-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HgKceNKn4138LB8PWqBvRUaXat9o3u5nmQihxN50OluTTKlv/zn8G2r5GUcUn2LE o3McqaDqslbnH4ik9Mvnsg== 0000352991-99-000015.txt : 19991018 0000352991-99-000015.hdr.sgml : 19991018 ACCESSION NUMBER: 0000352991-99-000015 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19991013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADVANCED OXYGEN TECHNOLOGIES INC CENTRAL INDEX KEY: 0000352991 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 911143622 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-09951 FILM NUMBER: 99727715 BUSINESS ADDRESS: STREET 1: C/O CORSSFIELD INC STREET 2: 230 PARK AVE STE 1000 CITY: NEW YORK STATE: NY ZIP: 10169 MAIL ADDRESS: STREET 1: C/O CROSSFIELD INC STREET 2: 230 PARK AVENUS SUITE 1000 CITY: NEW YORK STATE: NY ZIP: 10169 10KSB 1 U. S. SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-KSB (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1999 Commission file number 0-9951 ADVANCED OXYGEN TECHNOLOGIES, INC. (Name of small business Issuer in its charter) Delaware 91-1143622 (State of incorporation) (I.R.S. Employer Identification No.) 26883 Ruether Avenue Santa Clarita, CA 91351 (Address of principal executive offices) (Zip Code) 661-298-3333 (Issuer's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered under Section 12(g) of the Exchange Act: Common Stock, par value $.01 per share Check whether the Issuer (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 for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No[ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of Registrant'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 ] For the year ended June 30, 1999, Issuer's revenues were $741,153.96 The aggregate market value of Common Stock at June 30, 1999 held by non-affiliates approximated $1,534,375 based upon the average bid and asked prices for a share of Common Stock on that date. For purposes of this calculation, persons owning 10% or more of the shares of Common Stock are assumed to be affiliates, although such persons are not necessarily affiliates for any other purpose. As of June 30, 1999, there were 29,640,252 issued and outstanding shares of the registrant's Common Stock, $.01 par value. Transitional Small Business Disclosure Format (check one): Yes[ ] No [ X ] PART I . . . . . . . . . . . . . . . . . . . . 4 ITEM 1- DESCRIPTION OF BUSINESS . . . . . 4 The Patent Sale. . . . . . . . . . . . . . . . 4 Stock Acquisition Agreement, 12/18/97. . . . . 4 Purchase Agreement, 12/18/97 . . . . . . . . . 4 Waiver Agreement, 12/18/97 . . . . . . . . . . 5 Change of Directors. . . . . . . . . . . . . . 5 Trust Agreement, 12/18/97. . . . . . . . . . . 5 Acquisition or Disposition of Assets, March 09,1998.6 Teuber Employment Agreement Termination. . . . 6 Set Off of Promissory Note, 9/4/98 . . . . . . 6 Gaylord Employment Agreement Termination . . . 6 California Facilities, 9/30/98 . . . . . . . . 6 Demand for Indemnification, 12/9/98. . . . . . 6 Purchase Agreement of 1/29/99. . . . . . . . . 7 Employees. . . . . . . . . . . . . . . . . . . 7 ITEM 2. DESCRIPTION OF PROPERTY . . . . . . 7 ITEM 3. LEGAL PROCEEDINGS . . . . . . . . 7 Pending Matters. . . . . . . . . . . . . . . . 7 Settled Matters: . . . . . . . . . . . . . . . 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . 8 PART II. . . . . . . . . . . . . . . . . . . . 8 ITEM 5. MARKET OF REGISTRANT'S COMMON EQUITYAND RELATED STOCKHOLDER MATTERS . . 8 ITEM 6. PLAN OF OPERATION. . . . . . . . 9 Business Plan. . . . . . . . . . . . . . . . . 9 Client and Industry Representation . . . . . . 9 Y2K (Year 2000 Problem). . . . . . . . . . . .10 Forward Looking Statements . . . . . . . . . .10 ITEM 7. FINANCIAL STATEMENTS. . . . . . . . .11 Advanced Oxygen Technologies, Inc. Financial Statements;11 Statement of Operations. . . . . . . . . . . .12 Statement of Cash Flow . . . . . . . . . . . .14 Statement of Shareholder's Equity. . . . . . .15 PART III . . . . . . . . . . . . . . . . . . .16 ITEM 9.Directors and Officers of the Registrant 16 ITEM 10. Executive Compensation . . . . . . .16 ITEM 11. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . .19 ITEM 12. Certain Relationships and Related Transactions20 ITEM 13. Exhibits and Reports on Forms 8-K. .21 SIGNATURES . . . . . . . . . . . . . . . . . .22 PART I ITEM 1- DESCRIPTION OF BUSINESS Advanced Oxygen Technologies, Inc. ("Advanced Oxygen Technologies", "AOXY", "AOT" or the "Company"), incorporated in Delaware in 1981 under the name Aquanautics Corporation, was, from 1985 until May 1995, a development stage specialty materials company producing new oxygen control technologies. From May of 1995 through December of 1997 AOXY had minimal operations and was seeking funding for operations and companies to which it could merge or acquire. In March of 1998 AOXY began operations in California. The business consists of producing and selling CD-ROMS for conference events, advertisement sales on the CD's, database management and event marketing all associated with conference events. THE PATENT SALE On May 1, 1995, the Company sold its patents, and all related technology and intellectual property rights (collectively the "Patents Rights") to W. R. Grace & Co. Conn., a Connecticut corporation ("Grace"). The price for the Patents Rights was $335,000, in cash, and a royalty until April 30, 2007 of two percent (2%) of the net sales price of (a) all products sold by Grace that include as a component, material that absorbs, bars, climinates, extracts and/or concentrates oxygen that, but for the purchase of the Patents Rights, would fringe the Patents Rights, and (b) any mixture or compound (other than a finished product) which includes as a component material that absorbs, bars, climinates, extracts and/or concentrates oxygen that, but for the purchase of the Patent Rights, would infringe the Patent Rights. Subsequently these royalties and associated liabilities were transferred to a trust (see Trust Agreement 12/18/97 below). STOCK ACQUISITION AGREEMENT, 12/18/97 Pursuant to a Stock Acquisition Agreement dated as of December 18, 1997, Advanced Oxygen Technologies, Inc. ("AOXY") has issued 23,750,00 shares of its common stock, par value $.01 per share for $60,000 cash plus consulting services rendered valued at $177,500, to Crossland, Ltd., ("Crossland"), Eastern Star, Ltd., ("Eastern