SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended December 31, 2002.
[ ]Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
Commission file number: 000-049635
TECHNOLOGY ACQUISITION CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 87-2099034
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2807 Allen Street, Suite 809, Dallas, Texas 75204
(Address of principal executive office) (Postal Code)
(214) 948-2990
(Issuer's telephone number)
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____
The number of outstanding shares of the issuer's common stock, $0.001 par
value (the only class of voting stock), as of February 9, 2003 was
4,870,616.
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS
Unaudited Balance Sheet as of December 31, 2002 ..........................3
Unaudited Statement of Operations for the three and nine months ended
December 31, 2002 and 2001, and the period from inception to
December 31, 2002 ........................................................4
Unaudited Statement of Cash Flows for the nine months ended December 31,
2002 and 2001, and the period from inception to December 31, 2002 ........5
Notes to Unaudited Financial Statements ..................................6
ITEM 2. MANAGEMENT'S PLAN OF OPERATION .................................11
ITEM 3. CONTROLS AND PROCEDURES ........................................18
PART II
ITEM 1. LEGAL PROCEEDINGS ...............................................19
ITEM 2. CHANGE IN SECURITIES AND USE OF PROCEEDS ........................19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES .................................19
ITEM 4. SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS ..............19
ITEM 5. OTHER INFORMATION ...............................................19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ................................19
SIGNATURES ..............................................................20
CERTIFICATION ...........................................................21
INDEX TO EXHIBITS .......................................................23
PART I
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Technology Acquisition
Corporation, a Nevada corporation, unless otherwise indicated. In the
opinion of management, the accompanying unaudited financial statements
included in this Form 10-QSB reflect all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the results
of operations for the periods presented. The results of operations for the
periods presented are not necessarily indicative of the results to be
expected for the full year.
TECHNOLOGY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Interim Unaudited Balance Sheet
December 31, 2002
ASSETS
Current Assets
Cash $ 2,182
Total Current Assets 2,182
Computer Equipment, net 1,424
Total Assets $ 3,606
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 56,289
Accounts payable, related party (Note 4) 75,000
Loans from shareholders 27,000
Total Current Liabilities 158,289
Stockholders' Equity
Preferred Stock: $0.25 Par Value; Authorized Shares,
5,000,000, Issued and Outstanding, None None
Common Stock: $0.01 Par Value; Authorized Shares,
30,000,000; Issued and Outstanding, 5,771,115 57,711
Additional Paid In Capital 4,235,488
Deficit Accumulated During the Development Stage (4,447,882)
Total Stockholders' Equity (A Deficit) (154,683)
Total Liabilities and Stockholders' Equity $ 3,606
===========
See condensed notes to financial statements.
3
TECHNOLOGY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Interim Unaudited Statements of Operations
For the Three and Nine Months Ended December 31, 2002 and 2001,
and for the period from Inception (June 21, 1972)
to December 31, 2002
Deficit
Three Months Three Months Nine Months Nine Months Accumulated
Ended Ended Ended Ended During the
December 31, December 31, December 31, December 31, Development
2002 2001 2002 2001 Stage
______________________________________________________________________________________________________
Revenues $ 21,935 $ - $ 21,935 $ - $ 21,935
Cost of Revenues 15,960 - 15,960 - 15,960
_________________________________________________________________________
Gross Profit 5,975 - 5,975 - 5,975
Operating Expenses
General and
administrative expenses (51,929) (92,596) (70,009) (104,137) (822,351)
Research and development
expenses (4,512) - (10,312) - (10,312)
_________________________________________________________________________
Total operating expenses (56,441) (92,596) (80,411) (104,137) (832,663)
Operating Loss (50,466) (92,596) (74,436) (104,137) (826,688)
Other Expenses
Realized losses on per-
manent declines in
marketable equity
securities - - - - (1,574,100)
Interest expense - - - - (359,826)
_________________________________________________________________________
Total other expenses - - - - (1,933,926)
Net loss before discontinued
operations (50,466) (92,596) (74,436) (104,137) (2,760,614)
Discontinued operations
Operating loss (Note 6) - - - - (2,400,617)
Gain on disposal of
discontinued operations
(Note 6) - - - - 713,349
_________________________________________________________________________
Loss from discontinued
operations - - - - (1,687,268)
Net loss available to
common stockholders $ (50,466) $ (92,596) $ (74,436) $(104,137) $ (4,447,882)
=========================================================================
Basic and diluted loss per
share ofcommon stock
Net loss before discon-
tinued operations - - - - $ (1.13)
Discontinued operations - - - - (0.69)
_________________________________________________________________________
Net loss per common share $ (0.009) $ (0.02) $ (0.01) $ (0.02) $ (1.82)
Weighted average number of
common shares outstanding 5,771,115 4.866,224 5,771,115 4.360,406 2,449,811
See condensed notes to financial statements.
