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As filed with the Securities and Exchange Commission on November 13, 2000
REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
DEMARCO ENERGY SYSTEMS OF AMERICA, INC.
(Exact name of registrant as specified in charter)
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UTAH 3585 87-0392000
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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12885 HWY 183, STE 108-A, AUSTIN, TEXAS 78750
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(512) 335-1494
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(Address and telephone number of principal executive offices)
12885 HWY 183, STE 108-A, AUSTIN, TEXAS 78750
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(512) 335-1494
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(Address of principal place of business or intended principal place of business)
VICTOR DEMARCO, PRESIDENT AND CHIEF EXECUTIVE OFFICER
12885 HWY 183, STE 108-A
AUSTIN, TEXAS 78750
(512) 335-1494
(Name, Address and Telephone Number of Agent for Service)
Copy to:
CURTIS R. ASHMOS
LOCKE LIDDELL & SAPP LLP
100 CONGRESS, SUITE 300
AUSTIN, TEXAS 78701
(512) 305-4716
Approximate date of proposed sale to the public: From time to time after this
Registration Statement becomes effective.
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If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434 check
the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Price Per Aggregate Offering Amount of
Registered Registered Share Price Registration Fee
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Common Stock, $.0001 22,826,086 $0.23(1) $5,250,000(1) $1,386.00
par value shares
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(1) Estimated in accordance with Rule 457(c) of the Securities Act of 1933
solely for the purpose of calculating the registration fee based upon the last
sale reported for the Common Stock on the OTC EBB on November 7, 2000.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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DEMARCO ENERGY SYSTEMS OF AMERICA, INC.
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CROSS-REFERENCE SHEET
(BETWEEN ITEMS OF FORM SB-2 AND PROSPECTUS)
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FORM SB-2 ITEM NO. AND CAPTION PROSPECTUS CAPTIONS
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1. Front of Registration Statement and
Outside Front Cover of Prospectus Front Cover Page
2. Inside Front and Outside Back Cover Pages
Of Prospectus Inside Front Cover Page
3. Summary Information and Risk Factors Prospectus Summary; The Company; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not Applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Stockholders
8. Plan of Distribution Front Cover Page; Plan of Distribution
9. Legal Proceedings Business
10. Directors, Executive Officers, Promoters
and Control Persons Management; Selling Stockholders
11. Security Ownership of Certain Beneficial
Owners and Management Security Ownership of Certain Beneficial
Owners and Management
12. Description of Securities Description of Capital Stock
13. Interest of Named Experts and Counsel Experts
14. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities Description of Capital Stock
15. Organization Within Last Five Years The Company; Business
16. Description of Business Business
17. Management's Discussion and Analysis or Plan of Operation Management's Discussion and Analysis of Results
of Operations
18. Description of Property Business
19. Certain Relationships and Related Transactions Certain Transactions
20. Market for Common Equity and Related Stockholder Matters Front Cover Page; Description of Capital Stock;
Selling Stockholders
21. Executive Compensation Management
22. Financial Statements Index to Financial Statements
23. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure Not Applicable
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SUBJECT TO COMPLETION, DATED NOVEMBER 13, 2000
PROSPECTUS
22,826,086 Shares
DEMARCO ENERGY SYSTEMS OF AMERICA, INC.
Common Stock
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This Prospectus relates to the offering for resale of 22,826,086 shares of
Common Stock, par value $.0001 per share (the "Common Stock"), of DeMarco
Energy Systems of America, Inc. (the "Company"). All of the Common Stock being
registered may be offered and sold from time to time by certain selling
stockholders of the Company. See "Selling Stockholders" and "Plan of
Distribution". The Company will not receive any proceeds from the sale of the
Common Stock by the Selling Stockholders.
The Common Stock is traded in the over-the-counter market and quoted on the
OTC EBB under the symbol "DMES" and quoted in the pink sheets published by the
National Quotations Bureau. On November 7, 2000, the last reported sale price
for the Company's Common Stock on the OTC EBB was $0.23 per share.
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THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 7.
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Neither the Securities and Exchange
Commission nor any state securities commission has approved
or disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
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The Company has not authorized any person, agent or entity to give any
information or make any representation other than those contained in this
Prospectus (including material incorporated by reference herein). You should
not rely on any such information or representation as having been authorized by
the Company. This Prospectus is not an offer to sell the securities and it is
not soliciting an offer to buy the securities in any state where offers or sales
are not permitted.
The mailing address of the Company's principal executive offices is P.O. Box
201057, Austin, Texas 78720-1057 and the telephone number is (512) 335-1494.
The date of this Prospectus is , 2000
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TABLE OF CONTENTS
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PAGE
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Prospectus Summary 6
Risk Factors 7
Use of Proceeds 8
Management's Discussion and Analysis of Results of Operations 8
Business 10
Management 14
Security Ownership of Certain Beneficial Owners and Management 15
Selling Stockholders 15
Certain Transactions 16
Description of Capital Stock 16
Market for Common Stock 17
Plan of Distribution 17
Legal Matters 18
Experts 18
Additional Information 19
Index to Financial Statements F-1
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PROSPECTUS SUMMARY
This Prospectus contains, or incorporates by reference, certain statements that
may be deemed "forward-looking statements" within the meaning of Section 27A of
the Securities Act and Section 21E of the Exchange Act. All statements, other
than statements of historical facts, that address activities, events or
developments that the Company intends, expects, projects, believes or
anticipates will or may occur in the future are forward-looking statements.
Such statements are based on experience, market trends, our perception of
historical trends, current conditions, expected future developments and other
factors believed to be appropriate. The forward-looking statements included in
this Prospectus are also subject to a number of material risks and
uncertainties, including but not limited to economic, competitive, market,
governmental and technological factors affecting the Company's operations,
production, markets, products, services and prices, and other factors discussed
in our filings under the Securities Act and the Exchange Act. Investors are
cautioned that such forward-looking statements are not guarantees of our future
performance and that actual results, developments and business decisions may
differ from those envisioned by our forward-looking statements.
THE COMPANY
DeMarco Energy Systems of America, Inc. (or, the "Company") is an emerging
energy services company (ESCO), providing comprehensive energy solutions for
commercial applications. We feature a highly efficient heating/cooling system.
We own the patent right to the Energy Miser, which in our opinion is one of the
market's most efficient heating and cooling systems available for use in both
commercial and residential applications.
We started as a pioneer in solar energy, creating products and materials
through 1978; some of which are in use worldwide today. During this period, the
former Chairman of the Board & founder, Louis DeMarco, initiated a research and
development effort to invent an energy efficient heating and cooling system
which would not forfeit comfort. In 1985, a systems patent was granted
acknowledging and certifying this technology; titled as the DeMarco Energy
Miser. A second patent application has been filed utilizing similar technology
with an alternative medium water source, which may extend the first patent for
an additional 20 years. We cannot assure you the second patent will be granted.
The Company's product has produced energy savings results ranging from 50 to
70 percent, averaging a minimum of 20 percent benefit over existing
competitors' heating and cooling systems. The average return on investment for
our customers is 2.5 years. While in the development and testing stage, the
Energy Miser has been installed in commercial buildings in Texas, Washington,
Oregon, Mississippi, Pennsylvania, South Dakota, Montana, and California.
The mailing address of the Company's principal executive offices is P.O. Box
201057, Austin, Texas 78720-1057 and the telephone number is (512) 335-1494.
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RISK FACTORS
An investment in our Common Stock is speculative and involves a substantial
degree of risk. Investors should carefully consider, along with other
information in this Prospectus, the following considerations and risks in
evaluating an investment in our Company. You should not purchase any Common
Stock unless you can afford to lose your entire investment.
WE HAVE A LIMITED OPERATING HISTORY. Since inception up to the date of this
Prospectus, we have been a developmental stage Company. As such, our revenues
since inception have been almost non-existent. We own a patent for our Energy
Miser cooling/heating system and we anticipate generating revenue in the form
of royalty fees and commissions for the sale of these systems. However, we
cannot assure you that we will ever achieve suitable profitability.
WE WILL NEED ADDITIONAL FUNDING. In September 2000 we entered into an agreement
to issue $1,500,000 of 10% Secured Convertible Debentures. We received the
first $500,000 less legal expenses at that time. The funding of the remaining
$1,000,000 will occur at the time the Registration Statement of which this
Prospectus is a part is declared effective. We anticipate utilizing the funds
for acquisitions, marketing, internal corporate infrastructure development,
and/or general administrative expenses.
