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, 2004
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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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DATASCENSION 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 153,052,069 shares of Common stock outstanding, par value
$.001 per share as of March 31, 2004. The Registrant has 505,900 shares of
Preferred Stock Series B issued and outstanding as of March 31, 2004.
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
Item 3. Controls and Procedures............................... 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, 2004, 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, 2004. 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
DATASCENSION, INC.
(FORMERLY KNOWN AS NUTEK, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004
ACCOUNTANTS' REVIEW REPORT
To the Board of Directors of
Datascension, Inc. (formerly known as Nutek, Inc.)
Las Vegas, Nevada
We have reviewed the accompanying balance sheet of Datascension, Inc. (formerly
known as Nutek, Inc.) (a Nevada corporation) as of March 31, 2004 and the
related statements of income, changes in stockholders' equity 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 Datascension, 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 13, 2004
Las Vegas, Nevada
DATASCENSION INC.
(FORMERLY KNOWN AS NUTEK INC.)
BALANCE SHEETS
AS OF MARCH 31, 2004 AND DECEMBER 31, 2003
ASSETS
3/31/04 12/31/03
CURRENT ASSETS:
Cash $ 98,830 $122,981
Accounts receivable 1,334,886 1,087,694
Inventory 226,693 227,997
Accrued income 11,200 11,200
Prepaid expenses 134,238 194,623
Note receivable, related party 341,053 1,250
Current portion of notes receivable 1,376 451,054
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2,148,276 2,096,709
Property and Equipment, net of
accumulated depreciation 1,927,541 3,374,421
OTHER ASSETS:
Notes receivable, net of current portion - 5,800
Patent rights acquired, net of amortization 561,262 561,262
Due from Nutek Oil Inc. 1,170,972 -
Long-term investment 8,000 8,000
Website assets, net of amortization 29,590 29,340
Customer lists, net of amortization 43,611 43,611
Patterns-designs, net of amortization 44,583 44,583
Packaging design-artwork, net of amortization 86,512 86,512
Deposits 28,400 51,892
Goodwill 1,692,782 1,692,782
Trademarks 8,000 8,000
Licensing fees 50,000 50,000
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3,723,712 2,581,782
TOTAL ASSETS $7,799,529 $8,052,912
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
3/31/04 12/31/03
CURRENT LIABILITIES:
Accounts payable $ 250,891 $ 278,022
Accrued expenses 208,300 182,377
Accrued contingent liabilities 180,000 338,461
Line of credit 372,928 449,650
Notes payable, related party 204,238 328,540
Current portion of long-term notes payable 119,824 102,033
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TOTAL CURRENT LIABILITIES 1,336,181 1,679,083
Long-term notes payable, net of
current portion 158,401 16,565
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Total long-term debt 158,401 16,565
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TOTAL LIABILITIES 1,494,582 1,695,648
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STOCKHOLDERS' EQUITY:
Common stock:
Common stock, $0.001 par value, 200,000,000
shares authorized; 153,052,069 shares issued,
152,093,736 outstanding at March 31,
2003 and December 31, 2003, respectively 153,054 150,554
Preferred stock Series B:
Preferred stock, $0.001 par value, 10,000,000
shares authorized; 505,900 and 508,500
Series B shares issued and outstanding at March 31
2004 and December 31, 2003, respectively. 506 509
Additional paid-in capital-common stock 10,906,808 10,802,058
Additional paid-in capital-preferred Series A - -
Additional paid-in capital-preferred Series B 481,995 507,992
Noncontrolling interest in subsidiary
of Nutek Oil, Inc. - 311,137
Subscriptions receivable (153,750) (153,750)
Treasury stock, at cost; 958,333 shares at
March 31, 2004 and December 31, 2003 (134,388) (134,388)
Accumulated deficit (4,949,278) (5,126,848)
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Total stockholders' equity 6,304,947 6,357,264
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,799,529 $8,052,912
========== ==========
The accompanying notes to the financial statements are
an integral part of these financial statements.
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DATASCENSION INC.
(FORMERLY KNOWN AS NUTEK INC.)
