SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(mark one)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
CLAIRE TECHNOLOGIES, INC.
(Name of small business issuer in its charter)
Commission File No. 33-55254-33
NEVADA 87-0467224
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7373 North Scottsdale Road, # B150
Scottsdale, Arizona 85253
(Address of principal executive officer) (Zip Code)
Issuer's telephone number, including area code: (602) 483-8700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has 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.
[ X ] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not 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 II of this Form 10-KSB
or any amendment to this Form 10- KSB.
[ X ]
As of April 7, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $1,472,000 based on 3,200,000 shares at an
average bid and ask price of $0.46.
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding as of December 31, 1996
- ---------------------- ----------------------------------------
$.001 Par Value 8,539,500 Shares
Class A Common Stock
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PART I
ITEM 1. Business.
Claire Technologies, Inc., a Nevada corporation (the "Company"
"Claire") was incorporated in 1988 for the purpose of developing venture
businesses. Claire was formed by Capital General Corporation and has acquired
new management to acquire corporations and develop certain businesses. The
Company has acquired approximately 70.5% of the outstanding common stock of
Hyperflow Technologies, Inc. ("Hyperflow"), but does not control the operations
of Hyperflow. Hyperflow was incorporated in Nevada in May of 1995 and is a
development stage company engaged in the design, engineering, manufacturing, and
sales of etching, stripping, aqueous, and semi-aqueous precision cleaning
systems for computer, electronic, and semi-conductor industries.
Hyperflow has not generated significant income.
At December 31, 1995, the Company owed $280,969 to a British West
Indies entity controlled by a person who owned 23.86% of the Company's common
stock, and has options to purchase 180,000 shares at a price of $0.75 per share.
The loan is part of a $400,000 revolving floating loan. The interest rate is
12-1/2% per year. The loan is due thirty days after demand is made or October
31, 1996, whichever is earlier. The Company will also pay bonus interest in the
form of 10,000 shares of its common stock for each $50,000 (or portion thereof)
of the line of credit used up to a maximum of 80,000 shares. During 1996, the
loan was repaid except for $14,999. 80,000 shares of restricted common stock and
38,088 shares of Regulation S stock were also issued as additional interest.
On March 11, 1996 the Company issued a private placement memorandum
under Regulation S for the amount of $1,000,000 consisting of 2,000,000 shares
at $0.50 per share. This offering was completed on May 20, 1996 and all shares
were sold. Proceeds from this offering were used in the acquisition of Hyperflow
and for working capital.
On November 6, 1996, the Company entered into a Promissory Note with
Hyperflow for the amount of $65,000. On December 27, 1996, the Company entered
into a second Promissory Note with Hyperflow for the amount of $240,500.
Hyperflow is the debtor in both of these notes, which fall due on January 15,
1997.
The Company's executive offices are presently located at 7373 North
Scottsdale Road, Suite B150, Scottsdale, Arizona 85253, its telephone number at
this location is (602) 483-8700 and telefax number is (602) 443-1235.
History and Background of Capital General
Beginning in January 1986, Capital General Corporation ("CGC")
organized multiple companies in Utah or Nevada, one of which was Claire, by
acquiring shares from the respective corporations upon incorporation, and then
gifted these shares in 100 share increments to various individuals, companies
and institutions. The recipients were not required or allowed to tender any
consideration to CGC for those shares. Prior to distributing the shares to the
giftees, CGC received legal opinions indicating that such gifts were legal
pursuant to applicable state and federal securities laws. Beginning in August,
1988, CGC initiated registrations on Form 10 of the securities of several of the
public shell corporations pursuant to the provisions of the Securities Exchange
Act of 1934. Some states, the U.S. Securities Exchange Commission ("SEC") and
the National Association of
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Securities Dealers ("NASD") took the position that such distributions of stock
are in contravention to their respective securities laws. Further, it is the
position of the SEC staff that the gift transfers effectuated by CGC should have
been registered under Form S-1 of the Act. A registration statement was filed
("S-1") and declared effective June 30, 1993.
Claire was formed as a Nevada corporation May 3, 1988 to provide
vehicles for future business development by the principals of CGC. The company
was founded with three principal shareholders: CGC, David R. Yeaman ("Yeaman"),
and Krista Castleton ("Castleton"). During the period from on or about January
1986, and continuing through 1991, Yeaman, and individuals associated with
Yeaman, incorporated as many as 92 subsidiary corporations of CGC in Utah and
Nevada along with Claire. Beginning in April, 1986, and continuing through at
least May, 1991, Yeaman caused CGC to distribute without registration in
violation of Section 5(a) and (c) of the Securities Act, 100 shares from each of
at least 69 issuers, controlled by Yeaman and CGC, to between 275 and 900
persons throughout the United States ostensibly as gifts. Claire was one of
these issuers. In all instances, the gifted stock certificates failed to reflect
any restrictive legends. Claire was purchased from the principals of CGC and has
been separately managed and has entered into the Hyperflow agreements discussed
without CGC involvement.
History and Background of Claire
Harry Moll, David Hunter, and Logan Anderson acquired controlling
interest in Claire with the intent of acquiring a viable business. David L.
Hunter was the Company's President until November, 1995. Jan Wallace is the
current President and a Director with Grace Sim as the Secretary/Treasurer and
Director and Craig Hurst is a Director.
Management determined that it had interest in precision cleaning
systems for computer, electronic, and semi-conductor industries. The Company
entered into negotiations with Hyperflow as discussed previously. The Company
has not had operations that have generated income since its inception. Its only
receipts have been from the sale of its common stock, which have been used to
pay expenses and acquire a 70.5% interest in Hyperflow, as discussed previously.
Further, there has been a limited trading market for the Company's common stock
since its inception to the date of this report.
ITEM 2. Properties.
Claire is headquartered in leased office premises at 7373 North
Scottsdale Road, Suite B150, Scottsdale, Arizona 85253. The lease arrangement is
for three years beginning March 15, 1996. Amteck Management, Inc. ("Amteck") is
responsible for the monthly payments of $1,200 and expects to bill Claire $600
each month and another entity $600 each month. The Company owns no other
property.
The Company has no interest in any property of Hyperflow. Hyperflow
does have a facility for research in Gilbert, Arizona that is rented by
Hyperflow.
ITEM 3. Legal Proceedings.
