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, 2001
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, 2001, Issuer's revenues were $49,296
The aggregate market value of Common Stock at June 30, 2001 held by non-affiliates approximated $114,560.85 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 32,973,585 issued and outstanding shares of the registrant's Common Stock, $.01 par value.
Transitional Small Business Disclosure Format (check one):
Yes[ ] No [ X ]
Table of Contents
Table of Contents 2
PART I 3
ITEM 1- DESCRIPTION OF BUSINESS 3
THE PATENT SALE 3
STOCK ACQUISITION AGREEMENT, 12/18/97 3
PURCHASE AGREEMENT, 12/18/97 3
WAIVER AGREEMENT, 12/18/97 4
CHANGE OF DIRECTORS 4
TRUST AGREEMENT, 12/18/97 4
ACQUISITION OR DISPOSITION OF ASSETS, MARCH 09,1998. 4
TEUBER EMPLOYMENT AGREEMENT TERMINATION 5
SET OFF OF PROMISSORY NOTE, 9/4/98 5
GAYLORD EMPLOYMENT AGREEMENT TERMINATION 5
CALIFORNIA FACILITIES, 9/30/98 5
DEMAND FOR INDEMNIFICATION, 12/9/98 5
PURCHASE AGREEMENT OF 1/29/99 6
ARTICLES OF INCORPORATION AMENDMENT OF 04/18/2000 6
PURCHASE AGREEMENT OF 01/12/2001 6
EMPLOYEES 6
ITEM 2. DESCRIPTION OF PROPERTY 6
ITEM 3. LEGAL PROCEEDINGS 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 7
PART II 8
ITEM 5. MARKET OF REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 8
ITEM 6. PLAN OF OPERATION. 9
BUSINESS PLAN 9
CLIENT AND INDUSTRY REPRESENTATION 9
FORWARD LOOKING STATEMENTS 9
ITEM 7. AUDITED FINANCIAL STATEMENTS 9
BALANCE SHEETS 12
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT 13
STATEMENTS OF CASH FLOWS 14
STATEMENTS OF STOCKHOLDERS' DEFICIENCY 15
NOTES TO FINANCIAL STATEMENTS 15
ITEM 8. Changes in and Disagreements with Accounts on Accounting and Financial Disclosure 21
PART III 21
ITEM 9.Directors and Officers of the Registrant 21
ITEM 10. Executive Compensation 21
OPTION GRANTS DURING 1999; VALUE OF OPTIONS AT YEAR-END 22
Compensation Committee Report 22
Compensation Philosophy 22
Base Salary 22
Stock Option Awards 22
Board of Directors Compensation 24
ITEM 11. Security Ownership of Certain Beneficial Owners and Management 24
ITEM 12. Certain Relationships and Related Transactions 24
ITEM 13. Exhibits and Reports on Forms 8-K 25
Exhibits 25
SIGNATURES 26
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. From 1998 through 2000, the business consisted 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. From 2000 forward, the business consisted solely of database management.
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 | Number of Shares | Percent Ownership |
| Robert E. Wolfe | 50,000 | 0.17% |
| Crossland (Belize) | 6,312,500 | 21.30% |
| Triton International | 375,000 | 1.26% |
| Coastal Oil, Ltd | 5,9375,500 | 20.03% |
| Crossland Ltd | 5,937,500 | 20.03% |
| Eastern Star, Ltd | 5,937,500 | 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. ("Landlord") 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. As of June 30, 2001 the Company had abandoned the premises and had begun negotiations with the Landord for release of the remaining lease obligation 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 paid $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.
ARTICLES OF INCORPORATION AMENDMENT OF 04/18/2000
On April 18, 2000, notice was given that the Board of Directors and persons owning 64.7%, or 19,180,500 shares of common stock of Advanced Oxygen Technologies, Inc. have elected to adopt the following proposals: 1. To amend and restate the Company's Restated Articles of Incorporation to increase the Company's authorized Common Shares from 30,000,000 to 90,000,000 shares, 2. The Board of Directors has approved an amendment to the Company's Certificate of Incorporation to change the name of the Company to AOXY, Inc. The Company's current name was adopted in 1985 when the Company was focused on applications of its technology which it has since disposed of or otherwise abandoned. The Board of Directors believes it would be more appropriate for the Company to utilize a corporate name which more accurately describes the current focus of the Company or is not misleading as to the Company's operations. The above amendments to the Certificate of Incorporation will be filed with the Secretary of State of the State of Delaware, and the Name Change will become effective as of 5:00 p.m. Eastern Time, on the date of such filing.
PURCHASE AGREEMENT OF 01/12/2001
The Company sold to Purchasers (the "Purchasers" as defined in the Purchase Agreement) an amount of three million (3,000,000) shares (the "Regulation S Shares") of the capital stock of AOXY, Inc., ("AOXY") pursuant to the Purchase Agreement ("Purchase Agreement" Exhibit A) in an amount to each Purchaser as set forth on Schedule 1 of the Purchase Agreement attached thereto. The Regulation S Shares have not been 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 Regulations S Shares consisted of $125,000 cash and forgiveness of debt. (Exhibit A attached hereto).
EMPLOYEES
As of June 30, 2001 the Company had a total of 1 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
The Company was 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. A judgment against the Company has been filed with the Los Angeles Superior Court.
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. A judgment was filed against the Company and the Company has subsequently made payments to Mr. Rafalovich.
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. A judgment was filed against the Company.
On October 08, 1999, Acutrak, Inc. filed suit against the Company in the Municipal Court of Newhall, #99C01251 alleging non payment of invoices of $9.070.45. A judgment was filed on April 3, 2000 against the company.
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 judgment on July 06, 1998 from a case filed May 29,1998, to be amended to the Company. The Motion was denied and the judgment 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 15th day of each month beginning on June 15, 1999 until any debts owed are paid in full.
On August 01 2001, America United Enterprises, Inc filed a notice pursuant to Section 1951.3 of the Civil Code concerning the real property lease by the Company at 26883 Ruether Avenue, Santa Clarita CA whereby the real property at the locatation will be deemed abandoned and the lease will terminate on August 14 2001.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On April 18, 2000, notice in the form of Pre 14A, (see exhibits) was given that the Board of Directors and persons owning 64.7%, or 19,180,500 shares of common stock of Advanced Oxygen Technologies, Inc. have elected to adopt the following proposals:
1. To amend and restate the Company's Restated Articles of Incorporation to increase the Company's authorized Common Shares from 30,000,000 to 90,000,000 shares. The above amendments to the Certificate of Incorporation will be filed with the Secretary of State of the State of Delaware, and the Name Change will become effective as of 5:00 p.m. Eastern Time, on the date of such filing.
2. An amendment to the Company's Certificate of Incorporation to change the name of the Company to AOXY, Inc. The Company's current name was adopted in 1985 when the Company was focused on applications of its technology which it has since disposed of or otherwise abandoned. The Board of Directors believes it would be more appropriate for the Company to utilize a corporate name which more accurately describes the current focus of the Company or is not misleading as to the Company's operations. The above amendments to the Certificate of Incorporation will be filed with the Secretary of State of the State of Delaware, and the Name Change will become effective as of 5:00 p.m. Eastern Time, on the date of such filing.
3. The selection of Bernstein, Pinchuk and Kaminsky. LLP as the Company's independent public accountant for the fiscal year ended June 30, 1999 and 2000 and has further directed that management submit the selection of independent public accountants for ratification by the stockholders by written consents. Stockholder ratification of the selection of Bernstein, Pinchuk and Kaminsky, LLP as the Company's independent public accountants is not required by the Company's by-laws or otherwise and the Company had begun using some of their services.
