UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 000-26425
NextPath Technologies, Inc.
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(Exact name of registrant as specified in its charter)
NEVADA 84-1402416
- ---------------------------------------- ------------------------------------
(State of incorporation or organization) (I.R.S. Employer Identification No.)
1615 N. 24th West Avenue
Tulsa, Oklahoma 74127
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (918) 295-8289
Securities registered pursuant to section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class Name of each exchange on which registered
- ------------------------------- -----------------------------------------
Common Stock ($0.001 par value) None (OTCBB)
Indicated by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (s) has been subject to such
filing requirements for the last 90 days.
Yes No X
---
Indicated by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting common stock held by
non-affiliates as of May 8, 2000 was $147,219,770.
At May 8, 2000, there were 41,985,775 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995.
This 10-K/A contains statements that plan for or anticipate the future.
Forward-looking statements include statements about future business plans and
strategies and most other statements that are not historical in nature. In this
10-K/A, forward-looking statements are generally identified by the words
"anticipate," "plan," "believe," "estimate," and the like. Because
forward-looking statements involve future risks and uncertainties, there are
factors that could cause actual results to differ materially from those
expressed or implied, including, but not limited to, our ability to obtain
infusion of equity capital or financing on terms reasonably satisfactory to us,
competition, changes in consumer trends, and competitors' marketing strategies.
See Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations-Risk Factors. These forward-looking statements are based
on our current expectations or those of the preparer of the statement. Readers
of this 10-K/A are cautioned not to place undue reliance on the forward-looking
statements. The forward-looking statements included in this 10-K/A are made as
of the date of this 10-K/A and we don't undertake any obligation to update them
to reflect subsequent events or circumstances.
The terms "NextPath," the "Company," "we," "our" and "us" refer to
NextPath Technologies, Inc. and its subsidiaries and affiliates unless the
context suggests otherwise.
ITEM 1. BUSINESS
Our Organizational History
We were organized as Petrogenics, Inc. under the laws of the State of
Colorado on March 23, 1984. On May 12, 1997, we completed a change of domicile
merger with FSC Holdings, Inc., a Nevada corporation, thereby changing our
domicile from Colorado to Nevada and changing our name to FSC Holdings, Inc. On
January 27, 1998, Compact Power International, Inc. merged with and into us.
Pursuant to the Articles of Merger, our name was changed to Hyperion
Technologies, Inc. On July 22, 1999, we changed our name to NextPath
Technologies, Inc. and our OTC Bulletin Board trading symbol from "HYPE" to
"NPTK." On November 11, 1999, we were the surviving corporation in a merger with
Epilogue Corporation and became a reporting company under the Securities
Exchange Act of 1934 as a result of the merger.
We are a development stage holding company that identifies, acquires and
manages what we believe to be state-of-the-art technology companies that
together form a community of shared resources. We are organized into four
operating groups as follows: Precision Technologies Group, Internet and
E-Commerce Group, Environmental Technologies Group and Health Products Group.
Our Acquisitions
During most of 1999, we sought, negotiated and closed acquisition
agreements with several target companies. The following is a summary of our
acquisitions:
o On June 12, 1999, we signed an Option Agreement with PriMedium,
LLC. (the "PriMedium Transaction"). We are evaluating whether
or not to enter into a definitive agreement and there can be
no assurances that one will ultimately be consummated. See
"Internet and E-Commerce Group-PriMedium, LLC."
o On August 30, 1999, we purchased 666,666 Units in the capital of
LATelco International, Inc. See "Investments."
o On October 21, 1999, we acquired 1,000 shares of non-voting
Series A Preferred Stock of United Paper, Inc., a Dallas, Texas
based primary independent paper distributer. See "Investments."
o On October 18, 1999, we acquired LaserWireless, Inc.
o On November 2, 1999, we acquired Willow Systems Limited and its
subsidiaries, NextWave Photonics, LLC and Reflex LLC.
o On November 11, 1999, we acquired the Epilogue Corporation.
o On December 14, 1999, we acquired Sagebrush Technology, Inc.
o As of December 31, 1999, we had paid $1,500,000 to Group Now,
Inc. for Series A Convertible Preferred Stock pursuant to the
terms of a Subscription Agreement dated November 24, 1999. See
"Investments."
o On January 21, 2000, we acquired Essentia Water, Inc.
Other Transactions
In addition to the acquisitions set forth in "Our Acquisitions," we
entered into the following transactions:
o On January 28, 2000, our wholly owned subsidiary, NextPath
Environmental Services, Inc. ("NES"), formed a limited liability
company with Thermogenics, Inc. named NextPath Thermogenics, LLC,
but NES has not made all of its intitial required $1,750,000
capital contribution.
o On January 24, 2000, NES formed a limited liability company with
Tetra Separation Systems, LLC named NextPath Separation
Solutions, LLC, but NES has not yet made its initial required
$5,000,000 capital contribution.
o Our wholly owned subsidiary, NextPath AES, Inc. ("NAES") has
negotiated an Asset Purchase Agreement to acquire all of the
assets of Agri-Covers, Inc., but a definitive agreement has not
been signed pending funding by NAES.
o On April 4, 2000, we executed a definitive agreement to acquire
20% of US Certified Letters, LLC ("USCL"), which has licensed the
right to proprietary technology for transmitting any instruments
by certified mail via the Internet or other medium (the "C-mail
Technology") within the continential United States, Alaska and
Hawaii (the "USCL Transaction"). Closing is set to occur on or
before June 4, 2000.
o On April 4, 2000, our wholly owned subsidiary, Global Certified
Mail, Inc. ("GCM"), signed a License Agreement by which it
licensed the C-mail Technology for use outside of the
continential United States, Alaska and Hawaii in exchange for
which GCM transferred 20% of its stock to the Licensor (the "GCM
Transaction"). Closing is set to occur on or before June 4, 2000.
Our Business
Through our wholly owned subsidiaries, we're currently involved in the
following businesses: o We design, develop, manufacture and market positioning
devices known as gimbals.
o We design and market motion control systems.
o We design and market wireless communication technology.
o We design and market fiber optic switching and other fiber optic
technology.
o We bottle and market alkaline and electrolyte enhanced premium
water products.
o We develop energy and micro economic systems technology.
o Upon making the required capital contribution to the NextPath
Thermogenics, LLC, we will design, engineer, fabricate, own,
sell, lease and operate systems which convert waste products to
energy.
o Upon making the required capital contribution to the Separation
Solutions, LLC, we will design, engineer, fabricate, own,
operate, market and sell systems which remove waste products from
soil and water.
o Upon closing the USCL Transaction, we will be involved in the
commercialization and marketing of the C-mail Technology within
the continental United States, Alaska and Hawaii.
o Upon closing the GCM Transaction, we will be engaged in the
commercialization and marketing of the C-mail Technology outside
the continental United States, Alaska and Hawaii.
Our Growth Strategy and Plan of Operation
Our goal is to enhance shareholder value by increasing cash flow,
earnings and the value of our common stock. To successfully reach our goal, we
believe we must implement the following growth strategy and plan of operations
for the foreseeable future: o We must continue to identify, pursue and
capitalize acquisitions that provide attractive investment opportunities,
particularly where we can add value through our technical expertise.
o We must effectively integrate our businesses and technologies.
o We must grow our business nationally and internationally by
effectively developing, marketing and expanding our products and
services and our market base.
o We must continue to identify, attract, retain and motivate
qualified personnel.
o We must continue to identify and close sources of working
capital.
In view of our current working capital, we will need to raise or borrow
additional funds during the foreseeable future to meet the expenditures required
for operating our business. We are actively engaged in negotiations with debt
and equity sources and we will continue to pursue all such options on an
aggressive basis.
Our Proprietary Rights
We regard the protection of our patents, trademarks, trade secrets,
websites, and other proprietary rights as important to our success. We rely on a
combination of patent, trademark, service mark and trade secret laws and
contractual restrictions to protect our proprietary rights in technology,
products and services. We have entered, and will continue to enter, into
confidentiality and invention assignment agreements with our employees,
consultants and contractors.
THE PRECISION TECHNOLOGY GROUP
------------------------------
In General
The Precision Technologies Group (the "PTG") consists of three wholly
owned subsidiaries: LaserWireless, Inc. ("LaserWireless"), located in Lancaster,
Pennsylvania; Willow Systems, Inc. ("Willow"), located in Albuquerque, New
Mexico; and Sagebrush Technology, Inc. ("Sagebrush"), located in Albuquerque,
New Mexico. In turn, Willow owns NextWave Photonics, LLC and Reflex LLC and
holds a stock position in Skycam Systems, Inc. Together, these entities design,
engineer, manufacture, and market precision motion control systems, laser
communications systems, and purpose-designed, precision-controlled imaging
systems. Additionally, Willow, through NextPath Photonics, is engaged in
feasibility and design work on a solid state optical switching system.
Sagebrush Technologies, Inc.
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Overview
Sagebrush is an engineering and manufacturing company specializing in
providing innovative solutions based primarily on its patented Roto-Lok(R)
rotary drive technology. Its principal executive offices are located at 10300-A
Constitution, NE, Albuquerque, New Mexico 87112. Its telephone number is (505)
299-6623. Its website is www.sagebrushtech.com.
Growth Strategy and Plan of Operations
Sagebrush designs, develops, manufactures and markets positioning
devices. Its objective is to bring the latest technologies and best engineering
talents together to address its clients' needs. Its business philosophy is to
provide products that meet specifications, are safe to use, are kind to the
environment, are fairly priced, and are delivered on time. Sagebrush's growth
strategy will be to increase its production of positioning devices and other
quality products and to expand its customer base through an aggressive
advertising and marketing campaign to publicize its products. Key elements of
its growth strategy include:
Products. Sagebrush provides products, systems and Original Equipment
Manufacture (OEM) activators for applications that require state of the art
precision, smoothness, reliability and cost effective performance in all types
of environment. Its specialties include:
o laser communications gimbal systems
o low earth orbit satellite tracking systems
o stabilized platforms and gimbals
o medical and industrial activators and turntables
Gimbals are positioning devices. The mechanism that supports a telescope
so it can look at all different parts of the sky is a typical gimbal. It is most
often called a telescope mount but it can gimbal or swing in two axes, up and
down and side to side. Most people have seen gyroscopes that are mounted in a
gimbal arrangement so the gyroscope wheel stays oriented in the same direction
even when the base of the gimbal is rotated. Gyroscopic gimbal systems are used
in ships, airplanes, missiles and many other applications to indicate a stable
reference plane, even when the vehicle is pitching, rolling or changing
direction.
Antenna positioners are the devices that point antennas at a target.
Satellite antennas that are portable such as those used by the military, by the
networks or by local television stations require positioners that can lay the
antenna down flat during transit, then quickly raise it up and point it
accurately at a satellite. The large surface area of an antenna acts as a sail
in high winds. To keep the antenna pointed at the satellite, the antenna
positioner must be extremely stiff. The Sagebrush Roto-Lok(R) rotary drive
provides the stiffest drive currently available.
Sagebrush manufactures and sells several innovative products including a
20 lb. capacity Model-20 Pan & Tilt Gimbal.
Product Research and Development. Sagebrush believes that strong product
research and development capabilities are essential to maintain a competitive
edge with its products. Since inception, it has focused its research and
development efforts on developing the finest gimbals and other positioning
devices available. Its research and development efforts will continue.
Target Market. A major part of Sagebrush's business is supplying rotary
drive systems on an OEM basis for military, industrial, space, commercial,
aerospace, medical and research applications. Its products can be provided to
fit a customer's particular application.
The basic idea of the Roto-Lok(R) drive is the essence of simplicity.
But what this simplicity delivers to Sagebrush's customers is unparalleled
performance and cost benefits that go right to their bottom line. For some
customers the Roto-Lok(R) drive solution allows them to proceed with a project
that otherwise might not be possible to complete - at any cost. For other
customers, Roto-Lok(R) drive technology is providing a major advantage in their
quest for superior quality and cost effectiveness.
Sagebrush Technology. Sagebrush owns all rights to United States Patent
No. 5,105,672 issued on April 21, 1992 and entitled "Rotary Drive Apparatus
Having One Member with Smooth Outer Peripheral Surface." It also owns all title
to the registered trademark "Roto-Lok," Serial No. 73-451065 (Registration No.
1347219) dated July 9, 1985.
The Roto-Lok(R) rotary drive is an elegantly simple, yet powerful,
technology that utilizes the averaging effect of many cables - each sharing the
load - wrapped around a drive capstan and a driven drum. It was originally
invented as an inexpensive way to rotate large observatory telescopes accurately
and smoothly. Traditionally, precision gears have been used to position those
loads. However, even the best gears suffer from high friction, drive
irregularities and backlash, and they are expensive. They also require costly
precision sealed housings to support the gears and their lubricants and to keep
them clean. All Roto-Lok(R) rotary drive machined components are smooth and
round, making the parts easy to produce. The many cables serve to average the
rotation rate so that imperfections, dirt or other slight irregularities on a
single cable or drum do not have a significant effect. This results in superb
drive smoothness with no cogging or drive rate irregularity.
The following are some of the many advantages and benefits of the
Roto-Lok(R) rotary drive:
o The load bearing elements (cables) are statically tensioned to
increase the no-load stiffness of the drive. In a gear drive,
that tensioning will create friction and shorten the useful
zero-backlash life of the gears.
o Many load bearing elements can be paralleled to meet the peak
load requirements without significantly impacting the cost while
simultaneously improving the precision of the drive.
o The use of multiple cables virtually eliminates "cogging" found
in traditional gear drives. Near-perfect smoothness can be
attained with a properly designed drive because of the averaging
effect of the many cables.
o Where weight and power are at a premium, the Roto-Lok(R) drives
excel because they produce superior performance along with a 60%
to 70% savings in both weight and power. Because the drive is
stiff and efficient, smaller motors, wiring and power supplies
can be used.
The three primary performance attributes of the Roto-Lok(R) rotary drive
are its extremely high torsional stiffness, its high torque capacity, and its
total freedom from backlash.
Manufacturing Strategy. Sagebrush's ongoing manufacturing strategy will
be designed to increase capacity, improve quality, and reduce costs. It plans to
gradually increase its production in order to sustain its projected growth. In
any given year, its ability to reach its targeted production level will depend
upon, among other factors, its ability to (i) continue to realize production
efficiencies at its existing production facilities through implementation of
innovative manufacturing techniques and other means, (ii) successfully implement
production capacity increases in its facility, and (iii) sell all of the
products it can produce.
Sagebrush will not manufacture any of the parts it needs to produce its
products and it'll have to rely on outside suppliers to provide them.
Sagebrush's income projections are as follows:
Sagebrush Income Projections
----------------------------
2000 2001 2002 2003
---- ---- ---- ----
Net Sales $4,739,450 $5,269,750 $8,049,750 $8,199,750
Operating Costs and Expenses 5,894,168 4,681,178 7,043,531 7,051,785
--------- --------- --------- ---------
Income (Loss) From Operations (1,154,718) 578,573 1,006,219 1,147,965
Other income (Expenses) -- -- -- --
Net Income (Loss) (1,154,718) 578,573 1,006,219 1,147,965
Marketing Strategy. Sagebrush will conduct an aggressive advertising and
marketing campaign to publicize its products. Sagebrush believes that its
potential customers can best be reached through advertising in trade shows,
technical publications and direct marketing and on the Internet.
Sagebrush Facility
Sagebrush's executive offices and manufacturing facility are located in
a light industrial area in Albuquerque. They consist of approximately 10,650
square feet of leased space under a lease which expires in July 2000.
Competition
Sagebrush believes that it is at the forefront in the design,
development and manufacturing of positioning devices and related products. It
emphasizes quality, reliability, cost-effectiveness and timely delivery.
Nonetheless, other companies are engaged in the design, development and
manufacturing of positioning devices and related products which may be
competitive with Sagebrush's products. Many of those entities have substantially
greater financial, technical, manufacturing, marketing, distribution or other
resources than Sagebrush. Sagebrush's profitability will depend upon its ability
to compete in its market area.
Product Liability
The sale of its products may expose Sagebrush to product liability
claims. It believes that its products are, and will be, safe and that it will be
able to obtain product liability insurance at a reasonable cost. However, in the
event of an uninsured or inadequately insured product liability claim, or in the
event of an indemnification claim by a third party, Sagebrush's business and
financial condition could be materially adversely affected.
Regulation
Sagebrush's products and business may be subject to federal, state and
local regulations, including environmental regulations. Sagebrush can't
calculate exactly how much it will cost to comply with government regulation,
but it will try to ensure that its facilities and products comply with all
applicable regulations and standards. In any event, it doesn't think that the
cost of compliance will materially affect its financial condition.
Management
Sagebrush is currently managed by August Sanchez, its Vice President.
Don Carson, the founder of Sagebrush and the inventor of the Roto-Lok(R) drive
system with nearly 40 years experience developing precision mechanical and
opto-mechanical systems for worldwide research, industrial, military, aerospace,
medical and commercial customers, serves as a consultant to Sagebrush under a
Consulting Agreement which expires in December, 2003.
Employees
As of May 8, 2000, Sagebrush employed twenty-seven full-time employees
and two part-time employees. None of Sagebrush's employees is represented by a
union and management believes its employee relations are good.
Operating Results
The following financial information summarizes the more complete
historical financial information of Sagebrush contained elsewhere in this
10-K/A. The results in the following table do not necessarily indicate results
Sagebrush will achieve in the future.
