FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] 15,ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: 10/31/96
OR
[ ] 15,TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission file number: 0-25614
GLOBUS CELLULAR & USER PROTECTION, LTD.
(FORMERLY LERIDGES INTERNATIONAL, INC.)
(Exact name of Small Business Company in its charter)
NEVADA 88-0228274
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1980 Windsor Road
Kelowna, British Columbia, Canada V1Y 4R5
(Address of principal executive offices) (Zip Code)
Company's Telephone number, including area code:
(604) 860-3130
Securities registered pursuant to
Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act: Common Stock, $.001 par value
Warrants to purchase $.001 par
value Common Stock
Check whether the Company (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the preceding 12
months (or such shorter period that the Company was required to file such
reports), and (2) has been subject to such filing requirements for at least
the past 90 days. Yes __x__ 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 Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ x ]
The Company's revenues for its most recent fiscal year was $430,407.
As of October 31, 1996, the market value of the Company's voting $.00l par
value common stock held by non-affiliates of the Company was $ .
The number of shares outstanding of Company's only class of common stock, as
of October 31, 1996 was 3,829,949 shares of its $.001 par value common stock.
Check whether the Issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes __x__ No _____
No documents are incorporated into the text by reference.
Transitional Small Business Disclosure Format (check one)
Yes No x
-------- --------
<PAGE> 2
PART I
ITEM 1. BUSINESS General
Globus Cellular & User Protection Ltd. ("Company"), formerly Leridges
International, Inc., was incorporated on June 10, 1987, under the laws of the
State of Nevada under the name Daytona-Pacific Corporation. On July 31, 1989,
Company changed its name to Leridges International, Inc. On March 4, 1993,
Company filed a Chapter 11 petition for protection under the U.S. Bankruptcy
laws and subsequently filed a Plan of Reorganization, which was approved by
the U.S. Bankruptcy Court on October 18, 1994. The Plan provided for Company
to acquire all of the assets of Globus Cellular & User Protection Ltd.
(Canada), a corporation formed in the Province of British Columbia, Canada on
July 28, 1993, in consideration of Company's issuance of 2,880,000 Units of
its Common Stock. Also approved in the Plan was a change of Company's name to
Globus Cellular & User Protection Ltd.
Employees
Company has five full-time employees and three part-time employees. All of
these part-time employees are used on an as-needed basis for research and
development. These employees include third and fourth year Physics students
at Okanagan University College. The remaining part-time person is employed as
a bookkeeper.
Competition
The Company is not aware of any direct competition to its cellular mega range
Reduced radiation antenna technology with its patents pending. The mega
range antenna is a refractive radiation reducing plastics product. The
Company also has an x-ray products division selling to private clinics.
There are competitors to this product. Any competition with similar
products, if any, would be on the basis of price and quality of the products.
Principal Product
Company is engaged in the research and development of its low radiation mega
range antenna technology and marketing its exclusive line of x-ray film and
chemistry under the "Globus" label to private clinics.
The Company originally started out by manufacturing a shielding product as an
aftermarket add on for cellular phones and sold its entire inventory of 25,000
of the shielding product.
The United States Federal Communications Commission, on August 16, 1996,
came out with new stringent guidelines for the cellular industry
manufacturers of phone devises requiring that these products not exceed
certain radiation exposure levels to users. These guidelines force
manufacturers into compliance by either tuning down the output of the
phones or redesigning the antennas to reduce exposure to users.
The Company's testing capability for its antenna technology has been
developed with the assistance of Canada's National Research Counsel,
providing grant monies as well as assisting the Company in its
relationship with the Department of Physics of Okanagan University in
British Columbia. The Okanagan University Department of Physics published
a paper in 1996 citing mega range antenna as substantially reducing
human tissue absorption of radiation while increasing the performance of
the cellular phone compared to a leading manufacturer's cellular phone
product.
Patents
Dr. Paul F. Bickert, an officer, director and principal shareholder
of Company, is the owner of three patents currently pending on the
product in both the U.S. and Canada. On January 1, 1994, a Company
entered into a License of Technology Agreement ("License Agreement")
with Dr. Bickert granting Company the exclusive worldwide rights to
use the technology and proprietary knowledge to develop, produce,
manufacture, use, sell or otherwise commercially exploit the technology
and patents using the technology. The Agreement is in effect for a period of
eight (8) years with an option to renew for an additional five (5) years.
All patents pending are attached to Dr. Bickert's parent application filed in
1994. Under the terms of the License Agreement, Dr. Bickert will receive
the sum of One Hundred and Twenty Thousand Dollars U.S. ($120,000.00) per
year, due and payable on the first day of each year throughout the term of
the License Agreement, provided, however, the payment for 1995 has been
rescheduled such that $20,000 shall be due June 30, 1995, $20,000 shall be
due September 30, 1995 and the balance of $80,000 shall be due December 31,
1995. As of the date of this filing, there is no accrued amount due and
payable to Dr. Bickert under the License Agreement.
In addition, on January 1, 1994, Company entered into a Royalty Agreement with
Dr. Bickert wherein Dr. Bickert shall receive a royalty fee of six percent
(6%) of all "Gross Receipts" for any and all products sold by Company
utilizing the technology and proprietary rights granted to Company under the
terms of the License Agreement. The term of the Royalty Agreement shall
continue indefinitely. As of the date of this filing, there is no accrued
amount due and payable to Dr. Bickert under the Royalty Agreement.
<PAGE> 3
Marketing/Advertising
There are over Thirty Million ( 30,000,000) cellular phone subscribers in the
United States with a penetration rate of only approximately 6% and over Three
Million subscribers (3,000,000) in Canada with a penetration rate of only
approximately 4.78%. Cellular Business News, Oct. 1995.
The Company intends to market its antenna technology within the next twelve
months to three principal customers, i) original equipment manufacturers, ii)
after market replacement antenna customers and iii) license the technology to
antenna manufacturers and/or original equipment cellular manufacturers.
Manufacturing
The Company is currently not manufacturing its mega range antenna product
while it is seeking international patent protection.
Environmental Regulations
According to federal environmental regulators, both the U.S. and Canada,
the mega range antenna is considered a passive device and, as such, falls
outside the scope of Radiation Emitting Devices Regulations. At present,
there are no federal environmental regulations to which Company's
product is subject. Currently, the government of the United States, through
the FCC, is setting guidelines for antenna radiation emission levels and the
Company's antenna not only meets but has radiation levels far less than the
recommended maximum guidelines. There is no assurance, however, that
regulations on this type of product will not be implemented in the future
and that Company will be required to comply therewith.
Research and Development
Since inception, Company has expended approximately $198,220 (U.S.) in
research and development of its product.
The Company's antenna technology, with worldwide patents pending is currently
the focus of much of the Company's research and development attention.
Liability Insurance; Indemnification
Company has a general liability, fire and medical insurance policy of
insurance to protect against liabilities arising out of the negligence of its
officers and directors and/or deficiencies in any of its business operations.
