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 Fiscal Year Ended: December 31, 2002
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
TECHNOLOGY CONNECTIONS, INC.
(Name of small business issuer in our charter)
North Carolina
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
1731 56-2253025
(PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
4421 Stuart Andrew Blvd., Suite 102, Charlotte, North Carolina 28217
(704) 341-0698
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
Kevin G. Kyzer
4421 Stuart Andrew Blvd., Suite 102, Charlotte, North Carolina 28217
(704) 341-0698
(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
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. [ ]
1
State issuer's revenues for its most recent fiscal year: $276,445
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked prices of such common
equity, as of a specified date within the past 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act.) N/A
Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.
ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS
Indicate by check mark whether the issuer has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a court. Yes [ ]
No [ ]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
26,957,860 Shares of Common Stock
as of May 15, 2003
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
The listed documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended December 24,
1990).
No documents are incorporated by reference into this Annual Report on
Form 10-KSB.
Transitional Small Business Disclosure Format (check one): Yes [ ];
No [X]
2
TABLE OF CONTENTS
Part I.........................................................................4
Item 1. Description of Business................................................4
Item 2. Description of Property...............................................17
Item 3. Legal Proceedings.....................................................17
Item 4. Submission of Matters to a Vote of Security Holders...................17
PART II.......................................................................17
Item 5. Market for Common Equity and Related Stockholder Matters............. 17
Item 6. Management's Discussion and Analysis or Plan of Operation.............20
Item 7. Financial Statements..................................................18
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure..................................................23
PART III......................................................................23
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act.....................23
Item 10. Executive Compensation...............................................25
Item 11. Security Ownership of Certain Beneficial Owners and Management.......26
Item 12. Certain Relationships and Related Transactions.......................27
Item 13. Exhibits and Reports on Form 8-K.....................................28
Item 14. Controls and Procedures..............................................29
3
Part I
Item 1. Description of Business.
BUSINESS DEVELOPMENT.
Since our inception, our company has 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 six 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 is 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.
4
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 are 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.
5
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 are 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.
6
MARKET RESEARCH
- ----------------
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 2001 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. Charlotte became the 32nd largest city in the country and the 5th
largest urban region over that period of time. The population continues to grow
due largely to migration.
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
- -----------------------
In June of 2002 we moved into our new facilities. The headquarters are
located at 4421 Stuart Andrew Blvd., Suite 102, Charlotte, North Carolina 28217.
We have a showroom set up at this location. We occupy approximately 3,200
square feet for which we pay $3,091 per month. Our current lease expires on or
about June 1, 2007. We believe our new location has sufficient space to conduct
our operation over the next five years.
SALES TECHNIQUES
- -----------------
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
- ----------------------
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.
7
HOURS OF BUSINESS
- -----------------
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
- ------------
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
- -------------------------
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 offer 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
- ---------------
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.
8
ADVERTISING AND PROMOTIONS
- ---------------------------
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
- -----------
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. Steve Meredith is our Sales Manager and will attempt to impart
these qualities to our staff. 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.
9
RECENT PRIVATE PLACEMENTS
- --------------------------
During the first quarter of 2002, we sold 69,000 shares of our common
stock, $.001 par value, between $.25-.50 per share, to 24 investors in what was
intended to be a private placement to "accredited investors" within the meaning
of the rules and regulations under the Securities Act. Aggregate proceeds
amounted to $23,500. We relied upon the exemption from registration provided by
Section 4(2) and Rule 506 of Regulation D of the Securities Act, and on
comparable exemptions under state laws. We believed these exemptions were
available because the issuances were transactions not involving a public
offering and were made only to who it was believed were accredited investors.
As it turned out, 17 of the investors were non-accredited investors.
During the offering process, we inadvertently did not provide the information
required by Rule 502 of Regulation D to these non-accredited investors. As a
result, and with the advice of counsel, we decided to make a rescission offer to
each of the investors who purchased shares of common stock in our private
placement. In addition, we provided each investor with all of the information
required by Rule 502 of Regulation D, which we believe complies with the
informational and disclosure requirements of such regulation. None of the
investors elected to rescind their purchase within the thirty day period
provided by state law. Consequently, they are no longer entitled to the remedy
of rescission under state law, and their rights to sue under state law for any
alleged omission to provide material information about the Company in connection
with the offering is extinguished However, under Federal law, all of the
twenty-four investors have a year from their date of purchase to exercise their
rights of rescission.
