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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2000
Commission file number: 0-11419
ARMITEC, INC.
(Exact Name of Registrant as specified in its Charter)
DELAWARE 22-2435595
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
2965 B-2 Cobb Parkway, Atlanta, GA 30339
(Address of principal executive offices of Incorporation or organization
and zip code)
Issuer's telephone number: (770) 980-9806
(Registrants telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act: None.
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $0.00167 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the last 90 days.
YES [ ] NO [X]
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At December 31, 2000, 18,808,632 shares of the Registrant's Common
Stock were issued outstanding and the estimated aggregate market value of the
Registrant's outstanding common stock held by non-affiliates of the Registrant
was approximately $ 48,678.
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the 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. [ ]
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PART I
I. DESCRIPTION OF BUSINESS.
A. Business Development.
Armitec, Inc. ("Armitec," or "Registrant"), a Delaware
corporation, was incorporated on January 20, 1983 to provide
comprehensive administrative, marketing and consulting services to
physicians, dentists and professional corporations operating full
service dental centers and emergency/industrial medical centers.
Armitec found this activity to be unprofitable and it exited the
business service activity in October 1987 and became inactive, except
for the management of a limited portfolio of securities.
As a result of the disposition of the net assets of the
Registrant in August 2000, the Registrant became a development stage
company as of September 1, 2000. On December 29, 2000, the Registrant
issued 13,940,785 shares of its $0.00167 par value common stock in
exchange for all of the common stock of Armitec.com, Inc.
("Armitec.com") as described herein
B. Business of Issuer.
During the three years prior to fiscal year 2000, the
Registrant was inactive, except for the management of a limited
portfolio of securities. On December 29, 2000, the Registrant completed
its share exchange with Armitec.com, a privately-held Georgia
corporation, and Armitec.com became a wholly owned subsidiary of
Armitec. Armitec.com is a development stage company, and its business
plan consists of the manufacture and distribution of high quality
uniforms and accessories using the Internet and direct mail to reach
its consumer customer base and employing sales representatives to sell
to retailers and catalog houses.
C. Employees.
During the three previous years, the Registrant had no
full-time employees other than executive officers. At December 31,
2000, the executive officers of the Registrant were Bruce R. Davis,
President and Chief Executive Officer and Sandra Davis, Secretary.
II. PROPERTIES.
None.
III. LEGAL PROCEEDINGS.
The Company is not engaged in any litigation, and the officers and
directors presently know of no threatened or pending litigation in which it is
contemplated that the Company will be made a party.
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IV. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On August 24, 2000, the written consent of the Shareholders holding a
majority of the common stock of the Registrant was obtained to approve an
increase in the authorized capital stock of the corporation to 50,000,000
shares, and to approve the terms of the Share Exchange with Armitec.com.
On August 29, 2000, the written consent of the Shareholders holding a
majority of the common stock of the Registrant was obtained to approve a name
change of the Registrant from "Family Health Systems, Inc." to "Armitec, Inc."
On or about December 8, 2000, the Registrant mailed a 14C Information
Statement to its security holders concerning the foregoing. Additional
information can be obtained by reference to the Information Statement, which was
filed with the Securities and Exchange Commission.
No other matters were submitted to our security holders for a vote
during the fiscal year ending December 31, 2000.
PART II
V. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
A. Market information.
The Registrant's common stock was listed on the NASDAQ
National Market System, under the symbol FHSI until November 26, 1986,
at which time such listing was suspended because Armitec's assets and
net worth fell below the minimum required levels. Armitec was
reinstated on NASDAQ on April 2, 1987, but was again suspended on
February 12, 1988 when its assets and net worth fell below the NASDAQ
minimum requirements. There has not been any trading of Armitec common
stock on any listed exchange during calendar years 1995, 1996, 1997,
1998, 1999 and 2000. The Registrant is currently in the process of
having its stock relisted on the OTC Bulletin Board.
B. Holders.
As of December 31, 2000, the approximate number of holders of
record of the Registrant's common stock was 550. This number may not
include individuals whose shares are held in "street names."
