SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
Registration Statement
Under
The Securities Act of 1933
DATASCENSION, INC.
(Name of small business issuer in its charter)
NEVADA 5735 87-0374623
(State or other jurisdiction of(Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
6330 McLeod Drive, Suite 1, Las Vegas, Nevada 89120
(Address of principal executive offices) (Zip code)
Registrant's Address and Telephone number, including area code: 702-262-2061
Murray Conradie
Chief Executive Officer
6330 McLeod Drive, Suite 1
Las Vegas, Nevada 89120
(702) 262-2061
(Name, address and telephone number of Agent for Service)
Copies of communications to:
Owen Naccarato, Esq.
Naccarato & Associates
18301 Von Karman, Suite 430
Irvine, California 92612
(949) 851-9261
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the registration statement becomes effective.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
Title of each class Amount to Proposed maximum Proposed maximum Exercise Proceeds Amount of
of securities to be be offering price aggregate offering price per to DSEN registration
registered registered(1) per share (2) price (2) share (2) fee
Common Shares, par value
$.001 underlying
secured convertible debenture 9,875,000 $.30 $2,962,500 $375.68
(3)
Shares underlying warrants 3,125,000 $.30 $937,500 $118.78
(4)
Total Registration Fee $494.46
(1) Includes shares of our common stock, par value $0.001 per share, which may
be offered pursuant to this registration statement, which shares are
issuable upon conversion of a convertible debentures the exercise of
warrants held by the selling stockholder. In addition to the shares set
forth in the table, the amount to be registered includes an indeterminate
number of shares issuable upon conversion of the debentures and the exercise
of the warrants as such number may be adjusted as a result of stock splits,
stock dividends and similar transactions in accordance with Rule 416. The
number of shares of common stock registered hereunder represents a good
faith estimate by us of the number of shares of common stock issuable upon
conversion of the debentures and upon exercise of the warrants. For purposes
of estimating the number of shares of common stock to be included in this
registration statement, we calculated a good faith estimate of the number of
shares of our common stock that we believe will be issuable upon conversion
of the debentures to account for market fluctuations and the number of
shares of common stock that we believe will be issuable upon exercise of the
warrants to account for antidilution and price protection adjustments.
Should the conversion ratio of the secured convertible debentures result in
our having insufficient shares, we will not rely upon Rule 416, but will
file a new registration statement to cover the resale of such additional
shares should that become necessary. In addition, should a decrease in the
exercise price as a result of an issuance or sale of shares below the then
current market price, result in our having insufficient shares, we will not
rely upon Rule 416, but will file a new registration statement to cover the
resale of such additional shares should that become necessary.
(2)Estimated solely for the purpose of determining the registration fee.
(3)Common stock issuable upon conversion of an aggregate of $1,875,000 in
convertible debentures issued in connection with a November 2004 financing
including a 50% reserve and one year interest at a fixed conversion price of
$.30 per share.
(4)Common stock issuable upon the conversion of warrants issued in relation to
the funding.
---------------------
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effectiveness date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with section 8(a) of
the Securities Act of 1933, as amended, or until the registration statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said section 8(a), may determine.
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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED January 5, 2004
13,000,000 Shares of Common Stock
This prospectus relates to the resale by the selling stockholders of up to
13,000,000 shares of Datascension Inc.'s ("DSEN") common stock, including an
aggregate sum of 9,875,000 shares of common stock issuable upon conversion of
secured convertible debentures, which includes a 50% reserve and one year
interest, and 3,125,000 shares issuable upon the exercise of warrants to the
following : 2,426,666 shares of common stock issuable to Alpha Capital
Aktiengesellschaft, 3,640,000 shares of common stock issuable to Longview
Equity Fund LP, and 5,373,334 shares of common stock issuable to Longview Fund,
LP, 1,560,000 shares of common stock issuable to Longview International Equity
Fund, LP.
On November 17, 2004, DSEN issued an aggregate of $1,875,000 in Convertible
Debentures, pursuant to a Securities Purchase Agreement (the "Agreement") to
the following: $350,000 Convertible Debenture to Alpha Capital
Aktiengesellschaft, $525,000 Convertible Debenture to the Longview Equity Fund
LP, $775,000 Convertible Debenture to the Longview Fund LP., and $225,000
Convertible Debenture to the Longview International Equity Fund, LP. DSEN
shall reduce the principal amount of the note by 1/32nd per month starting 120
days after the closing, payable in cash or registered stock as described below.
If such amortization is in cash, the payment will be at 104% of the monthly
principal amortization amount.
If the note holders or DSEN converts any stock prior to any monthly
amortization payment, those conversions will be credited toward the next
monthly principal amortization and interest payment due. Any conversions above
the monthly principal amortization and interest payment due amount will be
credited towards future required payments.
The note holders and DSEN must convert the principal amortization and interest
payments through common stock if the market price for the stock at the time of
payment is 15% above the fixed conversion price of $.30 per share.
If the market price of the stock is 1) at or below 15% above the fixed
Conversion Price or 2) below the fixed $.30 fixed conversion price at the time
of payment, then DSEN may elect to pay the principal amortization in stock at a
price equal to 85% of the average of the five (5) lowest closing bid prices of
the stock over the previous twenty (20) trading days.
Each subscriber of convertible debentures (Alpha Capital Aktiengesellschaft,
Longview Equity Fund LP, Longview Fund LP and Longview International Equity
Fund, LP shall not be entitled to convert on a Conversion Date that amount of
the Note in connection with that number of shares of Common Stock which would
be in excess of the sum of (i) the number of shares of common stock
beneficially owned by the Subscriber and its affiliates on a Conversion Date,
and (ii) the number of shares of Common Stock issuable upon the conversion of
the Note with respect to which the determination of this provision is being
made on a Conversion Date, which would result in beneficial ownership by the
Subscriber and its affiliates of more than 4.99% of the outstanding shares of
common stock of DSEN on such Conversion Date. For the purposes of the
provision to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder. The foregoing limitation
shall be calculated as of each Conversion Date. Aggregate Conversions over
time shall not be limited to 4.99%. The Holder may void the Conversion Share
limitation upon 61 days prior notice to the Borrower. The Holder may allocate
which of the equity of the Borrower deemed beneficially owned by the Holder
shall be included in the 4.99% amount described above and which shall be
allocated to the excess above 4.99%.
Our Common Stock is quoted on the OTC Bulletin Board under the symbol "DSEN".
On January 4, 2005, the closing bid price of our Common Stock on the OTC
Bulletin Board was $0.60.