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, 2000 | High | Low |
| First Quarter | 0.078 | 0.015 |
| Second Quarter | 0.125 | 0.031 |
| Third Quarter | 0.328 | 0.031 |
| Fourth Quarter | 0.141 | 0.031 |
| Fiscal Year Ended June 30, 2001 | High | Low |
| First Quarter | 0.07 | 0.022 |
| Second Quarter | 0.04 | 0.009 |
| Third Quarter | 0.025 | 0.007 |
| Fourth Quarter | 0.04 | 0.009 |
At September 30, 2000, the closing bid price of the Company's Common Stock as reported by the National Quotation Bureau, Inc, was $0.01
ITEM 6. PLAN OF OPERATION.
BUSINESS PLAN
The Company had a location in Santa Clarita, CA and was the location for operations. The Company is in negotiation for the release of the obligations on this facility. The Company, during the fiscal year ending June 30, 2001, had sales soley from database management.
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.
During the fiscal year ending June 30, 2001, the Company significantly reduced its expenses, reduced or discontinued unprofitable operations, and concentrated on database management. 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 periodall orders and sales were completed trouhg outsourced sales. AOXY has 2 active contracts for Database Management. AOXY fulfils these contracts by providing, selling, updating and/or renting database information.
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. AUDITED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AND REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
ADVANCED OXYGEN TECHNOLOGIES, INC.
June 30, 2001 and 2000
CONTENTS
Page
Report of Independent Certified Public Accountants 1
Financial Statements
Balance Sheets 2
Statements of Operations and Accumulated Deficit 3-4
Statements of Cash Flows 5
Statements of Stockholders' Deficiency 6
Notes to Financial Statements 7-14
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Advanced Oxygen Technologies, Inc.
We have audited the accompanying balance sheet of Advanced Oxygen Technologies, Inc. as of June 30, 2001 and 2000 and the related statements of operations and accumulated deficit, cash flows and stockholders' deficiency for the years then ended. 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 made 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 Advanced Oxygen Technologies, Inc. as of June 30, 2001 and 2000 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As shown in the financial statements, the Company incurred operating losses of $550,797 and $389,378 respectively during the fiscal years ended June 30, 2000 and 2001, and as of those dates, the Company's current liabilities exceeded its current assets by $228,625 and $254,643, respectively. The foregoing raise substantial doubt about the Company's ability to continue as a going concern. The Company's continuation as a going concern is dependent on the attainment of profitable operations and meeting its obligations on a timely basis. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Bernstein Pinchuk & Kaminsky LLP
New York, New York
September 28, 2001
Advanced Oxygen Technologies, Inc.
BALANCE SHEETS
| Assets | June 30, 2001 | June 30 2000 |
| Current Assets | ||
| Cash | $ | $ 44 |
| Database management receivable | 14,228 | 3,786 |
| Accounts receivable, net of allowances of $1295 (Note 3) | 935 | 935 |
| Inventory (Note 3) | 13,122 | |
| Total Current Assets | 15,163 | 17,887 |
| Property and Equipment-at cost, | ||
| net of accumulated depreciation and | ||
| amortization (Notes 3 & 4) | 325,462 | |
| Other Assets | ||
| Security Deposits | 4,093 | 4,093 |
| TOTAL ASSETS | 19,256 | 347,443 |
| LIABILITIES AND STOCKHOLDERS' DEFICIENCY | ||
| CURRENT LIABILITIES | ||
| Accounts payable | 223,246 | 199,952 |
| Payroll and sales taxes payable | 36,225 | 36,225 |
| Corporation taxes payable | 3,960 | 3,960 |
| Accrued salaries and expenses | 6,375 | 6,375 |
| Total Current Liabilities | 269,806 | 246,512 |
| LONG TERM LIABILITIES | ||
| Capital leas obligation (Note 8) | - | |
| Due to affiliate (Note 7) | 107,758 | 182,974 |
| Other long term liabilities | 11,886 | |
| 107,758 | 194,860 | |
| COMMITMENTS AND CONTINGENCIES (Note 6) | ||
| STOCKHOLDERS; DEFICIENCY- (Notes 1 &2) | ||
| Convertible preferred stock, Series 2, par value $0.01; authorized | ||
| 10,000,000 shares; issued and outstanding 5,000 shares | ||
| liquidating preference $25,000 | 50 | 50 |
| Convertible preferred stock, Series 3, par value $0.01; authorized and | 16,700 | 16,700 |
| Convertible preferred stock, Series 4; issued and outstanding, 2 shares |
| Convertible preferred stock, Series 5; issued and outstanding, 1 share | ||
| Common Stock/ par value $0.01; authorized, 30,000,000 shares; | ||
| issued and outstanding, 29,640,252 shares | 329,736 | 296,403 |
| Additional paid in capital | 20,490,298 | 20,398,631 |
| Accumulated deficit | (21,187,808) | (20,798,430) |
| Less treasury stock, at cost-1,670,000 shares of convertible | ||
| preferred stock, Series 3 | (7,284) | (7,284) |
| Total | (358,308) | (93,930) |
| TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | 19,256 | $347,442 |
See the accompanying accountants' report and notes to financial statements
- 2 -
Advanced Oxygen Technologies, Inc.
STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
| 30-Jun-01 | 30-Jun-00 | |
| Revenues (Note 1) | ||
| California registrations | $ | $45,991 |
| Compact disk sales | 3,867 | |
| Commissions | - | |
| Sponsor sales | 14,230 | |
| Database Management/consulting | 49,296 | 27,628 |
| Total Revenues | 49,296 | 91,716 |
| Costs and expenses | ||
| Cost of products | 13,122 | 10,296 |
| Commissions | 5,127 | |
| Sales royalties | - | |
| Salaries and wages | 39,836 | |
| Advertising | - | |
| Professional Fees | 5,938 | 18,309 |
| Rent (Note 6) | 53,960 | 38,826 |
| Computer and equipment lease | 29,638 | |
| Transcribing | - | |
| Subcontracting | (1,748) | |
| Telephone | 3,314 | 25,213 |
| Travel | 12,382 | 13,061 |
| Utilities | 22 | 5,235 |
| Payroll and other taxes | 4,256 | |
| Depreciation and amortization (Notes 3,4,5) | 151,447 | 337,753 |
| Postage Printing and reproduction | 758 | 2,074 |
| Corporate Franchise Tax | 800 | 800 |
| Bank and credit card charges | 2 | 3,083 |
| Other costs and expenses | 20,136 | 28,866 |
| Total Costs | 261,881 | 560,625 |
| Loss from operations before other income (expenses) | ||
| income tax expense, and extraordinary gain | (212,585) | (468,909) |
| Other income (expenses) | ||
| Interest Expense | (2,778) | (2,435) |
| Bad debt expense | (117,220) | |
| Abandonment of Furniture and Equipment (note 1) | (174,015) | - |
| Interest income | 24,598 | |
| Other income | 13,169 | |
| Total Other income (expense) | (176,793) | (81,888) |
| NET (LOSS) INCOME | (389,378) | (550,797) |
| Accumulated deficit at beginning of year | (20,798,430) | (20,247,633) |
| Accumulated deficit at end of year | (21,187,808) | ($20,798,430) |
| See the accompanying accountants' report and notes to financial statements |
| -3- |
| Basic and diluted earnings per share: | ||
| Loss before extraordinary gain | -0.01 | -0.02 |
| Extraordinary gain on forgiveness of debt | ||
| NET (LOSS) INCOME | (0.01) | (0.02) |
See the accompanying accountants' report and notes to financial statements
- 4 -
Advanced Oxygen Technologies, Inc.
