SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
TO
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
ELECTRO PULSE
TECHNOLOGIES COMMERCIAL, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 95-4737506
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
48 Old Mill Road, Greenwich, CT 06831
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:
(203) 629-0110
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, $.001 PAR VALUE
(Title of Class)
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ELECTRO PULSE TECHNOLOGIES COMMERCIAL, INC.
FORM 10-SB
TABLE OF CONTENTS
PART I
ITEM NO. Page
Item 1. Description of Business ............................... 1
Item 2. Management's Discussion and Analysis
or Plan of Operation ...............................10
Item 3. Description of Properties .............................17
Item 4. Security Ownership of Certain Beneficial
Owners and Management ..............................18
Item 5. Directors, Executive Officers, Promoters and
Control Persons ....................................19
Item 6. Executive Compensation ................................21
Item 7. Certain Relationships and Related
Transactions .......................................22
Item 8. Description of Securities .............................23
PART II
Item 1. Market Price of and Dividends on the Registrant's
Common Equity and Other Shareholder Matters ........23
Item 2. Legal Proceedings .....................................24
Item 3. Changes in and Disagreements With
Accountants ........................................24
ITEM 4. Recent Sales of Unregistered Securities ...............24
ITEM 5. Indemnification of Directors and Officers ..............25
PART F/S
Financial Statements ...........................................27
PART III
Item 1. Index to Exhibits and Description of Exhibits ..........28
Signature Page ..................................................29
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company
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On January 14, 2000, Electronic Engineering and Design Corporation, a Delaware
corporation ("EED"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Electro Pulse Technologies Commercial, Inc. ("EPT"), a Delaware
corporation. Pursuant to the terms of the Merger Agreement, and subject to the
conditions set forth therein, EPT was merged with and into EED (the "Merger").
At the effective time of the Merger, the separate existence of EPT ceased and
was merged with EED. The effective date of the Merger was January 20, 2000. EED
is the surviving corporation. Immediately upon completion of the merger, EED
filed with the Delaware Secretary of State to change its name to Electro Pulse
Technologies Commercial, Inc.
Upon completion of the Merger, there were 5,600,000 shares of EED common stock
issued and outstanding, held as follows: 5,100,000 (i.e., 91%) common shares
held by the former shareholders of EPT and 500,000 (i.e., 8.9%) common shares
held by the existing shareholders of EED.
DRYTRONIC MERGER
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Prior to the Merger, as of December 31, 1999, Drytronic, Inc., a Wisconsin
corporation ("Drytronic"), merged with and into Drytronic Acquisition Co., a
wholly-owned subsidiary of EPT (the "Drytronic Merger"). In the Drytronic
Merger, each share of Drytronic common stock was exchanged for 0.3749 shares of
EPT common stock (resulting in the Drytronic shareholders owning 16% of EPT)
and, in addition, EPT agreed to deliver up to 400,000 additional shares of EPT
Common Stock (and to pay interest on the fair market value of such stock) to the
former Drytronic shareholders upon EPT's attainment of certain financial
benchmarks. Prior to the Drytronic Merger, Drytronic was engaged in EPS System
installations throughout the United States. In addition, prior to the Drytronic
Merger, Drytronic and EPT America Co., Inc., an affiliate of EPT, were engaged
in litigation involving certain intellectual property, which litigation was
settled. The Company believes that the melding of Drytronic's operating history
in installing the EPS System, and the implicit confirmation of the EPS System by
the U.S. Army Corps of Engineers, with the management expertise of EPT and EPT's
control of the intellectual property assets, which form the basis of the EPS
System, will create a strong presence in this unique and technologically
superior approach to waterproofing problems.
Business
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The Company's principal business lies in the waterproofing industry in the
commercial market in the United States and Canada. By utilizing revolutionary
patented technology, the Company will seek to become the preferred and specified
source for waterproofing all concrete, masonry and brick structures (the
"Structures") in the commercial market (the "Market"). The Market shall mean all
Structures except single and multi-family Structures up to 4 units or mixed-use
Structures with up to 4 units.
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The revolutionary technology - the Electro Pulse Shield System (the "EPS
System") - is the only waterproofing system available for Structures that
provides a permanent total solution by preventing water intruding into and
protecting the structural integrity of Structures, and drying out and reducing
the relative humidity within Structures.
Detailed Description
To attain its objectives, the Company will:
a) Establish a national platform of companies which will install the EPS
System ("Installation Companies") that service entities in all the segments
of the Market, service the customer base of these companies, and make ad
--
hoc installations in their respective territories;
---
b) Establish joint ventures and strategic alliances with large organizations
with recurring water problems, or which service recurring water problems or
which market and sell their products and services to the same customer base
as the Company; and
c) Strategically acquire companies for the Company's expansion of its customer
base and infrastructure.
The Company believes that it is the goal of the owner of a Structure to:
o maintain the stability and strength of the Structure;
o prolong the useful life of, and reduce the rate of deterioration within,
the Structure;
o reduce the costs of maintaining the Structure; and
o enhance the environment and habitability of the space within the Structure.
To achieve the foregoing, dampness and moisture must be reduced within and
without the Structure. The Company provides services to remove/reduce water by
use of an electrical chemical process known as electro-osmosis.
There is no question that serious problems result from the dampness and moisture
present in bridges, dams, tunnels, highways, commercial basements and
below-grade storage areas and other Structures. The Company believes that there
is no permanent solution to address these types of problems. The Company,
through the EPS System, offers its customers the only commercially viable
permanent solution available on the market today.
The EPS System should not be viewed as an isolated product; rather, the EPS
System is the means - the tool - by which to achieve a result. The Company is a
specialist in the movement of water and in the permanent resolution of water
problems, specialties in which the EPS System plays an integral part. The
Company has expansive knowledge and experience in the chemical and physical
composition of Structures, and in the proprietary and specialized know-how of
using electro-osmosis to permanently solve water problems.
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Servicing
The Company will warrant the hardware it installs for two years after
installation (and pass along manufacturer warranties, where applicable). After
the initial two-year warranty has expired, the Company will offer, at an
additional cost, a service contract covering periodic equipment maintenance and
site inspection. By selling a service contract, the Company will guarantee that
the Structure will remain dry (i.e., approximately 80% relative humidity ("RH"))
for the duration of the service contract.
Representatives of the United States Army Corps of Engineers (the "Army Corps")
have informed the Company that additional government facilities will be
interested in the EPS System being offered with a long-term maintenance
agreement.
EPS System Advantages
The Company believes that the EPS System:
o provides a cost effective permanent solution to resolving water related
problems;
o negates the need for expensive exterior site work - the EPS System is
flexible and can be installed from the exposed side of a Structure;
o uses low wattage and low voltage electricity, resulting in minimal running
costs - no more electricity than that used by an ordinary light bulb is
needed to protect 5,000 square feet in the ongoing maintenance stage;
o causes no known damaging side effects, and does not alter the material
composition of a Structure once installed correctly;
o prevents undesired chemical reactions attributable to high RH from
occurring within Structures by reducing RH to its optimal level, but in no
event below 79% (the EPS System is self-regulating; to reduce RH below 79%
might allow other chemical reactions to occur, causing damage to the
Structure);
o reduces or prevents the corrosion of steel reinforcing rods situated within
a Structure;
o aids in reducing cracks within the Structure;
o creates a permanent virtual shield which prevents water and corrosion
causing minerals, such as salt, from returning into the Structure;
o reduces the RH in spaces within a Structure, thereby preventing corrosion
and other damage to mechanical equipment and other fixtures present in such
interior spaces, as well as enhancing the environment for human
inhabitants;
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o enhances a Structure's insulation -- a wet wall is a better leader than a
dry wall;
o enhances the binding properties between old concrete and newly applied
concrete, an important consideration in the renovation of deteriorated
(cracked) concrete;
o prevents paint from peeling; and
o provides certain environmental benefits such as preventing the growth of
mold and mildew, eradicating foul smells, improving air quality for
breathing and removing numerous dangerous gasses (such as radon), either
caused during the concrete curing process or which otherwise travel via
water.
