U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 for the year ended: December 31, 2003
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___ to ________
Commission file number: 333-86000
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TECHNOLOGY CONNECTIONS, INC.
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(Name of small business issuer in our charter)
North Carolina
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(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
1731 56-2253025
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(PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
301C Verbena Street, Charlotte, North Carolina 28217
(704) 400-9042
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(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
Kevin G. Kyzer
301C Verbena Street, Charlotte, North Carolina 28217
(704) 400-9042
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(NAME, ADDRESS AND TELEPHONE OF AGENT FOR SERVICE)
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act: common stock, par value
$.001 per share; preferred stock, par value $.001 per share
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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation SB is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [x]
State issuer's revenues for its most recent fiscal year: $44,665.
As of April 20, 2004 there were 2,152,893 common shares outstanding and the
aggregate market value of the common shares (based upon the average of the bid
price of $.39 and the asked price of $.46 reported by brokers) held by
non-affiliates was approximately $914,980.
Transitional Small Business Disclosure Format (check one): Yes[ ] No[X]
Number of shares of common stock outstanding as of April 20, 2004: 2,152,893
Number of shares of preferred stock outstanding as of April 20, 2004: -0-
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
The discussion contained in this 10-KSB under the Securities Exchange Act of
1934, as amended, (the "Exchange Act") contains forward-looking statements that
involve risks and uncertainties. The issuer's actual results could differ
significantly from those discussed herein. These include statements about our
expectations, beliefs, intentions or strategies for the future, which we
indicate by words or phrases such as "anticipate," "expect," "intend," "plan,"
"will," "we believe," "the Company believes," "management believes" and similar
language, including those set forth in the discussion under "Description of
Business," including the "Risk Factors" described in that section, and
"Management's Discussion and Analysis or Plan of Operation" as well as those
discussed elsewhere in this Form 10-KSB. We base our forward-looking statements
on information currently available to us, and we assume no obligation to update
them. Statements contained in this Form 10-KSB that are not historical facts are
forward-looking statements that are subject to the "safe harbor" created by the
Private Securities Litigation Reform Act of 1995.
The rest of this page is left intentionally blank
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Part I
Item 1. Description of Business.
BUSINESS DEVELOPMENT.
Since our inception, we have focused on market opportunities in the Charlotte,
North Carolina market. We plan to become the leading provider in our market of
home wiring products. We currently staff three employees in our business. We do
not have signed employment agreements with our employees, but they do sign a
confidentiality agreement with respect to our business practices and technology.
Additionally, we plan to focus on hiring additional employees to undertake
regional expansion.
We have successfully engaged in selling and integrating audio/visual/security
devices in residential new construction homes. The typical home that we sell to
costs approximately $350,000 and up, and are 3,000 square feet and larger. We
also sell to pre-existing homes.
Our method of distribution typically involves agreements entered into with the
home builders. We compensate our sales people on solely a commission basis.
There is direct correlation between the demand for our products and services and
the home building industry as a whole. If mortgage interest rates are considered
low (typically below 8%), the housing market usually expands which we believe
will help drive demand for our products and services.
The industry that we compete in is relatively new. Our products and technology
are displayed in model homes developed by the home builders and when a purchase
decision is made, the price of our products and services can conveniently be
added into the new mortgage.
Sales on our equipment and installations are billed upon delivery. However, we
typically do not collect payment in full until the new home is completed. This
can occur as much as 90 days after installation and cause cash flow problems for
our company should our receivable accumulate or become uncollectible. We have
not had any material bad debt to date.
Our competition is primarily from sole proprietors who focus on local service
areas and are very limited in their product offering and installation
capabilities. There are no significant barriers to entry in our industry and
start up costs for a comparable business would typically be minimal. Our
products and services are typically bundled together and we believe we can
obtain a competitive advantage by offering more variety of products at better
prices as well as supply the labor to complete larger projects. We also plan to
forge strategic relationships with local and national home builders to expand
our sales. Currently, we are working with several new home builders, a national
new home builder, to offer our products and services to their customers.
Our management makes technical reviews of all sales quotes to ensure that our
technology is being properly used for our customers. We also make use of
Internet based scheduling, which offers more involvement for the builder and
help prevents scheduling errors. We believe we will see an increase in
competition as a result of the increasing popularity of home electronic
equipment and as prices for consumer electronics become more affordable.
Our major suppliers of technical devices and wiring are ADI, Graybar and USTec.
We do not currently have any specific purchase contracts with them. Pricing is
based on volume of products purchased. Additionally, we have at least four other
alternative suppliers should we have additional product delivery needs.
We have worked out a special pricing and priority scheduling with our new home
builders, of whom we are a subcontractor. Although we do not have a written
contract, we have oral agreements. In addition to our relationships with these
new home builders, we are also actively pursuing relationships with other home
builders of comparable volume.
The sale of electrical wiring and electrical equipment carries certain inherent
liability for us. To manage this risk, we carry general liability insurance. We
also carry workers compensation insurance, vehicle insurance.
We believe our level of insurance is adequate for our current level of
operations. We do not offer health insurance at this time, although we intend to
offer it as soon as is practicable for the Company.
Our return policy maintains that defective electronic equipment may be returned
for credit. In addition, we offer our customer written product and installation
warranties. For example, damaged wires are replaced at no charge. We do not
estimate these costs to be material to our operations.
We are considering expansion plans to increase sales and brand awareness
including purchasing additional companies providing our type of products and
services in other markets. We do not currently have enough capital to consummate
such an acquisition. If we choose to pursue this means of expansion, additional
capital raising activities may be necessary. There can be no assurance that
capital will be available to us on favorable terms. Additional expenditures
needed to facilitate this transaction could include travel, inventory, equipment
and administrative expenses. We may also need to hire and train additional
personnel in the sales and installation areas. Furthermore, we may incur
expenses to open additional offices in the regional areas.
A regulatory requirement for our business is that we must maintain a burglar
alarm license. We currently are licensed within our areas and may need to expand
this licensure if we expand our operations. Costs of maintaining our license is
not material to our financial statements. We also remain current in our
licensure requirements with the State of North Carolina, such as the need to
have a business license.
Our business is built around the concept of a networked home. A networked home
is a home that is built on a foundation of a structured cabling system that runs
into a central distribution point and is enclosed and situated in a closet or a
basement. The homeowner is provided with the capacity to deliver all of the
networked systems, such as security systems, satellite television or
entertainment technology throughout the home. The homeowner selects the modules
and services that are consistent with his or her particular lifestyle.
Additional modules and services can be added very efficiently at a later date as
the consumer's needs and desires change. Cost-effectiveness, convenience and
flexibility is often cited as the advantages of a networked home. The market for
our services should grow as the concept of a networked home becomes better
understood by potential customers.
Home builders benefit from our integrated services. They are able to subcontract
for all low-voltage wiring with one company, thereby reducing costs and
increasing efficiency. The company also saves the home builder money, and
increases their profits with upgrades and add-ons that our consultants sell to
the homebuyer with the home builder's profit margin included in the quote.
Home buyers also benefit from our integrated services. A home buyer has the
convenience of creating a "wired home" with different types of technical
equipment. By having the payment for all wiring and most equipment included in
their mortgage, the home buyer may be able to obtain more of the technology
features that they want for their home. They have low or no initial cash outlays
and are still able to buy the products and services that they desire. These
products and services are financed as part of the mortgage.
Our operating philosophy centers on delivering quality products and services.
Our technical consultants familiarize themselves with the standard operating
procedures of each builder and they strive to develop a good business
relationship with the builder's sales agents. Each customer proposal is reviewed
by one of our technical consultants before it is presented to the client. Upon
the acceptance of a customer proposal, the builder submits a purchase order.
Once it is received, it is then submitted to our scheduling staff, which is
responsible for coordinating with the construction management team of the
builder. Our installation team then performs the actual installation. Our
installers are experienced professionals who are primarily dedicated to working
for a particular builder. Each project is inspected by our Quality Assurance
Manager within twenty-four hours of installation to verify that the work
performed is of the highest quality and matches the purchase order. If any
changes are required, the Quality Assurance Manager is capable of making them
immediately.
We maintain an entertainment and technology showroom located at our headquarters
in Charlotte, North Carolina. This gives the consumer the chance to experience
the features and benefits of our communication, entertainment and other
technologies first-hand.
We are in the process of developing a program for regional expansion. The first
thrust will be to attempt to open offices in the Southeastern United States.
Potential cities identified for expansion include the following: Greensboro, NC,
Raleigh, NC and Wilmington, NC; Greenville, SC, Columbia, SC, Charleston, SC and
Myrtle Beach, SC; Atlanta, GA; and Orlando, FL and Tampa, FL.
We will only embark upon an expansion program once our operations in the
Charlotte, NC market is cash flow positive.
We focus on four market segments, as follows:
Residential new home construction
Existing home residential dwellings
Multiple dwelling units
Small commercial buildings
The products that we install include Direct TV, high speed Internet access,
security systems, central vacuum systems, solar power systems, home theatres,
structured wiring, landscaping lighting and home electrical improvements.
MARKET RESEARCH
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According to our studies, about two-thirds of Americans own their own homes, and
about one and one-half million new homes are constructed each year. Despite
general slowdown in the American economy over the last year, the housing market
has been relatively resistant to recession. While housing starts were slightly
weaker in 2002 than the previous year on a national basis, some regional housing
markets have shown signs of strength. For example, Charlotte, North Carolina and
Mecklenburg County were among the few areas in the country that experienced real
growth in economic and housing activity over the last ten years.
Our target customers are new home buyers with home purchase prices of $350,000
and higher, which is higher than the median house sale price of $200,000. We
believe that this segment of the housing market will be less affected by a
general economic slowdown.
LOCATION OF FACILITIES
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In 2003 we moved into our new facilities. The headquarters are located at 301C
Verbena Street, Charlotte, North Carolina 28217. We have a showroom set up at
this location. We occupy approximately 1,000 square feet for which we pay no
rent per month as the landlord is allowing us to rent the space gratuitously. We
believe our new location has sufficient space to conduct our operation over the
next five years.
SALES TECHNIQUES
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We are currently negotiating with several local home builders to provide
subcontracting services for all low voltage wiring and technology equipment for
new homes. When we act as subcontractor for a home builder, the cost of the
equipment is included in the sales price for the home. It gets financed through
the home buyer's mortgage.
Our showroom gives potential customers an opportunity to experience all the
equipment features before they are installed in the home.
In addition, by contracting with service dispatch firms we will be able to
obtain customers with little or no acquisition cost. Those customers will not
only provide us with sales but they will also provide us with opportunities from
up-sales and cross-sales for other products.
CUSTOMER CREDIT TERMS
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The customer typically locates their own source of credit. The credit terms for
our new homebuyer customers depends on the terms of the mortgage that they
obtain. If they obtain a mortgage for a period of 15-30 years, our equipment is
paid off over that time with the mortgage. We collect on our receivable when the
mortgage is funded.
For other customers who want to install our products in their existing homes, we
are in the process of arranging contracts with several lenders who will provide
credit to our customers at reasonable rates. The loans will may be secured or
unsecured based on the customers needs and usually carry an interest close to
the prime rate as published by the Wall Street Journal.
HOURS OF BUSINESS
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The business office at our headquarters is open from 8:00 a.m. to 5:00 p.m. on
Monday through Friday. The showroom at our headquarters is open from 10:00 a.m.
to 6:00 p.m. Monday through Saturday, and 12:00 p.m. to 6:00 p.m. on Sundays. We
expect to expand our showroom hours of operation on regular business days in the
near future. Our installers and service technicians work in two shifts from 8:00
a.m. to 9:00 p.m. Monday through Saturday.
