SECURITIES AND EXCHANGE COMMISSION
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: October 29, 1999
International Cavitation Technologies, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 0-28318 84-0768695
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(State or Other Jurisdiction (Commission (IRS Employer
Of incorporation) File Number) Identification number)
12407 S. Memorial Drive
Bixby, Oklahoma 74008
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(Address of principal executive offices) (Zip Code)
(918) 369-5950
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(Registrant's telephone number, including area code)
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Item 7. Financial Statements and Exhibits
(a) Financial statements of business acquired
EXHIBIT 1 - Financial statements of Big Blue, Inc. for the years ended
May 31, 1999 and 1998
EXHIBIT 2 - Incorporated by reference the form 10 KSB for the fiscal year ended
May 31, 1999
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
International Cavitation Technologies, Inc.
Date: October 29, 1999 By /s/ David N. Shroff, President
Date: October 29, 1999 By /s/ William W. Rippetoe, Director
and Principal Financial and
Accounting Officer
<PAGE>
EXHIBIT 1 - Financial statements of Big Blue, Inc. for the years ended May 31,
1999 and 1998
Page Description
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1 Independent Auditors' Report
2 Balance Sheet, May 31, 1999
3 Statements of Operations - For the Years Ended May 31, 1999 and
1998
4 Statements of Cash Flows - For the Years Ended May 31, 1999 and 1998
5 Notes to Financial Statements - For the Years Ended May 31, 1999 and
1998
<PAGE>
Independent Auditors' Report
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To the Board of Directors
and Stockholders of Big Blue, Inc.
We have audited the accompanying balance sheet of Big Blue, Inc. as of May 31,
1999, and the related statements of operations and cash flows for the years
ended May 31, 1999, and 1998. 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 Big Blue, Inc. at May 31, 1999,
and the results of its operations and its cash flows for the years ended May 31,
1999, and 1998, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company and its parent, International Cavitation
Technologies, Inc., do not have significant cash to develop their patents nor
have they had significant profitable operations which raises substantial doubt
about their ability to continue as a going concern. Management's plans in regard
to these matters are also described in Note 3. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
Oklahoma City, Oklahoma /s/ Hogan and Slovacek
August 27, 1999
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<PAGE>
BIG BLUE, INC.
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BALANCE SHEET
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MAY 31, 1999
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ASSETS
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<TABLE>
<CAPTION>
Current assets:
<S> <C>
Cash $ 5,426
Accounts receivable 153,069
Advances to related parties 1,006
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Total current assets 159,501
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Equipment 174,576
Accumulated depreciation (103,687)
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70,889
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Total assets $ 230,390
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</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
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<TABLE>
Current liabilities:
<S> <C>
Accounts payable - trade $ 6,889
Accounts payable - related parties 370,730
Notes payable 5,264
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Total current liabilities 382,883
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Stockholders' equity:
Common stock $1 par value, 1,000 shares authorized,
issued and outstanding 1,000
Retained earnings (deficit) (153,493)
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(152,493)
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Total liabilities and stockholders' equity $ 230,390
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</TABLE>
The accompanying notes are an integral part of this statement.
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<PAGE>
BIG BLUE, INC.
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STATEMENTS OF OPERATIONS
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FOR THE YEARS ENDED MAY 31, 1999 AND 1998
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<TABLE>
<CAPTION>
1999 1998
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<S> <C> <C>
Revenues from patent technologies $ 456,557 $ 607,476
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Costs and expenses:
Cost of revenues from patent technologies 45,610 101,340
Organizational and patent development cost 116,899 47,550
Administrative expense 474,404 429,817
Interest expense 891 215
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637,804 578,922
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Net (loss) income before income taxes (181,247) 28,554
Income tax expense - (5,000)
Utilization of loss carryback - 5,000
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Net (loss) income $ (181,247) $ 28,554
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</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
BIG BLUE, INC.
