UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB
FOR THE FISCAL YEAR ENDED JUNE 30, 2000
COMMISSION FILE No. 000-27629
GENERAL FORM FOR REGISTRATION
OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of The Securities Exchange Act of 1934
Nu Electric Corp.
(Name of Small Business Issuer in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
23-2426437
(I. R. S. Employer Identification No. )
624 East Tarpon Avenue, Tarpon Springs, FL 34689
(Address of principal executive offices) (Zip Code)
(727)942-8938
(Issuer's telephone number)
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock
1
TABLE OF CONTENTS
Part I
Item 1. Description of Business..............................................3
Item 2. Plan of Operation....................................................7
Item 3. Description of Property..............................................7
Item 4. Security Ownership of Certain Beneficial
Owners and Management................................................8
Item 5. Directors, Executive Officers, Promoters
and Control Persons..................................................9
Item 6. Executive Compensation..............................................10
Item 7. Certain Relationships and Related Transactions......................10
Item 8. Description of Securities...........................................10
Item 9. Management's Discussion and Analysis................................11
Part II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters.........................12
Item 2. Legal Proceedings...................................................13
Item 3. Changes in and Disagreements with Accountants.......................13
Item 4. Recent Sales of Unregistered Securities.............................13
Item 5. Indemnification of Directors and Officers...........................14
Part F/S
Financial Statements.........................................................15
Part III
Item 1. Index to Exhibits...................................................
Item 2. Description of Exhibits.............................................
Signatures...................................................................
2
THIS REGISTRATION STATEMENT CONTAINS CERTAIN FORWARD LOOKING STATEMENTS WITHIN
THE MEANING OF THE PRIVATE SECURITIES REFORM ACT OF 1995. THE REGISTRANT INTENDS
THAT SUCH FORWARD LOOKING STATEMENTS BE SUBJECT TO THE SAFE HARBORS CREATED
THEREBY. THESE FORWARD LOOKING STATEMENTS INCLUDE STATEMENTS REGARDING (I) THE
REGISTRANT'S RESEARCH AND DEVELOPMENT PLANS, MARKETING PLANS, CAPITAL AND
OPERATIONS EXPENDITURES, AND RESULTS OF OPERATIONS; (II) POTENTIAL FINANCING
ARRANGEMENTS; (III) POTENTIAL UTILITY AND ACCEPTANCE OF THE REGISTRANT'S
EXISTING AND PROPOSED PRODUCTS; AND (IV) THE NEED FOR, AND AVAILABILITY OF,
ADDITIONAL FINANCING.
THE FORWARD LOOKING STATEMENTS INCLUDED HEREIN ARE BASED ON CURRENT EXPECTATIONS
AND INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. THESE FORWARD LOOKING
STATEMENTS ARE BASED ON ASSUMPTIONS REGARDING THE REGISTRANT'S BUSINESS AND
TECHNOLOGY WHICH INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE
SCIENTIFIC, ECONOMIC, REGULATORY AND COMPETITIVE CONDITIONS, AND FUTURE BUSINESS
DECISIONS, ALL OF WHICH ARE DIFFICULT OR IMPOSSIBLE TO PREDICT ACCURATELY AND
MANY OF WHICH ARE BEYOND THE CONTROL OF THE REGISTRANT. ALTHOUGH THE REGISTRANT
BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD LOOKING STATEMENTS ARE
REASONABLE, ANY OF THE ASSUMPTIONS COULD PROVE INACCURATE AND, THEREFORE, ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD LOOKING
STATEMENTS. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD
LOOKING INFORMATION CONTAINED HEREIN, THE INCLUSION OF SUCH INFORMATION SHOULD
NOT BE REGARDED AS ANY REPRESENTATION BY THE REGISTRANT OR ANY OTHER PERSON THAT
THE OBJECTIVES OR PLANS OF THE REGISTRANT WILL BE ACHIEVED.
References in this registration statement to "We," "Us," or the "Company" refer
to Nu Electric Corporation, as well as their subsidiaries and predecessors.
PART I
Item 1. Description of Business.
(a) Business Development.
We were incorporated as Escalator, Inc. under the General Corporation
Laws of the State of Delaware on April 17, 1986. On June 3, 1986, Lone
Pine Resources, Inc. was merged with our Company through a reverse
merger whereby the shareholders of Lone Pine Resources, Inc. received
an equal number of shares in Escalator, Inc. Lone Pine Resources, Inc.
was incorporated under the laws of Utah on June 23, 1983.
In the past, we conducted operations through our three wholly-owned
subsidiaries Escalator Securities, Inc. and Escalator Investments, Inc.
, and Frank Communications Corp., all Pennsylvania corporations.
Escalator Investments, Inc. was incorporated in the State of
Pennsylvania on August 15, 1984
3
and conducted financial planning activities through approximately 1992
as a Registered Investment Advisor under the Investment Advisors Act of
1940. Since 1992, Escalator Investments, Inc. has had no operations.
Escalator Securities, Inc. was incorporated in the State of
Pennsylvania on August 22, 1985, and conducted business as a registered
broker-dealer under the Securities Exchange Act of 1934 and the
Pennsylvania Securities Act of 1972 until 1997. On December 31, 1997,
Escalator Securities, Inc. was closed by the National Association of
Securities Dealers. Since this date, Escalator Securities, Inc. has had
no operations.
On July of 1990, we acquired Frank Communications Corp., a Pennsylvania
corporation incorporated on May 30, 1989, which was in the business of
financial public relations. In consideration of this acquisition, we
paid $1,000. Frank Communications Corp. has no operations.
On June 30, 1997, we transferred our holdings in Escalator Securities,
Inc. to Escalator Investments, Inc. pursuant to the terms of an
Agreement and Plan of Spinoff. The shareholders of Escalator, Inc.
received all of the outstanding stock of Escalator Investments, Inc.,
and Escalator Securities, Inc., which then ceased being our
wholly-owned subsidiaries.
On April 22, 1998, we changed our name to Nu Electric Corporation. On
June 30, 1999, we acquired Clean Water Technologies, Inc. (hereinafter
"Clean Water"), a Florida limited liability company, through an
agreement and plan of merger whereby all of the outstanding and issued
shares of Clean Water were exchanged for shares of Nu Electric.
Pursuant to this agreement, we acquired all of the assets of the
business of Clean Water.
We have not been a party to any bankruptcy, receivership or similar
proceeding. We have not been involved in any material reclassification,
merger, consolidation, or purchase or sale of a significant amount of
assets not in the ordinary course of business.