COMPETITORS
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Our competition is somewhat fragmented and consists primarily of sole proprietor
installers and home electronic stores. We are not aware of any direct competitor
that markets a complete turn-key technology package like ours to homeowners. We
believe that this opens a window of opportunity to market our concept. It is
possible that other well-capitalized companies could realize the value of our
business concept and expand or enter into our market quickly. There can be no
assurance that we will be successful in managing profitability in a highly
competitive market.
CHANNELS OF DISTRIBUTION
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Our approach to delivering our products and services to customers is four-fold:
Establishing agreements with new home builders which allow us to have access to
their home-building customers during the construction phase of their homes.
Commercial sales representatives establish contacts in the local small business
markets and offers them our products and services.
We utilize service contracts with mailed brochures and door to door salespeople
in an effort to capture the existing home market for wireless technologies.
We will act as subcontractor for high speed Internet access companies and
providers of security services in order to place these products and services in
the home.
PRICING POLICY
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As we mentioned earlier, our products are relatively expensive for the average
home buyer's budget. In a typical $300,000 home, between $3,000 and $6,000
(1-2%) on average would be used toward a 'wired' home. In addition, we have to
include the builder's profit margin in the final price. However, by including
the cost of our equipment in the home sales price, the buyer is able to spread
payment over the lifetime of their mortgage. Existing home owners may take a
home equity loan for home improvements that could include our products and
services. Competitive market conditions could have an adverse affect on our
pricing policy.
ADVERTISING AND PROMOTIONS
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Advertising and promotions are an important part of our sales strategy. Our
advertising and promotional activities fall into five key areas:
Public relations
Showrooms
Internet Web site
Customer Relations
Press advertising.
Our company puts a significant effort into preparing and disseminating a
consistent array of press releases. These include information about the products
and services we provide, location of our showroom, and contact telephone
numbers. We regularly attempt to prepare and place advertisement pieces with
editors of publications. We currently have advertisements with home builder's
magazines, newspapers, radio and highway billboards.
We have an informative and actively managed showroom at our headquarters.
Customers are able to experience all of the advantages of having our products in
their homes first-hand, before they are ever installed. Sales representatives
help customers to choose a package of equipment and services that suit their
needs the best. We plan to open additional showroom locations in the future.
We have established an internet web site advertising the company's products and
services. The cost to build was approximately $15,000. Further information can
be found by visiting our site at www.connect2technology.com.
Customer relations are a very important part of our business strategy. We keep
records of every sales contact. Customer data such as source of inquiry,
existing services, customer needs, and customer job and income level is
included. By effectively keeping these types of records, we can offer truly
personalized service when the opportunity arises.
OPERATIONS
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In order to successfully sell our products and services to customers, our sales
force must be dedicated, knowledgeable about our products and services and be
well-trained. We provide one week of training to our sales people when they
start, in order to teach them the skills that they will need to succeed. In the
future, we may hire an outside trainer to teach sales techniques.
Supplies and equipment are shipped directly from the suppliers to our facilities
upon us receiving a customer order. This eliminates the need for the company to
carry inventory or rent a warehouse facility. We must pay for our products upon
delivery even though we may not receive collection of our customer receivable
until a home's closing. This time lag may require us to obtain additional
financing that may range from $100,000 to $250,000, depending on the level of
our business. We are investigating into what sources of financing may be
available for us including issuing notes payable, a follow on stock offering or
a bank credit line.
SOURCES AND AVAILABILITY OF RAW MATERIALS
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As of the date of this filing, we have no raw materials requirements. We do
have several suppliers that we rely on and their names are as follows:
ADI
Graybar
USTec
No supplier represents more than 20% of our purchases. We have alternative
suppliers available if we are not able to receive deliveries from one of the
above suppliers.
INTELLECTUAL PROPERTY
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At present, we do not have any patents, trademarks, licenses, franchises,
concessions, and royalty agreements, labor contracts or other proprietary
interests.
GOVERNMENT REGULATION ISSUES
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We are subject to minimal federal and state regulation. Our operations are
subject to regulations normally incident to business operations, such as
occupational safety and health acts, workmen's compensation statutes,
unemployment insurance legislation and income tax and social security related
regulations. We will make every effort to comply with applicable regulations.
RESEARCH AND DEVELOPMENT
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We have spent no funds on research and development.
ENVIRONMENTAL LAW COMPLIANCE
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There are no current existing environmental concerns for our products or
services. If this changes in the future, we make every effort to comply with all
such applicable regulations.
EMPLOYEES
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Currently, we have a staff of three employees. We have no employment agreements
with any of our employees.
REPORTS TO SECURITY HOLDERS
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We are a reporting company under the requirements of the Securities Exchange Act
of 1934 and will file quarterly, annual and other reports with the Securities
and Exchange Commission. This annual report contains the required audited
financial statements. We are not required to deliver an annual report to
security holders and will not voluntarily deliver a copy of the annual report to
security holders. The reports and other information filed by us will be
available for inspection and copying at the public reference facilities of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of such material may be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1-800-SEC-0330. In addition, the Commission
maintains a World Wide Website on the Internet at http://www.sec.gov that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
RISK FACTORS
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BECAUSE OUR STOCK IS CONSIDERED A PENNY STOCK ANY INVESTMENT IN OUR STOCK IS
CONSIDERED TO BE A HIGH-RISK INVESTMENT AND IS SUBJECT TO RESTRICTIONS ON
MARKETABILITY.
Our Shares are "penny stocks" within the definition of that term as contained in
the Securities Exchange Act of 1934, which are generally equity securities with
a price of less than $5.00. Our shares will then be subject to rules that impose
sales practice and disclosure requirements on certain broker-dealers who engage
in certain transactions involving a penny stock. Under the penny stock
regulations, a broker-dealer selling penny stock to anyone other than an
established customer or "accredited investor" must make a special suitability
determination for the purchaser and must receive the purchaser's written consent
to the transaction prior to the sale, unless the broker-dealer is otherwise
exempt. Generally, an individual with a net worth in excess of $1,000,000 or
annual income exceeding $200,000 individually or $300,000 together with his or
her spouse is considered an accredited investor. In addition, unless the
broker-dealer or the transaction is otherwise exempt, the penny stock
regulations require the broker-dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission relating to the penny stock market. A broker-dealer is also
required to disclose commissions payable to the broker-dealer and the Registered
Representative and current bid and offer quotations for the securities. In
addition a broker-dealer is required to send monthly statements disclosing
recent price information with respect to the penny stock held in a customer's
account, the account's value and information regarding the limited market in
penny stocks. As a result of these regulations, the ability of broker-dealers to
sell our stock may affect the ability of selling security holders or other
holders to sell their shares in the secondary market. In addition, the penny
stock rules generally require that prior to a transaction in a penny stock, the
broker-dealer make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for a stock
that becomes subject to the penny stock rules. These additional sales practice
and disclosure requirements could impede the sale of the Company's securities,
if our securities become publicly traded. In addition, the liquidity for the
Company's securities may be adversely affected, with concomitant adverse affects
on the price of the Company's securities. Our shares may someday be subject to
such penny stock rules and our shareholders will, in all likelihood, find it
difficult to sell their securities.
WE HAVE SUBSTANTIAL NEAR-TERM CAPITAL NEEDS AND WITHOUT ADEQUATE FUNDS WE MAY BE
REQUIRED TO CURTAIL OUR OPERATIONS.
We require additional funding. We estimate that we will need $100,000 in
additional funds over the next twelve months to fund our operations without
curtailing operations. While this estimate is given, our capital requirements
will depend on many factors including, but not limited to, opening additional
sales centers in our area, aggressiveness of product marketing and the hiring of
additional employees. Presently, we have only limited amounts of liquid assets
with which to pay our expenses. We do not have sufficient liquid assets to
continue to grow our company. Accordingly, we will seek outside sources of
capital such as conventional bank financing; however, additional capital may not
be available on favorable terms to us. If adequate funds are not available, we
may be required to curtail operations or to obtain funds by entering into
collaboration agreements on unattractive terms.
In addition, we have no credit facility or other committed sources of capital.
We may be unable to establish credit arrangements on satisfactory terms. If
capital resources are insufficient to meet our future capital requirements, we
may have to raise funds to continue development of our operations. To the extent
that additional capital is raised through the sale of equity and/or convertible
debt securities, the issuance of such securities could result in dilution to our
shareholders and/or increased debt service commitments. If adequate funds are
not available, we may be unable to sufficiently develop our operations to become
profitable.
BECAUSE WE HAVE ONLY A LIMITED OPERATING HISTORY, YOU WILL HAVE NO ABILITY TO
EVALUATE OUR BUSINESS PROSPECTS AND STRATEGIES.
We have been in existence only since May 18, 2001, and we have a limited
history of actually providing our services to customers. We have only limited
revenues and no other established funding sources. We are still in our
developmental stages and we will require significant expenses to develop our
business and future losses are likely before our operations become profitable.
You should be aware of the risks and difficulties that we may encounter in our
business. We may not be able to generate revenues or otherwise obtain funds to
adequately conduct our operations. Moreover, we may not be successful in our
business plans or we may not be able to operate profitably. Accordingly, you
have no basis upon which to judge our ability to develop our business and you
will be unable to forecast our future growth.
IF WE ARE UNSUCCESSFUL IN ACQUIRING A GROWING BACKLOG OF CONTRACTS, WE MAY BE
UNABLE TO SUCCESSFULLY DEVELOP OUR OPERATIONS
We have a limited backlog of contracts at any given point in time to assist us
in developing our operations. We currently have three employees. We are
prepared to hire additional employees only if and when our contracts
increase.
BECAUSE OUR FINANCIAL CONDITION IS POOR WE MAY BE UNABLE TO ADEQUATELY DEVELOP
OUR OPERATIONS, AND OUR LOSSES MAY ACCUMULATE.
Because we have only a limited operating history, assets, and revenue sources,
we may not adequately develop our operations. During the last twelve months
ended December 31, 2003, we generated losses totaling $302,444 compared to
$725,776 in 2002. These losses were primarily due to $201,000 and $469,430 of
expenses relating to stock issued for services in 2003 and 2002, respectively.
As a result of these losses, as of December 31, 2003, we had an accumulated
deficit in retained earnings of $1,028,220 and total assets of only $35,136
with which to operate. We anticipate that we will experience continued financial
difficulties without an immediate infusion of capital. Moreover, we may be
unable to operate profitably, even if we obtain immediate funding or further
develop our operations or increase our revenues. Our poor financial condition
could adversely affect our ability to expand our operations through acquisitions
in a timely fashion. Accordingly, we may experience future losses if we are
unable to adequately develop our operations.
OUR PRINCIPAL STOCKHOLDERS CONTROL OUR BUSINESS AFFAIRS IN WHICH CASE YOU WILL
HAVE LITTLE OR NO PARTICIPATION IN OUR BUSINESS AFFAIRS.
Currently, our principal stockholders, Kevin G. Kyzer and Stacey A. Kyzer, own
approximately 38.0% of our common stock. As a result, they will have
significant influence over all matters requiring approval by our stockholders
without the approval of minority stockholders. In addition, they will be able
to elect all of the members of our Board of Directors, this will allow them to
significantly control our affairs and management. They will also be able to
affect most corporate matters requiring stockholder approval by written consent,
without the need for a duly noticed and duly-held meeting of stockholders.
Accordingly, you will be limited in your ability to affect change in how we
conduct our business.
IF WE LOSE THE SERVICES OF OUR PRESIDENT, OUR BUSINESS MAY BE IMPAIRED.
Our success is heavily dependent upon the continued active participation of our
president, Mr. Kevin G. Kyzer. Mr. Kyzer has over ten years of experience in
technology businesses. The loss of Mr. Kyzer's services could have a
material adverse effect upon the development of our business. We do not maintain
"key person" life insurance on Mr. Kyzer. We do not have a written employment
agreement with Mr. Kyzer. We may be unable to recruit or retain other qualified
personnel, should it be necessary to do so.
