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Share Name | Share Symbol | Market | Type |
---|---|---|---|
EAU Technologies Inc (CE) | USOTC:EAUI | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.0001 | 0.00 | 01:00:00 |
Delaware
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2842
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87-0654478
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(State of Incorporation )
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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1890 Cobb International Blvd
Suite A
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Wade R. Bradley
1890 Cobb International Blvd
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(Address and telephone number of Principal Place of Business)
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(Name, address and telephone number of agent for service)
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Securities registered under Section 12(b) of the Act: | ||
Title of each class
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Name of each exchange on which registered
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None
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None
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Securities registered under Section 12(g) of the Act:
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Common Stock, $0.0001 par value
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(Title of class)
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Large accelerated filer
o
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
þ
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(Do not check if a smaller reporting company)
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Page | |||||
ITEM 1. | 2 | ||||
ITEM 1A. | 9 | ||||
ITEM 1B. | 15 | ||||
ITEM 2. | 15 | ||||
ITEM 3. | 16 | ||||
ITEM 4. | 16 | ||||
ITEM 5. | 16 | ||||
ITEM 6. | 17 | ||||
ITEM 7. | 17 | ||||
ITEM 7A. | 22 | ||||
ITEM 8. | 22 | ||||
ITEM 9. | 22 | ||||
ITEM 9A. | 22 | ||||
ITEM 9B. | 23 | ||||
ITEM 10. | 23 | ||||
ITEM 11. | 27 | ||||
ITEM 12. | 31 | ||||
ITEM 13. | 33 | ||||
ITEM 14. | 34 | ||||
ITEM 15. | 35 | ||||
38 |
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Our ability to raise investment capital necessary to continue to fund our operations and product development activities.
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Our ability to adequately manage and fund the development of our business.
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The introduction of new laws, regulations or policies that could affect our products or our business practices. These laws, regulations or policies could impact our industry as a whole, or could impact only those portions in which we are currently active.
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Our ability to continue to develop our products and to develop products and services that will be accepted by our customers.
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Changes in economic conditions, including changes in interest rates, financial market performance and our industry. These types of changes can impact the economy in general, resulting in a downward trend that impacts not only our business, but all companies with which we compete; or, the changes can impact only those parts of the economy upon which we rely in a unique manner.
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Changes in relationships with customers and/or suppliers: an adverse change in our relationships with customers and/or suppliers would have a negative impact on our earnings and financial position.
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Our ability to protect our intellectual property and trade secrets in order to maintain an advantage over our competitors.
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Our failure to achieve and maintain effective internal control over financial reporting.
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Factors that we have discussed in previous public reports and other documents filed with the Securities and Exchange Commission.
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Primacide A
is a disinfecting and sanitizing fluid that kills bacteria; yeast; molds; viruses, including e-coli, salmonella, staphylococcus, streptococcus, lysteria, campylobacter, vibrio vulnificus; and hundreds of other organisms. It is highly oxidative and acidic due to its pH of 2.4 and positive 1150 millivolt (one thousandth of a volt) ORP (oxidative reduction potential) and hypochlorous acid concentration of 10 to 200 ppm. Primacide A can be applied to a wide variety of surfaces. Hands sprayed with Primacide A and then wiped with a micro fiber cloth were found to have less residual bacteria and other microbes than hands cleaned using 62% alcohol. Tests performed by the University of Georgia Food Science Department indicated that Primacide A can be used to sanitize and wash meat carcasses, strawberries, lettuce, cabbage, carrots and other vegetables. Surfaces such as floors in hospital operating rooms, bench tops, treatment tables, cutting boards and other surfaces can be effectively sanitized by cleaning with Primacide A. Further tests performed at the University of Georgia Poultry Science Department have established successful and dramatic log reductions of organisms in chicken chillers and also in in-line spraying. We have filed and received patent protection for the washing and sanitizing of eggs and mold remediation and expect to receive additional patent protection for other uses of Primacide A. EAU has completed successful commercial installations as well as trials in the field to further validate the use of Primacide A as a disinfectant.
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●
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Primacide B
is an alkaline based cleaner. Primacide B is created in the electrolysis process with a sodium hydroxide ion attached to the oxygen and hydrogen molecules. It emulsifies oils, fats and other lipids, but has no surfactant base and therefore leaves no residue when used to clean surfaces. It has a pH of 11.0 to 11.5, and is therefore very alkaline. Its alkaline nature and its negative (960) millivolt ORP result in a product that is effective in emulsifying oil and grease. Primacide B is primarily a cleaner with some bacteria killing properties, but is significantly slower and less effective as an anti-bacterial agent than Primacide A. We have submitted provisional patent applications to the United States Patent and Trademark Office to approve Primacide B for many uses. We have received a patent for using Primacide B in carpet cleaning.
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●
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Primacide C
is a product that was developed by the University of Georgia by Dr. Yen Con Hung and Company executives to stabilize acid water (Primacide A). This process has been submitted for patent protection and is currently pending. We license this technology from the University of Georgia. This product is useful in applications ranging from spraying on produce in grocery stores to consumer products requiring a longer shelf life.
