<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000
Commission file number 0-30611
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
----------------------------------------------
(Name of Small Business Issuer in its Charter)
FLORIDA 52-2137517
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1 Field Court, Wrightstown, New Jersey 08562
---------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(609)723-3200
---------------------------
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange On Which Registered
-------------------------------------------------------------
None
Securities registered under Section 12(g) of the Exchange Act:
Title of Each Class Name of Each Exchange On Which Registered
-------------------------------------------------------------
Common Stock None
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $ -0-
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. $2,725,000 based on a price of $1.00 per share as of December 1, 2000.
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: December 1, 2000: 4,450,000 Shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
- None -
Transitional Small Business Disclosure Format (Check One)
Yes [ ] No [X}
<PAGE> 2
TABLE OF CONTENTS
PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis or
Plan of Operations
Item 7. Financial Statements
Item 8. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners
and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits, Lists and Reports on Form 8-K
ii
<PAGE> 3
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Our history
Technology Systems International, Inc. was incorporated under the laws
of Florida in November 1998. On December 16, 1998, we acquired the "Safe
Shopper(TM)" from Belco Systems Technology Corp., an affiliated entity. Our
headquarters are currently located at Two Field Court, Wrightstown, New Jersey
08562.
Operations
Currently, our only product is the Safe Shopper. The Safe Shopper is a
patented technology, which we believe will provide an accurate, safe and cost
effective method for transmitting credit card and personal data over standard
phone lines in consumer/merchant transactions. The Safe Shopper is still in the
development phase, however, we have working prototypes and are in the process of
commencing a full marketing campaign. As part of our marketing efforts, we are
attempting to establish a joint venture with participants in the credit card or
merchant banking industry through which we would license the Safe Shopper.
Products
The Safe Shopper is designed to provide credit card security to the
consumer, merchant and credit card industry.
The Safe Shopper is designed to either be attached to a telephone or
incorporated as an internal part of the telephone itself. The Safe Shopper must
be possessed by the consumer and the merchant in order for it to function. The
Safe Shopper operates by a standard credit card being swiped through the credit
card reader on the Safe Shopper. The information that is on the credit card will
then be sent to the merchant through the same phone line on which the person is
talking to the merchant. The merchant may then transmit all the information that
is on the magnetic strip to the merchant bank that would then clear the credit
card transaction.
The Safe Shopper remote unit simply plugs into any standard telephone.
It does not require software or any traditional modem to operate. Data is
transmitted directly over telephone lines. The system will also be available
with standard interfaces to enable computer links, as well as links through any
forthcoming technology. There is no need for modems or point of sale terminals.
The Safe Shopper is inexpensive, durable and easy to manufacture and
mass produce. All of the parts and components are presently manufactured and
readily available. This will keep production and distribution costs at a
minimum.
The consumer speaks directly with a live sales agent or an automated
voice ordering system and, when prompted, swipes their card. The data from the
card is read, momentarily stored,
<PAGE> 4
compared to previously stored data, then sent to the merchant, and ultimately,
from the merchant to the appropriate clearing house for approval. The customer
remains on the line with the merchant as the transaction is being processed and
it only takes a few seconds.
Every party in the transaction should benefit because the appropriate
card data is transmitted only after first being verified for specific use.
Merchants can ship their products quickly and payments should be expeditious.
Our management believes that the Safe Shopper will allow the merchant
to remotely capture the consumer's full credit card information, which will
provide a definitive record of the transaction and thereby eliminate merchants'
susceptibility to credit card charge backs and fraud which our management
estimates costs merchants, banks and consumers over one billion dollars per
year. Another example of the Safe Shopper's use would be that many smaller "mom
and pop" merchants could do business without the barriers to entry that are
sometimes found when smaller merchants attempt to set up a merchant credit card
account. Finally, the Safe Shopper will allow products purchased with its
technology to be shipped much quicker because the merchant will not have to wait
for credit card purchases to clear the merchant bank.
Product development
We developed prototypes of the Safe Shopper with the help of
International Management and Consulting Inc. (IMCI), a company located in
Asburn, Virginia. IMCI using our patent information, has developed 10 working
prototypes of the Safe Shopper.
