UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [Fee Required]
For the fiscal year ended - December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [No Fee Required]
For the transition period from ________ to ________
Commission file number 33-33042-NY
Coronado Industries, Inc.
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(Name of small business issuer in its charter)
Nevada 22-3161629
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
16929 E. Enterprise Drive, Suite 202, Fountain Hills, AZ 85268
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(Address of Principal executive offices) (as of date of filing) (Zip Code)
Issuer's telephone number (602) 837-6810
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Securities registered under Section 12(b) of the Exchange Act: NONE
Title of each class Name of each exchange on which registered
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Securities registered under section 12(g) of the Exchange Act: NONE
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(Title of Class)
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(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject such filing requirements for the past 90 days. Yes [ ] No [ X ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrants 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. [ ]
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CORONADO INDUSTRIES, INC.
FORM 10-KSB
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
Page
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PART I 1
Item 1 Business Development 1
Item 2. Description of Property 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II 8
Item 5. Market for Registrant's Common Equity and Related
Stockholders Matters 8
Item 6. Management's Discussion and Analysis or
Plan of Operation 9
Item 7. Financial Statements 10
Item 8. Changes In and Disagreement with Accountants on
Accounting and Financial disclosure 10
PART III 11
Item 9. Directors, Executive Officers, Promoters and
Control Persons' Compliance with Section 16(a)
of the Exchange Act 11
Item 10. Executive Compensation 12
Item 11. Security Ownership of Certain Beneficial Owners
and Management 12
Item 12. Certain Relationships and Related Transactions 13
PART IV 15
Item 13. Exhibits, Financial Statements, Schedules and
Reports on Form 8K 15
SIGNATURES 16
SUPPLEMENTAL INFORMATION AND EXHIBITS 17
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PART I
ITEM 1(a). BUSINESS DEVELOPMENT
INITIAL PUBLIC OFFERING
The Registrant was incorporated under the laws of the State of New York
on December 21, 1989. The effective date of the registrant's public offering was
March 13, 1990. The Registrant offered 5,000 common shares, par value $.001
each, at $4.50 per Share and 5,000 Warrant Units each Warrant Unit consisting of
8 redeemable common share purchase "A" warrants, 16 redeemable common share
purchase "B" warrants and 16 redeemable common share purchase "C" warrants at
$.50 per Warrant Unit.
5,000 Shares and 5,000 Warrant Units were sold in the offering yielding
gross proceeds of $25,000 and net proceeds of $15,000 after payment of offering
expenses of $10,000. The Offering closed on May 1, 1990.
For further information concerning the Registration Statement, see File
No. 33-33042-NY at the Securities and Exchange Commission's Regional Office in
New York City or at its principal office in Washington, D.C.
GENERAL DESCRIPTION OF INITIAL BUSINESS
The Registrant was organized under the name, First Lloyd Funding, Inc.
as a blank check company. The Registrant was not engaged in any business prior
to its initial public offering. It was formed to invest in, merge, or otherwise
combine with or acquire another company or other companies.
ACQUISITION
The Registrant, on May 16, 1990, acquired 30% of the issued and
outstanding shares of common stock of Logical Computer Services, Ltd., a
Delaware corporation, ("LCS") through the issuance of an aggregate of 600,000 of
its common shares to the stockholders of LCS. On May 18, 1990, the Registrant
filed an amendment to its certificate of incorporation changing its name to
Logical Computer Services of New York, Ltd.
LCS commenced business in January, 1989. It provided third party
hardware maintenance for existing microcomputer systems. It sold maintenance
contracts on an annual basis to the government and commercial sectors. These
contracts constituted a mode of "downtime insurance" as the client was thus
protected from loss of use of the system through malfunction. LCS also provided
time and material services on a per call basis. Because of the price erosion of
computer systems and equipment and their increasing reliability, the prices its
customers were willing to pay for its services were not economic and markups on
the resale of inventoried equipment became minimal. As a result, during June,
1991, LCS ceased doing business.
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MERGER AGREEMENT - ANDROID CORPORATION
At the Registrant's shareholder meeting held on April 19, 1994, the
shareholders of the Registrant ratified an Agreement and Plan of Reorganization
("Merger Agreement") with Android Corporation, a privately held Delaware
corporation. Under the terms of the Agreement, the shareholders of Android
Corporation would receive controlling interest of the Registrant, upon the
merger of the two corporations; however, the Registrant would be the surviving
company. Subsequent to the ratification by the shareholders of the merger
agreement, certain events occurred within Android Corporation. Specifically, the
three operating subsidiaries of Android Corporation were rendered inactive by
the loss of key personnel. Pursuant to certain agreements that existed within
Android Corporation, prior to the Merger Agreement, the assets owned by the
subsidiary corporations reverted to the personnel that left Android Corporation.
Subsequent to these actions, Android Corporation was left with a very small
amount of operating assets and an excessive amount of debt. The Directors of the
Registrant determined that a material change had taken place within Android
Corporation and it was no longer advisable to complete the Merger Agreement.
Therefore, pursuant to the terms of the Merger Agreement, the Board of Directors
of the Registrant voted to terminate the merger.
CREATION OF SUBSIDIARY
Subsequent to the termination of the Merger Agreement, in October 1994
the Board of Directors of the Registrant established a wholly owned subsidiary
under the Laws of the State of Ohio known as Logical Research, Inc. The purpose
of establishing the subsidiary was to acquire the inventory and technology still
held by Android Corporation with respect to the laser-assisted wheel alignment
system developed for the automotive industry. As of December 31, 1994, the
Registrant had secured a licensing agreement to utilize the technology developed
by Android Corporation with respect to the laser-assisted wheel alignment
system. Under the terms of the licensing agreement, for a period of not more
than two years, the Registrant was to pay the sum of $500 to Android Corporation
for each wheel alignment system sold that utilized the technology improved upon
by Android Corporation. In addition, in January, 1995, the Board of Directors
secured an assignment of patent rights for the patented portion of the
underlying technology involving the wheel alignment system. The majority of the
patent rights are held by two former shareholders of Android Corporation, Mr.
James L. Woodruff and Mr. John G. Lange. Mr. Woodruff and Mr. Lange agreed to
permit the registrant to practice the technology disclosed in the patent and to
formally assign the patent to the Registrant at such times as Mr. Lange and Mr.
Woodruff were successful in obtaining permission to assign the patent from a
third individual that holds the remaining patent rights. In exchange for the
permission to practice the technology and the future assignment of the
technology, the Board of Directors issued to Mr. Lange and Mr. Woodruff a total
of 188,491 shares of common stock in the Corporation in January, 1995.
