mirenco10ksb123104
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2004
Commission File No. 333-41092
MIRENCO, INC.
(Name of small business issuer in its charter)
IOWA 39-1878581
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
206 MAY STREET, RADCLIFFE, IOWA 50230
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (515) 899-2164
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which
registered
__________________________ ______________________________
Common Stock, no par value NONE
Securities registered under Section 12(g) of the Exchange Act: NONE Check
whether the issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 12 months (or for such shorter period
that the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES X NO __
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this Form 10-KSB, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this
Form 10-KSB. X
The issuer's revenues for the most recent fiscal year were $353,834.
The aggregate market value of the voting stock held by nonaffiliates, based on
the closing sale price of the over-the-counter market on March 15, 2004, was
$1,561,000. As of March 31, 2004, there were 14,645,082 shares of Common Stock,
no par value, outstanding.
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MIRENCO, INC.
FORM 10-KSB
Fiscal Year Ended December 31, 2004
TABLE OF CONTENTS
PART I
Item 1. Description of Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis or Plan of Operation
Item 7. Financial Statements and Supplementary Data
Item 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure
Item 8A. Controls and Procedures
Item 8B. Information Requiring Disclosure on Form 8-K
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons, Compliance With Section 16(a) of the
Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and
Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K
Item 14. Principal Accountant Fees and Services
SIGNATURES
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Cautionary Statement on Forward-Looking Statements.
The discussion in this Report on Form 10-KSB, including the discussion in
Item 1 and Item 6, contain forward-looking statements that have been made
pursuant to the provisions of the Private Securities Litigation Reform Act of
1995.
Such forward-looking statements are based on current expectations,
estimates and projections about the Company's business, based on management's
current beliefs and assumptions made by management. Words such as "expects",
"anticipates", "intends", believes", "plans", "seeks", "estimates", and similar
expressions or variations of these words are intended to identify such
forward-looking statements. Additionally, statements that refer to the Company's
estimated or anticipated future results, sales or marketing strategies, new
product development or performance or other non-historical facts are
forward-looking and reflect the Company's current perspective based on existing
information. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict. Therefore, actual results and outcomes may differ materially from what
is expressed or forecasted in any such forward-looking statements. Such risks
and uncertainties include those set forth below in Item 1 as well as previous
public filings with the Securities and Exchange Commission. The discussion of
the Company's financial condition and results of operations included in Item 6
should also be read in conjunction with the financial statements and related
notes included in Item 7 of this annual report. The Company undertakes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
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PART I
ITEM 1. Description of Business
(a) Development
Mirenco, Inc. was organized and incorporated in the State of Iowa on February
21, 1997. We develop and market technologically advanced products for throttle
control of internal combustion vehicles to improve fuel efficiency, reduce
vehicle maintenance costs, and reduce environmental emissions. Mirenco also
offers consultative services in evaluating diesel engines through its Combustion
Management Program which consists of testing procedures, comparison to other
engines on its proprietary data base and making recommendations for maintenance
activities and/or application of Mirenco's patented technology.
From July 30, 1999 to July 30, 2000, we raised $7,806,240 in the sale of
1,561,248 shares of common stock at $5.00 per share to Iowa-only residents in a
self underwritten, intrastate direct public offering. We claimed the exemption
from registration in this intrastate offering provided by Section 3(a)(11) of
the Securities Act of 1933. We noted that the shares were part of an issue
registered, offered and sold only to residents of Iowa; we are incorporated in
Iowa; and we do business within Iowa. Nonetheless, certain of our "Iowa-Only
Offering Shares" were resold by Iowa residents to non-Iowa residents before
"coming to rest" underss. 3(a)(11) and/or Rule 147's nine-month standard. As a
result, we voluntarily elected to rescind the Iowa-Only Offering, which resulted
in the refund of $261,700 for 52,340 shares returned and cancelled, incurring
total interest expense of $14,990. The rescission offer was available only to
the Iowa-Only Offering Stockholders. As of February 26, 2001, the termination
date of the rescission offer, the Iowa-Only Offering net investment was
$7,544,540, or 1,508,908 shares. On February 26, 2004, the statute of
limitations on this rescission offering expired and $7,544,540 was reclassified
to equity.
(b) Business
Our primary products are derived from technology patented in the U.S., Mexico
and Canada. These products are DriverMax(R), DriverMax-
CX(R)DriverMax(R)Software, HydroFire(R)Injection, HydroFire(R)Fluid,
HydroFire(R)Lubricant and EconoCruise(R). In addition to products, Mirenco, Inc.
offers consultative services with its Combustion Management Program.
(1) Products and services
DriverMax(R)is a device that improves engine exhaust emissions and fuel mileage
while it reduces vehicle maintenance costs using precise programmable computer
management of the vehicle's throttle position. The device controls the fuel flow
directly proportional to the engine's combustion capability. This product is
designed primarily for heavy start-stop vehicles such as buses, garbage trucks
and construction vehicles.
We completed the development of a new DriverMax(R)product, which operates an
electronically digitally controlled engine, thus opening up a completely new
market relative to the extra heavy-duty diesel engine. We are working in
conjunction with the United States Department of Energy to develop a prototype
of this technology, perform appropriate testing and launch production of this
product. The application for this technology is the reduction of black smoke
(opacity) in off-road construction equipment as well as heavy-duty underground
equipment used in mining, gravel, and sandpit operations.
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Another new product we have completed is an adaptation of the
DriverMax-CX(R)which can operate on digitally controlled electronic engines..
Prior to introducing this new product, DriverMax(R)was operable only on analog
controlled electronic engines.
The HydroFire(R)System is a sophisticated superset of the
DriverMax(R)technology, providing all the benefits of the DriverMax(R)plus the
additional benefit of cutting oxides of nitrogen (NOx) emissions under
performance conditions where NOx is produced. Specifically, NOx is produced
under heavy loads and high engine temperatures. When these conditions occur,
HydroFire(R)Injection injects a patented fluid, HydroFire(R)Fluid, into the
engine to reduce the NOx production by approximately 50%. The HydroFire(R)Fluid
is a patented water-alcohol-lubricant mixture for which we have patented the
blending process. Specifically, water cuts the NOx production, alcohol serves as
antifreeze for the water, and HydroFire(R)Lubricant serves to thwart the
potentially solvent and/or corrosive characteristics of the alcohol in the
engine and/or storage containers. HydroFire(R)Systems are designed primarily for
heavy transport vehicles such as buses and over-the-road trucks.
EconoCruise(R), currently in development, is a highly sophisticated throttle
control system which provides advanced levels of "intelligence" to common cruise
control technology. EconoCruise(R)utilizes Global Positioning System signals to
"know" the topography of the road ahead, thereby allowing the vehicle to best
manage throttle and emissions. We anticipate that this product will be
marketable to the population of existing vehicles as an "add-on" and that the
rights to the patented technology and proprietary design work will be marketable
to automakers.
Mirenco, Inc. also offers its Combustion Management Program.
This program consists of an evaluation of the diesel engine based on test
results and comparisons with other like engines. Mirenco has developed an
extensive data base of evaluation results from prior testing of thousands of
diesel engines. The evaluation consists of performing the SAE-J1667 test using
smoke meters and in some cases a 5 Gas test.
The SAE-J1667 test consists of measuring the opacity of the smoke emitted from
the exhaust of the diesel engine. Technicians also observe other pertinent items
such as the temperature at time of test, the type of fuel being used and the
color of the smoke being emitted from the exhaust pipe. This test is run six
times to insure a representative sample of the opacity is valid. The results of
these tests allow Mirenco to evaluate the condition of the engine, determine
commonalities among engine types, evaluate the entire fleet and recommend
appropriate maintenance procedures for each specific vehicle. From these
results, we can also make recommendations for the appropriate application and
programmable setting of DriverMax(R)to best suit the engine.
Our continued relationship with the Transit Authority of River City (TARC) of
Louisville, Kentucky, had yielded a dramatic reduction in tailpipe emissions for
their fleet. The program has reduced the number of pounds of soot emitted by 70
% and saved Louisville thousands of dollars in fuel costs since inception of the
program. We have developed an emissions testing program under a service
agreement that requires tailpipe emissions testing of each bus three times a
year. The results are reported on a fleet and per vehicle basis to assist TARC
in determining the need for maintenance and application of and/or adjustment of
the DriverMax(R)system.
This contractual model is the forerunner of Mirenco's efforts in assisting our
customers to further reduce emissions, apply economical maintenance procedures
and recognize an excellent cost benefit from the program.
Mirenco's Combustion management program has been successfully applied to the
underground mining industry to reduce diesel particulate matter. This industry
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is under strict regulation from the Mining Safety and Health Administration
(MSHA) to reduce particulate emissions for the safety of its workers. During
2004, Mirenco's technicians applied the combustion management program,
DriverMax(R) and DriverMax-CX(R)products in 15 mines throughout the United
States.
The applications have resulted in a dramatic reduction in the emissions of
diesel particulate matter resulting in achieving or approaching MSHA's
requirements.
(2) Distribution methods
We are developing relationships with distributors for the delivery of our
products as well as for direct sales and marketing services. We believe that
various methods will be employed for varying markets, and we will use the most
economical means available as our marketing development continues. Mirenco's
marketing will include increasing the information distribution about what our
product can do as well as educating the customer concerning the value of
Mirenco's programs compared to alternative solutions.
