Form 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[X] Quarterly report pursuant section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1998
[ ] Transition report pursuant section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from.....to.....
Commission file number: 0-23897
TOUPS TECHNOLOGY LICENSING, INC.
(Exact name of small business issuer as specified in its charter)
Florida 59-3462501
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
7887 Bryan Dairy Road, Suite 105, Largo, Florida 33777
(Address of principal executive offices)
(813)-548-0918
(Issuer's telephone number)
None
(Former name, former address and former fiscal year,
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 registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No___
--
Applicable only to corporate issuers
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable
As of June 11, 1998, the Company had 10,701,798 of its $0.001 par value
Common Shares outstanding.
Transitional Small Business Disclosure Format (check one); Yes___ No X
--
INDEX
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements...............................................3
Balance Sheet as of March 31, 1998 (unaudited)
and December 31, 1997...........................................3
Statements for the Periods ended March 31, 1998 and 1997:
Operations......................................................4
Changes in Stockholders' Equity.................................5
Cash Flows......................................................6
Notes to Financial Statements...................................7
Item 2 Management's Discussion and Analysis..............................11
PART II - OTHER INFORMATION
Item 1 Legal Proceedings..............................................13
Item 2 Changes in Securities..........................................13
Item 3 Defaults Upon Senior Securities................................13
Item 4 Submission of Matters to a Vote of Security Holders...........13
Item 5 Other Information..............................................13
Item 6 Exhibits and Reports on Form 8-K...............................13
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
TOUPS TECHNOLOGY LICENSING, INC.
BALANCE SHEETS
March 31, 1998 (Unaudited) and December 31, 1997
(Unaudited)
March 31 December 31
1998 1997
Assets
Cash $192,577 $60,421
Inventory, at cost 56,666 -
Prepaid expenses - other 3,457 -
Prepaid royalty expenses 53,000 11,000
Deferred charges - 5,195
Property and equipment, net of
accumulated depreciation of $482 36,535 -
-------- -------
Total assets $342,235 $76,616
======== =======
Liabilities:
Accounts payable and accrued liabilities $63,365 $8,559
Capital lease obligations 9,529 -
-------- -------
Total liabilities 72,894 8,559
Stockholders' equity:
Common stock 9,525 8,630
Additional paid-in capital 515,300 99,840
Deficit accumulated during development stage (255,484) (40,413)
-------- --------
Total stockholders' equity 269,341 68,057
-------- -------
Total liabilities and stockholders' equity $342,235 $76,616
======== =======
See Notes to Financial Statements
TOUPS TECHNOLOGY LICENSING, INC.
STATEMENTS OF OPERATIONS
For the three-month period ended March 31, 1998 (Unaudited)
and for the period from July 28, 1997 (date of inception)
through December 31, 1997
(Unaudited) July 28, 1997
Three-month (Inception)
Period ended through
March 31, December 31,
1998 1997
-------------- --------
Interest Income $1,442 $ 543
Expenses:
Salaries 92,295 17,902
Consulting fees 29,861 14,209
Other operating costs 94,357 8,845
----------- ---------
Total expenses 216,513 40,956
----------- ----------
Net loss $215,071 $40,413
========== =========
Weighted average number of
shares outstanding 9,112,757 8,381,751
Net loss per share $.0236 $.005
========== ========
See Notes to Financial Statements
TOUPS TECHNOLOGY LICENSING, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the three-months ended March 31, 1998 (Unaudited) and
for the period from July 28, 1997 (Date of inception)
through December 31, 1997
Deficit
Accumulated
Common Additional During
Number Stock Paid-In Development
of shares (At Par) Capital Stage Total
Issuance of common
stock from inception 8,250,000 $8,250 $- $- $8,250
Stock Issued for:
Services 100,000 100 - - 100
Cash 160,000 160 99,840 - 100,000
Rent 120,000 120 - - 129
Deficit accumulated during
development stage through
December 31, 1997 - - - (40,413) (40,413)
-------- ------ ------ ------- --------
Balance,
December 31, 1997 8,630,000 8,630 99,840 (40,413) 68,057
Stock Issued for:
Cash 704,535 705 415,460 - 416,165
Services 190,000 190 - - 190
Deficit accumulated during
development stage
January 1, 1998 through
March 31, 1998 - - - (215,071) (215,071)
-------- ------ ------ --------- ---------
Balance
March 31, 1998 9,524,535 $9,525 $515,300 $(255,484) $269,341
========= ====== ======== ========== ========
See Notes to Financial Statements
TOUPS TECHNOLOGY LICENSING, INC.
