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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
For the Fiscal Year Ended June 30, 2003
[ ] Transition Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934
Commission File Number 333-29903
TS&B HOLDINGS, INC.
(Name of small business issuer in its charter)
Utah 30-0123229
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
556 Sand Lake Center IV 7380 Sand Lake Rd., Orlando, Florida 32819
(Address of principal executive offices) (Zip Code)
Issuer's telephone no.: (407) 649-8325
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common
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 S-B contained in this form, and no disclosure will be contained, to
the best of the 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.
State the issuer's revenues for its most recent fiscal year. $46,200.
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and ask prices of such stock as of a specified date within 60 days.
$463,914 (Based on bid price of $.009 and ask price of .012 on September 30,
2003 and 44,113,796 shares held by non-affiliates)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Class Outstanding as of September 30, 2003
Common Stock, Par Value 53,259,700
$.001 per share
DOCUMENTS INCORPORATED BY REFERENCE
NONE
Transitional Small Business Disclosure Format. Yes [ ] No [X]
TS&B HOLDINGS, INC.
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business ......................................... 3
Item 2. Description of Property.......................................... 4
Item 3. Legal Proceedings................................................ 4
Item 4. Submission of Matter to a Vote of Security Holders............... 4
PART II
Item 5. Market for Common Equity and Related Stockholder Matters......... 5
Item 6. Management's Discussion and Analysis or Plan of Operation........ 6
Item 7. Financial Statements............................................ 10
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 10
PART III
Item 9. Directors, Executive Officers, Promoters and Control persons;
Compliance with Section 16(a) of the Exchange Act......... 11
Item 10. Executive Compensation.......................................... 12
Item 11. Security Ownership of Certain Beneficial Owners and Management.. 12
Item 12. Certain Relationships and Related Transactions.................. 13
PART IV
Item 13. Exhibits and Reports............................................ 13
SIGNATURES............................................................... S-1
2
PART I
Item 1. Description of Business
Business Development
TS&B Holdings, Inc. ("TSBB" or the "Company"), a Utah corporation, is engaged in
the business of financial services through its subsidiary TS&B Financial
Services, Inc.
TS&B Financial Services, Inc. (TS&B-FS), a Florida corporation, provides
investment, merchant and mortgage banking services to micro-, small- and mid-cap
businesses. TS&B-FS also offers consulting services. Servicing businesses
primarily in the $5 million to $150 million revenues range, TS&B-FS creates
value by molding strategic direction, fostering positive net-present-value
capital decisions and restructuring operations to increase free cash flow for
client businesses.
TS&B Financial Services, Inc., an independent financial services firm serving
customers nationally from its headquarters in Orlando, Florida, has offices in
Freeport, Illinois, and Tavernier, Florida.
The Company's principal executive offices are located at 556 Sand Lake Center
IV, 7380 Sand Lake Rd., Orlando, Florida, 32819, and its telephone number is
407-649-8325.
Marketing
The Company markets it products and services through its operating subsidiary
TS&B Financial Services, Inc.
TS&B Financial Services, Inc., a Florida corporation, provides investment,
merchant and mortgage banking services to a wide array of private and public
corporate clients. These services are designed to service corporate clients
with sale of $5 to $150 million in annual sales. The Company's market is not
industry specific. Management estimates that there are 3,500 listed public
companies and 1,500,000 private firms within the Company's target market.
3
The Company uses direct mail, broker referral and print media to present its
services to the target market.
Competition
TS&B Financial Services, Inc. competes nationally with companies such as
Goldsmith-Agio, Raymond James and Houlihan Lokey as well as many local firms.
Employees
Presently, the Company does not have employees. The Company has two full time
officers. The officers are paid on performance. The Company does not currently
offer a pension plan. Management intends to hire qualified personnel as business
conditions warrant. The Company may use the services of certain outside
consultants and advisors as needed on a contract basis.
Facilities
The Company's principal place of business and corporate offices are located at
556 Sand Lake Center IV, 7380 Sand Lake Rd., Orlando, Florida, 32819. These
temporary facilities are located in the Sand Lake Center IV Building. The leased
facilities consist of approximately 500 square fee of Class A space, at a rate
of $23.00 per square foot. The term of the lease, negotiated in August 2003, is
six (6) months.
The subsidiary of the Company represents certain sectors of the nation through
offices located in Tavernier, Florida, and Freeport, Illinois.
Item 2. Description of Property
The information required by this Item is contained in Item 1 above, under the
heading "Facilities."
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the Company or any of
its subsidiaries is a party or to which any of its property is subject and, to
the best of its knowledge, no such actions against the Company are contemplated
or threatened.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's Securities Holders during
the fourth quarter of the Company's fiscal year ended June 30, 2003.
4
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's common stock is eligible to be traded in the over-the-counter
market and quotations are published on the OTC Bulletin Board under the symbol
"TSBB," and in the National Quotation Bureau, Inc. ("NQB") "pink sheets" under
TS&B Holdings, Inc. Inclusion on the OTC Bulletin Board permits price quotations
for the Company's shares to be published by such service.
The following table sets forth the range of high and low bid prices of the
Company's shares for each quarterly period for the past two fiscal years as
reported by the NQB. These prices represent prices between dealers, do not
include retail markups, markdowns or commissions and do not represent actual
transactions.
Fiscal Year High Low
(Starting July 1)
2002 First Quarter .01 .055
Second Quarter .055 .012
Third Quarter .02 .008
Fourth Quarter .017 .009
2002 First Quarter .019 .005
Second Quarter - -
Third Quarter - -
Fourth Quarter - -
--------- ---------
(1) Through June 30, 2003
As of September 30, 2003 there were approximately 1,101 holders of record of the
Company's common stock, which figure does not take into account those
shareholders whose certificates are held in the name of broker-dealers.
Dividend Policy
The Company has not declared or paid cash dividends or made distributions in the
past on its common stock, and the Company does not anticipate that it will pay
cash dividends or make distributions in the foreseeable future. The Company
currently intends to retain and invest future earnings to finance its
operations.
