File Number 333-70531 as filed with the Securities and Exchange Commission
on June 23, 1999
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form SB-2/A
REGISTRATION STATEMENT UNDER the Securities Act of 1933
TOUPS TECHNOLOGY LICENSING, INC.
(Name of small business issuer in its charter)
Florida 3990 59-3462501
(State or jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification No.)
organization) Classification
Code Number)
7887 Bryan Dairy Road, Suite 105, Largo, Florida 33777 (813)-548-0918
(Address and telephone number of principal executive offices)
Mark Clancy, Corporate Secretary
7887 Bryan Dairy Road, Suite 105, Largo, Florida 33777
(813)-548-0918 (Name, address and telephone number
of agent for service)
Approximate date of proposed sale to the public:
As soon as practicable after the registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ( )
If this Form is a post-effective amendment filed pursuant to Rule 462 under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement of
the same offering. ( )
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box ( )
CALCULATION OF REGISTRATION FEE
Title of each Dollar Proposed Proposed
class of Amount maximum maximum Amount of
securities to be offering aggregate registration
to be registered price offering fee(2)
registered(1) per share price
- ------------- --------- --------- --------- ------
Common $11,624,291 $1.96 $11,624,291 $3,231
$.001 par value
(1) A portion of the Shares registered pursuant to this Registration Statement
were issued between October and December, 1998 pursuant to a Private
Offering made in reliance on Section 4(2) or 3(b) of the Securities Act of
1933, as amended (the "Act") according to the Rules contained in Regulation
D, Rule 506 of that Act.
(2) Calculated pursuant to Rule 457(c). The closing "bid" price of the shares
of common stock being registered hereby as quoted on the over-the-counter
Bulletin Board market was $1.96 on January 11, 1999, the date of the
initial filing of this Form SB-2.
This registration statement relates to 5,682,520 shares which are being
offered for sale by Selling Security Holders.
<PAGE>
CROSS-REFERENCE
REGISTRATION STATEMENT LOCATION OR CAPTION
ITEM NUMBER AND HEADING IN PROSPECTUS
1. Front of Registration Statement and Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus
3. Summary Information and Risk Factors
4. Use of Proceeds
5. Determination of Offering Price
6. Selling Security Holders
7. Plan of Distribution
8. Legal Proceedings
9. Directors, Executive Officers, Promoters and Control Persons
10. Security Ownership of Certain Beneficial Owners and Management
11. Description of Securities
12. Interest of Named Experts and Counsel
13. Description of Business
14. Management's Discussion and Analysis or Plan of Operation
15. Description of Property
16. Certain Relationships and Related Transactions
17. Market for Common Equity and Related Stockholder Matters
18. Executive Compensation
19. Financial Statements Part F/S
20 Changes in and disagreements of Accountants on accounting or financial
disclosure
Part II - Information not required in Prospectus
1 Indemnification of Directors & Officers
2 Other Expenses of Issuance and Distribution
3 Recent sales of unregistered securities
4 Exhibits
5 Undertakings
6 Signatures
PROSPECTUS
TOUPS TECHNOLOGY LICENSING, INC.
5,682,520 SHARES OF COMMON STOCK
OFFERED BY CERTAIN SELLING SECURITY HOLDERS
----------------------------------
This Prospectus relates to the sale of 5,682,520 shares of common stock,
$.001 par value (the "Common Stock"), of Toups Technology Licensing, Inc., (the
"Company"), all of which are offered by the holders thereof identified as
"Selling Security Holders" in this Prospectus. See "SELLING SECURITY HOLDERS."
The Company will not receive any proceeds from the sale of shares of Common
Stock by the Selling Security Holders. Sales of shares of Common Stock may be
made from time to time (in transactions which may include block transactions) by
or for the account of the Selling Security Holders in the over-the-counter
market or in negotiated transactions, or otherwise, at market prices prevailing
at the time of sale or at negotiated prices. The Company has informed the
Selling Security Holders that the anti-manipulative rules under the Securities
Exchange Act of 1934, Regulation M, may apply to their sales and has furnished
each of the Selling Stockholders with a copy of these Rules. The Company has
also informed the Selling Security Holders of the need for delivery of copies of
this Prospectus. See "SELLING SECURITY HOLDERS" and "PLAN OF DISTRIBUTION."
------------------------
THE SECURITIES OFFERED INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS"
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
ALL OF THE 5,682,520 COMMON SHARES REGISTERED HEREIN ARE BEING OFFERED BY
SELLING SECURITY HOLDERS. THE COMPANY WILL NOT RECEIVE ANY PROCEEDS FROM THE
SALE OF SHARES BY THE SELLING SECURITY HOLDERS. SEE PAGE 4 RELATING TO THE RISKS
INVOLVED IN THIS OFFERING.
PROCEEDS TO
PROPOSED UNDERWRITING PROCEEDS TO THE SELLING
CLASS OF SECURITY OFFERING PRICE DISCOUNTS THE COMPANY SECURITY HOLDERS
- ------------------------------------------------------------- ----------------
$.001 par value $11,624,291(1) $0(2) $0 $11,624,291
Common Stock
(1) Represents the anticipated sale price by the Selling Security Holders at
$1.96 per share which was the closing bid price on January 11, 1999. There
can be no assurances, however, that the Selling Security Holders will be
able to sell their shares of Common Stock at this price, or that a liquid
market will exist for the Company's Common Stock.
(2) Does not give effect to ordinary brokerage commissions or to the costs of
sale that will be borne solely by the Selling Security Holders.
INSIDE FRONT COVER
Available Information
The Company is subject to the reporting requirements of the Securities and
Exchange Act of 1934, as amended, and provides quarterly and annual reports to
the Securities and Exchange Commission. The Company's annual report on Form
10-KSB, when filed, shall contain audited financial statements. The reports and
other information filed by the Company may be inspected and copied at the public
reference facilities of the Securities and Exchange Commission (SEC) in
Washington, D. C., and at some of its Regional Offices, and copies of such
material can be obtained from the Public Reference Section of the SEC,
Washington, DC 20549 at prescribed rates. The Company is an electronic filer and
the SEC maintains a Web site that contains reports, proxy and information
statements and other information regarding issuers that file electronically. The
SEC Web site address is http://www.sec.gov. The Company will provide a report to
stockholders, at least annually, which report will include audited financial
statements of the Company.
Incorporation of Documents by Reference.
All materials incorporated by reference throughout this Prospectus are
available (not including exhibits to the information that is incorporated by
reference unless the exhibits are themselves specifically incorporated by
reference) without charge from the Company to each person who receives a
Prospectus, upon written or oral request of such person. Any request for such
material should be directed to the Corporate Secretary, if in writing, to 7887
Bryan Dairy Road, Suite 105, Largo, Florida 33777, or, if by phone, (813)
548-0918.
The Registrant is subject to the informational and reporting requirements
of Sections 13(a), 13(C) and 14 and 15(d) of the Securities and Exchange Act of
1934, as amended (the "Exchange Act") and in accordance therewith, files
reports, proxy statements and other information with the Securities and Exchange
Commission ("SEC"). The following documents, which are on file with the SEC are
incorporated in this Registration Statement by reference:
(a) The Registrant's Securities and Exchange Commission Forms 8-K, 14A,
10-SB, 10-QSBs and SB-2 which contain, either directly or by
incorporation by reference, audited financial statements of the
Registrant's latest fiscal year for which such statements have been
filed.
(b) The description of the Common Stock which are contained in registration
statements filed under the Exchange Act, including any amendment or
report filed for the purpose of updating such description.
<PAGE>
Prospectus SUMMARY
The following Summary is qualified in its entirety by other more detailed
information throughout this Registration Statement. Statements in this document
which are not purely historical facts, including statements regarding
anticipations, beliefs, expectations, hopes, intentions or strategies for the
future, may be forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended and Section 21.E of the Securities
Exchange Act of 1934, as amended. All forward-looking statements within this
document are based upon information available to the Company on the date of this
Registration Statement. Any forward-looking statements involve risks and
uncertainties that could cause actual events or results to differ materially
from the events or results described in the forward-looking statements,
including the timing and nature of independent test results; the nature of
changes in laws and regulations that govern various aspects of the Company's
business; the market acceptance of the Company's licensed technologies;
retention and productivity of key employees; the availability of acquisition
candidates and proprietary technologies at prices the Company believes to be
fair market; the direction and success of competitors; management retention; and
unanticipated market changes. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise. Readers are cautioned not to place
undue reliance on these forward-looking statements.
The Company
The following highlights the Company's business. This section is followed
by a more detailed discussion relating to each of our nine divisions which is
immediately followed by an overview of the marketplace for the Company's
products and services. Beginning on page F-1 is the Company's Independent
Auditor's Report and audited financial statements for the year ending December
31, 1998.
Toups Technology Licensing, Inc. was incorporated in the state of Florida
on July 28, 1997. The Company was formed to improve, enhance or remediate the
environment through technologies and services. Led by its Environmental
Solutions Division, the Company works to achieve its business purpose through
three major divisions:
Toups Technology sells Environmental Solutions equipment and techniques
principally through its Village Concept of converting municipal solid waste into
useable energy.
The Company's Manufactured Products division is the manufacturing source
for the Balanced Oil Recovery System, Tunnel Bat Culvert Vehicles and a host of
high tech radio frequency power supplies.
The Company's E-Commerce division features TTLOnline.com, an internet
retail marketing program and InterSource HealthCare, an internet marketer of
medical equipment, supplies and pharmaceuticals.
Results of 1998 (first full year) Operations - The following discussion
should be read in conjunction with the Company's audited financial statements
for the years ended December 31, 1998 and 1997 which begin on page F-1. For the
period ending December 31, 1998, the Company posted revenues of $3,132,001,
compared with $1,196,169 for the fiscal year ending December 31, 1997. Gross
profit for 1998 was $1,147,071 or 37% of revenues, which was up from $373,799 or
31% of revenues for 1997. Net income for the period ending December 31, 1998
reflects a loss of $(5,039,766) or a loss of ($0.22) per share based on the
22,217,299 shares outstanding at December 31, 1998 or a loss of $(0.41) per
share on a fully-weighted average compared with net income of $49,101 or $0.005
per share for the year ending December 31, 1997.
The Company attributes 71% or $3,580,123 of its losses during 1998 to a
one-time charge against earnings relating to the issuance of common stock
attract and retain key pesonnel, to acquire various license agreements, to make
acquisitons and for other develomental needs. The Company attributes the
remaining 29% or $1,459,463 of its losses to earnings at the full-year ending
December 31, 1998 to first year operational losses incurred in the development
and market introduction of its various technologies. (See "Independent Auditor's
Report and accompanying consolidated balance sheets of Toups Technology
Licensing, Incorporated and subsidiaries as of December 31, 1998 and 1997, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended" which begin on Page F-1 of this Form
10-KSB).
For the year ended December 31, 1998, the Company had total assets of
$5,312,840 as compared with $562,054 for the period ending December 31, 1997 and
stockholders equity grew from $256,484 at December 31, 1997 to $3,360,798 at the
year ending December 31, 1998.
The Company envisions growth during 1999 will be approximately 80% internal
and 20% from the licensing/acquisitions of new technologies. The Company
estimates it will derive revenues during 1999 from all current divisions. The
Company intends to acquire technologies through licensing, joint ventures,
acquisitions, manufacturing rep agreements and other similar means. The Company
intends to commercialize its technologies through joint ventures; strategic
alliances; sub-licenses; providing services; and through the direct manufacture
and sale of products.
Business Method - TTL enters worldwide exclusive license agreements for
developed technologies, which are at or near the market-entry stage. The Company
also makes acquisitions of existing companies, which add to or compliment TTL's
technology mix. TTL commercializes the technologies by folding each into a
seasoned, entrepreneurial-minded corporate infrastructure housed in a
state-of-the-art manufacturing facility. The combination results in a turnkey
process wherein emerging technologies can mature into marketable products or
services and the Company's shareholders can participate in a multi-technology
approach at the development/market introduction stage.
Management - The Company's management team is led by President, Chief
Executive Officer and Chairman of the Board, Leon H. Toups. Mr. Toups' past
associations include ten years serving as President and Chief Executive Officer
of Chromalloy American. Prior to its sale and during the period of Mr. Toups'
association, Chromalloy American was a 600 company international conglomerate
serving six major market segments with revenues of approximately $2 billion.
Co-founders of Toups Technology include Chief Executive Officer and Chairman Mr.
Leon Toups, Executive Vice President and Director Mr. Mark Clancy and Chief
Financial Officer and Director Mr. Michael Toups. (See "Directors, Executive
Officers, Promoters and Control Persons; Compliance with Section 16(a) of the
Exchange Act").
Operating structure - In addition to the above named Officers, at the staff
level to support all technologies, the Company has a Safety Officer, Engineering
Coordinator, Sales Manager, Compliance/Quality Control Director and Purchasing
Coordinator. At the line level, the Company typically engages an
industry-experienced professional as Division Manager. This structure preserves
the single-minded, entrepreneurial spirit of each project while providing
managerial support in matters relating to operations, sales and marketing,
finance and business development.
Operating facilities - The Company's headquarters and manufacturing
facility occupies approximately 50,000 (fifty thousand) square-feet within the
96-acre Pinellas Science Technology and Research Center ("STAR Center") located
at 7887 Bryan Diary Road, Largo, Florida. The Company also has leased a 10,000
(ten thousand) square foot stand-alone building within which is housed TTL's
AquaFuel(a) Division. The Company also maintains its Balanced Oil Recovery
System (BORS) Lift Engineering office in Claremore, Oklahoma. (See "Description
of Property").
Employees - The Company provides medical insurance, vacations, stock
incentives and other, similar employee benefit programs. None of the Company's
employees are represented by collective bargaining agreements. At December 31,
1998, the Company had 88 full-time and 0 part-time employees engaged in the
following areas:
Executive 5
Engineering/technical 11
Manufacturing 59
Sales 9
Administrative 4
Total 88
<PAGE>
1999 capital financing programs. During the first quarter, 1999, the
Company completed agreements for the sale of $1,500,000 of its Subordinated
Convertible Notes (the " Notes") and the sale of $750,000 of its Series A 7%
Convertible Preferred Stock (the "Preferred"). Each transaction was done with a
domestic US fund. Both placements were conducted to provide for capital expenses
estimated to occur throughout 1999. (See "Market for Common Equity and Related
Shareholder Matters").
Divisional Summary:
Environmental Solutions Division - represents the focus of the Company's
business purpose and encompasses proprietary waste-to-energy equipment designed
to treat all hydrocarbon-based waste in a closed, non-polluting environment. The
equipment includes:
i. Pyrolytic Carbon Extraction(a),
ii. Pyrolytic Tire Reclamation and the
iii.Hot Plasma Destructive Distillation(a)
In addition, the Environmental Solutions division features three,
clean-burning alternative fuels including:
i. Phoenix 777(a);
ii. AquaFuel(a), and;
iii.Magnagas(a).
Manufactured Products Division - supports the Company's business purpose
through the fabrication and assembly of the environmental equipment cited above
as well as acting as the manufacturer for the Company's Balanced Oil Recovery
System Lift, Tunnel Bat Culvert Reclamation Vehicles and a complete line of
high-tech radio frequency powered generators. The Manufactured Products Division
earns revenues through the sale of proprietary manufactured products for the
Company and as an outsource provider for a host of third-party manufactured
parts and products.
E-Commerce Division - supports the Company's business purpose through
conducting secured transactions through the internet for both the Company's line
of products as well as on a fee basis for third party merchants. At present, the
E-Commerce Division featuring InterSource HealthCare, markets medical equipment
as well as a host of medical products and pharmaceuticals. TTLOnline.com came
on-line during June, 1999 to serve as the marketplace for our E-Commerce
Division allowing the Company to now stock our shelves with a host of products
which will be offered for sale on a shared-revenue basis. The E-Commerce
Division earns revenues through the sale of both proprietary and third-party
products on the internet.
1998 into 1999. During 1998, the Company grew from 5 to 88 employees and
from occupying 5,000 square-feet in a single location to now operating a 50,000
square foot manufacturing, precision micro-welding facility, a 10,000 square
foot off site location, a national engineering office in Claremore, Oklahoma and
a national sales office in Garden City, Kansas.