In addition to the aforementioned stock issued in 1995, the Board of
Directors authorized a private offering of stock in the amount of 540,000 shares
of the Registrant's common stock during the fourth quarter of 1994. The stock
was offered to former shareholders of Android Corporation at the rate of $0.50
per share. An additional 150,430 shares of common stock were issued as a result
of this private offering of this amount: 19,939 shares were reportedly issued
for new capital and the balance was reportedly issued as a capitalization of
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outstanding loans to the Registrant. The present management of the Company is
investigating the facts involving the issuance of these shares to confirm that
the Company received the consideration reported. At this time the Company has
obtained sufficient information to challenge the validity of the issuance of a
substantial number of these shares. (See "Ophthalmic International, L.L.C. and
American Glaucoma" below).
SPIN-OFF OF SUBSIDIARY
On October 13, 1995, Mr. James L. Woodruff, director and President of
the Corporation, was sentenced as a result of a prior guilty plea to one count
of filing a false document. The Federal District Court in Colorado sentenced Mr.
Woodruff to a prison term of three years as a result of this plea. On October
20, 1995, the Board of Directors of the Corporation's subsidiary, Logical
Research, Inc., terminated Mr. Woodruff's employment contract and removed him as
President of that corporation. Thereafter, the Board of Directors of the
Registrant considered its options with regard to the continuation of operations
of Logical Research, Inc. and as to the disposition of the inventory and
technology held by the corporation. It was determined by the Board of Directors
that Logical Research, Inc. had become a significant liability to the Registrant
and that the Registrant could not utilize the technology held by the subsidiary
corporation without the efforts of Mr. James Woodruff.
Thereafter, on October 31, 1995, the Registrant and Mr. James Woodruff
entered into an agreement whereby Mr. Woodruff would purchase from the
Registrant all of the shares held by the Registrant in Logical Research, Inc.,
an Ohio corporation. Mr. Woodruff would pay for the shares of stock in Logical
Research, Inc. by conveying his holdings in the Registrant, amounting to 173,995
shares of the Registrant's common stock to the treasury of the Registrant. This
transaction was subsequently completed at the beginning of November, 1995. In
conjunction with the sale of the Registrant's subsidiary, Mr. James L. Woodruff
resigned all positions that he held in the Registrant. After the completion of
this transaction, the Registrant ceased either directly or indirectly being
engaged in any business.
CORONADO STONE PRODUCTS
On June 4, 1996 the Registrant executed a Letter of Intent to exchange
15,000,000 shares of its common stock for 100% of the outstanding shares of
Creative Stone Manufacturing, Inc. d/b/a/ Coronado Stone Products. As a result
of this Letter of Intent, on August 30, 1996 the Registrant's shareholders voted
to: (i) increase the number of authorized preferred stock shares from 1,000,000
to 3,000,000; (ii) to consolidate the Registrant's outstanding common stock
shares by means of a 5-for-1 reverse stock split; (iii) to change the
Registrant's name to Coronado Industries, Inc.; (iv) to change the domicile of
the Registrant from the State of New York to the State of Nevada. (All common
stock share numbers used in this report have been adjusted for the reverse stock
split.)
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The contemplated acquisition of Creative Stone Manufacturing, Inc., was
abandoned in September, 1996.
OPHTHALMIC INTERNATIONAL, L.L.C. AND AMERICAN GLAUCOMA, INC.
On November 5, 1996 the Registrant entered into an Asset Purchase
Agreement with Ophthalmic International, L.L.C. ("OI"), and American Glaucoma, a
joint venture ("AG"), which provided for the purchase of the assets of OI and AG
in exchange for 15,592,224 shares of the Registrant's common stock (85%) to be
issued to the Registrant's current three Directors. An additional 855,000 shares
were issued as finders fees to twelve entities and individuals, including
340,000 shares to Edward A. Barth (then President and a Director of the
Registrant) and Barth Construction Co., Inc., 5,000 shares to Richard Campanalie
(then a Registrant Director) and 20,000 shares to Richard Hooper (then a
Registrant Director). See "Item 12. Certain Relationships and Related
Transactions."
The assets of OI transferred to the Registrant were a patent pending
and other proprietary information concerning equipment and a process for the
treatment of open angle glaucoma. The assets of AG transferred to the Registrant
were the concept and a business plan for forty glaucoma treatment centers in the
United States. However, a provision in the Asset Purchase Agreement allows OI to
rescind the transaction and receive the patent rights and other proprietary
rights back from the Registrant in the event OI discovers within one year after
the date of the Asset Purchase Agreement that the Registrant breached one of its
representations or warranties in that agreement.
ITEM 1(b). BUSINESS OF ISSUER
The Registrant, through its Ophthalmic International, Inc. subsidiary,
will be manufacturing and marketing a vacuum fixation device with a patented
designed suction ring that treats Open Angle and Pigmentary glaucoma.
In the United States, glaucoma is a leading cause of blindness. About 3
percent of Americans older than 65 years (2 million people) are affected. Of
those, about 60,000 are legally blind. If detected and treated early, glaucoma
need not cause blindness or even severe vision loss. Glaucoma is not a single
disease but rather a group of diseases that effect the eye. This group of
diseases has a single feature in that progressive damage to the optic nerve due
to increased pressure within the eyeball. As the optic nerve deteriorates, blind
spots and patterns develop. If left untreated, the result may be total
blindness.
The term glaucoma is derived from the Greek work "glauco" which means
bright or sparkling. The term has evolved to mean vision loss associated with
increased pressure within the eye. The space between the lens and the cornea in
the eye is filled with a fluid called the aqueous humor. This fluid circulates
from behind the colored portion of the eye (the iris) through the opening at the
center of the eye (pupil) and into the space between the iris and cornea. The
aqueous humor is produced constantly, so it must be drained constantly. The
drain is at the point where the iris and cornea meet, known as the drainage
angle, which directs fluid into a channel (Schlemm's canal) that then leads it
to a system of small veins outside the eye. When the drainage angle does not
function properly, the fluid cannot drain and pressure builds up within the eye.
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Pressure also is exerted on another fluid in the eye, the vitreous humor behind
the lens, which in turn presses on the retina. This pressure affects the fibers
of the optic nerve, slowly damaging them. The result over time is a loss of
vision.
After three years of ongoing studies involving Dr. John T. LiVecchi,
M.D., F.A.C.S., Assistant Clinical Professor of Ophthalmology, Allegheny
University and Dr. Guillermo Avolos, Professor of Ophthalmology, University of
Guadalajara, Mexico, it was determined that a 2 minute treatment with Ophthalmic
International's "vacuum fixation device and patented design suction ring"
temporarily reduced I.O.P. in the treatment of Open angle Glaucoma by
approximately 6 Hg for an average of three months at which time the treatment
can be repeated with no serious side effects. This I.O.P. lowering is achieved
when the external suction device is applied over the perilimbal area for a
specified time. With this treatment the Registrant believes that there are no
harmful side effects, like those associated with eye drop treatments. In
addition, the following patent entitled "Open Angle Glaucoma Treatment Apparatus
and Method" has been approved and therefore will allow the Registrant to achieve
a significant market advantage over any future competitor.
