UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
(Mark One)
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: August 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to _____
Commission file number: 000-13041
TTI INDUSTRIES, INCORPORATED
(Name of small business issuer in its charter)
Texas 75-1939021
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
3838 Oak Lawn Avenue, Dallas, Texas 75219
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(Address of principal executive offices)
(214) 520-1702
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(Issuer's telephone number)
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Securities registered under Section 12(b) of the Exchange Act:
None.
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Sections 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 [ ] No [X]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of 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. [X]
State issuer's revenues for its most recent fiscal year: $0.
The number of shares of the registrant's common stock outstanding as of
June 30, 2000 was 4,169,414. There was no established published market for
the registrant's common stock during the last fiscal year. Although there
were published bid and asked prices, registrant believes the quotes were too
sparse and varied to be indicative of an established market value.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
None.
Transitional Small Business Disclosure Format (Check One)
Yes No X
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PART I.
ITEM 1.
DESCRIPTION OF BUSINESS
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A. General. Prior to May 6, 1998, TTI Industries, Incorporated (the
"Company") operated under the name of Environmental Plus, Inc., and was
primarily in the business of construction and repair of industrial cooling
towers, mostly in Texas, Louisiana and Arkansas, for electric utility
companies; and the marketing of a fire retardant foam as a fire fighting
device for industrial use.
The Company incurred operating losses in fiscal 1996 through 1999 which
raised substantial doubt about the Company's ability to continue as a going
concern. Effective January 15, 1998, and as part of management's plan to
have the Company continue to operate
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in the foreseeable future, a Stock Purchase Agreement was entered into among
Terminator Technologies, Inc., a Texas corporation ("Terminator Texas"), the
Company and various shareholders of the Company (the "Agreement"). The
transactions contemplated by the Agreement closed on May 6, 1998. As a
result of the Agreement, AMJ Resources, Inc., and its affiliates became the
new controlling shareholder(s) of the Company, through the purchase of a
majority of the Company's Common Stock from certain shareholders, including
past management shareholders, and the Company changed its name to TTI
Industries, Incorporated.
The Company subsequently completed the transactions contemplated in the
Agreement and, effective May 1, 1998 the Company changed its name to TTI
Industries, Incorporated, effected the 1-for-10 reverse stock split, and
changed its trading symbol to TTIA.
The Company's results of operations for the year ended August 31, 1999
were significantly affected by the Company's discontinuation of the business
of construction and repair of industrial cooling towers and the consummation
of the Agreement. As a result of the Terminator Texas transaction, new
management was appointed, the Company discontinued existing operations,
changed its name to TTI Industries, Incorporated, and commenced planning for
new operations, including the acquisition, production and marketing of (a)
innovative pest control products for home and garden with an emphasis on
products that (i) are safe for children, pets and wildlife, (ii) are
environmentally friendly, (iii) are low cost, (iv) utilize attractive
designs, and (v) are user friendly, and (b) other products related to pest
control and product safety. The Company did not obtain sufficient financing
to implement its plans for new operations during the year ended August 31,
1999 and there can be no assurance that the Company will be successful in
this effort. Thus, the Company had no revenues for the year ended
August 31, 1999.
B. Company's Business Plan. During the year ended August 31, 1999 the
Company's Board of Directors developed a new operational and financial
restructuring plan for the Company. While the Company had virtually no
business operations during fiscal 1999, the new business plan (the "Business
Plan") was presented to and adopted by the Company's Board of Directors in
January 1999. While the Business Plan was adopted in 1999, the Company did
not, and has not, secured the financing necessary to implement the Business
Plan in any meaningful manner. Thus, the Company has conducted virtually no
income-producing activity in 1999. The Business Plan requires substantial
additional financing, and there can be no assurance that the Company can
obtain such financing or that, even if such financing is obtained, the
Business Plan will be successful or will produce any revenue or income for
the Company.
Pursuant to the Business Plan, the Company plans to operate as a
holding company, with its primary operations conducted through subsidiaries.
Effective January 19, 1999, the Company formed Terminator Technologies,
Incorporated and Term Tex Corporation, Delaware corporations. Pursuant to
the Business Plan, the Company intends to utilize Terminator Technologies,
Incorporated as a manufacturing and marketing facility for the Company's
products and Term Tex Corporation as a research and development facility for
the Company's products. Neither the Company nor either of the subsidiaries
has obtained, or entered into any agreements or arrangements to obtain, the
financing necessary to implement the Business Plan and there can be no
assurance that such financing can be obtained.
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C. Option Agreement with AMJ. In anticipation of the implementation
of the Business Plan, on January 19, 1999 the Company entered into an
agreement (the "Option Agreement") with AMJ Resources Corporation ("AMJ"), a
shareholder of the Company, relating to certain products, which Agreement
was amended on October 4, 1999. Pursuant to the Agreement as originally
executed, among other things, (i) the Company acquired AMJ's rights to use,
manufacture and sell three (3) separate products (Terminator Night OwlT (a
flea trap), Terminator Flower TrapT (various insect traps) and Terminator
PyramidT (a fly trap) (collectively, the "Products")) when they are market
ready, on such terms as would be mutually agreeable at a future date by and
between the Company and AMJ; (ii) the Company's rights under the Option
Agreement were for a period of twenty-four (24) months, and (iii) AMJ had
the right to assign the rights to the Products to a limited partnership for
the purpose of funding research and development, provided the Company
retains its rights to use, manufacture and sell the Products. The Option
Agreement was later amended to eliminate the conditions and lengthen them
the term. See "Subsequent Events."
Notwithstanding AMJ's relationship to the Company as a significant
shareholder, and the relationship of Mr. Miller, the Company's chairman of
the Board of Directors and Mr. Korsmoe, the Company's principal financial
officer, as affiliates of AMJ, there can be no assurance that the Option
Agreement will result in any revenue or income for the Company, that the
Company will obtain financing necessary to manufacture and distribute the
Products which are not market ready, or that the Option Agreement will have
any ultimate realizable value to the Company.
AMJ is a Delaware corporation, the stock of which is owned by Mr.
Miller's daughter, grandson and an irrevocable trust, the beneficiaries of
which are members of Mr. Miller's family. Mr. Miller is neither a
beneficiary or trustee of the family trust nor a shareholder, officer or
director of AMJ.
D. Assignment by AMJ. Additionally, in anticipation of
implementation of the Business Plan, on January 19, 1999 AMJ and the Company
entered into an assignment agreement (the "Assignment") relating to an
additional product, which was also amended on October 4, 1999. Pursuant to
the Assignment as originally executed, among other things, AMJ assigned to
the Company all of AMJ's rights under a license agreement dated June 16,
1998 between AMJ and Terminator Turtle TM L.P. (the "License Agreement"),
relating to the Terminator Turtle TM and Terminator Turtle Bait Tray TM, in
exchange for the Company assuming all of AMJ's obligations under the License
Agreement and the payment by the Company to AMJ of a cashless warrant
exercisable for a period of two (2) years to purchase 2,000,000 shares of
the Company's common stock at $0.10 per share. Although the Assignment was
approved by the Company's Board of Directors, it provided that it would not
become effective until (i) the Company became current with its filings to
the Securities and Exchange Commission under the reporting requirements of
the Securities Exchange Act of 1934, as amended, and (ii) the Company had
completed the sale of certain 12 1/2% convertible preferred shares. Neither
the Option Agreement nor the Assignment have yet been valued and will be so
valued as soon as practicable.
Under the Assignment as originally executed, among other things, (i)
Terminator Turtle TM L.P., a California limited partnership ("TTLP"), assigned
its rights to the Terminator
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TurtleTM and Terminator Turtle Bait Tray TM (collectively, "Terminator
Turtle") to the Company. (TTLP had acquired those rights from Albert
Miller, the inventor of the Terminator Turtle TM); (ii) the Company was
granted exclusive worldwide use of the patent relating to the Terminator
Turtle TM until December 31, 2009, and (iii) the Company was granted the right
to manufacture, market, sell and distribute the Terminator Turtle TM, all in
exchange for a royalty payable to TTLP equal to 5% of all sales of
Terminator Turtle TM, but in no event less than $100,000. The Assignment was
later amended to eliminate the conditions. See "Subsequent Events".
