UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT
Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended June 30, 2000
LOG POINT TECHNOLOGIES, INC.
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(Name of Small Business Issuer in its Charter)
Colorado 84-1360787
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
465 Fairchild Drive, Suite 111, Mountain View, CA 94043
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(Address of principal executive offices) (Zip Code)
(650) 967-3974
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(Issuer's Telephone Number)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class to be registered: Name of each exchange on which
each class is to be registered:
N/A N/A
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Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock
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<PAGE>
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] No
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 registrant's knowledge, in definitive or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Company's revenues for its most recent year were $0.00.
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The aggregate market value of the voting and non-voting common equity held by
non-affiliates was approximately $4,500,000 as of September 25, 2000.
The number of shares outstanding of the Company's classes of common and
preferred equity are as follows.
a. Common Stock
------------
The Company is authorized to issue 50,000,000 shares of no par value per share
common stock. The holders of each share are entitled to one vote for each share
held, and are entitled to dividends when and as declared by the Board of
Directors. At September 25, 2000, common shares issued and outstanding totaled
11,247,333.
b. Preferred Stock
---------------
The Company is authorized to issue 5,000,000 shares of no par value per share
preferred stock, which may be issued in classes or series with various rights
and designations by the Board of Directors. No shares have been issued. Each
share of preferred stock is entitled to dividends when and if declared by the
Board of Directors.
Transitional Small Business Disclosure Format (Check one): Yes [ ]; No [X] .
<PAGE>
LOG POINT TECHNOLOGIES, INC.
ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR ENDED JUNE 30, 2000
TABLE OF CONTENTS
PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Securities Holders
PART II
Item 5. Market for Registrant's common Equity and Related
Stockholder Matters
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 7. Financial Statements
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosures
PART III
Item 9. Directors and Executive Officers of the Registrant
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners
and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K
Certain statements contained in this Annual Report on Form 10-KSB, including
without limitation, statements containing the words "believes", "anticipates",
"hopes", "intends", "expects", and other words of similar import, constitute
"forward looking" statements within the meaning of the Private Litigation Reform
Act of 1995. Such statements involve known and unknown risk, uncertainties and
other factors which may cause actual events to differ materially from
expectations. Such factors include the following: (1) technological,
engineering, quality control or other circumstances which could delay the sale
or shipment of products.; (2) economic, business, market and competitive
conditions in the software industry and technological innovations which could
affect the Company's business; (3) the Company's inability to protect its trade
secrets or other proprietary rights, operate without infringing upon the
proprietary rights of others or prevent others from infringing on the
proprietary rights of the Company; and (4) general economic and business
conditions and the availability of sufficient financing.
<PAGE>
PART I
Item 1. DESCRIPTION OF BUSINESS.
INTRODUCTION
------------
Log Point is, and has been for the past seven years, a development stage digital
electronics company that develops high performance embedded digital computation
products. Log Point's innovations include software that can be embedded in
software applications, a set of mathematical functions that can be embedded in
computer software languages, and electronic firmware that can be mounted on
printed-circuit boards. These products are used to perform specific mathematical
functions many times faster than currently available technology. These products
can be used to complement or modify existing microcontrollers and
microprocessors to substantially improve their performance. They can also be
used to build stand-alone math coprocessors, graphics chips and graphics
accelerators that work with or expand the capabilities of existing hardware
numerical processors.
Log Point began as a private, California based research and development firm in
February, 1993. On October 24, 1997, a transaction was closed in which Log Point
California was merged into Sandtech Developments, Inc., a Colorado corporation
organized on July 19, 1996. Through this merger, accounted for as a reverse
purchase acquisition, Sandtech Developments, Inc. acquired all of the assets and
liabilities of Log Point California, the name of Sandtech Developments, Inc. was
changed to Log Point Technologies, Inc., new officers and directors were
elected, and the shareholders of Log point California became the controlling
shareholders of Sandtech Developments, Inc.
There have been no bankruptcies, receiverships or similar proceedings in this
Company.
BUSINESS
--------
General
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Log Point is, and has been for the past seven years, a development stage digital
electronics company that develops high performance embedded digital computation
products. Log Point's innovations include software that can be embedded in
software applications, a set of mathematical functions that can be embedded in
computer software languages, and electronic firmware that can be mounted on
printed-circuit boards. These products are used to perform specific mathematical
functions many times faster than currently available technology. These products
can be used to complement or modify existing microcontrollers and
microprocessors to substantially improve their performance. They can also be
used to build stand-alone math coprocessors, graphics chips and graphics
accelerators that work with or expand the capabilities of existing hardware
numerical processors.
<PAGE>
The Company's products are based upon its patented logarithm-based computation
processes for use in the software and digital electronics industries.
Math-intensive applications that are enhanced by Log Point's processes
experience speed increases of 2 to 1000 times faster than conventional methods.
The Company uses its exponential floating-point computational methodology to
increase greatly the speed of computer applications, such as sound and graphics.
When applied to low-cost high-volume computer chips, the Company believes that
resulting speed increases can make such chips economical for use in all sorts of
digital electronic products, making them "smart" products. In addition, applying
the Company's technology in newer chips significantly enhances performance in
software and digital electronic products.
The Company's products can be incorporated in digital electronics chips and
microprocessors in areas such as automotive controls, games, 2-D and 3-D
graphics, handheld and desktop personal computers, computer networks and related
computer peripherals, signal processing, multimedia, avionics, instrumentation,
laser printers, robotics, imaging, instrumentation, computers and peripheral,
and communications.
To maintain a competitive edge in price sensitive volume consumer electronics
products, the Company believes that manufacturers of such products face many
challenges, such as a market that demands increasing product performance, the
need of a lower cost per function, the problem of a decreasing product life and
the need to decrease the time from product development to market. Log Point
believes its products meet these needs.
Log Point's technology is based on logarithms and ultra efficient look-up
table-based function generators providing fast and precise calculations. This
technology allows many new design alternatives, and efficient computations, even
in pure software executed by low-cost embedded computer chips.
While developing its hardware designs, Log Point made what it believes to be a
breakthrough in numerical computation. Through electronic design, the silicon
area for Log Point technology was shown to be more than 10 times smaller than
the area required for conventional floating point hardware. This reduction in
silicon area means that less power is consumed by the hardware chip that leads
to less heat generation. Thus the reduced silicon area leads to lower-cost
product designs and to longer battery life for the end user of consumer
electronics.
Log Point possesses exclusive rights to market and vend products based upon
patents on its technology. Log Point has completed construction of several
SuperSpeed Soft CoProcessor products and is now marketing these products
directly and as a third-party vendor on Microsoft and Inprise (f/k/a Borland)
and several major semiconductor chip manufacturers (Intel, Fujitsu, National
Semiconductor and Mitsubishi) websites. These companies have placed Log Point
products on their web sites with links to Log Point's web site at
http://www.logpoint.com. Log Point also has links to the above companies
websites at http://www.logpoint.com/interest.htm.
The Company is targeting its present SuperSpeed(TM) software product designs to
the manufacturers and users of embedded microprocessors, including manufacturers
of numerous categories of lower-cost, volume manufactured electronic products.
The SuperSpeed software products include Soft CoProcessor(TM) high performance
exponential floating-point (efp) virtual processors and scaled-integer
generators of numerous scientific and engineering functions heretofore not
<PAGE>
available at ultra-high speed and low cost. "Floating point" and "scaled
integer" refers to particular ways that numbers are represented in a computer.
The Company is targeting its electronics efp hardware designs to manufacturers
of 32 to 64 bit embedded microprocessors, including manufacturers of numerous
categories of volume manufactured consumer digital electronic products.
Log Point's marketing effort is centered on developing joint marketing and sales
efforts with microprocessor manufacturers, compiler vendors, and other embedded
systems vendors such that both Log Point and other companies leverage each
other's capabilities to increase product sales. Log Point is continuing to
develop joint relationships with other companies.
Log Point is designing hardware versions of its technology for various
manufacturing processes in the electronics industry. The first hardware designs
should be available for licensing in the near future.
Log Point has completed negotiations for a $20,000,000 financing for hardware
production of digital-signal-processing (DSP) chips, graphics accelerator chips,
and efp microprocessor designs. Log Point plans to out-source the production of
hardware chips to semiconductor manufacturers. As sales of hardware chips
increase, Log Point plans to purchase or build a fabrication plant to produce
its own chips.
As of June 30, 2000, no sales of Log Point products have been made. Software
products, that have been completed by Log Point, are being evaluated by
companies. Log Point expects that some of the companies evaluating the software
to become customers. The hardware design products, for licensing to the
electronics industry are still being developed. The production of hardware
chips, that are based on the hardware designs, will require financing. No
significant licensing of hardware designs and sales of hardware chips are
expected until Log Point receives financing. Therefore no significant licensing
or sales of products are expected over the twelve-month period ending June 30,
2001. When financing is obtained, Log Point will accelerate its product
development, and increase its sales and marketing activities.
PRODUCT LINES
-------------
The Company is developing and marketing software, hardware designs, and hardware
product lines. Products completed and being marketed are:
Software--Soft CoProcessors
o Portable C source for basic efp arithmetic and scientific function
libraries
o 32-bit C and assembler source for SPARC and SPARClite 930 Series
o 32-bit C and assembler source for Intel 386, 486 and Pentium
o 24-bit DSP (digital signal processing) assembler source for 8-bit
Intel 8051/2 and Motorola 68HC11/12/16
o In-house GNU tools support (GNU tools is a C computer programming
language)
o 32-bit C++ class arithmetic and scientific function libraries.