C. Dividends.
Cash dividends have not been paid by the Registrant since it
was formed and the Registrant does not plan to issue any dividends.
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D. Recent Sales of Unregistered Securities.
In January, 2000, the Registrant issued an aggregate of 18,000
shares of its common stock in settlement of a prior account payable.
These shares were sold pursuant to Section 4(2) of the Securities Act
and have been marked "restricted."
In February, 2000, the Registrant issued an aggregate of 2,000
shares of its common stock to an individual for services provided to
the Registrant. The services were valued at $20.00 or $0.01 per share.
These shares were sold pursuant to Section 4(2) of the Securities Act
and have been marked "restricted."
On June 1, 2000, the Registrant issued an aggregate of
1,000,000 shares of its common stock to two individuals as salary for
their previous services provided to the Registrant for 15 and 12 years,
respectively. The services were valued at $10,000.00 or $0.01 per
share. These shares were sold pursuant to Section 4(2) of the
Securities Act and have been marked "restricted."
In September, 2000, the Registrant issued an aggregate of
25,100 shares of its common stock to one individual as salary for
previous services provided to the Registrant. The services were valued
at $251.00 or $0.01 per share. These shares were sold pursuant to
Section 4(2) of the Securities Act and have been marked "restricted."
In December, 2000, the Registrant agreed to issue 1,815,990
shares of its common stock to two individuals for services provided and
to be provided to the Registrant. The services were valued at
$18,159.90 or $0.01 per share. These shares were sold pursuant to
Section 4(2) of the Securities Act and have been marked "restricted."
On December 29, 2000, the Registrant issued an aggregate of
13,940,785 shares of its common stock to Galt Capital Corporation in
exchange for all of the outstanding common shares of Armitec.com, Inc.
These Shares were sold pursuant to Section 4(2) of the Securities Act
and have been marked "restricted."
VI. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is a discussion of the Registrant's financial
condition and results of operations. This discussion should be read in
conjunction with the Consolidated Financial Statements of the
Registrant appearing under Item VII of this Report. Statements
contained in this "Management's Discussion and Analysis of Financial
Conditions and Results of Operations," which are not historical facts
may be forward-looking statements. Such information involves risks and
uncertainties, including those created by general market conditions,
competition and the possibility that events may occur which could limit
the ability of the Registrant to maintain or improve its operating
results or execute its primary growth strategy. Although management
believes that the assumptions underlying the forward-looking statements
are reasonable, any of the assumptions
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could be inaccurate, and there can therefore be no assurance that the
forward-looking statements included herein will prove to be accurate.
The inclusion of such information should not be regarded as a
representation by management or any other person that the objectives
and plans of the Registrant will be achieved. Moreover, such
forward-looking statements are subject to certain risks and
uncertainties which could cause actual results to differ materially
from those projected. Readers are cautioned not to place undue reliance
on these forward-looking statements that speak only as of the date
hereof.
A. Results and Plan of Operations.
Armitec, Inc. became a development stage company as of
September 1, 2000 as a result of or the disposition of the net assets
of Armitec, Inc. in August 2000. The operations of Armitec, Inc. are
reflected as development stage activities since July 24, 2000, the date
of its formation.
From the period July 24, 2000 to December 31, 2000 the
Registrant produced no revenue and recognized a net loss of ($222,746).
The par value of the shares in the Financial Statements of the
Registrant appearing under Item VII of this Report was inadvertently
reported as $0.0016, which was the par value reported in the
Registrant's Certificate of Amendment of Certificate of Incorporation
filed as Exhibit 5.1 to the Registrant's Form 8-K filed on September
22, 2000. The Registrant subsequently filed a Certificate of Correction
with the State of Delaware to reflect the par value as $0.00167.
Management does not believe that this materially affects the
information in the Registrant's Financial Statements.
Management intends for the Registrant to proceed in its
efforts to implement the business plan of Armitec and Armitec.com, and
to expand the Registrant's holdings through the acquisition of
existing, profitable companies that complement the business plan of
Armitec and Armitec.com.
On December 12, 2000, the Registrant entered into a Plan and
Agreement to Exchange Stock by and among Registrant, JRO Group, Inc.
