THIS DOCUMENT IS A COPY OF THE FORM 8-K/A AMENDMENT FILED ON
FEBRUARY 28, 2000 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP
EXEMPTION.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
December 13, 1999
Date of Report
(Date of Earliest Event Reported)
THE HYDROGIENE CORPORATION
(Exact Name of Registrant as Specified in its Charter)
12335 World Trade Drive, Suite 8
San Diego, CA 92128
(Address of principal executive offices)
858/675-8033
FAX: 858/675-0380
Registrant's telephone number
DECURION CORPORATION
1504 R Street, N.W.
Washington, D.C. 20009
Former name and former address
Florida 0-26417 91-1853701
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
(A) Pursuant to an Agreement and plan of
Reorganization (the "Acquisition Agreement") effective December
13, 1999, the Hydrogiene Corporation ("Hydrogiene" or the
"Company"), a Florida corporation, acquired all the outstanding
shares of common stock of Decurion Corporation ("Decurion"), a
Delaware corporation, from the shareholders thereof in an
exchange for an aggregate of 1,500,000 shares of common stock
of Hydrogiene (the "Acquisition").
The Acquisition was approved by the unanimous consent
of the Board of Directors of Hydrogiene on November 29, 1999.
The Acquisition is intended to qualify as a reorganization within
the meaning of Section 368(a)(1)(B) of the Internal Revenue Code
of 1986, as amended.
Prior to the Acquisition, Hydrogiene had 38,794,221
shares of common stock issued an outstanding and 40,294,221
shares issued and outstanding following the Acquisition.
Upon effectiveness of the Acquisition, pursuant to Rule
12g-3(a) of the General Rules and Regulations of the Securities
and Exchange Commission, Hydrogiene elected to become the
successor issuer to Decurion Corporation for reporting purposes
under the Securities Exchange Act of 1934 an elects to report
under the Act effective December 13, 1999.
A copy of the Acquisition Agreement is filed as an exhibit
to this Form 8-K and is incorporated in its entirety herein. The
foregoing description is modified by such reference.
(b) The following table contains information regarding
the shareholdings of Hydrogiene's current directors and executive
officers and those persons or entities who beneficially own more
than 5% of its common stock (giving effect to the exercise of the
warrants held by each such person or entity):
Number of shares of Percent of
Common Stock Beneficially Common Stock
Name Owned Beneficially Owned (1)
Charles Kallmann(2) 4,625,646 11.92%
11870 Caminito Ronaldo #139
San Diego, CA 92128
Wiebeke Kallmann(3) 11,287,709 10.98%
Revocable Trust dated 5/16/96
Wiebeke Kallmann, Trustee
11870 Caminito Ronaldo #139
San Diego, CA 92128
CEDE & Co. 5,521,350 14.23%
P.O. Box 222
Bowling Green Station
New York, NY
Michael Brette (4) 4,125,000 10.63
24064 Adams Avenue
Murrietta, CA 92562
(1) Based upon 38,794,221 outstanding shares of common
stock.
(2) Includes an option to purchase an addtional 3,000,000
shares of common stock of the Company at a strike price of $0.15
per share held in Mr. Kallmann's name. This option is exercisable
for 36 months and will expire in 2002.
(3) Includes 7,2026,747 shares issued to Magna IV, Ltd., a
Delaware corporation whose stock is owned by the Wiebeke
Kallmann Revocable Trust dated 5/16/96 and of which Wiebeke
Kallmann is Trustee. Magna IV has been merged into the
Company and its shares issued to the Wiebeke Kallann Revocable
Trust. Wiebeke Kallmann is the wife of Charles Kallmann, Chief
Executive Officer of the Company and Chairman of the Board of
Directors.
(4) Includes an option to purchase an additional 3,000,000
shares of common stock of the Company at an exercise price of
$0.15 per share held in Mr. Brette's name. This option is
exercisable for 36 months and will expire in 2002.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) The consideration exchanged pursuant to the
Acquisition Agreement was negotiated between Decurion and
Hydrogiene. In evaluating the Acquisition, Decurion used criteria
such as the value of the assets of Hydrogiene, Hydrogiene's ability
to compete in the market for personal hygiene products, the unique
nature of Hydrogiene's products, the increased use of the Internet
as a marketing tool, Hydrogiene's current and anticipated business
operations, and Hydrogiene's business name and reputation in the
personal hygiene industry.
(b) The Company intends to achieve its expansion
objectives by growth at its existing facilities, use of multiple
media consumer education marketing efforts, establishing its name
recognition and consumer familiarity with the Company's
products and obtaining patent and trademark protection for its
family of personal hygiene products.
BUSINESS
Company
Hydrogiene is a development-stage company, originally
incorporated on December 28, 1995 in the State of Delaware,
reincorporated on August 28, 1997 in the State of California,
whose net assets were aquired by a Nevada inactive corporation on
October 13, 1998 and, subsequently, merged into a trading shall
corporation incorporated in the State of Florida. The Company
manufactures and markets the Hydrogiene family of personal care
systems that convert tank-type and flush-type valve toilets into
personal multi-functional cleansing, water therapy and sitz bath
systems. The Company's systems are similar in function to
Europe's bidets wihout the additional plumbing and space
requirements. To the best of the Company's awareness, there is
no other company in the U.S. engaged in manufacturing or
marketing goods similar to those manufactured or marketed by the
Company. While there are products which can convert a standard
toilet to a bidet-type fixture, the Company believes its product is
the only one which can be added to a standard toilet, easily by the
homeowner, without modifying the fixture itself. The Company
requires additional funding in order to accomplish its growth
objectives and marketings of its products.
Products
The Company's products are the Theraclenze and
Mediclenze systems, European-style personal hygiene and water
therapy systems for tank-type or flushometer-equipped toilets.
These systems may be installed on existing toilets without
incurring additional plumbing, electrical or construction costs.
Each unit includes a limited lifetime warranty as well as a 3-year
warranty on springs and washers.
The Theraclenze System. The Theraclenze System comes
completely assembled, requiring only affixing the Theraclenze
System to the toilet with four screws. The installation procedure
is usually less than five minutes. Th Theraclenze System fastens
onto any water inlet coupling and ballcock fitting used by United
States toilets over the past 50 years. The Theraclenze System is
designed to be easily used by the physically challenged or
handicapped. Once released, the system automatically turns itself
off or may be kept on until desired to be turned off at the option of
the user. The auto control handle prevents the possibility of flood
or waste water. The unit retracts when not in use, thereby
preventing it from being soiled. The Theraclenze System is
designed so that soiled water cannot flow back into the water tank.
The System is supplied in a lasting clinical white finish with a
lifetime anti-bacterial surface. High tensile strength plastic
construction of the Theraclenze System allows the Company to
offer a lifetime warranty on al parts exclusive of springs, washers,
and O-rings. The Company's Theraclenze System meets all
states' health and building codes. The Company expects the
Theraclenze System to be Medicare approved in early 2000.
The Mediclenze System. The Mediclenze Flush Valve
Intimate Personal Care and Therapy System, a companion to the
Theraclenze model, is specifically designed for commercial use
and installation to existing Flushometer Systems. The Mediclenze
System differs from the Theraclenze System in several ways. It
was designed to endure heavy-duty usage over long periods of
time. The installation is tamper and vandal resistant, and is
permanently fixed to the bottom of the seat. Corrosion resistant
materials are used throughout the Mediclenze System. The
Mediclenze System features an anti-bacterial coating impregnated
into the ABS plastic surfaces to combat several bacteria. The
Company believes that the Mediclenze System meets all
applicable plumbing codes used throughout the United States.
The System was specifically designed for use in hospitals, hotels
(in their public restrooms), office and commercial buildings,
wherever tank type toilets are not installed. An off-balance sheet
lease as well as a finance program have been designed to make
volume installations affordable. The Mediclenze System comes
with a limited lifetime warranty on all parts exclusive of O-rings,
washers and hoses.
Both the Theraclenze and Mediclenze Systems are
currently undergoing extensive testing by Underwriters
Laboratories, an independent entity that performed durability,
corrosion, seepage and water pressure limits for the International
Association of Plumbing and Manufacturers Organization
("IAMPO"). No conclusions as to validity or health benefits of
the Hydrogiene personal care systems has been reached as of yet.
Operations
The Company believes it is the only manufacturer of the
Mediclenze and Theraclenze Systems type products in the United
States market at this time. The Company has applied for Medicare
approval and is expecting approval early in 2000. The Compnay
is also in theprocess of applying for ADA approval. The
Company's products may be tax deductible with a physician's or
chiropractor's prescription.
Commencing in April 2000, the Company intends to
deliver its Hydrogiene Theraclenze and Mediclenze Systems to
several retail outlets throughout the United States. The Company
also intends to install its products in hotels and other leisure
facilities in the San Diego, Orange County and Riverside Counties
of Southern California, as well as several hotels located in Las
Vegas, Nevada. The Company intends to generate cash flow as a
result of these operations.
Currently, the Company has placed the primary emphasis
on product development and dependability, testing and customer
test marketing. The Company has made limited sales of its
products and has been, and is currently operating at a loss. The
Company requires additional funding to achieve its growth
objectives. If the Company does not receive additional funding,
it will not be able to pursue its marketing plan and, in such case,
may not be able to successfully conduct its operations.
Marketing
The Company intends to employ a variety of marketing
techniques to attract potential consumers of its products. In
addition to trade shows, conferences and conventions, the
Company intends to mount an integrated marketing campaign.
This marketing campaign will target both potential dealers and
distributors of the Company product and end users and customers
of the Hydrogiene products. The Company intends to deploy a
multiple media marketing campaign to increase the process of
awareness, interest, evaluation, trial and purchase of the Company
product by prospective customers.
As a part of its promotional campaign, the Company
placed an advertisement in the Sears Home Care catalog in June,
1999. Subsequently, the Company shipped its initial order to
Sears as stock inventory for Sears. As a result of this advertising
effort, 48 units have been ordered and shipped. Also, two
newspaper articles briefly describing the Company's personal
hygiene and water therapy systems were featured in April 1999
issues of the Los Angeles Times and Chicago Tribune. The major
purpose of these articles was to introduce the Company to the
buying public and to inform the public concerning the Company's
plans to market its personal care systems to the U.S. consumers.
Articles did not contain any technical information.
The Company has established its presence on the Internet
through a Web site at http.//www.hydrogiene.com. This Web site
has been indexed with national and international search engines,
enabling consumers around the globe to be able to access
Hydrogiene personal care systems information.
The Company intends to launch a print media
advertisement campaign. Management has identified several
trade, general consumer and special interest group promotion
publications. The Company also intends to develop a national
television advertising campaign with the production of an
informercial utilizing several spokespersons in order to reach the
widest possible segments of the U.S. population.
