-----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, IemjMSC6xQ703priZOL/YDW9JoqFAYHBGjZLszToIgk6TtrmPfOxsKngtQxcZu2f kbJevdLw48XptG2nyaAV1A== 0000352991-99-000010.txt : 19990518 0000352991-99-000010.hdr.sgml : 19990518 ACCESSION NUMBER: 0000352991-99-000010 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: 99625152 BUSINESS ADDRESS: STREET 1: 26883 RUETHER AVENUE STREET 2: 230 PARK AVE STE 1000 CITY: SANTA CLARITA STATE: CA ZIP: 91351 BUSINESS PHONE: 805-298-3333 MAIL ADDRESS: STREET 1: ADVANCED OXYGEN TECHNOLOGIES, INC. STREET 2: 26883 RUETHER AVENUE CITY: SANTA CLARITA STATE: CA ZIP: 91351 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 March 31, 1999 ( )TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT COMMISSION OF 1934 For the Transition period March 31, 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) (805)-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 March 31, 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 March 31, 1999. (Unaudited) . . . . .3 Balance Sheet. . . . . . . . . . . . .3 Income Statement . . . . . . . . . . .5 Statement of Cash Flow . . . . . . . .7 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . .9 Y2K (Year 2000 Problem). . . . . . . 11 PART II. . . . . . . . . . . . . . . . . . . . 12 Item 1: Legal Proceedings . . . . . . . . 12 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURE. . . . . . . . . . . . . . . . . . . 13 PART 1: FINANCIAL INFORMATION Item I: Financial Statements for the three months ending March 31, 1999. (Unaudited) Balance Sheet of Advanced Oxygen Technologies, Inc. for the three months ending March 31, 1999 (UNAUDITED) ASSETS 1999 Current Assets 03/31/99 Regular Checking Account <2,454.16 Payroll Checking Account <6,424.67> Money Market Account 15,021.63 Client Fees Receivables 19,715.86 Contracts Receivables 53,543.96 ITSMA Receivables <7,685.50> Mecklermedia InternetWorld 1,608.59 Other Receivables <1,276.00> Allowance for doubtful Account <1,295.00> Database Management Receivable 18,625.43 Inventory 156.26 Inventory 6,051.15 Inventory CD's <200.00> Total Current Assets 95,381.68 Property and Equipment Furniture and Fixtures 31,869.00 Office Equipment 17,882.00 Equipment 98,858.00 Capitalized Equipment 25,406.00 Other Depreciable Property 911,391.00 Accum. Depreciation-Furniture <4,008.36> Accum. Depr. Office equipment <1,788.00> Accum. Depreciation-Equipment <62,728.12> A/D Capitalized Equipment <2,118.00> Accum. Depreciation Other <76,547.40> Total Property & Equipment 938,216.12 Other Assets Deposits 4,092.50 Total Assets 1,037,690.30 LIABILITIES AND CAPITAL CURRENT LIABILITIES Accounts Payable 11,284.20 Accounts Payable 177,625.59 Sales Tax Payable <27.06> Sales Tax Payable 2,274.80 Health Care Contributions 5,894.07 Federal Payroll Taxes payable 42,805.66 State Payroll Taxes Payable 5,246.46 SUTA Tax Payable <154.40> IMA Short Term Note Payable 450.00 State Tax Payable 800.00 Total Current Liabilities 245,299.32 LONG TERM LIABILITIES Capital Lease Obligation 23,637.00 Note Payable, Crossfield 6,500.00 Note Payable, Crossfield <4,260.50> ICON 2 year Note 15,000.00 Other Long-Term Liabilities 1.00 Other Long-Term Liabilities 10,625.50 Total Long Term Liabilities 51,503.00 Total Liabilities 296,802.32 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 <20,444,662.14> Net Income 973,766.12 Total Capital 740,887.98 Total Liabilities and Capital 1,037,690.30
Income Statement for Advanced Oxygen Technologies, Inc. for the Three Months Ending December 31, 1998 (UNAUDITED) 3 months 9 months REVENUES Income Consulting 0.00 105,200.00 CA Registrations 0.00 346,034.17 CD Sales Santa Clarita 1,419.00 142,931.96 CA Sponsor/Ad Income 11,835.00 11,835.00 CA Client Contract Income 0.00 12,190.19 CA Database Management 7,071.51 20,104.83 Commission 0.00 69,099.00 TOTAL REVENUES 20,325.51 707,395.15 COST OF SALES Cost of Goods 14.20 7,648.86 Cost of Sales Freight 0.00 <5,387.90> Independent Contractors 0.00 52,339.75 Royalty Fees on Sales 0.00 16,008.53 Purchase Returns/allowances 0.00 510.00 TOTAL COST OF SALES 14.20 71,119.24 GROSS PROFIT 20,311.66 636,275.35 EXPENSES IC Reimbursable Expense <137.00> 274.00 Advertising Expense 0.00 <6,177.08> Accounting/Prof. Fee 287.25 32,665.00 Auto Expenses 198.35 198.35 Bad Debt Expense 0.00 <45,554.00> Bank Charges 533.94 7,437.14 Closing Costs 0.00 26,910.15 Commissions & Fees Exp 0.00 <572.42> Credit Card Charges 0.00 1,490.68 Depreciation Expense 40,697.22 62,751.96 Dues 151.19 1,756.19 Employee Benefit 751.48 7,359.57 Freight Expense 382.43 <1,956.79> Interest Expense 4,036.01 28,252.07 Cleaning Expense 0.00 <3.00> Cleaning Expense 290.06 1,422.49 Legal/Professional 0.00 <24,821.00> Legal/Professional 139.00 <8,120.89> Maintenance Expense 0.00 718.00 Moving Expense 25.00 996.36 Entertainment 638.84 591.82 Office Expense 1,965.55 2,790.65 Payroll Tax Expense 2,293.49 15,489.01 Postage Expense 620.34 5,188.12 Printing and Reproduction 777.34 18,132.58 Professional Salaries (billable) 0.00 40.00 Transfer Agent Expense 1,550.00 1,785.00 