SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
033-36198
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Commission File Number
NET/TECH INTERNATIONAL, INC.
----------------------------
(Name of Small Business Issuer in its charter)
DELAWARE 22-3038309
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization). Identification No.)
1 WEST FRONT STREET, SUITE 30, RED BANK, NEW JERSEY 07701
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (732) 345-1100
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: _________ shares of common stock on
_________________.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ ]
<PAGE>
Net/Tech International, Inc.
Part I
Item 1
Balance Sheet Assets ............................................ 1
Balance Sheet Liabilities ....................................... 2
Income Statement ................................................ 3
Cash Flow Statement ............................................. 4
Statement of Stockholder's Equity ............................... 5
Item 2
Part II .............................................................. 6
Item 6 ............................................................... 8
<PAGE>
Part I
- ------
Item 1
- ------
Balance Sheet Assets
- --------------------
(Unaudited)
Net/Tech International, Inc.
Balance Sheets
<TABLE>
<CAPTION>
February 29, November 30,
2000 1999
-----------------------------
Assets
Current Assets
<S> <C> <C>
Cash $ 6,728 $ 18,589
Accounts receivable -- 24,000
Inventory
Prepaid expenses -- 3,168
-----------------------------
Total Current Assets 6,728 45,757
-----------------------------
Fixed Assets
Leasehold improvements -- --
Furniture and fixtures -- --
Machinery and equipment -- --
-----------------------------
Less Accumulated Depreciation -- --
-----------------------------
Intangible Assets
Patent application costs (net of accumulated
amortization of $6,250 and $5,000 respectively) 18,750 20,000
Other Assets
Security deposits -- 10,850
-----------------------------
Total Assets $ 25,478 $ 76,607
=============================
</TABLE>
1
<PAGE>
Balance Sheets Liabilities
- --------------------------
(Unaudited)
Net/Tech International, Inc.
Balance Sheets
<TABLE>
<CAPTION>
February 29, November 30,
2000 1999
-----------------------------
Liabilities
Liabilities and Stockholdrs' Equity
Current Liabilities
<S> <C> <C>
Accounts payable and accrued expenses and interest $ 126,945 $ 173,745
Obligations under capital lease, current portion -- --
-----------------------------
Total Liabilities 126,945 173,745
-----------------------------
Stockholders' Equity (Deficit)
Common Stock, $.01 par value: 20,000,000 authorized;
9,758,671 and 9,758,671 shares issued and
outstanding, respectively 97,587 97,587
Additional paid-in capital 5,980,800 5,980,800
Deficit (6,179,854) (6,175,525)
-----------------------------
Total Stockholders' Equity (101,467) (97,138)
-----------------------------
Total liabilities and stockholders' equity $ 25,478 $ 76,607
=============================
</TABLE>
See accompanying notes to consolidated financial statements are an integral part
of these financial statements
2
<PAGE>
Income Statement
- ----------------
(Unaudited)
Net/Tech International, Inc.
Statement of Losses
<TABLE>
<CAPTION>
For the Three For the Year For the Year
Months Ended Ended Ended
February 29, November 30, November 30,
2000 1999 1998
----------------------------------------------
<S> <C> <C> <C>
Revenue $ 12,000 $ 158,381 $ 36,022
----------------------------------------------
Costs and Expenses:
Cost of Sales -- 12,535 14,674
Marketing, general & administrative expenses 15,288 295,211 1,298,821
Research, development and related expenses -- 25,298 419,013
Litigation Settlement -- 80,904
Depreciation and amortization 1,250 20,419 20,266
----------------------------------------------
Operating Loss (4,538) (275,986) (1,716,752)
Other (income) and expense
Interest Income (209) (2,602) (16,366)
Interest Expense -- 276 409
Loss on abandonment of assets -- 30,483 371,082
----------------------------------------------
Net Income (Loss) $ (4,329) $ (304,143) $ (2,071,877)
==============================================
Net Income (loss) per share (0.00) (0.03) (0.29)
Nuber of Shares Used In Computation 9,758,671 9,680,894 7,085,086
</TABLE>
See accompanying notes to consolidated financial statements are an integral part
of these financial statements
3
<PAGE>
Cash Flow Statement
- -------------------
(Unaudited)
Net/Tech International, Inc.
