U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended November 30, 2001
-----------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File No. 0-32435
-------
Texas Scientific Inc.
--------------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada 76-0609433
- ------ ----------
(State or Other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No)
Suite 155-11960 Hammersmith Way
Richmond, BC V7A 5C9
--------------------------------------------
(Address of Principal Executive Offices)
604-275-8994
--------------------------------------------
Issuer's Telephone Number
N/A
--------------------------------------------
(Former Name or Former Address, if changed since last Report)
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 Company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
(1) Yes X No (2) Yes X No
--- --- --- ---
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Not applicable
(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:
December 17, 2001
Common - 2,500,000 shares
DOCUMENTS INCORPORATED BY REFERENCE
A description of any "Documents Incorporated by Reference" is contained in Item
6 of this Report.
Transitional Small Business Issuer Format Yes X No
--- ---
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The Financial Statements of the Company required to be filed with this 10-QSB
Quarterly Report were prepared by management and commence on the following page,
together with related Notes. In the opinion of management, the Financial
Statements fairly present the financial condition of the Company.
Texas Scientific Inc.
(A Development Stage Company)
Interim Financial Statements
November 30, 2001
(unaudited)
Texas Scientific Inc.
(A Development Stage Company)
Balance Sheets
(expressed in U.S. dollars)
November 30, May 31,
2001 2001
$ $
(unaudited) (audited)
ASSET
License (Note 3) - -
- ---------------------------------------------------------------------------------------------------
Total Assets - -
===================================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities 4,948 900
- ---------------------------------------------------------------------------------------------------
Total Liabilities 4,948 900
- ---------------------------------------------------------------------------------------------------
Contingent Liability (Note 1)
Stockholders' Deficit
Common Stock, 25,000,000 shares authorized with a par value of $0.001;
2,500,000 shares issued and outstanding 2,500 2,500
Additional Paid-in Capital 189 189
- ---------------------------------------------------------------------------------------------------
2,689 2,689
Deficit Accumulated During the Development Stage (7,637) (3,589)
- ---------------------------------------------------------------------------------------------------
Total Stockholders' Deficit (4,948) (900)
- ---------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit - -
===================================================================================================
F-2
(The accompanying notes are an integral part of the financial statements)
Texas Scientific Inc.
(A Development Stage Company)
Statements of Operations
(expressed in U.S. dollars)
(unaudited)
Accumulated From
April 2, 1999 Three Months Six Months
(Date of Inception) Ended Ended
to November 30, November 30, November 30,
2001 2001 2000 2001 2000
$ $ $ $ $
Revenue - - - - -
- ----------------------------------------------------------------------------------------------------------
Expenses
Amortization of license 1,333 - - - -
Audit and accounting 2,581 431 - 1,681 -
Legal 473 - - 473 -
License written-off 667 - - - -
Organizational expenses 689 - - - -
Transfer agent 1,894 320 - 1,894 -
- ----------------------------------------------------------------------------------------------------------
7,637 751 - 4,048 -
- ----------------------------------------------------------------------------------------------------------
Net loss for the period (7,637) (751) - (4,048) -
==========================================================================================================
Net Loss Per Share
==========================================================================================================
Weighted Average Shares Outstanding 2,500,000 2,500,000 2,500,000 2,500,000
==========================================================================================================
F-3
(The accompanying notes are an integral part of the financial statements)
Texas Scientific Inc.
(A Development Stage Company)
Statements of Cash Flows
(expressed in U.S. dollars)
(unaudited)
Six Months
Ended
November 30,
2001 2000
$ $
Cash Flows to Operating Activities
Net loss (4,048) -
Non-cash Items
Accounts payable and accrued liabilities 4,048 -
- ------------------------------------------------------------
Net Cash Used by Operating Activities - -
- ------------------------------------------------------------
Cash Flows from Financing Activities - -
- ------------------------------------------------------------
Net Cash Provided by Financing Activities - -
- ------------------------------------------------------------
Cash Flows from Investing Activities - -
- ------------------------------------------------------------
Net Cash Provided by Investing Activities - -
- ------------------------------------------------------------
Change In Cash - -
Cash - Beginning of Period - -
- ------------------------------------------------------------
Cash - End of Period - -
============================================================
Non-Cash Financing Activities - -
============================================================
Supplemental Disclosures
Interest paid - -
Income tax paid - -
F-4
(The accompanying notes are an integral part of the financial statements)
Texas Scientific Inc.
