U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A
(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, 2003
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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)
6330 McLeod Drive, Suite 1, Las Vegas, NV 89120
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(Address of principal executive offices) (zip code)
702-262-2061 (Telephone) 702-262-0033 (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 [X] No [ ]
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 91,682,243 shares of Common stock issued and 90,723,910
outstanding, par value $.001 per share as of March 31, 2003. 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, 2003.
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........................................ 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 17
Item 2. Changes in Securities and Use of Proceeds............ 17
Item 3. Defaults upon Senior Securities...................... 17
Item 4. Submission of Matters to a Vote
of Security Holders................................. 17
Item 5. Other Information..................................... 17
Item 6. Exhibits and Reports on Form 8-K...................... 17
Signatures...................................................... 24
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
The unaudited financial statements of registrant for the three months ended
March 31, 2003, 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, 2003. 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.
TABLE OF CONTENTS
ACCOUNTANTS' REVIEW REPORT F1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheet F2-F3
Consolidated Statement of Income F4
Consolidated Statement of Cash Flows F5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F6 - F15
To the Board of Directors of
Nutek, Inc.
Las Vegas, Nevada
We have reviewed the accompanying balance sheet of Nutek, Inc. (a Nevada
corporation) as of March 31, 2003 and the related statements of operations and
cash flows for the three months then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute
of Certified Public Accountants. All information included in these financial
statements is the representation of the management of Nutek, Inc.
A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than
an audit in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
Gary V. Campbell, CPA, Ltd.
May 12, 2003
Las Vegas, Nevada
- F1 -
BALANCE SHEET
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2003 AND DECEMBER 31, 2002
UNAUDITED AUDITED
3/31/03 12/31/02
ASSETS
CURRENT ASSETS:
Cash $ 170,301 $ 44,371
Accounts receivable 1,349,370 1,567,277
Inventory 225,318 222,890
Accrued income 11,200 11,200
Notes receivable, related party 3,750 7,500
Notes receivable, current portion 753,263 753,206
Prepaid expenses 345,873 119,408
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Total current assets 2,859,075 2,725,852
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PROPERTY AND EQUIPMENT:
Property and equipment, net of depreciation 2,920,753 2,953,336
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Total Property and Equipment 2,920,753 2,953,336
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OTHER ASSETS:
Patent rights acquired, net of amortization 561,262 561,262
Notes receivable, net of current portion 1,376 5,800
Website assets, net of amortization 28,340 19,654
Customer lists, net of amortization 43,583 43,583
Patterns/designs, net of amortization 44,488 44,488
Packaging design/artwork, net of amortization 74,687 69,687
Long-term investment 8,000 8,000
Deposits 40,784 30,284
Goodwill 1,692,782 1,692,782
Trademarks 8,000 8,000
Other assets 1,425 -
Licensing fees 50,000 50,000
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Total other assets 2,554,727 2,533,540
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TOTAL ASSETS: $8,334,555 $8,212,728
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- F2 -
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $448,070 $591,723
Accrued expenses 91,125 153,233
Line of credit 374,775 373,800
Notes payable, related party 230,000 170,000
Current portion of long-term notes payable 126,772 123,418
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Total current liabilities 1,270,742 1,412,174
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LONG-TERM DEBT:
Long-term notes payable 45,914 58,173
Bonds payable 170,411 170,411
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Total long-term debt 216,325 228,584
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TOTAL LIABILITIES: 1,487,067 1,640,758
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STOCKHOLDERS' EQUITY
Common Stock 91,682 88,974
Common Stock, $0.001 par value, 200,000,000 shares authorized;
91,682,243 and 88,973,910 shares issued and
90,723,910 and 88,015,577 shares outstanding at 3/31/03 and 12/31/02.
Preferred Stock - Series A 560 560
Preferred stock - Series A, $0.001 par value, 20,000,000 shares authorized;
559,508 shares issued and outstanding at 3/31/03 and 12/31/02.
