UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB/B
General form for registration of securities of Small
Business Issuers Under Section 12(b) or (g) of the
Securities Exchange Act of 1934
TOUPS TECHNOLOGY LICENSING INCORPORATED
(Name of Small Business Issuer in its charter)
Florida 59-3462501
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7887 Bryan Dairy Road, Suite 105, Largo, Florida 33777
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (813)-548-0918
Securities to be registered under Section 12(b) of the Act:
None None
Title of each class Name of each exchange on which
to be so registered each class is to be registered
Securities to be registered under Section 12(g) of the Act:
Par $.001 Common
(Title of class)
(1)
<PAGE>
CONTENTS
PART I
ITEM 1 DESCRIPTION OF BUSINESS-------------------------------------------1
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN---------------------10
OF OPERATION
ITEM 3 DESCRIPTION OF PROPERTY------------------------------------------15
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND--------------16
MANAGEMENT
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND---------------------16
CONTROL PERSONS
ITEM 6 EXECUTIVE COMPENSATION-------------------------------------------17
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS-------------------18
ITEM 8 DESCRIPTION OF SECURITIES----------------------------------------18
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S----------------19
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
ITEM 2 LEGAL PROCEEDINGS------------------------------------------------19
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS--------------------19
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES--------------------------19
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS------------------------20
PART F/S
AUDITOR'S REPORT AND ACCOMPANYING FINANCIAL STATEMENTS------------------21
PART III
ITEM 1 INDEX TO EXHIBITS--------------------------------------------36
SIGNATURES
(2)
<PAGE>
ITEM 1 - DESCRIPTION OF BUSINESS
Toups Technology Licensing, Incorporated, was incorporated in the state of
Florida on July 28, 1997 ("Toups Technology" or the "Company"). The Company was
formed to facilitate the market applications of late-stage technologies
primarily in the energy, environmental and natural resources market segments.
The Company has not been the subject of any bankruptcy, receivership or
similar proceeding and has not undertaken any material reclassification, merger,
consolidation or sale of assets.
The Company intends to achieve its business purpose by entering into
exclusive licensing agreements which grant the Company the exclusive
manufacturing and marketing rights to technologies with applications in the
energy, environmental and natural resource market segments. The Company also
intends to acquire operating companies within its market segments as
opportunities and resources permit. At present, the Company is not engaged in
any discussions relating to prospective acquisitions.
The Company does not intend to acquire rights to technologies which are
subject to short-term obsolescence such as computers or computer software or
technologies in need of further research and development. Instead, the Company
selects proprietary products or devices within its market segments which
management perceives are not subject to rapid change and can be delivered to the
marketplace within a three to six month period. To date, the Company has entered
into three agreements, all of which are more fully described below.
Principal Products or Services
Since inception during July, 1997, the Company has not earned meaningful
revenues from its technologies The Company currently has three technologies
under license which are in various stages of market entry. On April 29, 1998,
the Company acquired AMW Metal Fabricators:
Balanced Pistons Valve ("BP Valves")
Since inception during July, 1997, the Company has not earned meaningful
revenues from the BP Valve product. The Company received a purchase order for
certain BP Valves in January and specification designs from prospective end
users during February. Based on these orders, the Company anticipates generating
revenues commencing the second quarter, 1998.
Recently the Company has been has been awarded a grant relating to the BP
Valve technology; has completed a 1,000,000 (one-million) cycle, leakage and
torque test of the prototype BP Valve; has completed design of the Company's
initial product-line offering; has scheduled a marketing campaign to include
advertisements in seven industry related publications and intends to conduct a
15,000 piece direct marketing program during May, 1998. (See "Recent Events")
On November 1, 1997, the Company entered into a world wide exclusive
license agreement with Robert Jaeger, who is the owner of the Balanced Piston
Fluid Valve. The BP Valves design is covered under United States Patent
5,309,934 Balanced Piston Fluid Valve issued May 10, 1994 and United States
Patent 5,421,358 Fluid Valve Mechanism and Valving Method issued June 6, 1995.
The BP Valve invention relates to regulating the flow of fluids in piping
systems and machinery through a valve closure made by fitting together old and
well known elements to form a new result. The ease of closure achieved through
the BP Valve invention translates into higher speed - smaller automated valve
assembly size - lighter weight - longer life - reduced system costs reduced
system complexity - ease of computer control and monitoring. The Company has
retained Robert Jaeger, two, full-time selling engineers and one full-time
design engineer to assist in the manufacturing and marketing BP Valves. The
Company intends to outsource the manufacture and assembly of valves on a per
order basis. The Company intends to conduct all design and other technical
drawings relating to its BP Valves at its facilities in the Pinellas Science
Technology and Research Center located at 7887 Bryan Dairy Road, Largo, Florida.
The Company's license agreement relating to the BP Valve technology
specifies (i) the duration of the agreement is for the life of the patent: (ii)
each license agreement will be for an initial period of one-year whereafter it
can be renewed for three-year periods at the Company's discretion; (iii) the
subject of the license will be all present technologies and all future
improvements and developments. The license agreement obligates the Company to
pay an annual 6% royalty fee. (See "Patents and Royalty Agreements and
acquisition agreement" and "Note 4 to Financial Statements.")
(3)
<PAGE>
AquaFuel(TM)
Since inception during July, 1997, the Company has not earned revenues from
the AquaFuel(TM) technology. On May 16, 1998, the Company caused for the
publication of Technical Report of Toups Technology Licensing Number TTL-98-005
(the "AquaFuel(TM) Certification) relating to 1) the results of the research on
the new, nonfossil, combustible gas called AquaFuel(TM) conducted by a group of
scientists during the past months; 2) the reports on various measurements
conducted by independent laboratories which have been inspected and appraised
both, personally, by the underwriter as well as collegially by the research
group; 3) the numerous tests conducted in recent months at TTL plant; 4)
competition and cost analysis as available at this writing; and 5) expected
future possibilities currently under test. The Company anticipates marketing
products and services derived from the AquaFuel(TM) technology commencing during
the third quarter, 1997. (See "Recent Events")
On November 3, 1997, the Company executed a world wide exclusive license
agreement with William Richardson, the owner of AquaFuel(TM). The AquaFuel(TM)
technology is covered under United States Patent Number 5,435,274 titled
Electric Power Generation Without Harmful Emissions dated July 25, 1995 and
United States Patent Number 5,692,459 titled Pollution-Free Vehicle Operation
dated December 2, 1997. AquaFuel(TM) is a non-fossil, combustible gas which is
produced by an electric discharge of carbon arcs within distilled, fresh, salt
or other types of water, thus being essentially composed of Hydrogen, Oxygen,
Carbon and their compounds. Among the conclusions reached in the AquaFuel(TM)
certification are (a) "The tests and measurements reported in this presentation
establish that AquaFuel(TM) is superior to Hydrogen in cost, energy content,
simplicity and rapidity of production anywhere desired in small or large
volumes; (b) The AquaFuel(TM) product, service and process are near commercial
applications, as in the case of AquaFuel(TM) as combustible gas, recycling of
sewage or organic waste, environmental clean-ups, and others, and; (c) The
ability to serve Government, Military, Space Industry as well as private
markets, including households, on a world-wide basis has been also established."
The Company completed the construction of several AquaFuel(TM) prototype
units during the past three months primarily for scientific testing and
verification. A number of AquaFuel(TM) prototype units were also constructed in
Europe for the same purpose. The Company is now engaged in the design and
construction of an AquaFuel(TM) commercial apparatus.
The Company's license agreement relating to the AquaFuel(TM) technology
specifies (i) the duration of the agreement is for the life of the patent: (ii)
each license agreement will be for an initial period of one-year whereafter it
can be renewed for three-year periods at the Company's discretion; (iii) the
subject of the license will be all present technologies and all future
improvements and developments. The license agreement obligates the Company to
pay a royalty fee of 6% of annual revenues related to the sale of AquaFuel(TM)
and related products or services. The Company is also required to make a
one-time advance payment of $60,000 in four quarterly installments of $15,000
each quarter. Advance royalty fees shall be applied toward 1/2 the first twelve
months royalty fees. The advance royalty fee will be retained by the recipient
regardless of the performance of AquaFuel(TM) in the marketplace. (See "Patents
and Royalty Agreements and acquisition agreement" and "Note 4 to Financial
Statements.")
Balanced Oil Recover System Lift ("BORS Lift").
Since inception during July, 1997, the Company has not earned any
meaningful revenues from the BORS Lift technology. The Company has thus far
received deposits against purchase orders for 27 BORS Lifts at the purchase
price of $7,500 each. The Company anticipates deriving revenues from the sale of
pumps beginning the second quarter, 1998. The Company is manufacturing the BORS
Lift at its facilities in Largo, Florida. Recently, the Company manufactured and
shipped three BORS Lifts on a field-trial basis to two sites in Texas. (See
"Recent Events.")
On January 15, 1998, the Company executed an exclusive Manufacturing
License Agreement with Gerold Allen for the rights to manufacture the BORS Lift.
The BORS Lift is not covered under any patent or similar device. The BORS Lift
Pump is designed to replace traditional oil patch pump jacks. The BORS Lift is a
device developed in response to the current high cost/low production of stripper
wells (oil wells that produce 10 barrels or less per day) which contributed to a
flat-lining of the annual domestic oil production. The unit is comprised of
hardware that is both positioned above ground and downhole as well as a
programmable logic controller. The Company has retained inventor Gerold Allen
and is currently manufacturing BORS Lifts at its headquarters facility. The
Company currently has the capacity to manufacture 25 BORS Lift pumps per month
at its headquarters facilities in the Pinellas Science Technology and Research
Center.
(4)
<PAGE>
The Company's BORS Lift Agreement specifies: (i) the Company is to pay a 6%
royalty fee to the Licensor of the net sales price received from the sale of
BORS Lifts; (ii) requires the Company to remit an advance first year royalty
payment of $80,000 in increments of $20,000 each with the first due upon
execution and the remainder due in equal amounts every three months thereafter.
However, the BORS Lift Agreement acknowledge the Company will not be required to
remit the remaining $60,000 advance royalty payments if the payment of the first
three BORS Lifts is not received. The BORS Lift Agreement further requires the
Company to have the capability to manufacture a minimum of 100 pumps in the
first year and not less than three hundred pumps each year thereafter. The BORS
Lift Agreement remains in effect until December 31, 2002. (See "Patents and
Royalty Agreements and acquisition agreement" and "Note 4 to Financial
Statements.")
Advanced Microwelding, Inc., ("AMW")
On April 29, 1998, the Company acquired AMW in exchange for 500,000 shares
of the Company's restricted Common stock. The Company anticipates relocating AMW
into its headquarters facility in the STAR Center during June, 1998. (See
"Patents and Royalty Agreements and acquisition agreement" and Auditor's Report
relating to A.M.W. Microwelding, Inc.)
AMW was formed in 1992 and has since operated in Largo, Florida as a metal
fabrication shop specializing in micro-welding. Together with the owners, AMW
employs a total of seven persons, six of which are shop employees. To date, the
owner has served the dual role of sales and marketing as well as performing
micro-welding and design services. The Company's proposed product lines
resulting from the BP Valve, AquaFuel(TM) and BORS Lift technologies all require
various degrees of metal fabrication and precision cutting/welding.
The Company acquired AMW to make available a greater degree of control over
scheduling and to reduce the cost of metal fabrication. The Company further
anticipates that by combining the equipment owned by AMW with the equipment
available to the Company at the STAR Center, the micro-welding component of
AMW's service line can potentially be expanded.
Product background
As it relates to BP Valves, the initial thrust of standard line prototype
development is targeting three broad spectrum core valve group design concepts.
Each of the three concepts consists of a basic valve structure with a different
application target focus. Initial valve flow capacity of 1/2" nominal porting
has been selected based on the ability to market products across the broadest
industrial valve application range encompassing both fluid power and fluid
process control. Each basic structure is a nucleus whereupon application
specific attachments are added to fulfill a variety of particular customer
needs.
The basic structure will often be modified to accommodate various pipeline
and system installation requirements. Attachments will include actuators for
manual, electric, and fluid powered driving of the core components. These
actuators will range from simple hand operated knobs and levers to highly
engineered electromechanical motors and solenoids as well as pneumatic and
hydraulic prime movers. Other attachments include feedback devices monitoring
valve position for computer and automatic control. The Company's initial BP
Valve product line consists of:
1 2-way unidirectional basic valve structure starting with a simple on/off
mode of flow control. The above mentioned actuator sub-assemblies will be
developed for attachment installation along with feedback options. The
Company has manufactured 24 prototype models which are being used for sales
demonstration and testing.
2 3-way multidirectional flow structure valve will provide various
capabilities such as flow stream diverting, mixing, and directional
control.
3 regulator/pilot type valve will provide automatic control and performance
enhanced actuation drive options.
Each one of these valve groups represent product lines with the capability
of being both scaled up or scaled down to meet standard customer market system
flow capacities and performance needs. Basic models and spare parts can be
pre-manufactured to maintain a stock valve and parts inventory available for
rapid customer order turnaround time delivery.
As it relates to the AquaFuel(TM) Technology, the Company has identified three
prospective applications. The first relates to a product in the form of a gas
created through the AquaFuel(TM) process and the second application relates to
utilizing the AquaFuel(TM) apparatus for certain water reclamation and organic
waste disposal activities. Finally, the AquaFuel(TM) Certification indicates a
third potential use as a means of water separation, production of new chemicals
and production of gases.
(5)
<PAGE>
The AquaFuel(TM) Technology makes use of a new carbon electrode arc
technology used underwater to produce a new clean-burning, low-cost alternative
synthetic gas or syngas called AquaFuel(TM). To make AquaFuel(TM), an ac or dc
electric arc tunnels through water between the tips of carbon electrodes. The
5,000 to 7,000 degrees Fahrenheit heat from the arc dissociates nearby water
molecules into hydrogen and oxygen atoms. Carbon atoms break loose from the
electrodes and form bonds in this high energy plasma soup. The resulting
hydrogen/carbon/oxygen molecules cool and bubble up to the surface in the
surrounding water.
This renewable, inexhaustible, lighter-than-air syngas can be produced and
used in place of costly, non-renewable, pollution generating fossil fuels.
AquaFuel(TM) can be produced practically anywhere, in large or small production
facilities. The process works with any type of water including salt, tap, river
or even distilled water and with no electrolyte or any other additives required.
The AquaFuel(TM) apparatus can also serve as a means to reclaim polluted
waterways or for use in the disposal of organic (farm-animal) waste.
On May 16, 1998, the Company published Technical Report of Toups Technology
Licensing Number TTL-98-005 First Certification of AquaFuel(TM) Based on
Measurements Available on May 16, 1998 (the "AquaFuel(TM) Certification"). The
AquaFuel(TM) Certification is summarized in the section marked Recent Events.
(See "Recent Events")
As it relates to the BORS Lift Technology The BORS Lift unit uses an oil
recovery tube that is attached to material similar to that used as seat belts
inmost cars. The material guides the material down into the well and into the
oil column that is contained within the production casing of the well. As the
material dip into the oil column, the BORS Lift units stops, then reverses
direction to come back "up-hole." The BORS Lift unit is stationed approximately
20 feet from the well bore hole. PVC piping is reversibly inclined such that the
metal sweep is higher than the entrance into the BORS Lift unit.
An oil transfer pump located inside the small holding tank then transfers
the oil to a nearby collection tank. After a 2 to 3 minutes drain time, the
machine then reverses direction to send the material down the hole again into
the oil column without going into the water column which is situated below the
oil column. The result is minimal to no water lifted and no saltwater disposal
systems typically used with such wells are required. The BORS Lift operates on a
3/4 horse power electrical motor that drives the unit and programmable logic
controller which combined utilizes less than $15 of electric power per month per
pump.
The BORS Lift unit employs a Programmable Logic Controller to self correct
operational problems that the pure mechanical lifting device encounters in
specific field applications. The Programmable Logic Controller is literally the
brains of the BORS Lift unit.
Principal Markets
As it relates to the BP Valves design, the Company envisions that the use
of valves is not limited to a particular market segment. The Company operates on
the premise US demand for industrial valves will advance based on heightened
capital spending and rising production levels in key end-uses (i.e., chemicals
and other process industries). Gains will result from an increasing emphasis on
modernization and automation of production processes, both to remain globally
competitive and to reduce product costs through improved operating efficiencies.
The introduction of more advanced, energy efficient and generally better
performing valves will further spur gains, as utilities and other end-users seek
components which streamline operations and require less maintenance. This drive
to modernize will also support dollar gains, as end-users become increasingly
willing to purchase more capital-intensive valve products, aware that in the
long-run these larger up-front outlays will reduce operating costs.
As it relates to the AquaFuel(TM) technology, the AquaFuel(TM)
Certification indicates the following prospective market opportunities: (See
"Recent Events")
USE AS FUEL:
1. Motor fuel because of the remarkable reduction of pollutants in the
exhaust, high energy content, better safety, and other aspects
indicated earlier;
2. Heating fuel for homes and industries, for the same reasons;
3. Cooking fuel, because it is clearly preferable over methane and
other gases;
4. Industrial fuel for a variety of uses, such as for furnaces in the
steelindustry and others;
5. Emergency fuel, for instance, for the continuation of service in a
broken line of natural gas; and others.
(6)
<PAGE>
USE FOR SERVICE:
1. Recycling of liquid waste such as sewage;
2. Recycling of solid waste such as rubber tires;
3. Environmental clean-ups;
4. Production of electricity for various industrial and consumer uses;
5. Desalination; and other uses.
USE FOR PROCESSING:
1. Separation of water;
2. Production of new chemicals;
3. Production of gases, e.g., Hydrogen; and other possibilities are
currently under study.
As it relates to the BORS Lift device, the Company acts as the exclusive
manufacturer for a specific type of oil-well pump. The Company envisions it will
initially market the BORS Lift primarily to small, privately-owned oil
companies. The Company operates on the premise that in 1992, when the majors
produced a per company average of 345,000 barrels per day and the mid-level
publicly-traded oil and gas companies produced an average of 10,000 barrels per
day, the remaining oil and gas companies produced an average of only 300 barrels
per day.
These small private producers are quite numerous, accounting for about
7,400 of the nearly 8,000 companies reporting oil and/or natural gas production
in the United States in 1992. In the same year, 427 publicly traded corporations
disclosed that Standard Industrial Code (SIC) 1311 (oil and gas extraction) was
one of the industries in which they operate, of which 327 stated that SIC 1311
was their primary industry.
Distribution methods
As it relates to BP Valves, the Company is currently marketing sub-license
agreements with valve manufacturing entities which sub-license agreements would
allow the licensee to develop the BP Valve technology into a specific
application which, at this time, cannot be known. In addition, the Company
intends to develop a core group of design concepts which can be marketed
directly to valve end-users. The Company has retained two, full time selling
agents that dedicate 100% of their time and expertise in executing TTL's direct
valve marketing program.
As it relates to AquaFuel(TM), the Company intends to enter arrangements such as
sub-license, joint-ventures and/or strategic alliances relating to the
technology on an application/geographic basis and to market the resultant fuel
directly to the consumer. The Company's Vice President, Sales and Marketing
dedicates a portion of his time to investigating various AquaFuel(TM) revenue
opportunities. As the Company completes third-party documentation relating to
the AquaFuel(TM) process and resultant gas, Toups Technology may increase its
inhouse selling program or may outsource marketing responsibilities to firms
which are currently engaged in the business of developing sub-license,
joint-venture or strategic alliances.
As it relates to the BORS Lift, the Company has been engaged strictly as the
hardware manufacturer relating to the mechanical portions of the pump and to
conduct final assembly and delivery. Marketing of the BORS Lift is the
responsibility of Lift Pump, L.L.C.,, an Oklahoma Limited Liability Company
formed by the pump inventor Gerold Allen. The Company is a 20% owner of Lift
Pump, L.L.C..
Competitive business conditions
As it relates to BP Valves, approximately 250 companies participate in the
US valves industry, although aggressive acquisition activity has reduced the
base of producers and suppliers to some extent. The two largest producers --
Watts Industries and Emerson Electric -- together supply about ten percent of
the market. The other top manufacturers, each with less than 2.5 percent of the
market, are Crane, Neles-Jamesbury (UPM-Kymmene), Tyco, Duriron and Keystone
International.
The US industrial valve industry is very price competitive and relatively
mature. Although the variety of products spans from fire hydrants (which have
experienced very few innovations in recent decades) to smart valves, which
utilize microchip technology to integrate with other plant systems and provide
diagnostic and maintenance feedback, valves nevertheless remain a commodity-like
product. Thus, to gain market share, competitors must offer favorable pricing,
full service packages and a consistent array of new and better performing valves
(well over a hundred new valve products were introduced in 1995 alone). However,
product differentiation is difficult to achieve in such an environment. Many
producers therefore target individual markets, specialty niches and product
segments, although large producers generally offer a full valve line.
(7)
<PAGE>
The US industrial valve industry is comprised of a variety of manufacturers
typically engaged in specialize not only in the design and production of valves,
but also entire fluid control systems and automation systems. Contrastingly,
many of the smaller companies involved in the industry produce only a limited
line of valves as their primary business activity. Hansen, for instance,
manufactures valves for refrigeration applications. In addition, some very large
firms engaged in diverse activities target particularly lucrative niches (such
as Honeywell, via its Skinner subsidiary).
At present, the top five manufacturers within the valve industry are
comprised of:(derived from Freedonia Market Research Group, October 1993)
Company Market Share
Emerson Electric 3.8
KSB 2.9
Kitz 2.4
BTR 2.4
Keystone International 1.9
As it relates to the AquaFuel(TM) technology, the Company has recently published
the AquaFuel(TM) Certification which identifies a number of prospective
marketing opportunities for the AquaFuel(TM) technology including use as a fuel
to replace natural gas and gasoline; use for service relating to the recycling
of liquid and solid waste, and; for processing such as the separation of water,
production of new chemicals and production of gases, e.g., Hydrogen. However,
due to the early-stage nature of the AquaFuel(TM) technology, no meaningful
marketing information can be given.
