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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended: August 31, 1999
Commission File Number: 0-7568
TOTH ALUMINUM CORPORATION
(Exact name of registrant as specified in its charter)
LOUISIANA 72-064658
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
Highway 18, River Road, P. O. Box 250, Vacherie, LA 70090
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (225) 265-8181
Securities registered pursuant to Section 12(b) of the Act:
NONE
(Title of each class)
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, WITHOUT PAR VALUE
(Title of class)
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 receding 12 months (or for such
shorter periods that the registrant was required to file reports),
and (2) has been subject to such filing requirements for the past 90
days: Yes X No
State the aggregate market value of the voting stock held by non-
affiliated of the registrant as of September 30, 1999; $531,500.
The aggregate market value was computed using the average between the
closing bid and ask prices as reported by NASDAQ and does not take
into account the fact that many of the outstanding shares of common
stock are restricted and may not be freely traded.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Common stock, without par value 35,466,193
Class Outstanding at Sept. 30, 1999
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PART I.
Item 1. Description of Business.
(a) General development of business. Since inception in
1966, the Company has been engaged in the research and development
of a commercial process(es) for the production of aluminum metal,
alumina and aluminum trichloride (commonly referred to as aluminum
chloride), silicon tetrachloride, titanium tetrachloride and other
commercial grade byproducts by means of patented chemical and
engineering processes. The principal raw materials used in the
Company's proprietary processes are aluminum bearing materials,
such as kaolin and flint clays, of which there are extensive
deposits in North America and throughout the world. A variety
of such clays has been tested by the Company, demonstrating the
feasibility of producing commercial grades of aluminum chloride,
silicon tetrachloride, titanium tetrachloride, alumina and aluminum
from these clays. It is the Company's belief that its proprietary
clay carbo-chlorination process (the "TAC Process") will be more
economical, and consume less energy in the production of aluminum
chloride, silicon tetrachloride, titanium tetrachloride, alumina and
aluminum than conventional methods.
The Company promotes it's technology through the formation
of joint ventures. To date, the Company has constructed two pilot
plant facilities. From inception through August 31, 1999, the
Company has derived no continuing revenues from the operations.
The Company, which has devoted itself primarily to the research
and development of the TAC Process, has incurred a net loss of
approximately $71,713,335 from inception through August 31, 1999.
The Company has obtained its working capital almost exclusively
from the private placement of its securities, a public stock
offering, a public offering of its convertible debentures and
related party and non-related party debt. The Company's continued
existence is dependent upon its ability to (1) generate sufficient
cash flow to meet its continuing obligations on a timely basis,
(2) obtain additional financing as may be required and (3) ultimately
to attain successful operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
The Company was incorporated under the laws of the State of
Louisiana on August 25, 1966, under the name Applied Aluminum
Research Corporation and was changed to the Company's present
name on August 20, 1973. The principal office of the Company
is located at 2141 Toth Street, Highway 18, River Road, P. O. Box
250, Vacherie, LA 70090, and its telephone number is (225) 265-
8181, fax number is (225) 265-7795. The Company's Standard
Industrial Classification Code Number is 8890.
- Narrative description of business.
(1) Description of business done and intended to be done.
The Company had been engaged in the research and development of
processes and methods relating to clay carbo-chlorination technology
for the production of aluminum metal and aluminum intermediates and
other valuable separable metal and chemical products. The Company
is currently focusing on commercializing a combination of its clay
chlorination technology with aluminum chloride smelting ("ACS")
processing to manufacture aluminum metal from clay. The principal
raw materials used in the TAC Process are aluminum bearing
materials, such as kaolin and flint clays, of which there are
extensive deposits in North America and throughout the world.
In the U.S., extensive deposits of kaolin and flint clay occur
in Georgia, South Carolina, Ohio, Pennsylvania and Colorado and
in western Canada. Extensive deposits occur on all continents
in the world, as for an example in England, France, Germany,
Russia and India. A variety of such clays have been tested by
the Company, demonstrating to the Company the feasibility of
producing a commercial grade of metal chlorides from these
clays. It is the Company's belief that utilization of the TAC
Process will be more economical, and consume less energy in the
production of aluminum chloride, silicon tetrachloride, titanium
tetrachloride, alumina and aluminum than conventional methods
currently used.
From its formation in 1966 until 1974, the Company directed
its research and development activities toward the development
of alternative methods of producing aluminum directly from raw
materials, other than bauxite. Much of this work was done at
the University of Veszprem, and other institutions in Budapest,
Hungary during the period 1970 to 1987.
In 1974, the Company shifted its research and development
focus to emphasize the production of aluminum chloride, the
principal intermediate product in the manufacture of aluminum
metal from clay via the TAC Process. Laboratory and mini-plant
facilities were constructed and operated in New Orleans during
the period 1974 to 1978. It was during this period that the
technology known today as the TAC Process was developed.
Development Plans
As in previous years, the principal goal of the Company is
to commercialize its process to produce aluminum metal and
intermediate chloride and oxide products from clay. One of the
first steps in the commercialization process is the commercial
production of metal chlorides. The Company is engaged in
pursuing options to achieve this first level of commercialization.
In August 1995, Fluor Daniel Inc. undertook a feasibility
study of a project to construct a commercial Metal Chlorides
Plant to manufacture aluminum chloride, silicon tetrachloride,
titanium tetrachloride and other products from clay using the
company's proprietary carbo-chlorination technology. Fluor
Daniel's assessment was highly favorable, but the Company has
not succeeded in raising the funding needed to complete the
project.
In March 1998, the Company negotiated with and entered into an
Engagement Agreement with a Denver, CO based financial brokerage
firm, Mercantile Resource Finance, Inc. (MRFI) for the sole purpose
of accelerating the efforts to fully commercialize the TAC Process.
The initial agreement has matured and was renewed, with a new
expiration date of December 31, 1998. Through the end of the fiscal
year, some interest had been shown by prospective investors, but
nothing significant and as of this writing, nothing material or
consequential has materialized.
Plan for Aluminum Metal
The principal business goal of the Company is the commercialization
of its Clay-to-Aluminum technology. This will involve the
incorporation of electrolytic cells for the direct conversion of
aluminum chloride to metallic aluminum. Such electrolytic conversion
has already been demonstrated successfully on large scale, by other
companies. Due to the large scale of the commercialization effort, the
company is attempting to attract industrial partners, in a corporate
venture, suitable to all concerned, to employ this technology.
The TAC Process
Currently, aluminum is produced from bauxite and alumina by
the conventional Bayer and Hall processes. Metal chlorides,
such as aluminum chloride, silicon chloride and titanium
chloride, are made from a variety of materials by several
different methods. The TAC Process is designed to produce
aluminum and other metal chlorides from aluminum-bearing
materials, such as kaolin or flint clays, bauxite or certain fly
ash, with low grade lignite or bituminous char and coke,
chlorine, and certain other materials. The Company considers
all such raw materials utilized in the TAC Process to be in
adequate supply and readily available in North America, and
around the world.
In the TAC Process, wet clay is heated in a dryer until the
free moisture is evaporated. The dried clay is then mixed with
lignite char and a catalyst then sent to a calciner where
heating drives off the remaining moisture and activates the
clay. The calcined clay, together with lignite char, is fed
continuously into a fluid bed chlorinator where it reacts with
chlorine gas. The oxide compounds, present in the clay, react
with chlorine and form gaseous chloride compounds. These are
condensed and separated into aluminum chloride, silicon chloride
and titanium chloride. Aluminum chloride may be smelted by
electrolysis to produce aluminum, or it can be oxidized to
produce alumina and chlorine.
Alumina is utilized as feed stock in the conventional Hall
process to produce aluminum. Alternatively, in the past the Alcoa
smelting process utilized aluminum chloride itself as feed stock for
producing aluminum, thus making the oxidation of aluminum chloride
unnecessary in aluminum production. It is management's belief that
the TAC Process will ultimately produce aluminum and other metal
intermediates at less cost, and at lower energy consumption, than
conventional production methods currently used.
The Products
The products from commercial application of TAC's technology will
include aluminum metal, aluminum chloride, high performance alumina,
silicon tetrachloride, titanium tetrachloride and other metal chlorides
and oxides. The market for aluminum is well-known and includes
structural items, automobile parts, bus and trailer bodies, food
wrapping, beverage cans and many other items.
At present, in management's belief, substantially all of
the domestic annual consumption of aluminum chloride and high-
purity alumina are used in applications outside the aluminum
industry. Aluminum chloride is commonly used as a catalyst to
make detergents, dyes, pigments and pharmaceuticals. The
primary end-products of non metallurgical alumina are abrasives
(corundum), catalysts, high-grade ceramics, and refractories
(heat and corrosion-resistant bricks and liners for smelters,
kilns and chemical reactors).
Silicon tetrachloride is used principally as a feed stock
for fumed silica, which has a number of commercial applications.
Today, it is used most commonly as a component in silicon
rubbers and household caulking compounds, as a additive in
powdered foods, and as a thickening agent in products, such as
paint and cosmetics. Additionally, high purity silicon
tetrachloride can be a source of high purity polycrystalline
silicon metal, which has electrical/electronic applications in
the semiconductor industry.
Titanium tetrachloride is used in the manufacture of
titanium metal and alloys and for production of titanium dioxide
pigment for paper and paints.
