SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______TO ___________
Commission Fine Number 0 - 30164
TENSLEEP.COM, INC.
(Name of Small Business Issuer in its charter)
COLORADO 33-0789960
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2201 N. LAMAR BLVD., SUITE 201, AUSTIN, TEXAS 78705
(Address of Principal Executive offices, Zip Code)
(512) 236-8140
(Issuer's Telephone Number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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. Yes [X] No [ ]
The number of shares outstanding of issuer's only class of Common Stock.
$0.01 par value, was 7,003,976 on January 31, 2000.
INDEX
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Financial Statements for Tensleep.com, Inc.:
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Operations . . . . . . . . . . . . . . . . . . .
Statements of Shareholders' Equity . . . . . . . . . . . . . .
Statements of Cash Flows . . . . . . . . . . . . . . . . . . .
Notes to the Financial Statements . . . . . . . . . . . . . .
Item 2. Management's Discussion and Analysis or Plan of Operations
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan of Operation . . . . . . . . . . . . . . . . . . . . . . .
Part II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . .
Item 2. Changes in Securities . . . . . . . . . . . . . . . . .
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . .
Item 4. Submission of Matters to Vote of Security-Holders . . .
Item 5. Other Information . . . . . . . . . . . . . . . . . . .
Item 6. Exhibits and Reports on Form 8 - K . . . . . . . . . . .
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Introduction
The financial statements have been prepared by Tensleep.com, Inc. (the
"Company"), formerly Tensleep Technologies, Inc., without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. The
Company believes that the disclosures are adequate to make the information
presented not misleading when read with the Company's financial statements for
the years ended September 30, 1998 and 1999. The financial information
presented reflects all adjustments, consisting only of normal recurring
adjustments, which are, in the opinion of management necessary for a fair
statement of the results from the periods presented.
TENSLEEP.COM, INC.
(Formerly Tensleep Technologies, Inc.)
(A Development Stage Company)
BALANCE SHEETS
September 30, 1998 and 1999
(Unaudited)
<TABLE>
<CAPITION>
ASSETS
<S> <C> <C>
1998 1999
------------ -----------
CURRENT ASSETS:
Cash $ 22,077 $
72,024
Prepaid Expenses (See note 16) - 681,767
Investment in Pooled Account, (See note 1) 18,693
-
------------ -----------
Total Current Assets 40,770 753,791
------------ -----------
PROPERTY AND EQUIPMENT:
Machines & Equipment 102,106 102,014
Software 172,371 172,371
------------ -----------
274,477 274,385
Less accumulated Depreciation and amortization 68,598 160,060
------------ -----------
Net Property & Equipment 205,879 114,325
------------ -----------
OTHER ASSETS:
Investment in AFC (See note 9) - 1,400,000
Investment in CFC (See note 2) 198,000 398,000
Investment in Silicon Resources (See note 12) - 1,103,800
Credit for Engineering Services (See note 12) 25,950
-
------------ -----------
Total Other Assets 223,950 2,901,800
------------ -----------
TOTAL ASSETS $ 470,599 $ 3,769,916
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts Payable $ - $ 5,393
Loan Payable to Corporate Finance
Company (See Note 4) 14,442 17,168
Accrued Consulting fees (See note 9 and 15) - 66,800
------------ -----------
Total Current Liabilities 14,442 83,968
------------ -----------
TOTAL LIABILITIES; 14,442 89,361
------------ -----------
STOCKHOLDERS' EQUITY (DEFICIT:
Preferred stock, no stated value, 10,000,000
shares authorized, no shares issued and
outstanding - -
Common stock, $0.01 stated value, 50,000,000 66,910 70,040
shares authorized, 6,691,016 and 7,039,976
shares issued and outstanding at December
31, 1998 and 1999, respectively
Notes Receivable for common stock (See note 17) ( 870,200) -
Additional paid-in capital 3,064,506 5,128,959
Net Loss (Deficit accumulated during the
development stage) ( 1,805,059) (1,518,444)
------------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 456,157 3,680,556
------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 470,599 $ 3,769,916
============= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
TENSLEEP.COM, INC.
(Formerly Tensleep Technologies, Inc.)
(A Development Stage Company)
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<S> <C> <C> <C>
For the period
From Inception
For the Three For the Three (October 23, 1997)
Months Ended Months Ended through
December 31, December 31, December 31,
1998 1999 1999
----------------- -------------- -----------------
REVENUES:
License Fees (See note ) $ - $ 750,000 $ 750,000
Lease Income (See note 12) 28,950 - 121,150
Other Income 14,722 - 17,818
----------------- -------------- -----------------
Total Revenues 43,672 750,000 888,968
OPERATING EXPENSES:
Operating Expenses 67,801 277,148 2,407,411
----------------- -------------- -----------------
NET LOSS (DEFICIT ACCUMULATED DURING
THE DEVELOPMENT STAGE) $ ( 24,129) $ 472,852 $ (1,518,443)
================= ============== =================
EARNINGS (LOSS) PER COMMON SHARE
(See Note 14) $ (0.004) $ 0.066 $ (0.245)
================= ============== =================
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
TENSLEEP.COM, INC.
(Formerly Tensleep Technologies, Inc.)
(A Development Stage Company)
(Unaudited)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
For the period from Inception (October 23, 1997) through December 31, 1999
<TABLE>
<CAPITION>
Deficit
Accumulated Note
Additional during the Receivable
See Number of Common Paid-In Development for
Note Date Shares Consideration Stock Capital Stage Stock Total
---- -------- --------- ------------- -------- ---------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Stock issued 5A 11/10/97 4,500,000 Non-cash $ 45,000 $ - $ - $ - $ 45,000
Stock issued 5B 11/10/97 1,000,000 Non-cash 10,000 190,000 - - 200,000
Stock issued 5C 12/23/97 500,000 Non-cash 5,000 245,000 - - 250,000
Exercise A 5D 4/1/98 400 Non-cash 4 156 - - 160
Exercise A 5D 4/1/98 400 Non-cash 4 156 - - 160
Exercise A 5D 5/27/98 2,000 Non-cash 20 780 - - 800
Exercise A 5E 6/2/98 200 Cash 2 78 - - 80
Exercise A 5D 6/17/98 16 Non-Cash - 16 - - 16
Exercise A 5F 6/23/98 100,000 Non-Cash 1,000 99,000 - - 100,000
Net Loss for
the period
from October
23, 1997 to
September 30,
1998) (1,780,930) - (1,780,930)
--------- -------- ---------- ------------ ---------- ------------
Balance, 6,103,016 $61,030 $ 535,186 $(1,780,930) - $(1,184,714)
September 30,1998
Stock issued 5G 12/15/98 35,000 Cash/Note 350 174,650 - - 175,000
Stock issued 5H 12/15/98 8,000 Non-Cash 80 39,920 - - 40,000
Stock issued 5I 12/15/98 300,000 Non-Cash 3,000 1,497,000 - - 1,500,000
Stock issued 5H 12/15/98 4,000 Non-Cash 40 19,960 - - 20,000
Stock issued 5H 12/15/98 4,000 Non-Cash 40 19,960 - - 20,000
Stock issued 5H 12/15/98 4,000 Non-Cash 40 19,960 - - 20,000
Stock issued 5H 12/15/98 4,000 Non-Cash 40 19,960 - - 20,000
Stock issued 5J 12/15/98 4,000 Non-Cash 40 19,960 - - 20,000
Stock issued 5K 12/15/98 137,000 Note 1,370 683,630 - - 685,000
Exercise A 5K 12/15/98 88,000 Note 880 34,320 - - 35,200
Exercise B 5L 03/31/99 4,000 Non-Cash 40 19,960 - - 20,000
Exercise A,B 5M 09/13/99 350,000 Non-Cash 3,500 496,500 - - 500,000
Net Loss - - - (210,365) - (210,365)
for 1999
--------- -------- ---------- ------------ ---------- ------------
Balance, 7,045,016 $ 70,450 $3,580,966 $(1,991,295) - $ 1,660,121
September 30,
1999
Exercise B 5N 10/11/99 15,000 Non-Cash 150 74,850 - - 75,000
