UNITED STATES
SECURITIES AND EXCHANGE COMMISSSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934: For the fiscal year ending September 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934: For the transition period from _________ to _________
Commission file number: 000-30734
TTI Holdings of America Corp.
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(Name of small business issuer in its charter)
Delaware 11-3255619
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
545 Madison Ave, 6th Floor NY, NY10022 10022
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(Address of Principal executive offices) (Zip Code)
Issuer's telephone number (212) 755-8777
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Securities registered under Section 12(b) of the "Exchange Act"
Common Share Par Value, $.0001
------------------------------
(Title of each Class)
Securities registered under Section 12(g) of the Exchange Act: None
----
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 a 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. [X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K 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 II of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The issuer's revenues for its most recent fiscal year: None
The aggregate market value of the voting common equity held by non-affiliates
based on the average closing sales price of such common equity, as of December
31, 2001 was approximately $ 891,893
The number of shares of Common Stock outstanding, as of December 31, 2001 was
6,894,466.
Transitional Small Business Disclosure Format (check one): Yes ; No X
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1
TTI HOLDINGS OF AMERICA CORP.
ANNUAL REPORT ON FORM 10-KSB
FOR FISCAL YEAR ENDED SEPTEMBER 30, 2001
INDEX
Page No:
PART I....................................................................... 3
ITEM 1. DESCRIPTION OF BUSINESS.................................... 3
ITEM 2. DESCRIPTION OF PROPERTY.................................... 7
ITEM 3. LEGAL PROCEEDINGS.......................................... 7
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS....................................................
PART II...................................................................... 9
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS........................................ 9
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.................................................. 10
ITEM 7. FINANCIAL STATEMENTS....................................... 13
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE..................... 26
PART III..................................................................... 27
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16 (a) OF
THE EXCHANGE ACT........................................... 28
ITEM 10 EXECUTIVE COMPENSATION..................................... 28
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT............................................. 29
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............. 30
PART IV .....................................................................
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K........................... 32
SIGNATURES ................................................ 35
2
TTI Holdings of America Corp.
This Form 10-KSB contains forward looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, regarding future events. The future performance of the
Company involve risks and uncertainties which may cause actual results in future
periods to be materially different from any future performance suggested herein.
Management believes that its current business strategy focused on finding a
suitable merger or acquisition partner is not unique and is executable.
Nevertheless, there can be no assurance that our strategy will be successful. In
addition there can be no assurance that sufficient capital can be obtained to
continue operations. Our performance and actual results could differ materially
from those projected in the forward-looking statements contained herein. Part I
Item 1. Description of Business
Business Development:
---------------------
TTI Holdings of America Corp was incorporated in November 1994 under
the laws of the State of Delaware under the name Thermaltec International, Corp.
On May 18, 2001, Thermaltec changed its name to TTI Holdings of America Corp.
("TTI" or the "Company"). From its inception until July 2001, TTI was primarily
engaged in the thermal spray coating industry in the U.S. and Costa Rica. In
July 2001, TTI divested the operations of its thermal spraying business,
formerly consolidated in its wholly owned subsidiary Panama Industries, Ltd, to
its shareholders of record as of June 22, 2001 in the form of a stock dividend
on the basis of one (1) share of Panama for every three (3) shares of TTI owned
(the "Panama Spin-off"). Accordingly, as of July 2, 2001, TTI was no longer in
the thermal spraying business and has been operating as a holding company with
minimal capital, focused on finding new business opportunities and a merger or
acquisition partner.
Since September 2001, the Company has devoted a substantial amount of
its time and resources in discussions with several companies in different
industries regarding a business combination. To date, these discussions have not
resulted in a completed transaction. The Company is currently in discussion with
several companies regarding a merger where it is expected that the target
company's current business would be the business of the Company going forward.
Although the Company believes that it will conclude a transaction as described
above on favorable terms, no guarantee can be given that any transaction will
occur in the short term, or if at all.
Due to the fact that the divesture of its thermal spraying business
took place in the Company's fourth fiscal quarter (July 2001), the majority of
the September 30, 2001 year activity reflected in the accompanying financial
statements and the discussion hereafter is related to this business. Following
the Panama Spin-off, as a result of the changes in the marketplace and a
deterioration to the Company's financial position, the Company discontinued its
business strategy of making acquisitions and investments in private companies
and accelerated the process of simplifying the Company's capital structure and
seeking a strategic partner. In order to facilitate the new direction, in August
2001, the Company engaged outside management consultants Crossover Advisors, LLC
3
with the mandate to assess the strategic value of all current holdings as well
as identify a merger or acquisition partner that could upon combination, deliver
value to TTI and its shareholders. In addition to being engaged in the thermal
spray coating industry during fiscal 2001, TTI was also involved in certain
investment activities as the Company previously pursued a strategy of growth
through investment in and acquisitions of small private companies in targeted
industries.
Recent Transactions:
--------------------
In June 2001, TTI acquired Transventures Industries, Inc., a New York
corporation for 250,000 shares of its Common Stock. The purpose of this
acquisition was to utilize Transventures as a vehicle to exploit opportunities
in the transportation and logistics industries by providing capital and other
corporate support.
In June 2001, TTI acquired 300,000 shares of Cobex Technologies Inc.
for $50,000 and the issuance of 100,000 shares of its Common Stock. These shares
represented approximately 18% of Cobex's total outstanding shares. Cobex is a
New York based communications interconnect provider and installer serving small
to middle sized companies and institutions. On December 12, 2001, TTI agreed to
sell all of its shares back to Cobex for a total of $35,000, payable in
installments over a 12-month period. This transaction is expected to close in
February 2002.
On October 10, 2001, TTI entered into an agreement to merge
Transventures into Cyberedge Enterprises, Inc, a Delaware corporation company
that had recently filed for reorganization under Chapter 11 of the U.S.
Bankruptcy Code. TTI was to receive 20% of the total outstanding shares of
Cyberedge at the closing. The purpose of the transaction was to allow
Cyberedge's management to develop Transventure's business opportunities in the
transportation and logistics business utilizing a network of industry contacts.
On November 2, 2001, James W. Zimbler was named TTI's interim President
in addition to being named to the TTI Board of Directors. Mr. Zimbler replaced
TTI's then current Chief Executive Officer and President Andrew B. Mazzone who
resigned both positions effective November 1, 2001. Mr. Zimbler is also the
president of Cyberedge. On December 14, 2001, TTI and Cyberedge mutually agreed
to terminate the merger of Transventures into Cyberedge as it was determined by
both companies that TTI was better suited to raise working capital for
Transventure's business plan.
Prior Transactions:
-------------------
On May 19, 2000 the Company acquired all of the assets and liabilities
of High Velocity Technology, Inc. by merging it into Panama Industries Ltd., its
wholly-owned subsidiary, in a tax-free reorganization qualifying under Section
368(a)(1)(A) of the Internal Revenue Code. The President and sole shareholder of
High Velocity, Robert J. Lalumiere received in exchange for all of his stock in
High Velocity 250,000 shares of the Company's common stock and $65,000, $50,000
of which was paid at closing and $15,000 was paid in October 2000. High Velocity
is a manufacturer of thermal spray equipment and a distributor of thermal spray
4
supplies. As such, it was part of the thermal spray business that supplies
coating service shops such as the Company's shop in Costa Rica. The assets of
High Velocity consisted primarily of the machinery and equipment necessary to
operate the thermal spray equipment manufacturing business. High Velocity's
business was integrated into Panama's operations. In November 2001, the business
of High Velocity was sold by Panama back to its former owner Robert Lalumiere.
THERMAL SPRAY BUSINESS:
-----------------------
Thermal spraying is a technology used to coat a substrate (surface)
with various materials such as metals, alloys, carbides, ceramics, and some
plastics. The coating material utilized depends upon the requirements of each
specific application.