Recent Sales of Unregistered Securities
In fiscal 2003, the Company issued the following shares as compensation,
acquisition and consulting fees:
--------------------- ------------
Joel Arvilla 1,500,000
--------------------- ------------
Scott Neils 2,000,000
--------------------- ------------
Roy Salisbury 3,500,000
--------------------- ------------
Charles Giannetto 2,000,000
--------------------- ------------
Frank Clear 200,000
--------------------- ------------
David Bryant 7,000,000
--------------------- ------------
Diana Jenkins 4,500,000
--------------------- ------------
Kirt Ashman 4,500,000
--------------------- ------------
Michael Ebbeler 7,000,000
--------------------- ------------
Richard Harris 400,000
--------------------- ------------
5
The above referenced shares were issued in private, isolated transactions. In
completing each transaction, the Company relied upon the exemption from
registration under the Securities Act of 1933, as amended, provided by Section
4(2) of such Act.
Item 6. Management's Discussion and Analysis or Plan of Operation
The following information should be read in conjunction with the consolidated
financial statements and notes thereto appearing elsewhere in this Form 10-KSB.
Management's Statement
TS&B Holdings, Inc. over the past year has been working to implement the
strategy of the company as a financial services and real estate development
company. The Company currently has one subsidiary, TS&B Financial Services,Inc..
Management's ongoing goal is to develop the Company into a real estate
development and financial services firm. Management continues to look at and
explore other acquisition opportunities as they present themselves.
Planned Acquisition
On April 15, 2002, the Company entered into an acquisition agreement, subject to
final audit, with PDG LLC ("PDG"), a Florida LLC, which provides and engages in
real estate development and management. PDG has yet to supply audited financial
statements to complete the transaction.
Agreements
On January 30,2003 Company signed a fee letter agreement with an Orlando
developer, Gillio Development, for financing for a chain of national franchise
restaurants. TS&B Financial Services, a subsidiary of Company in connection with
the Gillio engagement is providing investment and merchant banking services,
strategic planning advice and corporate finance consulting.
On January 22, 2003 the Company signed a Consulting Agreement with Cummings
Financial Services, a local multi-talented entrepreneur and country and western
entertainer to assist in raising capital for his entertainment career and for
the manufacturing and marketing of two unique patented accessories that will be
sold to the recreational vehicle and automotive accessories industry. This
client also retained Company to assist in the sale of its residential mortgage
business in the Tampa area.
On February 4, 2003 Company announced a new business relationship with Trust
Mortgage Company, a nationwide mortgage banking firm headquartered outside of
Boston MA. This relationship implements a strategic goal of Company's corporate
growth program designed to establish the Company as a leading financial services
and commercial real estate holding company with strong national presence. This
relationship will enhance the Company's direct lending services for commercially
viable projects. This development provides Company with the strong backing of an
established nationwide mortgage-banking firm enabling Company to offer
commercial mortgage funding nationwide for qualified properties. Funding is
provided through the mortgage firm's relationships with life insurance
companies, conduits, banks and HUD insurance programs. The mortgage firm is a
federally licensed mortgagee through FHA.
6
On March 10, 2003 the Company signed a consulting agreement with answerRx, a
Florida firm that provides consulting services to large groups for fulfillment
of prescriptions from licensed Canadian pharmacies. Company is providing
consulting and strategic planning services this group prescription service firm.
With the national concern over the high cost of prescriptions is in the
forefront of the domestic news, Company believes this pharmacy service firm
provides a valuable service.
On April 10, 2003 Company signed a Letter Agreement with a California company,
The Credit Exchange, to provide corporate consulting and write a business plan
and Private Placement Memorandum to be used in conjunction with a Private
Placement the Credit Exchange is undertaking. The Credit Exchange acts as an
intermediary for credit repair services nationwide.
On May 7, 2003 Company executed a Letter of Intent to acquire the assets of
Independence Water Group, a Virginia LLC (IWG). IWG acquired the assets of
Grayson Spring Water, from a sale in bankruptcy. In their last year of operation
the former company known as Grayson had revenues of approximately $15M dollars.
The water company's primary asset is an existing plant with capacity to produce
3.0M bottles of water a month. IWG developed unique formulas for nutritional
water, and healthful sports and isotonic waters and will begin branding these
products under the name Health Beverage Group, Inc.. Bottled water is the
fastest growing major beverage category with annual sales approaching $9.0
Billion. Company looks forward to aggressively entering this market. Company.
will immediately begin assisting in development and marketing of Health Beverage
Group, Inc. products. The agreements are subject to material and customary
contingencies.
On June 22, 2003 Company entered into a Letter Agreement with Stanton Walker &
Company, a New York Investment Banking Firm to acquire ninety percent of
Wellstone Acquisition Corp. The agreements are subject to material and customary
contingencies.
Subsequent Events
On September 22, 2003 Company through it's nominee, Health Beverage Group, Inc.,
(a to be formed Virginia Corporation), signed an asset acquisition agreement
with Independence Water Group (IWG).The pertinent provisions of said agreement
follow:
At Closing, HBG shall acquire the Assets and business set forth on Exhibit "A"
(collectively "Assets") of SELLER for the total purchase price specified herein
below ("Purchase Price"). SELLER at Closing shall provide HBG with a Warranty
Deed and Bill of Sale for the items set forth on Exhibit A. Said Warranty Deed
and Bill of Sale shall convey the Assets free and clear of all liens,
encumbrances and charges. The Purchase Price shall be payable at Closing as
follows:
7
a) a sum of cash represented by cash, capital contributions, and SELLER
loans (currently this amount is Eight Hundred Thirty One Thousand
dollars ($831,000.00) USD in cash, at Closing;
b) a non-accountable expense premium of 25% on the amount in sub-paragraph
1(a), in cash at Closing;
c) A valid enforceable Second Mortgage in the amount of One Million Two
Hundred Thousand ($1,200,000.00)USD secured by Assets from HBG to
SELLER (or its successors or assigns)
d) Payment of the Grayson National Bank mortgages in the approximate
amount of Two Million Five Hundred Forty Thousand dollars
($2,540,000.00) USD
e) Payment of Trade payables in the current approximate amount of
$165,000.00 as set forth in Exhibit "B". The final amount paid
hereunder is subject to Article 2.
