UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to _______________
Commission File No. 001-15355
HOLTER TECHNOLOGIES HOLDING, AG
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(Name of Small Business Issuer in its charter)
Nevada 84-1393541
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23548 Calabasas Road, Suite 202, Calabasas, California 91302
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (818) 224-2145
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
N/A N/A
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [ ] Yes [x] No
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $2,626,460
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked price of such common equity, as of a
specified date within the past 60 days. (See definition of affiliate in Rule
12b-2 of the Exchange Act.) $68,550,143.76 as of November 30, 2000.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [ ] Yes [ ] No
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. 95,208,533 as of November 30, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly described them
and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).
Transitional Small Business Disclosure Format (Check one): Yes ; No X
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PART I
Item 1. Description of Business
Business Development
Holter Technologies Holding, AG (the "Company") was incorporated in the
State of Nevada on March 21, 1997 as Lyon Mountain, Inc. On February 10, 1998,
the Company changed its name to Falken Investment, AG. On January 21, 1999, the
Company changed its name to Holter Technologies Holding, AG. The Company is
engaged primarily in the business of producing, marketing and selling air
filtration, water filtration and energy efficient products.
In February 1999, the Company acquired 100% of the outstanding equity
interests of Holter Sachsen DENATEC GmbH ("Denatec"), a German limited liability
company, and 80% of the outstanding equity interests of Philaqua
Aufbereitungstechnik GmbH ("Philaqua"), a German limited liability company, from
the stockholders of Denatec and Philaqua, including Professor Heinrich W.
Holter, the Company's President and Chairman of the Board of Directors. The
purchase price of Denatec and Philaqua was 44.1 million shares of the Company's
common stock, par value $.001 per share (the "Common Stock"). Denatec holds the
exclusive rights to exploit certain worldwide patents, patents pending and
similar intellectual property rights (collectively, "Intellectual Property
Rights") and other inventions of air filtration processes, including denaturing
heat exchangers and electrostatic filters having a denaturing collector
electrode. See Part I, Item 1, "Description of Business - Air Filtration."
Philaqua holds the exclusive rights to exploit certain worldwide Intellectual
Property Rights regarding industrial water treatment and purification through
ultraviolet light filtration. In December 1998, Philaqua entered into an
exclusive distribution agreement with Laboratory of Impulse Technique ZAO
("LIT"), a Russian corporation. The joint venture was formed to facilitate the
manufacture of UV constructions and for market support of each of Philaqua's and
LIT's products. Pursuant to the joint venture, Philaqua agreed to purchase
ultraviolet-based water treatment products and other products as agreed by the
parties from time to time exclusively from LIT, and LIT agreed not to supply its
products to any other distributors in the world except those located in the
former Soviet Union.
In March 2000, the Company acquired 30% of the outstanding common stock
of Heinrich Holter GmbH ("Holter GmbH"), a German corporation, from Professor
Holter in exchange for US$1.5 million. In December 2000, the Company acquired an
additional 20% of the outstanding common stock of Holter GmbH from Professor
Holter in exchange for 15,000,000 shares of the Company's Common Stock. Holter
GmbH engages primarily in the business of marketing, sales, production, research
and development of air, water and energy systems.
In March 2000, the Company acquired 50% of the outstanding common stock
of Holter Systembau GmbH ("Holter Systembau"), a German corporation, for
US$125,000. Holter Systembau engages primarily in the business of marketing and
sales of low-energy modular housing systems.
In April 2000, the Company acquired 50% of the outstanding common stock
of LK- Luftqualitat AG ("LK-Luftqualitat"), a Swiss corporation, for US$650,000.
LK-Luftqualitat engages primarily in the business of marketing, sales,
production, research and development of the Ionair(R) filtration system. See
Part I, Item I, "Description of Business - Air Filtration."
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In April 2000, the Company acquired 20% of the outstanding common stock
of Coolpoint Ventilation Equipment Ltd., a Hong Kong limited liability
corporation, now known as Coolpoint-Holter Environmental Technologies Limited
("Coolpoint"), in exchange for 1,388,889 shares of the Company's Common Stock.
Coolpoint engages primarily in the business of marketing and sales of air
filtration systems in Asia. The Company was granted an option to purchase up to
20% of any Coolpoint shares offered to the public in the future. In the event
that the price of the Company's Common Stock has failed to reach at least $2.00
per share on or before December 31, 2000, Coolpoint will receive an option from
the Company to purchase additional shares of the Company's Common Stock as
determined by the following formula:
Net profit distributed to the Company by Coolpoint Number of shares
---------------------------------------------------- = of Common Stock
The Company's Common Stock price on available to Coolpoint
December 31, 2000 pursuant to option
There can be no assurance that the price of the Company's Common Stock will
equal or exceed $2.00 prior to December 31, 2000 or that the Company will not be
required to issue the option to Coolpoint.
In April 2000, the Company acquired 23% of the outstanding common stock
of Huta Zabrze SA ("Huta Zabrze"), a Polish corporation, from Leszek Kulawik,
the Managing Director of Huta Zabrze, in exchange for 2,750,000 shares of the
Company's Common Stock. In May 2000, the Company acquired an additional seven
percent of the outstanding common stock of Huta Zabrze and $800,000 in exchange
for 2,000,000 shares of the Company's Common Stock. Huta Zabrze engages
primarily in the production, marketing and sales of steel and iron and
construction, telecommunication and energy systems in the international market.
In June 2000, the Company acquired 50% of the outstanding common stock
of Intherm GmbH ("Intherm"), a German corporation, for US$125,000. Intherm
engages primarily in the business of marketing and sales of energy systems such
as the IntherMobil(R), a refrigerated box used to provide refrigeration where
needed which may be loaded onto different types of machinery.
In December 2000, the Company acquired 50% of the outstanding common
stock of Holter Italia s.r.l. ("Holter Italia"), an Italian corporation, from
Professor Holter in exchange for 10,000,000 shares of the Company's Common
Stock. Holter Italia engages primarily in the business of marketing and sales of
air filtration systems.
In February 2000, the Company entered into a Distribution and
Cooperation Agreement with INSTAL Warszawa S.A. ("INSTAL"), a Polish
corporation. INSTAL engages in the design, construction and installation of air
conditioning systems in Poland and provides trained service support of such
systems. The agreement permits INSTAL and the Company to bid for and service
contracts in Poland using the Company's air filtration technologies. Each of
INSTAL and the Company agreed not to enter into agreements with other
competitors during the term of the agreement. Unless earlier terminated, the
agreement expires on December 31, 2003, and shall automatically renew for two
year terms unless terminated by either party at least six months in advance of
the termination date.
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The Company's acquisition of and/or association with these companies,
in whole or in part, has permitted the Company to increase its access to
intellectual property in its areas of primary focus, such as air filtration,
water filtration, and energy-related and energy conservation products.
Through its affiliates and subsidiaries, the Company operates in four
areas:
1. Marketing and sale of air filtration systems, including denaturing air
filters, Filtervlies, the Aer-O-Med(R)and Ionair(R)systems.
2. Marketing and sale of water filtration systems, including water
treatment and sewage sludge reduction treatments and UV/Ozon.
3. Marketing and sale of energy-related and energy conservation products,
including coal-waste systems, Hocodems, Pyrotec, Clean Coal Technology,
Thermo-Multiform and IntherMobil(R).
4. Provision of design and engineering services to third parties relating
to the development of large building or industrial projects in the
areas of air filtration, water filtration and energy conservation.
Air Filtration
With regard to air filtration products and services, the Company and
many of its affiliates and subsidiaries engage in the design, engineering and
provision of wet and dry dust collection systems for all types of industries,
including, but not limited to, power plants, steelworks and foundries, coke
processing plants, waste incineration plants and industrial boiler
installations. The Company contracts with third parties to provide design and
engineering services of air cleansing systems to major projects, either as a
contractor or subcontractor. The Company will design the system and subcontract
the production of the air cleansing equipment to a third party using
Intellectual Property Rights licensed to or otherwise owned by the Company. The
Company and a few of its subsidiaries and affiliates also engage in limited
production of air cleansing systems, such as the Filtervlies, Ionair(R) and
Aer-O-Med(R) products.
Holter GmbH, Denatec, LK-Luftqualitat, Holter Italia, INSTAL and
Coolpoint engage in marketing and sales of the Company's air filtration services
and systems. Holter GmbH, Coolpoint, INSTAL and LK-Luftqualitat also engage in
limited production of the systems.
The retail price and production of the Company's products is determined
on a contract-by-contract basis with each customer. As of the date of this Form
10-KSB, the Company's products are not sold or distributed to the general
public, but rather to large purchasers such as municipalities, governmental
entities and other large users such as shopping malls, hotels and office
buildings interested in improving air quality. Because the number and type of
the Company's products are determined on a contract-by-contract basis, the
Company does not have any current plans for distribution.
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The Company and certain of its subsidiaries and affiliates engage in
limited production of the Filtervlies, Ionair(R) and Aer-O-Med(R) products.
Other products distributed by the Company and its subsidiaries and affiliates
are subcontracted to third parties to produce the products. The Company's
monthly production capacity of its air filtration products is affected by the
Company's existing agreements and varies depending upon contract requirements.
As of the date of this Form 10-KSB, the Company has met all material service and
production requirements.
