The Series A Preferred Stock has equal dividend rights to the common shares, is not convertible into common shares, has no cumulative dividend requirements and has liquidation preferences equivalent to the common shares. 3,400,000 of the Series A Preferred Stock are entitled to the voting rights of 10 common shares, and 2,000,000 of the Series A Preferred Stock are entitled to the voting rights of 100 common shares. At September 30, 2015 and June 30, 2015, there were 5,400,000 Series A Preferred Stock issued and outstanding, respectively.
The Series B Preferred Stock has equal dividend rights to the common shares, has no cumulative dividend requirements, has liquidation preferences equivalent to the common shares and each preferred share is entitled to the voting rights of 10 common shares. Each share is convertible into options to purchase two shares of common stock at $3.00 per share, exercisable immediately and the options expire ten years from the date the preferred stock is exchanged. At September 30, 2015 and June 30, 2015, there were 300,000, series B Preferred shares issued and outstanding.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
. As of September 30, 2015, Registrant had cash of $794,531. Cash increased from the June 30, 2015, balance due to the proceeds (amounting to $800,000) from a placement of 2,500,000 shares of restricted common stock on August 13, 2015. Funds expended on the technology development, as well as products of the declined during the quarter as the Company focused management efforts to finalize a license for the Solar Lens system with two private companies.
Registrant has total liabilities at September 30, 2015, of $209,766 compared to the liabilities at June 30, 2015, of $214,462. The shareholders' equity at September 30, 2015, increased to $868,450 from the June 30, 2015 balance of $86,045. (The increase was generated primarily from the proceeds received through the placement of common stock during August of 2015. During the quarter the June 30, 2015 obligation to a related party of $163,668 decreased to $153,517 as of September 30, 2015.
Registrant had cash and total current assets of $794,531, had current liabilities of $209,766 and had shareholders' equity of $868,450 as of September 30, 2015, compared to cash of $16,822, current liabilities of $214,462 and stockholders
’
equity of $86,045 as of June 30, 2015. As of September 30, 2015, the ratio of current assets to current liabilities (current ratio) was approximately 3.8.
Results of Operation
. For the quarters ended September 30, 2015 and 2014, Registrant had no revenues. For the quarter ended September 30, 2015, Registrant had expenses of $17,595 compared to expenses of $30,087 for the September 30, 2014 period a year earlier. The lack of revenues reflects the focus on licensing the Solar Lens technology with an expectation of generating royalty income.
For the quarter ended September 30, 2015, the Registrant incurred a net loss of ($17,595) compared to a net loss of ($30,087) for the same period a year earlier. The decrease in net loss is attributable primarily to the reduction in research and development expenses. Additionally all assets were sold or fully depreciated so starting in fiscal year end June 30, 2016, the depreciation expense went to $-0-. Operating expenses have changed to negotiating licensing arrangements for the developed Solar Lens technology. Finally, for the past year the Company has incurred professional fees for accounting and legal services required as management has been focused upon bringing the public filings of the Company current.
The first quarter 2015 basic and diluted loss per share was $(0.00) which was consistent with the loss per share of (0.00) reported in the first quarter of 2014.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Management is pursuing various sales and licensing agreements, will receive $3, 077,838.83 from placement of common stock; and is hopeful that the stock placement and the licensing agreements will generate sufficient cash flow for the Company to remain a going concern.
Company
’
s Business
. The products which the Company has under development are described in its report on Form 10-K, which was filed on or about March 3, 2016. Generally speaking the Company anticipates completing the license agreement allowing licensees to develop, manufacture and sell products based upon the Alternate Solar Lens technology. Management and the board of directors plan to consider options for researching and developing products based upon various products, for which the Company has developed core technologies, including opportunities for products based upon:
1.
Alternate Solar Energy Thermal Lens Technology;
2.
Bladeless Propulsion Steam Turbine;
3.
Automated Fingerprint Identification Machine;
4.
Digital Wave Modulation;
5.
Automatic Self-Service Checkout System;
The Company is incorporating the report on Form 10-K filed on March 11, 2016, into this report by reference.
