SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported): April 8, 1999
MILLENNIUM ELECTRONICS, INC.
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(Exact name of registrant as specified in it charter)
Nevada 000-22515 33-0750730
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(State of incorporation) (Commission (I.R.S. Employer
File Number) Identification Number)
92 Argonaut, Suite 120, Aliso Viejo, California 92656
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(Address of principal executive offices)
Registrant's telephone number, including area code: (949) 587-3400
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Former address: 51 Discovery, Irvine, California 92618
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Exhibit Index on Page 5
Page 1 of 17
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Item 2. Acquisition or Disposition of Assets
All or substantially all of Registrant's assets were disposed of on
April 8, 1999 when Registrant's wholly owned subsidiary, Millennium
Memory, Inc. (the "Company"), surrendered and granted exclusive
peaceful possession of the Company's assets pledged as collateral
(the "Collateral") to Coast Business Credit, a division of Southern
Pacific Bank, due to the Company's default under the borrowing
agreement (the "Agreement") with Coast Business Credit. The Company
has consented to the disposition of the Collateral by Coast Business
Credit at a private or public sale. Proceeds from the sale or
disposition of the Collateral will be applied first to the costs of
the sale, second to attorney's fees, third to accrued interest and
fourth to unpaid principal. Pursuant to the Agreement, as of April
8, 1999, the Company is indebted to Coast Business Credit in the
principal amount of $675,000.00. As of April 8, 1999 the Company
listed total assets of $631,500.00 and total current liabilities of
$2,532,790.00. The surrender of the Company's assets is further
described in a letter to Coast Business Credit filed herewith as
Exhibit 2.1.
Registrant has not filed an annual report on Form 10-K for the
fiscal year ended December 31, 1998 due to the cash liquidity
crises. A press release dated February 22, 1999 announcing financial
results for fiscal 1998 is filed herewith as Exhibit 99.1.
Item 5. Other Events
Ken Gerstner, director, acting CEO and Chief Financial Officer of
Registrant resigned from the board of directors and all offices of
Registrant and the Company effective as of April 8, 1999.
Page 2 of 17
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Item 7. Financial Statements and Exhibits
The following financial statements and exhibits are filed as part of
this report:
(a) Exhibits in accordance with Item 601 of Regulation S-K:
Exhibit No. Description
- ----------- -----------
2.1 Letter to Coast Business Credit dated April 8, 1999
regarding the disposition of the assets of Millennium
Memory, Inc.
99.1 Press release dated February 22, 1999.
Page 3 of 17
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant
has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
MILLENNIUM ELECTRONICS, INC.
Date: April 21, 1999 By: /s/ Douglas P. Morris
-------------------------------------
Douglas P. Morris
President, Chief Executive Officer
and Chairman of the Board
Page 4 of 17
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Exhibit Index
Exhibit No. Description Page
- ----------- ----------- ----
2.1 Letter to Coast Business Credit dated April 8, 1999 6
regarding the disposition of the assets of Millennium
Memory, Inc.
99.1 Press release dated February 22, 1999. 13
Page 5 of 17
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Exhibit 2.1
MILLENNIUM MEMORY, INC.
92 Argonaut, Suite 120/130
Aliso Viejo, California 92656
April 8, 1999
Coast Business Credit
12121 Wilshire Blvd., Ste. 1400
Los Angeles, California 90025
Gentlemen:
Reference is made to our borrowing arrangement (the "Arrangement') with
you pursuant to, among others, the following documents: (a) Loan and Security
Agreement between Millennium Memory, Inc. ("MMI") and Coast Business Credit
("Coast") dated September 20, 1995, (b) the Accounts Collateral Security
Agreement dated September 20, 1995 together with all other amendments,
instruments and agreements between you and us, (c) the Validity Guaranty dated
October 31, 1997 of Troy D. Barnes and "The Troy D. Barnes Trust dated April 2,
1994" ("Barnes"), and (d) the Continuing Guaranty (the "Millennium Electronics
Guarantee") dated January 8, 1998 of Millennium Electronics, Inc. (formerly
known as Beacon Capital Investment, Inc.) ("Millennium Electronics"), of the
Obligations of MMI to Coast.
