UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2002
---------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------------------------
Commission file number 1-14072
THE AMANDA COMPANY, INC.
(Exact name of small business issuer as specified in its charter)
UTAH 7372
(State or other jurisdiction of (Primary Standard Industrial
incorporation or organization) Classification Code Number)
87-0430260
(I.R.S. Employer
Identification No.)
13765 Alton Parkway, Irvine CA. 92618
(Address of Principal Executive Offices) (Zip Code)
(949) 859-6279
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock and
Common Stock Warrants
Indicate by check mark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2)has been subject to such filing requirements for the past 90 days. Yes X
No _
Indicate by check mark if disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. _____
The issuer had revenues of $3,154,289 for the fiscal year ended September 30,
2002.
The aggregate market value of the voting stock held by non-affiliates on
September 30, 2002 was approximately $350,369 based on the average of the bid
and asked prices of the issuer's common stock in the over-the-counter market on
such date as reported by the OTC Bulletin Board. As of September 30, 2002,
108,159,899 shares of the issuer's Common Stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's report on Form S-8 dated May 3, 2002 The Company's report on Form
8-K dated April 4, 2002: Item 6. The Company's report on Form S-8 dated February
4, 2002
Transitional Small Business Disclosure Format Yes No X
2
FORM 10-KSB
THE AMANDA COMPANY, INC.
Table of Contents
Page
PART I
1. Description of Business 4
2. Description of Property 6
3. Legal Proceedings 7
4. Submission of Matters to a Vote of Security Holders 7
PART II
5. Market for Common Equity and Related Stockholder Matters 8
6. Management's Discussion and Analysis or Plan of Operation 15
7. Financial Statements 18
8. Changes in and disagreements with accountants on accounting and 18
financial disclosure
PART III
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act 19
10. Executive Compensation 20
11. Security Ownership of Certain Beneficial Owners and Management 21
12. Certain Relationships and Related Transactions 21
13. Exhibits and Reports on Form 8-K 21
14. Controls and Procedures 24
Signatures 25
3
PART I
ITEM 1. DESCRIPTION OF BUSINESS
FORWARD-LOOKING STATEMENTS. This annual report contains certain
forward-looking statements within the meaning of section 27A of the Securities
Act of 1933, as amended, and section 21E of the Securities Exchange Act of 1934,
as amended, that involve risks and uncertainties. In addition, the Company may
from time to time make oral forward-looking statements. Actual results are
uncertain and may be impacted by many factors. In particular, certain risks and
uncertainties that may impact the accuracy of the forward-looking statements
with respect to revenues, expenses and operating results include without
limitation; cycles of customer orders, general economic and competitive
conditions and changing consumer trends, technological advances and the number
and timing of new product introductions, shipments of products and components
from foreign suppliers, and changes in the mix of products ordered by customers.
As a result, the actual results may differ materially from those projected in
the forward-looking statements.
Because of these and other factors that may affect the Company's
operating results, past financial performance should not be considered an
indicator of future performance, and investors should not use historical trends
to anticipate results or trends in future periods.
(A) BUSINESS DEVELOPMENT
General
The Amanda Company ("Amanda") is located at 13765 Alton Parkway, phone
(949) 859-6279 and is a Utah Corporation. On October 1, 2001, The Amanda
Company, formerly known as Pen Interconnect, Inc. ("Pen"), merged with The
Automatic Answer, Inc. ("tAA") and changed its name to The Amanda Company, Inc.
The transaction was accounted for as a reverse merger with tAA as the surviving
entity. Amanda, prior to the merger, was a shell company with no operations.
(B) BUSINESS OF ISSUER
Amanda is a technology company with its primary focus in call processing.
Amanda's principal product is a voice messaging system that functions from the
client's server using software that works primarily with Microsoft's Windows
operating systems. Amanda's voicemail system uses the worldwide public switched
telephone network ("PSTN") and both Intranet and Internet computer computer
based technologies which allows communication content to flow through a
telephone network and the Internet.
Amanda's new focus is in redefining business communication as a convergence
and innovation software company. The Amanda Company is dedicated to the
development, production and support of the Amanda family of products and
the supply of applications for the enterprise segment. From the smallest
business to the largest corporation, our products are tailored to
streamline processes and dramatically improve the way day-to-day business
is conducted. We offer innovative, dependable voice processing software
from basic voice mail / automated attendant features to the integration of
data for intelligent call and message handling.
(1) Amanda's Principal Product
Amanda is in the intelligent CRM telecommunications industry. Amanda is a
supplier of call processing software systems that are used with industry
standard-personal computer setups.
Amanda delivers to the market the following products:
* Amanda voicemail software utilizing Microsoft DOS 6.22 Operating System,
sold to the small business segment utilizing from four to twenty-four ports
and providing up to 33 hours of message storage, subject to disk space on
the hardware platform. This system supports PBX ("Private Brand Exchanges")
and Key Systems (telephone equipment) ranging from ten to 200 telephone
users. * Amanda software utilizing Microsoft Windows Operating System for
the small and medium business segment utilizing from four to seventy-two
ports and unlimited message storage subject to disk space. This system
supports PBX and Key System of over 200 telephone users and smaller users
with high voice mail storage requirements. These systems are also capable
of supporting multiple PBXs.
* Amanda voicemail software utilizing Microsoft Windows NT/XP Operating
System capable of integrating with PSTN and Internet networks. This system
has also the ability to integrate with other computer based data bases
and/or applications. (Amanda Portal)
4
Amanda systems interoperate with traditional telephone networks (PSTN),
voice over IP networks (VoIP), local area networks (LANs), wireless networks,
and the Internet. The Amanda Company's software is ported on a variety of PC
based hardware platforms and Microsoft Operating Systems. The latest Amanda
technology is a communication Operating System that uses TCL, a widely
recognized Internet-friendly language. The movement from PC centricity to
Network centricity is addressed by porting our Internet compatible software on
traditional telephony or IP networks. Through our web browser-based products, we
can enhance existing private enterprise and public networks under an
Applications Service Provider (ASP) model and continue to serve the stand-alone
systems requirements behind key systems, PBXs, LANs or WANs.
License Revenue:
Amanda also licenses under OEM agreements its software to other organizations.
Some of those organizations are Cadcom, Cobotyx and Transtel Communications
(2) Non-Amanda Products
Amanda also distributes third party products to its indirect
distribution, such as voice boards that interface to switches and the PSTN,
manufactured by companies such as Intel/Dialogic, Brooktrout and Bicom.
(3) Marketing and distribution Process
Amanda currently has a network of 650 dealers that resell the Amanda line
of products to the small business market and distribution houses strategically
located in the country serving more than 25,000 independent dealers.
Our approach to market is through indirect distribution supported by a
National Inside Sales and Technical Support Call Center located in Danbury,
Connecticut, which handles both the domestic and international markets.
Sales by Geographic Area
Ninety-five percent (95%) of our sales come from the domestic market and
five percent from International areas. Of the domestic market 98% of sales are
to dealers and 2% to OEM entities who utilize our software for their own brands.
35% of sales are shipped to dealers in the western states, 30% to the eastern
states, 25% to the southern states and 10% to the Great Lakes states.
Competition
There are several small businesses that provide similar products,
however, our traditional competition has been acquired by larger entities, such
as, Active Voice was acquired by Nippon Electric Corporation (NEC), Centigram
was acquired by Mitel of Canada, Octel and VMX was acquired by
Avaya/Lucent/AT&T.
5
Other manufacturers are building voicemail capabilities internal to their
products such as Panasonic, Intertel, Mitel, etc. Other competitors are
manufacturers such as Toshiba and Cisco. Most of the large competitors target
the Fortune 1000 companies, which leaves the small to medium size business as
our main target.
Suppliers
Our main suppliers are Brooktrout Technologies (voice processing cards),
BICOM, Inc. (voicemail platforms), Central Technology of Texas (PC platforms),
and Aleen Technologies (voicemail systems).
Amanda has replacement suppliers available for all supplies.
Government Regulation or Government Approval
Amanda's products require FCC approval..
Research and Development
Amanda does not do research and development.
Patents, Trademarks and Licenses
Amanda maintain several Trademarks involving the name Amanda.
(c) EMPLOYEES
Amanda employs a total of 7 full time and no part time employees in the
corporate office and 7 full time employees outside of the corporate office.
ITEM 2. DESCRIPTION OF PROPERTY FACILITIES
Amanda's corporate offices are located at 13765 Alton Parkway, Suite F,
Irvine, CA 92618. Amanda is committed through July 15, 2004 with monthly
payments $5,928.13 for approximately 4,961 square feet.
Amanda's national sales and support office is located at 100 Mill Plain
Road, Danbury CT. The term is a three year agreement leasing 2,184 square feet,
expiring January 31, 2005 with monthly payments as follows:
1.February 1, 2002 through January 31, 2004 - monthly payments of
$4,459.00
2.February 1, 2004 through January 31, 2005 - monthly payments
of $4,595.50
6
ITEM 3. LEGAL PROCEEDINGS
1. On October 28, 1999 Color Savvy Systems, Ltd., filed suit to recover $165,750
in past due uncontested vendor obligations. On February 16, 2000, Color Savvy
obtained a judgment against the Company for $165,750. No payments were made
during fiscal 2001. The Company is still attempting to negotiate a final
settlement.
2. On February 15, 2000, Amistar Corporation filed suit against the Company to
recover $95,733 in uncontested past due vendor obligations. Amistar has accepted
and received 31,912 shares of Company stock on September 20,2000 as payment in
full of debt.
3. On March 21, 2000, Interworks Computer Products, Inc., filed suit to recover
$35,771 in past due uncontested vendor obligations. Interworks received 11,924
shares of stock in January 2001 as settlement of all amounts due.
4. On July 22, 2000, Force Electronics filed suit to recover $68,816 in past due
uncontested vendor obligations, and obtained a judgment on September 15, 2000.
Force received 23,316 shares of common stock in January 2001 as full settlement
of this obligation.
5. Control Design Supply/Nedco filed suit to recover $6,788 in past due
uncontested vendor obligations. The company paid off this judgement during
fiscal 2000.
6. On March 20, 2000, DHL Airways Inc. obtained a judgment in the amount of
$3,868 for past due uncontested vendor obligation. This suit was settled in
March 2001 for 769 shares of the Company's stock.
7. On April 5, 2001, Sony Recording Media Products obtained a judgment against
the company in the amount of $35,000. This suit was settled for cash with a
final payment made in February 2002.
8. On November 15, 1999, Alan L. Weaver, former CEO of Pen Interconnect, Inc.,
obtained a judgment against the Company in the amount of $118,500 for breach of
a settlement agreement relative to Mr. Weavers' employment agreement with the
Company. The Company has reserved $135,300 for this agreement, which includes
interest from the date of the judgment. The settlement calls for monthly
payments of $3,500. To date, the Company has made payments totaling $8,500.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following matters were voted on by the shareholders at the last annual
meeting of the stockholders, which took place on August 30,2002:
1. The election of six persons to serve as Directors on the Company's board of
directors;
2. The ratification of the appointment of Pohl, McNabola, Berg & Company LLP as
independent auditors for the Company, for the fiscal year ending September
30, 2002, for the purpose of auditing the financial statements and books of
the Company, for, and during, the period ending on that date;
3. Increase the number of common shares authorized to 500,000,000 shares.
7
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
Our common stock and warrants have been traded on the OTC Bulletin Board
since they were de-listed from the National Association of Securities Dealers
Automated Quotation system as of March 30, 1999. They were traded under the
symbol "PENC:OB" for the common stock and "PENCW" for the warrants. On December
11, 2001, the stock symbols changed to AMNA.OB for the common stock and AMNAW
for the warrants. The common stock and warrants were first publicly traded on
November 17, 1995. The following table sets forth the range of high and low bids
for our common stock for the last three years.
High Low
Fiscal Year 2001-Quarter Ended
September 30, 2002 $0.01 $0.003
June 30, 2002 0.02 0.01
March 31, 2002 * 0.03 0.01
December 31, 2001 0.03 0.01
Fiscal Year 2000-Quarter Ended
September 30, 2001 $0.04 $0.03
June 30, 2001 0.05 0.04
March 31, 2001 0.11 0.03
December 31, 2000 0.19 0.02
Fiscal Year 1999-Quarter Ended
September 30, 2000 $0.30 $0.17
June 30, 2000 0.36 0.18
March 31, 2000 0.55 0.20
December 31, 1999 0.53 0.25
Fiscal Year 1998-Quarter Ended
September 30, 1999 $0.81 $0.52
June 30, 1999 1.19 0.78
March 31, 1999 2.00 0.72
December 31, 1998 2.50 0.77
* Post reverse split
On February 8, 2002, Amanda did a 10 to 1 reverse stock split of its
common stock. Before the reverse split on February 8, 2002 there were
349,219,760 shares of common stock outstanding. After the reverse split on
February 28, 2002 there were 70,351,927 shares of common stock outstanding, held
by approximately 4,100 shareholders, including several holders who are nominees
for an undetermined number of beneficial owners.
On September 30, 2002, the closing quotation for the warrants was $0.002
per warrant. The Company extended the public warrants for one more year to
November 17, 2002 as they were to expire on November 17, 2001. As of September
30, 2001, there were issued and outstanding public and private warrants to
purchase 10,509,700 shares of the Company's common stock.
8
Transfer Agent and Registrar
The Company's transfer agent is American Stock Transfer and Trust Company
located at 6201 15th Avenue, Brooklyn, NY 10004.