The coatings utilized by TTI are produced from materials in the form of
either wire or powder. The material is melted in a flame or heat source, and
projected onto a substrate by a mixture of air flammable gases to form the
coating. The air, flammable gases and coating are brought together in a flame in
the nozzle of the gun where the coating is melted and sprayed forward onto the
surface to be coated. The gases and molten coating are cooled by the surface and
the coating adheres to the surface.
Thermal spray coating technology can be utilized in any situation in
which metal surfaces are worn from use or exposed to erosion or corrosion. A few
of the most common applications include the rebuilding of mechanical parts, the
protection of pipes (inside and outside) from corrosion, and the repair of
crankshafts, turbine blades and pumps.
Thermal spraying is a generic term used to describe a number of
different technologies. Each sub-technology shares a common element in that
molten or semi-molten metal particles are propelled onto a substrate where they
adhere to form a coating. Each sub-technology involves trade-offs among coating
quality, deposition rates, and cost. Each of the thermal spray technologies is
discussed in greater detail below.
Thermal spray technology is a subset of materials science and surface
coating engineering. Using thermal spray, technicians can apply a thick or thin
metal or ceramic coating on top of a metal substrate. The coating is bonded
strongly to the substrate, because the process projects molten particles onto
the targeted surface at high, sometimes hypersonic, velocities. The coatings are
thus applied with a combination of thermal and kinetic energies.
Since it is usually only the exposed surface of parts that are
subjected to stresses such as wear, erosion, or corrosion, it is possible using
this technology to economically protect such surfaces. The required protection
can be provided with thin coatings, using relatively little material. As a
result, high performance coatings and even exotic materials can be utilized at
limited cost.
Most of the Company's thermal spraying operations to date has taken
place in Costa Rica. As of September 30, 2001, TTI did business in Costa Rica
with over 300 customers.
5
TTI also operated a manufacturing business, High Velocity Technologies,
Inc., based in Lebanon, New Hampshire. This latter business is described in the
section titled "Prior Transactions".
Competition:
------------
TTI experienced competition in the thermal spraying business from a few
different sources including the traditional manufacturers of thermal spray
equipment and supplier i.e. Sulzer Metco, Westbury, NY, Eutectic Corporation,
Flushing, NY, and Praxair Inc., Danbury, Connecticut, etc. Although primarily
engaged in selling equipment and supplies, the users of the thermal spray
processes may ultimately shift their strategy to become prime users also of the
process. The two largest original equipment manufacturers in thermal spraying in
the United States are Sulzer Metco and Praxair.
In the Costa Rican market, the competition for original equipment is
Eutectic Corporation of Flushing, NY.
Customers:
----------
Following the Panama Spin-off, the Company did not have any customers
nor generate any revenue. All of the customers and revenue during the fiscal
year ended September 30, 2001 were derived from Panama's business. For the year
ended September 30, 2000, one customer in the corrosion-protection field
accounted for 16% of the Company's sales and 25% of its accounts receivable.
During the year ended September 30, 2001, Costa Rica accounted for 24%
of total Company sales; during the year ended September 30, 2000, Costa Rica
accounted for 36% of Company sales.
Although we had approximately 300 thermal spray service customers in
Costa Rica, we had only 2 significant thermal spray customers in New York.
Intellectual Property:
----------------------
We have not applied for any patents, trademarks or license as of this
time. The Company is not engaged and has not engaged in Research and Development
activities.
Management, Employees and Consultants:
--------------------------------------
Until the Panama Spin-off, TTI had 5 full time employees in the U.S.,
12 full time employees in Costa Rica, and 2 part-time employees in the U.S.
Following the Panama Spin-off and through September 30, 2001, TTI had 1 full
time employee, its Chief Executive Officer and President Andrew B. Mazzone and 1
part-time employee.
On November 1, 2001, Mr. Mazzone resigned as Chief Executive Officer
and President of the Company. Mr. Mazzone remains as the Chairman of the Board
of Directors. James W. Zimbler, of Crossover Advisors, LLC was named as interim
President effective as of the same date. Mr. Zimbler was also appointed to the
Board of Directors.
On August 23, 2001, TTI entered into an agreement with Crossover
Advisors, LLC to provide certain financial, business and strategic consulting
services for a term of eighteen (18) months (the "Crossover Agreement"). On
September 6, 2001 and on November 15, 2001 the Crossover Agreement was amended
to expand the level of services to be provided to TTI including the retention of
6
Mr. Zimbler as TTI's new President. As of December 31, 2001, TTI has issued to
Crossover an aggregate of 950,000 shares of it's common stock and is accruing a
monthly fee of $10,000 per month commencing November 1, 2001, in consideration
of the provision by Crossover and Mr. Zimbler of such services.
Item 2. Description of Property
TTI maintained offices at three locations until the Panama Spin-off.
The Company's executive offices and shop were located at 68A Lamar
Street, W. Babylon, NY 11704 and consisted of approximately 2000 square feet of
office space at a monthly rent of $1100. The Company also operated its wholly
owned subsidiary, High Velocity Technologies, at 21 Technology Drive, Lebanon,
NH 03784. Such space consisted of 1800 square feet, of which 360 square feet was
devoted to office and 1440 square feet was devoted to manufacturing and storage.
In addition a wholly owned subsidiary was located in San Jose, Costa Rica, in a
8,000 sq. ft. facility with 900 sq. ft. set aside for offices and 7,100 sq. ft..
dedicated to spray and machine shop areas.
On August 23, 2001, TTI entered into a Management Services Agreement
and Licensing Agreement with Adelphia Holdings, LLC ("Adelphia"), an affiliate
of Crossover to provide certain administrative services and office space to TTI
at Crossover's New York City location. Since November 1, 2001, Adelphia has been
accruing a monthly fee of $5000 per month for the provision of such services and
office space.
Item 3. Legal Proceedings
Other than described below, there are no past, pending or, to our
knowledge, threatened litigation or administrative action which has or is
expected by our management to have a material effect upon our business,
financial condition or operations, including any litigation or action involving
our officer, director or other key personnel.
In May and June 2001, TTI entered into several letter agreements to
acquire up to eleven separately owned comprehensive outpatient rehabilitation
facilities ("CORF's") that were managed by a Florida based company named Total
Health Care Consulting, Inc ("Total"). The Company was essentially acquiring the
licenses to operate these CORF's with Total providing the back-office management
functions. The acquisition of these CORF's was to have been executed by the
distribution of shares of TTI to the CORF owners based upon certain financial
criteria. On August 24, 2001 the Company terminated the agreements with the CORF
owners and did not consummate the acquisitions upon being informed that certain
representations regarding the financial condition of the CORFs and Total and
other material matters were found to be not true. Although approximately
3,500,000 shares of TTI had been issued to the owners of the CORFs, the shares
have been returned to authorized but unissued status on the books of the
Company. Other than the legal, accounting and due diligence expenses incurred in
the pursuit of this acquisition, no other costs were incurred. The Company is
exploring all of its legal remedies in this matter.
7
Indemnification of Officers and Directors
-----------------------------------------
At present we have not entered into individual indemnity agreements
with our Officer or Director. However, our By-Laws and Certificate of
Incorporation provide a blanket indemnification that we shall indemnify, to the
fullest extent under Delaware law, our director and officer against certain
liabilities incurred with respect to their service in such capabilities. In
addition, the Certificate of Incorporation provides that the personal liability
of our director and officer and our stockholders for monetary damages will be
limited.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended September 30, 2001.
8
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
General:
--------
We are authorized to issue 10,000,000 shares of Common Stock, at a par
value $.0001 per share. As of December 31, 2001 there are 6,894,466 shares of
common stock outstanding. The number of record holders of Common Stock as of
December 31, 2001 is approximately 800.
