UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2001
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from to
FTLA, INC.
(Exact name of Registrant as specified in its charter)
Florida 06-1562447
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6066 Vineyard Drive
Ottawa, Ontario Canada K1C 2M5
(Address of principal executive offices) (Zip Code)
613-837-1909
(Registrant's telephone number, including area code)
Check whether Registrant has filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months and has been subject to such filing requirements for the past 90 days.
NO.
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practical date: On June 30, 2001, the issuer had
479,875 shares of common stock, no par value outstanding.
FTLA, Inc. and Subsidiary
(F/K/A Floran International, Inc. and Subsidiary)
(A Development Stage Company)
FORM 10-QSB
QUARTERLY PERIOD ENDED JUNE 30, 2001
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheets (Unaudited)
As of June 30, 2001 (Unaudited) and as of December 31, 2000...............3
Consolidated Statements of Operations (Unaudited)
For the Three and Six Months Ended June 30, 2001 and Cumulative
from August 1, 2000 (Inception) to June 30, 2001.......................4
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2001 and Cumulative
from August 1, 2000 to June 30, 2001....................................5
Condensed Notes to Consolidated Financial Statements......................6-9
Item 2 - Management's Discussion and Analysis and Plan of
Operations...............................................................10
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings.................................................11
Item 2 - Changes in Securities.............................................11
Item 3 - Default Upon Senior Securities....................................11
Item 4 - Submission of Matters to a Vote of Security Holders...............11
Item 5 - Other Information.................................................11
Item 6 - Exhibits and Reports on Form 8-K..................................11
Signatures.................................................................12
Page 2
FTLA, Inc. and Subsidiary
(F/K/A Floran International, Inc. and Subsidiary)
(A Development Stage Company)
Consolidated Balance Sheets
---------------------------
June 30, 2001
(Unaudited) December 31, 2000
----------------- -----------------
Assets
------
Current Assets
Cash $ 36 $ --
----------------- -----------------
Total Current Assets 36 --
----------------- -----------------
Other Assets
Equipment 1,231 --
License and rights -- 1,547,500
----------------- ----------------
Total Other Assets 1,231 1,547,500
----------------- -----------------
Total Assets $ 1,267 $ 1,547,500
================= =================
Liabilities and Stockholders' Deficiency
----------------------------------------
Current Liabilities
Note payable 21,775 --
Bank overdraft 1,317 464
Accounts payable and accrued expenses 225,737 37,215
Due to investors 238,200 86,000
Due to principal stockholder 93,962 --
Payable under license agreement -- 1,450,000
----------------- -----------------
Total Current Liabilities 580,991 1,573,679
----------------- -----------------
Total Liabilities 580,991 1,573,679
----------------- -----------------
Stockholders' Deficiency
Common stock, no par value, 100,000,000 shares authorized,
519,875 and 500,417 shares issued and outstanding,
respectively 630,320 125,100
Common stock issuable (3,750 and 417 shares, respectively) 37,500 104
Additional paid-in capital 747,680 --
Deficit accumulated during development stage (1,995,224) (151,383)
----------------- -----------------
Total Stockholders' Deficiency (579,724) (26,179)
----------------- -----------------
Total Liabilities and Stockholders' Deficiency $ 1,267 $ 1,547,500
================= =================
See accompanying notes to consolidated financial statements.
3
FTLA, Inc. and Subsidiary
(F/K/A Floran International, Inc. and Subsidiary)
(A Development Stage Company)
Consolidated Statements of Operations
-------------------------------------
(Unaudited)
Cumulative
Six Months Three Months From August 1,
Ended Ended 2000 (Inception)
June 30, 2001 June 30, 2001 to June 30, 2001
---------------- ---------------- ----------------
Revenues $ 8,000 $ -- $ 8,000
Cost of Goods Sold 892 -- 892
---------------- ---------------- ----------------
Gross Profit 7,108 -- 7,108
---------------- ---------------- ----------------
Operating Expenses
Compensation 44,862 -- 143,348
Bad debt 2,900 2,900 2,900
Subcontractors 37,790 -- 37,790
Consulting 1,303,707 46,162 1,303,707
Amortization 38,688 -- 38,688
Demonstration supplies -- -- 10,682
Director fees 119,025 -- 119,025
General and administrative 78,435 16,474 98,806
Loss on impairment 78,812 -- 78,812
Professional fees 57,692 10,695 79,536
Settlement expense 89,038 89,038 89,038
---------------- ---------------- ----------------
Total Operating Expenses 1,850,949 165,269 2,002,332
---------------- ---------------- ----------------
Net Loss $ (1,843,841) $ (165,269) $ (1,995,224)
================ ================ ================
Net loss per share - basic and diluted $ (3.32) $ (0.30) $ (3.76)
================ ================ ================
Weighted average number of shares outstanding during
the period - basic and diluted 555,972 552,034 530,333
================ ================ ================
See accompanying notes to consolidated financial statements.
