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--------------------------------------------59
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 10,268,218 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
In a series of transactions between July 28, 1997 and January 29, 1998, the
Company issued "restricted" securities as that term is defined in Rule 144a3i in
that all such securities were acquired directly from the Company in transactions
not involving any public offering. As the term "restricted" is used in the
foregoing, all such securities may only be sold upon compliance with Rule 144,
adopted under the Act of 1933. Further, all persons to date receiving
"restricted" securities are affiliates of the Company and therefore subject to
on-going limitations in the resale of their securities including providing
advance notice prior to such proposed sale.
Further, As it relates to the transactions cited in paragraphs three
through twelve of this Item 4, the Company relied on Section 4(2) of the
Securities Act of 1933, as amended and all purchasers executed a Subscription
Agreement indicating they have such knowledge and experience in financial and
business matters that either alone or with a purchasers representative, they are
capable of evaluating the merits and risks of the investment.
(19)
<PAGE>
On July 29, 1997 (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" securities. For the purposes of
this transaction, the Company valued the 8,250,000 Common Shares at $.001 per
Common Share (the "par value"). Valuation factors considered by the Company at
date of issuance include the restriction or lack of liquidity for the
"restricted" shares; lack of operations; lack of any license agreements; lack of
any contracts for sales, lack of operating capital and lack of facilities.
On November 1, 1997, in conjunction with the execution of the BP Valve
License Agreement, the Company issued 25,000 of its par value Common shares to
the Licensor. The 25,000 shares were issued as "restricted" securities. For the
purposes of this transaction, the Company valued the 25,000 Common Shares at par
value. Valuation factors considered by the Company at date of issuance include
the restriction or lack of liquidity for the "restricted" shares; lack of
operations; immaturity of initial license agreement; lack of any contracts for
sales, minimal operating capital and lack of facilities.
On November 3, 1997, in conjunction with the execution of the AquaFuel(TM)
License Agreement, the Company issued 50,000 of its par value Common shares to
the Licensor. The 50,000 shares were issued as "restricted" securities. For the
purposes of this transaction, the Company valued the 50,000 Common Shares at par
value. Valuation factors considered by the Company at date of issuance include
the restriction or lack of liquidity for the "restricted" shares; lack of
operations; immaturity of initial license agreements; lack of any contracts for
sales, minimal operating capital and lack of facilities.
On November 8, 1997, in conjunction with the execution of an employment
agreement, the Company issued 25,000 of its par value Common shares to David
DeCara. The 25,000 shares were issued as "restricted" securities. For the
purposes of this transaction, the Company valued the 25,000 Common Shares at par
value. Valuation factors considered by the Company at date of issuance include
the restriction or lack of liquidity for the "restricted" shares; lack of
operations; immaturity of initial license agreements; lack of any contracts for
sales, minimal operating capital and lack of facilities.
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. For the purposes of this
transaction, the Company valued the 120,000 Common Shares at par value.
Valuation factors considered by the Company at date of issuance include the
restriction or lack of liquidity for the "restricted" shares; lack of
operations; immaturity of initial license agreements; lack of any contracts for
sales and minimal operating capital
On January 4, 1998, in conjunction with the execution of an employment
agreement, the Company issued 10,000 of its par value Common shares to Michael
Reilly. The 10,000 shares were issued as "restricted" securities. For the
purposes of this transaction, the Company valued the 10,000 Common Shares at par
value. Valuation factors considered by the Company at date of issuance include
the restriction or lack of liquidity for the "restricted" shares; lack of
operations; immaturity of initial license agreements; lack of any meaningful
contracts for sales and minimal operating capital.
On January 15, 1998, in conjunction with the execution of an employment
agreement, the Company issued 100,000 of its par value Common shares to Ruggero
Santilli. The 100,000 shares were issued as "restricted" securities. For the
purposes of this transaction, the Company valued the 100,000 Common Shares at
par value. Valuation factors considered by the Company at date of issuance
include the restriction or lack of liquidity for the "restricted" shares; lack
of operations; immaturity of initial license agreements; lack of any meaningful
contracts for sales and minimal operating capital.
On January 15, 1998, in conjunction with the execution of an employment
agreement, the Company issued 10,000 of its par value Common shares to Kenneth
Lindfors. The 10,000 shares were issued as "restricted" securities. For the
purposes of this transaction, the Company valued the 10,000 Common Shares at par
value. Valuation factors considered by the Company at date of issuance include
the restriction or lack of liquidity for the "restricted" shares; lack of
operations; immaturity of initial license agreements; lack of any meaningful
contracts for sales and minimal operating capital.
