U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
--------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
-------------- --------------
Commission File Number: 0-30611
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Technology Systems International, Inc.
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(Exact name of Small Business Issuer as specified in its Charter)
Florida 52-2137517
----------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2 Field Court, Wrightstown, New Jersey
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(Address of principal executive offices)
(609) 723-3200
------------------------
(Issuer's telephone number)
(Former Name, former address and former fiscal year, if changed
since last Report.)
Check mark whether the Issuer (1) has 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 4,475,000 Common Stock as
of August 10, 2000.
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
---------------------
<S> <C> <C>
Item 1. Financial Statements (unaudited) 1
Balance Sheets as of June 30, 2000 2
Statements of Operations from inception to June 30, 2000. 3
Statements of Stockholders' Equity for the period from
November 23, 1998 (date of inception) to June 30, 2000 4
Consolidated Statements of Cash Flows from inception to June
30, 2000. 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis and Plan of Operations 12
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Basis of Presentation
The accompanying unaudited consolidated financial statements of
Technology Systems International, Inc. (the "Company"), have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation (consisting of normal recurring accruals) have been
included. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Operating
results from inception to June 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending September 30, 2000. For further
information, refer to the consolidated financial statements and footnotes found
in the Company's registration statement on Form SB-2.
1
<PAGE>
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
JUNE 30, 2000
(UNAUDITED)
ASSETS
Cash $ 552
Marketable securities, at market [Cost $16,133] 15,000
Prepaid offering costs 8,576
Patent costs, net of $16,260 amortization 61,580
---------
TOTAL ASSETS $ 85,708
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 17,109
Stockholders' equity
Common stock - authorized 25,000,000 shares, 4,475
issued and outstanding 4,475,000 shares,
par value $.001; Preferred stock -
authorized 5,000,000 shares, no shares
issued or outstanding, par value $.001
Additional paid-in capital 155,941
Deficit accumulated during the development stage (91,817)
---------
68,599
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 85,708
=========
2
<PAGE>
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD FROM NOVEMBER 23,1998 (DATE OF INCEPTION)
TO JUNE 30, 2000
(UNAUDITED)
Revenues $ 0
Expenses
General and administrative expenses 85,355
Other income
Investment (loss), net of expenses (6,462)
-----------
Net (loss) and accumulated deficit $ (91,817)
===========
Basic and diluted (loss) per common share $ (0.02)
===========
Basic and diluted weighted average common shares outstanding 4,301,000
===========
3
<PAGE>
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM NOVEMBER 23, 1998 (DATE OF INCEPTION)
TO JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During The
Common Paid-In Development
Shares Stock Capital Stage
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance At Date Of Inception
November 23, 1998 -- $ -- $ -- $ --
Common stock purchased upon
incorporation 2,625,000 2,625 -- --
Common stock issued for patent technology
purchased December 1998 250,000 250 57,541 --
Net proceeds from sale of common stock
completed January 1999 600,000 600 49,400 --
Common stock issued for consulting
services - April 1999 1,000,000 1,000 49,000 --
Deficit accumulated during the
development stage -- -- -- (91,817)
--------- --------- --------- ---------
Balance at June 30, 2000 4,475,000 $ 4,475 $ 155,941 $ (91,817)
========= ========= ========= =========
</TABLE>
4
<PAGE>
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM NOVEMBER 23,1998 (DATE OF INCEPTION)
TO JUNE 30, 2000
(UNAUDITED)
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES
Deficit accumulated during the development stage $ (91,817)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Amortization 16,475
Unrealized depreciation in value of investments 1,333
Increase in accounts payable and accrued expenses 17,109
Common stock issued for consulting services 50,000
---------
NET CASH (USED) BY OPERATING ACTIVITIES (7,100)
---------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES
Purchases of marketable securities, net of sales (16,133)
Organizational costs (215)
Capitalized patent legal fees (20,049)
---------
NET CASH (USED) BY INVESTING ACTIVITIES (36,397)
---------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES
Net proceeds from sale of common stock 52,625
Prepaid offering costs incurred (8,576)
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 44,049
---------
NET INCREASE IN CASH AND EQUIVALENTS - JUNE 30, 2000 $ 522
=========
SCHEDULE OF NONCASH ACTIVITIES
Common stock issued for purchase of patent technology $ 57,791
Common stock issued for consulting services 50,000
---------
$ 107,791
=========
5
<PAGE>
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
SUMMARY FINANCIAL DATA
The following table provides summary financial information on Technology Systems
International, Inc. for the period from inception - November 23, 1998 to
September 30, 1999 and June 30, 2000 and for the nine month period ended June
30, 2000. The accompanying financial statements are based on the assumptions and
adjustments described in the accompanying notes to the financial statements
which we believe to be reasonable.
