SCHEDULE 14C
INFORMATION STATEMENT
Amendment No. 1
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential for use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
EMPS CORPORATION
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): N/A
(4) Proposed maximum aggregate value of transaction: $28,078
(5) Total fee paid: $5.62
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, of
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
EMPS CORPORATION
2319 Foothill Blvd., Suite 250
Salt Lake City, Utah 84109
NOTICE OF SHAREHOLDER ACTION TAKEN BY MAJORITY
WRITTEN CONSENT IN LIEU OF A SHAREHOLDER MEETING
__________________, 2003
To the Shareholders of EMPS Corporation:
On May 22, 2003, our Board of Directors declared the advisability of,
and recommended that our shareholders approve, a spin-off distribution of the
common shares of EMPS Research Corporation ("Research") owned by EMPS
Corporation to our shareholders. Research is currently a majority-owned
subsidiary of EMPS Corporation. On May 23, 2003, the holders of a majority of
our outstanding shares of stock entitled to vote thereon executed written
consents in accordance with Section 78.320(2)of the Nevada Revised Statutes (the
"NRS") approving and adopting the action to effect a spin-off distribution of
our Research shares to our shareholders. Enclosed with this letter is a copy of
the Information Statement filed with the Securities and Exchange Commission
pursuant to Section 14(c) of the Securities Exchange Act of 1934, as amended,
and the regulations promulgated thereunder. The Information Statement describes
in greater detail the spin-off distribution of Research shares to our
shareholders.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
Thank you for your continued interest in and support of EMPS
Corporation.
Sincerely,
/s/ Louis Naegle
-------------------------------
Louis Naegle, President
Enclosures
EMPS CORPORATION
2319 Foothill Blvd., Suite 250
Salt Lake City, Utah 84109
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS INFORMATION
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
This Information Statement is being mailed, commencing on or about June
____________, 2003, to all of our shareholders of record as of the close of
business on
May 22, 2003 (the "Record Date"), in connection with the spin-off distribution
(the "spin-off") of common shares of our majority- owned subsidiary EMPS
Research Corporation ("Research"). If this Information Statement is being
delivered to two or more security holders who share the same address, such
security holders can request a single copy of future communications, such as
Information Statements, from EMPS Corporation by written request to Interwest
Transfer Company, Inc., our transfer agent, at 1981 East 4800 South, Suite 100,
Salt Lake City, Utah 84117.
On May 22, 2003, our board of directors declared the advisability of,
and recommended that our shareholders approve, the spin-off of Research shares
to our shareholders. On May 23, 2003, the holders of a majority of our
outstanding shares of stock entitled to vote thereon executed written consents
in accordance with Section 78.320(2)of the Nevada Revised Statutes (the "NRS")
approving and adopting the action to effect the spin-off of Research to our
shareholders.
We are not aware of any substantial interest, direct or indirect, by
security holdings or otherwise, that is in opposition to matters of action
taken. In addition, pursuant to Nevada corporation law, the actions taken by
majority written consent in lieu of a special shareholder meeting do not create
appraisal or dissenters' rights.
Our board of directors determined to pursue shareholder action by
majority written consent presented by our outstanding shares of stock entitled
to vote in an effort to reduce the costs and management time required to hold a
special meeting of shareholders and to implement the spin-off to our
shareholders in a timely manner.
The spin-off of Research shares to our shareholders will be effected by
instructing Interwest Transfer Company, Inc., our transfer agent, to distribute
our shares of Research to our shareholders to shareholders of record, on a
1
pro-rata basis, on or about __________, 2003 (the "Payment Date"). All necessary
corporate approvals in connection with the matters referred to herein have been
obtained, and the purpose of this Information Statement is to furnish certain
information regarding the spin-off to both our shareholders and to the trading
market.
As of the Record Date, we had 30,000,000 shares of common stock issued
and outstanding, with each such share entitled to one vote with respect to the
spin-off. We had no other issued and outstanding classes of stock entitled to
vote. The holders of 16,300,644 shares of our issued and outstanding common
stock, representing approximately 54.3% of the votes entitled to be cast with
regard to the spin-off, approved and adopted the recommendation of our board of
directors by written consent.
THE SPIN-OFF OF EMPS RESEARCH CORPORATION
Our management, in connection with the management of Research, has
determined it is in the best interest of both corporations to pursue the
spin-off of Research to our shareholders by making a pro-rata distribution of
our 3,000,000 shares of Research common stock to our shareholders. Our shares of
Research represent 90.9% of the currently issued and outstanding common shares
of Research. The spin-off will be effected without registering the distribution
of shares to our shareholders with the Securities and Exchange Commission
("SEC") pursuant to its Staff Bulletin 4, which sets forth the conditions to be
met by corporations effecting spin-off distributions without registration.
Our management believes the spin-off does not have to be registered
because it complies with five specific conditions set forth in Section 4.4A of
the Staff Bulletin. Specifically: (i) our shareholders will not provide any
consideration for Research shares; (ii) the spin-off is pro-rata to our
shareholders; (iii) this Information Statement and the Exchange Act Registration
Statement on Form 10-SB, as amended, filed by Research provide adequate
information regarding the spin- off; (iv) we have valid business purposes, as
set forth below for the spin-off; and (v) the restricted spun-off securities
have been held by us for over two years.
Consideration & Distribution Ratio
You are not required to provide any consideration for the shares you
receive in the spin- off. Each EMPS Corporation shareholder will have the same
proportionate interest in EMPS Corporation and Research both before and after
the spin-off. As such, there will be a distribution ratio of one for ten meaning
you will receive one (1) share of Research common stock for every ten (10)
shares of EMPS Corporation common stock you own.
Information to Shareholders & Trading Markets
Research has not been subject to the Exchange Act reporting
requirements for ninety (90) days. Therefore, pursuant to Section 4(4)(A)(3)(a)
2
of SEC Staff Bulletin 4, we have caused this Information Statement to be
distributed to you. Also, on March 26, 2003, Research filed a registration
statement, as amended, to register its common shares pursuant to section 12(g)
of the Securities Exchange Act of 1934. The registration statement of Research
on Form 10-SB, as amended, is attached hereto as Annex A. You may request
additional copies of the Research Form 10-SB, as amended, by written or oral
request. Written requests should be directed to Poulton & Yordan, 136 East South
Temple, Suite 1700A, Salt Lake City, Utah 84111, and oral requests should be
directed to Poulton & Yordan at (801) 355-1341. Requesters of additional copies
of the Research Form 10-SB will be required to make payment for reasonable
reproduction and postage costs prior to delivery of the additional documents
requested.
We are furnishing this Information Statement solely to provide
information to our shareholders who will receive Research shares in the
distribution. It is not, and is not to be construed as, an inducement or
encouragement to buy or sell any securities of Research or EMPS Corporation. The
information contained in this Information Statement is believed to be accurate
as of the date set forth on the cover of this Information Statement. Changes may
occur after that date, and neither Research nor EMPS Corporation will update the
information except as required by law in the normal course of their respective
public disclosure practices.
Valid Business Purposes for Spin-Off
Since our acquisition of Caspian Service Group, Limited in July 2002,
our major focus has been the development of the business operations of Caspian
Services Group Limited. Caspian Services Group Limited is engaged in the oil and
gas services industry in the Kazakhstan sector of the Caspian Sea. As a result
of this acquisition of Caspian Services Group Limited, our business focus and
the business focus of Research have become distinct. We believe each corporation
will have greater success in their particular industry if Research is no longer
a majority-owned subsidiary of EMPS Corporation.
Our management believes that the spin-off will allow Research to pursue
needed financial investment and attract management assistance suited for a
technology development company. Our management further believes that by
spinning-off Research, each corporation will be able to concentrate attention
and financial resources on its respective business activities, without regard to
the objectives and policies of the other business. As independent businesses
each will be able to offer employee incentives tied directly to the results of
the respective business activities. In addition, the spin-off will allow
investors to better evaluate each business. Finally, each corporation will be
able to negotiate financing terms focused on the distinct activities of each
business and thereby improve the likelihood that each corporation will achieve
its objectives.
Holding Period of "restricted securities"
On February 14, 2001, Research issued 1,000,000 restricted common
shares to EMPS Corporation pursuant to an exemption from registration provided
under Section 4(2) of the Securities Act of 1933, as amended. The shares were
3
issued in exchange for all right, title and interest in certain U.S. Patents,
for organization costs and for cash in the amount of $2,100. On December 23,
2002, Research filed an amendment to its Articles of Incorporation effecting a
one for three forward split of its issued and outstanding common stock resulting
in 2,000,000 shares being issued to EMPS Corporation.
Although our corporation caused Research to be formed and therefore may
not be required to meet the two year holding requirement of restricted
securities prior to any spin-off, the 3,000,000 restricted common shares of
Research have complied with the two year holding period.
For the foregoing reasons, our management believes that the Research
shares issued to our shareholders pursuant to the spin-off are not required to
be registered under the Securities Act and will be free trading shares. The only
exception will be shares issued to control persons. Shares issued to10%
shareholders of EMPS Corporation will be required to bear a control legend and
may only be sold in compliance with Rule 144.
ISSUANCE OF RESEARCH SHARES
You do not need to surrender or exchange your EMPS Corporation stock
certificates or take any other action in order receive the Research shares. On
the Payment Date, approximately twenty days after this Information Statement is
mailed to shareholders, our transfer agent will issue Research common stock
certificates to our shareholders on a pro-rata basis and will mail the
certificates to the addresses on record with our transfer agent. The costs of
the spin-off shall be borne by the corporations. Any fractional shares resulting
from the distribution ratio will be rounded up to the next whole share.
PRINCIPAL EFFECTS OF THE SPIN-OFF
As of the close of business on the Effective Date, the 3,000,000 shares
of Research common stock will be distributed and spun-off to our shareholders
and Research will no longer be our majority-owned subsidiary.
We do not know, and cannot predict, how our limited trading market will
react to the spin-off. Although our shareholders will receive free trading
shares of Research common stock, there is no trading market for Research at this
time. We have been informed that management of Research plans to pursue listing
on the Over the Counter Bulletin Board ("OTCBB"). There is, however, no
assurance that Research will be successful in its plans to trade on the OTCBB or
that any other trading market will ever develop for the Research shares. If
Research is unsuccessful in entering a trading market then the Research shares
could remain highly illiquid indefinitely.
