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SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street, N.W.
Washington, D. C. 20549
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FORM 10-SB
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of
The Securities Exchange Act of 1934
EXHAUST TECHNOLOGIES, INC.
(Exact name of registrant as specific in its charter)
Washington Applied For
(State of Incorporation) (I.R.S. Employer
Identification No.)
230 North Division
Spokane, Washington 99201
(Address of executive offices, including zip code.)
Registrant's telephone number: (509) 838-4401
Copies to: Conrad C. Lysiak, Esq.
601 West First Avenue
Suite 503
Spokane, Washington 99201
Securities to be registered pursuant to Section 12(b) of the Act:
NONE
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(Title of Class)
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK
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(Title of Class)
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ITEM 1. DESCRIPTION OF BUSINESS.
THE BUSINESS
EXHAUST TECHNOLOGIES, INC. (the "Company") is a development stage
enterprise formed under the laws of the State of Washington on July 21,
1998, for the purpose of developing, manufacturing and marketing two
automotive devices.
The Devices
The two automotive devices the Company intends to develop,
manufacture and market are the Turbolator and the Pneumatic Hand Tool
Exhaust Muffler.
The Turbolator
The Turbolator was invented by Robert Sterling, the Company's
President and a member of the Board of Directors and his son, Matthew
R. Sterling in 1990. A patent was applied for on November 18, 1992 and
issued on October 18, 1994 (No. 5,355,673). During the period that the
patent was pending, the Turbolator was marketed and generated gross
revenues of $160,364. The foregoing revenue was earned prior to the
Company being formed and is not revenue to the Company. In addition to
obtaining a patent for the Turbolator, Robert Sterling obtained a
trademark with the United States Trademark office on the name
"Turbolator." Messrs. Sterling and Sterling have issued an exclusive
license to the Company to manufacture, develop and market the
Turbolator in the United States, provided the Company generates sales
from the Turbolator of $-0- in fiscal 1999 and $1,000,000 per year,
thereafter.
The Turbolator is designed for installation on all vehicles, with
the exception of turbo-charged vehicles. It is composed of a spring
butterfly valve mounted in a tube housing. The butterfly valve is
regulated by a pre-loaded torsion spring. The tube housing or tip
housing is installed directly behind the catalytic converter or
directly behind the muffler. The Turbolator comes in five sizes which
are six inches long with an outside diameter varying from 2 7/8 inches
to 4 1/8 inches depending on the exhaust pipe size. Two Turbolators are
installed for a vehicle equipped with dual exhausts.
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The purpose of the Turbolator is to regulate exhaust flow from the
engine. By regulating exhaust flow, the device creates a more efficient
fuel burning engine, thus creating more horsepower and torque without
other modifications to the engine.
The Turbolator operates in conjunction with the exhaust system
"OEM" computer controlled electronic port fuel injection and emission
control systems already certified with the stock engine. Installation
of the Turbolator does not alter the OEM location of the oxygen sensor
and the converter. The tune-up specifications for a vehicle remain the
same. In lab (controlled) tests the Turbolator have shown to reduce
certain emissions and improve fuel mileage.
Pneumatic Hand Tool Exhaust Muffler
The Pneumatic Hand Tool Exhaust Muffler (the "PHTEM") was invented
by Robert E. Sterling, the Company's President and a member of the
Board of Directors, in 1997. Mr. Sterling applied for a patent on
January 13, 1998 and the patent has been approved. The PHTEM is
currently being test marketed. No sales have been made to date and the
Company has not concluded if the PHTEM will be economically successful.
Mr. Sterling has granted an exclusive license to the Company to
manufacture and market the PHTEM, in the United States, provided the
Company generates sales of $-0- in fiscal 1999, $500,000 in fiscal 2000
and $1,000,000 each year thereafter.
The PHTEM is a tool with a noise muffling system that can reduce
sound levels and remove entrained solid and oil contaminates from the
exhaust air before it is discharged into the atmosphere. The PHTEM has
a handle with an exhaust passage where the contaminates pass. The PHTEM
includes a number of washers positioned longitudinally about the inner
tube. The combination of the inner tube and washers are located within
the handle exhaust passage. An end cap is provided in closing off the
inner tube distal end. During use, exhaust air enters the inner tube,
flows out the inner tube airflow openings into the washers, and out the
end cap. The handle muffles the sound the tool and retains the
contaminates therein.
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Manufacturing
The Company intends to contract with third parties for the
manufacture of the Turbolator and PHTEM. As of the date hereof, the
Company has not entered into any contracts with any manufacturers, and
there is no assurance that the Company will enter into any contracts
with any manufacturers in the future. The Company believes there are
any number of manufacturers who are capable of producing the Turbolator
and the PHTEM.
Marketing
The Company intends to market the Turbolator and the PHTEM through
other automotive suppliers. As of the date hereof, the Company has not
contacted any other automotive suppliers and there is no assurance that
any other automotive suppliers will ever sell Turbolators or PHTEMs.
Company's Office
The Company's offices are located at 230 North Division, Spokane,
Washington 99202. These are the offices of Robert Sterling, the
Company's President and major shareholder.
Employees
The Company has no full-time employees. The Company's three
Officers provide their services on a part-time basis. See
"Management."
Risk Factors
1. No Operating History and Revenues and Development Stage
Operation. The Company is recently formed and is subject to all the
risks inherent in the creation of a new business. Since the Company is
a new venture, it has no record of operations and there is nothing at
this time upon which to base an assumption that the Company's plans
will ultimately prove successful. The Company's Independent Certified
Public Accountant's report on the Company's January 31, 1999 financial
statements contained an explanatory paragraph which expressed
substantial doubt about the Company's ability to continue as a going
concern due to the Company's loss from operations and lack of revenue.
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2. Lack of Market Research. The Company has neither conducted nor
has the Company engaged other entities to conduct market research such
that management has assurance market demand exists for the business
contemplated by the Company. See "Business."
3. Year 2000. The Company is aware of the issues associated
with the programming code in existing computer systems as the
millennium (year 2000) approaches. The "year 2000" problem is
pervasive and complex as virtually every computer operation will be
affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date
sensitive information when the year changes to 2000. Systems that do
not properly recognize such information could generate erroneous data
or cause a system to fail. Since the Company is not producing or
maintaining time sensitive operations at present, the year 2000 problem
is not anticipated to have a significant impact on the Company's
operations. However, it may have a significant impact on key suppliers
and customers with whom the Company may conduct business in the future.
4. Securities are Subject to Penny Stock Rules. The Company's
shares are "penny stocks" consequently they are subject to Securities
and Exchange Commission regulations which impose sales practice
requirements upon brokers and dealers to make risk disclosures to
customers before effecting any transactions therein.
5. Lack of Key Personnel Insurance. The Company has not obtained
key personnel life insurance on the lives of any of the officers or
directors of the Company. The death or unavailability of one or all of
the officers or directors of the Company could have a material adverse
impact on the operation of the Company. See "Management."
6. No Insurance Coverage. The Company, like other companies in its
industry, is finding it difficult to obtain adequate insurance coverage
against possible liabilities that may be incurred in conducting its
business activities. At present, the Company has not secured any
liability insurance. The Company has potential liability from its
general business activities, and accordingly, it could be rendered
insolvent by a serious error or omission.
7. Uninsured Risks. The Company may not be insured against all
losses or liabilities which may arise from operations, either because
such insurance is unavailable or because the Company has elected not to
purchase such insurance due to high premium costs or other reasons.
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8. Need for Subsequent Funding. The Company believes it will need
to raise additional funds in order to achieve its operations. The
Company's continued operations therefore will depend upon the
availability of cash flow, if any, from its operations or its ability
to raise additional funds through bank borrowings or equity
or debt financing. There is no assurance that the Company will be able
to obtain additional funding when needed, or that such funding, if
available, can be obtained on terms acceptable to the Company. If the
Company cannot obtain needed funds, it may be forced to curtail or
cease its activities. See "Business."
9. Need for Additional Key Personnel. At the present time, the
Company employs no full time employees. The success of the Company's
proposed business will depend, in part, upon the ability to attract and
retain qualified employees. The Company believes that it will be able
to attract competent employees, but no assurance can be given that the
Company will be successful in this regard. If the Company is unable to
engage and retain the necessary personnel, its business would be
materially and adversely affected. See "Business."
10. Reliance Upon Directors and Officers. The Company is wholly
dependent, at the present, upon the personal efforts and abilities of
its Officers who will exercise control over the day-to-day affairs of
the Company, and upon its Directors, most of whom are engaged in other
activities, and will devote limited time to the Company's activities.
The President will devote approximately ten hours per month to the
operation of the day-to-day affairs of the Company, the Vice President
will devote approximately two hours per month to the operation of the
day-to-day affairs to the Company and the Secretary/Treasurer will
devote approximately two hours per month to the operation of the day to
day affairs to the Company. Accordingly, while the Company may solicit
business through its Officers, there can be no assurance as to the
volume of business, if any, which the Company may succeed in obtaining,
nor that its proposed operations will prove to be profitable. As of the
date hereof, the Company does not have any commitments regarding its
proposed operations and there can be no assurance that any commitments
will be forthcoming. See "Business" and "Management."
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11. Issuance of Additional Shares. As of April 19, 1999,
approximately 95,309,750 shares of Common Stock or 95.31% of the
100,000,000 authorized shares of Common Stock of the Company remain
unissued. The Board of Directors has the power to issue such shares,
subject to shareholder approval, in some instances. The Company may
also issue additional shares of Common Stock pursuant to a plan and
agreement of merger with a private corporation. Although the Company
presently has no commitments, contracts or intentions to issue any
additional shares to other persons, the Company may in the future
attempt to issue shares to acquire products, equipment or properties,
or for other corporate purposes. See "Description of Securities -
Shares Eligible for Future Sale."