Statement of Cash Flows
<TABLE>
<CAPTION>
For the Three For the Year For the Year
Months Ended Ended
February 29 November 30, November 30,
2000 1999 1998
----------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net profit (loss) $ (4,329) $ (60,756) $ (2,071,877)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED IN OPERATING ACTIVITIES
Depreciation 16,091 12,873
Amortization of intangible assets 1,250 2,500 7,394
Loss (gain) on disposal of assets 30,133 119,795
Compensation paid in common stock -- 202,905
Accounts receivable 24,000 (146,563) (9,437)
Inventory -- 41,479
Prepaid expenses 3,168 9,251 (12,419)
Security deposits 10,850 -- (6,806)
Accounts payable, accrued expenses and interest (46,800) (55,642) 44,486
Accrued compensation -- (125,000)
Deposits -- 1,600
Other -- (84)
----------------------------------------------
Total Adjustments (7,532) (144,230) 276,786
----------------------------------------------
NET CASH (USED IN) OPERATING ACTIVITIES (11,861) (204,986) (1,795,091)
----------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment-net -- -- (80,572)
----------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Issuance of common stock 65,000 1,205,000
Proceeds from options sold -- --
Principal payments under capital leases (1,759) (1,505)
----------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- 63,241 1,203,495
----------------------------------------------
NET INCREASE (DECREASE) IN CASH (11,861) (141,745) (672,168)
CASH AT BEGINNING OF YEAR 18,589 160,334 832,502
----------------------------------------------
CASH AT END OF YEAR $ 6,728 $ 18,589 $ 160,334
==============================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ -- $ 276 $ 409
Income taxes $ -- $ -- $ --
</TABLE>
Supplemental schedule of noncash activities:
The Company recognized consulting expense of $12,605 for common stock in
connection with contracts to vendors. The Company recognized $170,000 in
compensation expense on options granted an employeee. The expense was calculated
on the difference between the fair market value of the stock less the exercise
price on the date of the grant. The Company abandoned its original prototype and
sustained a loss of $119,795 which was net of accumulated depreciation of
$6,495. The Company abandoned all of its inventory in relation to the original
prototypes and sustained a loss in the amount of $251,288.
The accompanying notes to the financial statements are an integral part of these
statements.
4
<PAGE>
Statement of Stockholder's Equity
- ---------------------------------
(Unaudited)
Net/Tech International, Inc.
Statement of Stockholders' Equity (Deficit)
Inception Through November 30, 1999
<TABLE>
<CAPTION>
Total
Common Stock Additional Deficit Shareholders'
Shares Amount Paid-in Capital Equity (Deficit)
------------------------------------------------------------------------------
January 10, 1990 (Inception)
<S> <C> <C> <C> <C> <C>
Shares issued at $.01 per unit 3,162,500 $ 31,625 $ -- $ -- $ 31,625
For cash-private placement 25,000 250 250
For promotional service provided 750,000 7,500 7,500
For subscription receivable 100,000 1,000 1,000
For organizational costs provided 200,000 2,000 2,000
For patent assignment
Shares issued at $1.00 per unit
For cash-private placement 130,000 1,300 128,700 130,000
Exercise of Options 30,000 300 29,700 30,000
Net (Loss) (154,151) (154,151)
------------------------------------------------------------------------------
Balance November 30, 1990 4,397,500 43,975 158,400 (154,151) 48,224
December 1,1990 to November 30,1991
Net (Loss) (144,403) (144,403)
------------------------------------------------------------------------------
Balance November 30, 1991 4,397,500 43,975 158,400 (298,554) (96,179)
Shares issued at $7.00 per share
for cash - IPO 149,110 1,491 1,042,279 1,043,770
Shares issued at $2.32 per share
for convertible note 55,787 558 129,426 129,984
Shares issued at $2.00 per share
for inside A Warrants 10,000 100 19,900 20,000
Shares issued at $2.67 per share
for inside B Warrants 10,000 100 26,600 26,700
Reduction of defered offering costs (212,813) (212,813)
Net (Loss) (662,629) (662,629)
------------------------------------------------------------------------------
Balance November 30,1992 4,622,397 46,224 1,163,792 (961,183) 248,833
Shares issued at $7.50 per share
for - IPO Warrants 33,230 332 248,893 249,225
Shares issued at $4.66 per share
for convertible Note A Warrants 500 5 2,325 2,330
Shares issued at $2.00 per share
for inside A Warrants 25,000 250 49,750 50,000
Shares issued at $2.67 per share
for inside B Warrants 5,000 50 13,320 13,370
Proceeds from private placement:
Shares issued at $2.50 per share 60,000 600 148,386 148,986
Shares issued at $6.00 per share 3,000 30 17,870 17,900
Shares issued at $2.42 per share 92,000 920 222,080 223,000