("JRO") and the Shareholders of JRO. On March 20, 2001, the parties
completed the share exchange. In March 2001, a report of the accounts
receivable status by a Special Master for the acquired company was
presented to the Superior Court of Fulton County, pursuant to a request
by the acquired company's bank. Based on this report and the subsequent
events resulting therefrom, the acquired company is unable to finance
its current assets as it had done formerly. On April 23, 2001, the
parties mutually agreed to rescind the share exchange because of the
foregoing, and the inability of JRO to obtain the audits necessary for
the Registrant to complete its filings under the Securities Exchange
Act of 1934. On that same date, Armitec and JRO entered into a letter
of intent whereby Armitec will act as a receiver and liquidator over a
one-year period. The proposed
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management agreement would provide that Armitec would issue shares of
its common stock based solely on the success of the liquidation.
B. Financial Condition, Liquidity and Capital Resources.
Armitec has no assets and no operations from which it can
obtain working capital. Armitec recognizes that it must find a source
of working capital or Armitec may not be able to continue its
existence. Although Armitec has entered into a management contract with
JRO Group, Inc., which management believes may provide Armitec with
working capital, JRO Group, Inc. is subject to litigation that
currently prevents Armitec from recognizing any revenue from this
contract. There can be no assurance that the management contract with
JRO will generate any revenue for the Registrant or that JRO will be
able to settle its current litigation.
In addition, additional capital will be needed to continue the
Registrant's operations. The Registrant expects to obtain additional
capital through the private sale of the Registrant's securities or from
borrowings from private lenders and/or financial institutions. There
can be no assurance that the Registrant will be successful in obtaining
any additional capital which may be needed.
C. Certain Risk Factors.
In evaluating the Company and its line of business, the following
factors should be considered:
WE ARE A NEW BUSINESS WITH NO OPERATING HISTORY
The share exchange with Armitec.com resulted in a change of control of
the Registrant and a change in the Registrant's management. Our only operations
at this time currently consist of a Letter of Intent with JRO Group, Inc.
whereby Armitec will act as a receiver and liquidator of JRO Group, Inc. over a
one-year period. JRO Group, Inc. is currently subject to litigation and there is
no assurance that Armitec will be able to perform under the proposed management
agreement. Our profitability will depend primarily upon the Registrant's
operations and there is no assurance that the Registrant will ever operate
profitably. Because of the substantial start-up costs that must be incurred by a
new company, we expect to incur significant operating losses during our initial
years of operations. No assurance can be given that the future operations of the
Registrant will be successful.
WE MAY BE UNABLE TO RAISE ADDITIONAL FUNDING TO PURSUE OUR STRATEGIES WHICH MAY
HARM OUR BUSINESS
The Registrant anticipates the need for additional capital as it
pursues its business strategy. The Registrant expects to raise additional
capital through a combination of new debt issuances and equity sales, from
private as well as public sources. Issuance of new debt and/or the sale of
equity will likely have a dilutive effect on the Registrant and its
shareholders. Implementation of the Registrant's strategy and its business plans
is
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contingent upon the availability of such funding sources. No assurance can be
given that the Registrant will be able to raise debt or equity capital, at terms
that are acceptable to the Registrant, or at all, in order to fund its
operations as set forth above.
THERE HAS BEEN NO RECENT TRADING MARKET FOR THE REGISTRANT'S COMMON STOCK
Since 1995, there has been no trading market for our common stock. The
Registrant is currently in the process of having its common stock relisted on
the OTC Bulletin Board under the symbol "AMTI."
The development of a trading market depends, however, upon the
existence of willing buyers and sellers. Neither the Registrant, nor any market
maker can control this development. Even with a market maker, factors such as
the limited size of this offering, the lack of earnings history and the absence
of a reasonable expectation of dividends within the near future mean that there
can be no assurance of the development of an active liquid market for the common
stock in the foreseeable future. Even if a market develops, there can be no
assurance that a market will continue. You should carefully consider the
potentially illiquid and long-term nature of any investment in the common stock
of the Registrant.