12. Non-Arms' Length Transaction. The number of shares of Common
Stock issued to present shareholders of the Company for property and
services was arbitrarily determined and may not be considered the
product of arm's length transactions. See "Principal Shareholders."
13. Indemnification of Officers and Directors for Securities
Liabilities. The Articles of Incorporation of the Company provide that
the Company may indemnify any Director, Officer, agent and/or employee
as to those liabilities and on those terms and conditions as are
specified in the Washington Business Corporation Act. Further, the
Company may purchase and maintain insurance on behalf of any such
persons whether or not the corporation would have the power to
indemnify such person against the liability insured against. The
foregoing could result in substantial expenditures by the Company and
prevent any recovery from such Officers, Directors,
agents and employees for losses incurred by the Company as a result of
their actions. Further, the Company has been advised that in the
opinion of the Securities and Exchange Commission, indemnification is
against public policy as expressed in the Securities Act of 1933, as
amended, and is, therefore, unenforceable.
14. Competition. The Company believes that it will have
competitors and potential competitors, many of whom may have
considerably greater financial and other resources than the Company.
See "Business - Competition."
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15. No Public Market for Securities. At present, no public market
exists for the Company's securities and there is no assurance that a
trading market will develop in the future, or if developed, that it
will be sustained. A shareholder of the Company's securities may,
therefore, be unable to resell the securities should he/she desire to
do so. Furthermore, it is unlikely that a lending institution will
accept the Company's securities as pledged collateral for loans unless
a regular trading market develops.
16. Cumulative Voting, Preemptive Rights and Control. There are no
preemptive rights in connection with the Company's Common Stock.
Cumulative voting in the election of Directors is not provided for.
Accordingly, the holders of a majority of the shares of Common Stock,
present in person or by proxy, will be able to elect all of the
Company's Board of Directors.
17. No Dividends Anticipated. At the present time the Company does
not anticipate paying dividends, cash or otherwise, on its Common Stock
in the foreseeable future. Future dividends will depend on earnings, if
any, of the Company, its financial requirements and other factors.
Investors who anticipate the need of an immediate income from their
investment in the Company's Common Stock should refrain from the
purchasing the Company's securities. See "Dividend Policy."
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Company has inadequate cash to maintain operations during
the next twelve months. In order to meet its cash requirements the
Company will have to raise additional capital through the sale of
securities or borrowings from the Company's shareholders. As of the
date hereof, the Company has not made sales of additional securities
and there is no assurance that it will be able to raise additional
capital through the sale of securities in the future. Further, the
Company has not initiated any negotiations for additional loans to the
Company, other than a $50,000 line of credit from the Company's
president and there is no assurance that the Company will be able to
raise additional capital in the future through loans. In the event
that the Company is unable to raise additional capital, it may have to
suspend or cease operations.
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The Company does not intend to conduct any additional product
research or development. The Company believes that Turbolator and
PHTEM are ready for manufacturing and marketing in their current
status. As a result, the Company is in the process of finalizing an
agreement with a marketing company to promote the products through the
use of television and networking and the Company has located
manufacturers for the products and is arranging for product molds to be
built for production of the products. The Company may conduct product
research and development in the future; however, there are no plans to
do so at the present time.
The Company does not intend to purchase a plant or
significant equipment.
The Company will hire employees on an as needed basis. The
Company, however, does not expect any significant changes in the number
of employees.
Results of Operations - Period from Inception (July 21, 1998) through
January 31, 1999.
The Company is considered to be in the development stage as
defined in Statement of Financial Accounting Standards No. 7. There
have been no revenues since incorporation. For the year ended January
31, 1999, the Company incurred a net loss of $35,866, or $(0.01) per
share, which is primarily the result of the recognition of compensation
expense for common stock issued to directors for services.
Liquidity and Capital Resources.
Through April 19, 1999, the Company has issued 4,690,250 shares of
its Common Stock to officers, directors and others. The Company has no
operating history and no material assets. The Company has $27,265 in
cash as of January 31, 1999.
At January 31, 1999, the Company had net deferred tax assets of
approximately $12,500 and has established a valuation allowance equal
to the net deferred tax assets as management of the Company cannot
determine that it is more likely then not that the Company will realize
the benefit of the net deferred tax asset.
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The Company has been in the development stage since its inception.
The Company has had no recurring source of revenue and has incurred
operating losses since inception. These factors raise substantial
doubt about the Company's ability to continue as a going concern. As
a result of these factors, the Company's independent certified public
accountants have included an explanatory paragraph in their report on
the Company's January 31, 1999 financial statements which expressed
substantial doubt about the Company's ability to continue as a going
concern.
Management of the Company has undertaken certain actions to
address these conditions. Management currently plans to commence
production in fiscal 2000. To this end, management is currently in
negotiations with manufactures to produce the Company's products and
with marketing representatives to establish a product channel. Funds
required to carry out management's plans are expected to be derived
from future stock sales or borrowings from the Company's shareholders.
There can be no assurances that the Company will be successful in
executing its plans.
IMPACT OF YEAR 2000
The Company is aware of the issues associated with the programming
code in existing computer systems as the millennium (year 2000)
approaches. The "year 2000" problem is pervasive and complex as
virtually every computer operation will be affected in some way by the
rollover of the two digit year value to 00. The issue is whether
computer systems will properly recognize date sensitive information
when the year changes to 2000. Systems that do not properly recognize
such information could generate erroneous data or cause a system to
fail. Since the Company is not producing or maintaining time sensitive
operations at present, the year 2000 problem is not anticipated to have
a significant impact on the Company's operations. However, it may have
a significant impact on key suppliers and customers with whom the
Company may conduct business in the future.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 requires companies to recognize all derivative contracts as either
assets or liabilities in the balance sheet and to measure
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them at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match
the timing of gain or loss recognition on the hedging derivative with
the recognition of (i) the changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk or (ii) the
earnings effect of the hedged forecasted transaction. For a derivative
not designated as a hedging instrument, the gain or loss is recognized
as income in the period of change. SFAS No. 133 is effective for all
fiscal quarters of fiscal years beginning after June 15, 1999. Based
on its current and planned future activities relative to derivative
instruments, the Company believes that the adoption of SFAS No. 133 on
January 1, 2000 will not have a significant effect on its financial
statements.
In June 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position 98-5 (SOP 98-5), Reporting on the Costs of Start-Up
Activities. SOP 90-5 requires all start-up and organizational costs to
be expensed as incurred. It also requires all remaining historically
capitalized amounts of these costs existing at the date of adoption to
be expensed and reported as the cumulative effect of a change in
accounting principle. SOP 98-5 is effective for all fiscal years
beginning after December 31, 1998. The Company believes that the
adoption of SOP 98-5 will not have a significant effect on its
financial statements.
In February 1999 the Financial Accounting Standards Board issued
SFAS No. 135, Rescission of Financial Accounting Standards Board No. 75
("SFAS No. 75") and Technical Corrections. SFAS No. 135 rescinds SFAS
No. 75 and amends SFAS No 35. SFAS No. 135 also amends other existing
authoritative literature to make various technical corrections, clarify
meanings, or described applicability under changed conditions. SFAS
No. 135 is effective for financial statements issued for fiscal years
ending after February 15, 1999. The Company believes that the adoption
of SFAS No. 135 will not have a significant effect on its financial
statements.
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ITEM 3. DESCRIPTION OF PROPERTIES.
The Company does not own any real property. The Company owns
personal property in the form of inventory, office equipment and
manufacturing equipment. The Company currently uses office space
provided by the Company's President and major shareholder.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth the Common Stock ownership as of
April 19, 1999, of each person known by the Company to be the
beneficial owner of five percent or more of the Company's Common Stock,
each director individually and all officers and directors of the
Company as a group. Each person has sole voting and investment power
with respect to the shares of Common Stock shown, unless otherwise
noted, and all ownership is of record and beneficial.
Percentage
Name and Number of Of Shares
address of owner Shares Position Owned
Robert E. Sterling 4,300,000 President and a 91.68%
230 North Division Street member of the Board
Spokane, WA 99201 of Directors
Ronald L. Allen 50,000 Vice President and 1.07%
3031 West 22nd Avenue a member of the
Spokane, WA 99204 Board of Directors
William A. Sutherland 50,000 Secretary/Treasurer, 1.07%
1761 55th Street Chief Financial Officer
Brooklyn, NY 11204 and a member of the
Board of Directors
All officers and 4,400,000 93.82%
directors as a
group (3 persons)
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ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The officers and directors of the Company are as follows:
Name Age Position
Robert E. Sterling 56 President and a member of the Board
of Directors
Ronald L. Allen 59 Vice President and a member of the
Board of Directors
William A. Sutherland 54 Secretary/Treasurer and a member of
the Board of Directors
All directors hold office until the next annual meeting of
shareholders and until their successors have been elected and
qualified. The Company's officers are elected by the Board of
Directors after each annual meeting of the Company's shareholders and
hold office until their death, or until they resign or have been
removed from office.
Robert E. Sterling - President and a member of the Board of Directors.
Mr. Sterling is a founder, President, and a member of the Board of
Directors of the Company. Mr. Sterling is the founding principal and
sole owner of Bob Sterling Enterprises, Inc., a Washington corporation,
located in Spokane, Washington. Sterling Enterprises was formed in 1967
and conducts business through itself and several subsidiary
corporations in general contracting, real estate and retail stores.
Since 1967, Mr. Sterling has owned Midas Muffler Shops in Washington
and Idaho and has from time-to-time owned and operated Midas Muffler
Shops in Hawaii and Nevada. Mr. Sterling has also served as an officer
and director of several publicly traded companies, including Gold
Express Corporation and Gold Coin Mining, Inc.
