PROSPECTUS
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
900,000 SHARES OF COMMON STOCK
THIS INVESTMENT HAS A HIGH DEGREE OF RISK. You should carefully consider the
risk factors beginning on page 4 before purchasing any of the shares of
Technology Systems International common stock offered by this prospectus.
The selling security holders identified on pages 19 to 20 of this prospectus are
offering 900,000 shares of our common stock. The shares are underlying warrants
previously purchased by the selling security holders from us in a private
placement which were exempt from the registration requirements of the Securities
Act of 1933. The shares are issuable upon exercise of these warrants at $1.00
per share through January 31, 2002. We will not receive any portion of the
proceeds from the sale of these shares.
Our common stock is currently trading on the Pink Sheets under the symbol
"TSYN."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed on the
adequacy or accuracy of the prospectus. Any representation to the contrary is a
criminal offense.
The date of this prospectus is May 12, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page No.
<S> <C>
Prospectus Summary.................................................................................. 3
Summary Financial Data.............................................................................. 4
Risk Factors........................................................................................ 5
Use of Proceeds..................................................................................... 7
Capitalization...................................................................................... 8
Management's Discussion and Analysis of
Financial Condition and Plan of Operations....................................................... 9
Business............................................................................................ 10
Management.......................................................................................... 14
Indemnification of Officers and Directors........................................................... 15
Certain Relationships and Related Transactions...................................................... 15
Principal Shareholders.............................................................................. 16
Market For Our Securities........................................................................... 17
Selling Security Holders............................................................................ 18
Plan of Distribution................................................................................ 19
Description of Securities........................................................................... 21
Legal Matters....................................................................................... 22
Experts............................................................................................. 22
Index to Financial Statements....................................................................... F-1
</TABLE>
2
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PROSPECTUS SUMMARY
OFFERING
This prospectus relates to the potential resale by our selling
shareholders of up to 900,000 shares of our common stock. These shares of common
stock are underlying warrants that we previously sold in a private placement
which we conducted in reliance upon an exemption from registration provided by
the Securities Act of 1933.
The shares are issuable upon exercise of these warrants at $1.00 per
share through January 31, 2002.
OUR HISTORY AND OVERVIEW
Our company, Technology Systems International, Inc., was incorporated
in November 1998. We own the Safe Shopper(TM), a patent protected technology.
3
<PAGE>
SUMMARY FINANCIAL DATA
The following table provides summary financial information on
Technology Systems International from our inception on November 23, 1998 to
September 30, 1999 and December 31, 1999 and for the three month period ended
December 31, 1999. The accompanying financial statements are based on the
assumptions and adjustments described in the accompanying notes to the financial
statements, which we believe are reasonable.
Statement of Operations data:
<TABLE>
<CAPTION>
(AUDITED) (UNAUDITED) (UNAUDITED)
Nov. 23, 1998 Nov. 23, 1998 October 1, 1999
to to to
September 30, 1999 December 31, 1999 December 31, 1999
------------------ ----------------- -----------------
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 0
Expenses
General and administrative expenses 69,038 74,007 4,969
Other income
Investment income (loss), net of expenses (9,387) (8,373) 1,014
Net (loss) and accumulated deficit (78,425) (82,380) (3,955)
Basic and diluted (loss) per share $ (0.02) $ (0.02) $ (.0.00)
Basic and diluted weighted average
common shares outstanding 4,128,000 4,215,000 4,475,000
Balance Sheet Data:
ASSETS
- ------
(AUDITED) (UNAUDITED)
----------- -----------
Cash $ 966 $ 420
Marketable securities, at market 16,810 17,821
Patent costs, net of amortization 68,859 66,114
Organizational costs, net of amortization 175 --
TOTAL ASSETS $ 86,810 $ 84,355
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 4,819 $ 6,319
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) (82,380)
81,991 78,036
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 86,810 $ 84,355
=========== ===========
</TABLE>
4
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RISK FACTORS
An investment in our common stock involves a high degree of risk. In
addition to the other information contained in this prospectus, you should
carefully consider the following risk factors before investing in our common
stock.
FAILURE TO PROTECT OUR TECHNOLOGY COULD PERMIT OTHERS TO APPROPRIATE
OUR TECHNOLOGY, ADVERSELY AFFECTING OUR FINANCIAL CONDITION. Although we have
received patent protection on our technology, we may not be able to secure
meaningful worldwide proprietary protection relevant to our business operations.