4
FTLA, Inc. and Subsidiary
(F/K/A Floran International, Inc. and Subsidiary)
(A Development Stage Company)
Statements of Cash Flows
------------------------
(Unaudited)
Cumulative
From
August 1, 2000
Six Months Ended (Inception) to
June 30, 2001 June 30, 2001
---------------- ----------------
Cash flows from operating activities
Net loss $ (1,843,841) $ (1,995,224)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt 2,900 2,900
Stock based expenses 1,316,307 1,394,011
Amortization 38,688 38,688
Loss on impairment 78,812 78,812
Changes in operating assets and liabilities:
Increase (decrease) in:
Due to principal stockholder 93,962 93,962
Accounts payable and accrued liabilities 181,386 218,601
---------------- ----------------
Net cash used in operating activities (131,786) (165,616)
---------------- ----------------
Cash flows from investing activities
Purchase of machinery and equipment (1,231) (1,231)
Payment under license agreement (20,000) (70,000)
---------------- ----------------
Net cash used in investing activities (21,231) (71,231)
---------------- ----------------
Cash flows from financing activities
Proceeds from investors 152,200 238,200
Bank overdraft 853 1,317
---------------- ----------------
Net cash provided by financing activities 153,053 239,517
---------------- ----------------
Net increase in cash 36 36
Cash at beginning of period -- --
---------------- ----------------
Cash at end of period $ 36 $ 36
================ ================
See accompanying notes to consolidated financial statements.
5
FTLA, Inc. and Subsidiary
(F/K/A Floran International, Inc. and Subsidiary)
(A Development Stage Company)
Notes to Consolidated Financial Statements
June 30, 2001
-------------
(Unaudited)
Note 1 Basis of Presentation, Organization and Principles of Consolidation
- ----------------------------------------------------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America and the rules and regulations of the Securities and Exchange
Commission for interim consolidated financial information. Accordingly, they do
not include all the information and footnotes necessary for a comprehensive
presentation of the consolidated financial position and results of operations.
It is management's opinion, however, that all material adjustments (consisting
of normal recurring adjustments) have been made which are necessary for a fair
consolidated financial statements presentation. The results for the interim
period are not necessarily indicative of the results to be expected for the
year.
For further information, refer to the audited financial statements and footnotes
of H2O International, Inc., FTLA, Inc.'s (the Company) legal subsidiary, for the
period from August 1, 2000 (inception) to December 31, 2000 included in the
Company's Form 8-K/A dated January 16, 2001.
On May 10, 2001, the Company changed its name to FTLA, Inc. and affected a
1-for-100 reverse split of its outstanding common stock, effective October 15,
2001. The effect of the reverse stock split is reflected retroactively in the
accompanying consolidated financial statements.
On January 9, 2001, H2O International, Inc. was acquired by an inactive Florida
corporation, 3045 Corp., which is traded on the OTCBB and reports to the
Securities and Exchange Commission under the Securities Exchange Act of 1934.
Pursuant to Accounting Principles Board Opinion No. 16 ("APB 16"), the
acquisition was treated as a recapitalization of H20 International, Inc. Just
subsequent to the recapitalization, there were 603,617 (including 417 common
shares issuable) common shares outstanding after a 10-for-1 split, which
occurred in January 2001, as the stockholders of 3045 Corp. held 103,200 common
shares. The name of 3045 Corp. was changed to Floran International, Inc. and
later changed to FTLA, Inc. (see above). The authorized shares and capital
structure in the accompanying consolidated financial statements reflect those of
the legal parent, FTLA, Inc.
The accompanying consolidated financial statements include the accounts of FTLA,
Inc. and its wholly-owned subsidiary, H2O International, Inc. All material
intercompany transactions and balances have been eliminated.
