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FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ý | Quarterly Report under Section 13 or 15(d) of the Securities and Exchange Act of 1934 |
For the Quarterly Period Ended February 28, 2002
o | Transition under Section 13 or 15(d) of the Securities and Exchange Act of 1934 |
(No fee required) for the period from to
Commission File Number 0-33255
NEWTECH RESOURCES LTD.
(Exact Name Of Registrant As Specified In Its Charter)
Incorporated in the State of Nevada
IRS Employer Identification Number 98-0342217
Address: 841 West Broadway, Suite 200, Vancouver, B.C. V5Z 1J9
Securities registered under Section 12(b) of the Exchange Act:None
Securities registered under Section 12(g) of the Exchange Act:Common Stock
Check whether the issuer: (1) filed all reports required to be filed by Telephone: (604) 729-5790 Section 13 or 15(d) of the Securities 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 ý No o
State the number of shares outstanding of each of the issuer's classes of equity, as of the latest practicable date: Common Stock: 11,060,000 shares—February 28, 2002
Transitional Small Business Disclosure Format: Yes o No ý
Attached hereto and incorporated herein by reference.
Item 2. Management's Discussion and Analysis or Plan of Operation.
The following information contains certain forward looking statements that anticipate future trends or events. These statements are based on certain assumptions that may prove to be erroneous and are subject to certain risks including but not limited to the risks of increased competition in the company's industry and other risks detailed in the company's U.S. Securities and Exchange Commission filings. Accordingly, actual results may differ, possibly materially, from the predictions contained herein.
During the three months ended February 28, 2002, operating expenses totaled $39,729, and the experienced a net loss of $39,729 against no revenues, as compared to a net loss of $30,000 against no revenues for the three months ended February 28, 2001. The increase in operating expenses were a result of increased legal and interest expenses and transfer agent fees. However, also during the three months ended February 28, 2002, the company saw greater improvements in bioactivity and stability. A test run was conducted in a small fermentation tank for the commercial manufacturing process of cystatin for the research laboratory market. As such, the company made additional advances to Kaizen Food Corporation in the amount of $36,000, as compared to no advances in February 28, 2001.
The earnings per share (fully diluted) was a net loss of $0.004 for the three month period ended February 28, 2002, compared to a net loss of $0.003 for the three month period ended February 28, 2001.
Reference is made to Item 2, "Management's Discussion and Analysis" included in the company's registration statement on Form 10-SB for the year ended August 31, 2001, on file with the U.S. Securities and Exchange Commission. The following analysis and discussion pertains to the company's results of operations for the three months ended February 28, 2002, compared to the results and operations for the period ended February 28, 2001.
SIX MONTHS ENDED February 28, 2002 and 2001
Operating expenses for the six months ended February 28, 2002, totaled $85,259, and the company experienced a net loss of $85,259 against no revenues, as compared to a net loss of $60,000 against no revenues for the six months ended February 28, 2001. The increase in operating expenses were a result of increased legal and interest expenses and transfer agent fees.
The earnings per share (fully diluted) was a net loss of $0.008 for the six month period ended February 28, 2002 compared to a net loss of $0.006 for the six month period ended February 28, 2001.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the company has financed its cash flow and operations from the sale of stock and notes payable to shareholders. The company's total cash and cash equivalent position as at February 28, 2002 was $200,971 and as at August 31, 2001 was $86,690.
For the six months ended February 28, 2002, net cash used in operating activities was ($49,719) compared to cash used in operating activities of ($0.00) for the same period in 2001. Net cash used in operating activities for 2002 consisted mostly of loss from operations and increases in accounts payable.
Net cash provided by financing activities of $164,000 for the six months ended February 28, 2002, and $0.00 for the same period in 2001. Financing activities for 2002 resulted from advances from shareholders of $164,000 offset by a decrease in license fee payable of $36,000.
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Working capital deficiency as of February 28, 2002 and August 31, 2001 was ($2,278,979) and ($2,193,720) respectively.
The company has no external sources of liquidity in the form of credit lines from banks. Management believes that its available cash will be sufficient to fund the company's working capital requirements through December 31, 2002. Management further believes that available cash will be sufficient to implement the company's research and development plans. No investment banking agreements are in place and there is no guarantee that the company will be able to raise capital in the future should that become necessary.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Reference is made to Risk Factors in Part 1. Item 1. Included in the company's registration statement on Form 10-SB for the year ended August 31, 2001, on file with the U.S. Securities and Exchange Commission.
