SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
(AMENDMENT NUMBER ONE)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of earliest event reported: October 26, 2004
MEMS USA, INC.
(FORMERLY LUMALITE HOLDINGS, INC.)
(Exact name of registrant as specified in charter)
Nevada 0-4846-3 82-0288840
-------------------------------------------------------------------------------
(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification no.)
5701 Lindero Canyon Rd., #2-100
Westlake Village, CA 91362
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (818) 735-4750
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS
On February 18, 2004, MEMS USA, Inc. (formerly Lumalite Holdings,Inc.)
(hereinafter, the "Company") acquired 100 % of the common stock of the common
stock of MEMS USA, Inc., a California corporation (hereinafter "MEMS"), pursuant
to that certain Merger Agreement and Plan of Reorganization entered into as of
January 29, 2004 by and among, among others, MEMS, the Company, MemAcq1-2-3,
Inc., a California corporation (a wholly owned subsidiary of the Company), and
certain shareholders of MEMS and the Company (the "Agreement").
This transaction (the "acquisition") closed on February 18, 2004.
The acquiring entity for accounting purposes was MEMS, which is the
primary operating entity. MEMS' fiscal year ends on September 30.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
No financial statements or exhibits were filed in conjunction with the
Form 8-K filed to report the acquisition. The following financial statements of
the Company are deemed filed as Exhibits 1 and 2 of this Form 8-K/A Amended
Report and are incorporated herein by this reference:
Exhibit 1: Audited consolidated Financial Statements for the Company and
MEMS for the financial years ending September 30, 2002 and September 2003; and
Exhibit 2: Unaudited condensed consolidated Financial Statements for the
Company for the nine month period ending June 30, 2004.
Exhibit 3: The Agreement.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MEMS USA, INC.
Date: November 22, 2004 By: /s/ Lawrence Weisdorn
--------------------------------
Lawrence Weisdorn, CFO
EXHIBIT INDEX
1. Audited Financial Statements of MEMS USA, Inc. for the period ending
September 30, 2003
2. Unaudited Financial Statements of MEMS USA, Inc. for the period ending
June 30, 2004
3. Merger Agreement and Plan of Reorganization entered into as of January 29,
2004 by and among, among others, MEMS, the Company, MemAcq1-2-3, Inc., a
California corporation (a wholly owned subsidiary of the Company), and
certain shareholders of MEMS and the Company.
Exhibit 1
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
CONTENTS
Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Balance Sheet 2
Statements of Operations 3
Statement of Stockholders' Deficit 4-6
Statements of Cash Flows 7
Notes to Financial Statements 8-17
Board of Directors
Mems USA, Inc.
Westlake Village, California
We have audited the accompanying balance sheet of Mems USA, Inc. (a California
corporation in the development stage) as of September 30, 2003 and the related
statements of operations, stockholders' deficit and cash flows for the two years
ended September 30, 2003 and for the period from inception (November 17, 2000)
to September 30, 2003. 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 financial statements referred to above present fairly, in
all material respects, the financial position of Mems USA, Inc. as of September
30, 2003, and the results of its operations and cash flows for the two years
ended September 30, 2003 and for the period from inception (November 17, 2000)
to September 30, 2003, 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 1 to the
accompanying financial statements, the Company has no established source of
revenue, which raises substantial doubt about its ability to continue as a going
concern. Management's plan in regard to these matters is also discussed in Note
1. These financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
CERTIFIED PUBLIC ACCOUNTANTS
Santa Monica, California
December 1, 2003
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET - SEPTEMBER 30, 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 23,613
Contracts in process, net of reserves 70,000
------------
Total current assets $ 93,613
PROPERTY AND EQUIPMENT, net 153,896
DEPOSITS 49,140
------------
Total assets $ 296,649
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 313,971
Accrued salaries to be paid by the issuance of common stock 228,250
Dividends payable 6,100
Deferred revenue 28,333
------------
$ 576,654
STOCKHOLDERS' DEFICIT:
Convertible preferred stock, Series A, $0.001 par value,
1,200,000 shares authorized, 86,000 shares issued
and outstanding 86
Common stock; $.001 par value, 25,000,000 shares
authorized, 5,015,600 shares issued and outstanding 5,016
Stock subscriptions receivable (50,300)
Additional paid in capital 616,398
Deficit accumulated during development stage (851,205)
------------
Total stockholders' deficit (280,005)
------------
Total liabilities and stockholders' deficit $ 296,649
============
The accompanying notes form an integral part of these financial statements.