STATEMENT OF CASH FLOWS
For the three-months ended March 31, 1998 (Unaudited) and
for the period from July 28, 1997 (Date of inception)
through December 31, 1997
(Unaudited) July 28, 1997
Three Months (Inception)
Ended through
March 31, December 31,
1998 1997
------------- --------
Cash flows from operating activities:
Net loss $215,071 $(40,413)
Add (deduct) items no affecting cash:
Depreciation 482 -
Capital stock issued for
consulting fees and rent 190 8,470
Cash provided (used) due to changes in
assets and liabilities:
(Increase) in inventory (56,666) -
(Increase) in prepaid
royalty expenses (42,000) -
(Increase in prepaid expenses - other (3,457) (11,000)
(Increase) decrease in
deferred charges 5,195 (5,195)
Increase (decrease) in accounts payable
and accrued liabilities 54,806 8,559
----------- ---------
Net cash used by operating activities (256,521) (39,579)
---------- --------
Cash flows from investing activities:
Acquisition of equipment (25,871) -
---------- ---------
Net cash used by investing activities (25,871) -
---------- --------
Cash flows from financing activities:
Proceeds from sale of capital stock 416,165 100,000
Principal payments on capital
lease obligation (1,617) -
---------- -------
Net cash provided by financing
activities 414,548 100,000
---------- -------
Net increase in cash 132,156 60,421
Cash, beginning of period 60,421 -
---------- -------
Cash, end of period $192,577 $60,421
========= ========
Supplemental cash flow disclosures:
Noncash items:
Equipment acquired under capital lease $11,146 $ -
========= ========
See Notes to Financial Statements
TOUPS TECHNOLOGY LICENSING, INC.
NOTES TO FINANCIAL STATEMENTS
For the three-months ended March 31, 1998 (Unaudited) and
for the period from July 28, 1997 (Date of inception)
through December 31, 1997
1. Summary of Significant Accounting Policies
Company - Toups Technology Licensing, incorporated (Company), a Florida
Corporation, was formed on July 28, l997, and activated its startup
operations on November 1, 1997 to facilitate market applications through
the licensing of late-stage technologies primarily in the energy,
environmental and natural resources market segments. The Company selects
proprietary products or devices within market segments which management
perceives are not subject to rapid change and can be delivered to the
marketplace within a three to six month period. The Company is in the
development stage of its operations and has not realized any revenues from
its product lines (see subsequent event note 7). The Company's intended
market will be world-wide.
Inventories - Inventories consist of work-in-process and parts held for
manufacturing and are valued at cost using the first-in, first-out method.
Property and Equipment - Property and equipment are recorded at cost.
Depreciation is computed using the straight-line method over their estimate
useful lives. At March 31, 1998 property and equipment consisted of
machinery and equipment.
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 reporting period. Actual results could differ from
those estimates.
Income Taxes - Deferred income taxes are reported using the liability
method. Deferred tax assets are recognized for deductible temporary
differences and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are differences between the
reported amounts of assets and liabilities and their tax bases. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of the
deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Restricted Common Stock - Restricted common stock is subject to the resale
provisions of SEC Rule 144. Due to the uncertainty of the future of the
Company, restricted stock is recorded at its par value ($.001) per share.
Basis of Presentation - Three months Ended March 31, 1998 - The unaudited
interim financial statements for the three months ended March 31, 1998
included herein have been prepared by the Company, without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission and,
in the opinion of the Company, reflect all adjustments (consisting only of
normal recurring adjustments) and disclosures which are necessary for a
fair presentation. The results of operations for the three months ended
March 31, 1998 are not necessarily indicative of the results for the full
year.
