UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 130R 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 2000
[ ] 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
----------------------------
(Exact name of small business issuer as specified in its charter)
Texas 75-1939021
- --------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3838 Oak Lawn Avenue, Dallas, Texas 75219
- -----------------------------------------------------------------
(Address of principal executive offices)
(214) 520-1702
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(Issuer's telephone number)
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]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 4,169,414 as of
June 30, 2000
Transitional Small Business Disclosure Format (Check One) Yes
; No X
- ---- ----
PART I.
Item 1. Financial Statements
TTI INDUSTRIES, INCORPORATED
AND SUBSIDIARIES
Consolidated Balance Sheets
February 28 February 29 August 31
1999 2000 1999
----------- ----------- -----------
(Unaudited) (Unaudited)
ASSETS
CURRENT
Cash $ 10,057 $ 11,028 $ 166
Advances receivable (trade) - 57,924 -
Advances receivable
(affiliates) 126,000 -
---------- --------- ----------
-
Total current assets 136,057 68,952 166
INVESTMENT IN SUBSIDIARIES 5,000 5,000 5,000
---------- ---------- ---------
Total Assets $ 141,057 $ 73,952 $ 5,166
========== ========== =========
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES
Accounts payable and accrued
expenses $22,031 $ 145,467 $ 47,477
Notes payable and due to
related parties 10,000 67,986 7,400
---------- ---------- --------
Total current liabilities 32,031 213,453 54,877
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock ($1.00 par,
100,000,000
authorized, 1775, 2700 and 2950
issued and outstanding at
February 29, 2000 and August 31,
1999, respectively) 1,775 2,700 2,950
Common stock (100,000,000 shares
authorized, $.01 par,
4,072,151, 4,159,414 and
4,068,914 shares issued and
outstanding at February 28,
1999, February 29, 2000 and
August 31, 1999, respectively) 42,003 43,133 42,128
Additional Paid-in Capital
1,171,723 1,418,793 1,342,928
Accumulated deficit (1,106,475) (1,602,687) (1,437,717)
----------- ----------- -----------
Total Stockholders' Equity (109,026) (138,781) (49,111)
----------- ----------- ----------
$ 141,057 $ 73,952 $ 5,166
=========== =========== ==========
See accompanying summary of accounting policies
and notes to consolidated financial statements
-2-
TTI INDUSTRIES, INCORPORATED
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
February 29 February 28
2000 1999
------------ -----------
NET REVENUES $ 56,637
COST OF SALES $ 70,753
-----------
$ (14,116)
GENERAL ADMINISTRATIVE
Salaries (Allocated) $ 78,402
Interest and bank charges 10
Equipment rental 2,400
Computer lease 11,728
Insurance 702
Postage and delivery 406
Office expense 981
Printing and reproduction 4,721
Professional fees 44,141 $ 29,884
Promotion 141
Rent 3,762
Travel and entertainment 3,152
Trade Show expenses 928
Other Administrative Expenses 100 2,357
---------- ----------
Total General and
Administrative 151,574 32,241
---------- ----------
NET INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEM (165,690) (32,241)
INCOME TAXES -- --
----------- -----------
NET INCOME (LOSS) $ (165,690) $ (32,241)
=========== ===========
PER SHARE DATA:
Net income (loss) per share -
basic $ (.04) $ (.01)
=========== ==========
Net earnings (loss) per share
- diluted $ (.03) $ (.01)
=========== ==========
Weighted average shares
outstanding - basic 4,088,851 4,033,189
=========== ==========
Weighted average shares
outstanding - diluted 5,588,851 5,533,189
=========== ==========
See accompanying summary of accounting policies
and notes to consolidated financial statements
-3-
TTI INDUSTRIES, INCORPORATED
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
February 29 February 28
2000 1999
------------ ------------
NET REVENUES $ 56,637
COST OF SALES $ 52,753
$ 3,884
GENERAL ADMINISTRATIVE
Salaries (Allocated) $ 39,201
Interest and bank charges
Equipment rental 1,200
Computer lease 7,378
Insurance
Postage and delivery 406
Office expense
Printing and reproduction 3,209
Professional fees 36,480 $ 9,884
Promotion 141
Rent 1,881
Travel and entertainment
Trade Show expenses 928
Other Administrative Expenses 100 618
----------- ----------
Total General and Administrative 90,923 10,502
NET INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY ITEM (87,040) (10,502)
INCOME TAXES -- --
NET INCOME (LOSS) $ (87,040) $ (10,502)
=========== ==========
PER SHARE DATA:
Net earnings (loss) per share
- basic $ (.02) $ (.00)
=========== ==========
Net earnings (loss) per share