Products for future development and marketing are:
<PAGE>
Software for licensing to the electronics industry:
o Function Generators (development is complete but is currently being
upgraded)
o Assembler efp for the following microprocessors: PowerPC, 68xxx,
ColdFire, HPPA, MIPS, ARM, StrongArm, Hitachi SH Series and Mitsubishi
M32R/D (in final development stage)
o Enhanced Conventional Floating-Point Math Libraries (in R&D)
o Application software (in R&D)
Hardware Designs for licensing to the electronics industry:
o Function Generators (development is complete but is currently being
upgraded)
o Electronic design Standard Cell Libraries (in final development stage)
o New Microprocessor Instructions (in final development stage)
o EFP Cores (in R&D)
o Hardware, intellectual property (in final development stage)
Hardware chips for sale to the consumer electronics industry:
o Function Generators (in final development stage)
o FPGA Chips (in final development stage)
o DSP Chips (in final development stage)
o ASIC Chips (in final development stage)
o Microprocessor Chips (in final development stage)
MARKET AND MARKETING STRATEGY/DISTRIBUTION METHODS
--------------------------------------------------
The Company's technology has applications in virtually all aspects of digital
electronics chips and equipment, including computers. The markets for these
products are huge and growing rapidly. According to DataQuest, electronics
equipment markets for calendar year 1992 were $642 billion and will grow to over
one trillion dollars for calendar year 1999. Other products, such as
automobiles, that have a high electronic content, but not enough to be
classified as electronic equipment, add considerably to that number.
Automobiles, with over $400 of electronics each, would account for at least an
additional $50 billion annually. The microprocessor market is expected to be
over $30 billion for calendar year 1999 and growing 13.4% per year. The
ASIC/Logic Chips market is expected to be over $21 billion by 1999 and growing
8.1% per year. By the calendar year 2000, the combined microprocessor and the
ASIC/Logic Chips markets will be over $70 billion. [The DSP market and other
markets are neglected in this analysis.]
Target Markets
--------------
Log Point is a developer of high performance embedded digital computation. Its
products include software that can be embedded directly in software
applications, a complete set of algorithms that can be embedded in computer
programming languages, and firmware that can be mounted on printed-circuit
boards. This firmware would be used to perform specific high performance
numerical computations many times faster than conventional technology. The Log
<PAGE>
Point technology can also be implemented in digital electronic design to
complement existing computer chips. It can be used to build stand alone math
coprocessors that work with existing computer chips or used to expand the
capabilities of existing hardware numerical processors. Log Point products fit
many applications across the entire digital electronics industry.
The Company's target market includes all users and developers of:
o Microprocessors
o DSP (digital signal processors), graphics, filter chips
o FPGA (field-programmable gate array) users and manufacturers
o Standard cells, ASIC (application specific integrated circuit) chips
o Custom chips incorporating any of the above.
o Design software for chips
o Compilers for high level programming languages (C/C++, Basic, FORTRAN)
o Application software
The Company anticipates the following marketing obstacles:
o Getting its message of new computational capabilities to the embedded
system designers that buy development tools. This includes FAA
certification, which is a strong selling point to decision-makers, not
just in aviation, but throughout the embedded computation industry.
Some Log Point software products have been completed and have been
thoroughly tested for speed and reliability. The products are ready
for FAA certification when a customer has a requirement for FAA
certification. This enables the designers to demand that all major
development tool vendors support the Company's products. This then
enables the Company's products to have direct distribution channels to
the entire body of vendors' customer bases throughout the world.
o PR, advertising, and articles in trade publications require
substantial time to make a real impact in the industry.
o When a customer requires FAA certification of Log Point products for
the first time, FAA certification will take at least a few weeks to
commence and likely several months to complete. After FAA
certification has been completed, the certification will not have to
be repeated for future customers who require FAA certified products.
It must be point out, that Log Point does not need FAA certification
to sell its products. Some companies require FAA certification. Log
Point desires FAA certification of its products, because FAA
certification will lend credibility to Log Point products.
o After sufficient numbers of designers request the Company's products,
a few months are likely required for the release of a vendor's tools
that provide support of the Company's products.
o There is a delay while designers use such tools to examine the effect
that the Company's products have on their embedded designs before they
license the Company's products.
o While making a strenuous effort toward market penetration, price
concessions will also be used to maximize the quantity of design wins
incorporating Company products.
Log Point has made great strides to overcome the obstacles to its entry into the
floating-point market. The Company has created a website (www.logpoint.com)
which has received over 20,000 visits. The Company has also arranged with Intel,
IBM, Microsoft, Fujitsu, Mitsubishi and National Semiconductor to publish Log
<PAGE>
Point's product information on their websites with web links to the Log Point
website. This Internet exposure has attracted many Beta testers of Log Point's
products and has attracted potential investors and take-over suitors. The
Company expects some of the Beta testers to become customers of its products.
The Company is contemplating debt financing and private placement investments
from potential investors as well as being acquired by other corporations.
The thrust of the Company's marketing strategy includes:
Software:
o Developing joint marketing and sales efforts with each microprocessor
manufacturer such that both the Company and the microprocessor
manufacturer leverage each other's capabilities to increase product
sales.
o Conducting direct mail campaigns targeted at the technology
decision-makers at volume manufacturers of consumer products.
o Telemarketing follow up.
o Providing beta site developer kits for evaluation of the Company's
products.
o Giving engineering presentations to the evaluation team.
o Benchmarking potential customer software using the Company's
technology.
o Negotiating licenses.
o Supporting customer product development to optimize performance and
quality.
o Receiving royalties for each unit of customer product shipped.
o Teaching seminars for customers.
Hardware Designs:
o Obtaining software porting/proof-of-concept contracts with
microprocessor manufacturers.
o Obtaining hardware feasibility contracts with microprocessor
manufacturers.
o Negotiating license for hardware design.
o Supporting microprocessor manufacturer with the design of SuperSpeed
pipelined floating-point technology into their microprocessor.
o Receiving royalty payments for each microprocessor shipped.
Hardware:
o Design hardware products.
o Produce evaluation boards for distribution to the digital electronics
market.
o Help potential customers efficiently design their product with Log
Point hardware products.
o Receive orders from customers for hardware and firm commitment to pay
for hardware.
o Contract with computer chip manufacturer to produce chip from hardware
design.
o Deliver completed hardware chips to customer.
<PAGE>
World Wide Web
--------------
The Company has a World Wide Web home page at the URL: http://www.logpoint.com.
This Web page contains basic information about the Company, its latest news,
technology, products, application notes, special programs, investor information
and frequently asked questions, as well as how to contact the Company. Log
Point's Web page is also listed with many of the most popular Web search
engines. When the Company receives sufficient capital, it intends to advertise
the Web page on the World Wide Web and in trade publications oriented toward
embedded systems and digital signal processing. Log Point is also listed in the
Web pages of Intel, Fujitsu, Wind River Systems, Mitsubishi, Inprise, Motorola,
Integrated Systems and National Semiconductor, among others. The Company has
identified many sales leads, beta testers, and potential joint ventures through
its Web page.
Marketing Efforts
-----------------
The Company has established third-party marketing efforts on IBM, Microsoft,
Intel, National Semiconductor, Fujitsu, Motorola, Integrated Systems,
Mitsubishi, and Wind River Systems websites through which Log Point product
descriptions and Log Point web link on each of these companies web sites. While
there are no written agreements with these companies, they have voluntarily
included Log Point on their respective web sites. These relationships will
continue as long as it is mutually beneficial to each company.
Intel has stopped producing the 187 and 387 hardware numerical coprocessors.
Many of Intel's customers presently manufacture products requiring the hardware
numerical performance of the 187, 287 and 387. In most cases, Log Point's Soft
CoProcessor can replace the discontinued hardware. National Semiconductor is
displaying the Company's products, through the National Semiconductor web site,
to its customer base. Integrated Systems has incorporated the Company's Soft
CoProcessor product into their Embedded Systems Development Tools and has
created an automobile cruise control demonstration model using the Soft
CoProcessor.
PATENTS
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The Company has more than 60 patents that have issued in the U.S. and 41 foreign
countries. Some patents are still pending in the PCT which covers Japan and
Europe, and the Company expects more patents to issue in 17 foreign country
soon.. The patents cover method and apparatus, using logarithmic and
table-look-up technology, to generate functions and complete floating-point
systems for digital electronics. The Company has filed a patent in the U.S. and
internationally, that covers improvements in the software performance for
microprocessors. The Company has filed patents on small-silicon-area pipelined
versions of its floating-point hardware designs and graphics accelerator
designs. The new technology improves the Company's competitive edge in silicon
designs and performance of its Soft CoProcessor products. The life of these new
patents will be approximately 20 years.
TRADEMARKS
----------
The Company has trademarks on "Log Point(TM)," "SuperSpeed(TM)", "Soft
CoProcessor(TM)," and "FastFun(TM)."
<PAGE>
TECHNOLOGY LICENSE AGREEMENT
----------------------------
On February 18, 1993, the Company entered into a technology license agreement
with the founders of the Company, one of whom is the holder of three United
States Patents, a pending patent, pending international patents, and licensed
trademarks and logo for founders common shares, $210,000 to the one founder who
is the owner of the patents, and royalties based upon revenues to be paid to the
owner of the patents. The $210,000 was due upon signing of the agreement or in
installment payments over an unstated period. Royalties of 5% of annual gross
receipts to $25,000,000, and 2% of annual gross receipts over $25,000,000. At
June 30, 1999 and 2000, the unpaid balance of the $210,000 amount was $160,574
and $170,428, respectively. The aforementioned agreement does not have a
termination date, and provides the Company with the exclusive worldwide right to
manage all leasing, marketing, selling and vending of sub-licenses with respect
to the licensed technology and products under the patents. The approximate
remaining life of the three United States patents is 15 years.
COMPETITION
-----------
The computer technology industry is highly competitive. The Corporation competes
with many other companies in the computer technology industry, many of which are
larger and better capitalized than the Company. The Company's primary sources of
competition are microprocessor manufacturers and vendors of conventional
floating-point software systems.
The Company believes its competitive advantages include a reduced silicon area
needed on a computer chip coupled with the fact that hardware using the
Company's technology is 10 to 100 times faster than conventional floating point
hardware, which gives Log Point a competitive advantage in products using chips
or microprocessors with floating point technology. Silicon is very expensive and
cost of manufacturing electronic hardware chips increases dramatically as the
chip area required increases. These advantages provide for a greater selection
of functions, fitting applications in more end user products, allowing more
design alternatives and flexibility, being more cost effective, upgrading lower
cost components, and invading existing markets as well as opening up whole new
ones.
SEASONALITY
-----------
The Company's product diversification is such that it does not expect to
experience seasonal up or down turns.