STATEMENTS OF CASH FLOWS
| 30-Jun-01 | 30-Jun-00 | |
| Cash flows from operating activities | ||
| Net (loss) income | (389,378) | ($550,797) |
| Adjustments to reconcile net income to net cash | ||
| provided by operating activities: | ||
| Depreciation and amortization | 151,447 | 337,753 |
| Abandonment of furniture and equipment | 174,015 | - |
| Changes in operating assets and liabilities | ||
| Decrease in accounts receivable | (10,442) | 70,502 |
| Increase in inventories | 13,122 | (6,363) |
| Increase in other assets | 57 | |
| Increase in accounts payable | 23,294 | 19,262 |
| Increase in payroll and sales taxes payable | (19,074) | |
| Decrease in accrued liabilities | (4,493) | |
| Increase in income taxes payable | 2,060 | |
| Increase in due to affiliate | ||
| Increase in employee deferred savings payable | (58,226) | |
| Net cash provided by operating activities | (37,942) | (209,319) |
| Cash flow from investing activities: | ||
| Cash payments for the purchase of property | - | |
| Net cash used in investing activities | - | |
| Cash flow from financing activities: | ||
| Proceeds from issuance of long-term debt | - | |
| Loans from affiliate | 37,898 | 154,575 |
| Cash payment for purchase of treasury stock | - | |
| Proceeds from employee deferred savings | - | |
| Net cash provided by financing activities | 37,898 | 154,575 |
| NET INCREASE IN CASH | (44) | (54,744) |
| Cash and equivalents, beginning of year | - | 54,788 |
| Cash and equivalents, end of year | - | 44 |
| Supplemental Disclosures: | ||
| Interest Expense paid | 2,778 | 20,968 |
See the accompanying accountants' report and notes to financial statements
- 5 -
STATEMENTS OF STOCKHOLDERS' DEFICIENCY
| Common stock, par value $0.01, authorized, 90,000,000 shares; issued and outstanding as follows: | June 2001 | June 2000 |
| Balance at beginning of year 29,649,252 shares | $ 296,403 | $296,403 |
| Issued during year to unrelated parties for reduction in Company's balance due to affiliate, 3,000,000 shares | 30,000 | |
| Issued for 1 class 5 preferred stock share, 333,333 shares | 3,333 | |
| Balance at end of year 32, 973, 585 and 29,649,252 | 329,736 | 296,403 |
| Additional paid in capital | ||
| Balance at beginnin of year | 20,398,631 | 20,398,631 |
| Excess of reduction in due to affiliate over par value of shares issued | 95,000 | |
| Par Value of common stock exchanged for preferred share | (3,333) | |
| Balance at End of Year | 20,490,298 | 20,398,631 |
| Accumulated deficit: | ||
| Balance at beginning of year | (20,798,430) | (20,247,633) |
| Net loss for the year | (389,378) | (550,797) |
| Balance at the end of year | (21,187,808) | (20,798,430) |
| Other stockholders' deficiency accounts (no change during year) | ||
| Convertible preferred stock, net of treasury stock (see balance sheet) | 9,466 | 9,466 |
| Stockholders' deficiency at end of year | $(358,308) | (93,930) |
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND LINE OF BUSINESS
ORGANIZATION:
Advanced Oxygen Technologies, Inc. (formerly Aquanautic Corporation) (the "Company") was a specialty materials company in the development stage (as defined by the Financial Accounting Standards Board ("FASB") in Statement of Financial Accounting Standards ("SFAS") no. 7, "Accounting and Reporting by Development Stage Enterprises"). The Company's core technology consisted of a variety of materials, which have a high affinity for oxygen. Through 1993 the Company also conducted research through funding from various government agencies such as the office of Naval Research and from Small Business Innovative Research ("SBIR") grants, as well as through its own internally generated funds.
The Company's patent Rights and Trademark Rights were sold to W.R. Grace & Company - Connecticut ("Grace") in February 1995 for $236,000, net of applicable selling costs, in cash plus a royalty of 2% of the net sales price of any products sold by Grace which would, the sale of the Patent Rights notwithstanding, cause a patent infringement.
The Company has agreed to indemnify Grace for any out of pocket costs incurred because of the claims, litigation, arbitration, or other proceedings (a) relating to the validity or ownership of the Patent Rights, (b) relating to any infringement by the Patent Rights of any other patent or trademark owned by a third party, (c) relating to any breach by the Company of its representations, warranties, covenants in the Purchase Agreement, or (d) arising from any state of affairs existing at closing which was not this indemnity. The indemnity is for all such costs up to $75,000 and for 50% of such costs over $75,000. Amounts due Grace under the indemnity would be paid by withholding royalties from the Company.
The Company ceased its normal operation described above during 1995 and had dormant operations until March 1998. During 1997, the Company entered into the following agreements in preparation of starting a new line of business:
Stock Acquisition Agreement:
Pursuant to a Stock Acquisition dated as of December 18, 1997, the Company issued 23,750,000 shares of its common stock, par value $0.01 per share, to several investors for $60,000 in cash, plus consulting services with a fair value of $177,500. In December, 2000 an affiliated creditor received $125,000 to reduce the Company's debt from an unrelated buyer of 3,000,000 shares of common stock which the Company issued during the year
Waiver Agreement:
Three of the Company's shareholders paid $60,000 in cash to former directors for the Company's release from liability for repayment of an aggregate of $275,000, plus any interest accrued thereon. In addition, the Company entered into a Trust Agreement (described below) as additional consideration to the former directors.
NOTE 1 - (Continued)
Trust Agreement:
The Company assigned certain royalty rights and liabilities related to the technology sold to Grace to a trust. As part of the agreement, the trust assumed the obligations of the $275,000 in advances from the former directors.
On March 9, 1998, pursuant to an Agreement of Purchase and Sale of Specified Business Assets ("Purchase Agreement"), a Promissory Note, and a Security Agreement, the Company purchased certain tangible and intangible assets (the "Assets"), including goodwill and rights under certain contracts from Integrated Marketing Agency, Inc. ("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 consisted of (a) a cash down payment of $10,000, (b) a note payable of $550,000, and (c) 1,670,000 shares of the Company's Series 3 convertible preferred stock. As described in Note 10, the preferred shares automatically convert into the Company's common shares on March 2, 2000 in a manner that depends on the value of the common stock during the ten trading days immediately prior to March 1, 2000. However, as part of the Purchase Agreement, IMA has the option to redeem the converted shares for the aggregate sum of $500,000 by delivering written notice to redeem the converted shares within ten business days after the conversion date. At the time of the purchase, the fair value of the preferred shares was not clearly evident, even though it appeared to be less than $500,000. Therefore, the purchase price had a fair value of at least $1,060,000. The assets purchased were recorded based upon their fair values.
Pursuant to a Purchase Agreement dated January 28, 1999, the Company purchased the 1,670,000 shares of the Series 3 convertible preferred stock and the promissory note discussed in the preceding paragraph. As part of the agreement, the Company paid $15,000 to IMA, assumed a certain computer equipment lease with remaining obligations totaling $44,811 and executed a one-year $5,000 promissory note to IMA. In addition, both IMA and the Company provided mutual liability releases to each other. (See Note 8)
Line of Business:
After the Company purchased the assets of IMA in March 1998, the Company began its current operations of database management and CD-ROM production/sales. During the year ended June 30, 2001 all of the Company's revenues were from a single customer.