We currently have patent protection in the United States on the Safe Shopper.
The Safe Shopper is our only product. Even though our patent is approved, there
are no unique barriers for others to emulate our methods of operations except
for those barriers and limitations confronting anyone engaged in undertaking
innovative activities and obtaining credibility in an emerging industry.
WE LACK BINDING AGREEMENTS WHICH WE NEED TO DEVELOP OUR PRODUCT. In
order for us to implement our business plan, we will be required to reach
understandings with numerous third parties and enter into joint ventures. We
have not entered into any binding agreements or joint ventures with third
parties to manufacture and develop our product or to offer and sell our product.
In the event we are unable to reach acceptable understandings with third
parties, we may be unable to successfully engage in business operations.
WE WILL DEPEND ON THIRD-PARTY MANUFACTURERS AND WE CURRENTLY DO NOT
HAVE ANY MANUFACTURING CONTRACTS. Our product will be manufactured by
third-party manufacturers pursuant to a final product formulation developed by
us. We do not have any written contracts with any suppliers or manufacturers or
commitments from any suppliers or manufacturers to sell our product.
WE FACE RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGES AND FAILURE TO
ADAPT TO SUCH CHANGES WOULD MAKE OUR TECHNOLOGY OBSOLETE, ADVERSELY AFFECTING
OUR BUSINESS. The market in which we will compete is characterized by rapidly
changing technology, evolving industry standards, frequent new product and
service announcements, introductions and enhancements, and changing customer
demands. These market characteristics are heightened by the emerging nature of
the Internet. Accordingly, our future success will depend on our ability to
adapt to rapidly changing technologies, our ability to adapt our product to meet
evolving industry standards and our ability to continually improve the
performance, features and reliability of our product in response to both
changing customer demands and competitive product and service offerings. Our
failure to successfully adapt to such changes in a timely manner could have a
material adverse effect on our business, results of operations and financial
condition.
WE DO NOT HAVE ANY REVENUE OR OPERATING PROFITS AND OUR AUDITOR HAS
EXPRESSED SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN. We
have incurred losses and expect to incur substantial operating losses for the
immediate future. We currently have no sources of revenue, whether from product
sales, license fees or research funding, and there can be
5
<PAGE>
no assurance that we will be able to develop such revenue sources or that our
operations will become profitable, even if we are able to enter into joint
venture arrangements to commercialize our product. If we do not generate revenue
and operating profits, we may be forced to cease our operations.
OUR FUTURE CAPITAL NEEDS ARE UNCERTAIN AND WE WILL NEED ADDITIONAL
FINANCING. Our current capital is insufficient to fund our operations. If our
warrants are not exercised we will need to raise additional funds. We may seek
to satisfy our future funding requirements from numerous sources including
public or private offerings of securities, arrangements with strategic partners,
or debt arrangements. We may not be able to locate additional financing. If we
do not secure additional financing we may be forced to cease our operations.
6
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USE OF PROCEEDS
We will not receive any proceeds from the resale of our common stock
issuable upon exercise of our warrants by the selling security holders made
under this prospectus. However, we will receive the proceeds from the sale of
900,000 shares of our common stock to our warrant holders upon exercise of their
warrants. These proceeds will be up to $900,000. Expenses associated with this
potential offering are expected to be approximately $15,000. These expenses
consist of our legal fees and printing costs. Assuming all funds from the
exercise of warrants are received, our net proceeds of approximately
$885,000 will be used as follows:
<TABLE>
<CAPTION>
Use Amount
--- ------
<S> <C>
Hiring of additional personnel $300,000
Marketing 150,000
Advertising 150,000
Working capital 285,000
--------
TOTAL: $885,000
========
There is no guarantee that all or any of the funds from the exercise of
our warrants will be received.
</TABLE>
7
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization at September 30, 1999
and December 31, 1999 and has been derived from financial information appearing
in the financial statements included in this prospectus. The pro forma column
assumes the exercise of our warrants. There is no guarantee that all or any of
the funds from the exercise of our warrants will be received.