TAX CONSEQUENCES OF SPIN-OFF
Our management believes that the spin-off qualifies as a tax-free
distribution to you for U.S. federal income tax purposes pursuant to Sections
4
368(a)(1)(D) and 355 of the Internal Revenue Code of 1986, as amended. This
belief is subject to certain assumptions which, if incorrect in any material
respect, would cause our belief to become invalid. Our management is not aware
of any facts or circumstances that would cause the assumptions to be untrue.
Tax Basis & Holding Period
To determine the U.S. federal income tax basis in the EMPS Corporation
stock and the newly received Research stock, you must allocate the tax basis in
your EMPS Corporation stock immediately before the spin-off among such shares.
The tax basis in your EMPS Corporation stock before the spin-off generally is
equal to the cost of such shares, including commissions. If you acquired shares
at different times and at different costs, you will be required to make separate
tax basis calculations for each group of shares. Please consult your tax advisor
to determine your tax basis in your EMPS Corporation stock to be allocated.
Your holding period for U.S. federal income tax purposes for the
newly-received Research stock is the same holding period as your EMPS
Corporation stock unless you fall within a special category of holder, such as a
dealer or trader who did not hold the EMPS Corporation stock as a capital asset
on the Record Date.
Statement in U.S. Federal Income Tax Return
U.S. Treasury regulations may require each shareholder to attach to his
or her 2003 U.S. federal income tax return a signed statement setting forth
certain prescribed information about the spin- off. For this purpose, we are
enclosing a sample statement attached hereto as Annex B, which you may complete
and use when filing your 2003 tax return.
The tax information included in this Information Statement represents
our understanding of existing U.S. federal income tax law and regulations and
does not constitute tax advice. Nor do we purport this information to be
complete or to describe tax consequences that may apply to particular categories
of shareholders. Each shareholder should consult a tax advisor as to the
particular consequences of the spin-off under U.S. federal, state and local tax
laws and foreign tax laws that may affect the description set forth above.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 31, 2003, the name and the
number of shares of the Registrant's Common Stock, par value of $0.001 per
share, held of record or beneficially by each person who held of record, or was
known by the Registrant to own beneficially, more than 5% of the 30,000,000
issued and outstanding shares of the Company's Common Stock, and the name and
shareholdings of each director and of all officers and directors as group.
5
Type of Amount & Nature of % of
Security Name and Address Beneficial Ownership Class
-------- ---------------- -------------------- -----
Common Marat Cherdabayev -0- -0-
2319 Foothill Blvd., Suite 250
Salt Lake City, Utah 84109
Common Dora International Limited 3,250,764 11%
P.O. Box 357
Pirouet House, Union Street
St. Helier, Jersey, Channel Islands
JE4 9WQ, United Kingom
Common Laird Garrard 3,250,764 11%
Dostyk 63-65/ Shevchenko 13
Almaty 480100
Republic of Kazakhstan
Common Mirgali Kunayev -0- -0-
Dostyk 63-65/ Shevchenko 13
Almaty 480100
Republic of Kazakhstan
Common Louis Naegle -0- -0-
2319 Foothill Blvd., Suite 250
Salt Lake City, Utah 84109
Common Paul Roberts 3,250,764 11%
Dostyk 63-65/ Shevchenko 13
Almaty 480100
Republic of Kazakhstan
Common Petroleum Services Group Limited 14,086,644 47%
P.O. Box 544
14 Britania Place Bath Street
St. Helier, Jersey, Channel Islands
JE2 4SU, United Kingdom
Common Satco International Limited 2,460,000 8%
Room 304, Arion Commercial Centre
2-12 Queens Road West
Hong Kong, People's Republic of China
6
Type of Amount & Nature of % of
Security Name and Address Beneficial Ownership Class
-------- ---------------- -------------------- -----
Common Techgrand Company Limited 3,250,764 11%
Room 304, Arion Commercial Centre
2-12 Queens Road West
Hong Kong, People's Republic of China
--------------------------------------------------------------------------------
All officers and directors 6,501,528 22%
as a group (5 persons)
--------------------------------------------------------------------------------
TOTAL 29,546,700 98%
--------------------------------------------------------------------------------
Mr. Cherbadayev, Mr. Garrard, Mr. Kunayev and Mr. Naegle are officers
of EMPS. Mr. Cherdabayev, Mr. Kunayev and Mr. Roberts are directors of EMPS.
Ms. Cynthia Murray, as the managing director of Dora International
Limited, ("Dora"), may be deemed to be the beneficial owner of shares held in
the name of Dora. The principal business address of Ms. Murray is PO Box 357,
Priouet House Union Street, St. Helier, Jersey JE4 9WQ, Channel Islands, United
Kingdom.
Mr. Jonathan Charles Brannam, as the managing director of Petroleum
Group Services Ltd., ("PGSL"), may be deemed to be the beneficial owner of
shares held in the name of PGSL. The principal business address of Mr. Brannam
is PO Box 544, 14 Britannia Place, Bath Street, St. Helier, Jersey JE2 4SU,
Channel Island, United Kingdom.
Mr. Choy Mow Shan, is the principal shareholder of Satco International
Limited ("Satco"), and may be deemed to be the beneficial owner of shares held
in the name of Satco. The principal business address of Mr. Shan is Room 304,
Arion Commercial Centre, 2-12 Queens Road West, Hong Kong, People's Republic of
China.
Hsuih Chi Hun, of Hong Kong, Peoples Republic of China, is the
principal shareholder of Techgrand Company Limited and may be deemed to
beneficially own shares held in the name of Techgrand Company Limited.
FORWARD-LOOKING STATEMENTS
Certain statements in this Information Statement may be deemed to be
forward-looking statements. Forward-looking statements regarding economic
conditions, effects of corporate initiatives, future profitability, projections,
future revenue opportunities, and their impact on the company are
forward-looking statements and not historical facts. These statements are
estimates or projections involving numerous risks or uncertainties, including
but not limited to, consumer demand, acceptance of services offered by the
company, the company's ability to maintain current expenses and revenue levels,
actions by competitors, impairment of federal funding, legislative action,
student default rates, changes in federal or state authorization or
accreditation changes, changes in market needs and technology, political or
regulatory matters, litigation, general economic conditions, changes in
management strategy and the company's ability to leverage its curriculum and
management infrastructure to build its student base. Actual results or events
could differ materially from those discussed in the forward-looking statements.
See our reports on Forms 10-KSB, 10-QSB and 8-K filed with the Securities and
Exchange Commission for further information. We disclaim any obligation to
publicly update, revise or correct any forward-looking statements, whether as a
result of new information, future events or otherwise.
7
ANNEXES
A EMPS Research Corporation Attached
Form 10-SB, as amended
B IRS Tax notification form Attached
By order of the board of directors,
EMPS CORPORATION
/s/ Louis Naegle
----------------------
LOUIS NAEGLE
President
8
ANNEX A
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-SB/A-5
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g) of the Securities Exchange Act of 1934
0-50218
------------------------
Commission File Number
EMPS RESEARCH CORPORATION
--------------------------------------------
(Name of Small Business Issuer in its charter)
UTAH 87-0669131
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
875 Donner Way, Unit 705, Salt Lake City, Utah 84108
------------------------------------------------ -----------
(Address of principal executive Offices) (Zip Code)
Issuer's telephone number: (801) 582-1881
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
---------------------- --------------------------------
N/A N/A
Securities to be registered under Section 12(g) of the Act:
COMMON
---------------
(Title of Class)
1
TABLE OF CONTENTS
PART I.
Item 1. Description of Business .............................................3
Item 2. Plan of Operations .................................................11
Item 3. Description of Property ............................................13
Item 4. Security Ownership of Certain Beneficial Owners and Management .....14
Item 5. Directors, Executive Officers, Promoters and Control Persons .......15
Item 6. Executive Compensation .............................................18
Item 7. Certain Relationships and Related Transactions .....................19
Item 8. Description of Securities ..........................................19
PART II.
Item 1. Market Price of and Dividends on the Company's Common Equity
and Other Shareholder Matters ....................................21
Item 2. Legal Proceedings ..................................................21
Item 3. Changes in and Disagreements with Accountants ......................22
Item 4. Recent Sales of Unregistered Securities ............................22
Item 5. Indemnification of Directors and Officers ..........................22
PART F/S
Index to Financial Statements ...............................................F1
PART III.
Item 1. Index to Exhibits ..................................................24
SIGNATURES ..................................................................25
2
PART 1
Item 1. Description of Business
Company History and Business
EMPS Research Corporation (the "Company") was incorporated under the
laws of the state of Utah on January 30, 2001, for the purpose of researching
and developing commercial applications for patented technology for a high
frequency eddy current separator, which may be used to separate nonmagnetic
particulate materials from other materials without chemicals, heat or water. The
patented technology was originally acquired by the Company's parent company,
EMPS Corporation, a Nevada corporation, from Particle Separation Technologies,
L.C., a Utah limited liability company. The Company is a majority owned
subsidiary of EMPS Corporation and is in the development stage.
In February, 2001, the Company acquired Patent No. 5,439,117 issued
August 8, 1995, continuation in part Patent No. 5,772,043 issued June 30, 1998
and continuation in part Patent No. 6,095,337 issued on August 1, 2000, from
EMPS Corporation. The three patents are titled "System and Method for Separating
Electronically Conductive Particles." The Company received all right, title and
interest in and to the said inventions and patents in exchange for 1,000,000
restricted common shares of EMPS Research Corporation valued at the patents'
book value of $2,636 and EMPS Corporation provided the Company with $2,100 cash
and paid organizational costs of $264.
On December 23, 2002, the Company filed an amendment to its Articles of
Incorporation effecting a one for three forward stock split resulting in an
increase of the issued and outstanding common stock from 1,000,000 shares to
3,000,000 shares.
On March 26, 2003, the Company voluntarily filed an Exchange Act
registration statement on Form 10-SB for the purpose of complying with
Securities and Exchange Commission Staff Bulletin number 4 regarding spin-off
distributions. As such, the Company plans to make a spin-off distribution of its
shares to the shareholders of EMPS Corporation, its parent company. Please see
Item 2. Plan of Operations for more detailed information.