DSENs shares of Common Stock are "penny stocks" as defined in the Securities
Exchange Act, which are quoted in the over-the-counter market on the OTC
Bulletin Board. As a result, an investor may find it more difficult to dispose
of or obtain accurate quotations as to the price of the shares of the Common
Stock being registered hereby. In addition, the "penny stock" rules adopted by
the Commission under the Exchange Act subject the sale of the shares of the
Common Stock to certain regulations which impose sales practice requirements on
broker-dealers. See the "Risk Factors" section beginning on page 16 of this
Prospectus discussing the applicability of the "Penny Stock Rules" to
transactions in DSEN's securities.
Investing in these securities involves significant risks. SEE "RISK FACTORS"
BEGINNING ON PAGE 9 OF THIS PROSPECTUS.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this Prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
The date of this prospectus is January 5, 2004
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
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TABLE OF CONTENTS
Section Title Page No.
Summary of Information in the Prospectus 6
Risk Factors 9
Dividend Policy 16
Dilution 16
Use of Proceeds 17
Market for Common Equity and Related Stockholder Matters 18
Management's Discussion and Analysis or Plan of Operations 20
Our Business 25
Management 28
Executive Compensation 30
Security Ownership of Certain Beneficial Owners and Management 32
Certain Relationships and Related Transactions 32
Description of Securities 33
Selling Stockholders 34
Plan of Distribution 36
Legal Proceedings 38
Experts 38
Legal Matters 38
Other Available Information 38
Financial Statements F-1
Indemnification 40
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PROSPECTUS SUMMARY
This summary contains all material terms of the offering. To understand this
offering fully, you should read the entire document carefully. Please pay
particular attention to the section entitled "RISK FACTORS" and the section
entitled "FINANCIAL STATEMENTS".
Unless otherwise indicated, this Prospectus assumes that any of DSEN's
outstanding options or warrants have not been exercised into shares of DSEN's
Common Stock.
DATASCENSION, INC.
Datascension, Inc. ("DSEN"), was incorporated under the laws of the State of
Nevada, on August 23, 1991, under the name Swiss Technique, Inc. On March 3,
1995 Datascension, Inc. changed its name from Swiss Technique, Inc., to Nutek,
Inc. and on January 5th, 2004, its name was changed to its present name,
Datascension, Inc.
Datascension, Inc. is engaged in multiple business activities, which include
the following:
(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.
For the nine months ended September 30, 2004, we generated revenues in the
amount of $6,380,487 and net income of $12,930. In addition, for the year
ended December 31, 2003, we generated revenue in the amount of $7,057,087 and
net income before contingencies of $154,605 with a net loss after contingencies
of $182,895. Our accumulated deficit for the year ended December 31, 2003 was
($5,126,848).
DSEN's mailing address is: 6330 McLeod Drive, Suite 1, Las Vegas, Nevada 89120,
phone number: 702-262-2061. DSEN's websites can be found at: www.tekplate.com
and www.datascension.com.
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THE OFFERING
Securities Up to 13,000,000 including i) up to 9,875,000 shares of
Offered by common stock underlying convertible debentures in the amount of
Selling $1,875,000, and ii) up to 3,125,000 shares of common
Shareholders stock issuable upon the exercise of purchase warrants at an
exercise price of $.30 per share.
Common Stock Outstanding after the offereing Up to 28,944,790 Shares
Offering The selling shareholders can sell the shares at any price.
Price
Use of This prospectus relates to shares of DSEN's common stock that
Proceeds may be offered and sold from time to time by the selling
stockholders. We will not receive any proceeds from the sale
of shares by the selling shareholders. However, we will
receive proceeds upon the exercise of any warrants that may
be exercised by the selling shareholders. These funds will
be used for ongoing operations.
Market for Our Common Stock is quoted on the Over-the Counter Bulletin
our Common Board, also called OTCBB, under the trading symbol "DSEN".
Stock The market for our Common Stock is highly volatile. We can
provide no assurance that there will be a market in the
future for our Common Stock.
The above information regarding common stock to be outstanding after the
offering is based on 15,944,790 (post-split) shares of common stock outstanding
as of September 30, 2004 and assumes the subsequent conversion of the aggregate
sum of $1,875,000 in issued convertible debentures and the exercise of
warrants.
On November 17, 2004, DSEN issued an aggregate sum of $1,875,000 in Convertible
Debentures, pursuant to a Securities Purchase Agreement (the "Agreement"). DSEN
shall reduce the principal amount of the note by 1/32nd per month starting 120
days after the closing, payable in cash or registered stock as described below.
If such amortization is in cash, the payment will be at 104% of the monthly
principal amortization amount.
If the note holders or DSEN converts any stock prior to any monthly
amortization payment, those conversions will be credited toward the next
monthly principal amortization and interest payment due. Any conversions above
the monthly principal amortization and interest payment due amount will be
credited towards future required payments.
The note holders and DSEN must convert the principal amortization and interest
payments through common stock if the market price for the stock at the time of
payment is 15% above the fixed conversion price of $.30 per share.
If the market price of the stock is 1) at or below 15% above the fixed
Conversion Price or 2) below the fixed $.30 fixed conversion price at the time
of payment, then DSEN may elect to pay the principal amortization in stock at a
price equal to 85% of the average of the five (5) lowest closing bid prices of
the stock over the previous twenty (20) trading days.
Each subscriber of convertible debentures (Alpha Capital Aktiengesellschaft,
Longview Equity Fund LP, Longview Fund LP and Longview International Equity
Fund, LP shall not be entitled to convert on a Conversion Date that amount of
the Note in connection with that number of shares of Common Stock which would
be in excess of the sum of (i) the number of shares of common stock
beneficially owned by the Subscriber and its affiliates on a Conversion Date,
and (ii) the number of shares of Common Stock issuable upon the conversion of
the Note with respect to which the determination of this provision is being
made on a Conversion Date, which would result in beneficial ownership by the
Subscriber and its affiliates of more than 4.99% of the outstanding shares of
common stock of the Company on such Conversion Date. For the purposes of the
provision to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder. The foregoing limitation
shall be calculated as of each Conversion Date. Aggregate Conversions over
time shall not be limited to 4.99%. The Holder may void the Conversion Share
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limitation upon 61 days prior notice to the Borrower. The Holder may allocate
which of the equity of the Borrower deemed beneficially owned by the Holder
shall be included in the 4.99% amount described above and which shall be
allocated to the excess above 4.99%.
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RISK FACTORS
An investment in shares of DSEN's Common Stock involves a high degree of risk.