Water Filtration
With regard to water filtration, the Company, through Philaqua and
others, including SHW Holter Wassertechnik GmbH, a German corporation founded by
Professor Holter, the Company's President and Chairman of the Board of
Directors, designs and supplies, and engages in limited production of, systems
and components for the treatment of water and wastewater, soils and sludge
through the use of ozone, ultraviolet light and biological applications. In
Philaqua's technology, the ozone is generated in a gas-tight apparatus and mixed
with oxygen. The mixture of oxygen and ozone is then transported via pipes into
the water to be cleaned, which is contained in stainless steel or concrete
vessels. The ozone-oxygen mixture is absorbed in the water and removes and/or
destroys surfactants, dyes, bacteria, viruses and spores in the water. Any gas
discharge from the chemical reaction is destroyed by catalysts. The water is
then disinfected by UV-irradiation prior to distribution for drinking. This
technology may be applied to reservoir, river, contaminated ground and cooling
water.
Philaqua also has developed its technology to reduce sewage sludge
produced by water treatment plants. The Company believes its technology reduces
the amount of sewage sludge by more than 80%. This technology uses ozone to
remove surfactants and dyes from sewage.
Philaqua also provides services to biologists, chemists and mechanical,
processing, electrical and site engineers engaged in large building projects to
assess water treatment processes.
Production of Philaqua's water filtration systems is performed by LIT.
Philaqua and LIT have entered into an exclusive distributorship, whereby
Philaqua has agreed to acquire its products exclusively from LIT, and LIT has
agreed not to sell its products to any third party except those located in the
former Soviet Union. By its terms, the exclusive distributorship agreement will
expire on December 31, 2001, although the agreement may be extended by mutual
agreement of the parties. Philaqua uses LIT's products to assemble and complete
Philaqua's products. Philaqua's monthly production capacity of its water
filtration products is affected by its existing agreements and varies depending
upon contract requirements. As of the date of this Form 10-KSB, Philaqua has met
all material service and production requirements.
The retail price and production of Philaqua's products is determined on
a contract-by-contract basis with each customer. As of the date of this Form
10-KSB, Philaqua's products are not sold or distributed to the general public,
but rather to large purchasers such as municipalities, governmental entities and
other large users such as shopping malls, hotels and office buildings interested
in improving water quality. Because the number and type of the Company's
products are determined on a contract-by-contract basis, the Company does not
have any current plans for distribution.
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Energy-Related and Energy Conservation Products
With regard to energy products, the Company, through its affiliates
Huta Zabrze, Holter Polska, a Polish corporation owned and controlled by
Professor Holter, the Company's President and Chairman of the Board of
Directors, Holter Systembau and Intherm, and its subsidiary Holter GmbH, engages
in the marketing and sale and limited production of various combustion,
conservation and environmental cleaning systems relating to energy products such
as coal.
Combustion Systems
Holter GmbH's product, coal waste systems ("CWS"), converts waste
products' inherent chemical energy into thermal energy in hot flue gas. Waste
products such as those normally deposited in landfills are instead used by a
power station to create a separate source of thermal energy, independent of
electricity, coal or other powered energy. The thermal energy is created by
converting the chemical energy of waste products into hot flue gas by means of a
plant satellite parallel to a power station steam generator. The waste products
are heated and converted to hot flue gas. The hot flue gas is conveyed to the
lower furnace section of a large steam generator in substitution for an
equivalent amount of coal. The hot flue gas is then heated to approximately
1,500 degrees Celsius. Any dioxins and furans contained in the hot flue gas are
destroyed during the heating process, and the remaining hot flue gases may be
cleaned with a conventional flue-gas scrubber normally used in coal-fired power
stations. The created energy is used to supply power for the power station. The
Company believes that this CWS technology results in a more efficient heating
method for the plant and a reduction in landfill waste and carbon dioxide
emissions of approximately 60%.
The Company's Pyrotec product is a two stage fluidized bed combustor
integrated into a steam boiler. It may be used to burn biomass materials such as
wood, hay, straw and paper, treated wood products, refuse-derived fuel, coal,
industrial and municipal sludge products. The Company believes that the use of
the Pyrotec product results in the ability to use a wide load range of
combustible materials, low carbon monoxide emissions, a high burn out rate and
an efficient method of thermal energy.
Conservation Systems
The Company's Thermo-Multiform product is a building product made of
expanded polystyrene which may be used to construct affordable, well-insulted
and hygienic housing. The Company believes that expanded polystyrene results in
a product that is resistant to fire, fails to absorb water, allows the passage
of gases, is more dense and has a higher heat insulation capacity than
conventional building materials such as brick or concrete. Additionally, the
expanded polystyrene consists of 98% air, which the Company believes results in
excellent heat insulation and a low specific weight. The Thermo-Multiform
product is produced in component pieces, which may be pieced together by the
home builder in the manner desired by the home owner similar to modular housing.
In order to construct a structure, the units are placed next to each other and
pressed together, and the hollow sections of the Thermo-Multiform blocks may be
filled with cement. Load-bearing cores may be inserted into multiple-block
walls.
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The Company's Okompakt product is an air handling device which offers
low energy ventilation of homes and offices, which the Company believes results
in an energy savings of up to 66% compared to open-window ventilation.
Environmental Cleaning Systems Relating to Energy Products
The Company's "clean coal technology" cleans mined coal of sulfur and
other particulate matter from the coal itself, yielding what the Company
believes is a cleaner burning product that weighs less so it costs less to
transport. The raw mined coal is inserted into a boiler located at the mine
site. The boiler contains technology which pulverizes and heats the coal, thus
releasing the sulfur which may be extracted as a gas. Any withdrawn particulate
matter, such as ash, fuel and limestone, is funneled to an encased handling
system, resulting in a virtually dust-free operation. The technology may be
applied to many types of coal, and meets all current European Union
environmental and emissions requirements.
The Company's Hocodems product separates coal into two medium outlets,
which divide the coal into lower and higher density materials. The lower density
materials are distributed to the lower outlet by a vortex. The higher density
materials are moved along a chamber by means of centrifugal force and ejected at
the upper end of the vessel by a discharge facility. The Company believes that
the Hocodems product results in a simpler and smaller plant layout, less
necessary equipment, lower capital and operating costs and improved
availability.
Intherm's product, IntherMobil(R), consists of a refrigerated box on
wheels which may be transferred from one type of transport to another depending
upon need. IntherMobil(R) may be loaded onto any vehicle by means of wheels
attached to the bottom of the box. The product is then secured to the vehicle
and the materials may be transported. This enables a transporter to make more
efficient use of its vehicles and permits repair of the vehicle and/or the
IntherMobil(R) separately. The IntherMobil(R) product may be used for
refrigeration or freezing.
In addition to its limited production of energy products, the Company,
Holter GmbH, Holter Polska and Holter Systembau also provide design and
engineering of energy systems for third parties. As of the date of this Form
10-KSB, the Company has met all material service and production requirements.
The retail price and production of the Company's energy products is
determined on a contract-by-contract basis with each customer. As of the date of
this Form 10-KSB, the Company's products are not sold or distributed to the
general public, but rather to large purchasers such as municipalities,
governmental entities and other large users such as shopping malls, hotels and
office buildings interested in improving emissions and efficiency of its
facilities. Because the number and type of the Company's products are determined
on a contract-by-contract basis, the Company does not have any current plans for
distribution.
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Design and Engineering Services
The Company and its subsidiaries and affiliates also provide design and
engineering services to third parties relating to the development of large
building or industrial projects in the areas of air filtration, water filtration
and energy conservation. The services are provided on a contract-by-contract
basis and are priced accordingly.
Markets
The Company believes its markets are worldwide, but presently is
focusing primarily upon markets in Eastern Europe, Germany, Asia and the Middle
East. The Company's research indicates that there are over 80,000,000 square
meters of floor space in the Federal Republic of Germany alone, and that such
space is growing by approximately 5,000,000 square meters each year. Based upon
the foregoing, the Company estimates a potential market of approximately 900,000
electrostatic denaturing outlet filters by January 2002. The Company intends to
focus its marketing efforts to consumers the Company believes would be
particularly attracted to the elimination of bacteria, spores, mold and other
airborne allergens and particulate removal, such as hospitals, other medical
facilities, schools, restaurants, hotels, apartment houses and office buildings.
The Company intends to enter into relationships with third parties to
market its products. As of the date of this Form 10-KSB, Holter GmbH, Denatec,
LK-Luftqualitat, Holter Italia, INSTAL and Coolpoint engage in marketing and
sales of the Company's air filtration systems; LIT and the Fushun Coal Mining
Bureau ("Fushun") have entered into agreements to market Philaqua's water
filtration products; and Huta Zabrze, Holter GmbH, Holter Polska, Holter
Systembau, Intherm and Fushun engage in the marketing and sales of the Company's
energy-related products. The Company intends to enter into further marketing
relationships with third parties.
Competition
Although the Company owns or has the rights by license to many of its
proprietary technologies, the Company has many competitors in the general areas
of air filtration, water filtration and energy-related products and the
provision of design and engineering services. Many of the Company's competitors
are larger, established companies with greater assets and financial reserves
than the Company. The Company's future success will partly depend on its ability
to compete with these businesses. Presently, there can be no assurance that the
Company will be able to compete with these businesses.