On January 7, 1994, the Bureau of Securities of the State of New Jersey
filed a complaint in the matter of CGC, Yeaman and 74 other named defendants,
Nevada and Utah corporations,
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including the Company, which complaint proposes that civil monetary penalties
totaling $30,000 be assessed against CGC for alleged violations of the Uniform
Securities Law (1967), N.J.S.A. 49:3- 47 et.seq., by (1) selling to 24 New
Jersey residents between April 1986 and May 1991, securities in 25 of the 74
above referred to respondent corporations named in the proceeding, not including
the Company, which were neither registered nor exempt from registration, and (2)
making untrue statements of material fact and omitting to state material facts
in connection with said New Jersey sales in 6 of the 74 above referred to
respondent corporations named in the proceeding, not including the Company.
Also, on January 7, 1994, the Bureau of Securities of the State of New Jersey,
based on substantially similar allegations as in the above referred complaint,
issued its Order Denying Exemptions and to Cease and Desist. This order
summarily denied the exemptions contained in N.J.S.A. 49:3-50(b), (1), (2), (3),
(9), (11), and (12) of the securities of CGC and the other 74 respondent
corporations, including the Company, except that excluded from the summary
denial of the exemption contained in N.J.S.A. 49-3-50(b)(12) is the Offer of
Rescission by CGC to 24 New Jersey residents pursuant to the offer of rescission
which began about April 28, 1993. This order also ordered CGC and Yeaman to
Cease and Desist from offering or selling any securities in blind pool
corporations into, or from, the State of New Jersey.
CGC and Yeaman filed answers denying the material allegations of said
complaint and resisting the imposition of said civil monetary penalties, and the
said Order Denying Exemptions and to Cease and Desist. Subsequently, the issues
raised in said complaint and order were settled by agreement between the said
Bureau of Securities and Yeaman and CGC in a consent order dated July 11, 1994
and approved by an administrative law judge of the State of New Jersey Office of
Administrative Law September 2, 1994. Under the terms of said consent order, all
claims in the complaint against all named respondents were settled by the
payment of a $3,000 civil penalty, and the said order was modified so as not to
apply to 27 of the respondent companies, not including the Company.
Other than this matter, the Company and any of its subsidiaries and any
of their property, are not involved in any material pending legal proceeding. At
this time, the Company does not have any material bankruptcy, receivership, or
similar proceeding pending.
ITEM 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted to the Company's security holders for a vote
during the fourth quarter of the fiscal year ending December 31, 1996.
This space intentionally left blank.
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PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholders Matters.
Beginning July 24, 1995, the Company's common stock began trading on
the NASD-OTC System under the symbol CLEA. The information below was provided by
brokers and does not necessarily represent prices of actual sales of the
Company's common stock, nor does it take into account any brokerage discounts,
commissions, or fees.
High High Low Low
Quarter Bid Ask Bid Ask
First 1996 $0.50 $1.75 $0.375 $1.687
Second 1996 $0.625 $1.25 $0.50 $1.156
Third 1996 $0.312 $1.00 $0.25 $0.968
Fourth 1996 $0.28 $0.75 $0.25 $0.625
As of April 10, 1997, there were 412 record holders of the Company's
common stock.
The Company has not previously declared or paid any dividends on its
common stock and does not anticipate declaring any dividends in the foreseeable
future.
On December 31, 1996, the last reported sale price of the common stock
on NASDAQ was $.3125.
ITEM 6. Management's Discussion and Analysis or Plan of Operation
The Company has not had operations that have generated income since its
inception. Its only receipts have been from the sale of its common stock, which
have been used to pay expenses and acquire a 70.5% interest in Hyperflow.
Further, there has been a limited trading market for the Company's common stock
since its inception to the date of this report.
During the year ended December 31, 1996, management fees in the amount
of $392,500 were paid or accrued. The Company's President received $120,000 and
the Company's former Secretary received $120,000, including accrued amounts of
$91,000 and $60,000, respectively. $39,000 was paid or accrued to an entity
controlled by the Company's Secretary for rent and other administrative
services.
Net loss for the year ended December 31, 1996 was $1,973,145, compared
with a net loss of $991,943 for the year ending December 31, 1995. The main
reason for this increase is due to the large amount of interest expense and loss
on investment that were not present in 1995.
General and administrative expenses for the year ended December 31,
1996 were $580,112, compared with $705,958 for the same period in 1995.
Depreciation and amortization expense for the year ended December 31,
1996 was $3,209, compared with $12,843 for the same period in 1995.
Interest expense for the year ended December 31, 1996 was $101,357,
compared with $5,842 for the same period in 1995. The increase relates to
interest on bridge loans.
Loss from investment, which represents the Company's write-off of
Hyperflow in 1996 and share of Hyperflow's loss in 1995, was $982,967 for the
year ended December 31, 1996 and $265,000 for the year ended December 31, 1995.
The Company plans for 1997 to resolve the current working capital
deficiency and to find an appropriate project and/or investment for the Company.
In order to do this the Company will need to raise additional funds most likely
through the sale of shares as well as the possible issuance of shares to settle
outstanding debts.
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The Company had no operational history until it entered into an
investment agreement with Hyperflow which is in the precision cleaning market
for electronics, precision machining, relating to the medical, aerospace, and
semi-conductor industries. All risks inherent in new and inexperienced
enterprises are inherent in the Company's business. The Company has not made a
formal study of the economic potential of any business.
During the year, the Company invested $795,500 in Hyperflow
Technologies, Inc. ($490,000 as equity, and $305,500 by way of loans). In the
last quarter of 1996 the Company determined that Hyperflow was not and would not
meet its business objectives. As a result, the Company determined it would not
advance or invest additional funds in Hyperflow and would sell its interest in
the Company.
The Company foreclosed on the loans made to Hyperflow in the first
quarter of 1997, and sold the assets to Hyperflo, Inc. (an Arizona Company,
unrelated to both Claire and Hyperflow), which had some common management with
Hyperflow.
The assets were sold to Hyperflo, Inc. for a $305,500 Promissory Note.
The Note bears interest at 7.87% per annum and the accrued interest and
principle are due September 6, 2003. The Company will also receive a royalty of
2.5% of the gross revenue received from sales of products developed with
Hyperflow technology. The first $1,500,000 of gross revenue is not subject to
the royalty. The Promissory Note must also be paid in full if Hyperflo, Inc.
sells the technology.
During the year, the Company sold 120,000 shares of its restricted
common stock at $0.75 per share and received $90,000 and 25,000 shares of its
restricted common stock at $1.00 per share and received $25,000. It also sold
2,108,500 shares of Regulation "S" stock at $0.50 per share and received
$1,054,250 in the form of cash or settlement of interest expense.
