10QSB
<DOCUMENT-COUNT> 1
<NOTIFY-INTERNET> ceo@nutk.com
<SROS> NASD
<PERIOD> 03/31/2002
10QSB
U.S. 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 March 31, 2002
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[ ] Transition Report under Section 13 or 15(d)of the Exchange Act For the
Transition Period from ________ to ___________
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Commission File Number: 0-29087
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NUTEK, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 87-0374623
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1110 Mary Crest Road, Henderson, NV 89074
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(Address of principal executive offices) (zip code)
702-567-2613 (Telephone) 702-567-2617 (Fax)
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Issuer's Telephone Number
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past
12 months (or 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 [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
1
The Registrant has 72,242,535 shares of Common stock issued and
outstanding, par value $.001 per share as of March 31, 2002. The
Registrant has 596,408 shares of Preferred Stock Series A issued and
outstanding and 508,500 shares of Preferred Stock Series B issued and
outstanding as of March 31, 2002.
Traditional Small Business Disclosure Format (check one) Yes [ ] No [X]
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................. 4
Balance Sheet (unaudited)............................ 5-6
Statements of Operations (unaudited)................. 7
Statements of Cash Flows (unaudited)................. 8
Notes to Financial Statements........................ 9-15
Item 2. Management's Discussion and Analysis of Plan
of Operation........................................ 0
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 0
Item 2. Changes in Securities and Use of Proceeds............ 0
Item 3. Defaults upon Senior Securities...................... 0
Item 4. Submission of Matters to a Vote
of Security Holders................................. 0
Item 5. Other Information..................................... 0
Item 6. Exhibits and Reports on Form 8-K...................... 0
Signatures...................................................... 0
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
The unaudited financial statements of registrant for the three months
ended March 31, 2002, follow. As prescribed by item 310 of Regulation
S-B, the independent auditor has reviewed these unaudited interim
financial statements of the registrant for the three months ended March
31, 2002. The financial statements reflect all adjustments which are,
in the opinion of management, necessary to a fair statement of the
results for the interim period presented.
4
Nutek, Inc.
CONSOLIDATED
BALANCE SHEET
AS AT
December 31, 2001 and March 31, 2002
ASSETS
March 31 December 31
2002 2001
CURRENT ASSETS
Cash 54,450.00 60,610.00
Accounts Receivable 1,148,227.00 681,042.00
Marketable Securities 72,000.00 72,000.00
Inventory 193,265.00 163,006.00
Accrued Income 11,200.00 11,200.00
Loans Receivable 25,865.00 0.00
Prepaid Expenses 167,609.00 167,609.00
---------- ---------
Total Current Assets 1,672,616.00 1,155,467.00
PROPERTY AND EQUIPMENT
Property and Equipment
(net of depreciation) 2,984,321.00 2,994,776.00
------------ ------------
Total Property and Equipment 2,984,321.00 2,994,776.00
OTHER ASSETS
Patent Rights Acquired
(net of amortization) 560,226.00 561,262.00
Long Term Investment 188,000.00 188,000.00
Website Assets 12,154.00 12,154.00
Customer Lists 43,583.00 43,583.00
Patterns/Designs 44,488.00 44,488.00
Trade Show Booths 5,909.00 5,909.00
Packaging Design/Artwork 70,864.00 67,317.00
Deposits 22,652.00 13,715.00
Goodwill 1,462,782.00 1,462,782.00
Trademarks 8,000.00 8,000.00
Licensing Fees - Mirianna 50,000.00 50,000.00
------------ ------------
Total Other Assets 2,468,658.00 2,457,210.00
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TOTAL ASSETS 7,125,595.00 6,607,453.00
============ ============
See accompanying notes to financial statements
5
Nutek, Inc.
CONSOLIDATED
BALANCE SHEET
AS AT
December 31, 2001 and March 31, 2002
LIABILITIES & EQUITY
March 31 December 31
2002 2001
CURRENT LIABILITIES
Accounts Payable 171,027.00 233,270.00
Accrued Expenses 263,572.00 105,867.00
Short Term Notes Payable 67,826.00 140,604.00
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Total Current Liabilities 502,425.00 479,741.00
OTHER LIABILITIES
Long Term Notes Payable 1,074,570.00 636,767.00
Bonds Payable 170,411.00 170,411.00
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Total Other Liabilities 1,244,981.00 807,178.00
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TOTAL LIABILITIES 1,747,406.00 1,286,919.00
EQUITY
Common Stock 72,243.00 71,392.00
Common Stock, $0.001 par value,
authorized 200,000,000; shares issued
and outstanding at March 31, 2002
72,242,535 common shares; issued and
outstanding at December 31, 2001,
71,392,535 common shares
Additional Paid in Capital 10,414,906.00 10,505,593.00
Preferred Stock 1,105.00 1,390.00
Preferred Stock, $.001 par value,
20,000,000 shares authorized; 508,500
Series B shares issued and outstanding
as of March 31, 2002 and 793,500
shares as of December 31, 2001; 596,408
Series A shares issued and outstanding
as of March 31, 2002 and 596,408 shares
as of December 31, 2000.
Treasury Stock (52,388.00) (52,388.00)
Retained (Deficit) (5,057,677.00) (5,205,454.00)
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Total Stockholders' Equity 5,378,189.00 5,320,534.00
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TOTAL LIABILITIES AND OWNERS EQUITY 7,125,595.00 6,607,453.00
============ ============
See accompanying notes to financial statements
6
Nutek, Inc.
CONSOLIDATED
STATEMENT OF OPERATIONS
FOR 3 MONTHS ENDED
March 31, 2001 and March 31, 2002
STATEMENT OF OPERATIONS
Unaudited Audited
--------- --------
Three months ended Jan 1
March 31 2001,
to Dec.