However, the Company estimates that the AquaFuel(TM) Technology, in the gas
service and process market segments, will be in competition with
long-established providers that have substantially greater marketing and
financial resources and as such, may preclude any significant deployment of the
AquaFuel(TM) Technology.
As it relates to the BORS Lift Technology, Management is of the view that the a
significant number of domestic oil wells fit the definition of a "stripper" well
and are prime candidates for the net efficiency increase afforded through an
BORS Lift.
The U. S. Department of Energy in the annual Energy Review reports that
despite the fact there are large numbers of oil wells drilled each year, the
total number of producing wells (oil & gas) does not increase because of the
large number of marginally profitable wells that cease production based on
economic factors.
Three main factors contribute to the number of marginal wells which are
abandoned each year: The production of large amounts of water in conjunction
with production of small amounts of oil; cost to provide power to operate each
well exceeds the revenues produced and/or; the daily flow of oil decreases to
the point that continued operation is no longer economically feasible. The
Company believes the BORS Lift device can enhance marginal wells to the point of
profitability and therefore extend the life of fields which would otherwise
cease operation.
Patents and royalty agreements and acquisition agreement
The Company has entered two agreements relating to four U. S. patents and a
manufacturing agreement. All three agreements are summarized below and each
requires advance and on-going royalty payments. On April 29, 1998, the Company
acquired AMW in exchange for restricted Common shares.
Relating to BP Valves, on the 3rd of November, 1997, the Company executed a
exclusive agreement to design, manufacture and sell or otherwise commercialize
technologies based on U. S. Patent 5,309,934 Balanced Piston Fluid Valve and U.
S. Patent 5,421,358 Fluid Valve Mechanism and Valving Method (collectively "BP
Valves"). BP Valves agreement contains customary elements relating to agreements
of this nature and will, at a minimum, provide that (i) the duration of the
agreement is for the life of the patent: (ii) each license agreement will be for
an initial period of one-year whereafter it can be renewed for three-year
periods at the Company's discretion; (iii) the subject of the license will be
all present technologies and all future improvements and developments. The
license agreement obligates the Company to pay an annual 6% royalty fee. The
Company is also required to make a one-time advance payment of $36,000 upon
execution of the license agreement which is to be applied toward 1/2 the first
twelve months royalty fees. The advance royalty fee will be retained by the
recipient regardless of the performance of BP Valves in the marketplace. One of
the Company's Directors is the beneficial owner of approximately 30% of patents
relating to BP Valves.
(8)
<PAGE>
Relating to AquaFuel(TM), on the 3rd of November, 1997, the Company executed an
exclusive agreement to design, manufacture and sell or otherwise commercialize
the water-derived fuel technology based on United States Patent 5,435,274
Electric Power Generation Without Harmful Emissions and United States Patent
5,692,459 Pollution Free Vehicle Operation. The AquaFuel(TM) Agreement contains
customary elements relating to agreements of this nature and, at a minimum,
provides that (i) the duration of the agreement is for the life of the patent:
(ii) each license agreement will be for an initial period of one-year whereafter
it can be renewed for three-year periods at the Company's discretion; (iii) the
subject of the license will be all present technologies and all future
improvements and developments. The license agreement obligates the Company to
pay a royalty fee of 6% of annual revenues related to the sale of AquaFuel(TM)
and related products or services. The Company is also required to make a
one-time advance payment of $60,000 in four quarterly installments of $15,000
each quarter. Advance royalty fees shall be applied toward 1/2 the first twelve
months royalty fees. The advance royalty fee will be retained by the recipient
regardless of the performance of AquaFuel(TM) in the marketplace. The License
Agreement allows the principals of the AquaFuel(TM) patent 90 days from the date
of execution to conclude agreements with the nations of Australia, Austria,
Britain, France, Japan, Mexico and Taiwan. If the principals of the AquaFuel(TM)
patent are unable to conclude such negotiations within 90 days, then the Company
is entitled to a 50% portion of any agreements negotiated after that date. One
of the Company's Directors is the beneficial owner of approximately 30% of
patents relating to AquaFuel(TM).
Relating to BORS Lift, the Company executed a five-year Manufacturing License
Agreement effective January 1, 1998, by and between Gerold Allen ("Licensor")
and Toups Technology Licensing, Inc., ("Licensee") (the "BORS Lift Agreement").
The BORS Lift Agreement requires the Licensee to pay a 6% royalty fee to the
Licensor of the net sales price received from the sale of BORS Lifts. The BORS
Lift Agreement requires the Company to remit an advance first year royalty
payment of $80,000 in increments of $20,000 each with the first due upon
execution and the remainder due in equal amounts every three months thereafter.
However, the BORS Lift Agreement acknowledge the Company will not be required to
remit the remaining $60,000 advance royalty payments if the payment of the first
three BORS Lifts is not received. The BORS Lift Agreement further requires the
Company to manufacture a minimum of 100 pumps in the first year and not less
than three hundred pumps each year thereafter. The BORS Lift Agreement remains
in effect until December 31, 2002.
On April 29, 1998, the Company executed a Sale of Corporations Assets in
Exchange For Stock of Purchasing Corporation Agreement (the "Acquisition
Agreement) with A. M. W. Metal Fabricators, Corporation, a Florida corporation
("AMW"). Under the terms of the Acquisition Agreement, the Company acquires all
of AMW's assets, business and good will in exchange solely for 500,000
(five-hundred thousand) shares of the Company's restricted common stock or 50
shares of the Company's common stock in exchange for one share of AMW. Amendment
A to the Acquisition Agreement obligates the Company to provide facilities
within the STAR Center for the relocation of AMW no later than June 30, 1998.
Continuing obligations of the Acquisition Agreement obligate the Company to
assume or negotiate for the Company's common stock a loan in the amount of
$54,450. The Amendment to the Acquisition Agreement further obligates the
Company to compensate AMW owner Tim Rice at the rate of $60,000 annually with
salary increases at the rate of $5,000 annually commensurate with an increase of
$50,000 annual revenue which exceed expectations. Base salary for Tim Rice
however shall not exceed $150,000 under this incentive program and within 60
days of the Acquisition Agreement, the Company shall enter an employment
agreement with Tim Rice for a period of at least five years.
The Company currently has 19 full-time employees and one employ who
provides 50% of his time in matters relating to the AquaFuel(TM) process. None
of the Company's employees are covered by collective bargaining agreements.
Messrs. Jaeger, Richardson and Allen have agreements relating to their services
regarding BP Valves, AquaFuel(TM) and BORS Lift technologies, respectively. The
Company's employees are classified as:
Executive 4
Sales 3
Engineering 4
Other 8
-
Total Employees 19
(9)
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company was organized during July, 1997, became operational on November, 1,
1997 and has no earnings to date. The Company's initial success is predicated on
successfully marketing applications of the AquaFuel(TM), BP Valves and the BORS
Lift technologies. To date the Company has funded its operations through the
private sale of its securities. To date, the Company has received deposits
against orders for 27 BORS Lifts at the purchase price of $7,500. The Company
has now shipped three BORS Lift devices and completed field trials and will
thereafter formulate a delivery schedule for the first 27 BORS Lifts. To date,
the Company has received orders and/or specification sheets for its BP Valves
which management estimates will result in revenues during the second quarter,
1998. The Company does not anticipate marketing its AquaFuel(TM) technologies
until commencing with the third quarter, 1998. On April 29, 1998, the Company
acquired AMW, a seven-year old metal fabrication and micro-welding company. The
Company believes its cash reserves together with net-income from operations are
sufficient to satisfy the Company's cash requirements for at least the next
twelve months. However, the Company may need to raise cash through loans or the
additional sale of its securities to fully maximize any one or all of the
Company's technologies. Failure to successfully raise additional cash may
therefore preclude the Company from taking full advantage of its various
technologies.
The technologies licensed by the Company to date have been developed during
the past 3 - 5 years. The Company's strategy envisions acquiring a license for
the technology thereby avoiding the research and application development
expenses. The Company has decide to proceed in this manner because it believes
the expenses of developing new technologies can result in significant losses
which must be recouped prior to achieving a profitable operation. At the point
in time when the Company acquires a particular license, the underlying
technology the Company anticipates that it will be ready for entrance into the
market place and not in the development or start-up state. This strategy is
designed to enable the Company to achieve revenues for its licensed technologies
within approximately six months of obtaining the license.
With the acquisition of AMW, the completion of prototype testing relating
to the BP Valve and BORS Lift and with the completion of phase one AquaFuel(TM)
scientific documentation, the Company does not anticipate any significant
capital expenditures during the next twelve months. The Company may incur an
estimated $30,000 in research and development costs relating to on-going
scientific investigation of the AquaFuel(TM) technology.
An example of the Company's plan of operation is reflected in the BORS
Lift. With the BORS Lift, the Company executed its manufacturing agreement on
January 15, 1998 and as of February 20, 1998, has received orders totaling more
than $200,000 in gross sales. Another example of the Company's plan of operation
is reflected in the BP Valve. With the BP Valve, the Company executed its
agreement on the 3rd of November, 1997 and received its first purchase order on
the first of January, 1998.
The Company has not relied on anything other than the opinion of management
in developing the business plan for AquaFuel(TM), BORS Lift and BP Valves. The
Company is therefore subject to all the risks inherent in any start-up venture,
many of which are beyond the control of management. Among the factors which
could adversely effect the Company's on-going operations include lack of market
acceptance for the applications developed from the Company's licensed
technologies; inability to manufacture products developed from the Company's
licensed technologies or, if accepted and produced, an inability of the Company
to profitably sell such products or services in light of existing marketplace
competitors most of which have substantially greater financial resources and
historical operating performance.
On January 15, 1998, the Company engaged the Institute for Basic Research
("IBR") through its President Dr. Ruggero Maria Santilli, to conduct theoretical
evaluations in the form of a series of technical reports relating to the
AquaFuel(TM) technology. The Company has caused for the first five Technical
Papers of which the AquaFuel(TM) Certification is paper numbered 005. A summary
of the AquaFuel(TM) Certification is included in the section marked "Recent
Developments." (See "Recent Development")
The Company occupies approximately 5,000 square-feet within the 96-acre
Pinellas Science Technology and Research Center ("STAR Center") in Largo,
Florida. Formerly used by Lockheed Martin Specialty Components, Inc. ("Lockheed
Specialty Components") as a provider of nuclear triggers for the Department of
Energy ("DOE"), the STAR Center has been converted into a technology incubator
for engineering firms and specialty manufacturers.
When the Department of Energy no longer had use for the facility, an
extraordinary amount of high technology manufacturing equipment became available
for STAR Center tenets at the rate of $1.00 per year. Under this program, the
Company has already acquired an estimated $1,700,000 in various computer,
manufacturing and high-technology equipment at a cost of $1.00 per year. The
Company does not envision therefore a need to make any significant purchase of
equipment in the course of establishing and operating its manufacturing
capabilities.
(10)
<PAGE>
Recent Developments
As it relates to BP Valves. On May 8, 1998 the Company was notified it had been
awarded a grant relating to the BP Valve technology; has completed a 1,000,000
(one-million) cycle, leakage and torque test of the prototype BP Valve; has
completed design of the Company's initial product-line offering; has scheduled a
marketing campaign to include advertisements in seven industry related
publications and intends to conduct a 15,000 piece direct marketing program
during May, 1998.
The Grant. The following was extracted from The Technology Deployment
Center Proposal Submission Packet:
"The Technology Deployment Center (TDC) is a joint program developed by
Lockheed Martin Specialty Components and the University of South Florida at the
United States Department of Energy (DOE) Pinellas Plant in Largo, Florida. The
TDC is funded by means of the Department of Defense (DOD) appropriation and DOE
economic development funds.
In general, proposals are evaluated on the following four priority areas:
(1) Significant technology push, (2) existence of a working laboratory model
ready for prototyping; (3) strong market pull, and; (4) high degree of
Lockheed-Martin/Pinellas Plant interest and involvement. Recommendation for
funding will be made by the review committees to the TDC Technical Advisory
Committee. The Advisory Committee will ensure that the required technical
resources are available. DOE/DOD oversite managers will make final funding
decisions".
On December 16, 1997, the Company was invited to submit a proposal to the
TDC for a grant relating to the Balanced Pistons Valve technology. The Company
appeared at Committee meetings in January and March. The Company further
provided results from its proto-type testing (see below). The TDC Executive
Committee made a personal appearance at the Company's facilities on April 24,
1998. On May 8, 1998, the Company received notification that the Balanced
Pistons Valve technology had been awarded a grant in the amount of $50,000. The
TDC administered grants are typically awarded in anticipation of a 3:1 repayment
with payment scheduled to begin in approximately three years from date of award.
The test. The Company completed tests relating to the torque, seat leakage
and life-cycle of the BP Valve design. The engineering test study conducted by
the Company at its headquarters facilities relate to four (4) 1/2" port
prototype Balanced Pistons Valves.
Torque Test
Parameters. Torque in rotational motion corresponds to force in linear
motion. It is the product of the force tending to rotate an object, multiplied
by the perpendicular radius arm through which the force acts. The net torque on
an object is proportional to the resulting change in angular momentum. Torque is
a vector directed along the rotational axis.
Results. At 100 pounds per square inch gauge (psig), the torque or force to
mobilize a BP valve was 95 inch-ounces. Typically, torque is measured in "foot
pounds". This standard measurement means that a certain amount of "foot-pounds"
are necessary in order to cause a conventional valve to turn (open and close).
In the case of the BP Valve, the torque was so minor that standard measurements
had to be reduced from foot-pounds to inch-ounces.
Seat leakage
Parameters. The seat leakage portion of the engineering tests seeks to
determine the amount of leakage which occurs when the valve is fully closed.
Seat leakage tests were performed in 10psig increments beginning from 0psig to
100 psig. Further, there were two types of o-rings used in the course of the
test: two of the four valves used a standard buna-n o-ring. The second two
valves used o-rings that were silicone encapsulated in Teflon. It should be
noted that the silicone/Teflon o-ring valves were supplied dry filtered air. The
buna-n o-rings valves were supplied filtered air with oil via an airline
lubricator.
Results. The two valves outfitted with the standard buna-n 0-ring did not
experience any leakage up to 100 psig. This translates to a Class 6 leakage
rating according to ANSI/FCI 70-2. The two valves which had silicone/Teflon
o-rings experienced slight leakage which is a Class 4 leakage per ANSO/FCI 70-2.
Life cycles
Parameters. The life (number of cycles) of a valve can vary greatly due to
operating conditions, cycle rate and type of fluid being controlled. The company
began with four valves. Two with buna-n o-rings and a lubricated air supply and
two with silicone/Teflon o-rings and dry filtered air supply as described above.
A 12 rpm motor would drive all four valves simultaneously. The line pressure was
90 psig and our initial objective was to achieve up to 1,000,000 cycles.
Results. At the 1,000,000 cycle mark, the test was halted and the valves
inspected. The lubricated line valves both appeared to be operating properly and
showing no signs of leakage. Testing each valve for torque and leakage at 10psig
increments, we found the valves remained at zero leakage throughout the pressure
range the highest torque increase was approximately 40%. However, significant
leakage was noticed in the two silicone/Teflon dry filtered air valves.
(11)
<PAGE>
The Company has completed the designs and is actively marketing 2-way and
3-way valve designs compatible to 1/2", 3/4" 1", 1-1/2" and 2" pipeline valve
sizes. The Company's design incorporates stainless steel body and trim and
electric rotary actuator. This line of valves is recommended for clean liquids
and gases up to 500 psig and 300(degree)F.
The Company has scheduled a 1/2 page two-color advertisement to run in
seven industry related publications between May and December, 1998 including
Hydrocarbon Process, Processing, Chemical Engineering, Flow Control, Valve,
Intech and Mechanical Engineering. Further, the Company intends to execute a
15,000 piece direct mail program during May, 1998.
As it relates to the BORS Lift: To date the Company has received a deposit
against an order for 27 BORS Lifts. The Company has also manufactured and
shipped three BORS Lifts on a field-trial basis to two sites in Texas. For the
oil-field operator, payment of the pumps was contingent upon successful
performance against pre-set benchmarks. For the Company, the field-test would
aid in identifying any final design adjustments prior to manufacturing the BORS
lift in any significant quantities. Further, lacking any meaningful field
operations of the BORS Lift concept, the Company envisioned that data collected
from the field-test was essential in demonstrating the attributes of the BORS
Lift device.
At test site one, two of the three pumps have undergone approximately 200
hours of intermittent field operation during the course of a four week period.
Test site two is located in a field approximately 70 miles from test site one.
The field testing has been conducted by the inventor Gerold Allen and the
distance between the two test sites made simultaneous testing impractical.
The depth of the two wells at test site one is approximately 2,000 feet.
Historically, well number 1 produces on average one barrel of oil per day at a
cost of electricity of $3.50 per barrel. Historically, well number 2 produces on
average 3/4 of a barrel of oil per day and also operates at an electricity cost
of $3.50 per barrel. In addition to the oil, historically, each well produces on
average 5 barrels of water per day. The water must be removed through a
separation process and disposed prior to sale of the oil.
After 200 hours of intermittent operation monitored by the inventor and the
field owner, well number one was producing on average six barrels of oil per day
and well number two was producing on average four barrels of oil per day. Total
electricity used was 8 kilowatts or a total cost of $0.56 which computes to an
average of $0.035 per barrel. Further, BORS Lift was able to extract the oil
with an insignificant quantity of water thereby eliminating a need for the
process of separation.
A number of design enhancements and manufacturing improvements were
identified which, when incorporated, are anticipated to lower the cost and
improve efficiencies of manufacturing each BORS Lift as well as improve long
range durability. As an example, each BORS Lift was designed with a large metal
wheel around which the oil collection material was fed into the well. The wheel
required a laser cut to prevent warping and painting to avoid rust and
corrosion. By switching the metal wheel to one made of hard plastic, the Company
is able to lower the cost of materials and eliminate the need to paint or
special-cut the wheel. In operation, the hard plastic wheel is not susceptible
to warping. It was also noted that the electric motor mounted into each BORS
Lift should be repositioned by approximately 36 inches and that a cooling
mechanism was required to keep the computer control device form overheating.
The Company is completing the manufacturing specifications and drawings
which incorporate the final changes identified in the field-test. Thereafter,
the Company is scheduled to manufacture a single BORS lift which incorporates
all field-test design modification and allows for a practical dry-run of the
final manufacturing process. The company anticipates it will manufacture and
install the final BORS Lift at test site one in Texas during early June, 1998.
The Company has the capacity to manufacture up to 25 BORS Lift devices per
month at its headquarters facility. In the event that demand for the BORS Lifts
exceeds current in-house capacity, the final engineering drawings will enable
the Company to out-source manufacturing on a fixed-cost basis.
As it relates to AquaFuel(TM) on May 16, 1998, the Company published
Technical Report of Toups Technology Licensing Number TTL-98-005 First
Certification of AquaFuel(TM) Based on Measurements Available on May 16, 1998
(the "AquaFuel(TM) Certification"). The AquaFuel(TM) Certification was prepared
on behalf of the Company by Dr. Ruggero Santilli, President, the Institute for
Basic Research ("IBR") (the "underwriter" of the AquaFuel(TM) Certification).
The IBR is comprised of approximately 100 scholars plus 30 members with dual
affiliations to universities and research institutions throughout the world.
Each IBR member is selected based on an expertise in the fields of contemporary
mathematics, physics, biology and other, related fields. The IBR is
headquartered at the Castle Prince Pignatelli, in Molise, Italy and has
editorial offices in Palm Harbor, Florida. The IBR is the publisher of Algebras,
Groups and Geometries (15 years of publication), Hadronic Journal (20 years of
publication) and Hadronic Journal supplement (12 years of regular publication).
(12)
<PAGE>
Dr. Ruggero Maria Santilli has been engaged by the Company as Theoretician
charged with organizing the Company's scientific documentation of the
AquaFuel(TM) technology. Dr. Santilli is the current President and Professor of
Theoretical Physics for the IBR and is the author of over 150 research papers,
12 advanced monographs and editor of 30 volumes of conference proceedings and
collected works.
Dr. Santilli has held faculty or visiting positions at the University of
Miami, Boston University, M.I.T., Harvard University Departments of Physics and
Mathematics, J.I.N.R., Dubna Russia, Ukraine, Romanian and Estonian Academies of
Sciences. Dr. Santilli received a Ph.D. in Theoretical Physics at the University
of Turin, Italy in 1966 and is the recipient of two Gold Medals for scientific
merits.
The text portion of the AquaFuel(TM) Certification is included in this
transmission. The text portion does not included the attachments and exhibits to
the AquaFuel(TM) Certification. The Company was unable to include the
attachments and exhibits to the AquaFuel(TM) Certification in the electronic
filing due to the length, complexity and expense. A complete AquaFuel(TM)
Certification has been submitted manually pursuant to Regulation SB, Rule 202. A
complete copy of the AquaFuel(TM) Certification is available from the Company
upon request at no charge.
Since inception, the Company has not derived any revenues from its AquaFuel
technologies.
The following summarizes the AquaFuel(TM) Certification. All items within
quotation marks (" ") are extracted from the report. Items without quotation
marks are either the opinion of management or were derived from other indicated
sources.
Overview
"Objectives. ...to review and certify 1) the results of the research on the
new, nonfossil, combustible gas called AquaFuel(TM) conducted by a group of
scientists under (Dr. Santilli's) supervision during the past months; 2) the
reports on various measurements conducted by independent laboratories which have
been inspected and appraised both, personally, by the underwriter as well as
collegially by the research group; 3) the numerous tests conducted in recent
months at TTL plant; 4) competition and cost analysis as available at this
writing; and 5) expected future possibilities currently under test."
