Form 10-QSB/A
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 June 30, 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
(a) 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 30, 1998, the Company had 11,077,232 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 Unaudited Financial Statements:
Consolidated Statements of Operations for the
three months ended June 30, 1998 and 1997
Consolidated Statements of Operations for the
six-months ended June 30, 1998 and 1997
Consolidated Balance Sheets as of June 30, 1998
and December 31, 1997
Consolidated Statement of Stockholders'
Equity for the six-month period ended
June 30 1998 and for the period form July 28, 1997
(date of inception) through December 31, 1997
Consolidated Statements of Cash Flows for the
six-months ended June 30, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2 Management's Discussion and Analysis
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Toups Technology Licensing, Inc.
STATEMENTS OF OPERATIONS
for the six-month period ended June 30, 1998 (Unaudited)
and for the six-month period ended June 30, 1997 (Unaudited)
(Unaudited) (Unaudited)
Six-Month Six-Month
Period ended Period ended
June 30, June 30
1998 1997
---- ----
Sales $ 274,040 $ 112,581
Cost of Goods Sold 137,139 61,358
------------- -------------
Gross Profit 136,901 51,223
------------- -------------
Expenses:
Salaries 256,700 36,574
Consulting fees 158,143 1,569
Other operating costs 380,986 56,785
------------- -------------
Total expenses 795,829 94,928
------------- -------------
Net Operating Loss (658,928) (43,705)
------------- -------------
Other Income:
Interest Income 2,937 -
------------- -------------
Net Loss $ (655,991) $ (43,705)
============= =============
Weighted average number of
shares outstanding 11,077,232 8,881,751
Net loss per share $ 0.0592 0.0049
============= =============
See Notes to Financial Statements
Toups Technology Licensing, Inc.
BALANCE SHEETS
June 30, 1998 (Unaudited) and December 31, 1997 (Restated)
(Unaudited)
Unaudited Restated (Note 5)
June 30, June 30
1998 1997
---- ----
Assets:
Cash $ 277,454 $ 74,636
Accounts Receivable, net of
Allowance for doubtful accounts
Of $5,000 64,960 27,147
Notes Receivables 32,000 -
Inventory at cost 85,785 -
Prepaid expenses-other 3,457 -
Prepaid royalty expenses 71,000 11,000
Deferred charges - 5,075
Property and equipment, net of
Accumulated depreciation of $56,885 240,592 21,117
------------- -------------
Total Assets $ 775,248 $ 138,975
============= =============
Liabilities: 118,888 46,141
Deposits 6,000 -
Capital lease obligations 188,473 -
------------- -------------
Total liabilities $ 313,361 $ 46,141
------------- -------------
Stockholders' equity
Common stock 11,077 9,010
Additional paid-in capital 1,147,224 148,547
Retained Earnings (40,423) (71,137)
Deficit accumulated during
development stage (655,991) 8,414
------------- -------------
Total stockholders' equity $ 461,887 $ 92,834
------------- -------------
Total liabilities and
stockholders' equity $ 775,248 $ 138,975
============= ============
See Notes to Financial Statements
Toups Technology Licensing, Inc.
STATEMENTS OF STOCKHOLDERS' EQUITY For the
six-month period ended June 30, 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
Stocks issued for:
Cash 1,661,232 1,661 997,791 - 999,452
Services 286,000 286 - - 286
Acquisition of AMW
(Note 5) 500,000 500 49,593 - 50,093
Deficit accumulated during
development stage-
January 1, 1998 through
June 30, 1998 - - - (655,991 (655,991)
- - - --------- ---------
Balance
June 30, 1998 11,077,232 11,077 1,147,224 (696,414) 461,887
========== ====== ========= ========= =======
See Notes to Financial Statements
Toups Technology Licensing, Inc.