2002 2001 31, 2001
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REVENUES 1,461,142.00 315,856.00 2,915,548.00
COSTS AND EXPENSES
Cost of Goods Sold 769,196.00 61,384.00 130,325.00
---------- ---------- ------------
GROSS PROFIT 691,946.00 254,472.00 2,785,223.00
Selling, General and
Administrative 493,628.00 258,152.00 2,771,149.00
Depreciation Expense 56,893.00 40,699.00 178,726.00
Amortization Expense 1,761.00 17,632.00 38,651.00
----------- ---------- -----------
Total Costs and Expenses 552,282.00 316,483.00 2,988,526.00
----------- ---------- -----------
Operating Income (Loss) 139,664.00 (62,011.00) (203,303.00)
OTHER INCOME/(EXPENSES)
Interest Income 0.00 0.00 1,087.00
Forgiveness of debt 10,501.00 0.00 15,000.00
Interest Expense (12,289.00) (4,500.00) (87,878.00)
Loss on disposition of assets 0.00 0.00 4,291.00
Miscellaneous Income 9,901.00 0.00 0.00
----------- ---------- -----------
8,113.00 (4,500.00) (67,500.00)
----------- ---------- -----------
NET ORDINARY INCOME (LOSS) 147,777.00 (66,511.00) (270,803.00)
=========== ========== ===========
Basic weighted average
number of common
shares outstanding 71,817,535 45,283,007 59,140,808
Basic Net Loss Per Share 0.002 (0.001) (0.0045)
See accompanying notes to financial statements
7
Nutek, Inc.
CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR 3 MONTHS ENDED
March 31, 2001 and March 31, 2002
STATEMENT OF CASH FLOWS
Jan 1, 2002 Jan 1, 2001
to Mar 31, to Mar 31,
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/(loss) from Operations 147,777.00 (66,511.00)
Adjustments to reconcile net income
to net cash provided
Items not requiring cash
Depreciation Expense 56,893.00 40,699.00
Amortization of Intangibles 1,761.00 22,132.00
(Increase)/Decrease in accounts receivable (501,493.00) (30,475.00)
(Increase)/Decrease in other receivables (25,865.00) 0.00
(Increase)/Decrease in inventory (30,259.00) 28,794.00
(Increase)/Decrease in Deposits (8,936.00) (400.00)
Increase/(Decrease) in Accounts payable 160,438.00 11,943.00
----------- ----------
Net Cash flow provided by operating
activities (199,684.00) 6,182.00
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Print Shop Assets 0.00 50,000.00
Purchase of Prepaid Services 0.00 170,000.00
Purchase of Other Assets/Investment 46,588.00 0.00
Net cash used by investing activities (46,588.00) (220,000.00)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Capital Stock 0.00 79,189.00
Increase/(Decrease) in Notes payable 240,113.00 107,620.00
Increase/(Decrease) in Royalty Investments 0.00 (10,000.00)
Net Cash provided by financing activities 240,113.00 176,809.00
Balance as at beginning of period 60,610.00 48,071.00
Net increase (decrease) in cash (6,159.00) (37,009.00)
Balance as at end of period 54,451.00 11,062.00
See accompanying notes to financial statements
8
Nutek, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2002
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
Nutek, Inc. was incorporated in August of 1991 under the laws of
the State of Nevada, as Nutek, Inc. (the Company) and is engaged in
multiple industries.
SRC International, Inc. was incorporated on June 20, 1997 in Illinois.
SRC International Inc. manufactures "Super Glide", a rail covering made
of an extremely durable, super-slick, space age polymer, designed to
reduce friction between rails and hangers in the dry cleaning and
garment industries.
Vac-U-Lift Production Company was incorporated in the State of Texas
in March of 1995 and is in the oil extracting industry for leases in
Texas. The Company remained inactive until Nutek acquired it in June
of 1996. Nutek determined at the end of Fiscal 2000 to shut down this
operation through bankruptcy. This company had no significant assets
but had accounts payable of approximately $19,000, which was discharged
as a result of the bankruptcy.
Century Clocks, Inc. is a Nevada corporation formed by Nutek, Inc. and
doing business in California. Century Clocks has a joint venture
agreement with the Department of Veterans Industries. The company
produces clocks assembled and packaged by U.S. Veterans.
Elite Fitness Systems, Inc. is a Nevada corporation doing business in
California. Elite Fitness Systems, Inc. markets a proven fitness system
that has kept the world's finest fighting force in supreme physical
condition.
Nutek determined at the end of Fiscal 2000 to return Elite Fitness
Systems Inc. to Mr. Helvenston in exchange for the 125,000 shares
of Nutek Restricted Stock that were originally issued for the purchase
of this corporation. Accordingly, Elite Fitness Systems, Inc.'s results
of operations, assets, liabilities and other financial activities are
not included in Nutek's Consolidated Statements for the year ended 2001.
Kristi & Co., a Nevada Corporation doing business in California, was
incorporated on September 13, 1999. The Company markets woman's
resort-wear. The Company purchased the clothing designs and design groups
on January 6, 2000.
Nutek Oil, Inc. was incorporated on December 3, 1998. The Company is in
the oil producing business and purchased selected equipment and assets on
February 23, 2000 from Clipper Operating Company. During 2001, Nutek Oil
was spun off as a separate company.
Datascension, Inc. and related assets was purchased on September 27, 2001
for $2,200,000 using company shares at fair market value. Datascension,
Inc. is a premier data solutions company representing a unique expertise
in the collecting, storage, processing and interpretation of data.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Company's policy is to prepare the financial statements on the accrual
basis of accounting. The fiscal year end is December 31.
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments with
maturities of three months or less when purchased.
Investments and Marketable Securities
The Company has adopted FASB 115. Its equity securities are classified
as available for sale and reported at fair value.