THE ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK IN THE FUTURE MAY HARM THE
BOOK VALUE OF THE OUTSTANDING SHARES OF COMMON STOCK
To the extent the future funding requirements of the Registrant require
the issuance of convertible securities or securities or debt having a priority
to the shares of Common Stock, the shares of Common Stock may suffer a decline
in book value.
WE DO NOT ANTICIPATE PAYING DIVIDENDS ON OUR COMMON STOCK IN THE FORESEEABLE
FUTURE
The Registrant intends to retain all future earnings for use in the
development of its business. The Registrant has never paid and does not
currently anticipate paying any cash dividends on its Common Stock in the
foreseeable future.
VII. FINANCIAL STATEMENTS.
The following documents are filed as part of this report:
(1) Report of Independent Certified Public Accountants..............................F-1
(2) Financial statements:
Balance Sheet as of December 31, 2000.........................................F-2
Statement of operations cumulative from July 24, 2000 (inception)
to December 31, 2000......................................................F-3
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Statement of Stockholders' Equity ............................................F-4
Statement of cash flows cumulative from July 24, 2000 (inception)
to December 31, 2000......................................................F-5
Notes to Financial Statements.................................................F-6
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or other notes herein.
VIII. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL MATTERS.
None.
PART III
IX. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth all the directors, executive officers
and significant employees of the Registrant as of December 31, 2000. In the
years prior to December 31, 2000, various officers, directors and control
persons have failed to timely report under section 16(a) of the Exchange Act.
The following persons became officers and directors of the Registrant on
December 29, 2000 and filed a Form 3 on January 25, 2001.
NAME AGE POSITION
Bruce R. Davis 66 President, CEO, and Chairman of the Board
Sandra Davis 63 Secretary and Director
Bruce R. Davis, Chairman, President and Chief Executive Officer. Mr.
Davis became Chairman, President and Chief Executive Officer of the Registrant
on December 29, 2000 pursuant to the terms of the Share Exchange between the
Company and Armitec.com. Mr. Davis is a CPA by profession and was president of
S.W.S. Garment, Inc., a manufacturer of uniforms, from 1997 until sold in 1999.
From 1991 until 1995, Mr. Davis served as President and Chief Executive Officer
of Disposal Specialists, Ltd., a company engaged in the waste management
industry. From 1995 until the present time, Mr. Davis has served as the
President and Chief Executive Officer of Galt Capital Corporation in Atlanta,
Georgia, a real estate development and consulting company. Mr. Davis has also
served as President, Treasurer and as a director of Armitec.com from July 2000
to the present time. Mr. Davis obtained his Bachelor of Science degree from New
York University in 1956. Mr. Davis is the husband of Sandra Davis, the Secretary
and a director of the Registrant.
Sandra Davis, Secretary and Director. Ms. Davis became Secretary of the
Registrant on December 29, 2000 pursuant to the terms of the Share Exchange
between the Company and Armitec.com. From 1995 until the present time, Ms. Davis
has served as the Secretary of Golf Capital Corporation in Atlanta, Georgia, a
real estate
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development and consulting company. Ms. Davis has also served as Secretary and
as a director of Armitec.com from July 2000 to the present time. Ms. Davis
attended New York University. Ms. Davis is the wife of Bruce Davis, President,
Chief Executive Officer and a director of the Registrant
Directors hold office until the next annual meeting of shareholders.
Officers are elected by the Board of Directors following the Annual meeting of
stockholders.
X. EXECUTIVE COMPENSATION.
Cash compensation. The following table sets forth the actual cash
compensation of any officer or director of the Registrant who received in excess
of $100,000 in the fiscal year ended December 31, 2000, and the Chief Executive
Officer of the Registrant.
Bruce R. Davis, CEO...................................None
Compensation of Directors:
During the Registrant's fiscal year ended December 31, 1987, the
Registrant passed a resolution that all officers and directors who attended
meetings of the Board of Directors or Shareholders and who were not on other
salary with Armitec, would receive restricted shares of stock of Armitec, equal
to $500 per day. The number of shares to be determined by the bid price of the
stock on the meeting date. Directors were not paid any stock under the foregoing
resolution during the previous fiscal year.