The following is a description of these business activities:
CD-ROM Production/Sales:
The Company produces a CD-ROM of client conferences, including the audio, video, graphics, and verbatim transcripts of the conferences and sells them through telemarketing.
NOTE 1 - (continued)
Event Sales:
The Company sells event registrations for conferences for its clients. The Company receives a commission on each registration sold.
Database Management:
The Company consults clients in effective marketing with databases and database management.
NOTE 2 - GOING CONCERN AND BASIS OF PRESENTATION:
The accompanying financial statements have been prepared in accordance with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. As shown in the financial statements, the Company incurred a large operating loss and had negative working capital at June 30, 2001. Furthermore, during the six months ended June 30, 2001 corporate revenues were only $6,028. These factors raise substantial doubt about the Company's ability to continue as a going concern.
In view of the matters described in the preceding paragraph, continued operations are dependent upon the Company's ability to continue to raise capital and generate positive cash flows from operations. These financial statements do not include any adjustments relating to the classification of recorded asset amounts or amounts and classifications of liabilities that might be necessary should the Company be unable to continue its existence.
Management plans to take the following steps, which it believes will be sufficient to provide the Company with the ability to continue in existence:
- Increase its business volume and customer base.
- Acquire additional debt or equity financing.
- Control its costs in order to achieve its profit goals.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition:
Product Sales:
Revenue is recognized after the reservation has been made and the time period for the registrant to cancel the registration and still receive a refund has expired.
Consulting Income:
Revenue is recognized at the time the consulting work is performed.
Income Taxes:
The Company accounts for income taxes under the asset and liability method of accounting. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is required when it is less likely than not that the Company will be able to realize all or a portion of its deferred tax assets.
Net Earnings per Share:
For the year ended June 30, 1999, the Company adopted SFAS No. 128, "Earnings per Share". Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were dilutive.
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all highly-liquid investments purchased with original maturities of three months or less to be cash equivalents.
Inventory:
Inventory is stated at the lower of cost (first-in-first-out method) or market.
Furniture and Equipment:
Furniture and equipment, including capitalized leases, are stated at cost less accumulated
NOTE 3 - (continued)
depreciation and amortization. The Company provided for depreciation and amortization using the straight-line method over the estimated useful lives or the term of the lease, whichever is shorter, as follows:
Furniture and fixtures 5 years
Office equipment 5 years
Computers and computer equipment 5 years
Capitalized leased equipment 5 years
Capitalized database cost 3 years
During the year ended June 30, 2001 the Company abandoned its furniture and equipment,
resulting in a charge to operations of $174,015 during the year ended June 30, 2001.
Estimates:
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates.
NOTE 4 - FURNITURE AND EQUIPMENT:
Furniture and equipment at June 30, 2000 consisted of the following:
| Furniture and Fixtures | 31,869 |
| Office Equipment | 17,882 |
| Computers and computer equipment | 98,858 |
| Capitalized equipment | 25,406 |
| Capitalized database | 911,391 |
| Total | 1,085,406 |
| Less accumulated depreciation and amortization | 759,944 |
| Net Total | 325,462 |
Depreciation and amortization expense for the years ended June 30, 2001 and 2000 was $151,447 and $337,753, respectively.
NOTE 5 - CAPITALIZED COST OF DATABASE RECORDS
The database records were part of the assets purchased from IMA in the Agreement of Purchase and Sale of Specified Business Assets on March 9, 1998. The records consist of information on individuals for marketing purposes. There were approximately 742,000 individuals included in the database at the time of purchase. The records were recorded at their estimated fair value at the time of purchase, which was $911,391. The cost of the database records has been amortized over a three-year period.
NOTE 6 - COMMITMENTS AND CONTINGENCIES:
Lease:
On October 1, 1998, the Company entered into a non-cancelable lease agreement for its operating facilities in Santa Clarita, California. Monthly rent of $4,038 is due with annual increases starting October 1, 1999.
Minimum annual non-cancelable commitments under the lease are as follows:
Year Ending June 30,
| 2002 $ 56,052 |
| 2003 58,904 |
| 2004 19,952 |
| Total $134,908 |
At June 30, 2001, the Company had not paid $17.860 rent due under this lease. Subsequent to June 30, 2001, the Company vacated the premises. Rent expense under this lease aggregated
$53,960 during the year ended June 30, 2001. The Company was negotiating with the landlord to obtain a release from the balance of the lease in exchange for payments of balances owing.
Litigation:
The Company is a defendant in various legal proceedings and claims that have arisen in the ordinary course of business. Under current circumstances, no determination can be made as to the ultimate outcome of the legal proceedings and claims or as to the necessity for any provision, in the accompanying financial statements, for any liability that may result from final adjudications.
NOTE 7 - DUE TO AFFILIATE
Due to affiliate at June 30, 2001 and 2000 consisted of advances payable to Crossfields, Inc., a related party, which are not collateralized, non-interest bearing, and payable upon demand, however, the Company does not expect to make payment within one year. During the year ended June 30, 2001 this affiliate reduced the Company's debt to it by $125,000 in exchange for receiving $125,000 paid by unaffiliated purchasers of 3,000,000 shares of the Company's newly issued common stock.
NOTE 8 - CAPITAL LEASE OBLIGATIONS:
In the fiscal year ended June 30, 2000, the Company terminated three leases for equipment which had an expiration date in 2003 and returned all leased equipment covered by such leases to the lessor.
NOTE 9 - INCOME TAXES
The current provision for income taxes is the minimum tax due to the State of California.
As of June 30, 2001, the Company had federal and state net operating loss carryforwards of approximately $18,700,000. These carryforwards are beginning to expire since they are unused. Section 382 of the Internal Revenue Code imposes substantial restrictions on the utilization of net operating loss and tax credit carryforwards when a change in ownership occurs.
The overall effective tax rate differs from the federal statutory tax rate of 34% due to operating losses and other deferred assets not providing benefit for income tax purposes.
NOTE 10 - SHAREHOLDERS' EQUITY:
Preferred Stock
The Company is authorized to issue 10,000,000 shares of $0.01 par value preferred stock. The Company may issue any class of preferred shares in series. The board of directors has the authority to establish and designate series and to fix the number of shares included in each such series.
Series 2 Convertible Preferred Stock
Each Series 2 preferred share is convertible into two shares of common stock at the option of the holder. Each Series 2 preferred share also includes one warrant to purchase two common shares for $5.00. The warrants are exercisable over a three-year period. In the event of the
liquidation of the Company, holders of Series 2 preferred stock would be entitled to receive $5.00 per share, plus any unpaid dividends declared on the Series 2 preferred stock from the funds remaining after the Company's creditors, including directors, have been paid. There have been no dividends declared.
During November 1997, 172,000 shares of Series 2 preferred stock were converted into 344,000 shares of the Company's common stock.
Note 10 - (continued)
Series 3 Convertible Preferred Stock:
Each share automatically converts on March 2, 2000 into either (a) one (1) share of the Company's common stock if the average closing price of the common stock during the ten trading days immediately prior to March 1, 2000 is equal to or greater than sixty-six cents ($0.66) per share, or (b) one and one-half (1 1/2) shares of common stock if the average closing price of the common stock during the ten trading days immediately prior March 1, 2000 is less than sixty-six cents ($0.66) per share. (See Note 1)
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 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, 2001. All directors are elected for one-year terms, which expire as of the date of the Company's annual meeting.
| Name | Age | Position | Director Since: |
| Robert E. Wolfe | 38 | Chairman of the Board and CEO | 1997 |
| Joseph N. Noll | 78 | Director | 1997 |
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 $350,000 annual for the year ending June 30, 2001. 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, 2001 to officers or other employees. Prior to the Stock Acquisition of December 12, 1997, 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, 2001.
