage
in the business of owning and operating gaming vessels based in South Florida.
Mr. Lipstein also serves as the Chief Executive Officer and President of Med-Vax
Technologies, Inc. ("Med-Vax Technologies"), a corporation that intends to offer
its stock to the public in a public offering during the fourth quarter of 1996.
Mr. Lipstein has held such position since December 1995. Med-Vax Technologies
plans to engage in the business of selling medical equipment for the treatment
of back pain to doctors, hospitals and other health care providers. Mr. Lipstein
has also served as the Vice President and a Director of Environmental
Professionals since July 1993. Mr. Lipstein also served as the Chief Executive
Officer and President of Eagle Vision, Inc., a corporation that previously owned
Environmental Professionals. Mr. Lipstein has held such position since 1989.
Dr. Gerard Norton, age 60, is Vice President-Finance, Secretary and a Director
of the Company. Dr. Norton became a director and an officer of the Company on
July 6, 1995, positions he resigned on January 22, 1996. Dr. Norton was
reappointed to the Company's Board of Directors on May 30, 1996, at which time
he resumed the positions of director, Vice President-Finance, and Secretary,
positions Dr.
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Norton continues to hold. Dr. Norton is also a Vice President and a Director of
Prentice Capital, Inc., a corporation whose stock is traded on the NASDAQ OTC
Bulletin Board. Dr. Norton has served in such capacity since August 1994.
Prentice Capital is engaged in the business of owning and operating podiatry
practices in Tampa, Florida and intends to engage in the business of owning and
operating gaming vessels based in South Florida. While serving as the Vice
President of Prentice Capital, Inc., Dr. Norton also served as the Vice
President of Med-Vax Technologies, a corporation that intends to offer its stock
to the public in a public offering during the fourth quarter of 1996. Dr. Norton
has held such position since December 1995. Med-Vax Technologies plans to engage
in the business of selling medical equipment for the treatment of back pain to
doctors, hospitals and other health care providers. Dr. Norton has served as the
Vice President and a Director of Environmental Professionals since July 1993.
Dr. Norton also served as the Vice President of Eagle Vision, Inc., a
corporation that previously owned Environmental Professionals. Dr. Norton has
held such position since 1989. Previous thereto, Dr. Norton was engaged in
business as a self employed consultant, for the period beginning July 1990 and
ending August 1991, on a full time basis by Great Lakes Environmental, Ltd., a
Canadian corporation ("Great Lakes") that contemplated acquiring the common
stock of Frontier Chemical. Dr. Norton's duties included analyzing, on behalf of
Great Lakes, the economic feasibility of acquiring Frontier Chemical. From
February 1990 to July 1990, Dr. Norton was employed as the President of Xysys
Systems, Inc., a corporation based in Ann Arbor, Michigan, engaged in the
automotive computer aided design ("CAD") software business. Prior thereto, from
January 1989 to February 1990, Dr. Norton worked in England and, as a self
employed consultant, provided managerial consulting services, on a full time
basis, to Ortech, Ltd., an engineering firm specializing in providing services
to the coal mining industry. From August 1988 to December, 1988, Dr. Norton was
employed as the Chairman and Chief Executive Officer of Xysys International,
Inc., the holding company for Xysys Systems, Inc.
SECTION 16 REPORTS
The requirements imposed by Section 16(a) of the Securities Exchange
Act of 1934, as amended, provide that the Company's Officers and Directors, and
persons who own more than ten percent of the Company's Common Stock, file
initial statements of beneficial ownership (Form 3), and statements of changes
in beneficial ownership (Forms 4 or 5) with the Securities and Exchange
Commission ("SEC"). Officers, directors and greater than ten percent
shareholders are required by SEC regulations to furnish the Company with copies
of all such forms they file. Based solely on its review of the copies of such
forms received, the Company believes that all of its officers, directors and
greater than 10% shareholders filed such reports in a timely manner, other than
reports that Mr. Lipstein and Dr. Norton should have filed upon the receipt and
subsequent sale of shares issued to them in August 1995 and reports that should
have been filed by two shareholders of the Company, Vietri Investments and
Roscom, Ltd. that, at the time of the acquisition and disposition of shares of
the Company's common stock, each owned more than 10% of the Company's common
stock, upon the acquisition and disposition of shares that such entities
acquired during the Company's 1996 fiscal year. Based on information provided to
the Company, these late reports have been filed with the SEC.
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ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-----------------------------------------------------
Other
Annual
Compen-
Name and Principal Salary Bonus sation
Position Year ($) ($) ($)
(a) (b) (c) (d) (e)
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George Carras,
Chief Executive Officer 1996 $ 45,000 $100,000
Alan S. Lipstein,
Chief Executive Officer 1996 $300,000 --
Gerald Norton,
Vice President 1996 $100,000 --
Robert Fredericks,
Director 1996 -- $100,000
</TABLE>
Alan Lipstein, the Company's Chief Executive Officer, and Jerry Norton,
the Company's Vice-President of Finance and Secretary, received 300,000 and
100,000 shares of the Company's common stock, respectively, as payment for
services to be rendered to the Company during the five year period beginning
August 1, 1995. George Carras, who served as the Chief Executive Officer of the
Company during a portion of the Company's 1996 fiscal year, was paid a cash
salary of $108,000. Mr. Carras was also issued 50,000 shares of the Company's
common stock during the Company's 1996 fiscal year, and Bob Fredericks, a
director of the Company, was issued 50,000 shares of the Company's common stock
during the Company's 1996 fiscal year.
The Company has entered into employment agreements with each of Messrs.
Lipstein, Norton and Carras. The employment agreements between the Company and
Messrs. Lipstein and Norton expire on July 31, 2000 and provide for no
additional consideration to be paid to Messrs. Lipstein or Norton, other than
the shares that were issued to them on the date the employment agreements were
executed. Mr. Carras's employment agreement was for a three year term beginning
December 1, 1995 and ending November 30, 1998. On May 30, 1996, the Company
redefined the duties of Mr. Carras. As of May 30, 1996, Mr. Carras resigned as
an officer and director of the Company and became a consultant to the Company,
agreeing to provide up to 20 hours per week, of accounting and other financial
services for the Company during the remaining term of the employment agreement.
The Company agreed to pay Mr. Carras $300,000 for performing such consulting
services during the remaining term of his employment agreement. On or about May
30, 1996, the Company paid Mr. Carras $100,000 of that amount, and agreed to
issue to Mr. Carras shares of its common stock with a fair market value of
$200,000. These shares have not been issued. On or about June 30, 1996, the
Company elected to terminate Mr. Carra's consulting agreement and agree to a
settlement with Mr. Carras for the balance owed to him of $200,000, payable in
shares of its common stock with a fair market value of $200,000. The Company
further agreed to file a registration statement with the Securities and Exchange
Commission, including therein, the shares to be issued to Mr. Carras (the
"Registration Statement"). Until such time as Mr. Carras is able to dispose of
the shares to be issued to him, and until the Company satisifies a debt to one
of its creditors, Sherri Guimond, the Company agreed not to issue any additional
shares without the consent of Mr. Carras.
On May 30, 1996, the Company also agreed to issue additional shares of
its common stock to each of Messrs. Fredericks and Carras, so that the fair
market value of the 50,000 shares previously issued to each of them during the
Company's 1996 fiscal year would had a fair market value of $200,000 ($100,000
for each of Messrs. Carras and Fredericks) on the date that the Company's then
contemplated reverse stock split would be effective (June 24, 1996). The Company
further agreed to include the shares to be issued to Messrs. Carras and
Fredericks in the Registration Statement. These shares have not been issued.
14
<PAGE> 15
Advantage Life may adopt additional compensation programs at a later date
suitable for its executive personnel. Advantage Life is unable to predict at
this time the format or manner of compensation to be included in any such
program.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table enumerates, as of September 9, 1996, there were no
(1) beneficial owners of more than five percent of Advantage Life's outstanding
Common Stock; (2) the ownership of Directors and Executive Officers of Advantage
Life, individually; and (3) the Directors and Executive Officers as a group.
There are no shares which each of the following could purchase under outstanding
stock options, warrants, conversion privileges or other rights which were
exercisable as of September 9, 1996.
In preparing the following tables, Advantage Life has relied upon
statements filed with the Securities and Exchange Commission by beneficial
owners of more than 5 percent of Advantage Life's outstanding Common Stock
pursuant to Section 13(d) or 13(g) of the Securities Act of 1934, unless
Advantage Life knew or had reason to believe that the information contained in
such statements was not complete or accurate, in which case Advantage Life
relied upon information which it considered to be accurate and complete.