Our Safe Shopper will be produced and developed by third parties. All
production and commercial development will be done by third parties, depending
on how they want to tailor the Safe Shopper technology to their specific needs.
For example, the entity that we license the Safe Shopper to might want to put it
into telephone, computer keyboard, or some other device, rather than making it a
stand-alone unit.
We have not entered into any agreements with third parties at the time
of this prospectus. There are no current negotiations for agreements at this
time. We have made, and continue to make demonstrations and presentations to
pursue third party relationships. We need funding to develop a marketing plan
and to employ a technical marketing firm or individual to help us develop these
third party relationships.
Production and distribution
We are currently working to structure agreements, joint ventures,
licensing contracts and strategic alliances to produce and distribute our Safe
Shopper. We are relying on third parties to produce and distribute our Safe
Shopper. We do not have any relationships with third parties as of the date of
this report.
If we are able to establish the Safe Shopper in the United States, we
will work with our partners to introduce and distribute the system throughout
the world. Additionally, our system may
2
<PAGE> 5
be introduced to businesses that do not presently use financial cards or other
forms of magnetic stripe cards and smart cards.
Our intellectual property
We have received a patent for the Safe Shopper from the U.S. Patent
Office and have also sought patent protection on an international basis. We
currently have patents pending in Canada, the European community and Mexico. Our
success depends in part on our ability to protect our intellectual property. Our
failure or inability to protect our proprietary rights could materially
adversely effect our business, financial condition, and results of operations by
lessening the value of the intellectual property and possibly increasing
competition.
Competition
We believe that we do not face any direct competition at this time due
to the uniqueness of the Safe Shopper. This is evidenced by the U.S. patent we
now hold. However, there may be other products on the market that do not use our
technology, but are able to provide similar or superior credit card security and
transmissions.
Government regulation
We do not believe that our business activities are currently subject to
direct regulation by any government agency; other than regulations applicable to
business generally. However, it is possible that laws and regulations may be
adopted in the future covering issues such as privacy. Additionally, our product
will be subject to regulations that effect the credit card industry.
Employees
We currently employ one employee. Once we have the necessary capital to
market our Safe Shopper we will hire additional employees to suit our growing
needs.
ITEM 2. DESCRIPTION OF PROPERTY
Our principal offices are located in approximately 500 square feet at 2
Field Court, Wrightstown, New Jersey. We occupy this property on a rent free
basis from Stephen Beloyan, our president.
ITEM 3. LEGAL PROCEEDINGS
We are not a party to any legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
3
<PAGE> 6
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is currently trading on the Over-the-Counter Bulletin
Board under the symbol TSYN. Our common stock has traded at the following prices
for the periods indicated:
High Low
----- ----
October 1, 1998 - December 31, 1998 4.125 4.00
January 1, 1999 - March 31, 1999 4.125 4.00
April 1, 1999 - June 30, 1999 4.125 4.00
July 1, 1999 - September 30, 1999 4.125 4.00
October 1, 1999 - December 31, 1999 4.125 4.00
January 1, 2000 - March 31, 2000 4.125 4.00
April 1, 2000 - June 20, 2000 4.125 4.00
July 1, 2000 - September 30, 2000 4.125 4.00
October 1, 2000 - September 30, 2000 4.125 1.00
There is no trading market for our 900,000 warrants.
We have approximately 27 record shareholders of our common stock. Based
upon the records of our transfer agent, we believe we have in excess of 27
beneficial owners of our common stock.
We have not declared any dividends on our common stock and do not plan
to do so in the future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
We have been working to develop the Safe Shopper and believe that the
prototypes we have developed with the help of International Management and
Consulting, Inc. can be developed into a commercially viable product. We remain
focused on identifying companies and organizations in the credit card industry
and related fields to form agreements and alliances. Presently we are working to
structure agreements, joint ventures, licensing contracts, and strategic
alliances with these companies.
If the Safe Shopper is established in the United States, we will work
to introduce and distribute it throughout the world focusing on securing
international patent protection for our product.