However, we will need to seek additional capital through public or private
sales of our securities, including equity or debt securities, in order to fund
our activities on a long-term basis. We may not be able to obtain adequate
funds, whether through financial markets or collaborative arrangements with
strategic partners or from other sources, on acceptable terms when needed. If
we are unable to secure sufficient funds, we may have to delay, scale back or
eliminate certain or all of our research and development programs or license
third parties to commercialize products or technologies that we would otherwise
seek to develop ourselves. This would adversely affect our long-term
profitability.
WE HAVE ACCUMULATED A DEFICIT AND ANTICIPATE FUTURE LOSSES. From inception
through June 30, 2000, we had generated immaterial revenues and had an
accumulated deficit in the amount of $2,435,049. The products scheduled for
manufacturing and distribution will require significant marketing expenditures
that, together with projected general and administrative expenses, may cause
operating losses for the near future. We cannot assure you that our
manufacturing, marketing, distribution and development activities will be
successful, or generate net operating income.
OUR DEBT-HOLDERS HAVE A SECURITY INTEREST IN ALL OF OUR ASSETS. In September
2000 we agreed to issue $1,500,000 in 10% Secured Convertible Debentures. These
Debentures are secured by virtually all of the Company's assets and
intellectual property. If the Company defaults upon the repayment terms of
these Debentures, our assets would become subject to foreclosure and it would
be very difficult to remain a going concern.
WE HAVE LIMITED SOURCES FOR OUR PRODUCT MANUFACTURING. We currently have an
agreement with Florida Heat Pump Manufacturing Company ("FHP") for the
production of our Energy Miser system. Should FHP sever this agreement or be
unable to manufacture units on a quality or quantity basis, we could be
adversely affected. We cannot assure you that we will be able to find
alternative manufacturing facilities.
OUR TECHNOLOGY COULD BECOME OBSOLETE. We have a patent for our Energy Miser
system. We cannot assure you that the technology involved under this patent
will not become obsolete due to government regulations, manufacturing cost
constraints, new innovations created by competitors or any other reason. Should
this technology become unmarketable, our operations and financial condition
will be adversely affected.
OUR BUSINESS IS DEPENDENT ON ACCEPTANCE BY GOVERNMENT REGULATORS. One
significant obstacle confronted by the Company in the marketing of the Energy
Miser has been governmental interpretation and regulation. The Energy Miser
requires a constant flow of water, the volume of which must increase as the
amount of space to be air or heat conditioned and the size of the unit
increases. For many applications, this requires connecting into the public
water supply to gain access to "main" water lines. In some cases public
officials in charge of maintaining public water supplies challenge any such
tapping into the public potable water supply. The Energy Miser does not use
water - it only uses the thermal properties of the water, meaning that the
water removed from the main is returned at a slightly different temperature. We
are not aware of any proof to support water quality concerns of public
officials. However, we can offer no assurances that we will ever be able to
overcome the concerns of public water officials.
WE FACE STRONG COMPETITION THAT WE MAY NOT BE ABLE TO OVERCOME. Our Energy
Miser system has many competitors, many of whom are large with well-known
brands and manufacture their own systems. This could result in a competitive
disadvantage to the Company. Our lighting retrofit business competes with a
very wide array of businesses, some of whom are quite substantial. Several of
our competitors manufacture the lighting fixtures they market, which may offer
them a competitive advantage. Others are affiliates
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of electric utilities, which may afford them greater or more ready access to
potential customers. We cannot assure you that the Company will be able to
overcome these advantages.
OUR PATENT MIGHT ONLY OFFER LIMITED PROTECTION. The possibility exists that
competitors are developing or will develop and distribute products similar to
ours. Partial security from competition is obtained by relying on the
protection afforded us under the United States and foreign patent laws. Others
may design similar products that, although not identical and therefore not
infringing upon the patents used by us, could function adequately and be
distributed into the same market. It is also possible that other parties have
non-patented but prior existing products or designs that have never been made
public and therefore are not known to us or the industry in general. A
competitor could introduce such a product into the market without infringing
upon our patents. If any such competing non-infringing products are produced
and distributed, the Company's profit potential could be limited, resulting in
a decrease in revenues.
WE ARE DEPENDENT ON OUR PRESIDENT AND CHIEF EXECUTIVE OFFICER AND NEED TO HIRE
ADDITIONAL KEY EMPLOYEES. Our operations are dependent on Victor DeMarco,
President, Chief Executive Officer and a significant shareholder. The Company
plans on hiring key individuals primarily in the areas of marketing and
internal operating staff. Competition for qualified employees is intense, and
if we lose any of these persons, or are unable to attract, retain and motivate
highly skilled employees required for the expansion of our activities, it would
adversely affect our business plans. There is no assurance we will be able to
retain our existing personnel or attract additional qualified employees.
WE DO NOT HAVE ADEQUATE MARKETING AND SALES EXPERIENCE AND OUR FUTURE SUCCESS
WILL IN PART BE BASED ON OUR ABILITY TO HIRE EMPLOYEES WITH ADEQUATE BACKGROUND
IN THESE AREAS. We do not currently have adequate personnel with marketing and
sales experience and will need to recruit additional qualified personnel and
representatives for the purpose of marketing our complete product line. We
cannot guarantee that we will be able to hire the right people or that our
marketing efforts will be successful.
IF OUR PRODUCTS FAIL WE COULD BECOME SUBJECT TO PRODUCT LIABILITY CLAIMS. As we
successfully develop and install our products, we may be exposed to product
liability claims. We might also be required to indemnify manufacturing
affiliates against any product liability claims incurred by them as a result of
products developed by the Company under agreements with these affiliates. We
currently do not carry adequate product liability insurance. We cannot assure
you that we will in the future be able to obtain sufficient amounts of
insurance to protect us against such liability at a reasonable cost. If we
experience an uninsured or inadequately insured product liability claim, our
business and financial condition could be materially adversely affected.
WE HAVE NEVER GENERATED PROFITS TO PAY DIVIDENDS. We have not paid any cash
dividends on our Common Stock and do not expect to do so in the foreseeable
future.
The aforementioned risk factors should not be considered all-inclusive. Other
risk factors certainly exist and new risk factors may arise from time to time.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock by the
Selling Stockholders.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
The financial information set forth in the following discussion should be read
in conjunction with, and qualified in its entirety by, the financial statements
of the Company included elsewhere herein.
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION
The following analysis of historical financial condition and results of
operations is not necessarily reflective of the on-going operations of the
Company.
OVERALL OPERATING RESULTS:
Fiscal year ended June 30, 2000 compared to fiscal year ended June 30, 1999:
The Company had net sales of $22,000 for the fiscal year ended June 30, 2000.
Prior year net sales were $9,000. The Company anticipates that increased
marketing efforts in the future will generate the required revenues to sustain
the anticipated growth of the Company. We can give no assurances that such
sales will occur. Operating expenses and interest expenses increased $10,000 or
4% to
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$292,000 as compared to the prior year expenses of $282,000. The primary area
where expenses increased was in professional fees as they relate to fees
incurred with the recent patent application as well as expenses incurred in
registering the Company's securities in connection with the filing of SEC Form
10SB12G.
The Company incurred a net loss for the current fiscal year of $271,000 as
compared to a net loss of $217,000 for the prior fiscal year. We continue to
closely monitor expenses. The prior year loss includes a one-time gain of
$66,000 for the forgiveness of debt owed to the former majority shareholder,
Louis DeMarco. The loss for the fiscal year ended June 30, 1999 would have been
$283,000 if that gain had been excluded.
One sale was completed during the first quarter of 2000. During the final
quarter of 1999, the US Government authorized the Marine Air Station in
Beaufort, South Carolina to purchase the DeMarco Energy Miser heating and
cooling system and employ the base's water main. The gross sale for the system
was $220,000, and during the second quarter of calendar year 2000, the Company
received its royalty compensation of $21,906 from the sale. The Company and FHP
Manufacturing have previously agreed to a standard royalty fee of twenty
percent, however, under certain circumstances, and with the prior approval of
the Company, this fee may be negotiated as part of the bidding process. The
Beaufort, South Carolina installation was subject to such negotiation. The
sales process for this installation site from bid notification until contract
award required approximately one year. The sales process for the Energy Miser
systems can range from as little as one month to as much as 2 years base on our
prior experience. The lighting systems retrofits have no historical sales data
on which to base averages.
