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 September 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 September 30, 1998 and 1997
Consolidated Statements of Operations for the
nine-months ended September 30, 1998 and 1997
Consolidated Balance Sheets as of September 30, 1998
and December 31, 1997
Consolidated Statement of Stockholders' Equity for the nine-month
period ended September 30 1998 and for the period from July
28,1997 (date of inception) through December 31, 1997
Consolidated Statements of Cash Flows for the
nine-months ended September 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 three-month period ended September 30, 1998 (Unaudited)
and for the three-month period ended September 30, 1997 (Unaudited)
(Unaudited) (Unaudited)
Three-Month Three-Month
Period ended Period ended
September 30, September 30
1998 1997
---- ----
Sales $ 811,822 $ 187,950
Cost of Goods Sold 514,555 141,641
------------- -------------
Gross Profit 297,267 46,309
------------- -------------
Expenses:
Salaries 195,393 26,129
Consulting fees 121,144 0
Other operating costs 188,357 35,518
------------- -------------
Total expenses 504,894 61,647
------------- -------------
Net Operating Loss (207,627) (15,338)
------------- -------------
Other Income:
Interest Income 870 -
------------- -------------
Net Loss $ (206,757) $ (15,338)
============= =============
Weighted average number of
shares outstanding 13,632,283 8,881,751
Net loss per share $ (0.015) (0.002)
============= =============
See Notes to Financial Statements
Toups Technology Licensing, Inc.
STATEMENTS OF OPERATIONS
for the nine-month period ended September 30, 1998 (Unaudited)
and for the nine-month period ended September 30, 1997 (Unaudited)
(Unaudited) (Unaudited)
Nine-Month Nine-Month
Period ended Period ended
September 30, September 30
1998 1997
---- ----
Sales $ 1,700,984 $ 898,803
Cost of Goods Sold 1,052,725 556,325
------------- -------------
Gross Profit 648,259 342,478
------------- -------------
Expenses:
Salaries 516,235 110,115
Consulting fees 276,166 0
Other operating costs 622,115 158,431
------------- -------------
Total expenses 1,414,516 268,546
------------- -------------
Net Operating Loss (766,257) 73,933
------------- -------------
Other Income:
Interest Income 3,807 0
------------- -------------
Net Loss $ (762,450) $ 73,933
============= =============
Weighted average number of
shares outstanding 13,632,283 8,881,751
Net loss per share $ (0.056) 0.008
============= =============
See Notes to Financial Statements
Toups Technology Licensing, Inc.
BALANCE SHEETS
September 30, 1998 (Unaudited) and December 31, 1997 (Restated)
(Unaudited)
Unaudited Restated (Note 5)
September 30, December 31
1998 1997
---- ----
Assets:
Cash $ 188,120 $ 104,580
Accounts Receivable, net of
Allowance for doubtful accounts
Of $5,000 588,842 32,591
Inventory at cost 342,055 237,682
Prepaid royalty expenses 104,000 11,000
Deferred charges - 5,875
Property and equipment, net of
Accumulated depreciation of $113,394 291,484 32,990
Other assets 29,700 700
------------- -------------
Total Assets $ 1,526,201 $ 425,418
============= =============
Current Liabilities:
Current portion long-term liabilities 0 19,509
Accounts payable and accrued liabilities 254,251 109,748
Notes payable 4,600 -
Customer deposits 12,083 73,540
Capital Lease Obligation 50,458 -
Other current liabilities 0 5,691
------------- -------------
Total current liabilities $ 321,392 $ 208,488
------------- -------------
Long-term liabilities,
less current portion 120,490 23,306
------------ -------------
Total Liabilities $ 441,882 $ 231,794
Stockholders' equity
Common stock 16,187 9,910
Additional paid-in capital 1,871,006 248,437
Retained Earnings (40,423) (71,137)
Deficit accumulated during
development stage (762,450) 8,414
------------- -------------
Total stockholders' equity $ 1,084,319 $ 193,624
------------- -------------
Total liabilities and
stockholders' equity $ 1,526,201 $ 425,418
============== ============
See Notes to Financial Statements
Toups Technology Licensing, Inc.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the nine-month period
ended September 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 2,237,070 2,237 1,561,082 - 1,563,319
Services 3,920,263 3,920 - - 3,920
Acquisition of Brounley-Note5 900,000 900 160,490 161,390
Acquisition of AMW
(Note 5) 500,000 500 49,593 - 50,093
Deficit accumulated during
development stage-
January 1, 1998 through
September 30, 1998 - - - (762,450) (762,450)
- - - --------- ---------
Balance
September 30, 1998 16,187,333 16,187 1,871,005 (802,873) 1,084,319
========== ====== ========= ========= =========
See Notes to Financial Statements
Toups Technology Licensing, Inc.