A 1995 market assessment concluded that the market for
aluminum chloride, silicon tetrachloride and titanium
tetrachloride is sufficiently large for the Company to market
the projected production of these products from a commercial
metal chlorides plant.
The Armant Plant
Under the terms of the Partnership agreement, the Company
has a 2% ownership interest and under a separate non-exclusive
license agreement, a right to royalty payments based on positive
cash flow of the Partnership. The license agreement provides
for royalty payments to the Company equal to 28.6% of net
positive cash flow until each limited partnership interest has
received its respective investment. Thereafter, royalty payments
to the Company increase to 49% of net positive cash flow. The
Company applies the equity method in accounting for its investment
in the Armant Partnership.
Competition
Competing producers of aluminum metal, alumina, aluminum
trichloride, silicon tetrachloride and titanium tetrachloride
include larger, more established firms, some of which are
divisions of international corporations. These firms have
established markets, and proven technologies. In addition,
neither of the plants utilizing the TAC Process has yet to
achieve sustained commercial production. There can be no
assurance that the plants will ultimately achieve such
production, or if such production is achieved, it will be at
competitive costs.
Government Regulation
The manufacture, sale and installation of equipment in
chemical manufacturing facilities in the United States and
abroad are subject to stringent and broad regulations by
federal, state and local authorities concerning the environment,
occupational safety and health. Any plant that TAC would
construct will be in full compliance with all relevant federal,
state, and local permitting statutes.
Patents
The Company had been issued patents on significant aspects
of the TAC Process in the United States, and intends to apply
for a significant number of additional patents and/or
Continuations in Part.
Of the Company's current patents, three will still be in
force after the year 2000. As in most countries, a United
States patent prevents anyone from making, using or selling the
patented process in the United States, without a valid license.
Once the Company has attained a source of steady funding,
it intends to vigorously pursue patenting of new process
improvements and designs which would be aimed at preventing
others from potentially competing against the Company. In
addition to patent protection, the technical know how and
experience the Company has attained shall remain private and part
of its Intellectual property, which serves as a hindrance to others
who would attempt to utilize this Clay-to-Aluminum technology.
Research and Development Activities
From inception, the Company's primary business has been
research and development of the TAC Process. For the three
years ended August 31, 1999, the Company has spent and
depreciated an aggregate of $55,800 in continuing research and
development in the United States, Canada and overseas. These
expenditures are shown by year in the following table:
Fiscal Years Ended August 31,
1999 1998 1997
Research and development $13,700 $ 12,400 $29,700
Employees
At September 30, 1999, the Company had 4 full time employees.
Item 2. Properties.
The Company believes that its current offices are sufficient
to house its existing operations. See "BUSINESS-The Armant
Plant; TACMA" for a description of the properties utilized
by the Armant Partnership and by TACMA, respectively.
Item 3. Legal Proceedings.
See Item 8 - "Involvement in Legal Proceedings."
PART II
Item 4. Market for Common Stock and Related Security Holder Matters.
The Company's common stock is traded on the NASDAQ Bulletin
Board Market. The table below sets forth the closing high
and low bid prices for the common stock. The prices shown
represent prices between dealers and do not include retail
mark-up, mark-down, or commission. They may not represent
actual transactions.
Bid Price
Low High
----- ------
1999:
First Quarter, 1/32 3/32
Second Quarter, 1/32 3/32
Third Quarter, 1/32 1/8
Fourth Quarter, 1/32 1/8
1998:
First Quarter, 1/32 3/32
Second Quarter, 1/32 3/32
Third Quarter, 1/32 1/8
Fourth Quarter, 1/32 3/32
As of September 30, 1999, there were approximately 12,000
shareholders of record of the Company's common stock. It is
estimated that an equal number of stockholders's shares
are held in "nominee" or "street" name.
Item 5. Selected Financial Data.
The following selected financial data has been derived
from the Company's unaudited financial statements. This
selected financial data should be read in conjunction with
the financial statements of the Company and notes related
thereto appearing elsewhere herein. The financial statements
of the Company have been prepared on a going concern basis,
which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company has incurred a net loss from its inception in
1966 through August 31, 1999 of approximately $71,713,335.
Although the Company's investee (Armant) has constructed
a facility that will employ the Company's patented processes,
Armant has not achieved sustained commercial production, and
the commercial viability of the processes has not been
demonstrated. The recover ability of the Company's
investment in and receivables from Armant is dependent on the
applicable investee achieving sufficiently profitable
commercial operations. These factors, among others, may
indicate that the Company will be unable to continue in
existence. The financial statements do not include any
adjustments relating to the recover ability and classification
of recorded asset amounts or the amount and classification of
liabilities that might be necessary should the Company be unable
to continue in existence. The Company's continuation in existence
is dependent upon its ability to generate sufficient cash flow
to meet its continuing obligations on a timely basis, to obtain
additional financing as may be required, and ultimately to attain
successful operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the
Financial Statements of the Company and Notes thereto.
Selected Financial Data
Years Ended August 31,
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
Total Assets..... $ 38,158 $108,042 $195,040 $1,045,282 $4,507,997
Net loss.........$ 3,239,325 $3,496,071 $3,927,866 $6,864,124 $16,157,338
Loss per share of
common stock.... $.09 $.09 $.11 $.19 $.46
Long-term debt:
Convertible
Debenture....... $20,437 $ 20,437 $20,437 $20,437 $20,437
Long term debt:
Series "A-1"
debt........... $19,866,905 $19,866,905 $19,866,905 $19,866,905 $17,292,937
Total
stockholders
equity.........($33,270,465) ($30,031,090)($26,535,019)($22,607,153) ($15,743,029)
The significant decrease in the Total Stockholders Equity in
1996 is directly attributed to the Company's forced write down
of its investment in Armant, thereby increasing its loss, while
it sought funding for either its Armant and its Canadian
Operations.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
During the fiscal year ended August 31, 1999, total assets decreased to
$35,158 from $108,042 at August 31, 1998 and $195,040 at August 31, 1997.
The recoverability of the Company's investment in and advances to Armant of
$15,254 is dependent on the Armant Partnership achieving and sustaining
sufficiently profitable commercial operations (see note 2 of Notes to
Financial Statements). Total liabilities, including the new Series "A-1"
Convertible Promissory Note increased from $26,709,622 at August 31, 1997
to $30,139,132 at August 31, 1998 to $33,288,186 at August 31, 1999. Cash
on hand decreased from $918 at August 31, 1998 to $440 at August 31, 1999.
Working Capital Meeting Operating Needs and Commitments
Due to the length of its development stage activities,
liquidity has always been a continuing concern. The Company
has incurred net losses from its inception in 1966 through
August 31, 1999, of approximately $71,713,335. The
Company's continuation in existence is dependent upon its
ability to generate sufficient cash flow to meet its
continuing obligations on a timely basis, to obtain
additional financing as may be required, and ultimately to
attain successful operations.
The Company's intention, in the near-term, is to focus its
efforts and resources on completing a project to commercialize
the Clay-to-Aluminum Process, and is to be undertaken in
multiple steps.
In the first step, which TAC has designated Phase 1, TAC
proposes that a semi-commercial demonstration plant be built
and operated. Operation of this semi-commercial plant will
permit engineers to fine tune the design of the subsequent
full commercial facility in Phase 2. Equally important, the
Phase 1 plant will provide a hands-on training facility for
commercial plant staff. Phase 2 of the project will comprise
the design and construction of a full scale commercial Clay-
to-Aluminum plant. Cost of Phase 1 is estimated to be $45
million and the cost of Phase 2 will be determined after
Phase 1 has been completed.
There will be two principal goals in executing Phase 1.
The first goal is to refine TAC's clay chlorination
procedures for implementation in commercial production
facilities. TAC has already developed these procedures to an
advanced stage in its pilot plant, but the design of that
pilot plant did not permit long duration, continuous
operation runs. Refinement of procedures will permit
confident scale-up to full scale commercial plant capacity.
The second goal will be the generation of refined designs
for full scale commercial smelting cells. This will be
accomplished by constructing the operating a complete ACS
smelting facility which will consume a portion of the
aluminum chloride produced in clay chlorination. The balance
of production will be marketed as high purity anhydrous
aluminum chloride to generate revenues to help defray plant
operating costs. Smelting specialists foresee rapid
development of a final design for commercial cells in Phase
1, and anticipate that this will consume nine to twelve
months of development time.
The project will start as soon as TAC has secured the financing
for Phase 1. Initial tasks includes detailed engineering design
of clay chlorination and smelting facilities, and the selection
of a suitable plant site. Construction will begin with site
preparation, approximately nine months after the project start.
After an initial start-up period, the Phase 1 plant is expected
to reach full design capacity within 36 months after project start.
After confirmation of the economic viability of the Clay-
to-Aluminum Process, work will begin on the second phase of
the project, namely the design, construction and operation of
a commercial Clay-to-Aluminum plant. TAC proposes that a
modular design concept be adopted for Phase 2, such that the
eventual full scale commercial plant will consist of a set of
duplicate plant modules, operating in parallel. TAC
estimates that the first plant module will be completed in
year seven of the project, with additional modules
constructed in parallel, in subsequent years.