You should carefully consider the following information, which summarizes all
material risks, together with the other information contained in this
prospectus, before you decide to buy DSEN's common stock. If any of the
following risks actually occur, DSEN's business would likely suffer. In these
circumstances, the market price of DSEN's common stock could decline, and you
may lose all or part of your investment.
RISKS RELATING TO OUR BUSINESS:
EFFORTS TO EXPAND OPERATIONS THROUGH DEVELOPING NEW SERVICES, FEATURES AND
FUNCTIONS MAY DRAIN CAPITAL RESOURCES IF NOT SUCCESSFUL
There can be no assurance that DSEN will be able to expand its operations
in a cost-effective or timely manner or that any such efforts would maintain or
increase overall market value and acceptance. Furthermore, any new business
launched by DSEN that is not favorably received by consumers could drain DSEN
of needed capital, damage DSEN's reputation and diminish the value of its brand
name.
Expansion of DSEN's operations would require significant expenditure for
development, operation setup, and training of DSEN's management, financial and
operational resources. Any lack of market acceptance of DSEN's products or
services would result in the inability to generate satisfactory revenues and to
offset its costs of the expansion, which could have a material adverse effect
on DSEN's results of operations and financial condition.
EFFORTS TO ESTABLISH BRAND IDENTITY IS COSTLY AND FAILURE TO SUCCEED COULD
ADVERSELY AFFECT DSEN'S ABILITY TO GROW.
DSEN believes that establishing and maintaining brand identity is a
critical aspect of its efforts to attract new customers. In order to attract
new customers, advertisers and commerce vendors, and in response to competitive
pressures, DSEN intends to make a commitment to the creation and maintenance of
brand loyalty among these groups. DSEN plans to accomplish this, although
not exclusively, through advertising its products and services through its
Web site, through the various search engines, through other Web sites and
marketing its site to businesses and customers through e-mail, online media,
trade publications, trade shows and other marketing and promotional efforts.
There can be no assurance that brand promotion activities will yield
increased revenues or that any such revenues would offset the expenses
incurred by DSEN in building its brands. If DSEN fails to promote and
maintain its brand or incurs substantial expenses in an attempt to promote and
maintain its brand or DSEN's existing or future strategic relationships fail to
promote DSEN's brand or increase brand awareness, DSEN's business, results of
operations and financial condition would be materially adversely affected.
THERE ARE COMPETITIVE FACTORS THAT MAY HAVE AN ADVERSE IMPACT ON DATASCENSION
INC'S OPERATIONS.
Competitive pressures could harm our financial performance.
The market for customer contact services and market research is highly
fragmented and very competitive. In certain segments of the industry, however,
the customer contact services and market research industries have begun to
experience a degree of consolidation, and the development of major customer
contact center companies has resulted in an additional level of competition
from service providers that have greater name recognition, larger installed
customer bases, and significantly greater financial, technical, and marketing
resources than we have. Large established enterprise software companies may
leverage their existing relationships and capabilities to offer customer
service applications. In other instances, many large companies provide their
own in-house customer care support and customer training. Also, a number of
existing companies have experienced rapid internal growth, and several of these
companies have been active in acquiring smaller regional customer contact
services and call center companies and are becoming major competitors with a
measurable share of this rapidly expanding market. If our competitors provide
more efficient or less expensive services, we may lose market share and
revenues.
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OUR CLIENTS MAY ADOPT TECHNOLOGIES THAT DECREASE THE DEMAND FOR OUR SERVICES,
WHICH COULD REDUCE OUR REVENUES AND SERIOUSLY HARM OUR BUSINESS.
We target clients with a high need for our market research services and
we depend on their continued need of our services, especially our major clients
who generate the substantial majority of our revenues. However, over time, our
clients may adopt new technologies that decrease the need for live customer
interaction, such as interactive voice response, web-based research and other
technologies used to automate interactions with interviewers. The adoption of
such technologies could reduce the demand for our services, pressure our
pricing, cause a reduction in our revenues and harm our business.
WE SERVE MARKETS THAT ARE HIGHLY COMPETITIVE AND WE MAY BE UNABLE TO COMPETE
WITH BUSINESSES THAT HAVE GREATER RESOURCES THAN WE DO.
We currently face significant competition for outsourced market research
services and expect that competition will increase. We believe that, in
addition to prices, the principal competitive factors in our markets are
service quality and interviewing skills, the ability to develop customized
solutions and technological and industry expertise. While numerous companies
provide market research services, we believe our principal competitors include
our clients' own in-house market research groups, including, in some cases, in-
house groups operating offshore, offshore outsourcing companies and U.S.-based
outsourcing companies. The trend toward offshore outsourcing, international
expansion by foreign and domestic competitors and continuing technological
changes will result in new and different competitors entering our markets.
These competitors may include entrants from the communications industries or
entrants in geographic locations with lower costs than those in which we
operate.
We have existing competitors, and may in the future have new competitors,
with greater financial, personnel and other resources, longer operating
histories, more technological expertise, more recognizable brand names and more
established relationships in industries that we currently serve or may serve in
the future. Increased competition, our inability to compete successfully
against current or future competitors, pricing pressures or loss of market
share could result in increased costs and reduced operating margins, which
could harm our business, operating results, financial condition and future
prospects.
MANY OF OUR CONTRACTS CAN BE TERMINATED BY OUR CLIENTS ON SHORT NOTICE AND IN
MANY CASES WITHOUT PENALTY. WE ALSO GENERALLY DO NOT HAVE EXCLUSIVE
ARRANGEMENTS WITH OUR CLIENTS OR A MINIMUM REVENUE COMMITMENT FROM OUR CLIENTS,
WHICH CREATES UNCERTAINTY ABOUT THE VOLUME OF SERVICES WE WILL PROVIDE AND THE
AMOUNT OF REVENUES WE WILL GENERATE FROM ANY OF OUR CLIENTS.
We typically enter into written agreements with each client for our
services. We seek to sign multi-year contracts with our clients, but many of
our contracts permit our clients to terminate the contracts upon short notice.
The volume and type of services we perform for specific clients may vary from
year to year, particularly since in many cases we are not the exclusive
provider of outsourcing services to our clients. A client in one year may not
provide the same level of revenues in a subsequent year. Many of our clients
may terminate their contracts with us before their expiration with no penalties
or limited penalties.
Many of our clients could terminate their relationship with us or reduce
their demand for our services due to a variety of factors, including factors
that are unpredictable and outside of our control. The services we provide to a
client could be reduced if the client were to change its outsourcing strategy.