Past Installations; EPS System Applications
There are more than 1,000 successful installations of the EPS System in Norway,
Sweden and Denmark. There are more than 100 successful installations of the EPS
System in the United States.
The Company has several installation reports on file which demonstrate the
benefits of the EPS System including installations at:
o the University of Wisconsin (Madison) detailing the installation of the EPS
System in an elevator shaft several feet below sea level, adjacent to Lake
Mendota. This is an excellent example of a severe water problem occurring
below the water table, which was solved by the EPS System. A video was also
prepared about the installation;
o the US Army Corps of Engineers Testing Facility, in which the report
detailed an installation in the mechanical room of an Army barracks. A
video was also prepared about the installation (an internal Army flyer of
this installation is available);
o the Washington County Public Services Building is Hillsborough, Oregon,
involving the attempt to waterproof a 16,000 square feet basement which
provide unsuccessful until the installation of the EPS System.
o the Department of Treasury headquarters in Washington, DC. The EPS System
arrested water intrusion in a 150 year old basement vault room.
o Fort Monmouth, New Jersey, where two 15,000 square feet basements were
protected from water intrusion.
Prime candidates for installation of the EPS System are Structures featuring
below-grade construction including dams, sea-walls, tunnels, bridges, decks,
basements, utility stations, water towers, silos, culverts, plants and
basements.
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Competition
The Company will fill a void within the construction industry. The "state of the
art" waterproofing techniques in the industry today can be characterized as
temporary solutions to a problem for which there was, prior to the advent of the
EPS System, no apparent permanent solution. The Company believes that the EPS
System represents a dramatic improvement to the problem.
In certain circumstances, other waterproofing products may be used by the
customer instead of or in competition with the EPS System. While the direct
expense of certain of these stand-alone products and solutions might be
perceived by the customer as being less expensive, use of these products and
solutions are fraught with significant weaknesses when compared to the EPS
System. However, if used in concert with the EPS System, certain of these other
products and solutions (such as penetrants and additives) might enhance the
result (i.e., make the overall solution less costly) achieved by the customer.
Pricing and Price Competition
The EPS System is not a standard "off-the-shelf-product" as each installation is
independently priced. The Company believes that the EPS System is extremely
competitive with traditional waterproofing systems when the following costs are
considered: excavation, reconstruction, refurbishing, maintenance, labor,
warehousing and downtime. The Army Corps estimates that the EPS System provides
a 40% savings over existing waterproofing solutions and saved the Army
approximately $5 million in 1997. Additionally, because there is less need for
extensive testing, structural analysis and engineering, as well as simpler
installation procedures in new construction, the EPS System represents a
considerable cost savings when installed in new construction vs. existing
construction.
The extent and scope of the installation will vary from site to site, and will
depend upon such variables as, among others, the composition of the Structure
(which affects the rate at which water travels), the moisture content within the
Structure, the level of outside pressure and the extent of capillary synthesis.
When pricing an installation, hardware costs will in most instances represent
only a small portion of the total sales price, while labor and engineering costs
will comprise a greater portion. Thus, a number of factors will be considered,
such as the:
o size of the control unit(s), number of positive and negative electrodes and
length of connecting cable required;
o accessibility to area to be protected;
o number of man-hours required to design, engineer and effect the
installation of the EPS System; and
o number of man-hours and material needed to refurbish the Structure, if
necessary.
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Another factor to be considered is the customer's perceived value of the
solution. How costly would the problem be if the customer were to solve the
problem by conventional methods? For example, perhaps the outside of the
Structure must be excavated, leaders repaired or new membranes installed--work
which is costly and demanding. Since the EPS System may be installed from the
interior, much site work of this kind will be unnecessary.
Further, not only does a customer have to address the costs associated with
maintaining and repairing a deteriorating Structure, but, in many instances, it
must also address the costs associated with maintaining or repairing, even
replacing equipment, such as elevators and turbines, and furnishings exposed to
the damaging effects of high RH. In addition, the potential significant cost
savings to be realized by installing the EPS System as a preventive measure
before any damage occurs will be factored into the sales price.
As evident from the above discussion, installation of the EPS System requires
specific engineering for unique problem resolution. Hence, installations require
a high degree of experience in, and knowledge of, concrete, brick and masonry,
and moderate engineering skill and proficiency to develop the best and most
cost-effective solution.
Obviously, it is not possible to establish a standard per square foot price.
The Company believes that it will continue to operate at high margins for the
foreseeable future by virtue of the enhancements and improvements on the drawing
board, which are anticipated to reduce the costs and expand the uses of the EPS
System. See "Management Discussion and Analysis of Financial Condition and
Results of Operation." While the focus is on customers' emergencies, the
Installation Companies will also market the EPS System as a proactive rather
than reactive solution, recognizing the enhanced value of a "healthy" Structure.
Backlog
As of December 31, 1999, the Company had a backlog of three jobs representing
approximately $250,000 in revenue.
Dependence on Limited Number of Customers
As of December 31, 1999, Drytronic and EPT had performed installations of the
EPS System for US Navy; US Air Force; US Army; US Army Reserves; Government
Services Administration; US Treasury; the Pentagon; University of Wisconsin
(Madison); Washington County, Oregon; Veteran's Administration hospitals; State
of Nebraska and State of Wisconsin. In addition, the Company has performed
installations for private commercial entities.
Intellectual Property
Drytronic and EPT rely on certain intellectual property rights which form the
basis of the EPS System.
Government Regulation
The Company does not believe that it will be subject to any governmental
regulations which will cause it to expend significant amounts of money.
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Research and Development
Other than amounts to be incurred in connection with relocating Kjell Utklev,
the inventor of the EPS System, to the United States, the Company does not
expect to expend any amounts on research and development during the first three
months of 2000.
MARKET ANALYSIS
Overview
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The Company believes that the EPS System represents a dramatic potential
solution to the age old problem of preventing water from invading a Structure
and degrading the integrity of the Structure. While the traditional
waterproofing market is highly competitive and fragmented, the EPS System
presents an opportunity for the Company to address the waterproofing problem in
a unique and, the Company feels, technologically superior way. The Company
believes that its overall strategy must be to expand in a targeted manner to
introduce the EPS System into key markets.
The waterproofing market has historically been considered part of the general
construction market, making it difficult to isolate the volume of sales
attributable solely to waterproofing. Any Structure, whether old or new,
represents an opportunity for installation of the EPS System. While the new
construction market is large, the rehabilitation aftermarket is even larger.
Today's waterproofing market is based in large part on costly repetitive repairs
and maintenance activities resulting from the fact that available techniques and
systems are only temporary solutions. Theoretically, use of the EPS System would
decrease the maintenance and repair segment of the market. However, the Company
believes there are a significant number of jobs, which are not being undertaken
today because conventional methods are too cumbersome and costly. Further, a
Structure in need of waterproofing may have deteriorated to such an extent that
a costly construction rebuild is the only recourse available. If used as a
permanent tool in a customer's preventative and maintenance program, such as
installing the EPS System in new construction, the EPS System will reduce total
construction and long term maintenance costs. In discussions with Siemans in
connection with its facility management operation, the Company was informed that
Siemans estimates that the relationship between the cost of new construction and
the cost of maintenance over its useful life is 5% and 95%, respectively. Hence,
if the EPS System would only reduce the cost of maintenance a few percent, it
would represent a significant value to the construction industry. Customers are,
therefore, able to focus monies otherwise designated for maintenance and repairs
to new and expanded projects.
The Company recognizes that the construction industry is conservative, and that
it can take years before the market embraces new technologies and theories. Yet,
over the long term, the Company anticipates the EPS System will also
dramatically affect construction design and architecture. We foresee a future
where leaders are no longer leading water away from buildings and where
buildings (or parts of buildings) are constructed below grade and in locales
which were heretofore considered inappropriate. With relative ease, Installation
Companies can enable the construction of underground facilities below the water
table.
