SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 33-3385LA
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Nevada 87-0430816
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
870 East 9400 South, #203, Sandy, Utah 84094
- -------------------------------------- -----
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code: (801) 553-9393
----------------
Securities registered pursuant to Section 12(b) of the Act: None.
--------
Securities registered pursuant to Section 12(g) of the Act: None.
--------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the
past 90 days.
Yes No [ X ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [N/A]
State issuer's revenue for it most recent fiscal year: None.
The aggregate market value of the voting stock held by non-affiliates of the
registrant is not currently determinable inasmuch as there is no bona fide
trading market for the registrant's common stock.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock as of the latest practicable date: 17,422,900 shares of
Common Stock outstanding on January 13, 1995.
Documents incorporated by reference: None.
Transitional Small Business Disclosure Format (check one): Yes No[ X ]
PART I
Item 1. DESCRIPTION OF BUSINESS.
(a) Business Development.
Environmental Plasma Arc Technology, Inc. (the "Company") was
incorporated under the laws of the State of Nevada in 1986 under the name
Mainstay Investments, Inc. The Company's name was changed in 1987 to Bio-
Helix, Inc., in 1990 to Concept Gold, Inc. and in 1992 to its current name.
From December 31, 1991 through June 1992, the Company had no ongoing business
operations and investigated various acquisition possibilities.
In June 1992, the Company entered into an agreement with Nu Arc
Scientific, Inc. ("Nu Arc Scientific") and its principal stockholders, Edward
and Carole Taylor (the "Taylors") whereby the Company acquired world-wide
commercial exploitation rights with respect to a technology used for the
treatment of industrial emissions and other sources of air pollution. The
technology, known as "environmental plasma arc technology" (the "EPAT
Technology"), principally relates to a method and devices used to remove and
reduce air pollutants from a variety of discharge facilities. From this
acquisition to the present, the Company has operated as a research and
development company, seeking to identify applications for the EPAT Technology.
The Company did not have any revenues from operations in 1994.
In connection with the June 1992 agreement, the Company's
stockholders approved a 1-for-5 reverse stock split of the outstanding shares
of common stock of the Company and ratified the agreement. Thereafter, the
Company issued shares of common stock to the Taylors, Nu Arc Scientific and an
investor group, resulting in the Taylors' holding approximately 70 % of the
outstanding shares of the Company's common stock. In November 1993, the shares
of the Company's common stock owned by the Taylors were sold at a sheriff's
sale to a group of investors and current stockholders of the Company, which
changed the control of the Company to that group. The Company has also worked
to resolve third party claims with respect to the EPAT Technology that had
arisen from certain actions taken by the Taylors prior to the August 1992
agreement and during their relationship with the Company. The Company
believes that resolution and settlement of all material claims have been
reached with the claimants, except for those that have not been deemed
meritorious and continue to be defended by the company. See "Legal
Proceedings."
At a special meeting of stockholders in February 1994, the
stockholders elected David A. Orischak, Richard W. Patton, Mitchell T. Godfrey
and John S. Clayton as directors of the Company. Mr. Clayton resigned as a
director of the Company in September 1994. The officers of the Company as of
December 31, 1994 were: David A. Orischak, President and Treasurer and
Richard W. Patton, Vice President and Secretary.
In June 1994, pursuant to a court order, Mitchell Godfrey, acting
as trustee on behalf of a group of shareholders, acquired through a
garnishment proceeding the patent application relating to the EPAT Technology.
In July 1994, Mr. Godfrey assigned all rights to the patent application to the
Company, and the Company became the owner of the patent application relating
to the EPAT Technology. In November 1994, the Company was issued a patent
from the United States Patent and Trademark Office with respect to the EPAT
Technology.
(b) Business of the Company.
Development of the EPAT Technology and Products
------------------------------------------------
As of December 31, 1994, the Company operated primarily as a
research and development company working to identify applications and develop
products for the EPAT Technology. The EPAT Technology is an electro-
mechanical system that the Company believes is capable of reducing air
pollutants from commercial and industrial facility discharge systems by means
of an electrical field. The process uses "non-thermal plasmas" generated by
electric arcs and coronas that energize air stream molecules and remove
pollutants by causing them to undergo molecular changes. The Company believes
that the applications of this process have the potential to be used by oil
refineries, steel production plants, public utility power plants, co-
generation facilities, chemical producers, commercial printers, waste disposal
facilities, incinerators and other discharge facilities.
The Company is currently in the process of developing and testing
a prototype configuration of the EPAT Technology. Tests of the EPAT Technology
occurred in June 1993 on a biomedical incinerator and in August 1993 on a
commercial printing facility. These tests were conducted by independent
testing agencies that measured removal rates of pollutants produced by
discharge systems at those facilities. Management believes that the
achievement of removal rates measured in such tests by the Company's first
generation prototype offers considerable promise for the development of the
EPAT Technology for a number of applications, although there can be no
assurance that such development will be successful.
During 1993, the Company began the development of a fourth
prototype EPAT system. This unit will be used in an on-site test of the EPAT
Technology and is an integral part of the development plan of the EPAT
Technology. In addition to the manufacture of this prototype, the Company
successfully tested the EPAT Technology in a biomedical incinerator
application and in a commercial printing application. Although neither test
was conclusive, each served to further establish the viability of the EPAT
Technology as potentially effective in reducing air pollutants.