Investments are recorded at the lower of cost or market. Any reductions
in market value below cost are shown as unrealized losses in the
consolidated statement of operations.
Summary of Non-Cash Transactions
There were non-cash transactions that are discussed in Note 3.
Consolidation Policy
The accompanying consolidated financial statements include the
accounts of Nutek Inc., and its different business segments, SRC
International, Inc., Century Clocks, Kristi & Co., and Nutek Oil,
Inc. All significant inter-company balances and transactions have
been eliminated.
Inventory Valuation
Inventories are stated at the lower of cost or market, cost being
determined on the first in, first out (FIFO) basis.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates
and assumptions which affect the reported amounts of assets and
liabilities as at the date of the financial statements and revenues
and expenses for the period reported. Actual results may differ from
these estimates.
SOP 98-5
The Company has adopted SOP 98-5, which treats the remaining portion
of organizational costs as an expense. Start-up costs and reorganization
costs were expensed when SOP 98-5 was adopted.
Dividend Policy
The Company has not yet adopted any policy regarding payment of
dividends. The Company has authorized 20,000,000 shares of preferred
stock with a par value of $0.001. 793,500 shares have been issued as
Series B shares for cash at $1.00 a share and 596,408 shares have been
issued as Series A shares.
Preferred shares have the same voting rights as the common shares but
have priority in the event of company liquidation. All of the Series B
shares outstanding were to be redeemed at $1.00 a share plus all accrued
dividends prior to December 31, 1993. This has been extended by mutual
agreement. Series B shares have annual dividends of $.15 per share that
are payable quarterly. They are convertible to common shares on a one
for one basis at the holders' option.
Fixed Assets
Fixed assets are stated at cost. Expenditures that materially increase
the life of the assets are capitalized. Ordinary maintenance and repairs
are charged to expense as incurred. When assets are sold or otherwise
disposed of, the cost and the related accumulated depreciation and
amortization are removed from the accounts and any resulting gain or
loss is recognized at that time. Depreciation is computed primarily
on the straight-line method for financial statements purposes over
the following estimated useful lives:
Computer Equipment 5 Years
Drilling Equipment 20 Years
Factory Equipment 7 Years
Furniture & Fixtures 7 Years
Office Equipment 5 Years
Equipment and Machinery 20 Years
Molds and Tooling 20 Years
Depreciation expense was $178,726 and $56,893 for 2001 and the
first quarter 2002, respectively.
All assets are booked at historical purchase price and there is
no variance between book value and the purchase price.
Intangible Assets
Identifiable intangibles with the exception of patents are
amortized over five years. All patents are amortized over
17 years. The amount of amortization recorded in 2001 and
the first quarter 2002 was $38,651 and $ 1,761, respectively.
The Company has adopted SFAS 142. Under guidance from SFAS 142,
Management has determined that as the major intangible asset,
the value of the electric light switch, purchased late in 1999,
has not significantly decreased and there has been no reduction
in the usefulness of the asset as of December 31, 2001.
Additionally, this asset will not be amortized and will be tested
for impairment at least annually by comparing the fair value of
the asset with the recorded value.
The Company has also adopted SFAS 144. Under guidance from
SFAS 144, Management has determined that the website has been
materially impaired by approximately $30,000 as of December 31,
2000, therefore, a prior period adjustment has been made to
remove this asset from the books.
Earnings per Share
Basic earnings per share is computed using the weighted average
number of shares of common stock outstanding for the period end.
The net income (loss) for the period end is divided by the
weighted average number of shares outstanding for that period
to arrive at earnings per share.
Diluted earnings per share were not included as the inclusion
of convertible notes, convertible preferred stock and warrants
would be anti-dilutive and all contingencies for conversion
have not occurred.
Income Taxes
The Company experienced losses during the previous fiscal
tax year reported. The Company will review its need for a
provision for federal income tax after each operating quarter.
The Company has adopted FASB 109, as discussed in Note 7.
Advertising
Advertising costs are expensed when incurred. Advertising
expense was $35,230 for 2001.
Depletion
Oil well leases are depleted over the units of production, or
12 years, whichever is shorter.
Research and Development
The Company expenses its research and development in the
periods incurred.
Reclassifications
Certain reclassifications have been made to the December 31,
2000 amounts to conform to the December 31, 2001 financial
statement presentation. The reclassifications had no effect
on net income.
NOTE 3 - SUMMARY OF NON-CASH TRANSACTIONS
Assets and leases of the Clipper Operating Company were
acquired on February 23, 2000 with 2,064,348 shares of
Nutek stock at the current market price of $0.31 representing
$639,948. A note for $639,948 was issued for the balance
of the purchase price. The note balance as of December 31,
2001 is $464,268.
Kristi and Co was acquired on January 6, 2000 for 250,000
shares of the Company's stock in exchange for the outstanding
common stock of Kristi and Co at the current market price of
$0.20, and a note for $50,000 with annual interest of 7% was
issued for the balance of the purchase price, payable within
18 months.
Datascension was acquired on September 27, 2001 for 27,500,000
shares, valued at $2,200,000. The value was determined by the
average closing price of the stock over the five previous days
the stock traded. Of this amount 20,911,111 has been converted
to 209,111 shares of the Series A preferred stock. As part of
this acquisition, the Company received $650,000 of accounts
receivable and $472,500 of property and equipment.