(AquaFuel(TM) Certification 1.1)
"This certification has been finally made possible by invaluable technical
assistance provided by me by Dr. M. Fetterolf, Dr. D. Shallidy, Dr. C. Hales,
Dr. D. Pachuta and others in the United States, Dr. P. Glueck in Romania, Dr. D.
Schuch in Germany, Dr. J. Dunning-Davies in England, Dr. B. Lavenda in Italy and
other members of our Institute, as well as by all personnel of TTL, including
Mr. Leon Toups, President, Mr. Jerry Kammerer and Mr. Mark Clancy, Vice
Presidents, as well as William Richardson Jr., (AquaFuel(TM) inventor) and Mr.
Jack Hansen and Ken Lindfors and other TTL personnel." (AquaFuel(TM)
Certification 1.1)
Insufficiencies of this presentation. It should be stressed that this is
the "first" of an expected series of certifications of the characteristics and
applications of AquaFuel(TM) due to the novelty of the product and the lack of
availability at this writing of certain measures. In the final analysis,
scientific and systematic studies of AquaFuel(TM) have initiated by our group
only three months ago." (AquaFuel(TM) Certification 1.12)
"Main characteristics. AquaFuel(TM) has excellent exhaust characteristics
second only to those of the Hydrogen; it can be produced rapidly in large
volumes anywhere desired with simple, easily realizable equipment, its cost is
moderate; and the gas is safer than other fuels in both its production and
storage." (AquaFuel(TM) Certification 1.4)
"Cost comparison. Keep in mind that the prohibition of the use of all
conventional fossil fuels in polluted cities such as Los Angeles, Tokyo, Milan,
etc., is expected in the near future, while alternatives such as fuel cells are
expected in the far future. In order to have practical or otherwise industrial
meaning, cost analysis and comparisons should be conducted between AquaFuel(TM)
and Hydrogen." (AquaFuel(TM) Certification 1.6)
"A serious cost comparison requires that the following additional
considerations. First, there is the savings due to transporting because other
gases have to be produced in specialized plants and then transported to the
consumer, while AquaFuel(TM) can be produced anywhere desired." (AquaFuel(TM)
Certification 1.7)
"Secondly, in comparing AquaFuel(TM) and Hydrogen one must take into
consideration the fact that, according to all available measures outlined below,
AquaFuel(TM) has an energy content greater than that of Hydrogen." (AquaFuel(TM)
Certification 1.7)
"Cost of AquaFuel(TM). As we shall see, one of the most effective
industrial and consumer use of the AquaFuel(TM) process is for recycling.
AquaFuel(TM) is automatically produced in such recycling as a by-product. Cost
considerations should also include the revenues from solids precipitated during
the process." (AquaFuel(TM) Certification 1.9)
(13)
<PAGE>
"Cost competitiveness of AquaFuel(TM) with respect to Hydrogen. As stressed
above, Hydrogen has only one class of applications, that after its formation for
fuel, chemistry, propulsion, etc. As a result, all costs to produce, store
transport Hydrogen must be applied in their totality to the use of Hydrogen."
(AquaFuel(TM) Certification 1.10)
Measurements Available On May 16, 1998
"An engine running AquaFuel(TM) would have to operate for over 210,000
hours to equal the amount of CO produced in 24 hours while being fueled by
gasoline."(AquaFuel(TM) Certification 2.3 - Tests on combustion exhaust)
"Equally impressive is the presence of 7.1% of Oxygen in the exhaust which
is evidently important to maintain the Oxygen balance in our atmosphere. This is
a clear indication that AquaFuel(TM) is not a lean mixture, but a mix with
excess power." (AquaFuel(TM) Certification 2.3 Tests on combustion exhaust)
"Engine tests of AquaFuel(TM) were performed on a small internal combustion
(IC) engine at the Briggs & Stratton Test Center of Milwaukee, Wisconsin, by
comparing the new fuel to gasoline." "Additional tests were done in 1994 at the
EPA facilities in Ann Arbor, Michigan with the following results." "Further
tests were done on 4-20-98 under the supervision of Motor Fuelers, Inc., of
Largo, Florida." (AquaFuel(TM) Certification 2.3 - Tests on combustion exhaust)
<TABLE>
combustion table
<CAPTION>
Motorfuelers Briggs & Stratton US EPA, Ann Arbor
<S> <C> <C> <C> <C> <C> <C>
AF Gas AF Gas AF GAS
HCpm 7.0 420.0 185.0 2,436.0 122.0 3,867.0
CO% 0.17 8.5 0.04 4.3 0.16 3.1
O2% 12.0 0.13 7.1 0.54 N/A N/A
CO2 8.3 9.9 15.0 12.0 13.0 9.0
</TABLE>
"Note the extreme advantage for AquaFuel(TM) over gasoline in the reduction
of hydrocarbons, carbon monoxide and oxygen, and the consistency between each
test." (AquaFuel(TM) Certification 2.3 - Tests on combustion exhaust)
2.4 Tests on recycling. TTL obtained 3 gallons of sewage from the City of
Largo, Florida... The samples were encoded by TTL with cryptographic
identification to prevent the knowledge of the sequential character. The encoded
samples were then examined by Constellation Technology Corporation of Largo,
Florida..." (AquaFuel(TM) Certification 2.4)
As one can see, all bacteriological activities ceased to exist in 3 gallons
of sewage following one minute of exposure to the AquaFuel(TM) process. To
properly appraise this result, one should keep in mind that it was obtained with
a small, low efficiency welder with about 5Kw." (AquaFuel(TM) Certification 2.4)
"The above results indicate that the AquaFuel(TM) process does indeed
provide a new viable form of recycling sewage either by municipalities or by
individual households..." (AquaFuel(TM) Certification 2.4)
"2.5 Tests on the BTU content. Several tests on the BTU content of
AquaFuel(TM) by a number of independent laboratories as well as at TTL have been
conducted as of today, May 16, 1998, although for various reasons, they are not
final. The only scientific conclusion which can be stated at this writing is
that the energy content of AquaFuel(TM) is greater than that of Hydrogen
although the actual amount is under test and will be released in future
certifications." (AquaFuel(TM) Certification 2.5)
"The claim that AquaFuel(TM) has a BTU content greater than that of
Hydrogen is based on the following evidence: A) Preliminary measurements via the
bomb calorimeter by Dr. Fetterolf; B) Comparative measures of flame
temperatures; C) Cutting tests; D) Engine tests. E) Theoretical calculation of
BTU content." (AquaFuel(TM) Certification 2.5)
"2.6 Production tests with batteries. A series of tests was first conducted
at TTL via the use as power unit of ordinary car batteries. Even though far from
a real production set up and possessing a number of drawbacks, the use of car
batteries results to be useful to reach basic knowledge, such as energy absorbed
and volume of AquaFuel(TM) produced. Also, the test with car batteries is quite
simple and can be easily reproduced everywhere." (AquaFuel(TM) Certification
2.6)
(object omitted)
"FIGURE 3: The diagram expressing the dependence of the volume of
AquaFuel(TM) produced in cubic feet per hour (CFH) as a function of the voltage
(V DC). Note its nonlinear character of parabolic types, that is, CFH is
proportional to the square of the voltage. This property, first established with
the battery tests is of fundamental relevance, because it indicates the
possibility of increasing the efficiency of AquaFuel(TM) production with the
increase of the voltage." (AquaFuel(TM) Certification 2.6)
(14)
<PAGE>
"The cost of 333 cf of AquaFuel(TM) with the above empirical pre-production
units is therefore 333/42 = $7.92 plus the cost of the Carbon rods, plant
amortization and other costs, which can be estimated (in excess) to a total
production cost of $21.5 per 333cf with a sale price of $50 per 333cf."
(AquaFuel(TM) Certification 2.9 Preliminary costs analysis on AquaFuel(TM))
"Air Products and Chemicals, Inc., of Largo, Florida released the following
costs for Hydrogen for local deliveries:
1) $2.50 per 100 cf of Hydrogen under the minimal purchase of 300,000 cf.
By recalling that Hydrogen has about 300 British Thermal Units per cubit feet
(BTU/cf), the above price corresponds to the wholesale cost of $83.33 per 333
cf.
"2.10 Tests on chemical composition. A number of analyses on the chemical
composition of AquaFuel(TM) have been performed by various leading laboratories.
However, none of them can be considered conclusive at this writing because of
contradictions, either internally, or with respect to other more established and
verifiable measurements." (AquaFuel(TM) Certification 2.10)
"CONCLUSIONS
In summary, following the personal supervision, eye-witnessing and inspection of
the measurements and tests conducted on AquaFuel(TM) during the past three
months, the underwriter hereby states that:
1) The representations made by TTL on AquaFuel(TM) (which are contained in
the AquaFuel(TM) Certification) are correct and supported by experimental
evidence.
2) All tests were conducted correctly and reported accurately.
3) The tests results and their interpretation were the outcome of a
collegial effort involving several independent scientists as well as
various TTL personnel.
4) The tests and measurements reported in this presentation establish that
AquaFuel(TM) is superior to Hydrogen in cost, energy content, simplicity
and rapidity of production anywhere desired in small or large volumes.
5) The AquaFuel(TM) product, service and process are near commercial
applications, as in the case of AquaFuel(TM) as combustible gas,
recycling of sewage or organic waste, environmental clean-ups, and
others.
6) The ability to serve Government, Military, Space Industry as well as
private markets, including households, on a world-wide basis has been
also established.
In conclusion, as stressed in Sect. 1.5, environmental problems caused by highly
pollutant fuels are, by far, the largest problems of contemporary societies.
Thus, the availability of a new, clean, cheap, and readily producible fuel, such
as AquaFuel(TM), should be taken seriously by all."
ITEM 3 - DESCRIPTION OF PROPERTY
The Company's headquarters and manufacturing facility occupies
approximately 5,000 square-feet within the 96-acre Pinellas Science Technology
and Research Center ("STAR Center") located at 7887 Bryan Diary Road, Suite 210,
Largo, Florida, 33777. The Company issued 120,000 of its restricted Common
Shares to InterSource Health Care, Inc. in exchange for the use of 5,000 square
feet for a period of twelve months, which twelve months ends December 31, 1998.
Thereafter, the Company intends to negotiate a lease directly with the STAR
Center. The Company intends to lease additional space during June with the
relocation of AMW to the Company's headquarters facility in the STAR Center. The
Company is currently negotiating its lease and estimates a per square foot
charge of approximately $7 per square foot for an additional 10,000 square feet
of space.
InterSource Health Care, Inc., is a privately-held medical equipment
brokerage firm which refurbishes and resells used medical equipment. InterSource
is unrelated to Toups Technology except for common ownership. The Company's
Chief Executive Officer and Chief Financial Offer are Directors and shareholders
of InterSource. Neither individual received any of the restricted Common Shares
issued to InterSource in exchange for its use of the facilities.
(See "related transactions")
Formerly used by Lockheed Martin Specialty Components, Inc. as a provider
of nuclear triggers for the Department of Energy ("DOE"), the STAR Center has
been converted into a technology incubator for engineering firms and specialty
manufacturers. The STAR Center is a 739,873 square-foot complex comprised of 17
separate buildings; a 150,000 square foot, 16 foot high bay manufacturing area
and approximately 100 separate areas including laboratories, production space
and offices. The STAR Center contains world class analytical laboratory
facilities for chemical, metallurgical, ceramic, polymer and environmental
analysis. Distributed computer networks throughout the facility and full
manufacturing machine shop capability including several CNC lathes, 4-axis
machine centers, automatic CNC screw machines and wire EDM facilities.
(15)
<PAGE>
The Company does not invest in real estate or real estate mortgages nor
does the Company invest in the securities of or interests in persons primarily
engaged in real estate activities.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company has 9,100,214 shares of its Common Stock issued and outstanding. The
following table sets forth, as of January 31, 1998, the beneficial ownership of
the Company's Common Stock (i) by the only persons who are known by the Company
to own beneficially more than 5% of the Company's Common Stock; (ii) by each
director of the Company; and (iii) by all directors and officers as a group.
<TABLE>
Beneficial ownership of the Company's Common Stock
<CAPTION>
(1) (2)
Name and Amount and
Address of Nature of
Beneficial Beneficial (3)
Title of Class Owner Owner Percent of Class
-------------- ----- ----- ----------------
<S> <C> <C> <C>
Common Leon H. Toups 3,200,000 31.1%
418 Harbor View Lane
Largo, Florida 33770
Common Mark Clancy 1,600,000 15.5%
417 Barrett Court
Tampa, Florida 33617
Common Michael Toups 1,600,000 15.5%
400 Palm Drive
Largo, Florida 33770
Common Jerry Kammerer 1,600,000 15.5%
1421 Water View Drive
Largo, Florida 33771
Common Charles McClure 250,000 2.4%
701 Bayshore Blvd #201
Tampa, Florida 33606
Common Officers and Directors 8,250,000 80.3%
(five persons)
<FN>
- ----------
(1) Mr. L. Toups serves as the Company's President, Chief Executive Officer and
Chairman of the Board of Directors. Mr. Clancy serves as a Director and as
the Corporate Secretary and Vice President, Sales and Marketing. Mr. M.
Toups serves as a Director and as the Company's Chief Financial Officer
and Vice President, Finance. Mr. Kammerer serves as a Director and as
the Company's Vice President, Technology Development. Mr. McClure
serves as a Director and as the Company's Patent Advisor.
(2 All Shares issued to named persons and Officers and Directors as a group
were issued upon incorporation in lieu of salary. None of the named persons
and Officer and Directors as a group are holders of any options, warrants,
right conversion privileges or similar items.
(3) The Company has not granted any options, warrants, rights conversion
privileges or similar items. There are no provisions which allow for a
change in control of the issuer beyond the annual election of Directors. The
Company is unaware of any voting trusts or similar agreements among its
Shareholders.
</FN>
</TABLE>
ITEM 5 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Directors and Executive Officers. The following Directors and Executive
Officers have served in their respective capacities since July 28, 1997. The
Directors were re-elected for the current term at a Meeting of Shareholders
conducted January 5, 1998. None of the Directors hold similar positions in any
reporting company.
Chairman of the Board of Directors, President and Chief Executive Officer
Leon H. Toups (58). Mr. Toups' past professional experiences include from 1980
to present as President and Chairman of the Board of Directors, DMV, Inc.,
Clearwater, Florida. DMV is a private business consulting company. Prior
thereto, from 1973 to 1980, Mr. Toups served as President and Chief Operating
Officer, as a Member, of the Board of Directors and as a Member of the Executive
Committee for Chromalloy American Corporation, St. Louis, Missouri and as
President, Chromalloy Natural Resources Company, Houma, Louisiana. Chromalloy
American was an international conglomerate with sales of approximately $1.6
billion which employed 32,000 people worldwide and traded its capital stock on
the New York Stock Exchange. Mr. Toups holds the following degrees: M.S.
Aerospace Engineering, University of Florida; M.S. Mechanical Engineering,
Georgia Tech; B.S. Mechanical Engineering, Georgia Tech. From 1968 - 1969
attended M.I.T. on a NASA Hugh Dryden Fellowship.
(16)
<PAGE>
Director and Vice President, Technology Development, Jerry Kammerer (53).
Mr. Kammerer's past professional experiences include from 1980 through the
present, President, Filter and Systems, Inc., Minneapolis, Minnesota; Co-founder
of New Thermal Technologies, Inc., Clearwater, Florida. and as a Director of
Ceramic Rotors, Inc., Clearwater, Florida. Prior thereto, Mr. Kammerer was a
licensed developer involved in the following projects: President, Kam Builders,
Inc.; President, HPI Development and Construction Company; President, The Adonis
Group, Inc.. Mr. Kammerer holds a B.A., Business Administration, Fort Lewis
College, Durango, Colorado and a B.A., Faith Theological College, Scottville,
Michigan.
Director, Vice-President, Finance, Chief Financial Officer, Michael P.
Toups (32). Mr. Toups' past professional experiences include from: 1996 to
present as a Director and Vice President, Finance for InterSource Health Care,
Inc., Clearwater, Florida ; 1992 through Present, Vice President, Finance and
Operations, DMV, Inc., Clearwater, Florida. Mr. Toups holds an MBA, University
of Notre Dame with concentrations in finance and marketing and a BA, Business
Administration, Texas Christian University.
Director, Corporate Secretary and Vice President, Sales and Marketing, Mark
Clancy (42). Mr. Clancy's past business experiences include from: 1993 to
Present, Compliance Officer, DMV, Inc., Largo, Florida; 1996 to Present,
President, Total Kids, Incorporated, Tampa, Florida. Total Kids, Inc., a service
corporation which intends to engage in the operation of child-care centers.
Prior thereto, Mr. Clancy as General Sales Manager, WRCC FM Radio, Cape Coral,
Florida and as Sales Consultant, WIZD FM Radio, West Palm Beach, Florida. Mr.
Clancy holds an AA from Hillsborough Community College, Tampa, Florida.
Director and Patent Advisor, Charles A. McClure (71). Mr. McClure's past
professional experiences are as an active member of District of Columbia,
Florida and Pennsylvania Bar. Registered Patent Attorney (regn. No 17,177) in
United States Patent Office. Originally E.I. duPont de Nemours & Company legal
department, Wilmington, Delaware. Subsequently in private practice in
Philadelphia for two decades and as a full-time practitioner of intellectual
property law in Tampa, Florida since 1983. Mr. McClure holds an A.B. in
Chemistry, Oberlin College; an MS in Physics and J.D. in Law, University of
Illinois; an MBA, Management, Wharton School, University of Pennsylvania, and;
MA, PhD, Communications, Annenberg School, University of Pennsylvania.
The Company's Chief Financial Officer, Vice President, Finance and Director
Michael Toups is the son of the Company's President, Chief Executive Officer and
Chairman of the Board of Directors, Leon H. Toups.
ITEM 6 - EXECUTIVE COMPENSATION
The following table depicts all plan and non-plan compensation awarded to,
earned by or paid to the named executive officer of this corporation for the
period indicated:
<TABLE>
Annual Long Term
Compensation Compensation
------------ ------------
<CAPTION>
(a) (b) (c) (d) (e)
Restricted
Stock Total
Name and Principal Salary Bonus award(s) Compensation
Position Year ($) ($) ($) ($)
-------- ---- --- --- --- ---
<S> <C> <C> <C> <C> <C>
Leon H. Toups 1997 $2,000 $0 $3,200 $5,200
President
Chief Executive Officer
Mark Clancy 1997 $2,000 $0 $1,600 $3,600
Corporate Secretary
Vice President, Sales
& Marketing
Jerry Kammerer(f) 1997 $2,000 $0 $1,600 $3,600
Vice President,
Technology Development
Michael Toups 1997 $2,000 $0 $1,600 $3,600
Vice President, Finance
<FN>
a) All named executive Officers have served in their respective capacities
since formation of the Company during July, 1997.
(b) The Company was incorporated during July, 1997.
</FN>
</TABLE>
(17)
<PAGE>
(c) All named Officers have agreed to serve in their respective capacities at
the rate of $4,000 per month until such time as the Company's Board of
Directors authorizes an increase. Such an increase would be predicated on
prevailing industry standards and the existent financial situation of the
Company. The Board of Directors may authorize an increase in the
compensation of the Company's executive officers without a vote of
Shareholders.
The Company began organizational/business planning activities during
March, 1997. At that time, executive officers elected to accept
restricted Shares of the Company's $.001 par value Common Stock in lieu
of salary. The Company currently pays its Officers an entry rate of
$4,000 per month. During November, the Company began to compensate its
Officers at the rate of $1,000 cash per month. During February, 1998, the
Company began compensating its Officers at the rate of $4,000 cash per
month.
(d) The Company did not make any bonus payments to its executive officers
since inception. However, the Company may in the future develop programs
which may include bonus payments.
(e) Each Officer received their shares upon incorporation at par value in
lieu of cash compensation.
The Company does not compensate its Directors for their participation.
Charles McClure, the Company's Patent Advisor and a Director was given a
one-time grant of 250,000 of the Company's Restricted $.001 par value Common
Shares. Mr. McClure is not scheduled to receive any further payments from the
Company in either cash or stock except as to which he would be entitled in the
execution of the Technology Licensing Agreements to which he is a party.
(See "Patents and Royalty Agreement and acquisition agreement")
The Company does not provide for agreements with any of its executive
officers. However, the company may in the future need to compete for the
services of its executive officers at which time the Board of Directors may
adopt and require its executive officers to execute employment agreements.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's Director and Patent Advisor Mr. Charles McClure is a 30%
partner to the BP Valve Agreement and the AquaFuel(TM) Agreement. Accordingly,
Mr. McClure is entitled to 30% of all royalty payments which have been or which
are scheduled to be paid in the performance of these Agreements.
Three of the Company's Officers and Directors are each 10% shareholders in
Lift Pump, L.L.C., an Oklahoma Limited Liability Company formed by Gerold Allen
to conduct the marketing and maintenance of the BORS Lift. The Company is a 20%
shareholder in Lift Pump, L.L.C. As such, when sales of the BORS Lift are made,
the Company and three of its Officers and Directors will receive a pro rata
portion of the net proceeds thereto. The Lift Pump, L.L.C., intends to assume
its responsibilities immediately following the initial placement and payment of
the first three BORS Lifts. The Company may incur certain as yet unknown
expenses in the course of operationally activating Lift Pump, L.L.C.,
The Company issued 125,000 of its restricted Common shares to InterSource
Health Care ("InterSource") in exchange for 5,000 square-foot facility located
within the Pinellas County Science Technology and Research Center. Messrs. L.
Toups and M. Toups, the Company's President, Chief Executive Officer and the
Company's Chief Financial Officer, are also shareholders and Directors of
InterSource. Mr. M. Toups also serves as the Vice President, Finance and Chief
Financial Officer for InterSource. Upon issuance of the 125,000 restricted
Common shares, InterSource distributed the shares among its employees with the
exception of Mr. L. Toups or Mr. M. Toups. The Company does not anticipate any
further transactions with InterSource and is currently negotiating a lease
directly with the STAR Center.