Company is currently in the process of undertaking a Private Placement to fund
the transaction.
On September 23, 2003 Company signed a Memorandum of Understanding with
EnviroTech Rotary Power Holdings, Inc. (ERPH) to acquire eighty percent of the
ERPH. ERPH is a company with ownership and cross ownership in various companies
and technologies, including, Cryofire Golf Technology, Rotary Power Engine
Technology and ElectroMarine Technology. Company and ERPH shall enter into a
Stock Acquisition Agreement whereby ERPH shall convey 80% ownership to Company
for Five Million (5,000,000) common shares of Company shares and $750,000USD
post merger from an equity Line. ERPH owners will retain twenty percent (20%)
ownership in ERPH. ERPH will act as a Holding Company for the these various
technology subsidiaries. ERPH will own no less than forty-nine percent (49%) of
each subsidiary and the balance of the 51% shall be owned by the original
shareholders of ERPH or their nominees. The Purchase shall be funded by Company
providing a post-merger initial equity Line in the amount of $2.5M to fund the
initial purchase of $750,000USD and the balance of cash for future expansion of
ERPH and its subsidiaries. The agreements are subject to material and customary
contingencies.
On September 24, 2003 Company entered into an acquisition agreement with Sports
Nation, Inc., a Nevada privately held company in the sports memorabilia and
related businesses. The agreements are subject to material and customary
contingencies. The pertinent provisions of said agreement follow:
"At Closing, TSBB shall acquire One Hundred Percent (100%) of all of the issued
and outstanding capital stock (fully paid and non-assessable) of the SELLER, the
amount of One Thousand (1,000) common shares ("SHARES") of SELLER for the total
purchase price of Thirty Thousand and 00/100 Dollars ($30,000) USD ("Purchase
Price") payable at Closing as follows: Three Million Rule 144 shares of TSBB
("STOCK").
8
Results of Operations
The following table sets forth the percentage relationship to total net sales of
principal items contained in the Company's Statements of Operations for the two
most recent fiscal years ended June 30, 2003 and 2002. It should be noted that
percentages discussed throughout this analysis are stated on an approximate
basis.
Fiscal Years Ended
June 30,
2003 2002
Total net sales 100% 100%
Cost of sales - -
Gross profit 100 100
Sales and marketing expenses 23 15
General and administrative expenses 3,608 1,205
Depreciation and amortization 3.5 1
(Loss) from operations (3,438) (1,121)
Other income (loss) (170) (137)
Net loss from discontinued operations -0- (682)
Income (loss) before income taxes (3,682) (1,940)
Provisions (benefit) for income taxes - -
Net income (loss) (3,682) (1,940)
For the Year Ended June 30, 2003 Compared to the Year Ended June 30, 2002
Total sales, net of allowances and discounts, for the fiscal year ended June 30,
2003 ("2003") decreased 75% from the fiscal year ended June 30, 2002 ("2002")
attributed to reduced client fees. Cost of sales (as a percentage of total
revenues) in 2003 and 2002 did not exist
Sales and marketing expenses decreased 29% in 2003 due to reduced overhead and
the discontinuance of certain product offerings. As a percentage of total
revenues, sales and marketing expenses increased from 11% in 2002 to 23% in
2003, attributed to decrease revenue. General and administrative expenses
increased 284% in 2003 primarily due to professional fees. As a percentage of
total revenues, general and administrative expenses (including professional
fees) increased from 1,205% in 2002 to 3,682% in 2003. This result is primarily
attributed to reduced sales. Although, there was an increase in the percentage
of G & A, the overall expense amount was reduced 33% in 2003.
During 2003, the Company recognized no loss from trading equities compared to a
loss of $288,390 in 2002. The Company had a net loss of $1,588,23 in 2003
compared to a net loss of $4,081,069 in 2002.
Net Operating Losses
The Company has accumulated approximately $11,300,000 of net operating loss
carryforwards as of June 30, 2003, which may be offset against future taxable
income. The net operating loss begins to expire in the year 2009. The use of
these losses to reduce future income taxes will depend on the generation of
sufficient taxable income prior to the expiration of the net operating loss
carryforwards. In the event of certain changes in control of the Company, there
will be an annual limitation on the amount of net operating loss carryforwards
which can be used. No tax benefit has been reported in the financial statements
for the year ended June 30, 2003 because the potential tax benefits of the loss
carryforward is offset by valuation allowance of the same amount.
9
Liquidity and Capital Resources
Historically, the Company's working capital needs have been satisfied by sales
revenues and from the sale of securities. At June 30, 2003 the Company had a net
working capital of $38,076, compared to net working capital deficit of $(304) at
June 30, 2002. The increase in working capital at June 30, 2003 is primarily
attributed to proceeds from Note Payable and officer and shareholder advances.
Working capital was positively affected at June 30, 2003 by the increase in
accounts payable and accrued expenses.
At June 30, 2003, the Company had total assets of $238,758 and total
stockholders' equity of $(233,664), compared to total assets of $198,667 and
total stockholders' equity of $9,984 at June 30, 2002.
Net cash used by operating activities for 2003 was $236,672 compared to $280,300
in 2002. This was due to primarily to the reduced staff and increases in
non-cash expenses for 2003, including inventory write down and decrease in
market value of tradeable securities. The Company was provided no cash flows by
investing activities in 2003 compared to $114,683 used by investing activities
in 2002. The Company realized $275,052 cash from financing activities in 2003,
and realized $161,243 in 2002 from debt financing. The Company anticipates
meeting its working capital needs during 2003 fiscal year primarily with
revenues and debt financing. In the opinion of management, inflation has not had
a material effect on the operations of the Company.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to the "safe harbor"
provisions of the Private Securities Litigation Reform Act of 1995. The Company
wishes to advise readers that actual results may differ substantially from such
forward-looking statements. Forward-looking statements involve risks and
uncertainties that could cause actual results to differ materially from those
expressed in or implied by the statements, including, but not limited to, the
following: Changing economic conditions, interest rate trends, continued
acceptance of the Company's products in the marketplace, competitive factors,
and other risks detailed in the Company's periodic report filings with the
Securities and Exchange Commission.