XI. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNER AND MANAGEMENT.
The following table sets forth information regarding ownership of the
Registrant's common stock by all persons who are known by the Registrant to own
more than 5% of the total outstanding shares and by all officers and directors
of the Company as of December 31, 2000. Except as otherwise indicated in the
table, the address of the stockholders listed below is that of the Company's
principal executive office. Directors not included in the table below do not
hold Company securities.
SHARES BENEFICIALLY OWNED
AS OF DECEMBER 31, 2000
NAME AND ADDRESS NUMBER PERCENT
Bruce R. Davis 13,940,785(1) 74.1%
Sandra Davis 13,940,785(2) 74.1%
Galt Capital Corporation 13,940,785 74.1%
1295 West Garmon Road
Atlanta, Georgia 30327
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SHARES BENEFICIALLY OWNED
AS OF DECEMBER 31, 2000
NAME AND ADDRESS NUMBER PERCENT
Donald C. Carman 979,100 5.2%
110 St. Andrews
St. Simons Island, Georgia 31522
Kevin Masters 907,995 5.0%
5205 Camden Lake Parkway
Ackworth, Georgia 30101
Ari Berman 907,995 5.0%
4545 Devonshire Road
Dunwoody, Georgia 30338
(1) Based on 13,940,785 shares of common stock owned by Galt Capital
Corporation. One hundred percent of the Capital Stock of Galt Capital
Corporation is owned by Sandra P. Davis, the wife of Bruce R. Davis.
(2) Based on 13,940,785 shares of common stock owned by Galt Capital
Corporation. One hundred percent of the Capital Stock of Galt Capital
Corporation is owned by Sandra P. Davis
Changes in Control.
Registrant is not aware of any arrangement which may result in a change
of control of Registrant at present.
XII. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Armitec incurred accounting and legal expenses to Colonial Corporation
in connection with the reorganization of Armitec. Donald C. Carman, a former
Director of Armitec, owns 100% of the stock of Colonial Corporation. Armitec.com
agreed to pay an amount of $100,000 to Colonial Corporation for reimbursement of
such expenses incurred by Colonial Corporation on behalf of Armitec. Armitec
acknowledges that Colonial Corporation has received $25,000 cash from
Armitec.com for such reimbursement, and Armitec.com delivered to Colonial
Corporation, on December 29, 2000, a note in the amount of $75,000 due upon the
earlier of the completion of a Private Placement by Armitec or Ninety (90) days
therefrom. The note was guaranteed by Bruce R. Davis. The members of the Armitec
Board of Directors knew about these additional interests, and considered them,
when they approved the Share Exchange.
In contemplation of the Exchange Agreement, the Board of Directors and
a majority of the shareholders of Armitec approved a distribution of the
remaining assets of Armitec as of August 31, 2000 to Colonial Corporation. The
net assets were $86,420 and this transaction was recorded as a consultant fee
for the quarter ended September 30, 2000.
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XIII. OTHER.
Exhibits
3.1 Articles of Incorporation and Bylaws *
3.2 Amendment to Articles of Incorporation **
16.1 Letter on Change of Certifying Accountant ***
17.1 Director Resignation ****
27 Financial Data Schedule. Attached
* Incorporated by reference to the Registrant's registration statement
on Form S-18 filed with the Securities and Exchange Commission in August 1983.
** Incorporated by reference to the Form 8-K report filed by Registrant
on September 22, 2000.
*** Incorporated by reference to the Form 8-K report filed by
Registrant on May 2, 2001, amended on May 18, 2001.
**** Incorporated by reference to the Form 8-K report filed by
Registrant on January 16, 2001.
During the fourth quarter of 2000, the Registrant filed the following
reports on Form 8-K.
Form 8-K/A report filed on November 17, 2000 that reported a prior
change in the Registrant's accountants, a prior change in the Registrant's
fiscal year, and amended information included in the Form 8-K filed on September
22, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: 7/02/01 /s/ Bruce R. Davis
--------------------------------------------
Chairman of the Board, President,
Chief Executive Officer,
Chief Financial and Accounting Officer
Treasurer
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INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
ARMITEC, INC.