Early in 2009 EAU received an issued patent for the use of Empowered Water™ (both Primacide A and C) in mold remediation.
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Dairy Drinking Water
–
The Company commenced hydration and production tests on dairy cattle in 2006. Initial results indicate a possible increase in milk production and milk fat while maintaining the protein content. The Company has expanded its investment into the application of its technology in the dairy channel. Multiple trials and University studies are being either planned or implemented to validate early results.
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generate electrolyzed water that has a longer shelf life;
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show value add propositions through commercial installations;
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sanitize agricultural products;
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enhance current products for further use in carpet cleaning;
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sanitize and disinfect hard and soft surfaces;
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find more efficient ways to apply our effective solutions;
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provide a superior dairy drinking water product.
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-
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Growth rate of the market for environmentally friendly sanitizing products;
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-
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Our ability to attract and retain customers;
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-
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Our ability to upgrade, develop and maintain our systems and infrastructure;
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-
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Amount and timing of operating costs and capital expenditures relating to business expansion and infrastructure;
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-
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Delays in developing and introducing new products;
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-
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Announcement, introduction and market acceptance of new or enhanced sanitizing products by competitors;
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-
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Governmental regulation of our products by agencies such as the FDA, USDA, EPA, or others.
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We may be sensitive to a slowdown in economic growth or other adverse changes in the China economy. This is particularly true in light of current financial and economic uncertainties. A slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in China may materially reduce the demand for our services and materially and adversely affect our business.
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New political and economic policies of the PRC government could affect our business.
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The PRC legal system embodies uncertainties which could limit the legal protections available to us. The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. We are subject to laws and regulations applicable to foreign investment in mainland China. However, these laws, regulations and legal requirements are relatively recent, and their interpretation and enforcement involve uncertainties. These uncertainties could limit the legal protections available to us and other foreign investors.
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EAU Technologies, Inc. Common Stock
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||||||||
High
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Low
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|||||||
Year Ended December 31, 2012
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||||||||
Quarter Ended March 31, 2012
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$ | 0.10 | $ | 0.01 | ||||
Quarter Ended June 30, 2012
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0.60 | 0.07 | ||||||
Quarter Ended September 30, 2012
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0.15 | 0.01 | ||||||
Quarter Ended December 31, 2012
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0.14 | 0.02 |
High | Low | |||||||
Year Ended December 31, 2011
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||||||||
Quarter Ended March 31, 2011
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$ | 0.31 | $ | 0.17 | ||||
Quarter Ended June 30, 2011
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0.45 | 0.25 | ||||||
Quarter Ended September 30, 2011
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0.35 | 0.25 | ||||||
Quarter Ended December 31, 2011
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0.35 | 0.20 |
●
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Revenue recognition;
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●
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Inventory valuation;
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Impairment of long-lived assets; and
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Allowances for doubtful accounts.
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December 31,
2012
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December 31,
2011
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|||||||
Balance Sheet Data
:
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||||||||
Cash
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$ | 753,348 | $ | 84,328 | ||||
Total Current Assets
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1,970,348 | 1,379,379 | ||||||
Total Assets
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2,854,800 | 2,114,923 | ||||||
Total Current Liabilities
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8,824,377 | 3,095,138 | ||||||
Long Term Debt
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- | 3,272,481 | ||||||
Total liabilities and stockholders’ equity
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$ | 2,854,800 | $ | 2,114,923 |
(1)
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Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
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(2)
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Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
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(3)
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Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
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Name and Address
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Age
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Position and Office Held
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Wade R. Bradley
1890 Cobb International Blvd.
Kennesaw, GA 30152
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52 |
Chief Executive Officer; Director
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Brian D. Heinhold
1890 Cobb International Blvd.
Kennesaw, GA 30152
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40 |
Chief Financial Officer
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Doug Kindred
1890 Cobb International Blvd.
Kennesaw, GA 30152
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58 |
Executive Vice President and Chief Technology Officer
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William J. Warwick
1063 Ocean Ridge Drive
Wilmington, North Carolina 28405
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77 |
Director
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Peter Ullrich
1800 NW 89
th
Place
Miami, FL 33172
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70 |
Director
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Theodore C. Jacoby, Jr.
1716 Hidden Creek Ct.
St. Louis, MO 63131
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72 |
Director
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J. Leo Montgomery
1890 Cobb International Blvd.
Kennesaw, GA 30152
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72 |
Non-executive Chairman of the Board; Director
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●
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Has the authority to engage independent compensation consultants and legal advisors when determined by the Committee to be necessary or appropriate. In 2007, the Committee engaged a compensation consultant, Phillip Blount & Associates, Inc., to assist it with, among other things, research on appropriate director, executive and employee compensation levels.
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●
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Has the authority to delegate its responsibilities as it may deem appropriate, to the extent allowed under applicable law. The Committee generally does not delegate its responsibilities to others.
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Requests that the Chief Executive Officer provide to the Committee his recommendations relative to compensation of other executive officers of the Company. The Committee meets in executive session to determine the compensation of the Chief Executive Officer of the Company.