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Management firmly believes that EPT and Drytronic can develop their positions
within the Market just as rapidly as the Market can learn about the EPS System.
As is evident, the EPS System's success will not be limited by the size of its
potential market; rather, the success will be limited by the capital available
to exploit the EPS System and the ability to attract and educate personnel.
Delineation of Market
The Market is traditionally divided into the following segments:
o Commercial: Commercial buildings such as office buildings, apartment
complexes, hotels, parking garages and schools;
o Industrial: Industrial facilities such as water-sheds, water-towers,
waste-water treatment plants, silos, factories and power plants; and
o Heavy and Highway: Such as bridges, dams, tunnels and roadways.
According to the U.S. Census Bureau/Department of Commerce, revenue attributable
to new construction in the U.S. in 1998 equaled more than $500 billion. The
Transportation Equity Act for the 21st Century has allocated more than $200
billion to new construction and refurbishment of the U.S. infrastructure. The
Federal Highway Administration estimates that 42% of its 575,000 bridges in the
U.S., or 241,500 bridges, are structurally deficient and in need of repair due
to water damage which equates to construction requirements for repairs to those
budgeted in excess of $20 billion.
The Department of Commerce also reports that there are over 5 million commercial
buildings of which the U.S. Government operates approximately 520,000.
EPT's potential customers are:
o real-estate owners or operators;
o the customer base of construction companies, construction management
companies, architectural & engineering companies, and facility management
companies; and
o the customer base of organizations, which market complementary products and
services, and other firms with which there is otherwise synergy.
The Company will provide hardware, education and engineering solutions to its
Installation Companies, which may or may not be owned in conjunction with its
strategic partners. Drytronic and the Installation Companies will install the
EPS Systems, sell maintenance contracts and maintain the installations.
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The Company's plan of operations envisions a centralized marketing function at
the headquarters level to establish the overall marketing strategies for the EPS
System, and to promote the EPS System to potential corporate affiliations with
joint ventures, strategic partners and architectural and engineering firms,
which many times act as specifiers of construction jobs. The essential message
to the potential affiliates is that the EPS System is generally less costly and
more effective and permanent than traditional waterproofing procedures, thereby
increasing customer satisfaction. Without reducing the Company's margins, the
Company believes that the EPS System will in many situations permit higher
margins for the construction phase of refurbishing existing and new Structures.
The EPS System will also permit companies to maintain their standard
construction industry margins and reduce their prices, permitting them to choose
whether to increase their volume or margins. Additionally, a construction
company which has access to the EPS System will be equipped with an active sales
tool rather than having to passively wait for architects and engineers to
specify the construction company. Therefore, the Company believes that a
construction company which has the right to utilize the EPS System will have a
competitive edge. During the next three years, the Company conservatively
estimates that it will form approximately 36 Installation Companies. In
addition, Drytronic is working closely with the Army Corps which has agreed to
support and introduce the EPS System to the U.S. Federal Government market. For
example, Drytronic is making installations at Army bases and the General
Services Administration-managed buildings and has recently commenced discussions
with the Air Force.
In addition, the Company has initiated discussions with:
o One of the largest internal controls company in the world for a potential
joint venture. This company has recently launched a new indoor air quality
("IAQ") service aimed at the tens of thousands of buildings it services in
the Market. This company understands that IAQ is significantly impacted by
humidity, which is caused by, among other things, water intrusion.
Currently, it uses drains to remove water once it has intruded. The EPS
System would potentially be added to its arsenal of products so that water
could be arrested from intruding into the Structures.
o One of the largest waterproofing companies in the Market with more than 40
offices and $100 million in revenue. This company has started to introduce
the Company to its customer base, initially in the New York metropolitan
area.
o One of the largest construction companies in the country.
The Installation Companies will implement the marketing strategy developed by
headquarters. The Company's marketing teams will work hand in hand with
affiliated construction companies in their marketing efforts to their customers
and architect and engineering firms or, where appropriate, directly with the
Company's own contact sphere.
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Since each installation of the EPS System will be unique and requires
comprehensive fact finding, analysis, design and engineering, the Company will
work closely with the customers to educate them about the EPS System and the
following installation procedures:
o Inspection. A member of an Installation Company's sales personnel visits
the site and makes a physical inspection to determine the extent of the
damage, which often consist of measuring the RH and in some instances
involves an assessment of the Structure's composition. The findings are
presented to the customer in an inspection report for an inspection fee,
providing the customer with various alternatives for the most effective and
cost efficient solutions. Sales personnel discuss the findings with the
customer, who may then request a proposal for an EPS System installation.
The inspection report is submitted to the Company's design and engineering
department. The design department engineers a solution, which forms the
basis for the proposal, submitted by the sales person.
o Installation. Upon the acceptance of the proposal, the customer pays a down
payment. An installation may require construction-related procedures to
prepare the Structure for the installation. These procedures are either
handled by the Installation Company or an affiliated construction company.
The balance of the purchase price is paid when the Company has completed
the installation. Drytronic's arrangement in the Government market permits
it to receive 90% of the purchase price up-front.
o Warranty. In addition to its own two year warranty (see "The Business of
the Company--Servicing"), the Company will pass on any manufacturer's
warranty on equipment and will offer an annual maintenance program.
ITEM 2. MANAGEMENTMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
For the period since inception (November, 20 1998) through December 31,
1999, during the Company's development stage, the Company has generated a net
loss of ($1,139).
FINANCIAL CONDITION AND LIQUIDITY
The Company has limited liquidity and has an ongoing need to finance its
activities. As of December 31, 1999, prior to the Merger, the Company has funded
these cash requirements by offering and selling its Common Stock, and has issued
1,019,000 shares of Common Stock for net proceeds of $1,019.00.
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Following the Merger, the Company has made no material commitment regarding
capital expenditures. The Company and its subsidiary, Drytronic, shall make
expenditures in the ordinary course of business as capital is made available.
To date, the Company's subsidiary, Drytronic, has incurred expenditures for its
activities in the military sector. Sales are being made, generating nominal
revenue to date, resulting in negative monthly cash flow. As noted previously
(see "RISK FACTORS - Our Limited Operating History Makes Evaluating Our business
Difficult"), EPT and Drytronic have been engaged in adversarial activities over
the past 18 months which have limited the ability of respective management to
focus on growing revenues and have been a severe drain on the resources of each.
The recent settlements of Drytronic's legal disputes, the settlement of
Drytronic's conflict with EPT and the merger of Drytronic with Drytronic
Acquisition have enhanced both EPT's and Drytronic's ability to become
successful. Based on these developments, the Company is optimistic of its
prospects going forward.
Based on the forgoing and on the recently issued U.S. Army Internal Department
Order, initially in the amount of $5 million, the Company is expected to
generate higher monthly revenues. The Company has recently been able to initiate
substantial relationships in the private sector, which are expected to generate
revenues within the foreseeable future.
PLAN OF OPERATIONS
As a result of increased marketing activity in the first part of 2000, the
Company anticipates that general and administrative expenses will increase
during that period as the Company hires additional employees, moves into
expanded office space and embarks on an aggressive marketing campaign. The
Company does not intend to incur substantial capital equipment expenses during
the first two quarters of 2000.
The Company's overall strategy dictates that, in the short term, current
profitability is not as important as revenue growth. The Company's planned sales
and marketing campaign are expected to increase the Company's revenues during
2000, but there can be no assurance that such an increase will occur, or that
its magnitude will be consistent with the Company's expectations. The Company
can give no assurance as to the level or timing of future profitability.
The Company's plan of operations further calls for expanded marketing and
development efforts. The Company expects to hire several additional employees
during 2000. The Company plans to embark on an aggressive policy of targeting
existing construction companies in an effort to introduce the EPS System. In
addition the Company, where appropriate, will enter into joint ventures and
strategic alliance with construction, architectural and engineering companies to
expand the Company's national sales platform. The Company will attempt to make
strategic acquisitions, including existing waterproofing companies, to build and
develop infrastructure.