Item 7. Financial Statements
The Company's financial statements as of and for the fiscal years ended June 30,
2003 and 2002 have all been examined to the extent indicated in their report by
B2d Semago, independent certified public accountants, and have been prepared in
accordance with generally accepted accounting principles and pursuant to
Regulation S-B as promulgated by the Securities and Exchange Commission. The
aforementioned financial statements are included herein starting with page F-1.
10
Item 8. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
This Item is not Applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act The following table sets forth the names,
ages, and offices held with the Company by its directors and executive officers:
Name Position Director Since Age
James E. Jenkins President, Chief 2003 48
Executive Officer
and Director
Charles Giannetto Secretary/Treasurer 2003 48
Chief Financial
Officer and Director
Thomas Ginther Director 2003 44
All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. There are no
agreements with respect to the election of directors. The Company pays each
director $500 per quarter for service on the Board of Directors.
Any non-employee director of the Company is reimbursed for expenses incurred for
attendance at meetings of the Board of Directors and any committee of the Board
of Directors. The Executive Committee of the Board of Directors, to the extent
permitted under Utah law, exercises all of the power and authority of the Board
of Directors in the management of the business and affairs of the Company
between meetings of the Board of Directors. Each executive officer serves at the
discretion of the Board of Directors.
The business experience of each of the persons listed above during the past five
years is as follows:
James E. Jenkins is the President and Chief Executive Officer of the Company.
Prior to his position with the Company, Mr. Jenkins was Co-Managing General
Partner for Marco Cat, LLP; a partnership formed to acquire the Olde Marco
Island Inn. Mr. Jenkins has founded and operated several companies in
manufacturing and financial services. Mr. Jenkins has over 20 years of
diversified experience in senior management, operations and financial positions.
Mr. Jenkins attended Northern Essex Community College and Daniel Webster
Community College for business management.
Charles Giannetto is the Secretary/Treasurer/CFO of the Company. Charles
Giannetto is a graduate of the University of Minnesota. He received his law
degree from William Mitchell College of Law in 1980 and was in private practice
for 20 years. Mr. Giannetto is a presently a principal and officer with the
investment banking firm of TransAtlantic Surety & Bond Company. Ltd., UK.
11
Thomas Ginther, a Director of the Company. Mr. Ginther is a graduate of Troy
State University and received his degree in business. Mr. Ginther has been a
licensed securities principal for over 13 years and has previously held Series 6
and 63 licenses. Mr. Ginther is currently a principal of Chesterfield Properties
and Liquid Grass.
Item 10. Executive Compensation
The Company does not have a bonus, profit sharing, or deferred compensation plan
for the benefit of its employees, officers or directors. The Company does pay
each director $500 per quarter as a directors' fee. The Company's subsidiaries
do have performance bonuses or profit sharing as part of their employment
contracts with key employees.
Cash Compensation
The following table sets forth all cash compensation paid by the Company for
services rendered to the Company for the fiscal years ended June 30, 2000, 2001
and 2002, to the Company's Chief Executive Officer. No executive officer of the
Company has earned a salary greater than $100,000 annually for any of the
periods depicted.
Summary Compensation Table
Other All
Annual Other
Name and Fiscal Compen- Compen-
Principal Position Year Salary Bonus sation sation
none
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth information, to the best knowledge of the Company
as September 30, 2002, with respect to each person known by the Company to own
beneficially more than 5% of the Company's outstanding common stock, each
director and all directors and officers as a group.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class(1)
- ------------------- -------------------- -----------
James E. & Diana Jenkins* 5,372,3947 9.91%
556 Sand Lake Center
7380 Sand Lake Rd
Orlando, Florida 32819
Charles Giannetto* 500,000 0.93%
556 Sand Lake Center
7380 Sand Lake Rd.
Orlando, Florida 32819
12
Thomas Ginther* 0 0.0%
1501 Citrus Center
255 South Orange Avenue
Orlando, Florida 32801
TransAtlantic Surety & 3,273,510 6.15%
Bond Company, Ltd.
c/o 5703 Red Bug Lake Rd. #214
Winter Springs, Florida 32708
All directors and executive 9,145,904 33.5%
officers as a group
(3 persons in group)
- ----------------
* Director and/or executive officer
Note: Unless otherwise indicated in the footnotes below, the Company has been
advised that each person above has sole voting power over the shares indicated
above.
(1) Based upon 53,259,700 shares of common stock outstanding on September 30,
2003.
Item 12. Certain Relationships and Related Transactions
During 2003 the Company provided financial advisory services to Transatlantic
Surety & Bond Co., Ltd., a 6.15% stockholder of the Company. Fees charged
for these services amounted to $210,300. At June 30, 2003, the Company wrote off
$107,403 for the above-described services.
In early fiscal 2003 the Company advanced a stockholder and former employe
$60,000. As of June 30, 2003, management has determined this amount to be
uncollectible and has written it off.
The Company disposed ot its manufacturing segment during 2002. The net assets
were purchased by companies owned by a stockholder and former officer of the
Company. In connection with this transaction a loss of $192,858 on disposal of
discontinued operations was recorded.
PART V
Item 13. Exhibits and Reports on Form 8-K
Exhibit No. Description
- ----------- -------------
31.1 Certification of President and Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of President and Chief Executive Officer
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
Company Financial Statements June 30, 2003
13
TS&B HOLDINGS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
TS&B HOLDINGS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003
CONTENTS
Page
-------
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET F-2
CONSOLIDATED STATEMENTS OF OPERATIONS F-3 - F-4
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
ACCUMULATED (DEFICIT) F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS F-6 - F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-8 - F-19
To the Board of Directors
TS&B Holdings, Inc.