While we were organized in late 1998, we have little operating history
upon which an evaluation of management's performance and our future prospects
can be made. There can be no assurances whatsoever that we will be able to
successfully implement our business strategy or
4
<PAGE> 7
penetrate our markets or attain a wide following for our product, or that we
will ever attain a level of profitability. In addition, we will be subject to
all the risks inherent in a start-up enterprise. Our prospects must be
considered in light of the numerous risks, expenses, delays, problems and
frequently encountered in the establishment of a new business in industries
characterized by emerging markets and intense competition.
We believe we can satisfy our cash requirements for the next 12 months
if our warrants are exercised. If our warrants are not exercised in the near
future we will need to raise additional funds to aid us in marketing the Safe
Shopper so we can locate third parties to develop and produce the Safe Shopper.
In the event we need to raise additional capital we will consider third party
financing or the private placement of our securities as sources to raise funds.
Research and development has resulted in our patented technology in the
United States. We also have patents pending in the European Community, Canada
and Mexico. We are not conducting any research and development at this date. We
are currently focusing our attention towards locating relationships to market,
license, manufacture and produce our technology. We will rely on relationships
with third parties for the production and distribution of the Safe Shopper.
We do not anticipate any purchase of plant or significant equipment
during the next 12 months. We also do not anticipate any significant change in
the number of our employees in the next 12 months.
ITEM 7. FINANCIAL STATEMENTS
The financial statements required by this report are included,
commencing on F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
5
<PAGE> 8
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The following table sets forth the names, positions and ages of our
executive officers and directors.
Name Age Positions Held
---- --- ---------------
Stephen A. Beloyan 35 President, Treasurer, Secretary and Director
Stephen Beloyan has been our director, president, treasurer and
secretary since our inception. From 1989 to 1999 Mr. Beloyan has been president
and treasurer of Professional Home Inspections, Inc., a Pennsylvania company
which provides home inspection and testing services. Since 1997, Mr. Beloyan has
been president, treasurer and sole shareholder of Beloyan Inspection Services,
Inc., a New Jersey company providing home inspection and testing services. Since
March 1998, Mr. Beloyan has been president, secretary and director of Belco
Systems Technology Corp., the company from whom we acquired the Safe Shopper
technology.
Darius Oshidar resigned as a director on October 1, 2000.
Each director is elected at our annual meeting of shareholders and
holds office until the next annual meeting of shareholders, or until his
successor is elected and qualified. Officers are elected annually by the board
of directors and their terms of office are at the discretion of the board.
ITEM 10. EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS
Mr. Beloyan currently devotes approximately 10 hours per week to our
affairs. He does not receive a salary or have an employment agreement. To ensure
continued contribution to our growth and development, we may enter into an
employment agreement with him and employment agreements with future executive
officers. We have not entered into any employment agreements as of the date of
this report.
EXECUTIVE COMPENSATION
Mr. Beloyan, our sole executive officer, has not received any
compensation since our inception in November 1998. However, he did receive
1,500,000 shares of common stock upon our inception. Mr. Beloyan, a member of
our board of directors and our executive officer does not receive any additional
compensation for his services to us in his capacity as a member of our board of
directors.
6
<PAGE> 9
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 1, 2000 there were 4,450,000 shares of our common stock
issued and outstanding, without giving effect to the exercise of our outstanding
warrants to acquire an additional 900,000 shares of our common stock. The number
of shares of common stock beneficially owned includes all securities underlying
our warrants. The following table sets forth information as of December 1, 2000,
with respect to the beneficial ownership of shares of common stock currently
issued and outstanding by:
- each person known to us to be the owner of more than 5% of the
outstanding shares of common stock,
- each officer and director, and
- all officers and directors as a group.
Stephen Beloyan and Lionel Beloyan each own 50% of the issued and
outstanding stock of Belco Systems Technology Corp. These shares are not
included in their individual interests listed below. Unless otherwise indicated,
the address for each shareholder listed is 2 Field Court, Wrightstown, New
Jersey 08562.