The company does not have any derivative financial instruments as of February 28, 2002. However, the company is exposed to interest rate risk.
The company's interest income and expense are most sensitive to changes in the general level of U.S. and Canadian interest rates. In this regard, changes in U.S. and Canadian interest rates affect the interest paid on the company's cash equivalents as well as the interest paid on debt.
FOREIGN CURRENCY RISK
The company operates primarily in Canada. Therefore, the company's business and financial condition is sensitive to currency exchange rates or any other restriction imposed on its currency.
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Item 1. Legal Proceedings. None.
Item 2. Changes in Securities and Use of Proceeds. None.
Item 3. Default Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders.
- a.
- The company's annual meeting of shareholders was held on August 31, 2001.
- b.
- The following directors and officers were re-elected to serve until the 2002 annual meeting of shareholders or until their successors are duly elected and qualified.
Terry Woo | Director/Chief Executive Officer/ President | |
Chui Keung Ho | Director/Chief Financial Officer/Secretary/Treasurer |
Item 5. Other Information. None.
Item 6.b. Reports on Form 8-K. None.
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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NEWTECH RESOURCES LTD. (Registrant) | ||
Dated: April 30, 2002 | /s/ TERRY WOO,President and Director |
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NEWTECH RESOURCES LTD.
INTERIM FINANCIAL STATEMENTS
FEBRUARY 28, 2002
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Newtech Resources Ltd.
(a development stage company)
(a Nevada Corporation)
Unaudited Interim Balance Sheet
As at February 28, 2002 and August 31, 2001
(in U.S. Dollars)
| February 28 (unaudited) 2002 | August 31 2001 | ||||||
---|---|---|---|---|---|---|---|---|
ASSETS | ||||||||
Current | ||||||||
Cash | $ | 200,971 | $ | 86,690 | ||||
Prepaid expenses | 8,000 | 8,000 | ||||||
208,971 | 94,690 | |||||||
License fee (Note 3) | 2,040,000 | 2,040,000 | ||||||
Total assets | $ | 2,248,971 | $ | 2,134,690 | ||||
LIABILITIES | ||||||||
Current | ||||||||
Accounts payable and accrued liabilities | $ | 63,950 | $ | 28,410 | ||||
License fee payable | 1,964,000 | 2,000,000 | ||||||
Notes payable—shareholders (Note 4) | 460,000 | 260,000 | ||||||
Total liabilities | 2,487,950 | 2,288,410 | ||||||
DEFICIENCY IN ASSETS | ||||||||
Capital Stock (Note 5) | ||||||||
Authorized—30,000,000 common shares with par value of $.001 Issued—11,060,000 common shares (2001—11,060,000) | 11,060 | 11,060 | ||||||
Contributed surplus (Note 5) | 224,190 | 224,190 | ||||||
Deficit | (474,229 | ) | (388,970 | ) | ||||
(238,979 | ) | (153,720 | ) | |||||
$ | 2,248,971 | $ | 2,134,690 | |||||
Commitments (Note 8) | ||
Approved by the Board | ||
/s/ TERRY WOO | Director | |
/s/ CHUI KEUNG HO | Director |
The accompanying notes are an integral part of these financial statements
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Newtech Resources Ltd.
(a development stage company)
(a Nevada Corporation)
Unaudited Interim Statement of Operations
For the 3 months and 6 months ended February 28, 2002 and February 28, 2001
(in U.S. Dollars)
| 3 Months | 6 Months | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2002 | 2001 | 2002 | 2001 | ||||||||||
Expenses | ||||||||||||||
Audit and accounting | $ | — | $ | — | $ | — | $ | — | ||||||
Bank charges | — | — | 30 | — | ||||||||||
Filing and registration fees | 1,229 | — | 5,229 | — | ||||||||||
Interest income | — | — | — | — | ||||||||||
Interest on note payable | 6,500 | — | 13,000 | — | ||||||||||
Legal | 2,000 | — | 7,000 | — | ||||||||||
Management and consulting fees (Note 6) | 30,000 | 30,000 | 60,000 | 60,000 | ||||||||||
39,729 | 30,000 | 85,259 | 60,000 | |||||||||||
Net loss for the period | (39,729 | ) | (30,000 | ) | (85,259 | ) | (60,000 | ) | ||||||
Net loss per common share | $ | (0.004 | ) | $ | (0.003 | ) | $ | (0.008 | ) | $ | (0.006 | ) | ||
Number of common shares outstanding | 11,060,000 | 11,060,000 | 11,060,000 | 11,060,000 |
The accompanying notes are an integral part of these financial statements
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Newtech Resources Ltd.