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1999
(Audited) (Unaudited) Pro Forma
--------- ----------- ---------
<S> <C> <C> <C>
Total Debt: $ 4,819 $ 6,319 $ 6,319
Stockholders' equity:
common stock, $.001 par value
per share: 25,000,000 shares
authorized; 4,475,000 shares issued
and outstanding at December 31, 1999 4,475 4,475 5,375
Additional paid-in capital 155,941 155,941 1,040,041
Deficit accumulated during development stage (78,425) (82,380) 82,380
Total stockholders' equity 81,991 78,036 963,036
====== ====== =======
Total capitalization 86,810 84,355 969,355
====== ====== =======
</TABLE>
There is no guarantee that all or any of the proceeds from the exercise
of our warrants will be received.
8
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND PLAN OF OPERATIONS
The following discussion should be read in conjunction with our
financial statements and the related notes which appear elsewhere in this
prospectus.
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 are now
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.
We were recently organized and 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 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.
9
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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 merchant in order for it to function. The Safe
Shopper operates by a standard credit card being swiped by the consumer 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, compared to previously stored data, then sent
to the merchant, and ultimately, from the
10
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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 prospectus.
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
11
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may 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.
FACILITIES
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.
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.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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HOW TO GET MORE INFORMATION
We have filed with the SEC a registration statement on Form SB-2 which
can be read and copied at the public reference facilities maintained by the SEC
at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. Information about
the operation of the Public Reference Room may be obtained by calling
1-800-SEC-0330. The registration statement is also available to the public from
commercial document retrieval services, or via EDGAR on the SEC's Web site at
www.sec.gov.
Before the date of this prospectus we have been a non-reporting
company. Upon effectiveness of the registration statement, we will begin filing
quarterly, annual and other reports with the SEC. We intend to furnish our
stockholders with annual reports, which will include financial statements
audited by independent accountants, and other periodic reports as we may chose
to provide, or as we are required by law.
We have not authorized any dealer, salesperson, or other person to
provide any information or make any representations about us, except the
information or representations contained in this prospectus. You should not rely
on any additional information or representation.
This prospectus does not constitute an offer to sell, or a solicitation
of an offer to buy, any securities:
- except the common stock offered by this prospectus;
- in any jurisdiction in which the offer or solicitation is not
authorized;
- in any jurisdiction where the dealer or other salesperson is
not qualified to make the offer or solicitation;
- to any person to whom it is unlawful to make the offer or
solicitation; or
- to any person who is not a United States resident or who is
outside the jurisdiction of the United States.
The delivery of this prospectus or any accompanying sales does not
imply that:
- there have been no changes in our affairs after the date of
this prospectus; or
- the information contained in this prospectus is correct after
the date of this prospectus.
13
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the names, positions and ages of our
executive officers and directors.
<TABLE>
<CAPTION>
Name Age Positions Held
- ---- --- --------------
<S> <C> <C>
Stephen A. Beloyan 34 Director, Secretary, President and Treasurer
Darius Oshidar 36 Director
</TABLE>
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 graduated in 1985 from Suny at Stony Brook College with
a bachelor of science degree in biology with a minor in telecommunications. He
graduated from University of Medicine and Dentistry of New Jersey in 1989 with a
doctorate in dental medicine. From 1989 through 1992 he served in the U.S. Army
Dental Corps. He also served as acting clinic chief of the Walson Army Hospital
Dental Clinic and during Operation Dessert Storm as a mobilization dentist. From
1992 through 1995 Dr. Oshidar served at Fort Monmouth Army Base in New Jersey as
acting clinic chief. He retired with the rank of major from the U.S. Army Dental
Corps in 1995. Since 1995 he has served as president of Quality Dental Care and
is its sole shareholder.
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.
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 prospectus.
14
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EXECUTIVE COMPENSATION
Mr. Beloyan, our sole executive officer, has not received any
compensation since our inception in November 1998. 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.
Dr. Oshidar is currently our outside director. He receives no
compensation.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Florida Business Corporations Act provides for indemnification of
directors, employees, officers and agents of Florida corporations. Our articles
of incorporation and bylaws provide that we shall indemnify our directors and
officers to the fullest extent permitted by the Florida Business Corporation
Act. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers or persons by these
provisions, we have been informed that, in the opinion of the SEC,
indemnification is against public policy as expressed and the Securities Act of
1933 and is therefore unenforceable.
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.