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
1. Development Stage Company
Texas Scientific Inc. herein (the "Company") was incorporated in the State
of Nevada, U.S.A. on April 2, 1999. The Company acquired a license to
market and distribute a product, as discussed in Note 3. This license is in
jeopardy and the Company has retained the right to sue the vendor.
The Company's new business plan is as a "blank check" company under the
Securities Act of 1933. A blank check company is a development stage
company that has no specific business plan or purpose or has indicated that
its business plan is to engage in a merger or acquisition with an
unidentified company or companies and is issuing "penny stock" securities.
In a development stage company, management devotes most of its activities
in investigating business opportunities. Planned principal activities have
not yet begun. The ability of the Company to emerge from the development
stage with respect to any planned principal business activity is dependent
upon its successful efforts to raise additional equity financing and find
an appropriate merger candidate. There is no guarantee that the Company
will be able to raise any equity financing or find an appropriate merger
candidate. There is substantial doubt regarding the Company's ability to
continue as a going concern.
2. Summary of Significant Accounting Policies
(a) Year end
The Company's fiscal year end is May 31.
(b) Licenses
Costs to acquire the license was capitalized. These costs were
amortized on a straight-line basis until November 30, 1999 at which
time the license was written off.
(c) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less at the time of issuance to be cash equivalents.
(d) 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 the reported amounts of revenues
and expenses during the periods. Actual results could differ from
those estimates.
3. License
The Company's only asset was a license to distribute and produce an oxygen
enriched water product, called "Biocatalyst," for remediation of
aquiculture, mariculture, fish farming and other similar operations
exclusive of remediation of petroleum based hydrocarbon contamination, and
the rights accruing from this license. The Company's original business plan
was to determine the feasibility of the Biocatalyst sewage and waste
remediation application, and, if Biocatalyst proved to be feasible for this
application, become a Biocatalyst producer. The Company acquired the
three-year license from Mortenson & Associates on April 5, 1999 by issuing
2,000,000 shares at a fair market value of $.001 or $2,000. The general
partner of Mortenson & Associates was also a former President of the
Company. Mortenson & Associates acquired its right to sublicense
Biocatalyst to the Company from NW Technologies.
F-5
Texas Scientific Inc.
(A Development Stage Company)
Notes to the Financial Statements
(expressed in U.S. dollars)
3. License (continued)
The Company filed a Form S-1 Registration Statement with the SEC on August
4, 1999. In December, 1999, David R. Mortenson, Mortenson & Associates'
principal, notified the Company that he was involved in a legal dispute
with NW Technologies, and would be unable to fulfill his obligations under
the license to the Company. As a result, the Company's ability to implement
its business plan was seriously undermined, and on February 15, 2000, the
Company requested withdrawal of its Form S-1 Registration Statement.
4. Related Party Transaction
The License referred to in Note 3 was sold to the Company by a partnership
whose general manager was the former President of the Company and a
director for consideration of 2,000,000 shares for total fair market
consideration of $2,000. These shares were paid evenly to the ten partners.
F-6
Item 2. Management's Discussion And Analysis or Plan of Operations
- ------------------------------------------------------------------------------
The following discussion and analysis should be read in conjunction with the
Company's Financial Statements and Notes thereto and other financial information
included elsewhere in this Form 10-QSB. This Form 10-QSB contains, in addition
to historical information, forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from the
results discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include those discussed below.
OVERVIEW
The Company's business plan is to merge with or acquire a business entity in
exchange for the Company's securities. The Company has no particular acquisition
in mind and has not entered into any negotiations regarding such an acquisition.
Neither the Company's sole officer and director nor any affiliate has engaged in
any negotiations with any representative of any company regarding the
possibility of an acquisition or merger between the Company and such other
company.
Management anticipates seeking out a target company through solicitation. Such
solicitation may include newspaper or magazine advertisements, mailings and
other distributions to law firms, accounting firms, investment bankers,
financial advisors and similar persons, the use of one or more World Wide Web
sites and similar methods. No estimate can be made as to the number of persons
who will be contacted or solicited. Management may engage in such solicitation
directly or may employ one or more other entities to conduct or assist in such
solicitation. Management and its affiliates will likely pay referral fees to
consultants and others who refer target businesses for mergers into public
companies in which management and its affiliates have an interest. Payments
would be made if a business combination occurs, and may consist of cash or a
portion of the stock in the Company retained by management and its affiliates,
or both.