NOTE 4 - STOCKHOLDERS' EQUITY
The Articles of Incorporation were amended by deleting the
existing ARTICLE IV and replacing it in its entirety with
the following amendments:
"ARTICLE 4: Authorized Shares: The aggregate number of
shares which the corporation shall have authority to issue shall
consist of two hundred million (200,000,000) shares of Common
Stock having a $.001 par value, and twenty million (20,000,000)
shares of Preferred Stock having a $.001 par value. The Common and/or
Preferred Stock of the Company may be issued from time to time
without prior approval by the stockholders. The Common and/or
Preferred Stock may be issued for such consideration as may be
fixed from time to time by the board of directors. The Board of
Directors may issue such share of Common and/or Preferred Stock in
one or more series, with such voting powers, designations, preferences
and rights or qualifications, limitations or restrictions thereof as
shall be stated in the resolution or resolutions."
This amendment to the Articles of incorporation has been duly
adopted, filed and accepted by the Nevada Secretary of State
in accordance with General Corporation Law of the State of Nevada.
On December 27, 2001, an agreement was reached with three
affiliates to exchange notes and common stock, including accrued
and unpaid interest, for Series A Preferred Stock at $5.42 per
share. The exchange for 596,408 Series A Preferred Stock was
completed in December 2001.
The Series A Preferred Stock are convertible at any time into
a number of shares of Common Stock determined by the greater of
$5.42 per share of Series A Preferred Stock, plus any accrued
and unpaid dividends thereon or one hundred (100) shares of
common stock for one (1) share of Series A Preferred Stock
plus any accrued and unpaid dividends thereon. Dividends
on the Series A Preferred Stock are cumulative and payable
quarterly at an annual dividend rate of 5%. The Company,
at its option, may redeem the Series A Preferred Stock, in
whole or in part, at any time and from time to time, at a
redemption price of $5.42 per share plus any accrued and
unpaid dividends thereon. Upon liquidation, holders of the
Series A Preferred Stock will be entitled to repayment of the
greater of $5.42 per share of Series A Preferred Stock, plus
any accrued and unpaid dividends thereon or one hundred (100)
shares of common stock for one (1) share of Series A Preferred
Stock plus any accrued and unpaid dividends thereon, prior to
any distributions to holders of common Stock. The Series A
Preferred Stock does not have any voting rights except as
required by law or as set forth in the exhibits in the resolution
by the Board of Directors.
On December 27, 2001, the Company issued 596,408 shares of
Series A Preferred Stock of the Company's Class B Preferred
Stock to three affiliates. The conversion consideration was
determined by the historical value of the common shares
converted into the Series A Preferred Stock and the value of
the notes converted into the Series A Preferred Stock of the
Company based on the value of the common stock at the time of
conversion. The Class B Series A Preferred Shares are convertible
into a number of shares of Common Stock, determined by the greater
of one hundred (100) common shares per one (1) share of Series A
Preferred Stock plus all accrued and unpaid dividends thereon, or
the Series A Preferred Stock having a value of $5.42 per share plus
all accrued and unpaid dividends thereon subject to adjustment as
provided in the exhibits in the resolution by the Board of Directors.
On January 9, 2001, the Company increased its authorized shares
to 200,000,000 shares of common stock, par value $.001 and
20,000,000 shares of preferred stock, par value $.001.
On September 27, 2001, the Company issued 27,500,000 shares in
exchange for 100% of the stock of Datascension. Based on the
average closing stock price over the five previous days, the
purchase price was $2,200,000. Of this amount, 20,911,111 has
been converted to 209,111 shares of the Series A preferred stock.
During 2001, the Company issued 2,063,550 shares, valued at $86,501
to employees.
During 2001, the Company issued 2,487,220 shares to various consultants
There were 3,000,000 shares cancelled for stock that was given
to an employee and subsequently canceled upon that employee
leaving the Company. An additional 200,000 shares were cancelled
during 2001, which were originally given as the collateral when
the Company bought the print shop and a further 125,000 shares
were cancelled which had been previously issued to Mr. Helvenston
for the purchase of Elite Fitness.
The Company issued 1,000,000 shares of stock, valued at $180,000
in exchange for 5,000 shares, representing one-third ownership of
Electrostatic Solutions, Inc. stock.
The Company reduced the Series B Preferred stock by 285,000 shares
from 793,500 to 508,500 shares as 285,000 Series B Preferred had
been converted to common stock.
The Company issued 650,000 shares of restricted stock, at par
value to an individual in final settlement of the slip and fall
lawsuit in Texas. This was a confidential out of court settlement.
An additional 200,000 shares of restricted stock were issued for
the settlement of this lawsuit for a third party involved in the
lawsuit. The officer responsible at the time paid the Company
$10,000.00 for the 200,000 shares of restricted stock that were
issued for this third party.
NOTE 5 - OTHER ASSETS
Other assets consists of patents, the purchase of Kristi and Co,
Inc for $100,000, design and artwork and website development for
software and coding. These assets were valued at the existing
market value of Nutek stock at the time of purchase, when stock
was used to purchase the asset.
NOTE 6 - LONG-TERM DEBT
Long-term debt consists of the following:
The Company obtained a loan on February 20, 2000 to assist in the
purchase of Nutek Oil, Inc. The loan accrued interest at 7 1/2%
per year through September 30, 2001 and is accruing interest at
10% per year from October 1, 2001 on. The balance on this loan
at December 31, 2001 is $464,268 and $390,060 as of March 31, 2002.
The Company obtained a loan from Orange Printing on February 12,
2001. The note carries an interest rate of 8% per year and had
a balance at December 31, 2001 of $7,501 and $0 as of March 31, 2002.
The Company obtained a loan from Gertrude Madich in the amount
of $40,000, bearing an interest rate of 10% per year on November
13, 2001. There have been interest payments made in the amount
of $344.11 on this note as of March 31, 2002. This note is due
December 31, 2006.
The Company obtained a loan from Theressa Lindert in the amount
of $20,000, bearing an interest rate of 10% per year on November
16, 2001. There have been interest payments made in the amount
of $197.26 on this note as of March 31, 2002. This note is due
December 31, 2006.