(b) Business of Issuer.
(1) Principal products or services and their markets.
We currently have no products, services or revenues. We plan
to focus our efforts on sub-licensing environmentally friendly
technology developed by third parties. We have developed no
criteria for identifying such technology or for the
identification of sub-licensees of such technology. There can
be no guarantee that we will be able to locate and obtain
licenses to such technology or such sub-licensees.
If we are able to obtain licenses for the use of technologies,
we plan to sub-license such technology to third parties. If we
are able to locate sub-licensees, and such sub-licensees are
subsequently able to locate applications for the technology,
we plan to obtain royalty fees on the use of the licensed
technology. There can be no assurance that, if we obtain
licenses to environmentally friendly technologies, we will be
able to locate entities with the requisite knowledge and
experience to arrange application of such technology. Further,
there is no guarantee that if located, we will be able to
enter into licensing agreements with favorable terms, if
4
at all. If we are unable to acquire rights to technology or
sub-license such technology to qualified entities, if
obtained, it may have a materially adverse effect on our
business and operations.
In our acquisition of Clean Water, we acquired a license to
a technology related to the removal of arsenic from water
("arsenic technology"). We have sublicensed this arsenic
technology to GSA Resources, Inc. We received patent approval
for the arsenic technology on March 28, 2000 from the U.S.
Patent Office.
(2) Distribution methods of the products or services.
We have no products or services to be distributed. As of the
date of this annual report, we have no plans for
distribution of any products or services that we may develop
in the future.
(3) Status of any publicly announced new product or service.
We currently have no new products or services that have been
publicly announced.
(4) Competitive business conditions and the small business
issuer's competitive position in the industry and methods of
competition.
In our search for technology and qualified parties to apply
such technology, we will compete with entities having
significantly greater financial and other resources than that
of the company. There can be no assurance that we will be able
to compete effectively with such entities. Further, we will
compete with our own potential sub-licensees for the location
and acquisition of environmentally friendly technologies. Our
failure to effectively compete with such entities could have a
materially adverse effect on our business and operations.
(5) Sources and availability of raw materials and the names of
principal suppliers.
We have no arrangements for raw materials or suppliers.
(6) Dependence on one or a few major customers.
We have no customers.
(7) Intellectual Property.
Through our acquisition of Clean Water, we acquired an
exclusive license for a process to remove arsenic from
drinking water. More specifically, the technology is a method
of removing arsenic species from an aqueous liquid using
modified zeolite materials. This agreement is for a period of
the longer of twenty years or the patent expiration. Although
we are the exclusive licensee of this technology, the owners
of the technology are permitted by the agreement to infringe
upon our
5
exclusive rights in the case of our insolvency, bankruptcy,
dissolution, breach or similar occurrence. In addition, we are
required to carry product liability insurance coverage in an
amount sufficient to cover claims arising from the use of the
Clean Water technology.
In consideration for this exclusive license, Clean Water paid
seven-hundred thousand (700,000) shares of their common stock
as the initial license fee for this technology. Further, we
must pay two percent (2%) of revenues earned from the use of
this technology. This percentage is subject to the following
minimum royalty schedule:
First 24 months $0
End of year three $5,000
End of year four $6,000
End of year five $7,200
End of year six $8,640
End of year seven and each year thereafter $10,368
As of the date of this registration statement, we currently
have no trademarks, franchises, concessions, royalty
agreements or labor contracts.
(8) Need for any government approval of principal products or
services. We are not in need of governmental approval, as we
have no products or services.
(9) Effect of existing or probable governmental regulations on the
business. Although we have no operations which are currently
affected by governmental regulation, we feel that the
following may be of importance, if we attempt to utilize our
license for the technology to remove arsenic from water.
Environmental Protection Agency ("EPA") established the
current maximum contaminant level (MCL) for arsenic, 50
micrograms per liter (ug/L) or parts per billion (ppb), in
1975. This drinking water standard is based on the standard
set by the Public Health Service in 1943.
In 1996, Congress established certain requirements the EPA
must meet in designating a new standard for arsenic. These
requirements have shaped the agency's strategic approach. The
EPA will use peer-reviewed health effects research to meet the
statutory deadlines, along with studies of treatment,
analytical methods, occurrence, and cost-benefits, and will
identify affordable small system technologies. Results of
focused long-term arsenic research efforts
6
will be considered in future reviews of the MCL, which will be
evaluated at least every 6 years, as appropriate, as required
by the 1996 amendments.
New standards on arsenic may be finalized by the EPA on
January 1, 2001. These standards will dictate the parameters
within which our company may be able to proceed in developing
an area of operations.
Further, if we are able to acquire other environmentally
friendly technologies in the future, of which there can be no
assurance, we will likely be affected by regulations similar
to those discussed above. Our failure to develop awareness on
all regulations relating to technologies, which we may seek to
acquire, could result in obsolescence of licenses obtained by
us. Such obsolescence could have a materially adverse effect
on our business and operations.
(10) Research and Development in the last two fiscal years. As of
the date of this registration statement, no amount has been
spent on research and development.
(11) Costs and effects of compliance with environmental laws. We
anticipate that the nature of our business will surround
compliance with environmental laws. We plan to acquire
technology based on compliance with the environmental law
standards. Since these standards will likely change regularly
in the future, we will incur expenses in seeking technology
which compliments such standards. Our failure to acquire
technologies, which comply with environmental law regulations,
could have a materially adverse effect on our operations.
(12) Number of total employees and number of full time employees.
We currently have three total and full-time employees. There
are no employment or collective bargaining agreements in
place.
Item 2. Plan of Operation.
We are currently unable to satisfy our cash requirements without the financial
support of our management. We anticipate that we will meet our cash requirements
for the foreseeable future through financial support of our management.
Eventually, we may seek to raise additional funds. We have not yet determined if
or how we plan to obtain these additional funds.
We plan to acquire existing technology, which has already been fully developed.
Consequently, we do not anticipate significant research and development expenses
over the next twelve months. We do not expect to purchase or sell any plant and
significant equipment or make any significant changes in the number of employees
over the next twelve months.
Item 3. Description of Property.