Exercise A 5O 10/26/99 20,000 Non-Cash 200 19,800 - - 20,000
Exercise A 5P 10/29/99 35,000 Non-Cash 350 27,650 - - 28,000
Exercise A 5Q 11/01/99 5,000 Cash 50 3,950 - - 4,000
Exercise A 5R 11/03/99 1,000 Cash 10 790 - - 800
Exercise A 5S 11/03/99 1,000 Cash 10 790 - - 800
Exercise A 5T 12/07/99 10,000 Non-Cash 100 7,900 - - 8,000
Exercise A 5U 12/06/99 13,000 Non-Cash 130 12,870 - - 13,000
Exercise A SV 12/07/99 50,000 Non-Cash 500 49,500 - - 50,000
Stock Issued 5W 12/08/99 60,000 Non-Cash 600 59,400 - - 60,000
Exercise A 5X 12/10/99 20,000 Cash 200 35,283 - - 35,483
Exercise B 5Y 12/13/99 25,000 Non-Cash 250 122,250 - - 122,500
Exercise A & 5Z 12/30/99 300,000 Non-Cash 3,000 597,000 - - 600,000
Stock Issued
Exercise B 5AA 12/30/99 50,000 Non-Cash 500 249,500 - - 250,000
Exercise A 5AB 12/30/99 253,960 Non-Cash 2,540 197,460 - - 200,000
Exercise A 5AC 12/30/99 100,000 Non-Cash 1,000 79,000 - - 80,000
Stock
Cancelled 5AD 12/30/99 1,000,000 Non-Cash ( 10,000) 10,000 - - 0
Net Income
for quarter
12/31/99 - - - 472,852 - 472,852
--------- -------- ---------- ------------ --------- ------------
Balance,
December 31,
1999 7,003,976 $ 70,040 $5,128,959 $(1,518,443) - $ 3,680,556
========= ======== ========== ============ ========= ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
TENSLEEP.COM, INC.
(Formerly Tensleep Technologies, Inc.)
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the period
from Inception
(October 23,1997)
through
September 30, December 31, December 31,
1999 1999 1999
----------------- -------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) (Deficit
accumulated during
the development stage) $ ( 1,991,295) $ 472,852 $ (1,518,443)
Adjustments to reconcile net loss to
net cash used in operations:
Depreciation and amortization 137,194 22,866 160,060
Expenses incurred in exchange for 280,000 224,333 504,333
common stock
Non cash expense for accrued 120,000 - 120,000
consulting fees
Non cash expense for purchase of 1,327,052 - 1,327,062
technology, products, goodwill,
and cancellation of royalties
Non cash Income - (750,000) ( 750,000)
Increase in prepaid expenses - (2,601) ( 2,601)
Increase in accounts payable 4,639 700 5.393
Increase in accounts receivable (103,800) - (103,800)
Increase in accrued consulting fees 140,000 140,000
-------------- -------------- --------------
Net cash used by operating Activities ( 86,156) ( 31,850) (118,006)
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment 1,437 - (1,437)
-------------- -------------- --------------
Net cash used by investing activities 1,437 - (1,437)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan Repayment on Stock Purchase - 60,000 60,000
Borrowings from Corporate Finance Co. 17,578 2,726 20,304
Proceeds from Pooled Investment Acct 45,000 - 45,000
Proceeds from sale of stock 25,000 - 25,000
Proceeds from Exercise of warrants 80 41,083 41,163
-------------- ------------- --------------
Net cash provided by financing 87,658 103,809 191,467
activities
-------------- ------------- --------------
NET INCREASE (DECREASE) IN CASH 65 71.959 72,024
CASH, beginning of period - 65 -
-------------- ------------- --------------
CASH, end of year $ 65 $ 72,024 $ 72,024
============== ============= ==============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
TENSLEEP.COM, INC.
(Formerly Tensleep Technologies, Inc.)
(A Development Stage Company)
(Unaudited)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND
FOR THE PERIOD FROM INCEPTION (oCTOBER 23, 1997)
THROUGH DECEMBER 31, 1999
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Tensleep.com, Inc. (formerly Tensleep Technologies, Inc. and Tensleep
Design, Inc.) (see note 18) (A Colorado Corporation) is a development stage
integrated Internet company. (The Company) has both a consumer and business
to business focus. Its Consumer focus is directed toward a hub or portal for
Financial and Investment Services. The Board of Directors has authorized the
Consumer focus business to be conducted in a wholly owned subsidiary
corporation which was formed on November 10, 1999 as Tensleep Finance.com,
Inc. Its business focus is directed toward the business of designing,
developing, and marketing Internet Appliances and other integrated circuits
with a specific focus on digital signal processors. The Board of Directors
has authorized the Business focus business to be conducted in a wholly owned
subsidiary corporation which was formed on May 10, 1999 , but as yet has not
commenced doing business. The Company is located in Austin, Texas. Both
subsidiaries are expected to commence business during the current year. The
Consumer focus business will be directed to small businesses and individuals
and the Business focus will be directed to original equipment manufactures
located throughout the world.
Development Stage Company
The Company is currently in its development stage, and has not generated
income from operations, except for a one time license fee. The Company was
incorporated in October 1997, and is currently obtaining funding to proceed
with development and marketing of its technologies. The Company's success is
dependent on obtaining additional funding and the ultimate successful sales of
its products. There is no assurance that funding will be obtained or that the
Company can ever operate profitably. Success in also dependent on many other
factors, such as management and distribution. Some of these factors may be
beyond the Company's control.
Cash and Cash Equivalents
For the purposes of financial statement reporting, the Company considers
all highly liquid investments with maturity of 3 months or less to be
considered cash equivalents.
Concentration of Credit Risk
The Company maintains its operating cash account at a commercial bank in
Orange County, California. The account at the bank is guaranteed by the
Federal Deposit Insurance Corporation (FDIC) up to $100,000 per account.
Property and Equipment, Depreciation and Amortization
Property and equipment obtained in exchange for stock is carried at the
fair market value of the equipment on the date of exchange, if purchased it is
carried at cost as of the date of purchase.
Depreciation and amortization is computed using the straight-line method
over the assets' expected useful lives. The useful lives of property and
equipment for purposes of computing depreciation and amortization are:
Machinery & Equipment 3 years
Software 3 years
Repairs and maintenance are charged to operations when incurred. Cost of
betterments which materially extend the useful lives of the asset are
capitalized. Gains and losses from sales or disposition of assets are
included in the statement of operation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Fair Value of Financial Instruments
For the Company's financial instruments, the carrying value is considered
to approximate the fair value. Cash and accounts payable are settled so close
to the balance sheet date that fair value does not differ significantly from
the stated amounts.
Income Taxes
The Company has not generated any taxable income and therefore a
provision for income taxes is not necessary. Similarly, a provision for
deferred taxes is not necessary. The Company has available at September 30,
1999, unused operating loss carryforwards that may be applied against future
taxable income and that expire as follows:
Amount of Unused Operating Expiration During Year
Loss Carryforwards Ended September 30:
State -
Federal Colorado Federal State
---------- ---------- ------- ------
$1,991,295 $1,991,295 2019 2014
Adjustments
In the opinion of management the data reflects all adjustments necessary
for a fair statement of results for this period. All adjustments are of a
normal and recurring nature.