Trademarks and Patents
Presently, the Company has no patents or trademarks. The
Company is pursuing domestic and international trademark
protection of its Mediclenze and Theraclenze systems and these
applications are currently pending approval. The Company
intends to file one or more patent applications in late spring 2000.
Pending completion of test routines, the Company intends
to request an approval and official "Universal Plumbing Code"
logo of the International Association of Plumbing and Mechanical
Officials. "UPC" logo indicates that the Company products meet
plumbing code requirements in all fifty states. No assurance can
be given that the Company will receive such approval.
Property
The Company's principal executive offices are at the 4,700
square foot assembly facility located a 12335 World Trade Drive,
Suite 8, San Diego, California 92128 and its telephone number is
(858) 675-8033. This building is a leased facility with a monthly
rent of $3,488. The lease term is five years and it will terminate
on January 3, 2004.
Suppliers
The Company sub-contracts all components manufacturing
of its products. Several vendors in San Diego, California supply
plastic parts, tubing, and rings and springs coating. Presently,
there are no contractual arrangements between the Company and
suppliers. Purchase orders are written to request parts as required
to meet delivery schedule when production commences. The
Company owns all tools and molds used to fabricate its plastic
parts.
Employees
The company currently employs five full time and no
parttime employees.
Litigation
On August 23rd, 1999, the City of San Diego filed a
criminal complaint against the Hydrogiene Corporation, Charles
Kallmann, president of the Company, and Wiebeke Kallmann,
then a director of the Company and the spouse of Charles
Kallmann, for 120 counts of misleading statements regarding the
health benefits of the Company's products and publishing a
general announcement of a securities offering that did not conform
to the California Corporations Code. All counts were
misdemeanors. Subsequently, the court dismissed charges against
the Company and Mrs. Kallmann and accepted Mr. Kallmann's no
contest plea to avoid the additional costs of a trial. Mr. Kallmann
was sentenced to a 3-year probation on the condition that he
violate no laws, perform community service and pay a $10,000
fine and $200 in restitution. The full amount of a $10,000 fine
remains outstanding.
There is no current outstanding litigation in which the
Company is involved and the Company is unaware of any pending
actions or claims against it.
MARKET FOR THE COMPANY'S SECURITIES
The Company has been a non-reporting publicly traded
company with certain of its securities exempt from registration
under the Securities Act of 12933 pursuant to Rule 504 of
Regulation D of the General Rules and Regulations of the
Securities and Exchange Commission. The Company's common
stock is traded on the NASD OTC Bulletin Board under the
symbol HICS. The NASD OTC Stock Market has implemented
a change in its rules requiring all companies trading securities on
the NASD OTC Bulletin Board to become reporting companies
under the Securities Exchange Act of 1934.
The Company was required to become a reporting
company by the close of business on December 15, 1999.
Hydrogiene acquired all the outstanding shares of Decurion to
become successor issuer to it pursuant to Rule 12g-3 in order to
comply with the reporting company requirements implemented by
the Nasdaq Stock Market.
Management
Name Age Title
Charles Kallmann 72 President, Chief
Executive Officer, Director
Michael Brette 49 Director, Vice President
Arden E. Roney 63 Director
Noel D. Thomas 56 Director of Operations
Charles W. Kallmann has served as President and Chief
Executive Officer of the Hydrogiene Corpora since the Company's
inception in 1995. From 1992 to 1995, Mr. Kallmann was
President and Chief Executive Officer of Star of Phoenix Aircraft
Corporation, a manufacturer of training and sports-light aircraft.
From 1985 to 1992, Mr. Kallmann resided in Hamburg, Germany,
where he served as a Managing Director of ARK Petroleum
Group, GMBH, a bulk petroleum distributor. Mr. Kallmann
attended Riverside Military Academy from 1938 to 1944.
Michael Brette has served as Vice President and Director
of the Hydrogiene Corporation since 1998. Prior to Mr. Brette's
association with the Hydrogiene Corporation, he served as a
Chairman of Capital Asset Management, LLC. Mr. Brette is
President of BST International, a company handling investments
in off-shore mutual funds, banking and trust administration and
formations. Mr. Brette is a Managing Director for Swiss Trade
and Commerce Trust Co. Mr. Brette has received a Bachelor of
Science degree in Political Science and Bachelor of Arts degree in
Philosophy from Ohio State University in 1974 and a Juris Doctor
degree from Western State University Law School in 1978.
Arden E. Roney has served as Director of the Company
since July, 1998. Mr. Roney is one of the co-founders of Nu-skin,
a multi-level cosmetics marketing company. During past several
years, Mr. Roney was employed as a consultant capacity to
numerous businesses both nationally and internationally. Mr.
Roney received a Bachelor of Business Administration degree in
1950 from the University of California at Los Angeles and a
Master's of Business Administration/Marketing degree in 1950
from the University of California in Los Angeles.
Noel D. Thomas has served as Director of Operations for
the Hydrogiene Corporation since June, 1998. Mr. Thomas
possesses experience dealing with the Federal and State
Governments as to labor and accidents reports and in helping to
set up fire department training through the Department of Labor
and the Local Firefighters Union. Mr. Thomas earned an
Associate of Science Degree in Fire Science from Miramar
College in San Diego in 1975 and is a Certified Strike Team
Leader, Fire Instructor and Fire Officer.
Executive Compensation
Charles Kallmann receives $144,000 per annum. He has
no form of other compensation. No compensation is paid to any
of the other directors
RISK FACTORS
The Hydrogiene Corporation is currently operating at a
loss. For the fiscal year 1999, through November, 1999 had a net
loss. If losses continue, The Hydrogiene Corporation may need to
raise additional capital through the placement of its securities or
from other debt or equity financing. If the Company is not able to
raise such financing or obtain alternative sources of funding,
management will be required to curtail operations. There is no
assurance that the Company will be able to continue to operate if
additional sales of its securities cannot be generated or other
sources of financing located.
Limited History of operations. The Company did not
commence its operations until 1996. The Company has only a
limited history of operations. The Company operations are subject
to the risks and competition inherent in the establishment of a
relatively new business enterprise in a competitive field of
personal care and hygiene. There can be no assurance that future
operations will be profitable. Revenues and profits, if any, will
depend upon various factors, including market acceptance of its
products and concepts, market awareness, its ability to expand its
network of participating distributors, reliability and acceptance of
the Internet as a means of promoting the Company product,
dependability of its advertising and recruiting network, and
general economic conditions. There is no assurance that the
Company will achieve its expansion goals and the failure to
achieve such goals would have an adverse impact on it.
Loss of the Company key employees may adversely affect
growth objectives. The Company's success in achieving its
growth objectives depends upon the efforts of Charles Kallmann,
president of the Company and other top Company management
members. Their experience and industry-wide contacts
significantly benefit the Company. The loss of the services of any
of these individuals may have a material adverse effect on our
business, financial condition and results of operations. The
Company does not maintain key-man life insurance on any of its
executives. There is no assurance that the Company will be able
to maintain and achieve its growth objectives should it lose any or
all of these individuals' services.
The Company may fail to generate sufficient interest in its
products. The Company must undertake substantial effort to
educate the buying public in the U.S. as to the Company's
products and their potential health and personal care benefits. The
Company may encounter significant cultural and social resistance
in its marketing efforts. There is no assurance that the Company
will be able to generate interest in and to create and maintain
steady demand for its products over any period of time.
Management and affiliates own enough shares to control
shareholder vote. Charles Kallmann and Michael Brette together
with entities affiliated with them or otherwise in cooperation with
them, may control up to 52% of the outstanding common stock.
As a result, these stockholders may be able to exercise control
over matters requiring stockholder approval, including the election
of directors and the approval of material corporate matters such as
change of control transactions. The effects of such control could
be to delay or prevent a change of control of the Company which
may be favorable to other stockholders unless the terms are
approved by Mr. Kallmann and Mr. Brette.
Lack of continued development of e-commerce market.
The use of the Internet and World Wide Web for commercial
purposes is expanding dramatically. There is no assurance,
however, that as increased commerce takes place on the Internet,
unforeseen overloads, lack of sufficient hardware, telephone
availability or other problems may not develop. In addition,
consumer use of the Internet for purchases, banking, and other
commercial uses may decline for any number of reasons such as
security problems, overload difficulties, shopping trends, or slow
Internet access. These difficulties may undermine Company's
promoting and marketing efforts. There is no assurance that the
Company would be able to successfully overcome these
difficulties.
Failure to attract qualified personnel. A change in labor
market conditions that either further reduces the availability of
employees or increases significantly the cost of labor could have
a material adverse effect on the Company's business, financial
condition and results of operations. The Company's business is
dependent upon its ability to attract and retain qualified
personnel, administrators and corporate management. There is no
assurance that the Company will be able to employ a sufficient
number of qualified training personnel in order to achieve its
growth objectives.
Trademark protection and proprietary marks. The
Company has filed for patent and trademark protection. There is
also no assurance that the Company will be able to prevent
competitors from using the same or similar names, marks,
concepts or appearances or that it will have the financial resources
necessary to protect its marks against infringing use.
Issuance of future shares may dilute investors share value.
The Articles of Incorporation of the Company authorize the
issuance of 50,000,000 shares of common stock and 10,000,000
shares of preferred stock. The future issuance of all or part of the
remaining authorized common or preferred stock may result in
substantial dilution in the percentage of the Company's common
stock held by the its then existing shareholders. Moreover, any
common stock issued in the future may be valued on an arbitrary
basis by the Company. The issuance of the Company's shares for
future services or acquisitions or other corporate actions may have
the effect of diluting the value of the shares held by investors,
and might have an adverse effect on any trading market, should a
trading market develop for the Company's common stock.
Penny Stock Regulation. The Company's common stock
is deemed to be a penny stock. Penny stocks generally are equity
securities with a price of less than $5.00 per share other than
securities registered on certain national securities exchanges or
quoted on the Nasdaq Stock Market, provided the current price
and volume information with respect to transactions in such
securities is provided by the exchange or system. The Company's
securities may be subject to "penny stock rules" that impose
additional sales practice requirements on broker-dealers who sell
such securities to persons other than established customers and
accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000 or $300,000
together with their spouse). For transactions covered by these
rules, the broker-dealer must make a special suitability
determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to
the purchase. Additionally, for any transaction involving a penny
stock, unless exempt, the "penny stock rules" require the delivery,
prior to the transaction, of a disclosure schedule prescribed by the
Commission relating to the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-dealer
and the registered representative and current quotations for
the securities. Finally, monthly statements must be sent disclosing
recent price information on the limited market in penny stocks.