Our offices are located at 624 East Tarpon Avenue, Tarpon Springs, Florida. The
space is approximately 1500 square feet and is leased by Wall Street
Communications, Inc., a sub-chapter
7
S corporation controlled by the Scalas, at a monthly rent of $1200.00. We do not
own any significant real or personal property.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
Title of Name & Address of Amount & Nature Percent
Class Beneficial Owner.. of Ownership of Class
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Howard & Laurie Scala 1,400,000 Joint Tenancy 34.0%
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Howard & Laurie Scala 2,500 Indirect .0006%
Wall Street Communications
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Howard Scala / IRA 151,630 Direct 3.7%
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Laurie Scala /IRA 55,970 Direct 1.4%
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Laurie Scala C/F 33,230 Direct 0.8%
Matthew & Jeffrey Scala
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Clifford Gross 491,957 Direct 12.0%
Utek, LLC
202 South Wheeler Street
Plant City, Florida 33566
(b) Security Ownership of Management
Title of Name & Address of Amount & Nature Percent
Class Beneficial Owner of Ownership of Class
-----------------------------------------------------------------------------------------------------
Common Howard & Laurie Scala 1,400,000 Joint Tenancy 34.0%
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Howard & Laurie Scala 2,500 Indirect .0006%
Wall Street Commmunications
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Howard Scala / IRA 151,630 Direct 3.7%
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Laurie Scala /IRA 55,970 Direct 1.4%
8
624 East Tarpon Avenue
Tarpon Springs, FL 34689
Common Laurie Scala C/F 33,230 Direct 0.8%
Matthew & Jeffrey Scala
624 East Tarpon Avenue
Tarpon Springs, FL 34689
----------------------------------------------------------------------------------------------------------
TOTAL Howard & Laurie Scala 1,643,330 shares 39.9%
</TABLE>
(c) Changes in Control.
There are currently no arrangements which may result in a change of
control of the Company.
Item 5. Directors and Executive Officers, Promoters and Control Persons.
(a) Officers and Directors.
The following chart sets forth information on our officers and
directors:
<TABLE>
<CAPTION>
Name Age Title(s) Term of Office
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Laurie C. Scala 46 President, Secretary/Treasurer, & Director July 1, 1998 to present
Howard A.Scala 48 Vice President & Director July 1, 1998 to present
</TABLE>
Our Bylaws require that we have a minimum of one director. Directors
are elected at our annual meeting to be held on the second Monday of
each September or at a time as soon thereafter as is convenient, at a
time to be fixed by the Board of Directors. Directors shall serve until
their successors are duly elected or appointed. A vacancy on the Board
of Directors may be filled by a majority vote of the remaining
directors.
Our Bylaws provide for a minimum of the following officers: President,
Treasurer and Secretary. These officers are to be elected by the Board
of Directors at the first Board meeting following the annual meeting.
Other officers may be appointed by the Board at any time, and the Board
may fill any vacancies.
Laurie C. Scala is a graduate of Douglas College in Communications
(B.A. 1975). She began her brokerage career as a registered
representative of Merrill Lynch, Pierce, Fenner & Smith, Inc. in 1976.
In 1980, she became a Vice President of Herzfeld & Stern, Inc. In 1982,
Mrs. Scala assumed a position as Vice President of Thomson McKinnon
Securities, Inc. In 1984, she left her former position to work at a
partnership formed with her husband, Howard Scala, providing financial
planning and brokerage services. Since its formation in 1986, Mrs.
Scala has worked for the Company. She holds no other directorships in
any reporting companies.
Howard A. Scala is a graduate of Syracuse University School of
Management in Marketing (B.S. 1973). He began his brokerage career as a
registered representative of Merrill Lynch, Pierce, Fenner & Smith,
Inc. in 1976. In 1980, he became a Vice President of Herzfeld & Stern,
Inc. In 1982, Mr. Scala assumed a position as Vice President of Thomson
McKinnon Securities, Inc. In 1984, he left his former position to work
at a partnership formed with his wife, Laurie Scala, providing
financial planning and brokerage services. Since its formation
9
in 1986, Mr. Scala has worked for the Company. He holds no other
directorships in any reporting companies.
(b) Identify Significant Employees.
We have no persons, not mentioned above, who are expected to make a
significant contribution to our business.
(c) Family relationships.
Laurie and Howard Scala are husband and wife.
(d) Involvement in certain legal proceedings. As of December 31, 1997,
the registration of Escalator Securities, Inc. as a broker-dealer from
the National Association of Securities Dealers, was revoked, and Howard
Scala was barred as a broker.
Other than the aforementioned, we have had no events that occurred
during the past five years, including bankruptcies, criminal
convictions or proceedings, court orders or judgments, that are
material to an evaluation of the ability or integrity of any director,
person nominated to become a director, executive officer, promoter or
control person of our Company.
Item 6. Executive Compensation.
<TABLE>
<CAPTION>
--------------------- -------- ---------- ---------- ------------------- ------------------ ----------------- ----------- ---------
Name and Principal Year Salary Bonus ($) Other Annual Restricted Securities LTIP Other
Position ($) Compensation ($) Stock Award(s) Underlying Payouts ($)
($) Options (#) ($)
--------------------- -------- ---------- ---------- ------------------- ------------------ ----------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Laurie & Howard
Scala, 1996 0 0 0 0 0 0 0
President & Vice 1997 0 0 0 0 0 0 0
President 1998 0 0 0 $187,500 0 0 0
respectively 1999 0 0 0 $234,375 0 0
--------------------- -------- ---------- ---------- ------------------- ------------------ ----------------- ----------- ---------
</TABLE>
Item 7. Certain Relationships and Related Transactions.
There have been no transactions during the last two years, or proposed
transactions, to which we were or are a party, in which any of our directors,
executive officers, nominees for such positions, security holders or the
families of such people had a material interest. We are not a subsidiary of any
other company. We have retained Wall Street Marketing Group, Inc. to provide
public relations and promotional services. We issued 300,000 restricted shares
to them as compensation.
Item 8. Description of Securities.
Common Stock.
In General. We are authorized to issue 50,000,000 shares of common stock with a
par value of $0.002 each, of which have 4,112,855 common shares were outstanding
as of June 30, 2000. All of the issued and outstanding common stock is
fully paid and non-assessable.
Voting. Each share of our common stock entitles the holder thereof to one vote
per share in the election of directors and in all other matters upon which
stockholders are entitled to vote. The holders of shares of common stock do not
have cumulative voting rights, which means that the
10
holders of more than 50% of the outstanding shares voting for the election of
directors can elect all of the directors to be elected, if they so choose. In
such event, the holders of the remaining shares will not be able to elect any of
our directors. As of the date of this registration statement, Howard and Laurie
Scala are the beneficial owners of 1,643,330 voting shares or approximately
39.9% of our outstanding voting stock.