<TABLE>
<CAPTION>
Statement of Operations Data: (AUDITED) (UNAUDITED) (UNAUDITED)
November 23, 1998 November 23, 1998 April 1, 2000
to to to
September 30, 1999 June 30, 2000 June 30, 2000
------------------ ------------- -------------
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 0
Expenses
General and administrative 69,038 85,355 4,890
Other income
Investment (loss), net of expenses (9,387) (6,462) (2,340)
Net (loss) (78,425) (91,817) (2,550)
Basic and diluted (loss) per share $ (0.02) $ (0.02) $ --
Basic and diluted weighted average common shares 4,128,000 4,301,000 4,475,000
outstanding
Balance Sheet Data:
(AUDITED) (UNAUDITED)
ASSETS
Cash $ 966 $ 552
Marketable securities, at market 16,810 15,000
Prepaid offering costs -- 8,576
Patent costs, net of amortization 68,859 61,580
Organizational costs, net of amortization 175 -
-------------- -------------
TOTAL ASSETS $ 86,810 85,708
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 4,819 17,109
Stockholders' equity
Common stock - authorized 25,000,000 shares, 4,475 4,475
issued and outstanding 4,475,000 shares,
par value $.001; Preferred stock -
authorized 5,000,000 shares, no shares
issued or outstanding, par value $.001
Additional paid-in capital 155,941 155,941
Deficit accumulated during the development stage (78,425) (91,817)
-------------- -------------
Total Stockholders' Equity 81,991 68,599
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 86,810 $ 85,708
============== =============
</TABLE>
6
<PAGE>
Technology Systems International, Inc.
(A Development Stage Company)
Notes To Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To June 30, 2000
Note 1 - Summary Of Significant Accounting Policies
---------------------------------------------------
Business And Organization
Technology Systems International, Inc. (a development stage company) (also
referred to as "TSI, Inc.") is a Florida corporation incorporated on November
23, 1998 for the purpose of marketing the "Safe Shopper"[TM] technology which
was acquired from an affiliated party. Management believes that this United
States approved patented technology provides an accurate, safe and cost
effective method for transmitting credit card and personal data over standard
telephone lines in consumer/merchant transactions. The Safe Shopper[TM] is
designed to either be attached to a telephone or incorporated as in internal
part of the telephone. This technology operates through a standard credit card
being swiped through the credit card reader on the Safe Shopper[TM] which is
then transmitted to the merchant on the same telephone line which the person is
communicating with the merchant. The merchant can then transmit this information
to the merchant's banking institution who would then clear the credit card
transaction. Management believes that this technology, which allows the merchant
to capture the consumer's credit information electronically, will significantly
reduce merchant's susceptibility to credit card chargebacks and fraud in
addition to providing smaller businesses the availability of this service
without the typical barriers of entry for small businesses attempting to set up
merchant credit card accounts at various institutions.
Although organized in November 1998, the Company has only recently commenced
operations. To-date, the Company has not executed any marketing or licensing
agreements for its acquired technology nor are there earned revenues nor are
there any assurances the Company will be able to do so. Accordingly, the Company
is considered in the development stage and the accompanying financial statements
represent those of a development stage enterprise.