Air Filtration Products: The Company is not aware of any competitors in
the removal and denaturization of bacteria, spores, mold and other airborne
allergens. However, the Company believes that the following, among others,
compete with the Company by producing a product which removes particulate matter
from the air: Minnesota Mining and Manufacturing Company, General Electric
Company, Siemans AG, Camfil GmbH, Delbag Luftfilter GmbH and Gebruder Trox GmbH
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Water Filtration Products: The Company believes that Passavant-Roediger
Umwelttechnik GmbH, Wedeco AG, Philipp Muller-Hager & Elsasser GmbH, Degremont
S.A. and SHW Holter Wassertechnik GmbH, among others, compete with the Company
in water filtration. Nevertheless, the Company is not aware of any competition
in the area of its protected sewage sludge reduction technology.
Energy-Related Products: The Company believes that Asea Brown Boveri
AG, Babcock BSH AG, Lurgi AG and L.&C. Steinmuller GmbH, among others, compete
with the Company in the provision of energy-related products similar to those
offered by the Company. Nevertheless, the Company is not aware of any competitor
in the area of coal waste co-combustion technology whose system has up to 50%
lower investment cost and up to 300% higher energy efficiency than conventional
waste incineration plants.
Principal Suppliers
LIT is the sole contractual supplier of components to Philaqua. The
Company, its affiliates and subsidiaries do not rely substantially on any
supplier.
Dependence Upon Customers
For the year ended December 31, 1999, the Company obtained 91% of its
total revenues, from Holter GmbH, a subsidiary of the Company. See Part III,
Item 12, "Certain Relationships and Related Transactions." Additionally, the
Company, through its affiliates, has significant material contracts with each of
the Government of the City of Moscow, Russian Federation, and Lurgi Lent Jes AG
and Lurgi Energie Und Entsorgung GmbH with regard to a project in the Ukraine.
The size of either of these agreements may result in the Company deriving a
significant portion of its revenues from that source in any given time period.
There can be no assurance that the Company will not be significantly dependent
upon revenues derived from any one customer at any given time since the Company
fulfills executed contracts for completion of projects. The Company may remain
dependent in the immediate future upon a limited number of customers (the
identity of which may be subject to change from year to year) for a material
percentage of its annual operating revenue.
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Governmental Regulation
The Company is subject to ordinary business regulation of employers and
businesses in the Federal Republic of Germany, ordinary business regulation of
businesses in the State of Nevada, and environmental regulations in each country
in which the Company's products are sold, including Russia, China, Poland,
Switzerland, Italy and Germany. The Company does not anticipate being subject to
significant regulation as a result of its business plans other than typical
safety certifications for its products and manufacturing capabilities,
electrical appliances and devices. To the best knowledge of the Company, as of
the date of this Form 10-KSB, the Company is in compliance with all applicable
material environmental laws. The costs and effects of such compliance are
incorporated into the costs of the Company's products charged to each customer
depending upon the country in which the customer wishes the Company's products
to be operational and installed and cannot be quantified. To the best knowledge
of the Company, as of the date of this Form 10-KSB, the Company has obtained all
applicable governmental approvals for its principal products and services.
Patents, Trademarks and Licensing Agreements
Professor Heinrich W. Holter, the Company's President and Chairman of
the Board of Directors, owns approximately 3,500 international Intellectual
Property Rights in the areas of air filtration, water filtration, energy
production and other technologies. Professor Holter has licensed approximately
975 of these Intellectual Property Rights to the Company and its subsidiaries,
including Denatec and Philaqua, and affiliates by royalty-free, nonexclusive,
perpetual licenses. By terms of the licenses, the Company may sublicense these
Intellectual Property Rights to third parties at its option.
The Company has no other Intellectual Property Rights or licensing
agreements except for standard software license agreements.
Research and Development
The Company engages in research and development substantially through
its affiliates and subsidiaries. Air and water filtration and energy research
and development is performed by Holter GmbH. Air filtration research and
development is performed by Denatec, LK-Luftqualitat, and contracted out by the
Company to unaffiliated universities and centers of higher education such as
ILK, Uni Munchen, TU Dresden, Uni Essen and Institut Bodensee, German
universities and academic centers. Water filtration research and development is
performed by Philaqua. The owner of any results of the research and development
is the person or entity which pays for the research and development.
Accordingly, in the event that Professor Holter, the Company's President and
Chairman of the Board of Directors, pays for the research and development, he
will own the results of the research and development.
The Company estimates that an average of DM30 million was spent on
research and development on its behalf by Professor Holter or by companies
affiliated or owned, in whole or in part, by him. The costs of research and
development are not borne directly by customers.
Employees
Presently, the Company has five employees, all of whom are full-time,
in the Gladbeck, Germany office. The Company has three executive officers:
Professor Holter, the Company's President and Chairman of the Board of
Directors, Dirk Brinkmann, the Company's Executive Vice President and a
director, and Daniel Lezak, the Company's Secretary/Treasurer and a director.
See Part III, Item 9, "Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange Act." The Company
utilizes the personnel of its subsidiaries and affiliates as it deems necessary
from time to time. The Company's subsidiaries have the following number of
full-time employees: Holter Italia (130), Holter GmbH (105), Philaqua (12),
Holter Systembau (12), LK-Luftqualitat (10), Denatec (8) and Intherm (5). The
Company's affiliates have the following number of full-time employees: Coolpoint
(800) and Huta Zabrze (450).
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Item 2. Description of Property
The Company's principal place of business and corporate offices are
located at 23548 Calabasas Road, Suite 202, Calabasas, California 91302. The
Calabasas facilities consist of approximately 600 square feet of office space
and are leased on a month to month basis from Gateway Industries, Ltd., of which
Daniel Lezak, the Company's Secretary/Treasurer and a director, is the
President. The monthly rental for the Calabasas property is $1,050 per month.
The purposes of this office are to maintain corporate records and provide office
space for corporate maintenance.
The Company also occupies office space in Dusseldorf and Gladbeck,
Germany as well as Italy, Poland, China, Switzerland, Russia and Czech Republic.
The Dusseldorf property consists of approximately 800 square feet, and is
provided by Holter GmbH, a subsidiary of the Company which Professor Holter, the
Company's President and Chairman of the Board of Directors, is the President, at
no cost to the Company. The Gladbeck offices are located in a building operated
by Grundstucksgesellschaft HKP GbR, a partnership in which Professor Holter, the
Company's President and Chairman of the Board of Directors, is a partner. The
offices consist of approximately 1,000 square feet of office space. The Company
does not pay rent nor has an executed lease for the premises. The Italian
property is located in Fano, Italy, consists of approximately 600 square feet,
and is provided by Holter Italia, a subsidiary of the Company, at no charge to
the Company. The Polish property is located in Zabrze, Poland, consists of
approximately 1,000 square feet, and is provided by Huta Zabrze, an affiliate of
the Company, at no charge to the Company. The Chinese properties are located in
Hong Kong and Fushun, China, consist of approximately 800 and 1,000 square feet,
and are provided by Coolpoint, an affiliate of the Company, and Fushun Cool
Mining Bureau, a party with whom the Company has a joint venture agreement, at
no charge to the Company. The Swiss property is located in Lucerne, Switzerland,
consists of approximately 900 square feet, and is provided by LK-Luftqualitat, a
subsidiary of the Company, at no charge to the Company. The Russian property is
located in Moscow, Russia, consists of approximately 1,200 square feet, and is
provided by the city of Moscow, a third party with whom the Company, through an
affiliate of Professor Holter has a relationship, has an agreement, at no charge
to the Company. The Czech property is located in Prague, Czech Republic,
consists of approximately 1,100 square feet, and is provided by Holter GmbH, at
no charge to the Company.
Item 3. Legal Proceedings
There are presently no material pending legal proceedings to which the
Company or any of its subsidiaries is a party or to which any of its property is
subject and, to the best of its knowledge, no such actions against the Company
or any of its subsidiaries are contemplated or threatened.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of the Company's fiscal year, no matters were
submitted to a vote of security holders.
12
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Prior to the filing of this Form 10-KSB, no shares of the Company's
Common Stock have been registered with the Commission or any state securities
agency of authority.
The Company's Common Stock is listed for trading on the Pink Sheets.
Pink Sheets LLC is a provider of pricing and financial information for
over-the-counter ("OTC") securities markets. The Pink Sheets provide products
and services that increase the information available in the OTC markets so as to
make them more efficient for all participants. The Pink Sheets offer a
centralized information network that includes services designed to benefit
market makers, issuers, brokers and OTC investors.
The Company trades on the Pink Sheets under the symbol "HOTK." The
Company traded on the Over-the-Counter-Bulletin-Board from March 1998 until
November 1999. Prior to March 1999, the Company's Common Stock traded under the
symbol "FALK." The following sets forth the high and low bid prices for the
Common Stock to the best knowledge of the Company for the year ended December
31, 1999 as of the dates set forth below.
Quarter Ending High Bid Low Bid
-------------- -------- -------
March 31, 1999 0.4688 0.3750
June 30, 1999 3.25 0.3750
October 31, 1999 N/A 0.47
December 31, 1999 N/A 0.50
As of December 27, 2000, there were 460 holders of record of the
Company's Common Stock. As of November 30, 2000, the Company had issued and
outstanding 95,208,533 shares of Common Stock.