- diluted $ (.02) $ (.00)
=========== ==========
Weighted average common
shares outstanding - basic 4,088,851 4,033,189
=========== ==========
Weighted average common
shares outstanding - diluted 5,588,851 5,533,189
=========== ==========
See accompanying summary of accounting policies
and notes to consolidated financial statements
-4-
TTI INDUSTRIES, INCORPORATED
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended For the Six Months Ended
-------------------------- -------------------------------
February 29 February 28 February 28 February 28
2000 1999 2000 1999
----------- ----------- -------------- -------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Income (loss) from operations $ (87,040) $ (10,502) $ (165,690) $ (32,241)
Adjustments to reconcile income
(loss) from operations to
cash provided by (used in)
operating activities:
Depreciation and amortization
Imputed officers' salaries
Change in assets and
liabilities:
Increase in accounts (57,924) (57,924)
receivable - trade
Increase in advances payable 54,200 (15,000) 60,587 (126,000)
Increase in accounts payable
and accrued expenses $ 65,636 10,046 97,989 9,195
----------- --------- ---------- ----------
Net cash flow used in operating
activities (25,128) (15,456) (65,038) (149,046)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Sale of Preferred Stock net of
offering costs 30,000 162,640
Sale of Common Stock net of
offering costs 35,180 375 35,180 1,475
Purchase of subsidiaries (5,000) (5,000)
Sale of Common Stock option 720 40,720
---------- --------- ----------- ------------
Net cash flows provided by
investing activities 35,900 25,375 75,900 159,115
CASH FLOW FROM FINANCING
ACTIVITIES:
Retirement of debt
Net cash flows provided by
financing activities
Increase (decrease) in Cash 10,772 9,919 10,862 10,069
Cash, beginning of period 256 138 166 (12)
----------- --------- ---------- ----------
Cash, end of period $ 11,028 $ 10,057 $ 11,028 $ 10,057
=========== ========= ========== ==========
See accompanying summary of accounting policies
and notes to consolidated financial statements
-5-
TTI INDUSTRIES, INCORPORATED
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity (Capital Deficit)
(Unaudited)
For the Six Months Ended February 29, 2000
Preferred Stock Common Stock Total Equity
$1.00 Par Value $.01 Par Value Additional Stockholders'
---------------- ------------------- Paid-In Accumulated Equity
Shares Amount Shares Amount Capital Deficit (Deficiency)
-------- ------- -------- --------- ----------- ------------ ----------------
Balance - August 31, 1999
(Adjusted) 2,950 $ 2,950 4,068,914 $ 42,128 $1,342,928 $(1,437,717) $ (49,711)
Sale of Common Stock Option $ 40,720 $ 40,720
Sale of Common Stock 75,500 $ 755 $ 34,425 $ 35,180
Conversion to Common Stock (250) $ (250) 25,000 $ 250
Net Loss for Period $ (165,690) $ (165,690)
-------- ------- --------- --------- ----------- ----------- ------------
Balance - February 29, 2000 2,700 $ 2,700 4,169,414 $ 43,133 $ 1,418,793 $(1,603,407) $ (138,781)
======== ======= ========= ========= =========== ============ =============
-6-
See accompanying summary of accounting policies
and notes to consolidated financial statements
TTI INDUSTRIES, INCORPORATED
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
February 29, 2000
1. SUMMARY OF ACCOUNTING POLICIES
Unaudited Interim Financial Information
The financial statements as of February 29, 2000 and 1999 have been
prepared by the Company pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC") and are unaudited.
These statements are unaudited and, in the opinion of management,
include all adjustments (consisting of normal recurring adjustments
and accruals) necessary to present fairly the results for the periods
presented. The balance sheet at August 31, 1999 has been derived
from the audited financial statements at that date. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such SEC rules and
regulations. Operating results for the quarter ended February 29,
2000 are not necessarily indicative of the results that may be
expected for the year ending August 31, 2000. These financial
statements should be read in conjunction with the audited financial
statements and the accompanying notes included in the Company's
annual Report on Form 10-KSB for the year ended August 31, 1999.
Certain prior period balances have been reclassified to conform to
the current period presentation.
Nature of Business and Basis of Presentation
The accompanying consolidated financial statements include the
accounts of TTI Industries, Inc. and its wholly-owned subsidiaries.
All material intercompany transactions and balances have been
eliminated in consolidation.