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Name and Principal Position
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Year
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Salary
($)
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Bonus
($)
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Stock Awards
($)
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Option Awards
($)
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Non-Equity Incentive Plan Compensation
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Change in Pension Value and Nonqualified Deferred Compensation Earnings
($)
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All Other Compensation ($)
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Total ($)
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Wade R. Bradley
Chief Executive Officer
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2012
2011
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240,000
240,000
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0.00
0.00
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0.00
0.00
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0.00
0.00
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0.00
0.00
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0.00
0.00
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6,000 (1)
6,000 (1)
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246,000
246,000
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Doug Kindred
Chief Technology Officer
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2012
2011
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176,985
176,985
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0.00
0.00
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0.00
0.00
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0.00
0.00
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0.00
0.00
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0.00
0.00
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6,000 (1)
6,000 (1)
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182,985
182,985
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(1)
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Other compensation consists of car allowances.
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Option Awards
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||||||||||
Name
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Number
of Securities Underlying Unexercised Options
(#)
Exercisable
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Number of Securities Underlying Unexercised Options (#)
Unexercisable
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Option
Exercise Price
($)
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Option
Expiration Date
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||||||
Wade R. Bradley,
Chief Executive Officer
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500,000 | 0.31 |
11/6/2016
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Doug Kindred,
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20,000 | 0.31 |
5/27/2015
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Chief Technology Officer | 25,000 | 0.31 | 6/1/2015 | |||||||
530,000 | 0.31 | 11/8/2017 |
-
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Salary.
Any unpaid base salary through the date of termination.
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-
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Vacation.
Any earned but unused vacation time.
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-
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Severance Payment.
He will be entitled to an amount equal to twelve months of base salary payable over the 12-month period immediately following termination.
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-
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Options.
All unvested options shall immediately vest and, together with the previously vested options, must be exercised during the 60 days immediately following the date of termination (and if not so exercised, all such options shall automatically and irrevocably terminate).
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-
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Salary
.
Any unpaid base salary through the date of termination.
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-
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Vacation
.
Any earned but unused vacation time.
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-
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Severance Payment.
He will be entitled to an amount equal to six months of base salary payable over the 6-month period immediately following termination. (This was amended in February 2010.)
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-
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Options
.
All unvested options shall immediately vest and, together with the previously vested options, must be exercised during the 60 days immediately following the date of termination (and if not so exercised, all such options shall automatically and irrevocably terminate).
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●
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each person or entity who is known by us to own beneficially more than 5% of the outstanding shares of our common stock;
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●
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each of our directors;
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●
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each of our named executive officers; and
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●
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all directors and executive officers as a group.
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Name and Address of Beneficial Owner
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Number of
Shares
Beneficially Owned
|
Percentage of
Shares
Outstanding
|
||||||
Peter F. Ullrich (1)
1800 NW 89th Place
Miami, FL 33172
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24,271,536 | 72.2 | % | |||||
Water Science, LLC. (1)
1800 NW 89th Place
Miami, FL 33172
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10,330,770 | 32.7 | % | |||||
Wade R. Bradley (2)
1890 Cobb International Blvd., Ste 100
Kennesaw, GA 30152
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500,000 | 1.7 | % | |||||
Doug Kindred (3)
1890 Cobb International Blvd., Ste 100
Kennesaw, GA 30152
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703,250 | 2.4 | % | |||||
William J. Warwick (4)
1063 Ocean Ridge Drive
Wilmington, North Carolina 28405
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348,240 | 1. 2 | % | |||||
Theodore C. Jacoby, Jr. (5)
1716 Hidden Creek Ct.
St. Louis, MO 63131
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609,531 | 2.1 | % | |||||
J. Leo Montgomery (6)
1890 Cobb International Blvd., Ste 100
Kennesaw, GA 30152
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742,540 | 2.5 | % | |||||
All current directors and executive officers as a group
(7 persons)
|
27,336,388 | 76.7 | % |
(1)
|
Mr. Ullrich is the managing member of Water Science, LLC. Mr. Ullrich beneficially owns 11,915,770 shares, warrants to purchase 1,521,306 shares at an exercise price of $0.31 per share, options to purchase 209,230 shares at an exercise price of $0.31 per share; 145,163 shares are currently exercisable or exercisable within 60 days of the date of this report. Mr. Ullrich holds a convertible note currently convertible into 358,527 shares and indirectly through Water Science beneficially owns 7,330,770 shares and a convertible note currently convertible into 3,000,000 shares.
|
(2)
|
Mr. Bradley holds options to purchase a total of 500,000 shares at an exercise price of $0.31 per share; all options are currently exercisable or exercisable within 60 days of the date of this report.
|
(3)
|
Mr. Kindred beneficially owns 128,250 shares and holds options to purchase a total of 575,000 shares at exercise prices of $0.31 per share; all options are currently exercisable or exercisable within 60 days of the date of this report.
|
(4)
|
Mr. Warwick beneficially owns 203,077 shares and holds options to purchase a total of 290,325 shares at an exercise price of $0.31 per share; options to purchase 145,163 shares are currently exercisable or exercisable within 60 days of the date of this report.