The following table sets forth the total compensation paid or accrued to its Chief Executive Officer, Robert E. during the fiscal year ending June 30, 2001. There were no other corporate officers in any of the last three fiscal years.
Executive Compensation
| Name | Yr. | Salary | Bonus | Other Compensation | Restricted Awards | LTIP Awards | Other |
| Robert E. | 2001 | 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. during the fiscal year ended June 30, 2001 and unexercised options held as of that date. Mr. Wolfe did not exercise any options during fiscal 2001.
| Name | # of Securities | % Total Options | Option Price | Exercise Price | Expiration Date |
| Robert E. | 0 | 0 | 0 | 0 | 0 |
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, 2001 1,000,000 shares of Common Stock were available for issuance under future option grants.
Board of Directors Compensation
As of June 30, 2001 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, 2001, 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.
| Name and Address of Beneficial Owner | No. Shares fully diluted | % ownership |
| Crossland Ltd. Belize
60 Market Square PO Box 364 Belize City, Belize, Central America |
6,312,500 | 19.14% |
| Coastal Oil, Ltd.
40 Santa Rita Road Corazal, Belize, Central America |
5,937,500 | 18.00% |
| Crossland, ltd.
104B Saffrey Square Nassau, Bahamas |
5,937,500 | 18.00% |
| Eastern Star, Ltd
Bay Street Nassau Bahamas |
3,280,000 | 9.95% |
| Robert E. Wolfe | 50,000 | 0.15% |
| Joseph N. Noll | 0 | 0.00% |
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
s) Amendment of the Articles of Incorporation dated April 18, 2000, incorporated by reference to the Registrant's 2000 definitive Proxy Statement filed pursuant to Regulation 14 A attached hereto.
t) Sale of Equity Securities of January 12, 2001. Incorporated by reference to the Registrant's report on Form 8-K dated January 12, 2001 also attached hereto. The Company sold to Purchasers (the "Purchasers" as defined in the Purchase Agreement) an amount of three million (3,000,000) shares (the "Regulation S Shares") of the capital stock of AOXY, Inc., ("AOXY") pursuant to the Purchase Agreement ("Purchase Agreement" Exhibit A) in an amount to each Purchaser as set forth on Schedule 1 of the Purchase Agreement attached thereto. The Regulation S Shares have not been 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 Regulations S Shares consisted of $125,000 cash and forgiveness of debt.
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 paid $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.
A report on Form 8-K was filed on January 12, 2001 for the Sale of Equity Securities whereby the Company sold to Purchasers (the "Purchasers" as defined in the Purchase Agreement) an amount of three million (3,000,000) shares (the "Regulation S Shares") of the capital stock of AOXY, Inc., ("AOXY") pursuant to the Purchase Agreement ("Purchase Agreement" Exhibit A) in an amount to each Purchaser as set forth on Schedule 1 of the Purchase Agreement attached thereto. Consideration for the Regulations S Shares consisted of $125,000 cash and forgiveness of debt.
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: September 30, 2001 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: September 30, 2001 By (Signature and title):
/s/Joseph Noll /s/
-------------------------
Joseph N. Noll
Director
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
January 12, 2001
(Date of Earliest Event Reported)
ADVANCED OXYGEN TECHNOLOGIES, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware 000-09951 91-1143622
(State of Incorporation) (Commission File No.) (I.R.S. Employer Identification No.)
26883 Ruether Avenue
Santa Clarita, CA 91351
(Address of Principal Executive Offices)
Registrant's Telephone Number: (661) 298-3333
230 Park Avenue, Suite 1000
New York, NY, 10169
(Former Address)
=====================================================================
_ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION & EXHIBITS.
(c) Exhibits
Exhibit A Stock Acquisition Agreement
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.
The Company sold to Purchasers (the "Purchasers" as defined in the Purchase Agreement) an amount of three million (3,000,000) shares (the "Regulation S Shares") of the capital stock of AOXY, Inc., ("AOXY") pursuant to the Purchase Agreement ("Purchase Agreement" Exhibit A) in an amount to each Purchaser as set forth on Schedule 1 of the Purchase Agreement attached thereto. The Regulation S Shares have not been 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 Regulations S Shares consisted of $125,000 cash and forgiveness of debt.
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 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; and (vi) it agreed that it would not transfer Regulation S Shares to a U.S. Person before the 360th day from the date the Buyer purchased the Regulation S Shares.
AOXY represented to the Buyers that it had not conducted any "directed selling efforts" 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.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: January 12, 2001
ADVANCED OXYGEN TECHNOLOGIES, INC.
BY:/s/ Robert E. Wolfe /s/
-------------------------------
Robert E. Wolfe
President
Exhibit A
PURCHASE AGREEMENT
THIS AGREEMENT made as of the 31st day of December, 2000, (herein, together with the Schedules attached hereto, referred to as "Agreement") by and among the persons listed on Schedule 1 hereto (herein referred to collectively as "Purchasers" and each a "Purchaser") and AOXY Inc., formerly named Advanced Oxygen Technologies, Inc. (herein referred to as "Seller").
In reliance upon the representations and warranties made herein and in consideration of the mutual agreements herein contained the parties hereby agree as follows:
1. SALE AND PURCHASE OF STOCK.
a. Sale of Stock to Purchasers. Seller shall at the closing of the transactions hereinafter provided:
i. Sell, transfer, assign and deliver to Purchasers an amount of three million (3,000,000) shares (the " Initial Shares") of the capital stock of AOXY, Inc., a Delaware Corporation, ("AOXY") in an amount to each Purchaser as set forth on Schedule 1 hereto.
b. Consideration for Stock. In consideration of the sale of the Initial Shares and Option Shares,
i. Purchasers shall pay at the Closing (herein defined) to Seller for the Initial Shares, the aggregate amount of US$125,000 (the "Initial Purchase Price") in the form of an official bank check or a certified check of the Purchasers payable to the Seller in the amount specified on Schedule 1 and Purchasers shall forgive any debt owed by AOXY to them, if any.
c. Transactions on the Closing Date
i. Delivery of Initial Shares. At the Closing, Seller will deliver to Purchasers stock certificates, representing the shares duly endorsed for transfer with their respective signatures guaranteed in form acceptable to the transfer agent of AOXY; and
ii. Delivery of Consideration. At the Closing, Purchasers will deliver to the Seller an official bank check or a certified check of the Purchasers payable to the Seller in the amount of the Purchase Price payable to such Seller as set forth on Schedule 1., and
iii. Documents. Each of the documents contemplated by this Agreement.
d. CLOSING. The Closing will take place at the offices of Tartaglia Law Offices White Plains, New York, at 10:00 A.M. on the date of execution and delivery hereof by all of the parties.