6
FTLA, Inc. and Subsidiary
(F/K/A Floran International, Inc. and Subsidiary)
(A Development Stage Company)
Notes to Consolidated Financial Statements (Continued)
June 30, 2001
-------------
(Unaudited)
Note 2 Impairment of License and Rights and Discontinuance of Operations
- --------------------------------------------------------------------------
The Company was in the development stage and was formed for the purpose of
marketing a cleaning process for large-scale water and fluid treatment,
filtering, and storage facilities. On August 1, 2000, the Company licensed the
marketing, sale, and distribution rights from the owner of the technology.
The Company had defaulted on the February 23, 2001 payment under its license
agreement and was granted an extension to April 30, 2001.
On April 30, 2001 the licensor notified the Company that it was terminating the
license agreement due to the Company's default on the April 30, 2001 payment.
Management believes that its remaining obligation under the agreement was
relieved as a result of the termination of the agreement. Accordingly, the
Company has written off the unamortized portion of the license and rights asset
against the then remaining liability of $1,430,000, resulting in a loss on
impairment of $78,812 charged to operations during the three months ended March
31, 2001. Prior to the write-off of the license, the Company recognized
amortization of $38,688. The licensor subsequently returned the 90,000 common
shares previously received as a license fee. Since pursuant to the license
agreement the licensor did not appear to have an obligation to return the
shares, the transaction was recorded as contributed capital with no resulting
consolidated financial statement effect (see Note 4(B)).
As a result of the license termination, the Company has discontinued its
operations and become inactive. Accordingly, the accompanying consolidated
statements of operations and cash flows reflect discontinued operations only and
the consolidated balance sheet reflects assets and liabilities of discontinued
operations.
Note 3 Due to Investors
In December 2000, the Company raised $86,000 from three investors based on a
private placement offering at $1.00 per share. The investors subsequently agreed
to rescind the subscription agreements and subscribe to a new private placement
offering, which occurred in 2001 at $0.50 per share after the recapitalization.
Accordingly, the $86,000 was reflected as a liability at December 31, 2000. The
new shares were never issued and accordingly, the liability remains at June 30,
2001.
During the three months ended March 31, 2001, the Company raised $152,200 under
common stock subscriptions for 304,400 common shares. However, the shares were
never issued and the Company is now inactive due to the loss of its license.
Accordingly, the $152,200 is included in the due to investors' liability at June
30, 2001.
7
FTLA, Inc. and Subsidiary
(F/K/A Floran International, Inc. and Subsidiary)
(A Development Stage Company)
Notes to Consolidated Financial Statements (Continued)
June 30, 2001
-------------
(Unaudited)
Note 4 Stockholders' Deficiency
- ---------------------------------
(A) Common Stock Settlements
On May 9, 2001, (the "settlement date") the Company issued 6,663 common
shares to settle various obligations including certain employment and
consulting agreements. The stock was valued at the common stock trading
price on the settlement date resulting in a settlement expense of $89,038.
The Company received settlement releases from most of the parties resulting
in the termination of any contracts and release from any future obligations
including the cancellation of any stock options issued or due; however,
settlement releases were not entered into with some of those parties as
described below.
One director held or was owed options to purchase 250 (post reverse-split)
shares at $10.00 per share (post reverse-split). Two consultants were
issued common shares in settlement but no settlement releases have been
obtained. In October 2001, one employee surrendered 10,000 common shares
and 3,750 issuable shares, but no settlement release was obtained or
entered into. In October 2001, two stockholders who were not directors,
employees or consultants, surrendered an aggregate 30,000 common shares to
the Company's treasury, but no settlement releases were entered into
between these stockholders and the Company. (see Notes 4(B), 5 and 8)
Future contingencies which cannot be estimated by management, may exists
for the above matters including but not limited to issuance of capital
stock and other financial obligations.
(B) Cancellation of Common Shares
In May 2001, the 90,000 common shares that the Company originally issued to
the licensor were returned to the Company due to the termination of the
License Agreement (see Note 2). Subsequent to June 30, 2001, in October,
2001, another 40,000 common shares and 3,750 issuable shares were
surrendered by stockholders (see Notes 4(A), 5 and 8).
(C) Additional Paid-In Capital
Additional paid-in capital represents the value of options issued to
consultants and directors and prior recapitalization accounting.