Our Dividend Policy
Company does not anticipate paying dividends on the Common Stock in the
foreseeable future. The payment of future dividends will be at the sole
discretion of the Company's Board of Directors and will depend the Company's
general business condition. Recent Sales of Unregistered Securities
Shares of common stock issued
(1) In October 1998, Amanda issued 388,846 shares of common stock to BNC Bach
International Ltd. Upon conversion of subordinated debentures of $252,750.
(2) In October 1998, Amanda issued 157,935 shares of common stock to RBB Bank
Aktiengrsellshaft. Upon conversion of subordinated debentures of $107,668.
(3) In November 1998, Amanda issued 30,000 shares of common stock at $0.75 per
share to Heracles Holdings Limited upon exercise of warrants.
(4) In November 1998, Amanda issued 20,000 shares of common stock at $0.75 per
share to Lawson Rollins upon exercise of warrants.
(5) In December 1998, Amanda issued 50,000 shares of common stock at $0.75 per
share to Louis F. Centofanti upon exercise of warrants.
(6) In December 1998, Amanda issued 20,000 shares of common stock at $0.75 per
share to Neyla Kizner upon exercise of warrants.
(7) In December 1998, Amanda issued 10,000 shares of common stock at $0.75 per
share to Rahim Kaba upon exercise of warrants.
(8) In December 1998, Amanda issued 307,692 shares of common stock to RBB Bank
Aktiengrsellshaft. upon conversion of subordinated debentures of $200,000.
(9) In December 1998, Amanda issued 90,000 shares of common stock at $0.75 per
share to Gordon Mundy upon exercise of warrants.
(10) In January 1999, Amanda issued 46,014 shares of common stock to BNC Bach
International Ltd. upon conversion of subordinated debentures of $50,846.
(11) In January 1999, Amanda issued 103,956 shares of common stock to Dundee
Securities. upon conversion of subordinated debentures of $101,877.
(12) In March 1999, Amanda issued 172,681 shares of common stock to BNC Bach
International Ltd. upon conversion of subordinated debentures of $127,784.
(13) In March 1999, Amanda issued 104,372 shares of common stock to BNC Bach
International Ltd.
9
In fiscal 2000, there were 17,958,832 shares of common stock issued of which
16,698,832 were unregistered, as follows:
(14) In April 2000, 411,112 shares of common stock were issued at $.20 per share
upon exercise of Series B Preferred stock. These shares were issued
pursuant to the exemption provided for under Section 4(2) of the Securities
Act of 1933, as amended, as a "transaction not involving a public
offering." The investors of the stock were accredited investors.
(15) In February 2000 through April 2000, there were 9,406,977 shares of common
stock issued upon conversion of Series A Preferred stock. These shares were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a
public offering." The investors of the stock were accredited investors.
(16) In September 2000, Amanda issued 1,055,540 shares of common stock in
payment of $101,305 at $.10 a share, or 50% of market price, in payment of
accounts payable. These shares were issued pursuant to the exemption
provided for under Section 4(2) of the Securities Act of 1933, as amended,
as a "transaction not involving a public offering." The investors of the
stock were accredited investors.
(17) In December 1999 through April 2000 3,041,668 shares of common stock were
issued at $.14 a share upon exercise of warrants. These shares were issued
pursuant to the exemption provided for under Section 4(2) of the Securities
Act of 1933, as amended, as a "transaction not involving a public
offering." The investors of the stock were accredited investors.
(18) In March of 2000, Amanda issued 315,000 shares of common stock at $.27 a
shares upon conversion of warrants. These shares were issued pursuant to
the exemption provided for under Section 4(2) of the Securities Act of
1933, as amended, as a "transaction not involving a public offering." The
investors of the stock were accredited investors.
(19) In May and June of 2000, Amanda issued 1,397,328 shares of common stock for
services rendered at $.25 a share (approximately market price). These
shares were issued pursuant to the exemption provided for under Section
4(2) of the Securities Act of 1933, as amended, as a "transaction not
involving a public offering." The investors of the stock were accredited
investors.
(20) In May and June of 2000, Amanda issued 1,065,000 shares of common stock for
services rendered at $.22 a share (approximately market price) upon the
exercise of options. These shares were issued pursuant to the exemption
provided for under Section 4(2) of the Securities Act of 1933, as amended,
as a "transaction not involving a public offering." The investors of the
stock were accredited investors.
(21) In September 2000, Amanda issued 6,207 shares of common stock in payment of
accounts payable at $.01 per share (approximately 50% discount to market).
These shares were issued pursuant to the exemption provided for under
Section 4(2) of the Securities Act of 1933, as amended, as a "transaction
not involving a public offering." The investors of the stock were
accredited investors.
10
In fiscal 2001, there were 22,276,657 shares of common stock issued of which
10,666,657 were unregistered, as follows:
(22) In October 2000, Amanda issued 95,000 shares of common stock at $.16 a
share (approximately market price) a share to Alan Weaver for services
rendered. These shares were issued pursuant to the exemption provided for
under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering." The investor of the stock
was an accredited investor.
(23) In October 2000, Amanda issued 617,000 shares of common stock at $.06 a
share upon the exercise of warrants. These shares were issued pursuant to
the exemption provided for under Section 4(2) of the Securities Act of
1933, as amended, as a "transaction not involving a public offering." The
investor of the stock was an accredited investor.
(24) In October 2000, Amanda issued 667 shares of common stock at $3.00 per
share to Mr. Fisher to retire debt owed. These shares were issued pursuant
to the exemption provided for under Section 4(2) of the Securities Act of
1933, as amended, as a "transaction not involving a public offering." The
investor of the stock was an accredited investor.
(25) In October 2000, Amanda issued 3,200 shares of common stock at $3.00 a
share to Multitik to retire debt owed. These shares were issued pursuant to
the exemption provided for under Section 4(2) of the Securities Act of
1933, as amended, as a "transaction not involving a public offering." The
investor of the stock was an accredited investor.
(26) In November 2000, Amanda issued 481,979, shares of common stock at $.08 a
shares (approximately market price) to The Trading Post upon exercise of
warrants. These shares were issued pursuant to the exemption provided for
under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering." The investor of the stock
was an accredited investor.
(27) In November 2000, Amanda issued 47,222, shares of common stock at $.09 a
shares (approximately market price) to Milt Haber upon exercise of
warrants. These shares were issued pursuant to the exemption provided for
under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering." The investor of the stock
was an accredited investor.
(28) In November 2000, Amanda issued 500,000, shares of common stock at $.05 a
shares (approximately market price) to Bi-Coastal Consulting Group upon
exercise of warrants. These shares were issued pursuant to the exemption
provided for under Section 4(2) of the Securities Act of 1933, as amended,
as a "transaction not involving a public offering." The investor of the
stock was an accredited investor.
(29) In November 2000, Amanda issued 200,000, shares of common stock at $.03 a
shares (approximately market price) to Josh Weinfield upon exercise of
warrants. These shares were issued pursuant to the exemption provided for
under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering." The investor of the stock
was an accredited investor.
(30) In December 2000, Amanda issued 450,000, shares of common stock at $.02 a
shares (a 50% discount to market price) to AMRO International upon exercise
of warrants. These shares were issued pursuant to the exemption provided
for under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering." The investor of the stock
was an accredited investor.
11
(31) In December 2000, Amanda issued 475,000, shares of common stock at $.05
(approximately market price) to Ed Saverese upon exercise of warrants.
These shares were issued pursuant to the exemption provided for under
Section 4(2) of the Securities Act of 1933, as amended, as a "transaction
not involving a public offering." The investor of the stock was an
accredited investor.
(32) In January 2001, Amanda issued 75,000, shares of common stock at $.06
(approximately market price) to Scott Sellers upon exercise of warrants.
These shares were issued pursuant to the exemption provided for under
Section 4(2) of the Securities Act of 1933, as amended, as a "transaction
not involving a public offering." The investor of the stock was an
accredited investor.
(33) In January 2001, Amanda issued 250,000, shares of common stock at $.03
(approximately market price) to Bi-Coastal Consulting Group upon exercise
of warrants. These shares were issued pursuant to the exemption provided
for under Section 4(2) of the Securities Act of 1933, as
(34) In January 2001, Amanda issued 500,000, shares of common stock at $.02
(approximately 50% discount to market price) to Ed Saverese upon exercise
of warrants. These shares were issued pursuant to the exemption provided
for under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering." The investor of the stock
was an accredited investor.
(35) In February 2001, Amanda issued 117 shares of common stock at $3.00
(settlement figure) to US Vibra in payment of debt. These shares were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a
public offering." The investor of the stock was an accredited investor.
(36) In February 2001, Amanda issued 1,194 shares of common stock at $3.00
(settlement figure) to AndersonECD in payment of debt. These shares were
issued pursuant to the exemption provided for under Section 4(2) of the
Securities Act of 1933, as amended, as a "transaction not involving a
public offering." The investor of the stock was an accredited investor.
(38) In February 2001, Amanda issued 5,000 shares of common stock at $1.97
(settlement figure) to Pioneer Standard in payment of debt. These shares
were issued pursuant to the exemption provided for under Section 4(2) of
the Securities Act of 1933, as amended, as a "transaction not involving a
public offering." The investor of the stock was an accredited investor.
(39) In May 2001, Amanda issued 416,667 shares of common stock at $.04 a shares
(approximately market price) to Austost Anstalt upon exercise of warrants.
These shares were issued pursuant to the exemption provided for under
Section 4(2) of the Securities Act of 1933, as amended, as a "transaction
not involving a public offering." The investor of the stock was an
accredited investor.
(40) In May 2001, Amanda issued 416,667 shares of common stock at $.04 a shares
(approximately market price) to Balmore Funds upon exercise of warrants.
These shares were issued pursuant to the exemption provided for under
Section 4(2) of the Securities Act of 1933, as amended, as a "transaction
not involving a public offering." The investor of the stock was an
accredited investor.
(41) In June 2001, Amanda issued 237,000 shares of common stock at $.04 a shares
(approximately market price) to Jay Chung upon exercise of warrants. These
shares were issued pursuant to the exemption provided for under Section
4(2) of the Securities Act of 1933, as amended, as a "transaction not
involving a public offering." The investor of the stock was an accredited
investor.
(42) In June 2001, Amanda issued 1,217,039 shares of common stock at $.03 a
shares (approximately market price) to AMRO International upon exercise of
warrants. These shares were issued pursuant to the exemption provided for
under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering." The investor of the stock
was an accredited investor.
(43) In June 2001, Amanda issued 300,000 shares of common stock at $.03 a shares
(approximately market price) to Ashford Capital for services rendered.
These shares were issued pursuant to the exemption provided for under
Section 4(2) of the Securities Act of 1933, as amended, as a "transaction
not involving a public offering." The investor of the stock was an
accredited investor.
(44) In June 2001, Amanda issued 910,000 shares of common stock at $.05 a shares
(approximately market price) to Bi-Coastal Consulting Group for services
rendered. These shares were issued pursuant to the exemption provided for
under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering." The investor of the stock
was an accredited investor.
(45) In July 2001, Amanda issued 500,000 shares of common stock at $.03 a shares
(approximately market price) to Milton Hauber for services rendered. These
shares were issued pursuant to the exemption provided for under Section
4(2) of the Securities Act of 1933, as amended, as a "transaction not
involving a public offering." The investor of the stock was an accredited
investor.
12
(46) In July 2001, Amanda issued 100,000 shares of common stock at $.03 a shares
(approximately market price) to Christine Risner for services rendered.
These shares were issued pursuant to the exemption provided for under
Section 4(2) of the Securities Act of 1933, as amended, as a "transaction
not involving a public offering." The investor of the stock was an
accredited investor.
(47) In July 2001, Amanda issued 500,000 shares of common stock at $.03 a shares
(approximately market price) to Brian Bonar for services rendered. These
shares were issued pursuant to the exemption provided for under Section
4(2) of the Securities Act of 1933, as amended, as a "transaction not
involving a public offering." The investor of the stock was an accredited
investor.
(48) In July 2001, Amanda issued 300,000 shares of common stock at $.03 a shares
(approximately market price) to Robert Dietrich for services rendered.
These shares were issued pursuant to the exemption provided for under
Section 4(2) of the Securities Act of 1933, as amended, as a "transaction
not involving a public offering." The investor of the stock was an
accredited investor.
(49) In July 2001, Amanda issued 250,000 shares of common stock at $.03 a shares
(approximately market price) to Finova Capital for settlement of debt.
These shares were issued pursuant to the exemption provided for under
Section 4(2) of the Securities Act of 1933, as amended, as a "transaction
not involving a public offering." The investor of the stock was an
accredited investor.
(50) In August 2001, Amanda issued 500,000 shares of common stock at $.03 a
shares (approximately market price) to Finova Capital for Settlement of
Debt. These shares were issued pursuant to the exemption provided for under
Section 4(2) of the Securities Act of 1933, as amended, as a "transaction
not involving a public offering." The investor of the stock was an
accredited investor.
(51) In August 2001, Amanda issued 392,157 shares of common stock at $.03 a
shares (approximately market price) to Austost Anstalt upon conversion of
preferred stock. These shares were issued pursuant to the exemption
provided for under Section 4(2) of the Securities Act of 1933, as amended,
as a "transaction not involving a public offering." The investor of the
stock was an accredited investor.
