<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
For the transition period from _______________________ to _________________
Commission file number 33-25126-D
----------
SEPTIMA ENTERPRISES, INC.
-------------------------
(Exact name of small business issuer as specified in its charter)
Colorado 85-0368333
- ------------------------------- ------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
600 Sandtree Drive
Lake Park, FL 33403
----------------------------------------
(Address of Principal Executive Offices)
(561) 624-7299
-----------------------------------
(Issuer's Telephone Number, Including Area Code)
Former Address: 600 Depot Street, Latrobe, PA 15650, Former Fiscal Year: May 31
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by
Sections 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
------- ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes ______ No _______
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 8,235,629 as of November 1,
1996.
Transitional Small Business Disclosure Format (Check one):
Yes No X
----- -----
<PAGE>
SEPTIMA ENTERPRISES, INC.
FORM 10-QSB/A
AMENDMENT NO. 1
INDEX
-----
PAGE
PART I: FINANCIAL INFORMATION NUMBER
- ------- --------------------- ------
Item 1. Financial Statements:
Financial Statements of Septima Enterprises, Inc. for
the quarter ended September 30, 1996:
Accountants' Report.................................. 1
Balance Sheet as of September 30, 1996............... 2
Statements of Operations for the period September 12,
1988 (Inception) to September 30, 1996.............. 3
Statements of Stockholder's Equity for the period
September 12, 1988 (Inception) to September 30, 1996 4
Statements of Cash Flows for the period ended
September 30, 1996.................................. 8
Notes to Financial Statements........................ 10
Financial Statements of Septima Enterprises, Inc. for the
quarter ended June 30, 1996:
Accountants' Report.................................. 22
Balance Sheet as of June 30, 1996.................... 23
Statements of Operations for the period September 12,
1988 (Inception) to June 30, 1996................... 24
Statements of Stockholder's Equity for the period
September 12, 1988 (Inception) to June 30, 1996..... 25
Statements of Cash Flows for the period ended
June 30, 1996....................................... 27
Notes to Financial Statements........................ 28
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
DELISI, HENNINGER AND ASSOCIATES CERTIFIED PUBLIC ACCOUNTANTS
================================================================================
235 Humphrey Road - Suite 3
David S. Delisi, C.P.A. Two Pineview Place
Greensburg, Pennsylvania 15601-4579
Martha Henninger, C.P.A. (412) 832-8585
FAX (412) 832-8590
Board of Directors and Shareholders
Septima Enterprises, Inc.
We have reviewed the accompanying balance sheet of Septima Enterprises, Inc. (a
development stage company) as of September 30, 1996, and the related statements
of operations, stockholders' equity, and cash flows for the three months then
ended, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Septima Enterprises, Inc. The financial statements for the short
year ended June 30, 1996 were reviewed by us. We were not aware of any
material modifications to the financial statements in order for them to be in
conformity with generally accepted accounting principles. The financial
statements for the year ended May 31, 1996 were audited by us, and we expressed
a qualified opinion that discussed the Company's ability to continue as a going
concern and the uncertain status of a marketing agreement, in our report dated
July 22, 1996. We have not performed any auditing procedures since that date.
The financial statements for the year ended May 31, 1995 were also audited by
us, and we expressed a qualified opinion citing uncertainties as to a land
purchase option and the status of a marketing agreement and the inability to
obtain a legal opinion from the Company's attorney, in our report dated May 24,
1996. The financial statements for the period September 12, 1988 (inception)
to May 31, 1994, were audited by other auditors whose reports dated October 5,
1994, on those statements included an explanatory paragraph that described
recurring losses from operation and cash flow problems that raise substantial
doubt about its ability to continue operations. They have not performed any
auditing procedures since that date.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than
an audit in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles. As discussed in Note
B, certain conditions indicate that the Company may be unable to continue as a
going concern. The accompanying financial statements do not include any
adjustments to the financial statements that might be necessary should the
Company be unable to continue as a going concern. Additionally, as discussed
in Note J, the Company considers a marketing agreement entered into with an
outside firm as void. It is uncertain as to the outside firm's view of the
agreement. The agreement could effect future marketing and distribution of the
firm's product. The accompanying financial statements do not include any
adjustments to the financial statements that might be necessary should the
marketing agreement be deemed valid.
Greensburg, Pennsylvania
October 23, 1996 /s/ Delisi, Henninger and Associates
MEMBER PENNSYLVANIA AND AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
1
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
BALANCE SHEET
September 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets
Cash and cash equivalents (note A3) $ 72,506
Accounts receivable--trade -0-
Inventories (note A4)
Finished products -0-
Products in progress -0-
Raw materials and supplies -0-
Prepaid expenses 92,946
Deposits 20,250
----------
Total current assets 185,702
Equipment (net of accumulated depreciation
of $56,049) (note A5) 28,095
----------
Other assets
Organization costs (net of accumulated
amortization of $250) (note A5) -0-
Technology license (note G) -0-
-----------
Total assets $ 213,797
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable--trade $ 51,382
Note payable--SMC (note C) 267,992
Deposits from customers 125,000
Accrued expenses 24,416
----------
Total current liabilities 468,790
----------
Stockholders' equity
Preferred stock, no par value, 10,000,000
shares authorized no shares issued -0-
Common stock, no par value, 25,000,000 shares
authorized 7,785,629 shares issued and
outstanding (note E) 1,029,292
Deficit accumulated during the development
stage (note A2) (1,284,285)
---------
Total stockholders' equity ( 254,993)
---------
Total liabilities and stockholders' equity $ 213,797
==========
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT.
2
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the Period September 12, 1988 (Inception) to September 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
September 12, 1988
Three Months Ended (inception) to
September 30, 1996 September 30, 1996
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
Sales $ - 0 - $ 3,126
Interest income - 0 - 64,583
Other income - 0 - 199,381
---------- -----------
Total Income - 0 - 267,090
---------- -----------
Costs and expenses
General and administrative 35,141 964,767
Research and development (note A8) 3,193 362,680
Loss on debt extinguishment--related party - 0 - 50,452
Depreciation and amortization 4,165 58,263
Selling expenses - 0 - 5,893
Cost of products sold - 0 - 47,049
---------- -----------
Total Expenses 42,499 1,489,104
---------- -----------
(Loss) before income taxes
and other expenses (42,499) (1,222,014)
Other expenses
Loss on marketable equity securities - 0 - (58,924)
Income tax (note D) - 0 - (3,347)
---------- ------------
Net income/(loss) $ (42,499) $(1,284,285)
========== ============
Weighted average number of common
shares outstanding 7,785,629 7,354,515
---------- -----------
Net income/(loss) per share $(.00546) $(.17463)
========= ========
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT.
3
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the Period September 12, 1988 (Inception) to September 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Preferred stock Common stock
------------------- -----------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Common stock issued on
September 12, 1988 for
$.00009 per share -0- $-0- 165,000,000 $ 15,000
Common stock issued on
March 10, 1989 for
$0.01 per share, net of
underwriter's fees and
other costs -0- -0- 33,005,800 257,753
Donated services -0- -0- -0- 2,945
Net loss -0- -0- -0- -0-
------- ------- --------------- --------
Balance at May 31, 1989 -0- -0- 198,005,800 275,698
Donated services -0- -0- -0- 14,135
Net loss -0- -0- -0- -0-
------- ------- --------------- --------
Balance at May 31, 1990 -0- -0- 198,005,800 289,833
Donated services -0- -0- -0- 13,559
Net loss -0- -0- -0- -0-
------- ------- --------------- --------
Balance at May 31, 1991 -0- -0- 198,005,800 303,392
Donated services -0- -0- -0- 18,280
Net loss -0- -0- -0- -0-
------- ------- --------------- --------
Balance at May 31, 1992 -0- -0- 198,005,800 321,672
One for two hundred reverse
stock split on October 23,
1992 -0- -0- (197,015,771) -0-
Common stock subscribed on
May 25, 1993 for $1.00 per
share -0- -0- -0- -0-
Donated services -0- -0- -0- 73,670
Net loss -0- -0- -0- -0-
------- ------- --------------- --------
Balance at May 31, 1993 -0- -0- 990,029 395,342
Common stock issued between
July 15, 1993 and October 25,
1993 for $1.00 per share, net
of costs -0- -0- 275,000 256,052
Common stock issued on March 8,
1994 for services rendered,
valued at $1.00 per share -0- -0- 25,500 25,500
Donated services -0- -0- -0- 102,147
Net loss -0- -0- -0- -0-
------- ------- --------------- --------
Balance at May 31, 1994 -0- $-0- 1,290,529 $779,041
------- ------- --------------- --------
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT.