Preferred Stock - Series B 509 509
Preferred stock - Series B, $0.001 par value, 20,000,000 shares authorized;
508,500 shares issued and outstanding at 3/31/03 and 12/31/02.
Additional paid-in capital - common stock 7,690,350 7,555,559
Additional paid-in capital - preferred series A 3,021,131 3,021,132
Additional paid-in capital - preferred series B 507,992 507,991
Stock Subscription (153,750) (153,750)
Treasury stock (134,388) (134,388)
Non-Controlling Interest in Subsidiary 357,251 355,782
Accumulated deficit (4,533,849) (4,670,399)
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Total stockholders' equity 6,847,488 6,571,970
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $8,334,555 $8,212,728
========== ==========
The accompanying independent accountants' review report and
notes to financial statements should be
read in conjunction with these Consolidated Balance Sheets.
- F3 -
STATEMENTS OF INCOME
FOR THREE MONTHS ENDED
MARCH 31, 2003 AND 2002
UNAUDITED
Three months ended
3/31/03 3/31/02
REVENUE $1,564,999 $1,461,142
COST OF GOODS SOLD 736,901 769,196
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GROSS PROFIT 828,098 691,946
EXPENSES:
Selling, general and administrative 636,877 493,628
Depreciation expense 64,912 56,893
Amortization expense - 1,761
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Total expenses 701,789 552,282
OPERATING INCOME (LOSS) 126,309 139,664
OTHER INCOME/(EXPENSES):
Interest income 402 -
Discount on Settlement 24,000 10,501
Interest expense (15,021) (12,289)
Other income 3,000 -
Other expenses (671) -
Minority interest in earnings (1,469) 9,901
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Total other income/(expenses) 10,241 8,113
NET ORDINARY INCOME (LOSS) $136,550 $147,777
========= =========
Basic weighted average number of
common shares outstanding 89,026,225 71,817,535
Diluted weighted average number of
common shares outstanding 144,977,025 71,817,535
Basic Net Income (Loss) per Share $0.002 $0.002
Diluted Net Income (Loss) per Share $0.001 $0.002
The accompanying independent accountants' review report and
the notes to financial statements should be read in conjunction
with these Consolidated Statements of Income and Accumulated Deficit.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31, 2003 AND 2003
Three months ended
3/31/03 3/31/02
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income / (Loss) from Operations $ 136,550 $ 147,777
Adjustments to reconcile net income
to net cash provided
Increase in non-controlling interest in subsidiary 1,469 -
Depreciation Expense 64,912 56,893
Amortization Expense - 1,761
(Increase) / Decrease in Other Assets (1,425) -
(Increase) / Decrease in Prepaid Expenses (226,464) -
(Increase) / Decrease in Notes Receivable - (25,865)
(Increase) / Decrease in Accounts Receivable 217,906 (501,493)
(Increase)/ Decrease in Deposits (10,500) (8,936)
(Increase) / Decrease in Inventory (2,428) (30,259)
Increase / (Decrease) in Accrued Expenses (62,089) -
Increase / (Decrease) in Accounts Payable (143,673) 160,438
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Net cash provided by (used) by operating activities (25,742) (199,684)
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) / Decrease in Notes Receivable 8,117 -
(Increase) / Decrease in Other Assets - (46,588)
(Increase) / Decrease in Intangibles (13,686) -
(Increase)/ Decrease in Property & Equipment (32,329) -
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Net cash provided by (used in) investing activities (37,898) (46,588)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Capital Stock 137,500 -
Increase/(Decrease) in Short Term Loans Payable 975 -
Increase/(Decrease) in Long Term Loans Payable 51,095 240,113
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Net cash provided by (used in) financing activities 189,570 240,113
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Balance as at beginning of period 44,371 60,610
Net decrease in cash 125,930 (6,159)
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Balance as at end of period $170,301 $54,451
SUPPLEMENTAL INFORMATION:
Interest Paid $15,021 $12,289
Taxes Paid $ - $ -
- F5 -
NUTEK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
Nutek, Inc. was incorporated in August 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
extremely durable, super-slick space age polymer, designed to reduce
friction between the rails and hangers in the dry cleaning and garment
industries.