The Company's business activity is focused on continuing research and
development efforts to develop and test prototype equipment derived from the
patents. The Company has primarily funded its research and development
activities from a research grant awarded to the Company from the Department of
Energy's Office of Industrial Technologies 2000 Inventions and Innovation
program. The research grant was received by the Company in January of 2001 in
the amount of one hundred ninety-nine thousand dollars ($199,000). To date the
Company has spent approximately $140,000 of the grant.
3
Description of the Company's Technology
The Company is engaged in the business of developing, marketing and
licensing its patented technology for use in commercially separating nonmagnetic
particulate material by building and testing a High Frequency Eddy-Current
Separator ("HFECS"). The Company is developing a prototype primarily for use in
recovering metals at foundries and smelters, scrap recycling plants,
environmental remediation firms, sand and gravel mining and the food processing
industry. The Company anticipates that the HFECS prototype will be capable of
separating 500 pounds of particles or materials per hour.
It is expected that the Company's HFECS can recover metal particles as
small as 0.2 mm. According to a market assessment research report on the
Company's HFECS, which was independently commissioned and funded by the U.S.
Department of Energy, there is no known system or method that exists in industry
for commercially separating nonmagnetic particulate material smaller than
approximately 2mm from other materials without chemicals, heat or water. These
current methods are expensive and can be environmentally unsafe.
When water is used as a separation medium, the water carries the
particles through machinery, over vibrating tables or centrifugal apparatuses
that utilize specific gravity in the separation process. When water is
available, its usage often requires significant capital expenditures for pumping
systems, infrastructure and maintenance. Water separation systems can be
seasonally restrictive due to weather considerations. After separation,
additional energy is needed for the drying processes to remove the moisture from
the separated material.
Chemical methods require great planning and care. Without proper
handling and disposal of the caustic chemicals typically used in these
processes, environmental disasters can occur. The long-term environmental
effects of chemical separation are only now beginning to be understood. Usually,
drying processes are needed to remove the moisture from the separated material.
Methods utilizing heat require strict attention to the toxic gases
created in the energy- intensive burn process. Scrubbers and other apparatuses
are needed to capture furnace emissions.
The Company's invention uses patented principles that allow separation
of electrically conductive, nonmagnetic fine particles in a laboratory setting.
Applying the Company's technology on a full-scale basis may be more efficient
and safe than other technologies. The Company's technology, however, may prove
to be ineffective, uneconomical and may not achieve market acceptance on a
full-scale or commercial level. That is why the Company is producing a prototype
for further testing and use to determine its feasibility on a commercial scale.
Electrodynamic separation of nonmagnetic free-flowing materials is
accomplished by introducing the material into a region of magnetic field
gradient that fluctuates with time. The variable field induces magnetic dipoles
in the conducting particles of the material, producing electrodynamic forces
that deflect the electrically conducting particles from the imposed magnetic
field. Therefore, when feed material is passed through the magnetic field, the
4
conducting particles are separated from the feed material. The Company's
research derived from mathematical and actual working models indicate that the
invention should specifically address this problem in industry.
The Company employs the use of an alternating magnetic field in certain
configurations to produce an electromagnetic force with frequencies set
according to the specific resistivity and size of the particulate material which
is to be separated from other material.
Independent tests were performed on the Company's technology by the
Department of Metallurgical Engineering at the University of Utah. After careful
consideration by the faculty, it was determined that these experiments warranted
special Departmental attention due to the unique nature of the novel principles
involved. Independent test results with supporting calculations, data and
experiments were implemented by a special team, including two faculty members,
and are described by graduate student, Dongman Kim, in a Master's Thesis
entitled "Electrodynamic Separation of Conducting Particles in an Alternating
Magnetic Field" published in November, 1998. The Thesis concludes:
"In this study, separation of conductive materials from mixed particles
has been proved to be successful. Based on what is reported here, a
pilot-scale unit can be built for further scale-up to a larger
industrial-size unit."
It is this prototype or "pilot-scale" unit that is the focus of the
Company's financial and technical resources.
The Company's invention provides a system and method for separating
electrically conductive, nonmagnetic fine particles which could not otherwise be
separated using flotation or filtration schemes. Further, the Company's
invention provides a system and method for separating electrically conductive,
nonmagnetic fine particles using characteristics such as the specific
resistivity and the size of the particle to determine the separation of one
material from other materials.
The Company's invention provides a system for first separating
electrically conductive particulate material from one or more other materials.
The invention is particularly intended for use with materials in particulate
form but can also be used with materials in other forms. The Company's invention
can also be used in conjunction with other separation technologies, such as
flotation and filtration, which are known in the art. For example, the
separation techniques of the present invention can be used before or after
materials have been subjected to other separation techniques known in the art.
The Company's invention includes means for localizing a magnetic field
at a first location. The magnetic field is an alternating or oscillating field.
In contrast with prior technology, the present invention considers the size of
the particle when selecting the frequency. As the size of the particle to be
separated decreases, the frequency increases.
5
The Company's invention exploits the characteristics of particle
electrical specific resistivity and particle size. Thus, in contrast to the
previously proposed schemes, the present invention considers the size of the
particles in the separation process. For example, some embodiments of the
present invention preferably include means for sorting particles having a
diameter not larger than about five millimeters and more preferably not larger
than about two millimeters. Embodiments of the present invention may also
comprise means for measuring the size of the particles of the electrically
conductive particulate material so that the operation of the system can be
adjusted for best efficiency. Moreover, in contrast to the previously proposed
schemes, the present invention considers the specific resistivity of the
particles in the separation process.
Included in the Company's invention is a means for generating an
alternating current and for applying it to the means for localizing a magnetic
field. The frequency of the alternating current is set according to the specific
resistivity or conductivity of the desired material and the size of the
particles comprising the desired material. Selected embodiments of the present
invention preferably include means for increasing the frequency of the
alternating current as the size of the first particles decreases.
The means for localizing a magnetic field and the means for generating
an alternating current cooperate together to create an alternating magnetic
field at a location, for example the gap, where separation occurs. Separation
occurs as a result of the alternating magnetic field deflecting the path of the
desired material in a different amount than the other material present in the
stream is deflected. Structures are also included to function as a means for
gathering the first particles as they are separated from the material stream.
The method of the Company's invention preferably includes the steps of
generating an alternating magnetic field, introducing a stream of particles into
the magnetic field, the stream of particles including both the desired first
particles and undesired second particles. The step of adjusting the frequency of
the alternating magnetic field is carried out according to the specific
resistivity and the size of the first particles. By properly adjusting or
choosing the frequency of the alternating magnetic field, the first particles
are imparted a trajectory which is different than the trajectory of the other
particles in the particle stream. In order to adjust for the size of the
particles, the Company's invention increases the frequency of the alternating
magnetic field as the size of the first particles decreases.
Since the size of the particles greatly influences the separation
process, it may be desirable to pre-sort the particles according to size or
adjust the size of the particles before being subjected to the alternating
magnetic field. Moreover, it is desirable to adjust the velocity of the
particles in the particle stream as they enter the magnetic field.
The particle stream is subjected to the magnetic field for a period of
time while the first particles are gathered into one location and the remaining
material gathered into another location. The Company's invention has particular
application for separating particles of gold from other materials.
6
On a laboratory level, the Company's invention separates electrically
conductive, nonmagnetic particles based upon the particle's size and the
particle's specific electrical resistivity. We believe that applying our
technology on a full-scale basis, one type of desired electrically conductive,
nonmagnetic particle can be readily separated commercially from other undesired
electrically conductive, nonmagnetic particles. Even if the desired and
undesired particles are of substantially the same particle size, but the
particles have different specific electrical resistivities, the particles can be
separated from one another, using the Company's invention.
The Company believes its invention can be carried out so that particles
can be separated from each other in a batch-by-batch fashion or in a continuous
flow process. The continuous flow process is presently preferred and more
efficient.
Further, the Company's invention provides a system and method for
separating electrically conductive nonmagnetic materials which does not rely on
moving mechanical parts to achieve a separation of the particles. The Company's
invention also provides a system and method for separating electrically
conductive, nonmagnetic particles by producing a magnetic field that induces
eddy currents in the particles and causes movement of the particles which are to
be separated. Both the electrical conductivity and the size of the particle
determine the separation of one type of particle from other types of particles.
Research and Development
The Company is working to develop and demonstrate a High-Frequency
Eddy-Current Separator ("HFECS") prototype. Research and development began in
February 2001 and is scheduled to be completed in the third quarter of 2003. At
that time the prototype is expected to be a fully operational piece of
equipment. The Company does not plan to manufacture the equipment; rather, it
plans to research and develop and test the prototype. If and when testing proves
to be successful, the Company will seek to license the technology for marketing
and manufacture. The Company expects that the prototype will work in smaller
commercial settings.
On August 14, 2001, the Company entered into a Subcontract Agreement
with the University of Utah. The Subcontract Agreement commenced on August 15,
2001 and will continue in effect until August 14, 2003. The Subcontract
Agreement calls for the University of Utah Department of Metallurgical
Engineering to test the equipment design and implementation, test a working
prototype, and to do the needed data analysis and computer modeling. The
Subcontract Agreement contemplates that the University of Utah will be paid
approximately $105,000 over a two-year period for these services. As of December
31, 2002, the University of Utah had been paid approximately $47,692. This
Subcontract Agreement may be terminated at any time by either party by written
notice. Termination will not relieve either party of any obligation or liability
accrued prior to termination.
In addition, the Subcontract Agreement provides that the University of
Utah may receive ownership of all rights, title and interest in all inventions
and improvements that are conceived or reduced to practice during the
7
performance of their services. Ownership is dependent upon whether the
inventions and improvements are conceived solely by the University of Utah,
solely by the Company or jointly between the University of Utah and the Company.
As such, ownership of all rights, title and interest to improvements conceived
or reduced to practice shall belong to the either the sole conceiver or joint
conceivers. In the event that the University of Utah is the sole conceiver, the
Company has an option to an exclusive license on any improvements, applications
or patents. Similar rights have not been granted to any other third party.
The Company also anticipates that $72,000 will be needed to design,
fabricate, and test the initial prototype. The Company is using Altaire Systems
L.C. ("Altaire Systems") to design, fabricate, assemble and test the initial
prototype. Altaire Systems is an electronics lab in Ogden, Utah, and is not
affiliated with the Company or any of its officers, directors or control
shareholders. Altaire Systems is performing these services pursuant to periodic
work orders placed by the Company. As of December 31, 2002, Altaire Systems had
been paid approximately $71,820.