2
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the year ended
-------------------------------- From November 17,
September 30, September 30, 2000 (inception) to
2003 2002 September 30, 2003
-------------- -------------- --------------
REVENUES $ -- $ -- $ --
-------------- -------------- --------------
COSTS:
Contract costs 18,057 -- 18,057
General and administrative expenses 614,021 219,127 833,148
-------------- -------------- --------------
632,078 219,127 851,205
-------------- -------------- --------------
LOSS BEFORE PROVISION FOR INCOME TAXES (632,078) (219,127) (851,205)
PROVISION FOR INCOME TAXES -- -- --
-------------- -------------- --------------
NET LOSS $ (632,078) $ (219,127) $ (851,205)
============== ============== ==============
NET LOSS PER SHARE, BASIC $ (0.13) $ (0.10)
============== ==============
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING, BASIC 4,775,471 2,106,500
============== ==============
3
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT
PERIOD FROM NOVEMBER 17, 2000 (INCEPTION) TO SEPTEMBER 30, 2003
Common stock Preferred stock Additional
----------------------------------------------------------------- paid-in
Shares Amount Shares Amount capital
-------------- -------------- -------------- -------------- --------------
Balance at November 17, 2000 -- $ -- -- $ -- $ --
Issuance of common stock;
founders shares - November 2000 1,250,000 1,250 -- -- --
Net loss -- --
-------------- -------------- -------------- -------------- --------------
Balance at September 30, 2001 1,250,000 1,250 -- -- --
Issuance of common stock;
founders shares - July 2002 3,250,000 3,250 -- -- --
Issuance of common stock for
services - July 2002 6,000 6 -- -- 5,994
Issuance of common stock for
services - July 2002 20,000 20 -- -- 19,980
Issuance of common stock for
services - July 2002 50,000 50 -- -- 49,950
Issuance of common stock for
services - July 2002 100,000 100 -- -- 99,900
Net loss for the year ended
September 30, 2002 -- -- -- --
-------------- -------------- -------------- -------------- --------------
Balance at September 30, 2002 4,676,000 4,676 -- -- 175,824
Deficit
accumulated
during Total
Subscriptions development stockholders'
receivable stage deficit
-------------- -------------- --------------
Balance at November 17, 2000 $ -- $ -- $ --
Issuance of common stock;
founders shares - November 2000 -- -- 1,250
Net loss
-------------- -------------- --------------
Balance at September 30, 2001 -- -- 1,250
Issuance of common stock;
founders shares - July 2002 (2,050) -- 1,200
Issuance of common stock for
services - July 2002 -- -- 6,000
Issuance of common stock for
services - July 2002 -- -- 20,000
Issuance of common stock for
services - July 2002 -- -- 50,000
Issuance of common stock for
services - July 2002 -- -- 100,000
Net loss for the year ended
September 30, 2002 -- (219,127) (219,127)
-------------- -------------- --------------
Balance at September 30, 2002 (2,050) (219,127) (40,677)
4
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT (CONTINUED)
PERIOD FROM NOVEMBER 17, 2000 (INCEPTION) TO SEPTEMBER 30, 2003
Common stock Preferred stock Additional
----------------------------------------------------- paid-in Subscriptions
Shares Amount Shares Amount capital receivable
---------- --------- ----------- ---------- ---------- -------------
Issuance of common stock for
cash - October 2002 5,000 5 -- -- 4,995 --
Issuance of common stock for
cash - January 2003 26,000 26 -- -- 25,974 (10,000)
Issuance of common stock for
cash - February 2003 57,000 57 -- -- 56,943 (2,000)
Issuance of common stock for
cash - March 2003 10,000 10 -- -- 9,990 --
Issuance of common stock for
cash - April 2003 5,000 5 -- -- 4,995 (5,000)
Issuance of common stock for
cash - May 2003 15,000 15 -- -- 14,985 --
Issuance of common stock for
cash - June 2003 20,000 20 -- -- 19,980 --
Issuance of common stock for
cash - September 2003 190,000 190 -- -- 189,810 --
Issuance of common stock for
services - August 2003 2,000 2 -- -- 1,998 --
Deficit
accumulated
during Total
development stockholders'
stage deficit
------------ -------------
Issuance of common stock for
cash - October 2002 -- 5,000
Issuance of common stock for
cash - January 2003 -- 16,000
Issuance of common stock for
cash - February 2003 -- 55,000
Issuance of common stock for
cash - March 2003 -- 10,000
Issuance of common stock for
cash - April 2003 -- --
Issuance of common stock for
cash - May 2003 -- 15,000
Issuance of common stock for
cash - June 2003 -- 20,000
Issuance of common stock for
cash - September 2003 -- 190,000
Issuance of common stock for
services - August 2003 -- 2,000
5
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' DEFICIT (CONTINUED)
PERIOD FROM NOVEMBER 17, 2000 (INCEPTION) TO SEPTEMBER 30, 2003
Common stock Preferred stock Additional
------------------------------------------------------- paid-in
Shares Amount Shares Amount capital
-------------- -------------- -------------- -------------- --------------
Issuance of common stock for
services - September 2003 9,600 10 -- -- 9,590
Issuance of Series "A" preferred stock for
cash - June 2003 -- -- 10,000 10 12,490
Issuance of Series "A" preferred stock for
cash - July 2003 -- -- 12,000 12 14,988
Issuance of Series "A" preferred stock for
cash - August 2003 -- -- 34,000 34 42,466
Issuance of Series "A" preferred stock for
cash - September 2003 -- -- 30,000 30 37,470
Preferred stock dividends -- -- -- -- (6,100)
Net loss for the year ended
September 30, 2003 -- -- -- (632,078) (632,078)
-------------- -------------- -------------- -------------- --------------
Balance at September 30, 2003 5,015,600 $ 5,016 86,000 $ 86 $ 616,398
