1
FORM 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1997
-------------------
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
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Commission file number 93-67656-S
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LEADING-EDGE EARTH PRODUCTS, INC.
---------------------------------
(Name of small business issuer as specified in its charter)
Oregon 93-1002429
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(State of incorporation or organization) (I.R.S. Employer ID No.)
319 Nicherson St. #186, Seattle, WA 98109
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(Address of principal executive offices) (Zip Code)
800-788-3599
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Issuer's telephone number
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days X
----- -----
Yes No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 30,0017,951 as of March 18,
1997
Transitional Small Business Disclosure Format (check one):
Yes No X
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LEADING-EDGE EARTH PRODUCTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
PART I
ITEM 1. FINANCIAL STATEMENTS
Interim Financial Statements for the periods ending January 31, 1997, and 1996
are attached hereto.
ITEM 2. PLAN OF OPERATION
The Company has yet to generate revenues from the sale of building panels. No
revenues were earned in fiscal 1995/1996; however, $294,324 was earned in
fiscal 1995/1996, primarily in the form of license revenue from the Agile
Building Technology, Inc. ("Agile") license as provided for by a license
agreement the Company approved on December 4, 1995, (see exhibits to 10-KSB for
year ended April 30, 1996). An agreement was entered into as of February 28,
1997 which cancels the December 4, 1995 agreement and the Company no longer
will be receiving the revenues described in that agreement. The operations of
the Company, since inception, have been focused on research and development.
LEEP is about to enter the manufacturing phase of its life. The Company
believes it has a basis to produce cost effective new building construction
components and systems. The Company believes it has five salable products;
three of which the Company's joint venture partner, Agile, will produce and two
which LEEP will produce. The Company intends to immediately commercialize its
proprietary technology for cost/performance effective building systems and
initiate directly, or by license, manufacturing operations in the U.S. and
worldwide.
LEEP has begun the formalities to register a secondary public stock offering to
drive its direct and joint venture operations. A substantial portion of the
capital raised will be invested in Agile to give it the necessary operating
capital to expand its manufacturing capability.
The December 4, 1995 agreement between Grant Record, WLP, Agile and Agile
Investment Corporation ("A.I.C."), non-exclusively licensed Agile to
manufacture, market and sell products based on the Company's: composite
building system concepts, patents, patents pending, patent applications, trade
secrets and future product developments (jointly or independently
accomplished). Under the new agreement dated February 28, 1997, Agile shall
have a non-exclusive license to utilize for the purposes of manufacture and
sale, certain LEEP technology, within a radius of 500 miles of Williamsport,
PA. Said license shall only be available so long as Agile shall effectively,
commercially use said LEEP Technology. LEEP Technology licensed shall not,
without the express consent of LEEP, for consideration deemed adequate thereto,
be sub licensed by Agile. No license or consulting revenues are considered in
the new agreement.
The Company intends to immediately begin pilot manufacturing of its LEEP
structural core product line. The Company is negotiating to joint venture this
undertaking, several
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joint-venture candidates are working with the Company to determine the best
course of action to place, manage, and finance the required manufacturing
facility.
It has been determined that A.I.C. is not likely to effectively carry out its
purposes and the parties have resolved to eliminate A.I.C. in two stages. The
first step consists of immediate return to LEEP of 4,216,601 of its shares,
which represents LEEP's pro-rata interest in A.I.C. The balance of 5,224,960
LEEP shares owned by A.I.C. (subject release of 1.4 million pledged LEEP shares
held by A.I.C.) will be returned to LEEP for cancellation pro-rata to an option
granted for LEEP's purchase of Agile shares being exercised up to $4,000,000
for 14% of the outstanding shares of Agile, equal to respectively, 5,224,960
LEEP shares and pro-rata additional equity ownership of Agile. If LEEP
completes the full $4,000,000 purchase of its intended investment, A.I.C.
shall be dissolved and LEEP's ownership in Agile will be 49%.