WE DO NOT HAVE ANY IMMEDIATE PLANS TO HIRE ADDITIONAL PERSONNEL, WHICH MAY CAUSE
SUBSTANTIAL DELAYS IN OUR OPERATIONS.
Although we plan to expand our business and operations, we have no immediate
plans to hire additional personnel. As we expand our business there will be
additional strains on our operations due to increased cost. In addition, there
may be additional demand for our services. We now only have the services of
Kevin G. Kyzer, our president, Stacey A. Kyzer, our Vice President ,in addition
to our other employees, to accomplish our current business and our planned
expansion. If our growth outpaces their ability to provide services and we do
not hire additional personnel it may cause substantial delays in our operations.
WE FACE COMPETITION IN OUR BUSINESS, AND POTENTIAL COMPETITORS FACE FEW BARRIERS
TO ENTRY; WE MUST OVERCOME THIS COMPETITION IF WE ARE TO OPERATE PROFITABLY.
We face competition from companies engaged in similar businesses. We anticipate
that competition will intensify within as the opportunities inherent in our
business become more apparent. Some of our competitors have significantly
greater customer bases, operating histories, financial, technical, personnel and
other resources than we do. As a response to changes in the competitive
environment, we may from time to time make certain service, marketing or supply
decisions or acquisitions that could negatively impact our operations and
financial condition.
WE HAVE NEVER PAID DIVIDENDS AND WE DO NOT INTEND TO PAY DIVIDENDS.
We have never paid dividends. We intend to retain earnings, if any, to
finance the development and expansion of our business. Future dividend policy
will be at the discretion of the Board of Directors and will be contingent upon
future earnings, if any, our financial condition, capital requirements, general
business conditions and other factors. Future dividends may also be affected by
covenants contained in loan or other financing documents, which may be executed
by us in the future. Therefore, cash dividends of any kind may never be paid.
THE RISK OF WAR AND TERRORISM NEGATIVELY AFFECTS THE LOCAL HOME BUILDING
INDUSTRY AND ADVERSELY AFFECTS OUR NEW HOME INSTALLATIONS MARKET
Terrorist acts of war (wherever located around the world) may cause damage or
disruption to our business and could have an adverse effect on our operations
and financial results. Travel, tourism and building development throughout the
United States and the world, have been significantly effected since the events
of September 11, 2001. Our revenue is generated, in part, from businesses that
rely on home building development. If this industry is weak, our new home
installations will likely be adversely affected. The economic uncertainty
stemming from the terrorist attacks of September 11, 2001, may continue through
the pending wartime economy. At this time, we are unable to predict what impact
a prolonged war on terrorism will have on the respective economies of the United
States or how it will effect our operations.
NEGATIVE TRENDS IN RESIDENTIAL HOMEBUILDING CAN ADVERSELY AFFECT OUR BUSINESS
Negative trends in residential homebuilding can adversely affect our business.
New home installations are the largest component of our revenues, and if new
homebuilding slows down, it can negatively impact our revenues. Factors that
affect residential homebuilding include downturns in interest rates and
worsening general economic conditions.
IF WE ARE UNABLE TO EXPAND OUR INFRASTRUCTURE, WE WILL NOT BE SUCCESSFUL IN
MANAGING OUR PLANNED GROWTH.
Our anticipated growth could significantly strain our operational infrastructure
and financial resources. Our business and results of operations may be adversely
affected if we are unable to increase our financial resources and improve our
operational infrastructure.
THE PRICE OF OUR COMMON STOCK MAY BE HIGHLY VOLATILE.
The price of our common stock may be highly volatile. Numerous factors
could have a significant effect on the market price of our common stock.
Such factors include the announcements of fluctuations in operating results,
new contracts or customers. In addition, the stock market has experienced
significant price and volume fluctuations in recent years that have been
unrelated or disproportionate to the operating performance of companies. These
broad fluctuations may adversely affect the market price of our common stock.
FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT THE STOCK PRICE.
Future sales of substantial amounts of our common stock in the public
market, or the perception that such sales could occur, could adversely affect
the market price of our common stock.
Controls and Procedures
(a) On December 31, 2003, our Chief Executive Officer and Chief Financial
Officer made an evaluation of our disclosure controls and procedures. In
our opinion, the disclosure controls and procedures are adequate because
the systems of controls and procedures are designed to assure, among other
items, that 1) recorded transactions are valid; 2) valid transactions are
recorded; and 3) transactions are recorded in the proper period in a timely
manner to produce financial statements which present fairly the financial
condition, results of operations and cash flows for the respective periods
being presented. Moreover, the evaluation did not reveal any significant
deficiencies or material weaknesses in our disclosure controls and
procedures.
(b) There have been no significant changes in our internal controls or in other
factors that could significantly affect these controls since the last
evaluation.
Item 2. Description of Property.
We do not own any property nor do we have any contracts or options to acquire
any property in the future. Between January and May 2002, we operated from the
residence of our president while we were awaiting readiness of our new
headquarters. In 2003, we moved into our new offices located at 301C Verbena
Street, Charlotte, North Carolina 28217. We occupy approximately 1,000 square
feet for which we pay no rent per month as the landlord is allowing us to use
the space gratuitously. We believe this space to be adequate for our present and
forecasted levels of operations.
We have no policy with respect to investments in real estate or interests in
real estate.
Item 3. Legal Proceedings.
We are not aware of any pending or threatened legal proceedings, in which we are
involved.
In addition, we are not aware of any pending or threatened legal proceedings in
which entities affiliated with our officers, directors or beneficial owners are
involved.
Item 4. Submission of Matters to a Vote of Security Holders.
None
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
Our stock is qualified for quotation on the over the counter bulletin board
under the symbol "TLGY", formerly "TGYC" in 2003.
During the 2002 through 2003 period, the Company's common stock traded on the
Over-the-Counter Bulletin Board. The range of high and low bid quotations for
the Common Stock for the two most recently completed fiscal years and the
current fiscal year are provided below. The volume of trading in the Company's
Common Stock has been limited and the bid prices as reported may not be
indicative of the value of the Common Stock or of the existence of an active
trading market. These over-the-counter market quotations were provided by the
Over-the-Counter Bulletin Board and may not necessarily represent actual
transactions; they reflect inter-dealer prices without retail markup, markdown
or commissions.
High Bid Low Bid
--------- --------
2002 Fiscal Year
- ------------------
First Quarter (1) $ NA $ NA
Second Quarter (1) $ NA $ NA
Third Quarter (1) $ NA $ NA
Fourth Quarter (2) $ 5.00 $ 4.00
High Bid Low Bid
--------- --------
2003 Fiscal Year
- ------------------
First Quarter (2) $ 0.42 $ 0.30
Second Quarter (2) $ 0.66 $ 0.24
Third Quarter (2) $ 0.64 $ 0.16
Fourth Quarter (2) $ 0.80 $ 0.40
(1) Trading on the OTC Bulletin Board was first reported on 12/09/02.
(2) Adjusted to reflect a 1:20 reverse stock split for holders of record as of
12/31/03.
Holders
The number of recorded holders of the Company's common stock as of April 20,
2004 is approximately 46.
Penny Stock Considerations
Our shares will be "penny stocks" as that term is generally defined in the
Securities Exchange Act of 1934 to mean equity securities with a price of less
than $5.00. Our shares thus will be subject to rules that impose sales practice
and disclosure requirements on broker-dealers who engage in certain transactions
involving a penny stock. Under the penny stock regulations, a broker-dealer
selling a penny stock to anyone other than an established customer or accredited
investor must make a special suitability determination regarding the purchaser
and must receive the purchaser's written consent to the transaction prior to the
sale, unless the broker-dealer is otherwise exempt. Generally, an individual
with a net worth in excess of $1,000,000 or annual income exceeding $100,000
individually or $300,000 together with his or her spouse is considered an
accredited investor.
In addition, under the penny stock regulations the broker-dealer is required to:
o Deliver, prior to any transaction involving a penny stock, a disclosure
schedule prepared by the Securities and Exchange Commissions relating to
the penny stock market, unless the broker- dealer or the transaction is
otherwise exempt;
o Disclose commissions payable to the broker-dealer and our registered
representatives and current bid and offer quotations for the securities;
o Send monthly statements disclosing recent price information pertaining to
the penny stock held in a customer's account, the account's value and
information regarding the limited market in penny stocks; and
o Make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement
to the transaction, prior to conducting any penny stock transaction in the
customer's account.
Because of these regulations, broker-dealers may encounter difficulties in their
attempt to sell shares of our common stock, which may affect the ability of
selling shareholders or other holders to sell their shares in the secondary
market and have the effect of reducing the level of trading activity in the
secondary market. These additional sales practice and disclosure requirements
could impede the sale of our securities. In addition, the liquidity for our
securities may be decreased, with a corresponding decrease in the price of our
securities. Our shares in all probability will be subject to such penny stock
rules and our shareholders will, in all likelihood, find it difficult to sell
their securities.
Dividends
We have not declared any cash dividends on our common stock since our inception
and do not anticipate paying such dividends in the foreseeable future. We plan
to retain any future earnings for use in our business. Any decisions as to
future payments of dividends will depend on our earnings and financial position
and such other facts as the board of directors deems relevant.
Dividend Policy
All shares of common stock are entitled to participate proportionally in
dividends if our Board of Directors declares them out of the funds legally
available. These dividends may be paid in cash, property or additional shares of
common stock. We have not paid any dividends since our inception and presently
anticipate that all earnings, if any, will be retained for development of our
business. Any future dividends will be at the discretion of our Board of
Directors and will depend upon, among other things, our future earnings,
operating and financial condition, capital requirements, and other factors.
Item 6. Management's Discussion and Analysis or Plan of Operation.
SPECIAL INFORMATION REGARDING FORWARD LOOKING STATEMENTS
Some of the statements in this Form 10K-SB are "forward-looking statements."
These forward-looking statements involve certain known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by these forward-looking statements. These
factors include, among others, the factors set forth above under "Risk Factors."
The words "believe," "expect," "anticipate," "intend," "plan," and similar
expressions identify forward-looking statements. We caution you not to place
undue reliance on these forward-looking statements. We undertake no obligation
to update and revise any forward-looking statements or to publicly announce the
result of any revisions to any of the forward-looking statements in this
document to reflect any future or developments.
Overview
- --------
We were incorporated in North Carolina on May 23, 2001, to engage in the
business of installing structured wiring capacities into newly constructed homes
and retrofitting existing homes with the same integrated technology components
and systems. Such integrated technology and systems include security systems,
Internet technology, satellite television delivery systems, indoor/outdoor
lighting, solar energy systems and entertainment/communication technology.
Our executive offices are located at 301C Verbena Street, Charlotte, North
Carolina 28217. Our telephone number is (704) 400-9042. We currently have three
employees. We are authorized to issue common and preferred stock. Our total
authorized common stock consists of 100,000,000 shares, with a par value of
$.001 per share, of which 2,152,893 shares are issued and outstanding. Our
total authorized preferred stock consists of 5,000,000 shares, with a par
value of $.001 per share, of which no shares are issued and outstanding.
RESULTS OF OPERATIONS
- -----------------------
For the 12 months ended December 31, 2003.
Sales.
Sales consisted primarily of setup and installation of the following:
Security systems
Outdoor landscape lighting
Audio systems
Central home wiring centers
Video and monitoring systems
Home theater installation
Computer networks
Central vacuum systems
Indoor lighting
Home automation systems, including remote appliance capabilities
All revenues were from unrelated third parties and were made primarily from new
home buyers.