Also during 1998, the Company acquired the rights to four technologies,
made three acquisitions and increased assets from approximately $562,054 to
$5,312,840. The Company continues to operate with minimal debt and normal trade
payables and has seen meaningful revenue growth from the last quarter, 1998 to
the first quarter, 1999. With the maturing of the Company's nine divisions
coupled with the recently completed private securities sale of $2,250,000, the
Company is confident it can expand operations for the remainder of 1999.
Research and development. As a facilitator of technologies, a portion of
the Company's cash will be used to finance the development of its products,
particularly its Tunnel Bat technologies. The Company also estimates it may
incur additional research and development costs in relation to AquaFuel. As of
this writing, the Company estimates such 1999 research and development costs
would be approximately: Tunnel Bat vehicles - $72,000 and; potentially, AquaFuel
- - $300,000.
RISK FACTORS
The securities offered hereby involve a high degree of risk and each
prospective investor should consider certain risks and speculative features
inherent in and affecting the business of the Company before purchasing any of
the securities offered hereby. In considering the following risk and speculative
factors, a prospective purchaser should realize that there is a substantial risk
of losing his entire investment. Among these speculative factors which
management considers pose the greatest risk to prospective investors include the
following.
Risks relating to the Offering
Limited, early-stage public trading market for the Company's Common Shares. The
Company's Shares began trading through the NASD OTC Electronic Bulletin Board
under the symbol TOUP during June, 1998. Accordingly, there can be no assurance
that a trading market will continue. Each purchaser should view their investment
in these securities for long-range investment purposes only and not with a view
to resell or otherwise dispose of their shares in the near future. If and when a
registration statement becomes effective relating to the Shares sold herein,
purchasers who desire to liquidate their shares may have difficulty selling them
considering the early stage nature of the Company's public market, should any
such market develop. Accordingly, shares should only be purchased as a long-term
investment.
Shares Eligible for Future Sale May Adversely Affect the Market. Should the
Company be successful in the registration of the Shares described herein, such
an event may have a depressive effect on the then trading price of the Company's
common shares. Further, the Company's business purpose is the licensing of
rights relating to patents or otherwise protected devices and processes in part
with the Company's Common Shares that, upon issuance, would be unregistered
securities and, in the future, may be sold upon compliance with Rule 144,
adopted under the Act of 1933. Further, in 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. In the future, the Company intends
to enter into licensing and other agreement(s) which may provide for an exchange
of the Company's Common Shares. Accordingly, there is the possibility that sales
of Common Shares issued in such a manner may, in the future, have a depressive
effect on the price of the Company's Common Stock in any market which may
develop.
Risks relating to Toups Technology
Recent Organization. The Company was organized during July 1997 and should be
considered as still in the development and promotional stage. The Company's
initial success is predicated on the success of AquaFuel, BORS Lift, AMW Metal
Fabricators, Tunnel Bat, Electromagnetic Tire Recycling, Brounley & Associates
and InterSource. The Company has not relied upon anything other than the opinion
of management in developing the business plan for of AquaFuel, BORS Lift, AMW
Metal Fabricators, Tunnel Bat, Electromagnetic Tire Recycling, Brounley &
Associates and InterSource. The Company is, therefore, subject to all the risks
inherent in any start-up venture, many of which are beyond the control of
management.
Concentration of Stock Ownership. Upon completion of this Offering, the present
directors and officers will beneficially own approximately 35.0% of the
outstanding Common Stock. As a result, current management will be substantially
able to exercise significant influence over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions.
Reliance on Forward Looking Statements. Statements in this document which are
not purely historical facts, including statements regarding anticipations,
beliefs, expectations, hopes, intentions or strategies for the future, may be
forward looking statements within the meaning of section 27A of the Securities
Act of 1933, as amended and Section 21.E of the Securities Exchange Act of 1934,
as amended. All forward looking statements within this document are based upon
information available to the Company on the date of this release. Any forward
looking statements involve risks and uncertainties that could cause actual
events or results to differ materially from the events or results described in
the forward looking statements, including the timing and nature of independent
test results; the nature of changes in laws and regulations that govern various
aspects of the Company's business; the market acceptance of the Company's
licensed technologies; retention and productivity of key employees; the
availability of acquisition candidates and proprietary technologies at prices
the Company believes to be fair market; the direction and success of
competitors; management retention; and unanticipated market changes. The Company
undertakes no obligation to publicly update or revise any forward looking
statements, whether as a result of new information, future events or otherwise.
Readers are cautioned not to place undue reliance on these forward looking
statements.
Risks relating to the Company's proposed operations
Reliance on Future Licensing Agreements and Acquisitions. The Company's
long-term growth strategy envisions licensing or acquiring through acquisition,
a continual flow of products, processes or devices which are derived from
patents or other similarly protected intellectual properties. Accordingly, once
a particular aquisition is identified or patent-use is determined, the Company
must negotiate an acquisition or License Agreement on terms and under conditions
which are favorable to profitable operations. In the course of such activities,
a number of factors can contribute to a lack of success, including a lack of
availability of patents, inability of management to successfully negotiate a
favorable license or, if negotiated, an inability to profitably deliver the
intended device or process to the market. Further, until such time as the
Company obtains sufficient assets to offset any potential loss, the failure of
any one of the Company's technologies could result in an inability to continue
as a going concern. Except in the case of the acquisition of an operating
entity, Toups Technology business strategy is equivalent to a continual cycle of
operating start-up or development stage entities with all the risks inherent to
any start-up or development stage entity. Accordingly, there can be no assurance
that the Company can initially accomplish its business objectives or, if
accomplished, that the Company can continue profitable operations.
Competition and No formal feasibility or marketing studies. Numerous firms, also
located in South Florida as well as throughout the United States, compete or may
compete vigorously with the Company for the licensing of patented or other
intellectually protected processes and devices and for acquisitions. The Company
will be at a competitive disadvantage in the pursuit of possible target
acquisitions or licensing agreements because of the inexperience of the Company.
No independent feasibility or marketing studies have been performed to determine
the demand for the Company's services. Accordingly, there can be no assurance
that any market exists or will develop for the Company's services or, if any
market does develop, there can be no assurance that the Company can successfully
complete its business purpose.
Vulnerability to fluctuation in economy. Demand for technologies to be
commercialized by the Company is dependent upon, among other things, general
economic conditions which are historically cyclical in nature.
Prolonged recessionary periods may be damaging to the Company.
No assurance of commercial success. Even if the Company is successful in
conducting its affairs in the manner described herein as it relates to AquaFuel,
BORS Lift, AMW Metal Fabricators, Tunnel Bat, Electromagnetic Tire Recycling,
Brounley & Associates and InterSource, market acceptance and the ability to
expand market penetration of these products and related services is driven by
the demand for such products or services. As such, there can be no assurance
that the AquaFuel, BORS Lift, AMW Metal Fabricators, Tunnel Bat, Electromagnetic
Tire Recycling, Brounley & Associates and InterSource product/service line will
either achieve initial market acceptance or, if achieved, will maintain
sufficient market share to conduct profitable operations.
Dependence upon key personnel. The Company's continued success will be heavily
dependent upon the services of key personnel and the Corporate Board of
Directors who founded the Company. These key personnel are expected to remain
with the Company, however the loss of one or more of these individuals could
have an adverse effect on the operations of the Company until a suitable
replacement can be found. As the Company expands, the continued success of the
business will increasingly depend on the Company's ability to retain and add to
the existing management team. At present, the Company does not provide
employment agreements for its Officers. Accordingly, there can be no assurance
given that the Company's current Officers will continue to serve in their
respective roles.
Limited liability of Officers and Directors. The Company's Certificate of
Incorporation and by-laws provide that a Director's liability to the Company for
monetary damages will be limited. In addition, the Company is obligated under
the Certificate of Incorporation and by-laws to indemnify its Directors and
Officers against certain liabilities incurred with their service in such
capacities. The Company will in the future execute indemnification agreements
which will indemnify each Director and Officer against certain liabilities which
they may incur. Each of these measures could reduce the legal remedies available
to the Company and the shareholders against such individuals.
USE OF PROCEEDS
The Company will not realize any proceeds from the sale of shares of
Common Stock by the Selling Security Holders. See "SELLING SECURITY HOLDERS."
DETERMINATION OF OFFERING PRICE
The offering price of the securities described herein was calculated
pursuant to Rule 457(c) of the Act and was not computed based on the assets,
historical operating performance or other conventional means and should not be
construed to indicate any relationship thereto. In establishing the offering
price, the Company relied on the closing "bid" price as reflected in the
over-the-counter (OTC) marketplace. On June 16, 1998, the Company's Common
Shares were cleared for trading through the OTC under the symbol TOUP. Since
that date, the Company's Common Shares have traded at prices ranging from
$1.37-$3. On January 11, 1999, the closing "bid" price of the Company's
securities was $1.96
SELLING SECURITY HOLDERS
The shares of Common Stock of the Company offered by this Prospectus are
being sold for the account of the Selling Security Holders identified in the
table indicated below (the "Selling Security Holders"). The Selling Security
Holders are offering for sale an aggregate of 5,930,761 shares of the Company's
Common Stock.
The following table sets forth the number of Shares being held of record or
beneficially (to the extent known by the Company) by such Selling Security
Holders and provides (by footnote reference) any material relationship between
the Company and such Selling Security Holders, all of which is based upon
information currently available to the Company.
Number of Number of Number of
Shares of Shares of Shares of
Common Common Common
stock Percent Stock Stock Percent
Name Before Before to be sold After After
Offering Offering in Offering Offering Offering
Arabaje, C. Isdaias(10)...... 500,000 2.2% 500,000 0 0%
Aubin, Brian St. (1) ......... 10,000 (11) 10,000 0 0%
Augustine Fund(5) ............ 842,696 3.7% 842,696 0 0%
Augustine Warrants(5) ...... 125,000 (14) 125,000 0 0%
Ayers, Gregory S. Ayers(2) . 15,000 (11) 15,000 0 0%
Bailey, Sandra(1) .......... 1,000 (11) 1,000 0 0%
Bartolacci, Rhonda (1) ..... 50,000 (12) 50,000 0 0%
Bartolacci, Tiffany (1) .... 50,000 (12) 50,000 0 0%
Belhassan, Mehdi (1) ....... 10,000 (11) 10,000 0 0%
Blauvelt, Tom(1) ........... 3,750 (11) 3,750 0 0%
Boyer, Michael(1) .......... 10,000 (11) 10,000 0 0%
Bracciale, Steve(1) ........ 72,500 (13) 72,500 0 0%
Bramscher, Craig (1) ......... 75,000 (13) 75,000 0 0%
Burleson, Linda(1) ........... 2,000 (11) 2,000 0 0%
Butler, Mike(1) .............. 5,000 (11) 5,000 0 0%
Calyanis, Beth (1) ........... 10,000 (11) 10,000 0 0%
Calyanis, Bill (1) ........... 5,000 (11) 5,000 0 0%
Calyanis, Jon (1) ............ 2,500 (11) 2,500 0 0%
Calyanis, Paul (1) ........... 10,000 (11) 10,000 0 0%
Caveny, John F. (1) .......... 15,000 (11) 15,000 0 0%
Cardinal Capital(8) ......... 50,000 (12) 50,000 0 0%
CG Capital(1) ................ 100,000 (13) 100,000 0 0%
Cianciolo, Michael W. (2) .... 30,000 (12) 30,000 0 0%
Collins, Barbara(1) .......... 25,000 (11) 25,000 0 0%
Conrotto, Giuseppe and ....... 30,000 (12) 30,000 0 0%
Loner, Graziella(1)
Crossman, Dan(1) ............. 10,000 (11) 3,000 7,000 .001%
D'Angelo, George(1) .......... 75,000 (13) 75,000 0 0%
DeCara, Dave (4) ............. 200,000 (14) 50,000 150,000 .0067%
Deheart, Ryler(1) ............ 2,500 (11) 2,500 0 0%
Disparti, Joseph L. (1) ...... 10,000 (11) 10,000 0 0%
Dixon, Peter B.(1) ........... 35,000 (12) 35,000 0 0%
Dowdy, Greg & Carol (1) ...... 2,500 (11) 2,500 0 0%
Dowdy, Susan P. (1) .......... 10,000 (11) 10,000 0 0%
Dryer, James(1).............. 10,000 (11) 10,000 0 0%
Dudley, Thomas(4) ............ 20,000 (11) 20,000 0 0%
Eschenroeder, Dana(1) ........ 25,000 (11) 25,000 0 0%
Eschenroeder, Edward(1) ...... 25,000 (11) 25,000 0 0%
Eschenroeder, Roger(1) ....... 25,000 (11) 25,000 0 0%
Eschenroeder, Scott(1) ....... 25,000 (11) 25,000 0 0%
Famiglietti, Klaus(1)........ 5,517 (11) 5,517 0 0%
Farina, Gerri (1) ............ 4,000 (11) 4,000 0 0%
Feeney, Susan L. (1) ......... 10,000 (11) 10,000 0 0%
Ficocelli, Bob(1) ............ 4,000 (11) 4,000 0 0%
First New York(9) ............ 50,000 (12) 50,000 0 0%
Flex, A. Scott(1) ............ 50,000 (12) 50,000 0 0%
Fritze George T. & Carol J(1). 15,000 (11) 15,000 0 0%
Frueh, Richard A. (1) ........ 15,000 (11) 15,000 0 0%
Garvey, Daniel(1) ............ 60,000 (13) 60,000 0 0%
GFC Communications(3) ........ 175,000 (14) 175,000 0 0%
GFC Communications(3)......... 112,000 (14) 112,000 0 0%
Gloyer, M. Katherine(1) ...... 1,250 (11) 1,250 0 0%
Goldstein, Michelle(4) ....... 22,260 (11) 22,260 0 0%
Gouge, Shirley A.(3) ......... 10,000 (11) 10,000 0 0%
Green, David E.(1) ........... 10,000 (11) 10,000 0 0%
Guidry, Sybil(1) ............. 500 (11) 500 0 0%
Hackman, Darrel(3)............. 3,000 (11) 3,000 0 0%
Harris, Calvin(1) ............ 25,000 (11) 25,000 0 0%
Hedges, Burke(1) ............. 29,500 (12) 29,500 0 0%
Hillel, Doron(1) ............. 100,000 (13) 100,000 0 0%
Hornstrom, Carole (1) ........ 10,000 (11) 10,000 0 0%
Hornstrom, Joseph (1) ........ 4,000 (11) 4,000 0 0%
Hornstrom, Meghan (1) ........ 20,000 (11) 20,000 0 0%
Hornstrom, Nicole (1) ........ 2,000 (11) 2,000 0 0%
Hornstrom, Richard N. (1) .... 20,000 (11) 20,000 0 0%
Jenkins, Tom(1) .............. 20,000 (11) 20,000 0 0%
Johnson, Richard(1) .......... 1,200 (11) 1,200 0 0%
Kempka, Daniel (1) ........... 100,000 (13) 100,000 0 0%
Kilgore, Julie(1) ............ 10,000 (11) 10,000 0 0%
Klimek, Maryann (1) .......... 10,000 (11) 10,000 0 0%
Koehler, Jerry and Noreen(1) . 25,000 (11) 25,000 0 0%
Krauthamer, Gary(1) .......... 50,000 (12) 50,000 0 0%
Kudelko, Robert (2) .......... 15,000 (11) 15,000 0 0%
Lorenzen, Sandra(1) .......... 750 (11) 750 0 0%
Luttrell, Scott D.(1) ........ 100,000 (13) 100,000 0 0%
Maloney, Doris, F.(1)........ 10,000 (1) 10,000 0 0%
Matherley, Ann(1) ............ 50,000 (12) 50,000 0 0%
Mathison, Steve & Carrie(1)... 63,000 (12) 63,000 0 0%
McBee, Michael (3) ........... 5,000 (11) 5,000 0 0%
McFadden, Robert (1) ......... 8,000 (11) 8,000 0 0%
