UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 2000
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _____________.
Commission File Number: 000-25107
THERMOELASTIC TECHNOLOGIES, INC.
(Name of Small Business Issuer in its charter)
Colorado 51-0387926
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
5466 Canvasback Road, Blaine, Washington 98230
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(Address of principal executive offices)(Zip Code)
Issuer's telephone number: (360) 371-5061
Securities registered pursuant to Section 12(b) of the Act: None.
Name of each exchange on which registered: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or such
shorter period of that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes |X| No |_|
Check if there is no disclosure of delinquent filers to Item 405 of Regulation
S-B contained in this form, and if no disclosure will be contained, to the best
of the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. |_|
State Issuer's Revenues for its most recent fiscal year: $3,840
The number of shares outstanding of the Company's $.0001 Par Value Common Stock,
as of September 30, 2000 were 17,338,164. The aggregate number of shares of the
voting stock held by non-affiliates on January 13, 2000 was 5,952,440. The
market value of these shares, computed by reference to the market closing price
on January 13, 2000 was $2,976,220. For the purposes of the foregoing
calculation only, all directors and executive officers of the registrant have
been deemed affiliates.
DOCUMENTS INCORPORATED BY REFERENCE: None.
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PART I
ITEM 1. BUSINESS
A) General
L.P.R. Cybertek, Incorporated ("LPR Cybertek") was incorporated on January 30,
1995 under the laws of the State of Colorado to engage in any lawful corporate
undertaking including, but not limited to, selected mergers and acquisitions.
On July 15, 1999, LPR Cybertek entered into an Agreement and Plan of
Reorganization with ThermoElastic Technologies, Inc., a Delaware corporation
("ThermoElastic Delaware"). Pursuant to the Agreement and Plan of
Reorganization, ThermoElastic Delaware merged into LPR Cybertek, with LPR
Cybertek being the surviving corporation. The shareholders of ThermoElastic
Delaware received 138,164 shares of LPR Cybertek common stock, 666,400 Class A
Warrants, 666,400 Class B Warrants and 100,000 options to purchase common shares
of LPR Cybertek at $1.00 per share of common stock in exchange for all their
common shares, warrants and options in ThermoElastic Delaware. As part of the
Agreement and Plan of Reorganization, the then-shareholders of LPR Cybertek sold
15,766,629 common shares of LPR Cybertek's common stock, representing 91.67% of
the issued and outstanding shares of LPR Cybertek, to ThermoElastic Delaware
designees, resulting in a change of control of LPR Cybertek.
Pursuant to the Agreement and Plan of Reorganization, LPR Cybertek changed its
name to ThermoElastic Technologies, Inc. ("ThermoElastic" or the "Company").
The Company's principal offices are located at 5466 Canvasback Road, Blaine,
Washington 98239, telephone number (360) 371-5061. These offices consist of 150
square feet on a month-to-month lease. The monthly rental fee is included in
management remuneration.
Employees. The Company does not currently have any employees. The Company has
engaged consultants to assist it as needed.
Government Regulations. At the present time, there are no pervasive regulations
of the Company's business.
Competition. It is important to note that none of the competing products in the
marketplace today possess the thermoelastic consistency of BITEM. All the
competing products are single purpose products and have distinctive drawbacks.
Some of the existing products on the market have functions similar to the
products made with BITEM, but the Company believes that there is no comparison
in performance.
1. The Myoloc System: Similar to BITEM blocks, one of the BITEM applications,
are made of bent metal wires. These wires act as rigid sublingual stabilizers,
which are difficult to place into the neutral zone under the tongue. Myolocs
must be removed from the patient's mouth to be adjusted.
2. Myoflex: A single purpose Technologies utilizing the sub mandibular undercut
to retain a lower denture. Nylon inserts are incorporated into the extended
flange and make the extensions movable. This method is complicated and technique
sensitive. Impressions have to be very precise in order to assure patient
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comfort. The patient cannot control tension on the extensions, resulting in
possible pain and discomfort.
3. Molloplast-B: A superior soft reline material that will form a silicone
cushion under the denture. Such relines are often difficult to bond to acrylic
and will eventually harden and can cause odor over time.
4. Flexite M.P.: This material is a poly thermoplastic that can only be
injection molded. The metal-free denture designs are somewhat similar to BITEM
partials but flexite is not compatible with acrylic and cannot be repaired or
bonded to teeth. It is injected under heat but once set it is not thermal
adjustable. Eventually the flexite material becomes brittle and often snaps.
5. Brux-Eze/Impak/Thermoflex: This material is used to construct sportsguards
and nightguards. It will soften in warm water, but the consistency is not
controllable and usually remains relatively soft.
Product Introduction
Apple Dental Ventures has developed a "new generation" acrylic. This new
technology can immediately find applications in almost every facet of the dental
field and many medical, sport, and allied areas. This product is currently being
used by dentists, denturists, and dental laboratories in Ontario, Canada, where
testing occurred. Currently, in the dental field, "BITEM" is the acronym for
Biocompatable Intraoral Thermal Elastic Material and represents the trade name
for this acrylic composition.
The Technologies
The uniqueness of BITEM lies in the control of flexibility, memory and rigidity,
during and after the processing stage. This material allows for the creation of
more than 60 new applications in the dental field. The greatest improvements are
with fit, tightness, aesthetics and comfort for removable dental appliances.
This special composition once added to a denture softens in warm water and can
be adapted to the contours of the patient's gums and/or teeth. The acrylic
material requires the temperature of the water to be only between 120 - 155
degrees Fahrenheit or 50 - 63 degrees Celsius. This process can be repeated as
many times as necessary to ensure complete fit and comfort. The innovation of
this patented Technologies lies in the controlling mixture of the two liquid
monomers: A- the softener and B-the hardener. The relative proportions of the
two monomers determine the range of BITEM's consistencies, from the cushiony
soft to the hard acrylic base of commonplace denture material.
After polymerization BITEM remains "thermoelastic"- meaning that the material
may be heated in water to soften, in order to be adapted to tissues and teeth as
often as necessary to insure the most comfortable fit. It is unique with its
dual qualities- the rigidity is controllable during the mixing process and
remains "thermo" adjustable everafter.
The quality of BITEM is that it is a consistently controllable thermo elastic
acrylic material that can be used to fabricate dental appliances of varying
rigidities. This appliance can be softened with hot water or a hot air dryer and
fashioned to the contour of the patient's mouth.
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The Products
Dental Applications
In the world of full and partial dentures, more comfort is now a reality, due to
the newly invented thermo-adjustable parts. This is the primary benefit to the
patient. This system is so versatile that it can be applied in more than a dozen
ways using a diverse range of flexibilities and rigidities in critical areas of
a denture. The advantage of using this material as a heat sensitive reliner is
that it allows denture wearers the luxury of being able to fit and refit their
own dentures when there is any discomfort just by softening the liner in warm
water.
This material is available in raw material (powder and liquid), "heat-cure". or
in "self-cure" packages. It can made available in pre-manufactured sublingual
wings containing the thermoelastic material and can be used to stabilize
existing lower dentures by installing them under the tongue.
Dental patients will be the primary beneficiaries of BITEM due to the increased
comfort afforded by the material. The dentist will also benefit due to the
product's ease of use. Most products available in the dental business have a
single purpose or are use specific. The dual properties of BITEM, provides the
dentist with abilities never before available A) complete control in the mixing
process - allowing an infinite variety of rigidities B) the ability to create
many different critical parts of dental appliances; and C) to create a dental
appliances which are thermo- adjustable for their lifetime. D) the following are
15 examples of the over 60 dental applications of BITEM.
1. Post dam for upper dentures
The back part of a denture on the palate is known as the post dam and can be
easily adjusted and manipulated using hot water to ensure the appliance's direct
contact with the tissue surface.
2. Lingual flange on lower dentures
If there is little ridge height to support prosthesis, the dentist may expand
the prosthesis in the lingual space. The resultant extensions are easily
adjusted using hot water and tongue posturing giving the denture increased
stability.
3. Sublingual stabilizer wings
Engagement of undercuts in the retromylohyoid fossa to improve retention of the
mandibular prosthesis. The flanges can be displaced after being tempered in hot
water and then repositioned intraorally to engage the undercuts.
4. Clasps on partial dentures
In order to cut down on the amount of metal use in a cast partial denture, and
to improve the aesthetics, particularly in the anterior area of the mouth, tooth
colored BITEM material can be used in order to make the clasps for those
particular areas.
5. Gasket clasps
These allow for maintenance of the remaining teeth in a partially edentulous
mouth. Processing the material into inter-proximal areas will also allow
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increased retention. By tempering the denture, the denture can be inserted and
retained.
6. Stressbreaker connected to rigid attachment or implants
Instead of complex and expensive precision attachments, conventionally used for
this application, a layer of Thermoelastic material is chemically layered into
the denture right behind the attachment. This will provide a simple, strong and
relentless method of stress breaking on abutment teeth.
7. Temporo-Mandibular Joint (TMJ) appliances
These appliances, commonly known as "splints" or oral orthopedic appliances are
used to correct malocclusion for malpositioning of the lower jaw. Currently made
with hard acrylic and metal ball clasps to retain, can now be constructed with a
thermo-adjustable flap.
8. Obturator
These appliances are made to correct parts of oral cavity, caused by birth
defects or accidents. Often they are difficult to insert; however with the
availability of producing certain parts of these appliances with BITEM, the
placement in the mouth could mean the start of a whole new Technologies.
9. Thermo relines
Relining prosthesis with a softened version of BITEM will allow the prosthesis
to sit comfortably and allow the patient to modify the prosthesis on a daily
basis. Before insertion of the prosthesis in the morning, the prosthesis is
tempered in water, the patient then seats the prosthesis and occludes heavily.
The inner surface of the prosthesis will then mold to the tissues and create a
newly adapted surface.
10. Preformed sheets of vacuum forming
Existing Technologies provides different sheets for forming trays over dental
models. With BITEM SHEETS, parts of appliances can be formed and will be able to
be used for many novel ideas.
