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: 10/31/98
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, LTD.
(FORMERLY GLOBUS CELLULAR & USE PROTECTION, LTD.
And 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 were $0.00. As of
October 31, 1998, the market value of the Company's voting $.00l par value
common stock held by non-affiliates of the Company was $1,465,569.
The number of shares outstanding of Company's only class of common stock, as
of October 31,1998 was 6,744,711 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
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<PAGE> 2
PART I
ITEM 1. BUSINESS - General
Globus Cellular, Ltd. ("Company"), formerly Globus Cellular & User
Protection, Ltd. and 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. In August, 1997, the Company changed its name to Globus Cellular, Ltd.
Employees
The Company has five full-time employees.
Competition
The Company is not aware of any direct competition to its cellular Mega
RangeTM Reduced radiation antenna technology with its patents pending. The
Mega RangeTM antenna is a refractive radiation reducing plastics product.
The Company also has a x-ray products division selling to private clinics.
There are competitors to this product. Any competition with
similarproducts, if any, would be on the basis of price and quality of the
products.
Principal Product
The Company is currently 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 RangeTM 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 the Company the exclusive worldwide rights to use the technology and
proprietary knowledge to develop, produce, manufacture, use, sell or
otherwise commercially exploit th 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. In the last year, 2002, Dr. Bickert shall receive
$40,000.
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
<PAGE>3
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.
During May 1997, the Company entered into a royalty agreement whereby Dr.
Bickert is to receive a 4% royalty fee on gross receipts from the sale of
products incorporating newly developed technology for a high performance
antenna for a portable communication device. 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.
Marketing/Advertising
There are over Fifty Million (50,000,000) 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. 1998.
Manufacturing
The Company is currently not manufacturing its Mega RangeTM antenna product
while it is seeking international patent protection. The Company intends to
commence manufacturing in May 1999.
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, the Company has expended approximately $265,905 (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
The 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 $2,430.00 (Cdn.) annually for $2,000,000 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 that
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 this facility was $118,000 (Canadian), ($92,286 US). During 1997, the
Company sold its interest the building used for its office and warehouse
activities to its president. The Company recorded a gain from the
transaction of $5,604. Corresponding reductions of mortgage indebtedness of
$60,960 and amounts due its president of $33,205 were recorded in connection
with the transaction. The Company leases the facility from its president at
$1,217 per month.
In 1996, the Company 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
<PAGE>4
Company and monthly rental payments are considered to be at competitive
market rates. As of January 1, 1999, this lease was canceled. The Company
moved into a new 7,000 square foot facility at 1955 Moss Court, Kelowna, B.C.
ITEM 3. LEGAL PROCEEDINGS.
A successor company to Idex, 2834332 Canada Inc., has filed an action in the
Supreme Court of the State of New York claiming that the Company has
fraudulently misrepresented that it was the worldwide licensee or holder of
worldwide rights to distribute its X-ray developing technology belonging to
Idex. The claim seeks the return of $200,000 of distribution rights income
plus interest and unspecified punitive damages. The Company believes that it
has meritorious defense to the action and that the New York court lacks
jurisdiction to hear the matter. The Company is unable to predict the
outcome of the case nor estimate the range of possible loss.
The Company knows of no other 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 third quarter of the fiscal year ended October 31, 1998, the
following matters were submitted to a vote of the Company's security holders,
through the solicitation of proxies.
1. Election of Directors
2. Approval of Winter, Scheifley & Associates, P.C. as Independent
Certified Accountants for fiscal year ending October 31, 1998.
<PAGE>5
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 ACAP Financial, M.H. Meyerson & Co.,
Inc. and Vantage Point Capital (Canada). 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>
1/31/97 .88 .81
4/30/97 .56 .50
7/30/97 .719 .625
10/31/97 1.406 1.313
1/31/98 .656 .656
4/30/98 .531 .500
7/30/98 .375 .375
10/31/98 .250 .250
</TABLE>
The approximate number of holders of record of the Company's $.001 par value
common stock, as of October 31, 1998, was 232. Currently, as of February
20, 1999, 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 that 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 acquisition of the assets of Globus Cellular & User Protection
Ltd., a Canadian corporation, 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"), that
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, 1998, the Company issued 156,343 shares of
its common stock pursuant to the exercise of warrants for cash aggregating
$47,951. Also, 72,500 Common Shares were sold for cash of $50,949 in
November 1997 in connection with the private placement that was begun in
1997.
Additionally during 1998, the Company issued an aggregate of 310,055 Common
Shares to individuals or entities that had provided goods or services to the
Company during the year. The aggregate value of the goods and services
provided to the Company was $264,967.
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.
As of October 31, 1998, the Company had outstanding options to purchase and
aggregate of 1,139,570 shares of its common stock by officers and directors
at an exercise price of $.165. The options were granted during the years
ended October 31, 1995 and 1996. Additionally, the Company had 746,157
outstanding A warrants to purchase common stock at an exercise price of $.875
per share issued in connection with the private placement and 156,313 B
warrants exercisable at $.53 per share issued in connection with the exercise
of the A warrants.
<PAGE>6
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 for the technology utilized in the Company's
products. This agreement expires in 2002, with an option to renew. Total
payments required under this lease are as follows:
1999 $120,000
2000 120,000
2001 120,000
2002 40,000
- ---------
$400,000
During May 1997, the Company entered into a royalty agreement whereby Dr.