STATEMENTS OF INCOME
FOR THREE MONTHS ENDED
MARCH 31, 2004 AND 2003
UNAUDITED
Three months ended
3/31/04 3/31/03
REVENUE $2,034,454 $1,564,999
COST OF GOODS SOLD 1,702,318 736,901
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GROSS PROFIT 332,136 828,098
EXPENSES:
Selling, general and administrative 178,236 636,877
Depreciation expense 84,840 64,912
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Total expenses 263,076 701,789
OPERATING INCOME (LOSS) 69,060 126,309
OTHER INCOME/(EXPENSES):
Interest income 343 402
Discount on Settlement - 24,000
Interest expense (30,019) (15,021)
Other income 2,185 3,000
Other expenses - (671)
Minority interest in earnings - (1,469)
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Total other income/(expenses) (27,491) 10,241
NET ORDINARY INCOME (LOSS) $ 41,569 $136,550
========= =========
Basic weighted average number of
common shares outstanding 152,364,569 89,026,225
Diluted weighted average number of
common shares outstanding 152,364,569 144,977,025
Basic Net Income (Loss) per Share $0.000 $0.002
Diluted Net Income (Loss) per Share $0.000 $0.001
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.
- F4 -
DATASCENSION INC.
(FORMERLY KNOWN AS NUTEK INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31, 2004 AND 2003
Three months ended
3/31/04 3/31/03
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income / (Loss) from Operations $ 41,569 $ 136,550
Adjustments to reconcile net income
to net cash provided
Stock issued for services 6,250 -
Increase in non-controlling interest in subsidiary - 1,469
Depreciation Expense 84,840 64,912
(Increase) / Decrease in Other Assets - (1,425)
(Increase) / Decrease in Prepaid Expenses 56,612 (226,464)
(Increase) / Decrease in Accounts Receivable (260,507) 217,906
(Increase)/ Decrease in Deposits 23,492 (10,500)
(Increase) / Decrease in Inventory 1,304 (2,428)
Increase / (Decrease) in Accrued Expenses 37,929 (62,089)
Increase / (Decrease) in Accounts Payable (18,634) (143,673)
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Net cash provided by (used) by operating activities (27,145) (25,742)
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CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) / Decrease in Notes Receivable 115,675 8,117
(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 115,675 (37,898)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Capital Stock 75,000 137,500
Cash in distributed subsidiary 10,661 -
Proceeds from line of credit (3,798) -
Increase/(Decrease) in Short Term Loans Payable - 975
Increase/(Decrease) in Long Term Loans Payable (194,454) 51,095
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Net cash provided by (used in) financing activities (112,591) 189,570
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Balance as at beginning of period 122,891 44,371
Net decrease in cash (24,061) 125,930
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Balance as at end of period $98,830 $170,301
SUPPLEMENTAL INFORMATION:
Interest Paid $33,672 $15,021
Taxes Paid $ - $ -
During the three months ended March 31, 2004 the Company sold their
investments in Nutek Oil, Inc.
During the three months ended March 31, 2004 the Company settled 2,600
shares of Series B preferred stock for 500,000 shares of common stock.
During the three months ended March 31, 2004 the Company purchased
equipment for $236,320 through the use of long-term debt.
DATASCENSION, INC. (FORMERLY KNOWN AS NUTEK, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
Datascension, Inc. (formerly known as 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 Innovations, Inc. is a Nevada corporation formed by Datascension,
Inc. (formerly known as Nutek, Inc.) and is doing business in California.
Century Innovations, 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, 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.
Datascension International, Inc. and related assets were purchased on
September 27, 2001 for $2,200,000 using company shares at fair market value.
Datascension International, Inc. is a premier data solutions company
representing a unique expertise in the collecting, storage, processing, and
interpretation of data. During 2002, Datascension International, 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.
DATASCENSION, INC. (FORMERLY KNOWN AS NUTEK, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONSOLIDATION POLICY
The accompanying consolidated financial statements include the accounts of
Datascension, Inc. (formerly known as Nutek, Inc.) and its different
business segments: SRC International, Inc., Century Innovations, Inc.,
Kristi & Co., and Datascension International, 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
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, 2004.
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
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.