(52) In August 2001, Amanda issued 392,157 shares of common stock at $.03 a
shares (approximately market price) to Balmore Funds upon conversion of
preferred stock. These shares were issued pursuant to the exemption
provided for under Section 4(2) of the Securities Act of 1933, as amended,
as a "transaction not involving a public offering." The investor of the
stock was an accredited investor.
(53) In December 2001, Amanda issued 236,174,041 shares of common stock pursuant
to the "Final Merger Agreement Pen Interconnect,Inc./The Automatic Answer,
Inc." dated October 23, 2001.
13
(54) In April 2002, Amanda issued 28,119,856 shares of common stock pursuant to
the "Final Merger Agreement Pen Interconnect,Inc./The Automatic Answer,
Inc." dated October 23, 2001.
In fiscal 2002, there were 55,522,539 shares of common stock issued of which
19,312,586 were unregistered, as follows:
(1) 4,987,360 shares of common stock were issued pursuant to the TAA
acquisition agreement. These shares were issued pursuant to the exemption
provided for under Section 4(2) of the Securities Act of 1933, as amended,
as a "transaction not involving a public offering."
(2) 539,995 shares of common stock were issued to consultants for services at
$.08 a share. These shares were issued pursuant to the exemption provided
for under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering."
(3) 10,333,334 shares of common stock were issued for the conversion of debt at
$.02 a share. These shares were issued pursuant to the exemption provided
for under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering."
(4) 3,451,897 share of common stock were issued for merger expenses at $.17 per
share. These shares were issued pursuant to the exemption provided for
under Section 4(2) of the Securities Act of 1933, as amended, as a
"transaction not involving a public offering."
Subsequent issuance:
(1) In October 2002, the Company issued 2 million shares of restricted common
stock and a warrant convertible into 5 million shares of common stock for
consulting services provided to the Company.
Convertible Notes issued
On March 8, 2001, Amanda issued three convertible debentures for an
aggregate of $200,000 in cash in accordance with ss. 4(2) and Rule 506 under the
Securities Act of 1933, as amended (the "Securities Act"). The investors of
these securities were accredited investors.
On May 14, 2001, Amanda issued a convertible debenture for an $150,000 in
cash in accordance with ss. 4(2) and Rule 506 under the Securities Act of 1933,
as amended (the "Securities Act"). The investors of these securities were
accredited investors.
On July 9, 2001, Amanda issued a convertible debenture for an $100,000 in
cash in accordance with ss. 4(2) and Rule 506 under the Securities Act of 1933,
as amended (the "Securities Act"). The investor of this security is an
accredited investor.
On July 16, 2001, Amanda issued a convertible debenture for an $100,000
in cash in accordance with ss. 4(2) and Rule 506 under the Securities Act of
1933, as amended (the "Securities Act"). The investor of this security is an
accredited investor.
On October 4, 2001, Amanda issued a convertible debenture for an $250,000
in cash in accordance with ss. 4(2) and Rule 506 under the Securities Act of
1933, as amended (the "Securities Act"). The investor of this security is an
accredited investor.
In November, 2001, Amanda issued four convertible debentures for an
aggregate of $320,000 in cash in accordance with ss. 4(2) and Rule 506 under the
Securities Act of 1933, as amended (the "Securities Act"). The investors of
these securities were accredited investors.
On January 9, 2002, Amanda issued a convertible debenture for an amount
of $300,000 in cash in accordance with ss. 4(2) and Rule 506 under the
Securities Act of 1933, as amended (the "Securities Act"). The investor of this
security is an accredited investor.
Warrants and options issued:
On October 4, 2001 Amanda issued a total of 8,055,583 warrants. Each
warrant allows the holder to purchase 1 share of our common stock at an exercise
price equal to $02 per share. These warrants expire October 4, 2006. The Warrant
provides that in no event shall the holder beneficially own more than 4.999% of
our outstanding common stock. These warrants were issued in accordance
withss.4(2) and Rule 506 under the Securities Act of 1933, as amended (the
"Securities Act"). The investors of these securities were accredited investors.
On November 26, 2001 Amanda issued a total of 7,944,682 warrants. Each
warrant allows the holder to purchase 1 share of our common stock at an exercise
price equal to $01 per share. These warrants expire November 26, 2006. The
Warrant provides that in no event shall the holder beneficially own more than
4.999% of our outstanding common stock. These warrants were issued in accordance
withss.4(2) and Rule 506 under the Securities Act of 1933, as amended (the
"Securities Act"). The investors of these securities were accredited investors.
On January 11, 2002, Amanda issued a total of 8,571,429 warrants. Each
warrant allows the holder to purchase 1 share of our common stock at an at an
exercise price per share equal to the lesser of (i) $.007 and (ii) the average
of the lowest three (3) trading prices during the thirty (30) trading days
immediately prior to exercise, discounted by 30%. The Warrant provides that in
no event shall the holder beneficially own more than 4.999% of our outstanding
common stock.. These warrants do not have an expiration date. These warrants
were issued in accordance with ss. 4(2) and Rule 506 under the Securities Act of
1933, as amended (the "Securities Act"). The investors of these securities were
accredited investors. These warrants have been canceled.
14
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis provides certain information, which the
Company's management believes is relevant to an assessment and understanding of
the Company's results of operations and financial condition for the fiscal years
ended September 30, 2002 and 2001. This discussion and analysis should be read
in conjunction with the Company's financial statements and related footnotes.
General
Plan of Operation
The short-term objectives of Amanda are the following:
* Regain profitability through product cost restructuring, pricing changes
and simplification of products.
* Develop new products that integrate our technologies with other ready to
market technologies.
* Develop strategic relationships that license our technologies.
* Reduce revenue product dependency on voice mail.
Amanda's long-term objectives are as follows:
* Position Amanda Portal as an industry recognized communications opersting
system.
* Enhance revenue stream with recurring service revenues.
* Develop new intelligently integrated applications that are market specific
products that will allow different communication devices work together,
Strategic Vision
Key to Amanda's business in the future is the following:
* Transition of Amanda's product strength away from PBX and Key Systems that is
a declining market to products that bring together PSTN and IP network
capabilities to develop intelligent call processing and message handling
systems. Amanda's Microsoft DOS based product line still has a demand for new
shipments and field replacements, which represents the bulk of Amanda sales.
However, the Amanda Portal is beginning to generate new revenues as a product
that can bring together and create new applications for PSTN, IP network and
database capabilities.
* Sustaining our dealer network to take our products to market.
* Developing strategic relationships to create high margin opportunities while
minimizing our exposure.
* Leveraging Amanda Portal as a communications operating system to quickly bring
intelligently integrated database processing and message handling applications
to specialized markets. Over the next twelve months, Management is of the
opinion that sufficient working capital will be obtained from operations and
external financing to meet the Company's liabilities and commitments as they
become payable. The Company has in the past successfully relied on private
placements of common stock securities, bank debt, loans from private investors
and the exercise of common stock warrants in order to sustain operations.
There is no expected or planned sale of significant equipment by the
Company. The Company's work force is expected to remain at the current level
over the next twelve months.
15
Results of Operations
Net sales: Net sales for the Company decreased $878,257 to $3,154,289 for the
period ending September 30, 2002 from $4,032,546 for the period ending September
30, 2001, or approximately 22 percent. A slowdown in orders from Amanda's
distributors resulted in the reduced sales. Our distributors claim to have
experienced lower sales as a result of the economic conditions.
Cost of sales: Cost of sales of $1,676,403 for the period ended September 30,
2002 decreased $718,408 from $2,394,811 or 29% from the same period prior year.
As a percentage of net sales, Cost of sales decreased to 53% of net sales as
compared to 59% for the same period in the prior year. The decrease in Cost of
sales was mainly due to the reduction in shipping costs due to improved
management of inventory purchases and shipments to customers.
Selling, general and administrative expenses: Selling, general and
administrative expenses of $2,799,955 for the period ending September 30, 2002
increased by $852,361 from $1,947,594 or approximately 44% from the year ended
September 30, 2001. This increase was due an increase consulting expenses over
prior year.
Interest expense: Interest expense of $156,681 for the period ending September
30, 2002 increased $56,396 from the same period prior year.
Liquidity and capital resources
Amanda had negative working capital at September 30, 2002 of $3,255,667 compared
to negative working capital of $1,641,440 at September 30, 2001 for a decrease
in working capital of $1,614,227. The decrease is due to the raising of
additional capital through the issuance of convertible debentures which allowed
the company to have sufficient working capital to pay salaries, office rent and
other expenses while the company looked for a merger partner.
During fiscal 2002 Amanda continued to experience cash flow problems. For most
of fiscal 2002, the market price of Amanda's stock was sufficient to raise
additional funds to support the negative cash flow from operations.
Going Concern
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in note
2 to the consolidated financial statements, the Company has a working capital
deficiency of $ 3,255,667 as at September 30, 2002 and has suffered recurring
losses from operations which raise substantial doubt about its ability to
continue as a going concern. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
16
Other events
On March 8, 2001, Amanda issued three convertible debentures for an aggregate
amount of $200,000, with simple interest accruing at the annual rate of 8%.
These debentures are due March 8, 2002. Interest payable on the Debentures shall
be paid quarterly commencing March 30, 2001. The holders shall have the right to
convert the principal amount and interest due under the debentures into shares
of Amanda's common stock. The conversion price in effect on any Conversion Date
shall be the lesser of (1) $.04 and (2) 70% of the average of the lowest three
inter-day sales prices of the Common Stock during the thirty Trading Days
immediately preceding the applicable Conversion Date.
On May 14, 2001, Amanda issued a convertible debenture for $150,000, with simple
interest accruing at the annual rate of 8%. These debentures are due May 14,
2004. Interest payable on the Debentures shall be paid quarterly commencing June
30, 2001. The holders shall have the right to convert the principal amount and
interest due under the debentures into shares of Amanda's common stock. The
conversion price in effect on any Conversion Date shall be the lesser of (1)
$.04 and (2) 70% of the average of the lowest three inter-day sales prices of
the Common Stock during the thirty Trading Days immediately preceding the
applicable Conversion Date.
On July 9, 2001, Amanda issued a convertible debenture for $100,000, with simple
interest accruing at the annual rate of 8%. These debentures are due July 9,
2004. Interest payable on the Debentures shall be paid quarterly commencing
September 30, 2001. The holders shall have the right to convert the principal
amount and interest due under the debentures into shares of Amanda's common
stock. The conversion price in effect on any Conversion Date shall be the lesser
of (1) $.04 and (2) 70% of the average of the lowest three inter-day sales
prices of the Common Stock during the thirty Trading Days immediately preceding
the applicable Conversion Date.
On July 16, 2001, Amanda issued a convertible debenture for $100,000, with
simple interest accruing at the annual rate of 8%. These debentures are due July
16, 2004. Interest payable on the Debentures shall be paid quarterly commencing
September 30, 2001. The holders shall have the right to convert the principal
amount and interest due under the debentures into shares of Amanda's common
stock. The conversion price in effect on any Conversion Date shall be the lesser
of (1) $.04 and (2) 70% of the average of the lowest three inter-day sales
prices of the Common Stock during the thirty Trading Days immediately preceding
the applicable Conversion Date.
On October 4, 2001, Amanda issued a convertible debenture for $250,000, with
simple interest accruing at the annual rate of 8%. These debentures are due
October 4, 2004. Interest payable on the Debentures shall be paid quarterly
commencing December 31, 2001. The holders shall have the right to convert the
principal amount and interest due under the debentures into shares of Amanda's
common stock. The conversion price in effect on any Conversion Date shall be the
lesser of (1) $.02 and (2) 70% of the average of the lowest three inter-day
sales prices of the Common Stock during the thirty Trading Days immediately
preceding the applicable Conversion Date. Amanda also issued a total of
8,055,583 warrants (pre-split). Each warrant allows the holder to purchase 1
share of our common stock at an exercise price equal to $02 per share. These
warrants expire October 4, 2006.
On October 23, 2001, Pen Interconnect changed its name to The Amanda Company.
On November 19, 2001, Amanda issued two convertible debentures for an aggregate
of $100,000 with simple interest accruing at the annual rate of 8%. These
debentures are due November 19, 2004. Interest payable on the Debentures shall
be paid quarterly commencing December 31, 2001. The holders shall have the right
to convert the principal amount and
17
interest due under the debentures into shares of Amanda's common stock. The
conversion price in effect on any Conversion Date shall be the lesser of (1)
$.02 and (2) 70% of the average of the lowest three inter-day sales prices of
the Common Stock during the thirty Trading Days immediately preceding the
applicable Conversion Date.
On November 26, 2001, Amanda issued two convertible debentures for an aggregate
of $220,000 with simple interest accruing at the annual rate of 8%. These
debentures are due November 26, 2004. Interest payable on the Debentures shall
be paid quarterly commencing December 31, 2001. The holders shall have the right
to convert the principal amount and interest due under the debentures into
shares of Amanda's common stock. The conversion price in effect on any
Conversion Date shall be the lesser of (1) $.02 and (2) 70% of the average of
the lowest three inter-day sales prices of the Common Stock during the thirty
Trading Days immediately preceding the applicable Conversion Date. Amanda also
issued a total of 7,944,682 warrants (pre-split). Each warrant allows the holder
to purchase 1 share of our common stock at an exercise price equal to $01 per
share.