We hereby acknowledge that, pursuant to the Arrangement and the Millennium
Electronics Guarantee, as of April 8, 1999 MMI and Millennium Electronics are
indebted to you in the principal amount of $579,011.90, plus accruing interest
from and after April 8, 1999, attorney fees, expenses and subsequent advances.
We acknowledge that, pursuant to the Arrangement, you have been granted a
valid perfected first security interest in, among other things, all of MMI's
present and future assets including, among other things, its accounts, inventory
(including, without limitation, work in progress and raw materials), machinery
and equipment wherever located, and general intangibles, and the proceeds and
products thereof (collectively, "the Collateral").
Exhibit 2.1
Page 1
Page 6 of 17
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Millennium Memory, Inc.
April 8, 1999
Page 2
We further acknowledge that MMI and Millennium Electronics are in default
under the Arrangement and the Millennium Electronics Guarantee, are unable to
meet their obligations thereunder as they become due, that you have the right to
take immediate possession of all of the Collateral, pursuant to the Arrangement
and as a secured party under the California Commercial Code, and you are not
obligated to make any additional advances to MMI.
We further acknowledge that, as a result of our default, you are presently
entitled to exercise all rights and remedies granted to you under the
Arrangement and by law, including without limitation, the right to conduct a
foreclosure sale of the Collateral.
Accordingly, we hereby surrender and grant to you exclusive peaceful
possession of the Collateral, wherever located, including but not limited to the
collateral located at our premises at 92 Argonaut, Suite 120/130, Aliso Viejo,
California 92656, and at any other warehouse, showroom or other location in the
United States or elsewhere at which the Collateral is or may be located.
We hereby represent and warrant to you that the Collateral being delivered
to you is all of the Collateral that exists. We hereby agree that you shall have
no responsibility or liability in connection with your possession of the
Collateral, or the safekeeping thereof, and we hereby specifically agree that
you shall have no duty or obligation to insure any of the same against any risk
or casualty whatsoever. Until the removal or sale of the Collateral, we agree
that the same may remain on our premises and that you may (but are not obligated
to) have a guard on the premises or take other steps to safeguard the Collateral
that you, in you sole discretion, deem appropriate.
We hereby consent to your disposition of the Collateral in accordance with
the terms of the Arrangement, at private or public sale, at your sole
discretion, and we waive any rights we may have under Section 9504 of the
California Commercial Code, or otherwise, with respect to the sale or
disposition of, or any notice regarding the sale or disposition of, the
Collateral. We hereby consent to your application of any proceeds from the sale
or disposition of the Collateral first to costs of sale, second to attorneys'
fees, third to accrued interest, and fourth to unpaid principal.
We will cooperate with and assist you in taking possession of the
Collateral, and we will execute and deliver such other documents as you or your
counsel shall require in order to effectuate and carry out the terms of this
letter agreement.
Exhibit 2.1
Page 2
Page 7 of 17
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Millennium Memory, Inc.
April 8, 1999
Page 3
We hereby represent and warrant to you that the Collateral is not subject
to any other liens or security interests, and we hereby agree to indemnify you,
and hold you harmless from and against any and all claims, demands, liabilities,
debts, obligations, expenses, sales and other taxes, actions and causes of
action, of every nature, which you may sustain or incur in connection with the
sale of the Collateral.
We hereby release and forever discharge you of and from any and all
claims, demands, liabilities, debts, obligations, expenses, actions and causes
of action of every nature which we now have, heretofore had or may hereafter
have, whether known or unknown, suspected or unsuspected, based upon, related
to, or by reason of any matter, fact, act, omission, cause or thing whatsoever,
including without limitation, any acts or omissions in connection with the
enforcement of your rights and remedies against us. Each of the undersigned
acknowledges that he is familiar with the provisions of California Civil Code
Section 1542, which provides: "A general release does not extend to claims which
the creditor does not know or suspect to exist in his favor at the time of
executing the Release, which if known by him must have materially affected his
settlement with the debtor." Each of the undersigned hereby waives any and all
rights or benefits which it has or may have under Section 1542.