Common Stock:
-------------
The holders of Common Stock are entitled to one vote for each share
held of record on all matters to be voted on by stockholders. There is no
cumulative voting with respect to the election of directors, with the result
that the holders of more than 50% of the shares voting for the election of
directors can elect all of the directors then up for election. The holders of
Common Stock are entitled to receive ratably such dividends when, as and if
declared by the Board of Directors out of funds legally available therefore. In
the event we have a liquidation, dissolution or winding up, the holders of
Common Stock are entitled to share ratably in all assets remaining which are
available for distribution to them after payment of liabilities and after
provision has been made for each class of stock, if any, having preference over
the Common Stock. Holders of shares of Common Stock, as such, have no
conversion, preemptive or other subscription rights, and there are no redemption
provisions applicable to the Common Stock
Price Ranges of TTI Common Stock:
----------------------------------
Market Information
Since June 2001, the Company's Common Stock has been trading on the
NASD OTC Bulletin Board under the symbol "TTIH". Although the Company began
trading on the OTC Bulletin Board on July 30, 1996 under the symbol "THRM", the
Company was de-listed from April 19, 2000 to March 2001 for failure to file its
Form 10-KSB on time. During that time, the Company's stock was traded in the
"pink sheets" published by the National Quotations Bureau, LLC. On March 15,
2001, the Company again was approved for quotation on the OTC Bulletin Board and
has been traded there since that time. There is currently a limited trading
market for the Company's Common Stock. The following chart lists the high and
low sales prices for shares of the Company's Common Stock during each quarter
within the last two years. These prices are between dealers and do not include
retail markups, markdowns or other fee and commissions, and may not represent
actual transactions.
9
THREE MONTHS ENDED: High Low
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December 30, 1999 $8.500 $0.625
March 31, 2000 $8.500 $1.031
June 30, 2000 $3.500 $1.060
September 30, 2000 $3.300 $1.560
December 31, 2000 $2.000 $0.750
March 31, 2001 $4.000 $1.375
June 30, 2001 $4.250 $1.580
September 30, 2001 $1.800 $0.430
December 31, 2001 $0.480 $0.100
Liquidation:
------------
In the event of a liquidation of the Company, all stockholders are
entitled to a pro rata distribution after payment of any claims. Warrant holders
will not be entitled to liquidation rights, and will not be treated as
stockholders prior to the exercise of the warrants.
Dividend Policy:
----------------
The Company has never declared or paid cash dividends on its common
stock and anticipates that all future earnings will be retained for development
of its business. The payment of any future dividends will be at the discretion
of the Board of Directors and will depend upon, among other things, future
earnings, capital requirements, the financial condition of the Company and
general business conditions.
Stock Transfer Agent:
---------------------
Our transfer agent and registrar of the Common Stock is Manhattan
Transfer Registrar Co., P.O. Box 361, Holbrook, NY 11741.
Recent Sales of Unregistered Securities
---------------------------------------
The information concerning the recent sales of unregistered securities
required by Item 5 is incorporated by reference to the information set forth in
Item 12 "Certain Relationships and Related Transactions" set forth hereafter
Item 6. Management's Discussion and Analysis or Plan of Operation
This Annual Report on form 10-KSB contains certain forward-looking
statements within the meaning of the federal securities laws. Actual results and
the timing of certain events could differ materially from those projected in the
forward-looking statements due to a number of factors contained elsewhere
herein. This commentary should read in conjunction with our financial statements
that appear in this report.
10
Results of Operations:
----------------------
For the Year Ending September 30, 2001 vs. September 30, 2000
-------------------------------------------------------------
During 2001, the Company did not report any sales from operations.
Sales revenues and operating expenses previously reflected in the financial
statements from the operations of Panama Industries, Ltd. were shown, as
required, as a single caption titled "Loss from Discontinued Operations."
During 2001, the Company incurred approximately $771,000 of expenses
for general and administrative expenses associated with the Panama Spin-off, its
pursuit of the merger and business activities described above, and the general
operation of the Company. The Company paid for $425,000 of these expenses with
Company shares.
Year Ending September 30, 2000 vs. September 30, 1999
-----------------------------------------------------
For the year ended September 30, 2000, Thermaltec International had
$301,000 of consolidated sales, a decrease of 26% from the prior year, as the
inclusion of $141,000 of sales from High Velocity Technology, Inc. ("HVT") for
the four months of operations was more than offset by the decline in corrosion
protection sales in the United States of $161,000. Gross margins were 5%, a
decline from 23% in the prior year, primarily reflecting $50,000 of cost
overruns and rework at Thermaltec de Costa Rica (TCR). Selling, general and
administrative expenses were $1,246,000, $195,000 more than the prior year;
$410,000 was the result of shares issued for services during the period. Of the
total expenses, $194,000 was required to bring the unsuccessful Camanco
Communication merger process, begun in 1999, to a conclusion. In addition, the
Company incurred $60,000 in pursuing other mergers. Expenses other than merger
costs were $987,000 during the year, an increase of $386,000 from the year ago
period, as the Company incurred $277,000 of costs in technical training and
expansion for its Costa Rican subsidiary and approximately $44,000 in costs for
registration and filing of Form 10-SB. No shares were issued to principals of
the registrant for services in connection with the Comanco merger.
As stated above, the Company incurred approximately $60,000 of
administrative and legal expenses during the year ending September 30, 2000 in
pursuing merger discussions and "due diligence" investigation of four
acquisition candidates, specifically High Velocity Technologies, Edge Management
Inc., I x Partners, Ltd. and Viaplex Communications. The acquisition of High
Velocity was consummated on May 19, 2000 by the exchange of 250,000 shares of
Thermaltec common stock and $100,000 in cash for all of the assets of High
Velocity. During the year ended September 30, 2000, the Company chose to
withdraw from further negotiations with Edge Management Inc. and with Viaplex
Communications upon completion of the respective due diligence processes. On
December 14, 2000 the Company also chose to withdraw from further negotiations
with I x Partners.
11
Liquidity and Financial Resources
---------------------------------
As shown in the financial statements, the Company incurred a net loss
of $1.15 million during the year ended September 30, 2001 and has incurred
substantial net losses for each of the past three years. At September 30, 2001,
current liabilities exceed current assets by $85,000; at the same time, total
assets exceeded total liabilities by only $187,000. These factors raise
substantial doubt about the Company's ability to continue as a going concern. It
is the intention of the Company's management to attempt to improve its liquidity
by raising additional investment capital to provide for continued operating
funds and to become profitable by finding business opportunities that create
operating revenues. The ultimate success of these measures is not reasonably
determinable at this time.
The Company has limited the amount of the debt it has raised. Debt
outstanding as of September 30, 2001 consists primarily of approximately $40,000
owed to a shareholder. Since inception, the Company has raised $2.7 million
through the sale of common stock other than stock issued in exchange for
services.
Inflation
---------
The amounts presented in the financial statements do not provide for
the effect of inflation on the Company's operations or its financial position.
Because the Company has no fixed assets, the net operating losses shown would
approximate those reported if the effects of inflation were reflected either by
charging operations with amounts that represent replacement costs or by using
other inflation adjustments.
Forward-looking Information
---------------------------
Certain statements in this document are forward-looking in nature and
relate to trends and events that may affect the Company's future financial
position and operating results. The words "expect" "anticipate" and similar
words or expressions are to identify forward-looking statements. These
statements speak only as of the date of the document; those statements are based
on current expectations, are inherently uncertain and should be viewed with
caution. Actual results may differ materially from the forward-looking
statements as a result of many factors, including changes in economic conditions
and other unanticipated events and conditions. It is not possible to foresee or
to identify all such factors. The Company makes no commitment to update any
forward-looking statement or to disclose any facts, events or circumstances
after the date of this document that may affect the accuracy of any
forward-looking statement.