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" securities. Valuation factors considered by the Company at date
of issuance include the restriction or lack of liquidity for the "restricted"
shares; lack of operations; immaturity of initial license agreements; lack of
any meaningful contracts for sales and minimal operating capital.
(20)
<PAGE>
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 10,000 shares
were issued as "restricted" securities. Valuation factors considered by the
Company at date of issuance include the restriction or lack of liquidity for the
"restricted" shares; lack of operations; immaturity of initial license
agreements; lack of any meaningful contracts for sales and minimal operating
capital.
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 for an aggregate of
approximately $978,400 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
representative, 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 "Exhibits 5.i & 5.ii - 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.
(21)
<PAGE>
PART F/S
1.
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
2.
The following pro forma condensed consolidated balance sheet as of December
31, 1997, and the pro forma condensed consolidated statements of operations for
the periods ended December 31, 1996 and December 31, 1997, give effect to the
business combination of Advanced Micro Welding, Inc. (AMW) and Toups Technology
Licensing, Incorporated (TTL).
Pro forma condensed consolidated financial statements.........29
Pro forma condensed consolidated balance sheet................30
Pro forma condensed consolidated statements of operations.....31
Notes to the Pro forma financial statements...................32
3.
The following is the Auditor's Report and accompanying balance sheets of
Toups Technology Licensing, Incorporated (A Development Stage Company) as of
December 31, 1997, 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.
Auditor's Report...........................................33
Balance Sheets.............................................34
Statements of Operations...................................35
Statement of Stockholders' Equity..........................36
Statements of Cash Flows...................................37
Notes to Financial Statements..............................38
4.
The following pro forma condensed consolidated balance sheet as of March
31, 1998 and the pro forma condensed consolidated statements of operations for
the three-month period ended March 31, 1998 and the periods ended December 31,
1997 and 1996, give effect to the business combination of Advanced Micro
Welding, Inc. (AMW) and Toups Technology Licensing, Incorporated (TTL).
Pro forma condensed consolidated financial statements.........41
Pro forma condensed consolidated balance sheet................42
Pro forma condensed consolidated statements of operations.....43
Notes to the Pro forma financial statements...................45
5.
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 years ended December
31, 1997 and 1996.
Auditor's Report...........................................46
Balance Sheets.............................................47
Statements of Operations...................................48
Statement of Stockholders' Equity..........................49
Statements of Cash Flows...................................50
Notes to Financial Statements..............................51
6.
The following is the accountants' compilation report and accompanying
balance sheet of Advanced Micro Welding, Inc. as of March 31, 1998, and the
related statements of operations, stockholders' equity and cash flows for the
three-month period then ended.
Accountant's Compilation Report............................52
Balance Sheets.............................................53
Statements of Operations...................................54
Statement of Stockholders' Equity..........................55
Statements of Cash Flows...................................56
Notes to Financial Statements..............................57
(22)
<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 audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of 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
(23)
<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
(24)
<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
(25)
<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
(26)
<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
(27)
<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:
(28)
<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. The Company has raised an additional $565,966 in equity from the sale of
849,725 shares of common stock subsequent to January 31, 1998.
C. The Company entered into a two year agreement with the Pinellas County
Industrial Council for the lease of machinery and equipment with an
original cost of $1,700,000 for $1 per year. Additionally, the Company has
an option to purchase the equipment at under 10% of the original cost of
the equipment at the end of the lease.
D. The Company received a $50,000 grant from the U. S. Department of Energy
and administered by the Technology Deployment Center for the development of
one of its technologies.
E. On April 29, 1998, Toups Technology Licensing Incorporated (TTL) acquired
Advanced Micro Welding, Inc. (AMW) in a business combination accounted for
as a pooling of interests. AMW, a company specializing in micro welding and
custom metal fabrication, became a wholly owned subsidiary of TTL through
the exchange of 500,000 shares restricted common stock of TTL's common
stock for all of the outstanding stock of AMW.
(29)
<PAGE>
TOUPS TECHNOLOGY LICENISNG, INCORPORATED (TTL)
(A Development Stage Company)
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following pro forma condensed consolidated balance sheet as of December
31, 1997 and the pro forma condensed consolidated statements of operations for
the periods ended December 31, 1996 and December 31, 1997, give effect to the
business combination of Advanced Micro Welding, Inc. (AMW) and Toups Technology
Licensing, Incorporated (TTL). The pro forma financial statements are based on
the historical financial statements of TTL and AMW accounting for the
combination as a pooling of interests and giving effect to the adjustments
described in the notes to the pro forma financial\ statements.
