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)
7887Bryan 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.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<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
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
TOUPS TECHNOLOGY LICENISNG, INC.
a diversified technology company
5,857,761 SHARES OF COMMON STOCK
OFFERED BY CERTAIN SELLNG SECURITY HOLDERS
(IMAGE OMITTED)
This Prospectus relates to the sale of 5,857,761 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 3,144,822 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.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
THE DATE OF THIS PROPOSED PROSPECTUS IS MARCH, 1999.
Prospectus
SUMMARY
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." 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 statement involves risks and uncertainties that could cause
actual events or results to differ materially from the events or results
described in the forward-looking statements. Some of the risks inherent in any
forward-looking statements include 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; 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.
Toups Technology Licensing, Inc., was incorporated in the state of Florida
on July 28, 1997 ("Toups Technology", "TTL" or the "Company" to commercialize
late-stage technologies, which are acquired through license agreements and
acquisitions. The Company's voice telephone number is (727)-548-0918 and
facsimile number is (727)-549-8138. The Company maintains a Web site at
http//:toupstech.com which site provides links to each of the Company's
technologies and SEC filings.
THE OFFERING
Securities Being Offered - This Prospectus relates to the sale of 5,857,761
shares of Common Stock by the holders hereof, identified as "Selling
Security Holders" in this Prospectus. The Company will not receive any
proceeds from shares sold by the Selling Security Holders. See "Selling
Security Holders" and "Plan of Distribution."
The Company - At the end of 1998, the Company was comprised of nine
divisions resulting from licensed technologies, the acquisition of
operating entities and a manufacturing rep agreement. During 1998, the
Company earned its revenues from six of its nine divisions. See
"Description of Business."
Result of Operations - For the period ending December 31, 1998, the
Company's audited consolidated financial statements reflect 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
$(2,187,994) or a loss of ($0.09) per share based on the 22,217,299 shares
outstanding at December 31, 1998 or a loss of $(0.18) 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. See "Auditor's Report and
accompanying Consolidated Financial Statements and Notes thereto for the
years ending December 31, 1998 and 1997."
Risk Factors The Common Stock offered hereby involves a high degree of risk
and prospective investors should consider carefully the factors specified
under "RISK FACTORS" before electing to invest. See "RISK FACTORS".
Trading Symbol Common Stock "TOUP"
Total number of shares of Common Stock outstanding 25,438,356
Total number of shares of Common Stock being Offered
by Selling Security Holders 5,857,761
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
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. 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.
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 its various technologies and
acquisitions. The Company has not relied upon anything other than the opinion of
management in developing the business plan for its technologies or acquisitions.
The Company's business purpose is the commercialization of technologies through
license agreements and acquisitions. As such, the majority of the Company's
divisions are still in the early-stage or start-up phase of operations. The
Company is 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 34.3% 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 acquisition 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 its
various technologies and acquisitions, 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 any of the Company's product or service lines 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 success will be heavily dependent
upon the continued leadership 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.
Unidentified risks. Although the Company has endeavored to identify the material
risks, particularly associated with an investment in the Common Stock, material
risks could exist which have not been identified herein.
<PAGE>
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
$1.50-$3. On March 31, 1999, the closing "bid" price of the Company's securities
was $2.00
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 5,857,761 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%
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%
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%
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 . 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%
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%
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% 450,000 0 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'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%
Rigis, John (1) ............. 100,000 (13) 100,000 0 0%
Rivera, John(3) ............. 100,000 (13) 100,000 0 0%
Rosenstein, Robert(8) ....... 50,000 (12) 50,000 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) ............ 40,000 (12) 40,000 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)
Suton, Larry(1) ............. 50,000 (12) 50,000 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%
AquaFuel-Dominicana ......... 500,000 2.2% 500,000 0 0%
Total ....................... 6,014,761 27.07% 5,857,761 157,000 .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
<PAGE>
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) 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 was recently served with notice relating to an alleged conflict
between the various patents underlying TTL's AquaFuel technology and patents
held in the name of Wilbur Dammann and David Wallman. Counsel to the Company has
since opined that the allegations are without legal merit. However, due to the
importance of AquaFuel to the Company's business purpose, the following
discussion is provided.
On November 25, 1998, the Company was served with an Infringement Notice by
Counsel representing Messrs. Wilbur A. Dammann and W. David Wallman as inventors
relating to U. S. patents 5,159,900 Method and Means of Generating Gas from
Water for Use As A Fuel issued November 3, 1992 and 5,417,817 Biomass
Gasification Process and Apparatus issued May 23, 1995 (collectively "Dammann
and Wallman Patents).
The November 25, 1998 Infringement Notice alleged the commercialization of
technology based on US Patents 5,435,274 and 5,692,459 and other associated
patents and trademarks (collectively the "AquaFuel Patents") would infringe on
the Dammann and Wallman Patents. By inference, the November 25, 1998
Infringement Notice further alleges that parts of the AquaFuel Patents are based
on a practice which is in the public domain as such practice is based on US
Patent 603,058 issued April 26, 1898 in the names of Hillary Eldridge, Daniel
Johnson Clark and Sylvain Blum (the "Eldridge Patent").
The Infringement Notice further alleged the Company had failed to cite
these matters in its Internet home page and in official filings submitted to the
Securities and Exchange Commission.
At the time the Infringement Notice was received, the Company was actively
engaged in license negotiations relating to the Dammonn and Wallman Patents.
Messrs. Dammonn and Wallman had neglected to inform their counsel of active
license negotiations prior to serving the Infringement Notice. Upon notification
of on-going negotiations, on December 9, 1998, counsel to Messrs. Dammonn and
Wallman withdrew their charge of infringement.
The Company subsequently proposed a license agreement relating to the
Dammonn and Wallman Patents which was rejected in a January 8, 1999, two-page,
seventeen point writing (the "Rejection Letter").
Throughout the Rejection Letter, Dammonn and Wallman state that TTL should
terminate its world-wide exclusive agreements relating to AquaFuel and that the
Company should execute a non-exclusive, relatively short-term agreement with
Dammonn and Wallman. Further, the Dammonn and Wallman rejection letter directed
TTL to pay anywhere from $750,000 to $2,000,000 for the short-term,
non-exclusive license agreement.
Upon receipt of these materials, the Company engaged its patent counsel to
conduct an in-depth review of the three patents underlying the AquaFuel
technology which are in the name of William Richardson, Jr., the two Dammann and
Wallman Patents and the Eldridge Patent.
Further, the Company conducted a thorough review of all materials posted on
the Company's Internet home page and in all documents filed with the Securities
and Exchange Commission.
At the conclusion of this investigation, on January 26, 1999, the Company
responded to Dammann and Wallman stating the following:
1. The Dammann and Wallman claims to patent priority were "without legal
merit.";
2. The Dammann and Wallman statements to members of the financial community
were based on false assumptions and were potentially damaging to TTL;
3. That any claims of misrepresenting information in the Company's official
security filings should be immediately brought forth;
4. That in legal fact, the Dammann and Wallman patents are subordinate to
the AquaFuel Patents and that any commercialization of their technology
would result in a cease and desist order from TTL;
5. The Company's WAFT agreement (the Company's AquaFuel license agreement is
with WAFT Partners) requires TTL pay quarterly advance royalty fees.
After receipt of the Rejection Letter, TTL paid all advance royalty fees
through 1999. TTL further notified WAFT Partners of the Company's intent
to continue the agreement for the next three-year period beginning
January 1, 1999.