Nothing herein shall be deemed to be a waiver or modification of any
rights or remedies you now have or may hereafter have under the Arrangement, at
law or in equity.
We acknowledge that you have not made any representation, warranties,
promises or agreements in order to induce us to execute this letter agreement,
and we agree that your acceptance of this letter agreement does not constitute a
waiver of, or agreement to forebear from exercising, any of your rights and
remedies whatsoever.
A resolution from MMI's Board of Directors dated April 8, 1999 is attached
hereto authorizing this action. This letter agreement shall be effective and
Exhibit 2.1
Page 3
Page 8 of 17
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Millennium Memory, Inc.
April 8, 1999
Page 4
binding upon each signatory hereto at the time of their execution hereof,
notwithstanding any failure to execute this letter agreement by any other
signatory hereto.
Very truly yours,
MILLENNIUM MEMORY, INC.
By /s/ Kenneth Gerstner
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Kenneth Gerstner, President &
Chief Financial Officer
/s/ Troy D. Barnes
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Troy D. Barnes, Individually
The Troy D. Barnes Trust dated April 2, 1994
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/s/ Troy D. Barnes
Troy D. Barnes, Trustee
MILLENNIUM ELECTRONICS, INC.
By /s/ Kenneth Gerstner
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Kenneth Gerstner, President &
Chief Financial Officer
Exhibit 2.1
Page 4
Page 9 of 17
<PAGE>
MINUTES OF A SPECIAL MEETING
OF
THE BOARD OF DIRECTORS
OF
MILLENNIUM ELECTRONICS, INC.
The Board of Directors of Millennium Electronics, Inc. a Nevada
corporation (the "Corporation") held a meeting at the Corporation's offices at
92 Argonaut, Aliso Viejo California at 9:00 A.M. Pacific Daylight Time, April 8,
1999. The following directors of the Corporation attended the meeting:
Barry G. Morganstern (Via Telephone Conference)
Douglas P. Morris (Via Telephone Conference)
Kenneth W. Gerstner
Mr. Gerstner acted as chairmen and Secretary of the meeting. All those in
attendance attended by telephone conference except Mr. Gerstner was at the
Corporate Office. All members indicated that they could hear everyone.
Coast Business Credit, Peaceful Possession of Collateral.
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Coast Business Credit will no longer fund C.O.D. purchases after Thursday,
April 8th, 1999. We have no ability to operate and have been unable to generate
sufficient sales and gross profit levels to function as a going concern. Based
on a current liquidation analysis, I recommend we discontinue operations at the
close of business April 8th, 1999 and enter into an arrangement with Coast
Business Credit to grant exclusive peaceful possession of the Collateral of
Millennium Memory Inc.
After Discussion, upon motion duly made by Doug Morris and seconded by
Barry Morganstern, the following motion was unanimously adopted:
BE IT THEREFORE RESOLVED that Kenneth W. Gerstner, Chief Executive Officer
of this Corporation, is authorized to sign and enter into an exclusive peaceful
possession of Collateral Arrangement with Coast Business Credit under the terms
and conditions of the agreement attached to these minutes.
Exhibit 2.1
Page 5
Page 10 of 17
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Resignation of Kenneth W. Gerstner from Millennium Memory Inc. and Millennium
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Electronics
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Mr. Gerstner advised the Board of his resignation effective April 8th,
1999 a copy of which is attached to these minutes.
There being no further business to come before the Board, the meeting was
adjourned at 9:15 p.m. Pacific Coast Time.
/s/ Kenneth W. Gerstner
-----------------------------
Kenneth Gerstner
Secretary of the Meeting
Exhibit 2.1
Page 6
Page 11 of 17
<PAGE>
April 8, 1999
To Board of Directors, Millennium Electronics and Millennium Memory Inc.
Board of Millennium Electronics
Board of Millennium Memory Inc.