TOUPS TECHNOLOGY LICENSING, INC.
NOTES TO FINANCIAL STATEMENTS
(continued)
For the three-months ended March 31, 1998 (Unaudited) and
for the period from July 28, 1997 (Date of inception)
through December 31, 1997
2. Capital Stock
Common
The Company is authorized to issue 20 million shares of common stock
with a par value of $0.001 (one, one-thousandth dollar) per share. As of
March 31, l998 there were 9,524,535 shares issued and outstanding. Each
share of common stock has one vote on all matters acted upon by the
shareholders. Of the 9,524,535 shares issued and outstanding at March 31,
1998, 864,535 shares are unrestricted and 8,660,000 shares are restricted
as to the sale to other parties.
Preferred
The Company is also authorized to issue 10 million shares of preferred
stock having a par value of $1.00 per share. There were no preferred shares
issued outstanding at March 31, 1998.
3. Employment Agreements Stock Commitments
The Company entered into a series of one-year employment contracts.
Within those contracts, 85,000 shares of stock were issued to certain
employees. These shares have been recorded in the accompanying balance
sheet. Additionally, there are incentive clauses in these contracts that
allow up to another 270,000 shares of common stock to be issued to
employees if certain goals are met. None of these shares are scheduled to
be issued to officers, directors, or holders of more than 5% of the
outstanding stock. The additional 270,000 shares have not been recorded in
the accompanying financial statements.
4. Licensing Agreement Commitments
The Company entered into two licensing agreements in November 1997,
whereby, the Company has exclusive rights to make, use, lease, market and
sell these product lines. In January, 1998, the Company executed a five
year manufacturing agreement with a third licensor. In exchange for these
rights, under the three agreements, the Company has committed to pay the
Licensor a 6% royalty as computed by those agreements. The Company agreed
to pay a minimum of $176,000 of royalties in 1998, of which $53,000 has
been paid as of March 31, 1998. The remaining royalty payments for the
initial licensing term will be paid as follows:
Year Ending
1998 $123,000
1999 96,000
2000 96,000
------
$315,000
The Company can offset these advanced payments against the royalties
earned in 1998 through the year 2000.
TOUPS TECHNOLOGY LICENSING, INC.
NOTES TO FINANCIAL STATEMENTS
(continued)
For the three-months ended March 31, 1998 (Unaudited) and
for the period from July 28, 1997 (Date of inception)
through December 31, 1997
In addition to the above, if the Company exercised its option to renew
the licenses it will have future minimum royalties as follows:
Year Ending
2001 $200,000
2002 $250,000
2003 $300,000
2004 and every year thereafter $400,000
5. Non-Cash Disclosures
The following transactions were excluded from the statement of cash
flows at March 31, 1998 because they were not cash transactions.
The Company issued 190,000 shares of stock to consultants and
employees. These shares are recorded at $190.
6. Income Taxes
A deferred tax asset stemming from the Company's net operating loss
carry forward has been reduced by a valuation account to zero due to
uncertainties regarding the utilization of the deferred asset. The deferred
tax asset and the corresponding valuation allowance were approximately
$64,000 as of March 31, 1997.
The net operating loss of $40,423 will expire in 2012.
Deferred tax asset:
Net operating loss carry forwards $64,000
Less valuation allowance (64,000)
Net deferred taxes $ -
========
7. Capital Lease
In March 1998, the Company acquired machinery and equipment under the
provisions of a capital lease. The lease expires December 1999. The
machinery and equipment has a cost of $11,146 and net book value of $11,146
at March 31, 1998.
The future minimum lease payments under capital lease and the net
present value of the future minimum lease payments at March 31, 1998 are as
follows:
Total minimum lease payments $ 10,799
Amount representing interest (1,270)
-------
Present value of net minimum lease payments $9,529
TOUPS TECHNOLOGY LICENSING, INC.