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Ronald L Allen - Vice President and a member of the Board of Directors.
Mr. Allen is a founder, Vice President and a member of the Board
of Directors of the Company. Mr. Allen has been engaged in the
commodity futures business since 1973 and is the owner of Merchants
Futures of the Northwest, a commodity brokerage company located in
Spokane, Washington. Mr. Allen has also served on the Board of
Directors of several publicly traded corporations.
William A. Sutherland - Secretary/Treasurer, Chief Financial Officer,
and a member of the Board of Directors.
Mr. Sutherland is a founder, Secretary/Treasurer, Chief Financial
Officer and a member of the Board of Directors of the Company. Since
1970, Mr. Sutherland has been involved in the automotive industry as a
consultant and automobile dealer. He has owned Lincoln, Mercury, and
Mercedes Benz car dealerships and is currently a consultant to a number
of auto dealerships located in Spokane, Washington.
All of the officers and directors are engaged in other business.
As such, they will not be devoting time exclusively to the operation of
the Company. The President expects to devote approximately ten hours of
his time per month to the operation of the Company and the Vice
President and Secretary/Treasurer each expect to devote approximately
two hours of their time per month to the operation of the Company. It
is expected that the day-to-day operations of the Company will be
directed by Mr. Sterling, the Company's President.
ITEM 6. EXECUTIVE COMPENSATION.
Summary Compensation.
The following table sets forth the compensation paid by the
Company during fiscal 1999 to its officers. This information includes
the dollar value of base salaries, bonus awards and number of stock
options granted, and certain other compensation, if any.
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Summary Compensation Table.
Annual Compensation
-------------------
Principal
Name Position Year Salary ($)
- ------------- --------- ---- ----------
Robert E. Sterling President 1999 $ 0 [1]
Ronald L. Allen Vice President 1999 $ 0 [1]
William A. Sutherland Secretary/Treasurer 1999 $ 0 [1]
[1] Compensation for services rendered by the officers have been
imputed at a nominal value.
There are no stock option, retirement, pension, or profit sharing
plans for the benefit of the Company's officers and directors.
Option/SAR Grants.
No individual grants of stock options, whether or not in tandem
with stock appreciation rights ("SARs"), and freestanding SARs have
been made to any executive officer or any director since the inception
of the Company, accordingly, no stock options have been exercised by
any of the officers or directors in fiscal 1999.
Long-Term Incentive Plan Awards.
The Company does not have any long-term incentive plans that
provide compensation intended to serve as incentive for performance to
occur over a period longer than one fiscal year, whether such
performance is measured by reference to financial performance of the
Company or an affiliate, the Company's stock price, or any other
measure.
Compensation of Directors.
Each member of the Board of Directors received 50,000 shares of
Common Stock to serve on the Board of Directors during fiscal 1999.
The directors did not receive any other compensation for serving as
members of the Board of Directors. The Board has not implemented a plan
to award options. There are no contractual arrangements with any member
of the Board of Directors.
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The Company does expect not to pay any salaries to its officers
for the fiscal year-ended January 31, 2000. The Company does not
expect to pay salaries to any of its officers until such time as the
Company generates sufficient revenues to do so. The Company does not
anticipate paying any salaries to its officers until fiscal 2001. The
Company does not intend to pay any additional compensation to its
directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
On July 21, 1998, the Company entered into a Licensing Agreement
with Robert Sterling and Matthew Sterling for the licensing of the
development, manufacturing and market of the Turbolator. Further, on
the same date, the Company entered into a licensing agreement with
Robert Sterling for the development, manufacturing and marketing of the
PHTEM.
On July 31, 1998, the Company issued 4,500,000 shares of Common
Stock to the following pursuant to Reg. 504 of the Securities Act of
1933 (the "Act"):
Total Shares
Name Consideration Acquired
Robert E. Sterling 4,250,000 shares for 4,300,000
the Licensing Agreement and
50,000 shares for services
as director
Ronald L. Allen 50,000 shares for services 50,000
as director
William A. Sutherland 50,000 shares for services 50,000
as director
Matthew R. Sterling 100,000 shares for the 100,000
Licensing Agreement
TOTAL Licensing Agreement and 4,500,000
Services valued at $45,841
The Company has received cash advances under a line of credit
totaling $22,509 at January 31, 1999 from Robert Sterling, the
Company's President. Borrowings under the line of credit accrue
interest at the rate of 8% per annum and mature on July 31, 1999. The
borrowings are unsecured.
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ITEM 8. LEGAL PROCEEDINGS.
No material legal proceedings to which the Company is a party are
pending nor are any known to be contemplated and the Company knows of
no legal proceedings pending or threatened, or judgments entered
against, any Director or Officer of the Company in his capacity as
such.
ITEM 9. MARKET PRICE FOR COMMON EQUITY AND OTHER SHAREHOLDER MATTERS.
No market exists for the Company's securities and there is no
assurance that a regular trading market will develop, or if developed,
that it will be sustained. A shareholder in all likelihood, therefore,
will be unable to resell the securities referred to herein should he or
she desire to do so. Furthermore, it is unlikely that a lending
institution will accept the Company's securities as pledged collateral
for loans unless a regular trading market develops.
There are no plans, proposals, arrangements or understandings with
any person with regard to the development of a trading market in any of
the Company's securities. Public Securities, Inc, however, has filed
a Form 211 with the National Association of Securities Dealers, Inc.
(the "NASD") requesting that the Company's common stock be listed on
the Bulletin Board operated by the NASD. On January 4, 1999, the NASD
amended its rules regarding listing of
securities for trading on the Bulletin Board. Effective on January 4,
1999, securities of corporations will not be listed for trading on the
Bulletin Board unless the corporation files reports pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934. Accordingly, the
Company's common stock will not be listed for trading on the Bulletin
Board until such time as this registration statement is declared
effective by the Securities and Exchange Commission (the "Commission")
and the Company has satisfied all comments made by the Commission.
As of April 19, 1999, the Company has 45 holders of record of its
Common Stock.
The Company has not paid any dividends since it is inception and
does not anticipate paying any dividends on its Common Stock in the
foreseeable future.
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SEC Rule 15g
The Company's shares are covered by Section 15g of the Securities
Act of 1933, as amended that imposes additional sales practice
requirements on broker/dealers who sell such securities to persons
other than established customers and accredited investors (generally
institutions with assets in excess of $5,000,000 or individuals with
net worth in excess of $1,000,000 or annual income exceeding $200,000
or $300,000 jointly with their spouses). For transactions covered by
the Rule, the broker/dealer must make a special suitability
determination for the purchase and have received the purchaser's
written agreement to the transaction prior to the sale. Consequently,
the Rule may affect the ability of broker/dealers to sell the Company's
securities and also may affect the ability of purchasers to sell their
shares in the secondary market.
Section 15g also imposes additional sales practice requirements on
broker/dealers who sell penny securities. These rules require a one
page summary of certain essential items. The items include the risk of
investing in penny stocks in both public offerings and secondary
marketing; terms important to in understanding of the function of the
penny stock market, such as "bid" and "offer" quotes, a dealers
"spread" and broker/dealer compensation; the broker/dealer
compensation, the broker/dealers duties to its customers, including the
disclosures required by any
other penny stock disclosure rules; the customers rights and remedies
in causes of fraud in penny stock transactions; and, the NASD's toll
free telephone number and the central number of the North American
Administrators Association, for information on the disciplinary history
of broker/dealers and their associated persons.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES.
In July 31, 1998, the Company issued 4,500,000 shares of Common
Stock to its officers, directors and one other person in consideration
of licensing agreements and services valued at $45,841. No commissions
were paid to any persons in connection with such sales, no advertising
of any nature was made in connection with the sale of said shares and
all Company information was made available to said purchasers. The
foregoing shares were issued pursuant to Reg. 504 of the Securities Act
of 1933, as amended (the "Act").
<PAGE> 19
In March 1999, the Company completed its sale of 190,250 shares of
Common Stock to 41 persons in consideration of $38,050, pursuant to
Reg. 504 of the Act. No commissions were paid to any persons in
connection with such sales, no advertising of any nature was made in
connection with the sale of said shares and the Company delivered an
offering memorandum to the purchasers.
ITEM 11. DESCRIPTION OF SECURITIES.
The authorized capital stock of the Company currently consists of
100,000,000 shares of Common Stock, $0.00001 par value per share. As of
April 19, 1999, 4,690,250 share of common stock were issued and
outstanding. Of the 4,690,250 shares presently outstanding, 4,400,000
are owned by officers and directors of the Company and may only be
resold in compliance with Reg. 144 of the Securities Act of 1933 (the
"Act"), with the exception of the one year holding period. The balance
of the Shares (290,250) are freely tradeable.
In general, under Reg. 144, a person who has held his shares for
a period of one (1) year, may sell in ordinary market transactions
through a broker or with a market maker, within any three (3) month
period a number of shares which does not exceed the greater of one
percent (1%) of the number of outstanding shares of Common Stock or the
average of the weekly trading volume of the Common Stock during the
four calendar weeks prior to such sale. Sales under Reg. 144 require
the filing of Form 144 with the Securities and Exchange Commission. If
the shares of Common Stock have been held for more than two (2) years
by a person who is not
an affiliate, there is no limitation on the manner of sale or the
volume of shares that may be sold and no Form 144 is required. Sales
under Reg. 144 may have a depressive effect on the market price of the
Company's Common Stock.
Dividends
Holders of the Common Stock are entitled to share equally in
dividends when, as and if declared by the Board of Directors of the
Company, out of funds legally available therefore. No dividend has been
paid on the Common Stock since inception, and none is contemplated in
the foreseeable future.