Mirenco's marketing strategy includes the direct sale by Mirenco's sales force
of our methodology, the Combustion Management Program and our technology,
DriverMax(R). These products can demonstrate an economic benefit to our
customers and potential customers, particularly those whose fleets have a high
degree of stops and accelerations in their duty cycle. The methodology promotes
the use of the technology and the technology promotes the use of the methodology
or each product or service can be marketed independently.
(3) New Products
During 2004, the Company completed the development of its DriverMax-CX which is
an application for digitally controlled electronic diesel engines. This provided
a new market in the industrial, construction and additional over the road
vehicles.
(4) Competition
The market for our products and services is characterized by rapid technological
developments, frequent new product introductions and evolving, varying industry
and regulatory standards. We believe there is no known automotive retrofit
device that can compete with our current or contemplated spectrum of products.
Mirenco Inc.'s technologies and solutions are aimed at reducing wasted fuel and
excess emissions. Mirenco, Inc.'s Combustion Management Program also includes a
financing option for its products and services. Our greatest advantage over
other competing products is that Mirenco's overall program keeps engines burning
fuel efficiently thereby extending the vehicle's useful life. This is the
Mirenco advantage over other environmental solutions which either filter engine
exhaust emissions (with the risk of clogging) or exhaust catalysts that burn
fuel with no useful application of the energy produced.
Other products Mirenco must consider as competitive include: catalytic
converters, exhaust traps, fuel additives and other specialized products such as
alternative fuels.
(5) Production suppliers
We currently outsource the production of DriverMax(R)according to our
specifications to ICE Corporation, an FAA certified electronic manufacturing
company located in Manhattan, Kansas. Generally all materials required to
manufacture and assemble our product line are readily available shelf items.
Orders are typically manufactured and delivered within, at most, a ten week time
frame. Payment terms are standard for the industry. We are not required to order
or accept delivery of any product based on a predetermined time schedule, and
production unit costs decrease with increasing quantities.
At the present time, we intend to continue outsourcing production to companies
which can meet our specifications for high quality and reliability. Management
has contacted other companies capable of producing our products at the desired
levels should the need arise.
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(6) Patents and trademarks
Mirenco, Inc. owns the following patents. Patents number 1 through 5 were
purchased from American Technologies on April 30, 1999:
1. United States Patent Number 4,958,598, issued September 25, 1990, entitled
"Engine Emissions Control Apparatus Method."
2. United States Patent Number 5,315,977, "Fuel Limiting Method and Apparatus
for an Internal Combustion Vehicle" issued May 31, 1994.
3. Canadian Patent Number 1,289,430, issued September 24, 1991, entitled "Engine
Modification Apparatus Fuel."
4. Mexican Patent Number 180,658, "Fuel Limiting Method and Apparatus (Staged
Fueling). Registration date January 17, 1996.
5. Canadian Patent Number 2,065,912, issued June 1, 1999, entitled "Fuel
Limiting Method and Apparatus for an Internal Combustion Vehicle." Application
date April 13, 1992.
6. United States Patent Number 6,370,472 B1 issued April 9, 2002 entitled Method
and Apparatus for Reducing Unwanted Vehicle Emissions Using Satellite
Navigation.
7. Patent pending - Method and apparatus for remote communication of vehicle
combustion performance parameters (filed May 23, 2003).
As part of the purchase agreement for the patents listed in paragraphs 1-5,
Mirenco, Inc. agreed to pay American Technologies a 3% royalty of annual gross
sales for a period of twenty years, which began November 1, 1999.
In addition to the above described patents, we have filed for and obtained the
following Registered Trademarks:
1. HydroFire(R)Fluid 5. EconoCruise(R)
2. HydroFire(R)Injection 6. "SmartFoottm
3. HydroFire(R)Lubricant 7. "Satellite-to-Throttletm
4. DriverMax(R)
(7) Government regulation
Currently, all conventional vehicles, as well as most alternate fuel vehicles
and certain retrofit technologies legally sold in the United States, must be
"certified" by the Environmental Protection Agency (EPA) to qualify for the "Low
Emission Vehicle" ("LEV") classification necessary to meet federal fleet vehicle
conversion requirements. Our products have not been verified by the EPA,
however, our marketing efforts to federal fleets is non-existent.
In addition, The Mine Safety and Health Administration (MSHA) has begun
extensive air quality testing in underground mines. This activity has produced a
new emphasis on the underground mining industry to consider new methods to
improve the air quality for its employees. We have made significant inroads in
marketing both our methodology and technology in the underground mining markets.
We believe our products to be "retrofit devices" as defined under EPA
regulations. We are, however, subject to the regulatory risk that the EPA may
construe distribution of the products to be also governed by "fuel additive"
regulations. These more stringent regulations sometimes require scientific
testing for both acute and chronic toxicity, which is not required for approval
of pollution control products deemed as "retrofit devices". Such additional
compliance procedures could substantially delay the wide commercialization of
HydroFire(R)products. We believe the EPA "fuel additive" regulations do not
apply to our DriverMax(R)products, since our product does not involve the
introduction of additives into the engine air intake system, as those terms are
defined in EPA regulations and generally understood in the automotive
engineering community.
We are not aware of any proposed regulatory changes that could have a material
adverse effect on our operations and/or sales efforts. Further, we have not been
required to pay any fines for, and are not aware of any issues of, noncompliance
with environmental laws.
(8) Research and development
The Company expenses research and development costs as incurred, classifying
them as operating expenses. Such costs include certain prototype products, test
parts, consulting fees, and costs incurred with third parties to determine
feasibility of products. Costs incurred for research and development were $8,772
and $42,245 in 2004 and 2003, respectively.
(9) Employees
As of December 31, 2004, and as of the date of this filing, we had 18 full-time
employees, with four part-time employees. There have been no management-labor
disputes, and we are not a party to any collective bargaining agreement.
ITEM 2. Properties
Mirenco, Inc. owns a 21,600 square foot office, warehouse and distribution
facility located in Radcliffe, Iowa. . The building is located on 1.2 acres of
land. Prior to the completion of this new facility in 2001, Mirenco, Inc. owned
no property and leased all business facilities.
ITEM 3. Legal Proceedings
None.
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ITEM 4. Submission of Matters to a Vote of Security Holders
NONE
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PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information
Effective June 15, 2001, Mirenco, Inc. common stock began initial trading on the
over-the-counter "bulletin board" market under the symbol "MREO.OB".
Price Range of Common Stock
The following table sets forth the high and low sales prices of the Company's
common stock as obtained from the Quotes tab at the Internet site
www.nasdaq.com. These prices reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions. The
stock did not begin trading until the second quarter of 2001.
Fiscal Period 2004 2003
High Low High Low
First Quarter .75 .30 .85 .26
Second Quarter .55 .35 .70 .35
Third Quarter .47 .20 .65 .30
Fourth Quarter .45 .16 .60 .25
During the 2004, the Company issued non registered securities to accredited
investors only as follows:
(1) Notes Payable to four shareholders $ 50,000
(2) Common stock 1,770,000 shares $545,685
(b) Approximate Number of Equity Security Holders
Approximate Number of
Record Holders
Title of Class as of December 31, 2004
Common Stock, no par value 3,600(1)
(1) Included in the number of stockholders of record are shares held in
"nominee"or "street" name.
(c) Dividend History and Restrictions
The Company has never paid a cash dividend on its common stock and has no
present intention of paying cash dividends in the foreseeable future. Future
dividends, if any, will be determined by the Board of Directors in light of the
circumstances then existing, including the Company's earnings, financial
requirements, general business conditions and any future possible credit
agreement restrictions.
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(d) Securities Authorized for Issuance Under Equity Compensation Plans
Name of Plan Number of securities Number of securities Number of securities Number of securities
Authorized for issuance awarded plus number of to be issued upon exer- remaining available
Under the plan securities to be issued cise of outstanding for future issuance
Upon exercise of options, options, warrants or
Warrants or rights granted rights
During last fiscal
Year
1998 Common
Stock
Compensation
Plan 1,200,000 shares 367,400 shares 299,400 shares 832,600 shares
1999 Common
Stock
Compensation
Plan 750,000 shares 450,000 shares 450,000 shares 300,000 shares
2001 Common
Stock
Compensation
Plan 250,000 shares 23,060 shares 22,560 shares 226,940 shares
2004 Common 1,000,000 shares 257,250 shares 250,250 shares 752,750 shares
Stock
Compensation
Plan
All of the above Stock Compensation Plans were approved by the Company's
shareholders.
There were no individual stock compensation arrangements outside of the formal
plans indicated in the table above.
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ITEM 6. Management's Discussion and Analysis or Plan of Operation
General and Background
We have incurred annual losses since inception while developing and introducing
our original products and focusing management and other resources on
capitalizing the Company to support future growth. The losses incurred to date
are considered normal for a development stage company. Relatively high
management, personnel, consulting and marketing expenditures were incurred in
prior years in preparation for the commercialization of our products. We expect
distribution, selling, general and administrative expenses to increase directly
with sales increases, however, as a percentage of sales, these expenses should
decline.