ITEM 8 - DESCRIPTION OF SECURITIES
The Company is authorized to issue up to 20,000,000 shares of Common Stock,
par value $.001 per share and 10,000,000 shares of Preferred Stock, par value
$1.00 per share. As of the date hereof, none of the Preferred Shares were
outstanding and there were 10,268,218 Common Shares outstanding.
Of the 10,268,218 Common Shares, 8,610,000 Common Shares are "restricted
securities" as that term is defined and, in the future, said Shares may only be
sold upon compliance with Rule 144, adopted under the Securities Act of 1933.
Further, in Securities and Exchange Commission (SEC) Release No. 33-7390
Revision of Holding Period Requirements in Rules 144 and 145 the SEC amended the
holding period contained in Rule 144 to permit the resale of limited amounts of
restricted securities by qualified persons after a one-year, rather than a
two-year, holding period. Also, the amendments permit unlimited resales of
restricted securities held by non-affiliates of the Company after a holding
period of two years, rather than three years.
As of the date of this Form 10-SB, none of the Company's Officers,
Directors, associates, employees or affiliates hold any free-trading Common
Shares. There are no promoters, consultants, underwriters or persons or firms
acting in any similar capacity associated with the Company.
(18)
<PAGE>
Holders of Common Shares are entitled to one vote per Common Share on all
matters to be voted on by Shareholders. The Common Shares do not have cumulative
voting rights. Therefore, holders of a majority of the Common Shares are also
members of the Board of Directors. A majority vote is also sufficient for most
other actions requiring the vote or concurrence of Shareholders. The Company's
Officers and Directors as a group (five persons) own directly approximately
90.3% of the Issuer's capital stock. As such, these individuals will be in a
position to constitute a majority of the Shareholders at any vote of
shareholders including the election of Directors.
All Shares are entitled to share equally in dividends when and if declared
by the Board of Directors out of funds legally available therefore. It is
anticipated that the Company will not pay cash dividends on its Shares in the
foreseeable future. In the event of liquidation or dissolution of the Company,
whether voluntary or involuntary, holders of the Shares are entitled to share
equally in all assets of the Company legally available for distribution to
Shareholders. The holders of Shares have no preemptive or other subscription
rights to acquire authorized but unissued capital stock of the Company, and
there are no conversion rights or redemption or sinking fund provisions with
respect to such Shares. All of the outstanding Shares and those Shares issued in
accordance with this offering will be fully paid and non assessable.
PART II
ITEM 1 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS
To date there is no public trading market for the Company's securities.
The Company intends to apply for inclusion of the Common Shares on the
NASDAQ OTC (Over the Counter) Bulletin Board. However, there can be no
assurances that an active trading market will develop, even if the securities
are accepted for quotation.
Quotations on the Nasdaq OTC Bulletin Board reflect inter-dealer prices,
without retail mark-up, mark-down or commission and may not represent actual
transactions.
As of April 29, 1998, the Company has been listed under Company
Descriptions in Standard and Poor's Corporation Records, page 8153.
As of 28 February, 1998, Company had 59 Shareholders of Record.
Holders of the Company's Common Stock are entitled to dividends when, as
and if declared by the Board of Directors out of funds legally available
therefore. The Company does not anticipate the declaration or payment of any
dividends in the foreseeable future.
The Company intends to retain earnings, if any, to finance the development
and expansion of its business. Future dividend policy will be subject to the
discretion of the Board of Directors and will be contingent upon future
earnings, if any, the Company's financial condition, capital requirements,
general business conditions and other factors. Therefore, there can be no
assurance that any dividends of any kind will ever be paid.
The Company registrar and transfer agent is Continental Stock Transfer &
Trust Company.
ITEM 2 - LEGAL PROCEEDINGS.
The Company is not subject to any legal proceedings. The Company is unaware
of any governmental authority that is contemplating any procedure to which the
Company is a participant.
ITEM 3 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Toups Technology has never had any disagreements with its accountants.
ITEM 4 - RECENT SALES OF UNREGISTERED SECURITIES
On incorporation, the Company issued 8,250,000 of its $.001 par value
Common Shares to its Officers and Directors in lieu of salary. The 8,250,000
shares were issued as "restricted shares" which can only be resold if a
registration statement relating to said securities is effective or if qualified
counsel opines that such registration is not required.
On November 1, 1997, in conjunction with the execution of the BP Valve
License Agreement, the Company issued 25,000 of its $.001 par value Common
Shares to the Licensor. The 25,000 shares were issued as "restricted shares"
which can only be resold if a registration statement relating to said securities
is effective or if qualified counsel opines that such registration is not
required.
On November 1, 1997, in conjunction with the execution of the AquaFuel(TM)
License Agreement, the Company issued 50,000 of its $.001 par value Common
Shares to the Licensor. On January 29, 1997, in conjunction with AquaFuel(TM),
the Company issued 10,000 of its $.001 par value Common Shares to the Licensor.
The 50,000 and 10,000 shares were issued as "restricted shares" which can only
be resold if a registration statement relating to said securities is effective
or if qualified counsel opines that such registration is not required.
(19)
<PAGE>
Between November 8, 1997 and January 15, 1998, the Company issued 25,000,
10,000, 50,000 and 10,000 of its $.001 par value Common Shares to its employees
Messrs DeCara, Reilly, Santilli and Lindfors, respectively. The 95,000 shares
were issued as "restricted shares" which can only be resold if a registration
statement relating to said securities is effective or if qualified counsel
opines that such registration is not required.
On December 1, 1997, the Company entered an agreement with InterSource
HealthCare, Inc. underwhich the Company would occupy 5,000 square-feet of
office/manufacturing space which was under a lease between InterSource and the
STAR Center. The Agreement required the Company to issue 120,000 of its
restricted Common Shares to InterSource in exchange for the use of the
facilities. Two of the Company's Officers and Directors are also Officers and
Directors of InterSource. Upon receipt of the 120,000 restricted Common Shares,
InterSource distributed the Shares to its employees except for the individuals
who are also Officers and Directors of Company.
On January 29, 1998, in conjunction with the BORS Lift License Agreement,
the Company issued 60,000 of its $.001 par value Common Shares to Messrs Greever
and Allen in increments of 30,000 per individual. The 60,000 shares were issued
as "restricted shares" which can only be resold if a registration statement
relating to said securities is effective or if qualified counsel opines that
such registration is not required.
Between November 1, 1997 and May 4, 1998, the Company sold 1,608,218 Shares
of its $.001 par value Common Stock at prices ranging from $0.62 - $0.67
(sixty-two - sixty-seven cents) per Common Share to 9 accredited investors and
28 unaccredited investors which investors purchased such securities pursuant to
an exemption from registration according to Regulation D, Rule 504 (the "Private
Offering"). There were no underwriters involved in the Private Offering and no
commissions were paid nor discounts given to any individual. The Company relied
on Section 4(2) of the Securities Act of 1933, as amended, pursuant to
Regulation D, Rule 504 of said Act in the sale of its securities. All 37
purchasers executed a Subscription Agreement indicated they have such knowledge
and experience in financial and business matters that either alone or with a
purchasers representive, they are capable of evaluating the merits and risks of
the investment. No purchasers used a purchaser representative. None of the
Company's Officers, Director or affiliates participated in the aforesaid sale of
securities. See "Exhibit ___ - Opinion of Tradability")
ITEM 5 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article III of the Company's by-laws provide for the indemnification of
directors in that Directors of this Corporation shall not be personally liable
for monetary damages to the corporation or any other person for any statement,
vote, decision or failure to act, regarding corporate management or policy, by a
director unless the director breached or failed to perform his duties as
director.
Article VI of the Company's by-laws provide for the indemnification of
officers, directors, employee and agents of the Company. Such indemnification is
available to any person who was or is a party to any proceeding (other than an
action by, or in the right of, the corporation), by reason of the fact that he
or she is or was a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable.
(20)
<PAGE>
PART F/S
The following is the Auditor's Report and accompanying audited balance
sheets of Toups Technology Licensing, Inc. (A Development Stage Company) as of
December 31, 1997 and January 31, 1998, and the related statements of
operations, stockholders' equity and cash flows for the period from July 28,
1997 (date of Inception) through December 31, 1997, for the month ended January
31, 1998 and for the period from July 28, 1997(Date of Inception) through
January 31, 1998.
Auditor's Report...........................................22
Balance Sheets.............................................23
Statements of Operations...................................24
Statement of Stockholders' Equity..........................25
Statements of Cash Flows...................................26
Notes to Financial Statements..............................27
The following is the Auditor's Report and accompanying balance sheet of
Advanced Micro Welding, Inc. as of December 31, 1997, and the related statements
of operations, stockholders' equity and cash flows for the year then ended.
Auditor's Report...........................................30
Balance Sheets.............................................31
Statements of Operations...................................32
Statement of Stockholders' Equity..........................33
Statements of Cash Flows...................................34
Notes to Financial Statements..............................35
(21)
<PAGE>
lNDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Toups Technology Licensing, lncorporated
(A Development Stage Company)
Largo, Florida
We have audited the accompanying balance sheets of Toups Technology
Licensing, lncorporated (A Development Stage Company) as of December 31, 1997
and January 31, 1998, and the related statements of operations, stockholders'
equity, and cash flows for the period from July 28, 1997 (Date of Inception)
through December 31, 1997, for the month ended January 31, 1998, and for the
period from July 28, 1997 (Date of Inception) through January 31, 1998.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supPorting
the amounts and disclosures in the financial statements. An audt also includes
assessing the accounting principles used and significant estimates made by
management, as weII 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 Toups Technology Licensing,
lncorporated (A Development Stage Company) as of December 31, 1 997 and January
31, i998, and the results of its operations and its cash flows for the period
from July 28, l997 (Date of Inception) through December 31, 1997, for the month
ended January 31, 1998, and for the period from July 28, 1997 (Date of
Inception) through January 31, 1998.
February 12, 1998 (except for Notes 4 and 7
as to which the date is May 13, 1998
Harper, Van Scoik & Company, L. L. P.
A WORLDWlDE ORGANIZATION OF ACCOUNTlNG FlRMS AND BUSlNESS ADVlSORS
Clearwater, Florida
(22)
<PAGE>
Toups Technology Licensing Incorporated
(A Development Stage Company)
<TABLE>
Balance Sheet (audited)
<CAPTION>
BALANCE SHEETS
December 31, 1997 and January 31, 1998
December 31 January 31
1997 1998
---- ----
<S> <C> <C>
Assets:
Cash $60,421 $185,920
Prepaid royalty expenses 11,000 31,000
Property and equipment - 3,433
Deferred Charges 5,075 8,775
----- -----
Total assets $76,496 $229,128
======== ========
Liabilities:
Accounts payable and $8,559 $1,694
accrued liabilities
------ -------
Total liabilities 8,559 1,694
Stockholders' equity:
Common stock 8,510 9,049
Additional paid-in capital 99,850 284,036
Deficit accumulated during
development stage (40,423) (65,651)
-------- --------
Total stockholders' equity 67,937 227,434
------ -------
Total liabilities and
stockholders' equity $76,496 $229,128
======= ========
</TABLE>
See Notes to Financial Statements
(23)
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
(A Development Stage Company)
<TABLE>
Statement of Operations (audited)
<CAPTION>
STATEMENT OF OPERATIONS
For the period from July 28, 1997 (Date of
Inception) through December 31, 1997, for the month ended
January 31, 1998, and the period from July 28, 1997
(Date of Inception) through January 31, 1998
July 28, 1997 July 28, 1997
(inception) Month (Inception)
through Ended through
December January 31 January 31,
1997 1998 1998
---- ---- ----
<S> <C> <C> <C>
Interest Income $ 543 $ 327 $ 870
Expenses:
Salaries 17,902 6,227 24,129
Consulting fees 14,209 6,536 20,745
Other operating costs 8,855 12,792 21,647
----- ------ ------
Total expenses 40,966 25,555 66,521
------ ------ ------
Net loss $40,423 $25,228 $65,651
======= ======= =======
Weighted average number
of shares outstanding 8,358,057 8,723,960 8,418,390
Net loss per share $.005 $.003 $.008
</TABLE>
See Notes to Financial Statements
(24)
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
(A Development Stage Company)
<TABLE>
Statement of Stockholders' Equity (audited)
<CAPTION>
STATEMENT OF STOCKHOLDERS' EQUITY
For the period from July 28, 1997 (Date of
Inception) through December 31, 1997, for the month
ended January 31, 1998,
and the period from July 28, 1997
(Date of Inception) through January 31, 1998
Deficit
Accumulated
Common Additional During
Number Stock Paid-in Development
of Shares (At Par) Capital Stage Total
--------- -------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Issuance of common
stock upon inception 8,250,000 $8,250 $-0- $-0- $8,250
Stock issued for:
Services 110,000 110 - - 110
Cash 150,000 150 99,850 - 100,000
Deficit accumulated
during development
stage through
December 31, 1997 - - - (40,423) (40,423)
- - - -------- --------
Balance
December 31, 1997 8,510,000 8,510 99,850 (40,423) 67,937
Stock issued for:
Cash 278,714 279 184,186 - 184,465
Services 140,000 140 - - 140
Rent 120,000 120 - - 120
Deficit accumulated
during development
stage January 1,
1998 through January
31, 1997 - - - (25,228) (25,228)
- - - -------- --------
Balance
January 31, 1998 9,048,714 $9,049 $284,036 $(65,651) $227,434
========= ====== ======== ======== ========
</TABLE>
See Notes to Financial Statements
(25)
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
(A Development Stage Company)
<TABLE>
Statement of Cash Flows (audited)
<CAPTION>
STATEMENT OF CASH FLOWS
For the period from July 28, 1997 (Date of
Inception) through December 31, 1997, for the month
ended January 31, 1998,
and the period from July 28, 1997
(Date of Inception) through January 31, 1998
July 28, 1997 July 28, 1997
(Inception) Month (Inception)
through Ended through
December January 31, January 31,
1997 1998 1998
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(40,423) $(25,228) $(65,651)
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Capital stock issued
for services and rent 8,360 260 8,620
(increase prepaid expenses (11,000) (70,000) (31,000)
Increase in deferred charges (5,075) (3,700) (8,775)
Increase (decrease) in
accounts payable 8,559 (6,865) 1,694
------ ------ -------
Net cash used by
operating activities (39,579) (55,533) (95,112)
Cash flows from investing activities:
Acquisition of equipment - (3,433) (3,433)
- ------- -------
Net cash used
by investing activities - (3,433) (3,433)
- ------- -------
Cash flows from
financing activities:
Proceeds from sale of
capital stock 100,000 184,465 284,465
------- ------- -------
Net cash provided by
financing activities 100,000 184,465 284,465
Cash, beginning of period - 60,421 -
------- ------ -------
Cash, end of period $60,421 $185,920 $185,920
====== ======== ========
</TABLE>
See Notes to Financial Statements
(26)
<PAGE>
TOUPS TECHNOLOGY LICENSING, lNCORPORATED
(A Development Stage Company)
NOTES TO FlNANClAL STATEMENT
December 31, 1997 and January 31, 1998
1. Summary of Significant Accounting Policies
Company - Toups Technology Licensing, lncorporated (Company), a Florida
Corporation, was formed on July 28, l997, and activated its startup
operations on November 1, 1997 to facilitate market applications through the
licensing of late-stage technologies primarily in the energy, environmental
and natural resources market segments. The Company selects proprietary
products or devices within market segments which management perceives are not
subject to rapid change and can be delivered to the marketplace within a
three to six month period. The Company is in the development stage of its
operations and has not realized any revenues from its product lines (see
subsequent event note 7). The Company's intended market will be world-wide.
Machinery and Equipment - Machinery and equipment are recorded at cost.
Depreciation is computed on an accelerated method over seven years.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Income Taxes - Deferred income taxes are reported using the liability method.
Deferred tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
Restricted Common Stock - Restricted common stock is subject to the resale
provisions of SEC Rule 144. Due to the uncertainty of the future of the
Company, restricted stock is recorded at its par value ($.001) per share.
2. Capital Stock
Common
The Company is authorized to issue 20 million shares of common stock with a
par value of $0.001 (one, one-thousandth dollar) per share. As of December
31, ol997 and January 31, 1998, there were 8,510,000 and 9,048,714 shares
issued and outstanding, respectively. Each share of common stock has one vote
on all matters acted upon by the shareholders. Of the 9,048,714 shares issued
and outstanding at January 31, i998, 428,714 shares are unrestricted and
8,620,000 shares are restricted as to the sale to other parties.
Preferred
The Company is also authorized to issue 10 million shares of preferred stock
having a par value of $i per share. There were no preferred shares issued
outstanding at either December 31, 1997 or January 31, 1998,
3. Employment Agreements Stock Commitments
The Company entered into a series of one-year employment contracts. Within
those contracts, 85,000 shares of stock were issued to certain employees.
These shares have been recorded in the accompanying balance sheet.
Additionally, there are incentive clauses in these contracts that allow up to
another 270,000 shares of common stock to be issued to employees if certain
goals are met. None of these shares are scheduled to be issued to officers,
directors, or holders of more than 5% of the outstanding stock. The
additional 270,000 shares have not been recorded in the accompanying
financial statements.
4, Licensing Agreement Commitments
The Company entered into two licensing agreements in November 1997, whereby,
the Company has exclusive rights to make, use, lease, market and sell these
product lines. In January, 1998, the Company executed a five year
manufacturing agreement with a third licensor. In exchange for these rights,
under the three agreements, the Company has committed to pay the Licensor a
6% royalty as computed by those agreements. The Company agreed to pay a
minimum of $176,000 of royalties in1998, of which $31,000 has been paid as of
January 31, 1998. The remaining royalty payments for the initial licensing
term will be paid as follows:
(27)
<PAGE>
Year Ending
-----------
1998 $145,000
1999 96,000
2000 96,000
------
$337,000
========
The Company can offset these advanced payments against the royalties
earned in 1998 through the year 2000.
In addition to the above, if the Company exercised its option to renew
the licenses it will have future minimum royalties as follows:
Year Ending
2001 $200,000
2002 $250,000
2003 $300,000
2004 and every year thereafter $400,000
5. Non-Cash Disclosures
The following transactions were excluded from the statement of cash flows
because they were not cash transactions.
At inception the Company issued 8,250,000 shares to its organizers. These
shares of stock were recorded at a total of $8,250.
In addition to the commitments described in the 'licensing agreement
commitment" note, the Company issued 115,000 shares of stock to the licensors of
the Company's three technologies. These shares of stock were recorded at a total
of $115.
The Company issued 135,000 shares of stock to consultants and employees.
These shares were recorded at $135.
The Company issued 120,000 shares of stock for the use of operating
facilities for one year. These shares of stock were recorded at $120.
6. Income Taxes
A deferred tax asset stemming from the Company's net operating loss
carryforward has been reduced by a valuation account to zero due to
uncertainties regarding the utilization of the deferred asset. The deferred
tax asset and the corresponding valuation allowance were approximately $8,085
as of December 31, 1997.
The net operating loss of $40,423 will expire in 2012.
Deferred tax asset:
Net operating loss carryforwards $8,085
Less valuation allowance 8,085
------
Net deferred taxes $ -
======
7. Subsequent Event
A. Management has a signed purchase order and a $6,000 deposit for the
sale of the first Balanced Oil Recovery System Lift Pumps. These pumps
are expected to be installed in the second quarter of 1998 at a total
sales price of $180,000.
B. On April 29, 1998, the Company agreed to a statutory merger with a
Company specializing in Micro Welding. The merger will be accounted
for using the polling-of-interests method.
(28)
<PAGE>
The following is a summary of how the balance sheet and statement of
operations would appear if the entities were combined as of and for the year
ended December 31, 1997:
<TABLE>
Balance Sheet
<S> <C>
Cash $ 74,636
Accounts receivable, net of allowance for
doubtful accounts of $5,000 82,940
Prepaid expenses 11,000
Property and equipment, net of
accumulated depreciation of $39,620 96,840
Deferred charges 5,075
Deposits 5,000
---------
Total $ 275,491
Accounts payable and accrued liabilities $ 46,141
Capital lease obligation 73,776
Total liabilities 119,917
Common stock 18,510
Additional paid-in capital 137,047
retained earnings 17
Total stockholders' equity 155,574
Total liabilities and stockholders' equity $ 275,491
Statement of Operations
Revenues $ 344,149
Cost of goods sold 202,689
Gross profit 141,460
General and administrative expenses 126,641
Other income 543
Net income $15,362
</TABLE>
c. The Company has raised an additional $565,966 in equity from the sale of
849,725 shares of common stock.
(29)
<PAGE>
Board of Directors and Stockholders
Advanced Micro Welding, Inc.
Largo, Florida
We have audited the accompanying balance sheet of Advanced Micro Welding,
Inc. as of December 31, 1997 and the related statements of operatins,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of Advanced Micro Welding, Inc.'s management.
Out responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures n the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit 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 Advanced Micro Welding, Inc.
as of December 31, 1997, and the results of operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principals.
April 29, 1998
Clearwater, Florida
Harper, Van Scoik & Company, L. L. P.
A WORLDWlDE ORGANIZATION OF ACCOUNTlNG FlRMS AND BUSlNESS ADVlSORS
(30)
<PAGE>
ADVANCED MICRO WELDING, INC.