12
Item 7. Financial Statements
TTI Holdings of America Corp. and Subsidiaries
Index to Financial Statements
CONTENTS
INDEPENDENT AUDITORS' REPORT F2-F3
Consolidated Balance Sheet as of September 30, 2001 F-4
Consolidated Statement of Operations and Comprehensive Income
for the periods ended September 30, 2001 and 2000 F-5
Consolidated Statements of Shareholders' Equity for the periods
ended September 30, 2001 and 2000 F-6
Consolidated Statements of Cash Flows for the periods ended
September 30, 2001 and 2000 F-7
Notes to Consolidated Financial Statements F-8
F-1
INDEPENDENT AUDITOR'S REPORT
----------------------------
The Board of Directors of
TTI Holdings of America Corp.
I have audited the accompanying consolidated balance sheet of TTI Holdings of
America Corp. and Subsidiaries as of September 30, 2001 and the related
consolidated statements of operations and comprehensive income, stockholders'
equity and cash flows for the years ended September 30, 2001. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
I conducted my audit in accordance with generally accepted auditing standards
generally accepted in the United States. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of 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 consolidated financial statement presentation. I believe
that my audit provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TTI Holdings of
America Corp. and Subsidiaries as of September 30, 2001, and the results of its
operations and cash flows for the years ended September 30, 2001, in conformity
with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to the
consolidated financial statements, The Company has suffered losses from
operations and has a net capital deficiency that 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 1. The accompanying consolidated
financial statements do not included any adjustments that might result from the
outcome of this uncertainty.
Aaron Stein, C.P.A.
Woodmere, New York
February 11, 2002
F-2
INDEPENDENT AUDITOR'S REPORT
The Board of Directors of
Thermaltec International Corporation and Subsidiaries
We have audited the accompanying consolidated statements of operations and
comprehensive income, stockholders' equity and cash flows of Thermaltec
International Corporation and Subsidiaries for the year ended September 30,
2000. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit 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 consolidated
financial statements are free of 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 consolidated financial statement presentation. We believe
that our audit provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations, and cash flows of
Thermaltec International Corporation and Subsidiaries for the years ended
September 30, 2000, in conformity with accounting principles generally accepted
in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered losses from operations and has a
net capital deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regards to these matters are
also described in Note 9. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Capraro, Centofranchi, Kramer & Co, P.C.
South Huntington, New York
December 12, 2000
F-3
TTI Holdings of America Corp.
Consolidated Balance Sheet
As of September 30, 2001
Assets
Current Assets:
Cash and Cash Equivalents $ 946
-----------
Total Current Assets
Other Assets:
Loan Receivable 89,719
Investment (at Cost) 182,000
-----------
Total Other Assets 271,719
-----------
Total Assets $ 272,665
===========
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities
Vendor Accounts Payable $ 20,703
Payment for Shares not Issued 30,000
Due to Shareholder 34,593
-----------
Total Current Liabilities 85,296
Stockholders' Equity
Common Stock 545
Additional Paid-in Capital 3,400,848
Accumulated Deficit (3,214,024)
-----------
Total Shareholders' Equity 187,369
-----------
Total Liabilities and Shareholders' Equity $ 272,665
===========
See accompanying notes to financial statements
F-4
TTI Holdings of America Corp.
Consolidated Statements of Operations and Comprehensive Income
For the
Year ended September 30,
2001 2000
----------- -----------
Sales $ 0 $ 0
Cost of Sales 0 0
----------- -----------
Gross Profit 0 0
General and Administrative Expenses 771,405 360,148
----------- -----------
Net Loss from Continuing Operations (771,405) (360,148)
Discontinued Operations (Note 11)
Loss from Discontinued Operations,
Net of Income Taxes of $0 (376,291) (868,498)
----------- -----------
Net Loss ($1,147,696) ($1,228,646)
=========== ===========
Basic and Diluted Loss per Share ($ 0.24) ($ 0.37)
=========== ===========
Weighted Average Number of Shares Outstanding 4,753,899 3,296,761
=========== ===========
See accompanying notes to financial statement
F-5
TTI Holdings of America Corp.
Consolidated Statements of Stockholders' Equity (Deficit)
Common Stock Accumulated
------------ Additional Retained Other
Number of Paid-in Earnings Comprehensive
Shares Amount Capital (Deficit) Income(Loss) Total
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 1999 2,608,118 $ 261 $ 1,902,407 ($2,175,983) $ 25,086 ($ 248,229)
------------------------------------------ ----------- ----------- ----------- ----------- ----------- -----------
Net Loss for the year ended 9/30/00 (1,230,225) (1,230,225)
Warrants exercised during the year 1,000 0 1,000 1,000
Stock issued in lieu of cash repayment
Of shareholder loan during year 198,000 20 197,980 198,000
Stock issued for services 233,833 23 409,493 409,516
Stock issued for employee awards 4,850 1 7,274 7,275
Stock sold during the year 834,000 83 833,917 834,000
Stock issued in lieu of cash repayment
Of other loans 175,000 17 174,983 175,000
Stock issued for purchase of HVT 250,000 25 218,725 218,750
Other Comprehensive Income:
Foreign Currency Adjustment 1,579
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 2000 4,304,801 430 3,745,779 3,406,208 26,665 366,666
Net Loss for the year ended 9/30/01 (1,147,696) (1,147,696)
"A" Warrants exercised during the year 33,400 3 33,397 33,400
"B" Warrant exercised during the year 50,295 5 75,437 75,443
Shares issued for shareholder loan 170,000 17 101,983 102,000
Shares issued for employee loans 14,000 1 23,345 23,346
Shares issued for services 383,804 39 394,554 394,593
Shares issued for asset 4,500 1 12,555 12,556
Shares issued from option letter 120,000 12 119,988 120,000
Shares issued for vendor payables 13,000 1 18,093 18,094
Shares issued for purchase of COBEX 100,000 10 131,990 132,000
Shares issued for purchase of Transventure 250,000 25 329,975 330,000
Other Comprehensive Income:
Foreign Currency Adjustment 7,294 7,294
Net Effect of Spinoff of Panama Industries
And its Subsidiaries (1,586,248) 1,339,879 (33,959) (280,328)
----------- ----------- ----------- ----------- ----------- -----------
Balance, September 30, 2001 5,443,800 $ 545 $ 3,400,848 ($3,214,025) $ 0 $ 187,368
=========== =========== =========== =========== =========== ===========
See accompanying notes to financial statement
F-6
TTI Holdings of America Corp.
Consolidated Statements of Cash Flow
For the
Year ended September 30,
2001 2000
----------- -----------
Cash Flows from Operating Activities:
Net Loss ($1,147,696) ($1,230,225)
----------- -----------
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation & Amortization -0- 39,810
Common Stock Issued for Services and Awards 425,243 416,791
Net Effect of Panama Industries Spin-off 511,825 -0-
(Increase) decrease in:
Accounts Receivables - 0- 78,613
Inventories - 0 - (9,546)
Prepaid Expenses and Other Current Assets - 0 - (44,625)
Other Assets - 0 - (15,313)
Increase(decrease) in:
Accounts Payable - 0 - (65,730)
Accrued Expenses & Other Current Liabilities -0- 103,586
----------- -----------
Total Adjustments 937,068 503,586
----------- -----------
Net cash used in Operating Activities (210,628) (726,639)
----------- -----------
Cash Flows from Investing Activities:
Purchases of Fixed Assets - 0- (10,685)
Cash paid in acquisition of subsidiary 0 (50,000)
----------- -----------
Net cash used in Investing Activities -0- (60,685)
Cash Flows from Financing Activities:
Proceeds from sale of shares, net of offering costs 108,843 835,000
Repayments of Long-Term Debt - 0 - (98,785)
Payment for Shares not yet Issued 30,000 -0-
Net Proceeds (repayments) of Shareholder Loans -0- (16,311)
----------- -----------
Net cash provided by Financing Activities 138,843 719,904
----------- -----------
Effect of exchange on cash 7,294 1,579
----------- -----------
Net increase (decrease) in cash and cash equivalents (64,491) (65,841)
Cash & Cash Equivalents, Beginning of Period 65,437 131,278
----------- -----------
Cash & Cash Equivalents, End of Period $ 946 $ 65,437
=========== ===========
See accompanying notes to financial statement
F-7
TTI Holdings of America Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION/REPORTING ENTITIES
The consolidated financial statements of Thermaltec International Corp. and
Subsidiaries (the "Company") include the following entities:
THERMALTEC INTERNATIONAL CORP.