Dividend Policy
The Company has not declared or paid cash dividends or made
distributions in the past on its Common Stock. The Company reserves the right to
declare a dividend when operations may merit.
Recent Sales of Unregistered Securities
During the period covered by this Form 10-KSB, the Company issued
shares of its Common Stock in private placements to the following investors in
the following amounts:
13
<PAGE>
<TABLE>
<CAPTION>
Price
# of shares Aggregate per
Date Name issued Consideration share
---- ---- ------ ------------- -----
Acquisition, Reorganization and Services (1)
--------------------------------------------
<S> <C> <C> <C> <C>
4/16/99 Prof. Heinrich W. Holter 36,000,000 Share Exchange
4/16/99 La Salle Investments, Ltd. 2,600,000 Share Exchange
4/16/99 Daniela Brinkmann 1,000,000 Share Exchange
4/16/99 Prof. Heinrich W. Holter 1,000,000 Share Exchange
4/16/99 Dr. Gerhardt Holter 1,000,000 Share Exchange
4/16/99 La Salle Investments, Ltd. 1,000,000 Share Exchange
4/19/99 Gateway Industries Ltd. 1,000,000 Share Exchange
4/19/99 Ralph Burstedde 500,000 Share Exchange
8/9/99 Dennis Brovarone 50,000 Services $ .80
Regulation S Sales (2)
7/7/99 Walter Dreher 6,028 $ 5,274.50 $ .87
7/7/99 Gretel Fischer 1,909 $ 1,670.37 $ .87
7/7/99 Ute Fischer 3,014 $ 2,637.25 $ .87
7/7/99 Katharina Giel 4,521 $ 3,955.87 $ .87
7/7/99 Richard Kehrer 11,152 $ 19,516.00 $1.75
7/7/99 Inge Pfeffer 1,808 $ 1,670.37 $ .87
7/7/99 Emil Teufel 1,909 $ 1,670.37 $ .87
7/7/99 Andreas Thomas 1,909 $ 1,670.37 $ .87
7/7/99 Erwin Ulrich 6,028 $ 5,274.50 $ .87
7/7/99 Nedzad Redzepagic 1,507 $ 1,318.62 $ .87
8/2/99 Uwe Arnot 3,014 $ 2,109.80 $ .70
8/2/99 Moritz von Bethmann 18,512 $ 12,958.40 $ .70
8/2/99 Elena Munzer 22,898 $ 16,028.60 $ .70
8/4/99 Karl Burkhart 30,000 $ 21,000.00 $ .70
8/4/99 Frank Braun 7,072 $ 4,950.40 $ .70
10/21/99 Hans Joachim Sieland 500,000 $200,000.00 $ .40
10/21/99 Rolf-Schmitt and Hans Joachim Sieland 500,000 $200,000.00 $ .40
10/26/99 Antonio Sieland 100,000 $40,000.00 $ .40
10/26/99 Hans Joachim Sieland 400,000 $160,000.00 $ .40
11/9/99 Rolf Schmitt 500,000 $200,000.00 $ .40
11/26/99 Sigrid Molz 32,565 $ 26,052.00 $ .80
11/29/99 Reinhard Hofmann 11,718 $ 9,374.40 $ .80
12/6/99 Hermann Casper 6,410 $ 5,128.00 $.80
12/6/99 Franz-Josef Meyer 19,336 $ 15,468.80 $.80
12/6/99 Sylvia Rudell 12,820 $ 10,256.00 $.80
12/6/99 Gerlinde Walter 6,410 $ 5,128.00 $.80
12/7/99 Hans-Jurgen Prei(beta)mann 32,552 $ 26,041.60 $.80
12/9/99 Alexander Aschauer 15,037 $ 10,525.90 $.70
12/15/99 Andreas Prei(beta)mann 16,108 $ 12,886.40 $.80
12/15/99 Andreas Weber 13,500 $ 5,400.00 $.40
</TABLE>
14
<PAGE>
(1) With the exception of the shares issued to Mr. Brovarone, the shares
were issued in relation to the Company's acquisition of Denatec and
Philaqua. Shares issued to Mr. Brovarone were issued as compensation
for legal services rendered to the Company.
(2) The private placements were conducted pursuant to Regulation S. The
securities were sold in an offshore transaction to non-U.S. persons
located outside of the United States at the time the Common Stock was
purchased and the Company did not engage in any directed selling
efforts in the United States. No offer or sale was made to a U.S.
person or for the account or benefit of a U.S. person. No general
solicitation or advertising was made. The Common Stock sold pursuant to
the private placements was restricted. Each purchaser was notified of
the restrictions imposed on the Common Stock and his or her transfer
thereof. Upon purchase of the Common Stock, each purchaser signed an
investment letter, acknowledging that the Common Stock was not
registered pursuant to the Securities Act of 1933, as amended (the
"Securities Act") and that resale of such Common Stock could only occur
if the Common Stock was subsequently registered pursuant to the
Securities Act or an exemption from such registration was available.
Each purchaser further acknowledged that he or she purchased the Common
Stock for his or her own account and not with a view to public resale
or distribution, and that he or she was capable of bearing the economic
risks of investment in the Common Stock. Each share certificate
representing the Common Stock contained a legend reflecting the
restrictions on transfer of the Common Stock. The proceeds from the
issuances were used for general corporate operating purposes.
None of the issuances of shares set forth above were registered with
the Commission under the Securities Act, because the transactions were believed
to be exempt from such registration pursuant to the exemptions provided by
Regulation S.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following information should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Form 10-KSB.
December 31, 1999 and December 31, 1998
Changes in Financial Condition
In 1999, the Company acquired Denatec and Philaqua by issuing
43,600,000 shares of restricted Common Stock of the Company for all of the
outstanding common stock of Denatec and 80% of the outstanding common stock of
Philaqua. These acquisitions were accounted for as recapitalizations of Denatec
and Philaqua. Accordingly, the consolidated financial statements of Denatec and
Philaqua are presented as the historical financial statements of the Company.
The acquisition of Denatec and Philaqua has made a substantial, positive
contribution to the financial condition of the Company through year-end. The
balance of current assets at December 31, 1999 was $2,080,343, compared to a
balance of $157,602 at December 31, 1998. The balances of current liabilities
were $1,267,563 and $493,081 for the same periods respectively. The resulting
current ratio at December 31, 1999 was 1.6 :1. The current ratio at December 31,
1998 was 0.3 :1.
15
<PAGE>
The increase of current assets at December 31, 1999 over December 31,
1998 was due primarily to the increase of cash from $156,995 to $1,369,990, an
increase of $1,212,995, or 773%. This increase is due primarily to the cash
generated from the sale of the Company's common stock for cash of $923,324.
Current assets at December 31, 1999 also increased due to the increase
of accounts receivable and notes receivable from $0 to $616,765, an increase of
100%, of which $604,175 was to related parties. Additionally, inventory
increased $92,610 or 100% from $0 at December 31, 1998, to $92,610 at December
31, 1999. The balance at December 31, 1999 included primarily materials
purchased for jobs in progress.
The balance of current liabilities at December 31, 1999 was $1,267,563
compared to $493,081 at December 31, 1998. The increase of $774,482, or 157%,
was due primarily to the accrued expenses payable at December 31, 1999 of
$619,775. Current liabilities at December 31, 1999 also increased by a related
party payable of $59,125. Accounts payable increased $151,134 or 68%, from
$220,727 at December 31, 1998 to $371,861 at December 31, 1999. The increase is
primarily due to the expanded operations of the Company.
The Company purchased $50,636 of equipment during the year ended
December 31, 1999. Depreciation expense for the current year was $34,290
compared to $12,976 for the prior year.
At December 31, 1999, the Company had no long-term debt. The Company
had sufficient cash flow from operations to meet its current cash obligations.
The Company anticipates continued positive cash flow from existing operations
during the next twelve months, and will continue to look for ways to invest its
cash flow in acquisitions of companies and other investments that will
contribute in a positive way to the Company's operating strategy.
Results of Operations
Sales for the year ended December 31, 1999 were $2,626,460 compared to
$291,735 for the year ended December 31, 1998, resulting in an increase of
$2,334,725 or 80%. Cost of goods sold for the year ended December 31, 1999 was
$487,078, or 19% of sales, resulting in gross profit of $2,139,382, or 81%, of
sales.
Operating expenses include primarily salary and wage expenses and
general and administrative expenses. Salary and wage expenses for the year ended
December 31, 1999 were $895,925 compared to salary and wage expenses of $302,337
for the year ended December 31, 1998. General and administrative expenses were
$762,697, or 29%, of sales for the same period in 1998, resulting in an increase
of $487,880, or 178%. The increase was due to the expanded operations of Denatec
and Philaqua.
16
<PAGE>
Other income increased from $11,798 in 1998 to $56,063 for the year
ended December 31, 1999, an increase of $44,265, or 375%. This increase is
offset somewhat by the increase in interest expense from $1,157 for the year
ended December 31, 1998 to $49,064 for the year ended December 31, 1999, a
decrease of $47,097, or 4141%.
Inflation
In the opinion of management, inflation has not had a material effect
on the operations of the Company.