<TABLE>
Balance Sheet (audited)
<CAPTION>
BALANCE SHEETS
December 31, 1997
December 31
1997
----
<S> <C>
Assets:
Cash $14,215
Accounts receivable, net of
allowance for doubtful acctouns
of $5,000 82,940
Property and equipment, net of
accumulated depreciation of $39,620 96,840
Deposits 5,000
-----
Total assets $198,995
========
Liabilities:
Accounts payable $37,393
Accrued expenses 189
Capital lease obligations 73,776
------
Total liabilities 111,358
-------
Stockholders' equity:
Common stock 10,000
Additional paid-in capital 37,197
Retained Earnings 40,440
--------
Total stockholders' equity 87,637
------
Total liabilities and
stockholders' equity $198,995
=======
</TABLE>
See Notes to Financial Statements
(31)
<PAGE>
ADVANCED MICRO WELDING, INC.
<TABLE>
Statement of Operations (audited)
<CAPTION>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<S> <C>
Revenue $344,149
Cost of goods sold 202,689
-------
Gross profit 141,460
General and administrative expenses 85,675
------
Net Income $55,785
=======
Weighted average number
of shares outstanding 10,000
Net Income per share $ 5.5785
=======
</TABLE>
See Notes to Financial Statements
(32)
<PAGE>
ADVANCED MICRO WELDING, INC.
<TABLE>
Statement of Stockholders' Equity (audited)
<CAPTION>
STATEMENT OF STOCKHOLDERS' EQUITY
For the year ended December 31, 1997
Common Additional
Number Stock Paid-in Retained
of Shares (At Par) Capital Earnings Total
--------- -------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1996 10,000 $10,000 $37,197 $26,182 $73,379
Net Income for the
year ended
December 31, 1997 - - - 55,785 55,785
Distributions to
Shareholders - - - (41,527) (41,527)
------- ----- ----- -------- --------
Balance
December 31, 1997 10,000 $10,000 $37.197 $40,440 $87,637
====== ======= ======= ======= =======
</TABLE>
See Notes to Financial Statements
(33)
<PAGE>
ADVANCED MICRO WELDING, INC.
<TABLE>
Statement of Cash Flows (audited)
<CAPTION>
STATEMENT OF CASH FLOWS
For the year ended December 31, 1997
<S> <C>
Cash flows from operating activities:
Net income $55,785
Add (deduct) items not affecting cash:
Depreciation expense 10,709
Bad debts 5,000
Cash provided (used) due to changes
in assets and liabilities:
Accounts receivable (64,537)
Deposits (5,000)
Accounts payable 37,393
Accrued expenses 74
-------
Net cash provided by
operating activities 39,424
Cash flows from investing activities:
purchase of property and equipment (10,159)
-------
Cash flows from
financing activities:
Distribution to owners (41,527)
Principal payments on capital lease obligations (4,197)
-------
Net cash used by financing activities (45,724)
Net decrease in cash (16,469)
Cash, beginning of period 30,674
------
Cash, end of period $14,215
========
Supplemental Cash Flows Disclosures:
Interest paid in cash $1,903
========
Noncash items:
Assets acquired under capital lease $77,973
========
</TABLE>
See Notes to Financial Statements
(34)
<PAGE>
ADVANCED MICRO WELDING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
1. Summary of Significant Accounting Policies
Company - Advanced Micro Welding, Inc., (Company), a Florida Corporation,
was formed on February 3, 1992. The Company's primary operations consist of
micro welding and custom metal fabrication.
Receivable - The Company's trade receivables include amount due from
businesses predominantly in the Tampa Bay geographic area but includes
customers throughout the Southeast United States. Management believes that
receivables are stated at their net realizable value.
Property and Equipment. - Property and equipment are recorded at cost.
Depreciation is recorded using accelerated and straight-line methods over
their estimated useful lives.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumption s that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
2. Property and equipment
The estimated useful lives and classification of property and equipment as
of December 31, 1997, are summarized as follows:
Life In Years Cost
Machinery and equipment 5 - 7 $136,460
Less:accumulated depreciation 39,620
Net property and equipment $ 96,840
3. Capital Leases
The Company acquired equipment totaling $77,973 under two capital lease
agreements. Amortization of these capital leases included in depreciation
expense amounted to $2,250 for the year ended December 31, 1997.
Accumulated amortization amounted to $2,250 as of December 31, 1997 and is
included in accumulated depreciation.
The future minimum lease payments under capital lease and net present value
of the future minimum lease payments at December 31, 1977, are as follows:
Total minimum lease payments $92,785
Amount representing interest (19,009)
Present value of net minimum lease payments $73,776
4. Capital Stock
The Company is authorized to issue 10,000 shares of common stock with a par
value of $1 per share. As of December 31, 1997, 10,000 shares were issued
and outstanding.
5. Income Taxes
The Company's shareholders have elected to have income taxed under Section
1372 of the internal Revenue Code which provides that in lieu of
corporation income taxes, the stockholders are taxed on their proportionate
share of the Company's income. Income tax expense accounts, therefore, have
not been recorded in these financial statements.
6. Subsequent Event
In January 1998, the Company entered into a capita lease agreement for
equipment totaling $113,520. The lease calls for monthly payment s of
$2,545 until April 2003. On April 29, 1998, the Company agreed to a
statutory merger with Toups Technology Licensing, Inc. Shareholders of the
Company will receive 50 shares of Toups Technology Licensing, Inc. for each
share of Advanced Micro Welding, Inc. The merger will be accounted for
using the pooling-of-interests method.
(35)
<PAGE>
PART III
ITEM 1 - INDEX TO EXHIBITS
#Exhibit
--------
EX-3.(i) Articles of Incorporation
EX-3.(ii) By-laws
EX-5.(i) Opinion re: legality
EX-5.(ii) Opinion re: legality
EX-10.(i) BPV License Agreement (BP Valves)
EX-10.(ii) WAFT License Agreement (AquaFuel)
EX-10.(iii) BORS Lift Manufacturing License Agreement
EX-10.(iv) AMW Acquisition Agreement
EX-20 AquaFuel Certification Report
EX-23 Auditor's Consent
(36)
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Toups Technology Licensing, Inc.
(Registrant)
May 18, 1998
By Leon H. Toups, Chief Executive Officer
S/S LEON H. TOUPS
-----------------
(Signature)*
(37)
Law Office of
Eric P. Littman, P.A.
7605 SW 104th Street
Offices at Pinecrest
Suite 210
Miami, Florida 33156
March 2, 1998
Board of Directors
Toups Technology Licensing, Incorporated
7887 Bryan Dairy Road
Suite 210
Largo, FL 33777
Tradability of the Outstanding Shares of Common Stock of Toups Technology
Licensing, Incorporated
Our File No. 1880
Gentlemen.:
You have requested an opinion as to whether or not a public trading market
may be established in the issued and outstanding shares of common stock (the
"Shares") of Toups Technology Licensing, Incorporated, Florida corporation (the
"Company") and whether the Shares may be traded and/or transferred without
violation of the Securities Act of 1933, as amended (the "Act"). In providing
this opinion, the following factors have been considered and examined:
1. The present corporate status of the Company and the legal validity and
effect of prior actions of the Company's Board of Directors and
shareholders.
2. The adequacy and timeliness of the Company's current public information
made available and distributed by the Company, and whether such
information has been made "publicly available."
3. The present status and validity oft he Company's authorized, issued and
outstanding Shares.
4. The Tradability of the Company's Shares in interstate commerce under the
Act pursuant to the rules and regulations promulgated thereunder.
FACTS AND HISTORY
In rendering this opinion, we have reviewed certain documents and
information provided to us by the Company. Among the documents examined are the
Company's Articles of Incorporation, By Laws, minutes, Private: Placement
Memorandum and Form D filed with the S.E.C.
Based upon our review of the documents and information, the following facts
are set forth:
1. The Company was incorporated under the laws of the state of FIorida on
August 4, 1997 and is a corporation in good standing in the state of
Florida The Company currently has authorized capitalization of 20,000,000
shares of common stock, par value $.001 and 10,000,000 shares of
preferred stock, par value $ 1.00.
2. 8,610,000 Shares are currently held by the Company's officers, directors,
and affiliates and are considered restricted shares.
3. The Company undertook an offering of Shares pursuant to Rule 504 as
promulgated under Regulation D of the Act and issued 864,535 Shares in
that Offering. Such Shares were offered investors for a cash and services
and are held by 18 unaffiliated shareholders.
That offering is now closed.
THE LAW
Section 5 of the Act prohibits the sale of any security unless "a
Registration Statement is in effect." Section 4 of the Act provides several
transactional exemptions to the registration requirements of Section 5, as do
certain rules and regulations promulgated under the Act. Regulation D provides
rules governing the limited offer and sale of securities under the Act. Rule 504
under Regulation D) provides for the limited offer and sale by certain issuers
not exceeding $1,000,000. Rule 504(b)(l) provides that certain securities issued
under the Rule 5 04 exemption are not subject to the limitations on resale
provisions applicable to other securities issued under Regulation D. Section
2(4) of the Act defines the term "issuer" and Section (2(11) of the Act defines
the term "underwriter." Rule 144 under the Act provides guidelines fur the sale
of securities by an affiliate or controlling person of the issuer, or the sale
of restricted securities by any person,
As of the date of this opinion, the Company has 9,474,535 Shares
outstanding, of which 8,610,000 are restricted from resale by virtue of Rule 144
and 864,535 Shares which are freely tradable by virtue of the Company's Rule 504
offering.
COMPANY'S INFORMATION AND DISCLOSURE STATEMENT
The Information and Disclosure constitutes "adequate and current"
information with respect to the Company within the meaning of those terms as
they are used in and defined by Paragraph (c) of Rule 144 under the Act.
In the opinion of the undersigned, the Company has complied with all pubic
disclosure requirements of the Act. This opinion is based, without limitation
upon the following:
1. That by the time this opinion letter is used, the Company will have made
available to its shareholders copies of the Information and Disclosure
Statement with all attached exhibits; and
2. That the information and Disclosure Statement contains the Company's
representation that copies thereof will be furnished to interested
securities broker/dealers upon request; and
3. That the Company bas represented that it will, in the immediate future,
seek to have its common stock quoted on the OTC Bulletin Board and that the
Company will furnish copies of its information and Disclosure Statement in
support of its proposed market maker's application for such quotation to
the NASD. Assuming that said quotation is included on the OTC Bulletin
Board and assuming the persons who are contemplating the purchase or sale
of the Company's Shares contact a broker-dealer, that broker-dealer would
be in compliance with the provisions of Rule 15c2-211 and hence would have
information in question and would be obligated to make such information
reasonably available upon request, and;
4. That the Company has represented to the undersigned that copies of the
Company's Information and Disclosure Statement have been furnished to its
registered agent in the state of Florida and that they will be delivered
free of charge to interested persons who inquire; and to interested
persons who inquire,
5. That the Company intends to hereinafter have information concerning
itself available on a continuous and ongoing basis through the issuance
of timely (in light of any subsequent material transactions), periodic
reports to not only the Company's shareholders and broker-dealers who may
become market makers in its Shares, but also to financial and statistical
services, and any other person whom the Company becomes aware may be
interested.
In light of the foregoing,, it is the conclusion of the undersigned that
the Company has done all that it can reasonably do, and which is calculated to
assure that the information concerning the Company is accessible without undue
effort to anyone interested and hence that the information concerning the
Company contained in its information and Disclosure Statement is "publicly
available."
TRADEABILITV OF COMPANY'S ISSUED AND OUTSTANDING SHARES
Based upon the foregoing, Company's corporate records, including the
Company's Private Placement Memorandum, Form D as filed with the S.E.C., stock
transfer records, and Minutes, it is the opinion of the undersigned that the
864,535 Shares issued in the Company's Regulation D offering have come to rest
in the hands of the current holders and are freely tradable. The remaining
8,610,000 Shares are restricted and may not be freely traded. In rendering this
opinion, we relied upon the representations of management set forth herein as to
their truth and accuracy, but for which we do not assume the responsibility.
Very Truly Yours,
Eric P. Littman
<PAGE>
Law Office of
Eric P. Littman, P.A.
7605 SW 104th Street
Offices at Pinecrest
Suite 210
Miami, Florida 33156
May 15, 1998
Mr. Steve Nelson
Continental Stock Transfer & Trust Company
2 Broadway
New York, NY 10004
Re: Toups Technology Licensing, incorporated our file no: 1880
Dear Mr. Nelson:
As we previously informed you, our office is securities counsel to Toups
Technology Licensing, incorporated . (the "Company"). The Company has now
completed its private placement of its common stock pursuant to Rule 504 of
Regulation D as promulgated under the Securities Act of 1933, as amended (the
"Act), which was the subject of our March 2, 1998 Opinion. Since that opinion
the Company has sold an additional 743,683 shares in its Rule 504 offering.
These shares have been sold to the individuals listed on the attached list which
has been provided by the Company.
In our opinion, these shares are to be issued as unrestricted and free
trading under the Securities Act of 1933 and may be issued without a legend on
the certificates. Once the certificates are ready, please forward them directly
to the Company.
If anything else is required, please call me immediately.
Very truly yours,
Eric P. Littman
cc: Toups Technology Licensing, Incorporated
SALE OF CORPORATIONS ASSETS IN EXCHANGE FOR STOCK OF PURCHASING CORPORATION
AGREEMENT dated April 29, 1998, by and between A. M. W. Metal Fabricators,
Corporation, a Florida corporation (hereinafter "Seller") and Toups Technology
Licensing, Inc., a Florida corporation, (hereinafter "Buyer").
WHEREAS the Seller is engaged in metal fabrication and advanced micro
welding and;
WHEREAS, the Buyer desires to acquire all of the Seller's assets, business
and good will in exchange for shares of the Buyer's common stock and for the
assumption by the Buyer of all of the Seller's liabilities and obligations,
subject to the further provisions of this Agreement; and
WHEREAS, the Seller desires that all of the Seller's properties be sold and
exchanged solely for shares of the Buyer's common stock and for the assumption
by the Buyer of such liabilities and obligations of the Seller (subject as
aforesaid) in connection with the dissolution and complete liquidation of the
Seller, whereupon the Seller will distribute to the holders of its common stock,
pro rata, all its right, title and interest in and to the shares of the Buyer's
stock to be received by the Seller as aforesaid, in exchange for the surrender
by such stockholders for cancellation of all of the Seller's outstanding common
stock, all as hereinafter more fully provided, and for the purpose of carrying
out a tax-free reorganization within the meaning of the Internal Revenue Code of
1954.
NOW THEREFORE, in consideration of the premises and the respective
agreements hereinafter set forth, the Seller and the Buyer hereby agree as
follows:
1a. Sale and Transfer of Assets. The Seller hereby agrees that, subject to the
terms and conditions this Agreement, the Seller will sell, convey, transfer
and deliver to the Buyer, at the Closing hereunder all of the Seller's then
existing assets and business including, without limitation, all of the
Seller's good will and its right to the use of its name. The assets so to
be sold, conveyed, transferred and delivered shall include those owned by
the Seller as of the effective date of this Agreement (including, without
limitation, those reflected in the Seller's audited financial statements.
Without limitation of the foregoing provisions, the aforesaid sale,
conveyance and transfer shall include all of the Seller's rights and
interests in, to and under all patents, patent applications, trademarks,
trademark registrations and applications therefor, copyrights, copyright
registrations and applications therefor, wherever issued or pending, all
trade names, labels and other trade rights, whether or not registered, all
inventions, discoveries, improvements, processes, formulae, trade secrets,
ideas, and other know-how, whether patentable or not, and all shop rights,
licenses and other agreements (including agreements with employees of the
Seller) relating in whole or in part to any of the foregoing.
b. Consideration for Sale and Transfer. The Buyer hereby agrees that, at the
Closing, subject to the terms and conditions of the Agreement, and in full
consideration for the aforesaid sale, conveyance, transfer and delivery,
(i) the Buyer will deliver to the Seller a certificate or
certificates for 500,000 (five-hundred thousand) shares of the
Buyer's common stock of the par value of $0.001 per share, so
that the aggregate number of shares of common stock so to be
delivered shall be at the rate of 50 shares of a share of the
Buyer's common stock for each share of common stock of the
Seller outstanding in the hands of the public at the Closing
Date, such delivery to be made by the Buyer in such authorized
full share denominations and registered in the name of the
SelIer or its nominees or such other names as the Seller shall
request in writing; and
(ii) the Buyer assumes and agrees to pay, perform and discharge all
debts, obligations, contracts and liabilities of the Seller of
any kind, character or description, whether accrued, absolute,
contingent or otherwise (and whether or not reflected or
reserved against in the Seller's balance sheets, books of
accounts and records), provided, however, that the Buyer shall
have no liability with respect to any items as to which
provision is made for payment in subsection (e) of this
Section 1 or with respect to any other obligations or
liabilities incurred by the Seller after the Closing.
c. Instruments of Conveyance and Transfer. The Seller hereby agrees that, at
the Closing, it will deliver to the Buyer (i) such deeds, bills of sale,
endorsements, assignments, and other good and sufficient instruments of
conveyance and transfer, in form satisfactory to the Buyer's counsel, as
shall be effective to vest in the Buyer good and marketable title to the
assets and business to be sold, conveyed, transferred and delivered
hereunder, all as provided in this Agreement, and (ii) all of the Seller's
contracts and commitments, books (except minute and stock books), records
and other data relating to its assets, business and operations, including,
without limitation, all its notebooks and other records relating to
inventions, discoveries and improvements, whether patentable or not; and
that, simultaneously with such delivery, all such steps will be taken as
may be requisite to put the Buyer in actual possession and operating
control of such assets and business.
d. Further Assurances. The Seller hereby agrees that, from time to time, at
the Buyer's request and without further consideration, the Seller will
execute and deliver such other instruments of conveyance and transfer and
take such other action as the Buyer reasonably may require more effectively
to convey, transfer to and vest in the Buyer, and to put the Buyer in
possession of, any property to be sold, conveyed, transferred and delivered
hereunder, and, in the case of contracts and rights, if any, which cannot
be transferred effectively without the consent of third parties which is
unobtainable, to use the Seller's best efforts to assure to the Buyer the
benefits thereof.
e. Seller's Liquidation and Dissolution Expenses. The Buyer shall provide for
the payment of the liquidation and dissolution expenses of the Seller,
including relocation and other costs in the amount of up to $5,000
(five-thousand dollars).
2. Closing. The closing of the transactions provided for in subsections (a),
(b) and (c) of Section 1 above (herein called the Closing) shall take place
at the Seller's office at 6225 118th Avenue North, Largo, Florida, at
10:00AM on April 29, 1998; provided , however, that either the Buyer or the
Seller, by written notice or notices to the other from time to time, shall
be entitled to postpone the Closing to a date not later than thirty days
after the above specified date. If, due to causes beyond the control of
either the Buyer or the Seller, the Closing is not consummated on or before
the above specified date or within thirty days thereafter, this Agreement,
unless mutually extended in writing by the Buyer and the Seller, shall
terminate without liability of any kind on the part of either the Buyer or
the Seller. The date of the Closing is referred to in this Agreement as the
Closing Date.
3. Approval by Seller's Stockholders. The Seller hereby agrees that it will
duly call and give notice of a meeting of the holders of its common stock,
to be held on or prior to May 30, 1998, for the purpose of voting upon the
dissolution and liquidation of the Seller and in connection therewith the
change of name and the sale and transfer contemplated thereby. The Seller
hereby further agrees that, promptly after the Closing, the Seller will
take all such action as may be required to change its name and to dissolve
and terminate its corporate existence and to completely liquidate and to
distribute directly to the holders of the Seller's common stock, pro rata,
all its right, title and interest in and to the shares of Buyer's stock
received by the Seller under this Agreement, in exchange for the surrender
by such stockholders for cancellation of such common stock; the
arrangements for such distribution and exchange to include provision for
the purchase or sale, for account of the Seller's stockholders, of their
fractional interests in the Buyer's stock to the end that no fractional
shares of such stock will be required to be issued in connection therewith.
4. Approval by Buyer's Stockholders. The Buyer hereby agrees that it will duly
call and give notice of meeting of the holders of its preferred and common
stocks, to be held on or prior to May 30, 1998, for the purpose of voting
upon the acquisition by the Buyer contemplated hereby, a proposal to
increase the number of authorized shares of the Buyer's common stock, par
value $.001 per share, from 9,474,535 shares to 9,974,535 shares.
5. Representations and Warranties by the Seller. The Seller hereby represents
and warrants as follows:
(a) Organization and Capitalization. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Florida, has corporate power to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good
standing in each jurisdiction in which the character and location of the
properties owned by it or the nature of the business transacted by it makes
such qualifications necessary. The Seller's authorized capital stock
consists of 10,000 shares of common stock, par value $.001 per share, of
which 10,000 shares were validly issued and outstanding, fully paid and
non-assessable, at the close of business on April 29, 1998. There are no
existing, options, calls or commitments of any character relating to the
Seller's authorized or issued stock. The copies of the Seller's Articles of
Incorporation and of the Seller's By-Laws which have been delivered to the
Buyer are complete and correct as at the date of this Agreement.
(b) Authority to Execute Agreement. The execution, delivery and performance of
this Agreement by the Seller including, without limitation, the sale,
conveyance, transfer, and delivery contemplated hereby have been duly and
effectively authorized by the Seller's Board of Directors, subject to
approval by the Seller's stockholders as required by law.
(c) Financial Statements. The Seller has delivered to the Buyer copies of its
audited financial statements, all of which are true and complete and have
been prepared in accordance with generally accepted accounting principles
consistently followed throughout the periods indicated. The Buyer shall
incur the expense associated with and shall make use of the Buyers
independent auditor for the purposes of this Agreement.