4
TECHNOLOGY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Interim Unaudited Statements of Cash Flows
For the Nine Months Ended December 31, 2002 and 2001,
and for the period from
Inception (June 21, 1972) to December 31, 2002
Deficit
Nine Months Nine Months Accumulated
Ended Ended During the
December 31, December 31, Development
2002 2001 Stage
______________________________________________________________________________________
Cash flows from operating
activities
Net loss $ (74,436) $ (104,137) $ (4,447,882)
Adjustments to reconcile net
loss to net cash used in
operating activities
Depreciation 49 - 434,059
Common stock issued for services - 79,000 257,500
Common stock issued for licensing
agreement - 10,000 10,000
Transfer of asset for
past services rendered - - 14,595
Notes payable incurred for
services rendered - - 220,000
Write down of inventory - - 572,829
Gain on asset exchange - - (713,349)
Realized losses on marketable
securities - - 1,574,100
Changes in Assets and Liabilities
Increase (decrease) in accounts
payable 51,136 (9,090) 428,486
Increase (decrease) in accrued
liabilities - - 240,966
_________________________________________________
Total adjustments 51,185 (79,910) 3,039,186
Net cash used in operating
activities (23,251) (24,227) (1,408,696)
Cash flow from investing activities
Capital expenditures (1,473) - (1,473)
Net cash flow used in investing
activites (1,473) - (1,473)
Cash flows from financing
activities
Checks issued in excess of cash (94) - -
Proceeds from the sale of common
stock - - 187,226
Loans from shareholders 27,000 24,205 88,305
Capital contributions - - 82,412
Proceeds on notes payable - - 1,054,408
_________________________________________________
Net cash provided by financing
activities 26,906 24,205 1,412,351
Increase (decrease) in cash and
cash equivalents 2,182 (22) 2,182
Cash and cash equivalents,
beginning of period 0 25 0
_________________________________________________
Cash and cash equivalents,
end of period $ 2,182 $ 5 $ 2,182
=================================================
Cash paid for interest and
income taxes: - - -
See condensed notes to financial statements.
5
TECHNOLOGY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
Interim Unaudited Statements of Cash Flows
For the Nine Months Ended December 31, 2002 and 2001,
and for the period from
Inception (June 21, 1972) to December 31, 2002
Deficit
Nine Months Nine Months Accumulated
Ended Ended During the
December 31, December 31, Development
2002 2001 Stage
__________________________________________________________________________________________
Supplemental noncash investing
and financing activities:
Common stock issued for services
rendered - $ 79,000 $ 257,500
Common stock issued for
licensing agreement - $ 10,000 $ 10,000
Gain on exchange of net assets
for common stock of
Healthbridge, Inc. - - $ 713,349
Transfer of 330,000 shares of
Healthbridge, Inc. to
majority stockholder in full
satisfaction of shareholder
loans and for past services
rendered - - $ 14,595
Realized losses on marketable
securities - - $ 1,574,100
Notes payable incurred for
services rendered - - $ 220,000
Conversion of debt to equity - - $ 1,143,002
Common stock exchanged for
subsidiary - - $ 2,520,009
Notes payable exchanged for
inventory - - $ 638,010
Common stock issued for
organization costs - - $ 102,500
Write down of inventory - - $ 572,829
See condensed notes to financial statements.
6
TECHNOLOGY ACQUISITION CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
DECEMBER 31, 2002
NOTE 1. STATEMENT OF INFORMATION FURNISHED
The accompanying unaudited interim financial statements have been prepared
in accordance with Form 10-QSB instructions and in the opinion of management
contains all adjustments (consisting of only normal recurring adjustments)
necessary to present fairly the financial position as of December 31, 2002,
and the results of operations and cash flows for the three and nine months
ended December 31, 2002 and 2001. These results have been determined on
the basis of generally accepted accounting principles and practices and
applied consistently with those used in the preparation of the Company's
2002 Annual Report on Form 10-KSB, as amended.
Certain information and footnote disclosure normally included in the
financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that the accompanying financial statements be read in conjunction with
the accompanying financial statements and notes thereto incorporated by
reference in the Company's 2002 Annual Report on Form 10-KSB, as amended.