In total, the Company has spent approximately $140,080 on research and
development from inception through December 31, 2002.
Patents
The Company owns U.S. Patents 5,439,117, 5,772,043, and 6,095,337, each
entitled "System and Method for Separating Electrically Conductive Particles."
The patents were issued on August 8, 1995, June 30, 1998, and August 1, 2000,
respectively. All three patents expire December 21, 2013. These patents cover
the technology which allows the Company to separate nonmagnetic particles from
feed material. These patents are very important to the Company's business and
add significant value because they give it an exclusive right to the covered
technology. Moreover, in the event someone else attempts to use this technology
before the patents expire, the Company may have a right to recover damages from
that party.
While the Company believes it could continue to operate following the
expiration of the patents, the Company believes its business will be adversely
effected. Once the patents expire, the information covered by them will become
part of the public domain. It is anticipated that few purchasers would be
willing to pay the Company for a license for its technology when it is part of
the public domain. Similarly, once this information becomes part of the public
domain, others could use that technology to compete directly with the Company,
which could adversely effect the Company's business.
Competition
The Company operates in a highly competitive environment against
companies that have greater resources than the Company. There are many occasions
in scientific and industrial applications where materials must be separated from
one another. Particularly in the mining industry, valuable metals must be
efficiently separated from other materials which are found in ore. In many
industrial applications, separation of particles having different sizes and
8
densities relies on the earth's gravity as well as some additional process such
as filtration. All such arrangements which have been devised utilizing gravity
to separate particles of different densities include one or more drawbacks as
are recognized in the art. For example, such arrangements may require water as a
carrier for the particles to be separated. Disadvantageously, the water must be
removed from the particles after separation. Moreover, in some mining locations,
water is not readily available.
To provide efficient separation without water, various apparatus and
techniques have been proposed which also utilize some electromagnetic properties
of materials, rather than density alone, to separate materials. While the task
of separating magnetic materials from non magnetic materials is a relatively
easy one, the task of separating a nonmagnetic material from other nonmagnetic
materials utilizing the magnetic properties of the materials has been the
subject of research in the industry. Still, many problems and drawbacks exist
with the proposed schemes. Particularly in the mining industry, there have been
numerous attempts to separate materials from one another, for example gold from
other materials, based on the differing magnetic properties of the materials.
One example of a previous scheme is represented by U.S. Pat. No.
5,057,210 to Julius. The Julius reference recognizes that the creation of eddy
currents in conductive materials allows a magnetic field to move a nonmagnetic
material. The Julius reference, however, utilizes a rotating permanent magnet to
mechanically generate a changing magnetic field.
Another example of a previous scheme is represented by U.S. Pat. No.
5,161,695 to Roos. The Roos reference also recognizes that the creation of eddy
currents in conductive materials allows a changing magnetic field to move
particles of a nonmagnetic material. The Roos reference, however, utilizes
permanent magnets, as does the Julius reference. The scheme of the Roos
reference is ineffective.
By relying on mechanically generated fields through the use of rotating
permanent magnets, the Julius and Roos technologies fail to recognize an
additional critical aspect of the use of induced eddy currents in electrically
conductive, nonmagnetic materials. Electromagnetically generated induced eddy
currents, such as those created by the Company's technology, are capable of
producing much higher frequencies and stronger field currents, which allow for
separation of a significantly broader range of particulate sizes.
The primary objective of the Company's invention is to provide a
practical system and method for separating electrically conductive nonmagnetic
fine materials. It is also an object of the Company's invention to provide a
system and method for separating electrically conductive nonmagnetic materials
which does not rely on moving mechanical parts to achieve separation of the
materials. It is further the object of the Company's invention to provide a
system and method for separating electrically conductive nonmagnetic fine
materials from each other which does not require any liquid.
The Company does not know the respective market share held by its
competitors in the current particle separation industries. According to Dunn &
9
Bradsteet MarketPlace, there are over 1,800 foundries that specialize in casting
non-ferrous metals. Metals and Industrial Minerals Mining, Economic and Trade
Trends reported that in 1998 1.5 billion tons of crushed stone and 1.02 tons of
sand and gravel were mined and according to a Market Assessment commissioned by
the DOE, there are approximately 175-200 automobile recycling plants. The
Company believes that all of these industries are currently using various
competitors' separation services and technology. The Company does not know what
its market penetration in these and other areas may be.
If the Company's technology proves successful, then the Company
believes the principal competitive factors affecting its position within the
industry will be a separation technology that is capable of efficiently
separating very small particles, lower projected capital, operating and
maintenance costs, rugged design with no moving parts and transportable for use
in remote locations.
Advertising and Marketing Strategy
The Company plans to focus its operations on developing a functional
prototype and to seek contracts for licensing its technology for third party
manufacturing and use. It is unlikely the Company will secure any licensing
agreements until the prototype is further along in its development. Until the
time a functional prototype is constructed, approximately the end of the third
quarter of fiscal 2003, the Company's advertising and marketing will be limited.
The Company's marketing efforts, if any, will be primarily directed
towards potential licensees of its technology to third parties. The Company may
begin immediately seeking such relationships through limited advertizing and
marketing through interaction with the target industry and direct contact sales.
The Company may seek further exposure through trade journals and symposia.
Additionally, the Company may also position itself to assist in environmental
clean-up operations through existing companies involved in governmental
projects.
Employees
The Company currently has no full time employees. The officers and
directors work on a part time, as needed, basis with no commitment for full time
employment. The Company also has a part time project manager. Raj Rajamani and
Vladimir Saveliev have agreed to consult with the Company on an as needed basis.
Rajamani and Saveliev will be compensated on an as used hourly basis. Rajamani
is to be compensated at a rate of $45.10 per hour and will be compensated
through the subcontract agreement with the University of Utah. Saveliev is to be
compensated at a rate of $31.75 per hour. To date, the Company has not used the
services of Saveliev, nor has he received any compensation from the Company. The
Company does not foresee hiring any further employees until revenues and
operations warrant the addition of employees.
10
Reports to Security Holders
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, (the "Exchange Act") and will file reports and
other information with the Securities and Exchange Commission ("Commission").
The public may read and copy materials filed by the Company with the Commission
at their Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. The public may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The Company is an
electronic filer and the Commission maintains an Internet site that will contain
reports and other information regarding the Company which may be viewed at
http://www.sec.gov.
Item 2. Plan of Operations
Development of Proto-Type
The Company's primary operations are to develop and demonstrate its
HFECS prototype.
On or about January 16, 2001, the Company received a research grant in
the amount of $199,000 from the Department of Energy ("DOE"), through its Office
of Industrial Technologies 2000 Inventions and Innovation ("I&I") program for
use in developing an HFECS prototype.
Altaire Systems is assisting the Company in designing, fabricating and
assembling the prototype HFECS. Altaire Systems will also be responsible for
field testing and training. Altaire Systems began work on the prototype in
February 2001 and has finished much of the design, fabrication and assembly of
the initial prototype. Based on the work remaining to be completed, the Company
expects Altaire Systems to finish the initial prototype for testing during the
third quarter of 2003. The funds to pay Altaire Systems have and will come from
the I&I grant money.
The Company has retained the University of Utah to test and analyze
equipment design and implementation, test working scale models and perform the
needed data analysis and computer modeling once the prototype is fully
functional. The University of Utah will also assess and develop a plan for
commercializing the technology. For these services, the University of Utah will
receive an estimated total of $104,968. The funds to pay for these services have
and will come from the I&I research grant received by the Company.
As of December 31, 2002, the Company had spent approximately $140,000
of the I&I grant money. The Company paid $20,000 to Stephen Smoot, a related
party, in project management fees. The Company does not expect to pay any
additional project management fees. As of December 31, 2002, the Company had
paid the Altaire Systems approximately $71,820 and the University of Utah
approximately $47,692.
11
By the end of the third quarter of 2003, the Company anticipates that
the prototype will be a fully operational piece of machinery. The Company does
not plan to market or manufacture the equipment. Rather, it plans to research,
develop and test the prototype. If and when testing proves to be successful, the
Company will seek to license the technology for marketing and manufacture. The
Company expects that the prototype will work in smaller commercial settings.
It is the Company's intent to pursue outside sources through licensing
agreements to market and exploit the commercial applications of this technology.
To date, however, the Company has made limited contacts with outside sources and
no firm commitments or license arrangements are in place.
The Company believes it can satisfy its current cash requirements for
the next twelve months from the remaining proceeds of the I&I grant and from
funds raised through a private off-shore sale of stock to a non-U.S. person in
December 2002. Thereafter, the Company will need to seek additional funding to
finance operations. To raise additional capital, the Company may have to sell
additional equity securities in accordance with federal and state securities
laws. The Company may also seek additional funds through debt financing.
In addition, the Company has been invited by the DOE to make
application for the DOE NICE(3) grant in conjunction with the Utah Engineering
Experiment Station at the University of Utah and the University's industry
partners in Utah. The NICE(3) grant is a cost sharing program for projects that
develop and demonstrate advances in energy efficient and clean production
technologies. To date the Company has not actively pursued this grant. It does,
however, plan to seek an industry partner through the University of Utah and
make application for said grant if and when an industry partner is secured.
Distribution Proposal
The Company has been informed that management of its parent company,
EMPS Corporation, plans to pursue a spin-off of the Company to the shareholders
of EMPS Corporation by making a pro-rata distribution of its 3,000,000 shares of
Company common stock to EMPS Corporation shareholders (the "spin-off"). The
shares held by EMPS Corporation represent 90.9% of the currently issued and
outstanding common shares of the Company. The proposed spin-off will be effected
without registering the distribution of shares to the shareholders of EMPS
Corporation with the Securities and Exchange Commission pursuant to its Staff
Bulletin 4 which sets forth the conditions to be met by corporations effecting
spin-off distributions without registration of the shares.
The management of the Company is in agreement with EMPS Corporation
that a spin-off transaction will benefit both corporations. Since EMPS
Corporation completed the acquisition of Caspian Service Group, Ltd in July
2002, the major focus of EMPS Corporation has been the development of the
business operations of Caspian Services Group Ltd. Caspian Services Group
Limited, is engaged in the oil and gas services industry in the oil rich
Kazakhstan sector of the Caspian Sea. EMPS Corporation and the Company's
management agree that the business focuses of the corporations are distinct and
12
each may have greater success in their particular industry if the Company is no
longer a subsidiary of EMPS Corporation.