Bickert is to receive a 4% royalty fee on gross receipts from the sale of
products incorporating newly developed technology for a high performance
antenna for a portable communication device.
The Company entered into an employment contract with an officer. The
agreement covers the year ended October 31, 1998 and provides for payments
aggregating $7,500 per month. The agreement is expected to continue in
force until terminated by either party.
Discontinued operation. On November 20, 1998, the Company entered into an
agreement to sell the exclusive rights to distribute its line of X-ray
products in Canada. In connection with the agreement, the Company agreed to
cease the operation of its X-ray products division effective on the purchase
date. The purchase price for the transaction is $38,830 and is payable in
59 equal monthly installments of $762 including interest at 6.75 per annum.
The agreement includes provisions for maintaining sales levels during a two-
year period subsequent to the purchase date and for failure to make the
required installment payments that could cause the agreement to terminate.
Should the agreement terminate, the Company would regain all rights
transferred to the purchaser.
The net assets of the X-ray division at October 31, 1998 consist of the
following:
Accounts receivable $ 1,599
Inventory 57,291
Accounts payable (4,791)
-------
$54,099
The purchase agreement includes provisions whereby the purchaser will act as
the Company's agent in the liquidation of remaining division inventory and
the value of such inventory has been reduced to give effect to a 25%
commission to be earned by the purchaser upon sale o the inventory.
For the two years ended October 31, 1998 the operating results of the X-ray
division were as follows:
1998 1997
Revenues $66,384 $95,372
Cost of sales 27,435 67,571
Administrative 23,356 35,089
-------- -------
Gain (loss) from division $15,593 $(7,288)
Additionally, the Company shall pursue a registration of its Common Shares
and Class A and B 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 $41,193. This resulted
in net cash used in investing activities of $41,193. 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
The Company acquired plant and equipment valued at $3,595 for the year ended
October 31, 1997. The Company expended $22,944 on trademark costs. The
Company received proceeds from the sale of fixed assets of $45,400 for the
year ended October 31, 1997. This resulted in net cash provided by
<PAGE>7
investing activities of $18,861 for the year ended October 31, 1997. 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 received $98,900 from the sale of its common stock for the year
ended October 31,1998. The Company repaid $142 of notes payable and received
cash advances from an officer of $2,714 for the year ended October 31, 1998.
The Company repaid $167,221 in officer loans resulting in net cash used in
financing activities of $65,749 for the year ended October 31, 1998.
The Company received $502,898 from the sale of its common stock for the year
ended October 31,1997. The Company received cash advances from an officer of
$68,000 for the year ended October 31, 1998. The Company repaid $18,180 in
officer loans resulting in net cash provided by financing activities of
$552,718 for the year ended October 31, 1997.
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, the Company's product is new in the
market and there are no assurances it can be marketed successfully and/or
profitably.
The management of the Company is led by Dr. Paul F. Bickert, Dr. Ronald
Armstrong and Jerome W. Cwiertnia. 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.
Results of Operations.
1998 compared to 1997
The Company experienced a net loss from operating activities of $737,836 for
the year ended October 31, 1998. The Company did not receive any sales
revenue for the years ended 1998 and 1997. Selling, general and
administrative expenses decreased to $687,003 for the year ended October 31,
1998 compared to $821,455 for the same period in 1997 due to accounting fees
of $22,420, advertising of $679, consulting of $216,764, legal of $43,535,
management contract payments of $90,000, technology lease expense of
$120,000, travel of $17,576, rent of 10,669, wages of 50,237.09 and
miscellaneous office expenses of $115,123. Research and development
expenses decreased from $78,789 for the year ended October 31, 1997 to
$67,685 for the same period in 1998 due to the stage of development of the
antenna product.
The Company issued stock options for officer services of $150,630 for the
year ended October 31, 1998. Depreciation for the year ended October 31,
1998 was $16,446. The Company had amortization of unpaid stock subscriptions
of $97,276. The Company had a loss on the sale of fixed assets of $4,520.
Additionally, the Company converted salary and license costs to officer loans
of $210,000 for the year ended October 31, 1998. For the year ended
October 31, 1998, the Company experienced a decrease in accounts receivable
of $90,512, a increase in inventory of $2,548 due to decreased sales, a
decrease in prepaid expenses of $646 and a decrease in accounts payable of
$7,033, all due to decreased operations. Additionally, the Company had a
decrease in net assets of discontinued operation of $3,623 for the year ended
October 31, 1998. Foreign exchange translation adjustment was $(36,756) for
the year ended October 31, 1998. These items resulted in net cash used in
operating activities of $210,519 for the year ended October 31, 1998.
The Company experienced a net loss from operating activities of $884,335 for
the year ended October 31, 1997. The Company received no sales revenues in
1997. Selling, general and administrative expenses decreased slightly to
$821,455 for the year ended October 31, 1997 compared to $898,939 for the
same period in 1996 due to accounting fees of $22,610, advertising of $9,125,
consulting of $403,177, legal of $26,031, management contract payments of
$92,858, technology lease expense of $120,000, travel of $25,386 and
miscellaneous office expenses of $122,268. Research and development
expenses increased from $13,220 for the year ended October 31, 1996 to
$78,789 for the same period in 1997 due to the stage of development of the
antenna product.