NOTE 2. GOING CONCERN, FINANCIAL RESULTS AND LIQUIDITY
The Company has been a development stage company and has incurred net
operating losses since inception, June 21, 1972. The accompanying
financial statements have been prepared in conformity with generally
accepted accounting principles in the United States, which contemplates
continuation of the Company as a going concern, which is dependent upon the
Company's ability to establish itself as a profitable business. Management
is devoting substantially all of its present efforts in securing and
establishing a new business and has generated minimal revenues. Management
plans to conduct limited operations to minimize operating expenses until
external funds can be raised or internal cash flows are generated.
Management believes that it will continue to incur losses for at least
the next twelve months, and as a result will require additional funds
through loans from shareholders, debt or equity financing, to insure that
there is sufficient capitalization of the Company in marketing the
Oxywell System.
Due to certain developments occurring within Oxywell GmbH ("Oxywell"), a
Germany company headquartered in Munich, adequate and orderly delivery of
the apparatus and cartridges to the Company is not guaranteed in the long
term by Oxywell. The start-up costs in the USA and Canada are large;
therefore it would be fatal if the supply were not available past the
introductory phase. Pursuant to a letter dated September 17, 2002, the
President of the Company and Oxywell agreed to amend the terms of the
agreement as defined in the "Independent Representation Agreement" dated
7
October 2, 2001. Specifically, the geographic scope of the territory and
the restrictions imposed thereon were deleted without substitution.
Additionally, the minimum purchase requirements are newly defined as
follows:
1. starting with the day that Oxywell can guaranty long-term delivery
viability, a period of three months begins;
2. starting with the first day of the following calendar month, TAC will
accept delivery of a least 1,000 oxygen units per month for six months
and thereafter 3,000 devices per month;
3. the rate of increase is deleted without substitution;
4. the duration of the contract is extended based on the above; and
5. the "payment of product" definition by an irrevocable commercial Letter
of Credit is changed to "30 days, 2% discount from the date of shipment
or 60 days net from date of shipment. Oxywell has not yet guaranteed
long-term production viability. The contract termination date changes
from December 31, 2006 to April 30, 2008, and may be extended for two
con-secutive two-year periods. Thereafter, the agreement is to be
renewed annually subject to a right of termination by either party prior
to the beginning of the next succeeding year.
The company is planning to introduce the product in five stages. The first
stage will be a "test market" in a single metro location, San Diego, to
confirm the consumer acceptance of the product. The Company anticipates this
first stage will last three to six months and costs approximately $65,000.
The second stage will be a "rehearsal market" in the Southern California
region to ensure Distribution Logistics and Ordering Systems are as
fault-free as they can be made. The third, fourth and fifth stages will
complete national distribution with the third stage likely to include
the remainder of the Pacific Region and the Southwest Region, the fourth
stage, the Northeast Region, and the fifth and final stage, the remainder
of the U.S.A. The Company is in the final stages of completing its
marketing and financing plans. Current objective is to introduce to the test
market in the second quarter of calendar 2003.
Financing of the first stage is anticipated to come from shareholder loans
and investors' funds. Financing of the second stage is anticipated to
come from a blend of investors' funds and profits from sales. Financing of
stages three, four and five is anticipated to come from profits from sales.
Specific timing of each succeeding stage is thus totally dependent upon
the rate of sales success. The company currently anticipates complete
national availability will be achieved within two years from the start
of marketing.
The Company has identified and mapped out its logistics network associates
which include an inbound carrier in Mississauga, Ontario, Canada, a
warehouse and fulfillment center located in Buffalo, New York, and
customer delivery carriers that will provide three-day delivery service
anywhere in the lower 48 states. Sales channels will include an Internet
website, telephone and fax call centers, and mail order facilities.
8
The Company has established payment methods to be accepted via the four
major credit card companies.
Consumers will be made aware of the product's benefits and informed about
how to order it by a combination of paid and unpaid media. Specific details
and timings of the company's communications' program will ultimately depend
upon budget availability. The company's basic starter website will educate
consumers as well as serve as one of the ordering locations. The website
will be expanded and linked to other sites and search engines as funds
permit. As market interest increases, printed brochures will be used
to educate consumers and will contain an order form, which will be
distributed opportunistically to health and fitness establishments,
media people, at health and fitness trade shows, and any other venues that
represent an interest. Powerpoint presentations will be created to educate
PR professionals, media people and prominent health and fitness authorities.
Interviews with the lifestyle and health and fitness writers with local
newspapers and magazines, then writers with regional, then national
magazines, will be arranged in order to secure articles for the product.
Ads in local newspapers and magazines, then regional, then national
magazines will be placed as the stages of introduction progress. Local
television commercials/infomercials will be created and aired as markets
develop. Targeted national e-mail campaigns will be considered.