December 31, 2003 vs. December 31, 2002
Revenues decreased from $276,445 in 2002 to $44,665 in 2003 due to a decrease in
our relationships with new home builders and weaker operating efficiencies.
Cost of Revenues decreased from $248,646 in 2002 to $16,166 in 2003 due to
decreased sales in 2003.
Gross Profit increased from $27,799 in 2002 to $28,499 in 2003 due to better
pricing resulting from volume purchasing from suppliers.
Operating Expenses:
Interest expense decreased from $46,410 in 2002 to $26,220 in 2003 due to the
$206,480 forgiveness of shareholder loans in 2003.
Total operating expenses decreased from $707,165 in 2002 to $304,723 in 2003 due
primarily to decreased costs associated with common shares issued to consultants
in 2003 compared to 2002. Operating expenses also consists primarily of
salaries, general overhead, and technical personnel. We anticipate that
Operating Expenses will continue to decrease as business decreases.
Basic EPS equals diluted EPS because of the net loss above. Preferred stock had
no effect on the calculation of EPS.
Plan of operations:
We plan to conduct a minimum of $50,000 in research in the development of our
sales and operations procedures during the next 12 months, provided the funds
are available. In addition, one aspect of our strategy to grow is to expand the
scope of our operations by acquiring other businesses in audio/video
entertainment technology related industries, such as providers of low voltage
services and products. We believe that our public company status will make us an
attractive buyer to certain entertainment technology related acquisition
candidates in this area. We have not developed any acquisition discipline or
criteria to evaluate acquisition opportunities. Accordingly, any acquisition
candidate that is selected may be a financially unstable company or an entity in
an early stage of development or growth, including entities without established
records of sales or earnings.
Liquidity and Capital Resources
Cash flows used in operations was $109,786 for the year ended December 31, 2003,
and $94,250 for the year ended December 31, 2002. The use of cash flows from
operating activities for the years ended December 31, 2003 and 2002 are
primarily attributable to losses from operations, partially offset by non-cash
expenses, such as common stock issued for services.
Cash flows used in investing activities were $-0- for the year ended December
31, 2003 and $53,759 for the same period in 2002. Cash used in investing were
solely attributable to $53,759 in equipment purchases during 2003 and 2002.
Cash flows provided by financing activities were $105,711 and $151,276 for the
years ended December 31, 2003 and 2002, respectively. The positive cash flows in
2003 and 2002 were primarily due to the $61,000 equity placement of common stock
sold during 2002 and proceeds from a shareholder loan made by our officer and
director of $113,125 and $61,468 in 2003 and 2002, respectively.
We have funded our cash needs from inception through December 31, 2003 with a
series of debt and equity transactions, including private placements.
We have suffered recurring losses and have yet to generate an internal cash
flow. We project that current and projected revenues and capital reserves will
sustain it for six months. If the projected revenues of these sources fall short
of needed capital because of a decrease in demand for the company's services as
well as other factors, we may not be able to sustain its capital needs for more
than six months. We will then need to obtain additional capital through equity
or debt financing to sustain operations for an additional year. A lack of
significant revenues beginning in the first two quarters of 2004 will
significantly affect the cash position of us. Additional funds through equity or
debt financing will be necessary.
On a long-term basis, liquidity is dependent on continuation and expansion of
operations, receipt of revenues, additional infusions of capital and debt
financing. We are considering launching a wide scale marketing and advertising
campaign. Our current capital and revenues are not sufficient to fund such a
campaign. If we choose to launch such a campaign it well require substantially
more capital. If necessary, we plan to raise this capital through an additional
follow-on stock offering. The funds raised from this offering will be used to
develop and execute the marketing and advertising strategy that may include the
use of television, radio, print and Internet advertising. However, we may not be
able to obtain additional equity or debt financing in the future, if at all. If
we are unable to raise additional capital, the growth potential will be
adversely affected. Additionally, we will have to significantly modify its
plans.
Critical Accounting Policies (FR-60)
Revenue recognition is a critical accounting policy of ours since it represents
the majority of our entire financial statements taken as a whole. It is also
important in light of the Staff Accounting Bulletins published by the Securities
and Exchange Commission the past few years.
Income Taxes
Income taxes are provided in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." A deferred tax
asset or liability is recorded for all temporary differences between financial
and tax reporting and net operating loss-carry forwards.
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 asset will not be realized. Deferred tax assets and liabilities are adjusted
for the effect of changes in tax laws and rates on the date of enactment.
Recent Sales of Unregistered Securities
During the quarter ending December 31, 2003, we did not issue any common or
preferred shares.
Item 7. Financial Statements.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Technology Connections, Inc.
We have audited the accompanying balance sheet of Technology Connections, Inc.
as of December 31, 2003, and the related statements of operations and
stockholders' deficit and cash flows for the years ended December 31, 2003 and
2002. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Technology Connections, Inc. as
of December 31, 2003, and the results of its operations and its cash flows for
the year ended December 31, 2003 and 2002 in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note C, notes to the
financial statements, the Company has experienced losses from operations, has
yet to generate an internal cash flow, has negative working capital, has a
stockholders' deficit and has outstanding and delinquent payables including
payroll taxes as of December 31, 2003, which raises substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regard
to these matters are described in Note C. The financial statements do not
include any adjustments that might result from the outcome of these risks and
uncertainties.
/s/ Perrella & Associates, P.A.
- -----------------------------------
Perrella & Associates, P.A.
Pompano Beach, Florida
April 12, 2004
TECHNOLOGY CONNECTIONS, INC.
BALANCE SHEET
DECEMBER 31, 2003
================================================================================
ASSETS
2003
--------------
CURRENT ASSETS
Cash and Cash Equivalents $ 382
Inventory 3,000
Accounts Receivable, net of allowance for doubtful
accounts of $31,564 7,434
--------------
TOTAL CURRENT ASSETS 10,816
--------------
PROPERTY AND EQUIPMENT
Property and Equipment 33,787
Accumulated Depreciation (9,467)
--------------
Net Property and Equipment 24,320
--------------
TOTAL ASSETS $ 35,136
==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 202,428
Notes Payable 67,400
--------------
TOTAL CURRENT LIABILITIES 269,828
--------------
STOCKHOLDERS' DEFICIT
Preferred Stock ($.001 par value, 5,000,000 authorized:
none issued and outstanding) -
Common Stock ($.001 par value, 100,000,000 shares authorized:
1,347,893 shares issued and outstanding)
1,348
Additional Paid-in-Capital 792,180
Accumulated Deficit (1,028,220)
--------------
TOTAL STOCKHOLDERS' DEFICIT (234,692)
--------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 35,136
==============
The accompanying notes are an integral part of the financial statements
TECHNOLOGY CONNECTIONS, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
================================================================================
2003 2002
---------- ----------
SALES AND COST OF SALES:
Sales $ 44,665 $ 276,445
Cost of Sales 16,166 248,646
---------- ----------
Gross Profit 28,499 27,799
---------- ----------
OPERATING EXPENSES:
Selling, general and administrative 41,267 268,595
Consulting fees 263,456 438,570
---------- ----------
304,723 707,165
---------- ----------
OPERATING LOSS (276,224) (679,366)
OTHER EXPENSE:
Interest Expense 26,220 46,410
---------- ----------
NET LOSS $ (302,444) $ (725,776)
========== ==========
Net Loss Per Common Share
Basic & Fully Diluted $ (0.23) $ (0.65)
========== ==========
Weighted Average Common Shares Outstanding
- Basic and Fully Diluted 1,302,900 1,125,200
========== ==========
The accompanying notes are an integral part of the financial statements
TECHNOLOGY CONNECTIONS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
==========================================================================================================================
Preferred Preferred Common Common Additional Accumulated Total
Shares Shares Shares Stock Paid-in Deficit
$.001 Par $.001 Par Capital
--------- --------- -------- --------- ---------- ----------- ---------
Balances, January 1, 2002 - $ - 992,500 $ 993 $ 61,007 $ (206,382) $(144,382)
Reclassification of Subchapter S
corporation accumulated losses - - - - (206,382) 206,382 -
Issuances of common stock for services - - 254,443 254 469,176 - 469,430
Issuances of common stock for cash - - 10,950 11 60,989 - 61,000
Net loss - - - - - (725,776) (725,776)
--------- --------- -------- --------- ---------- ----------- ---------
Balances, January 1, 2003 - $ - 1,257,893 $ 1,258 $ 384,790 $ (725,776) $(339,728)
Issuances of common stock for services - - 90,000 90 200,910 - 201,000
Foregiveness of stockholders' loans - - - - 206,480 - 206,480
Net loss - - - - - (302,444) (302,444)
--------- --------- -------- --------- ---------- ----------- ---------
Balances, December 31, 2003 - $ - 1,347,893 $ 1,348 $ 792,180 $(1,028,220) $(234,692)
========= ========= ======== ========= ========== =========== =========
The accompanying notes are an integral part of the financial statements
TECHNOLOGY CONNECTIONS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
================================================================================
2003 2002
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (302,444) $ (725,776)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 7,363 6,136
Stock issued for services 201,000 469,430
Loss on disposal of vehicle, net 363 -
Forgiveness of interest on Loans
from Stockholders 12,947 -
Noncash interest on Loans from Stockholders - 4,601
(Increase) decrease in operating assets:
Accounts receivable (3,638) 35,728
Inventory 3,411 (6,411)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (28,788) 122,042
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (109,786) (94,250)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment - (53,759)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES - (53,759)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock - 61,000
Proceeds from stockholder loans 113,125 61,468
Repayments of stockholders loans (6,754) (13,488)
Borrowings on notes payable 2,400 50,357
Repayments of notes payable (3,060) (8,061)
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 105,711 151,276
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (4,075) 3,267
CASH AND CASH EQUIVALENTS:
Beginning of period 4,457 1,190
End of period $ 382 $ 4,457
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for interest $ 161 $ 19,712
Decrease in note payable bank due
to repossessed vehicle $ 30,158 $ -
The accompanying notes are an integral part of the financial statements
TECHNOLOGY CONNECTIONS, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002
NOTE A - NATURE OF THE BUSINESS
- -------------------------------------
THE ORGANIZATION AND OPERATIONS - Technology Connections, Inc. (the "Company")
was organized under the laws of the State of North Carolina on May 18, 2001.
The Company provides technical equipment installation and structured security
wiring capacities for homes and offices. The Company's sales are performed
primarily under fixed price contracts and individual orders that vary in
completion time, generally less than two weeks.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------------
CASH AND CASH EQUIVALENTS - For purposes of the Statement of Cash Flows, the
Company considers liquid investments with an original maturity of three months
or less to be cash equivalents.
INVENTORY - Inventory is valued at the lower of cost (which approximates
computation on a first-in first out basis) or market (net realizable value or
replacement cost). Inventory consists of finished goods and installation
supplies.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Fixed asset
additions are capitalized, while repair and maintenance costs are charged to
operations as incurred. Depreciation is provided utilizing the straight-line
method over the estimated useful lives of the related assets, which range from
five to seven years.
IMPAIRMENT OF LONG-LIVED ASSETS - The Company evaluates the recoverability of
its property and equipment and other assets in accordance with Statement of
Financial Accounting Standards No.144, "Accounting for the Impairment or
Disposal of Long-Lived Assets"("SFAS 144"). SFAS 144 requires recognition of
impairment of long-lived assets in the event the net book value of such assets
exceeds the estimated future undiscounted cash flows attributable to such assets
or the business to which such assets relate. SFAS 144 excludes goodwill and
intangible assets. When an asset exceeds its expected cash flows, it is
considered to be impaired and is written down to fair value, which is determined
based on either discounted future cash flows or appraised values. The
provisions of SFAS 144 are effective for financial statements issued for fiscal
years beginning after December 15, 2001. The Company adopted the statement on
January 1, 2002. No impairments were recognized during the years ended December
31, 2003 and 2002.