Barry Morganstern
Doug Morris
Fred Newton
Barry Morganstern
Doug Morris
Based on the Board of Directors resolution dated April 7th, 1999 to enter into a
peaceful possession agreement with Coast Business Credit to Foreclose I hereby
submit my resignation from the Board of Directors, Offices and Committees for
Millennium Electronics and Millennium Memory Inc. effective April 8, 1999. All
employees will be notified tomorrow of the Company's decision to shutdown.
Respectively Submitted
/s/ Kenneth W. Gerstner
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Kenneth W. Gerstner
Exhibit 2.1
Page 7
Page 12 of 17
<PAGE>
Exhibit 99.1
Monday February 22, 8:37 pm Eastern Time
Company Press Release
MILLENNIUM ELECTRONICS INC. REPORTS FOURTH
QUARTER AND FISCAL YEAR 1998 RESULTS
ALISO VIEJO, Calif.--(BUSINESS WIRE)--Feb. 22, 1999--Millennium Electronics Inc.
(Nasdaq:MILM - news) Monday reported sales and earnings for its fiscal 1998
fourth quarter and twelve months ended Dec. 31, 1998.
For the quarter, the company reported revenues of $4,503,000 and a net loss of
$3,713,000, or a loss of 45 cents per diluted share, compared with revenues of
$10,882,000 and net income of $120,000, or 2 cents per diluted share, in the
prior-year quarter.
For the twelve-month period ended Dec. 31, 1998, the company reported revenues
of $34,551,000 and a net loss of $8,376,000, or a loss $1.01 per diluted share,
compared with revenues of $47,469,000 and net income of $612,000, or 8 cents per
diluted share, in the prior year.
Net income for the fourth quarter was adversely impacted by a number of factors.
The company recorded a $1,998,000 noncash charge to net income for impairment of
the goodwill related to the September 1997 acquisition of NetRam Components.
In addition, write-offs and reserves of $1,034,000 were taken related to
discontinuing manufacturing operations at its 34,000-square-foot facility in
Irvine, Calif., and relocating the company to a smaller, 4,000-square-foot
facility in Aliso Viejo.
Excluding the goodwill and nonrecurring write-offs, the company had a net loss
for the fourth quarter of $581,000. The company had increased costs associated
with its sub-$1,000 computers, including refurbishing returned computers and
selling the refurbished units below cost.
Market pressure on prices remained very strong; such price pressures, combined
with inventory adjustments for slow-moving inventory, contributed to the
negative gross margins for the quarter. As a result of the decreased sales
volume, the fixed costs of the new Millennium facility were being spread over a
significantly lower volume base.
Exhibit 99.1
Page 1
Page 13 of 17
<PAGE>
Finally, net income for the quarter was negatively impacted as a result of not
recording an income tax benefit on the current quarter and year-to-date
operating losses.
Kenneth Gerstner, Millennium's interim chief executive officer, commented:
"During the fourth quarter, our revenues continued to be impacted by a major
decrease in orders from our largest customers as a result of our decision to
reduce the company's losses in the retail channel in the third quarter.
"During the fourth quarter, we were not able to obtain the necessary volume
levels from the VAR channel to support our computer manufacturing operation, and
decided to discontinue manufacturing operations at the end of November and
revert back to a third-party manufacturer.
"Based on the last three quarters' sales and current market trends, we have
refocused the company's efforts on its core computer memory products business.
We will continue to implement cost-reduction measures that adjust our operating
expenses to the lower-volume levels associated with our current strategy."
Based on the company's current financial situation, it continues to explore
workout alternatives with its major creditors with the assistance of outside
counsel in an effort to avoid the significant legal and administrative costs
associated with a filing under the bankruptcy laws. Should these efforts not
meet with success, the company anticipates that it will file for protection
under Chapter 11 of the United States Bankruptcy Code.
About the Company
Millennium Electronics is a nationwide provider of Dynamic Random Access Memory
(DRAM) upgrade components for personal computers; laptop and notebook computers;
file servers; and printers sold to retailers, resellers, value-added resellers,
value-added distributors and original equipment manufacturers. The company's
memory modules incorporate industry-standard specifications and are compatible
with a wide variety of computing and electronic equipment.