STATEMENTS OF CASH FLOWS
for the six-month period ended June 30, 1998 (Unaudited)
and for the six-month period ended June 30, 1997 (Unaudited)
(Unaudited) (Unaudited)
Six-month Six-month
Period ended Period ended
June 30, June 30
1998 1997
---- ----
Cash flows from operating activities:
Net loss $(655,991) $(43,705)
Add (deduct) items not affecting cash:
Depreciation 16,574 0
Amortization 623 0
Cash provided (used) due to changes in
assets and liabilities
(increase) in inventory (85,785) 0
(Increase) decrease in accounts receivable (64,960) 1,205
(Increase) in notes receivable (32,000) 0
(Increase) in prepaid royalty expense (60,000) 0
(Increase) in prepaid expenses (3,457) 0
(Increase) decrease in deferred charges 5,075 0
Increase (decrease) accounts payable 110,329 15,107
Increase (decrease) in deposits 6,000 0
--------------- ----------
Net cash used by operating activities (763,592) (27,393)
--------------- ----------
Cash flows from investing activities:
Acquisition of equipment (45,551) 0
--------------- ---------
Net cash used by investing activities (45,551) 0
--------------- -----------
Cash flows from financing activities:
Proceeds from sale of capital stock 1,029,870 0
Distribution to owners (7,593) 0
Principal payments on
capital lease obligations (10,316) 0
--------------- ---------
Net cash provided by financing activities 1,011,961 0
------------- ----------
Net increase in cash 202,818 (27,393)
-------------- ----------
Cash, beginning of period 74,636 30,674
--------------- ----------
Cash, end of period $227,454 $3,281
=============== ==========
Supplemental Cash Flows Disclosures
Noncash items
Equipment acquired under capital lease $124,666 $ 0
=============== ==========
Common stock issued for consulting
services and rent $ 286 $ 0
============ ==========
See Notes to Financial Statements
Toups Technology Licensing, Inc.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998 (Unaudited)
and December 31, 1997 (Restated)
1. Summary of Significant Accounting Policies
(a) Company - Toups Technology Licensing, Incorporated (Company), a
Florida Corporation, was formed on July 28, 1997, 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 operations.
(b)Receivables - The Company's trade receivables include amounts due from
business predominately in the Tampa Bay geographic area but includes
customers throughout the Southeast United States. Management believes
that receivables are stated at their net realizable values.
(c)Notes Receivable - The Company's note receivable is a 60-day note with
no stated interest.
(d)Inventories - Inventories consist of work-in-process and parts held
for manufacturing and are valued at cost using the first-in, first-out
method.
(e)Property and Equipment - Property and equipment are recorded at cost.
Depreciation is computed using the straight-line method over their
estimated useful lives. At June 30, 1998, property and equipment
consisted of machinery and equipment.
(f)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.
(g)Deposits - As of June 30, 1997, management has purchase orders and
$6,000 in deposits for the sale of the first Balanced Oil Recovery
System Lift Pumps. These pumps are expected to be installed in the
third quarter of 1998 at a total sales price of $ 207,194. Inventory in
the amount of $ 69,388 relating to this equipment is recorded in the
June 30, 1998 financial statements.
(h)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 amount 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.
(i)Basis of Presentation - Six Months Ended June 30, 1998 - The unaudited
interim financial statements for the six months ended June 30, 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 six months ended June 30, 1998 are not necessarily indicative of
the results of the full year.
2. Capital Stock
(a)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 June 30, 1998, there were 11,077,232 shares issued and
outstanding. Of the 11,077,232 shares issued and outstanding, at June
30, 1998, 9,469,014 shares are restricted as to the sale to other
parties and 1,608,218 are unrestricted. Each share of common stock has
one vote on all matters acted upon by the shareholders.
(b)Preferred. The company is authorized to issue 10 million shares of
preferred stock having a par value of $1 per share. There were no
preferred shares issued or outstanding at June 30, 1998.
3. Employment and Services Agreements-Stock Commitments
(a) 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.
(b) On June 17, 1998, the Company entered a consulting agreement with Great
Britain-based Global Resource Management, Inc. to take steps necessary
for the Company's shares to be listed on the London stock exchange and
to represent the Company's technology offering within the European
community. The Agreement requires the Company compensate Global at the
rate of 10,000 unregistered common shares per month plus $3,000 cash
payment per month.
4. Licensing Agreement Commitments
(c) 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 licenser. In June, 1998,
the Company executed an additional license agreement as disclosed in
Footnote 8, Other Significant Events, Note (B). In exchange for these
rights, under the four agreements, the Company has committed to pay the
Licenser a 6% royalty as computed by those agreements. The Company
agreed to pay a minimum of $176,000 of royalties in 1998, of which
$71,000 has been paid as of June 30, 1998. The remaining royalty
payments for the initial licensing term will be paid as follows:
Year Ending:
1998 $ 105,000
1999 96,000
2000 96,000
-------------
$ 297,000
(d) The Company can offset these advanced payments against the royalties
earned in 1998 through the year 2000.
(e) 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 $ 400,000
5. Acquisition of Advanced Micro Welding
(a) 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 of restricted
common stock of TTL's common stock for all the outstanding stock of
AMW. The statement of stockholders' equity reflects a restatement of
$49,593 to additional paid in capital as a result of the acquisition.