============== ============== ============== ============== ==============
Deficit
accumulated
during Total
Subscriptions development stockholders'
receivable stage deficit
-------------- -------------- --------------
Issuance of common stock for
services - September 2003 -- -- 9,600
Issuance of Series "A" preferred stock for
cash - June 2003 (6,250) -- 6,250
Issuance of Series "A" preferred stock for
cash - July 2003 (12,500) -- 2,500
Issuance of Series "A" preferred stock for
cash - August 2003 -- -- 42,500
Issuance of Series "A" preferred stock for
cash - September 2003 (12,500) -- 25,000
Preferred stock dividends -- -- (6,100)
Net loss for the year ended
September 30, 2003
-------------- -------------- --------------
Balance at September 30, 2003 $ (50,300) $ (851,205) $ (280,005)
============== ============== ==============
6
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the year ended
-------------------------------- From November 17,
September 30, September 30, 2000 (inception) to
2003 2002 September 30, 2003
-------------- -------------- -------------------
CASH FLOWS PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net loss $ (632,078) $ (219,127) $ (851,205)
-------------- -------------- --------------
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH
USED FOR OPERATING ACTIVITIES:
Depreciation 13,186 714 13,900
Common stock issued for services 11,600 176,000 187,600
(INCREASE) DECREASE IN ASSETS:
Contracts in process (70,000) -- (70,000)
Deposits (49,140) -- (49,140)
INCREASE IN LIABILITIES:
Accounts payable and accrued expenses 271,238 43,713 314,951
Accrued salaries to be paid by issuance of common
stock 228,250 -- 228,250
-------------- -------------- --------------
Total adjustments 405,134 220,427 625,561
-------------- -------------- --------------
Net cash provided by (used for) operating activities (226,944) 1,300 (225,644)
-------------- -------------- --------------
CASH FLOWS USED FOR INVESTING ACTIVITIES -
purchase of property and equipment (147,796) -- (147,796)
-------------- -------------- --------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Common stock issued for cash 307,189 1,200 308,389
Series 'A' preferred stock issued for cash 88,664 -- 88,664
-------------- -------------- --------------
Net cash provided by financing activities 395,853 1,200 397,053
-------------- -------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 21,113 2,500 23,613
CASH AND CASH EQUIVALENTS, beginning of period 2,500 -- --
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 23,613 $ 2,500 $ 23,613
============== ============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Income taxes paid $ -- $ -- $ --
============== ============== ==============
Interest paid $ -- $ -- $ --
============== ============== ==============
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING
ACTIVITIES:
Common stock issued for services $ 11,600 $ 176,000 $ 187,600
============== ============== ==============
Dividends accrued $ 6,100 $ -- $ 6,100
============== ============== ==============
Stock issued in exchange for subscriptions receivable $ 48,250 $ 2,050 $ 50,300
============== ============== ==============
7
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF BUSINESS:
Mems USA, Inc. (the "Company") is currently a development stage
company under the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 7 "Accounting and Reporting by Development
Stage Enterprises" and was incorporated under the laws of the State
of California on November 17, 2000. The company is in the business
of providing Micro Electrical Mechanical Solutions for major
scientific and engineering companies, using existing technology and
patent rights furnished by the customers. The Company designs and
engineers prototypes and manufactures products and systems for
distribution by the customer.
BASIS OF PRESENTATION AND GOING CONCERN CONSIDERATION:
The accompanying financial statements have been prepared in
conformity with accounting principles generally accepted in the
United States of America, which contemplate continuation of the
Company as a going concern. However, the Company has no substantial
established source of revenue. This matter raises substantial doubt
about the Company's ability to continue as a going concern. These
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 as a going concern.
Management plans to take the following steps that it believes will
be sufficient to provide the Company with the ability to continue in
existence. Management plans on a reverse merger into a public shell,
prerequisite to the funding of approximately $2,000,000 in seed
financing from a syndicate put together by investment bankers.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company measures its financial assets and liabilities in
accordance with accounting principles generally accepted in the
United States of America. For certain of the Company's financial
instruments, including contracts in process, accounts payable,
accrued expenses and deferred revenue, the carrying amounts
approximate fair value due to their short maturities.
USE OF ESTIMATES:
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
8
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CASH CONCENTRATION AND CASH EQUIVALENTS:
Cash equivalents include all highly liquid debt investments with
original maturities at three months or less which are not securing
any corporate obligations. The Company maintains its cash in bank
deposit accounts which, at times, may exceed federally insured
limits. The Company has not experienced any losses in such accounts.