STATEMENTS OF CASH FLOWS
for the nine-month period ended September 30, 1998 (Unaudited) and
for the nine-month period ended September 30, 1997 (Unaudited)
(Unaudited) (Unaudited)
Six-month Six-month
Period ended Period ended
September 30, September 30
1998 1997
---- ----
Cash flows from operating activities:
Net loss $(762,450) $(44,854)
Add (deduct) items not affecting cash:
Depreciation 47,138 0
Amortization 998 0
Cash provided (used) due to changes in
assets and liabilities
(increase) in inventory (86,373) 0
(Increase) decrease in accounts receivable (500,458) (6,855)
(Increase) in prepaid royalty expense (93,000) 0
(Increase) decrease in deferred charges 5,875 0
Increase (decrease) accounts payable
and accrued liabilities 138,812 18,712
Increase (decrease) in deposits (61,457) 0
--------------- ----------
Net cash used by operating activities (1,310,915) (32,997)
--------------- ----------
Cash flows from investing activities:
Acquisition of equipment (117,889) 0
--------------- ---------
Net cash used by investing activities (117,889) 0
--------------- -----------
Cash flows from financing activities:
Proceeds from sale of capital stock 1,566,907 0
Proceeds from line of credit 4,600 0
Payment of long term debt (42,815) 0
Principal payments on
capital lease obligations (16,348) 0
--------------- ---------
Net cash provided by financing activities 1,512,344 0
------------- ----------
Net increase in cash 83,540 (32,997)
-------------- ----------
Cash, beginning of period 104,580 30,674
--------------- ----------
Cash, end of period $188,120 $(2,323)
=============== ==========
Supplemental Cash Flows Disclosures
Noncash items
Equipment acquired under capital lease $113,520 $ 77,933
=============== ==========
Common stock issued for consulting
services $3,920 $ 0
============ ==========
See Notes to Financial Statements
TOUPS TECHNOLOGY LICENSING, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
September 30, 1998 (Unaudited)
and December 31, 1997 (Restated)
1. Summary of Significant Accounting Policies
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 has made strategic acquisitions that compliment its
proprietary products and devices and furthers its business purposes.
(See Note 5)
Receivables - The Company's trade receivables include amounts due from business
throughout the United States. Management believes receivables are stated at
their net realizable values.
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 estimated
useful lives. At September 30, 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 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.
Restricted Common Stock - Restricted common stock is subject to the resale
provisions of SEC Rule 144. Restricted stock is recorded at par value ($.001)
per share.
Basis of Presentation - Nine Months Ended September 30, 1998 -The
unaudited interim financial statements for the nine months ended September 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 nine months ended September 30,
1998 are not necessarily indicative of the results of the full year.
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
September 30, 1998, there were 16,187,333 shares issued and outstanding. Of the
16,187,333 shares issued and outstanding, at September 30, 1998, 14,579,115
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.
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 September 30, 1998.
3. Licensing Agreement Commitments
The Company entered into two licensing agreements, one for AquaFuel and
one for Balanced Piston Values, 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 licensing and manufacturing agreement for
Balanced Oil Recovery System (BORS) Lifts with a third licensee. In June, 1998,
the Company executed a licensing agreement for Smokeless Scrap Tire Process and
in July, 1998 the Company executed a licensing agreement for Tunnel Bat; both
agreements are for the exclusive rights to make, use, lease, market and sell
this product line. In exchange for these rights, under the four agreements, the
Company has committed to pay the Licensee a 6% royalty as computed by those
agreements. The Company agreed to pay a minimum of $176,000 of royalties in
1998, of which $104,000 has been paid as of September 30, 1998. The remaining
royalty payments for the initial licensing term will be paid as follows:
Year Ending:
1998 $ 72,000
1999 96,000
2000 96,000
$ 264,000
The Company can offset these advanced payments against the royalties
earned in 1998 through the year 2000. 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
4. Acquisition of Advanced Micro Welding and Brounley Associates, Inc.
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.