During the first quarter, 125,860 shares of our common stock were
issued to eleven different employees and vendors in exchange for services
rendered in reliance on the exemption provided by Section 4(2) of the Securities
Act. Also during early January, 2002, 150,000 shares of our common stock were
sold to Michael Durbin, former Exec. Vice President of the Company, for $.25 per
share in reliance upon an exemption provided by Section 4(2) of the Securities
Act. In the case of each of these issuances, we relied on the following
facts: (1) the issuances were isolated private transactions which did not
involve a public offering; (2) there was only one offeree, (3) the offeree has
agreed to the imposition of a restrictive legend on the face of the stock
certificate representing its shares, to the effect that it will not resell the
stock unless its shares are registered or an exemption from registration is
available; (4) the offeree was a sophisticated investor very familiar with our
company and stock-based transactions; (5) there were no subsequent or
contemporaneous public offerings of the stock; (6) the stock was not broken down
into smaller denominations; and (7) the negotiations for the sale of the stock
took place directly between the offeree and our management.
10
Between March and April of 2002, shares of our common stock were issued to
four consultants and a law firm in reliance upon an exemption provided by
Section 4(2) of the Securities Act. 975,000 shares of common stock were issued
to Greentree Financial Group, Inc. in connection with their provision of
consulting services in the preparation of this Registration Statement on Form
SB-2. In addition, 250,000 shares of common stock were issued to Brown &
Associates, PLLC in connection with their provision of legal services in the
preparation of this Registration Statement on Form SB-2. Also, 1,225,000 shares
of our common stock were issued to 21st Equity Partners, LLC in connection with
their provision of consulting services in the preparation of this Registration
Statement on Form SB-2. In addition, 1,250,000 shares of our common stock were
issued to The Corporate Solution, Inc. in connection with their agreement to
provide business consulting and financial public relations services to our
Company. Finally, 1,250,000 shares of our common stock were issued to
Chester-Link, Inc. in connection with its agreement to provide business
consulting and financial public relations services to our Company. The shares
were issued pursuant to these agreements on June 6, 2002.
The issuances to the five entities referred to above were made based
upon the following facts: (1) the issuance was an isolated private transaction
which did not involve a public offering; (2) there was only one offeree, (3) the
offeree has agreed to the imposition of a restrictive legend on the face of the
stock certificate representing its shares, to the effect that it will not
resell the stock unless its shares are registered or an exemption from
registration is available; (4) the offeree was a sophisticated investor very
familiar with our company and stock-based transactions; (5) there were no
subsequent or contemporaneous public offerings of the stock; (6) the stock was
not broken down into smaller denominations; and (7) the negotiations for the
sale of the stock took place directly between the offeree and our management.
On February 15, 2002, we sold 13,000 shares of our common stock to Mr.
Robert Smith, owner of a substantial quantity of office furniture in exchange
for such furniture. We relied on exemptions provided by Section 4(2) of the
Securities Act of 1933, as amended. We made this offering based on the
following facts: (1) the issuance was an isolated private transaction which did
not involve a public offering; (2) there was only one offeree, (3) the offeree
has agreed to the imposition of a restrictive legend on the face of the stock
certificate representing its shares, to the effect that it will not resell the
stock unless its shares are registered or an exemption from registration is
available; (4) the offeree was a sophisticated investor very familiar with our
company and stock-based transactions; (5) there were no subsequent or
contemporaneous public offerings of the stock; (6) the stock was not broken down
into smaller denominations; and (7) the negotiations for the sale of the stock
took place directly between the offeree and our management.
SOURCES AND AVAILABILITY OF RAW MATERIALS
- ------------------------------------------
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.
11
CUSTOMER BASE
- --------------
For the period beginning on May 18, 2001 until March 31, 2002, we had
approximately 460 customer projects performed. As of the date of this
filing, our company is working on an average of 40 customer projects per
month.
INTELLECTUAL PROPERTY
- -----------------------
At present, we do not have any patents, trademarks, licenses, franchises,
concessions, and royalty agreements, labor contracts or other proprietary
interests.
GOVERNMENT REGULATION ISSUES
- -------------------------------
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
- ---------------------------
We have spent no funds on research and development.
ENVIRONMENTAL LAW COMPLIANCE
- -------------------------------
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
- ----------
Currently, we have a staff of six employees. We have no employment
agreements with any of our employees. We anticipate hiring up to ten additional
employees within the next year if our business expands.
REPORTS TO SECURITY HOLDERS
- -------------------------------
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.
12
RISK FACTORS
WE MAY HAVE VIOLATED PROVISIONS OF THE FEDERAL SECURITIES LAWS IN CONNECTION
WITH OUR YEAR 2002 PRIVATE PLACEMENT OF COMMON STOCK, GIVING RISE TO A
CONTINGENT LIABILITY OF $23,500.