CONTRACTS IN PROCESS:
Costs incurred on contracts in process consists of development
costs, engineering, materials and labor related to the development
of prototype products for specific contracts with customers, net of
reserves for any anticipated contract losses. At September 30, 2003,
such costs related to one contract for which reserves of
approximately $18,000 have been provided.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Depreciation of property
and equipment is provided by the straight-line method over their
estimated useful lives.
REVENUE RECOGNITION:
The Company plans to follow the percentage of completion method of
accounting for future contracts. However, because the Company has
not yet established a history on which determinable estimates of
revenues and costs can be made, the completed contract method of
accounting is being applied for the one contract outstanding as of
September 30, 2003.
SHIPPING AND HANDLING COSTS:
The Company will expense future shipping and handling costs, as
incurred, and will include the expense in selling, general and
administrative expenses.
ADVERTISING COSTS:
The Company will expense the cost of advertising as incurred. There
was no advertising expense charged to operations for the two years
ended September 30, 2003 and 2002 and for the period from inception
(November 17, 2000) to September 30, 2003.
9
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
INCOME TAXES:
Provisions for future federal and state income taxes will be
calculated on reported financial statement income based on the
current tax law. Such provisions may differ from the amounts payable
to tax authorities because certain items of income and expense,
known as temporary differences, are recognized in different tax
periods for financial reporting purposes than for income tax
purposes. Deferred income taxes are recognized for the tax
consequences in future years of differences between the tax basis of
assets and liabilities and their financial reported amounts at each
period end, based on enacted tax laws and statutory tax rates
applicable to the period 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. There is no provision for income taxes for the periods
presented. Net operating loss carryforwards have been offset in
their entirety by a valuation allowance.
COMPREHENSIVE INCOME:
The Company utilizes SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for reporting comprehensive
income and its components in a financial statement. Comprehensive
income as defined includes all changes in equity (net assets) during
a period from non-owner sources. Comprehensive income is not
presented in the Company's financial statements since the Company
did not have any of the items of comprehensive income in the periods
presented.
EARNINGS PER SHARE:
Basic loss per share is computed by dividing net loss attributable
to common stockholders, after deducting preferred stock dividends,
by the weighted average number of common shares outstanding. Common
stock equivalents consisting of employee stock options (see Note 5)
have been excluded because their effect is anti-dilutive.
STOCK BASED COMPENSATION:
The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees", APB 25
and related interpretations in accounting for its employee stock
options because the alternative fair value accounting provided for
under SFAS Statement No. 123, "Accounting for Stock-Based
Compensation," ("SFAS 123") requires the use of option valuation
models that were not developed for use in valuing employee stock
options. Options granted to key consultants under the Plan are
accounted for under SFAS 123 as interpreted by FIN 44. Under APB 25,
because the exercise price of the Company's employee stock options
equal or exceed the fair market value of the underlying stock on the
date of grant, no compensation expense is recognized.
10
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
STOCK BASED COMPENSATION, CONTINUED:
Pro forma information regarding net loss and loss per share,
pursuant to the requirements of SFAS 123, for the years ended
September 30, 2003 and 2002, are as follows:
2003 2002
-------------- --------------
Net loss, as reported $ (632,078) $ (219,127)
Deduct: Total stock-based employee
compensation expense determined under the
fair value Black-Scholes method with a 3%
volatility and a 6% risk free rate of return
assumption (424,930) (101,716)
-------------- --------------
Pro forma net loss $ (1,057,008) $ (320,843)
============== ==============
Loss per share:
Basic and diluted - as reported $ (.13) $ (.10)
============== ==============
Basic and diluted - pro forma $ (.22) $ (.15)
============== ==============
RECENT ACCOUNTING PRONOUNCEMENTS:
In October 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which requires companies to record the fair
value of a liability for asset retirement obligations in the period
in which they are incurred. The statement applies to a company's
legal obligations associated with the retirement of a tangible
long-lived asset that results from the acquisition, construction,
and development or through the normal operation of a long-lived
asset. When a liability is initially recorded, the company would
capitalize the cost, thereby increasing the carrying amount of the
related asset. The capitalized asset retirement cost is depreciated
over the life of the respective asset while the liability is
accreted to its present value. Upon settlement of the liability, the
obligation is settled at its recorded amount or the company incurs a
gain or loss. The statement was effective for fiscal years beginning
after June 30, 2002. The adoption did not have a material impact on
the Company's financial position or results of operations.
11
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
RECENT ACCOUNTING PRONOUNCEMENTS, CONTINUED:
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". Statement 144
addresses the accounting and reporting for the impairment or
disposal of long-lived assets. The statement provides a single
accounting model for long-lived assets to be disposed of. New
criteria must be met to classify the asset as an asset
held-for-sale. This statement also focuses on reporting the effects
of a disposal of a segment of a business. This statement was
effective for fiscal years beginning after December 15, 2001. The
adoption did not have a material impact on the Company's financial
position or results of operations.
In April 2002, the FASB issued Statement No. 145, "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No.