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As noted previously, the Company intends to form separate Installation Companies
in various locations around the country. The Company will provide hardware,
education and engineering solutions to its Installation Companies which may be
owned in conjunction with its strategic partners. The Installation Companies
will sell installations of the EPS System, and maintain the installations
through the standard and extended warranty periods.
The Company believes that the proceeds of a limited private offering, plus the
anticipated cash generated by operations should be sufficient to satisfy the
Company's needs through the first six months of 2000. The expectation is,
however, based in part on anticipated increases in revenues as described above.
The Company will seek additional financing during the first and second quarters
of 2000. Should the Company be unable to obtain additional financing, the
Company will be unable to continue with its planned marketing and development
efforts.
RISK FACTORS
A PURCHASE OF SHARES OF COMMON STOCK IN THE COMPANY INVOLVES A HIGH DEGREE OF
FINANCIAL RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER ALL OF THE RISK
FACTORS DESCRIBED BELOW. THE FOLLOWING RISK FACTORS SHOULD NOT BE CONSIDERED AS
AN EXHAUSTIVE LIST OF ALL RISK FACTORS INHERENT IN AND AFFECTING THE BUSINESS OF
THE COMPANY, BUT RATHER A PARTIAL LIST OF SOME OF THE RISKS ASSOCIATED WITH
INVESTMENT IN THE COMPANY. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE
FOLLOWING RISKS AND OTHER FACTORS PRIOR TO MAKING AN INVESTMENT DECISION.
OUR LIMITED OPERATING HISTORY MAKES EVALUATING OUR BUSINESS DIFFICULT.
Our prospects must be considered in the light of the risks, uncertainties,
expenses and difficulties frequently encountered by companies in their early
states of development, particularly a company like ours, which will seek to
implement a novel and unique approach to a traditional area of construction. In
December 1999, we consummated the merger of Drytronic with and into Drytronic
Acquisition Co. (see Item 1 - Description of Business, "Drytronic Merger").
Prior to the Drytronic Merger, Drytronic and EPT were essentially competitors
and were actively engaged in adversarial activities, including litigation, which
caused them to expend significant amount of money and management talent, and
which distracted the management of Drytronic and EPT to focus on resolving the
dispute between them, and not in growing their separate businesses. We believe
that the Drytronic Merger will prove beneficial to our business prospects as it
will meld the operating history of Drytronic in installing the EPS System with
the intellectual property assets controlled by EPT, which form the basis of the
EPS System. Since EPT and Drytronic have collectively installed only
approximately 100 larger installations of the EPS Systems, we have only a
limited operating history on which you can base an evaluation of our business
and prospects. Our limited operating history makes an evaluation of our business
and prospects very difficult. You must consider our business and prospects in
light of the risks and difficulties we encounter in this new and unique approach
to arresting and correcting water and moisture problems in concrete, masonry and
brick Structures. These risks and difficulties include, but are not limited to:
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1. a new and unique approach to arresting and correcting water and moisture
problems in buildings which may or may not be accepted in the commercial
marketplace;
2. lack of sufficient customers, orders, net sales and cash flow;
3. difficulties in managing rapid growth in personnel and operations;
4. the possibility that third parties may infringe upon or engineer around our
intellectual property rights; and,
5. the uncertainty in obtaining our projected purchase price for each EPS
System installation or the required number of 416 large installations over
a three year period.
We cannot be certain that our business strategy will be successful or that we
will successfully address these risks. Our failure to address any of the risks
described above could have a material adverse effect on our business.
IF THE PROTECTION OF OUR PATENTS AND PROPRIETARY RIGHTS IS INADEQUATE, OUR
BUSINESS MAY BE SERIOUSLY HARMED.
We regard patent rights, copyrights, service marks, trademarks, trade secrets
and similar intellectual property as important to our success. We rely on
patent, trade secret protection and confidentiality or license agreements with
our employees, customers, partners and others to protect our proprietary rights;
however, the steps we have taken and plan to take to protect our proprietary
rights may be inadequate. Our failure to protect our proprietary rights could
materially adversely affect our business and competitive position.
Although we believe that we have obtained, or are in the process of obtaining,
patent protection which will enable us to successfully practice the EPS System,
we cannot assure you that any of the pending applications will be approved or
that any issued patents will protect our intellectual property or that any
issued patents will not be challenged by third parties. In addition, the
possibility exists that third parties could willfully infringe our patents and,
if such third persons were better funded than us, such third persons might
prevail in a "war of attrition." Finally, although unlikely, other parties may
independently develop similar or competing technology or design around any
patents that form the basis of the EPS System.
OTHER TECHNOLOGIES MAY ARISE THAT ARE COMPETITIVE TO, AND MORE EFFECTIVE THAN,
THE EPS SYSTEM.
Although we believe that the EPS System represents a superior and commercially
viable solution to the traditional method of arresting and correcting water and
moisture problems in concrete, masonry and brick Structures, the possibility
exists that other, as yet undeveloped, technologies could appear which might
prove more effective than the EPS System, notwithstanding the high cost of
developing, marketing and installing such system. In addition, our success will
depend, to some degree, on the acceptance of the EPS System over more
traditional waterproofing methods.
13
<PAGE>
OUR EXPANSION PLANS ARE DEPENDENT ON OUR ABILITY TO INSTALL EPS SYSTEMS
EFFICIENTLY AND COST EFFECTIVELY, HIRE QUALIFIED PERSONNEL AND CONVINCE THE
MARKET TO ACCEPT THIS NEW TECHNOLOGY.
Since the installation of the EPS System requires certain know-how and knowledge
by our installation teams and engineers, we cannot be certain that we can
attract and educate personnel of a quality and in a quantity which we will
require to meet our projections. Our failure to successfully manage these
personnel and training problems could have a material adverse effect on our
business.
WE HAVE NO EXPERIENCE IN MANAGING GEOGRAPHICALLY DIVERSE OPERATIONS.
Although we plan to expand geographically, we have no experience operating in
any other regions or in managing a national platform of local installation
companies. Accordingly, the success of our planned expansion will depend upon a
number of factors, including:
1. our ability to integrate the operations of local installation companies
into existing operations;
2. our ability to integrate the operations of our local installation companies
with our strategic business partners and customers; and
3. our ability to establish and maintain adequate management and information
systems and financial controls.
Our failure to successfully address these factors could have a material adverse
effect on our ability to expand and on our results of operations.
WE WILL NEED A SIGNIFICANT ADDITIONAL CAPITAL INFUSION IF WE ARE TO REALIZE OUR
BUSINESS OBJECTIVES.
Our business model requires us to raise additional equity capital if we are to
realize our objectives on a timely basis. In addition to the proceeds from our
limited private offering, we expect to require substantial additional capital to
fund our expansion program and operating expenses. We currently anticipate that
the net proceeds of a limited private offering will be sufficient to meet our
anticipated needs for working capital and capital expenditure through the next
six months. We cannot be certain that we will be able to raise additional equity
capital. If we are unable to obtain sufficient additional capital when needed,
we could be forced to alter our business strategy. Our inability to raise
additional capital could have a material adverse effect on our business,
financial condition and prospects. In addition, if we raise additional funds
through the issuance of equity, equity-linked or debt securities, those
securities may have rights, preferences or privileges senior to those of the
rights of our common stock and our stockholders may experience additional
dilution. Our inability to raise additional amounts could materially adversely
affect our business prospects.
14
<PAGE>
WE FACE INTENSE COMPETITION FROM TRADITIONAL WATERPROOFING CONTRACTORS.
We can only assume that existing waterproofing contractors with which we do not
have a relationship or have acquired will do everything to denounce the EPS
System and, since the construction industry in general is conservative, the
conventional waterproofing contractors could be successful in inhibiting the
acceptance of the EPS System.