In light of the Company's net operating loss carry-forwards of
approximately $57,908,338 at August 31, 1999, management believes
that none of the provisions of the Tax Reform Act of 1986 will,
in any respect, have a material impact upon the Company's liquidity
or earnings for the foreseeable future.
Results of Operations
The Company had no operating revenues and reported net
losses. The Company had been considered a development stage
enterprise; start-up activities have commenced, but the
Company has received no continued revenue therefrom.
1999 Compared to 1998
The net loss for the fiscal year ended August 31, 1999 was
$3,239,375 compared to $3,496,071 in 1998. The decrease was
due to an decrease in Loss in Investment and advances to
Armant. The Company has nearly written of its entire
investment in the Armant Partnership. Cost and Expenses
decreased to $3,147,457 in 1999 from $3,320,510 in 1998.
During the same period, promotional, general and
administrative expenses increased to $634,138. During the
year ended August 31, 1999, the company recognized $2,499,619
in interest expense, compared to $2,838,598 in 1998. Also,
during fiscal year ended August 31, 1999, the company
recognized $43,206 in loss from Armant. Armant has had no
operation during this year, except for routine maintenance
and upkeep, and the Company recognizes the related loss.
1998 Compared to 1997
The net loss for the fiscal year ended August 31, 1998 was
$3,496,071 compared to $3,927,866 in 1997. The decrease was
due to an decrease in Loss in Investment and advances to
Armant. The Company has nearly written of its entire
investment in the Armant Partnership. Total expenses
increased to $3,320,510 in 1998 to $1,732,823 in 1997.
During the same period, promotional, general and
administrative expenses increased to $469,512. During the
year ended August 31, 1998, the company recognized $2,838,598
in interest expense, compared to $1,732,823 in 1997. Also,
during fiscal year ended August 31, 1998, the company
recognized $51,800 in loss from Armant. Armant has had no
operation during this year, except for routine maintenance
and upkeep, and the Company recognizes the related loss.
1997 Compared to 1996
The net loss for the fiscal year ended August 31, 1997 was
$6,864,124 compared to $16,157,338 in 1996. The loss in 1996
occurred because the Company, due to prolonged delays in
attaining funding, was forced to write off a major part of
its investment in the Armant Partnership. Total expenses
decreased from $2,490,204 in 1996 to $2,393,685 in 1997.
During the same period, promotional, general and
administrative expenses decreased to $375,421. During the
year ended August 31, 1997, the company recognized $1,974,483
in interest expense compared to $2,000,363 in 1996. Also,
during fiscal year ended August 31, 1997, the company
recognized $4,470,439 loss from Armant. Again due to the
prolong delays in attaining the necessary funding to restart
the Armant Plant the company was force to write off a major
part of its investment in the Armant Partnership. Armant has
had no operation during this year, except for routine maintenance
and upkeep, and the Company recognizes the related loss.
Item 7. Financial Statements and Supplementary Data.
Please refer to the Company's unaudited Financial
Statements attached.
PART III
Item 8. Directors and Officers of the Company.
The directors and officers of the Company and their ages
are as follows:
Name Age Position with the Company
------------------ ---- ---------------------------
Charles Toth 67 Chairman of the Board of
Directors and Chief
Executive Officer
Gervase M. Chaplin 62 Sr. Vice President
Engineering and Technology
Glenn A. Nesty 87 Director
Calvin J. Laiche 68 Director
Russell F. Haas 62 Director and Chief Financial Officer
Charles Toth, the Company's Chairman of the Board, founded
the Company in 1966. Mr. Toth served as President from 1966
to 1974, when he resigned as President and was elected
Chairman of the Board of Directors.
Gervase M. Chaplin has been with the Company since January
1976, and currently holds the position of Senior Vice
President, Engineering and Technology. He had previously
been Manager of Process Development. Dr. Chaplin has B.S.
degrees in Chemistry, Geology, and Metallurgical Engineering
and holds a Ph.D. in Chemical Engineering. He had previously
served as Plant Manager for Newmont Mining and as Senior
Research Specialist with Exxon Production Research of
Houston.
Glenn A. Nesty, a director since 1979, was Vice President
for Research at International Paper Company between 1969 and
1976, when he retired. Between 1955 and 1968 he was Vice
President for Research and Development and a member of the
Board of Directors of Allied Chemical Corporation. Dr. Nesty
holds a Ph.D. in Organic Chemistry.
Calvin J. Laiche, Director and Attorney at Law, Member of
Louisiana Bar, Civil Practice, State and Federal Attorney for
Jefferson Parish, City of Westwego Housing Authority Attorney
and Magistrate for the Town of Jean Lafitte, Registered
Mechanical Engineer State of Louisiana, Registered Patent
Attorney, House Counsel for Toth Aluminum Corporation, and
former Project Engineer for Shell Chemical Corporation.
Russell F. Haas, Director and Chief Financial Officer, has
served as bank president for two local banks, during his 36
year tenure in the industry. For the past 7 years, Mr. Haas
has turned his attention to management consulting, performing
work for local entrepreneurs. He brings to the board, a vast
array of knowledge in the financial and management field.
In July of 1999, Mr. Haas, filed personal bankruptcy, in an
effort to settle outstanding liability issues.
Involvement in Legal Proceedings
Under little known prior law, insiders of a corporation could not
buy and sell any company's stock within a six month period of time.
Such a transaction, at that time, was considered a violation of
Rule 16 (b) of the Securities Exchange Act of 1934. This provision
has since been re-enacted and this type of transaction is now
completely in compliance with the new Rule 16 (b).
Between 1983 and 1989, this Corporation has been unable to raise
sufficient capital from any outside source to keep it in operation.
Consequently, its CEO, while holding substantial amounts of stock at
the time, sold his private stock, under the "Dribble Out Rules",
shares that were released from Escrow after almost 12 years, where
he could only sell small amounts of stock at a time, and loaned
proceeds to the Corporation and/or purchased equipment needed in the
Corporation's operation. Several years later, a new minority stockholder
purchased less than 50 shares of the Corporation's stock, and employed
an attorney, who specialized in Rule 16 (b) violations, filed a suit in
Federal Court, challenging this procedure. Our research indicated that
the new and now current law was not made retroactive upon re-enactment,
because this opposing attorney lobbied Congress and prevailed, keeping
the old law in tact, for existing cases. Today, there are legal
provision in Rule 16 (b) for transactions of this nature, making them
in total compliance of the law.
Even under the old Rule 16 (b) law, various exceptions existed, such
as the sale of Stock that was acquired in good faith in connection
with a debt previously contracted, as was urged in the legal proceeding
by the Corporation's CEO. While the transaction was very legal, only
the recordation of the transaction on the Corporate books was not
specific enough to comply with this complicated, archaic Rule 16 (b),
which has since been modified. Because the specific language was not
employed between the CEO and the Corporation, an oversight on the part
of the Corporate Secretary, this allowed the minority stockholder to
argue against the exception that the Corporation had relied upon in
support of these transactions, after having expended considerable legal
fees and having filed many legal proceedings prior to the trial.
A Settlement Agreement was reached, whereby the Corporation's CEO
agreed to reimburse the Corporation the amount of $1,700,000, for
which the Board of Directors approved indemnification of the
Corporation's CEO, pursuant to the Article of Incorporation. For more
details, see the appropriate section of the 10K, for the prior year.
Item 9. Executive Compensation
(a) Cash Compensation.
The following table sets forth, as of the fiscal year
ended August 31, 1999, all remuneration paid by the Company
during the last fiscal year to each officer whose aggregate
cash compensation exceeded $60,000 to all officers of the
Company, as a group.
Other
Compensation
Cash Securities
Name of Individual Compensation Properties
or NO. of Persons Capacities in Salaries, Personal
in Group which served Fees, Bonus Benefits
------------------ -------------- ----------- -------------
Gervase M. Chaplin Sr. Vice. President $120,000 (1)
Technology &
Development
Charles Toth Chairman of the $150,000 (1)
Board & CEO
Russell F. Haas Director and CFO $1 (1&2)
(1) Due to the company's chronic cash shortage, these
officers elected to accrue all of their salaries.
(2) Mr. Haas works for a management company that
currently performs work for the Company, on the basis of
$120,000 annually, but due to the company's cash position,
elected to accrue all of the fee, except for $4,000 per
month.
(b) Compensation of Directors.
The Company does not have a standard arrangement for
compensation of directors. Except for services performed for
the Company, other than normal attendance at board meetings,
they will be compensated at a per diem rate equal to their
normal business compensation.
(c) Termination of employment and change of control arrangement.
There are no arrangements for termination of employment or
change of control.
Item 10. Security Ownership of Certain Beneficial Owners and Management.
(a) Security ownership of certain beneficial owners.
The following table sets forth certain information as of
September 30, 1999, with respect to the beneficial ownership
of the Company's common stock by all stockholders known by
the Company to be the beneficial owners of more than 5% of
its outstanding common stock, by directors who own common
stock and by all officers and directors as a group:
Number of Percent
Name Shares Owned (1) of Class
---------------------- ---------------- ---------
Charles Toth 1,416,750 (2) 4.0%
Dr. Gervase M. Chaplin 140,000 *
Glenn A. Nesty 34,000 *
Calvin J. Laiche 0 *
Russell F. Haas 20,000 (3) *
All officers and directors
as a group (5 persons) 1,519,000 4.5%
*Less than 1%
1 All shares are beneficially owned and the sole
investment and voting power is held by the person, except
as otherwise indicated.