13, and Technical Corrections." This Statement rescinds FASB
Statement No. 4, "Reporting Gains and Losses from Extinguishments of
Debt", and an amendment of that Statement, FASB Statement No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements"
and FASB Statement No. 44, "Accounting for Intangible Assets of
Motor Carriers". This Statement amends FASB Statement No. 13,
"Accounting for Leases", to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic
effects that are similar to sale-leaseback transactions. The
adoption did not have a material impact on the Company's financial
position or results of operations.
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities", which addresses
financial accounting and reporting for costs associated with exit or
disposal activities and supersedes EITF Issue 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including certain Costs Incurred in a
Restructuring)." SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. SFAS No. 146 also establishes that the
liability should initially be measured and recorded at fair value.
The Company adopted the provisions of SFAS No. 146 for exit or
disposal activities that were initiated after December 31, 2002. The
adoption did not have a material impact on the Company's financial
position or results of operations.
In October 2002, the FASB issued SFAS No. 147, "Acquisitions of
Certain Financial Institutions" which provides guidance on the
accounting for the acquisition of a financial institution. SFAS No.
147 removes acquisitions of financial institutions from the scope of
both FASB Statement No. 72 and FASB Interpretation No. 9 and
requires that those transactions be account for in accordance with
FASB Statements No. 141 and 142. Additionally, SFAS No. 147 amends
FASB Statement No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets, to include in its scope long-term
customer-relationship intangible assets of financial institutions.
The adoption of this pronouncement did not have a material impact on
the Company's financial position or results of operations.
12
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
RECENT ACCOUNTING PRONOUNCEMENTS, CONTINUED:
In November 2002, the FASB issued Interpretation No. (FIN) 45,
"Guarantor's Accounting and Disclosure requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others." Among
other things, the Interpretation requires guarantors to recognize,
at fair value, their obligations to stand ready to perform under
certain guarantees. FIN 45 is effective for guarantees issued or
modified on or after January 1, 2003. The adoption of this
pronouncement did not have a material impact on the Company's
financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure", which amends
SFAS No. 123, "Accounting for Stock-Based Compensation", to provide
alternative methods of transition for a voluntary change to the fair
value based method of accounting for stock-based employee
compensation. Additionally, SFAS No. 148 amends the disclosure
requirements of SFAS No. 123, regardless of which method of
accounting is chosen, to require prominent disclosures in both
annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of
the method used on reported results. The statement was effective for
fiscal years beginning after December 15, 2002, with earlier
application permitted in certain circumstances. The interim
disclosure provisions are effective for financial reports containing
financial statements for interim periods beginning after December
15, 2002. The adoption of this statement did not have a material
impact on the Company's financial position or results of operations
as the Company has not elected to change to the fair value based
method of accounting for stock-based employee compensation.
In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities". FIN 46's consolidation criteria are based on
analysis of risks and rewards, not control, and represent a
significant and complex modification of previous accounting
principles. FIN 46 represents an accounting change, not a change in
the underlying economics of asset sales. The adoption of this
pronouncement did not have a material impact on the Company's
financial position or results of operations.
During April 2003, the FASB issued SFAS 149 - "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities",
effective for contracts entered into or modified after June 30,
2003, except as stated below and for hedging relationships
designated after June 30, 2003. In addition, except as stated below,
all provisions of this Statement should be applied prospectively.
The provisions of this Statement that relate to Statement 133
Implementation Issues that have been effective for fiscal quarters
that began prior to June 15, 2003, should continue to be applied in
accordance with their respective effective dates. In addition,
paragraphs 7(a) and 23(a), which relate to forward purchases or
sales of when-issued securities or other securities that do not yet
exist, should be applied to both existing contracts and new
contracts entered into after June 30, 2003. The Company does not
participate in such transactions, however, is evaluating the effect
of this new pronouncement, if any, and will adopt FASB 149 within
the prescribed time.
13
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
RECENT ACCOUNTING PRONOUNCEMENTS, CONTINUED:
During May 2003, the FASB issued SFAS 150 - "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity", effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003
for public companies. This Statement establishes standards for how
an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an
issuer classify a freestanding financial instrument that is within
its scope as a liability (or an asset in some circumstances). Many
of those instruments were previously classified as equity. Some of
the provisions of this Statement are consistent with the current
definition of liabilities in FASB Concepts Statement No. 6, Elements
of Financial Statements. The Company is evaluating the effect of
this new pronouncement and will adopt FASB 150 within the prescribed
time
(2) PROPERTY AND EQUIPMENT:
A summary at September 30, 2003 is as follows:
Leasehold improvements $ 71,741
Lab equipment 45,447
Furniture and equipment 27,497
Computer equipment 23,111
--------------
167,796
Less accumulated depreciation 13,900
--------------
$ 153,896
Depreciation expense charged to operations totaled $13,186 and $714 for
the year ended September 30, 2003 and 2002, respectively.