It is believed that a spin-off will allow the Company to pursue needed
financial investment and attract management assistance suited for a technology
development company if the spin-off is effected. Each corporation would be able
to concentrate attention and financial resources on its respective business
activities, without regard to the objectives and policies of the other business.
As independent businesses each would be able to offer employee incentives tied
directly to the results of the respective business activities. In addition, the
spin-off would allow investors to better evaluate each business, negotiate
financing terms focused on the distinct activities of each business and thereby
improve the likelihood that each corporation will achieve its objectives.
The EMPS Corporation shareholders would not be required to provide
consideration for the Company shares received in a spin-off distribution. Each
EMPS Corporation shareholder would have the same proportionate interest in EMPS
Corporation and the Company both before and after the spin-off.
The spin-off distribution will be subject to furnishing certain
information regarding the Company to both the EMPS Corporation shareholders and
to the trading markets of EMPS Corporation. One of the purposes of filing this
registration statement to register the common shares of the Company pursuant to
section 12(g) of the Securities Exchange Act of 1934 will be to provide
information regarding the Company to the EMPS Corporation trading markets prior
to affecting the spin-off distribution.
The Company believes that the shares issued to its parent's
shareholders pursuant to the spin-off distribution will be free trading shares
except for shares issued to control persons. Any shares issued to10%
shareholders of EMPS Corporation will bear a control legend and may be sold only
in compliance with Rule 144.
Item 3. Description of Property
Property & Facilities
The Company uses one-quarter of an 800 square foot office condominium
located at 875 Donner Way, Unit 705, Salt Lake City, Utah 84108 for its
corporate offices. The Company currently pays no rent for this space pursuant to
a verbal agreement with Particle Separation Technologies, L.C. This free rent is
of nominal value. There is no lease agreement with Particle Separation
Technologies, L.C. If at any time Particle Separation Technologies, L.C.,
decides it needs or wants the space, the Company has no right to continue to
occupy the space and could be forced to move.
13
Item 4. Security Ownership of Certain Beneficial Owners and Management
The term "beneficial owner" refers to both the power of investment and
the right to buy and sell shares of EMPS. It also refers to rights of ownership
or the right to receive distributions from EMPS and proceeds from the sale of
EMPS shares. Since these rights may be held or shared by more than one person,
each person who has a beneficial ownership interest in shares is deemed to be
the beneficial owners of the same shares because there is shared power of
investment or shared rights of ownership.
Type of Amount & Nature of
Security Name and Address Beneficial Ownership % of Class
Common Louis Naegle -0- -0-
1020 E. 900 N.
Bountiful, UT 84010
Common Timothy L. Adair -0- -0-
4811 S. 1115 E.
Salt Lake City, UT 84117
Common EMPS Corporation 3,000,000 90.9
2319 Foothill Blvd, #250
Salt Lake City, Utah 84109
Common Techgrand Company, Ltd. 300,000 9.1
Room 304, Arion Commercial Cntr
2-12 Queens Road West
Hong Kong, PR of China
All officers and directors -0- -0-
as a group (2 persons)
--------- ---
TOTAL 3,300,000 100%
========= ===
Mr. Naegle and Mr. Adair are officers and directors of the Company.
Hsuih Chi Hun, of Hong Kong, Peoples Republic of China, is the
principal shareholder of Techgrand Company Limited and may be deemed to
beneficially own shares held in the name of Techgrand Company Limited.
14
Change in Control
To the knowledge of the management, there are no present arrangements
or pledges of the Company's securities that may result in a change in control of
the Company other than those discussed in the Plan of Operations relating to the
potential spin-off distribution to EMPS Corporation shareholders.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The following table sets forth the Company's directors, executive
officers, promoters and control persons, their ages, and all offices and
positions held within the Company. Directors are elected for a period of one
year and thereafter serve until their successor is duly elected by the
stockholders and qualified. Officers and other employees serve at the will of
the Board of Directors.
Name of Director Age Term Served as Positions with EMPS
---------------- --- -------------- -------------------
Louis Naegle 36 Since January 30, 2001 President, Treasurer, and
Director
Timothy L. Adair 36 Since January 30, 2001 Principal Accounting Officer,
Secretary and Director
The above named individuals serve as the Company's officers and/or
directors. A brief description of their positions, proposed duties and their
background and business experience follows:
Louis Naegle, President, Treasurer and Director. Mr. Naegle graduated
from the University of Utah in 1991 with a Bachelor of Arts degree in Political
Science. Mr. Naegle brings over 13 years experience in marketing and sales. He
earned top sales awards while working for a large international home builder. In
1996-1997, he owned a successful sales consulting business with annual sales
revenue of about $70,000. From 1994 through 1998, Mr. Naegle was employed as a
sales agent for Equimark Properties, Inc. Since 1998, he has been a licensed
real estate broker. Mr. Naegle has sold over $30,000,000 in real estate. He
currently owns LISN Investments, LC., a limited liability company used for the
purchase and sale of real estate. He also brings experience from the
international arena where he served as liaison in the former Soviet Union for
SATCO International, a trading company specializing in tourism and sales of
consumer products. Mr. Naegle serves on a part time, as needed basis and on
average devotes under ten hours a month to the Company's business. Mr. Naegle is
not currently serving as a director of any other reporting company.
Timothy L. Adair, Principal Accounting Officer, Secretary and Director.
For more than ten years, Mr. Adair has worked at Intermountain Health Care in
Salt Lake City. Mr. Adair currently acts as a HR Analysis Manager where he works
15
specifically with Information Systems/Processes and Financial Analysis. Mr.
Adair graduated from Brigham Young University in 1988 with a Bachelor of Science
degree in Mechanical Engineering and received a Masters of Business
Administration from Brigham Young University in 1990. Prior to his current
position, Mr. Adair has six years previous experience as a Financial Analyst and
a Compensation Analyst. Mr. Adair has had nearly ten years of real estate
investment and management experience. He is a Partner of Adlaw, a real estate
holding and management partnership. He is also a Member of Forest Property
Management LLC, a limited liability company used for the purchase and sale of
real estate and accounting services. Mr. Adair serves on a part time, as needed
basis and on average devotes under ten hours a month to the Company's business.
Mr. Adair is not currently serving as a director of any other reporting company.
Key Consultants
Raj K. Rajamani, Ph.D. During the past five years, Dr. Rajamani has
been a professor at the Metallurgical Engineering Department of the University
of Utah. Dr. Rajamani received his Bachelor of Science in Chemical Engineering
at the Annamalai University in Madras, India and received his M. Tech. in
Chemical Engineering from the Indian Institute of Technology in Kanpur, India.
He later received both an M.E. in Chemical Engineering and a Ph.D. in Metallurgy
from the University of Utah. Dr. Rajamani has done research and published
extensively on ultra fine grinding, computational fluid dynamics applications,
electrodynamic separation of particles and has done modeling of grinding
kinetics and charge motion in comminution machines. Dr. Rajamani supports the
Company as a consultant on an as needed basis. Dr. Rajamani is 53 years old.
Vladimir Leonidovich Saveliev, Ph.D. During the past five years, Dr.
Saveliev has worked as a Senior Researcher at the Institute of Ionosphere and
Higher Energy Physics, Academy of Sciences of the Republic of Kazakhstan, in
Almaty, Kazakhstan. Dr. Saveliev specializes in the fields of plasma physics,
electrodynamics, propagation of radio waves, kinetic theory, applied
mathematics, Monte-Carlo method and numerical simulation. His extensive
education includes a 1966 Specialized Physics, Mathematics and Chemistry
certificate, a 1971 Master of Science degree from Novosibirsk State University
in Physics, 1982 Degree, Candidate of Physical and Mathematical Sciences, which
is equivalent to a Ph.D. Defended at the Institute of Theory and Applied
Mechanics, Novosibirsk Scientific Center and a 1990 Academic Rank of Senior
Researcher, certified by the High Certification Committee at Ministry Council of
USSR. Dr. Saveliev began his professional career at the Institute of High Energy
Physics, Academy of Sciences of SazSSR in 1971. He has been advisor to the Ph.D.
Thesis of several scientists and a Senior Researcher, Scientific Consultant,
Leading Researcher. He is a member of the American Mathematic Society, Referee
of European Physics Letters and other journals, Expert of Ministry of Science -
Academy of Sciences Republic of Kazakhstan. Dr. Saveliev is widely published in
the areas of electromagnetics, plasma dynamics and ionosphere excitation. Dr.
Saveliev is 52 years old.
Stephen Smoot, Project Manager. During the past five years Mr. Smoot
has been primarily engaged in foreign technology development and transfer. From
16
the inception of the Company through September of 2002 Mr. Smoot devoted
approximately twenty hours per week to Company matters as the project manager.
From September of 2002 to the present time Mr. Smoot has devoted under ten hours
per month on Company matters. The Company anticipates that Mr. Smoot's
involvement in Company matters will increase in the third quarter of 2003 or
when the HFECS prototype is completed. Mr. Smoot is 48 years old. Family
Relationships
There are no family relationships between any of the Company's officers
and directors.
Involvement in Legal Proceedings
To the knowledge of management, during the past five years, no present
or former director, executive officer or person nominated to become a director
or an executive officer of the Company:
15
(1) filed a petition under the federal bankruptcy laws or any state
insolvency law, nor had a receiver, fiscal agent or similar officer appointed by
a court for the business or property of such person, or any partnership in which
he was a general partner at or within two years before the time of such filing,
or any corporation or business association of which he was an executive officer
at or within two years before the time of such filing;
(2) was convicted in a criminal proceeding or named subject of a
pending criminal proceeding (excluding traffic violations or other minor
offenses);
(3) was the subject of any order, judgement or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from or otherwise limiting, the
following activities;
(i) acting as a future commission merchant, introducing
broker, commodity trading advisor, commodity pool operator, floor broker,
leverage transaction merchant, associated person of any of the foregoing, or as
an investment advisor, underwriter, broker or dealer in securities, or as an
affiliate person, director or employee of any investment company, of engaging in
or continuing any conduct or practice in connection with such activity;
(ii) engaging in any type of business practice; or
(iii) engaging in any activity in connection with the purchase
or sale of any security or commodity or in connection with any violation of
federal or state securities laws or federal commodities laws;
(4) was the subject of any order, judgement, or decree, not
subsequently reversed, suspended, or vacated, of any federal or state authority
barring, suspending, or otherwise limiting for more than 60 days the right of
such person to engage in any activity described above under this Item, or to be
associated with persons engaged in any such activity;
17
(5) was found by a court of competent jurisdiction in a civil action or
by the Securities and Exchange Commission to have violated any federal or state
securities law, and the judgment in such civil action or finding by the
Securities and Exchange Commission has not been subsequently reversed,
suspended, or vacated;
(6) was found by a court of competent jurisdiction in a civil action or
by the Commodity Futures Trading Commission to have violated any federal
commodities law, and the judgment in such civil action or finding by the
Commodity Futures Trading Commission has not been subsequently reversed,
suspended or vacated.