<PAGE> 20
Transfer Agent
The Company's transfer agent is American Securities Transfer &
Trust, Inc.,938 Quail Street, Suite 101, Lakewood, Colorado 80215-5513
and its telephone number is (303) 298-5370.
Rights of Shareholders
All shares have equal voting rights and are not assessable.
Voting rights are not cumulative and, therefore, the holders of more
than 50% of the Common Stock could, if they chose to do so, elect all
of the directors of the Company.
Shareholders of the Company have no preemptive rights to acquire
additional shares of Common Stock or other securities. The Common
Stock is not subject to redemption and carries no subscription or
conversion rights. In the event of liquidation of the Company, the
shares of Common Stock are entitled to share equally in corporate
assets after satisfaction of all liabilities. The shares of Common
Stock, when issued, will be fully paid and non-assessable.
There are no outstanding options, warrants or rights to purchase
shares of the Company's Common Stock, other than as disclosed herein.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Washington Revised Statutes and certain provisions of the
Company's Bylaws under certain circumstances provide for
indemnification of the Company's Officers, Directors and controlling
persons against liabilities which they may incur in such capacities.
A summary of the circumstances in which such indemnification is
provided for is contained herein, but this description is qualified
in its entirety by reference to the Company's Bylaws and to the
statutory provisions.
In general, any Officer, Director, employee or agent may be
indemnified against expenses, fines, settlements or judgments arising
in connection with a legal proceeding to which such person is a party,
if that person's actions were in good faith, were believed to be in the
Company's best interest, and were not unlawful. Unless such person is
successful upon the merits in such an action, indemnification may be
<PAGE> 21
awarded only after a determination by independent decision of the Board
of Directors, by legal counsel, or by a vote of the shareholders, that
the applicable standard of conduct was met by the person to be
indemnified.
The circumstances under which indemnification is granted in
connection with an action brought on behalf of the Company is generally
the same as those set forth above; however, with respect to such
actions, indemnification is granted only with respect to expenses
actually incurred in connection with the defense or settlement of the
action. In such actions, the person to be indemnified must have acted
in good faith and in a manner believed to have been in the Company's
best interest, and have not been adjudged liable for negligence or
misconduct.
Indemnification may also be granted pursuant to the terms of
agreements which may be entered in the future or pursuant to a vote of
shareholders or Directors. The statutory provision cited above also
grants the power to the Company to purchase and maintain insurance
which protects its Officers and Directors against any liabilities
incurred in connection with their service in such a position, and such
a policy may be obtained by the Company.
ITEM 13. FINANCIAL STATEMENTS.
Exhaust Technologies, Inc.
Report of Independent Certified Public Accountants . F-2
Balance Sheet . . . . . . . . . F-3
Statement of Loss . . . . . . . . F-4
Statement of Changes in Stockholders' Equity . . . F-5
Statement of Cash Flows . . . . . . . F-6
Summary of Accounting Policies . . . . F-7 to F-10
Notes to Financial Statements . . . .F-11 to F-12
<PAGE> 22
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Exhaust Technologies, Inc.
We have audited the accompanying balance sheet of Exhaust Technologies,
Inc. (a development stage company), as of January 31, 1999, and the
related statements of loss, changes in stockholders' equity and cash
flows for the period from inception (July 21, 1998) through January 31,
1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Exhaust
Technologies, Inc. as of January 31, 1999, and the results of its
operations and its cash flows for the period from inception (July 21,
1998) through January 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1
to the financial statements, the Company has no recurring source of
revenue and has incurred a loss. These conditions raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note
1. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Spokane, Washington
March 11, 1999
F-2
<PAGE> 23
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
ASSETS (Note 1)
<TABLE>
<CAPTION>
January 31,
1999
-----------
<S> <C>
Current assets:
Cash $ 27,265
Supplies inventory 7,991
--------
Total current assets 35,256
--------
Other assets:
Licenses, net of accumulated
amortization of $1,584 (Note 2) 14,257
--------
$ 49,513
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued interest $ 785
Line of credit - related party (Note 3) 22,509
--------
Total current liabilities 23,294
--------
Commitments and contingencies (Notes 1, 3 and 4)
Stockholders' equity:
Common stock, $.00001 par value;
100,000,000 shares authorized;
4,642,500 shares issued and
outstanding 46
Additional paid-in capital 62,039
Deficit accumulated during the
development stage (35,866)
--------
Total stockholders' equity 26,219
--------
$ 49,513
========
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
F-3
<PAGE> 24
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF LOSS
<TABLE>
<CAPTION>
Period from
Inception
(July 21, 1998)
through
January 31,
1999
--------------
<S> <C>
Revenues $ -
--------
Operating expenses:
Amortization 1,584
Travel 2,838
Directors fees 30,000
Office expense 659
---------
Total operating expenses 35,081
---------
Loss from operations (35,081)
---------
Other expense:
Interest expense (785)
---------
Net loss $ (35,866)
=========
Net loss per share basic and diluted $ (0.01)
=========
Weighted average number of shares
basic and diluted 4,516,264
=========
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
F-4
<PAGE> 25
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
------------ Paid-in Development
Shares Amount Capital Stage Total
------ ------ -------- -------- -----
<S> <C> <C> <C> <C> <C>
Common stock issued to
inventors for licenses
at $0.01 per share 4,350,000 $ 43 $ 15,798 $ - $ 15,841
Common stock issued for
services at $0.20 per
share 150,000 2 29,998 - 30,000
Common stock issued for
cash at $0.20 per
share 142,500 1 16,243 - 16,244
Net loss for the period - - - (35,866) (35,866)
--------- ----- --------- --------- ---------
Balance,
January 31, 1999 4,642,500 $ 46 $ 62,039 $ (35,866) $ 26,219
========= ===== ========= ========= =========
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
F-5
<PAGE> 26
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Period from
Inception
(July 21, 1998)
through
January 31,
1999
--------------
<S> <C>
Cash flows from operating activities:
Net loss $ (35,866)
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization 1,584
Issuance of common stock for services 30,000
Changes in assets and liabilities:
Inventory and supplies (780)
Accrued interest 785
---------
Net cash used in operating activities (4,277)
---------
Cash flows from financing activities:
Borrowings under line of credit
related party 15,298
Net proceeds from sale of common stock 16,244
---------
Net cash provided by financing activities 31,542
---------
Net increase in cash 27,265
Cash at beginning of period -
---------
Cash at end of period $ 27,265
=========
Supplemental schedule of cash activities:
Cash paid for interest $ -
Cash paid for income taxes $ -
=========
Supplemental schedule of non-cash
financing activities:
Issuance of common stock in exchange
for licenses $ 15,841
Inventory advanced under line of credit -
related party $ 7,211
=========
</TABLE>
See accompanying summary of accounting policies and
notes to financial statements.
F-6
<PAGE> 27
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF ACCOUNTING POLICIES
Nature of Business
Exhaust Technologies, Inc. ("Exhaust Technologies" or "the Company") is
a development stage enterprise which holds exclusive manufacturing,
developing, and marketing rights in the United States for the
Turbolator, a tube-housing designed for installation on vehicles to
regulate exhaust flow from the engine, and for the Pneumatic Hand Tool
Exhaust Muffler ("PHTEM"), a noise muffling system installed on
pneumatic wrenches which can reduce the sound levels and remove
contaminates from the exhaust air before discharging into the
atmosphere. The Company was incorporated pursuant to the laws of the
state of Washington in July 1998.
Cash Equivalents
For financial reporting purposes, the Company considers all highly
liquid investments with an original maturity of three months or less
when purchased to be a cash equivalent. Financial instruments which
potentially subject the Company to a concentration of credit risk
consist of cash and cash equivalents. Cash and cash equivalents
consist of funds deposited with various high credit quality financial
institutions.
Inventory
Inventory consists of supplies and component parts. Inventory is
stated at the lower of cost (first-in, first-out method) or market.
Equipment
Equipment is recorded at cost. Depreciation and amortization are
provided using the straight-line method over the useful lives of the
respective assets. Major additions and betterments are capitalized.
Upon retirement or disposal, the cost and related accumulated
depreciation or amortization are removed from the accounts and any gain
or loss is reflected in operations. Equipment with a nominal value was
contributed by the founders at inception, and accordingly, no asset has
been recognized.
Licenses
The costs associated with acquiring exclusive licensing rights to
patented technology have been capitalized and are being charged to
expense using the straight line method of amortization over ten years,
the estimated useful lives of the patents.
F-7
<PAGE> 28
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF ACCOUNTING POLICIES
In accordance with the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-
lived Assets and for Long-lived Assets to be Disposed of", management
of the Company reviews the carrying value of its intangible assets on
a regular basis. Estimated undiscounted future cash flows from the
intangible assets are compared with the current carrying value.
Reductions to the carrying value are recorded to the extent the net
book value of the property exceeds the estimate of future discounted
cash flows.
Income Taxes
Income taxes are provided based on the liability method of accounting
pursuant to SFAS No. 109, "Accounting for Income Taxes." Under this
approach, deferred income taxes are recorded to reflect the tax
consequences on future years of differences between the tax basis of
assets and liabilities and their financial reporting amounts at each
year end. A valuation allowance is recorded against deferred tax
assets if management does not believe the Company has met the "more
likely than not" standard imposed by SFAS No. 109 to allow recognition
of such an asset.
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
dates of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheet as of
January 31, 1999 for cash equivalents and accrued expenses approximate
fair value because of the immediate or short-term maturity of these
financial instruments. The fair value of the line of credit - officer
approximates its carrying value as the stated rate of the debt reflects
recent market conditions.