The pro forma financial statements have been prepared based upon the
historical financial statements of TTL and AMW. These pro forma financial
statements may not be indicative of the results that actually would have
occurred if the combination had been in effect on the dates indicated or which
may be obtained in the future. The pro forma financial statements should be read
in conjunction with the historical financial statements and notes of TTL and
AMW.
(30)
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
Historical
AMW TTL
December 31, December 31, Pro Forma Pro Forma
1997 1997 Adjustments Adjustments
<S> <C> <C> <C> <C>
ASSETS
Cash $14,215 $60,421 $ - $ 74,636
Accounts receivable,
net of allowance for
doubtfull amounts
of $5,000 82,940 - - 82,940
Prepaid expenses - 11,000 - 11,000
Property and equipment,
net of accumulated
depreciation of $39,620 96,840 - - 96,840
Deferred charges - 5,075 - 5,075
Deposits 5,000 - - 5,000
------- ------ -------- --------
Total assets $198,995 $76,496 $ - $275,491
======== ====== ======= ========
LIABILITIES
Accounts payable and
accrued liabilities $37,582 $8,559 $ - $46,141
Capital lease obligation 73,776 - - 73,776
------- ------ -------- --------
Total liabilities 111,358 8,559 - 119,917
STOCKHOLDERS' EQUITY
Common Stock 10,000 8,510 (1) (9,500) 9,010
Additional Paid-in capital 37,197 99,850 (2) 40,440 186,987
(1) 9,500 -
Retained earnings 40,440 (40,423) (2) (40,440) (40,423)
------- ------ -------- --------
Total stockholders' equity 87,637 67,937 - 155,574
Total liabilities and
stockholders' equity $198,995 $76,496 $ - $275,491
======== ====== ======= ========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
(31)
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Periods Ended December 31, 1997
Pro Forma Pro Forma
(3) AMW (3) TTL Adjustments Consolidated
<S> <C> <C> <C> <C>
Revenue $ 344,149 $ - $ - $ 344,149
Cost of goods sold 202,689 - - 202,689
--------- -------- -------- ---------
Gross profit 141,460 - - 141,460
General admini-
strative expenses 85,675 40,966 - 126,641
Other income - 543 - 543
--------- -------- -------- --------
Income (loss)
before tax 55,785 (40,423) - 15,362
Income tax
provision - - (4) (2,920) (2,920)
--------- -------- -------- --------
Net Income $ 55,785 $(40,423) $(2,920) $12,442
========= ========= ======== =======
Weighted average
number of shares
outstanding (5) 8,858,057
=========
Pro forma net
income per share (5) $ 0.0014
Periods Ended December 31, 1996
Pro Forma Pro Forma
(3) AMW (3) TTL Adjustments Consolidated
Revenue $ 373,675 $ - $ - $ 373,675
Cost of goods sold 193,421 - - 193,421
--------- -------- -------- --------
Gross profit 180,421 - - 180,421
General and
administrative
expense 131,176 - - 131,176
--------- -------- -------- --------
Income before taxes 49,078 - - 49,078
Income tax provision - - (4) (9,325) (9,325)
--------- -------- -------- --------
Net Income $49,078 - (9,325) $39,753
======== ======== ======== ========
Weighted average
number of shares
outstanding (5) 8,858,057
=========
Pro forma net
income per share (5) $ .0045
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
(32)
<PAGE>
TOUPS TECHNOLOGY LICENISNG, INCORPORATED
(A Development Stage Company)
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 1997
1. To reflect adjustments to common and additional paid-in capital accounts to
conform to pooling of interest accounting principles.
2. To reflect reclassification of previously taxed earnings of the
S-Corporation (AMW) not withdrawn by shareholders prior to business
combination as contribution of capital.
3. The condensed consolidated statements of operations for the periods ended
December 31, 1997 include the period from July 28, 1997 (date of inception)
through December 31, 1997 for TTL and the 12 months ended December 31, 1997
and 1996 for AMW.
4. AMW has elected to be taxed as an S-corporation. Accordingly, the
historical financial statements of AMW do not include a provision for
income taxes. TTL, however, will be taxed as a C-corporation. Therefore,
the following pro forma adjustments have been recorded to reflect a pro
forma income tax provision on the pro forma income statements as follows
1997 1996
Income before taxes $15,362 $49,078
Federal and state income tax rate 19% 19%
------ -------
Provision for income tax $2,920 $9,325
====== ======
5. Pro forma earnings per share have been computed by dividing pro forma net
income by the equivalent number of shares of TTL that would have been
outstanding if the 500,000 shares of restricted common stock related to the
business combination with AMW discussed above had been issued during the
historical periods presented.