|
(5)
|
Mr. Jacoby beneficially owns 464,368 shares and holds options to purchase a total of 290,325 shares at an exercise price of $0.31 per share; options to purchase 145,163 shares are currently exercisable or exercisable within 60 days of the date of this report.
|
(6)
|
Mr. Montgomery beneficially owns 97,377 shares and beneficially holds options or warrants to purchase up to 645,163 shares at an exercise price of $0.31 per share. 500,000 of the warrants are held by JL Montgomery Consulting, LLC.
|
EQUITY COMPENSATION PLAN INFORMATION AS OF DECEMBER 31, 2012
|
||||||||||||
Plan category
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
Weighted-average exercise price of outstanding options, warrants and rights
|
Number of securities remaining available for future issuance under equity compensation plans
|
|||||||||
Equity compensation plans approved by security holders
|
1,746,448 | $ | 0.31 | 258,090 | ||||||||
Equity compensation plans not approved by security holders*
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3,151,306 | $ | 0.31 | N/A | ||||||||
Total
|
4,897,754 | $ | 0.31 | N/A |
HJ & Associates, LLC
|
||||||||
2012
|
2011
|
|||||||
Audit Fees
|
$ | 50,300 | $ | 55,900 |
Report of Independent Registered Public Accounting Firm
|
Balance Sheets, December 31, 2012 and 2011
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Statements of Operations for years ended December 31, 2012 and 2011
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Statements of Changes of Stockholders’ Equity (Deficit) for years ended December, 2012 and 2011
|
Statements of Cash Flow for year ended December, 2012 and 2011
|
Notes to Financial Statements
|
Exhibit No.
|
Identification of Exhibit
|
||
3(i).1
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Articles of Incorporation (incorporated by reference from registration statement on Form SB-2 filed with the SEC on July 29, 2002)
|
||
3(i).2
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Certificate of Amendment of Certificate of Incorporation (incorporated by reference from registration statement on Form SB-2 filed with the Securities and Exchange Commission on July 29, 2002)
|
||
3(i).3
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Certificate of Amendment of Certificate of Incorporation (Incorporated by reference from current report on Form 8-K filed with the Securities and Exchange Commission on January 17, 2007)
|
||
3(ii).1
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Amended and Restated Bylaws (incorporated by reference from registration statement on Form 8-K filed with the Securities and Exchange Commission on September 12, 2007).
|
||
10.1
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Settlement and License Amendment dated as of March 7, 2008 between the Company and University of Georgia Research Foundation (Incorporated by reference from current report on Form 8-K filed with the Securities and Exchange Commission on March 13, 2008)
|
||
10.2
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Amended and Restated Exclusive License and Distribution Agreement, by and between the Company and Water Science, LLC, dated May 1, 2006 (Incorporated by reference to Exhibit 10.4 of the Company’s Form 8-K, dated May 4, 2006)
|
||
10.3
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Consulting Agreement by and between the Company and JL Montgomery Consulting, LLC, dated May 1, 2006 (Incorporated by reference to Exhibit 10.13 of the Company’s Form 10-QSB for the quarter ended March 31, 2006)
|
||
10.4*
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Form of Employment Agreement dated as of October 24, 2006 with Wade R. Bradley. (Incorporated by reference to Exhibit 10.1 of the Company's Form 8-K dated October 30, 2006.)
|
||
10.5*
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Form of Option Agreement dated as of October 24, 2006 with Wade R. Bradley. (Incorporated by reference to Exhibit 10.2 of the Company's Form 8-K dated October 30, 2006.)
|
||
10.6
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Amended and Restated License Agreement dated as of January 10, 2007 by and between Electric Aquagenics Unlimited, Inc. and Zerorez Franchising Systems, Inc. (Incorporated by reference to Exhibit 10.1 of the Company's Form 8-K dated November 16, 2006.)
|
||
10.7*
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EAU Technologies, Inc. 2007 Stock Incentive Plan (incorporated by reference to Annex A to the Registrant’s Definitive Proxy Statement filed with the Commission on November 5, 2007).
|
||
10.8*
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Form of Employment Agreement dated as of November 8, 2007 with Doug Kindred (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated November 8, 2007)
|
||
10.9*
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Form of Option Agreement dated as of November 8, 2007 with Doug Kindred (Incorporated by reference to Exhibit 10.2 of the Company’s Form 8-K dated November 8, 2007)
|
||
10.10*
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Form of Option Agreement dated as of December 6, 2007 with select employees (Incorporated by reference to Exhibit 10.1 of the Company’s Form 8-K dated December 6, 2007)
|
||
10.11
|
First Amendment to Lease Agreement dated as of October 31, 2006 between the Company and Cobb International Associates. (Incorporated by reference to Exhibit 10.39 of the Company's Registration Statement on Form S-1 (File No. 333-144646 dated April 11, 2008.)
|
||
10.12
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Security Agreement dated September 16, 2005 between the Company and Water Science LLC (Incorporated by reference to Ex. 10.3 to the Company’s Form 8-K filed on October 12, 2005).