It presently pays $1,290.00 (Cdn.) annually for $1,000,000 coverage. There is
no assurance, however, that such insurance coverage would be adequate to
satisfy any potential claims made against Company, its officers and directors,
or its business operations or products. Any such liability which might arise
could be substantial and may exceed the assets of Company. The Articles of
Incorporation and By-Laws of the Company provide for indemnification of
officers and directors to the fullest extent permitted under Nevada law.
However, insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons, it is the opinion of the Securities and Exchange Commission such
indemnification is against public policy, as expressed in the Act, and is
therefore, unenforceable.
ITEM 2. PROPERTIES.
On January 3, 1994, Company purchased a unit in an office/warehouse building
in Kelowna, B.C., Canada, for its corporate headquarters. The purchase price
of the 1800 sq. ft. unit was $118,000 (Cdn.). The transaction was a freehold
estate fee simply transfer under Canadian law and Company is the registered
owner. Kelowna & District Credit Union holds a first mortgage on the property
in the principal sum of $82,600 (Cdn.), payable monthly with interest only
payments at the prime rate plus 1% per annum. The principal balance of the
mortgage is due and payable in full upon demand.
In addition, Company leases, on a month-to-month basis, warehouse space at the
B & O Commerce Centre in Portland, Oregon, where it stores all of its C.U.P
product inventory. The monthly rental rate is $75.00 (U.S.) per month, which
is a comparable rental rate for warehouse space in the geographical area.
In 1996, the Company has entered into an operating lease for additional office
and warehouse space adjacent to its existing facility. This lease is paid on
a month-to-month basis. The leased space is owned by an officer of the
Company and monthly rental payments are considered to be at competitive market
rates. Rent expense amounted to $4,418 and $514 for the periods ended October
31, 1996 and 1995.
ITEM 3. LEGAL PROCEEDINGS.
The Company knows of no material pending or threatened legal proceedings to
which the Company is a party or of which any of its properties is subject, and
no such proceedings are known to the Company to be contemplated by
governmental authorities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the fiscal year ended October 31, 1996, no
matters were submitted to a vote of the Company's security holders, through
the solicitation of proxies or otherwise.
<PAGE> 4
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Information. The Company's common stock commenced trading in the
over-the-counter market on September 19, 1995.
The following table sets forth the range of high and low bid quotations for
the Company's common stock for each quarter of the last two fiscal years, as
reported on the NASD Bulletin Board, by Wm. V. Frankel and Company, Inc. and
Paragon Capital Corporation. The quotations represent inter-dealer prices
without retail markup, markdown or commission, and may not necessarily
represent actual transactions.
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
<S> <C> <C>
1/31/95 * *
4/30/95 * *
7/30/95 * *
10/31/95 2.125 2.125
1/31/96 .75 .75
4/30/96 1.25 1.25
7/30/96 1.63 1.50
10/31/96 .72 .69
</TABLE>
* No market information is available for these periods. Management
believes that there were no broker-dealers making a market in its securities
during these quarters and as of the date of filing this Annual Report.
Holders. The approximate number of holders of record of the Company's
$.001 par value common stock, as of October 31, 1996, was 229. Currently, as
of January 20, 1997, there are 232 holders of record.
Dividends. Holders of the Company's common stock are entitled to receive
such dividends as may be declared by its Board of Directors. No dividends on
the Company's common stock have ever been paid, and the Company does not
anticipate that dividends will be paid on its common stock in the foreseeable
future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Capital Resources and Liquidity.
The Company emerged (October 18, 1994) from a Chapter 11 bankruptcy proceeding
which it filed in March, 1993. Since the date of filing of the bankruptcy
proceeding, Company was inactive and was not engaged in any business. The
recent acquisition of the assets of Globus Cellular & User Protection Ltd., a
Canadian corporation, has put the Company into the position of starting a new
business.
Globus Cellular & User Protection Ltd. (Canada), a British Columbia
corporation, was incorporated on July 28, 1993. Thereafter, the corporation
acquired the patent rights to the cellular phone product (the "C.U.P"), which
it subsequently sold to Company pursuant to the Plan of Reorganization, filed
and approved by the U.S. Bankruptcy Court.
During the year ended October 31, 1996, the Company issued 419,280 shares of
its common stock, registered under Form S-8, to entities providing consulting
services to the Company. The stock was valued at the market value on the date
such shares were authorized to be issued by the Board of Directors. A portion
of these hares were issued pursuant to a service contract which provides for
services to be rendered to the Company in the future. The value ascribed to
these services ($293,000) has been recorded as an unpaid subscription of
common stock.
Also, the Company issued 33,435 shares of restricted common stock for services
rendered to the Company. These shares were valued at 50% of the market price
on the date such shares were authorized to be issued by the Board of
Directors.
Additionally, the Company issued 117,900 shares of restricted common stock for
the exercise of warrants and options related thereto for cash aggregating
$102,851.
The Company completed a private sale of 500,000 common shares for $500,000 in
the third and fourth quarter of fiscal 1995 and has settled all debts,
including payment on the License of Technology to January 1, 1995. The
payment on License of Technology for the first six months of 1996 is being
rescheduled by Dr. Bickert and the Company due to the expense being incurred
by the Company to secure world-wide patent protection on its patent
co-operation treaty filing. Additionally, the Company has just commenced
reselling of x-ray products (film, shielding garments, -x-ray machines and
accessories) to generate an immediate input of additional revenues. Company
believes that the proceeds will be sufficient to allow it to operate with
minimum revenues over the next twelve (12) months. However, such proceeds
will not allow the Company to commence full scale operations regarding its
planned product.
<PAGE> 5
Additionally, the Company received $102,780 in officer loans resulting in net
cash provided by financing activities of $583,505 for the year ended October
31, 1995.
Long-term liquidity will be dependent on anticipated future revenue.
Additionally, the Company shall pursue a registration of its Common Shares and
Class "A" Warrants and will, in part, rely on the subsequent exercise of said
Warrants. Any additional funds raised and any revenues received from sale of
Company's products will enable Company to expand its plan of operations by
increasing its production and expanding its product line.
The Company acquired plant and equipment valued at $15,089 for the year ended
October 31, 1996. The Company expended $1,804 on trademark costs. This
resulted in net cash used in investing activities of $16,893. The Company
does not anticipate purchasing any additional plant or significant equipment
and does not expect any significant changes in the number of its employees,
nor does Company expect to perform any product research and development during
the next twelve (12) months.
The Company acquired plant and equipment valued at $17,528 for the year ended
October 31, 1995. This resulted in net cash used in investing activities of
$17,528. The Company does not anticipate purchasing any additional plant or
significant equipment and does not expect any significant changes in the
number of its employees, nor does Company expect to perform any product
research and development during the next twelve (12) months.
The Company is not presently aware of any known trends, events or
uncertainties that may have a material impact on net sales, revenues or income
from its operations. However, Company's product is new in the market and
there are not assurances it can be marketed successfully and/or profitably.