Clients may move more market research functions in-house, to an affiliated
outsourcing provider or to one of our competitors. Clients may reduce spending
on outsourcing services due to changing economic conditions or financial
challenges, or political or public relations pressures to reduce or eliminate
offshore outsourcing of business processes. If our clients are not successful
or if they experience any significant decrease in their businesses, the amount
of business they outsource and the prices that they are willing to pay for such
services may be diminished and likely would result in reduced revenues for us.
Any reduction in revenues would harm our business, negatively affect operating
results and may lead to a decline in the price of our common stock.
WE HAVE A LIMITED OPERATING HISTORY AND OUR BUSINESS AND FUTURE PROSPECTS ARE
DIFFICULT TO EVALUATE.
Due to our limited operating history, especially in Costa Rica where we
consolidated our market research operations in 2002, our business and future
prospects are difficult to evaluate. We are exploring opportunities to provide
other outsourced services that we have not provided to date. You should
consider the challenges, risks and uncertainties frequently encountered by
early-stage companies using new and unproven business models in rapidly
evolving markets. These challenges include our ability to:
* attract and retain clients;
* attract and retain key personnel and customer management
professionals;
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* generate sufficient revenues and manage costs to maintain
profitability;
* manage growth in our operations; and
* access additional capital when required and on reasonable terms.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY AND COULD CAUSE THE MARKET
PRICE OF OUR COMMON STOCK TO FALL RAPIDLY AND WITHOUT NOTICE.
Our revenues and operating results are difficult to predict and may
fluctuate significantly from quarter to quarter due to a number of factors,
including:
* the addition or loss of a major client and the volume of services
provided to our major clients;
* the extent to which our services achieve or maintain market
acceptance, which may be affected by political and public relations reactions
to offshore outsourcing;
* our ability to introduce new or enhanced services to our existing
and prospective clients and to attract and retain new clients;
* long sales cycles and fluctuations in sales cycles;
* the extent to which we incur expenses in a given period in
anticipation of increased demand in future periods, and the extent to which
that demand materializes;
* changes in our pricing policies or those of our competitors, as
well as increased price competition in general;
* variation in demand for our services and the services or products
of our major clients, particularly clients in the travel and hospitality
industry; and
* the introduction of new or enhanced services by other outsourced
service providers.
Results of operations in any quarterly period should not be considered
indicative of the results to be expected for any future period. In addition,
our future quarterly operating results may fluctuate and may not meet the
expectations of securities analysts or investors. If this occurs, the trading
price of our common stock could fall substantially, either suddenly or over
time.
IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS MAY NOT SUCCEED.
We have expanded significantly since our formation and intend to maintain
our growth focus. However, our growth will place demands on our resources and
we cannot be sure that we will be able to manage our growth effectively. In
order to manage our growth successfully, we must:
* maintain the hiring, training and management necessary to ensure
the quality and responsiveness of our services;
* expand and enhance our administrative and technical infrastructure,
facilities and capacities to accommodate increased call volume and other
customer management demands; and
* continue to improve our management, financial and information
systems and controls.
Continued growth could place a strain on our management, operations and
financial resources. Our infrastructure, facilities and personnel may not be
adequate to support our future operations or to adapt effectively to future
growth. As a result, we may be unable to manage our growth effectively, in
which case our operating costs may increase at a faster rate than the growth in
our revenues, our margins may decline and we may incur losses.
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WE MAY EXPERIENCE SIGNIFICANT EMPLOYEE TURNOVER RATES IN THE FUTURE AND WE MAY
BE UNABLE TO HIRE AND RETAIN ENOUGH SUFFICIENTLY TRAINED EMPLOYEES TO SUPPORT
OUR OPERATIONS, WHICH COULD HARM OUR BUSINESS.
The market research outsourcing industry is very labor intensive and our
success depends on our ability to attract, hire and retain qualified employees.
We compete for qualified personnel with companies in our industry and in other
industries and this competition is increasing in Costa Rica as the outsourcing
industry expands. Our growth requires that we continually hire and train new
personnel. The outsourcing industry, including the customer management services
industry, has traditionally experienced high employee turnover. A significant
increase in the turnover rate among our employees would increase our recruiting
and training costs and decrease operating efficiency and productivity, and
could lead to a decline in demand for our services. If this were to occur, we
would be unable to service our clients effectively and this would reduce our
ability to continue our growth and operate profitably. We may be unable to
continue to recruit, hire, train and retain a sufficient labor force of
qualified employees to execute our growth strategy or meet the needs of our
business.
OUR SENIOR MANAGEMENT TEAM IS IMPORTANT TO OUR CONTINUED SUCCESS AND THE LOSS
OF MEMBERS OF SENIOR MANAGEMENT COULD NEGATIVELY AFFECT OUR OPERATIONS.
The loss of the services of Murray Conradie, our Chief Executive Officer;
Jason Griffith, our Chief Financial Officer; Scott Kincer, our President of
Datascension International; or Joseph Harmon, our Vice President of Sales and
Marketing, could seriously impair our ability to continue to manage and expand
our business. Our success depends on the continued service and performance of
our executive officers, and we cannot guarantee that we will be able to retain
these individuals.
OUR FACILITIES ARE AT RISK OF DAMAGE BY EARTHQUAKES AND OTHER NATURAL
DISASTERS.
We currently rely on the availability and condition of our leased Costa
Rican and Dominican Republic facilities to provide service and support to our
clients. These facilities are located in regions that are susceptible to
earthquakes and other natural disasters, which may increase the risk of
disruption of information systems and telephone service for sustained periods.
Damage or destruction that interrupts our provision of outsourcing services
could damage our relationship with our clients and may cause us to incur
substantial additional expense to repair or replace damaged equipment or
facilities. While we currently have commercial liability insurance, our
insurance coverage may not be sufficient. Furthermore, we may be unable to
secure such insurance coverage or to secure such insurance coverage at premiums
acceptable to us in the future. Prolonged disruption of our services as a
result of natural disasters may entitle our clients to terminate their
contracts with us.
OUR OPERATIONS COULD SUFFER FROM TELECOMMUNICATIONS OR TECHNOLOGY DOWNTIME,
DISRUPTIONS OR INCREASED COSTS.
We are highly dependent on our computer and telecommunications equipment
and software systems. In the normal course of our business, we must record and
process significant amounts of data quickly and accurately to access, maintain
and expand the databases we use for our services. We are also dependent on
continuous availability of voice and electronic communication with customers.
If we experience interruptions of our telecommunications network with our
clients, we may experience data loss or a reduction in revenues. These
disruptions could be the result of errors by our vendors, clients or third
parties, electronic or physical attacks by persons seeking to disrupt our
operations, or the operations of our vendors, clients or others. A significant
interruption of service could have a negative impact on our reputation and
could lead our present and potential clients not to use our services. The
temporary or permanent loss of equipment or systems through casualty or
operating malfunction could reduce our revenues and harm our business.