Star"), Coastal Oil, Ltd. ("Coastal") and Crossland, Ltd. (Belize) ("CLB"). Crossland and Eastern Star, Ltd. are Bahamas corporations. Coastal Oil and CLB are Belize corporations. PURCHASE AGREEMENT, 12/18/97 Pursuant to a Purchase Agreement dated as of December 18, 1997, CLB, Triton-International, Ltd., ("Triton"), a Bahamas corporation, and Robert E. Wolfe purchased an aggregate of 800,000 shares of AOXY's common stock from Edelson Technology Partners II, L.P. ("ETPII") for $10,000 cash. AOXY issued 450,000 shares of its capital stock to ETPII in exchange for consulting services to be rendered. The general partner of ETPII is Harry Edelson, Chairman of the Board and Chief Executive Officer of AOXY prior to the transactions resulting in the change of control (the "Transactions"). Prior to the Transactions Mr. Edelson directly or indirectly owned approximately 25% of the issued and outstanding common stock of AOXY, and following the completion of Mr. Edelson's consultancy he will own approximately 1.5%. Company/Individual # of Shares % Robert E. Wolfe 50,000 shares 0.17% Triton-International 375,000 shares 1.26% Crossland, Ltd. (Belize) 6,312,500 shares 21.30% Crossland, Ltd. 5,937,500 shares 20.03% Coastal Oil, Ltd. 5,937,500 shares 20.03% Eastern Star, Ltd. 5,937,500 shares 20.03%
The 23,750,000 shares of AOXY common stock sold by AOXY as of December 18, 1997 to Crossland, Eastern, Coastal and CLB pursuant to the Stock Acquisition Agreement (the "Regulation S Shares") were not registered under the Securities Act of 1933, as amended, in reliance on the exemption from registration provided by Rule 903(c)(2) of Regulation S. Consideration for the Regulation S Shares consisted of $60,000 cash and consulting services rendered valued at $177,500. Each of the purchasers of the Regulation S Shares (a "Buyer") has represented to AOXY that (i) it is not a "U.S. Person" as that term is defined in Rule 902 (o) of Regulation S; (ii) the sale of the Regulation S Shares was taking place outside of the United States; (iii) no offer was made in the United States; (iv) it was purchasing the Regulation S Shares for its own account and not as a nominee or for the account of any other person or entity; (v) it had no intention to sell or distribute the shares except in accordance with Regulation S; (vi) it agreed that it would not transfer Regulation S Shares to a U.S. Person before the 41st day from the date the Buyer purchased the Regulation S Shares. AOXY represented to the Buyers that it had not conducted any "directed selling effort" as defined in Regulation S, and that it had filed all reports required to be filed under the Securities Exchange Act of 1934 during the preceding twelve months. WAIVER AGREEMENT, 12/18/97 Pursuant to a Waiver Agreement dated as of December 18, 1997, Emile Battat, Richard Jacobsen, each directors of AOXY prior to the Transactions, Sharon Castle, a former officer of AOXY, and ETPII released AOXY from any liability for repayment of an aggregate of $275,000 of loans plus all interest due thereon previously made by them to AOXY in consideration of an aggregate amount of $60,000 cash paid to them pro rata in proportion to their individual loans outstanding by CLB, Triton and Robert E. Wolfe. The source of funds for the Transactions was working capital and personal funds. To the knowledge of the registrant, no arrangements exist which might subsequently result in a change in control of the registrant. CHANGE OF DIRECTORS All of the directors and officers of AOXY resigned in connection with the Transactions on December 18, 1997. Robert E. Wolfe and Joseph N. Noll were elected as directors and Mr. Wolfe was appointed President. TRUST AGREEMENT, 12/18/97 On December 18, 1997, pursuant to a Trust Agreement dated as of November 7, 1997 and an Assignment and Assumption Agreement dated as of November 8, 1997, certain royalty rights associated with Grace and liabilities related to technology AOXY sold to a third party in 1995 were transferred to a trust for the benefit of the AOXY shareholders of record at that date. No royalties had been paid or become due with respect to the rights transferred to the Trust, and no value was assigned to such rights on the books of AOXY. ACQUISITION OR DISPOSITION OF ASSETS, MARCH 09,1998. On March 9, 1998, pursuant to an Agreement for Purchase and Sale of Specified Business Assets, a Promissory Note, and a Security Agreement all dated March 9, 1998, Advanced Oxygen Technologies, Inc.(the "Company") purchased certain tangible and intangible assets (the "Assets") including goodwill and rights under certain contracts, from Integrated Marketing Agency, Inc., a California Corporation ("IMA"). The assets purchased from IMA consisted primarily of furniture, fixtures, equipment, computers, servers, software and databases previously used by IMA in its full service telemarketing business. The purchase price of $2,000,000 consisted of delivery at closing by the Company of a $10,000 down payment, a Promissory Note in the amount of $550,000 payable to IMA periodically, with final payment due on April 10, 2000 and accruing compounded interest at a rate of nine percent (9%) per annum, and 1,670,000 shares of convertible, preferred stock, par value $.01 per share, of the Company (the "Preferred Stock"). The Preferred Stock is automatically convertible into shares of the Company's common stock, par value $.01 per shares (the "Common Stock"), on March 2, 2000, at a conversion rate which will depend on the average closing price of the Common Stock for a specified period prior thereto. The purchase price was determined based on the fair market value of the purchased assets. The down payment portion of the purchase price was drawn from cash reserves of the Company, and the cash required for payments due under the Promissory Note will be generated by future revenues from the Company's business. TEUBER EMPLOYMENT AGREEMENT TERMINATION Pursuant to an employment agreement dated March 09, 1998 between the Company and John Teuber ("Employment Agreement"), on September 04, 1998 the Company terminated John Teuber for cause without relinquishing any of its rights or remedies. SET OFF OF PROMISSORY NOTE, 9/4/98 Pursuant to the Note, the Purchase Agreement, and the Security Agreement between the Company and ("IMA"), the Company on September 04, 1998 exercised its right