Morgan, William(1) ........... 450,000 2.0% 300,000 150,000 0%
Murphy, Martha(1) ............ 1,000 (11) 1,000 0 0%
Nelsen, Keith J. (1) ......... 26,500 (11) 26,500 0 0%
Novak, Michael R. (1) ........ 10,000 (11) 10,000 0 0%
O'Donnell, Michael, J.(1).... 125,000 (11) 125,000 0 0%
O'Malley, James Joseph (1) ... 20,000 (11) 20,000 0 0%
O'Malley, James(1) ........... 5,000 (11) 5,000 0 0%
O'Malley, Matthew Joseph (1) 20,000 (11) 20,000 0 0%
O'Malley, Robert E.(1) 4,000 (11) 4,000 0 0%
O'Malley, Ryan(1) ........... 20,000 (11) 20,000 0 0%
O'Malley, Thomas Robert 5,000 (11) 5,000 0 0%
Lisa Marie (1)
Parago, Jewel(1) ............ 750 (11) 750 0 0%
Patteri, Carla J., Trustee, 15,000 (11) 15,000 0 0%
U.T.A., 3-3-98(2)
Pennington, Jackqueline(1) .. 20,000 (11) 20,000 0 0%
Pennington, Les(1) .......... 25,000 (11) 25,000 0 0%
Plavnick, Kim(1) ............ 850 (11) 850 0 0%
Price, Steve(1) ............. 10,000 (11) 10,000 0 0%
Rappa, Phil(4) .............. 15,000 (11) 15,000 0 0%
Reagin, Leslie(1)........... 103,448 (11) 103,448 0 0%
Ricciardi, Lino P(1)......... 13,794 (11) 13,794 0 0%
Rigis, John (1) ............. 100,000 (13) 100,000 0 0%
Rivera, John(3) ............. 200,000 (13) 200,000 0 0%
Rosenthal, Monroe and Andrea 50,000 (12) 50,000 0 0%
Family Trust(1)
Rowe, Kevin S. (2) .......... 15,000 (11) 15,000 0 0%
Sabag, Rafael (1) ........... 75,000 (13) 75,000 0 0%
Scanlon, Bill(1) ............ 21,250 (11) 21,250 0 0%
Shaar Fund, Ltd, The (6) .... 312,500 1.4% 312,500 0 0%
Shaar Fund, Ltd., The (7) ... 93,750 (13) 93,750 0 0%
Shelton, Estate of Richard .. 6,000 (11) 6,000 0 0%
L. (1)
Sider, Revocable Living 15,000 (11) 15,000 0 0%
Trust of Todd & Katherine(2)
Silverman, Richard N. (1) ... 10,000 (11) 10,000 0 0%
Slaughter, Mary(4) .......... 11,130 (11) 11,130 0 0%
Sloan, Peter M. (1) ......... 5,000 (11) 5,000 0 0%
Soudan, Mary (1) ............ 25,000 (12) 40,000 0 0%
Soudan, Elizabeth 1998 Trust(1). 5,000 (12) 5,000 0 0%
Soudan, Joseph 1998 Trust(1). 5,000 (12) 5,000 0 0%
Soudan, Thomas 1998 Trust(1). 5,000 (12) 5,000 0 0%
Soudan, Peter (1) ........... 25,000 (11) 25,000 0 0%
Spackman, Troy(1) ........... 10,000 (11) 10,000 0 0%
Stahl, Brent G. (1) ......... 9,375 (11) 9,375 0 0%
Stern, Mark S. & Ellen as ... 30,000 (12) 30,000 0 0%
Tenants by the Entirety(2)
Stern, Mark S. and 15,000 (11) 15,000 0 0%
Irrevocble Children's
Trust for (1/3 Elliot
Benjamin, 1/3 Lennie
Beth, 1/3 Zachary Adam)(2)
Steves, Kelly................ 1,000 (11) 1,000 0 0%
Suton, Larry(1) ............. 50,000 (12) 50,000 0 0%
Swaim, Denelle.............. 1,000 (11) 1,000 0 0%
Terry, Arthur(1) ............ 150,000 (14) 150,000 0 0%
Terry, James L. (1) ......... 10,000 (11) 10,000 0 0%
Terry, Maude D. (1) ......... 10,000 (11) 10,000 0 0%
Todd, Virgil & Theresa, ..... 30,000 (12) 30,000 0 0%
Joint Tenant with Right
of Survivorship(2)
Trinske, Mark(3) ............ 10,000 (11) 10,000 0 0%
Ungar, Merrick (1) .......... 48,750 (12) 48,750 0 0%
Ungar, Scott (1) ............ 48,750 (12) 48,750 0 0%
Wainrib, Andrew(1) .......... 5,000 (11) 5,000 0 0%
Widelitz Family Trust ....... 100,000 (13) 100,000 0 0%
4/15/94(1)
Witkov, Bruce A. (1) ........ 2,000 (11) 2,000 0 0%
Wolfe, Jason E. (1) ......... 2,500 (11) 2,500 0 0%
Wong, Jody (1) .............. 10,000 (11) 10,000 0 0%
Wong, Wa-She Grandmother's .. 50,000 (12) 50,000 0 0%
Trust(1)
Wong, Wa-She(1) ............. 31,250 (12) 31,250 0 0%
Wood, Stephen R. and Diane .. 30,000 (12) 30,000 0 0%
M. (2)
Worden, Darlin(1) ........... 15,000 (11) 15,000 0 0%
Worldbridge Financial Ltd(1) 250,000 1.1% 250,000 0 0%
Total ....................... 6,114,761 27.07% 5,957,761 157,000 .007%
(1) Share issued pursuant to an Accredited Investor Offering made in reliance
on Section 4(2) or 3(b) of the Act according to Regulation D, Rule 506. See
"Recent Sales of Unregistered Securities."
(2) Shares issued as a part of the acquisition of InterSource Health Care, Inc.
(3) Shares issued as compensation for various marketing and sales consulting
services, contract coordination and technical internet support.
(4) Mr. Dudley is engaged by the Company as technical assistant for the
Electromagnetic Tire Recycling Process and Mr. DeCara is engaged by the
Company as corporate Sales Manager. Ms. Slaughter and Ms. Goldstein are
both employees of the Company and received their shares in lieu of
compensation. Mr. Rappa serves as President of the Company's Brounley
division.
(5) Issued pursuant to the sale of convertible subordinate Notes representing
the first $750,000 received. Upon effectiveness of this registration
statement, the Company shall receive an additional $750,000 and has
undertaken to register an additional 421,348 shares and 75,000 shares
underlying warrants in connection therewith. See "Recent Sales of
Unregistered Securities."
(6) Represents Common Shares underlying the Company's Series A 7% Convertible
Preferred Shares issued to The Shaar Fund, Ltd.
(7) Represents 93,750 shares underlying Warrants issued to The Shaar Fund, Ltd.
in connection with the sale of the Company's Series A 7% Convertible
Preferred stock. The 93,750 Warrants, if fully exercised, would result in
the Company receiving an additional $225,000.
(8) Represents 50,000 shares underlying Warrants issued to Robert Rosenstein as
part of a finder's fee in connection with the sale of the Company's Series
A 7% Convertible Preferred stock.
(9) Shares issued for services.
(10) Shares issued pursuant to the AquaFuel-Dominicana Joint-Venture.
(11) Represents less than 0.125% of the Company's issued and outstanding shares
(12) Represents less than 0.25% of the Company's issued and outstanding shares
(13) Represents less than 0.5% of the Company's issued and outstanding shares
(14) Represents less than 1% of the Company's issued and outstanding shares
(15) Represents less than 2% of the Company's issued and outstanding shares
PLAN OF DISTRIBUTION
Selling Security Holders
The Selling Security Holders are offering shares of Common Stock for their
own account and not for the account of the Company. The Company will not receive
any proceeds from the sale of the shares of Common Stock by the Selling Security
Holders.
Each Selling Security Holder will, prior to any sales, agree (a) not to
effect any offers or sales of the Common Stock in any manner other than as
specified in this Prospectus, (b) to inform the Company of any sale of Common
Stock at least one business day prior to such sale and (c) not to purchase or
induce others to purchase Common Stock in violation of Regulation M under the
Exchange Act.
The shares of Common Stock may be sold from time to time to purchasers
directly by any of the Selling Security Holders acting as principals for their
own accounts in one or more transactions in the over-the-counter market or in
negotiated transactions at market prices prevailing at the time of sale or at
prices otherwise negotiated. Alternatively, the shares of Common Stock may be
offered from time to time through agents, brokers, dealers or underwriters
designated from time to time, and such agents, brokers, dealers or underwriters
may receive compensation in the form of commissions or concessions from the
Selling Security Holders or the purchasers of the Common Stock.
Under the Exchange Act, and the regulations thereunder, any person engaged
in a distribution of the shares of Common Stock of the Company offered by this
Prospectus may not simultaneously engage in market making activities with
respect to the Common Stock of the Company during the applicable "cooling off"
periods prior to the commencement of such distribution. In addition, and without
limiting the foregoing, each Selling Security Holder will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including, without limitation, Regulation M, which provisions may
limit the timing of purchases and sales of Common Stock by the Selling Security
Holder. There are possible limitations upon trading activities and restrictions
upon broker-dealers effecting transactions in certain securities which may also
materially affect the value of, and an investor's ability to dispose of, the
Company's securities.
The Company will use its best efforts to file, during any period in which
offers or sales are being made, one or more post-effective amendments to the
Registration Statement, of which this Prospectus is a part, to describe any
material information with respect to the plan of distribution not previously
disclosed in this Prospectus or any material change to such information in this
Prospectus.
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.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following Directors and Executive Officers have served in their
respective capacities since July 28, 1997 (date of inception). The Directors
were re-elected for the current term at a Meeting of Shareholders conducted
January 5, 1998. On May 26, 1999 the Company held its annual meeting of
shareholders at which meeting the following individuals stood for election to
the Company's Board of Directors. Of the total common shares eligible to cast a
vote, approximately 82% so voted. Of the 82% that cast a vote, 99% voted in
favor of the following five directors, three of whom are founders of the
Company. None of the Directors hold similar positions in any other reporting
company. The Company intends to conduct its next election of Directors at its
next Annual Meeting of Shareholders.
Chairman of the Board of Directors, President and Chief Executive Officer:
Leon H. Toups (60). Mr. Toups' past professional experiences include, from 1980
to present, that of President and Chairman of the Board of Directors of DMV,
Inc., Clearwater, Florida. 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 of Chromalloy American Corporation,
St. Louis, Missouri, and as President of Chromalloy Natural Resources Company,
Houma, Louisiana. Chromalloy American was an international conglomerate with
sales of approximately $2.0 billion which employed 45,000 people world-wide 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 to 1969, Mr. Toups attended M.I.T. on a NASA Hugh Dryden Fellowship.
Director, Corporate Secretary and Executive Vice President: Mark Clancy
(43). 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. Prior thereto, Mr. Clancy served as General
Sales Manager of WRCC FM Radio, Cape Coral, Florida, and as Sales Consultant to
WIZD FM Radio, West Palm Beach, Florida. Mr. Clancy holds an AA from
Hillsborough Community College, Tampa, Florida and currently attends the
University of South Florida.
Director, Vice-President, Finance, Chief Financial Officer: Michael P.
Toups (33). Mr. Toups' past professional experiences include, from 1996 to
present: a Director and Vice-President, Finance for InterSource Health Care,
Inc., Clearwater, Florida; 1992 through the 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 degree in
Business Administration from Texas Christian University.
Director, Errol J. Lasseigne (57). Proposed Director. Mr. Lasseigne is
currently an owner/Officer of Senior Life Management, a New York corporation
which provides psychological services and is an owner/Officer of Garden State
Hospice, a New Jersey corporation which provides hospice services and family
counseling. Mr. Lasseigne is also an owner/Officer of L & G Management, a
Florida corporation which provides health care consulting and management
services. Prior thereto, Mr. Lasseigne spent 24 years with the Eckerd
Corporation serving in various retail pharmacy management positions and in
development of institutional pharmacies. Mr. Lasseigne spent 2 years with the
Dell Crane Corporation as Executive Vice President and Chief Operating Officer.
Mr. Lasseigne is currently affiliated with the American Society of Consultant
Pharmacist, American Pharmaceutical Association and the Florida State Chapter.
He has served as Chairman of various professional committees in six States where
he is registered to practice pharmacy.
Director, Leslie D. Reagin, III (55). Proposed Director. Mr. Reagin is the
current President/Owner of the L.DR. Group, an investment management company
established in 1993. Prior thereto, Mr. Reagin was engaged by the Eckerd
Corporation for 32 years of which he served in various executive positions for
22 years. Mr. Reagin is currently affiliated with the following organization:
Board Chairman for Webber College (18 year member); Board Chairman for Career
Options Inc,; Board member and Member of the Executive Committee of Abilities of
Florida, Inc; Board member of the Florida Chamber Foundation; Board member of
the Morton Plant Mease Foundation and Board Member of the YMCA, Clearwater,
Florida. Mr. Reagin's previous affiliations include serving as a Board member of
the Florida Chamber of Commerce; Vice President of Finance and Chairman of the
Chamber Management Corporation; Member o the Board of Overseers for the Southern
College of Pharmaceutical Sciences, Miami, Florida; Past Board Chairman of the
Pinellas Private Industry Council; Member of the National Association of Chain
Drug Stores.
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.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
At December 31, 1998, the Company has 22,217,299 shares of its Common Stock
issued and outstanding. The following table sets forth, as of January 1, 1999,
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.
Beneficial ownership of the Company's Common Stock:
(1) (2)
Name and Amount and
Address of Nature of
Beneficial Beneficial (3)
Title of Class Owner Owner Percent of Class
Common Leon H. Toups 3,356,680(5) 15%
418 Harbor View Lane
Largo, Florida 33770
Common Mark Clancy 1,733,340(5) 7.8%
417 Barrett Court
Tampa, Florida 33617
Common Michael Toups 1,733,340(5) 7.8%
400 Palm Drive
Largo, Florida 33770
Common Errol J. Lasseigne 188,263 0.8%
2364 Violet Place
Palm Harbor, Florida 34685
Common Leslie D. Reagin, III 469,873 2.1%
720 Bluffview Drive
Belleair, Florida 34640
Common Officers and Directors 7,481,496 33.6%
(three persons)
Common Jerry Kammerer 1,660,000(4) 7.4%
1421 Water View Drive
Largo, Florida 33771
(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 Executive Vice President. Mr. M. Toups serves
as a Director and as the Company's Chief Financial Officer and Vice
President, Finance.
(2) None of the named persons or Officer and Directors are holders of any
options, warrants, right conversion privileges or similar items.
(3) 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.
(4) Mr. Jerry Kammerer is a former Director of the Company. Mr. Kammerer was
terminated as an Officer and Director of the Company on August 20, 1998. As
of January 19, 1999, of the 1,750,000 shares originally owned by Mr.
Kammerer, 180,000 were eligible for resale pursuant Rule 144.
(5) In lieu of compensation, during September, 1998 Messrs. L. Toups, M. Clancy
and M. Toups were each and all granted options, which, for a period of
three years following, entitles each to purchase 650,000 of the Company's
common stock at $0.639 per share.
DESCRIPTION OF SECURITIES
The Company is authorized to issue up to 50,000,000 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, 750 of the Preferred Shares were
outstanding and there were 22,217,299 Common Shares outstanding.
At the conclusion of this Offering of the 22,217,299 Common Shares issued
and outstanding, 10,325,482 Common Shares are unregistered securities, and, in
the future, said unregistered shares may only be sold upon compliance with Rule
144, adopted under the Securities Act of 1933. 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. There are no promoters, underwriters or persons or firms acting in
any similar capacity associated with the Company.
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. Holders of a majority of the Common Shares are also members of
the Board of Directors. A majority vote is sufficient for most other actions
requiring the vote or concurrence of Shareholders. The Company's Officers and
Directors as a group (three persons) own directly approximately 39.3% of the
Issuer's capital stock.
All Shares are entitled to share equally in dividends when and if declared
by the Board of Directors out of funds legally available therefor. 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.
INTEREST OF NAMED EXPERTS AND COUNSEL
No such interest.
DESCRIPTION OF BUSINESS.
Background
Toups Technology Licensing, Inc., was incorporated in the state of Florida
on July 28, 1997 ("Toups Technology", "TTL" or the "Company"). The Company's
business plan is to pursue the commercialization of late-stage technologies
through obtaining license agreements and acquisitions. The Company operates in
the energy, environmental and natural resource market segments.
The Company earns its revenues primarily through the sale and service of
the following product lines.