Sagebrush Operating Results
---------------------------
Year Ended December 31,
-----------------------
1999 1998 1997 1996
------ ------ ------ -----
Income Statement Data:
Revenues $1,759,350 $1,758,747 $658,191 $1,039,318
Cost of Goods Sold 1,099,071 906,655 417,071 781,760
Selling, General and Administrative 1,277,323 743,845 362,010 300,267
Depreciation 21,840 10,340 2,258 6,342
--------- --------- ------- ---------
Income (Loss) from Operations (638,884) 97,907 (123,148) (49,051)
Other Income (Loss) 50,494 130,900 92,294 (11,642)
--------- --------- ------- ---------
Income (Loss) before Taxes (588,390) 228,807 (30,854) (60,693)
Deferred Tax Expense 14,882 - - -
--------- --------- ------- ---------
Net Income (Loss) (603,272) 228,807 (30,854) (60,693)
Accumulated Deficit,
Beginning of Year (35,597) (264,404) (233,550) (172,857)
--------- --------- --------- ---------
Accumulated Deficit, End of Year $ (638,869) $(35,597) $(264,404) $(233,550)
========= ========= ========== ==========
Balance Sheet Data
Total Assets (1) $ 735,281 $282,734 $62,106 (2)
Total Liabilities 1,248,438 318,191 326,370 (2)
Deferred Income Tax 14,882 - -
Common Stock 140 140 140 (2)
Additional Paid-In Capital 110,690 - - -
Accumulated Deficit (638,869) (35,597) (264,404) (2)
- --------------------------------
(1) Net of accumulated depreciation and amortization.
(2) Not available.
Willow Systems, Inc.
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Overview
Willow is an engineering and manufacturing company specializing in
providing custom real-time motion control and electronics solutions. Its
principal executive offices are located at 15100 Central Avenue SE, Albuquerque,
New Mexico 87193. Its telephone number is (505) 299-2486. Its website is
www.willowsystems.com.
Growth Strategy and Plan of Operations
Willow specializes in translating its customers' motion control
requirements into reliable, custom hardware solutions. Its objective is
to bring the latest technologies and best engineering talents together to
address its clients' needs. Its business philosophy is to provide products that
meet specifications, are safe to use, are kind to the environment, are fairly
priced, and are delivered on time. Willow's growth strategy will be to increase
its production of motion control devices and other quality products and to
expand its customer base through an aggressive advertising and marketing
campaign to publicize its products. Key elements of its growth strategy include:
Willow designs and markets custom motion control, robotics and
electronics solutions with leading edge technologies in the areas of gimbals and
photographic/electro-optical systems. Willow has the capability to translate
real-time motion control requirements into reliable, hardware solutions, and its
technologies have potential application in a wide range of
businesses.
Willow is also engaged in the business of designing and developing new
and innovative MicroElectro Mechanical Systems ("MEMS") technology and
associated controls and electronics, primarily for optical applications. MEMS
are machines so small that they are imperceptible to the human eye.
Willow is also developing a high-speed fiber optic switch that will
control communications routing over fiber optic networks. This switch will be
compatible with the high capacity wavelength division multiplexed ("WDM") fiber
optic systems that are expected to dominate the fiber optic communications
market over the next decade.
Products. Willow provides gimbals, camera and electro-optical systems.
Its specialties include:
o Gimbals and pedestals
o real-time control systems
o specialized board designs
o analog designs
o camera systems
o real-time micro controller, DSP, and state machine designs
Product Research and Development. Willow believes that strong product
research and development capabilities are essential to maintain a competitive
edge with its products. Since inception, it has focused its research and
development efforts on developing the finest motion control systems available.
Its research and development efforts will continue.
Target Market. A major part of Willow's business is supplying motion
control systems on an OEM basis for military, industrial, space, commercial,
aerospace, and motion picture applications. Its products can be provided to fit
a customer's particular application.
Willow uses focused system engineering approach to all of its projects.
It is able to do this because it possesses a very broad range of expertise in
all aspects of precision motion control and electro-optical systems, and in
supporting engineering disciplines. Willow specializes in precision-engineered
solutions - cutting-edge design, engineering, manufacturing, testing, and
customer support - to provide maximum value for its customer's program dollar.
Willow applies this systems approach using integrated product
development teams. Each development team typically includes not only the
internal engineering and management capabilities required for a project, but its
customers and key suppliers as well. Regular technical interchange ensures that
Willow remains focused on its customers' needs and provides timely visibility
throughout the design process. Involvement of essential suppliers helps ensure
that components and subsystems meet design parameters. This integrated product
development approach helps to provide its customers with a product that is
reliable, manufacturable, high-quality and that will test to the customer's
specifications.
Manufacturing Strategy. Willow's ongoing manufacturing strategy will be
designed to increase capacity, improve quality, and reduce costs. It plans to
gradually increase its production in order to sustain its projected growth. In
any given year, its ability to reach its targeted production level will depend
upon, among other factors, its ability to (i) continue to realize production
efficiencies at its existing production facilities through implementation of
innovative manufacturing techniques and other means, (ii) successfully implement
production capacity increases in its facility, and (iii) sell all of the
products it can produce.
Willow will assemble its products; however Willow will not manufacture
all of the parts it needs to produce its products and it'll have to rely on
outside suppliers to provide most of them.
Willow's income projections are as follows:
Willow Income Projections
-------------------------
2000 2001 2002 2003
---- ---- ---- ----
Net Sales $1,234,664 $20,164,000 $45,823,250 $91,726,000
Operating Costs
and Expenses 1,109,562 18,066,944 40,920,162 61,636,140
--------- ---------- ---------- ----------
Income (Loss)
From Operations 125,100 2,097,056 4,903,088 10,089,860
Other income (Expenses) -- -- - --
Net Income (Loss) 125,100 2,097,056 4,903.088 10,089,860
Marketing Strategy. Willow will conduct an aggressive advertising and
marketing campaign to publicize its products. Willow believes that its potential
customers can best be reached through advertising in technical publications,
trade shows and direct marketing and on the Internet.
Willow Facility
Willow's executive offices and manufacturing facility are located in a
light industrial area in Albuquerque. They consist of approximately 5,960 square
feet of leased space under a lease which expires in October 2001.
Competition
Willow believes that it is at the forefront in the design, development
and manufacturing of motion control devices and related products. It emphasizes
quality, reliability, cost-effectiveness and timely delivery. Nonetheless, other
companies are engaged in the design, development and manufacturing of motion
control devices and related products which may be competitive with Willow's
products. Many of those entities have substantially greater financial,
technical, manufacturing, marketing, distribution or other resources than
Willow. Willow's profitability will depend upon its ability to compete in its
market area.
Product Liability
The sale of its products may expose Willow to product liability claims.
It believes that its products are, and will be, safe and that it will be able to
obtain product liability insurance at a reasonable cost. However, in the event
of an uninsured or inadequately insured product liability claim, or in the event
of an indemnification claim by a third party, Willow's business and financial
condition could be materially adversely affected.
Regulation
Willow's products and business may be subject to federal, state and
local regulations, including environmental regulations. Willow can't calculate
exactly how much it will cost to comply with government regulation, but it will
try to ensure that its facilities and products comply with all applicable
regulations and standards. In any event, it doesn't think that the cost of
compliance will materially affect its financial condition.
Management
Willow is currently managed by Doug Elerath, its President, and Sam
Rogers, Jr., its Vice President.
Employees
As of May 8, 2000, Willow employed twenty-two full-time employees and
two part-time employees. None of Willow's employees is represented by a union
and management believes its employee relations are good.
Operating Results
The following financial information summarizes the more complete
historical financial information of Willow contained elsewhere in this 10-K/A.
The results in the following table do not necessarily indicate results Willow
will achieve in the future.
Willow Operating Results
------------------------
Year Ended December 31,
-----------------------
1999 1998 1997 1996
------ ------ ------ -----
Income Statement Data:
Revenues (Net Sales) $1,231,791 $1,039,117 $551,331 $33,298
Research and Development 536,353 - - -
General and Administrative
Expenses 1,468,267 845,007 445,116 7,199
Depreciation 18,817 17,791 10,393 5,520
--------- --------- ------- ------
Income (Loss) from Operations (791,646) 176,319 95,822 20,579
Other Income (Loss) (652) 40 -- --
--------- --------- ------- ------
Income (Loss) Before Taxes (792,298) 176,359 95,822 20,579
Income Taxes (11,451) 64,607 24,651 4,103
---------- -------- -------- --------
Net Income (Loss) (780,847) 111,752 71,171 16,476
Retained Earnings,
Beginning of Year 199,399 87,647 16,476 --
--------- -------- -------- --------
Accumulated Deficit, End of Year $ (581,448) $199,399 $87,647 $16,476
========= ======== ======= =======
Balance Sheet Data:
Total Assets (1) $ 445,922 $370,580 $146,359 (2)
Total Liabilities 1,027,170 159,530 52,558 (2)
Deferred Income Taxes - 11,451 5,954 (2)
Common Stock 200 200 200 (2)
Retained Earnings (581,448) 199,399 87,647 (2)
- -----------------------------------
(1) Net of accumulated depreciation and amortization.
(2) Not available.
LaserWireless, Inc.
- -------------------
LaserWireless, which began its operations in 1999, specializes in the
development, sale and support of state-of-the-art wireless optical communication
systems capable of transmitting video, voice, telephone and data through the
atmosphere using eye-safe laser technology. This capability offers a solution
for private communications where a leased line cannot be used, for example, when
land is not owned between two sites or where physical barriers, such as rivers,
highways, parking lots, etc., prevent use of conventional cables. The systems
include full time electronic tracking for maximum availability. Its principal
executive offices are located at 2145 Lincoln Plaza, Lancaster, Pennsylvania.
Its telephone number is (877) 527-3757. Its website is www.laserwireless.com.
Growth Strategy and Plan of Operations
LaserWireless designs, develops, manufactures and markets
state-of-the-art atmospheric laser communications equipment for voice, video,
phones and data. Its objective is to bring the latest technologies and best
engineering talents together to address its clients' needs. Its business
philosophy is to provide products that meet specifications, are safe to use, are
fairly priced, and are delivered on time. LaserWireless' growth strategy will be
to increase its production of laser communications systems and other quality
products and to expand its customer base through an aggressive advertising and
marketing campaign to publicize its products. Key elements of its growth
strategy include:
Products. There is a growing need in today's information society to
augment existing communication systems with reliable, high bandwidth
communication capability. Laser communication systems provide users with an
alternative to traditional copper or fiber communications pathways.
LaserWireless systems facilitate immediate communication enhancements with full
network interface support.
The LaserWireless LightBridge 155 communication system features
electronic tracking to ensure continuous alignment of both transmitting and
receiving optical links. A typical system consists of two Laser Transceivers and
two Digital Remote Status Monitors. The Laser Transceivers provide a high speed
full-duplex data link between sites, while the Remote Status Monitors allow the
user to verify correct system operation. Two advance features - Full Time
Electronic Tracking and Remote Factory Diagnostics - ensure the highest levels
of reliability and availability. Currently the system will support data rates to
155 million bits per second (Mbps) with a range to 2.5 kilometers (1.5 miles).
Development plans include systems supporting tomorrow's ultra-high data rates.
Other features include remote status monitoring and diagnostics, both supported
by 24-hour technical support.
Product Research and Development. LaserWireless believes that strong
product research and development capabilities are essential to maintain a
competitive edge with its products. Since inception, it has focused its research
and development efforts on developing the finest laser communication devices
available. Its research and development efforts will continue.
Target Market. Current applications for LaserWireless products include
university and office campuses, building-to-building communications, military
mobile communications, emergency communication networks and temporary
communications. Important military applications include mobile, high bandwidth
communications using a battery-powered system that is easily transportable,
non-detectable, and secure. Emergency communication needs arise in disaster
areas where damage has occurred to above ground or underground communication
systems. Other temporary communication needs include conventions, expositions,
trade shows, and mobile command and control.
LaserWireless is preparing for the future of high-speed communications
with system development efforts focused on providing 622 Mbps and 2+ Gbps
communication capabilities.
LaserWireless Technology. LaserWireless' system is the latest technology
in optical communications for distances up to 2.5 kilometers with greater than
95% availability. The system incorporates full real-time electronic tracking to
ensure continuous alignment. The transmitters are easy to install and operate,
requiring only a clear line-of-sight and solid supporting locating for mounting.
Any problems in the field can be diagnosed by the factory using standard phone
lines. The transceivers are field repairable and include full factory support.
There are no license or right-of-way requirements.
The following are some of the features of the LaserWireless system:
o data rates from 1 to 155 Mbps
o 2.5 kilometer range (1.5 miles)
o electronic tracking system
o no licensing required
o D.C. operational
o remote status monitor
o complete diagnostics from factory
o 7 plus years MTBF
o waterproof, modular design
o protocol transparent
o highly cost effective
o secure transmission
o very high bandwidth capabilities
o compatible with all network interfaces
o eye-safe design
o certified CSA, UL, CDRH and CE
Manufacturing Strategy. LaserWireless' ongoing manufacturing strategy
will be designed to increase capacity, improve quality, and reduce costs. It
plans to gradually increase its production in order to sustain its projected
growth. In any given year, its ability to reach its targeted production level
will depend upon, among other factors, its ability to (i) continue to realize
production efficiencies at its existing production facilities through
implementation of innovative manufacturing techniques and other means, (ii)
successfully implement production capacity increases in its facility, and (iii)
sell all of the products it can produce.
LaserWireless will not manufacture any of the parts it needs to produce
its products and it'll have to rely on outside suppliers to provide the rest.
LaserWireless' income projections are as follows:
LaserWireless Income Projections
--------------------------------
2000 2001 2002 2003
---- ---- ---- ----
Net Sales $2,311,932 $5,064,740 $10,775,318 $20,599,640
Operating Costs
and Expenses 2,018,832 4,001,145 7,679,160 10,923,880
--------- --------- --------- ----------
Income (Loss)
From Operations 293,100 1,063,595 3,096,158 9,675,760
Other income (Expenses) -- -- -- --
Net Income (Loss) 293,100 1,063,595 3,096,158 9,675,760
Marketing Strategy. LaserWireless will conduct an aggressive advertising
and marketing campaign to publicize its products. LaserWireless believes that
its potential customers can best be reached through advertising in trade shows
and direct marketing and on the Internet.
LaserWireless Facility
LaserWireless' executive offices and manufacturing facility are located
in a light industrial area in Lancaster, Pennsylvania. They consist of
approximately 10,500 square feet of leased space under a lease which expires in
January 2003.
Competition
LaserWireless believes that it is at the forefront in the design,
development and manufacturing of laser communication systems. It emphasizes
quality, reliability, cost-effectiveness and timely delivery. Nonetheless, other
companies are engaged in the design, development and manufacturing laser
communication systems which may be competitive with LaserWireless' products.
Many of those entities have substantially greater financial, technical,
manufacturing, marketing, distribution or other resources than LaserWireless.
LaserWireless' profitability will depend upon its ability to compete in its
market area.
Product Liability
Although LaserWireless believes its laser systems to be safe at any
distance, the sale of its products may expose LaserWireless to product liability
claims. It believes that its products are, and will be, safe and that it will be
able to obtain product liability insurance at a reasonable cost. However, in the
event of an uninsured or inadequately insured product liability claim, or in the
event of an indemnification claim by a third party, LaserWireless' business and
financial condition could be materially adversely affected.
Regulation
LaserWireless' products and business may be subject to federal, state
and local regulations, including environmental regulations. LaserWireless can't
calculate exactly how much it will cost to comply with government regulation,
but it will try to ensure that its facilities and products comply with all
applicable regulations and standards. In any event, it doesn't think that the
cost of compliance will materially affect its financial condition.
Management
LaserWireless is currently managed by Richard Walter, its President.
Employees
As of May 8, 2000, LaserWireless employed nine full-time employees and
one part-time employee. None of LaserWireless' employees is represented by a
union and management believes its employee relations are good.
Operating Results
LaserWireless began operations in 1999. The following financial
information summarizes the more complete historical financial information of
LaserWireless contained elsewhere in this 10-K/A. The results in the following
table do not necessarily indicate results LaserWireless will achieve in the
future.
LaserWireless Operating Results
-------------------------------
Year Ended December 31, 1999
----------------------------
Income Statement Data:
Revenues $ -
Research and Development 150,828
General and Administrative 311,601
Depreciation 2,505
---------
Loss from Operations (464,934)
Other Income -
---------
Loss Before Taxes (464,934)
Income Taxes -
---------
Net Loss (464,934)
Accumulated Deficit, Beginning of Year -
---------
Accumulated Deficit, End of Year (1) (464,934)
=========
Balance Sheet Data:
Total Assets (2) 264,565
Total Liabilities 729,399
Common Stock 100
Accumulated Deficit (464,934)
- -------------------------------
(1) Before depreciation of any assets.
(2) Net of accumulated depreciation and amortization.
HEALTH PRODUCTS GROUP
---------------------
Essentia Water, Inc.
Overview
Essentia Water, Inc. ("Essentia") is a Woodinville, Washington based
bottled water marketing company acquired by NextPath on January 21, 2000. Its
principal executive offices are located at 24100 State Route 9 SE, Bldg. A,
Woodinville, Washington. Its phone number is (425) 488-9400. Its website is
www.essentiawater.com.
Growth Strategy and Plan of Operations
Essentia is engaged in the business of developing, manufacturing,
packaging, and marketing bottled alkaline and electrolyte enhanced premium water
products with health and hydration benefits. Essentia water is initially
pre-filtered and purified using reverse osmosis and ozonation to achieve 99.9%
purity. A bio-available electrolyte formulation of bicarbonate, magnesium,
potassium, sodium and calcium is added and the water is then processed using
Essentia's ionic separation technology to increase its alkalinity to assist in
balancing the acidic nature of American diets and to aid in producing a smooth
taste. Key elements of its growth strategy include:
Products. Bottled in 20 oz., 1.0 liter and 1.5 liter recyclable P.E.T.