From July 30, 1999 through July 30, 2000, we raised $7,806,240 from our
Iowa-Only Offering. On August 12, 2000, we determined that resales of Iowa-Only
shares by Iowa residents to non-Iowa residents violated certain provisions of
the Securities Act of 1933. In response, we undertook an offering to rescind the
earlier Iowa-Only Offering in an offering effective January 26, 2001. The
Rescission Offer terminated on February 26, 2001 with the result that we
refunded 52,340 shares or $261,700, incurring interest expense of $14,990. As a
result, at December 31, 2001, the 1,508,908 Iowa-Only Offering Shares, in the
amount of $7,544,540, are classified as a liability . These shares will remain
as a liability until such time as the violations under the securities laws have
been cured. Subsequent to the close of the Rescission Offer, we believe that
Iowa-Only Offering Stockholders are estopped from alleging injury. However, we
will continue to be contingently liable to such stockholders during the statute
of limitations, a period of three years from the date of the Rescission Offer.
On February 26, 2004, the relevant statute of limitations expired and we have
reclassified the temporary equity to permanent equity as of that date.
Plan of Operation
The Company is making the transition from research and development to sales and
service. We believe this transition timing is appropriate for sales of our
products and service. Due to increased regulation and economic issues, Mirenco
recognizes the growing importance of tailpipe emissions control and the cost of
vehicle operation. We believe that market attention to tailpipe emissions and
demand for our DriverMax(R)technology and our Combustion Management Program
methodology will increase as we make the market aware of our products and
services.
From January of 2003 until July 2003, the Company concentrated on verification
by the EPA and the California Air Resources Board (CARB). The verification
efforts were considered important to receive federal monies for the
DriverMax(R)technology and to receive certification from CARB as an emissions
control device.
In July, 2003, the Company shifted its emphasis since its primary markets are
outside the Federal Government and its technology had already been certified by
CARB as a fuel saving device.
Approximately August 1, 2003, the Company began changing from a Research and
Development Company to a Marketing Company. The Company began determining its
markets, the effectiveness of its efforts in Mexico and Canada, the
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effectiveness of its international sales representative and the effectiveness of
its other sales representative and distribution arrangements in relation to its
markets.
Mirenco determined its markets to be segmented into eight groups:
1. Metropolitan Transit Authorities
2. Bus Manufacturers
3. Mining Operations
4. School Buses
5. Government Entities
6. Over-the Road Transportation Companies
7. Company Owned Fleets
8. Other (Construction, Agriculture, etc.)
Mirenco determined the most effective approach to each of these markets was the
development of a long term strategy to develop its distribution and sales
representative network in addition to its own internal sales staff. The sale of
Mirenco's technology and methodology is an extensive process with an educational
approach required. Before we can attract quality sales representatives and
distributors, we have to develop an internal customer base in specific markets.
We can then repeat our successes in the sales representative and distributor
sales channel.
Mirenco had established several relationships with sales representatives and
distributorships which did not meet the criteria necessary to promote a
successful relationship for either Mirenco or the outside sales entity. These
relationships were eliminated by March 31, 2004. Mirenco has established, or is
in the process of establishing new industry specific relationships.
Mirenco continues to develop its data base as a significant component to its
Combustion Management Program. With over 200,000 data points and a growing
number of engines involved, the Program allows for a comparison of like engines
to determine commonalities which are useful in recommended maintenance and
technology application.
While the Company is expanding its marketing activities, certain research and
development activities continue. These activities are concentrated in expanding
current DriverMax(R)capabilities including applications for mechanically timed
engines and applications for digital, electronic fuel injection engines.
The Balance of This Page Left Intentionally Blank
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Results of Operations
Sales increased $260,748 in the year ended December 31, 2004 compared to the
same period for 2003. During 2004, we have continued to focus management and
other resources on developing our products and markets.
During 2004, we continued developing the new sales strategy founded upon
collecting emissions data before and after the use of our products and providing
continuing emission testing services of our installed products. In addition, the
Company believes the development of a data base cataloguing the results of
testing without the use of Mirenco's products has provided a source of
information for fleet operators for determining the need, and in some cases, the
nature of maintenance needed. In 2003, the Company established its internal
sales department to promote direct sales and develop relationships with
professional distributors established in the industries identified. To date, the
Company is in negotiations with two such distributors that meet the criteria to
promote and install its products.
In July, 2002, the company entered into an agreement with The Iowa Foundation
for Educational Administration, Inc. to participate in the Bus Emissions
Education Program (BEEP).
Under the terms of the contract, Mirenco agreed to perform semi-annual testing
of tail pipe emissions on all participating diesel school buses in the State of
Iowa. During 2002, Mirenco performed 2 rounds of the semiannual tests on
approximately 5,000 buses. The test results were reported to each school
district for evaluation and maintenance planning and performance.
Mirenco is also responsible to perform fundraising for the non-profit program.
The fundraising is ongoing and includes funding requests from both public and
private sources. Mirenco's ability to collect for its services to the BEEP
Program depend on its ability to successfully raise the required funds for
payment under the terms of the contract. There were no revenues recorded on the
Company's financial statements for the fiscal year ended December 31, 2002 with
respect to this program. The tests did however demonstrate the value of the
database and reports of the emissions information for maintenance planning and
performance with respect to the BEEP Program. Sales of $882,900, originally
included in revenues in 2003, from the Bus Emissions and Education Program were
written off in 2003. This agreement was terminated in 2004.
Total cost of sales was approximately 68% of total revenue in 2004 compared to
97% of total revenue in 2002. This decrease is related to the continued focus
during the year from research and development or information gathering mode to
development of sales. Management believes cost of sales will range between 40%
and 60% of sales as increased unit sales levels cover production overhead and
unit costs.
Operating expenses in 2004 decreased $303,661 from 2003. The decrease is
attributable to efforts to hold down costs while devoting efforts to sales
development.
Royalty expense for the years ended December 31, 2004 and 2003 was 3% of sales
calculated per the patent purchase agreement with American Technologies.
Our net loss decreased from $1,590,370 in 2003 to $1,229,182 in 2004 as a result
of increased sales and reduction in operating expenses.
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Liquidity and Capital Resources
We have not yet commenced generating substantial revenue.
The Company expects to incur losses until we are able to generate sufficient
income and cash flows to meet operating expenditures and other requirements.
Since our inception in 1997, we have primarily relied on the sources of funds
discussed in "Cash Flows" below to finance our testing and operations. The
proceeds raised from the Iowa-Only Offering, net of the Rescission Offer, will
not be adequate to continue our operations, including the contemplated expansion
of sales efforts, inventories, and accounts receivable through the next twelve
months.
Since acceptance or the affirmative rejection or failure to respond to the
Rescission Offer does not act as a release of claims, eligible Iowa-Only
Offering Stockholders who have accepted, rejected, or failed to respond to the
Rescission Offer would retain any rights of claim they may have under federal
securities laws. Any subsequent claims by an Iowa-Only Offering Stockholder
would be subject to any defenses we may have, including the running of the
statute of limitations and/or estoppel. In general, to sustain a claim based on
violations of the registration provisions of federal securities laws, the claim
must be brought within one year after discovery of the violation upon which the
claim is based, in this case, based on the date of the sale (or three years from
the date of the original sale of Iowa only offering shares). Under the principle
of estoppel, the person bringing a claim must carry the burden of proof of why
he or she took no action under the Rescission Offer and/or how he or she may
have been injured. Subsequent to year end, on February 26, 2004, the statute of
limitations expired with respect to claims regarding the Iowa only offering and
the liability was reclassified to equity on the balance sheet as of February 29,
2004.
The Company began an additional private offering, to accredited investors only,
in February, 2004. The intent is to raise up to $1,250,000 from the issuance of
notes with common stock and common stock warrants. As June, 2004, the Board of
Directors authorized the sale of common stock with warrants and common stock
without warrants to facilitate the addition of capital. As of March 31, 2005 the
Company raised $595,685.
Cash Flows for the Years Ended December 31, 2004 and 2003
Since our inception, February 21, 1997, through December 31, 2001, our
activities were organizational, devoted to developing a business plan and
raising capital. Indirect and administrative costs, such as management salaries,
have been expensed in the accompanying statements of operations during the
period in which they were incurred. Capital fund raising costs, which are both
directly attributable to our offerings and incremental, have been treated as
offering costs in the accompanying balance sheets.
Subsequent to 2001, the Company has devoted its efforts to marketing, product
identification and application of its "Program" model.
Net cash used in operating activities for the years ended December 31, 2004 and
2003 was $1,042,107 and $1,437,135, respectively. The use of cash in operating
activities was primarily related to our net losses from operations net of
depreciation and net of the loss on the write down of our building in 2002.
Net cash used in investing activities for the years ended December 31, 2004 and
2003 was $1,279 and $23,576, respectively. The use of cash in investing
activities in 2004 was for the purchase of equipment.
Net cash provided by financing activities for the year ended December 31, 2004
was $656,111 compared to $18,081 used in financing activities for the year ended
December 31, 2003. Equity and borrowed funds from stockholders and others were
15
obtained in the year ended December 31, 2004. Principal payments on long-term
debt were made in both years.
Recent Accounting Pronouncements
We do not believe any recently issued accounting standards will have an impact
on our financial statements.
Going Concern
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 incurred and may continue to incur net losses in the
future. It has a stockholders' equity of $315,733 as of December 31, 2004;
and if revenues do not increase substantially in the near future,
additional sources of funds will be needed to maintain operations. These
matters give rise to substantial doubt about the Company's ability to
continue as a going concern.