4
<PAGE>
<TABLE>
<CAPTION>
Deficit accumulated during
Common stock subscribed the development stage Total
----------------------- -------------------------- -----
Shares Amount
------ ------
<S> <C> <C> <C>
-0- $ -0- $ -0- $ 15,000
-0- -0- -0- 257,753
-0- -0- -0- 2,945
-0- -0- ( 517) ( 517)
------ ------- --------- ---------
-0- -0- ( 517) 275,181
-0- -0- -0- 14,135
-0- -0- ( 12,099) ( 12,099)
------ ------- --------- ---------
-0- -0- ( 12,616) 277,217
-0- -0- -0- 13,559
-0- -0- ( 71,687) ( 71,687)
------ ------- --------- ---------
-0- -0- ( 84,303) 219,089
-0- -0- -0- 18,280
-0- -0- ( 28,122) ( 28,122)
------ ------- --------- ---------
-0- -0- (112,425) 209,247
-0- -0- -0- -0-
30,000 30,000 -0- 30,000
-0- -0- -0- 73,670
-0- -0- (253,334) (253,334)
------ ------- --------- ---------
30,000 30,000 (365,759) 59,583
(30,000) (30,000) -0- 226,052
-0- -0- -0- 25,500
-0- -0- -0- 102,147
-0- -0- (422,723) (422,723)
------ ------- --------- ---------
-0- $ -0- $(788,482) $ (9,441)
------ ------- --------- ---------
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT.
5
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY--CONTINUED
For the Period September 12, 1988 (Inception) to September 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Preferred stock Common stock
--------------- ------------
Shares Amount Shares Amount
------ ------ ------ -------
<S> <C> <C> <C> <C>
Common stock issued on
August 8, 1994 for services
rendered, valued at $.77
per share -0- -0- 325,000 $250,251
Common stock acquired on
May 26, 1994 due to the
liquidation of
Eco-Logics, Inc. -0- -0- 6,170,100 -0-
Donated services -0- -0- -0- -0-
Net loss -0- -0- -0- -0-
----- ----- --------- ----------
Balance at May 31, 1995 -0- -0- 7,785,629 1,029,292
----- ----- --------- ----------
Net gain -0- -0- -0- -0-
----- ----- --------- ----------
Balance at May 31, 1996 -0- -0- 7,785,629 1,029,292
----- ----- --------- ----------
Net loss -0- -0- -0- -0-
----- ----- --------- ----------
Balance at June 30, 1996 -0- -0- 7,785,629 1,029,292
----- ----- --------- ----------
Net loss -0- -0- -0- -0-
----- ----- --------- ----------
Balance at September 30, 1996 -0- $-0- 7,785,629 $1,029,292
===== ===== ========= ==========
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT.
6
<PAGE>
<TABLE>
<CAPTION>
Deficit accumulated during
Common stock subscribed the development stage Total
----------------------- -------------------------- -----
Shares Amount
- ------ ------
<S> <C> <C> <C>
-0- $ -0- $ -0- $ 250,251
-0- -0- -0- -0-
-0- -0- -0- -0-
-0- -0- ( 467,600) ( 467,600)
----- ------ ----------- ----------
-0- -0- (1,256,082) ( 226,790)
----- ------ ----------- ----------
-0- -0- 21,551 21,551
----- ------ ----------- ----------
-0- -0- (1,234,531) ( 205,239)
----- ------ ----------- ----------
-0- -0- ( 7,255) ( 7,255)
----- ------ ----------- ----------
-0- -0- (1,241,786) ( 212,494)
----- ------ ----------- ----------
-0- -0- ( 42,499) ( 42,499)
----- ------ ----------- ----------
-0- $ -0- $(1,284,285) $( 254,993)
===== ====== ============ ===========
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT.
7
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Period Ended September 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
September 12, 1988
Three Months Ended (inception) to
September 30, 1996 September 30, 1996
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ -0- $ 16,811
Interest received -0- 59,879
Cash paid to suppliers (97,891) (751,405)
Income taxes paid -0- (3,704)
Customer deposits 125,000 125,000
------- -------
Cash provided by/(used) in
operating activities 27,109 (553,419)
------- --------
Cash flows from investing activities:
Purchase of equipment -0- (77,289)
Purchase of certificates of deposit -0- (250,473)
Maturity of certificates of deposit -0- 250,473
Purchase of marketable equity securities -0- (293,385)
Proceeds from sale of marketable equity
securities -0- 231,961
Loan disbursements -0- (15,000)
Loan proceeds from related parties 40,000 315,261
Repayments to related parties -0- (9,889)
Advances to related parties -0- (44,539)
Acquisition of purchase option -0- (20,000)
Repayment of note receivable -0- 10,000
------- ---------
Cash provided by investing activities 40,000 97,120
------- ---------
Cash flows from financing activities:
Proceeds from issuing common stock -0- 620,050
Proceeds from stock subscription -0- 30,000
Exercise of stock subscription -0- (30,000)
Costs associated with public offering
of common stock -0- (72,297)
Costs associated with private offering
of common stock -0- (18,948)
------- ---------
Cash provided by financing activities -0- 528,805
------- ---------
Net increase (decrease) in cash
and cash equivalents 67,109 72,506
Cash and cash equivalents at beginning
of period 5,397 - 0 -
------- ---------
Cash and cash equivalents at end of period $72,506 $72,506
======= =======
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT.
8
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS--CONTINUED
For the Period September 12, 1988 (Inception) to September 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Period from
September 12, 1988
Three Months Ended (inception) to
September 30, 1996 September 30, 1996
(Unaudited) (Unaudited)
------------------ ------------------
<S> <C> <C>
Reconciliation of net loss to cash
used in operating activities
Net income/(loss) $(42,499) $(1,284,284)
Noncash charges to net loss
Depreciation 4,165 56,050
Write-off of prepaid parts and freight - 0 - 4,951
Amortization of organization costs - 0 - 250
Donated services - 0 - 474,987
Write-off related payables/inventory - 0 - (4,649)
Write-off note receivable - 0 - 5,000
Forfeited purchase option - 0 - 20,000
Write-down on marketable securities - 0 - 2,500
Loss on sale of marketable equity
securities - 0 - 58,924
Increase in prepaid expenses (57,813) (64,386)
Increase in prepaid expenses
(Advertising) (6,714) (28,561)
Increase in deposits - 0 - (20,249)
Increase in organization costs - 0 - (250)
Increase in accounts payable (2,307) 51,382
Increase in accrued expenses 7,277 24,416
Common stock issued for services - 0 - 25,500
Increase in customer deposits 125,000 125,000
-------- -----------
Cash provided by/(used) in
operating activities $27,109 $ (553,419)
======== ===========
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT.
9
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------
1. Basis of Presentation
- -------------------------
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) which are in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the three months ended September 30, 1996 are not
necessarily indicative of the results to be expected for the full year.
The accompanying financial statements, presented on the accrual basis, include
the balances and accounts of Septima Enterprises, Inc. They do reflect the
balances or accounts of Eco-Logics, Inc., a related party, which was liquidated
on May 26, 1994, since its efforts to obtain a permit from the State of New
Mexico to operate a bio-medical incineration plant were unsuccessful.
On May 31, 1992, the Company issued shares of its common stock to Cottonbloom,
Inc., in exchange for all of the outstanding stock of Eco-Logics. The
transaction effected control of the Company by Cottonbloom and has been
accounted for as a reverse acquisition of the Company by Eco-Logics.
Consolidated financial statements for Eco-Logics previously included the
balances and accounts of the Company.
The 3,960,100 shares issued in the May 31, 1992 transaction, considered to be
recapitalization equity of Eco-Logics, and 2,210,000 shares subsequently issued
to Cottonbloom for certain licenses and technology, were not included in the
Company's stockholders' equity as of May 31, 1994. However, due to the
liquidation of Eco-Logics, Inc., these 6,170,000 shares were included in
Septima's stockholders' equity as of May 31, 1995. Previously, the shares of
common stock were reflected on the financial statements of Eco-Logics, Inc.