(3) INCOME TAXES:
The reconciliation of the effective income tax rate to the Federal
statutory rate is as follows:
Federal income tax rate 40.0%
Current year losses (40.0)
-----------
Effective income tax rate --%
===========
The deferred tax asset results from net operating loss carryforwards of
approximately $600,000, expiring in 2018. The resulting asset of
approximately $250,000 is completely offset by a valuation allowance
because of uncertainties as to its realization.
14
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
(4) STOCKHOLDERS' EQUITY:
In November 2000, the Company issued 1,250,000 shares of its $0.001 par
value common stock in consideration for organizational costs incurred by
one of the founding members.
In July 2002, the Company issued 3,250,000 shares of its $0.001 par value
common stock as Founders' shares.
In July 2002, the Company issued 26,000 shares of its $0.001 par value
common stock in exchange for services.
In July 2002, the Company issued 150,000 shares of its $0.001 par value
common stock in exchange for services.
In October 2002, the Company issued 5,000 shares of its $0.001 par value
common stock for cash.
In January 2003, the Company issued 26,000 shares of its $0.001 par value
common stock for cash.
In February 2003, the Company issued 57,000 shares of its $0.001 par value
common stock for cash.
In March 2003, the Company issued 10,000 shares of its $0.001 par value
common stock for cash.
In April 2003, the Company issued 5,000 shares of its $0.001 par value
common stock for cash.
In May 2003, the Company issued 15,000 shares of its $0.001 par value
common stock for cash.
In June 2003, the Company issued 20,000 shares of its $0.001 par value
common stock for cash.
In June 2003, the Company issued 10,000 shares of its $0.001 Series `A'
Preferred stock for cash.
In July 2003, the Company issued 12,000 shares of its $0.001 Series `A'
Preferred stock for cash.
In August 2003, the Company issued 2,000 shares of its $0.001 par value
common stock for services.
In August 2003, the Company issued 34,000 shares of its $0.001 Series `A'
Preferred stock for cash.
15
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
(4) STOCKHOLDERS' EQUITY, CONTINUED:
In September 2003, the Company issued 30,000 shares of its $0.001 Series
`A' Preferred stock for cash.
In September 2003, the Company issued 190,000 shares of its $0.001 par
value common stock for cash.
In September 2003, the Company issued 9,600 shares of its $0.001 par value
common stock in-exchange for services.
The preferred shares receive a dividend of 8% of the Liquidation
Preference Amount (i.e. face amount of shares plus unpaid dividends, if
any). Dividends will accrue from the issue date with the first payment due
on September 20, 2003 for the period ending September 30, 2003 and are
payable each quarter thereafter, on December 20th, March 20th, June 20th
and September 20th. The preferred shares are convertible at any time into
one share of the Common Stock of Mems USA, Inc. at a price of $1.25 per
share. The preferred shares are also redeemable by the Company for cash at
any time 24 months after the Series A 8% Convertible Preferred Stock is
issued by making a cash payment equal to $1.50 per share plus all accrued
but unpaid dividends.
In connection with the employment agreements referred to in Note (6), the
Company has the option to repurchase the 4,500,000 founders shares for a
three-year period of time until the Company becomes profitable, for $.001
per share. In the event of a merger or change in control this option
expires.
(5) EMPLOYEE STOCK OPTIONS:
In connection with the employment agreements referred to in Note (6), the
Company has granted options to certain key executives to acquire common
stock of the Company ("Options").
The number and weighted average exercise prices of all options granted for
the years ended September 30, 2003 and 2002 are as follows:
2003 2002
---------------------- ----------------------
Average Average
Exercise Exercise
Number Price Number Price
Outstanding at beginning of the year 2,250,000 $ 1.00 -- $ --
Granted during the year 230,000 1.33 2,250,000 1.00
Outstanding at end of the year 2,480,000 1.03 2,250,000 1.00
Exercisable at end of the year 8,000 1.25 -- --
Exercised during the year -- -- -- --
Cancelled during the year -- -- -- --
16
MEMS USA, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED SEPTEMBER 30, 2003 AND 2002
(6) COMMITMENTS:
The Company leases the facility used for its operations under a lease
agreement expiring December 31, 2008. The following is a schedule by years
of future minimum base rental payments, excluding operating expenses,
required under the operating lease, which represents non-cancelable lease
terms in excess of one year as of September 30, 2003:
Year ending September 30,
2004 $ 98,280
2005 98,280
2006 98,280
2007 98,280
2008 24,570
--------------
$ 417,690
==============
Rent expense amounted to $94,810 for the year ended September 30, 2003.
(None for fiscal 2002.)
The Company has employment agreements with certain key executives through
2006 providing aggregate annual compensation of approximately $800,000.
(7) SUBSEQUENT EVENTS:
Subsequent to September 30, 2003, the Company issued 182,600 common shares
with an estimated fair value of $1.25 as consideration for accrued
salaries payable of $228,250.
In October 2003, the Company entered into an additional employment
agreement for the services of a scientist. The agreement calls for annual
compensation of $37,000 through October 2006. In connection with this
agreement, the individual was granted options for the purchase of 80,000
shares at $1.25 per share, exercisable over a period of three years.