Orlando, Florida
Independent Auditors' Report
We have audited the accompanying consolidated balance sheet of TS&B Holdings,
Inc. as of June 30, 2003, and the related consolidated statements of operations,
changes in stockholders' equity accumulated (deficit) and cash flows for the
years ended June 30, 2003 and 2002. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
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 audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TS&B Holdings, Inc.
as of June 30, 2003, and the results of its operations, changes in stockholders'
equity accumulated (deficit) and cash flows for the years ended June 30, 2003
and 2002, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in the accompanying financial
statements, the Company's liabilities exceed assets and it has incurred net
losses from continuing operations of $1,588,423 and $2,647,337 for 2003 and
2002. During 2002, the Company began offering investment banking and other
financial advisory services. In 2003 and 2002, revenues from these services were
not able to support on-going operations. Further, 2003 operating cash flows were
insufficient to support operations. Through October 10, 2003, the Company has
not generated revenues nor obtained debt or equity funding to support continuing
operations. These factors and others discussed in Note M raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets or the amounts and classification of
liabilities that might be necessary in the event the Company cannot continue in
existence.
/s/B2d semago
CERTIFIED PUBLIC ACCOUNTANTS
Tampa, Florida
October 10, 2003
F-1
TS&B HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2003
ASSETS
CURRENT ASSETS
Cash $ 38,076
Accounts receivable 7,000
Interest due on stock subscription
receivable 153,082
Other current assets 100
-------------
TOTAL CURRENT ASSETS 198,258
OTHER ASSET - DEPOSIT ON PENDING
ACQUISITION 40,500
-------------
$ 238,758
=============
LIABILITIES AND STOCKHOLDERS' EQUITY ACCUMULATED (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued
expenses $ 177,553
Advances from officers and stockholders 144,869
Note payable to related parties 150,000
-------------
TOTAL CURRENT LIABILITIES 472,422
-------------
COMMITMENTS AND CONTINGENCIES -
-------------
STOCKHOLDERS' EQUITY ACCUMULATED (DEFICIT)
Common stock, $.001 par value,
100,000,000 shares authorized,
53,259,700 issued and outstanding 53,260
Additional paid-in capital 14,487,594
Stock subscription receivable ( 1,250,000)
Accumulated deficit (13,524,518)
-------------
( 233,664)
-------------
$ 238,758
=============
The accompanying notes to consolidated financial statements
are an integral part of this statement.
F-2
TS&B HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
2003 2002
----------- ------------
REVENUES $ 46,200 $ 210,400
----------- ------------
OPERATING EXPENSES
Professional fees 673,297 2,174,677
General and administrative 1,027,891 361,641
Depreciation and amortization 1,653 837
Marketing expenses 10,656 32,192
----------- -------------
1,713,497 2,569,347
----------- -------------
NET OPERATING LOSS (1,667,297) (2,358,947)
----------- -------------
OTHER INCOME (EXPENSE)
Interest income 75,000 -
Interest expense ( 13,096) -
Loss on stock investment - ( 288,390)
Other 16,970 -
----------- ------------
78,874 ( 288,390)
----------- ------------
NET LOSS FROM CONTINUING
OPERATIONS (1,588,423) (2,647,337)
----------- ------------
NET LOSS FROM DISCONTINUED
OPERATIONS
Net loss from discontinued
operations - (1,240,874)
Loss on disposal of discontinued
operations - ( 192,858)
----------- ------------
- (1,433,732)
NET LOSS $(1,588,423) $(4,081,069)
=========== ===========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-3
TS&B HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
(Continued)
2003 2002
------------ -------------
NET LOSS PER COMMON
SHARE $( .04) $( .31)
============ =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 35,945,453 13,247,634
============ =============
NET LOSS FROM CONTINUING
OPERATIONS $( .04) $( .20)
============ =============
NET LOSS FROM DISCONTINUED
OPERATIONS $( - ) $( .09)
============ =============
LOSS ON DISPOSAL OF DISCONTINUED
OPERATIONS $( - ) $( .02)
============ =============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-4
TS&B HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ACCUMULATED (DEFICIT)
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
Additional Stock
Common stock paid-in subscription Accumulated
-------------------------
Shares Par value capital receivable (deficit)
-------------------------- ------------- -------------- -------------
BALANCE JUNE 30, 2001 10,911,700 $ 10,912 $ 10,895,317 $ (1,250,000) $ (7,855,026)
Stock issued for Director,
employee and officer
compensation 912,000 912 130,888 - -
Stock issued for
professional services 8,786,000 8,786 2,149,264 - -
Net (loss) - - - - (4,081,069)
-------------------------- ------------- -------------- -------------
BALANCE JUNE 30, 2002 20,609,700 20,610 13,175,469 (1,250,000) (11,936,095)
Stock issued for employee
and officer compensation 9,150,000 9,150 712,325 - -
Stock issued for
professional services 19,000,000 19,000 563,800 - -
Stock issued in connection
with acquisition 4,500,000 4,500 36,000 - -
Net (loss) - - - - (1,588,423)
-------------------------- ------------- -------------- -------------
BALANCE JUNE 30, 2003 53,259,700 $ 53,260 $ 14,487,594 $ (1,250,000) $(13,524,518)
========================== ============= ============== =============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
TS&B HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
2003 2002
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 39,200 $ 102,097
Cash paid for continuing operating
expenses (292,842) ( 56,924)
Cash paid for discontinued operations - (325,473)
Other 16,970 -
--------- -----------
Net cash used by operating
activities (236,672) (280,300)
--------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments - 40,610
Repayment of notes receivable - 87,486
Purchase of office equipment - ( 8,263)
Other - ( 5,150)
--------- -----------
Net cash provided by
investing activities - 114,683
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable 150,000 173,100
Proceeds from officer and
stockholder advances 125,052 ( 11,857)
--------- ----------
Net cash provided by
financing activities 275,052 161,243
--------- ----------
NET INCREASE (DECREASE) IN CASH 38,380 ( 4,374)
CASH, BEGINNING OF YEAR ( 304) 4,070
--------- ----------
CASH (DEFICIT), END OF YEAR $ 38,076 $( 304)
========= ==========
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
TS&B HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2003 AND 2002
2003 2002
------------ ------------
RECONCILIATION OF NET LOSS TO
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS $(1,588,423) $(4,081,069)
RECONCILING ADJUSTMENTS
Loss on disposition of assets 5,783 -
Loss on investments - 288,390
Loss from discontinued operations - 1,240,874
Loss on disposal of discontinued
operations - 192,858
Decrease (increase) in accounts
receivable 101,203 ( 108,303)
(Increase) decrease in other assets ( 69,850) 10,674
Depreciation and amortization 1,653 827
Increase in accounts payable
and accrued expenses 8,687 211,072
Stock issued for services 1,304,275 2,289,850
Decrease in net assets from
discontinued operations - ( 325,473)
------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES $( 236,672) $( 280,300)
============ ============
NONCASH INVESTING AND FINANCING ACTIVITIES
STOCK ISSUED FOR SERVICES $ 1,304,275 $ 2,289,850
============ ============
STOCK ISSUED AS DEPOSIT $ 40,500 $ -
============ ============
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-7
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company activities
TS&B Holdings, Inc. (formerly known as Ammonia Hold, Inc.) (the Company) was
incorporated in the state of Utah in 1980.