ATLANTA, GEORGIA
We have audited the accompanying consolidated balance sheet of Armitec,
Inc. and subsidiary as of December 31, 2000, and the related consolidated
statements of operations and cash flows from July 24, 2000 (inception of
development stage) to December 31, 2000, and changes in stockholders' equity for
the year ended December 31, 2000. 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 audits.
We conducted our audit in accordance with U.S. generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Armitec,
Inc. and subsidiary as of December 31, 2000, and the results of its operations
and its cash flows from July 24, 2000 (inception of development stage) to
December 31, 2000, in conformity with U.S. generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in Note 1 to
the financial statements, the Company is dependent upon its ability to develop
additional sources of capital, and/or achieve profitable operations. These
conditions raise substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of these uncertainties.
Braverman & Company, P.C.
Prescott, Arizona
April 23, 2001
F-1
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ARMITEC, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
ASSETS
CURRENT ASSETS-Cash $ 100
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OTHER ASSETS-Deferred offering costs 21,251
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$ 21,351
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 51,250
Related party obligations 173,687
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TOTAL CURRENT LIABILITIES 224,937
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $.0016, 50,000,000 shares authorized,
18,808,632 shares issued and outstanding 30,094
Paid-in capital 24,033
(Deficit) accumulated during the development stage (257,713)
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TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (203,586)
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$ 21,351
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-2
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ARMITEC, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF OPERATIONS
CUMULATIVE FROM JULY 24, 2000 (INCEPTION) TO DECEMBER 31, 2000
REVENUE $ --
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OPERATING EXPENSES
General and administrative 220,798
Interest expense 1,948
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TOTAL EXPENSES 222,746
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NET (LOSS) FROM OPERATIONS $ (222,746)
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BASIC AND DILUTED (LOSS) PER SHARE $ (0.01)
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WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING $ 16,716,683
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SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-3
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ARMITEC, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(DEFICIT)
ACCUMULATED
DURING
COMMON STOCK PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
---------- -------- -------- ----------- ----------
BALANCES, AT INCEPTION 15,947,542 $ 25,516 $ -- $ (34,967) $ (9,451)
Shares issued for compensation
to employees @ $.01 1,027,100 1,643 8,628 10,271
Shares issued to settle debt @
$.01 18,000 29 151 180
Shares issued for outside
services @ $.01 1,815,990 2,906 15,254 18,160
Net (loss) for the period (222,746) (222,746)
---------- -------- -------- ---------- ----------
Balances, December 31, 2000 18,808,632 $ 30,094 $ 24,0333 $ (257,713) $ (203,586)
========== ======== ========= ========== ==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-4
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ARMITEC, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
CUMULATIVE FROM JULY 24, 2000 (INCEPTION) TO DECEMBER 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) from operations $ (222,746)
Adjustments to reconcile net (loss) to net
cash used by operating activities:
Issuance of stock for services 18,160
Changes in-
Accounts payable 51,250
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NET CASH FLOWS (TO) CONTINUING OPERATING ACTIVITIES (153,336)
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NET CASH FLOWS FROM (TO) DISCONTINUED OPERATIONS OR
PRIOR TO COMMENCEMENT OF DEVELOPMENT STAGE
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CASH FLOWS FROM INVESTING ACTIVITIES
Deferred offering costs (21,251)
Other receivable advances
Other receivable advances repaid
Investment in closely-held company
Repayment of notes receivable
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NET CASH FLOWS FROM (TO) INVESTING ACTIVITIES (21,251)
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CASH FLOWS FROM FINANCING ACTIVITIES
Increase in paid-in capital 1,000
Increase in related party obligations 173,687
----------
NET CASH FROM FINANCING ACTIVITIES 174,687
----------
NET INCREASE (DECREASE) IN CASH 100
----------
CASH BEGINNING PERIOD --
----------
CASH END OF PERIOD $ 100
==========
SUPPLEMENTAL INFORMATION
Interest paid $ 1,948
==========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-5
18
ARMITEC, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Background
Armitec, Inc. (the Company or AI), a Delaware corporation formed
January 1983 to provide comprehensive administrative, marketing and consulting
services to group dental and medical practices, became inactive in October 1987,
except for the management of a limited portfolio of securities. On August 31,
2000, the Company transferred all of its net assets as part of the consideration
to be paid for having a related corporation assume all of the obligations to be
incurred for a pending merger as more fully described below. It had a fiscal
year-end of August 31 until it changed to December 31 in 1999.