On January 9, 2002, Amanda issued a convertible debenture for an aggregate
amount of $300,000, with simple interest accruing at the annual rate of 8%. This
debenture is due January 9, 2003. Interest payable on the Debentures shall be
paid quarterly commencing March 30, 2002. The holders shall have the right to
convert the principal amount and interest due under the debentures into shares
of Amanda's common stock. The conversion price in effect on any Conversion Date
shall be the lesser of (1) $.10 and (2) 70% of the average of the lowest three
inter-day sales prices of the Common Stock during the thirty Trading Days
immediately preceding the applicable Conversion Date. Amanda also issued common
stock purchase warrants (pre-split) for the right to purchase 8,571,1429 shares
vof Common Stock of Amanda at an exercise price per share equal to the lesser of
(i) $.02 and (ii) 70% of the average of the lowest three inter-day sales prices
during the thirty (30) Trading Days immediately prior to exercise. These shares
have been canceled.
It is anticipated that the above of convertible debentures will be converted
into shares in accordance with the terms of these debentures.
There is no expected or planned sale of significant equipment by the Company.
The Company's work force is expected to remain at the current level over the
next twelve months.
ITEM 7. FINANCIAL STATEMENTS
The financial statements and supplementary data are included beginning at
page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Not applicable.
18
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
Directors and Executive Officers.
The Company's directors and executive officers, and their respective ages
and positions with the Company, are set forth below in tabular form.
Biographical information on each person is set forth following the tabular
information. There are no family relationships between any of the Company's
directors or executive officers. The Company's board of directors is currently
comprised of six members, each of whom is elected for a term of one year.
Executive officers are chosen by and serve at the discretion of the Board of
Directors.
Name Age Position
Brian Bonar 54 Chairman of the Board, Acting Chief
Executive Officer
Stephen J. Fryer 64 Director
David Woo 41 Director
E. Timothy Morgan 43 Director
Jose Candia (1) 53 Director
Bill Prevot (2) 58 Director
(1) Resigned April 1, 2002 (2) Resigned March 26, 2002
The officers and Directors of Amanda will devote only such time as they
deem appropriate in the business affairs of our Company. It is, however,
expected that the officers will devote the time deemed necessary to perform
their duties for the business of our Company. The amount of time devoted by each
director is discussed below.
The directors of Amanda are elected to hold office until the next annual
meeting of shareholders and until their respective successors have been elected
and qualified.
Biographies Of Our Executive Officers And Directors
Stephen J. Fryer had served as Chief Executive Officer of the Company from 1999
to 2001 and has been a director of the Company since 1997. He served as Senior
Vice President of Sales and Marketing from October 1996 to October 1997. From
1989 to 1996, Mr. Fryer was a principal in Venting International, Ltd, an
Irvine, California based venture capital and private investment banking firm.
Mr. Fryer graduated from the University of Southern California in 1960 with a
Bachelors Degree in Mechanical Engineering and has spent over twenty-eight years
in the computer business in the United States, Asia and Europe.
Brian Bonar was appointed a director of the Company on November 30, 1999 and on
April 1, 2000 was appointed as the interim Chairman of the Board and chief
Executive Officer. Mr. Bonar currently serves as CEO and President of Imaging
Technologies Corporation (ITEC) and has held this position since April 1998.
Prior to his appointment as CEO of ITEC, Mr. Bonar served in other capacities
with ITEC since August 1992. From 1991 to 1992 Mr. Bonar was Vice President of
Worldwide Sales and Marketing for Bezsier Systems, Inc. From 1990 to 1991 he was
Worldwide Sales Manager for Adaptec, Inc. From 1988 to 1990 Mr. Bonar was Vice
President of Sales and Marketing for Rastek Corporation. From 1984 to 1988 Mr.
Bonar was employed as Executive Director of Engineering at QMS, Inc. Prior to
these appointments, Mr. Bonar was employed by IBM, U.K. Ltd. for approximately
17 years.
David Woo, director and past chairman, was appointed to the Board of the Company
on August 30, 2001. Mr. Woo was the Founder and past CEO of tAA. He received his
Bachelors Degree in Computer Science from Columbia College, Columbia University.
E. Timothy Morgan was appointed a director of the Company on August 30, 2001.
Mr. Morgan is a Founder and Senior Vice President of Advanced Research at TAA.
Mr. Morgan has over twenty years experience in computer programming and software
engineering. His work in concurrent software design includes software tools and
authoring of several publications explicitly for the analysis of concurrent
systems.
19
ITEM 10. EXECUTIVE COMPENSATION
The following table shows the compensation paid by the Company to its
current Chairman and Chief Executive Officer, and the Company's other most
highly paid executive officer.
None of the other executive officer's total annual salary and bonus
exceeded $100,000 for the years presented.
Summary Compensation Table
Annual Compensation
Name and Principal Fiscal Year Salary Bonus
Stephen J. Fryer(1) 2001 $ 63,267 $ 0
President & CEO 2000 148,802 4,116
1999 139,000 17,304
Joe Candia (2) 2001 90,000 0
Vice President
Jim Pendleton (3) 1999 139,666 0
Chairman/CEO
Mehrdad Mobasseri (3) 1999 96,000 89,282
President-InCirT
Alan Weaver (3) 1999 100,000 30,881
Vice President
The tables above do not include certain insurance, the use of a car,
and other personal benefits, the total value of which does not exceed
$50,000 or 10% of such person's salary and bonus.
(1) Resigned in 2001 for personal reasons
(2) Resigned April 1, 2002
(3) Resigned in 1999/2000 for personal reasons
20
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the number of shares of the Company's
common stock beneficially owned as of September 30, 2002, (i) by each person who
is known by the Company to own beneficially more than 5% of the Company's common
stock, (ii) by each director and director nominee, (iii) by each of the
Company's named executive officers, and (iv) by all directors, director nominees
and executive officers, as a group, as reported by each such person. Unless
otherwise indicated, each stockholder's address is c/o the Company, 13765 Alton
Parkway, Suite F Irvine, CA. 92618.
Amount and Amount Issuable Percentage of
Name and Address of Nature of on Exercise of Outstanding
Beneficial Owner Beneficial Owner Options Common Stock
------------------- -------------------- ------------------ -------------
Steven Fryer 3,092,500 2.8
Brian Bonner 3,397,383 3.1
E. Timothy Morgan 5,779,780 5.3
David L. Woo 8,307,788 7.7
All Officers and
Directors as a
Group (4 persons) 20,577,451 19.0
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of the registration
statement upon the exercise of options or warrants. Each of the above beneficial
owner's percentage ownership is determined by including the options and/or
warrants that are held by such person and which are exercisable within 60 days
of the date of this registration statement. Unless otherwise indicated, the
company believes that all persons named in the table have voting and investment
power with respect to all shares of common stock beneficially owned by them.
Based on 108,159,899 shares issued and outstanding as of September 30, 2002.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following information summarizes certain transactions, either engaged
in within the last two (2) years or, proposed to be engaged in, by the Company
and the individuals described.
Stephen J. Fryer, former chairman, CEO, President and Chief Accounting Officer
received options and warrants for 470,000 common shares in 2001.
Brian Bonar and Milton Haber, Directors of Amanda, received 50,000 shares of
common stock for their continued service as Board Members. Additionally, Mr.
Bonar received options for 50,000 shares of the Company's common stock.
During 2002, Brian Bonar, Steve Fryer and Milton Haber received 65,000. 109,000
and 15,322 shares respectively, as compensation for services. The aggregate
value of the shares issued as compensation for services was $33,175.
ITEM 13 - Index of Exhibits and Reports on Form 8-K
(a) Reports on Form 8-K
Reports on Form 8-K were filed by the Company during the three months
ended September 30, 2001.
(b) Exhibit No. Description
1. Underwriter's Warrant Agreement including Form of Underwriter's
Warrant, incorporated by reference to the Company's Registration
Statement filed on Form SB-2, SEC File No. 33-96444.
3. Articles of Incorporation and By-Laws, incorporated by reference to the
Company's Registration Statement filed on Form SB-2, SEC File No.
33-96444
4.1 Certificate of Amendment creating Series A Convertible Preferred Stock
as amended, as filed February 10, 1999. See Exhibit to report on Form
8-K filed on February 17, 1999.
4.2 Certificate of Amendment creating Series B Convertible Preferred Stock
as amended.
21
10.4 Form of Warrant between the Registrant and JW Charles Securities, Inc.,
BMC Bach International Ltd., Gordon Mundy, Louis Centofanti and
Heracles Holdings. See Registration Statement filed on Form S-3, SEC
File No. 333-60451.
10.5 Form of 1995 Stock Option Plan. See Registration Statement filed on
Form SB-2, SEC File No. 33-96444.
10.7 Loan and Security Agreement between FINOVA and the Company. See Exhibit
to Report on Form 10-KSB, dated September 30, 1997.
10.8 Employment Agreement between Stephen J. Fryer and the Company. See
Exhibit to Report on Form 10-KSB, dated September 30, 1997.
10.11.1 Finder's Agreement between the Registrant and JW Charles Securities,
Inc., dated June 2, 1998. See Registration Statement filed on Form S-3,
SEC File No. 333-60451.
10.12 Convertible Preferred Stock and Warrant Purchase Agreement between Pen,
RBB Bank AG, Austost Anstalt Schaan, Balmore Funds SA and AMRO
International, SA dated as of February 12, 1999. See Exhibits to Report
on Form 8-K filed February 17, 1999.
10.13 Amendment in Total and Complete Restatement of the Deferred
Compensation Salary Continuation Plan and Employment Agreement between
Pen and James S. Pendleton, dated as of July 23, 1999.
10.14 Amendment in Total and Complete Restatement of the Deferred
Compensation Salary Continuation Plan and Employment Agreement between
Pen, Wayne R. Wright, and Rent A Profession, dated as of October 1,
1999.
10.15 Change in Pen's Auditors from Grant Thornton LLP to Berg & Associates
as of March 7, 2000, and FINOVA's foreclosure action on Pen's assets to
recover its' loans to the Company. See Exhibits to Report on Form 8-K
filed on March 14, 2000, SEC File No. 1-14072.
10.16 Amended Registration Rights Agreement for registration of Common stock,
Form S-B2 filed February 16, 2000. Registration Statement # 333-79631.
10.17 1999 Consulting Services Agreement and Compensation Plan for outside
consultants (Incorporated by reference to Form S-8, filed September 3,
1999.
10.18 2000 Consulting Services Agreement and compensation plan for outside
consultants. (Incorporated by reference to Form S-8 filed May 17, 2000.
10.19 2001 Consulting and Advisors Service Agreement for outside consultants
(Incorporated by reference to Form S-8 filed on May 19, 2001; Form S-8 filed on
August 14, 2001; Form S-8 filed on February 23, 2001 and Form S-8 filed on
January 25, 2001.
22
10.20 Convertible Note issued to AMRO Int'l S.A. dated August 24, 2000. (1)
10.21 Convertible Note issued to Austost Anstalt Schaan dated August 24,
2000.(1)
10.22 Convertible Note issued to Balmore S.A dated august 24, 2000. (1)
10.23 Convertible Note issued to ALPHA CAPITAL AG dated March 8, 2001. (1)
10.24 Convertible Note issued to AMRO Int'l S.A. dated March 8, 2001. (1)
10.25 Convertible Note issued to Woo Young Kim dated March 8, 2001. (1)
10.26 Convertible Debenture Purchase Agreement dated March 8, 2001. (1)
10.27 Registration Rights Agreement Dated March 8, 2001. (1)
10.28 Convertible Note issued to Filter Int'l Corp. dated May 14, 2001. (1)
10.29 Convertible Note issued to George Furla dated July 9, 2001. (1)
10.30 Convertible Note issued to Howard Schraub dated July 16, 2001. (1)
10.31 Convertible Note Purchase Agreement, Filter Int'l, George Furla, Howard
Schraub. (1)
10.32 Registration Rights Agreement, Filter Int'l, George Furla, Howard Schraub
10.33 Convertible Note issued to Stonestreet LP dated October 4, 2001. (1)
10.34 Warrant Agreement, Stonestreet LP dated October 4, 2001. (1)
10.35 Convertible Note Purchase Agreement, Stonestreet L.P., dated October 4,
2001. (1)
10.36 Registration Rights Agreement, Stonestreet L.P., dated October 4, 2001.(1)
10.37 Convertible Note issued to AMRO Int'l S.A. dated November 19, 2001. (1)
10.38 Convertible Note Purchase Agreement, AMRO Int'l S.A. dated November 19,
2001. (1)
10.39 Registration Rights Agreement, AMRO Int'l S.A. dated November 19,
2001. (1)
10.40 Convertible Note issued to ALPHA Capital AG dated November 19, 2001. (1)
10.41 Convertible Note Purchase Agreement, ALPHA Capital AG dated November 19,
2001. (1)
10.42 Registration Rights Agreement, ALPHA Capital AG dated November 19, 2001
10.43 Convertible Note Purchase Agreement, Stonestreet L.P., dated November 26,
2001. (1)
10.44 Convertible Note Purchase Agreement, Stonestreet Corporation., dated
November 26,2001. (1)
10.45 Warrant Agreement, Stonestreet LP dated November 26, 2001. (1)
10.46 Warrant Agreement, Stonestreet Corporation dated November 26, 2001. (1)
10.47 Convertible Note Purchase Agreement, dated November 26, 2001. (1)
10.48 Registration Rights Agreement, dated November 26, 2001. (1)
10.49 2001 Consulting and Advisors Service Agreement for outside consultants
Incorporated by reference to Form S-8 filed on October 19, 2000, and
Form S-8 filed on December 04, 2001). (1)
10.50 Warrant Agreement, Bristol Investment Fund, Ltd., dated January 12,
2002.(1)
10.51 Warrant Agreement, Bristol Capital, LLC dated January 12, 2002. (1)
10.52 Warrant Agreement, Alexander Dunham Capital Group, Inc., dated January 7,
2003 12, 2002. (1)
10.53 tAA and Pen Interconnect Merger Agreement dated October 23, 2001. (1)
10.54 Secured Convertible Note Purchase Agreement, Bristol Investment
Fund, Ltd.,dated January 12, 2002. (2)
10.55 Registration Rights Agreement, dated January 12, 2002. (2)
10.56 Secured Convertible Note, Bristol Investment Fund, Ltd. January 12,
2002. (2)
(1) Previously filed on Form SB-2 on April 14, 2002, File No. 333-86038 (2)
Previously filed on Form SB-2A on May 17, 2002, File No. 333-86038
23
ITEM 14 - Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized, and reported within the time periods
specified in the SEC's rules and forms, and that such information is
accumulated and communicated to the Company's management, including its
Principal Executive Officer and Principal Financial Officer, to allow timely
decisions regarding required disclosure. Management necessarily applied its
judgment in assessing the costs and benefits of such controls and procedures
which, by their nature, can provide only reasonable assurance regarding
management's control objectives.