Shares issued at $2.33 per share 10,000 100 23,250 23,350
Shares issued at $4.00 per share
for professional services 2,000 20 7,980 8,000
Net (Loss) (656,814) (656,814)
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Balance November 30,1993 4,853,127 48,531 1,897,646 (1,617,997) 328,180
Proceeds from private placement:
shares issued at $2.75 per share 2,000 20 5,480 5,500
Net (Loss) (521,615) (521,615)
------------------------------------------------------------------------------
Balance November 30, 1994 4,855,127 48,551 1,903,126 (2,139,612) (187,935)
Net (Loss) (235,508) (235,508)
------------------------------------------------------------------------------
Balance November 30, 1995 4,855,127 48,551 1,903,126 (2,375,120) (423,443)
Shares issued at $1.25 per share for
inside A&B Warrants 149,874 1,499 185,844 187,343
Proceeds from private placement:
shares issued at $0.25 per share 150,000 1,500 36,000 37,500
Shares issued at $1.00 per share
to acquire Pressure Point Tech 25,000 250 24,750 25,000
Shares issued at $1.00 per share
for convertible loan 517,211 5,172 512,039 517,211
Net (Loss) (198,241) (198,241)
------------------------------------------------------------------------------
Balance November 30, 1996 5,697,212 56,972 2,661,759 (2,573,361) 145,370
Proceeds from private placement:
Shares issued at $1.25 per share 626,000 6,260 776,240 782,500
Sale of Options for $1.00 per option
with an exercise price of $2.50 -- -- 200,000 200,000
Sale of Options for $0.25 per option
with an exercise price of $2.50 -- -- 270,000 270,000
Shares issued at $1.50 per share upon
exercise of stock options 349,998 3,500 521,500 525,000
Shares issued upon exercise of
stock options 16,000 160 15,090 15,250
Compensation expense for issuance of
stock options 94,000 94,000
Net (Loss) (1,226,144) (1,226,144)
------------------------------------------------------------------------------
Balance November 30, 1997 6,689,210 66,892 4,538,589 (3,799,505) 805,976
Shares issued at $2.00 per share 245,000 2,450 487,550 490,000
Shares issued upon exercise of
stock options 20,000 200 24,800 25,000
Shares issued at $1.25 per share 100,000 1,000 124,000 125,000
Shares issued for consulting service 11,858 119 27,486 27,605
Shares issued as compensation 1,429 14 4,986 5,000
Shares issued at $1.75 per share 57,143 571 99,429 100,000
Shares issued at $1.50 per share 100,000 1,000 149,000 150,000
Proceeds from private placement:
Shares issued at $0.15 per share 2,099,997 21,000 294,000 315,000
Compensation expense for issuance of
stock options 170,300 170,300
Net (Loss) (2,071,877) (2,071,877)
------------------------------------------------------------------------------
Balance November 30, 1998 9,324,637 93,246 5,920,140 (5,871,382) 142,004
Shares issued upon exercise of
stock options 434,034 4,341 60,660 65,001
Net (Loss) (304,143) (304,143)
------------------------------------------------------------------------------
Balance November 30, 1999 9,758,671 97,587 5,980,800 (6,175,525) (97,138)
Net (Loss) (4,329) (4,329)
------------------------------------------------------------------------------
Balance February 29, 2000 9,758,671 $ 97,587 $ 5,980,800 $ (6,179,854) $ (101,467)
==============================================================================
</TABLE>
The accompanying notes to the financial statements are an integral part of these
statements.
5
<PAGE>
NOTE 1: FINANCIAL STATEMENTS
The Balance Sheet as of February 29,2000, the Statement of Operations for
the three months ended February 29, 2000 and the Statement of Cash Flows for the
three months ended February 29, 2000 have been prepared by the Company, without
audit. In the opinion of Management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and changes in cash flows at February 29, 2000 and for all
periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's November 30, 1999 annual
report to shareholders. The results of operations for the period ended August
31, 1999 are not necessarily indicative of the operating results for the full
year.
Part II
- -------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION.
The Company has entered into an agreement to acquire Results Oriented
Integration Corporation d/b/a ROI Corporation, a privately held Georgia
corporation. With the acquisition of ROI, the Company will be in a new business,
providing payment processing software to the e-commerce marketplace, as well as
retail and mail order businesses.
ROI ACQUISITION
ROI markets software that processes electronic payment transactions for
companies selling through Internet e-commerce, retail outlets, and mail order
call centers. ROI's primary software is "e-transaction middleware" that is
certified to provide access to credit card and check authorization networks for
application software from companies like Binary Tree, Computer Associates, J.D.