Environmental Solutions:
Equipment:
Pyrolytic Carbon Extraction(a)(PCE) Processor
Hot Plasma AquaFueler(a) 1500
Pyrolytic Tire Reclamation Process
Alternative Fuels:
AquaFuel(a)
Phoenix 777(a)
Magnagas(a)
Manufactured Products
Balanced Oil Recovery System Lift
Tunnel Bat Culvert Reclamation Vehicle
Brounley Radio Frequency CO2 Lasers and Power Generators
E-Commerce Division
InterSource HealthCare
TTLOnline.com
<PAGE>
Pyrolytic Carbon Extraction (PCE) Processor
The Company's Pyrolytic Carbon Extraction Process or PCE treats both liquid
and solid hydrocarbon-based waste in a closed system without releasing harmful
emissions, fluids or solids into the environment. The industrial system
transforms about 40% of the waste into carbon black. The remainder becomes a
clean-burning gas named Phoenix 777(a) which demonstrates exhaust and combustion
properties superior to natural gas. The combustion of Phoenix 777(a) emits less
than half of the carbon dioxide of natural gas and virtually no carbon monoxide
or hydrocarbons, is lighter than air and has a distinct odor which is an
important safety feature..
(Picture Omitted)
The PCE refinery or fuel-processing unit provides for both mechanical and
electrical output. The unit operates on wastes ranging from household garbage,
tires, vegetable matter, manure of all types, waste oils (fossil or vegetable),
animal fat and a host of other hydrocarbon-based waste.
The PCE unit is a dual-fuel unit. The PCE unit is designed to be activated
with propane and once in operation, the dual-fuel capability allows the unit to
switch from propane to its own Phoenix 777(a). The unit will consume about 20%
of the Phoenix 777(a) produced in the course of its operation.
System Features:
Fuel: Waste material such as paper, plastic, tires, animal fat,
used motor oil, cloth, bio-mass
Power Plant: 4-cylinder internal combustion engine carbureted for
propane and Phoenix 777@ - (diesel or gasoline
configuration optional)
Automatic operation using embedded controller
System Benefits:
o Produces drinking and potable water with optional evaporator unit o
Waste disposal solution with short-term payback capabilities o
Generation of electricity when put in series with a generator o
Environmentally clean - no emissions, no landfill waste o Carbon black
extraction affords additional revenue stream o Minimal global warming
contribution o No fuel or electric costs for operation
Manufacturing:
The Company fabricates and assembles the PCE equipment at its Largo, Florida
based plant.
<PAGE>
Hot Plasma AquaFueler1500
TTL's Hot Plasma AquaFueler 1500 is designed to recycle a variety of
materials into a clean burning, combustible fuel. Some of the materials for
which this unit was designed to convert to a useful, combustible gas include:
- Chemical/hydrocarbon contaminated soil, PCP contaminated transformer oil,
Water/land-based oil spills, Refinery pit oil, Antifreeze, Solvents,
Processing oils, Hazardous runoff water, Paint sludge, Crankcase sludge,
Bilge water, Processing oils, Tank bottoms, Parts washer solvents,
Chemical wash water
The AquaFueler
The AquaFueler 1500 makes up to 3,000 cubic feet of clean-burning AquaFuel
per hour for about five cents per cubic foot. Three one-by-twelve-inch carbon
rods are automatically fed into the liquid-filled AquaFuel generation chamber.
Liquids used in the process can range from salt water to raw sewage. The
AquaFueler 1500 is the only safe, reliable and effective way to make AquaFuel.
(Picture Omitted)
Manufacturing:
The Company fabricates and assembles the AquaFuel 1500 equipment at its
Largo, Florida based plant.
<PAGE>
Pyrolytic Tire Reclamation (PTR) Process
The Company's PTR Process was developed to recover the oil, steel and
carbon black used in the manufacture of tires. The process is self-contained,
using scrap tires as the feed-source, fed in through the PTR equipment as a
means to reduce the tires to their basic elements. As a percent of weight, the
by-products of each tire are 10% steel; 25% fuel gas; 25% Petro-chemicals, and;
40% carbon black. The PTR technology reclaims these products which are then
offered for sale.
The PTR technology differentiates from competition because there are no
emissions and, therefore, no residue from combustion. The PTR technology is
further differentiated from competition in its modular design, which allows for
a tire "plant" to be a single unit up through a full-scale, multi-unit plant.
(Picture Omitted)
PTR Research and Development - The final commercial development of the PTR
equipment will take a two-pronged path through (i) the fabrication of the actual
PTR module and; (ii) a detailed analysis of materials resulting from the PTR
equipment including carbon black, oils and Petro-chemicals. The purpose of the
Company's testing program is to determine the quality and character of the
materials produced by the equipment such that a market demand determination can
be made.
Manufacturing
As a part of its development agreement with a national heat rod company,
the Company intends to outsource portions of the fabrication aspect of its PTR
technology
<PAGE>
AquaFuel
AquaFuel is produced as a result of recycling liquid waste. AquaFuel is a
non-fossil, combustible gas that results from the introduction of an electric
arc under water in the presence of carbon. The resulting fuel is so
clean-burning that it gives off as much carbon monoxide in 24 years as the same
engine on gasoline does in 24 minutes.
At present, the only device able to manufacture AquaFuel in commercially
viable quantities is the AquaFueler 1500.
AquaFuel can be used to power everything from cooking stoves to electric
generators to replacing acetylene for metal cutting.
The various studies completed until now have identified the following main
characteristics:
1) AquaFuel is cost competitive even neglecting its free production as a
byproduct of sewage recycling, it has dramatically less pollutants in
the combustion exhaust, and can be more easily and safely produced and
stored than any other combustible gas, ;
2) In view of the above characteristics, AquaFuel is clearly among the
best fuels available at this writing for automotive and other uses on a
world wide basis, with particular reference to consumer, but also for
municipal, industrial and military applications;
3) The AquaFuel process provides a basically novel method for recycling
liquid waste which produces AquaFuel as a usable gas, water usable for
irrigation and solids usable for fertilization;
4) AquaFuel is an excellent gas for the production of electricity,
particularly in the free form obtained from the recycling of liquid waste
from cities and municipalities.
5) Systematic scientific experimentation and theoretical studies of the
chemical and particulate behavior have identified a number of anomalies
in AquaFuel which are applicable to all other gases, thus permitting a
new gas technology with implications and applications to the entire gas
industry and consequentially vast, additional economic horizons.
<PAGE>
Phoenix 777(a)
Phoenix 777(a) is derived through the operation of the Company's Pyrolytic
Carbon Extraction equipment.
Phoenix 777(a) demonstrates unique properties with exhaust and combustion
properties superior to natural gas.
Combustion emits less carbon dioxide emissions than natural gas and
virtually no carbon monoxide (as measured by percentage of emissions) or
unburned hydrocarbons (as measured by parts per million).
It also contains a concentration of oxygen higher than 7% plus water vapor.
And, like natural gas (methane), it is lighter than air and has a distinct odor.
Measurements to date reflect in combustion, Phoenix 777(a) emits:
CO2 7%
O2 9%
CO 0.02%
the balance of the emissions contain water vapor
Phoenix 777(a) has also been found to contain approximately 800 Btu per
cubic foot.
<PAGE>
Manufactured Products Division
The Company's Manufactured Products Division is the manufacturing source of:
Balanced Oil Recovery System Lift
AquaFueler 1500
Pyrolytic Carbon Extractor
Pyrolytic Tire Reclamator
Tunnel Bat Culvert Reclamation Vehicles
Radio Frequency Plasma Generators and associated proprietary products
including:
The Company's manufacturing division incorporates state of the art custom
metal fabrication and machining. The Company's metal fabrication capabilities
allow TTL to build to print products for a wide range of industrial and business
needs. With its in-house equipment, TTL can fabricate a wide range of material
including stainless and carbon steel, aluminum, copper, titanium and incanel.
TTL's machine stop is equipped to do prototype, customer or production work. TTL
has the latest in CNC technology with A Hass Hl-4 30hp Lathe and a Haas VF-4
vertical milling center. The equipment is efficient for production runs and the
Company also has several vertical mills, tooling lathes and drill presses. In
addition, TTL's Manufactured Products Division offers a total range of welding
capabilities including inert gas or CO2, plasma, laser and electron beam
welding.
1. It is an excellent source of revenues;
2. It provides for increased efficiencies resulting from distributing
overhead, operating costs and providing additional buying power;
3. Exposure to potential business and strategic partners;
4. Real-time control over quality, timing and workmanship for all
proprietary products. New inventions often require one-of-a-kind
specialty parts. Given the unique nature of many TTL manufactured
products, exact attention to specifications is assured while retaining
flexibility mindful of changing designs and invention.
The manufacturing facility occupies 50,000 square feet in the Pinellas
Science Technology and Research Center. Formerly occupied by Lockheed Martin
Specialty Components as a high-tech parts provider to the Department of Energy,
the 96-acre center has been converted to a home for private technology firms and
manufacturers.
The following highlights the Company's Manufactured Products Division
market-ready product line.
<PAGE>
The Balanced Oil Recovery System (BORS) Lift
The BORS Lift is a turnkey device that more economically produces oil from
shallow, low-volume "stripper" wells (10 barrels per day or less). By lifting
oil rather than pumping, the BORS Lift also eliminates conventional rods,
tubing, downhole pumps or pumping units, and related maintenance costs. Standing
just 4 ft tall and 8 ft long, it is capable of producing from a gas driven well
with a maximum fluid-balance level of 2,500 feet.
(Picture Omitted)
The operating concept is based on a balanced technology of extracting oil
through a collection tube and dumping it into a collection tank without bringing
up water. Using the BORS lift, wells that were expelling 25 barrels or more of
salt water every day are now pulling up only oil, saving on salt water disposal.
Installations of the BORS lift have demonstrated an average 387 percent increase
in oil production and a decrease in per barrel electric costs from $3.50 to
$0.035.
Manufacturing
The Company manufactures the BORS device in-house except for the
galvanizing process. The Company purchases the computers and motors for the BORS
device from national suppliers. Based on current equipment and facilities, the
Company is able to manufacture 125 BORS units per month on a single-shift basis
and can manufacture up to 500 BORS units per month on a three-shift basis. The
Company currently maintains storage facilities in Claremore, Oklahoma which can
inventory BORS units pending sale and delivery.
<PAGE>
Tunnel Bat Culvert Reclamation Vehicle
The Tunnel Bat technology refers to a vehicle specifically designed to
mobilize the removal of silt, debris, vegetation, soil, rock, and other types of
blockage from inside a box culvert. Box culverts relate to a sewer or drain
running under a road or embankment. Invented by Dave Richardson in 1994, the
Tunnel Bat vehicle represents a solution to the growing problem of removing
blockage from box culverts. The unit is driven by a person, moves both forward
and backward at about 3 to 5 mph with attachments are on both front and rear.
(Picture Omitted)
The Tunnel Bat equipment is able to turn a slow, unpleasant job into a
reliable, thorough professional approach to desilting box culverts. The
equipment is fully mobilized allowing for the maximum removal of blockage while
providing a safe working environment. Toups Technology is unaware of any other
product on the market that is designed to address the thousands of box culverts
throughout the United States.
Before the Tunnel Bat After The Tunnel Bat
(picture omitted) (picture ommitted)
The Company has now completed preliminary production designs and is
ordering parts components necessary to construct the first mass production
Tunnel Bat vehicle. The Tunnel Bat Licensor, Mr. David Richardson, operates a
Tunnel Bat service company within the State of Florida and operates with two
Tunnel Bat vehicles.
Brounley Engineering & Associates. On September 30, 1998, the Company
acquired Brounley Associates, Inc. in an exchange of common shares in which TTL
issued 900,000 unregistered common shares in exchange for 100% of the issued and
outstanding common shares of Brounley. The Company agreed to register 125,000 of
the 900,000 common shares issued in the acquisition of Brounley. Brounley is a
wholly owned subsidiary of Toups Technology.
(PICTURE OMITTED)
Brounley Technology - Brounley is engaged in the design and manufacture of
RF (radio frequency) and related circuits, particularly in the field of solid
state power generation. Brounley's integrated and modular design concepts
competitively differentiate their product line of high-powered RF generators in
small packages. In 1993, Brounley added production facilities to build a new
line of generators for Lasers and for the Plasma Etching & Sputtering industry.
In addition to Integrated RF Generators, Brounley offers clients a full range of
services from original design to a final product.
(PICTURE OMITTED)
Brounley Product Line - Brounley offers a full line of RF Power Generators
for the laser and plasma industries which includes a power range from 50W to
10,000W. In addition, Brounley also offers solid state tuners for the plasma
industry. Other Brounley products include power supplies, RF pre & power
amplifiers and a variety of designs to support Military communications programs.
Viperstrike RF Power Generators. Brounley offers its own brand of RF power
generators dubbed Viperstrike. The Company's Viperstrike RF Generators is
available in size from the PB300 laser mounted model with 300W output power up
through the 8X2 with 10,000W output power. The Viperstrike line of RF power
generators can be controlled by an existing system or with the addition of a
Brounley digital or analog controller. The user can combine or divide the output
power from Viperstrike RF power generators using Brounley's line of RF combiners
and dividers.
International Organization for Standardization (ISO) 9000. Brounley is
currently engaged in a top to bottom quality program designed to lead to an ISO
9000 Certification during the fourth quarter, 1999. ISO is a worldwide
federation of national standards bodies, from some 90 countries. It promotes the
development of standardization and related activities to facilitate the
international exchange of goods and services, and develop intellectual,
scientific, technological and economic cooperation. The ISO consists of some 170
technical committees, 640 subcommittees, 1800 working groups and 10 ad hoc study
groups. These represent the viewpoints of manufacturers, vendors and users,
engineering professions, testing laboratories, public services, governments,
consumer groups and research organizations in each of the 90 member countries.
As an ISO 9000 certified manufacturing facility, Brounley's product line
achieves a heighten level of client receptivity resulting from a verifiable
design, testing and manufacturing techniques. The ISO 9000 is recognized as the
guidelines for selection and use of quality management and assurance standards
for both supplier and customer. ISO 9000 elaborates on the general philosophy of
quality systems standards, their characteristics, the existing types, where and
when they are best used, and describes what elements quality assurance models
should incorporate. It also deals with demonstration and documentation
requirements, pre-contract assessment and contract preparation.
Brounley Research and Development - Brounley's engineering department is
working to further reduce the overall size of the Company's generators while
preserving and increasing the power. Brounley is also engaged in a Plasma
generator design which is slated for market introduction during the fourth
quarter, 1999 through the first quarter, 2000. As a part of its overall
development, Brounley is evaluating all aspects of its operations so as to
become an ISO 9000 certified manufacturing facility by the fourth quarter, 1999.
InterSource Health Care. On December 18, 1998, the Company acquired
two-year old InterSource Healthcare, Inc. in an exchange of common shares
agreement in which the Company issued 1,203,241 unregistered common shares in
exchange for 100% of the issued and outstanding common shares of InterSource.
The Company agreed to register 225,000 of the 1,203,241 common shares issued in
the course of the acquisition. InterSource is a wholly owned subsidiary of Toups
Technology
(PICTURE OMITTED)
InterSource Business - InterSource seeks to match buyers and sellers of new
and used (refurbished) medical equipment and consumables through its internet
site located at www.intersourcenet.com. For the seller of new or refurbished
medical equipment and/or consumables, InterSource offers a secure internet site
coupled with a professionally staffed in-house sales force. For the buyer of
medical equipment and/or consumables, InterSource offers a one-stop means to
comparatively shop through the convenience of the internet.
InterSource Marketing - InterSource offers its equipment and products
through a secure internet home page and through an in-house, direct sales
program. The staff of InterSource's direct sales program includes a licensed
medical doctor, a registered pharmacist, a registered nurse and the former
principal of Alpha Laboratories Corporation.
An InterSource Transaction - Contact is made with a prospective customer
that became aware of available equipment and/or products either through
InterSource's internet home-page or from direct selling efforts. A detailed
investigation is done to assure the supply of the proper product at the proper
cost to meet an individual need of the customer. Once completed, the customer
places an order. InterSource then procures the needed item(s), receives and
inspects the products, and ships direct to the customer. Payment terms vary
dependant of the product(s) ordered, however, 95% of the payments are made
between time of order and time of delivery. The other 5% are net 30-day terms
for smaller orders of consumable products to credit worthy customers.
