SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended May 31, 2003.
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
to .
Commission file number: 000-33255
NEWTECH RESOURCES LTD.
(Exact name of small business issuer as specified in its charter)
Nevada 98-0342217
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1818-1177 West Hastings Street, Vancouver, British Columbia, Canada V6E 2K3
(Address of principal executive office) (Postal Code)
(604) 602-1717
(Issuer's telephone number)
Check whether the registrant: (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
The number of outstanding shares of the registrant's common stock, $0.001 par
value (the only class of voting stock), as of July 7, 2003 was 11,060,000.
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS............................................. 3
Unaudited Balance Sheet as of May 31, 2003.................................... 4
Unaudited Statement of Operations for the three and nine months ended
May 31, 2003 and 2002......................................................... 5
Unaudited Statement of Cash Flows for the nine months ended May 31, 2003
and 2002.................................................................... 6
Notes to Unaudited Financial Statements.................................... 7
ITEM 2. MANAGEMENT'S PLAN OF OPERATION................................... 11
ITEM 3. CONTROLS AND PROCEDURES............................................ 12
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................... 12
SIGNATURES.................................................................. 13
INDEX TO EXHIBITS.............................................................15
2
PART I
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Newtech Resources, Ltd., a Nevada
corporation, unless otherwise indicated. In the opinion of management, the
accompanying unaudited financial statements included in this Form 10-QSB reflect
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of the results of operations for the periods presented. The
results of operations for the periods presented are not necessarily indicative
of the results to be expected for the full year.
3
Newtech Resources Ltd.
(a development stage company)
(a Nevada Corporation)
Interim Balance Sheet
As at May 31, 2003 and August 31, 2002
(in U.S. Dollars)
ASSETS May 31 August
(unaudited) 31
Current 2003 2002
Cash $ 1,981 $ 156,540
--------------- ----------------
--------------- ----------------
Total assets $ 1,981 $ 156,540
=============== ================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 104,825 $ 142,950
Notes payable-shareholders ( Note 4 ) 460,000 460,000
--------------- ----------------
Total liabilities 564,825 602,950
--------------- ----------------
DEFICIENCY IN ASSETS
Capital Stock ( Note 5 )
Authorized -30,000,000 common shares with par value of $.001
Issued -11,060,000 common shares ( 2002 - 11,060,000) 11,060 11,060
Contributed surplus ( Note 5 ) 224,190 224,190
Deficit (798,094) (681,660)
--------------- ----------------
(562,844) (446,410)
--------------- ----------------
$ 1,981 $ 156,540
=============== ================
Commitments (Note 8)
The accompanying notes are an integral part of these financial statements
4
Newtech Resources Ltd.
(a development stage company)
(a Nevada Corporation)
Unaudited Interim Statement of
Operations For the 3 months and 9 months
ended May 31, 2003 and May 31, 2002
(in U.S. Dollars)
3 Months Ended 9 Months Ended
2003 2002 2003 2002
Expenses
Audit and accounting (1,710) - (410) -
Bank charges - 18 60 48
Filing and registration fees (8,102) - 3,706 5,229
Interest income - (844) - (844)
Interest on notes payable 10,575 11,500 33,575 24,500
Legal 13 7,533 3,853 14,533
Management and consulting fees (Note 6) 650 30,000 60,650 90,000
Research 10,000 25,000 15,000 61,000
-----------------------------------------------------------
------------------------------
11,426 73,207 116,434 194,466
-----------------------------------------------------------
------------------------------
Net loss for the period (11,426) (73,207) (116,434) (194,466)
===========================================================
==============================
Net loss per common share $ (0.001) $ (0.007) $ (0.011) $ (0.018)
===========================================================
==============================
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
5
Newtech Resources Ltd.
(a development stage company)
(a Nevada Corporation)
Unaudited Interim Statement of Cash Flow
For the 9 months ended May 31, 2003 and May 31, 2002
(in U.S. Dollars)
2003 2002
Operating activities -
Net loss for the period $ (116,434) $ (194,466)
Adjustments to reconcile net loss to net cash used by operating activities
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable and accrued liabilities (38,125) 77,040
---------------- ----------------
Net cash used in operations (154,559)
(117,426)
---------------- ----------------
Financing activity-
Advances from shareholders - 200,000
---------------- ----------------
Cash provided by financing activity -
200,000
---------------- ----------------
Change in cash during the period (154,559) 82,574
Cash, beginning of period 156,540 86,690
---------------- ----------------
Cash, end of period $ 1,981 $ 169,264
================ ================
Supplemental Disclosures of Cash Flow Information Cash paid during the period
for:
Interest $ - $ -
================ ================
Income taxes $ - $ -
================ ================
The accompanying notes are an integral part of these financial statements
6
Newtech Resources Ltd.