The Company issued stock options for officer services of $366,217 for the
year ended October 31, 1997. Depreciation for the year ended October 31,
1997 was $9,496. The Company had a gain on the sale of fixed assets of
$11,255. Additionally, the Company converted salary and license costs to
<PAGE>8
officer loans of $107,805 for the year ended October 31, 1997. For the
year ended October 31, 1997, the Company experienced an increase in accounts
receivable of $85,549, a decrease in inventory of $12,700 due to decreased
sales, a decrease in prepaid expenses of $712 and a decrease in accounts
payable of $6,846, all due to decreased operations. Foreign exchange
translation adjustment was $(8,788) for the year ended October 31, 1997.
These items resulted in net cash used in operating activities of $262,454 for
the year ended October 31, 1997.
1997 compared to 1996
The Company experienced a net loss from operating activities of $884,335 for
the year ended October 31, 1997. Total sales decreased from $281,059 for
the year ended October 31, 1996 to $0.00 for the year ended October 31, 1997
due to the one time sale of C.U.P. product in 1996 and distributorship sales
in 1996 that did not occur in 1997. However, cost of sales decreased from
$233,202 to $0.00 for those same periods respectively. Selling, general and
administrative expenses decreased slightly to $856,545 for the year ended
October 31, 1997 compared to $898,939 for the same period in 1996 due to
accounting fees of $22,610, advertising of $9,125, consulting of $403,177,
legal of $26,031, management contract payments of $92,858, technology lease
expense of $120,000, travel of $25,386 and miscellaneous office expenses of
$157,341. Research and development expenses increased from $13,220 for the
year ended October 31, 1996 to $78,789 for the same period in 1997 due to the
stage of development of the antenna product.
The Company issued stock options for officer services of $366,217 for the
year ended October 31, 1997. Depreciation for the year ended October 31,
1997 was $9,496. The Company had a gain on the sale of fixed assets of
$11,255. Additionally, the Company converted salary and license costs to
officer loans of $107,805 for the year ended October 31, 1997. For the
year ended October 31, 1997, the Company experienced an increase in accounts
receivable of $42,089, a decrease in inventory of $14,342 due to decreased
sales, and decrease in prepaid expenses of $712 and a decrease in accounts
payable of $10,284, all due to decreased operations. Foreign exchange
translation adjustment was $(8,788) for the year ended October 31, 1997.
These items resulting in net cash used in operating activities of $262,454
for the year ended October 31, 1997.
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 14.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have not been any changes in or disagreements with accountants on
accounting and financial disclosure.
<PAGE>9
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 53 President, Director and
3200 Watt Road Chairman of the Board
Kelowna, B.C., V1Y4R5
Jerome W. Cwiertnia, 57 Director
17 Montecito Drive
Corona del Mar, CA 92625
Ronald L. Armstrong 67 Director
1005-16 Ave. N.W.
Calgary, Alberta T2M0K7
Lynda Newitt
1103 Trevor Drive
Kelowna, B.C. V12 2J9 48 Secretary/Director
Nick Wizinsky
1160 Trevor Drive
Kelowna, B.C. V12 2K2 40 Director
</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 the
Company.
Jerome W. Cwiertnia - Mr. Cwiertnia was Executive V. P., Chief Financial
Officer and Director from 1979 to 1989, President, Chief Operating Officer
and Director in 1990 and Chief Executive Officer, President and Director from
1991 to 1995 for National Education Corporation. Mr. Cwiertnia retired in
May 1995. Mr. Cwiertnia graduated in 1963 from Northern Illinois University
and is a Certified Public Accountant.
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 the
Company.
Lynda Newitt. Ms. Newitt was office manager and executive assistant since
late 1993 to late 1998. In the fourth quarter of 1998, Ms Newitt became
Secretary/Treasurer of the Company and was appoint to the position of
Investor Relations manager. She is responsible for all aspects of investor
relations and corporate communications. Ms. Newitt graduated from Business
College in Saskatoon, Saskatchewan in 1971.
<PAGE>10
Nick Wizinsky. Mr. Wizinsky was Chief Operations Officer from April 1997 to
December 1998. Mr. Wizinsky has served as a Director of the Company from
April 1997 to present. From 1994 to 1997, Mr. Wizinski was self employed as
a business management consultant. From 1986 to 1993, Mr. Wizinsk worked in
various positions for FCSAL. Mr. Wizinski attended pre-commerce studies at
Camosun College from 1980-1981. Mr. Wizinski obtained a Bachelor of Commerce
degree from the University of British Columbia in 1985.
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 1998, 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 April 1, 1997, the Board of Directors approved the issuance of 842,825
restricted shares of the Company to Dr. Paul F. Bickert as compensation for
salary, Lease of Technology payments and interest owing for 1995 and 1996 and
255,555.56 restricted shares of the Company be issued to Bernie D. Penner for
compensation for salary owing during 1995 and 1996.
On April 2, 1997, the Board of Directors approved the issuance of 333,333
restricted shares of the Company ($.225 per share) to Dr. Paul F. Bickert as
compensation for the period November 1, 1996 to January 31, 1997 and February
1, 1997 to April 30, 1997.
The Company entered into an employment contract with an officer. The
agreement covers the year ended October 31, 1998 and provides for payments
aggregating $7,500 per month. The agreement is expected to continue in
force until terminated by either party.