WE COULD CAUSE DISRUPTIONS TO OUR CLIENTS' BUSINESS FROM INADEQUATE SERVICE,
AND OUR INSURANCE COVERAGE MAY BE INADEQUATE TO COVER THIS RISK.
Most of our contracts with our clients contain service level and
performance requirements, including requirements relating to the timing and
quality of responses to market research. The quality of services that we
provide is measured by quality assurance ratings, which are based in part on
the results of customer satisfaction and direct monitoring of interactions
between our professionals and customers. Failures to meet service requirements
of a client could disrupt the client's business and result in a reduction in
revenues or a claim for damages against us. For example, some of our agreements
have standards for service that, if not met by us, result in lower payments to
us. In addition, because many of our projects are business-critical projects
for our clients, a failure or inability to meet a client's expectations could
seriously damage our reputation and affect our ability to attract new business.
Under our contracts with our major clients and many of our contracts with other
clients, our liability for breaching our obligations is generally limited to
actual damages up to a portion of the fees paid to us. To the extent that our
contracts contain limitations on liability, such contracts may be unenforceable
or otherwise may not protect us from liability for damages. While we maintain
general liability insurance coverage, this coverage may be inadequate to cover
one or more large claims, and our insurer may deny coverage.
12
UNAUTHORIZED DISCLOSURE OF SENSITIVE OR CONFIDENTIAL CLIENT AND CUSTOMER DATA,
WHETHER THROUGH BREACH OF OUR COMPUTER SYSTEMS OR OTHERWISE, COULD EXPOSE US TO
PROTRACTED AND COSTLY LITIGATION AND CAUSE US TO LOSE CLIENTS.
We are typically required to collect and store sensitive data in
connection with our services, including names, addresses and other personal
information. If any person, including any of our employees, penetrates our
network security or otherwise misappropriates sensitive data, we could be
subject to liability for breaching contractual confidentiality provisions or
privacy laws. Penetration of the network security of our data bases could have
a negative impact on our reputation and could lead our present and potential
clients to choose other service providers.
WE MAY CHOOSE TO EXPAND OPERATIONS OUTSIDE OF COSTA RICA OR THE DOMINICAN
REPUBLIC AND MAY NOT BE SUCCESSFUL.
We may consider expanding to countries other than Costa Rica and the
Dominican Republic. We cannot predict the extent of government support,
availability of qualified workers, or monetary and economic conditions in other
countries. Although some of these factors may influence our decision to
establish operations in another country, there are inherent risks beyond our
control, including exposure to currency fluctuations, political uncertainties,
foreign exchange restrictions and foreign regulatory restrictions. One or more
of these factors or other factors relating to international operations could
result in increased operating expenses and make it more difficult for us to
manage our costs and operations, which could harm our business and negatively
impact our operating results.
WE ARE SUBJECT TO EXTENSIVE LAWS AND REGULATION THAT COULD LIMIT OR RESTRICT
OUR ACTIVITIES AND IMPOSE FINANCIAL REQUIREMENTS OR LIMITATIONS ON THE CONDUCT
OF OUR BUSINESS.
The market research and call center industry has become subject to an
increasing amount of federal and state regulation in the past five years.
Despite our focus on outbound market research and a lesser extent inbound call
handling, we are subject to regulations governing communications with consumers
due to the activities we undertake on behalf of our clients to encourage
customers to provide sensitive personal information about themselves. For
example, limits on the transport of personal information across international
borders such as those now in place in the European Union (and proposed
elsewhere) may limit our ability to obtain customer data.
Additional federal, state, local or international legislation, or changes
in regulatory implementation, could further limit our activities or those of
our clients in the future or significantly increase the cost of regulatory
compliance.
OUR ABILITY TO RAISE CAPITAL IN THE FUTURE, IF AND WHEN NEEDED, MAY BE LIMITED,
AND COULD PREVENT US FROM EXECUTING OUR BUSINESS STRATEGY. THE SALE OF
ADDITIONAL EQUITY SECURITIES WOULD RESULT IN FURTHER DILUTION TO OUR
STOCKHOLDERS.
We believe that our existing cash and cash equivalents, together with the
net proceeds of this offering, will be sufficient to support our anticipated
cash needs through 2005, even after we make payments to senior management and
other key employees upon completion of this offering. However, the timing and
amount of our working capital and capital expenditure requirements may vary
significantly depending on numerous factors, including:
* market acceptance of and demand for our offshore outsourced
services which may be affected by political and public relations reactions to
offshore outsourcing;
* access to and availability of sufficient management, technical,
marketing and financial personnel;
* the need to enhance our operating infrastructure;
* the continued development of new or enhanced services and hosted
solutions;
* the need to adapt to changing technologies and technical
requirements;
* increasing costs, particularly in the Philippines;
* the existence of opportunities to acquire businesses or
technologies, or opportunities for expansion; and
* increased competition and competitive pressures.
13
If our capital resources are insufficient to satisfy our liquidity
requirements, we may seek to sell additional equity or debt securities or
obtain other debt financing. The sale of additional equity securities or
convertible debt securities would result in additional dilution to our
stockholders. Additional debt would result in increased expenses and could
result in covenants that restrict our operations. We may be unable to secure
financing in sufficient amounts or on terms acceptable to us, if at all, in
which case we may not have the funds necessary to finance our ongoing capital
requirements or execute our business strategy.
RISKS RELATED TO DOING BUSINESS OFFSHORE
WE MAY FACE WAGE INFLATION AND ADDITIONAL COMPETITION OFFSHORE FOR OUR
PROFESSIONALS, WHICH COULD INCREASE THE COST OF QUALIFIED EMPLOYEES AND THE
AMOUNT OF EMPLOYEE TURNOVER.
Wages for our employees offshore could increase at a faster rate than for
U.S. employees, which could result in increased costs to employ our outsourcing
center professionals. We also are faced with competition in Costa Rica for
outsourcing center professionals, and we expect this competition to increase as
additional outsourcing companies enter the market and expand their operations.
In particular, there may be limited availability of qualified interviewers and
both middle and upper management candidates. We have benefited from an excess
of supply over demand for college graduates in Costa Rica. If this favorable
imbalance changes due to increased competition, it could affect the
availability or cost of qualified professionals, who are critical to our
performance. This could increase our costs and turnover rates.
RISKS RELATING TO OUR INDUSTRY:
THE MARKETING RESEARCH INDUSTRY IS VULNERABLE TO GENERAL ECONOMIC CONDITIONS,
WHICH MAY AFFECT OUR REVENUES.