<TABLE>
<CAPTION>
Title Percent
Class Name and Address Amount of Class
- - ----- ---------------- ------ --------
<S> <C> <C> <C>
Common Alan Lipstein, Chairman of the 0 0%
Board, Chief Executive Officer,
President and Chief Financial Officer
13902 N. Dale Mabry Hwy., Suite 119
Tampa, Florida 33618
Common Gerald Norton, Director 0 0%
and Secretary
13902 N. Dale Mabry Hwy., Suite 119
Tampa, Florida 33618
Common All Officers and Directors as a group 0 0%
</TABLE>
15
<PAGE> 16
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS WITH MANAGEMENT AND
OTHERS
On August 1, 1995, Advantage Life entered into an employment agreement
with Alan S. Lipstein (the "Lipstein Employment Agreement"), wherein Mr.
Lipstein and Advantage Life executed a 5 year employment agreement, pursuant to
which Mr. Lipstein was to serve as the President of Advantage Life. At the time
such employment agreement was executed, Mr. Lipstein was an officer and director
of Advantage Life. Mr. Lipstein received 300,000 shares of the common stock of
Advantage Life as payment for his services to be rendered under the employment
agreement.
On August 1, 1995, Advantage Life entered into an employment agreement
with Gerard Norton (the "Norton Employment Agreement"), wherein Dr. Norton and
Advantage Life executed a 5 year employment agreement, pursuant to which Dr.
Norton was to serve as the Vice-President and Secretary of Advantage Life. At
the time such employment agreement was executed, Dr. Norton was an officer and
director of Advantage Life. Dr. Norton received 100,000 shares of the common
stock of Advantage Life as payment for his services to be rendered under the
employment agreement.
On or about October 31, 1995, Mr. Carras and Bob Fredericks, who were
then directors of the Company, were each issued 50,000 shares of the Company's
common stock for services previously rendered to the Company.
On November 14, 1995, Advantage Life entered into an employment
agreement with George Carras (the "Carras Employment Agreement"), wherein Mr.
Carras and Advantage Life executed a three year employment agreement, pursuant
to which Mr. Carras was to serve as the President and Chief Executive Officer of
Advantage Life. At the time such employment agreement was executed, Mr. Carras
was a director of Advantage Life. Mr. Carras was to be paid $108,000 per year
for his services under the employment agreement.
16
<PAGE> 17
ITEM 13. EXHIBITS, LISTS, AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
(i) and (ii) Financial statements and schedules:
The Index to Financial Statements appearing on page F-1 are
incorporated herein by this reference.
(iii) Exhibits
<TABLE>
<CAPTION>
Number Description
- - ------ -----------
<S> <C>
3.1 Articles of Incorporation, as amended. Incorporated by reference
to Exhibit 3.1 to the Company's Registration Statement on Form S-18,
Registration No. 33-18036-LA ("Registration Statement").
3.2 Certificate of amendment of Articles of Incorporation as filed on
October 10, 1989. Incorporated by reference to Exhibit 1.2 to the
Company's Form 10-K report to the Securities and Exchange Commission
for the fiscal year ended April 30, 1990.
3.3 Bylaws. Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement.
10.1 1986 Incentive Stock Option Plan. Incorporated by reference to Exhibit
10.2 to the Company's Registration Statement.
10.2 1989 Incentive Stock Option, Non-Qualified Option and Restricted
Stock Purchase Plan (the "1989 Plan"). Incorporated herein by reference
to Exhibit 4.2 to the Company's Registration Statement on Form S-8,
registration No. 33-33648 ("S-8").
10.3 Form of Incentive Stock Option Agreement pertaining to the 1989
Plan. Incorporated herein by reference to Exhibit 4.3 to the Company's
S-8.
10.4 Form of Non-Qualified Stock Option Agreement pertaining to the 1989
Plan. Incorporated herein by reference to Exhibit 4.4 to the Company's
S-8.
10.5 Form of Restricted Common Stock Purchase Agreement pertaining to the
1989 Plan. Incorporated herein by reference to Exhibit 4.5 to the
Company's S-8.
10.6 Agreement - Employment - Danks - December 1, 1986, as amended.
Incorporated by reference to Exhibit 10.19 to the Company's
Registration Statement.
10.7 Lease - Manufacturing Facility - York, Nebraska - June 22, 1988.
Incorporated by reference to Exhibit 10.53 to the Company's
Registration Statement.
10.8 Agreement - More Direct Response - CigArrest Retail Sales - January 10,
1989. Incorporated by reference to Exhibit 10.53 to the Company's Form
10-K report to the Securities and Exchange Commission for the fiscal
year ended April 30, 1989.
10.9 Agreement - More Direct Response - CigArrest Gum Retail Sales - January
10, 1989. Incorporated by reference to Exhibit 10.54 to the Company's
Form 10-K report to the Securities and Exchange Commission for the
fiscal year ended April 30, 1989.
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
10.10 Smoking Alternative Products Marketing Agreement - Daleco/Advantage
Partners I, Daleco Capital Corp. - June 4, 1990. Incorporated by
reference to Exhibit 10.16 to the Company's Form 1O-K report to the
Securities and Exchange Commission for the fiscal year ended April 30,
1990.
10.11 Borrowing Documents - Security Agreement and Promissory Note - Line of
Credit - Sanwa Bank California - August 30, 1990. Incorporated by
reference to Exhibit 10.11 to the Company's Form 10-K report to the
Securities and Exchange Commission for the fiscal year ended April 30,
1991.
10.12 Lease - Administrative Office - Laguna Hills, California - Saddleback
II Associates - May 30, 1991. Incorporated by reference to Exhibit
10.12 to the Company's Form 10-K report to the Securities and Exchange
Commission for the fiscal year ended April 30, 1991.
10.13 Agreement to settle litigation - More Direct Response, Inc. - September
14, 1990. Incorporated by reference to Exhibit 10.13 to the Company's
Form 10-K report to the Securities and Exchange Commission for the
fiscal year ended April 30, 1991.
10.14 Agreement - Balance For Life - Exclusive Marketing For Smokers Choice
and QuitPower - September 26, 1991. Incorporated by reference to
Exhibit 10.14 to the Company's Form 1O-K report to the Securities and
Exchange Commission for the fiscal year ended April 30, 1992.
11.15 Agreement - More Direct Response - Amendment To CigArrest Plan And Gum
Distribution - October 8, 1991. Incorporated by reference to Exhibit
10.15 to the Company's Form 10-K report to the Securities and Exchange
Commission for the fiscal year ended April 30, 1992.
11.16 Agreement - Beder Health Associates - QuitPower - December 23, 1991.
Incorporated by reference to Exhibit 10.16 to the Company's Form 1O-K
report to the Securities and Exchange Commission for the fiscal year
ended April 30, 1992.
10.17 Agreement - Cruttenden & Company - Private Placement Of Up To 2,700,000
Shares - December 27, 1991. Incorporated by reference to Exhibit 10.17
to the Company's Form 1O-K report to the Securities and Exchange
Commission for the fiscal year ended April 30, 1992.
10.18 Agreement - Mr. Kiki Vandeweghe - Be Safe spokesperson - April 1, 1992.
Incorporated by reference to Exhibit 10.18 to the Company's Form 10-K
report to the Securities and Exchange Commission for the fiscal year
ended April 30. 1992.
10.19 Agreement - The Johns Hopkins School of Hygiene and Public Health - Be
Safe - April 20, 1992. Incorporated by reference to Exhibit 10.19 to
the Company's Form 10-K report to the Securities and Exchange
Commission for the fiscal year ended April 30, 1992.
10.20 Agreement: Rockefeller, Rothschild & Steele - Private Placement Of Up
To 3,500,000 Shares - June 1, 1992. Incorporated by reference to
Exhibit 10.20 to the Company's Form 10-K report to the Securities and
Exchange Commission for the fiscal year ended April 30, 1993.
10.21 Agreement - Deralee Scanlon - Consulting Agreement - Cholest Control -
April 20, 1993. Incorporated by reference to Exhibit 10.21 to the
Company's Form 10-K report to the Securities and Exchange Commission
for the fiscal year ended April 30, 1993.
10.22 Agreement - Lip Stick Saver - Licensing Agreement - April 13, 1993.
Incorporated by reference to Exhibit 10.22 to the Company's Form 10-K
report to the Securities and Exchange Commission for the fiscal year
ended April 30, 1993.
10.23 Agreement - Investor Resource Services - Consulting Agreement - April
12, 1993. Incorporated by reference to Exhibit 10.23 to the Company's
Form 10-K report to the Securities and Exchange Commission for the
fiscal year ended April 30, 1993.