In addition, the Registrant will be changing the labeling on the
equipment from a "vacuum fixation device" to a "glaucoma treatment device." This
labeling requires FDA approval, for which the first step is the completion of a
3-month Duke University study anticipated to start in June, 1997 and to be
completed by October, 1997. The Registrant's treatment is a "Non-Invasive
Procedure" and the Registrant believes the procedure has no harmful side
effects, like those associated with eye drops. The test results thus far have
indicated an average drop of I.O.P. per procedure was 6 mm Hg and 73% of all
eyes treated maintained an I.O.P. lowering effect (without additional
traditional treatment) after 8 months.
On February 11, 1997 the U.S. Patents and Trademarks Office issued a
patent to Ophthalmic International, L.L.C., Patent Number 5,601,548, for the
process, equipment and the procedure which has been licensed to the Registrant.
The Registrant believes, without assurance, that this patent provides the
Registrant with a substantial competitive advantage over current and future
glaucoma treatment competitors. The Registrant is not aware of any other patent
being granted for glaucoma treatment.
MARKETING STRATEGY
Registrant's subsidiary, Ophthalmic International, Inc., intends to
manufacture and sell the vacuum equipment, the patented rings and the process in
the United States and abroad, primarily through distributors who will be
assigned specific geographical territories, on the basis of continents or
countries. Ophthalmic International entered into a confidentiality agreement
with Alcon Co. in March, 1997 as the first step in negotiating for Alcon to
become a distributor. The Registrant expects Ophthalmic International to enter
into confidentiality agreements with one or more additional potential
distributors and to commence negotiations for exclusive worldwide distribution
rights within the next 30 days. These negotiations may not be completed and
definitive agreements executed until the Duke University study is completed.
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Until such time as Registrant executes an exclusive worldwide
distribution agreement, Registrant expects to enter into one or more
non-exclusive distribution agreements with medical equipment dealers in the Far
East and/or Europe. These short-term agreements will provide Registrant with
test-marketing results for use in its negotiations for the exclusive worldwide
rights and provide Registrant with interim cash flow. Registrant has sold one
vacuum fixation unit to a German dealer with which the dealer has commenced his
initial marketing. Registrant expects one or more of these short-term
non-exclusive distribution agreements to be executed within the next few weeks.
The Registrant expects its distributors will purchase the vacuum
equipment for approximately $5,000-$10,000 per unit and purchase the patented
ring which is placed on the patient's eye, for approximately $10 to $15 each,
depending upon volume. The Registrant expects, without assurance, to have a
gross profit margin on the vacuum equipment and patented rings in excess of 60%.
The Registrant's vacuum equipment is composed of special order parts,
such as molded case, display board, circuit boards, and motors, all for which
Registrant has established manufacturing relationships with manufacturers.
Registrant's subsidiary, Ophthalmic International, Inc., assembles the vacuum
fixation device at its offices in Fountain Hills, Arizona. At such time as
Registrant executes an agreement with a major worldwide distributor, Registrant
may also sell the manufacturing rights to the same company. The Registrant has
contracted for the manufacture of the patented rings with a medical device
manufacturer located in California.
Registrant's subsidiary, American Glaucoma, Inc., intends to open and
operate as many as 40 glaucoma treatment clinics throughout the United States,
subject to obtaining adequate financing. American Glaucoma plans on opening its
first glaucoma treatment clinic in the Phoenix, Arizona area. Registrant
estimates that there are approximately 62,000 to 75,000 potential glaucoma
patients in the Phoenix area, based upon a 3% general population occurrence of
the condition. Based upon an estimated start-up cost and first year budget of
$600,000 for the Phoenix clinic, Registrant estimates that it would have to
treat approximately 800 patients for an annual clinic fee of $1,500 to
break-even on these initial expenditures, assuming a 50% net income margin (of
which there is no assurance).
POTENTIAL MARKET
Registrant estimates that approximately 6,000,000 people in the United
States are affected by Open Angle or Pigmentary glaucoma. The initial studies on
the Registrant's process indicate that it yields effective results with
approximately 75% to 80% of all people with such conditions. Certain ethnic
populations, such as Orientals, have a higher incidence of the condition. Such a
worldwide incidence of the condition leads the Registrant to the conclusion that
there is a multimillion dollar market presently for the Company's patented
process, equipment and rings.
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ITEM 2. DESCRIPTION OF PROPERTY.
During the calendar year 1996, the Registrant owned no real property.
For the first ten months of the calendar year, the principal offices were
located, on a rental free basis, within the offices operated by Mr. Edward
Barth, the interim President of the Registrant. These offices were located at
4264 Strausser Street, N.W., North Canton, Ohio 44720.
Commencing on November 5, 1996, the Registrant's offices were moved to
16929 E. Enterprise Drive, Suite 202, Fountain Hills, AZ 85268, where Registrant
is currently leasing approximately 1,600 square feet of space from a third party
landlord. Registrant is paying approximately $1,000 per month, including
utilities, in rent for this space on a month-to-month basis. Registrant
presently believes this space is adequate to satisfy Registrant's needs for the
foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
There have been no legal proceedings instituted by or against the
Registrant during the last calendar year. However, at least one of the Company's
former officers and Directors has threatened to sue the Company and its current
Directors as a result of damages which have been incurred because the Company
has refused to permit the transfer of his shares. The Company has decided to
file a lawsuit against this and other former officers, as well as other
shareholders, on the basis that it now appears they may have been issued Company
shares without the Company receiving consideration therefor, as well as other
grounds. (See "Certain Transactions")
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On July 31, 1996 a majority of the Registrant's shareholders approved
the following corporate actions:
(i) Increase number of authorized Preferred Stock shares from
1,000,000 to 3,000,000.
(ii) Acquire Creative Stone Manufacturing, Inc.
(iii) Change name of Registrant to Coronado Industries, Inc.
(iv) Change state of incorporation from New York to Nevada.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
MARKETING INFORMATION. The principal U.S. market in which the
registrant's common shares (all of which are one class, $.001 par value) were
traded was the over-the-counter market. The aforesaid securities are not traded
or quoted on any automated quotation system. Such over-the-counter market
quotations reflect inter-dealer prices without retail markup, markdown or
commission and may not necessarily represent actual transactions. The following
table shows the low and the high bid reported by the NASDAQ Bulletin Board
System in 1996, by fiscal quarter, and for the first quarter of 1997.
Low High
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January 1, 1996 - March 31, 1996 0 0
April 1, 1996 - June 30, 1996 (reflecting 5:1 reverse split) 0 0
July 1, 1996 - September 30, 1996 0 0
October 1, 1996 - December 31, 1996 $1.50 $9.75
January 1, 1997 - March 31, 1997 $3.00 $6.75
HOLDERS. The Registrant has approximately 220 stockholder accounts.