Year 2000
The Year 2000 issue results from an industry-wide practice of
representing years with only two digits instead of four. Beginning in the Year
2000, date code fields need to accept four digit entries to distinguish
twenty-first century dates from twentieth century dates (2000 or 1900). As a
result, computer systems and/or software used by many companies needed to be
upgraded to comply with such Year 2000 requirements. Through June 30, 2000, the
Company has not experienced any significant problems associated with the Year
2000 issue. As of June 30, 2000, the Company has not been made aware of, nor has
it experienced, date related problems with any third-party software. Although it
appears that the Year 2000 issue will not have a significant adverse effect on
the Company, the Company continues to monitor the Year 2000 compliance of its
internal systems. Undetected errors in its internal systems that may be
discovered in the future could have a material adverse effect on its business,
operating results or financial condition.
Forward Looking Statements
This Form 10-KSB contains certain forward looking statements. The
Company wishes to advise readers that actual results may differ materially from
such forward looking statements. Forward looking statements involve substantial
risks and uncertainties that could cause actual results to differ materially
from those expressed in or implied by the statements, and which may be beyond
the Company's control, including, but not limited to, the following: the
possible success of the Company's varied projects and subsidiaries, the
volatility of the financial markets in which the Company invests, the ability of
the Company to fund its current and future projects and its ability to meet its
cash and working capital needs, the industries in which the Company operates,
and other risks detailed in the Company's periodic report filings with the
Securities and Exchange Commission (the "Commission"). Any statements contained
in this Form 10-KSB that are not statements of historical fact may be deemed to
be forward looking statements. Without limiting the generality of the foregoing,
words such as "may," "will," "expect," "anticipate," "intend," "could,"
"estimate," or "continue," or the negative or other variations thereof or
comparable terminology are intended to identify forward looking statements.
17
<PAGE>
Item 7. Financial Statements
The financial statements required by this Item are included herewith as
a separate section of this Report, commencing on Page F-1.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act
Executive Officers and Directors
The executive officers and directors of the Company are:
Name Age Position
---- --- --------
Professor Heinrich W. Holter 70 President and Chairman of
the Board of Directors
Dirk Brinkmann 35 Executive Vice President, Director
Daniel Lezak 66 Secretary/Treasurer, Director
All directors hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified. Directors will
be elected at the annual meetings to serve for a term of one year, and until his
successor shall have been elected and accepted his election to the board in
writing.
Except as otherwise provided herein, none of the officers and/or
directors of the Company are officers or directors of any other publicly traded
corporation, nor have any of the directors, officers, affiliates, subsidiaries
or promoters of the Company filed any bankruptcy petition, been convicted in or
been the subject of any pending criminal proceedings, or the subject of any
order, judgment, or decree involving the violation of any state or federal
securities laws within the past five years.
The business experience of each of the persons listed above during the
past five years is as follows:
18
<PAGE>
Professor Heinrich W. Holter, President and Chairman of the Board of Directors
Professor Holter has served as the Company's President and Chairman of
the Board of Directors since January 1999 and the Managing Director and
principal shareholder of Holter GmbH since 1995. He also serves as the Managing
Director of each of Denatec, Philaqua, Holter Systembau, LK-Luftqualitat, Holter
Italia and Holter Polska.
Professor Holter holds over 3,500 international Intellectual Property
Rights in the area of environmental protection technology. In 1985, he was
appointed Chairman of the German Diesel Board by the Society of Inventors. He
has been awarded the order of merit from the Federal Republic of Germany
(Bundesverdienstkreuz), the Diesel gold medal for his scientific works, and the
German Federal Service Cross with ribbon. Professor Holter also received the
order of merit from the Moscow Academy of Sciences. Professor Holter was the
first citizen of the Federal Republic of Germany to receive the "Order of
Friendship" granted to him by the President of the Russian Federation, Boris
Yeltsin, for "personal contribution to the development of the coal industry of
Russia and to the strengthening of the friendly relations between Germany and
Russia." Professor Holter received this honor for his work as the president and
a member of the East-West Academy, a foundation which promotes multinational
cooperation in the field of environmental protection, technology and medicine.
Professor Holter holds an engineering degree (Dipl.-Ing., Graduate in
Engineering) from the Mining College in Essen, Germany in 1953, a Doctor of
Science degree (Dr. sc.) from the technical University of Mining in Ostrava in
1991, and a Doctor of Engineering degree (Dr.-Ing.) from the Silesian Technical
College in Gliwice in 1992. Professor Holter has served as a University
Professor at Kosice Technical University, Germany since 1994, and was awarded a
prestigious State Professor position by the State of North-Rhine-Westphalia,
Germany.
Dirk Brinkmann, Executive Vice President and Director
Since 1995 Mr. Brinkmann has been employed as a financial advisor by
several entities owned and/or controlled by Professor Holter, the Company's
President and Chairman of the Board of Directors, including Holter GmbH and
Holter Polska. Mr. Brinkmann obtained an advanced degree in finance from College
Monchengladbach in 1989. Mr. Brinkmann has served as the Company's Executive
Vice President since October 2000 and as a director since January 1999.
Daniel Lezak, Secretary/Treasurer and Director
Mr. Lezak holds a B.S. Degree in Accounting from Roosevelt University
in Chicago and is a Certified Public Accountant. He has performed consulting
services to financially distressed public and private companies since 1965,
establishing reorganization plans through acquisition, sale or Chapter 11
bankruptcy reorganization. Mr. Lezak joined the Company in January 1999 as its
Secretary/Treasurer and a director.
In addition to his position with the Company, Mr. Lezak serves as Vice
President and a director of Turbo, Inc., a publicly held company that was
formerly engaged in gold mining in California, and President and a director of
Sierra-Rockies Corporation, a publicly held company presently in Chapter 11
reorganization in California. Until August 2000, Mr. Lezak served as President
and a director of Organik Technology, Inc., a publicly held company recently
released from Chapter 11 proceedings.
19
<PAGE>
Mr. Lezak is also an officer and a director of Gateway Industries Ltd.,
a privately-held consulting and holding company which is a shareholder of the
Company. See Part I, Item 4, "Security Ownership of Certain Beneficial Owners
and Management."
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Exchange Act, the Company's directors,
executive officers and any person holding 10.0% or more of its Common Stock are
required to report their beneficial ownership and any changes therein to the
Commission. Specific due dates for these reports have been established and the
Company is required to report herein any failure to file such reports by those
due dates. Based solely on review of the copies of such reports furnished to the
Company or written representations that no other reports were required, the
Company believes that, during its fiscal year ended December 31, 1999, its
executive officers, directors and greater than 10.0% beneficial owners complied
with all applicable Section 16(a) filing requirements with the exception of the
filing of Forms 3, which were not timely filed by any of the persons required to
file such Forms 3.
Item 10. Executive Compensation
During the fiscal years ended December 31, 1998 and 1999 and for the
six month period ended June 30, 2000, the Company did not pay compensation to
its officers or directors. During such periods, Professor Heinrich W. Holter,
the Company's President and Chairman of the Board of Directors, and Dirk
Brinkmann, the Company's Executive Vice President and a director, received
compensation from Holter GmbH and other affiliates or subsidiaries of the
Company. Because the Company did not pay compensation to its officers or
directors, the summary compensation table has been omitted from this Form
10-KSB.
On October 25, 2000, the Company entered into employment agreements
with each of Professor Holter and Mr. Brinkmann. Each employment agreement will
terminate on December 31, 2005, and each automatically extends for another
calendar year unless terminated by either party by November 30 of each calendar
year. Pursuant to the terms of the employment agreements, Professor Holter will
be paid $20,000, and Mr. Brinkmann will be paid $10,000, per month. Both
Professor Holter and Mr. Brinkmann will be entitled to an annual bonus as
determined by the Board of Directors after consideration of each person's
contributions to the Company and the performance of his duties. Each employment
agreement provides that upon the termination of the employee's employment by the
Company other than for "cause" (as defined in the employment agreements) or by
the employee for certain actions of the Company, such as effecting a material
adverse change in the employee's responsibilities, the employee will be entitled
to all compensation and benefits payable under the employment agreement for the
remainder of the term. As of the date of this Form 10-KSB, no payments have been
made to Professor Holter or Mr. Brinkmann pursuant to the employment agreements.
20
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, to the best of the
Company's knowledge, as of November 30, 2000 with respect to each person known
by the Company to own beneficially more than 5% of the outstanding Common Stock,
each director and all directors and officers as a group.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class(1)
------------------- ------------------- -----------
Prof. Heinrich W. Holter 63,083,333(2) 66.2%
President, Chairman of the Board
of Directors
Beisenstr.39
45964 Gladbeck, Germany
Dirk Brinkmann 1,055,555(3) 1.1%
Executive Vice President, Director
Beisenstr. 39
45964 Gladbeck, Germany
Daniel Lezak 1,055,555(4) 1.1%
Secretary/Treasurer, Director
23548 Calabasas Road, Suite 202
Calabasas, California 91302
Herman Hogg 4,270,348(5) 4.5%
Hans-Adolf-Buhler-Strasse 8
D-79361 Sasbach-Jechtingen
Germany
Leszek Kulawik 4,750,000(6) 5.0%
Bytomska 1
41-800 Zabrze, Poland
All directors and officers 65,184,443 68.5%
a group (3 persons)
(1) Based upon 95,208,533 shares outstanding as of November 30, 2000.