Advertising
Advertising costs, except for costs associated with direct-response
advertising, are charged to operations when incurred. The costs of direct-
response advertising, if any, are capitalized and amortized over the period
during which future benefits are expected to be received.
Note Receivable for common stock
The Company reports notes received in payment for the Company's stock a
deduction from stockholders' equity (deficit). A note will be recorded as
an asset if collected in cash prior to the issuance of the financial
statements.
NOTE 1: INVESTMENT IN POOLED EQUITY ACCOUNT
The Company owns an interest in a personal brokerage account held by a
shareholder. At December 31, 1999 and 1998, the account has a balance of
zero and $18,693, respectively. Originally, the Company received a $45,000
interest in the account which was obtained in exchange for 4.5 million shares
of common stock, as described in Note 3. The Company has received $22,693
and $22,307 from the shareholder for the years ended September 30, 1999 and
1998, respectively.
NOTE 2: INVESTMENT IN CORPORATE FINANCE COMPANY
In 1997 the Company acquired 80,000 shares of Corporate Finance Company
("CFC") common stock. CFC is an affiliate company. The Company acquired
an additional 80,000 shares in 1999 (see note 3). Shares acquired represent
approximately a 8.8% ownership in CFC. A major shareholder of the Company is
also a major shareholder of CFC. Based on the 8.8% ownership interest in CFC,
the Company has accounted for the investment under the cost method. The
shares were obtained in the cash-free exchange described in Note 3 and were
valued at $2.50 per share, which represents the sale price of CFC shares in
transactions during the six to twelve months prior to the date of the
exchange. The valuation of the shares obtained was an agreed-upon value as
of the date of the exchange and will be carried on the books of the Company
at cost. In 1998 the Company sold 800 shares of CFC common stock to
unrelated parties. The proceeds from the sale were given directly to CFC
to reduce the Company's loan payable to CFC (See note 4).
NOTE 3: NON CASH TRANSACTIONS
As explained in Note 1, 4.5 million shares of common stock were sold
for $45,000. In lieu of cash, a $45,000 shared interest in a personally held
brokerage account was granted. The account has been funded by a shareholder
with cash payments totaling $77,000.
As explained in Note 2, the investment of 80,000 shares of Corporate
Finance Company was obtained in exchange for 1 million investment units. Each
unit is composed of one share of common stock and one warrant to purchase one
share of common stock at a specified price (see note 7). The Company obtained
an additional 80,000 shares of Corporate Finance company in 1999 from R Tucker
and Associates in exchange for a $200,000 reduction to a note receivable owed
to the Company by R Tucker and Associates (see note 17).
As explained in Note 5C, the Company obtained its licensing
agreement in exchange for 500,000 shares of common stock. The common stock
was valued at the agreed-upon price of $250,000, or 50 cents per share.
As explained in Note 5F and Note 11, the Company acquired from LS2
equipment and software in exchange for 100,000 shares of common stock.
As explained in Note 5F and Note 11, the Company acquired from LS2
equipment and software in exchange for 100,000 shares of common stock.
As explained in 5H, the Company issued 24,000 shares of common stock to
pay off $120,000 in accrued consulting fees.
As explained in Note 5I, the Company issued 300,000 shares of common
stock to pay off $1,500,000 in convertible debt.
As explained in Note 5J, the Company exchanged 4,000 shares of common
stock for advertising. The common stock was valued at the agreed-upon price
of $20,000, or $5.00 per share.
As explained in Note 5L, the Company exchanged 4,000 shares exercise
from Class B Warrants for advertising and promotional services. The common
stock was valued at the agreed-upon price of $20,000, or $5.00 per share.
As explained in Note 5M the Company exchanged 300,000 shares exercised
from Class A Warrants and 50,000 shares from Class B Warrants for advertising
and promotional services. The common stock was valued at the agreed-upon
price of $500,000.
As explained in Note 5N the Company exchanged 15,000 shares exercised
from Class A Warrants for promotional services to be performed over six months
commencing October 11, 1999 through April 10, 2000. The common stock was
valued at $75,000, the agreed-upon value of the services to be received.
As explained in Note 5O the Company exchanged 20,000 shares exercised
from Class A Warrants for consulting services to be performed over three
months commencing October 28, 1999 though January 24, 2000. The common stock
was valued at $40,000, the agreed-upon value of the services to be received.
As explained in Note 5P the Company exchanged 35,000 shares exercised
from Class A Warrants for designing and consulting services to be performed
over six months commencing October 29, 1999 through April 29, 2000. The
common stock was valued at $28,000, the agreed-upon value of the services to
be received.
As explained in Note 5T the Company exchanged 10,000 shares exercised
from Class A Warrants for consulting services. The common stock was valued at
$8,000, the agreed-upon value of the services to be received.
As explained in Note 5U the Company exchanged 13,000 shares exercised
from Class A Warrants in cancellation of an indebtedness of the Company in the
amount of $13,000.
As explained in Note 5V the Company exchanged 50,000 shares exercised
from Class A Warrants in cancellation of an indebtedness of the Company in the
amount of $50,000.
As explained in Note 5W the Company exchanged 60,000 shares, restricted,
for consulting services to be performed over 30 days. The common stock was
valued at $60,000, the agreed-upon value of the services to be received.
As explained in Note 5Y the Company exchanged 25,000 shares exercised
from Class B Warrants for consulting services to be performed over three
months. The common stock was valued at $122,500, the agreed-upon value of the
services to be received.
As explained in Note 5Z the Company exchanged 300,000 shares of which
100,000 were exercised from Class B Warrants and 200,000 shares were issued
and and exchanged for 300,000 shares of Amcor Financial Corp. common stock and
were valued at $600,000.
As explained in Note 5AA the Company exchanged 50,000 shares exercised
from Class B warrants for shares of stock in Silicon Resources, Inc. (see note
12).
As explained in Note 5AB the Company exchanged 253,960 shares exercised
from 253,960 Class A Warrants in exchange for 100,000 restricted shares of
Amcor Financial Corp. common stock valued at $200,000.
As explained in Note 5AC the Company exchanged 100,000 shares exercised
for 100,000 Class A Warrants in exchange for prepaid services to be performed
over the next 12 months.
As explained in Note 5AD the Company received 1,000,000 shares of its
common stock as a contribution for cancellation and to be added to the
authorized but unissued common stock.
NOTE 4: LOAN PAYABLE TO CORPORATE FINANCE COMPANY
CFC has loaned the Company certain funds to cover operating expenses.
The balance due on the loan from CFC as of December 31, 1999 in the amount
of $17,168 is covered by a non-interest bearing demand note.
NOTE 5: CAPITAL FUNDING
The Board of Directors authorize private offerings pursuant to
Regulation S, Section 3 (b) and/or 4(2) of the Securities Act of 1933, as
amended, and/or Rule 504 of Regulation D promulgated thereunder. The Board
of Directors authorized a public offering pursuant to Regulation A, an
exemption under the Securities Act of 1933, as amended. These offerings can
be composed of common stock and/or warrants. Such offerings could result in
dilution to Company stockholders prior to each offering. Additionally,
dilution could also result from the exercising of warrants, incentive stock
options, and non-incentive stock options. Stock option plans are described in
Note 6. The following summarizes the various stock and warrant transactions
as reported in the accompanying Statement of Changes in Stockholders' equity
(deficit):
Note A - 4.5 million shares of common stock were sold for $45,000. In
lieu of cash, a $45,000 shared interest in a personally held
brokerage account was granted. The account had been originally
funded by the shareholder with cash payments totaling $77,000.