2. Organization and Development Stage Activities
- -------------------------------------------------
Septima Enterprises, Inc. was incorporated on September 12, 1988, for the
purpose of acquiring interests in other business entities and commercial
technologies. Operations to date have consisted of acquiring capital, evaluating
investment opportunities, acquiring interests in other businesses and
technologies, establishing a business concept, conducting research and
development activities, and manufacturing. An insignificant amount of revenue
from sales has been generated to date. The Company intends to market an ignition
enhancer marketed under the registered name of Swaser. Swaser is a registered
name of HDI Systems, Inc.
Accordingly, the costs and expenses related to these activities are accumulated
and reported in the financial statements as "deficit accumulated during the
development stage".
10
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
- ---------------------------------------------------------------
3. Cash and Cash Equivalents
- -----------------------------
The Company considers all investment instruments with original maturities of
three months or less when purchased to be cash equivalents.
4. Inventory Pricing
- ---------------------
As of September 30, 1996, no inventory exists.
5. Depreciation and Amortization
- ---------------------------------
Costs of organizing the Company have been capitalized and are being amortized by
the straight-line method over sixty (60) months.
The Company's equipment is recorded at cost and depreciated using the straight-
line method over sixty (60) months.
Depreciation expense for the three months ending September 30, 1996, is $4,165.
6. Advertising
- ---------------
Management has elected to capitalize costs associated with designing advertising
and promotional formats in connection with the peaking capacitor product
incurred in a prior year. These costs are being amortized over a twenty-four
month period. The amortization expense for the three month period is $4,080.
7. Net Loss Per Common Share
- -----------------------------
Net loss per share is based on the weighted average number of shares issued and
outstanding during the periods presented, giving retroactive effect to a one for
two hundred reverse stock split. As of May 31, 1995, all Class A and B warrants
have expired, per legal counsel.
8. Research and Development Expenses
- -------------------------------------
Research and development expenses are expensed as incurred.
9. Compensation Costs
- ----------------------
Compensation costs are charged to expense for the period in which stock bonus
and award plans are granted.
11
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
- ---------------------------------------------------------------
10. Qualified Retirement/Profit Sharing Plan
- ---------------------------------------------
The Company does not maintain a qualified pension or profit sharing plan.
11. Finance Charges
- --------------------
It is the Company's policy to reflect accounts payable net of finance charges.
12. Employees
- --------------
All persons working for Septima are paid through Spark Management Corporation, a
related party. Septima has no payroll. The Company did not have compensated
employees during the review period.
13. Risks and Uncertainties
- ----------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
14. Change of Fiscal Year
- --------------------------
The Company changed its fiscal year from June 1 through May 31 of each calendar
year to July 1 through June 30 of each calendar year commencing with the fiscal
year ended June 30, 1996.
15. Revenue Recognition
- ------------------------
The Company recognizes revenue when the product is manufactured and shipped to
the customer. At September 30, 1996, the Company had received $125,000
considered as a deposit on a total order of $282,000.
NOTE B--GOING CONCERN
- ---------------------
As shown in the accompanying financial statements, the Company has incurred
recurring losses during the development stage and has experienced cash flow
problems.
As of September 30, 1996, the issue of going concern is relevant due to a
financing arrangement with Spark Management Corporation providing Septima
Enterprises, Inc., with up to $400,000 of funding. This arrangement will not
continue if Spark Management Corporation does not exercise their $935,000 option
to purchase 51 percent of the outstanding shares of Septima Enterprises, Inc.,
by September 26, 1997.
12
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE B--GOING CONCERN--(CONTINUED)
- ----------------------------------
If this option is not exercised, there will be substantial doubt raised about
the Company's ability to continue as a going concern without new capital
investment to complete development, manufacturing and marketing of products.
NOTE C--NOTE PAYABLE
- --------------------
Spark Management Corporation has agreed to advance Septima Enterprises a line of
credit in the amount of $400,000 to provide working capital. This demand note
bears an interest rate of twelve percent per annum. As of September 30, 1996,
the balance due to Spark Management by Septima was $267,992. Also, $24,354 of
accrued interest was due.
NOTE D--INCOME TAXES
- --------------------
The Company has elected for tax purposes to amortize research and development
costs rather than expensing them. The following is a summary of these intangible
assets as of September 30, 1996:
<TABLE>
<S> <C>
Organization costs $ 250
Reorganization costs 9,075
Stock offering costs 4,910
Sales brochures 2,726
Capitalized R & D 248,496
--------
$ 265,457
========
</TABLE>
The deferred expenses will be amortized over 60 months, beginning in the month
the Company realizes benefit from such expenses. As of September 30, 1996,
accumulated amortization of these assets was $118,062. The amortization expense
for the current period is $12,580. For tax purposes, assets are being
depreciated using the modified accelerated cost recovery system. The tax
depreciation expense for the period is $2,419. See note A5 for description of
book depreciation.
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
Period from
9/12/88
Three Months Ended (inception)
September 30, 1996 to 9/30/96
------------------ -----------
<S> <C> <C>
Federal $ -0- $3,091
State -0- 256
------ ------
$ -0- $3,347
====== ======
</TABLE>
13
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE D--INCOME TAXES--(CONTINUED)
- ---------------------------------
The reconciliation of income tax computed at statutory tax rates to income tax
expense is:
<TABLE>
<CAPTION>
Period from
9/12/88
Three Months Ended (inception)
September 30, 1996 to 9/30/96
------------------ ----------
<S> <C> <C>
Expected tax benefit $(30,801) $(403,579)
Nondeductible expenses -0- 350,049
Provision of deferred tax
valuation allowance 30,801 56,877
-------- ---------
Deferred expense $ -0- $ 3,347
======== =========
</TABLE>
At September 30, 1996, the Company had net operating losses totaling $560,584
available to offset future income.
If not used, they will expire as follows:
<TABLE>
<CAPTION>
Operating
Year Losses
---- ---------
<S> <C>
2008 $101,787
2009 185,068
2010 249,748
2011 13,127
2012 10,854
--------
$560,584
========
</TABLE>
The net deferred tax asset in the accompanying Balance Sheet consists of the
following:
Deferred tax asset $403,579
Deferred tax valuation
allowance $(403,579)
---------
Deferred income taxes $ -0-
=========
A deferred tax valuation allowance has been provided because it is more likely
than not that the related deferred tax benefit will not be realized in the
future.
The Internal Revenue Service approved the change in fiscal year (See Note A14)
submitted on Form 1128 on August 9, 1996.
14
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE E--COMMON STOCK
- --------------------
Donated Services
- ----------------
None of the officers or directors received cash compensation for services
rendered the Company. These services have been valued by the Company and charged
to expense and common stock (donated capital) at $0 and $474,987 for the three
months ended September 30, 1996, and for the period from September 12, 1988
(inception) to September 30, 1996, respectively.
Private Offering
- ----------------
On July 24, 1994, the Company prepared a private offering pursuant to Regulation
D, in which is offered to accredited investors, 1,000,000 units, at a price of
$2.50 per unit. Each unit consists of one share of restricted common stock and
one warrant to purchase one share of common stock at an exercise price of $4.75
per share. The securities comprising the units are immediately separable. The
warrants are exercisable for a period of 18 months commencing on the date of
their issuance and redeemable by the Company at $0.01 per warrant. Costs
associated with this private offering amount to $6,573 at May 31, 1994, and have
been recorded as a prepaid expense. The offering expired September 1, 1994, but
can be extended by the Company. The Company has not released this offering.
Management has indicated they intend to withdraw this offering. In written
action dated September 9, 1996 in lieu of a special meeting of the Board of
Directors, the Company has indicated a private offering authorizing the sell of
1,000,000 to 1,200,000 shares of Septima common stock at a price of $2.00 to
$2.50 per share. The Company intends to complete the offering pursuant to
Regulation D.
13-D Registration
- -----------------
On September 26, 1995, Spark Management Corporation filed a 13-D Registration
Statement related to the common stock, no par value per share of Septima
Enterprises, Inc.
Spark and Cottonbloom, Inc., a New Mexico Corporation and controlling
shareholder of Septima, executed an Option Agreement on September 26, 1995,
granting Spark the option to acquire at least 51 percent of the outstanding
stock of Septima.
The option is presently exercisable and will expire on September 26, 1997. While
the option remains outstanding, the option stock is held in a voting trust by
David Norvell, as Trustee, pursuant to the terms of a Voting Trust Agreement
dated September 26, 1995.
Spark possesses the right to vote all the option stock prior to the expiration
of the option.