IF WE FAIL TO GENERATE SUFFICIENT LEVELS OF ACCEPTANCE AND MARKET PENETRATION,
OUR BUSINESS AND NET SALES WILL BE ADVERSELY AFFECTED.
As noted above, the EPS System represents a new and unique method of arresting
and correcting water and moisture problems in concrete, masonry and brick
Structures. While we believe the EPS System represents a major breakthrough in
arresting and correcting water and moisture problems in concrete, masonry and
brick Structures, we are uncertain as to whether the commercial Market will
accept this new technology, notwithstanding our success to date in a limited
area and the implicit seal of approval from the Army Corps of Engineers and the
Government Accounting Office and the fact that our technology was the runner-up
in 1999 for the prestigious Charles Pankow Award for innovation from the
Construction Engineers Research Foundation which is part of the American Society
of Civil Engineers. In addition to this acceptance, the success of our business
depends on our ability to establish a sufficient level of penetration in our
planned local markets. If we are unable to establish sufficient market
penetration levels, our business and net sales would be materially adversely
affected.
THERE IS NO GUARANTY THAT WE WILL BE ABLE TO EMPLOY A SUFFICIENT NUMBER OF
QUALIFIED EMPLOYEES TO HANDLE THE EXPECTED NUMBER OF INSTALLATIONS.
Rather than license the EPS System to construction contractors, we plan to
utilize our own employees to install the EPS System. Our planned establishment
of a national platform of local installation companies will require us to
cost-effectively hire, train and retain employees capable of installing and
servicing the EPS System. Our inability to fulfill that requirement could
materially adversely affect our business and competitive position.
SEVERAL KEY MEMBERS OF OUR MANAGEMENT TEAM HAVE ONLY RECENTLY JOINED US AND IF
THEY ARE NOT SUCCESSFULLY INTEGRATED INTO OUR BUSINESS OR FAIL TO WORK TOGETHER
AS A MANAGEMENT TEAM, OUR BUSINESS WILL SUFFER.
Several key members of our management team have joined us in late 1999, or will
be joining us in early 2000, and we expect to hire additional key personnel. If
we do not effectively integrate these employees into our business, or if they do
not work together as a management team to enable us to implement our business
strategy, our business will suffer.
15
<PAGE>
THE LOSS OF THE SERVICES OF ONE OR MORE OF OUR KEY PERSONNEL, OR OUR FAILURE TO
ATTRACT, ASSIMILATE AND RETAIN OTHER HIGHLY QUALIFIED PERSONNEL IN THE FUTURE
COULD SERIOUSLY HARM OUR BUSINESS.
The loss of the services of one or more of our key personnel could seriously
harm our business. We depend on the continued services and performance of our
senior management and other key personnel. Our future success depends upon the
continued service of our executive officers and other key construction,
merchandising, marketing and support personnel. The loss of key personnel, or
the failure to attract additional personnel, could have a material adverse
effect on our business, results of operations and performance.
OUR OFFICERS AND DIRECTORS AND THEIR AFFILIATES WILL EXERCISE SIGNIFICANT
CONTROL OVER THE COMPANY.
Our executive officers and directors and their affiliates beneficially own a
majority of our outstanding common stock. As a result, these stockholders are
able to exercise significant control over all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions, which could delay or prevent someone from acquiring or
merging with us. See "Principal Stockholders."
SOME MEMBERS OF OUR SENIOR MANAGEMENT WILL BE ENGAGED IN OTHER ACTIVITIES.
Simultaneously with performing their executive duties for us, our Chief
Executive Officer, Bjorn Koritz, and our Vice President Corporate, Farhaan Mir,
will also be engaged in similar activities for Basement Solutions Technologies,
Inc. ("BST"). BST will engage in activities similar to ours with a focus on the
residential market. In addition, Mr. Koritz will be involved in business
activities in entities other than the Company and BST. The inability of Messrs.
Koritz and Mir to direct all of their attention to the Company may materially
adversely affect our business prospects.
LIMITED MANAGEMENT EXPERIENCE
Messrs. Koritz and Mir have had only limited experience in the administrative
and financial management of a business organization. Our ability to expand to
maintain our business will be dependent in part upon our ability to attract and
retain qualified personnel in financial, technical, marketing and other areas.
16
<PAGE>
WE HAVE ENGAGED IN CERTAIN AFFILIATED TRANSACTIONS.
We have entered into certain transactions with affiliates with respect to a
license of the EPS System. Pursuant to the License Agreement, we have licensed
from PowerShield LLC ("PowerShield") the technology and intellectual property
rights which form the basis of the EPS System for an annual royalty equal to
five percent (5%) of net profit. Bjorn Koritz, our Chief Executive Officer, is
the managing partner of, and has an indirect controlling interest in,
PowerShield. Mr. Koritz was also a significant shareholder in Drytronic.
Additionally, as part of the License Agreement EPT and Drytronic has agreed to
pay a royalty to Kjell Utklev equal to 6% percent of the actual costs incurred
for the purchase of components that are covered by the patents or patent
applications comprising the EPS System (estimated to be approximately $30 per
control unit sold). As of the date of this report, no royalties have been paid
and the effective date as defined under the proposed employment agreement with
Kjell Utklev will begin the later of the date on which (a) EPT America has been
funded by the minimum of two million dollars, (b) Utklev has been granted a
permit to immigrate and work in the United States; and (c) Utklev has arrived to
EPT's office in the United States ready, willing and able to work. Once this
happens, Utklev will render technical, executive, supervisory, and general
administrative capacities.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Registration Statement contains forward-looking statements that are subject
to a number of risks and uncertainties, many of which are beyond our control.
All statements, other than statements of historical facts included in this
prospectus, regarding our strategy, future operations, financial position,
estimated revenues or losses, projected costs, prospects, plans and objectives
of management are forward-looking statements. When used in this prospectus, the
words "will", "believe", "anticipate", "intend", "estimate", "expect", "project"
and similar expressions are intended to identify forward-looking statements,
although not all forward-looking statements contain such identifying words. All
forward-looking statements speak only as of the date of this prospectus. You
should not place undue reliance on these forward-looking statements. Although we
believe that our plans, intentions and expectations reflected in or suggested by
the forward-looking statements we make in this prospectus are reasonable, we can
give no assurance that these plans, intentions or expectations will be achieved.
We disclose important factors that could cause our actual results to differ
materially from our expectations under "Risk Factors" and elsewhere in this
registration statement. These cautionary statement qualify all forward-looking
statements attributable to us or persons acting on our behalf.
ITEM 3. DESCRIPTION OF PROPERTIES
The Company's executive and administrative offices are located at 48 Old
Mill Road, Greenwich, CT. As of December 31, 1999, the Company has paid no rent
for use of its office.
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<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Company's Common Stock as of the date hereof (subsequent to the
merger) by (i) each person known by the Company to be the beneficial owner of
more than five percent of its Common Stock; (ii) each director; (iii) each
executive officer; and (iv) all directors and executive officers as a group.
Unless otherwise indicted, each of the following stockholders has sole voting
and investment power with respect to the shares beneficially owned, except to
the extent that such authority is shared by spouses under applicable law.