WORKFORCE
---------
The Company currently employs six individuals; two individuals in management,
two individuals in administrative, and two individuals in engineering and
research and development. The Company currently has two part-time individuals
working on a consultant basis who provides marketing assistance for the Company.
There is no collective bargaining agreement with employees. The Company
considers its relationship with its employees to be excellent.
<PAGE>
YEAR 2000
---------
Overview
--------
Historically, certain computerized systems have had two digits rather than four
digits to define the applicable year, which could result in the system
recognizing a date using "00" as the year 1900 rather than the year 2000. This
could cause significant software and hardware failures or miscalculations and is
generally referred to as the "Year 2000" problem.
The company recognizes that the impact of the Year 2000 problem extends beyond
its computer hardware and software and may ultimately affect utility and
telecommunication services, as well as the systems of its customers and
suppliers. The company acknowledges that none of its products are date sensitive
and therefore, are all Year 2000 compliant. The company is prepared to take
corrective action that may be required within each of the following areas:
Log Point Products
------------------
Log Point has completed its internal Year 2000 testing and analysis of its
products. The Company believes that all of its products are Year 2000 compliant
and is committed to maintaining compliance in any future revisions of its
products.
Internal Information Systems
----------------------------
The Company's internal information systems utilize hardware and software from
several commercial suppliers. The Company has investigated its internal
information systems for Year 2000 compliance, and certain modifications have
been identified and corrected on critical systems to ensure that the Company's
operations will be Year 2000 compliant. This effort will continue throughout
2000.
Third Parties
-------------
The Company has had communications with certain of its significant suppliers and
customers to evaluate their Year 2000 compliance plans, state of readiness and
to determine the extent to which the Company's systems and products may be
affected by the failure of others to remedy their own Year 2000 issues. Year
2000 compliance is a prerequisite to new supplier relationships. There can be no
assurance that such other parties will complete their Year 2000 conversion in a
timely fashion or will not suffer a Year 2000 business disruption that may
adversely affect the Company's business, financial condition or results of
operations.
Cost for Year 2000 Compliance
-----------------------------
The Company believes that the total cost of Year 2000 compliance activity will
not be material to the Company's operations, liquidity and capital resources.
Year 2000 Risks Faced by Log Point
----------------------------------
The Company may not be able to identify, successfully remedy or assess all
date-handling problems in its business systems or operations or those of its
customers and suppliers. As a result, the Year 2000 problem could have a
materially adverse affect on the Company's business financial condition or
results of operation. Log Point has conducted a review of its business systems
in an attempt to identify ways in which its systems could be affected by Year
2000 problems. Based on this review, the company does not expect the Year 2000
issue to have a material adverse affect on its systems.
<PAGE>
Item 2. DESCRIPTION OF PROPERTY.
The Issuer's principal offices are located at 465 Fairchild Drive, Suite 111,
Mountain View, California 94043. This leased location has approximately 680
square feet of office space. The current lease expires on December 31, 2000. The
Issuer feels that this facility is overcrowded and inadequate for its current
level of activity and plans to expand to approximately 10,000 square feet of
office space in the near future.
Item 3. LEGAL PROCEEDINGS.
From time to time, in the normal course of doing business, the Company has legal
proceedings. The Company is not involved in legal proceedings that will have a
material effect on the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
<PAGE>
PART II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock is listed on the OTC Bulletin Board under the trading
symbol "LGPT." The Company's common stock has been traded since October, 1997,
before which there was little or no activity. Currently, the following brokerage
firms are making a market in the Company's common stock: Hill Thompson Magid &
Co., Herzog & Co., Sharpe Capital, Inc., GVR Company, Paragon Capital Corp.,
Sherwood Securities, Wm. V. Frankel & Co. Inc., Wien Securities Corp., Sierra
Brokerage Services, Inc., M. H. Meyerson, Knight Securities, USCC Trading and
Lloyd Wade Securities.
The following table sets forth for the period indicated, the range of high and
low closing bid quotations per share. These quotations represent inter-dealer
prices, without retail markups, markdowns or commissions and may not necessarily
represent actual transactions.
Price per Share
---------------
Period Ended High Low
------------ ---- ---
Fourth Quarter 1999 (6/30/00) $ 1.38 $ 0.91
Third Quarter 1999 (3/31/00) $ 1.19 $ 0.53
Second Quarter 1999 (12/31/99) $ 3.19 $ 0.53
First Quarter 1999 (9/30/99) $ 3.19 $ 0.97
The Company has approximately 150 shareholders of record.
The Company has not paid, nor does it anticipate paying dividends in the
foreseeable future.
<PAGE>
The common shares of the Company are subject to the "Penny Stock Rules" of Rule
15(g) of the Securities Exchange Act of 1934. These rules impose additional
sales requirements on broker dealers selling securities to persons other than
established customers and accredited investors as defined in the Securities Act
of 1933. Brokerage transactions falling within these rules require brokers to
make a special suitability determination for the purchaser and to obtain the
purchaser's written consent to make the trade before making the sale.
Accordingly, these Penny Stock Rules may adversely affect the ability of the
purchasers to resell these securities.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
During the fiscal years ended June 30, 1999 and 2000, the Company incurred
losses of $782,706 and $865,831, respectively.
Log Point is a development stage company that incurred losses of $782,706 and
$865,831 for years ended June 30, 1999 and 2000, respectively. Since inception
the Company has incurred losses totaling $2,953,377.
To date, Log Point has been dependent upon the proceeds from an equity
transaction, under a 504 offering, to fund its development stage operations, and
at a minimum, management believes that its borrowings from private individuals,
officers and directors will be adequate to fund its minimum requirements for
fiscal year ending June 30, 2001. Log Point does not expect any significant
revenues during the twelve-month period ending June 30, 2001.
When Log Point emerges from its development stage, additional financing will be
needed. Log Point has completed negotiations for a $20,000,000 financing, and
has a commitment form Monmouth Partners to finance Log Point. The current price
of the stock will have no effect on the financing. As far as the financing is
concerned, the price of the stock will not be a factor in dilution of the
Company stock. The Company also has the opportunity to obtain additional funds,
as needed, through Monmouth Partners, provided Monmouth Partners continues to do
business. These additional funds will be used to increase sales and marketing
efforts and to accelerate production of hardware chips from the Company's
hardware designs.
The Company will require substantial additional financing in future years. The
additional financing would be obtained through loans, secondary public
offerings, private placements, and/or mergers. There can be no assurance that
such funds will be sufficient in the near term or that conditions and
circumstances described herein may not result in subsequent cash requirements by
the Company in the immediate future just to sustain operation. In the event of
such developments, attaining financing under such conditions may not be
possible, or even if additional capital may be otherwise available, the terms on
which such capital may be available may not be commercially feasible or
advantageous. If future funding is not obtained, Log Point would continue to
receive loans from private individuals, officers and directors until revenue
from product licensing and sales become adequate to sustain the companies
operations.
Log Point will not conduct any significant research and development during the
next twelve months ending June 30, 2001.
<PAGE>
Log Point has no plans to purchase any plant or significant equipment during the
next twelve months ending June 30, 2001.
The Company does not anticipate any significant changes in its number of
employees during the next twelve months ending June 30, 2001.
<PAGE>
Item 7. FINANCIAL STATEMENTS
AUDITORS REPORT FOR THE YEAR ENDED JUNE 30, 2000
Board of Directors
Log Point Technologies, Inc.
(A development stage company)
Mountain View, California
We have audited the accompanying balance sheet of Log Point Technologies, Inc.
(a development stage company) as of June 30, 2000 and the related statements of
operations, stockholders' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Log Point Technologies, Inc. (a
development stage company) as of June 30, 1999 and for the period since
inception (February 1, 1993) to June 30, 1999, were audited by other auditors
whose report dated October 27, 1999 expressed an unqualified opinion, with a
going concern issue, on those statements. The financial statements for the year
ended June 30, 1999 are presented for comparative purposes only and are covered
by the prior auditors' opinion.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinions.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Log Point Technologies, Inc. (a
development stage company) as of June 30, 2000 and the results of its operations
and cash flows for the year then ended in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the notes to the
financial statements, the Company is in the development stage, has not realized
revenues and profitable operations, and is dependent upon loans and equity
financing to conduct its operations, which situation raises substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
By: /s/ Robert C. Olivieri, Jr.
----------------------------------
Robert C. Olivieri, Jr. P C
CERTIFIED PUBLIC ACCOUNTANT
September 26, 2000
<PAGE>
LOG POINT TECHNOLOGIES, INC.
(A Development Stage Company)
Balance Sheets
June 30, 2000 and 1999
Assets
2000 1999
---- ----
Current assets
Cash $ 67 $ 466
-------- --------
Furniture and equipment
Furniture and equipment, at cost 68,695 68,695
Less: accumulated depreciation 39,574 29,100
-------- --------
29,121 39,595
-------- --------
Other assets
Product technology license, net
of accumulated amortization of
$ 103,250 and $ 89,250 106,750 120,750
Deposits 4,377 4,281
-------- --------
Total other assets 111,127 125,031
-------- --------
Total assets $140,315 $165,092
======== ========
See auditors' report and notes to financial statements
<PAGE>
LOG POINT TECHNOLOGIES, INC.
(A Development Stage Company)
Balance Sheets
June 30, 2000 and 1999
Liabilities and stockholders' equity
2000 1999
---- ----
Current liabilities
Current portion of capital
lease obligations $ 11,673 $ 11,861
Accounts payable 174,985 148,648
State franchise taxes payable 800 --
Accrued accounting fees 13,500 --
----------- -----------
200,958 160,509
----------- -----------
Long-term liabilities
Loans from officers 515,020 6,761
Capital lease obligation, net
of current maturities 1,358 13,031
Due on product license 170,428 160,574
----------- -----------
Total long term liabilities 686,806 180,366
----------- -----------
Deferred salaries and related
payroll taxes and interest 1,241,734 882,569
----------- -----------
Stockholders' equity
Preferred stock, no par value
Authorized: 5,000,000 shares
No shares issued -- --
Common stock, no par value
Authorized: 50,000,000 shares
Issued:
11,233,333 and 10,757,403 shares
Outstanding:
10,932,403 and 10,757,403 1,559,630 1,029,194
Treasury stock:
300,930 shares and 300,930 shares (445,436) --
Retained earnings (deficit) (3,103,377) (2,087,546)
----------- -----------
(1,989,183) (1,058,352)
----------- -----------
$ 140,315 $ 165,092
=========== ===========
See auditors' report and notes to financial statements
<PAGE>
LOG POINT TECHNOLOGIES, INC.