There can be no assurance that the Company will obtain financing
necessary to manufacture and distribute the Terminator Turtle TM or that the
Assignment will have any ultimate realizable value to the Company or will
result in any revenue or income to the Company.
The Company has two (2) full-time employees, who as of the date of this
filing were uncompensated. For financial statement purposes, compensation
was imputed as required by the SEC.
E. The Company's Product(s). Terminator Turtle TM is an easy to use
snail and slug control system which was designed as a safe alternative to
existing snail and slug killing products which can be extremely dangerous to
children, pets and wildlife. The Terminator Turtle TM encompasses two
products: (a) The Terminator Turtle Bait Station TM - a metal turtle-shaped
enclosure that keeps the bait away from children and animals; and (b) The
Terminator Turtle Bait Tray TM - a disposable plastic tray containing snail
and slug bait that fits inside the steel turtle.
The Company believes that nearly all existing snail and slug control
products involve dispensing poisonous pesticide granules or powder directly
on the snail, thus, creating a hazard to children, pets, wildlife and the
environment, particularly when the pesticide filters through the soil into
the groundwater and into rivers and reservoirs. Such snail and slug bait
when exposed to sun, rain and water also deteriorates quickly, thus
requiring more poison to be effective.
The snail and slug bait in the Terminator Turtle Bait Tray TM is enclosed
in the steel Turtle, safely isolated from children, pets, wildlife and the
elements. Protected from rain, watering and the sun, the enclosed bait is
effective for at least three or four weeks, and because the bait does not
touch the soil, it does not effect the groundwater.
AMJ test-marketed the Terminator Turtle TM in the Northwest United States
in 1997, for a period of six weeks, selling all units made available. AMJ
also completed EPA registration for the Terminator Turtle Bait Tray TM in all
50 states. After the test-market, AMJ made additional modifications to the
Terminator Turtle TM design and completed fabrication on the high volume
tooling needed to produce the Terminator Turtles TM in large quantities at a
low cost. AMJ has advised the Company that AMJ and associates have expended
in excess of $2,000,000 in the development of the Terminator Turtle TM and
certain other products, none of which shall be repaid by the Company.
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The Company intends to sell the Terminator Turtle Bait Station TM
(including one Terminator Turtle Bait Tray TM) at a suggested retail price of
$9.95 per unit and replacement Terminator Turtle Bait Trays TM at $4.95.
The Company intends to market its retail products directly to retailers
who will market to consumers by the use of point of purchase displays that
are strategically placed by retailers in their outlets. The display for the
Terminator Turtles TM and 24 Bait Tray Refill packs is a free-standing unit
with a printed 4-color promotional picture of the Turtle on top.
F. Manufacture and Marketing. The Company presently intends to
outsource all manufacturing functions for its product(s). At present, the
Company has no facilities capable of manufacturing its product(s) and is not
a party to any formal agreements with respect to manufacturing of its
product(s). In the past, AMJ outsourced the manufacture of the Terminator
Turtle TM and agreed to assign its rights to manufacturing agreements to the
Company. AMJ, through a wholly owned subsidiary, has inventory of finished
and partially finished products and parts for approximately 200,000
Terminator Turtles TM a portion of which were partially financed with funds
advanced by the Company in late 1998 and early 1999. AMJ has verbally
agreed to transfer the inventory to the Company at AMJ's cost (less any
amounts advanced by the Company). The Company has not independently
verified the amount of such inventory or the cost. Moreover, the Company
does not have, nor has it made any arrangements for, the financing necessary
to manufacture product(s) or purchase the inventory from AMJ, nor is there
any assurance that it can obtain such financing.
The Company intends to market its product(s) through its wholly owned
subsidiary Terminator Technologies, Inc. Neither the Company nor Terminator
Technologies, Inc. have any contractual commitments or arrangements relating
to the marketing or sale of product(s). Terminator Texas has agreements
with independent sales representatives on a nonexclusive basis to market and
sell the Terminator Turtle TM and has verbally agreed to assign those
agreements to the Company or its subsidiary. There can be no assurance that
such assignment, if made, will result in any revenue or income to the
Company.
Notwithstanding the foregoing agreements, the Company does not have the
financial resources to manufacture or distribute any products and the only
product that is market ready is the Terminator Turtle TM and Bait Tray. The
other products require additional development. There can be no assurance
that the Company can or will obtain the financing necessary to take
advantage of the Option Agreement or the Assignment.
Since the Company has not yet obtained financing to implement its plans
with respect to the Terminator Turtle TM or any other product, there can be no
assurance that such financing will be obtained and there can be no assurance
that the Company's plans for the Terminator Turtle TM or any other product
will be realized or successful.
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SUBSEQUENT EVENTS
A. Amendment to Option Agreement. On October 4, 1999 the Company and
AMJ agreed to amend the Option Agreement to eliminate the condition of
subsequent pricing and to lengthen the terms to the life of existing and
pending patents and to provide for the Company reimbursing AMJ's actual
costs for the development of the Products. In January 2000, AMJ agreed to
eliminate the reimbursement condition.
B. Amendment of Assignment. On October 4, 1999 the Company and AMJ
agreed to amend the Assignment so that (a) AMJ would receive a cashless
warrant to acquire 2,000,000 shares of the Company's common stock at $0.05
per share; (b) the warrant would expire on November 10, 2001 but would not
be exercisable until September 11, 2000; (c) the conditions to effectiveness
of the Assignment were eliminated; and (d) the royalty from the Company to
AMJ was eliminated.
C. Production and Marketing of Terminator Turtle. Effective October
4, 1999, in connection with the Assignment regarding the Terminator Turtle TM,
AMJ through its wholly owned subsidiary, agreed to be responsible for
arranging the manufacture, production and marketing of the Terminator
Turtle TM, at cost plus 10%, on behalf of and for the benefit of the Company.
During the quarter ended November 30, 1999, such activities produced no
revenue for the Company and produced a cost of sales of $18,000. For the
quarter ended February 29, 2000, sales of the Terminator Turtle TM resulted in
gross revenue for the company of $56,637 at a cost of sales of $52,753.
D. Agreement with Speed Release Lock Company. On October 5, 1999,
the Company entered into a Stock Purchase and Exchange Agreement (the "Speed
Release Agreement") with Speed Release Lock Company ("Speed Release") and
Mr. Steve Bedowitz. Pursuant to the Speed Release Agreement, among other
things, (i) Mr. Steve Bedowitz, president and majority shareholder of Speed
Release, purchased an option exercisable upon 60 days prior written notice,
at a price of $40,000 paid to the Company, to purchase 165,000 shares of the
Company's Common Stock at a purchase price of $.01 per share; (ii) the
Company acquired 10% of Speed Release's Common Stock in exchange for 9.9% of
the Company's Common Stock valued at $149,938 in a transaction accounted for
under the cost method of accounting; (iii) the Company obtained the right
for a period of 180 days to demand that Speed Release, at Speed Release's
cost, file a registration statement with the Securities and Exchange
Commission, with respect to the Speed Release shares owned by the Company,
provided however, that the Company, if such right is exercised, is limited
to distributing such Speed Release shares only to shareholders of the
Company (and may not sell such shares in the open market); and (iv) if the
Company does not exercise its right to demand registration within 180 days
from the date of the Speed Release Agreement, Speed Release may rescind the
transaction and reacquire its shares in return for the Company's shares
acquired by Speed Release. The Company has notified Speed Release that the
Company has exercised its demand registration rights and Speed Release has
filed a registration statement with respect to such shares. There can be no
assurance that the registration statement will become effective.
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Speed Release is engaged in the manufacture and sale of safe and
reliable firearm safety products to prevent the unauthorized use of
firearms, including unintentional discharge by children and assailants.
Speed Release's mission is to both market and manufacture firearm safety
locks that maximize the user's ability to operate the device quickly in an
emergency situation, while prohibiting unauthorized users from using the
firearm.
Speed Release manufactures and markets a keyless, programmable, trigger
lock that fits most firearms (the "Lock"). Speed Release began selling the
Lock in 1997 and since then, the Lock has been sold through a number of
catalogs and retail establishments, as well as to a number of law
enforcement groups and the military.
