Form 10QSB for TRUE PRODUCT ID, INC.
13-Feb-2007
Quarterly Report
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
On January 17, 2007 the Company closed an initial bridge financing with a private investor for $500,000; a portion of these proceeds will go to fulfill orders in China and to enhance the ability of the Company and its Chinese joint venture partner and their facilities and staff to address growing opportunities for our products and services in China and elsewhere.
On a related front, the Company took a step in its restructuring efforts by entering into the January 4, 2007 Restructuring Agreement with Sure Trace Security Corporation, Sure Trace Asia Limited, and William Chan. This initial restructuring effort resulted in the Company's acquisition of an initial 40% interest in our Chinese joint venture, which strengthens the Company's operations and revenue recognition ability, and which will enable East and West to develop stronger working relationships. Further, it completes the steps envisioned months ago whereby the Company is not and can now grow separate and totally independent from Sure Trace Security Corporation and Sure Trace Asia Limited. The Company is continuing to further its restructuring efforts in China.
Given the strategic alliances already formed there, China and its tremendous market remain the immediate focus and priority for the Company. The Company however is also cultivating the United States and European markets and is pursuing similar government and industry strategic alliances in the U.S. and Europe. The Company continues to take the necessary precautions to protect our intellectual property through patent applications and to make certain that our technology continues to evolve and be state of the art.
Among the industries/applications in China which the Company and its Chinese joint venture partner have been approached to use our technology are: (1) automobile, motorcycles, and automobile/motorcycle parts and auto insurance policies and other documentations; (2) cigarettes; (3) currency, checks, and other financial documentation; (4) computer software, hardware, and other electronics; (5) national welfare and sports lottery tickets; (6) government records and other items, such as property records, official invoices, and military uniforms; (7) sports tickets; (8) soft drink, liquor, and other beverages; (9) art and antiques; and (10) building-related materials.
Our cash balance as of December 31, 2006 was $528. This was obviously before the receipt of the initial bridge financing discussed above. Since the change in control of the Company on March 16, 2006 the employees of the Company have not received any payroll. It is the Company's intention to seek strategic partnerships that result in an infusion of cash into the Company.
Based upon our business plan for the current year, we do not expect that significant expenditures for the purchase of plant and equipment or research and development as our existing products are not labor intensive. We expect that our existing cash balances and cash flows from operations (as of December 31, 2006) will be not be sufficient to finance our working capital and capital expenditure requirements through Fiscal 2007. We intend to seek capital via the sale of shares in the equity markets or from cash generated from product licensing transactions. However, if events occur or circumstances change such that we fail to meet our operating plan as expected, we may require additional funds to support our working capital requirements or for other purposes and may seek to raise additional funds through public or private equity or debt financing or from other sources. If additional financing is needed, we cannot be assured that such financing will be available on commercially reasonable terms or at all.
In March 2006, we entered into a Services Agreement with James MacKay ("MacKay"), where MacKay will serve as our Chairman of the Board of Directors for a three-year term, with annual compensation of $300,000. At December 31, 2006 Mr. MacKay is owed $237,500 representing all compensation earned by him since he joined us. On November 13, 2006 Mr. MacKay vested 39,559,961 shares of our common stock as part of the aforementioned Services Agreement. Our common shares closed trading on November 13, 2006 at $0.07 per share resulting in a valuation of $2,769,197, which was expensed in the quarter ending December 31, 2006. Mr. MacKay's common shares vested to him prior to the vesting of common shares to Mr. Bendis.
In March 2006, we entered into an Executive Employment Agreement with Richard A. Bendis ("Bendis"), where Bendis will serve as our President and Chief Executive Officer for a three-year term, with annual compensation of $500,000. At December 31, 2006 Mr. Bendis is owed $395,833 representing all compensation earned by him since he joined us. Additionally, accrued liabilities include $60,078 representing unreimbursed employee expenditures primarily for travel. On November 13, 2006 Mr. Bendis vested 30,329,303 shares of our common stock as part of the aforementioned Executive Employment Agreement. Our common stock closed trading on November 13, 2006 at $0.07 per share resulting in a valuation of $2,123,051, which was expensed in the quarter ending December 31, 2006. |