|
||
10.13*
|
Amendment to Employment Agreement dated as of December 17, 2008 between the Company and Wade Bradley. (Incorporated by reference to Ex. 10.32 to the Company’s Form 10-K filed on March 30, 2009).
|
||
10.14*
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Amendment to Employment Agreement dated as of December 17, 2008 between the Company and Doug Kindred (Incorporated by reference to Ex. 10.33 to the Company’s Form 10-K filed on March 30, 2009).
|
||
10.15*
|
Form of Amended Stock Option Agreement for Employees, Officers and a director.
|
||
10.16
|
$358,527 Loan Agreement dated December 31, 2011 between the Company and Peter F. Ullrich (Incorporated by reference to Ex. 10.1 to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 5, 2012)
|
||
10.17
|
Warrant Agreement dated December 31, 2011 between the Company and Peter F. Ullrich (Incorporated by reference to Ex. 10.2 to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 5, 2012)
|
||
10.18
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First Amendment to Third Amended and Restated Senior Secured Convertible Promissory Note dated as of December 31, 2011 between the Company and Water Science LLC (Incorporated by reference to Ex. 10.3 to the Company’s Form 8-K filed with the Securities and Exchange Commission on March 5, 2012)
|
10.19
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Form of Option Agreement for Board of Directors Compensation (Incorporated by reference to Ex. 10.1 to the Company’s Form 10-Q filed with the Securities and Exchange Commission on March 31, 2012)
|
||
14
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Code of Ethics (incorporated by reference from our Annual Report for the year ended December 31, 2004, filed with the Securities and Exchange Commission on April 15, 2005).
|
||
Consent of HJ & Associates, LLC.
|
|||
Certification by Wade R. Bradley under section 302 of the Sarbanes-Oxley Act of 2002.
|
|||
Certification by Brian D. Heinhold under section 302 of the Sarbanes-Oxley Act of 2002.
|
|||
Certification of Wade R. Bradley pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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|||
Certification of Brian D. Heinhold pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
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101.INS**
|
XBRL Instance Document
|
|
101.SCH**
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL**
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.LAB**
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
101.PRE**
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
*
|
Executive Compensation Arrangement pursuant to 601(b)(10)(iii)(A) of Regulation S-K
|
**
|
Furnished herewith. Pursuant to applicable securities laws and regulations, the Company is deemed to have complied with the reporting obligation relating to the submission of interactive data files in such exhibits and is not subject to liability under any anti-fraud provisions of the federal securities laws as long as the Company has made a good faith attempt to comply with the submission requirements and promptly amends the interactive data files after becoming aware that the interactive data files fails to comply with the submission requirements. Users of this data are advised that, pursuant to Rule 406T, these interactive data files are deemed not filed and otherwise are not subject to liability.
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EAU Technologies, Inc.:
|
|||
Dated: April 1, 2013
|
By:
|
/s/ Wade R. Bradley | |
Wade R. Bradley | |||
Chief Executive Officer
(Principal Executive Officer)
|
|||
By: | /s/ Brian D. Heinhold | ||
Brian D. Heinhold
Chief Financial Officer
(Principal Financial Officer)
|
Signature
|
Title
|
Date
|
||
/s/ Wade R. Bradley
|
Chief Executive Officer
(principal executive officer)
|
April 1, 2013
|
||
Wade R. Bradley | ||||
/s/ Brian D. Heinhold
|
Chief Financial Officer (principal accounting officer)
|
April 1, 2013
|
||
Brian D. Heinhold | ||||
/s/ J. Leo Montgomery
|
Director
|
April 1, 2013
|
||
J. Leo Montgomery | ||||
/s/ Theodore C. Jacoby, Jr.