On September 30, 1998, Toups Technology Licensing, Incorporated (TTL)
acquired Brounley Associates, Inc. (Brounley) in a business combination
accounted for as a pooling of interests. Brounley, a company specializing in the
design, manufacturing and sale of radio frequency (RF) generators, became a
wholly owned subsidiary of TTL through the exchange of 900,000 shares of
restricted common stock of TTL's common stock for all the outstanding stock of
Brounley. The statement of stockholders' equity reflects a restatement of
$160,490 to additional paid in capital as a result of the acquisition. The
restatement includes $54,982 and $105,508 respectfully, for the disposition of
Brounley stock and adjustment of retained earnings for the pooling.
The restated Balance Sheet as of December 31, 1997 reflects the
acquisition of Brounley and AMW. The restated financial statements are based on
the historical financial statements of TTL, Brounley and AMW accounting for the
combination as a pooling of interest. All three companies were audited
independently on December 31, 1997. The restated balance sheet as of December
31, 1997, reflects the unaudited combination of these numbers.
The restated financial statements have been prepared based upon the
historical financial statements of TTL, Brounley 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.
5. Income Taxes
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
September 30, 1998.
6. Capital Lease
The Company has four capital equipment leases totaling $202,639 for
equipment and machinery. Amortization of these capital leases included in
depreciation expense amounted to $20,517 for the nine months ended September 30,
1998. Accumulated amortization amounted to $33,867 as of September 30, 1998 and
includes accumulated depreciation. The future minimum lease payments under
capital lease and net present value of the future minimum lease payments at
September 30, 1998, are as follows:
Total minimum lease payments $ 216,600
Amount representing interest ( 45,652)
Present value of net minimum lease payments $ 170,948
Future minimum lease payments under capital leases as of September 30, 1998
are as follows:
1998 $ 12,614
1999 50,458
2000 50,458
2001 103,070
2002 44,125
After 12,483
$ 216,600
7. Subsequent Events
A. Subsequent to September 30, 1998, the Company sold 1,760,000 shares of
its restricted Common Shares to accredited investors for an aggregate
of $1,360,000.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
TOUPS TECHNOLOGY LICENSING, INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS OFINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations for the Nine Months Ended
September 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. 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 intends to pursue its business purpose through acquisition of
existing companies; joint-ventures; strategic alliances; sub-licenses; providing
services; and through the manufacture and sale of products. As of September 30,
1998, the Company has five technologies under license and has made two
acquisitions.
Summary of Technologies
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.
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.
Summary of Acquisitions
Brounley Engineering & Associates ("Brounley") was formed to engage in the
design and manufacture of RF (radio frequency) and related circuits,
particularly in the field of solid state power generation. Brounley's integrated
and modular design concepts competitively differentiate their product line of
high powered RF generators in small packages. In 1993, Brounley added production
facilities to build a new line of generators for Lasers and for the Plasma
Etching & Sputtering industry. In addition to Integrated RF Generators, Brounley
offers clients a full range of services from an original design to a final
product, including: Transmitters: AM, FM, SSB, Switching, Pulsed; Filters;
Switching Regulators, Modulators, Power Factor Correction; VSWR Characterization
of Power Amplifiers and Protection; TTL Logic Control Circuits; Crystal, LC
Oscillators and VCO's; Frequency Multipliers; Receiver Designs: HF, VHF, UHF,
AM, FM, SSB, Pulsed.
Brounley's unaudited financial statements for the period January 1, -
August 31, 1998 reflect revenues of $816,000 and net before tax income of
$154,900.
Advanced Micro Welding (AMW). On April 29, 1998, TTL acquired
seven-year-old AMW and relocated AMW within TTL's 35,000 square-foot facilities
in Largo, Florida. AMW brings in-house both a highly specialized manufacturing
capability and also allows TTL to offer products and services in the marketplace
of industrial/specialized welding and metal fabrication. The combination of
AMW's equipment and expertise, combined with TTL's state-of-the-art facilities,
engineers and draftsmen, equipment and operational experiences, result in an
extensive range of services including:
Custom Metal Fabricator - TTL's AMW can "build-to-print" products for a
wide range of industrial and business needs. Machine Shop - AMW's shop is
equipped to do prototype, custom work or production work. Precision micro
welding - AMW's equipment and expertise also supports the tool and die, plastic
injection molding and other industries with welding requiring filler wire sizes
from .005 to .020 inch in diameter. Laser and Electron Beam Welders - AMW is one
of the few Florida-based companies able to support assemblies that require
detailed welding to specific tolerances, such as the electronic, medical,
defense, aircraft and research and development industries.