The Company expects to begin marketing the product in the second quarter of
2003 after Oxywell confirms that it can guarantee adequate and orderly
delivery of the product to the Company. In the event, however, that the
expectations of management do not materialize, within the next twelve months,
TAC may be forced to deal with customary minimal costs involved in the
maintenance of corporate franchise and filing reports and reporting
obligations under the Securities Exchange Act of 1934. These expenses
would involve legal and auditing expenses. The expenses of the Company's
audit, legal and professional requirements (including expenses in connection
with complying with the Securities Exchange Act 1934) have been and continue
to be advanced by TAC's president and majority shareholder. It is possible
that any advances by management may be paid by issuing shares of the
Company's common stock.
Currently, the President and majority stockholder has committed to and is
in the process of advancing the Company the necessary funds over the next
several weeks, which the Company estimates will bring it to a point in its
development where it can introduce the product into the test market. During
the nine months ended December 31, 2002, the Company received $27,000
from the President and majority stockholder. Once Oxywell is able to
guarantee long-term delivery of the product, the Company's cash
requirements will increase significantly as a result of teh minimum monthly
purchase commitments pursuant to the Oxywell Agreement. The Company does
not have any financing arrangement with Oxywell GmbH and the cost per
the Oxywell Agreement is $65.50.
9
The Company's ability to meet these cash requirements is dependent upon
the Company's ability to successfully obtain external financing, to market
and develop national marketing channels, and to generate revenues. The
Company operates in an intensely competitive industry and many of its
competitors have much greater resources. There can be no assurance that
any of the Company's business activities will result in any operating
revenues or profits. Investors should be aware that they might lose all
or substantially all of their investment.
Due to the "start up" nature of the Company's business, the Company
expects to incur losses as it expands. The Company expects to raise
additional funds through private or public equity investment in order to
expand the range and scope of its business operations, but there is no
assurance that such additional funds will be available for the Company
to finance its operations on acceptable terms, if at all. Furthermore,
there is no assurance the net proceeds from any successful financing
arrangement will be sufficient to cover cash requirements during the
initial stages of the Company's operations.
The continued existence of the Company is dependent upon its ability
to meet future financing requirements and the success of future
operations. These factors raise substantial doubt about the Company's
ability to continue as a going concern. Management believes that actions
presently taken to revise the Company's operating and financial
requirements provide the opportunity for the Company to continue as a
going concern. The Company's ability to achieve these objectives cannot
be determined at this time.
NOTE 3. EARNINGS PER SHARE
Basic earnings or loss per share is based on the weighted average number
of shares outstanding during the period of the financial statements.
Diluted earnings or loss per share are based on the weighted average number
of common shares outstanding and dilutive common stock equivalents. All
per share and per share information are adjusted retroactively to reflect
stock splits and changes in par value, when applicable. All earnings or
loss per share amounts in the financial statements are basic earnings or
loss per share.
10
The computation of basic loss per share is as follows:
Deficit
Three Months Three Months Six Months Six Months Accumulated
Ended Ended Ended Ended During the
December 31, December 31, December 31, December 31, Development
2002 2001 2002 2001 Stage
Numerator-net loss
available to common
stockholders $ (50,466) $ (92,596) $ (74,436) $ (104,137) $(4,477,882)
Denominator-weighted
average number of
common shares
outstanding 5,771,115 4.866,224 5,771,115 4.360,406 2,449,811
Basic and diluted loss
per common share $ (0.009) $ (0.02) $ (0.01) $ (0.02) $ (1.83)
NOTE 4. RELATED PARTIES
Oxywell Agreement: On September 1, 2002, Wilhelm Liesner ("Liesner"),
President and majority stockholder of TAC, became President of Oxywell
GmbH ("Oxywell"), a German company headquartered in Munich. In October
2001, Oxywell entered into an agreement with Liesner pursuant to which it
granted Liesner exclusive rights to market the Oxywell System in the
United States, Puerto Rico and Canada and an option to market and sell the
System in Mexico. In November 2001, TAC entered into a licensing agreement
with its majority shareholder, Wilhelm Liesner, pursuant to which it
acquired the exclusive rights to market and sell the Oxywell water-
oxygenating system in North America (the "Oxywell System" or "System"). The
System was originally developed by Oxywell GmbH, which began marketing the
System in the European Economic Community in July, 2001. The license
agreement between Mr. Liesner and the Company is virtually co-extensive
with the Oxywell Agreement.
Loans from Shareholders: From time to time, the Company's president or one
of his related entities advances funds to pay expenses incurred on behalf of
the Company. These loans are unsecured, non-interest bearing and due on
demand. As of December 31, 2002, included in loans from shareholders is
$27,000 due to the Company's president.