Note B - 1 million investment units were exchanged for 80,000 shares of
Corporate Finance Company. Each investment unit is composed of
one share of common stock and one warrant to purchase one share
of common stock at a specified price (See note 7). The
valuation of the shares obtained was an agreed-upon value as of
the date of exchange.
Note C - The Company obtained a technology licensing agreement in
exchange for 500,000 shares of common stock. The common stock
was valued at the agreed-upon price of $250,000, or 50 cents per
share. The original agreement made in 1997 required a royalty
be paid to the licensor based upon sales. In 1998 the Company
acquired from the licensor machinery and equipment, software,
technology, goodwill and cancellation of royalties (See note
10).
Note D 2840 warrants were exercised. The exercise price of the
warrants was $.40 per share and the cash from the exercise
of these warrants was received by CFC and was used to reduce
the Company's loan payable to CFC. The warrants were
exercised by unrelated third parties.
Note E 200 warrants were exercised. The exercise price of the warrants
was $.40 per share. The cash from these warrants was deposited
into the Company's checking account and were exercised by
unrelated third parties.
Note F In exchange for 100,000 warrants the Company acquired testing
equipment, design software, hardware, and intellectual property
from LS Squared, Inc. a California corporation, valued at
$100,000 and appearing on LS2 books and records at approximately
$120,000. The common stock was valued at $100,000, the
agreed-upon value of the property received from LS Squared, Inc.
Note G 35,000 shares of common stock were sold for $175,000. The
Company received $25,000 in cash and promissory notes in the
amount of $155,000. One of the promissory notes received was
for $50,000 and R Tucker & Associates was the payee (see note K)
Note H 24,000 shares of common stock were issued for $120,l000 to pay
off accrued consulting fees.
Note I 300,000 shares of common stock were issued for $1,500,000 to pay
off the convertible note, which was issued in exchange for fixed
assets of $172,948 and Research & development expenses of
$1,327,052 (see note 10).
Note J 4,000 shares of common stock were issued for $20,000 in exchange
for advertising.
Note K 137,000 shares of common stock were issued for $685,000 and
88,000 Class A warrants exercised in exchange for $765,200
promissory note, secured by 200,000 shares of common stock. The
$765,200 note includes $50,000 resulting from the cancellation
of a $50,000 note previously issued by R Tucker & Associates to
an unrelated in an unrelated transaction (see note G).
Note L 4,000 Class B Warrants were exercised for $20,000 in exchange
for advertising and promotional services for the year ending
March 31, 2000.
Note M 300,000 Class A Warrants and 50,000 Class B Warrants were
exercised for $500,000 in exchange for advertising and
promotional services for the years ending September 30, 2000 and
2001.
Note N 15,000 Class B warrants were exercised for $75,000 in exchange
for promotional services to be performed over six months
commencing October 11, 1999 through April 10, 2000.
Note O 20,000 Class A warrants were exercised for $20,000 in exchange
for consulting services to be performed over three months
commencing October 28, 1999 though January 24, 2000.
Note P 35,000 Class A warrants were exercised for $28,000 in exchange
for designing and consulting services to be performed over six
months commencing October 29, 1999 through April 29, 2000.
Note Q 5,000 Class A Warrants were exercised for cash at $0.80 per
share. The cash from these was deposited into the Company's
checking account and exercised by unrelated third parties.
Note R 1,000 Class A Warrants were exercised$0.80 per share. The
cash from these was deposited into the Company's checking
account and exercised by unrelated third parties.
Note S 1,000 Class A Warrants were exercised $0.80 per share. The cash
from these was deposited into the Company's checking account
and exercised by unrelated third parties.
Note T 10,000 Class A Warrants were exercised for $8,000 in exchange for
consulting services.
Note U 13,000 Class A Warrants were exercised for $13,000 in exchange
for the cancellation of an indebtedness of the Company.
Note V 50,000 Class A Warrants were exercised for $50,000 in exchange
for the cancellation of an indebtedness of the Company.
Note W 60,000 shares, restricted, were issued in exchange for
consulting services to be performed over 30 days and valued
for $60,000.
Note X 20,000 Class A Warrants were exercised for an aggregate value of
$35,200. The cash from these was deposited into the Company's
checking account and exercised by unrelated third parties.
Note Y 25,000 Class B Warrants were exercised for $122,250 in exchanged
for consulting services to be performed over three months.
Note Z 100,000 Class A Warrants were exercised and 200,000 shares were
issued for $600,000 in exchange for 300,000 shares of Amcor's
common stock.
Note AA 50,000 Class B Warrants were exercised for $250,000 in
exchange A shares of common stock in Silicon Resources, Inc.
(see note 12).
Note AB 253,960 Class A Warrants were exercised for $200,000 in
exchange for 100,000 shares of Amcor Financial Corp.
Note AC 100,000 Class A Warrants were exercised for $80,000 for
services to be performed over the next year.
Note AD 1,000,000 shares of the Company's common stock were
contributed to the Company, canceled, and returned to the
Company's authorized but unissued shares.
NOTE 6: STOCK OPTION PLANS
The Company has a stock option plan pursuant to Section 422A of the
Internal Revenue Code. The plan has yet to be defined other than the
reserving of 500,000 shares of common stock for such a plan.
The Company has also adopted a non-incentive stock option plan. This
plan grants options that can be exercised at a specified price. The Company
has resolved that 800,000 shares of common stock be reserved for this plan.
As of April 30, 1998, the options to purchase 250,000 shares at 50 cents per
share (same as the then current market price) had been granted to the
majority and controlling shareholders and an independent consultant. During
the year ended September 30, 1999 the company revoked 50,000 shares, leaving
200,000 options still outstanding. These options expire December 1, 2002.
The Company granted on October 26, 1999, the options to purchase 120,000
additional shares at $1.25 per share (same as the then current market price)
to the majority and controlling shareholders.
NOTE 7: WARRANTS
As part of its funding activities, the Company has issued warrants for
the purchase of common stock. Additional warrants may be issued in the future
during additional offerings. As of December 31, 1999, the following warrants
were outstanding:
Class B - one warrant can purchase one common share
R Tucker and Associates - 221,000 warrants at $4.50 per share
George N. Haddad - 35,000 warrants at $4.50 per share
The warrants expire on May 31, 2002. The Company has the right to call
the unexercised Class B Warrants before their expiration date at a price of 10
cents per warrant provided the bid price for the Company's common stock for 10
consecutive trading days is $5.50 or more.
NOTE 8: RISKS AND UNCERTAINTIES
As discussed in "Organization and Summary of Significant Accounting
Policies", the Company has been in the development stage since its inception
on October 23, 1997. Realization of a major portion of the assets is
dependent upon the Company's ability to meet its future financing
requirements, and the success of capital funding and future operations.
These factors raise substantial doubt about the Company's ability to continue
as a going concern.
The investments in the pooled equity account are held available-for-
sale. As of September 30, 1999 the account balance is zero. As of September
30, 1998, the account consists of 4,000 shares of Torch Energy Royalty Trust,
listed on the New York Exchange, symbol "TRU", with a value of $5 15/16 per
share, bid price, 2000 shares Karzco Realty Trust, listed on the New York
Exchange, symbol "KRT", with a value of $16 11/16 per share, 500 shares of
Cross Timbers Royalty Trust, listed on the New York Exchange, symbol "CRT",
with a value of $11 5/8 per share, 60 shares of Alliance Pharmaceutical Corp.,
listed on the New York Exchange, symbol "ALLP", with a value of $3.04688 per
share, 4,000 shares Amtech Systems, Inc. listed on the NASDAQ smallcap, with a
value of $27/32 per share, and 1,000 Amylin Pharmaceuticals, Inc. listed on
NASDAQ national market, with a value of $3 3/32 per share, and $4,531 in cash.