Prior to 2003 the principal business of the Company was the manufacture of odor
reducing and oil and grease absorbent products using patented processes. As
further described below, at June 30, 2002, the Company disposed of this segment
of the business.
Commencing in 2002, the Company began offering investment banking and other
financial advisory services to companies in a variety of businesses.
Basis of presentation
The accompanying consolidated financial statements include the Company and its
wholly-owned subsidiary TS&B Financial Services, Inc. in 2003 and 2002, and
Super Dry Industries, Inc. in 2002. All intercompany accounts and transactions
have been eliminated in consolidation.
Revenue recognition
The Company's revenues are derived from the following sources:
- - contingency and other fees associated with providing investment banking
services;
- - hourly and other fees for providing financial advisory services.
Contingency and other fees associated with providing investment banking services
are recognized when the earning process is complete and management is confident
the Company will be paid.
Hourly and other fees from advisory services are recognized as the services are
rendered.
Impairment of long-lived assets
Long-lived assets, including goodwill and other intangibles, are periodically
reviewed for impairment when events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable.
The amount of an impairment loss is measured as the excess of the carrying
amount of the asset over the fair value of the asset.
See Note G for impairment adjustments related to long-lived assets.
F-8
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
These estimates and assumptions affect the reported amounts of assets and
liabilities and disclosure of contingent asset and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Deferred income taxes
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the period the
change is enacted.
Loss per common share
Loss per common share is computed using the weighted average of shares
outstanding during the periods presented in accordance with Statement of
Financial Accounting Standards No. 128, Earnings Per Share.
Cash and cash equivalents
For the purpose of the statement of cash flows, cash and cash equivalents
includes time deposits with original maturities of three months or less.
F-9
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE B - STOCK ISSUED FOR COMPENSATION AND CONSULTING SERVICES
During the years ended June 30, 2003 and 2002, the Company issued shares of
Company stock for Director, officer and employee compensation and for various
professional consulting services. A summary of these activities is as follows
(shares in 100's):
2003 2002
Shares Amount Shares Amount
--------------------- ---------------------------
Director compensation - $ - 5,000 $ 70,000
Employee and officer
compensation 91,500 721,475 4,120 61,800
Professional
consulting
services 190,000 582,800 87,860 2,158,050
---------------------- ---------------------------
281,500 $ 1,304,275 96,980 $ 2,289,850
====================== ===========================
The value assigned to the above shares is based on the stocks' traded market
price on or about the date the shares were issued.
For the years ended June 30, 2003 and 2002, the above amounts are included in
professional fees and general and administrative expenses.
NOTE C - STOCK SUBSCRIPTION RECEIVABLE
In June 2001, the Company entered into an acquisition agreement with
Transatlantic Surety and Bond Co., Ltd. (TSB), a United Kingdom corporation, for
purchase of 30% of its outstanding stock. Terms of the agreement provided for
the following, among others:
- - a purchase price of $1,250,000, payable in the form of a convertible,
callable, secured, subordinated debenture (see below);
- - TSB shall, on a best efforts basis, raise debt funds, and acquire
operating companies, as defined;
- - granted stock purchase options to TSB for a three year period as follows:
- - 3,000,000 shares at $1.50 per share
- - 3,000,000 shares at $3.50 per share
F-10
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE C - STOCK SUBSCRIPTION RECEIVABLE (continued)
The subordinated debenture noted above is from a company affiliated with TSB
Holdings, Inc. and bears interest at 6.0%. A portion of the acquired shares are
held in escrow pending TSB performance on debenture terms. Principal is payable
as follows:
Date Amount
--------- -----------
June 2002 $ 312,500
June 2003 312,500
June 2004 625,000
-----------
$ 1,250,000
===========
In addition, the Company has the option after June 2004, to convert the
debenture into stock of the affiliated company at the then existing market
price.
At June 30, 2003 and through October 10, 2003, TSB and/or its affiliated company
has not made its scheduled principal and interest payments. Further TSB has been
unsuccessful in raising debt funds and acquiring operating companies. At June
30, 2003, unpaid interest on the debenture amounted to $153,082.
F-11
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE D - SEGMENTS
Through June 30, 2002, the Company operated in two business segments;
manufacture of odor and absorption products; and financial services. Separate
management of each segment is required because each business unit is subject to
different marketing, delivery and technology strategies.