Except as discussed above, 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. Members of
the Board of Directors are to receive an honorarium of $7,500 US per year,
payable in stock of the Company at 85% of 1/2 of market bid. To date, no
remuneration of any kind has been paid and the first such remuneration is not
scheduled until April, 1999.
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
Title of Beneficial % of
Name and Address Class Ownership Class
<S> <C> <C> <C>
Dr. Paul F. Bickert Common 467,457 Direct 6.93%%
3200 Watt Road 176,676 Indirect <F1> 2.62%
Kelowna, B.C., Canada
V1W 3C8
<PAGE>11
Jerome W. Cwiertnia Common 52,129 .77%
17 Montecito Drive
Corona del Mar, CA 92625
Dr. Ronald L. Armstrong Common 31,966 Direct .47%
1005 - 16th Ave., N.W. 47,588 Indirect <F2> .71%
Calgary, Alberta, Canada
T2M 3X8
CEDE & Co. Common 3,335,493 49.45%
P.O. Box 222
Bowling Green Station
New York, NY
TD Securities, Inc. Common 1,274,767 18.90%
585 Nuddkefuekd Rd., Unit 33
Scarborough, ON M4X 1J9
The Canadian Depository for Securities Ltd./
Control Account Common 586,167 8.90%
2020 University St., Ste. 1620
Montreal, PQ H3A 2L4
L.J. Newitt Common 47,347 Direct .70%
1103 Trevor Drive 9,275 Indirect <F3> .14%
Kelowna, B.C. V1Z 2J9
Nick Wizinsky Common 30,000 .44%
1160 Trevor Drive
Kelowna, B.C. V1Z 2K2
All officers and
directors as a Group Common 628,899 Direct 9.32%
233,539 Indirect 3.46%
<FN>
<F1> 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.
<F2> 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.
<F3> These shares are held in the name of Gordon Newitt, husband of Ms.
Newitt.
</FN>
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.
As of October 31, 1998, there were 1,139,570 options to purchase Common
Shares of the Company. The options are held by current and past officers
and directors as follows:
</TABLE>
<TABLE>
<CAPTION>
Name # of Options %
<S> <C> <C>
Dr. Paul F. Bickert 751,087 55.46%
(President & CEO
Dr. Ronald Armstrong
(Vice President & Director) 12,121 .90%
Jerome W. Cwiertina
(Director) 0 0.00%
Bernie Penner
(Past VP & Director 590,909 43.64
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED 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
<PAGE>12
periods ended October 31, 1996, the Company paid $18,800 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.
Effective November 1, 1996, the Company assumed the responsibility of
maintaining the patents and bears the cost of filing them in other
jurisdictions. The amounts capitalized in connection with extending the
patents to additional jurisdictions during the year ended October 31, 1998
and 1997 were $12,200 and $42,236, respectively, and amortization thereof for
the years ended October 31, 1998 and 1997, based on the remaining term of the
license agreement with Dr. Bickert, amounted to $14,630 and $10,559
respectively.
Dr. Bickert had demand loans to the Company for cash advances and unpaid
salary and technology lease payments totaling $382,995 and $157,625 at
October 31, 1998 and 1997, respectively.
During the year ended October 31, 1998, the Company received cash advances
from Dr. Bickert amounting to $2,714 and repaid advances in the amount of
$167,221. Additionally, the Company cancelled 755,000 shares of common
stock that had been authorized by the Company and issued by its transfer
agent in prior years as repayment of amounts due Dr. Bickert. The shares
returned had a fair value of $169, 875 and such amount has been added to the
officer loan account. The loan account was also increased by $210,000
during 1998 due to technology lease and salary payments due to Dr. Bickert.
During the year ended October 31, 1997, the Company received cash advances
from Dr. Bickert amounting to $58,000 and repaid advances in the amount of
$18,180. Additionally, the office paid $17,305 of legal expenses in favor
of the Company. Salary and technology lease payments added to the loan
balance amounted to $100,500 for the year ended October 31, 1997.
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.................................14
Balance Sheet........................................................ 15
Statement of Operations...............................................16
Statement of Stockholder's Equity................ ....................17
Statement of Cash Flows...............................................18
Notes to Financial Statements.........................................19-25
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
<PAGE>13
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
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
None
<PAGE>14
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Globus Cellular Ltd.
We have audited the accompanying balance sheet of Globus Cellular
Ltd. as of October 31, 1998, and the related statements of
operations, stockholders' equity, and cash flows for the years
ended October 31, 1998 and 1997. 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 Ltd. as of October 31, 1998, and the results
of its operations, and its cash flows for the years ended October
31, 1998 and 1997, in conformity with generally accepted
accounting principles.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
December 18, 1998
(Except for Note 7. for which
the date id February 18, 1999)
<PAGE>15
Globus Cellular Ltd.
Balance Sheet
October 31, 1998
ASSETS
Current assets:
Cash $ 31,673
Accounts receivable, other 5,562
Inventories 2,548
Prepaid expenses 1,826
Net assets of discontinued operation 54,099
-----------
Total current assets 95,706
Property and equipment, at cost, less
accumulated depreciation of $50,981 53,025
Other assets 24,989
-----------
$ 173,720
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 19,599
Note payable 1,890
Loans from stockholder 372,855
-----------
Total current liabilities 394,343
Stockholders' equity:
Preferred stock, $.001 par value,
20,000,000 shares authorized, -
Common stock, $.001 par value,
100,000,000 shares authorized,
6,744,711 shares issued and
outstanding 6,745
Additional paid-in capital 3,325,270
Foreign exchange adjustment (52,084)
(Deficit) (3,500,554)
-----------
(220,623)
-----------
$ 173,720
===========
See accompanying notes to financial statements.