Business Combinations and Investments
For business combinations which have been accounted for under the
purchase method of accounting, the Company includes the results of
operations of the acquired business from the date of acquisition.
Net assets of the companies acquired are recorded at their fair value
at the date of acquisition. The excess of the purchase price over
the fair value of net assets acquired is included in goodwill and
other purchased intangibles in the accompanying consolidated balance
sheets.
Other investments, for which the Company does not have the ability to
exercise significant influence, are accounted for under the cost
method of accounting. Dividends and other distributions of earnings
from other investees, if any, are included in income when declared.
The Company periodically evaluates the carrying value of its
investments accounted for under the cost method of accounting and as
of February 29, 2000, such investments were recorded at the lower of
cost or estimated net realizable value.
-7-
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 disclosure 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 Recognition
The Company recognizes revenue from sales, net of discounts 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.
Income Taxes
Income taxes are provided for the tax effect 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
deducible when the assets and liabilities are recovered or settled.
Product Development
Product development expenses consist principally of personnel and
consultants, patents and cost of acquired products. To date, all
product development costs have been expensed as incurred.
Cash and Cash Equivalents
For purposes of the consolidated statements 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 Share
Basic EPS is computed by dividing net 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.
-8-
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 Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments", requires that the Company
disclose the estimated fair values for its financial 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
approximate fair value because of the short-
maturity of those instruments.
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 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 AND DUE TO RELATED PARTIES
Notes payable and due to related parties consist of $67,986 and
$7,400 due AMJ at February 29, 2000 and August 31, 1999,
respectively.
The Company initiated a non-cancelable lease on a computer system
effective March 1, 2000. The original lease term was 36 months.
This lease meets the criteria of a capital lease and has been
capitalized with an implicit interest rate of 31.4%. The related
assets are included in property and equipment at March 1, 2000 in the
amount of $34,884.
Minimum future lease obligations on capitalized leases in effect at
March 1, 2000 are:
2000 $11,662
2001 $17,268
2002 $17,268
2003 $ 7,195
Total minimum lease payments $53,394
Amount representing interest 18,510
Present value of net minimum
lease payments $34,884
Current portion 5,901
Long-term obligation at
March 1, 2000 28,983
-9-
3. TRANSACTIONS WITH RELATED PARTIES AND SUBSEQUENT EVENTS
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 as an increase to paid-in capital. In
addition, certain other operating expenses absorbed by related
parties were charged to expense and credited to accrued expenses to
be reimbursed.
Effective October 4, 1999 the Company entered into an agreement with
Terminator Technologies, Inc. (Texas) whereby the Terminator Turtle
Product would be sold thru Terminator Technologies, Inc. and the
revenues received would be applied to costs and expenses incurred on
the products.
Options Agreement with AMJ
In connection with the Company's Business Plan adopted in January
1999 (the "Business Plan"), on 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.
Assignment by AMJ
In connection with the 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 June 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
-10-
warrant exercisable for a period of two (2) years to purchase
2,000,000 shares of the Company's common stock at $0.05 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.
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. Speed Release has filed a registration statement (May 2000)
with respect to such shares. Such registration statement has not yet
become effective.
Legal Proceedings
On October 18, 2000, the Company was served with Plaintiff's Original
Petition in the case of Santo Andrei, Ltd. v. TTI Industries, Inc.,
AMJ Resources Corporation, A.J. Miller and Jesus H. "Chuy" Muniz;
Cause No. C-1784-00F, In the 332nd Judicial District Court, Hidalgo
County, Texas. Essentially, the Petition alleges that the Plaintiff
invested $75,000 for the purchase of 150,000 shares of the Company's
common stock and in connection therewith, the Defendants
misrepresented to Plaintiff among other things, that the Company's
common stock would trade at a value of $8.00 per share. The Petition
alleges breach of contract, fraud and negligent misrepresentation and
asks for damages in the amount of $1,200,000 (calculated at 150,000
shares of the Company's common stock times $8.00 per share that
Plaintiff alleges he was promised for his shares) plus exemplary
damages. The Company denies the material allegations of Plaintiff's
Original Petition and intends to vigorously defend against the
litigation. The case is in its preliminary stages and no discovery
has been conducted.