The Lock is a computerized device that fits over the trigger guard of
98% of all firearms, preventing the movement of the trigger. As a result,
the unintentional firing of the firearm is prevented. The Lock contains
five translucent buttons, which illuminate in dark or dim light. There are
38,000 programmable codes available for the device, making it extremely
difficult to open without knowledge of the passcode and therefore resistant
to tampering by children and other unauthorized users. It is constructed of
a high-density polymer called Celcon that is fourteen (14) times stronger
than die cast metal. As a result, once the lock is in place, it is
virtually tamper resistant and can only be removed by entering the correct
code, using extensive force, defacing the weapon, or shipping the firearm
through a licensed firearms dealer to Speed Release's headquarters.
In the future, Speed Release hopes to employ the concepts used in the
Lock for other purposes, such as electronic bicycle locks. The Company
recently filed a patent application with the United States Patent Office on
the Lock that, if granted, will be owned entirely by Speed Release.
Speed Release has informed the Company that Speed Release believes that
(i) no other company employs technology similar to the Lock; (ii) Speed
Release's largest competitors are gun safes and key locks; (iii) there are
several more sophisticated safety devices that are much more expensive,
making them cost prohibitive for many gun owners, and (iv) unlike these
other devices, the Speed Release Lock is affordable, easy to operate and
makes the firearm easily accessible to its users.
Speed Release was founded in 1996 by the Company's principal
shareholder, Steve Bedowitz. In 1991, Speed Release acquired Trigger Block,
Inc., the founder of the concept of the Speed Release Lock. Mr. Bedowitz is
57 years old and has successfully built and managed several successful
companies.
The Lock competes with a number of products that reduce the risk of
firearm misuse. These products include other types of gun locks and gun
safes. Speed Release believes, however, that its Lock is superior to these
products in that it is easier to use in an emergency situation. Firearm
safes clearly offer a high level of security from both theft and
unauthorized use; however, their high cost prohibits many firearm owners
from using them. Furthermore, firearm safes hinder an owner's access to
firearms in the case of an emergency, making their use prohibitive in
instances in which the firearm owner wishes to use the weapon for personal
safety. Competing gun locks, in comparison, also hinder access to the
firearm in that they
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typically require a key to open and for safety reasons, the key should be
kept in a different place than the gun itself. Speed Release's Lock, in
comparison, is easy to remove through a programmable code that only the
owner of the firearm knows. This makes access to the firearm efficient at a
low cost to the consumer. In addition to gun safes and gun locks that
require a key to unlock, there are a number of additional trigger locks on
the market. Namely, the Saf-T-Lok, which is actually installed in the
firearm and is not removed and the "Smart Gun," which is currently in
development and will only work for the owner of the firearm. The Smart Gun
has not yet been perfected. In addition, it is extremely expensive and
cannot be used with existing firearms, since it is itself a firearm.
Speed Release focuses its marketing strategy to current as well as
future firearm owners. Its advertisements are geared toward men over 25
years old with at least a high school education and incomes in excess of
$35,000. The Lock has been featured in a number of hunting, shooting and
law enforcement magazines such as Shooting Times, Sports Afield, Clay
Shooting, Buckmasters, Field & Stream, Gun World, Skeet Shooting Review, The
Chief of Police, Guns Magazine, Law Enforcement Technology and S.W.A.T. In
addition, catalogs like Sharper Image and Orvis have featured the product.
Due to the rise of firearm violence and in light of the number of
children engaging in violence with handguns and rifles, there has recently
been increased interest in requiring firearm users to keep unauthorized
users from using firearms. Congress is currently considering legislation
which would require that a gun lock be sold with every new firearm sold in
the United States. In addition, a number of states have passed laws
requiring gun locks for every firearm sold within the state. Such laws
require firearm owners to safely store their firearms and increase the need
and demand for products like the Speed Release Gun Lock. Speed Release
anticipates that Congress will pass additional laws dealing with gun control
and requirements for gun locks.
E. Addition and Changes in Management. On January 7, 2000, the Board
of Directors elected Mr. Jesus Muniz as an additional director of the
Company. On January 10, 2000 Mr. Muniz was elected by the Board of
Directors as President of the Company to replace Mr. Frank Harrison who
resigned from that position on January 7, 2000. Mr. Harrison remains as a
director of the Company.
F. Company Activities and Financial Position. The following
information relating to fiscal year 2000 is unaudited. During fiscal year
2000 the Company continued its efforts to obtain the financing necessary to
implement the Business Plan adopted in January 1999. While the efforts
produced $40,000 in the quarter ended November 30, 1999 and approximately
$36,000 during the quarter ended February 29, 2000, such amounts were not
sufficient to implement the Business Plan in any meaningful manner. While
the Company produced no revenue for the quarter ended November 30, 1999 it
received $56,637 in revenue from product sales during the quarter ended
February 29, 2000, at a cost of $52,753, but produced a net loss for that
quarter of ($90,923) or ($.02) per share. The Company is continuing its
efforts to obtain financing for operations.
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"Safe Harbor" Statement under the Private Securities Litigation
---------------------------------------------------------------
Reform Act of 1995
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Forward-looking statements in this report, including without
limitation, statements relating to the adequacy of the Company's resources
and any anticipated changes in the Company's business following the
consummation of the Agreement and Speed Release Agreement, statements as to
the Company's objective to grow through strategic acquisitions and internal
growth, the impact of acquisitions on the Company's earnings, the Company's
ability to realize operating efficiencies in the integration of its
acquisitions, trends in the Company's future operating performance, Year
2000 Compliance, the effects of legal or governmental proceedings, the
effects of changes in accounting pronouncements and statements as to the
Company's or management's beliefs, expectations and opinions are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements are subject to risks and
uncertainties and may be affected by various factors which may cause actual
results to differ materially from those in the forward-looking statements.
In addition to the factors discussed in this report, certain risks,
uncertainties and other factors, including, without limitation the risk that
the Company will not be able to realize operating efficiencies in the
integration of its acquisitions, risks associated with growth and future
acquisitions, fluctuations in quarterly operating results, risks relating to
Year 2000 compliance and the other risks detailed from time to time in the
Company's filings with the Securities and Exchange Commission can cause
actual results and developments to be materially different from those
expressed or implied by such forward-looking statements.
Year 2000 Compliance
--------------------
Like other companies, the Company could be adversely affected if the
computer systems the Company, its suppliers or customers use do not properly
process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as the
"Year 2000" or "Y2K" issue. Additionally, this issue could impact non-
computer systems and devices such as production equipment, elevators, etc.
While the Company's project to assess and correct Y2K related issues
regarding the year 2000 has been completed, and the Company has not
experienced any significant Y2K related events, interactions with other
companies' systems make it difficult to conclude there will not be future
effects. Consequently, at this time, management cannot provide assurances
that the Year 2000 issue will not have an impact on the Company's future
operations. Since January 1, 2000, the Company has had no material impact
from the Y2K issue.
ITEM 2.
DESCRIPTION OF PROPERTY
-----------------------
The principal office of the Company is in Dallas, Texas and consists of
rented office space of approximately 200 sq. ft. which the Company believes
is suitable and adequate to meet the Company's needs. The Company also
occupies an office of approximately 1,700 square feet in San Jose,
California, which it occupies rent free from AMJ.
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ITEM 3.
LEGAL PROCEEDINGS
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The Company is not involved in any material legal proceedings.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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There were no matters submitted to a vote of security holders of the
Company during the fiscal year 1999.
PART II
ITEM 5.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------
The common stock of the Company has traded from time to time on the
over-the-counter market. Due to the infrequency of trades during the past
three years, the Company does not believe that there is an established
public trading market for its common stock.
On May 31, 2000, the common stock of the Company was removed from
quotation on the OTC Bulletin Board as a result of the Company's failure to
fulfill its reporting obligations under the Securities Exchange Act of 1934,
as amended. The common stock of the Company is quoted in the Pink Sheets.
As of June 30, 2000, there were approximately 1526 shareholders of
record of the Company's common stock. There have been no dividends paid or
declared since the inception of the Company, and the Company's present
financial condition does not permit the payment of dividends. The Company
cannot predict when, if at all, it will commence payment of dividends.
ITEM 6.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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Overview
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The Company's results of operations for the year ended August 31, 1999
were significantly affected by the Company's discontinuation of its past
business and the consummation of the Terminator Texas transaction which
closed on May 6, 1998. During the year ended August 31, 1999 the Company did
not engage in any income producing activities.