11. Pre-made forms for temporary crowns
These crowns would be made of tooth-colored BITEM material and can be used by
dentists as temporary crowns, while the laboratory is preparing the permanent
crowns.
12. Supplemental prosthetic devices for specialized use
Sometimes it is necessary to construct a prosthetic appliance for a specialized
use. For example, denture wearing wind instrument players need a specialized
appliance to allow them to play their instrument.
By utilizing BITEM on these devices, we can accomplish a superior fit over the
conventional hard acrylic devices, providing greater comfort and benefit to the
musician. This is only a single example where BITEM can be used in place of
conventional acrylic material in specialized conditions.
13. Orthodontic appliance
Spring retainers, one of the most frequently used Ortho appliances, can be
outfitted with BITEM incisor pads. The ability of the thermoelastic material to
replace clasps, wires and springs would make it extremely useful.
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14. Night guards/Athletic guards
These guards can be produced either with the Vacu-former (plus cold cure
thermoelastic in the case of night guards) or waxed and baked liked the other
applications.
15. Cosmetic adjustments
One example of cosmetic adjustments would be when the gum in the anterior area
has shrunk severely; the only cosmetic solution is to fabricate a piece of rigid
acrylic to fill the gap. This now can be done using a BITEM adapted substitute
resulting in more comfort for the patient.
We are currently seeking uses for this Technologies inside and outside of the
dental world. We are currently pursuing the following opportunities:
1. Orthotics
Orthotics are shoe inserts. They are intended to adjust an abnormal or regular
gait. They help make standing, walking and running more comfortable by altering
the angle at which the foot strikes the ground. The goal of Orthotics is to
improve foot function and minimize stresses that can cause foot pain and
deformity. There are two forms of Orthotics.
Rigid Orthotics: they are designed to control foot function and are made of a
stiff material such as plastic. Rigid Orthotics are fabricated from as mold of
an individual's foot and normally extends along the sole of the heel to the ball
or toes of the foot. These Orthotics are designed to control motion at the sub-
talar joint. Rigid Orthotics have a long life span and do not change shape. If
the patient requires a change for whatever reason, entirely new Orthotics must
be fabricated and it is not uncommon for a new pair of Orthotics to cost a
patient upwards of Five hundred dollars ($500).
Incorporating BITEM into the design of rigid Orthotics will result in a dramatic
cost saving to patients and to Medical insurers. The thermoelastic qualities of
BITEM allow doctors to adjust the patients existing Orthotics to match the
changing needs of the patient and to reduce the need for costly fabrication of a
new pair of Orthotics.
Soft Orthotics: They are designed to absorb shock and aid in increasing foot
comfort. They are constructed of compressible material and molded to a plaster
impression of the foot. Many geriatric patients help ease the pain associated
with arthritis and diabetic foot ulcers by the use of soft Orthotics.
Incorporating BITEM into the fabrication of soft Orthotics reduces the need to
replace the Orthotics to accommodate changes in weight bearing patterns that
often occur as a result of foot pain. With Bitem, the Orthotics can be, placed
in hot water, remolded to the desired shape and left to cool. The Orthotics can
be remolded as many times as are needed to accommodate the changes that are
occurring in the patient's feet.
2. Splints
The thermoelastic qualities of BITEM are particularly suitable for the
fabrication of low-cost splints. They are often used in the management and
prevention of soft tissue contractures, which often follow joint immobilization,
neurological insult and other joint and soft tissue problems. The application
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of a low-level tissue stress for prolonged periods of time is often the
therapist's treatment of choice for such conditions.
A contracture is a normal response to muscle spasticity or joint immobilization
that prevents the movements of the affected joint through its range of motion.
The loss of mobility in the soft tissue is caused by a remodeling of the tissues
in the joint-tendon-muscle unit in response to joint immobilization. Eventually,
the soft tissue becomes stiff, thickened, and immobile, rendering the affective
joint useless. Management of soft tissue contracture relies on eliciting a
plastic response from the affected tissues. By eliciting a plastic response from
the soft tissue, a permanent elongating of the affected tissue may be achieved.
The plastic response can be elicited by applying a progressive long-term, low
intensity stretch to the affected tissue. The most common way of doing this is
with a dynamic splint.
Taking advantage of BITEM's thermoelastic properties, low cost contracture
management splints can be fabricated. Splints made from BITEM can be constantly
adjusted to progressively increase the amount of tension applied to soft tissue
surrounding a joint. The adjustment process only requires that the splint be
heated in hot water, then bent to the desired angle and left to cool before the
patient puts the splint back on the body.
3. Medical Prostheses
The fabrication of prosthetic and orthopedic devices from BITEM adds a new
dimension to the practice of Prosthetics and Orthotics. By taking advantage of
the thermoelastic and consistency control capabilities of BITEM, custom-made
prosthetic devices can be made, that are both economical and versatile.
Prosthetic devices can be mass-produced to standard sizes and yet customized for
each individual user by molding the prosthetic in hot water. The material will
help increase the lifespan of products and reduce costs at the same time.
4. Braces
Prosthetics and Orthopedic braces and artificial limbs are a billion dollar a
year industry in the United States. There are approximately 2.5 million amputees
in the U.S. and is estimated that this number grows by 125,000 annually.
Approximately 54% of all amputations are below the knee, 37% are above the knee
and 7% are amputations of the arm. The demands for orthotics and prosthetics are
expected to grow over the next twenty years, according to the National
Commission on Orthotic and Prosthetic Education. There will be a 25% percent
increase in the number of people with paralysis, deformity of orthopedic
impairments in that time. Over the same period, the number of people expected to
require prosthesis will increase by 47% and the number of people using
orthopedic braces is expected to increase by 3 1 %.
The market demands for Orthotics and Prosthetics is projected to grow so fast,
that even with a 20% increase in the number of certified Orthotists and
Prosthetists, only 65% of the population needs will be met. (See: issues
affecting the future demand for Orthotists and Prosthetists: National Commission
of Orthotic and Prosthetic Education, 1996).
According to the Orthotists and Prosthetists National Office, studies show that
for every dollar spent on rehabilitation, including Orthotic and Prosthetic
care,
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more than eleven dollars is saved in long-term health care. Using our BITEM
material could significantly add the saving for the health care insurers and the
patients.
5. Custom Furniture
The BITEM Technologies is now being used in the architectural process to
customize a new artistically designed line of contemporary furniture. This "new
form" is expected to revolutionize the industry in form, comfort, and design.
6. Specialized Glasses
With BITEM, the Optical industry is able to customize the nose and ear parts of
the frames of all their clients. It would also be easy for the patients to
adjust their own frames from time to time as needed.
Many other uses in the industry would become available as the product was used,
especially in the area of disabilities and malformed structures.
7. Hearing Aids
Audiologists are always looking for new technologies and materials to improve
upon the fit and service of the hearing aids for their patients. Each ear
differs and depending upon the type of hearing aid used would determine how the
patient could utilize BITEM. We intend to explore this area with both doctors
and technicians who make the appliances and fit them.
8. Aids to daily living
Rehabilitation centers, physio and occupational therapists work with many people
who, because of accident, injury or disease have problems with items standard in
every household. With BITEM, we are able to design special equipment to
accommodate these special needs. Most of these designs and manufacturing will be
left to the specialists in the field by entering into licensing agreements for
BITEM's use. Many situations can be easily remedied by the use of this new
material.
9. Sports Equipment
In all sports, there is a need to customize the equipment used in that sport and
to fit each participant's particular requirements. Racquet sports, such as
tennis, squash or racquetball could benefit from custom grips or handles made
from BITEM. This could also apply to ski boots, running shoes, poles etc., all
to assist or improve the efficiency and performance for the athletes whom
participate within a given sport.
10. Customized Instrumentation
Any or trade that requires or uses specialized tools could be a candidate for
this a new material. There is a large market in many fields, where this type of
customization and adjustability would be desired.
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In most areas outside of Dentistry, we intend to license the Technologies to
various industries that specialize in the above area and allow them to open up
the various market places.
Currently in the dental field there are a total of ten products offered. Dental
companies such as Ash Temple, Central Dental, and Unident are merchandising
these products to the dental professions. As the demand grows, new uses will be
found for the thermoelastic properties of BITEM.
PATENTS AND LICENSING RIGHTS
BITEM is protected by US Patent #5,431,563, Canadian Patent #2,111,789 and
European Patent #0605912. The United States Divisional Patent for the BITEM
Technologies, allowed since February 1996 has been issued. This second patent
covers a thermoelastic composite material formed using the BITEM Technologies
and expands the use of the product into all possible fields.
ThermoElastic Technologies, Inc. (TTI) has entered into an agreement with regard
to the acquisition of a license for the exclusive worldwide rights and related
privileges to the BITEM products, which provided for a deposit of $50,000
payable by February 28, 1999 and the balance of $200,000 due by February 28,
2000 and a graduated royalty fee: 5% for the first $25,000,000 in gross annual
income, 3.5% for the next $25,000,000 and 2.5% for sales exceeding $50,000,000.
MARKETING
The goal of ThermoElastic Technologies, Inc. (TTI) is to market products
throughout specified geographical locations in the dental field. Licensing
agreements will be entered into with qualified companies and individuals to
fulfill the dynamic potential of this material and to expand its use into other
diverse areas and products.
Market Study
A preliminary North American market study on BITEM was conducted by the Canadian
Industrial Innovation Center in 1992. This report showed shipments of dental
equipment and supplies in the United States increased at an annual compounded
growth rate of 5.1% over the period 1986 to 1991. Presently there are an
estimated 2.24 million Canadians with dentures. Assuming a conservative 10%
market penetration in the first two years, it would suggest about 224,000
patients would be served by the product.
Item 2. Properties.
The Company's principal offices are located at 5466 Canvasback Road, Blaine,
Washington 98239, telephone number (360) 371-5061. These offices consist of 150
square feet on a month-to-month lease. The monthly rental fee is included in
management remuneration.