We may have violated provisions of the Federal securities laws in
connection with our year 2002 private placement of common stock. Such laws give
investors in the common stock the right to rescind their purchases and seek a
refund of the purchase price which they paid for a period of one year. The
possibility of rescission represents a contingent liability to us in the amount
of $23,500 for that period of time. It is reflected in the notes to our
financial statements.
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.
13
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 $190,000 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 six employees. We
are prepared to hire additional employees only if and when our contracts
increase.
14
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, 2002, we generated losses totaling $725,776. These
losses were primarily due to $492,930 of expenses relating to having our
common stock publicly traded and stock issued for services. Of that amount,
$462,930 was paid in common stock and the other $30,000 in cash.
Additionally, we incurred $46,410 in interest expense for the period. As a
result of these losses, as of December 31,2002, we had an accumulated deficit in
retained earnings of $932,158 and total assets of only $76,866 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 78.1% 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, which 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.
15
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.
16
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.
A 6% ORAL DEMAND LOAN WITH A STOCKHOLDER IN THE AMOUNT OF $22,628, POSES A RISK
THAT WE COULD NOT REPAY ON DEMAND.
We have a 6% oral demand loan with a stockholder in the amount of $22,628.
There is a risk that demand for repayment could be made at anytime, when we do
not have funds, and the terms of the loan itself could be the subject of a
dis
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 June of 2002, we moved into our new offices located at 4421
Stuart Andrew Blvd., Suite 102, Charlotte, North Carolina 28217. We occupy
approximately 3,200 square feet for which we pay $3,091 per month. We have
signed a five year lease at this location which expires in June of 2007. 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 "TGYC" in 2002.
Holders
The number of recorded holders of the Company's common stock as of December 31,
2002 is approximately 54.
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.
17
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.
18
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 4421 Stuart Andrew Blvd., Suite 102,
Charlotte, North Carolina 28217. Our telephone number is (704) 341-0698. We
currently have six 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 25,157,860 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.
19
RESULTS OF OPERATIONS
- ------------------------
For the 12 months ended December 31, 2002.
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, 2002 vs. December 31, 2001
Income Statement Year end December 31 Reason
______________________ _____________ _______________ __________________________________
2001 2002
______________________ _____________ _______________ __________________________________
Revenues $153,426 $276,445 Revenues increased due to an
increase in our relationships with
new home builders and greater
operating efficiencies.
______________________ _____________ _______________ __________________________________
Cost of Revenues $185,768 $248,646 Due to increased sales.
______________________ _____________ _______________ __________________________________
______________________ _____________ _______________ __________________________________
Gross Profit ($32,343) $27,799 Gross Profit increased due to
better pricing resulting from
volume purchasing from suppliers.
______________________ _____________ _______________ __________________________________
Operating Expenses: $158,889 $707,165 See Total Operating Expenses
______________________ _____________ _______________ __________________________________
______________________ _____________ _______________ __________________________________
Interest Expense $15,151 $46,410 Interest Expense increased due to
accerlerated interest and late fees.
______________________ _____________ _______________ __________________________________
Total Operating Expenses $174,040 $753,575 Primarily increased due to costs
associated with becoming publicy
trading, SEC compliance costs.
Operating expenses also consists
primarily of salaries,
general overhead,and technical personnel.
We anticipate that Operating Expenses
will continue to increase
as business expands.
______________________ _____________ _______________ __________________________________
20
Plan of operations:
We plan to accomplish our future plan of operations as follows:
________________________________ ______________________________ __________________________ __________________
EVENT OR MILESTONE PERTAINING TIME FRAME FOR METHOD OF ACHIEVEMENT ESTIMATED
TO PRODUCT DEVELOPMENT IMPLEMENTATION COST LOW END
HIGH END
________________________________ ______________________________ __________________________ __________________
Complete Software Implementation June 15, 2003 - Hire a professional to $5,000 to
for on-line scheduling system July 30, 2003 configure network access $15,000
and accounting program. to application server.
________________________________ ______________________________ __________________________ __________________
______________________________________ ________________________________ ______________________________ _______________________
EVENT OR MILESTONE PERTAINING TO TIME FRAME FOR METHOD OF ACHIEVEMENT ESTIMATED COST
SALES AND MARKETING IMPLEMENTATION LOW END - HIGH END
______________________________________ ________________________________ ______________________________ _______________________
Conduct a North Carolina public June 15, 2003 - December 31, Hire a professional public $30,000 to $50,000
advertising campaign 2003 relations and media
relations firm. Place
interviews and a small
amount of media advertisements
in local newspapers and
recognized newspapers and
trade publications.