Item 6. Executive Compensation.
The following chart sets forth the compensation paid to each Officer
and Director of the Company, from the Company, for the last twelve months and
the planned compensation during the next twelve months.
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
Restricted
Name and Principal Bonus Other Annual Stock Options/ LTIP All Other
Position Year Salary $ Compensation Awards SARs Payout Compensation
------------------ ---- ------ ----- ------------ ----------- -------- ------ ------------
Louis Naegle 2002 -0- -0- -0- -0- -0- -0- -0-
President 2001 -0- -0- -0- -0- -0- -0- -0-
Tim Adair 2002 -0- -0- -0- -0- -0- -0- -0-
Secretary 2001 -0- -0- -0- -0- -0- -0- -0-
No other compensation has been paid directly or accrued to any other
officer or director of the Company to date. The Company has no policy for
compensating its directors for attendance at Board of Directors meetings or for
other services as directors.
Compensation of officers and directors is determined by the Company's
Board of Directors and is not subject to shareholder approval. The Company has
no agreement at this time, with any officer, director or key employee, regarding
employment with the Company or compensation for services.
18
The Company has no retirement, pension, or benefit plan at the present
time, however, the Board of Directors may adopt plans as it deems to be
reasonable under the circumstances.
Employment Contracts and Termination of Employment and Change in Control
Arrangement
The Company has no employment agreements with its employees or
executive officers. In the past three years no executive officer has received
any amounts in connection with an executive officer's resignation, retirement,
or other termination. No executive officer received any amounts in the last
three years in connection with a change in control of the Company of a change in
the executive officer's responsibilities after a change in control.
Item 7. Certain Relationships and Related Transactions.
The Company does not anticipate engaging in any significant dealings
with affiliates. If, however, there are dealings with related parties in the
future, the Company will attempt to deal on terms competitive in the market and
on the same terms that either party would deal with a third person.
The Company is currently a majority owned subsidiary of EMPS
Corporation, a Nevada corporation, which currently owns 3,000,000 or 91% of the
issued and outstanding common stock of the Company.
Item 8. Description of Securities
Description of Common Stock.
The Company has authorized capital stock consisting of 50,000,000
shares of common stock with a $.001 par value, of which 3,300,000 shares are
issued and outstanding. Holders of common stock are entitled to receive
dividends when declared by the Board of Directors out of funds legally available
therefore. Any such dividends may be paid in cash, property or shares. The
Company has not paid any dividends since inception. All dividends will be
subject to the discretion of the Company's Board of Directors, and will depend
upon, among other things, the operating and financial conditions, capital
requirements and general business conditions. Therefore, there can be no
assurance that any dividends on the shares will be paid in the future.
All shares have equal voting rights and, when validly issued and
outstanding, will have one vote per share on all matters to be voted upon by the
shareholders. Cumulative voting in the election of directors is not allowed, and
a quorum for shareholder meetings shall result from a majority of the issued and
outstanding shares present in person or by proxy. Accordingly, the holders of a
majority of the shares present, in person or by proxy at any legally convened
shareholders' meeting at which the Board of Directors is to be elected, will be
19
able to elect all directors and the minority shareholders will not be able to
elect a representative to the Board of Directors.
Shares have no preemptive or conversion rights, no redemption or
sinking fund provisions, and are not liable for further call or assessment. Each
share is entitled to share pro rata any assets available for distribution to
holders of its equity securities upon our liquidation.
Description of Stock Options.
The Company has adopted the EMPS Research Corporation 2003 Stock Option
Plan (the "Plan") allowing it to offer key employees, officers, directors,
consultants and sales representatives, an opportunity to acquire a proprietary
interest in the Company. The various types of incentive awards which may be
provided under the Stock Option Plan will enable the Company to respond to
changes in compensation practices, tax laws, accounting regulations and the size
and diversity of its business. To date the Company has not issued any options
pursuant to the Plan. The total number of shares reserved and available for
distribution under the Plan is 5,000,000 shares. These shares underlie the
options issued by the Company pursuant to the Plan. The option holders will not
be protected against dilution if the Company issues additional shares in the
future. Neither the options, nor the shares underlying the option have
preemptive rights.
In the case of any reclassification, change, consolidation, merger,
sale or conveyance of our shares to another corporation, the Company will make
adequate provision whereby the registered holder of any outstanding option will
have the right thereafter to receive an exercise of the options immediately
prior to the reclassification, change, consolidation, merger, sale or conveyance
of the Company shares.
Other provisions of the options are set forth below. This information
is subject to the provisions of the Plan and the Stock Option Certificates
representing the options. The following information is a summary of the EMPS
Research Corporation 2003 Stock Option Plan and is qualified by reference to the
plan.
1. The shares underlying the Options offered pursuant to the Plan are
subject to the same rights and restrictions as other shares.
2. Once an option is granted, it may not be called by the Company.
3. The options may not be sold prior to six months from the date of the
grant of the related award without our prior approval.
4. Unless exercised within the time provided for exercise, the options
will automatically expire.
5. The exercise price per share purchasable under a stock option shall
be determined by the Committee at the time of grant and may not be less that
20
100% of Fair Market Value of the shares, provided however, that the exercise
price of an Incentive Stock Option granted to a 10% Stockholder shall not be
less than 110% of the Fair Market Value of the shares.
6. There is no minimum number of shares which must be purchased upon
exercise of the option.
7. The option holders, in certain instances, are protected against
dilution of their interest represented by the underlying shares upon the
occurrence of stock dividends, stock splits, reclassifications and mergers.
Transfer Agent.
The Company's transfer agent and registrar is Interwest Transfer
Company, Inc., 1981 East 4800 South, Suite 100, Salt Lake City, Utah 84117,
Telephone (801) 272-9294.
PART II
Item 1. Market Price of and Dividends on Registrants Common Equity and
Other Shareholder Matters.
The Company's shares are not traded publicly. The Company, however, may
apply for trading on the Over-the-Counter Bulletin Board ("OTCBB") at a future
date. The Company currently has 3,300,000 shares outstanding held by 2
shareholders.
As of the date of this registration statement none of the Company's
common shares are subject to outstanding options or warrants to purchase, or
securities convertible into, common shares of the Company. Of the 3,300,000
restricted shares the Company currently has outstanding, approximately 33,000
shares are eligible for resale pursuant to Rule 144 every 90 days. The Company
has no agreements to register shares on behalf of shareholders currently holding
unregistered securities. The Company has not paid, nor declared, any dividends
since its inception and does not intend to declare any such dividends in the
foreseeable future. The Company's ability to pay dividend is subject to
limitations imposed by Utah law. Under Utah law, dividends may be paid to the
extent that the corporation's assets exceed its liabilities and it is able to
pay its debts as they become due in the usual course of business.
Item 2. Legal Proceedings.
To the knowledge of management, there is no material litigation or
governmental agency proceeding pending or threatened against the Company or its
management. Further, the Company is not aware of any material pending or
threatened litigation or governmental agency proceeding to which the Company or
any of its directors, officers or affiliates are or would be a party.
21
Item 3. Changes in and disagreements with accountants on accounting and
financial disclosure
None.
Item 4. Recent Sales of Unregistered Securities.
On February 14, 2001, the Company issued 1,000,000 restricted common
shares to EMPS Corporation pursuant to an exemption from registration provided
under Section 4(2) of the Securities Act of 1933, as amended. The shares were
issued in exchange for right, title and interest of one US Patent and two
continuation in part US Patents (the book value of all three patents was
$2,636), for organization costs in the amount of $264 and for cash in the amount
of $2,100.
On December 23, 2002, the Company filed an amendment to its Articles of
Incorporation effecting a one for three forward split of its issued and
outstanding common stock resulting in 2,000,000 shares being issued to EMPS
Corporation, the sole shareholder at the time.
On December 31, 2002, the Company issued 300,000 restricted common
shares to Techgrand Company, Ltd., a Hong Kong Ltd. company, pursuant to an
exemption from registration provided under Rule 903 of Regulation S as
promulgated by the Securities and Exchange Commission, under the Securities Act
of 1933, as amended. The Company received $30,000 in cash.
Item 5. Indemnification of Directors and Officers
The statutes, charter provisions, bylaws, contracts or other
arrangements under which controlling persons, directors or officers of the
registrant are insured or indemnified in any manner against any liability which
they may incur in such capacity are as follows:
The Company's Articles of Incorporation and Bylaws limit liability of
and indemnify its Officers and Directors to the full extent permitted by the
Utah Revised Business Corporation Act ("Utah Act").
Under the Utah Act, a Utah corporation has the authority to indemnify
officers and directors:
(1) Except as provided in Subsection (4), a corporation may indemnify
an individual made party to a proceeding because he is or was a director,
against liability incurred in the proceeding if:
(a) his conduct was in good faith; and
22
(b) he reasonably believed that his conduct was in, or not
opposed to, the corporation's best interests; and
(c) in the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
(2) A director's conduct with respect to any employee benefit plan for
a purpose he reasonably believed to be in or not opposed to the interests of the
participants in and beneficiaries of the plan is conduct that satisfies the
requirement of Subsection (1)(b).
(3) The termination of a proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct
described in this section.
(4) A corporation may not indemnify a director under this section:
(a) in connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(b) in connection with any other proceeding charging that the
director derived an improper personal benefit, whether or not
involving action in his official capacity, in which proceeding
he was adjudged liable on the basis that he derived an
improper personal benefit.