Item 3 Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Security Holders
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None.
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters.
The Company's common stock has been traded on the OTC Electronic Bulletin
Board since October, 2000 under the symbol "TMRO". Since the Company's common
stock was not publicly traded during the fiscal year ended September 30, 2000,
no high or low bid prices are available for that time period. The following
table reflects the high and low quarterly bid prices since the end of the fiscal
year of September, 2000. This information was provided to the Company by the
National Association of Securities Dealers, Inc. (the "NASD"). These quotations
reflect inter-dealer prices, without retail mark-up or mark-down or commissions.
These quotations may not necessarily reflect actual transactions.
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Period High Bid Low Bid
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4th Qtr 2000 1.75 .187
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As of September 30, 2000, the Company had 17,338,164 shares of its common stock
issued and outstanding, of which 5,952,440 were held by non-affiliates. The
Company has authorized a total of 100,000,000 shares of common stock, par value
$.0001. The Company has authorized a total of 20,000,000 shares of preferred
stock, par value $.0001 and presently has no shares of preferred stock issued
and outstanding. As of September 30, 2000, the Company estimates there are 80
"holders of record" of its common stock and estimates that there are
approximately 100 beneficial shareholders of its common stock.
The Company has 666,400 Series A warrants issued and outstanding. The Series A
warrants are exercisable for one share of common stock at an exercise price of
$2.00 and are currently exercisable, subject to certain conditions, until they
expire on December 31, 2001. The Series A Warrants are redeemable by the Company
upon thirty days' written notice at $.01 per warrant.
The Company has 666,400 Series B warrants issued and outstanding. The Series B
warrants are exercisable for one share of common stock at an exercise price of
$3.00 and are currently exercisable, subject to certain conditions, until they
expire on December 31, 2001. The Series B Warrants are redeemable by the Company
upon thirty days' written notice at $.01 per warrant.
Item 6. Management's Discussion of Financial Condition and Plan of Operations
FORWARD-LOOKING STATEMENTS MAY NOT PROVE ACCURATE
When used in this Form 10-KSB, the words "anticipated", "estimate", "expect",
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks, uncertainties and assumptions
including the possibility that the Company's will fail to generate projected
revenues. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual results may vary
materially from those anticipated, estimated or projected.
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As shown in the accompanying financial statements, the Company has incurred net
losses of ($1,211,936) since inception. The Company is experiencing liquidity
problems. These factors create substantial doubt about the Company's ability to
continue as a going concern. The Company intends to generate cash flows from
operations and from proceeds on the exercise of warrants, if any. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern.
Trends and Uncertainties. Demand for the Company's services will be dependent
on, among other things, general economic conditions which are cyclical in
nature. Inasmuch as a major portion of the Company's activities are sales and
marketing of dental application products, the Company's business operations may
be adversely affected by the Company's competitors and prolonged recessionary
periods.
Capital and Source of Liquidity. The Company currently has no material
commitments for capital expenditures.
For the period from inception (January 30, 1995) to September 30, 2000,
ThermoElastic Delaware (prior to the merger) purchased product rights for
$250,000 and issued common shares valued at $20,000. As a result, ThermoElastic
Delaware had net cash used in investing activities of $238,679 for the period
from inception to September 30, 2000.
For the period from inception to September 30, 2000, ThermoElastic Delaware
received $737,385 from the issuance of common stock in an offering pursuant to
Rule 504. As a result, ThermoElastic Delaware had net cash provided by financing
activities of $572,385 for the period from inception to September 30, 2000.
The Company expects that the net proceeds it hopes to receive from its current
stock offering and the cash flow from future operations, if any, will be
sufficient to allow the Company to meet the expected growth in demand for its
products and services. Additionally, the Company expects to use any proceeds
from the exercise of the Series A and B Warrants to expand operations. However,
there can be no assurance that the warrants will be exercised or that our sales
will meet our growth expectations. Should either of these fail to occur, we may
elect to (i) reduce the planned expansion of operations or (ii) pursue other
financing alternatives such as a rights offering, warrant exercise or
borrowings. The Company's planned growth and profitability could be delayed or
diminished if the two options listed above are not implemented.
Over the next two years, our liquidity is dependent on increased revenues from
operations, additional infusions of capital and debt financing. The Company
believes that additional capital and debt financing over the next twelve months
will allow it to commence its marketing and sales efforts and will result in
revenues and greater liquidity in the long term. However, there can be no
assurances that the Company will be able to obtain additional equity or debt
financing in the future, if at all.
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PLAN OF OPERATION. The Company intends to market and distribute dental
applications in the United States and internationally as well as through the
Internet over the next twelve months. The Company shall conduct product research
and development as funds allow. Management possesses the requisite experience to
implement the Company's business plan. No significant equipment purchases are
planned over the next twelve months.
The Company shall seek to maintain low operating costs while commencing
operations and increasing operating revenues. The Company has maintained a low
cost administrative approach but anticipates that increased marketing expenses
will occur in the future as the Company attempts to further increase its
marketing and sales efforts.
Effect of Inflation
Inflation did not have any significant effect on the operations of the Company
during the year ended September 30, 2000. Further, inflation is not expected to
have any significant effect on future operations of the Company.
Item 7. Financial Statements.
Financial statements are audited and included herein beginning on Exhibit 1,
page 1 and are incorporated herein by this reference.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There were no disagreements with accountants on accounting and financial
disclosure during the relevant period.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.
Identification of Directors and Executive Officers of the Company
The following table sets forth the names and ages of all directors and executive
officers of the Company and all persons nominated or chosen to become a
director, indicating all positions and offices with the Company held by each
such person and the period during which he has served as a director:
The principal executive officers and directors of the Company are as follows:
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Name Age Positions Held and Tenure
---- --- -------------------------
Dennis Epstein 65 Chairman of the Board, since 7/30/99
Kenneth B. Liebscher 57 President, Director, since 7/30/99
Bernard Teitelbaum 50 Vice President of Sales and Marketing,
Secretary, since 7/30/99
Daniel Wiseman 33 CFO, since 3/1/00
Dr. Lorne Berman 38 Director, since 7/30/99
Dr. Stephen Rivers 51 Director, since 7/30/99
Dr. Ila Berman 39 Director, since 7/30/99
Dr. Izchak Barzilay 40 Director, since 7/30/99
Bonnie D. Walton 46 Director, since 7/30/99
George Osterbauer 55 CEO, since 10/16/00
Fred Heaps 61 Director, since 7/30/99
Identification of Certain Significant Employees. The Company does not employ any
persons who make or are expected to make significant contributions to the
business of the Company.
Remuneration: To date, none of the officers have received any compensation.
Board of Directors Compensation. Members of the Board of Directors will receive
compensation as yet to be determined per meeting if these Directors are not
separately compensated by the Company and will be required to attend a minimum
of four meetings per fiscal year. All expenses for meeting attendance or out of
pocket expenses connected directly with their Board representation will be
reimbursed by the Company.
Director liability insurance may be provided to all members of the Board of
Directors. The Company has not yet obtained such insurance and does not have any
specifics for available cost and coverage. The Company does not have a specific
time frame to obtain the insurance. No differentiation is made in the
compensation of "outside directors" and those officers of the Company serving in
that capacity.
Conflicts of Interest Policy. The Company has adopted a policy that any
transactions with directors, officers or entities of which they are also
officers or directors or in which they have a financial interest, will only be
on terms consistent with industry standards and approved by a majority of the
disinterested directors of the Company's Board of Directors. The Bylaws of the
Company provide that no such transactions by the Company shall be either void or
voidable solely because of such relationship or interest of directors or
officers or solely because such directors are present at the meeting of the
Board of Directors of the Company or a committee thereof which approves such
transactions, or solely because their votes are counted for such purpose if: (i)
the fact of such common directorship or financial interest is disclosed or known
by the Board of Directors or committee and noted in the minutes, and the Board
or committee authorizes, approves or ratifies the contract or transaction in
good faith by a vote for that purpose without counting the vote or votes of
these interested directors; or (ii) the fact of the common directorship or
financial interest is disclosed to or known by the shareholders entitled to vote
and they approve or ratify the contract or transaction in good faith by a
majority vote or written
13
<PAGE>
consent of shareholders holding a majority of the common shares entitled to vote
(the votes of the common or interested directors or officers shall be counted in
any such vote of shareholders), or (iii) the contract or transaction is fair and
reasonable to the Company at the time it is authorized or approved. In addition,
interested directors may be counted in determining the presence of a quorum at a
meeting of the Board of Directors of the Company or a committee thereof which
approves such transactions.
The Directors named above will serve until the next annual meeting of the
Company's stockholders. Thereafter, Directors will be elected for one-year terms
at the annual stockholders' meeting. Officers will hold their positions at the
pleasure of the Board of Directors, absent any employment agreement, of which
none currently exist or is contemplated. The Company's basic philosophy requires
the inclusion of directors who will be representative of management, employees
and minority shareholders. Directors may only be removed for "cause".
Dr. Ila Berman and Dr. Lorne Berman are sister and brother.
There is no family relationship between or among any Officer and Director except
as disclosed above.
The Directors and Officers of the Company will devote their time to the
Company's affairs on an "as needed" basis. As a result, the actual amount of
time which each will devote to the Company's affairs is unknown and is likely to
vary substantially from month to month.
The Company has no audit or compensation committee.
Identification of Certain Significant Employees. The Company does not employ any
persons who make or are expected to make significant contributions to the
business of the Company.
Business Experience. The following is a brief account of the business experience
during at the least the last five years of the directors and executive officers,
indicating their principal occupations and employment during that period, and
the names and principal businesses of the organizations in which such
occupations and employment were carried out.