DATASCENSION, INC. (FORMERLY KNOWN AS NUTEK, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION
Revenues are considered earned when sales of goods are shipped and contracts
are complete.
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 reviewed 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,
2004.
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,
2004: clothing patterns and designs, artwork, customer lists, packaging
designs, patents, and trademarks.
NET INCOME PER SHARE
Basic net income 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 net income per share.
Diluted net income 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.
ADVERTISING
Advertising costs are expensed when incurred. Advertising for the three
months ended March 31, 2004 amounted to $1,170.
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, 2004:
Factory equipment $ 1,381
Equipment and machinery 502,168
Molds and tooling 758,065
Office equipment 1,251,148
Trade show booths 6,150
Leasehold improvements 14,159
Accumulated depreciation (605,530)
-----------
$ 1,927,541
NOTE 4 - STOCKHOLDERS' EQUITY
During the three months ended March 31, 2004, the Company sold 1,875,000
shares of common stock for $75,000.
The Company also issued 125,000 shares of common stock for services during
the three months ended March 31, 2004 valued at $6,250.
The Company also issued 500,000 shares of common stock for conversion of
Series B preferred stock during the three months ended March 31, 2004.
The Company also sold their investment in Nutek Oil, Inc. eliminating the
non-controlling interest in subsidiary and reducing income deficit by
$136,001.
NOTE 5 - LONG-TERM NOTE PAYABLE
The Company has entered into agreements for long-term notes payable. Long-
term notes payable consists of the following at March 31, 2004:
Note payable to a vendor, no specific repayments terms
and no stated interest rate. Secured by assets.$ 40,000
Note payable to a vendor, monthly payments of $348
inclusive of 7% annual interest through September 2006,
secured by equipment. 9,572
Note payable to a vendor, monthly payments of $169
inclusive of 23.99% annual interest through March 2006,
secured by equipment. 3,974
Note payable to a vendor, monthly payments
of $7,375 inclusive of 10.83% annual interest through
December 2006, secured by equipment. 209,679
Note payable to a vendor, monthly payments of $906,
inclusive of 12% annual interest through February 2006.
Secured by equipment. 15,000
278,225
Less current portion (119,824)
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$ 158,401
DATASCENSION, INC. (FORMERLY KNOWN AS NUTEK, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - LONG-TERM NOTE PAYABLE (CONTINUED)
Principal maturities are as follows:
Twelve months ended March 31,
2005 $ 119,824
2006 92,871
2007 65,530
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$ 278,225
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:
3 MONTHS
ENDED
MARCH 31, 2004
Depreciation and amortization $ 7,768
Net operating loss carryforward 6,365
Valuation allowance (14,133)
-----------
$ -
The components of the net deferred tax asset at March 31, 2004 under SFAS
109 are as follows:
Depreciation and amortization $ 1,000,531
Net operating loss carryforward (1,288,138)
Valuation allowance 287,607
-----------
$ -
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:
3 MONTHSPERCENT OF
ENDED PRETAX
MARCH 31, 2004 INCOME
Expected $ 14,133 34%
Valuation allowance (14,133) (34%)
----------- -----
Actual expense $ - 0%
DATASCENSION, INC. (FORMERLY KNOWN AS NUTEK, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - LINE OF CREDIT
The Company has a line of credit agreement with a financial institution
which 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 a stockholder.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company holds a note payable to a shareholder, in the amount of $48,375,
inclusive of accrued interest. 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 has an outstanding note payable to a shareholder, in the amount
of $45,586. This payable has no stated interest rate and no specific
repayment terms.
The Company has an outstanding note payable to a shareholder, in the amount
of $44,000. This payable accrues interest at 1% monthly due on the first
day of each month.
The Company has an outstanding note payable to a shareholder, in the amount
of $11,277. This payable has no stated interest rate and no specific
repayment terms.
The Company has an outstanding receivable from a shareholder, in the amount
of $341,053. This receivable has no stated interest rate due in full on or
before April 30, 2004.