(A Development Stage Company)
Statements of Operations Years
ended June 30, 2000 and 1999 and the period from
inception (February 1, 1993) to June 30, 2000
February 1, 1993
(inception) to
2000 1999 June 30, 2000
---- ---- -------------
Revenues $ 1,200 $ -- $ 71,680
------------ ------------ ------------
Cost of goods sold -- -- --
------------ ------------ ------------
Operating expenses
General and administrative
expenses 657,353 303,318 1,173,885
Research and development 220,300 411,364 1,569,999
Depreciation and amortization 24,474 23,640 142,823
------------ ------------ ------------
Total operating expenses 902,127 738,322 2,886,707
------------ ------------ ------------
Loss before other income and
expenses (900,927) (738,322) (2,815,027)
------------ ------------ ------------
Other income and expenses
Interest expense (114,910) (56,278) (301,163)
Interest income 6 11,894 12,813
------------ ------------ ------------
Total other income and
expenses (114,904) (44,384) (288,350)
Net loss $ (1,015,831) $ (782,706) $ (3,103,377)
============ ============ ============
Loss per share $ (0.094) $ (0.072)
============ ============
Weighted average number
of shares 10,814,820 10,865,503
============ ============
See auditors' report and notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
LOG POINT TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Cash Flows Years ended
June 30, 2000 and 1999 and the period from
inception (February 1, 1993) to June 30, 2000
February 1, 1993
(inception) to
2000 1999 June 30, 2000
---- ---- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) from operations: $ (865,831) $ (782,706) $(2,953,377)
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization 24,474 23,640 142,823
Deferred salaries, related taxes and interest 359,166 277,352 1,241,735
Payment of expenses and loans with stock 85,000 -- 251,060
Accrued interest on officers' loans 3,859 (5,042) 2,122
Accrued interest on other loans payable 9,853 9,490 84,036
Changes in assets and liabilities:
(Increase) decrease in advanced funding fees (150,000) (150,000)
(Increase) decrease in prepaid expenses -- 2,500 --
(Increase) decrease in deposits (96) (510) (4,377)
Increase (decrease) in accounts payable 26,337 143,858 174,985
Increase (decrease) in accrued expenses 14,300 -- 14,300
Increase (decrease) in payables from officers 504,400 109,000 512,898
----------- ----------- -----------
Net cash provided (used) by operating activities 11,462 (222,418) (683,795)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of equipment -- (17,092) (68,694)
----------- ----------- -----------
Net cash provided (used) by investing activities -- (17,092) (68,694)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capitalized leases -- 7,484 45,049
Repayment of debt (11,861) (30,109) (155,627)
Proceeds from sales of preferred and common stock -- -- 1,308,570
Purchases of treasury stock -- (445,436) (445,436)
----------- ----------- -----------
Net cash provided (used) by financing activities (11,861) (468,061) 752,556
----------- ----------- -----------
Net increase in cash (399) (707,571) 67
Cash at beginning of year 466 708,037 --
----------- ----------- -----------
Cash at end of year $ 67 $ 466 $ 67
=========== =========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ -- $ 15,904
=========== ===========
See auditors' report and notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOG POINT TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
Years ended June 30, 2000 and 1999 and the period
from inception (February 1, 1993) to June 30, 2000
Retained
Preferred Stock Common Stock Earnings
Shares $ Shares $ (Loss)
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Proceeds from issuance of common stock 648,800 $ 160,000
Exchanges of loans payable for common stock 34,000
Common stock issued for services 1,520 7,600
Net loss $ (213,300)
-------------------------------------------------------------------------------------------------------------------------
Balance June 30, 1994 650,320 $ 201,600 $ (213,300)
Cancellation of common shares in
exchange for preferred shares 403,200 $ 201,600 (650,320) (201,600)
Issuance of preferred shares to founders 610,000
Sale of preferred shares 4,400 10,000
Sale of common shares 1,931,792 24,147
Common stock issued for receivable
subsequently paid 2,015,000 25,188
Net loss (230,677)
-------------------------------------------------------------------------------------------------------------------------
Balance June 30, 1995 1,017,600 $ 211,600 3,946,792 $ 49,335 $ (443,977)
Common stock issued for receivable
subsequently paid 152,763 1,910
Sale of common shares 10,000 125
Sale of preferred shares 9,240 19,500
Exchange of preferred shares for loans 118,000 99,000
Exchange of preferred shares for services 2,000 5,000
Net loss (193,432)
-------------------------------------------------------------------------------------------------------------------------
Balance June 30, 1996 1,146,840 $ 335,100 4,109,555 $ 51,370 $ (637,409)
Sale of preferred shares 36,780 76,950
Exchange of preferred shares for loans 10,000 5,000
Sale of common shares for loans 60,000 750
Exchange of common shares for loans 1,236,825 15,460
Net loss (234,404)
-------------------------------------------------------------------------------------------------------------------------
Balance June 30, 1997 1,193,620 $ 417,050 5,406,380 $ 67,580 $ (871,813)
Adjustment to reflect reverse purchase
acquisition (1,193,620) (417,050) 2,793,620 417,050
Sale of common shares 2,858,333 990,000
Net Loss (433,027)
See auditors' report and notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOG POINT TECHNOLOGIES, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
(continued) Years ended June 30, 2000 and 1999
and the period from inception (February 1, 1993)
to June 30, 2000
Retained
Preferred Stock Common Stock Earnings
Shares $ Shares $ (Loss)
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance June 30, 1998 -- -- 11,058,333 $ 1,474,630 $(1,304,840)
Purchase of treasury stock (300,930) (445,436)
Net Loss (782,706)
--------------------------------------------------------------------------------------------------------------
Balance June 30, 1999 -- -- 10,757,403 $ 1,029,194 $(2,087,546)
Exchange of common shares for services 175,000 85,000
Net Loss (1,015,831)
--------------------------------------------------------------------------------------------------------------
Balance June 30, 2000 -- $ -- 10,932,403 $ 1,114,194 $(3,103,377)
=========== =========== ========== =========== ===========
See auditors' report and notes to financial statements
</TABLE>
<PAGE>
LOG POINT TECHNOLOGIES, INC.
Notes To Financial Statements
June 30, 2000 and 1999
Note 1 - Organization and History
---------------------------------
Log Point Technologies, Inc. ("Company") is the result of the acquisition and
merger of Sandtech Developments, Inc. (a Colorado corporation and Log Point
Technologies, Inc. (a California corporation) ("Log Point California").
Log Point California was organized on February 1, 1993 under the laws of the
State of California. Since inception to date, Log Point California has been in
the development stage with respect to its primary product(s) that is centered
upon mathematical functions and systems that are embedded in computer
microprocessor chips to enable and enhance mathematical calculations.
Sandtech Developments, Inc. was organized as a Colorado corporation on July 19,
1996. Since inception, Sandtech has been in the development stage and has not
conducted operations, excepting for minor administrative matters. Sandtech had
minimal assets and liabilities at the date of the merger.
In October 1997 Log Point California received 18,400,000 shares of the
20,000,000 outstanding common shares of Sandtech, and the 300,000 outstanding
shares of preferred stock for the 1,600,000 remaining outstanding common shares.
All the 300,000 preferred shares received, and 11,800,000 of the 18,400,000
common shares received were retired. Simultaneously, 6,600,000 common shares of
the Company were exchanged for all of the outstanding shares of Log Point
California; the assets and liabilities of Log Point California were transferred
to Sandtech; Log Point California was dissolved; and, Sandtech changed its name
to Log Point Technologies, Inc. As a result of the merger and exchange of
shares, the shareholders of Log Point California became the controlling
shareholders of the Company. The Company also declared a one for ten reverse
split of its preferred and common stocks. For financial reporting purposes, the
transaction was accounted for as a reverse purchase acquisition under which the
companies were recapitalized to include the historical financial information of
Log Point California. For financial reporting purposes, all shares have been
reflected in post split shares.
Note 2 - Basis of Presentation
------------------------------
The financial statements of the Company as of June 30, 2000 and 1999 and for the
years then ended have been prepared using the accrual basis of accounting, and
on the basis that the Company is a going concern, which contemplates the
realization of assets and satisfaction of liabilities in the normal course of
business. To date, the Company has realized minimal revenues from the sale of
its products and services, and has been dependent upon proceeds of loans
<PAGE>
LOG POINT TECHNOLOGIES, INC.
Notes To Financial Statements
June 30, 2000 and 1999
Note 2 - Basis of Presentation (Continued)
-----------------------------------------
from officers and directors and equity transactions to fund its development
stage operations. Management believes, as a minimum, that its borrowings from
officers will be adequate to fund its need for the next year. No adjustments
have been recognized in the financial statements to reflect the uncertainties of
the Company to develop profitable operations and/or to continue funding its
operations from borrowings and equity transactions.
Note 3 - Cash and Cash Equivalents
----------------------------------
At June 30, 2000 and June 30, 1999, $ 46 and $ 255, respectively, of the total
cash and cash equivalents represented monies deposited in an uninsured money
market fund.
Note 4 - Summary of Significant Accounting Policies
---------------------------------------------------
Revenue recognition - Revenue is recognized when products are shipped or
services are rendered.
Furniture and equipment - Furniture and equipment is recorded at acquisition
cost. Repairs and maintenance that do not extend the useful life are charged to
expense when incurred, and improvements and betterments that extend the useful
life are capitalized. Depreciation is calculated using methods that approximate
the straight-line method over the estimated lives, generally five and seven
years.
Technology license agreement - The technology license agreement is carried at
cost, and is being amortized ratably over the remaining life (approximately 15
years) of the underlying patents.
Research and development - Research and development expenses are charged to
operations as incurred.