1997 1996
Net income $ 12,442 $ 39,753
Weighted average number
of shares outstanding 8,858,057 8,858,057
Net income per share $.0014 $.0045
====== ======
(33)
<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 the related statements of operations, stockholders' equity, and cash flows
for the period from July 28, 1997 (Date of Inception) through December 31, 1997.
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 audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Toups Technology Licensing,
lncorporated (A Development Stage Company) as of December 31, 1997, and the
results of its operations and its cash flows for the period from July 28, l997
(Date of Inception) through December 31, 1997.
February 12, 1998 (except for Notes 4 and 9
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
(34)
<PAGE>
Toups Technology Licensing Incorporated
(A Development Stage Company)
<TABLE>
Balance Sheet (unaudited)
<CAPTION>
BALANCE SHEETS
March 31, 1998 (Unaudited) and December 31, 1997
(Unaudited)
March 31 December 31
1998 1997
---- ----
<S> <C> <C>
Assets:
Cash $192,577 $60,421
Inventory at cost 56,666 -
Prepaid expenses - other 3,457 -
Prepaid royalty expenses 53,000 11,000
Deferred Charges - 5,075
Property and equipment, net of
accumulated depreciation of $482 36,535 -
----- -----
Total assets $342,235 $76,496
======== ========
Liabilities:
Accounts payable and
accrued liabilities $63,365 $8,559
Capital lease obligations 9,529 -
------ -------
Total liabilities 72,894 8,559
Stockholders' equity:
Common stock 9,471 8,510
Additional paid-in capital 515,389 99,850
Deficit accumulated during
development stage (255,519) (40,423)
-------- --------
Total stockholders' equity 269,341 67,937
------ -------
Total liabilities and
stockholders' equity $342,235 $76,496
======= ========
</TABLE>
See Notes to Financial Statements
(35)
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
(A Development Stage Company)
<TABLE>
Statement of Operations
<CAPTION>
STATEMENT OF OPERATIONS
For the three-month period ended March 31, 1998 (Unaudited)
and for the period from July 28, 1997 (Date of Inception)
through December 31, 1997
(Unaudited) July 28, 1997
Three-month (Inception)
Period Ended through
March 31 December 31,
1998 1997
---- ----
<S> <C> <C>
Interest Income $ 1,442 $ 543
Expenses:
Salaries 92,295 17,902
Consulting fees 29,861 14,209
Other operating costs 94,382 8,855
------ ------
Total expenses 216,538 40,423
------- ------
Net loss $215,096 $40,423
======== =======
Weighted average number
of shares outstanding 9,074,088 8,358,057
Net loss per share $.0237 $.005
</TABLE>
See Notes to Financial Statements
(36)
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
(A Development Stage Company)
<TABLE>
Statement of Stockholders' Equity
<CAPTION>
STATEMENT OF STOCKHOLDERS' EQUITY
For the three-month period ended March 31, 1998 (Unaudited)
and for the period from July 28, 1997 (Date of Inception)
through December 31, 1997
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 629,535 626 415,539 - 416,165
Services 215,000 215 - - 215
Rent 120,000 120 - - 120
Deficit accumulated
during development
stage January 1,
1998 through March
31, 1998 - - - (215,096) (215,096)
- - - -------- --------
Balance
March 31, 1998 9,474,535 $9,471 $515,389 $(255,519) $269,341
========= ====== ======== ========= ========
</TABLE>
See Notes to Financial Statements
(37)
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
(A Development Stage Company)
<TABLE>
Statement of Cash Flows
<CAPTION>
STATEMENT OF CASH FLOWS
For the three-month period ended March 31, 1998 (Unaudited)
and for the period from July 28, 1997 (Date of Inception)
through December 31, 1997
(Unaudited) July 28, 1997
Three Month (Inception)
Ended through
March 31, December 31,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(215,096) $(40,423)
Add (deduct) items not affect cash:
Depreciation 482 -
Capital stock issued for consulting fees and rent 335 8,360
Cash provided (used) due to changes in
assets and liabilities:
(Increase) in inventory (56,666) -
(Increase) in prepaid royalty expenses (42,000) -
(Increase) in prepaid expenses - other (3,457) (11,000)
(Increase) decrease in deferred charges 5,075 (5,075)
Increase (decrease) in accounts payable 54,806 8,559
------ -------
Net cash used by
operating activities (256,521) (39,579)
------ -------
Cash flows from investing activities:
Acquisition of equipment (25,871) -
------ -------
Net cash used
by investing activities (25,871) -
------- -------
Cash flows from
financing activities:
Proceeds from sale of
capital stock 416,165 100,000
Principal payments on capital lease obligations (1,617) -
------- -------
Net cash provided by
financing activities 414,548 100,000
------ -------
Net increase in cash 132,156 60,421
Cash, beginning of period 60,421 -
Cash, end of period $192,577 $60,421
======== ========
Supplemental cash flow disclosures:
Noncash items:
Equipment acquired under capital lease $11,146 $ -
======= =========
Common Stock issued for consulting services and rent 335 $ 8,360
====== ========
</TABLE>
See Notes to Financial Statements
(38)
<PAGE>
TOUPS TECHNOLOGY LICENSING, lNCORPORATED
(A Development Stage Company)
NOTES TO FlNANClAL STATEMENT
March 31, 1998 (Unaudited)
and December 31, 1997
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.