The Company obtained a loan from Gertrude Madich in the amount
of $10,000, bearing an interest rate of 10% per year on December
11, 2001. There have been interest payments made in the amount
of $86.03 on this note as of March 31, 2002. This note is due
December 31, 2006.
The Company obtained a loan from Venture Resource Consulting in
the amount of $87,400, bearing an interest rate of 12% per year
on February 14, 2002. There have been no payments made on this
note as of March 31, 2002. This note is due August 13, 2002.
The Company obtained a credit line from Black Mountain Bank in
January 2002. The credit line carries an interest rate of 7%
per year. There have been interest payments made in the amount
of $1,300.94 on this line as of March 31, 2002. The balance on
this line as of March 31, 2002 is $274,000.
All other notes payable are non-interest bearing. Interest on
notes payable, which are non-interest bearing, have been imputed
at the rate of 9% per annum.
NOTE 7 - INCOME TAXES
Nutek, Inc. and its business segments available net operating
loss carry forwards to offset future federal taxable income of
approximately $5,057,677. The carry forwards start expiring
in 2004. The Company has deemed it less than likely that this
benefit will be utilized. Therefore Company recognized no
income tax benefit from the losses generated during the year
ended December 31, 2000. The Company has adopted the Statement
of Financial Accounting Standards No. 109 - "Accounting for
Income Taxes."
Deferred tax asset
Net operating loss carry forwards $ 5,057,677
Valuation allowance (5,057,677)
Net deferred tax asset -
NOTE 8 - CONTINGENCIES AND COMMITMENTS
Handi-Plate Royalty
As part of acquiring the patents for this product, Nutek Inc.
agreed to provide the inventor a 2.5% royalty interest on the
gross sales of this product.
After numerous delays by the manufacturer of the tooling to
provide Nutek the final finished product in order to fulfill
orders received, Nutek lost over $5 million in sales of this
product. In December 2000, the Company prepared a lawsuit,
which it has served on Advance plastics, et al, of San Diego,
California claiming more than $5 million in damages. These
revenues had made up a significant part of Nutek's growth
strategy for 2000 and were a significant setback to meeting
the sales objectives for the year.
The company has determined it is in the best interests of the
shareholders to not pursue further legal action against
Advanced Plastics of San Diego since Advanced Plastics has
agreed to return the Handi-Plate mold to the company.
Clock royalty
As part of the acquisition of Century Clocks SA clock molds,
a 7.5% royalty interest was given. The royalty owners
advanced $55,000 to Nutek, Inc. Murray Conradie had the
option of converting the loan which he made to Nutek Inc.
in the amount of $57,000 to a royalty interest and becoming
a participant in the 7.5% royalty interest. During 2001,
the note was cancelled and converted to the preferred stock.
Subscriptions Receivable
The Company has received common stock subscriptions in the
amount of $100,000. The Company reported this as part of
shareholder's equity. The Company received the payment for
the subscriptions in the first quarter 2000.
Litigation
A lawsuit was initiated by the Company to recover 1,000,000
shares of its common stock, which was issued to an individual
for services, which were not received. Nutek successfully
resolved this case in November 2000 before going to trial.
After numerous delays by the manufacturer of the tooling to
provide Nutek the final finished product for the Handi-Plate
product in order to fulfill orders received, Nutek lost over
$5 million in sales of this product. In December 2000, the
Company prepared a lawsuit, which it has served on Advance
plastics, et al, of San Diego, California claiming more
than $5 million in damages. These revenues had made up a
significant part of Nutek's growth strategy for 2000 and
were a significant setback to meeting the sales objectives
for the year.
After numerous delays by the inventor of the Electrostatic
Light Switch patent number 5833350 to provide Nutek the
information, continuation patents and schematics which Nutek
purchased, Nutek acquired world wide rights to a significantly
enhanced patent and returned the rights to Electro Static
Solutions LLC for patent number 5833350. Electro Static
Solutions and its members are now involved in litigation
with Nutek for the return of $150,000 in cash and $180,000
in Nutek stock paid to Electro Static Solutions. Electro
Static Solutions is claiming the balance of the purchase
price. The Company is very confident that the company will
prevail in this litigation.
Computers
The Company initiated a 36 month lease on March 9, 2000.
The payments are for $704 per month. The balance on this
lease at December 31, 2001 was $10,553 and $7,458 as of
March 31, 2002.
NOTE 9 - ACQUISITIONS
All assets are booked at historical purchase price and there
is no variance between book value and the purchase price.
Patent rights for an electro static light switch were
acquired August 27, 1999 for the fair market price of
$1,000,000 from a non-related party. Payment was made
by issuing 600,000 shares of Restricted Common Stock
valued at $.30 per share. Another $150,000 was to be
paid in cash with the balance of $670,000 to be paid by
increasing the royalty payment from seven to ten percent
until the balance is paid off. After numerous delays by
the inventor of the Electrostatic Light Switch patent
number 5833350 to provide Nutek the information, continuation
patents and schematics which Nutek purchased, Nutek
acquired world wide rights to a significantly enhanced
patent and returned the rights to Electro Static Solutions
LLC for patent number 5833350.
Nutek Oil, Inc., some of the assets and leases of the
Clipper Operating Company were acquired on 02/23/2000
with 2,064,348 shares of Nutek stock at the current market
price of $0.31 representing $639,948 a note for $639,948
was issued for the balance of the purchase price. The
purchase price of $1,279,896 was made up of (mineral acreage
for $454,959; equipment at market value $788,217; and gas
pipeline at market value $36,720),
Vac-U-Lift Production Company, Inc. In June of 1996, the
company exchanged 100,000 shares of its common stock and
a certain amount of cash to acquire all of the outstanding
common shares of Vac-U-Lift Production Company, Inc., a
Texas corporation. The business combination was been
accounted for under the purchase method of accounting.