Research and Development Costs
Research and development costs are charged to expense as incurred.
F-8
<PAGE> 29
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF ACCOUNTING POLICIES
Net Loss Per Share
SFAS No. 128 requires dual presentation of basic EPS and diluted EPS on
the face of all income statements issued after December 15, 1997 for
all entities with complex capital structures. Adoption of SFAS No. 128
had no effect on the Company's financial statements. Basic EPS is
computed as net income divided by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through stock
options, warrants and other convertible securities. The Company had no
dilutive potential common stock at January 31, 1999 and therefore,
basic and diluted EPS are the same for this period.
New Accounting Pronouncements
In June 1998 the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities.
SFAS No. 133 requires companies to recognize all derivative contracts
as either assets or liabilities in the balance sheet and to measure
them at fair value. If certain conditions are met, a derivative may be
specifically designated as a hedge, the objective of which is to match
the timing of gain or loss recognition on the hedging derivative with
the recognition of (i) the changes in the fair value of the hedged
asset or liability that are attributable to the hedged risk, or (ii)
the earnings effect of the hedged forecasted transaction. For a
derivative not designated as a hedging instrument, the gain or loss is
recognized as income in the period of change. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after June
15, 1999. Based on its current and planned future activities relative
to derivative instruments, the Company believes that the adoption of
SFAS No. 133 on January 1, 2000 will not have a significant effect on
its financial statements.
In June 1998 the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position 98-5 ("SOP 98-5"), Reporting on the Costs of Start-up
Activities. SOP 98-5 requires all start-up and organizational costs to
be expensed as incurred. It also requires all remaining historically
capitalized amounts of these costs existing at the date of adoption to
be expensed and reported as the cumulative effect of a change in
accounting principle. SOP 98-5 is effective for all fiscal years
beginning after December 31, 1998. The Company believes that the
adoption of SOP 98-5 on January 1, 2000 will not have a significant
effect on its financial statements.
F-9
<PAGE> 30
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY OF ACCOUNTING POLICIES
In February 1999 the Financial Accounting Standards Board issued SFAS
No. 135, Rescission of Financial Accounting Standards Board No. 75
("SFAS No. 75") and Technical Corrections. SFAS No. 135 rescinds SFAS
No. 75 and amends Statement of Financial Accounting Standards Board No
35. SFAS No. 135 also amends other existing authoritative literature
to make various technical corrections, clarify meanings, or describe
applicability under changed conditions. SFAS No. 135 is effective for
financial statements issued for fiscal years ending after February 15,
1999. The Company believes that the adoption of SFAS No. 135 will not
have a significant effect on its financial statements.
F-10
<PAGE> 31
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
1. Development Stage Operations and Going Concern
The Company has been in the development stage since its inception. The
Company has no recurring source of revenue and has incurred a loss.
These factors raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include
any adjustments that may be necessary if the Company is unable to
continue as a going concern.
Management of the Company has undertaken certain actions to address
these conditions. Management currently plans to commence production in
fiscal 2000. To this end, management is currently in negotiations with
manufacturers to produce the Company's products and with marketing
representatives to establish a product channel. Funds required to
carry out management's plans are expected to be derived from future
stock sales or borrowings from the Company's shareholders. There can
be no assurances that the Company will be successful in executing its
plans.
2. Licenses
In 1998, the Company acquired exclusive licensing rights to
manufacture, develop and market the Turbolator and the PHTEM from the
Company's president and his son ("the inventors") under separate
licensing agreements. The licenses were acquired through the issuance
of 4,350,000 shares of common stock, valued at $15,841, which
represented the inventors' historical cost basis in the licenses.
Pursuant to the terms of the agreements, the Company is required to
generate sales of the Turbolator of $1,000,000 per year beginning in
fiscal 2000 and generate sales of the PHTEM of $500,000 in fiscal 2000
and $1,000,000 per year thereafter, in order to retain the licensing
rights.
3. Line of Credit - Related Party
The Company has a line of credit with the Company's president which
allows for borrowings up to $50,000. Outstanding borrowings under the
line of credit, which accrue interest at 8% and mature on July 31,
1999, totaled $22,509 at January 31, 1999. Borrowings under the line
of credit are unsecured.
F-11
<PAGE> 32
EXHAUST TECHNOLOGIES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
4. Income Taxes
At January 31, 1999, the Company had net deferred tax assets of
approximately $12,500 principally arising from net operating loss
carryforwards for income tax purposes. As management of the Company
cannot determine that it is more likely than not that the Company will
realize the benefit of the net deferred tax asset, a valuation
allowance equal to the net deferred tax asset has been established at
January 31, 1999.
At January 31, 1999, the Company has net operating loss carryforwards
totaling approximately $37,000 which expire in the year 2014.
F-12
<PAGE> 33
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial
disclosures from the inception of the Company through the date of this
Registration Statement.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS.
(a) List of Financial Statements.
Report of Independent Certified Public Accountants
Balance Sheet
Statement of Loss
Statement of Changes in Stockholders' Equity
Statement of Cash Flows
Summary of Accounting Policies
Notes to Financial Statements
(b) Exhibit No. Description
3.1 Articles of Incorporation.
3.2 Bylaws.
4.1 Specimen Stock Certificate.
27 Financial Data Schedule
10.1 Licensing Agreement for Turbolator
10.2 Licensing Agreement for Pneumatic Hand Tool
Exhaust Muffler.
<PAGE> 34
SIGNATURES
In accordance with Section 12 of the Securities Ace of 1934, the
registrant caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized:
EXHAUST TECHNOLOGIES, INC.
BY: /s/ Robert E. Sterling
Robert E. Sterling, President
KNOW ALL MEN BY THESE PRESENT, that each person whose signature
appears below constitutes and appoints Robert E. Sterling, as true and
lawful attorney-in-fact and agent, with full power of substitution, for
his and in his name, place and stead, in any all capacities, to sign
any and all amendments (including post-effective amendments) to this
registration statement, and to file the same, therewith, with the
Securities and Exchange Commission, and to make any and all state
securities law or blue sky filings, granting unto said attorney-in-fact
and agent, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the
premises, as fully to all intends and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorney-
in-fact and agent, or any substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of
1934, this Form 10SB Registration Statement has been signed by the
following persons in the capacities and on the dates indicated:
Signatures Title Date
/s/ Robert E. Sterling
Robert E. Sterling Chairman of the Board 04/26/99
of Directors and
President
/s/ Ronald L. Allen
Ronald L. Allen Vice President and a 04/26/99
Member of the Board
of Directors
______________________
William A. Sutherland Secretary/Treasurer 04/__/99
and a member of the
Board of Directors
<PAGE> 35
ARTICLES OF INCORPORATION
OF
EXHAUST TECHNOLOGIES, INC.
The undersigned, acting as incorporator of a corporation
under the Washington Business Corporation Act adopts the following
Articles of Incorporation for such Corporation.
ARTICLE I
NAME OF CORPORATION
The name of the Corporation shall be:
EXHAUST TECHNOLOGIES, INC.
ARTICLE II
DURATION OF CORPORATION
The period of duration of the Corporation shall be perpetual.
ARTICLE III
CORPORATION PURPOSES
The purpose or purposes for which the Corporation is
organized are:
Section 1.
To engage in the business of developing, manufacturing and
marketing exhaust systems.
Section 2.
In general, to carry on any lawful business whatsoever in
connection with the foregoing which is calculated, directly or
indirectly, to promote the interests of the Corporation or to enhance
the value of its properties.
Section 3.
To engage in and carry on any lawful business or trade,
regardless of whether or not said business or trade is directly or
indirectly related to the business referred to in Section 1 of the
Article III and to exercise all powers granted to a corporation formed
under the Washington Business Corporation Act, including any amendments
thereto or successor statutes that may hereinafter be enacted.
<PAGE> 36
ARTICLE IV
CAPITALIZATION
The aggregate number of shares which the Corporation shall
have the authority to issue is 100,000,000 shares of Common Stock
having a par value of $0.00001 per share. There shall be no other
class or shares of stock in the Corporation. The Corporation shall
have the right to purchase, take, receive or otherwise acquire, hold,
own, pledge, transfer and dispose of its own shares, to the extent of
both its unrestricted and unreserved capital surplus.
ARTICLE V
NO PREEMPTIVE RIGHTS
Shareholders shall have no preemptive rights to acquire
additional shares offered for sale by the corporation.
ARTICLE VI
NO CUMULATIVE VOTING
Each shareholder entitled to vote at any election for
Director shall have the right to vote, in person or by proxy, the
number of shares owned by him for as many persons as there are
Directors to be elected and for whose election he has a right to vote,
and no shareholder shall be entitled to cumulate his votes.
ARTICLE VII
GENERAL PROVISIONS
Section 1.
The Board of Directors shall have full power to adopt, alter,
amend, or repeal the Bylaws or adopt new Bylaws. Nothing herein shall
deny the concurrent power of the shareholders to adopt, alter, amend,
or repeal the Bylaws.
Section 2.
The Corporation reserves the right to amend, alter, change,
or repeal any provisions contained in its Articles of Incorporation in
any manner now or hereafter prescribed or permitted by statue. All
rights of shareholders of the Corporation are granted subject to this
reservation.
<PAGE> 37
Section 3.