2 Includes 91,570 shares originally issued and owned
by Mr. Toth but for which Mr. Toth no longer holds
certificates. Neither Mr. Toth's nor the Company's stock
transfer records indicate a disposition of these shares.
3 The 20,000 shares listed under Mr. Haas are owned
by his son.
Item 11. Certain relationships and related transactions.
As of August 31, 1999, Charles Toth, the Company's founder
and Chairman of the Board, had loaned the Company an
aggregate of $2,763,200 cash plus accruing interest of
$1,743,613. The total outstanding balance is accruing
interest at twelve (12.0%) percent and is payable on December
31, 2001, payable in Common Stock of TAC and as provided in
accordance with the separate document identified as Series
"A-1" Stock Rights Certificate. Also, see section Part III
item 9, subsection (b) "Other Compensation".
PART IV
Item 12. Exhibits and financial statements.
a) Exhibits: Exhibits numbered one through eight and
nine for Toth Aluminum Corporation are incorporated by
reference to the Annual Report on 10-K of the Company
filed for the fiscal years ended August 31, 1983 and
1985 respectively.
1. Amended and Restated Articles of Incorporation of
the Registrant, dated January 31, 1972.
2. Amendment to Articles of Incorporation of Registrant
dated April 24, 1973.
3. Amendment to Articles of Incorporation of Registrant
dated August 20, 1973.
4. Amendment to Articles of Incorporation of Registrant
date November 17, 1976.
5. By-Laws of Registrant dated November 22, 1976.
6. Specimen certificate of the Registrant's Common
Stock, no par value.
7. Specimen certificate of the Registrant's 6%
Convertible Participating Preferred Stock.
8. Promotion Agreement between Registrant and Indian
Magsee Alloy, Inc.
9. Stock Option Waiver Agreement dated December 4, 1985.
SIGNATURE
Pursuant to the requirements of Section 13 of 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
TOTH ALUMINUM CORPORATION
BY: Charles Toth
CHARLES TOTH
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER
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 date indicated.
Charles Toth December 9, 1999
Charles Toth
Chairman of the Board
of Directors and Chief
Executive Officer
Charles Ernest Toth Jr. December 9, 1999
Charles Ernest Toth Jr.
Treasurer
Glenn Nesty December 9, 1999
Glenn Nesty
Director
Calvin J. Laiche December 9, 1999
Calvin J. Laiche
Director
Russell F. Haas December 9, 1999
Russell F. Haas
Director and CFO
TOTH ALUMINUM CORPORATION
FORM 10-K
ITEMS 8, 14(a)(1) AND (2)
INDEX OF FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements, of the Registrant, required
to be included in Item 8 and 14(a)(1), are listed below:
Page
Financial Statements:
Balance Sheets......................
Statements of Operations and
Deficit Accumulated During
the Development Stage...........
Statements of Stockholders' Equity.
Statements of Cash Flows...........
Notes To Financial Statements......
The following financial statement schedule of the
Registrant is included in Item 14(a)(2):
IV - Indebtedness of and to Related
Parties....................
Schedules, other than the above
mentioned, are omitted because the
conditions requiring their filing
do not exist or because the
required information is given in
the financial statements, including
the notes thereto.
TOTH ALUMINUM CORPORATION
COMBINED BALANCE SHEETS, AUGUST 31, 1999 AND 1998 (Unaudited)
1999 1998
------ ------
ASSETS
CURRENT ASSETS:
Cash .................................... $ 440 $ 918
Accounts receivable:
Officers and employees................
Other................................. 0 0
Prepaid:
Leases ...............................
Other.................................
Total current assets..................... $ 440 $ 918
INVESTMENTS IN AND ADVANCES TO:
TACMA India Limited...................
Armant Partnership.................... $ 15,254 $ 58,460
Total.................................... $ 15,254 $ 58,460
PROPERTY, PLANT AND
EQUIPMENT - Net....................... $ 22,654 $ 48,354
PREPAID LEASES ..........................
PATENTS AND PATENT RIGHTS (net of
accumulated amortization: ............ $ 110 $ 320
========= ==========
TOTAL................................... $ 38,158 $ 108,042
See notes to financial statement
TOTH ALUMINUM CORPORATION
COMBINED BALANCE SHEETS, AUGUST 31, 1999 AND 1998 (Unaudited)
1999 1998
LIABILITIES ------ ------
CURRENT LIABILITIES:
Notes payable-related parties............ $ 23,100 $ 23,100
Notes payable-bank....................... - -
Notes payable-other ..................... 300,000 300,000
Accounts payable:
Trade................................. 594,631 498,300
Officers and employees................ 458,467 357,491
Accrued salaries ........................ 2,644,995 2,246,955
Accrued expenses ........................ 337,585 243,000
Accrued interest payable................. 2,729,972 1,855,552
Total current liabilities................ 7,088,690 5,524,398
DEFERRED CREDIT ......................... 0 0
SERIES "A-1" Convertible
Promissory Note (CPN)1
CPN Related Parties
Principal........................... 7,398,265 7,398,265
Accrued interest payable............ 6,846,628 5,958,838
CPN Other Parties
Principal........................... 5,978,421 5,978,421
Accrued interest payable............ 5,976,182 5,258,773
Total Series "A-1" Notes............$ 26,199,496 $ 24,594,297
CONVERTIBLE DEBENTURES PAYABLE
(net of discounts, commissions,
and offering costs of)...............$ 20,437 $ $20,437
STOCKHOLDERS' EQUITY:
Common stock - no par value;
Authorized 36,000,000 shares;
issued and outstanding:
35,466,193 shares in 1998
and 35,466,193 shares in 1997.........$ 38,258,096* $ 38,258,096*
Common stock subscribed.................. 20,000 20,000
Paid in capital.......................... 164,774 164,774
Deficit accumulated during
the development stage.................. (71,713,335) (68,473,960)
Total stockholders' equity............... (33,270,465) (30,031,090)
=========== ==========
TOTAL....................................$ 38,158 $ 108,042
*See section 11 of the "Notes to Financial Statements"
TOTH ALUMINUM CORPORATION STATEMENTS OF OPERATIONS AND DEFICIT
FOR THE YEARS ENDED AUGUST 31, 1999, 1998, AND 1997 AND CUMULATIVE FOR THE
PERIOD FROM INCEPTION (AUGUST 1966) TO AUGUST 31, 1999 (Unaudited)
FROM
INCEPTION TO
.......FOR THE YEARS ENDED AUGUST 31 ... AUGUST 31,
1999 1998 1997 1999
---- ----- ---- ----
COSTS AND EXPENSES:
Research and
development...... $ 13,700 $ 12,400 $ 29,700 $7,743,240
Promotional,
general and
administrative... 634,138 469,512 379,271 16,534,376
Interest........... 2,499,619 2,838,598 1,323,852 17,241,537
--------- --------- --------- ----------
Total.............. 3,147,457 3,320,510 1,732,823 41,519,153
========== ========== ========== ==========
OTHER (INCOME) EXPENSE:
Loss in Investment
and advances to
Armant...........(A) 43,206 51,800 784,175 17,462,369
Equity in Loss
in Armant........ 48,712 123,761 1,410,868 12,731,813
-------- ---------- ---------- -----------
NET LOSS........... 3,239,375 3,496,071 3,927,866 71,713,335
========= ========== ========== ===========
DEFICIT ACCUMULATED
DURING THE
DEVELOPMENT STAGE,
BEGINNING OF
PERIOD............ $68,473,960 $64,977,889 $61,050,023
------------ ----------- -----------
DEFICIT ACCUMULATED
DURING THE
DEVELOPMENT STAGE,
END OF PERIOD..... $71,713,335 $68,473,960 $64,977,889 $71,713,335
=========== =========== =========== ===========
LOSS PER
COMMON SHARE $.09 $.09 $.11
=========== =========== ===========
(A) Due to the prolonged delay in attaining the necessary
funding, the company was forced to write down $17,419,163 of its
investment and advances in Armant.
See notes to financial statements.