Consequently, the "penny stock rules" may restrict the ability of
broker-dealers to sell the Company's securities. The foregoing
required penny stock restrictions will not apply to the company's
securities if such securities maintains a market price of $5.00 or
greater. There can be no assurance that the price of the Company's
securities will reach or maintain such a level.
Computer Systems Redesigned for Year 2000. Many
existing computer programs use only two digits to identify a year
in such program's date field. These programs were designed and
developed without consideration of the impact of the change in the
century for which four digits will be required to accurately report
the date. If not corrected, many computer applications could fail
or create erroneous results by or following the year 2000 (the
"Year 2000 problem"). Many of the computer programs
containing such language problems have been corrected by the
companies or governments operating such programs. The
Company's operations are dependent upon the properly
functioning computer equipment which may fail because of such
Year 2000 problems. The Company does not know what steps, if
any, have been taken by any of its business partners in regard to
the Year 2000 problems. The Company's operations will be
severally curtailed if one or more of its business partners were to
suffer Year 2000 problems. Furthermore, it is impossible to
predict if the basic utilities serving the Company will continue
uninterrupted.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING
ACCOUNTANT
At the time of the reverse acquisition described herein, the
Company chose to engage Weinberg & Company, P.A., formerly
the auditors of Decurion Corporation, the corporation with which
it merged, to perform the audit of the Company. Since there were
no prior auditors on the Company, this did not constitute a
reportable change in registrant's certifying accountant.
ITEM 5. OTHER EVENTS
Successor Issuer Election.
Pursuant to Rule 12g-3(a) of the General Rules and
Regulations of the Securities Exchange Commission, upon
effectiveness of the Acquisition of the Company elected to
become the successor issuer to Decurion Corporation for reporting
purposes under the Securities Exchange Act of 1934 and elects to
report under the Act effective December 13, 1999.
ITEM 6. RESIGNATIONS OF DIRECTORS AND
EXECUTIVE OFFICERS
James M. Cassidy resigned as an officer and director of
Decurion effective upon completion of the Acquisition.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
THE HYDROGIENE CORPORATION AND
SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE 1 INDEPENDENT AUDITORS' REPORT
PAGE 2-3 CONSOLIDATED BALANCE SHEETS AT
DECEMBER 31, 1998 AND 1997
PAGE 4 CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS'
DEFICIENCY FOR THE PERIOD FROM
DECEMBER 28, 1995 (INCEPTION) TO
DECEMBER 31, 1998
PAGES 6-7 CONSOLIDATED STATEMENTS OF CASH
FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 AND FOR
THE PERIOD FROM DECEMBER 28, 1995
(INCEPTION) TO DECEMBER 31, 1998
PAGES 8 23 NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
The Hydrogiene Corporation
We have audited the accompanying consolidated balance sheets
of The Hydrogiene Corporation and Subsidiaries (a
development stage company) as of December 31, 1998 and
1997 and the related consolidated statements of operations,
changes in stockholders' deficiency and cash flows for the years
then ended and for the period from December 28, 1995
(Inception) to December 31, 1998. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management,
as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly in all material respects, the financial
position of The Hydrogiene Corporation and Subsidiaries (a
development stage company) as of December 31, 1998 and
1997 and the results of its operations and its cash flows for the
years then ended and for the period from December 28, 1995
(Inception) to December 31, 1998 in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going
concern. As discussed in Note 10 to the consolidated financial
statements, the Company's recurring losses from operations,
working capital deficiency and stockholders' deficiency raise
substantial doubt about its ability to continue as a going
concern. Management's Plan in regards to these matters is also
described in Note 10. The consolidated financial statements do
not include any adjustments that might result from the outcome
of this uncertainty.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
February 18, 2000
<TABLE>
THE HYDROGIENE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<CAPTION>
ASSETS
1998 1997
<S> <C> <C>
Current assets
Cash $ 41,169 $ 1,182
Accounts receivable 694 -
Prepaid expense 2,990 -
Total Assets 44,853 1,182
PROPERTY & EQUIPMENT -
NET 41,476 22,555
OTHER ASSETS
Royalty advances-
license agreement - 2,777
Total Other Assets - 2,777
TOTAL ASSETS $ 86,329 $ 26,514
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
<S> <C> <C>
Cash overdraft $ 21,505 $ -
Accounts payable 584,198 214,120
Payroll tax payable
and accrued 44,209 11,100
Accrued compensation 79,262 78,009
Interest payable 14,005 636
Loans payable - 363,480 202,701
CURRENT
Obligation under capital
lease - current 5,392 5,817
Accrued royalty fees-
related party 63,133 -
Total Current 1,175,184 512,383
Liabilities
LONG-TERM LIABILITIES
Obligation under 15,336 10,976
capital lease
Loans payable 7,925 -
Total Liabilities 1,198,445 523,359
COMMITMENTS AND
CONTINGENCIES (Note 6)
STOCKHOLDERS' DEFICIENCY
Preferred stock, $.0001 par value,
50,000,000 shares authorized,
none issued and outstanding - -
Common stock, $.0001 par value,
50,000,000 shares authorized,
12,343,501 and 3,466,796 shares issued
and outstanding in 1998 and 1997,
respectively 1,234 347
Additional paid in capital 3,873,372 243,653
Accumulated deficit during
development stage (4,914,922) (740,845)
(1,040,316) (496,845)
Less subscriptions receivable (71,800) -
Total Stockholders'
Deficiency (1,112,116) (496,845)
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIENCY
$ 86,329 $ 26,514
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
THE HYDROGIENE CORPORATION AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR FROM DECEMBER 28
ENDED ENDED 1995 (INCEPTION) TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, 1998
1998 1997
<S> <C> <C> <C>
SALES $ 8,920 $ 5,834 $ 14,754
COST OF SALES 124,534 37,510 162,044
GROSS PROFIT (115,614) (31,676) (147,290)
OPERATING EXPENSES
Officer compen 2,287,084 79,600 2,366,684
Consulting 892,857 209,025 1,102,294
Employee comp
and taxes 185,799 32,955 218,754
Depreciation 14,459 8,278 25,111
Professional fees 220,161 37,674 264,718
Research and 36,809 - 49,764
Development
Royalty expense 112,583 8,287 120,870
Advertising 38,348 101,245 160,355
Other selling,
general admin.
expenses 252,499 155,907 437,056
Total Operating 4,040,599 632,971 4,745,606
Expenses
LOSS FROM OPERATIONS (4,156,213) (664,647) 4,892,896
OTHER INCOME (EXPENSE)
Interest expense (16,322) (4,242) (20,564)
Loss on abandonment
of leasehold (1,650) - (1,650)
improveents
Interest income 108 26 188
Total Other Income
(Expense) (17,864) (4,216) (22,026)
NET LOSS $(4,174,077) $ (668,863) $ (4,914,922)
Net loss per share - basic
and diluted $ (0.48) $ (0.11) $ (0.71)
Weighted average
number of shares
outstanding during
the period basic
and diluted 8,737,087 6,016,132 6,938,147
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
<CAPTION>
THE HYDROGIENE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM DECEMBER 29, 1995 (INCEPTION) TO DECEMBER 31, 1998
ADDITIONAL
COMMON STOCK PAID-IN
SHARES AMOUNT CAPITAL
__________________________________________________________________________
<S> <C> <C> <C>
Founders' stock
issued for cash 2,179, 434 $ 218 $ 802
Net loss 1996
Balance,
December 31, 1996 2,179,434 218 802
Founder's stock
issued for cash 1,025,616 103 377
Stock issued for cash 112,177 1 102,489
Stock issued
for services 149,569 15 139,985
Net loss 1997
Balance,
December 31, 1997 3,466,796 347 243,653
Stock issued for cash 5,342 1 2,499
Stock issued for
services 2,942,878 294 2,913,372
Warrants issued
for services 29,900
Stock issued for
officers accrued
salary 339,735 34 158,966
Recapitalization:
Stock issued
to High Climbers, Inc.
stockholders 2,397,750 239 17,261
Accumulated deficit
of High
Climbers, Inc. - - -
Reclassificiation of
accumulated deficit - - (17,500)
Stock issued for
accrued royalty fee 45,000 5 44,995
Stock issued in private
placement 2,946,000 294 449,706
Stock issued for
services 200,000 20 30,520
Net loss 1998 - - -
BALANCE,
DECEMBER 31, 1998 12,343,501 $ 1,234 $ 3,873,372
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
THE HYDROGIENE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM DECEMBER 29, 1995 (INCEPTION) TO DECEMBER 31, 1998
<CAPTION>
ACCUMULATED
DEFICIT DURING SUBSCRIPTIONS TOTAL
DEVELOPMENT RECEIVABLE
STAGE
<S> <C> <C> <C>
Founders' stock
issued for cash $ - $ - 1,020
Net loss 1996 (71,982) (71,982)
Balance, December 31, 1996 (71,982) - (70,962)
Founders' stock issued
for cash - - 480
Stock issued for cash - - 102,500
Stock issued for services - - 140,000
Net loss 1997 (668,863) - (668,863)
Balance, December 31, 1997 (740,845) - (496,845)
Stock issued for cash - - 2,500
Stock issued for services - - 2,913,666
Warrants issued for services - - 29,900
Stock issued for
officers accrued salary - - 159,000
Recapitalization:
Stock issued to High
Climbers, Inc.
stockholders - - 17,500
Accumulated deficit of High
Climbers, Inc. (17,500) - (17,500)
Reclassification of
accumulated deficit 17,500 - -
Stock issued for
accrued royalty fee - - 45,000
Stock issued in
private placement - (71,800) 378,200
Stock issued for services - - 30,540
Net loss 1998 (4,174,077) - (4,174,077)
BALANCE,
DECEMBER 31, 1998 (4,914,922) $ (71,800) $(1,112,116)
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
THE HYDROGIENE CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
<CAPTION>
FOR THE PERIOD
FOR THE YEAR FOR THE YEAR FROM DECEMBER 28
ENDED ENDED 1995 (INCEPTION) TO
DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1998
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (4,174,077) $ (668,863) $ (4,914,922)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and amortization 14,459 8,278 25,111
Loss on abandoment of
leasehold imp. 1,650 - 1,650
Expenses incurred on issuance of
common stock 3,178,106 140,000 3,318,106
Changes in operating assets and
liabilities:
Increase (decrease) in:
Accounts receivable (694) - (694)
Prepaid expense (2,990) - (2,990)
Cash overdraft 21,505 - 21,505
Accounts payable 370,081 197,204 584,199
Payroll taxes payable and
accrued 33,109 11,100 44,209
Accrued compensation 1,253 78,009 79,262
Interest payable 13,368 637 14,005
Accrued royalty fees 65,910 (2,777) 63,133
Net cash used in
operating activities (478,320) (236,412) (767,426)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of property and equipment (9,369) (5,436) (23,603)
Net cash used in investing activities (9,369) (5,436) (23,603)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayment of loans (269,200) - (269,200)
Payment on capital lease
obligations (717) (2,179) (2,896)
Loan proceeds 416,893 141,479 619,594
Proceeds from issuance of
common stock 380,700 102,980 484,700
Net cash provided
by financing activities 527,676 242,280 832,198
NET INCREASE IN CASH 39,987 432 41,169
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,182 750 -
___________________ _______________ __________________
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 41,169 $ 1,182 $ 41,169
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During 1998 and 1997 the Company entered into certain capital lease agreements (see Note 6)
See accompanying notes to consolidated financial statements
</TABLE>
THE HYDROGIENE CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATMENTS
AS OF DECEMBER 31, 1998 AND 1997
NOTE 1 SUMMARY OF SIGNIFICANT ACOUNTING
POLICIES AND ORGANIZATION
(A) Organization
On December 28, 1995, Hydrogiene Corporation ("HC-Delaware"),
was incorporated in Delaware. The Hydrogiene Corporation
("HC-California") was incorporated in the State of
California on August 21, 1997.