______________________________________ ________________________________ ______________________________ _______________________
Conduct a North Carolina direct mail June 15, 2003 - December 31, Hire a professional $15,000 to $30,000
campaign aimed at potential and new 2003 promotions firm. Attend
homeowners. various trade shows and
public engagements as
advised to promote our
services.
______________________________________ ________________________________ ______________________________ _______________________
Conduct various expeditions to June 1, 2003 - December 31, As required, depending on $30,000 to $100,000
thriving new home construction markets 2003 nature and duration of
to seek out potential new office travel.
locations throughout the United States.
______________________________________ ________________________________ ______________________________ _______________________
Hire a direct sales manager. June 1, 2003 - July 15, Through in-house efforts. Salaries - $60,000
2003
______________________________________ ________________________________ ______________________________ _______________________
_______________________________ ______________________________ ___________________________ __________________
EVENT OR MILESTONE PERTAINING TIME FRAME FOR METHOD OF ACHIEVEMENT ESTIMATED
TO CUSTOMER SUPPORT IMPLEMENTATION COST
_______________________________ ______________________________ ___________________________ __________________
Hire two customer support June 1, 2003 - July 15, Through in-house efforts. Salaries -
staff. 2003. $50,000
_______________________________ ______________________________ ___________________________ __________________
Total Low End Cost--$190,000
Total High End Cost--$305,000
Excludes general working capital
The cost of these activities must all be funded with future debt or equity
financing.
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.
21
Item 7. Financial Statements.
Technology Connections, Inc.
(A development STage Company)
FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2002 AND
FOR THE PERIOD FROM INCEPTION (MAY 18, 2001) TO DECEMBER 31, 2001
TABLE OF CONTENTS
Auditor Consent F-1
Report of Independent Certified Public Accountants F-2
Balance Sheet
December 31, 2002 F-3
Statements of Operations
For the year ended December 31, 2002 and
for the Period from Inception (May 18, 2001) to December 31, 2001 F-4
Statements of Changes in Stockholders' Deficit
For the year ended December 31, 2002 and
for the Period from Inception (May 18, 2001) to December 31, 2001 F-5
Statements of Cash Flows
For the year ended December 31, 2002 and
for the Period from Inception (May 18, 2001) to December 31, 2001 F-6
Notes to the Financial Statements F-7
through F-13
18
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation of our report, dated May 12, 2003,
relating to the financial statements of TECHNOLOGY CONNECTIONS, INC. in the 10-
KSB dated on May 15, 2003.
Perrella & Associates, P.A.
Pompano Beach, Florida
May 15, 2003
F-1
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, 2002, and the related statements of operations and
stockholders' deficit and cash flows for the years ended December 31, 2002 and
for the period from inception (May 18, 2001) to December 2001. 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, 2002, and the results of its operations and its cash flows for
the year ended December 31, 2002 and for the period from inception (May 18,
2001) to December 31, 2001 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 suffered recurring losses, has yet to
generate an internal cash flow and has not successfully raised adequate working
capital which raise substantial doubt about its ability to continue as a going
concern. Management's plan 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.
Perrella & Associates, P.A.
Pompano Beach, Florida
May 12, 2003
F-2
TECHNOLOGY CONNECTIONS, INC.
Balance Sheet
December 31, 2002
ASSETS
2002
CURRENT ASSETS
Cash and Cash Equivalents $4,457
Inventory 6,411
Accounts Receivable, net of allowance for doubtful
accounts of $31,564 3,796
TOTAL CURRENT ASSETS 14,664
PROPERTY AND EQUIPMENT
Property and Equipment 71,938
Accumulated Depreciation (9,736)
Net Property and Equipment 62,202
TOTAL ASSETS $76,866
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $231,216
Current Portion of Notes Payable 22,091
Loans Payable to Stockholders 89,287
TOTAL CURRENT LIABILITIES 342,594
LONG-TERM DEBT
Notes Payable, less current portion 74,000
STOCKHOLDERS' DEFICIT
Preferred Stock ($.001 par value, 5,000,000 authorized:
none issued and outstanding) -
Common Stock ($.001 par value, 100,000,000 shares authorized:
25,157,860 shares issued and outstanding) 25,158
Additional Paid-in-Capital 360,890
Retained Deficit (725,776)
TOTAL STOCKHOLDERS' DEFICIT (339,728)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $76,866
The accompanying notes are an integral part of the financial statements
F-3
TECHNOLOGY CONNECTIONS, INC.