Dividends. Each share of common stock entitles the holder thereof to receive
cash dividends as the Board of Directors may declare from funds legally
available therefor. However, we have not declared any dividends to date and do
not intend to declare any dividend on our common stock in the foreseeable
future.
Rights. There are no preemptive rights with respect to the common stock. Upon
liquidation, dissolution or winding up of the affairs of the Company, and after
payment of creditors, the assets legally available for distribution will be
divided ratably on a share-for-share basis among the holders of the outstanding
shares of common stock.
Preferred Stock.
We are not authorized to issue any preferred stock at this time.
Item 9. Management's Discussion and Analysis
The company is considered to be in the development stage, and has generated no
revenues in the last two fiscal years. In 1999, we experienced a loss of
$22,259. Management cannot say with certainty when significant revenue will be
received from the company's business.
We are dependent on financial support from the management of the company to meet
our cash requirements. While the company hopes to raise money through the sale
of securities in a public or private offering during the next fiscal year, there
is no guarantee that we will do so.
After acquiring Clean Water Technologies, we signed an agreement with GSA
Resources to act as our exclusive sublicensee. Pursuant to the contract, the
company is entitled to a royalty of 5% of the gross revenue transacted by GSA,
along with a minimum royalty payment of at least $5000, up to a maximum of
$10,368. GSA has ambitious plans to exploit our arsenic technology and is in the
process of raising money to support their marketing effort. These royalty
payments commence on December 31, 2001.
We signed a letter of intent to acquire Zorax, Inc. on May 1,2000. After
performing due diligence on the company, we agreed to issue 600,000 shares of
restricted common stock to acquire Zorax, on September 21,2000. We continue to
explore the acquisition of environmentally friendly technologies.
11
PART II
Item 1. Market Price of and Dividends on the Registrant's Common Equity and
Related Stockholder Matters.
(a) Market information.
Our common stock is traded on the Over the Counter Bulletin
Board ("OTCBB") under the symbol NRGE. The following bid quotations
have been reported for the period beginning January 1, 1998 and ended
June 30, 2000:
Bid Quotations
--------------
Period High Low
------ ---- ----
Quarter Ended:
March 31, 1998 $3/8 $1/4
June 30, 1998 $1/2 $3/8
September 30, 1998 $17/32 $3/8
December 31, 1998 $23/32 $5/32
Quarter Ended:
March 31, 1999 $11/16 $13/32
June 30, 1999 $1 7/8 $3/8
September 30, 1999 $1 1/16 $1/2
December 31, 1999 $1 1/16 $11/16
Quarter Ended:
March 31, 2000 $2 7/16 $13/16
Jume 30, 2000 $2 $1 3/32
Such quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission. Such quotes are not necessarily representative
of actual transactions or of the value of our securities, and are in
all likelihood not based upon any recognized criteria of securities
valuation as used in the investment banking community.
The Company has been advised that approximately eleven member firms of
the NASD are currently acting as market makers for the common stock.
There is no assurance that an active trading market will develop which
will provide liquidity for the Company's existing shareholders or for
persons who may acquire common stock through the exercise of warrants.
(b) Holders.
12
As of June 30, 2000, there were approximately 618 holders of
record of our 4,112,855 shares of common stock outstanding. Of these
shares, 2,903,858 are restricted securities within the meaning of Rule
144(a)(3) promulgated under the Securities Act of 1933, as amended,
because such shares were issued and sold by the Company in private
transactions not involving a public offering. Certain of the shares of
common stock are held in "street" name and may, therefore, be held by
several beneficial owners. Our transfer agent is Fidelity Transfer
Company located at 1800 South West Temple, Suite 301, Box 53, Salt Lake
City, UT 84115.
No prediction can be made as to the effect, if any, that future sales
of shares of common stock or the availability of common stock for
future sale will have on the market price of the common stock
prevailing from time-to-time. Sales of substantial amounts of common
stock on the public market could adversely affect the prevailing market
price of the common stock.
(c) Dividends.
We have not paid a cash dividend on our common stock in the past two
years. The payment of dividends may be made at the discretion of our
Board of Directors and will depend upon, among other things, our
operations, our capital requirements and our overall financial
condition. As of the date of this registration statement, we have no
intention to declare dividends.
Item 2. Legal Proceedings.
We are currently unaware of any pending legal proceeding or any proceeding
contemplated by a governmental authority in which we may be involved.
Item 3. Changes in and Disagreements with Accountants.
In August 1998, we retained our current accountants, Acquavella, Chiarelli,
Shuster & Co. We dismissed our previous accountant, Robert DiMarco, because the
firm was understaffed. The dismissal was not due to any unfavorable report or
disagreement. Further, the dismissal was not related to any advice or
recommendations of the accountant. The change was made solely based on the fact
that the Board of Directors felt that a larger firm may better meet the needs of
our Company.
Item 4. Recent Sales of Unregistered Securities.
On January 13, 1997 we issued 3,000 shares of our common stock as an employee
bonus. This transaction was made in reliance on the exemption from the
registration requirements provided in section 4(2) of the Securities Act of
1933.
On June 30, 1997, we issued 306,000 shares of our common stock in the conversion
of outstanding 10% convertible bonds. This transaction was made in reliance on
the exemption from the registration requirements provided in section 4(2) of the
Securities Act of 1933.
On March 2, 1998, we issued 3,000 shares of our common stock as an employee
bonus. In addition, we issued 500,000 shares to Howard and Laurie Scala as
compensation for services
13
rendered on the same date. These transactions were made in reliance on the
exemption from the registration requirements provided in section 4(2) of the
Securities Act of 1933.
On February 17, 1999, we issued 2,000 shares of our common stock as an employee
bonus. This transaction was made in reliance on the exemption from the
registration requirements provided in section 4(2) of the Securities Act of
1933.
On June 17, 1999 we issued 1,000,000 shares of our common stock as compensation
for services rendered. This transaction was made in reliance on the exemption
from the registration requirements provided in section 4(2) of the Securities
Act of 1933.
On June 30, 1999, we issued 893,000 shares of our common stock pursuant to the
Agreement and Plan of Merger with Clean Water.
On December 30, 1999, we issued 2,000 shares of our common stock as an employee
bonus. This transaction was made in reliance on the exemption from the
registration requirements provided in section 4(2) of the Securities Act of
1933.
Item 5. Indemnification of Directors and Officers.
Our Amended and Restated Certificate of Incorporation eliminates the liability
of our directors, officers, and trustees to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law ("DCGL"), as the same may be
amended from time to time.