On September 1, 1997, HC-Delaware, the predecessor, was
merged into HC-California. The merger was treated as a
combination of entities under common control and, accordingly,
recorded at historical cost. The accompanying consolidated
financial statements reflect the operations of both companies for
the periods presented. Concurrent with the merger, HC-Delaware
changed its name to Magna IV, Ltd. and was never
dissolved. Therefore, it remains as an inactive subsidiary.
On October 13, 1998, The Hydrogiene Corporation, ("THC"), a
Nevada corporation, acquired all the net assets of HC-California
by issuing one share of its common stock for each share of
HC-California common stock outstanding. HC-California was
never dissolved and remains as an inactive affiliate.
On October 14, 1998, High Climbers, Inc. ("HCI"), an inactive
shell Florida corporation quoted at that time on the NASD
OTCBB, acquired all of the outstanding stock of THC. The
merger agreement stipulated that HCI issue to the shareholders
of THC 2.1367 shares of HCI's common stock for every one
share held by THC's stockholders. As a result of the merger,
the shareholders of THC received 6,754,571 shares and became
shareholders of approximately 72% of HCI. Generally accepted
accounting principles require that the company whose
shareholders retain a majority voting interest in a combined
business be treated as the acquirer for accounting purposes. As
a result, the merger was treated as an acquisition of HCI by
THC and as a recapitalization of THC. Accordingly, the
financial statements include the following: (1) the balance sheet
consists of the THC's net assets at historical cost and HCI's net
assets at historical cost and (2) the statement of operations
includes the THC's operations for the period presented and the
operations of HCI from the date of merger. HCI changed its
name to The Hydrogiene Corporation (hereinafter referred to as
"the Company").
The Company manufactures and markets a family of personal
hygiene products similar to European cleansing, therapy and
sitz bath systems. The Company currently is in the
development stage and activities to date include fund raising,
product design and development, and establishment of markets.
(B) Principles of Consolidation
The consolidated financial statements includes the accounts of
the Company and its wholly-owned inactive subsidiaries,
Magna IV, Ltd., The Hydrogiene Corporation, a Nevada
Corporation, and Hydrogiene Corporation de Mexico, S.A. de
C.V. All intercompany balances and transactions have been
eliminated in consoidation.
(C) Use of Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to
make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements and
revenues and expenses during the reported period. Actual
results could differ from those estimates.
(D) Cash and Cash Equivalents
For purposes of the cash flow statements, the Company
considers all highly liquid investments with original maturities
of three months or less at the time of purchase to be cash
equivalents.
(E) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value of Financial Instruments,"
requires disclosures of information about the fair value of
certain financial instruments for which it is practicable to
estimate the value. For purposes of this disclosure, the fair
value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between
willing parties other than in a forced sale or liquidation.
The carrying amounts of the Company's accounts payable,
accrued liabilities, and loans payable approximates fair value
due to the relatively short period to maturity for these
instruments.
(F) Stock Options and Warrants
In accordance with Statement of Financial Accounting
Standards No. 123, ("SFAS 123") the Company has elected to
account for Stock Options and Warrants issued to employees
under Accounting Principles Board Opinion No. 25 ("APB
Opinion No. 25") and related interpretations. The Company
accounts for stock options and warrants issued to nonemployees
for services under the fair value method of SFAS 123.
(G) Property and Equipment
Property and equipment are stated at cost and depreciated using
the double-declining balance method over the estimated
economic useful lives of 3 to 7 years. Expenditures for
maintenance and repairs are charged to expense as incurred.
Major improvements are capitalized.
(H) Revenue Recognition and Cost of Goods Sold
The Company recognizes revenue upon shipment of products.
Cost of goods sold in 1998 and 1997 includes the cost of
impaired inventory disposed of.
(I) Income Taxes
The Company accounts for income taxes under the Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("Statement
109"). Under Statement 109, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered
or settled. Under Statement 109, the effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(J) Advertising Costs
In accordance with the Accounting Standards Executive
Committee Statement of Position 93-7 ("SOP 93-7"), costs
incurred for producing and communicating advertising of the
Company are charged to operations.
(K) Concentration of Credit Risk
The Company maintains its cash in bank deposit accounts,
which, at times, may exceed federally insured limits. The
Company has not experienced any losses in such accounts and
believes it is not exposed to any significant credit risk on cash
and cash equivalents.
(L) Loss Per Share
Basic and diluted net loss per common share for the years ended
December 31, 1998 and 1997 is computed based upon the
weighted average common shares outstanding as defined by
Financial Accounting Standards No. 128, "Earnings Per Share".
In accordance with the Securities and Exchange Commission
Staff Accounting Bulletin Topic 4(D), for purposes of
computing loss per share, a nominal issuance of 1,025,616
common shares in 1997 and 2.777.641 common shares in 1998
has been treated as outstanding for all reported periods in the
accompanying consolidated financial statements. Common
stock equivalents have not been included in the computation of
diluted loss per share since the effect would be anti-dilutive. At
December 31, 1998 there were 550,505 warrants issued and
outstanding that could potentially dilute earnings per share in
future periods.
(M) Business Segments
The Company applies Statement of Financial Accounting
Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information." The Company operates in
one segment and therefore segment information is not
presented.
(N) Recent Accounting Pronouncements
The Financial Accounting Standards Board has recently issued
several new accounting pronouncements. Statement No. 133,
"Accounting for Derivative Instruments and Hedging
Activities", as amended by Statement No. 137, establishes
accounting and reporting standards for derivative instruments
and related contracts and hedging activities. This statement is
effective for all fiscal quarters and fiscal years beginning after
June 15, 2000. The Company believes that its adoption of
pronouncement No. 133, as amended by No. 137, will not have
a material effect on the Company's financial position or results
of operations.
NOTE 2 STOCK SUBSCRIPTION RECEIVABLE
Pursuant to a Regulation D, Rule 504 private offering in 1998,
the Company issued 2,946,000 shares of common stock to
investors for proceeds of $450,000 (See Note 7(C)). As of
December 31, 1998 the Company received $378,200 in cash
and recorded a stock subscription receivable of $71,800. The
Company received the $71,800 in 1999.
NOTE 3 PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at
December 31:
1998 1997
Computer software $ 6,117 $6,117
Furniture and fixtures 3,029 3,029
Office equipment 10,089 5,089
Equipment under capital lease 23,623 18,973
Automobile 16,012 -
Leasehold improvements 7,718 -
Less: Accumulated depreciation (25,112) (10,653)
Property and equipment - net $ 41,476 $22,555
NOTE 4 ACCRUED COMPENSATION
The Company has employment agreements with two individuals
to serve as the Chief Executive Officer and Vice President-
Communications of the Company (See Note 6(C). The
individuals agreed to defer payment of the amounts owed to
them pursuant to the agreements due to the Company's lack of
funds. During 1998, $74,600 of accrued compensation from
1997 and $85,000 from 1998, totaling $159,000, was converted
to common stock at $1.00 per share. Additional compensation
expense of $1.00 per share or $159,000 was recognized on the
conversion date based on a recent cash offering price of $2.00
per share. The Company owed the individuals $79,262 and
$74,600 at December 31, 1998 and 1997, respectivel, which is
included in accrued compensation in the balance sheets.
NOTE 5 NOTES AND LOANS PAYABLE
The following schedule reflects notes and loans payable at
December 31:
1998 1997
Note payable, interest at 20.27%
per annum,$308 due monthly
until August 2002,secured by
an automobilewith a book value
of $12,810 $ 9,806 $ -
Loan payable, non-interest
bearing, due on demand,
unsecured 56,000 90,650
Loan payable, non-interest
bearing, due on demand,
unsecured 20,000 10,000
Loan payable, non-interest
bearing, due on demand,
unsecured 5,000 5,000
Loan payable, non-interest
bearing, due on demand,
unsecured 60,000 25,000
Loan payable, non-interest
bearing, due on demand,
unsecured 110,798 10,000
Loan payable, non-interest
bearing, due on demand,
unsecured - 20,000
Loan payable, non-interest
bearing, due on demand,
unsecured 30,000 20,000
Loan payable, non-interest
bearing, due on demand,
unsecured 5,000 5,000
Loan payable, non-interest
bearing, due on demand,
unsecured 1,700 1,700
Loan payable, non-interest
bearing, due on demand,
unsecured 2,851 2,851
Loan payable, non-interest
bearing, due on demand,
unsecured 12,500 12,500
Loan payable, non-interest
bearing, due on demand,
unsecured 2,500 -
Loan payable, non-interest
bearing, due on demand,
unsecured 49,250 -
Loan payable, non-interest
bearing, due on demand,
unsecured 1,000 -
Loan payable, non-interest
bearing, due on demand,
unsecured 5,000 -
371,405 202,701
Less current portion 363,480 202,701
$ 7,925 $ 0
NOTE 6 COMMITMENTS AND
CONTINGENCIES
(A) Capital Lease Agreements
The Company leases office equipment under non-cancelable
capital lease agreements.
Future minimum lease payments under capital leases are as
follows at December 31, 1998
1998 $ -
1999 12,344
2000 7,333
2001 5,650
2002 2,012
2003 507
Total 27,846
Less interest 7,118
20,728
Less current portion 5,392
$ 15,336
(B) Operating Leases
The Company leases corporate office space under operating
leases. These leases have remaining terms varying from the
years 2003 through 2004.
Future minimum lease payments under operating leases are as
follows at December 31, 1998.
1999 71,400
2000 73,200
2001 75,100
2002 77,200
2003 56,400
$ 353,300
Rent expense under operating leases for the years ended
December 31, 1998 and 1997 was $27,800 and $13,127,
respectively.