2. REPRESENTATIONS AND WARRANTIES OF SELLER. The Seller, as and for himself or itself, severally and not jointly, represents and warrants the following to the best of his or its knowledge without independent investigation:
a. Organization and Standing.
i. AOXY is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, the State of its incorporation, and is authorized to conduct business in and is in good standing in each jurisdiction in which the character of the properties owned by it or the nature of the business transacted by it makes such license or qualification necessary.
ii. The certified copies heretofore delivered to AOXY, of the certificate of incorporation, of all licenses to transact business and of the by-laws of AOXY with all amendments to the date hereof are true, complete and correct.
iii. AOXY has no subsidiaries.
b. Capital Stock.
i. The capital stock of AOXY consists of (A) ninety million (90,000,000) shares of common stock, par value one cent (US $0.01) per share of which twenty nine million, six hundred forty thousand, two hundred and fifty two (29,640,252) shares have been validly issued and are fully paid and are non-assessable and are fully transferable, and (b) ten thousand non issued shares to be issued upon conversion of five thousand shares of Preferred Stock.
ii. None of the issued and outstanding shares is subject to any voting trust agreement or other agreement relating to the voting thereof.
iii. No transfer tax will be payable with respect to the issuance of AOXY's stock contemplated hereby.
c. Stock Ownership. The Seller shall issue to Purchasers at Closing authorized common stock of AOXY which is free and clear of any encumbrances, liens or restrictions on sale, other than those applicable to restricted securities as defined under the rules and regulations promulgated by the Securities and Exchange Commission.
d. Validity of Agreement; Authority. This Agreement has been duly executed and delivered by the Seller and (assuming valid execution and delivery by Purchasers) is a valid and binding obligation, enforceable in accordance with its terms.
e. Authority to take Action.
i. The execution and delivery of this Agreement and delivery of the subject shares and the carrying out of the provisions hereof will not contravene any provisions of law, any order, judgment and/or decree of any court or other governmental agency or the Seller's certificate of incorporation, by-laws, charter, partnership agreement, if any, or any indenture, agreement or other instrument to which the Seller is a party or by which the Seller may be bound, or by which any property owned by the Seller may be bound.
ii. All legal actions required to be taken in connection with this Agreement pursuant to the laws of any State or other governmental authority have been so taken.
f. Accounts Receivable. AOXY accounts receivable are indicated in the recent filings of AOXY in the form of 10-QSB and 10-KSB and contained in Exhibit B herein.
g. Liabilities of AOXY. AOXY has no liabilities or obligations of any nature other than as indicated in the recent filings of AOXY in the form of 10-QSB and 10-KSB.
h. No Dividends or Distributions. Since June 30, 1999, AOXY has not declared, set aside or paid to its stockholder any dividend or other distribution in respect of its capital stock or redeemed or purchased or otherwise acquired any of its capital stock or agreed to take any such action.
i. Absence of Material Changes or Events. Except for matters publicly disclosed on (1) AOXY's Proxy Statements in connection with the sale of its oxygen control technology to W.R. Grace ("Grace") in February 1995 and in connection with the change of Articles of the Company, the change of Auditors, and the change of the name; (2) AOXY's Reports on Form 10-KSB with respect to AOXY's fiscal years ended June 30, through 1999 and (3) AOXY's Reports on Form 10-QSB for the quarters ending September 30, 1999 and December 31, 1999 and AOXY's 8-K's filed prior hereto, copies of which have been heretofore delivered to Seller, since June 30, 1999 there has been no event or condition of any character, materially and adversely affecting AOXY's financial position, assets, liabilities (contingent or otherwise), results of operation, business or business prospects, and AOXY has not:
i. Incurred any obligation or liability (absolute, accrued, contingent, or otherwise) except in the ordinary course of business or except in connection with the performance of this Agreement;
ii. Mortgaged, pledged or subjected to lien, charge or other encumbrance, any of its assets, tangible or intangible;
iii. Sold or transferred any of its assets or canceled any debts or claims, or waived any right of substantial value;
iv. Made or committed to make any single capital expenditure in excess of five thousand dollars ($5,000.00) or purchased or contracted to purchase any land;
v. Increased the compensation payable or to become payable by AOXY to any of its officers, employees or agents, or any bonus payment or arrangement made to or with any of them;
vi. Agreed to modify in any material respect any contract or other instrument to which AOXY is a party;
vii. Increased or changed the medical insurance provided for the benefit of its employees and their families.
viii. Increased or changed the amount of disability insurance provided for the benefit of its employees;
ix. Entered into any transaction other than in the ordinary course of business; or
x. Made any material change in any method of accounting or any accounting practice.
j. Title to Property. AOXY has material assets as indicated in the filings of AOXY in the form of 10-QSB and 10-KSB..
k. Buildings, Equipment and Motor Vehicles. AOXY is the owner of buildings, equipment or motor vehicles as indicated in the filings of AOXY in the form of 10-QSB and 10-KSB.
l. Tax Status.
i. AOXY has heretofore furnished to Seller true and complete copies of all federal, state, local and foreign income tax returns of AOXY filed for the three (3) years ended June 30, 1995. Said tax returns of AOXY have not been audited by the applicable taxing authorities. No agreements made by AOXY for an extension of time for the assessment of any tax are now in effect. All taxes, including interest and penalties thereon, shown on said tax returns to be due and payable by AOXY, or required to be withheld by AOXY on or before the date hereof, have been paid or fully reserved for and withheld and no formal written claim for any tax, assessment or levy for which AOXY may become liable exists which has not been settled.
ii. All other taxes, due and payable at the Closing Date, of any kind whatsoever, including, but not limited to, estimated income tax, franchise tax, excise tax, doing business tax, payroll tax, personal property tax, use tax and sales tax are as indicated in the filings of AOXY in the form of 10-QSB and 10-KSB..
m. Status of Contracts. Except as reflected in the filings of AOXY in the form of 10-QSB and 10-KSB and its normal course of business, AOXY is not a party to any written or oral (i) contract for the employment of any officer or individual employee, or any pension, profit sharing, bonus, retirement, stock option or similar incentive or deferred compensation plan or arrangement in effect with its officers, employees or others; (ii) continuing contract for the acquisition of real estate or fixed assets; (iii) financing arrangement involving the mortgaging, pledging or other hypothecation of assets or involving borrowing which may not be repaid in part or in full on not more than thirty (30) days' notice with reference to unearned or amortized discount and without premium or penalty; (iv) contract with any labor union; (v) continuing contract for the future purchase of materials or supplies; (vi) contract with any agent, representative or distributor. True and complete copies of the filings of AOXY in the form of 10-QSB and 10-KSB to Purchaser.
n. Status of Leases. AOXY is not a party to any leases other than as indicated in the filings of AOXY in the form of 10-QSB and 10-KSB.
o. Directors and Officers; Compensation;. Schedule 3(o) hereto contains a true an complete list showing (i) the names of all directors and officers of AOXY; (ii) the names of all persons whose compensation from AOXY for the period beginning July 1, 1999 and ending March 31, 2000 will equal or exceed ten thousand dollars ($10,000.00) together with a statement of the full amount paid or payable to each such person for services rendered or to be rendered in such period and the basis therefor; and (iii) the names of all persons holding powers of attorney from AOXY, and a summary statement of the terms thereof;
p. Status of Insurance. AOXY has no insurance.
q. Permits and Licenses. AOXY is not required to have permits, licenses, approvals, and authorization of all federal, state, local and foreign authorities.
r. Litigation. There is no action, suit, proceeding or investigation pending, or to the knowledge of AOXY threatened, against or affecting AOXY before any court, arbitrator or administrative or governmental body and AOXY is not presently subject to or in default in respect of any order, injunction or decree of any court or government instrumentality other than as indicated in the filings of AOXY in the form of 10-QSB and 10-KSB.
s. Compliance with Laws. Except as reflected on Schedule 3(s), AOXY is not in violation of any law, regulation or ordinance which violation would materially and adversely affect it or its operations.
t. Employee Benefit Plans. AOXY is not party to any bonus, incentive compensation, profit-sharing, pension, retirement, stock purchase, stock option, deferred compensation, hospitalization, group insurance, death benefit, disability, collective bargaining and other fringe benefit plans, trust agreements, arrangements or commitments other than as indicated in the filings of AOXY in the form of 10-QSB and 10-KSB.