Deferred salaries & wages - All the officers of the Company and other Company
personnel have agreed to defer part, or all, of their salaries. The deferred
amounts, which include the estimated related payroll taxes, will not be payable
until the Company attains revenues of $250,000 per calendar quarter, at which
time a percentage, to be determined by the Company, of the amounts of revenues
over $ 250,000 will be devoted to paying the deferred amounts. Interest at the
rate of 6% per annum, compounded quarterly, has been recognized on the accrual
of the deferred salaries & wages.
<PAGE>
LOG POINT TECHNOLOGIES, INC.
Notes To Financial Statements
June 30, 2000 and 1999
Note 4 - Summary of Significant Accounting Policies (continued)
--------------------------------------------------------------
Income taxes - The provision (benefit) for income taxes is based on the pre-tax
earnings (loss) reported in the statement of operations, adjusted for
transactions that may never enter into the computation of income and expenses
for financial statements and income tax purposes. A valuation allowance is
provided in the event that the tax benefits are not expected to be realized.
Earnings (Loss) per share - Earnings (loss) per common share is based upon the
weighted average number of common shares (after the reverse split) outstanding.
Economic and Concentration Risk - The business of the Company is primarily in
the development, under existing patents, and marketing of enhanced mathematical
functions embedded in computer microprocessor chips to customers in the United
States of America and certain foreign countries. The Company may encounter risk
from competitors who have significantly greater resources, and from
technological breakthroughs that are commonplace in the computer industry.
Use of Estimates - 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 revenues and expenses during
the reporting period(s). Actual results could differ from those estimates.
Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers all highly liquid financial instruments purchased with an
original maturity of three months of less to be cash equivalents.
Note 5 - Equipment
------------------
Property and equipment consists of the following:
6/30/00 6/30/99
-------- --------
Computers & related items $ 42,665 $ 42,665
Office furniture & fixtures 26,030 26,030
-------- --------
Total 68,695 68,695
Less:accumulated depreciation (39,574) (29,100)
-------- --------
$ 29,121 $ 39,595
======== ========
<PAGE>
LOG POINT TECHNOLOGIES, INC.
Notes To Financial Statements
June 30, 2000 and 1999
Note 6 - Technology License Agreement
-------------------------------------
On February 18, 1993, the Company entered into a technology license agreement
with the founders of the Company, one of whom is the holder of two United States
Patents, a pending patent, pending international patents, and licensed
trademarks and logo for founder's common shares that were not ascribed a value.
The agreement also required $210,000 to be paid to the one founder who is the
owner of the patents, and royalties based upon the signing of the agreement or
in installment payments over an unstated period. Royalties of 5% of annual gross
receipts to $ 25,000,000 and 2% of annual gross receipts over $ 25,000,000 are
also required. At, June 30, 2000 and 1999, the unpaid balance of the $ 210,000
amount was $170,428 and $160,574, respectively, including interest at the rate
of 6% per annum, compounded quarterly. The aforementioned agreement does not
have a termination date, and provides the Company with the exclusive worldwide
right to manage all leasing, marketing, selling, and vending of sublicenses with
respect to the licensed technology and products under the patents.
The amount of $ 210,000 is being amortized ratably over 15 years, the
approximate remaining life of the two United States Patents and 20 years for the
third United States Patent. At June 30, 2000 and 1999, the unamortized portions
were $ 106,750 and $ 120,750 respectively.
Note 7 - Deposits
-----------------
At June 30, 2000 and 1999 the Company had a deposit of $ 3,326 and $ 3,230,
respectively, on its operating lease with Pecten Court Mountain View Associates,
LLC for the lease of its office space and a deposit of $ 760 and $ 760,
respectively, on its capital lease for computer equipment with Newcourt
Financial Services. In addition, there were other miscellaneous deposits of $
291 and $ 291, respectively, for the years ended June 30, 2000 and 1999.
<PAGE>
LOG POINT TECHNOLOGIES, INC.
Notes To Financial Statements
June 30, 2000 and 1999
Note 8 - Loans From Officers
----------------------------
At June 30, 2000 and 1999, the officers of the Company had advanced a total of $
115,020 and $ 6,761 with the approval of the Board of Directors of the Company.
The advanced amounts bear interest at six percent annum, compounded quarterly,
and are due no later than five years from June 30, 2000. Also, at June 30, 2000
and 1999, the officers had deferred salary amounts, including interest at 6%
annum, compounded quarterly, from the Company of $ 681,063 and $ 465,537.
In December 1999, an officer of the Company put up 1,440,000 shares of his
restricted stock as collateral on a short-term financing loan from a nonrelated
individual in the amount of $ 400,000, which included $ 60,000 in accrued fees
and $ 38,000 in accrued interest, originally due to be repaid on February 1,
2000. These shares were put into an escrow account in the name of the lender. As
of June 30, 2000 the Company is in negotiations with the lender to pay the loan
balance in full and have the stock returned to them. This matter has not been
resolved as of the date of this report. Provisions have been made trough
shareholders that represent more than fifty percent (50%) of the outstanding
shares, a board action, and an agreement between the officer and the Company
that if stock used by the Company as collateral were to be lost for any reason,
the company will issue enough stock to make the stockholder's ownership equal to
the percentage of ownership on the date the loan becomes effective.
Note 9 - Capitalized Leased Payables
------------------------------------
The Company has entered into agreements for the lease purchase of certain
computer and related equipment, which agreements have been determined to
constitute financing leases. Accordingly, the Company recorded the asset costs
of $ 35,573 and related principal lease obligations of an equal amount. The
capitalized lease agreements require monthly payments, including interest, of $
1,289 through November 2000; of $ 1,047 from December 2000 to May 2001; and of $
289 from June 2001 to November 2001.
<PAGE>
LOG POINT TECHNOLOGIES, INC.
Notes To Financial Statements
June 30, 2000 and 1999
Note 10 - Deferred Salaries and Wages
-------------------------------------
At June 30, 2000 and 1999, the Company had accrued salaries and wages to
officers and employees of $ 1,241,734 and $ 882,568, respectively. Because of
the development stage of the Company, it made arrangements with its employees
under informal letter agreements to defer all or a part of the salaries or wages
until the Company attains ability to permit payments. The arrangements do not
specify a time period for payment, and the Company has recognized interest at
the rate of 6% per annum, compounded quarterly.
6/30/00 6/30/99
------- -------
Officers $ 597,832 $ 417,832
Employees 411,390 307,510
Accrued interest 131,590 83,694
Payroll taxes 100,922 73,533
----------- ---------
Total $ 1,241,734 $ 882,569
=========== =========
Note 11 - Employee Common Stock
-------------------------------
The Company has a non-qualified employee common stock purchase program, under
which employees, from time to time, are granted the right to purchase a certain
number of shares at a stipulated price, with ownership vesting over a period of
time. In the event the employee is terminated or leaves the employ of the
Company before the vesting period is complete, the employee must sell the
unvested shares to the Company at the same amount for which they were purchased.
At June 30, 2000, a total of 5,199,153 of common shares had vested under the
program, and 207,228 common shares were unvested.
Note 12 - Income Taxes
----------------------
At June 30, 2000 the Company has accumulated losses of $ 2,953,377 which may be
available to offset future operating income. The Company will need to realize
significant profits to utilize the losses, all of which may not be immediately
available due to the merger and issuance of additional stock, and capitalization
matters. If deductible, the accumulated losses represent a deferred tax asset of
approximately $ 704,000 for which a valuation allowance of the same amount has
been provided because it is more likely than not that the amounts may not be
immediately deductible.
<PAGE>
LOG POINT TECHNOLOGIES, INC.
Notes To Financial Statements
June 30, 2000 and 1999
Note 12 - Income Taxes (Continued)
------------------------------------
A reconciliation of current and deferred income taxes is as follows:
6/30/00 6/30/99
Current tax expense:
Federal $ -- $ --
State -- --
--------- ---------
Total current -- --
Deferred tax expense (benefit):
Federal (587,139) (414,747)
State (116,778) (83,994)
--------- ---------
Total deferred (703,917) (498,741)
Valuation allowance 703,917 498,741
--------- ---------
Total provision for income taxes $ -- $ --
========= =========
At June 30, 2000 the Company had unused net operating losses for regular income
tax purposes, which are due to expire in the following tax years:
Tax Year Federal Amount State Amount
-------- -------------- ------------
2000 $ 77,665
2001 104,428
2002 123,938
2003 507,948
2004 507,035
2007 $ 31,024
2008 238,661
2009 136,180
2010 77,665
2011 104,428
2017 123,938
2018 507,948
2019 507,035
<PAGE>
LOG POINT TECHNOLOGIES, INC.
Notes To Financial Statements
June 30, 2000 and 1999
Note 13 - Common and Preferred Stock
------------------------------------
Preferred Stock
---------------
At June 30, 2000, the Company was authorized to issue 5,000,000 shares of no par
value preferred stock, which may be issued in classes or series with various
rights and designations by the Board of Directors. No shares were issued and
outstanding at June 30, 2000. Each share of preferred stock is entitled to
dividends when and if declared by the Board of Directors, and other rights
and/or preferences as may be designated by the Board of Directors.
Common Stock
------------
The Company is authorized to issue 50,000,000 shares of no par value common
stock. The holders of each share are entitled to one vote for each share held,
and are entitled to dividends when and if declared by the Board of Directors. At
June 30, 2000 and 1999, common shares issued and outstanding totaled 10,932,403
and 10,757,403, respectively, which includes 175,000 shares issued between June
30, 1999 and June 30, 2000. Treasury stock at June 30, 2000 and 1999 consisted
of 300,930 shares at cost. Treasury stock at June 30, 2000 consisted of 300,930
shares at cost. As of June 30, 1999, the Company intende to retire the shares
that were held in the treasury. This was not accomplished as of the date of this
report, and, therefore, the shares are reported as treasury stock as of June 30,
2000
Note 14 - Commitments and Contingencies
---------------------------------------
The Company leases its office space under a lease that requires a minimum
monthly rental payment of $1,326, which monthly rate increases at the rate of
2.5% each year through December 2003.
The Company is presently, and from time to time, subject to pending claims and
lawsuits arising in the ordinary course of business. In the opinion of
management, the ultimate resolution of these pending legal proceedings will not
have a material adverse effect upon the Company's operations or financial
position.