<PAGE>16
Globus Cellular Ltd.
Statements of Operations
Years Ended October 31, 1998 and 1997
</TABLE>
<TABLE>
<S> <C> <C>
1998 1997
Revenue: -------- --------
Sales $ - $ -
Other income 10,129 27,700
----------- -----------
10,129 27,700
Other costs and expenses:
General and administrative 687,003 821,455
Research and development 67,685 78,789
----------- -----------
754,689 900,244
----------- -----------
Income (loss) from continuing operations (744,560) (872,544)
Other income and (expense):
Interest expense (8,868) (4,503)
----------- -----------
(8,868) (4,503)
----------- -----------
Income (loss) from continuing operations
before income taxes (753,428) (877,047)
Provision for income taxes 2,340 -
----------- -----------
Income (loss) from continuing operations (751,088) (877,047)
Income (loss) from discontinued operation
net of income taxes of $2,340 13,252 (7,288)
----------- -----------
Net income (loss) $ (737,836) $ (884,335)
=========== ===========
Basic earnings (loss) per share:
Net income (loss) from continuing operations $ (0.10) $ (0.17)
Net income (loss) from discontinued operation 0.01 (0.00)
--------- ----------
$ (0.09) $ (0.17)
========= ==========
Weighted average shares outstanding 7,224,437 5,060,809
========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>17
Globus Cellular Ltd.
Statement of Changes in Stockholders' Equity
For the Periods Indicated
<TABLE>
<CAPTION>
Additional Foreign
Common Stock Paid -in Stock Accumulated Exchange
ACTIVITY Shares Amount Capital Subscriptions Deficit Adjustment
<S> <C> <C> <C> <C> <C> <C>
Balance, October 31, 1996 3,803,289 $ 3,803 $ 2,130,021 $ (45,864) $ (1,878,383) $(6,539)
Exercise of warrants and options
for cash 385,963 386 64,301
Stock issued for services 472,393 472 264,495
Stock sold for cash by private
Placement 830,000 830 477,250
Expenses of offering (39,869)
Shares issued for future services (24,000)
Issuance of subscribed shares 1,469,168 1,469 346,917 (247,136)
Amortization of unpaid subscriptions - - 219,724
Foreign exchange (l) (8,788)
Net (loss) for the year ended
October 31, 1997 - - (884,335)
--------- -------- --------- --------- ---------- --------
Balance, October 31, 1997 6,960,813 6,960 3,243,115 (97,276) (2,762,718) (15,327)
Exercise of warrants and options
for cash 156,343 157 47,794
Stock issued for services or
equipment 310,055 310 152,605
Stock sold for cash by private
placement 72,500 73 50,876
Shares returned by officer (755,000) (755) (169,120)
Amortization of unpaid subscriptions 97,276
Foreign exchange (loss) (36,757)
Net (loss) for the year ended
October 31, 1998 (737,836)
--------- -------- ----------- ------------ --------- ---------
Balance, October 31, 1998 6,744,711 $ 6,745 $ 3,325,270 $ - $(3,500,554) $(52,084)
</TABLE>
See accompanying notes to financial statements.
<PAGE>18
Globus Cellular Ltd.
Statements of Cash Flows
Years Ended October 31, 1998 and 1997
<TABLE>
<S> <C> <C>
1998 1997
-------- --------
Net income (loss) $ (737,836) $ (884,335)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 16,446 9,496
Stock and options issued for services 150,630 366,217
(Gain) loss on disposition of fixed assets 4,520 (11,255)
Salary and license costs converted
to officer loans 210,000 107,805
Amortization of unpaid stock subscriptions 97,276 195,724
Foreign exchange translation adjustment (36,756) (8,788)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 90,512 (85,549
(Increase) decrease in inventory (2,548) 12,700
(Increase) decrease in net assets of
discontinued operation 3,623 41,664
(Increase) decrease in prepaid expenses 646 712
Increase (Decrease) in accounts payable (7,033) (6,846)
---------- ---------
Total adjustments 527,316 621,880
---------- ---------
Net cash provided by (used in)
operating activities (210,519) (262,454)
---------- ---------
Cash flows from investing activities:
Purchase of equipment (41,193) (3,595)
Proceeds from sale of fixed assets - 45,400
Trademark costs - (22,944)
---------- ---------
Net cash provided by (used in)
financing activities (41,193) 18,861
Cash flows from financing activities:
Common stock sold for cash 98,900 502,898
Repayment of notes payable (142) -
Cash advances from officer 2,714 68,000
Repayment of officer loans (167,221) (18,180)
--------- ---------
Net cash provided by (used in)
financing activities (65,749) 552,718
--------- ---------
Increase (decrease) in cash (317,461) 309,124
Cash and cash equivalents,
beginning of period 349,133 40,009
--------- ---------
Cash and cash equivalents,
end of period $ 31,673 $ 349,133
========= =========
Supplemental cash flow information:
Cash paid for interest $ 8,868 $ 4,503
Cash paid for income taxes $ - $ -
Non-cash investing and financing activities:
Equipment finaqnced by note payable $ 1,984 $ -
Abandonment of leasehold improvements $ 4,518 $ -
Return of common stock by officer $169,875 $ -
</TABLE>
See accompanying notes to financial statements.