Marketing Strategy
------------------
The Company's short-term marketing strategy is to install a
test/demonstration unit at a host facility, which would agree to purchase a
system from the Company at such time as the unit demonstrates its
effectiveness. It is intended that a complete set of third party tests will
be conducted at this site to evaluate the capabilities and effectiveness of
the EPAT Technology. Other opportunities will be sought to install units for
other applications that are compatible with the current stage of development
of the EPAT Technology in an attempt to attain technical credibility for the
systems. Assuming the EPAT Technology is demonstrated to be successful in
effectively removing and reducing air pollutants, of which there can be no
assurance, it is anticipated that the devices using the EPAT Technology will
be manufactured in various sizes, and would be capable of removing and
reducing emissions of a wide range of pollutants and compounds and of
providing either primary or secondary air stream treatment.
Competition
-----------
If the Company is able to develop a product using the EPAT
Technology that is demonstrated to be effective in removing or reducing air
pollutants, the Company believes that the EPAT Technology can compete
effectively with other technologies that are currently used to control
emissions of air pollutants, including, for example, scrubbers, electrostatic
precipitators, catalytic converters, carbon absorption systems, filtration
devices, thermal incinerators and other methods of controlling such emissions.
If a system using the EPAT Technology is successfully developed, of which
there can be no assurance, the Company believes that such system will compete
favorably in a number of areas. The Company's system is intended to reduce
multiple pollutants in a single process, while most currently existing systems
are effective in reducing only one pollutant in the air stream and require by-
product removal and clean-up. The Company believes that its system will most
likely compete favorably in the area of initial cost, the costs of continued
maintenance and effectiveness. The Company faces substantial competition,
however, from conventional environmental control methods and may compete with
companies that have more extensive research, marketing and manufacturing
capabilities and significantly greater financial, technical and personnel
resources than the Company.
Patent and Patent Applications
-----------------------------
The Company has been issued a patent relating to the EPAT
Technology from the United States Patent and Trademark Office and has filed
patent applications in several foreign jurisdictions. The Company may seek
additional patents with respect to the EPAT Technology in the United States
and internationally.
Research and Development
-------------------------
As described above, virtually all of the Company's operations have
consisted primarily of research and development activities with respect to the
EPAT Technology.
Employees
---------
As of December 31, 1994, the Company employed one full time
employee.
Item 2. PROPERTIES.
As of December 31, 1994, the Company did not own any real
property. As of December 31, 1994, it occupied offices located at 42 Lloyd
Avenue, Malvern, Pennsylvania pursuant to an arrangement with an affiliate of
Mr. Patten, Vice President and a director of the Company. Pursuant to such
arrangement, the Company was permitted to use lab space made available by such
affiliate and interim office space and administrative support. See "Certain
Transactions."
Item 3. LEGAL PROCEEDINGS.
The Company was a co-defendant, along with the Taylors and Nu-Arc
Scientific in litigation regarding marketing and manufacturing rights with
respect to the EPAT Technology, in an action entitled Bio-Arc Inc., a Delaware
Corporation v. Edward O. Taylor and Carole A. Taylor, Civil No. 920903383,
Third Judicial District of Salt Lake County, Utah. An out of court settlement
was negotiated in this case to be paid in cash and stock. An order dismissing
the action was signed on June 29, 1994.
On September 29, 1993 Mitchell Godfrey took an assignment on a
judgment in favor of Brown & Brown, plaintiff in the case of Brown & Brown,
P.C. v. Nu Arc Scientific Incorporated, Carole Taylor and Edward Taylor, Third
District Court of Salt Lake County, Utah, in the amount of $50,000. Mr.
Godfrey then succeeded in a garnishment proceeding in attaching U.S. patent
application serial no. 07/786,261, held by the defendants in satisfaction of
the judgment. Mr. Godfrey subsequently assigned this patent to EPAT.
The Company was named a defendant in an action entitled Bank One,
Utah, National Association v. Environmental Plasma Arc Technology, Civil No.
930905654CN, Third Judicial District of Salt Lake County, Utah, seeking to
recover from the Company certain sums relating to an overdraft in the
Company's account with Bank One. The Company entered into a settlement
agreement (the "Settlement Agreement") with Bank One in March 1994, pursuant
to which the Company agreed to pay the principal sum of the overdraft of
$101,606.27 plus interest and certain expenses. Bank One agreed to assign to
the Company Bank One's claim against Nu Arc Scientific relating to an
overdraft in a Nu Arc Scientific account with Bank One. The Company was
unable to meet the terms of the Settlement Agreement and on September 19, 1994
the co-defendants repaid the overdraft sums and some additional monies and
took an assignment of the Bank's claim against the Company. All of the
parties to the Settlement Agreement expressly reserved all claims against
Edward and Carole Taylor and NuArc Scientific. Additionally, the Company
pledged all of its assets (including patent rights as) collateral for the
payments of the overdraft amount. The lawsuit has been dismissed with respect
to the Company with prejudice.
During 1994, the Company negotiated stock settlement agreements
with several vendors and creditors of the Company. The board of directors
also approved the settlement of several obligations of Nu-Arc Scientific, Inc.
and Edward and Carole Taylor, with stock of the Company owned by shareholders
of the Company. This was done to alleviate the risk of any future claims
being brought against the Company's right to market the technology purchased
from Nu-Arc Scientific and Edward and Carole Taylor. Approximately $271,553
of accounts payable and accrued expenses recorded on the books of the Company
at December 31, 1993 were satisfied through these settlement agreements.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of the Company's stockholders
during the fourth quarter of the year ended December 31, 1994.