Management and other personnel have been focused on product and service
development in lieu of product marketing. In an effort to make the
transition from a development stage company to a viable business entity,
the Company's management team has diligently explored several market
segments relative to the Company's product and service lines over the past
3 years. From that exploration, the Company has decided it is in its best
interests to explore the use of existing, well-established distribution
channels for marketing and selling the DriverMax(R)product line. Management
also believes a large market exists for the Company's testing services and
the information provided by those services. A combination of the products
and services has been developed as a long-term program for current and
potential customers, particularly in regulated markets. The Company has
designed such a program for the school bus fleet in the state of Iowa and
is awaiting funding to complete a 5-year contract. Management will focus on
the Company's efforts on the sales of products, services, and programs with
sensible controls over expenses. Management believes these steps, if
successful, will improve the Company's liquidity and operating results,
allowing it to continue in existence.
The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern.
The Balance of This Page Left Intentionally Blank
16
ITEM 7. Financial Statements and Supplementary Data
Financial Statements and Report of Independent Registered Public Accounting Firm
Mirenco, Inc.
December 31, 2004 and 2003
C O N T E N T S
Page
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 18
FINANCIAL STATEMENTS
BALANCE SHEET 19
STATEMENTS OF OPERATIONS 20
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY 21
STATEMENTS OF CASH FLOWS 22
NOTES TO FINANCIAL STATEMENTS 23
17
REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
MIRENCO, Inc.
We have audited the accompanying balance sheet of MIRENCO, Inc. as of December
31, 2004 and the related statements of operations, changes in stockholders'
equity, and cash flows for the years ended December 31, 2004 and 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 audits.
We conducted our audits in accordance with the auditing standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audits 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
audits provide 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 MIRENCO, Inc. as of December
31, 2004, and the results of its operations and its cash flows for the years
ended December 31, 2004 and 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 B, the Company
incurred a net loss of $1,229,182 and $1,590,370 during the years ended December
31, 2004 and 2003. This, among others factors, as discussed in Note B to the
financial statements, raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in Note B. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ Stark Winter Schenkein & Co., LLP
Denver, Colorado
April 8, 2005
18
MIRENCO, Inc.
BALANCE SHEETS
December 31, 2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 33,127
Accounts receivable 73,877
Inventories 123,134
Other 5,012
Total current assets 235,150
PROPERTY AND EQUIPMENT, net 565,138
PATENTS AND TRADEMARKS, net 4,165
$ 804,453
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of note payable $ 8,947
Accounts payable 126,172
Accrued expenses 29,485
Due Officers 104,943
Note payable to related parties 4,527
Total current liabilities 274,074
NOTE PAYABLE, less current portion 141,677
NOTES PAYABLE TO RELATED PARTIES, less current portion 72,969
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value: 50,000,000 shares
authorized, -
Common stock, no par value: 100,000,000 shares
authorized, 14,074,082 shares issued and outstanding
at December 31, 2004 8,752,385
Additional paid-in capital 1,714,954
Deferred compensation (3,933)
Accumulated (deficit) (10,147,673)
315,733
$ 804,453
=============
See the accompanying notes to the financial statements.
19
MIRENCO, Inc.
STATEMENTS OF OPERATIONS
Years ended December 31,
2004 2003
Sales $ 353,834 $ 93,086
Cost of sales 239,094 90,447
Gross profit 114,740 2,639
Salaries and wages 762,358 837,928
Other general and administrative expenses 570,658 798,749
1,333,016 1,636,677
(Loss) from operations (1,218,276) (1,634,038)
Other income (expense)
Other income - 21,621
Interest income 847 23,732
Interest expense (11,753) (1,685)
(10,906) 43,668
Net (loss) $ (1,229,182) $ (1,590,370)
============= =============
Net (loss) per share available for common
shareholders - basic and diluted $ (0.09) $ (0.12)
============= =============
Weighted-average shares outstanding -
basic and diluted 13,451,707 13,304,242
============= =============
See the accompanying notes to the financial statements.
20
MIRENCO, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Year Ended December 31, 2004 and 2003
Additional
Common stock Paid-In Accumulated Deferred
Shares Amount Capital (Deficit) Compensation Total
Balance January 1, 2003 11,795,334 $ 760,010 $1,714,954 $ (7,328,121) $ - $ (4,853,157)
Net (loss) - - - (1,590,370) - (1,590,370)
Balance December 31, 2003 11,795,334 760,010 1,714,954 (8,918,491) - (6,443,527)
Transfer from Stock
Subject to Rescission 1,508,908 7,544,540 - - - 7,544,540
Issuance of stock for cash 1,757,340 442,585 - - - 442,585
Shares contributed and
cancelled (1,000,000) - - - - -
Issuance of shares as additional
consideration for loans 12,500 5,250 - - (5,250) -
Amortization of deferred compensation - - - - 1,317 1,317
Net (loss) - - - (1,229,182) - (1,229,182)
Balance December 31, 2004 14,074,082 $8,752,385 $1,714,954 $ (10,147,673) $ (3,933) $ 315,733
============ =========== =========== ============== ========== =============
See the accompanying notes to the financial statements.
21
MIRENCO, Inc.
STATEMENTS OF CASH FLOWS
Years ended December 31,
2004 2003
Cash flows from operating activities
Net (loss) $ (1,229,182) $ (1,590,370)
Adjustments to reconcile net (loss) to net cash
and cash equivalents used in operating activities:
Depreciation and amortization 61,038 77,824
(Increase) decrease in assets
Accounts receivable (72,873) 46,739
Inventories 7,314 10,155
Other 22,038 (14,211)
Increase (decrease) in liabilities
Accounts payable 68,896 21,744
Due officers 85,304 19,639
Accrued expenses 15,358 (5,901)
Other current liabilities - (2,754)
Net cash (used in) operating activities (1,042,107) (1,437,135)
Cash flows from investing activities
Purchase of property and equipment (1,279) (23,576)
Net cash (used in) investing activities (1,279) (23,576)
Cash flows from financing activities
Proceeds from issuance of stock 442,585 -
Principal payments on long-term debt:
Banks and others (11,878) (8,752)
Related parties (9,596) (9,329)
Proceeds from long-term borrowing:
Banks and others 155,000 -
Related parties 80,000 -
Net cash provided by (used in) financing activities 656,111 (18,081)
Decrease in cash and cash equivalents (387,275) (1,478,792)
Cash and cash equivalents, beginning of period 420,402 1,899,194
Cash and cash equivalents, end of period $ 33,127 $ 420,402
=============== =============
Suplementary disclosure of cash flow information:
Cash paid during the period for interest $ 11,753 $ 1,685
=============== =============
Cash paid during the period for income taxes $ - $ -
=============== =============
Non-cash investing and financing activities:
Acquisition of land with payable to related party $ - $ 20,000
=============== =============
See the accompanying notes to the financial statements.
22
MIRENCO, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 2004 and 2003
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. Nature of Business
MIRENCO, Inc. (the Company) was incorporated as an Iowa corporation in 1997. The
Company is a marketing company that distributes a variety of automotive and
aftermarket products for which it has exclusive licensing rights. The products
primarily reduce emissions and increase vehicle performance. The Company's
products are sold primarily in the domestic market.
2. Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original
maturity of 3 months or less to be cash equivalents.
3. Revenue Recognition
In general, the Company records revenue when persuasive evidence of an
arrangement exists, services have been rendered or product delivery has
occurred, the sales price to the customer is fixed or determinable, and
collectability is reasonably assured. The following policies reflect specific
criteria for the various revenues streams of the Company:
Revenue is recognized from sales when a product is shipped and from services
when they are performed.
4. Accounts Receivable
Accounts receivable are stated at estimated net realizable value. Accounts
receivable are comprised of balances due from customers net of estimated
allowances for uncollectible accounts. In determining collectability, historical
trends are evaluated and specific customer issues are reviewed to arrive at
appropriate allowances.
5. Inventories
Inventories, consisting of purchased finished goods ready for sale, are stated
at the lower of cost (as determined by the first-in, first-out method) or
market.
23
6. Income Taxes
The Company accounts for income taxes under the asset and liability method,
whereby deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
applied to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date. Deferred tax assets are recognized to the extent
management believes that it is more likely than not that they will be realized.
7. Patents and Trademarks
Patents and trademarks will be amortized on the straight-line method over their
remaining legal lives of 7 years as of December 31, 2004. The Company recorded
amortization expense of $980 in 2004 and 2003. Patents are stated net of
amortization of $5,635.
8. Property and Equipment
Property and equipment are stated at cost. The Company provides for depreciation
on the straight-line method over the estimated useful lives of 3 years for
computer equipment, 5 years for manufacturing and test equipment and other
equipment, and 39 years for buildings.
9. Impairment of Long-Lived Assets
The carrying value of long-lived assets is reviewed on a regular basis for the
existence of facts and circumstances that suggest impairment. During 2004 and
2003, no material impairment has been indicated. Should there be an impairment,
in the future, the Company will measure the amount of the impairment based on
the amount that the carrying value of the impaired assets exceed the
undiscounted cash flows expected to result from the use and eventual disposal of
the from the impaired assets.
10. Stock-Based Compensation
The Company accounts for equity instruments issued to employees for services
based on the fair value of the equity instruments issued and accounts for equity
instruments issued to other than employees based on the fair value of the
consideration received or the fair value of the equity instruments, whichever is
more reliably measurable.
The Company accounts for stock based compensation in accordance with SFAS 123,
"Accounting for Stock-Based Compensation." The provisions of SFAS 123 allow
companies to either expense the estimated fair value of stock options or to
continue to follow the intrinsic value method set forth in APB Opinion 25,
"Accounting for Stock Issued to Employees" (APB 25) but disclose the pro forma
effects on net income (loss) had the fair value of the options been expensed.