ITEM 7. Financial Statements and Supplementary Data.
See Item 13.
ITEM 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
No independent accountant previously engaged as the principal
accountant to audit the Company's financial statements, nor an independent
accountant who was previously engaged to audit a significant subsidiary and on
whom the principal accountant expressed reliance in its report, has resigned or
was dismissed. The Company has not changed accountants nor has it had any
disagreements with any accountants.
PART III
ITEM 9. Directors and Executive Officers of the Registrant.
The following table shows the positions held by the Company's Officers
and Directors. The Directors were appointed and will serve until the next annual
meeting of the Company's stockholders, and until their successors have been
elected and have qualified. The Officers were appointed to their positions, and
continue in such positions at the discretion of the Directors.
Name Age Position
Jan Wallace 41 President, Chief Executive Officer, Director
Grace Sim 36 Secretary/Treasurer, Director
Craig Hurst 32 Director
Jan Wallace (age 41) is President and Chief Executive Officer, and Director
of the Company. Ms. Wallace has been employed by the Company since May, 1995,
when she was elected to the Board of Directors. In November 1995, she accepted
the position of President. Ms. Wallace was previously Vice President of Active
Systems, Inc., a Canadian Company specializing in SGML Software, an ISO standard
in Ottawa, Ontario. Prior to that she was President and Owner of Mailhouse Plus,
Ltd., an office equipment distribution company which was sold to Ascom
Corporation. She has also been in management with Pitney Bowes- Canada and Bell
Canada where she received its highest award in Sales and Marketing. Ms. Wallace
was educated at Queens University in Kingston, Ontario and Carleton University,
Ottawa, Ontario in Political Science with
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a minor in Economics. Ms. Wallace is also an Officer and Director of Dynamic
Associates, Inc., a company which files annual reports pursuant to the
Securities Exchange Act of 1934.
Grace Sim (age 36) is Secretary/Treasurer of the Company and a Director.
Ms. Sim has been Secretary/Treasurer since March 7, 1997. Prior to joining
Claire Technologies, Inc., Ms. Sim owned an accounting consulting company in
Ottawa, Ontario, Canada. Ms. Sim received with honors her Bachelor of
Mathematics from the University of Waterloo in Waterloo, Ontario. Ms. Sim is
also an Officer in Dynamic Associates, Inc., a company which files annual
reports pursuant to the Securities Exchange Act of 1934.
Craig A. Hurst (age 32) has been a director since May 3, 1996. From
1987 to 1988 Mr. Hurst was a pro-trader on the V.S.E. with C.M. Oliver & Co.
From 1988 to 1989 he acted as a licensed investment advisor with First Vancouver
Securities, and from 1989 to present has been an independent venture capital
executive consultant specializing in drafting and structuring of new
corporations, merger and acquisition consulting, and development of public
relations programs for both public and private companies.
Logan B. Anderson (age 42) was Secretary/Treasurer of the Company until
March 7, 1997. Mr. Anderson has been Secretary/Treasurer of the Company since
April, 1995. Since 1993, Mr. Anderson has been Principal and President of Amteck
Financial Services Corp., a financial consulting company in Vancouver, B.C.
During 1992 and 1993, Mr. Anderson was an Officer and Director of Certrepoint
Equities, Inc., in Vancouver, B.C. From 1982 to 1992, Mr. Anderson was
Controller of Cohart Management Group, which was responsible for management of
private and public corporations. Mr. Anderson received his Bachelors of Commerce
degree in Accounting and Economics from Otago University, New Zealand in 1977.
Mr. Anderson is an Associated Chartered Accountant (New Zealand). Mr. Anderson
is a citizen of New Zealand and Canada. Mr. Anderson is also an Officer and
Director of Dynamic Associates, Inc. Mr. Anderson could now be considered a
significant consultant to the Company.
ITEM 10. Executive Compensation.
<TABLE>
<CAPTION>
Annual Compensation Table
Annual Long-term
------------------------------ ----------------------------------
Restricted
Other Stock Options/* LTIP All other
Name and Title Year Salary Bonus Compensation Awarded SARs (#) Payouts ($) Compensation
- -------------- ---- ------ ----- ------------ ------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jan Wallace,
President,
CEO, Director 1996 $ 120,000 $ 0 0 0 85,000 0 0
Logan Anderson,
Secretary/
Treasurer,
Direct 1996 $ 120,000 $ 0 0 0 95,000 0 0
(resigned as
officer and
director on
March 7, 1997)
Grace Sim,
Secretary/
Treasurer,
Direct 1996 $ 0 $ 0 0 0 0 0 0
Craig Hurst,
Director 1996 $ 0 $ 0 0 0 49,500 0 0
</TABLE>
There can be no assurance that the amounts of compensation actually
paid for 1997, or the persons to whom it is paid, will not differ materially
from the above amounts paid for 1996.
*Options
The following options were granted to former or current directors and
officers of the Company. The options were granted when the Company did not
publicly trade and no monetary value had been attributed to the granting of the
options. The stock options are at a price of $.75 per share. 1,375,000 options
were granted in 1995. 594,500 options were issued but not yet exercised at the
end of 1996.
<TABLE>
<CAPTION>
Date Date Expiration % of Total
Granted/Issued Exercised Number Date Granted
-------------- --------- ------ ---- -------
<S> <C> <C> <C> <C> <C>
Harry Moll 06/30/95 165,000 06/30/98 12.00%
Harry Moll 06/30/95 12/31/95 35,000 06/30/98 2.55%
Harry Moll 06/30/95 05/20/96 25,000 06/30/98 1.82%
Jan Wallace 06/30/95 85,000 06/30/98 6.18%
Jan Wallace 06/30/95 12/31/95 40,000 06/30/98 2.91%
Logan Anderson 06/30/95 95,000 06/30/98 6.91%
Logan Anderson 06/30/95 12/31/95 45,000 06/30/98 3.27%
Logan Anderson 06/30/95 06/21/96 25,000 06/30/98 1.82%
Logan Anderson 06/30/95 06/24/96 25,000 06/30/98 1.82%
Logan Anderson 06/30/95 06/26/96 15,000 06/30/98 1.09%
Logan Anderson 06/30/95 07/03/96 20,000 06/30/98 1.45%
Ken Berscht 06/30/95 12/31/95 20,500 06/30/98 1.49%
Craig Hurst 06/30/95 49,500 06/30/98 3.60%
Craig Hurst 06/30/95 12/31/95 15,500 06/30/98 1.13%
Craig Hurst 06/30/95 06/24/96 15,000 06/30/98 1.09%
Craig Hurst 06/30/95 06/26/96 20,000 06/30/98 1.45%
</TABLE>
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ITEM 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth, as of December 31, 1996,
information regarding the beneficial ownership of shares by each person known by
the Company to own five percent or more of the outstanding shares, by each of
the Directors and Officers, and by the Directors and Officers as a group.