<PAGE>19
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. Subsequent to
October 31, 1998, the Company disposed of the net assets and
operations of its X-ray products division. The Company is also
developing advanced antenna designs that incorporate the
Company's proprietary shielding technology. Prior to 1997, the
Company was known as Globus Cellular and User Protection Ltd.
The Company was incorporated in the State of Nevada on June 10,
1987.
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, which consist primarily of finished goods, 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. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets. When assets are retired or otherwise disposed of, the cost
and the related accumulated depreciation are removed from the
accounts, and any resulting gain or loss is recognized in operations
for the period. The cost of repairs and maintenance is charged to
operations as incurred and significant renewals or betterments are
capitalized. 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
In February 1997, the Financial Accounting Standards Board
("FASB") issued SFAS No. 128, "Earnings Per Share." SFAS No. 128
supersedes and simplifies the existing computational guidelines
under Accounting Principles Board ("APB") Opinion No. 15,
"Earnings Per Share." The statement is effective for financial
statements issued for periods ending after December 15, 1997.
Among other changes, SFAS No. 128 eliminates the presentation of
primary earnings per share and replaces it with basic earnings
per share for which common stock equivalents are not considered
in the computation. It also revises the computation of diluted
earnings per share. The Company has adopted SFAS No. 128 and
there is no material impact to the Company's earnings per share,
financial condition, or results of operations. The Company's
earnings per share have been restated for all periods presented
to be consistent with SFAS No. 128.
<PAGE>20
Basic 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.
Advertising Expenses
Advertising expenses are charged to expense upon first showing.
Amounts charged to expense were $679 and $9,125 for the periods
ended October 31, 1998 and 1997, 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, 1998 the Company has accumulated net operating
losses available to offset future taxable income of approximately
$3,500,000, expiring $72,000 in 2008, $370,000 in 2009, $700,000
in 2010, $734,000 in 2011, $884,000 in 2012 and $740,000 in 2013.
Deferred tax assets, approximately $1,190,000, which may arise
from the utilization of the operating losses have been fully
reserved as such utilization is not assured. The increase in the
deferred tax asset and related reserve applicable to the 1998
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.
Fair value of financial instruments
The Company's short-term financial instruments consist of cash and
cash equivalents, accounts and loans receivable, and accounts payable
and accruals. The carrying amounts of these financial instruments
approximates fair value because of their short-term maturities.
Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of cash and accounts
receivable, trade. The Company currently purchases its X-ray film
developing chemicals from one supplier, however the Company
believes that the chemicals are readily available elsewhere.
Stock-based Compensation
The Company adopted Statement of Financial Accounting Standard
No. 123 (FAS 123), Accounting for Stock-Based Compensation
beginning with the Company's first quarter of 1996. Upon
adoption of FAS 123, the Company continued to measure
compensation expense for its stock-based employee compensation
plans using the intrinsic value method prescribed by APB No. 25,
Accounting for Stock Issued to Employees, and has provided in
Note 6 pro forma disclosures of the effect on net income and
earnings per share as if the fair value-based method prescribed
by FAS 123 had been applied in measuring compensation expense.
New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income", establishes
guidelines for all items that are to be recognized under
accounting standards as components of comprehensive income to be
reported in the financial statements. The statement is effective
for all periods beginning after December 15, 1997 and
reclassification of financial statements of financial statements
for earlier periods will be required for comparative purposes. To
date, the Company has engaged in transactions which would result
<PAGE>21
in any significant difference between its reported net loss and
comprehensive net loss as defined in the statement. The Company's
accounting for foreign currency translation adjustments may be
affected by SFAS No. 130.
In April 1998, the American Institute of Certified Public
Accountants issued Statement of Position ("SOP") 98-5, "Reporting
on the Cost of Start-up Activities". This SOP requires that the
cost of start-up activities, or one-time activities that relate to
the opening of a new facility and organizational cost be expensed
as incurred instead of being capitalized. This SOP must be
implemented by no later than the first quarter of 1999 at which
time the write-off of any unamortized pre-opening costs or
organization cost will be reported as a cumulative effect of a
change in accounting principle in the statement of operations.
Note 2. Property and Equipment
At October 31, 1998 Property and equipment consists of:
Machinery and office equipment $ 39,995
Moldings 27,190
Computer software 2,087
Research and development equipment 34,734
--------
104,006
Less accumulated depreciation 50,981
--------
$ 53,025
Depreciation charged to expense was $16,687 and $9,496 for the
years ended October 31, 1998 and 1997, respectively.
Note 3. 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 for the technology
utilized in the Company's products. This agreement expires in
2002, with an option to renew. Total payments required under
this lease are as follows:
1999 $120,000
2000 120,000
2001 120,000
2002 40,000
--------
$400,000
During May 1997, the Company entered into a royalty agreement
whereby Dr. Bickert is to receive a 4% royalty fee on gross
receipts from the sale of products incorporating newly developed
technology for a high performance antenna for a portable
communication device.
The Company entered into an employment contract with an officer.
The agreement covers the year ended October 31, 1998 and provides
for payments aggregating $7,500 per month. The agreement is
expected to continue in force until terminated by either party.