Pursuant to the Option Agreement and the Voting Trust Agreement, Spark possesses
the right to vote 4,307,270 shares of Septima common stock, representing what is
presently believed to be 55 percent of the outstanding shares of Septima common
stock. Also pursuant to the Option Agreement, Spark
15
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE E--COMMON STOCK--(CONTINUED)
- ---------------------------------
possesses the option to acquire 4,307,270 shares of Septima common stock from
Cottonbloom at any time prior to September 26, 1997. The directors and executive
officers of Spark do not beneficially own any shares of common stock of Septima.
In a document dated September 26, 1995, between a former officer/director of the
Company and the Company, the officer agreed to release and quit claim all of his
interest in a stock option. The stock option was originally dated May 1, 1994,
granting an option to purchase 250,000 shares of common stock of Septima within
five years of the date at one dollar per share. (See Note F)
In connection with the Option Agreement, Septima and Hensley Plasma Plug
Partnership, a Colorado partnership, executed an agreement for Assignment of
Technology and Patents and Assignment of Technology. The intellectual property
assigned pursuant to these agreements had been licensed to Cottonbloom which had
assigned its rights to Septima. The Technology Assignment replaced the previous
agreements and directly granted Septima rights in the Intellectual Property.
While Spark was negotiating on behalf of Septima to obtain the Technology
Assignment, other partners of the Hensley Partnership were assigning rights in
the Intellectual Property to Pulse Power Technologies Co., Ltd., a New Mexico
limited liability company. Litigation ensued among the various entities
regarding the rights to the Intellectual Property. The litigation was resolved
pursuant to a Settlement Memorandum dated November 16, 1995. The Settlement
Memorandum upholds the Technology Assignment and Option Agreement.
Under the Agreement for Assignment of Technology and Patents, Septima
Enterprises, Inc. is to make royalty payments to Hensley Plasma Plug Partnership
for as long as one or more patents remain in effect according to the following
schedule:
a. A royalty of four percent (4%) of Adjusted Gross Revenues realized
from the sale of Products which first total One (1) Million Dollars;
plus
b. A royalty of three percent (3%) of Adjusted Gross Revenues realized
from the sale of Products which next total One (1) Million Dollars;
plus
c. A royalty of two percent (2%) of Adjusted Gross Revenues realized
from the sale of Products which next total One (1) Million Dollars;
plus
d. A royalty of one percent (1%) of all Adjusted Gross Revenues
realized from the sale of Products thereafter.
16
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE E--COMMON STOCK--(CONTINUED)
---------------------------------
During the first two years of the agreement, there are no minimum royalty
payments. The minimum royalty payment for year three is $100,000 and the
minimum for years four and beyond is $150,000.
NOTE F--RELATED PARTY TRANSACTIONS
----------------------------------
On September 26, 1995, an agreement was entered into between George H.
Hensley, individually and as a partner in Hensley Plasma Plug Partnership;
James Robert Hensley, individually, as a partner in Hensley Plasma Plug
Partnership, and as co-trustee under the Ronald Hensley Irrevocable Trust
dated February 2, 1982; Raymond E. Hensley, individually, as a partner in
Hensley Plasma Plug Partnership, and as a co-trustee under the Ronald Hensley
Irrevocable Trust dated February 2, 1982; Cottonbloom, Inc., a New Mexico
corporation to release Septima of all claims, suits, demands, debts, dues,
accounts, bonds, covenants, contracts, promises, agreements, judgments,
liabilities, obligations, rights, costs, expenses, attorney's fees, and
actions from the beginning of the world to the date of the release. As a
result of this agreement, the following related party amounts were written
off:
<TABLE>
<CAPTION>
Related Party Amount
------------- ------
<S> <C>
Amarillo Valley Ridge $ 13,013.31
CAMI 13,233.56
Cottonbloom 66,080.82
Ecologics 3,735.50
HDI Partner/CB 10,255.49
HDI Partnership 7,939.44
George Hensley 57,750.00
-----------
Total $172,008.12
===========
</TABLE>
A prior officer and current stockholder of the Company is owed $9,415 for
funds advanced and reimbursable costs. This related party payable was not
covered by the September 26, 1995 agreement.
Under stock options, related parties, a marketing company, and a former
director were granted or resolved to be granted five year options to acquire
960,000 shares of the Company's common stock at $1.00 per share.
As part of the 960,000 shares, in written action in lieu of a special meeting
of the Board of Directors, a former director of the Company was granted an
option to purchase 200,000 shares of stock at an exercise price of $1.00 per
share exercisable at any time prior to October 1, 2001.
17
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE F--RELATED PARTY TRANSACTIONS--(CONTINUED)
-----------------------------------------------
The stock options are due to expire five years from grant date:
<TABLE>
<CAPTION>
Option Price per share Number of Options Date of Grant
---------------------- ----------------- -------------
<S> <C> <C>
$1.00 160,000 February 22, 1994
$1.00 500,000 May 1, 1994
$1.00 50,000 November 16, 1995
$1.00 25,000 April 1, 1996
$1.00 25,000 July 1, 1996
$1.00 200,000 September 4, 1996
</TABLE>
The Company has developed a compensation arrangement whereby a marketing
consultant will be granted (upon quarterly review by Septima) the option to
purchase 110,000 total shares at $1.00/share for fiscal quarters ending
October 1, 1996 until January 1, 1999. The grant is for 25,000 shares for the
first two quarters and 7,500 shares for the subsequent eight quarters.
A former director of the Company was previously granted 250,000 options at
$1.00 per share on May 1, 1994. In an agreement dated September 26, 1995, the
former director released and quit claim all interest in the options.
In a written action in lieu of a special meeting, the Board of Directors on
September 9, 1996 granted stock options to two Board members. The options are
exercisable at $.20/share within ten years.
Option Price
Per Share Number of Options Date of Grant Expiration of Grant
--------- ----------------- ------------- -------------------
$.20 312,500 Sept. 9, 1996 Sept. 9, 2006
Additionally, the Board authorized annual compensation to the members of the
Company's Board of Directors by issuing to each of them options to purchase
20,000 shares of common stock at an exercise price of $1.00 per share.
18
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE F--RELATED PARTY TRANSACTIONS--(CONTINUED)
-----------------------------------------------
The Company has negotiated with Worldwide Associates, an entity in which a
prior officer and current stockholder of the Company have an interest, whereby
Worldwide would be given nearly exclusive distribution rights outside the
United States for the Company's products. The Company considers the agreement
void.
No confirmation was received, in a prior period, from Worldwide Associates
regarding their view of the status of the agreement (See Note J).
The Company has negotiated a Manufacturing and Distribution Agreement for
Mexico sales with a company operated by a former director and current
shareholder (See Note H). The Company has entered into a Master Licensing
Agreement with Spark Management Corporation (See Note G). Spark Management is
owned by two directors of the Company. The Company has entered into a
Manufacturing Agreement with a company owned by two former directors (See Note
H).
NOTE G--TECHNOLOGY LICENSE
--------------------------
Currently, Spark Management Corporation (Spark) anticipates that Septima will
sublicense certain Intellectual Property obtained pursuant to the Technology
Assignment to Spark for the manufacture of certain aftermarket auto parts. As
of September 30, 1996, Spark intends that another corporation will manufacture
various components of the products and sell them to Septima.
Spark Management Corporation entered into a Master Licensing Agreement dated
September 10, 1996 with the Company. The Company acquired developments,
information, proprietary rights, and trade secrets collectively referred to as
Ignition Systems and Processes (See Note H). Unless terminated or canceled,
the Agreement will terminate ten (10) years following the last expired patent
acquired by Spark Management.
Spark intends to periodically review and evaluate the market for Septima's
common stock; Septima's business, prospects, and financial condition; general
economic conditions, and other opportunities available to Spark. On the basis
of such periodic reviews and evaluations, Spark may determine to increase or
decrease its investments in Septima through exercise of the option in whole or
in part or not at all.
NOTE H--COMMITMENTS
-------------------
The Company's research, development, and manufacturing activities are
conducted from facilities leased under short-term operating leases. The
facilities are leased by Spark Management Corporation.
An agreement dated March 22, 1994, exists between Septima Enterprises, Inc.,
and a company, whereby the company will pursue capital and licensing
endeavors. Septima is to pay the company six percent of any funds, money, or
renumeration, plus any applicable taxes received by Septima as a result of the
company's efforts.