(Polyethylene Terephtalate) bottles, Essentia water is distributed through
natural/health food and retail grocery channels (natural sets only) throughout
the United States. In addition to manufacturing bottled water products under its
own name, Essentia bottles under private labels such as Wild Water(TM) for Wild
Oats Community Markets, the second largest national chain of health food stores;
BonH2O(TM) for The Bon Marche, a flagship brand of Federated Department Stores;
and PETsMART.
In contrast to so many bottled waters, Essentia avoids the use of
"source" water from springs, glaciers, mountains, etc. because of their
inconsistencies. Instead, Essentia's unique process involves first purifying
water to its essence through reverse osmosis, then adding nutrient minerals that
are more bio-available (absorbable) by the body.
As a result, no other bottled water has the unique biological active
properties of Essentia Water. Certified lab analysis verifies that Essentia
(compared to other bottled waters) provides an abundant source of active
hydrogen that "quenches free radicals;" has less cohesion (better saturating
water) thus promoting faster hydration; is higher in alkalinity (+/- 9.5) thus
assisting the body in maintaining proper pH balance by neutralizing acidic
conditions; and delivers a proprietary formula of pure minerals for vital
cellular electrolyte replenishment.
All these active properties enhance the body's innate ability to heal
itself. These unique processes mean Essentia can bottle Essentia Water anywhere
in the world, consistently and within stringent quality assurance standards set
forth by Essentia while incorporating federal and state guidelines as the
foundation. Thus, Essentia Water is lab certified, user endorsed and 100%
satisfaction guaranteed to ensure consumer trust - an important part of
continued purchases and long term brand loyalty.
Product Research and Development. Essentia believes that strong product
research and development capabilities are essential to maintain a competitive
edge with its products. Essentia is committed to making Essentia an
international brand. Essentia realizes that a successful brand is not built by
accident, but requires the brand to become the focal point of the company's
vision. Essentia has gathered a seasoned team of business executives and
industry professionals all committed to research, development and product
engineering to further the Essentia vision.
Target Markets. Essentia currently co-packs, markets, and sells high
alkaline (pH) and electrolyte enhanced bottled water under the brand name
Essentia Water. Bottled in PET - 20 oz., 1.0 liter and 1.5 liter sizes, Essentia
Water is distributed through natural/health food stores and retail grocery
channels (natural sets only) throughout most of the United States. Essentia has
developed a national distribution infrastructure for catalog and Internet sales,
which provides direct delivery to Essentia's customers, adding to its national
distribution capabilities.
Essentia Technology. We believe Essentia Water is the only water of its
kind in the market today. Unlike source waters (spring, glacier, mountain,
etc.), Essentia, using its unique process, removes all foreign minerals and
contaminates commonly known as TDS (total dissolved solids) that survive
standard filtration.
Essentia specifications require our water to be purified to three (3)
parts per million (PPM) TDS. Some source waters have been tested and contain
over 100 times more TDS than Essentia Water. The amount and class of TDS found
in source water as compared to Essentia Water will change from bottle to bottle
giving little consistency to the water taste and profile.
Once Essentia Water is purified, our proprietary, pure electrolyte,
formulation is added. This formulation contains vital pure minerals including
calcium, magnesium, potassium, sodium and bicarbonates the human body requires.
Compared to source water, these minerals can be easily assimilated by the body.
Additionally, our proprietary formulation is tasteless, colorless, odorless and
water soluble.
After the electrolytes have been added, the purified water runs through
our proprietary Ionic Separation Technology. This technology separates the
water's alkaline ions (negative charged) from the acidic ions (positive
charged). Essentia bottles only the alkaline water we call "negative charged."
Essentia water has a pH level to +/- 9.5 compared to source water having an
average pH level of 7.0. A diagram of our process can be found at
www.essentiawater.com.
Marketing Strategy. Essentia's marketing strategy is designed to
increase sales by (i) expanding its product lines, (ii) continuing to increase
its distribution network, and (iii) adding a new east coast production facility
(co-packer). In any given year, its ability to reach its targeted sales level
will depend upon, among other factors, (i) its ability to obtain financial
resources, (ii) market acceptability of its new products, and (iii) its ability
to successfully increase its East coast production capacity.
Financial Summary. Since its inception in July 1998, Essentia has seen
product sales grow from 18,000 cases in the second half of 1998 to 75,000 cases
in 1999. Essentia expects sales of 200,000 cases in year 2000.
Results of Operations: 2000 (forecast) 2001 (forecast)
- ---------------------- --------------- ---------------
Net Revenues $ 3,111,300 $ 5,093,900
Cost of Goods Sold 1,929,400 2,995,900
--------------- ---------------
Gross Profit 1,181,900 2,098,000
Operating Expenses 1,715,700 1,872,000
Depreciation & Amortization 86,700 111,200
--------------- ---------------
Loss from Operations (620,500) 114,800
Other Income (Expense), Net 57,400 44,600
=============== ===============
Net Income $ (563,100) $ 159,400
(Loss) =============== ===============
These financial forecasts do not reflect an increase in net revenues
from sources other than those derived by Essentia's normal course of business in
the natural and health foods channels, in both branded and private label product
sales.
Essentia Facility
Essentia's executive offices are located in Woodinville, Washington,
which is located outside Seattle. They consist of approximately 800 square feet
of leased space under a lease which is month to month. Essentia is planning a
corporate office move to Phoenix, Arizona within the next 90 days. Essentia's
current business strategy is to continue to "partner" with contract packing
companies to produce its products under Essentia'a product specifications and
quality control standards. Essentia believes that contract packing
("co-packing") provides the most flexibility and the least capital investment.
Essentia anticipates having multiple plants strategically located around the
United States by the end of 2000. Currently Essentia's co-packers are California
Bottling Company located in Roseville, California and Renegade of America
located in Glendale, Arizona.
Competition
Essentia believes that Essentia Water is the only water of its kind in
the market today. However, many other water bottlers have substantially greater
financial, technical, bottling, marketing or other resources than Essentia.
Essentia's profitability will depend upon its ability to compete in its market
area.
Product Liability
The sale of its products may expose Essentia to product liability
claims. It believes that its products are, and will be, safe and that it will be
able to continue to obtain product liability insurance at a reasonable cost.
However, in the event of an uninsured or inadequately insured product liability
claim, or in the event of an indemnification claim by a third party, Essentia's
business and financial condition could be materially adversely affected.
Regulation
Essentia's products and business may be subject to federal, state and
local regulations, including environmental regulations. Essentia can't calculate
exactly how much it will cost to comply with government regulation, but it will
try to ensure that its facilities and products comply with all applicable
regulations and standards. In any event, it doesn't think that the cost of
compliance will materially affect its financial condition.
Management
Essentia is currently managed by Kenneth Uptain, its Chief Executive
Officer, and by James Tonkin, its President and Chief Operating Officer.
Employees
As of May 8, 2000, Essentia employed five full-time employees and one
part-time employee plus four contract consultants, two of whom are full-time and
two of whom are part-time. None of Essentia'a employees is represented by a
union and management believes its employee relations are good.
The following financial information summarizes the more complete
historical financial information of Essentia contained elsewhere in this 10-K/A.
The results in the following table do not necessarily indicate results Essentia
will achieve in the future.
Essentia Operating Results
--------------------------
Year Ended December 31,
1999 (July-December) 1998
---------- --------------------
Income Statement Data:
Net Revenues $677,221 $174,401
Cost of Goods Sold 499,755 199,468
------- -------
Gross Profit (Loss) 177,466 (25,067)
Operating Expenses 821,903 475,565
-------- -------
Operating Loss (644,437) (500,632)
Interest Expense 43,713 2,948
-------- -------
Net Loss $(688,150) $(503,580)
======= ========
Balance Sheet Data:
Current Assets $263,964 $118,350
Property and Equipment-At Cost, Net 280,010 312,763
------- -------
Current Liabilities 676,857 375,846
Paid In Capital 1,058,847 558,847
Accumulated Deficit (1,191,730) (503,580)
ENVIRONMENTAL TECHNOLOGIES GROUP
--------------------------------
Overview
The Environmental Technologies Group ("ETG") was created in October,
1999, is headquartered in Tulsa, Oklahoma, and is concerned with the
acquisition, development, and application of specific, environmentally-benign
technologies.
NextPath AES, Inc.
In General. NextPath AES, Inc. ("NAES"), a wholly owned subsidiary of
NextPath, was formed in November 1999. AES (Agro-Economic Systems) is the
acronym used to denote our self-sustaining, integrated agribusiness initiatives.
Status and Mission. Home-based in Tulsa, Oklahoma, NAES was established
to design, build, own, and operate AES facilities worldwide. Our AES facilities
are being designed to grow, process, and package fresh produce and fish on a
continuous, year-round basis. To the maximum extent possible, produce and fish
are to be certifiable as "organically" or "naturally" grown in accordance with
national organic growing standards. Commercial facilities are to include
self-contained energy systems. Light, temperature, humidity, nutrient streams,
water quality, effluent, and emissions at our AES facilities are to be fully
controlled. Fish-tank water is to be used in plant nutrition ("aquaponics"), and
effluent water from plant-beds and processing lines is to be filtered and
recycled. Waste products are to be recycled as fuel for the energy system.
Design Productivity. The target design-productivity of our typical AES
facility is to be considerably greater than that of known hydroponic or
aquaponic systems. Production and processing is to occur on a continuous basis,
and AES facilities are to be able to schedule just-in-time (JIT) delivery of
fresh food to retailers, with consequent savings in cold storage costs and
reduction in spoilage. Additionally, production costs are to be reduced by not
having to accommodate harvesting and processing "surges." Thus, processing lines
can be smaller, with fewer employees needed for harvesting and processing. At
the same time, technical tasks will be more sophisticated and varied, requiring
a larger proportion of trained, salaried workers.
Two Models. Two models are being developed: a large-scale, commercial
version and a "community food security" (CFS) model devised for developing
economies. Needful Provision, Inc. (NPI), a non-profit organization located
in Tahlequah, Oklahoma, which licenses proprietary processes and sub-systems to
NextPath, has been engaged to develop the CFS model, test basic bio-systems, and
provide training for operations and technical personnel.
Support Entities. A Tulsa architectural and construction management
firm, Ragsdale and Associates, has been engaged to oversee facilities design and
engineering. A gasifier-based energy system, designed and built by Thermogenics,
Inc., Albuquerque, New Mexico, has been selected for use at our AES facilities.
Our AES will employ proprietary aquaponics systems and technologies developed by
Agri-Covers, Ltd., of Gridley, Illinois. We have negotiated a definitive
agreement to acquire the assets and intellectual property of Agri-Covers, but
await funding to close the acquisition.
Prototype Commercial Facility. A number of potential Oklahoma sites are
being considered for the prototype facility. Upon completion of current design
and engineering work, contracts will be let to construct and equip that
facility.
Production and Installation Standards. AES facilities are to be built in
modules. Each module is to represent a specific set of growing and processing
conditions and production objectives. Energy requirements, and, therefore,
self-contained heating and electrical systems, are to be sized accordingly.
Modular structures, fixtures, and operating equipment are to incorporate
appropriate ISO 9001, ASME, and DIN specifications. Products, outputs,
environmental control features, and sizes of our AES facilities will vary by
market region. Modular structures and equipment sets are to be supplied in kit
configuration, suitable for containerized shipment to foreign sites. The AES
program envisions installation of facilities at land reclamation sites, in urban
locations, in areas where severe climate prevents outdoor cultivation, and in
lesser-developed regions in order to enhance general nutrition. In some locales,
we may supplement production through contract growers using company-prescribed
techniques and systems under our supervision.
Marketing Plan and Revenue Sources. Revenues are to come from the sale
of bulk and packaged vegetables, fish, herbs, plant oil extracts (including
health-related products), and ornamental plants. Facilities are to be sized for
economies of scale, with some installations requiring more than fifty acres of
installation space. Target profit margins of 25% or greater per year have been
projected for AES facilities in developed-nation configurations. These are to be
achieved through precise selection of the types of produce grown and value-added
processing. Wholesale lots are to be marketed over the Internet and through
direct, forward supply contracts to large retailers. Some health-food related
products are to be direct-marketed through NextPath's Health Products Group. We
are studying the possibility of marketing fresh produce and fish via overnight
air delivery service.
Estimated Near-Term Capital Requirements. We estimate that approximately
$14,000,000 will be required to implement our business plan for NAES in the near
term.
NextPath Environmental Services, Inc.
In General. NextPath Environmental Services, Inc. ("NES"), also located
in Tulsa, Oklahoma, was formed in November 1999 to develop, sell, own, and
operate systems that convert waste to energy, clean-up water and soil
contaminated by fuel, oil, and chemical spills, provide potable water at
locations that have no water treatment systems, and provide on-site effluent
control, filtration and treatment systems, and, more recently, to acquire,
develop, and market devices to drastically reduce exhaust emissions from, while
increasing the energy efficiency of, internal combustion engines. Two entities
are, or are targeted to be, included under the NES umbrella, NextPath
Thermogenics, LLC and NextPath Separation Solutions, LLC.
NextPath Thermogenics, LLC.
---------------------------
In General. NextPath Thermogenics, LLC (the "Thermogenics, LLC") is a
limited liability company owned 51% by Thermogenics, Inc., Albuquerque, New
Mexico, and owned 49% by NES. The Thermogenics, LLC designs, fabricates and
sells proprietary gasification systems that use virtually any hydrocarbon-based
waste product as fuel to create a low-temperature, high-quality gas.
Technology Base. This gas is known as "producer gas" or "syngas".
Depending on the design of the system, the gas can be either low- or
medium-heating value. The process involves a first stage high temperature
decomposition without combustion in a low-oxygen environment. The system uses
neither a combustion process nor incineration. Further, when coupled to an
engine, gas turbine or boiler, there are no gaseous emissions from the
gasification system and therefore the system can meet rigorous air quality
standards. This gas can be cleanly burned, liquefied, or used in a bio-process
to produce ethanol. The Thermogenics, LLC is actively pursuing opportunities in
this regard with existing process equipment and catalyst suppliers as well as
with waste generators and academic research facilities. Typically, this gas
would be combusted to produce heat for heat exchangers or steam boilers, or
directly fed to an internal combustion or gas turbine engine linked to an
electricity generation device. Thus, these units can be used for small-scale
electrical power generation (co-generation). For these reasons, the Thermogenics
unit was selected as the on site energy system for NextPath's AES facilities
(see above). The unit itself has no regulated emissions. Inert solid residues
from the reaction process can be safely land-filled or mixed with a binder and
used as a paving or building material.
Mission. The purpose of the Thermogenics, LLC is to build, own, and
operate waste-to-energy systems installed for specific waste disposal and energy
generation tasks. This normally would involve multiple units configured to
handle various waste streams, including municipal solid waste (MSW), discarded
tires, oil sludge, trap grease, animal wastes, plant residues, dewatered sewage
sludge, coal tailings, textile waste, automobile shredder waste, industrial
wastes such as paint sludge and used oils, food processing wastes, and wood
products waste. After removal of larger metallic solids, these wastes can be
batched or blended, depending upon energy output requirements.
Peripheral Equipment Requirements While Thermogenics, Inc. is the
provider and manufacturer of patented gasification systems that form the core of
the Thermogenics, LLC's waste-to-energy business, complete projects will utilize
equipment from a variety of international manufacturers for the processing of
waste and the conversion of the gas produced by the gasification systems into
different forms of energy. This could include shredders, grinders, a briquetting
system, various conveyor systems, internal combustion engines configured for use
with liquid petroleum or natural gas, gas turbines, electrical generators and
turbo-alternators steam boilers, heat-exchangers, distillation and
bio-conversion units (ethanol production) and other peripherals.
System Control, Safety, and Standards. Waste-to energy and peripheral
systems are to be electronically controlled through desktop computers, using
proprietary control logic, circuit boards, and software. All systems are to be
equipped with automated safety and shut-down systems. Facilities and equipment
designed and supplied by the Thermogenics, LLC are to be compliant with local
environmental regulations. The Thermogenics, LLC has committed to bring its
equipment and facilities into conformance with ISO 9000 and 9001 standards at
the earliest possible date.
Project Types and Bases
Build, Own, Operate (BOO). This type of project is to be a long-term (10
years or more) commitment by the Thermogenics, LLC to design, build and operate
a waste-to-energy facility. Typically a local partner will be involved and
contribute a portion of the equity, while Thermogenics, LLC provides the
majority of the funding. Long-term contracts for the supply of the waste and for
the sale of energy would be involved. In most cases the land for the facility is
supplied under a lease agreement with the customer with only a nominal rental
fee. In some cases improvements to the site are cost-shared with the customer
and landowner.
Build-Own-Operate-Transfer (BOOT). A BOOT project is similar to the BOO
project, except that there would be a predetermined time in the future, usually
3 to 5 years when ownership would be transferred to a governmental or private
entity. The Thermogenics, LLC would usually continue to operate and maintain the
facility under a long-term contract with the new owner.
Turn-Key With a Management Contract. This project type would allow an
owner to place a single contract for the entire facility, sometimes even
including the site preparation and civil work, and the Thermogenics, LLC would
serve as General Contractor, working with local contractors, to design,
construct, install and start-up the entire plant. The Thermogenics, LLC could,
at the owner's option, facilitate construction financing, with full payment made
when the installation and start-up phase is completed and the plant is in full
operation. The Thermogenics, LLC could then, under a long-term contract with the
owner, be responsible for operation and maintenance of the facility on a fee or
cost-plus basis.
Straight Turn-Key. While less attractive to the Thermogenics, LLC, this
form of project could be expedient when special financing conditions, or a need
for the technical skills dictate. In this instance the Thermogenics, LLC would
be paid progress payments during the design and construction phases, and fully
paid off when the plant is accepted and ready to begin full operation. Completed
facilities would remain under the Thermogenics, LLC service and maintenance
agreements for an indefinite period. Operators would be trained and certified by
the Thermogenics, LLC.