10.24 Agreement - Regal Communications - License Agreement - February 1,
1993. Incorporated by reference to Exhibit 10.24 to the Company's Form
10-K report to the Securities and Exchange Commission for the fiscal
year ended April 30, 1993.
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C>
10.25 Agreement - Regal Communications - Escrow & Pledge Agreement - February
1, 1993. Incorporated by reference to Exhibit 10.26 to the Company's
Form 10-K report to the Securities and Exchange Commission for the
fiscal year ended April 30, 1993.
10.27 Agreement - Regal Communications - Promissory Note - February 1, 1993.
Incorporated by reference to Exhibit 10.27 to the Company's Form 10-K
report to the Securities and Exchange Commission for the fiscal year
ended April 30, 1993.
10.28 Agreement - Sun Gen Lo Sun - Promissory Note & Escrow Agreement -
February 11, 1993. Incorporated by reference to Exhibit 10.28 to the
Company's Form 10-K report to the Securities and Exchange Commission
for the fiscal year ended April 30, 1993.
10.29 Agreement - Michael Ackerman - Promissory Note & Security Agreement
-June 4, 1993. Incorporated by reference to Exhibit 10.29 to the
Company's Form 10-K report to the Securities and Exchange Commission
for the fiscal year ended April 30, 1993.
10.30 Agreement - Lasting Cosmetics - Incorporated by reference from Form
8-K -July 23, 1993.
10.31 Agreement - Guthy-Renker Corporation - May 5, 1994. Incorporated by
reference to Exhibit 10.31 to the Company's Form 10-K report to the
Securities and Exchange Commission for the fiscal year ended April 30,
1994.
10.32 Lease - office and warehouse - Irvine, California - Irvine Business
Center Investors - May 11, 1994. Incorporated by reference to Exhibit
10.32 to the Company's Form 10-K report to the Securities and Exchange
Commission for the fiscal year ended April 30, 1994.
</TABLE>
19
<PAGE> 20
<TABLE>
<S> <C>
10.33 Certificate of amendment of Articles of Incorporation as filed on
November 10, 1994. Incorporated by reference to Exhibit 1.2 from Form
8-K - November 10, 1994.
10.34 Agreement and Plan of Merger - Advantage Acquisition, Eagle Vision,
Environmental Professionals. Incorporated by reference to Exhibit 2.2
from Form 8-K - July 20, 1995.
10.35 Employment Agreement between the Company and Alan S. Lipstein, dated
August 1, 1995.*
10.36 Employment Agreement between the Company and Gerald Norton, dated
August 1, 1995.*
10.37 Employment Agreement between the Company and George M. Carras, dated
November 14, 1995.*
10.38 Extension Agreement between the Company and Roscom, Ltd., effective as
of August 31, 1996.*
10.39 Extension Agreement between the Company and Vietri Investments,
effective as of August 31, 1996.*
10.40 Capital Stock Purchase Agreement between the Company and Cimtran, Ltd.,
together with promissory note and stock pledge agreement, effective as
of August 31, 1996.*
10.41 Agreement and Plan of Reorganization - The Company, Advantage Life
Acquisition, Universal Mica Products, Inc. and George Lafauci,
effective September 6, 1996.*
22. The Company has three subsidiaries: Lasting Cosmetics, Inc., a Delaware
corporation, Environmental Professionals, Inc. and Universal Mica
Products, Inc.*
27. Financial Data Schedule (for SEC use only)
- - --------------
*Previously filed.
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
20
<PAGE> 21
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized on this 12th day June 1997.
Advantage Life Products, Inc.
By: Richard J. Diamond
-----------------------
Richard J. Diamond
Chief Executive Officer
In accordance with the Exchange, this Report has been signed below by
the following persons on behalf of the Registrant, and in the capacities and on
the date indicated.
SIGNATURE TITLE DATE
/s/Richard J. Diamond Chairman of the Board of Directors,
- - ------------------------- Chief Executive Officer, President June 12, 1997
Richard J. Diamond
/s/Donald R. Mastropietro Secretary, Chief Financial Officer
- - ------------------------- and Director June 12, 1997
Donald R. Mastropietro
21
<PAGE> 22
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----------
<S> <C>
Independent Auditors' Report F-1
Consolidated Balance Sheets as of April 30, 1996 and 1995 F-2
Consolidated Statements of Operations for each of the years in
the two-year period ended April 30, 1996 F-3
Consolidated Statements of Stockholders' Equity for each of
years in the two-year period ended April 30, 1996 F-4 - F-5
Consolidated Statements of Cash Flows for each of the
years in the two-tear period ended April 30, 1996 F-6 - F-7
Notes to Consolidated Financial Statements F-8 - F-21
</TABLE>
<PAGE> 23
[GUIDA & JIMENEZ, P.A. LETTERHEAD]
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
and Stockholders of
Advantage Life Products, Inc.
Tampa, Florida
We have audited the consolidated balance sheet of Advantage Life Products, Inc.
and subsidiaries as of April 30, 1996 and the related statements of operations,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. These standards require that we 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. We believe that our audit provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advantage Life Products, Inc.
and subsidiaries as of April 30, 1996 and the results of their operations, and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raise substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Guida & Jimenez
- - ---------------------
GUIDA & JIMENEZ, P.A.
Tampa, Florida
December 18, 1996
<PAGE> 24
[CORBIN & WERTZ LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To Advantage Life Products, Inc.
We have audited the accompanying consolidated balance sheet of Advantage Life
Products, Inc. and subsidiaries (the Company) as of April 30, 1995 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the two-year period then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we 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. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Advantage Life Products, Inc. and
subsidiaries at April 30, 1995 and the results of their operations and their
cash flows for each of the years in the two-year period then ended, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to
the consolidated financial statements, the Company has recurring losses from
operations and as of April 30, 1995, the Company has a negative working capital
of $863,460. These factors raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans with respect to these
matters are also described in Note 2. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
/s/ Corbin & Wertz
Irvine, California
July 11, 1995
<PAGE> 25
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
---- ----
<S> <C> <C>
Current Assets:
Cash $ 204,171 $ 83,538
Accounts Receivable, less allowance for uncollectible
accounts of $175,179 in 1996, $144,567 in 1995 220,082 80,839
Income tax receivable 87,214 ---
Note receivable from stockholder, net of allowance of $185,000 25,000 25,000
Inventory 34,274 180,849
Production costs --- 45,812
Other current assets 40,557 17,434
------------ -----------
Total current assets 611,298 433,472
------------ -----------
Property & Equipment:
Property & equipment, net of accumulated
depreciation of $318,694 in 1996, $419,789 in 1995 582,423 22,131
------------ -----------
Other Assets:
Goodwill, net of accumulated amortization of $1,804,022 in 1996,
$251,540 in 1995 4,074,197 1,163,794
Covenants not to compete, net of accumulated amortization of $165,000 255,000 ---
Other intangible assets, net of accumulated amortization of $1,054,267 845,734 ---
Note receivable, related party 15,000 ---
Other 3,563 ---
------------ -----------
Total other assets 5,193,494 1,163,794
------------ -----------
$ 6,387,215 $ 1,619,397
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities :
Notes payable $ 376,625 $ 6,625
Accounts payable 1,375,407 480,111
Accrued product returns 84,456 226,564
Accrued royalties 518,696 374,255
Other accrued expenses 189,835 209,377
Note payable, current portion 22,400 ---
------------ -----------
Total current liabilities 2,567,419 1,296,932
------------ -----------
Non-current Liabilities:
Note Payable, long-term 33,816 ---
------------ -----------
Stockholder's Equity:
Common stock, $0.16 par value, 25,000,000 shares authorized;
issued and outstanding, 296,476 in 1996 and 19,845 in 1995 47,437 3,176
Additional paid-in capital 17,705,204 6,080,413
Accumulated deficit (10,291,661) (5,761,124)
------------ -----------
Subtotal 7,460,980 322,465
Less: Common stock subscribed (2,775,000) ---
Unearned Compensation (900,000) ---
------------ -----------
Total Stockholder's equity 3,785,980 322,465
------------ -----------
$ 6,387,215 $ 1,619,397
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE> 26
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For Each Of The Years In The Two Year Period Ended April 30, 1996
<TABLE>
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
REVENUES:
Sales $ 5,530,245 $13,778,762
Returns and allowances (807,042) (3,885,583)
----------- -----------
Net Revenues 4,723,203 9,893,179
----------- -----------
COSTS AND EXPENSES:
Cost of goods sold 2,894,693 2,353,164
Selling, general, and administrative 6,194,192 9,245,226
----------- -----------
Total costs and expenses 9,088,885 11,598,390
----------- -----------
Loss from operations (4,365,682) (1,705,211)
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (22,621) ---
Other (1,077,271) 40,897
Impairment of goodwill (1,000,000) ---
----------- -----------
Total other income (expense) (2,099,892) 40,897
----------- -----------