Dennis Epstein CA, CMC, CBV, Chairman of the Board. Mr. Epstein is a co-founder
of ThermoElastic Delaware and has been a partner with Horwath Orenstein from
1966 to the present. Mr. Epstein was the managing partner of Horwath Orenstein
from 1983 to 1992. Horwath Orenstein is a Toronto based Chartered Accounting
firm and member of Horwath International. He is a member of the Institute of
Chartered Accounts of Ontario, Canadian Associations of Management Consultants
of Ontario, and the Canadian Institute of Chartered Business Valuators. He has
successfully completed the Canadian Security Course, is a member of such
associations as the Canadian Franchise Association and the Canadian Venture
Capital Association. His practice includes public financing of early stage
technology opportunities, debt equity financing proposals, acquisitions and
mergers, real estate syndications, transportation technologies, franchising and
assisting entrepreneurs to manage growth for profit. Mr. Epstein has written a
book, "Growth Hormones in the Technology Sector."
14
<PAGE>
George Osterbauer, CEO. Prior to joining the Company, Mr. Osterbauer was senior
vice president of new ventures and high technology marketing for Ash Temple
Ltd., a premier supplier of dental products in North America. prior to joining
Ash Temple, Mr. Osterbauer worked for 18 years at Dentsply International Inc. ,
most recently as its vice president and general manager of Dentsply Canada Ltd.
Mr. Osterbauer is an active member of the Board of Directors of the Dental
Industry Association of Canada, has served on various committees for the
Canadian Dental Association as a dental industry representative and served as
the industry representative on a number of Medical Standards Writing Committee
for the Canadian Standards Industry (CSA) and the International Standards
Organization (ISO).
Mr. Osterbauer is a graduate of Queens University at Kingston, Ontario, in
Economics and Business. Mr. Osterbauer has completed numerous courses in
management including courses at Queens University School of Business Executive
Program, the university of Pennsylvania Wharton School of Business and the
Canadian Management Centre.
Dr. Lorne Berman, Director. Dr. Berman has been in private practice as an
optometrist in Toronto from 1985 until the present. From 1998 to 1999, he was a
lecturer for the Canadian College of Naturopathic Medicine. From 1986 to 1987,
Dr. Berman was a Clinical Supervisor, University of Waterloo, School of
Optometry. Dr. Berman is a member of the Canadian Association of Optometrists,
the Ontario Association of Optometrists, Glaucoma Research Society and an
Affiliate Doctor with TLC, the Laser Center. Dr. Berman graduated from the
University of Waterloo School of Optometry in 1985.
Dr. Stephen Rivers, Director. Dr. Rivers received his Honors BA in Psychology at
Carleton University in 1971. He graduated from McMaster University with an MA in
Psychology in 1973. Dr. Rivers obtained his Ph.D. in Psychology from Carleton
University in 1979. He was under contract with the Canadian Federal Government
in 1979. From 1995 to present, Dr. Rivers has been a Coordinator in the
Adolescents Substance Abuse Program at the Hospital for Sick Children in
Toronto. Dr. Rivers is employed as a staff psychologist. He also carries on a
part-time private practice in a medical clinic as a psychologist treating both
adults and children. His expertise falls into the areas of parenting and child
management, marital relationships, relationship issues, drug/alcohol abuses,
work dissatisfaction, depression and stress management. From 1992 to 1995, Dr.
15
<PAGE>
Rivers worked at the Thistletown Regional Center for Children and Adolescents as
a staff psychologist for the Peel Children's Center in Mississauga, Ontario.
From 1988 until 1989, he did his externship in family therapy at
Thistletown/Peel Children's Center. From 1981 to 1987, Dr. Rivers was employed
by the Ottawa Board of Education as a staff psychologist on a full-time basis.
From 1980 to 1981, Dr. Rivers was under contract with the Children's Aid Society
of the County of Lamark, working with adolescents and counseling adults,
performing psychometric and emotional assessments of infants and young children.
Dr. Rivers is registered with The College of Psychologist of Ontario. He is
affiliated with the following organizations: Canadian Psychology Association,
American Psychology Association and The Ontario Psychological Association. Dr.
Rivers has published extensively and has many conference presentations to his
credit.
Dr. Ila Berman, Director. Dr. Berman graduated from the School of Architecture,
Carleton University in Ottawa, Canada with a Bachelor of Architectural Degree
with High Distinction in 1983. She studied abroad at the Techinion Institute of
Technology, Haifa, Israel for one semester from 1983 to 1984. Dr. Berman worked
as an architect in Tel Aviv, Israel in 1984. She returned to Toronto and worked
for Norr Partnership Limited, Architects and Engineers, in the position of
Project Design Architect. Dr. Berman was responsible for the principal research
program and development of design pertaining to Norr Care, a division of Norr,
established to respond to social needs, by providing architectural alternatives
to traditional institutions related to the community, social services, housing
and health care. From 1986-1989 she designed Covenant House, Street Youth Hostel
Crisis Care Center in Toronto. From 1986-1989, Dr. Berman designed Woodroffe
Center in Ottawa, the Cape Breton Regional Hospital in Cape Breton, Nova Scotia,
the St. Thomas-Elgin Rehabilitation Unit in St. Thomas and the Freeport Hospital
Chronic Care Facility in Kitchener, Ontario. In 1991, Dr. Berman graduated with
a masters of Design Studies in Architecture from Harvard University Graduate
School of Design. In 1993, Dr. Berman received her Doctorate in Design in
Architecture from Harvard University Graduate School of Design. From 1997 to
1999, Dr. Berman held the position of Assistant Professor to the Illinois
Institute of Technology College of Architecture. During her time at Harvard
University, Dr. Berman has received numerous awards, fellowships and
scholarships. When Dr. Berman graduated from Carleton University in 1983, she
received the Lieutenant Governor of Ontario's Metal for Design and Architecture.
Dr. Berman is not only a scholar and a teacher, but she is also a recognized
artists and has had a number of one artist shows and group exhibitions.
Bonnie D. Walton, Director. Ms. Walton is presently the Managing Director of
Walton Interiors, specializing in commercial and residential interiors and
construction. She has completed her studies at Sheridan College in Ontario and
at Christies Education in London, England. In the past, Ms. Walton has been
extensively involved in the management, sale, developing and redeveloping of
commercial real estate. Bonnie has also had extensive business management
experience having provided management services on a contract basis to the legal
profession.
Kenneth B. Liebscher, President, Director. Mr. Liebscher is an international
businessman with 28 years of executive management experience. He was 22 years
with the world's largest dental products manufacturer, DENTSPLY INTERNATIONAL
16
<PAGE>
INC. He held several positions culminating as the Manager of their West Coast
division, headquartered in San Francisco, CA. Mr. Liebscher was recruited by a
major European based competitor, IVOCLAR LIECHTENSTEIN, to lead their entry into
the North American market and within two years became Executive Vice President
of Sales and Marketing and helped expand this company's sales to 300 million
dollars U.S. before retiring. Mr. Liebscher became a Director of E.T.C., a
publicly traded company, in 1992 and became President of it's wholly owned
subsidiary, The Electric Car Company. In 1994, he led a team that developed the
Ml- 6 prototype electric car from the ground up. Mr. Liebscher serves on the
Board of Directors of several public companies listed on the Vancouver and U.S.
Stock Exchanges. Mr. Liebscher is graduate of St. George's School, Vancouver
B.C. and also attended the University of British Columbia.
Bernard Teitelbaum, Vice President Sales and Marketing. From 1990 until 1994,
Mr. Teitelbaum was with DENTSPLY CANADA LTD. as Director of Sales and Marketing.
He was fully responsible for sales and marketing for both business units, i.e.,
the dental laboratory and dental equipment divisions. He launched the Trublend
SLM, the largest single tooth company, launched in the corporation's history
with 100% dealer network penetration. From 1986 until 1992, Mr. Teitelbaum
continued with Dentsply as Sales Manager of the Laboratory Products Business
Unit. He successfully launched, in the European market, a tooth line called
Biodent into a 50 % dealer distribution network and also captured 33% of the
market share in Europe with pre-mixed opaquing porcelain called Biopaque. From
1981 until 1986, he was treasurer and controller of DENTSPLY CANADA LTD. and was
an officer and director of DENTSPLY CANADA LTD. Operating Divisions. He was
directly responsible for the full financial reporting, planning, data processing
and asset management for all Canadian businesses of DENTSPLY INTERNATIONAL INC.
From 1977 until 1981, Mr. Teitelbaum was with DENCO, A DIVISION OF MCGAW SUPPLY
LTD. as Assistant Controller. Mr. Teitelbaum graduated from University of
Toronto in 1971 with a Bachelor of Commerce degree. He took additional courses
at Osgoode Hall Law school in the L.L.B. program, Sir Wilfred Laurier University
in export management, University of Toronto in strategic planning, intermediate
accounting & auditing. He also took courses at Xerox in York, Pennsylvania in
professional selling skills and has attended many one and two day special
interest courses in sales and marketing management.
Dr. Izchak Barzilay, Director. Dr. Barzilay graduated from the University of
Toronto with a Bachelor of Science Degree in 1979. He obtained his DDS from the
Faculty of Dentistry, University of Toronto in 1983. He then put in a one-year
Faculty Internship Program with the Department of Oral Medicine and Pathology at
the University of Toronto, Faculty of Dentistry. Dr. Barzilay, at the Eastman
Dental Center, University of Rochester, obtained his Specialty Certificate in
Prosthodontics in 1986. He continued on in the Department of Dental Research,
University of Rochester and obtained his Masters Degree in 1991. Dr. Barzilay
has been in private practice in Toronto as a Prosthodontist since 1987. He is an
Associate in Dentistry, Department of Prosthodontics, Faculty of Dentistry,
University of Toronto. Dr. Barzilay is on staff at the Toronto Hospital and is
Head of the Division of Prosthodontics, Mount Sinai Hospital. He is also on the
Editorial Board of Dental Implant Perspectives. Dr. Barzilay's professional
experience, includes the following: Faculty Internship at the University of
Toronto, Clinical Instructor in Oral Diagnosis and Emergency Departments,
Resident Dentist, University of Toronto Mobile Dental Clinic for the Disabled
Resident and Department of Dentistry, Moose Factory General Hospital. Izchak was
17
<PAGE>
in private practice in General Dentistry in 1984. Between 1985 and 1986 he
attended at the Genesee Hospital, Prosthodontics. Between 1986 and 1987 he was
at Strong Memorial Hospital in Prosthodontics, attending. He was Assistant
Professor, Department of Prosthodontics, Eastman Dental Center, Rochester, NY,
and a Member - Executive of the Ontario Study Club for Osseointegration between
the years of 1991 and 1993. In 1991, he was President of the Ontario study Club
for Osseointegration. Research activities are many and varied in the area of
Cured, Composite Resins, Titanium Implants, Light-cured Composite Resins,
Bonding Composite Resins, Evaluation of Porcelain Repair Materials and from
1996, Clinical Evaluation of BITEM, our Intraoral Thermo Elastic Material. Dr.