A working prototype of the Safe Shopper[TM] has been manufactured; the company
is seeking to license this technology including its production and develop a
comprehensive marketing plan for this innovative product. As part of this
effort, the Company seeks to establish a joint venture with participants in the
credit card or merchant banking industry through which the company would license
the Safe Shopper[TM] technology to such companies. A United States patent for
the "Personal Reader Technology Capture Transfer Technology" integrated into the
Safe Shopper [TM] was granted on November 17, 1998 and the international patents
are pending.
7
<PAGE>
Technology Systems International, Inc.
(A Development Stage Company)
Notes To Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To June 30, 2000
Note 1 - Summary Of Significant Accounting Policies - Continued
---------------------------------------------------------------
Business And Organization - Continued
Although the Company has received a domestic patent on its technology in
addition to patents pending in certain foreign markets, there is only limited
proprietary protection as to its products. Accordingly, the Company may not be
able to secure meaningful proprietary protection relevant to its method of
business operations as there are no unique barriers for others to emulate the
Company's methods of operations except for those barriers and limitations
confronting anyone engaged in undertaking innovative activities and obtaining
credibility in this emerging industry. In addition, there can be no assurance
the Company's products can be successfully marketed, or that any or all of the
products will be commercially accepted. Even if commercial acceptance is
received, the appeal of the Company's products may be limited given the wide
range of similar available products. Management has not conducted any marketing
or feasibility studies or surveys relating to the marketability of the products
sought to be manufactured or marketed by the Company. These conditions raise
doubt as to the entire recoverability of one's investment in the event of
immediate cash needs should they arise.
Accounting Policies
The accompanying financial statements have been presented in accordance with
generally accepted accounting principles, which assume the continuity of the
Company as a going concern. However, as discussed above, the Company is in the
development stage and, therefore, has generated no revenue to-date. As reflected
in the accompanying financial statements, the Company has incurred a net loss on
its limited operations for the initial period beginning November 23, 1998 and
ended June 30, 2000. The Company's capital requirements in connection with it's
proposed operations will be significant. The Company believed that the funds
raised from its completed initial private placement offering will be adequate to
develop and operate the business through September 30, 2000. As such, the
Company will be dependent not only on its initial working capital proceeds, but
on future private and/or public financings to expand its operation, including
the continuing development of its technology and the sales and marketing of its
technology and product development. There can be no assurance that additional
financing will be available on commercially reasonable terms. The inability to
obtain additional financing, when needed, would have a material adverse effect
on the company, including possibly requiring the Company to significantly
curtail its operations. In addition, there are no assurances that future
revenues from this technology will result.
8
<PAGE>
Technology Systems International, Inc.
(A Development Stage Company)
Notes To Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To June 30, 2000
Note I - Summary Of Significant Accounting Policies - Continued
---------------------------------------------------------------
Accounting Policies - Continued
At a meeting of the Company's Board of Directors on October 1, 1999, it was
adopted that the Company's fiscal year end on September 30th.
Cash and equivalents consist primarily of cash in banks and highly liquid money
market investments.
Marketable securities consist of NASDAQ traded securities which are valued at
market value. These securities are summarized as follows:
Cost of securities $ 16,133
Unrealized (depreciation) ( 1,333)
$ 15,000
Patent costs are being amortized over a seven year period using the straight
line method and amounted to $13,467 for the period from November 23, 1998 (date
of inception) to June 30, 2000.
Organizational costs amounting to $215 are expensed for the period from November
23, 1998 (date of inception) to June 30, 2000.
Upon incorporation, the Board of Directors approved for the issuance of
preferred stock with such designations, preferences, conversion rights,
cumulative, relative, participating, optional or other rights including voting
rights, qualifications, limitations or restrictions thereof to be stated and
expressed in the resolution or resolutions providing for the creation and
issuances of such shares to be adopted by the Board of Directors. There are
presently no plans to authorize the issuance of preferred shares.