TOTH ALUMINUM CORPORATION (A DEVELOPMENT STAGE ENTERPRISE) STATEMENTS OF STOCKHOLDER'S
EQUITY FOR THE YEARS ENDED AUGUST 31, 1999, 1998, AND 1997 AND CUMULATIVE FOR THE
PERIOD FROM INCEPTION (AUGUST 1966) TO AUGUST 31,1999
(Unaudited)
..............FOR THE YEARS ENDED AUGUST 31........................ FROM INCEPTION
.......1999...................1998....................1997 ........ TO AUGUST 31, 1999
SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARES AMOUNT
PREFERRED STOCK:
Balance beginning of period .... -------- $ ------ ----- $ ----- ----- $ ----- ----- $ ----
Issued for cash to
Louisiana residents
($25 per share)............... 10,656 266,400
Issued to officers,
employees and consultants
for services (assigned
value of $25 per share)....... 1,344 33,600
Conversion of preferred
stock to common stock......... (11,989) (299,725)
Redeemed for cash .............. (11) (275)
------- ------ ------ ------ ----- ----- -------- ---------
Balance, end of period.......... - 0 - - 0 - - 0 - - 0 - - 0 - - 0 - - 0 - - 0 -
======= ====== ====== ====== ===== ===== ======== =========
COMMON STOCK:
Balance, beginning
of period.................... 35,446,193 38,428,176 35,446,193 38,428,176 35,446,193 38,428,176 35,446,196 38,428,176
Issued at inception
(August 1966) to the
founders for patent
rights and services.... 4,400,000 27,500
Issued for cash on
initial offering to
Louisiana residents.......... 80,000 4,875
Issued for cash pursuant
to offering under
Regulation A of Securities
Act of 1933.................. 232,740 290,925
Issued for Cash................ 11,417,494 17,538,195
Issued to officers, employees,
directors and consultants
for services.................. 2,462,576 2,225,807
Issued for merchant
banking services.............. 98,800 247,000
Issued for underwriting
commissions of
common stock sale............ 87,860 233,806
Issued for commission
on sales of Armant
Partnership units............ 26,812 53,625
Issued in the acquisition
of subsidiary................ 500,000 1,830,000
Returned on divestiture
of subsidiary................ (500,000)(1,400,000)
Issued upon divestiture
of subsidiary................ 131,854 482,586
Issued upon cancellation
of indebtedness.............. 4,139,731 4,936,561
Issued upon conversion
of debenture................. 3,222,479 3,946,307
Issued upon exercise of
warrants and options......... 6,253,950 6,473,943
Issued for prepaid leases...... 497,353 778,706
Issued upon conversion
of preferred
stock to common stock........ 1,195,940 299,725
Issued for the
acquisition of assets......... 118,934 89,200
Issued in satisfaction
of prepaid royalties.......... 200,000 172,760
Issued in settlement of
litigation ................... 130,000 157,000
Common stock subject
to rescission................. 1,096,900 1,371,125
---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------
Common stock subscribed.........
---------- ---------- ---------- ---------- ---------- ---------- ----------- ---------
Balance, end of period..........35,466,193 38,428,176 35,466,193 38,428,176 35,446,193 38,428,176 35,466,193 38,428,176
========== ---------- ========== ---------- ========== ---------- =========== ----------
See notes to financial statements.
TOTH ALUMINUM CORPORATION (A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF STOCKHOLDERS EQUITY (Continued) (Unaudited)
.............FOR THE YEARS ENDED AUGUST 31............................. FROM INCEPTION
.........1999.......................1998................1997........... TO AUGUST 31, 1999
SHARE AMOUNT SHARE AMOUNT SHARE AMOUNT SHARES AMOUNT
COMMON STOCK WARRANTS:
Balance, beginning
of period................
--- ---
Warrants issued
for cash................ 727,966 72,718
Warrants exercised........ (26,594) (3,577)
Warrants expired.......... (701,372) (69,141)
_____ _____ _____ _____ _____ _____ ________ _______
Balance, end of period.... - 0 - - 0 - - 0 - - 0 -
===== ----- ===== ----- ===== ----- ======== -------
PAID IN CAPITAL:
Balance, beginning
of period................. 164,774 164,774 164,774
In conjunction
with financing........... 95,000
In connection with
acquisition of subsidiary. 140,356
In connection with
divestiture of subsidiary. (140,356)
Common stock warrants
expired and exercised..... 69,774
________ ________ ________ ________
Balance, end of period..... 164,774 164,774 164,774 164,774
________ ________ ________ ________
DEFICIT ACCUMULATED DURING
THE DEVELOPMENT STAGE:
Balance, beginning
of period................ (68,473,960) (64,977,887) (61,050,023)
New Loss................... (3,239,375) (3,496,071) (3,927,866) (71,713,335)
------------ ------------ ------------ ------------
Balance, end of period..... (71,713,335) (68,473,960) (64,977,887) (71,713,335)
TOTAL STOCKHOLDERS EQUITY.. (33,270,465) (30,031,090) (26,535,019) (33,270,465)
TOTH ALUMINUM CORPORATION (A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED AUGUST 31, 1999, 1998,AND
1997 AND CUMULATIVE FOR THE PERIOD FROM INCEPTION (AUGUST 1966) TO AUGUST 31, 1999
FROM INCEPTION
.......FOR THE YEARS ENDED AUGUST 31.... TO AUGUST 31,
1999 1998 1997 1999
------ ------ ------ ------
OPERATING ACTIVITIES
NET LOSS................ $(3,239,375) $(3,496,071) $(3,927,866) $(71,713,335)
ADJUSTMENTS TO RECONCILE
NET INCOME TO NET CASH
PROVIDED BY OPERATING
ACTIVITIES:
Depreciation and
amortization.......... 25,700 31,384 31,384 1,192,225
Amortization and write
off of patents........ 210 620 31,264 440,708
Amortization of
financing costs....... 95,000
Loss on divestiture
of subsidiaries....... 912,586
Amortization of prepaid
leases................ 302,424
Losses from joint
venture.............. 48,712 123,761 1,410,868 11,189,335
Other.................. 111,616
Proceeds from royalty
prepayments........... 172,760
Prepayment of leases... (16,104)
Disposition of property,
plant and equipment... 27,745
CHANGES IN OPERATING ASSETS
AND LIABILITIES:
Decrease (Increase)
in accounts receivable. (10,787)
Decrease (Increase)in
prepaid expenses...... (27,371)
Increase (Decrease) in
accounts payable...... 1,506,129 952,022 853,283 14,864,935
Increase (Decrease) in
notes payable......... 1,605,199 2,295,840 539,563 21,913,974
--------- ----------- --------- ----------
$(92,396) $(92,444) $(1,039,663) $(20,544,289)
TOTH ALUMINUM CORPORATION (A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS - (Continued
FROM INCEPTION
......FOR THE YEARS ENDED AUGUST 31.... TO AUGUST 31,
1999 1998 1997 1999
------ ------ ------ ------
INVESTING ACTIVITIES:
Purchase of property,
plant and equipment.... (1,159,046)
Acquisition of patents... (443,475)
Investment of
certificates of deposit. (3,995,000)
Cash investments in and
advances to TACMA..... (1,076,595)
Cash investments in and
advances to Armant.... 9,741 37,450 257,820 (20,760,548)
Write off of Investments
and Cash advances to
Armant................ 43,206 51,800 782,175 17,115,802
Redemption of certif.-
cates of deposit...... 3,995,000
Proceeds from sale of
net profit interest... 50,000
--------- ---------- ---------- ----------
52,947 89,250 1,040,025 (6,273,862)
--------- ---------- ---------- ----------
FINANCING ACTIVITIES:
Stock issued for cash.... 18,481,076
Preferred stock issued
for cash............... 266,400
Proceeds from long
term obligations....... 1,430,349
Proceeds from warrants
issued for cash........ 6,236,507
Common stock
issuance costs......... (166,550)
Issuance of convertible
debentures............. 1,913,963
Cash received upon
conversion of debentures
to common stock........ 112,999
Payment of long term
obligations............. (1,457,071)
--------- --------- ---------- -----------
26,817,673
--------- --------- ---------- -----------
INCREASE (DECREASE) IN CASH $ (478) (3,194) 362 (478)
CASH BEGINNING OF PERIOD 918 4,112 3,750
--------- --------- ---------- -----------
CASH END OF PERIOD $ 440 $ 918 $ 4,112 $ 440
========= ========= ========== ===========
TOTH ALUMINUM CORPORATION (A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED AUGUST 31,
1999, 1998 AND 1997 AND CUMULATIVE FOR THE PERIOD FROM INCEPTION
(AUGUST 1966) TO AUGUST 31, 1999
(Unaudited)
1. ORGANIZATION AND ACCOUNTING POLICIES
Going Concern Basis
The accompanying financial statements of the Company have been
prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business. The Company has incurred net losses
from its inception in August 1966 through August 31, 1999, and
August 31, 1998, of $71,713,335 and $68,473,960, respectively.
Due to the length of its development stage activities,
liquidity has always been a continuing concern. The Company has
incurred net losses from its inception in 1966 through August 31,
1999, of approximately $71,713,335. The Company's continuation in
existence is dependent upon its ability to generate sufficient cash
flow to meet its continuing obligations on a timely basis, to
obtain additional financing as may be required, and ultimately to
attain successful operations. Management believes that the plants
constructed by Armant and TACMA demonstrate that the production of
metal chlorides and aluminum intermediates through the Company's
patented processes is possible.
The Company's intention in the near-term is to focus its efforts and
resources on completing a project to commercialize the Clay-to-Aluminum
Process be undertaken in several steps.
There will be two principal goals in executing Phase 1. The
first goal is to refine TAC's clay chlorination procedures for
implementation in commercial production facilities. TAC has
already developed these procedures to an advanced stage in its
pilot plant, but the design of that pilot plant did not permit long
duration, continuous operation runs. Refinement of procedures will
permit confident scale-up to full scale commercial plant capacity.
The second goal will be generation of refined designs for full
scale commercial smelting cells. This will be accomplished by
constructing the operating a complete ACS smelting facility which
will consume a portion of the aluminum chloride produced in clay
chlorination. The balance of production will be marketed as high
purity anhydrous aluminum chloride to generate revenues to help
defray plant operating costs. Smelting specialists foresee rapid
development of a final design for commercial cells in Phase 1, and
anticipate that this will consume nine to twelve months of
development time.