Inventories - Inventories consist of work-in-process and parts held for
manufacturing and are valued at cost using the first-in, first-out method.
Property and Equipment - Property and equipment are recorded at cost.
Depreciation is computed using the straight-line method over their estimated
useful lives. At March 31, 1998 property and equipment consisted of machinery
and equipment.
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.
Basis of Presentation - Three months Ended March 31, 1998 - The unaudited
interim financial statements for the three months ended March 31, 1998 included
herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission and, in the opinion of
the Company, reflect all adjustments (consisting only of normal recurring
adjustments) and disclosures which are necessary for a fair presentation. The
results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results for the full year.
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 March 31, l997=
there were 9,469,535 shares issued and outstanding. Each share of common stock
has one vote on all matters acted upon by the shareholders. Of the 9,469,535
shares issued and outstanding at March 31, 1998, 779,535 shares are unrestricted
and 8,695,000 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.
(39)
<PAGE>
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 in 1998, of which $53,000 has been paid as of March 31, 1998. The
remaining royalty payments for the initial licensing term will be paid as
follows:
Year Ending
-----------
1998 $123,000
1999 96,000
2000 96,000
------
$315,000
========
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.
The Company issued 215,000 shares of stock to consultants and
employees. These shares are recorded at $215.
The Company issued 120,000 shares of stock to a related party 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
$64,000 as of March 31, 1997.
The net operating loss of $40,423 will expire in 2012.
Deferred tax asset:
Net operating loss carryforwards $64,000
Less valuation allowance (64,000)
------
Net deferred taxes $ -
======
7. Capital Lease
In March 1998, the Company acquired machinery and equipment under the
provisions of a capital lease. The lease expires December 1999. The machinery
and equipment has a cost of $11,146 and net book value of $11,146 at March 31,
1998.
The future minimum lease payments under capital lease and the net present
value of the future minimum lease payments at March 31, 1998 are as follows:
Total minimum lease payments $ 10,799
Amount representing interest (1,270)
-------
Present value of net minimum lease payments $9,529
======
(40)
<PAGE>
8. Operating Lease
In January, 1998, the Company issued 120,000 shares of stock to a
related party in exchange for the use of a 5,000 square foot facility for a
twelve month period.
9. Subsequent Events
A. Management has a 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. Inventory in the amount of $56,666
relating to this equipment is recorded in the March 31, 1998
financial statements.
B. The Company has raised an additional $334,266 and $750,431 in
equity through the sale of 498,904 and 1,028,439 shares of common
stock subsequent to March 31, 1998 and December 31, 1997,
respectively.
C. The Company entered into a two year agreement with the Pinellas
County Industrial Council for the lease of machinery and
equipment with an original cost of $1,700,000 for $1 per year.
Additionally, the Company has an option to purchase the equipment
at under 10% of the original cost of the equipment at the end of
the lease.
D. The Company received a $50,000 grant from the U. S. Department of
Energy and administered by the Technology Deployment Center for
the development of one of its technologies.
E. On April 29, 1998, Toups Technology Licensing Incorporated (TTL)
acquired Advanced Micro Welding, Inc. (AMW) in a business
combination accounted for as a pooling of interests. AMW, a
company specializing in micro welding and custom metal
fabrication, became a wholly owned subsidiary of TTL through the
exchange of 500,000 shares restricted common stock of TTL's
common stock for all of the outstanding stock of AMW.
(41)
<PAGE>
TOUPS TECHNOLOGY LICENISNG, INCORPORATED (TTL)
(A Development Stage Company)
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following pro forma condensed consolidated balance sheet as of March
31, 1998 and the pro forma condensed consolidated statements of operations for
the three-month period ended March 31, 1998 and the period ended December 31,
1997 and 1996, give effect to the business combination of Advanced Micro Welding
(AMW) and Toups Technology Licensing, Incorporated (TTL). the pro forma
financial statements are based on the historical financial statements of TTL and
AMW accounting for the combination as a pooling of interests and giving effect
to the adjustments described in the notes to the pro forma financial statements.