LIQUIDITY AND CAPITAL RESOURCES:
The Company has been financed through a cumulative convertible debenture that
began in the first quarter of 2000, a private equity offering which ended
during the third quarter of 1999, and has been supported in the interim by
loans from the President, Victor DeMarco.
The Company completed a convertible debenture debt offering of $229,000 (see
"BUSINESS") that began in January 2000 and concluded in August 2000. The
proceeds were utilized for repayment of accounts payable and operating
expenses.
On September 26, 2000, we entered into an agreement with AJW Partners, LLC. and
New Millennium Capital Partners II, LLC. (the "Debenture Holders") for the
private placement of $1,500,000 of the Company's Secured Convertible
Debentures. These debentures are convertible into shares of the Common Stock of
the Company based on the formulas listed below. The funding of the debentures
will occur in two phases. The first $500,000 (less legal expenses) was received
by the Company on September 27, 2000. The remaining $1,000,000 will be funded
within 30 days following the effective registration with the Securities and
Exchange Commission of the underlying shares of common stock of the Company.
The Company will utilize the funds for acquisitions, marketing and sales
promotion, internal corporate infrastructure development and general operating
expenses.
The primary terms of the Convertible Debentures are as follows:
- Entire principal amount will mature on September 26, 2001.
- Debentures bear 10% interest per annum with interest payments due quarterly.
Interest to be paid in cash or shares of Common Stock at the option of the
Debenture Holders.
- The Debenture Holders have the option to convert any unpaid principal and
accrued interest into shares of the Company's Common Stock at any time after
the original issue date (subject to certain limitations).
- The conversion price per share in effect on any conversion date shall be the
lesser of (1) $0.34 per share and (2) 60% of the average of the lowest three
inter-day trading prices during the ten trading days immediately preceding
the applicable conversion date.
- The debentures bear a mandatory prepayment penalty of 130% of the principal
and all accrued interest being prepaid.
- The debentures are secured by all unpledged assets of the Company, including
the Company's current and pending patents.
- The Company will file a SB-2 Registration Statement with the Securities and
Exchange registering 200% of the Common Stock underlying the debentures.
The Secured Convertible Debenture Purchase Agreement, the DeMarco Energy
Systems of America, Inc, 10% Secured Convertible Debenture, the Security
Agreement, the Intellectual Property Security Agreement, the Registration
Rights Agreement, and the Escrow Agreement were all filed electronically as
Exhibits to the Securities and Exchange Commission Form 8-K filed with the
Commission on October 11, 2000.
The Company had negative working capital of $385,000 at the end of the current
fiscal year as compared to negative working capital of $87,000 at the end of
the prior fiscal year end, June 30, 1999. This increase in negative working
capital is primarily the result of the funding of operations to date.
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Variations in shareholder/insider debt (other than the issuance of the
convertible debentures) are attributable to the settlement of the estate of
Louis DeMarco, the prior majority shareholder, and the dissolution of Cyberlink
Systems, Inc., a former subsidiary of the Company.
NEW ACCOUNTING PRONOUNCEMENTS
The Company has adopted FASB Statement 128. It is not expected that the Company
will be impacted by other recently issued standards. FASB Statement 128
presents new standards for computing and presenting earnings per share (EPS).
The Statement is effective for financial statements for both interim and annual
periods ending after December 15, 1997.
FASB Statement 131 presents news standards for disclosures about segment
reporting. The Company does not believe that this accounting standard applies
to the Company as all operations of the Company are integrated for financial
reporting and decision-making purposes.
YEAR 2000 PREPAREDNESS
The Company has not been materially affected with Y2K problems to date.
INFLATION
The Company's results of operations have not been affected by inflation and
management does not expect inflation to have a significant effect on its
operations in the future.
BUSINESS
GENERAL
DeMarco Energy Systems of America, Inc. was organized under the laws of the
State of Utah in 1983. The Company is primarily engaged in the process of
investigating business opportunities which appear to have profit potential for
the Company. Primary emphasis is currently being placed on marketing and
selling the DeMarco Energy's geothermal ground source heating/cooling systems.
During 1989, the Company exchanged 10,396,790 shares of its stock for exclusive
rights to a United States patent. The patent was granted for a unique
water-source heat pump system that both heats and cools buildings and provides
domestic hot water at an extremely low cost to install and operate. The heat
pump is specifically designed to utilize municipal water systems as a heat
source. Florida Heat Pump Manufacturing Co. ("FHP") manufactures the DeMarco
Energy Miser System under a patent licensing agreement.
The Company recently applied for approval for a second patent covering a heat
pump system using reuse water sources, reclaimed water sources and other
non-potable water sources.
In July 1996, the Company organized Cyberlink Systems, Inc. (Cyberlink), a
wholly owned subsidiary. Cyberlink was organized to refurbish and market
after-market computer components. During March of 1998 Cyberlink ceased doing
business. All activities regarding Cyberlink were wound down during the fiscal
year ended June 30, 1999, and the subsidiary was dissolved.
The Company currently competes in the heating and cooling market, and primarily
in the geothermal heat pump segment. Within this business segment we market,
sell and (1) install the heating and cooling systems during construction of new
facilities, and (2) install the heating and cooling system in existing
facilities replacing less efficient, antiquated, or inoperable systems.
Through September of 2000, the Company operated primarily as a research and
development entity. Its primary research activities focused towards exploring
and investigating energy products and services, specifically within the heating
and cooling markets. The development of the Energy Miser system has produced
alternate mediums for operation, forging new patent opportunities. Previous
sales conducted prior to September 30, 2000, were to determine product
viability, service requirements, liabilities, and costs associated with
installation and operation of the Energy Miser system. The Company expects to
formally release for commercial sale the Energy Miser heating and cooling
system in the third quarter of the fiscal year 2001. In August of 2000, the
Company received the final version of the Engineering Manual for the Energy
Miser heating/cooling system. The Engineering Manual was the last step before
introducing the Energy Miser to the world's commercial heating and cooling
markets. FHP manufactures DeMarco's Energy
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Miser system. FHP and the Company have developed a marketing and promotion
program that introduces the manual to FHP's sales representatives and
nationwide distributor network.
The Company has prepared a marketing presentation of the Energy Miser system,
which initially targets Energy Service Companies (ESCOs). ESCOs offer
performance contracting for projects generally greater than $10 million, most
of which require retrofitting heating and cooling systems. ESCOs implement
systems that provide the greatest percentage of energy reduction to maximize
savings benefits and focus on the shortest return on investment cycle. We
cannot assure you that the marketing program will produce the desired results
of substantially increasing revenues or profitability.
PRODUCTS
The DeMarco Energy Miser Heating and Cooling System
The Energy Miser is a patented earth-coupled heat pump utilizing the municipal
water main or any other underground piping loop to heat, cool and provide
domestic hot water for buildings. Earth-coupled heat pumps are from 50% to 70%
more efficient than other methods for heating and air conditioning. Monthly
operating costs are significantly lower than other methods.
In the cooling mode, heat pumps operate by removing heat from the inside of a
building to an exterior heat "sink." In the heating mode, the process is
reversed. Heat is moved from an exterior source to the inside of a building.
Earth-coupled heat pumps normally use the heat absorbing, or heat supplying,
capacity of large bodies of water such as lakes, ponds, water wells or
specially constructed networks of pipe called ground loops. The requirements
for a "large body of water" as the external source/sink or the costly
excavating required for the heat pump, imposes three constraints on anyone
wanting to take advantage of the system. The first is the need to be located
near such a body of water if a natural source/sink is going to be used. The
second is the added expense of drilling a water well. The third is the need for
enough property to accommodate the underground installation of several hundred
feet of plastic pipe.
The Energy Miser removes those three constraints by utilizing the thermal
properties of public water supplies. Because the thermal properties of the
water in the underground piping infrastructure are used as a medium (and not
for consumption or re-distribution), the need for large external bodies of
water and expensive wells or land acquisitions for ground loops are eliminated.