This news release may contain forward-looking statements that involve risks and
uncertainties that could cause actual results to differ from predicted results.
Further information on factors that could affect the company's results is
detailed in the company's report on Form 10-K for the year ended Dec. 31, 1997,
and the report on Form 10-Q for the period ended Sept. 30, 1998, as filed with
the Securities and Exchange Commission. The company undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements.
Exhibit 99.1
Page 2
Page 14 of 17
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MILLENNIUM ELECTRONICS INC.
AND ITS SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
Dec. 31, 1998 Dec. 31, 1997
(Unaudited) (Audited)
ASSETS
Current Assets
Cash & Cash Equivalents $ 55,315 $ 211,273
Accounts receivable, net of an allowance for
doubtful accounts of $1,393,741 and $175,000,
respectively 1,528,229 6,876,495
Stock Subscription Receivable -- 1,494,366
Inventories - net of reserve 336,637 1,541,666
Prepaid expenses 46,876 100,139
Income Taxes Receivable -- 163,719
Deferred Tax Asset -- 125,000
Other current assets 28,838 57,551
Total current assets 1,995,895 10,570,209
Furniture and equipment, net 250,242 147,675
Other assets 76,963 97,735
Excess cost over fair value of net assets
acquired, net of accumulated amortization of
$2,315,195 and $84,258, respectively -- 2,274,937
Total assets $ 2,323,100 $13,090,556
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Lines of credit $ 1,333,538 $ 4,877,286
Accounts payable and accrued liabilities 2,193,116 1,317,229
Total current liabilities 3,526,654 6,194,515
Long-Term Liabilities
Deferred income taxes -- 25,000
Stockholders' equity
Common stock, par value .001: 25,000,000 shares
authorized, 8,056,242 and 8,167,150 shares issued
and outstanding 8,056 8,167
Treasury Stock (50,000) --
Additional Paid Capital 6,927,211 6,575,359
Retained earnings (accumulated deficit) (8,088,821) 287,515
Total stockholders' equity (1,203,554) 6,871,041
Total liabilities and stockholders' equity $ 2,323,100 $13,090,556
Exhibit 99.1
Page 3
Page 15 of 17
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MILLENNIUM ELECTRONICS INC.
AND ITS SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
3 Months Ended 12 Months Ended
Dec. 31, Dec. 31,
1998 1997 1998 1997
Net Sales $ 4,503,141 $10,881,975 $34,511,354 $47,468,949
Cost of Sales 4,842,270 9,416,907 33,716,465 42,117,720
Gross Profit (339,129) 1,465,068 834,889 5,351,229
Selling, general and
administrative expenses 2,535,485 1,099,600 7,969,886 4,048,734
Income (Loss)
from operations (2,874,614) 365,467 (7,134,997) 1,302,495
Other income (expense)
Other Income 1,877 614 2,745 20,280
Other expenses (764,100) (185,853) (1,168,384) (617,974)
Income (Loss) before
provision for income
taxes (3,636,837) 180,228 (8,300,636) 704,801
Provision (Benefit) for
Income Taxes
Current (24,300) 15,435 (24,300) 192,606
Deferred 100,000 45,200 100,000 (100,000)
Net Income $(3,712,537) $ 119,593 $(8,376,336) $ 612,195
Basic earnings (loss)
per share $ (.45) $ .02 $ (1.01) $ .09
Diluted earnings (loss)
per share $ (.45) $ .02 $ (1.01) $ .08
Weighted average shares 8,220,355 6,892,587 8,220,355 6,892,587
outstanding
Exhibit 99.1
Page 4
Page 16 of 17
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Contact:
Millennium Electronics Inc., Aliso Viejo
Kenneth W. Gerstner, 949/587-3400
[email protected]
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or
Coffin Communications Group, Sherman Oaks, Calif.
William F. Coffin, 818/789-0100
[email protected]
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Exhibit 99.1
Page 5
Page 17 of 17