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class(1)
- -------------------- ------------------------ ----------
PowerShield LLC (2) 3,634,883 64.90%
Farhaan Mir 403,882 7.21%
Bjorn R. Koritz 189,048 3.64%
Ray J. Slaback (3) 153,752 2.74%
Adamas, Ltd. 100,000 1.78%
All officers and directors as a group 778,320 13.89%
(3 persons)
- ---------------------------------
(1) Based on 5,600,000 shares issued and outstanding as of January 20, 2000
(2) An affiliate of Bjorn Koritz
(3) Includes 26,390 shares owned by Mr. Slaback's spouse
18
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
On January 14, 2000, Registrant received and accepted the resignations of
George A. Todt as President and Sole Director, Mary Elizabeth Rowbottom as
Secretary and James Walters as Vice President, Treasurer and Chief Financial
Officer. On that same date the following directors and executive officers were
appointed:
Name Position Age
- ---- -------- ---
Bjorn R. Koritz Chief Executive Officer and Chairman of the 56
Board of Directors
Ray J. Slaback President & COO - Drytronic; Director 55
Paul Femmer Chief Financial Officer and 46
Chief Administrative Officer
Richard Klenk Vice President - Marketing and Sales; 65
Director
John Vrabel Director 45
Farhaan Mir Vice President, Corporate 31
Michael Connor Vice President, Construction - Drytronic 48
Kjell Utklev Manager of Technology Development/ Training 52
- EPT
Egil Bjerke Consultant for Technology Development/ 42
Training - Drytronic
The Company's bylaws provide for a board of directors with staggered terms. All
directors hold office until the annual meeting of shareholders of the Company
next following their term, and until their successors have been elected and
qualified. Officers serve at the discretion of the Board of Directors.
Other than the fact that Paul Femmer is the brother-in-law of Bjorn Koritz,
there are no family relationships between any directors or executive officers of
the Company. Set forth below are brief descriptions of the recent employment and
business experience of the officers and directors of the Company.
19
<PAGE>
BJORN KORITZ: Chief Executive Officer & President; Chairman of the Board of
Directors
Bjorn Koritz was born July 2, 1943 in Gothenburg, Sweden. Following his receipt
of a law degree from the Stockholm University School of Law (Stockholm) and
employment as "apprentice judge" at Svartlosa Tingsratt, Huddinge, Sweden, Mr.
Koritz commenced the study of law in 1972 at New York University School of Law,
New York, New York, where he received a master of jurisprudence (MCJ). Admitted
to practice, Mr. Koritz has been practicing corporate and commercial law as a
member of the New York Bar since 1977. Mr. Koritz has extensive experience
representing Scandinavian and domestic companies in their legal and business
affairs, including service as a member of their Boards of Directors.
Mr. Koritz, who founded the Company, will continue to lead EPT's strategic
planning and to oversee its implementation and control. He will also act as lead
negotiator for the Company's acquisitions and other corporate relationships.
PAUL FEMMER: Chief Financial Officer and Chief Administrative Officer
Mr. Femmer is the former Controller of Ziegler Coal Holding Co., a New York
Stock Exchange Company. Mr. Femmer was formerly the controller of a chemical
company with annual revenues of $450 million and a senior manager for Price
Waterhouse.
RICHARD KLENK: Vice President, Marketing & Sales
Mr. Klenk has agreed to assume the role of Vice President, Marketing & Sales.
Mr. Klenk has approximately four decades of experience in the construction
industry. Initially, Mr. Klenk held various prominent positions with the
transportation division of the Port Authority of New York and New Jersey. Most
recently Mr. Klenk retired as Senior Vice President of Bovis Construction and
Lehrer, McGovern Bovis, Intl., Ltd., (the American arm of Bovis Construction)
the largest construction company in the U.S., where Mr. Klenk has served as a
Director of one of its subsidiaries. His responsibility originating and
supervising airport, rail, transit and infrastructure design, construction and
operation projects estimated at several hundred million dollars. Mr. Klenk's
contacts and experience will be invaluable for EPT as Mr. Klenk has been
executive manager for construction of the new passenger terminal complex at
Ben-Gurion International Airport in Israel, including rail access; United
Airlines Indianapolis Maintenance Center in Indiana, which is a 300 acre $1
billion center; LaGuardia Airport Capital Redevelopment Program in New York;
Heathrow Airport expansion in London a $2 billion project for the British
Airport Authority; and the Palma De Mallorca International Airport expansion in
Spain, a $300 million program for construction of a new terminal and associated
infrastructure.
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<PAGE>
FARHAAN MIR: Vice President, Corporate
Prior to his association with EPT, Mr. Mir worked with a multinational
manufacturing and distribution company in its finance/operations and corporate
development departments. Additionally, he has served as a consultant to both
public and private enterprise with respect to accounting, business analysis and
implementing hardware/software solutions to facilitate corporate growth. Mr. Mir
will work directly with Mr. Koritz and Mr. Femmer.
RAY SLABACK: President & Chief Operating Officer - Drytronic; Director
Ray Slaback, formerly the largest shareholder of Drytronic has overall
responsibility for Drytronic. Mr. Slaback has been involved in commercial
construction for the past 35 years and has served as president of several
recycling companies. Mr. Slaback will continue as president of Drytronic after
the acquisition. Mr. Slaback will also be responsible for overseeing production
of the EPS System control box and delivery of electrodes and connecting wire
from exclusive OEM manufacturers.
MIKE CONNOR: Vice President, Construction - Drytronic
Michael Connor is directly responsible for installlations by Drytronic. His
duties include site reviews, site drawings and project bids, and site
supervision. Mr. Connor has 31 years of experience in construction project
management including owning his own construction company.
KJELL UTKLEV: Manager of Technology Development/Training - EPT
Kjell Utklev, the inventor of the EPS System, has agreed to relocate to the U.S.
He will be engaged in the Company's research and development as well as in the
training program for the EPS System.
EGIL BJERKE: Technology Development/Training - Drytronic
Egil Bjerke was formerly associated with a waterproofing installation company of
Asea Brown Boveri in Norway. He will act as a consultant for training and
development.
ITEM 6. EXECUTIVE COMPENSATION
As of December 31, 1999, no executive officer of the Company received
compensation for services rendered to the company. However, such persons were
entitled to be reimbursed for expenses incurred by them in pursuit of the
Company's business objectives.
21
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUE
The Company does not have any officer or director stock option plan. The
Company intends to incorporate one after a public offering. The Company does not
have an employee stock option plan. (ESOP). The Company intends to incorporate
one after a public offering.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Annual Compensation Long Term Compensation
---------------------------------------------- ------------------------------------------------
(a) (b) (c) (d) (e) (f) g) (h) (i)
Other Restricted
Annual Stock Options LTIP All Other
Position Year Salary ($) Bonuses($) Compensation Awards SARs Payouts ($) Compensation
- -------- ---- ---------- ---------- ------------ ---------- ------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
None
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
There were no option/SAR Grants in the last fiscal year.
COMPENSATION OF DIRECTORS
As of December 31, 1999, the Company's directors have served without
compensation.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (As of
December 31, 1999)
In November 1998, EED issued 9,500 shares and in March 1999, EED issued
100,000 shares to PageOne Business Productions, LLC, of which Mr. Todt is a
managing member and Ms. Rowbottom is the Vice President.
22
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES
Registrant's Restated Certificate of Incorporation provides for an
authorized capital stock of 100,000,000 shares of Common Stock, $0.001 par value
(the "Common Stock"), and 8,000,000 shares of Preferred Stock, $0.001 par value
(the "Preferred Stock"). At December 31, 1999, the Company had 1,019,000 shares
of Common Stock issued and outstanding. At such date, there were no shares of
Preferred Stock issued and outstanding.
COMMON STOCK
Each share of Common Stock entitles the holder thereof to one vote for
each share on all matters submitted to the stockholders. The Common Stock is not
subject to redemption or to liability for further calls. Holders of Common Stock
will be entitled to receive such dividends as may be declared by the Board of
Directors of the Company out of funds legally available therefor and to share
pro rata in any distribution to stockholders. The stockholders have no
conversion, preemptive or other subscription rights. Shares of authorized and
unissued Common Stock are issuable by the Board of Directors without any further
stockholder approval.
PREFERRED STOCK
The Board of Directors is authorized, without further action by the
stockholders, to issue from time to time shares of Preferred Stock in one or
more classes or series and to fix the designations, voting rights, liquidation
preferences, dividend rights, conversion rights, rights and terms of redemption
(including sinking fund provisions) and certain other rights and preferences of
the Preferred Stock. The issuance of shares of Preferred Stock under certain
circumstances could adversely affect the voting power of the holders of Common
Stock and may have the effect of delaying, deferring or preventing a change in
control of the Company. As of the date of this Prospectus, the Company has no
plan or arrangement for the issuance of any shares of Preferred Stock.