InterSource maintains a minimal inventory of items; most items are purchased for
direct resale after an actual order is received from a customer. InterSource,
under the terms of a wholesale broker license can only broker pharmaceuticals
and cannot take possession of same. All pharmaceutical sales are done on a
letter of credit basis payable at time of delivery.
InterSource Marketplace - The Company estimates the marketplace for its
InterSource division is the general medical equipment marketplace of
approximately $100 billion annually. InterSource also operates in a limited way
in the United States pharmaceutical marketplace. Both the new and used medical
equipment and pharmaceutical industries are highly competitive. The Company is
unaware of other entities engaged in a business purpose similar to that of
InterSource. However, given the size and scope of the medical industry, the
Company expects to encounter competition more than likely from companies with
greater financial and marketing resources than TTL.
Municipal Solid Waste
The municipal solid waste (MSW) industry has four components: recycling,
composting, landfilling, and combustion. The U.S. Environmental Protection
Agency defines MSW to include durable goods, containers and packaging, food
wastes, yard wastes, and miscellaneous inorganic wastes from residential,
commercial, institutional, and industrial sources. It excludes industrial waste,
agricultural waste, sewage sludge, and all categories of hazardous wastes,
including batteries and medical wastes. More than 209 million tons of MSW was
generated in 1994. Paper and paperboard accounted for 81.3 million tons (38.9
percent) of the total waste stream, yard wastes 30.6 million tons (14.6
percent), plastics 19.8 million tons (9.5 percent), metals 15.8 million tons
(7.6 percent), food 14.1 million tons (6.7 percent), glass 13.3 million tons
(6.3 percent), and other 34.2 million tons (16.4 percent).
Type of Process and Capacity - Competitive answers to MSW
Generally, WTE facilities can be divided into two process types: mass burn
and refuse-derived fuel (RDF). Mass burn facilities process raw waste; it is not
shredded, sized, or separated before combustion. Very large items such as
refrigerators or stoves and batteries/hazardous waste materials are removed
before combustion. Noncombustible materials such as metals can be removed before
or after combustion, but they are usually separated from the ash with magnetic
separators. The waste is usually deposited in a large pit and moved to furnaces
with overhead cranes.
Combusting waste usually reduces its volume by approximately 90 percent.
The remaining ash is buried in landfills. The ash is divided into two
categories: bottom ash and fly ash. Bottom ash is deposited at the bottom of the
grate or furnace. Fly ash is composed of small particles that rise during
combustion and are removed from the flue gases with fabric filters and
scrubbers. Fly ash is usually considered to be the more significant
environmental problem.
Waste is preprocessed at RDF facilities. Noncombustible materials are
removed, increasing the energy value of the fuel. The extent to which
noncombustible materials are removed varies. Most systems remove metals with
magnetic separators; glass, grit, and sand may be removed through screening.
Some systems utilize air classifiers, trommel screens, or rotary drums to
further refine the waste.
Modular facilities are small mass burn facilities; they are usually
prefabricated and shipped fully assembled or in modules to the construction
site. Mass burn waterwall facilities are usually custom-designed and constructed
at the site. Waterwall furnaces contain closely spaced steel tubes that
circulate water through the sides of the combustion chamber. The energy from the
burning waste heats the water and produces steam. Some waterwall facilities also
use rotary combustors to rotate the waste, resulting in more complete
combustion.
The overall majority of WTE facilities employ mass burn processes. Of the
101 facilities reporting the type of process employed in 1996, 86 were mass burn
facilities and 15 were RDF facilities. Two of the mass burn facilities
codisposed their waste with sludge. Although only 22 percent of the facilities
were of the smaller modular type, 6 of the 13 facilities located in the North
Central region were modular . Over half of the facilities were of the mass burn,
waterwall type. More than 40 percent of the facilities are located in the
Northeast and another one-third in the South. Only 22 percent are located in the
West and North Central regions, where landfill space is relatively less scarce.
The average capacity of U.S. WTE facilities is almost 1,000 tons per day.
RDF facilities, on average, have more than twice the capacity of mass burn
facilities (almost 1,900 tons per day versus 850 tons per day). The facilities
in the Northeast and South regions have an average capacity greater than 1,000
tons per day. The average capacity of the facilities in the North Central and
West regions is between 700 and 800 tons per day (Table 11). Modular facilities
are by far the smallest, ranging from an average of 89 tons per day in the North
Central region to 256 tons per day in the Northeast.
Primary Energy Form
Over 80 percent of the 102 facilities produce electricity. Twenty of the 84
facilities that produce electricity cogenerate steam and electricity. Only 18 of
the facilities produce just steam; 12 of those facilities are modular. None of
the RDF facilities produce steam only, compared with more than half of the
modular facilities, most of which are older facilities.
In recent years most of the installations have generated electric power.
The guaranteed market for electricity under PURPA minimizes the financial risk
for facilities generating electricity. This condition could change if
electricity prices drop as a result of restructuring in the electric utility
market.
Air Pollution Control Equipment
Various types and designs of air pollution control equipment are used by
most WTE facilities. Dry scrubbers and baghouse filters used in combination are
more efficient than most electrostatic precipitators in removing acid gases and
particulates from stack gases. Nitrogen oxide and mercury emissions must also be
controlled in most regions of the United States. Modular facilities that have
exclusively used after-burn or two-chamber combustion systems can no longer rely
on those systems for adequate pollution prevention in many parts of the United
States. As a result, some have been retrofitted. Others have permanently closed
down.
Participants
Waste-to-Energy Facilities
As of the fall of 1996, there were 102 WTE facilities marketing energy in
the United States. The number of facilities has declined by more than 10 percent
during the past few years. Most of the WTE facilities in the United States are
located in the East, where landfill space is the most scarce. WTE capacity has
declined by approximately 2 percent over the last year or so, from almost
101,000 tons per day to approximately 99,000 tons per day.
Almost half (48) of the WTE facilities in the United States are privately
owned; 3 are joint public/private ventures; and the remainder are publicly
owned. Twenty-five of the facilities owned by the public sector are operated by
private sector. Thus, 70 percent of all U.S. WTE facilities are operated by the
private sector.
Trends in Municipal Solid Waste Generation
The generation of MSW has increased from 88 million tons in 1960 to 209.1
million tons in 1994. During that time, per capita generation of MSW increased
from 2.7 pounds per person per day to 4.4 pounds per person per day. Per capital
generation is expected to remain constant through 2000, when total MSW
generation is expected to 223 million tons.
In 1960, approximately 30 percent (27 million tons) of MSW generated was
incinerated, most without energy recovery or air pollution controls. During the
next two decades, combustion declined steadily, to 13.7 million tons by 1980, as
old incinerators were closed. Less than 10 percent of the total MSW generated in
1980 was combusted. With the enactment of the Public Utility Regulatory Policies
Act of 1978, (PURPA) and the emergence of a guaranteed energy market, combustion
of MSW increased to 31.9 million tons or 16 percent of generation by 1990. All
of the major new waste-to-energy facilities are designed with air pollution
controls and have energy recovery. During the 1990s, the absolute amount of MSW
combusted and converted into energy remained fairly constant, although the share
declined slightly. By the year 2000, the amount of MSW combusted is expected to
reach 34 million tons.
PCE differentiates from alternative MSW solutions
At present, approximately 57% of Municipal Solid Waste is placed in
landfills while 16% is used in combustion and 27% is recovered. What is
important to note here is that of the estimated 16% of MSW which burned or used
in combustion, produces two grades of ash which must then be buried at the
landfill.
(GRAPHIC OMITTED)
The reasons for the predominate use of landfills is understandable when
considering the trend in tipping fees. Note the tipping fees for waste-to-energy
facilities have grown to in excess of $62 per ton while the tipping fees for
landfill disposal of MSW have remained constant since 1994 at approximately $31
per ton.
(GRAPHIC OMITTED)
The most practical entry into the MSW marketplace, as it relates to the
Company's Environmental Solution as delivered through TTL's Village Concept is
by focusing on the use of Landfill for municipal solid waste. This becomes clear
when considering the large market share currently held by Landfill and the many
negative factors which accompany this type of MSW disposal.
(GRAPHIC OMITTED)
MSW contains significant portions of organic materials that produce a
variety of gaseous products when dumped, compacted and covered in landfills.
Anaerobic bacteria thrive on the oxygen-free environment resulting in the
degradation of the organic materials and the production of primarily carbon
dioxide and methane. Carbon dioxide is likely to leach out of the landfill
because it is soluble in water. Methane, on the other hand, which is less
soluble in water and lighter than air, its likely to migrate out of the
landfill. Of interesting note is a type of gas called Landfill gas or LFG.
In the United States, there are 133 facilities that convert landfill gas
into energy at landfill sites that are either operational or temporarily shut
down. The LFG-to-energy facilities appear to be evenly distributed throughout
the regions of the country. The West region has the largest number, followed by
the Northeast, North Central and South. Almost on-third of all the facilities
are located in California and New York has the second largest number. The first
LFG-to-energy facilities began operations in 1979 and approximately 70 percent
of the 133 facilities that are in existence today began operation during the 7
year period 1984 to 1990.
To collect LFG, wells are usually drilled 30 to 100 feet into a landfill.
Key characteristics of a landfill that determine the amount of gas available
include the type and compactness of the refuse buried, the length of time is has
been burned and the amount of rainfall in the area.
Historically, LFG has been collected and flared at sites because it was
uneconomical to convert to energy. Energy application include the use of low to
medium Btu gas to generate electricity or as a boiler fuel. The LFG can also be
upgraded for use in natural gas pipelines and small amounts of LFG are used for
soil remediation or synthetic fuels.
Most LFG-to-energy facilities create medium-Btu gas by filtering out
particulate matter and removing water vapor. This gas has an energy value of
approximately 500 Btu per cubic foot. Pipeline-quality gas (100 percent methane)
can be created by further refinement to remove most of the carbon dioxide and
other contaminants. However, in recent years the percentage of facilities
producing pipeline-quality gas has declined as a result of low natural gas
prices.
Approximately 75 percent of the LFG-to-energy facilities in the United
States produce electricity. Prices for the sale of electricity from LFG plants
in 1994 were reported for 82 facilities (existing and planned). The average
prices (in cent per kilowatthour) were 6.81, 5,76, 4.98 and 4.39 in the West,
Northeast, South and North Central regions, respectively. Many of the facilities
receive peak and off-peak rates.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Results of Operations for the Year Ended December 31, 1998
The following discussion and analysis should be read in conjunction with
the financial statements and related notes, as well as the discussion in the
Form 10-KSB, which provide additional information concerning the Company's
financial activities and condition.
Overview:
Toups Technology Licensing, Incorporated ("TTL" or "The Company) business
purpose is commercializing late-stage technologies, which are acquired through
license agreements and acquisitions. The Company's technologies and acquisitions
to date are in the energy, environmental, natural resource and healthcare market
segments. At the end of 1998, the Company was comprised of nine divisions, six
of which earned revenues during 1998.
Results of Operations
Fiscal Year Ended December 31, 1998, Compared to Fiscal Year Ended December 31,
1997
Sales for 1998 were $3,132,001, an increase of $1,935,832 or 62% from
$1,196,169 in 1997. The increase in revenues was attributable to the market
launch and acceptance of the Company's BORS Lift units during the Fourth Quarter
of 1998, as well as sales growth in the TTL Manufacturing division, formerly
Advanced Micro-Welding, Inc. ("AMW"), and Brounley Associates, Inc.
("Brounley"), a wholly-owned subsidiary of TTL. AMW and Brounley were two
acquisitions accounted for as a pooling of interest by TTL during April and
October 1998, respectively. Since TTL did not commence operations until November
1997, figures for the year ended December 31, 1997, reflect less than a full
year's transactions (subsidiaries accounted for by the pooling of interest
method reflect the full year's transactions for the year ended December 31,
1997). The Company's third acquisition, InterSource Health Care, Inc.
("InterSource"), was accounted for by the purchase method of accounting for a
business combination. Accordingly, the accompanying statements do not reflect
revenues or expenses related to the acquisition prior to the closing date of
November 30, 1998.
Gross profit for 1998 was $1,147,071 or 37% of revenues, which was up from
$373,799 or 31% of revenues for 1997. The increase in gross profit as a
percentage of revenues in 1998 was the result the strong profit margin of the
in-house manufactured BORS Lift.
The Company's selling, general and administrative (SG&A) expenses of
$3,276,932 were comprised of development expenses, salaries, consulting
services, and other operating costs in 1998, up from $315,893 during 1997. As a
percentage of revenues, SG&A increased to 105% in 1998 up from 26% in 1997. SG&A
expenses increased in 1998 to support further technology development, new
product introductions and future business expansion. In 1998, $728,351 or 33% of
SG&A expenses were non-cash expenses paid for through capital stock issued for
services to further the Company's technologies.
<PAGE>
The Company incurred increased personnel expenses and development costs to
build its infrastructure, assembling a team of engineers, scientists and other
professionals, and prepare its technologies for market applications. During
1998, the Company completed its independent testing for AquaFuel market
applications and scalability results including its first production-unit
contract for the Dominican Republic. In addition, the Company completed field
tests of BORS Lifts and began full-scale production placing 100 units in the
field, developed applications for its tire recycling process technology,
completed design for and began production of Tunnel-Bat units, completed the
acquisition of AMW, Brounley and InterSource and furthered discussions with
potential acquisition candidates, as well as candidates for technology licenses
that fit with the Company's business purpose.
As a result of these activities, the Company had a 1998 operating loss of
$2,129,861, a decrease from an operating profit of $57,906 for 1997.
Net interest expense for 1998 was $14,373, up from $664 in 1997. Interest
expense related to borrowings of wholly-owned subsidiaries prior to acquisition.
Liquidity and Capital Resources
Net cash used by operating activities of $2,422,529 related primarily to
the Company's operating loss and the increase in accounts receivable and
inventories from BORS lifts sales in the fourth quarter of 1998. The Company,
however, had a net working capital surplus of $1,545,580 at year end, an
increase of $1,331,762 from December 31, 1997. The increase in working capital
was principally the result of an increase in accounts receivable resulting from
Fourth Quarter BORS Lift sales and financing activities through the issuance of
$3.8 million in common stock through private equity offerings. At December 31,
1998 the Company had $5,312,840 in assets and $3,360,798 in stockholders' equity
up from $562,054 and $256,484 respectively at December 31, 1997.
As of December 31, 1998, the Company had $49,574 drawn on a $50,000 bank
line of credit for InterSource and $388,237 in capital leases for TTL
Manufacturing. The Company had no other bank financing or other debt obligations
outstanding other than trade payables, accrued expenses, and other expenses due
during the normal course of business.
Through the acquisitions of AMW, Brounley and InterSource the Company has
significant production capabilities available without the requirement for large
plant and equipment capital expenditures. The InterSource acquisition added in
excess of $2 million in fair market value of equipment purchased and refurbished
by InterSource under its facility lease. The equipment remained from the
facility's former tenant, a large defense contractor, and included computers,
milling equipment, lathes, shelving and storage units, precision welding
equipment and other production machinery. InterSource held this equipment for
resale but TTL has chosen to maximize the equipment through internal
utilization. This equipment combined with AMW's, Brounley's and InterSource's
technical resources will allow TTL to fully utilize its development and
production capabilities 1999.
<PAGE>
The Company has also completed agreements for two financing offerings
subsequent to year end for a total of $2,250,000. The financings are structured
as $1,500,000 subordinated convertible Note and $750,000 convertible preferred
stock. The proceeds of the sale of these offerings are available for capital
expenditures related to technology development costs, future acquisitions,
working capital, and general corporate purposes.
The Company believes its existing cash, together with projected cash flows
from operations and the availability of future equity and/or offerings, will be
sufficient to meet the Company's cash requirements in 1999.
The Company recognizes revenues under the accrual basis of accounting where
revenues are recognized when earned. Revenues are considered earned when product
has been shipped. The Company accounts for all of its operating subsidiaries in
this manner.
At fiscal year-end 12-31-98, the Company had $1,768,999 in accounts receivable
which represents 56% of total sales at that time. The accounts receivable were
derived primarily from sales of our Balanced Oil Recovery System Lift in the
fourth quarter of 1998. For certain BORS customers, the Company carries 90-day
terms. The Company considers all of its accounts receivable to be collectible.