Development Plan. The initial development plan envisions 10 to 12
projects in the Western United States and Europe. Project costs to the
Thermogenics, LLC include manufacture and procurement of systems and related
equipment, and the hiring and training of operators. Some foreign projects could
involve co-ventures with waste management and power companies. In some
instances, bank financing and economic development incentives have been
proffered. The Thermogenics, LLC is exploring a number of public and private
project finance options.
Revenue Sources. Revenues are to be derived from on-site waste disposal
contracts; tipping fees (fees for the handling of waste--some running to more
than $400 per ton of waste received); contract management of the Thermogenics,
LLC provided waste-to-energy facilities; consulting services for purpose-design
of facilities to dispose of particular wastes or produce energy for particular
industrial purposes (for example, an ethanol plant, a foundry, AES facilities, a
sugar plant, and a wood products plant); generation of electrical power (in the
range of approximately three to 20 megawatts); generation of heat for central
steam heating systems; production of derivative fuels including liquid petroleum
gas and ethanol/methanol; other byproducts (including ash, carbon dioxide, and
carbon monoxide); and the sale or leasing of complete systems. Rates of return
for these operations are being assessed; however, the Thermogenics, LLC criteria
for acceptance of contract proposals includes a requirement of projected
internal rates of return on equity greater than 20%.
Estimated Near-Term Capital Requirements. We estimate that approximately
$16,000,000 will be required to implement the business plan for the
Thermogenics, LLC in the near term.
NextPath Separation Solutions, LLC.
In General. NextPath Separation Solutions, LLC (the "Separation
Solutions, LLC") is a limited liability company owned 51% by the Lewis
Corporation (Tetra, Separation Systems, LLC), Pocatello, Idaho, and owned 49% by
NES.
Technology Base. Tetra, Separation Systems, LLC /Lewis designs,
fabricates, and sells proprietary oil-water separation and soil remediation
systems that feature patented and proprietary components. These systems are
transportable (skid-mounted) or mobile, and are capable of on-site clean-up of
petroleum and chemical spills, with accompanying on-site restoration of
contaminated soils as required. Systems are automated for two-person operation.
Independent laboratory test results disclose that these systems can reduce
petroleum contamination in soil to less than 100 parts per million and volatile
organic compounds (VOC's) to trace levels in a single-pass operation. Oil
contamination in water can be virtually eliminated in a single pass.
Demonstrations have been successfully conducted for environmental protection and
quality authorities.
Mission. The Separation Solutions, LLC has been formed to build, own,
and operate these systems for contract clean-up and remediation. Operations can
involve three systems, the sump system, the soil system, and the oil-water
system. Operating systems would be installed at clean-up sites such as gas
stations and fuel depots, environmental cleanup zones, industrial waste dumps,
waste transfer stations, and landfills.
Development Plan. Two production model systems are already in operation.
The initial development plan envisions equipping 18 operating locations with
sump systems. This includes manufacturing and procurement of the systems and
related equipment, localized marketing efforts, and the hiring and training of
operators. Initial target markets include the western and southwestern regions
of the United States. This plan would be accelerated to accommodate additional
domestic and European markets that have been identified. Depending upon market
conditions, and demand, the Separation Solutions, LLC is prepared to establish
up to 200 operating sites within the first seven years.
Revenue Sources. Revenues are to be derived from on-site water and soil
cleanup contracts. For example, a sump system operating at an average rate of 50
gallons per minute can process 24,000 gallons per 8-hour day. Processing
contracts, typically bring an average of $1 per gallon on a range of $.50 to
$1.50 per gallon. Therefore, the Separation Solutions, LLC projects average
operating-day revenue per sump system to be approximately $24,000, or $5.4
million per year if operated for 225 days per year. Current projections indicate
potential average margins exceeding 40% beginning in the third year.
Estimated Near-Term Capital Requirements. We estimate that approximately
$17,000,000 will be required to implement the business plan of the Separation
Solutions, LLC in the near term.
NextPath Bio-Products Research; Needful Provision, Inc.
In General. Applications research is to be sponsored by all NextPath
entities; however, the main bio-product development arm for the company is to be
Needful Provision, Inc, ("NPI"), an Oklahoma based non-profit organization that
licenses proprietary systems and processes to NextPath. David Nuttle, NextPath's
Chairman and interim President and CEO, is also President, CEO and Chairman of
NPI and the inventor of the proprietary technology owned by NPI and licensed to
NextPath. The scope of NPI operations for NextPath remains proprietary and
budgets for grants and research contracts to NPI are included in those of the
operating companies. NPI has been previously, or is now, engaged in cooperative
research activities with Oklahoma State University, North Carolina State
University/Research Triangle Institute, and the National Renewable Energy
Laboratory. NextPath has a first right-of-refusal for commercialization of NPI's
products and processes. Some of NPI's development work on our behalf includes:
o development of genetic stocks of fish, plants, and micro-
organisms for AES operations;
o applied research into photo-flash methods for stimulating plant
growth;
o applied research into the production and refinement of biofuels
from fresh water micro-algae;
o applied engineering of effluent control systems using bio-
filtration and vegetative filter beds;
o applied research and engineering of aquaculture and hydroponic
systems;
o applied research into the nutritional properties of high-protein,
naturally occurring grains and "ethno-botanicals" (plants
cultivated and used for nutrition and medicinal purposes by
indigenous peoples);
o applied research into lipid/oil extraction from vegetation and
micro-organisms;
o applied research into the natural enhancement and control of
nutrients for hydroponic plants and aquaculture fish;
o training curricula and contract training for AES operators and
technicians; and
o information compendia for bio-systems development.
INTERNET AND E-COMMERCE GROUP
-----------------------------
PriMedium, LLC
On June 12, 1999, NextPath signed an Option Agreement with PriMedium,
LLC, a Dallas, Texas, based software development firm that specializes in
creating websites for Internet sales and purchase ordering. One of the primary
reasons NextPath signed the Option Agreement was to develop the means for direct
sale of NextPath and its subsidiaries' products and sales over the Internet with
all of NextPath websites linked. Among other terms, the Option Agreement
provides that NextPath would pay $1,500,000, issue 600,000 shares of NextPath
common stock, and grant an annual royalty payment of ten percent (10%) based on
the pre-tax profits of PriMedium to the equity owners of PriMedium. Although the
shares were issued by NextPath at the direction of our former President and CEO,
neither the Option Agreement nor the issuance of the stock was known to, or
approved by, the Board. We are reevaluating whether or not to enter into a
definitive agreement and there can be no assurances that one will ultimately be
consummated.
US CertifiedLetters LLC
US CertifiedLetters LLC ("USCL") was formed for the purpose of
licensing, developing and commercializing proprietary technology for
transmitting instruments by certified mail via the Internet or other medium (the
"C-mail Technology") in the continental United States, Alaska and Hawaii. C-mail
Technology will enable postal customers to send certified mail over the
Internet. On April 3, 2000, NextPath signed a definitive agreement to acquire
20% of USCL. The purchase price will consist of a combination of cash and stock,
of which NextPath has advanced $2,750,000. The parties expect to complete the
acquisition by June 4, 2000. There are no assurances that this transaction will
be closed within the anticipated timeframe or that it will close consistent with
terms of the initial agreement.
USCL provides electronic business-to-business and business-to-consumer
mail services, and has developed Internet technologies to provide new and more
efficient mail processing capabilities to consumers, particularly in the area of
certified mail. USCL believes it is the first and only company to be granted
approval by the USPS to provide certified mail processing services online. In
1998, the U.S. Postal Service processed 510,878,000 pieces of certified mail
(according to the USPS website, www.usps.gov, and 1998 annual report). USCL
expects to capture a portion of this market.
Through its proprietary web site, www.USCertifiedLetters.com, USCL
believes that it will be one of the most reliable ways to send certified mail
within the continental United States, Alaska and Hawaii. William T. Carter, the
Manager and founder of USCL, has also developed www.globalcertifiedpost.com
(GCP) for overseas certified mail delivery.
USCL's licensed new generation of proprietary, patent pending,
information software, Automated Certified Mail, has been test marketed, is
approved by the USPS and is ready to mass market. This software allows the user
to create a letter (or insert one from a word processing program) at the
www.USCertifiedLetters.com. site, pay on-line, and then send the letter. The
automated certified mail system verifies the address, adds the barcode, prints
and folds the letter, and automatically completes the certification forms with
just a few clicks of a mouse. The customer can expect a return receipt within 4
to 6 days, compared to the average of 10 to 12 days for manual processing.
Global Certified Mail
Global Certified Mail, Inc. ("GCM") was formed by NextPath in October
1999 to commercialize the same proprietary electronic certified mail system for
areas outside the continental United States, Alaska and Hawaii. Many businesses
and organizations in other countries require verification of mail delivery to
the United States, but traditional delivery methods are expensive and time
consuming.
On April 3, 2000, NextPath signed an agreement to exchange a 20%
interest in GCM for a license from William T. Carter to use his C-mail
Technology to enable global postal customers to send certified mail over the
Internet outside of the continental United States, Alaska and Hawaii. The
Company will maintain an 80% ownership interest in GCM. The parties expect to
complete this transaction by June 4, 2000. There are no assurances that this
transaction will be closed within the anticipated timeframe or that it will
close consistent with terms of the initial agreement.
USCL is currently developing the web site to be used by GCM, where the
process will be similar to that of www.USCertifiedLetters.com. However, all
letters will be processed at one facility in Birmingham into a standard
certified letter, making the "point of origin" for the letter a point within the
United States, rather than a foreign city. This will reduce the delivery time,
speed return receipts, and reduce costs compared to the current alternatives.
GCM intends initially to target multinational businesses, financial institutions
and law firms in Europe.
USCL recently chose IBM Global Services (NYSE: IBM) and ITC^DeltaCom
(Nasdaq: ITCD) to design, manage and host both the new USCL site.
INVESTMENTS
-----------
United Paper, Inc.
We own 1,000 shares of non-voting Series A Preferred Stock of United
Paper, Inc., a Texas corporation ("United Paper"), for which we paid $1,000,000.
Each share of Series A Preferred Stock has the right to priority mandatory
cumulative dividends of $120 per year.
United Paper is an independent paper distributor to newspapers,
publishing companies, printers and catalog houses. It is the resulting company
of the August 10, 1999 merger of All-Pro Paper of Texas, Crown Converting of
Texas, G.B. Goldman Paper of Philadelphia, and The Paper Group of Chicago on
August 10, 1999.
All Pro and The Paper Group are merchant wholesalers that currently sell
paper in the South Central and Mid Western United States. These company's have
the ability to repackage, cut and customize paper for shipment. They sell
groundwood newsprint, groundwood coated free sheet, and coated free sheet to
printers and end users.
G.B. Goldman is a paper wholesaler that specializes in uncoated free
sheet, coated free sheet, and coated paperboard. The company has a successful
history of selling in job lot quantities and providing competitive value added
services to the paper merchant and converter trade.
Crown Converting, with locations in Philadelphia PA, Lufkin TX, and
Nashville TN, can handle a full range of converting needs including rewinding,
slitting, and sheeting.
North American Paper was acquired by United Paper in December 1999 and
is a paper merchant wholesaler selling to publishing, catalogs, and other
periodicals. The company specializes in full graphic, print, and paper
solutions. Advantage Paper was acquired by United Paper in February 2000 and is
a printer direct seller, handling commodity offset and paper board.
GroupNow, Inc.
On November 24, 1999 we signed a Subscription Agreement to purchase
1,000,000 shares of Series A Convertible Preferred Stock in VentureNow, Inc.,
(now known as GroupNow, Inc.) at a price of $10 per share. The Series A
Convertible Preferred Stock has voting powers per share equal to GroupNow's
Common Stock. However, the holders of the Series A Convertible Preferred Stock
are entitled, as a class, to receive seventy percent (70%) of any dividend paid
by GroupNow, Inc. prior to conversion. Holders of the Series A Preferred Stock
will share dividends paid by GroupNow, Inc., if any, ratably in accordance with
their percentage ownership within the class of Series A Convertible
Stockholders. Each share of Series A Convertible Preferred Stock will
automatically convert to one share of Common Stock under certain circumstances.
As of December 31, 1999, we had paid $1,500,000 to GroupNow, Inc. in accordance
with the terms of the Subscription Agreement. Therefore, as of this date,
NextPath owns 15% of the Series A Convertible Preferred Stock. We have not
decided whether or not we will acquire the remaining 85% of the Series A
Convertible Preferred Stock for $8,500,000 and there can be no assurance that we
will acquire the remaining stock.
GroupNow, Inc. is a non-operating holding company, the operating
subsidiaries of which are VentureNow, LLC, VentureNow Holdings, LLC and Now
Securities, LLC.
VentureNow, LLC is a venture capital investment firm focusing on late
stage investments in Information Technology and Internet focused companies. In
addition to its proprietary funds, VentureNow plans to develop additional
private equity funds targeted toward different stages of investment (e.g. early
stage, second stage, etc.) in its target sectors. The company plans to derive
revenue from turnover of its proprietary investments and from fees for
management of the planned private equity funds.
VentureNow Holdings, LLC has been established to act as the general
partner of the proposed private equity funds for which VentureNow, LLC will
serve as manager. VentureNow Holdings, LLC plans to derive revenue through
capital gains on its investments and the general partner's share of any carried
interest of the private equity funds for which it plans to act as general
partner.
Now Securities, LLC is a financial advisory and investment banking firm
in development. It currently focuses on advising emerging growth companies
regarding corporate structuring and development, as well mergers and
acquisitions.
LATelco International, Inc.
On August 10, 1999, we purchased 666,666 Units in the capital of LATelco
International, Inc. ("LATelco") for $100,000, each Unit consisting of one common
share and one non-transferable share purchase warrant authorizing the holder to
purchase one common share at a price of $0.15 per share on or before August 10,
2000. There can be no assurance that we will exercise our warrants.
LATelco, a corporation continued under the laws of the Turks and Caicos
Islands, is headquartered in San Antonio, Texas. Its stock is traded on the
Canadian Venture Stock Exchange under the symbol "LTO." It maintains a website
at http://home.flash.net/~latelco. LATelco was organized in 1993 for the purpose
of developing wireless communications systems and providing specialized wireless
services. Its principal business lines include the design, manufacture and
operation of wireless data systems and networks incorporating proprietary
software and equipment developed by LATelco.
ITEM 2. PROPERTIES
Our executive offices are located at 1615 N. 24th West Avenue, Tulsa,
Oklahoma. We occupy approximately 6,000 square feet of space on a month to month
lease. This space is shared with NextPath AES, Inc.
Each of our subsidiaries maintains executive office and manufacturing
facilities, as the case may be, as described in Item 1. Business. We believe
that our facility and those of our subsidiaries are adequate for our and their
current needs.
ITEM 3. LEGAL PROCEEDINGS
NextPath and its former President, James R. Ladd, are two of the named
defendants in the case of Tim McMurray vs. James R. Ladd, Robert Wehle et al.,
District Court of Dallas County, Texas (No. 00-00170) filed January 10, 2000.
The action alleges "tortious interference with existing and/or potential
business relations," "civil conspiracy," and negligence and also seeks
injunctive relief. NextPath believes that this action is wholly without merit
and intends to vigorously defend it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1999.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
The Company's authorized common equity securities consist of par value
$0.001 common stock.
From January 27, 1998 until July 23, 1999, our common stock was quoted
on the OTC Bulletin Board under the symbol "HYPE." Since July 23, 1999, our
common stock has been quoted on the OTC Bulletin Board under the symbol "NPTK."
Prior to January 27, 1998, there was no established public market for our common
stock. The following table sets forth the high and low closing bid prices per
share of our common stock for each full quarterly period during the two most
recent fiscal years as reported by the OTC Bulletin Board:
High Low
---- ---
Year Ended December 31, 1998
First Quarter ............................. $ N/A $ N/A
Second Quarter ............................ .50 .38
Third Quarter ............................. .44 .38
Fourth Quarter ............................ .63 .38
Year Ended December 31, 1999
First Quarter ............................. $1.00 $ .44
Second Quarter ............................ 2.38 .88
Third Quarter ............................. 7.00 1.93
Fourth Quarter............................. 25.00 7.00
Bid prices for the OTC Bulletin Board reflect inter-dealer prices, do
not include retail mark-ups, mark-downs and commissions, and do not necessarily
reflect actual transactions.
Holders
As of May 8, 2000, there were 1,234 shareholders of record of our common
stock. On May 8, 2000, the last reported sale price of our common stock on the
OTC Bulletin Board was $3.56 per share.
Dividends
We haven't declared or paid any dividends on our common stock in the
past, and we don't anticipate declaring or paying any dividends in the
foreseeable future. We intend to retain future earnings, if any, to reinvest in
our business. Any future determination as to the declaration and payment of
dividends will be at the discretion of our board of directors and will depend on
then existing conditions, including our financial condition, results of
operations, capital requirements, business prospects, and such other factors as
the board deems relevant.
Recent Sales of Unregistered Securities
On March 17, 2000, James Ladd, NextPath's Chairman, President, Chief
Executive Officer and Treasurer, resigned due to persistent problems with his
health. On March 30, 2000, Douglas McClain, a member of NextPath's Board,
resigned for personal reasons. Since that time, our new management team and
reconstituted Board has been using their best efforts to ascertain the full
extent to which NextPath, at the direction of Messrs. Ladd and McClain without
notice to the Board and without Board approval, may have sold securities, or may
have benefited from the sale of our stock held by Messrs. Ladd, McClain and
others, since January 27, 1998, which were not registered under the Securities
Act of 1933. As of May 8, 2000, we are aware of the following sales of
unregistered securities and transactions involving securities which were issued
in exchange for property, services, or other securities. The transactions set
forth below are not intended to be all inclusive and there may be other
transactions, the exact facts and details of which we are investigating.