The Corporation may enter into contracts and otherwise
transact business as a vendor, purchaser, or otherwise, with its
Directors, Officers, and shareholders and with corporations,
associations, firms and entities in which they are or may be or become
interested as Directors, Officers, shareholders, members, or otherwise,
as freely as though such adverse interests did not exist, even though
the vote, action or presence of such Director, Officer or shareholder
may be necessary to obligate the corporation upon such contracts or
transactions; and in the absence of fraud, no such Director, Officer or
shareholder shall be held liable to account to the Corporation, by
reason of such adverse interest or by reason of any fiduciary
relationship to the corporation arising out of such office or stock
ownership, for any profit or benefit realized by him through any such
contract or transaction; provided that in the case of Directors and
Officers of the Corporation (but not in the case of shareholders who
are not Directors or Officers), the nature of the interest of such
Director or Officer, though not necessarily the details or extent
thereof, be disclosed or known to the Board of Directors of the
Corporation, at the meeting thereof at which such contract or
transaction is authorized or confirmed. A general notice that a
Director or Officer of the Corporation is interested in any
corporation, association, firm, or entity shall be sufficient
disclosure as to such Director or Officer with respect to all contracts
and transactions with that corporation, association, firm, or entity.
ARTICLE VIII
REGISTERED OFFICE AND ADDRESS
The address of the initial registered office of the
Corporation is 601 West First Avenue, Suite 503, Spokane, Washington
99201 and the name of the initial registered agent at said address is
Conrad C. Lysiak.
ARTICLE IX
BOARD OF DIRECTORS
Section 1.
The number, qualifications, terms of office, manner of
election, time and place of meetings, and powers and duties of the
Directors shall be prescribed in the Bylaws.
<PAGE> 38
Section 2.
A Director of the Corporation shall not be personally liable
to the Corporation or its shareholders for monetary damages for conduct
as a Director, except for:
(a) Acts or omissions involving intentional misconduct
by the Director or a knowing violation of law by the
Director;
(b) Conduct violating RCW 23B.08.310 (which involves
certain distributions by the Corporation); or
(c) Any transaction from which the Director will
personally receive a benefit in money, property, or services
to which the Director is not legally entitled.
If the Washington Business Corporation Act is amended to
authorize corporate action further eliminating or limiting the personal
liability of Directors, then the liability of a Director of the
Corporation shall be eliminated or limited to the fullest extent
permitted by the Washington Business Corporation Act, as so amended.
Any repeal or modification of the foregoing paragraph by the
shareholders of the Corporation shall not adversely affect any right or
protection of a Director of the Corporation with respect to any acts or
omissions of such Director occurring prior to such repeal or
modification.
ARTICLE X
INDEMNIFICATION
Section 1.
The Corporation shall indemnify its Directors and Officers to
the fullest extent permitted by the Washington Business Corporation Act
now or hereafter in force. However, such indemnity shall not apply on
account of:
(a) Acts or omissions of the Director or Officer
finally adjudged to be intentional misconduct or a knowing
violation of law;
(b) Conduct of the Director or Officer finally adjudged
to be in violation of RCW 23B.08.310; or,
<PAGE> 39
(c) Any transaction with respect to which it was
finally adjudged that such Director or Officer personally
received a benefit in money, property, or services to which
the Director was not legally entitled.
The Corporation shall advance expenses for such persons
pursuant to the terms set forth in the Bylaws, or in a separate
Directors' resolution or contract.
Section 2.
The Board of Directors may take such action as is necessary
to carry out these indemnification and expense advancement provisions.
The Corporation is expressly empowered to adopt, approve and amend from
time to time such Bylaws, resolutions, contracts, or further
indemnification and expense advancement arrangements as may be
permitted by law, implementing these provisions. Such Bylaws,
resolutions, contracts, or further arrangements shall include but not
be limited to implementing the manner in which determinations as to any
indemnity or advancement of expenses shall be made.
Section 3.
No amendment or repeal of this Articles shall apply to or
have any effect on any right to indemnification provided hereunder with
respect to acts or omissions occurring prior to such amendment or
repeal.
ARTICLE XI
INCORPORATOR
The name and address of each incorporator is:
Name Address
Conrad C. Lysiak 601 West First Avenue
Suite 503
Spokane, Washington 99201
IN WITNESS WHEREOF, the incorporator hereinabove named has
executed these Articles of Incorporation this 20th day of July, 1998.
/s/ Conrad C. Lysiak
Conrad C. Lysiak, Incorporator
<PAGE> 40
CONSENT TO APPOINTMENT AS REGISTERED AGENT
I, Conrad C. Lysiak, hereby consent to serve as Registered
Agent in the State of Washington for the following Corporation:
EXHAUST TECHNOLOGIES, INC.
I understand that, as agent for the Corporation, it will be
my responsibility to receive service of process in the name of the
Corporation; to forward all mail to the Corporation; and, to
immediately notify the office of the Secretary of State in the event of
my resignation, or of any changes in the registered office address of
the Corporation for which I am agent.
Dated this 20th day of July, 1998.
/s/ Conrad C. Lysiak
Conrad C. Lysiak
601 West First Avenue
Suite 503
Spokane, Washington 99201
(509) 624-1475
<PAGE> 41
EXHIBIT 3.2
BYLAWS
OF
EXHAUST TECHNOLOGIES, INC
I. SHAREHOLDER'S MEETING.
.01 Annual Meetings.
The annual meeting of the shareholders of this Corporation, for
the purpose of election of Directors and for such other business
as may come before it, shall be held at the registered office of
the Corporation, or such other places, either within or without
the State of Washington, as may be designated by the notice of the
meeting, on the third week in July of each and every year, at 1:00
p.m., commencing in 1999, but in case such day shall be a legal
holiday, the meeting shall be held at the same hour and place on
the next succeeding day not a holiday.
.02 Special Meeting.
Special meetings of the shareholders of this Corporation may be
called at any time by the holders of ten percent (10%) of the
voting shares of the Corporation, or by the president, or by the
Board of Directors or a majority thereof. No business shall be
transacted at any special meeting of shareholders except as is
specified in the notice calling for said meeting. The Board of
Directors may designate any place, either within or without the
State of Washington, as the place of any special meeting called by
the president or the Board of Directors, and special meetings
called at the request of shareholders shall be held at such place
in the State of Washington, as may be determined by the Board of
Directors and placed in the notice of such meeting.
.03 Notice of Meeting.
Written notice of annual or special meetings of shareholders
stating the place, day, and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the
meeting is called shall be given by the secretary or persons
authorized to call the meeting to each shareholder of record
entitled to vote at the meeting. Such notice shall be given not
less than ten (10) nor more than fifty (50) days prior to the date
<PAGE> 42
of the meeting, and such notice shall be deemed to be delivered
when deposited in the United States mail addressed to the
shareholder at his/her address as it appears on the stock transfer
books of the Corporation.
.04 Waiver of Notice.
Notice of the time, place, and purpose of any meeting may be
waived in writing and will be waived by any shareholder by his/her
attendance thereat in person or by proxy. Any shareholder so
waiving shall be bound by the proceedings of any such meeting in
all respects as if due notice thereof had been given.
.05 Quorum and Adjourned Meetings.
A majority of the outstanding shares of the Corporation entitled
to vote, represented in person or by proxy, shall constitute a
quorum at a meeting of shareholders. A majority of the shares
represented at a meeting, even if less than a quorum, may adjourn
the meeting from time to time without further notice. At such
adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally notified. The
shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
.06 Proxies.
At all meetings of shareholders, a shareholder may vote by proxy
executed in writing by the shareholder or by his/her duly
authorized attorney in fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the
meeting. No proxy shall be valid after eleven (11) months from
the date of its execution, unless otherwise provided in the proxy.
.07 Voting of Shares.
Except as otherwise provided in the Articles of Incorporation or
in these Bylaws, every shareholder of record shall have the right
at every shareholder's meeting to one (1) vote for every share
standing in his/her name on the books of the Corporation, and the
affirmative vote of a majority of the shares represented at a
meeting and entitled to vote thereat shall be necessary for the
adoption of a motion or for the determination of all questions and
business which shall come before the meeting.
<PAGE> 43
II. DIRECTORS.
.01 General Powers.
The business and affairs of the Corporation shall be managed by
its Board of Directors.
.02 Number, Tenure and Qualifications.
The number of Directors of the Corporation shall be not less than
one nor more than five. Each Director shall hold office until the
next annual meeting of shareholders and until his/her successor
shall have been elected and qualified. Directors need not be
residents of the State of Washington or shareholders of the
Corporation.
.03 Election.
The Directors shall be elected by the shareholders at their annual
meeting each year; and if, for any cause the Directors shall not
have been elected at an annual meeting, they may be elected at a
special meeting of shareholders called for that purpose in the
manner provided by these Bylaws.
.04 Vacancies.
In case of any vacancy in the Board of Directors, the remaining
Director, whether constituting a quorum or not, may elect a
successor to hold office for the unexpired portion of the terms of
the Director whose place shall be vacant, and until his/her
successor shall have been duly elected and qualified.
.05 Resignation.
Any Director may resign at any time by delivering written notice
to the secretary of the Corporation.
.06 Meetings.
At any annual, special or regular meeting of the Board of
Directors, any business may be transacted, and the Board may
exercise all of its powers. Any such annual, special or regular
meeting of the Board of Directors of the Corporation may be held
outside of the State of Washington, and any member or members of
the Board of Directors of the Corporation may participate in any
<PAGE> 44
such meeting by means of a conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other at the same time;
the participation by such means shall constitute presence in
person at such meeting.
A. Annual Meeting of Directors.
Annual meetings of the Board of Directors shall be held
immediately after the annual shareholders' meeting or at such time
and place as may be determined by the Directors. No notice of the
annual meeting of the Board of Directors shall be necessary.
B. Special Meetings.
Special meetings of the Directors shall be called at any time and
place upon the call of the president or any Director. Notice of
the time and place of each special meeting shall be given by the
secretary, or the persons calling the meeting, by mail, radio,
telegram, or by personal communication by telephone or otherwise
at least one (1) day in advance of the time of the meeting. The
purpose of the meeting need not be given in the notice. Notice of
any special meeting may be waived in writing or by telegram
(either before or after such meeting) and will be waived by any
Director in attendance at such meeting.