DIVIDENDS. The Registrant has not paid or declared any dividends upon
its common shares since its inception and, by reason of its present financial
status and its contemplated financial requirements, does not intend to pay or
declare any dividends upon its common shares within the foreseeable future.
WARRANTS. In addition to the Registrant's common shares, there were
issued and outstanding as of December 31, 1991, 80,000 "B" Warrants and 80,000
"C" Warrants (the "A" Warrants having expired) each redeemable warrant entitles
the holder to purchase a like number of common shares. The warrants became
exercisable on the closing date of the Offering, May 1, 1990. The "B" Warrants
were to expire two years from the closing date and the "C" Warrants were to
expire three years from the closing date. The Registrant had the right to redeem
the warrants at any time upon 30 days' notice at $.001 each. Exercise price,
after the reverse split, is $7.25 for the "B" Warrants and $12.50 for the "C"
Warrants. On May 7, 1992 all of the outstanding warrants were surrendered by the
holder thereof for cancellation. No remuneration was paid to the holder of these
warrants in exchange for the surrender.
During the fourth quarter of 1994, the Directors voted to offer
warrants for the purchase of Registrant's $0.001 par value common stock. The
warrants were to be offered to those former shareholders of Android Corporation
who did not subscribe to the private offering initiated during September, 1994.
The terms of the warrants were that each warrant enabled the purchaser to
purchase up to 2,000 shares of the Registrant's $0.001 par value common stock at
a price of $0.15 per share. Only accredited investors were offered the warrants
and if exercised, the purchaser would have received restricted shares. All
warrants were to expire on January 31, 1996, if not exercised. A total of 13.1
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warrants were subscribed for during the first quarter of 1995 at $1.00 per 2,000
warrants. None of the $.15 warrants were exercised during the calendar year
1995. All outstanding warrants expired on January 31, 1996.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
OPERATIONS. Registrant was a development stage company at year-end
December 31, 1996, with no revenues having been generated during the year. Also,
prior to November 5, 1996 Registrant had been a dormant shell company with no
operations since 1994. Therefore, there is no comparable prior year's operations
to which to compare the 1996 annual operating results.
With respect to future operations Registrant intends to commence
actively marketing and manufacturing its patented Vacuum Fixation Device and
patented suction rings in the second-half of 1997. The profitability of these
operations will be dependent upon the total number of units sold. Registrant
believes, without assurances, that its gross profit margins are such that
Registrant could be profitable if as few as 200 Vacuum Fixation Devices were
sold during 1997.
Registrant is also planning, without assurances, on opening its first
glaucoma treatment center in the United States in Phoenix, Arizona in the second
half of 1997. On an annual basis, this glaucoma center could be profitable from
serving as few as 800 patients. Registrant believes, without assurances, that it
is likely to be servicing between 1,000 and 3,000 patients on an annual basis by
the end of the glaucoma center's first full year of operations.
LIQUIDITY AND CAPITAL RESOURCES
On a short-term and long-term basis Registrant requires only minimal
capital to sustain its manufacturing and marketing of the patented Vacuum
Fixation Device and the patented suction rings, because of Registrant's current
inventory levels and the low cost of marketing these patented products. However,
on a short-term basis Registrant requires approximately $600,000 to $800,000 to
adequately fund the first year's operation of its initial glaucoma treatment
center in Phoenix, Arizona. Registrant is presently planning to conduct a
private placement of its securities in mid-1997 to secure this financing.
However, at this time Registrant has received no commitments from any source to
provide such financing. On a long-term basis, Registrant anticipates, without
assurances, that its initial glaucoma treatment center will be sufficiently
profitable to permit an additional 39 glaucoma centers to be funded over the
subsequent two years from a combination of internal and external sources.
In December, 1996 Registrant borrowed $10,000, payable on January 31,
1998 and bearing 15% annual interest. Subsequent to year end Registrant borrowed
an additional $162,000 from the same lender on the same terms.
On international product sales, Registrant anticipates, without
assurance, avoiding currency deviations by receiving U.S. currency for all
product sales.
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ITEM 7. FINANCIAL STATEMENTS.
See Financial Statements starting on page F-1 for this information.
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
On March 21, 1996, Registrant's last certifying accountant, Hobe &
Lucas of Independence, Ohio, issued an opinion on the consolidated financial
statements of Logical Computer Services of New York, Ltd., a New York
corporation and a Company predecessor corporation, in conjunction with the
issuance of the Company's annual report on Form 10-KSB for the fiscal year ended
December 31, 1995. The opinion stated that the accompanying consolidated
financial statements for the fiscal years ended December 31, 1995 and 1994 were
prepared assuming that the Company would continue as a going concern. The letter
referred to disclosures in Note 8 of the financial statements that the Company
had incurred net losses during the years ended December 31, 1995 and 1994,
respectively, which, along with other conditions, raised substantial doubt about
the Company's ability to continue as a going concern. The opinion additionally
stated that the financial statements did not include any adjustments that might
result from the outcome of these uncertainties. Note 8 to the accompanying
financial statements disclosed that in order to meet the Company's current debt,
additional working capital would be required and that as of the date of the
report the Company had not raised sufficient funds to meet its needs. Registrant
is unaware of any disagreements with Hobe & Lucas that existed at any time.
On January 17, 1997 Hobe & Lucas resigned from its engagement with
Registrant as a result of Registrant's move of its offices to Arizona.
On March 13, 1997 Arthur Andersen LLP ("Arthur Andersen") was engaged
by Registrant to audit its financial statements for the fiscal year ended
December 31, 1996. Registrant was not provided with any advice as to accounting,
auditing or financial reporting issues arising from any discussion with Arthur
Andersen. On March 28, 1997, Arthur Andersen resigned as the certifying
accountant for Registrant. Arthur Andersen had not issued any report on the
financial statements of Registrant. Registrant is aware of no disagreements or
reportable events with respect to its relationship with Arthur Andersen.
On May 8, 1997, Registrant engaged Semple & Cooper, L.L.P., as its
principal accountant to audit Registrant's financial statement, commencing with
the year-ended December 31, 1996. Prior to its engagement of Semple & Cooper
L.L.P., the Registrant had not contacted Semple & Cooper L.L.P. with respect to
any accounting matter or the subject of any disagreement with a previous
accounting firm.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS'
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The directors and executive officers of the Registrant as of December
31, 1996 were as follows:
Name and Address Position
---------------- --------
Gary R. Smith Director, President and Treasurer
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
G. Richard Smith Director and Secretary
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
John T. LiVecchi Director
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
The Company presently has two vacancies on its Board of Directors.
GARY R. SMITH, age 53, has been a Director of the Registrant since
November 5, 1996, and President and Treasurer of the Registrant since November
5, 1996. From July, 1995 to November 5, 1996 Gary R. Smith was a member and Vice
President of Product Development and Manufacturing of Ophthalmic International,
L.L.C., the company that developed and patented the glaucoma treatment which was
conditionally transferred to the Registrant. From 1987 to June, 1995 Gary R.