On February 18, 1994 a special meeting of stockholders of the
Company was held for the purpose of electing directors. Holders representing
13,847,100 shares of Common Stock out of the total outstanding of 18,331,800
shares were in attendance at the special meeting.
The following persons were elected as directors of the Company at
the special meeting, and the tabulation with respect to each nominee for
director is as follows:
Name of Nominee Votes for Votes Withheld
---------------- ----------- ---------------
David A. Orischak 13,847,100 0
Richard W. Patton 13,847,100 0
Mitchell T. Godfrey 13,847,100 0
John S. Clayton 13,847,100 0
Part II
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
During the period covered by this Form 10-KSB report, there has
been no public market for the Company's Common Stock. The Company's Common
Stock, par value $.001 per share, is the only class of securities of the
Company that is authorized, issued and outstanding. As of January 13, 1995
there were 17,422,900 shares issued and outstanding, held by approximately 603
stockholders of record.
The Company has never paid any dividends on its outstanding shares
of Common Stock, and no dividends are contemplated to be paid in the
foreseeable future.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Overview
- --------
Since July 1992, the Company has been working to develop the EPAT
Technology into a viable pollution control device. Through December 31, 1994,
the executive management team had directed this development effort across a
broad application spectrum ranging from a small commercial printing
application to a large medical waste incinerator application. The end result
proved that the Company lacked the financial and managerial resources to be
effective under this approach.
During the fiscal year ended December 31, 1994, the Company
received no revenue from operations. The Company was unable to complete the
development of EPAT Technology and thus was unable to effect sales of its
product. The Company is currently planning for the continued development of
the EPAT Technology pending a successful refinancing effort. A new management
team has been organized and a business plan developed. The Company is
investigating several potential funding sources.
During 1994, the Company was able to raise $166,000 through the
sale of Common Stock. Due in part to insufficient funding, the Company was
unable to realize its goal of bringing a product to market in 1994. By year
end, the staffing of the Company was reduced to minimum levels to maintain
operations. The Company incurred cumulative losses through 1994 of
$1,936,025. The operating loss of 1994 was $327,142.
The Company moved its corporate headquarters to a location
approximately 20 miles west of Philadelphia, Pennsylvania and shared office
space with VFL Technologies, Inc. As a result of this relocation, the Company
no longer had any lease obligations in Utah.
As of December 31, 1994, the Company had outstanding notes payable
to several shareholders totaling $226,573. A portion of these funds were used
to pay off an outstanding note with a bank. See "Legal Proceedings."
Results of Operations
- -----------------------
The Company received no revenue from operations during the fiscal
year ended December 31, 1994. As of December 31, 1994, the Company was
operating at a minimum level and incurring minor expenses on a monthly basis.
These expenses were averaging about $3,000 per month. During 1994, the
management team attempted to settle outstanding debts and obligations of the
Company. Through such negotiations, the Company was able to reduce in excess
of $200,000 in outstanding accounts payable and accrued expenses.
Liquidity and Resources
- ------------------------
The Company has financed itself primarily through the sale of its
Common Stock. This trend in funding is necessary for the Company to continue
the development of the EPAT Technology to the point where products utilizing
the EPAT Technology can be made available for sale to customers. If the
Company is unsuccessful in obtaining financing, the Company will be unable to
complete the development of the EPAT Technology.
Director Compensation
- ----------------------
Directors are not paid any compensation for their services as
director of the Company.
Item 7. FINANCIAL STATEMENTS.
The consolidated audited financial statements of the Company for
the fiscal year ended December 31, 1994 are attached hereto and incorporated
herein by reference.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Part III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
(a) Directors and Executive Officers.
The following table sets forth as of December 31, 1994 certain
information regarding the executive officers and directors of the Company.
Name Age Position
- ---- --- --------
David Orischak 39 President, Treasurer and Director
Richard W. Patton 54 Vice President, Secretary and Director
Mitchell T. Godfrey 49 Director
David A. Orischak has served as the President of the Company since
January 1994 and as a director of the Company since February 1994. Mr.
Orischak also served as the President and Chief Executive Officer of EPAT
Marketing Corporation, a wholly owned subsidiary of the Company from March
1993 until December 1993. From 1991 to 1993, Mr. Orischak performed
consulting services for a number of companies in the computer industry. From
1990 through 1991, Mr. Orischak was Executive Vice-President of PC Concepts, a
Ziff Communications company, where he was responsible for managing all aspects
of field operations including the development of annual goals, objectives and
budgets. In 1985, he founded PC Concepts, a computer training and support
services company headquartered in Pennsylvania, where, until 1989, he served
as Vice-President of Marketing and Sales. During this period, Mr. Orischak
developed the marketing strategy for PC Concepts as well as tactical marketing
plans and the management of the national sales force. PC Concepts had grown
to 14 locations and 125 employees across the country prior to its acquisition
by Ziff Communications. From 1977 through 1984, he worked for IBM in various
marketing capacities.
