EVOI - Management`s Discussions: 10-K, DIRECT CONNECT INTERNATIONAL INC 4 of 4
FRIDAY, OCTOBER 01, 1999 12:42 PM
- Edgar Online
During the years ended April 30, 1999, 1998 and 1997 the Company purchased products totaling approximately $0, $0, and $305,000, respectively, from a corporation which is owned and operated by a principal stockholder and executive vice president of the Company. During the fiscal years ended April 30, 1999, 1998 and 1997 the Company incurred product development expenses of approximately $0, $ 0, and $24, 000, respectively, payable to this corporation.
During the fiscal year ended April 30, 1999, the Company incurred consulting fees totaling $143,000 in connection with activities taken on its behalf by its Chairman to develop new business or merger opportunities. In addition, during the year ended April 30, 1999, the Chairman also advanced $50,300 to the Company of which $20,300 was repaid prior to April 30, 1999.
During each of the years ended April 30, 1999, 1998 and 1997, the Company paid approximately $72,000 to an officer for legal services rendered.
As of April 30, 1999 and April 30, 1998 the Company held 8% notes receivable from certain officers aggregating approximately $97,600, and $99,000, respectively, including interest. Interest income for the years ended April 30, 1999, 1998, and 1997 on officers' loans totaled approximately $6,700, $4,900, and $6,000, respectively.
Note 11 - Commitments and Contingencies
(a) License Agreements
The Company has the right to use product names and designs under license agreements with designers. These agreements require the Company to pay royalties ranging from 5% to 10% of sales.
For the years ended April 30, 1999, 1998, and 1997 approximately 0, 0 and 77%, respectively, of sales were the licensed products, Little Sleepy Eyes and Lamb Chop.
DIRECT CONNECT INTERNATIONAL INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1999 Note 11 - continued
(b) Major Customers
The Company had sales to major customers during the years ended April 30, 1999, 1998, and 1997 as follows:
% of Total
Sales
Year Ended Number of Attributable to
April 30 Major Customers Major
Customers
-------- --------------- ---------------
1999 0 0 1998 0 0
1997 2 86 Note 12 - Subsequent Events
(a) In June 1998, the Company's subsidiary, Amerawell Products, Limited (Amerawell) commenced a lawsuit in the Superior Court of New Jersey against Toys R Us (TRU) for products shipped and delivered to TRU amounting to approximately $185,000, which has not been paid. TRU has answered the complaint, denying liability. TRU, in the same proceeding, named the Company as a third party defendant alleging, among other things, that the Company breached its contract with TRU regarding advertising such products and that the Company because of its relationship to Amerawell or as a result of its own conduct was liable for all the damages suffered by TRU allegedly amounting to approximately $250,000. The Company's management believes that the Company has a meritorious defense.
In December 1998 the Company was also served with a complaint through its designated agent in Delaware by Chieftain LLC, a California limited liability corporation, and Leonard Mahowa in connection with a lawsuit brought in the State of California. The complaint was primarily directed against Medical Device Alliance, Inc. (MDA) a Nevada corporation engaged in the business of marketing, selling and leasing an ultrasonic liposuction system. The case generally involves the issuance of securities by MDA in a private placement. The Company is a named defendant for alleged conspiracy to defraud, conspiracy to divert assets and for undetermined damages for alleged ultra vires transactions which allegedly arose out of MDA's purchase of stock and notes from the Company's preferred stockholders and noteholders in the aggregate amount, at September 10, 1999, of approximately $2,475,000. The Company believes that such allegations are without merit and has retained California counsel to defend it in this matter.
(b) From May 1, 1999 through September 10, 1999, the Company sold 70, 000 shares of Datatec stock for an aggregate sales price of $218,822. The proceeds from such sales were used to fund the Company's operating activities.
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