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, 2004, aggregate future minimum payments under these leases, are
as follows:
DATASCENSION, INC. (FORMERLY KNOWN AS NUTEK, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - CONTINGENCIES AND COMMITMENTS (CONTINUED)
Twelve months ended March 31,
2005 $ 152,141
2006 133,259
2007 105,773
2008 105,773
2009 -
Thereafter -
-----------
Total minimum lease payments $ 496,946
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 Datascension,
Inc. (formerly known as Nutek, Inc.) the information, continuation patents,
and schematics which Datascension, Inc. (formerly known as Nutek, Inc.)
purchased, Datascension, Inc. (formerly known as Nutek, Inc.) acquired world
wide rights to a significantly enhanced patent and returned the rights to
Electro Static Solutions, LLC for Patent Number 5833350.
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 has been accounted for under the
pooling of interest method.
CENTURY INNOVATIONS, INC.
This company was incorporated in Nevada on January 15, 1999 by Datascension,
Inc. (formerly known as 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.
14
DATASCENSION, INC. (FORMERLY KNOWN AS NUTEK, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 - ACQUISITIONS (CONTINUED)
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 of $50,000 which has been paid in full
as of March 31, 2004. 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
Datascension, Inc. (formerly known as 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.
Management based its evaluation on the fact that these customer lists,
designs, and patterns had previously generated revenues of approximately 18
months. Datascension, Inc. (formerly known as 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 INTERNATIONAL, INC.
This company was acquired on July 2, 2001 for $2,000,000 of Datascension,
Inc.'s (formerly known as Nutek, Inc.) restricted common stock in exchange
for the outstanding common stock of Datascension International, 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 International, 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 Datascension, Inc. (formerly known as 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 Datascension,
Inc. (formerly known as Nutek, Inc.)'s stock for the five trading days prior
to May 13, 2002 at the price of $0.0725. This acquisition entitled
Datascension, Inc. (formerly known as 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.
15
DATASCENSION, INC. (FORMERLY KNOWN AS NUTEK, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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- ARBITRATION AWARDS
During 2003, a suit was filed against the Company by a former landlord
which, as of the balance sheet date, the district court awarded judgment in
the amount of $180,000, including attorney fees. The final payment terms
and amount are currently being negotiated.
16
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 International Inc., which conducts telephone market research
and provides data entry services for third parties;
(B) Century Innovations Inc., which markets a patented safety product that
replaces standard light switch cover plates that automatically provide
illumination in the event of a power failure; a patented plastic buffet plate
that allows the user to hold both a plate and cup in one hand and the
productions of plastic wall clocks;
(C) SRC International Inc., which produces plastic coverings for metal rails.
The Company's mailing address is: 6330 McLeod Drive, Suite 1, Las Vegas, Nevada
89120, phone number: 702-262-2061. 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.
- Make acquisitions of strategic competitors.
- Develop strategic Joint Venture relationships.
Concurrent with the name change from Nutek to Datascension, the Company made
the decision to eliminate certain operations to focus more of its resources on
its core growth operations. As discussed in our December 8, 2003 press release,
the company has undergone a corporate restructuring allowing us to focus and
have the Company's capital better utilized in expanding Datascension
International moving forward. This restructuring and spin off of Nutek Oil,
allowed that Company to operate independently of the parent and have the
Datascension International results reflect its own operations.
Datascension anticipates these actions will reduce operating expenses and at
the same time have a significant impact on increasing revenue and profits.
Additionally, the company is potentially seeking a listing on a larger
exchange.
(ii) Long-term Objectives:
- Secure additional business opportunities for Datascension International.
- Grow the Datascension International operations extensively through
acquisitions of smaller call center operations which stand to benefit from the
work being shifted overseas.
- Expand Datascension International's Costa Rica and Dominican Republic
operations.
There is a planned sale of significant equipment and assets to include, Kristi
& Co., Inc, and SRC International Inc. Since the TekPlate product has been put
into the Century Innovations subsidiary, that company is expected to be spun
off and function as a separate entity.
Excluding any potential acquisition, the Company's Costa Rica and Dominican
Republic work force is expected to increase at a rate equal to actual increases
of our business operations. Through technological advancements (such as
predictive phone dialers), the expansion of our business should be able to grow
at a rate slightly faster than required employee and payroll increases.
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 Datascension to meet its obligations and commitments as they
become payable. Historically, Datascension 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 line of credit.