17
Exhibit 2
MEMS USA, INC.
(A Development Stage Company)
BALANCE SHEET
June 30, 2004
(Unaudited)
June 30
2004
-----------
ASSETS
Current Assets:
Cash and cash equivalents $ 58,272
Joint venture investment 350
Contracts in progress, net of reserves 257
-----------
Total current assets 58,879
-----------
Property and equipment, net 228,423
Deposits 343,880
-----------
Total assets $ 631,182
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses $ 151,152
Liability to be satisfied through the issuance of shares 1,874,080
-----------
Total current liabilities 2,025,232
-----------
Stockholders' Deficit:
Convertible preferred stock, Series A, $.001 par value,
1,200,000 authorized, none issued and outstanding
Common stock, par value $.001 per share,
100,000,000 authorized, 13,385,779 shares issued and
outstanding 13,386
Stock subscriptions receivable (2,249)
Additional paid in capital 1,419,424
Accumulated deficit during development stage (2,824,611)
-----------
Total stockholders' deficit (1,394,050)
-----------
$ 631,182
===========
3
MEMS USA, INC.
--------------
(A Development Stage Company)
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
(Unaudited)
Nine-Months Ended Nine-Months Ended Three-Months Ended Three-Months Ended
June 30 June 30 June 30 June 30
2004 2003 2004 2003
--------------------------------------------------------------------------------
CONTINUING OPERATIONS:
Revenues:
Contract revenue 95,350 95,350
Costs:
Contract costs $ 495,931 280,952
General and administrative expenses 1,174,712 126,401 444,149 68,007
Expenses related to merger 350,360
--------------------------------------------------------------------------------
Net income (loss)
from continuing operations (1,926,003) (126,401) (629,751) (68,007)
--------------------------------------------------------------------------------
Retained earnings (accumulated deficit),
beginning of period (898,958) (201,677) (2,194,860) (260,071)
--------------------------------------------------------------------------------
Retained earnings (accumulated deficit),
end of period $ (2,824,611) (328,078) (2,824,611) (328,078)
================================================================================
Net income (loss) per share:
Net Income (loss) per share, basic and diluted $ (0.16) (0.02) (0.05) (0.01)
================================================================================
Weighted average number of common
shares outstanding, basic: 11,913,477 8,118,778 13,385,779 8,212,099
================================================================================
From November 17,
2000 (inception) to
June 30, 2004
-------------------
CONTINUING OPERATIONS:
Revenues:
Contract Income 95,350
Costs:
Contract costs $ 514,338
General and administrative expenses 2,055,263
Expenses related to merger 350,360
--------------------
Net income (loss)
from continuing operations (2,824,611)
--------------------
Retained earnings (accumulated deficit),
beginning of period 0
-------------------
Retained earnings (accumulated deficit),
end of period $ (2,824,611)
===================
4
MEMS USA, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
From
Nine-Months Ended Nine-Months Ended November 17, 2000
June 30 June 30 (inception) to
2004 2003 June 30, 2004
---------------------------------------- --------------------
Cash flows provided by (used for) operating activities:
Net Loss $(1,926,003) (126,401) $(2,824,611)
------------------------------- -----------
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Depreciation 30,268 44,168
Common stock issued for services 350,360 748,610
(Increase) decrease in assets:
Contracts in progress 156,493 86,143
Joint Venture investment (350) (350)
Deposits (294,740) (49,140) (343,880)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (59,444) 25,050
Accrued salaries (161,695)
Payroll taxes payable 52,220 99,013
Liability for stock subscribed 1,874,080 1,874,080
Accrued interest payable 20,989
Dividends payable 6,100
Increase in loan payable 77,500
Deferred revenue (28,333) 28,333
------------------------------- -----------
Total adjustments 1,918,859 56,693 2,559,923
Net cash provided by (used for) operating activities (7,144) (69,708) (264,688)
Cash flows from investing activities:
Purchase of fixed assets (97,297) (53,194) (272,591)
Loss on discontinued operations
------------------------------- -----------
Net cash provided by (used for) investing activities: (97,297) (53,194) (272,591)
Cash flows from financing activities:
Increase in subscriptions receivable (151) 3,700 (2,249)
Dividends
Issuance of preferred and common stock 139,251 145,500 597,800
------------------------------- -----------
Net cash flows provided by (used for) financing
activities: 139,100 149,200 595,551
Net Increase (decrease) in cash and cash
equivalents during the period 34,659 26,298 58,272
Cash and cash equivalents, beginning of period 23,613 2,500 0
------------------------------- -----------
Cash and cash equivalents, end of period 58,272 28,798 $ 58,272
=============================== ===========
Supplemental disclosure of cash flow information:
Income taxes paid $ -- $ --
=============================== ===========
Interest paid $ -- $ --
=============================== ===========
Supplemental disclosure of non-cash financing activities:
Common stock issued for services $ 350,360 $ 748,610
=========== ===========
Dividends accrued $ -- $ --
=========== ===========
Stock issued in exchange for subscriptions receivable $ -- $ --
=========== ===========
Issuance of Series A preferred stock in satisfaction $ 228,250 $ 228,250
=========== ===========
5
MEMS USA, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
(1) Nature of Business:
MEMS USA, Inc. (the "Company") is currently a development stage company
under the provisions of Statement of Financial Accounting Standards
("SFAS") No. 7 "Accounting and Reporting by Development Stage Enterprises"
and was incorporated under the laws of the State of California on November
17, 2000. The Company is in the business of providing Micro Electrical
Mechanical Solutions for major scientific and engineering companies, using
existing technology and patent rights furnished by the customers. The
Company designs and engineers prototypes and manufactures products and
systems for distribution by the customer.