11
Related party transactions: Accounts payable, related party at December
31, 2002 represents $75,000 for services rendered by two companies that are
wholly-owned by the President of the Company. The payables incurred
represent consulting services rendered related to the Company's development,
production, and marketing of its self-contained infectious waste disposal
system (Redloc II Disposal System). The services were performed during the
period of October 1, 1996 to December 31, 1997. There was no contract.
NOTE 5. COMMON STOCK-CONTINGENT CONSIDERATION
The Company has issued but not yet released 1,500,000 shares of common stock
pending a final written agreement between Oxywell and the Company, whereby
Oxywell will sell certain of its assets to the Company in exchange for
1,500,000 shares of the Company's common stock. The issuance of the common
stock is not shown as outstanding securities because the outcome of the
contingency is not yet determinable beyond a reasonable doubt.
NOTE 6. SUBSEQUENT EVENTS
On February 7, 2003, the company canceled 900,499 shares of previously issued
common stock due to the fact that the consideration was never given or the
services were never rendered. There was no significant effect on net loss
per common share for teh comparative periods presented.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTION CONCERNING FORWARD-LOOKING STATEMENTS. When used in this discussion,
the words "believes", "anticipates", "expects", and similar expressions are
intended to identify forward-looking statements. Such statements are subject
to certain risks and uncertainties, which could cause actual results to
differ materially from those projected. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of
the date hereof. Technology Acquisition Corporation (TAC) undertakes no
obligation to republish revised forward-looking statements to reflect events
or circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Readers are also urged to carefully review and consider
the various disclosures made by TAC which attempt to advise interested
parties of the factors which affect the Company's business, in this report,
as well as the TAC's periodic reports on Forms 10-KSB, 10-KSB, as amended,
10-QSB and 8-K filed with the Securities and Exchange Commission.
RISK FACTORS. Factors that might cause actual results, performance or
achievements to differ materially from those projected or implied in such
forward-looking statements include, among other things: (i) the impact of
competitive products; (ii) changes in law and regulations; (iii) adequacy
and availability of insurance coverage; (iv) limitations on future financing;
(v) increases in the cost of borrowings and unavailability of debt or
equity capital; (vi) the effect of adverse publicity regarding our product
or similar products; (vii) the inability of the Company to gain and/or hold
market share; (viii) exposure to and expense of resolving and defending
12
product liability claims and other litigation; (ix) consumer acceptance of
the Company's products; (x) managing and maintaining growth; (xi) customer
demands; (xii) market and industry conditions including pricing, demand
for products, levels of trade inventories and raw materials availability,
(xiii) the success of product development and new product introductions
into the marketplace; (xiv) slow or negative growth in the industry;
(xv) the departure of key members of management; (xvi) the ability of
the Company to efficiently manufacture its products; as well as other
risks and uncertainties that are described from time to time in the
Company's filings with the Securities and Exchange Commission.
RESULTS OF OPERATIONS.
Revenues. The company generated revenue of $21,935 for the three and nine
months ended December 31, 2002 compared to none in the corresponding prior
period. Sales were minimal because the Company has not been able to fully
implement and market its products due to undertain delivery of the apparatus
and cartridges to the Company from Oxywell, which has not yet guaranteed
long-term production viability.
Costs of revenues and gross margin. Costs of revenues were $15,960 yielding
a gross margin of $5,975 or 27%, for the periods presented.
Operating Expenses. Operating expenses for the three months ended December
31, 2002 and 2001 included general and administrative expenses of $51,929 and
$92,596, respectively, and research and development expenses of $4,512 and $0,
respectively. Operating expense for the nine months ended December 31, 2002
and 2001 included general and administrative expenses of $70,099 and $104,137,
respectively, and research and development expenses of $10,312 and $0,
respectively.
For the nine months ended December 31, 2002, operating expenses represented the
following approximated expenses: marketing and advertising fees of $5,200,
legal and professional fees of $29,000, consulting fees of $17,800, web site
development fees of $4,500, and various other general and administrative
expenses of $13,500 associated with establishing a business and supporting and
implementing the Company's plan of operation.
For the nine months ended December 31, 2001, operating expenses represented the
following approximated expenses: professional expenses of $11,000, an asset
write down of $10,000 representing common stock issued to the President and
majority stockholder for a licensing agreement valued at $10,000, and common
stock issued for services rendered of $79,000 representing $4,000 for legal
services rendered, $5,000 for accounting and bookkeeping services rendered by
the daughter of the President and majority stockholder, $40,000 for marketing
services, $5,000 for directors fees, and $25,000 to the President and
majority stockholder for past services rendered.