Statements of Operations
For the year ended December 31, 2002 and
for the Period from Inception (May 18, 2001) to December 31, 2001
2002 2001
SALES AND COST OF SALES:
Sales $ 276,445 $ 153,426
Cost of Sales (248,646) (185,768)
Gross 27,799 (32,342)
Profit
(Loss)
OPERATING EXPENSES (707,165) (158,889)
OPERATING LOSS (679,366) (191,231)
OTHER EXPENSE:
Interest Expense (46,410) (15,151)
NET LOSS $ (725,776) $ (206,382)
Net Loss Per Common Share
Bassic & Fully Diluted $ (0.03) $ (0.01)
Weighted Average Common
Shares Outstanding 24,502,383 19,860,000
The accompanying notes are an integral part of the financial statements
F-4
TECHNOLOGY CONNECTIONS, INC.
Statements of Changes in Stockholders' Deficit
For the year ended December 31, 2002 and
for the Period from Inception (May 18, 2001) to December 31, 2001
Common Additional
Common Stock Paid-in Retained
Shares $.001 Par Capital Deficit
Balances, May 18, 2001 - $- $- $-
Issuances of common stock to Founders 19,700,000 19,700 12,300
Issuances of common stock for cash 150,000 150 29,850 -
Net loss - - - (206,382)
Balances, January 1, 2002 19,850,000 $19,850 $42,150 $(206,382)
Reclassification of Subchapter S
corporation accumulated losses - - (206,382) 206,382
Issuances of common stock for services 5,088,860 5,089 464,341 -
Issuances of common stock cash 219,000 219 60,781 -
Net loss - - - (725,776)
25,157,860 $25,158 $360,890 $(725,776)
The accompanying notes are an integral part of the financial statements
F-5
TECHNOLOGY CONNECTIONS, INC.
Statements of Cash Flows
For the years ended December 31, 2002 and
for the Period from Inception (May 18, 2001) to December 31, 2001
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(725,776) $(206,382)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 6,136 3,600
Stock issued for services 469,430 -
Noncash interest on Loans from 4,601 -
Stockholders
(Increase) decrease in operating
assets:
Accounts receivable 35,728 (39,525)
Inventory (6,411) -
Increase in operating liabilities:
Accounts payable and accrued 122,042 106,886
expenses
Outstanding checks in excess of - 2,288
bank balance
NET CASH USED IN OPERATING (94,250) (133,133)
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (53,759) (18,179)
NET CASH USED IN INVESTING (53,759) (18,179)
ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock 61,000 62,000
Proceeds from stockholder loans 61,468 36,707
Repayments of stockholders loans (13,488) -
Borrowings on notes payable 50,357 60,000
Repayments of notes payable (8,061) (6,205)
NET CASH PROVIDED BY FINANCING 151,276 152,502
ACTIVITIES
NET INCREASE IN CASH AND
CASH EQUIVALENTS 3,267 1,190
CASH AND CASH EQUIVALENTS:
Beginning of period 1,190 -
End of period $ 4,457 $ 1,190
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for interest $ 19,712 $15,151
The accompanying notes are an integral part of the financial statements
F-6
TECHNOLOGY CONNECTIONS, INC.
Notes to the Financial Statements
For the year ended December 31, 2002 and
For the Period from Inception (May 18, 2001) to December 31, 2001
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).
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 year ended December
31, 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.
F-7
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 all of the deferred tax asset will not be
realized.
Earnings 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.
F-8
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recent Accounting Pronouncements - In June 2001, the Financial Board issued
Statement of Financial Accounting Standards ("SFAS") No.143, "Accounting for
Asset Retirement Obligations" which addresses the accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated retirement costs. SFAS No. 143 requires that the fair value of a
liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value cannot be made. SFAS
No. 143 is effective for financial statements issued for fiscal years beginning
after June 15, 2002. The Company does not expect SFAS No. 143 to have a material
effect on its financial condition or cash flows.
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.
The Company will adopt SFAS 145 on January 1, 2003.
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 Company
does not expect SFAS 146 to have an impact its financial statements once adopted
on January 1, 2003.
In November 2002, the FASB issued Interpretation No. 45 ("FIN 45"), "Guarantor's
Accounting and Disclosure Requirements for Guarantee, Including Indirect
Guarantees of
Indebtedness of Others", which addresses the disclosures to be made by a
guarantor in its interim and annual financial statements about its obligations
under guarantees. FIN 45
also requires the recognition of a liability by a guarantor at the inception of
certain guarantees that are entered into or modified after December 31, 2002.