C. Regular Meetings of Directors.
Regular meetings of the Board of Directors shall be held at such
place and on such day and hour as shall from time to time be fixed
by resolution of the Board of Directors. No notice of regular
meetings of the Board of Directors shall be necessary.
.07 Quorum and Voting.
A majority of the Directors presently in office shall constitute
a quorum for all purposes, but a lesser number may adjourn any
meeting, and the meeting may be held as adjourned without further
notice. At each meeting of the Board at which a quorum is
present, the act of a majority of the Directors present at the
meeting shall be the act of the Board of Directors. The Directors
present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of
enough Directors to leave less than a quorum.
<PAGE> 45
.08 Compensation.
By resolution of the Board of Directors, the Directors may be paid
their expenses, if any, of attendance at each meeting of the Board
of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director.
No such payment shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation
therefor.
.09 Presumption of Assent.
A Director of the Corporation who is present at a meeting of the
Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken
unless his/her dissent shall be entered in the minutes of the
meeting or unless he/she shall file his/her written dissent to
such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by
registered mail to the secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall
not apply to a Director who voted in favor of such action.
.10 Executive and Other Committees.
The Board of Directors, by resolution adopted by a majority of the
full Board of Directors, may designate from among its members an
executive committee and one of more other committees, each of
which, to the extent provided in such resolution, shall have and
may exercise all the authority of the Board of Directors, but no
such committee shall have the authority of the Board of Directors,
in reference to amending the Articles of Incorporation, adoption
a plan of merger or consolidation, recommending to the
shareholders the sale, lease, exchange, or other disposition of
all of substantially all the property and assets of the
dissolution of the Corporation or a revocation thereof,
designation of any such committee and the delegation thereto of
authority shall not operate to relieve any member of the Board of
Directors of any responsibility imposed by law.
<PAGE> 46
.11 Chairman of Board of Directors.
The Board of Directors may, in its discretion, elect a chairman of
the Board of Directors from its members; and, if a chairman has
been elected, he/she shall, when present, preside at all meetings
of the Board of Directors and the shareholders and shall have such
other powers as the Board may prescribe.
.12 Removal.
Directors may be removed from office with or without cause by a
vote of shareholders holding a majority of the shares entitled to
vote at an election of Directors.
III. ACTIONS BY WRITTEN CONSENT.
Any corporate action required by the Articles of Incorporation, Bylaws,
or the laws under which this Corporation is formed, to be voted upon or
approved at a duly called meeting of the Directors or shareholders may
be accomplished without a meeting if a written memorandum of the
respective Directors or shareholders, setting forth the action so
taken, shall be signed by all the Directors or shareholders, as the
case may be.
IV. OFFICERS.
.01 Officers Designated.
The Officers of the Corporation shall be a president, one or more
vice presidents (the number thereof to be determined by the Board
of Directors), a secretary and a treasurer, each of whom shall be
elected by the Board of Directors. Such other Officers and
assistant officers as may be deemed necessary may be elected or
appointed by the Board of Directors. Any Officer may be held by
the same person, except that in the event that the Corporation
shall have more than one director, the offices of president and
secretary shall be held by different persons.
.02 Election, Qualification and Term of Office.
Each of the Officers shall be elected by the Board of Directors.
None of said Officers except the president need be a Director, but
a vice president who is not a Director cannot succeed to or fill
the office of president. The Officers shall be elected by the
Board of Directors. Except as hereinafter provide, each of said
<PAGE> 47
Officers shall hold office from the date of his/her election until
the next annual meeting of the Board of Directors and until
his/her successor shall have been duly elected and qualified.
.03 Powers and Duties.
The powers and duties of the respective corporate Officers shall
be as follows:
A. President.
The president shall be the chief executive Officer of the
Corporation and, subject to the direction and control of the Board
of Directors, shall have general charge and supervision over its
property, business, and affairs. He/she shall, unless a Chairman
of the Board of Directors has been elected and is present, preside
at meetings of the shareholders and the Board of Directors.
B. Vice President.
In the absence of the president or his/her inability to act, the
senior vice president shall act in his place and stead and shall
have all the powers and authority of the president, except as
limited by resolution of the Board of Directors.
C. Secretary.
The secretary shall:
1. Keep the minutes of the shareholder's and of the Board
of Directors meetings in one or more books provided for
that purpose;
2. See that all notices are duly given in accordance with
the provisions of these Bylaws or as required by law;
3. Be custodian of the corporate records and of the seal of
the Corporation and affix the seal of the Corporation to
all documents as may be required;
4. Keep a register of the post office address of each
shareholder which shall be furnished to the secretary by
such shareholder;
<PAGE> 48
5. Sign with the president, or a vice president,
certificates for shares of the Corporation, the issuance
of which shall have been authorized by resolution of the
Board of Directors;
6. Have general charge of the stock transfer books of the
corporation; and,
7. In general perform all duties incident to the office of
secretary and such other duties as from time to time may
be assigned to him/her by the president or by the Board
of Directors.
D. Treasurer.
Subject to the direction and control of the Board of Directors,
the treasurer shall have the custody, control and disposition of
the funds and securities of the Corporation and shall account for
the same; and, at the expiration of his/her term of office, he/she
shall turn over to his/her successor all property of the
Corporation in his/her possession.
E. Assistant Secretaries and Assistant Treasurers.
The assistant secretaries, when authorized by the Board of
Directors, may sign with the president or a vice president
certificates for shares of the Corporation the issuance of which
shall have been authorized by a resolution of the Board of
Directors. The assistant treasurers shall, respectively, if
required by the Board of Directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as
the Board of Directors shall determine. The assistant secretaries
and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or the treasurer,
respectively, or by the president or the Board of Directors.
.04 Removal.
The Board of Directors shall have the right to remove any Officer
whenever in its judgment the best interest of the Corporation will
be served thereby.
<PAGE> 49
.05 Vacancies.
The Board of Directors shall fill any office which becomes vacant
with a successor who shall hold office for the unexpired term and
until his/her successor shall have been duly elected and
qualified.
.06 Salaries.
The salaries of all Officers of the Corporation shall be fixed by
the Board of Directors.
V. SHARE CERTIFICATES
.01 Form and Execution of Certificates.
Certificates for shares of the Corporation shall be in such form
as is consistent with the provisions of the Corporation laws of
the State of Washington. They shall be signed by the president
and by the secretary, and the seal of the Corporation shall be
affixed thereto. Certificates may be issued for fractional
shares.
.02 Transfers.
Shares may be transferred by delivery of the certificates
therefor, accompanied either by an assignment in writing on the
back of the certificates or by a written power of attorney to
assign and transfer the same signed by the record holder of the
certificate. Except as otherwise specifically provided in these
Bylaws, no shares shall be transferred on the books of the
Corporation until the outstanding certificate therefor has been
surrendered to the Corporation.
.03 Loss or Destruction of Certificates.
In case of loss or destruction of any certificate of shares,
another may be issued in its place upon proof of such loss or
destruction and upon the giving of a satisfactory bond of
indemnity to the Corporation. A new certificate may be issued
without requiring any bond, when in the judgment of the Board of
Directors it is proper to do so.
<PAGE> 50
VI. BOOKS AND RECORDS.
.01 Books of Accounts, Minutes and Share Register.
The Corporation shall keep complete books and records of accounts
and minutes of the proceedings of the Board of Directors and
shareholders and shall keep at its registered office, principal
place of business, or at the office of its transfer agent or
registrar a share register giving the names of the shareholders in
alphabetical order and showing their respective addresses and the
number of shares held by each.
.02 Copies of Resolutions.
Any person dealing with the Corporation may rely upon a copy of
any of the records of the proceedings, resolutions, or votes of
the Board of Directors or shareholders, when certified by the
president or secretary.
VII. CORPORATE SEAL.
The following is an impression of the corporate seal of this
Corporation:
VIII. LOANS.
Generally, no loans shall be made by the Corporation to its Officers or
Directors, unless first approved by the holder of two-third of the
voting shares, and no loans shall be made by the Corporation secured by
its shares. Loans shall be permitted to be made to Officers, Directors
and employees of the Company for moving expenses, including the cost of
procuring housing. Such loans shall be limited to $25,000.00 per
individual upon unanimous consent of the Board of Directors.
IX. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
.01 Indemnification.
The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any proceeding, whether
civil, criminal, administrative or investigative (other than an
action by or in the right of the Corporation) by reason of the
<PAGE> 51
fact that such person is or was a Director, Trustee, Officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, Trustee, Officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorneys' fees), judgment, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith
and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to
believe such person's conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which such person reasonably
believed to be in or not opposed to the best interests of the
Corporation, and with respect to any criminal action proceeding,
had reasonable cause to believe that such person's conduct was
unlawful.
.02 Derivative Action
The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to
procure a judgment in the Corporation's favor by reason of the
fact that such person is or was a Director, Trustee, Officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a Director, Trustee, Officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including
attorney's fees) and amount paid in settlement actually and
reasonably incurred by such person in connection with the defense
or settlement of such action or suit if such person acted in good
faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with
respect to amounts paid in settlement, the settlement of the suit
or action was in the best interests of the Corporation; provided,
however, that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been
adjudged to be liable for gross negligence or willful misconduct
in the performance of such person's duty to the Corporation unless
and only to the extent that, the court in which such action or
suit was brought shall determine upon application that, despite
<PAGE> 52
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as such court shall deem
proper. The termination of any action or suit by judgment or
settlement shall not, of itself, create a presumption that the
person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests
of the Corporation.