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OUR PRINCIPAL SHAREHOLDERS
As of March 31, 2000, there were 4,475,000 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 March 31, 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 individual 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%
Darius Oshidar -0- -0-
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 (2 persons)
</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.
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MARKET FOR OUR SECURITIES
Our common stock is currently trading on the Pink Sheets. Our common
stock has traded at the following prices since our inception:
High Low
---- ---
Fourth Quarter 1998 4 1/8 4
First Quarter 1999 4 1/8 4
Second Quarter 1999 4 1/8 4
Third Quarter 1999 4 1/8 4
Fourth Quarter 1999 4 1/8 4
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.
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SELLING SECURITY HOLDERS
The following table sets forth the name of each selling security
holder, the number or shares of common stock underlying our warrants
beneficially owned by the selling security holder as of March 31, 2000, and
the number of shares being offered by each selling security holder. Since
inception no selling security holder has been an officer, director or affiliates
of our company, nor has any selling security holder had any material
relationship with us during the period, other than as set forth below.
The shares of common stock being offered by this prospectus are being
registered to permit public secondary trading of the shares of common stock
underlying the warrants. The selling security holders may offer for resale from
time to time all or part of the shares that are issued upon exercise of our
warrants. However, the selling security holders are under no obligation to sell
all or any portion of the shares of common stock immediately under this
prospectus. Because the selling security holders may sell all or a portion of
their shares of common stock, no estimate can be given as to the number of
shares of common stock that will be held by any selling security holder upon
termination of any offering made under this prospectus; accordingly, the
following table assumes the exercise of the warrants exercisable at $1.00 per
share of common stock and the sale of all shares of common stock underlying the
warrants by the selling security holders immediately following the date of this
prospectus.
<TABLE>
<CAPTION>
No. of Shares No. of Shares of No. of Shares
of Common Stock Common Stock of Common Stock
Name of Selling Beneficially Owned Offered by Beneficially Owned Percentage Ownership
Security Holder as of March 31, 2000 This Prospectus After Offering After Offering
- --------------- -------------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
William E. Huston 265,000 54,000 211,000 4%
William J. Huston 265,000 54,000 211,000 4%
Ken Bonawitz 140,000 54,000 186,000 3%
Lisa Bonawitz 90,000 54,000 36,000 *
Karl G. Rich 60,000 36,000 24,000 *
Nathaly R. Rich 60,000 36,000 24,000 *
George Brous 210,000 36,000 174,000 *
Roy D. Mittman 60,000 36,000 24,000 *
Christina A. Mittman 60,000 36,000 24,000 *
Barbara Shulman 90,000 54,000 36,000 *
Bernard Shulman 240,000 54,000 186,000 3%
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No. of Shares No. of Shares of No. of Shares
of Common Stock Common Stock of Common Stock
Name of Selling Beneficially Owned Offered by Beneficially Owned Percentage Ownership
Security Holder as of March 31, 2000 This Prospectus After Offering After Offering
- --------------- ---------------------- --------------- -------------- --------------
Frederick P. Sturgis 60,000 36,000 24,000 *
Jacqueline Anne Cooper 60,000 36,000 24,000 *
Mark Beloyan 114,000 90,000 24,000 *
Alicia Beloyan 114,000 90,000 24,000 *
Aaron Anderson 60,000 36,000 24,000 *
Gloria Barton 90,000 36,000 24,000 *
Daniel Bellet 60,000 36,000 24,000 *
Carol A. Bellet 60,000 36,000 24,000 *
Total 2,228,000 900,000 1,328,000
</TABLE>
* represents less than 1%
In the preceding table:
Beneficial ownership is determined in compliance with the rules of the
SEC and generally includes voting or investment power with respect to securities
and includes any securities which the person has the right to acquire within 60
days of this registration statement through the conversion or exercise of any
security or other right.
All shares of common stock we are offering in this registration
statement are exercisable from warrants that our security holders originally
purchased in a private placement of securities in January 1999. We conducted
this private placement in reliance of the exemption from registration provided
by Rule 504 of Regulation D.