Within 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and with the participation of the Company's
management, including the Company's Principal Executive Officer and Principal
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures pursuant to Exchange Act Rule
13a-14. Based upon the foregoing, the Company's Principal Executive Officer
and Principal Financial Officer concluded that the Company's disclosure controls
and procedures are effective in timely alerting them to material information
relating to the Company (including its consolidated subsidiary) required to be
included in the Company's Exchange Act reports. There have been no significant
changes in the Company's internal controls or in other factors which could
significantly affect internal controls subsequent to the date the Company
carried out its evaluation.
24
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: January 13, 2003 THE AMANDA COMPANY, INC.
By: /s/ Brian Bonar
Brian Bonar
Chairman of the Board, Acting
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates indicated:
/s/ David Woo
David Woo Director January 13, 2003
/s/Brian Bonar
Brian Bonar Chairman of the Board January 13, 2003
Acting Chief Executive officer
/s/ Steve Fryer
Steve Fryer Director January 13, 2003
/s/ E.Timothy Morgan
E. Timothy Morgan Director January 13, 2003
25
CEO CERTIFICATION
I, Brian Bonar, certify that:
1. I have reviewed this annual report on Form 10-K of The Amanda Company,
Inc.,
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: January 13, 2003
/s/ Brian Bonar
--------------------------------------------
Brian Bonar
Acting Chief Executive Officer
CFO CERTIFICATION
I, Jim Jungwirth, certify that:
1. I have reviewed this annual report on Form 10-K of The Amanda Company,
Inc.,
2. Based on my knowledge, this Annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: January 13, 2003
/s/ Jim Jungwirth
--------------------------------------------
Jim Jungwirh
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Amanda Company, Inc. (the
"Company") on Form 10-KSB for the fiscal year ending September 30, 2002 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Brian Bonar, Acting Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. ss 1350, as adopted pursuant to ss 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
_____________________________
Brian Bonar
Acting Chief Executive Officer
January 13, 2003
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Amanda Company, Inc. (the "Company")
on Form 10-KSB for the fiscal year ending September 30, 2002 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Jim
Jungwirth, Chief Financial Officer of the Company, certify, pursuant to 18
U.S.C. ss 1350, as adopted pursuant to ss 906 of the Sarbanes-Oxley Act of 2002,
that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
_____________________________
Jim Jungwirth
Chief Financial Officer
January 13, 2003
THE AMANDA COMPANY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2002 AND 2001
THE AMANDA COMPANY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002 AND 2001
C O N T E N T S
Report of Independent Certified Public Accountants 1
Consolidated Balance Sheets 2 - 3
Consolidated Statements of Operations 4
Consolidated Statements of Shareholders' Equity 5
Consolidated Statements of Cash Flows 6 - 7
Notes to Consolidated Financial Statements 8 - 31
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
The Amanda Company, Inc.
We have audited the accompanying consolidated balance sheets of The Amanda
Company, Inc., as of September 30, 2002 and 2001 and the related consolidated
statements of operations, shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Amanda Company,
Inc., as of September 30, 2002 and 2001 and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations.
The Company has a stockholders' deficit of $3,514,646 and $1,627,136 and its
current liabilities exceeded its current assets by $3,255,667 and $1,641,440 as
of September 30, 2002 and 2001, respectively. These factors, among others, as
discussed in Note 2 to the financial statements, raise substantial doubt about
the Company's ability to continue as a going concern. Management's plans in
regards to these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/Pohl, McNabola, Berg & Company LLP
Pohl, McNabola, Berg & Company LLP
San Francisco, CA
January 3, 2003
F-1
The Amanda Company, Inc.
Consolidated Balance Sheets
As of September 30, 2002 and 2001
2002 2001
---------- ----------
ASSETS
Current Asseets
Cash and cash equivalents $ 57,413 $ 27,999
Accounts receivable (net of allowance for doubtful accounts) 84,395 155,824
Other receivables 10,795 -
Inventory 56,469 172,617
Prepaid and other current assets 75,549 -
---------- ----------
Total Current Assets 284,621 356,440
Property and Equipment (net of accumulated depreciation) 82,282 131,925
Noncurrent Assets
Deferred debt insuance costs 286,982 -
Other assets 29,974 35,757
---------- ----------
Total Assets $ 683,859 $ 524,122
========== ==========
(continued)
The accompanying notes are an integral part of these financial statements.
F-2
The Amanda Company, Inc.
Consolidated Balance Sheets (Continued)
As of September 30, 2002 and 2001
2002 2001
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 576,109 $ 521,675
Payable to Pen Interconnect - 461,200
Liabilities from discontinued operations 444,841 -
Accrued liabilities 400,846 393,704
Dividends payable 629,126 -
Deferred revenue 17,001 16,249
Convertible debentures 1,006,425 -
Lease financing payable 36,440 32,052
Notes payable 429,500 573,000
---------- ----------
Total Current Liabilities 3,540,288 1,997,880
Long-Term Liabilities
Convertible debentures 570,000 -
Deferred gain on sale leaseback 32,680 60,691
Lease financing payable 55,537 92,687
---------- ----------
Total Long-Term Liabilities 658,217 153,378
Shareholders' Equity
Convertible preferred stock, $0.01 par value,
5,000,000 shares authorized
Seried A, issued and outstanding, 21 shares in 2002 1 -
Series B, issued and outstanding, 631 shares in 2002 6 -
Common stock, $0.01 par value, 500,000,000 shares authorized;
108,159,899 shares in 2002 and 52,637,360 in 2001 1,081,599 526,374
Additional paid-in capital 2,441,675 594,160
Accumulated deficit (7,037,927) (2,747,670)
---------- ----------
Total Shareholders' Equity (3,514,646) (1,627,136)
---------- ----------
Total Liabilities and Shareholders' Equity $ 683,859 $ 524,122
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
The Amanda Company, Inc.
Consolidated Statements of Operations
For the Years Ended September 30, 2002 and 2001
2002 2001
------------ ------------
Net Sales $ 3,154,289 $ 4,032,546
Cost of Sales 1,676,403 2,394,811
------------ ------------
Gross Profit 1,477,886 1,637,735
Operating Expenses
Depreciation and amortization 27,732 86,472
General and administrative 706,012 327,106
Office rent 136,704 206,302
Salaries 1,284,040 1,443,470
Selling expense 60,599 (49,192)
Advertising and promotion 10,586 19,908
Merger ezpenses 602,014 -
------------ ------------
Incoeme (loss) from operations (1,349,801) (396,331)
------------ ------------
Other Income (Expense)
Interest expense (156,681) (100,285)
Debt issuance costs (118,746) -
Other income 87,290 90,016
Impairment of goodwill (2,811,498) -
Gain from discontinued operations 210,382 -
------------ ------------
Total Other Income (Expense) (2,789,253) (10,269)
------------ ------------
Income (Loss) Before Income Taxes (4,139,054) (406,600)
Provision for income taxes (2,400) (1,600)
------------ ------------
Net Income (Loss) (4,141,454) (408,200)
------------ ------------
Preferred stock dividend (148,803) -
------------ ------------
Net loss attibutable to common stockholders $ (4,290,257) $ (408,200)
============ ============
Basic loss per share $ (0.056) $ (0.008)
============ ============
Diluted loss per share $ (0.056) (0.008)
============ ============
Weighted-average shares outstanding - basic 77,251,367 52,637,360
============ ============
Weighted-average shares outstanding - diluted 77,251,367 52,637,360
============ ============
The accompanying notes are an integral part of these financial statements.
F-4
The Amanda Company, Inc.
Consolidated Statements of Shareholders' Equity
For The Years Ended September 30, 2002 and 2001
Additional Retained
Preferred Stock Common Stock paid-in earnings Total
Shares Amount Shares Amount capital (deficit) Equity
------ ------ ------------- ------------ ------------- ------------ ------------
Balance, September 30, 2000 - $ - 52,367,360 $ 526,374 $ 594,160 $ (2,339,470) $ (1,218,936)
Net loss - - - - - (408,200) (408,200)
------ ------ ------------- ------------ ------------- ------------ ------------
Balance, September 30, 2001 - $ - 52,637,360 $ 526,374 $ 594,160 $ (2,747,670) $ (1,627,136)
====== ====== ============= ============ ============= ============ ============
Acquisition - Common Stock issuance - - 4,987,360 49,874 909,704 - 959,578
Acquisition - Preferred Stock issuance 977 10 - - - - 10
Conversion of Preferred Stock - Series B (255) (3) 16,471,620 164,716 (164,713) - -
Conversion of Preferred Stock - Series A (70) - 4,090,636 40,906 (40,906) - -
Common Stock issued for services - - 235,153 2,352 26,981 - 29,333
Stock granted as compensation - - 539,995 5,400 39,458 - 44,858
Preferred dividend adjustments - - - - - (148,803) (148,803)
Conversion of debt into common stock - - 10,333,334 103,333 74,667 - 178,000
Common stock issued for merger expenses - - 3,451,897 34,519 567,495 - 602,014
Conversion of notes payable - - 15,412,544 154,125 (56,018) - 98,107
Warrants payable - - - - 405,728 - 405,728
Compensation expense on warrants and
options granted - - - - 95,119 - 95,119
Debt issuance cost - - - - (10,000) - (10,000)
Net loss - - - - - (4,141,454) (4,141,454)
------ ------ ------------- ------------ ------------- ------------ ------------
Balance, September 30, 2002 652 $ 7 108,159,899 $ 1,081,599 $ 2,441,675 $ (7,037,927) $ (3,514,646)
====== ====== ============= ============ ============= ============ ============
The accompanying notes are an integral part of these financial statements.
F-5
The Amanda Company, Inc.
Consolidated Statements of Cash Flows
September 30, 2002 and 2001
2002 2001
------------- -------------
Cash flows from operating activities
Net income (loss) $ (4,141,454) $ (408,200)
Adjustments to reconcile net cash provided (used) in
operating activities:
Depreciation and amortization 27,732 86,472
Gain on debt relief (83,500) (50,000)
Gain from settlement of discontinued operation payable (210,382) -
Realized gain on sale of equipment - (12,138)
Warrant/option compensation expense 95,119 -
Imparment of Goodwill 2,811,498 -
Common stock issued for merger expenses 602,014 -
Common stock issued for services 29,336 -
Common stock issued for compensation 44,858 -
Effect on cash of changes in operating assets and liabilities:
Decrease (increase) in accounts receivable, net 71,429 (1,076)
Decrease in other receivables 29,205 -
Decrease (increase) in inventory 116,148 (52,544)
Decrease (increase) in prepaid assets (75,549) (19,715)
Decrease in other assets (5,783) (279)
Increase (decrease) in accounts payable 54,434 (158,486)
Increase (decrease) in unearned gain on sale leaseback - 72,829
Increase (decrease) in deferred revenue 752 (48,716)
Increase in accrued expenses 7,142 27,947
------------- -------------
Net cash provided (used) in operating activities (627,001) (563,906)
------------- -------------
Cash flows from investing activities
Cash received in acquisition 6,839 -
Purchase/write-off of property and equipment (6,100) (85,613)
------------- -------------
Net cash used in investing activities 739 (85,613)
------------- -------------
Cash flows fromm financing activities
Deferred debt issuance costs 96,741 -
Borrowings on equipment lease financing - 129,813
Payments on equipment lease financing (32,762) (14,009)
Borrowing under notes payable 64,000 59,050
Proceeds from advances from Pen Interconnect - 461,200
Preferred dividends adjustments (148,803) -
Payments on notes payble (193,500) -
Proceeds from convertible promissory notes 870,000 -
------------- -------------
Net cash provided (used) by financing activities 655,676 636,054
------------- -------------
Net increase (decrease) in cash and cash equivalents 29,414 (13,465)
Cash and cash equivalents, beginning of year 27,999 41,464
------------- -------------
Cash and cash equivalents, end of year $ 57,413 $ 27,999
============= =============
(continued)
The accompanying notes are an integral part of these financial statements.
F-6
The Amanda Company, Inc.