Richard W . Patton has served as Vice President and a director of
the Company since September 1992. Mr. Patton has more than 29 years of
experience in industrial, utility and municipal waste management. As founder
and a principal of VFL Technology Corporation, established in 1981, he has
directed all operations, including engineering, construction, marketing, sales
and financial planning for projects involving hazardous and low-level
radioactive wastes, chemical fixation of sludges and soils, air pollution
control, wastewater treatment, disposal of coal combustion wastes and
bioremediation of liquids and solids. Previously, Mr. Patton was an executive
for a major utility waste management firm and was responsible for development
of waste management systems for facilities with more than 10,000 megawatts of
power production. He also directed the operations of a liquid waste treatment
facility and secure chemical landfills. Prior to the founding of VFL, Mr.
Patton served in several executive positions at IU Conversion Systems, a major
utility waste firm.
Mitchell T. Godfrey has served as a director of the Company since
September 1992. Since 1987, Mr. Godfrey has held the following positions:
from 1987 through 1988 Mr. Godfrey was President of Rocky Mountain Collection;
from June 1988 through the present he has been the Vice-President of Tax
Planning Inc.; from November 1991 until the present date he has served as
President of Tirex Inc.; and, for the past ten years through the present he
has served as co-owner of M & M Development, Inc. In the foregoing positions,
Mr. Godfrey's areas of responsibilities have been in an administrative
capacity and in such areas as employee relations, sales and marketing.
(b) Compliance with Section 16(a) of the Exchange Act.
The Company does not have a class of securities registered under
the Securities Exchange Act of 1934, and, therefore, its officers, directors
and holders of more than 10% of the outstanding shares of the Company are not
subject to the provisions of Section 16(a).
Item 10. EXECUTIVE COMPENSATION.
(a) Executive Compensation.
The following table contains compensation data with respect to
David A. Orischak who served as the Company's chief executive officer during
the year ended December 31, 1994. No executive officers of the Company
received in excess of $100,000 in salary and bonus in 1994, and no other
officer of the Company received any compensation from the Company other than
David A. Orischak.
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
Long Term All Other
---------- ---------
Annual Compensation Compensation Compensation
------------------- ------------ ------------
Name and
Principal Other Annual Restricted
Position Year Salary Bonus Compensation Stock Awards
- -------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
David A. Orischak 1994 75,000 0 0 0 0
Richard W. Patton 1994 0 0 0 0 0
</TABLE>
No options, SARs or LTIPs or other forms of compensation other
than that set forth above were awarded in 1994.
(b) Employment Agreements.
The Company entered into an employment agreement (the "Employment
Agreement") with its President, David A. Orischak on February, 1994. The
initial term of the Employment Agreement was for three years, and Mr. Orischak
has the option to renew for one three-year period. Under the Employment
Agreement, salary for the initial 12 months accrues at the rate of $75,000 per
year, with payment deferred until such time as funds have been obtained
through the issuance of corporate securities or other obligations or through
the sales of products or services in amounts sufficient to pay such salary as
well as other ordinary operating expenses of the Company. The annual salary
for the second and third years under the Employment Agreement is $150,000,
provided funds have been obtained through the issuance of corporate securities
or other obligations or through the sales of products or services in amounts
sufficient to pay such salary as well as other ordinary operating expenses of
the Company. Mr. Orischak is entitled to be nominated as one of the directors
of the Company. The Employment Agreement provides that, through the term of
the Agreement and for a period of five years after the termination of the
Employment Agreement, Mr. Orischak will not, directly or indirectly, engage or
participate in or become employed by or render any services to any entity that
competes with the business of the Company. The Employment Agreement also
provides that during such period Mr. Orischak will not disclose, reveal or
transmit information concerning the proprietary secrets of the Company to any
other person, firm or corporation.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of January 13, 1995 the name
and address of each person who is known by the Company's Board of Directors to
be the beneficial owner of more than 5% of the Company's outstanding Common
Stock and the beneficial ownership of the Company's Common Stock by the
Company's directors and executive officers.
Under the rules of the Securities and Exchange Commission, a
person is deemed to be the beneficial owner of securities if he has or shares
"voting power" (which includes the power to vote, or to direct the voting of,
such securities) or "investment power" (which includes the power to dispose,
or to direct the disposition, of such securities). A person is also deemed to
be the beneficial owner of any securities that he has the power to acquire
beneficial ownership of within 60 days. Under these rules, more than one
person may be deemed the beneficial owner of the same securities.
Name and No. of Shares Percent of Outstanding
Address Beneficially Owned Common Stock
- ----------------- ------------------ ----------------------
David A. Orischak 1,000,000 5.7%
3 Bell Circle
Malvern, PA 19355
Richard W. Patton 1,380,000 7.9%
82 Lloyd Avenue
Malvern, PA 19355
Mitchell T. Godfrey 1,566,250 9.0%
c/o Mt. Baldy Associates
3626 Highway 284
Townsend, MT 59644
John Clayton 1,280,800 7.4%
6144 Vixon Way
Sandy, Utah 84094
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
John Clayton received shares for his services as promoter of the
Company's securities in various offerings and placements of the Company's
securities.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit No. Description
---------- ------------
3.1 Articles of Incorporation of the Company, as amended.
3.2 By-laws of the Company.
23 Consent of Jones, Jensen & Company *
27 Financial Data Schedule *
(b)
Reports on Form 8-K.
None.
_______________
* filed herewith
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant cause this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ENVIRONMENTAL PLASMA
ARC TECHNOLOGY, INC.