PLAN OF DISTRIBUTION
The shares of our common stock offered by this prospectus may be sold
from time to time by the selling security holders, who consist of the persons
named under "Selling Security Holders" above and those persons' pledgees,
donees, transferees or other successors in interest. We will be required,
however, to amend this registration statement to provide the names of pledgees,
donees, transferees or other successors in interest who may seek to sell under
this registration statement. The selling security holders may sell the shares on
the Pink Sheets or otherwise, at market prices or at negotiated prices. They may
sell the shares of common stock by one or a combination of the following:
19
<PAGE>
* a block trade in which a broker or dealer so engaged will
attempt to sell the shares as agent, but may position and
resell a portion of the block as principal to facilitate the
transaction;
* purchases by a broker or dealer as principal and resale by the
broker or dealer for its account under this prospectus;
* ordinary brokerage transactions and transactions in which a
broker solicits purchasers;
* privately negotiated transactions;
* short sales;
* if a sale qualifies, in compliance with Rule 144 of the
Securities Act of 1933 rather than under this prospectus; and
* any other method permitted by applicable law.
From time to time, one or more of the selling security holders may
pledge, hypothecate or grant a security interest in some or all of the shares of
common stock owned by them, and the pledgees, secured parties or persons to whom
the shares have been hypothecated shall, upon foreclosure in the event of
default, be deemed to be selling security holders under this prospectus. The
number of selling security holders' shares of common stock beneficially owned by
those selling security holders who transfer, pledge, donate or assign the shares
will decrease when they take that action. The plan of distribution for selling
security holders' shares of common stock sold under this prospectus will
otherwise remain unchanged, except that the transferees, pledgees, donees or
other successors will be selling security holders under this prospectus.
A selling security holder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the common
stock in the course of hedging the positions they assume with the selling
security holder, including in connection with distributions of the common stock
by broker-dealers. A selling security holder may also enter into option or other
transactions with broker-dealers that involve the delivery of the shares of
common stock to the broker-dealers, who may then resell or otherwise transfer
the shares. A selling security holder may also loan or pledge the shares of
common stock to a broker-dealer and the broker-dealer may sell the shares so
loaned or upon a default may sell or otherwise transfer the pledged shares of
common stock.
Brokers, dealers, underwriters or agents participating in the
distribution of the shares of common stock as agents may receive compensation in
the form of commissions, discounts or concessions from the selling security
holders and/or purchasers of the common stock for whom broker-dealers may act as
agent, or to whom they may sell as principal, or both. The
20
<PAGE>
compensation as to a particular broker-dealer may be less than or in excess of
customary commissions. The selling security holders and any broker-dealers who
act in connection with the sale of the shares of common stock under this
prospectus may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, and any commission they receive and proceeds of any sale
of the shares of common stock may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933. Neither we nor any selling
security holder can presently estimate the amount of compensation. We know of no
existing arrangements between any selling security holder, any other
stockholder, broker, dealer, underwriter or agent relating to the sale or
distribution of the shares of common stock included in this prospectus.
We will pay substantially all of the expenses incident to the
registration, offering and sale of the shares of common stock included in this
prospectus to the public, which includes our legal, accounting and printing
expenses. We will not pay commissions or discounts of underwriters,
broker-dealers or agents, or any other costs incurred by the selling security
holders.
We have advised the selling security holders that during the time as
they may be engaged in a distribution of the shares of common stock included in
this prospectus they are required to comply with Regulation M adopted under the
Exchange Act. With some exceptions, Regulation M precludes any selling security
holder, any affiliated purchasers, and any broker-dealers or other person who
participates in the distribution from bidding for or purchasing, or attempting
to induce any person to bid for or purchase any security which is the subject of
the distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made to stabilize the price of a security in
connection with the distribution of that security. All of the factors may affect
the marketability of the shares of our common stock.
DESCRIPTION OF SECURITIES
COMMON STOCK
Our authorized capital stock currently includes 25,000,000 shares of
common stock, par value $.001 per share. As of March 31, 2000, there were
4,475,000 shares of common stock issued and outstanding. The holders of our
common stock:
- have equal ratable rights to dividends;
- are entitled to share ratably in all of our assets available
for distribution to holders of common stock upon liquidation,
dissolution or winding up of our affairs;
- do not have preemptive subscription or conversion rights and
there are no redemption or sinking fund provisions; and
- are entitled to one vote per share on all matters on which
stockholders may vote at all meetings of stockholders.