<TABLE>
<CAPTION>
Name and address Amount of Percent
Title of class of owner ownership of class
-------------- -------- --------- --------
<S> <C> <C> <C>
Class A Common Harry Moll 645,000(1) 7.41%
All shares Box 836
are Restricted Georgetown, Grand Cayman, BWI
Class A Common Torbay Co 800,000 9.37%
Shares are Regulation "S" 55 King St & Bay
Toronto, Ontario Canada
Class A Common Jan Wallace 485,000(2) 5.62%
All shares are restricted 6929 East Cheney
Paradise Valley, AZ 85253
Class A Common Grace Sim 0 0.00%
c/o Claire Technologies, Inc.
7373 North Scottsdale Road, Suite B150
Scottsdale, Arizona 85253
Class A Common Logan Anderson 350,000(3) 4.05%
5,000 shares are free 4915 East Doubletree Ranch Road
trading, balance is Paradise Valley, AZ 85253
restricted
Class A Common Craig Hurst 199,500(4) 2.32%
All shares are restricted c/o Claire Technologies, Inc.
7373 North Scottsdale Road, Suite B150
Scottsdale, Arizona 85253
Class A Common All Officers and Directors 1,034,500 11.80%
as a Group (4 persons)
</TABLE>
(1) Includes 80,000 shares owned by SSM Ltd., which is controlled by Mr. Moll
and 165,000 options held by Mr. Moll.
(2) Includes 85,000 options held by Ms. Wallace.
(3) Includes 95,000 options held by Mr. Anderson.
(4) Includes 49,500 options held by Mr. Hurst.
ITEM 12. Certain Relationships and Related Transactions.
No transactions occurred during 1996 in which an officer or director of
the Company was an interested party.
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ITEM 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following financial statements, financial statement schedules, and
supplementary data are included:
F-1 Independent Auditor's Report
Financial Statements:
F-2 Balance Sheets - December 31, 1996 and 1995
F-3 Statements of Operations - Years ended December 31, 1996, 1995
and 1994
F-4 Statement of Changes in Stockholders' Equity - Years ended
December 31, 1996, 1995, and 1994
F-6 Statements of Cash Flows - Years ended December 31, 1996, 1995,
and 1994
F-7 Notes to Financial Statements
(3)(i) Articles of Incorporation are incorporated by reference.
(ii) By-Laws are incorporated by reference.
(27) Financial Data Schedule
(b) Reports on Form 8-K.
Not applicable.
This space intentionally left blank.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrants has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CLAIRE TECHNOLOGIES, INC.
Date: April 15, 1997 By: /s/
Jan Wallace, President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Date: April 15, 1997 By: /s/
Jan Wallace, President and Director
Date: April 15, 1997 By: /s/
Grace Sim, Director
<PAGE>
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: CRANDALL BUILDING SUITE 700
AMERICAN INSTITUTE OF 10 WEST 100 SOUTH
CERTIFIED PUBLIC ACCOUNTANTS SALT LAKE CITY, UTAH 84101
UTAH ASSOCIATION OF TELEPHONE: (801) 575-8297
CERTIFIED PUBLIC ACCOUNTANTS FACSIMILE: (801) 575-8306
- -------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Claire Technologies, Inc. (A Development Stage Company)
We have audited the accompanying balance sheets of Claire Technologies, Inc. (a
development stage company) as of December 31, 1996 and 1995, and the related
statements of operations, changes in stockholders' equity (deficit), and cash
flows for the years ended December 31, 1996, 1995, and 1994 and for the period
of May 3, 1988 (date of inception) to December 31, 1996. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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 financial statements referred to above present fairly, in
all material respects, the financial position of Claire Technologies, Inc. (a
development stage company) as of December 31, 1996 and 1995, and the results of
its operations, changes in stockholders' equity (deficit) and its cash flows for
the years ended December 31, 1996, 1995, and 1994 and for the period of May 3,
1988 (date of inception) to December 31, 1996 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 shown in the financial statements,
the Company has a working capital deficiency of $722,966 at December 31, 1996
and an accumulated deficit of $2,967,088. The Company has suffered losses from
operations and has a substantial need for working capital. This raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are described in Note 14 to the financial
statements. The accompanying financial statements do not include any adjustments
that may result from the outcome of this uncertainty.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
March 27, 1997
F-1
<PAGE>
CLAIRE TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
------------------------------------------
1996 1995
----------------- ------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash in bank $ 708 $ 81,326
Prepaid expenses (Note 4) 5,000 100,000
Option (Note 5) 0 0
----------------- -----------------
TOTAL CURRENT ASSETS 5,708 181,326
EQUIPMENT (Note 6 and Schedules V and VI) 25,128 18,814
OTHER ASSETS
Investment (Note 7) 0 173,000
Loan receivable (Note 7) 0 0
Goodwill (Note 1) 0 319,967
----------------- -----------------
0 492,967
----------------- -----------------
$ 30,836 $ 693,107
================= =================
LIABILITIES & EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 8,121 $ 31,843
Accrued expenses - related parties (Note 10) 283,800 102,547
Bridge loan (Note 8) 14,999 280,969
Loans payable - related parties (Note 9) 398,750 212,000
Accrued interest payable - related parties 23,004 5,691
----------------- -----------------
TOTAL CURRENT LIABILITIES 728,674 633,050
Commitments and contingencies (Note 15) 0 0
STOCKHOLDERS' EQUITY (DEFICIT) Common Stock $.001 par value:
Authorized - 100,000,000 shares
(50,000,000 in 1995)
Issued and outstanding 8,539,500
shares (6,156,000 in 1995) 8,540 6,156
Additional paid-in capital 2,260,710 1,128,844
Deficit accumulated during the
development stage (2,967,088) (993,943)
Stock subscription receivable (Note 3) 0 (81,000)
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (697,838) 60,057
----------------- -----------------
$ 30,836 $ 693,107
================= =================
</TABLE>
See Notes to Financial Statements.