Date: December 30, 1996. By: /s/ Mitchell T. Godfrey
________________________________
Mitchell T. Godfrey
President, Chief Executive
Officer, & Director
In accordance with the Securities Exchange Act of 1934, this report has
been signed by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Date: December 30, 1996 By: /s/ David Rees
------------------
David Rees
Secretary/Treasurer, Director
Date: December 30, 1996 By: /s/ Mitchell T. Godfrey
------------------------------
Mitchell T. Godfrey
President, Chief Executive Officer &
Director
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Financial Statements
December 31, 1995 and 1994
CONTENTS
Independent Auditors Report 3
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statements of Stockholders Equity (Deficit) 6
Consolidated Statements of Cash Flows 9
Notes to the Consolidated Financial Statements 11
<Letterhead of Jones, Jensen & Company, Certified Public Accountant, appears
here>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Environmental Plasma Arc Technology, Inc.
We have audited the accompanying consolidated balance sheets of Environmental
Plasma Arch Technology, Inc. (A Development Stage Company), as of December 31,
1995 and December 31, 1994, and the related consolidated statements of
operations, stockholders' equity and cash flows for the years ended December
31, 1995, 1994 and 1993 and from inception on February 10, 1986 to December
1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the consolidated
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatements. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the financial position of
Environmental Plasma Arc Technology, Inc. (A Development Stage Company), as of
December 31, 1995 and 1994, and 1993 and from inception on February 10, 1986
to December 31, 1995 in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has suffered
recurring losses from operations that raises substantial doubt about its
ability to continue as a going concern. Management s plans in regard to these
matters are described in Note 6. The financial statements do not include any
adjustments that might from the outcome of this uncertainty.
/S/ Jones, Jensen & Company
Jones, Jensen & Company
October 30, 1996
ENVIRONMENTAL PLASMA ARCH TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
------
<TABLE>
<CAPTION>
December 31,
------------
<S> <C> <C>
1995 1994
----------- ----------
CURRENT ASSETS
Cash $ - $ 6,775
Work in process inventory (Note 1) 341,128 341,128
------- -------
Total Current Assets 341,128 347,903
------- -------
PROPERTY AND EQUIPMENT (Note 4) 22,169 28,491
------ ------
TOTAL ASSETS $ 363,297 $ 376,394
======== =========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
<TABLE>
<CAPTION>
December 31,
------------
<S> <C> <C>
1995 1994
---- ----
CURRENT LIABILITIES
Accounts payable $ 304,949 $300,176
Accrued expenses 49,744 54,550
Payroll taxes payable 60,139 33,031
Notes payable - shareholders (Note 3) 241,128 224,088
Note payable - (Note 7) 2,485 2,485
----- -----
Total Current Liabilities 658,445 614,330
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTE 2) - -
----- -----
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - $0.001 par value;
50,000,000 shares authorized;
18,195,000 and 18,275,000
shares issued outstanding,
respectively 18,195 18,275
Additional paid-in capital 1,679,579 1,679,814
Deficit accumulated during the
development stage (1,992,922) (1,936,025)
----------- -----------
Total Stockholders' Equity (Deficit) (295,148) (237,936)
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 363,297 $ 376,394
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
On February 10,
1986 to
For the Years Ended December 31, December 31,
<S> <C> <C> <C> <C>
1995 1994 1993 1995
---- ---- ---- ------------
REVENUES $ - $ - $ - $ 50,000
EXPENSES
Selling expense - - 109,489 109,489
Depreciation and amortization 6,322 1,203 8,045 17,298
Research and development - - 25,738 42,492
General and administrative 22,338 325,939 706,370 1,608,092
------ ------- ------- ---------
Total Expenses 28,660 327,142 849,642 1,777,371
------ ------- ------- ---------
OPERATING INCOME (LOSS) (28,660) (327,142) (849,642) (1,727,371)
-------- ------- ------- ---------
OTHER INCOME (EXPENSE)
Interest (28,237) (19,950) (5,125) (53,312)
Loss on disposal of assets - (36,492) (339) (211,831)
Income Taxes - (208) (100) (408)
--------- -------- ----- -----
Total Other Income
(Expense) (28,237) (56,650) (5,564) (265,551)
-------- -------- ------- ---------
NET LOSS $ (56,897) $(383,792) $(855,206) $ (1,992,922)
========== =========== ========== =============
Weighted average loss per
share $ (0.00) $ (0.02) $ (0.04)
========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common Stock Additional During the Stockholders
-------------- Paid-in Development Treasury Equity
Shares Amount Capital Stage Stock (Deficit)
---------- ---------- -------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance,
February 10, 1986 - $ - $ - $ - $ - $ -
Shares issued to
officers and directors
at $.025 per share 200,000 200 4,800 - - 5,000
Net loss for the
period ended December
31, 1986 - - - (160) - (160)
------- -------- ------- ----- ------ -----
Balance,
December 31, 1986 200,000 200 4,800 (160) - 4,840
Shares issued through
public offering at $.25
per share 400,000 400 99,600 - - 100,000
Public offering costs - - (20,315) - - (20,315)
Shares issued in
acquisition of wholly-
owned subsidiary 720,000 720 29,280 - - 30,000
Shares issued through
private placement at
$2.50 per share 10,000 10 24,990 - - 25,000
Net loss for the year
ended December 31, 1987 - - - (36,112) - (36,112)
--- --- --- -------- --- --------
Balance
December 31, 1987 1,330,000 1,330 138,355 (36,272) - 103,413
Shares issued trough
private placement at
$2.50 per share 30,000 30 74,970 - - 75,000
Net loss for the year