of "Set Off" of the Note, as defined therein due to IMA's breach of numerous representations, warranties and covenants contained in the Note and certain ancillary documents. The Company further reserved any and all rights and remedies available to it under the Note, Purchase Agreement and Security Agreement. GAYLORD EMPLOYMENT AGREEMENT TERMINATION The Company entered into a two year employment agreement ("NAG Agreement" as contained in Exhibit I of the registrants SEC Form 10-K for the period ending June 30, 1998) with Nancy Gaylord on March 13, 1998. On September 18, 1998, Nancy Gaylord terminated her employment with the Company. The NAG Agreement had no provision for this termination. CALIFORNIA FACILITIES, 9/30/98 The Company entered into a lease agreement as contained in Exhibit I of the registrants SEC Form 10-QSB for the period ending September 30, 1998 with America-United Enterprises Inc. on October 01, 1998 and took possession of 4,700 s.f. of premises on November 06,1998 in Santa Clarita for its CA location. Currently, this is the only California location of the Company. DEMAND FOR INDEMNIFICATION, 12/9/98 On December 9, 1998 the company delivered to IMA, "Notification to Indemnifying Party and Demand for Indemnification for $2,251,266." Pursuant to the Note, the Purchase Agreement, the Security Agreement, and the Employment Agreement (collectively the "Agreements"), the Company demanded that IMA pay $2,251,266 or defend the Company against the Liabilities (as defined therein) due to, among other things, IMA's breach, representations, warranties, and violation of the Agreements. PURCHASE AGREEMENT OF 1/29/99 On January 29, 1999, pursuant to the Purchase Agreement of 1/28/99, Advanced Oxygen Technologies, Inc. ("AOXY") purchased 1,670,000 shares of convertible preferred stock of Advanced Oxygen Technologies, Inc. ("STOCK") and a $550,000 promissory note issued by Advanced Oxygen Technologies, Inc ("Note") from Integrated Marketing Agency, Inc.("IMA"). The terms of the Purchase Agreement were: AOXY payed $15,000 to IMA, assumed a Citicorp Computer Equipment Lease, #010-0031648-001 from IMA, delivered to IMA certain tangible business property (as listed in Exhibit A of the Purchase Agreement), executed a one year $5,000 promissory note with IMA, and delivered to IMA a Request For Dismissal of case #PS003684 (restraining order) filed in Los Angeles county superior court. IMA sold, transferred, and delivered to AOXY the Stock and the Note. IMA sold, transferred, assigned and delivered the Note and the Stock to AOXY, executed documents with Citicorp Leasing, Inc. to effectuate an express assumption by AOXY of the obligation under lease #010-0031648-001 in the amount of $44,811.26, executed a UCC2 filing releasing UCC-1 filing #9807560696 filed by IMA on March 13, 1998, and delivered such documents as required. In addition, both IMA and AOXY provided mutual liability releases for the other. EMPLOYEES As of June 30, 1999 the Company had a total of 7 employees. ITEM 2. DESCRIPTION OF PROPERTY The assets of the Company consist primarily of furniture, fixtures, equipment, computers, servers, software and databases. ITEM 3. LEGAL PROCEEDINGS PENDING MATTERS The Company is a party to the following legal proceedings: On April 30, 1999 NEC America Filed suit against Advanced Oxygen Technologies, Inc. In the Los Angeles Superior Court, North Valley Branch, Case Number PC 023087X alleging default of the Lease Agreement of November, 1998 in the amount of $57,167.28. AOXY has answered the suit and denies some or all of the allegations, and believes that the jurisdiction of the case should be in New York. A previous employee, Tim Rafalovich has filed suit against Advanced Oxygen Technologies, Inc. in the Small Claims court of New Hall, CA alleging that AOXY has not paid approximately $5,000 in wages, case number 99S00761. The appeal is pending and AOXY denies all allegations, and will defend the case. On June 14, 1999 Airborne Express, Inc. filed suit against Advanced Oxygen Technologies, Inc., case # 99-C00738 in small claims court of Los Angeles CA Municipal district, Newhall Judicial District for $5,093.95, including court costs and attorney's fees alleging monies owed. AOXY denies the allegations and plans to defend the claim and believes that some or all of the shipping charges cited were from a previously shared location in Santa Clarita. SETTLED MATTERS: On September 09, 1998 the Company appeared before the Santa Clarita County small claims court to represent itself in a motion ("Motion") filed by a plaintiff, Alpha Graphics, against John Teuber for a judgement on July 06, 1998 from a case filed May 29,1998, to be amended to the Company. The Motion was denied and the judgement was not amended to reflect the Company as a defendant. On February 10, 1999 in the Municipal Court of California, county of Los Angeles, Newhall Judicial District, America-United Enterprises, Inc. filed suit against Advanced Oxygen Technologies, Inc, case no. 99U00109, alleging that the February, 1999 rent due on February 01, 1999 had not been paid by Advanced Oxygen Technologies, Inc. The suit has been settled out of court and Advanced Oxygen Technologies, Inc. has tendered the monies owed in full. On February 19, 1999, Written Communications, Inc. filed suit against Advanced Oxygen Technologies, Inc. in the small claims court in Van Nuys CA Municipal Court, Case no. 99V12825 for unpaid service rendered in the amount of $4,875.00. The company paid the amount in full. On January 16, 1999, A Better Type filed suit against Advanced Oxygen Technologies, Inc. in the small claims court of the Municipal Court of California, San Diego Judicial District, Case no.691493 alleging non payment for services rendered of $5,000. The Company paid the amount in full. On March 23, 1999 Corestaff Services filed suit against Advanced Oxygen Technologies, Inc. in the small claims court Newhall CA Judicial district case no 99S00349 for lack of payment in the amount of $4,106. The case was settled out of court and the company has agreed to pay Corestaff $500.00 on the 15 Th day of each month beginning on June 15, 1999 until any debts owed are paid in full. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no submissions of matters for a vote to the security holders. PART II ITEM 5. MARKET OF REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock is traded on the Over-The-Counter Bulletin Board. The following table sets forth the range of high and low bid quotations on the Common Stock for the quarterly periods indicated, as reported by the National Quotation Bureau, Inc. The quotations are inter-dealer prices without retail mark-ups, mark downs or commissions and may not represent actual transactions. Fiscal Year Ended June 30, 1998 High Low First Quarter 0.07 0.010 Second quarter 0.02 0.005 Third Quarter 0.09 0.015 Fourth Quarter 0.23 0.055 Fiscal Year Ended June 30, 1999 High Low First Quarter 0.220 0.055 Second quarter 0.047 0.015 Third Quarter 0.031 0.015 Fourth Quarter 0.200 0.015