The management of Company is led by Dr. Paul F. Bickert, Dr. Ronald Armstrong
and Bernard Penner. Dr. Bickert and Dr. Armstrong are both doctors of
chiropractic who have studied the principles, practice and use of X-rays and
have a thorough understanding of the nature of U.H.F. radiation and the
potential health risks to persons exposed to radiation over long period of
time. Mr. Penner owns and operates a large and highly successful construction
business and will provide quality control and management skills to Company,
which are necessary to develop a labor force to manufacture and market
Company's products.
Results of Operations.
The Company experienced a net loss from operating activities of $734,145 for
the year ended October 31, 1996. Total sales increased from $40,980 for
the year ended October 31, 1995 to $281,059 (additionally, the Company sold
$128,485 in licenses) for the year ended October 31, 1996 due to
increased operations. However, cost of sales increased from $22,045 to
$233,202 for those same periods respectively. Selling, general and
administrative expenses increased to $898,939 for the year ended October 31,
1996 compared to $690,600 for the same period in 1995 due to accounting
fees of $12,331, advertising of $83,914, consulting of $285,537, legal of
$10,689, management contract payments of $110,000 technology lease expense
of $120,000, travel of $52,940, wages of $83,615 and miscellaneous office
expenses of $223,827. Research and development expenses decreased
from $24,476 for the year ended October 31, 1995 to $13,220 for the same
period in 1996 due to the stage of development of the antenna product and
commencement of sale of said product.
The Company issued stock options for officer services of $422,324 for the year
ended October 31, 1996. Depreciation for the year ended October 31, 1996
was $14,515. For the year ended October 31, 1996, the Company experienced an
increase in accounts receivable of $46,343, a decrease in inventory of
$122,366 due to increased sales, and increase in prepaid expenses of $499 and
an increase in accounts payable of $18,064, all due to increased operations.
Foreign exchange translation adjustment was $920 for the year ended October
31, 1996. These items resulting in net cash used in operating activities of
$202,798 for the year ended October 31, 1996.
The Company experienced a net loss from operating activities of $706,368 for
the year ended October 31, 1995. Total Sales increased from $4,411 for the
year ended October 31, 1995 to $40,980 for the year ended October 31, 1995 due
to increased operations. However, Cost of Sales increased from $6,438 to
$22,045 for those same periods respectively. Selling, general and
administrative expenses increased substantially to $690,600 for the year ended
October 31, 1995 compared to $224,982 for the same period in 1994 due to the
Company's increased operations. Research and development expenses decreased
from $148,573 for the year ended October 31, 1994 to $24,476 for the same
period in 1995 due to the stage of development of the C.U.P. product and
commencement of sale of said product and the National Research Council
grant.
The Company issued stock options for officer services of $272,679 and for
license fees for the year ended October 31, 1995. Depreciation for the
year ended October 31, 1995 was $12,421. For the year ended October 31,
1995, the Company experienced an increase in accounts receivable of
$6,008, an increase in inventory of $31,570, and increase in prepaid
expenses of $23,815 and a decrease in accounts payable of $10,544, all
<PAGE> 6
due to increased operations. Foreign exchange translation adjustment
was $1,049 for the year ended October 31, 1995. These items resulting in
net cash used in operating activities of $444,526 for the year ended
October 31, 1995.
The Company experienced a net loss from operating activities of $375,335
for the Ten Months Ended October 31, 1994 compared to a net loss of
$70,627 for the year ended December 31, 1993. This increased loss is
mainly a result of the selling, general, administrative costs of consulting
of $48,137 and legal fees of $27,685 associated with the merger and royalty
and licensing fees of $87,183. Total Sales decreased for the Ten months
ended October 31, 1994 to $4,411 from $25,534 for the year ended December
31, 1995 due to the Company's decision to cease the distribution of its
products by direct sale and instead engage in extensive research to
demonstrate effectiveness of its product and to make necessary
modifications to increase said effectiveness. Additionally, Cost of Sales
have also decreased from $18,415 to $6,438 for those same periods
respectively. Selling, general and administrative expenses increased
substantially to $225,718 for the six months ended July 31, 1995 compared
to $14,454 for the year ended December 31, 1994 mainly as result of
consulting of $48,137 and legal fees of $27,685 associated with the merger
and royalty and licensing fees of $87,183. Research and development
expenses increased from $63,765 for the year ended December 31, 1993 to
$148,573 for the ten months ended October 31, 1993 due to the stage of
development of the C.U.P. product and commencement of sale of said
product.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
The response to this item is being submitted as a separate section of this
report beginning on page F-l.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The former accountant was dismissed on November 22, 1995.
The principal accountant's report on the financial statements for either of
the past two years did not contain an adverse opinion or disclaimer of
opinion, nor were the reports modified as to the uncertainty, audit scope or
accounting principles. The decision to change accountants was approved by
the board of directors. There were no disagreements with the former
accountant on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.
Winter, Scheifley & Associates, P.C. was engaged by the Company as of November
23, 1995.
<PAGE> 7 PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Identification of Directors and Executive Officers of the Company. The
names, addresses and positions of the present directors and officers of the
Company are set forth below:
<TABLE>
<CAPTION>
Name and Address Age Position
<S> <C> <C>
Dr. Paul F. Bickert 51 President, Director and
3200 Watt Road Chairman of the Board
Kelowna, B.C., V1Y4R5
Bernard D. Penner 36 Secretary, Treasurer
157-7841 Hwy #97 N. and Director
Winfield, B.C. V0H2C0
Ronald L. Armstrong 65 Director
1005-16 Ave. N.W.
Calgary, Alberta T2M0K7
</TABLE>
All directors will serve on the Board of Directors until the next annual
meeting of the shareholders of Company, or until their successors have been
duly elected and qualified. Officers serve at the discretion of the Board of
Directors.
Background of Directors and Officers
Dr. Paul F. Bickert - Dr. Bickert has been the President and Chairman
of the Board of Directors of Company since October 18, 1994, when he was
appointed under the terms of the Plan of Reorganization filed by Company and
approved by the U.S. Bankruptcy Court. Since its inception in 1993, he was
the President and Chairman of the Board of Directors of Globus Cellular & User
Protection, Ltd., the Canadian corporation from which Company acquired assets
in the bankruptcy reorganization. From 1974 to 1993, Dr. Bickert was a
self-employed private chiropractic practitioner in Canada. He graduated from
the Palmer College of Chiropractic in 1974, with a Doctor of Chiropractic
Degree. Dr. Bickert devotes full time to the business of Company.
Bernard D. Penner - Mr. Penner has been the Secretary/Treasurer and a
Director of Company since October 18, 1994, when he was appointed under the
terms of the Plan of Reorganization filed by Company and approved by the U.S.
Bankruptcy Court. Since its inception in 1993, he was the Vice President and
Director of Globus Cellular & User Protection, Ltd., the Canadian corporation
from which Company acquired assets in the bankruptcy reorganization. Since
August 1992, Mr. Penner has been the Owner and President of Redline
Contracting, Ltd., a construction company in Kelowna, B.C., Canada. From 1988
to 1992, he was the owner of B.P. Construction a construction company doing
business in both Oliver, B.C., Canada and Kelowna, B.C., Canada. Mr. Penner
will devote his time on an as-needed basis (not specifically determinable) to
the business or Company.