AI became a development stage company as defined in FASB No.7 since its
business ceased on August 31, 2000 as a result of the distribution of its net
assets at that date as further described below.
Principles of Consolidation
The Company's consolidated financial statements include the financial
statements of the Company and its wholly owned subsidiary, Armitec.Com, Inc.
(ACI), a Georgia corporation acquired in a reverse merger on December 29, 2000.
All significant intercompany accounts and transactions have been eliminated.
Financial Statement Presentation
The Company issued 13,940,785 shares of its $.0016 par value common
stock in exchange for all of the shares of common stock outstanding of ACI. ACI
is a development stage company, wholly owned by a corporation owned and
controlled by the president of ACI. An additional 13,525,928 shares of the
Company's common stock were set aside for private placement and services to be
subsequently incurred in connection with the business plan of the Company.
Shares unsold at the end of the private placement offering period are to be
issued to the AI shareholder at nominal value.
The historical transactions of ACI have been carried forward, similar
to the accounting treatment given in a "pooling of interests". In effect, ACI is
considered the acquirer for accounting purposes only, since ACI shareholders
received more shares of AI's common stock than were outstanding prior to the
exchange. ACI has a fiscal year-end of December 31. As a result of the
disposition of the net assets of AI in August 2000, AI became a development
stage company as of September 1, 2000, whereas, the operations of ACI are
reflected as development stage activities since July 24, 2000, the date of its
formation. All prior operations of AI have been eliminated in the statements of
operations and cash flows. Unless otherwise indicated, all references to the
Company include AI and ACI.
F-6
19
ARMITEC, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates and Assumptions
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts and the disclosure of
contingent amounts in the Company's financial statements and the accompanying
notes. Actual results could differ from those estimates. Certain prior year
amounts have been reclassified to conform to the current year presentations.
Cash Equivalents
The Company considers all highly liquid investments with the original
maturities of three months or less to be cash equivalents. To date the Company
has had none of these.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, Disclosures about
fair value of financial instruments, defines the fair value of a financial
instrument as the amount at which the instrument could be exchanged in a current
transaction between willing parties. The carrying values of the Company's
financial instruments, which include cash, accounts receivable, accounts payable
and accruals, approximate fair values due to the short maturities of such
instruments. The fair value of the Company's long-term debt, which approximates
carrying value, is estimated based on the current rates offered to the Company
for debt of the same remaining maturities.
IncomeTaxes
Income taxes are provided for using the liability method of accounting
in accordance with Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". A deferred tax asset or liability is recorded for
all temporary difference between financial and tax reporting of which
depreciation is the most significant. Deferred tax expense (benefit) results
from the net change during the year of deferred tax assets and liabilities.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to more likely than not be realized in future tax
returns. Tax law and rate changes are reflected in income in the period such
changes are enacted.
Prior to the merger, the AI sustained net operating losses for income
tax purposes of approximately $1,350,000, which expires under current tax law
through 2013. However, the Company did not meet the continuity of business
requirements of Section 382 (c) of the Internal Revenue Code, therefore such
pre-merger losses are not deductible.
F-7
20
ARMITEC, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
For financial reporting purposes, the Company has sustained a
consolidated loss for the development stage period commencing July 24, 2000 and
ending December 31. 2000, of approximately $222,000 of which approximately $
122,000 is considered start-up costs, deferred for income tax purposes until the
Company commences operations. The balance is considered a permanent
non-deductible difference. The Company's future utilization of such deferred tax
benefit cannot be currently ascertained. Accordingly, a valuation allowance of
approximately $37,000 has been provided equal to the value of the deferred tax
asset. Start-up costs are not deductible until the business of the Company
commences, at which time they are amortizable over a 60-month period, unless
permanently capitalized. Therefore, at December 31, 2000, there is no
significant net operating loss for income tax purposes.