<TABLE>
<CAPTION>
Approximate Percentage
Number of Shares of Outstanding Shares
Name Beneficially Owned Beneficially Owned
---- ------------------ ----------------------
<S> <C> <C>
Stephen Beloyan 1,500,000 34%
Lionel Beloyan 500,000 11%
FMS Distributors, Inc.(1) 300,000 7%
Raffles Toho, Inc. (2) 300,000 7%
William E. Huston 265,000 6%
William J. Huston 265,000 6%
Belco Systems Technologies Corp. 250,000 6%
All Officers and Directors 1,500,000 34%
as a Group (1 person)
</TABLE>
(1) The sole shareholder of FMS Distributors is Frank Dolney. The company's
address is 8700 N.W. 47th Drive, Coral Springs, Florida 33067.
(2) The sole shareholder of Raffles Toho is Nick Pirgousis. The company's
address is 3560 Cypress Gardens Road, Winter Haven, Florida 33884.
7
<PAGE> 10
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 16, 1998, we acquired the Safe Shopper from Belco Systems
Technologies Corp. in consideration for 250,000 shares of our common stock.
Stephen Beloyan is an officer, director and 50% shareholder of Belco Systems
Technologies Corp. and is our officer and director and significant shareholder.
Mr. Lionel Beloyan is also an officer, director and 50% shareholder of Belco
Systems Technologies Corp. and one of our principal shareholders. Lionel Beloyan
is the father of Stephen Beloyan.
We occupy our executive offices from Stephen Beloyan at no cost.
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
Exhibit No. Description of Exhibits
----------- -----------------------
2.1 Form of Warrant Agreement*
3.1 Articles of Incorporation of Technology Systems
International, Inc.*
3.2 By-Laws of Technology Systems International, Inc.*
10 Acquisition of Safe Shopper*
21 Subsidiaries of the Registrant
27 Financial Data Schedule
99 U.S. Patent*
*Previously filed.
8
<PAGE> 11
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act of 1934, as
amended the Registrant caused this Report to be signed on its behalf by the
undersigned and duly authorized on December 5, 2000.
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
By: /s/ Stephen Beloyan
---------------------------------------
Stephen Beloyan, Chief
Executive Officer and Director
9
<PAGE> 12
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
AUDITED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR'S REPORT
SEPTEMBER 30, 2000
<PAGE> 13
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
AUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
TABLE OF CONTENTS
Page
----
Independent Auditor's Report ............................................ 1
Financial Statements
Balance Sheet ....................................................... 2
Statement Of Operations And Accumulated Deficit ..................... 3
Statement Of Stockholders' Equity ................................... 4
Statement Of Cash Flows ............................................. 5
Notes To Financial Statements ....................................... 6 - 10
<PAGE> 14
<TABLE>
<CAPTION>
<S> <C> <C>
MEMBER RICHARD M. BOGDANOFF, P.A. MEMBER
FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANT AMERICAN INSTITUTE OF
CERTIFIED PUBLIC ACCOUNTANTS CERTIFIED PUBLIC ACCOUNTANTS
</TABLE>
INDEPENDENT AUDITOR'S REPORT
To The Board Of Directors And Stockholders
Of Technology Systems International, Inc.
We have audited the accompanying balance sheet of Technology Systems
International, Inc. (a development stage company) as of September 30, 2000, and
the related statements of operations and accumulated deficit, stockholders'
equity, and cash flows for the period from November 23, 1998 (date of inception)
to September 30, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Technology Systems
International, Inc. as of September 30, 2000 and the results of its operations
and cash flows for the period from November 23, 1998 (date of inception) to
September 30, 2000 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As more fully discussed in Note 1 to the
financial statements, the Company is in the development stage and has incurred a
net loss for the period from November 23, 1998 (date of inception) to September
30, 2000. In addition, the Company has limited working capital and the Company
has not entered into any marketing or licensing agreements for its acquired
technology nor are there earned revenues or any assurances that the Company will
be able to do so. These conditions raise substantial doubt as to the ability of
the Company to continue as a going concern. Management's plans with regard to
this matter are also described in Note 1 to the financial statements. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Richard M. Bogdanoff, P.A.