The Company's purpose is to seek, investigate and, if such investigation
warrants, acquire an interest in a business entity which desires to seek the
perceived advantages of a corporation which has a class of securities registered
under the Exchange Act. The Company will not restrict its search to any specific
business, industry, or geographical location and the Company may participate in
a business venture of virtually any kind or nature. Management anticipates that
it will be able to participate in only one potential business venture because
the Company has nominal assets and limited financial resources. See "Item 1,
Financial Statements." This lack of diversification should be considered a
substantial risk to the shareholders of the Company because it will not permit
the Company to offset potential losses from one venture against gains from
another.
The Company will not restrict its search for any specific kind of business
entity, but may acquire a venture which is in its preliminary or development
stage, which is already in operation, or in essentially any stage of its
business life. It is impossible to predict at this time the status of any
business in which the Company may become engaged, in that such business may need
to seek additional capital, may desire to have its shares publicly traded, or
may seek other perceived advantages which the Company may offer.
The Company may seek a business opportunity with entities which have recently
commenced operations, or which wish to utilize the public marketplace in order
to raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. The Company
may acquire assets and establish wholly-owned subsidiaries in various businesses
or acquire existing businesses as subsidiaries.
The Company anticipates that the selection of a business opportunity in which to
participate will be complex and extremely risky. Management believes (but has
not conducted any research to confirm) that there are business entities seeking
the perceived benefits of a publicly registered corporation. Such perceived
benefits may include facilitating or improving the terms on which additional
equity financing may be sought, providing liquidity for incentive stock options
or similar benefits to key employees, increasing the opportunity to use
securities for acquisitions, providing liquidity for shareholders and other
F-7
factors. Business opportunities may be available in many different industries
and at various stages of development, all of which will make the task of
comparative investigation and analysis of such business opportunities difficult
and complex.
The Company has, and will continue to have, no capital with which to provide
cash or other assets to the owners of business entities. However, management
believes the Company will be able to offer owners of acquisition candidates the
opportunity to acquire a controlling ownership interest in a public company
without incurring the cost and time required to conduct an initial public
offering. Management has not conducted market research and is not aware of
statistical data to support the perceived benefits of a merger or acquisition
transaction for the owners of a business opportunity.
The analysis of new business opportunities will be undertaken by, or under the
supervision of, the sole officer and director of the Company, who is not a
professional business analyst. In analyzing prospective business opportunities,
management will consider such matters as the available technical, financial and
managerial resources; working capital and other financial requirements; history
of operations, if any; prospects for the future; the nature of present and
expected competition; the quality and experience of management services which
may be available and the depth of that management; the potential for further
research, development, or exploration; specific risk factors not now foreseeable
but which then may be anticipated to impact the proposed activities of the
Company; the potential for growth or expansion; the potential for profit; the
perceived public recognition or acceptance of products, services, or trades;
name identification; and other relevant factors. This discussion of the proposed
criteria is not meant to be restrictive of the Company's virtually unlimited
discretion to search for and enter into potential business opportunities.
The Company may enter into a business combination with a business entity that
desires to establish a public trading market for its shares. A target company
may attempt to avoid what it deems to be adverse consequences of undertaking its
own public offering by seeking a business combination with the Company. Such
consequences may include, but are not limited to, time delays of the
registration process, significant expenses to be incurred in such an offering,
loss of voting control to public shareholders or the inability to obtain an
underwriter or to obtain an underwriter on satisfactory terms.
Management of the Company, which in all likelihood will not be experienced in
matters relating to the business of a target company, will rely upon its own
efforts in accomplishing the business purposes of the Company. Outside
consultants or advisors may be utilized by the Company to assist in the search
for qualified target companies. If the Company does retain such an outside
consultant or advisor, any cash fee earned by such person will need to be
assumed by the target company, as the Company has limited cash assets with which
to pay such obligation.
A potential target company may have an agreement with a consultant or advisor
providing that services of the consultant or advisor be continued after any
business combination. Additionally, a target company may be presented to the
Company only on the condition that the services of a consultant or advisor be
continued after a merger or acquisition. Such preexisting agreements of target
companies for the continuation of the services of attorneys, accountants,
advisors or consultants could be a factor in the selection of a target company.
In implementing a structure for a particular business acquisition, the Company
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. It may also acquire
stock or assets of an existing business. On the consummation of a transaction,
it is likely that the present management and shareholder of the Company will no
longer be in control of the Company. In addition, it is likely that the
Company's officer and director will, as part of the terms of the acquisition
transaction, resign and be replaced by one or more new officers and directors.