At the end of the quarter $22,750 was still due the Company based on capital
received by Agile. $24,500 had been paid to the Company for consulting
services due the Company under the December 4, 1995, Agreement and $158,500 was
still due the Company. The Company has agreed to temporarily defer Agile's
payout of accrued consulting fees due from Agile under the December 4, 1995
Agreement, and reserves the right to demand such amounts at any time.
Agile, at December 31, 1996, had approximately $500,000 in trade and other
short-term debt. Approximately one-half of this amount was consolidated under
the Bank line discussed herein and longer-term notes. Agile is seeking bridge
financing assistance to ensure orderly operations until larger financing is
completed. No assurances can be made that bridge or other classes of
capitalization will be finalized.
The bank line which consolidated a large amount of Agile debt in December 1996,
was also used to secure an operating in place polyisocyanurate expansion foam
panel lamination production line. This plant is presently operated under
contract by the former owner and has manufacturing capacity in place of $69,000
per shift for Agile's current product.
The Company has limited cash reserves. The Company anticipates administrative
and other overhead in the twelve months ending April 30, 1997, of $900,000
(cash and non cash items combined). It is anticipated that this amount can be
raised by private equity and/or debt placement by itself in the event the
planned secondary financing is delayed. There can be no assurance that these
results will be attained.
The Company financed it's cost of operations by issuing stock and granting
stock options for services, stockholder and other loans. For further analysis,
see the Company's Statement of Cash Flows.
Contract salaries and incentives have increased considerably primarily because
the Company recruited a new president capable of overseeing the operating side
of the company as it enters the manufacturing phase.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 27, 1995, the Company filed an action against Timothy J. Metz in the
Superior Court of the State of Washington for King County, Cause No.
95-2-19488. Mr. Metz is a former officer of the Company. The Company alleges
that Mr. Metz breached his contract with the Company. The Company seeks:
monetary damages against Mr. Metz; an injunction enjoining Metz from violating
the confidentiality provisions of the contract; and a declaratory judgment
that Mr. Metz is not entitled to anything under his contract. On August 23,
1995, Mr. Metz filed his answer to the Company's action, and in addition filed
a counterclaim against the Company and added Grant Record as a third party
defendant. In his counterclaim, Mr. Metz seeks to establish co-ownership and
rights to certain patents involving building panels and means for joining such
panels. Mr. Metz also alleges he was wrongfully terminated, and seeks damages
of $395,000 in connection therewith. Additionally, Mr. Metz seeks unspecified
damages, which he seeks to have trebled, plus attorney fees. Mr. Metz sought to
remove the Company's action against him and his counterclaim and third party
complaint to the United States District Court for the Western District of
Washington. His removal petition is filed in United States district Court,
Cause No. C95-1302. The Company resisted the removal petition, and requested
that the matter be heard in the same court. The United States District Court
granted the Company's motion to remand to the state court, and ordered that all
proceedings in the United States District Court pertaining to the patent
litigation be stayed until the state court case is resolved. Because of a
personal tragedy, Mr. Metz has not been able to respond to the discovery
requested of him by the Company. The Company has not used and does not use the
technology to which Mr. Metz claims rights. Although the suit has been pending
for over a year, no discovery has taken place. Based on the Company's knowledge
of Mr. Metz's claims, the Company is of the opinion that it has meritorious
defenses and intends to defend vigorously against the claims brought by Mr.
Metz.
The Company has made demands to Harvey and Gary Bryant (Bryant Investment
Company, Las Vegas, NV) for their return to the Company of, respectively,
250,000 shares each of the common, restricted stock of the Company due to
nonperformance on an earlier (1994) undertaking in which Bryant Investment
Company committed to raise a minimum of $1.0 million for the Company. To
date, Bryant Investment Company has not responded to the Company's demands to
return the stock and the company is contemplating legal action to retrieve and
cancel the shares.