(5) Indemnification permitted under this section in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
In accordance with the Utah Act indemnification may also be provided as
follows:
(1) an officer of the corporation is entitled to mandatory
indemnification, and is entitled to apply for court-ordered indemnification, in
each case to the extent as a director.
(2) the corporation may indemnify and advance expenses to an officer,
employee, fiduciary, or agent of the corporation to the same extent as to a
director; and
(3) a corporation may also indemnify and advance expenses to an
officer, employee, fiduciary, or agent who is not a director to a greater
extent, if not inconsistent with public policy, and if provided for by its
articles of incorporation, bylaws, general or specific action of its board of
directors, or contract.
PART F/S
[THIS SPACE INTENTIONALLY LEFT BLANK]
23
EMPS RESEARCH CORPORATION
(A Development Stage Company)
FINANCIAL STATEMENTS
WITH
INDEPENDENT AUDITOR'S REPORT
F-1
EMPS RESEARCH CORPORATION
(A Development Stage Company)
CONTENTS
PAGE
Independent Auditor's Report F-3
Balance Sheets F-4
Statements of Operations F-5
Statement of Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8
F-2
Independent Auditor's Report
Board of Directors
EMPS RESEARCH CORPORATION
I have audited the accompanying balance sheets of EMPS Research Corporation (a
development stage company) as of December 31, 2002 and 2001 and the related
statements of operations, stockholders' equity and cash flows for the year ended
December 31, 2002 and the period from inception (January 31, 2001) to December
31, 2001 and the period from inception (January 31, 2001) to December 31, 2002.
These financial statements are the responsibility of the Company's management.
My responsibility is to express an opinion on these financial statements based
on my audits.
I conducted my audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that I plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audits provide a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of EMPS Research Corporation (a
development stage company) at December 31, 2002 and 2001, and the results of its
operations and its cash flows for the year ended December 31, 2002 and the
period from inception (January 31, 2001) to December 31, 2001 and the period
from inception (January 31, 2001) to December 31, 2002 in conformity with
accounting principles generally accepted in the United States of America.
/s/ David T. Thomson, PC
-----------------------------------
Salt Lake City, Utah
February 11, 2003
F-3
EMPS RESEARCH CORPORATION
(A Development Stage Company)
BALANCE SHEETS
ASSETS
March 31, December 31, December 31,
2003 2002 2001
---------- ---------- ----------
(Unaudited)
CURRENT ASSETS:
Cash $ 29,573 $ 34,437 $ 6,406
Prepaid expenses 2,500 3,441 -
---------- ---------- ----------
Total Current Assets 32,073 37,878 6,406
---------- ---------- ----------
OTHER ASSETS
Patents and deferred patent costs, net of amortization
of $436, $385 and $180 2,199 2,251 4,601
---------- ---------- ----------
Total Other Assets 2,199 2,251 4,601
---------- ---------- ----------
TOTAL ASSETS $ 34,272 $ 40,129 $ 11,007
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 519 $ 719 $ 3,013
Franchise tax payable 100 100 100
Deferred revenue 8,840 11,232 3,231
Due to Parent - - 2,145
---------- ---------- ----------
Total Current Liabilities 9,459 12,051 8,489
---------- ---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock; $.001 par value, 50,000,000
shares authorized, 3,300,000 and 1,000,000 shares
issued and outstanding respectively 3,300 3,300 1,000
Additional paid-in capital 33,845 33,845 4,000
Deficit accumulated during the development stage (12,332) (9,067) (2,482)
---------- ---------- ----------
Total Stockholders' Equity (Deficit) 24,813 28,078 2,518
---------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 34,272 $ 40,129 $ 11,007
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-4
EMPS RESEARCH CORPORATION
(A Development Stage Company)
STATEMENTS OF OPERATIONS
From
Inception
For the For the (January 31,
Three Months Three Months For the 2001) Cumulative
Ended Ended Year Ended to During The
March 31, March 31, December 31, December 31, Development
2003 2002 2002 2001 Stage
------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
REVENUE $ - $ - $ - $ - $ -
------------ ------------ ------------ ------------ ------------
EXPENSES
General and administrative 3,214 457 6,377 2,263 11,854
Amortization expense 51 51 205 180 436
------------ ------------ ------------ ------------ ------------
Total Expenses 3,265 508 6,582 2,443 12,290
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) FROM OPERATIONS (3,265) (508) (6,582) (2,443) (12,290)
OTHER INCOME (EXPENSE)
Grant revenue, net of grant expenses of
$2,392, $19,462, $77,923, $62,157
and $142,472 - - - - -
Interest expense - (42) (3) (39) (42)
------------ ------------ ------------ ------------ ------------
Total income (expense) - (42) (3) (39) (42)
------------ ------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (3,265) $ (550) $ (6,585) $ (2,482) $ (12,332)
============ ============ ============ ============ ============
EARNINGS (LOSS) PER SHARE $ (0.00) $ (0.00) $ (0.00) $ (0.00) $ (0.00)
============ ============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 3,300,000 3,000,000 3,025,000 3,000,000 3,046,154
============ ============ ============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-5
EMPS RESEARCH CORPORATION
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
Deficit
Common Stock Accumulated
---------------------- Additional During The
Paid-in Development
Shares Amount Capital Stage
--------- ------- -------- ---------
BALANCE, January 31, 2001 (inception) - $ - $ - $ -
Shares issued to parent in exchange for assignment
of patents and other consideration at $.005 per share,
January 31, 2001 1,000,000 1,000 4,000 -
Net income (loss) from inception (January 31, 2001) to
December 31, 2001 - - - (2,482)
--------- ------- -------- ---------
BALANCE, December 31, 2001 1,000,000 1,000 4,000 (2,482)
Capital contributed by parent upon forgiveness of debt - - 2,145 -
on September 30, 2002
Shares issued pursuant to a 3 for 1 forward split
authorized on November 29, 2002 with no change
in par value 2,000,000 2,000 (2,000) -
Shares issued for cash at $.10 per share on December
31, 2002 300,000 300 29,700 -
Net income (loss) for the year ended
December 31, 2002 - - - (6,585)
--------- ------- -------- ---------
BALANCE, December 31, 2002 3,300,000 3,300 33,845 (9,067)
Net income (loss) for the three months
ended March 31, 2003 (Unaudited) - - - (3,265)
--------- ------- -------- ---------
BALANCE, March 31, 2003 (Unaudited) 3,300,000 $ 3,300 $ 33,845 $ (12,332)
========= ======= ======== =========
The accompanying notes are an integral part of these financial statements.
F-6
EMPS RESEARCH CORPORATION
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From
For the For the Inception
Three Months Three Months For the (January 31, 2001) Cumulative
Ended Ended Year Ended to During The
March 31, March 31, December 31, December 31, Development
2003 2002 2002 2001 Stage
--------- --------- --------- --------- ---------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash from grant $ - $ 28,621 $ 85,924 $ 65,388 $ 151,312
Cash paid for interest - (42) (3) (39) (42)
Cash paid for grant expenses (2,625) (16,208) (77,922) (58,880) (139,427)
Cash paid for non grant expense (2,239) (1,220) (9,868) (2,163) (14,270)
Cash paid for taxes - (100) (100) - (100)
--------- --------- --------- --------- ---------
Total cash used in operating activities (4,864) 11,051 (1,969) 4,306 (2,527)
--------- --------- --------- --------- ---------
CASH FLOW FROM INVESTING ACTIVITIES: - - - - -
--------- --------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock for cash - - 30,000 2,100 32,100
--------- --------- --------- --------- ---------
Total cash provided by financing activities - - 30,000 2,100 32,100
--------- --------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH (4,864) 11,051 28,031 6,406 29,573
CASH - BEGINNING OF PERIOD 34,437 6,406 6,406 - -
--------- --------- --------- --------- ---------
CASH - END OF PERIOD $ 29,573 $ 17,457 $ 34,437 $ 6,406 $ 29,573
========= ========= ========= ========= =========
RECONCILIATION OF NET INCOME (LOSS) TO
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES
NET INCOME (LOSS) $ (3,265) $ (550) $ (6,585) $ (2,482) $ (12,332)
--------- --------- --------- --------- ---------
Adjustment to reconcile net income (loss) to net
cash provided (used) by operating activities
Amortization of patent costs 51 51 205 180 436
Organization costs paid by issued common stock - - - 264 264
Patent write-off - - 2,145 - 2,145
Change in assets and liabilities
(Increase) decrease in prepaid expenses 941 - (3,441) - (2,500)
Increase (decrease) in accounts payable (200) 3,254 (2,294) 3,013 519
Increase in due to parent - (763) - - -
Increase (decrease) in franchise tax payable - (100) - 100 100
Increase (decrease) in deferred revenue (2,391) 9,159 8,001 3,231 8,841
--------- --------- --------- --------- ---------
Total Adjustments (1,599) 11,601 4,616 6,788 9,805
--------- --------- --------- --------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (4,864) $ 11,051 $ (1,969) $ 4,306 $ (2,527)
========= ========= ========= ========= =========
NONCASH TRANSACTIONS
Common stock issued to pay for organization costs $ - $ - $ - $ 264 $ 264
========= ========= ========= ========= =========
Forgiveness of payable to Parent for patent costs $ - $ - $ 2,145 $ - $ 2,145
========= ========= ========= ========= =========
Commons stock issued for assignment of patents
from Parent $ - $ - $ - $ 2,636 $ 2,636
========= ========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-7
EMPS RESEARCH CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 2002 is Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization - EMPS Research Corporation (The Company) was organized
under the laws of the State of Utah on January 31, 2001 and has elected
a fiscal year end of December 31st. EMPS Corporation (Parent) formed
the Company by giving cash and other consideration in exchange for all
of the issued and outstanding shares of EMPS Research Corporation (See
note 3). The Company was formed for the purpose of furthering
development and marketing of patented technology for commercially
separating nonmagnetic particulate material from other materials
without heat or water. The Company has not commenced planned principle
operations and is considered a development stage company as defined in
SFAS No. 7. The Company has three patents having to do with the
business purpose outlined above.
Financial statements - The accompanying financial statements include
only the accounts of EMPS Research Corporation and are not presented on
a consolidated basis with EMPS Corporation which is its Parent Company.