TRANSFER AGENT
The Company has appointed American Securities Transfer and Trust as the transfer
agent and registrar of the Common Stock.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is not presently traded on an established
public trading market. Following the filing on this Form 10, the Company
anticipates that it will submit its Common Stock for listing on the OTC
Electronic Bulletin Board.
23
<PAGE>
The approximate number of record holders of the Company's Common Stock as
of December 31, 1999 was two, inclusive of those brokerage firms and/or clearing
houses holding the Company's common shares for their clientele (with each such
brokerage house and/or clearing house being considered as one holder). The
aggregate number of shares of Common Stock outstanding as of December 31, 1999
was 1,019,000. Effective with the completion of the Merger, there were 5,600,000
shares of Common Stock issued and outstanding and the number of holders of
record of the Company's Common Stock was 335.
The Company has not declared or paid any cash dividends on its Common
Stock and does not intend to declare any dividends in the foreseeable future.
The payment of dividends, if any, is within the discretion of the Board of
Directors and will depend on the Company's earnings, if any, its capital
requirements and financial condition, and such other factors as the Board of
Directors may consider. In addition, if the Company is able to negotiate new
credit facilities, such facilities may include restrictions on the Company's
ability to pay dividends.
ITEM 2. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party
or to which any of the Company's assets or properties are subject.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS
Weinberg & Company, P.A., Certified Public Accountants ("Weinberg"), has
served as the Company's principal accountant since inception. There were no
accounting or auditing disagreements between the Company and Weinberg.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In November 1998, 9,500 shares of Common Stock were sold to both
PageOne Business Productions, LLC and Appletree Investment Company, Ltd. In
March 1999, the Company sold shares of Common Stock to the initial shareholders
of the Company resulting in the issuance and delivery of 100,000 shares and
900,000 shares of the Company's Common Stock to PageOne Business Productions,
LLC, and Appletree Investment Company, Ltd., respectively. The aggregate 109,500
and 909,500 shares, respectively, were sold pursuant to a 504 offering for
aggregate consideration totaling $1,029. The free trading shares were sold
pursuant to an exemption from registration provided under the Delaware General
Corporation Law and the exemption provided by Section 4(2) of the Securities Act
of 1933, as amended, for issuances of securities not involving any public
offering.
24
<PAGE>
The following table sets forth the names of the recipients and amounts
received in connection with said transactions:
Number of Shares of
Name of Stockholder Common Stock Acquired
------------------- ---------------------
PageOne Business 109,500
Productions, LLC
Appletree Investment 909,500
Company, Ltd.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation provides that, except to the
extent prohibited by the Delaware General Corporation Law (the "DGCL"), its
directors shall not be personally liable to the Company or its stockholders for
monetary damages for any breach of fiduciary duty as directors of the Company.
Under Delaware law, the directors have fiduciary duties to the Company that are
not eliminated by this provision of the Certificate of Incorporation and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available. In addition, each director will
continue to be subject to liability under Delaware law for breach of the
director's duty of loyalty to the Company for acts or omissions that are found
by a court of competent jurisdiction to be not in good faith or involving
intentional misconduct, for knowing violations of law, for action leading to
improper personal benefit to the director and for payment of dividends or
approval of stock repurchases or redemptions that are prohibited by Delaware
law. This provision also does not affect the director's responsibilities under
any other laws, such as the federal securities laws or state or federal
environmental laws. In addition, the Company intends to maintain liability
insurance for its officers and directors.
Section 145 of the DGCL permits the Company to, and the Certificate of
Incorporation provides that the Company may, indemnify each 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, by reason of the fact that he or she is or was, or has agreed to
become, a director or officer of the Company, or is or was serving, or has
agreed to serve, at the request of the Company, as a director, officer or
trustee of, or in a similar capacity with, another corporation, partnership,
joint venture, trust or other EEDs (including any employee benefit plan), or by
reason of any action alleged to have been taken or omitted in such capacity,
against all expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with such action, suit or proceeding and any appeal therefrom. Such
right of indemnification shall inure to such individuals whether or not the
claim asserted is based on matters that antedate the adoption of the Certificate
of Incorporation. Such right of indemnification shall continue as to a person
who has ceased to be a director or officer and shall inure to the benefit of the
heirs and personal representatives of such a person. The indemnification
provided by the Certificate of Incorporation shall not be deemed exclusive of
any other rights that may be provided now or in the future under any provision
25
<PAGE>
currently in effect or hereafter adopted by the Certificate of Incorporation, by
any agreement, by vote of stockholders, by resolution of directors, by provision
of law or otherwise. Insofar as indemnification for liabilities arising under
the Securities Act may be permitted to directors of the Company pursuant to the
foregoing provision, or otherwise, the Company has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Section 102(b)(7) of the DGCL permits a corporation to eliminate or
limit the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL relating to unlawful dividends, stock purchases or
redemptions or (iv) for any transaction from which the director derived an
improper personal benefit. Section 102(b)(7) of the DGCL is designed, among
other things, to encourage qualified individuals to serve as directors of
Delaware corporations. The Company believes this provision will assist it in
securing the services of qualified directors who are not employees of the
Company. This provision has no effect on the availability of equitable remedies,
such as injunction or rescission. If equitable remedies are found not to be
available to stockholders in any particular case, stockholders may not have any
effective remedy against actions taken by directors that constitute negligence
or gross negligence
26
<PAGE>
PART F/S
ELECTRONIC ENGINEERING & DESIGN CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
PAGE F - 1 INDEPENDENT AUDITORS' REPORT
PAGE F - 2 BALANCE SHEET AS OF DECEMBER 31, 1999
PAGE F - 3 STATEMENTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1999 AND FOR THE PERIOD FROM
NOVEMBER 20, 1998 (INCEPTION) TO
DECEMBER 31, 1999
PAGE F - 4 STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM NOVEMBER 20, 1998 (INCEPTION)
TO DECEMBER 31, 1999
PAGE F - 5 STATEMENTS OF CASH FLOW FOR THE YEAR ENDED
DECEMBER 31, 1999 AND FOR THE PERIOD FROM
NOVEMBER 20, 1998, (INCEPTION) TO DECEMBER 31, 1999
PAGES F - 6-8 NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999
27
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of:
Electronic Engineering & Design Corporation
(A development Stage Company)
We have audited the accompanying balance sheet of Electronic Engineering &
Design Corporation. (a Development Stage Company) as of December 31, 1999 and
the related statements of operations, changes in stockholders' deficiency and
cash flows for the year ended December 31, 1999 and for the period from November
20, 1998 (inception) to December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly in all
material respects, the financial position of Electronic Engineering & Design
Corporation. (a development stage company) as of December 31, 1999, and the
results of its operations and its cash flows for the year then ended and for the
period from November 20, 1998 (inception) to December 31, 1999, in conformity
with generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
January 28, 2000
F-1
<PAGE>
ELECTRONIC ENGINEERING & DESIGN CORPORATION
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
3
ASSETS
CURRENT ASSETS
Cash $ 200
Loan receivable - Page One 180
-----------
TOTAL ASSETS $ 380
------------
===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
LIABILITIES
Accrued expenses $ 500
-----------
Total liabilities 500
-----------
STOCKHOLDERS' DEFICIENCY
Preferred stock, $0.001 par value, 8,000,000
shares authorized, none issued and outstanding -
Common stock, $0.001 par value, 100,000,000
shares authorized, 500,000 issued and
outstanding 500
Additional paid in capital 519
Accumulated deficit during development stage (1,139)
-----------
TOTAL STOCKHOLDERS' DEFICIENCY (120)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 380
----------------------------------------------
===========
See accompanying notes to financial statements
F-2
<PAGE>
ELECTRONIC ENGINEERING & DESIGN CORPORATION.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1999 AND FOR THE PERIOD
FROM NOVEMBER 20, 1998 (INCEPTION) TO
DECEMBER 31, 1999.