Professional Salaries, non Billable 0.00 695.74 Rent or Lease Expense 12,112.50 24,304.00 Computer/Equip Leases 11,336.69 32,379.99 Repairs Expense 0.00 550.00 Transcribing Expense 0.00 34,819.74 Salaries Expense 20,448.52 106,769.64 Employee Commission Expense 967.62 8,267.53 Subcontract fees 520.74 16,114.92 Supplies Expense 218.06 3,003.85 Computer Software Upgrades 162.35 620.11 Telephone Expense 13,489.76 54,957.58 Travel Expense 6,542.46 14,983.93 Utilities Expense 1,592.49 3,574.08 Wages Expense 4,755.94 63,465.53 CA Overtime Wage Expense 0.00 146.25 Other Expense 191.70 404.69 TOTAL EXPENSES 127,539.57 494,101.54 Extraordinary Income Bad Receivables Income <106,244.83> <196,887.99> Interest Income 0.87 55.00 Other Income 30.00 2,461.28 2/16/99 Forgiveness of Deb 1,021,894.11 1,021,894.11 Total Extraordinary Income 915,722.35 831,591.75 NET INCOME 808,494.09 973,766.12
Statement of Cash Flow for Advanced Oxygen Technologies, Inc. for the Three Months Ending March 31, 1999 (UNAUDITED) 3 months 9 months Cash Flows From Operating Activities Net Income 808,494.09 973,766.12 Adjustments to reconcile net income to net cash provided by operating activities Accum. Depreciation-Furniture 616.50 2,415.00 Accum. Dep. Office Equipment 0.00 894.00 Accum Dep. Equipment 39,631.89 57,785.52 A/D Capitalized Equipment 0.00 1,059.00 Accum. Depreciation, other 448.83 598.44 Client Fees Receivables 106,285.33 77,675.15 Contracts Receivable <396.97> <52,729.54> Knowledge Alliance Receivables 2,390.00 2,390.00 ITSMA Receivables 4,190.00 40,350.50 DMDNY Receivables 0.00 4,000.00 NMS Receivables 0.00 1,190.00 M3 Learning 0.00 4,590.00 Mecklermedia 310.00 8,048.41 Other Receivables 1,202.00 9,642.26 Allowance for Doubtful accounts 0.00 1,295.00 Database Receivables <5,586.24> <18,619.56> A/R Reserve 0.00 <45,554.00> Inventory 0.00 <156.26> Inventory 14.20 <2,526.70> Inventory CD's 0.00 200.00 Accounts Payable 71.63 1,477.73 Accounts Payable 23,523.21 120,941.59 Accrued Expenses 0.00 <24,821.00> Accrued Expenses 0.00 <16,484.00> Sales Tax Payable 61.22 598.81 Health Care Contributions 842.96 4,543.13 Federal Payroll Taxes 6,578.26 15,644.88 State Payroll Taxes Payable 502.08 3,605.74 SUTA Tax Payable 26.04 65.14 IMA Short Term Note Payable <450.00> <450.00> Payable to Client 0.00 <61,418.00> Deferred Income Commission 0.00 <7,681.00> TOTAL ADJUSTMENTS 180,260.94 128,570.79 Net Cash Provided by Operations 988,755.03 1,102,336.91 CASH FLOWS FROM INVESTING Net cash used in investing <55.00> <4,092.50> Cash flows from financing activities Proceeds from: Notes Payable Jens Olsen 0.00 8,400.00 Notes Payable Crossfield 0.00 5,314.50 ICON 2 year Note 15,000.00 15,000.00 Preferred Stock 0.00 10,000.00 Used for: Notes Payable Olsen 0.00 <1,740.50> Notes Payable Jens Olsen 0.00 <8,400.00> Note Payable Crossfield 0.00 <1,500.00> Note Payable Crossfield 0.00 <19,500.00 > Note Payable IMA <516,714.06> <528,466.48> Other Long Term Liabilities 0.00 <4,374.50> Preferred Stock 0.00 <10,000.00> Paid in Capital <500,000.00> <500,000.00> Net Cash Used in Financing <1,001,714.06> <1,035,266.98> Net Increase (decrease) in cash <13,014.03> 62,977.43
SUMMARY Cash Balance at End 6,142.80 6,142.80 of Period Cash Balance at beginning 678.52 56,834.63 of period Net Increase in cash 6,821.32 62,977.43
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"). The Company uses the Assets to generate revenues from sales of Multi-Media CD-ROMS, database management and fax broadcasting. 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 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. On November 6, 1998, the Company completed its move to its new California location, 26883 Ruether Avenue, Santa Clarita, CA 91351. Currently this location is the only location the Company has operations. On November 10, 1998 the Company entered into a lease with NEC Leasing company for a lease of NEC NEAX 2000 IVS phone system for the Santa Clarita, CA location. 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 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. The Company also continues to explore potential mergers, acquisitions, sales and purchases with other companies. 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 possibly 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. PART II Item 1: Legal Proceedings 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 will dispute the amount owed. 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. On March 17, 1999 a judgement was entered against AOXY for $5,000. 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 has been 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 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: January 27, 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-30-1999 MAR-31-1999 6,142 0 84,531 (1,295) 5,581 95,381 1,089,494 (147,189) 1,037,690 245,299 51,503 0 50 296,403 16,700 1,037690 20,325 20,325 14 14 46,145 (106,244) 4,036 808,494 0 808,494 0 1,021,966 0 808,494 0.03 0.03
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