13
Plan of Operations
We have generated minimal revenues and have incurred ongoing operating losses
since inception due to costs related to business development, legal and
accounting fees, consulting fees, reporting obligations under the Securities
Exchange Act of 1934, and other costs associated with establishing a business.
We have no internal sources of liquidity and we currently generate
insignificant internal cash flow to fund working capital needs. These factors
raise substantial doubt about our ability to continue as a going concern. We
are currently conducting limited operations and our operating expenses have
been minimized until we are able to raise external funds or generate adequate
internal cash flows. The Company's current cash needs are funded by its
President and majority shareholder, Wilhelm Liesner.
Due to certain developments occurring within Oxywell, adequate and orderly
delivery of the apparatus and cartridges to the Company is not guaranteed in
the long term by Oxywell. The start-up costs in the USA and Canada are
immense; therefore it would be fatal if the supply were not available in
the introductory phase. Pursuant to a letter dated September 17, 2002,
between the President of the Company and Oxywell, Oxywell agreed to amend
the terms of the agreement as defined in the "Independent Representation
Agreement" dated October 2, 2001. Specifically, the geographic scope of
the territory and the restrictions imposed thereon were deleted without
substitution. Additionally, the minimum requirements are newly
defined as follows:
1. starting with the day that Oxywell can guaranty long-term delivery
viability, a period of three months begins;
2. starting with the first day of the following calendar month, TAC will
accept delivery of at least 1,000 oxygen units per month for six months
and thereafter 3,000 devices per month;
3. the rate of increase is deleted without substitution;
4. the duration of the contract is extended based on the above; and
5. the "payment of product" definition by an irrevocable commercial Letter of
Credit is changed to "30 days, 2% discount from the date of shipment or 60
days net from date of shipment. Oxywell has not yet guaranteed long-term
production viability. The contract termination date changes from December
31, 2006 to April 30, 2008, and may be extended for two consecutive two-
year periods with an option to renew by the Company for two consecutive
two-year periods. Thereafter, the agreement is to be renewed annually
subject to a right of termination by either party prior to the beginning
of the next succeeding year.
14
The company is planning to introduce the product in five stages. The
first stage will be a "test market" in a single metro location,
San Diego, to confirm the consumer acceptance our consumer research and
market investigations have led us to expect. We anticipate this first
stage will last three to six months and will cost approximately $65,000.
The second stage will be a "rehearsal market" in the Southern California
region to ensure all our Distribution Logistics and Ordering Systems are
as fault-free as they can be made. The third, fourth and fifth stages will
complete national distribution with the third stage likely to include the
remainder of the Pacific Region and the Southwest Region, the fourth stage,
the Northeast Region, and the fifth and final stage, the remainder of
the U.S.A. The Company is in the final stages of completing its marketing
and financing plans. Current objective is to introduce to the test market
in the second quarter of calendar 2003.
Financing of the first stage is anticipated to come from shareholder loans
and investors' funds. Financing of the second stage is anticipated to come
from a blend of investors' funds and profits from sales. Financing of
stages three, four and five is anticipated to come from profits from sales.
Specific timing of each succeeding stage is thus totally dependent upon the
rate of sales success. The company currently anticipates complete national
availability will be achieved within two years from the start of marketing.
The Company has identified and mapped out its logistics network associates
which include an inbound carrier in Mississauga, Ontario, Canada, a
warehouse and fulfillment center located in Buffalo, New York, and customer
delivery carriers that will provide three-day delivery service anywhere in
the lower 48 states. Sales channels will include an Internet website,
telephone and fax call centers, and mail order facilities. The Company has
established payment methods to be accepted via the four major credit card
companies.
Consumers will be made aware of the product's benefits and informed about
how to order it by a combination of paid and unpaid media. Specific details
and timings of the company's communications' program will ultimately depend
upon budget availability. The company's basic starter website will educate
consumers as well as serve as one of the ordering locations. The website
will be expanded and linked to other sites and search engines as funds
permit. As market interest develops, printed brochures will be used to
educate consumers and will contain an order form, which will be distributed
opportunistically to health and fitness establishments, media people, at
health and fitness trade shows and any other venues that represent an
interest. Powerpoint presentations will be created to educate PR
professionals, media people and prominent health and fitness authorities.
Interviews with the lifestyle and health and fitness writers with local
newspapers and magazines, then writers with regional, then national
magazines, will be arranged in order to secure articles for the product.
Ads in local newspapers and magazines, then regional, then national
magazines will be placed as the stages of introduction progress. Local
television commercials/infomercials will be created and aired as markets
develop. Targeted national e-mail campaigns will be considered.