At September 30, 1999, the closing bid price of the Company's Common Stock as reported by the National Quotation Bureau, Inc, was $0.0625 ITEM 6. PLAN OF OPERATION. BUSINESS PLAN The Company currently has two locations. The location in New York is the location for some of the administrative operations and through June 30, 1999 was offered to the Company on a month to month basis at no cost from Crossfield, Inc. Robert E. Wolfe is president of Crossfield, Inc. The location in Santa Clarita, CA is the location for operations. The Company currently has four areas of concentration: CD-ROM production/sales, event sales, database management and marketing. The Company began producing and selling educational CD-ROMS in March of 1998. The content of the CD-ROMS is derived from conferences, held by clients of the Company. AOXY produces a CD-ROM of the conferences including the audio, video, graphics and/or verbatim transcripts of the conference. AOXY sells CD's direct to the client and public, and/or sells advertisement space on the CD's and produces the CD at no cost to the conference organizer. All CD's are in HTML format and are directly linked to the Internet sites of AOXY and the Client. The sales efforts are conducted on the Internet and in the Santa Clarita CA location. In addition, the Company began selling event registrations for conferences where AOXY is producing CD-ROMS. The Company sells the events through fax broadcasting, direct mail, and telemarketing from Santa Clarita CA. In March 1998, AOXY began database management which includes managing client databases, assisting clients in effective marketing with databases, providing database information to clients, list rentals, and utilizing and structuring databases for fax broadcasting. Currently the Company has the ability to fax broadcast or email broadcast to a large number of contacts. The Company continues it efforts to raise capital to support operations and growth, and is actively searching acquisition or merger with another company that would compliment AOXY or increase its earnings potential. CLIENT AND INDUSTRY REPRESENTATION During this reporting period, 7 client contracts were concluded. There were 4 active clients as of June 30, 1999. Because the company represents a variety of clients in a variety of industries, the operation of each client account is unique. In addition to the CD Production Clients of AOXY, AOXY has 2 active contracts for Database Management. AOXY fulfils these contracts by providing, selling, updating and/or renting database information. Y2K (YEAR 2000 PROBLEM) Y2K, or the Year 2000 Problem is a potential problem for computers whereby the system would not recognize the date 2000 as year 2000 but instead as 1900 due to the fact that the computer industry standard for dating was a 2 digit system and not 4 digits. Each date represented was the last two digits of the year, i.e.: 1998 was 98. This problem could render important computer and communication systems inoperable which could have a significant effect on the Company's operations. The Company's current exposure to potential Y2K systems that could be affected include (but not limited to): computers, telephones, all forms of electronic communications, switches, routers, software, accounting software, banking, electricity, credit card processors, electronic data exchange, security systems, fax broadcasting software and hardware, database software, archives, data, records, and others. In an effort to minimize the Company's exposure to the potential Y2K problem, the Company has contacted each of our vendors to assess how Y2K will affect our operations. Although some vendors make verbal assurances of Y2K compliance, there can be no certainty that the systems that the Company use will not be affected. AOXY continues to examine the risks associated with its most reasonable worst case Year 2000 scenarios. Scenarios might include a possible but presently unforeseen failure of key supplier or customer business, processes, or systems. These situations could conceivably persist for some months after the millennium transition and could lead to possible revenue losses. The Company also may not have the applicable capital resources to correct or replace certain systems to be compliant with Y2K. The Company may be able to replace or correct the Y2K problem within the organization, and still be affected by outside utilities and or vendors. The Company may not directly experience any effect from the Y2K problem, but the suppliers, vendors, clients or other associates of the Company, may be affected and could cause the Company harm by loss of clients, loss of contracts, inability to receive supplies, etc. The Y2K element alone could significantly alter the Company's operations and profitability. FORWARD LOOKING STATEMENTS Certain statements contained in this report, including statements concerning the Company's future and financing requirements, the Company's ability to obtain market acceptance of its products and the competitive market for sales of small production business' and other statements contained herein regarding matters that are not historical facts, are forward looking statements; actual results may differ materially from those set forth in the forward looking statements, which statements involve risks and uncertainties, including without limitation to those risks and uncertainties set forth in any of the Company's Registration Statement's under the heading "Risk Factors" or any other such heading. In addition, historical performance of the Company should not be considered as an indicator for future performance, and as such, the future performance of the Company may differ significantly