24
The Company has elected to continue to apply APB 25 in accounting for its stock
option incentive plans.
11. Net Loss Per Share
The Company calculates net income (loss) per share as required by Statement of
Financial Accounting Standards (SFAS) 128, "Earnings per Share." Basic earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares outstanding for the period. Diluted earnings
(loss) per share is calculated by dividing net income (loss) by the weighted
average number of common shares and dilutive common stock equivalents
outstanding. During periods in which the Company incurs losses common stock
equivalents, if any, are not considered, as their effect would be anti dilutive.
12. Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 2004. The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash,
accounts receivable, accounts payable and accrued expenses and notes payable.
Fair values were assumed to approximate carrying values for these financial
instruments because they are short term in nature and their carrying amounts
approximate fair values.
The carrying value of the Company's long-term debt approximated its fair value
based on the current market conditions for similar debt instruments.
13. Royalty Expense
Royalty expense is recorded and paid based upon the sale of products, services,
and rights related to patents according to a contractual agreement (see Note K).
14. Advertising
Advertising costs are charged to expense as incurred and were $9,457 and $51,721
for the years ended December 31, 2004 and 2003, respectively.
15. Offering Costs
Specific incremental costs are directly attributable to the Company's equity
offerings. These costs include advertisements in newspapers, radio, and direct
mail, letters, printing costs, and certain identifiable legal fees and are
charged against the gross proceeds of the offerings.
16. Software Development Costs
In connection with the development of software, the Company will incur external
costs for software, and consulting services, and internal costs for payroll and
related expenses of its technology employees directly involved in the
development. Purchased software costs will be capitalized in accordance with
Statement of Position 98-1 "Accounting for the Costs of Computer Software
25
Developed or Obtained for Internal Use". All other costs will be reviewed for
determination of whether capitalization or expense as product development cost
is appropriate in accordance with Statement of Position 98-1.
17. Research and Development
The Company expenses research and development costs as incurred. Such costs
include certain prototype products, test parts, consulting fees, and costs
incurred with third parties to determine feasibility of products. Costs incurred
for research and development were $8,772 and $42,245 in 2004 and 2003,
respectively.
18. Use of Estimates
In preparing financial statements in conformity with accounting principles
generally accepted in the United States of America, management is required to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, the 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.
19. Segment Information
The Company follows SFAS 131, "Disclosures about Segments of an Enterprise and
Related Information." Certain information is disclosed, per SFAS 131, based on
the way management organizes financial information for making operating
decisions and assessing performance. The Company currently operates in a single
segment and will evaluate additional segment disclosure requirements as it
expands its operations.
20. Recent Pronouncements
In December 2003, the Financial Accounting Standards Board issued FASB
Interpretation Number 46-R "Consolidation of Variable Interest Entities." FIN
46-R, which modifies certain provisions and effective dates of FIN 46, sets for
the criteria to be used in determining whether an investment is a variable
interest entity should be consolidated. These provisions are based on the
general premise that if a company controls another entity through interests
other than voting interests, that company should consolidate the controlled
entity. The Company believes that currently, it does not have any material
arrangements that meet the definition of a variable interest entity which would
require consolidation.
In November 2004, the FASB issued SFAS 151, "Inventory Costs." SFAS 151 amends
the accounting for abnormal amounts of idle facility expense, freight, handling
costs, and wasted material (spoilage) under the guidance in ARB 43, Chapter 4,
"Inventory Pricing." Paragraph 5 of ARB 43, Chapter 4, previously stated that
"...under some circumstances, items such as idle facility expense, excessive
spoilage, double freight, and rehandling costs may be so abnormal as to require
treatment as current period charges...." This Statement requires that those
items be recognized as current-period charges regardless of whether they meet
the criterion of "so abnormal." In addition, this Statement requires that
allocation of fixed production overheads to the costs of conversion be based on
26
the normal capacity of the production facilities. This statement is effective
for inventory costs incurred during fiscal years beginning after June 15, 2005.
Management does not expect adoption of SFAS 151 to have a material impact on the
Company's financial statements.
In December 2004, the FASB issued SFAS 152, "Accounting for Real Estate
Time-Sharing Transactions." The FASB issued this Statement as a result of the
guidance provided in AICPA Statement of Position (SOP) 04-2, "Accounting for
Real Estate Time-Sharing Transactions." SOP 04-2 applies to all real estate
time-sharing transactions. Among other items, the SOP provides guidance on the
recording of credit losses and the treatment of selling costs, but does not
change the revenue recognition guidance in SFAS 66, "Accounting for Sales of
Real Estate," for real estate time-sharing transactions. SFAS 152 amends
Statement 66 to reference the guidance provided in SOP 04-2. SFAS 152 also
amends SFAS 67, "Accounting for Costs and Initial Rental Operations of Real
Estate Projects", to state that SOP 04-2 provides the relevant guidance on
accounting for incidental operations and costs related to the sale of real
estate time-sharing transactions. SFAS 152 is effective for years beginning
after June 15, 2005, with restatements of previously issued financial statements
prohibited. Management does not expect adoption of SFAS 152 to have a material
impact on the Company's financial statements.
In December 2004, the FASB issued SFAS 153, "Exchanges of Nonmonetary Assets,"
an amendment to Opinion No. 29, "Accounting for Nonmonetary Transactions."
Statement 153 eliminates certain differences in the guidance in Opinion No. 29
as compared to the guidance contained in standards issued by the International
Accounting Standards Board. The amendment to Opinion No. 29 eliminates the fair
value exception for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets that do
not have commercial substance. Such an exchange has commercial substance if the
future cash flows of the entity are expected to change significantly as a result
of the exchange. SFAS 153 is effective for nonmonetary asset exchanges occurring
in periods beginning after June 15, 2005. Earlier application is permitted for
nonmonetary asset exchanges occurring in periods beginning after December 16,
2004. Management does not expect adoption of SFAS 153 to have a material impact
on the Company's financial statements.
In December 2004, the FASB issued SFAS 123(R), "Share-Based Payment." SFAS
123(R) amends SFAS 123, "Accounting for Stock-Based Compensation," and APB
Opinion 25, "Accounting for Stock Issued to Employees." SFAS 123(R) requires
that the cost of share-based payment transactions (including those with
employees and non-employees) be recognized in the financial statements. SFAS
123(R) applies to all share-based payment transactions in which an entity
acquires goods or services by issuing (or offering to issue) its shares, share
options, or other equity instruments (except for those held by an ESOP) or by
incurring liabilities (1) in amounts based (even in part) on the price of the
entity's shares or other equity instruments, or (2) that require (or may
require) settlement by the issuance of an entity's shares or other equity
instruments. This statement is effective (1) for public companies qualifying as
SEC small business issuers, as of the first interim period or fiscal year
beginning after December 15, 2005, or (2) for all other public companies, as of
the first interim period or fiscal year beginning after June 15, 2005, or (3)
for all nonpublic entities, as of the first fiscal year beginning after December
15, 2005. Management is currently assessing the effect of SFAS No. 123(R) on the
Company's financial statements.
27
NOTE B - REALIZATION OF ASSETS
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 incurred and is may continue to incur net losses in the future. If revenues
do not increase substantially in the near future, additional sources of funds
will be needed to maintain operations. These matters give rise to substantial
doubt about the Company's ability to continue as a going concern.
Management and other personnel have been focused on product and service
development in lieu of product marketing. In an effort to make the transition
from a development stage company to a viable business entity, the Company's
management team has diligently explored several market segments relative to the
Company's product and service lines over the past 3 years. From that
exploration, the Company has decided it is in its best interests to explore the
use of existing, well-established distribution channels for marketing and
selling the DriverMax(R)product line. Management also believes a large market
exists for the Company's testing services and the information provided by those
services. A combination of the products and services has been developed as a
long-term program for current and potential customers, particularly in regulated
markets. The Company has designed such a program for the school bus fleet in the
state of Iowa and is awaiting funding to complete a 5-year contract. Management
will focus on the Company's efforts on the sales of products, services, and
programs with sensible controls over expenses. Management believes these steps,
if successful, will improve the Company's liquidity and operating results,
allowing it to continue in existence.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.
NOTE C - OTHER CURRENT ASSETS
Other current assets consisted of the following at December 31, 2004
Other prepaid expenses $ 5,012
28
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at December 31, 2004:
Land and building $ 569,748
Computer equipment 81,241
Manufacturing and test equipment 70,872
Tool and die 29,025
Other equipment 122,678
873,564
Less accumulated depreciation 308,426
$ 565,138
==============
The Company recorded $58,740 and $76,844 respectively, of depreciation expense
for the years ended December 31, 2004 and 2003.