F-2
<PAGE>
CLAIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
5/3/88
(Date of
Year ended December 31, inception) to
---------------------------------------------------
1996 1995 1994 12/31/96
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Net sales $ 0 $ 0 $ 0 $ 0
Cost of sales 0 0 0 0
------------ ------------ ------------ -------------
GROSS PROFIT 0 0 0 0
General & administrative
expenses 580,112 705,958 0 1,288,020
Depreciation & amortization 3,209 12,843 0 16,102
Interest expense 101,357 5,842 0 107,199
Bad debts 305,500 2,300 0 307,800
------------ ------------ ------------ -------------
NET LOSS BEFORE OTHER (990,178) (726,943) 0 (1,719,121)
OTHER EXPENSE
Loss on investment (Note 7) (982,967) (265,000) 0 (1,247,967)
------------ ------------ ------------ -------------
NET LOSS BEFORE
INCOME TAXES (1,973,145) (991,943) 0 (2,967,088)
INCOME TAXES 0 0 0 0
------------ ------------ ------------ ------------
NET LOSS $ (1,973,145) $ (991,943) $ 0 $ (2,967,088)
============ ============ ============ ============
Net income (loss) per weighted
average share - operations $ (.13) $ (.13) $ .00
Net income (loss) per weighted
average share - other expense (.13) (.05) .00
----------- ----------- -----------
Net income (loss) per weighted
average share $ (.26) $ (.18) $ .00
============ =========== ===========
Weighted average number of
common shares used to
compute net income
(loss) per weighted
average share 7,612,174 5,393,333 1,000,000
============ =========== ===========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
CLAIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional Stock During
Par Value $.001 Paid-in Subscription Development
Shares Amount Capital Receivable Stage
------------- ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balances at 5/3/88
(Date of inception) 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock (restricted) at
$.002 per share at 5/5/88 1,000,000 1,000 1,000
Net loss for period (1,950)
Balances at 12/31/88 1,000,000 1,000 1,000 0 (1,950)
Net loss for year (10)
------------- ------------- --------------- --------------- ---------------
Balances at 12/31/89 1,000,000 1,000 1,000 0 (1,960)
Net loss for year (10)
------------- ------------- --------------- --------------- ---------------
Balances at 12/31/90 1,000,000 1,000 1,000 0 (1,970)
Net loss for year (10)
------------- ------------- --------------- --------------- ---------------
Balances at 12/31/91 1,000,000 1,000 1,000 0 (1,980)
Net loss for year (20)
------------- ------------- --------------- --------------- ---------------
Balances at 12/31/92 1,000,000 1,000 1,000 0 (2,000)
Net income for year 0
------------- ------------- --------------- --------------- ---------------
Balances at 12/31/93 1,000,000 1,000 1,000 0 (2,000)
Net income for year 0
------------- ------------- --------------- --------------- ---------------
Balances at 12/31/94 1,000,000 1,000 1,000 0 (2,000)
Issuance of common stock (restricted) at
4/3/95 for subsidiary (Note 13) 10,500,000 10,500 (6,000)
Cancellation of stock at 5/31/95 (Note 13) (10,400,000) (10,400) 6,000
Sale of common stock (Regulation "S") at
$.05 per share at 5/16/95 2,000,000 2,000 98,000
Issuance of common stock (restricted) at
$.001 per share for services at 6/30/95 1,900,000 1,900
Sale of common stock (restricted) at $1.00
per share at 6/30/95 520,000 520 519,480
Sale of common stock (restricted) at $1.00
per share at 7/24/95 455,000 455 454,545
Costs associated with stock sales (100,000)
Issuance of common stock (restricted) at
$.001 per share for services at 11/30/95 25,000 25 (25)
Options exercised (Note 3) 156,000 156 155,844 (81,000)
Net loss for year (991,943)
------------- ------------- --------------- --------------- ---------------
Balances at 12/31/95 6,156,000 6,156 1,128,844 (81,000) (993,943)
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE>
CLAIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional Stock During
Par Value $.001 Paid-in Subscription Development
Shares Amount Capital Receivable Stage
------------- ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balances at 12/31/95 6,156,000 $ 6,156 $ 1,128,844 $ (81,000) $ (993,943)
Collection of stock subscription 81,000
Issuance of common stock (restricted) at
$.50 per share for interest expense
at 5/14/96 130,000 130 64,870
Issuance of common stock (Regulation S)
to pay interest expense and reduce debt
at $.50 per share at 5/14/96 1,308,500 1,309 652,941
Sale of common stock (S-8) at $1.00 per
share at 5/20/96 25,000 25 24,975
Sale of common stock (Regulation S) at $.50
per share at 5/31/96 800,000 800 399,200
Sale of common stock (S-8) at $.75 per share
at 6/24/96 25,000 25 18,725
Sale of common stock (S-8) at $.75 per share
at 6/25/96 45,000 45 33,705
Sale of common stock (S-8) at $.75 per share
at 6/27/96 30,000 30 22,470
Deferred offering costs (100,000)
Sale of common stock (S-8) at $.75 per share
at 7/8/96 20,000 20 14,980
Net loss for year (1,973,145)
------------- ------------- --------------- --------------- ---------------
Balances at 12/31/96 8,539,500 $ 8,540 $ 2,260,710 $ 0 $ (2,967,088)
============= ============= =============== =============== ===============
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE>
CLAIRE TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
5/3/88
(Date of
Year ended December 31, Inception) to
----------------------------------------------------
1996 1995 1994 12/31/96
---------------- --------------- ---------------- ----------------
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net income (loss) $ (1,973,145) $ (991,943) $ 0 $ (2,967,088)
Adjustments to reconcile net income
(loss) to cash used by operating
activities:
Depreciation and amortization 3,209 12,843 0 16,102
Stock issued for expenses 84,044 2,000 0 86,044
Loss on investment 492,967 265,000 0 757,967
Changes in assets and liabilities:
Prepaid expenses 95,000 (100,000) 0 (5,000)
Accounts payable (23,722) 31,843 0 8,121
Accrued expenses 181,253 102,547 0 283,800
Accrued interest payable 17,313 5,691 0 23,004
---------------- --------------- ---------------- ----------------
NET CASH USED
BY OPERATING ACTIVITIES (1,123,081) (672,019) 0 (1,797,050)
INVESTING ACTIVITIES
Purchase of equipment (9,523) (20,624) 0 (30,147)
Purchase of investment 0 (438,000) 0 (438,000)
Goodwill 0 (331,000) 0 (331,000)
Organization costs 0 0 0 (50)
---------------- --------------- ---------------- ----------------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (9,523) (789,624) 0 (799,197)
FINANCING ACTIVITIES
Proceeds from sale of common stock 496,000 1,050,000 0 1,548,000
Loan proceeds 810,986 561,207 0 1,372,193
Loan repayments (255,000) (68,238) 0 (323,238)
---------------- --------------- ---------------- ----------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 1,051,986 1,542,969 0 2,596,955
---------------- --------------- ---------------- ----------------
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (80,618) 81,326 0 708
Cash and cash equivalents at beginning
of year 81,326 0 0 0
---------------- --------------- ---------------- ----------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $ 708 $ 81,326 $ 0 $ 708
================ =============== ================ ================
SUPPLEMENTAL INFORMATION
Cash paid for interest $ 268 $ 151 $ 0 $ 419
================ =============== ================ ================
</TABLE>
During 1996, the Company issued 1,270,412 shares of Regulation S stock to pay
$635,206 of debt.
