-----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, E4v+FetsQcpTndBJntskfUI7ppq29JpazT/ILMNkEBAW2HFl2M8Ux6Ybx+jYtfHN VirHuS3fDop2GJ4PhI6s2Q== 0000352991-99-000017.txt : 19991117 0000352991-99-000017.hdr.sgml : 19991117 ACCESSION NUMBER: 0000352991-99-000017 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 10QSB SEC ACT: SEC FILE NUMBER: 000-09951 FILM NUMBER: 99754801 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 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (x)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 ( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT COMMISSION OF 1934 For the Transition period September 30, 1999 Commission file number 0-9951 ADVANCED OXYGEN TECHNOLOGIES, INC. (Exact name of small business issuer as specified in its charter) Delaware 91-1143622 (State of Incorporation) (IRS Employer Identification No.) 26883 Ruether Avenue, Santa Clarita, CA 91351 (Address of principal executive offices) (661)-298-3333 (Issuer's telephone number) Check whether the issuer (1) has filed all reports required to be filled by Section 13 or 15(d) of the Exchange Act during the past 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 The number of shares of common stock outstanding as of September 30, 1999 was 29,640,252. Transitional Small Business Disclosure Format (check one): Yes No X ADVANCED OXYGEN TECHNOLOGIES, INC. INDEX PART 1: FINANCIAL INFORMATION. . . . . . . . . .3 Item I: Financial Statements for the three months ending September 30, 1999. (Unaudited) . . .3 Balance Sheet, September 30, 1999. . .3 Income Statement . . . . . . . . . . .5 Statement of Cash Flow . . . . . . . .6 Statement of Changes . . . . . . . . .8 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . . . . .9 PART II. . . . . . . . . . . . . . . . . . . . 13 Item 1: Legal Proceedings . . . . . . . . 13 Item 6. Exhibits and Reports on Form 8-K 13 SIGNATURE. . . . . . . . . . . . . . . . . . . 14 PART 1: FINANCIAL INFORMATION Item I: Financial Statements for the three months ending September 30, 1999. (Unaudited) BALANCE SHEET, SEPTEMBER 30, 1999 Current Assets Cash on Hand $2,607.75 Accounts Receivable $106,527.21 Allowance for Doubtful Accounts $(1,295.00) Database Management Receivables $23,400.00 Inventory $7,682.80 - ------------------------------------------- Total Current Assets $138,922.76 Property and Equipment Furniture and Fixtures $31,869.00 Office Equipment $17,882.00 Equipment $98,858.00 Capitalized Equipment $125,352.40 Other Depreciable Property $911,391.00 Accum. Depreciation $(228,584.32) - ------------------------------------------- Total Property & Equipment $956,768.08 Other Assets Deposits $4,092.50 Total Other Assets $4,092.50 =========================================== Total Assets $1,099,783.34 Liabilities and Capital Current Liabilities Accounts Payable $216,227.60 Sales Tax Payable $2,669.94 Health Care Contributions $5,894.06 Due to Employees $6,374.59 Federal Payroll Taxes Payable $52,919.92 State Payroll Taxes Payable $5,842.31 SUTA Tax Payable $(122.91) IMA Short Term Note Payable $(3,150.00) State Tax Payable $800.00 - ------------------------------------------- Total Current Liabilities $287,455.51 Long Term Liabilities Capital Leases Obligation $123,583.40 Note Payable Crossfield $17,083.75 Note Payable Icon $15,000.00 Other Long Term Liabilities $1.00 401 K T Account $32,325.51 - ------------------------------------------- Total Long Term Liabilities $187,993.66 =========================================== Total Liabilities $475,449.17 Capital Beginning Balance Equity $16,700.00 Preferred Stock $50.00 Common Stock $296,403.00 Paid In Capital $19,898,631.00 Retained Earnings $(19,533,698.82) Net Income $(53,751.01) - ------------------------------------------- Total Capital $624,334.17 =========================================== Total Liabilities & Capital $1,099,783.34
INCOME STATEMENT FOR THE THREE MONTHS ENDING SEPTEMBER 30, 1999 Revenues 3 Months Ending 9/30/99 CA Registrations $45,991.47 CD Sales $3,698.00 Advertising Sales $8,880.00 Database Management $15,043.28 Interest Income $211.17 - ------------------------------------------- Total Revenues $73,826.92 Cost of Sales Cost of Goods $1,977.23 Contractor Commissions $738.08 Purchase Returns $6,000.00 - ------------------------------------------- Total Cost of Sales $8,715.31 Gross Profit $65,108.61 Expenses Accounting Fees $7,362.50 Auto Expenses $1,739.61 Bank Charges $434.95 Commissions $1,471.05 Credit Card Charges $36.71 Depreciation Expense $40,697.22 Employee Benefit $555.00 Freight Expense $240.70 Laundry/Cleaning $3.00 Legal/Professional $907.34 Meals/Entertainment $887.88 Office Expense $744.60 Payroll Tax Expense $2,238.55 Postage Expense $263.74 Rent $12,112.50 Computer Leases $883.87 Repairs Expense $391.26 Salaries Expense $10,323.00 Employee Commissions $723.34 Subcontractor Fees $652.00 Software Upgrades $74.90 Telephone Expense $7,899.37 Travel Expense $1,735.36 Utilities Expense $2,289.42 Wages Expense $15,804.40 Other Expense $387.35 - ------------------------------------------- Total Expenses $118,859.62 Net Income $(53,751.01)