The pro forma financial statements have been prepared based upon the
historical financial statements of TTL and AMW. These pro forma financial
statements may not be indicative of the results that actually would have
occurred if the combination had been in effect on the dates indicated or which
may be obtained in the future. The pro forma financial statements should be read
in conjunction with the historical financial statements and notes of TTL and
AMW.
(42)
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
Historical
AMW TTL
March 31, March 31, Pro Forma Pro Forma
1998 1998 Adjustments Consolidated
<S> <C> <C> <C> <C>
ASSETS
Cash $47,010 $192,577 $ - $239,587
Inventory, at cost - 56,666 - 56,666
Accounts receivable,
net of allowance for
doubtfull amounts
of $5,000 52,014 - - 52,014
Prepaid expenses - 56,457 - 56,457
Property and equipment,
net of accumulated
depreciation of $47,652 202,810 36,535 - 239,345
------- ------ -------- --------
Total assets $301,834 $342,235 $ - $644,069
======== ====== ======= ========
LIABILITIES
Accounts payable and
accrued liabilities $ 35,600 $63,365 $ - $ 98,965
Capital lease obligation 178,944 9,529 - 188,473
------- ------ -------- --------
Total liabilities 212,544 72,894 - 287,438
STOCKHOLDERS' EQUITY
Common Stock 10,000 9,471 (1) (9,500) 9,971
Additional Paid-in capital 37,197 515,389 (2) 40,093 602,179
(1) 9,500 -
Retained earnings (deficit) 40,093 (255,519)(2) (40,093) (255,519)
------- ------ -------- --------
Total stockholders' equity 87,290 269,341 - 356,631
Total liabilities and
stockholders' equity $301,834 $342,235 $ - $644,069
======== ======== ======= ========
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
(43)
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three-month period ended March 31, 1998
Historical Pro Forma Pro Forma
(3) AMW (3) TTL Adjustments Consolidated
<S> <C> <C> <C> <C>
Revenue $ 109,154 $ - $ - $ 109,154
Cost of goods sold 72,844 - - 72,844
--------- -------- -------- ---------
Gross profit 36,310 - - 36,310
General admini-
strative expenses 29,064 218,538 - 245,602
Other income - 1,442 - 1,442
--------- -------- -------- --------
Income (loss)
before tax 7,248 (215,096) - (207,850)
Income tax
provision - - (4) - -
--------- -------- -------- --------
Net Income $ 7,248 $(215,096) $ - $(207,850)
========= ========= ======== =======
Weighted average
number of shares
outstanding (5) 9,574,088
=========
Pro forma net
income per share (5) $(.0217)
Period Ended December 31, 1997
Historical Pro Forma Pro Forma
(3) AMW (3) TTL Adjustments Consolidated
Revenue $ 344,149 $ - $ - $ 344,149
Cost of goods sold 202,689 - - 202,689
--------- -------- -------- ---------
Gross profit 141,460 - - 141,460
General admini-
strative expenses 85,875 40,966 - 126,641
Other income - 543 - 543
--------- -------- -------- --------
Income (loss)
before tax 55,785 (40,423) - 15,362
Income tax
provision - - (4) (2,920) (2,920)
--------- -------- -------- --------
Net Income $55,786 $(40,423) $ (2,920) $12,442
========= ========= ======== =======
Weighted average
number of shares
outstanding (5) 8,858,057
=========
Pro forma net
income per share (5) $.0014
(44)
<PAGE>
Periods Ended December 31, 1996
Historical Pro Forma Pro Forma
(3) AMW (3) TTL Adjustments Consolidated
Revenue $ 373,675 $ - $ - $ 373,675
Cost of goods sold 193,421 - - 193,421
--------- -------- -------- --------
Gross profit 180,421 - - 180,421
General and
administrative
expense 131,176 - - 131,176
--------- -------- -------- --------
Income before taxes 49,078 - - 49,078
Income tax provision - - (4) (9,325) (9,325)
--------- -------- -------- --------
Net Income $49,078 - (9,325) $39,753
======== ======== ======== ========
Weighted average
number of shares
outstanding (5) 8,858,057
=========
Pro forma net
income per share (5) $ .0045
</TABLE>
See Notes to Pro Forma Condensed Consolidated Financial Statements.
(45)
<PAGE>
TOUPS TECHNOLOGY LICENISNG, INCORPORATED
(A Development Stage Company)
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 1997
1. To reflect adjustments to common and additional paid-in capital accounts to
conform to pooling of interest accounting principles.
2. To reflect reclassification of previously taxed earnings of the
S-Corporation (AMW) not withdrawn by shareholders prior to business
combination as contribution of capital.