19
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE H--COMMITMENTS--(CONTINUED)
--------------------------------
In consideration of the Master Licensing Agreement (See Note G), Spark
Management Corporation will receive 450,000 shares of Company stock. The
Company will pay Spark Management one dollar ($1.00) for each Product/Insert
until one million aggregate Products/Inserts are sold; fifty cents ($.50) for
each Product/Insert sold on the next million aggregate units; and twenty-five
cents ($.25) for each Product/Insert sold thereafter.
The Company entered into a Consulting Agreement with Spark Management
Corporation. Spark Management will provide services to the Company as a
consultant for a five year period commencing September 10, 1996. Spark
Management will be compensated on a cost plus 10 percent basis for the first
year. During the final four years, the compensation will be $250,000
annually, paid quarterly.
The company entered into a Manufacturing and Distribution Agreement dated
August 23, 1996 with a company. The company is required to order a minimum
aggregate of Products/Inserts per year from Septima Enterprises.
The Company entered into a Manufacturing Agreement dated September 4, 1996
(See Note F). The Company engaged the manufacturer as its exclusive producer
for the entire requirements for the product produced in the United States.
The initial term is for four (4) years automatically renewable for one (1)
year periods.
NOTE I--UNCERTAINTIES
---------------------
The Company accounts payable listing differs materially from an amount
confirmed, in a prior period, directly with a vendor. The vendor has
indicated legal action will be pursued to collect the difference between
Company account payable amount and vendor amount. The Company has filed a
declaratory action against the vendor.
NOTE J--DEMAND FOR ARBITRATION-WORLDWIDE ASSOCIATES, INC.
---------------------------------------------------------
On June 17, 1996, a demand for arbitration was filed with the American
Arbitration Association in Phoenix, Arizona relating to an agreement dated
May 27, 1994. The nature of the dispute: 1) Failure of Worldwide Associates,
Inc. to make payment for product delivered as per Article 5.03 of the
agreement in the amount of $1,050 and 2) Failure of consideration to support
the Agreement. The claim or relief being sought: 1) Award of damages on
invoice stated above plus costs and attorney's fees, and 2) Declaration that
the agreement was void at its inception for failure of consideration or, in
the alternative, that the agreement is terminated because of Worldwide breach.
An arbitration hearing has been scheduled for the week of December 9, 1996.
20
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1996
(UNAUDITED)
NOTE K--WITHDRAWAL OF DIRECTORS
-------------------------------
Effective September 4, 1996, an individual has resigned as a Director of
Septima Enterprises, Inc. The individual was later replaced by another
individual, as indicated in written action in lieu of a special meeting of the
Board of Directors dated September 9, 1996.
NOTE L--SUBSEQUENT EVENTS
--------------------------
The Company intends to reimburse Spark Management Corporation for Company
related start-up and travel costs incurred in 1995-1996 in the second quarter
of the 1996-1997 fiscal year. Amounts of the reimbursement are being
calculated by the Company.
The Company has assumed a lease for office space in Lake Park, Florida. The
period of the agreement is 11 1/2 months with a provision to extend the
agreement for an additional year. Monthly rental payments are $2,062.50.
The Company intends to change the Corporate Offices to Lake Park, Florida.
21
<PAGE>
DELISI, HENNINGER AND ASSOCIATES CERTIFIED PUBLIC ACCOUNTANTS
===============================================================================
DAVID S. DELISI, C.P.A. 235 Humphrey Road-Suite 3
Two Pineview Place
Greensburg, Pennsylvania 15601-4579
MARTHA HENNINGER, C.P.A. (412) 832-8585
FAX (412) 832-8590
Board of Directors and Shareholders
Septima Enterprises, Inc.
We have reviewed the accompanying balance sheet of Septima Enterprises, Inc. (a
development stage company) as of June 30, 1996, and the related statements of
operations, stockholders' equity, and cash flows for the year then ended, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Septima Enterprises, Inc. The financial statements for the year
ended May 31, 1996 were audited by us, and we expressed a qualified opinion that
discussed the Company's ability to continue as a going concern and the uncertain
status of a marketing agreement, in our report dated July 22, 1996. We have not
performed any auditing procedures since that date. The financial statements for
the year ended May 31, 1995 were also audited by us, and we expressed a
qualified opinion citing uncertainties as to a land purchase option and the
status of a marketing agreement and the inability to obtain a legal opinion from
the Company's attorney, in our report dated May 24, 1996. The financial
statements for the period September 12, 1988, (inception) to May 31, 1994, were
audited by other auditors whose reports dated October 5, 1994, on those
statements included an explanatory paragraph that described recurring losses
from operation and cash flow problems that raise substantial doubt about its
ability to continue operations. They have not performed any auditing procedures
since that date.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles. As discussed in Note
B, certain conditions indicate that the Company may be unable to continue as a
going concern. The accompanying financial statements do not include any
adjustments to the financial statements that might be necessary should the
Company be unable to continue as a going concern. Additionally, as discussed in
Note K, the Company considers a marketing agreement entered into with an outside
firm as void. It is uncertain as to the outside firm's view of the agreement.
The agreement could effect future marketing and distribution of the firm's
product. The accompanying financial statements do not include any adjustments to
the financial statements that might be necessary should the marketing agreement
be deemed valid.
Greensburg, Pennsylvania /s/ Delisi, Henninger and
September 26, 1996 Associates
MEMBER PENNSYLVANIA AND AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
BALANCE SHEET
June 30, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets $ 5,397
Cash and cash equivalents (note A3) 0
Accounts receivable--trade 0
Inventories (note A4)
Finished products 0
Products in progress 0
Raw materials and supplies 0
Prepaid expenses 28,420
Deposits 20,250
-----------
Total current assets 54,067
Equipment (net of accumulated depreciation of $51,884) (note A5) 32,260
-----------
Other assets
Organization costs (net of accumulated amortization of $250) 0
(note A5)
Technology license (Note H) 0
Total assets $ 86,327
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable--trade $ 53,690
Note payable--SMC (note C) 227,992
Accrued expenses 17,139
-----------
Total current liabilities 298,821
-----------
Stockholders' equity
Preferred stock, no par value, 10,000,000 shares authorized, 0
no shares issued
Common stock, no par value, 25,000,000 shares authorized, 1,029,292
7,785,629 shares issued and outstanding (note F)
Deficit accumulated during the development stage (note A2) (1,241,786)
-----------
Total stockholders' equity (212,494)
-----------
Total liabilities and stockholders' equity $ 86,327
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
For the Period September 12, 1988 (Inception) to June 30, 1996
<TABLE>
<CAPTION>
Period from
Sept. 12, 1988
Year Ended (inception) to
June 30, 1996 June 30, 1996
----------------- ----------------
<S> <C> <C>
Sales $ 0 $ 3,126
Interest income 0 64,583
Other income (note D) 125 199,381
----------- -----------
Total Income 125 267,090
----------- -----------
Costs and expenses
General and administrative 5,986 929,626
Research and development (note A8) 0 359,487
Loss on debt extinguishment--related party 0 50,452
Depreciation and amortization 1,403 54,098
Selling expenses 0 5,893
Cost of products sold ( 9) 47,049
----------- -----------
Total Expenses 7,380 1,446,605
----------- -----------
(Loss) before income taxes and other
expenses ( 7,255) (1,179,515)
Other expenses 0 ( 58,924)
Loss on marketable equity securities
Income tax (note E) 0 ( 3,347)
----------- -----------
Net income/(loss) $ ( 7,255) $(1,241,786)
=========== ===========
Weighted average number of common shares
outstanding 7,785,629 6,548,430
----------- -----------
Net income/(loss) per share $( .00093) $( .18963)
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the Period September 12, 1988 (Inception) to June 30, 1996
<TABLE>
<CAPTION>
Common Stock Deficit
Preferred Stock Common Stock Subscribed Accumulated