Barzilay is a member of Alpha Omega Dental Fraternity, the Canadian Dental
Association, the American College of Prosthodontist, American Association for
Dental Research, Ontario Study Club for Osseointegration, American Association
of Dental Research Implantology Group, Canadian Academy of Restorative Dentistry
& Prosthodontics, the Academy of Prosthodontics - Fellow, Academy of Dentistry
International Fellow and in many more. Dr. Barzilay has received many honors and
awards, and has lectured and published extensively. Dr. Barzilay has done our
main clinical study of the BITEM product and he has become our Foremost
Authority in this particular Product.
Fred J. Heaps, Director. From 1991 to 1998, Mr. Heaps was Managing Director and
Partner of ITIS, Inc., and information and database provider to the North
American Travel industry, located in Concord, Ontario. In 1990 Mr. Heaps was
President and CEO of Armada Equipment Co. From 1964 to 1989 he was with
DENTSPLY INTERNATIONAL INC., where his positions included Sales Representative,
Division Manager for North East United States and Canada, Vice President and
CEO of DENTSPLY CANADA LTD., President of Amalgamated Dental Company, President
of Ash USA, President of Medical and Industrial Equipment, President of National
Refining Co. and President of Canadian Dental Supply Company. Mr. Heaps has 30
years of multinational corporate management experience in North America and
Europe at all levels of product development, financing and marketing, with
recent in depth involvement in Canadian information services and database
environments, procedures and development processes. Mr. Heaps graduated from the
University of British Columbia with a business major. He attended York
University and added business and financial postgraduate courses. He also
attended University of Chicago taking additional marketing courses.
Daniel Wiseman, Chief Financial Officer. Mr. Wiseman worked as a staff
accountant for Arthur Andersen & Co., LLP from 1993 to 1995, where he
specialized in family wealth and tax planning. In late 1995, Mr. Wiseman became
controller for a gaming company. From 1996 to 1997, Mr. Wiseman was CFO for Le
Print Express International Inc. In mid 1997, Mr. Wiseman founded and is
currently president and chief executive officer of Harvard Investment Group,
Ltd., an investment banking firm. In 1998, Mr. Wiseman was a founder and
director of Harvard Capital Corp. From December 1999 to October 2000, Mr.
Wiseman was vice president of corporate development for Nework Corp., formerly
Harvard Capital Corp. Mr. Wiseman received a Bachelor of Science degree form New
York University in psychology in 1989, an Honour Bachelor of Commerce Degree in
1991 in Finance and Marketing from the University of Windsor, Ontario and his
Chartered Accountant designation in 1995.
Item 10. Executive Compensation.
During fiscal 2000, and as of the date of the filing of this report, none of the
Company's officers were paid any compensation by the Company.
Compensation of Directors
No director receives or accrues any compensation for his services as a Director,
including committee participation and or special assignments. Directors are
entitled to reimbursement for reasonable travel and other out-of-pocket expenses
incurred in connection with attendance at meeting of the Board of Directors. The
Company anticipates compensating its directors for their attendance at meetings
if these directors are not separately compensated by the Company and said
directors attend a minimum of four meetings. The amount of compensation to be
paid has not yet been determined. The Company anticipates purchasing director
liability insurance in the future to cover its directors but has made no
commitment to purchase said insurance in the near future.
The Company has no material bonus or profit-sharing plans pursuant to which cash
or non-cash compensation is or may be paid to the Company's directors or
executive officers except as described above.
The Company has no compensatory plan or arrangements, including payments to be
received from the Company, with respect to any executive officer or director,
where such plan or arrangement would result in any compensation or remuneration
being paid resulting from the resignation, retirement or any other termination
of such executive officer's employment or from a change-in-control of the
Company or a change in such executive officer's responsibilities following a
change-in- control and the amount, including all periodic payments or
installments where the value of such compensation or remuneration exceeds
$100,000 per executive officer.
18
<PAGE>
During the last completed fiscal year, no funds were set aside or accrued by the
Company to provide pension, retirement or similar benefits for Directors or
Executive Officers.
The Company has no written employment agreements.
Compensation Pursuant to Plans. Other than disclosed above, the Company has no
plan pursuant to which cash or non-cash compensation was paid or distributed
during the last fiscal year, or is proposed to be paid or distributed in the
future, to the individuals and group described in this item.
Compensation of Directors. Directors of the Company are entitled to reasonable
reimbursement for their travel expenses in attending meetings of the Board of
Directors.
Termination of Employment and Change of Control Arrangement. Except as noted
herein, the Company has no compensatory plan or arrangements, including payments
to be received from the Company, with respect to any individual names above from
the latest or next preceding fiscal year, if such plan or arrangement results or
will result from the resignation, retirement or any other termination of such
individual's employment with the Company, or from a change in control of the
Company or a change in the individual's responsibilities following a change in
control.
Section 16(a) Beneficial Ownership Reporting Compliance. During the year ended
September 30, 2000, the following persons were officers, directors and more than
ten-percent shareholders of the Company's common stock:
Name Position Filed Reports
---- -------- -------------
Dennis Epstein Chairman of the Board No
Kenneth B. Liebscher President, Director No
Bernard Teitelbaum Vice President of Sales
and Marketing, Secretary No
Dr. Lorne Berman Director No
Dr. Stephen Rivers Director No
Dr. Ila Berman Director No
Dr. Izchak Barzilay Director No
Bonnie D. Walton Director No
George Osterbauer CEO No
Grace Maitland Carter Shareholder No
Howard Kerbel Shareholder No
Fred Heaps Director No
Daniel Wiseman CFO No
Item 11. Security Ownership of Certain Beneficial Owners and Management.
19
<PAGE>
There were 17,338,164 shares of the Company's common stock issued and
outstanding on September 30, 2000. No preferred shares were issued and
outstanding at September 30, 2000. The following tabulates holdings of shares of
the Company by each person who, subject to the above, at the date of this
Report, holds or record or is known by Management to own beneficially more than
five percent (5%) of the Common Shares of the Company and, in addition, by all
directors and officers of the Company individually and as a group.
--------------------------------------------------------------------------------
Name and Address Number of Percentage of
Shares Owned Shares
Beneficially Owned
Beneficially
--------------------------------------------------------------------------------
Cede and Company 6,408,136 36.96%
PO Box 222
New York NY 10274
--------------------------------------------------------------------------------
Dennis Epstein (1)(2) 3,226,534 18.61%
14 Chicora Avenue
Toronto Ontario M5R 1T6
--------------------------------------------------------------------------------
Kenneth Liebscher (1) 50,000 .29%
1180 - 666 Burrard
Street
Vancouver BC V6C 2X8
--------------------------------------------------------------------------------
Bernard Teitelbaum (1) 0 0.00%
390 Edgeley Blvd. #19
Concord Ontario L4X 3Z_
--------------------------------------------------------------------------------
Daniel Wiseman (1) 50,000 0.29%
942 Yonge St. #1020
Toronto ONT M4W 3S8
--------------------------------------------------------------------------------
Dr. Steven Rivers (1) 50,500 .29%
1 Corwin Crescent
Toronto Ontario M3H 1Z9
--------------------------------------------------------------------------------
Dr. Ila Berman (1)(4) 130,000 .75%
1106 Felicity Street
New Orleans LA 70130
--------------------------------------------------------------------------------
Dr. Izchak Barzilay (1) 50,000 .29%
18 Green Acres Road
Thornhill Ontario M5R
1A3
--------------------------------------------------------------------------------
20
<PAGE>
--------------------------------------------------------------------------------
Bonnie D. Walton (1)(3) 3,273,333 18.88%
94 Cumberland St #906
Toronto Ontario M5R 1A3
--------------------------------------------------------------------------------
Rosemarie Berman (4) 1,653,207 9.54%
1131 Steeles Avenue W
PH105
Toronto Ontario
--------------------------------------------------------------------------------
Sondra Black 2,901,450 16.73%
21 Roxborough Lane
Thornhill Ontario L4J
aT1
--------------------------------------------------------------------------------
Grace Maitland Carter (2) 3,197,534 18.44%
14 Chicora Avenue
Toronto Ontario
--------------------------------------------------------------------------------
Howard Kerbel (3) 3,223,033 18.59%
120 Wembley Road
Toronto Ontario M6C 2G6
--------------------------------------------------------------------------------
Dr. Joshua Kerbel (3) 1,670,411 9.63%
525 Chaplin Crescent
#815
Toronto Ontario
--------------------------------------------------------------------------------
Dr. Lorne Berman (1)(4) 3,222,533 18.59%
2267 Islington Ave. #4
Toronto Ontario M9W 1R4
--------------------------------------------------------------------------------
Officers and Directors 10,052,900 57.98%
As A
Group (11 persons)
--------------------------------------------------------------------------------
(1) Denotes Officer and/or Director.
(2) Mr. Epstein and Ms. Carter are married and Ms. Carter's shares may be
deemed to be beneficially owned by Mr. Epstein.
(3) Ms. Walton and Mr. Howard Kerbel are married. Mr. Kerbel's shares may be
deemed to be beneficially owned by Ms. Walton. Joshua Kerbel is Howard
Kerbel's son.