See Notes to Financial Statements.
F-6
<PAGE>
CLAIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Accounting Methods
The Company recognizes income and expenses based on the accrual method
of accounting.
Dividend Policy
The Company has not yet adopted any policy regarding payment of
dividends.
Equipment
Equipment is recorded at cost and is being depreciated over a useful
life of seven years using the straight-line method.
Cash and Cash Equivalents
For financial statement purposes, the Company considers all highly
liquid investments with an original maturity of three months or less
when purchased to be cash equivalents.
Organization Costs
Organization costs were amortized over four years.
Goodwill
Goodwill was being amortized over fifteen years. Goodwill related to
the investment in Hyperflow (see Note 7).
Income Taxes
The Company records the income tax effect of transactions in the same
year that the transactions enter into the determination of income,
regardless of when the transactions are recognized for tax purposes.
Tax credits are recorded in the year realized.
The Company utilizes the liability method of accounting for income
taxes as set forth in Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109). Under the liability
method, deferred taxes are determined based on the differences between
the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are
expected to reverse. An allowance against deferred tax assets is
recorded when it is more likely than not that such tax benefits will
not be realized.
NOTE 2: DEVELOPMENT STAGE COMPANY
The Company was incorporated under the laws of the State of Nevada on
May 3, 1988 as Demure, Inc., and has been in the development stage
since incorporation. On June 7, 1995, the name was changed to Claire
Technologies, Inc. The Company has entered into the precision cleaning
market for electronics precision machining relating to the medical,
aero-space, and semi-conductor industries.
NOTE 3: CAPITALIZATION
On the date of incorporation, the Company sold 1,000,000 shares of its
common stock to Capital General Corporation for $2,000 cash for an
average consideration of $.002 per share. The Company's authorized
stock includes 100,000,000 shares of common stock at $.001 par value.
During 1995, the Company issued 10,500,000 shares of its restricted
common stock in connection with the acquisition of a subsidiary and
shortly thereafter canceled 10,400,000 shares (see Note 13). The
Company issued 2,050,000 shares of stock for services at $.001 per
share (see Note 10). The Company sold 2,000,000 Regulation "S" shares
at $.05 per share and sold 975,000 restricted shares at $1.00 per
share.
During 1995, the Company's President exercised stock options on 40,000
shares at $1.00 per share and a consultant exercised stock options on
35,000 shares at $1.00 per share. The two individuals provided
services of $75,000 to exercise the options.
Also during December, 1995, three individuals exercised options for
81,000 shares of stock at $1.00 per share. The $81,000 was received in
January, 1996 and is reflected on the 1995 balance sheet as a stock
subscription receivable.
During 1996, the Company issued 130,000 shares of restricted common
stock at $.50 per share for interest expense, issued 1,308,500 shares
of Regulation S stock at $.50 per share for interest expense and debt
repayment, sold 800,000 shares of Regulation S stock at $.50 per share
for cash, sold 25,000 S-8 shares at $1.00 per share for cash and sold
120,000 S-8 shares at $.75 per share for cash.
F-7
<PAGE>
CLAIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1996 and 1995
NOTE 4: PREPAID EXPENSES
During 1995, the Company prepaid $100,000 in connection with stock
offerings planned for 1996. The $100,000 was offset against the
proceeds since the offerings were successful. The $5,000 at December
31, 1996 relates to other prepaid expense.
NOTE 5: OPTION
During 1995, the Company bought 500,000 shares of Hyperflow
Technologies, Inc. ("Hyperflow") stock at a price of $1.00 per share.
This represented 54.2% of the total outstanding stock of Hyperflow.
The Company acquired an option to purchase 250,000 shares of Hyperflow
stock at a price of $2.00 per share and 300,000 shares of Hyperflow
stock at $4.00 per share anytime before July 25, 1998. Prior to
December 31,1995, the Company exercised part of the option and paid
$269,000 to acquire 134,500 shares. If the Company exercises the whole
option, it will own 1,050,000 of the total outstanding shares of
1,550,000, or 67.7%, and will have paid a total of $2,200,000 for the
shares, $1,700,000 for the 550,000 shares acquired pursuant to the
option and $500,000 paid for the first 500,000 shares. At December 31,
1995, the Company owned 634,500 shares of the total of the 1,113,724
shares outstanding, or 56.97%.
NOTE 6: EQUIPMENT
Equipment has a cost of $30,147. The allowance for depreciation is
$5,019 at December 31, 1996. Depreciation expense for the year ended
December 31, 1996 was $3,209 ($1,810 in 1995).
NOTE 7: INVESTMENT
At December 31, 1995, the Company owned 634,500 shares of the common
stock of Hyperflow, a private Nevada corporation. The investment was
recorded under the equity method because the Company did not control
the operations of Hyperflow even though it owned 56.97% of Hyperflow.
Original cost was $769,000 with $331,000 being allocated to Goodwill.
The Company's share of Hyperflow's 1995 loss amounted to $265,000, and
reduced the investment to a value of $173,000. Hyperflow had a
separate Board of Directors which was independent of the Company's
Board of Directors.
During 1996, the Company invested an additional $490,000 in Hyperflow
for a total of $1,259,000 and owned about 70.5% of Hyperflow, but
still was not controlling the daily operations. Also during 1996, the
Company loaned $305,500 to Hyperflow. By the end of 1996, it was
apparent that Hyperflow was not going to be profitable as expected.