NOTES TO FINANCIAL STATEMENTS
(continued)
For the three-months ended March 31, 1998 (Unaudited) and
for the period from July 28, 1997 (Date of inception)
through December 31, 1997
8. Operating Lease
In December, 1997, the Company issued 120,000 shares of stock to a
related party in exchange for the use of a 5,000 square foot facility for a
twelve month period.
9. Subsequent Events
A. Management has a purchase order and a $6,000 deposit for the sale of
the first Balanced Oil Recovery System Lift Pumps. These pumps are
expected to be installed in the second quarter of 1998 at a total sales
price of $180,000. Inventory in the amount of $56,666 relating to this
equipment is recorded in the March 31, 1998 financial statements.
B. The Company has raised an additional $334,266 and $750,431 in equity
through the sale of 498,904 and 1,128,439 shares of common stock
subsequent to March 31, 1998 and December 31, 1997, respectively.
C. The Company entered into a two year agreement with the Pinellas County
Industrial Council for the lease of machinery and equipment with an
original cost of $1,700,000 for $1 per year. Additionally, the Company
has an option to purchase the equipment at under 10% of the original
cost of the equipment at the end of the lease.
D. The Company received a $50,000 grant from the U. S. Department of
Energy and administered by the Technology Deployment Center for the
development of one of its technologies.
E. On April 29, 1998, Toups Technology Licensing Incorporated (TTL)
acquired Advanced Micro Welding, Inc. (AMW) in a business combination
accounted for as a pooling of interests. AMW, a company specializing in
micro welding and custom metal fabrication, became a wholly owned
subsidiary of TTL through the exchange of 500,000 shares restricted
common stock of TTL's common stock for all of the outstanding stock of
AMW.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Overview
The Company licenses and facilitates the market applications of late-stage
technologies in the energy, environmental and natural resources market segments.
The Company selects proprietary products or processes in market segments
management perceives are not subject to rapid change and which can be delivered
to the marketplace within a three to six month period. The Company currently has
four technologies under license:
AquaFuel(TM) is a non-fossil, combustible gas which is produced by an
electric discharge of carbon arcs within distilled, fresh, salt or other types
of water, thus being essentially composed of Hydrogen, Oxygen, Carbon and their
compounds. In the opinion of management, the AquaFuel technology affords a
number of prospective applications including: (1) a clean synthetic gas that
emits no harmful emissions; (2) feedstock for chemical extraction that would
allow the production of pure hydrogen and/or carbon dioxide; (3) desalination of
salt water (by product of creating gas); (4) organic or farm-animal waste
disposal; (5) industrial waste disposal; co-generation of electricity and; (6)
fuel for internal combustion engines.
Balanced Oil Recover System (BORS) Lift is designed to replace traditional
oil patch pump jacks. The BORS Lift is a device developed in response to the
current high cost/low production of stripper wells (oil wells that produce 10
barrels or less per day) which contributed to a flat-lining of the annual
domestic oil production. The unit is comprised of hardware that is both
positioned above ground and downhole as well as a programmable logic controller.
Flow Control featuring Balanced Pistons Valve (BP Valves) relates to
regulating the flow of fluids in piping systems and machinery through a valve
closure made by fitting together old and well known elements to form a new
result. The ease of closure achieved through the BP Valve invention translates
into higher speed - smaller automated valve assembly size - lighter weight -
longer life - reduced system costs reduced system complexity - ease of computer
control and monitoring.
Smokeless, Scrap Tire Processing Technology (SSTP(TM)) equipment reclaims
the original oil, steel and carbon black elements that went into making tires.
The entire tire recycling process is a closed system. The SSTP(TM)
differentiates from competition because there are no emissions and therefore, no
residue from combustion. The SSTP(TM) is further differentiated from competition
in its modular design which allow for a tire "plant" to be a single unit
estimated to cost under $20,000 up through a full-scale, multi-unit plant. The
SSTP(TM) devise was developed to meet the need for an economically viable method
for the permanent disposal of tires.