However, should other transactions be discovered, they will be disclosed, if
required, in an amended 10-K or other appropriate report.
(a) Compact Power Merger. In connection with our acquisition of all
of the issued and outstanding common stock of Compact Power
International, Inc. on January 27, 1998, we issued approximately
5,480,000 shares of restricted common stock to the following
shareholders of Compact Power ("CP") in a stock-for-stock
transaction for shares of CP:
Name Shares CP Shares
---- ------ ---------
James R. Ladd 4,223,000 1,175
Mary W. Harrison 580,000 150
Joseph P. Kane 387,000 100
Willow Holdings, Inc. 290,000 75
------- -----
Total 5,480,000 1,500
This transaction was exempt from registration under the
Securities Act pursuant to Section 4(2) on the basis that the
transaction did not involve a public offering.
(b) First 1998 504 Offering. On February 1, 1998, we offered
1,500,000 shares of common stock for $.25 per share to certain
qualified investors in a private placement. This transaction was
exempt from the registration requirements of the Securities Act
pursuant to Section 3(b) and Rule 504 of Regulation D.
(c) Second 1998 504 Offering. On March 10, 1998, we offered 1,100,000
shares of common stock for $.25 per share to certain qualified
investors in a private placement. This transaction was exempt
from the registration requirements of the Securities Act pursuant
to Section 3(b) and Rule 504 of Regulation D.
(d) 1999 504 Offering. On January 1, 1999, we offered 1,500,000
shares of common stock for $.40 per share to certain qualified
investors in a private placement. This transaction was exempt
from the registration requirements of the Securities Act pursuant
to Section 3(b) and Rule 504 of Regulation D.
(e) Regulation S Transaction. During 1999, we sold and issued
approximately 1,365,000 shares of restricted common stock for
approximately $15,430,000 to European investors. This transaction
was exempt from the registration requirements of the Securities
Act as an offshore transaction pursuant to Regulation S.
(f) NPI License. On September 23, 1999, we issued 500,000 shares of
restricted stock to Needful Provision, Inc. as required by our
License Agreement with NPI dated June 1, 1998.
(g) Sagebrush Acquisition. In connection with our acquisition of all
140,000 shares of outstanding common stock of Sagebrush
Technology, Inc. ("Sagebrush") on December 14, 1999, we paid cash
and issued 600,000 shares of common stock to the four
shareholders of Sagebrush in exchange for their restricted common
stock in Sagebrush. This transaction was exempt from the
registration requirements of the Securities Act pursuant to
Section 4(2) on the basis that the transaction did not involve a
public offering.
(h) Willow Acquisition. In connection with our acquisition of all 200
shares of the outstanding common stock of Willow Systems Limited
("Willow") on November 2, 1999, we paid cash and issued 500,000
shares of restricted common stock to the two shareholders of
Willow in exchange for their common stock in Willow. This
transaction was exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) on the basis that the
transaction did not involve a public offering.
(i) Reflex LLC Purchase Agreement. In connection with our acquisition
of Willow, we also acquired complete ownership of its subsidiary,
Reflex LLC. On November 2, 1999, we issued 50,000 shares of
restricted common stock to the owner of one-third of Reflex LLC
for his interest in Reflex. This transaction was exempt from the
registration requirements of the Securities Act pursuant to
Section 4(2) on the basis that the transaction did not involve a
public offering.
(j) LaserWireless Acquisition. In connection with our acquisition of
all 100 shares of the outstanding common stock of LaserWireless,
Inc. ("LaserWireless") on October 18, 1999, we paid cash and
issued 100,000 shares of restricted common stock to the sole
shareholder of Laser Wireless in exchange for his common stock
in LaserWireless. In addition, we placed 300,000 shares of
restricted common stock in a Restricted Stock Plan for the
benefit of the employees of LaserWireless. This transaction was
exempt from the registration requirements of the Securities Act
pursuant to Section 4(2) on the basis that the transaction did
not involve a public offering.
(k) NextWave Photonics Acquisition. In connection with our
acquisition of all 200 shares of the outstanding member interests
of NextWave Photonics, LLC ("NextWave") on November 2, 1999,
we issued 50,000 shares of restricted common stock to John
Hodges, an equity owner of NextWave, in exchange for his
membership interest in NextWave. This transaction was exempt from
the registration requirements of the Securities Act pursuant to
Section 4(2) on the basis that the transaction did not involve a
public offering.
(l) IC Holdings Agreement. On May 6, 1999, we issued 60,000 shares of
restricted common stock to IC Holdings III, LLC as partial
compensation for investor relations services to be provided by IC
Holdings to us. This transaction was exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) on
the basis that the transaction did not involve a public offering.
(m) IPA Consulting Agreement. We issued 550,000 shares of restricted
common stock to International Profit Associates, Inc. as partial
compensation for consulting services to be provided by IPA to us
pursuant to a Consulting Agreement dated September 15, 1998. This
transaction was exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) on the basis that the
transaction did not involve a public offering.
(n) Essentia Water, Inc. In connection with our acquisition of all
3,657,966 shares of outstanding common stock of Essentia Water,
Inc. ("Essentia") on January 21, 2000, we issued $7,654,294 worth
of our restricted common stock (585,760 shares) to the
shareholder of Essentia in exchange for its common stock. The
transaction was exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) on the basis that the
transaction did not involve a public offering.
(o) PriMedium, Inc. On or about July 12, 1999, NextPath, at the
direction of James Ladd, issued 800,000 shares of restricted
stock to the owners of PriMedium, Inc., notwithstanding that the
issuance had not been brought to the attention of the Board, let
alone authorized by the Board. We are reevaluating whether or not
to enter into a definitive agreement and there can be no
assurances that one will ultimately be consummated.
(o) Consulting Agreements. We now believe that NextPath, at the
direction of Mr. Ladd, restricted common stock was issued to a
number of individuals and entities pursuant to consulting
agreements, including but not limited to, the following:
Name Shares
---- ------
Douglas McClain 5,000,000
W.O.W. Consulting Group 11,000,000
BLISS Unlimited, Inc.
(Interplex Capital & Equity Corp) 2,500,000
Affiliated Communications Co. 1,700,000
(p) Compact Power Limited. In April 2000, we issued 250,000 shares of
restricted common stock with piggyback registration rights to
Compact Power Limited as consideration for the Mutual Release of
a Franchise Agreement we entered into with Compact Power Limited
on June 1, 1998. The transaction was exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) on
the basis that the transaction did not involve a public offering.
ITEM 6. SELECTED FINANCIAL DATA
Prior to our merger with Compact Power International on January 27,
1998, we had no operating history. Since that merger, we have been involved
primarily in activities related to the acquisition of our subsidiaries. Our
subsidiaries also have limited operating histories. Sagebrush Technology, Inc.
(NM) was incorporated on April 1, 1991; Willow Systems Limited (NM) was
incorporated on May 23, 1996; Essentia water, Inc. (WA) was incorporated on June
30, 1998; and Laser Wireless, Inc. was incorporated on March 2, 1998, but was
inactive until May of 1999.
The following sets forth selected consolidated financial date for the
periods indicated. The selected consolidated financial data were derived from,
and should be read in conjunction with, our Consolidated Financial Statements:
Fiscal Year
1999 1998 1997
------------ ---------- -----
Revenue $ 356,157 $ - $ -
Cost of Goods 235,788 - -
Gross Profit 120,369 - -
Expenses 33,079,957 528,142
Net Loss from Operations (32,958,588) - -
Net Loss (36,768,153) (528,142) -
Net Loss Per Share (2.22) (.069) (.000)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
We don't have any significant operating history other than that of our
wholly owned subsidiaries. We currently derive all of our revenue from the
operations of our wholly owned subsidiaries and from our other investments.
During 1999, most of our efforts have been directed to the raising of sufficient
capital to finance our operations and costs associated with the negotiation and
closing of acquisition agreements with our subsidiaries. We intend to continue
to identify and pursue acquisitions which provide attractive investment
opportunities, particularly when we can add value through our technical
expertise. Our operating expenses are comprised of our general and
administrative overhead and the expenses of our subsidiaries.
We intend to provide our subsidiaries with sufficient funds so that they
can grow their businesses nationally and internationally by effectively
developing, marketing and expanding their products, services and market base.
However, absent an infusion of equity capital or financing on terms acceptable
to us, we do not believe that we have the liquidity and capital resources
necessary to operate our business and those of our subsidiaries for the
foreseeable future. We are actively engaged in negotiations with debt and equity
sources and we will continue to purse all such options on an aggressive basis.
Results of Operations
In 1999, we incurred a net loss of $36,768,153. In 1998 we incurred a
net loss of $528,142. See our Consolidated Financial Statements.
Liquidity and Capital Resources
We do not believe that our existing working capital, the anticipated
revenues of our subsidiaries, and the anticipated revenues from our other
investments will be sufficient to fund our cash requirements and capital needs
for the foreseeable future. See ITEM 1. BUSINESS. The extent of additional
financing needed will depend on the success of our business and our ability to
identify and pursue additional acquisitions that provide attractive investment
opportunities. While to the extent possible we intend to fund future
acquisitions primarily with our common stock, most acquisitions require that a
portion of the consideration be in the form of cash. If we significantly
increase the operations of our subsidiaries or our acquisitions beyond planned
levels or if our revenues are lower than anticipated, our cash needs will be
increased. In addition, our future capital requirements will depend on a number
of other factors, including the level of our product research and development,
the level of market acceptance of our goods and services, and the feasibility
and extent of international expansion.
Competition from larger and more established companies may hamper
marketability. NextPath and its subsidiaries may face intense competition from
similar, more well-established competitors, including national, regional and
local companies possessing substantially greater financial, marketing, personnel
and other resources than NextPath. NextPath may not be able to market or sell
its products if faced with direct product competition from these larger or more
established companies.
Patents, trademark protection and proprietary marks. Notwithstanding any
potential registration of patents and certain trade names with the United States
Patent Office and the United States Trademark Office, there is no assurance that
NextPath or its subsidiaries would be able to enforce against use of any of the
proprietary products or marks of its subsidiaries. There is also no assurance
that NextPath will be able to prevent competitors from using the same or similar
products, names, marks, concepts or appearances of it or its subsidiaries or
that it will have the financial resources necessary to protect its marks against
infringing use.
Issuance of future shares may dilute investors' share value. The
Articles of Incorporation as amended of NextPath authorizes the issuance of
100,000,000 shares of common stock. The future issuance of all or part of the
remaining authorized common stock may result in substantial dilution in the
percentage of our common stock held by our then existing shareholders. Moreover,
any common stock issued in the future may be valued on an arbitrary basis by us.
The issuance of our shares for future services or acquisitions or other
corporate actions may have the effect of diluting the value of the shares held
by investors, and might have an adverse effect on any trading market.
Current trading market for the Company's securities. Our common stock is
traded on the OTC Bulletin Board operated by Nasdaq under the symbol NPTK. The
NASD has implemented a change in its rules requiring all companies trading
securities on the OTC Bulletin Board to be registered as a reporting company.
The Company was required to become a reporting company by the close of business
on December 15, 1999. NextPath effected the merger with Epilogue on November 11,
1999 and became a successor issuer thereto in order to comply with the reporting
company requirements implemented by the NASD.
Penny Stock Regulation. Our common stock may be deemed a penny stock.
Penny stocks generally are equity securities with a price of less than $5.00 per
share other than securities registered on certain national securities exchanges
or quoted on the Nasdaq Stock Market, provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or system. Our securities may be subject to "penny stock rules" that
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual income exceeding
$200,000 or $300,000 together with their spouse). For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase of such securities and have received the purchaser's written
consent to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the "penny stock rules"
require the delivery, prior to the transaction, of a disclosure schedule
prescribed by the SEC relating to the penny stock market. The broker-dealer also
must disclose the commissions payable to both the broker-dealer and the
registered representative and current quotations for the securities. Finally,
monthly statements must be sent disclosing recent price information on the
limited market in penny stocks. Consequently, the "penny stock rules" may
restrict the ability of broker-dealers to sell our securities. The foregoing
required penny stock restrictions will not apply to our securities if such
securities maintain a market price of $5.00 or greater. As of the date of this
10-K/A, the trading price of our common stock is less than $5.00 per share, and
there can be no assurance that the price of our securities will exceed such a
level.
We are currently operating at a loss. Until the recent acquisition of
Sagebrush, Willow, LaserWireless and Essentia, we had no operations or revenues
and we borrowed funds or sold our securities to begin our operations and fund
our acquisitions. Our ability to develop operations is dependent upon our
ability to acquire companies for which we will need to raise capital through the
placement of our securities or from other debt or equity financing. If we are
not able to raise such financing or to obtain alternative sources of funding,
management will be required to curtail operations. There is no assurance that we
will be able to continue to operate if additional sales cannot be generated.
We have a limited operating history. We have only a limited history of
operations which to date have not been profitable. Our operations are subject to
the risks and competition inherent in the establishment of a relatively new
business enterprise. There can be no assurance that future operations will be
profitable. Revenues and profits, if any, will depend upon various factors,
including market acceptance of its concepts, market awareness, reliability and
acceptance of the Internet, dependability of its distribution network, and
general economic conditions. There is no assurance that we will achieve our
expansion goals and the failure to achieve such goals would have an adverse
impact on us.
Possible inability to finance acquisitions. In transactions in which we
agree to acquire a company for cash, we will have to locate financing from
third-party sources such as banks or other lending sources or we will have to
raise cash through the sale of our securities. There is no assurance that such
funding will be available to us when required to close a transaction or if
available on terms acceptable to us.
Operation of LaserWireless business involves the use of lasers.
LaserWireless utilizes lasers. Although the lasers are of relatively low power
and to be located in unpopulated areas such as rooftops and although the laser
devices are marked with "hazard" signs, there can be no assurance that passersby
will not cross the path of a laser, causing damage to the eyes or causing other
health hazards.
Unforeseen risks of acquired companies. Companies that may be acquired
by us or with which we enter into business relationships may face competition
from more-established or better financed companies. In addition, any one or more
of these companies may produce or manufacture equipment, technology or other
goods that pose inherent risks in production or operation. It is impossible to
foresee these risks herein, but we will consider such risks before entering into
any business combination.
Our acquisition program may lead to uncertain liabilities. We are
currently engaged in an active acquisition program. Although we evaluate all
potential acquisitions, the acquisition of going concerns could potentially lead
to the acquisition of the target company's liabilities, including patent and
trademark infringement claims, product liability claims, breach of contract
claims, or shareholder derivative claims. There can be no assurance that any
companies that we acquire are free of potential liabilities.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Index to Financial Statements and Schedules" included on page 39
for information required under this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Crouch, Bierwolf & Chisholm, Certified Public Accountants, whose address
is 50 West Broadway, Suite 1130, Salt Lake City, Utah 84101, the independent
accountant which was previously engaged as the principal accountant to audit
NextPath's financial statements, was dismissed on February 8, 2000 so that we
could engage the services of Gray & Northcutt Inc. Crouch, Bierwolf & Chisholm
stated in its report on the financial statements of NextPath for the past two
years (1997 and 1998) that they were prepared assuming that NextPath will
continue as a going concern and the report contained the firm's opinion that the
Company's recurring operating losses and lack of working capital raise
substantial doubt about its ability to continue as a going concern. The decision
to change accountants was recommended and approved by our Board of Directors.
During our two most recent fiscal years, there have not been any
disagreements with Crouch, Bierwolf & Chisholm on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
We provided Crouch, Bierwolf & Chisholm with a copy of the Current
Report on Form 8-K prior to its filing with the SEC and requested that Crouch,
Bierwolf & Chisholm furnish us with a letter addressed to the SEC stating
whether it agrees with the statements made in the Current Report on Form 8-K
and, if not, stating the respects in which it does not agree. The letter of
Crouch, Bierwolf & Chisholm is attached as an exhibit to the Current Report on
Form 8-K filed with the SEC February 14, 2000.
Weinberg & Company, P.A., Certified Public Accountants, whose address is
6100 Glades Road, Suite 314, Boca Raton, Florida 33434, the independent
accountant which was previously engaged as the principal accountant to the audit
financial statements of Epilogue Corporation, with whom we merged on November
12, 1999, was dismissed on February 8, 2000 so that NextPath, as the surviving
corporation in the merger, could engage the services of Gray & Northcutt Inc.
Weinberg & Company audited the balance sheet of Epilogue Corporation (a
development stage company) as of June 7, 1999 and the related statements of
operations, changes is stockholder's equity and cash flows for the period from
June 4, 1999 (inception) to June 7, 1999. The decision to change accountants was
recommended and approved by our Board.
There have not been any disagreements with Weinberg & Company on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure.
We provided Weinberg & Company with a copy of the Current Report on Form
8-K prior to its filing with the SEC and requested that Weinberg & Company
furnish us with a letter addressed to the SEC stating whether it agrees with the
statements made in the Current Report on Form 8-K and, if not, stating the
respects in which it does not agree. The letter of Weinberg & Company is
attached as an exhibit to the Current Report on Form 8-K filed with the SEC on
February 14, 2000.
On February 8, 2000, Gray & Northcutt, located in Oklahoma City,
Oklahoma, was engaged by us to audit the consolidated balance sheets of NextPath
and its wholly-owned subsidiaries. Other than concerning its engagement, we had
not consulted with Gray & Northcutt Inc. prior to February 8, 2000.
On March 23, 2000, Gray & Northcutt, Inc. resigned from the audit
engagement of NextPath effective that date. Gray & Northcutt, Inc. agreed
to complete its audits of our subsidiaries, Laser Wireless, Inc., Willow
Systems, Inc. and Sagebrush Technology, Inc.