Summary of Technologies Being Developed
. The Company has an Alternate Solar Energy Thermal Lens (
“
Lens
”
) which has been the subject of licensing efforts with two private companies. The lens may also be incorporated with the Company
’
s bladeless turbine as a system to generate power. The system would focus and efficiently capture the solar energy onto a receiver which could then be used to propel the bladeless turbine. The System may use multiple concentrators to supply a single turbine.
The Company has an Automated Fingerprint Identification Machine (
“
AFIM
”
) which is designed to have the capability of verifying the identity of individuals. The AFIM will be able to identify a person utilizing information previously stored. The Company believes that it has the ability to connect a series of AFIM
’
s to a single personal computer. The person whose identity will be verified has the AFIM read their fingerprint. The person whose identify is being verified has the AFIM read the fingerprint which is then stored in a storage medium and is available for subsequent positive identification of individuals via their fingerprint.
The Company purports that it has developed technology and theoretical application that would transmit information and data using different electromagnetic wave patterns (radio waves). The different patterns are based upon configurations and timing of the radio waves. The Company refers to this technology as the Digital Wave Modulation (
“
DWM
”
). The Company believes that this technology may increase the amount of information which can be transmitted during discrete time periods (increased band-width density). The commercial feasibility of this technology has not been demonstrated. The Company plans to continue investigating the technology
’
s feasibility. There is great competition in the communication, data transfer and storage systems. There are risks arising from the costs required to develop commercially viable products. The Company
’
s research and commercialization is limited by funds available for development. To be successful the Company must have necessary skilled personnel marketing capabilities and strategies for each product developed or under development.
The Company has patented a bladeless propulsion steam turbine. It uses the expansion of steam to create a rotational force. The Company believes that its turbine is at least as effective as other turbines, is smaller in size, requires less maintenance, is less expensive to manufacture, is mass producible, and does not require cooling towers. It is more mobile and water conserving than other turbines. The Company believes that its turbine will be marketable to the utility power industry, hydrogen production operators, and transportation support. The Company may not be able to manufacture because of lack of sufficient funding, government interference and regulation, lack of acceptance in the industry, and many other conditions not under the Company
’
s control.
The Company has developed an Automatic Self-Service Check-Out System. In retail operations the Self-Check-Out System would allow customers to personally check out and pay for the items to be purchased. A scanner reads the bar codes on the items being purchased and a scale weighs the scanned items that are placed in the receiving baskets. The Self-Check-Out System is designed to replace or supplement clerk operated cashier registers. When fully implemented a store manager is able to maintain accurate inventory of items on a contemporary basis.
For the Self-Check-Out System to operate, at least 95% of the items must have bar codes. The retailer may have to purchase equipment to be able to put bar codes on items in the store. The Company believes that the Self-Check-Out System may reduce thefts and employees will be unable to circumvent traditional Check-Out systems.
Another market being tested is automatic ordering and payment. Customers would use a touch screen to initiate an order and make payment using the Company
’
s AFIM technology. The order would be sent automatically to the food preparers.
Patents and Trade Secrets
. The Company has been assigned or will be assigned the rights to several U.S. patents. Four patents pertaining to the AFIM technology were granted in January 1997, February 2001, July 2001, and September 2002. Seven patents pertaining to the DWM technology were granted in May 1996, June 1997, November 1997, July 2000, September 2000, October 2000, and May 2001. A patent relating to shelf tag was granted on September 2003. Four patents relating to the turbine were granted in March 2003, January 2004, February 2006, and November 2007. A patent pertaining to the solar energy technology was granted in October 2007.
The Company has not sought or received an opinion from an independent patent attorney regarding the strength of the patents or patents pending and the ability of the Company to withstand any challenge to the patent or any future efforts by the Company to enforce its rights under a patent or patents against others. In 2008 a court held that one of the AFIM patents was invalid.
The Company believes that it also owns trade secrets and it makes efforts to safeguard and secure its trade secrets. There can be no assurance that these safeguards will enable the Company to prevent competitors from gaining knowledge of these trade secrets and using them to their advantage and to the detriment of the Company.
The Company relies to a great extent upon its proprietary technology for development of its products. There can be no assurance that others may not develop technology which competes with the Company
’
s products and technology.