ended December 31, 1988 - - - (48,075) - (48,075)
---------- --------- --------- -------- --------- --------
Balance
December 31, 1988 1,360,000 $ 1,360 $ 213,325 $(84,347) - 130,338
Net loss for the year
ended December 31, 1989 - - - (175,094) - (175,094)
--- --- --- --------- --- ---------
Balance
December 31, 1989 1,360,000 $ 1,360 $ 213,325 $(259,441) $ - $ (44,756)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common Stock Additional During the Stockholders
---------------------- Paid-in Development Treasury Equity
Shares Amount Capital Stage Stock (Deficit)
----------- --------- ---------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1989 1,360,000 $ 1,360 $213,325 $ (259,441) $ - $ (44,756)
Expenses paid on behalf
of the Company by
Stockholders - - 53,481 - - 53,481
Shares issued for
services provided by
stockholders at
$.001 per share 170,000 170 (170) - - -
Net loss for the year
December 1990 - - - (8,685) - (8,685)
-------- -------- -------- --------- --- -------
Balance,
December 31, 1990 1,530,000 1,530 266,636 (268,126) - 40
Net loss for the year
ended December 31, 1991 - - - (41,701) - (41,701)
---------- -------- --------- --------- ------ --------
Balance
December 31, 1991 1,530,000 1,530 266,636 (309,827) - (41,661)
Shares issued for
cash and relief of
debt 470,000 470 80,370 - - 80,840
Shares issued for
marketing and
manufacturing rights 14,000,000 14,000 (14,000) - - -
Shares issued for
services performed 2,000,000 2,000 (2,000) - - -
Shares issued through
private placement at
$.25 per share 2,000,000 2,000 453,692 - (192) 455,500
Net loss for the year
ended December 31, 1992 - - - (387,200) - (387,200)
----------- -------- --------- ----------- -------- --------
Balance
December 31, 1992 20,000,000 $ 20,000 $ 784,698 $(697,027) $ (192) $ 107,479
----------- ---------- --------- ---------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Statements of Stockholders Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Common Shares Additional During the Stockholders
---------------------- Paid-in Development Treasury Equity
Shares Amount Capital Stage Stock (Deficit)
----------- --------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1992 20,000,000 $20,000 $ 784,698 $(697,027) $ (192) $ 107,479
Shares issued through
private placement at
$.25 per share - - 47,808 - 192 48,000
Cancellation of shares
issued for private
placement (2,000,000) (2,000) 2,000 - - -
Shares through
private placement
at $.50 per share 332,000 332 165,860 - - 166,192
Capital contributed
by shareholder - - 80,826 - - 80,826
Net loss for the year
December 1993 - - - (855,206) - (855,206)
----------- ---------- ----------- ---------- ---------- --------------
Balance,
December 31, 1993 18,332,000 18,332 1,081,192 (1,552,223) - (452,709)
Cancellation of
shares (57,000) (57) 57 - - -
Capital contributed
by shareholders - - 598,565 - - 598,565
Net loss for the year
ended December 31, 1994 - - - (383,792) - (383,792)
----------- ----------- ------------ ---------- ---------- -------------
Balance
December 31, 1994 18,275,000 18,275 1,679,814 (1,936,025) - (237,936)
Cancellation of
shares (Note 5) (80,000) (80) (40,900) - - (40,980)
Capital Contributed
by shareholders - - 40,665 - - 40,665
Net loss for the year
ended December 31, 1995 - - - (56,897) - (56,897)
---------- --------- ----------- ---------- ---------- -------------
Balance
December 31, 1995 18,195,000 $ 18,195 $1,679,579 $(1,992,922) $ - $ (295,148)
=========== ========== ============ ============= ========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
From Inception
On February 10,
1986 to
For the Years Ended December 31, December 31,
1995 1994 1993 1995
------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss From Operations $ (56,897) $ (383,792) $ (855,206) $(1,992,922)
Adjustments to Reconcile
Net Cash Provided by
Operating Activities
Depreciation and amortization 6,322 1,203 8,045 17,298
Loss on disposal of assets - 36,492 339 36,831
Changes operating assets
and liabilities (Increase)
decrease in receivables - - 50,000 -
(Increase) decrease in
inventory - (36,589) (202,390) (341,128)
employee and shareholder
advances - 9,176 101,315 9,176
Increase (decrease) in
payables, accrued expenses
and payroll taxes (10,905) (260,697) 472,932 370,321
-------- --------- ------- --------
Net Cash Used by Operating
Activities (61,480) (634,207) (424,965) (1,900,424)
---------- ---------- ---------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of fixed assets - - (12,930) (85,818)
Payment of organization costs - - - (110)
Cash from sale of assets - 970 1,000 1,970
Cash placed in trust - 20,000 (20,000) -
--------- ------ -------- --------
Net Cash Used by Investing
Activities $ - $ 20,970 $ (31,930) $ (83,958)
--------- ------ -------- --------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<TABLE>
<CAPTION>
From Inception
On February 10,
1986 to
For the Years Ended December 31, December 31,
1995 1994 1993 1995
------------ ---------- ------------ ---------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM FINANCING
ACTIVITIES
Contribution by stockholders $ 40,665 $ 758,403 $ 128,826 $ 996,375
Payment to stockholder - - - (13,202)
Sale of common stock - - 166,000 876,185
Cash received from debt
financing 14,040 - 246,354 364,384
Cash paid on debt financing - (138,391) (84,285) (239,360)
--------- --------- -------- ---------
Net Cash Provided from
Financing Activities 54,705 620,012 456,895 1,984,382
------ ------- ------- ---------
NET INCREASE (DECREASE)IN CASH (6,775) 6,755 - -
CASH AT BEGINNING OF PERIOD $ 6,775 - - -
--------- ---------- --------- ----------
CASH AT ENDING OF PERIOD $ - $ 6,775 $ - $ -
=========== ========== =========== ============
SUPPLEMENTAL CASH FLOWS
INFORMATION:
CASH PAID FOR:
Interest $ - $ - $ - $ -
Income taxes $ - $ - $ - $ -
NON CASH FINANCING ACTIVITIES:
Issuance of stock for relief
of note payable $ - $ - $ - $ 40,840
Capital contributed by
shareholders $ 40,665 $ 598,565 $ - $ 639,230
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1995 and 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
- ------------
The financial statements presented are those of Environmental Plasma Arc
Technology, Inc. (The Company). The Company was incorporated under the laws
of the State of Nevada on February 10, 1986 as Bio-Helix, Inc. The Company
was organized for the purpose of searching out and acquiring or participation
in a business or business opportunity. On July 13, 1992, the Company s name
was changed to Concept Gold, Inc., and on September 30, 1992, the shareholders
of the Company voted to change the name to Environmental Plasma Arc
Technology, Inc. At such time, the Company resolved to issue stock for an
agreement between Nu-Arc Scientific, Inc., Edward Taylor and Carole Taylor,
which gave the Company exclusive marketing and manufacturing rights of certain
patented air purification systems for internal combustion engines and other
applications. The Company is currently in the beginning stages of marketing
and manufacturing these purification systems, and no significant revenues have
been realized from the sale of these purification system units. Accordingly,
the Company is classified as a development stage company as defined in SFAS
No. 7.
Consolidation
- -------------
The consolidated financial statements are those of Environmental Plasma Arc
Technology, Inc. and its wholly owned subsidiary EPAT Marketing Corporation.
All intercompany accounts have been eliminated in the consolidation.
Work in Process Inventory
- -------------------------
Work in process inventories are stated at the lower of cost or market and
consist of the following:
1995 1994
---- ----
Materials $ 277,915 $277,915
Labor 63,213 63,213
--------- --------
$341,128 $341,128
-------- --------
These costs have been incurred in manufacturing air purification systems for
resale. At December 31, 1995 and 1994, the estimated market value was assessed
and the cost of the inventory was decreased by a valuation account in the
amount of $-0- and #32,467, respectively.
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1995 and 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Organization Costs
- ------------------
The Company amortized its organization costs, which reflect amounts expended
to organize the Company, over sixty months using the straight-line method.
Cash
- ----
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Income Taxes
- ------------
No federal taxes have been accrued due to net operating losses in each year
presented. The Company has net operating loss carryovers of approximately
$1,780,000 which, begin to expire in 2007 through 2000. The minimum state
income taxes of $100 have been accrued at December 31, 1995 and 1994,
respectively. No tax benefit has been reported in the financial statements
for the net operating loss carryforward because of the uncertainty that
sufficient future income will be generated to offset the losses. The
valuation allowance of the loss carryforwards offset any potential tax
benefit.
Reclassifications
- -----------------
Certain 1994 items have been reclassified to conform to the 1995 presentation.
Recently issued Accounting Standards
- ------------------------------------
In March 1995, the Financial Accounting Standards Board issued a new statement
titled Accounting for Impairment of Long-Lived Assets. This new standard is
effective for years beginning after December 15, 1995, but was adopted early
by the Company. The early adoption of the new standard did not have a
material effect on the financial statements.
In October 1995, the Financial Accounting Standards Board issued a new
standard titled Accounting for Stock-Based Compensation . This new standard
encourages, but does not require, companies to recognize compensation expense
for grants of stock, stock options, and other equity instruments to employees
based on fair value. Companies that do not adopt the fair value accounting
rules must disclose the impact of adopting the new method in the notes to the
financial statements. Transactions in equity instruments with non-employees
for goods or services must be accounted for on the fair value method.
Although the Company has not performed a detailed analysis of the impact of
this new standard on the Company s financial statements, the Company does not
believe that adoption of the new standard will have a material effect on the
financial statements.
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1995 and 1994
NOTE 2 - COMMITMENTS AND CONTINGENCIES
The Company was included in a lawsuit as a co-defendant with, Nu-Arc
Scientific, Inc. Edward Taylor and Carole Taylor. The litigation concerned
the marketing and manufacturing rights of the plasma arc technology, which
rights were purchased by the Company. An out of court settlement of cash and
stock totaling $23,750 was negotiated on the case. An order dismissing the
action was subsequently signed on June 29, 1994.
The Company is involved as a co-defendant in a law suit with Bank One. Bank
One instituted a suit against the Company and certain affiliates of the
Company seeking to recover certain sums relating to overdrafts in the
Company s bank account. On March 18, 1994, the Company and its affiliates
entered into a settlement agreement, and on September 19, 1994 the co-
defendants took assignments of the bank s claim. The claims were paid by co-
defendants and were contributed to additional paid-in capital.
NOTE 3 - RELATED PARTY TRANSACTIONS AND NOTES PAYABLE - SHAREHOLDERS
All of the original shares issued were restricted shares and not to be
resold except in compliance with the provisions of Rule 144 promulgated by the
Securities and Exchange Commission.