At December 31, 2002 and 2001 EMPS Corporation owned 91% and 100% of
the common stock of EMPS Research Corporation respectively.
Net Earnings Per Share - The computation of net income (loss) per share
of common stock is based on the weighted average number of shares
outstanding during the periods presented.
Assignment of Patent Rights - The Company is amortizing its cost
associated with the acquisition of its patents over a remaining life of
12.8 years using the straight-line method. This life is the legally
remaining protected lives of the patents.
Income Taxes - Due to losses at December 31, 2002 and 2001, no
provisions for income taxes has been made. There are deferred income
taxes resulting from income and expense items being reported for
financial accounting and tax reporting purposes in different periods.
The difference arises from the accelerating of the write-off of
organization costs for financial statement purposes as compared to
amortizing over 60 months for tax purposes.
Cash and Cash Equivalents - For purposes of the statement of cash
flows, the Company considers all highly liquid debt instruments
purchased with a maturity of three months or less to be cash
equivalents. The Company did not have non-cash investing activities
during the presented periods for 2002 and 2001.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Grant revenue recognition - The DOE grant is funded on a cost
reimbursement basis and payments received from the grant are treated as
earned and recognized as revenue at the time expenditures reimbursable
under the grant are made by the Company. The grant has provisions for
advance payments. A grant receivable is recorded if expenditures exceed
amounts received under the grant and deferred revenue is recorded if
payments exceed costs expended under the grant.
F-8
EMPS RESEARCH CORPORATION
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 2002 is Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Unaudited Interim Information - In the opinion of management, the
unaudited financial statements reflect all adjustments, consisting only
of normal adjustments, necessary to present fairly, the financial
position of the Company at March 31, 2003 and the results of operations
and cash flows for the three months then ended. The results of
operations and cash flows for the three months ended March 31, 2003,
should not necessarily be taken as indicative of the results of
operations and cash flows for the entire year ended December 31, 2003.
NOTE 2 - EQUITY TRANSACTIONS
On January 31, 2001, the Parent formed the Company as a wholly owned
Subsidiary by giving cash and other consideration in exchange for
1,000,000 shares of the Company's common stock. The Company was
incorporated on January 31, 2001 in the State of Utah. At that time the
Parent owned all of the issued and outstanding common shares of the
Company (1,000,000 shares). The consideration given by the Parent to
the Company for its shares was $2,100 of cash, payment of organization
costs of $264 on behalf of the Company and the assignment of three
Patents owned by the Parent to the Company at their book value
(historical costs) at time of assignment in the amount of $2,636. Thus,
the Parent paid a total price of $5,000 for the 1,000,000 shares of
common stock of the Company.
On November 29, 2002, the stockholder (Parent) approved a 3 for 1
forward stock split of the issued and outstanding common shares of the
Company. At the time of the stock split the number of shares authorized
and the par value of the common shares remained unchanged. As a result
of the split, 2,000,000 additional shares were issued, and additional
paid in capital was reduced by $2,000. All references in the
accompanying financial statements to the number of common shares and
per-share amounts have been restated to reflect the stock split.
On December 31, 2002, the Company sold 300,000 shares of its common
stock for cash at $.10 per share for a total amount of $30,000. The
shares were sold to Techgrand Company Ltd., a Hong Kong company, which
owns shares of the common stock of the Company's Parent. At the
completion of the transaction the Company was no longer a wholly owned
subsidiary of EMPS Corporation.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Company has no employees. As of December 31, 2002 and 2001 no
compensation was paid or accrued to any officers or directors of the
Corporation due to the fact that it is of only nominal value. Starting
in the first quarter of 2001 and through the second quarter of 2001,
compensation was paid to the project manager of the government grant
issued to the Company (see note 3) in the amount of $20,000. The
project manager was a related party to the Company at the time of the
payment.
The Company is receiving free office space through a related Party. The
value of the free rent to date has been of nominal value.
F-9
EMPS RESEARCH CORPORATION
(Development Stage Companies)
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 2002 is Unaudited)
NOTE 3 - RELATED PARTY TRANSACTIONS - continued
The Company decided to abandon its continuation-in-part (CIP) patent
application during the quarter ended September 30, 2002. At December
31, 2001, the costs associated with this application were recorded as
deferred patent costs. After abandonment, the costs for the CIP patent
application were deemed by the Company to have no future value and the
costs were expensed. The total amount paid for the CIP patent
application was $2,145 and was paid in behalf of the Company by its
Parent. The Parent by corporate resolution dated September 30, 2002 has
forgiven the debt. By corporate resolution dated September 30, 2002,
the Company decided to treat the forgiveness of repayment for the
$2,145 advanced as a capital contribution.
NOTE 4 - INCOME TAXES
Income tax expense consists of the following components:
2002 2001
---- ----
Current $ - $ -
Estimated deferred tax liability (benefits) (1,355) (368)
Less valuation allowance 1,355 368
------- ------
Net $ - $ -
======= ======
At December 31, 2002 and 2001, the Company had net federal operating
losses (NOL) of $6,628 and $2,273, which can be carried forward to
offset operating income. The Company's NOL will expire between the
years 2022 and 2021. Valuation allowances totaling $1,355 and $368 have
been established for deferred tax assets associated with the above NOL
for 2002 and 2001 and for the amortizing of organization costs for tax
purposes for the same periods. The change in the NOL allowances for
2002 and 2001 was $987 and $368.
NOTE 5 - DEPARTMENT OF ENERGY AWARD
The Department of Energy (DOE), through its Office of Industrial
Technologies (OIT) 2000 Inventions and Innovation (I&I) Program awarded
a grant to the Company during 2001. The Company's application was
titled "Development of a High-Frequency Eddy-Current Separator". The
grant was approved in the amount of $199,000.
The grant is a DOE small business grant and thus the Company has no
financial obligation to DOE under the award. The Company is not
required to compensate DOE upon successful (or unsuccessful)
commercialization of a prototype (such as for royalties or
commissions). As a small business concern the Company prior to entering
into the award had the option to identify technical data that was
proprietary and to elect to retain title to this proprietary data. In
so doing this election, the unlimited right to such technical data by
DOE was voided per DOE regulations. Per DOE regulations if the Company
has a "subject invention" related to work done under the award it can
obtain unlimited rights to the technical data for the "subject
invention" and has license to use the invention only for government use
not commercial use. Even so, if proper application and reporting is
done for the "subject invention" the Company can retain title to the
"subject invention" and the above rights to DOE to use the invention or
technical data is voided.
F-10
EMPS RESEARCH CORPORATION
(Development Stage Companies)
NOTES TO FINANCIAL STATEMENTS
(Information Subsequent to December 31, 2002 is Unaudited)
NOTE 5 - DEPARTMENT OF ENERGY AWARD - continued
It is management's intention to perform the proper reporting and
application process to retain title to any "subject invention" that may
arise, if any, during the course of the award.
The project period is from February 1, 2001 to January 31, 2003 and has
subsequently been extended to May 31, 2003. Specific amounts have been
subcontracted to two entities to assist in the research to be conducted
under the grant. During the year ended December 31, 2002 the Company
had incurred grant expenses in the amount of $77,923 and from inception
through December 31, 2001, the Company had incurred grant expenses in
the amount of $62,157. Total grant expenses from inception through
December 31, 2002 is $140,080. Grant expenses for the three months
ended March 31, 2003 were $2,392.
NOTE 6 - PATENTS
The cost of the patents being amortized is $2,635. The amortization
expense for the periods ending December 31, 2002 and December 31, 2001
was $205 and $180 respectively. The amortization expense for the next
five years is anticipated to be the same for each year and that amount
is $205 per year. The amortization expense for the three months ended
March 31, 2003 was $51.
F-11
PART III
Item 1. Index and Description of Exhibits
Exhibit
Number Title of Document Location
------ ----------------- --------
3.(1).1 Articles of Incorporation Incorporated by reference to
Form 10-SB as filed on 3-26-03
3.(1).2 Amendments to Articles of Incorporated by reference to
Incorporation Form 10-SB as filed on 3-26-03
3.2 Bylaws Incorporated by reference to
Form 10-SB as filed on 3-26-03
4.1 EMPS Research Corporation 2003 Incorporated by reference to
Stock Option Plan Form 10-SB as filed on 3-26-03
10.1 Assignment of Patents Incorporated by reference to
Form 10-SB as filed on 3-26-03
10.2 Subcontract Agreement Incorporated by reference to
Form 10-SB as filed on 3-26-03
21.1 Subsidiaries of Registrant Incorporated by reference to
Form 10-SB as filed on 3-26-03
99.01 EMPS Corporation Information Incorporated by reference to
Statement 14(c), as amended Form 10-SB/A No. 5 as filed on
6-30-03
99.02 Techgrand Company Limited Incorporated by reference to
Subscription & Investment Letter Form 10-SB/A No. 5 as filed on
6-30-03
24
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf,
thereunto duly authorized.
EMPS RESEARCH CORPORATION
Date: June 30, 2003 /s/ Louis Naegle
--------------------------------
Louis Naegle, President
Date: June 30, 2003 /s/ Timothy L. Adair
--------------------------------
Timothy L. Adair, Secretary
24
ANNEX B
Statement of common shareholder of EMPS Corporation, a Nevada
corporation, filed pursuant to Treasury Regualtion Section 1.355-5(b), with
respect to the spin-off distribution of stock of EMPS Research Corporation, a
Utah corporation.
1. The undersigned, a shareholder owning common stock of EMPS
Corporation received a distribution on July __, 2003 of shares of
common stock of EMPS Research Corporation, a controlled corporation, in
a distribution which is subject to Section 355 of the Internal Revenue
Code of 1986, as amended (the "Code").
2. The names and addresses of the corporations involved are:
(a) EMPS Corporation
2319 Foothill Blvd., Suite 250
Salt Lake City, Utah 84109
(b) EMPS Research Corporation
875 Donner Way, Unit 705
Salt Lake City, Utah 84108
3. The undersigned surrendered no stock or securities of EMPS
Corporation, a Nevada corporation, or any other consideration in
connection with the distribution.
4. The undersigned received ____________ shares of common
stock of EMPS Research Corporation, a Utah corporation, in the
distribution.
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Shareholder Signature
If shares owned jointly, both taxpayers must sign
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Shareholder Signature