------------------ ----------------------- --------------------- during the
Development
Shares Amount Shares Amount Shares Amount Stage Total
-------- -------- -------- -------- -------- -------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock issued on
September 12, 1988 for
$.00009 per share 0 $ 0 165,000,000 $ 15,000 0 $ 0 $ 0 $ 15,000
Common stock issued on
March 10, 1989 for
$0.01 per share, net
of underwriter's fees
and other costs 0 0 33,005,800 257,753 0 0 0 257,753
Donated services 0 0 0 2,945 0 0 0 2,945
Net loss 0 0 0 0 0 0 ( 517) ( 517)
-------- ------- ------------ ---------- ------- ----------- ------------- -------------
Balance at May 31, 1989 0 0 198,005,800 275,698 0 0 ( 517) 275,181
Donated services 0 0 0 14,135 0 0 0 14,135
Net loss 0 0 0 0 0 0 ( 12,099) ( 12,099)
-------- ------- ------------ ---------- ------- ----------- ------------- -------------
Balance at May 31, 1990 0 0 198,005,800 289,833 0 0 ( 12,616) 277,217
Donated services 0 0 0 13,559 0 0 0 13,559
Net loss 0 0 0 0 0 0 ( 71,687) ( 71,687)
-------- ------- ------------ ---------- ------- ----------- ------------- -------------
Balance at May 31, 1991 0 0 198,005,800 303,392 0 0 ( 84,303) 219,089
Donated services 0 0 0 18,280 0 0 0 18,280
Net loss 0 0 0 0 0 0 ( 28,122) ( 28,122)
-------- ------- ------------ ---------- ------- ----------- ------------- -------------
Balance at May 31, 1992 0 0 198,005,800 321,672 0 0 ( 112,425) 209,247
One for two hundred
reverse stock split
on October 23, 1992 0 0 (197,015,771) 0 0 0 0 0
Common stock subscribed on
May 25, 1993 for $1.00
per share 0 0 0 0 30,000 30,000 0 30,000
Donated services 0 0 0 73,670 0 0 0 73,670
Net loss 0 0 0 0 0 0 ( 253,334) ( 253,334)
-------- ------- ------------ ---------- ------- ----------- ------------- -------------
Balance at May 31, 1993 0 $ 0 990,029 $ 395,342 30,000 $ 30,000 $( 365,759) $ 59,583
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY -- CONTINUED
For the Period September 12, 1988 (Inception) to June 30, 1996
<TABLE>
<CAPTION>
Common Stock Deficit
Preferred Stock Common Stock Subscribed Accumulated
------------------ ----------------------- --------------------- during the
Development
Shares Amount Shares Amount Shares Amount Stage Total
-------- -------- -------- -------- -------- -------- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Common stock issued
between July 15,
1993 and October 25,
1993 for $1.00 per
share, net of costs 0 $ 0 275,000 $ 256,052 ( 30,000) $(30,000) $ 0 $226,052
Common stock issued on
March 8, 1994 for
services rendered,
valued at $1.00 per
share 0 0 25,500 25,500 0 0 0 25,500
Donated services 0 0 0 102,147 0 0 0 102,147
Net loss 0 0 0 0 0 0 ( 422,723) ( 422,723)
-------- ------- --------- ---------- ------- -------- ------------ ------------
Balance at May 31, 1994 0 0 1,290,529 779,041 0 0 ( 788,482) ( 9,441)
-------- ------- --------- ---------- ------- -------- ------------ ------------
Common stock issued on
August 8, 1994 for
services rendered,
valued at $.77 per
share 0 0 325,000 250,251 0 0 0 250,251
Common stock acquired on
May 26, 1994 due to the
liquidation of Eco-Logics,
Inc. 0 0 6,170,100 0 0 0 0 0
Donated services 0 0 0 0 0 0 0 0
Net loss 0 0 0 0 0 0 ( 467,600) ( 467,600)
-------- ------- --------- ---------- ------- -------- ------------ ------------
Balance at May 31, 1995 0 0 7,785,629 1,029,292 0 0 ( 1,256,082) ( 226,790)
-------- ------- --------- ---------- ------- -------- ------------ ------------
Net gain 0 0 0 0 0 0 21,551 21,551
-------- ------- --------- ---------- ------- -------- ------------ ------------
Balance at May 31, 1996 0 0 7,785,629 1,029,292 0 0 (1,234,531) ( 205,239)
-------- ------- --------- ---------- ------- -------- ------------ ------------
Net loss 0 0 0 0 0 0 ( 7,255) ( 7,255)
-------- ------- --------- ---------- ------- -------- ------------ ------------
Balance at June 30, 1996 0 $ 0 7,785,629 $1,029,292 0 $ 0 $(1,241,786) $( 212,494)
======== ======= ========= ========== ======= ======== ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Period Ended June 30, 1996
<TABLE>
<CAPTION>
Period from
Sept. 12, 1988
Year Ended (inception) to
Cash flows from operating activities: June 30, 1996 June 30, 1996
--------------- ---------------
<S> <C> <C>
Cash received from customers $ 0 $ 16,811
Interest received 0 59,879
Cash paid to suppliers ( 11,687) ( 653,514)
Income taxes paid 0 ( 3,704)
--------------- --------------
Cash used in operating activities ( 11,687) ( 580,528)
--------------- --------------
Cash flows from investing activities:
Purchase of equipment 0 ( 77,289)
Purchase of certificates of deposit 0 ( 250,473)
Maturity of certificates of deposit 0 250,473
Purchase of marketable equity securities 0 ( 293,385)
Proceeds from sale of marketable equity
securities 0 231,961
Loan disbursements 0 ( 15,000)
Loan proceeds from related parties 10,354 275,261
Repayments to related parties 0 ( 9,889)
Advances to related parties 0 ( 44,539)
Acquisition of purchase option 0 ( 20,000)
Repayment of note receivable 0 10,000
--------------- --------------
Cash used in investing activities 10,354 57,120
--------------- --------------
Cash flows from financing activities:
Proceeds from issuing common stock 0 620,050
Proceeds from stock subscription 0 30,000
Exercise of stock subscription 0 ( 30,000)
Costs associated with public offering of
common stock 0 ( 72,297)
Costs of associated with private offering of
common stock 0 ( 18,948)
--------------- --------------
Cash provided by financing activities 0 528,805
--------------- --------------
Net increase (decrease) in cash and cash
equivalents ( 1,333) 5,397
Cash and cash equivalents at beginning of
period 6,730 0
--------------- --------------
Cash and cash equivalents at end of
period $ 5,397 $ 5,397
=============== ==============
Reconciliation of net loss to cash used in
operating activities
Net income/(loss) $( 7,255) $(1,241,785)
Noncash charges to net loss
Depreciation 1,403 51,885
Write-off of prepaid parts and freight 0 4,951
Amortization of organization costs 0 250
Donated services 0 474,987
Write-off related payables/inventory 0 ( 4,649)
Write-off note receivable 0 5,000
Forfeited purchase option 0 20,000
Write down on marketable securities 0 2,500
Loss on sale of marketable equity
securities 0 58,924
Increase in prepaid expenses 0 ( 6,573)
Increase in prepaid expenses (Advertising) 0 ( 21,847)
Increase in deposits 0 ( 20,249)
Increase in organization costs 0 ( 250)
Increase in accounts payable ( 8,065) 53,689
Increase in accrued expenses 2,230 17,139
Common stock issued for services 0 25,500
--------------- --------------
Cash used in operating activities $( 11,687) $( 580,528)
=============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------
1. Basis of Presentation
- -------------------------
The accompanying financial statements, presented on the accrual basis, include
the balances and accounts of Septima Enterprises, Inc. They do reflect the
balances or accounts of Eco-Logics, Inc., a related party, which was liquidated
on May 26, 1994, since its efforts to obtain a permit from the State of New
Mexico to operate a bio-medical incineration plant were unsuccessful.
On May 31, 1992, the Company issued shares of its common stock to Cottonbloom,
Inc., in exchange for all of the outstanding stock of Eco-Logics. The
transaction effected control of the Company by Cottonbloom and has been
accounted for as a reverse acquisition of the Company by Eco-Logics.
Consolidated financial statements for Eco-Logics previously included the
balances and accounts of the Company.
The 3,960,100 shares issued in the May 31, 1992 transaction, considered to be
recapitalization equity of Eco-Logics, and 2,210,000 shares subsequently issued
to Cottonbloom for certain licenses and technology, were not included in the
Company's stockholders' equity as of May 31, 1994. However, due to the
liquidation of Eco-Logics, Inc., these 6,170,100 shares were included in
Septima's stockholders' equity as of May 31, 1995. Previously, the shares of
common stock were reflected on the financial statements of Eco-Logics, Inc.
2. Organization and Development Stage Activities
- -------------------------------------------------
Septima Enterprises, Inc., was incorporated on September 12, 1988, for the
purpose of acquiring interests in other business entities and commercial
technologies. Operations to date have consisted of acquiring capital,
evaluating investment opportunities, acquiring interests in other businesses and
technologies, establishing a business concept, conducting research and
development activities, and manufacturing. An insignificant amount of revenue
from sales has been generated to date. The Company intends to market an ignition
enhancer marketed under the registered name of Swaser. Swaser is a registered
name of HDI Systems, Inc.