F-9
NOTE C - LIQUIDITY AND GOING CONCERN
The Company experienced losses of $725,776 and $206,382 during the year ended
December 31, 2002 and for the period from inception (May 18, 2001) to December
2001, respectively, had a net working capital deficiency of $327,931 and had
outstanding and delinquent payables including payroll taxes as of December 31,
2002. 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.
Management's plans with regard to these matters encompass the following actions:
Management's operating plan, which was put into effect in the latter part of
2002, has implemented cost reduction policies and developed an aggressive sales
strategy. The Company believes these efforts in conjunction with raising
equity, will improve liquidity and sustain continuing operations.
The cost reduction policies include reducing overhead expenses, personnel
expense and a more effective and efficient manner of installation.
The Company has focused on building relationships with local builders to obtain
structural wiring contracts for new home construction sub-divisions. As of
April 2003, the Company secured a large contract with a major homebuilder in the
Charlotte area to pre-wire new homes in twelve new sub-divisions, over the next
24 months.
Management has also implemented a sales plan to further develop its sales of
home and office security alarm systems. During the first four months of 2003,
sales of these systems have out paced the prior year due to its effective sales
team efforts.
The Company also intends to pursue equity capital or debt funding.
With equity funding and anticipated future sales growth, management believes the
Company will be able to generate sufficient funds to continue in business as a
going concern. 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.
F-10
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of December 31, 2002:
Office furniture $ 619
Office equipment 31,258
Transportation equipment 40,062
Accumulated depreciation ( 9,736)
Net property and equipment $ 62,202
NOTE E - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consists of the following on December 31,
2002:
Accounts payable $ 177,168
Withholding taxes payable 46,653
Accrued interest 7,395
$ 231,216
NOTE F - NOTES PAYABLE
The December 31, 2002 balance consists of two promissory notes and a loan
secured by a vehicle purchase during 2002.
One note is 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, 2002 the note has accumulated accrued
interest of $7,395.
The second note is an unsecured non-interest bearing note payable for $15,000
from an unrelated individual dated December 23, 2002. The principal is due on
June 1, 2003. As of December 31, 2002 no principal was paid on this note.
On June 12, 2002, the Company purchased a vehicle that is secured with a note in
the amount of $34,151. The note bears interest of 4.9% per annum and is
amortized over 60 monthly payments of $644.20 through July 12, 2007. As of
December 31, 2002, the principal balance due on the note was $31,092.
F-11
NOTE F - NOTES PAYABLE (continued)
The principal maturities with regard to the above notes payable are as follows
for the next five years:
2003 $ 21,348
2004 56,666
2005 7,000
2006 7,351
2007 3,726
$ 96,091
NOTE G - LOANS PAYABLE TO STOCKHOLDERS
The loans payable to stockholders at December 31, 2002 consist of unsecured
notes payable to the Company's President and majority stockholder and its Vice
President. The notes bear interest at a rate of 6% and are due on demand. As of
December 31, 2002, the amount due on these loans is $89,287 and includes accrued
interest of $4,601.
NOTE H - 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 May 2001, two officers purchased founders shares of 19,700,000 for $32,000
and nrelated parties purchased 150,000 shares of common stock for $30,000.
In February 2002, the Company issued 219,000 shares of commons stock for $61,000
to accredited investors in a private placement.
During the year ended December 31, 2002, the Company issued 4,950,000 common
shares, valued at $400,000, as payment for professional services related to the
initial public offering and 138,860 common stock shares, valued at $62,930 to
subcontractors for services rendered. The stock was valued at the market value
of the services rendered.
NOTE I - INCOME TAXES
The Company has approximately $726,000 of federal and state net operating losses
available that expire in various years through the year 2017.
F-12
NOTE I - INCOME TAXES (continued)
Due to operating losses, there is no provision for current federal or state
income taxes for the years ended December 31, 2002 and 2001.
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, 2002 consists of net operating
loss carry forwards calculated using federal and state effective tax rates
equating to approximately $283,000 less a valuation allowance in the amount of
approximately $283,000. Because of the Company's lack of earnings history, the
deferred tax asset has been fully offset by a valuation allowance.
The Company's total deferred tax asset as of December 31, 2002 is as follows:
Net operating loss carry forwards $ 283,000
Valuation allowance (283,000)
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, 2002 and 2001 is as
follows:
2002 2001
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 J - COMMITMENTS
On April 15, 2002, the Company entered into a lease agreement for its executive
offices under non-cancelable operating lease that expires on April 30, 2007.
Rent expense for the years ended December 31, 2002 and 2001, was $29,120 and
$36,691, respectively. Future minimum rental payments as of December 31, 2002,
in the aggregate and for each of the five succeeding years are as follows:
2003 $ 38,014
2004 39,388
2005 40,762
2006 42,136
2007 14,198
F-13
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure.