(a development stage company)
( a Nevada company)
Notes to Unaudited Interim Financial Statements
May 31, 2003
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
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 May 31, 2003, its operating results for the
three months and nine months ended May 31, 2003 and 2002 and cash flows for
the nine months ended May 31, 2003 and 2002.
The balance sheet at August 31, 2002 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 and its amendments filed with the Securities and
Exchange Commission.
The results of operations for the nine months ended May 31, 2003 are not
necessarily indicative of the results that may be expected for future
quarters or the year ended August 31, 2003.
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.
7
Newtech Resources Ltd.
(a development stage company)
( a Nevada company)
Notes to Unaudited Interim Financial Statements
May 31, 2003
(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 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.
(d) Research
Research expenses are charged to income in the year that they are
incurred. Research costs of $10,000 (2002-$25,000) and $15,000 (
2002-$61,000) was expensed for the 3 month period and 9 month period
ended May 31, 2003 respectively.
(e) Financial instruments
The fair values of the financial instruments approximate their carrying
value.
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.
8
Newtech Resources Ltd.
(a development stage company)
( a Nevada company)
Notes to Unaudited Interim Financial Statements
May 31, 2003
3. Licence 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, 2004. The Company is required to
make quarterly royalty payments of 8% of sales with a minimum annual
royalty payment of $30,000 with payments to be applied to research costs.
4. Short term borrowings
May 31, 2003 August 31, 2002
Notes payable to shareholders,
Bearing interest at a rate of 10% $460,000 $460,000
The note payable to a shareholder is due on demand 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).
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 May 31,
2003.
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 $90,000
for the nine months ended May 31, 2003 and May 31, 2002.
9
Newtech Resources Ltd.
(a development stage company)
( a Nevada company)
Notes to Unaudited Interim Financial Statements
May 31, 2003
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 $ 5,590
Bank charges 278
Filing and registration 12,320
Interest income (3,994)
Interest expense 72,000
Legal 31,079
Management fees 559,821
Research 121,000
Total 798,094
10
Item 2. Management's 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. The Company undertakes no obligation to
republish revised forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Readers are also urged to carefully review and consider the various disclosures
made by the Company that attempt to advise interested parties of the factors
which affect the Company's business, in this report, as well as all the
Company's periodic reports on Forms 10-KSB, 10-QSB and 8-K filed with the
Securities and Exchange Commission.
THREE MONTHS ENDED May 31, 2003 and 2002
During the three months ended May 31, 2003, operating expenses totaled $11,426,
causing the Company to experience a net loss of $11,426 against no revenues, as
compared to a net loss of $73,207 against no revenues for the three months ended
May 31, 2002. The decrease in operating expenses were a result of a decrease in
management and consulting fees, filing and registration agent fees and research
expenses. However, also during the three months ended May 31, 2003, the Company
was seeking additional financing. As such, the company made advances to Kaizen
Food Corporation of $10,000, as compared to $25,000 in advances in May 31, 2002.
The losses per share (fully diluted) was a net loss of $0.001 for the three
month period ended May 31, 2003, compared to a net loss of $0.007 for the three
month period ended May 31, 2002.
Reference is made to Item 2, "Management's Discussion and Analysis" included in
the Company's registration statement on Form 10-KSB for the year ended August
31, 2002, on file with the U.S. Securities and Exchange Commission.
NINE MONTHS ENDED May 31, 2003 and 2002
Operating expenses for the nine months ended May 31, 2003, totaled $116,434 and
the Company experienced a net loss of $116,434 against no revenues, as compared
to a net loss of $194,466 against no revenues for the nine months ended May 31,
2002. Decreases in operating expenses were the result of a decrease in legal,
management and consulting fees, and research expenses.
The losses per share (fully diluted) was a net loss of $0.011 for the nine month
period ended May 31, 2003 compared to a net loss of $0.018 for the nine month
period ended May 31, 2002.