Accordingly, the costs and expenses related to these activities are accumulated
and reported in the financial statements as "deficit accumulated during the
development stage".
3. Cash and Cash Equivalents
- -----------------------------
The Company considers all investment instruments with original maturities of
three months or less when purchased to be cash equivalents.
4. Inventory Pricing
- ---------------------
As of June 30, 1996, no inventory exists.
5. Depreciation and Amortization
- ---------------------------------
Costs of organizing the Company have been capitalized and are being amortized by
the straight-line method over sixty (60) months.
28
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
- ---------------------------------------------------------------
5. Depreciation and Amortization--(CONTINUED)
- ----------------------------------------------
The Company's equipment is recorded at cost and depreciated using the straight-
line method over sixty (60) months.
Depreciation expense for the period ending June 30, 1996, is $1,402.
6. Advertising
- ---------------
Management has elected to capitalize costs associated with designing advertising
and promotional formats in connection with the peaking capacitor product
incurred in a prior year. These costs will be written off in future years as the
Company begins to market the product. No advertising costs have been expensed
in the current year.
7. Net Loss Per Common Share
- -----------------------------
Net loss per share is based on the weighted average number of shares issued and
outstanding during the periods presented, giving retroactive effect to a one for
two hundred reverse stock split. As of May 31, 1995, all Class A and B
warrants have expired, per legal counsel.
8. Research and Development Expenses
- -------------------------------------
Research and development expenses are expensed as incurred.
9. Compensation Costs
- ----------------------
Compensation costs are charged to expense for the period in which stock bonus
and award plans are granted.
10. Qualified Retirement/Profit Sharing Plan
- ---------------------------------------------
The Company does not maintain a qualified pension or profit sharing plan.
11. Finance Charges
- --------------------
It is the Company's policy to reflect accounts payable net of finance charges.
12. Employees
- --------------
All persons working for Septima are paid through Spark Management Corporation, a
related party. Septima has no payroll. The Company did not have compensated
employees during the review period.
13. Risks and Uncertainties
- ----------------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
29
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
- ---------------------------------------------------------------
14. Change of Fiscal Year
- --------------------------
The Company changed its fiscal year from June 1 through May 31 of each calendar
year to July 1 through June 30 of each calendar year commencing with the fiscal
year ended June 30, 1996.
NOTE B--GOING CONCERN
- ---------------------
As shown in the accompanying financial statements, the Company has incurred
recurring losses during the development stage and has experienced cash flow
problems.
As of June 30, 1996, the issue of going concern is relevant due to a financing
arrangement with Spark Management Corporation providing Septima Enterprises,
Inc., with up to $400,000 of funding. This arrangement will not continue if
Spark Management Corporation does not exercise their $935,000 option to purchase
51 percent of the outstanding shares of Septima Enterprises, Inc., by September
26, 1997. If this option is not exercised, there will be substantial doubt
raised about the Company's ability to continue as a going concern without new
capital investment to complete development, manufacturing and marketing of
products.
NOTE C--NOTE PAYABLE
- --------------------
Spark Management Corporation has agreed to advance Septima Enterprises a line of
credit in the amount of $400,000 to provide working capital. This demand note
bears an interest rate of twelve percent per annum. As of June 30, 1996, the
balance due to Spark Management by Septima was $227,992. Also, $16,965 of
accrued interest was due.
NOTE D--OTHER INCOME
- --------------------
As indicated on the Statement of Operations, other income is comprised of write-
offs of accrued commissions and taxes in the amount of $125.
NOTE E--INCOME TAXES
- --------------------
The Company has elected for tax purposes to amortize research and development
costs rather than expensing them.
The following is a summary of these intangible assets as of June 30, 1996:
<TABLE>
<CAPTION>
<S> <C>
Organization costs $ 250
Reorganization costs 9,075
Stock offering costs 4,910
Sales brochures 2,726
Capitalized R&D 248,496
---------
$265,457
=========
</TABLE>
30
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1996
NOTE E--INCOME TAXES--(CONTINUED)
- ---------------------------------
The deferred expenses will be amortized over 60 months, beginning in the month
the Company realizes benefit from such expenses. As of June 30, 1996,
accumulated amortization of these assets was $105,482. The amortization expense
for the current period is $4,187. For tax purposes, assets are being
depreciated using the modified accelerated cost recovery system. The tax
depreciation expense for the period is $815. See note A5 for description of
book depreciation.
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
Period from
September 12,
Year ended 1988 (inception)
June 30, 1996 to June 30, 1996
------------- ----------------
<S> <C> <C>
Federal $ 0 $ 3,091
State 0 256
------------- ---------------
$ 0 $ 3,347
============= ===============
</TABLE>
The reconciliation of income tax computed at statutory tax rates to income tax
expense is:
<TABLE>
<CAPTION>
Period from
September 12,
Year ended 1988 (inception)
June 30, 1996 to June 30, 1996
------------- ----------------
<S> <C> <C>
Expected tax benefit ( 12,240) ( 372,778)
Nondeductible expenses 0 350,049
Provision of deferred tax valuation allowance 12,240 26,076
-------------- ----------------
Deferred expense $ 0 $ 3,347
============== ================
</TABLE>
As of June 30, 1996, the Company had net operating losses totaling $560,584
available to offset future income. If not used, they will expire as follows:
<TABLE>
<CAPTION>
Operating
Year Losses
------ -----------
<S> <C>
2008 $101,787
2009 185,068
2010 249,748
2011 13,127
2012 10,854
-----------
$ 560,584
</TABLE>
31
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1996
NOTE E--INCOME TAXES--(CONTINUED)
- ---------------------------------
The net deferred tax asset in the accompanying Balance Sheet consists of the
following:
<TABLE>
<S> <C>
Deferred tax asset $ 372,778
Deferred tax valuation allowance $ (372,778)
-----------
Deferred income taxes $ 0
===========
</TABLE>
A deferred tax valuation allowance has been provided because it is more likely
than not that the related deferred tax benefit will not be realized in the
future.
The Internal Revenue Service approved the change in fiscal year (see Note A14)
submitted on Form 1128 on August 9, 1996.
NOTE F--COMMON STOCK
- --------------------
Donated Services
- ----------------
None of the officers or directors received cash compensation for services
rendered the Company. These services have been valued by the Company and
charged to expense and common stock (donated capital) at $0 and $474,987 for the
year ended June 30, 1996, and for the period from September 12, 1988
(inception) to June 30, 1996, respectively.
Private Offering
- ----------------
On July 24, 1994, the Company prepared a private offering pursuant to Regulation
D, in which is offered to accredited investors, 1,000,000 units, at a price of
$2.50 per unit. Each unit consists of one share of restricted common stock and
one warrant to purchase one share of common stock at an exercise price of $4.75
per share. The securities comprising the units are immediately separable. The
warrants are exercisable for a period of 18 months commencing on the date of
their issuance and redeemable by the Company at $0.01 per warrant. Costs
associated with this private offering amount to $6,573 at May 31, 1994, and have
been recorded as a prepaid expense. The offering expired September 1, 1994, but
can be extended by the Company. The Company has not released this offering.
13-D Registration
- -----------------
On September 26, 1995, Spark Management Corporation filed a 13-D Registration
Statement related to the common stock, no par value per share of Septima
Enterprises, Inc.
Spark and Cottonbloom, Inc., a New Mexico Corporation and controlling
shareholder of Septima, executed an option Agreement on September 26, 1995,
granting Spark the option to acquire at least 51 percent of the outstanding
stock of Septima.
32
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1996
NOTE F--COMMON STOCK--(CONTINUED)
- ---------------------------------
13-D Registration--(CONTINUED)
- ------------------------------
The option is presently exercisable and will expire on September 26, 1997.
While the option remains outstanding, the option stock is held in a voting trust
by David Norvell, as Trustee, pursuant to the terms of a Voting Trust Agreement
dated September 26, 1995. Spark possesses the right to vote all the option
stock prior to the expiration of the option.
Pursuant to the Option Agreement and the Voting Trust Agreement, Spark possesses
the right to vote 4,307,270 shares of Septima common stock, representing what is
presently believed to be 55 percent of the outstanding shares of Septima common
stock. Also pursuant to the Option Agreement, Spark possesses the option to
acquire 4,307,270 shares of Septima common stock from Cottonbloom at any time
prior to September 26, 1997. The directors and executive officers of Spark do
not beneficially own any shares of common stock of Septima.