Summary of TTL's patent counsel Opinion relating to a review of the
AquaFuel, Dammann and Wallman and Eldridge Patents:
"It is my opinion that neither of the Dammann patents is of concern to the
present technical efforts of TTL." As it relates to the assertion that the
AquaFuel patents cannot be practiced without infringing on the Dammann and
Wallman Patents, TTL's counsel indicated this "made no sense." The assertion
that the AquaFuel Patents cannot be enforced, TTL's counsel states "These
comments are without legal merit." As it relates to the assertion that the
AquaFuel patent owner failed to cite the Eldridge or Dammonn and Wallman
Patents, TTL's counsel reports "the public records in the file wrappers of the
first two Richardson (AquaFuel) Patents show that Dammonn 1 was cited by the
Examiner against Richardson 1 and 2 and were found to be patentable thereover."
The Company has engaged additional patent counsel whom is preparing an
affidavit of testimony relating to these matters. The following pictorial
reflects the time-frames involved and provides certain pertinent notes relating
to the AquaFuel and Dammann and Wallman Patents:
PICTURE OMITTED
1. According to WAFT Partnership patent counsel, Richardson's patent
priority over Dammann and Wallman was established by virtue of 1989
disclosure of invention to Florida for funding.
2. Dammann executes a Statutory Disclaimer relating to claims 1, 2 and 3 of
original Dammann Patent 1. According to WAFT Partnership patent counsel,
"Hence, Dammann having admitted on the record that he never was the first
inventor of his first claimed embodiment."
3. In correspondence setting forth reasons for allowing certain claims made
in AquaFuel Patent 2, the Patent Office Examiner states: "The following
is an examiner's statement of reasons for allowance: The 35 USC 102(b)
rejection of claims 1, 6, 8, 11-14, 22 and 23 has been withdrawn because,
as a result of the evidence of the disclaimer of claims 1-3 by Dammann,
that patent no longer claims the rejected invention and therefore the
Rule 131 Declaration is considered sufficient to overcome the rejection.
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. None of the Directors hold similar positions in any other
reporting company. The Company intends to conduct its next election of Directors
at its February 19, 1999 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.
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
The Company has 22,217,299 shares of its Common Stock issued and
outstanding. The following table sets forth, as of December 30, 1998, the
beneficial ownership of the Company's Common Stock (i) by the only persons who
are known by the Company to own beneficially more than 5% of the Company's
Common Stock; (ii) by each director of the Company; and (iii) by all directors
and officers as a group.
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 4,006,680 15.7%
418 Harbor View Lane
Largo, Florida 33770
Common Mark Clancy 2,383,340 9.3%
417 Barrett Court
Tampa, Florida 33617
Common Michael Toups 2,383,340 9.3%
400 Palm Drive
Largo, Florida 33770
Common Officers and Directors 8,773,360 34.3%
(three persons)
Common Jerry Kammerer 1,660,000(4) 7.4%
1421 Water View Drive
Largo, Florida 33771
(1) 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 and Mr.
Kammerer subsequently resold the 180,000 shares.
(2) During December, 1998, Mr. Toups donated 110,000 unregistered common shares
to organizations which are part of the Catholic Church.
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 25,438,356 Common Shares outstanding.
At December 31, 1998, the date of the Company's audited consolidated
financial statements, TTL had issued and outstanding 22,217,299 common shares of
which 6,034,056 shares were either registered or had been sold pursuant to
exemptions from registration. Of the 6,034,056 shares, 1,608,218 were issued
pursuant to Regulation D, Rule 504 during 1997 at the Company's inception and
4,425,838 shares were previously registered on Form SB-2 in November, 1998. Of
the 22,217,299 common shares issued and outstanding at December 31, 1998,
16,183,243 were unregistered. Since the date of the Company's audited
consolidated financial statements, the Company ha s issued an additional
4,089,425 and has canceled 868,368 unregistered common shares.
At the conclusion of this Offering, of the 25,438,356 Common Shares issued
and outstanding, 11,964,817 Common Shares are registered and in the future, may
be resold.
At the conclusion of this Offering of the 25,438,356 Common Shares issued
and outstanding, 13,473,539 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 42% of the
Issuer's capital stock. As such, these individuals will be in a position to
constitute a majority of the Shareholders at any vote of shareholders, including
the election of Directors.
All Shares are entitled to share equally in dividends when and if declared
by the Board of Directors out of funds legally available 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 EXPERT AND COUNSEL
No such interest.
DESCRIPTION OF BUSINESS
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.
Business Purpose - 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 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.
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
$(2,187,994) or a loss of ($0.09) per share based on the 22,217,299 shares
outstanding at December 31, 1998 or a loss of $(0.17) 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 33% or $722,748 of its losses during 1998 to a
charge against earnings relating to the issuance of common stock for services.
The Company attributes the remaining 66% or $1,465,246 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).
Forecast of growth - A division by division forecast of operational expectations
for 1999 begins on page 10. 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
nine 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 the technology
inventor as Project Manager. This structure preserves the single-minded,
entrepreneurial spirit of each inventor 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 and BORS national
sales office in Garden City, Kansas. (See "Description of Property").
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
1999 capital financing programs. During the first quarter, 1999, the Company
completed 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
At the end of 1998, the Company was comprised of nine divisions resulting
from licensed technologies, the acquisition of operating entities and a
manufacturing rep agreement. During 1998, the Company earned its revenues from
six of its nine divisions. A more complete discussion of each division is
immediately following the table on the next page.
Market Business Date & Method of 1998
# Division Segment Purpose Acquisition revenue
- - -------- ---------------- ----------------- ----------------- -------
1 BORS Energy & Manufacture and January, 1998 Yes
Natural Resource direct sale of Exclusive world
oil pump equipment wide license
2 Brounley Energy Manufacture and sale September , 1998 Yes
Engineering of radio frequency acquisition
power generators
for lasers, plasma
etching and other
applications
3 InterSource Healthcare Resale of medical December 16, 1998 Yes
Healthcare equipment and acquisition
consumbables.
4 TTL Manufacturing Fabrication to April, 1998 Yes
Manufacturing customer prints acquisition
(formerly A.M.W.
Metal Fabricators)
5 AquaFuel Energy & Alternative fuel and November 3,1997 Yes
Environment & Recycling of polluted Exclusive,world
Natural water wide license
Resource
6 ETR Energy & Recycles scrap tires June, 1998 No
Environment into various products Exclusive, world
wide license
7 Precision Manufacturing Precision welding for Internally Yes
Micro Welding aerospace, medical and developed
automotive components
8 Tunnel Bat Environment Manufacture and sale of August, 1998 No
culvert reclamation Exclusive,world
vehicle wide license
9 TTL Energy Provides electric power June, 1998 No
Power Systems co-generation that Non-exclusive
parallels with the manufacturers rep
local manufacturers
utility grid
A detailed discussion of each above cited division begins on page 12. The
Company spent virtually all of 1998 in developing its business purpose. In
considering the Company's operational objectives during 1999, the following
discussion is provided.
1998 into 1999. For the Company's first full fiscal year ending December
31, 1998, TTL's independent audit reflects revenues of $3,132,001 and net income
(loss) of ($2,187,994). 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. The
following discussion relates to management's short and long-term expectations
for each division with an emphasis on near term opportunities.
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 Electromagnetic Tire Recycling and 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: Electromagnetic Tire
Recycling - $450,000; Tunnel Bat vehicles - $72,000 and; potentially, AquaFuel -
$300,000.
The Balanced Oil Recovery System Lift - (BORS) The Company believes its
near-term opportunity with the BORS technology is an expansion of TTL's direct
selling program. A detailed discussion of the BORS technology can be found
beginning on page 31.
The Company believes that during 1998, the BORS technology followed a
conventional path from prototype through market introduction and sales.