Dr. Ronald L. Armstrong - Dr. Armstrong has been a Director of Company
since October 18, 1994, when he was appointed under the terms of the Plan or
Reorganization filed Company and approved by the U.S. Bankruptcy Court. Since
its inception in 1993, he was the Vice President and a Director of Globus
Cellular & User Protection, Ltd., the Canadian corporation from which Company
acquired assets in the bankruptcy reorganization. In addition, since 1971,
Dr. Armstrong has been a self-employed private chiropractic practitioner in
Toronto, Ontario, Canada. He graduated from the Canadian Memorial
Chiropractic College in Toronto, Ontario, Canada in 1971, with a Doctor of
Chiropractic Degree. Dr. Armstrong only sits as a Board Member and is not an
employee of the Company. Dr. Armstrong will devote his time on an as-needed
basis (not specifically determinable) to the business of Company.
Directorships. No director or nominee for director holds a directorship in
any other company with a class of securities registered pursuant to Section 12
of the Securities Exchange Act of 1934 or subject to the requirements of
Section 15(d) of such Act or any company registered as an investment company
under the Investment Company Act of 1940.
ITEM 10. EXECUTIVE COMPENSATION
During fiscal 1996, and as of the date of filing this report, no compensation
has been paid, nor have there been compensation arrangements or plans, other
than what has been indicated below.
On November 1, 1994, Company entered into an Employment Agreement with Dr.
Paul F. Bickert, the President and Chairman of the Board of Directors of
Company. The Agreement provides for payment or accrual of a salary of $7,500
(U.S.) per month to Dr. Bickert, effective on the date of Agreement, payable
or accrued on the last day of each month. The term of the Agreement is for
thirteen (13) months, terminating on December 31, 1995, and may be renewed if
mutually agreed upon by the parties on the expiration date.
Ron Armstrong received 5,000 stock options at $.225 per option for services
provided in 1995. On November 15, 1995, Dr. Paul Bickert was granted
stock options salary to purchase 163,636 common shares of the Company at
<PAGE> 8
the exercise price of $.225 per common share. Mr. Penner was granted stock
options in lieu of salary to purchase 227,273 common shares of the Company
at the exercise price of $.225 per common share.
None of the other officers and/or directors receive any compensation for their
services and there are not plans to pay any such compensation in the near
future. All officers and directors are, however, reimbursed for expenses
incurred on behalf of Company.
The Company maintains and pays an annual premium of $6,433 (Cdn.) for a 10-year
term policy of life insurance underwritten by Capri Insurance Company of
Canada which includes: (1) key-man protection on Dr. Paul F. Bickert,
President and Chairman of the Board, and Mr. Bernard D. Penner,
Secretary/Treasurer and a Director of Company; (2) shareholder protection
insurance; principals' family protection; and future tax shelters for company
dollars. The policy provides for key-man protection of Mr. Penner of
$500,000; $500,000 (Cdn.) joint last-to-die protection on Mr. and Mrs. Penner;
key-man protection of Dr. Bickert of $1,000,000, and $500,000 (Cdn.) joint
last-to-die protection of Dr. and Mrs. Bickert.
The Company presently has no other pension, health stock option, annuity,
bonus, insurance, profit-sharing or other similar benefit plans; however,
Company may adopt such plans in the future. There are presently no personal
benefits available for directors, officers or employees of Company.
There is no plan or arrangement with respect to compensation received or that
may be received by the executive officers in the event of termination of
employment or in the event of a change in responsibilities following a change
in control.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table lists each officer or director and each shareholder
owning of record or known to the Company to own beneficially, either directly
or indirectly, at least 5% of the issued and outstanding shares of Common
Stock of the Company as of the date hereof:
<TABLE>
<CAPTION>
Amount and
Nature of
Title of Beneficial % of
Name and Address Class Ownership Class
<S> <C> <C> <C>
Dr. Paul F. Bickert Common 557,937 Direct 17%
3200 Watt Road 453,558 Indirect (2)
Kelowna, B.C., Canada
Dr. Ronald L. Armstrong Common 11,183 Direct 1%
1005 - 16th Ave., N.W. 11,183 Indirect (2)
Calgary, Alberta, Canada
Bernard D. Penner Common 103,031 Direct 7%
157-7841 Hwy. #97 N. 121,280 Indirect (3)
Winfield, B.C., Canada
All officers and
Directors as a Group Common 1,238,180 39%
</TABLE>
(1) These shares are held in the name of Marlene Bickert, wife of Dr.
Bickert, and Dr. Bickert has shared voting rights in and to the shares.
(2) These shares are held in the name of Nesbitt Burns in trust for Sandra
Armstrong RRSP, wife of Dr. Armstrong, and Dr. Armstrong has shared voting
rights in and to the shares.
(3) 117,552 of these shares are held in the name of Loretta Penner, wife
of Mr. Penner, and Mr. Penner has shared voting rights in and to the shares.
3,728 of these shares are held in the name of Burns Fry Ltd., in trust for
Loretta Penner, 3GDJNT5, a Canadian retirement account, and Mr. Penner has
shared voting rights in and to the shares. 2,982 of these shares are held in
the name of Burns Fry Ltd., in trust for Bernie Penner #3GDFXT2, a Canadian
retirement account, and Mr. Penner as 100% voting rights in and to the shares.
The Company does not know of any arrangements, the operation of which may, at
a subsequent date, result in a change in control of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 3, 1994, Company purchased a unit in an office/warehouse building
in Kelowna, B.C., Canada, for its corporate headquarters. The purchase price
of the 1800 sq. ft. unit was $118,000 (Cdn.). The transaction was a freehold
estate fee simply transfer under Canadian law and Company is the registered
owner. Kelowna & District Credit Union holds a first mortgage on the property
in the principal sum of $82,600 (Cdn.), payable monthly with interest only
payments at the prime rate plus 1% per annum. The principal balance of the
mortgage is due and payable in full upon demand.
<PAGE> 9
In addition, Company leases, on a month-to-month basis, warehouse space at the
B & O Commerce Centre in Portland, Oregon, where it had stored all of its C.U.P
product inventory. The monthly rental rate is $75.00 (U.S.) per month, which
is a comparable rental rate for warehouse space in the geographical area.
In 1996, the Company has entered into an operating lease for additional office
and warehouse space adjacent to its existing facility. This lease is paid on
a month-to-month basis. The leased space is owned by an officer of the
Company and monthly rental payments are considered to be at competitive market
rates. Rent expense amounted to $4,418 and $514 for the periods ended October
31, 1996 and 1995.
The President and General Manager of the Company, Dr. Paul Bickert is the
inventor of the Company's major product and is the founder of the Company.
Dr. Bickert and his wife jointly are the Company's largest stockholder.