There was no goodwill or intangible assets recorded for this
acquisition. Nutek determined at the end of Fiscal 2000
to shut down this operation through bankruptcy. This
company had no significant assets but had accounts payable
of approximately $19,000.00, which was discharged as a result
of the bankruptcy.
SRC International, Inc. was acquired for 1,000,000 shares of
the Company's common stock for all the outstanding stock of
SRC International, Inc. in a transaction consummated on
04/01/1998. SRC International Inc. manufactures "Super Glide"
a rail covering made of an extremely durable, super-slick,
space age polymer designed to reduce friction between rails
and hangers in the dry cleaning and garment industries. The
business combination has been accounted for under the pooling
of interest method.
Century Clocks, Inc. (a Nevada Corporation) was incorporated
on January 15, 1999 by Nutek, Inc. On April 30, 1999, clock
molds valued at $257,800 were acquired. Shares in the amount
of 1,315,000 with a fair market value of $.12 totaling
$157,800 plus notes payable in the amount of $100,000 was
given in exchange for the clock molds.
Kristi and Co. was acquired 01/06/2000 for 250,000 shares of
the Company's stock in exchange for the outstanding common
stock of Kristi and Co and a note payable in the amount of
$50,000 payable within 18 months at an interest rate of 7%
per annum. Kristi and Co. has the rights to certain woman's
resort wear clothing designs and design groups. Kristi and
Co. plans to market these items and to continue creating new
designs. Kristi and Co. was incorporated September 13, 1999.
Kristi and Co. reported the rights and assets purchased from
Kristi Hough at their historical cost of zero in a manner
similar to a pooling of interest due to the common control of
management, per APB Opinion 16. When Nutek, Inc. purchased
Kristi and Co., the acquisition was booked at the estimated
fair market value of those rights and assets which Kristi
and Co. owned under the purchase method of accounting for
business combinations per APB 16 as there was not a common
control issue for this transaction. Accordingly, these
designs and client lists were restated at their estimated
fair market values per the best judgment of management.
Management based its evaluation on the fact that these
customer lists, designs and patterns had previously generated
revenues of approximately $1,500,000 for a company in a
similar line of business over a period of approximately 18
months. Nutek, Inc. estimated the customer list at $30,000
and the designs and patterns at $70,000. Current sales and
cash flows of Kristi and Co.'s line indicate that the
valuation was accurate. The Company anticipates selling
these items since Kristi and Co. is no longer in business.
Datascension, Inc. was acquired on July 2, 2001 for $2,200,000
of Nutek, Inc's restricted common stock in exchange for the
outstanding common stock of Datascension, Inc. There were
27,500,000 shares issued. Of this amount, 20,911,111 has
been converted to 209,111 shares of the Series A preferred
stock. Datascension, Inc. is a premiere data solutions
company representing unique expertise in collection, storage,
processing and interpretation of data.
NOTE 10 - RELATED PARTY TRANSACTIONS
Mr. Conradie was formerly an officer and manager of Century
Clocks SA. He negotiated a purchase of clock molds from
South Africa. This was a three party transaction which
involved Mr. Conradie purchasing the molds in South Africa
and then transferring the clock molds to Century Clocks, Inc.,
a company wholly owned by Nutek, Inc. and formed to pursue
this business opportunity. The clock molds were recorded at
Mr. Conradie's, the transferor's, historical cost and book value.
There were no inventories involved in these transactions.
Mr. Conradie also received 1,050,000 shares of the Company's
common stock valued at $126,000, December 30, 1999 the day the
stock was authorized and recorded in the Company's minutes.
Murray Conradie received 175,000 shares of the company's common
stock valued at $26,250 for unpaid compensation during the
first six months of 2000.
Kristi Conradie, vice president, received 250,000 shares of Nutek
Inc's common restricted stock and a note payable in the amount
of $50,000 for the outstanding stock of Kristi and Co., Inc.
Kristi Conradie received 163,334 shares of the company's common
stock valued at $24,500 for unpaid compensation during the first
six months of 2000.
Murray Conradie and Kristi Conradie have loaned the company an
additional $107,333 through their personal lines of credit
which is included in the short-term notes payable.
NOTE 11 - WARRANTS AND OPTIONS
The Company does not currently have any stock options issued.
The company has adopted FASB 123 and will account for stock
issued for services and stock options under the fair value method.
NOTE 12 - SEGMENT INFORMATION
The Company has adopted FASB 131. The adoption of FASB 131 did
not affect results of the company's statement of operations or
financial position, but did affect the disclosure of segment
information. The Company operates within two segments, retail
sales and exploration and production of oil and gas. Retail
sales includes Kristi and Co., SuperGlide, Electrostatic light
switch, Tekplate, and Century Clocks.
NOTE 13 - PRIOR PERIOD ADJUSTMENT
Prior management had a company called Vac-U-Lift Production
Company Inc., which went bankrupt and was closed down.
Management had formed a partnership called the Vac-U-Lift
partnership, which was formed to drill a single oil well. This
was previously reported on the books as "Drilling equipment" for
$260,604. This amount was removed, along with a $97,173 adjustment
for inventory of Kristi & Co., reported on the prior financial
statements.