------------------------------
Thermaltec International Corp. ("TTI") was incorporated in 1994 under the
laws of the state of Delaware. TTI was organized for the purpose of
engaging in the sale of thermal sprayed coatings to individual customers in
the United States and other countries. TTI also serves as the parent
company, which acts as a holding company for its subsidiaries and provides
administrative support to the operations of the Company. In May 1999, all
operating assets and liabilities of Thermaltec were transferred into Panama
Industries.
PANAMA INDUSTRIES,LTD.
----------------------
Panama Industries is a wholly owned subsidiary of TTI incorporated in March
1998. It was inactive and not part of the consolidated group until May
1999. At that time, all operating assets and liabilities of Thermaltec
International were transferred into Panama Industries. Panama Industries
and the following subsidiaries were spun off on June 22, 2001.
HIGH VELOCITY TECHNOLOGIES, INC.
--------------------------------
High Velocity Technologies, Inc. (HVT), located in West Lebanon, NH, is a
wholly owned subsidiary of Panama Industries, acquired on May 19, 2000. HVT
manufactures and sells equipment and materials used in the thermal spraying
industry.
AMZ THERMALTEC, S.A.
--------------------
AMZ THERMALTEC, S.A. (AMZ) is a wholly owned subsidiary of Panama
Industries located in San Jose, Costa Rica. AMZ began operations in June
2000 and provides thermal spray coatings to businesses and individuals
throughout Costa Rica.
THERMALTEC DE COSTA RICA, S.A.
------------------------------
Thermaltec de Costa Rica, S.A. ("TCR") is a wholly owned subsidiary of TTI
located in San Jose, Costa Rica. TCR began operations during fiscal 1995,
and provides thermal spray coatings to businesses and individuals
throughout Costa Rica.
SPINOFF OF SUBSIDIARY
---------------------
On May 31, 2001, the Company announced that it intended to spin off, as a
stock dividend, all of its equity in Panama Industries, LTD., a wholly
owned subsidiary. The shares in Panama Industries would be distributed to
the Company's shareholders of record as of the close of business June 22,
2001; the distribution would be on a basis of one share of Panama to every
three shares of the Company. On July 2, 2001, the spin-off was executed as
announced. On June 22, 2001, in connection with this transaction, the
Company incurred a charge to paid-in capital of $1,586,248. In connection
with the stock dividend, on July 25, the Company transferred 100% ownership
of TCR to Panama Industries.
PRINCIPLES OF CONSOLIDATION
---------------------------
The consolidated balance sheet of the Company as of September 30, 2001
includes the balances of Transventures, Inc. The Results of Operations and
cash flows for the year ended September 30, 2000 include the results of HVT
for the approximately four months that the business was a wholly owned
subsidiary of the Company. The results of Operations and cash flows for the
year ended September 30, 2001 include the results of Panama Industries and
its subsidiaries for nine months that the business was a wholly owned
subsidiary of the Company.
All material inter-company transactions have been eliminated in the
consolidated financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
REVENUE RECOGNITION
Revenues from contracts which have terms greater than one month and are
fixed-price contracts are recognized on the percentage-of-completion
method, measured by the percentage of actual cost incurred to date, to the
estimated total cost for each contract. On those contracts which are not
fixed-price in nature and which contractually require the billing of actual
costs and expenses incurred during the period, revenue is recognized as the
actual amount invoiced during the period.
F-8
TTI Holdings of America Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
Estimated costs and revenues are based upon engineering estimates of the
work performed to date relative to the total work required under the
contract. Changes in contract estimates which result in changes in
estimated profit are applied to the cumulative work accomplished on the
project. The re-calculated gross profit on the contract is applied to the
revenues recorded to date for the entire life of the contract; the gross
profit for the year is determined by subtracting from the cumulative gross
profit the gross profit reported in a prior year. On those projects where a
re-estimate indicates that a loss on the entire project is likely, the full
amount of the loss is recorded, in the period when the likelihood of loss
is first identified.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company includes cash
on deposit, money market funds, amounts held by brokers in cash accounts
and funds temporarily held in escrow to be cash equivalents.
ACCOUNTS RECEIVABLE
Accounts receivable have been adjusted for all known uncollectible
contracts; an allowance for doubtful contracts has not been provided, as
the amount is not considered material.
INVENTORIES
Inventories and prepaid supplies consist of various materials and supplies
utilized on construction contracts and are valued at the lower of cost
(first-in, first-out) or market.
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment is stated at cost. Major expenditures for property
and, those that substantially increase useful lives, are capitalized.
Maintenance, repairs, and minor renewals are expensed as incurred. When
assets are retired or otherwise disposed of, their costs and related
accumulated depreciation are removed from the accounts and resulting gains
or losses are included in income. Depreciation is provided by both
straight-line and accelerated methods over the estimated useful lives of
the assets.
GOODWILL AND INTANGIBLE ASSETS
The Company recognizes the excess of purchase price over book value for
acquired subsidiaries as Goodwill on the consolidated balance sheet. The
Company is amortizing goodwill on a straight-line basis over ten years.
EARNINGS (LOSS) PER SHARE
The Company has adopted SFAS No. 128, "Earnings per Share", which requires
presentation of basic earnings per share ("Basic EPS") and diluted earnings
per share ("Diluted EPS") by all publicly traded entities, as well as
entities that have made a filing or are in the process of filing with a
regulatory agency in preparation for the sale of securities in a public
market.
Basic EPS is computed by dividing income or loss available to common
shareholders by the weighted average number of common shares outstanding
during the period. The computation of Diluted EPS gives effect to all
dilutive potential common shares during the period. The computation of
Diluted EPS does not assume conversion, exercise or contingent exercise of
securities that would have an antidilutive effect on earnings.
INCOME TAXES
The Company has adopted Financial Accounting Standards Board Statement No.
109, " Accounting for Income Taxes". The Company files a consolidated
Federal tax return, which includes all of the subsidiaries. Accordingly,
Federal Income taxes are provided on the taxable income of the consolidated
group. State income taxes are provided on a separate company basis, if and
when taxable income, after utilizing available carryforward losses, exceeds
certain levels.
F-9
TTI Holdings of America Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 and 2000
DEFERRED INCOME TAXES
Deferred tax assets arise principally from net operating losses and capital
losses available for carryforward against future years' taxable income.
FOREIGN EXCHANGE
Thermaltec International and its subsidiary Panama Industries treat the
U.S. Dollar as the functional currency; the subsidiary companies, AMZ and
TCR use the Costa Rican Colon as its functional currency. Accordingly,
gains and losses resulting from the translation of accounts designated in
other than the functional currency are reflected in the determination of
other comprehensive income and have been immaterial.
REPORTING COMPREHENSIVE INCOME
The Company has adopted Statement of Financial Accounting Standard No. 130,
"Reporting Comprehensive Income". This Statement establishes standards for
reporting and displaying comprehensive income and its components in a full
set of general-purpose financial statements. This statement requires the
classification of items of comprehensive income by their nature in a
financial statement and the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital in
the equity section of the balance sheet.
2. SUPPLEMENTAL CASH FLOW INFORMATION
For the period ended:
September 30,
2001 2000
Cash paid for: ---- ----
Interest Expense: $15,767 $22,320
Income Taxes -- --
During the year ended September 30, 2000, the Company issued 233,833 shares
of stock as payment for services in the amount of $409,516.