The Company has an exclusive eight year lease on the cellular phone user
protection technology from Dr. Bickert. The Company possesses the exclusive
right to sublease or sell this technology to others. See Note 5. During the
periods ended October 31, 1996 and 1995, the Company paid $18,800 and $19,088
respectively to patent attorneys for services in connection with patent
applications filed in behalf of Dr. Bickert for the above mentioned
technology. The sum of these amounts have been applied to reduce unpaid
technology lease obligations due Dr. Bickert, so therefore, ultimately
paid by Dr. Bickert.
The vice president and production manager, Mr. Bernie Penner and his wife
jointly are the Company's second largest stockholder.
During 1996 and 1995 the Company paid $1,694 and $3,024 respectively, to a
company controlled by Mr. Penner for improvements to the Company's plant. The
Company believes that such amounts are not in excess of their fair market
value.
Additionally, rent in the amount of $3,110 was paid to Mr. Penner in 1996 for
office and warehouse space in connection with the lease described in Note 4.
Dr. Bickert and Mr. Penner had loans to the Company for cash advances and
unpaid salary and technology lease payments totaling $244,636 and $102,780 at
October 31, 1996 and 1995 respectively. These are demand notes and interest
is being accrued at 8.75% per year. Subsequent to October 31, 1996 these
individuals agreed to waive payment of the total amounts due in exchange for
the exercise of common stock options previously granted to them at an exercise
price of $.225 per share.
The Company has an agreement with Dr. Paul F. Bickert (its founder, product
inventor, President and General Manager, Director and major stockholder) to
pay Dr. Bickert lease of technology payments of $10,000 (US) monthly. This
agreement expires in 2002, with an option to renew. Total payments required
under this lease are as follows:
1997 120,000
1998 120,000
1999 120,000
2000 120,000
2001 120,000
--------
$600,000
On January 13, 1995, Company entered into a Marketing & Promotion Agreement
(the "Agreement") with Brahma Capital Corporation, a British Columbia
corporation ("Brahma"), whereby Brahma was engaged to promote and assist in
the sale of the maximum amount of Company's securities under the private
placement offering and any possible subsequent public offering. The term of
the Agreement is for a period of twelve (12) months or until such time as the
private placement offering has been successfully completed. Under the terms
of the Agreement, Brahma shall be reimbursed for all office, travel and
entertainment expenses in connection with services rendered thereunder. As
compensation for its services, Brahma was to be advanced the sum of $2,500.00
(U.S.) per month, which sum shall be deducted from the following total
commissions earned by Brahma in connection with its sale of Company's
securities under the terms of the Agreement:
(a) 10% of the gross proceeds received by Company from the sale of
securities under the private placement offering by Brahma; and
(b) 7% of the gross proceeds received by Company from the sale of
securities under any subsequent offering of securities made by
Company.
Upon the successful completion of the private placement offering, Company
paid Brahma the sum of $3,500 (U.S.), which sum represents the balance of
consulting fees due and payable to Brahma for work performed for Globus
Cellular & User Protection Ltd., (Canada) prior to the reorganization and
acquisition of its assets by Company.
Due to lack of performance, the Agreement with Brahma has been terminated and
no further amounts are owing.
<PAGE> 10
On October 31, 1994, Company executed a Promissory Note in the amount of
$3,100.00 (Cdn.) in favor of Bernard D. Penner, Secretary/Treasurer and
Director of Company in consideration of a cash loan made to Company. The Note
is payable on demand with interest at 10% per annum, calculated semi-annually.
This Note has been paid in full.
On October 31, 1994, Company executed a Promissory Note in the amount of
$51,167 (Cdn.) in favor of Dr. Paul F. Bickert, President and Chairman of the
Board of Company, in consideration of loans made to Company. The Note is
payable on demand with interest at the rate of 10% per annum, calculated
semi-annually. This Note has been paid in full.
On December 27, 1994, Company executed a Promissory Note in the amount of
$7,500.00 (Cdn.) in favor of Dr. Paul F. Bickert, President and Chairman of
the Board of Company, in consideration of a cash loan made to Company. The
Note is payable on demand with interest only payments at 12% per annum due
monthly, beginning on January 27, 1995. This Note has been paid in full.
On October 18, 1994, pursuant to the terms of a Plan of Reorganization (the
"Plan") filed and approved by the U.S. Bankruptcy Court, Company commenced a
private placement offering (the "Offering") of its securities to the public,
both in the U.S. and in Canada, through an exemption from registration
provided by Section 1145 of the U.S. Bankruptcy Code. The Offering is for a
minimum of 100,000 Units, up to a maximum of 500,000 Units, consisting of one
share of Company's Common Stock, one "A" Warrant and one "B: Warrant, at a
price of $1.00 (U.S.) per Unit. Each "A" Warrant entitles the holder to
purchase one share of Common Stock of Company for a period of one year from
the effective date of the Plan at an exercise price of $1.50 (U.S.) per share.
Each "B" Warrant entitles the holder to purchase one share of Common Stock of
Company for a period of two years from the effective date of the Plan at an
exercise price of $2.00 (U.S.) per share. The Offering was successfully
completed in April, 1995 and terminated.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements and schedules are filed as part of this
report:
Report of Independent Public Auditors.................................15
Balance Sheets............................................................17
Statement of Operations.................................................18
Statement of Stockholder's Equity......................................19
statement of Cash Flows................................................20
Notes to Financial Statements..........................................21-27
Schedules Omitted: All schedules other than those shown have been omitted
because they are not applicable, not required, or the required information is
shown in the financial statements or notes thereto.
(b) List of Exhibits
The following of exhibits are filed with this report:
Exhibit 1 Marketing & Promotion Agreement with Brahma Capital
Corporation incorporated by reference to Form 10-SB, File #0-
25614.
Exhibit 2 Plan of Reorganization, Disclosure Statement and Order
Confirming Plan of Reorganization incorporated by reference to
Form 10-SB, File # 0-25614
Exhibit 3(a)(i) Articles of Incorporation of Company and Amendments thereto
incorporated by reference to Form 10-SB, File # 0-25614
Exhibit 3(a)(ii) Bylaws of Company incorporated by reference to Annual Report
on Form 10-SB, File # 0-25614
Exhibit 3(b) Articles of Incorporation of Globus Cellular & User
Protection, Ltd. (Canada) and Amendments thereto
incorporated by reference to Annual Report on Form 10-SB,
File # 0-25614
Exhibit 10(a) Production Agreement between Market-Ability, Inc. and company
incorporated by reference to Form 10-SB, File # 0-25614
Exhibit 10(b) Press and News Releases incorporated by reference to Form
10-SB, File # 0-25614
Exhibit 10(c) License of Technology Agreement between Dr. Paul F. Bickert
and Company incorporated by reference to Form 10-SB, File
# 0-25614
Exhibit 10(d) Royalty Agreement between Dr. Paul F. Bickert and Company
incorporated by reference to Form 10-SB, File # 0-25614
Exhibit 10(e) State of Title Certificate and Mortgage on Real Property
incorporated by reference to Form 10-SB, File # 0-25614
<PAGE> 11
Exhibit 10(f) Employment Agreement between Dr. Paul F. Bickert and Company
incorporated by reference to Form 10-SB, File # 0-25614
Exhibit 10(g) Key-Man Life Insurance Policy incorporated by reference to
Form 10-SB, File # 0-25614
Exhibit 10(h) Promissory Notes incorporated by reference to Form 10-SB, File
# 0-25614
Exhibit 14 Patents and Trademarks incorporated by reference to Form
10-SB, File # 0-25614
(B) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K regarding a change of fiscal year in
May, 1995.