In 1996, the Company entered into an operating lease for
additional office and warehouse space adjacent to its existing
facility. This lease was paid on a month-to-month basis and was
discontinued in 1997. The leased space was owned by an officer
of the Company and monthly rental payments are considered to be
at competitive market rates. During 1997, in connection with the
sale of its office/warehouse facility, the Company entered into a
lease agreement with its president for use of the facility. The
lease provides for monthly payments of $1,217 through February,
1999. The payments are considered to be at a fair market rate.
See Note 4. Rent expense amounted to $10,669 and $14,100 for the
years ended October 31, 1998 and 1997.
<PAGE>22
During 1996, the Company began selling distribution rights to
products included in its line of X-ray film and developer
catalogue. The distribution rights covered certain eastern
provinces in Canada and other territories outside of Canada. The
Company had been purchasing developer products exclusively from
Idex International Corp., a company now in bankruptcy. The
Company has substituted developer chemicals purchased from a new
supplier to its distributors.
A successor company to Idex, 2834332 Canada Inc., has filed an
action in the Supreme Court of the State of New York claiming
that the Company has fraudulently misrepresented that it was the
worldwide licensee or holder of worldwide rights to distribute
the X-ray developing technology belonging to Idex. The claim
seeks the return of $200,000 of distribution rights income plus
interest and unspecified punitive damages. The Company believes
that it has meritorious defense to the action and that the New
York court lacks jurisdiction to hear the matter. There has been
no activity in the matter during the year ended October 31, 1998.
The Company is unable to predict the outcome of the case nor
estimate the range of possible loss.
Notes 4. 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. During the period ended October 31, 1996, the Company
paid $18,800 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.
Effective November 1, 1996, the Company assumed the
responsibility of maintaining the patents and bears the cost of
filing them in other jurisdictions. The amounts capitalized in
connection with extending the patents to additional jurisdictions
during the years ended October 31, 1998 and 1997 were $12,200 and
$42,236 respectively, and amortization thereof for the years
ended October 31, 1998 and 1997, based on the remaining term of
the license agreement with Dr. Bickert, amounted to $14,630 and
$10,559 respectively.
Dr. Bickert had demand loans to the Company for cash advances and
unpaid salary and technology lease payments totaling $372 885 and
$157,625 at October 31, 1998 and 1997 respectively
During the year ended October 31, 1998, the Company received cash
advances from Dr. Bickert amounting to $2,714 and repaid advances
in the amount of $167,221. Additionally, the Company cancelled
755,000 shares of common stock which had been authorized by the
Company and issued by its transfer agent in prior years as
repayment of amounts due Dr. Bickert. The shares returned had a
fair value of $169,875 and such amount has been added to the
officer loan account. The loan account was also increased by
$210,000 during 1998 due to technology lease and salary payments
due to Dr. Bickert.
During the year ended October 31, 1997, the Company received cash
advances from Dr. Bickert amounting to $58,000 and repaid
advances in the amount of $18,180. Additionally, the office paid
$17,305 of legal expenses in favor of the Company. Salary and
technology lease payments added to the loan balance amounted to
$100,500 for the year ended October 31, 1997.
Note 5. 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
<PAGE>23
from registration under section 4(2), it could be liable for
rescission of the sales if such exemptions were found not to
apply.
During the year ended October 31, 1998, the Company issued
156,343 shares of its common stock pursuant to the exercise of
warrants for cash aggregating $47,951. The "A" warrants were
issued in connection with the 1997 private placement described
below and had an original exercise price of $.87 per share.
<PAGE>18
During August, 1998 the Company's board of directors authorized a
limited time discount of the exercise price to warrant holders
wishing to exercise all or part of their outstanding warrants.
The exercise price was discounted to $.31 per share due to the
Company's need for additional equity capital and a decline in the
fair value of its common stock. Warrant holders who exercised
during the discount period were awarded "B" warrants exercisable
at $.53 per share for one year on a one warrant for one share
purchased basis. Also, 72,500 shares of the Company's common
stock were sold for cash of $50,949 in November 1997 in
connection with the private placement that was begun in 1997.
Additionally during 1998, the Company issued an aggregate of
310,055 shares of its common stock to individuals or entities who
had provided goods or services to the Company during the year.
The shares were valued at the fair value of the common stock
issued at the date the issuance was authorized by the board of
directors. The aggregate value of the goods and services
provided to the Company was $264,967.
During the year ended October 31, 1997, the Company issued 1,823
shares of its common stock pursuant to the exercise of warrants
for cash aggregating $1,823. Also, options to purchase 384,140
shares of the Company's common stock previously issued to an
officer were exercised for cash consideration to the Company
aggregating $62,864.
In addition, the Company issued 198,298 shares of its common
stock as compensation to consultants and employees, pursuant to a
registration statement on Form S-8, filed in January 1996. The
shares were valued at the market price of the common stock on the
date the issuance of shares was authorized. The aggregate value
of the shares issued in these transactions was $160,426.
Additionally, the Company issued restricted common stock as
compensation to consultants and others for services performed for
the Company aggregating 274,095 shares valued at $104,542, based
on the market value of the stock on the grant date discounted by
50% due to the restricted nature of the securities.