There is no cross flow between the water supply and the heat pump. The
integrity of the water is retained with any application of the Energy Miser
system.
We have filed a second patent application with the United States Patent office.
The second Patent is for an invention that relates to heat pumps that are
automatically thermodynamically balanced to operate at optimum conditions using
water, and in this case reuse water systems. This patent was designed to
utilize reuse water from private, public or other types of managed secondary
water lines with the DeMarco Energy Miser heating and cooling system. Reuse
water is defined as treated sewer water that falls below the standards of
drinking water. For many years, reuse water has been used in secondary water
systems for watering lawns and charging fire hydrants, as well as other
non-potable water applications. It has only been in recent years that the
secondary water systems have been given greater consideration due to water
shortages.
The DeMarco Energy Miser excels in any managed water system, saving consumers
as much as seventy percent from heating and cooling costs. This system is
available for both residential and commercial applications. The Energy Miser
system thrives in potable water and reuse water, as well as other similar
managed water systems. Incorporating the FDA approved Alfa Laval heat exchanger
within the DeMarco Energy Miser system, the potential for cross-contamination
is eliminated in all potable water systems.
The Energy Miser system has to date (pending the outcome of the second patent
application for the utilization of reuse water sources) only utilized potable
water systems as demonstrated within several military bases, as well as other
commercial and institutional applications nationwide. The Company has organized
marketing efforts to launch its sales program in cities using or proposing to
implement reuse water systems. Although the Company anticipates a significant
increase in revenue if the reuse water patent is approved there can be no
assurances that such marketing efforts will have their intended effect of
increasing such revenues or profitability.
Energy Efficient Lighting Systems
The Company has signed a Strategic Partnership agreement with Lighting
Management Consultants (LMC) in Houston, Texas. The agreement provides for
forthcoming lighting projects awarded to DeMarco to be performed by LMC within
their geographic business environment. Additionally, the Company has entered
into a Strategic Partnership with SLi, Inc. (NYSE:SLI), which provides for SLi
11
<PAGE> 12
to perform lighting retrofit and energy management services for DeMarco awarded
contracts outside the parameters, scope and geography of the LMC partnership.
As of November 6, 2000, there have been no sales generated from these
agreements.
In commercial facilities, lighting typically represents 30 to 40 percent of a
commercial facility's energy consumption. By reducing the kilowatts used for
lighting, utility costs can be reduced. Efficient lighting systems can reduce
consumption by as much as 50 percent, without reducing lumens.
The lighting retrofit services may be offered as a combined package with the
DeMarco Energy Miser system, creating a marketing/sales program based upon
return on investment time parameters. Sub-contractors generally located within
the geographic region of the project perform lighting retrofit installations.
These sub-contractors are identified, recruited and managed by DeMarco's
partners. As of November 6, 2000, the Company has not initiated sales efforts
for lighting products.
MARKETING AND COMPETITION
The Company markets and sells its Energy Miser system through a partnership
agreement with Florida Heat Pump Manufacturing Company, of Ft. Lauderdale,
Florida, and via exposure through the Geothermal Heat Pump Consortium. FHP
manufactures, distributes and markets the DeMarco Energy Miser as a private
label through its dealer/distributor network. DeMarco and FHP focus primarily
on the commercial and institutional markets. The Company displays the Energy
Miser at trade shows in booths for public exhibition and education. In addition
to trade shows, the Company markets the Energy Miser directly to end users,
architects, designers and installers of HVAC equipment. The market for HVAC
equipment and installation exceeds $10 billion (according to the Markintel
Report, an InvesText market research firm in Boston, MA.) annually and is
expected to eclipse $17.5 billion (Markintel Report) by year-end 2002. In this
business segment, the Company is in competition with all other producers of
HVAC systems, some of which are more firmly established in the marketplaces and
have substantially greater financial resources than the Company.
GOVERNMENT REGULATION
One significant obstacle confronted by the Company in the marketing of the
Energy Miser is governmental interpretation and regulation. The Energy Miser
requires a constant flow of water, the volume of which must increase as the
amount of space to be conditioned and as the size of the unit increases. For
many applications, this requires connecting into the public water supply to
gain access to "main" water lines. In some cases public officials in charge of
maintaining public water supplies challenge any such tapping into the public
potable water supply. The Energy Miser does not use water - it only uses the
thermal properties of the water, meaning that the water removed from the main
is returned at a slightly different temperature. The Company is not aware of
any proof to support water quality concerns of public officials. We can offer
no assurances that we will ever be able to overcome the concerns of public
water officials.
Notwithstanding governmental obstacles, the Company has experienced success in
two areas. When a given facility will be sufficiently large that it has a
significant demand for water, the "private" water pipes bringing the water in
from the public water supply may have the requisite volume. In addition, for
such sites, it is possible and cost effective to install a back-flow preventor,
which prevents the return of water from the site into the public water supply.
The back-flow prevention addresses concerns of public health officials. In
addition, some sites use enough water that the reuse water in the sanitary
sewer would provide sufficient volume to utilize the Energy Miser. We are
attempting to maximize our marketing efforts in these areas.
Secondary water systems have been used for more than twenty years, and recently
became the initiative of approximately 2,000 communities throughout the United
States. Currently, more than 1,500 cities worldwide employ this technology as a
water conservation measure. Secondary water systems provide water treated to a
standard less than that of potable water, and referred to as either reuse,
gray, or brown water. This water type is used for applications other than human
or animal consumption, such as cooling towers and boiler systems, lawn
sprinklers and fire prevention.
RECENT DEVELOPMENTS
The Counsel of Governments in Washington, D.C. has awarded a contract estimated
to be worth over $1 billion over the life of the program to PG&E Energy
Services (an Energy Services Company, or ESCO (NYSE:PCG)), whose bid included
the DeMarco Energy Miser as the first choice for heating and cooling systems
for upgrades and retrofits. PG&E Energy Services division was recently acquired
by Chevron Energy Solutions division (NYSE:CHV). PG&E Energy Services
management has confirmed that the Company's contract was conveyed in the sale;
however, confirmation from Chevron is still pending. The billion dollar
estimate was calculated from retrofitting 154 public schools, 4000 HUD homes,
plus government owned facilities throughout the jurisdiction of the Counsel of
Governments.
12
<PAGE> 13
The heating and cooling portion represents a major portion of the program's
total expected revenues. Work on the contract could begin as early as the
winter of 2000.
The Counsel of Governments includes municipalities and local governments
surrounding Washington, D.C., which may include the public school systems in
several counties and municipalities as well as public housing authorities.
Other agencies that may become users of this program, greatly expanding the
scope and business potential, include agencies of the Federal Government and
other municipalities outside of the immediate Washington, D.C. metropolitan
area. DeMarco Energy has also been invited to bid lighting portions of the
project from the ESCO.
During the eight-month period from January through August 2000, the Company
issued a series of convertible debentures bearing 8% interest. A total of
$229,000 was raised from this issuance. The debentures mature in 24 months from
the time of issue. Interest payments are calculated quarterly and totaled upon
conversion and included in the stock distribution. The debentures carry various
conversion rights ranging from $0.10 to $0.45 a share. The holders have the
right to convert any or all of the principal into common stock of the Company
at any time after the first 12 months from issuance. If all debenture holders
elect to convert, the Company will issue approximately 1.2 million shares of
its common stock to the holders and be relieved of the debt. The Company
utilized the proceeds of these convertible debentures to reduce accounts
payable and for operating expenses.
On June 27, 2000, DeMarco Energy Systems signed a letter of intent to acquire
Lighting Management Consultants. Terms of the acquisition included cash and
stock for one hundred percent of the equity in LMC. Because of the results of
financing and certain conditions arising from the negotiations of the
acquisition, both parties to the letter of intent have agreed to place on hold
and revisit the acquisition discussions in 2001.
On July 10, 2000, the Company's Energy Miser heating and cooling system was
invited to be used as an application for the new reclaim water system being
installed throughout the City of Austin, Texas. Austin is among 1,500 cities
nationwide that have begun to implement a secondary water system which supplies
water for irrigation of golf courses, ball parks, schools, parks, industrial
centers, apartment complexes, commercial properties, home lawn watering and
road medians; cooling towers; fire fighting; industrial and manufacturing
processes; and road construction. Reuse water is defined as treated sewer water
that falls just below the standards of drinking water.