(d) Absence of Undisclosed: Liabilities. Except as and to the extent reflected
or reserved against in the Seller's Balance Sheet, the Seller has no
liabilities or obligations (whether accrued, absolute, contingent or
otherwise) of a nature customarily reflected in a corporate balance sheet
prepared in accordance with generally accepted; accounting principals,
including, without limitation, any tax liabilities due or to become clue
and whether (i) incurred in respect of or measured by the Seller's income
for any period prior to the closing of business on April 29, 1998,
(e) Absence of Certain Changes or Events. Since March 1, 1998, there has not
been:
(1) any change in the Seller's financial condition, assets, liabilities or
business, other than changes in the ordinary course of business and changes
of which the Buyer has been advised in writing, none of which has been
materially adverse;
(2) any declaration, setting aside or payment of any dividend or other
distribution in respect of the Seller's capital stock;
(3) any increase in the compensation payable or to become payable by the Seller
to any of its officers, employees or agents, other than increases made in
the ordinary course of business pursuant to the Seller's salary plan and
increases of which the Seller has advised the Buyer in writing, or any
bonus, percentage compensation, service award or other like benefit,
granted, made or accrued to or to the credit of any of the officers,
employees or agents of the Seller, or any employee welfare, pension,
retirement or similar payment or arrangement made or agreed to by the
Seller except payments made pursuant to the existing welfare, pension and
retirement plans and arrangements and except changes of which the Seller
has advised the Buyer in writing; or
(4) any significant labor trouble or any other event or condition of any
character which has materially and adversely affected the Seller's
business.
(f) Taxes. The provision made for taxes on the Seller's Balance Sheet is
sufficient, in the opinion of the Seller, for the payment of all accrued
and unpaid United States, Canadian, state, county and local taxes of the
Seller, whether or not disputed, for the four months period ended on April
29, 1998, and for all years prior thereto. There are no agreements by the
Seller for the extension of the time for the assessment of any tax, and all
United States, Canadian, state and local taxes due and payable by the
Seller on or before the date of this Agreement have been paid.
(g) Accounts Receivable. The accounts receivable of the Seller shown on the
Seller's Balance Sheet or thereafter acquired by it prior to the date of
this Agreement, have been collected or are collectible at the aggregate
recorded amounts thereof less applicable reserves.
(h) Inventories. The Seller's inventory shown on the Seller's Balance Sheet, or
thereafter acquired by it prior to the date of this Agreement, consist of
items of a quality and quantity usable or saleable in the normal course of
the Seller's business; the value of obsolete materials and of materials of
below standard quality has been written down to realizable market value or
adequate reserves provided therefor, and the values at which such
inventories are carried reflect the Seller's normal inventory valuation
policy of stating the inventory at cost, not in excess of market, all in
accordance with generally accepted accounting practices.
(i) Title to Properties; Absence of Liens and Encumbrances. The Seller has good
and marketable title to all its properties and assets, real and personal,
including those reflected in the Seller's Balance Sheet, except as since
sold or otherwise disposed of in the ordinary course of business or as
advised to the Buyer in writing, free and clear of all liens and
encumbrances.
(j) Lists of Properties, Contracts, etc. The Seller has delivered to the Buyer
accurate lists and summary descriptions, certified by authorized officers
of the Seller to be correct to the best of their knowledge and belief of
the following:
List of existing contracts
List of properties and equipment
(k) Litigation. Except as set forth in letter attached by the Seller to the
Buyer and except for suits, if any of a character incident to the normal
conduct of the Seller's business and involving not more than $1,000 in the
aggregate, there is no litigation, proceeding or governmental investigation
pending, or so far as known to the Seller, threatened against or relating
to the Seller or its properties or business, or the transactions
contemplated by this Agreement, nor is there any basis known to the Seller
for any such action.
(l) No Brokers. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Seller
directly with the Buyer, without the intervention of any person as the
result of any act of the Seller (and so far as known to the Seller, without
the intervention of any other person) in such manner as to give rise to any
valid claim against either of the parties hereto for a brokerage commission
or other like payment.
6. Representations and warranties by the Buyer. The Buyer hereby represents
and warrants
(a) that the Buyer is a corporation duly organized, existing and in good
standing under the laws of the State of Florida
(b) that the authorized capital stock of the Buyer consists of 20,000,000
shares of common stock of the par value of $.001 per share of which, at the
close of business on April 29, 1998, 9,474,535 shares were validly issued
and outstanding and no shares were reserved for issuance,
(c) that there has been no material change in the condition, financial or
otherwise, of the Buyer as shown in the audited balance sheet thereof as of
January 31, 1998, as submitted to stockholders, other than changes
occurring in the ordinary course of business, which changes have not
materially adversely affected its business, properties or financial
condition.
(d) that the execution, delivery and performance of this Agreement by the Buyer
have been duly and effectively authorized by the Buyer's Board of
Directors, subject to approval by the Buyer's stockholders,
(e) that the shares of the Buyer's common stock to be issued to the Seller,
pursuant to this Agreement, for distribution to its stockholders as
provided in Section 3 above, will, when so issued, be validly issued and
outstanding, fully paid and non-assessable. Said Common Shares shall be
issued as "restricted shares" as that term is defined in Rule 144, as
amended, and shall bear a legend in the following manner:
THESE SECURITIES CANNOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
BY ANY HOLDER TO ANY OTHER PERSON OR ENTITY UNLESS SUBSEQUENTLY
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND UNDER
APPLICABLE LAW OF THE STATE OR STATES WHERE SOLD, TRANSFERRED OR
DISPOSED OF, UNLESS SUCH SALE, TRANSFER OR Disposition SHALL QUALIFY
UNDER AN ALLOWED EXEMPTION TO SUCH REGISTRATION. ANY REQUEST FOR THE
SALE, TRANSFER OR OTHER DISPOSITION OF THESE SHARES SHALL BE
ACCOMPANIED BY AN OPINION OF COUNSEL ACCEPTABLE TO THIS CORPORATION.
(f) that the negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by the Buyer directly with the
Seller, without the intervention of any persons or as the result of any act
of the Buyer (and, so far as known to the Buyer, without the intervention
of any other person) in such manner as to give rise to any valid claim
against either of the parties hereto for a brokerage commission or other
like payment.
7. Conditions Precedent to Buyer's Obligations Hereunder. All obligations
of the Buyer under this Agreement are subject to the fulfillment, prior
to or at the Closing of each of the following conditions:
(a) The Buyer shall not have discovered any material error, misstatement or
omission in the representations and warranties made by the Seller
throughout this Agreement;
(b) The Seller's representations and warranties contained in this Agreement
shall be deemed to have been made again at and as of the time of Closing
and shall then be true in all material respects, except that litigation
commenced or threatened after the date of this Agreement against or
relating to the Seller shall not constitute a non-fulfillment of this
condition unless such litigation, if decided against the Seller, would
materially adversely affect the business of the Seller; the Seller shall
have performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by it prior to or at the
Closing; and the Buyer shall have been furnished with a certificate of
appropriate officers of the Seller, dated the Closing Date, certifying in
such detail as the Buyer may request to the fulfillment of the foregoing
condition.
(c) The sale and transfer by the Seller of its assets, business and goodwill
and its change of name and liquidation and dissolution as provided herein,
shall have been approved by the holders of at least two-thirds of the
outstanding stock of the Seller entitled to vote.
(d) The acquisition by the Buyer of the Seller's assets, business and goodwill
as provided in this Agreement have been approved at a meeting of the
Buyer's stockholders by affirmative votes constituting a majority of the
votes entitled to be cast by the holders of the Buyer's stock, preferred
and common, present or represented at such meeting and entitled to vote
thereat, relating to the increase in the Buyer's authorized common stock
and shall have been approved at said meeting by the holders of at least
two-thirds of each class of such shares, preferred and common, present and
voting at such meeting.
(e) Funds in Seller's reserves are adequate to provide for payment of all then
accrued and unpaid United States, Florida, Pinellas County and any other
local taxes of the Seller, whether or not disputed, for the fiscal year
then ended and for all fiscal years prior thereto.
8. Conditions Precedent to the Obligations of the Seller. All obligations of
the Seller under this Agreement are subject to the fulfillment, prior to or
at the Closing of each of the following conditions:
(a) The Seller shall not have discovered an;y material error, misstatement or
omission in the representations and warranties made by the Buyer
hereinabove.
(b) The Buyer's representations and warranties contained in this Agreement
shall be deemed to have been made again at and as of the time of the
Closing and shall then be true in all material respects; the Buyer shall
have performed and complied with all agreements and conditions required by
this Agreement to be performed or complied with by it prior to or at the
Closing; and the Seller shall have been furnished with a certificate of one
of the Buyer's Vice Presidents or its Comptroller, dated the Closing Date,
certifying in such detail as the Seller may request to the fulfillment of
the foregoing conditions.
(c) The acquisition by the Buyer of the Seller's assets, business and good will
as provided in this Agreement shall have been approved at a meeting of the
Buyer's stockholders by affirmative votes constituting a majority of the
votes entitled to be cast by the holders of the Buyer's stock, preferred
and common, present or represented at such meeting and entitled to vote
thereat, and the increase in the Buyer's authorized common stock
contemplated herein shall have been approved at said meeting by the holders
of at least two-thirds in interest of each class of such shares, preferred
and common, present and voting at such meeting.
9. Bulk Sales Law. The Buyer hereby waives compliance by the Seller with the
provisions of the Bulk Sales Law of any State.
10. Termination of Representations and Warranties. The Seller and the Buyer
agree that their respective representations and warranties contained herein
shall expire with, and be terminated and extinguished by, the Closing under
this Agreement on the Closing Date, and that, the Closing having been
consummated, neither the Seller nor the Buyer shall be under any liability
whatsoever with respect to any such representation or warranty,
11. Notices, Etc. All notices, requests, demands, and other communications
hereunder shall be in writing and shall be deemed to have been duly given
if delivered or mailed, first class postage prepaid,
(a) if to the Seller, at
A.M.W. Metal Fabricators
6225 118th Avenue North
Largo, Florida 33773
(813) 530-7670
(b) if to the Buyer at:
Toups Technology Licensing, Inc.
7887 Bryan Dairy Road, Suite 105
Largo, Florida 33777
(813)-548-0918
12. Amendments. This Agreement may be amended or modified by a written
instrument executed by the Buyer and the Seller acting by their respective
officers thereunto duly authorized by their respective Boards of Directors
or Executive Committees; provided, however, that no such amendment or
modification shall change the number of share of the Buyer to be issued
pursuant to this Agreement and provided further that no such amendment or
modification shall change the provisions with respect to the transfer of
the Seller's assets to, and assumption of its liabilities by, the Buyer,
and the distribution to the Seller's stockholders of shares of the Buyer's
common stock in exchange for the surrender by the stockholders of the
Seller, for cancellation, of the Seller's outstanding common stock in any
manner which would materially adversely affect the rights of the
stockholders of the Seller.
13. Sections and Other Headings. The section and other headings contained in
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
14. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. Parties In Interest. This Agreement shall inure to the benefit of and be
binding upon the parties named herein as the Seller and the Buyer and their
respective successors and assigns;nothing in this Agreement express or
implied, is intended to confer upon any other person any rights or remedies
under or by reason of this Agreement.
16. Florida Law to Govern. This Agreement shall be construed and enforced in
accordance with the laws of the State of Florida.
<PAGE>
IN WITNESS WHEREOF, the undersigned parties hereto have duly executed this
Agreement on the date first above written.
For Seller For Buyer
Tim Rice Leon H. Toups, President
Kim Rice
Witness:
For Seller For Buyer
Michael Toups Mark Clancy, Corporate Secretary
<PAGE>
Amendment A to that
AGREEMENT dated April 29, 1998, by and between A. M. W. Metal Fabricators,
Corporation, a Florida corporation (hereinafter "Seller") and Toups Technology
Licensing, Inc., a Florida corporation, (hereinafter "Buyer").
1. Relocation. The Buyer has agreed to provide facilities for the relocation
of Seller to the Science Technology and Research Center and such facilities
have been inspected and approved by the Seller. The Buyer agrees to have
concluded all facility requirement so as to allow for Seller to complete
relocation no later than June 30, 1998.
2. Continuing Obligations
a. As a part of this agreement, Seller has agreed to mediate between the
individual and Buyer relating to the loan in the amount of $54,450 so that
said Note is either:
(i) Settled for Toups Common Stock, or;
(ii) Assumption of Note by Toups under existing terms and the removal of Tim and
Kim as guarantors to include release of their personal collateral.
b. The canceled lease in the amount of $83,000 which is currently in dispute
shall remain the responsibility of Seller. Buyer will assist with
settlement issues but does not intend to assume this lawsuit or its
expenses.
3. Compensation. Tim Rice shall be compensated at the rate of $60,000 annually
and shall be entitled to participate in any and all bonus and incentive
plans promulgated by Buyer for its Officers and Directors. Key personnel of
AMW would also be eligible to participate in any and all bonus and
incentive plans promulgated by Buyer for its Officers and Directors.
4. Incentive Program. Tim Rice shall be entitled to an increase in salary at
the rate of $5,000 annually commensurate with an increase of $50,000 annual
revenue which exceed expectations. Base salary for Tim Rice however shall
not exceed $150,000 under this incentive program.
5. Expectations. The audited data indicates 1997 revenues of $344,000
(break-even). The audited data indicates first quarter 1997 revenues of
$110,000 (break-even). With the combined resources of Buyer, it is
anticipated that AMW shall achieve minimum 1998 revenues of $650,000 and
1999 revenues of $1,000,000.
6. Employment. Within sixty days of this Agreement, Buyer shall enter an
employment agreement for the services of Tim Rice which shall contain,
among other things, a minimum employment period of five years.
7. Prior taxes. All taxes and related forms required for filing by Seller
prior to April 29, 1998, including those subsequently extended for prior
periods, shall remain the responsibility of Seller. These taxes may include
amendments to prior years and other responsibilities related to the
Subchapter "S" status of the Seller.
IN WITNESS WHEREOF, the undersigned parties hereto have duly executed this
Amendment on April 29, 1998.
For Seller For Buyer
Tim Rice Leon H. Toups, President
Kim Rice
Witness:
For Seller For Buyer
Michael Toups Mark Clancy
Technical Report of TOUPS TECHNOLOGY LICENSING Number TTL-98-005
FIRST CERTIFICATION OF
AquaFuelTM
Based on Measurements Available
on May 16, 1998
by
Ruggero Maria Santilli
President
Institute for Basic Research
P. O. Box 1577, Palm Harbor, FL 34682, U.S.A.
[email protected], http://home1.gte.net/ibr/
Copyright (C) 1998 by Toups Technology Licensing
Largo, Florida
1. INTRODUCTION
1.1. Statement of objectives.
1.2. Description.
1.3. Existing literature.
1.4. Main characteristics.
1.5. Competition.
1.6. Cost comparison.
1.7. Criteria for cost comparison.
1.8. Main applications of AquaFuel.
1.9. Cost of AquaFuel.
1.10. Cost competitiveness of AquaFuel with respect to Hydrogen.
1.11. Other compatible technologies at TTL.
1.12. Insufficiencies of this presentation.
2. MEASUREMENTS AVAILABLE ON MAY 16, 1998.
2.1. Description of equipment.
2.2. Safety precaution.
2.3. Tests on combustion exhaust.
2.4. Tests on recycling.
2.5. Tests on the BTU content.
2.6. Production tests with batteries.
2.7. Production test with a Miller AC/DC welder.
2.8. Future production power unit.
2.9 Preliminary costs analysis on AquaFuel.
2.10. Tests on chemical composition.
2.11. Radioactivity test.
2.12. Comments on the energy balance of AquaFuel.
3. CONCLUSIONS
REFERENCES
1. INTRODUCTION
1.1. Statement of objectives. On behalf of Toups Technology Licensing (TTL) of
Largo, Florida, in this presentation the underwriter shall review and certify:
1) the results of the research on the new, nonfossil, combustible gas called
AquaFuelTM conducted by a group of scientists under his supervision during the
past months; 2) the reports on various measurements conducted by independent
laboratories which have been inspected and appraised both, personally, by the
underwriter as well as collegially by the research group; 3) the numerous tests
conducted in recent months at the TTL plant; 4) competition and cost analysis as
available at this writing; and 5) expected future possibilities currently under
test. This certification has been made possible thanks to all the necessary
financial support provided by TTL which has permitted the conduction of all
suggested experimental measurements and tests on AquaFuel.
This certification has been finally made possible by invaluable technical
assistance provided to me by Dr. M. Fetterolf, Dr. D. Shillady, Dr. C. Hales,
Dr. D. Pachuta and others in the USA,Dr. P. Glueck in Romania, Dr. D. Schuch in
Germany, Dr. J. Dunning-Davies in England, Dr. B Lavenda in Italy, and other
members of our Institute, as well as by all personnel of TTL, including Mr. Leon
Toups, President, Mr. Jerry Kammerer and Mr. Mark Clancy, Vice Presidents, as
well as William Richardson, jr, Jack Hansen, Ken Lindfors and other TTL
personnel.
1.2. Description. AquaFuelTM is a nonfossil combustible gas discovered by Mr.
William Richardson, jr, (see Patents [1]) and currently developed by TTL, which
is produced by an electric discharge of carbon arcs within distilled, fresh,
salt or other types of water, thus being essentially composed of Hydrogen,
Oxygen, Carbon and their compounds.
1.3. Existing literature. AquaFuel has been the subject of various articles
listed in Refs. [2]. The initiation of systematic scientific studies was
reported in paper [3] which identifies the status of the knowledge on AquaFuel
as of January 1998.
1.4. Main characteristics. AquaFuel has excellent exhaust characteristics second
only to those of the Hydrogen; it can be produced rapidly in large volumes
anywhere desired with simple, easily realizable equipment; its cost is moderate;
and the gas is safer than other fuels in both its production and storage.
(IMAGE OMITTED)
FIGURE 1: A view of the process underlying AquaFuelTM. Note the thin Carbon rod
and the large Carbon block and the bubbling of the gas thru the water and its
clean burning at the top (photo by Rob Jaeger and Ken Lindfors). 1.5.
Competition. According to official figures, the U. S. A. has experienced about
300 deaths during the winter months of January, February and March, 1998, due to
tornados which should have occurred instead in the summer, thus establishing the
existence of a climactic anomaly due to the pollutants in current fuels beyond
credible doubts. All indications suggest that the number of deaths in the USA
alone in the same period will rise progressively in future years and surpass in
the next decade the rate of 1,000 deaths per year due to climactic changes.
Predictions of corresponding damages to agriculture via floods, droughts or high
temperature are equally catastrophic. This evidence mandates a very serious
consideration of the pollutants in current fuels as a necessary condition for
our survival.
In view of the above scenario, in the opinion of this underwriter, the major
competition of AquaFuel is Hydrogen. This is due to the fact that all other
fuels of current use are highly pollutant, including gasoline, Methane,
Acetylene, etc. while, by comparison, AquaFuel has a much better quality of
combustion exhaust as identified below.
1.6. Cost comparison. Keep in mind that the prohibition of the use of all
conventional fossil fuels in polluted cities such as Los Angeles, Tokyo, Milan,
etc., is expected in the near future, while alternatives such as fuel cells are
expected in the far future. In order to have practical or otherwise industrial
meaning, cost analysis and comparisons should be conducted between AquaFuel and
Hydrogen.
1.7. Criteria for cost comparison. The cost of Hydrogen and other fuels has been
traditionally computed from production, storage, utilities, and other costs.
This traditional approach for cost analysis is basically inapplicable and
actually misleading for AquaFuel because it has a number of uses and services in
addition to that as fuel.
More specifically, the traditional computation of the cost of AquaFuel via the
sole consideration of the cost the energy input and the Carbon rods is
inapplicable because, the production of AquaFuel occurs jointly with services,
such as recycling of waste, and processing, such as the production of
fertilizers. A serious comparative study of the cost of AquaFuel must therefore,
first, take into account the revenues from these additional applications and,
then, compare costs.
A serious cost comparison requires the following additional consideration.
First, there is the savings due to transportation because other gases have to be
produced in specialized plants and then transported to the consumer, while
AquaFuel can be produced anywhere desired.
Secondly, in comparing AquaFuel and Hydrogen one must take into consideration
the fact that, according to all available measurements outlined below, AquaFuel
has an energy content greater than that of Hydrogen.
Thirdly, AquaFuel will be shown in Sect. 2 to provide other benefits during the
process of gas production that must also be considered
1.8. Main applications of AquaFuel. The applications of the AquaFuel process are
numerous and can be divided into three classes:
I: USE AS FUEL. In this class we note:
I.1) Motor fuel because of the remarkable reduction of pollutants in the
exhaust, high energy content, better safety, and other aspects indicated
earlier;
I.2) Heating fuel for homes and industries, for the same reasons;
I.3) Cooking fuel, because it is clearly preferable over methane and other
gases;
I.4) Industrial fuel for a variety of uses, such as for furnaces in the steel
industry and others; I.5) Emergency fuel, for instance, for the continuation of
service in a broken line of natural gas; and others.
II: USE FOR SERVICE. In this class we note:
II.1) Recycling of liquid waste such as sewage;
II.2) Recycling of solid waste such as rubber tires;
II.3) Environmental clean-ups; II.4) Production of electricity for various
industrial and consumer uses; II.5) Desalination; and other uses.
III: USE FOR PROCESSING. In this class we note:
III.1) Separation of water;
III.2) Production of new chemicals;
III.3) Production of gases, e.g., Hydrogen; and other possibilities are
currently under study.
A serious industrial and financial appraisal of the possibilities and costs
related to AquaFuel requires a knowledge of the combination of the above three
classes of application.
1.9. Cost of AquaFuel. As we shall see, one of the most effective industrial and
consumer use of the AquaFuel process is for recycling. AquaFuel is automatically
produced in such recycling as a by-product. Cost consideration should also
include the revenues from solids precipitated during the process, as in the
following examples:
MUNICIPALITIES. More specifically, the use of AquaFuel by highly polluted cities
such as Los Angeles is as follows:
Primary use: recycling of sewage;
Secondary use: clean fuel produced as a by-product;
Tertiary use: precipitation of solids useful for fertilizers.