Smith was Co-owner and Vice President of Product Development and Manufacturing
for Southern California Medical Distributors, Ltd. ("SCMD"), where he developed
a turbine powered keratotome for eye surgery. Gary R. Smith attended Detroit
Institute of Technology in Detroit, Michigan from 1961 through 1963.
G. RICHARD SMITH, age 49, has been a Director of the Registrant since
November 5, 1996 and Secretary of the Registrant since November 5, 1996. From
July, 1995 to November 5, 1996 G. Richard Smith was a member and President of
Ophthalmic International, L.L.C., the company that developed and patented the
glaucoma treatment which was conditionally transferred to the Registrant. From
1987 to June, 1995 G. Richard Smith was Co-owner and President of Southern
California Medical Distributors, Ltd. ("SCMD") which developed a turbine powered
keratotome for eye surgery. G. Richard Smith attended Oakland University in
Oakland County, Michigan from 1968 to 1970.
11
<PAGE>
JOHN T. LIVECCHI, age 49, has been a Director of the Company since
December 16, 1996. Dr. LiVecchi received his medical degree in 1977 from the
University of Rome, Italy. From 1983 to present Dr. LiVecchi has been in private
medical practice in the field of ophthalmology in the Scranton, Pennsylvania
area. Dr. LiVecchi has been on the staff of several hospitals and universities.
Dr. LiVecchi is licensed to practice medicine in the States of New York,
Michigan and Pennsylvania. Dr. LiVecchi has authored numerous articles and
presentations. In 1994 Dr. LiVecchi undertook the project of developing
equipment and procedures for treating open angle glaucoma, along with the
Company's other Directors.
Messrs. Smith, Smith and LiVecchi were the three owners of SCMD which
developed a turbine powered keratome for eye surgery. They sold this company to
its Chinese distributor in 1995. During the last year before its sale, this
company had total revenues of approximately $1,050,000 and net income of
approximately $695,000. This company was sold for a multiple of its net income.
Messrs. Smith, Smith and LiVecchi sold SCMD to devote their efforts to the
development of the glaucoma treatment process and equipment, which they felt
could be more profitable than the turbine keratome.
Compliance with Section 16(A)
During the fiscal year ended December 31, 1996, Gary R. Smith failed to
comply with the reporting requirements of Section 16(A) by failing to timely
report to the SEC his acquisition of 6,796,112 total shares from Registrant on
November 5, 1996 and 19 subsequent gifts of stock to family and friends.
During the fiscal year ended December 31, 1996, G. Richard Smith failed
to comply with the reporting requirements of Section 16(A) by failing to timely
report to the SEC his acquisition of 6,796,112 total shares from Registrant on
November 5, 1996 and 3 subsequent gifts of stock to family and friends.
During the fiscal year ended December 31, 1996, John T. LiVecchi failed
to comply with the reporting requirements of Section 16(A) by failing to report
to the SEC his acquisition of 2,000,000 total shares from Registrant on November
5, 1996.
ITEM 10. EXECUTIVE COMPENSATION.
As of December 31, 1996, there are no outstanding employment contracts.
However, the Company's Board of Directors approved annual salaries of $100,000
for the Company's two Officers, Gary R. Smith and G. Richard Smith, commencing
November 5, 1996. To the extent these salaries cannot be paid from Company cash
flow, the salaries will be accrued. As Company revenues and earnings increase in
the future, the salaries of these Company officers may increase.
12
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of June 1, 1997 there were 18,344,253 outstanding shares. The
following table sets forth the name, address, number of shares beneficially
owned, and the percentage of the Company's total outstanding common stock shares
owned by: (i) each of the Company's Officers and Directors; (ii) the Company's
Officers and Directors as a group; and (iii) other shareholders of 5% or more of
the Company's total outstanding common stock shares.
Name and Address Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership(1) of Class
- --------------------------------------------------------------------------------
Common Stock Gary R. Smith 6,528,612 35.6%
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
Common Stock G. Richard Smith 6,728,612 36.7%
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
Common Stock John T. LiVecchi 2,000,000 10.9%
16929 E. Enterprise Drive
Suite 202
Fountain Hills, AZ 85268
Common Stock Officers and Directors, As a 15,257,224 83.2%
Group (3 People)
Common Stock J.R. Vincent and M.M. Vincent(1) 1,197,904 6.5%
11 Third Avenue
Douglas, Isle of Man
IM2 6AL
(1) J.R. Vincent and M.M. Vincent are the sole directors of Tryson
Distributors Limited which owns 648,952 shares and Swincan Development Limited
which owns 548,952 shares.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the fiscal year ending December 31, 1992, two significant events
took place regarding individuals holding more than 10 percent interest in the
Registrant that materially effects the management of the Registrant. On May 7,
1992, Mr. John Troster (the Registrant's President, Treasurer, Director and
owner of 93,500 shares of the Registrant's common shares) sold 87,300 shares to
an investors group comprised of Mr. Stephen A. Jones, Mr. Mitsuo Tatsugawa, Mr.
Robert Kube, Mr. David Warren, Mr. Raymond R. Gheen and Mr. Timothy J. Miles.
The shares were sold to the investment group as part of a 108,000 share
purchase. The total purchase price for all of the shares sold was $35,000.00. As
part of this transaction, John Troster resigned as President, Treasurer and
Director of the Registrant and John A. Catricola resigned as Vice President,
Secretary and Director of the Registrant. Prior to resigning as Director of the
Registrant, John Troster appointed Raymond Gheen and Stephen Jones to fill the
vacancies on the Board of Directors that had resulted from prior resignations.
Following John Troster's resignation, Mitsuo Tatsugawa was appointed to replace
John Troster. Effective May 7, 1992, the new Board of Directors elected Timothy
Miles to serve as President and Treasurer of the Registrant and Mary Ellen Miles
to serve as Vice President and Secretary of the Registrant. The principal place
of business of the Registrant was changed to Mr. Miles' residence on a rent-free
basis.
13
<PAGE>
In November, 1992, the Registrant's officers entered into negotiations
with Android Corporation, for a merger of the two corporations wherein the
Registrant would be the surviving entity. A binding agreement, subject to
shareholder approval, was effective on April 5, 1993. As part of this agreement,
the investment group who purchased control of the Registrant in 1992 sold to
Android Corporation, 20,000 shares of the Registrant's common stock at the rate
of $2.50 per share and thereafter sold an additional 2,500 shares of the
Registrant's common stock at the rate of $5.00 per share. In conjunction with
the initial agreement among the control group shareholders and Android
Corporation, the shareholders also gave Android Corporation their proxy for all
of the remaining shares controlled by the investment group for a period form
April 5, 1993 through May 31, 1993. No votes of shareholders were taken during
this time and the proxies expired.