The Energy Miser will be the only water source heating and cooling system
available as a re-claim water system for the City of Austin. The Company
expects to launch sales efforts for Austin plus other targeted cities during
fiscal year 2001, which began July 1, 2000. There can be no assurances that
this acceptance by the city of Austin will result in increased revenues.
The Company is currently finalizing a convertible debt offering of $1,500,000
(see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS") that will
be directed toward acquisitions, marketing, internal corporate infrastructure
development, and/or general administrative expenses.
On October 10, 2000, the Company retained the services of Marschall Design, a
fifteen-year-old corporate image consulting company. Marschall will assist the
Company in its marketing efforts. Marschall anticipates that the new media
materials will be available for release as early as December of 2000. Marschall
will assist with brochures, tradeshow display, stationery, web design plus any
other areas requiring image design and enhancements.
PWG Media of Austin, Texas has been retained by the Company to build an
effective corporate visual program. An eight-minute video describing the Energy
Miser system is expected to be available in late December of 2000. Marschall
and PWG have worked together in the past to assist each other and their clients
with image design and image conveyance measures.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings, and no
material legal proceedings have been threatened by or, to the best of
the Company's knowledge, against the Company.
DESCRIPTION OF PROPERTY
The Company occupies approximately 1,200 square feet of office space at 12885
Hwy 183, Suite 108-A, Austin, Texas 78750. The Company owns no property other
than office furniture, equipment, software and the patent for the Energy Miser
System.
13
<PAGE> 14
EMPLOYEES
The Company employs 3 full time people. It is anticipated that up to 20
additional personnel will be required to meet the demands of the projected
market over the next five years. Most of these positions will be in the areas
of sales, marketing and project management as the Company's projected volume
increases. We cannot assure you that such volume increases will occur.
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information concerning the sole director and
executive officers of the Company and their age and position with the Company.
Each director holds office until the next annual stockholders' meeting and
thereafter until the individual's successor is elected and qualified. Officers
serve at the pleasure of the board of directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Victor M. DeMarco........... 37 Chairman, President and CEO
Peter Des Camps............. 36 Senior Vice President, Corporate Development
</TABLE>
Victor M. DeMarco, President/CEO. Mr. DeMarco served as Executive Vice
President of DeMarco Energy Systems from 1986 to 1990, and currently serves as
President and Chief Executive Officer. For more than 15 years, Mr. DeMarco has
been involved with research of geothermal heat pumps and related technology,
resulting in an exceptional working knowledge of geothermal heat pump
applications and the heat pump industry. Mr. DeMarco has been published in
numerous industry trade publications, television interviews, news papers, as
well as serving as an advisor for the Geothermal Heat Pump Consortium. Mr.
DeMarco attended Texas Technological University in Lubbock, Texas, where he
majored in marketing and finance.
Peter M. Des Camps, Senior Vice President of Corporate Development.
Mr. Des Camps served more than 12 years as a consultant and/or intermediary for
more than one hundred companies throughout the United States. Since 1987,
Mr. Des Camps has served as an analyst and consultant specifically with sales
planning and control projects and organizational re-structuring implementations.
From January 1994 until December of 1998, Mr. Des Camps served as Partner and
Director of Corporate Development in an Austin, Texas-based financial services
company. Mr. Des Camps has served as President and Chief Executive Officer for
Lead Capital Ventures, a private venture capital company, since its founding in
1999. Mr. Des Camps joined DeMarco Energy in December of 1998 as a contracted
consultant through October 31, 2000. On November 1, 2000 he became a full time
employee. Mr. Des Camps has consulted with companies within various industries
including: Semiconductor, Artificial Intelligence, Hi-Tech Research &
Development, Oil and Gas, and Aviation Design & Refurbishment; providing
intermediary services, organization for management and sales planning and
control implementations. Mr. Des Camps majored in Business Management and has
been a guest lecturer for the MBA entrepreneur program at the University of
Texas - Austin.
EXECUTIVE COMPENSATION
The following table reflects compensation paid to the mostly highly compensated
executive officer of the Company.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------
AWARDS
-----------------------
PAYOUTS
-------
ANNUAL COMPENSATION RESTRICTED SECURITIES
------------------------ STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS OTHER AWARD OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) SARS(#) ($) ($)
------------------------------------- ---- ------- ------- ----- ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Victor DeMarco....................... 2000 $45,600 $ 0 $ 0 $ 0 0 0 $ 0
President & Chief Executive Officer
</TABLE>
COMPENSATION OF DIRECTORS
The Company does not currently compensate directors in cash for any services
provided as a director.
14
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of November 6, 2000, the name and
shareholdings, including options to acquire Common Stock, of each person who
owns of record, or was known by the Company to own beneficially, 5% or more of
the shares of the Common Stock currently issued and outstanding; the name and
shareholdings, including options to acquire the Common Stock, of each director;
and the shareholdings of all executive officers and directors as a group. The
address of each of the individuals listed below is the address of the Company.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
NAME OF PERSON OR GROUP SHARES OWNED OWNERSHIP
----------------------- ------------ -------------
<S> <C> <C>
Victor DeMarco.................. 9,255,609 26.1%
AJW Partners, LLC............... 5,434,782(1) 15.3%
New Millennium Capital Partners II, LLC 5,434,782(1) 15.3%
Executive Officers and Directors as a group 9,388,942 26.5%
(2 persons)
</TABLE>
(1) Shares issuable upon conversion of 10% Secured Convertible Debentures
assuming a conversion price of $0.138 per share. (See "Selling
Stockholders").
SELLING STOCKHOLDERS
On September 26, 2000, AJW Partners, LLC and New Millennium Capital Partners
II, LLC purchased an aggregate of $1,500,000 of 10% Convertible Debentures to
purchase, respectively, a total of 5,434,782 and 5,434,782 shares of common
stock from us in a private placement transaction. Of the $1,500,000 invested,
$1,000,000 will be received upon effectiveness of this registration statement
and satisfaction of certain conditions.
The debentures are convertible into shares of our common stock, at the option
of the holder at any time and from time to time after the date when the
debentures where issued, at a conversion price equal to the lower of (i) $0.34
per share and (ii) 60% of the average of the lowest three inter-day trading
prices of our common stock during the ten trading days preceding the date of
conversion. Interest on the debentures is payable on a quarterly basis on March
31, June 30, September 30 and December 31 of each year while such debentures
are outstanding and on each date of conversion, whichever occurs earlier.
Interest may be paid, at the holder's option, in cash or common stock. Any
debentures outstanding on October 26, 2001, automatically convert into shares
of our common stock at the then applicable conversion price. The debentures are
redeemable under certain circumstances as stated in the Convertible Debenture.
Each holder of the debenture may not convert its securities into shares of our
common stock if after the conversion, such holders, together with any of its
affiliates, would beneficially own over 4.999% of the outstanding shares of our
common stock. This restriction may be waived by each holder on not less than 61
days' notice to us. Since the number of shares of our common stock issuable
upon conversion of the debentures will change based upon fluctuations of the
market price of our common stock prior to a conversion, the actual number of
shares of our common stock that will be issued under the debentures, and
consequently the number of shares of our common stock that will be beneficially
owned by AJW Partners and New Millennium Capital Partners cannot be determined
with certainty at this time. Because of this fluctuating characteristic, we
agreed to register a number of shares of our common stock that exceeds the
number of our shares of common stock currently beneficially owned by AJW
Partners and New Millennium Capital Partners. The number of shares of our
common stock listed in the table below as being beneficially owned by AJW
Partners and New Millennium Capital Partners includes the shares of our common
stock that are issuable to AJW Partners and New Millennium Capital Partners
subject to the 4.999% limitation, upon conversion of their debentures and
exercise of their warrants. However, the 4.999% limitation would not prevent
AJW Partners and New Millennium Capital Partners from acquiring and selling in
excess of 4.999% of our common stock through a series of conversions and sales
under the debentures.
The following table sets forth the name of each person who is offering shares
of common stock by this prospectus, the number of shares of common stock
beneficially owned by each person, the number of shares of common stock that
may be sold in this offering and the number of shares of common stock each
person will own after the offering, assuming they sell all of the shares
offered. Beneficial ownership is determined in accordance with SEC rules and
generally includes voting or investment power with respect to securities.