Item 4. Changes in Company's Certifying Accountant.
(a)(1)(i) The former accountant was dismissed on November 22, 1995.
(ii) The principal accountant's report on the financial statements
for either of the past two years did not contain an adverse opinion or
disclaimer of opinion, nor were the reports modified as to the uncertainty,
audit scope or accounting principles.
(iii) The decision to change accountants was approved by the board
of directors.
(iv)A There were no disagreements with the former accountant on
any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure.
B-E Not applicable
(a)(2) Winter, Scheifley & Associates, P.C. has been engaged by the
Company as of November 23, 1995.
Item 8. Change in Fiscal Year.
a. Date of such determination - May 8, 1995
b. Date of new fiscal year end - October 31, 1994
c. Form on which the report covering the transition period will be
filed. - Form 10-KSB
<PAGE> 12
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Globus Cellular and User Protection, Ltd.
We have audited the accompanying balance sheet of Globus Cellular
and User Protection, Ltd. as of October 31, 1996, and the related
statements of operations, stockholders' equity, and cash flows
for the years ended October 31, 1996 and 1995. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates by management, as well as evaluating the
overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Globus Cellular and User Protection, Ltd. as of October 31,
1995, and the results of its operations, and its cash flows for
the years ended October 31, 1996 and 1995, in conformity with
generally accepted accounting principles.
Winter, Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
January 10, 1997
<PAGE> 13
Globus Cellular and User Protection Ltd.
Balance Sheet
October 31, 1996
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $40,009
Accounts receivable, trade, less allowance for
doubtful accounts of $1,939 45,733
Accounts receivable, other 10,525
Inventories 76,316
Prepaid expenses, related party 3,184
------------
Total current assets 175,767
Property and equipment, at cost, net of
accumulated depreciation of $34,217 130,076
Trademarks 1,804
------------
$307,647
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Mortgage payable, bank $61,169
Accounts payable 43,441
------------
Total current liabilities 104,610
Commitments and contingencies (Note 5)
Stockholders' equity:
Preferred stock, $.001 par value,
20,000,000 shares authorized, -
Common stock, $.001 par value,
100,000,000 shares authorized,
3,829,949 shares issued
and outstanding, respectively 3,803
Additional paid-in capital 2,130,021
Common stock subscribed 247,136
Unpaid stock subscriptions (293,000)
Stockholders' (deficit) (1,878,384)
Foreign exchange adjustment (6,539)
------------
203,037
------------
$307,647
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 14
Globus Cellular and User Protection Ltd.
Statements of Operations
For the Years Ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, October 31,
1996 1995
<S> <C> <C>
Revenue:
Sales $281,059 $40,980
License of distribution rights 128,485 -
Other income 20,863 1,596
------------ ------------
430,407 42,576
Costs and expenses:
Cost of sales 233,202 22,045
General and administrative 898,939 690,600
Research and development 13,220 24,476
------------ ------------
1,145,361 737,121
------------ ------------
Income (loss) from operations (714,954) (694,545)
Other (expense):
Interest expense (19,191) (5,100)
------------ ------------
(19,191) (5,100)
------------ ------------
Income (loss) before income taxes (734,145) (699,645)
Provision for income taxes - -
------------ ------------
Net income (loss) $(734,145) $(699,645)
============ ============
Earnings (loss) per share:
Net income (loss) $(0.21) $(0.21)
============ ============
Weighted average shares outstanding 3,505,363 3,379,955
============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 15
Globus Cellular and User Protection Ltd.
Statement of Changes in Stockholders' Equity
For the Years Ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
Additional
Common Stock Paid -in
ACTIVITY Shares Amount Capital
<S> <C> <C> <C>
Balance, October 31, 1994 3,201,272 $3,201 $649,133
Cancellation of shares previously
issued for services (492,426) (492) 492
Private sale of shares for cash at $1
May 1995 242,911 243 242,668
June 1995 252,661 253 252,408
September 1995 4,428 4 4,424
Sale of reacquired shares for cash
in September 1995 at $1 1,500 2 1,498
Exercise of $1.50 warrants
in October 1995 22,328 22 33,470
Forgiveness of shareholder debt for
options to purchase common stock - - 272,679
Net (loss) for the year ended
Foreign exchange loss - - -
October 31, 1995 - - -
------------ -------- -------
Balance, October 31, 1995 3,232,674 3,233 1,456,772
Exercise of warrants and options
for cash 117,900 118 102,733
Stock issued for services 419,280 419 558,011
Stock (restricted)issued for
services 33,435 33 12,505
Options exercised by officers
Shares issued for future services
Foreign exchange gain - - -
Net (loss) for the year ended
October 31, 1996 - - -
------------ --------- ---------
Balance, October 31, 1996 3,803,289 $3,803 2,130,021
============ ========= =========
</TABLE>
Globus Cellular and User Protection Ltd.
Statement of Changes in Stockholders' Equity (CONTINUED)
For the Years Ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
Foreign
Stock Accumulated Exchange
ACTIVITY Subscriptions Deficit Adjustment
<S> <C> <C> <C>
Balance, October 31, 1994 $ - $ (444,594) $(736)
Cancellation of shares previously
issued for services - - -
Private sale of shares for cash at $1
May 1995 - - -
June 1995 - - -
September 1995 - - -
Sale of reacquired shares for cash
in September 1995 at $1 - - -
Exercise of $1.50 warrants
in October 1995 - - -
Forgiveness of shareholder debt for
options to purchase common stock - - -
Net (loss) for the year ended
Foreign exchange loss - - (6,723)
October 31, 1995 - (699,645) -
----- ---------- ---------
Balance, October 31, 1995 - (1,144,239) (7,459)
Exercise of warrants and options
for cash - - -
Stock issued for services - - -
Stock (restricted)issued for
services - - -
Options exercised by officers (293,000)
Shares issued for future services 247,136
Foreign exchange gain - - 920
Net (loss) for the year ended
October 31, 1996 - (734,145) -
------- ---------- --------
Balance, October 31, 1996 $(45,864) $(1,878,384 $(6,539)
======== =========== =======
</TABLE>
See accompanying notes to financial statements
<PAGE> 16
Globus Cellular and User Protection Ltd.