Throughout 1998, the Company believes it verified the feasibility of the
technology and, through field trials and engineering development, completed the
production model. During the fourth quarter, 1998 into the first quarter, 1999,
the Company began sales within the States of Texas and Oklahoma. During the
first quarter, 1999, the Company sought to establish the field service and sales
infrastructure necessary to provide for on-going, reliable operations and to
expand its primary sales territory to include Kansas.
The Company has established a minimal goal of selling 600 BORS units during
1999. The Company intends to manufacture and assemble the BORS device at its
facilities in Largo, Florida. The Company has engaged a three-fold strategy to
achieve its 1999 sales objectives including (i) a leasing program for both the
private operator as well as the small business owner; (ii) establishing and
staffing a national direct sales office located in Garden City, Kansas and; (ii)
establishing a series of distributors each of whom would be responsible for a
minimal number of sales and for providing service on BORS units sold.
The Company has developed a leasing program utilizing outside leasing
sources to provide for both the private operator defined as the purchaser of 1
to 4 BORS units and the Small Business or partnership defined as the purchaser
of amounts in excess of $75,000. The leasing program can provide approval in one
day for amounts below $75,000 and within three days for transactions over that
amount. The following table outlines the essential requirements of the Company's
BORS leasing program:
of Units Standards
1 2 years in business under current ownership - average daily checking
balance $1,500 or higher for the past 2 years
2 4 years in business under current ownership - average daily checking
balance $6,500 or higher for the past 2 years
3 or 4 5 years in business under current ownership - average daily checking
balance $10,500 or higher for the past 2 years and comparable credit
with a loan or lease
More than 4 Five years in business under current ownership - average daily
checking balance $20,000 or higher for the past 3 years and
comparable credit with a loan or lease
To better focus the Company's direct BORS selling program, during February,
1999, TTL engaged Mr. Larry Rice as its Vice President, BORS and opened a
national sales office in Garden City, Kansas. Mr. Rice's past experiences
include more than 20 years industry-related experience. Mr. Rice is a salaried,
full-time employee of TTL. As a part of the BORS pricing structure, the Company
offers a $1,000 commission for the sale of each BORS unit. Utilizing this
commission structure, the Company seeks to engage field sales representatives
whom are engaged on a commission-only basis. After running classified ads
throughout the states of Texas, Oklahoma and Kansas, during March the Company
trained a total of 23 sales representatives at its Garden City office. As of
this writing, the Company has 23 field sales representatives operating in the
states of Texas, New Mexico, Louisiana, Mississippi, Oklahoma and Kansas. The
Company's direct selling program is, in the view of management, a part of
establishing a series of distributors whom will also be accountable for
providing after sale service requirements.
To facilitate the field-network approach, the Company developed a
Distributorship Agreement which provides an exclusive territory to a particular
Distributor. Under the terms of the agreement, the Company provides product and
training. In exchange for the "exclusive" nature of the agreement, the
Distributor is obligated to cause for the sale of a specified number of units
and to provide for all after market service requirements. The Distributor is
able to charge a fee for service-related work outside the scope of the Company's
BORS warranty. In general, the terms of the agreement provide for an exclusive
territory for initial periods of twelve months afterwhich it can be extended
automatically for twelve months provided the minimum number of BORS units are
sold.
The Distributorship Agreements are not contracts for sale but represent a
minimal number of BORS units which a particular distributor must sell during the
term of their agreement to retain exclusive rights to market the BORS product
line.
To date, the Company has executed 5 Distributorship Agreements with parties
covering territories in the states of Texas, New Mexico, Louisiana, Mississippi,
Oklahoma, California and Kansas.. The following table summarizes the key
elements of these agreements. There is no penalty to the distributor for failing
to meet the following objectives except to lose the exclusive rights to a
particular territory. The Distributors under agreement with the Company to date
are an Oklahoma-based oil field equipment company; a Louisiana-based
environmental technologies company; an Oklahoma-based oil field equipment
company, and; an Oklahoma-based oil field operator. The five distributorship
agreements are summarized below:
Distributor State Term of Agreement Number of BORS
Units to be sold
- ---------- ---------------------- ----------------- ----------------
A Edmond, Oklahoma-based March 26, 1999 120
March 26, 2000
B Lafayette,Louisiana-based March 22, 1999 200
March 22, 2000
C Seminole, Oklahoma-based March 18, 1999 120
March 18,2000
D Ardmore, Oklahoma-based March 18, 1999 60
September 18, 1999
InterSource. The Company's near-term opportunities for its InterSource division
are expansion of its consumables, particularly pharmaceutical sales, as well as
expanding its international new and used equipment selling activities. The
Company's InterSource division markets new and used medical equipment for both
domestic and international clients as well as consumable items.
As a marketer of new and used medical equipment, InterSource represents
numerous original equipment manufactures in a variety of specialized product
areas including imaging and laboratory equipment; outfitting clinics and
hospitals, physicians' office equipment and ultrasound units. In consumables.
InterSource offers a portfolio of products including insulin, insulin syringes,
physicians' office supplies, surgical instruments and urine drainage bags.
In furtherance of marketing both new and used medical equipment, the
Company has engaged an in-house selling division comprised of a licensed medical
doctor, a registered pharmacist and a registered nurse. The Company believes the
experiences of its sales personnel are instrumental in articulating the value or
benefit of a particular piece of equipment. The Company's professional staff of
InterSource selling agents also participates in the sale of consumables.
To expand consumable sales, InterSource President John Silwoski concluded a
distributorship agreement with Texas-based Carrington Surgical Instruments, Inc.
and Carrington International Group, LLC.. Under the terms of the distributorship
agreement, InterSource shall act as a distributor for all Carrington products.
During the month of March, 1999, InterSource processed $1,500,000 in sales by
virtue of the Carrington distributorship agreement.
AquaFuel. The Company's near term opportunities with AquaFuel include a
continuation of its AquaFuel-Dominicana Joint Venture and the market
introduction of consumer and industrial equipment. The Company's long-term
opportunities foresee an expansion of the Company's AquaFuel division into an
Alternative Fuels division as TTL acquires, through license agreement or
acquisition, additional fuel technologies. A complete discussion of the AquaFuel
technology can be found starting on page 34.
During December, 1998, the Company entered into a joint-venture with a
consortium of companies in the Dominican Republic. The joint-venture named
AquaFuel-Dominicana is structured to purchase AquaFuel-producing equipment from
TTL. Once the equipment is purchased, the joint-venture intends to utilize the
fuel produced in the production of electricity in various parts of the Dominican
Republic. The Company would derive its revenues both from the sale of equipment
and as a 49% owner of the joint-venture.
Throughout 1998, the Company believes it successfully demonstrated the
quantitative aspects and established the character of AquaFuel through the
publication of two certification reports. AquaFuel, in the opinion of
management, is the cleanest burning fuel known at this writing and can be used
in any combustion engine with minor modifications. Satisfied with the result of
the AquaFuel technology, i.e., clean burning, non-fossil fuel, the Company
sought to improve on the economics of producing AquaFuel in large quantities.
For the analytical purposes of studying AquaFuel, throughout 1998, the Company
made use of a crude production apparatus able to generate approximately 30 cubic
feet of AquaFuel fuel per hour. Using this apparatus, the costs to produce
AquaFuel were significantly higher than the costs to produce fossil fuels.
However, as discussed in the Company's AquaFuel Certification Reports, the
production of the fuel grows on an exponential basis relative to an increase in
electric power. The amount of fuel produced from a 40 volt charge was
approximately 3 times the amount of fuel produced from a 20 volt charge.