At June 30, 2003 and 2002, and for the years then ended, information on
reportable segments is as follows:
June 30, 2003
Financial Consolidated
Manufacturing services totals
------------- ----------- ------------
External revenues $ - $ 46,200 $ 46,200
============= =========== ============
Intersegment revenues $ - $ - $ -
============= =========== ============
Interest expense, net $ - $ - $ -
============= =========== ============
Depreciation $ - $ 1,653 $ 1,653
============= =========== ============
Loss from continuing
operations $ - $(1,588,423) $(1,588,423)
============= =========== ============
Loss from discontinued
operations $ - $ - $ -
============= =========== ============
Significant non-cash
items -
Employee and
consultant
compensation $ - $ 1,304,275 $ 1,304,275
Loss on stock
investments - - -
Loss on disposal of
discontinued assets - - -
------------ ----------- ------------
$ - $ 1,304,275 $ 1,304,275
============ =========== ============
Total assets $ - $ 238,758 $ 238,758
============ =========== ============
Expenditures for long-
lived assets $ - $ - $ -
============ =========== ============
F-12
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE D - SEGMENTS (continued)
June 30, 2002
Financial Consolidated
Manufacturing services totals
------------- ------------- -------------
External revenues $ - $ 210,400 $ 210,400
============= ============= =============
Intersegment revenues $ - $ - $ -
============= ============= =============
Interest expense, net $ - $ - $ -
============= ============= =============
Depreciation $ - $ 837 $ 837
============= ============= =============
Loss from continuing
operations $ - $(2,647,337) $(2,647,337)
============= ============= =============
Loss from discontinued
operations $(1,240,874) $ - $(1,240,874)
============= ============= =============
Significant non-cash
items -
Employee and
consultant
compensation $ - $(2,289,850) $(2,289,850)
Loss on stock
investments - ( 288,390) ( 288,390)
Loss on disposal of
discontinued assets ( 192,858) - ( 192,858)
------------ ------------- -------------
$( 192,858) $(2,578,240) $ 2,771,098
============ ============= =============
Total assets $ - $ 198,667 $ 198,667
============ ============= =============
Expenditures for long-
lived assets $ - $ 8,263 $ 8,263
============ ============= =============
The chief operating decision makers do not use cash loaned or invested in the
Company's segments to evaluate their performance. However, such information is
furnished to the chief operating decision makers. For the years ended June 30,
2003 and 2002, cash loaned or invested in each of the Company's segments
amounted to:
2003 2002
--------- ---------
Manufacturing $ - $ 173,100
Financial services 275,052 -
--------- ---------
$ 275,052 $ 173,100
========= =========
F-13
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE D - SEGMENTS (continued)
The manufacturing segment derived its revenues from sale of odor reducing and
oil and grease absorption products. The financial services segment derives its
revenues from hourly contingency and other fees from providing investment
banking and financial services.
At June 30, 2002, the Company had disposed of its manufacturing segment (see
Note E).
NOTE E - DISCONTINUED OPERATIONS
At June 30, 2002, the Company disposed of its manufacturing segment. Assets and
liabilities associated with this segment were sold to companies owned or
controlled by an officer and shareholder of the Company under the following
terms:
- - assets were disposed of at their carrying value at June 30, 2002, which
management approximates at their fair market value;
- - liabilities were assumed at their carrying value as of June 30, 2002;
A summary of assets disposed of and liabilities assumed at June 30, 2002, are as
follows:
Current assets $ 357,426
Fixed assets, net 1,096,730
Other assets 528,485
Current liabilities ( 683,885)
Bank and other long-
term debt (1,105,898)
------------
Loss on disposal $ 192,858
============
Included in current liabilities above is $425,000, the Company owes the Internal
Revenue Service for current and delinquent payroll taxes and associated interest
and penalties. The purchaser has indemnified the Company in the event they are
unable to settle and pay amounts due and the IRS pursues collection efforts
against the Company. At June 30, 2003, the eventual outcome of the purchaser's
payment efforts with the Internal Revenue Service; the purchaser's ability to
financially indemnify the Company, and the Company's ultimate liability to the
Internal Revenue Service, is unknown.
NOTE F - BUSINESS ACQUISITIONS
During 2002, the Company pursued a number of acquisitions of operating companies
- - including issuing memorandums of understanding and signing purchase
agreements. Each of these documents included contingent purchase terms and other
requirements. At June 30, 2003, other than described below, all such
acquisitions have been cancelled due to the contingent purchase terms not being
met.
F-14
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE F - BUSINESS ACQUISITIONS (continued)
At June 30, 2003 and through October 10, 2003, the Company has three active and
separate acquisitions under consideration. The composition of the now existing
aggregate purchase prices, in summary, on all three of these acquisitions is as
follows:
Required cash payment $ 931,000
Issuance of Company common
stock, at estimated current
value 70,500
Issuance of debt instruments
or assumption of other
liabilities 7,137,750
-----------
$ 8,139,250
===========
As of June 30, 2003, the Company has issued 4,500,000 shares of the purchase
shares described above. These shares have been recorded at the shares market
value when issued. Pending closing of the acquisition these shares have been
recorded as "deposit on pending acquisition" in the accompanying financial
statements.
Closing of the acquisitions described above is contingent upon satisfying
purchase terms and meeting certain requirements of the Securities and Exchange
Commission's rules and regulations. Through October 10, 2003, none of the above
acquisitions have closed.
NOTE G - IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS
During the year ended June 30, 2002, the Company became aware of impairments in
value for certain long-lived and intangible assets. All of these assets were
acquired by the Company on or before June 30, 2001. The Company evaluated
impairment of long-lived and intangible assets in accordance with Statement of
Financial Standards No. 121, Impairment Of Long-Lived Assets And Long-Lived
Assets To Be Disposed Of.
A description of impaired assets, facts and circumstances leading to impairment,
how fair value was determined and amount of impairment loss follows.
F-15
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE G - IMPAIRMENT OF LONG-LIVED AND INTANGIBLE ASSETS (continued)
The Company and its wholly-owned subsidiary had several patents that were
related to the methods of manufacturing their products. During 2002, the Company
had a significant decrease in revenues from these products. Further, management
evaluation indicated future revenues directly attributable to the patents were
insufficient to support their carrying value. This led management to conclude
the patents' carrying value was impaired. The impairment loss recorded by the
Company of $304,533 is equal to the cost of the patents less accumulated
amortization. This impairment loss is included in net loss from discontinued
operations in the accompanying financial statements. Management determined the
patents had no value to an arms-length buyer.