Century Clocks, Inc. is a Nevada corporation formed by Nutek, Inc. and is
doing business in California. Century Clocks, Inc. has a joint venture
agreement with the Department of Veterans Industries. The company produces
clocks assembled and packaged by U.S. Veterans.
Kristi & Co., a Nevada corporation doing business in California, was
incorporated on September 13, 1999. The company markets women's resort
wear. The company purchased 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,
Inc. began operations as a separate company.
Datascension, Inc. and related assets were 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. During
2002, Datascension, Inc. expanded operations into Costa Rica purchasing Sin
Fronteras, Inc.
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 No. 115. 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.
CONSOLIDATION POLICY
The accompanying consolidated financial statements include the accounts of
Nutek, Inc. and its different business segments: SRC International, Inc.,
Century Clocks, Inc., Kristi & Co., Datascension, Inc., and Nutek Oil, Inc.
All significant inter-company balances and transactions have been
eliminated.
- F6 -
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
of the date of the financial statements and revenues and expenses for the
period reported. Actual results may differ from these estimates.
COMPREHENSIVE INCOME
Statements of Financial Accounting Standards No. 130, Reporting
Comprehensive Income (SFAS 130), requires that total comprehensive income be
reported in the financial statements. The Company does not have any items
considered to be other comprehensive income for the three months ended March
31, 2003.
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
statement purposes over the following estimated useful lives:
Computer equipment 5 years
Drilling equipment 20 years
Factory equipment 7 years
Furniture and fixtures 7 years
Office equipment 5 years
Equipment and machinery 20 years
Molds and tooling 20 years
All assets are booked at historical purchase price and there is no variance
between book value and the purchase price.
INTANGIBLE ASSETS
The Company has adopted SFAS No. 142, "Goodwill and Other Intangible
Assets", which requires that goodwill and other indefinite lived intangible
assets are no longer amortized, but renewed annually, or sooner if deemed
necessary, for impairment. Under guidance from SFAS No. 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 March 31,
2003.
- F7 -
The following intangible assets have also been assessed under guidance from
SFAS No. 142, and concluded that they have not significantly decreased and
there has been no reduction in the usefulness of the assets as of March 31,
2003: clothing patterns and designs, artwork, customer lists, packaging
designs, patents, and trademarks.
EARNINGS PER SHARE
Basic earnings per share are 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 reflects the potential dilution that could occur
if the securities or other contracts to issue common stock were exercised or
converted into common stock.
COMPENSATED ABSENCES
The Company has made no accrual for vacation or sick pay because the Company
does not provide for these benefits. Therefore, the amount of compensation
is not reasonably estimable.
ADVERTISING
Advertising costs are expensed when incurred. There were no amounts paid
for advertising for the three months ended March 31, 2003.
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.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are made up of the following as of March 31, 2003:
Drilling equipment $ 138,220
Factory equipment 1,381
Equipment and machinery 1,780,372
Molds and tooling 758,065
Office equipment 386,146
Trade show booths 6,150
Leasehold improvements 514,545
Accumulated depreciation (664,126)
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$ 2,920,753
- F8 -
NOTE 4 - STOCKHOLDERS' EQUITY
During the first quarter of 2003, the Company issued 1,250,000 shares of
restricted stock to private investors and issued 1,458,333 shares for services
for the period ended March 31, 2003.
NOTE 5 - LONG-TERM NOTE PAYABLE
The Company has entered into agreements for long-term notes payable. Long-
term notes payable consists of the following at March 31, 2003:
Note payable to Investor; no specific
repayment terms, interest at 12% annually through February
2004. The loan is secured by stock in Nutek Oil, Inc. $ 84,750
Note payable to R.L. Polk, no specific repayments terms
and no stated interest rate. Secured by assets. 45,000
Note payable to Vendor, monthly payments of $348
inclusive of 7% annual interest through September 2006,
secured by equipment. 12,557
Note payable to Vendor, monthly payments of $906,
inclusive of 12% annual interest through February 2006.