21
<PAGE>
All shares of common stock now outstanding are fully paid and
non-assessable. The holders of our shares of common stock do not have cumulative
voting rights, which means that the holders of more than 51% of such outstanding
shares, voting for the election of directors, can elect all of the directors to
be elected, if the so choose and in such event, the holders of the remaining
shares will not be able to elect any of our directors. Our board of directors is
empowered to take all actions necessary to increase the number of shares we have
authorized as necessary, and subject to appropriate financing arrangements,
intends to alter our capital stock structure.
PREFERRED STOCK
The Company is authorized to issue 5,000,000 shares of preferred stock
with such designations, rights and preferences as may be determined from time to
time by our board of directors. Our board of directors is empowered, without
stockholder approval, to issue preferred stock with dividend, liquidation,
conversion, voting or other rights which could adversely effect the voting power
or other rights of the holders of our common stock. In the event of issuance,
our preferred stock could be utilized, under certain circumstances, as a method
of discouraging, delaying or preventing a change in our control.
WARRANTS
As of March 31, 2000, there were outstanding warrants to purchase
900,000 shares of our common stock exercisable at $1.00 per share. The warrants
are exercisable for a period of three years beginning January 31, 1999.
TRANSFER AGENT
Our transfer agent is Florida Atlantic Stock Transfer, Inc., 7130 Nob
Hill Road, Tamarac, Florida 33321.
LEGAL MATTERS
Legal matters in connection with this registration statement will be
passed upon for us by Atlas Pearlman, P.A., 350 East Las Olas Boulevard, Suite
1700, Fort Lauderdale, Florida 33301.
EXPERTS
Our financial statements as of September 30, 1999 which are included in
this prospectus have been audited by Richard M. Bogdanoff, P.A., independent
certified public accountant, as indicated in his reports. These financial
statements are included in this prospectus in reliance upon the authority of
Richard M. Bogdanoff, P.A. as an expert in accounting and auditing.
22
<PAGE>
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
AUDITED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR'S REPORT
SEPTEMBER 30, 1999
<PAGE>
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
PAGE
----
Independent Auditor's Report.............................................F-1
Audited Financial Statements September 30, 1999
Balance Sheet....................................................F-2
Statement Of Operations And Accumulated Deficit..................F-3
Statement Of Stockholders' Equity................................F-4
Statement Of Cash Flows..........................................F-5
Notes To Financial Statements....................................F-6-10
Unaudited Financial Statements for the Periods Ended December 31, 1999
Balance Sheets...................................................F-11
Statements of Operations and Accumulated Deficit.................F-12
Statement of Stockholders' Equity................................F-14
Statements of Cash Flows.........................................F-15
Notes to Financial Statements....................................F-16-20
<PAGE>
Richard M. Bogdanoff, PA.
Certified Public Accountant
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, 1999, 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, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is 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 obtain
reasonable assurance about whether the financial statements 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 the overall financial statement presentation. We believe
that our provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fair1y, in
all material respects, the financial position of Technology Systems
International, Inc. as of September 30, 1999 and the results of its operations
and cash flows for the period from November 23, 1998 (date of inception) to
September 30, 1999 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 stages and, has incurred
a net loss for the period from November 23, 1998 (date of inception) to
September 30, 1999. In addition, the company has limited working capital and the
Company has not entered into any marketing or licensing agreements for its
acquired techno1ogy 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
statement. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Richard M. Bogdanoff, PA.
Boca Raton, Florida
November 24, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
TECHNOLOGY SYSTEMS INTERNATiONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
SEPTEMBER 30, 1999
<S> <C>
ASSETS
Cash and equivalents $ 966
Marketable securities (at market, cost $29,594) 10,810
Patent costs, net of $7,977 amortization 68,859
Organizational costs, net of $40 amortization 175
----------
TOTAL ASSETS $ 88,810
==========
LIABILITIES AND STOCKHOlDERS' EQUITY
Accounts payable and accrued expenses $ 4,819
Stockholders' equity
Common stock - authorized 25,000,000 shares, 4,475
issued and outstanding 4,475,000 shares,
par value $.O01; 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 (78,425)
----------
81,991
----------
TOTAL LiABiLITIES AND STOCKHOLDERS' EQUITY $ 86,810
==========
The accompanying notes are an integral part of these financial statements.