During the year ended October 31, 1997, two of the Company's
officers agreed to forego cash payments for salary and technology
lease payments accrued during the quarter in exchange for common
stock of the Company. The restricted shares to be issued to the
officers in lieu of cash payments of $101,250 were valued at $.22
per share, an amount equal to one-half of the bid price for the
Company's common stock on the date the transaction was approved
by the Company's board of directors. Additionally one of the
officers received 110,720 shares of restricted common stock for
services rendered during the second quarter of the current fiscal
year and for payment of other amounts due him. The aggregate
value of the stock issued was $23,930.
During October 1997, the Company commenced a private offering of
its common stock, restricted for a period of eighteen months, to
a limited group of Canadian investors. The Company received net
proceeds of $438,211 for the sale of 830,000 shares of common
stock. The shares were sold in a unit offering which provides
for a total of 2,500,000 units to be sold at a price of $.56 per
unit. Each unit consists of one share of common and a warrant to
purchase an additional share of stock. The warrants are
exercisable at $.875 each and expire if not exercised within a
two year period of their issue date.
<PAGE>24
At October 31, 1997 the Company had received subscription
agreements for the sale of $85,898 of the common stock the
payment for which was received subsequent to that date. This
amount is included in accounts receivable other at October 31,
1997 and the corresponding shares are included in stockholders'
equity
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.
As of October 31, 1998, the Company had outstanding options to
purchase and aggregate of 1,139,570 shares of its common stock by
officers and directors at an exercise price of $.165. The
options were granted during the years ended October 31, 1995 and
1996. Additionally, the Company had 746,157 outstanding "A"
warrants to purchase common stock at an exercise price of $.875
per share issued in connection with the above described private
placement and 156,313 "B" warrants exercisable at $.53 per share
issued in connection with the exercise of the "A" warrants as
described above..
During the year ended October 31, 1997 the Company established a
non-statutory stock option plan to benefit employees, officers,
directors, consultants and others providing services to the
Company. The Company has reserved 500,000 shares of common stock
for issuance in connection with option grants made pursuant to
the plan. The purchase price for shares granted under the plan
shall not be less than 85% of the fair market value of the stock
on the grant date. No shares have been granted under the plan as
of the date of these financial statements.
The weighted average fair value at the date of grant for warrants
and options granted during 1998 and 1997 was $.12 and $ .03 per
option. The fair value of the options at the date of grant was
estimated using the Black-Scholes model with assumptions as
follows:
Stock based compensation costs would have reduced pretax income
by approximately $28,000 and $26,900 in 1998 and 1997 ($.00 and
$.01 per share) if the fair value of the warrants granted had
been recognized as compensation expense.
Note 6 Discontinued operation
On November 20, 1998, the Company entered into an agreement to
sell the exclusive rights to distribute its line of X-ray
products in Canada. In connection with the agreement, the
Company agreed to cease the operation of its X-ray products
division effective on the purchase date. The purchase price for
the transaction is $38,830 and is payable in 59 equal monthly
installments of $762 including interest at 6.75 per annum. The
agreement includes provisions for maintaining sales levels during
a two year period subsequent to the purchase date and for failure
to make the required installment payments which could cause the
agreement to terminate. Should the agreement terminate, the
Company would regain all rights transferred to the purchaser.
The net assets of the X-ray division at October 31, 1998 consist
of the following:
Accounts receivable $ 1,599
Inventory 57,291
Accounts payable (4,791)
--------
$ 54,099
The purchase agreement includes provisions whereby the purchaser
will act as the Company's agent in the liquidation of remaining
division inventory and the value of such inventory has been
reduced to give effect to a 25% commission to be earned by the
purchaser upon sale of the inventory.
<PAGE>25
For the two years ended October 31, 1998 the operating results of
the X-ray division were as follows:
1998 1997
Revenues $ 66,384 $ 95,372
Cost of sales 27,435 67,571
Administrative 23,356 35,089
-------- ---------
Gain (loss) from
division $ 15,593 $ (7,288)
Note 7. Subsequent event
During February 1999, the Company resumed the operations of its
X-ray division due to the cancellation of the purchase agreement
described in Note 6. The Company is seeking another purchaser
for its X-ray division and does not intend to operate the
division on an ongoing basis.
<PAGE>26
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: March 17, 1999 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 3/17/99
- ------------------------------ Date:
Dr. Paul Bickert
President and Director
(Principal Executive, Financial and Accounting)
/s/ Jerome W. Cwiertnia 3/17/99
- ------------------------------ Date:
Jerome W. Cwiertnia
Secretary/Treasurer and Director
/s/ Ronald L. Armstrong 3/17/99
- ------------------------------ Date:
Ronald L. Armstrong
Director
/s/ Nick Wizinski 3/17/99
- ------------------------------ Date:
Nick Wizinski
Director
/s/ Lynda Newitt 3/17/99
- ------------------------------ Date:
Lynda Newitt
Director
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<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<CASH> 31,673
<SECURITIES> 0
<RECEIVABLES> 5,562
<ALLOWANCES> 0
<INVENTORY> 2,548
<CURRENT-ASSETS> 95,706
<PP&E> 53,025
<DEPRECIATION> 24,989
<TOTAL-ASSETS> 173,720
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<BONDS> 0
<COMMON> 6,745
0
0
<OTHER-SE> (227,368)
<TOTAL-LIABILITY-AND-EQUITY> 173,720
<SALES> 0
<TOTAL-REVENUES> 10,129
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<OTHER-EXPENSES> 754,689
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (751,088)
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<NET-INCOME> (737,836)
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