from historical performance. ITEM 7. FINANCIAL STATEMENTS ADVANCED OXYGEN TECHNOLOGIES, INC. FINANCIAL STATEMENTS; Advanced Oxygen Technologies Inc. Balance Sheet for the year ending June 30, 1999 Assets 1999 1998 Current Assets Cash 54,057 (56,835) Receivables 61,203 161,064 Allowance for Doubtful Accounts (1,295) 0 Database Management Receivables 15,315 0 A/R Reserve 0 (45,554) Inventory 6,759 3,525 Total Current Assets $136,039 $62,200 Property and Equipment Furniture and Fixtures 31,869 31,869 Office Equipment 17,882 17,882 Equipment 98,858 98,858 Capitalized Equipment 125,352 25,406 Other Depreciable Property 911,391 911,391 Accumulated Depreciation (187,887) (84,438) Total Property and Equipment $997,465 $1,000,968 Other Assets Deposits 4,093 0 Total Other Assets $4,093 $0 Total Assets $1,137,597 $1,063,168 Liabilities and Capital Current Liabilities Accounts Payable 179,930 66,490 Accrued Expenses 0 41,305 Sales Tax Payable 2,577 1,649 Health Care Contributions 5,894 1,351 Due to Employees 6,375 0 Federal payroll Taxes Payable 46,546 27,161 State Payroll Taxes payable 5,436 1,641 SUTA Tax payable (140) (220) IMA Short Term Note (1,800) 0 State Taxes Payable 800 800 Payable to Client 0 61,418 Deferred Commission Income 0 7,681 Total Current Liabilities $245,276 $209,276 Long Term Liabilities Note Payable Olsen 0 1,741 Capital Leases Obligation 123,583 23,637 NOTE Payable Crossfield 20,199 17,925 Note payable IMA 0 528,466 Other Long Term Liabilities 11,886 0 401k T Account 58,226 15,001 Total Long Term Liabilities 213,895 586,770 Total Liabilities $459,512 $796,046 Capital Beginning Balance Equity 16,700 16,700 Preferred Stock 50 50 Common Stock 296,403 296,403 Paid in Capital 20,398,631 20,398,631 19,898,631 Retained Earnings (20,444,662)(20,187,362) Net Income 410,963 (257,300) Total Capital $678,085 $267,122 Total Liabilities & Capital 1,137,597 1,063,168
STATEMENT OF OPERATIONS Advanced Oxygen Technologies Inc. Income Statement for the year ending June 30, 1999 1999 1998 Revenues Service Fees 0 1,395 Consulting 105,895 50,000 CA Registrations 346,234 9,799 CD Sales 142,617 150,727 Sponsor Sales 32,602 10,995 Client Contracts 12,190 58,434 Database Management 32,516 225 Commissions 69,099 31,254 Total Revenues 741,154 312,829 Cost of Sales Cost of Product 10,681 12,709 Freight (5,388) 0 Other 0 2,114 Independent Contract commissions 42,882 105,647 Royalties 16,009 0 Show Fees 0 110,000 Amortization 0 75,949 Returns and Allowances 510 0 Total Cost of Sales 64,694 306,419 Gross Profit 676,460 6,410 Expenses IC Reimbursable Expense 274 92 Advertising Expense (4,993) 2,383 Accounting/Professional Fee 32,953 4,107 Auto Expense 248 1,050 Bad Debt Expense (45,554) 50,554 Bank Charges 17,024 2,487 Closing Costs 26,910 54,665 Commissions and Fees Expense 2,571 183,951 Consulting Expense 0 3,000 Credit Card Charges (1,076) 0 Depreciation Expense 103,449 8,489 Dues and Subscriptions 1,756 (2,139) Employee Benefits 3,001 49 Freight 282 726 Interest Expense 28,252 8,858 Cleaning Expense 978 2,024 Legal & Professional Expense (26,117) 57,930 Maintenance Expense 718 46 Management Expenses 0 434 Moving Expense 996 48 Meal & Entertainment Expense 973 1,557 Misc. Expense 0 16,875 Office Expense 2,906 952 Other Taxes 0 193 Payroll Tax Expense 16,950 4,018 Postage Expense 6,002 3,313 Printing and Reproduction 16,529 7,613 Professional Development 0 32 Professional Salaries Billable 40 0 Share/Transfer Agent expense 1,785 5,270 Professional Salaries-Non Billable 707 411 Rent/Lease Expense 37,293 20,848 Computer & Equipment leases 40,962 12,237 Repairs Expense 550 0 Transcribing Expense 35,588 14,290 Salaries Expense 114,825 59,111 Employee Commission Expenses 9,372 1,491 Subcontract Fees 18,444 2,952 Temporary Employment 0 318 Supplies Expense 2,555 2,363 Computer Software Upgrades 726 3,652 Telephone Expense 53,506 18,194 Travel Expense 15,967 11,821 Utilities Expense 5,658 4,585 Wages Expense 72,232 9,990 Overtime Wage Expense 146 0 Other Expenses 465 360 State Tax Provision 0 800 Total Expenses 595,853 581,997 Extraordinary Income Bad Receivables Income (201,630) 0 Commission Income 0 8,000 Interest Income 108 0 Other Income 5,914 17,188 12/97 Forgiveness off Debt 0 286,374 1/29/99 Forgiveness of Debt 521,894 0 Shipping Charges Reimbursed 4,069 6,726 Total Extraordinary Income $830,357 $318,288 NET INCOME $410,963 ($257,300)
STATEMENT OF CASH FLOW Advanced Oxygen Technologies Inc. Statement of Cash Flow June 30, 1999 1999 CASH FLOWS FROM OPERATING ACTIVITIES NET INCOME 410,963 Adjustments to reconcile net income to Net Cash by operating activities Accum. Depreciation 103,449 Accounts Receivable 99,861 Allowance for Doubtful accounts 1,295 Database Management Receivable (15,315) A/R Reserve (45,554) Inventory (3,234) Accounts Payable 113,440 Accrued Expenses (41,305) Sales Tax Payable 928 Health Care Contributions 4,543 Due to Employees 6,375 Federal Payroll Taxes Payable 19,385 State Payroll Taxes Payable 3,795 SUTA Tax Payable 80 IMA Short Term Note Payable (1,800) Payable to Clients (61,418) Deferred Commission Income (7,681) Total Adjustments 176,843 Net Cash Provided By Operations 1,087,806 CASH FLOWS FROM INVESTING ACTIVITIES Used For:: Capitalized Equipment (99,946) Deposits (4,093) Net Cash used in investing (104,039) Cash Flows from Financing activities Proceeds From: Capital Leases Obligation 99,946 Notes Payable Jens Olsen 8,400 Note Payable Crossfield 23,274 Other Long Term Liabilities 1,259 401K T account 58,226 Preferred Stock 10,000 Used For: Notes Payable Olsen (10,141) Notes Payable Crossfield (21,000) Note Payable IMA (528,466) Other Long Term Liabilities (4,375) Preferred Stock (10,000) Net Cash used in Financing (872,875) Net Increase (decrease) in cash 110,892 Summary: Cash Balance at End of Period 54,057 Cash Balance at Beginning of Period 6,099 Net Increase (decrease) in cash 60,156