F-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 SEPTEMBER 30, 1999
Revenues $ 0
Expenses
General and administrative expenses 69,038
Other income
Investment (loss), net of expenses (9,387)
----------
Net (loss) and accumulated deficit $ (78,425)
==========
Basic and diluted (loss) per common share $ (0.02)
==========
Basic and diluted weighted average common shares outstanding 4,125,000
==========
</TABLE>
The accompanying notes notes are integral part of these financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
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. 1999
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 - - - (78,425)
----------- --------- ---------- ----------
Balance at September 30, 1999 4,475,000 $ 4,475 $ 155,41 $ (78,425)
=========== ========= ========== ==========
</TABLE>
The accompanying notes am an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
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, 1999
<S> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES
- --------------------------------------------------
<Deficit accumulated during the development stage $ (78,425)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Amortization 8,017
Unrealized depreciation in value of investments 12,784
Increase in accounts payable and accrued expenses 4,819
Common stock issued for consulting services 50,000
---------------
NET CASH (USED) BY OPERATING ACTIVITIES (2,805)
---------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES
- --------------------------------------------------
Purchase of marketable securities, net of sales (29,594)
Organizational costs (215)
Capitalized patent legal fees (19,045)
---------------
NET CASH (USED) BY INVESTING ACTIVITIES (48,854)
---------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
- -------------------------------------------
Net proceeds from sale of common stock 52,625
---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 52,625
---------------
NET INCREASE IN CASH AND EQUIVALENTS - SEPTEMBER 30,1999 $ 966
===============
SCHEDULE OF NONCASH ACTIVITES
Common stock issued for purchase of patent technology $ 57,791
Common stock issued for consulting services 50,000
---------------
$ 107,791
===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
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, 1999
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 end personal data over standard
telephone lines in consumer/merchant transactions. The Safe Shopper[TM) is
designed to either be attached to 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 I 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. 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.
F-6
<PAGE>
Technology Systems International, Inc.
(A Development Stage Company)
Notes To Financial Statements
For The Period From November 23, 1998 (Date Of Exception)
To September 30, 1999
Note 1 - Summary Of Significant Accounting Policies - Continued
- ---------------------------------------------------------------
Business And Organization - Continued
Although the Company has received a domestic patent on its technology 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 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, 1999. The Company's capital requirements in connection with
it's proposed operations will be significant. The Company believes that the
funds raised from its completed initial private placement offering will be
adequate to develop and operate the business through March 31, 1999. 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.
F-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 September 30, 1999
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.
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 $ 29,594
Unrealized (depreciation) 12,784)
--------
$ 16,810)
========
Patent costs are being amortized over a seven year period using the straight
line method and amounted to $7,977 for the period from November 23, 1998 (date
of inception) to September 30, 1999.
Organizational costs are being amortized over a period of sixty months using the
straight line method and amounted to $40 for the period from November 23, 1998
(date of inception) to September 30, 1999.
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.
F-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 September 30, 1999
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 promulgated under the Securities
Exchange Act of 1934. These rule 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 3O, 1999.
F-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 September 30, 1999
Note 4 - Income Taxes
- ---------------------
As of September 30, 1999, the Company has a net operating loss carryforward for
Federal income tax purposes amounting to approximate1y $52,800 which expires in
2014.
The components of the deferred tax asset as of September 30, 1999 is as follows:
Benefit of net operating loss carryforwarda $ 65,600
Less: timing differences (12,800)
valuation allowance (52,800)
--------------
$ -
==============
At September 30, 1999 sufficient uncertainty exists regarding the realizability
of the Company's operating loss carryforwards and, accordingly, a valuation
allowance of $52,800 which relates to the net operating loss, has been
established.