The project will start as soon as TAC has secured the financing for
Phase 1. Initial tasks includes detailed engineering design of clay
chlorination and smelting facilities, and the selection of a suitable
plant site. Construction will begin with site preparation, approximately
nine months after the project start. After an initial ramp-up period
the Phase 1 plant is expected to reach full design capacity within 36
months after project start.
After confirmation of the economic viability of the Clay-to-
Aluminum Process, work will begin on the second phase of the
project, namely the design, construction and operation of a
commercial Clay-to-Aluminum plant. TAC proposes that a modular
design concept be adopted for Phase 2, such that the eventual full
scale commercial plant will consist of a set of duplicate plant
modules, operating in parallel. TAC estimates that the first plant
module will be completed in year seven of the project, with
additional modules constructed in parallel in subsequent years.
In light of the Company's net operating loss carry-forwards of
approximately $56,172,863 at August 31, 1999, management believes
that none of the provisions of the Tax Reform Act of 1986 will, in
any respect, have a material impact upon the Company's liquidity or
earnings for the foreseeable future.
The Company's continuation in existence is dependent upon its
ability to generate sufficient cash flow to meet its continuing
obligations on a timely basis, and to fund the purposed projects
and ultimately to attain successful operations. These factors,
among others, may indicate that the Company will be unable to
continue in existence. The financial statements do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts or the amount and classification of
liabilities that might be necessary should the Company be unable to
continue in existence.
Related Party Transactions
A significant aspect of the Company's business activities
consists of transactions with related parties. The following
summarizes significant assets at August 31, 1999 and 1998 arising
from transactions with related parties:
August 31,
1999 1998
------- -------
Advances to Armant (Note 2) $ 17,131,056 $17,127,870
Less write off due to the
Prolonged delay in
Obtaining funding (17,115,802) (17,069,420)
Prepaid leases (Note 4) --- ---
---------- -----------
Total $ 15,254 $ 58,450
========== ===========
Development Stage Enterprise
The Company was incorporated in August 1966. Since inception,
the Company's activities have consisted primarily of the
development of processes for the commercial production of aluminum
intermediates together with marketable byproducts. The Company is
considered to be a development stage enterprise; start-up and pre-
operating activities have commenced at the Armant facility, but the
Company has received no revenues therefrom.
Property and Depreciation
Property, plant and equipment is stated on a cost basis.
Depreciation for book purposes is provided by use of the straight-
line method over the estimated useful lives of the assets, which
range from 4 to 20 years. Depreciation for tax purposes is
provided by use of the MACRS method for the current year and ACRS
method for previous years. Improvements on leased property are
amortized over the lesser of the lease term or useful life of the
asset. Renewals and betterments of property and equipment are
capitalized and maintenance and repairs are charged to operations
as incurred. Upon retirement or sale of property, the cost and
accumulated depreciation are removed from the accounts and any gain
or loss is recognized. Investment tax credits are accounted for
using the flow-through method.
Patents
Patent costs include legal and other costs incurred in filing
for and obtaining patents; such costs are amortized using the
straight-line basis over the lesser of the legal or estimated
useful life of the patent.
Disclosure of Year 2000 Issues
The Company is engaged in the commercialization of its
patented carbo-chlorination processes for the production of
aluminum, alumina and aluminum trichloride, silicon
tetrachloride, titanium tetrachloride. At present the
company has no ongoing manufacturing operation, therefore
no revenues are derived from its operation. Recent market
surveys indicate a continued growth and demand for these
products beyond the year 2000.
Management has conducted an extensive assessment of the
Year 2000 issues, and has concluded there will be no
material effects on the company's business, there will be
no material effects on the results of operations, and there
will be no material effects on its financial condition.
The Company is in a 100% state of readiness for the year
2000. The Company has conducted extensive testing of its
computer and other date related systems, and has determined
that nearly all are year 2000 complainant. Those systems
which are not year 2000 complainant, have been discarded.
Furthermore, the Company has conducted an informal surveyed
on its utility companies, telephone company, and its
banking institutions to verify they are year 2000
complainant as well.
The Company anticipates little to no ill effects from
the Year 2000. The demand for its products continue to
grow, thereby making the prospects of a future joint
venture very pausable. The worst case scenario, would be
a total collapse of the US Capital Markets where by funding
for the Company's future commercialization of its process
could not be achieved.
The Company has prepared a contingency plan in the event
of a disruption in its ability to continue funding of its
ongoing operation. The Company has secured a personal
commitment for its operating capital needs. However, in the
event of a major disruption of the Financial Markets, the
Company's continued existing would be in doubt.
Loss Per Common Share
Loss per common share is computed based upon the weighted
average number of shares of common stock outstanding. The weighted
average number of shares outstanding for the fiscal years ended
August 31, 1999, and 1998 was 35,466,193, and 35,466,193,
respectively. The Company has options outstanding that are common
stock equivalents which are not considered in the computation of
loss per share since the effect would be anti-dilutive.
Common Stock Issued in Exchange for Assets Acquired or Services Rendered
The Company at times issues common stock in exchange for
assets acquired or services rendered. The amounts recorded for
assets acquired or services rendered are based on the estimated
fair value of the assets or services, or if such fair value is not
readily determinable, on the estimated fair value of the common
stock issued. All issuances of common stock are approved by the
Company's Board of Directors.
Statement of Cash Flows
In November, 1987, the Financial Accounting Standards Board
issued Statement No. 95, "Statement of Cash Flows". The Company
adopted provisions of the statement in its 1988 financial
statements and restated previously reported statements of changes
and are reflected in financial position for 1999, 1998 and the
statement from inception to August 31, 1999.
The Company considers highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
2. INVESTMENTS
General
The Company has historically maintained investments in two
affiliates, TACMA and Armant. The investment in TACMA was expensed
during 1988. The Company applies the equity method of accounting
for its investment in Armant. The collectibiilty of the advances
to and the recovery of the investment in Armant depends upon the
affiliate achieving successful commercial operations.
TACMA
In January 1982, the Company and an Indian company entered into
a Promotion Agreement providing for the formation of TACMA. TACMA
was formed to construct a plant in India designed to produce
metal chloride through the use of the Company's carbo-chlorination
processes. The Promotion Agreement provided for an initial capital
contribution by the Company of approximately $42,800 in exchange
for a 40% equity interest in TACMA. During the 1983 fiscal year,
the Company and TACMA's other stockholder assigned to a third party
the right to a 25% equity interest in TACMA in exchange for the
third party's $200,000 advance to TACMA. A transfer of equity
interest to the third party, which is subject to the prior approval
of the Indian government, would have reduced the Company's equity
interest in TACMA to 27 1/2%. The Company and the third party also
entered into a separate agreement which provided that the third
party could convey to the Company its right to the 25% equity
interest in TACMA in exchange for 200,000 shares of the Company's
common stock. During July 1987, the Company issued 200,000 shares
of its common stock valued at $325,000 in exchange for the third
party's rights to the additional equity in TACMA. Under this
agreement, the transfer to the Company of the additional equity
interest in TACMA, which is subject to the prior approval of the
Indian government, would increase the Company's equity interest in
TACMA to 52 1/2%.
As of August 31, 1984, the Company had also made cash advances
to TACMA totaling approximately $218,600. In addition, during
December 1984, the Company acquired from Empresas Lince, S.A., a
receivable from TACMA of $60,000 in exchange for 60,000 shares of
the Company's restricted common stock. The Company has also
incurred costs on TACMA's behalf which the Company considers
reimbursable under the terms of its service agreement with TACMA.
At August 31, 1988 and 1987, the Company's receivable for such
costs billed to TACMA was approximately $815,000. TACMA has not
recorded a corresponding payable for such costs because the
approval of the Indian government and Reserve Bank of India is
required before TACMA can make payment to the Company. The
collectibiilty of this receivable is dependent on obtaining
approval of foreign authorities as well as TACMA commencing and
sustaining sufficiently profitable commercial operations, for which
the Company currently has no plans. During the fiscal year ended
August 31, 1987, because of the continuing delays in obtaining
government approval, the Company reversed the previously recorded
receivable from TACMA. During 1988, based upon the Company's
decision to indefinitely postpone attempts to bring the TACMA plant
to full commercial production, its previously recorded investment
in the TACMA facility was also reversed.
Reference is made to Note 6 regarding a Swiss corporation's
advance to TACMA, in 1982, on the Company's behalf. The Company
recorded this advance as an additional investment in and advance to
TACMA. The Swiss corporation has not received payments equal to
$50,000, and in 1994 they have requested action requiring the
Company to replace or supplement its interest in TACMA. During
1995 the company issued a Series "A-1" Convertible Promissory Note
to the Swiss Corporation for the original $50,000 plus accrued
interest of $98,200 for a total of $148,000.
Armant
The Company is general partner in a limited partnership
(Armant) formed in 1982 to construct and operate a metal chlorides
plant in Vacherie, Louisiana. The plant, which through August 31,
1988, has cost approximately $22.9 million to construct, has been
built on land (the Armant site) owned by Empresas Lince, S.A.,
(ELSA), a Central American corporation controlled by a former member
of the Company's Board of Directors. The Company is leasing the land
from ELSA, as more fully described in Note 4.