(2) Includes 1,000,000 shares held by his son, Dr. Gerhardt Holter, in
which Professor Holter disclaims beneficial ownership.
21
<PAGE>
(3) Includes 1,000,000 shares held by his wife, Daniela Brinkmann, in which
Mr. Brinkmann disclaims beneficial ownership.
(4) Includes 1,000,000 shares indirectly held by Gateway Industries, Ltd.,
of which Mr. Lezak is a beneficial owner.
(5) Includes 20,348 shares held by his children, Michael and Verena Hogg,
in which Mr. Hogg disclaims beneficial ownership.
(6) Includes 2,000,000 shares held by Huta Zabrze, of which Mr. Kulawik is
Managing Director and in which he may be considered to have a
beneficial interest.
Unless otherwise indicated in the footnotes, the Company has been
advised that each person above has sole voting power over the shares indicated
above.
Item 12. Certain Relationships and Related Transactions
There have been no transactions between the Company and any officer,
director, nominee for election as director, or any shareholder owning greater
than five percent (5%) of the Company's outstanding shares, nor any member of
the above referenced individuals' immediate family, except as set forth below.
In February 1999, the Company acquired 100% of the outstanding equity
interests of Denatec, a German limited liability company, and 80% of the
outstanding equity interests of Philaqua, a German limited liability company,
from the stockholders of Denatec and Philaqua, including Professor Heinrich W.
Holter, the Company's President and Chairman of the Board of Directors. The
purchase price of Denatec and Philaqua was 44.1 million shares of the Company's
Common Stock, valued at aggregate predecessor cost of US$263,935. Denatec holds
the exclusive rights to exploit certain worldwide Intellectual Property Rights
and other inventions of air filtration processes, including denaturing heat
exchangers and electrostatic filters having a denaturing collector electrode.
See Part I, Item 1, "Description of Business - Air Filtration." Philaqua holds
the exclusive rights to exploit certain worldwide Intellectual Property Rights
and other inventions regarding industrial water treatment and purification
through ultraviolet light filtration. See Part I, Item 1, "Description of
Business - Water Filtration."
In March 2000, the Company acquired 30% of the outstanding common stock
of Holter GmbH, a German corporation, from Professor Holter in exchange for
US$1.5 million. In November 2000, the Company acquired an additional 20% of the
outstanding common stock of Holter GmbH from Professor Holter in exchange for
15,000,000 shares of the Company's Common Stock. Holter GmbH engages primarily
in the business of marketing, sales, production, research and development of
air, water and energy systems.
In March 2000, the Company acquired 50% of the outstanding common stock
of Holter Systembau, a German corporation, for US$125,000. Holter Systembau
engages primarily in the business of marketing and sales of low-energy modular
housing systems.
22
<PAGE>
In November 2000, the Company acquired 50% of the outstanding common
stock of Holter Italia, an Italian corporation, from Professor Holter in
exchange for 10,000,000 shares of the Company's Common Stock. Holter Italia
engages primarily in the business of marketing and sales of air filtration
systems.
For the year ended December 31, 1999, the Company derived 91% of its
total revenues from Holter GmbH, a subsidiary of the Company, and purchased
US$123,017 of equipment and other products from Holter GmbH.
In March 1997, the Company was formed in part by Mr. Georgios Stolte, a
German resident. The Company considers Mr. Stolte to be an initial promoter of
the Company.
During 1999, the Company made unsecured loans in the amount of $520,841
to Holter GmbH, a company owned and controlled at the time by Professor Holter.
During 1999, Holter GmbH made unsecured loans in the amount of $36,931 to the
Company. Each of the loans has an interest rate of 6.5% per annum and is due and
payable upon demand.
On December 30, 1998, Professor Holter executed a loan agreement for
$39,743 in favor of Denatec. The loan accrues interest at 6% per annum and is
due and payable on demand with six months prior notice. On December 30, 1998,
Denatec executed a loan agreement for $18,560 in favor of Holter GmbH in the
amount of $7,552.
Item 13. Exhibits and Reports on Form 8-K
Except as otherwise indicated, the following exhibits are filed with
this Report by reference to the Company's Registration Statement, filed with the
Commission:
Exhibit No. Exhibit Name
3.1 Articles of Incorporation and Amendments*
3.2 Bylaws*
10.1 Acquisition Agreement of Denatec*
*Filed previously
23
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly organized.
HOLTER TECHNOLOGIES HOLDING, AG
(Registrant)
Date: December 29, 2000 By: /s/ Prof. Dr. Dr. Heinrich W. Holter
------------------------------------
Prof. Dr. Dr. Heinrich W. Holter
President and Chairman
of the Board ofDirectors
Date: December 29, 2000 By: /s/ Dirk Brinkmann
------------------
Dirk Brinkmann
Executive Vice President
and Director
Date: December 29, 2000 By: /s/ Daniel Lezak
----------------
Daniel Lezak
Secretary, Treasurer and Director
24
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
<PAGE>
<TABLE>
<CAPTION>
C O N T E N T S
<S> <C>
Independent Auditors' Report.................................................................................... F-3
Consolidated Balance Sheet...................................................................................... F-4
Consolidated Statements of Operations........................................................................... F-6
Consolidated Statements of Stockholders' Equity................................................................. F-8
Consolidated Statements of Cash Flows........................................................................... F-9
Notes to the Consolidated Financial Statements.................................................................. F-11
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors
Holter Technologies Holding AG and Subsidiaries
Calabasas, California
We have audited the accompanying consolidated balance sheet of Holter
Technologies Holding AG and Subsidiaries as of December 31, 1999 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended December 31, 1999 and 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall consolidated financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Holter
Technologies Holding AG and Subsidiaries as of December 31, 1999 and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1999 and 1998, in conformity with generally accepted
accounting principles.
/s/ HJ & Associates, LLC
------------------------
HJ & Associates, LLC
Salt Lake City, Utah
May 10, 2000
F-3
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Consolidated Balance Sheet
ASSETS
------
December 31,
1999
-----------
CURRENT ASSETS
Cash $ 1,369,990
Accounts receivable, net (Note 2) 12,590
Accounts receivable - related party, net (Note 7) 83,334
Inventory (Note 2) 92,610
Prepaid expenses 978
Notes receivable - related party (Note 4) 520,841
-----------
Total Current Assets 2,080,343
-----------
PROPERTY AND EQUIPMENT (Note 2)
Equipment and machinery 246,758
Furniture and office equipment 42,812
Software 1,046
Less - accumulated depreciation (47,266)
-----------
Total Property and Equipment 243,350
-----------
OTHER ASSETS
Patents (Note 10) --
Deposits 16,704
-----------
Total Other Assets 16,704
-----------
TOTAL ASSETS $ 2,340,397
===========
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Consolidated Balance Sheet (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31,
1999
-----------
CURRENT LIABILITIES
Accounts payable $ 371,861
Accounts payable - related party (Note 7) 123,017
Accrued expenses 619,775
Lines of credit (Note 6) 203
Notes payable - related party (Note 5) 36,931
Billings in excess of costs and
earned profit on construction
contracts (Notes 2 and 3) 33,890
Provision for projected loss on
construction contracts (Note 3) 81,886
-----------
Total Current Liabilities 1,267,563
-----------
LONG-TERM DEBT --
-----------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARY 88,727
-----------
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY
Common stock: $0.001 par value; 200,000,000 shares
authorized, 54,837,737 shares issued and outstanding 54,838
Additional paid-in capital 1,303,425
Other comprehensive income (loss) 53,776
Accumulated deficit (427,932)
-----------
Total Stockholders' Equity 984,107
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,340,397
===========
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Consolidated Statements of Operations
For the Years Ended
December 31,
-------------------------
1999 1998
----------- -----------
REVENUES
Sales revenue $ 2,468,807 $ 291,735
Contracting revenue (Note 3) 157,653 --
----------- -----------
Total Revenues 2,626,460 291,735
----------- -----------
COST OF SALES
Direct sales costs 197,363 --
Direct contracting costs (Note 3) 289,715 --
----------- -----------
Total Cost of Sales 487,078 --
----------- -----------
GROSS MARGIN 2,139,382 291,735
----------- -----------
EXPENSES
General and administrative 762,697 274,817
Research and development 65,678 --
Advertising and marketing 88,699 13,208
Salaries and wages 895,925 302,339
Bad debt expense 14,567 --
Depreciation expense 34,290 12,976
----------- -----------
Total Expenses 1,861,856 603,340
----------- -----------
GAIN (LOSS) BEFORE OTHER INCOME (EXPENSES) 277,526 (311,605)
----------- -----------
OTHER INCOME (EXPENSES)
Other income 44,561 11,798
Interest income 11,502 --
Interest expense (49,064) (1,157)
----------- -----------
Total Other Income (Expenses) 6,999 10,641
----------- -----------
GAIN (LOSS) BEFORE INCOME TAXES 284,525 (300,964)
PROVISION FOR INCOME TAXES (Note 2) 386,272 --
----------- -----------
LOSS BEFORE MINORITY INTEREST IN NET INCOME
OF CONSOLIDATED SUBSIDIARIES (101,747) (300,964)
----------- -----------
MINORITY INTEREST IN NET INCOME OF CONSOLIDATED
SUBSIDIARY 85,414 (60,193)
----------- -----------
NET LOSS $ (187,161) $ (240,771)
----------- -----------
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Consolidated Statements of Operations (Continued)
For the Years Ended
December 31,
-------------------------
1999 1998
----------- -----------
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustments $ 64,525 $ (10,749)
--------- ---------
Total Other Comprehensive Income (Loss) 64,525 (10,749)
--------- ---------
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) $(122,636) $(251,520)
========= =========
BASIC LOSS PER SHARE (NOTE 9) $ (0.00) $ (0.00)
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE>
<TABLE>
<CAPTION>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Consolidated Statements of Stockholders' Equity
Other
Common Stock Additional Comprehensive