ITEM 2. CHANGES IN SECURITIES
There have been no changes in instruments defining the rights of holders of any
class of securities.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
On October 14, 1996, at the annual meeting of shareholders, A. Charles Bush and
Richard M. Pell, in addition to the incumbent Board of Directors, were elected
to serve as directors of the Company until the next annual meeting. Each of the
director nominees (7 persons) received 23,731,293 votes for and 15,337 votes
against election to serve as director, with no votes withheld. Richard M.
Pell has since resigned from the Board.
At the same meeting, management was given the authority to consider moving its
audit responsibility to the East Coast, to be more consistent with
management's' location. 23,497202 votes in favor and 15,200 votes against were
cast, with 234,228 votes withheld.
ITEM 5. OTHER INFORMATION
Matters discussed herein, contain forward looking statements that involve risk
and uncertainties. The Company's results may differ significantly from results
indicated by forward looking statements. Factors that might cause some
differences, include, but are not limited to:
The Companies ability to successfully complete a secondary public stock
offering;
Changes in general economic conditions, including but not limited to increases
in interest rates, and shifts in domestic building construction requirements;
Changes in government regulations effecting customers, the Company, or Agile.
Risks generally involved in the construction business, including weather, fixed
price contracts and shortages of materials or price competitive labor.
Competition;
The ability of the Company and Agile to successfully bring the products from
Development Stage into full and profitable Production Stage.
The Company and/or Agile's ability to raise sufficient debt and equity capital
to perfect Agile's business plans and to enable Agile to continue in existence.
The occurrences of incidents which could subject the Company to liability or
fines;
Agile's ability to obtain the sales orders necessary to support the production
intended by the Agile Business Plan.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The Company filed a report on form 8-K dated March 17, 1997
disclosing the new President David Moran.
The Company filed a report on form 8-K dated March 17, 1997
disclosing a new technology license and operating agreement
that replaces existing agreements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LEADING-EDGE EARTH PRODUCTS, INC.
---------------------------------
(Registrant)
Date: MARCH 18, 1997 By: GRANT C. RECORD
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CEO and Secretary
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LEADING-EDGE EARTH PRODUCTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
INTERIM FINANCIAL STATEMENTS
JANUARY 31, 1997 AND 1996
(UNAUDITED)
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LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)
Condensed Balance Sheets January 31, 1997 and April 30, 1996
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31-Jan-97 30-Apr-96
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ASSETS
Current assets:
Cash $14,241 $5,700
Receivables from Agile Building Technology Inc. $185,320 $68,125
Inventory $4,778 $4,778
Prepaid expenses and deposits $5,000 $38,401
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Total current assets $209,339 $117,004
Property, plant and equipment $0 $50,695
Less accumulated depreciation $0 $3,161
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Net plant and equipment $0 $47,534
Other assets:
Note receivable $275,000 $0
Accrued interest $17,187 $0
Intangible asset $25,822 $0