STATEMENT OF SHAREHOLDER'S EQUITY Advanced Oxygen Technologies Inc. Statement of Shareholder's Equity For the Year ended June 30, 1999 Jan 29, 1999 Balance Purchase of Note Net Balance 6/30/1998 & Preferred Shares Income 6/30/1999 ============================================================================ Series2 Shares 5,000 5,000 Amount $50 $50 - ----------------------------------------------------------------------------- Series3 Shares 1,670,000 (1,670,000) 0 Amount $16,700 $16,700 - ----------------------------------------------------------------------------- Series4 Shares 2 2 Amount $0 $0 - ----------------------------------------------------------------------------- Series5 Shares 1 1 Amount $0 $0 - ----------------------------------------------------------------------------- Preferred Shares 0 1,670,000 1,670,000 Treasury Stock Amount $0 $0 - ----------------------------------------------------------------------------- Common Stock Shares 29,640,252 29,640,252 Amount $296,403 $296,403 - ----------------------------------------------------------------------------- Addtnl Paid in Capital $20,398,631 ($500,000) $20,398,631 - ----------------------------------------------------------------------------- Accumulated Deficit ($20,187,362) 410,963 ($19,276,399) ============================================================================= TOTAL (257,300) $678,085
ITEM 8. Changes in and Disagreements with Accounts on Accounting and Financial Disclosure The Company has no disagreements with accountants on accounting and financial disclosure. During this time AOXY has engaged Singer, Lewak Greenbaum & Goldstein, LLP, 10960 Wilshire Blvd, Los Angeles, CA 90024 and Bernstein Pinchuk & Kaminsky, Llp, Seven Penn Plaza, New York, NY, 10001 PART III ITEM 9.Directors and Officers of the Registrant Set forth below is information regarding the Company's directors and executive officers, including information furnished by them as to their principal occupations for the last five years, other directorships held by them and their ages as of June 30, 1999. All directors are elected for one-year terms, which expire as of the date of the Company's annual meeting. Name Director Since Age Positions Robert E. Wolfe 1997 36 Chairman of the Board Chief Executive Officer Joseph N. Noll 1997 76 Director Robert Wolfe has been the Chairman and CEO for AOXY, Inc. since 1997. Concurrently he has been the President and CEO of Crossfield, Inc. and Crossfield Investments, llc , both corporate consulting companies. From 1992-1993 he was Vice President and partner for CFI, NY Ltd. A Subsidiary of Corporate Financial Investments, PLC, London. Joseph N. Noll has been a director of the Company since 1997.Mr. Noll was president and CEO of Franco Machine Corp (a manufacturer of machine tools) for 25 years. Mr. Noll was the Secretary of the State of Wisconsin department of Labor, Industry and Human Relations, from 1983 to 1985. Mr. Noll was also President and CEO of Columbia Car Company, a manufacturer of golf carts. ITEM 10. Executive Compensation Robert Wolfe, Chairman and CEO has waived his $250,000 annual for the year ending June 30, 1999. No officer or director received any compensation from the Company during the last fiscal year. The Company paid no bonuses in the last three fiscal years ended June 30, 1999 to officers or other employees. Prior to the Stock Acquisition of December 12, 1998, the Company's Chief executive officer and Chairman of the Board was Harry Edelson. Mr. Edelson received no compensation during the fiscal year ending June 30, 1999. The following table sets forth the total compensation paid or accrued to its Chief Executive Officer, Robert E. Wolfe and former Chief Executive officer Harry Edelson during the fiscal year ending June 30, 1999. There were no other corporate officers in any of the last three fiscal years. Executive Compensation Other LTIP Compen- Restricted Pay All Name Yr Salary Bonus sation Awards outs Security Other =============================================================================== Harry Edelson 99 0 0 0 0 0 0 0 Robert Wolfe 99 0 0 0 0 0 0 0
OPTION GRANTS DURING 1999; VALUE OF OPTIONS AT YEAR-END The following tables set forth certain information covering the grant of options to the Company's Chief Executive Officer, Mr. Robert E. Wolfe and the former Chief Executive Officer, Mr. Harry Edelson during the fiscal year ended June 30, 1999 and unexercised options held as of that date. Neither Mr. Wolfe or Mr. Edelson exercised any options during fiscal 1998. Name # Securities % of Total Exercise Expiration Date underlying Options to Price Option Employer ============================================================================ Harry Edelson 0 0 n/a n/a Robert Wolfe 0 0 n/a n/a
Compensation Committee Report The Compensation Committee of the Board of Directors was responsible for reviewing and approving the Company's compensation policies and the compensation paid to executive officers. Mr. Wolfe and Mr. Noll, who comprise the Compensation Committee are employee and non-employee directors respectively. Compensation Philosophy The general philosophy of the Company's compensation program, which has been reviewed and endorsed by the Committee, was to provide overall competitive compensation based on each executive's individual performance and the Company's overall performance. There are two basic components in the Company's executive compensation program: (i) base salary and (ii) stock option awards. Base Salary Executive Officers' salaries are targeted at the median range for rates paid by competitors in comparably sized companies. The Company recognizes the need to attract and retain highly skilled and motivated executives through a competitive base salary program, while at the same time considering the overall performance of the Company and returns to stockholders. Stock Option Awards With respect to executive officers, stock options are generally granted on an annual basis, usually at the commencement of the new fiscal year. Generally, stock options vest ratably over a four-year period and the executive must be employed by the Company in order to vest the options. The Compensation Committee believes that the stock option grants provide an incentive that focuses the executives' attention on managing the Company from the perspective of an owner with an equity stake in the business. The option grants are issued at no less than 85% of the market price of the stock at the date of grant, hence there is incentive on the executive's part to enhance the value of the stock through the overall performance of the Company. Compensation Pursuant to Plans The Company has three plans (the "Plans") under which its directors, executive officers and employees may receive compensation. The principal features of the 1981 Long-Term Incentive Plan (the "1981 