The Company has completed negotiations and has received a commitment letter for
a $20,000,000 financing. The commitment is subject to the Company satisfying
covenants, which have not been satisfied as of the date of this report.
<PAGE>
LOG POINT TECHNOLOGIES, INC.
Notes To Financial Statements
June 30, 2000 and 1999
Note 15 - Fair Value of Financial Instruments
---------------------------------------------
The carrying amounts of the Company's cash equivalents (money market fund) and
receivables are considered to approximate its fair market value. Similarly, the
amount of the Company's obligations are considered to represent the approximate
fair value of such instruments based upon management's best estimate.
Note 16 - Reporting Status
--------------------------
On February 19, 2000 the Company became a fully reporting company with the
Securities and Exchange Commission.
Note 17 - Reclassifications
---------------------------
Certain reclassifications have been made to the June 30, 1999 financial
statements to conform to the June 30, 2000 classifications.
<PAGE>
Auditors' Report and Financial Statements from Inception through June 30, 1999
ALESSANDRI & ALESSANDRI, P.A.
Certified Public Accountants
--------------------------------------------------------------------------------
Independent Auditors' Report
LOG POINT Technologies, Inc.
Mountain View, California
We have audited the accompanying balance sheets of LOG POINT Technologies,
Inc. ("Company"), as of June 30, 1999 and 1998 and the related statements of
operations, stockholders' equity, and cash flows for the years then ended and
for the period since inception (February 1993) to June 30, 1999. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of LOG POINT Technologies,
Inc., as of June 30, 1999 and 1998, and the results of its operations, and cash
flows for the years then ended and for the period since inception (February
1993) to June 30, 1999 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the notes to the
financial statements, the Company is in the development stage; has not realized
revenues and profitable operations, and is dependent upon loans and equity
financing to conduct its operations, which situation raises substantial doubt
about its ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
By: /s/ Alessandri & Alessandri, P.A.
October 27, 1999 ------------------------------------
Alessandri & Alessandri, P.A.
<PAGE>
<TABLE>
<CAPTION>
LOG POINT Technologies, Inc.
(a development stage company)
BALANCE SHEETS
JUNE 30, 1999 AND 1998
-----------------------------------------------------------------------------------------------------------
1999 1998
------------ -----------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ 466 $ 708,037
Prepaid expenses 2,500
------------ -----------
Total Current Assets 466 710,537
------------ -----------
EQUIPMENT & FURNITURE
Office Equipment & Furniture (net of depreciation of $29,099 & $19,459) 39,595 32,143
------------ -----------
OTHER ASSETS
Product technology license (net of amortization of $89,250 & $75,250) 120,750 134,750
Receivable from officers 97,197
Deposits 4,281 3,771
------------ -----------
Total Other Assets 125,031 235,718
------------ -----------
TOTAL $ 165,092 $ 978,398
============ ===========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of capitalized lease obligation $ 11,861 $ 5,071
Accounts Payable 148,648 4,790
------------ -----------
Total Current Liabilities 160,509 9,861
------------ -----------
LONG-TERM DEBT
Due on product license 160,574 172,084
Capitalized lease obligation less current portion 13,031 21,446
Loans from officers 6,761
------------ -----------
Total Long-Term Debt 180,366 193,530
------------ -----------
OTHER LIABILITIES
Deferred salaries & wages, and related payroll taxes 882,569 605,217
------------ -----------
Total Liabilities 1,223,444 808,608
------------ -----------
STOCKHOLDERS' EQUITY
Preferred stock-No par value: 5,000,000 shares authorized; no shares issued
Common Stock - No par value; 50,000,000 shares authorized; shares
issued and outstanding 10,757,403 and 11,058,333, respectively 1,029,194 1,474,630
Deficit accumulated during the development stage (2,087,546) (1,304,840)
------------ -----------
Total Stockholders' Equity (1,058,352) 169,790
------------ -----------
TOTAL $ 165,092 $ 978,398
============ ===========
See auditors' report and notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOG POINT Technologies, Inc.
(a development stage company)
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
AND FOR THE PERIOD FROM INCEPTION ( FEBRUARY 1993) TO JUNE 30, 1999
------------------------------------------------------------------------------------------
Since
1999 1998 Inception
------------ ------------ ------------
<S> <C> <C> <C>
SALES None None $ 70,480
------------
COST OF SALES None None None
OPERATING EXPENSES
General and Administrative $ 303,318 $ 127,73 $ 516,532
Research and development 411,364 247,424 1,349,699
Depreciation and Amortization 23,640 17,993 118,349
------------ ------------ ------------
Total Operating Expenses 738,322 393,147 1,984,580
------------ ------------ ------------
LOSS BEFORE OTHER ITEMS (738,322) (393,147) (1,914,100)
OTHER INCOME & EXPENSE
Interest expense (56,278) (40,793) (186,253)
Interest income 11,894 913 12,807
------------ ------------ ------------
NET LOSS $ (782,706) $ (433,027) $ (2,087,546)
============ ============ ============
Loss Per Share $ (0.07) $ (0.052)
------------ ------------
Weighted average number of shares 10,865,503 8,353,888
------------ ------------
See auditors' report and notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOG POINT Technologies, Inc.
(a development stage company)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
AND FOR THE PERIOD FROM INCEPTION (FEBRUARY 1993) TO JUNE 30, 1999
-------------------------------------------------------------------------------------------------
1999 1998 Since
Inception
----------- ----------- -----------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Income (Loss) From Operations: $ (782,70) $ (433,0$7) $(2,087,546)
Add: Non-Cash Items
Depreciation and Amortization 23,640 17,993 118,349
Deferred salaries, related taxes and interest 277,352 282,118 882,569
Payment of loans with preferred & common stock 153,460
Payment of expenses with preferred & common stock 12,600
Changes in Assets and Liabilities:
Prepaid expenses 2,500 (2,500)
Receivable & payables from officers-net 103,958 (105,723) 6,761
Deposits (510) (1,051) (4,281)
Accounts payable 143,858 (16,309) 148,648
Stock receivable 1,719
----------- ----------- -----------
Net Cash From (To) Operating Activities (231,908) (256,780) (769,440)
----------- ----------- -----------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Acquisition of Equipment (17,092) (28,842) (68,694)
----------- ----------- -----------
Net Cash From (To) Investing Activities (17,092) (28,842) (68,694)
----------- ----------- -----------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from capitalized leases 7,484 28,101 45,049
Repayment of Debt (20,619) (35,957) (69,583)
Proceeds from sales of preferred & common stock 990,000 1,308,570
Purchases of common stock (445,436) (445,436)
----------- ----------- -----------
Net Cash From (To) Financing Activities (458,571) 982,144 838,600
----------- ----------- -----------
Increase (Decrease) in Cash (707,571) 696,522 466
Cash Balance, Beginning 708,037 11,515 0
----------- ----------- -----------
Cash Balance, Ending $ 466 $ 708,$37 $ 466
----------- ----------- -----------
Supplemental Disclosures of Cash Flow Information:
Interest Paid $ 15,904 $ 1,017 $ 33,916
Supplemental Disclosure of Non-Cash transactions:
The Company issued 1,368,345 common shares in payment
of liabilities and expenses, and acquired a technology
See auditors' report and notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOG POINT Technologies, Inc.
(a development stage company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1999 AND 1998
AND FOR THE PERIOD FROM INCEPTION (FEBRUARY 1993) TO JUNE 30, 1999
-----------------------------------------------------------------------------------------------------------------------
Retained
Preferred Stock Common Stock Earnings
Shares $ Shares $ (Loss)
------------ ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Proceeds from issuance of common stock 648,800 $ 160,000
Exchange of loans payable for common
stock 34,000
Common stock issued for services 1,520 7,600
Net loss $ (213,300)
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1994 650,320 $ 201,600 $ (213,300)
Cancellation of common shares in
exchange for preferred shares 403,200 $ 201,600 (650,320) (201,600)
Issuance for preferred shares
to founders 610,000
Sale of preferred shares 4,400 10,000
Sale of common shares 1,931,792 24,147
Common stock issued for receivable
subsequently paid 2,015,000 25,188
Net Loss (230,677)
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1995 1,017,600$ 211,600 3,946,792 $ 49,335 $ (443,977)
Common stock issued for receivable
subsequently paid 152,763 1,910
Sale of common shares 10,000 125
Sale of preferred shares 9,240 19,500
Exchange of preferred shares for loans 118,000 99,000
Exchange of preferred shares for services 2,000 5,000
Net Loss (193,432)
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1996 1,146,840$ 335,100 4,109,555 $ 51,370 $ (637,409)
Sale of preferred sales 36,780 76,950
Exchange of preferred shares for loans 10,000 5,000
Sale of common shares 60,000 750
Exchange of common shares for loans 1,236,825 15,460
Net Loss (234,404)
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1997 1,193,620 $ 417,050 5,406,380 $ 67,580 $ (871,813)
Adjustment to reflect reverse purchase
acquisition (1,193,620) (417,050) 2,793,620 417,050
Sale of common shares 2,858,333 990,000
Net Loss (433,027)
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1998 None None 11,058,333 $ 1,474,630 $ (1,304,840)
Purchase of common shares (300,930) (445,436)
Net Loss (782,706)
------------ ------------ ------------ ------------ ------------
Balance, June 30, 1999 None None 10,757,403 $ 1,029,194 $ (2,087,546)
============ ============ ============ ============ ============
See auditors' report and notes to financial statements
</TABLE>
<PAGE>
LOG POINT Technologies, Inc.
(a development stage company)
Notes To Financial Statements
June 30, 1999 and 1998
--------------------------------------------------------------------------------
Note 1 - Organization and History
Log Point Technologies, Inc. ("Company"), is the result of the acquisition
and merger of Sandtech Developments, Inc. (a Colorado corporation) ("Sandtech")
and Log Point Technologies, Inc. (a California corporation.) ("Log Point
California").
Log Point California was organized on February 1, 1993 under the laws of
the State of California. Since inception to date, Log Point California has been
in the development stage with respect to its primary product(s) that is centered
upon mathematical functions and systems that are embedded in computer
microprocessor chips to enable and enhance mathematical calculations.