(a development stage company)
(a Nevada Corporation)
Unaudited Interim Statement of Cash Flow
For the 6 months ended February 28, 2002 and February 28, 2001
(in U.S. Dollars)
| 2002 | 2001 | ||||||
---|---|---|---|---|---|---|---|---|
Operating activities— | ||||||||
Net loss for the period | $ | (85,259 | ) | $ | (60,000 | ) | ||
Adjustments to reconcile net loss to net cash used by operating activities | ||||||||
Changes in operating assets and liabilities: | ||||||||
Increase in accounts payable and accrued liabilities | 35,540 | 60,000 | ||||||
Net cash used in operations | (49,719 | ) | — | |||||
Financing activities— | ||||||||
Licence fee payable | (36,000 | ) | — | |||||
Advances from shareholders | 200,000 | — | ||||||
Cash provided by financing activities | 164,000 | — | ||||||
Change in cash during the period | 114,281 | — | ||||||
Cash, beginning of period | 86,690 | — | ||||||
Cash, end of period | $ | 200,971 | $ | — | ||||
Supplemental Disclosures of Cash Flow Information | ||||||||
Cash paid during the period for: | ||||||||
Interest | $ | 13,000 | $ | — | ||||
Income taxes | $ | — | $ | — | ||||
The accompanying notes are an integral part of these financial statements
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Newtech Resources Ltd.
(a development stage company)
(a Nevada company)
Notes to Unaudited Interim Financial Statements
February 28, 2002
1. Operations
The company was organized under the laws of the state of Nevada on July 28, 1998. These financial statements have been prepared in accordance with generally accepted accounting principles in the United States.
The accompanying unaudited financial statements have been prepared by Newtech Resources Ltd., in accordance with the rules and regulations of the U.S. Securities and Exchange Commission for interim financial statements. Accordingly, certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been condensed or omitted pursuant to such rules and regulations. In the opinion of management of the company, the unaudited financial statements reflect all adjustments consisting only of normal recurring adjustments, necessary for a fair presentation of the company's financial position at February 28, 2002, its operating results for the three months and six months ended February 28, 2002 and 2001 and cash flows for the six months ended February 28, 2002 and 2001.
The balance sheet at August 31, 2001, has been derived from the company's audited financial statements as of that date. These financial statements and the notes should be read in conjunction with the company's audited consolidated financial statements and notes thereto contained in the company's Form 10-SB filed with the U.S. Securities and Exchange Commission.
The results of operations for the six months ended February 28, 2002 are not necessarily indicative of the results that may be expected for future quarters or the year ended August 31, 2002.
2. Significant accounting policies
- (a)
- Use of estimates
The preparation of these financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as at the date of the financial statements, the reported revenues and expenses during the reporting periods and the disclosure of contingent assets and liabilities. Actual results may differ from these estimates. - (b)
- Loss per share
The company reports loss per share in accordance with SFAS No. 128, earnings per share, which requires the reporting of both basic and diluted earnings per share. Net loss per share-basic is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Because the company has no common stock equivalents, no difference exists between basic and diluted earnings per share. - (c)
- Income taxes
The company follows the policies of Statement of Financial Accounting Standards No 109, Accounting for Income taxes which requires use of the asset and liability method of accounting for income taxes. Under this method, future income taxes are recognized for the future tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between the financial statement carrying amounts and
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- (d)
- License fee
The license fee is recorded at cost and will be amortized over a 5 year period, upon commencement of sales. - (e)
- Financial instruments
The fair values of the financial instruments approximate their carrying value.
the tax basis of existing assets and liabilities. Future income tax assets are evaluated and if realization is not considered "more likely than not", a valuation allowance is provided.
Financial instruments which potentially subject the company to concentration of credit risk consist of cash deposits.
Cash balances are held principally at one financial institution and, may at times, exceed insurable amounts. The company believes it mitigates its risk by investing in or through major financial institutions. Recoverability is dependent upon the performance of the institution.