The aggregate value of the account is $57,213 as of September 30, 1998.
The investment in the pooled equity account is subject to the hazards
of trading equities on the open market. The account will experience growth
and loss in varying amounts depending on the performance of the securities
traded. All of the Company's $22,693 interest in the account is at risk and
subject to loss. The sum of $22,693 will be paid to the Company as required
to pay its costs and expenses as incurred until revenues are sufficient to
pay such costs and expenses. Any unpaid balance, at the time revenues are
sufficient to pay monthly costs and expenses, will be repaid pursuant to a
plan to be made at that time.
The Company has commenced a plan of strict limits on and control over
costs, expenses, compensation and capital expenditures. The Company
believes it will receive sufficient capital from the exercise of warrants
and the repayment of Notes from related and unrelated parties and the sale
of an affiliates common stock, held by the Company, through a private
placement.
NOTE 9: RELATED PARTY TRANSACTIONS
A director of the Company is also a director and major shareholder of R
Tucker & Associates and Corporate Finance Company. Transactions between the
Company and these entities above have been described in Notes 2, 3 and 4.
In November 1997 the Company issued 4,500,000 shares of its common stock
at a stated value of $.01 per share to a related party in exchange for an
assignment of a right to $45,000 in a pooled investment account. (See Note 1,
3, 5, and 8)
In November 1997 the Company issued 1,000,000 investment units to a
related party in exchange for 80,000 shares of its common stock. (See Note 2)
In December 1997 the Company issued 500,000 shares of its common stock to
an unrelated party, which later became a related party, in exchange for a
license agreement valued at $250,000. (See Notes 3 and 5C)
In December 1998 the Company issued 300,000 of its common stock to a
related party in cancellation of an indebtedness incurred in the purchase of
technology and other assets pursuant to a purchase agreement entered into by
the Company in January 1998. (See Note 10)
In June 1998 the Company issued 100,000 shares of its common stock to an
unrelated party in exchange for technology and equipment/software valued at
$100,000. (See Note 11)
The accrued consulting fee as of September 30, 1999 is payable to R
Tucker & Associates, Inc., performed by Dennis Kaliher and Ronald S.
Tucker, the president and vice president of the Company, respectively, for
consulting services rendered. This liability was canceled December 15, 1998
in exchange for 24,000 shares of common stock (See note 15). The accrued
consulting fee as of September 30, 1999 is payable to Corporate Finance
Company for services performed by Dennis Kaliher and Ronald S. Tucker.
In conjunction with the purchase of LS Squared, Inc. equipment by the
Company, Ronald S. Tucker, a major shareholder of the Company, also purchased
LS Squared, Inc. individually (See note 11).
In March 1999 the Company reduced a Note Receivable from R Tucker and
Associates in exchange for 80,000 shares of common stock in Corporate Finance
Company valued at $200,000 (see note 2).
In December 1999 the Company exchanged shares with Amcor Financial
Corporation, an independent company, whose President and a Director is also
the President and a Director of the Company. The Company exchanged 300,000
shares of its common stock for 300,000 shares of Amcor Financial's Common
stock valued at $600,000. In addition the Company received 300,000 shares of
Amcor Financial's common stock in cancellation of the indebtedness of the
promissory notes for the purchase of stock in the amount of $600,000 (See note
3 and 5).
In December 1999 the Company issued Corporate Finance Company 100,000
shares of common stock valued at $80,000 in exchange for promotional services.
NOTE 10: PURCHASE OF TECHNOLOGY
On January 30, 1998 the Company acquired from the Licensor, pursuant to
an agreement dated January 23, 1998, the following items valued as follows:
Machines & Equipment $ 40,577.00
Software 132,371.00
Technology
A/dsc321 Digital Signal Controller
A/dsc421 Dual Processor Controller
A/dsc 521 Digital Signal Controller
V.29/V.17 Fax Modem software
V.32/V.32bis Data Modem software
Z80-compatible 8-bit Microcontroller
Products
T2901 Fax Modem
T1701 Fax Modem
T3217 Data/Fax Modem
Total Technology & Products 1,200,000.00
Goodwill and cancellation of Royalties 127,052.00
------------
Total $ 1,500,000.00
The Licensor received a non-interest bearing note from the Company for
specified items in the amount of $1,500,000.00. The amount representing
Technology, Products, Goodwill and cancellation of Royalties was charged to
research and development costs (See note 13) in the development stage period
as required by generally accepted accounting principles. The convertible note
payable was reported under current liabilities in the accompanying balance
sheet since the Licensor has agreed to accept the Company's securities in
cancellation of the indebtedness. The Licensor has agreed to accept 300,000
tradable Units at $5 per unit, if qualified by July 31, 1998 or 500,000
restricted shares of common stock if not qualified by July 31, 1998. The
date for qualifying the tradable Units was extended until December 31, 1998.
This note was canceled December 15, 1998 in exchange for 300,000 shares of
common stock (See note 15).
NOTE 11: PURCHASE OF EQUIPMENT AND DESIGN SOFTWARE
On June 19, 1998, the Company acquired testing equipment, design
software, hardware, and intellectual property from LS Squared, Inc., (LS2) a
California corporation, valued at $100,000 and appearing on LS2 books and
records with a book value of an approximate amount. LS2 was an independent
third party and a non-affiliate of the Company and none of its officers and
directors were or are affiliated with the Company at the time of the equipment
acquisition. The terms of the agreement provided that the Company receive the
assets in exchange for 100,000 shares of the Company's common stock through
the exercise of 100,000 Class A Warrants. In July 1998 Ronald S. Tucker, a
major shareholder of the Company purchased LS2 as an individual. At the time
of purchase, LS2 was a California Corporation with no assets or liabilities.
NOTE 12: LEASE INCOME
The Company entered into an agreement to lease equipment to an unrelated
third party, Silicon Resources, Inc., dated August 21, 1998 and received a
partial payment in the amount of $5,350. The original agreement had the
following terms:
18 months
$8500 per month if all the workstations are installed
Silcon Resources, Inc. was to bill the Company for office space rental at
$1.50 square foot per month and provide engineering services at a rate of
$104.05 per hour or $18,000 per month as requested by the Company as a credit
for the lease of the equipment.
The above lease agreement was amended on October 22, 1998 to provide for
the following terms:
Silicon Resources, Inc., rented equipment from the Company for a rental
rate of $9,650 per month for five work stations payable in the form of
a credit. Silicon Resources would provide the Company with office space
for $1,000 per month and the Company will credit Silicon Resources for
$1,000 of the equipment rental payment. The remainder of the credit
will be used to employ Silicon Resources, Inc. to provide engineering
personnel on the Company's projects at a rate of $104 per hour. Any
unused credit in a month would be accrued and could be used in subsequent
months.