The Company charged its investment to expense and has fully reserved
the receivable of $305,500. Subsequent to December 31, 1996, the
Company took all assets of Hyperflow pursuant to a security agreement
executed in 1996. The Company then sold all of the Hyperflow assets to
another entity interested in developing the technology. The other
entity signed a promissory note in the amount of $305,500 with an
interest rate of 7.87% per annum. The principal and accrued interest
in the total amount of $500,000 are due on September 6, 2003. If the
loan is repaid prior to September 6, 2003, the entire $500,000 is
still due. Also the $500,000 is due if the other entity sells all or
any part of its interest in the Hyperflow products, technology or
patent. The other entity will also pay the Company a royalty of 2.5%
of the gross revenue received from sales of products developed with
the Hyperflow technology. The first $1,500,000 of gross revenue is not
subject to the royalty.
NOTE 8: BRIDGE LOAN
At December 31, 1995, the Company owed $280,969 to a British West
Indies entity controlled by a person who owned 23.86% of the Company's
common stock, and has options to purchase 180,000 shares at a price of
$.75 per share. The loan is part of a $400,000 revolving floating
loan. The interest rate is 12 1/2% per year. The loan is due thirty
days after demand is made, or October 31, 1996, whichever is earlier.
The Company will also pay bonus interest in the form of 10,000 shares
of its common stock for each $50,000 (or portion thereof) of the line
of credit used up to a maximum of 80,000 shares. During 1996, the loan
was repaid except for $14,999. 80,000 shares of restricted common
stock and 38,088 shares of Regulation S stock were also issued as
additional interest.
F-8
<PAGE>
CLAIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1996 and 1995
NOTE 9: LOANS PAYABLE - RELATED PARTIES
At December 31, 1995, the Company owed $212,000 to Dynamic Associates,
Inc. The Company's President is also Dynamic's President. The loan
bears interest at 12% per year and is payable every six months. The
loan was payable on demand or by August 31, 1996. The Company paid a
bonus of 50,000 shares of its common stock because the loan was not
repaid by February 29, 1996. During 1996, the loan was repaid in full.
At December 31, 1996 the Company owes $375,000 to Dynamic for
additional loans received in 1996. The loan bears interest at 10% per
annum. The loan is convertible to the Company's stock at $.20 per
share. The Company will also issue 100,000 shares of its restricted
common stock. Beginning February 28, 1997 and every three months
thereafter, the Company will issue an additional 100,000 shares if the
loan is still outstanding. The loan is payable November 1, 1997 and if
not paid by that date the Company will pay an additional 500,000
common (restricted) shares. The Company will have 30 days grace to
remedy the payment, and the loan will be payable on demand thereafter.
At December 31, 1996, the Company also owes $23,750 to one of its
former directors. The loan bears interest at 12.5% per annum and is
due on demand.
NOTE 10: RELATED PARTY TRANSACTIONS
During 1995, 2,025,000 shares of the Company's restricted common stock
were issued to various entities for assistance provided to the
Company. The shares were valued at par value because there was no
market for the Company's stock at the time. During 1995 $80,000 was
paid to the Company's President, $40,000 in cash and $40,000 in the
form of exercised stock options. $25,000 was paid to the Company's
former President. $62,000 was paid to other officers and/or directors.
During 1996, the President received compensation of $120,000 including
$91,000 which is accrued at December 31, 1996, $120,000 was paid to an
officer/director including $60,000 which is accrued at December 31,
1996, $32,500 was paid to a consultant/director including $15,500
which is accrued at December 31, 1996, and $120,000 was paid to a
consultant/major shareholder including $104,300 which is accrued at
December 31, 1996. At December 31, 1996, the Company owes $283,800 to
various related parties for management fees and administrative
services. The $283,800 includes the $270,800 detailed above and also
includes $13,000 due to an entity controlled by one of the directors.
NOTE 11: INCENTIVE STOCK OPTION PLAN
During 1995, the Company established an incentive stock option plan
for employees and directors of the Company. The maximum number of
shares to be issued under the plan is 3,000,000. The Company also can
grant non-qualified stock options. The aggregate fair market value
(determined at the grant date) of the shares to which options become
exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000 for qualified options and $1,000,000 for
non-qualified options. For 10% shareholders, the option price shall
not be less than 100% of the fair market value of the shares on the
grant date and the exercise period shall not exceed five years from
the grant date. During 1995, options were granted to nine individuals,
four of whom were officers and/or directors, to purchase a total of
1,375,000 shares at $1.00 per share. During January, 1996, 156,000
shares were issued for shares exercised in 1995 (see Note 3). During
1996, 25,000 non-qualified options were exercised at a price of $1.00
per share, 120,000 non-qualified options were exercised at a price of
$.75 per share and 479,500 non-qualified options expired or were
canceled. At December 31, 1996, 594,500 non-qualified stock options
remain outstanding but not exercised. During January, 1996, 550,000
options were reserved. 100,000 shares have an option price of $1.00
per share. 250,000 shares have an option price of $1.25 per share.
200,000 shares have an option price of $1.75 per share. The 550,000
options have exercise periods of one year.
NOTE 12: INCOME TAXES
No Federal income taxes were due for the years ended December 31,
1996, 1995, or 1994.
At December 31, 1996, the Company has a Federal net operating loss
carryover of approximately $1,412,000 which expires at follows:
Year ended Amount Expiration Date
---------------------- ----------------- -----------------
December 31, 1995 $ 708,900 December 31, 2010
December 31, 1996 703,100 December 31, 2011
-----------------
$ 1,412,000
=================
The Company also has a capital loss carryover of $1,259,000 which
expires December 31, 2001.
At December 31, 1996, a deferred tax asset has not been recorded due
to the Company's current lack of operations to provide income to use
the net operating loss carryover.
F-9
<PAGE>
CLAIRE TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 1996 and 1995
NOTE 13: CANCELLATION OF STOCK
Effective April 3, 1995, the Company issued 10,500,000 shares of its
restricted common stock to acquire Nu-Aire Distribution Corporation
("Nu-Aire"). On May 31, 1995, the Company and Nu-Aire mutually agreed
to terminate the agreement and render it null and void. 10,400,000
shares of common stock were canceled. Individuals who helped with the
acquisition were allowed to keep 100,000 shares for their fee.
NOTE 14: GOING CONCERN
The financial statements are presented on the basis that the Company
is a going concern, which contemplates the realization of assets and
the satisfaction of liabilities in the normal course of business over
a reasonable length of time. At December 31, 1996, the Company has a
deficit in working capital of $722,966, a loss from operations for
1996 of $990,178 and an accumulated deficit of $2,967,088.
Management feels that loans from related parties will provide
sufficient working capital to allow the Company to continue as a going
concern.