15
The Company expects to begin marketing the product in the second quarter
of 2003 after Oxywell confirms that it can guarantee adequate and orderly
delivery of the product to the Company. In the event, however, that the
expectations of management do not materialize, within the next twelve months,
TAC may be forced to deal with customary minimal costs involved in the
maintenance of corporate franchise and filing reports and reporting
obligations under the Securities Exchange Act of 1934. These expenses
would involve professional, legal and auditing expenses, including expenses
in connection with complying with the Securities Exchange Act of 1934, have
been and continue to be advanced by TAC's president and majority shareholder.
It is possible that any advances by management may be paid by issuing shares
of the Company's common stock.
Currently, the President and majority stockholder has committed to and is in
the process of advancing the Company the necessary funds over the next several
weeks, which the Company estimates will bring it to a point in its development
where it can introduce the product into the test market. During the nine
months ended December 31, 2002, the Company received $27,000 from the President
and majority shareholder.
Once Oxywell is able to guarantee long-term delivery of the product, the
Company's cash requirements will increase significantly as a result of the
minimum monthly purchase commitments pursuant to the Oxywell Agreement. The
Company does not have any financing arrangement with Oxywell GmbH and the unit
cost per the Oxywell Agreement is $65.50. The Company's ability to meet these
cash requirements is dependent upon the Company's ability to successfully obtain
external financing, to market and develop national marketing channels, and to
generate revenues. The Company operates in an intensely competitive industry
and many of its competitors have much greater resources. There can be no
assurance that any of the Company's business activities will result in any
operating revenues or profits. Investors should be aware that they might lose
all or substantially all of their investment.
Due to the "start up" nature of the Company's business, the Company expects to
incur losses as it expands. The Company expects to raise additional funds
through private or public equity investment in order to expand the range and
scope of its business operations, but there is no assurance that such
additional funds will be available for the Company to finance its operations
on acceptable terms, if at all. Furthermore, there is no assurance the net
proceeds from any successful financing arrangement will be sufficient to cover
cash requirements during the initial stages of the Company's operations.
16
The continued existence of the Company is dependent upon its ability to meet
future financing requirements and the success of future operations. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management believes that actions presently taken to revise the
Company's operating and financial requirements provide the opportunity for the
Company to continue as a going concern. The Company's ability to achieve these
objectives cannot be determined at this time.
The Company does not expect any significant purchases or sales of plant and
significant equipment. We do not expect significant changes in the number of
our employees or in our business operations; provided, however, that if we are
unable to successfully market the Oxywell System we may be required to change
our business or cease operations altogether.
Liquidity and Capital Resources
The Company's future funding requirements will depend on numerous
factors, some of which are beyond the Company's control. These factors
include the Company's ability to operate profitably, its ability to
recruit and train management and personnel, and its ability to compete
with other, better-capitalized and more established competitors who
offer alternative or perhaps similar products to those of the Company.
Management believes that the Company can satisfy its cash requirements
over the next twelve months by advances from its President and majority
shareholder and/or through debt or equity offerings and private
placements.
Currently, the President and majority stockholder has committed to and
is in the process of advancing the Company the necessary funds over the
next several weeks, which the Company estimates will bring it to a point
in its development where it can introduce the product into the test market.
During the nine months ended December 31,002, the Company received $27,000
from the President and majority stockholder. Once Oxywell is able to
guarantee long-term delivery of the product, the Company's cash requirements
will increase significantly as a result of the minimum monthly purchase
commitments pursuant to the Oxywell Agreement. The Company does not have
any financing arrangement with Oxywell GmbH and the unit cost per the
Oxywell Agreement is $65.50.
17
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Related party Transactions.
(i) Oxywell Agreement - On September 1, 2002, Wilhelm Liesner ("Liesner"),
President and majority stockholder of TAC, became President of Oxywell
GmbH ("Oxywell"), a German company headquartered in Munich. In October
2001, Oxywell entered into an agreement with Liesner pursuant to which
it granted Liesner exclusive rights to market the Oxywell System in the
United States, Puerto Rico and Canada and an option to market and sell
the System in Mexico. In November 2001, TAC entered into a licensing
agreement with its majority shareholder, Wilhelm Liesner, pursuant to
which it acquired the exclusive rights to market and sell the Oxywell
water-oxygenating system in North America (the "Oxywell System" or
"System"). The System was originally developed by Oxywell GmbH, which
began marketing the System in the European Economic Community in July
2001. The license agreement between Mr. Liesner and the Company is
virtually co-extensive with the Oxywell Agreement.