In a document dated September 26, 1995, between a former officer/director of the
Company and the Company, the officer agreed to release and quit claim all of his
interest in a stock option. The stock option was originally dated May 1, 1994,
granting an option to purchase 250,000 shares of common stock of Septima within
five years of the date at one dollar per share. (See Note G)
In connection with the Option Agreement, Septima and Hensley Plasma Plug
Partnership, a Colorado partnership, executed an agreement for Assignment of
Technology and Patents and Assignment of Technology. The intellectual property
assigned pursuant to these agreements had been licensed to Cottonbloom which had
assigned its rights to Septima. The Technology Assignment replaced the previous
agreements and directly granted Septima rights in the Intellectual Property.
While Spark was negotiating on behalf of Septima to obtain the Technology
Assignment, other partners of the Hensley Partnership were assigning rights in
the Intellectual Property to Pulse Power Technologies Co., Ltd., a New Mexico
limited liability company. Litigation ensued among the various entities
regarding the rights to the Intellectual Property. The litigation was resolved
pursuant to a Settlement Memorandum dated November 16, 1995. The Settlement
Memorandum upholds the Technology Assignment and Option Agreement.
Under the Agreement for Assignment of Technology and Patents, Septima
Enterprises, Inc. is to make royalty payments to Hensley Plasma Plug Partnership
for as long as one or more patents remain in effect according to the following
schedule:
a. A royalty of four percent (4%) of Adjusted Gross Revenues realized from
the sale of Products which first total One (1) Million Dollars; plus
33
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1996
NOTE F--COMMON STOCK--(CONTINUED)
- ---------------------------------
13-D Registration--(CONTINUED)
- ------------------------------
b. A royalty of three percent (3%) of Adjusted Gross Revenues realized
from the sale of Products which next total One (1) Million Dollars;
plus
c. A royalty of two percent (2%) of Adjusted Gross Revenues realized from
the sale of Products which next total One (1) Million Dollars; plus
d. A royalty of one percent (1%) of all Adjusted Gross Revenues realized
from the sale of Products thereafter.
During the first two years of the agreement, there are no minimum royalty
payments. The minimum royalty payment for year three is $100,000 and the
minimum for years four and beyond is $150,000.
NOTE G--RELATED PARTY TRANSACTIONS
- -----------------------------------
On September 26, 1995, an agreement was entered into between George H. Hensley,
individually and as a partner in Hensley Plasma Plug Partnership; James Robert
Hensley, individually, as a partner in Hensley Plasma Plug Partnership, and as
co-trustee under the Ronald Hensley Irrevocable Trust dated February 2, 1982;
Raymond E. Hensley, individually, as a partner in Hensley Plasma Plug
Partnership, and as a co-trustee under the Ronald Hensley Irrevocable Trust
dated February 2, 1982; Cottonbloom, Inc., a New Mexico corporation to release
Septima of all claims, suits, demands, debts, dues, accounts, bonds, covenants,
contracts, promises, agreements, judgements, liabilities, obligations, rights,
costs, expenses, attorney's fees, and actions from the beginning of the world to
the date of the release.
As a result of this agreement, the following related party amounts were written
off:
<TABLE>
<CAPTION>
Related Party Amount
--------------------- ------------
<S> <C>
Amarillo Valley Ridge $ 13,013.31
CAMI 13,233.56
Cottonbloom 66,080.82
Eco-Logics 3,735.50
HDI Partner/CB 10,255.49
HDI Partnership 7,939.44
George Hensley 57,750.00
------------
Total $172,008.12
============
</TABLE>
A prior officer and current stockholder of the Company is owed $9,415 for funds
advanced and reimbursable costs. This related party payable was not covered by
the September 26, 1995 agreement.
34
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1996
NOTE G--RELATED PARTY TRANSACTIONS--(CONTINUED)
- -----------------------------------------------
Using stock bonuses and awards, 75,000 shares of the Company's common stock,
valued at $1.00 per share, were issued to a marketing company and related
parties during the fiscal year ended May 31, 1996. Under stock options, related
parties were granted or resolved to be granted five year options to acquire
735,000 shares of the Company's common stock at $1.00 per share.
The stock options are due to expire five years from grant date:
<TABLE>
<CAPTION>
Numbers
of Options Date of Grant
------------ -----------------
<S> <C>
160,000 February 22, 1994
500,000 May 1, 1994
50,000 November 16, 1995
25,000 April 1, 1996
</TABLE>
The Company has developed a compensation arrangement whereby a marketing
consultant will be granted (upon quarterly review by Septima) the option to
purchase 135,000 total shares at $1.00/share for fiscal quarters ending July 1,
1996 until January 1, 1999. The grant is for 25,000 shares for the first three
quarters and 7,500 shares for the subsequent eight quarters.
A former director of the Company was previously granted 250,000 options at $1.00
per share on May 1, 1994. In an agreement dated September 26, 1995, the former
director released and quit claim all interest in the options. (See Note F)
The Company has negotiated with Worldwide Associates, an entity in which a prior
officer and current stockholder of the Company have an interest, whereby
Worldwide would be given nearly exclusive distribution rights outside the United
States for the Company's products. The Company considers the agreement void.
No confirmation was received, in a prior period, from Worldwide Associates
regarding their view of the status of the agreement (see Note K).
NOTE H--TECHNOLOGY LICENSE
- --------------------------
Currently, Spark Management Corporation (Spark) anticipates that Septima will
sublicense certain Intellectual Property obtained pursuant to the Technology
Assignment to Spark for the manufacture of certain aftermarket auto parts. As of
June 30, 1996, Spark intends that Carrera Corporation, a Pennsylvania
corporation, will manufacture various components of the products and sell them
to Septima.
It is also anticipated that Spark may assist Septima in marketing and testing
the products, and may receive a small commission on sales of the products. No
agreements have been executed among Septima, Spark, or Carrera, and no current
understandings exist regarding how the testing, manufacture, marketing and sales
of the products will actually be completed.
35
<PAGE>
Septima Enterprises, Inc.
(A Development Stage Company)
Notes to Financial Statements
June 30, 1996
NOTE H--TECHNOLOGY LICENSE--(CONTINUED)
- ---------------------------------------
Spark intends to periodically review and evaluate the market for Septima's
common stock; Septima's business, prospects, and financial condition; general
economic conditions, and other opportunities available to Spark. On the basis
of such periodic reviews and evaluations, Spark may determine to increase or
decrease its investments in Septima through exercise of the option in whole or
in part or not at all.
NOTE I--COMMITMENTS
- --------------------
The Company's research, development, and manufacturing activities are conducted
from facilities leased under short-term operating leases. The facilities are
leased by Spark Management Corporation.
An agreement dated March 22, 1994, exists between Septima Enterprises, Inc., and
The IBEN Company, Inc., whereby IBEN will pursue capital and licensing
endeavors. Septima is to pay IBEN six percent of any funds, money, or
remuneration, plus any applicable taxes received by Septima as a result of
IBEN's efforts.
NOTE J--UNCERTAINTIES
- ---------------------
The Company accounts payable listing differs materially from an amount
confirmed, in a prior period, directly with a vendor. The vendor has indicated
legal action will be pursued to collect the difference between Company account
payable amount and vendor amount.
NOTE K--DEMAND FOR ARBITRATION--WORLDWIDE ASSOCIATES, INC.
- ----------------------------------------------------------
On June 17, 1996, a demand for arbitration was filed with the American
Arbitration Association in Phoenix, Arizona relating to an agreement dated May
27, 1994. The nature of the dispute: 1) Failure of Worldwide Associates, Inc.
to make payment for product delivered as per Article 5.03 of the agreement in
the amount of $1,050, and 2) Failure of consideration to support the Agreement.
The claim or relief being sought: 1) Award of damages on invoice stated above
plus costs and attorney's fees, and 2) Declaration that the agreement was void
at its inception for failure of consideration or, in the alternative, that the
agreement is terminated because of Worldwide breach.
NOTE L--WITHDRAWAL OF DIRECTORS
- -------------------------------
Effective June 26, 1996, two individuals have resigned as Directors of Septima
Enterprises, Inc.
NOTE M--SUBSEQUENT EVENTS
- -------------------------
The Company received a deposit of $125,000 in September 1996 for a customer
order that will total $250,000.
36
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Dated: December 3, 1996 SEPTIMA ENTERPRISES, INC.
---------------------------------
R. Edwin Morgan
President, Chief Executive Officer
and Principal Financial Officer
37