As a part of its obligations under the AquaFuel-Dominicana joint venture,
the Company is scheduled to deliver equipment during the second quarter, 1999
which is able to produce AquaFuel at the rate of 4,000 cubic feet per hour. In
order to carefully address the mechanics of expanding equipment capability from
producing 30 cubic feet per hour to 4,000 cubic feet per hour, the Company opted
to develop an intermediary step and develop an initial unit able to produce a
minimum of 2,000 cubic feet per hour. Since January, 1999, the Company has been
engineering and fabricating the intermediary, 2,000 cubic feet per hour unit at
its facilities in Largo, Florida.
To date, the Company has been able to develop equipment able to generate a
minimum of 1,500 cubic feet per hour. The Company envisions that this first
AquaFuel production apparatus can meet the cubic feet per hour obligations of
the AquaFuel-Dominicana Joint Venture by running two or three units in series.
During preliminary operation of the prototype commercial AquaFuel unit, as a
stand-alone unit only, the Company has not experienced a significant improvement
in the economics of producing AquaFuel. However, as previously described, when
AquaFuel is produced in conjunction with the recycling of liquid waste, the
"cost" of producing AquaFuel can be substantially reduced below the costs of
producing other fossil fuels.
When and as the Company is able to reduce the production costs of AquaFuel,
TTL envisions marketing industrial and consumer equipment such as welding tips,
combustible engine conversion kits, gas burners and various AquaFuel production
units which can range in size from a few hundred to a few thousand cubic feet
per hour.
As a part of the Company's long-term environmental commitment, during 1999
TTL intends to expand its AquaFuel division into an general Alternative Fuels
division through acquiring the license rights to other existing alternative-fuel
technologies. While preliminary discussions with the owners of such alternative
fuel technologies has been promising, there can be no assurance the Company will
be successful in attracting other alternative fuel technologies.
Electromagnetic Tire Recycling Process. The Company's near term
opportunities relating to the Electromagnetic Tire Recycling Process ("ETRP") is
the activation of the first commercial size ETRP module, the sale of products
estimated to result therefrom and through granting license agreements. A
complete discussion of the ETRP technology can be found starting on page 37.
The ETRP technology relates to a fully-contained module designed to process
up to 100 tires per hour into which the shredded rubber tires are reverted back
to the original elements of carbon black, oils and petro-chemicals. The module
design anticipates the majority of the steel is removed prior to processing. In
order for the Company to demonstrate the economic viability of the technology,
TTL must construct a single module, and locate the proto-type device within an
existing tire processing facility. It is not necessary for the Company to incur
the expense of constructing a fully-operational stand-alone plant to in order to
demonstrate the economic viability of the ETRP technology.
Accordingly, the Company is currently investigating a number of sites
throughout the state of Florida and has ear marked the capital expense funds
necessary to complete the design and fabrication of the proto-type ETRP module.
The Company estimates the costs to complete development of the ETRP module will
be approximately $450,000. Once built, the Company will propose to enter a
partnership with an existing facility that can allow the ETRP module to operate
under existing environmental permits as well as save the Company substantial
capital expenditures by making use of shredders, baggers, conveyor belts and
other standard equipment necessary for the processing of used tires.
Should the Company be unsuccessful in locating a partnership with an
existing facility, given the emission-free character of the ETRP apparatus, the
Company believes it will be able to gain the necessary permits to operate a
prototype module from its headquarters facility in Largo, Florida. The
environmental permitting process of an entity such as that envisioned through
the operation of an ETRP apparatus can be lengthy and expensive. In addition to
any required emission permits, in order to operate an ETRP apparatus, the
Company must also gain permits for the handling of the resultant products
including Carbon Black, petro-chemicals and certain oils. Failure on the
Company's part to gain any one or all of the various environmental permits could
prevent TTL from operating an ETRP proto-type module.
Tunnel Bat. The Company's near-term opportunities relating to Tunnel Bat include
completing manufacturing design and assembly of the Tunnel Bat production model
and engaging the sale thereof. A complete discussion of the Tunnel Bat
technology begins on page 42.
As the Tunnel Bat licensee, the Company desires to manufacture for sale the
Tunnel Bat vehicle. The Company may manufacture the vehicle or may outsource the
manufacturing of the vehicle. At present, there are two proto-type vehicles
which are actively engaged by technology inventor and Tunnel Bat Licensor David
Richardson in providing the Tunnel Bat reclamation services throughout Florida.
The Company is now in the process of completing the engineering specifications,
design, drawings and parts lists for the first production model Tunnel Bat
vehicle.
The Company estimates the costs to complete the engineering development of
the Tunnel Bat production model will be approximately $72,000. The Company has
ear marked these funds from on-hand reserves. The Company estimates the
engineering development will take approximately four and half months. The
Company has broken the Tunnel Bat vehicle development schedule into five phases:
specifications; design assembly; order main components; detail parts, and;
assembly. Once the design phase is complete, the Company may manufacture the
Tunnel Bat vehicle from its facilities in Largo, Florida.
The Company estimates the Tunnel Bat vehicle can be in production
approximately the third quarter, 1999. The Company intends to market the Tunnel
Bat vehicle primarily through direct mail to construction and similar companies
initially in southeastern United States. As the Company is unaware of a
competitive box culvert reclamation vehicle, no meaningful estimation of demand
or market acceptance can be given. The Company has set a goal of selling twenty
Tunnel Bat vehicles during 1999. Once the Tunnel Bat vehicle is ready for
production, the Company intends to develop an in-house marketing program using
conventional mediums and at least one dedicated sales representative. The
Company estimates the majority of the Tunnel Bat vehicle purchasers would be
governmental entities such as municipalities, counties and cities. The Company
also believes the Tunnel Bat vehicle can be marketed to general contractors whom
provide work for such governmental entities.
Brounley Engineering. The Company's near-term opportunities through its Brounley
division are an expansion of its direct domestic and international selling
programs. The current products offered by Brounley are primarily radio-frequency
generators used to power CO2 lasers used in medical, marking and machining
applications. The power levels vary from 600 to 10,000 watts at frequencies of
13.56 to 125 Mhz. The designs are modularized resulting in ease of manufacturing
from a parts commonality standpoint as well as testing. A complete discussion of
the Brounley technology begins on page 43.
TTL Manufacturing and Precision Micro-Welding. A significant portion of the
Company's development strategy was the organization of a state-of-the-art
manufacturing, specialty welding division. Operating now from 50,000 square-feet
with the Science Technology and Research Center in Largo, Florida, the Company
has configured a significant amount of high technology manufacturing equipment
and advanced micro-welding devices. .A complete discussion relating to the
Company's manufacturing capabilities begins on page 41 and precision
micro-welding capabilities begins on page 47.
During the fourth quarter, 1998 and first quarter, 1999, the Company has
dedicated its efforts to bringing the various pieces of equipment on-line and
ready for operation. For instance, the Company expensed approximately $25,000 in
the assembly and start-up of a Leybold-Heraeus Electron Beam Welder which
carries a 150KV, 40 milliamp output. Together with the resource gained through
acquiring AMW Metal Fabricators during the summer, 1998, the Company is now
prepared to provide a full metal fabrication, machine and specialty
micro-welding capability to the west coast area of Florida.
On April 5, 1999, the Company intends to activate the selling program of
its manufacturing and precision micro-welding divisions through adding an
executive level sales manager to organize and execute the Company's selling
objectives. To support this introductory selling program, the Company plans to
conduct a direct-mail campaign. In addition to the dedicated selling efforts of
each of its divisions, TTL also intends during April to add a telemarketing
position to its corporate office such that this function can support the efforts
of which ever division is most in need. Initially, the Company will focus a
substantial portion of its telemarketing efforts on expanding sales for its
manufacturing and specialty micro-welding divisions.