LOSS BEFORE INCOME TAXES (6,465,574) (1,664,314)
INCOME TAX PROVISION 800 800
----------- -----------
NET LOSS $(6,466,374) $(1,665,114)
=========== ===========
LOSS PER COMMON SHARE $ (26.31) $ (83.91)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 245,807 19,845
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 27
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For Each Of The Two-Year Period Ended April 30, 1996
<TABLE>
<CAPTION>
Common Stock
---------------------- Additional
(RESTATED) Paid-in Accumulated
Shares Amount Capital Deficit Total
------ ------ ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
Balances, April 30, 1994 17,505 $2,801 $5,408,051 $(4,096,010) $1,314,842
Issuance of common stock:
For exercise of options 79 13 23,562 --- 23,575
For offering costs --- --- (23,569) --- (23,569)
For services rendered 42 7 19,526 --- 19,533
For conversions of debt 684 110 153,890 --- 154,000
For trade payables 83 13 21,987 --- 22,000
For cash, net of related
commissions and offering
costs of $23,569,
pursuant to private
placements 1,119 179 327,019 --- 327,198
For cash pursuant to
marketing agreement 333 53 149,947 --- 150,000
Net loss for year ended
April 30, 1995 --- --- --- (1,665,114) (1,665,114)
------ ------ ---------- ----------- -----------
Balances, April 30, 1995 19,845 $3,176 $6,080,413 $(5,761,124) $ 322,465
====== ====== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 28
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For Each Of The Two-Year Period Ended April 30, 1996
<TABLE>
<CAPTION>
Common Stock
Common Stock Additional Subscribed/
----------------------- Paid-in Accumulated Unearned
Shares Amount Capital Deficit Compensation Total
----------------------- ---------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance May 1, 1995 19,845 $ 3,176 $ 6,080,413 $ (5,761,124) $ --- $ 322,465
Issuance of stock on the
acquisition of Environmental
Professionals 46,306 7,409 6,167,893 (1,238,625) --- 4,936,677
Environmental Professionals
elimination --- --- --- 3,174,462 --- 3,174,462
Shares issued under employment
agreements and other 26,250 4,200 2,488,750 --- (900,000) 1,592,950
Common stock sold 200,000 32,000 2,968,000 --- (2,775,000) 225,000
Additional acquisition cost 4,075 652 148 --- --- 800
Net (Loss) for the year --- --- --- (6,466,374) --- (6,466,374)
------- ------- ----------- ------------ ----------- -----------
Balance, April 30, 1996 296,476 $47,437 $17,705,204 $(10,291,661) $(3,675,000) $ 3,785,980
======= ======= =========== ============ =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 29
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(6,466,374) $(1,665,114)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED IN OPERATING ACTIVITIES:
Depreciation and amortization 2,119,344 147,075
Impairment of goodwill 1,000,000 ---
Provision (benefit) for allowance for uncollectible 30,612 (257,886)
Undepreciated balance of assets disposed of 30,094 ---
Non-cash charges & other 1,609,669 ---
Non-cash incentives to convert note payable --- 44,000
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Receivables 1,879,553 1,181,332
Inventory 227,075 223,745
Other assets 65,676 ---
Prepaid expenses and other 298,381 565,577
Other accrued expenses (65,789) 328,635
Accounts payable (1,018,572) (1,283,115)
----------- -----------
Net cash provided by (used in) operating activities (290,331) (715,751)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Note receivable from stockholder (15,000) 250,000
Capital expenditures (27,011) (22,783)
----------- -----------
Net cash provided by (used in) in vesting activities (42,011) 227,217
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment on note payable (138,779) ---
Issuance of note payable 40,056 60,000
Proceeds from issuance of common stock & warrants, net 225,000 477,204
Proceeds from September 1995 private offering 237,499 ---
Proceeds from October 1995 private offering 89,199 ---
----------- -----------
Net cash provided by financing activities 452,975 537,204
----------- -----------
NET CHANGE IN CASH 120,633 48,670
CASH, BEGINNING OF YEAR 83,538 34,868
----------- -----------
CASH, END OF YEAR $ 204,171 $ 83,538
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 30
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
SUPPLEMENTAL SCHEDULE
For Each Of The Two-Year Period Ended April 30, 1996
Supplemental schedule of non-cash investing and financing activities:
The Company purchased all of the common stock of Environmental
Professionals, Inc. for $6,175,301. In connection with the
acquisition $6,075,301 was non-cash considerations.
Deferred compensation arrangements of $900,000 were entered into
with executives(see Note 6).
Additional shares of were sold for cash and a promissory note for
$2,775,000(see Note 4).
Additional acquisition cost of $800 were charged to additional paid
in capital.
F-7
<PAGE> 31
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 1: GENERAL
Advantage Life Products, Inc. (the "Company" or "Advantage") was formed under
Colorado law on June 19, 1986 under the name Advantage Video, Inc. On January
15, 1987, the Company changed its name to Advantage Entertainment, Inc. and on
October 10, 1989, the Company changed its name to Advantage Life Products,
Inc. On August 22, 1994, the Company reincorporated in the State of Delaware.
On July 1, 1993, the Company acquired Lasting Cosmetics, Inc. ("Lasting
Cosmetics"), which enabled the Company to obtain rights to market and distribute
Secret Hair and Lasting Kiss Cosmetics (see Note 12). Lasting Cosmetics develops
and markets retail consumer products, focusing on cosmetic, beauty and health
products. Lasting Cosmetics' emphasis has been the marketing of Jose Eber's
Secret Hair, primarily through infomercials.
On July 6, 1995, the Company consummated the acquisition of Environmental
Professionals, Inc. ("EPI"), an environmental testing and remediation company
(see Note 12).
NOTE 2: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and
satisfaction of liabilities in the normal course of business. The Company's
losses from operations of $6,466,374 and $1,665,114 for the years ended April
30, 1996 and 1995, respectively, and its negative working capital at April 30,
1996 of $1,956,121, raise substantial doubt about its ability to continue as a
going concern for a reasonable period of time.
Subsequent to the end of the year, the Company entered into an agreement to
sell 5,000,000 shares of its $.16 par value common stock for $2,500,000,
payable $100,000 at closing and a single maturity promissory note in the amount
of $2,400,000, including interest at the rate of 8% per annum due on August 31,
1997 (Note 13). In addition, the Company entered into a merger agreement with
Universal Mica, Inc. (Note 13). Management believes that the infusion of cash
from the sale of stock, and cash from the operations of Universal Mica, Inc.
("Universal Mica") is the basis of a viable plan that will provide the Company
sufficient funds to remain a going concern. There are no assurances that the
cash from the sale of stock or from the operation of Universal Mica will be
sufficient to fully develop the Company's business plan. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Advantage and its wholly-owned subsidiaries. The consolidated operations
include accounts of EPI from July 6, 1995 (date of merger) through April 30,
1996. All significant Intercompany accounts have been eliminated in
consolidation.
EPI outstanding stock at the date of the merger was restated for the equivalent
number of shares received in the merger taking into consideration respective
par values.
CASH AND CASH EQUIVALENTS
For the purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
F-8
<PAGE> 32
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 2: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INVENTORY
Inventory is valued at the lower of cost or market. Cost is determined on a
first-in, first-out basis. Inventory is comprised primarily of purchased
finished goods for resale.
PRODUCTION COSTS
Costs related to the production of the Company's direct response televised
advertising programs (infomercials) are capitalized and amortized over the
shorter of the estimated useful life of the production or based on the
percentage of actual sales to projected sales from the production. During the
year ended April 30, 1996, no production costs were capitalized. Amortization
of such costs for 1996 and 1995 amounted to $45,812 and $169,734, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated or amortized
using the straight-line method over their estimated useful lives of three to
five years. Depreciation expense for 1996 and 1995 amounted to $55,807 and
$5,099 respectively.
GOODWILL
Goodwill, which represents the excess of the purchase price over the fair value
of net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited. The Company assesses the recoverability of goodwill
periodically by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through projected undiscounted cash
flows. The amount of goodwill impairment, if any, is charged to operations in
the period in which goodwill impairment is determined by management.
Management has amortized goodwill using the estimated periods to be benefited
of 3 to 5 years through April 30, 1996. Amortization of goodwill for the years
ended April 30, 1996 and 1995, including any charge off based on the
determination of impairment, amounted to $2,700,714 and $147,075, respectively.
For the year ended April 30, 1996, $2,873,601 was attributable to Advantage
and $104,740 was attributable to EPI.