As part of the merger agreement, the Registrant had agreed to pay a
commission to Mr. Timothy J. Miles for his efforts in arranging the merger. The
commission was to be in the form of the issuance of 44,000 shares of the
Registrant's common stock. The stock was to restrict stock pursuant to Rule 144.
Although the merger was not finally culminated, the Board of Directors,
comprised of Mr. Miles and his wife, instructed these shares of stock to be
issued to him. Between April, 1993 and May 28, 1995, the Company issued
approximately 257,298 post-split shares to then officers and Directors of the
Company and certain shareholders of Android Corp., a company whose proposed
merger with the Company was never completed. These shares were supposedly issued
as finders fees or in consideration of monies paid to the Company. The Company
has recently learned that little or no consideration was received for some of
these shares, because substantially all of the monies were paid to Android Corp.
and not the Company. For these and other reasons, the Company has decided to
attempt to reclaim these shares through litigation against these shareholders.
On November 5, 1996, the Registrant entered into the Asset Purchase
Agreement with Ophthalmic International, L.L.C., and American Glaucoma, whereby
6,796,112 restricted shares of Registrant's common stock were issued to each of
Gary R. Smith and G. Richard Smith, and 2,000,000 restricted shares were issued
to John T. LiVecchi. Messrs. Smith, Smith and LiVecchi became the Registrant's
sole Directors as a result of this transaction. For accounting purposes, Messrs.
Smith, Smith and LiVecchi are deemed to have no cost in the assets transferred
to the Registrant. Ophthalmic International, L.L.C., has the right to rescind
the transaction and receive the return of the patent and other proprietary
assets it transferred to Registrant, if it discovers that Registrant breached
any of its warranties or representations contained in the Asset Purchase
Agreement.
Edward A. Barth, Richard Companalie and Richard Hooper, former
directors of the Registrant, received 335,000, 5,000, and 20,000 restricted
Registrant shares, respectively, as a finder's fee in the Asset Purchase
Agreement. In addition, Barth Construction Co., Edward Barth's construction
company, received 5,000 shares of Registrant common stock as a finder's fee in
the Asset Purchase Agreement. An additional 495,000 post-split shares was issued
in November, 1996 by the Company to former officers of the Company and
shareholders of Android Corp. supposedly as finder's fees. The Company is
currently investigating the propriety of these finder fees to these individuals.
14
<PAGE>
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8K.
Reference is herewith made to the financial statements and notes
thereto included herein and to the cover page of this 10-KSB with respect to
documents incorporated by reference in accordance with Rule 12b-33.
On November 14, 1996, Registrant filed a Form 8-K with the SEC
reporting on a change in control of Registrant, acquisition of assets, other
events and resignations of Directors, with no financial statements filed.
INDEX TO EXHIBITS PROVIDED
1. Financial Statements F-1
2. Exhibit 11 -- Computation of Earnings (Loss) per Share
3. Exhibit 27 -- Financial Data Schedule
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto authorized.
CORONADO INDUSTRIES, INC.
By: /s/ Gary R. Smith
------------------------------
Gary R. Smith, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities on the date(s) indicated.
/s/ Gary R. Smith
- ----------------------- President, (Chief Executive Dated: June 16, 1997
Gary R. Smith Officer) Treasurer (Chief
Accounting Officer), Director
/s/ G. Richard Smith
- ----------------------- Secretary, Director Dated: June 16, 1997
G. Richard Smith
- ----------------------- Director Dated:
John LiVecchi
16
<PAGE>
SUPPLEMENTAL INFORMATION AND EXHIBITS
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 BY REGISTRANTS WHICH HAVE NOT
REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
The Registrant's fiscal year ended December 31, 1996. The Registrant
currently has not held its Annual Meeting of Stockholders.
Four copies of all material to be mailed to stockholders with respect
to such meeting will be furnished to the Securities and Exchange Commission but
such documents, when furnished, will not be deemed to be filed with the
Securities and Exchange Commission or otherwise subject to liabilities of
Section 18 of the Act (except to the extent that the Registrant specifically
incorporates such material by reference in any subsequent Form 10-KSB); it is
expected that such documents will consist of a Form of Proxy, Notice of Annual
Meeting, Information Statement with Schedules and/or Exhibits annexed thereto.
17
<PAGE>
CORONADO INDUSTRIES, INC.
(A Development Stage Company)
(Formerly Logical Computer Services
of New York, Ltd.)
FINANCIAL STATEMENTS
For The Year Ended
December 31, 1996
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Stockholders and Board of Directors of
Coronado Industries, Inc. (A Development Stage Company)
(Formerly Logical Computer Services of New York, Ltd.)
We have audited the accompanying balance sheet of Coronado Industries, Inc. (A
Development Stage Company) as of December 31, 1996, and the related statements
of operations, changes in 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.
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 our audit provides 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 Coronado Industries, Inc. (A
Development Stage Company) as of December 31, 1996, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Certified Public Accountants
Phoenix, Arizona
May 27, 1997
<PAGE>
CORONADO INDUSTRIES, INC.
(A Development Stage Company)
(Formerly Logical Computer Services of New York, Ltd.)
BALANCE SHEET
December 31, 1996
ASSETS
Current Assets:
Cash $ 7,183
Inventory 10,567
--------
Total Current Assets 17,750
--------
Property and Equipment, net 8,799
--------
Other Assets:
Intangible assets 8,266
--------
Total Assets $ 34,815
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 8,272
Accrued salaries 30,556
--------
Total Current Liabilities 38,828
Long-Term Debt 10,000
--------
Total Liabilities 48,828
--------
Stockholders' Deficit:
Preferred stock - $.0001 par value;
3,000,000 shares authorized, none
issued or outstanding --
Common stock - $.001 par value;
20,000,000 shares authorized,
18,344,253 shares issued and outstanding 18,344
Additional paid-in capital 37,149
Accumulated deficit during development stage (69,506)
--------
Total Stockholders' Deficit (14,013)
--------
Total Liabilities and Stockholders' Deficit $ 34,815
========
The Accompanying Notes are an Integral Part
of the Financial Statements
F-2
<PAGE>
CORONADO INDUSTRIES, INC.
(A Development Stage Company)
(Formerly Logical Computer Services of New York, Ltd.)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
For The Year Ended December 31, 1996
Revenues $ --
-----------
General and Administrative Expenses:
Officers salaries $ 30,556
Advertising 285
Amortization 285
Bad debts 900
Bank charges 86
Business promotion 187
Depreciation 1,766
Directors fees 1,200
Dues and subscriptions 127
Meals and entertainment 59
Office supplies 1,746
Outside services 107
Postage and delivery 374
Professional fees 24,740
Taxes and licenses 3,489
Taxes - property 248
Telephone 772
Travel 1,490
-----------
Total operating expenses 68,417
-----------
Loss from Operations (68,417)
Interest Expense 1,089
-----------
Net Loss $ (69,506)
===========
Net Loss per Share (Note 1) $ --
===========
Weighted Average Shares Outstanding 18,344,253
===========
The Accompanying Notes are an Integral Part
of the Financial Statements
F-3
<PAGE>
CORONADO INDUSTRIES, INC.