During the year ended September 30, 2000, the Company had non-cash
investing and financing activities that resulted from the acquisition of a
subsidiary whose net liabilities exceeded net assets, summarized as
follows:
Goodwill Acquired $450,772
Less non - cash transactions:
Excess of liabilities over assets acquired 132,022
Note payable to former shareholder 50,000
Stock issued for acquisition of subsidiary 218,750
Payment to acquire Subsidiary $ 50,000
========
During the year ended September 30, 2000, the Company had a non-cash
financing activity of $373,000 when it issued shares of stock for repayment
of shareholder and various other loans.
During the year ended September 30, 2000, the Company had a non-cash
investing and financing activity of $30,000 when it financed the purchase
of machinery.
During the year ended September 30, 2001, the Company issued 383,804 shares
of stock as payment for services in the amount of $394,592.
During the year ended September 30, 2001, the Company had a non-cash
financing activity of $125,316 when it issued shares of stock for repayment
of shareholder and various other loans.
F-10
TTI Holdings of America Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2001
During the year ended September 30, 2001, the Company issued 17,500 shares
of stock in payment of assets and to satisfy trade accounts payable in the
amount of $30,680.
During the year ended September 30, 2001, the Company issued 120,000 shares
of stock pursuant to the exercise of a shareholder's option agreement.
3. DUE TO OFFICER/SHAREHOLDER
Due to Shareholder represents the net amount due to the majority
shareholder of the Company as of September 30, 2001. This loan has no
maturity and bears no interest.
4. COMMITMENTS AND CONTINGENCIES
On August 23, 2001, the Company entered into an agreement with Crossover
Advisors, LLC to provide certain financial, business and strategic
consulting services for a term of eighteen (18) months. On September 6,
2001 and November 15, 2001 the Agreement was amended to expand the level of
services to be provided to the Company. As of December 31, 2001, the
Company has issued to Crossover, an aggregate of 950,000 shares of its
common stock consisting of 210,000 free-trading and unrestricted shares and
740,000 restricted shares. Additionally, a fee of $10,000 per month is
accruing, commencing November 1, 2001.
On August 23, 2001, the Company entered into a Management Services
Agreement and Licensing Agreement with Adelphia Holdings, LLC, (Adelphia),
an affiliate of Crossover to provide certain administrative services and
office space to the Company at Crossover's New York City location. Since
November 1, 2001, Adelphia has been accruing a monthly fee of $5,000 per
month for the provision of such services and office space.
5. SALES TO MAJOR CUSTOMERS
For the year ending September 30, 2000, one customer accounted for 16% of
the Company's sales and 25% of the Company's accounts receivable.
6. COMMON STOCK
For the Year Ended
September 30,
2001
----
Common stock is as follows:
Common stock, $.0001 par value,
10,000,000 shares authorized
Shares issued and outstanding 5,443,800
Par Value $ 544
Common Stock:
-------------
During the year ending September 30, 2000, the Company issued 233,833
shares for services to outside consultants as follows:
Marketing services 53,209 shares $ 81,929
Administrative services 180,624 shares $ 327,587
During the year ending September 30, 2001, the Company issued 383,804
shares for services to outside consultants as follows:
Legal services 5,000 shares $ 5,807
Administrative services 378,804 shares 388,785
F-11
TTI Holdings Of America, Inc
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
For the year ended September 30, 1998, the Company completed the issuance
of 271,600 shares of common stock at various prices of $ 0.75 to $ 1.50 per
share and carried with them a warrant granting the right to purchase, for
each share purchased, an additional share of Thermaltec common stock at a
price of $ 1.00 per share. The warrants expire on January 31, 2001. At
September 30, 1999 a total of 108,200 warrants had been exercised for an
equal number of shares. The proceeds from the sale of these shares, net of
registration fees, totaled $106,949. During the year ending September 30,
2000, a total of 1,000 warrants had been exercised for an equal number of
shares. The registration fee was waived. During the year ending September
30, 2001, a total of 33,400 "A" warrants, valued at $33,400 and 50,295 "B"
warrants, valued at $75,443, had been exercised for an equal number of
shares.
During the year ended September 30, 2000, the Company issued 373,000 shares
of common stock in lieu of cash repayment of shareholder loans.
On May 31, 1999, the Company authorized the sale of 1,000,000 shares of
common stock to be offered in private transactions of 1,000 Units,
representing 1,000 shares per Unit. Each Unit consisted of 1,000
Common shares and 750 B Warrants and 500 C Warrants for the purchase of
additional shares of the Company. Such offering was filed with the State of
New York Department of Law. The Company utilized an exemption from the
registration provisions under Regulation D Rule 504, as amended, and sold
in those States which permit the offering to take place. The termination
date of the offering was March 31, 2000. The exercise price of the Warrants
is $1.50 per B Warrant share and $2.00 per C Warrant share, exercisable
commencing one year from the date of the subscription agreement for the B
Warrant and two years from the date of the subscription agreement for the C
Warrant. The B Warrants will expire March 31, 2002 and the C Warrants will
expire March 31, 2003. 999,000 shares were subscribed in the offering.
There were 649,350 B Warrants and 499,500 C Warrants subscribed. On April
13, 2000, 999,000 shares were issued of which 834,000 shares were sold and
165,000 shares were issued as repayment of various loans described above.
On June 13, 2000, 250,000 shares were issued as partial payment for the
purchase of High Velocity Technology, Inc.
On June 15, 2001, 100,000 shares were issued as partial payment for the
purchase of a 18% interest in COBEX Technologies, Inc.
One June 20, 2001, 250,000 shares were issued as payment in full for the
purchase of Transventures, Inc.
7. INCOME TAXES
No provision for income taxes was recorded during the years ended September
30, 2001 and 2000, due to net losses being incurred. At September 30, 2001,
the Company had net operating loss carryforwards for tax purposes of
approximately $ 3.5 million, which would expire in 2015.
The Company's effective tax rate in 1999 and 2000 differs from the federal
statutory rate as a result of a full valuation allowance being provided
against gross deferred tax assets.
Deferred tax assets consist of the following components at:
September 30:
2001 2000
---------- ----------
Net operating loss carryforwards $1,470,000 $1,192,200
Less: valuation allowance 1,470,000 1,192,200
---------- ----------
Total Deferred $ -- $ --
========== ==========
At September 30, 2001 and 2000, the Company provided a full valuation
allowance against the gross deferred tax asset since, in management's
judgment, it is more likely than not, such benefits will not be realized.
F-12
TTI Holdings Of America, Inc
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000
8. GEOGRAPHIC INFORMATION
The Company's revenues from external customers is derived from the
following geographic markets:
For the year ended
September 30:
2001 2000
-------- --------
United States $343,269 $193,943
Costa Rica 104,915 106,916
-------- --------
Total $447,184 $300,859
======== ========
9. GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial
statements, the Company incurred a net loss of $ 1,147,696 for the year
ended September 30, 2001 and has incurred substantial net losses for each
of the past three years. At September 30, 2001 current liabilities exceed
current assets by $ 84,350. These factors raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements
do not include any adjustments relating to the recoverability and
classification of recorded assets, or the amounts and classification of
liabilities that might be necessary in the event the Company cannot
continue in existence. It is the intention of the Company's management to
attempt to improve liquidity by raising additional investment capital to
provide for continued operating funds and to find business opportunities
that create operating revenues.
10. MERGERS AND ACQUISITIONS
On June 15, 2001, the Company acquired 300,00 of COBEX Technologies, Inc.
(COBEX) for $50,000 and the issuance of 100,000 shares of common stock.
This investment represents approximately 18% of COBEX's total outstanding
shares. COBEX is a private interconnect communications company specializing
in the sales, installation and maintenance of communication systems located
in West Babylon, New York. The investment in COBEX is recorded on the
Company's balance sheet at the original acquisition cost.