Various shareholders advanced funds to the Company on a short-term basis as
needed. The balances owed to the shareholders at December 31, 1995 and 1994
were $241,128 and $224,088, respectively. The notes accrue interest at
various rates of 11.25% to 12.0%, are due on demand and are unsecured.
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1995 and 1994
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31:
1995 1994
---- ----
Automobiles $ 2,500 $ 2,500
Equipment 1,920 1,920
Furniture and fixtures 497 497
Promotional video 25,597 25,597
------ ------
Total 30,514 30,514
Less accumulated depreciation (8,345) (2,023)
------- -------
$22,169 $28,491
------- -------
Property and equipment are recorded at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the related
assets. Depreciation expense for the years ended December 31, 1995 and 1994
was $6,322 and $1,203, respectively.
NOTE 5 - STOCKHOLDER TRANSACTIONS
On September 25, 1992, stockholders ratified an agreement dated August 10,
1992 to purchase the manufacturing and marketing rights of air purification
systems held by Nu-Arc Scientific, Inc., Edward Taylor and Carole Taylor. The
agreement provided that 70% of the total issued and outstanding stock would be
issued for a private placement, and 10% would be held by the shareholders of
Concept Gold, Inc.
In November of 1992, the Company issued 14,000,000 shares for the marketing
and manufacturing rights to the Plasma Arc Technology. The value of the
rights was recorded at predecessor cost which was $-0-.
Also in November of 1992, the Company issued 2,000,000 shares to an investor
group for services performed, and 2,000,000 shares were issued and kept in
treasury for the private placement. 1,808,000 shares were sold for cash of
$455,500 with the remaining 192,000 shares remaining in treasury at December
31, 1992. During 1993 the remaining 192,000 shares were sold for cash at $.25
per share.
In June 1993, the board of directors approved the cancellation of 2,000,000
shares issued to Nu-Arc Scientific, Inc.
As mentioned in Note 3, Nu-Arc Scientific, Inc. sold some of its stock in the
Company to pay liabilities incurred by the Company, with the remainder being
contributed to capital.
During 1993, Edward Taylor and Carole Taylor, major shareholders of the
Company, filed for bankruptcy. Their stock was sold at a sheriff s sale to a
group of investors and certain shareholders of the Company, thus changing the
majority control of the Company. In 1994 some of these shares were used to
settle debts of the Company. (See Note 8)
During 1994, the board of directors approved the cancellation of 57,000 shares
issued to Nu-Arc Scientific, Inc.
During 1995, 80,000 shares issued to a vendor in lieu of the payment were
returned to the Company and were canceled. The corresponding liability was
added back to accounts payable.
NOTE 6 - GOING CONCERN
The Company s financial statements prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has not yet realized significant revenue from
the sale of the purification systems, and must rely on proceeds from stock
sales to continue operations. The Company plans to continue to market the
systems in order to increase revenues to a level sufficient to support
operations. Without realization of additional adequate financing it would be
unlikely that the Company will be able to pursue and realize its objectives.
ENVIRONMENTAL PLASMA ARC TECHNOLOGY, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements (Continued)
December 31, 1995 and 1994
NOTE 7 - NOTE PAYABLE
Notes payable at December 31, 1995 are as follows:
1995 1994
---- ----
Note payable to an individual, bears interest at
12%, is due on demand and is unsecured. $2,485 $2,485
------ ------
Principal requirements are as follows:
1996 $2,485
NOTE 8 - STOCK SETTLEMENTS
During 1994, the Company negotiated stock settlement agreements with several
vendors and creditors of the Company. The board of directors also approved
the settlement of several obligations of Nu-Arc Scientific, Inc. and Edward
and Carole Taylor, with stock of the Company owned by shareholders of the
Company. This was done to alleviate the risk of any future claims being
brought against the Company s right to market the technology purchased from
Nu-Arc Scientific, Inc. and Edward and Carole Taylor.
Approximately $271,553 of accounts payable and accrued expenses recorded on
the books of the Company at December 31, 1993 were satisfied through these
settlement agreements.
NOTE 9 - INTANGIBLE ASSETS
In November of 1993, a group of investors and certain shareholders of the
Company acquired the patent rights of the Plasma Arc Technology . The group
of investors and certain shareholders of the Company contributed the patent to
the Company. The value of the patent was recorded at predecessor cost, which
was $-0-.
NOTE 10 - SUBSEQUENT EVENTS
The Company issued 6,019,000 shares of common stock during October 1996 to
cancel debt owed to related parties in the amount of $200,516. An additional
2,000,000 shares of common stock were issued during October 1996 for services
rendered during 1996.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Form 10-KSB of
Environmental Plasma Arc Technology, Inc. of our report for the year ended
December 31, 1994.
JONES, JENSEN & COMPANY
-----------------------------
/s/ Jones, Jensen & Company
Salt Lake City, Utah
January 3, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 6,775
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 341,128
<CURRENT-ASSETS> 347,903
<PP&E> 28,491
<DEPRECIATION> 0
<TOTAL-ASSETS> 376,394
<CURRENT-LIABILITIES> 387,757
<BONDS> 226,573
0
0
<COMMON> 18,275
<OTHER-SE> (256,211)
<TOTAL-LIABILITY-AND-EQUITY> 376,394
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (363,634)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (19,950)
<INCOME-PRETAX> (383,584)
<INCOME-TAX> (208)
<INCOME-CONTINUING> (383,792)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (383,792)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