Under the terms of the original Partnership Agreement, the
Company was to have a 50% ownership interest in the Partnership. In
March 1983, the partnership agreement was revised to provide the
Company a 2% ownership interest and under a separate license
agreement, a royalty payment based on net positive cash flow of the
partnership. The license agreement provides for royalty payments
to the Company equal to 28.6% of net positive cash flow until each
limited partnership unit has received $160,000 in cash, at which
time royalty payments increase to 49% of net positive cash flow.
The Company's capital contribution to Armant consisted of
certain improvements to the property, a non-exclusive licensing
agreement providing for Armant's use of the Company's carbo-
chlorination processes for producing metal chlorides, and prepaid
leases as described in Note 4.
Contributions to Armant by the limited partners, on the basis
of a single limited partnership unit, consisted of $25,000 in
initial cash deposits, $75,000 in cash to be paid in equal monthly
installments of $5,000 and either a $60,000 letter of credit or the
purchase of $60,000 of the Company's restricted common stock.
Armant has received subscriptions for all thirty-five limited
partnership units. At August 31, 1988, Armant had received cash
contributions of approximately $3,459,000. The Chairman of the
Company's Board of Directors holds fifteen of the thirty-five
units.
During November 1984, the Company loaned $3,995,000 to Armant,
resulting in the Company now having a receivable from Armant in the
amount of $3,995,000 bearing interest at 13.5% per annum. As of
August 31, 1988, the Company had made additional cash advances to
the Armant Partnership totaling $16,819,407, bearing interest at
12% per annum. The Company has also liquidated $240,000 of
Armant's notes payable plus accrued interest due to a corporation
controlled by a member of the Company's Board of Directors by
issuing 240,000 shares of the Company's restricted common stock.
As a result the Company recorded a receivable from Armant of
$276,000 bearing interest at 12% per annum. The Company had
additional non-interest bearing receivables from Armant totaling
$173,000 which were incurred in fiscal 1984, resulting from billing
under a service agreement. Subsequent to that date all costs,
including general and administrative cost, incurred by the Company
related to the construction and operation of the Armant Plant,
have been absorbed by the Company and expensed as incurred.
The initial phase of construction of the Armant Plant was
completed in December 1983. Since that time, numerous test runs
have been performed in an effort to achieve continuous commercial
production of market grade metal chlorides. Subsequent to the
Company's 1986 fiscal year end, Armant determined additional
funding would be required to sustain successful operations.
Therefore, because of unexpected construction delays and the
continued lack of commercial production at Armant, the Company
elected to discontinue accruing interest income on the Armant
receivable and reversed, in the fourth quarter of fiscal year 1986,
all interest income previously accrued which totaled $1,164,000 of
which $551,000 was accrued through August 31, 1986.
Further, Armant elected to discontinue capitalizing plant
start-up costs. The net loss recognized by Armant during the year
ended August 31, 1987, which primarily resulted from expensing
start-up costs, was first allocated to the partners' equity
accounts based upon their respective percentage interests in the
total partnership equity. To the extent that this loss exceeded
the total limited partners' equity, all additional losses were
allocated to the Company's equity interest in the partnership,
since the Company is the sole general partner in the limited
partnership and is at risk for these losses in the form of advances
to Armant. The Company's equity in the loss of Armant for the
years ended August 31, 1988 and 1987, was $2,880,165 and
$2,177,562, respectively. All of the loss for 1988 and $1,999,562
in 1987 was a result of Armant losses in excess of total
partnership equity and was recorded as a reduction in investment in
and advances to Armant.
Since the plant was shutdown in 1988 due to insufficient
capital to maintain operations, the Company had attempted to
secure additional funds to enable it to modify and start-up the
Armant plant. Significant effort has been devoted in the period
1988 to 1996 to securing funding from the DOE under the "Steel and
Aluminum Energy Conservation and Technology Competitiveness Act of
1988". Presently, the Company has postponed its efforts to up-grade
the Armant Plant.
During fiscal years 1998 and 1999, the prolonged delay in
securing the necessary funding to restart the Armant Pant forced
the Company to write off a significant portion of the Armant
assets. Costs capitalized and deferred by Armant consisted of the
following:
August 31,
1999 1998
------ ------
Direct carbo-chlorination
plant costs:
Process equipment............. $ 1,740,000 $2,950,000
Other equipment............... 0 0
Leasehold improvements........ 37,000 72,000
----------- ----------
1,777,000 3,022,000
Self-construction and start-up costs:
Salaries:
Engineering .................. 17,000 40,000
Plant construction and
operations................ 420,000 720,000
Indirect labor and
overhead.................. 17,000 35,000
----------- ----------
454,000 777,000
----------- ----------
$ 2,231,000 $3,799,000
Presented below is summarized financial information of Armant.
Beginning September 1, 1986, Armant elected to discontinue
capitalizing costs not directly associated with plant construction.
Prior to September 1, 1986, all costs were capitalized and
deferred.
August 31,
1999 1998
------ ------
Assets:
Plant and equipment........ $ 2,231,000 $ 3,799,000
Other...................... 72,000 100,000
----------- -----------
Total.................. $ 2,303,000 $ 3,899,000
=========== ===========
Liabilities and Equity:
Notes payable - Toth Aluminum
Corporation................. $ 3,240,000 $ 4,740,000
Notes payable - Bank.... 0 0
Payables - Toth
Aluminum Corp......... 17,420,000 16,970,000
Other payables.......... 790,000 710,000
Equity - Toth Aluminum
Corporation........... (19,134,000) (18,508,000)
- Other............... (13,000) (13,000)
(19,147,000) (18,521,000)
----------- -----------
Total.................... $ 2,303,000 $ 3,899,000
=========== ===========
Year Ended August 31,
1999 1998
------ ------
Statement of Plant Expenses
Direct plant costs........... $ 33,000 $ 14,000
Interest Expense.......... 274,000 195,000
General and
administrative costs.... 76,000 98,000
---------- -----------
Net loss $ 383,000 $ 307,000
========== ===========
August 31,
1999 1998
------ ------
Payable to and Equity of
Toth Aluminum Corporation
Notes payable.................... $20,013,000 $ 19,842,000
Payables......................... 4,689,000 5,240,000
Beginning equity of
the Company................... (5,560,000) (5,560,000)
Less: Loss from Armant.......... (10,989,000) (11,650,000)
Affiliates interest
capitalized by Armant, but
not accrued by the Company.. (5,620,000) (5,620,000)
Expensed by Armant, but not
accrued by the Company...... (2,518,000) (2,310,000)
----------- ------------
Investment in and advances to
Armant...................... $ 15,254 $ 58,450
=========== ============
3. PROPERTY, PLANT AND EQUIPMENT
At August 31, 1999 and 1998, the Company's property, plant
and equipment consisted of the following:
1999 1998
------ ------
Equipment........................ $ 15,325 $ 15,325
Furniture and fixtures........... 99,636 99,636
Leasehold improvements........... 355,127 355,127
Autos, tractors and trucks....... 39,800 39,800
-------- --------
509,888 509,888
Accumulated depreciation and
amortization................... (487,234) (453,330)
-------- --------
Property, plant
and equipment - net............ $ 22,654 $ 56,558
========= =========
4. PREPAID LEASES
During 1982, the Company was leasing from ELSA 16 acres of
land, together with certain improvements, at the Armant site. The
Company had prepaid the first four years' rent on these five year
leases, which commenced June l, 1981, by issuing common stock to ELSA.
In August 1983, the Company and ELSA agreed that ELSA would
purchase 281,353 shares of the Company's common stock for $562,706,
with the stipulation that the Company would repay the balance of
ELSA's mortgage note on the Armant property, which was
approximately equal to the funds received and would receive a ten
year lease of 104 acres and improvements, together with the right
to pledge the leased property as security for a bank loan. In
September 1983, the Company paid the balance of ELSA's mortgage
note and obtained a ten year lease on the property commencing
September 1983 and the right to pledge the property as security for
a bank loan. The Company had an option to purchase the leased
property, at a price determined by independent appraisal, at any
time during the ten year lease term. The prior five year leases
were canceled upon execution of the ten year lease, and ELSA
retained the common stock it had received in prepayment of the five
year leases.
Management concluded that the transactions described above
were essentially a non-monetary transaction consisting of the
acquisition of a ten year lease and the right to pledge the
property in exchange for common stock and the cancellation of the
five year leases, and should be recorded based on the fair value of
the ten year lease. An independent appraisal of the ten year lease
established that its fair value was between $600,000 and $700,000.
Since the aggregate of the unamortized prepayment of the canceled
five year leases (approximately $95,000 at August 31, 1983) and the
balance (approximately $562,000) of ELSA's mortgage note paid by
the Company was within the range of the ten year lease's fair value
established by appraisal, management used $657,000 as the basis for
recording the transactions.
The Company has contributed to Armant a lease of 25 acres and
improvements for a period of approximately five years, commencing
in September 1983, and has retained for its use the remainder of
the lease. Of the $657,000 aggregate discussed above, the Company
allocated $138,000 to its capital contribution to Armant, and
$519,000 to prepaid leases at August 31, 1983.