However, the Company has recorded a $79,237 write-off for doubtful accounts for
the year ending December 31, 1998. The Company does not anticipate this
condition to continue in future years for two reasons: (i) the BORS was a
development product for the first three quarters of 1998. For that reason,
meaningful sales did not begin until the fourth quarter and (ii) 1998 was a
development-stage year for the Company and we are already seeing a maturing of
our divisions and expect our accounts receivable to reflect this balance as a
percentage of total sales for this year.
The Company did not consider segment reporting to be either cost effective or
practical at year end 1998. Up to this point, the Company has not used segment
reporting for internal use. At the close of 1998, the Company's "divisions" were
aggregated with revenues primarily derived from manufacturing operations.
Further, those "division" which out of this realm (InterSource) were not a part
of the Company until the end of the year. The Company intends to use the segment
accounting approach for its annual audit for the period ending December 31,
1999.
As a part of its joint-venture project, the Company is obligated to issue
2,000,000 of its unregistered common stock to the President of
AquaFuel-Dominicana and such shares shall become fully vested upon formalization
and initial payments relating to the Company's joint-venture agreement. The
Company anticipates these shares will all become fully vested during the course
of 1999. When said shares become fully vested, the Company shall account for
such shares strictly according to their fair market value at date of issuance.
"Fair market value" is an amount equal to 100% of the cash-price received by the
Company for any stock sales or 100% of the average closing "bid" price of the
Company's shares for the thirty-days immediately preceding the issuance/vesting
of such shares.
As a part of the Company's joint-venture, TTL is now a 9% owner of a Public
Urban Development (PUD) project within the Dominican Republic. Key elements of
the Company's PUD project are:
Location: Rancho La Regina
Purpose: To build to process all types of organic
material including, but not limited to,
tires, waste food and packaging, waste oils
(fossil and vegetable), paper, plastic,
leaves and other similar waste streams. The
plant must be able to generate an output of
approximately 15 mega watts (MW) of
electricity from gas produced in the
pyrolysis and 160 tons per day of carbon
black.
Equipment: 400 tons per day pyrolytic carbon extraction
plant
Timing First prefabricated home assemblies to begin in August, 1999.
Status of Agreement: Plant Quote dated June 16, 1999 - issued and
accepted
PUD Agreement by and between Mr. Isaias
Arbaje, CEO of Arbaje Agroindustrial SA and
Vice President of AquaFuel Dominicana and
Newton Equities Dominicana, S.A., by its
President Joseph J. Territo was executed May
13, 1999
As a part of its joint-venture agreement, the Company will negotiate a license
agreement for the exclusive rights to commercialize AquaFuel in certain
geographic areas. At this time, the Company has not negotiated any of the
specific terms to such an exclusivity and cannot estimate what, if any,
additional obligations would be incurred by either party.
During the course of the Company's development year, 1998, TTL issued
unregistered shares of its stock to attract and retain key employees, to acquire
various license agreements, to make acquisitions and for other, developmental
needs. At the mid-year point, the Company's financial statements reflected an
expense equal to par value or $0.001 per share. At year end, the Company had
issued a total of 5,602,697 which were reflected as an expense equal to $0.13
per share or a total charge to earnings of $728,351. During May, 1999, the
Securities and Exchange Commission advised the Company that these shares should
have been recorded at a price approximately equal to the then cash-sales price
of the Company's securities or an average price of $0.639 per share which
represents the average cash-price paid per share of $0.71 minus a 10% discount
for lack of liquidity. This finding by the Securities and Exchange Commission
therefore required to the Company to restate its annual financial statements to
reflect a total charge to earnings of $3,580,123 or an increase of $2,851,772
over the previously reported charge to earnings of $728,351. This charge is a
non-cash compensation expense under General and Administrative Expense.
The effect of this non-cash, one-time event increases the Company's 1998
losses from ($2,187,994) to ($5,039,766). As a result of this action, all
persons receiving a part of the 5,602,697 shares shall be issued appropriate tax
forms relating to the value of the shares which is considered income to the
individual.
Further, the Balance Sheet impact of the non-cash compensation expense
increases Additional Paid-In Capital $2,851,772 from $5,484,950 to $8,336,722
and decreases Retained Earnings (Deficit) $2,851,772 from ($2,146,369) to
($4,998,141). The cumulative effect to the Balance Sheet Stockholders' Equity
section is $0.
Of the 5,602,697 unregistered shares, 1,950,000 were issued to Officers and
Directors in lieu of compensation. In light of the higher valuation and inherent
tax consequences, the Company's officers and Directors have opted to convert the
issuance of these shares to treasury shares in exchange for an option for the
purchase of these 1,950,000 unregistered shares at the rate cited as the "fair
market value" or $0.639 per share. The option rights will provide for the
exercise of these options anytime during a three-year period following the
granting of the option, September 1, 1998 - September 1, 2001.
Accordingly, had the Company issued options versus the shares, the Company
would have been required to record the issuance of only 3,652,697 shares at the
rate of $0.639 per share or a total charge to earnings of $2,334,073, an
increase of $1,605,722 above the previously reported $728,351. Therefore, had
the Company been allowed to value the issuance of options versus the issuance of
shares, total losses for the year-ending December 31, 1998 would have been
($3,793,716) or ($0.31) per share on a weighted average basis or ($0.172) per
share based on the number of shares outstanding at December 31, 1998.
As a result of the conversion of the shares issued to options for the
purchase of shares, the company will realize a gain corresponding to the loss
reported at year end 1998 through the recapture of the compensation expense of
$1,246,050 in 1999 which is attributed to the 1,950,000 shares described above.
Forward Looking Statements
This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains certain "forward-looking statements" as defined
in the Private Securities Litigation Reform Act of 1995. Such statements are
based on management's estimates, assumptions, and projections. Major factors
that could cause results to differ materially from those expected by management
include, but are not limited to: the timing and nature of independent test
results; the nature of changes in laws and regulations that govern various
aspects of the Company's business; retention and productivity of key employees;
the availability of acquisition candidates and proprietary technologies at
purchase prices the Company believes to be a fair market; the direction and
success of competitors; management retention; and unanticipated market changes.
Year 2000 Compliance
The Company has completed a prelimanary assessment concerning Year 2000
issues and has determined that its technologies, manufacturing factilites and
internal operatins will not be impacted or affected. The Company made no
material expenditures in 1998 with regard to Year 2000 issues and anticipates
that expenditures in 1999 will have no material effect to its results of
operations and capital resources. In addition, the Company's stock transfer
agent, Continental Stock Transfer % Trust Company, has been certified as Y2K
compliant
DESCRIPTION OF PROPERTY
The Company's headquarters and manufacturing facility occupies
approximately 50,000 (fifty-thousand) square-feet within the 96-acre Pinellas
Science Technology and Research Center ("STAR Center") located at 7887 Bryan
Diary Road, Largo, Florida.
Formerly used by Lockheed Martin Specialty Components, Inc. as a provider
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 Company also maintains a 10,000 square-foot facility wherein is housed
its AquaFuel(a) division. The Company also maintains an engineering,
installation and field service office in Claremore, Oklahoma and a national
sales office in Garden City, Kansas relating to its BORS device.
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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Michael Toups, who serves as the Company's Chief Financial Officer and
as a Director, is the son of the Company's President and Chairman of the Board,
Leon H. Toups.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Since activation of operations in November, 1997, the Company has provided
for its venture funding requirements through sales of its securities at prices
ranging from $0.62 to $1.25 per share. As a result of these sales, the Company
issued securities to various persons and firms and all such securities were
acquired directly from the Company in transactions not involving any public
offering. All securities were sold in reliance on Section 4(2) of the Securities
Act of 1933. All purchasers executed a Subscription Agreement indicating they
have such knowledge and experience in financial and business matters that either
alone or with a purchasers representative, are capable of evaluating the merits
and risks of the investment.
The Company has not relied on an underwriter or similar person in the
course of selling its securities or the subsequent trading thereof. The Company
has made use of its securities counsel, independent auditor and independent
transfer agent as needed. As a part of its Private Placement Memorandum used by
the Company for the initial sale of its securities during late 1997, TTL
undertook certain specific steps necessary to effect a public trading market.
The following relates to the tasks completed, which relate to the Company's
undertakings assured in the initial sales of its securities.
EXECUTIVE COMPENSATION
The following table depicts all-plan and non-plan compensation awarded to,
earned by or paid to the named executive officer of the Company for the period
indicated:
Annual Long Term
Compensation Compensation
(a) (b) (c) (d) (e)
Restricted
Stock Total
Name and Principal Salary Bonus award(s) Compensation
Position Year ($) ($) ($) ($)
Leon H. Toups 1998 $63,666 $0 $0 $63,666
President
Chief Executive Officer
Mark Clancy 1998 $62,997 $0 $0 $62,997
Executive Vice President
Corporate Secretary
Michael P. Toups 1998 $61,958 $0 $0 $61,958
Vice President, Finance
Chief Financial Officer
Jerry Kammerer 1998(f) $48,000 $0 $0 $48,000
(a) All named executive Officers have served in their respective capacities
since formation of the Company during July 1997 except Mr. Kammerer who
served through August, 1998.
(b) The Company was incorporated during July 1997. The Company activated
operations on November 1, 1997 and all three current officers were
compensated at the rate of $3,000 per month for the months of November and
December, 1997.
(c) Any increase in Officer compensation would be predicated on prevailing
industry standards and the existing 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.
(d) The Company did not make any bonus cash payments to its executive officers
since inception except a Christmas bonus equal to one weeks salary which
was also given to all of the Company's employees. However, the Company may,
in the future, develop programs which may include bonus payments.
(e) During the course of 1998, the Company granted options for the purchase of
650,000 unregistered common shares to each of its then Officers. The
Company's three Officers also received TTL unregistered shares as a part of
the acquisition of InterSource Health Care.
(f) Mr. Kammerer served as a Director and as the Company's Vice President,
Business Development from January through August, 1998.
The Company does not compensate its Directors for their participation.
Part F/S
lNDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Toups Technology Licensing, lncorporated
(A Development Stage Company)
Largo, Florida
We have audied the accompanying consolidated balance sheets of Toups
Technolgy Licensing, Incorporated and subsidiaries (the Company) as of December
31, 1998 and 1997, and the related consolidated statemsnf of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supPorting
the amounts and disclosures in the financial statements. An audt also includes
assessing the accounting principles used and significant estimates made by
management, as weII as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Toups Technology Licensing, Incorporated and subsidiaries as of December 31,
1998 and 1997, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principals.
February 2, 1999 (except for notes 18, 19, 20
and 21 as to which the date is June 21, 1999)
Harper, Van Scoik & Company, L. L. P.
A WORLDWlDE ORGANIZATION OF ACCOUNTlNG FlRMS AND BUSlNESS ADVlSORS
TOUPS TECHNOLOGY LICENSING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
1997
1998 (Note 2)
---- --------
ASSETS
Current assets:
Cash $772,080 $104,580
Accounts receivalbe - trade (net of allowance
of $74,237 and $5,000, respectively) 1,768,999 88,384
Inventory 542,555 237,682
Prepaid royalties 89,000 11,000
Other current assets 2,776 800
----------- --------
Total current assets 3,175,510 442,446
----------- -------
Property, plant and equipment:
Property, plant and equipment 2,170,072 174,488
Less: Accumulated depreciation and amortization 152,159 65,775
---------- --------
Net property, plant and equipment 2,017,913 107,713
---------- --------
Other assets:
Security deposits 31,932 5,000
Related party receivables 87,485 0
Other assets - 5,895
-------- ------
Total other assets 119,417 10,895
--------- --------
Total assets $5,312,840 $562,054
========== ========
See Auditor's Report and accompanying financial statements and Notes thereto
<PAGE>
TOUPS TECHNOLOGY LICENSING, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1998 and 1997
1997
1998 (Note 2)
---- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $1,391,826 $109,748
Royalties payable 42,843
Income taxes payable 40,562 -
Deposits 39,000 73,540
Current portion of notes payable - stockholder - 15,325
Current poriton of capital lease obligations 66,125 24,324
Line of credit 49,574 -
Other current liabilities - 5,691
------ ---------
Total current liabilities 1,629,930 228,628
----------- -------
Long-term debt:
Capital lease obligation, net of current portion 322,112 49,452
Notes payable - stockholder, less current portion - 27,490
-------- -------
Total long-term debt 322,112 76,942
--------- --------
Total liabilities 1,952,042 305,570
---------- -------
Stockholders' equity:
Capital stock 22,217 10,030
Additional paid-in capital 8,336,722 197,237
Retained earnings (deficit) (4,998,141 49,217
----------- ------
Total stockholders' equity 3,360,798 256,484
---------- -------
Total liabilities and stockholders' equity $5,312,840 $562,054
=========== ========
See Auditor's Report and accompanying financial statements and Notes thereto
<PAGE>
TOUPS TECHNOLOGY LICENSING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 1998 and 1997
1997
1998 (Note 2)
---- --------
Revenue $3,132,001 $1,196,169
Cost of goods sold 1,984,930 822,370
----------- ----------
Gross profit 1,147,071 373,799
General and administrative expenses 6,128,704 315,893
---------- ---------
Total operating earnings (deficit) (4,981,633) 57,906
Other income (expense):
Interest income 6,861 543
Interest expense (21,234) (1,207)
Other income - 155
Other expense - (325)
----------- --------
Total other income (expenses) (14,373) (834)
---------- ---------
Earnings (deficit) before income taxes (4,996,006) 57,072
Income taxes 43,760 7,971
---------- ---------
Net income (loss) $(5,039,766) $ 49,101
=========== ========
Weighted average number of
shares outstanding 12,167,182 9,781,751
Net income (loss) per share $ (0.4142) $ 0.005
============ ========
See Auditor's Report and accompanying financial statements and Notes thereto
<PAGE>
TOUPS TECHNOLOGY LICENSING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended Decmeber 31, 1998 and 1997
1997
1998 (Note 2)
---- --------
Cash flows from operating activities:
Net income (loss) $(5,039,766) $ 49,101
Adjustments to reconcile net income (loss) to
net cash provided (used by operating activities:
(Gain) loss on sale of assets - (155)
Depreciation and amortization expense 81,634 21,840
Bad debt expense 76,312 5,000
Capital stock issued for services 3,580,123 8,470
(Increase) decrease in accounts receivable (1,656,051) (11,933)
(Increase) decrease in inventory (291,042) (54,403)
(Increase) decrease in other current assets (1,976) -
(Increase) decrease in security deposits 26,932) (5,000)
(Increase) decrease prepaid royalties (78,000) (11,000)
(Increase) decrease in other assets 5,895 (5,195)
(Increase) decrease in accounts payable 565,382 56,334
(Increase) decrease in royalties payable 42,843 -
(Increase) decrease accrued expenses 350,218 74
(Increase) decrease in income taxes payable 40,562 -
(Increase) decrease in other current liabilities (71,731) -
--------- -------
Net cash provided (used) by operating activities (2,422,529) 53,133
Cash flows from investing activities:
Acquisition of cash from investing 3,715 -
Acquisiton of property, plant and equipment (507,047) (15,690)
Proceeds from sale of equipment - 750
Loans to related party (18,428) -
Loans to subsidiary prior to acquisition (164,297) -
---------- ------
Net cash used by investing activities (686,057) (14,940)
See Auditor's Report and accompanying financial statements and Notes thereto
<PAGE>
TOUPS TECHNOLOGY LICENSING, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended Decmeber 31, 1998 and 1997
1997
1998 (Note 2)
---- --------
Cash flows from financing activities:
Distributions to stockholders (7,592) (41,527)
Proceeds from the sale of capital stock 3,850,278 100,000
Principal repayments on notes payable - stockholder (11,215) (4,685)
Proceeds from line of credit 4,600 -
Repayments on line of credit (4,600) -
Principal repayments on capital lease obligations (55,385) (4,197)
Purchase of treasury stock - (29,000)
--------- -------
Net cash provided by financing activities 3,776,086 20,591
---------- --------
Net increase in cash 667,500 8,784
Cash, beginning of year 104,580 45,796
--------- -------
Cash, end of year $772,080 $104,580
========= ========
Supplemental Cash Flow Disclosures:
Cash paid for interest $21,234 $ 3,110
Cash paid for income taxes $ 11,967 $ 4,481
See Auditor's Report and accompanying financial statements and Notes thereto
<PAGE>
TOUPS TECHNOLOGY LICENSING, INC.