Common shares that are issuable upon the exercise of outstanding options,
warrants, convertible Preferred Stock or other purchase rights, to the extent
exercisable within 60 days of the date of this Prospectus, are treated as
outstanding for purposes of computing each Selling Shockholder's percentage
ownership of outstanding common shares.
15
<PAGE> 16
<TABLE>
<CAPTION>
SHARES TO BE SHARES BENEFICIALLY
SHARES BENEFICIALLY OWNED SOLD IN OWNED
NAME OF SELLING STOCKHOLDER PRIOR TO THE OFFERING OFFERING AFTER OFFERING
------------------------- ------------ -------------------
NUMBER OR PERCENT(2) NUMBER OF PERCENT
SHARES SHARES
<S> <C> <C> <C> <C> <C>
AJW Partners, LLC 1,295,661(1) 4.999% 1,295,661(3) 0 0%
New Millennium Capital Partners II, LLC 1,295,661(1) 4.999% 1,295,661(3) 0 0%
</TABLE>
(1) Includes the shares of our common stock issuable to AJW Partner and New
Millennium Capital Partners, subject to the 4.999% limitation, upon
conversion of its debentures.
(2) Percentages are based on 24,622,747 shares of our common stock outstanding
as of November 6, 2000.
(3) Pursuant to the Registration Rights Agreement between us and the debenture
holders, we are required to register such number of shares of common stock
equal to the sum of 200% of the number of shares of common stock issuable
upon conversion in full of their debentures, assuming for such purposes
that all interest is paid in shares of our common stock, that the
Debentures are outstanding for one year and that such conversion occurred
at a price equal to the lesser of (a) $0.34 and (b) 60% of the average of
the lowest three inter-day prices (which need not occur on consecutive
trading days) during the ten trading days immediately preceding the
closing date.
All unsold securities being registered in this Registration Statement will be
removed from registration by means of a post-effective amendment.
CERTAIN TRANSACTIONS
Mr. Victor DeMarco, the Company's controlling shareholder and Chief Executive
Officer and sole director had personally guaranteed indebtedness of the Company
totaling approximately $99,000. During the fiscal quarter ended September 30,
2000, Mr. DeMarco converted this debt into 1,650,000 shares of the Company's
Common Stock at a conversion price of $0.06 per share.
Mr. Peter Des Camps, the Company's Senior Vice President of Corporate
Development also serves as President and Chief Executive Officer for Lead
Capital Ventures ("LCV"), a private investment company formed in 1999. LCV paid
a debt of DeMarco Energy in the amount of $20,000 and acquired the Common Stock
conversion rights associated with that debt. The conversion rights were at
$0.156 per share which resulted in 133,333 shares of Common Stock being issued
to LCV. This transaction occurred prior to the close of the fiscal year ended
June 30, 2000.
DESCRIPTION OF CAPITAL STOCK
COMMON STOCK
The Company is authorized to issue 100,000,000 shares of Common Stock, of which
24,622,747 shares are currently issued and outstanding. Holders of shares of
Common Stock are entitled to receive such dividends as may be declared by the
Board of Directors from assets legally available for that purpose and are
entitled at all meetings of stockholders to one vote for each share held by
them. The shares of Common Stock are not redeemable and do not have any
preemptive or conversion rights. All of the outstanding shares of Common Stock
are fully paid and non-assessable. In the event of a voluntary or involuntary
winding up or dissolution, liquidation, or partial liquidation of the Company,
holders of Common Stock shall participate, pro rata, in any distribution of the
assets of the Company remaining after payment of liabilities.
16
<PAGE> 17
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The articles of incorporation of the Company limit the personal monetary
liability of the Company's directors to the fullest extent permissible under
the corporation laws of Utah. In general, Section 16-10a-841 of the Utah
Revised Business Corporation Act (the URBCA"), permits the elimination of
personal monetary liability in all cases except liability for: (a) the amount
of a financial benefit received by a director to which he is not entitled; (b)
an intentional infliction of harm on the corporation or the shareholders; (c) a
violation of Section 16-10a-842 of the Utah Revised Business Corporation Act
(relative to distribution of assets in violation of the URBCA or the Company's
articles of incorporation); or (d) an intentional violation of criminal law.
Except as set forth in the articles of incorporation and under the provisions
of the URBCA, no statute, charter provision, bylaw, contract or other
arrangement which indemnifies any controlling person, officer or director of
the Company, affects or limits their liability.
As of September 30, 2000, there were approximately 1,500 holders of record of
Common Stock.
TRANSFER AGENT
The transfer agent for the Common Stock is Fidelity Transfer Company, 1800
South West Temple, Salt Lake City, Utah 84115.
MARKET FOR COMMON STOCK
The Common Stock is traded in the over-the-counter market and quoted on OTC EBB
under the symbol "DMES" and quoted in the pink sheets published by the National
Quotations Bureau. Since 1984, from time to time, a very small number of
securities broker-dealers published only intermittent quotations for the Common
Stock, and there was no continuous, consistent trading market. The trading
volume in the Common Stock has been and is extremely limited. During the above
period, the limited nature of the trading market created the potential for
significant changes in the trading price for the Common Stock as a result of
relatively minor changes in the supply and demand for Common Stock and perhaps
without regard to the Company's business activities. Because of the lack of
specific transaction information and the Company's belief that quotations
during the period were particularly sensitive to actual or anticipated volume
of supply and demand, the Company does not believe that such quotations during
this period are reliable indicators of a trading market for the Common Stock.
Subject to the above limitations, the Company believes that during eight fiscal
quarters preceding the date of this filing, the high and low sales prices for
the Common Stock during each quarter are as set forth in the table below (such
prices are without retail mark-up, mark-down, or commissions).
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
------------- ---- ---
<S> <C> <C>
June 30, 2000 .875 .281
March 31, 2000 .531 .125
December 31, 1999 .25 .125
September 30, 1999 .35 .125
June 30, 1999 .281 .125
March 31, 1999 .53 .125
December 31, 1998 .281 .094
September 30, 1998 .375 .125
</TABLE>
PLAN OF DISTRIBUTION
The Selling Stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of Common Stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions.
17
<PAGE> 18
These sales may be at fixed or negotiated prices. The Selling Stockholders may
use any one or more of the following methods when selling shares:
o ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
o block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
o purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
o an exchange distribution in accordance with the rules of the applicable
exchange;
o privately negotiated transactions;
o short sales;
o broker-dealers may agree with the Selling Stockholders to sell a specified
number of such shares at a stipulated price per share;
o a combination of any such methods of sale; and
o any other method permitted pursuant to applicable law.
The Selling Stockholders may also sell shares under Rule 144 under the
Securities Act, if available, rather than under this prospectus.
The Selling Stockholders may also engage in short sales against the box, puts
and calls and other transactions in securities of the Company or derivatives of
Company securities and may sell or deliver shares in connection with these
trades. The Selling Stockholders may pledge their shares to their brokers under
the margin provisions of customer agreements. If a Selling Stockholder defaults
on a margin loan, the broker may, from time to time, offer and sell the pledged
shares. The Selling Stockholders have advised the Company that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their shares other than
ordinary course brokerage arrangements, nor is there an underwriter or
coordinating broker acting in connection with the proposed sale of shares by
the Selling Stockholders.
Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The Selling Stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to the
Selling Stockholders. The Company has agreed to indemnify the Selling
Stockholders against certain losses, claims, damages and liabilities, including
liabilities under the Securities Act.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby has
been passed upon for the Company by Locke Liddell Sapp LLP, Austin, Texas.
EXPERTS
The consolidated financial statements of the Company for the years ended June
30, 2000, and 1999, appearing in this Prospectus and Registration Statement
have been audited by Nathan M. Robnett, CPA, Austin, Texas, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as an expert in accounting and auditing.
18
<PAGE> 19
ADDITIONAL INFORMATION
As permitted by the rules and regulations of the Commission, this Prospectus
does not contain all of the information set forth in the Registration Statement
and in the exhibits and schedules thereto. For further information with respect
to the Company and the Common Stock offered hereby, reference is made to the
Registration Statement and the exhibits thereto. Statements contained in this
Prospectus concerning the provisions of documents filed with the Registration
Statement as exhibits and schedules are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference to
the copy of the applicable document filed with the Commission. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge and copied upon payment of the charges prescribed by the
Commission at the Public Reference Room of the Commission, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission maintains a website that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission at
http://www.sec.gov.