The restatement includes $9,500 and $40,093 respectfully, for the
disposition of AMW stock and adjustment of retained earnings for the
pooling.
(b) The restated Balance Sheet as of December 31, 1997, reflects the
acquisition of AMW. The restated financial statements are based on the
historical financial statements of TTL and AMW accounting for the
combination as a pooling of interest. Both companies were audited
independently on December 31, 1997. The restated balance sheet as of
December 31, 1997, reflects the unaudited combination of these numbers.
(c) The restated financial statements have been prepared based upon the
historical financial statements of TTL and AMW. These restated
financial statements may not be indicative of the results that actually
would have occurred if the combination had been in effect on the dates
indicated or which may be obtained in the future.
6. Income Taxes
(a) A deferred tax asset stemming from the Company's net operating loss
carryforward 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 June 30, 1998.
The net operating loss of $40,423 will expire in 2012
Deferred tax asset:
Net operating loss carryforward $64,000
Less valuation allowance ( 64,000)
---------
Net deferred taxes $ -
============
7. Capital Lease
(a) 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 a net book value of
$11,146 at June 30, 1998. In addition, a wholly owned subsidiary of the
Company acquired equipment totaling $191,493 under three capital lease
agreements. Amortization of these capital leases included in
depreciation expense amounted to $ 11,100 for the six months ended June
30, 1998. Accumulated amortization amounted to $9,800 as of June 30,
1998 as of June 30, 1998 and is included in accumulated depreciation.
(b) The future minimum lease payments under capital lease and net present
value of the future minimum lease payments at June 30, 1998, are as
follows:
Total minimum lease payments $ 246,091
Amount representing interest (57,618)
-------------
Present value of net minimum lease payments $ 178,944
============
(c) Future minimum lease payments under capital leases as of June 30, 1998
are as follows:
1998 $ 30,649
1999 51,048
2000 51,048
2001 47,037
2002 45,329
After 10,181
-------------
$ 235,292
8. Other Significant Events
(a) 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.
(b) On May 20, 1998, the Company entered a world-wide exclusive license
agreement for the commercialization of the Smokeless, Scrap Tire
Processing Technology (SSTP). Under the terms of the License, the
Company receives the right to design, manufacture, sell or other wise
commercialize the SSTP technology. The License obligates the Company to
pay a 6% royalty fee on all SSTP-related sales and granted a one-time
issuance of 60,000 unregistered common shares.
(c) On June 29, 1998, the Company entered a Letter of Intent for the
acquisition of a Group that is comprised of a collection of consumer
services companies. The core Group company has been operating since
1981 and posted revenues of approximately $24,000,000 in 1996 and
approximately $30,000,000 in 1997. Under the terms of the Letter of
Intent, TTL would issue 1,000,000 Shares of the Company's Common Stock
in exchange for 100% of the outstanding Groups Shares. As a further
condition to the acquisition, TTL would apply a minimum of $150,000
within 30 days; an additional $300,000 within 120 days, and; an
additional $550,000 during the first twelve-months following the
acquisition. The Letter of Intent further required the Group to
conclude employment agreement with key management and other actions
customary for this type of transaction.
9. Subsequent Events
(a) On July 1, 1998, the Company entered a worldwide exclusive license
agreement for a patent-pending technology referred to as "Tunnel Bat"
technology. Under the terms of the License, the Company receives the
right to design, manufacture sell or otherwise commercialize the Tunnel
Bat technology on a worldwide exclusive basis for an initial period of
three years after which the Tunnel Bat License may be extended for
additional three-year periods. The Tunnel Bats License obligates the
Company to pay six percent (6%) royalty on gross revenues derived from
the Tunnel Bat technology. In addition, the Company made a one-time
issuance of 150,000 of its restricted $.001 par value Common Shares and
undertook to register at least 50,000 of the foresaid Shares no later
than six months after June 15, 1998. The Company also retained Tunnel
Bat technology inventor/patent-pending owner David Richardson to act as
Technical Assistant, Tunnel Bat Technology.
(b) On July 6, 1998, the Company entered a Letter of Intent and Purchase
Order for the sale of 430 Balanced Oil Recovery System (BORS) lift
pumps with CMT, Inc. Under the terms of the Letter of Intent, CMT has
been given exclusivity for the sale of the BORS pumps throughout Kansas
and Oklahoma and has agreed to a minimum purchase of 50 pumps during
1998, 200 pumps during 1999 and 180 pumps during 2000. The Company is
scheduled to ship the first five pumps from its manufacturing facility
in Florida during August, 1998.