Section 145(a) of the DGCL provides that a Delaware corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
14
Section 145 of the DGCL further provides that to the extent a director or
officer of a corporation has been successful on the merits or otherwise in the
defense of any action, suit or proceeding referred to in subsections (a) and (b)
of Section 145, or in the defense of any claim, issue, or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; that indemnification and
advancement of expenses provided by, or granted pursuant to Section 145 shall
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to his official capacity and as to action in another capacity while holding such
office; that indemnification and advancement of expenses provided by, or granted
pursuant to, Section 145 shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person; and that the corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
such Section 145.
15
NU ELECTRIC, CORPORATION & SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
NU ELECTRIC, CORPORATION & SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
TABLE OF CONTENTS
Page
Independent Auditor's Report 1
Consolidated Financial Statements:
Balance Sheet 2
Statement of Operations 3
Statement of Stockholder's Equity (Deficiency) 4
Statement of Cash Flows 5
Notes to Financial Statements 6-8
Consolidating Supplementary Information:
Independent Auditor's Report on
Supplementary Information 9
Consolidating Balance Sheet 10
Consolidating Statement of Operations 11
To The Stockholders And Directors
Nu Electric, Corporation & Subsidiaries
Tarpon Springs, Florida 34689
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheet of Nu Electric,
Corporation & Subsidiaries, as of June 27, 1999 and June 30, 2000 and the
related consolidated statements of operations, retained earnings, stockholder's
equity (deficiency) and cash flows for the fifty two weeks then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. A audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. A audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nu Electric, Corporation &
Subsidiaries, as of June 27, 1999 and June 30, 2000, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
Acquavella, Chiarelli,
Schuster & Co.
Iselin, New Jersey
July 10, 2000
Page 2
NU ELECTRIC, CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE
ASSETS
June 27, June 30,
1999 2000
Cash $16,483 $14,552
Deposits 925 925
Property and equipment (net) (note 2) 12,638 9,478
$30,046 $24,955
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Due to officer 15,000 15,000
Accrued expenses - 7,500
Total liabilities 15,000 22,500
Stockholders' equity and deficiency
Common stock - par value $.001
Authorized 50,000,000 shares - -
Issued and outstanding 4,112,855
shares 61,543 61,543
Additional paid in capital 763,158 763,158
Accumulated deficit (809,655) (812,246)
Total stockholders' equity (deficit) 15,046 7,455
$30,046 $24,955
See accountants' report and notes to financial statements
Page 3
NU ELECTRIC, CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Fifty-two Fifty-two
Weeks Ended Weeks Ended
June 27, 1999 June 30, 2000
Revenue $-0- $-0-
Operating Expenses:
Salaries and related expenses - -
Clearing expenses and commissions - -
Depreciation/amortization 3,160 3,160
Rent 6,102 -0-
Selling, general and administration 34,318 9,597
Total operating expenses 43,580 12,757
Net Income (loss) from operations ($43,580) ($12,757)
Interest and dividend income 18 166
Other income 21,303
Net income (loss) ($22,259) ($12,591)
Net income (loss) per common share (.00584) (.00306)
See accountants' report and notes to financial statements.
Page 4
NU ELECTRIC, CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY (DEFICIT)
FIFTY-TWO WEEKS ENDED JUNE 27, 1999 AND FIFTY-TWO WEEKS ENDED JUNE 30, 2000
C o m m o n S t o c k
Additional
Number of Par Paid-In
Shares Value Capital Deficit
Balance - June 28, 1998 1,906,397 $21,543 $761,158 ($787,396)
Net income (loss) 1,011,458 40,000 2,000 ( 22,259)
Balance - June 27, 1999 2,917,855 61,543 763,158 (809,655)
Net income (loss) 1,195,000 - - (12,591)
Balance - June 30, 2000 4,112,855 $61,543 $763,158 ($812,246)
See accountants' report and financial statements.
Page 5
NU ELECTRIC, CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Fifty-two Fifty-two
Weeks Ended Weeks Ended
June 27, 1999 June 30, 2000
Cash flows from operating activities:
<S> <C> <C>
Net income/(loss) ($22,259) (12,591)
Adjustment to reconcile net loss to
net cash used in operations:
Depreciation and amortization 3,160 3,160
Increase (decrease) in accounts payable and
accrued expenses 7,500
Net cash provided (used) by operating activities (19,099) 1,931
Cash flows from financing activities:
Proceeds from the issuance of 1,000,000
shares of common stock 40,000
Decrease in 10% convertible notes payable (3,000)
(Increase) decrease in due from officers 10,000
Net cash provided (used) by financing activities 27,000
Net increase (decrease) in cash 7,901 (1,931)
Cash - beginning 8,582 16,483
Cash - ending $16,483 $14,552
</TABLE>
See accountants' report and notes to financial statements.
Page 6
NU ELECTRIC, CORPORATION & SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
1. Organization and Nature of Business:
Escalator, Inc. was incorporated under the General Corporation laws of the
state of Delaware on April 17, 1986. On April 22, 1998, a certificate of
amendment was filed to change the name of the Corporation to Nu-Electric
Corporation. The Company is a publicly traded Company which trades under the
symbol NRGE. The Company owns 100% of Frank Communications Corp. and Escalator,
Inc. (Pennsylvania). Escalator, Inc. (Pennsylvania) owns 100% of Escalator,
Investments Inc. and Escalator Securities Inc.
Escalator Securities Inc. is a licensed broker dealer and market maker in
securities. The Company is licensed by the Securities and Exchange Commission,
various State security agencies and the National Association of Securities
Dealers. On December 31, 1997 the Company surrendered its license. Frank
Communications Corp. provides Financial Public Relations Services. The Company
ceased operations in July of 1997. As of June 28, 1998 all subsidiaries have
ceased doing business and are in the process of being dissolved. All significant
intercompany transactions and balances have been eliminated.
2. Summary of Significant Accounting Policies
a. Principals of Consolidation: The consolidated financial statements
include the accounts of Nu-Electric Corporation (Delaware), its wholly-owned
subsidiaries of Frank Communications Corp. and Escalator, Inc. (Pennsylvania).
Also Escalator Investments, Inc. and Escalator Securities, Inc. both
Pennsylvania corporations wholly owned by Escalator, Inc. (Pennsylvania). All
significant intercompany transactions and balances have been eliminated.
b. Securities not Readily Marketable: Securities not readily marketable
represent securities which cannot be sold or offered due to arrangements,
restrictions or other conditions applicable to the Company. The securities are
listed at fair value as determined by Board of Directors and is unchanged for
the period covered by the accompanying financial statements.
a. Property, Equipment, Depreciation and Amortization: Property and
equipment are stated at cost. Depreciation and amortization are provided using
the straight-line and declining balance method over the estimated useful lives
of the assets.