1) During the First Quarter ended March 31, 2004 the Company had a net profit
of $41,569 from operations against revenues of $2,034,454 as compared to a net
profit from operations of $136,550 against revenues of $1,564,999 for the same
quarter last year. The Company has decreased its selling, general and
administration costs from $636,877 for the same period last year to $178,236
for the First Quarter this year. Depreciation costs for the First Quarter this
year were $84,840 as compared to $64,912 for the same period last year.
As of March 31, 2004, the Company has one hundred fifty two million fifty two
thousand sixty nine (153,052,069) shares of its $0.001 par value common voting
stock 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, 2004. 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.
2) Results of Operations
For the First Quarter, ended March 31, 2004, the Company has generated
$2,034,454 in revenues and generated a profit of $41,569 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
$394,469 from a positive $417,626 at December 31, 2003 to a positive $812,095
on March 31, 2004.
The majority of the Company's expenses for the quarter included payroll and
administrative costs.
Ending this first quarter of 2004 the company is has made significant
investments in our infrastructure to provide cost cutting, along with enhanced
ability for revenue generation.
The Company is pleased with the dramatic increase in the revenues and attribute
it to both the installation of predictive dialers and expansions in the Costa
Rica and Dominican Republic facilities. The associated costs with the expansion
increased the payroll expenses and depreciation costs, but we anticipate this
expansion to bring a large benefit to the Company in the future.
The TekPlate brand is continuing forward with Mr. Silverman's efforts and has
developed some promising leads. The new packaging and literature created has
drawn attention from some retailers which we hope to close a strategic
relationship with in the short term.
Nutek Oil was completely spun off on January 8, 2004. That company completed a
Form 10 filing with the SEC and after the above date is no longer affiliated
with Datascension Inc.
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 Datascension to meet its obligations and commitments as they
become payable. Historically, Datascension 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 four hundred forty two (442) employees
of which six (6) are Officers of the Company. As the Company continues to grow
and offer additional services and retain additional clients, 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.
Earnings 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 Form 10-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
Item 3. Controls and Procedures
Within 90 days prior to the date of this quarterly report on Form 10-QSB for
the first quarter ended March 31, 2004, the Company carried out an evaluation,
under the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act
of 1934. Based upon that evaluation, these principal executive officers and
principal financial officer concluded that the Company's disclosure controls
and procedures are effective in timely alerting them to material information
relating to the Company, including its consolidated subsidiaries, required to
be included in the Company's periodic SEC filings. There have been no
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most
recent evaluation.
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 was in litigation with two separate lawsuits during 2004. They
were:
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. This
court case went to trial during January of 2004 and the courts found in favor
of the prior landlord for the amount owed to them through the time necessary to
re-let the premises to a new tenant. The Registrant had recorded this as a
contingency and expensed this in 2003.
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. The plaintiffs filed an amended complaint alleging
securities fraud; common law fraud; conversion; negligence; breach of contract;
breach of covenant of good faith and fair dealing; negligence based on
knowledge of specific problems in the securities industry; bad faith conduct;
deceptive trade practice; racketeering; interference with contracts;
interference with prospective economic advantages; conversion; conspiracy;
declaratory relief and injunctive relief. The amended complaint also added (a)
fifteen (15) additional plaintiffs, bringing the total number of plaintiffs to
twenty-five (25), and (b) thirty (30) additional defendants, including twenty
two (22) named individuals from the securities industry. The twenty-five (25)
plaintiff shareholders have collectively purchased in excess of 4,827,981
shares of Nutek Inc., for which physical delivery has been demanded. In
addition to delivery of their physical share certificates, the plaintiffs are
each seeking $10 million in general damages and $10 million in punitive
damages, to be tripled under the RICO Act for the failed delivery of their
shares and other misconduct.
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
There were three Form 8-K's filed during the first quarter of 2004. They were:
- Exh. 99-1 Form 8-K, dated January 26, 2004
- Exh. 99-2 Form 8-K, dated February 18, 2004
- Exh. 99-3 Form 8-K, dated March 24, 2004
Exh. 99-1
FORM 8-K
CURRENT REPORT
ITEM 5. OTHER ITEMS
On January 26, 2004, Nutek, Inc. (the "Company") issued a press release
announcing that the Company would be changing the Corporation name to
Datascension Inc., and require a mandatory share exchange. The Amended Bylaws
of the Corporation additionally require all shares include the name of the
beneficial owner of the shares.