During 1998, the Company derived revenues from six divisions including (1)
BORS Lift; (2) Brounley Engineering; (3) InterSource Health Care; (4) TTL
Manufacturing; (5) AquaFuel, and; (7) Precision Micro-Welding.
During 1998, the Company did not derive revenues from three divisions
including (6) Electromagnetic Tire Recycling Process; (8) Tunnel Bats, and; (9)
TTL Power Systems.
(1) The Balanced Oil Recovery System Lift. On January 15, 1998 as amended
in June, 1998 the Company executed an exclusive worldwide License
Agreement with inventor Gerold Allen for the rights to commercialize
the BORS Lift technology. The BORS Lift is not covered under any patent
or similar device. Mr. Allen now serves as the Company's Claremore,
Oklahoma-based BORS Chief Engineer.
(PICTURE OMITTED)
The BORS Technology - From January through September, 1998, the
Company engaged in BORS Lift field trials and completed a base-unit
design. 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.
Collectively, the Company-sponsored field tests and sales
installations to date demonstrate that the BORS(a) Lift device is able
to increase production by approximately 200% - 400%, decrease electric
costs from $3.50 per barrel to $0.035 per barrel, and is able to
extract oil with an insignificant quantity of water, thereby
eliminating any need for the process of separation and disposal.
<PAGE>
BORS 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 and
Garden City, Kansas, which can inventory BORS units pending sale and
delivery.
BORS Research and Development - There is not additional research and
development necessary to commercialize the BORS technology. While the
Company continues sales of the initial BORS Lift device, it is
developing two additional models (i) one of which is a deep-well design
configured to extract oil at a depth of up to 7,500 feet, and; (ii) the
second is known as a "bailer" which is a pump designed to extract the
highest volume of liquid possible without regard to water separation.
BORS Leasing Program - To enhance the likelihood of the BORS market
introduction, the Company has arranged for a lease-financing program.
The program allows for approval within 24 to 72 hours with no
application fee. Qualified purchasers can take possession of and
operate the equipment for two months prior to making the first of
sixty, $400 payments. The lease financing company considers the
equipment as well as the production of oil in collateralizing each
sale. Including the production of oil as a part of the buyer's payment
assurances significantly increases the number of prospective well
owners which can qualify for this program.
BORS Marketplace - The Company's BORS device is designed to extract oil
primarily from gas-driven wells with a fluid depth of 2,500 feet and
rates of production under 10 barrels per day. Management estimates that
nearly one quarter of domestically produced oil comes from wells which
on average produce 10 or less barrels per day. According to The Texas
Monthly Crude & Condensate Report, per barrel prices paid during
September 1998 ranged from $11 to $13.50 compared with 1985 prices,
which ranged up to $21.00 per barrel. Extracting oil using traditional
pumps can exceed the value of the oil removed. The Company believes the
increase in production and decrease in utility costs competitively
differentiates the BORS device. The Company does not have any
meaningful data relating to the number of worldwide oil wells, which
fit this criteria. However, the Company believes the potential market
place is large enough to allow for the sale of 100 BORS units per month
on a continuous basis.
(2) 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.
Brounley Marketplace - Currently, Brounley sells into the laser and
plasma markets for industrial, medical and military applications as
well as military communications and power industries. The Company
believes that once Brounley is ISO 9000 certified the market acceptance
of its products will be significantly enhanced.
(3) 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.
(4) TTL Manufacturing (formerly AMW Metal Fabricators Corporation (AMW)).
On April 29, 1998, the Company acquired AMW in an exchange of common
shares agreement in which the Company issued 500,000 unregistered
common shares in exchange for 100% of the issued and outstanding common
shares of AMW. AMW is a wholly owned subsidiary of Toups Technology and
is been renamed as TTL Manufacturing.
Manufacturing capabilities - 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. The following displays the
more significant sheet metal and machining equipment now available at
TTL's manufacturing plant in Largo, Florida.
Sheet Metal
(PICTURE OMITTED)
Accurshear NC controlled backstop with an accuracy to within .002" with a 1/4"
capacity up to 10' sheets.
(PICTURE OMITTED)
Accurpress a 3 asix CNC control, 175 ton with 3/8" capacity in 12' sheets
(PICTURE OMITTED)
Trumatic 200 CNC Punch - Capable of punching and forming up to 3/16' carbon
steel. Includes 17 tooling stations
(PICTURE OMITTED)
M.G. Industries DNC 2.8. CNC High-definition Plasma cutter with a 3/8"
capacity, a 6' X 12' cutting area and hypertherm 70 amp power source.
Machining
(PICTURE OMITTED)
Haas VF-4 Vertical Machining Center features a 20 station tool holder;
2-speed gear box; 250 feet-lbs of cutting torque; 20 hp spindle; dual 22 bit
processors, and; travels 50"X20"X25."
<PAGE>
(PICTURE OMITTED)
Haas HL-4 CNC Lathe featuring 30 hp spindle; 14.5" turning diameter; 34"
turning depth; 12 tooling stations; up to 5" bar capacity and a fully
programmable tailstock.
Various other machining equipment such as 3 vertical mills with DRO; 2 tool
room lathes (1 with DRO); Geisholt turret lathe with 6 tool stations; 2
horizontal band saws; hyd-mech band saw with NC auto feed (12" X 12" cutting
area)
(PICTURE OMITTED)
(5) AquaFuel(TM). The Company is the worldwide exclusive licensee for
AquaFuel(TM). On the 3rd of November, 1997, the Company executed a
world-wide exclusive license agreement to design, manufacture and sell
or otherwise commercialize technology based on a series of United
States patents, patents pending and trademarks, collectively known as
"AquaFuel(TM)." The patents include (i) US Patent 5,435,274 titled
Electric Power Generation Without Harmful Emissions dated July 25,
1995; (ii) US Patent 5,692,459 titled Pollution-Free Vehicle Operation
dated December 2, 1997; (iii) US Patent 5,792,325 titled Electric Arc
Material Processing System US Patent 5,826,548.
(PICTURE OMITTED)
AquaFuel(TM) Technology - AquaFuel(TM) is a non-fossil combustible gas
produced by an electric discharge of carbon arcs within distilled,
fresh, salt or other types of water, thus being essentially composed of
Hydrogen, Oxygen, Carbon and their compounds. AquaFuel(TM) is
competitive with respect to Hydrogen for cost, easiness and rapidity of
production and energy content. AquaFuel(TM) is manufactured using
off-the-shelf equipment and requires no fossil fuel in any form. The
materials used in the AquaFuel(TM) manufacturing process include water,
carbon and an electric arc.
AquaFuel(a) Research and Development - The Company has completed its
first two scientific certification reports relating to AquaFuel(a). The
certifications embody scientific measurements, observations and
narrative compiled from a worldwide body of scientists, engineers,
universities, laboratories and governmental agencies relating to the
characteristics of AquaFuel(a). The conclusions of the research team
leader Dr. Rugero Maria Santilli state:
1 AquaFuel(a) is cost competitive, has dramatically less pollutant
in the combustion exhaust, and can be more easily and safely
produced and stored anywhere desired than any other combustible
gas, even neglecting its free production as a by product of
sewage recycling;
2 In view of the above characteristics, AquaFuel is one of the
best, if not the best fuel 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
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.