(c) On July 7, 1998, the Company entered a Letter of Intent relating to
licensing the commercialization of the Company's Smokeless, Scrap-Tire
Processing Technology (SSTP) with a Vienna, Virginia based US company
("proposed Licensee") Under the terms of the Letter of Intent, the
proposed Licensee desires to license the rights to construct the first
industrial size SSTP facility capable of recycling two hundred waste
tires per hour. In addition to requiring a negotiated License Fee and
royalties, the proposed Licensee would thereafter be entitled to
exclusive use of the SSTP technology within North America and TTL would
manufacture the SSTP equipment for their exclusive use within the
licensed area. The Company anticipates entering the development portion
of the Letter of Intent during August, 1998. Thereafter, the Company
would enter a formal license agreement with the proposed Licensee.
(d) On July 9, 1998, the Company entered a License Agreement with an
entity. Wherein TTL grants exclusive rights to the entity to sell,
market and distribute products relating to the AquaFuel (TM)
technology. Under the terms of the License Agreement, the entity shall
cause for sales to commence during third quarter, 1998 and continue
thereafter for a period of three years. The License Agreement grants
the entity the rights to market AquaFuel (TM) category one - "Fuel";
AquaFuel (TM) category 2 - "Public and private services", and; AquaFuel
(TM) category 3 - "processing and research and development."
(e) On July 9, 1998, the Company proposed four Letters of Intent with an
International provider of various gaseous materials. The proposed
Letters of Intent include (1) a proposed License Agreement for the
purpose of commercializing AquaFuel (TM) system for eliminating
biological waste in commercial use applications; (2) a proposed sale of
Electric Power Generation equipment; (3) a proposed License Agreement
for the purpose of marketing AquaFuel (TM) and the construction of
AquaFuel (TM) related plants, and; (4) a proposed Joint-Venture
relating to development of certain aspects relating to AquaFuel (TM).
(f) Subsequent to June 30, 1998, the Company sold 28,732 shares of its
restricted Common Shares to accredited investors for an aggregate of
$25,440.
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(a) 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.
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(a)) 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(a) differentiates
from competition because there are no emissions and therefore, no residue from
combustion. The SSTP(a) 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(a) devise
was developed to meet the need for an economically viable method for the
permanent disposal of tires.
Tunnel Bat Technology represents a mobilized solution to desilting and
otherwise cleaning box culverts. Prior to the invention of the Tunnel bat, box
culverts were manually cleaned by crawling into the box culvert with a small red
wagon and shovel, filling the wagon with blockage, crawling back out to empty
the wagon and then repeating the process until the box culvert was cleaned. In
addition to being a slow, difficult manual process, many box culverts are found
to have snakes and other creatures living among the blockage material, making it
possibly unsafe for personnel. The Tunnel Bat equipment is able to turn a slow,
unpleasant job into a reliable, thorough professional approach to desilting box
culverts. The equipment is fully mobilized allowing for the maximum removal of
blockage while providing a safe working environment.
Results of Operations
TOUPS TECHNOLOGY LICENSING, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OFINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations for the Six Months Ended
June 30, 1998
Overview:
Toups Technology Licensing, Incorporated ("TTL or "The Company") licenses and
facilitates the market applications of late-stage technologies in the energy,
environmental, and natural resources market segments...
Results of Operations
Three Months Ended June 30, 1998, Compared to Three Months Ended June 30, 1997
For the three months ended June 30, 1998, the Company reported revenues from
operations of $109,143, a 73% increase over 1997 second quarter revenues of
$62,971. Second quarter revenues for both periods were generated by the
Company's wholly owned subsidiary Advanced Micro Welding, Inc. ("AMW"). TTL
acquired AMW on April 29, 1998 in a business combination accounted for as a
pooling of interest. AMW, a company specializing in micro welding and custom
metal fabrication grew through an increased emphasis on its metal fabrication
business. AMW gives TTL production capacity and expertise in micro welding,
metal fabrication, and machining which provides infrastructure and compliments
the Company's emphasis on developing market applications for its technologies.
Cost of goods sold in second quarter of 1998 was $65,018 or 60% of revenues,
which compared to the same percentage of revenues for the second quarter of
1997. The cost of goods sold for both periods relate only to AMW.
The Company's selling and administrative expenses of $549,580 were comprised of
salaries, consulting fees, and other operating costs in the second quarter of
1998, up from $51,149 during the second quarter of 1997. This 974% increase in
operating expenses was primarily the result of increased personnel expenses
incurred by the Company in building its infrastructure, assembling a team of
engineers, scientists and other professionals, and preparing its technologies
for market applications. Selling and administration expenses for the 1997 period
relate only to AMW. TTL had no operations during the second quarter of 1997.