Many of the companies served by our clients treat all or a portion of
their marketing research expenditures as discretionary. As general economic
conditions worsen and these companies seek to control variable costs, research
projects for which we have been engaged to collect data may be delayed or
cancelled, and new project bookings may slow. As a result, our growth rate and
revenues may decline.
RISKS RELATING TO OUR STOCK:
THE ISSUANCE OF THE SHARES IN THIS OFFERING, PLUS THE EXISTING OUTSTANDING
CONVERTIBLE NOTES, WILL RESULT IN DILUTION.
There are a large number of shares underlying the convertible note and
warrants in this offering that may be available for future sale and the sale of
these shares may depress the market price of DSEN's common stock and may cause
substantial dilution to DSEN's existing stockholders.
The number of shares of common stock issuable upon conversion of the
convertible note in this offering may increase if the market price of DSEN's
stock declines. All of the shares, including all of the shares issuable upon
conversion of the notes and debentures and upon exercise of DSEN's warrants,
may be sold without restriction. The sale of these shares may adversely affect
the market price of DSEN's common stock. The issuance of shares upon conversion
of the convertible notes and debentures and exercise of outstanding warrants
will also cause immediate and substantial dilution to DSEN's existing
stockholders and may make it difficult to obtain additional capital.
The following gives examples of the number of shares that would be
issued if the debentures in this offering were converted at one time at prices
representing 70%, 50%, and 25% of the current market price (assuming a
conversion price to the note holders of $0.30). As of September 30, 2004, we
had 15,944,790 (post-split) shares of common stock outstanding.
14
- 70% of current stock price:
DSEN's stock converted at 70% of current stock price would result in a
debenture conversion rate of $.21 cents. To convert the $1,875,000
convertible debenture would require 8,928,571 shares of DSEN's common
stock, or 56% of DSEN's current outstanding shares.
- 50% of current stock price:
DSEN's stock converted at 50% of current stock price would result in a
debenture conversion rate of $.15 cents. To convert the $1,875,000
convertible debenture would require 12,500,000 shares of DSEN's common
stock, or 140% of DSEN's current outstanding shares.
- 25% of current stock price
DSEN's stock converted at 25% of current stock price would result in a
debenture conversion rate of $.075 cents. To convert the $1,875,000 of
convertible debentures would require 25,000,000 shares of DSEN's common
stock, or 280% of DSEN's current outstanding shares.
SEE THE "SECURITY OWNERSHIP TABLE", DESCRIPTION OF SECURITIES AND THE
"SELLING SECURITY HOLDER TABLE" BEGINNING ON PAGE 31, 34 AND PAGE 35,
RESPECTIVELY, OF THIS PROSPECTUS.
THE OVERHANG AFFECT FROM THE RESALE OF THE SELLING SHAREHOLDERS SECURITIES ON
THE MARKET COULD RESULT IN LOWER STOCK PRICES WHEN CONVERTED
Overhang can translate into a potential decrease in DSEN's market price
per share. The common stock underlying unconverted debentures represents
overhang. These debentures are converted into common stock at a discount to
the market price providing the debenture holder the ability to sell his or her
stock at or below market and still make a profit, which is incentive for the
holder to sell the shares as quickly as possible to ensure as much profit as
possible in case the stock price falls. If the share volume cannot absorb the
discounted shares, DSEN's market price per share will likely decrease. As the
market price decreases, each subsequent conversion will require a larger
quantity of shares.
DSEN'S COMMON STOCK IS SUBJECT TO THE "PENNY STOCK" RULES OF THE SEC AND THE
TRADING MARKET IN DSEN'S SECURITIES IS LIMITED, WHICH MAKES TRANSACTIONS IN
DSEN'S STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN DSEN'S
STOCK.
DSEN's shares of Common Stock are "penny stocks" as defined in the
Exchange Act, which are quoted in the over-the-counter market on the OTC
Bulletin Board. As a result, an investor may find it more difficult to dispose
of or obtain accurate quotations as to the price of the shares of the Common
Stock being registered hereby. In addition, the "penny stock" rules adopted by
the Commission under the Exchange Act subject the sale of the shares of the
Common Stock to certain regulations which impose sales practice requirements on
broker-dealers. For example, broker-dealers selling such securities must,
prior to effecting the transaction, provide their customers with a document
that discloses the risks of investing in such securities. Included in this
document are the following:
- The bid and offer price quotes for the penny stock, and the number
of shares to which the quoted prices apply.
- The brokerage firm's compensation for the trade.
- The compensation received by the brokerages firm's salesperson for
the trade.
In addition, the brokerage firm must send the investor:
- Monthly account statement that gives an estimate of the value of
each penny stock in your account.
- A written statement of your financial situation and investment
goals.
Legal remedies, which may be available to you, are as follows:
- If penny stocks are sold to you in violation of your rights listed
above, or other federal or state securities laws, you may be able to
cancel your purchase and get your money back.
- If the stocks are sold in a fraudulent manner, you may be able to
sue the persons and firms that caused the fraud for damages.
- If you have signed an arbitration agreement, however, you may have
to pursue your claim through arbitration.
If the person purchasing the securities is someone other than an
accredited investor or an established customer of the broker-dealer, the
broker-dealer must also approve the potential customer's account by obtaining
information concerning the customer's financial situation, investment
experience and investment objectives. The broker-dealer must also make a
determination whether the transaction is suitable for the customer and whether
the customer has sufficient knowledge and experience in financial matters to be
reasonably expected to be capable of evaluating the risk of transactions in
such securities. Accordingly, the Commission's rules may limit the number of
potential purchasers of the shares of the Common Stock.
15
RESALE RESTRICTIONS ON TRANSFERRING "PENNY STOCKS" ARE SOMETIMES IMPOSED BY
SOME STATES, WHICH MAY MAKE TRANSACTIONS IN OUR STOCK CUMBERSOME AND MAY REDUCE
THE VALUE OF AN INVESTMENT IN OUR STOCK.
Various state securities laws impose restrictions on transferring "penny
stocks" and as a result, investors in the Common Stock may have their ability
to sell their shares of the Common Stock impaired. For example, the Utah
Securities Commission prohibits brokers from soliciting buyers for "penny
stocks", which makes selling them more difficult.
DSEN'S ABSENCE OF DIVIDENDS OR THE ABILITY TO PAY THEM PLACES A LIMITATION ON
ANY INVESTORS RETURN.
DSEN anticipates that for the foreseeable future, earnings will be
retained for the development of its business. Accordingly, DSEN does not
anticipate paying dividends on the common stock in the foreseeable future. The
payment of future dividends will be at the sole discretion of DSEN's Board of
Directors and will depend on DSEN's general business condition.