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Total other assets $318,009 $0
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Total assets $527,348 $164,538
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Notes payable $49,330 $40,000
Accounts payable $205,019 $108,525
Accrued contract salary $312,428 $242,377
Accrued royalties and interest payable $90,032 $59,418
Loans from shareholder $269,417 $177,798
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Total current liabilities $926,226 $628,118
Shareholders' equity (deficit):
Common stock, no par value $4,220,309 $3,470,409
Note receivable from shareholders ($208,784) ($128,784)
Deficit accumulated during development stage ($4,410,403) ($3,805,205)
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Total shareholders' equity ($398,878) ($463,580)
Adjustment
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Total liabilities and shareholders' equity $527,348 $164,538
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LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)
Statements of Operations Three and nine Months Ended January 31, 1997 and January 31, 1996
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Period from
Dec. 23, 1991
Three months ended Nine months ended (inception)thrgh
31-Jan-97 31-Jan-96 31-Jan-97 31-Jan-96 31-Jan-97
- ------------------------------------------------------------------------------------------------------------------------------
INCOME:
Licence and consulting revenues $46,000 $45,000 $211,125 $45,000 $483,000
Interest $10,313 $8,089 $17,264 $8,089 $25,389
Other $95 $3,503 $16,559 $3,503 $30,881
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Total income $56,408 $56,592 $244,948 $56,592 $539,270
RESEARCH AND DEVELOPMENT EXPENSES:
Salaries $0 $3,889 $0 $12,072 $418,827
Supplies/shipping $0 $156 $301 $3,901 $91,130
Professional fees $1,471 $4,548 $3,554 $28,165 $164,054
License fees $6,000 $0 $24,000 $0 $24,000
Travel $0 $0 $0 $0 $11,418
Rent $0 $0 $0 $249 $37,715
Legal $5,978 $8,580 $11,132 $21,645 $30,058
Depreciation $0 $522 $0 $1,566 $6,264
Utilities $0 $53 $162 $782 $6,371
Write-down of assets $0 $5,746 $47,534 $5,746 $147,675
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Total research and development $13,449 $23,494 $86,683 $74,126 $937,512
GENERAL AND ADMINISTRATIVE EXPENSES:
Contract salaries and incentives $135,950 $20,397 $257,667 $71,397 $1,390,825
Rent $2,383 $4,644 $10,345 $14,216 $74,207
Depreciation $0 $678 $0 $2,034 $7,912
Office supplies $1,789 $1,734 $6,819 $5,574 $47,368
Postage and shipping $1,687 $1,052 $4,668 $4,601 $22,105
Telephone $3,653 $2,868 $10,588 $10,485 $120,632
Travel and entertainment $6,341 $5,893 $17,289 $37,286 $160,181
Relocation $0 $357 $3,403 $357 $18,572
Payroll and payroll expenses $48 $0 $14,423 $0 $17,458
Legal and professional $71,757 $10,707 $149,046 $44,969 $929,947
Stockholder costs $4,652 $1,111 $9,088 $4,819 $46,390
Interest and bank charges $7,335 $7,856 $23,357 $21,261 $132,951
Promotion & corp. development $96,089 $151,525 $216,523 $157,267 $412,268
Insurance $0 $0 $0 $4,474 $7,865
Other $1,006 $535 $3,247 $745 $19,982
---------- ---------- ---------- ---------- -----------
Total general and administrative $332,690 $209,357 $726,463 $379,485 $3,408,663
Royalties and royalty buyout expense $37,000 $0 $37,000 $0 $547,000
---------- ---------- ---------- ---------- -----------
Net loss ($326,731) ($176,259) ($605,198) ($397,019) ($4,353,905)
Loss per common share $(0.01) $(0.01) $(0.02) $(0.02) $(0.23)
Weighted average shares outstanding 30,067,951 24,258,880 29,752,985 21,546,967 18,854,446
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LEADING-EDGE EARTH PRODUCTS, INC.