|
Director
|
April 1, 2013
|
||
Theodore C. Jacoby, Jr. | ||||
/s/ Peter F. Ullrich
|
Director
|
April 1, 2013
|
||
Peter F. Ullrich | ||||
/s/ William J. Warwick
|
Director
|
April 1, 2013
|
||
William J. Warwick |
Page
|
||||
Report of Independent Registered Public Accounting Firm
|
F-2 | |||
Financial Statements
|
||||
Balance Sheets
|
F-3 – F-4 | |||
Statements of Operations
|
F-5 | |||
Statements of Changes in Stockholders’ Equity (Deficit)
|
F-6 | |||
Statements of Cash Flows
|
F-7 – F-8 | |||
Notes to Financial Statements
|
F-9 – F-21 |
December 31,
|
||||||||
2012
|
2011
|
|||||||
CURRENT ASSETS
|
||||||||
Cash
|
$ | 753,348 | $ | 84,328 | ||||
Accounts receivable, net
|
2,500 | 83,378 | ||||||
Accounts receivable – related party, net
|
5,500 | 5,500 | ||||||
Prepaid expense
|
39,034 | 32,260 | ||||||
Inventory, net
|
1,169,966 | 1,173,913 | ||||||
Total current assets
|
1,970,348 | 1,379,379 | ||||||
PROPERTY AND EQUIPMENT, net of
|
||||||||
accumulated depreciation of $120,721 and $119,712
|
- | 1,009 | ||||||
LEASED EQUIPMENT, net of
|
||||||||
accumulated depreciation of $502,861 and $502,861
|
602,948 | 602,948 | ||||||
OTHER ASSETS
|
||||||||
Deposits
|
144,273 | 8,838 | ||||||
Intellectual property, net
|
137,231 | 122,749 | ||||||
Total other assets
|
281,504 | 131,587 | ||||||
Total assets
|
$ | 2,854,800 | $ | 2,114,923 |
December 31,
|
||||||||
2012
|
2011
|
|||||||
CURRENT LIABILITIES
|
||||||||
Accounts payable
|
$ | 287,236 | $ | 530,056 | ||||
Accrued expenses
|
49,903 | 515,369 | ||||||
Accrued interest
|
1,560,422 | 1,152,250 | ||||||
Warranty reserve
|
145,000 | 120,000 | ||||||
Advance deposits on machine orders
|
1,624,058 | 14,070 | ||||||
Advance deposits on machine orders – related party
|
515,383 | 763,393 | ||||||
Unsecured short term advances – related party
|
1,325,000 | - | ||||||
Convertible note payables – related party, current portion net of discounts of $41,152 and $0
|
3,317,375 | - | ||||||
Total current liabilities
|
8,824,377 | 3,095,138 | ||||||
LONG TERM LIABILITIES
|
||||||||
Convertible note payables – related party, net of discounts of $0 and $86,046
|
- | 3,272,481 | ||||||
Total long term liabilities
|
- | 3,272,481 | ||||||
Total Liabilities
|
8,824,377 | 6,367,619 | ||||||
STOCKHOLDERS’ EQUITY (DEFICIT)
|
||||||||
Common stock, $.0001 par value; 50,000,000 shares authorized; 28,575,371 and 28,567,460 issued and outstanding, respectively
|
2,858 | 2,857 | ||||||
Additional paid in capital
|
45,557,946 | 45,242,947 | ||||||
Accumulated deficit
|
(51,530,381 | ) | (49,498,500 | ) | ||||
Total stockholders’ equity (deficit)
|
(5,969,577 | ) | (4,252,696 | ) | ||||
Total liabilities and stockholders’ equity (deficit)
|
$ | 2,854,800 | $ | 2,114,923 |
For the Year Ended
|
||||||||
December 31,
|
||||||||
2012
|
2011
|
|||||||
NET REVENUES – RELATED PARTY
|
$ | 273,011 | $ | 3,192 | ||||
NET REVENUES
|
198,198 | 1,900,422 | ||||||
TOTAL REVENUES
|
471,209 | 1,903,614 | ||||||
COST OF GOODS SOLD
|
320,672 | 1,199,061 | ||||||
GROSS PROFIT
|
150,537 | 704,553 | ||||||
OPERATING EXPENSES
|
||||||||
Depreciation and amortization
|
2,366 | 9,400 | ||||||
Research and development
|
7,500 | 37,641 | ||||||
Selling, general and administrative
|
1,743,079 | 2,533,881 | ||||||
Total operating expenses
|
1,752,945 | 2,580,922 | ||||||
LOSS FROM OPERATIONS
|
(1,602,408 | ) | (1,876,369 | ) | ||||
OTHER INCOME (EXPENSE)
|
||||||||
Interest expense
|
(465,336 | ) | (1,169,158 | ) | ||||
Interest income
|
49 | 98 | ||||||
Gain on extinguishment of debt
|
35,814 | - | ||||||
Total other income (expense)
|
(429,473 | ) | (1,169,060 | ) | ||||
INCOME (LOSS) BEFORE PROVISION
FOR INCOME TAXES
|
(2,031,881 | ) | (3,045,429 | ) | ||||
PROVISION FOR INCOME TAXES
|
- | - | ||||||
NET INCOME (LOSS)
|
$ | (2,031,881 | ) | $ | (3,045,429 | ) | ||
NET INCOME (LOSS) PER SHARE
|
$ | (0.07 | ) | $ | (0.15 | ) | ||
WEIGHTED AVERAGE OF
SHARES OUTSTANDING – BASIC AND FULLY
DILUTED
|
28,575,371 | 20,007,494 |
ADDITIONAL
|
|||||||||||||||||||||
COMMON STOCK
|
PAID IN
|
ACCUMULATED
|
|||||||||||||||||||
SHARES
|
AMOUNT
|
CAPITAL
|
DEFICIT
|
TOTAL
|
|||||||||||||||||
Balance, December 31, 2010
|
20,006,168 | $ | 2,001 | $ | 42,368,794 | $ | (46,453,071 | ) | $ | (4,082,276 | ) | ||||||||||
Issuance and vesting of options and warrants for services
|
- | - | 134,963 | - | 134,963 | ||||||||||||||||
Issuance of shares for cash at $0.31 per share, to a related party.
|
161,291 | 16 | 49,984 | - | 50,000 | ||||||||||||||||
Issuance of shares at $0.31 per share upon exercise of warrants to related party
|
5,806,452 | 581 | 1,799,419 | - | 1,800,000 | ||||||||||||||||
Issuance of shares for cash at $0.31 per share, to a related party.