Boca Raton, Florida
November 16, 2000
- 1 -
Schever International Plaza * Suite 106 *
7280 West Palmetto Park Road - Boca Raton, Florida 33433-3401
Telephone (561) 394-6191 - Fax (561) 395-5012
<PAGE> 15
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
SEPTEMBER 30, 2000
ASSETS
Cash $ 33
Marketable securities, at market [Cost $16,133] 10,785
Prepaid offering costs 6,423
Patent costs, net of $19,040 amortization 58,800
-----------
TOTAL ASSETS $ 76,041
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 21,453
Stockholders' equity
Common stock - authorized 25,000,000 shares, 4,450
issued and outstanding 4,450,000 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 (105,803)
----------
54,588
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 76,041
==========
- 2 -
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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 SEPTEMBER 30, 2000
Revenues $ 0
Expenses
General and administrative expenses 95,126
Other income
Investment (loss), net of expenses (10,677)
----------
Net (loss) and accumulated deficit $ (105,803)
==========
Basic and diluted (loss) per common share $ (0.02)
==========
Basic and diluted weighted average common shares outstanding 4,301,000
==========
- 3 -
<PAGE> 17
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM NOVEMBER 23, 1998 (DATE OF INCEPTION)
TO SEPTEMBER 30, 2000
<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 --
Incorporation shares cancelled for non-
performance - September 2000 (25,000) (25)
Deficit accumulated during the
development stage -- -- -- (105,083)
--------- ------- -------- ---------
Balance at September 30, 2000 4,450,000 $ 4,450 $155,941 $(105,083)
========= ======= ======== =========
</TABLE>
- 4 -
<PAGE> 18
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM NOVEMBER 23, 1998 (DATE OF INCEPTION)
TO SEPTEMBER 30, 2000
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES
Deficit accumulated during the development stage $(105,803)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Amortization 19,255
Unrealized depreciation in value of investments 5,348
Increase in accounts payable and accrued expenses 21,453
Common stock issued for consulting services 50,000
---------
NET CASH (USED) BY OPERATING ACTIVITIES (9,747)
---------
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 52,600
Prepaid offering costs incurred (6,423)
---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 46,177
---------
NET INCREASE IN CASH AND EQUIVALENTS - SEPTEMBER 30, 2000 $ 33
=========
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> 19
Technology Systems International, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To September 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.
- 6 -
<PAGE> 20
Technology Systems International, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To September 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 September 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 would be
adequate to develop and operate the business through March 31, 1999. As such,
the Company is 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.
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<PAGE> 21
Technology Systems International, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To September 30, 2000
NOTE 1 - 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.
Marketable securities consist of a NASDAQ traded security which is valued at
market value. This security is summarized as follows:
Cost of security $16,133
Unrealized (depreciation) (5,348)
-------
Market Value - 9/30/00 $10,785
=======
Patent costs are being amortized over a seven year period using the straight
line method and amounted to $19,040 for the period from November 23, 1998 (date
of inception) to September 30, 2000.
Organizational costs amounting to $215 are expensed for the period from November
23, 1998 (date of inception) to September 30, 2000.
Upon incorporation, the Board of Directors approved for the issuance of
preferred stock with such designations, preferences, conversions 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.
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<PAGE> 22
Technology Systems International, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To September 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.
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<PAGE> 23
Technology Systems International, Inc.
(A Development Stage Company)
Notes to Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To September 30, 2000
NOTE 4 - INCOME TAXES
As of September 30, 2000, the Company has a net operating loss carryforward for
Federal income tax purposes amounting to approximately $81,200 which expires in
2014. In addition, the Company has approximately $12,500 of capital losses
available to offset future capital gains of which $3,800 expire in 2004 and
$8,700 expire in 2005.
The components of the deferred tax asset as of September 30, 2000 is as follows:
Benefit of net operating loss carryforwards $ 81,200
Less: valuation allowance (81,200)
--------
$ 81,200
========
At September 30, 2000 sufficient uncertainty exists regarding the realizability
of the Company's operating loss carryforwards and, accordingly, a valuation
allowance of $81,200 which relates to the net operating losses, has been
established.
NOTE 5 - PROPOSED COMMON STOCK OFFERING
In December 1999 the Company has 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 $6,423 at September 30, 2000.
- 10 -