(ii) Loans from shareholders. From time to time, the Company's president
or one of his related entities advances funds to pay expenses incurred
on behalf of the Company. These loans are unsecured, non-interest bearing
and due on demand. As of December 31,2002, included in loans from share-
holders is $27,000 due to the Company's president.
iii) Related party transactions. Included in accounts payable at December 31,
2002 is $75,000 for services rendered by two companies that are wholly-
owned by the President of this Company. The payables incurred
represent consulting services rendered related to the Company's
development, production, and marketing of its self-contained infectious
waste disposal system (Redloc II Disposal System.) The services were
performed during the period October 1, 1996 to December 31, 1997.
There was no contract. Also included in accounts payable is $32,000
due to the Company's president for consulting services rendered.
The president renders services on a monthly basis. There is
currently no contract.
CRITICAL ACCOUNTING POLICIES. Our discussion and analysis or plan of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States. The preparation of these financial statements requires us
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. On an on-going basis, we evaluate our estimates, including
those related to bad debts, inventories, income taxes and contingencies.
We base our estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions. We do not currently have any critical accounting policies that
affect the financial statements for the periods presented.
18
RECENT ACCOUNTING PRONOUNCEMENTS. The Financial Accounting Standards Board
has issued the following accounting pronouncement:
SFAS No. 148 -"Accounting for Stock Based Compensation-Transition and
Disclosure," was adopted in December 2002, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. This statement is effective for financial statements for
fiscal years ending after December 15, 2002. The Company has not had a
chance to review what impact this standard may have on its financial
statements.
ITEM 3. CONTROLS AND PROCEDURES
The President, who is also the chief executive officer and the chief
financial officer of the Registrant, has concluded based on his evaluation
as of a date within 90 days prior to the date of the filing of this Report,
that the Registrant's disclosure controls and procedures are effective to
ensure that information required to be disclosed by the Registrant in the
reports filed or submitted by it under the Securities Act of 1934, as amended,
is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and forms, and
include controls and procedures designed to ensure that information
required to be disclosed by the Registrant in such reports is accumulated
and communicated to the Registrant's management, including the president,
as appropriate to allow timely decisions regarding required disclosure.
There were no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls
subsequent to the date of such evaluation.
19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT 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
(a) Exhibits. See Index to Exhibits.
(b) Reports on Form 8-K. None.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
TECHNOLOGY ACQUISITION CORPORATION
/s/ Wilhelm Liesner
Wilhelm Liesner, President and Director
21
CERTIFICATION
I, Wilhelm Liesner, certify that:
1. I have reviewed this quarterly report on Form 10QSB of Technology
Acquisition Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing
the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
22
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this annual report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: February 9, 2003
/s/ Wilhelm Liesner
Chief Executive Officer and Chief Financial Officer
23
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
3.1 (a) Articles of incorporation
3.2 (a) Certificates of Amendment to Certificate of Incorporation
of Registrant
3.3 (a) Certificates of Amendment to Certificate of Incorporation
of Registrant
3.4 (a) Articles of Incorporation of Registrant
3.5 (a) Articles of Merger of Registrant
3.6 (a) Certificate of Amendment to Certificate of Incorporation
of Registrant
3.7 (a) Bylaws of Registrant
3.8 (a) Amended Bylaws of Registrant
10.1 (a) License Agreement between Registrant and Wilhelm Liesner
10.2 (a) License Agreement between Wilhelm Liesner and
Oxywell GmbH
10.3 (b) Agreement of Amendment between Wilhelm Liesner and
Oxywell GmbH
10.4 (c) Agreement of Amendment between Wilhelm Liesner and
Oxywell GmbH
99.1 18 Certification of Principal Executive and Financial Officer
pursuant to 18 U.S.C. Section 1350
- ----------------------------------------------------------------------------
(a) Incorporated by reference from the 10-SB filed with the Securities
and Exchange Commission on February 20, 2002
(b) Incorporated by reference from the 10-SB/A filed with the Securities
and Exchange Commission on July 9, 2002
(c) Incorporated by reference from the 10QSB filed with the Securities
and Exchange Commission on November 14, 2002
24
Exhibit 99.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
(Section 906 of the Sarbanes-Oxley Act of 2002)
I, Wilhelm Liesner, Chief Executive Officer and Principal Financial Officer
of Technology Acquisition Corporation (the "Registrant"), certify to the best
of my knowledge, based upon a review of the Quarterly Report on Form 10-QSB
for the period ended December 31, 2002 (the "Report") of the Registrant, that:
(1) The Report fully complies with the requirements of section 13(a) of the
Securities Act of 1934, as amended; and
(2) The information contained in the Report, fairly presented, in all
material respects, the financial condition and results of operations
of the Registrant.
By: _/s/ Wilhelm Liesner
Date: February 9, 2003