FURTHER DILUTION MAY OCCUR IF DSEN ENTERS INTO ADDITIONAL SERVICE CONTRACTS IN
THE FUTURE, WHICH REQUIRES ISSUANCE OF MORE COMMON STOCK SHARES.
Assuming there was no change in the net tangible book value (net tangible
book value means total assets (exclusive of copyrights, patents, goodwill,
research and development costs and similar intangible items) minus total
liabilities of DSEN after September 30, 2004 and taking into consideration
$1,506,790 net proceeds received from the sale of debentures our adjusted net
tangible book value as determined after the receipt of net proceeds from such
maximum offering amount, totaling $3,881,025 will be $.243 per share of common
stock. This represents an immediate increase in our net tangible book value of
$0.057 per share of Common Stock to the Existing Stockholders, and an immediate
dilution of $0.114 per share to the investors purchasing shares of common stock
in this offering (the "New Stockholders").
The following table illustrates this per share dilution at September 30, 2004:
Offering Price per share of Common Stock (Avg) $0.30
Adjusted net tangible book value (deficit) per share of
Common Stock at September 30, 2004
Before this Offering $0.243
Increase attributable to the Offering $0.057
Adjusted net tangible book value (deficit)
per share of Common Stock
After this Offering $0.186
Dilution in adjusted net tangible book
Value per share of Common Stock
to New Stockholders $0.114
In addition, further dilution could occur in the future due to any contracts we
may enter into with third party entities for consulting or other services
should any additional Common Stock shares be issued for those consulting or
other services.
16
INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements, which involve
substantial risks and uncertainties. These forward-looking statements can
generally be identified because the context of the statement includes words
such as "may," "will," "except," "anticipate," "intend," "estimate,"
"continue," "believe," or other similar words. Similarly, this prospectus also
contains forward-looking statements about our future. Forward-looking
statements include statements about our:
Plans, Objectives, Goals, Strategies, Expectations for the future, Future
performance and events, Underlying assumptions for all of the above and other
statements, which are not statements of historical facts.
These forward-looking statements involve risks and uncertainties discussed in
the risk factor section (see page 7), which could cause our actual results to
materially differ from our forward-looking statements. We make these forward-
looking statements based on our analysis of internal and external historical
trends, but there can be no assurance that we will achieve the results set
forth in these forward-looking statements. Our forward-looking statements are
expressed in good faith and we believe that there is a reasonable basis for us
to make them.
We have no obligation to update or revise these forward-looking statements to
reflect future events.
USE OF PROCEEDS
DSEN will not receive any of the proceeds from the sale of the shares of common
stock offered by the selling shareholders under this prospectus. There is a
warrant being issued with the current funding. If the warrant was exercised,
the maximum DSEN would receive are proceeds of approximately $937,500.
If the resale of the warrant shares fails to be registered pursuant to an
effective registration statement under the Securities Act, this warrant may
affect a cashless exercise, including a calculation of the number of shares of
Common Stock to be issued upon such exercise. In the event of a Cashless
Exercise, in lieu of paying the Exercise Price in cash, the holder shall
surrender this Warrant for that number of shares of Common Stock determined by
multiplying the number of Warrant Shares to which it would otherwise be
entitled by a fraction, the numerator of which shall be the difference between
the then current market price per share of the common stock and the exercise
price, and the denominator of which shall be the then current market price per
share of common stock. For example, if the holder is exercising 100,000
warrants with a per warrant exercise price of $0.75 per share through a
cashless exercise when the Common Stock's current Market Price per share is
$2.00 per share, the holder will receive 62,500 shares of Common Stock.
The proceeds, if any, that DSEN receives from the exercise of warrants will be
used for working capital in support of the growing business.
17
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our common stock is quoted on the Over-the Counter Bulletin Board, also called
the OTCBB, under the trading symbol "DSEN". The following table set forth the
quarterly high and low bid prices per share for our common stock. The bid
prices reflect inter-dealer prices, without retail markup, markdown, or
commission and may not represent actual transactions.
Fiscal YearQuarter Ended High *Low *
2001 March 31,2001 $3.00 $1.80
June 30, 2001 $3.40 $1.40
September 30, 2001$2.20 $0.70
December 31, 2001 $2.20 $0.70
2002 March 31, 2002 $1.30 $0.50
June 30, 2002 $1.35 $0.60
September 30, 2002$1.20 $0.40
December 31, 2002 $1.00 $0.35
2003 March 31, 2003 $0.80 $0.40
June 30, 2003 $1.10 $0.40
September 30, 2003$1.00 $0.70
December 31, 2003 $0.90 $0.60
2004 March 31, 2004 $2.50 $0.60
June 30, 2004 $1.20 $0.50
September 30, 2004$0.60 $0.40
December 31, 2004 $0.90 $0.35
* Adjusted for the 10 to one reverse split.
DSEN has not declared or paid any cash dividends on the common stock and does
not anticipate that any cash dividends will be paid in the foreseeable future.
As of September 30, 2004, there were approximately 719 registered shareholders
of the DSEN"s Common Stock .
Transfer Agent and Registrar
DSEN's transfer agent is Transfer Online, Inc., 317 SW Alder Street, 2nd
Floor, Portland, OR 97204.
18
SUMMARY FINANCIAL INFORMATION
The summary historical financial data should be read in conjunction with the
financial statements (and notes thereto) of DSEN and the "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus.
Year ended December 31, 9 months ended September 30,
2003 2002 2004 2003
(Audited) (Unaudited)
Revenue $7,057,087 $6,594,154 $6,380,487 $5,213,830
Cost of Revenue 4,039,343 2,561,803 5,091,217 2,877,824
---------- ---------- ---------- ----------
Gross Margin 3,017,743 4,032,351 1,289,271 2,336,006
General and Administrative 2,633,934 3,437,699 1,014,082 1,827,849
Depreciation & Amortization 276,593 224,042 256,133 193,274
Total Other Income (Expense) 47,389 87,803 (6,126) 102,888
Net Income before Contingencies
$ 154,605 $ 458,413 12,930 417,771
Contingency Accruals (292,500) - - -
Lawsuit Liability (45,000) - - -
Net Income (Loss) $ (182,895) $ 458,413 12,930 417,771
Weighted average Common
Shares outstanding 9,617,251* 8,131,775* 15,510,064* 9,236,944*
Net income (loss) per share $(0.02) * $0.06 * $0.00 * $0.00 *
Total Assets $8,052,912 $7,939,173 $7,678,870 $8,119,015
Total Liabilities $1,695,648 $1,640,758 $1,339,505 $1,097,756
Shareholders' equity $6,357,264 $6,298,415 $6,339,365 $7,021,259
* Adjusted for ten to one reverse split
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATION
GENERAL
1) PLAN OF OPERATION
DSEN 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.