AquaFuel Commercialization - The Company is engaged in the construction
of the first commercial-sized AquaFuel(TM) production unit. Delivery of
the unit is scheduled for April, 1999. The device being constructed has
been designed as a continuous run system in a hi-duty cycle mode. This
AquaFuel(TM) commercial apparatus makes use of off-the-shelf proven
electric arc technology with a pressurized gas production and
collection system. The 3-phase-AC system will utilize 480V input
voltage with an electrical load of 135KVA.
A primary consideration in making AquaFuel(TM) commercially
available is to develop sophisticated production equipment able to
generate AquaFuel(TM) at prices competitive with fossil fuels. The
AquaFuel(TM) production apparatus being constructed is estimated to
produce in excess of 4,000 cubic feet of fuel per hour. More
importantly, the electric arc technology allows for a dramatic
reduction in the use of carbon which, together with water, comprise the
main ingredients in the production of AquaFuel(TM).
Significant AquaFuel Agreement - Dominican Republic-based Electric
Utility Joint Venture. On December 16, 1998, the Company entered into a
joint venture with Dominican Republic-based Comapnia de Luz y Fuerza de
las Terrenas to construct and operate an AquaFuel(TM) facility to
provide fuel for the production of electricity. Luz y Fuerza,
headquartered in Santo Domingo, Dominican Republic, is a consortium of
entities organized to privatize the delivery of electric power through
the Dominican Republic. It is the country's only non-government
electric utility, operating several power generation facilities. The
Luz y Fuerza transmission lines provide electricity to four major urban
areas.
The TTL-Luz y Fuerza joint-venture estimates a 15-month schedule
from feasibility study through fully operational output required to
reach the AquaFuel production rate necessary to fulfill the agreement.
The first significant equipment is scheduled to arrive in April, 1999
which will be able to generate AquaFuel at the minimum rate of 4,000
cubic-feet per hour (see above discussion relating to
Commercialization).
(6) Electro-magnetic Tire Recycling Process ("ETR Process") The Company is
the worldwide exclusive licensee for the ETR technology. On April 20,
1998, the Company acquired the worldwide exclusive license rights for
the life of ETR patents pending. The Company has aided the inventor in
filing for applicable patents.
(PICTURE OMITTED)
The ETR Technology - The ETR Process was developed to recover the oil,
steel and carbon black that were utilized in the manufacture of tires.
The process is self-contained, using scrap tires as the feed-source,
fed in through the ETR 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 ETR technology reclaims these products which are then
offered for sale.
The ETR technology differentiates from competition because there
are no emissions and, therefore, no residue from combustion. The ETR
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.
ETR Research and Development - The final commercial development of the
ETR equipment will take a two-pronged path through (i) the fabrication
of the actual ETR module and; (ii) a detailed analysis of materials
resulting from the ETR equipment including carbon black, oils and
petro-chemicals. The following discussion relates to the Company's
testing program for end product viability. The ETR equipment reverts
tires back to their original elements. 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.
As it relates to the gas, the Company is currently test BTU
Composition, Btu content & physical properties of reformed "catalytic"
or refinery type gases. This testing series describes the heating value
of the gases, their physical properties and the composition of gases on
a percentage basis. The importance of this test lies in the heating
value (Btu content) of the gas which must be known to determine its
value as a fuel and the types of equipment suitable for its use. The
physical properties, molecular weight, density, specific gravity are
considered important, base-line information. The Company is also
conducting tests to determine concentrations of benzene and volatile
sulfur compounds. The Company's ETR process produces over eight to ten
gases which will be similarly tested.
The Company's testing relating to the oil products produced from
include physical characteristics such as specific gravity, flashpoint
and carbon residue. The importance of these tests can be seen in
comparing these with produces such as regular and low sulfur diesel
fuels, special petroleum spirits, kerosene and grades 1 and 2 burner
fuels. Other tests underway relating to the oil products include
gross/net heat of combustion, possible sulfur content, cetane index and
trace metals.
The carbon black is the final series of products produced from the ETR
equipment and is currently being tested for the typical
physico-chemical properties of carbon produces including particle,
size, weight, structure, iodine adsorption number, tint strength, DBP
oil absorption, heat loss, ash content, pour density and stress. The
tire project has purchased blenders, sieves and a shaker to determine
the characteristics size and weight of the carbon products. Samples are
separated two ways. The first is a "not force" separation. It
identifies the percentage of each size mesh the carbon classifies to
with no crushing effort. The second type of sizing utilizes the
blenders, a roller, sieves and a shaker to process the carbon as finely
as possible. This small scale operation mimics commercial carbon
processing for particle size reduction. The sizing will determine
proportions and consistency of the carbon black product.
Commercial Scale-Up. The Company is now engaged in the construction of
a 100-tire per hour module. The remainder of the components necessary
for each ETR plant are standard, off-the-shelf equipment such as a
shredder, gas and oil collection systems and storage tanks. TTL intends
to commercialize its ETR technology through joint ventures, strategic
alliances, and the direct sale of products and services.
(7) Precision Micro-Welding. TTL's Precision Micro-Welding division is the
result of equipment acquired by the Company such as an Electron Beam
Welder valued at $1,200,000 and the operational expertise of AMW
Manufacturing. TTL's Precision Micro-Welding equipment and expertise
supports the tool and die, plastic injection molding and other
industries with welding requiring filler wire sizes from .005 to .020
inch in diameter.
The Company's Precision Micro-Welding Division offers a total
range of welding capabilities including inert gas or CO2, plasma, laser
and electron beam welding processes. Welding provides the greatest
junction strength. In a proper weld the joint will be as strong as the
parent material--sometimes stronger.
In welding, two metal sections are normally joined by bringing
their surfaces into contact under high temperature, high pressure, or
both, depending on the application. Although most welds are made
between similar metals, different compatible metals may also be welded.
(PICTURE OMITTED)
Electron Beam Welding provides solutions to many sophisticated
welding problems by joining components with very precise, finely
controlled, accelerated stream of electrons. With the Electron Beam
process, the metallurgical characteristic and overall integrity of the
most precision components are kept intact.
A big advantage to the Electron Beam process is the low total
energy input to the work piece. Conventional welding methods depend on
thermal conductivity or on surface melting in order for the fusion to
penetrate. The electron beam welder also offers these major advantages
over alternative welding methods:
o Welding highly reflective material (such as cooper) Electrons are
a much more efficient form of energy than photons of light (use
with lasers)
o Versatility - From thin .001" to 2" deep penetration welds, EBW
can satisfy the entire range with extraordinary control and
repeatabley
o inaccessible deep areas - Long focal distances allow welding in
tight deep areas
o Refractive materials. Electron Beam welding is conducted in a
very high vacuum creating a fusion zone of vacuum melt quality
that can yield over 95% strength of the base material.
Laser Welding. Light emerges from a laser in a narrow beam that can be focused
down to less than 0.001 inch in diameter. Such concentrated beams are so
powerful that they are used to drill tiny holes in diamonds, taking minutes
where old methods took days. Ultra thin wires are also made by pulling metal
through these holes. Laser light can then be used to weld these tiny wires.
(PICTURE OMITTED)
2 Micro Tig Welding Stations. For Tig welding, the Company's welders use 75
power microscopes to produce high quality precision welds on all types of
materials.
(PICTURE OMITTED)
Arc welding uses the intense heat of an electrical arc generated
when a high current flows between the base metal and an electrode.
Temperatures of up to 7,000(degree)F (3,870(degree)C) are applied to
melt the local base and filler materials. Shielded metal-arc welding
uses electrodes made of a coated metal filler wire. The electrical arc
breaks down the coating to provide a protective atmosphere that both
stabilizes the arc and acts as a flux.