On June 20, 2001, the Company acquired 100% of Transventures, Inc, a
private transportation and logistics company located in Huntington, New
York. Transventures, Inc. was acquired for 250,000 common shares of the
Company valued at $330,000. As a result of the purchase of Transventures,
Inc., the Company has recorded in goodwill of $330,000 ,which represents
the excess of the purchase price over the net value of assets acquired. The
goodwill has been fully charged against the earnings for the year ended
September 30, 2001. Due to the inability of the Company to raise the
necessary capital, no activity has taken place to-date regarding the
Transventures, Inc. subsidiary.
11. SUBSEQUENT EVENTS
On October 10, 2001, TTI entered into an agreement to merge Transventures
into Cyberedge Enterprises, Inc. a Delaware corporation that had recently
filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. TTI
was to receive 20% of the total outstanding shares of Cyberedge at the
closing. The purpose of the transaction was to allow Cyberedge's management
to develop Transventure's business opportunities in the transportation and
logistics business utilizing network of industry contacts. On December 14,
2001, TTI and Cyberedge mutually agreed to terminate the merger of
Transventures into Cyberedge as it was determined by both companies that
TTI was better suited to raise working capital for Transventure's business
plan.
On December 12, 2001, the Company agreed to sell all of its shares in COBEX
Technologies, Inc. back to COBEX for a total of $35,000, payable in
installments over a 12-month period.
On November 1, 2001, 200,000 shares of Common Stock were issued to the
Company's former Chief Executive Officer and President Andrew B. Mazzone in
satisfaction of outstanding loans and advances of $41,000 made by Mr.
Mazzone on behalf of the Company from time to time.
On January 22, 2002 the Company borrowed a total of $35,000 from three
"accredited investors" through the issuance of 7% convertible promissory
notes (the "Notes"). The Notes have a one (1) year term and are convertible
at the holders election into shares of Common Stock at the lower of (i)
$0.05 or (ii) a variable conversion price equal to 50% of the average
closing bid price of the Common Stock prior to the day of conversion. The
Notes are automatically converted upon a merger or other extraordinary
corporate transaction.
F-13
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
On February 1, 2002, the Registrant notified the previous Auditor Capraro,
Centofranchi, Kramer & Co., P.C. (hereinafter referred to as "CCK"), that the
Board of Directors had decided to change auditors to Aaron Stein, CPA. The
Company thereupon filed a Form 8-K, Current Report, on February 6, 2002.
During their tenure, CCK issued reports on Registrant's financial
statements up to September 30, 2000 that neither contained an adverse opinion or
disclaimer of opinion, or was not qualified or modified as to audit scope or
accounting principles. It was modified for a going concern uncertainty.
During the period of CCK's engagement and for the period of the two most
recent fiscal years and any subsequent interim period preceding this action,
there was no disagreement between Registrant and CCK on any matter of accounting
principals or practices, financial statement disclosure or audit scope and
procedure, which disagreement(s), if not resolved to the satisfaction of CCK,
would have caused them to make reference to the subject matter of the
disagreement in connection with its opinion.
Effective February 1, 2002, Aaron Stein CPA ("Stein"), has been retained as
independent auditor of TTI Holdings of America Corp., and was retained as
independent auditor of the registrant for the fiscal year ending September 30,
2001. Prior to the engagement, Registrant did not consult with Stein regarding
the application of accounting principles to a specific transaction, or the type
of audit opinion that may be rendered with respect to the Registrant's financial
statements.
Part III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.
The following table sets forth information with respect to the directors and
executive officers as of September 30, 2001
DATE
SERVICE
NAME AGE OFFICE COMMENCED
-------- --- --------------------- ----------
Andrew Mazzone* 60 Chairman, CEO December, 1995
President/Secretary/
Treasurer
*Indicates Board Member
All directors will hold office until the next annual stockholder's meeting
and until their successors have been elected or qualified or until their death,
resignation, retirement, removal, or disqualification. Vacancies on the board
will be filled by a majority vote of the remaining directors. Officers of the
Company serve at the discretion of the Board of Directors.
Andrew B. Mazzone:
------------------
Mr. Mazzone has been the Chairman of the Company since its inception. He
resigned as Chief Executive Officer and President effective November 1, 2001.
From 1970 until February 15, 1995, Mr. Mazzone was employed by Metco, Westbury,
NY, a subsidiary of the Perkin Elmer Corp. The Company was acquired by a foreign
holding corporation, which changed the Company's name to Sulzer Metco. Mr.
Mazzone, as President, resigned from Sulzer Metco after the acquisition of the
Company. Mr. Mazzone did so to pursue his belief that there is an unexploited
opportunity in the thermal spray industry to set up industrial thermal spray
shops around the world, excluding the areas of Europe and the United States. In
this endeavor, he left Sulzer Metco on good terms and with the understanding
that his strategy, if successful, would mean even more business for Sulzer Metco
Corporation. Some of the highlights of Andrew Mazzone's Metco career include
positions as Director of Logistics, Director of Sales and Marketing, Director of
Manufacturing, Executive Vice President and President. Mr. Mazzone has degrees
from Babson College, Babson Park, Massachusetts in finance and an advanced
degree in economics, with a specialty in economic history. During the fiscal
year ended September 30, 2001, Mr. Mazzone devoted his full time to the efforts
of the Company.
James W. Zimbler:
-----------------
On November 1, 2001, Mr. Zimbler, age 36, was appointed as President and
Director of the Company. From February 2001 until October 15, 2001, Mr. Zimbler
was engaged in consulting for various companies and for a portion of that time
has been a principal member in Crossover Advisors, LLC. Prior to that, from
January 1999 to November 1999, Mr. Zimbler was Chairman of the Board of
Directors and President of IntermediaNet, Inc. now known as Cyberedge
Enterprises, Inc., a public company and in November 1999, became just the
Chairman until February 2001. He was re-appointed CEO and a Director in
September 2001. Mr. Zimbler was also Chairman and CEO of Universal Media
Holdings, Inc., until February 2001. From December 1996 through November 1998,
Mr. Zimbler was President and Chief Operating Officer for Total Freight
Solutions America, Inc. Mr. Zimbler was employed by Packaging Plus Services,
Inc. from August of 1994 through December of 1996. Mr. Zimbler attended Suffolk
Community College from 1983 through 1985 where he majored in Business
Administration.
Other Significant Employees:
----------------------------
Robert J. Lalumiere, age 48, was the President and Chief Executive Officer
of Panama Industries, Ltd for most of the fiscal year ended September 30, 2001.
He entered into an employment agreement with the Company in May 2000 at the time
of the acquisition of High Velocity Technologies. Mr. Lalumiere was the
President of High Velocity Technologies for the last five years. He also was
their Chief Engineer for Product Development.
Item 10. Executive Compensation
For the fiscal year ended September 30, 2001, no Officer/Director has been
compensated with salaries or other form of remuneration except the
CEO/President, Andrew B. Mazzone who received the following compensation:
Capacities in which Aggregate
Name Remuneration was Received Period Remuneration
--------------------------------------------------------------------------------
Andrew Mazzone CEO/President For the year $ 10,316
ended 9/30/01
Chief Engineer, NYSERDA For the year $ 5,260
Project and Project Manager Ended 9/30/01
As Salary
James W. Zimbler Consultant For the year $112,025 (1)
ended 9/30/01
-------------------------
(1) Reflects payment made through issuance of 55,000 Shares of Common Stock
Director Compensation:
----------------------
Our directors receive no compensation for their services as director.
Director and Officer Insurance:
-------------------------------
The Company has no directors and officers ("D & O") liability insurance.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of December 31, 2001, by (i) each
person (including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934 (the "Exchange Act") who is known by the Company
to own beneficially 5% or more of the Common Stock, (ii) each director of the
Company, and (iii) all directors and executive officers as a group. Unless
otherwise indicated, all persons listed below have sole voting power and
investment power with respect to such shares. Total number of shares originally
authorized was 10,000,000 shares of common stock, each of which had a $.0001 per
share par value.
As of December 31, 2001 a total of 6,894,466 shares of Common Stock, have
been issued and are outstanding.