COVENANTS NOT TO COMPETE
Covenants not to compete are part of the net assets acquired in the acquisition
of Environmental Professionals, Inc. The agreements are with former
stockholders-managers of Environmental Professionals, Inc. Amortization of
these covenants is taken on a straight line basis over 7 years. Amortization
for the year ended April 30, 1996 amounted to $50,000.
OTHER INTANGIBLE ASSETS
Other intangible assets are part of the net assets acquired in the acquisition
of Environmental Professional, Inc. The group is comprised of a customer list,
a covenant not to compete, licenses and permits, and trade marks. Amortization
is taken on a straight line basis over 5 years. Amortization for the year
ended April 30, 1996 amounted to $313,334.
REVENUE RECOGNITION
The Company recognizes revenue on the accrual method of accounting at the time
goods are shipped. Estimated future product returns are provided for at the
time units are shipped.
F-9
<PAGE> 33
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 2: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "ACCOUNTING FOR INCOME TAXES" (Statement No. 109). Under
Statement No. 109, the liability method is used in accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse (see Note 5).
PER SHARE INFORMATION
Per share information is based on the weighted average number of common shares
and common equivalent shares outstanding during the year, giving effect to a 1
for 3 reverse stock split on October 20, 1994, the 100% stock dividend of
August 1, 1995, the 1 for 20 reverse stock split on August 1, 1995, and a 1 for
20 reverse stock split on June 24, 1996. Common equivalent shares have not
been included in the calculation of net loss per share for fiscal 1996 and 1995
because their effect would be antidilutive. For purposes of computing the
weighted average number of shares, all common shares outstanding were
retroactively adjusted to the beginning of the periods presented.
RECLASSIFICATIONS
Certain reclassifications have been made to the amounts shown on the 1995
financial statements to conform to the 1996 presentation.
NOTE 3: PROPERTY AND EQUIPMENT
Property and equipment are summarized by major classifications as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Leasehold improvements $ 42,207 $ 2,000
Office equipment & furniture 201,051 392,296
Machinery & equipment 268,283 47,624
Vehicles 389,576
-------- --------
901,117 441,920
Less accumulated depreciation 318,694 419,789
-------- --------
$582,423 $ 22,131
======== ========
</TABLE>
NOTE 4: STOCKHOLDERS' EQUITY
REVERSE STOCK SPLITS
On October 20, 1994, the Company effected a 1 for 3 reverse stock split. On
August 1, 1995, the Company effected a 1 for 20 reverse stock split, and on the
same date effected a 100% stock dividend. On June 24, 1996 the Company also
effected a 1 for 20 reverse stock split. All common stock transactions have
been retroactively restated for all periods presented as a result of these
reverse stock splits and stock dividends.
F-10
<PAGE> 34
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 4: STOCKHOLDERS' EQUITY - CONTINUED
PRIVATE PLACEMENTS
In September 1994, the Company engaged a New York based investment banking firm
to sell a private placement of up to 500,000 shares (1,250 shares after the 1
for 20 reverse split on June 24, 1996) of its common stock. The Company issued
166,666 shares (832 shares after the 1 for 20 reverse stock split on June 24,
1996) at $1.44 each, net of commissions of $2,500. In connection with the
private placement, the Company issued 13,334 detachable warrants exercisable at
$1.80 which expire in October 1997.
In October 1994, the Company utilized the services of a New York based capital
management firm to sell common stock through a private placement. In
connection therewith, the Company issued 57,133 shares (287 shares after the 1
for 20 reverse stock split on June 24, 1996) of common stock at $1.57 per
share, net of commissions of $500. In connection with the private placement,
the Company issued 2,857 detachable warrants exercisable at $2.35 per share
which expire in April 1996.
STOCK ISSUANCE
During the fiscal year 1995, and in connection with the marketing agreement
with GRC (see Note 9) the Company issued 66,667 shares (333 shares after the 1
for 20 reverse stock split on June 24, 1996) of common stock at $2.25 per share
together with an option to purchase 133,333 additional shares (333 shares after
the 1 for 20 reverse stock split on June 24, 1996) of common stock at a price
of $1.89 per share. No amount was charged to expense, as the value of the
option was not considered significant. The options expire in September 1999.
On August 8, 1995 the Company issued common stock to officers of the Company in
exchange for services (see Note 6).
STOCK ISSUED IN CONNECTION WITH DEBT CONVERSION
On July 29, 1994, the Company issued 136,889 shares (684 shares after the 1 for
20 reverse stock split on June 24, 1996) with a value of $154,000 to an
investor group to convert certain notes payable with a principal balance of
$110,000 at the date of conversion. The difference between the value of the
shares of common stock issued and the principal balance of the notes payable
was recorded as interest expense in the accompanying consolidated statement of
operations for the year ended April 30, 1995.
COMMON STOCK ISSUED FOR SERVICES
In July 1994, the Company issued a total of 16,667 shares (83 shares after the
1 for 20 reverse stock split on June 24, 1996) of its common stock valued at
$22,000 as payment on certain accounts payable related to investor relations.
On October 3, 1994, the Company issued 8,333 shares (42 shares after the 1 for
20 reverse stock split on June 24, 1996) of common stock with a market value of
$19,533 for certain services in connection with the production of the Secret
Hair infomercial. In connection with these services, options to purchase an
additional 50,000 shares (125 shares after the 1 for 20 reverse stock split on
June 24, 1996) at $1.68 per share were issued by the Company. No amount was
charged to expense, as the value of the warrant was not considered significant.
The options vest equally over a three year period and expire in September
1997.
CAPITAL STOCK SALES
The Company entered into two separate Capital Stock Purchase Agreements
("Agreements") for the sale of 2,000,00 shares (200,000 shares after the 1 for
20 reverse stock split of June 24, 1996) each to Roscom, Ltd ("Roscom") and
Vietri Investments, Ltd ("Vietri"), unrelated entities for a total
consideration of $3,000,000. Under the term of the Agreements, dated August
15, 1995 with respect to Roscom and October 6, 1995 with respect to Vietri, the
Company was to receive $200,000 in cash and a promissory note from Roscom and
Vietri in the principal amount of $1,300,000 which matured August 15, 1996 with
respect to Roscom and August 31, 1996 with respect to Vietri.
F-11
<PAGE> 35
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 4: STOCKHOLDERS' EQUITY - CONTINUED
CAPITAL STOCK SALES (CONTINUED)
The respective promissory notes were secured by the shares sold to each entity.
There was a scrivener's error in the promissory note issued by Roscom to the
Company as the actual promissory note delivered to the Company by Roscom
indicated that the note matured December 31, 1995, whereas the Agreement
indicated that the note was payable August 15, 1996. The Company has
subsequently asked Roscom to execute a new note reflecting the correct maturity
date, August 15, 1996.
The Agreements further indicated that the shares would have no voting rights
until such time as Roscom and/or Vietri had paid for the shares.
The Agreements contemplated that Roscom would pay $200,000 by August 15, 1995,
and Vietri would pay $200,000 by October 5, 1995, the closing dates of the
transactions. The Company subsequently agreed to extend the date that the cash
portion of the purchase price was payable until December 31, 1995. The amounts
paid by Roscom and Vietri to the Company totaled $225,000 and was paid on or
about December 15, 1995. Additionally, Roscom and Vietri agreed to assume
$175,000 of the Company's and/or its subsidiaries indebtedness owed to two of
the Company's officers and Directors, Alan Lipstein and Gerald Norton and such
persons released the Company of $175,000 of such indebtedness.
While the shares issued to Roscom and Vietri contained restrictive legends, the
Company received an opinion of counsel from Joel Schneider, an attorney
practicing in New York, that the legend could be removed from the certificates
issued to Roscom and Vietri. Messrs. Lipstein and Norton further agreed to
cause the shares owned by Roscom and Vietri to be partially released from the
stock pledge agreement. It was Mr. Lipstein's and Mr. Norton's understanding
that the directors of the Company understood that certain shares would be
released from the Stock Pledge Agreements. Approximately 2,500,00 shares
(125,000 shares after the 1 for 20 reverse stock split of June 24, 1996) of the
Company's common stock was released from the terms of the Stock Pledge
Agreement.
On August 31, 1996, the Company agreed to extend the due date of the promissory
notes until August 31, 1997, provided Roscom and Vietri would pledge additional
collateral to the Company. As additional collateral, Roscom pledged 300,000
shares of stock of Med-Vax Technologies, Inc., with an approximate value of
$1,500,000. As additional collateral, Vietri pledged 300,000 shares of stock of
Prentice Capital, Inc., a public company, with an approximate value of
$1,650,000. Mr. Alan S. Lipstein, the Company's president is also the president
of Med-Vax Technologies, Inc. and Prentice Capital, Inc.