None
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. . 32 President and Director
- ------------------ --- --------------------------------------
Stacey A. Kyzer . 31 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 $10 million in annual computer hardware and software purchase
orders.
Stacey A. Kyzer has been our Vice President, Secretary and Director since
our incorporation on June 23, 2001. She will serve as a director until our next
annual shareholder meeting or until a successor is elected who accepts the
position.
Ms. Kyzer's experience over the last five years consists of the following.
Ms. Kyzer was employed as a Pharmacist by Walgreens from January 1996 to
the present, and as a Pharmacy Manager by Walgreens from August 1999 to April
2001.
Ms. Kyzer has been employed as a Vice President, Secretary and Director of
our Company from May 2001 to the present.
Family Relationships.
Family Relationships
Kevin G. Kyzer, our President, and Stacey A. Kyzer, our Vice President, are
husband and wife. There are no other family relationships.
Significant Employees.
Legal Proceedings
No officer, director, or persons nominated for such positions, promoter or
significant employee has been involved in legal proceedings that would
be material to an evaluation of our management.
Promoters
- ----------
Our Company has issued 1,250,000 shares of our common stock to The
Corporate Solution, Inc., a Nevada corporation, for its agreement to provide
business consulting and financial public relations services. In addition, our
Company has issued 1,250,000 shares of our common stock to Chester-Link, Inc., a
Texas corporation, for its agreement to provide business consulting and
financial public relations services.
Item 10. Executive Compensation.
Summary Compensation Table As of December 31, 2002
- ----------------------------------------------------
Annual Compensation Long Term Compensation
------------------- ------------------------
Other Annual Restricted
Salary Bonus Compensation Stock Award(s)
Name and Principal Position . . . . . . . . . . . . Year ($) ($) ($)
- - --------------------------------------------------- -------- --------------- ------------- -------------- ------------
Kevin G. Kyzer
President . . . . . . . . . . . . . . . . . . . . . 2002 $ 0 0 0 0
Stacy A. Kyzer
Vice President. . . . . . . . . . . . . . . . . . . 2002 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, 2002, 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.
Title of . . . . . . Current
Class . . . . . . . Name and Address # of Shares Ownership % Owned
- --------------------- ---------------------- ------------ --------- ------
Kevin G. Kyzer
10812 Kenderly Ct.
Common . . . . . . . Charlotte, N.C. 28277 9,860,000 Direct 39.1%
- --------------------- ---------------------- ------------ --------- ------
Stacey A. Kyzer
10812 Kenderly Ct.
Common . . . . . . . Charlotte, N.C. 28277 9,840,000 Direct 39.0%
- --------------------- ---------------------- ------------ --------- ------
Security Ownership of Officers and Directors (2).
Title of Class . . . . . . . Name and Address # of Shares Ownership Current % Owned
- ----------------------------- ------------------------ ----------- ---------- ----------------
Kevin G. Kyzer
10812 Kenderly Ct.
Common . . . . . . . . . . . Charlotte, NC 28277
9,860,000 Direct 39.1%
----------- ---------- ----------------
Stacey A. Kyzer
Common . . . . . . . . . . . 10812 Kenderly Ct.
Charlotte, NC 28277 9,840,000 Direct 39.0%
- ----------------------------- ------------------------ ----------- ---------- ----------------
All Officers And Directors
Common . . . . . . . . . . . As a Group (2) 19,850,000 Direct 78.7%
- ----------------------------- ------------------------ ----------- ---------- ----------------
There are currently no arrangements, which would result in a change in our
control.
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
25,159,860 shares of common stock outstanding as of December 31, 2002.
Item 12. Certain Relationships and Related Transactions.
In March 2002, we entered into a Consulting Services Agreement with
Greentree Financial Services, Corp. Under the terms of the agreement, Greentree
Financial Group, Inc. has agreed to use its best efforts to assist us in having
our common stock publicly traded. In exchange for its services, we have agreed
to pay Greentree Financial Group, Inc., 975,000 shares of stock. Those shares
were issued on June 6, 2002. Greentree Financial Group, Inc. is not entitled to
any future issuances of our common stock or other compensation from us.
Greentree Financial Group, Inc. is owned by Michael Bongiovanni and Robert C.
Cottone. Mr. Bongiovanni and Mr. Cottone have no other relationship to our
officers or directors and have never received or intended to receive any
compensation other than the compensation described.