u. Offer to Buy. No offer to buy the Shares was made to AOXY by any person in the United States.
v. Pre-Arranged Transaction. The transactions contemplated by this Agreement:
i. have not been pre-arranged with a purchaser who is in the United States or is a US Person; and
ii. are not part of a plan or scheme to evade the registration provisions of the Securities Act of 1933 (the "1933 Act").
w. Stop Transfer. AOXY has not issued, and provided nothing comes to AOXY's attention after the closing date that will cause it to believe in good faith that the issuance of the Shares was in contravention with any United States law, will not issue, any stop transfer order or other order impeding the sale and delivery of the Shares, or any underlying shares except for a stop order restricting the sale of the Shares into the United States or to, or for the account or benefit of, US Persons during the Restricted Period, as hereinafter defined.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser, as and for itself or himself, severally and not jointly, represents and warrants the following:
a. Organization and Standing.
i. Each corporate Purchaser is a corporation duly organized, validly existing, and in good standing under the laws of the place of its incorporation.
ii. The copy heretofore delivered to Seller, of the certificate of incorporation or charter of each corporate Purchaser with all amendments to the date hereof are true, complete and correct.
iii. Each corporate Purchaser has no subsidiaries, except as set forth on Schedule 4(a).
b. Validity of Agreement; Authority. This Agreement has been duly executed and delivered by the Purchasers and (assuming valid execution and delivery by the Seller) is a valid and binding obligation of each Purchaser, enforceable in accordance with its terms.
c. Authority to take Action.
i. The execution and delivery of this Agreement and delivery of the subject shares and the carrying out of the provisions hereof will not contravene any provisions of law, any order, judgment and/or decree of any court or other governmental agency or any corporate Purchaser's certificate of incorporation or charter, by-laws or any indenture, agreement or other instrument to which any Purchaser is a party or by which it may be bound, or by which any property owned by it may be bound.
ii. All corporate and legal actions required to be taken in connection with this Agreement pursuant to the laws of any State or other governmental authority have been so taken.
d. Compliance with Laws. No Purchaser has received notice of any violation of any law, regulation or ordinance which violation would materially and adversely affect it or its operations.
e. Consents. No Purchaser is required to obtain consent, approval, registration, qualification or filing with any United States federal, state or local government authority or any foreign government authority in connection with such Purchaser's execution of this Agreement or consummation of the transactions contemplated hereby, other than the required filings with the United States Securities and Exchange Commission.
f. Site and Condition of Sale. Each Purchaser is not a US Person (as that term is defined in Exhibit A attached hereto). Each Purchaser acknowledges that AOXY has not solicited this offer to purchase the Shares within the United States and that the sale of the Shares will not take place within the United States (for this purpose, the "United States" means the Unites States of America, its territories and possessions, and any state of the United States and the District of Columbia). Each Purchaser also acknowledges that the Shares have not been registered under the laws of any other country or jurisdiction and that AOXY takes no responsibility for complying with any such laws.
g. Investment Purposes. Each Purchaser is acquiring the Shares for investment, for its own account, and not with a view to, or for resale in connection with, any distribution of any part thereof. Each Purchaser acknowledges that the Seller is selling the Shares hereunder in reliance upon an exemption from the registration provisions of the Securities Act of 1933, as amended (the "Act") which depends upon, among other things, the bona fide nature of the investment intent and accuracy of such Purchaser's representations as expressed herein. Each Purchaser is able to fend for itself, can bear the economic risk of this investment and has such knowledge and experience in financial or business matters that it can evaluate the merits and risks of the investment. Each Purchaser is an "accredited investor" within the meaning of Rule 501(a) of Regulation D promulgated under the Securities Act.
Except as set forth in this Agreement, no representations or warranties, oral or otherwise, have been made to Purchasers, including without limitation, any representations concerning the future prospects of AOXY, by any Seller, by any agent of any Seller, any employees or affiliates of any Seller or by any other person whether or not associated with this transaction and in entering into this transaction Purchaser is not relying upon any information.
Without in any way limiting the representations set forth above, Purchaser further agrees not to make any disposition of all or any portion of the Shares that constitutes "restricted securities" delivered pursuant hereto unless (1) there is then in effect a Registration Statement under the Act covering the proposed disposition and disposition is made according to the Registration Statement; or (2) the transferee has agreed in writing for the benefit of AOXY to be bound by the restrictions set forth in this section, to the extent applicable; and each Purchaser has furnished AOXY with an opinion of counsel, reasonably satisfactory to AOXY, that such disposition will not require registration of the shares under the Act.
4. CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATION TO COMPLETE THE TRANSACTION. The obligation of each Purchaser to consummate the transactions described in Section 1 hereof is subject to the fulfillment of each of the following conditions prior to or at the Closing:
a. Delivery of Initial Shares. Each Purchaser shall have received delivery of the Shares as contemplated herein.
b. Representations and Warranties of Seller. The representations and warranties made by the Seller herein shall be true and correct in all material respects.
c. No actions or proceedings. No action or proceeding shall be pending or threatened on the Closing Date wherein an unfavorable judgment, decree or order would prevent or make unlawful the carrying out of this Agreement or would cause the transaction contemplated by this Agreement to be rescinded or would require a Purchaser to divest itself of the shares to be acquired.
It is understood that the certificates evidencing the Shares sold pursuant hereto may bear legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND UPON OBTAINING AN OPINION OF COUNSEL (WHICH MAY BE COUNSEL TO THE COMPANY) SATISFACTORY TO THE COMPANY THAT SUCH DISPOSITION MAY BE MADE WITHOUT REGISTRATION UNDER SAID ACT, OR UNLESS SOLD PURSUANT TO RULE 144.
5. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO COMPLETE THE TRANSACTION. The obligation of the Seller to consummate the transactions described in Section 1 hereof is subject to the fulfillment of each of the following conditions prior to or at the Closing:
a. Purchase Price. The Seller shall have received the purchase price to which each such Seller is entitled hereunder.
b. Representations and Warranties of Purchasers. The representations and warranties made by the Purchasers herein shall be true and correct in all material respects.
c. No actions or proceedings. No action or proceeding shall be pending or threatened on the Closing Date wherein an unfavorable judgment, decree or order would prevent or make unlawful the carrying out of this Agreement or would cause the transaction contemplated by this Agreement to be rescinded.
6. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties contained herein or made in writing by the parties in connection with the transactions contemplated hereby shall survive the execution and delivery of this Agreement and the closing of the transactions contemplated by this Agreement, regardless of any investigation made by or on behalf of the parties or any payment for and acceptance of stock hereunder. All statements contained in any certificate, list, letter or other instrument delivered by or on behalf of the parties pursuant hereto or in connection with the transactions contemplated hereby (including statements, letters or certificates of independent parties such as public accountants or attorneys) shall constitute representations and warranties by the parties hereunder.