(C) Employment Agreements
The Company entered into an employment agreement with a
principal stockholder effective on August 21, 1997. The
agreement calls for the individual to become the Chief
Executive Officer of the Company at an annual salary of
$144,000 expiring on August 21, 2002. The agreement
automatically renews for succeeding terms of three years each
unless notice is received by either party prior to the expiration.
The agreement also calls for medical coverage, life insurance
and the use of two company provided vehicles.
The Company entered into an employment agreement with a
stockholder effective August 21, 1997. The agreement calls for
the individual to become the Vice-President of Communications
for the Company at an annual salary of $75,000 expiring on
August 20, 2002. The agreement automatically renews for
succeeding terms of three years each unless notice is received
by either party prior to the expiration. The agreement also calls
for medical coverage, life insurance and the use of one company
vehicle.
(D) Consulting Agreements
On August 12, 1997, the Company entered into a consulting
agreement to provide start-up financing. The agreement called
for the consultant to provide a loan of $25,000 upon execution
of the agreement. The agreement calls for a fee of $5,000 per
month for 12 months. The $25,000 was received by the
Company in 1997 and reflected as loans payable at December
31, 1998 and 1997. Additionally, the balance of the fee due
under the agreement was added to the loan payable, increasing it
to $60,000 as of December 31, 19987. (See Note 5).
Subsequently, in July 1999 the Company satisfied this loan by
issuance of 180,000 restricted common shares.
On March 7, 1998, the Company entered into an agreement with
a consultant to provide advisory servicess and assist the
Company in an offering to raise $2,000,000 in equity. The
Agreement called for a monthly fee of $10,000 beginning the
first month after the Company has received the initial $500,000
from the Offering. The cash payments were never made. Total
funds raised were $450,000. The final compensation issued to
he consultant was 320,000 common stock warrants and all toher
consideration was cancelled purusant to a settlement agreement.
(Ssee Note 7(E))
License and Royalty Agreements
(i) License Agreement-Related Party
On August 21, 1997, the Company entered into a Licensing
Agreement with its principal stockholder to continue
development, manufacturing and marketing of the predecessor's
personal hygiene products. This Agreement calls for a royalty
payment of 3% of gross sales of all Hyrdogiene products. The
Agreement calls for a minimum royalty payment of $100,000 in
year one, $250,000 in year two, and $300,000 for each
subsequent year. The Agreement was effective the first month
the Company began sales to customers, which was December
1997. Royalty expense was $112,583 and $8,287 in 1998 and
1997, respectively. (See Note 7(D)).
(ii) Royalty Agreements
During 1998 and 1997 the Company entered into royalty
agreements with various individuals who paid monies to the
Company in exchange for stipulated royalties based on sales
volume. Due to the minimal sales during 1998 and 1997, in
1999 the Company agreed to cancel all the royal agreements,
consider all amounts paid to the Company as loans and then
convert certain of these loans to common stock of the Company
(see Note 11). Accordingly, all amounts are reflected as loans
at December 31, 1998 and 1997 (see Note 5).
(G) Indemnification
The Board of Directors has authorized the indemnification of its
officers, directors, agents, fiduciaries or employees against any
claim, liability or expense arising against or incurred by such
person acting on behalf of the Company. As of December 31,
1998 and 1997 the Company had not obtained any insurance
policy providing such indemnification. During 1999 the
Company incurred approximately $17,000 in legal fees on
behalf of its Chairman of the Board/CEO. (see Note 6 (G)(iii).
(G) Litigation, Claims, and Assessments
(i) Litigation with Creditors
The Company is party to various lawsuites, some of
which have been reduced to judgements. These lawsuits and /or
judgements agggregate $34,6226 and are reflected in accounts
payable as of December 31, 1998.
(ii) Other Significant Claims
The Company is in process of negotiating the settlement of
approximately thirty two separate claims against it, primarily
from vendors and services providers, aggregating approximately
$185,000 as of the date of this report. All amounts relating to
1998 and 1997 have been expensed and accrued as accounts
payable at December 31, 1998 and 1997, respectively.
(iii) Litigation Relating to Officers and Directors
On August 23, 1999, the City of San Diego filed a criminal
complaint against The Hydrogiene Corporation, it Chief
Executive Officer and director, and another director of the
Company, for 120 counts of misleading statements regarding
the health benefits of the Company's products and publishing a
general announcement of a securities offering that did not
conform to the California Corporations Code. All counts were
misdemeanors. Subsequently, the court dismissed the charges
against the Company and the other director and accepted the
Chief Executive Officer's no contest plea. The Chief Executive
Officer was sentenced to a 3-year probation on the condition
that he violate no laws, perform community service and pay a
$10,000 fine and $200 in restitution. Based upon the
indemnification discussed in Note 6(G) above, the Company
will incur the cost of the $10,000 fine.
NOTE 7 STOCKHOLDERS' EQUITY
(A) Retroactive Restatement of Capital
Pursuant to the mergers, acquisitions and recapitalizations
discussed in Note 1(A), all share quantities, amounts and par
value in the accompanying consolidated financial statements
have been retroactively restated.
(B) Preferred Stock
The Company authorized 50,000,000 shares of preferred stock
at $0.0001 par value to be issued in one or more series with
such rights, preferences, and restrictions as determined by the
Board of Directors at the time of authorization of issuance. At
December 31, 1998 and 1997 there were none issued and
outstanding.
(C) Stock Issued for Cash
In January 1996 the Company issued 2,179,434 shares of
common stock to its founders for $1,020.
In August 1997 the Company issued 1,025,616 shares of
common stock to its founders for $480.
In December 1997 the Company issued 106,835 shares of
common stock for $100,000, and 5,342 shares for $2,500 in
reliance on an exemption from the registration under the
Securities Act of 1933, as amended.
During the period of January to June 1998 the Company issued
another 5,342 shares of common stock for cash of $2,500.
During 1998 the Company issued 2,946,000 shares of common
stock for $450,000 in reliance on a Regulation D, Rule 504
exemption from registration under the Securities Act of 1933, as
amended.
(D) Stock Issued for Services
In December 1997 the Company issued 149,569 common shares
for services valued for financial accounting purposes at
$140,000 based upon the then recent cash offering price of the
material cash issuance of 106,835 shares discussed above.
During the period from January to September 1998 the
Company issued 2,942,878 common shares for services
performed in 1998 to employees, officers, directors and third
parties. The shares were valued for financial accounting
purposes based upon the then most recent cash offering price of
the material cash issuance of 106,835 shares discussed above.
Accordingly, compensation expense of $2,754,666 was
recognized.
During the period from January to June 1998 the Company
issued 309,821 common shares and in October 1998 issued
29,914 common shares to officers for $159,000 in accrued
salaries. The difference between the exchange price and the fair
market value based upon the most recent cash offering price of
the material cash issuance of 106,835 shares discussed above
aggregating $159,000 was recognized as additional
compensation expense at the issuance date. (See Note 4)
On October 13 and October 14, 1998 the Company recapitalized
through a reincorporation and merger, respectively. (See Note
1(A))
On November 18, 1998 the Company issued 45,000 common
shares for accrued royalty fees due to a related party of $45,000.
The difference between the $1.00 per share price and recent
cash offering price under the private placement (see Note 7(C))
was recorded as additional paid-in capital.
During the period from October 14, 1998 to December 31, 1998
the Company issued 200,000 common shares for services
performed in 1998 valued for financial accounting purposes at
the then recent cash offering price under the private placement
of $0.1527. Compensation expense of $30,540 was recognized
on the grant date.
(E) Common Stock Warrants
The Company issued 320,505 warrants during 1998, at an
exercise price of $0.25 per share as consideration for assistance
with the $450,000 cash offering. The fair market value of the
warrants, aggregating $ 41,665, was estimated on the grant date
using the Black-Scholes option pricing model as required under
SFAS 123 with the following weighted average assumptions:
expected dividend yield 0%, volatility 0%, risk-free interest rate
5.0%, expected option life 1 year. The value of the warrants is a
direct offering expense and accordingly, has been charged to
equity in 1998.
The Company issued 230,000 warrants during 1998, at an
exercise price of $0.25 per share to a 1998 advertising service
provider. The fair market value of the warrants, aggregating $
29,900, was estimated on the grant date using the Black-Scholes
option pricing model as required under SFAS 123 with the
following weighted average assumptions: expected dividend
yield 0%, volatility 0%, risk-free interest rate 5.0%, expected
option life 1 year. The $29,900 was charged to 1998 selling,
general and administrative expense at the grant date.
NOTE 8 INCOME TAXES
Income tax expense (benefit) for the years ended December 31,
1998 and 1997 is summarized as follows:
1998 1997
Current:
Federal $ - $ -
State - -
Deferred-Federal and State 1,192,403 202,309
Change in Valuation
Allowance (1,192,403) (202,309)
Income tax expense (benefit) $ - $ -
The Company's tax expense differs from the "expected" tax
expense for the years ended December 31, 1998 and 1997, as
follows:
1998 1997
U.S. Federal income tax
provision (benefit) $(1,419,186) (227,413)
Nondeductible stock based
compensation 1,080,556 47,600
Effect of net operating loss
carryforward 338,630 179,813
$ - $ -
The tax effects of temporary differences that gave rise to
significant portions of deferred tax assets and liabilities at
December 31, are as follows:
1998 1997
Deferred tax assets:
Net operating loss carryforward $ 338,630 $179,813
Stock based compensation 1,080,556 47,600
Total gross deferred tax
assets - -
Less valuation allowance 1,419,186 227,413
Net deferred tax assets $ - $ -
At December 31, 1998, the Company had net operating loss
carryforwards of approximately $996,000 for U.S. federal
income tax purposes available to offset future taxable income
expiring on various dates beginning in 2016 through 2018.
The valuation allowance at January 1, 1998 was $227,413. The
net change in the valuation allowance during the year ended
December 31, 1998 was an increase of $1,191,773.
NOTE 9 RELATED PARTIES
Accrued compensation to officers was exchanged for common
stock (see Note 4)).
The Company has a license agreement with its principal
stockholder whereby royalties are paid to that stockholder based
on product sales and stipulated minimum payments (see Note 6
(E)).
Accrued royalty fees to a principal stockholder were exchanged
for common stock (see Note 7(D)).
The Company has an employment agreement with its principal
stockholder (see Note 6 (C)).
During 1998 and 1997, the Company paid $5000 each year of
expenses on behalf of an affiliate owned by the Chief Executive
Officer. These amounts were charged against loans and accrued
salaries due to that officer, in each respective year.
The Company indemnifies its officers and directors. (See Note
6(F)).