Other precision welding support equipment at TTL includes:
Weld Logic Pulsearc .10 to 100 amp range;
Miller Aerowave CC, AC-DC 3-400 amp AC wave control;
2 Secheroa Plasma Fix 50 E welders with Merrick Amptrack Micro 1-B
computer and positioner
2 Raytheon Yag Laser Welders
Jec Laser engraver
Vacuum welding chamber
(8) Tunnel Bat(TM) On July 1, 1998, the Company entered a worldwide
exclusive license agreement with inventor Dave Richardson for the
commercialization of the Tunnel Bat technology. The Company intends to
apply for Tunnel Bat patent(s) on behalf of Mr. Richardson. The
exclusive ownership of all such patents shall be 100% with Mr.
Richardson and none with TTL. The Company will continue to
commercialize the Tunnel Bat technology by virtue of its exclusive
worldwide license.
(PICTURE OMITTED)
Tunnel Bat technology. 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.
(PICTURE OMITTED)
Prior to the invention of the Tunnel Bat, box culverts were
manually cleaned by crawling into the box culvert with a small wagon
and shovel, filling the wagon with blockage, crawling back out to empty
the wagon and then repeating the process until the box culvert was
cleaned. In addition to being a slow and difficult manual process, many
box culverts are found to have snakes and other creatures living among
the blockage material, making it possibly unsafe for personnel.
(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.
Tunnel Bat development. The Company is now engineering final vehicle
production model designs. During this time, the Licensor is operating
two Tunnel Bat prototype vehicles in the course of cleaning box
culverts under contract with the State of Florida through the
Department of Transportation. The Company estimates the Tunnel Bat
production model will be completed on or about June, 1999. Thereafter,
the Company intends to offer the vehicle through its in-house sales
department primarily to contractors and government municipalities.
(9) TTL Power Systems. During the third quarter, 1998, the Company entered a
non-exclusive product representation agreement with Southwest Machine, a
Missouri corporation ("manufacturer"). Under the terms of the
non-exclusive agreement, the Company is to provide marketing, finance,
sales and coordination and the manufacturer is provide its products at
favorable prices. In the course of executing a proposed TTL Power Systems
sale, the Company would contact and negotiate through the closing with
prospective customer and then forward the order to the manufacturer. The
manufacturer then produces and delivers the equipment to the end-user.
(PICTURE OMITTED)
Power System features. The electric generators which the Company offers
by virtue of its rep agreement features a system that can either
synchronizes with the local utility or as act as a stand-alone source of
power. The units can produce 120, 240, 480 or other specified voltage.
The generators are designed to operate on almost any fuel including
Natural Gas, raw wellhead gas, propane, diesel and each generator can be
converted from running one fuel to another with a simple conversion kit.
One 80 kilowatt generator will supply enough power for about five typical
households and the units can be linked together for flexible power
requirements and uninterrupted service during maintenance of individual
units.
Power System product line. By virtue of its rep agreement, the Company is
able to offer Hercules Engine Generator Set complete with oil field skid
and enclosure with paralleling switchgear in sizes which include a 130KW
turbo and an 80KW non-turbo. In addition, the Company is able to offer
the Engine Master diesel Engine Generator Set complete with oil field ski
and enclosure with paralleling switchgear in sizes which include 25KW
turbo and a 30KW nonturbo. While the 25KW turbo can run either on either
a multi-fuel or gas while the 30KW is designed to operate on diesel fuel
only.
<PAGE>
The Company's Marketplace. In determining the Company's overall
marketplace, TTL has categorized its nine divisions as follows:
In the case of the BORS Lift device, the Company operates in the oil field
equipment segment of the manufacturing sector;
In the case of Brounley Engineering, the Company operates in the
electronics segment of the manufacturing
sector;
In the case of InterSource HealthCare, the Company operates in the
healthcare equipment segment of the healthcare sector;
In the case of TTL Manufacturing, the Company operates in the metal
fabrication segment of the manufacturing sector;
In the case of AquaFuel, the Company operates in the alternative fuel
segment of the energy sector;
Further in the case of AquaFuel, the Company operates in the sale of
equipment segment of the environmental sector;
In the case of Precision Micro-Welding, the Company operates in the
specialty-welding segment of the
manufacturing sector;
In the case of Tunnel Bat, the Company operates in the manufacture and sale
of equipment segment of the manufacturing sector;
In the case of Power Systems, the Company operates in the sale of equipment
segment of the energy sector.
Accordingly, the major market sectors within which the Company competes
include Manufacturing, Healthcare, Energy and the Environment. The Company's
various products and services are predominately at the market entry stage and as
yet have not achieved any meaningful market share. Due to the novel nature of
the BORS Lift, AquaFuel, ETR and Tunnel Bat technologies, coupled with the
absence of significant sales to date, the Company is unable to provide
meaningful competitive information.
The only significant competitive factor of which management is aware at
this time includes the per-barrel price of oil, which is currently at an all
time low. While the Company believes this factor encourages the sales of its
BORS Lift device, the current price of oil may preclude certain producers from
having sufficient capital to purchase the Company's BORS Lift or, if purchased,
may have difficulty maintaining payments. The Company intends to exercise
prudent business judgements in granting any credit for the purchase of its BORS
Lift device.
<PAGE>
Manufacturing - The Manufacturing sector includes companies involved in all
manner of manufacturing operations, from heavy machinery to hardware as well as
companies involved in the wholesale distribution of these products. Among the
companies covered are agricultural, construction and material handling machinery
makers; machine tool, metal fabrication and flow control equipment companies;
electrical equipment makers, packaging makers and rubber, plastic and glass
products companies.
Healthcare . In 1997, the US annual expenditures on health products is estimated
at $111 billion with US expenditures on drugs and other medical nondurables came
to about $95 billion while spending for medical equipment such as eyeglasses,
hearing aids, artificial limbs and wheelchairs cam to about $16 billion.
Worldwide drug sales are rising at the rate of 8% -10% a year and medical device
sales at 7% a year. In the international marketplace, US firms account for more
than 40% of the $120 billion market for medical devices and more than 30% of the
$265 billion pharmaceutical market. Medical products, the most diverse and
fragmented segment of the health care market, include some 130,000 items --
everything from flimsy exam gowns and gauze to heart valves and sophisticated
diagnostic equipment. The threat of AIDS and other infectious diseases has led
to the increased use of protective equipment and disposable products, while the
aging population has fueled growth in orthopedic an cardiovascular markets.
Energy. The US energy industry is estimated at $473 billion. About 85% of the
energy we consume comes from three major sources: oil, which is #1 in terms of
energy consumption; natural gas, #2; and coal, #3. The electric company uses
much of these fuels, and with good reason: close to 100% of US homes and
businesses are wired for electricity. The oil industry, composed of integrated
oil companies and oil field equipment and services companies, as well as
pipelines, refineries, and resellers, produces the crude oil that is converted
to gasoline, heating fuel, jet fuels and more.
Environment . The Environmental Equipment and Services industry is estimated at
$150 billion annual revenues with annual growth estimated at 5%. The
predominantly small environmental firms purify air and water, cart away wastes,
and clean up toxic dumping grounds, often according to plans conceived by
engineering consulting firms. In genera, environmental technologies are
classified four ways: monitoring and assessment to detect pollutants and
indicate the environment's condition; control of hazardous substances before
they enter the environment; "remediation' to detoxify hazardous substances after
they enter the environment; and restoration of already polluted ecosystems. A
1990 EPA report estimated that in the year 2000, the annual cost of EPA
regulations, including the costs of compliance and going through the regulatory
process, would be approximately 2.8% of the gross national product.
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.