3. The condensed consolidated statements of operations for the periods ended
December 31, 1997 include the period from July 28, 1997 (date of inception)
through December 31, 1997 for TTL and the 12 months ended December 31, 1997
and 1996 for AMW.
4. AMW has elected to be taxed as an S-corporation. Accordingly, the
historical financial statements of AMW do not include a provision for
income taxes. TTL, however, will be taxed as a C-corporation. Therefore,
the following pro forma adjustments have been recorded to reflect a pro
forma income tax provision on the pro forma income statements as follows
Three Months
Ended
March 31, December December
1998 1997 1996
Income (loss) before taxes $(207,850) $15,362 $49,078
Federal and state income tax rate - 19% 19%
--------- ------ -------
Provision for income tax $ - $ - $9,325
========= ====== =======
5. Pro forma earnings per share have been computed by dividing pro forma net
income by the equivalent number of shares of TTL that would have been
outstanding if the 500,000 shares of restricted common stock related to the
business combination with AMW discussed above had been issued during the
historical periods presented.
Three Months
Ended
March 31, December December
1998 1997 1996
Net Income (loss) $(207,850) $12,442 $39,753
Weighted average number
of shares outstanding 9,574,088 8,858,057 8,858,057
--------- --------- -------
Net income (loss) per share $(.0217) $.0014 $.0045
========= ====== =======
(46)
<PAGE>
<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 operations,
stockholders' equity and cash flows for the years ended December 31, 1997 and
1996. 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 in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit 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 years ended December 31, 1997 and 1996, in conformity with generally
accepted accounting principals.
May 26, 1998
Clearwater, Florida
Harper, Van Scoik & Company, L. L. P.
A WORLDWlDE ORGANIZATION OF ACCOUNTlNG FlRMS AND BUSlNESS ADVlSORS
(47)
<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 accounts
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
(48)
<PAGE>
ADVANCED MICRO WELDING, INC.
<TABLE>
Statement of Operations (audited)
<CAPTION>
STATEMENT OF OPERATIONS
For the years ended December 31, 1997 and 1996
<S> <C> <C>
1997 1996
Revenue $344,149 $373,675
Cost of goods sold 202,689 193,421
------- -------
Gross profit 141,460 180,254
General and administrative expenses 85,675 131,176
------ -------
Net Income $55,785 $49,078
======= =======
Weighted average number
of shares outstanding 10,000 10,000
Net Income per share $ 5.5785 $ 4.9078
======= =======
</TABLE>
See Notes to Financial Statements
(49)
<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, 1995 10,000 $10,000 $37,197 $733 $47,930
Net income for the
year ended
December 31, 1996 - - - 49,078 49,078
Distribution to
shareholders - - - (23,629) (23,629)
------ ------ ------- ------- -------
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
(50)
<PAGE>
ADVANCED MICRO WELDING, INC.
<TABLE>
Statement of Cash Flows (audited)
<CAPTION>
STATEMENT OF CASH FLOWS
For the years ended December 31, 1997 and 1996
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net income $55,785 $49,078
Add (deduct) items not affecting cash:
Loss on disposal of assets - 3,006
Depreciation expense 10,709 14,613
Bad debts 5,000 55,793
Cash provided (used) due to changes
in assets and liabilities:
Accounts receivable (64,537) (49,714)
Other assets - 149
Deposits (5,000) -
Accounts payable 37,393 (7,436)
Accrued expenses 74 61
------- -------
Net cash provided by
operating activities 39,424 65,550
------- -------
Cash flows from investing activities:
purchase of property and equipment (10,159) (15,794)
------- -------
Net cash used by investing activities (10,159) (15,794)
Cash flows from
financing activities:
Distribution to owners (41,527) (23,629)
Principal payments on capital lease obligations (4,197) -
------- -------
Net cash used by financing activities (45,724) (23,629)
Net increase (decrease) in cash (16,469) 26,127
Cash, beginning of period 30,674 4,547
------- -------
Cash, end of period $14,215 $30,674
======== ========
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
(51)
<PAGE>
ADVANCED MICRO WELDING, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
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 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.
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 payments 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.
(52)
<PAGE>
Board of Directors and Stockholders
Advanced Micro Welding, Inc.
Largo, Florida
We have compiled the accompanying balance sheet of Advanced Micro Welding,
Inc. as of March 31, 1998, and the related statements of operations,
stockholders' equity, and cash flows for the three-month period then ended, in
accordance with Statement on Standards for Accounting and Review Services issued
by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
April 29, 1998
Clearwater, Florida
Harper, Van Scoik & Company, L. L. P.
A WORLDWlDE ORGANIZATION OF ACCOUNTlNG FlRMS AND BUSlNESS ADVlSORS
(53)
ADVANCED MICRO WELDING, INC.