AND SUBSIDIARIES
CONSOLIATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the year ended December 31, 1998 and 1997
Common Additional Retained
Number Stock Paid-In Earnings
Of Shares (At Par) Capital (Deficit) Total
Balance
December 31, 1996
(Note 2) 1,400,000 $1,400 $97,397 $41,643 $140,440
Issuance of common
stock upon
inception 8,250,000 8,250 0 0 8,250
Stock Issued for:
Services 100,000 100 - - 100
Cash 160,000 160 99,840 - 100,000
Rent 120,000 120 - - 120
Net income (loss) for
the year ended
December 31, 1997 - - - 49,101 49,101
Distributions to
shareholders - - - (41,527) (41,527)
-------- ------ ------- -------- -------
Balance, December 31,
1997 (Note 2) 10,030,000 10,030 197,237 49,217 256,484
Stock issued for:
Services 5,602,697 5,603 3,574,520 - 3,574,520
Cash 5,381,361 5,361 3,844,897 - 3,850,278
Acquisitions 1,203,241 1,203 688,468 - 689,671
Cancellation of note
payable-stockholder - - 31,600 - 31,600
Net income (loss) for
the year ended
December 31, 1998 - - - (5,039,766)(5,039,766)
Distributions to
shareholders - - - (7,592) (7,592)
------- ------ ------ ---------- ----------
Balance, Decemeber 31,
1998 22,217,299 $22,217 $8,336,722 $(4,998,141) $3,360,798
========== ======= ========== ============ ==========
See Auditor's Report and accompanying financial statements and Notes thereto
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
1. Summary of Significant Accounting Policies
Company - Toups Technology Licensing, Incorporated (Company), a
Florida Corporation, was formed on July 28, 1997, 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, natural resources and healthcare 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
consolidated financial statements include the accounts of the Company and
the following wholly owned subsidiaries. All material intercompany
transactions have been eliminated.
Subsidiary's Name Business Activity
Advanced Micro Welding, Inc.(AMW) Advanced Micro Welding, Inc., a Florida
Corporation, was formed on February 3, 1992. The Company's primary operations
consist of custom metal fabrication and micro welding.
Brounley Associates, Inc. (Brounley) Brounley Associates, Inc., a Florida
Corporation, was formed on February 23, 1994. The Company is engaged in the
design, manufacture and sale of radio frequency (RF) generators.
InterSource Healthcare, Inc. (InterSource) InterSource Healthcare, Inc., a
Florida Corporation, was formed on November 9, 1996. The Company sells and
refurbishes medical equipment, provides services for medical facility
development, and sells pharmaceutical products.
Basis of Accounting - The accompanying consolidated financial statements
are prepared using the accrual basis of accounting where revenues are recognized
when earned and expenses are recognized when incurred. This basis of accounting
conforms to general accepted accounting principles.
1. Summary of Significant Accounting Policies (Continued)
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.
Inventories - Inventories are stated at the lower of cost (determined
on a first-in, first-our basis) or market. Work-in-process and finished
goods include material, labor and overhead.
Comparability of Statements - Since Toups Technology Licensing,
Incorporated did not commence operations until November 1997, amounts for
the year ended December 31, 1997, reflect less than a full year's
transactions (subsidiaries accounted for using the pooling-of-interest
method reflect the full year ending December 31, 1997) and are not
directly comparable with 1998 figures.
Advertising - Advertising costs are charged to operations in the year
incurred and totaled $66,756 and $1,522 for 1998 and 1997, respectively.
Property, Plant and Equipment - All property, plant and equipment is
recorded at cost. Depreciation, which includes the amortization of assets
recorded under capital leases, is computed on the straight-line method
over the estimated useful lives of the assets. Repair and maintenance
costs which do not increase the useful life of the assets are charged to
operations as incurred.
Allowance for Doubtful Accounts - The Company establishes an
allowance for uncollectible trade accounts receivable based on historical
collection experience and management's evaluation of collectibility of
outstanding accounts receivable. The allowance for doubtful accounts was
$74,237 and $5,000 as of December 31, 1998 and 1997, respectively.
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.
Earnings (Loss) per Share - Earnings per share are computed by
dividing net income (loss) by the weighted-average number of shares issued
and outstanding during the reporting period. Shares issued or purchased
during the period affect the amount of shares outstanding and are weighted
by the fraction of the period they are outstanding.
<PAGE>
2. Acquisition of Businesses
Advanced Micro Welding, Inc.
On April 1, 1998, the Company acquired all the common stock of
Advanced Micro Welding, Inc. (AMW) in exchange for 500,000 shares of the
Company's restricted common stock. AMW is engaged in micro welding and
custom metal fabricating. The transaction has been accounted for as a
pooling of interest and, accordingly, the consolidated financial
statements for 1998 and 1997 have been restated to include all accounts
and operations of AMW as if the acquisition had occurred at the beginning
of the year presented.
Unaudited net sales and net income of the separate companies for the
period prior to the acquisition were:
March 31,
1998 1997
Net sales:
Toups Technology Licensing, Incorporated(1) $ -0- $ -0-
AMW 109,154 344,149
--------- ---------
Total $ 109,154 $344,149
Net income (loss):
Toups Technology Licensing, Incorporated $(215,096) $(40,413)
AMW 7,246 55,785
-------- ---------
Total $(207,850) $15,372
(1)Toups Technology Licensing, Incorporated was a development stage company
during all of 1997.
Brounley Associates, Inc.
On October 1, 1998, the Company acquired all the common stock of
Brounley Associates, Inc. (Brounley) in exchange for 900,000 shares of the
Company's restricted common stock. Brounley is engaged in the design
manufacture and sale of radio frequency generators throughout the United
States and abroad. The transaction has been accounted for as a pooling of
interest and, accordingly, the consolidated financial statements for 1998
and 1997 have been restated to include all accounts and operations of
Brounley as if the acquisition had occurred at the beginning of the year
presented.
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
Acquisitions of Businesses (Continued)
Unaudited net sales and net income of the separate companies for the
period prior to the acquisition were:
September 30,
1998 1997
Net sales:
Toups Technology Licensing Incorporated
and subsidiary $790,667 $ 344,149
Brounley 910,292 852,020
-------- ----------
Total $1,700,959 $1,196,169
Net income (loss):
Toups Technology Licensing, Incorporated
and subsidiary (1,358,377) 15,372
Brounley 158,427 33,729
----------- ---------
Total $(1,199,950) $49,101
InterSource Healthcare, Inc.
On November 30, 1998, the Company purchased 100% of the stock of
InterSource Healthcare, Inc. (InterSource) by issuing 1,203,241 shares of
restricted and unrestricted common stock . InterSource acquires and
refurbishes used medical equipment for resale, sells pharmaceutical
products and provides services for medical facility development. The
Company's 1998 consolidated results include the operations of InterSource
from the date of acquisition.
The acquisition was accounted for using the purchase method of
accounting. Accordingly, the purchase price was allocated to the net
assets acquired based upon their estimated fair market values.
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
Acquisitions of Businesses (Continued)
The following unaudited pro forma summary combines the consolidated
results of the Company and InterSource as if the acquisition had occurred
at the beginning of 1998 and 1997 after giving effect to certain pro forma
adjustments, including, among other things, additional depreciation based
on the fair value of equipment acquired and the estimated related income
tax effect.
1998 1997
In thousands, (unaudited)
Net sales $4,134,161 $1,970,559
Net income (loss) $(2,213,556) $(23,547)
This pro forma financial information is presented for informational
purposes only and may not be indicative of the results of operations as
they would have been if the Company and InterSource had been a single
entity during 1998 and 1997, nor is it necessarily indicative of the
results of operations which may occur in the future.
Joint Venture
Effective December 15, 1998, the Company entered into an agreement
with Compania DeLuz Y Fuerza De Las Terrenas, C. por A. (Utility), a
Dominican Republic utility company, to form the joint venture "Aqua
Fuel(a)-Dominicana, SA". The ownership of Aqua Fuel-Dominicana will be 49%
to Toups Technology Licensing, Inc. (TTL) and 51% to the utility.
The purpose of Aqua Fuel-Dominicana is the construction and operation
of an Aqua Fuel(a) production facility which, at a minimum, is able to
generate 1.653 gigawatts of electric power during a twenty year period.
The agreement outlines a three-step approach to accomplish Aqua
Fuel-Dominica's purpose, 1) a feasibility study of an Aqua Fuel(a)
generator with a capability of at least 4,000 CF/hr to run a 1,000 KW
generator successfully and continuously for a period of two weeks and is
scheduled to conclude no later than sixty days after the Aqua Fuel(a)
generator is installed in the Dominican Republic; 2) immediately after the
completion of the Feasibility Study, the development of the blueprints and
design for construction of the Aqua Fuel(a) production facility shall
commence and will be completed no later than 60 days thereafter; and 3)
the construction of the plant shall commence immediately upon receipt of
the drawings and materials being available in the Dominican Republic and
is scheduled for completion within six months.
TTL's capital contribution to Aqua Fuel-Dominicana will be the
delivery of the Aqua Fuel(a) technology and the equipment as required by
the agreement, the Utility is required to fund all other capital needs of
the joint venture. Additionally, the Utility is to find investors who will
invest at least $500,000 in TTL, TTL is to issue 500,000 of its shares to
the Utility and 2,000,000 shares to the president of Aqua Fuel-Dominicana
for services during 1999.
4. Concentration of Credit Risk
The Company maintains cash deposits with a bank that include funds
greater than the federally insured limit of $100,000. The cash balances in
excess of the insured amounts were $650,765 at December 31, 1998 and $-0-
at December 31, 1997. Management believes the Company is not exposed to
any significant credit risk related to cash.
The Company grants credit to its customers during the normal course
of business and performs ongoing credit evaluations of its customers'
financial condition. The Company maintains allowances for potential credit
losses. The Company had sales to five customers that totaled approximately
83% of total sales for the year ended December 31, 1998. Additionally,
three customers comprise approximately 96% of the December 31, 1998
accounts receivable - trade. The owners of the entities that comprise the
three customers are minority shareholders of the Company.
5. Inventories
Inventories as of December 31, 1998 and 1997 consisted of the
following:
1998 1997
Raw materials $455,357 $99,278
Work-in-process 46,004 131,554
Finished goods 41,294 6,850
------- --------
Total $542,655 $237,682
6. Licensing Agreement Commitments
The Company has entered into licensing agreements with three
licensors. Amounts relating to these agreements recorded in the
accompanying consolidated statements are as follows:
Year ending December 31,
1998 1997
Prepaid royalties $89,000 $11,000
========= ========
Royalties payable $42,843 $ -0-
======= =======
<PAGE>
6. Licensing Agreement Commitments (Continued)
Royalty expense for the year ended December 31, 1998 and 1997 was
$94,843 and $-0-, respectively. In exchange for the rights under these
agreements, the Company has committed to pay the following:
Year ending
1999 $ 96,000
2000 96,000
----------------
Total $ 192,000
================
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
7. Property, Plant and Equipment
Property, plant and equipment, at cost, and related accumulated
depreciation and amortization as of December 31, 1998 and 1997 are
summarized as follows:
1998 1997
Leasehold improvements $ 96,999 $ -0-
Office furniture and equipment 119,467 7,594
Machinery and equipment 1,505,517 88,921
Equipment under capital leases 448,089 77,973
-------- -------
2,170,072 174,488
Less: Accumulated depreciation
and amortization 152,159 65,775
-------- -------
Total $2,017,913 $108,713
<PAGE>
8. Related Party Transactions
The Company has the following receivables from officers and/or
stockholders:
1998 1997
Interest-free demand note - unsecured:
Shareholders $85,263 $ -0-
Officers 2,222 -0-
------- ------
Total $87,485 $ -0-
======= ========
8% note payable $ -0- $ 42,815
Less: Current portion -0- 15,325
Long-term portion $ -0- $ 27,490
================ ===============
For the year ending December 31, 1998, the Company had sales of
approximately $1.7 million to entities owned by certain minority
shareholders of the Company.
The Company paid approximately $22,632 for employee leasing, $102,308
for rent, and $21,000 for consulting fees to Intersource prior to
acquisition.
9. Capital Leases
The following is an analysis of the equipment under capital leases by
major classes:
1998 1997
Machinery and equipment $448,089 $ 77,973
Less: Accumulated depreciation 53,003 2,250
-------- --------
Total $395,086 $ 75,723
=========== =========
Amortization of leased equipment is included in depreciation expense and
totaled $50,753 and $2,250 for the year ending December 31, 1998 and 1997,
respectively.
<PAGE>
9. Capital Leases (Continued)
The following is a schedule by years of future minimum lease payments as of
December 31, 1998 and 1997.
1998 1997
1998 $ - $ 20,503
1999 111,359 20,503
2000 118,403 20,503
2001 115,817 20,503
2002 101,541 10,773
2003 61,549 -
Total minimum lease payments 508,669 92,785
Less: Amount
representing interest 120,432 19,009
Present value of net
imum lease payments $ 388,237 $73,776
=========== =======
The present value of net minimum lease payments are reflected in the
balance sheet as:
1997 1998
Current portion of capital lease obligations materials $66,125 $24,324
Capital lease obligations, net of current portion 322,112 49,452
--------- --------
$ 388,237 $ 73,776
========== =======
10. Note Payable - Stockholder
The balance reflected on the December 31, 1997 consolidated financial
statements relates to a note payable with an original principal balance of
$47,500 and interest rate of 8% to a stockholder dating back to 1994 when
Brounley was formed. No payments were made on this note prior to 1997.
During 1998, the note balance of $31,600 was reclassified as additional
paid-in capital.
<PAGE>
TOUPS TECHNOLOGY LICENSING, INCORPORATED
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
<PAGE>
11. Line of Credit
InterSource maintains a $50,000 bank line of credit with interest
payable monthly at bank prime (current 8.75%) plus 2%. At December 31, 1998
and 1997, the amounts due were $49,574 and $-0-, respectively. The line of
credit matures November 30, 1999. The line is secured by inventory and the
personal guarantee of certain stockholders.
12. Capital Stock
Common
In 1998, the Company amended its Articles of Incorporation to
authorize 50 million shares of common stock with a par value of $0.001
(one, one-thousandth dollar) per share. As of December 31, 1998 and 1997,
there were 22,217,299 and 8,630,000 shares issued and outstanding,
respectively. Of the 22,217,299 shares issued and outstanding at December
31, 1998, 6,034,056 shares are unrestricted and 16,183,243 shares are
restricted as to the sale to other parties pursuant to the resale
provisions of Sec. Rule 144. Of the 8,630,000 shares issued and outstanding
at December 31, 1997, 170,000 shares are unrestricted and 8,460,000 shares
are restricted as to the sale to other parties pursuant to the resale
provisions of SEC Rule 144.
Preferred
The Company is also authorized to issue 10 million shares of
preferred stock having a par value of $1 per share. There were no preferred
shares issued or outstanding at either December 31, 1998 or 1997.
13. Operating Leases
The Company has leases for buildings which are classified as
operating leases. Total rent expense for all operating leases for 1998 and
1997 was $117,154 and $-0-, respectively.
Future minimum lease payments under the noncancellable operating
leases with initial or remaining terms of one year or more are as follows:
1999 $ 291,410
2000 263,718
2001 276,904
2002 265,414
___________
$ 1,097,446
14. Income Taxes
The Company has cumulative net operating losses of approximately
$2,300,000 and $40,413 at December 31, 1998 and 1997, respectively, which
are expected to provide future tax benefits of approximately $782,000 and
$8,085, respectively, for both Federal and State purposes. A valuation
allowance for the entire benefit has been recognized as it is not
reasonable to estimate when or if the benefit will be realized. These tax
benefits expire beginning in 2012. The income tax expense recorded in the
accompanying financial statements represents income taxes payable for
operations of the companies acquired for activities prior to the dates of
merger.
15. Noncash 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. In 1997, the Company issued 165,000 shares of restricted stock
to the licensors of the Company's three technologies. These shares were recorded
at a total of $165.