7. INDEMNIFICATION.
a. Of Seller. Each Purchaser agrees to defend, indemnify and hold harmless Seller against and in respect of (i) any and all losses, liabilities, damages, deficiencies, costs or expenses (including, without limitation reasonable attorneys fees and disbursements) resulting from (A) the breach of any covenant, warranty or agreement hereunder by such Purchaser or (B) any representations made by such Purchaser in this Agreement, not being complete and correct or being false and misleading or containing any material misstatement of fact or omitting any material fact required to be stated to make the statements therein not misleading; and (ii) any and all actions, suits, proceeding, claims, demands, assessments, judgments, costs and expenses (including, without limitation, reasonable attorneys fees and disbursements) incident to any of the foregoing; provided, however, that if any such action, suit or proceeding shall be asserted against Seller in respect of which Seller or AOXY propose to demand indemnification, such Purchaser shall be promptly notified to that effect and shall have the right to assume the control of the defense, compromise or settlement thereof, including, at their own expense, employment of counsel reasonably acceptable to Seller.
b. Of Purchasers. The Seller, severally and not jointly, agrees to defend, indemnify and hold harmless Purchasers against and in respect of (i) any and all losses, liabilities, damages, deficiencies, costs or expenses (including, without limitation reasonable attorneys fees and disbursements) resulting from (A) the breach of any covenant, warranty or agreement hereunder by such Seller or (B) any representations made by such Seller in this Agreement, not being complete and correct or being false and misleading or containing any material misstatement of fact or omitting any material fact required to be stated to make the statements therein not misleading; and (ii) any and all actions, suits, proceeding, claims, demands, assessments, judgments, costs and expenses (including, without limitation, reasonable attorneys fees and disbursements) incident to any of the foregoing; provided, however, that if any such action, suit or proceeding shall be asserted against a Purchaser in respect of which such Purchaser proposes to demand indemnification, all Seller shall be promptly notified to that effect and the Seller or Seller against whom indemnification is sought shall have the right to assume the control of the defense, compromise or settlement thereof, including, at their own expense, employment of counsel reasonably acceptable to such Purchaser.
c. Payment. Any indemnification payments required pursuant to Section 7(a) and 7(b) hereof shall be paid in full within ten (10) days after receipt of notice specifying (i) the amount required to be paid and (ii) the nature of the event or events giving rise to indemnification hereunder.
d. Liability. The liability of the parties under this Section 7 shall be without limitation, and the failure of either of them to withhold amounts from any payments shall not act as a waiver of or diminish the obligations of parties under this Section 7.
e. Interest. Any and all amounts which may become due and payable pursuant to this Section 7 shall bear interest from the date when due to the date of payment at a percentage rate of twelve (12%) percent per annum.
8. COMMISSIONS, FEES AND EXPENSES. Purchasers and Seller each represent and warrant to the other that the negotiations relative to this Agreement and the transactions contemplated hereby have been carried on by Purchaser and Seller directly and in such manner as not to give rise to any valid claim against either for a brokerage commission, finder's fee or other like payment.
9. APPLICABLE LAW. This Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware (other than its law with respect to conflicts of laws), including all matters of construction, validity and performance.
10. NOTICES. All notices, requests, permissions, waivers, and other communications hereunder shall be in writing and shall be deemed to have been duly given if signed by the respective persons giving them (in the case of any corporation the signature shall be by an officer thereof) and delivered by hand, sent via facsimile transmission, nationally-recognized overnight courier service or deposited in the United States mail (registered, return receipt requested), properly addressed and postage prepaid to the intended recipient thereof to the address for such person on the signature page(s) hereof. All such notices, requests, consents and other communications shall be deemed to have been delivered (a) in the case of personal delivery or delivery by telecopy, on the date of such delivery, (b) in the case of dispatch by nationally-recognized overnight courier, on the next business day following such dispatch and (c) in the case of mailing, on the third business day after the posting thereof. Such names and addresses may be changed by such notice.
11. ENTIRE AGREEMENT; AMENDMENT; HEADINGS; COUNTERPARTS. This Agreement, including the Schedules hereto, all of which are a part hereof, contains the entire understanding of the parties hereto with respect to the subject matter contained herein and therein, supersedes and cancels all prior agreements with respect hereto or thereto and may be amended only by a written instrument executed by the parties or their respective successors or assigns. There are no restrictions, promises, representations, warranties, agreements or undertakings of any party hereto with respect to the transactions under this Agreement other than those set forth herein or made hereunder in the documents delivered at each Closing. The section and paragraph headings contained in this Agreement and the description of exhibits attached hereto are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. This _Agreement may be executed in one or more counterparts and each counterpart shall be deemed to be an original.
12. PARTIES IN INTEREST. Except with the express written consent of the other parties hereto, this Agreement shall not be assignable or otherwise transferred in whole or in part. This Agreement shall inure to the benefit of and be binding upon the parties and their respective successors. Nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies under or by reason of this Agreement.
13. SEVERABILITY. The invalidity of any portion hereof shall not affect the validity, force or effect of the remaining portions hereof.
14. FURTHER ASSURANCES. Seller and Purchasers shall execute and deliver or cause to be executed and delivered such additional instruments, and take such other actions as the other party may reasonably request in writing in order to effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first above written.
PURCHASERS:
Eastern Star, Bay Street, Nassau Bahamas
/s/A. Howarth /s/
Baldwin Construction, Ltd
Gml Sandbjerg 79, DK 6000, Kolding, Denmark
/s/ Bent Jul /s/
Seller:
___________________________________
Advanced Oxygen Technologies, Inc.
Robert E. Wolfe, CEO, Chairman
_
Schedule 1
Purchasers
Name & Address Amount in US Dollars ($) Debt Reduction Amount in US Dollars Number of Shares
Eastern Star, Ltd.
Bay Street, Nassau, Bahamas $113,000.00 Any Claim prior to 12/31/2000 2,712,000
Baldwin Construction Co
Gml. Sandbjerg 79
DK 6000, Kolding Denmark $12,000.00 $0.00 288,000
Total $125,000.00 3,000,000
_
Schedule 4(a)
Subsidiaries of Purchasers/Sellers
NONE
_
Schedule 3(s)
Compliance with Laws (Seller)
Purchaser has not held an annual meeting since October, 1993.
_
Schedule 3(o)
Directors:
Robert E. Wolfe
Joseph N. Noll
Officers:
Robert E. Wolfe Chairman of the Board and
Chief Executive Officer, President, Chief Financial Officer and Director
_
Schedule 3(m)
Contracts of AOXY
AOXY contracts are indicated in its filings on Form 10-KSB, 10-QSB, 8-K and other public filings with the SEC._ EXHIBIT A
US PERSON
1. "US Person" means:
(i) Any natural person resident in the United States;
(ii) Any partnership or corporation organized or incorporated under the laws of the United States;
(iii) Any estate of which any executor or administrator is a US person;
(iv) Any trust of which any trustee is a US person;
(v) Any agency or branch of a foreign entity located in the United States;
(vi) Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a US person;
(vii) Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and
(viii) Any partnership or corporation if: (A) organized or incorporated under the laws of any foreign jurisdiction; and (B) formed by a US person principally for the purpose of investing in securities not registered under the Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a)) who are not natural persons, estates or trusts.
2. Notwithstanding paragraph 1 of this rule, any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-US person by a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States shall not be deemed a "US person."
3. Notwithstanding paragraph 1, any estate of which any professional fiduciary acting as executor or administrator is a US person shall not be deemed a US person if:
(i) An executor or administrator of the estate who is not a US person has sole or shared investment discretion with respect to the assets of the estate; and
(ii) The estate is governed by a foreign law.
4. Notwithstanding paragraph 1, any trust of which any professional fiduciary acting as trustee is a US person shall not be deemed a US person if a trustee who is not a US person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlement or if the trust is revocable) is a US person.
5. Notwithstanding paragraph 1, an employee benefit plan established and administered in accordance with the law of a country other than the United States and customary practices and documentation of such country shall not be deemed a US person.
6. Notwithstanding paragraph 1, any agency or branch of a US person located outside the United States shall not be deemed a "US person" if:
(i) The agency or branch operates for valid business reasons; and
(ii) The agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located.
7. The International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans shall not be deemed "US persons."
_EXHIBIT B
RECENT FILINGS