Edwards, Friedman Corporation, HarrisData, Intentia, LANSA, VAI, and dozens
more. ROI's middleware is used in both business-to-business and
business-to-consumer transactions by companies ranging from very small to very
large Internet marketers and retailers, including Alltel, Brunswick, 800.com,
IBM, Omaha Steaks, and Skytel.
ROI is a leader in credit card processing software for the IBM AS/400 in
the United States. The AS/400 is one of the world's most popular business
computers, with more than 650,000 systems sold in more than 150 countries. The
Company believes the availability of additional capital will allow ROI to
leverage its position and expand internationally. Additionally, ROI intends to
offer its new ROI JavaCardTM middleware on other systems like Unix, Linux, and
Windows. To further broaden its offerings, the Company will pursue acquisitions
of other software companies whose products are complementary to ROI's.
Once all of the terms and conditions of the agreement for the acquisition
of ROI have been met, ROI's shareholders will have controlling interest in the
Company, ROI management will replace Net/Tech management, and the name of the
Company will be changed to ROI. The Company believes that the potential market
for ROI products and services will continue to grow rapidly as more and more
companies implement e-commerce systems.
6
<PAGE>
The Company must issue (after a 1-for-6 reverse split) a total of 6,118,918
shares of Common Stock, par value $.01 per share, to be exchanged for all of the
issued and outstanding shares of common stock of ROI. These shares will not be
registered under the Securities Act of 1933, as amended, and must be held for a
minimum of two years. 2,352,988 of these shares will be delivered at closing and
3,765,930 of these shares will be held in escrow, with a portion released each
year based on the Company's Net Income Before Income Taxes ("NIBIT") for the
fiscal years ending in 2000, 2001, 2002, 2003, 2004, and 2005. Each year's
released shares must be held for a minimum of one year. Except for the minimum
holding period, all of these shares are subject to piggyback registration rights
which will enable the holder of such shares to have such shares registered along
with any possible future registration of shares of the Company.
LIQUIDITY AND CAPITAL RESOURCES
The Company has incurred operating losses since inception and revenues
consist of $12,000 for the three months ended February 29, 2000 from GOJO
Industries royalty payments. At February 29, 2000 the Company had cash and cash
equivalents of $6,728. In January the Company received a payment of $12,000 from
GOJO.
Subsequent to November 30, 1999, GOJO made a determination not to proceed with
the commercialization of the next generation of Hygiene Guard Systems. In recent
communications, GOJO cited the grant of a third party patent for a similar use
and an initial rejection of one of Net/Tech's pending patent applications as
reasons for ceasing commercialization. GOJO has proposed transferring the patent
estate back to Net/Tech in exchange for termination of the agreement and a
general release. The terms of the original agreement called for GOJO to pay
Net/Tech a total of $290,000 over 20 months. Through January, 2000, GOJO had
paid Net/Tech $158,000 and has not made the February payment. In addition,
Net/Tech was to receive 10% of U.S. net sales and 7% of overseas net sales for
10 years and a sliding scale percentage for the balance of the 15 year
agreement.
Current Net/Tech management will attempt to resolve the GOJO matter as soon as
possible. Net/Tech and ROI have agreed that any resolution with GOJO must be
acceptable to ROI in order for the pending acquisition to be completed. Net/Tech
shareholders are scheduled to vote on the ROI acquisition at the Annual Meeting
on March 20, 2000. The Company may not have enough cash to pay-off its current
payables and operate. There is no assurance that additional financing will be
available. The Company has not established borrowing arrangements or have an
available line of credit.
MANAGEMENT
At present there are 2 employees on the staff of the Company. Glenn E.
Cohen serves as the Chairman of the Board and Chief Executive Officer.
FORWARD LOOKING STATEMENTS
Statements wherein the terms "believes", "intends", or "expects" are
intended to reflect "forward looking statements" of the Company. The information
contained herein is subject to various risks, uncertainties and other factors
that could cause actual results to differ materially from the results
anticipated in such forward looking statements or paragraphs. Readers should
carefully review the risk factors described in other documents the Company files
from time to time with the Securities and Exchange Commission, including the
most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any
Current Reports on Form 8-K.
7
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Certificate of Incorporation(1)
3.2 By-Laws(1)
------------------
(1) Incorporated by reference to the Company's Registration Statement
on Form S-1 (No. 33-36198).
(b) Reports on Form 8-K.
Item 4 Change in Accountant was filed since the last reporting period (1)
- -----------------
(1) Incorporated by reference to the Company's most recent 8-K and 8-K/A filing
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NET/TECH INTERNATIONAL, INC.
/S/ GLENN E. COHEN
------------------
Glenn E. Cohen
Chairman and Chief Executive Officer