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amount of assets and liabilities as of the date of the balance sheet
and operations for the periods. Certain estimates, which may be material, may be
subject to a change in their valuation as they relate to the determination of
the estimated net realizable value of certain elements of the Company's patent
and the estimated amortization period of its intangible assets. Although these
estimates are based on management's knowledge of current events and actions it
may undertake in the future, they may ultimately differ from actual results.
9
<PAGE>
Technology Systems International, Inc.
(A Development Stage Company)
Notes To Financial Statements For The Period From November 23, 1998 (Date Of
Inception)
To June 30, 2000
Note 2 - Operations And Basis Of Presentation
---------------------------------------------
In January 1999, the Company completed an initial private placement offering
resulting in the sale of 10,000 units at $5.00 per unit with each unit
consisting of sixty (60) shares of common stock and warrants to purchase ninety
(90) shares of common stock exercisable at $1.00 per share which expire three
years from the date of issuance.
If a public market ever develops for the Company's securities, these securities
will most likely be subject to the Penny Stock Rules promulgated under the
Securities Exchange Act of 1934. These rules generally regulate broker-dealer
practices in connection with transactions in equity securities with a price of
less than five dollars ($5.00) which require obtaining and providing additional
disclosure information and written documentation to prospective buyers which may
result in making it more difficult to market the Company's securities.
Note 3 - Related Party Transactions
-----------------------------------
On December 17, 1998, the Company acquired the Safe Shopper[TM] technology from
Belco Systems Technologies Corp. in consideration for 250,000 shares of common
stock of the Company. The purchase price was based on the selling Company's book
value of the patent on the date of sale which amounted to $57,791. Mr. Stephen
Beloyan is an officer, director and 50% shareholder of Belco Systems
Technologies Corp. and is an officer, director and significant shareholder of
the Company. Mr. Lionel Beloyan is also an officer, director and 50% shareholder
of Belco Systems Technologies Corp. and is a principal shareholder of the
Company.
Purchasers of the private placement offering completed in January 1999 included
family members related to the Officers and Directors of the Company.
In April 1999 the Company issued 1,000,000 shares of common stock for consulting
services rendered to the Company by shareholders pursuant to agreements dated
March 31, 1999 which the Company valued at $.05 per share. The consulting
services expired September 30, 1999.
10
<PAGE>
Technology Systems International, Inc.
(A Development Stage Company)
Notes To Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To June 30, 2000
Note 4 - Income Taxes
---------------------
As of June 30, 2000, the Company has a net operating loss carryforward for
federal income tax purposes amounting to approximately $77,600 which expires in
2014.
The components of the deferred tax asset as of March 31, 2000 is as follows:
Benefit of net operating loss carryforwards $ 77,600
Less: valuation allowance (77,600)
--------
$ -
========
At June 30, 2000 sufficient uncertainty exists regarding the realizability of
the Company's operating loss carryforwards and, accordingly, a valuation
allowance of $77,600 which relates to the net operating loss, has been
established.
Note 5 - Proposed Common Stock Offering
---------------------------------------
In December 1999 the Company filed with the Securities and Exchange Commission
for a proposed offering of 900,000 shares of the Company's common stock which
will be issuable upon the exercise of warrants purchased in connection with the
private placement of securities in January 1999. On May 12, 2000 approval of
this offering was received from the Securities and Exchange Commission. Offering
related costs amounted to $ 8,576 at June 30, 2000.
11
<PAGE>
Item 2. Managements Discussion and Analysis of Financial Condition and Plan
of Operations
General
Management's discussion and analysis contains various forward looking
statements. These statements consist of any statement other than a recitation of
historical fact and can be identified by the use of forward-looking terminology
such as "may," "expect," "anticipate," "estimate" or "continue" or use of
negative or other variations or comparable terminology.
Management cautions that these statements are further qualified by important
factors that could cause actual results to differ materially from those
contained in the forward-looking statements, that these forward-looking
statements are necessarily speculative, and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements.