Secured by equipment. 30,379
172,686
Less current portion (126,772)
$ 45,914
Principal maturities are as follows:
Twelve months ended March 31,
2004 $ 126,772
2005 28,362
2006 15,964
2007 1,588
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$ 172,686
NOTE 6 - INCOME TAXES
Deferred income taxes result from timing differences in the recognition of
expense for tax and financial statement purposes. Statements of Financial
Accounting Standards No. 109 "Accounting for Income Taxes", (SFAS 109)
requires deferred tax liabilities or assets at the end of each period to be
determined using the tax rate expected to be in effect when taxes are
actually paid or recovered. The sources of those timing differences and the
current tax effect of each were as follows:
Depreciation and amortization $ (77,624)
Net operating loss carry forward 124,051
Valuation allowance (46,427)
--------------
$ -
The components of the net deferred tax asset at March 31, 2003 under SFAS
109 are as follows:
Depreciation and amortization $ (786,209)
Net operating loss carry forward 917,862
Valuation allowance (131,653)
--------------
$ -
Reconciliations between the actual tax expense and the amount computed by
applying the U.S. Federal Income Tax rate to income before taxes are as
follows:
Percent of
Pretax
Amount Income
Expected $ 46,427 34%
Valuation allowance 46,427) (34%)
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Actual expense $ - 0%
- F9 -
NOTE 7 - LINE OF CREDIT
The Company has a line of credit agreement with a financial institution that
provides maximum borrowing of $375,000. Interest on outstanding balances
accrues at 7% and is payable monthly. The line has no specific expiration
date and is secured by the company assets and receivables.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company holds a note payable to a shareholder, in the amount of $45,000.
This agreement has no specific repayment terms, and 3% interest annually
through June 2004. This loan is unsecured.
The Company holds a note payable to a shareholder, in the amount of $55,000.
This agreement has no specific repayment terms, no annual interest, and no
defined maturity date. This loan is unsecured.
The Company holds a note payable to a shareholder, in the amount of $50,000.
This agreement has no specific repayment terms, and 10% interest annually
through June 2003. This loan is unsecured.
The Company holds a note payable to a shareholder in the amount of $20,000.
This agreement has no specific repayment terms, and 10% interest annually
through June 2006. This loan is unsecured.
The Company holds an outstanding note payable to a shareholder in the amount
of $50,000. This payable accrues interest at 10% annually through January
2004. All principal and interest is due in full on January 24, 2004.
The Company has an outstanding note payable to a related party, in the
amount of $10,000. This payable has no stated interest rate and no specific
repayment terms.
The Company holds bonds payable in the amount of $170,411 to various
individuals with no specified repayment terms and no stated interest rates.
Amounts are to be converted to company stock.
The Company has an outstanding receivable to a shareholder, in the amount of
$3,750. This receivable has no stated interest rate and no specific
repayment terms.
NOTE 9 - CONTINGENCIES AND COMMITMENTS
SUBSCRIPTIONS RECEIVABLE
The Company has received common stock subscriptions in the amount of
$153,750. The Company reported this as part of a shareholder's equity.
LEASES
The Company is committed under several non-cancelable lease agreements for
office space with various termination dates through 2011.
At March 31, 2003, aggregate future minimum payments under these leases,
are as follows:
Twelve months ended March 31,
2004 $ 148,988
2005 139,601
2006 141,341
2007 104,693
2008 104,693
Thereafter 290,302
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Total minimum lease payments $ 929,618
- F10 -
NOTE 10 - 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, Inc. the
information, continuation patents, and schematics which Nutek, Inc.
purchased, Nutek, Inc. 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
February 23, 2000 with 2,064,348 shares of Nutek, Inc. stock at the current
market price of $.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.
SRC INTERNATIONAL, INC.
This company 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 April 1, 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 ahs been accounted
for under the pooling of interest method.
CENTURY CLOCKS, INC.
This company was incorporated in Nevada 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 & CO.