NOTE E - ACCRUED EXPENSES
Accrued expenses consisted of the following at December 31, 2004
Royalty $ 5,031
Payroll and payroll taxes 19,911
Other 4,543
$ 29,485
============
NOTE F - NOTES PAYABLE
Notes payable consisted of the following at December 31, 2004:
Current Long-term
Total Portion Portion
Notes payable to investors, 9% interest payable
quarterly, principal due in March and April, 2007 $ 30,000 - $ 30,000
Note payable to bank in montly installments of
$1,435, including principal and variable interest,
currently 7.75%, guaranteed by stockholder,
guaranteed by Small Business Administration 120,624 8,947 111,677
$150,624 $8,947 $141,677
========= ======= ==========
Maturities of notes payable are as follows:
2005: $ 8,947 - 2006: $ 9,666 - 2007: $40,442 - 2008: $11,260 - 2009: $12,185 -
Thereafter: $ 68,124
29
NOTE G - NOTES PAYABLE TO RELATED PARTIES
Notes payable to related parties consisted of the following a December 31, 2004:
Current Long-term
Total Portion Portion
Note payable to stockholder, 9% interest payable
quarterly, principal due in March, 2007 $ 20,000 $ - $ 20,000
Note payable to related Company in montly
installments of $689, including principal and
interest of 6.75% maturing May, 2009 57,496 4,527 52,969
$ 77,496 $ 4,527 $ 72,969
========= ========= ==========
Maturities of related party notes payable are as follows:
2005: $ 4,527 - 2006: $ 4,852 - 2007: $ 25,180 - 2008: $ 5,540 - 2009: $ 37,397
NOTE H - CONCENTRATION OF CUSTOMERS
The Company had 4 customers that accounted for 62% of 2004 sales and 4 customers
that accounted for 80% of 2003 sales.
NOTE I - LEASES
The Company entered into a lease agreement with its majority stockholder for the
land on which the Company had constructed a new facility. The lease established
a perpetual term commencing October 1, 2000 at no rental cost to the Company.
The Company purchased the land in 2003. (See Note K).
NOTE J - INCOME TAXES
The Company accounts for income taxes under SFAS 109 which requires use of the
liability method. SFAS 109 provides that deferred tax assets and liabilities are
recorded based on the differences between the tax basis of assets and
liabilities and their carrying amounts for financial reporting purposes,
referred to as temporary differences. Deferred tax assets and liabilities at the
end of each period are determined using the currently enacted tax rates applied
to taxable income in the periods in which the deferred tax assets and
liabilities are expected to be settled or realized.
The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before provision for income taxes.
The sources and tax effects of the differences are as follows:
30
2004 Net Operating Loss $ 1,229,182
Income tax provision at federal statutory rate 34%
Effect of Operating Losses (34%)
--%
2004 2003
Deferred Tax Assets
Net Operating Loss Carryforward $ 7,477,433 $ 6,248,251
7,477,433 6,248,251
Deferred Tax Liability
Accelerated Depreciation 11,764 6,181
Amortization 3,538 3,670
15,302 9,851
7,462,131 6,238,400
Effective Federal Rate 34% 34%
Deferred Tax Asset $ 2,537,125 $ 2,121,056
Valuation Allowance (2,537,125) (2,121,056)
Net Deferred Tax Asset $ - $ -
============ ============
As of December 31, 2004, the Company has a net operating loss carryforward of
approximately $7,500,000. This loss carryforward will be available to offset
future taxable income. If not used, this carryforward will expire through 2019.
The deferred tax asset of approximately $2,500,000 relating to the operating
loss carryforward has been fully reserved as of Decenber 31, 2004. The increase
the valuation allowance related to the deferred tax asset was approximately
$400,000 during 2004. The principal difference between the accumulated deficit
for income tax purposes and for financial reporting purposes results principally
from stock based compensation.
NOTE K - RELATED PARTY TRANSACTIONS
In 2004 the Company paid rent in the amount of $9,600 to an officer and majority
stockholder. Payments to related parties in 2003 amounted to $14,666.
The Company had entered into a lease with its majority stockholder for the land
on which the Company had constructed a new facility. The lease provided a buyout
option which the Company exercised to purchase the land for $20,000 in 2003.
31
During 2002, the Company entered into a note payable with the majority
stockholder for $20,615 which required monthly installments of $861 including
principal and interest at 8%. The note matured and final payment was made in
September, 2004.
On April 30, 1999, the Company entered into an agreement to acquire patents and
trademarks for an initial price of $25,000 from a company whose stockholders
have controlling ownership in the Company. The patents and trademarks were
recorded as a lump-sum purchase at the affiliate's carrying value, $9,800, at
the date of purchase. The remaining $15,200 was recorded as a distribution to
stockholders. In July 2000, upon the completed sale of 1,000,000 shares of stock
to the public and in accordance with the patent purchase agreement a payment of
$225,000 was paid and was accounted for as a distribution to stockholders. Also,
the agreement provides for royalty payments in the amount of 3% of gross sales
(including product sales, service revenues, and all revenues from sales of
patent rights) for the 20 years which began November 1, 1999. This agreement can
be terminated by the seller if the Company fails to make the above payments or
becomes insolvent. From January 1, 1999 to October 31, 1999, the Company paid
royalties for the use and potential marketing of the patents to the company that
owned the patents based on 3% of sales calculated at an established unit price
($495) and minimum quantities (40 to 80 units per month), with payments
generally made quarterly. The Company paid royalty fees to a company partially
owned by the majority stockholder of the Company for the years ended December
31, 2004 and 2003 in the amounts of $10,113 and $2,137 respectively.
In September, 2004, the Company entered into a seven year employment contract with an
officer that requires to pay one percent of sales in addition to a base salary
of $132,000 as his compensation.
NOTE L - COMMON STOCK OPTIONS AND WARRANTS
Options
During 1998, the Company established a nonqualified stock option plan (the 1998
Plan) pursuant to which options for up to 1,200,000 shares of the Company's
authorized but unissued common stock may be granted to employees and certain
non-employees. During 1999, the Company adopted the 1999 Stock Option Plan (the
1999 Plan), which provides for granting of options to officers, employees,
advisors, and consultants of the Company, for the purchase of up to a total of
750,000 shares of the Company's authorized but unissued common stock. During
2001, the Company adopted the 2001 Stock Option Plan (the 2001 Plan), which
provides for the granting of up to a total of 250,000 shares of the Company's
authorized but unissued common stock. During 2004, the Company adopted the 2004
Stock Option Plan (the 2004 Plan) which provides for the granting up to a total
of 1,000,000 shares of the Company's authorized but unissued common stock.
During 2003 the Company granted 18,500 options as shown below. The options are
fully vested. The exercise price is the fair market value at the date of grant.
The options expire 10 years from the date of grant. During 2004 the Company
granted 257,250 options and 7,000 options were exercised as shown below. The
options are fully vested. The exercise price is the fair market value on the
date of the grant and the options expire 6 years from the date of the grant.
Substantially all of the options were granted to employees, officers and
directors. No compensation costs have been recorded in conjunction with the
issuances of the options.
32
Weighted-
average
exercise
Number of shares price
Outstanding Exercisable per share
Outstanding, Jajuary 1, 2003 753,960 753,960 $ 3.02
Granted 18,500 18,500 0.07
Outstanding, December 31, 2003 772,460 772,460 3.02
Granted 257,250 257,250 0.49
Exercised (7,000) (7,000) 0.71
Outstanding, December 31, 2004 1,022,710 1,022,710 $ 2.37
=========== =========== =======
The following table summarizes information about options outstanding at December
31, 2004 under the Compensatory Stock Option Plans:
2004 Compensatory Stock Options and Warrants
Options outstanding Options exercisable
Weighted-average
Range of Number remaining Weighted-average Number Weighted-average
exercise prices outstanding contractual life exercise price exercisable exercise price
$0.29-$5.00 1,022,710 5.17 2.99 1,022,710 2.37
SFAS 123 requires the Company to provide proforma information regarding net
income and earnings per share as if compensation cost for the Company's stock
option plans had been determined in accordance with the fair value based method
prescribed in SFAS 123. The fair value of the option grants is estimated on the
date of grant utilizing the Black-Scholes option pricing model with the
following weighted average assumptions for grants: expected life of options of
10 years, expected volatility of 113%, risk-free interest rate of 3.0% and no
dividend yield. The weighted average fair value at the date of grant for options
granted approximated $.31. These results may not be representative of those to
be expected in future years.
Under the provisions of SFAS 123, the Company's net (loss) and (loss) per share
for the year ended December 31, 2004 would have been (increased) to the proforma
amounts indicated below:
Net (loss)
As reported $(1,229,182)
Proforma $(1,308,982)
Basic and diluted (loss) per share
As reported $ (.09)
Proforma $ (.10)
Had compensation cost for the 2001 Plan been determined based on the fair value
of the options at the grant date, the Company's net loss would have been
substantially the same as that reported for 2003.
Warrants
The Company extended the expiration date of 275,116 warrants which were to
expire on June 24, 2004 to June 25, 2006. The warrants entitle the warrant
holders to acquire one common share for each warrant at $1.00 per share.
In conjunction with the return of 1,000,000 common shares discussed in Note M
the Company issued 1,000,000 warrants to purchase common stock at $.25 per share
to an officer. The warrants have no expiration date.
In addition, in conjunction with the cash sale of common shares discussed in
Note M the Company issued 366,580 warrants to purchase common stock at $.20 per
share. There warrants expire on June 30, 2006.
33
NOTE M - STOCKHOLDERS' EQUITY
During 2004, the Company issued 12,500 shares of common stock in conjunction
with a private placement debt offering to qualified investors only. The fair
market value of these shares of $5,250 has been recorded as deferred
compensation and is being amortized over the term of the debt of 36 months.
Amortization of $1,317 was recorded in 2004. The Company also sold 1,000,000
shares of common stock in an unregistered transaction to an unrelated investor
for cash aggregating $250,000 and issued 7,000 shares of common stock to an
officer pursuant to an option exercise for cash aggregating $5,000. Also in
2004, the Company sold 750,340 shares for $187,585 cash.