Sandtech was organized as a Colorado corporation on July 19,1996. Since
inception Sandtech has been in the development stage and has not conducted
operations, excepting for minor administrative matters. Sandtech had minimal
assets and liabilities at the date of merger.
In October 1997 Log Point California received 18,400,000 shares of the
20,000,000 outstanding common shares of Sandtech, and the 300,000 outstanding
shares of preferred stock for the 1,600,000 remaining outstanding common shares.
All of the 300,000 preferred shares received, and 11,800,000 of the 18,400,000
common shares received were retired. Simultaneously, 6,600,000 common shares of
Sandtech were exchanged for all of the outstanding shares of Log Point
California; the assets and liabilities of Log Point California were transferred
to Sandtech; Log Point California was dissolved; and, Sandtech changed its name
to LOG POINT Technologies, Inc. As a result of the merger and exchange of
shares, the shareholders of Log Point California became the controlling
shareholders of the Company. The Company also declared a one for ten reverse
split of its preferred and common stocks. For financial reporting purposes, the
transaction was accounted for as a reverse purchase acquisition under which the
companies were recapitalized to include the historical financial information of
Log Point California. For financial reporting purposes, all shares have been
reflected in post split shares.
Note 2 - Basis of Presentation
The financial statements of the Company as of June 30, 1999 and 1998, and
for the years then ended have been prepared using the accrual basis of
accounting, and on the basis that the Company is a going concern, which
contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. To date, the Company has realized minimal revenues
from sale of its products and services, and has been dependent upon the proceeds
from loans and equity transactions to fund its development stage operations,
and, management believes that its borrowings and equity transactions, if any,
will be adequate to fund its needs for the next year. No adjustments have been
recognized in the financial statements to reflect the uncertainties of the
Company to develop profitable operations and/or to continue funding its
operations from borrowings and equity transactions.
<PAGE>
Note 3 -Cash and Cash Equivalents
At June 30, 1998, $690,668 of the total cash and cash equivalents
represented monies deposited in an uninsured money market fund.
Note 4 - Summary of Significant Accounting Policies
Revenue recognition - Revenue is recognized when products are shipped or
services are rendered.
Equipment - Equipment is recorded at acquisition cost. Repairs and
maintenance that do not extend the useful life are charged to expense when
incurred, and improvements and betterments that extend the useful life are
capitalized. Depreciation is calculated using methods that approximate the
straight-line method over the estimated lives, generally five and seven years.
Technology license agreement - The technology license agreement is carried
at cost, and is being amortized ratably over the remaining life (appx. 15 years)
of the underlying patents.
Research and development - Research and development expenses are charged to
operations as incurred.
Deferred salaries & wages - All of the officers of the Company and other
Company personnel have agreed to defer part or all of their salaries. The
deferred amounts, which include the estimated related payroll taxes, will not be
payable until the Company attains revenues of $250,000 per calendar quarter, at
which time a percentage, to be determined by the Company, of the amounts of
revenues over $250,000 will be devoted to paying the deferred amounts. Interest
at the rate of 6% per annum, compounded quarterly, has been recognized on the
accrual of the deferred salaries & wages.
Income taxes - The provision (benefit) for income taxes is based on the
pre-tax earnings (loss) reported in the balance sheet, adjusted for transactions
that may never enter into the computation of income taxes payable. A deferred
tax liability or asset is recognized for the estimated future tax effect
attributable to temporary differences in the recognition of income and expenses
for financial statements and income tax purposes. A valuation allowance is
provided in the event that the tax benefits are not expected to be realized.
Earnings (Loss) per share - Earnings (loss) per common share is based upon
the weighted average number of common shares (after the reverse split)
outstanding.
Economic and Concentration Risk - The business of the Company is primarily
in the development, under existing patents, and marketing of enhanced
mathematical functions embedded in computer microprocessor chips to customers in
the United States of America and certain foreign countries. The Company may
encounter risk from competitors who have significantly greater resources, and
from technological breakthroughs that are commonplace in the computer industry.
Use of Estimates - 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 disclosures of contingent assets and liabilities at the date of
<PAGE>
the financial statements and the reported amounts of revenues and expenses
during the reporting period(s). Actual results could differ from those
estimates.
Statement of Cash Flows - For purposes of the statement of cash flows, the
Company considers all highly liquid financial instruments purchased with an
original maturity of three months or less to be cash equivalents.
Note 5 - Equipment
Equipment consists of the following:
6/30/99 6/30/98
-------- --------
Computers & related items $ 52,641 $ 44,191
Office furniture & fixtures 16,053 7,411
-------- --------
Total 68,694 51,602
Less-accumulated depreciation 29,099 19,459
-------- --------
Net $ 39,595 $ 32,143
-------- --------
Note 6 - Technology License Agreement
On February 18, 1993, the Company entered into a technology license
agreement with the founders of the Company, one of whom is the holder of two
United States Patents, a pending patent, pending international patents, and
licensed trademarks and logo for founders common shares that were not ascribed a
value. The agreement also required $210,000 to be paid to the one founder who is
the owner of the patents, and royalties based upon revenues to be paid to the
holder of the patents. The $210,000 was due upon the signing of the agreement or
in installment payments over an unstated period. Royalties of 5% of annual gross
receipts to $25,000,000, and 2% of annual gross receipts over $25,000,000 are
also required. At, June 30, 1999 and 1998, the unpaid balance of the $210,000
amount was $160,574 and $172,084, respectively, including interest at the rate
of 6% per annum, compounded quarterly. The aforementioned agreement does not
have a termination date, and provides the Company with the exclusive worldwide
right to manage all leasing, marketing, selling, and vending of sub-licenses
with respect to the licensed technology and products under the patents.
The amount of $210,000 is being amortized ratably over 15 years, the
approximate remaining life of the two United States Patents. At June 30, 1999
and 1998, the unamortized portions were $120,750 and $134,750, respectively.
Note 7 - Receivable From Officers
At June 30, 1998, one of the officers of the Company had been advanced a
total of $97,197, with the approval of the Board of Directors of the Company.
The advanced amounts bear interest at six percent per annum, compounded
quarterly, and are due on demand, but, not later than five years from June 30,
1998. Also, at June 30, 1999 and 1998, the officers had deferred salary amounts,
including interest at 6% per annum, compounded quarterly, from the Company of
$465,537 and $375,059. At June 30, 1999 an officer of the Company had loaned the
Company $6,761.
<PAGE>
Note 8 - Capitalized Lease Payables
The Company has entered into agreements for the lease purchase of certain
computer and related equipment, which agreements have been determined to
constitute financing leases. Accordingly, the Company recorded the asset costs
of $35,573 and related principal lease obligations of an equal amount. The
capitalized lease agreements require monthly payments, including interest, of
$1,289 through November 2000; of $1,047 from December 2000 to May 2001; and, of
$289 from June 2001 to November 2001.
Note 9 - Deferred Salaries and Wages
At June 30, 1998 and 1997, the Company had accrued and unpaid salaries and
wages to officers and employees of $882,568 and $605,217, respectively. Because
of the development stage of the Company, it made arrangements with its employees
under informal letter agreements to defer all or a part of the salaries or wages
until the Company attains the ability to permit payments. The arrangements do
not specify a time period for payment, and the Company has recognized interest
at the rate of 6% per annum, compounded quarterly.
6/30/99 6/30/98
-------- --------
Officers $417.832 $237,832
Employees 307,510 269,560
Accrued interest 83,694 47,086
Payroll taxes 73,532 50,739
-------- --------
Total $882,568 $605,217
-------- --------
Note 10 - Employee Common Stock
The Company has a non-qualified employee common stock purchase program,
under which employees, from time to time, are granted the right to purchase a
certain number of shares at a stipulated price, with ownership vesting over a
period of time. In the event the employee is terminated or leaves the employ of
the Company before the vesting period is complete, the employee must sell the
unvested shares to the Company at the same amount for which they were purchased.
At June 30, 1999, a total of 4,899,153 of common shares had vested under the
program, and 507,228 common shares were unvested.
Note 11 - Income Taxes
At June 30, 1999 the Company has accumulated losses of $2,088,000 which may
be available to offset future operating income. The Company will need to realize
significant profits to utilize the losses, all of which may not be immediately
available due to the merger and issuance of additional stock, and capitalization
matters. If deductible, the accumulated losses represent a deferred tax asset of
approximately $710,000 for which a valuation allowance of the same amount has
been provided because it is more likely than not that the amounts may not be
immediately deductible.
The provision (benefit) for income taxes differs from the amount of income
tax determined by applying the applicable U.S. statutory federal income tax rate
to pre-tax income as a result of the following differences at June 30.
<PAGE>
1999 1998
---------- ----------
Income tax provision (benefit) - 34% $(266,120) $( 147,229)
--------------------------------------------------------------------------------
Increase (decrease) in rates resulting from
State taxes (46,358) (25,265)
Valuation allowance for deferred tax assets 312,478 172,494
--------- ----------
Effective tax rates -0- -0-
--------- ----------
The accumulated losses expire for tax purposes generally as shown below:
Year Amount
---- ------
2009 $212,000
2010 231,000
2011 195,000
2012 234,000
2013 433,000
2014 783,000
Note 12 - Common and Preferred Stock
Preferred Stock
At June 30, 1999, the Company was authorized to issue 5,000,000 shares of
no par value per share preferred stock, which may be issued in classes or series
with various rights and designations by the Board of Directors. No shares were
issued and outstanding at June 30, 1999. Each share of preferred stock is
entitled to dividends when and if declared by the Board of Directors, and other
rights and/or preferences as maybe designated by the Board of Directors.
Common Stock
The Company is authorized to issue 50,000,000 of no par value per share
common stock. The holders of each share are entitled to one vote for each share
held, and are entitled to dividends when and is declared by the Board of
Directors. At June 30, 1999, common shares issued and outstanding totaled
10,757,403.
Note 13 - Commitments and Contingencies
The Company leases its office space under a lease that requires monthly
rental payment of $1,462, which monthly rate increases at the rate of 2.5% each
year, through December 2003.