3. License Fee.
The company acquired from Kaizen Food Corporation, the exclusive North American rights to market, sell and distribute technology referred to as "modified cystatins". As condition of the license agreement, the company is to pay cash or arrange financing in the amount of $40,000 on June 30, 2001 and an additional $2,000,000 on June 30, 2002. The company is required to make quarterly royalty payments of 8% of sales, and beginning with the second year of the agreement, a minimum annual royalty payment of $30,000. The license agreement has no fixed term, but the company intends to amortize the cost of the license over a five year period, a conservative estimate of the sales period for the technology, beginning with achievement of sales.
SFAS 142 which is effective for year ends commencing after December 15, 2001, requires that the company not amortize indefinite useful life assets, but rather that they be tested for impairment at least annually by comparing their fair value of those assets with their recorded amounts and written down as required. As their has been no amortization taken to date on the license fee, there would be no change in the company's reported income for the period under SFAS 142 and there would be no change in the recorded value of the license fee asset. In adopting SFAS 142, the company would not amortize the license fee costs, but would review the license for evidence of impairment In value with any required write downs made.
During the period, the company made installment payments of $36,000 towards the balance of license fees payable.
4. Short term borrowings
| Feb. 28, 2002 | August 31, 2001 | ||||
---|---|---|---|---|---|---|
Notes payable to shareholders, Bearing interest at a rate of 10% | $ | 460,000 | $ | 260,000 |
The notes payable to a shareholders are due on December 31, 2002, and bears interest at 10% per annum.
5. Share capital
In July 1998, the company issued 2,750,000 shares of its common stock to its initial shareholders for cash consideration of $2,750 ($0.001 per share).
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In February 1999, the company issued 8,250,000 shares of its common stock for cash consideration of $82,500 ($0.01 per share)
In March 1999, the company issued 60,000 shares of its common stock for cash consideration of $150,000 ($2.50 per share)
There are no warrants or options to purchase common stock as at February 28, 2002.
6. Related party transactions and management services
Joist Management Ltd. is related by management contract to provide administrative and general office services to the company. None of the shareholders, officers or directors of Joist Management Ltd. are shareholders of Newtech Resources Ltd. The company paid management fees of $60,000 and $60,000 for the six months ended February 28, 2002 and February 28, 2001, respectively.
7. Going Concern
The company's financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Without realization of additional capital, it would be unlikely for the company to continue as a going concern. Management's plan in this regard is to seek additional funding through equity and/or debt and upon achievement of scale-up to commercial production levels, commencing sales. Initially these sales will be made to markets, such as research laboratories, where FDA approval is not required. The operating expenses of the company are expected to be lower with the reduction of startup costs associated with legal, accounting and consulting.
8. Commitments and Contingencies
The company's office space is provided to it on a month to month basis by its management company and is included in its management fee.
9. Cumulative statement of operations since inception
The following supplemental information is provided related to the cumulative statement of operations since inception.
Expenses | ||||
Audit and accounting | $ | 3,000 | ||
Bank charges | 182 | |||
Filing and registration | 6,614 | |||
Interest income | (2,856 | ) | ||
Interest expense | 15,425 | |||
Legal | 12,693 | |||
Management fees | 439,171 | |||
Total | 474,229 | |||
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PART I—FINANCIAL INFORMATION
- Item 1. Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation.
Item 3. Quantitative and Qualitative Disclosures About Market Risks
- Item 1. Legal Proceedings.
Item 2. Changes in Securities and Use of Proceeds.
Item 3. Default Upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6.a. Exhibit 27.
Item 6.b. Reports on Form 8–K.
Newtech Resources Ltd. (a development stage company) (a Nevada Corporation) Unaudited Interim Balance Sheet As at February 28, 2002 and August 31, 2001 (in U.S. Dollars)
Newtech Resources Ltd. (a development stage company) (a Nevada Corporation) Unaudited Interim Statement of Operations For the 3 months and 6 months ended February 28, 2002 and February 28, 2001 (in U.S. Dollars)
Newtech Resources Ltd. (a development stage company) (a Nevada Corporation) Unaudited Interim Statement of Cash Flow For the 6 months ended February 28, 2002 and February 28, 2001 (in U.S. Dollars)
Newtech Resources Ltd. (a development stage company) (a Nevada company) Notes to Unaudited Interim Financial Statements February 28, 2002