Page 7
NU ELECTRIC, CORPORATION & SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
2. Summary of Significant Accounting Policies (Continued)
d. Amortization of Debt Issuance Costs: The company and its subsidiaries
file a consolidated Federal income tax return. Investment tax credits, when
applicable, are recorded as a reduction of Federal income tax in the year in
which the credits are utilized.
e. Income Taxes: Debt issue costs associated with the 10% convertible notes
payable are being amortized over the term of the notes using the straight line
method which expired in 1997.
f. Income/(Loss) Per Common Share: The income or loss per common share is
based on the weighted average number of shares outstanding (4,112,855).
a. Statement of cash flows: For purposes of the statement of cash flows,
the Company considers all highly liquid accounts with a maturity of three months
or less as cash equivalents.
a. Concentrations of Credit Risk: Financial instruments which potentially
subject the Company to concentrations of credit risk consist of cash and cash
equivalents. The company places its temporary cash investments with a quality,
high credit financial institution. At times, such investments, along with the
Company's cash balances with this institution, exceeded the current insured
amount under the Federal Deposit Insurance Corporation.
i. Use of Estimates in Preparation of Financial Statements: The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make certain estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Page 8
NU ELECTRIC, CORPORATION & SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
3. Income Taxes
For income tax reporting, the Company and its subsidiaries have net
operating loss carry forwards, and investment tax credit carry forwards
available to reduce future Federal income taxes. If not used, the carry forwards
will expire as follows:
Year Ending Federal Net
In June Operating Loss
2001 $32,835
2002 54,000
2003 71,000
2004 183,000
2005 160,000
2008 33,713
2010 13,569
2011 121,290
2012 24,259
2013 22,798
$716,464
4. Business Combination
On June 30, 1999, Nu Electric, Corporation & Subsidiaries, a Delaware
Corporation entered into a merger agreement with Clean Water Technologies, Inc.,
(CWT) a Florida Corporation. The merger was accounted for by the pooling of
interests method, where the 10,000,000 shares of outstanding common stock of CWT
was converted to 893,000 shares of common stock of Nu Electric, Corporation &
Subsidiaries. CWT had no assets, liabilities or income of any kind, character or
description at the time of the merger, and accordingly there was no effect on
the revenues and earnings reported. CWT holds a license for a technology
developed at USF
Page 9
NU ELECTRIC, CORPORATION & SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
4. Business Combination (Continued):
(University of South Florida) to remove arsenic from drinking water. As of
October 1999 Nu Electric granted GSA Resources, Inc. an exclusive sublicense to
use and market the technology to remove arsenic from drinking water. Minimum
royalty payments under this agreement are as follows:
2001 5,000
2002 6,000
2003 7,200
2004 8,640
2005 (and until termination) 10,368
5. Commitments and Contingencies:
a. As of May 1, 2000 the Company has signed a letter of intent to acquire
Zorax, Inc. and the exclusive worldwide license to manufacture and market a
proprietary process technology that improves the extraction of cryptosparedium
and giardia from drinking water. A US patent has been filed by John Hopkins
University, the owners' of the technology. Zorax Inc. has no assets or
liabilities other than as relates to its license of the technology and research
agreement with John Hopkins University. Nu Electric proposes to acquire Zorax,
Inc. no later than August 31, 2000 by way of a tax free merger whereby Nu
Electric will issue 1,000,000 shares of its common stock in exchange for all
outstanding shares of Zorax, Inc.
Stockholders and Directors
Nu Electric, Corporation & Subsidiaries
Tarpon Springs, Florida 34689
INDEPENDENT AUDITOR'S REPORT ON
CONSOLIDATING SUPPLEMENTARY INFORMATION
Our audits of the consolidated financial statements included in the
preceding section of this report were directed to the consolidating
supplementary information as of June 27, 1999 and the June 30, 2000, and for the
fifty-two weeks then ended, presented in the following section of this report
has been subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements. This information, while not considered
necessary for fair presentation of the consolidated financial position, results
of operations and cash flows of the Company and its subsidiaries, is in our
opinion, fairly stated in all material respects in relation to the consolidated
financial statements taken as a whole.
Page 11
NU ELECTRIC, CORPORATION & SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000
Fifty-two Fifty-two
Weeks Ended Weeks Ended
June 27, 1999 June 30, 2000
Dues and subscriptions $1,945
Fines litigation and assessments -
Insurance -
Legal and accounting 4,274 5,000
Office expenses and supplies 8,642
Sales, promotional, auto ant travel 12,320
Taxes, licenses and filing fees 1,854 2,606
Telephone and utilities and maintenance 5,283 1,991
$34,318 $9,597
See accountants' report and notes to financial statements.
EXHIBIT INDEX
EXHBIT # ITEM Page
2.1 Acquisition of Escalator, Inc.*
2.2 Lone Pine Resources, Inc. Merger*
2.3 Agreement and Plan of Spinoff*
2.4 Acquisition of Clean Water Technologies, Inc.*
3.1 Articles of Incorporation*
3.2 Bylaws*
4 Share Certificate*
10 Sublicense Agreement GSA
21 Subsidiaries of the Registrant*
27 Financial Data Schedule*
* Previously filed.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
NU ELECTRIC CORP.
/s/ Laurie Scala
---------------------------
By: Laurie Scala, President
Date:
Exhibit 10 Sublicense Agreement GSA
SUBLICENSE AGREEMENT
THIS AGREEMENT, effective the 12th day of OCTOBER 1999, is between NuElectric
Corp., a Delaware corporation, ("NUELECTRIC"), located at 624 East Tarpon
Avenue, Tarpon Springs, Florida 34689 and GSA Resources, Inc. ("GSA") an Arizona
corporation, located at 7660 N. Business Park Drive, Tucson, Arizona 85743.
Introduction
WHEREAS, GSA is involved in the merchandising of several Zeolite related
products. WHEREAS, the University of South Florida ("U8F") has developed the
following technology: Method for removing arsenic species from an aqueous
liquid using modified zeolite materials as disclosed in US patent applications
60/036,704 and 90/016, 126 by inventor Dr. Dagmar Bonnin. Copies of the patent
application have been provided to GSA. WHEREAS, NUELECTRIC is the exclusive
licensor ofUSF Technology and is willing to grant GSA an exclusive sublicense
to use and market USF Technology; and WHEREAS, NUELECTRIC believes it is in its
best interest to grant GSA a license as set forth below: NOW THEREFORE,
in consideration of the premises and mutual covenants set forth herein, and
intending to be legally bound, the parties agree as follows:
1. Definitions
A. "NUELECTRIC Patent Rights" shall mean the license rights to the
USF Patent Application listed above and any successor application, domestic or
foreign resulting therefrom, and any US or foreign patents issuing therefrom.