Consolidated Statements of Cash Flows (continued)
September 30, 2002 and 2001
2002 2001
------------- -------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interst $ 15,520 $ -
============= =============
Income tax - -
============= =============
Supplemental Schedule of Non-cash investing and
financing transactions:
Computer equipment refinanced under lease transactions $ - $ 124,739
============= =============
Conversion of debt into common stock $ 178,000 $ -
============= =============
Conversion of interest on notes payable into common stock $ 4,532 $ -
============= =============
Conversion of notes payable into common stock $ 93,575 $ -
============= =============
Retirement of preferred stock by conversion to common stock $ 205,622 $ -
============= =============
Common stock issued for services $ 29,333 $ -
============= =============
Common stock issued for compensation $ 44,858 $ -
============= =============
Common stock issued for merger expenses $ 602,014 $ -
============= =============
Finders fee non-cash payment $ 10,000 $ -
============= =============
Merger with Pen Interconnect, Inc.
Goodwill $ 2,811,498 $ -
Receivables 461,200 -
Liabilities assumed (1,519,949) -
Convertible debentures (800,000) -
Preferred stock (10) -
Issuance of common stock for acquisiton (959,578) -
------------- -------------
Cash received $ (6,839) $ -
============= =============
The accompanying notes are an integral part of these financial statements.
F-7
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
1. Summary of Significant Accounting Policies
Organization and line of business
The Amanda Company, Inc. (the Company) operates in a single business segment
that includes the design, development, and manufacture of PC enabled telephone
answering system software and related equipment and products. The Company's
products include voice mail, automated attendant, call control, messaging and
voice over Internet. Sales are made primarily to resellers and dealers. The
Company operated as The Automatic Answer, Inc (tAA) prior to October 1, 2001,
which is the effective date of its merger with Pen Interconnect, Inc. The
trading symbol of Amanda is AMNA.
Pen Interconnect, Inc. ("Pen") was incorporated on September 30, 1985, in the
State of Utah. Pen was a shell company that had discontinued its operations and
had no operating revenues during fiscal 2002 and 2001. Through March 3, 2000,
the date of foreclosure of its last operating division, the Company was a total
interconnection solution provider offering custom design and manufacturing of
circuit boards, battery chargers, power supplies and uninterrupted power supply
systems for original equipment manufacturers. Pen did not have any revenue
during the years ended September 30, 2002 and 2001.
Basis of presentation
Effective October 1, 2001, the Company acquired Pen Interconnect, Inc. (Pen)
(trading symbol: PENC) through a reverse merger.
The application of reverse takeover accounting, resulted in the consolidated
financial statements being issued under the name of the legal parent (f/k/a Pen
Interconnect, Inc.), but are a continuation of the financial statements of the
legal subsidiary, (the Automatic Answer), and not of the legal parent. The
control of the assets and business of Pen Interconnect, Inc., is deemed acquired
in consideration for the issuance of capital by tAA. Upon completion of the
merger, Pen Interconnect, Inc., changed its name to The Amanda Company.
Consolidation policy
The accompanying consolidated financial statements include the accounts of the
Company and its majority-owned subsidiary corporations, after elimination of all
material inter-company accounts, transactions and profits. These financial
statements consolidate the accounts of the Amanda Company and Pen subsequent to
the merger date. Pen's operating activity, which is limited to the resolution of
various amounts payable, is included as discontinued operations.
F-8
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
1. Summary of Significant Accounting Policies (continued)
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosures of
contingent assets and liabilities at the date of the financial statements, as
well as the reported amounts of revenues and expenses during the reporting
period. Significant estimates include reserve for bad debts, reserve for
obsolete inventory, and depreciation. Actual results could differ from those
estimates.
Contingencies
Certain conditions may exist as of the date the financial statements are issued,
which may result in a loss to the Company but which will only be resolved when
one or more future events occur or fail to occur. The Company's management and
its legal counsel assess such contingent liabilities, and such assessment
inherently involves an exercise of judgment. In assessing loss contingencies
related to legal proceedings that are pending against the Company or unasserted
claims that may result in such proceedings, the Company's legal counsel
evaluates the perceived merits of any legal proceedings or unasserted claims as
well as the perceived merits of the amount of relief sought or expected to be
sought therein.
If the assessment of a contingency indicates that it is probable that a material
loss has been incurred and the amount of the liability can be estimated, then
the estimated liability would be accrued in the Company's financial statements.
If the assessment indicates that a potentially material loss contingency is not
probable but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered remote are generally not disclosed unless they
involve guarantees, in which case the nature of the guarantee would be
disclosed.
Cash and cash equivalents
For purpose of the statements of cash flows, cash equivalents include amounts
invested in a money market account with a financial institution. The Company
considers all highly liquid investments with an original maturity of three
months or less to be cash equivalents. Cash equivalents are carried at cost,
which approximates market.
Concentration of cash
The Company at times maintains cash balances in excess of the federally insured
limit of $100,000 per institution. There were no uninsured balances as of
September 30, 2002.
F-9
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
1. Summary of Significant Accounting Policies (continued)
Revenue recognition
The Company recognizes revenue when merchandise is shipped to a customer or at
the time services are rendered. Advances received before the merchandise is
delivered are recorded as deferred revenue.
Accounts receivable and the allowance for doubtful accounts
Accounts receivable are typically unsecured. The Company performs ongoing credit
evaluations of its customers' financial condition. It generally requires no
collateral and maintains reserves for potential credit losses on customer
accounts when necessary
The Company establishes an allowance for uncollectible trade accounts receivable
based on historical collection experience and management evaluation of
collectibility of outstanding accounts receivable.
Inventory
Inventory consists principally of network telephone PC hardware and is stated at
the lower of cost (first-in, first-out method) or market. Management reviews the
quality and salability of the inventory on a periodic basis and establishes
reserves based upon the lower of cost or fair market value.
Property and equipment
Property and equipment are recorded at cost less accumulated depreciation and
amortization. Maintenance and minor replacements are charged to expense as
incurred. Gains and losses on disposals are included in the results of
operations.
Depreciation and amortization are provided using the straight-line method over
the estimated useful lives of the respective assets as follows:
Office furniture and fixtures 7 years
Computer and office equipment 5 years
Computer software 3 years
Amortization of leasehold improvements is computed using the straight-line
method over the lesser of the asset life or the life of the respective lease.
F-10
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
1. Summary of Significant Accounting Policies (continued)
Assets held under capital leases
Assets held under capital leases are recorded at the lower of the net present
value of the minimum lease payments or the fair value of the leased asset at the
inception of the lease. Amortization expense is computed using the straight-line
method over the shorter of the estimated useful lives of the assets or the
period of the related lease.
Advertising costs
The Company expenses advertising costs as incurred. Total advertising expense
was $928 and $17,195 for the years ended September 30, 2002 and 2001,
respectively.
Basic and diluted net earnings per share
Basic net earnings (loss) per common share is computed by dividing net earnings
(loss) applicable to common shareholders by the weighted-average number of
common shares outstanding during the period. Diluted net earnings (loss) per
common share is determined using the weighted-average number of common shares
outstanding during the period, adjusted for the dilutive effect of common stock
equivalents, consisting of shares that might be issued upon exercise of common
stock options. In periods where losses are reported, the weighted-average number
of common shares outstanding excludes common stock equivalents, because their
inclusion would be anti-dilutive.
Income taxes
The Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires
the recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial statements
or tax returns. Under this method, deferred income taxes are recognized for the
tax consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each period end based
on enacted tax laws and statutory tax rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized. The provision for income taxes represents the tax
payable for the period and the change during the period in deferred tax assets
and liabilities.
F-11
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
1. Summary of Significant Accounting Policies (continued)
Fair value of financial instruments
The Company measures its financial assets and liabilities in accordance with
generally accepted accounting principles. For certain of the Company's financial
instruments, including cash and cash equivalents and accounts payable and
accrued liabilities, the carrying amounts approximate fair value due to their
short maturities. The amounts shown for notes payable also approximate fair
value because current interest rates offered to the Company for debt of similar
maturities are substantially the same.
Adoption of SFAS-133: Accounting for Derivative Instruments and Hedging
Activities
The Company has adopted Financial Accounting Standards Board Statement No. 133
"Accounting for Derivative Instruments and Hedging Activities", which requires
that all derivative instruments be recorded on the balance sheet at fair value.
The Company is currently not engaged in hedging activities nor does it have any
derivative instruments, thus there is no impact on the current periods financial
statements
Goodwill and other intangible assets
Goodwill represents the purchase price and transaction costs associated with
business acquisitions in excess of the estimated fair value of the net assets of
these businesses.
The carrying value and useful lives of goodwill are based on management's
current assessment of recoverability. Management periodically evaluates whether
certain circumstances may affect the estimated useful lives or the
recoverability of the unamortized balance of goodwill or other intangible assets
using both objective and subjective factors. Objective factors include
management's best estimates of projected future earnings and cash flows and
analysis of recent sales and earnings trends. Subjective factors include
competitive analysis and the Company's strategic focus.
Assets held under capital leases
Assets held under capital leases are recorded at the lower of the net present
value of the minimum lease payments or the fair value of the leased asset at the
inception of the lease. Amortization expense is computed using the straight-line
method over the shorter of the estimated useful lives of the assets or the
period of the related lease.
F-12
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
1. Summary of Significant Accounting Policies (continued)
Comprehensive income (loss)
Comprehensive income consists of net income and other gains and losses affecting
shareholders' equity that, under generally accepted accounting principles are
excluded from net income in accordance with Statement on Financial Accounting
Standards No. 130, "Reporting Comprehensive Income." The Company, however, does
not have any components of comprehensive income (loss) as defined by SFAS No.
130 and therefore, for the years ended September 30, 2002 and 2001,
comprehensive income (loss) is equivalent to the Company's reported net income
(loss).
Deferred revenue
The Company recognizes revenues as earned. Amounts billed in advance of the
period in which service is rendered are recorded as a liability under "Deferred
revenue."
Stock split
In October 2002, the board of directors approved a one-for-ten reverse stock
split of the Corporation's common stock, which was effective in 2002 to
shareholders of record on February 8, 2002. Shareholders' equity, common stock,
and stock option activity for all periods presented have been restated to give
retroactive recognition to the stock split. In addition, all references in the
financial statements and notes to financial statements, to weighted average
number of shares, per share amounts, and market prices of the Company's common
stock have been restated to give retroactive recognition to the stock split.
Stock option plan
Financial Accounting Standards Board Statement No. 123 (Accounting for
Stock-Based Compensation) encourages, but does not require, companies to record
compensation cost for stock-based employee compensation plans based on the fair
value of options granted. The Company has elected to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25 (Accounting for Stock Issued to
Employees) and related interpretations and to provide additional disclosures
with respect to the pro forma effects of adoption had the Company recorded
compensation expense as provided in FAS-123 (see Note 15).
In accordance with APB-25, compensation cost for stock options is recognized in
income based on the excess, if any, of the quoted market price of the stock at
the grant date of the award or other measurement date over the amount an
employee must pay to acquire the stock. Generally, the exercise price for stock
options granted to employees equals or exceeds the fair market value of the
Company's common stock at the date of grant, thereby resulting in no recognition
of compensation expense by the Company.
F-13
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
1. Summary of Significant Accounting Policies (continued)
Stock option plan (continued)
In March 2000, the FASB released Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation." This Interpretation addresses
certain practice issues related to APB Opinion No. 25 in regards to options or
warrants granted to employees and other third-parties. The Company's policies
comply with the guidance provided by FIN No.44.
Long-lived assets
The Company accounts for the impairment and disposition of long-lived assets in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of". In accordance with SFAS No.
121, long-lived assets to be held are reviewed for events or changes in
circumstances, which indicate that their carrying value may not be recoverable.
During the years ended September 30, 2002 and 2001, no impairment has been
recorded.
Discontinued operations
Pen's current operating activities consist solely of the resolution of amounts
remaining payable to the prior Pen creditors that did not participate in a
voluntary conversion of debt for common stock program. These payables are
included as liabilities from discontinued operations.
Segment reporting
The FASB issued SFAS 131 on "Disclosures about Segments of an Enterprise and
Related Information" effective in 1998. The Company evaluated SFAS 131 and
determined that it operates in only one segment.
Recent accounting pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS 141"), "Business Combinations,"
which supercedes Accounting Principles Board ("APB") Opinion No. 16, "Business
Combinations." SFAS 141 requires the purchase method of accounting for business
combinations initiated after June 30, 2001, and eliminates the
pooling-of-interests method. In addition, SFAS 141 establishes specific criteria
for the recognition of intangible assets separately from goodwill and requires
unallocated negative goodwill to be written off immediately as an extraordinary
gain. The provisions of SFAS 141 are required to be adopted July 1, 2001. The
adoption of SFAS 141 will not change the method of accounting used in previous
business combinations including those the Company accounted for under the
pooling-of-interests method. The adoption of this statement did not have any
impact on the Company's financial condition or results from operations.
F-14
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
1. Summary of Significant Accounting Policies (continued)
Recent accounting pronouncements (continued)
In July 2001, the FASB also issued Statement of Financial Accounting Standards
No. 142 ("SFAS 142"), "Goodwill and Other Intangible Assets," which is effective
for fiscal years beginning after December 15, 2001. Certain provisions shall
also be applied to acquisitions initiated subsequent to June 30, 2001. SFAS 142
supercedes APB Opinion No. 17, "Intangible Assets," and requires, among other
things, the discontinuance of amortization related to goodwill and
indefinite-lived intangible assets. These assets will then be subject to an
impairment test at least annually. In addition, the standard includes provisions
upon adoption for the reclassification of certain existing recognized
intangibles as goodwill, reassessment of the useful lives of existing recognized
intangibles and reclassification of certain intangibles out of previously
reported goodwill. The adoption of this statement did not have any impact on the
Company's financial condition or results from operations.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." SFAS No. 143 requires liability recognition for obligations
associated with the retirement of tangible long-lived asset and the associated
asset retirement costs. The Statement is effective for financial statements
issued for fiscal years beginning after June 15, 2002 with earlier application
encouraged. The implementation of SFAS No. 143 will not have a material affect
on the Company's results of operations or financial position.