In 1998 the Company acquired its wholly owned subsidiary, Super Dry Industries,
Inc. In 2001 the Company incurred substantial net operating losses. Further, the
Company had insufficient capital to increase subsidiary revenues and demand for
the subsidiaries product was weak. Based on these factors, Management decided to
shut down the subsidiary's operations. During 2002, Management evaluated the
long-lived idle assets and determined a substantial portion was impaired. The
impairment loss recorded by the Company of $535,473 is equal to the cost of the
long-lived assets less accumulated depreciation, less management's estimate of
value to an arms-length buyer. This impairment loss is included in net loss from
discontinued operations in the accompanying financial statements. Management
determined the long-lived asset value through analysis of fair market value to
an arms-length buyer.
See Note D for business segments affected by the impairment losses noted above.
NOTE H - INCOME TAXES
For the years ended June 30, 2003 and 2002, the benefit for income taxes
consists of the following:
2003 2002
---------- ------------
Deferred tax benefit $ 555,000 $ 1,185,000
Less valuation allowance (555,000) (1,185,000)
---------- ------------
$ - $ -
========== ============
The valuation allowance has been provided by the management of the Company. This
is due to the uncertainty of the realization of the future benefit of the
deferred tax assets.
F-16
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE H - INCOME TAXES (continued)
For the years ended June 30, 2003 and 2002, the following temporary differences
give rise to the above deferred tax benefits:
2003 2002
---------- ------------
Net operating loss carryovers $ 555,000 $ 1,310,000
Realized security losses - ( 125,000)
---------- ------------
$ 555,000 $ 1,185,000
========== ============
For the years ended June 30, 2003 and 2002, a reconciliation of the income tax
benefit at statutory rates to the Company's effective rate is as follows:
2003 2002
------------ -------------
Benefit computed at statutory
rates 37.6% 37.6%
Less valuation allowance on
deferred tax assets ( 37.6%) ( 37.6%)
------------ -------------
Benefit computed at effective
rate - % - %
============ =============
At June 30, 2003 and 2002, deferred tax assets consist of the following:
2003 2002
------------ ------------
Deferred tax assets $ 4,520,000 $ 3,965,000
Less valuation allowance (4,520,000) (3,965,000)
------------ ------------
$ - $ -
============ ============
At June 30, 2003, the Company has approximately $11,300,000 of tax net operating
losses available for carryforward through 2022.
NOTE I - LEASE ACTIVITY
In 2003, the Company leased office and operating facilities under a short-term
operating lease.
For the years ended June 30, 2003 and 2002, rent expense on lease activity
amounted to $94,239 and $34,572, respectively.
F-17
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE J - STOCK OPTIONS
In June 2001, the Company entered into a stock option agreement with a
stockholder. The agreement grants options of 3,000,000 shares at an exercise
price of $1.50 and 3,000,000 shares at an exercise price of $3.50. These options
have a term of thirty six months and expire on June 15, 2004. As of June 30,
2003, the options have not been exercised.
NOTE K - RELATED PARTY ACTIVITY
During 2002 the Company provided financial advisory services to Transatlantic
Surety and Bond Co., Ltd., a stockholder of the Company (see Note C). Fees
charged for these services amounted to $210,300 and are included in revenues in
the accompanying financial statements. At June 30, 2002, the Company was owed
$108,203 for the above described services.
During the year ended June 30, 2003, the unpaid portion of these fees, amounting
to $107,403, were determined by management to be uncollectible and were written
off.
In early fiscal year 2003, the Company advanced a stockholder and former
employee $60,000. At June 30, 2003, management has determined this amount to be
uncollectible and has written it off.
As described in Note E, the Company disposed of its manufacturing segment during
2002. The net assets were purchased by companies owned by a stockholder and
officer of the Company. In connection with this transaction a loss of $192,858
on disposal of discontinued operations was recorded.
NOTE L - NOTE PAYABLE TO RELATED PARTIES
In August 2002, certain officers, both present and former, and shareholders of
the Company personally borrowed $150,000 from a bank. Concurrently, the loan was
assigned to the Company. Terms of the loan provided for interest at 10% with the
principal due in November 2002.
At June 30, 2003, the loan with the bank and Company was in default. The bank is
pursuing collection efforts against the present and former Company officers and
shareholders.
F-18
TS&B HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2003 AND 2002
NOTE M - GOING CONCERN
As noted in the accompanying financial statements, the Company has sustained
substantial net operating losses. Its ability to continue as a going concern and
realize its assets and pay its liabilities is dependant upon generating
sufficient profitable revenues and obtaining funding to support operations and
fund planned acquisitions.
Management is attempting to generate sufficient revenues and obtain funds to
support continuing operations and fund acquisitions. At June 30, 2003, and
subsequently, management is addressing funding sources to meet its projected
needs. Management is confident they will be successful and will generate
sufficient revenues and obtain the necessary funding. Through October 10, 2003,
additional funding to support operations and planned acquisitions has not been
obtained.
F-19
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.
TS&B HOLDINGS, INC.
By: /s/ CHARLES GIANNETTO
------------------------
Charles Giannetto,
Chief Financial Officer
Dated: October 15, 2002
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
Signature Title Date
By: /s/ JAMES E. JENKINS President, C.E.O. and October 14, 2003
- -------------------------- Director
JAMES E. JENKINS
By: /s/ CHARLES GIANNETTO Vice President and October 14, 2003
- ----------------------- Director
CHARLES GIANNETTO Chief Accounting Officer
Principal Financial Officer
By: /s/ THOMAS GINTHER Director October 14, 2003
- -----------------------
THOMAS GINTHER
By: /s/ Director October 14, 2003
- -------------------------
By: /s/ Director October 14, 2003
- --------------------------
S-1