19
<PAGE> 20
INDEX TO FINANCIAL STATEMENTS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditor's Report (Nathan M. Robnett, CPA) F-2
Comparative Balance Sheets at June 30, 1999 and June 30, 2000 F-3
Comparative Statements of Income and Retained Earnings for the F-4
Two Years ended June 30, 1999 and June 30, 2000
Comparative Statements of Cash Flows for the Two Years ended F-5
June 30, 1999 and June 30, 2000
Notes to Financial Statements F-6
</TABLE>
F-1
<PAGE> 21
Report of Independent Auditors
To the Board of Directors of DeMarco Energy Systems, Inc.
We have audited the accompanying balance sheet of DeMarco Energy Systems, Inc.
as of June 30, 2000, and the related statements of income and retained
earnings, and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our 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 financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DeMarco Energy Systems, Inc.
as of June 30, 2000, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting
principles.
Nathan M. Robnett, C. P. A.
September 5, 2000
F-2
<PAGE> 22
DEMARCO ENERGY SYSTEMS, INC.
COMPARATIVE BALANCE SHEETS
AS OF JUNE 30, 1999 AND JUNE 30, 2000
<TABLE>
<CAPTION>
AS OF AS OF
JUNE 30, 1999 JUNE 30, 2000
------------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 2,647 $ 23,213
Accounts Receivable 45,000
----------- -----------
Total Current Assets $ 47,647 $ 23,213
----------- -----------
Capital Assets:
Fixtures, Equipment and Other 149,045 171,049
Accumulated Depreciation and Amortization (92,712) (125,661)
----------- -----------
Total Fixed Assets $ 56,333 $ 45,388
----------- -----------
Other Assets: $ 10,664 $ 4,241
----------- -----------
TOTAL ASSETS $ 114,644 $ 72,842
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Accounts payable $ 46,108 $ 37,656
Promissory Note 57,898 34,833
Current Portion of Long-term Debt 26,852 29,954
Convertible Debentures -- 197,000
Other Current Liabilities 4,388 1,775
Note Payable to Shareholders -- 107,451
----------- -----------
Total Current Liabilities $ 135,246 $ 408,669
----------- -----------
Long-Term Notes Payable 52,541 22,586
Long-Term Notes Payable to Shareholders 55,420 20,000
----------- -----------
TOTAL LIABILITIES $ 243,207 $ 451,255
----------- -----------
SHAREHOLDERS' EQUITY
Common Stock, $0.001 par value,
100,000,000 shares authorized and
22,453,657 shares issued at 6/30/99 $ 22,454 $ 43,274
and 22,839,414 shares issued at 6/30/2000
Additional paid-in capital 2,223,892 2,223,892
Retained (deficit) (2,164,379) (2,435,049)
Subscriptions Receivable (210,530) (210,530)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY (128,563) (378,413)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 114,644 $ 72,842
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-3
<PAGE> 23
DEMARCO ENERGY SYSTEMS, INC.
COMPARATIVE STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED JUNE 30, 1999 AND JUNE 30, 2000
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDED ENDED
JUNE 30, 1999 JUNE 30, 2000
------------- -------------
<S> <C> <C>
Revenues
Net Sales $ 14,761 $ 21,906
Other Income 76,356
----------- -----------
Total Revenues $ 91,117 $ 21,906
----------- -----------
Costs and expenses
Cost of Merchandise Sold $ 5,545
Selling and Administrative 217,178 $ 230,410
Depreciation and Amortization 37,084 32,949
Interest 28,284 29,217
----------- -----------
Total Costs and Expenses $ 288,091 $ 292,576
----------- -----------
Other Income and Expense
Loss on Equipment Sales $ 19,866
Net Loss $ (216,840) $ (270,670)
Retained deficit at beginning of year (1,947,539) (2,164,379)
----------- -----------
Retained deficit at the end of year $(2,164,379) $(2,435,049)
=========== ===========
Loss per Common Share $( 0.007) $ 0.012
=========== ===========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE> 24
DEMARCO ENERGY SYSTEMS, INC.
COMPARATIVE STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 1999 AND JUNE 30, 2000
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
JUNE 30, JUNE 30,
1999 2000
------------------ ------------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Loss $ (216,840) $ (270,670)
Adjustments to reconcile net loss to net cash
Provided (used) by operating activities:
Depreciation and Amortization 37,084 32,701
Changes in operating assets and liabilities:
Prepaid Expenses $ 10,157
Due From Shareholders 115,843
Accounts Receivable (45,000) $ 45,000
Inventories 5,545
Other Assets (1,000) (3,240)
Accounts Payable (3,350) (8,452)
Promissory Note (23,065)
Current Portion of Long Term Debt 3,665 3,102
Other Current Liabilities 3,634 (2,615)
--------- ----------
Net Cash Used by Operating Activities $ 89,494 10,730
Cash flows used in investing Activities
Long term Assets 9,176 (12,092)
Net cash provided (used) by financing activities
Line of Credit $ (43,141)
Convertible Debentures $ 197,000
Long Term Notes Payable (25,873) (29,954)
Notes to Shareholders 41,035 72,031
Common Stock 104,310 20,820
--------- ----------
Net Cash provided by financing Activities $ 76,331 $ 259,897
Net increase in Cash and Cash Equivalents $ (4,755) $ 20,566
Cash and Cash Equivalents at Beginning of Year
7,402 2,647
---------- ----------
Cash and Cash Equivalents at End of Year $ 2,647 $ 23,212
========== ==========
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-5
<PAGE> 25
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
DeMarco Energy Systems, Inc. (the Company) was organized under the laws of the
State of Utah in 1983. The Company is primarily engaged in the process of
investigating business opportunities that appear to have profit potential for
the Company. Primary emphasis is being placed on the DeMarco Energy System
water-air heating/cooling systems, energy audits and energy related equipment
such as lighting and electrical fixture retro-fittings.
During 1989, the Company exchanged 10,396,790 shares of its stock for exclusive
rights to a United States patent. The patent was granted for a unique
water-source heat pump system that both heats and cools buildings and provides
domestic hot water at an extremely low cost to install and operate. The heat
pump is specifically designed to utilize municipal water systems as a heat
source/sink. Florida Heat Pump Manufacturing Co. manufactures the DeMarco
Energy Miser System under a patent licensing agreement.
During the fiscal year ending June 30, 1999, the Company filed an application
with the United States Patent Office for a patent covering a heat pump system
using gray water sources, reclaimed water sources and other non-potable water
sources. Costs of approximately $20,000 related to the patent application have
been capitalized. The eventual approval or denial of this patent application is
indeterminable at this time.
DeMarco Energy Systems, Inc. currently has installations in Oregon,
Pennsylvania, Washington, Montana, South Dakota, Mississippi, and California.
Furniture and Equipment
Furniture and equipment and other long-term assets are recorded at historical
cost less depreciation and amortization. Depreciation and amortization are
accounted for on the straight-line method based on estimated useful lives.
Betterments and large renewals that extend the life of assets are capitalized
whereas maintenance and repairs and small renewals are expensed as incurred.
ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Note B - Long Term Debt
Long-term debt consists of $52,540 in notes to financing companies
collateralized by computer systems that have a net book value of $19525.13. The
amount due within one year is $29,954.
The maturities of long-term debt for each of the succeeding five fiscal years
subsequent to June 30, 2000, are as follows:
<TABLE>
<S> <C>
Year ending June 30, 2001 29,954
Year ending June 30, 2002 22,586
-------
Total $52,540
=======
</TABLE>
NOTE C - COMMITMENTS AND CONTINGENCIES
The company has entered into an office facility lease calling for the following
future rents:
<TABLE>
<S> <C>
Year ending June 30, 2001 13,061
Year ending June 30, 2002 6,683
-------
Total $19,744
=======
</TABLE>
The company has had, and renewed, a short term promissory note payable. At June
30, 2000, the balance was $34,833. That amount has been paid off in full after
fiscal year end and prior to the report date. The note was secured by shares in
the company owned by the company's president, Mr. Victor DeMarco. The president
has also guaranteed payments called for under the long term debt above and the
office facility lease payments.