Results of Operations
Three Months Ended September 30, 1998, Compared to Three Months Ended
September 30, 1997
For the three months ended September 30, 1998, the Company reported revenues
from operations of $811,822, a 332% increase over 1997 third quarter revenues of
$187,950. Third quarter revenues for both periods include revenues generated by
the Company's wholly-owned subsidiaries Advanced Micro Welding, Inc. ("AMW") and
Brounley Associates, Inc. ("Brounley").
TTL acquired AMW on April 29, 1998 in a business combination accounted for as a
pooling of interest. AMW now operates as TTL Manufacturing and generates
revenues through its micro welding and custom metal fabrication activities, as
well as its primary activity of manufacturing the Company's BORS Lift. The BORS
Lift is an oil and gas industry device that replaces the traditional stripper
well with a mechanical apparatus including a programmable logic controller that
increases production and decreases operating costs.
TTL acquired Brounley on September 30, 1998 in a business combination accounted
for as a pooling of interest. Brounley is engaged in the design, manufacture and
sale of radio frequency (RF) generators to the laser industry. Brounley gives
TTL additional production capacity and engineering expertise in the expanding
market segment of power generation
Cost of goods sold in the third quarter of 1998 was $514,555 or 63% of revenues,
which was down from 75% of revenues for the third quarter of 1997. The decrease
in cost of goods sold as a percentage of revenues in 1998 was the result of
larger, more efficient production runs for Brounley and TTL Manufacturing.
The Company's selling and administrative expenses of $504,894 were comprised of
salaries, consulting fees, and other operating costs in the third quarter of
1998, up from $61,647 during the third quarter of 1997. This 719% 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. During the third quarter of 1998, the Company completed
its second round of independent testing for AquaFuel market applications and
scalability results, completed field tests of BORS Lifts and began full-scale
production, developed applications for its Smokeless Scrap-Tire Process
technology, completed design for and began production of Tunnel-Bat units,
completed the acquisition of Brounley 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 third quarter operating
loss of $206,757, an increase from an operating loss of $15,338 for the same
period of 1997. For the month of September, 1998, however the Company showed its
first profitable month of operations with a profit of $63,812.
Interest income during the third quarter period was generated from excess cash
balances resulting from the Company's private common stock offering during 1998.
As of September 31, 1998, the Company has two Letters of Intent for open
purchase orders for 630 BORS Lifts with a minimum purchase of 250 units in 1998,
200 during 1999, and 180 during 2000. The BORS Lift end-user price is $15,000
per unit. The Company has built its monthly production capacity to 100 units
in-house and has the ability to further increase production through additional
manufacturing shifts and vendor outsourcing.
The Company has entered into Letters of Intent or is negotiating for licensing
fee arrangements for its other technologies including AquaFuel, SSTP, and
Tunnel-Bats. The Company expects to generate revenues from these activities in
the fourth quarter of 1998.
Nine Months Ended September 30, 1998, Compared to Nine Months Ended
September 30, 1997
For the nine months ended September 30, 1998, the Company reported revenues from
operations of $1,700,984, a 90% increase over 1997 nine month revenues of
$898,803. Revenues for both nine month periods were primarily generated by the
Company's wholly-owned subsidiaries.
Cost of goods sold for the first nine months of 1998 was $1,052,725 or 62%
of revenues, which compared to the same percentage of revenues for the third
quarter of 1997.
Company's selling and administrative expenses of $1,414,516 were compromised of
salaries, consulting fees and other operating costs in the third quarter of
1998, up from $268,546 during the third quarter of 1997. This 427% 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 and Brounley. TTL had no operations for the first nine months
of 1997.
As a result of these activities, the Company had a 1998 nine month operating
loss of $762,450, an increase from an operating profit of $73,933 for the same
period of 1997. For the month of September, 1998, however the Company showed its
first profitable month of operations with a profit of $63,812.
Interest income during the nine 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 ($1,310,915) related primarily to the
Company's $762,450 operating loss and $500,458 increase in accounts receivable.
The Company, however, had a net working capital surplus of $883,625, an increase
of $491,897 from December 31, 1997. The increase in working capital was
principally the result of an increase in financing activities through the
issuance of $1.9 million in common stock through a private equity offering.
As of September 30,1998 the Company had $4,600 drawn on a $125,000 bank line of
credit for Brounley. The Company has no other 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 Brounley along with 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 and Brounley's resources will
allow TTL to fully utilize its development and production capabilities during
the fourth quarter of 1998 and into fiscal year 1999.
The Company has also completed 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)
Nov 15 1998
By Leon H. Toups, Chief Executive Officer
S/S LEON H. TOUPS
(Signature)
(Signature)