-11-
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 February 29
Year ended August 31, 1999 2000
--------------------------------------------------
Deferred tax asset $ 293,000 $ 458,690
Less valuation
allowance (293,000) (458,690)
Net deferred tax asset $ - -
--------------------------------------------------
The valuation allowance
activity for:
August 31 February 29
Year ended August 31, 1999 2000
--------------------------------------------------
Balance, beginning of
year $ 169,000 $ 293,000
current year net
operating loss 124,000 165,690
Balance, end of period $ 293,000 $ 458,690
--------------------------------------------------
5. PREFERRED STOCK
The preferred stock has following features:
a. $100 par value
b. Preferred as to liquidation of assets
c. Carries a dividend rate of 12.5% per annum, payable semi-
annually
d. Voting rights of 1 vote per share
e. Convertible into 67 common shares upon 30-day notice
f. Redeemable at any time at par plus 10% plus accrued
dividends
6. STOCK PURCHASE WARRANTS
As part of the May 1, 1998 acquisition Agreement, the Company issued
a 1.5 million Stock Purchase Warrant to AMJ for $20,000. The value
of these shares is considered de minimus. The warrants are initially
exercisable at $0.04445 per share and expire May 6, 2000. The
transaction resulted in a $20,000 credit to additional paid-in
capital.
-12-
On October 5, 1999, pursuant to a Stock Purchase and Exchange
Agreement by and among the Registrant, Speed Release Lock Company
("Speed Release") and Steve Bedowitz ("Bedowitz"), the Company issued
to Steve Bedowitz an option to purchase 165,000 shares of the
Registrant's common stock at a purchase price of $.01 per share
exercisable upon 60 days prior written notice. The purchase price
for the option was $40,000.
On December 19, 1999, the Company issued to Frank Harrison III an
option to purchase 18,000 shares of the Company's common stock at a
purchase price of $0.01 per share exercisable at any time prior to
December 19, 2001. The purchase price for the option was $720.
7. COMMITMENTS AND CONTINGENCIES
The Company is generally self-insured for losses and liabilities
related primarily to 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 CASH FLOW INFORMATION
During the year ending August 31, 1999 there was no cash paid for
interest or income taxes, and $862 paid for Texas franchise taxes.
9. GOING CONCERN AND SUBSEQUENT EVENTS
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. 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.
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 TermTex
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
-13-
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.
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.
10. YEAR 2000 COMPLIANCE (UNAUDITED)
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 any impact on the Company's future
operations. Since January 1, 2000 through May 31, 2000, the Company
has had no material impact from the Y2K issue.
Item 2. Management's Discussion and Analysis or Plan of
Operation
Liquidity and Capital Resources
At February 29, 2000, the Company's principal sources of
liquidity consisted of $11,028 of cash compared to $10,057 of cash at
February 28, 2000. Working capital at February 29, 2000 was
($144,501) compared to $104,026 at February 28, 1999.
The Company obtained $35,900 from the private placement of
securities during the quarter ended February 29, 2000 and used
$90,923 in operating activities for the quarter ended February 29,
2000 and $151,574 for the six months ended February 29, 2000, as
compared to $10,502 and $32,241, respectively, for similar periods of
1999. During the quarter and six months ended February 29, 2000,
$54,200 and $60,587, respectively, was advanced to AMJ
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Resources, Inc., an affiliate of the Company, to assist in the
implementation of the Business Plan by the Company. See "Results of
Operations" below.
The Company made no capital acquisitions or improvement
expenditures during the quarter and six months ended February 29,
2000 (similarly for the quarter and six months ended February 28,
1999), but anticipates a substantial increase in its capital needs
consistent with the implementation of the Company's Business Plan
when implemented. The Company initiated a non-cancelable capital
lease on a computer system effective March 1, 2000. The original
lease term was 36 months. 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 the cash flow are subject to substantial uncertainty. While the
Company intends to seek additional financing, there can be no
assurance that the Company will obtain financing necessary to fully
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,
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.
Results of Operations
Net revenues for the quarter and six months ended February 29,
2000 were $56,637 and $56,637 as compared to $0 and $0 for the
quarter and six months ended February 28, 1999, respectively. The
revenue for the quarter and six months ended February 29, 2000 was
derived solely from the Terminator Turtles. The Company incurred an
operating loss for the quarter and six months ended February 29, 2000
of ($87,040) and ($165,690), respectively, compared to ($10,502) and
($32,241), respectively, for similar periods of 1999. The operating
loss for the quarter and six months ended February 29, 2000 was
primarily due to professional fees of $36,480 and $44,141 as compared
to $9,884 and $29,884 for similar periods of 1999 and to allocated
salaries of $39,301 and $78,402 for the quarter and six months ended
February 29, 2000, respectively, as compared to $0 and $0 for similar
periods of 1999.