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 May 31, 2003 was $1,981 and as at August 31, 2002
was $156,540.
For the nine months ended May 31, 2003 net cash used in operating activities was
($154,559) compared to cash used in operating activities of ($117,426) for the
same period in 2002. Net cash used in operating activities for 2003 consisted
mostly of loss from operations and decreases in accounts payable.
11
Net cash provided by financing activity of $0 for the nine months ended May 31,
2003, and $200,000 for the same period in 2002. Financing activity for 2002
resulted from advances from shareholders.
Working capital deficiency as of May 31, 2003 and August 31, 2002 was ($562,844)
and ($446,410) respectively.
Management believes that the limited cash will be sufficient to fund the
Company's working capital requirements through the end of its fiscal year,
August 31, 2003. However, management recognizes that the continuance of the
Company's research and development plans require a cash infusion in the near
term. However, the Company has no external sources of liquidity in the form of
credit lines from banks and no investment banking agreements are in place.
Management intends to conduct either a public or private placement of its common
stock to generate funds for its research and development plans but there is no
guarantee that the Company will be able to raise such capital as it becomes
necessary.
ITEM 3. CONTROLS AND PROCEDURES
The Company's president acts both as the Company's chief executive officer and
chief financial officer ("Certifying Officer") and is responsible for
establishing and maintaining disclosure controls and procedures for the Company.
The Certifying Officer has concluded (based on his evaluation of these controls
and procedures as of a date within 90 days of the filing of this report) that
the design and operation of the Company's disclosure controls and procedures (as
defined in Rule 13a-14(c) under the Securities Exchange Act of 1934) are
effective. No significant changes were made in the Company's internal controls
or in other factors that could significantly affect those controls subsequent to
the date of the evaluation, including any corrective actions with regard to
slight deficiencies and material weaknesses. Due to the Certifying Officer's
dual role as chief executive officer and chief financial officer, the Company
has no segregation of duties related to internal controls.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation
S-B are listed in the Index to Exhibits on page 15 of
this Form 10-QSB, and are incorporated herein by this reference.
(b) Reports on Form 8-K.No reports on Form 8-K were filed during the period
covered by this report.
12
SIGNATURES
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. In accordance with the requirements of
the Securities Exchange Act, this 8th day of July, 2003
NEWTECH RESOURCES LTD.
/s/ Ross Wilmot
Ross Wilmot
President, Chief Financial Officer, and Director
13
CERTIFICATION PURSUANT TO RULE 13a-14 OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED, AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Ross Wilmot, Chief Executive Officer and Chief Financial Officer of the
Company certify that:
1) I have reviewed this quarterly report on Form 10-QSB of the Company;
2) Based on my knowledge, this quarterly 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 quarterly
report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4) I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and have:
a) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5) I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6) I have indicated in this quarterly 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 my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: July 8, 2003
/s/ Ross Wilmot
Ross Wilmot
Chief Executive Officer and Chief Financial Officer
14
EXHIBIT PAGE
NO. NO. DESCRIPTION
3(i) * Articles of Incorporation of Newtech Resources Ltd.
3(ii) * By-laws of Newtech Resources Ltd.
10(i) * Option Agreement with Kaizan Food
Corporation
10(ii) * Letter from Kaizan Food Corporation Granting the Company the Right to Exercise the Option
10(iii) * Integra Bioscience Consulting, Inc. - Advisors to Kaizan Food Corporation
99.1 16 Certification Pursuant to 18 U.S.C. Section 1350, Section 906 of the Sarbanes-Oxley Act
of 2002.
99.2 * Market Assessment and Research Technology Study of Kaizan Technology
* Incorporated by reference to Form 10-SB filed with the Securities and Exchange
Commission on October 16, 2001.
15
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of the Company on Form 10-QSB for the
period ended May 31, 2003 as filed with the Securities and Exchange Commission
on the date hereof, I, Ross Wilmot, Chief Executive Officer and Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. S 1350, S 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) This Form 10-QSB complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act; and
(2) The financial information contained in this Form 10-QSB fairly presents, in
all material respects, the financial condition and results of operations of the
Company.
Date: July 8, 2003
/s/ Ross Wilmot
Ross Wilmot
Chief Executive Officer and Chief Financial Officer