This company was acquired January 6, 2000 for 250,000 shares of the
Company's stock in exchange for the outstanding common stock of Kristi &
Co., and a note payable in the amount $50,000 which has been paid in full as
of March 31, 2003. Kristi & Co. has the rights to certain women's resort
wear clothing designs and design groups. Kristi & Co. plans to market these
items and to continue creating new designs. Kristi & Co. was incorporated
September 13, 1999.
Kristi & 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 & Co., the acquisition was booked at the estimated
fair market value of those rights and assets which Kristi 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.
- F11 -
Management based its evaluation on the fact that these customer lists,
designs, and patterns had previously generated revenues of approximately 18
months. Nutek, Inc. estimated the customer list at $50,000 and the designs
and patterns at $50,000.
Current sales and cash flows of Kristi & Co.'s line indicate that the
valuation was accurate. The Company anticipates selling these items since
Kristi & Co. is no longer in business.
DATASCENSION, INC.
This company was acquired on July 2, 2001 for $2,000,000 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.
Sin Fronteras, Inc., a Costa Rican company, was acquired on May 13, 2002 for
13,517,241 shares of Nutek, Inc.'s common stock in exchange for the
outstanding common stock of Sin Fronteras, Inc. at the fair market value of
the average trading price of Nutek, Inc.'s stock for the five trading days
prior to May 13, 2002 at the price of $0.0725. This acquisition entitled
Nutek, Inc. to assume $750,000 of note receivable due to Sin Fronteras, Inc.
No other assets or liabilities were assumed. The transaction was accounted
for by the purchase method of accounting for business combinations.
NOTE 11 - WARRANTS AND OPTIONS
The Company does not currently have any stock options issued. The Company
has adopted FASB No. 123 and will account for stock issued for services and
stock options under the fair value method.
NOTE 12 - MINORITY INTEREST IN SUBSIDIARIES
The Company has accounted for minority interest in Nutek Oil, Inc. in the
amount of $1,469. This amount represents the 22.82% interest owned by
various individuals other then Nutek, Inc.
- F12 -
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:
The Company plans to accomplish the following:
- Introduce an audit committee
- Introduce a compensation committee comprised of a majority of
independent members
- 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
(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, 2003 the Company had a net profit
of $136,550 from operations against revenues of $1,564,999 as compared to a net
profit from operations of $147,777 against revenues of $1,461,142 for the same
quarter last year. The Company has increased its selling, general and
administration costs from $493,628 for the same period last year to $636,877
for the First Quarter this year. Depreciation costs for the First Quarter this
year were $64,912 as compared to $56,893 for the same period last year.
As of March 31, 2003, the Company has ninety one million six hundred eighty two
thousand two hundred forty three (91,682,243) shares of its $0.001 par value
common voting stock issued and ninety million seven hundred twenty three
thousand nine hundred ten (90,723,910) outstanding which are held by
approximately six hundred fifty (650) 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, 2003. 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, 2003.
2) Results of Operations
For the First Quarter, ended March 31, 2003, the Company has generated
$1,564,999 in revenues and generated a profit of $136,550 for the same period.
This compares to revenues of $1,461,142 and a profit of $147,777 for the same
period last year. The Company has increased its working capital position by
$274,655 from a positive $1,313,678 at December 31, 2002 to a positive
$1,588,333 on March 31, 2003.
The majority of the Company's expenses for the quarter included payroll and
administrative costs.
Ending this first quarter of 2003 the company has accomplished more than 90% of
the cost cutting strategies implemented almost 12 months ago as part of our
overall internal restructuring and cost cutting measures.
Our revenues would have been higher this first quarter, but during the month of
February and into late March we moved our Datascension operations from the
Riverside facility to new state of the art premises in Brea, California. This
will result in significant long-term savings as we have decreased the size of
the facilities in California from over 22,000 sq.ft to approximately 8,000
sq.ft. Additionally, with this move, approximately 125 employees were
terminated from the Riverside facility and replacements were hired and are
being trained at our Costa Rican facilities.