The Company had no material commitments for capital expenditures as of
the end of fiscal 1999, and has determined it will not have any commitments
for capital expenditures as of the end of fiscal 2000. While the Company
intends to focus future operations on the acquisition, production, and sale
of pest control products for home and garden use, and other safety-related
products, there can be no assurance that the Company will be successful in
this effort and, without obtaining a source of financing for such efforts,
will, in all likelihood, not be successful in such efforts.
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The Company intends to establish a National brand name presence for the
"Terminator" brand in the retail home and garden pest control market. To
accomplish that goal, it will be necessary for the Company to engage in an
extensive advertising and public relations campaign. However, the Company
has made no arrangements for the financing of such activities and there can
be no assurance that such financing can be obtained, or, if obtained, that
the goal can be accomplished.
Liquidity and Capital Resources
-------------------------------
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed below and in the
opinion and footnotes of the financial statements, the Company has
discontinued its operating segments and suffered recurring losses from
operations that raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans are discussed throughout
this document and in the footnotes to the financial statements.
The Company's working capital deficit at August 31, 1999 was ($49,711)
compared to ($22,836) at August 31, 1998. Cash and cash equivalents were $166
at August 31, 1999 as compared to $12 at August 31, 1998. During the year
ended August 31, 1999, available cash was used to pay the fees and expenses
related to the Business Plan.
The Company obtained $281,632 through the private placement of
securities during the year ended August 31, 1999 and used $276,478 in
operating activities for the year ended August 31, 1999, as compared to
$53,781 for the year ended August 31, 1998. During the twelve months ended
August 31, 1999, $250,000 was paid to AMJ Resources, Inc., an Affiliate, to
assist in inventory financing in connection with agreements with AMJ
regarding the acquisition by the Company of rights to certain products and
the completion of the Business Plan by the Company. See "Results of
Operations" below.
Investment activities for 1999 consisted of a $5,000 investment in
"start-up" subsidiaries. In 1998 $30,492 was received from shareholders
contributions to capital.
Trade accounts payable were $47,477 at August 31, 1999 and $17,848 at
August 31, 1998.
The Company made no capital acquisitions or improvement expenditures
during the year ended August 31, 1999 but anticipates a substantial increase
in its capital needs consistent with the implementation of the Company's
Business Plan (described herein), when, and if, implemented. The Company
believes that its current capital will not be sufficient to meet its
anticipated cash needs for the next 12 months. However, any projections of
future cash needs and cash flow are subject to substantial uncertainty.
While the Company intends to obtain additional financing through the sale of
equity and/or debt securities, there can be no assurance that the Company
will obtain financing necessary to implement and undertake its Business
Plan. Moreover, the obtaining of any financing by the Company, will, in all
likelihood, involve the sale of additional equity, debt, or convertible debt
securities, which could result in additional dilution to the Company's
shareholders. Additionally, the Company will, from time to time, consider
the acquisition of or investment in complementary businesses, products,
-12-
<PAGE>
services and technologies, which might impact the Company's liquidity
requirements or cause the Company to issue additional equity or debt
securities. There can be no assurance that financing will be available in
amounts or on terms acceptable to the Company, if at all, in order to
implement its Business Plan.
The Company's liquidity and capital resources did not dramatically
change during fiscal year 2000. On October 1999, in connection with the
Speed Release transaction, the Company sold an option to purchase 40,000
shares of its common stock for which it was paid $40,000. During the
quarter ended February 29, 2000 the Company received an additional
approximately $36,000 as the result of the sale of additional 75,000 shares
of its common stock. As a result of its agreements with AMJ, the Company
sold some product during the quarter ended February 29, 2000 and realized
$56,637 in revenue. However, the Company still lacks the liquidity and
capital resources necessary to implement the Company's Business Plan in any
meaningful manner. The Company continues to search for financing to
accomplish its plan.
Results of Operations for the years ended August 31, 1998
---------------------------------------------------------
and 1999
--------
Revenues.
--------
The Company conducted no revenue-producing activity for the year ended
August 31, 1999 as compared to $16,738 for the year ended August 31, 1998.
The revenue for the year ended August 31, 1998 was derived solely from the
discontinued operations. Other than spending additional funds paid to AMJ
to assist in inventory financing in connection with agreements with AMJ and
the continuing development and implementation of the Company's Business
Plan, the Company had virtually no operations during the year ended
August 31, 1999. Without revenue the Company incurred an operating loss for
the year ended August 31, 1999 of ($363,495) compared to ($211,911) for
similar periods of 1998. The operating loss for the year ended August 31,
1999 was primarily due to expensed research and development costs paid to an
affiliate (AMJ) (totaling $250,000), professional fees totaling $75,342
(including $30,000 of imputed expenses or expenses absorbed by a
shareholder), imputed salaries of $25,000, other administrative expenses of
$10,537 and investor relations of $2,616.
The operating loss in 1998 consisted of $87,114 in professional fees,
bad debts of $69,083, salaries and benefits of $57,031 (imputed salaries
total $50,000), and other administrative expenses of $13,987.
Additionally there was no loss from discontinued operations in 1999
compared to $17,444 in 1998.
New Accounting Standards.
In July 1998, the Financial Accounting Standards Board (FASB) issued
SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities",
which establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the balance sheet and
measure those instruments at fair value. Management does not believe this
will have a material effect on the operations. Implementation of this
standard has recently been delayed by the FASB for a 12-month period through
the issuance of SFAS No. 137. "Accounting for Derivative
-13-
<PAGE>
Instruments and Hedging Activities - deferral of the effective date of FASB
Statement No. 133". The Company will now adopt SFAS 133 as required for its
first quarterly filing of fiscal year 2001.
ITEM 7.
FINANCIAL STATEMENTS
Index to Financial Statement.................................22
Report of Independent Certified Public Accountants
(BDO Seidman, LLP).........................................22
Consolidated balance sheets at August 1999 and 1998..........23
Consolidated statements of loss for the years ended
August 31, 1999 and 1998................................24
Consolidated statements of capital deficit for
the years ended August 31, 1999 and 1998................25
Consolidated statements of cash flows for the years ended
August 31, 1999 and 1998................................26
Notes to consolidated financial statements...................28
-14-
<PAGE>
ITEM 8.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------
None.
PART III
ITEM 9.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16 OF THE EXCHANGE ACT
-------------------------------------------------------
The following table contains information regarding the Company's
directors and executive officers.
Name (and Age) Position(s) Held
-------------- ----------------
Albert Miller (70) Chairman, and Chief
Executive Officer
Frank Harrison (63) Director
George Davis (70) Director
Joe Nicholson (66) Director
Jesus H. "Chuy" Muniz (51) Director and President
Pierre Korsmoe (55) Advisory Director and
principal financial and
accounting officer
Albert Miller has been Chief Executive Officer and Chairman of the
Board of Directors of the Company since January 7, 2000. Prior to that, Mr.
Miller acted as a business consultant to various companies in the finance,
manufacturing, engineering, construction and marketing sectors both in the
U.S. and abroad. Mr. Miller attended San Jose State University and Santa
Clara University. Mr. Miller is a consultant to AMJ Resources, Inc., which,
together with affiliates, hold a majority of the common stock of the
Company.
Frank Harrison, Sr. has been a Director of the Company since May 6,
1998. From 1995 and up until January 7, 2000, he served as President and
Director of Terminator Technologies, Inc. Prior to that, he was responsible
for marketing and investment services for Beechwood Corporation. From 1985
to 1993, Mr. Harrison was President of International Research Securities,
Inc., an investment banking firm in Dallas, Texas. Mr. Harrison is
licensed by the National Association of Securities Dealers, Inc. as a Series
7 investment advisor and principal. Mr. Harrison is a 1957 graduate of the
University of Notre Dame with a B.S. in Marketing.
-15-
<PAGE>
George Davis has been a Director of the Company since 1996, and since
1976 has served as President and Chief Executive Officer of Gulf Coast
Cooling Tower Service, Inc.
Joe Nicholson has been a Director of the Company since May 6, 1998.
During the past five years, Mr. Nicholson has been president and principal
owner of Joe Nicholson & Associates, Inc., a company which represents Dale
Carnegie of North Texas. Mr. Nicholson is a graduate of the University of
Nebraska where he received his Bachelor of Arts degree in 1957.