NOTE 14 - SUBSEQUENT EVENTS
The company sold the print shop for $41,000 including principal
and interest on April 16, 2002. The sale consisted of a $5,000
down payment and the company carrying a two-year note receivable
in the amount of $33,500, bearing interest at 7.00%. There will
be monthly payments of principal and interest of $1,500, with the
note maturing on April 1, 2004.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
The following is a discussion of certain factors affecting
Registrant's results of operations, liquidity and capital
resources. You should read the following discussion and analysis
in conjunction with the Registrant's consolidated financial
statements and related notes that are included herein under Item 1
above.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
The statements contained in the section captioned Management's
Discussion and Analysis of Financial Condition and Results of
Operations which are historical are "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements represent
the Registrant's present expectations or beliefs concerning
future events. The Registrant cautions that such forward-looking
statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance
or achievements of the Registrant to be materially different
from any future results, performance or achievements expressed
or implied by such forward-looking statements. Such factors
include, among other things, the uncertainty as to the
Registrant's future profitability; the uncertainty as to the
demand for Registrant's services; increasing competition in the
markets that Registrant conducts business; the Registrant's
ability to hire, train and retain sufficient qualified personnel;
the Registrant's ability to obtain financing on acceptable terms
to finance its growth strategy; and the Registrant's ability to
develop and implement operational and financial systems to manage
its growth.
1) Plan of Operation
The Company is engaged in multiple business activities, which
currently include:
(A) Datascension Inc., which conducts telephone market research
and provides data entry services for third parties;
(B) Nutek Oil Inc, which owns the rights to oil leases in Texas;
(C) Kristi & Co., Inc., which designs, manufactures and sells
woman's resort wear clothing;
(D) Century Clocks Inc., which produces plastic wall clocks;
(E) SRC International Inc., which produces plastic coverings for
metal rails;
(F) Other consumer/industrial products which include: a patented
safety product that replaces standard light switch cover plates
that automatically provide illumination in the event of a power
failure; and a patented plastic buffet plate that allows the user
to hold both a plate and cup in one hand.
The Company's websites can be found at: www.nutk.com;
www.tekplate.com and www.datascension.com
(i) Short-term Objectives:
- Continue the expansion of Datascension.
- Expand Datascension to have International operations.
- Continue market penetration and consumer awareness of the
Tekplate product
- Make acquisitions of strategic competitors.
- Develop strategic Joint Venture relationships.
Nutek recently made the decision to eliminate certain operations
to focus more of its resources on its core growth operations. The
decision was based on a number of factors including the performance
and cash flow requirements of Kristi & Co., Inc. and Century Clocks Inc.,
the general slow growth projections for the next few
years, the high cost of customer acquisition and retention and the
ongoing costs associated with maintaining these operations at a
competitive level. Kristi & Co., Inc and Century Clocks Inc., did
expand their customer base of customers, however, to maintain and
continue growth would require significant additional capital
requirements. This capital can be better utilized in expanding
Datascension and funding additional TekPlate inventory. Nutek
anticipates that these actions will reduce operating expenses
and at the same time have a significant impact on increasing
revenue and profits.
(ii) Long-term Objectives:
- Expand the Tekplate penetration to both a national and
international level.
- Secure significant business opportunities for Datascension Inc.
- Complete in-field drilling of 20 additional oil wells.
There is a planned sale of significant equipment and assets to
include, Kristi & Co., Inc, Century Clocks Inc., SRC International
Inc., and the entire print shop. The company anticipates a
significant capital infusion into the company from the sale of
these assets which will provide additional capital for the
purchase of Tekplate inventory and the expansion of Datascension
into the International markets. Excluding any potential acquisition,
the Company's work force is expected to increase at a rate equal
to actual increases of our business operations.
1) During the First Quarter ended March 31, 2002 the Company
had a net profit of $147,777 from operations against revenues
of $1,461,142 as compared to a net loss from operations of $66,511 against
revenues of $315,856 for the same quarter last
year. The Company has increased its selling, general and
administration costs from $258,152 for the same period last year
to $493,628 for the First Quarter this year. Depreciation costs
for the First Quarter this year were $56,893 as compared to $40,699
for the same period last year.
As of March 31, 2002, the Company has seventy two million two
hundred and forty two thousand five hundred and thirty-five
(72,242,535) shares of its $0.001 par value common voting stock
issued and outstanding which are held by approximately five hundred
and sixteen (516) shareholders of record. The Company also has
five hundred and eight thousand five hundred (508,500) shares of
its $0.001 par value Preferred Stock Series B issued and
outstanding, as of March 31, 2002. All Series B Preferred shares
which have been issued were issued for cash at $1.00 a share.
Series B Preferred shares have the same voting rights as the common
shares but have priority in the event of Company liquidation. All of the
shares outstanding were to be redeemed at $1.00 a share
plus all accrued dividends prior to December 31, 1993. This has
been extended by mutual agreement. Series B shares have annual
dividends of $.15 a share payable quarterly. They are convertible
to common shares on a one for one basis at the holders' option.
The Company also has five hundred and ninety-six thousand four
hundred and eight (596,408) shares of its $0.001 par value Preferred
Stock Series A issued and outstanding, as of March 31, 2002.
2) Results of Operations
For the First Quarter, ended March 31, 2002, the Company has
generated $1,461,142 in revenues and generated a profit of $147,777
for the same period. This compares to revenues of $315,856 and a
loss of $66,511 for the same period last year. The Company has
increased its working capital position by $494,465 from a positive
$675,726 at December 31, 2001 to a positive $1,170,191 on March 31,
2002.
The majority of the Company's expenses for the quarter included
selling, general administrative costs. Additionally, there were
non-recurring costs for the 2001 year end 10K audit fees of $37,303
included in this first quarters expenses.
3) Liquidity and Capital Resources
Management is of the opinion that sufficient working capital will
be available from internal operations and from outside sources
during the next twelve months thereby enabling Nutek to meet its
obligations and commitments as they become payable. Historically,
Nutek has been successful in its efforts to secure working capital
from private placements of common stock securities, bank debt, and
loans from private investors. Currently, Mr. Conradie and Mr. Kincer
have both provided significant personal collateral to the
Company's bankers in return for a substantial line of credit and
the commitment to fund purchase orders for the Tekplate product
from major wholesalers.