------------------------- Paid-In Income Accumulated
Shares Amount Capital (Loss) Deficit
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 -- $ -- $ -- $ -- $ --
Common stock issued to
founders at $0.006 per share 44,100,000 44,100 219,835 -- --
Currency translation adjustment -- -- -- (10,749 --
Net loss for the year ended
December 31, 1998 -- -- -- -- (240,771)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1998 44,100,000 44,100 219,835 (10,749) (240,771)
Common stock issued in
recapitalization 8,400,000 8,400 (8,400) -- --
Common stock issued for cash
at $0.30 to $0.80 per share 2,184,767 2,185 921,139 -- --
Common stock issued for services
at $0.30 to $0.80 per share 152,970 153 76,829 -- --
Contributed capital by founding
shareholders -- -- 94,022 -- --
Currency translation adjustment -- -- -- 64,525 --
Net loss for the year ended
December 31, 1999 -- -- -- -- (187,161)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1999 54,837,737 $ 54,838 $ 1,303,425 $ 53,776 $ (427,932)
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-8
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Consolidated Statements of Cash Flows
For the Years Ended
December 31,
-------------------------
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (187,161) $ (240,771)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Minority interest 96,997 (8,271)
Common stock issued for services 76,982 --
Depreciation 34,290 12,976
Bad debt expense 14,567 --
Currency translation adjustment 64,525 (10,749)
Change in assets and liabilities:
(Increase) in accounts receivable (110,491) --
(Increase) in prepaids (371) (607)
(Increase) in inventories (92,610) --
(Increase) in deposits (16,704) --
Increase in accounts payable 151,134 220,727
Increase in payable to related parties 59,125 63,892
Increase in accrued expenses 606,951 128,600
----------- -----------
Net Cash Provided by Operating Activities 697,234 165,797
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Lending to related parties (520,841) --
Purchase of property and equipment (50,636) (239,976)
----------- -----------
Net Cash Used in Investing Activities (571,477) (239,976)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash acquisition recapitalization 112,621 --
Proceeds from lines of credit -- 57,063
Common stock issued for cash 923,324 151,314
Contributed capital by founding shareholders 94,022 --
Borrowings from related parties 14,131 22,797
Payment on lines of credit (56,860) --
----------- -----------
Net Cash Provided by Financing Activities $ 1,087,238 $ 231,174
----------- -----------
The accompanying notes are an integral part of these consolidated
financial statements.
F-9
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Consolidated Statements of Cash Flows (Continued)
For the Years Ended
December 31,
-------------------------
1999 1998
----------- -----------
NET INCREASE (DECREASE) IN CASH $1,212,995 $ 156,995
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 156,995 --
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $1,369,990 $ 156,995
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest $ 42,902 $ 1,157
Income taxes $ 153,915 $ --
NON-CASH FINANCING ACTIVITIES
Common stock issued for services $ 76,982 $ --
The accompanying notes are an integral part of these consolidated
financial statements.
F-10
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 1 - ORGANIZATION
The consolidated financial statements include those of Holter
Technologies Holdings AG (HTH AG) and its wholly-owned subsidiary,
Holter Sachsen Denatec GmbH (Denatec), and its 80% owned
subsidiary Philaqua Aufbereitungstechnik GmbH (Philaqua).
Collectively, they are referred to herein as "the Company".
HTH AG was incorporated under the laws of the State of Nevada on
March 21, 1997 under the name of Lyon Mountain, Inc. On March 5,
1998, the Company changed its name to Falken Investment, AG and
then later changed its name on January 20, 1999 to Holter
Technologies Holding AG in contemplation of a merger with Denatec
and Philaqua. HTH AG was incorporated to seek business
opportunities and acquire interests in products and businesses
which may have a potential for profit. Prior to the acquisition of
Denatec and Philaqua, HTH AG was a non-operating public shell.
Denatec was incorporated under the laws of Germany on May 3, 1998
for the purpose of acquiring technology. Denatec is engaged in the
continued development of a denaturing electrostatic filter
technology.
Philaqua was incorporated under the laws of Germany on June 30,
1998 for the purpose of acquiring and implementing technology.
Philaqua supplies systems and components to many processes in the
environmental engineering field. Philaqua's main focus is on the
treatment of water, waste water, soils, sludges, and air.
During 1999, HTH AG completed an agreement and plan of
reorganization whereby HTH AG issued 43,600,000 shares of common
stock in exchange for all of the outstanding shares of Denatec and
Philaqua. Pursuant to the reorganization, the name of the Company
was changed to Holter Technologies Holding AG.
The reorganization was accounted for as a recapitalization of
Denatec and Philaqua because the shareholders of Denatec and
Philaqua controlled the Company after the acquisition. Therefore,
Denatec and Philaqua are treated as the acquiring entity.
Accordingly, there was no adjustment to the carrying value of the
assets or liabilities of Denatec and Philaqua. HTH AG is the
acquiring entity for legal purposes and Denatec and Pilaqua are
the surviving entity for accounting purposes. As such, the
financial statements reflect the history of Denatec and Philaqua
prior to the acquisition.
F-11
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The Company's consolidated financial statements are prepared using
the accrual method of accounting. The Company has elected a
December 31 year end.
b. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments
with maturities of three months or less at the time of
acquisition.
c. Provision for Taxes
The provision for income taxes charged to operations for the years
ended December 31, 1999 and 1998 was $386,272 and $-0-,
respectively. This amount is based on the income tax rates in the
country of Germany and has been converted to U.S. dollars.
d. Principles of Consolidation
The consolidated financial statements include those of Holter
Technologies Holding AG (HTH AG) and its wholly-owned subsidiary,
Holter Sachsen Denatec GmbH (Denatec), and its 80% owned
subsidiary, Philaqua Aufbereitungstechnik GmbH (Philaqua). All
significant intercompany accounts and transactions have been
eliminated.
For the Company's foreign subsidiaries (Denatec and Philaqua) the
functional currency has been determined to be the Duetsch Mark.
Accordingly, assets and liabilities are translated at year-end
exchange rates, and operating statement items are translated at
average exchange rates prevailing during the year. The resultant
cumulative translation adjustments to the assets and liabilities
are recorded as a separate component of stockholders' equity.
Exchange adjustments resulting from foreign currency transactions
are included in the determination of net income (loss). Such
amounts are immaterial for all years presented.
In accordance with Statement of Financial Accounting Standards No.
95, "Statements of Cash Flows," cash flows from the Company's
foreign subsidiaries are calculated based upon the local
currencies. As a result, amounts related to assets and liabilities
reported on the statements of cash flows will not necessarily
agree with changes in the corresponding balances on the balance
sheets.
F-12
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Inventory
Inventory supplies are stated at the lower of purchase or
production cost (computed on a first-in, first-out basis) or
market. The inventory cost includes all expenses necessary to
place the inventory in a saleable condition. The components of
inventory are as follows:
Prepaid inventory $ 42,135
Finished goods 50,475
-------------------
Total $ 92,610
===================
f. Property and Equipment
Property and equipment are stated at cost. Expenditures for small
tools, ordinary maintenance and repairs are charged to operations
as incurred. Major additions and improvements are capitalized.
Depreciation is computed using the straight-line method over
estimated useful lives as follows:
Equipment and machinery 3-10 years
Furniture and office equipment 5-10 years
Software 5 years
Depreciation expense for the years ended December 31, 1999 and
1998 was $34,290 and $12,976, respectively.
g. Accounts Receivable
Accounts receivable are recorded net of the allowance for doubtful
accounts of $7,282 as of December 31, 1999.
h. Revenue Recognition - Inventory Sales
Revenue is recognized upon shipment and acceptance of goods by the
customer. If the Company installs the units, revenue is recognized
on the transaction when the unit is installed. The customer has no
right of return on the products and as a result, no allowance has
been recorded for possible returns.
F-13
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
i. Revenue Recognition - Contract Sales
The financial statements are prepared on the
percentage-of-completion on individual contracts, commencing when
progress reaches a point where cost and estimate analysis and
other evidence of trends are sufficient to estimate final results
with reasonable accuracy. That portion of the total contract price
which is allocable to contract expenditures incurred and work
performed is accrued as earned income. At the time a loss on a
contract becomes known, the entire amount of the estimated
ultimate loss is accrued. Claims for additional revenue are
recognized when settled.
j. Costs and Billings on Contracts
Costs and earned profit on contracts - unbilled represent the
amount by which costs of contracts in process plus estimated
earned profit exceed related progress billings. Billings in excess
of costs and earned profit on contracts represent the amount by
which progress billings on contracts in process exceed related
costs and estimated earned profit.
k. Classifications of Current Assets and Liabilities
In accordance with industry practice, the Company includes in
current assets and liabilities amounts realizable and payable
under contracts which may extend beyond one year. Other assets and
liabilities are classified as current and non-current on the basis
of expected realization or payment within or beyond one year.
l. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and revenues
and expenses during the reporting period. In these financial
statements; assets, liabilities, and earnings form contracts
involve extensive reliance on management's estimates. Actual
results could differ from those estimates.
m. Advertising
The Company follows the policy of charging the costs of
advertising to expense as incurred.