(A Development Stage Enterprise)
Condensed Statements of Cash Flows for Three and nine Months Ended January 31, 1997 and January 31, 1996
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Period from
Dec. 23, 1991
Three months ended Nine months ended (inception)thrgh
31-Jan-97 31-Jan-96 31-Jan-97 31-Jan-96 31-Jan-97
- --------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($326,731) ($176,259) ($605,198) ($397,019) ($4,353,905)
Adjustments to reconcile net loss to cash
flows used in operating activities:
Noncash compensaton expenses related to
nonqualified stock options granted $75,000 $0 $131,500 $0 $1,274,339
Depreciation $0 $1,200 $0 $3,600 $14,176
Write-off of long-term assets $0 $5,746 $47,534 $5,746 $158,089
Noncash compensation expenses
related to stock grants $75,000 $0 $165,900 $0 $750,648
Accrued royalty obligation $37,000 $0 $37,000 $0 $237,000
Changes in operating assets and liabilities:
Receivables ($46,000) $0 ($117,195) $0 ($185,320)
Inventory $0 $0 $0 $0 $(4,778)
Prepaid expenses and deposits ($5,000) ($949) $33,401 $(51) $(5,000)
Accounts payable $114,158 ($8,042) $96,494 $155 $511,919
Accrued salary obligations $36,135 $18,956 $70,051 $71,396 $312,429
Accrued interest receivable ($10,312) $0 ($17,187) $0 ($17,186)
Accrued interest payable $7,044 ($656) ($6,387) $14,974 $226,065
--------- --------- --------- --------- -----------
Net cash used ($43,706) ($160,004) ($164,087) ($301,199) ($1,081,524)
CASH FLOWS FROM INVESTING ACTIVITIES:
Equipment purchases $0 ($2,862) $0 ($10,703) ($170,064)
Investment in supplier $0 $0 ($25,822) $0 ($26,822)
Pmts on notes receivable fm stockholders $0 $0 $0 $0 $6,500
--------- --------- --------- --------- -----------
Net cash used in investing $0 ($2,862) ($25,822) ($10,703) ($190,386)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock $0 $160,053 $72,500 $237,560 $442,500
Exercise of stock options $0 $23,540 $25,000 $23,540 $67,537
Exercise of Class A warrants $0 $0 $0 $0 $3,300
Contributed capital $0 $0 $0 $0 $100,910
Proceeds from notes payable $49,330 ($50,000) $49,330 $0 $246,830
Proceeds from loans from stockholders $6,500 ($78,815) $135,120 ($90,865) $714,453
Payments on notes payable $0 $0 $0 $45,500 ($53,500)
Payments on loans from stockholders $0 $117,315 ($83,500) $117,315 ($235,879)
--------- --------- --------- --------- -----------
Cash provided by financing $55,830 $172,093 $198,450 $333,050 $1,286,151
Net change in cash $12,124 $9,227 $8,541 $21,148 $14,241
Cash at beginning of period $2,117 $12,308 $5,700 $387 $0
--------- --------- --------- --------- -----------
Cash at end of period $14,241 $21,535 $14,241 $21,535 $14,241
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LEADING-EDGE EARTH PRODUCTS, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997, AND 1996
(UNAUDITED)
1. GENERAL
The interim financial statements have been prepared by the Company without
audit and are subject to normal recurring year-end adjustments. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the Securities
and Exchange Commission. In the opinion of the Company, the accompanying
unaudited financial statements contain all adjustments, (all of which are of a
normal recurring nature), necessary to present fairly the financial position of
the Company as of January 31, 1997, and the results of operations for the
three and nine months ending January 31, 1997 and 1996. It is suggested that
these interim statements be read in conjunction with the financial statements
and notes thereto contained in the Company's audited financial statements for
the years ended April 30, 1996 and 1995. The results of operations for the
three and nine months ended January 31, 1997 and 1996 are not necessarily
indicative of the results to be expected for the full year.
2. INCOME TAXES
The Company has no taxable income to date; therefore, no provision for income
taxes has been made. The deficit accumulated during the development stage is
generally available to offset future taxable income.
3. NET LOSS PER COMMON STOCK
Net loss per common share is computed based on the weighted average number of
common shares and common share equivalents outstanding. When dilutive, stock
options are included as common share equivalents using the treasury stock
method.
4. CONTINUING EXISTENCE
The Company has yet to produce and sell its products. The burden of trade debt
has been reduced by equity advances made by WLP, license fee income, and
intermediate term loans. Its ability to continue in existence is dependent
upon obtaining sufficient funding to begin manufacturing operations and achieve
a positive cash flow in which the Company can participate. Management believes
that sufficient funding and operational success will be achieved to allow the
Company to realize planned business objectives, but at this time it is not
assured.
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5. ISSUANCE OF SECURITIES
On August 10, 1996 a former officer of the Company exercised options to
purchase 50,000 rule 144 restricted shares in exchange for a $3,500 reduction
of a note payable by the Company.