A serious appraisal of the cost of AquaFuel as a combustible gas for cooking or
transportation cannot be done by just computing the cost of electricity and
carbon, and requires instead the consideration of: A. The INCOME from recycling
sewage and/or SAVINGS over current recycling means. B. The INCOME from the sale
of recycled water and chemicals. C. The COST of electricity and carbon.
FACTORIES. the above consideration for the best use of AquaFuel also apply to
factories, corporations or businesses at large.
HOUSEHOLDS. Note that the same basic usages also apply to an individual
household. In fact, existing cars can be easily converted to the use of
AquaFuel, while the latter can be produced via a small unit for individual
houses which: 1) recycles all liquid waste of the household; 2) produces an
excellent fuel for automotive and cooking usage; and 3) releases water and
solids usable for lawns.
1.10. Cost competitiveness of AquaFuel with respect to Hydrogen. As stressed
above, Hydrogen has only one class of applications, that after its formation for
fuel, chemistry, propulsion, etc. As a result, all costs to produce, store and
transport Hydrogen must be applied in their totality to the use of Hydrogen.
As equally stressed above, AquaFuel has instead a variety of usage in which that
as fuel is generally a by-product. The cost competitiveness of AquaFuel over
hydrogen is then self evident.
There are however additional aspects which should be considered for a serious
analysis and comparison of costs. Hydrogen can be only produced in specialized
plants. On the contrary, AquaFuel can be produced anywhere desired via light
weight equipment. This implies the additional savings of rather significant
costs for transportation of AquaFuel as compared to Hydrogen.
Irrespective of all that, the preliminary production data presented in Sect. 2
indicates that the cost of AquaFuel is competitive with respect to that of
Hydrogen, even for preliminary non-production units, even when produced in low
quantities, and even without including the other applications.
When primary applications such as recycling are included, and AquaFuel is
produced as a by-product, AquaFuel can be considered to be produced free of any
cost as compared to Hydrogen.
Moreover, since AquaFuel has an energy content greater than that of Hydrogen, it
can effectively replace all existing applications of the latter.
In summary, when all the above aspects are taken into account, AquaFuel is
competitive with respect to Hydrogen on costs, energy content, rapidity of
production, easiness of production anywhere desired, and other aspects.
1.11. Other compatible technologies at TTL. It should be indicated that TTL is
developing a number of highly advanced and innovative technologies some of which
have a direct bearing on AquaFuel.
One of these technologies which is particularly important for AquaFuel is that
developed by Mr. Jack Hansen which consists of new means for recycling
automotive tires resulting in market quality black carbon, fuel gas, fuel oil
and steel without air consumption or emission in the open air.
The importance for AquaFuel of the Hensen's NEW recycling of automotive tires is
that it essentially produces all needed Carbon free of costs. This is the case
in view of the existence of very large number of automotive tires in the USA, in
the range of hundred of millions of units which have remained without recycling
so far, while the Hansen Processor uses only 25 % of fuel it extracts from tires
to run itself.
A serious cost analysis for AquaFuel therefore requires the additional
consideration that Carbon can be obtained at no cost FROM the recycling of
automotive tires.
For other very intriguing and innovative new technologies under development at
TTL we refer the interested READER to the TTL Web Site http//www.toupstech.com/
1.12. Insufficiencies of this presentation. It should be stressed that this is
the "first" of an expected series of certifications of the characteristics and
applications of AquaFuel due to the novelty of the product and the lack of
availability at this writing of certain measures. In the final analysis,
scientific and systematic studies of Aquafuel have initiated by our group only
three months ago.
Additional tests are required on the energy content of AquaFuel. Only
preliminary data can therefore be provided and defer any final statement to
future certifications.
Moreover, power units specifically built for production are needed to replace
the use of welders as power units of the tests presented in Sect. 2, which are
not the appropriate power units for AquaFuel. The latter are under construction
by TTL and the related data will be presented in future certifications.
Any serious cost comparison must therefore take into account the fact that the
production data given below are based on preliminary-empirical means of
producing AquaFuel and not via a regular production equipment. It is however
evident that the preliminary production costs given in Sect. 2 will considerably
improve with appropriate power units specifically built for production.
Also the lack of detailed experimental knowledge of costs for recycling and
other applications, which are are under experimentation at this writing, prevent
final cost analysis of AquaFuel. It then follows that all costs analysis at this
writing can only be qualitative, yet they are indicative indeed.
We should finally indicate that this presentation is specifically restricted to
the certification of AquaFuel at "below-unit" conditions, that is, at conditions
under which the ratio between the energy contained in AquaFuel EAF, Out and the
electrical energy input EEl, In is smaller than one, EAF, Out / EEl., In < 1.
Possibilities for over-unit conditions have been empirically discussed by other
authors in the existing literature [2] and shall be briefly indicated for future
presentations following the necessary measurements by independent laboratories.
2. MEASUREMENTS AVAILABLE ON MAY 16, 1998.
2.1. Description of equipment. With reference to Figure 2, the AquaFuel
production equipment consists of:
1) a source of continuous electric current (DC) with sufficient voltage and
amperage as identified below which is called the power unit;
2) a container of the water used;
3) the discharge mechanism for the production of the electric discharge under
water between two carbon electrodes;
4) the collector of the gas bubbling to the surface;
5) the Aquafuel tank for the collection and storage of the gas under pressure;
6) a pump and and related line from the collector to the tank; and
7) a number of meters including a wattmeter for the measure of the used energy,
a thermometer for the increase in the water temperature, a sensitive scale to
measure the weight of the container, with or without water, and with or without
the discharge mechanism, an Oxygen detector and other gas detector put in line
between the collector and the tank, toxic gas detectors placed in the
environment, a flow meter to measure the AquaFuel produced, and any other needed
measuring device.
FIGURE 2: A schematic view of the preliminary equipment for the production of
AquaFuelTM used in the test reported in this certification.
The container generally used in the tests reviewed below is made of transparent
acrylic and houses about 120 liters of water. Two interconnected towers made of
transparent acrylic are used for collection of AF with the total capacity of 60
liters. The AquaFuel tank contains approximate 10 cf at the pressure of 100 psi.
The cathode of the discharge mechanism is made up of a Carbon disk of about 6"
diameter and 1" thick. The anode used in the tests is instead made up of
conventional Carbon rods produced for welding with sizes of 1/4" to 1" in
diameter. In all tests reported below the discharge mechanism was activated by
hand. An automatic discharge mechanism shall instead be used for the regular
production unit currently under construction.
The tests were conducted as follows: different power units were used as
identified below; air was removed with a pump from the two collection towers
which were then filled up completely with distilled water; the arc was manually
activated within the water under the collection towers; AquaFuel then bubbled
all the way to the top of the collection towers in equal amounts thus displacing
the water; large marks were placed on the towers to identify the production of
20 liters which was very visible at a distance due to the transparency of the
towers as well as the creation of AquaFuel via a lowering of the water level;
the volume of AquaFuel produced was accurately measured with a stopwatch RADIO
SHACK Model "Sports"; the electrical energy input was measured with a portable
wattmeter EXTECH Model 382060; the weight of the equipment was measured with a
sensitive scale and the temperature increase of the water and of its container
was measured with a sensitive thermometer; the energy lost to light was
approximately measured; other measurements are identified below.
2.2. Safety precaution. AquaFuel is inherently safe to produce by virtue of its
very conception. In fact, the electric current decomposes the Carbon crystal of
the rod thereby carrying Carbon into the high temperature plasma surrounding the
discharge. Under these conditions, the Carbon combines itself with the Oxygen
produced in the separation of water by the discharge and reduces the pure Oxygen
content to a safe minimum of the order of 1%. Alternatively, in the absence of
the AquaFuel process, the sole production of an electric discharge under water
without the Carbon would separate the water into Hydrogen and Oxygen, thus
resulting in an explosive and unstable mixture.
Despite these inherent safety features, a number of measures were implemented by
TTL for unexpected occurrences during the tests. First a protocol was identified
and implemented. Mr. Jack Hansen was appointed Safety Director by Mr. Leon
Toups, TTL President, and put in charge of safety with authority to halt all
tests at any time.
The most important safety precaution for the production of AquaFuel is that the
electric discharge must be solely allowed if going through a Carbon rod,
otherwise Oxygen is not removed from the separation of water by the discharge as
indicated above. To verify that Oxygen is down to a safe minimum, an Oxygen
detector was placed in line with the production of AF. Additional meters for
toxic gases were also installed, although none were detected. Whenever there was
no need to use the the AquaFuel produced, all gas pumped from the collection
towers was discharged in open air.
2.3. Tests on combustion exhaust. Engine tests of AquaFuel were performed on a
small internal combustion (IC) engine at the Briggs & Stratton Test Center of
Milwaukee, Wisconsin, by comparing the new fuel to gasoline. It was established
that AquaFuel requires considerably less air as compared to other fuels due to
its large content of Oxygen bonded in various forms. By comparison, other gases
such as methane require from ten to fifteen parts of air to one part of gas. The
results of the Briggs & Stratton test are as follow:
<TABLE>
Briggs and Stratton Test
<CAPTION>
Gasoline AquaFuel
<S> <C> <C>
RPM 3060 3060
Torque 3.45 3.20
HP 2.05 1.86
Oil Temp. 227F 165F
Exhaust 751F 637F
Hydrocarbons 2436 ppm 185 ppm (parts per million)
CO% 4.343 0.039
CO2% 12.086 14.695
Oxygen % 0.544 7.100
Hydrocarbon 13.367 0.001 g/hr (grams per hour)
Nitrogen Ox. 5.921 0.002 g/hr
CO 421.141 0.002 g/hr
</TABLE>
The g/hr figures for CO are most impressive. The engine running on AquaFuel
would have to operate for over 210,000 hours to equal the amount of CO produced
in 24 hours while being fueled by gasoline.
Equally impressive is the presence of 7.1% of Oxygen in the exhaust which is
evidently important to maintain the Oxygen balance in our atmosphere. This is a
clear indication that AquaFuel is not a lean mixture, but a mix with excess
power.
Additional tests were done in 1994 at the EPA facilities in Ann Arbor, Michigan,
with the following results
<TABLE>
Emission Tests
<CAPTION>
AquaFuel AquaFuel Indolene Indolene
Test 1 test 2 test 3 Test 4
<S> <C> <C> <C> <C>
HC ppm 113.4 131.94 3753 3981
Nox ppm 380.34 428.04 388.98 419.76
CO % 0.162 0.162 3.078 3.042
CO2 % 12.564 12.618 9.198 9.324
</TABLE>
Further tests were done on 4-20-98 under the supervision of MOTOR FUELERS, INC
of Largo, Florida. A gasoline powered generator set with a 10 hp Tecumseh engine
and a 5000 Watt generator was purchased. The generator was a Coleman Powermate
MAXA 5000, model PM0525202. The objective was to run the engine under load with
both AquaFuel and gasoline. Motorfuelers, Inc. of Largo, Florida supervised the
the test which was expected to yield information useful also on the BTU content.
To run the engine on Aquafuel the fuel line was disconnected from the gas tank
and a hole was drilled in the manifold between the carburetor and the head. This
was to bypass the carburetor and to control the addition of air which is
substantially less than needed by gasoline. To revert back to gasoline, the hole
was plugged and the fuel line was reconnected. The plan was to let the engine
run on Aquafuel for as long as the gas lasted in the compressor containing
approximately 10 cubic feet of gas at 100.
The following table represents a comparison of the emissions results of this
test with two previously tests conducted by independent third parties.
<TABLE>
Motorfuelers Briggs & Stratton US EPA, Ann Arbor
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
AF GAS AF GAS AF GAS
HC ppm 7 420 185 2436 122 3867
CO % .17 8.5 .04 4.3 .16 3.1
O2 % 12 .13 7.1 .54 N/A N/A
CO2 % 8.3 9.9 15 12 13 9
</TABLE>
Note the extreme advantage for AquaFuel over gasoline in the reduction of
hydrocarbons, carbon monoxide and oxygen, and the consistency between each test.
Note also that Indolene was used as a control fuel for test purposes.
It should be also noted that, as a result of the above measurements, AquaFuel
can be used as a fuel without any catalytic converter and the emission exhausts
would still meet the EPA requirements.
It should be finally noted that current EPA requirements do not monitor the CO2
content of combustion exhausts. Nevertheless, a technology specifically aimed at
the reduction of CO2 content in the AquaFuel combustion exhausts is under
development at TTL and it will be addressed in a future presentation.
2.4. Tests on recycling. TTL obtained 3 gallons of sewage from the City of
Largo, Florida, which were placed in a small AquaFuel container powered by a
LINCOLN Welder Model LN130 with 24 V DC under load and 130 Amps. Samples were
then taken of the raw sewage, and of the sewage treated with the AquaFuel
process at sequential durations of 2, 5, and 13 minutes.
The samples were encoded by TTL with cryptographic identification to prevent the
knowledge of their sequential character. The encoded samples were then examined
by CONSTELLATION TECHNOLOGY CORPORATION of Largo, Florida, as per the results
attached to this document, which also contains their decoding.
As one can see, all bacteriological activities ceased to exist in 3 gallons of
sewage following one minute of exposure to the Aquafuel process. To properly
appraise this result, one should keep in mind that it was obtained with a small,
low efficiency welder with about 5 Kw. It is then evident that the recycling
rate and efficiency will increase substantially with the appropriate production
unit equipped with the appropriately high DC voltage.
Moreover, a significant component of sewage, Acetone, is transformed by the
AquaFuel process into a sequence of compounds, whose final products are volatile
substances. As expected, a solid residue was found at the bottom of the
container, which is currently under testing.
AquaFuel was produced in the above recycling process essentially as that
produced via the use of ordinary water. In fact, the content of hydrocarbons in
AquaFuel produced via distilled water is less than one percent. Biomaterial are
also contained in sewage fluids in a few percentage and they consequently result
in a small increase of the percentage of hydrocarbon in AquaFuel. These aspects
are currently under analytic tests for finalization.
The above results indicate that the AquaFuel process does indeed provide a new
viable form of recycling sewage either by municipalities or by individual
households which essentially consists in :
1) passing the sewage through a duct with the AquaFuel processing at a flow
dependent on the used characteristics of voltage DC and amperage;
2) collecting the AquaFuel produced and the solid precipitated at the bottom;
and
3) treating the emerging water with filters and other means under patenting,
which water can then be used for irrigation or other usages.
The advantages of the above new form of recycling sewage over existing forms of
recycling are evident, e.g., in savings, reduction of land currently needed for
large tanks, elimination of bad odors for neighborhoods, etc.
Systematic studies on this new form of recycling are now under way at TTL and
they will be reported in some future presentation.
Further research and development is under way at TTL to ascertain whether, under
proper design, the AquaFuel process can be used as a new form of desalination of
salt water.
2.5. Tests on the BTU content. Several tests on the BTU content of AquaFuel by a
number of independent laboratories as well as at TTL have been conducted as of
today, May 16, 1998, although, for various reasons, they are not final. The only
scientific conclusion which can be stated at this writing is that the energy
content of AquaFuel is greater than that of Hydrogen, although the actual amount
is under test and will be released in future certifications.
The first difficulty was that calorimeters which are constructed and calibrated
for other combustible gases have resulted to be unable to measure the BTU
content of AquaFuel. As an illustration, Mr. Jerry Kammerer, a TTL Vice
President, drove with AquaFuel samples all the way to the plant producing of one
of the best calorimeters in the USA, that of the Badger Instruments in Tulsa,
Oklahoma When applied to that calorimeter, AquqFuel did not even initiate
combustion, let alone have a meaningful measurement. No re-calibration of the
calorimeter was possible without a structural re-design requiring months and
large investments.
This is due to the fact that different gases have different Oxygen needs. In
particular, AquaFuel has a requirement for Oxygen which is dramatically smaller
than that of other gases. As a result, the Badger Instrument which is one of the
best for the measure of the BTU content of Methane, resulted to be totally
inoperative for AquaFuel because of the large difference in Oxygen intake of the
two gases.
A series of additional tests were then conducted by
COSA INSTRUMENTS of Norwood, New Jersey
via the use of the calorimeter CW95H heating Value Analyzer, series # 75125
equipped with a BTU burner with Wobble inde 452 S.G. 0.802 HHV, which is
produced by the UNION CORPORATION in Germany.
Additional tests were done by
Dr. M. Fetterolf Department of Chemistry University of South Carolina Aiken,
S.C.
via a bomb calorimeter.
Unfortunately, all the latter tests resulted to be anomalous and unacceptable.
The underwriter then had a special analytic test done on the AquaFuel used for
the tests which resulted to possess about 35 % of Nitrogen. This is evidence
that AquaFuel used for the tests was defective because it included about 43% of
ordinary air. Subsequent inspections of the production unit identified the
existence of a large air leak in the head of the tank compressor. All the above
tests on the energy content of AquaFuel must therefore be re-done with pure
AquaFuel; they are under way at this writing; and their results will be
presented in future certifications.
The claim that AquaFuel has a BTU content greater than that of Hydrogen is based
on the following evidence:
A) Preliminary measurements via the bomb calorimeter by Dr. Fetterolf.
B) Comparative measurements of flame temperatures. TTL conducted these tests at
their facility under the presence of this underwriter, via the use of the same
beak, the same pressure and the same line for both AquaFuel and Hydrogen tanks.
The maximal temperature of the Hydrogen flame resulted to be 1,900 degrees F.
The maximal temperature of the AquaFuel flame reached the top of the scale of
the available meter, 2,200 degrees F, which is already about 252 degrees greater
than the flame temperature of Hydrogen. This is additional experimental evidence
that the energy content of AquaFuel is bigger than that of Hydrogen. No final
numerical value is possible because the measure of the maximal flame temperature
for AquaFuel will be known shortly and will be therefore reported in a future
certification.
C) Cutting tests. Additional tests for cutting metals via flames were conducted
at TTL under the presence of this underwriter for AquaFuel and Acetylene. The
two gases resulted to be compatible in pre-heat times prior to combustion of the
steel. Acetylene then had a cut about 10% superior than that of AquaFuel. This
performance confirms that AquaFuel has a BTU content greater than that of
Hydrogen.
D) Engine test. The same engine test for emission exhaust performed under the
supervision of Motor Fuelers, Inc., was also used to obtain some preliminary
information on the BTU content of AquaFuel.
The engine was set at "half load" with 25 light bulbs of 100 Watt each connected
in series on a piece of plywood. This corresponds to the engine running at 5 hp.
A measure of the current draw during each run would then verify the load.
The first run using Aquafuel lasted for 3-1/2 minutes. The current draw was 17.5
Amps. The engine was then ran on gasoline and recorded the same current draw of
17.5 Amps. This verifies that there was an equal load on the system for both
fuels. 17.5 Amps X 120 Volts = 2100 Watts.
To run for an hour on Aquafuel 60 minutes were divided by 3.5 minutes to get a
multiplier of 171 cubic feet. The manufacturer states that this generator set
will run at half load for 6 hours on 5 gallons of gasoline. A gallon of gasoline
can produce 130,000 BTU. 5 gal. X 130,000 BTU = 650,000 BTU. 6 hours X 171 cubic
feet of Aquafuel = 1026 cubic feet of Aquafuel. Therefore if 5 gallons of
gasoline or 1026 cubic feet of Aquafuel both will run the generator set for 6
hours, they should both have the same BTU content. Therefore 650,000 BTU divided
by 1026 cubic feet yields a BTU content of AquaFuel of 633 BTU/cf.
Upon the completion of the above tests, analytic measurements on the AquaFuel
used indicated a contamination of about 43 % with ordinary air due to a leak in
the compressor head. The tests will therefore be repeated with pure AquaFuel and
better results are evidently expected.
E) Theoretical calculations of BTU content. Additional preliminary information
on the BTU content of AquaFuel can be derived from theoretical calculations
based on its assumed chemical composition. The latter data confirm that AquaFuel
has an energy content greater than that of Hydrogen, although no final value is
possible for a variety of reasons. The most important reason is the lack of
final scientific knowledge on the chemical composition of AquaFuel as indicated
below.
In conclusion, AquaFuel is a basically novel combustible gas with essentially
unknown characteristics and structure. Protracted and repeated experience has
established that rules and tests easily valid for other gases generally yield no
significant result for AquaFuel.
2.6. Production tests with batteries. A series of tests was first conducted at
TTL via the use as power unit of ordinary car batteries. Even though far from a
real production set up and possessing a number of drawbacks, the use of car
batteries resulted to be useful to reach basic knowledge, such as energy
absorbed and volume of AquaFuel produced. Also, the test with car batteries is
quite simple and can be easily reproduced everywhere. Five automotive batteries
were purchased by TTL with the following characteristics:
Manufacturer: Interstate Batteries Model: Marine/RV Deep Cycle # SRM-29
Characteristics: 12 Volts DC each with 645 cold amps and 845 maximal cranking
capacity.
Five tests were then conducted with one, two, three, four and five batteries in
series, resulting in the total of 12, 24, 36, 48, 60 Volts DC at open arc. The
batteries were verified to be fully charged before each test. Several tests were
then performed per each voltage with individual measurements of voltage under
load, amperage, and volume/time produced. The average final results conducted
under the presence of this underwriter are:
<TABLE>
Average measurements with batteries
<CAPTION>
No. Batt Aver. V Aver. A AF Volume AF Volume Rod
(Liter/minute) (CF / hour (in inches)
<S> <C> <C> <C> <C> <C>
# 1 9 V 90 A 1 L/m 2.1 cf/h 1/2"
# 2 20 V 155 A 4 L/m 8.5 cf/h 1/2"
# 3 29 V 310 A 20 L/m 42.3 cf/h 1/2"
# 4 40 V 670 52 L/m 110 cf/h 1/2"
# 5 50 V 875 96 L/m 204 cf/h 1/2"
</TABLE>
To compute the energy, we use: the usual factor of 0.77 to compute the real Kw
absorbed from the KVA; the value 1 L = 1/28.31 cf = 0.0353 cf; and 1 watt-hour =
3413 BTU hour. From the preceding data we then obtain the following values:
<TABLE>
Electrical input energy / hour for batteries vs AquaFuel produced
<CAPTION>
No. Batteries Elec. En. Ele. En. Elec. En. AF produced
in KVA in Kw in BTU in cf/h
<S> <C> <C> <C> <C>
# 1 .8 KVA .6 Kw 2,046 BTU 2.1 cf/h
# 2 3.1 KVA 2.4 Kw 8,146 BTU 8.5 cf/h
# 3 9.0 KVA 6.9 Kw 23,625 BTU 42.3 cf/h
# 4 26.8 KVA 20.6 Kw 70,430 BTU 110 cf/h
# 5 43.7 KVA 33.7 Kw 114,975 BTU 204 cf/h
</TABLE>
The above data are reproduced in Figure 3 below. Note that no computation of BTU
values for AquaFuel is possible at this writing because of the lack of final
knowledge on the BTU/cf of Aqua Fuel.