During fiscal years 1985 and 1984 the Company, in its capacity
as general partner, negotiated loans of approximately $2.4 million
for the Armant Partnership using the property as collateral.
5. NOTES PAYABLE
Notes payable consisted of the following:
August 31,
1999 1998
------ ------
Notes payable to bank,
collateralized(A):
At 12% ......................... $ - $ -
Demand notes payable to other
parties, unsecured (A):
At 12% ......................... - -
Demand notes, and payable to
related parties, unsecured (A):
At 12%.......................... 323,100 323,100
---------- ----------
Series "A-1" Convertible
Promissory Notes
Payable to related parties...... 7,398,265 6,726,150
Payable to others............... 5,978,421 5,575,742
Interest Payable................ 12,822,810 11,217,611
=========== ===========
Total............................... $ 26,522,596 $24,917,397
A) Partial or full collateralized by a pledge of personal
assets owned by the Company's Chairman of the Board.
Bank borrowings and applicable interest rates were as
follows:
1998 1997 1996
Balance at end of period........ $ -0- $ -0- $ -0-
Maximum amount outstanding...... -0- -0- -0-
Weighted average amount
outstanding.................. -0- -0- -0-
Weighted average interest rate
during the year.............. - - -
Weighted average interest rate
at year end.................. - - -
The weighted average interest rate during the year was computed by
dividing applicable interest expense by average bank borrowings
outstanding.
6. INCOME TAXES
The Company has net tax operating loss carry-forwards
available which may be used to offset future taxable income.
Potential tax benefits of the loss carry-forwards have not been
recognized for accounting purposes since realization of the carry-
forwards is not assured. The principal differences between losses
recognized for tax and book purposes are research and development
expenses, which are capitalized for tax purposes and the method of
calculating the Company's equity in loss of Armant. At August 31,
1999, the amounts and expiration dates of the net operating loss
carry-forwards were as follows:
Expires in Year
Ending August 31, Amount
------------------ ----------
2000 377,500
2001 1,608,600
2002 1,407,200
2003 8,045,300
2004 1,931,000
2005 1,524,000
2006 1,234,000
2007 3,618,000
2008 2,204,000
2009 2,313,000
2010 16,157,300
2011 6,864,124
2012 3,927,868
2013 3,496,071
2014 3,239,375
------- ------------
Total $ 57,908,338
===========
7. STOCK OPTIONS AND WARRANTS
Stock Option Plans:
The Company's Board of Directors has, at various dates,
awarded options to individuals to purchase the Company's common
stock. During fiscal year 1999 no options were exercised. The
following information is furnished with respect to options and
warrants outstanding.
Number of Shares at
August 31, August 31,
1999 1998
-------- ---------
Exercise Price
Options:
$2.00-2.84 30,000 30,000
$4.00-5.00 5,000 5,000
Warrants: ---------- ----------
Total 35,000 35,000
========== ==========
During 1988, the Company commenced a private offering of
1,500,000 units of its securities. Each unit consisted of one
share of the Company's common stock and the right to acquire an
option to purchase an additional share at a price equal to the
original purchase price of the unit. As of August 31, 1988, the
Company had sold 919,981 units and had issued option rights to
purchase 919,981 shares with an exercise price ranging from $0.75
per share to $0.95 per share. The option is exercisable for a
period of three years, commencing on the date that the Company's
shareholders approve an increase in the authorized shares of the
Company so as to permit the exercise of all of the options offered
hereby, but in no event later than August 30, 2001. If no such
authorization has been made prior to that date, options will
automatically be converted into the Company's subordinated debt in
a principal amount representing the difference between the closing
bid price of the Company's common stock on August 30, 2001, and the
exercise price of the option, bearing interest at the rate of 1%
per month until paid.
8. COMMON STOCK ISSUANCES
On September 29, 1986, the shareholders of the Company
approved an increase in the authorized common stock of the Company
from 23,976,000 to 36,000,000.
Refer to "Involvement in legal proceedings", Part III, Item
10, for additional information on certain lawsuits related
to potential recoveries from alleged securities law violations.
The table below sets forth common stock issuances from
inception of the Company to August 31, 1998, and together with the
nature of the consideration received, the range of per share
prices, and the average per share price. The number of shares
issued and per share prices have been adjusted, where applicable,
for stock splits.
Number of Total Dollar Price Per Share
Shares Issued Consideration Range Average
------------- ------------- ----- -------
From September 1, 1992
to August 31, 1999:
Beginning Balance.............. 35,466,193 $38,428,176
Issued for cash................
Issued to officers, employees,
directors and consultants for
services......................
Issued upon payment of common
stock subscribed..............
Total
---------- -----------
Total at August 31, 1999 35,466,193 $38,428,176
========== ===========
9. CONVERTIBLE DEBENTURES
On December 24, 1985, the Company commenced an offering of its 10%
Convertible Debentures due August 1, 1990 (the "Debentures"). The offering
contemplated the sale of a maximum of $4,320,000 of Debentures,
convertible, at the election of the Debenture holders into 3,175,000 shares
of common stock, no par value, of the Company. The purchase price of each
Debenture was $1,000 payable in cash. No minimum offering of Debentures was
established and Offerees were apprized of the fact that the proceeds of the
offering would not be placed into escrow, but would be applied directly to
the Company.
The Debenture offering was closed as of May 31, 1986, resulting in net
proceeds of $3,852,963 after deducting offering costs of $467,037. As of
August 31, 1988, 4,298 debentures were converted into 3,152,955 shares of
the Company's common stock, resulting in an increase in common stock of
$3,833,307 (net of offering costs of $464,693) and a balance in debentures
payable of $20,437 (net of offering costs of $1,563).
10. SERIES "A-1" CONVERTIBLE PROMISSORY NOTE
In May of 1995, the Company elected to convert the majority of its
indebtedness into shareholder equity. At that time there existed a
Convertible Promissory Note, which provided for the existing indebtedness
to be converted into stock based upon the conversion price of $.50 per
share plus a warrant to purchase an additional equal number of shares at
$.75 per share. The new Series "A-1" Convertible Promissory Note's
conversion price remains the same at $.50 per shares, with a warrant to
purchase an additional equal number of shares, however, the price has
changed and is now at $.30 cents per share. There are several limitations,
primarily, the Company does not have sufficient shares of Common Stock
authorized to permit conversion of the Series "A-1" Notes. Accordingly,
the Notes is not convertible into Common Stock, until such time as there
has been an amendment to the Articles of Incorporation of the Company,
approved by its shareholders, increasing the number of authorized shares
of Common Stock to an amount sufficient to cover the number of shares
subject to conversion under the Series "A-1" Notes. This Series "A-1"
Convertible Promissory Note had a maturity of 5 years, which has
subsequently been extended for an additional 5 years by the Board of
Directors.
If as intended the holders of the Series "A-1" Convertible Promissory
Note were to convert today, this conversion would enhance the
Stockholder's Equity section by increasing the Common Stock by $26,199,496
thereby increasing the Common Stock to 87,865,185, eliminating the same
dollar value from the Company's liability. Management believes that of the
total outstanding debt, more than 90% will eventually convert their debt
into shareholder equity. Of the 10% who will not convert are companies
or individuals which can not accept payment of the company's equity,
such as lawyers and auditors.
If at the next regular shareholders meeting the Company has failed to
amend its Articles of Incorporation to authorize the issuance of additional
shares of Common Stock, the Note holder shall have the right and option to
tender the Series "A-1" Note to the Company to be exchanged for a new
non-convertible promissory note payable on demand in cash in a principle
amount equal to the greater of the principal amount and interest due under
this Note, or the product of the total number of shares of Common Stock
into which the Note is convertible multiplied by the average of the mean
bid and ask prices of the Company's Common Stock at the close of business
over the ten business days immediately preceding the date of tendering of
this Note.
TOTH ALUMINUM CORPORATION (A DEVELOPMENT STAGE ENTERPRISE)
Schedule IV - Indebtedness of and too Related Parties - Not Current
COL. A COL. B COL. C COL. D COL.E
----------------------Indebtedness of------------------------
Name of Balance at Balance
Related Party Beginning Additions Deductions at End
For the fiscal years
ended August 31,
1999
Armant $ 5,240,000 $ - $ 4,689,000A $ 551,000
TACMA* $ - $ - $ - $ -
1998
Armant $ 8,494,000 $ - $ 5,240,000A $ 3,254,000
TACMA* $ - $ - $ - $ -
1997
Armant $ 25,788,136 $ - $ 17,294,136A $ 8,494,000
TACMA* $ - $ - $ - $ -
A -Due to the continued delay in obtaining the necessary funding
the company wrote off this amount.
* -Due to continued delay in obtaining government approval, the
receivable from TACMA was reversed during the fiscal year ended
August 31, 1987.
TOTH ALUMINUM CORPORATION (A DEVELOPMENT STAGE ENTERPRISE)
Schedule IV - Indebtedness of and to Related Parties - Not Current
(Continued)
Col. F Col. G Col.H Col. I
------------------------Indebtedness to---------------------------
Name of Balance at Balance
Related Party Beginning Additions Deductions at End
For the fiscal years
ended August 31,
1999
Armant $ - - - -
TACMA $ - - - -
1998
Armant $ - - - -
TACMA $ - - - -
1997
Armant $ - - - -
TACMA $ - - - -