The Company is presently, and from time to time, subject to pending claims
and lawsuits arising in the ordinary course of business. In the opinion of
management, the ultimate resolution of these pending legal proceedings will not
have a material adverse effect upon the Company's operations or financial
position.
Management asserts that it has reviewed the computers and computer programs
that it utilizes to conduct its activities, and believes that such are Year 2000
compliant. While management has not conducted specific inquiries, it believes
<PAGE>
that the entities with which it interacts are Year 2000 compliant as they are
primarily in the computer industry.
Note 14 - Fair Value of Financial Instruments
The carrying amounts of the Company's cash equivalents (money market fund)
and receivables are considered to approximate its fair market value. Similarly,
the amount of the Company's obligations are considered to represent the
approximate fair value of such instruments based upon management's best
estimate.
Note 15 - Public Offering
During June 1998, the Company completed an offering under Regulation D,
Rule 504. As a result of the offering, the Company realized $990,000 and issued
2.858,333 common shares. The Company expects to file with the Securities and
Exchange Commission to become a reporting company.
<PAGE>
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Samuel P. Shanks, Ph.D. - President, Chief Executive Officer and Director.
--------------------------------------------------------------------------
Samuel P. Shanks, age 53, has served as the Company's President, Chief Executive
Officer and Director since its inception in 1993. Dr. Shanks was co-founder of
the Company along with Lester C. Pickett. From 1987 to 1993, Dr. Shanks served
with JAI Associates, Inc., a firm that performs government contracted numerical
research, where he served as its President from 1989. Dr. Shanks earned B.S.,
M.S., and Ph.D. degrees in Engineering, Mathematics and Computer Science from
Mississippi State University. Over the past 30 years, Dr. Shanks has worked with
many major corporations including General Dynamics, Flow Simulations, Inc., and
Rocketdyne Division of Rockwell International where he worked on the redesign of
the space shuttle main engine. Dr. Shanks developed a powered missile separation
Navier-Stokes code for missile launches from realistic aircraft configurations
and in 1985, Dr. Shanks received the highest award given at NASA/Ames for
research, the H. Julian Award, for his work on redesign of the space shuttle
main engine. Dr. Shanks has over 30 years of experience in computational fluid
dynamics and has made many substantial advances to the state of the art in that
field.
Lester C. Pickett - Chairman of the Board, Executive Vice President and
-----------------------------------------------------------------------
Secretary.
----------
Lester C. Picket, age 59, has served as the Company's Chairman of the Board,
Executive Vice President and Assistant Secretary since its inception in 1993.
Mr. Pickett was made Secretary in August, 1998. Mr. Pickett was co-founder of
the Company along with Samuel P. Shanks. Mr. Pickett has more than 30 years of
engineering experience, including more than 20 years as an independent engineer
consulting to numerous California manufacturing companies in the development of
new electronic products. Mr. Pickett has worked for such well-known corporations
as Douglas Aircraft (McDonnell Douglas, now Boeing) and Texas Instruments. Mr.
Pickett is the inventor of the ultra high performance function generators and
other central elements of a new type of processor for performing exponential
floating point computation at high speed in various hardware technologies as
well as pure software. Mr. Pickett has also shown in detail how to construct a
complete floating point computing environment based on such a processor. Mr.
Pickett holds two applicable patents that issued February 1993 and March 1993, a
third that issued in October 1994 and many issued and pending international
patents. All substantial rights to the many issued and pending patents held by
Mr. Pickett have been assigned to Log Point.
Errol Flynn - Director.
-----------------------
Errol Flynn, age 59, has served as Director of the Company since its inception
in 1993. Mr. Flynn has over 25 years of experience in all aspects of sales and
marketing. In 1992, he retired from his position as Vice President of Sales for
Xircom where he was responsible for the increase in annual sales from $4 million
to $90 million in just under three years.
<PAGE>
Charles Bond - Director.
------------------------
Charles Bond, age 61, has served as Director of the Company since 1994. Since
January 1998, Mr. Bond has been self-employed as an independent consultant. From
June 1997 to December 1997, Mr. Bond served as Director of Systems Development
of Ampex Corporation, a company specializing in electronic video recording and
other electronic consumer products. From March 1991 to June 1997, Mr. Bond
served as Director of Engineering for Read-Rite Corporation, a company
specializing in Read-Rite magnetic heads used in hard drives. Mr. Bond has over
20 years of experience in design engineering and technical management of disk
drives, peripherals, and media products and holds several patents in that area.
Mr. Bond has worked for QUME Corp., Trace Products, Inc., Verbatim Corp., Nestar
Systems, Inc., BASF Systems, Inc., Shugart and IBM. Mr. Bond has experience in
all phases of development from product concept through manufacturing and in
financial planning, staffing and resource management.
Warren E. Pickett, Ph.D. - Director.
------------------------------------
Warren E. Pickett, age 52, has served as Director of the Company 1994. Since
July 1997, Dr. Pickett has served as a professor of Physics at the University of
California at Davis. From October 1979 to June 1997, Dr. Pickett was a Senior
Research Physicist at the Naval Research Laboratory in Washington, D.C where he
formulated and performed research in condensed matter theory using
state-of-the-art theoretical approaches and computational methods. The emphasis
of his work was on superconductivity, magnetism and related unusual materials
properties. Dr. Pickett is the brother of Lester C. Pickett.
<PAGE>
<TABLE>
<CAPTION>
Item 10. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
------------------- ----------------------
Awards Payouts
------ -------
Other Securities
Name Annual Restricted Underlying All Other
and Principal Compensa- Stock Options/ LTIP Compensa-
Position Year Salary* Bonus tion Award(s) SARs Payouts tion
($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (j)
Samuel P. Shanks,
President
Lester C. Pickett,
Chairman, Exec.
Vice President &
Secretary
*At June 30, 1999 and 2000, the Company had accrued and unpaid salaries and
wages to Lester C. Pickett and Samuel P. Shanks of $417,832 and $597,832,
respectively, excluding interest Because of the development stage of the
Company, it made arrangements with its employees under informal letter
agreements to defer all or a part of the salaries or wages until the Company
attains the ability to permit payments. The arrangements do not specify a time
period for payment. The deferred amounts, which include the estimated related
payroll taxes, will not be payable until the Company attains revenues of
$250,000 per calendar quarter, at which time a percentage, to be determined by
the Company, of the amounts of revenues over $250,000 will be devoted to paying
the deferred amounts.
</TABLE>
<PAGE>
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Name and Address Amount Percent Title of Class
of Owner Owned of Class --------------
-------------- --------- --------
Common Samuel P. Shanks,
President/CEO/Director
655 Fair Oaks Ave., F205
Sunnyvale, CA 94086 2,029,824 18.35
Common Lester Pickett
Chairman/Exec. VP/Secretary
178 Centre St., #21
Mountain View, CA 94041 2,595,000 23.46
Common Charles R. Bond, Director
502 Sark Ct.
Milpitas, CA 9505 20,000 0.18
Common Errol Flynn, Director
407 W. Main St.
Sackets Harbor, NY 13685 182,000 1.64
Common Warren Pickett, Director
2613 Chateau Lane
Davis, CA 95616 180,000 1.62
------- ----
5,006,824 45.25
No officers, directors, or security holders listed above own any warrants,
options or rights.
The Company has an employee common stock purchase program, see Exhibit of form
of Restricted Stock Purchase Agreement, under which employees are permitted to
purchase shares at a price of $0.00125 per share. At June 30, 2000, a total of
5,199,153 common shares had vested under the program, and 207,228 common shares
were unvested and subject to repurchase. If the employee leaves the employment
of the Company during a certain period of time, the employee must sell the
unvested shares to the Company at the price for which the shares were purchased.
<PAGE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Lester C. Pickett, Chairman of the Board, Executive Vice President and Secretary
of the Company is the brother of Warren Pickett, who serves as a Director of the
Company.
As of June 30, 2000, officers of the Company had advanced a total of $115,020,
to the Company. Also, at June 30, 2000, the officers had deferred salary amounts
from the Company of $597,832, excluding interest.
On February 18, 1993, the Company entered into a technology license agreement
with the founders of the Company, one of whom is the holder of two United States
Patents, a pending patent, pending international patents, and licensed
trademarks and logo for founders common shares, $210,000 to the one founder who
is the owner of the patents, and royalties based upon revenues to be paid to the
owner of the patents. The $210,000 was due upon signing of the agreement or in
installment payments over an unstated period. Royalties of 5% of annual gross
receipts to $25,000,000, and 2% of annual gross receipts over $25,000,000. At
June 30, 1999 and 2000, the unpaid balance of the $210,000 amount was $160,574
and $170,428, respectively. The aforementioned agreement does not have a
termination date, and provides the Company with the exclusive worldwide right to
manage all leasing, marketing, selling and vending of sub-licenses with respect
to the licensed technology and products under the patents. The approximately
remaining life of the two United States patents is 15 years.
(Remainder of this page left intentionally blank.)
<PAGE>
Item 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
INDEX TO EXHIBITS.
Exhibit Description of Document
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3(i) Articles of Incorporation filed July 19, 1996.*
3(ii) Amendment to Articles of Incorporation filed January 22, 1997.*
3(iii) Amendment to Articles of Incorporation filed November 6, 1997.*
3(iv) Bylaws.*
10.0 Confidential Technology License Agreement dated February 18,
1993.*
10.1 Non-Disclosure Statement, Employee Proprietary and Confidential
Information Agreement with Samuel P. Shanks dated May 2, 1994.*
10.2 Non-Disclosure Statement, Employee Proprietary and Confidential
Information Agreement with Lester Pickett dated May 2, 1994.*
10.3 Stock Purchase Agreement, Form of*
23.1 Consent of Accountants.
99.0 Form of Stock Certificate.*
DESCRIPTION OF EXHIBITS.
------------------------
The required exhibits are attached hereto, as noted in Item 1 above.
(b). REPORTS ON FORM 8-K
Note: * Previously filed with Securities and Exchange Commission on EDGAR.
<PAGE>
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
LOG POINT TECHNOLOGIES, INC.
Date: October 19, 2000 By: /s/ Samuel P. Shanks
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Samuel P. Shanks, President