NOTE 10 GOING CONCERN
As reflected in the accompanying financial statements, the
Company has had continuing losses and at December 31, 1998,
has a working capital deficiency and stockholders' deficiency of
$1,130,331 and $1,112,116, respectively. The Company has
continuing losses during 1999 and 2000. The ability of the
Company to continue as a going concern is dependent on the
Company's ability to raise additional capital and implement its
business plan. The financial statements do not include any
adjustments that might be necessary if the Company is unable to
continue as a going concern.
The Company has continued its product design and
development oefforts to increase the marketability of its
products. In addition, the Company has settled various loans
payables and other liabilities during 1999 through the issuance
of its common stock. (Dee Note 11) The company intends to
file a Form SB-2 with the Securities and Exchange Commission
during the year 2000 to raise additional equity capital.
Management believes that actions presently taken to obtain
additional funding provide the opportunity for the Company to
continue as a going concern.
NOTE 11 SUBSEQUENT EVENTS
(A) Merger
Pursuant to an Agreement and plan of Reorganization (the
"Acquisition Agreement") effective December 13, 1999, the
Company acquired all the outstanding shares of common stock
of Decurion Corporation ("Decurion"), a Delaware corporation,
from the shareholders thereof in exchange for an aggregate
1,500,000 shares of common stock of the Company (the
"Acquisition").
The Acquisition was approved by the unanimous consent of the
Board of Directors of the Company on November 29, 1999.
The Acquisition is intended to qualify as a reorganization within
the meaning of Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended. For financial accounting purposes
the acquisition wil be accounted for using the purchase methods
of accounting.
Upon effectiveness of the Acquisition, pursuant to Rule 12g-3(a)
of the General Rules and Regulations of the Securities and
Exchange Commission, the Company elected to become the
successor issuer to Decurion Corporation for reporting purposes
under the Securities Exchange Act of 1934 and elects to report
under the Act effective December 13, 1999.
(B) Private Placement and Other Stock and Option
Issuances
During 1999 the Company issued 13,600,000 common shares
for cash of $596,000 under Regulation D of the Securities Act
of 1933, as amended.
During 1999 the Company issued 6,850,000 common shares for
accrued royalties. The shares were valued at their fair market
value of $960,000 for financial reporting purposes based on the
quoted market price of the stock on the grant dates. The
difference between the accrued royalties at the grant dates and
the fair market value was charged to royalties expense.
During 1999 the Company issued 446,400 common shares for
consulting services. The shares were valued at their fair market
value aggregating $1,947,470 for financial reporting purposes
based on the quoted market price of the stock on the grant dates.
The value was charged to consulting expense in 1999 since all
services were performed in that year.
During 1999 the Company issued 1,701,666 common shares to
officers and employees for services. The shares were valued at
their fair market value aggregating $1,115,791 for financial
reporting purposes based on the quoted market price of the
stock on the grant dates. The value was charged to
compensation expense in 1999 since all services were
performed in that year.
During 1999 the Company issued 4,494,054 common shares for
debt of $80,000. The shares were valued at their fair market
value aggregating $97,434 for financial reporting purposes
based on the quoted market price of the stock on the grant dates.
The Company recognized a loss on debt extinguishment of
$14,434 at the exchange dates.
During 1999 the Company granted approximately 75,000
common stock options at an exercise price of $.80 per share and
6,000,000 common stock opotions at an exercise priice of $0.15
per share to employees and nonemployees. Compensation expense
based on the option values was recognized on the grant dates
pursuant to APB 25 for employees and SFAS 123 for nonemployees.
(C) Consulting Agreements
In 1999, the Company entered into a one year agreement with a
consultant to provide strategic planning services. The
agreement calls for the consultant to receive an annual payment
of $100,000 or 500,000 shares of common stock. The
agreement expires on June 6, 2000. The 500,000 shares were
issued in 1999 and valued for financial accounting purposes at
the fair market value of the common stock on the grant date.
The consulting expenses will be recognized over the contract
life.
(D) Subsequent Borrowings
During 1999 the Company borrowed $32,000 from an
individual which was coverted into common stock during 2000.
(E) Subsequent Operations
The Company has had continuing losses through the date of this
report. (See Note 10).
Exhibits:
*2.1 Agreement and Plan of Reorganization and amendment
thereto between The Hydrogiene corporation and Decurion
Corporation, dated December 13, 1999.
EX-3.(i) Articles of Incorporation of The Hydrogiene
Corporation, as amended.
EX-3.(ii) By-Laws of The Hydrogiene Corporation, as
amended.
EX-27 Financial Data Schedule.
__________________
*Incorporated by reference from the Form 8-K filed by the
Company December 13, 1999, which this Form 8-K/A amends
SIGNATURES
Pursuant to the requirements of the securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
The Hydrogiene Corporation
Dated: February 25, 2000 Charles Kallmann
Charles Kallmann
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
THE HYDROGIENE CORPORATION
(f/k/a High Climbers, Inc.)
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned, being a natural person of the age
of eighteen (18) years or more, an desiring to amend and restate
its Articles of Incorporation under the laws of the State of
Florida, does hereby sign, verify and deliver in duplicate to the
Division of Corporations in the Department of State of the State
of Florida this
AMENDED AND RESTATED ARTICLES
OF INCORPORATION.
FIRST: The name of the corporation shall be The
Hydrogiene Corporation and its principal office and mailing
address shall be 12335 World Trade Drive, Suite 8, San Diego,
California 92128.
SECOND: The corporation shall have perpetual
existence.
THIRD: (a) Purposes. The nature, objects and
purposes of the business to be transacted shall be to transact all
lawful business for which corporations may be incorporated
pursuant to the Florida Business Corporation Act.
(b) Powers. In furtherance of the foregoing purposes,
the corporation shall have and may exercise all of the rights,
powers and privileges now or thereafter conferred upon
corporations organized under the laws of Florida. In addition, it
may do everything necessary, suitable or proper for the
accomplishment of any of its corporation purposes.
FOURTH: (a) The aggregate number of shares which
this corporation shall have the authority to issue is Fifty Million
(50,000,000) shares, with a par value of $.0001 per share, which
shares shall be designated common stock. No share shall be
issued until it has been paid for, and it shall thereafter be
nonassessable. The corporation may also issue up to Fifty
Million (50,000,000) shares of preferred stock at a par value of
$.0001 per share. The preferred stock of the corporation shall
be issued in one or more series as may be determined from time
to time by the Board of Directors. In establishing a series, the
Board of Directors shall give to it a distinctive designation so as
to distinguish it from the shares of all other series and classes,
shall fix the number of shares in such series, and the
preferences, rights and restrictions thereof. All shares in a
series shall be alike. Each series may vary in the following
respects:
(1) the rate of dividend; (2) the price at and the terms an
conditions on which shares shall be redeemed; (3) the amount
payable upon shares in the event of involuntary liquidation; (4)
the amount payable upon shares in the event of voluntary
liquidation; (5) sinking fund provisions for the redemption of
shares; (6) the terms and conditions on which shares may be
converted if the shares of any series are issued with the
privilege of conversion and (7) voting powers.
(b) Each shareholder of record shall have one vote for
each share of stock standing in his name on the books of the
corporation and entitled to vote. Cumulative voting shall not be
permitted in the election of directors or otherwise.
(c) At all meetings of shareholders, a majority of the
shares of a voting group entitled to vote at such meeting,
represented in person or by proxy, shall constitute a quorum of
that voting group.
(d) Shareholders of the corporation shall not have
reemptive rights to subscribe for any additional unissued or
treasury shares of stock or for other securities of any class, or
for rights, warrants or options to purchase stock, or for scrip, or
for securities of any kind convertible into stock or carrying
stock purchase warrants or privileges.
FIFTH: The number of directors of the corporation shall
be fixed by the bylaws. The name and address of the current
sole director is as follows:
Charles W. Kallmann
12335 World Trade Drive, Suite 8
San Diego, CA 92128
SIXTH: The address of the registered office of the
corporation is CorpAmerica, Inc., 1525 South Andrews Avenue,
Suite 216, Fort Lauderdale, FL 33316.
SEVENTH: The address of the principal office of the
corporation is 12335 World Trade Drive, Suite 8, San Diego,
CA 92128. The corporation may conduct part or all of its
business in any other part of Florida, of the United States or of
the world. It may hold, purchase, mortgage, lease and convey
real and personal property in any of such places.
EIGHTH: The following provisions are inserted for the
management of the business and for the conduct of the affairs of
the corporation, and the same are in furtherance of and not in
limitation or exclusion of the powers conferred by law.
(a) Conflicting Interest Transactions. As used in
this paragraph, "conflicting interest transaction": means any of
the following: (i) a loan or other assistance by the corporation to
a director of the corporation or to an entity in which a director
of the corporation is a director or officer or has a financial
interest; (ii) a guaranty by the corporation of an obligation of a
director of the corporation or of an obligation of an entity in
which a director of the corporation is a director or officer or has
a financial interest; or (iii) a contract or transaction between the
corporation and a director of the corporation or between the
corporation and an entity in which a director of the corporation
is a director or officer or has a financial interest. No conflicting
interest transaction shall be void or voidable, be enjoined, be set
aside or give rise to an award of damages or other sanctions in a
proceeding by a shareholder or by or in the right of the
corporation, solely because the conflicting interest transaction
involves a director of the corporation or an entity in which a
director of the corporation is a director or officer or has a
financial interest, or solely because the director is present at or
participates in the meeting of the corporation's board of
directors or of the committee of the board of directors which
authorizes, approves or ratifies a conflicting interest transaction,
or solely because the director's vote is counted for such purpose
if: (A) the material facts as to the director's relationship or
interest and as to the conflicting interest transaction are
disclosed or are known to the board of directors or the
committee, and the board of directors or committee in good
faith authorizes, approves or ratifies the conflicting interest
transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested directors
are less than a quorum; or (B) the material facts as to the
director's relationship or interest and as to the conflicting
interest transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the conflicting interest
transaction is specifically authorized, approved or ratified in
good faith by a vote of the shareholders; or (C) a conflicting
interest transaction is fair as to the corporation as of the time it
is authorized, approved or ratified by the board of directors, a
committee thereof or the shareholders. Common or interested
directors may be counted in determining the presence of a
quorum at a meeting of the board of directors or of a committee
which authorizes, approves or ratifies the conflicting interest
transaction.
(b) Loan and Guaranties for the Benefit of
Directors. Neither the board of directors nor any committee
thereof shall authorize a loan by the corporation to a director of
the corporation or to an entity in which a director of the
corporation is a director or officer or has a financial interest, or
a guaranty by the corporation of an obligation of a director of
the corporation or of an obligation of an entity in which a
director of the corporation is a director or officer or has a
financial interest, until at least ten days after written notice of
the proposed authorization of the loan or guaranty has been
given to the shareholders who would be entitled to vote thereon
if the issue of the loan or guaranty were submitted to a vote of
the shareholders. The requirements of this paragraph (b) are in
addition to, and not in substitution for, the provisions of
paragraph (a) of Article EIGHT.