On August 22, 1996, the Company issued a total of 100,000 shares of restricted
common stock in exchange for the cancellation of $69,000 in loans and accrued
interest from stockholders. Additionally, the Company issued 275,000 shares of
restricted common stock in exchange for a note payable from A.I.C. in favor of
a shareholder for $275,000. The note was assigned to the company by the
shareholder who lent the money to A.I.C.. A.I.C. will deliver 275,000 shares
of the Company's common stock held by A.I.C. for the note.
On June 18, 1996 the Company entered into a consulting agreement with its chief
financial officer and agreed to issue him options on October 1, 1996 to
purchase 50,000 shares at $.75 per share and 50,000 shares at $1.00 per share.
On January 7, 1997 the Company entered into an agreement with its new President
to grant him a 300,000 share option at .75 per share.
On October 3, 1996 a former employee of the Company exercised an option to
purchase 50,000 shares of common stock for $25,000 in cash.
75,000 shares reserved for services by a vendor were issued on December 10,
1996.
6. AGILE FEE
In accordance with the Pennsylvania Agreement, $45,000 in License fees were
accrued during the quarter from Agile. Fees from Agile are expected to
continue being deferred until Agile's cash flow improves.
7. INVESTMENTS IN AFFILIATES
The Company has a 35% interest in Agile with the remaining 65% interest held by
WLP. This investment is accounted for using the equity method. Any asset or
equity distributions from Agile will be made in accordance with the respective
ownership interests. Agile is a development stage enterprise established to
manufacture building panels using technology developed jointly and/or
independently by the Company and/or Agile. The Company has recorded no value
related to this investment due to the indeterminable values related to the
Company's common stock and technology given or the common stock of Agile
received in the investment transaction.
A.I.C. is an enterprise whose primary asset (Company stock) is used as security
to support Agile and the Company's operation using the investment to secure
loans, sell and or otherwise use as required for financing purposes for five
years. No value has been recorded by the Company related to the investment in
A.I.C. due to the indeterminable values related to the Company's common stock
given or the common stock of A.I.C. received in the investment transaction.
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8. AGILE AND A.I.C. REPORTED NET LOSES
The Company has not recognized its proportionate share of Agile's and A.I.C.'s
net losses as the Company has no obligation to fund any such losses and carries
its investment in Agile and A.I.C. at zero.
9. PROPERTY AND EQUIPMENT
All property and equipment assets have been written down to zero as the Company
has determined that assets not sold, would not be used in future related
activities.
10. OTHER ASSETS
On August 29, 1996, the Company assumed an agreement entered into by Grant
Record on March 30, 1996. In this agreement, the inventor disclosed certain
proprietary information for the use of Magnesium Oxide Technology (MgO) and the
Company received an exclusive and assignable right to the licensed technology,
including enhancements made by the licensee. The MgO technology is valuable to
the Company for control of odors produced in processing. The Company obtained
the right to use the technology by issuing a note to a stockholder for $25,822,
thereby, canceling an obligation incurred by Grant Record, in the same amount,
which he had used to purchase the rights from the inventor, thereby purchasing
the right to use the technology. The Company shows this purchase as an
intangible asset.
The Company has recorded a note receivable from A.I.C. in the amount of
$275,000 as discussed in Item 5 above. All accrued interest shown is from this
note.
11. SUBSEQUENT EVENTS
The Board has authorized that 150,000 shares be reserved for future services by
a vendor.
The technology license agreement dated December 4, 1995 has been canceled and a
new agreement between the parties dated February 28, 1997 was finalized on
March 15, 1997 as reported in a recent 8-K. License and consulting revenues
shown in the operating statement are a provision of the December 4 agreement
and will therefore end effective February 28, 1997. The February 28 agreement
also contemplates elimination of A.I.C. in two stages. The first step consists
of immediate return to LEEP of 4,216,601 of its shares and the balance at some
future date. Additional detail on this agreement can be found in item 2 of
Part I and a recent 8-K report.