Statements of Cash Flows
For the Years Ended October 31, 1996 and 1995
<TABLE>
<CAPTION>
Year Ended Year Ended
October 31, October 31,
1996 1995
<S> <C> <C>
Net income (loss) $(734,145) $(699,645)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 14,515 12,421
Stock and options issued for services 422,324 272,679
Foreign exchange translation adjustment 920 (6,723)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (46,343) (6,008)
(Increase) decrease in inventory 122,366 (31,570)
(Increase) decrease in prepaid expenses (499) 23,815
Increase (Decrease) in accounts payable 18,064 (9,495)
----------- -----------
Total adjustments 531,347 255,119
----------- -----------
Net cash provided by (used in)
operating activities (202,798) (444,526)
---------- -----------
Cash flows from investing activities:
Acquisition of plant and equipment (15,089) (17,528)
Trademark costs (1,804) -
----------- -----------
Net cash provided by (used in)
investing activities (16,893) (17,528)
----------- -----------
Cash flows from financing activities:
Common stock sold for cash 102,851 534,992
Increase in officer loans - 48,513
----------- -----------
Net cash provided by (used in)
financing activities 102,851 583,505
----------- -----------
Increase (decrease) in cash (116,840) 121,451
Cash and cash equivalents,
beginning of period 156,849 35,398
----------- -----------
Cash and cash equivalents,
end of period $40,009 $156,849
=========== ===========
Supplemental cash flow information:
Cash paid for interest $19,191 $ 5,100
Cash paid for income taxes $ - $ -
</TABLE>
See accompanying notes to financial statements.
<PAGE> 17
Globus Cellular and User Protection, Ltd.
Notes to Financial Statements
Note 1. Business and Significant Accounting Policies
Business
The Company manufactures and distributes a cellular telephone
radiation shielding product which universally fits most cellular
phones and distributes other radiation shielding products, X-ray
film and film development products manufactured by others to
customers in the medical and veterinary fields. The Company is
also developing advanced antenna designs that incorporate the
Company's proprietary shielding technology.
The Company has reclassified the presentation of certain prior-
year information to conform to the current year's presentation.
The Company was previously reported upon as a development stage
company.
History and Business Combination
The Company was incorporated in the State of Nevada on June 10,
1987 under the name of Daytona-Pacific Corporation. Thereafter,
on July 31, 1989, the Company filed an Amendment to the Articles
of Incorporation changing its name to Leridges International,
Inc..
On October 17, 1994 as part of the Company's plan of
reorganization and emergence from bankruptcy the Company
purchased the shares of Globus Cellular & User Protection Ltd., a
British Columbia, Canada corporation with 2,880,000 units of its
securities. Globus Cellular & User Protection Ltd. was
incorporated on July 28, 1993. The business combination was
accounted as a recapitalization of Globus whereby it adopted the
capital structure of Leridges. The financial statements
presented reflect the activity of the British Columbia Company.
The Nevada Company had no operations or transactions during these
periods.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, in banks and all
highly liquid investments with a maturity of three months or less
when purchased. Cash equivalents are stated at cost which
approximates market.
Inventories
Inventories are valued at the lower of cost or market. Cost is
determined using the first in, first-out (FIFO) method.
Prepaid Expenses
Prepaid expenses consist primarily of prepayments relating to
advertising and marketing.
Property and Equipment
Property and equipment are carried at cost, net of accumulated
depreciation and amortization. Expenditures for significant
renewals and improvements are capitalized. Repairs and
maintenance are charged to expense as incurred. Depreciation has
been provided using both straight-line and accelerated methods
over the useful lives of the assets, ranging from three to ten
years.
Foreign Currency Translation
The financial statements are presented in United States dollars.
The Company has significant Canadian operations, however United
States dollars are considered its functional currency.
Monetary assets and liabilities are translated into United States
dollars at the balance sheet date rate of exchange and non-
monetary assets and liabilities at historical rates. Revenues
and expenses are translated at appropriate transaction date
rates. Net gains or losses arising on translation are reflected
a separate component of stockholders equity
Loss Per Share
Loss per share for periods presented has been computed using the
weighted average number of shares of common stock outstanding
during the periods presented. Common stock equivalents are
excluded from the computation as their effect would be anti-
dilutive.
Revenue Recognition
Sales are recognized at the time goods are shipped. Revenue from
the sale of license distribution rights is recorded when the
licensee commences product operations.
<PAGE> 18
Advertising Expenses
Advertising expenses are charged to expense upon first showing.
Amounts charged to expense were $83,914 and $32,094 for the
periods ended October 31, 1996 and 1995, respectively.
Income Taxes
Effective July 1, 1993, the Company adopted the provisions of
Financial Accounting Standards Board Statement No. 109 (Statement
No. 109), Accounting for Income Taxes. Statement No. 109 requires
that deferred taxes reflect the tax consequences on future years
of differences between the tax bases of assets and liabilities
and their financial reporting amounts. At the date of adoption
of Statement No. 109, there was no material effect on the
Company's financial statements. Prior to July 1, 1993, the
Company accounted for income taxes using the deferred method. As
of October 31, 1996 the Company has accumulated net operating
losses available to offset future taxable income of approximately
$1,874,000, expiring $70,000 in 2008, $370,000 in 2009, $700,000
in 2010 and $734,000 in 2011. Deferred tax assets, approximately
$635,000, which may arise from the utilization of the operating
losses have been fully reserved as such utilization is not
assured. The deferred tax asset and related reserve applicable
to the 1996 operating loss was approximately $250,000.
Estimates
Management of the Company uses estimates and assumptions in
preparing financial statements in accordance with generally
accepted accounting principles. Those estimates and assumptions
affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported
revenues and expenses. Actual results could vary from the
estimates that management uses.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of cash and
accounts receivable, trade. During the year the Company did not
maintain cash deposits at financial institutions in excess of the
$100,000 limit covered by the Federal Deposit Insurance
Corporation. Additionally, the Company maintains note payable
with one financial institution. The maintenance of a
satisfactory relationship with this institution of significant
import to the Company. The Company currently purchases its X-ray
film developing chemicals from one supplier, however the Company
believes that the chemicals are readily available elsewhere.
Note 2. Inventories
At October 31, 1996 Inventories consists of:
CUP raw materials $ 12,700
X-ray and radiation shielding products 63,616
--------
$ 76,316
Note 3. Property and Equipment
At October 31, 1996 Property and equipment consists of:
<TABLE>
<S> <C>
Building $ 96,844
Machinery and office equipment 32,295
Moldings 27,190
Computer software 2,087
Leasehold improvements 5,877
--------
164,293
Less accumulated depreciation 34,217
--------
$130,076
</TABLE>
Depreciation charged to expense was $14,515 and $12,421 for the
periods ended October 31, 1996 and 1995, respectively.