(A Development Stage Company)
(Formerly Logical Computer Services of New York, Ltd.)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For The Year Ended December 31, 1996
<TABLE>
<CAPTION>
Common Stock
-------------------- Stock-
Retained Additional holders'
Shares Paid-in Earnings Treasury Equity
Outstanding Amount Capital (Deficit) Stock (Deficit)
----------- ------ ------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1995 1,885,573 $ 2,755 $ 253,737 $(298,854) $ (9,425) $(51,787)
Stock issued
for services 40,000 40 1,160 -- -- 1,200
One for five
reverse stock
split (1,540,448) (1,540) 1,540 -- -- --
Proceeds from
sale of stock 1,511,904 1,512 74,885 -- -- 76,397
Reverse merger
with American
Glaucoma and
Ophthalmic 15,592,224 15,592 (293,313) 298,854 -- 21,133
Retirement of
treasury stock -- (870) (8,555) -- 9,425 --
Stock issued
for finders fee 855,000 855 7,695 -- -- 8,550
Net loss -- -- -- (69,506) -- (69,506)
---------- -------- --------- -------- -------- --------
Balance at
December 31, 1996 18,344,253 $ 18,344 $ 37,149 $(69,506) $ -- $(14,013)
========== ======== ========= ======== ======== ========
</TABLE>
The Accompanying Notes are an Integral Part
of the Financial Statements
F-4
<PAGE>
CORONADO INDUSTRIES, INC.
(A Development Stage Company)
(Formerly Logical Computer Services of New York, Ltd.)
STATEMENT OF CASH FLOWS
For The Year Ended December 31, 1996
Cash Flows from Operating Activities:
Cash paid for general and administrative expenses $(75,528)
Interest paid (1,089)
--------
Net cash used in operating activities (76,617)
--------
Cash Flows from Financing Activities:
Cash received from long-term debt 10,000
Cash received from sale of stock 76,397
Repayment of notes payable to stockholders (4,000)
--------
Net cash provided by financing activities 82,397
--------
Net Increase in Cash 5,780
Cash, at beginning of year 1,403
--------
Cash, at end of year $ 7,183
========
Reconciliation of Net Loss to Net Cash Used in
Operating Activities:
Net loss $(69,506)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 1,766
Amortization 285
Stock issued for services 1,200
Changes in Assets and Liabilities:
Accounts payable (39,890)
Accrued payroll 30,556
Accrued expenses (1,028)
--------
Net Cash Used in Operating Activities $(76,617)
========
F-5
<PAGE>
CORONADO INDUSTRIES, INC.
(A Development Stage Company)
(Formerly Logical Computer Services of New York, Ltd.)
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies, Nature of Operations and Use of
Estimates:
Organization:
Coronado Industries, Inc. (the Company) was originally incorporated under
the laws of the State of New York in December 1989 as First Lloyd Funding,
Inc., which subsequently changed its name to Logical Computer Services of
New York, Ltd. In September, 1996, the Company changed its name to Coronado
Industries, Inc. The Company had limited activity prior to its merger on
November 5, 1996, when the Company acquired one hundred percent (100%) of
the assets of Ophthalmic International, L.L.C. and American Glaucoma.
The stockholders of American Glaucoma and Ophthalmic International, L.L.C.,
which are the same for both corporations, obtained majority control of the
Company in the combination. Therefore, the transaction is accounted for as
a reverse merger. The accompanying financial statements have been presented
on a contiguous basis due to the inactivity of Logical Computer Services of
New York, Ltd.
The Company has been in the development stage since its acquisition of
Ophthalmic International, L.L.C. and American Glaucoma in November 1996.
Ophthalmic International, L.L.C. has received a patent on the method for
treating Open Angle Glaucoma, as well as the devices used in the treatment,
including the Vacuum Fixation Device. However, a provision in the Asset
Purchase Agreement allows Ophthalmic International, L.L.C. to rescind the
transaction and receive the patent rights and other proprietary rights back
from the registrant in the event Ophthalmic International, L.L.C. discovers
within one (1) year after the date of the Asset Purchase Agreement that the
registrant breached one of its representations or warranties in that
agreement. The Company intends to manufacture and market the patented
Vacuum Fixation Device and the patented suction rings to major medical
supply companies and health care providers throughout the world. However,
the Company has yet to generate any revenues.
Use of Estimates in the Preparation of Financial Statements:
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
disclosure of 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.
Inventories:
Inventories are stated at the lower of cost, as determined on a
first-in/first-out (FIFO) basis or market.
F-6
<PAGE>
CORONADO INDUSTRIES, INC.
(A Development Stage Company)
(Formerly Logical Computer Services of New York, Ltd.)
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Summary of Signficant Accounting Policies, Nature of Operations and Use of
Estimates: (Continued)
Property and Equipment:
Property and equipment are stated at cost. Maintenance and repairs that
neither materially add to the value of the property nor appreciably prolong
its life are charged to operations as incurred. Betterments or renewals are
capitalized when incurred. Depreciation is provided using accelerated
methods over the following useful lives:
Office furniture and equipment 5-7 years
Machinery and equipment 5-7 years
Deferred Income Taxes:
Deferred income taxes are provided on an asset and liability method,
whereby deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards and deferred
tax liabilities are recognized for taxable temporary differences. Temporary
differences are the differences between the reported amounts of assets and
liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects
of changes in tax laws and rates on the date of enactment.
Fair Value of Financial Instruments:
The fair value of the Company's long-term debt is based on rates currently
available from the bank for debt with similar terms and maturities.
Loss Per Share:
The loss per share is based upon the weighted average number of shares
outstanding from the time of the reverse merger, and giving retroactive
effect to the one-for-five reverse stock split (Note 5).
Intangible Assets:
The Company reviews its intangible assets at least annually to evaluate
potential impairment by comparing the carrying value of the intangible with
expected future net operating cash flows from the related operations. If
the expected future net operating cash flows are less than the carrying
value, the Company recognizes an impairment loss equal to the amount by
which the carrying value exceeds the discounted expected future net
operating cash flows from the related operation.
F-7
<PAGE>
CORONADO INDUSTRIES, INC.
(A Development Stage Company)
(Formerly Logical Computer Services of New York, Ltd.)
NOTES TO FINANCIAL STATEMENTS (Continued)
2. Property and Equipment:
At December 31, 1996, property and equipment consists of the following:
Office furniture and equipment $10,300
Machinery and equipment 265
-------
10,565
Less: accumulated depreciation (1,766)
-------
Net property and equipment $ 8,799
=======
Depreciation expense was $1,766 for the year ended December 31, 1996.