STOCK ISSUANCE TO ADVISORS
The Company issued an additional 81,500 shares (4,075 shares after the 1 for 20
reverse stock split of June 24, 1996) to unrelated advisors who represented the
Company in its acquisition of Environmental Professionals, Inc.
On September 8, 1995, the Board of Directors approved the issuance of 125,000
shares (6,250 shares after the 1 for 20 reverse split on June 24, 1996), to two
officers Robert Fredericks and George Carras, 50,000 shares (2,500 shares after
the 1 for 20 reverse split on June 24, 1996) each, and 25,000 shares (1,250
shares after the 1 for 20 reverse split on June 24, 1996) to Donald Radcliffe a
consultant.
STOCK OPTIONS AND WARRANTS
The Company has a stock option plan (the Plan) which provides for the issuance
of options to purchase 666,667 shares (1,667 shares after the 1 for 20 reverse
stock split on June 24, 1996) of the Company's common stock. The Plan provides
for two types of options, Incentive Options and Non-qualified Options.
Incentive Options must be issued at greater than or equal to 100% of fair
market value, except where the individual already owns 10% or more of the
F-12
<PAGE> 36
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 4: STOCKHOLDERS' EQUITY - CONTINUED
STOCK OPTIONS AND WARRANTS (CONTINUED)
Company's common stock, in which case the options must be issued at greater
than or equal to 110% of fair market value. Non-qualified Options may be
issued at any price not less than 85% of fair market value. Fair market value
is defined as the average of the previous day's closing bid-and-ask price.
During the year ended April 30, 1995, the Company granted options to purchase
506,667 shares (1,267 shares, respectively, after the 1 for 20 reverse stock
split of June 24, 1996) under the Plan. No options were granted during the
year ended April 30, 1996.
In 1995, the Company granted options to purchase 478,109 shares (1,195 shares
after the 1 for 20 reverse stock split of June 24, 1996) of common stock with
exercise prices ranging from $1.31 to $4.00, expiring in 1997 through 1999.
In fiscal 1995, options to purchase 15,717 shares (79 shares after the 1 for 20
reverse stock split of June 24, 1996) of common stock were exercised in
exchange for services provided for capital raising activities valued at $1.50
per share.
Stock option transactions are summarized as follows:
<TABLE>
<S> <C> <C>
Balance at May 1, 1994 4,614 $262-$1,875
Granted 5,672 $262-$800
Exercised (79) $298
Canceled (1,365) $300-$678
------
Balance at April 30, 1995 8,842 $262-$1,875
Granted --
Exercised 3,520
Canceled (2,993)
------
Balance April 30, 1996 9,369
======
</TABLE>
NOTE 5: INCOME TAXES
The tax effects of temporary differences that give rise to significant
components of the Company's deferred tax assets and liabilities for federal and
state income tax as of April 30, 1996 and 1995 are as follows:
Complete table on the following page
F-13
<PAGE> 37
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 5: INCOME TAXES - CONTINUED
<TABLE>
<CAPTION>
Deferred tax assets: 1996 1995
---------- ----------
<S> <C> <C>
Net operating loss carryforward $ 4,385,097 $ 1,813,607
Accrued vacation --- 12,639
Accrued royalties --- 150,076
Allowance for product returns --- 90,852
Allowance for doubtful accounts 175,179 ---
Allowance for note receivable from
stockholder --- 74,185
----------- -----------
Total deferred tax assets 4,560,276 2,141,359
Deferred tax liabilities -0- -0-
----------- -----------
Valuation allowance for deferred tax assets (4,560,276) (2,141,359)
----------- -----------
Net deferred taxes $ -0- $ -0-
=========== ===========
</TABLE>
The valuation allowance increased by $702,585 and $640,118 during the years
ended April 30, 1996 and 1995.
The provision for income taxes for the year ended April 30, 1996 and 1995 are
comprised of the California minimum state income tax.
The differences between income taxes for financial reporting purposes and the
federal statutory rate of 34% for the years ended April 30, 1996 and 1995 are
as follows:
<TABLE>
<CAPTION>
Amount % Amount %
----------- ----- --------- -----
<S> <C> <C> <C> <C>
Income tax benefit at the
federal statutory rate $(1,779,933) (34.0) $(565,867) (34.0)
Nondeductible expenses 348,560 6.8 7,758 0.5
----------- ----- --------- -----
Valuation allowance for benefit 1,431,373 27.2 (558,109) (33.5)
of current year loss $ 1,432,173 27.2 $ 558,909 33.6
=========== ===== ========= =====
Total $ 800 NIL $ 800 0.1
=========== ===== ========= =====
</TABLE>
At April 30, 1996 and 1995, the Company had available net operating loss
carryforward for Federal and state income tax purposes of approximately
$8,931,526 and $4,721,608, respectively, which expire through 2011.
During December 1993, the Company experienced a change in ownership that
resulted in approximately $2,916,000 of the federal net operating loss
carryforward being subject to an annual utilization limitation of $449,000.
Furthermore, as a result of the Company's acquisition of EPI (see Note 12), the
management anticipates an additional limitation on the use of net operating
loss carryforward due to the change in ownership.
Income tax receivable in the amount of $87,214 is attributable Environmental
Professional, Inc.'s activities prior to the acquisition. The receivable was
generated by applying net operating losses to prior taxes paid.
F-14
<PAGE> 38
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 6: RELATED PARTY TRANSACTIONS
EMPLOYMENT AGREEMENTS
On August 1, 1995, the Company entered into a employment agreement with Alan S.
Lipstein, the President of the Company, and Gerald Norton, vice-president of
the Company. The agreements are for an initial period of five years, and can be
automatically extended for unlimited successive one year periods unless they
are terminated during the extension period.
Due to the Company's limited capital resources, Mr. Lipstein and Mr. Norton
agreed to accept, in lieu of cash payments otherwise due under the contracts,
300,000 and 100,000 shares respectively (15,000 shares and 5,000 shares
respectively after the 1 for 20 reverse stock split of June 24, 1996) valued at
$6 per share, of the Company's common stock, provided that the Company agreed
to file a registration statement. On August 4, 1995, the Company filed a
registration statement on Form S-8 registering the shares for sale.
On November 14, 1995, the Company entered into a employment agreement with
George A. Carras, the Company's chief financial officer. The agreement are for
an initial period of three years, and can be automatically extended for
unlimited successive one year periods unless they are terminated during the
extension period.
For the services to be rendered to the Company by Mr. Carras during the term of
the employment agreement, his compensation was $108,000 per annum, payable
monthly in arrears. In addition to his compensation, Mr. Carras was entitle to
three weeks vacations, and other fringe benefits.
On or about May 30, 1996, the Company elected to terminate Mr. Carras's
employment contract with an agreed settlement of $300,000. The Company paid Mr.
Carras $100,000 on that date, and agreed to issue common stock with a fair
market value for the remaining $200,000.
OTHER TRANSACTIONS
On July 29, 1994, the Company converted, debt of $110,000 payable to a firm
whose owners are officers/stockholders of the Company into shares of its common
stock valued at $154,000 (see Note 4).
On June 4, 1993 and July 25, 1993, the Company advanced Mr. Ackerman, its
former chief executive officer, $250,000 and $210,000, respectively. The
$250,000 advance represents a loan in the form of a 10% promissory note. The
$210,000 advance represents borrowings under a line of credit agreement. Both
the note and the line of credit were secured by 489,806 shares (1,225 shares
after the 1 for 20 reverse stock split of June 24, 1996) of the Company's
common stock. During fiscal 1995, the Company sold 323,014 (808 shares after
the 1 for 20 reverse stock split of June 24, 1996) of such common shares held
as collateral and collected approximately $280,000 of which approximately
$30,000 represented accrued interest on the note. Note receivable from
stockholder on the accompanying consolidated balance sheet at April 30, 1995,
represents the remaining balance due the Company, net of an allowance of
$185,000, which is secured by 166,792 shares (417 shares after the 1 for 20
reverse stock split of June 24, 1996) of the Company's common stock. As of
April 30, 1995, the Company is in litigation with Mr. Ackerman (see Note 12).
Effective May 1, 1995 the Company entered into a six month agreement with a
former officer under which the former officer is to be paid monthly fees of
$6,500 for consulting services. In addition, the Company committed to pay the
former officer the first $90,000 of proceeds, if any, from the settlement of
certain litigation in which the Company is the plaintiff.