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 STAR
Center contains world class analytical laboratory facilities for chemical,
metallurgical, ceramic, polymer and environmental analysis ... distributed
computer networks throughout the facility and full manufacturing machine shop
capability, including several CNC lathes, 4-axis machine centers, automatic CNC
screw machines and wire EDM facilities.
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. 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, they are capable of evaluating the merits and risks of their
investment.
The Company has not relied on an underwriter, promoter 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
November, 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.
1. Immediately upon completion of the Company's initial Private Placement
pursuant to Rule 504 of Regulation D, the Company submitted three
simultaneous applications:
(i) Form 10SB12G which is submitted to the Securities and Exchange
Commission. A registration of securities on this form obligates
the Company to provide existing and prospective shareholders with
certain information. A part of these requirements obligate the
Company to provide existing and prospective shareholders quarterly
financial statements prepared by management and an annual
financial audit prepared by independent auditors. The SEC declared
the Company's Form 10SB12G effective June, 1998.
(ii) An application was made with Standard and Poors Corporation
Records and as of April, 1998, the Company has been listed on page
8153 under the heading Company Descriptions in Standard & Poor's
Cooperation Records.
<PAGE>
(iii) A Form 15c2-11 was filed with the National Association of
Securities Dealers through the Company's initial Market Maker.
During June, 1998, the Company's securities were cleared for
trading through the NASD OTC Marketplace. Quotations on the OTCBB
reflect inter-dealer prices, without retail mark-up, mark-down or
commission, and may not represent actual transactions.
2. During October, 1998, the Company filed a securities registration on Form
SB-2 with the Securities and Exchange Commission relating to shares sold
exclusively to accredited investors in reliance on Regulation D, Rule
506.
Since June 16, 1998, the date when the Company's shares began trading, the
Company's per share price has ranged from $1.375 to $3.00 and has predominately
traded at an average of $2.00 per share. Throughout this period from June, 1998
through the date of this filing, the Company's securities have traded an average
of 67,000 shares daily.
As of December 30, 1998, Company had in excess of 700 Shareholders of
Record.
Holders of the Company's Common Stock are entitled to dividends when, as
and if declared by the Board of Directors, out of funds legally available
therefore. The Company does not anticipate the declaration or payment of any
dividends in the foreseeable future.
The Company intends to retain earnings, if any, to finance the development
and expansion of its business. Future dividend policy will be subject to the
discretion of the Board of Directors and will be contingent upon future
earnings, if any. Other factors regarding the payment of dividends include the
Company's financial condition, capital requirements, general business conditions
and other, similar matters. Therefore, there can be no assurance that any
dividends of any kind will ever be paid.
The Company's registrar and transfer agent is Continental Stock Transfer
&Trust Company.
THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
Executive Compensation
The following table depicts all-plan and non-plan compensation awarded to,
earned by or paid to the named executive officer of the Company for the period
indicated:
Annual Long Term
Compensation Compensation
(a) (b) (c) (d) (e)
Restricted
Stock Total
Name and Principal Salary Bonus award(s) Compensation
Position Year ($) ($) ($) ($)
Leon H. Toups 1998 $63,666 $0 $650 $64,316
President
Chief Executive Officer
Mark Clancy 1998 $62,997 $0 $650 $63,647
Executive Vice President
Corporate Secretary
Michael P. Toups 1998 $61,958 $0 $650 $62,608
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.
(b) The Company was incorporated during July 1997. The Company activated
operations on November 1, 1997 and all three 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) Each Officer received his shares upon incorporation, at par value, in
lieu of cash compensation. During the course of 1998, the Company has
issued 650,000 unregistered common shares to each of its Officers
(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. The
Company does not provide for agreements with any of its executive officers.
However, the Company may, in the future, need to compete for the services of its
executive officers, at which time, the Board of Directors may adopt and require
its executive officers to execute employment agreements.
FINANCIAL STATEMENTS
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
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 5,484,950 197,237
Retained earnings (deficit) (2,146,369) 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 3,276,932 315,893
---------- ---------
Total operating earnings (deficit) (2,129,861) 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 (2,144,234) 57,072
Income taxes 43,760 7,971
---------- ---------
Net income (loss) $(2,187,994) $ 49,101
=========== ========
Weighted average number of
shares outstanding 12,167,182 9,781,751
Net income (loss) per share $ (0.18) $ 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) $(2,187,994) $ 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 728,351 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 5,603 722,748 - 728,351
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 - - - (2,187,994)(2,187,994)
Distributions to
shareholders - - - (7,592) (7,592)
------- ------ ------ ---------- ----------
Balance, Decemeber 31,
1998 22,217,299 $22,217 $5,484,950 $(2,146,369) $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.
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.
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.
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.
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.
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
At December 31, 1998, the date of the Company's audited consolidated
financial statements, TTL had issued and outstanding 22,217,299 common shares of
which 6,034,056 shares were either registered or had been sold pursuant to
exemptions from registration. Of the 6,034,056 shares, 1,608,218 were issued
pursuant to Regulation D, Rule 504 during 1997 at the Company's inception and
4,425,838 shares were previously registered on Form SB-2 in November, 1998.
Of the 22,217,299 common shares issued and outstanding at December 31,
1998, 16,183,243 were unregistered. Since the date of the Company's audited
consolidated financial statements, the Company has 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. Accordingly, all such securities may only be resold either
upon registration or in compliance with Rule 144, adopted under the Act of 1933.
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 February 1998 through March, 1999, the Company completed an offering
consisting of 1,239,425 shares of its unregistered common stock in the manner
and on reliance of the various Sections of the Act of 1933 cited above
exclusively to accredited investors. The unregistered common shares were offered
and sold at the rate of $1.00 per share for an aggregate of $1,239,425 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 the first quarter, 1999, the Company issued 150,000 of its
unregistered common stock for services to First New York 100,000 shares; Dixie
Arc, Inc., 10,000 shares; Eric Littman, 20,000 shares; Shirley (Ernie) Gouge
10,000; Mike Finley 10,000 and; Arthur Barker 500 shares.
During January, 1999, the Company issued 200,000 to John Rivera as in-part
consideration for serving as the Company's Vice President, International
Development. The Company has included the 200,000 shares issued to Mr.
Rivera as a part of this registration.
During March, the Company issued 500,000 unregistered common shares to Mr.
Isaias C. Arabaje in connection with agreement leading to the formation of
AquaFuel-Dominicana. The Company has included the 500,000 shares issued to Mr.
Arabaje as a part of this registration.
During March, 1999, the Company issued 2,000,000 unregistered common shares
to Mr. John Rivera for (i) facilitating the organization and initial start-up of
the AquaFuel-Dominicana joint-venture; (ii) to secure participation by TTL's
InterSource division in the outfitting of five (5) hospitals, (iii) to secure
TTL's engineering participation in two hydro-electric damn projects. Mr. Rivera
acts as the Company's Vice President, International Development and is not a
representative of the government of the Dominican Republic. The payment of
shares to Mr. Rivera in no way assures the Company participation in any project.
There is no registration provision granted Mr. Rivera in connection with the
2,000,000 unregistered common shares.
During March, 1999, the Company's Board of Directors resolved to cancel
(868,368) unregistered common shares issued to Patty Gigliatti 500; Coffman
Systems, Inc., 587,868; Worldbridge Financial Ltd., 250,000, and; Global
Resource Management, Inc. 30,000.
During February and March, 1999, the Company concluded two transactions
relating to the sales of TTL's Subordinated Notes to The Augustine Fund and
Series A Preferred Stock to The Shaar Fund. The following discussion relates to
the various agreements executed in the course of these two placements.
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.
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
EX-23 Auditor's Consent
<PAGE>
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.
IGNATURES
________________________________
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): April 4, 1999