8
FTLA, Inc. and Subsidiary
(F/K/A Floran International, Inc. and Subsidiary)
(A Development Stage Company)
Notes to Consolidated Financial Statements (Continued)
June 30, 2001
-------------
(Unaudited)
Note 5 Contingencies
- ----------------------
Settlement releases were not entered into with some of those parties as
described below. (see Note 4)
One director held or was owed options to purchase 250 (post reverse-split)
shares at $10.00 per share (post reverse-split). Two consultants were issued
common shares in settlement but no settlement releases have been obtained. In
October, 2001 one employee surrendered 10,000 common shares and 3,750 issuable
shares, but no settlement release was obtained or entered into. In October,
2001, two stockholders who were not directors, employees or consultants,
surrendered an aggregate 30,000 common shares to the Company's treasury, but no
settlement releases were entered into between these stockholders and the
Company.
Future contingencies which cannot be estimated by management, may exists for the
above matters including but not limited to issuance of capital stock and other
financial obligations.
Note 6 Related Parties
- ------------------------
During the quarter ended June 30, 2001, the Company accrued $24,000 in
management fees payable and $1,262 in other amounts due to a principal
stockholder pursuant to a management agreement entered into in January 2001. At
June 30, 2001, $93,962 was due to that principal stockholder.
Note 7 Going Concern
- ----------------------
As reflected in the accompanying consolidated financial statements, the Company
became inactive (see Note 2), has a working capital deficiency of $580,955 and
has an accumulated deficit of $1,995,224 at June 30, 2001. The ability of the
Company to continue as a going concern is dependent on the Company's ability to
identify a merger candidate or new line of business. The consolidated financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern. Management is currently seeking a
merger candidate.
Note 8 Subsequent Events
- --------------------------
During October 2001, certain stockholders surrendered an aggregate 40,000 common
shares and 3,750 issuable shares to the Company's treasury. Such shares were
then cancelled be the Company. As there was no consideration for these
transactions, they are treated as contributed capital with no resulting
financial statement effect (see Note 5).
On October 15, 2001, a 1-for-100 reverse stock split became effective. The
effect of the reverse stock split is reflected retroactively in the accompanying
consolidated financial statements.
9
Item 2. Management's Discussion and Analysis and Plan of Operation.
Forward Looking Statements.
This report on Form 10-QSB contains forward looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. The words "we", "us", and "ours" refer to FTLA,
Inc. The words or phrases "would be," "will allow," "intends to," "will likely
result," "are expected to," "will continue," "is anticipated," "estimate,"
"project," or similar expressions are intended to identify "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Actual results could differ materially from those projected in the
forward looking statements as a result of a number of risks and uncertainties,
including: (a) lack of demand for the products or services that we may offer in
the future; (b) competitive products or services and pricing; and (c) our
limited cash resources to conduct our operations. Statements made herein are as
of the date of the filing of this Form 10-QSB with the Securities and Exchange
Commission and should not be relied upon as of any subsequent date. Unless
otherwise required by applicable law, the we do not undertake and we
specifically disclaim any obligation to update any forward-looking statements to
reflect occurrences, developments, unanticipated events or circumstances after
the date of such statement.
We are a development stage company that was formed to engage in the business of
selling mortgage related products on the Internet. After a period of inactivity,
we changed our business plan to engage in the marketing of a cleaning process
for large-scale water & fluid treatment, filtering, and storage facilities. On
August 1, 2000, we licensed the marketing, sale, and distribution rights from
the owner of certain technologies used in the cleaning processes for large-scale
water and fluid treatment, filtering, and storage facilities. On April 30, 2001
the licensor notified us that it was terminating the license agreement due to
our default on payments we were required to make to the licensor. As a result of
the license termination, we became inactive.
We do not expect to generate any meaningful revenue or incur any significant
operating expenses until such time that we begin meaningful operations; however,
we will continue to incur expenses pertaining to our periodic and other
reporting obligations with the Securities and Exchange Commission.
Liquidity and Capital Resources.
Our existing cash and future commission-based revenues may be insufficient to
fund our operations. If our revenues are insufficient to meet our needs, our
president plans to loan us funds to conduct our operations; however, we have no
agreement with our president to do so and he is under no obligation to loan us
funds. Moreover, there are no assurances that our president will have sufficient
funds to make these loans. Accordingly, there are no assurances that we will
receive loans from our president. We have no compensation agreements with our
president in connection with any loans that he may provide to us. If our
president is unable or unwilling to make loans to us necessary to implement our
continuing plan of operations, we will need additional financing through
traditional bank financing or a debt or equity offering; however, because we are
a development stage company with little operating history and a poor financial
condition, we may be unsuccessful in obtaining such financing to implement any
plan of operations. Accordingly, there can be no assurance that we will be able
to obtain financing on satisfactory terms or at all, or raise funds through a
debt or equity offering.