.03 Successful Defense.
To the extent that a Director, Trustee, Officer, employee or Agent
of the Corporation has been successful on the merits or otherwise,
in whole or in part in defense of any action, suit or proceeding
referred to in Paragraphs .01 and .02 above, or in defense of any
claim, issue or matter therein, such person shall be indemnified
against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
.04 Authorization.
Any indemnification under Paragraphs .01 and .02 above (unless
ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that
indemnification of the Director, Trustee, Officer, employee or
agent is proper in the circumstances because such person has met
the applicable standard of conduct set forth in Paragraphs .01 and
.02 above. Such determination shall be made (a) by the Board of
Directors of the Corporation by a majority vote of a quorum
consisting of Directors who were not parties to such action, suit
or proceeding, or (b) is such a quorum is not obtainable, by a
majority vote of the Directors who were not parties to such
action, suit or proceeding, or (c) by independent legal counsel
(selected by one or more of the Directors, whether or not a quorum
and whether or not disinterested) in a written opinion, or (d) by
the Shareholders. Anyone making such a determination under this
Paragraph .04 may determine that a person has met the standards
therein set forth as to some claims, issues or matters but not as
to others, and may reasonably prorate amounts to be paid as
indemnification.
.05 Advances.
Expenses incurred in defending civil or criminal action, suit or
proceeding shall be paid by the Corporation, at any time or from
time to time in advance of the final disposition of such action,
<PAGE> 53
suit or proceeding as authorized in the manner provided in
Paragraph .04 above upon receipt of an undertaking by or on behalf
of the Director, Trustee, Officer, employee or agent to repay such
amount unless it shall ultimately be by the Corporation is
authorized in this Section.
.06 Nonexclusivity.
The indemnification provided in this Section shall not be deemed
exclusive of any other rights to which those indemnified may be
entitled under any law, bylaw, agreement, vote of shareholders or
disinterested Directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who
has ceased to be a Director, Trustee, Officer, employee or agent
and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
.07 Insurance.
The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a Director,
Trustee, Officer, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a Director,
Trustee, Officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any
liability assessed against such person in any such capacity or
arising out of such person's status as such, whether or not the
corporation would have the power to indemnify such person against
such liability.
.08 "Corporation" Defined.
For purposes of this Section, references to the "Corporation"
shall include, in addition to the Corporation, an constituent
corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had
continued, would have had the power and authority to indemnify its
Directors, Trustees, Officers, employees or agents, so that any
person who is or was a Director, Trustee, Officer, employee or
agent of such constituent corporation or of any entity a majority
of the voting stock of which is owned by such constituent
corporation or is or was serving at the request of such
constituent corporation as a Director, Trustee, Officer, employee
or agent of the corporation, partnership, joint venture, trust or
<PAGE> 54
other enterprise, shall stand in the same position under the
provisions of this Section with respect to the resulting or
surviving Corporation as such person would have with respect to
such constituent corporation if its separate existence had
continued.
X. AMENDMENT OF BYLAWS.
.01 By the Shareholders.
These Bylaws may be amended, altered, or repealed at any regular
or special meeting of the shareholders if notice of the proposed
alteration or amendment is contained in the notice of the meeting.
.02 By the Board of Directors.
These Bylaws may be amended, altered, or repealed by the
affirmative vote of a majority of the entire Board of Directors at
any regular or special meeting of the Board.
XI. FISCAL YEAR.
The fiscal year of the Corporation shall be set by resolution of the
Board of Directors.
XII. RULES OF ORDER.
The rules contained in the most recent edition of Robert's Rules or
Order, Newly Revised, shall govern all meetings of shareholders and
Directors where those rules are not inconsistent with the Articles of
Incorporation, Bylaws, or special rules or order of the Corporation.
XIII. REIMBURSEMENT OF DISALLOWED EXPENSES.
If any salary, payment, reimbursement, employee fringe benefit, expense
allowance payment, or other expense incurred by the Corporation for the
benefit of an employee is disallowed in whole or in part as a
deductible expense of the Corporation for Federal Income Tax purposes,
the employee shall reimburse the Corporation, upon notice and demand,
to the full extent of the disallowance. This legally enforceable
obligation is in accordance with the provisions of Revenue Ruling
69-115, 1969-1 C.B. 50, and is for the purpose of entitling such
employee to a business expense deduction for the taxable year in which
the repayment is made to the Corporation. In this manner, the
Corporation shall be protected from having to bear the entire burden of
disallowed expense items.
<PAGE> 55
EXHIBIT 4.1
EXHAUST TECHNOLOGIES, INC.
INCORPORATION UNDER THE LAWS OF THE STATE OF WASHINGTON
AUTHORIZED SHARES NO PAR VALUE
NUMBER SHARES
CUSIP 302048 10 3
See Reverse
For Certain Definitions
THIS CERTIFIES THAT
Is The Owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF NO PAR VALUE COMMON STOCK
OF
EXHAUST TECHNOLOGIES, INC.
Transferable only on the books of the Company in person or by
duly authorized attorney upon surrender of this Certificate
properly endorsed. This Certificate is not valid unless
countersigned by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the said Company has caused this
Certificate to be executed by the facsimile signatures of its
duly authorized officers and to be sealed with the facsimile seal
of the Company.
Dated:
_______________________ _________________________
Secretary SEAL President
<PAGE> 56
EXHAUST TECHNOLOGIES, INC.
TRANSFER FEE: $20.00 PER NEW CERTIFICATE ISSUED
The following abbreviations when used in the inscription on
the face of this certificate, shall be construed as though they
were written out in full according to applicable law or
regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as
tenants in common
UNIF GIFT MIN ACT - __________ Custodian ___________ (Minor)
under Uniform Gifts to Minors Act ____________ (State)
Additional abbreviations may also be used though not in the above
list.
For Value Received, _________________ hereby sell, assign and
transfer unto _______________ (Please insert Social Security or
other identifying number of Assignee).
_________________________________________________________________
Please print or typewrite name and address, including zip code of
Assignee)
_________________________________________________________________
_________________________________________________________________
__________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do
hereby irrevocably constitute and appoint _______________________
attorney-in-fact to transfer the said stock on the books of the
within-named Corporation, with full power of substitution in the
premises.
Dated: _________________
_____________________________________________
Notice: The signatures to this Assignment
must correspond with the name(s) as written
upon the face of the certificate in every
particular, without alteration or enlargement
or any change whatsoever.
Signature(s) Guaranteed:
___________________________
The signature(s) must be guaranteed by an eligible guarantor
institution (Banks, Stockbrokers, Savings and Loan Associations
and Credit Unions with membership in an approved signature
guarantee Medallion Program), pursuant to S.E.C. Rule 17Ad-15.
<PAGE> 58
EXHIBIT 10.1
LICENSING AGREEMENT FOR TURBOLATOR
Robert E. Sterling and Matthew R. Sterling hereby grant an
exclusive license to Exhaust Technologies, Inc. to manufacture,
develop and market the Turbolator (Patent #5,355,673) in the
United States as long as Exhaust Technologies, Inc. is in
compliance with the following conditions:
1. Exhaust Technologies, Inc. generates sales of the
Turbolator of $-0- in 1998, $-0- in 1999, $1,000,000 in
2000 and $1,000,000 for all years thereafter.
2. Exhaust Technologies, Inc. has not filed bankruptcy nor
has been declared a bankrupt.
3. Exhaust Technologies has not been acquired nor merged
into another company. If there is a merger or sale of
the Company, Sterlings must approve a license transfer.
In consideration for granting this exclusive license, the
Sterlings will receive 1,000,00 shares of Exhaust Technologies,
Inc. common stock
/s/ Robert E. Sterling
Exhaust Technologies, Inc.
President
/s/ Robert E. Sterling
Robert E. Sterling
/s/ Matthew R. Sterling
Matthew R. Sterling
<PAGE> 59
EXHIBIT 10.2
LICENSING AGREEMENT
FOR
PNEUMATIC HAND TOOL EXHAUST MUFFLER
Robert E. Sterling hereby grants an exclusive license to Exhaust
Technologies, Inc. to manufacture, develop and market the
Pneumatic Hand Tool Exhaust Muffler (Patent #08/999,588) in the
United States as long as Exhaust Technologies, Inc. is in
compliance with the following conditions:
1. Exhaust Technologies, Inc. generates sales of the
Pneumatic Hand Tool Exhaust Muffler of $-0- in 1999,
$500,000 in 2000 and $1,000,000 for all years
thereafter.
2. Exhaust Technologies, Inc. has not filed bankruptcy nor
has been declared a bankrupt.
3. Exhaust Technologies, Inc. has not been acquired nor
merged into another company. If there is a merger or
sale of the Company, Sterlings must approve a license
transfer.
In consideration for granting this exclusive license, Robert E.
Sterling will receive 3,350,000 shares of Exhaust Technologies,
Inc. common stock.
/s/ Robert E. Sterling
Exhaust Technologies, Inc.
President
/s/ Robert E. Sterling
Robert E. Sterling
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Financial Condition at January 31, 1999 (Audited) and the
Statement of Income for the period from inception on July 21, 1998 to
January 31, 1999 (Audited) and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 27,265
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 7,991
<CURRENT-ASSETS> 35,256
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 49,513
<CURRENT-LIABILITIES> 23,294
<BONDS> 0
0
0
<COMMON> 46
<OTHER-SE> 26,173
<TOTAL-LIABILITY-AND-EQUITY> 49,513
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 785
<INCOME-PRETAX> (35,866)
<INCOME-TAX> 0
<INCOME-CONTINUING> (35,866)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (35,866)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