As an on going concern, if the Company needs to raise additional
funds in order to fund expansion, develop new or enhanced services
or products, respond to competitive pressures or acquire
complementary products, businesses or technologies, any additional
funds raised through the issuance of equity or convertible debt
securities, the percentage ownership of the stockholders of the
Company will be reduced, stockholders may experience additional
dilution and such securities may have rights, preferences or
privileges senior to those of the Company's Common Stock. The
Company does not currently have any contractual restrictions on
its ability to incur debt and, accordingly, the Company could
incur significant amounts of indebtedness to finance its operations.
Any such indebtedness could contain covenants which would restrict
the Company's operations.
The Company currently has two hundred and ninety-four (294)
employees of which six (6) are Officers of the Company. As the
Company continues to grow and develop its product lines it will
need to add employees.
The Company's consolidated financial statements have been prepared
on the assumption the Company will continue as a going concern.
Management believes that current operations will continue to provide
sufficient revenues to meet operating costs and expansion.
Unclassified Balance Sheet - In accordance with the provisions of
SFAS No. 53, the Company has elected to present an unclassified
balance sheet.
Loss Per Share - The Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share" that established standards for the computation, presentation
and disclosure of earnings per share ("EPS"), replacing the
presentation of Primary EPS with a presentation of Basic EPS.
It also requires dual presentation of Basic EPS and Diluted EPS on
the face of the income statement for entities with complex capital
structures. The Company did not present Diluted EPS since it has
a simple capital structure.
18
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts, included or
incorporated by reference in this Form 10-QSB which address activities,
events or developments which the Company expects or anticipates will or
may occur in the future, including such things as future capital
expenditures (including the amount and nature thereof), finding suitable
merger or acquisition candidates, expansion and growth of the Company's
business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and
analyses made by the Company in light of its experience and its
perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in
the circumstances. However, whether actual results or developments
will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic
market and business conditions; the business opportunities (or
lack thereof) that may be presented to and pursued by the Company;
changes in laws or regulation; and other factors, most of which are
beyond the control of the Company.
This Form10-QSB contains statements that constitute "forward-looking
statements." These forward-looking statements can be identified by the
use of predictive, future-tense or forward-looking terminology, such
as "believes," "anticipates," "expects," "estimates," "plans," "may,"
"will," or similar terms. These statements appear in a number of places
in this Registration and include statements regarding the intent,
belief or current expectations of the Company, its directors or its
officers with respect to, among other things: (i) trends affecting the
Company's financial condition or results of operations for its limited
history; (ii) the Company's business and growth strategies; (iii) the
Internet and Internet commerce; and, (iv) the Company's financing
plans. Investors are cautioned that any such forward-looking statements
are not guarantees of future performance and involve significant risks
and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various
factors. Factors that could adversely affect actual results and
performance include, among others, the Company's limited operating
history, dependence on continued growth in the use of the Internet, the
Company's inexperience with the Internet, potential fluctuations in
quarterly operating results and expenses, security risks of transmitting
information over the Internet, government regulation, technological
change and competition.
Consequently, all of the forward-looking statements made in this
Form 10-QSB are qualified by these cautionary statements and there
can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially
realized, that they will have the expected consequence to or effects
on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
19
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is from time to time involved in litigation incident
to the conduct of its business. Certain litigation with third
parties and present and former employees of the Company is routine
and incidental, such litigation can result in large monetary awards
for compensatory or punitive damages.
The Company is currently involved in the following litigation :
After numerous delays by the inventor of the Electrostatic Light
Switch patent number 5833350 to provide Nutek the information,
continuation patents and schematics which Nutek purchased, Nutek
acquired world wide rights to a significantly enhanced patent and
returned the rights to Electro Static Solutions LLC for patent number
5833350. Electro Static Solutions and its members are now involved
in litigation with Nutek for the return of $150,000.00 in cash and
$180,000.00 in Nutek stock paid to Electro Static Solutions. Electro
Static Solutions is claiming the balance of the purchase price.
The Company and legal counsel are very confident that the company
will prevail in this litigation.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
None.
20
SIGNATURES
Pursuant to the requirements of Section 12 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.
Nutek, Inc.
------------
(Registrant)
/s/ Murray N. Conradie
- -------------------
Murray N. Conradie,
President, Chairman
Date: April 30, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
Nutek, Inc.
/s/ Cipra Donmnitz
- -----------------------------------
Cipra Domnitz, CFO and Corporate Secretary
Date: April 30, 2002
EX-27.2
FINANCIAL DATA SCHEDULE
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET, THE STATEMENT OF OPERATIONS, AND THE STATEMENT OF
CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2002
<PERIOD-START> JAN-01-2002
<PERIOD-END> MAR-31-2002
<CASH> 54,451
<SECURITIES> 72,000
<RECEIVABLES> 1,148,277
<ALLOWANCES> 0
<INVENTORY> 193,265
<CURRENT-ASSETS> 1,672,616
<PP&E> 3,041,214
<DEPRECIATION> 56,893
<TOTAL-ASSETS> 7,125,595
<CURRENT-LIABILITIES> 502,425
<BONDS> 0
<PREFERRED-MANDATORY> 0
<PREFERRED> 1,105
<COMMON> 72,243
<OTHER-SE> 5,304,841
<TOTAL-LIABILITY-AND-EQUITY> 7,125,595
<SALES> 1,461,142
<TOTAL-REVENUES> 1,461,142
<CGS> 769,196
<TOTAL-COSTS> 1,321,478
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,289
<INCOME-PRETAX> 147,777
<INCOME-TAX> 0
<INCOME-CONTINUING> 147,777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 147,777
<EPS-PRIMARY> 0.002
<EPS-DILUTED> 0.002