In October 2001, the Financial Accounting Standards Bureau issued SFAS No. 144,
"Accounting for Impairment or Disposal of Long-Lived Assets." SFAS No. 144
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets. This statement also extends the reporting requirements to
report separately, as discontinued operations, components of an entity that have
either been disposed of or are classified as held-for-sale. The Company adopted
the provisions of SFAS No. 144 effective July 1, 2002. The adoption of this
statement did not have any impact on the Company's financial condition or
results from operations.
In April 2002, the FASB issued Statement of Financial Accounting Standards No.
145 ("SFAS 145"), "Rescission of FASB Statements Nos. 4, 44 and 64, Amendment of
FASB Statement No. 13, and Technical Corrections." SFAS 145 eliminates the
requirement that gains and losses from the extinguishment of debt be aggregated
and, if material, classified as an extraordinary item, net of the related income
tax effect. SFAS 145 was adopted by the Company in the fourth quarter of fiscal
2002. The adoption of SFAS 145 is not expected to have a material impact on the
Company's results of operations or financial position.
Reclassifications
Certain reclassifications have been made to the 2001 financial statements to
conform to the 2002 presentation.
F-15
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
2. Going Concern
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. The Company has an accumulated deficit of $
7,037,924 at September 30, 2002. In addition, the Company had a working capital
deficit of approximately $ 3,255,667 at September 30, 2002. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue in existence. The Company's continuation as a going concern
is dependent upon its ability to obtain the additional financing necessary to
complete development of new products and achieve the level of sales that will
enable it to sustain its operations.
Additionally, the Company is seeking to enter into a strategic acquisition or
merger with companies in allied businesses and anticipates obtaining more
financing from equity sources to fund its operations. No assurance can be given
that the Company will be successful in these efforts.
3. Accounts Receivable
The Company's accounts receivable consists of balances due from dealers in the
telecommunications industry. The terms are normally net 10 days. Accounts
receivable amounted to $137,870 at September 30, 2002 and $209,977 at September
30, 2001
The Company recorded an allowance for bad debts of $53,475 at September 30, 2002
and $54,153 at September 30, 2001.
4. Inventory
Inventory, which principally consists of computer hardware, amounted to $72,769
and $204,617 at September 30, 2002 and 2001, respectively. The Company's reserve
for obsolete inventory amounted to $16,300 and $32,000 at September 30, 2002 and
2001, respectively.
F-16
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
5. Property and Equipment
Property and equipment at September 30, 2002 and 2001 consisted of the
following:
2002 2001
----------- -----------
Office furniture and fixtures $ 264,166 $ 264,166
Computer and office equipment 306,201 306,201
Computer software 40,036 40,036
Leasehold improvements 6,100 2,245
----------- -----------
Total property and equipment 616,503 612,648
Less accumulated depreciation and amortization (534,221) (480,723)
----------- -----------
Total $ 82,282 $ 131,925
=========== ===========
Depreciation expense for the year ended September 30, 2002 and 2001 was $55,743
and $86,472, respectively. Computer and office equipment includes $97,592 of
leased computer equipment under lease financing arrangements at September 30,
2002.
6. Accrued Expenses
Accrued expenses at September 30, 2002 and 2001 consisted of the following:
2002 2001
----------- -----------
Accrued payroll and payroll taxes $ 73,470 $ 80,904
Accrued consulting fees 1,237 96,000
Accrued benefits 40,539 43,072
Accrued accounting fees 60,386 45,000
Income taxes 4,000 1,600
Accrued interest 221,214 75,478
Other accrued expenses - 51,650
----------- -----------
Total $ 400,846 $ 393,704
=========== ===========
F-17
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
7. Notes Payable - Shareholders
The company has entered into multiple loan agreements with its shareholders and
other related parties. Notes payable to shareholders and related parties at
September 30, 2002 and 2001, consist of the following:
2001 2002
--------- ---------
Note payable to a shareholder. Interest is 12% per
annum, payable monthly. The note is due on demand. $ 300,000 $ 300,000
Note payable to a shareholder. Interest is 12% per
annum. Interest and principal payments are due at
maturity, February 10, 2001. The note is secured
by the assets of the company and is due on demand. 50,000 -
Note payable to a shareholder. Interest is 12%.
Interest is payable monthly. This is a short-term
note with no fixed maturity date. 75,000 65,000
Note payable to a shareholder. Interest is 10% per
annum. Interest is payable monthly. The note is due
on demand and is still outstanding at September 30,
2002. 25,000 25,000
Note payable to a shareholder. Interest is 10% per
annum. Interest is payable monthly. The note is due
on demand and is still outstanding at September 30,
2002. 4,500 4,500
Note payable to a shareholder. Interest is 12% per
annum. Interest is payable monthly. The note is
due on demand and is still outstanding at
September 30, 2002. 35,000 35,000
Note payable to a Corporation. Interest is 7% per
annum. Principal and interest are due at maturity,
August 11, 2000. The note is secured by the assets
of the company. On May 16, 2001, the Corporation
filed a lawsuit against the company for repayment.
In February 2002, both parties agreed to a settlement. 33,500 -
--------- ---------
Total notes payable $ 523,000 $ 429,500
========= =========
In conjunction with the notes, tAA had issued warrants to the noteholders to
purchase shares of tAA common stock at exercise prices that range from $0.01 to
$3.00. These warrants were cancelled during 2002 as part of the merger.
Accrued interest on these notes amounted to $73,023 and $75,478 at September 30,
2002 and 2001, respectively.
F-18
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
8. Leases
The company entered into a financing arrangement with a financing company at
December 31, 2000. The company surrendered old equipment and received new
equipment as part of the transaction. The company recorded a lease financing
liability in the amount of $97,592 as a result of the financing arrangement.
During February 2001, the Company entered into another leasing arrangement and
recorded additional lease liabilities in the amount of $47,703.
Minimum annual rental payments at September 30,
2003 $ 47,670
2004 31,147
2005 27,821
2006 8,181
---------
Total minimum lease payments $ 114,819
Less amount representing interest 22,842
---------
Total lease financing payable 91,978
Less current portion (36,440)
---------
Lease financing payable - long term $ 55,537
=========
9. Note Payable - Lucent
On October 10, 1998, the Company entered into a volume purchase agreement with
Lucent Computer Telephony Products (CTP). CTP agreed to loan the company
$150,000 bearing interest at a rate of 10% per annum. One third of the debt plus
any accrued interest will be forgiven by CTP on October 1, 1999, November 1,
2000 and December 1, 2001, provided that CTP is the "primary supplier" of
computer telephony products to the Company for the three years following the
date of the agreement.
2002 2001
---------- ------------
Long term $ - $ -
Current - 50,000
---------- ------------
Total $ - $ 50,000
========== ============
The remaining balance was written off during the fiscal year ended September 30,
2002.
F-19
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
10. Income Taxes
Significant components of the provision for taxes based on income for the year
ended September 30 are as follows:
2002 2001
-------- --------
Current
Federal $ - $ -
State 2,400 1,600
-------- --------
$ 2,400 $ 1,600
======== ========
Deferred
Federal - -
State - -
-------- --------
Total $ 2,400 $ 1,600
======== ========
Significant components of the Company's deferred tax assets and liabilities for
income taxes consist of the following:
2002 2001
----------- ----------
Deferred tax asset
Net operating loss carryforwards $ 630,718 $ 626,438
Depreciation 11,149 39,418
Bad debts 10,695 23,199
Benefits and accruals 91,949 51,042
Goodwill 654,540 -
Debt Issuance Costs 23,749 -
----------- ----------
Total deferred tax asset $ 1,422,800 $ 740,097
----------- ----------
Deferred tax liability
State income taxes benefit - (51,924)
----------- ----------
Less valuation allowance $(1,422,800) $ (688,173)
----------- ----------
Net deferred tax asset $ - $ -
=========== ==========
F-20
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
10. Income Taxes (continued)
At September 30, 2002 and 2001, the Company has available approximately
$3,535,263 and $1,462,000 in net operating loss carryforwards available to
offset future federal and state income taxes, respectively, which expire
through 2020.
The provision for income taxes consists of state franchise taxes. The expected
combined federal and state income tax benefit of approximately 45% is reduced
predominately by the valuation allowance applied to such benefits. The use of
loss carryforwards from Pen of approximately $387,000 is limited because of the
change of greater than 50% in the ownership of its stock resulting from the
merger.
A reconciliation of the provision for income tax expense with the expected
income tax computed by applying the federal statutory income tax rate to income
before provision for (benefit from) income taxes for the year ended September
30, 2002, is as follows:
2002 2001
--------- --------
Income tax provision (benefit) computed
at federal statutory rate (35.00%) (35.00%)
State (8.84%) (8.84%)
Goodwill 22.00% -
Other 5.00% -
Valuation allowance 16.89% 39.92%
--------- --------
Effective tax rate 0.05% 3.92%
========= ========
11. Discontinued Operations
With the sale of its Cable and MOTO SAT operations during 1999 and the
sale of Powerstream operation and the foreclosure of its InCirt division in
2000, all of the operating divisions of Pen were closed.
For the years ended September 30, 2001 and 2002, there were no operating assets
or revenues. Activity for these discontinued operations was limited to the
resolution of liabilities. Amounts payable from discontinued operations were
$444,841 and $655,222, respectively, for the years ended September 30, 2002 and
2001, respectively. During 2002 the Company wrote off $210,382 of these
balances.
F-21
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
12. Commitments and Contingencies
Office leases
The Company is committed under operating lease agreements for its office
facility in California and Connecticut. In July 2001, the Company relocated and
entered into a new lease agreement with Kilroy Realty Corporation for a new
office space at 13765 Alton Parkway, Irvine, California. The lease is for a
period of three years beginning July 15, 2001 and expiring June 15, 2004. This
lease requires monthly rental payments of approximately $4,600. Future minimum
lease payments required under this non- cancelable operating lease are as
follows:
Years ending September 30, Amount
---------
2003 $ 56,556
2004 43,756
---------
$ 100,312
=========
In November 2001, the Company renewed the Connecticut lease for a period of
three years beginning on February 1, 2002 and expiring on January 31, 2005 with
a monthly base rent of approximately $4,500. Future minimum lease payments
required under this non- cancelable operating lease are as follows:
Years ending September 30, Amount
---------
2003 $ 53,508
2004 54,600
2005 18,382
---------
$ 126,490
=========
Rent expense for the year ended September 30, 2002 and 2001 amounted to
$136,704 and $ 206,302, respectively.
F-22
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
12. Commitments and Contingencies (continued)
Litigation
From time to time, the Company is engaged in various lawsuits or disputes as
plaintiff or defendant arising in the normal course of business.
Following are the matters pending as of September 31, 2002:
1) On October 28, 1999 Color Savvy Systems, Ltd. filed suit to recover $165,750
in past due uncontested vendor obligations. On February 16, 2000, Color Savvy
obtained a judgment against the Company for $165,783.
2) On November 15, 2000 Alan L. Weaver, former CEO of Pen Interconnect, Inc.,
obtained a judgment against the Company in the amount of $118,500 plus interest
for breach of a settlement agreement relative to Mr. Weaver's employment
agreement with the Company. The Company is currently negotiating a payment plan
with the former CEO.
3) Wayne Wright, the prior CFO of the Company, has a claim regarding the value
of certain stock given to him as part a settlement of his employment agreement.
The resolution of amounts due under this potential claim is not currently
determinable. The parties are in discussion regarding a possible settlement of
this claim
13. Convertible Debentures and Promissory Notes
During 2001, the Company issued $800,000 in new one-year convertible debentures
with interest rates ranging from 7% to 8%, payable quarterly. These debentures
are convertible in the Company's common stock at the lower of $.04 or 70% of the
average of the three lowest closing prices during the 30 days prior to the
conversion. All these debentures are redeemable in cash due one year from the
date of issuance.
During 2002, the Company issued an additional $870,000 in additional convertible
notes with 8% interest rates. $570,000 of these notes are due during the year
ended September 20, 2005, and are convertible into the Company's common stock at
the lower of $.02 or 70% of the average of the three lowest closing prices
during the 30 days prior to the conversion. One note for $300,000 is due in 2003
and is convertible into the Company's common stock at the lower of $.01 or 70%
of the average of the three lowest closing prices during the 30 days prior to
the conversion.
In conjunction with the issuance of the notes, the Company issued 1,600,053
five-year warrants convertible into the Company's common stock at $.02 and
857,144 seven-year warrants convertible into the Company's common stock at the
lower of $.01 or 70% of the average of the three lowest closing prices during
the 30 days prior to the conversion.
F-23
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
14. Stockholders' Equity Preferred stock dividends in arrears
Payments of annual dividends for 2002 and 2001 were deferred by the Company's
board of directors on the outstanding preferred stocks because of losses
sustained by the Company. As of September 30, 2002, preferred dividends in
arrears amounted to $629,126 on the Preferred Stock Series A and B.