Jesus H. "Chuy" Muniz has been a Director of the Company since January
7, 2000 and President since January 10, 2000. Mr. Muniz has been President
and Chief Executive Officer of Assurance Professional Contractors, Inc. in
Pharr, Texas, since January 1997. From February 1995 through January 1997,
Mr. Muniz served as Southwest Operations, Human Resources and Safety Manager
for Dean Foods and Vegetable Company in Uvalde, Texas. From May 1, 1994 to
February 23, 1995 he served as Vice-President, Administration for Assurance
Professional Contractors, Incorporated. Prior to that time, Mr. Muniz was
Human Resources/Safety/Quarry Manager for National Gypsum Company in Rotan,
Texas, Administrative Manager with Anchor West, Inc., in Pecos, Texas and
from January 26, 1973 to August 27, 1990, Human Resources/Employee Relations
Representative with Pennzoil Sulphur Company in Pecos, Texas. Mr. Muniz
attended Abilene Christian University in 1993 and 1994.
Pierre Korsmoe has been an advisory, nonvoting Director of the Company
and its Chief Financial Officer since May 6, 1998. Mr. Korsmoe is a
Certified Public Accountant and has been engaged in the private accounting
practice for more than 20 years. Mr. Korsmoe is a graduate of Golden Gate
University at San Francisco, where he received his bachelors degree in
accounting, and where he received his MBA in taxation. Mr. Korsmoe is a
consultant to AMJ Resources, Inc., with together with affiliates, holds a
majority of the Company's common stock. Mr. Korsmoe resigned from all
positions with the Company on July 31, 2000.
None of the officers or directors of the Company had directorships of
any other reporting companies.
None of the officers or directors are involved in any legal
proceedings.
Under the Company's Bylaws, each Director serves until the next
succeeding annual meeting and until his successor is elected and qualified
or until his death, resignation or removal. Annual meetings of shareholders
and directors are held at such time and place as the Board of Directors may
from time to time determine.
ITEM 10.
EXECUTIVE COMPENSATION
----------------------
During 1997, the officers of the Company determined that they would not
take a salary until cash flow from operations permitted them to pay each of
its three (3) officers at the time $50,000. No officers' salaries were paid
in fiscal 1999 or 1998. The SEC staff has determined that the historical
statement of operations should reflect all costs of doing business.
Accordingly, officers' salaries for 1999 and 1998 were imputed. This
expense is reflected in the 1999 statement of operations and also as an
increase to paid-in capital. As discussed above,
-16-
<PAGE>
salaries and benefits for fiscal 1999 were imputed at $25,000 compared to
$50,000 in fiscal 1998.
ITEM 11.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
----------------------
The following table sets forth certain information with respect to each
person known by the Company to be the beneficial owner of five percent (5%)
or more of the Company's Common Stock.
Name and Address
of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership (1) of Class
----------------- ------------------------ ---------
George Davis 242,000(2) 5.72
Route 1, Box 41
Overton, TX 75684
AMJ Resources 5,536,894(3) 72.19
Corporation
2902 D Almaden Expwy.
San Jose, CA 95125
(1) The beneficial owner listed has the sole power to vote and dispose
of the shares owned of record by it, subject to applicable
community property laws.
(2) Includes 60,000 shares issuable upon conversion of Mr.
Davis' preferred stock.
(3) Includes 400,000 shares held of record by AM Resources Corporation
and 400,000 shares held of record by Sytek Resources Corporation,
wholly-owned subsidiaries of AMJ Resources Corporation. Also
includes 3,500,000 shares that may be acquired under a currently
exercisable warrants.
-17-
<PAGE>
The following table sets forth certain information with respect to the
shares of the Company's common stock beneficially owned by each director of
the Company and all directors and executive officers of the Company as a
group.
Amount and Nature of
Name and Address Title of Beneficial Percent
of Beneficial Owner Class Ownership(1) of Class
-------------------- -------- ------------------- --------
Ablert Miller Common -- --
1941 Yellowhammer Ave.
McAllen, TX 8504
Frank Harrison Common 200,000 4.80%
3838 Oak Lawn Ave.
Suite 1000
Dallas, TX 75219
George Davis Common 242,000(2) 5.72%
Route 1, Box 41
Overton, TX 75684
Joe Nicholson Common 27,500(3) *
2025 Oak Meadow Dr.
Bedford, TX 76021
Jesus Muniz Common -- --
3020 Melinda Dr.
Edenburg, TX 78540
All directors and Common 469,500 11.04%
executive officers as
a group (5 persons)
_____________________________
*Less than 1% of class
(1) The beneficial owner listed has the sole power to vote and
dispose of the shares owned of record by it, subject to applicable
community property laws.
(2) Includes 60,000 shares issuable upon conversion of Mr.
Davis' preferred stock.
(3) Includes 25,000 shares issuable upon conversion of Mr.
Nicholson's preferred stock.
-18-
<PAGE>
ITEM 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
See Item 1, "Description of Business," in this report.
ITEM 13
EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) 1. Financial Statements.
The financial statements and schedule listed in the accompanying index
to financial statements are filed as part of this annual report.
2. Exhibits.
No. Description
3.1* Articles of Incorporation of the Registrant.
3.2* Amendment to the Registrant's Articles of Incorporation
changing the name of the Registrant from HAS Acquisition
Company to HAS Oil & Gas, Inc.
3.3* Amendment to the Registrant's Articles of Incorporation
changing the name of the Registrant from HAS Oil & Gas, Inc.
to Kinlaw Energy Partners Corporation
3.4* Amendment to the Registrant's Articles of Incorporation
changing the name of the Registrant from Kinlaw Energy
Partners Corporation to Environmental Plus, Inc.
3.5* Amendment to the Registrant's Articles of Incorporation
changing the name of the Registrant to TTI Industries,
Incorporated and effecting a 1-for-10 reverse stock split of
the Registrant's Common Stock.
3.6* Amendment to Registrant's Articles of Incorporation changing
the name of the Registrant from Environmental Plus, Inc. to
TTI Industries, Inc.
3.7* Bylaws of Registrant
4.1* Form of Common Stock Certificate of Registrant
10.1* Stock Purchase Agreement, dated as of January 15, 1998, by
and among the Registrant, certain of its shareholders and
Terminator Technologies, Inc.
10.2** Option agreement, dated as of January 19, 1999, by and
between the Registrant and AMJ Resources Corporation.
10.3** Amendment to Option Agreement, dated as of October 4, 1999,
by and between the Registrant and AMJ Resources Corporation.
10.4** Stock Purchase and Exchange Agreement, dated as of October 5,
1999, and among the Registrant, Speed Release Lock Company
and Steve Bedowitz. (schedules omitted)
-19-
<PAGE>
21.1* Subsidiaries of the registrant
27.1** Financial Data Schedule
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the last quarter of the period
covered by this Annual Report.
_________________
* Incorporated by reference from the Company's Form 10-KSB for the period
ended August 31, 1998.
**Filed herewith.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
TTI INDUSTRIES, INCORPORATED
By: /s/ Albert J. Miller
----------------------------- August 31, 2000
Albert J. Miller, Chief Executive Officer,
Principal Accounting and Financial Officer
and Chairman
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ George Davis Director August 31, 2000
--------------------
George Davis
/s/ Frank Harrison Director August 31, 2000
--------------------
Frank Harrison
/s/ Joe Nicholson Director August 31, 2000
--------------------
Joe Nicholson
/s/ Jesus H. Muniz Director August 31, 2000
--------------------
Jesus H. "Chuy" Muniz
-20-
<PAGE>
Index to Financial Statements
Index to Financial Statements................................21
Report of Independent Certified Public Accountants
(BDO Seidman, LLP).........................................22
Consolidated balance sheets at August 1999 and 1998..........23
Consolidated statements of loss for the years ended
August 31, 1999 and 1998................................24
Consolidated statements of capital deficit for
the years ended August 31, 1999 and 1998................25
Consolidated statements of cash flows for the years ended
August 31, 1999 and 1998................................26
Notes to consolidated financial statements...................28
-21-
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders
TTI Industries, Incorporated (F/K/A Environmental Plus, Inc.) and
Subsidiaries
We have audited the accompanying consolidated balance sheets of TTI
Industries, Incorporated (F/K/A Environmental Plus, Inc. ) and Subsidiaries,
(the "Company") as of August 31, 1999 and 1998 and the related consolidated
statements of loss, capital deficit and cash flows for the years then ended.