|
2,593,549 | 259 | 803,741 | - | 804,000 | ||||||||||||||||
Issuance of warrants to related party
|
- | - | 86,046 | - | 86,046 | ||||||||||||||||
Net loss for the year ended December 31, 2011
|
- | - | - | (3,045,429 | ) | (3,045,429 | ) | ||||||||||||||
Balance, December 31, 2011
|
28,567,460 | 2,857 | 45,242,947 | (49,498,500 | ) | (4,252,696 | ) | ||||||||||||||
Issuance and vesting of options and warrants for services
|
- | - | 315,000 | - | 315,000 | ||||||||||||||||
Reconciling adjustment
|
7,911 | 1 | (1 | ) | - | - | |||||||||||||||
Net loss for the year ended December 31, 2012
|
- | - | - | (2,031,881 | ) | (2,031,881 | ) | ||||||||||||||
Balance, December 31, 2012
|
28,575,371 | $ | 2,858 | $ | 45,557,946 | $ | (51,530,381 | ) | $ | (5,969,577 | ) |
For the Year ended
December 31,
|
||||||||
2012
|
2011
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net income (loss)
|
$ | (2,031,881 | ) | $ | (3,045,429 | ) | ||
Adjustments to reconcile net loss to net cash
used in operating activities:
|
||||||||
Depreciation and amortization
|
2,366 | 62,573 | ||||||
Warrants and options vested or issued for services
|
120,000 | 134,963 | ||||||
Discount of note payable
|
44,894 | 633,801 | ||||||
Gain on settlement of debt
|
(35,814 | ) | - | |||||
Changes in operating assets and liabilities:
|
||||||||
(Increase) decrease in accounts receivable
|
80,878 | (58,259 | ) | |||||
Decrease in accounts receivable – related party
|
- | 611 | ||||||
(Increase) decrease in pre-paid expense
|
(6,774 | ) | 10,592 | |||||
Decrease in inventory
|
3,947 | 634,171 | ||||||
(Increase) in deposits
|
(135,435 | ) | - | |||||
(Decrease) in accounts payable
|
(207,006 | ) | (3,013 | ) | ||||
Increase (decrease) in accrued expenses
|
(270,466 | ) | 173,656 | |||||
Increase in accrued interest
|
408,172 | 532,155 | ||||||
Increase in warranty reserve
|
25,000 | 47,204 | ||||||
Increase (decrease) in advance deposits on machine orders –
Related party
|
(248,010 | ) | 433,763 | |||||
Increase (decrease) in advance deposits on machine orders
|
1,609,988 | (432,536 | ) | |||||
Net cash used in operating activities
|
(640,141 | ) | (875,748 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Intellectual property additions
|
(15,839 | ) | (22,916 | ) | ||||
Net cash used in investing activities
|
(15,839 | ) | (22,916 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds from issuance of common stock – related party
|
- | 50,000 | ||||||
Proceeds from issuance of notes payable – related party
|
1,325,000 | 754,000 | ||||||
Net cash provided by financing activities
|
1,325,000 | 804,000 | ||||||
NET INCREASE (DECREASE) IN CASH
|
669,020 | (94,664 | ) | |||||
CASH, beginning of period
|
84,328 | 178,992 | ||||||
CASH, end of period
|
$ | 753,348 | $ | 84,328 |
Year ended December 31,
|
||||||||
2012
|
2011
|
|||||||
Supplemental Disclosures of Cash Flow Information
|
||||||||
Cash paid during the period for:
|
||||||||
Interest
|
$ | 12,270 | $ | 3,202 | ||||
Income Taxes
|
$ | - | $ | - | ||||
Supplemental Disclosures of Non-cash Flow Investing and Financing Activities
|
||||||||
Common stock issued for notes payable advances
|
$ | - | $ | 804,000 | ||||
Extinguishment of notes payable with the issuance of common
stock due to a warrant exercise
|
$ | - | $ | 1,800,000 |
2012 | 2011 | |||||||
Trade accounts receivable
|
$ | 2,500 | $ | 83,378 | ||||
Trade accounts receivable – related party
|
5,500 | 5,500 | ||||||
Less allowance for doubtful accounts
|
- | - | ||||||
$ | 8,000 | $ | 88,878 |
2012 | 2011 | |||||||
Finished goods
|
$ | 645,604 | $ | 550,197 | ||||
Raw materials
|
829,362 | 1,023,716 | ||||||
Allowance for obsolete inventory
|
(305,000 | ) | (400,000 | ) | ||||
$ | 1,169,966 | $ | 1,173,913 |
2012
|
2011
|
|||||||
Machinery and equipment
|
$ | 41,301 | $ | 41,301 | ||||
Furniture and fixtures
|
47,284 | 47,284 | ||||||
Leasehold improvements