Plan"), the 1988 Stock Option Plan (the "1988 Plan"), and the Non-Employee Director Plan (the "Director Plan") are described below. During the fiscal year ended June 30, 1994, the Company terminated its tax qualified cash or deferred profit-sharing plan (the "401(k) Plan"). During fiscal 1998, no executive officer received compensation pursuant to any of the Plans except as described below. The 1981 and 1988 Plans The purpose of the 1981 Plan and 1988 Plan (the "Option Plans") is to provide an incentive to eligible directors, consultants and employees whose present and potential contributions to the Company are or will be important to the success of the Company by affording them an opportunity to acquire a proprietary interest in the Company and to enable the Company to enlist and retain in its employ the best available talent for the successful conduct of its business. The 1981 Plan The 1981 Plan was adopted by the Board of Directors in May 1981 and approved by the Company's stockholders in March 1982. A total of 500,000 shares have been authorized for issuance under the 1981 Plan. With the adoption of the 1988 Plan, no additional awards may be made under the 1981 Plan. As a result, the shares remaining under the 1981 Plan are now available solely under the 1988 Plan. Prior to its termination, the 1981 Plan provided for the grant of the following five types of awards to employees (including officers and directors) of the Company and any subsidiaries: (a) incentive stock rights, (b) incentive stock options, (c) non-statutory stock options, (d) stock appreciation rights, and (e) restricted stock. The 1981 Plan is administered by the Compensation Committee of the Board of Directors. The 1988 Plan The 1988 Plan provides for the grant of options to purchase Common Stock to employees (including officers) and consultants of the Company and any parent or subsidiary corporation. The aggregate number of shares which remained available for issuance under the 1981 plan as of the effective date of the 1988 Plan plus an additional 500,000 shares of Common Stock. Options granted under the 1988 Plan may either be immediately exercisable for the full number of shares purchasable thereunder or may become exercisable in cumulative increments over a period of months or years as determined by the Compensation Committee. The exercise price of options granted under the 1988 Plan may not be less than 85% of the fair market value of the Common Stock on the date of the grant and the maximum period during which any option may be paid in cash, in shares if the Company's Common Stock or through a broker-dealer same-day sale program involving a cash-less exercise of the option. One or more optionees may also be allowed to finance their option exercises through Company loans, subject to the approval of the Compensation Committee. Issuable Shares As of September 20, 1995, approximately 374,000 shares of Common Stock had been issued upon the exercise of options granted under the Option Plans, no shares of Common Stock were subject to outstanding options under the Options Plans and 626,000 shares of Common Stock were available for issuance under future option grants. From July 1, 1991 to September 20, 1995, options were granted at exercise prices ranging from $1.22 to $8.15 per share. The exercise price of each option was equal to 85% of the closing bid price of Company's Common Stock as reported on the NASDAQ Over the Counter Bulletin Board Exchange. Due to employee terminations, all options became void in August 1995. As of September 30, 1999 1,000,000 shares of Common Stock were available for issuance under future option grants. Board of Directors Compensation As of June 30, 1999 the directors did not receive any compensation for serving as members of the Board. In addition to any cash compensation, non-employee directors also are eligible to participate in the Non-Employee Director Stock Option Plan and to receive automatic option grants thereunder. The Director Plan provides for periodic automatic option grants to non-employee members of the Board. An individual who is first elected or appointed as a non-employee Board member receives an annual automatic grant of 25,000 shares plus the first annual grant of 5,000 shares, and will be eligible for subsequent 5,000 share grants at the second Annual Meeting following the date of his initial election or appointment as a non-employee Board member. During the fiscal year ended June 30, 1999, no options were granted to non-employee Board members. ITEM 11. Security Ownership of Certain Beneficial Owners and Management The following table sets forth certain information regarding the beneficial ownership of the Company's Common Stock as of June 30, 1999, by ( i ) all those known by the Company to be beneficial owners of more than 5% of its Common Stock; ( ii ) all directors; and ( iii ) all officers and directors of the Company as a group. Beneficial Ownership Name and Address of Shares Fully Diluted Percent Beneficial Owner Crossland, Ltd. (Belize) 6,312,500 21.30% 60 Market Square PO Box 364 Belize City, Belize, Central America Eastern Star, Ltd. 5,937,500 20.03% 104B Saffrey Square Bank Lane and Bay Street Box N-1612 Nassau, Bahamas Coastal Oil, Ltd. 5,937,500 20.03% 40 Santa Rita Road Corazal, Belize, Central America Crossland, Ltd. 5,937,500 20.03% 104B Saffrey Square Nassau, Bahamas Robert E. Wolfe 50,000 0.17% Joseph Noll 0 0.00%