B. "USF Technology" shall mean a method for removing arsenic species from
aqueous liquid using modified zeolite minerals as described in USF's patent
application.
C. "Licensed Product" shall mean any GSA product, system and/or process in which
USF Technology is used, for arsenic removal.
D. To "Commercially Exploit" or "Commercial Exploitation" of a Licensed Product,
shall mean to provide the Licensed Product to a customer, in exchange for
valuable consideration.
E. "Revenue for a Licensed Product" shall mean consideration due or paid to GSA
for GSA's providing of a Licensed Product to a customer.
F. "Territory" shall mean Worldwide.
II .Grant
Subject to the covenants set forth in Section VII below, GSA is granted the
exclusive right and license to Commercially Exploit Licensed Products in the
Territory.
III. Best Efforts
GSA. shall use its best efforts to develop and Commercially Exploit Licensed
Products in the Territory.
IV. License Fees and Running Royalties
GSA agrees to pay license fees, and running royalties ( all payable to
NUELECTRIC) as follows:
A. For the arsenic removal technology (Dr. Dagrnar Bonnin's technology)
an initial license fee of $0.
IV. License Fees and Running Royalties ( continued) B. Running Royalties equal
to: Five Percent ( 5% ) of the gross revenue resulting from Commercial
Exploitation of Licensed Products in the United States on a semi-annual basis.
Two-Percent (2% ) of the gross revenue resulting from Commercial Exploitation of
Licensed Products outside the United States on a semi- annual basis.
C. GSA shall pay to NUELECTRIC the following minimum annual royalty payments:
Zero (0) dollars until December 30th, 2001; five thousand dollars ($5,000.00)
payable on December 31st, 2001 ;six thousand dollars ($6,000.00) payable on
December 31st, 2002; seventy-two hundred dollars ($7,200.00) payable on
December 31st, 2003; eight thousand six hundred forty dollars ($8,640.00)
payable on December 31st, 2004; and ten thousand three hundred sixty eight
dollars ($10,368.00) payable on December 31st, 2005; and on December 31st for
each successive year thereafter during the term of this Agreement.
V. Patent Prosecution
The filing, prosecution and maintenance of all USF Technology shall be at the
sole discretion of USF, provided that at GSA's request and sole expense,
NUELECTRIC will arrange for USF to seek, obtain and maintain the USF Technology
and requested other protection, in the territory, to the extent that USF is
lawfully entitled to do so, all of which shall be incorporated in USF
Technology. Should GSA elect not to seek, obtain or maintain a part of USF
Technology, all rights to such part shall revert to NUELECTRIC, and GSA shall
have no further interest therein.
VI. Assignability
This Agreement may not be assigned by GSA to any person or entity without
NUELECTRIC'S advance approval.
VII. NUELECTRIC Retained Rights and Covenant
USF retains the right to use this technology for educational and research
purposes.
NUELECTRIC covenants that it will not license to Commercially Exploit USF
Technology licensed to oSA under this Agreement, and will not itself so
Commercially Exploit, unless
(A) authorized by this Agreement, or (B) GSA becomes insolvent, or
(C) anyone files a lien against this Agreement, the USF Technology, or
the NUELECTRIC Patent Rights granted to GSA hereunder, or
(D) GSA takes any action, or fails to take any action, the result of
which gives a third party the right to acquire a security interest in
this Agreement, the USF Technology, or the NUELECTRIC Patent Rights
granted to GSA hereunder, or
(E) GSA files for bankruptcy or a receiver is
appointed, or
(F) GSA ceases to carry on its business, with the exception
of merger, reorganization, acquisition, or similar restructuring.
(G) GSA materially breaches this Agreement in a manner that causes the
Agreement to terminate or give NUELECTRIC the right to terminate under
Section XII.
VIII. Product Liability/Insurance
GSA shall, at all times during the term of this Agreement and thereafter,
be solely responsible for, and defend, hold harmless and indemnify USF, the
State of Florida, Board of Regents, NUELECTRIC, their trustees, officers,
employees, agents and other representatives, against any claims and expenses,
including legal expenses and reasonable attorney's fees, arising out of the
death of or injury to any person or property based upon products and/or services
produced, provided or developed for, or by GSA, or commercially exploited by GSA
pursuant to its rights under this Agreement. GSA shall obtain and carry in full
force and effect product liability insurance, in amounts customary in the
relevant industry in which GSA commercially exploits licensed products which
shall protect USF, their trustees, the Board of Regents, officers, employees,
and agents and the State of Florida and NUELECTRIC in regard to the foregoing
events at such time as GSA begins to commercially exploit licensed products.
IX. Record Keeping
A. GSA shall keep full, true and accurate books of account containing
all particulars that may be necessary for the purpose of showing the
amounts payable to NUELECTRIC hereunder. Said books of account shall be
kept at GSA's principal place of business. Said books and the supporting
data shall be open at all reasonable times, with reasonable advanced
notice for five (5) years following the end of the calendar year to
which they pertain, to the inspection of NUELECTRIC or its agents for
the purpose of verifying GSA's royalty statement or compliance in other
respects with Agreement.
B. GSA within ninety (90) days after each six (6) months, shall deliver
to NUELECTRIC true and accurate reports, giving such particulars of the
business conducted by GSA during the six (6) months as shall be
pertinent to royalty accounting hereunder. These shall include at least
the following:
(1) the number or amount of Licensed Products provided by GSA to its
customers, if any,
(11) the Revenue derived by GSA from its Commercial Exploitation of
Licensed Products, if any, and
(III) the royalties due pursuant to Section IV
With each such report submitted, GSA shall pay the royalties and any
other consideration due and payable under this Agreement. If no
royalties, fees or other consideration shall be due, GSA shall so
report.
C. On or before the ninetieth (90th) day following the close of GSA's
Fiscal year, GSA shall provide NUELECTRIC with GSA's financial
statements for the preceding fiscal year including, at a minimum, a
Balance Sheet and an Operating Statement.
D. The payments for royalties, fees or other consideration set forth in
this Agreement shall, if overdue, bear interest until payment at the
monthly rate of one percent ( 1% ). The payment of such interest shall
not foreclose NUELECTRIC from exercising any other rights either may
have as a consequence of the lateness of any payment.