NOTE N - STOCK SUBJECT TO RESCISSION OFFER
On August 12, 2000, the Company determined that re-sales of Iowa-Only Offering
Shares by Iowa residents to non-Iowa residents violated certain provisions of
the Securities Act of 1933. In response, the Company undertook an offering to
rescind the earlier Iowa-Only Offering. As a result, the Iowa-Only Offering
Shares, 1,561,248 shares, in the amount of $7,806,240, were classified as
temporary equity.
Once approved for distribution, the Rescission Offer was outstanding from
January 26, 2001 to February 26, 2001. During this period Iowa-Only Offering
Stockholders had the option to reject the Rescission Offer formally in writing;
to take no action within the 30 days, thereby retaining their outstanding
Iowa-Only Offering Shares; or to accept the Rescission Offer formally in
writing. Seventy-one formal rescission acceptances representing 52,340 shares
were received from Iowa-Only Offering Stockholders, resulting in a total of
$276,690 being paid in cash to these stockholders for the return of their
original investment plus interest at 8% annually. The maximum obligation under
this offer was estimated to be $8,100,000, including the original investment
plus interest at 8% per year. As a result of the rescission, the Company has
paid interest in the amount of $14,990, which is included in the total above.
34
As a result of the Rescission Offer, the Company had classified the Iowa-Only
Offering Shares and proceeds as a liability. These shares remained as a
liability until the violations under the securities laws had been cured.
Subsequent to the close of the original sale of Iowa-Only Offering Shares, the
Company believed that Iowa-Only Offering Stockholders were estopped from arguing
injury. However, the Company was contingently liable to such stockholders during
the period covered by the statute of limitations, a period of 3 years from the
date of the Rescission Offer which expired on February 26, 2004, at which time
the Company reclassified the amounts to equity.
NOTE O - AMENDMENT TO ARTICLES OF INCORPORATION
In January 2004, Stockholders of the Company approved a change to its Articles
of Incorporation increasing its authorized capital to 100,000,000 common shares
and 50,000,000 preferred shares. The Amended Articles of Incorporation were
filed with the Secretary of State of Iowa on June 18, 2004
NOTE P - SUBSEQUENT EVENTS
Through March 31,2005, the Company issued an aggregate of 571,000 shares of
common stock for cash aggregating $118,100. The shares sold for cash were
restricted and were sold at a discount to the trading price of the common shares
on the subscription dates.
________________________________________________________________________________
35
ITEM 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
All information regarding the change in accountants was filed on form 8-K in
August, 2003.
ITEM 8A. Controls and procedures
With the participation of management, the Company's chief executive officer and
chief financial officer evaluated the Company's disclosure controls and
procedures as of the date of this report. Based upon this evaluation, the chief
executive officer and chief financial officer concluded that the Company's
disclosure controls and procedures are effective in ensuring that material
information required to be disclosed is included in the reports that it files
with the Securities and Exchange Commission.
There were no significant changes in the Company's internal controls or, to the
knowledge of the management of the Company, in other factors that could
significantly affect these controls subsequent to the evaluation date.
ITEM 8B. Other Information Rquired to be Reported on Form 8-K
NONE
The Balance of This Page Left Intentionally Blank
36
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons, Compliance
With Section 16(a) of the Exchange Act
As of the date of this Annual Report, based solely upon a review of copies of
Forms 3, 4 and 5 and amendments thereto furnished to the Company during its most
recent fiscal year, management believes that all directors and officers, both
past and present, are in compliance with the reporting requirements of Section
16(a) of the Securities Exchange Act of 1934. Biographical summaries concerning
individuals serving on the Board of Directors, the Company's executive officers
and significant employees, are shown below.
Dwayne L. Fosseen, age 59, is founder, Chief Executive Officer, Chairman of the
Board of Directors, and Principal (controlling) Stockholder of Mirenco, Inc. Mr.
Fosseen has personally been involved in major projects with the U.S. Department
of Agriculture, the U.S. Department of Energy, the Iowa Corn Growers Board, the
National BioDiesel Board and the Iowa Soybean Promotions Board. Mr. Fosseen has
over 15 years' experience in the field of heavy-duty engines and has directed
major EPA testing efforts at Ortech Corporation, an international emissions
testing company.
Richard A. Musal, age 58, became Chief Financial Officer in December, 2002. Mr.
Musal graduated from Central Missouri State University in 1972 and became a
certified public accountant in 1973. Mr. Musal, formerly a partner with
McGladrey and Pullen has served as CFO andCOO at several companies throughout
his career. In August, 2003 he was elected a Director, Chief Financial Officer
and Chief Operating Officer.
Director Tim Neugent is a graduate of Marquette University and has is currently
Vice President of American Auto Finance and has owned and operated several
companies in central Iowa. Mr. Neugent brings valuable marketing expertise to
the Board of Directors.
Merlin Hanson, Director is a Certified Public Accountant and a graduate of the
University of Minnesota. Mr. Hanson is a retired partner with McGladrey and
Pullen with over 35 years with the firm. Mr. Hanson has served on many boards
and most significantly, was the Chairman of the Board for Goodwill Industries,
International.
Don D. Williams, age 70, a lifelong resident of Williams, Iowa, has been
involved in the grain business and is a major producer of livestock. Mr.
Williams has also been associated with real estate as a licensed associate. Mr.
Williams has served as an officer of the County Farm Bureau Board, Heart of Iowa
Realtors Board, and the County Compensation and Extension Board. A director of
Mirenco, Inc. since June 1, 1998, Mr. Williams is also a veteran of the Korean
War.
37
Mr. Hanson, Mr. Williams and Mr. Musal serve on the Company's Audit Committee.
Mr. Hanson qualifies as a financial expert with his long career as a Certified
Public Accountant with practice experience in reporting matters for publicly
held companies.
As of the filing of this report, the Registrant has not adopted a code of ethics
for its Chief Executive Officer or its Chief Financial Officer because of the
financial constraints. The Company's Board of Directors intends to provide a
code of ethics in 2005.
ITEM 10. Executive Compensation
The following table sets forth the compensation of the named executive officers
for each of the Company's last three completed fiscal years.
Summary Compensation Table
Options All Other
Name and Principal Position Year Salary Bonus Awarded Compensation
Dwayne Fosseen, CEO 2004 $ 75,000 $ - 6,000 $ -
2003 $ 75,000 $ - 4,000 $ -
2002 $ 75,000 $ - - $ -
Richard A. Musal, COO & CFO 2004 $ 40,000 $ - 181,000 $ 88,000
2003 $ - $ - - $ 91,500
Option Grants
There were 181,000 grants of stock options made to Mr. Musal and 6,000 grants of
options and 1,000,000 warrants granted to Mr. Fosseen in exchange for 1,000,000
shares of the Company's common stock during the Year Ended December 31, 2004 and
3,000 grants of stock options to Mr. Musal and 5,000 grants of stock options to
Mr. Fosseen in the year ended December 31, 2003.
Aggregate Option Exercises and Fiscal Year-End Option Value
Stock options of 7,000 were exercised by Mr. Fosseen during the year
ended December 31, 2004 and none were exercised during the year ended December
31, 2003.
Compensation of Directors
In 2004 Directors were awarded stock options for 24,000 shares, compared to
$5,500 in cash and stock options for 18,000 shares of common stock in 2003.
ITEM 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the individuals serving on the Board of
Directors, the Company's executive officers and significant employees, and
information with respect to the number of shares of the Company's common stock
beneficially owned by each of them directly or indirectly, as of March 31, 2005.
The number of shares beneficially owned includes shares, if any, held in the
name of the spouse, minor children, or other relatives of the individual living
in his home, as well as shares, if any, held in the name of another person under
an arrangement whereby the individual enjoys the right to vote or the use of the
income, or whereby the individual can vest or re-vest title in himself or
herself at once or at some future time.
38
Name, Position and Address Amount Beneficially Percent
of Beneficial Owner Owned of Class
Dwayne Fosseen, Director, Chairman of the Board 9,069,715 (a) 54.18%
and Chief Executive Officer
206 May Street
Radcliffe, IA 50230
Richard A. Musal, Director, Chief Operating Officer 506,500 (b) 3.03%
and Chief Financial Officer
206 May Street
Radcliffe, IA 50230
Don Williams, Director 357,800 (c) 2.14%
206 May Street
Radcliffe, IA 50230
Tim Neugent, Director 7,000 (d) 0.04%
206 May Street
Radcliffe, IA 50230
Merlin Hanson, Director 8,000 (e) 0.05%
206 May Street
Radcliffe, IA 50230
All Directors and Officers as a group
(5 persons) 9,949,015 59.44%
(a) Dwayne Fosseen's beneficial ownership includes 1,015,000 shares which are
acquirable pursuant to the exercise of outstanding stock options and
warrants, 3,200 shares owned by family members in his household and 35,450
shares, which are acquirable pursuant to the exercise of outstanding stock
options owned by his spouse.
(b) Richard Musal's beneficial ownership includes 184,000 shares which are
acquirable pursuant to the exercise of outstanding stock options.
(c) Don William's beneficial ownership includes 10,000 shares, which are
acquirable pursuant to the exercise of outstanding stock options.
(d) Tim Neugent's beneficial ownership includes 7,000 shares, which are
acquirable pursuant to the exercise of outstanding stock options.
(e) Merlin Hanson's beneficial ownership includes 8,000 shares, which are
acquirable pursuant to the exercise of outstanding stock options.