F-10
<PAGE>
<TABLE>
<CAPTION>
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1999
(UNAUDITED)
<S> <C>
ASSETS
Cash $ 420
Marketable securities, at market [Cost $29,594] 17,821
Patent costs, net of $10,722 amortization 66,114
-----------
TOTAL ASSETS $ 84,355
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 6,319
Stockholders' equity 4,475
Common stock - authorized 25,000,000 shares,
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 (82,380)
-----------
78,036
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY -----------
$ 84,355
===========
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
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 DECEMBER 31, 1999
(UNAUDITED)
<S> <C>
Revenues $ 0
Expenses
General and administrative expenses (74,007)
Other income
Investment (loss), net of expenses (8,373)
-----------
Net (loss) and accumulated deficit $ (82,380)
===========
Basic and diluted (loss) per common share $ (0.02)
===========
Basic and diluted weighted average common shares outstanding 4,215,000
===========
</TABLE>
F-12
<PAGE>
<TABLE>
<CAPTION>
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE PERIOD FROM OCTOBER 1, 1999 TO DECEMBER 31, 1999
(UNAUDITED)
<S> <C>
Revenues $ 0
Expenses
General and administrative expenses (4,969)
Other income
Investment income, net of expenses 1,014
-----------
Net (loss) $ (3,955)
===========
Basic and diluted (loss) per common share $ (0.00)
===========
Basic and diluted weighted average common shares outstanding 4,475,000
===========
</TABLE>
F-13
<PAGE>
<TABLE>
<CAPTION>
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM NOVEMBER 23, 1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
(UNAUDITED)
Deficit
Accumulated
Additional During the
Common Paid-In Development
Shares Stock Capital Stage
------ ----- ------- -----
<S> <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 - - - (82,380)
----------- ---------- ------------ ------------
Balance at December 31, 1999 4,475,000 $ 4,475 $ 155,941 $ (82,380)
=========== ========== ============ ============
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
TECHNOLOGY SYSTEMS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM NOVEMBER 23, 1998 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
(UNAUDITED)
<S> <C>
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES
- --------------------------------------------------
Deficit accumulated during the development stage $ (82,380)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities:
Amortization 10,937
Unrealized depreciation in value of investments 11,773
Increase in accounts payable and accrued expenses 6,319
Common stock issued for consulting services 50,000
--------------
NET CASH (USED) BY OPERATING ACTIVITIES (3,351)
--------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES
- --------------------------------------------------
Purchase of marketable securities, net of sales (29,594)
Organizational costs (215)
Capitalized patent legal fees (19,045)
--------------
NET CASH (USED) BY INVESTING ACTIVITIES (48,854)
--------------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
- -------------------------------------------
Net proceeds from sale of common stock 52,625
--------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 52,625
--------------
NET INCREASE IN CASH AND EQUIVALENTS - DECEMBER 31, 19999 $ 420
==============
SCHEDULE OF NONCASH ACTIVITIES
Common stock issued for purchase of patent technology $ 57,791
Common stock issued for consulting services 50,000
--------------
$ 107,791
==============
</TABLE>
F-15
<PAGE>
Technology Systems International, Inc.
(A Development Stage Company)
Notes To Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To December 31, 1999
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(TN) 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.
F-16
<PAGE>
Technology Systems International, Inc.
(A Development Stage Company)
Notes To Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To December 31, 1999
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 December 31, 1999. 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 March 31, 1999. 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.
F-17
<PAGE>
Technology Systems International, Inc.
(A Development Stage Company)
Notes To Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To December 31, 1999
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.
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 $ 29,594
Unrealized (depreciation) (11,773)
--------
$ 17,821
========
Patent costs are being amortized over a seven year period using the straight
line method and amounted to $7,977 for the period from November 23, 1998 (date
of inception) to September 30, 1999.
Organizational costs amounting to $215 are expensed for the period from November
23, 1998 (date of inception) to December 31, 1999.
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.
F-18
<PAGE>
Technology Systems International, Inc.
(A Development Stage Company)
Notes To Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To December 31, 1999
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.
F-19
<PAGE>
Technology Systems International, Inc.
(A Development Stage Company)
Notes To Financial Statements
For The Period From November 23, 1998 (Date Of Inception)
To December 31, 1999
Note 4 Income Taxes
- --------------------
As of December 31, 1999, the Company has a net operating loss carryforward for
Federal income tax purposes amounting to approximately $70,600 which expires in
2014.
The components of the deferred tax asset as of December 31, 1999 is as follows:
Benefit of net operating loss carryforwards $ 70,600
Less: valuation allowance (70,600)
---------
--
=========
At December 31, 1999 sufficient uncertainty exists regarding the realizability
of the Company's operating loss carryforwards and, accordingly, a valuation
allowance of $70,600 which relates to the net operating loss, has been
established.
Note 5 - Subsequent Event
- -------------------------
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. Approval of
this offering is currently pending before the Securities And Exchange
Commission.
F-20