F-6
<PAGE> 26
NOTE D - EARNINGS (LOSS) PER COMMON SHARE
Earnings (Loss) per common share are computed by dividing net losses by the
average number of common share outstanding during the year. The average number
of common shares outstanding during the year ended June 30, 2000 was
approximately 22,645,000 shares.
NOTE E - INCOME TAXES
As of June 30, 2000, DeMarco Energy Systems, Inc. had an operating loss carry
forwards of approximately $2,203,778 that expire between 2005 and 2014 and are
available to offset future taxable income to the extent permitted under the
Internal Revenue Code.
NOTE F - RELATED PARTY TRANSACTIONS
Mr. Victor DeMarco, president of the company has advanced sums of approximately
$99,000 as at June 30, 2000 and are included in Notes Payable to Shareholders
(current) in the financial statements.
F-7
<PAGE> 27
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The articles of incorporation of the Company limit the personal monetary
liability of the Company's directors to the fullest extent permissible under
the corporation laws of Utah. In general, Section 16-10a-841 of the Utah
Revised Business Corporation Act (the URBCA"), permits the elimination of
personal monetary liability in all cases except liability for: (a) the amount
of a financial benefit received by a director to which he is not entitled; (b)
an intentional infliction of harm on the corporation or the shareholders; (c) a
violation of Section 16-10a-842 of the Utah Revised Business Corporation Act
(relative to distribution of assets in violation of the URBCA or the Company's
articles of incorporation); or (d) an intentional violation of criminal law.
Except as set forth in the articles of incorporation and under the provisions
of the URBCA, no statute, charter provision, bylaw, contract or other
arrangement which indemnifies any controlling person, officer or director of
the Company, affects or limits their liability.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
All costs, expenses and fees in connection with the registration of the shares
of Common Stock offered hereby shall be borne by the Company. Commissions and
discounts, if any, attributable to the sales of shares of Common Stock
hereunder will be borne by the Selling Stockholders. The Selling Stockholders
may agree to indemnify any broker-dealer or agent that participates in a
transaction involving sales of shares of Common Stock against certain
liabilities, including liabilities arising under the Securities Act. The
Company has agreed to indemnify the Selling Stockholders against certain
liabilities in connection with the offering of the shares of Common Stock
hereunder, including liabilities arising under the Securities Act.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In September 1999, the Company completed a private placement (the "Placement")
of 696,852 shares of its common stock. The aggregate sales proceeds of the
Placement were $174,300. The Company believes that the issuance of shares of
common stock in the Placement was exempt from the registration requirements of
the Securities Act under Rule 504 under the Securities Act.
During the eight-month period from January through August 2000, the Company
issued a series of convertible debentures bearing 8% interest. A total of
$229,000 was raised from this issuance. The debentures mature in 24 months from
the time of issue. Interest payments are calculated quarterly and totaled upon
conversion and included in the stock distribution. The debentures carry various
conversion privileges ranging from $0.10 to $0.45 a share. The debenture
holders have the right to convert any or all of the principal into Common
Shares of the Company at any time after the first 12 months from issuance. If
all debenture holders elect to convert, the Company will issue approximately
1,200,000 shares of its Common Stock to the holders and be relieved of the
debt. The Company believes that the issuance of shares of common stock in the
Placement was exempt from the registration requirements of the Securities Act
under Rule 504 under the Securities Act.
On September 26, 2000, we entered into an agreement with AJW Partners, LLC. and
New Millennium Capital Partners II, LLC. for the private placement of
$1,500,000 of the Company's Secured Convertible Debentures. These debentures
are convertible into shares of the Common Stock of the Company. The funding of
the debentures will occur in two phases with the first $500,000 (less legal
expenses) being received by the Company on September 27, 2000. The remaining
$1,000,000 will be funded within 30 days following the effective registration
with the Securities and Exchange Commission of the underlying securities of the
Company. If all debenture holders elect to convert, the Company will issue
approximately 10,869,564 shares of its Common Stock to the holders and will be
relieved of the debt.
Mr. Victor DeMarco, the Company's controlling shareholder and Chief Executive
Officer and director had personally guaranteed indebtedness of the Company
totaling approximately $99,000. During the fiscal quarter ended September 30,
2000, Mr. DeMarco converted this entire debt into 1,650,000 shares of the
Company's Common Stock at a conversion price of $0.06 per share.
Mr. Peter Des Camps, the Company's Senior Vice President of Corporate
Development also serves as President and Chief Executive Officer for Lead
Capital Ventures ("LCV"), a private investment company formed in 1999. LCV paid
a debt of DeMarco Energy in the amount of $20,000 and acquired the Common Stock
conversion rights associated with that debt. The conversion rights were at
$0.156 per share which resulted in 133,333 shares of Common Stock being issued
to LCV. This transaction occurred prior to the close of the fiscal year ended
June 30, 2000.
II-1
20
<PAGE> 28
ITEM 27. EXHIBITS
Exhibit
Number Name of Exhibit
4.01 Secured Convertible Debenture Purchase Agreement (Incorporated by
reference from Form 8-K filed electronically on October 11, 2000)
4.02 DeMarco Energy Systems of America, Inc. 10% Secured Convertible
Debenture (Incorporated by reference from Form 8-K filed
electronically on October 11, 2000)
4.03 Security Agreement (Incorporated by reference from Form 8-K filed
electronically on October 11, 2000)
4.04 Intellectual Property Security Agreement (Incorporated by reference
from Form 8-K filed electronically on October 11, 2000)
4.05 Registration Rights Agreement (Incorporated by reference from Form 8-K
filed electronically on October 11, 2000)
4.06 Escrow Agreement (Incorporated by reference from Form 8-K filed
electronically on October 11, 2000)
5.01 Opinion of Locke Liddell & Sapp LLP with respect to the legality of
the securities being offered hereby (to be filed by Amendment)
13.01 Annual Report Form 10KSB for June 30, 2000 (Incorporated by reference
from Form 10KSB filed electronically on September 28, 2000)
23.01 Consent of Locke Liddell & Sapp LLP (included as part of its opinion)
23.02 Consent of Nathan M. Robnett, CPA (Filed electronically herewith)
ITEM 28. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
II-2
<PAGE> 29
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (40 or 497(b)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
The undersigned Registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under Securities Act may be
permitted to directors, officers and controlling persons of Registrant pursuant
to the provisions of its Articles of Incorporation, its By-Laws, or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by Registrant for
expenses incurred or paid by an officer, director or controlling person of
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-3
<PAGE> 30
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and authorized this
registration statement to be signed on its behalf by the undersigned, in the
City of Austin, State of Texas, on the 13th day of November, 2000.
DEMARCO ENERGY SYSTEMS OF AMERICA, INC,
By: /s/ Victor M. DeMarco
---------------------------------------------------
Victor M. DeMarco, President/
Chief Operating Officer, Chief Accounting Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Victor M. DeMarco President, Chief Operating Officer November 13, 2000
---------------------- Chief Accounting Officer
Victor M. DeMarco
</TABLE>
<PAGE> 31
TABLE OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
4.01 Secured Convertible Debenture Purchase Agreement (Incorporated by
reference from Form 8-K filed electronically on October 11, 2000)
4.02 DeMarco Energy Systems of America, Inc. 10% Secured Convertible
Debenture (Incorporated by reference from Form 8-K filed
electronically on October 11, 2000)
4.03 Security Agreement (Incorporated by reference from Form 8-K filed
electronically on October 11, 2000)
4.04 Intellectual Property Security Agreement (Incorporated by reference
from Form 8-K filed electronically on October 11, 2000)
4.05 Registration Rights Agreement (Incorporated by reference from Form 8-K
filed electronically on October 11, 2000)
4.06 Escrow Agreement (Incorporated by reference from Form 8-K filed
electronically on October 11, 2000)
5.01 Opinion of Locke Liddell & Sapp LLP with respect to the legality of
the securities being offered hereby (to be filed by Amendment)
13.01 Annual Report Form 10KSB for June 30, 2000 (Incorporated by reference
from Form 10KSB filed electronically on September 28, 2000)
23.01 Consent of Locke Liddell & Sapp LLP (included as part of its opinion)
23.02 Consent of Nathan M. Robnett, CPA (Filed electronically herewith)
</TABLE>