During the current fiscal year Silicon Resources, Inc. was billed
$115,800 for equipment leasing. This amount was reduced by $12,000 that the
Company owed to Silicon Resources, Inc. for office space rental, leaving a
balance due to the Company of $103,800 as of September 30, 1999. On September
1, 1999 the "Company began negotiations with Silicon Resources, Inc. to
purchase a portion of Silicon Resources, Inc. a consulting business. On
November 30, 1999 the Company entered into a modification agreement with
Silicon Resources, Inc. modifying the agreement entered into on September 1,
1999. Under the terms of the modification agreement Silicon Resources and the
Company will enter into a non-exclusive license agreement for the Company's
technology with a value of $750,000 for which the Company will receive Silicon
Resources, Inc. common stock. The Company, R Tucker and Associates, and
Silicon Resources, Inc. agreed to exchange 50,000 shares of its unrestricted
common stock and 60,000 Class A Warrants to purchase 60,000 shares of the
Company's common stock with an exercise price of $0.80 per share, all valued
at $250,000, cancel the indebtedness owed to the Company by Silicon Resources
in the amount of $103,800 pursuant to the Equipment lease, and the license fee
in the amount of $750,000 for a total of 1,900,452 shares of Silicon Resources
restricted common stock.
NOTE 13: RESEARCH AND DEVELOPMENT COSTS
Research and Development costs are charged to operations when incurred
and are reported separately in the accompanying Statement of Operations. The
components of research and development costs for the period from inception
(October 23, 1997) through September 30, 1998 consist of the following:
Technology license $ 250,000
Purchase of technology, products,
goodwill, and cancellation of royalties 1,327,052
------------
$ 1,577,052
============
NOTE 14: EARNINGS PER SHARE
As of December 31, 1999 and 1998 The Company had 7,003,976 and 6,691,016
common shares outstanding, respectively, and no preferred shares outstanding.
The earnings (loss) per share amount is based on the weighted average number
of shares actually outstanding. The number of shares used in the computation
for December 31, 1999 and 1998 was 7,179,016 and 6,299,016 shares,
respectively. The number of shares used in the computation for the period
from Inception (October 23, 1997) through December 31, 1999 was 6,196,769.
NOTE 15: STOCK DIVIDEND
On August 2, 1999 the Board of Directors authorized a 10% stock dividend
payable to those investors that purchase the corporations common stock in the
open market between August 2, 1999 and October 31, 1999, register the shares
in their name and are the registered shareholder on July 31, 2000. The Shares
to be distributed by August 31, 2000. On October 2, 1999 the Board of
Directors extended the date for purchasing common stock in the open market
from October 31, 1999 to December 31, 1999. On December 1, 1999 the Board of
Directors extended the date for purchasing common stock in the open market
from December 31, 1999 to January 31, 2000 and advanced the record date to
March 31, 2000 from July 31, 2000.
NOTE 16: PREPAID EXPENSES
As explained in Note 5L the Company exercised 4,000 Class B warrants in
exchange for $20,000 in advertising and promotional services for the one year
period from April 1999 to March 1999. During the current fiscal year the
Company expensed $5,000 as advertising expenses.
As explained in Note 5M the Company exercised 300,000 Class A Warrants
and 50,000 Class B Warrants in exchange for $500,000 in advertising and
promotional services for the two year period starting October 1, 1999. During
the current fiscal year the Company expensed $62,500 as advertising
expenses.
As explained in Note 5AD the Company exercised 100,000 Class A Warrants
in exchange for $80,000 in consulting services for a one year period starting
January 1, 2000. During the last period the Company did not expense any of
this amount.
NOTE 17: NOTE RECEIVABLE FOR COMMON STOCK
In December 1998, the Company issued 35,000 shares of common stock to an
unrelated investor in exchange for $25,000 in cash and a $105,000 note
receivable. After September 30, 1999 the note was paid off with cash and
shares of Amcor Financial Corp.
Also, in December 1998, the Company issued 137,000 shares of common
stock and 88,000 Class A Warrants were exercised in exchange for a $765,200
note receivable from a related party. In March 1999 of the current year the
note was reduced by $200,000 in exchange for 80,000 shares of common stock in
a related party transaction (see note 2). The balance of this note and the
one above was paid off with the payment of 300,000 shares of Amcor Financial
Corp common stock.
NOTE 18: NAME CHANGE
In April 1999 of the current year the Board of Directors voted to change
the Company's name from Tensleep Design, Inc. to Tensleep Technologies, Inc.
After year end, the Board of Directors voted to change the Company's name to
Tensleep.com, Inc. The purpose for changing the name was to reflect the focus
of the Company in developing Internet technologies and E-Commerce Portal
Sites.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
OVERVIEW
The Company, founded as fab-less semiconductor company in November 1997,
is now reorganized into an Integrated Internet Development Stage Company. The
Company's Internet Technology Division, Tensleep Design, Inc. ("Design"), is
focusing on both designing, developing, marketing and selling products used in
the Internet infrastructure and providing Internet services and solutions.
The E-Commerce Division, Tensleep Finance.com, Inc. ("Finance.com"), is
focused to developing and managing E-Commerce services, including Financial
Services. The Company currently has no revenues or sales from its Internet
Technology or E-Commerce Divisions, but for a one time license fee for its
technology.
Design is marketing a family of facsimile products and has completed the
concept design for two Internet-based products. The facsimile products are
fabricated by Samsung Electronics Co., Ltd. ("Samsung"). The first Internet
based product in development is a special purpose modular computer or server
( the "CyberServer"). The second in development is a communications device
(the "CyberCommunicator"). The Company has no sales from any of these
products.
Design's products are a combination of hardware and digital signal
processing software integrated into an integrated circuit. Digital signal
processing technology coverts analog signals to data in a digital format, the
data is then mathematically processed for use in that format or converted back
into analog signals. Digital signal processing has many uses, e.g. modems,
motor controls, disk file head positioning systems, sonars, and many others.
Finance.com's focus is directed to developing a financial services
Internet hub or portal and providing E-Commerce technical development services
to others. Financial and Investment services are planned to be provided to
small business's and individuals. Services may include Internet stock
trading, banking, mortgage lending, personal loans, investment services,
insurance, financial planning, estate planning, etc.
The Company to enhance its business is seeking strategic relationships
with companies that design, market and sell consumer Internet and
communications products and use products and/or technology similar to the
Company's.
OBJECTIVES
The Company's management, since the Company's inception a little more
than two years ago, has engaged in a continual process of assessing and
evaluating the strengths and weaknesses of its technology, products and
management to establish and update its objectives. Based on its assessments
and evaluations, management established objectives as follows:
1. Identify niche markets for the use of its Technology and the sale of
its products.
2. Establish a capital structure to raise required operating capital.
3. Identify new products and other sources of revenue for business
expansion.
4. Initialize and sustain revenues from the thin Internet server
market, fax-modem market, and licensing of Intellectual property.
5. To develop or acquire an interest in a design center for the design
and development of the Company's technology and products.
6. To establish and develop an E-Commerce operating division and
develop a Financial Services Portal.
7. To commence the development of a prototype for the CyberServer and
begin marketing it to original equipment manufacturers.
The first objective has been met by identifying three markets upon which
management believes it can build the Company's business. They are the thin
internet server, internet communication, and facsimile modem markets. A "thin
internet server" is a server that can process only a few requests from
customers at a time, as opposed to regular servers that many have to
accommodate thousands of simultaneous requests.
The second objective has been met by initiating and concluding its
Regulation D, Rule 504 private offering, its Regulation A Offering under the
Securities Act of 1933, as amended, and filing Form 10 pursuant to the
Securities Exchange Act of 1934, as amended. On becoming effective on
registering as a Reporting Company, the Company was listed on the OTC Bulletin
Board.
The third objective has been met by identifying new products using the
Company's technology and other sources of revenues. Identified new products
include power and motor control devices, Internet devices for the power
industry, Internet devices for the transfer of digital pictures to a
centralized web site. Other sources of revenue include the licensing of
intellectual property, and developing a financial services portal.