Results of Operations
For the three months ended March 21, 1998, the Company reported no revenues
from operations. The Company received a $6,000 deposit against a $180,000
purchase order for the sale of 27 BORS Lifts. As of March 31, 1998, the Company
had inventory on hand in the amount of $56,666 relating to this order in various
stages of production. The Company does not recognize a sale until final product
is shipped.
The Company is currently pursuing licensing agreements for its AquaFuel, BP
Valves and SSTP technologies. The Company expects to generate revenues from
these activities beginning in the third quarter, 1998.
On April 29, 1998, the Company acquired Advanced Micro Welding, Inc., (AMW)
in a business combination accounted for as a pooling of interest. AMW
specializes in micro welding and custom metal fabrication. AMW now operates as a
wholly-owned subsidiary of Toups Technology. AMW brings certain production and
expertise in micro welding, metal fabrication and machining which compliments
the Company's business strategy of developing market applications for its
technology mix.
The Company's selling and administrative expenses comprise salaries,
consulting fees and other operating costs. These expenses were the result of the
Company building its infrastructure, assembling a team of engineers, scientists
and other professional and preparing its technologies for market applications.
The Company has completed initial independent testing for AquaFuel, developed
applications for its BP Valves, field tested its BORS units at three sites in
Texas and concluded the acquisition of AMW.
Interest income was the Company's only source of income generated from
excess cash balances from the Company's private offering of common stock.
Liquidity and Capital Resources
Net cash used by operating activities was ($256,521) relating primarily to
the Company's operating loss. The Company had a net working capital surplus of
$242,335 reporting an increase of $174,278 from December 31, 1997. The increase
in working capital was principally a result of an increase in financing
activities through the issuance of $416,165 in common stock.
At March 31, 1998, the Company had no bank financing or other debt
obligations outstanding other than trade payables and accrued expenses due from
the normal course of business.
The Company has access to over $1.7 million in capital equipment it
currently utilizes as part of its lease agreement. The Company leases this
equipment for $1.00 per year and may exercise its option to purchase the
equipment for under 10% of its original costs before December 1999. The
equipment remains from the facility's former tenant, Lockheed Martin, a
contractor to the US Department of Energy. This equipment includes computers,
milling equipment and lathes, shelving and storage units, electron beam welders,
laser welders and other production machinery. The Company will be able to fully
utilize this equipment beginning in the second and third quarters of 1998
through its acquisition of AMW.
In April and May 1998, the Company raised an additional $334,266 in equity
through the sale of common stock. The proceeds from the sale of the equity
offering are available for future acquisitions, working capital and general
corporate purposes. The Company also received a $50,000 grant from the US
Department of Energy administrated by the Technology Deployment Center for the
development of market applications for its technologies.
The Company believes its existing cash, together with projected cash flows
from operations will be sufficient to meet the Company's cash requirements for
the next twelve months.
Forward Looking Statements
Statements in this document which are not purely historical facts,
including statements regarding anticipations, beliefs, expectations, hopes,
intentions or strategies for the future, may be forward look statements within
the meaning of section 27A of the Securities Act of 1933, as amended and Section
21.E of the Securities Exchange Act of 1934, as amended. All forward looking
statements within this document are based upon information available to the
Company on the date of this release. Any forward looking statements involve
risks and uncertainties that could cause actual events or results to differ
materially from the events or results described in the forward looking
statements, including the timing and nature of independent test results; the
nature of changes in laws and regulations that govern various aspects of the
Company's business; the market acceptance of the Company's licensed
technologies; retention and productivity of key employees; the availability of
acquisition candidates and proprietary technologies at prices the Company
believes to be fair market; the direction and success of competitors; management
retention; and unanticipated market changes. The Company undertakes no
obligation to publicly update or revise any forward looking statements, whether
as a result of new information, future events or otherwise. Readers are
cautioned not to place undue reliance on these forward looking statements.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is
a party or of which the Company's property is subject.
ITEM 2 CHANGES IN SECURITIES
None.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5 OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Toups Technology Licensing, Inc.
(Registrant)
June 16, 1998
By Leon H. Toups, Chief Executive Officer
S/S LEON H. TOUPS
(Signature)