YEAR ENDED NOVEMBER 20, 1998
DECEMBER 31, (INCEPTION) TO
1999 DECEMBER 31, 1999
------------ -----------------
INCOME $ - $ -
------------ -------------
EXPENSES
Accounting fees 500 500
Bank charges 120 120
Consulting fees 19 19
Legal fees 500 500
------------ -------------
NET LOSS $ (1,139) $ (1,139)
--------
============ =============
Net loss per share - basic
and diluted $ (0.003) $ (0.003)
============ =============
Weighted average number of shares
outstanding during the period
- basic and diluted 369,601 332,411
=========== ============
See accompanying notes to financial statements
F-3
<PAGE>
<TABLE>
ELECTRONIC ENGINEERING & DESIGN CORPORATION.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM NOVEMBER 20, 1998 (INCEPTION) TO DECEMBER 31, 1999
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ----------- ----------- -------------- ---------
<S> <C> <C> <C> <C> <C>
Common stock issuance-inception 9,123 $ 9 $ 10 $ - 19
Common stock issuance 490,677 $ 491 $ 509 $ - 1,000
Net loss for the year ended
December 31, 1999 - - - (1,139) (1,139)
----------- ---------- ----------- --------------- ---------
Balance, December 31, 1999 500,000 $ 500 $ 519 $ (1,139) $ ( 120)
- -------------------------- ========== ============ =========== =============== ==========
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
ELECTRONIC ENGINEERING & DESIGN CORPORATION
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED
DECEMBER 31, 1999 AND FOR THE PERIOD FROM NOVEMBER 20, 1998
(INCEPTION) TO DECEMBER 31, 1999.
NOVEMBER 20,
1999
YEAR ENDED (INCEPTION) TO
DECEMBER 31, DECEMBER 31,
1999 1999
------------- -------------
Cash flows from operating activities
Net loss $ (1,139) $ (1,139)
Adjustments to reconcile net cash used by
operating activities:
Increase in accrued expenses 500 500
Consulting services performed for issuance
of stock 19 19
------------- -------------
Net cash used in operating activities (620) (620)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in loan receivable - Page One (180) (180)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 1,000 1,000
------------- -------------
Net cash provided by financing activities 1,000 1,000
------------- -------------
INCREASE IN CASH AND CASH EQUIVALENTS 200 200
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD - -
------------- -------------
CASH AND CASH EQUIVALENTS -
- ---------------------------
END OF PERIOD $ 200 $ 200
- ------------- ============= =============
See accompanying notes to financial statements
F-5
<PAGE>
ELECTRONIC ENGINEERING & DESIGN CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ------- ------------------------------------------
(A) Organization and Description of Business
Electronic Engineering & Design Corporation (a development stage
company) (the "Company") was incorporated in the State of
Delaware on November 20, 1998 to serve as a vehicle to effect a
merger, exchange of capital stock, asset acquisition or other
business combination. At December 31, 1999, the Company had not
yet commenced any formal business operations, and all activity to
date relates to the Company's formation and fund raising.
The Company's ability to commence operations is contingent upon
its ability to identify a prospective target business and raise
the additional capital it will require through the issuance of
equity securities, debt securities, bank borrowings or a
combination thereof. (See Note 3)
(B) Use of Estimates
In preparing financial statements in conformity with generally
accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets
and liabilities at the date of the financial statements and
revenues and expenses during the reported period. Actual results
could differ from those estimates.
(C) Cash and Cash Equivalents
For purposes of the cash flow statements, the Company considers
all highly liquid investments with original maturities of three
months or less at time of purchase to be cash equivalents.
F-6
<PAGE>
ELECTRONIC ENGINEERING & DESIGN CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- ------- ------------------------------------------
(D) Income Taxes
The Company accounts for income taxes under the Financial
Accounting Standards Board Statement of Financial Accounting
Standards No. 109. "Accounting for Income Taxes" ("Statement
No.109"). Under Statement No. 109, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. Under Statement 109, the
effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the
enactment date. There was no current or deferred income tax
expense or benefits due to the Company not having any material
operations for the period ending December 31, 1999.
(E) Earnings Per Share
Net loss per common share for the year ended December 31, 1999
and for the period from November 20, 1999 (inception) to December
31, 1999 is computed based upon the weighted average common
shares outstanding as defined by Financial Accounting Standards
No. 128 "Earnings Per Share". There were no common stock
equivalents outstanding at December 31, 1999.
NOTE 2 STOCKHOLDERS' DEFICIENCY
A) Preferred Stock
The company was originally authorized to issue 100,000 shares of
preferred stock at $.01 par value, with such designations,
preferences, limitations and relative rights as may be determined
from time to time by the Board of Directors. In September 1999,
management filed a restated certificate of incorporation with the
state of Delaware which increased the number of authorized
preferred shares from 100,000 at $.01 par value to 8,000,000
shares at $.001 par value.
F-7
<PAGE>
ELECTRONIC ENGINEERING & DESIGN CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999
NOTE 2 STOCKHOLDERS' DEFICIENCY (Continued)
B) Common Stock
The Company was originally authorized to issue 10,000,000 shares
of common stock at $.001 par value. The Company issued 909,500
and 109,500 shares to AppleTree Investment Company, Ltd. and Page
One Business Productions, LLC, respectively. In September 1999,
management filed a restated certificate of incorporation with the
state of Delaware which increased the number of authorized common
shares from 10,000,000 to 100,000,000 shares.
NOTE 3 SUBSEQUENT EVENTS
A) Stock Split
On January 13, 2000 the Board of Directors authorized a reverse
.49068 for 1 stock split of common shares issued and outstanding,
making the issued and outstanding shares total 500,000. Per-share
amounts in the accompanying financial statements have been
retroactively adjusted for the split.
B) Merger Agreement
On January 14, 2000 the Company entered into a merger agreement
with Electro Pulse technologies Commercial, Inc. ("EPT") which
was incorporated in Delaware (as modified by the memorandum dated
March 3, 2000). Electronic Engineering and Design Corporation
will be the surviving company and shall change its name to
"Electro Pulse Technologies Commercial, Inc".
Under the terms of the agreement, at the closing, by virtue of
the merger, EPT shall cancel and extinguish each share of EPT
common stock issued and outstanding and held by EPT shareholders
immediately prior to closing. The Company shall then issue to
each of the EPT shareholders, on a pro rata basis, 5,100,000
shares of Electronic Engineering and Design Corporation's common
stock. For financial accounting purposes the merger will be
treated as a recapitalization of EPT.
F-8
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit
Number Description
- ------- -----------
2.1 Agreement and Plan of Merger dated as of January 14, 2000, between
Electronic Engineering and Design Corporation, a Delaware corporation#
and Electro Pulse Technologies Commercial, Inc., a Delaware corporation
(as modified by the memorandum dated March 3, 2000)#
3(i) Restated Certificate of Incorporation of Electro Pulse Technologies
Commercial, Inc. (contained in Exhibit 2.1)#
3(ii) Restated Bylaws of Electro Pulse Technologies Commercial, Inc.
(contained in Exhibit 2.1)#
27 Financial Data Schedule
# Filed as an exhibit to Registrant's 8-K Current Report dated
January 28, 2000 and incorporated herein by reference
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Company has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
ELECTRO PULSE TECHNOLOGIES COMMERCIAL, INC.
/s/ Bjorn Koritz
By:_______________________________
Amendment No. 2 Bjorn Koritz, President
March 7, 2000
29
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 200
<SECURITIES> 0
<RECEIVABLES> 180
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 380
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 380
<CURRENT-LIABILITIES> 500
<BONDS> 0
0
0
<COMMON> 500
<OTHER-SE> (620)
<TOTAL-LIABILITY-AND-EQUITY> 380
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,139
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,139)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,139)
<EPS-BASIC> (0.003)
<EPS-DILUTED> (0.003)
</TABLE>