The accompanying unaudited consolidated financial statements of MEMS USA,
Inc., (MEMS USA, Inc. - a Nevada "public shell" company "MEMS NV" and its
subsidiary MEMS USA, Inc. - a California non-public corporation "MEMS CA"
together), "The Company" have been prepared in conformity with accounting
principles generally accepted in the United States of America for interim
financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States
of America for complete financial statements. In the opinion of
management, all adjustments considered necessary for fair presentation
have been included.
(2) Exchange Transaction:
On January 28, 2004 the Registrant entered into an Agreement and Plan of
Reorganization to acquire all of the issued and outstanding common stock
of MEMS USA, Inc. (a California Corporation and private company, "MEMS CA"
in exchange for up to 10,000,000 shares (post split) of the registrant's
common stock. Each of MEMS CA's outstanding common shares were converted
into 1.7125634 shares of MEMS NV (formerly known as Lumalite Holdings, Inc
a public company with 3,385,779 shares outstanding prior to the
transaction), subject to adjustment for the elimination of fractional
shares. No fractional shares were issued. Instead, cash equal to $2.50 per
share of eliminated fractional shares will be paid to the stockholders. At
the closing, MEMS CA became a wholly-owned subsidiary and the MEMS CA
stockholders were issued 10,000,000 shares, owning approximately 80% of
the outstanding common stock. Since the former stockholders of MEMS CA
became the controlling stockholders of the company after the transaction,
it was accounted for as an acquisition of MEMS NV by MEMS CA, using
reverse merger accounting.
(3) Stock Exchange:
In connection with the aforementioned exchange transaction, the Company
effected a 1.7125634 to one stock split. The retroactive effect of the
split has been made for all periods presented.
6
MEMS USA, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
(4) Interim Financial Statements:
The accompanying unaudited financial statements for the nine months ended
June 30, 2004 and 2003 include all adjustments (consisting of only normal
recurring accruals), which, in the opinion of management, are necessary
for a fair presentation of the results of operations for the periods
presented. Interim results are not necessarily indicative of the results
to be expected for a full year. These unaudited financial statements
should be read in conjunction with the audited financial statements for
the period from November 17, 2000 (inception) to September 30, 2003, to be
included in an amendment to the company's Form 8-K.
(5) Going Concern Consideration:
As discussed above (Nature of Business), the accompanying financial
statements have been prepared in conformity with accounting principles
generally accepted in the United States of America, which contemplate
continuation of the Company as a going concern. The Company's primary
operations and sources of revenue are currently being developed. MEMS CA
revenue streams have been established, yet as a development stage
enterprise, these streams remain to be classified as consistently
substantial on an ongoing basis. This characteristic raises 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 as a going concern.
The Company has undergone a merger and plan of reorganization, obtaining
all outstanding shares of MEMS CA as of February 18, 2004. MEMS NV
exchanged 10,000,000 shares of MEMS NV common stock for all of the
outstanding common and preferred stock of MEMS CA. Management plans to
issue remaining shares of MEMS NV through syndicators and investment
bankers in order to provide financing for ongoing operations. During the
nine months ended June 30, 2004, the Company generated common stock
subscriptions totaling $1,874,080. The funds for these shares have been
collected and the shares will be issued upon the closing of the current
offering.
(6) Private Placement of Securities:
In connection with a private placement of securities in the quarter ended
June 30, 2004, the Company received $1,874,080 for the sale of its shares
in a private offering transaction. The transaction originally provided for
the sale of up to $1,500,000 (subsequently increased by consent of MEMS'
board) in shares of the Company's unregistered common stock, $.001 par
value per share, in minimum investment amounts of $10,000, sold to
accredited investors within the meaning of Rule 501(a) of regulation D of
the Securities Act of 1933. The shares will be priced at a 30% discount
from the closing price posted on the OTCBB on the day that the investment
amount is received by the Company.
7
MEMS USA, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED JUNE 30, 2004 AND 2003 (UNAUDITED)
(6) Private Placement of Securities, Continued:
As the shares related to the $1,874,080 receipts have not yet been issued
the amounts are classified in the accompanying balance sheet as a
liability to be satisfied through issuance of shares. On July 13, 2004,
the unregistered shares of common stock were issued.
8