The fourth objective has been met in part, in that the Company has
engaged three independent representatives and is now marketing its facsimile
products, and a web modem chip in the United States and Japan. At this date
there have been no sales, though negotiations are taking place. In November
1999, the Company granted the first license to its technology.
The fifth objective has been met through the acquisition of a minority
interest in an integrated circuit design services company, Silicon Resources,
Inc.
The sixth objective has been met, in part, with the incorporation of
Finance.com and the preparation of an organizational structure and
identification of what financial and investment services are to be included in
Finance.com's business.
The seventh objective is being met with the development of a prototype of
a CyberServer by Silicon Resources, which is expected to be completed within
30 to 60 days of the date of this document.
The management has added the following objectives to take place within
the next twelve months.
1. To develop a prototype of the motor control device.
2. To develop a prototype of a device to transfer digital pictures from
a digital camera to a central web-site.
3. To develop a Financial and Investors services web-site.
4. To develop a joint venture with a Chinese company to manufacture and
distribute one or more of the Company's products.
5. To obtain a commitment for a private placement and/or a secondary
public offering.
The implementation of the Company's general plan of operation, for the
next twelve months, requires additional personnel for the development and up
grading of the Company's various products. The Company has limited employees
and financial resources. The Company has and will continue to engage one or
more independent third party organizations to provide the quality and number
of personnel and services required for the development of the CyberServer and
to upgrade its other developed products. The development and upgrading
services provided by other organizations will be supervised and directed by
Mr. Kaliher. In addition, the Company will also seek strategic relationships
with independent third party organizations to participate in the development
and upgrading services. The Company, with limited financial resources, is
seeking third party service providers willing to invest in the Company. The
investment in services would be exchanged for shares of the Company's common
stock and/or other non-cash consideration. Other non cash consideration could
include licenses to use or sell the Company's intellectual property. Any
shares issued in exchange for services will be pursuant to Section 4(2) of the
Securities Act of 1933, as amended, and will be subject to Rule 144.
The Company has reached an agreement with Silicon Resources to provide
the Company with research and development services. The Company is also
currently negotiating with independent third parties to provide part of the
Company's required development and upgrading services, but no agreement has
been reached.
The Company through independent third parties is negotiating with several
Chinese companies, through several independent third parties, to establish one
or more joint ventures for the manufacture and distribution of the Company's
products in China. There can be no assurance that the Company will be able to
negotiate a joint venture with a Chinese company.
The Company plans to obtain funds, to implement its operational plan, and
expand its business by seeking private placements and public offerings. The
amount of money to be sought is yet to be determined. There is no assurance
the Company will be able to negotiate a private placement or public offering
in any amount.
RISKS
The factors, which follow, make the Company's Plan of Operation for the
next twelve months risky.
Access to Wafer Production Technology
The Company, to produce and sell its developed products, is dependent
upon developing a relationship with a semiconductor foundry or fabricator. At
this time, the Company has no source of production for its own products. The
Samsung fax modem/controller chips, currently sold by the Company are produced
by Samsung, are an exception. To produce its own developed products, the
Company will require significant funds to initialized production once a
relationship with a fabricator is established. There is no guaranty, the
Company can obtain sufficient funds, or even develop a relationship with a
fabricator.
Dependence upon New Product and Production Development
The communications and Internet markets are characterized by rapid
technological change, evolving industry standards, changes in customer needs
and frequent new product introductions, and are therefore highly dependent
upon timely product and production innovation. In particular, data
communication products are subject to continuous changes in the fabrication
process. Each change in technology and the fabrication process requires a
concomitant change in design and developed of the Company's products. The
Company may not have the resources to make those changes.
The Company's future success is dependent in part upon its ability to
anticipate changes in technology and industry standards and to develop
successfully and introduce new and enhanced products on a timely basis. The
Company will be required to replace declining revenues from older products
with new products. The Company's developed products are modular in design,
which may reduce the cost and time to market.
There is no assurance the Company, even if it has sufficient funds, will
be able to introduce new products on a timely basis. There is no assurance
the Company can produce the new or old products, nor achieve any significant
degree of market acceptance for them, nor that it can sustain acceptance for
any significant period. Failure to produce or achieve or sustain market
acceptance of its products would affect the Company's operating results.
Competition
The markets in which the Company operates are characterized by
competition among a small number of large companies that enjoy the major share
of the market. The large companies are well financed with a long history.
They have substantial advantages in terms of breadth of technology, sales,
marketing and support capability and resources. Most, if not all, have their
own fabrication facilities that cost hundreds of millions of dollars, if not
billions. The Company has limited capital and no fabrication facilities.
Ability to Manage a Rapidly Changing Business
The Company is anticipating significant growth, which will place a
substantial strain on its operational, administrative and financial resources.
The Company's officers have experience in managing companies as large and as
rapidly changing as is anticipated. However, there is no assurance that the
experience will prove beneficial to the new situation posed by the Company's
challenges. The Company's ability to manage any future changes effectively
will require it to have sufficient funds to attract, train, motivate and
manage its employees effectively.
Dependence on Key Personnel
The value of the Company lies in the experience of Mr. Kaliher and its
developed technology and products. Mr. Kaliher in the early 1980's was the
general manager of Rockwell International's modem division (This division has
been spun off and its new name is "Coexant").
The Company recognizes that some people believe that the high technology
industry, in which the Company hopes to compete, is one where significant
developments are in new technology and "expertise" is a quantity that dates
and loses value quickly.
The Company's success depends greatly on the continued contributions of
Mr. Kaliher. The loss of Mr. Kaliher's services could have a material
adverse impact on the Company's operating results. The Company has no
employment agreement with Mr. Kaliher and no keyman life insurance on his
life.
The Company believes its future success will depend in large part upon
its ability to attract and retain additional highly skilled management,
technical, marketing, research and development, product development and
operations personnel. Competition for such personnel is intense, and no
assurance can be given that the Company will be successful in attracting and
retaining such personnel.
Lack of Revenues
The Company has limited revenues. No assurance can be given that the
Company can earn revenues or obtain sufficient funds to sustain its planned
operations beyond the current minimal level for the next twelve months.
Lack of Funds
The Company, in order to effectively market its products, will require
significant cash to cover specific marketing costs, costs of prototypes and
technical and specific design services to be done for potential customers. No
assurance can be given that the Company can obtain sufficient funds to enable
it to conduct an adequate marketing and sales program.
PLAN OF OPERATION
The Company's business and operational plan, based on the described
objectives, for the next twelve months are directed toward developing revenues
and a foundation for growth. Management, based on its objectives, has
developed the following operational plan.
Operations
The Company is currently operating and will continue to operate with its
available funds. The current burn rate for the company is approximately
$3,000 to $10,000 per month. These funds have been and will continue to be
supplied by the Company, R Tucker & Associates or Mr. Tucker. The Company is
now and will continue to limit its expenses and not incur debt beyond the
$3,000 to $10,000 per month limit, unless additional funds are available. The
Company's expenses are limited to phone bills, limited travel, office
supplies, accounting services, repairs and maintenance, outside services and
other small but ordinary business expenses.
The Company believes that it can continue operating over the next twelve
months. It can do so by continuing the current level of expenditure and not
increasing the expenditure of cash without having the cash on hand.