39
(f) The beneficial ownership of all directors and officers as a group includes
513,000 shares which are acquirable pursuant to the exercise of outstanding
stock options and 1,022,000 shares which are acquirable pursuant to the
exercise of outstanding warrants.
ITEM 12. Certain Relationships and Related Transactions
In 2004 the Company paid rent in the amount of $9,600 to an officer and majority
stockholder. Payments to related parties in 2003 amounted to $14,666.
On April 30, 1999, the Company entered into an agreement to acquire patents and
trademarks from a company that Mr. Fosseen has a controlling ownership in the
Company for an initial price of $25,000. The patents and trademarks were
recorded as a lump-sum purchase at the affiliate's carrying value, $9,800, at
the date of purchase. The remaining $15,200 was recorded as a distribution to
stockholders. Another payment per terms of the patent purchase agreement,
$225,000, was paid in July 2000 and accounted for as a distribution to
stockholders upon the completed sale of 1,000,000 shares of stock offered to the
public. Also, the agreement provides for royalty payments in the amount of 3% of
gross sales (including product sales, service revenues, and all revenues from
sales of patent rights) for 20 years, which began November 1, 1999. This
agreement can be terminated by the seller if the Company fails to make the above
payments or becomes insolvent. From January 1 to October 31, 1999, the Company
paid royalties for the use and potential marketing of the patents to the company
that owned the patents based on 3% of sales calculated at an established unit
price ($495) and minimum quantities (40 to 80 units per month), with payments
generally made quarterly. The Company paid royalty fees to a company partially
owned by the majority stockholder of the Company for the years ended December
31, 2004 and 2003 in the amounts of $10,113 and $3,133, respectively.
40
ITEM 13. Exhibits
(a) Exhibits
The following are the exhibits to this annual report.
3.2(a) Articles of Amendment to Articles of Incorporation (Incorporated by
reference to the Company's 10QSB for the quarter ended June 30, 2004
filed on August 10, 2004)
3.2(b) Certificate of Incorporation and Certificates of Amendment to the
Certification of Incorporation of Registrant (incorporated by
reference to the Company's Registration Statement filed on July 10,
2000).
3.3 Bylaws of Registrant (incorporated by reference to the Company's
Registration Statement filed on July 10, 2000).
10.2(d) Stock Option Agreement between Registrant and Betty Fosseen
(incorporated by reference to the Company's Registration Statement
filed on July 10, 2000).
10.2(f) Stock Option Agreement between Registrant and J. Richard Relick
(incorporated by reference to the Company's Registration Statement
filed on July 10, 2000).
10.3 American Technologies LLC, Fosseen Manufacturing & Development,
Mirenco, Inc., Ethaco Agreements to Terminate Prior Agreements and
Transfer License, respectively (incorporated by reference to the
Company's Registration Statement filed on July 10, 2000).
10.4 Purchase Agreement Between Registrant and American Technologies, LLC
(incorporated by reference to the Company's Registration Statement
filed on July 10, 2000).
10.5 Environmental Regulatory Approvals with the U.S. Environment
Protection Agency and California Air Resources Board (incorporated by
reference to the Company's Registration Statement filed on July 10,
2000).
10.6 Summary of Patents and Associated Service Marks (incorporated by
reference to the Company's Registration Statement filed on July 10,
2000).
10.7 Copies of U.S. and Canadian Patents Issued to Dwayne L. Fosseen
(incorporated by reference to the Company's Registration Statement
filed on July 10, 2000).
10.8 Summary of Mexican Patents and Associated Protections Issued to Dwayne
L. Fosseen (incorporated by reference to the Company's Registration
Statement filed on July 10, 2000).
10.9 Rental Agreement Between Registrant and Fosseen Manufacturing &
Development, Inc (incorporated by reference to the Company's
Registration Statement filed on July 10, 2000).
41
10.10 March 31, 2000 Warrant Agreement between Registrant and Duncan, Blum
& Associates (incorporated by reference to the Company's Registration
Statement filed on July 10, 2000).
10.13 Lease for Land (incorporated by reference to the Company's
Registration Statement Amendment filed on April 17, 2001).
10.13(a)Stock Option Agreement between Registrant and Betty Fosseen
(incorporated by reference to the Company's Registration Statement
Amendment filed on April 17, 2001).
10.14 2001 Common Stock Compensation Plan (incorporated by reference to the
Company's 10KSB for the fiscal year ended December 31, 2001).
10.15 Cooperative Agreement between registrant and Iowa Foundation for
Educational Adminstration, Inc. (Incorporated by reference to the
Company's 10QSB for the quarter ended September 30, 2002 filed on
August 14, 2002).
10.16 Vehicle Purchase Agreement between registrant and Fosseen
Manufacturing Co., Inc. (Incorporated by reference to the Company's
10QSB for the quarter ended September 30, 2002 filed on November 14,
2002).
10.17 Bank Note between registrant and Randall-Story State Bank.
(Incorporated by reference to the Company's 10QSB for the quarter
ended September 30, 2002 filed on November 14, 2002).
10.18 Agreement between Richard A. Musal and registrant for Chief Financial
Officer Services. (Incorporated by reference to the Company's 10KSB
for the year ended December 31, 2002 filed on April 14, 2003).
10.19 Offer and Acceptance to purchase land from Dwayne Fosseen and spouse.
(Incorporated by reference to the Company's 10KSB for the year ended
December 31, 2002 filed on April 14, 2003).
10.20 Distribution Agreement with D-Max West, LLC for Exclusive
Distribution rights for California . (Incorporated by reference to the
Company's 10KSB for the year ended December 31, 2003 filed on April
14, 2004).
10.21 Distribution Agreement with D-Max West for exclusive distribution
rights for Arizona and Texas (Incorporated by reference to the
Company's 10KSB for the year ended December 31, 2003 filed on April
14, 2004).
10.22 Cancellation of distributor agreements between Mirenco and D-Max West
(Incorporated by reference to the Company's 10KSB for the year ended
December 31, 2003 filed on April 14, 2004).
10.23 Cancellation Of SPAP Company, LLC Sales Representative Agreement
(Incorporated by reference to the Company's 10KSB for the year ended
December 31, 2003 filed on April 14, 2004).
10.24 Sales Representative Agreement with Nevison Group, LLC (Incorporated
by reference to the Company's 10KSB for the year ended December 31,
2003 filed on April 14, 2004).
10.25 Sales Agreement with Grant Brothers Sales. Ltd. (Incorporated by
reference to the Company's 10KSB for the year ended December 31, 2003
filed on April 14, 2004).
10.26 Cancellation of Sales Representative Agreement with Grant Brothers
Sales, Ltd. (Incorporated by reference to the Company's 10KSB for the
year ended December 31, 2003 filed on April 14, 2004).
42
10.27 Distributor Agreement with Integrated Vision Marketing (Incorporated
by reference to the Company's 10KSB for the year ended December 31,
2003 filed on April 14, 2004).
10.28 Employment Agreement with Joseph A. Cassis III. (Incorporated by
reference to the Company's 10QSB filed November 19, 2004)
10.29 Employment Agreement with Richard A. Musal. (Incorporated by
reference to the Company's 10QSB filed November 19, 2004)
*10.30 2004 Common Stock Compensation Plan
* 31.1 Certificate of Principal Executive Officer dated April 15, 2005.
* 31.2 Certificate of Principal Financial Officer dated April 15, 2005.
* 32.1 Dwayne Fosseen's Certification dated April 15,2005 pursuant to 18
U.S.C. SECTION 1350, as adopted pursuant to, SECTION 906 of the
Sarbanes-Oxley Act of 2002
* 32.2 Richard A. Musal's Certification dated April 15, 2005 pursuant to
18 U.S.C. SECTION 1350, as adopted pursuant to SECTION 906 of the
Sarbanes-Oxley Act of 2002
* Filed with this report
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company's board of directors reviews and approves audit and permissible
non-audit services performed by its independent accountants, as well as the fees
charged for such services. In its review of non-audit service fees and its
appointment of Stark Winter Schenkein & Co., LLP as the Company's independent
accountants, the board of directors considered whether the provision of such
services is compatible with maintaining independence. All of the services
provided and fees charged by Stark Winter Schenkein & Co., LLP in 2004 and 2003
were approved by the board of directors.
Audit Fees
The aggregate fees billed by for professional services for the audit of the
annual financial statements of the Company and the reviews of the financial
statements included in the Company's quarterly reports on Form 10-QSB for 2004
and 2003 were $22,500 and $21,850, respectively, net of expenses.
Audit-Related Fees
There were no other fees billed by during the last two fiscal years for
assurance and related services that were reasonably related to the performance
of the audit or review of the Company's financial statements and not reported
under "Audit Fees" above.
Tax Fees
There were no fees billed during the last two fiscal years for professional
services rendered for tax compliance.
43
All Other Fees
There were no other fees billed by during the last two fiscal years for products
and services provided.
The Balance of This Page Left Intentionally Blank
44
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Mirenco, Inc.
(Registrant)
By: /s/ Richard A. Musal
Richard A. Musal
Chief Financial Officer
Date: April 15, 2005
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Dwayne Fosseen
Dwayne Fosseen
Chairman of the Board,
Chief Executive Officer
and Director
Date: April 15, 2005
By: /s/ Don Williams
Don Williams
Director
Date: April 15, 2005
By:: /s/ Richard A. Musal
Richard A. Musal
Director, Chief Operating Officer,
and Secretary