During the second quarter of 1998, the Company has completed initial independent
testing for AquaFuel, developed applications for Flow Control Valves, field
tested BORS lifts, licensed and developed applications for its Smokeless
Scrap-Tire Process ("SSTP") technology, negotiated a license for Tunnel-Bats and
entered discussions with potential acquisition candidates, as well as candidates
for technology licenses that fit with the Company's business plan.
As a result of these activities, the Company had a 1998 second quarter operating
loss of $503,960, an increase from an operating loss of $25,691 for the same
period of 1997. Interest income during the second quarter period was generated
from excess cash balances resulting from the Company's private common stock
offering in 1998.
As of June 30, 1998, the Company had purchase orders for 29 BORS Lift Pumps with
$6,000 on deposit towards a purchase price of $207,194. The Company had
inventory on hand in the amount of $69,388 related to these orders in various
stages of production. Subsequently, the Company has signed a Letter of Intent
with open purchase orders for an additional 430 BORS units with a minimum
purchase of 50 units in 1998, 200 during 1999, and 180 during 2000. The Company
is currently working on its first order against this purchase order for five
units with $12,500 on deposit towards a purchase price of $40,300. The Company
does not recognize a sale until the unit is shipped.
The Company has entered into Letters of Intent or is negotiating for licensing
fee arrangements for its other technologies including AquaFuel, Flow Control
Valves, SSTP, and Tunnel-Bats. (See Footnotes to Financial Statements: 8. Other
Significant Events and 9. Subsequent Events.) The Company expects to generate
revenues from these activities in the third quarter of 1998.
Six Months Ended June 30, 1998, Compared to Six Months Ended June 30, 1997
For the six months ended June 30, 1998, the Company reported revenues from
operations of $274,040, a 143% increase over 1997 six month revenues of
$112,581. Revenues for both six month periods were generated by the Company's
wholly owned subsidiary AMW.
Cost of goods sold for the first six months of 1998 was $137,139 or 50% of
revenues compared to $61,358 or 55% of revenues for the six month period in
1997. The decrease in the cost of goods sold as a percentage of revenues in 1998
was the result of larger, more efficient production runs for jobs in the first
quarter of 1998. The cost of goods sold figures for both periods relate only to
AMW.
The Company's selling and administrative expenses of $795,829 were compromised
of salaries, consulting fees and other operating costs in the second quarter of
1998, up from $94,928 during the second quarter of 1997. This 738% increase in
operating expenses was primarily the result of increased personnel expenses
incurred by the Company in building its infrastructure, assembling a team of
engineers, scientists, and other professionals, and preparing its technologies
for market applications. Selling and administration expenses for the 1997 period
relate only to AMW. TTL had no operations for the first six months of 1997.
As a result of these activities, the Company had a 1998 six month operating loss
of $658,928, an increase from an operating loss of $43,705 for the same period
of 1997. Interest income during the six month period was generated from excess
cash balances resulting from the Company's private common stock offering in
1998.
Liquidity and Capital Resources
Net cash used by operating activities of ($763,592) related primarily to the
Company's operating loss. The Company, however, had a net working capital
surplus of $409,768, an increase of $338,051 from December 31, 1997. The
increase in working capital was principally the result of an increase in
financing activities through the issuance of $1 million in common stock through
a private equity offering.
As of June 30,1998 the Company has no bank financing or other debt obligations
outstanding other than trade payables, accrued expenses, and capitalized lease
obligations due from the normal course of business.
Through the acquisition of AMW and the utilization of capital equipment
available under its facility lease, the Company has significant production
capabilities available without the requirement for large capital expenditures.
This equipment remains from the facility's former tenant, Lockheed Martin, and
includes computers, milling equipment and lathes, shelving and storage units,
electron beam welders, laser welders, and other production machinery. This
equipment combined with AMW's resources will allow TTL to fully utilize its
development and production capabilities during the second half of 1998.
In June, 1998, the Company was approved for a $50,000 grant from the US
Department of Energy, administered by the Technology Deployment Center for the
development of market applications from its Flow Control Valves. The Company has
also commenced on a second private equity offering. The proceeds of the sale of
this equity offering will be available for future acquisitions, working capital,
and general corporate purposes.
The Company believes its existing cash, together with projected cash flows from
operations and the availability of future equity offerings, will be sufficient
to meet the Company's cash requirements in 1998.
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)
July 22 1998
By Leon H. Toups, Chief Executive Officer
S/S LEON H. TOUPS
(Signature)
(Signature)