Conversion of Pen's convertible preferred stock - Series A
During 2002, Pen redeemed 70 shares of Preferred Stock Series A for 4,090,636
shares of common stock..
Conversion of Pen's convertible preferred stock - Series B
During 2002, Pen redeemed 255 shares of Preferred Stock Series B stock for
16,471,620 shares of common stock.
Conversion of tAA preferred stock
The merger of tAA and Pen resulted in the conversion of all outstanding shares
of tAA preferred stock into Pen's common stock.
Preferred stock
The Company issued two series of Preferred Stock. Series A was issued in
February 1999 consisting of 1,800 shares, par value $0.01 per share, for $1,000
per share. Series B was issued in April 1999 at the same price but only 1,000
shares were issued. As mentioned in Note C, part of the funds raised from the
issuance of this stock were used to repay the bridge loans made earlier in the
fiscal year. After repayment of the bridge loans and paying $238,500 in fees and
expenses, the net cash raised by the Company for operations was $1,665,500. Both
series of Preferred Stock carry a 16 percent dividend rate, which is paid
quarterly.
Both issuances of Preferred Stock are convertible into shares of the
Company's Common Stock. Each share of Series A Preferred Stock is convertible
into an amount of shares of Pen Common Stock equal to $1,000 divided by the
average of the two lowest closing bid prices for Pen Common Stock during the
period of 22 consecutive trading days ending with the last trading day before
the date of conversion, after discounting that market price by 15 percent (the
"Conversion Price"). During the first six months, the Board of Directors
approved a reduction of the maximum Conversion Price for the Series A Preferred
Stock and Series B Preferred Stock to $.53 from $1.17 and $.79 per share
respectively.
F-24
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
15. Stock Options and Warrants
Effective with the merger between tAA and Pen, the tAA 1996 Stock Option
Plan was terminated, and all options, which were granted and outstanding, were
cancelled. Additionally, tAA had warrants outstanding, which were all cancelled.
Pen had an existing Stock Option Plan (the Plan), which is in existence
subsequent to the merger date. The Plan provides for the granting of both
Incentive Stock Options (ISOs) and Non-qualified Stock Options (NSOs) to
purchase shares of common stock. ISOs are granted at not less than market value
on the date of grant, whereas NSOs may be granted at not less than 85 percent of
the market value on the date of the grant. Options may be granted under the Plan
to all officers, directors and employees of the Company. In addition, NSOs may
be granted to other parties who perform services for the Company. The Board of
Directors has granted management the authority to issue non-statutory stock
options and/or warrants to employees and consultants of the Company.
As of September 30, 2002 and 2001, the Company granted to its employees
and other eligible participants options and warrants exercisable for the
Company's common stock and preferred stock. Options and warrants to purchase
shares of its common stock are usually granted at the prices equal to the
current fair value of the Company's common stock at the date of grant.
Under the Plan, no option may be exercised after the expiration date of
ten years from the date of grant. As of September 30, 2002, there are two types
of convertible securities (NSOs and Warrants) outstanding.
NSOs may be granted to any eligible participant as determined by the management
of the Company.
Stock options and warrants issued as of September 30, 2002 and 2001 are
summarized as follows:
2002 2001
---------------------- --------------------
Average Average
Exercise Exercise
Shares Price Shares Price
--------- -------- ---------- --------
Outstanding at beginning of year 1,519,265 $ 3.40 1,103,665 $ 23.40
Granted 2,457,197 0.17 2,175,425 0.50
Exercised - - (1,644,825) 0.40
Forfeited/Cancelled (181,445) 2.05 (115,000) 0.60
--------- -------- ---------- --------
Outstanding at end of year 3,795,017 $ 0.34 1,519,265 $ 3.40
========= ======== ========= ========
Exercisable at end of year 3,795,017 $ 0.04 1,518,765 $ 10.32
========= ======== ========= ========
The non-statutory stock options and warrants are for periods of two to
five years.
F-25
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
15. Stock Options and Warrants (continued)
Under APB-25, the cost of compensation is measured by the excess of the fair
market price of the stock over the option exercise price on the measurement
date. This is referred to as the intrinsic value method. Accordingly, the
Company recorded compensation expense of $ 95,119 for options and warrants
granted for the year ended September 30, 2002.
The following table summarizes information about options and warrants
outstanding at September 30, 2002:
Warrants and Options Outstanding Warrants and Options Exercisable
------------------------------------------- --------------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Exercise Outstanding as of Contractual Exercise Exercisable as of Exercise
Prices September 30, 2002 Life Price September 30, 2002 Price
----------------- ------------------ ----------- -------- ------------------ -----------
$ 0.10 - 0.60 3,412,917 1.16 $ 0.35 3,412,917 $ 0.35
$ 1.00 51,000 1.07 $ 1.00 51,000 $ 1.00
$ 3.00 - 5.00 29,000 1.59 $ 3.10 29,000 $ 3.10
$ 5.10 - 10.00 16,600 4.17 $ 7.24 16,600 $ 7.24
$ 20.00 500 4.26 $ 20.00 500 $ 20.00
$ 20.01 - 65.00 285,000 0.09 $ 65.00 285,000 $ 65.00
------------------ ----------- -------- ------------------ -----------
3,795,017 3.487 $ 0.34 3,795,017 $ 5.10
================== =========== ======== ================== ===========
F-26
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
15. Stock Options and Warrants (continued)
The following table summarizes information with respect to options outstanding
and exercisable at September 30, 2001:
Warrants and Options Outstanding Warrants and Options Exercisable
------------------------------------------- --------------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Range of Exercise Outstanding as of Contractual Exercise Exercisable as of Exercise
Prices September 30, 2001 Life Price September 30, 2001 Price
----------------- ------------------ ----------- -------- ------------------ -----------
$ 0.10 - 0.60 1,104,970 0.65 $ 0.80 1,104,970 $ 0.80
$ 0.70 - 1.00 51,000 4.27 $ 1.00 51,000 $ 1.00
$ 1.10 - 5.00 31,500 3.69 $ 3.10 31,000 $ 3.10
$ 5.10 - 10.00 32,695 4.96 $ 7.30 32,695 $ 7.30
$ 10.01 - 20.00 14,000 1.13 $ 17.20 14,000 $ 17.20
$ 20.01 - 65.00 285,100 0.09 $ 64.90 285,100 $ 64.90
------------------ ----------- -------- ------------------ -----------
1,519,265 0.827 $ 3.40 1,518,765 $ 13.18
================== =========== ======== ================== ===========
The exercises period for the options ranges from immediate to four years from
the date of the grant and have various vesting requirements.
The Company has adopted only the disclosure provisions of SFAS No. 123. It
applies APB Opinion No. 25 and related interpretations in accounting for its
stock options and warrants granted to employees or to members of the Company's
Board of Directors. Pursuant to FASB Interpretation No. 44, the Company applies
provisions of SFAS No. 123 for options and warrants granted to third parties.
Accordingly, in 2002, compensation cost has been recognized for its stock
options and warrants granted to outside third parties subsequent to June 30,
2000. This information is required to be determined as if the Company had
accounted for its employee stock options/warrants granted subsequent to December
31, 1994, under the fair value method of that statement.
F-27
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
15. Stock Options and Warrants (continued)
If the Company had elected to recognize compensation expense based upon the
fair value at the grant date for awards under this plan consistent with the
methodology prescribed by SFAS No. 123, the Company's net loss and loss per
share would be reduced to the pro forma amounts indicated below for the years
ended September 30:
2002 2001
----------- ------------
Net Loss:
As reported $(4,141,454) $ (408,200)
Pro forma $(4,228,443) $ (423,166)
Basic and diluted loss per common share:
As reported:
Basic $ (0.05) $ (0.01)
Diluted $ (0.05) $ (0.01)
Pro forma:
Basic $ (0.05) $ (0.01)
Diluted $ (0.05) $ (0.01)
Options/warrants are granted at prices equal to the current fair value of the
Company's common stock at the date of grant. All options and warrants granted
during fiscal year 2002 and 2001 vest immediately.
The fair value of these options was estimated at the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions: 2002: dividend yield of 0%; expected volatility of 300%; risk-free
interest rate of 5.3%, and expected life of 2 to 5 years; 2001: dividend yield
of 0%; expected volatility of 300%; risk-free interest rate of 5.8%, and
expected life equal to the actual life for the period. The weighted-average fair
value of options and warrants granted were $0.02 and $0.06 for 2001, and $0.006
and $0.01 for 2002.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.
F-28
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
16. Earnings Per Share
The number of weighted common shares outstanding used in the loss per share
calculation is 77,251,367 in 2002 and 52,637,360 in 2001.
2002 2001
------------ -----------
Net loss $ (4,141,454) $ (408,200)
Dividends on preferred stock (148,803) -
------------ -----------
Loss applicable to common stock $ (4,290,254) $ (408,200)
============ ===========
There were no dilutive securities in 2002 and 2001.
17. Employee Benefit Plan
Effective January 1, 1996, the Company adopted a defined contribution plan (the
Plan) that meets the requirements of Section 401(k) of the Internal Revenue
Code. To become eligible to join the plan, employees must have attained the age
of 21 and completed 90 days of service with the Company. Participants may
contribute up to 15% of their compensation, not to exceed $10,500. The employer
matching percentage varies from 11% to 25% of the amount contributed by the
employee during a calendar year. The company terminated employer-matching
contribution in April 30, 2001.
18. Acquisition of The Automatic Answer (tAA)
Effective October 1, 2001, Pen completed a merger with The Automatic Answer,
Inc., a privately held manufacturer of PC-enabled telephone answering system
software. Under the merger agreement, Pen Interconnect, Inc., issued 526,373,600
(52,637,360 post reverse split) shares of its common stock to acquire a 100%
interest in tAA. The issuance of these common shares resulted in the
shareholders of tAA holding a 91.35% of the outstanding common shares and the
common shareholders of Pen Interconnect holding an 8.65% ownership interest.
The acquisition was accounted for as a purchase using reverse takeover
accounting; accordingly, Pen Interconnect, Inc.'s results of operations are
included in the consolidated financial statements since the date of merger, and
for accounting purposes, tAA is considered the continuing entity. The merger was
completed through the issuance of common stock.
F-29
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
18. Acquisition of The Automatic Answer (tAA)
The following table presents the allocation of the acquisition cost, including
professional fees and other related acquisition costs, to the assets acquired
and liabilities assumed:
Cash and cash equivalents $ 6,839
Note receivable - tAA 461,200
Goodwill 2,811,498
-------------
Total assets $ 3,279,537
-------------
Amounts payable $ (176,017)
Other current liabilities (648,710)
Advances payable, net (40,000)
Convertible debentures (800,000)
Liabilities from discontinued operations (655,222)
Preferred stock series A and B (10)
-------------
Total liabilities and preferred stock $ (2,319,959)
-------------
Total acquisition cost $ 959,578
=============
The allocation of the purchase price is based on market value of the stock on
the effective date of the merger. Cost in excess of net assets of businesses
acquired (goodwill) represents the unamortized excess of the cost of acquiring a
business over the fair values of the net assets received at the date of
acquisition.
Management reviewed the carrying value of acquired intangible asset to determine
whether impairment may exist. The Company considers relevant cash flow and
profitability information, including estimated future operating results, trends
and other available information, in assessing whether the carrying value of
intangible assets can be recovered. If the Company determines that the carrying
value of intangible assets will not be recovered from the undiscounted future
cash flows of the acquired business, the Company considers the carrying value of
such intangible assets as impaired and reduces them by a charge to operations in
the amount of the impairment. An impairment charge is measured as any deficiency
in the amount of estimated undiscounted future cash flows of the acquired
business available to recover the carrying value related to the intangible
assets. The Company recorded a goodwill impairment charge of $2,811,498 as
result of the merger.
F-30
The Amanda Company, Inc.
Notes to Consolidated Financial Statements
September 30, 2002 and 2001
18. Acquisition of The Automatic Answer (tAA) (continued)
The following pro forma consolidated results of operations have been prepared as
if the merger had occurred at October 1, 2000:
2001
--------------
Sales $ 4,032,546
Net loss $ (1,241,784)
Net loss per share - basic $ (0.02)
Net loss per share - diluted $ (0.02)
The pro forma information is presented for informational purposes only and is
not necessarily indicative of the results of operations that actually would have
been achieved had the acquisitions been consummated as of that time, nor is it
intended to be a projection of future results.
19. Related Party Transactions
Stephen J. Fryer, former Chairman, CEO, President and Chief Accounting Officer,
received options and warrants for 470,000 common shares in 2001.
Also during 2001, Brian Bonar and Milton Haber, Directors of Pen, received
50,000 shares of common stock for their continued service as Board Members.
Additionally, Mr. Bonar received options for 50,000 shares of the Company's
common stock.
Brian Bonar has been a Director with Pen since January 2000 and is also Chairman
of the Board at Itec. As of the foreclosure date, Itec owed InCirT/Pen $850,000
for services performed by InCirT. During the year ended September 30, 2001, the
Company received payments of $93,000 from Itec.
During 2002, Brian Bonar, Steve Fryer and Milton Haber received 65,000, 109,250
and 15,322 shares, respectively, as compensation for services. The aggregate
market value of the shares issued as compensation for services rendered was
$33,175.
20. Subsequent Event
In October 2002, the Company issued 2 million shares of restricted common stock
and a warrant convertible into 5 million shares of common stock for consulting
services provided to the Company.
F-31