REVENUE RECOGNITION - The Company obtains written purchase orders and contracts
from its customers for its products and services. Revenue is recognized when the
related service revenue is complete, provided collection of the related
receivable is reasonably assured. The Company performs ongoing credit
evaluations of its customers and establishes a reserve for those accounts deemed
uncollectible. Bad debt expense is $0 for 2003 and $31,564 for 2002.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- -----------------------------------------------------------------------
ADVERTISING COSTS - Advertising costs are expensed as incurred. The Company has
not incurred any direct-response advertising costs from inception.
INCOME TAXES - The Company elected to be an "S" Corporation under the Internal
Revenue Code until January 1, 2002, the Company terminated its' S corporation
election with the intent to offer its shares in an initial public offering.
Prior to this date all taxable income or losses flowed through to the
stockholders.
As of January 1, 2002 the Company accounts for income taxes according to
Statement of Financial Accounting Standard No. 109 "Accounting for Income
Taxes", which requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for differences between the financial and tax basis of assets
and liabilities that will result in taxable or deductible amounts in the future,
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that, some or the entire deferred tax asset will not be
realized.
LOSS PER SHARE - Statement of Financial Accounting Standard ("SFAS") No.128
requires dual presentation of basic and diluted EPS with a reconciliation of the
numerator and denominator of the EPS computations. Basic earnings per share
amounts are based on the weighted average shares of common stock outstanding. If
applicable, diluted earnings per share would assume the conversion, exercise, or
issuance of all potential common stock instruments such as options, warrants and
convertible securities, unless the effect is to reduce a loss or increase
earnings per share. Accordingly, this presentation has been adopted for the
years presented. There were no adjustments required to net loss for the years
presented in the computation of diluted earnings per share.
MANAGEMENT'S USE OF ESTIMATES - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosures of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- -----------------------------------------------------------------------
RECENT ACCOUNTING PRONOUNCEMENTS
In April of 2002, Statement of Financial Accounting Standards ("SFAS") No. 145
was issued which rescinded SFAS Statements No. 4, 44 and 64, amended No. 13 and
contained technical corrections. As a result of SFAS 145, gains and losses from
extinguishments of debt will be classified as extraordinary items only if they
meet the criteria in APB Opinion No. 30, that they are unusual and infrequent
and not part of an entity's recurring operations. The Company does not expect
SFAS No. 145 to have a material effect on its financial condition or cash flows.
In July 2002, the FASB issued SFAS 146, which addresses significant issues
regarding the recognition, measurement, and reporting of costs that are
associated with exit and disposal activities, including restructuring activities
that are currently accounted for pursuant to the guidance that the Emerging
Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (Including Certain Costs Incurred in a Restructuring)". SFAS 146
revises the accounting for certain lease termination costs and employee
termination benefits, which are generally recognized in connection with
restructuring charges. The provisions of SFAS 146 are effective for exit or
disposal activities that are initiated after December 31, 2002. The
implementation of the pronouncement did not have a material effect on our
financial condition or cash flow.
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46, ("FIN 46') "Consolidation of Variable Interest Entities"
which changes the criteria by which one company includes another entity in its
consolidated financial statements. FIN 46 requires a variable interest entity to
be consolidated by a company if that company is subject to a majority of the
risk of loss from the variable interest entity's activities or entitled to
receive a majority of the entity's residual returns or both. The consolidation
requirements of FIN 46 apply immediately to variable interest entities created
after January 31, 2003, and apply in the first fiscal period beginning after
June 15, 2003, for variable interest entities created prior to February 1, 2003.
The implementation of the pronouncement did not have a material effect on our
financial condition or cash flows.
In May 2003, the FASE issued Statement of Financial Accounting Standard ("SFAS")
No. 150, 'Accounting for Certain Financial Instruments with Characteristics of
both Liabilities and Equity'. The SFAS No.150 improves the accounting for
certain financial instruments that, under previous guidance, issuers could
account for as equity and requires that those instruments be classified as
liabilities in statements of financial position. In addition to its requirements
for the classification and measurement of financial instruments in its scope,
SFAS No. 150 also requires disclosures about alternative ways of settling the
instruments and
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- -----------------------------------------------------------------------
the capital structure of entities, all of whose shares are mandatory redeemable.
Most of the guidance in SFAS No. 150 is effective for all financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after September 15, 2003. The
implementation of the pronouncement did not have a material effect on our
financial condition or cash flows.
NOTE C - LIQUIDITY AND GOING CONCERN
- ------------------------------------------
The Company has experienced losses from operations of $302,444 and $725,776
during the years ended December 31, 2003 and 2002, respectively, has yet to
generate an internal cash flow, has negative working capital, has a
stockholders' deficit and has outstanding and delinquent payables including
payroll taxes as of December 31, 2003. These factors raise substantial doubt
about the Company's ability to continue as a going concern. The Company's
continued existence is dependent upon its ability to resolve its liquidity
problems, principally by obtaining equity funding, increasing sales and
achieving profitable operations. In regard to management's plans in these
matters, the Company entered into a "Merger Agreement" dated February 19, 2004,
whereby the Company is expected that its operations will become a business
segment in the merged entity and that certain liabilities will be paid by the
merged entity (See Note J Subsequent Events).
The eventual outcome, however, of management's plans cannot be ascertained with
any degree of certainty. The accompanying financial statements do not include
any adjustments that might result from the outcome of these risks and
uncertainties.
NOTE D - PROPERTY AND EQUIPMENT
- ------------------------------------
Property and equipment consisted of the following as of December 31, 2003:
Office furniture $ 619
Office equipment 33,168
Accumulated depreciation (9,467)
-----------
Net property and equipment $ 24,320
===========
Depreciation expense for the years ended December 31, 2003 and 2002 was $7,363
and $6,136 respectively.
NOTE E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
- -----------------------------------------------------
Accounts payable and accrued expenses consist of the following on December 31,
2003:
Accounts payable $ 137,692
Withholding taxes payable 51,297
Accrued interest 13,439
-----------
$ 202,428
===========
NOTE F - NOTES PAYABLE
- --------------------------
Notes payable at December 31, 2003 includes an unsecured note payable for
$50,000 to an unrelated individual dated April 12, 2001. The note bears interest
at the rate of 10% per annum and is due April 2004. As of December 31, 2003 the
note has accumulated accrued interest of $12,395 that is included in accrued
expenses.
The second note is an unsecured non-interest bearing note payable due on demand
from an unrelated individual dated December 23, 2002. The Company has received
various advances on the note and at December 31, 2003, the note balance is
$17,400 with imputed interest of $1,044 included in accrued expenses.
On June 12, 2002, the Company purchased a vehicle that is secured with a note in
the amount of $34,151 at 4.9% interest per annum payable over 60 months through
July 12, 2007. During 2003, the Company returned the vehicle to the lender and
was later sold at auction for a net loss to the Company of $363.
NOTE G - EQUITY
- ------------------
On January 16, 2002, the Company's Board of Directors amended its articles of
incorporation to increase the amount of authorized common stock to 100,000,000
shares, change its common stock par value to $.001 per share, and authorized a
20,000 for 1 stock split on the common stock. All per share amounts have been
restated retroactive. In addition, the Board of Directors authorized 5,000,000
shares of preferred stock to be issued.
In February 2002, the Company issued 10,950 shares of commons stock for $61,000
to accredited investors in a private placement.
NOTE G - EQUITY (CONTINUED)
- -------------------------------
During the year ended December 31, 2002, the Company issued 247,500 common
shares, valued at $400,000, as payment for professional services related in the
initial public offering and 6,943 common shares, valued at $69,430 to
subcontractors for services rendered. The stock was expensed as the fair value
for 2002 services.
In January and February 2003, The Company issued 90,000 shares of common stock
at a fair value of $201,000, as payment for consulting and professional
services. The stock was valued expensed as the fair value for 2003 services.
On April 1, 2003, the Company's Board of Directors approved a one-for-twenty
reverse stock split of the Company's common stock. As of the record date, there
were 26,957,860 shares of common stock outstanding. Each twenty shares of common
stock were converted into one share, resulting in 1,347,893 common shares
outstanding at December 31, 2003.
The loans payable to stockholders at December 31, 2003 and 2002 consisted of
unsecured notes payable to the Company's President and majority stockholder and
its Vice President. As of December 31, 2003, the amounts due on these loans were
$206,480 and included accrued interest of $12,947. In contemplation of the
impending merger (see Note J), the shareholders agreed to forgive their loans to
the Company as of December 31, 2003 whereby the loan balances are transferred to
equity as additional paid-in-capital.
NOTE H - INCOME TAXES
- -------------------------
The Company has approximately $703,000 of federal and state net operating losses
available that expire in various years through the year 2018.
Due to operating losses, there is no provision for current federal or state
income taxes for the years ended December 31, 2003 and 2002.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for federal and state income tax purposes.
The Company's deferred tax asset at December 31, 2003 consists of net operating
loss carry forwards calculated using federal and state effective tax rates
equating to approximately $118,000 less a valuation allowance in the amount of
approximately $118,000. Because of the Company's lack of earnings history, the
deferred tax asset has been fully offset by a valuation allowance.
NOTE H - INCOME TAXES (CONTINUED)
- --------------------------------------
The Company's total deferred tax asset as of December 31, 2003 is as follows:
Net operating loss carry forwards $ 118,000
Valuation allowance (118,000)
-----------
Net deferred tax asset $ --
===========
The reconciliation of income taxes computed at the federal statutory income tax
rate to total income taxes for the years ended December 31, 2003 and 2002 is as
follows:
2003 2002
---- ----
Income tax computed at the federal statutory rate 34% 34%
State income taxes, net of federal tax benefit 5% 5%
---- ----
39% 39%
Less Valuation allowance (39%) (39%)
---- ----
Total deferred tax asset 0% 0%
==== ====
NOTE I - COMMITMENTS AND CONTINGENCIES
- -------------------------------------------
On April 15, 2002, the Company entered into a lease agreement for its executive
offices under a non-cancelable operating lease that expires on April 30, 2007.
Rent expense for the years ended December 31, 2003 and 2002, was $10,685 and
$29,120, respectively. During 2003, the Company defaulted on the lease and the
Lessor waived the collection of past rent in the amount of $22,748 and took
possession of the property.
At December 31, 2003, the Company faces two lawsuits filed by a vendor and a
consultant. The vendor suit is for an alleged illegal fax blast. The consultant
suit is for a claim for approximately $18,000 in unpaid fees. It is the
Company's position that the consultant did not perform their required services
and that the Company will counter sue should the suit continue. The Company has
not accrued for these lawsuits filed and the unfavorable outcome of the
lawsuits, in the opinion of management and legal counsel, are remote under
Statement of Financial Accounting Standards No. 5.
NOTE J - SUBSEQUENT EVENTS
- ------------------------------
During January, February and March 2004, the Company issued 805,008 shares of
common stock to various consultants for services.
On February 19, 2004, the Company executed an Agreement and Plan of Merger (the
"Merger Agreement"), pursuant to which an unrelated company will merge with and
into the Company, with the unrelated company's stockholders receiving 27,288,732
shares of common stock and 1,000,000 shares of Class A Convertible Preferred.
The Company's stock will be exchanged for the shares of the unrelated company.
In addition, pursuant to this agreement, the Company agreed to change its
corporate name from "Technology Connections, Inc." to "HouseRaising, Inc." prior
to the closing. The merger closing will be on the second business day following
satisfaction or waiver of all conditions to the obligations of the Parties as
stated in the Merger Agreement. As of April 12, 2004, the merger has not closed.