Note 4. Commitments and Contingencies
The Company has an agreement with Dr. Paul F. Bickert (its
founder, product inventor, President and General Manager,
Director and major stockholder) to pay Dr. Bickert lease of
technology payments of $10,000 (US) monthly. This agreement
expires in 2002, with an option to renew. Total payments
required under this lease are as follows:
<TABLE>
<S> <C>
1997 120,000
1998 120,000
1999 120,000
2000 120,000
2001 120,000
--------
$600,000
</TABLE>
<PAGE> 19
The Company entered into an employment contracts with two of its
officers. The agreements cover the year ended October 31, 1996
and provide for payments aggregating of $10,000 per month. The
agreements are expected to continue in force until terminated by
either party.
In 1996, the Company has entered into an operating lease for
additional office and warehouse space adjacent to its existing
facility. This lease is paid on a month-to-month basis. The
leased space is owned by an officer of the Company and monthly
rental payments are considered to be at competitive market rates.
Rent expense amounted to $4,418 and $514 for the periods ended
October 31, 1996 and 1995.
Notes 5. Related Party Transactions
The President and General Manager of the Company, Dr. Paul
Bickert is the inventor of the Company's major product and is the
founder of the Company. Dr. Bickert and his wife jointly are the
Company's largest stockholder.
The Company has an exclusive eight year lease on the cellular
phone user protection technology from Dr. Bickert. The Company
possesses the exclusive right to sublease or sell this technology
to others. See Note 5. During the periods ended October 31, 1996
and 1995, the Company paid $18,800 and $19,088 respectively to
patent attorneys for services in connection with patent
applications filed in behalf of Dr. Bickert for the above
mentioned technology. The sum of these amounts have been applied
to reduce unpaid technology lease obligations due Dr. Bickert.
The vice president and production manager, Mr. Bernie Penner and
his wife jointly are the Company's second largest stockholder.
During 1996 and 1995 the Company paid $1,694 and $3,024
respectively, to a company controlled by Mr. Penner for
improvements to the Company's plant. The Company believes that
such amounts are not in excess of their fair market value.
Additionally, rent in the amount of $3,110 was paid to Mr. Penner
in 1996 for office and warehouse space in connection with the
lease described in Note 4.
Dr. Bickert and Mr. Penner had loans to the Company for cash
advances and unpaid salary and technology lease payments totaling
$244,636 and $102,780 at October 31, 1996 and 1995 respectively.
These are demand notes and interest is being accrued at 8.75% per
year. Subsequent to October 31, 1996 these individuals agreed to
waive payment of the total amounts due in exchange for the
exercise of common stock options previously granted to them at an
exercise price of $.225 per share.
Note 6. Company Facilities and Related Mortgage
On November 17, 1993 the Company purchased its warehousing and
office facilities in Kelowna, British Columbia. The facilities
consist of a wood framed warehouse unit with front office space
and rear warehouse space for manufacturing, packaging and
distribution.
The purchase price of this facility was $118,000 (Canadian),
($92,286 US) it is subject to a mortgage with a balance of
$82,600 (Canadian) ($61,169 US) at October 31, 1996. This
mortgage, held by a financial institution, is an interest only
open mortgage with a variable rate of Canadian prime plus one
percent. This mortgage has no fixed maturity date, but is payable
on demand. The Company's two principal officers have personally
guaranteed this mortgage.
Note 7. Stockholders Equity
During the periods covered by these financial statements the
Company issued shares of common stock without registration under
the Securities Act of 1933. Although the Company believes that
the sales did not involve a public offering of its securities and
that the Company did comply with the safe harbor exemptions
from registration under section 4(2), it could be liable for
rescission of the sales if such exemptions were found not to
apply.
During May 1995 the Company began offering shares of its common
stock at $1.00 per share pursuant to a private placement.
Pursuant to this private placement the Company issued 500,000
shares of common stock for cash aggregating $500,000. The
private placement was a unit offering consisting of one share of
restricted common stock, one A warrant and one B warrant to
<PAGE> 20
purchase additional shares at the rate of one share for each
warrant exercised. The A warrants are exercisable at $1.50 per
share for a period of one year and the B warrants are exercisable
at $2.00 per share for a period of two years.
During October 1995, the Company issued 22,328 shares for the
exercise of warrants and realized cash proceeds of $33,492.
During September 1995 the Company sold 1,500 shares of common
stock that had been reacquired for $1,500 in cash.
During November 1995, certain officers agreed to contribute
$272,679 in unpaid salaries and technology lease payments to the
capital of the Company in exchange for options to purchase
1,652,600 shares of restricted common stock. The options are
transferable, are exercisable at $.225 per share and expire on
October 31, 2000. The fair market value of the restricted common
stock at the date of the grant was $.265 per share
During the year ended October 31, 1996, the Company issued
419,280 shares of its common stock, registered under Form S-8, to
entities providing consulting services to the Company. The stock
was valued at the market value on the date such shares were
authorized to be issued by the Board of Directors. A portion of
these shares were issued pursuant to a service contract which
provides for services to be rendered to the Company in the
future. The value ascribed to these services ($293,000) has been
recorded as an unpaid subscription of common stock.
Also, the Company issued 33,435 shares of restricted common stock
for services rendered to the Company. These shares were valued
at 50% of the market price on the date such shares were
authorized to be issued by the Board of Directors.
Additionally, the Company issued 117,900 shares of restricted
common stock for the exercise of warrants and options related
thereto for cash aggregating $102,851.
No dividends have been declared since the inception of the
Company nor does the Company anticipate that dividends will be
declared in the ensuing fiscal year.
Note 8. Major Customer
The Company made sales in excess of 10% of its gross revenues for
the year ended October 31, 1996 to one customer located in Saudi
Arabia. The sale consisted of substantially all of the Company's
inventory of CUP product and accounted for 39% of the Company's
total revenue. Sales to this customer are not expected to
continue, however, the Company expects that sales by distributors
established in 1996 will offset the loss of this customer.
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this Report to
be signed on its behalf by the undersigned duly authorized person.
Date: FEBRUARY 6, 1997 Globus Cellular and User Protection, Ltd.
/s/ Dr. Paul Bickert
------------------------------------
By: Dr. Paul Bickert, President
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf
of the Company and in the capacities and on the dates indicated.
/s/ Dr. Paul Bickert 2/6/97
- ------------------------------ Date:
Dr. Paul Bickert
President and Director
(Principal Executive, Financial and Accounting)
/s/ Bernard D. Penner 2/6/97
- ------------------------------ Date:
Bernard D. Penner
Secretary/Treasurer and Director
/s/ Ronald L. Armstrong 2/6/97
- ------------------------------ Date:
Ronald L. Armstrong
Director
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 40,009
<SECURITIES> 0
<RECEIVABLES> 10,525
<ALLOWANCES> 0
<INVENTORY> 76,316
<CURRENT-ASSETS> 175,767
<PP&E> 130,076
<DEPRECIATION> 0
<TOTAL-ASSETS> 307,647
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<COMMON> 3,803
0
0
<OTHER-SE> 199,234
<TOTAL-LIABILITY-AND-EQUITY> 307,647
<SALES> 281,059
<TOTAL-REVENUES> 430,407
<CGS> 233,202
<TOTAL-COSTS> 1,145,361
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,191
<INCOME-PRETAX> (734,145)
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