In March 2002, we entered into a Consulting Agreement with 21st Equity
Partners, LLC. Pursuant to the agreement, 21st Equity Partners, LLC was issued
1,225,000 shares of our common stock on June 6, 2002 for consulting services in
connection with all phases of bringing our Company public and public relations
consultation after we are trading in the public market. 21st Equity Partners,
LLC will receive no additional compensation or issuances of common stock under
the agreement for the services that it is providing. Mr. David Wood is the sole
owner of 21st Equity Partners, LLC. Mr. Wood has no other relationship to our
officers and directors, and has never received or intended to receive any
compensation other than the compensation referred to above.
In April 2002, we entered into a contract with The Corporate Solution,
Inc., a Nevada corporation owned by Mr. Robert P. Atwell. It received
1,225,000 shares of our common stock on June 6, 2002 for agreeing to provide
business consulting and financial public relations services to our Company. The
Corporate Solution also assisted us in revising our business plan and developing
a marketing strategy for our products and concept. The Corporate Solution, Inc.
is not entitled to any future issuances of stock or other compensation from us.
Mr. Atwell has no other relationship to our officers and directors, and has
never received or intended to receive any compensation other than the
compensation referred to above.
In April 2002, we entered into a contract with Chester-Link, Inc., a Texas
corporation owned by Ms. Lynne Griffin. It received 1,250,000 shares of our
common stock on June 6, 2002 for agreeing to provide business consulting and
financial public relations services to our Company. Chester-Link also assisted
us in revising our business plan and developing a marketing strategy for our
products and concept. Chester-Link, Inc. is not entitled to any future issuances
of stock or other compensation from us. Ms. Griffin has no other relationship
to our officers and directors, and has never received or intended to receive any
compensation other than the compensation referred to above.
Item 13. Exhibits and Reports on Form 8-K.
(a) List of documents filed as part of this Report:
None
(b) Exhibits:
The following exhibits listed are filed as part of this Report:
99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Item 14. Controls and Procedures.
Within 90 days prior to the date of filing of this report, we carried out an
evaluation, under the supervision and with the participation of our management,
including the Chief Executive Officer (who also effectively serves as our
Principal Financial Officer), of the design and operation of our disclosure
controls and procedures. Based on this evaluation, our Chief Executive Officer
concluded that our disclosure controls and procedures are effective for the
gathering, analyzing and disclosing the information we are required to disclose
in the reports we file under the Securities Exchange Act of 1934, within the
time periods specified in the SEC's rules and forms. There have been no
significant changes in our internal controls or in other factors that could
significantly affect internal controls subsequent to the date of this
evaluation.
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 May 15, 2003 /s/ Kevin Kyzer
Principal Accounting Kevin Kyzer May 15, 2003 /s/ Kevin Kyzer
Officer
Principal Financial
Officer Kevin Kyzer May 15, 2003 /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 May 15, 2003
/s/ Stacey Kyzer Stacy Kyzer Director May 15, 2003
CERTIFICATIONS
I, Kevin Kyzer, certify that:
1. I have reviewed this annual report on Form 10KSB of Technology Connections;
2. Based on my knowledge, this annual 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; and
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 issuer as of, and for, the periods presented in this
annual report.
4. I and the issuer's other certifying officers are responsible for
establishing and maintaining disclosure controls and procedures for the
issuer and have:
(i) Designed such disclosure controls and procedures to ensure that
material information relating to the issuer, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which the
periodic reports are being prepared;
(ii) Evaluated the effectiveness of the issuer's disclosure controls and
procedures as of February 1, 2003 ("Evaluation Date"); and
(iii) Presented in the report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as
of the Evaluation Date;
5. I and the issuer's other certifying officers have disclosed, based on our
most recent evaluation, to the issuer's auditors and the audit committee of
the board of directors (or persons fulfilling the equivalent function):
(i) All significant deficiencies in the design or operation of internal
controls which could adversely affect the issuer's ability to
record, process, summarize and report financial data and have
identified for the issuer's auditors any material weaknesses in
internal controls; and
(ii) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the issuer's
internal controls; and
6. I and the issuer's other certifying officers have indicated in the report
whether or not 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: May 15, 2003
/s/ Kevin Kyzer
Kevin Kyzer
Chief Financial Officer and CEO
Exhibit 99.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the annual filing of Technology Connections, Inc., a North
Carolina corporation (the "Company"), on Form 10KSB for the period ended
December 31, 2002, as filed with the Securities and Exchange
Commission (the "Report"), I, Kevin Kyzer, Chief Financial Officer of the
Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C.ss.1350), that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company.
/s/ Kevin Kyzer
Kevin Kyzer
Director
March 28, 2003