The Company's accounts payable and notes payable to vendors, lessors,
subcontractors, governmental entities and other creditors shall not exceed
$200,000 that is to be paid by the merged entity and that certain liabilities
will be paid by the merged entity.
The shares of Class A Convertible Preferred Stock issued in the Merger are
convertible into ten (10) shares of fully paid and non-assessable shares of
common stock five (5) years after the date of issuance, and they have a class
vote to approve or disapprove any merger, sale of assets, combination or
reorganization involving the Company, or other fundamental corporate
transaction involving the Company. In addition, each share of Class A
Convertible Preferred Stock issued in the Merger is entitled to ten (10) votes
per share on all matters on which the common stock votes on upon issuance. The
Company's Board of Directors agreed to take action to designate the Class A
Convertible Preferred Stock under North Carolina law between the signing and
closing of the Merger.
On January 27, 2004, the Company adopted a non-qualified stock compensation plan
to register 400,000 shares of its common stock for the offer and sale to
employees, directors, officers, consultants, advisors and other persons
associated with the Company. The common stock is not subject to any restriction
on transferability.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None
ITEM 8a. Controls and Procedures
Quarterly Evaluation of Controls. As of the end of the period covered by this
annual report on Form 10-KSB, we evaluated the effectiveness of the design and
operation of (i) our disclosure controls and procedures ("Disclosure Controls"),
and (ii) our internal control over financial reporting ("Internal Controls").
This evaluation ("Evaluation") was performed by our President and Chief
Executive Officer, Kevin G. Kyzer ("CEO"), and by Kevin G. Kyzer who is also our
Chief Financial Officer ("CFO"). In this section, we present the conclusions of
our CEO and CFO based on and as of the date of the Evaluation, (i) with respect
to the effectiveness of our Disclosure Controls, and (ii) with respect to any
change in our Internal Controls that occurred during the most recent fiscal
quarter that has materially affected, or is reasonably likely to materially
affect our Internal Controls.
CEO and CFO Certifications. Attached to this annual report, as Exhibits 31.1
and 31.2, are certain certifications of the CEO and CFO, which are required in
accordance with the Exchange Act and the Commission's rules implementing such
section (the "Rule 13a-14(a)/15d-14(a) Certifications"). This section of the
annual report contains the information concerning the Evaluation referred to in
the Rule 13a-14(a)/15d-14(a) Certifications. This information should be read in
conjunction with the Rule 13a-14(a)/15d-14(a) Certifications for a more complete
understanding of the topic presented.
Disclosure Controls and Internal Controls. Disclosure Controls are procedures
designed with the objective of ensuring that information required to be
disclosed in our reports filed with the Commission under the Exchange Act, such
as this annual report, is recorded, processed, summarized and reported within
the time period specified in the Commission's rules and forms. Disclosure
Controls are also designed with the objective of ensuring that material
information relating to us is made known to the CEO and the CFO by others,
particularly during the period in which the applicable report is being prepared.
Internal Controls, on the other hand, are procedures which are designed with the
objective of providing reasonable assurance that (i) our transactions are
properly authorized, (ii) the Company's assets are safeguarded against
unauthorized or improper use, and (iii) our transactions are properly recorded
and reported, all to permit the preparation of complete and accurate financial
statements in conformity with accounting principals generally accepted in the
United States.
Limitations on the Effectiveness of Controls. Our management does not expect
that our Disclosure Controls or our Internal Controls will prevent all error and
all fraud. A control system, no matter how well developed and operated, can
provide only reasonable, but not absolute assurance that the objectives of the
control system are met. Further, the design of the control system must reflect
the fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance
that all control issues and instances so of fraud, if any, within the Company
have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. Additionally, controls can be circumvented
by the individual acts of some persons, by collusion of two or more people, or
by management override of the control. The design of a system of controls also
is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated objectives under all potential future conditions. Over time, control may
become inadequate because of changes in conditions, or because the degree of
compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to
error or fraud may occur and not be detected.
Scope of the Evaluation. The CEO and CFO's evaluation of our Disclosure Controls
and Internal Controls included a review of the controls' (i) objectives, (ii)
design, (iii) implementation, and (iv) the effect of the controls on the
information generated for use in this annual report. In the course of the
Evaluation, the CEO and CFO sought to identify data errors, control problems,
acts of fraud, and they sought to confirm that appropriate corrective action,
including process improvements, was being undertaken. This type of evaluation is
done on a quarterly basis so that the conclusions concerning the effectiveness
of our controls can be reported in our quarterly reports on Form 10-QSB and
annual reports on Form 10-KSB. The overall goals of these various evaluation
activities are to monitor our Disclosure Controls and our Internal Controls, and
to make modifications if and as necessary. Our external auditors also review
Internal Controls in connection with their audit and review activities. Our
intent in this regard is that the Disclosure Controls and the Internal Controls
will be maintained as dynamic systems that change (including improvements and
corrections) as conditions warrant.
Among other matters, we sought in our Evaluation to determine whether there were
any significant deficiencies or material weaknesses in our Internal Controls,
which are reasonably likely to adversely affect our ability to record, process,
summarize and report financial information, or whether we had identified any
acts of fraud, whether or not material, involving management or other employees
who have a significant role in our Internal Controls. This information was
important for both the Evaluation, generally, and because the Rule
13a-14(a)/15d-14(a) Certifications, Item 5, require that the CEO and CFO
disclose that information to our Board (audit committee), and to our independent
auditors, and to report on related matters in this section of the annual report.
In the professional auditing literature, "significant deficiencies" are referred
to as "reportable conditions". These are control issues that could have
significant adverse affect on the ability to record, process, summarize and
report financial data in the financial statements. A "material weakness" is
defined in the auditing literature as a particularly serious reportable
condition where the internal control does not reduce, to a relatively low level,
the risk that misstatement cause by error or fraud may occur in amounts that
would be material in relation to the financial statements and not be detected
within a timely period by employee in the normal course of performing their
assigned functions. We also sought to deal with other controls matters in the
Evaluation, and in each case, if a problem was identified, we considered what
revisions, improvements and/or corrections to make in accordance with our
ongoing procedures.
Conclusions. Based upon the Evaluation, the Company's CEO and CFO have
concluded that, subject to the limitations noted above, our Disclosure Controls
are effective to ensure that material information relating to the Company is
made known to management, including the CEO and CFO, particularly during the
period when our periodic reports are being prepared, and that our Internal
Controls are effective to provide reasonable assurance that our financial
statements are fairly presented inconformity with accounting principals
generally accepted in the United States. Additionally, there has been no change
in our Internal Controls that occurred during our most recent fiscal quarter
that has materially affected, or is reasonably likely to affect, our Internal
Controls.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
Directors and Executive Officers.
Our Bylaws provide that we must have a minimum and maximum of two
directors. Each director will serve until our next annual shareholder meeting,
to be held on the 20th day of March of each year. Directors are elected for
one-year terms. Our officers may be elected by our Board of Directors at any
regular or special meeting of the Board of Directors. Vacancies may be filled
by a majority vote of the remaining directors then in office. Our directors and
executive officers are as follows:
Name Age Position
- ----------------- --- --------------------------------------
Kevin G. Kyzer 33 President and Director
- ----------------- --- --------------------------------------
Stacey A. Kyzer 32 Vice President, Secretary and Director
- ----------------- --- --------------------------------------
Kevin G. Kyzer has been our President and a Director since our incorporation on
May 23, 2001. He will serve as a director until our next annual shareholder
meeting, or until a successor is elected who accepts the position. Mr. Kyzer's
experience as a technical officer working in technical fields over the last five
years consists of the following.
Mr. Kyzer was employed by Lifestyle Technologies as Chief Technical Officer from
February 2000 until February 2001. As Chief Technical Officer, he maintained and
implemented communications systems, including computer and telecommunications
for all office locations. He advised the Board of Lifestyle Technologies on all
technology aspects of the business. The average staff size that Mr. Kyzer
supervised was three persons.
Mr. Kyzer was employed by Pilot Home Technologies as Chief Technical
Officer from March 1999 until February 2000. As Chief Technical Officer, he:
Designed and implemented company telecom and data network.
Advised other members of management on planning and business strategy.
Created job cost budgets and supervised budget performance.
Performed research and development for new products and services.
Mr. Kyzer owned and operated a computer consultant business known as Data
Resources, a sole proprietorship, from April 1997 until March 1999. During this
time he advised business on network solutions, implemented telecom and data
networks for small business and sold small business computer hardware products
on a retail level.
Mr. Kyzer was employed by CompUSA as an Account Executive from October 1996 to
April 1997. During this time he acted as liaison between CompUSA and Siemens to
facilitate over $10 million in annual computer hardware and software purchase
orders.
Stacey A. Kyzer has been our Vice President, Secretary and Director since our
incorporation on June 23, 2001. She will serve as a director until our next
annual shareholder meeting or until a successor is elected who accepts the
position.
Ms. Kyzer's experience over the last five years consists of the following.
Ms. Kyzer was employed as a Pharmacist by Walgreen's from January 1996 to the
present, and as a Pharmacy Manager by Walgreen's from August 1999 to April
2001.
Ms. Kyzer has been employed as a Vice President, Secretary and Director of our
Company from May 2001 to the present.
Family Relationships
Kevin G. Kyzer, our President, and Stacey A. Kyzer, our Vice President, are
husband and wife. There are no other family relationships.
Section 16(a) Beneficial Ownership Reporting Compliance
Based on information furnished to Registrant, no officer, director, or ten
percent shareholder failed to file on a timely basis reports on Forms 3, 4, or 5
during the most recent two fiscal years, except for Kevin Kyzer, President and
Director, and Stacey Kyzer, Vice-President and Director. Each director failed to
file the required Form 3's after their respective acquisitions of common stock
registered under Section 12 of the Exchange Act of 1934. In addition, Mr. Kyzer
failed to file the required Form 4's in connection with subsequent sales of our
common stock. We are reviewing this situation and will make the necessary
filings to be in compliance with Section 16(a) of the Exchange Act of 1934.
Audit Committee Financial Expert
The Company does not have a separately designated standing audit committee.
Pursuant to Section 3(a)(58)(B) of the Exchange Act, the entire Board of
Directors acts as an audit committee for the purpose of overseeing the
accounting and financial reporting processes, and our audits of the financial
statements. The Commission recently adopted new regulations relating to audit
committee composition and functions, including disclosure requirements relating
to the presence of an "audit committee financial expert" serving on its audit
committee. In connection with these new requirements, our Board of Directors
examined the Commission's definition of "audit committee financial expert" and
concluded that we do not currently have a person that qualifies as such an
expert. Presently, there are only four (4) directors serving on our Board, and
we are not in a position at this time to attract, retain and compensate
additional directors in order to acquire a director who qualifies as an "audit
committee financial expert", but we intend to retain an additional director who
will qualify as such an expert, as soon as reasonably practicable. While neither
of our current directors meets the qualifications of an "audit committee
financial expert", each of our directors, by virtue of his past employment
experience, has considerable knowledge of financial statements, finance, and
accounting, and has significant employment experience involving financial
oversight responsibilities. Accordingly, we believe that our current directors
capably fulfill the duties and responsibilities of an audit committee in the
absence of such an expert.