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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company and Subsidiaries as of August 31, 1999 and 1998, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed in
Notes 1 and 9 to the financial statements, the Company has discontinued its
operating segments and has suffered recurring losses from operations that
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to this matter are also described in
Note 9. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ BDO Seidman
BDO Seidman, LLP
Dallas, Texas
January 31, 2000
-22-
<PAGE>
TTI Industries, Incorporated
(F/k/A Environmental Plus, Inc.)
and Subsidiaries
Consolidated Balance Sheets (Note 1)
August 31, 1999 1998
--------------------------------------- ----------- -------------
Assets
Current
Cash $ 166 $ 12
------------------------------------------------------------------
Total current assets 166 12
------------------------------------------------------------------
Other intangibles 5,000 -
------------------------------------------------------------------
$ 5,166 $ 12
==================================================================
Liabilities and Capital Deficit
Current liabilities
Accounts payable and accrued
expenses $ 47,477 $ 17,848
Notes payable and due to related
party 7,400 5,000
------------------------------------------------------------------
Total current liabilities 54,877 22,848
------------------------------------------------------------------
Commitments and contingencies
------------------------------------------------------------------
Capital deficit
Preferred stock, (100,000,000
authorized; $1.00 par, 2,950 and
-0- shares issued and outstanding
at August 31, 1999
and August 31, 1998, respectively) 2,950 -
Common stock, (100,000,000 shares
authorized, $0.01 par,
4,073,401 shares and 4,032,914
issued and outstanding,
at December 31, 1999 and 1998, 42,128 40,328
respectively)
Additional paid-in capital Deficit 1,342,928 1,011,058
Deficit (1,437,717) (1,074,222)
------------------------------------------------------------------
Total capital deficit (49,711) (22,836)
------------------------------------------------------------------
$ 5,166 $ 12
==================================================================
See accompanying summary of accounting policies and notes to
consolidated financial statements.
-23-
<PAGE>
TTI Industries, Incorporated
(F/k/A Environmental Plus, Inc.)
and Subsidiaries
Consolidated Balance Sheets (Note 1)
Years ended August 31, 1999 1998
-------------------------------------- --------- --------
Revenue:
Sales $ - $ 2,593
Other - 14,145
------------------------------------------------------------
Total - 16,738
------------------------------------------------------------
- 1,434
Cost of Sales
------------------------------------------------------------
General and Administrative:
Research and development costs,
paid to affiliate 250,000 -
Professional fees 75,342 87,114
Bad debts - 69,083
Salaries and benefits 25,000 57,031
Other administrative expenses 10,537 13,987
Investor relations 2,616 -
------------------------------------------------------------
Total General and Administrative 363,495 227,215
------------------------------------------------------------
Loss from Continuing Operations (363,495) (211,911)
------------------------------------------------------------
Loss from Discontinued Operations
(Note 1) - (17,744)
------------------------------------------------------------
Net Loss (363,495) (229,655)
------------------------------------------------------------
Per Share Data Basic and Diluted
(Note 1):
Loss from continuing operations (.09) (.05)
Loss from discontinued operations - (.01)
Net loss per share (.09) (.06)
Weighted average shares outstanding 4,065,401 4,032,914
===========================================================
See accompanying summary of accounting policies
and notes to consolidated financial statements.
-24-
<PAGE>
<TABLE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Consolidated Statements of Capital
Deficit
Years Ended August 31, 1999 and 1998
(Note 1)
Preferred Stock Common Stock Total
$1.00 Par Value $.01 Par Value Additional Stockholders'
------------------ ---------------- Paid-In Equity
Shares Amount Shares Amount Capital Deficit (Capital Deficit)
=========================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
$ 724,184 $ 466,600 4,032,914 $ 40,328 $ 644,084 $ (844,567) $ 306,445
Balance, August 31,
1997
Cancellation of all
outstanding shares
(issued related to
Gulf Coast and
Fire Zap
Acquisitions) due to
sale of
Gulf Coast and Fire
Zap (Note 1)
and adjustment for
excess cost of
cancelled preferred
shares over
net assets value of
sold subsidiaries
(Note 1) (724,184) (466,600) - - 266,482 - (200,118)
Imputed officer's
salary (Note 3) - - - - 50,000 - 50,000
Sale of common stock
warrants - - - - 20,000 - 20,000
Expenses paid by
shareholders - - - - 30,492 - 30,492
Net loss - - - - - (229,655) (229,655)
- - 4,032,914 40,328 1,011,058 (1,074,222) (22,836)
Balance, August 31, 1998
Imputed officer
salary and expenses - - - - 55,000 - 55,000
Net loss - - - - - (363,495) (363,495)
Issuance of preferred
stock 2,950 2,950 - - 276,870 - 276,870
Issuance of common
stock - - 36,000 1,800 - - 1,800
Balance, August 31, 1999 2,950 2,950 4,068,914 42,128 1,342,928 (1,437,717) (49,711)
=======================================================================================================
</TABLE>
See accompanying summary of accounting policies
and notes to consolidated financial statements.
-25-
<PAGE>
TTI Industries, Incorporated
(F/k/A Environmental Plus, Inc.)
and Subsidiaries
Consolidated Balance Sheets (Note 1)
Increase (Decrease) in Cash
Years ended August 31, 1999 1998
-----------------------------------------------------------------
Cash Flows from Continuing Operating
Activities:
Loss from operations $(363,495) $(229,655)
Adjustments to reconcile loss from
operations to
Cash used in operating activities:
Loss from discontinued operations - 17,744
Imputed officers' salaries and
expenses 55,000 50,000
Reserve for bad debts - 69,083
Change in assets and liabilities:
Accounts receivable - trade - 9,585
Due to related party 2,400 -
Note receivable - 45,186
Inventory - 218
Other assets - (4,707)
Accounts payable and accrued
expenses 29,617 (11,235)
------------------------------------------------------------------
Net cash flows used in operating
activities of continuing operations (276,478) (53,781)
------------------------------------------------------------------
Cash Flows from Continuing Investing
Activities:
Shareholder contributions to capital - 30,492
Investment in subsidiaries (5,000) -
------------------------------------------------------------------
Net cash flows (used in) provided by
investing activities (5,000) 30,492
------------------------------------------------------------------
Cash Flows from Continuing Financing
Activities:
Retirement of debt - (36,779)
Sale of stock and warrants 281,632 20,000
Proceeds from notes payable - affiliate - 5,000
------------------------------------------------------------------
Net cash flows provided by (used in)
financing activities 281,632 (11,779)
-------------------------------------------------------------------
-26-
<PAGE>
TTI Industries, Incorporated
(F/k/A Environmental Plus, Inc.)
and Subsidiaries
Consolidated Balance Sheets (Note 1)
Increase (Decrease) in Cash
Years ended August 31, 1999 1998
--------------------------------------------------------------------
Discontinued Operations:
Net cash provided by operating activities - 21,437
Net cash used in investing activities - (2,618)
Net cash used in financing activities - (2,965)
--------------------------------------------------------------------
Net cash provided by discontinued operations - 15,854
--------------------------------------------------------------------
Increase (decrease) in cash 154 (19,214)
Cash, beginning of year 12 19,226
--------------------------------------------------------------------
Cash, ending of year $ 166 $ 12
====================================================================
Supplemental Cash Flow Information:
Noncash activities:
Transfer of net assets to shareholder $ - $200,118
(Note 1)
Retirement of preferred shares $ - $466,600
====================================================================
See accompanying summary of accounting policies
and notes to consolidated financial statements.
-27-
<PAGE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
====================================================================
1. Summary of
Accounting
Policies
Nature of The accompanying consolidated financial
Business, statements include the accounts of TTI
Discontinued Industries, Inc. (F/K/A Environmental Plus,
Operations and Inc.) and its formerly wholly-owned
Basis of subsidiaries Fire Zap, Inc. and Gulf Coast
Presentation Towers, Inc. through the date of
disposition, as discussed below. All
material intercompany transactions and
balances have been eliminated in
consolidation.