In its resignation letter, Gray & Northcutt, Inc. stated as follows: "In
the course of performing our work, we have concluded that NextPath lacks the
internal controls necessary for the development of reliable financial
statements. Further, information has come to our attention that leads us to
conclude that we should not rely upon the representations of NextPath's
management in place during the period covered by this audit".
We do not disagree with the statements of Gray & Northcutt, Inc. In
response to these statements (i) we retained Robert Woodward as Chief Financial
Officer; (ii) Mr. Woodward has taken over our financial books and records and
accounts; (iii) our bank accounts are being moved from our Hillsborough, North
Carolina headquarters to its new headquarters in Tulsa, Oklahoma; (iv) we have
retained the services of an accountant to organize our financial books and
records; (v) we have adopted the financial management plan proposed by Mr.
Woodward; (vi) our Audit Committee has been filled with three independent
directors; (vii) we have accepted the resignations of James Ladd, our former
President, CEO and Chairman, and of Douglas McClain, a former director; (viii)
we engaged Crouch, Bierwolf & Chisholm, our former auditors, to complete the
audit of the Company begun by Gray & Northcutt, Inc. so that the Form 10-K/A for
the fiscal year ended December 31, 1999, the 10-Q for the period ended March 31,
2000, and all required amended Form 8-K's can be filed as soon as possible; and
(ix) three new directors have been elected to the Board.
We provided Gray & Northcutt, Inc. with a copy of the Current Report on
Form 8-K prior to its filing with the SEC and requested that Gray & Northcutt,
Inc. furnish us with a letter addressed to the SEC stating whether it agrees
with the statements made in the Current Report on Form 8-K and, if not, stating
the respects in which it does not agree. The letter of Gray & Northcutt, Inc. is
attached as an exhibit to the Current Report on Form 8-K dated April 3, 2000.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table lists the names, ages and all positions held by our
directors and executive officers as of May 8, 2000.
Name Age Position
---- --- --------
David A. Nuttle 63 Chairman, Interim President and Chief
Executive Officer, Secretary
Frederic F. Wolfer, Jr. 61 Vice President and Assistant Secretary
Robert Woodward 50 Director and Chief Financial Officer
Charles A. Gourd 51 Director
Kenneth E. Sweet 47 Director
Mr. Nuttle, who had been a director since January 1998, was appointed
Chairman and interim President and Chief Executive Officer on March 17, 2000. He
has over 40 years of economic and business development experience. Since June
1995, Mr. Nuttle has been Chairman, President and Chief Executive Office of
Needful Provision, Inc., a 503(c)(3) charity, which has licensed proprietary
technology to us.
Mr. Wolfer joined us in October 1999 as Vice President. He was elected
President of the Environmental Technologies Group on April 1, 2000. From April
1998 to August 1999, Mr. Wolfer was a Consultant to NextPath. From February 1997
to December 1997, he was a Country Representative for Citizens Network for
Foreign Affairs. From March 1991 to February 1997, Mr. Wolfer was President and
Chief Executive Officer of Controlled Environment Technologies, Inc., a sole
proprietorship consulting firm. Mr. Wolfer received a BA from the University of
North Carolina in 1960 and a M.A. from Central Washington State University in
1973.
Mr. Woodward became Chief Financial Officer of NextPath on March 17,
2000. He was elected a director on April 1, 2000. Since 1999 he has been a
Business Consultant at International Profit Associates. Mr. Woodward has over
twenty-five years of management consulting, public accounting and senior
management experience concentrated in the areas of strategic business planning,
corporate financial management, business infrastructure development and
administrative and operations management. From 1996 to 1999, Mr. Woodward was
an Independent Business Consultant. From 1989 to 1996, he was Chief Financial
Officer for Q-Com Corporation, a California environmental high technology
manufacturing company. Mr. Woodward received a BBA degree in 1972 from St.
Francis College, New York and an MBA degree in 1978 from Long Island University,
New York.
Dr. Gourd has been a Director since March 17, 2000. From August 1995 to
October 1999, he was Special Assistant to the Principal Chief of the Cherokee
Nation. From September 1993 to August 1995, Dr. Gourd was Director of Bilingual
Education at Keys Elementary School in Park Hill, Oklahoma. Dr. Gourd has
extensive academic and professional background in the practical application of
Anthropology for purposes of economic development. His professional background
includes economic development in third world countries, as well as work with the
U.S. State Department on multi-lateral Trade Agreements, development of an
international Free-Trade Zone, and is Fellow in the Entrepreneurial and MBA
Programs at Babson College in Boston, Massachusetts Dr. Gourd received his PhD
from the University of Kansas in 1984, a M.A. degree from the University of
Oklahoma in 1976, and a BS degree in History from Northeastern State University
in 1971.
Mr. Sweet has been a director since March 17, 2000. Mr. Sweet has over
nine years of executive director experience in management consulting, business
valuation, mergers and acquisitions, and financial advisory services. Since
1991, Mr. Sweet has been the Executive Director of Consulting Services and one
of the in-house counsel to International Profit Associates (IPA), an
international consulting firm. He has supervising and/or directing in excess of
21,000 client engagements to date. Prior to joining IPA, he was President of
Windbrook Securities, Inc., a broker/dealer, and The Compass Investment Group,
Inc., registered as a Commodity Trading Advisor (CTA). Mr. Sweet also worked
from 1981-1987 at E.F. Hutton & Company, Inc. as an Account Executive. He
received a BS in both Business Administration and Accounting, graduating Magna
Cum Laude from the University of San Diego in 1974. He also received a Juris
Doctorate degree from Western State College of Law in December 1977.
ITEM 11 EXECUTIVE COMPENSATION
Summary Compensation Table
The following summarizes, for the fiscal years indicated, and to the
knowledge of current management, the principal components of compensation for
our Chief Executive Officer and our only other executive officer. Mr. Ladd, our
Chief Executive Officer and President, was our only employee in 1998.
Long Term Compensation
----------------------------
Annual Compensation Awards Payouts
----------------------------- -------------------- --------
Securities
Other Under-lying All
Annual Restricted Options/ LTIP Other
Name and Principal Compen Stock SARs Payouts Compen-
Position Year Salary Bonus -sation Award(s) (1) sation
- -------------------------- ------ -------- ------ -------- ---------- ---------- ------- -------
James R. Ladd
Former Chairman, 1999 -- -- -- -- -- --
President (2) 1998 -- -- -- -- -- --
Richard F. Wolfer, Jr. 1999 $150,000 100,000
Vice President (3)
- -----------------------
(1) Creativity Incentive Plan.
(2) Mr. Ladd resigned on March 17, 2000. To our knowledge as of this date,
he did not receive any compensation in the years indicated.
(3) Mr. Wolfer was employed on November 1, 1999.
Options/SAR Grant In Last Fiscal Year
Our executive officers were not granted any options or SARs during our
last fiscal year.
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values
Our executive officers have not been granted any options or SARs.
Employment Agreements
Mr. Wolfer has a five year employment agreement with us. It expires in
2004.
Compensation of Directors
We anticipate paying reasonable and customary fees to our directors who
are not officers for their services as directors and for attendance, in person
or by telephone, at each meeting of the board of directors, but not for
committee meetings. Officers who are also directors will not be paid any
director fees.
Restricted Stock Plan
As part of the consideration we paid for all of the stock of
LaserWireless, Inc., we placed 300,000 shares of restricted common stock in a
Restricted Stock Plan for the benefit of the employees of LaserWireless, Inc. An
employee will become vested with respect to the shares of common stock
represented by his or her Restricted Stock Award Agreement on the fifth
anniversary of the date of the grant, provided he or she continuously serves as
an employee of LaserWireless, Inc. or another of our subsidiaries at all times
beginning with the date of the grant and ending on the fifth anniversary of the
grant.
Stock Option Plan
We recognize the need to implement, and we intend to propose and submit
to our shareholders, a stock option plan so that we may attract and retain the
high quality employees, consultants and directors necessary to build our
infrastructure and to provide ongoing incentives to our employees by enabling
them to participate in our success.
401(k) Plan
We anticipate that we will adopt an employee investment plan under
Section 401(k) of the Code.
Creativity Inventive Plan
In order to encourage and reward creativity, we will establish a
Creativity Incentive Plan in 2000. Employees who develop materials, inventions,
discoveries, improvements and designs will be eligible to participate in the
fruits of their inventiveness over and above any salary and other benefits they
may derive from their employment.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We have not issued any preferred stock. The following table sets forth
certain information regarding the ownership of our common stock, as of May 8,
2000, by (i) each director and nominee for director; (ii) each of our executive
officers; (iii) all of our executive officers and directors as a group; and (iv)
all those known by us to be beneficial owners of more than 5% of our common
stock:
Name and Address of Shares Benefically Percentage
Beneficial Owner Owned (1) Owned
- ------------------- ------------------ ----------
Directors and Executive Officers
David A. Nuttle (2) 475,000 1%
114 South Churton Street, Suite 101
Hillsborough, NC 27278
Frederic F. Wolfer, Jr. 100,000 *
Charles A. Gourd --
Kenneth E. Sweet (3) 56,907 *
Robert Woodward
All executive officers and directors
as a group (5 persons) 631,907 1.5%
5% Shareholders
James R. Ladd (4) 2,263,000 5.4%
7106 Sunrise Road
Chapel Hill, NC 27514
W.O.W. Consulting Group 6,467,877 15.0%
18352 Dallas Parkway, #136-440
Dallas, TX 75287
- -----------------------
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
securities. Shares of common stock subject to options or warrants
currently exercisable or convertible, or exercisable or convertible
within 60 days of September 30, 1999, are deemed outstanding for
computing the percentage of the person holding such option or warrant
but are not deemed outstanding for computing the percentage of any other
person. Except as indicated in the footnotes to this table and pursuant
to applicable community property laws, the persons named in the table
have sole voting and investment power with respect to all shares of
common stock beneficially owned.
(2) Mr. Nuttle is Chairman and President of Needful Provision, Inc., a
501(c)(3) charitable corporation in whose name this stock is registered.
(3) Mr. Sweet has the contractual right to acquire an additional 109,453
shares of 500,000 shares currently held by International Profit
Associates, with whom he has an agreement.
(4) Mr. Ladd's daughter, McGinnis Ladd, and his son, Joshua Ladd, own
250,000 and 500,000 shares of common stock respectively. We do not know
if Mr. Ladd claims any beneficial interest in the shares of his
children.
Number, Terms and Election of Directors
The number of directors is currently set at seven. Each director will
serve for a term of one year or until the next annual meeting at which directors
are elected. In the election of directors, each stockholder is entitled to one
vote for each share of common stock he holds. There are currently three
vacancies on our Board of Directors.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Directors and Executive Officers
Loans. As of December 31, 1999, we owed Joshua Ladd $1,570,250 for
advances made on our behalf. Joshua Ladd is the son of James Ladd, our former
Chairman, President and Chief Executive Officer.
Other Transactions. Mr. Ladd's departure as Chairman, President and
Chief Executive Officer, Mr. McClain's departure as a Director, and various
transactions by NextPath which occurred while they were affiliated with NextPath
in those capacities and which were not reported to the Board, but which were
recently brought to the attention of the Board, have caused the Board to
establish a Special Committee which will review all transactions engaged in by
NextPath since January 27, 1998. The effects of the transactions to be reviewed
and their materiality to our financial condition and our operations cannot be
fully assessed until the Special Committee has completed its review. However,
once the review has been completed, we will report any and all reportable
transactions to the SEC and our shareholders.
Director, Officer and Ten Percent Stockholder Securities Reports. We
understand, and have so advised our officers and directors, that the Federal
securities laws require them, as well as persons who own more than ten percent
of our stock, to file with the SEC initial reports of ownership and reports of
changes in ownership of our stock owned by them. We are aware of the following
filings during 1999:
Name Date Filing
---- ---- ------
James Ladd 12/21/99 Form 3
Frederic F. Wolfer, Jr. 11/24/99 Form 3
David A. Nuttle 11/24/99 Form 3
TPG Capital Corporation 12/13/99 SC 13G/A
Based solely on our review of the copies of the reports we have been
furnished, it appears that (a) except for Mr. McClain, all of the officers and
directors filed a Form 3 as required, (b) Messrs. Ladd and McClain have not
filed a Form 4 or a Form 5, if required, (c) no greater than ten percent
beneficial owners made any required filings, and (d) Mr. Nuttle, if deemed
required to do so, did not file a Form 5 indicating the disposition of 25,000
shares of stock by Needful Provision, Inc. ("NPI"). Mr. Nuttle has advised us
that he will file a Form 5, notwithstanding that the stock is owned by NPI and
he has no beneficial ownership interest in it.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS
(a) and (d) Financial Statements
See "Index to Financial Statements and Schedules on page 39.
(b) Reports on Form 8-K filed during the last quarter of the period
covered by this report.
We filed a Form 8-K on November 12, 1999, which reported the closing of
an Agreement and Plan of Merger between Epilogue Corporation and related
matters.
We filed a Form 8-K on December 13, 1999, which reported our acquisition
of Willow Systems Limited.
We filed a Form 8-K on December 23, 1999, which reported our acquisition
of Sagebrush Technology, Inc.
We filed a Form 8-K on December 28, 1999, which amended the Form 8-K we
filed on November 12, 1999 to reflect the stock ownership of our
officers and directors and those persons known to us to beneficially own
more 5% of our stock.
(c) Exhibits
See "Exhibit Index" at X-1.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NEXTPATH TECHNOLOGIES, INC.
/s/ David A. Nuttle May 16, 2000
-----------------------------
David A. Nuttle
Chairman, Interim Chief Executive Officer
and President (principal executive officer)
NEXTPATH TECHNOLOGIES, INC.
/s/ Robert Woodward May 16, 2000
Robert Woodward
Vice Chairman and Chief Financial Officer
(principal financial and accounting officer)
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 date indicated.
/s/ David A. Nuttle Chairman of the Board of Directors May 16, 2000
- --------------------
David A. Nuttle
/s/ Kenneth Sweet Director May 16, 2000
- --------------------
Kenneth Sweet
/s/ Robert Woodward Director May 16, 2000
- --------------------
Robert Woodward
/s/ Charles Gourd Director May 16, 2000
- -------------------
Charles Gourd
NextPath Technologies, Inc.
( Formerly, Hyperion Technologies, Inc.)
Consolidated Financial Statements
December 31, 1999 and 1998
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Page
Financial Statements Number
- --------------------- ------
Independent Auditor's Report............................................ F-3
Consolidated Balance Sheets............................................. F-4
Consolidated Statements of Operations................................... F-5
Consolidated Statements of Stockholders' Equity......................... F-6
Consolidated Statements of Cash Flows................................... F-7
Notes to Consolidated Financial Statements ............................. F-8
Schedules
All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
NextPath Technologies, Inc.
We have audited the accompanying consolidated balance sheets of NextPath
Technologies, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1999 and 1998 and the related consolidated statements of operations,
stockholders' equity and cash flows for the years ended December 31, 1999, 1998
and from inception on June 27, 1997 through December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the financial
statements of Laser Wireless, Inc., Willow Systems, Inc. and Sagebrush
Technology, Inc. (the subsidiaries), all wholly owned subsidiaries which
statements reflect total assets of $1,300,131 as of December 31, 1999, and total
revenues of $356,157 for the periods of acquisition through December 31,
1999. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the amounts
included for the subsidiaries, is based solely on the report of the other
auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a reasonable basis for our opinion.
In our opinion, based on our audits and the report of other auditors the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of NextPath Technologies, Inc. and
subsidiaries as of December 31, 1999 and 1998 and the results of its operations
and cash flows for the years ended December 31, 1999 and 1998 and from inception
on June 27, 1997 through December 31, 1997 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 discussed in Note 2, the Company's
recurring operating losses and lack of working capital raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard
to those matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Crouch, Bierwolf & Chisholm
Salt Lake City, Utah
May 12, 2000
NextPath Technologies, Inc.
Consolidated Balance Sheets
Assets
December 31, December 31,
1999 1998
------------- ------------
Current assets
Cash $ 658,837 $ -
Accounts receivable (net of allowance
Of $41,480) 282,051 -
Inventory 138,057 -
Prepaid expenses 42,674 -
Advances to shareholders 6,487 -
Advances & notes receivable (net of
allowance of $1,235,075)(Note 12) 3,260,161 -
---------- ---------
Total Current Assets 4,388,267 -
---------- ---------
Property & Equipment, Net (Note 3) 535,179 3,359
---------- ---------
Other Assets
Investments (Note 9) 2,600,000 -
Goodwill (Note 1) 17,883,754 -
Deposits 4,250 -
---------- ---------
Total Other Assets 20,488,004 -
---------- ---------
Total Assets $25,411,450 $ 3,359
========== =========
Liabilities and Stockholders' Equity
Current Liabilities
Bank overdraft - 5,397
Accounts payable 384,148 40,904
Accrued expenses 192,654 -
Deferred taxes (Note 1) 14,882 -
Notes payable (Note 7) 19,950 -
Notes payable - related party (Note 8) 3,435,919 68,650
---------- ---------
Total Current Liabilities 4,047,553 114,951
Stockholders' Equity
Common Stock, authorized
100,000,000 shares of $.001 par value,
issued and outstanding 37,136,430 and
8,356,843 shares, respectively 37,136 8,357
Additional Paid in Capital 58,623,056 408,193
Deficit Accumulated During the
Development Stage (37,296,295) (528,142)
---------- --------
Total Stockholders' Equity 21,363,897 (111,592)
---------- ---------
Total Liabilities and Stockholders' Equity $25,411,450 $ 3,359
The accompanying notes are an integral part of these financial statements
4
NextPath Technologies, Inc.