Management believes comparison of the results of operations for the quarter and
nine months ended June 30, 2000 to the quarter and nine months ended June 30,
1999 would not be meaningful as the Company is a developmental company, has
sustained operating losses and has sustained negative cash flows since
inception.
Plan of Operations
The Company was recently organized and has little operating history upon which
an evaluation of management's performance and future prospects can be made.
There can be no assurances whatsoever that the Company will be able to
successfully implement its business strategy or penetrate markets or attain a
wide following for its product, or that the Company will ever attain a level of
profitability.
The Company has been working to develop the Safe Shopper and believes that the
prototypes it has developed with the help of International Management and
Consulting, Inc. can be developed into a commercially viable product. The
Company is now focused on identifying companies and organizations in the credit
card industry and related fields to form agreements and alliances. Presently
management is working to structure agreements, joint ventures, licensing
contracts, and strategic alliances with these companies.
If the Safe Shopper is established in the United States, the Company will work
to introduce and distribute it throughout the world focusing on securing
international patent protection for the Safe Shopper. The Company is focusing
its attention towards locating relationships to market, license, manufacture and
produce its technology. It will rely on relationships with third parties for the
production and distribution of the Safe Shopper.
12
<PAGE>
Management does not anticipate any purchase of plant or significant equipment
during the next 12 months. Management also does not anticipate any significant
change in the number of its employees in the next 12 months.
Results of Operations
Since inception the Company has sustained a net loss of $91,817. Operating
expenses have been principally attributable to general and administrative
expenses.
Liquidity and Capital Resources
The Company, since its inception, has experienced negative cash flows and has
met its cash requirements by issuing its common stock.
Management believes the Company can satisfy its cash requirements for the next
12 months if its outstanding warrants are exercised. If warrants are not
exercised in the near future the Company will need to raise additional funds to
aid in marketing the Safe Shopper so management can locate third parties to
develop and produce the Safe Shopper. In the event the Company needs to raise
additional capital management will consider third party financing or the private
placement of the Company's securities as sources to raise funds.
Since inception the Company has had general and administrative expenses of
$85,355. The Company believes that it has sufficient liquidity to meet all of
its general and administrative expenses for the remainder of the fiscal year
ended September 30, 2000. Management believes, however, that additional funding
will be necessary to develop the Company's technology and marketing program.
The Company has never paid cash dividends on its common stock. The Company
presently intends to retain future earnings, if any, to finance the expansion of
its business and does not anticipate that any cash dividends will be paid in the
foreseeable future. The future dividend policy will depend on the Company's
earnings, capital requirements, expansion plans, financial condition and other
relevant factors.
On May 12, 2000, the Company's registration statement on Form SB-2 filed under
the Securities Act of 1933 was declared effective by the Securities and Exchange
Commission.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this Section and elsewhere in this report
regarding matters that are not historical facts are forward-looking statements.
Because such forward-looking statements include risks and uncertainties, actual
results may differ materially from those expressed or implied by such
forward-looking statements. All statements which address operating performance,
events or developments that management expects or anticipates to incur in the
future, including statements relating to sales and earnings growth or
13
<PAGE>
statements expressing general optimism about future operating results, are
forward-looking statements. The forward-looking statements are based on
management's current views and assumptions regarding future events and operating
performance. Many factors could cause actual results to differ materially from
estimates contained in management's forward- looking statements. The differences
may be caused by a variety of factors, including, but not limited to, adverse
economic conditions, competitive pressures, inadequate capital, unexpected
costs, lower revenues, net income and forecasts, the possibility of fluctuation
and volatility of the Company's operating results and financial condition,
inability to carry out marketing and sales plans and loss of key executives,
among other things.
14
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B
The following exhibits are filed as part of this report:
Exhibits:
(27.1) Financial Data Schedule
(b) Reports on Form 8-K
None.
15
<PAGE>
SIGNATURE
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 as duly authorized officers of the Registrant.
Technology Systems International, Inc.
By: /s/ Stephen Beloyan
-----------------------------
Stephen Beloyan, Chairman and
President
DATED: August 11, 2000