10
Our need for capital may change dramatically as a result of any business
acquisition or combination transaction or acquisition of a product or technology
suitable in the future. There is no assurance that we will identify any such
business, product, technology or company suitable for acquisition in the future
or that even if we were successful in such identification, that we would
consummate any acquisition on favorable terms. Moreover, there is no assurance
that we would profitably manage any business, product, technology or company
that we may acquire.
One director held or was owed options to purchase 250 (post reverse-split)
shares at $10.00 per share (post reverse-split). Two consultants were issued
common shares in settlement, but no settlement releases have been obtained. In
October 2001, one employee surrendered 10,000 common shares and 3,750 issuable
shares, but no settlement release was obtained or entered into. In October 2001,
two stockholders who were not directors, employees or consultants, surrendered
an aggregate 30,000 common shares to our treasury, but no settlement releases
were entered into between us and these stockholders.
Future contingencies, which cannot be estimated by management, may exist for the
above matters, including but not limited to issuance of capital stock and other
financial obligations. If we are required to issue our stock for such purposes
the value of our common stock will be diluted. If we are required to make
payment for such purposes, our financial condition will worsen and lead to
additional losses.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
On May 10, 2001, our Board of Directors and a majority of our shareholders
approved a reverse split of our outstanding common stock at a ratio of one (1)
share for every one hundred (100) shares held. This reverse split became
effective on October 15, 2001. The effect of the reverse stock split is
reflected retroactively in the accompanying consolidated financial statements.
On May 9, 2001 (the "settlement date"), we issued 6,663 common shares to settle
various obligations including certain employment and consulting agreements. The
stock was valued at the common stock trading price on the settlement date
resulting in a settlement expense of $89,038. We received settlement releases
from most of the parties resulting in the termination of any contracts and
release from any future obligations, including the cancellation of any stock
options issued or due; however, settlement releases were not entered into with
some parties described below.
One director held or was owed options to purchase 250 (post-reverse split)
shares at $10.00 per share (post-reverse split). Two consultants were issued
common shares in settlement, but no settlement releases have been obtained. In
October 2001, one employee surrendered 10,000 common shares and 3,750 issuable
shares, but no settlement release was obtained or entered into. In October 2001,
two stockholders who were not directors, employees or consultants, surrendered
an aggregate 30,000 common shares to our treasury, but no settlement releases
were entered into between us and these stockholders.
11
In May 2001, the 90,000 common shares that we originally issued to the licensor
were returned to us due to the termination of the License Agreement.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
On May 9, 2001, our Board of Directors and a majority of our shareholders
approved:
1) A reverse stock split of our common stock at a ratio of one (1) share
for every one hundred (100) shares and maintaining our authorized
common stock of 100,000,000 shares;
2) changing our name from Floran International, Inc. to FTLA, Inc.; and
3) Appointment of officers and members of our Board of Directors to fill
the following vacancies: (i) Mr. Lyndell Parks as our Chairman of the
Board; and (ii) Mrs. Audra Parks as our Secretary/Treasurer and a
Director.
On May 10, 2001, we filed with the Florida Secretary of State's Office, Articles
of Amendment to our Articles of Incorporation reflecting the 1-for-100 reverse
split of our outstanding common stock, our name change, and the above
officer/director appointments.
Our reverse stock split became effective on October 15, 2001.
Item 5. Other Information
On May 9, 2001, the following persons resigned their positions from our Board of
Directors: (a) Fred Jaroz; (b) Terry Pancake; (c) Dennis Gordon; (d) Dr. Javid
Sheik; (e) G. Brian Thomas; and (f) Wolfgang Zwanziger.
On May 9, 2001, Fred Jaroz resigned as our President and Terry Pancake resigned
as our Chief Financial Officer, Secretary and Treasurer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits and Index of Exhibits
None
(b) Reports on Form 8-K
We filed a current report on Form 8-K on April 14, 2001; Items 4 and 8
of that report reported a change in auditors and a change in fiscal
year from November 30 to December 31.
12
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.
Dated: April 1, 2002
FTLA, INC.
By: /s/ Lam Ko Chau
--------------------
Lam Ko Chau, President and Chief Executive Officer