During the year ended April 30, 1996, 125,000 shares (6,250 shares after the 1
for 20 reverse stock split of June 24, 1996) were issued to two former
directors and a consultant for services rendered. The fair value of these
shares was recorded at $.75 per share.
F-15
<PAGE> 39
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 7: COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases certain equipment and office and warehouse/assembly space.
The leases, which expire over the next five years, are classified as operating
leases. Future annual minimum lease payments required under non-cancelable
operating leases at April 30, 1996 are as follows:
<TABLE>
<CAPTION>
Future annual minimum lease payments:
<S> <C>
1997 $13,664
1998 13,664
1999 6,252
2000 3.927
2001 3,921
-------
Total future minimum lease payments $41,428
=======
</TABLE>
Rent expense amounted to $41,041 and $63,588 for the years ended April 30, 1996
and 1995, respectively.
LITIGATION
On May 3, 1995, the Company filed suit in the Superior Court of the State of
California, County of Los Angeles, against Guthy-Renker Corporation (GRC) (see
Note 12) and other parties. The Company is alleging various actions of
wrongful conduct by GRC and these other parties whereby GRC abused the
relationship for their own use, gain, profit and unfair advantage. The Company
seeks compensatory and punitive damages, reimbursement of legal fees and
restraint of GRC activities as they relate to Secret Hair. GRC has filed a
cross complaint seeking damages from the Company. The claims of the Company
against Guthy-Renker have been dismissed with prejudice.
On June 15, 1996, Guthy-Renker Corporation (GRC) filed a cross complaint in the
Superior Court of the State of California, County of Los Angeles against the
Company and Don Danks for breach of written contract, conversion, negligent
misrepresentation, bad faith denial of existence of contract, dissolution and
accounting, false designation or origin and false description, recession and
restitution, defamation, declaratory relief, and injunctive relief. GRC is
seeking approximately $4,500,000 in damage and reimbursement. The Company
believes the facts of which it has knowledge of will enable to prevail on all
claims from GRC.
On December 21, 1994, Sherry Guimond, a previous employee of the Company,
brought an action in the Orange County Superior Court, against the Company, Don
Danks, Parker Dale, James Stapleton, Robert Fredericks, and George Carras. The
suit alleges breach of contract, breach of covenant of good faith and fair
dealing, sex discrimination, fraud and deceit, tortuous inducement of breach of
contract, defamation, specified performance. The Company settled this lawsuit
and agreed to pay Ms. Guimond $85,000, of which $10,000 has been paid to date.
The remaining balance of the settlement is past due.
There are various lawsuits against Environmental Professionals, Inc., (EPI), one
of the Company's subsidiaries, however, EPI is now an inactive subsidiary of the
Company, and it is the opinion of management that the claims that any creditor
has against EPI will not permit that creditor to obtain any relief against the
parent company.
See Notes 8 and 12 for additional matters in which the Company is a defendant.
F-16
<PAGE> 40
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 8: LICENSE ARRANGEMENTS
LICENSEE ARRANGEMENT - CIGARREST PRODUCTS
On October 9, 1991, the Company (as licensee) and More Direct Response, Inc.
("MDR") signed an agreement, as amended, which granted the Company unrestricted
rights to market CigArrest products worldwide in exchange for a royalty of 10%
of net sales of products bearing the CigArrest name. No significant royalties
were paid by the Company through fiscal 1994. On March 28, 1994, the Company
terminated its rights to distribution of CigArrest products, as such, these
rights reverted back to MDR.
During fiscal 1995, MDR filed suit against the Company asserting that Regal
defaulted on a marketing agreement with Advantage related to CigArrest products
which had been previously assigned to a subsidiary of Regal Communications
Corporation, Inc. (see below), and that Advantage had an obligation to fulfill
this obligation. On June 1996, a default judgment was entered against the
Company in the amount of $458,000 after its counsel withdrew. The Company
intends to have this judgment overturned. Additionally, the Company intends to
settle the judgment at a considerable discount. Due to the uncertainty of the
final amount to be paid by the Company, the liability has not been recorded in
the accompanying financial statements.
LICENSOR ARRANGEMENT
On February 3, 1993, the stockholders of the Company (as licensor) approved an
agreement between the Company and Advantage/Regal, a newly-formed subsidiary of
Regal Communications Corporation, Inc., (collectively "Regal"), whereby the
Company licensed to Regal, on a worldwide basis, the exclusive rights to
sublicensee the manufacturing, selling and distribution of the Company's
CigArrest product line; in addition the Company sold to Regal all of its
existing inventory of the licensed product. As consideration, the Company
received 352,000 shares of Regal common stock upon closing of the agreement
with additional incentives if certain sales levels were attained by Regal.
The Company and Regal entered into a management agreement whereby Regal agreed
to pay for certain expenses associated with the sales, marketing and
distribution of the licensed product, including the salaries of certain
employees and other costs, as defined, in the form of a management fee. No
management fees were earned during the year ended April 30, 1996.
In 1994, the shares of common stock of Regal received by the Company were
registered. The Company sold the 352,500 shares of Regal for $1,735,507,
resulting in an insignificant gain.
On September 23, 1994, Regal filed Chapter 11 with the United States Bankruptcy
Court, Eastern District of Pennsylvania. As of April 30, 1995, the Company has
no outstanding obligations due Regal.
ROYALTY ARRANGEMENTS
The Company has entered into various royalty agreements for certain rights to
use names and trademarks which provide for payments at commercial rates based
on revenues generated, among other things. Royalties expense for the years
April 30, 1996 and 1995, are $248,914 and $1,045,062, respectively.
NOTE 9: MARKETING AND DISTRIBUTION AGREEMENT OF SECRET HAIR
On May 5, 1994, the Company entered into an agreement with GRC wherein the
Company and GRC share the rights to market and distribute the Company's hair
extension products in the United States. Under the terms of the agreement, GRC
was obligated to provide a minimum of $2,000,000 in media expenditures over a
six-month period in exchange for 50 percent of the net profits, as defined, of
all non-retail sales, and between 20 and 50 percent of retail sales, based on
actual media expenditures.
F-17
<PAGE> 41
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 9: MARKETING AND DISTRIBUTION AGREEMENT OF SECRET HAIR -
CONTINUED
In August 1994, GRC began Secret Hair sales from the infomercial produced by
the Company. In January 1995, management determined that GRC had violated
certain terms of the agreement, and that the contract was unenforceable. The
results of operations include the operations attributable to the agreement
through January 31, 1995. See Note 8 for discussion of litigation currently in
effect with respect to this agreement.
NOTE 10: SIGNIFICANT CUSTOMERS
During the year ended April 30, 1996, the Company did not have any customers
which represented greater than 10% of total revenues.
NOTE 11: FOURTH QUARTER ADJUSTMENTS
During the three months ended April 30, 1996 and 1995, the Company recorded the
following significant fourth quarter adjustments:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Write-off of receivable from GRC $ --- $1,093,284
Allowance for doubtful account expensed (reversed) 175,179 (113,319)
Provision for unused advertising credits --- 314,748
Write-off of inventory --- 144,553
Write-off of goodwill 1,000,000 ----
Accrued royalties reversed --- (181,544)
Accounts payable reversed --- (138,666)
---------- ----------
Total fourth quarter charges $1,175,179 $1,119,056
</TABLE> ========== ==========
NOTE 12: ACQUISITION
NEW LASTING COSMETICS, INC.
On July 1, 1993, the Company created a wholly-owned subsidiary, Lasting
Cosmetics, Inc. (referred to hereafter as New Lasting Cosmetics), a Delaware
corporation, to acquire intangible assets and certain contracts of Lasting
Cosmetics, Inc., (referred to hereafter as Old Lasting Cosmetics), a privately
held New York corporation, in exchange for 489,889 shares (1,225 shares after
the 1 for 20 reverse stock split of June 24, 1996) of the Company's common
stock valued at $1,201,535 and named Michael Ackerman, the former sole
stockholder of Old Lasting Cosmetics, as Chief Executive Officer of Advantage.
Based on post closing provisions in the agreement, as amended, the Company
issued 77,584 additional shares (194 share after the 1 for 20 reverse stock
split of June 24, 1996), under an arrangement similar to the ratchet provisions
described in the agreement, of its common stock valued at $158,854. The
acquisition is accounted for using the purchase method. The purchase price of
$1,415,334, including acquisition costs of $54,945, was assigned to goodwill
(see Note 2), as no tangible assets were acquired by the Company. In May 1996,
the Company decided to discontinue its "infomercial business" and is in the
process of winding up the affairs there to.