<TABLE>
Balance Sheet
<CAPTION>
BALANCE SHEETS
March 31, 1998
SEE ACCOUNTANTS' COMPILATION REPORT
March 31
1998
----
<S> <C>
Assets:
Cash $47,010
Accounts receivable, net of
allowance for doubtful accounts
of $5,000 52,014
Property and equipment, net of
accumulated depreciation of $47,170 202,810
-----
Total assets $301,834
========
Liabilities:
Accounts payable $32,634
Accrued expenses 2,966
Capital lease obligations 178,944
------
Total liabilities 214,544
-------
Stockholders' equity:
Common stock 10,000
Additional paid-in capital 37,197
Retained Earnings 40,093
--------
Total stockholders' equity 87,290
------
Total liabilities and
stockholders' equity $301,834
=======
</TABLE>
See Notes to Financial Statements
(54)
<PAGE>
ADVANCED MICRO WELDING, INC.
<TABLE>
Statement of Operations
<CAPTION>
STATEMENT OF OPERATIONS
For the three-month period ended March 31, 1998
SEE ACCOUNTANTS' COMPILATION REPORT
<S> <C>
Revenue $109,154
Cost of goods sold 72,844
-------
Gross profit 36,310
General and administrative expenses 29,064
------
Net Income $7,246
=======
Weighted average number
of shares outstanding 10,000
Net Income per share $ .72
=======
</TABLE>
See Notes to Financial Statements
(55)
<PAGE>
ADVANCED MICRO WELDING, INC.
<TABLE>
Statement of Stockholders' Equity
<CAPTION>
STATEMENT OF STOCKHOLDERS' EQUITY
For the three-month period ended March 31, 1998
SEE ACCOUNTANTS' COMPILATION REPORT
Common Additional
Number Stock Paid-in Retained
of Shares (At Par) Capital Earnings Total
--------- -------- ------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1997 10,000 $10,000 $37,197 $40,440 $87,637
Net Income for the
period January 1, 1998
through March 31, 1998 - - - 7,246 7,246
Distributions to
Shareholders - - - (7,593) (7,593)
------- ----- ----- -------- --------
Balance
March 31, 1998 10,000 $10,000 $37.197 $40,093 $87,290
====== ======= ======= ======= =======
</TABLE>
See Notes to Financial Statements
(56)
<PAGE>
ADVANCED MICRO WELDING, INC.
<TABLE>
Statement of Cash Flows
<CAPTION>
STATEMENT OF CASH FLOWS
For the three-month period ended March 31, 1998
SEE ACCOUNTANTS' COMPILATION REPORT
<S> <C>
Cash flows from operating activities:
Net income $7,246
Add (deduct) items not affecting cash:
Depreciation expense 7,550
Cash provided (used) due to changes
in assets and liabilities:
Accounts receivable 30,926
Deposits 5,000
Accounts payable (4,759)
Accrued expenses 2,777
-------
Net cash provided by
operating activities 48,740
Cash flows from
financing activities:
Distribution to owners (7,593)
Principal payments on capital lease obligations (8,352)
-------
Net cash used by financing activities (15,945)
Net increase in cash 32,795
Cash, beginning of period 14,215
------
Cash, end of period $47,010
========
Supplemental Cash Flows Disclosures:
Interest paid in cash $2,506
========
Noncash items:
Assets acquired under capital lease $113,520
========
</TABLE>
See Notes to Financial Statements
(57)
<PAGE>
ADVANCED MICRO WELDING, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
SEE ACCOUNTANTS' COMPILATION REPORT
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 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.
2. Property and equipment
The estimated useful lives and classification of property and equipment as
of March 31, 1998, are summarized as follows:
Life In Years Cost
Machinery and equipment 5 - 7 $249,980
Less:accumulated depreciation 47,170
Net property and equipment $ 202,810
3. Capital Leases
The Company acquired equipment totaling $191,493 under three capital lease
agreements. Amortization of these capital leases included in depreciation
expense amounted to $5,550 for the three months ended March 31, 1998.
Accumulated amortization amounted to $7,800 as of March 31, 1998 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 March 31, 1998 are as follows.
Total minimum lease payments $235,292
Amount representing interest (56,348)
Present value of net minimum lease payments $178,944
Future minimum lease payments under capital leases as of March 31, 1998 are
as follows:
1998 $30,649
1999 51,048
2000 51,048
2001 47,037
2002 45,329
After 10,181
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
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.
(58)
<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
(59)
<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 26, 1998
By Leon H. Toups, Chief Executive Officer
S/S LEON H. TOUPS
-----------------
(Signature)*
(60)