(4) Rosemarie Berman is the mother of Dr. Lorne Berman and Dr. Ila Berman who
disclaim any beneficial ownership of her shares.
Changes in Control. There are no arrangements known to the Company, including
any pledge by any person of securities of the Company, the operation of which
may at a subsequent date result in a change of control of the Company.
Item 12. Certain Relationships and Related Transactions.
On February 2, 1999, ThermoElastic Delaware entered into a contract with Vista
Developments Ltd., in which Vista would provide required marketing, promotion
and sales services. The contract stipulates such services will cost $150,000 per
annum, payable $12,500 per month, plus certain stock options and commissions
above stipulated sales levels.
On February 8, 1999, ThermoElastic Delaware entered into a five-year contract
with Gritell International Limited, in which Gritell would provide certain
management, business and financial advice and expertise. As amended April 1,
1999, Gritell will receive $6,000 per month for its services until further
notice plus certain expenses. The original compensation terms outlined in the
contract
21
<PAGE>
were $13,334 per month during the first year, $20,000 per the month during the
second and third years, and $33,334 per month during the fourth and fifth years.
Gritell has reserved the right to demand payment of any unpaid accrued balances.
Howard Kerbel, the president of Gritell, is married to Bonnie Walton, a Director
of the Company. The Company has also agreed to pay any taxes incurred as a
result of this agreement but does not know how much, if any, taxes will be due
under this agreement. The Company also has an account payable of approximately
$151,000 to Gritell.
On February 22, 1999, ThermoElastic Delaware entered into a five-year contract
with Trilock Financial Corporation, in which Trilock would provide certain
management, business and financial advice and expertise. As amended April 1,
1999, Trilock will receive $3,000 per month plus certain other expenses for its
services until further notice. The original compensation terms outlined in the
contract were $6,666 per month during the first year, $10,000 per month during
the second and third years, and $16,666 per month during the fourth and fifth
years. Trilock has reserved the right to demand payment of any unpaid accrued
balances.
All of the above agreements have been continued by us after the merger.
Due to Related Parties. As described above, ThermoElastic Delaware has entered
into management consulting fee contracts with Vista Developments, Ltd., Gritell
International Limited, Trilock Financial Corporation and PEL Moulds, Inc. Vista
Developments, Ltd. is a shareholder in the Company. Gritell International
Limited, Trilock Financial Corporation and PEL Moulds, Inc. are owned by
shareholders of the Company.
Due to related parties consisted of the following at September 30, 2000:
Gritell International $385,145
Vista Developments, Ltd. 150,000
Trilock Financial Corporation 161,785
Harvard Investment Group, Ltd. 11,413
--------
Total $708,343
========
Item 13. Exhibits and Reports on Form 8-K.
(a) Financial Statements and Schedules
The following financial statements and schedules are filed as part of this
report:
Independent Auditors' Report dated December 21, 2000
Consolidated Balance Sheet for the Year Ended September 30, 2000
Consolidated Statements of Comprehensive Loss for the Year Ended September 30,
2000 and For the Period From January 30, 1995 (Date of Inception) to September
30, 2000
Consolidated Statements of Operations for the Year Ended September 30, 200 and
for the Period from January 30, 1995 (date of Inception) to September 30, 2000
22
<PAGE>
Consolidated Statement of Changes in Stockholders' Equity for the Period from
January 30, 1995 (date of Inception) to September 30, 2000
Statements of Cash
Flows Notes to Financial Statements
List of Exhibits
The following exhibits are filed with this report.
Financial Statements.
Financial Data Schedule
(b) There were no Reports filed on Form 8-K during the fourth quarter of the
Company's fiscal year ended September 30, 2000.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
January 16, 2001 THERMOELASTIC TECHNOLOGIES, INC.
/s/ Kenneth B. Liebscher
----------------------------------------
Kenneth B. Liebscher, President,
Director
/s/ Daniel Wiseman
----------------------------------------
Daniel Wiseman, CFO
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ Dennis Epstein
January 16, 2001 ----------------------------------------
Dennis Epstein, Chairman of the Board
/s/ Kenneth B. Liebscher
January 16, 2001 ----------------------------------------
Kenneth B. Liebscher, Director
January __, 2001 ----------------------------------------
Dr. Lorne Berman, Director
23
<PAGE>
January __, 2001 ----------------------------------------
Dr. Steven Rivers, Director
/s/ Dr. Ila Berman
January 16, 2001 ----------------------------------------
Dr. Ila Berman, Director
January __, 2001 ----------------------------------------
Dr. Izchak Barzilay, Director
/s/ Bonnie D. Walton
January 16, 2001 ----------------------------------------
Bonnie D. Walton, Director
/s/ Fred Heaps
January 16, 2001 ----------------------------------------
Fred Heaps, Director
24
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC.
AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
<PAGE>
TABLE OF CONTENTS
Page No.
--------
INDEPENDENT AUDITORS' REPORT ......................................... 1
FINANCIAL STATEMENTS
Consolidated Balance Sheet .................................... 2
Consolidated Statements of Comprehensive (Loss) ............... 3
Consolidated Statements of Operations ......................... 4
Consolidated Statement of Stockholders' (Deficit) ............. 5 - 6
Consolidated Statements of Cash Flows ......................... 7 - 8
Notes to Financial Statements ................................. 9 - 18
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
ThermoElastic Technologies, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of ThermoElastic
Technologies, Inc. and Subsidiary as of September 30, 2000, and the related
consolidated statements of comprehensive (loss), operations, stockholders'
(deficit) and cash flows for the year ended September 30, 2000 and for the
period from January 30, 1995 (date of inception) to September 30, 2000. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting 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 ThermoElastic Technologies,
Inc. and Subsidiary as of September 30, 2000, and the results of its operations
and its cash flows for the period from January 30, 1995 to September 30, 2000,
in conformity with accounting principles generally accepted in the United States
of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 16 to the
financial statements, the Company is awaiting government approval of its
product, has incurred significant losses and has negative working capital. These
conditions raise substantial doubt about its ability to continue as a going
concern. Management's plans regarding these matters are described in Note 16.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Moffitt & Company, P.C.
Scottsdale, Arizona
December 21, 2000
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 805
Accounts and sundry receivables 507
Travel advances 1,000
Prepaid expenses 29,505
-----------
TOTAL CURRENT ASSETS $ 31,817
OFFICE FURNITURE AND COMPUTERS
Cost 3,679
Less accumulated depreciation 1,199
-----------
NET PROPERTY AND EQUIPMENT 2,480
OTHER ASSETS
Product rights 250,000
-----------
TOTAL ASSETS $ 284,297
===========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Accounts payable
Trade $ 101,633
Related entities 708,343
Accrued liabilities 12,314
Products rights payable 75,000
-----------
TOTAL CURRENT LIABILITIES $ 897,290
CONTINGENCIES
STOCKHOLDERS' (DEFICIT)
Preferred stock, par value $.0001 per share
Authorized 20,000,000 shares
0 shares issued and outstanding 0
Common stock, par value $.0001 per share
Authorized 100,000,000 shares
17,338,164 shares issued and outstanding 1,734
Paid in capital in excess of par value of stock 762,209
Cumulative currency translation adjustment (4,483)
Deficit accumulated during development stage (1,372,453)
-----------
TOTAL STOCKHOLDERS' (DEFICIT) (612,993)
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' (DEFICIT) $ 284,297
===========
See Accompanying Notes and Independent Auditors' Reports.
2
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
FOR THE YEARS ENDED SEPTEMBER 30, 2000 AND
FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2000
January 30,
1995, (Date of
Year Ended Inception) to
September 30, September 30,
2000 2000
------------- --------------
NET (LOSS) $(708,990) $(1,207,453)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments 638 (4,483)
--------- -----------
NET COMPREHENSIVE (LOSS) $(708,352) $(1,211,936)
========= ===========
See Accompanying Notes and Independent Auditors' Reports.
3
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2000 AND
FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2000
January 30,
1995, (Date of
Year Ended Inception) to
September 30, September 30,
2000 2000
------------- --------------
SALES $ 3,840 $ 6,380
COST OF SALES 1,782 3,599
------------ -----------
GROSS PROFIT 2,058 2,781
------------ -----------
EXPENSES
Development costs to related entities 359,000 591,411
General and administrative 352,048 618,823
------------ -----------
TOTAL EXPENSES 711,048 1,210,234
------------ -----------
NET (LOSS) $ (708,990) $(1,207,453)
============ ===========
NET (LOSS) PER COMMON SHARE
Basic and diluted $ (.04)
============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 17,338,164
============
See Accompanying Notes and Independent Auditors' Reports.
4
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT)
FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Deficit
Paid in Cumulative Accumulated
Preferred Stock Common Stock Capital in Currency During the
---------------------- ------------------------ Excess of Par Translation Development
Shares Amount Shares Amount Value of Stock Adjustment Stage
-------- ---------- ---------- ---------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
AT DATE OF INCEPTION 0 $ 0 0 $ 0 $ 0 $ 0 $ 0
JANUARY 30, 1995 - COMMON STOCK
ISSUED TO FOUNDERS FOR
SERVICES 0 0 13,760,000 1,376 (1,176) 0 0
AUGUST 1, 1995 - COMMON STOCK
ISSUED FOR CASH 0 0 1,720,000 172 9,828 0 0
DECEMBER 15, 1995 - COMMON STOCK
ISSUED FOR CASH 0 0 860,000 86 4,914 0 0
NET (LOSS) FOR THE YEAR ENDED
DECEMBER 31, 1995 0 0 0 0 0 0 (8,606)
-------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1995 0 0 16,340,000 1,634 13,566 0 (8,606)
FEBRUARY 10, 1996 - COMMON STOCK
ISSUED FOR SERVICES 0 0 860,000 86 4,914 0 0
NET (LOSS) FOR THE YEAR ENDED
DECEMBER 31, 1996 0 0 0 0 0 0 (10,202)
-------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1996 0 0 17,200,000 1,720 18,480 0 (18,808)
NET (LOSS) FOR THE YEAR ENDED
DECEMBER 31, 1997 0 0 0 0 0 0 (824)
-------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, DECEMBER 31, 1997 0 0 17,200,000 1,720 18,480 0 (19,632)
CAPITAL CONTRIBUTED TO THE
CORPORATION 0 0 0 0 10,000 0 0
NET (LOSS) FOR THE SHORT-YEAR
ENDED SEPTEMBER 30, 1998 0 0 0 0 0 0 (6,760)
-------- ---------- ---------- ---------- ---------- ---------- ----------
BALANCE, SEPTEMBER 30, 1998 0 $ 0 17,200,000 $ 1,720 $ 28,480 $ 0 $ (26,392)
</TABLE>
See Accompanying Notes and Independent Auditors' Reports.