NOTE 15: COMMITMENTS AND CONTINGENCIES
The Company had a consulting agreement with an entity to render advice
to the Company for a period of twelve months. Services were to be
rendered from December 18, 1995 to December 17, 1996. The fee was
$10,000 per month ($10,000 was paid in 1996 and $10,000 in 1995). The
consultant could terminate the agreement effective the last day of any
month by giving five days written notice. The consultant was to have
been granted warrants to purchase up to 450,000 fully registered
unrestricted shares of the Company's common stock. 250,000 shares are
exercisable at $1.25 per share and 200,000 are exercisable at $1.75
per share. The warrants need to be exercised by December 18, 2000. The
warrants were never delivered to the consultant. The Company felt the
consultant had not performed according to the agreement and stopped
making payments. The Company has not accrued the potential balance of
the agreement which is $100,000. The Company does not intend to pay
the $100,000.
The Company is provided with office space and other management
services on a month-to-month basis by Amteck Management, Inc., an
entity controlled by a director of the Company. $39,000 was paid or
accrued to Amteck during 1996. $600 per month was paid to Amteck as
rent beginning in March, 1996. Other fees to Amteck will be based on
services received. Officers currently are receiving no salary but are
being paid management fees when services are provided. Various other
individuals are paid as services are performed. There are no written
management contracts with any of the entities.
For 1997, it is projected that the Company's President will receive
$10,000 monthly, a former director will receive $10,000 monthly,
another director will receive $3,000 per month and another consultant
will receive $10,000 per month as compensation for their services as
consultants.
The Company has agreed to pay rent of $5,971 per month if Hyperflo
does not make the payment on its facility. However, Hyperflo is
looking for a new facility and has found someone to assume its lease,
so it is very doubtful the Company will incur any liability on behalf
of Hyperflo. The lease expires June 30, 2000.
NOTE 16: RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the December 31, 1995
financial statements to conform with the December 31, 1996 financial
statement presentation. Such reclassifications have had no effect on
net income as previously reported.
F-10
<PAGE>
SMITH & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF: CRANDALL BUILDING SUITE 700
AMERICAN INSTITUTE OF 10 WEST 100 SOUTH
CERTIFIED PUBLIC ACCOUNTANTS SALT LAKE CITY, UTAH 84101
UTAH ASSOCIATION OF TELEPHONE: (801) 575-8297
CERTIFIED PUBLIC ACCOUNTANTS FACSIMILE: (801) 575-8306
- ---------------------------------------------------------------------------
Board of Directors and Shareholders
Claire Technologies, Inc.
Scottsdale, Arizona
Our audit of the basic financial statements presented in the preceding section
of this report was made primarily to form an opinion on such financial
statements taken as a whole. The additional information, contained in the
following pages, is not considered essential for the fair presentation of the
financial position of Claire Technologies, Inc., the results of its operations
or cash flows in conformity with generally accepted accounting principles. The
following information consisting of Schedule V and Schedule VI is included to
comply with reporting requirements of the Securities and Exchange Commission.
Such data was subjected to the audit procedures applied in the audit of the
basic financial statements and, in our opinion, are fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
March 27, 1997
F-11
<PAGE>
CLAIRE TECHNOLOGIES, INC.
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Balance at Balance
Beginning Additions at End
of Period at Cost Retirement of Period
------------------ ------------------ ----------------- -----------------
Year Ended
December 31, 1994:
<S> <C> <C> <C> <C>
Equipment $ 0 $ 0 $ 0 $ 0
Furniture 0 0 0 0
Vehicle 0 0 0 0
------------------ ------------------ ----------------- -----------------
$ 0 $ 0 $ 0 $ 0
================== ================== ================= =================
Year Ended
December 31, 1995:
Equipment $ 0 $ 20,624 $ 0 $ 20,624
Furniture 0 0 0 0
Vehicle 0 0 0 0
------------------ ------------------ ----------------- -----------------
$ 0 $ 20,624 $ 0 $ 20,624
================== ================== ================= =================
Year Ended
December 31, 1996:
Equipment $ 20,624 $ 1,311 $ 0 $ 21,935
Furniture 0 712 0 712
Vehicle 0 7,500 0 7,500
------------------ ------------------ ----------------- -----------------
$ 20,624 $ 9,523 $ 0 $ 30,147
================== ================== ================= =================
</TABLE>
F-12
<PAGE>
CLAIRE TECHNOLOGIES, INC.
SCHEDULE VI - ACCUMULATED DEPRECIATION OF
PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Additions
Balance at Charged to Balance
Beginning Costs and at End
of Period Expenses Retirement of Period
------------------ ------------------ ----------------- -----------------
Year Ended
December 31, 1994:
<S> <C> <C> <C> <C>
Equipment $ 0 $ 0 $ 0 $ 0
Furniture 0 0 0 0
Vehicle 0 0 0 0
------------------ ------------------ ----------------- -----------------
$ 0 $ 0 $ 0 $ 0
================== ================== ================= =================
Year Ended
December 31, 1995:
Equipment $ 0 $ 1,810 $ 0 $ 1,810
Furniture 0 0 0 0
Vehicle 0 0 0 0
------------------ ------------------ ----------------- -----------------
$ 0 $ 1,810 $ 0 $ 1,810
================== ================== ================= =================
Year Ended
December 31, 1996:
Equipment $ 1,810 $ 3,133 $ 0 $ 4,943
Furniture 0 76 0 76
Vehicle 0 0 0 0
------------------ ------------------ ----------------- -----------------
$ 1,810 $ 3,209 $ 0 $ 5,019
================== ================== ================= =================
</TABLE>
F-13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Claire Technologies, Inc. December 31, 1996 financial statements and
is qualified in its entirety by refereence to such financial
statements.
</LEGEND>
<CIK> 0000894546
<NAME> CLAIRE TECHNOLOGIES, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 708
<SECURITIES> 0
<RECEIVABLES> 305,500
<ALLOWANCES> (305,500)
<INVENTORY> 0
<CURRENT-ASSETS> 5,708
<PP&E> 30,147
<DEPRECIATION> (5,019)
<TOTAL-ASSETS> 30,836
<CURRENT-LIABILITIES> 728,674
<BONDS> 0
0
0
<COMMON> 8,540
<OTHER-SE> (706,378)
<TOTAL-LIABILITY-AND-EQUITY> 30,836
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (888,821)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,357
<INCOME-PRETAX> (1,973,145)
<INCOME-TAX> 0
<INCOME-CONTINUING> (990,178)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,973,145)
<EPS-PRIMARY> (.26)
<EPS-DILUTED> (.26)
</TABLE>