Prior to the acquisition of majority shares
(fifty-eight percent) of the Company by a
new controlling shareholder group effective
May 1, 1998, the Company operated as
Environmental Plus, Inc. (EPI), a Texas
Corporation, and was primarily in the
business of construction and repair of
industrial cooling towers. During 1998 and
as part of management's plan to have the
Company continue to operate in the
foreseeable future, a Stock Purchase
Agreement (the "Agreement") was entered into
among Terminator Technologies, Inc. ("TTI"),
a Texas corporation, AMJ Resources, Inc.
("AMJ"), a Delaware corporation, EPI and its
various shareholders. As a result of the
Agreement, TTI, AMJ and their respective
assigns have become the new controlling
shareholder(s) and control group of the
Company.
As part of the Agreement, the Company
approved and adopted an amendment to the
articles of incorporation to consummate a
reverse stock split of its common shares of
1 for 10, effective May 1, 1998.
Discontinued Just prior to and as a condition of the
Operations Agreement, the Company sold its wholly-owned
subsidiaries, Fire Zap, Inc. and Gulf Coast
Towers, Inc. to individuals/shareholders
from whom the Company originally purchased
them in 1996. According to the provisions
of
-28-
<PAGE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================
the Agreement, the Company sold its
investment in the capital stock of its
wholly-owned subsidiaries in exchange for
all of the outstanding shares of the
Company's Series A convertible preferred
stock which was issued in connection with
the Company's acquisition of such
subsidiaries. The capital stock of the
wholly-owned subsidiaries was exchanged at
the net book value of the assets of the
respective companies. No gain or loss was
recognized by the Company.
The Company retired shares acquired in this
transaction totaling $150,000 and $574,184
of its Series A Preferred Stock for Fire
Zap, Inc. and Gulf Coast Towers, Inc.,
respectively.
The revenue and net loss from operations of
discontinued segments is as follows:
Year ended August 31, 1999 1998
---------------------------------------------
Revenues $ - $ 18,301
(Loss) from discontinued
operations - (17,744)
Use of Estimates The preparation of financial statements in
conformity with generally accepted
accounting principles requires management
to make estimates and assumptions that
affect the reported amounts of assets and
liabilities and disclose of contingent
assets and liabilities at the date of the
financial statements and reported amounts
of revenues and expenses during the
reporting period. Actual results could
differ from those estimates.
Revenue Service and sales revenue are recognized
Recognition when services are rendered and products
are shipped.
Reclassifications Certain consolidated financial statement
amounts were reclassified from the
previously reported financial statements
in order to conform with current
presentation.
-29-
<PAGE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================
Income Taxes Income taxes are provided for the tax
effects of transactions reported in the
financial statements and consist of taxes
currently due plus deferred taxes related
primarily to differences between the basis
of property, plant and equipment,
inventory, and accounts and notes
receivable for financial and income tax
reporting. The net deferred tax assets and
liabilities represent the future tax return
consequences of those differences, which
will either be taxable or deductible when
the assets and liabilities are recovered or
settled.
Cash and Cash For purposes of the consolidated statements
Equivalents of cash flows, the Company considers all
highly liquid debt instruments purchased
with an initial maturity of three months or
less to be cash equivalents.
Earnings Per Basic EPS is computed by dividing net
Share income (loss) available for common
shareholders, as well as other applicable
items in the Consolidated Statement of
Loss, by the weighted average number of
common shares outstanding during the
respective periods. Diluted EPS gives
effect to potential common shares
outstanding during the respective periods
and related adjustments to net income
(loss) available for common shareholders
and other reportable items as applicable.
No potential common shares shall be
included in the computation of any diluted
per share amount when a loss from
continuing operations exists, even if the
entity reports net income. Accordingly,
earnings per share assuming dilution on the
face of the income statement reflects the
same earnings per share and weighted
average shares outstanding as for the basic
EPS.
Fair Value of Statement of Financial Accounting Standards
Financial No. 107, "Disclosures about Fair Value of
Instruments Financial Instruments, "requires that the
Company disclose the estimated fair values
for its financial
-30-
<PAGE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================
instruments for which it is practicable to
estimate their values. The following
methods and assumptions were used to
estimate the fair value of each class of
financial instruments:
Notes payable to related party - The
carrying value of notes payable to
related party approximates fair value
because of the short-maturity of those
instruments.
New Accounting In July 1998, the Financial Accounting
Standards Standards Board (FASB) issued SFAS No. 133
"Accounting for Derivative Instruments and
Hedging Activities.", which establishes
accounting and reporting standards for
derivative instruments and hedging
activities. It requires that an entity
recognize all derivatives as either assets
or liabilities in the balance sheet and
measure those instruments at fair value.
Management does not believe this will have
a material effect on the operations.
Implementation of this standard has
recently been delayed by the FASB for a 12-
month period through the issuance of SFAS
No. 137. "Accounting for Derivative
Instruments and Hedging Activities -
deferral of the effective date of FASB
Statement No. 133". The Company will now
adopt SFAS 133 as required for its first
quarterly filing of fiscal year 2001.
2. Notes Payable Notes payable and due to related parties
and due to consist of $7,400 and $5,000 due AMJ at
Related Parties August 31, 1999 and 1998, respectively.
3. Transactions As part of the Agreement, TTI, AMJ and
with Related their respective assigns became the new
Parties and control group through the purchase of the
Subsequent majority shares of EPI and it's various
Events shareholders. In fiscal 1998, no
transaction occurred between the new
control group and the Company, except for a
$5,000 advance. During 1999, the Company
paid $250,000 to an affiliate for research
and development costs related to TTI's
expected products.
-31-
<PAGE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================
During 1999 and 1998, the officers of the
Company determined that they would not take
a salary until cash flow from operations
permitted them to pay each of three
officers $50,000. Therefore, no salaries
were paid in fiscal 1999 and 1998. The SEC
staff has determined that the historical
statement of operations should reflect all
costs of doing business. Accordingly,
officers' salaries for 1999 and 1998 were
imputed. This expense is reflected in the
1999 and 1998 statements of loss with an
increase to paid-in capital. In addition,
certain other operating expenses absorbed
by related parties were charged to expense
and credited to additional paid in capital
or accrued expenses to be reimbursed.
Option Agreement In connection with the Business Plan, on
with AMJ January 19, 1999 the Company entered into
an agreement (the "Option Agreement") with
AMJ which Agreement was amended on October
4, 1999. Pursuant to the Agreement as
originally executed, among other things,
(i) the Company acquired AMJ's rights to
use, manufacture and sell three separate
products when they are market ready, on
such terms as would be mutually agreeable
at a future date by and between the Company
and AMJ; (ii) the Company's rights under
the Option Agreement were for a period of
twenty-four (24) months, and (iii) AMJ had
the right to assign the rights to the
Products to a limited partnership for the
purpose of funding research and
development, provided the Company retains
its rights to use, manufacture and sell the
Products. On October 4, 1999 the Company
and AMJ amended the Option Agreement to
eliminate the condition of subsequent
pricing and to lengthen the terms of the
agreement to the life of existing and
pending patents and to provide for the
Company's reimbursement of AMJ's actual
costs for the development of the products.
On January 7, 2000, AMJ agreed to eliminate
and cancel the reimbursement provision of
the Option Agreement.
There can be no assurance that the Option
Agreement will result in any revenue or
income for the Company that the Company
will obtain financing necessary to
manufacture and distribute the products, or
that the Option Agreement will have any
ultimate realizable value to the Company.
-32-
<PAGE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
===============================================================
Assignment by Additionally, in connection with the
AMJ Business Plan, on January 19, 1999 AMJ and
the Company entered into an Assignment
Agreement (the "Assignment") which was also
amended on October 4, 1999. Pursuant to
the Assignment, among other things, AMJ
assigned to the Company all of AMJ's rights
under a license agreement dated July 16,
1998 between AMJ and Terminator Turtle TM
L.P. ("TTLP") (the "License Agreement"), in
exchange for the Company assuming all of
AMJ's obligations under the License
Agreement and the payment by the Company to
AMJ of a cashless warrant exercisable for a
period of two (2) years to purchase
1,500,000 shares of the Company's common
stock at $0.10 per share. Although the
Assignment was approved by the Company's
Board of Directors, it provided that it
would not become effective until (i) the
Company became current with its filings to
the Securities and Exchange Commission
under the reporting requirements of the
Securities Exchange Act of 1934, as
amended, and (ii) the Company had completed
the sale of certain 12 1/2% convertible
preferred shares.