Code of Ethics
We are presently working with our legal counsel to prepare and adopt a code of
ethics that applies to our principal chief executive officer, principal
financial officer, principal accounting officer or controller, or persons
performing similar functions (the "Code of Ethics"). A draft of the Code of
Ethics is attached hereto as Exhibit 14.1. The Code of Ethics is being designed
with the intent to deter wrongdoing, and to promote the following:
- - Honest and ethical conduct, including the ethical handling of actual or
apparent conflicts if interest between personal and professional
relationships
- - Full, fair, accurate, timely and understandable disclosure in reports and
documents that a small business issuer files with, or submits to, the
Commission and in other public communications made by the small business
issuer
- - Compliance with applicable governmental laws, rules and regulations
- - The prompt internal reporting of violations of the code to an appropriate
person or persons identified in the code
- - Accountability for adherence to the code
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, all executive officers, directors, and
each person who is the beneficial owner of more than 10% of the common stock of
a company that files reports pursuant to Section 12 of the Exchange Act, are
required to report the ownership of such common stock, options, and stock
appreciation rights (other than certain cash-only rights) and any changes in
that ownership with the Commission. Specific due dates for these reports have
been established, and the Company is required to report, in this Form 10-KSB,
any failure to comply therewith during the fiscal year ended December 2003. We
believe that all of these filing requirements were satisfied by our executive
officers, directors and by the beneficial owners of more than 10% of our common
stock. In making this statement, we have relied solely on copies of any
reporting forms received by it, and upon any written representations received
from reporting persons that no Form 5 (Annual Statement of Changes in Beneficial
Ownership) was required to be filed under applicable rules of the Commission.
Legal Proceedings
At December 31, 2003, we face two lawsuits filed by a vendor and a consultant.
The vendor suit is for an alleged illegal fax blast. The consultant suit is for
a claim for approximately $18,000 in unpaid fees. It is our position that the
consultant did not perform their required services and that we will counter sue
should the suit continue. We not accrued for these lawsuits filed and the
unfavorable outcome of the lawsuits, in the opinion of management and legal
counsel, are remote under Statement of Financial Accounting Standards No. 5.
Our officer, Kevin G. Kyzer, received a personal judgment against him during the
year ended December 31, 2003. This was for non-payment of a loan and is filed in
Mecklenburg County, North Carolina. No other officer, director, or persons
nominated for such positions, promoter or significant employee has been involved
in legal proceedings that would be material to an evaluation of our management.
Item 10. Executive Compensation.
Summary Compensation Table As of December 31, 2003
---------------------------------------------------------
Annual Compensation Long Term Compensation
------------------------------- ----------------------
Other Annual Restricted
Name and Principal Position Year Salary Bonus Compensation Stock Award(s)
- --------------------------- ---- ------ ----- ------------ ---------------------
Kevin G. Kyzer
President 2002 $ 0 0 0 0
President 2003 $ 0 0 0 0
Stacy A. Kyzer
Vice President 2002 $ 0 0 0 0
Vice President 2003 $ 0 0 0 0
We have not entered into any other employment agreements with our employees,
Officers or Directors. We have no standard arrangements under which we will
compensate our directors for their services provided to us.
Board Compensation
Our board does not receive cash compensation for services as directors.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth the ownership, as of December 31, 2003, of our
common stock by each person known by us to be the beneficial owner of more than
5% of our outstanding common stock, our directors, and our executive officers
and directors as a group. To the best of our knowledge, the persons named have
sole voting and investment power with respect to such shares, except as
otherwise noted. There are not any pending or anticipated arrangements that may
cause a change in control.
Security Ownership of Officers and Directors.
Title of Current
Class Name and Address # of Shares Ownership % Owned
- --------- ----------------------- ------------- ---------- --------
Common Kevin G. Kyzer
10812 Kenderly Ct.
Charlotte, N.C. 28277 426,350 Direct 19.8%
- --------- ----------------------- ------------- ---------- --------
Common Stacey A. Kyzer
10812 Kenderly Ct.
Charlotte, N.C. 28277 392,000 Direct 18.2%
- --------- ----------------------- ------------- ---------- --------
This table is based upon information derived from our stock records. Unless
otherwise indicated in the footnotes to this table and subject to community
property laws where applicable, we believe that each of the stockholders named
in this table has sole or shared voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages are based upon
2,152,893 shares of common stock outstanding as of April 20, 2004.
On February 19, 2004, we executed an Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which HouseRaising will merge with and into us, with
the HouseRaising stockholders receiving in the aggregate 26,980,000 shares
of common stock and 1,000,000 shares of Class A Convertible Preferred Stock of
us in exchange for their shares of HouseRaising. In addition, pursuant to
the Merger Agreement, we have agreed to change our corporate name from
"Technology Connections, Inc." to HouseRaising, Inc." prior to the closing.
The shares of Class A Convertible Preferred Stock issued in the Merger are
convertible into ten (10) shares of fully paid and non-assessable shares of
common stock five (5) years after the date of issuance, and they have a class
vote to approve or disapprove any merger, sale of assets, combination or
reorganization involving the Registrant, or other fundamental corporate
transaction involving the Registrant. In addition, each share of Class A
Convertible Preferred Stock issued in the Merger is entitled to ten (10) votes
per share on all matters on which the common stock votes on upon issuance. Our
Board of Directors agreed to take action to designate the Class A Convertible
Preferred Stock under North Carolina law between the signing and closing of
the Merger. An executed copy of the Merger Agreement, together with Exhibit A
thereto containing the Class A Convertible Preferred Stock designation, are
incorporated by reference as they are filed as Exhibits 10(a) and 10(b) in a
Form 8-K filed last month.
The Closing under the Merger Agreement will occur on the second day after the
satisfaction or waiver of all conditions precedent to the obligations of the
parties to consummate the transactions contemplated by the Merger Agreement. The
Merger is conditioned on, among other things, us and HouseRaising obtaining
the written consent of a majority of their shareholders to approve the
transactions contemplated by the Merger Agreement. Our Board of Directors and a
majority of the Shareholders of us and of HouseRaising have executed such
consents and thereby approved the Merger Agreement and the Merger.
In addition to filing this Current Report on Form 8-K, we contemplate filing
with the Commission, prior to the Closing, an Information Statement on
Schedule 14C, disclosing to its shareholders the details of the Merger and the
proposed filing with the Secretary of State of North Carolina of a Certificate
of Designation for the Class A Convertible Preferred Stock.
Item 12. Certain Relationships and Related Transactions.
In January and February 2003, we issued 90,000 shares of common stock at a fair
value of $201,000, as payment for consulting and professional services. The
stock was valued expensed as the fair value for 2003 services.
On April 1, 2003, our Board of Directors approved a one-for-twenty reverse stock
split of our common stock. As of that record date, there were 26,957,860 shares
of common stock outstanding. Each twenty shares of common stock were converted
into one share, resulting in 1,347,893 common shares outstanding at December 31,
2003.
The loans payable to stockholders at December 31, 2003 and 2002 consisted of
unsecured notes payable to our President and majority stockholder and ours Vice
President. As of December 31, 2003, the amounts due on these loans were $206,480
and included accrued interest of $12,947. In contemplation of the impending
merger (see Note K of the audited financial statements herein), the shareholders
agreed to forgive their loans to us as of December 31, 2003 whereby the loan
balances are transferred to equity as additional paid-in-capital.
Item 13. Exhibits and Reports on Form 8-K.
(a) List of documents filed as part of this Report:
Our financial statements are included in Part II, Item 7:
Independent Auditors' Report 14
Balance Sheet-December 31, 2003 15-16
Statements of Operations - years ended
December 31, 2003 and 2002 17-18
Statements of Cash Flows - years ended
December 31, 2003 and 2002 19-20
Statements of Stockholders' Deficit - years ended
December 31, 2003 and 2002 21
Notes to Financial Statements 22-28
(b) Exhibits:
The following exhibits listed are filed as part of this Report:
Articles of incorporation, bylaws and related amendments are incorporated by
reference to Exhibit No. 1 of Form 10-SB filed November 1999.
14.1. Code of Ethics
31.1. Rule 13a-14(a)/15d-14(a) Certifications of Chief Executive Officer
31.2. Rule 13a-14(a)/15d-14(a) Certifications of Chief Financial Officer
32.1. Section 1350 Certifications of Chief Executive Officer
32.1. Section 1350 Certifications of Chief Financial Officer
Item 14. Principal Accountant Fees and Services.
Fees Billed For Audit and Non-Audit Services
The following table represents the aggregate fees billed for professional audit
services rendered to the independent auditor, Perrella & Associates,
("Perrella") for our audit of the annual financial statements for the years
ended December 31, 2002 and 2003, and all fees billed for other services
rendered by Perrella during those periods.
Year Ended December 31 2003 2002
- ------------------------- -------- --------
Perrella Perrella
-------- --------
Audit Fees (1) $ 10,000 (2) $ 10,000 (3)
Audit-Related Fees (2) -- --
Tax Fees (3) -- --
All Other Fees (4) -- --
Total Accounting Fees and Services $ 10,000 $ 10,000
(1) Audit Fees. These are fees for professional services for our audit of the
annual financial statements, and for the review of the financial statements
included in our filings on Form 10-QSB, and for services that are normally
provided in connection with statutory and regulatory filings or
engagements.
(2) Audit-Related Fees. These are fees for the assurance and related services
reasonably related to the performance of the audit or the review of our
financial statements.
(3) Tax Fees. These are fees for professional services with respect to tax
compliance, tax advice, and tax planning.
(4) All Other Fees. These are fees for permissible work that does not fall
within any of the other fee categories, i.e., Audit Fees, Audit-Related
Fees, or Tax Fees.
Pre-Approval Policy For Audit and Non-Audit Services
We do not have a standing audit committee, and the full Board performs all
functions of an audit committee, including the pre-approval of all audit and
non-audit services before we engage an accountant. All of the services rendered
to the Company by Perrella were pre-approved by our Board of Directors.
We are presently working with our legal counsel to establish formal pre-approval
policies and procedures for future engagements of our accountants. The new
policies and procedures will be detailed as to the particular service, will
require that the Board or an audit committee thereof be informed of each
service, and will prohibit the delegation of pre-approval responsibilities to
management. It is currently anticipated that our new policy will provide (i) for
an annual pre-approval, by the Board or audit committee, of all audit,
audit-related and non-audit services proposed to be rendered by the independent
auditor for the fiscal year, as specifically described in the auditor's
engagement letter, and (ii) that additional engagements of the auditor, which
were not approved in the annual pre-approval process, and engagements that are
anticipated to exceed previously approved thresholds, will be presented on a
case-by-case basis, by the President or Controller, for pre-approval by the
Board or audit committee, before management engages the auditors for any such
purposes. The new policy and procedures may authorize the Board or audit
committee to delegate, to one or more of its members, the authority to
pre-approve certain permitted services, provided that the estimated fee for any
such service does not exceed a specified dollar amount (to be determined). All
pre-approvals shall be contingent on a finding, by the Board, audit committee,
or delegate, as the case may be, that the provision of the proposed services is
compatible with the maintenance of the auditor's independence in the conduct of
its auditing functions. In no event shall any non-audit related service be
approved that would result in the independent auditor no longer being considered
independent under the applicable rules and regulations of the Securities and
Exchange Commission.
--Signature Page Follows--
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Title Name Date Signature
Principal Executive Officer Kevin Kyzer April 20, 2004 /s/ Kevin Kyzer
Principal Accounting Officer Kevin Kyzer April 20, 2004 /s/ Kevin Kyzer
Principal Financial Officer Kevin Kyzer April 20, 2004 /s/ Kevin Kyzer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
date indicated.
SIGNATURE NAME TITLE DATE
/s/ Kevin Kyzer Kevin Kyzer Director April 20, 2004
/s/ Stacey Kyzer Stacey Kyzer Director April 20, 2004
EXHIBIT 14.1
CODE OF ETHICS
OF
TECHNOLOGY CONNECTIONS, INC.
I. OBJECTIVES
Technology Connections, Inc. (the "Company") is committed to the highest
level of ethical behavior. The Company's business success depends upon the
reputation of the Company and its directors, officer and employees to perform
with the highest level of integrity and principled business conduct.