Internet Technology Division
The Company during the next twelve months, at this level of expenditure,
will be able to (1) continue marketing the facsimile modem and facsimile
controller integrated circuits through its network of independent sales
representatives, as described herein; (2) develop the prototype for the
CyberServer;(3) negotiate agreements with independent parties to develop new
products using the Companies technology; (4) seek additional products
manufactured by others that can be sold by the Company's sales network; (5)
seek private Placements with accredited investors; and (6) identify and
negotiate with a Chinese company for the manufacture and distribution of one
or more of the Company's products in China and Asia.
The Company may not be able to start or complete the scheduled
development of the CyberCommunicator or achieve other objectives if it cannot
obtain sufficient funds for such activities.
If the Company does not receive sufficient funds and is not able to
obtain design and development services for non-cash consideration early
enough, the Company may not reach its objectives within the scheduled time, if
at all.
Internet Division
The Company during the next twelve months, at this level of expenditure,
will be able to (1) setup its financial services and E-Commerce web-sites, (2)
setup and establish the organizational structure for being an internet service
provider, (3) identify and negotiate for third party content provider, (4)
seek third parties to perform design and development services in exchange for
cash or non-cash consideration, (5) seek to acquire or enter strategic
relationships with service providers with non-cash consideration, and (6) seek
private placements with accredited investors. Non-cash consideration
includes, but is not limited to, an exchange of the Company's common stock.
If the Company does not receive sufficient funds and is not able to
obtain design and development services for non-cash consideration , the
Company may not reach its objectives within the next twelve months.
Capital Structure
Management believes that its present capital structure is sufficient to
provide the funds necessary to carry out the operational plan. Raising funds
from new offerings will not be necessary for the next 12 months but will be
required for the subsequent period.
Financing
The operational plan calls for the Company to seek private placements
and/or a public offering to raise $5,000,000 to $15,000,000 within the next
twelve months. However, there is no assurance the Company will be able to
obtain this financing, even though discussions are being conducted with
independent third parties.
Research and Development
The Company through Silicon Resources within the next twelve months plans
to complete the prototype for the CyberServer and commence the conversion of
the prototype into an integrated circuit. The Company is now attempting to
identify an independent third party to design and develop a prototype of the
CyberCommunicator. The Company, however, may not have sufficient funds
available to develop the CyberCommunicator. The Company is formulating
plans and seeking personal to market and sell its CyberServer products.
Purchase and Sale of Equipment
The Company does not expect to purchase or sale equipment during the
next 12 months.
Availability of Products
The Company is now marketing the facsimile modem and facsimile
controller integrated circuits. The Cyberserver is not expected to be ready
for the market until near the end of May. The CyberCommunicator will not be
available until after the next 12 months. The Company is considering the
development of several new products which it believes could be marketed in
approximately nine months from the date of this document.
The Company is seeking products manufactured by others that it can
market through its established independent sales network.
Employees
The Company expects to add additional management personnel and
independent third parties to perform design and development and other services
for the Company during the next 12 months. The number of independent parties
will depend on (1) the funds on hand and (2) the sales of the facsimile modems
and facsimile controller integrated circuits. The number of new personnel and
independent consultants' engaged depends on the above factors and the
Company's ability to negotiate the exchange of non-cash consideration for
their services. The number of employees and/or consultants hired within the
next 12 months could range from three to four.
INTERNET DEVICES
CyberServers
The operational plan provides for the Company to develop and sell a
series of products in the thin Internet server market. These products will be
developed in three stages. The Company plans to complete development and
commence selling the first stage thin Internet server within the next 12
months; however, the company has not developed any products for sale as of
this date.
The first product will be a thin Internet server designed and built by
the Company and Silicon Resources. Management estimates that it will cost
approximately $200,000 to develop this product over the next six to ten
months. This product will be distributed through the Company's current
network of independent representatives that are currently selling the fax
modem chips and others who are to be identified.
CyberCommunicator
The operational plan provides for the Company to seek out an unrelated
third party to participate in and perform the development of the
CyberCommunicator by the end of the next 12 months. The development of the
product requires designing skills different from those possessed by the
Company's contractors or consultants. Management at this time has made no
estimate of the development cost of this product and has not identified the
unrelated design firm to do the development. Management estimates that the
administrative cost of securing the unrelated design firm and refining its
design specifications will not exceed $10,000.
SAMSUNG ELECTRONICS
Fax Modem Chips
The operational plan provides for the Company's fax modem chips,
fabricated by Samsung, to be distributed through its network of independent
sales representatives. These representatives sell to fax machine
manufacturers in Japan and the United States. Presently the Company has one
representative in Japan and two in the United States. Management estimates
that the marketing costs will be approximately $25,000 over the next 12
months. Once the orders are received, the Company will incur the costs of
buying the chips, providing product support, and commissions. The customer
will pay the Company upon invoicing when the customer receives the chips.
STRATEGIC RELATIONSHIPS AND NEW TECHNOLOGY
The operational plan provides for seeking strategic relationship with
other companies in consumer internet and communications consumer products and
the acquisition of new products. The development of strategic relationship
and acquisition of new technologies is to exploit and enhance the Company's
business. Management intends to acquire other companies and acquire
technology by exchanging shares of its common stock or, in limited cases, when
sufficient funds are on hand to use cash. Management believes that its cost
to find and negotiate its acquisitions of business or technology and joint
ventures indirectly cost not more than $20,000.
YEAR 2000 ISSUES
The Company has completed the Year 2000 assessment and has determined
that Year 2000 issues will have no material effect.
CREDIT FACILITY
The management does not have a credit facility.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any litigation incidental to its business
or material to the business activities or financial performance of the
Company.
The Company is unaware of any legal proceedings being brought by the
former Chief Financial Officer of Sundance Design, Inc., claiming a security
interest in the Company's digital signal processing intellectual property.
The Company to avoid liability to Claimant is holding all securities to be
issued to Sundance Design, Inc. The shares will be delivered as agreed to by
the Claimant and Sundance Design or an order of a court exercising
jurisdiction over that matter.
ITEM 2. CHANGE IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 - K.
(a) Exhibits.
Exhibit No. Description Method of Filing
3. Charter and Bylaws
3.1 Articles of Incorporation A
3.1.1 Amended Articles for change of Name C
3.1.2 Amended Articles for change of Name D
3.2 Bylaws A
10. Material Contracts
10.1 License Agreement with Tensleep Design, Inc.,
a Texas corporation A
10.2 Purchase Agreement and Bill of Sale with
Tensleep Design, Inc., a Texas corporation A
10.3 Warrant Agreement for Class A Warrants A
10.4 Warrant Agreement for Class B Warrants A
10.5 Stock Option Plan A
10.6 Distribution Agreement C
11. Statement re: Computation of Per Share Earnings **
21. Subsidiaries of the Registrant B
27. Financial Data Schedule **
99. Additional Exhibits
99.1 Audited Financial Statement for the
Company date December 31, 1997 A
99.2 Agreement with Silicon Resources for
Rental B
** Contained in Financial Statements included herewith.
A Incorporated by reference to the Company's Form 1 - A Registration
Statement No. 24-3960.
B Filed with original Form 10SB, Accession Number:
0001006024-99-000010
C Filed with Form 10SB/A which became effective August 2, 1999.
D Filed with Form 10KSB Accession Number 0001006024-99-000015.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed by the undersigned, there unto
duly authorized.
Tensleep Design, Inc.
(Registrant)
Signature Title Date
/S/ Ronald S. Tucker President, CEO and CFO February 7, 2000
Ronald S. Tucker
<TABLE> <S> <C>
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<LEGEND>
This schedule contains summary financial information extracted from Tensleep
Technologies, Inc., unaudited Interim Financial Statements dated
December 31, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0001006024
<NAME> TENSLEEP.COM, INC.
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