. In 1997, the Company issued 125,000 shares of restricted stock to
consultants and employees. These shares were recorded at $125.
. In 1997, the Company issued 120,000 shares of restricted stock for the
use of operating facilities for one year. These shares of stock were recorded at
$120.
. In 1998, the Company acquired assets of $369,846 under capital lease
agreements.
. In 1998, a shareholder note payable for $31,600 was reclassified as
additional paid-in capital.
<PAGE>
15. Noncash Disclosures (Continued)
. In 1998, the Company issued 1,203,241 shares of restricted stock for the
acquisition of InterSouce Healthcare, Inc.
Assets acquired $1,301,521
Liabilities acquired $611,850
. In 1998, the Company issued 5,602,697 shares of restricted common stock for
services. These shares were recorded at a total of $728,351.
. In 1998, the Company issued 900,000 shares of restricted stock for the
acquisition of Brounley Associates, Inc.
Assets acquired $358,887
Liabilities acquired $99,670
. In 1998, the Company issued 500,000 shares of restricted stock for the
acquisition of Advanced Micro Welding, Inc.
Assets acquired $301,834
Liabilities acquired $214,544
16. Contingencies
The Company is periodically involved in legal actions and claims that
arise in the normal course of operations. Management believes that the
ultimate resolution of any such actions will not have a material adverse
effect on the Company's financial position.
The year 2000 is expected to create computer problems for many
organizations because some computers and their programs only recognize the
last two digits in the year. For example, the year 1998 is recognized as
98. When the year 2000 arrives some computers may not process information
accurately or may shut down. Management is in the process of evaluating
their systems to correct any problems which may be created by the year
2000. The Company plans to have all their vital internal systems compliant
before the year 2000 arrives. However, it is not possible to insure that
outside entities will be 2000 compliant.
<PAGE>
17. Commitments
The Company has entered into an agreement to have equipment
manufactured for a cost of $500,000. At December 31, 1998, the first phase
of the equipment is complete and $72,100 has been recorded in property,
plant and equipment.
18. Subsequent Events
In January 1999, the Company entered into a lease agreement that will be
accounted for as a capital lease. The equipment has a cost of $341,200. The
lease calls for an initial payment of $34,120 followed by sixty monthly payments
of $6,323.
In January 1999, the Company issued 25,000 shares of restricted common
stock at a price of $1.00 per share.
On February 17, 1999, the Company sold $750,000 of Series 1999-A Eight
Percent (8%) convertible notes due January 1, 2002. Under the securities
purchase agreement, the investor will purchase another $750,000 in convertible
notes within 30 days after the Company files a Registration Statement or at such
time as the parties mutually agree.
The notes can be converted to common stock of the company at a conversion
price (the "Conversion Price") for each share of common stock equal to the
lesser of (x) one hundred percent (100%) of the lowest of the closing bid prices
for the Common Stock for the five (5) trading days immediately preceding the
Closing Date (defined as the date of this Note); or (y) eighty percent (80%) of
the lowest of the closing bid prices for the Common Stock for the five (5)
trading days immediately preceding the Conversion Date as reported on the
National Association of Securities Dealers OTC Bulletin Board Market.
Additionally, the investor was issued a warrant to purchase 75,000 shares
of the Company's stock at $2.3375 per share through February 17, 2002.
Since the investor did not convert the notes ont eh day of closing, the
Company is required to recognize as interest expense the beneficial conversion
terms of the notes. This additional interest of $187,500 will be amortized over
the period between the closing date (February 17, 1999) and the first date (May
17, 1999) on which the notes can be converted.
At such time as the investor completes the agreement and pays the Company
the balance of $750,000, the investor will receive a three year warrant to
purchase 75,000 shares at 110% of the market price on the date of closing.
If the investor does not convert the second series of notes at the second
closing date, the Company will again be required to recognize additional
interest expense due to the beneficial conversion terms of the notes. Assuming
the market price is unchanged as of the second closing, the Company would
amortize $187,500 over the three months beginning with the date of the second
closing.
19. Restatement of Financial Statements
During 1998, the Company issued 5,602,697 unregistered, restricted shares
of its stock to attract and retain key employees, to acquire various license
agreements, to make acquisitions and for other developmental needs. These shares
were valued at $728,351 ($.13 per share) based on restricted liquidity, lack of
profitable operations and unproven marketability of several licensed
technologies. After consultation with the Securities and Exchange Commission
staff, the Company has determined that a more reasonable value for these shares
would be one in closer proximity to sales to others for similar shares, reduced
for a lack of liquidity discount. Based on this approach the Company has
determined that the shares should be recorded at $.639 per share. This change in
value requires an additional, non-cash charge to 1998 general and administrative
compensation of $2,851,772. This increases the Company's 1998 loss from
$2,187,994 ($0.1498 per share) to $5,039,766 ($0.4142 per share).
Further, the balance sheet impact of the additional non-cash compensation
expense increases additional paid-in capital from $5,484,590 to $8,336,722 and
decreases Retained Earnings (Deficit) from ($2,146,369) to ($4,998,141). The
overall change to the Stockholders' Equity section of the balance sheet is $0.
20. Recission of Stock
Subsequent to year-end, the Company decided to rescind 1,950,000 shares of
stock previously issued to certain officers/directors. The Company,
simultaneously, issued stock options to the same officers/directors to purchase
1,950,000 shares of the Company's stock. The stock may be purchased at $.639 per
share for a three year period beginning on September 1, 1998.
21. Issuance of Preferred Stock
On March 30, 1999, the Company executed a series of agreements and amended
its articles of incorporation in order to complete the placement of $750,000 of
its Series A 7% Preferred Stock with an investor. Under the terms of the Series
A Preferred Stock, the holder may convert at 105% of the closing price anytime
up to 90 days after issuance; 85% of the closing price anytime between 91 days
and 119 days following closing; 80% of the closing price anytime between 120 and
149 days following closing, or; 75% of the closing price anytime after 150 days
following the closing date through March 30, 2004. The Company also issued
93,750 warrants exercisable at $2.40 per share to the investor in connection
with the sale of the Preferred Stock. As a part of a finders fee the Company
issued 50,000 warrants allowing for the purchase of a like number of shares of
the Company's stock at $2.40 per share through March 30, 2004.
<PAGE>
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
The Company has never had any disagreement with its accountants.
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article III of the Company's by-laws provide for the indemnification of
directors, in that Directors of the Company shall not be personally liable for
monetary damages to the Company 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 Company), by reason of the fact that he or
she is or was a director, officer, employee or agent of the Company or is or was
serving at the request of the Company.
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.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Registration fees $ 3,231
Transfer agents' fees $ 1,500
-----
Total $ 4,731
=====
RECENT SALES OF UNREGISTERED SECURITIES
The Company issued "unregistered" securities to various persons and firms
as specified below and all such securities were acquired directly from the
Company in transactions not involving any public offering. All such securities
may only be resold upon compliance with Rule 144, adopted under the Act of 1933.
All securities were sold in reliance upon Section 4(2) of the Securities Act of
1933. All purchasers were either "accredited" or sophisticated. 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. All purchasers were provided with access to information about
the Company.
Further, throughout these transactions specified in the following
discussions, the Company relied on Section 4(2) of the Act of 1933, as amended
and all purchasers executed a Subscription Agreement indicating (i) they meet
the definition of "Accredited Investor" as that term is specified in Regulation
D, Rule 502, and; (ii) they have such knowledge and experience in financial and
business matters that either alone or with a purchasers representative, are
capable of evaluating the merits and risks of the investment.
During November 1998 through March, 1999, the Company completed an offering
of its unregistered common shares in the manner and on reliance of the various
Sections of the Act of 1933 cited above to 43 accredited investors. The
unregistered common shares were offered and sold at the rate of $1.00 per share
for an aggregate of $1,747,500 in proceeds to the Company The Company further
agreed to conduct a registration of the shares sold in the above described
private offering and all persons participating therein are included as a part of
the registration to which this Prospectus is intended. The Company's offering is
now closed.
During November, the Company issued 1,203,241 unregistered common shares in
exchange for 100% of the issued and outstanding capital stock of InterSource
Health Care, Inc. The Company agreed to registered 225,000 of the 1,203,241
unregistered shares issued in connection with the acquisition of InterSource.
During November through December, the Company issued 838,000 unregistered
common shares to either engage consultants or had fees come due from consultants
that had previously been engaged to include Michael McBee 5,000 shares; Mark
Trinske 10,000 shares; Steven Ungar 250,834 shares; Mike O'Malley 248,333
shares; Richh Limited Partnership 263,333 shares; Michael Finley 50,000 shares;
Eugene Malove 10,000 shares, and; Daniel B. Crossman 500 shares.
During November and December, 1998, the Company issued 150,500 unregistered
shares to employees including David DeCara 90,000; John Rogers 10,000; Michelle
Goldstein 20,000; Ronald Moore 15,000; Rebecca Bonner 3,500; Rick Gabel 6,000,
and; Cheryl McDermitt 6,000.
The Augustine Notes. On February 17, 1999, the Company executed a series of
agreements with Augustine Capital Group ("Augustine") relating to the purchase
by Augustine of $1,500,000 of TTL's Series 1999-A Eight Percent (8%) Covertible
Notes (the "Notes") and the issuance of Warrants and registration rights
relating thereto. On that same date, Augustine delivered $750,000 to TTL and is
obligated to deliver a second $750,000 30 days following the registration of the
shares underlying the Notes. There were no brokers, promoters, underwriters or
similar persons associated with this transaction. Closing fees of $10,000 were
paid (i) to Augustine counsel and (ii) third party counsel whom acted as Escrow
Agent. A more detailed summary of the Series 1999-A Eight Percent (8%)
Convertible Note due January 1, 2002 and the warrants and registrations rights
provided in connection therewith immediately follows
The Shaar Preferred. On March 30, 1999, the Company executed a series of
agreements and amended its articles of incorporation in order to complete the
placement of $750,000 of its Series A 7% Preferred Stock with The Shaar Fund.
Under the terms of the Series A Preferred Stock, the holder may convert at 105%
of the closing price (the "Closing Price" was fixed at $2.10 on March 30, 1999)
anytime up to 90 days after issuance; 85% of the closing price anytime between
91 days and 119 days following closing; 80% of the closing price anytime between
120 and 149 days following closing, or; 75% anytime after 150 days following the
closing date. The Company also issued 93,750 warrants exercisable at $2.40 per
share in connection with the sale of Preferred Stock and granted certain
registration rights. The Company paid a finders fee of 8% or $60,000 plus 50,000
Warrants allowing for the purchase of the Company's securities at 120% of the
closing bid price at time of exercise. A more detailed summary of the Series A -
7% Convertible Preferred Stock and the warrants and registrations rights
provided in connection therewith immediately follows this section.
Series 1999-A Eight Percent (8%) Convertible Note due January 1, 2002
The Company shall repay to Augustine the principal sum of $750,000 on
January 1, 2002 (Maturity Date) and interest on the principal sum outstanding at
the rate of 8% per annum due quarterly in arrears on March 31, June 30 ,
September 30 and December 31 of each year during the term of the Note. The first
such interest payment is due June 30, 1999. The Notes may be exchangable in
amounts of $50,000 or greater. Conversions of the Note must be effected in
increments of at least $10,000 of principal amount.
Augustine may convert the face amount of the Note at any time commencing
the earlier of (i) the date the Registration Statement relating to the shares
underlying the Note becomes effective, or; (ii) the date which is ninety (90)
days after February 17, 1999 (date of Note). Accordingly, the Conversion date
would be approximately May 17, 1999.
The per share price at which Augustine may convert the Note is the lesser
of: (i) 100% of the lowest closing bid price per share during the five days
preceeding the Closing Date (this price per share has been fixed at $1.78125 (1
& 25/32) per share. Accordingly, should Augustine select method (i) for the
conversion rate of their principal amount, they would be entitled to 421,053
Toups Technology common shares); or (ii) 80% of the lowest closing bid price per
share during the five days preceeding the conversion date.
The Company may, at its option, redeem the Note at any time in an amount
equal to 125% of the face amount of the portion of the Note remaining plus
interest at the time of such redemption.
In keeping with the intent of the parties, the Company shall register
421,053 common shares relating to the first closing and 421,053 common shares in
anticipation of the second closing. At this time, the estimated number of
registered common shares necessary for the full conversion of the principal
amount of the notes is 842,106 common shares.
Warrants in connection with the Augustine Notes
As a part of sale the Augustine Notes, the Company provided 125,000
Warrants wherein each such Warrant entitles the holder thereof to purchase the
Company's common stock at the rate of 110% of the closing bid price for the
Common Stock on the date of such Closing (the closing bid price for the
Company's common shares on February 17, 1999 was $2.00. Accordingly, the
exercise price for the Warrants relating to the first Closing is $2.20 per share
making the full exercise price of the 125,000 Warrants delivered in connection
with the first Closing $275,000).
Registration Rights in connection with the Augustine Notes
As a part of its Augustine agreements, the Company granted certain
registration rights which, in effect, require TTL to amend its current
pre-effective SB-2 Registration Statement to include the total estimated number
of shares available for conversion of the Notes and exercise of the Warrants.
Series A 7% Convertible Preferred Stock
On March 30, 1999, the Company executed a series of agreements and amended its
articles of incorporation in order to complete the placement of $750,000 of its
Series A 7% Preferred Stock with The Shaar Fund. Under the terms of the Series A
Preferred Stock, the holder may convert at 105% of the closing price anytime up
to 90 days after issuance; 85% of the closing price anytime between 91 days and
119 days following closing; 80% of the closing price anytime between 120 and 149
days following closing, or; 75% anytime after 150 days following the closing
date.
The Company also issued 93,750 warrants exercisable at $2.40 per share in
connection with the sale of Preferred Stock and granted certain registration
rights. The Company paid a finders fee of 8% or $60,000 plus 50,000 Warrants
allowing for the purchase of the Company's securities at 120% of the closing bid
price at time of exercise.
Warrants issued in connection with the Series A 7% Convertible Preferred Stock
As a part of the sale of its Series A 7% Convertible Preferred Stock, the
Company also issued 93,750 Warrants providing the holder the right to acquire
the Company's common stock at a price equal to 120% of the market price on the
closing date. The Warrants may be exercised anytime up through March 30, 2004.
The exercise price of the warrants issued in connection with the sale of Series
A 7% Convertible Preferred Shares is $2.40 per share. As a further part of the
sale of the Series A 7% Convertible Preferred Shares, the Company 50,000
warrants as a part of a finders fee. The finder's warrants are identical in all
respects to the warrants issued to the holder of the Series A 7% Convertible
Preferred Shares.
Registration rights in connection with the Series A 7% Convertible
Preferred Stock
As a part of its Shaar Fund agreements, the Company granted certain registration
rights which, in effect, require TTL to amend its current pre-effective SB-2
Registration Statement to include the total estimated number of shares available
for conversion of the Preferred Stock and exercise of the Warrants including
those Warrants issued to the finder.
<PAGE>
EXHIBITS
Table of Exhibits Page No.
The following Exhibits are incorporated by reference from previously filed
material:
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-10((v) Amended BORS Lift License Agreement
EX-10(vi) Magnetion(a) License Agreement
EX-10(vii) Tunnel Bat License Agreement
EX-10(viii) Exchange of Share Agreement, re: Brounley Engineering
EX-10(ix) Exchange of Share Agreement, re: InterSource Health Care, Inc.
EX-10(x) Joint Venture Agreement by and between Toups Technology and Luz
y Fuerza Utility
EX-20 AquaFuel Certification Report
The following exhibit is included herein and made a part hereof.
EX-23 Auditor's Consent
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UNDERTAKINGS
The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the
registration statement; and notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b), if, in
the aggregate, the changes in the volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement.
(iii)Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(4) 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 Company pursuant to the foregoing provisions,
or otherwise, the company 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. In the
event that a claim for indemnification against such liabilities (other
than the payment by the undersigned of expenses incurred or paid by a
director, officer or controlling person of the undersigned in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the undersigned will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
<PAGE>
SIGNATURES
Toups Technology Licensing, Inc.
(Registrant).
______________________
Leon H. Toups,
President and Chief Executive Officer
By (Signature and Title)
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
S/S LEON H. TOUPS
(Signature)
President and Chief Executive Officer
(Title)
(Date): June 23, 1999