5
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' (DEFICIT) (CONTINUED)
FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
Deficit
Paid in Cumulative Accumulated
Preferred Stock Common Stock Capital in Currency During the
----------------------- ------------------------- Excess of Par Translation Development
Shares Amount Shares Amount Value of Stock Adjustment Stage
--------- ----------- ------------ ----------- -------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
JULY 15, 1999, COMMON STOCK
DIVIDEND PAYABLE IN PREFERRED
STOCK 1,650,000 $ 165 0 $ 0 $ 164,835 $ 0 $ (165,000)
JULY 15, 1999 REDEMPTION OF
PREFERRED STOCK FOR CASH (1,650,000) (165) 0 0 (164,835) 0 0
JULY 15, 1999, MERGER WITH
THERMOELASTIC TECHNOLOGIES,
INC 0 0 0 0 732,385 0 0
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT 0 0 0 0 0 (5,121) 0
NET (LOSS) FOR THE YEAR ENDED
SEPTEMBER 30, 1999 0 0 0 0 0 0 (472,071)
---------- ----------- ---------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 1999 0 0 17,200,000 1,720 760,865 (5,121) (663,463)
FAIR VALUE OF OFFICE RENT
DONATED BY STOCKHOLDER 0 0 0 0 1,358 0 0
FRACTIONAL SHARES OF STOCK 0 0 138,164 14 (14) 0 0
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT 0 0 0 0 0 638 0
NET (LOSS) FOR THE YEAR ENDED
SEPTEMBER 30, 2000 0 0 0 0 0 0 (708,990)
---------- ----------- ---------- ----------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 2000 0 $ 0 17,338,164 $ 1,734 $ 762,209 $ (4,483) $(1,372,453)
========== =========== ========== =========== =========== =========== ===========
</TABLE>
See Accompanying Notes and Independent Auditors' Reports.
6
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 2000 AND
FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
January 30,
1995, (Date of
Year Ended Inception) to
September 30, September 30,
2000 2000
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $(708,990) $(1,207,453)
Adjustments to reconcile net (loss)
to net cash (used) by operating activities:
Depreciation 1,199 1,199
Fair value of rent 1,358 1,358
Stock issued for services 0 5,200
Changes in operating assets and liabilities:
Accounts and sundry receivables 2,156 (1,507)
Inventory 11,000 0
Prepaid expenses (24,888) (29,505)
Accounts payable 679,092 809,976
Accrued liabilities 12,314 12,314
Product rights payable 0 75,000
--------- -----------
NET CASH (USED) BY OPERATING ACTIVITIES (26,759) (333,418)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of product rights 0 (230,000)
Purchase of property and equipment 0 (3,679)
--------- -----------
NET CASH (USED) BY INVESTING ACTIVITIES 0 (233,679)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 0 737,385
Redemption of preferred stock 0 (165,000)
--------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 0 572,385
--------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS 638 (4,483)
--------- -----------
</TABLE>
See Accompanying Notes and Independent Auditors' Reports.
7
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED SEPTEMBER 30, 2000 AND
FOR THE PERIOD FROM JANUARY 30, 1995 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
January 30,
1995, (Date of
Year Ended Inception) to
September 30, September 30,
2000 2000
------------- --------------
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $(26,121) $ 805
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 26,926 0
-------- -------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 805 $ 805
======== =======
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid for interest $ 197 $ 197
======== =======
Cash paid for taxes $ 0 $ 0
======== =======
SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES
Common stock issued for services $ 0 $ 5,200
======== =======
Purchase of product rights through issuance
of common stock $ 0 $20,000
======== =======
Fair value of office rent donated by stockholders $ 1,358 $ 1,358
======== =======
</TABLE>
See Accompanying Notes and Independent Auditors' Reports.
8
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business and History of Company
On January 30, 1995, the Company was organized under the name of L.P.R.
Cybertek to engage in any lawful corporate undertaking, including, but not
limited to, select mergers and acquisitions. On July 15, 1999, the Company
entered into a merger agreement with ThermoElastic Technologies, Inc.
whereby ThermoElastic Technologies, Inc. was merged into L.P.R. Cybertek
and L.P.R. Cybertek's name was then changed to ThermoElastic Technologies,
Inc.
The Company is now in the business of developing, marketing and
distributing a new generation acrylic, known as Biocompatable Intraoral
Thermo Elastic Material (BITEM) which is anticipated to be sold to dental
related businesses and other allied fields throughout the world.
On June 14, 1999, the Company organized ThermoElastic Technologies
(Canada), Inc., a 100% owned Canadian subsidiary. As of September 30,
2000, the subsidiary was inactive and no financial activities have taken
place in the subsidiary.
Principles of Consolidation
The consolidated financial statements include the accounts of
ThermoElastic Technologies, Inc. and its wholly owned subsidiary
ThermoElastic Technologies (Canada), Inc.
There were no inter-company transactions between the companies.
Restatement of Common Stock
On July 15, 1999, the Company effected a 1 for 1.72 forward stock split.
The stock split has been retroactively recorded in the financial statement
as if it occurred at the date of inception.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Major renewals and improvements
are charged to the asset accounts while replacements, maintenance and
repairs, which do not improve or extend the lives of respective assets,
are expensed. At the time property and equipment are retired or otherwise
disposed of, the assets and related depreciation accounts are relieved of
the applicable amounts. Gains or losses from retirements or sales are
credited or charged to income.
The Company depreciates its property and equipment for financial reporting
purposes using the accelerated methods based upon an estimated useful life
of five years.
See Accompanying Notes and Independent Auditors' Reports.
9
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounting Estimates
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results could vary from the
estimates that were used.
Income Taxes
Provisions for income taxes are based on taxes payable or refundable for
the current year and deferred taxes on temporary differences between the
amount of taxable income and pretax financial income and between the tax
basis of assets and liabilities and their reported amounts in the
financial statements. Deferred tax assets and liabilities are included in
the financial statements at currently enacted income tax rates applicable
to the period in which the deferred tax assets and liabilities are
expected to be realized or settled as prescribed in FASB Statement No.
109, Accounting for Income Taxes. As changes in tax laws or rate are
enacted, deferred tax assets and liabilities are adjusted through the
provision for income taxes.
Net (Loss) Per Share
The Company adopted Statement of Financial Accounting Standards No. 128
that requires the reporting of both basic and diluted earnings (loss) per
share. Basic earnings (loss) per share is computed by dividing net income
(loss) available to common shareowners by the weighted average number of
common shares outstanding for the period. Diluted earnings (loss) per
share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into
common stock. In accordance with FASB 128, any anti-dilutive effects on
net loss per share are excluded.
Disclosure About Fair Value of Financial Instruments
The Company has financial instruments, none of which are held for trading
purposes. The Company estimates that the fair value of all financial
instruments at September 30, 2000, as defined in FASB 107, does not differ
materially from the aggregate carrying values of its financial instruments
recorded in the accompanying balance sheet. The estimated fair value
amounts have been determined by the Company using available market
information and appropriate valuation methodologies. Considerable
judgement is required in interpreting market data to develop the estimates
of fair value, and accordingly, the estimates are not necessarily
indicative of the amounts that the Company could realize in a current
market exchange.
See Accompanying Notes and Independent Auditors' Reports.
10
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Long-Lived Assets
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of
the asset in question may not be recoverable. This standard did not have a
material effect on the Company's results of operations, cash flows or
financial position.
Foreign Currency Translation
The financial statements of the Company are measured using the local
currency as the functional currency. Assets and liabilities of these
companies are translated at exchange rates as of the balance sheet date.
Revenues and expenses are translated at average rates of exchange in
effect during the year. The resulting cumulative translation adjustments
have been recorded as a separate component of stockholders' equity.
Foreign currency translations gains and losses are included in
consolidated net income. The financial statements are presented in United
States of America dollars.
NOTE 2 DEVELOPMENT STAGE OPERATIONS
As of September 30, 2000, the Company was in the development stage of
operations. According to the Financial Accounting Standards Board of the
Financial Accounting Foundation, a development stage Company is defined as
a company that devotes most of its activities to establishing a new
business activity. In addition, planned principle activities have not
commenced, or have commenced and have not yet produced significant
revenue.
The Company expensed $359,000 of development costs for the year ended
September 30, 2000, and $591,411 from January 30, 1995 to September 30,
2000.
NOTE 3 PROPERTY RIGHTS
The Company has entered into an exclusive agreement with Apple Dental
Ventures (a related entity) to acquire the rights and related privileges
to manufacture, market, distribute and sell by retail, wholesale or any
other method, the "BITEM" products. These products are protected by U.S.,
Canadian and European patents, and all divisional patents for non-dental
applications, along with improvements, variations and changes to these
patents for the entire world for a term which is the longer of 25 years or
the life of the patents or any extension or amendments of the patents.
(See note 5.)
See Accompanying Notes and Independent Auditors' Reports.
11
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 3 PROPERTY RIGHTS (CONTINUED)
The license agreement has been capitalized at a cost of $250,000. Payments
for the license agreement are $50,000 at the time of initial funding,
$20,000 in common stock, three payments of $35,000 every 2 months, and
$75,000 at the end of one year. At September 30, 2000, $75,000 remained in
product rights payable.
Product rights will begin being amortized once business activities
commence.