STATEMENT OF CASH FLOW FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 Cash Flows from Operations Net Income $(53,751.01) Adjustments to reconcile net income to net cash provided Accum Depreciation $40,697.22 Accounts Receivable $(45,324.28) Database Management Receivable $(8,084.68) Inventory $(923.77) Accounts Payable $36,297.49 Sales Tax Payable $92.61 Federal Payroll Taxes $6,374.42 State Payroll Taxes $406.72 SUTA Tax Payable $16.88 IMA Short Term Note $(1,350.00) - ------------------------------------------- Total Adjustments $28,202.61 Net Cash from Operations $(25,548.40) Cash from Investing Activities $0.00 Net Cash Used in Investing $0.00 Cash From Financing Activities Used For 401 K T Account $(25,900.94) Net Cash used in Financing $(25,900.94) Net increase (decrease) in cash$(51,449.34) Summary Cash Balance at end of Period $2,607.75 Cash Balance at Beginning of Period$(32,757.26) Net Increase (decrease) in Cash $ (30,149.51)
STATEMENT OF CHANGES FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 Source of Working Capital Net Income $(53,751.01) Add back items not requiring working capital Accum Depreciation $40,742.22 Working Capital from Operations $(13,053.79) Total Sources $(13,053.79) Uses of working Capital 401 K T account $(25,900.94) Total uses $(25,900.94) Analysis of components of changes Increase (decrease) in current assets Cash of hand $(51,449.34) Accounts Receivable $45,324.28 Database Management Receivables $8,084.68 Inventory $923.77 (Increase) Decrease in CurrentLiabilities Accounts Payable $36,297.49 Sales Tax $(92.61) Federal Payroll Taxes $(6,374.42) State Payroll Taxes $(406.72) SUTA Tax $(16.88) IMA Short Term Loan $1,350.00 Net Change $(38,954.73)
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations. On March 9, 1998, pursuant to an Agreement for Purchase and Sale of Specified Business Assets ("Purchase Agreement"), a Promissory Note ("Note"), and a Security Agreement ("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"). 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. 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. 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. 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 sf. of premises on November 06,1998 in Santa Clarita for its CA location. Currently, this is the only California location of the Company. 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. 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. 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 produces and sells educational CD-ROMS. 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. During this period, the Company completed production of CD's for the Interactive Music Expo, Health, the Healthy Living and Holistic Health Expo, and Independent Insurance Association of Indiana. Database management 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 has a database management contract with Dunn and Bradstreet, and during this period, the Company entered into a contract with Walter Karl, Inc., a division of InfoUSA, Inc. whereby, Walter Karl, Inc. will broker the company's database . 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. The Company continues its effort to increase the CD-ROM production and associated sales. The Company expects difficulty in financing the growth of the increased business and has been concentrating on raising capital or obtaining a line of credit. 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. PART II Item 1: 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. Item 6. Exhibits and Reports on Form 8-K A report on Form 8-K was filed on February 16, 1999 and reported under Item 2 the Purchase of Specified Assets from Integrated Marketing Agency, Inc. The assets purchased consisted a promissory note of $550,000 payable to IMA and issued by Advanced Oxygen Technologies date March 09, 1998 and 1,670,000 Preferred Shares of Advanced Oxygen Technologies. IMA, and Advanced Oxygen Technologies, Inc. provided each other a mutual release of liability. Exhibit 1, contained therein defined the terms and conditions of the transaction. SIGNATURE In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 12, 1999 /s/ Robert E. Wolfe/s/ Robert E. Wolfe, Chairman of the Board and Chief Executive Officer and Principal Financial Officer EX-27 2
5 3-MOS JUN-30-2000 SEP-30-1999 2,607 0 166,224 (1,295) 7,682 138,922 1,185,352 (228,584) 1,099,783 287,455 187,993 16,700 50 296,403 0 1,099,783 73,826 73,826 8,715 8,715 118,859 0 0 (53,751) 0 (53,751) 0 0 0 (53,751) (.002) (.002)
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