3. Intangible Assets:
Intangible assets consist primarily of goodwill, which represents the
excess of the cost of the combined companies over the fair value of their
net assets at the date of combination, and is being amortized ratably over
five (5) years. Amortization expense charged to operations for the year
ended December 31, 1996 was $285.
4. Long-Term Debt:
At December 31, 1996, long-term debt consists of the following:
10% note payable to Hayden Investments, principal
and interest due January 31, 1998; unsecured. $10,000
=======
5. Changes in Stockholders' Equity:
During the year ended December 31, 1996, the Company's Board of Directors
authorized a number of transactions to provide for operations and the
Company's reverse merger.
Common Stock:
The Board of Directors authorized the issuance of 40,000 pre-split shares
of common stock to its four directors (10,000 shares each). This issuance
was deemed compensation for services rendered.
The Board of Directors authorized and the stockholders approved a
one-for-five reverse stock split effective September 19, 1996.
F-8
<PAGE>
CORONADO INDUSTRIES, INC.
(A Development Stage Company)
(Formerly Logical Computer Services of New York, Ltd.)
NOTES TO FINANCIAL STATEMENTS (Continued)
5. Changes in Stockholders' Equity:(Continued)
The Board of Directors authorized the subscription of additional shares of
common stock through a private offering, pursuant to regulations of the
Security Act of 1933. This resulted in the issuance of 1,511,904 post-split
shares of common stock. The intent of the Board of Directors, in
authorizing the sale of additional common stock, was to raise capital
sufficient to pay off the Company's existing payables.
The Board of Directors authorized the issuance of common stock in
accordance with the Asset Purchase Agreement between the Company and
Ophthalmic International, L.L.C. and American Glaucoma. This resulted in
15,592,224 post-split shares of common stock being issued to the
stockholders of Ophthalmic International, L.L.C. and American Glaucoma.
Additionally, 855,000 shares were issued to individuals for finders fees.
Treasury Stock:
The Board of Directors approved the retirement of 869,977 shares of common
stock held in the treasury, and the return of these shares to the status of
authorized but unissued shares.
6. Income Taxes:
The net operating losses of the Company prior to the reverse merger have
been substantially eliminated due to the change in ownership. As such, as
of December 31, 1996, the Company has a net operating loss carryforward in
the approximate amount of $69,000, available to offset federal and state
taxable income primarily through December 31, 2011.
Differences between financial reporting and income tax losses to date
relates primarily to the Company's net operating loss carryforwards at
December 31, 1996. SFAS No. 109 requires the reduction of deferred tax
assets by a valuation allowance, if based on the weight of available
evidence, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Based on the weight of available
evidence, the Company has provided a full valuation allowance on its
deferred tax asset at December 31, 1996.
7. Subsequent Event:
Subsequent to December 31, 1996 and through April 20, 1997, the Company
received from Hayden Investments, $162,000 in exchange for several notes
payable, each payable within one (1) year with applicable interest stated
at 15%.
F-9
<PAGE>
CORONADO INDUSTRIES, INC.
(A Development Stage Company)
(Formerly Logical Computer Services of New York, Ltd.)
NOTES TO FINANCIAL STATEMENTS (Continued)
7. Subsequent Event:(Continued)
During the year ended December 31, 1996, the State of Nevada approved the
Company's change of incorporation from the State of New York, in which the
Company was originally incorporated and issued the Company a Nevada
Corporate Charter dated September 6, 1996. Subsequent to December 31, 1996,
the State of New York also approved the Company's change of incorporation.
The Company officially reincorporated June 4, 1997.
8. Going Concern:
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. However, the Company has sustained
continuing operating losses.
The primary business of the Company, which is in the development stage,
will be to manufacture and market a patented treatment for Open Angle
Glaucoma. The Company's patents relate to both the method of treatment and
the necessary devices. However, the Company has yet to generate revenues.
As shown in the accompanying statement of operations, the Company has
incurred net losses of $69,506 in 1996. Unaudited information subsequent to
December 31, 1996, indicates that losses are continuing. As of December 31,
1996, the accompanying balance sheet reflects $14,013 in net stockholders'
deficit.
The above conditions indicate that the Company may be unable to continue in
existence. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts, or the
amounts and classification of liabilities that might be necessary should
the Company be unable to continue in existence.
Management has secured additional funding of $162,000 through issuance of
notes payable (see Note 7) and is currently negotiating the marketing,
distribution and manufacturing of the Company's patented treatment with
potential customers.
9. Non-Cash Investing and Financing Activities:
During the year ended December 31, 1996, the Company merged with Ophthalmic
International, L.L.C. and American Glaucoma. In this merger the Company
conditionally received inventory totaling $10,567, office furniture and
equipment of $10,300, machinery and equipment of $265 and patents valued at
$1 in exchange for 15,592,224 shares of common stock.
During the year ended December 31, 1996, the Company retired 869,977 shares
of treasury stock booked at a cost of $9,425, reducing additional paid in
capital by the same amount.
F-10
<PAGE>
CORONADO INDUSTRIES, INC.
(A Development Stage Company)
(Formerly Logical Computer Services of New York, Ltd.)
NOTES TO FINANCIAL STATEMENTS (Continued)
10. Litigation:
There has been no litigation instituted by or against the Company for
the year ended December 31, 1996. However, at least one of the Company's
former officers and directors has threatened to sue the Company and its
current directors as a result of damages which have been incurred
because the Company has refused to permit the transfer of his shares.
The Company has decided to file a lawsuit against this and other former
officers, as well as other stockholders, on the basis that it now
appears they may have been issued Company shares without the Company
receiving consideration, as well as other grounds. Based on the
representations of the Company's legal counsel, no provision for gain or
loss has been included in the accompanying financial statements, as no
estimate can be made as to any amount to be ultimately recovered or
lost.
F-11
EXHIBIT 11
CORONADO INDUSTRIES, INC.
Earnings (Loss) Per Share
December 31, 1996
Net Loss $ (69,506)
Net Loss Per Share $ --
Weighted Average Shares Outstanding 18,344,253
The loss per share is based upon the weighted average number of shares
outstanding from the time of the reverse merger, and giving retroactive effect
to the one-for-five reverse stock split.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,183
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 10,567
<CURRENT-ASSETS> 17,750
<PP&E> 10,565
<DEPRECIATION> (1,766)
<TOTAL-ASSETS> 34,815
<CURRENT-LIABILITIES> 34,453
<BONDS> 10,000
0
0
<COMMON> 18,344
<OTHER-SE> (32,357)
<TOTAL-LIABILITY-AND-EQUITY> 34,815
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 68,417
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,089
<INCOME-PRETAX> (69,506)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69,506)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