Loss Per Share
Net loss per share is provided in accordance with Statement of
Financial Accounting Standards No. 128 (SFAS No.128) "Earnings Per Share". Basic
loss per share is computed by dividing net loss available to common stockholders
by the weighted average number of common shares outstanding during the period.
The shares issued to effect the merger have been considered outstanding since
the beginning of the period.
Basis of Presentation and Management's Actions to Overcome Operating
and Liquidity Problems
The Company's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company's
ability to continue in existence is dependent on its ability to develop
additional sources of capital, and/or achieve profitable operations. The
accompanying financial statements do not include any adjustments that might
result from the outcome of these uncertainties. Management's plan is to raise
additional debt or equity financing and to begin operations in the near term,
which are anticipated to be sufficient to provide the necessary cash flow to
meet the Company's expected cash flow requirements.
Patterns and Designs
The Company expenses the cost of all patterns and designs developed for
the use in future production and sales of uniforms.
Deferred Offering Costs
Legal fees of $21,251 incurred in connection with the December 14, 2000
preparation of a private placement memorandum, are being deferred until the
completion of the offering in 2001, at which time they will be charged against
the net proceeds from the offering.
F-8
21
ARMITEC, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2--RELATED PARTY TRANSACTIONS AND OBLIGATIONS
In connection with the merger, ACI agreed to pay on an unsecured basis
without interest, $75,000 to a company owned by the majority shareholders of AI,
for legal, auditing, and other expenses in addition to $25,000, which had been
paid to them for such costs as of December 31, 2000. The president of the
Company guaranteed this obligation which is evidenced by a promissory note due
March 29, 2001, if not sooner paid from the proceeds of the pending private
placement of the Company's common stock.
At December 31, 2000, the parent company of ACI paid or incurred a
total of $98,687 of costs and expenses on behalf of the Company through that
date. That amount and the $75,000 above are classified as related party
obligations in the accompanying financial statements.
NOTE 3 - SUBSEQUENT EVENTS
Acquisition
In December 2000, the Company agreed to acquire all of the outstanding
common stock of a Georgia Company engaged in the business of retail distribution
and sales of uniforms, principally to governmental agencies in Georgia. Upon the
completion of conditions precedent, the acquisition would have resulted in the
Company issuing 7,500,000 shares of its $.0016 par value common stock in a
transaction accounting for as a purchase.
In April 2001, the Company filed a Form 8-K reporting the transaction
as completed, subject to the furnishing of audited financial statements of the
acquired company. In March 2001, a report of the accounts receivable status by a
Special Master for the acquired company was presented to the Superior Court of
Fulton County, pursuant to a request by the acquired company's bank. Based on
this report and the subsequent events resulting therefrom, the acquired company
is unable to finance its current assets as it had done formerly. Accordingly,
the Company believes it is in its best interest to rescind the acquisition and
enter into a management agreement.
If the Company is successful with the rescission and management of the
acquired company, it would act as a receiver and liquidator over a one-year
period. The proposed management agreement would provide that the Company would
issue shares of its common stock based solely on the success of the liquidation.
Subsequent to December 31, 2000, the Company advanced approximately
$100,000 to the target company in furtherance of this contemplated liquidation
and agreement.
While the Company does not have specific rights to rescind the
acquisition, management of the Company believes it will be successful in the
rescission and ultimate management agreement.
F-9
22
ARMITEC, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - SUBSEQUENT EVENTS (continued)
Private Offering Memorandum
As a result of the private placement of the Company's common stock on
December 14, 2000, the Company received $124,992 as of February 12, 2001.
Related Party Obligation
The obligation to repay $75,000 to a related company as of March 29,
2001, became delinquent as a result of the Company's failure to timely repay
this debt. The creditor has taken no action, nor has the guarantor made any
repayment of this past due amount.
F-10