While the Company's Business Plan was adopted in January 1999,
the Company does not have, and has not secured, the financing to
implement the Business Plan in any meaningful manner. 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.
PART II
Item 1. Legal Proceedings
On October 18, 2000, the Company was served with Plaintiff's Original
Petition in the case of Santo Andrei, Ltd. v. TTI Industries, Inc.,
AMJ Resources Corporation, A.J. Miller and Jesus H. "Chuy" Muniz;
Cause No. C-1784-00F, In the 332nd Judicial District Court, Hidalgo
County, Texas. Essentially, the Petition alleges that the Plaintiff
invested $75,000 for the purchase of 150,000 shares of the Company's
common stock and in connection therewith, the Defendants
misrepresented to Plaintiff among other things, that the Company's
common stock would trade at a value of $8.00 per share. The Petition
alleges breach of contract, fraud and negligent misrepresentation and
asks for damages in the amount of $1,200,000 (calculated at 150,000
shares of the Company's common stock times $8.00 per share that
Plaintiff alleges he was promised for his shares) plus exemplary
damages. The Company denies the material allegations of Plaintiff's
Original Petition and intends to vigorously defend against the
litigation. The case is in its preliminary stages and no discovery
has been conducted.
Item 2. Changes in Securities
On December 19, 1999, the Company issued to Frank Harrison III
an option to purchase 18,000 shares of the Company's Common Stock at
a exercise price of $0.01 per share exercisable at any time prior to
December 19, 2001. The purchase price for the option was $720.
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Mr. Harrison exercised the option in full on December 19, 1999 and
was issued 18,000 shares of Common Stock. The issuance was made in
reliance on Section 4(2) of the Securities Act of 1933 as a
transaction of an issuer not involving a public offering.
On January 12, 2000, the Company issued to Joe Nicholson 50,000
shares of its Common Stock at a purchase price of $0.50 per share.
The issuance was made in reliance on Section 4(2) of the Securities
Act of 1933 as a transaction of an issuer not involving a public
offering.
On February 2, 2000, Joe Nicholson converted 250 shares of the
Company's preferred stock into 25,000 shares of Common Stock. The
issuance was made in reliance on Section 4(2) of the Securities Act
of 1933 as a transaction of an issuer not involving a public
offering.
On February 10, 2000, the Company issued to Al Trevino 53,340
shares of its Common Stock at a purchase price of $0.75 per share.
The issuance was made in reliance on Section 4(2) of the Securities
Act of 1933 as a transaction of an issuer not involving a public
offering.
On February 19, 2000, the Company issued to Al Reutlinger 18,667
shares of its Common Stock at a purchase price of $0.75 per share.
The issuance was made in reliance on Section 4(2) of the Securities
Act of 1933 as a transaction of an issuer not involving a public
offering.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
No. Description
--- -----------
3.1(1) Articles of Incorporation of the Registrant.
3.2(1) 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(1) 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(1) 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(1) 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(1) Amendment to Registrant's Articles of Incorporation
changing the name of the Registrant from Environmental
Plus, Inc. to TTI Industries, Inc.
3.7(1) Bylaws of Registrant
4.1(1) Form of Common Stock Certificate of Registrant
10.1(1) Stock Purchase Agreement, dated as of January 15,
1998, by and among the Registrant, certain of its
shareholders and Terminator Technologies, Inc.
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10.2(2) Option agreement, dated as of January 19, 1999, by and
between the Registrant and AMJ Resources Corporation
10.3(2) Amendment to Option Agreement, dated as of October 4,
1999, by and between the Registrant and AMJ Resources
Corporation
10.4(2) Stock Purchase and Exchange Agreement, dated as of
October 5, 1999, and among the Registrant, Speed Release
Lock Company and Steve Bedowitz. (schedules omitted)
27.1(3) Financial Data Schedule
_________________
1 Incorporated by reference from the Registrant's Form 10-KSB
for the period ended August 31, 1998.
2 Incorporated by reference from the Registrant's Form 10-KSB for
the period ended August 31, 1999.
3 Filed herewith.
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed by the Company during the
quarter ended February 29, 2000.
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SIGNATURES
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In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TTI INDUSTRIES, INCORPORATED
December 28, 2000 /s/ JESUS H. MUNIZ
- ------------------- ---------------------------------
Date Jesus H. "Chuy" Muniz, President
December 28, 2000 /s/ ALBERT J. MILLER
- ------------------- ----------------------------------
Date Albert J. Miller
Principal Accounting and Financial
Officer
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