Consolidated Statements of Operations
From inception
On June 27,
For the Year Ended 1997 through
December 31, December 31,
1999 1998 1997
------------ ------------ -------------
Revenues: $ 356,157 $ - $ -
Cost of Goods 235,788 - -
------------ ------------ ------------
Gross Profit 120,369 - -
Expenses:
General and administrative 3,830,344 528,142 -
Consulting 25,309,111 - -
Research & Development 2,334,392 - -
Bad Debt 1,605,110 - -
------------- ------------ ------------
Total Expenses 33,078,957 528,142 -
------------- ------------ ------------
Net Loss from Operations (32,958,588) - -
Other Income/(Expense)
Interest Income 5,982 - -
Dividend Income 16,813 - -
Loss on Investments (3,832,360) - -
------------- ------------ ------------
Net Loss $(36,768,153) $ (528,142) $ -
============= ============ ============
Net Loss Per Share $ (2.22) $ (.069) $ (.000)
============= ============ ============
Weighted average shares
outstanding 16,563,039 7,633,925 1,500
============= ============ ============
The accompanying notes are an integral part of these financial statements
5
NextPath Technologies, Inc.
Consolidated Statement of Stockholders' Equity
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
Shares Amount capital Stage
----------- -------- ----------- -------------
Common stock, issued to organizers for cash 1,500 $ 2 $ 98 $ -
----------- -------- ----------- -------------
Net loss for the year ended December 31, 1997
Balance, December 31, 1997 1,500 2 98 -
Reverse acquisition for accounting purposes
of Compact Power International, Inc. 5,883,543 5,883 (5,883) -
Stock issued for cash in 504 offering 2,256,800 2,257 381,943 -
Stock issued for Services 215,000 215 32,035 -
Net loss for the year ended December 31, 1998 (528,142)
----------- -------- ----------- -------------
Balance, December 31, 1998 8,356,843 8,357 408,193 (528,142)
Stock issued for cash at $.20 per share in 504 offering 1,000,000 1,000 199,000 -
Stock issued for consulting services at $.40 per share 150,000 150 59,850 -
Stock issued for consulting at $.91875 per share 22,192,188 22,192 20,375,480 -
Stock issued for services at $1.575 per share 60,000 60 94,440 -
Stock issued for option exercised at $.75 per share 600,000 600 449,400 -
Stock issued for employees compensation at
$4.22 per share 180,000 180 1,934,436 -
Stock issued for licenses at $4.22 per share 500,000 500 2,109,500 -
Stock issued for advances at $4.79 per share 800,000 800 3,822,560 -
Stock issued for Laser Wireless acquisition 400,000 400 (400) -
Stock issued for Willow merger 650,000 650 4,947,020 -
Stock issued for cash in Reg S offering at
$9-12 per share 1,341,399 1,341 13,112,845 -
Stock issued for services at $11.81 per share 6,000 6 70,869 -
Stock issued for Sagebrush acquisition 600,000 600 6,540,900 -
Stock issued for Services at $15.22 per share 300,000 300 4,567,200 -
Offering costs - - (68,237) -
Net loss for the year ended December 31, 1999 - - - (36,768,153)
---------- --------- ----------- -------------
Balance, December 31, 1999 37,136,430 $37,136 $58,623,056 $(37,296,295)
========== ========= =========== =============
The accompanying notes are an integral part of these financial statements
6
NextPath Technologies, Inc.
Consolidated Statements of Cash Flows
For the Year
ended
December 31,
1999 1998 1997
------------- ----------- ------------
Cash Flows form Operating Activities
Net loss $(36,768,153 $ (528,142) $ -
Adjustments to reconcile
net loss to net cash
provided by operations:
Depreciation & Amortization 367,324 57 -
Bad Debt 1,680,110 - -
Stock issued for services 27,131,564 32,250 -
Loss on Investments 3,823,360 - -
Stock issued for R & D expenses 2,109,999 - -
Increase/(Decrease) in
assets/liabilities
(net of acquisitions)
Accounts receivable 11,483 - -
Inventory (23,010) - -
Prepaids (28,270) - -
Accounts payable 109,021 40,904 -
Accrueds 20,404 - -
Deferred taxes 572 - -
Bank overdrafts - 5,397 -
---------- -------- -----
Net Cash (Used) Provided by
Operating Activities (1,565,596) (449,534) -
---------- ------- -----
Cash Flows from Investment Activities:
Cash paid for advances & notes
receivable (6,498,177) - -
Cash paid for purchase of
fixed assets (2)1,061 - -
Cash paid for investments (7,816,473) - -
Cash acquired from subsidiary 268,540 (3,416) -
---------- ------- -----
Net Cash (Used) Provided by
Investing Activities (14,257,171) (3,416) -
---------- ------- -----
Cash Flows from Financing Activities:
Cash received from debt financing 5,012,854 - -
Cash received from stock issuance 13,764,186 - -
Cash paid for offering costs (68,236) - -
Cash paid for long term debt (2,227,200) - -
Issued common stock for cash - 384,200 100
Increase in notes payable -
related party - 68,650 -
---------- ------- -----
Net Cash (Used) Provided by
Financing Activities 16,481,604 482,850 100
---------- ------- -----
Net increase (decrease) in cash 658,837 (100) 100
Cash, beginning of year - 100 -
---------- ------- -----
Cash, end of year $ 658,837 $ - $ 100
========== ======= =====
The accompanying notes are an integral part of these financial statements
7
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies
a. Organization
NextPath Technologies, Inc. (formerly Hyperion Technologies,
Inc.)(the Company) was incorporated on March 23, 1984 as Petrogenetics,
Inc. a Colorado Corporation organized to engage in mining and oil
production. The Company raised $100,000 in a public offering in 1984 and
acquired various properties and investments. In 1986, the Company became
inactive and all assets became worthless. In 1990, the Company settled
all debts of the Company with the issuance of common stock. On May 8,
1997 the Company merged with FSC Holdings, Inc. (FSC) a Nevada
corporation, wherein FCS became the surviving corporation. On January
19, 1998 the Company engaged in a share exchange with Compact Power
International, Inc ("Compact"), and changed its name to Hyperion
Technologies, Inc. The share exchange with Compact, a Delaware
corporation organized on June 27, 1997, was accounted for as a reverse
acquisition. Due to accounting for the acquisition of Compact as a
reverse acquisition, the 1997 historical financial information presented
herein is that of Compact (the acquirer for accounting purposes) and
stockholders equity was retroactively restated for the equivalent number
of shares issued after giving effect to the difference in par value.
Hyperion issued 5,800,000 common shares for 100 percent of the
outstanding stock of Compact. On July 22, 1999, the Company changed
it's name to NextPath Technologies, Inc. The Company has never had any
operations and is in the development stage according to Financial
Accounting Standards Board Statement No. 7. The Company is currently
engaged in the development and acquisition of new technologies in high
growth market sectors.
On November 11, 1999 Epilogue Corporation ("Epilogue"), an inactive
Delaware corporation with no assets or liabilities, merged with NextPath
Technologies, Inc., a Nevada corporation. All the outstanding shares of
common stock of Epilogue were exchanged for 150,000 shares of common
stock of NextPath in a transaction in which NextPath was the surviving
company. Prior to the merger, Epilogue had 5,000,000 shares of common
stock outstanding. The merger was treated as a domicile merger and
therefore, no goodwill was recorded nor was any value associated with
the merger, or the stock issuance. The net equity of Epilogue was $0.
The Company acquired three companies in 1999: Laser Wireless, Inc. on
October 18, 1999, Willow Systems, Inc. on November 2, 1999, and
Sagebrush Technology, Inc. on December 14, 1999.
Laser Wireless, Inc. - Laser Wireless, Inc. ("Laser"), a Pennsylvania
company, designs and manufactures a wireless laser communication
technology which can transmit video, voice, and data through the
atmosphere on a beam of light for distances up to 2.5 kilometers. This
capability offers a solution for private communications where a leased
line cannot be used such as property separated by physical barriers
(rivers, highways, parking lots, etc.) which prevent the use of
conventional cables.
Willow Systems, Inc. - Willow Systems, Inc. ("Willow"), a Delaware
corporation, is an advanced technology company providing custom
real-time motion control and electronic solutions which expertise
includes gimbals (positioning devices), camera and electro-optical
system design, embedded software development, and system engineering and
development. Willow's technologies have potential application in a wide
range of businesses.
Sagebrush Technology, Inc. - Sagebrush Technology, Inc. ("Sagebrush"), a
Delaware corporation, was established on April 4, 1991. Sagebrush is
engaged in the business of designing, developing, manufacturing, and
marketing positioning devices (gimbals and antenna positioners) based
primarily on its patented and proprietary Roto-Lok(R) rotary drive
technology.
8
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies (continued)
b. Accounting Method
The Company recognizes income and expense on the accrual basis of
accounting.
c. Earnings (Loss) Per Share
The computation of earnings per share of common stock is based on
the weighted average number of shares outstanding at the date of the
financial statements. Fully diluted earnings per share has not been
presented because it is anti-dilutive. 1,000,000 potentially issuable
common shares from options outstanding were excluded from the
calculation because their effect were anti-dilutive.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with maturities
of three months or less to be cash equivalents. The balance of NextPaths
money market account was in excess of $100,000, leaving $155,000 at
risk.
Willow Systems, Inc. The balance of the Company's general checking
account was in excess of $100,000 as of December 31, 1999. The Federal
Deposit Insurance Corporation insures all bank accounts up to $100,000.
Management believes its exposure to loss is minimal considering only the
amounts in excess of $100,000 are at risk and the depository bank is a
well established national bank and one of the nation's largest financial
institutions.
e. Provision for Income Taxes
No provision for income taxes has been recorded due to net
operating loss carryforwards totaling approximately $37,296,000 that
will be offset against future taxable income. These NOL carryforwards
begin to expire in the year 2013. Management believes a portion of
these NOL carryforwards will be realized this year, however, no taxable
income has yet been generated and not tax asset has been recorded.
Deferred tax assets and the valuation account is as follows at
December 31, 1999 and 1998.
1999 1998 1997
------------ ---------- ----------
Deferred tax asset:
NOL carrryforward $12,680,000 $ 179,568 $ -
Valuation allowance (12,680,000) (179,568) -
------------ ---------- ----------
Total $ - $ - $ -
============ ========== ==========
Willow Systems, Inc. Income taxes are provided for tax effect of
transactions reported in financial statements and consists of taxes
currently due plus deferred taxes. Deferred taxes arise primarily from
differences between the use of accelerated methods of depreciation for
tax purposes and straight-line methods for financial purposes. As of
December 31, 1999, the Company had a net operating carryforward of
approximately $580,000 the effect of which more than offsets the timing
differences between the reporting of book and tax depreciation,
therefore, no deferred income tax liability was reflected on the Company
books as of December 31, 1999.
9
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 1 - Summary of Significant Accounting Policies (continued)
Sagebrush Technology, Inc. For federal and state income tax purposes,
Sagebrush taxed as an S corporation during the period January 1, 1999
through December 13, 1999, thereafter its activity will be reported as
part of NextPath's consolidated returns. Income tax expense includes
deferred taxes rising from temporary timing differences between income
for financial reporting purposes and income tax reporting purposes. This
difference consists primarily of the difference between book and tax
depreciation as of December 14, 1999, the date the Company's subchapter
S election was terminated.
F. Research and Development Costs
Research and development costs are expensed as incurred. During the
fiscal year ended December 31, 1999, the Company incurred $2,334,392 in
research and development costs.
G. Patent
Sagebrush Technology, Inc. On April 21, 1992, the president of Sagebrush
was issued a United States Patent Number 5,105,672 for a Rotary Drive
Apparatus Having One Member With Smooth Outer Peripheral Surface. The
technology contained in this patent is utilized by Sagebrush in the
manufacture of the Company's gimbal product. Sagebrush incurred royalty
expense to the president of approximately $85,659 during the fiscal year
ended December 31, 1999, for the use of this technology.
H. Use of estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting
period. In these financial statements, assets involve extensive reliance
on management's estimates. Actual results could differ from those
estimates.
I. Impairment of Long Lived Assets
Fixed assets are evaluated annually by management and if impaired are
written down to the fair market value.
J. Goodwill
The Company recorded goodwill of $18,243,554 in connection with the
acquisitions of it's subsidiaries. Goodwill is being amortized over a
five year life, and amortization expense for 1999 was $359,800.
NOTE 2 - Going Concern
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has had
significant losses for the year and is dependent upon financing or
raising capital to continue operations. The Company may be unable to
raise funds from the public sector, or from private investors. The
Company has large advances and investments in start up companies, the
realization of these assets are uncertain. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty. It is management's plan to market the technology of its
subsidiaries, and generate necessary revenues from that source.
10
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
Sagebrush Technology, Inc. The accompanying financial statements have
been prepared in conformity with generally accepted accounting
principles, which contemplates continuation of the Company as a going
concern. However, the Company has sustained a substantial operating loss
during the current year. In addition, the company has used substantial
amounts of working capital in its operations. Further, at December
31,1999, current liabilities exceed current assets by $872,303 and total
liabilities exceed total assets by $582,367.
In view of the matters, realization of major portion of the assets in
the accompanying balance sheet is dependent upon continued operations of
the Company and the success of its future operations. Management
believes that actions presently being taken to revise the Company's
operating requirements provide the opportunity for the Company to
continue as a going concern.
NOTE 3 - Property and Equipment
Property and Equipment consists of the following at December 31,
1999 and 1998:
December 31,
1999 1998 1997
---------- -------- -------
Equipment $ 509,676 $ - $ -
Furniture & Fixtures 100,515 - -
Computer Equipment 111,159 3,416 -
Leasehold Improvement 4,018 - -
Accumulated Depreciation (190,189) (57) -
---------- -------- -------
Total Property & Equipment $ 535,179 $ 3,359 $ -
========== ======== =======
Depreciation expense for the years ended December 31, 1999, 1998 and
1997 was $2,150, $57 and $0, respectively.
NOTE 4 - Related Party Transactions
NextPath. All expenses incurred in organizing Compact and other
incidental expenses were paid for by Compacts founders. These founders
have waived any claim for reimbursements for these expenses, thus no
expenses have been recorded on the books of the Company prior to
December 31, 1997.
A family member of James Ladd, the former president of the Company
loaned the Company $732,700 and $57,800 during the year ended December
31, 1999 and 1998, respectively. The Company made payments toward the
loan of $6,000 and $42,100, respectively. The note is non-interest
bearing, unsecured, and upon demand. The balance of the note at December
31,1999 and 1998 is $725,700 and $15,700, respectively.
A shareholder loaned the Company $8,000 during the year ended
December 31, 1998. The note is non-interest bearing, unsecured, and due
within one year. The balance of the note at December 31, 1999 and 1998
is $0 and $8,000, respectively.
The president of the Company owns stock in a corporation that
loaned the Company $25,000 during the year ended December 31, 1998. The
note is non-interest bearing, unsecured, and due within one year. The
balance of the note at December 31, 1999 and 1998 is $0 and $25,000,
respectively.
11
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 4 - Related Party Transactions (continued)
A shareholder loaned the Company $19,950 during the year ended
December 31, 1998. The note is non-interest bearing, unsecured, and due
within one year. The balance of the note at December 31, 1999 and 1998
is $19,950.
The Company purchased a license from Needful Provision for the
issuance of license agreement. Needful Provision is a 501(c)3
charity, whose director is David Nuttle, an officer of the Company. The
Company advanced $95,000 in cash and issued 500,000 shares of stock
valued at $2,110,000. The license is month to month, therefore no rights
exist if the monthly contributions for research and development ceases.
Management therefore determined there to be no future value in the
license and expensed the entire amount to Research and Development.
Needful Provision is in the development of Bio-diesel fuels with
Oklahoma State University.
Laser Wireless, Inc. On October 18, 1999, Laser entered into an
employment agreement with a shareholder for a period of five years and
ensures the employee, among other items, of an annual salary, vacation
and an automobile allowance.
As of December 31, 1999, Laser had advances due to affiliated companies
and individuals as follows:
Advances from Nextpath shareholder $ 417,500
Advances from Nextpath affiliate $25,000
Willow Systems, Inc. On November 2, 1999, Willow issued approximately 47
shares of its no par value common stock to two employees of Willow as an
agreed condition of employment between Willow and the employees. No cash
consideration was given by the employees of the stock.
As of December 31,1999, Willow had advances due to affiliated companies
and individuals as follows:
Advances from Nextpath shareholder $ 114,550
During the year ended December 31, 1999, Willow had sales to Sagebrush
Technologies, Inc. totaling $305,911 of which $145,637 remained unpaid
as of December 31, 1999.
On November 2, 1999, Willow entered into an employment agreements with
the three shareholders for a period of five years and ensures the
employees, among other items, of an annual salary, vacation and an
automobile allowance.
On November 2, 1999, Willow purchased two-thirds ownership in Reflex LLC
(Reflex), a New Mexico limited liability company engaged in the business
of stabilized camera systems from two of Willow's shareholders for
$1,000. Reflex thereby became a wholly owned subsidiary of Willow since
the Company already owned one-third of Reflex before the purchase.
Reflex is a holding company that currently owns 15% of Cineflex, a
California corporation. The ownership of Cineflex by Reflex will
increase to 20% upon successful completion of contracted work. At the
time of purchase, Reflex had no operating agreement or operating
history.
On November 2, 1999, Willow purchased NextWave Photonics LLC, a Florida
limited liability company, engaged in the business of designing and
marketing fiber optic switching and other fiber optic technology from
two of Willow's shareholders for $1,000. At the time of purchase,
Nextwave had no operating history.
12
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
Sagebrush Technology, Inc. On December 14, 1999 Sagebrush entered into a
consulting agreement with one of the Company's stockholders for a period
of three years and ensures the stockholder, among other things,
compensation, additional shares of NextPath stock and reimbursement for
out-of-pocket expenses.