Under the Assignment, among other things,
(i) TTLP, assigned its rights to certain
products to the Company, (ii) the Company
was granted until December 31, 2009,
exclusive worldwide use of the patent
relating to certain products, and (iii) the
Company was granted the right to
manufacture, market, sell and distribute
these products, all in exchange for a
royalty payable to TTLP equal to 5% of all
related sales, but in no event less than
$100,000. On October 4, 1999 the Company
and AMJ amended the Assignment so that (a)
AMJ would receive a cashless warrant to
acquire 2,000,000 shares of the Company's
common stock exercisable at $0.05 per
share; (b) the warrant would expire on
November 10, 2001 but would not be exercisable
until September 11, 2000; (c) the conditions
to effectiveness of the Assignment were
eliminated; and (d) the royalty from the
Company to AMJ was eliminated.
There can be no assurance that the Company
will obtain financing necessary to
manufacture and distribute these products
or that the Assignment will have any
ultimate realizable value to the Company or
will result in any revenue or income to the
Company.
-33-
<PAGE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================
Agreement with Speed Release Lock Company.
On October 5, 1999, the Company entered
into a Stock Purchase and Exchange
Agreement (the "Speed Release Agreement")
with Speed Release Lock Company ("Speed
Release") and Mr. Steve Bedowitz. Pursuant
to the Speed Release Agreement, among other
things, (i) Mr. Steve Bedowitz, president
and majority shareholder of Speed Release,
purchase an option exercisable upon 60 days
prior written notice, at a price of $40,000
paid to the Company, to purchase 165,000
shares of the Company's Common Stock at a
purchase price of $.01 per share; (ii) the
Company acquired 10% of Speed Release's
Common Stock in exchange for 9.9% of the
Company's Common Stock; (iii) the Company
obtained the right for a period of 180 days
to demand that Speed Release, at Speed
Release's cost, file a registration
statement with the Securities and Exchange
Commission, with respect to the Speed
Release shares owned by the Company,
provided however, that the Company, if such
right is exercised, is limited to
distributing such Speed Release shares only
to shareholders of the Company (and may not
sell such shares in the open market); and
(iv) if the Company does not exercise its
right to demand registration within 180
days from the date of the Speed Release
Agreement, Speed Release may rescind the
transaction and reacquire its shares in
return for the Company's shares acquired by
Speed Release. The Company has notified
Speed Release that the Company has
exercised its demand registration rights
and has requested Speed Release to file a
registration statement with respect to such
shares. There can be no
assurance that the registration statement
will be filed, or if filed will become
effective. The Company's investment in
Speed Release will be accounted for using
the cost method and shall be valued at a
future date.
The Company and Speed Release have entered
into discussions regarding a possible
business combination. However, such
discussions are preliminary in nature and
there can be no assurance that such
discussions will result in any further
agreement between the Company and Speed
Release or that if any additional agreement
is reached that it will add any value to
the Company.
-34-
<PAGE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================
4. Income Taxes Management established a 100 percent
valuation allowance since it is more likely
than not that the deferred tax assets will
not be realized based on the weight of
available evidence.
In accordance with the Internal Revenue
Code, the availability to carry forward net
operating losses incurred prior to 1987 are
limited due to a significant change in
ownership during that year. If not
utilized, these net operating losses will
begin to expire in 2006. During fiscal
1996 and 1998 there were two separate
significant changes in ownership which
limit the availability of the net operating
losses. The extent of the limitation has
not been determined.
The net deferred tax asset in the
accompanying balance sheets includes the
following at August 31,:
1999 1998
--------------------------------------------
Deferred tax asset $ 293,000 $ 169,000
Less valuation
allowance (293,000) (169,000)
--------------------------------------------
Net deferred tax
asset $ - $ -
============================================
The valuation allowance activity for the
years ended August 31, consists of the
following:
1999 1998
----------------------------------------------
Balance, beginning of
year $ 169,000 $ 91,000
Current year net
operating loss 124,000 78,000
----------------------------------------------
Balance, end of year $ 293,000 $ 169,000
==============================================
-35-
<PAGE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================
5. Preferred Prior to the Agreement, as further discussed
Stock in Note 1, the Company exchanged all capital
stock of its wholly-owned subsidiaries in
exchange for all of the outstanding shares
of these Series A convertible preferred
stock. The transaction resulted in a
$466,600 charge to the preferred stock
account and $266,482 credit to additional
paid-in capital. All preferred shares were
canceled.
6. Stock Purchase As part of the Agreement, the Company issued
Warrants a 1.5 million Stock Purchase Warrant to TTI
for $20,000. The valuation of these shares
is consider de minimus. The warrants are
initially exercisable at $0.04445 per share
and expire prior to May 6, 2000. The
transaction resulted in a $20,000 credit to
additional paid-in capital.
7. Commitments The Company is generally self-insured for
and losses and liabilities related primarily to
Contingencies workers' compensation, health and welfare
claims, physical damage to property,
business interruption resulting from certain
events, and comprehensive general, product
and vehicle liability.
8. Supplemental During the year ending August 31, 1999 and
Cash Flow 1998 there was no cash paid for interest or
Information income taxes, and $862 paid for Texas
franchise taxes.
9. Going Concern The accompanying consolidated financial
and Subsequent statements have been prepared assuming the
Events Company will continue as a going concern.
As discussed in Note 1 to the financial
statements and below, the Company
discontinued its operating segments and
suffered recurring losses from operations
that raise substantial doubt about the
Company's ability to continue as a going
concern. Management's plans in regard to
this matter are described in the following
paragraphs. The financial statements do not
include any adjustments that might result
from the outcome of this uncertainty.
-36-
<PAGE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================
Since May 1998, Management developed a broad
operational and financial restructuring
plan. That plan was presented to the
Company's Board of Directors in January
1999. TTI Industries, Inc. had virtually no
business operations during fiscal 1999 and
1998. The Company plans to operate as a
holding company for certain subsidiaries.
One subsidiary, Terminator Technologies,
Inc., was formed as a manufacturing and
marketing subsidiary and TermTex Corporation
was formed as a research and development
subsidiary. In January 1999, the Company
concluded the purchase of the two subsidiary
companies, Terminator Technologies, Inc. and
Term Tex Corporation from AMJ, which
consisted of the purchase of all of the
1,000 issued and outstanding shares of each
Company's common stock for a total purchase
price of $5,000 ($2,500 each). The
Company's primary focus in the retail market
will be the production and sale of a series
of pest control products for the home and
garden, with an emphasis on products that
(1) are safe for children, pets and
wildlife, (2) are environmentally friendly,
(3) are low cost and (4) utilize attractive
animal-shaped designs.
Going forward, significant amounts of
additional cash will be needed to pay the
costs to implement the proposed business
plan and to fund losses until the Company
has achieved profitability. Based on
management's proposed plan, the Company
estimates that at least $1.5 million will be
required to fund the Company's restructuring
costs and operations through the end of
fiscal 2000 and that additional amounts
could be required thereafter.
-37-
<PAGE>
TTI Industries, Incorporated
(F/K/A Environmental Plus, Inc.)
and Subsidiaries
Notes to Consolidated Financial Statements
================================================================
While there is no assurance that funding
will be available to execute the plan, the
Company is continuing to seek financing
exploring a number of alternatives in this
regard. The Company believes that this
additional financing, along with its current
credit facilities, will be sufficient to
support the Company's liquidity requirements
through the end of fiscal 2000 depending on
operating results.
In the absence of long-term financial
support from investors, there can be no
assurance that additional financing can be
obtained from conventional sources.
Management is exploring alternatives that
include seeking strategic investors, or
pursuing other transactions that could
result in diluting existing shareholders.
There can be no assurance that management's
efforts in this regard will be successful.
Management believes that, despite the
financial hurdles and funding uncertainties
going forward, it has under development a
business plan that, if successfully funded
and executed can significantly improve
operating results. The support of the
Company's vendors, customers, lenders,
stockholders and employees will continue to
be key to the Company's future success.
-38-