Note: AOXY Purchase 1,670,000 Preferred Shares of Advanced Oxygen Technologies, Inc from IMA (see Purchase Agreement, 1/29/99) and includes shares of convertible, preferred stock, par value $.01, having the aggregate value of $1,440,000.00 w/fixed annual dividends of $0.001 per share payable on January 1 of each year; with an automatic conversion on 3/2/2000 of each share of preferred stock into either a) 1 share of common stock, par value $.01 per share if the average closing price of the common stock during the 10 trading days immediately prior to March 1, 2000 is equal to or greater than $0.66 per share or (b) 1 1/2 shares of common stock if the average closing price of the common stock during the 10 trading days immediately prior to March 1, 2000 is less than $0.66 per share. If on the conversion date the aggregate value of the common stock into which the preferred shares are converted is less than $500,000, then the Company could be caused to redeem the converted shares for the aggregate sum of $500,000 upon receiving notice of intention to redeem the converted shares within 10 business day. This stock is now treasury stock. ITEM 12. Certain Relationships and Related Transactions The Company's transactions with its officers, directors and affiliates have been and such future transactions will be, on terms no less favorable to the company than could have been realized by the Company in arms-length transactions with non-affiliated persons and will be approved by a majority of the independent disinterested directors. ITEM 13. Exhibits and Reports on Forms 8-K Exhibits Material Contracts 1981 Long-Term Incentive Plan, as amended in September 1988, incorporated herein by reference to Appendix A to the Registrant's 1986 definitive Proxy Statement. a) 1988 Stock Option Plan, incorporated by reference to the Registrant's 1988 definitive Proxy Statement filed pursuant to Regulation 14A b) Non-Employee Director Stock Option Plan incorporated by reference to the Registrant's report on Form 10-K for the fiscal year ended June 30, 1993 c) Patent Purchase Agreement between Advanced Oxygen Technologic Inc., and Grace-Conn, dated February 10, 1995 incorporated by reference to the Registrant's 1995 definitive Proxy Statement filed pursuant to Regulation 14A. d) Contingent Plan of Liquidation dated February 10, 1995, incorporated by reference to the Registrant's 1995 definitive Proxy Statement filed pursuant to Regulation 14 A e) Stock Acquisition Agreement dated December 18, 1997 incorporated by reference to the Registrant's report on form 8-K as Exhibit A f) Purchase Agreement of December 18, 1997 incorporated by reference to the Registrant's report on form 8-K as Exhibit B g) Waiver Agreement incorporated by reference to the Registrant's report on form 8-K as Exhibit C h) Trust Agreement incorporated by reference to the Registrant's report on form 8-K dated, December 18, 1997 as Exhibit D i) Assignment and Assumption Agreement incorporated by reference to the Registrant's report on form 8-K dated, December 18, 1997 as Exhibit D j) Agreement For Purchase & Sale Of Specified Business Assets incorporated by reference to the Registrant's report on form 8-K dated March 09, 1998 as Exhibit 1 k) Covenant of Non-Competition incorporated by reference to the Registrant's report on form 8-K dated March 09, 1998 as Exhibit B l) Promissory Note of March 09, 1998 incorporated by reference to the Registrant's report on form 8-K dated March 09, 1998 as Exhibit C m) Security Agreement of March 09, 1998 incorporated by reference to the Registrant's report on form 8-K dated March 09, 1998 as Exhibit D n) Employment Agreement, John Teuber, incorporated by reference to the Registrant's report on form 8-K dated March 09, 1998 as Exhibit F o) Employment Agreement, Nancy Gaylord, dated March 13, 1998 attached hereto as Exhibit 1 p) America United Lease, dated September 23, 1998 incorporated by reference to the Registrant's report form 10-QSB dated November 16, 1998 q) NEC Lease, date November 10, 1998, incorporated by reference to the Registrant's report form 10-QSB dated January 28, 1999 as Exhibit I. r) Purchase Agreement of 1/29/99, dated January 29, 1999, incorporated by reference to the Registrant's report form 8-K dated February 17, 1999 as Exhibit I REPORTS ON FORM 8-K A report on Form 8-K was filed on January 16, 1998 and reported under Item 1 that all directors and officers of AOXY resigned on December 18, 1997 and Robert E. Wolfe and Joseph N. Noll were elected as directors and Mr. Wolfe was appointed president in association with the transaction of December 18, 1997 of the Stock Acquisition Agreement, the Purchase Agreement, the Waiver Agreement and the Trust Agreement (all exhibited thereto). Under Item 2 that certain royalty rights and liabilities related to technology AOXY sold to a third party was transferred to a trust for the benefit of the AOXY shareholders of record of date. Further reported under Item 7 was the sale of 23,750,000 shares of AOXY common stock as of December 18, 1997 that were not registered under the Securities Act of 1933, as amended, in reliance on the exemption from registration provided by Rule 903 ( c ) (2) of Regulation S. for consideration of $60,000 cash and $177,500 in consulting services. A report on Form 8-K was filed on February 17, 1999 and reported under Item 2 the Purchase of Specified Assets from Integrated Marketing Agency, Inc. The assets purchased consisted of 1,670,000 shares of convertible preferred stock of Advanced Oxygen Technologies, Inc. ("STOCK") and a $550,000 promissory note issued by Advanced Oxygen Technologies, Inc ("Note") from Integrated Marketing Agency, Inc.("IMA"). The terms of the Purchase Agreement were: AOXY payed $15,000 to IMA, assumed a Citicorp Computer Equipment Lease, #010-0031648-001 from IMA, delivered to IMA certain tangible business property (as listed in Exhibit A of the Purchase Agreement), executed a one year $5,000 promissory note with IMA, and delivered to IMA a Request For Dismissal of case #PS003684 (restraining order) filed in Los Angeles county superior court. IMA sold, transferred, and delivered to AOXY the Stock and the Note. IMA sold, transferred, assigned and delivered the Note and the Stock to AOXY, executed documents with Citicorp Leasing, Inc. to effectuate an express assumption by AOXY of the obligation under lease #010-0031648-001 in the amount of $44,811.26, executed a UCC2 filing releasing UCC-1 filing #9807560696 filed by IMA on March 13, 1998, and delivered such documents as required. In addition, both IMA and AOXY provided mutual liability releases for the other. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant): ADVANCED OXYGEN TECHNOLOGIES, INC. Date: October 13, 1999 By (Signature and Title): /s/ Robert E. Wolfe /s/ ----------------- Robert E. Wolfe President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Date: October 13, 1999 By (Signature and title): /s/Joseph Noll /s/ ------------------------- Joseph N. Noll Director EX-27 2
5 YEAR JUN-30-1999 JUN-30-1999 54,057 0 76,518 (1,295) 6,759 136,039 1,185,352 (187,887) 1,137,597 245,617 213,895 0 50 296,403 16,700 1,137,597 741,154 741,154 64,694 64,694 567,601 0 28,252 80,606 0 0 0 330,357 0 410,963 0.014 0.014
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