(c) Indemnification. The corporation shall
indemnify, to the maximum extent permitted by law, any person
who is or was a director, officer, agent, fiduciary or employee of
the corporation or because he is or was serving another entity as
a director, officer, agent, fiduciary or employee of the
corporation or because he is or was serving another entity as a
director, officer, partner, trustee, employee, fiduciary or agent at
the corporation's request. The corporation shall further have the
authority to the maximum extent permitted by law to purchase
and maintain insurance providing such indemnification.
(d) Limitation on Director's Liability. To the
extent permitted by the Florida Business Corporation Act
director of this corporation shall have any personal liability for
monetary damages to the corporation or its shareholders for
breach of his fiduciary duty as a director, except that this
provision shall not eliminate or limit the personal liability of a
director to the corporation or its shareholders for monetary
damages for: (i) any breach of the director's duty of loyalty to
the corporation or its shareholders; (ii) acts or omissions not in
good faith or which involve intentional misconduct or a
knowing violation of law; (iii) voting for or assenting to a
distribution in violation of Florida Law or these Articles of
Incorporation if it is established that the director did not perform
his duties in compliance with Florida Law, provided that the
personal liability of a director in this circumstance shall be
limited to the amount of the distribution which exceeds what
could have been distributed without violation of Florida Law or
these Articles of Incorporation; or (iv) any transaction from
which the director directly or indirectly derives an improper
personal benefit. Nothing contained herein will be construed to
deprive any director of his right to all defenses ordinarily
available to a director nor will anything herein be construed to
deprive any director of any right he may have for contribution
from any other director or other person.
(e) Negation of Equitable Interests in Shares or
Rights. Unless a person is recognized as a shareholder through
procedures established by the corporation pursuant to Florida
Law or any similar law, the corporation shall be entitled to treat
the registered holder of any shares of the corporation as the
owner thereof for all purposes permitted by the Florida Business
corporation Act including without limitation all rights deriving
from such shares, and the corporation shall not be bound to
recognize any equitable or other claim to or interest in such
shares or rights deriving from such shares on the part of any
other person, including without limitation a purchaser, assignee
or transferee of such shares, unless and until such other person
becomes the registered holder of such shares or is recognized as
such, whether or not the corporation shall have either actual or
constructive notice of the claimed interest of such other person.
By way of example and not of limitation, until such other
person has become the registered holder of such shares or is
recognized pursuant to Florida Law or any similar applicable
law, he shall not be entitled: (i) to receive notice of the meetings
of the shareholders; (ii) to vote at such meetings; (iii) to
examine a list of the shareholders, (iv) to be paid dividends or
other distributions payable to shareholders; or (v) to own, enjoy
and exercise any other rights deriving from such shares against
the corporation.
DATED this 20th day of October 1998.
Charles W. Kallman, Director
CorpAmerica, Inc. hereby consents to the appointment
as the registered agent for the corporation.
CorpAmerica, Inc.
Diane L. Flanagan
Diane L. Flanagan
Assistant Secretary
BY-LAWS
OF
HIGH CLIMBERS, INC.
ARTICLE I
Share Certificates and Transfer
Section 1. Certificates.
Certificates representing the shares of capital stock of this
Corporation shall be printed or engraved in such form and contain
such recitals, signatures and seals as required by law, or to the
extent not in conflict therewith, as may be determined by the Board
of Directors. Every Shareholder shall be entitled to receive a
certificate representing the number of shares owned once such
shares are fully paid.
Section 2. Transfer.
Upon surrender to the secretary or transfer agent of the
Corporation of a certificate representing a share or shares of its
stock, duly endorsed or accompanied by evidence of succession,
assignment or authority to transfer reasonably satisfactory to the
Secretary or transfer agent, as well as all necessary Florida stock
transfer tax stamps or the funds therefor and evidence of compliant
with any conditions or restrictions set forth or referred to on the
certificate, the Corporation shall be required to issue a new certi-
ficate to the person entitled thereto, cancel the old certificate
and record the transaction on its books.
Section 3. Issuance of Substitute Certificates.
A new certificate may be issued in lieu of any certificate
previously issued which has been defaced or mutilated, upon sur-
render or cancellation of a part of the old certificate sufficient,
in the opinion of the Treasurer, to protect the Corporation against
loss or liability. A new certificate may also be issued in lieu of
any certificate then not in the possession of the holder of record if
such holder shall by written affirmation, under oath, state the
circumstances of its absence, and shall, if required by the Board,
provide the Corporation with an indemnity bond in form and with
one or more sureties satisfactory to the Board, in at least double
the value of the shares represented by the absent certificate and
satisfy any other reasonable requirements which it may impose.
ARTICLE II
Corporate Records and Seal; Authority to Act
Section 1. Records.
The Corporation shall maintain at its principal place of
business accurate and complete records of its operations and
properties, including a record of its Shareholders and minutes of the
proceedings of its Shareholders, Board of Directors and Board
committees. Unless modified by Shareholder resolution adopted
not later than four months following the close of each of the
Corporation's operational years, the Corporation shall prepare
within a reasonable time following the close of each such year and
maintain at its principal place of business, as well as at its
registered office, financial records which shall include a statement
of financial position as of the end of each such year and statement
of profit earned or loss incurred therein.
Section 2. Inspection.
All records required by the Florida Business Corporation
Act to be maintained b the Corporation shall be open for inspection
by the individuals and in the manner specified in such Act as the
same may be in effect from time to time.
Section 3. Closing Shareholder Record Book.
The Board may close the Shareholder record book for a
period of not more than 30 nor less than ten days preceding any
Shareholder meeting or the day fixed for the payment of a dividend,
and upon its failure to do so the Shareholder record date for either
purpose shall be 14 days preceding the event.
Section 4. Seal.
The Corporation shall own a corporate seal which shall be
circular in form and have inscribed thereon its name and the date
and state of its incorporation.
Section 5. Contracts.
The Board of Directors may by resolution authorize any
officer or agent to enter into any contract or execute and deliver
any instrument in the name of or on behalf of the Corporation, and
such authority may be general or confined to specific instances; but
absent the grant of such authority no individual, other than the
President, shall have power to bind the Corporation under any
contract, pledge its credit or render it liable for any purpose or in
any amount.
Section 6. Checks and Drafts.
All checks, drafts or other orders for the payment of money,
notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed or endorsed by such person or persons
and in such manner as shall be determined by resolution of the
Board of Directors.
ARTICLE III
Shareholder Meetings and Voting Rights
Section 1. Annual Meeting.
The annual meeting of the Shareholders of the Corporation
shall be held on the first Tuesday of the fourth month following the
close of the Corporation's operational year. If that day is a legal
holiday, the annual meeting will be held on the first day thereafter
that is not a legal holiday. At the annual meeting the Shareholders,
by vote of the holders of a majority of the shares represented, shall
elect a Board of Directors, consider reports of the affairs of the
Corporation and transact such other business as is properly brought
before the meeting.
Section 2. Special Meetings.
Special Shareholder meetings shall be held upon the
direction of the President or Board of Directors or upon the written
request of the holders of not less than ten percent of all shares
entitled to vote.
Section 3. Place of Meeting.
All Shareholder meetings shall be held at the principal office
of the Corporation unless an alternate location shall be selected by
the Board and communicated to the Shareholders by written notice.
The holders of a majority of shares of the Corporation's outstanding
voting stock shall have the right to reject such alternative location
by filing written notice to that effect with the Secretary not less
than two days prior to the called date of the meeting.
Section 4. Notice.
Written notice stating the place, day and hour of each
Shareholder meeting and, in the case of a special meeting, the nature
of the business to be transacted shall be delivered to each
Shareholder of record entitled to vote not less than ten days prior to
the date of such meeting and otherwise in the manner specified in
the Florida Business Corporation Act. When a meeting is adjourned
for 30 days or more, notice of the adjourned meeting shall be given
as in the case of the original meeting; otherwise no notice of the
adjournment or of the business to be transacted at the adjourned
meeting need be given other than by way of an announcement made
at the meeting at which such adjournment is taken.
Section 5. Voting List.
Unless the Corporation has fewer than six Shareholders, as
of the date fixed in accordance with the provisions of Article II,
Section 3, the officer or agent having charge of the Shareholder
record books shall prepare a list of the Shareholders entitled to
vote at each Shareholder meeting or any adjournment thereof,
including the address of and the number and class and series, if
any, of shares held by each. For a period of ten days prior to
the meeting, such list shall be kept at the Corporation's principal
place of business where any Shareholder shall be entitled to inspect
it during usual business hours. The list shall also be made
available and subject to inspection by any Shareholder at any time
during the subject meeting.
Section 6. Substance of Meeting.
Any questions may be considered and acted upon at an
annual meeting, but no question not stated in the call for a special
meeting shall be acted upon thereat unless the provisions of Article
III, Section 9 or Article VI, Section 3 are complied with.
Section 7. Shareholders' Quorum and Voting Rights.
The holders of a majority of the shares entitled to vote,
present in person or represented by proxy, shall constitute a quorum
at all meetings of the Shareholders, unless otherwise provided by
law, but a lesser interest may adjourn any meeting from time to time
until the requisite amount of voting shares shall be present.
Each outstanding share of the Corporation's capital stock shall
entitle the holder of record to one vote. An affirmative vote of
a majority of the shares represented at each meeting shall decide any
question brought before it, unless the question is one upon which,
by express provision of law, the Corporation's Articles of
Incorporation or these By-Laws, a larger or different vote is
required, in which case such express provision shall govern and
control the decision of such question.
Section 8. Proxies.
Every Shareholder entitled to vote, or to express consent to
or dissent from proposed corporation action, may do so either in
person or by written proxy duly executed and filed with the Secre-
tary of the Corporation. If a proxy is executed, its use shall be
controlled by the provisions of the Florida Business Corporation
Act.
Section 9. Action By Shareholders Without a Meeting.
Any action required or allowed to be taken at a meeting of
Shareholders may be taken without a meeting, prior notice or vote, if
a written consent, setting forth the action taken, shall be signed by
the holders of outstanding shares having not less than the minimum
number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were
present and voted, and the written consent specified in the Florida
Business Corporation Act shall be obtained and furnished to all
non-consenting Shareholders.
ARTICLE IV
Board of Directors
Section 1. Power and Responsibility.
Subject to the limitations imposed by the Articles of
Incorporation, these By-Laws or the Florida Business Corporation
Act, all corporate powers and responsibilities shall be exercised by
or under the authority of, and the business and affairs of the
Corporation shall be controlled by, the Board of Directors.
Section 2. Number.
The number of directors which shall constitute the entire
Board of Directors shall be not less than one nor more than seven.