2.7. Production test with a Miller AC/DC welder. A second series of tests were
performed with one of the best commercially available welders transforming AC
into DC, which was selected to provide the highest commercially available
voltage DC and with a controllable amperage so as to avoid un-necessary usage of
electricity.
It should be stressed that welders are not designed to produce AquaFuel and, as
such, they are far from a real production unit. Nevertheless, the welder was
selected for these second tests also because it is readily available everywhere,
thus permitting the reproduction of the tests by any interested person anywhere
desired. Also, the use of commercially available welders remain valid for small
production of AquaFuel. After due search, the welder selected for the test was:
Manufacturer: MILLER CORPORATION Tel: 1-800-426 4553 Web Site:
http://www.Miller.Welds.com Model: XMT 304 CC/CV Rate: Heavy industrial use
Line: single or three phase, 230 or 460 V AC Weigth: 76 lb (34.5 Kg) Size: H 217
ft (43 cm), W 12-1/2 ft (31.8 cm), D 24 in (62 cm) Characteristics claimed by
the manufacturer: # CV (controlled voltage) from 10.35 V DC under load (voltage
with open arc 90 V DC) # CC (controlled current) from 5 to 400 Amps # Real power
absorbed 11.6 Kw with 15.3 KVA
Three sequential tests were conducted under the presence of this underwriter,
each one repeated a number of time. The average results are the following
<TABLE>
Average measurements with the Miller Welder XTM 304 at maximal voltage setting
<CAPTION>
Test Voltage Amps AF volume Rod size
<S> <C> <C> <C> <C>
# 1 25 V 119 A 20 L / 5m 36 s 1/2"
# 2 26 V 220 A 20 L / 1m 43 s 1/2"
# 3 30 V 320 A 20 L / 1m 04 s 1/2"
# 4 32 V 400 A 20 L / 58 s 1/2"
# 5 38 V 400 A 20 L / 58 s 1/2"
</TABLE>
<TABLE>
Electrical input energy vs AquaFuel output energy per hour with Miller welder
<CAPTION>
No. Batteries Elec. En. Ele. En. AF produced
in KVA in Kw in cf
<S> <C> <C> <C>
# 1 9.5 KVA 7.3 Kw 7.5 cf/h
# 2 10.5 KVA 8.0 Kw 24.6 cf/h
# 3 12.9 KVA 9.9 Kw 39.7 cf/h
# 4 15.0 KVA 11.5 Kw 43.8 cf/h
# 5 16.2 KVA 12.4 Kw 43.8 cf/h
</TABLE>
The results of the above test are reported in Figure 4 below.
<TABLE>
Average measurements of the test with the Miller welder with dial on voltage set
at different values
<CAPTION>
Test Voltage Amps AF volume Rod size
<S> <C> <C> <C> <C>
# 1 10 V 400 A 38 cf/h 1/2"
# 2 18 V 400 A 42 cf/h 1/2"
# 3 28 V 400 A 42 cf/h 1/2"
# 4 38 V 400 A 50 cf/h 1/2"
</TABLE>
The results of the latter measures are summarized in the diagram of Figure 5
below. As one can see, the above production data are significant.
2.8. Future production power unit. As indicated earlier, to improve efficiency,
AquaFuel must be produced with a power unit specifically built for that scope,
by requesting in particular a unit with a voltage of the order of 100 V DC under
load and controllable amperage. The production unit also requires a completely
automated Carbon feeding in the discharge mechanism.
(IMAGE OMITTED)
FIGURE 3: The diagram expressing the dependence of the volume of aquaFuel
produced in cubic feet per hour (CFH) as a function of the voltage (V DC). Note
its nonlinear character of parabolic types, that is, CFH is proportional to the
square of the voltage. This property, first established with the battery tests
is of fundamental relevance, because it indicates the possibility of increasing
the efficiency of AquaFuel production with the increase of the voltage.
(IMAGE OMITTED)
FIGURE 4: A plot of the volume of AquaFuel produced with the Miller Welder XTM
304 with the voltage set at maximum yet controlled with the amperage dial.
(IMAGE OMITTED)
FIGURE 5: A plot of the volume of AquaFuel produced with the Miller welder as a
function of the voltage with amperage fixed at maximum and the voltage set at
different values.
TTL is in the process of producing such a production power unit with the
following main characteristics:
# A transformer operating at 460 V AC, three phases; # A reactor yielding up to
115 V DC under load and up to 1,000 amps; # A seven tab switch permitting seven
different voltage settings from 15 V DC to 115 V DC; # A chiller for temperature
control containing 15 tons of cooling liquid; # A completely automated discharge
mechanism; # A Yokogawa wattmeter, the latest model WT 1000.
A number of other production power units are under study, such as those with the
most recent high voltage fuel cells, those based on arc furnaces, and others.
Data on the production of AquaFuel via the appropriate equipment will be
certified at a future time upon completion of the tests. In the meantime, reader
can extrapolate the performance of the above production power unit from the
diagrams of Figures 3, 4, 5.
2.9. Preliminary costs analysis on AquaFuel. As indicated earlier, the most
important competition of AquaFuel is Hydrogen in view of the serious
environmental problems caused by other fuels. Consequently, cost analyses on
AquaFuel should be compared to those on Hydrogen.
It is evident that, at the time of this first certification, we are not in a
position to conduct such a cost analysis in the necessary depth because of the
lack of important information, such as the final value of the BTU content of
AquaFuel, ratios between energy input and AquaFuel produced via actual
production units, and other aspects.
Nevertheless, it is important for an overall appraisal of AquaFuel to have at
least a preliminary cost analysis which can be based on volumes, rather than on
BTU content, and evidently with the currently available empirical and
non-production units.
The following distributor of Hydrogen in Pinellas County, Florida,
AIR PRODUCTS AND CHEMICALS, Inc of Largo, Florida
released the following costs for Hydrogen for local deliveries:
1) $ 2.50 per 100 cf of Hydrogen under the minimal purchase of 300,000 cf. By
recalling that Hydrogen has about 300 British Thermal Units per cubit feet
(BTU/cf), , the above price corresponds to the wholesale cost of $ 83.33 per 333
cf. or, equivalently, for one million BTU, plus adjustments regarding distance
from the factory, frequency of purchase and maintenance and other fees, as well
as discounts for larger or more periodic purchases.
2) $ 90 per cylinder of 197 cf for Hydrogen of high purity which, at 300 BTU/cf,
corresponds to 59,100 BTU per cylinder. The cost in Pinellas County, Florida, of
high purity Hydrogen in cylinders is therefore 1,000,000/59,100 x 90 = $ 1,522
per 333 cf or per million BTU, with discounts of the order of 20% to 30% for
volume purchase.
3) $ 18 is the lowest available cost in Pinellas County, Florida, per cylinder
containing 197 cf which corresponds to 59,100 BTU. The retail cost in Pinellas
County of 333 cf of low grade Hydrogen or of one million BTU in cylinders is
therefore 1,000,000/59,100 x 18 = $ 304 with 20% to 30% discounts for large
purchases.
Additional data on costs of Hydrogen are presented in a separate report by Dr.
Peter Glueck (Ref. [4]). The reader should be aware that costs of Hydrogen
available in the Web vary quite largely and they generally miss the necessary
details of quantity, storage, transportation, etc. to be actual costs. The
direct verification of any cost of Hydrogen with an actual distributor is
therefore necessary for accuracy.
The production data of AquaFuel provided in Sect. 2 already establish the cost
competitiveness of AquaFuel over Hydrogen even under the conditions of its sole
use as fuel, and even via the use of preliminary non-production units.
As an example, controlled tests reported in Sect. 2 on the production of
AquaFuel via the preliminary use of the Miller Welder XTM 304 for power unit
indicate the use of about 12 Kw hour for the production of about 1,200 Liters of
AquaFuel also in one hour. At the cost of $ 0.08 per Kw in Pinellas County,
Florida, we have the approximate cost of $ 1 per 1,200 Liters of AquaFuel
corresponding to 42 cf. The cost of 333 cf of AquaFuel with the above empirical
pre-production units is therefore 333/42 = $ 7.92 plus the cost of the Carbon
rods, plant amortization and other costs, which can be estimated (in excess) to
a total production cost of $ 21.5 per 333 cf, with a sale price of $ 50 per 333
cf.
It is therefore evident that the $ 50 sale retail price of 333 cf of AquaFuel
produced with empirical non-production units in very low quantities and without
consideration of recycling and other factors, is less than the lowest available
price of Hydrogen, $ 83.3 per 333 cf for minimal purchases of 300,000 cf.
In addition to the lower cost, one should keep in mind that 333 cf of AquaFuel
contain more energy than the same volume of Hydrogen.
Needless to say, the cost of AquaFuel produced with the appropriate production
equipment is expected to be considerably less than $ 21.5 for 333 cf.
2.10. Tests on chemical composition. A number of analyses on the chemical
composition of AquaFuel have been performed by various leading laboratories.
However, none of them can be considered conclusive at this writing because of
contradictions, either internally, or with respect to other more established and
verifiable measurements.
A first analysis of the chemical composition of AquaFuel was conducted by the
NASA Laboratories at the Kennedy Space Center in Florida, with the following
results:
Non-Hydrocarbon Gases
Hydrogen 46.483 %
Carbon Monoxide 38.370
Carbon Dioxide 9.329
Nitrogen 3.818
Oxygen 1.164
-----------------------------------
SUBTOTAL 99.164 %
Hydrocarbon
-----------
Ethylene 0.049
Ethane 0.005
Acetylene 0.616
Methane 0.181
Total 100.015
------------------------------------
SUBTOTAL 0.851
GRAND TOTAL 100.015
However, the above analysis does not conform to the performance of AquaFuel and
other experimental evidence. First, the total BTU content of the gas is less
than 300 according to the above data, while the Briggs test shows almost 90% of
the torque and horsepower on AquaFuel as compared to that of the same mass of
gasoline, results which have been confirmed by other engine tests.
A series of additional tests were conducted by
ATLANTIC ANALYTICAL LABORATORY Whitehouse, New Jersey Tel. 908-534 2017
The best normalized composition in % v/v released by the lab as per attached
documentation yields the following composition of AquaFuel:
Non-Hydrocarbon gases
Hydrogen 45.6 % v/v
Carbon monoxide 36.7
Nitrogen 5.3
Carbon dioxide 4.5
Oxygen 1.3
Argon 0.074
-------------------------------------
SUBTOTAL 93.474
Hydrocarbons (ppm)
Acetylene 0.0034
Methane 0.0014
Propane 0.00097
Ethylene 0.00016
Hexanes+ 0.00004
Butene 0.00002
Isobutane 0.000008
N-Butane 0.000008
--------------------------------------
SUBTOTAL 0.0060
GRAN TOTAL 93.480
The similarities between the NASA and the AAL measures are considerable,
e.g.,
ELEMENT NASA AAL
Hydrogen 46.4 45.6
Carbon Monoxide 38.4 36.7
Nitrogen 3.8 5.3
Carbon Dioxide 9.3 4.5
Oxygen 1.2 1.3.
The differences between the two analyses might therefore be due to predictable
factors, such as differences in the water used for the production of AquaFuel,
differences in its purity, etc.
Nevertheless, the AAL results also exhibit a number of inconsistencies, such as:
1) The AAL Normalized Composition in %v/v do not add to 100%. In fact, The AAL
analysis misses 6.52% in total elements, which is a value for analytic measures
too high for resolutory results.
2) The AAL elemental analysis is not compatible with the volumetric analysis
(see, again the related attachment). For instance: the w/w Hydrogen derived from
the v/v data is 6.9% w/w while AAL quotes 13.6% w/w; for Carbon we compute 32.7%
w/w while AAL quotes 6.1% w/w; for Oxygen we have 51.3% w/w while AAL has 67.3%
w/w; and for Nitrogen we have 9.85% w/w while AAL has 12.9% w/w.
3) The energy/cf theoretically computed by AAL from the chemical analysis of
AquaFuel yields 286 BTU/cf, namely, a BTU content less than that of Hydrogen,
which is in contradiction with various direct measures of BTU content which
yield a BTU content higher than that of Hydrogen, as outlined earlier.
Additional baffling data are those of permeability. The test was performed by
filling up similar balloons with Hydrogen, CO, Acetylene, Helium and AquaFuel.
The time needed to fully deflate the balloons back to their original static
state was measured as follows:
Hydrogen Two hours.
CO Eight hours.
Acetylene Two days.
Helium Two week.
AquaFuel Three to six months.
As the gases leaked out of the AquaFuel balloon, the diameter was reduced by
about 10%. The other gases still in the balloon were flammable months into the
test. The AquaFuel balloon-test was conducted three times.
In view of the above and other evidence, the underwriter cannot consider as
conclusive the chemical analysis on AquaFuel by NASA, AAL and other
laboratories. A first motivation may be due to the fact that they used GC-MS
measuring techniques may imply a decomposition of some of the true molecules
composing AquaFuel.
Another possibility is that the molecules composing AquaFuel are not ordinary
molecules, since they have been formed under the extremely intense
electromagnetic field caused by the electric discharge. These fields are known
to polarize the molecules in a way proportional to their intensity. It is not
inconceivable, and it is in any case scientifically unsettled at this writing
one way or the other, that the electric and magnetic polarizations of the
molecules composing AquaFuel imply such a distortion, that the molecules escape
detection via conventional meters (essentially based on computer memories of any
given peak). Theoretical and experimental studies are under way for the latter
aspects, as we hope to report in a future certification.
All in all, the ultimate unknown origin, characteristics and composition of
AquaFuel are the very reasons for the research interest by the underwriter.
2.11. Radioactivity test. A radiation test was done by CONSTELLATION TECHNOLOGY
CORPORATION of Largo, Florida, with a highly sensitive Geiger counter as per
Attachment # 1, which resulted to be negative. In fact, water is known to be one
of the best material for the absorption of radiation, for which reason it is
used in nuclear power plants to shield the reactor. At any rate, AquaFuel is
only expected to produce low energy photons and electrons which are easily
absorbed by water.
2.12. Comments on the energy balance of AquaFuel. This presentation would be
incomplete without addressing the possible "over-unity" of AquaFuel which has
been discussed in the pre-existing literature [2]. I am referring to the
possibility that the energy content of AquaFuel, E(AF, Out) is greater than the
electrical energy input, E(El. In), as a result of which their ratio is greater
than one,
(Formula Omitted)
This expectation can be seen in this report, e.g., from the nonlinear, generally
quadratic dependence of the volume of AquaFuel produced with the voltage, as in
Diagrams 3, 4, 5, according to which the volume produced appears to increase
with the square of the voltage. This implies the theoretical possibility that
there should be a given value of the voltage after which over-unity (1) holds.
The first aspect to clarify is that at this writing, May 16, 1998, there is no
experimental evidence on the possible over-unity character of AquaFuel. Numerous
additional experimentations are needed to establish the behavior of the volume
of AquaFuel produced at voltages higher than those of Diagrams 3,4,5 because of
the realistic possibility that the behavior of the curve may flatten due to
increases of losses and several other aspects.
After having expressed due scientific caution, readers are discouraged from
opposite trends, such as flat denials of the possibility of over-unity. The only
scientific statement which can be voiced at this time is the traditional
expression that the issue is fundamentally open and unresolved at this writing
either way.
Flat denials are disproved by the fact that, contrary to popular beliefs, a
possible over-unity of AquaFuel would be in complete agreement with the
principle of conservation of the energy.
In fact, a scientific study of the energy balance for any production of energy,
let alone that of AquaFuel, requires the consideration of:
# the TOTAL input energy, which is given by the sum of the electric energy
plus the internal energy available in the water and in the carbon rod, and
# the TOTAL output energy, which is the energy of AquaFuel plus all losses
due to dispersal of energy into heat, light, separation of water and carbon
rod, etc. The ratio of the above two total energies is always smaller than
one because of un-accounted losses,
(Formula Omitted)
This implies the verification of the principle of conservation of the energy in
a way fully compatible with over-unit (1).
The best way to illustrate the above occurrence is to consider the case of
nuclear power plants which are over-unit by a factor of 10,000 or more, that is,
the ratio between the energy produced by nuclear power and the input electrical
energy, as in Eq. (1) is of the order of 10,000 or more,
(Formula Omitted)
This occurs without any violation of the principle of conservation of the energy
because the total input energy for the nuclear power is the electrical energy
plus the internal energy of the nuclei, thus verifying both laws (2) and (3).
If experimentally confirmed, the possible over-unity of AquaFuel would be fully
equivalent to the case of the nuclear power, the only difference being that the
internal energy of the nuclei is replaced with the internal energy of the water
and carbon. After all, water is one of the largest and cleanest reservoir of
energy available to mankind.
At any rate, no final conclusion can be reached on the energy balance of
AquaFuel prior to the achievement of a suitable production unit, the final
identification of the BTU content of AquaFuel, the measure of energies lost in
the decomposition of the water and of the Carbon crystal, light, heat, etc., as
well as the energies available from the creation of the various AquaFuel
molecules and other more subtle processes.
Quantitative studies on the energy balance of AquaFuel, as well as of its
underlying process, are under way via the use of the generalization of quantum
mechanics known as "hadronic mechanics" [5] and the generalization of quantum
chemistry known as "hadronic chemistry" [6]. The latter theories are a form of
"completion" of the pre-existing theories much along the historical argument by
Einstein, Podolsky and Rosen, although specialized to the effects expected in
deep overlappings of the wavepackets of particles, as expected in the nuclear
reactions which are possible in the AquaFuel plasma, or of valence electrons, as
expected in the separation of water and subsequent formation of the chemical
bonds of the AquaFuel molecules.
These aspects are under study elsewhere [7]. At this moment we merely mention
that one of the most intriguing and technologically promising aspects of
AquaFuel is that, despite its apparent simplicity, it exhibits a number of
properties and behaviors which are outside established doctrines, thus requiring
broader, more adequate theories.
3. CONCLUSIONS
In summary, following the personal supervision, eye-witnessing and inspection of
the measurements and tests conducted on AquaFuel during the past three months,
the underwriter hereby states that:
1) The representations made by TTL on AquaFuel are correct and supported by
experimental evidence.
2) All tests were conducted correctly and reported accurately.
3) The tests results and their interpretation were the outcome of a collegial
effort involving several indepenent scientists as well as various TTL
personnel.
4) After three months of testing, which TTL refers to as "Phase I", the test
results on AquaFuel show that the gas surpasses the initial expectations of
the Company in regard to applications and market potential of the AquaFuel
product, service and process.
5) The tests and measurements reported in this presentation establish that
AquaFuel is superior to Hydrogen in cost, energy content, simplicity and
rapidity of production anywhere desired in small or large volumes.
6) The AquaFuel product, service and process are near commercial applications,
as in the case of AquaFuel as combustible gas, recycling of sewage or
organic waste, environmental clean-ups, and others.
7) The ability to serve Government, Military, Space Industry as well as
private markets, including households, on a world-wide basis has been also
established.
8) The TTL "Phase II" is now well under way for the development of AquaFuel,
including the ongoing construction of an actual production unit, an actual
recycling unit, and an actual processing unit.
9) The evidence available as of this writing establishes that TTL has a large
potential, not only for direct sales, but also for granting licenses on
patents and/or know-how virtually all over the world.
In conclusion, as stressed in Sect. 1.5, environmental problems caused by highly
pollutant fuels are, by far, the largest problems of contemporary societies.
Thus, the availability of a new, clean, cheap, and readily producible fuel, such
as AquaFuel, should be taken seriously by all.
REFERENCES
1. W. H. Richardson, jr., US Pat 5,435,274 "Electrical power generation
without harmful emissions", July 25, 1995; US 5,692,459 "Pollution free
vehicle operation", Dec. 2, 1992; patents pending.
2. Infinite Energy no. 9, 1996; no. 10, 1996; no. 11, 1996; no. 13 1997; and
no. 14, 1997; International Journal of Hydrogen Energy no. 21, Feb 1996 p
142, H. Roger Hind's column "News and Views"
3. R. M. Santilli, An Outline of AquaFuelTM, its Energy Conversions,
Applications and Open Problems, Hadronic Journal Supplement Vol. 13, pp.
1-22, 1998.
4. P. Glueck, An Analysis of the Current Cost of Hydrogen, TTL report 004
dated May 16, 1998005, 1998.
5. R. M. Santilli, Elements of Hadronic Mechanics, Vols.. I and II, Ukraine
Academy of Sciences, Kiev, second edition, 1995, and Found. Phys. Vol. 27,
625, 1997.
6. R. M. Santilli and D. Shillady, "Ab initio Hadronic Chemistry", in
Fundamental Open Problems in Science at the Turn of the Millennium, T.
Gill. K. Liu and E. Trell, Editors, Hadronic Press (1998).
7. R. M. Santilli, The Emerging new Energies as Predicted by Hadronic
Mechanics, to appear.
Ruggero Maria Santilli
Palm Harbor, Florida