Mandatory Share Exchange
The Corporation requires a mandatory exchange of the old stock certificate,
with the name Nutek, Inc., for a new stock certificate, with the name
Datascension, Inc., with the stipulations that (a) old stock certificates, with
the old company name, will be void, shall not entitle the certificate holder to
any of the rights of a shareholder or the Corporation, and shall be worthless,
non-transferable and non-tradable in any public or private market or exchange
beginning ninety (90) days after the date of the filing of the Certificate of
Amendment of the Articles of Incorporation in the State of Nevada, and shall
have no value except for the right to be exchanged for new stock certificates;
and (b) physical exchange of the old stock certificates must be made
exclusively by and through the Corporation's stock transfer agent in order to
obtain a new stock certificate.
Persons who hold their shares in brokerage accounts or "street name" would not
be required to take any further actions to effect the exchange of their
certificates. Instead, the holder of the certificate will be contacted.
However, the Corporation requires that each new certificate representing shares
of common stock of the Corporation specify and include the name of the
beneficial owner of such shares and be mailed directly to that beneficial
holder.
No new certificates will be issued to a shareholder until the shareholder has
surrendered the shareholder's outstanding certificate(s) to the exchange agent.
Until surrender, each certificate representing shares before the name change
would represent the right to exchange the certificate bearing the name of Nutek
Inc., for a certificate bearing the name of Datascension Inc., only.
Stockholders should not destroy any stock certificate and should not submit any
certificates until instructed to by the Corporation.
On November 7, 2003, the Board of Directors determined to change the name of
the Company to Datascension Inc. and to change the Company's trading symbol to
reflect the name change of the Company. The purpose of the name and proposed
symbol change is to more accurately reflect the Company's business and its
activities after the change.
Item 7. Exhibits.
99.1 Press Release dated January 26, 2004.
99.2 Notification of Name change and Bylaw change to NASD.
99.3 Notification of Name change and Bylaw change to DTC.
99.4 Amendment to Certificate of Incorporation.
99.5 Amended Bylaws.
Date: January 26, 2004
Exh. 99-2
FORM 8-K
CURRENT REPORT
ITEM 9. Regulation FD Disclosure
Under Regulation FD Disclosure, the Company is filing the press release from
this morning as an 8-K.
(c) Exhibits
10. Press Release dated February 18, 2004.
Dated: February 18, 2004.
Exh. 99-3
FORM 8-K
CURRENT REPORT
ITEM 5. OTHER ITEMS
On March 24, 2004, the Company received confirmation from the NASD that the "V"
would be removed from the Registrant's stock symbol, effective March 25, 2004.
All trades conducted while the "V" was present, that is "trading as when
issued", will be expected to clear and settle by March 30, 2004. The Company's
stock symbol will be DTSN and will be changed back to T+3 status effective
March 25, 2004.
The reason for this change is that specific criteria for the exchange of Nutek
shares to Datascension shares have been met by the company.
During the mandatory exchange period, which began on January 26, 2004, NASDAQ
changed trading and quotation of Datascension Inc.'s securities on the OTC
Bulletin Board ("OTCBB") to a "when-issued" basis.
The effect of the "when-issued" basis was to take the clearing and settlement
of trades temporarily outside of the T+3 rule, which has the effect of
suspending clearing and settling trades of Datascension, Inc.'s stock during
the time that the "when-issued" status is in effect.
Participants with questions are encouraged to review the NASD release, UPC 037-
2004.
Date: March 24, 2004
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: May 17, 2004
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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.
Datascension Inc.
------------
(Registrant)
/s/ Murray N. Conradie
- -----------------------------------
Murray N. Conradie, President and Chairman of the Board
Date: May 17, 2004
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.
Datascension Inc.
/s/ Jason F. Griffith, CPA
- -----------------------------------
Jason F. Griffith, CFO and Corporate Secretary
Date: May 17, 2004