F-14
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
n. Concentrations of Risk
Cash
----
At times, the Company's funds exceed depository insurance limits
in the United States.
Foreign Currency Translation
Since Denatec and Philaqua are German companies whose financial
statements must be translated into U.S. Dollars to conform with
the requirements of the Securities and Exchange Commission, major
changes in the currency exchange rate between the German Mark and
U.S. Dollars may have a significant impact on operations of the
Company. Although the Company does not anticipate the currency
exchange rate to be significantly different over the next 12
months, no such assurances can be given. The aggregate adjustments
resulting from translation adjustments are found in the
consolidated statements of stockholders' equity.
Accounts Receivable
-------------------
Credit losses, if any, have been provided for in the financial
statements and are based on management's expectations. The
Company's accounts receivable are subject to potential
concentrations of credit risk. The Company does not believe that
it is subject to any unusual, or significant risks in the normal
course of its business.
o. Research and Development
The Company follows the policy of charging research and
development costs to expense as incurred.
p. Change in Accounting Principle
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities" which requires
companies to record derivatives as assets or liabilities, measured
at fair market value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending
on the use of the derivative and whether it qualifies for hedge
accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving
offsetting changes in fair value or cash flows. SFAS No. 133 is
effective for all fiscal quarters of fiscal years beginning after
June 15, 1999. The adoption of this statement had no material
impact on the Company's financial statements.
F-15
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 3 - CONTRACTS IN PROCESS
Comparative information with respect to contracts in process at
December 31, 1999 and 1998 follows:
1999 1998
--------- -----------
Expenditures $ 289,715 $ --
Estimated earnings (loss) thereon (132,062) --
--------- -----------
157,653
Less billings applicable thereto (191,543) --
--------- -----------
$ (33,890) $ --
========= ===========
Included in the accompanying balance
sheet under the following
captions:
Billings in excess of costs and earned
profit on construction $ (33,890) $ --
========= ===========
Provision for projected
loss on construction
contracts $ (81,886) $ --
========= ===========
NOTE 4 - NOTES RECEIVABLE - RELATED PARTY
Notes receivable - related party consisted of the following at
December 31, 1999:
<TABLE>
<CAPTION>
<S> <C>
Heinrich Holter, GmbH, unsecured due upon
demand, including accrued interest at 6.5% per annum. $ 520,841
------------------
Total notes receivable - related party 520,841
Less: current maturities (520,841)
------------------
Non-current notes receivable - related party $ --
==================
</TABLE>
F- 16
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 4 - NOTES RECEIVABLE - RELATED PARTY (Continued)
Maturities of notes receivable - related party debt are as
follows:
Year Ending
December 31, Amount
------------ ------------------
2000 $ 520,841
2001 --
2002 --
2003 --
2004 --
2005 and thereafter --
------------------
Total $ 520,841
==================
NOTE 5 - NOTES PAYABLE - RELATED PARTY
Notes payable - related party consisted of the following at
December 31, 1999:
Heinrich Holter GmbH, unsecured due
due upon demand, including accrued interest
at 6.5% per annum $ 36,931
------------------
Total notes payable - related party 36,931
Less: current maturities (36,931)
------------------
Notes payable - related party $ --
==================
Maturities of long-term debt are as follows:
Year Ending
December 31, Amount
------------ ------------------
2000 $ 36,931
2001 --
2002 --
2003 --
2004 --
2005 and thereafter --
------------------
Total $ 36,931
==================
F-17
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 6 - LINES OF CREDIT
An analysis of the lines of credit with various banks of the
Company and its subsidiaries as of December 31, 1999 is shown
below:
Line of Debt
Credit Outstanding
------------------ ------------------
Multi-currency line of credit $ 50,000 $ 68
Multi-currency line of credit 40,000 135
------------------ ------------------
$ 90,000 $ 203
================== ==================
Borrowings under the multi-currency lines of credit are guaranteed
by the Company and bear interest between 7.25% and 8.75%.
NOTE 7 - RELATED PARTY TRANSACTIONS
From time to time, the Company borrows and lends funds to and from
a Company controlled by its majority shareholder. The amounts are
non-interest bearing, due on demand and unsecured (see notes 4 and
5).
The Company also sells most of its product to a company controlled
by the major shareholder. In 1999, the related party sales were
91% of total revenues and 100% of total revenues in 1998. At
December 31, 1999, the Company was owed $83,334 for such sales.
The Company also purchases product from companies controlled by
the major shareholder. The Company owed $123,017 at December 31,
1999 for these purchases.
NOTE 8 - SEGMENT OF BUSINESS
The Company operates primarily in one industry segment which
includes the production and distribution of water and air
filtration systems.
A summary of the Company's sales by geographic area is as follows:
December 31,
---------------------------------------
1999 1998
----------------- -----------------
Foreign sales:
Asia $ - $ -
Europe 2,626,460 291,735
----------------- -----------------
Total foreign sales 2,626,460 291,735
Domestic sales - -
----------------- -----------------
Total Revenues $ 2,626,460 $ 291,735
================= =================
F-18
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 9 - BASIC AND DILUTED EARNINGS PER SHARE
The computation of basic loss per share of common stock is based
on the weighted average number of shares outstanding during the
period of the financial statements as follows:
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 31, 1999 December 31, 1998
---------------------------------------------------------------------------------------------------
Loss Shares Per-Share Loss Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
$ (187,161) 52,573,121 $ (0.00) $ (240,771) 52,000,000 $ (0.00)
=============== ================= ============= ================ ============== ==============
</TABLE>
Diluted loss per share is not presented because the common stock
equivalents are antidilutive.
NOTE 10 - PATENTS
In accordance with Generally Accepted Accounting Principles, the
cost to research and develop and obtain the patents in the
Company are expensed. The acquisition of HTH AG and Philaqua
created a reverse merger; therefore, the value of the patents
must be handled as if they were developed and not purchased.
Management has determined that in the long range planning this is
a more conservative approach and eliminates the need of burdening
future revenues with the amortization costs that would arise.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The Company is leasing its U.S. office on a month to month basis
from its secretary/treasurer at $1,050 per month. The Company's
Dusseldorf, Germany office is provided by Heinrich Holter, GmbH
at no cost to the Company.
Philaqua is leasing its office space under a 10-year lease from a
German partnership. The lease began on January 7, 1998. The lease
payment is $4,689 per month, plus insurance. The lease payment is
fixed for the term of the lease. The Company's majority
shareholder is a 1/3 partner of the partnership.
NOTE 12 - SUBSEQUENT EVENTS
Acquisitions
------------
Effective March 29, 2000, the Company purchased 30% of Heinrich
Holter, GmbH (HH) for $1,500,000. The shares were purchased from
the Company's majority shareholder at his original cost. HH is a
German company operating in environmental technology and mineral
processing in Europe and Asia.
F-19
<PAGE>
HOLTER TECHNOLOGIES HOLDING AG
AND SUBSIDIARIES
(Formerly Falken Investment AG)
Notes to the Consolidated Financial Statements
December 31, 1999
NOTE 12 - SUBSEQUENT EVENTS (Continued)
Acquisitions (Continued)
------------
Effective February 17, 2000, the Company acquired 50% of Holter
Systembau. GmbH (HSB) for $125,000. HSB is a newly formed German
corporation engaged primarily in the business of marketing and
sales of low energy modular housing systems.
On April 1, 2000, the Company purchased 20% of Coolpoint Holter
Environmental Technologies, Ltd. (Coolpoint), a Hong Kong limited
liability corporation, in exchange for 1,388,889 shares of the
Company's common stock. The Company was also granted an option to
purchase up to 20% of any Coolpoint shares offered to the public
in the future. The Company's shares were valued at the trading
price on the date of issue of $0.90 per share. Coolpoint engages
primarily in the business of marketing and sales of air
filtration systems in Asia. Coolpoint has the option to buy
additional shares of the Company's common stock based upon its
profits in the year 2000.
In April 2000, the Company acquired 50% of LK-Luftqualitaet AG
(LK), a Swiss corporation, for $615,000. LK engages primarily in
the business of marketing, sales, production, research and
development of air filtration systems in Europe.
In April 2000, the Company purchased 235 of the outstanding
common stock of Huta Zabrze, (HZ), a Polish corporation, in
exchange for 2,750,000 shares of the Company's common stock
valued at $0.80 per share. HZ engages primarily in the
production, marketing and sales of steel and iron construction,
telecommunication and energy systems in Europe.
On June 21, 2000, the Company acquired 50% of Intherm, GmbH
(Intherm), a German corporation, for $125,000. Intherm engages
primarily in the business of marketing and sales of energy
systems in Europe.
Stock Offerings
---------------
Subsequent to December 31, 1999, the Company sold approximately
7,385,160 shares of its common stock for $3,718,678.
F-20