E. GSA hereby agrees that it shall not sell, transfer, export or
re-export any Licensed Products or related information in any form or
any direct products of such information, except in compliance with all
applicable laws, including the export laws of any U.S. government agency
and any regulations thereunder, and will not sell, transfer, export or
re-export any such Licensed Products or information to any persons or
any entities with regard to which there exist grounds to suspect or
believe that they are violating such laws. GSA shall be solely
responsible for obtaining all licenses, permits or authorizations
required from the U.S. and any other government for any such export or
re-export.
X. Non Use of Names
GSA shall not use the names of USF or NUELECTRIC, nor any adaptation or
either, in any advertising, promotional or sales literature without
prior written consent obtained from USF and/or NUELECTRIC in each case,
except that GSA may state that it is licensed by NUELECTRIC under one or
more of the patents and/or applications comprising the USF Technology.
XI. Term and Termination
A. Unless sooner terminated as provided herein, the royalty obligations
of this Agreement will expire twenty (20) years from the date of the
execution of this Agreement.
B. In the event GSA files for bankruptcy or a receiver is appointed,
this Agreement may immediately thereafter be terminated at the option
of NUELECTRIC.
C. Should GSA fail to pay the royalties, and/or other consideration due
and payable hereunder, NUELECTRIC shall have the right to terminate this
Agreement on fofty-five (45) days written notice. Upon the expiration of
the fofty-five (45) day period, if GSA shall not have paid all such
royalties and interest thereon, NUELECTRIC shall have the right to
terminate this Agreement. Upon any material breach or default of
Agreement by GSA, other than those occurrences set out herein above
which shall always take precedence in that order over any material
breach or default referred to in this Section, NUELECTRIC shall have the
right to terminate this Agreement and the rights, privileges and license
granted hereunder upon fofty-five (45) days written notice to GSA. Such
termination shall become effective unless GSA shall have cured any such
breach or default prior to the expiration offofty-five (45) days from
the date GSA receives notice of the breach or default.
D. Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that
matured prior to the effective date of such termination. GSA may,
however, after the effective date of such termination, complete
Commercial Exploitation of Licensed Products for which GSA has received
consideration at the time off such termination and sell the same,
provided that GSA shall pay to NUELECTRIC the royalties or other
consideration thereon as required under the provisions of Section IV of
this Agreement, and shall submit the reports required under Section IX
regarding the Commercial Exploitation of the Licensed Products.
E. Upon termination of this Agreement for any reason, all intellectual
property rights licensed hereunder, including without limitation, all
USF Patent Rights and all USF Technology shall revert to NUELECTRIC, and
GSA shall have no further right to or continuing interest. In addition,
any sublicenses hereunder shall terminate, unless accepted by
NUELECTRIC.
F. GSA, its successors or assigns, shall have the option to terminate
this license agreement upon thirty {30) days written notice and in
that event, GSA shall cease using USF Technology and return same
to NUELECTRIC. In this event, it is understood that all future minimum
annual royalty payment obligations under this Agreement shall be void
and cancelled.
XII. Payments, Notices and Other Communications
Any payment, notice or other communication made to any party pursuant
to this Agreement shall be sufficiently made or given on the date of
mailing if sent to such party by certified first class mail or air
courier, postage prepaid, addressed to it at its address below, or at
such other address as it shall have designated by written notice given
to the other party.
In the case of NUELECTRIC: 624 East Tarpon Avenue
Tarpon Springs, FL 34689
In the case of GSA: 7660 N. Business Park Drive Tucson, Arizona 86743
XIII. Infringement
GSA understands that NUELECTRIC makes no representation and provides no
assurance that Commercial Exploitation of Licensed Products under this
Agreement does not and will not in the future, infringe or otherwise
violate the rights of others.
XIV. Miscellaneous Provisions
A. Each party represents and warrants that it has the' authority to
enter into this Agreement and that the execution, delivery and
performance of this Agreement does not conflict with any agreement, or
understanding, either written or oral, to which it is a party or to
which it is otherwise bound.
B. This Agreement shall be construed, governed, interpreted and
applied in accordance with the laws of the State of Florida, U.S.A.
C. The parties hereto acknowledge that this Agreement sets forth the
entire agreement and understanding of the parties, hereto as to the
subject matter hereof, and shall not be subject to any change or
modification except by the execution of a written instrument subscribed
to by the parties hereto.
D. If any term, covenant or condition of this Agreement or the
application thereof to any party or circumstance shall, to any extent
be held to be invalid or unenforceable,
(I) The remainder of this Agreement, or the application of such term,
covenant or condition to the parties or circumstances other than those
as to which it is held invalid or unenforceable, shall not
be affected thereby and each term, covenant or condition of this
Agreement shall be valid and be enforced to the fullest extent permitted
by law, and
(II) the parties hereto covenant and agree to renegotiate any such term,
covenant or application hereof in good faith in order to provide a
reasonably acceptable alternative to the term, covenant or condition of
this Agreement or the application thereof that is invalid or
unenforceable, it being the intent of the parties that the basic purpose
of this Agreement are to be effectuated.
E. GSA agrees to use in connection with Licensed Products used and/or
provided in the United States all applicable United States Patent
numbers requested by NUELECTRIC. All licensed Products used and/or
provided in other countries shall be marked in such a manner as to
conform with the patent, copyright and other laws and practice of the
country.
F. The failure of any party to asserts a right hereunder or to insist
upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure
to perform any such term or condition by the other party.
G. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THlS AGREEMENT,
NUELECTRIC MAKES NO REPRESENTATION AND EXTENDS NO WARRANTIES OF ANY
KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO
WARRANTIES OF MERCHANT ABILITY, FITNESS, AND VALIDITY OF USF TECHNOLOGY
OR NUELECTRIC PATENT RIGHTS.
H. It is understood and agreed that USF is a third party beneficiary of
this Agreement.
IN WITNESS WHEREOF, the parties hereunto set their hands and seals and
duly executed this Agreement the day and year set forth below.
NUELECTRIC CORP.
624 East Tarpon Avenue
Tarpon Springs, FL 35689
BY: ______________________________
Laurie C, Scala, President
February 14, 2000
WITNESS:________________________
Howard Scala
GSA Resources, Inc.
7660 N, Business Park Drive
Tucson, AZ 85743
BY:_________________________
Daniel T. Eyde, President
October 12, 1999
WITNESS:_____________________
(uninteligable)
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