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STATEMENTS OF CASH FLOWS
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FOR THE YEARS ENDED MAY 31, 1999 AND 1998
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<TABLE>
<CAPTION>
1999 1998
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Cash Flows from Operating Activities:
<S> <C> <C>
Net (loss) income $ (181,247) $ 28,554
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation 18,489 7,435
Changes in operating assets and liabilities:
Increase in accounts receivable (145,898) (7,737)
Decrease in advances to related parties 3,552 3,670
(Decrease) increase in accounts
payable - trade (11,059) 12,294
Increase in accounts payable -
related parties 370,730 -
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Net cash provided by operating activities 54,567 44,216
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Cash Flows from Investing Activities:
Purchases of equipment (20,075) (12,500)
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Net cash (used in) investing activities (20,075) (12,500)
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Cash Flows from Financing Activities:
Principal payments on notes payable (26,280) (31,716)
Shareholder distributions (2,786) -
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Net cash (used in) financing activities (29,066) (31,716)
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Net increase in cash 5,426 -
Cash, beginning of year - -
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Cash, end of year $ 5,426 $ -
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Supplemental Disclosure of Cash Flow
Information -
Cash paid for interest $ 891 $ 215
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</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
BIG BLUE, INC.
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NOTES TO FINANCIAL STATEMENTS
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FOR THE YEARS ENDED MAY 31, 1999 AND 1998
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NOTE 1 - ORGANIZATION
Big Blue, Inc. ( the "Company") was organized in the State of Oklahoma on July
5, 1994 by certain shareholders who now control International Cavitation
Technologies, Inc. (the "Parent"). The Company acquired licenses to utilize
certain patented technologies from Universal Environmental Technologies, Inc.
prior to its transfer of these patents to Ion Collider Technologies, Ltd.
("ICT"). ICT was acquired by the Parent corporation on September 30, 1998 and
the Company was acquired by the Parent corporation on May 31, 1999.
The Company developed the use of these patented technologies in various
applications and earned its revenues from utilization of the patent
technologies. Essentially, the Company was its former owner's vehicle to test
the usefulness of the patents. These patents use ion collider technology to
separate particles from liquid, enhance the recovery of crude oil, increase the
amount of hydrocarbons recoverable from underground reservoirs, for water
clarification and other applications to be developed.
Effective January 1, 1999, the Company entered into an agreement with ICT which
called for ICT to receive fees equal to 90% of all revenues generated by the
Company utilizing the patented technologies and obligating ICT to pay 100% of
the Company's operating and administrative expenses incurred in connection with
the generation of these revenues. For the five months ended May 31, 1999, the
Company earned $283,503 in revenues and incurred $159,370 in reimbursed
operating and general and administrative expenses in connection with this
agreement.
NOTE 2 - ACCOUNTING POLICIES
The Company records its transactions using the accrual basis of accounting.
Income is recognized when earned and costs and expenses are recorded when the
liability is incurred. The cost of equipment is depreciated over a seven year
life and consists of equipment used in the generation of contract revenues.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
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<PAGE>
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared in accordance with generally
accepted accounting principles applicable to a going concern which contemplates
the realization of assets and the liquidation of liabilities in the normal
course of business. All of the Company's related party accounts payable were
eliminated in consolidation with its Parent at May 31, 1999. Nevertheless, the
realization of its assets and its continuance as a going concern is dependent on
its Parent's ability to develop a market for its technology and to obtain
adequate financing in the interim to meet its operating expenses. All of these
factors raise substantial doubt about the Company's ability to continue as a
going concern. These financial statements do not include any adjustments related
to the recoverability and classification of recorded assets nor the amount and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence. The Parent's management is in the process of
attempting to raise additional capital and believe that there is a substantial
market for the Company's operations.
NOTE 4 - LEASE COMMITMENTS
The Company is leasing three automobiles under non-cancellable operating leases
having remaining terms in excess of one year as of May 31, 1999. Rentals for
each of the next five years and in the aggregate are:
Fiscal year ended May 31,
2000 17,230
2001 13,848
2002 7,529
2003 7,530
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Total future minimum
rental payments $ 46,137
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NOTE 5 - NOTES PAYABLE
The note payable is due to an individual, bears interest at 6% per annum, is due
in monthly installments of $2,500 through August of 1999, and is secured by
equipment.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company's related party accounts payable were due to its Parent and its
wholly owned subsidiary. These debts were incurred to provide capital for the
operations of the Company while it developed uses for the patents.
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<PAGE>
NOTE 7 - INCOME TAXES
Prior to its acquisition, the Company had a July 31 fiscal year end for income
tax reporting purposes. As of May 31, 1999, the Company has no current income
tax liability and no significant timing differences between the reporting of
income for financial and income tax reporting purposes.
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