NOTE 4 ACCOUNTS PAYABLE, RELATED ENTITIES
The Company is related to the following entities through common officer
positions and stock ownership:
Gritell International Limited $385,145
Trilock Financial Corporation 161,785
Vista Developments Ltd. 150,000
Harvard Investment Group Ltd. 11,413
--------
$708,343
========
NOTE 5 COMMITMENTS
The Company has entered into the following consulting agreements:
Gritell International Limited (A Related Entity)
1. Date - February 8, 1999
2. Term - Ten years
3. Compensation in US dollars
First year - $13,334 per month
Second and third year - $20,000 per month
Fourth and fifth year - $33,334 per month
Automobile lease and cellular telephone reimbursement
4. Income tax reimbursements - all income taxes which
accrue to Gritell as a result of the compensation shall
be paid by the Company
5. Services to perform - management, business and financial
advice to the Board of Directors
6. The agreement was amended on April 1, 1999, whereby
Gritell will, until it sees fit to do otherwise, accept
the payment of $6,000 per month, provided that the
balance shall accrue to Gritell's benefit and shall be
paid to Gritell as and when it, in its sole discretion,
shall demand payment of the accrued balance. The Company
has accrued for the deferred payments and include
$151,805 in accounts payable.
See Accompanying Notes and Independent Auditors' Reports.
12
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 5 COMMITMENTS (CONTINUED)
Trilock Financial Corporation (A Related Entity)
1. Date - February 22, 1999
2. Term - Ten years
3. Compensation in US dollars
First year - $6,666 per month
Second and third year - $10,000 per month
Fourth and fifth year - $16,666 per month
Automobile lease and cellular telephone reimbursement
4. Income tax reimbursements - all income taxes which
accrue to Trilock as a result of the compensation shall
be paid by the Company
5. Services to perform - management, business and financial
advice to the Board of Directors
6. The agreement was amended on April 1, 1999, whereby
Trilock will, until it sees fit to do otherwise, accept
the payment of $3,000 per month, provided that the
balance shall accrue to Trilock's benefit and shall be
paid to Trilock as and when it, in its sole discretion,
shall demand payment of the accrued balance. The Company
has accrued for the deferred payments and included
$117,910 in accounts payable.
Gulf Atlantic Publishing, Inc. (A Non-related Entity)
1. Date - February 18, 2000
2. Compensation in US dollars
A. 262,500 free trading shares issued by certain
stockholders of the Company
B. Company agrees to issue 262,500 shares of restricted
common stock
3. Services to provide - mailings and website advertising
Rainbow Communications, Inc. (A Non-related Entity)
1. Date - February 18, 2000
2. Compensation in US dollars
A. 87,500 free trading shares issued by certain
stockholders of the Company
B. Company agrees to issue 87,500 shares of restricted
common stock
3. Services to provide - advertising
Apple Dental Ventures (A Related Entity)
The Company entered an exclusive agreement with Apple Dental
Ventures to acquire the rights and related privileges to
manufacture, market, distribute and sell by retail, wholesale or any
other method, the "BITEM" products. (See note 3.)
See Accompanying Notes and Independent Auditors' Reports.
13
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 5 COMMITMENTS (CONTINUED)
For granting this exclusive license, Apple Dental Ventures will
receive, the following:
A. A royalty calculated as follows:
5% of the first $25,000,000 in gross annual income, and
3.5% of the next $25,000,000 in gross annual income, and
2.5% of gross annual income exceeding $50,000,000.
B. A consulting agreement for a 3-year term commencing
December 28, 1998, and payable at a maximum of Canadian
$60,000 (US $39,976 as of September 30, 2000) per year
for further research and development of new products,
marketing and training. This agreement shall be
renewable on mutual consent for two successive periods
of two years.
C. The right to purchase 100,000 common shares, par value
of $.0001 per share, at $.20 per share, or $20,000. This
right has been exercised as of the date of these
financial statements.
D. A two-year option to purchase 100,000 common shares at
$.0001 per share.
Vista Development Ltd. (A Related Entity)
1. Date - February 2, 1999
2. Compensation in US dollars
$150,000 per year, payable monthly
Commission of 1% on annual gross sales or five percent
of operating profit, whichever is the lesser.
3. Services to provide - Consulting for worldwide and
multi-industry marketing.
4. Performance based options on terms to yet be agreed upon
to be available from a pool of two million common shares
to be set aside for performance of this option plan.
5. Advisory Board - members of the Advisory Board would be
entitled to an option to acquire 25,000 shares of common
stock at the end of their two year term at 50% of the
current market price.
Future minimum payments on the commitments are as follows:
September 30, 2001 $ 630,004
September 30, 2002 589,999
September 30, 2003 190,000
September 30, 2004 190,000
September 30, 2005 190,000
----------
$1,790,003
==========
See Accompanying Notes and Independent Auditors' Reports.
14
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 6 INCOME TAXES
Significant components of the Company's deferred tax assets and
liabilities are as follows at September 30, 2000:
Deferred tax assets:
Net operating loss carryforward $240,700
Less valuation allowance 240,700
--------
Net deferred tax assets $ 0
========
Deferred tax liabilities: $ 0
========
A reconciliation of the valuation allowance is as follows:
Balance, October 1, 1999 $ 98,900
Addition to allowance for the year ended September 30, 2000 141,800
--------
Balance, September 30, 2000 $240,700
========
NOTE 7 PREFERRED STOCK
The preferred stock is non-voting and non-participating.
NOTE 8 COMMON STOCK ELIGIBLE FOR ISSUANCE
Total stock authorized 100,000,000
Less stock issued (17,338,164)
Less reserved for
Options (See note 9) (100,000)
Warrants (See note 10) (1,332,800)
Gulf Atlantic Publishing, Inc. (See note 5) (262,500)
Rainbow Communications, Inc.(See note 5) (87,500)
Vista Development Ltd - option pool (See note 5) (2,000,000)
Vista Development Ltd. - Advisory Board options (See note 5) (25,000)
-----------
Balance available for issuance 78,854,036
===========
See Accompanying Notes and Independent Auditors' Reports.
15
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 9 STOCK OPTIONS
The Company has the following stock options outstanding as of September
30, 2000:
Option
Shares Price
------- --------------
Apple Dental Ventures 100,000 $.0001
Per share
Vista Development Ltd - Advisory 50% of current
Board 25,000 market price
-------
125,000
=======
NOTE 10 STOCK WARRANTS
The Company has the following warrants outstanding as of September 30,
2000:
Number Expiration
Series Price of Shares Date
------ ----- --------- -----------------
A $2.00 666,400 December 31, 2001
B $3.00 666,400 December 31, 2000
The Company may redeem the warrants at $.01 per warrant.
NOTE 11 NET OPERATING LOSS CARRYFORWARDS
The Company has the following net operating loss carryforwards:
Tax Year Amount Expiration Date
------------------ ----------- ---------------
December 31, 1995 $ 8,396 2010
December 31, 1996 6,821 2011
December 31, 1997 381 2012
September 30, 1998 6,439 2018
September 30, 1999 472,284 2019
September 30, 2000 708,990 2020
-----------
$ 1,203,311
===========
See Accompanying Notes and Independent Auditors' Reports.
16
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 12 OPERATING LEASES
The Company leases two vehicles under operating leases with four - year
terms and monthly payments of $1,142.
Future minimum lease payments under the vehicle leases are as follows:
September 30, 2001 $13,712
September 30, 2002 13,712
September 30, 2003 7,392
-------
$34,816
=======
Rent expense for the year ended September 30, 2000 totaled $30,877.
NOTE 13 INTEREST EXPENSE
Interest expense for the year ended September 30, 2000 amounted to $197.
NOTE 14 CORRECTION OF SEPTEMBER 30, 1999 NET (LOSS), PAID IN CAPITAL, RETAINED
EARNINGS AND NET (LOSS) PER SHARE
The September 30, 1999 financial statements did not properly accrue
consulting fees and record prepaid expenses and did not recognize the
merger as a pooling of interest whereby the retained earnings for both
entities must be combined.
Net (loss)
As previously reported $(370,288)
Adjustments
Increase in consulting fees and accounts
payable, related entities $(107,250)
Increase in prepaid expenses 5,467 (101,783)
--------- ---------
As restated $(472,071)
=========
Paid in capital
As previously reported $ 569,473
Adjustment
Correct recording of merger 26,392
---------
As restated $ 595,865
=========
See Accompanying Notes and Independent Auditors' Reports.
17
<PAGE>
THERMOELASTIC TECHNOLOGIES, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE 14 CORRECTION OF SEPTEMBER 30, 1999 NET (LOSS), PAID IN CAPITAL, RETAINED
EARNINGS AND NET (LOSS) PER SHARE (CONTINUED)
Retained earnings
As previously reported $(370,288)
Adjustments
Correct recording of merger and record
October 1, 1998 retained earnings
balance (26,392)
Correct net (loss) for the year ended
September 30, 1999 (101,783)
---------
As restated $(498,463)
=========
Net (loss) per share
As previously reported $ (.03)
Adjustments
Correction due to change in net (loss) (.01)
---------
As restated $ (.04)
=========
NOTE 15 CONTINGENCIES
In the Company's contracts with Gritell International Limited and Trilock
Financial Corporation (see note 5), the Company agreed to reimburse
Gritell International Limited and Trilock Financial Corporation for any
income taxes that might accrue to them on the compensation they receive.
The amount of the tax, if any, is not known and the Company has not
accrued any liability for this contingency.
NOTE 16 GOING CONCERN
These financial statements are presented on the basis that the Company is
a going concern. Going concern contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business over a
reasonable length of time. The Company is in the development stage of
operations and has incurred losses of $1,207,453 from inception. In
addition, the Company's sources of working capital were supplied by loans
from related entities.
The Company is awaiting the United States Federal Department of
Agriculture approval to sell the "BITEM" product which will enable it to
market its "BITEM" product to the public.
See Accompanying Notes and Independent Auditors' Reports.
18