NOTE 4 - Related Party Transactions (continued)
On December 14,1999, Sagebrush entered into an employment agreement with
one of the Company's stockholders for a period of five years and
ensures, the employee, among other items, of an annual salary, vacation
and an automobile allowance.
As of December 31,1999, Willow had advances due to affiliated companies
and individuals as follows:
Advances from Nextpath shareholder $ 312,500
For the year ended December 31, 1999, the Company incurred obligations
for royalty payments to its former owner in the amount of $85,659 of
which $60,000 remained unpaid as of December 31,1999.
For the year ended December 31, 1999, the Company received billings for
services rendered from Willow Systems, Inc., an affiliated company,
totaling of $305,911 of which $145,637 was still outstanding as of
December 31, 1999.
NOTE 5 - Equity
During 1998, the Company issued 5,800,000 shares of common stock for
100 percent of the outstanding stock of Compact Power International,
Inc. However, these financial statements show an adjustment to bring the
shares from Compact's history to NextPath's issued and outstanding
shares.
During 1998, the Company issued 2,256,800 shares of common stock for
cash of $384,200.
During 1998, the Company issued 215,000 shares of common stock for
services valued at $32,250.
During 1999, the Company issued approximately 22,708,000 shares of
common stock to various individuals or companies for consulting services
valued at between $.40 and $15.22 per share. Several of these consulting
agreements were authorized by the Board of Directors during 1998, but no
shares were issued until 1999. Of the shares issued for services,
approximately 6,000,000 shares were issued without the approval of the
Board of Directors, but were issued due to the request of two previous
directors of the Company. Both directors resigned from the company in
March 2000. Although these shares were to be issued in 1998 as
restricted shares, the prior directors had the shares issued to many
individuals whom they sold stock to for cash. They then loaned the funds
to the Company for continued expansion. Outstanding payables to one of
these individuals at December 31, 1999 totals 1,618,979. The other owes
the Company 695,237. Advances also came through a family member of the
president and the balance is 725,700 at December 31, 1999. A contingency
may exist for this transaction. (See Note 6).
During March 1999, the Company sold 1,000,000 shares of stock in a 504
exempt offering for $200,000 cash.
13
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
In November and December, the Company sold 1,341,399 shares of stock
through a regulation S offering. The Company raised approximately
$13,100,000 from this offering.
The Company also issued 600,000 shares or cash of $450,000 from the
exercise of outstanding options issued in 1998.
NOTE 5 - Equity (continued)
The Company issued 180,000 shares to three employees of the Company for
bonuses valued at $1,934,616.
The Company issued 500,000 shares for a license with Needful Provision,
a related party, valued at $2,110,000.
The Company issued 800,000 shares in contemplation of a merger with
Primedium, LLC. The cash due on the acquisition was never issued and the
advance of stock was expensed. The shares were valued at $3,832,360.
Management has not determined whether to continue negotiations with
Primedium at this time.
In October 1999, the Company issued 400,000 shares and cash for the
acquisition of Laser Wireless, Inc. The 400,000 shares were to the
employees of Laser and vest in five years. The Company issued the
stock, but is holding the shares until they vest, therefore no value was
placed on these shares, and will be valued if issued in the future.
In November 1999, the Company issued 650,000 shares to the shareholders
of Willow Systems, Inc. for the merger of this subsidiary. The shares
were valued at $4,947,670.
In December 1999, the Company issued 600,000 shares for the acquisition
of Sagebrush Technology, Inc. The shares were valued at $6,541,500.
14
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
NOTE 6 - Commitments and Contingencies
NextPath and its subsidiaries lease office space and various equipment
under noncancelable operating leases expiring in various years as
follows:
NextPath: Leases expire in various years through 2003.
Minimum future rental payments under noncancelable operating leases
having remaining terms in excess of one year as of December 31, 1999 for
each of the next five years and in the aggregate are
2000 $ 119,930
2001 112,380
2002 98,580
2003 1,965
2004 -
----------------
Total minimum future rental payments $ 332,855
Total rental expense was $120,406 for the year ended December 31, 1999.
NOTE 6 - Commitment and Contingencies (continued)
Certain operating leases provide for renewal, and/or purchase options.
Generally, purchase options are at prices representing the expected fair
market value of the property at the expiration of the lease term, if not
before.
Laser Wireless: Leases expire in various years through 2004.
Minimum future rental payments under noncancelable operating leases
having remaining terms in excess of one year as of December 31, 1999 for
each of the next five years and in the aggregate are
2000 $ 63,886
2001 63,886
2002 61,914
2003 7,322
2004 2,103
--------------
Total minimum future rental payments $ 199,111
Certain operating leases provide for renewal, and/or purchase options.
Generally, purchase options are at prices representing the expected fair
market value of the property at the expiration of the lease term, if not
before.
15
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
Willow Systems: Leases expire in various years through 2001.
Minimum future rental payments under noncancelable operating leases
having remaining terms in excess of one year as of December 31, 1999 for
each of the next five years and in the aggregate are
2000 $ 48,000
2001 40,000
--------------
Total minimum future rental payments $ 88,000
In addition to the noncancelable operating leases, the Company also is
verbally committed to lease additional office space in Albuquerque, New
Mexico and Largo, Florida on a month-to-month basis.
Certain operating leases provide for renewal, and/or purchase options.
Generally, purchase options are at prices representing the expected fair
market value of the property at the expiration of the lease term, if not
before.
Sagebrush Technology: Leases expire in various years through 2001.
Minimum future rental payments under noncancelable operating leases
having remaining terms in excess of one year as of December 31, 1999 for
each of the next five years and in the aggregate are
2000 $ 57,450
2001 27,500
--------------
Total minimum future rental payments $ 84,950
Certain operating leases provide for renewal, and/or purchase options.
Generally, purchase options are at prices representing the expected fair
market value of the property at the expiration of the lease term, if not
before.
Laser Wireless, Inc. In April of 1999, NextPath was placed on notice
that two of the Company's key employees may have used assets, databases
and possible technology during their employment with an unrelated
company for purposes of setting up Laser Wireless, Inc. Furthermore, it
was contended that the actions of these two employees may have
contributed to the closing of this unrelated company. As of the date of
this report, no actions have been filed on these claims. Management
believes these claims are without merit. As of December 31, 1999, no
accrual has been made on the Company's books for any potential liability
related to this notice.
The Company and its former President, James R. Ladd, are two of the
named defendants in an action that alleges tortious interference with
existing and/or potential business relations, civil conspiracy, and
negligence and also seeks injunctive relief. The Company and its
attorney feel this action is wholly without merit. Counsel feels the
likelihood of an unfavorable outcome in such action is little to none.
The U. S. Securities and Exchange Commission (the "Commission") issued a
confidential formal order of investigation in December, 1999 concerning
the Company's public statements regarding its corporate acquisitions and
other business transactions, and regarding the possibility of a
manipulation of the price or volume of its common stock in the over-the-
counter market, and may include additional matters such as the failure
to register its securities under the Securities Act of 1933 and other
issues. The Commission has issued subpoenas for documents to the
Company, its subsidiaries, its affiliates, and other companies and
individuals associated with the Company. The Commission has also issued
subpoenas for testimony to certain directors, officers, and other
persons associated with the Company. In addition, the Commission has
conducted informal telephone interviews with companies and persons who
have conducted business with the Company, including, but not limited to,
certain customers, suppliers, contractors, consultants and investors,
and others. The investigation by the Commission appears to be
continuing. The Commission has not initiated or filed any civil or
administrative proceedings against the Company or any person associated
with the Company. The Commission has the statutory authority under the
Securities Act of 1933 and Securities Exchange Act of 1934 to seek an
injunction and ancillary statutory and equitable remedies, including,
but not limited to, disgorgement and civil penalties regarding amounts
realized by the Company in violation of the federal securities laws.
Because no civil or administrative action has been commenced by the
Commission and no specific allegations have been asserted by the
Commission, it is not possible to reasonably estimate any potential
liability in connection with this contingency.
NOTE 7 - Notes Payable - Related Party
Notes payable - related party are detailed as follows:
December 31,
1999 1998
---------- --------
Note payable to a family member of the
president of the Company, non-interest
bearing, due within one year and
unsecured $1,570,250 $15,700
Note payable to a shareholder of the
Company, non-interest bearing, due
within one year and unsecured - 8,000
16
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
Note payable to a related party corporation,
non-interest bearing, due within one year
and unsecured - 25,000
Note payable to a shareholder of the
Company, non-interest bearing, due
upon demand 1,618,979 -
Notes payable to affiliates of the Company
From subsidiaries 246,690 -
Note payable to a shareholder of the
Company, non-interest bearing, due
within one year and unsecured 19,950 19,950
----------- --------
Total Notes Payable- Related Party $3,455,869 $68,650
=========== ========
NOTE 8 - Stock Option
At January 1999, the Company had outstanding options to purchase
1,000,000 shares of it's common stock at a price of $2.0 per share. The
option was exercised in February 2000.
NOTE 9 - Investments
Securities investments note classified as either held-to-maturity or
trading securities are classified as available-for-sale securities.
Available-for-sale securities are recorded at the fair value of the
investments and are classified as other assets on the balance sheet,
with the change in fair value during the period excluded from earnings
and recorded net of tax as a component of other comprehensive income.
Investments in securities are summarized as follows at December 31,
1999:
Gross Gross
Unrealized Unrealized Fair
Gain Loss Value
---------- ---------- -----------
Available-for-sale securities
Common Stock $ - $ - $ 100,000
Preferred Stock - - 2,500,000
---------- ---------- -----------
$ - $ - $2,600,000
========== ========== ===========
NOTE 10 - Fair Values of Financial Instruments
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS
No. 107, "Disclosure about Fair Value of Financial Instruments".
The carrying amounts and fair value of the Company's financial
instruments at December 31,1999 and 1998 are as follows:
17
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
December 31, 1999 December 31, 1998
------------------------ ------------------
Carrying Fair Carrying Fair
Amounts Values Amounts Values
---------- ----------- -------- -------
Cash and cash equivalents $ 658,837 $ 658,837 $ - $ -
Notes and advances receivable 3,260,161 3,359,197 - -
Long-term debt including
current maturities 2,475,629 2,196,995 68,650 68,650
Investments 2,600,000 2,600,000 - -
NOTE 10 - Fair Values of Financial Instruments (continued)
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
Cash and Cash Equivalents
The carrying amounts reported on the balance sheet for cash and cash
equivalents approximate their fair value.
Long-term Debt
The fair values of long-term debt are estimated using discounted cash
flow analyses based on the Company's incremental borrowing rate as
the discount rate.
Notes and Advances Receivables and Investments
The fair values of notes receivable is estimated using cash flow
analyses based on the risk free interest rate.
NOTE 11 - Subsequent Events
The Company has made additional acquisitions in 2000.
Essentia Water, Inc. - Essentia Water, Inc. ("Essentia") is a
Woodinville, Washington based bottled water marketing company. It was
acquired on January 21, 2000. Essentia develops, manufactures, packages,
and markets bottled alkaline and electrolyte enhanced premium water
products with health and hydration benefits. Essentia's process provides
water with 99.9% purity.
NextPath AES, Inc. - NextPath AES, Inc. ("NAES") was formed in November,
1999. It is a wholly owned subsidiary of NextPath. AES is the acronym
used to denote the agribusiness initiatives.
NextPath Environmental Services, Inc. - NextPath Environmental Services,
Inc. ("NES") was formed in November 1999 to develop, sell, own, and
operate systems that convert waste to energy, clean-up water and soil
contaminated by fuel, oil, and chemical spills, provide potable water at
locations that have no water treatment systems, and provide on-site
effluent control, filtration and treatment systems, and, more recently,
to acquire, develop, and market devices to drastically reduce exhaust
emissions from internal combustion engines while increasing fuel
efficiency. The two entities that are included under the NES umbrella
are:
18
NextPath Technologies, Inc.
Notes to the Financial Statements
December 31, 1999 and 1998
NextPath Thermogenics, LLC - NextPath Thermogenics, LLC ("Thermogenics,
LLC") is a limited liability company owned 51% by Thermogenics, Inc. and
49% by NES. Thermogenics, LLC designs, fabricates and sells proprietary
gasification systems that use virtually any hydrocarbon-based waste
product as fuel to create a low-temperature, high-quality gas.
NextPath Separation Solutions, LLC - NextPath Separation Solutions, LLC
("Separation Solutions, LLC") is a limited liability company owned 51%
by Lewis Corporation ("Tetra, Separation Systems, LLC") and 49% by NES.
Tetra, Separation Systems, LLC/Lewis designs, fabricates, and sells
proprietary oil-water separation and soil remediation systems that
feature patented and proprietary components. Separation Solutions, LLC
was formed to build, own, and operate these systems for contract
clean-up and remediation.
NOTE 11 - Subsequent Events (continued)
U S CertifiedLetters LLC - U S CertifiedLetters, LLC ("USCL") was formed
for the purpose of licensing, developing and commercializing proprietary
technology for transmitting instruments by certified mail via the
Internet or other medium (the "C-mail Technology") in the continental
United States, Alaska, and Hawaii. C-Mail Technology will enable postal
customers to send certified mail over the Internet. NextPath signed a
definitive agreement to acquire 20% of USCL on April 3, 2000. The
parties expect to complete the acquisition by June 4, 2000.
Global Certified Mail, Inc.- Global Certified Mail, Inc. ("GCM") was
formed by NextPath in October, 1999. On April 3, 2000 NextPath signed an
agreement to exchange a 20% interest in GCM for a license to use C-mail
Technology to enable global postal customers to send certified mail over
the Internet outside the continental United States, Alaska, and Hawaii.
The Company will maintain an 80% ownership interest in GCM. The parties
expect the transaction to close by June 4, 2000.
Loan to ITV Corporation - NextPath loaned ITV Corporation $675,000 on
January 5, 2000 at 8% per annum interest. The term of the note is due to
expire on July 31, 2000.
Additional Issuance of Regulation S Shares of NextPath common stock -
142,100 shares of NextPath common stock were issued after December 31,
1999 for cash of $1,754,000 on a Regulation S offering.
Exercise of Stock Options - 1,000,000 shares of NextPath common stock
were issued for $2,000,000 cash through the exercise of granted stock
options.
NOTE 12 - Notes and Advances Receivable
The Company advanced $4,495,236 to several start-up companies in
contemplation of joint ventures or merger agreements. The Company was to
provide additional funding to the organizations after the merger
agreements were completed, however, many of the agreements did not
close. The Company has therefore established an allowance for doubtful
collection of these advances of $1,235,075. All advances are due within
one year. Because of the status and nature of the advances, no interest
is being accrued.
19
EXHIBIT INDEX
The following documents are the Exhibits to this Form 10-K/A. For
convenient reference, each Exhibit is listed according to the Exhibit Table of
Regulation S-K.
Exhibit No. Exhibit
*2.1 Agreement and Plan of Merger between Epilogue Corporation and
NextPath Technologies, Inc. dated November 11, 1999
*2.2 Agreement and Plan of Reorganization between FSC Holdings, Inc.
and Compact Power International, Inc. dated January 19, 1998
*2.3 Agreement and Plan of Merger between FSC Holdings, Inc. and
Petrogenetics, Inc. dated May 8, 1997
**3.1 Articles of Merger of NextPath Technologies, Inc. and Epilogue
Corporation as filed on November 16, 1999
**3.2 Certificate of Merger of Epilogue Corporation into NextPath
Technologies, Inc. as filed on November 12, 1999
**3.3 Articles of Merger for FSC Holdings, Inc. dated January 19, 1998
(filed January 27, 1998)
**3.4 Certificate of Correction to the Articles of Merger for FSC
Holdings, Inc. dated December 31, 1997
**3.5 Articles of Merger for FSC Holdings, Inc. dated May 8, 1997
(filed May 12, 1997 in NV)
**3.6 Articles of Merger for FSC Holdings, Inc. dated May 8, 1997
(filed May 12, 1997 in CO)
**3.7 Certificate of Amendment to Articles of Incorporation of
Hyperion Technologies, Inc. dated July 20, 1999
**3.8 Certificate of Amendment to the Articles of Incorporation of
Peak Development, Inc. as filed May 7, 1997
**3.9 Articles of Incorporation of Peak Development, Inc.
**3.10 Articles of Incorporation of Petrogenetics, Inc. dated March
23, 1984
**3.11 Bylaws of FSC Holdings, Inc.
**3.12 Seconded Amended Bylaws of NextPath Technologies, Inc. dated
November 1, 1999
**3.13 Amended Bylaws of NextPath Technologies, Inc. dated July 21,
1999
**10.1 Employment Agreement between NextPath and Frederic F. Wolfer,
Jr. dated November 1, 1999
*16.1 Letter of Crouch, Bierwolf & Chisholm dated February 8, 2000
regarding change in certifying accountant
*16.2 Letter of Weinberg & Company dated February 10, 2000 regarding
change in certifying accountant
*16.3 Letter of Gray & Northcutt, Inc. dated April 3, 2000 regarding
change in certifying accountant
**21.1 List of Registrant's Subsidiaries
Exhibit No. Exhibit
- ----------- -------
State of
Name Incorporation Ownership
---- ------------- ---------
Essentia Water, Inc. DE 100%
Global Certified Mail, Inc. DE 100%
Laser Wireless, Inc. DE 100%
Laser Wireless, Inc. PA 100%
NextPath AES, Inc. DE 100%
NextPath Environmental Services, Inc. DE 100%
NextPath Technologies, Inc. CA 100%
NextPath Technolgoies, Inc. DE 100%
Sagebrush Technology, Inc. DE 100%
Willow Systems, Inc. DE 100%
**23.1 Consent of Crouch Bierwolf & Chisholm
**27.1 Financial Date Schedule
- ---------------------------------
* Previously filed
** Filed Herewith