F-18
<PAGE> 42
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 12: ACQUISITION - CONTINUED
NEW LASTING COSMETICS, INC.(CONTINUED)
Under the terms of the agreement, Mr. Ackerman could earn up to 2,560,480
additional shares (6,401 shares after the 1 for 20 reverse stock split of June
24, 1996) of the Company's common stock over six years based on pre-tax profits
of New Lasting Cosmetics. Mr. Ackerman was to receive one share of the
Company's common stock for every dollar of pre-tax profit of the New Lasting
Cosmetics for a period of three years and then one share for every two dollars
of pre-tax profit of the subsidiary for the three years thereafter. On March
8, 1994, the Board of Directors terminated Mr. Ackerman as Chief Executive
Officer, due to breach of fiduciary duty.
On May 23, 1994, the Company filed suit in the Orange County Superior Court
against Mr. Ackerman alleging fraud and deceit, among other things. On
December 6, 1994, Mr. Ackerman filed a cross-complaint against the Company.
Mr. Ackerman asserts amounts are due him related to the promissory note and
stock security agreements (see above). A judgment was entered against the
Company in the amount of $400,000 after its counsel withdrew. The Company
intends to have this judgment overturned. Additionally, the Company has begun
negotiations with Mr. Ackerman's counsel to settle the judgment at a
considerable discount.
ENVIRONMENTAL PROFESSIONAL, INC.
On July 6, 1995, the Company acquired EPI, a wholly-owned subsidiary of Eagle
Vision, Inc. In connection with the acquisition, the Company issued 9,261,130
(46,306 shares after the 1 for 20 reverse stock split of June 24, 1996) shares
of its common stock (representing approximately 70% of the issued and
outstanding shares of its common stock). Current stockholders of the Company's
common stock may receive up to 1,017,613 additional shares (2.544 shares after
the 1 for 20 reverse stock split of June 24, 1996) of the Company's common stock
based on the net recovery, if any, from certain litigation in which the Company
is plaintiff. In addition, each stockholder of the Company's common stock will
receive an unspecified number of warrants to acquire additional common shares.
The acquisition was accounted for using the purchase method. Accordingly, for
financial reporting purposes, the 9,261,130 shares (46,306 shares after the 1
for 20 reverse stock split of June 24, 1996) issued to acquire EPI will be
considered outstanding as of the date of the acquisition. The purchase price
is $6,175,301, with the excess of cost over the net assets acquired of
approximately $5,249,763 was allocated to goodwill.
The consolidated statements of operations include ten months of operating
activity for EPI. Goodwill of $5,249,763 derived from the acquisition of
Environmental Professionals, Inc. will be amortized for a period of 36 months on
a straight line basis
NOTE 13: SUBSEQUENT EVENT
ENVIRONMENTAL PROFESSIONALS OPERATIONS
As the result of the insolvency of a major customer, and its inability to obtain
other sources of funding, one of the Company's subsidiaries, EPI was unable
its current obligations and, therefore, ceased operation on May 17, 1996. EPI
had pledged vehicles on loans to a bank, and in addition, had pledged all other
assets, including its accounts receivable, tangible and intangible assets of
that company, on line of credit to the same bank. The bank filed an action and
took possession of EPI's assets, and has appointed a Receiver. Management
believes that EPI's accounts receivable and other assets are sufficient to
satisfy the bank loan and therefore anticipates the ultimate return of its
operating assets. If EPI's insolvency is permanent the effect on the financial
statements of the Company could be fatal. In May 1996, the Company decided to
discontinue its "environmental remediation business" and is in the process of
winding up the affairs thereto.
F-19
<PAGE> 43
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 13: SUBSEQUENT EVENT - CONTINUED
LASTING COSMETICS OPERATIONS
Prior to the acquisition of Environmental Professionals, Inc. on July 6, 1995,
the Company was involved in the sale of cosmetics and hair products. The
Company's sales were derived substantially from the sale of one product. The
Company maintained a policy of money back guarantee for its products and
experienced a consistently high merchandise return, and as a result thereof,
the Company sustained recurring losses from operations. In May 1996, the
Board of Directors decided to phase out the cosmetics and hair products line of
business.
STOCK SUBSCRIPTION
On August 21, 1996, the Company entered into an agreement to sell 5,000,000
shares of its $.16 par value common stock, restricted under Section 144, to
Cimtran, Ltd. ("Cimtran"), an unrelated entity, for $2,500,000, payable $100,000
in cash, and the balance in the form of a single maturity promissory note in the
amount of $2,400,000, payable with interest at the rate of 8% per annum. As
security for the performance of its obligation, Cimtran pledged 5,000,000 shares
of Advantage Life Products, Inc. owned by Cimtran. The principal amount and the
accrued interest is due in a single payment on August 31, 1997.
ACQUISITION OF UNIVERSAL MICA, INC.
On August 9, 1996 the Company, through a newly established subsidiary, Advantage
Life Acquisition, Inc. ("Advantage Life Acquisition"), a Florida corporation,
entered into an Agreement and Plan of Reorganization with Universal Mica,
a New York corporation, and George Lafauci, the sole shareholder of Universal
Mica. In accordance with the merger agreement, all of the outstanding shares of
stock of Universal Mica were exchanged for and converted into 480,000 shares of
the Company's common stock (valued at $1,200,000), and a single maturity
promissory note in the amount of $800,000, with interest at the rate of 8% per
annum, payable monthly. The principal amount of the note is due in a single
payment on August 8, 1999. The note is secured by all of the assets of
Advantage Life Acquisition after the merger.
Immediately after the merger, the name of Advantage Life Acquisition, Inc. was
changed to Universal Mica, Inc. Until such time as all sums due to Mr. Lafauci
are paid in full, he is being appointed Director of Advantage Life Acquisition,
Inc.
Universal Mica entered into an employment agreement with Mr. Lafauci
immediately after the effective date of the merger upon terms and conditions
negotiated by the parties.
The Company's business plan is to expand its home furnishing business by
opening two additional retail locations in the greater New York City area in
the next twelve months. Management feels that this is a viable plan and will
be successful in generating the cash necessary to remain a going concern.
NOTE 14: SEGMENT INFORMATION
The Company operates in two distinct industries, personal care products through
Advantage Life and environmental remediation through EPI (see notes 1 and 12).
Information about those segments for the year ended April 30, 1996 is as
follows:
F-20
<PAGE> 44
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For Each Of The Years In The Two-Year Period Ended April 30, 1996
NOTE 14: SEGMENT INFORMATION - CONTINUED
<TABLE>
<CAPTION>
Personal Care Environmental
Products Remediation Consolidated
------------- ------------- ------------
<S> <C> <C> <C>
Sales to unaffiliated customers $ 1,923,219 $ 2,799,984 $ 4,723,203
=========== =========== ===========
Operating loss $(2,209,037) $ (698,177) $(2,907,214)
=========== ===========
Other expenses $ 131,567 $(1,231,459) (1,099,892)
=========== ===========
General corporate expenses (2,458,468)
-----------
Income from continuing operations
before income taxes $(6,465,574)
===========
Indentifiable assets at April
30, 1996 $ 1,644,198 $ 2,468,381 4,112,579
=========== ===========
Corporate assets 3,174,636
-----------
Total assets at April 30, 1996 $ 7,287,215
===========
</TABLE>
Operating loss is the total revenue less operating expenses, and excludes
general corporate expenses, interest expense and income taxes. For the year
ended April 30, 1996, depreciation expense of the personal care products and
environmental remediation segements was $9,007 and $46,800 repectively. Capital
expenditures for the two segments amounted to $0 and $27,011 respectively.
Indentifiable assets are those used by each segment of the Company's operation.
Coporate assets are primarily cash, equipment and intangibles.
F-21
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1995
<PERIOD-END> APR-30-1996
<EXCHANGE-RATE> 1
<CASH> 204,171
<SECURITIES> 0
<RECEIVABLES> 605,258
<ALLOWANCES> 360,176
<INVENTORY> 34,274
<CURRENT-ASSETS> 611,298
<PP&E> 901,117
<DEPRECIATION> 318,694
<TOTAL-ASSETS> 6,387,215
<CURRENT-LIABILITIES> 2,567,419
<BONDS> 0
0
0
<COMMON> 47,437
<OTHER-SE> 3,738,543
<TOTAL-LIABILITY-AND-EQUITY> 6,387,215
<SALES> 5,530,245
<TOTAL-REVENUES> 4,723,203
<CGS> 2,894,693
<TOTAL-COSTS> 2,894,693
<OTHER-EXPENSES> 6,194,192
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,621
<INCOME-PRETAX> (6,465,574)
<INCOME-TAX> (800)
<INCOME-CONTINUING> (6,466,374)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,466,374)
<EPS-PRIMARY> (26.31)
<EPS-DILUTED> (26.31)
</TABLE>