As is the case in major moves and adjustments like this, we had to plan for
service interruptions and scheduled the available production hours around this
move so none of our clients would receive any disruption in the quality
services we offer them.
Since this move is now completed, we will now focus on expanding our Costa
Rican operations to keep up with the level of demand for our Datascension
services.
TekPlate has undergone a complete repositioning under Mr. Silverman's direction
in terms of packaging, literature and the www.tekplate.com website will be
updated to reflect the new positioning of this product. The online store will
be re-opening and a password-protected store will be available allowing vendors
to place orders directly online.
The Company's subsidiary Nutek Oil is currently raising $1 million by offering
a Preferred Stock that offers an 8% annual interest. This is being undertaken
so as not to dilute the common shares in that company while operations are
increased in an attempt to increase the revenues and results of that company.
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 approximately three hundred twenty three (323)
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.
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:
The previous facility leased by Registrant in Henderson, Nevada was leased for
the purpose of consolidating all the operations into one location. A prior
tenant of the premises had vacated the premises leaving fixtures that occupied
approximately 50% of the floor space in the warehouse. The landlord had agreed
to have this equipment removed within 90 days. This did not occur and after 14
months, when the equipment had not been removed from the premises; a decision
was made to find alternate premises and terminate the lease for cause. The
Registrant is claiming damages, and this litigation is currently active.
The Company, along with a number of individual shareholders, filed a federal
lawsuit on March 21, 2003 in the United States District Court, District of
Nevada, against Ameritrade Holding Corp., E*Trade Group Inc., Fidelity
Brokerage Services LLC, Maxim Group LLC and Charles Schwab & Company Inc., for
securities fraud, breach of contract, and negligence, among other claims. The
plaintiff group is also demanding declaratory and injunctive relief, including
asking for general, special and punitive financial damages; and that the matter
be taken up for jury trial in the jurisdiction of the United States District
Court's Nevada District.
UPDATE
The attorneys representing the plaintiffs in the federal lawsuit filed on March
21, 2003 in the United States District Court, District of Nevada, have received
communication from the attorneys representing several of the defendants. These
defendants have requested a desire to settle this lawsuit if the shares are
delivered immediately. Plaintiffs and their attorneys will be reviewing the
terms of the proposed settlement once they are received.
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
Exh. 99-1
FORM 8-K
CURRENT REPORT
ITEM 5. OTHER ITEMS
a.) CANCELLATION OF S-8 ISSUANCE
The legal services agreement ("Services Agreement") commencing 27th day
of January 2003, by and between James W. Christian of Christian, Smith &
Jewell, L.L.P., of Houston, Texas and Nutek Inc. has been concluded. All S-8
stock issued to James W. Christian and held in a third party escrow account as
a retainer to guarantee payment will be returned to the company and cancelled
by the transfer agent.
b.) CHANGE OF ADDRESS
The new address for the Company is 6330 McLeod Drive, Suite 1, Las Vegas
Nevada 89120. The Company previously moved to 6340 McLeod, as our current
space was not available. The telephone number for the business remains the
same.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: February 24, 2003
Exh. 99-2
FORM 8-K
CURRENT REPORT
ITEM 5. OTHER ITEMS
The Company, along with a number of individual shareholders, filed a federal
lawsuit on March 21, 2003 in the United States District Court, District of
Nevada, against Ameritrade Holding Corp., E*Trade Group Inc., Fidelity
Brokerage Services LLC, Maxim Group LLC and Charles Schwab & Company Inc., for
securities fraud, breach of contract, and negligence, among other claims. The
plaintiff group is also demanding declaratory and injunctive relief, including
asking for general, special and punitive financial damages; and that the matter
be taken up for jury trial in the jurisdiction of the United States District
Court's Nevada District.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: March 26, 2003
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 and Chairman of the Board
Date: May 14, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person(s) on behalf of the
registrant and in the capacities and on the dates indicated.
Nutek, Inc.
/s/ Jason F. Griffith, CPA
- -----------------------------------
Jason F. Griffith, CFO and Corporate Secretary
Date: May 14, 2003