Shares Percent
------ -------
Andrew Mazzone(1) (2) 1,335,000 19.4%
513 Dryden Street
Westbury, NY 11590
Crossover Advisors LLC 950,000 13.8%%
545 Madison Avenue
New York, NY 10022
James W. Zimbler (1) (3) 1,100,000 15.9%
1 Diane Court
Nesconset, NY 11767
Directors and Officers as a group: 2,435,000 shares
(1) Director and Officer
(2)Includes 200,000 shares issued to Mr. Mazzone on November 1, 2001 and
258,000 shares held in an IRA account on behalf of Mr. Mazzone.
(3) Includes 150,000 shares of common stock held in the name of JWZ
Holdings, Inc., a corporation of which Mr. Zimbler is the sole shareholder and
950,000 shares held by Crossover Advisors, LLC of which JWZ Holdings, Inc. is a
principal member.
Item 12. Certain Relationships and Related Transactions
Issuance of Stock:
------------------
On November 21, 1995, the Company issued 1,425,000 common shares to Andrew
Mazzone, the Company's founder. On November 21, 1995, the Company issued 75,000
common shares to Christopher De Prima, a promoter and affiliate of the Company.
The shares were issued pursuant to Section 4(2) of the Securities and Exchange
Act of 1933.
For the year ended September 30, 1998, the Company completed the issuance
of 271,600 shares of common stock at various prices of $ 0.75 to $ 1.50 per
share and carried with them a warrant granting the right to purchase, for each
share purchased, an additional share of Thermaltec common stock at a price of
$1.00 per share. The warrants expire on January 31, 2001. At September 30, 1999
a total of 108,200 warrants had been exercised for an equal number of shares.
The proceeds from the sale of these shares, net of registration fees, totaled
$106,949. During the year ending September 30, 2000, a total of 1,000 warrants
had been exercised for an equal number of shares. During the year ended
September 30, 2001 a total of 83, 695 warrants have been exercised for an equal
number of shares.
On May 31, 1999, the Company authorized the sale of 1,000,000 shares of
common stock to be offered in private transactions of 1,000 Units, representing
1,000 shares per Unit. Each Unit consisted of 1,000 Common shares and 750 B
Warrants and 500 C Warrants for the purchase of additional shares of the
Company. Such offering was filed with the State of New York Department of Law.
The Company utilized an exemption from the registration provisions under
Regulation D Rule 504, as amended, and sold in those States which permit the
offering to take place. The termination date of the offering was March 31, 2000.
The exercise price of the Warrants is $1.50 per B Warrant share and $2.00 per C
Warrant share, exercisable commencing one year from the date of the subscription
agreement for the B Warrant and two years from the date of the subscription
agreement for the C Warrant. The B Warrants will expire March 31, 2002 and the C
Warrants will expire March 31, 2003. 999,000 shares were subscribed in the
offering. There were 649,350 B Warrants and 499,500 C Warrants subscribed. On
April 13, 2000, 999,000 shares were issued of which 834,000 shares were sold and
165,000 shares were issued as repayment of various loans described above.
There was no underwriter and the Company did not offer any discounts or pay
any compensation in connection with either offering. Moreover, in both cases
there was not general solicitation or general advertising. Since the Company was
not subject to the reporting requirements of section 13 or section 15(d) of the
Exchange Act, in both instances the offer and sale of securities satisfied the
requirements of, and were exempt under, Section 504 of Regulation D under the
Securities Act and the applicable $1,000,000 cap was not exceeded. Thus, in both
cases permissible sales were made to investors, some of who were not "accredited
investors" as that term is defined in Regulation D.
During the year ended September 30, 1999, the Company issued 30,000 shares
of common stock in lieu of cash repayment of a shareholder loan.
During the year ended September 30, 2000, the Company issued 373,000 shares
of common stock in lieu of cash repayment of shareholder loans and various other
loans.
During the year ended September 30, 1999, the Company issued 72,567 shares
to outside consultants, as follows:
Marketing services 35,067 shares $326,937
Legal services 21,000 shares $219,188
Financial & Administrative
Services 16,500 shares $ 96,593
During the year ending September 30, 2000, the Company issued 233,833
shares of Common Stock for services to outside consultants as follows:
Marketing services 53,209 shares $ 81,324
Administrative services 180,624 shares $327,593
During the year ended September 30, 2001, the Company issued 383,804 shares
of Common Stock for services to outside consultants as follows:
Financial/Administrative
Services 378,804 shares $388,785
Legal Services 5,000 shares $ 5,807
On June 13, 2000, 250,000 shares were issued as payment for the purchase of
High Velocity Technology, Inc.
On June 20, 2001, 250,000 shares of Common Stock were issued as payment for
the purchase of Transventures.
On June 20, 2001, 100,000 shares of Common Stock were issued and $50,000
was paid for the purchase of 300,000 shares of Cobex Technologies, Inc
On November 1, 2001, 200,000 shares of Common Stock were issued to the
Company's former Chief Executive Officer and President Andrew B. Mazzone in
satisfaction of outstanding loans and advances of $41,000 made by Mr. Mazzone on
behalf of the Company from time to time.
On January 22, 2002 the Company borrowed a total of $35,000 from three
"accredited investors" through the issuance of 7% convertible promissory notes
(the "Notes"). The Notes have a one (1) year term and are convertible at the
holders election into shares of Common Stock at the lower of (i) $0.05 or (ii) a
variable conversion price equal to 50% of the average closing bid price of the
Common Stock prior to the day of conversion. The Notes are automatically
converted upon a merger or other extraordinary corporate transaction.
Part IV
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits. The following is a list of exhibits filed as part of this Form
10-KSB where so indicated, exhibits that were previously filed are incorporated
by reference.
--------------------------------------------------------------------------------
SEC REFERENCE TITLE OF DOCUMENT
NUMBER
--------------------------------------------------------------------------------
3.1 Articles of Incorporation (1)
--------------------------------------------------------------------------------
3.2 Amendment to Articles of (1)
Incorporation
--------------------------------------------------------------------------------
3.3 Additional Amendment to (2)
Articles of Incorporation
--------------------------------------------------------------------------------
3.4 Bylaws (1)
--------------------------------------------------------------------------------
10.1 Lease Agreement on the premises (1)
West Babylon, NY
--------------------------------------------------------------------------------
10.2 Lease Agreement on the premises (1)
Costa Rica
--------------------------------------------------------------------------------
10.3 New York State Thruway (1)
Authority Thermal Spraying
Specification (Expanded)
--------------------------------------------------------------------------------
10.4 NYSERDA Contract (1)
--------------------------------------------------------------------------------
10.5 Consulting Agreement with
Crossover Advisors, LLC (3)
--------------------------------------------------------------------------------
10.6 Management Services Agreement and
License Agreement with Adelphia
Holdings, LLC (4)
--------------------------------------------------------------------------------
16.1 Letter of change of Accountants (5)
--------------------------------------------------------------------------------
21.1 Subsidiaries of Registrant This Filing
--------------------------------------------------------------------------------
(1) These documents are hereby incorporated by reference to Form 10SB filed
November 21, 2000.
--------------------------------------------------------------------------------
(2) These documents are incorporated by reference to the Form 8-K filed on June
29, 2001
(3) These documents are incorporated by reference to the Form S-8 registration
statement filed on August 27, 2001.
(4) These documents are incorporated by reference to the Form 8-K filed on
September 5, 2001.
(5) These documents are incorporated by reference to the Form 8-K filed on
February 6, 2002.
--------------------------------------------------------------------------------
(b) Reports from Form 8-K:
On July 17, 2001, the Company filed a Current Report on Form 8-KA with regard to
the transactions to acquire the licenses to own two comprehensive outpatients
rehabilitation facilities.
On September 5, 2001 the Company filed a Current Report on Form 8-K with regard
to the relocation of its corporate offices and the engagement of Crossover
Advisors.