|
32,136 | 32,136 | ||||||
Total property and equipment
|
120,721 | 120,721 | ||||||
Less: accumulated depreciation
|
(120,721 | ) | (119,712 | ) | ||||
Property and equipment, net
|
$ | - | $ | 1,009 |
2012
|
2011
|
|||||||
Leased equipment
|
1,105,809 | 1,105,809 | ||||||
Less: accumulated depreciation
|
(254,383 | ) | (254,383 | ) | ||||
Less: accumulated impairment of equipment
|
(248,478 | ) | (248,478 | ) | ||||
Leased equipment, net
|
$ | 602,948 | $ | 602,948 |
2012
|
2011
|
|||||||
Gross amount of patents
|
$ | 141,945 | $ | 126,106 | ||||
Less amount of accumulated amortization
|
(4,714 | ) | (3,357 | ) | ||||
Net value of patents
|
$ | 137,231 | $ | 122,749 |
2013
|
$ | 1,357 | ||
2014
|
$ | 1,357 | ||
2015
|
$ | 1,357 | ||
2016
|
$ | 1,357 | ||
2017
|
$ | 1,357 |
For the Year Ended December 31,
|
||||||||
2012
|
2011
|
|||||||
Warranty reserve at beginning of period
|
120,000 | $ | 72,796 | |||||
Costs accrued for additional warranties
|
25,894 | 51,193 | ||||||
Service obligations honored
|
(894 | ) | (3,989 | ) | ||||
Warranty reserve at end of period
|
$ | 145,000 | $ | 120,000 |
For the years ended December 31,
|
||||||||||||||||
2012
|
2011
|
|||||||||||||||
Shares
|
Weighted Average Exercise Price
|
Shares
|
Weighted Average Exercise Price
|
|||||||||||||
Outstanding at beginning of period
|
3,688,066 | $ | 0.31 | 9,185,991 | $ | 0.32 | ||||||||||
Granted
|
1,209,688 | 0.31 | 358,527 | 0.31 | ||||||||||||
Exercised
|
- | - | (5,806,452 | ) | 0.31 | |||||||||||
Expired or cancelled
|
- | - | (50,000 | ) | 1.88 | |||||||||||
Outstanding at end of period
|
4,897,754 | $ | 0.31 | 3,688,066 | $ | 0.31 | ||||||||||
Weighted average fair value of options and warrants exercisable
|
4,897,754 | $ | 0.31 | 3,688,066 | $ | 0.31 |
Warrants Outstanding | Warrants Exercisable | |||||||||||||||||||||
Range of
Exercise
Prices
|
Number
Outstanding
|
Weighted-Average
Remaining
Contra Life
|
Weighted-Average
Exercise Price
|
Number
Exercisable
|
Weighted Average
Exercise Price
|
|||||||||||||||||
$ | .01-.50 | 4,897,754 | 5.0 years | $ | 0.31 | 4,317,106 | $ | 0.31 |
Year Ended December 31,
|
||||||||
2012 | 2011 | |||||||
Current income tax expense: | ||||||||
Federal
|
$ | - | $ | - | ||||
State
|
- | - | ||||||
Net current tax expense | $ | - | $ | - | ||||
Deferred tax expense (benefit) arising from: | ||||||||
Net operating income (loss)
|
$ | (757,900 | ) | $ | ( 1,135,900 | ) | ||
Excess of tax over financial accounting depreciation | (43,900 | ) | (25,400 | ) | ||||
Stock for services
|
44,800 | 116,400 | ||||||
Accrued interest
|
150,000 | 63,900 | ||||||
Reserve for bad debts
|
- | (10,300 | ) | |||||
Warranty reserve
|
9,300 | 17,600 | ||||||
Amortization of debt discounts
|
16,700 | 236,400 | ||||||
Section 263(A)
|
1,800 | 11,800 | ||||||
Other – meals & entertainment, change in allowance for Obsolete
|
||||||||
inventory, gain on settlement of accrued contingent liability
|
(128,200 | ) | 1,900 | |||||
Valuation allowance
|
707,400 | 723,600 | ||||||
Net deferred tax expense | $ | - | $ | - |
December 31, | ||||||||
2012 | 2011 | |||||||
Excess of book accounting depreciation over tax
|
$ | 10,200 | $ | 54,100 | ||||
Obsolete inventory
|
113,800 | 149,200 | ||||||
Accrued interest – related party
|
586,700 | 341,300 | ||||||
Warranty reserve
|
54,100 | 44,800 | ||||||
Contribution carryover
|
- | 7,100 | ||||||
263A capitalization
|
27,500 | 29,400 | ||||||
NOL carryforwards
|
15,643,600 | 14,621,500 | ||||||
Valuation allowance
|
(16,435,900 | ) | (15,247,400 | ) | ||||
$ | - | $ | - |
For the Year Ended
|
||||||||
December 31,
|
||||||||
2012
|
2011
|
|||||||
Net (loss) (numerator)
|
$ | (2,031,881 | ) | $ | (3,045,429 | ) | ||
Shares (denominator)
|
||||||||
Basic
|
28,575,371 | 20,007,494 | ||||||
Per share amount
|
||||||||
Basic
|
$ | (0.07 | ) | $ | (0.15 | ) |
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