Within these limits the actual number constituting the entire Board
shall be that fixed from time to time by Board resolution, and until
such time as the Board determines otherwise, the number of
directors shall be two. No reduction in the number of Directors
shall have the effect of removing any director prior to the
expiration of his term of office.
Section 3. Election and Term.
At the first annual Shareholder meeting and at each annual
meeting thereafter the Shareholders shall elect directors to hold
office until the next succeeding annual meeting. Each director shall
hold office for the term for which he is elected or until his
successor shall have been elected and qualified or until his earlier
resignation, removal from office or death.
Section 4. Vacancy.
Any vacancy occurring in the Board of Directors, including
any vacancy created by reason of an increase in the number of
directors, may be filled by the affirmative vote of a majority of all
remaining directors, even if less than a quorum, and a director so
chosen shall hold office only until the next election of directors by
the Shareholders. The Shareholders may at any time elect a director
to fill any vacancy not filled by the directors, and may elect
additional directors at a meeting at which an amendment of the
By-Laws is voted authorizing an increase in the number of directors.
Section 5. Removal.
At a meting of Shareholders called expressly for that
purpose, any director or the entire Board may be removed, with or
without cause, by a vote of the holders of a majority of the shares
then entitled to vote at an election of directors.
Section 6. Presumption of Assent.
A director of the Corporation who is present at a meeting of
its Board of Directors at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless
he votes against such action or abstains from voting in respect
thereto because of an asserted conflict of interest.
Section 7. Quorum and Voting.
A majority of the number of directors fixed in the manner
prescribed in Article IV, Section 2 of these By-Laws shall constitute
a quorum for the transaction of business. The action of a majority
of the directors present at any meeting at which there is a quorum,
when legally assembled, shall be a valid corporate action.
Section 8. Director Conflicts of Interests.
The legal effectiveness or enforceability of any contract or
other transaction authorized by the Corporation's Board, any
committee thereof or its Shareholders which may present a conflict
of interest as contemplated by the Florida Business Corporation Act
shall be determined by the provisions thereof. Directors whose
relationship with another person or entity is the source of such
potential conflict of interest may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a
committee thereof which authorized, approves or ratifies such
contract or transaction.
Section 9. Executive and Other Committees.
(a) By resolution adopted by a majority of the entire
Board of Directors, there may be designated from among its
members an executive committee and other committees each of
which, to the extent provided in such resolution, shall have and may
exercise all the authority of the Board of Directors, except with
respect to those matters which by law are precluded from being
delegated to a committee.
(b) Each committee (including the members thereof)
shall serve at the pleasure of the Board and shall keep minutes and
report the same to the Board. The Board may designate one or more
directors as alternate members of any committee. In the absence or
upon the disqualification of a member of a committee, if no
alternate member has been designated by the Board, the members
present at any meeting and not disqualified from voting, whether or
not they constitute a quorum, may unanimously appoint another
member of the Board to act at the meeting in the place of the absent
or disqualified member.
(c) A majority of all members of a committee shall
constitute a quorum for the transaction of business, and the vote of
a majority of all the members of a committee present at a meeting
at which a quorum is present shall be the act of the committee.
Each committee shall adopt whatever other rules of procedure it
determines appropriate for the conduct of its activities.
Section 10. Place of Meeting.
Meetings of the Board of Directors may be held at any
location specified in the call of the meeting or as agreed to by the
directors.
Section 11. Time, Notice and call of Meetings.
(a) Annual Meeting. Promptly following the
adjournment of each annual Shareholder meeting, the Board of
Directors elected thereat shall, without notice, convene an annual
meeting an organize by the election of a Chairman who shall preside
over its further conduct.
(b) Regular Meeting. Regular meetings of the Board
may be held during each annual period in accordance with such
schedule as may be agreed to by the Board at its annual meeting.
No notice need be given of such regular meetings.
(c) Special Meetings. Special meetings of the Board
shall be held from time to time upon call issued by the Chairman of
the Board, any two directors, or the President or Vice-President of
the Corporation. Written notice of the time and place of each spe-
cial meeting shall be delivered personally to all directors or sent
to each by telegram or letter, charges prepaid, addressed to him at
his address shown on the records of the Corporation or as otherwise
actually known by the Secretary. If notice is mailed or telegraphed,
it shall constitute sufficient notice if it is delivered to the above
address not less than 24 hours prior to the time of the holding of
the meeting.
(d) Adjournment. A majority of the directors present,
whether or not a quorum exists, may adjourn any meeting of the
Board to another time and place. Notice of the time and place of
holding such adjourned meeting need not be given if they are fixed
at the meeting adjourned and while a quorum is present; otherwise,
notice shall be given to all directors in the manner directed in
subsection (c) above.
Section 12. Action Without a Meeting.
Any action required or permitted to be taken by the Board
or a committee thereof may be taken without a meeting if all
members shall individually or collectively consent in writing to
such action. Such written consent shall be filed in the minutes of
the proceedings of the Board or committee and shall have the same
effect as a unanimous vote in favor of the action consented to.
ARTICLE V
Officers
Section 1. Composition and Term.
The officers of the Corporation shall consist of a President,
Vice-President, Secretary,
Treasurer and such other officers with such titles, duties and powers
as may be prescribed by the Board of Directors. All officers shall
be elected by and serve at the pleasure of the Board.
Section 2. Election.
At their annual meeting the Directors shall elect officers of
the Corporation, any of whom may but need not be members of the
Board. Any two or more of such officers may be held by the same
individual.
Section 3. Resignation or Removal.
Any officer may resign by giving written notice to the Board
of Directors, the President or the Secretary. Such resignation shall
take effect upon receipt of the notice, or at any later time
specified therein (subject to the Board's right of removal), and,
unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 4. Vacancy.
A vacancy in any office shall be filled by action of the
Board, and its appointee shall hold office for the unexpired term or
until his successor is elected and qualified.
Section 5. President.
The President shall be the principal executive officer of the
Corporation, and, subject to the control of the Board, shall
generally supervise and control all of the business and affairs
of the Corporation. He shall preside at all meetings of the
Shareholders and, unless a Chairman of the Board of Directors
has been elected and is present, shall preside at meetings of the
Board of Directors. He shall be an ex-officio member of all
committees appointed by the Board, and shall have the general powers
and duties customarily performed and exercised by the chief executive
officer of any Corporation for profit organized under the laws of
Florida, as well as such additional powers or duties as may be
prescribed by these By-Laws or the Board.
Section 6. Vice-President.
In the absence of the President or in the event of his death,
inability or refusal to act, the Vice-President shall be vested
with the powers and duties of the President. Any Vice-President
may sign, with the Secretary, share certificates issued by the
Corporation; and shall perform such other duties as from time to
time may be assigned to him by the Board of Directors or President.
Section 7. Secretary.
The Secretary shall keep, or cause to be kept, a book of
minutes at the principal office or such other place as the Board of
Directors and Shareholders may designate, a current Shareholder
record book, showing the name of all Shareholders and their
addresses; and a record of all meetings conducted by the
Shareholders, Directors or Director Committees, which latter record
shall include the time and place of holding, whether regular or
special, and, if special, how authorized, the notice thereof given,
the names of those present at directors' meetings, the number of
shares present or represented at Shareholders' meetings, and the
proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal
office or at the office of the Corporation's transfer agent, a
Shareholder record, or a duplicate Shareholder record, showing the
names of the Shareholders and their addresses, the number and
classes of shares held by each, the number and date of certificates
issued for the same, and the number and dare of cancellation of
every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all
the meetings of the Shareholders and of the Board of Directors
required by the By-Laws or by law to be given, an he shall keep the
seal of the Corporation an affix said seal to all documents requiring
a seal, and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or the By-Laws.
Section 8. Treasurer.
The Treasurer shall have custody of all corporate funds,
securities, valuable papers and financial records; shall keep full
and accurate accounts of receipts and disbursements and render
accounts thereof at the annual meetings of Shareholders and at such
other times as requested by the Board or President; and shall per-
form such other duties as may be prescribed by the Board or
President.
Section 9. Assistant.
Any Assistant Secretary or Assistant Treasurer, respectively,
may exercise any of the powers of Secretary or Treasurer,
respectively, as provided in these By-Laws or as directed by the
Board of Directors, and shall perform such other duties as may be
prescribed by the Board or President.
ARTICLE VI
Miscellaneous
Section 1. Parliamentary Procedure.
When not in conflict with these By-Laws, Roberts Rules of
Parliamentary Procedure shall establish the rules at all Shareholder
and director meetings.
Section 2. Fiscal Year.
The fiscal year of the Corporation shall be fixed, and shall
be subject to change, by the Board.
Section 3. Consent to Meeting.
The transactions approved at any meeting of Shareholders
or the Board of Directors, however called and noticed, shall be as
valid as though acted upon at a meeting duly held after regular call
and notice, if a quorum is present (either in person or by proxy in
the case of a Shareholder meeting) and if, either before or after the
meeting, each of the Shareholders entitled to vote or directors, as
the case may be, not present (or represented by proxy in the case of
Shareholder meeting) signs a written waiver of notice, or a consent
to the holding of such meeting, or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed
with the corporate records or made a part of the minutes of the
meeting. Personal representatives, trustees and other fiduciaries
entitled to vote shares may sign such waivers, consents or
approvals.
Section 4. Amendment and Repeal of By-Laws.
(a) By Shareholders. New By-Laws may be adopted or
these By-Laws may be repealed or amended at the annual or any
other meeting of Shareholders called for that purpose, by a vote of
Shareholders entitled to exercise a majority of the voting power of
the Corporation, or by the written assent of such Shareholders.
(b) By Board of Directors. Subject to the right of the
Shareholders to adopt, amend or repeal By-Laws, as provided in this
section, the Board of Directors may adopt, amend or repeal any of
these By-Laws including the By-Law or amendment thereof
changing the authorized number of directors.
(c) Record of Amendments. Whenever an amendment
to or repeal of any existing By-Law is adopted, or an additional
By-Law provision is approved, a replacement page containing such new
material and noting the date and manner of its adoption shall be
inserted in the original By-Laws, in the appropriate place.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
HYDROGIENE CORPORATION AND SUBSIDIARIES (A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
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<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
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<RECEIVABLES> 3,684 0
<ALLOWANCES> 0 0
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<CURRENT-ASSETS> 44,853 1,182
<PP&E> 66,588 35,985
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0 0
0 0
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<OTHER-EXPENSES> 4,040,599 632,971
<LOSS-PROVISION> 1,650 0
<INTEREST-EXPENSE> 16,322 4,242
<INCOME-PRETAX> (4,174,077) (668,863)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,174,077) (668,863)
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<NET-INCOME> (4,174,077) (668,863)
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