It is anticipated that any securities issued in any such reorganization would be
issued in reliance upon exemption from registration under applicable federal and
state securities laws. In some circumstances, however, as a negotiated element
of its transaction, the Company may agree to register all or a part of such
securities immediately after the transaction is consummated or at specified
times thereafter. If such registration occurs, of which there can be no
F-8
assurance, it will be undertaken by the surviving entity after the Company has
entered into an agreement for a business combination or has consummated a
business combination and the Company is no longer considered a blank check
company. Until such time as this occurs, the Company will not register any
additional securities. The issuance of additional securities and their potential
sale into any trading market which may develop in the Company's securities may
depress the market value of the Company's securities in the future if such a
market develops, of which there is no assurance.
While the terms of a business transaction to which the Company may be a party
cannot be predicted, it is expected that the parties to the business transaction
will desire to avoid the creation of a taxable event and thereby structure the
acquisition in a "tax-free" reorganization under Sections 351 or 368 of the
Internal Revenue Code of 1986, as amended (the "Code").
With respect to any merger or acquisition negotiations with a target company,
management expects to focus on the percentage of the Company which target
company shareholders would acquire in exchange for their shareholdings in the
target company. Depending upon, among other things, the target company's assets
and liabilities, the Company's shareholders will in all likelihood hold a
substantially lesser percentage ownership interest in the Company following any
merger or acquisition. The percentage of ownership may be subject to significant
reduction in the event the Company acquires a target company with substantial
assets. Any merger or acquisition effected by the Company can be expected to
have a significant dilutive effect on the percentage of shares held by the
Company's shareholders at such time.
The Company will participate in a business opportunity only after the
negotiation and execution of appropriate agreements. Although the terms of such
agreements cannot be predicted, generally such agreements will require certain
representations and warranties of the parties thereto, will specify certain
events of default, will detail the terms of closing and the conditions which
must be satisfied by the parties prior to and after such closing, will outline
the manner of bearing costs, including costs associated with the Company's
attorneys and accountants, and will include miscellaneous other terms.
The Company will not acquire or merge with any entity which cannot provide
audited financial statements at or within a reasonable period of time after
closing of the proposed transaction. The Company is subject to all of the
reporting requirements included in the Exchange Act. Included in these
requirements is the duty of the Company to file audited financial statements as
part of or within 60 days following its Form 8-K to be filed with the Securities
and Exchange Commission upon consummation of a merger or acquisition, as well as
the Company's audited financial statements included in its annual report on Form
10-K (or 10-KSB, as applicable). If such audited financial statements are not
available at closing, or within time parameters necessary to insure the
Company's compliance with the requirements of the Exchange Act, or if the
audited financial statements provided do not conform to the representations made
by the target company, the closing documents may provide that the proposed
transaction will be voidable at the discretion of the present management of the
Company.
RESULTS OF OPERATIONS
During the period from April 2, 1999 (inception) through November 30, 2001, the
Company has engaged in no significant operations other than accounting, legal
and filing costs associated with continuous disclosure requirements of the SEC.
The Company anticipates that, it will not generate revenues other than interest
income, and may continue to operate at a loss thereafter, depending upon the
performance of an acquired business.
LIQUIDITY AND CAPITAL RESOURCES
The Company remains in the development stage and, since inception, has
experienced no significant change in liquidity or capital resources or
stockholder's equity. Consequently, the Company's balance sheet as of November
30, 2001 reflects current assets of $nil.
F-9
The Company will carry out its plan of business as discussed above. The Company
cannot predict to what extent its liquidity and capital resources will be
diminished prior to the consummation of a business combination or whether its
capital will be further depleted by the operating losses (if any) of the
business entity which the Company may eventually acquire.
The Company will need additional capital to carry out its business plan to
engage in a business combination. No commitments to provide additional funds
have been made by management or stockholders. Accordingly, there can be no
assurance that any additional funds will be available on terms acceptable to the
Company or at all. Irrespective of whether the Company's cash assets prove to be
inadequate to meet its operational needs, the Company might seek to compensate
providers of services by issuances of stock in lieu of cash.
F-10
SIGNATURES
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.
Dated: December 21, 2001 TEXAS SCIENTIFIC INC.
By: /s/ Larry Bishop
---------------------------------------
Larry Bishop, President
F-11