This Code of Ethics ("Code") applies to all directors, officers and
employees of the Company, including the Company's principal executive officer
and principal financial officer, (collectively, the "Covered Persons"). This
Code is designed to deter wrongdoing and to promote all of the following:
- - honest and ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships
- - full, fair, accurate, timely, and understandable disclosure in reports and
documents that the Company files with, or submits to, the Securities and
Exchange Commission (the "Commission"), and in other public communications
made by the Company
- - compliance with applicable governmental laws, rules and regulations;
- - the prompt internal reporting to an appropriate person or persons
identified herein for receiving violations of this Code
- - accountability for adherence to this Code.
Each Covered Person must conduct himself or herself in accordance with this
Code, and must seek to avoid even the appearance of improper behavior.
This Code is not intended to cover every applicable law, or to provide
answers to all questions that might arise; for such, the Company relies on each
person's sense of what is right, including a sense of when it is appropriate to
seek guidance from others on an appropriate course of conduct.
II. HONEST AND ETHICAL CONDUCT
Each Covered Person must always conduct himself or herself in an honest and
ethical manner. Each Covered Person must act with the highest standards of
personal and professional integrity and must not tolerate others who attempt to
deceive or evade responsibility for actions. Honest and ethical conduct must be
a driving force in every decision made by a Covered Person while performing his
or her duties for the Company. When in doubt as to whether an action is honest
and ethical, each Covered Person shall seek advice from his or her immediate
supervisor or senior management, as appropriate.
III. CONFLICTS OF INTEREST
The term "conflict of interest" refers to any circumstance that would cast
doubt on a Covered Person's ability to act objectively when representing the
Company's interest. Covered Persons should not use their position or
association with the Company for their own or their family's personal gain, and
should avoid situations in which their personal interests (or those of their
family) conflict or overlap, or appear to conflict or overlap, with the
Company's best interests.
The following are examples of activities that give rise to a conflict of
interest. These examples do not in any way limit the general scope of the
Company's policy regarding conflicts of interest.
- - Where a Covered Person's association with (or financial interest in)
another person or entity would reasonably be expected to interfere with the
Covered Person's independent judgment in the Company's best interest, that
association or financial interest creates a conflict of interest.
- - The holding of a financial interest by a Covered Person in any present or
potential competitor, customer, supplier, or contractor of the Company
creates a conflict of interest, except where the business or enterprise in
which the Covered Person holds a financial interest is publicly owned, and
the financial interest of the Covered Person in such public entity
constitutes less than one percent (1%) of the ownership of that business or
enterprise.
- - The acceptance by a Covered Person of a membership on the board of
directors, or serving as a consultant or advisor to any board or any
management, of a business that is a present or potential competitor,
customer, supplier, or contractor of the Company, creates a conflict of
interest, unless such relationship is pre-approved in writing by the
principal executive officer of the Company.
- - Engaging in any transaction involving the Company, from which the Covered
Person can benefit financially or otherwise, apart from the usual
compensation received in the ordinary course of business, creates a
conflict of interest. Such transactions include lending or borrowing money,
guaranteeing debts, or accepting gifts, entertainment, or favors from a
present or potential competitor, customer, supplier, or contractor of the
Company.
- - The use or disclosure of any unpublished information regarding the Company,
obtained by a Covered Person in connection with his or her employment for
personal benefit, creates a conflict of interest.
It is our policy and it is expected that all Covered Persons should
endeavor to avoid all situations that present an actual or apparent conflict of
interest. All actual or apparent conflicts of interest must be handled honestly
and ethically. If a Covered Person suspects that he or she may have a conflict
of interest, that Covered Person is required to report the situation to, and to
seek guidance from, his or her immediate supervisor or senior management, as
appropriate. For purposes of this Code, directors, the principal executive
officer, and the principal financial officer shall report any such conflict or
potential conflict situations to the chairman of the audit committee, if one be
created, and in the absence of an audit committee, to chairman of the board of
directors. Officers (other than the principal executive officer and principal
financial officer) and employees of the Company shall report any such situations
to their immediate supervisor. It is the responsibility of the audit committee
chairman or the chairman of the board, as applicable, to determine if a conflict
of interest exists or whether such situation is likely to impair the Covered
Persons ability to perform his or her assigned duties with the Company, and if
such situation is determined to present a conflict, to determine the necessary
resolution.
Loans are expressly prohibited from the Company to all directors and executive
officers.
IV. COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS
Full compliance with letter and the spirit of all applicable governmental
laws, rules and regulations, and applicable rules and listing standards of any
national securities exchange on which the Company's securities may be listed, is
one of the foundations on which this Company's ethical policies are built. All
directors and executive officers of the Company must understand and take
responsibility for the Company's compliance with the applicable governmental
laws, rules and regulations of the cities, states and countries in which the
Company operates, and for complying with the applicable rules and listing
standards of any national securities exchange on which the Company's securities
may be listed.
V. RULES TO PROMOTE FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE
DISCLOSURE
As a public company, the Company has a responsibility to report financial
information to security holders so that they are provided with accurate
information in all material respects about the Company's financial condition and
results of operations. It is the policy of the Company to fully and fairly
disclose the financial condition of the Company in compliance with applicable
accounting principles, laws, rules and regulations. Further, it is the
Company's policy to promote full, fair, accurate, timely and understandable
disclosure in all Company reports required to be filed with or submitted to the
Commission, as required by applicable laws, rules and regulations then in
effect, and in other public communications made by the Company.
Covered Persons may be called upon to provide or prepare necessary
information to ensure that the Company's public reports are complete, fair and
understandable. The Company expects Covered Persons to take this responsibility
seriously and to provide accurate information related to the Company's public
disclosure requirements.
All books and records of the Company shall fully and fairly reflect all
Company transactions in accordance with accounting principles generally accepted
in the United States of America, and any other financial reporting or accounting
regulations to which the Company is subject. No entries to the Company's books
and records shall be made or omitted to intentionally conceal or disguise the
true nature of any transaction. Covered Persons shall maintain all Company
books and records in accordance with the Company's established disclosure
controls and procedures and internal controls for financial reporting, as such
controls may be amended from time to time.
All Covered Persons must report any questionable accounting or auditing
matters that may come to their attention. This applies to all operating reports
or records prepared for internal or external purposes, such as sales or backlog
information. If any Covered Person has concerns or complaints regarding
questionable accounting or auditing matters of the Company, Covered Person shall
report such matters to his or her immediate supervisor. If the immediate
supervisor is involved in the questionable accounting or auditing matter, or
does not timely resolve the Covered Person's concern, the Covered Person should
submit their concerns to the principal executive officer or the principal
financial officer. If the principal executive officer and the principal
financial officer are involved in the questionable accounting or auditing
matter, or do not timely resolve the Covered Person's concerns, the Covered
person should submit his or her concern directly to the audit committee, if one
be established, or to the board of directors in the absence of a designated
audit committee. The reporting of any such matters may be done on a
confidential basis, at the election of the Covered Person making the report.
VI. CORPORATE OPPORTUNITIES
Directors and employees are prohibited from taking for themselves
opportunities that are discovered through the use of Company property,
information or position, or using Company property, information or position for
personal gain. Directors and employees have a duty to the Company to advance its
legitimate interest when the opportunity to do so arises.
VII. CONFIDENTIALITY
Directors and employees must maintain the confidentiality of non-public,
proprietary information regarding the Company, its customers or its suppliers,
and shall use that information only to further the business interests of the
Company, except where disclosure or other use is authorized by the Company or
legally mandated. This includes information disseminated to employees in an
effort to keep them informed or in connection with their work activities, but
with the instruction, confidential labeling, or reasonable expectation that the
information be kept confidential.
VIII. TRADING ON INSIDE INFORMATION
Inside information includes any non-public information, whether favorable
or unfavorable, that investors generally consider important in making investment
decisions. Examples including financial results not yet released, imminent
regulatory approval/disapproval of an alliance or other significant matter such
as the purchase or sale of a business unit or significant assets, threatened
litigation, or other significant facts about a business. No information
obtained as the result of employment at, or a director's service on the Board
of, the Company may be used for personal profit or as the basis for a "tip" to
others, unless such information is first made generally available to the public.
IX. PROTECTION AND PROPER USE OF COMPANY ASSETS
Directors and employees should protect the Company's assets and ensure
their efficient use. Theft, carelessness and waste have an adverse impact on
the Company and its profitability. Company assets may only be used for
legitimate Company business purposes.
X. INTELLECTUAL PROPERTY
The Company expends a great deal of time, effort and money to protect our
intellectual property. We are sensitive to issues regarding the improper use of
our intellectual property and avoiding the improper use of intellectual property
of others, including but not limited to copyrights, trademarks, trade secrets
and patents. In fulfillment of our legal obligations with respect to
intellectual property rights, the Company adheres to copyright laws, including
the application of those laws to copyrighted work in print, video, music,
computer software or other electronic formats. Employees must not make any
unauthorized reproduction of any copyrighted work.
XI. REPORTING VIOLATIONS OF THE CODE
Any Covered Person who becomes aware of any violation of this Code must
promptly bring the violation to the attention of the appropriate party as
follows: directors, the Company's principal executive officer and the principal
financial officer shall report on a confidential basis any violations to the
chairman of the audit committee, if one be created, and in the absence of an
audit committee, to the chairman of the board of directors of the Company;
Executive officers and employees of the Company shall report any violations to
the Company's principal executive officer or principal financial officer
XII. COMPLIANCE WITH THE CODE
All issues of non-compliance with this Code will be reviewed and evaluated
according to the circumstances and severity of the problem. Senior management
will take such actions as it deems appropriate, which can include disciplinary
action up to and including termination of employment, legal action, and other
measures.
XIII. WAIVER OF THE CODE
Any waiver of this Code may be made only by the independent directors on
the board of directors, or by an authorized committee of the board of directors
comprised solely of independent directors, and will be disclosed as required by
law, Commission regulations, or the rules and listing standards of any national
securities exchange on which the Company's securities may be listed.
EXHIBIT 31.1
Certifications
I, Kevin G. Kyzer, Chief Executive Officer certify that:
1. I have reviewed this annual report on Form 10-KSB of Technology
Connections, Inc.
2. Based on my knowledge, the 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officers and I am 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 annual report ("Evaluation Date"); and
c) presented in this annual report are 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 (all of which do not apply); and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls, (all of which do not apply); and
6. The registrant's other certifying officers and I have indicated in this
quarterly 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: April 20, 2004
/s/ Kevin G. Kyzer
- ---------------------
Kevin G. Kyzer
Chief Executive Officer
EXHIBIT 31.2
I, Kevin G. Kyzer, Chief Financial Officer certify that:
1. I have reviewed this annual report on Form 10-KSB of Technology
Connections, Inc.
2. Based on my knowledge, the 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officers and I am 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 annual 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 annual report ("Evaluation Date"); and
c) presented in this annual 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 (all of which do not apply); and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls (all of which do not apply); and
6. The registrant's other certifying officers and I have indicated in this
quarterly 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 (all of which do not apply).
Date: April 20, 2004
/s/ Kevin G. Kyzer
- ---------------------
Kevin G. Kyzer
Chief Executive Officer
EXHIBIT 32.1 & 32.2
STATEMENT REQUIRED BY 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report on Form 10-QSB of Technology Connections,
Inc. (the "Company") for the year ended December 31, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Kevin
G. Kyzer, Chief Executive Officer and Chief Financial Officer of the Company,
certify that:
* the Report fully complies with the requirements of Section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
* information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
/s/ Kevin G. Kyzer
- ---------------------
Kevin G. Kyzer
Director, President, Chief Executive Officer,
and Chief Financial Officer
April 20, 2004
This certification accompanies this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the
Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.