DSEN's mailing address is: 6330 McLeod Drive, Suite 1, Las Vegas, Nevada 89120,
phone number: 702-262-2061. DSEN's websites can be found at: 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.
Datascension anticipates these actions will reduce operating expenses and at
the same time have a significant impact on increasing revenue and profits.
(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.
Our consolidated net income has produced a slight income for the quarter, which
we attribute to both a traditionally slow third quarter along with the initial
hiring and training costs involved in the short term. We have managed to
reduce our overhead a significant amount as we focus on reducing costs, while
at the same time hiring and training new employees for new projects and
contracts we have obtained.
There is a planned sale of the equipment and assets of SRC International Inc.
The TekPlate product has been transferred into the Century Innovations
subsidiary and is expected to be spun off by the end of 2004 and function as a
separate independent entity.
Excluding any potential acquisition, DSEN'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.
20
2) RESULTS OF OPERATIONS
THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2004 COMPARED TO SEPTEMBER 30, 2003
1) During the Third Quarter ended September 30, 2004 DSEN had a net income of
$16,651 from operations against revenues of $2,101,033 as compared to a net
profit from operations of $122,670 against revenues of $1,712,748 for the same
quarter last year. DSEN has decreased its selling, general and administration
costs from $627,912 for the same period last year to $371,393 for the Third
Quarter this year. The administrative costs in the prior year included
significant training and management development; however, with the experience
levels of our current management, they are able to do more with less management
and overhead costs. Additionally, a portion of the prior year general and
administrative costs were related to Nutek Oil Inc., which is no longer a
subsidiary of Datascension Inc. Depreciation costs for the Third Quarter this
year were $85,646 as compared to $64,554 for the same period last year.
As of September 30, 2004, DSEN has one hundred fifty eight million four hundred
eighty nine thousand five hundred sixty nine (158,489,569) pre-split shares of
its $0.001 par value common voting stock outstanding which are held by
approximately two thousand nine hundred eleven (2,911) shareholders of record.
DSEN also has five hundred and five thousand nine hundred (505,900) shares of
its $0.001 par value Preferred Stock Series B issued and outstanding, as of
September 30, 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 DSEN's
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.
For the Third Quarter, ended September 30, 2004, DSEN has generated $2,101,033
in revenues and generated income of $16,651 for the same period. This compares
to revenues of $1,712,748 and a profit of $122,670 for the same period last
year. DSEN has increased its working capital position by $680,656 from a
positive $417,626 at December 31, 2003 to a positive $1,098,282 on September
30, 2004.
The majority of DSEN's expenses for the quarter included payroll and
administrative costs.
Ending this third quarter September 30, 2004, DSEN made significant investments
in the hiring and training of management and employees for the dual platform
software and expansion of our inbound call operations, which will enhance the
ability for further revenue generation.
The increase in our revenues is attributable to both the installation of our
predictive dialers and expansions in our Costa Rica and Dominican Republic
facilities. The associated costs with such expansion increased the payroll
expenses and depreciation costs, but we anticipate this expansion to bring a
large benefit to us in the future. Our employee increase at the end of the
second quarter 47.6% increase (193 employees) allowed us to expand our revenues
in what is a traditionally stagnant third quarter. We entered the 4th quarter
with approximately 551 employees, but expect to increase this number as needed
for new projects.
The TekPlate brand is now being exclusively run by Mr. Silverman 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.
YEAR ENDED DECEMBER 31, 2003 VERSUS YEAR ENDED DECEMBER 31, 2002
For the twelve month period ended December 31, 2003, DSEN has generated
$7,057,087 in revenues with a profit before contingencies of $154,605 and a
loss after contingencies of $(182,895). This compares to $6,594,154 in revenues
and a profit of $458,413 for the twelve month period ended December 31, 2002.
For the twelve month period ended December 31, 2003, DSEN decreased its working
capital position from $1,040,123 at December 31, 2002 to $417,626 at December
31, 2003.
For the calendar year ended December 31, 2003, revenues were approximately
$7,057,087 compared to $6,594,154 for the calendar year ended December 31,
2002, an increase of $462,933. The increase was due to revenue growth derived
from the continued growth of our Datascension International operation plus the
increase in revenues derived from the acquisition in Costa Rica. The steady
increase in oil prices benefited the oil production with revenues recorded at
gross revenue with working interest costs deducted as a contra-revenue account.
Gross profit was $3,017,743 for the calendar year ended December 31, 2003
compared to $4,032,351 for the calendar year ended December 31, 2002, a
decrease of $1,014,608. The decrease was due to increased payroll costs derived
from the continued growth of our Datascension International operation, along
with the expansion of new and existing facilities, resulting in increased
investment in training of employees.
21
SG&A expense decreased to $2,633,934 for the calendar year ended December 31,
2003 from $3,437,699 for the calendar year ended December 31, 2002, a decrease
of $803,765. The decrease in SG&A was due to the reduction in work force in our
California facility and relatively low management labor costs in the Costa Rica
facility.
Depreciation expense for the calendar year ended December 31, 2003 was $276,593
compared to $224,042 for the calendar year ended December 31, 2002, an increase
of $52,551. The increase resulted from the acquisition of additional assets in
the Datascension International and Nutek Oil divisions.
Interest expense for the calendar year ended December 31, 2003 was $97,728
compared to $73,890 for the calendar year ended December 31, 2002 an increase
of $23,838. The increase is from an increase in debt due to continued internal
growth.
Amortization expense for the calendar year ended December 31, 2003 was $0
compared to $0 for the calendar year ended December 31, 2002, a decrease of $0.
DSEN is testing the intangibles assets on an annual basis and will impose any
necessary impairment, should one exist, rather than amortizing the intangibles.
See Note 2 of the financial statements.
Along with the restructuring of DSEN in late 2003, Management decided to
additionally expense all known contingencies at the end of 2003 and enter 2004
with all know extraordinary items removed. With this move, along with the
dividend of Nutek Oil, to allow the oil company to operate as a standalone
entity, will allow shareholders to more readily identify accurate trends moving
forward and compare the Company's results with those of the other leaders in
the industry.
3) LIQUIDITY AND CAPITAL RESOURCES
Nine- Months Ended September 30, 2004
On September 30, 2004 DSEN had assets of $7,678,870 compared to $8,052,912 on
December 31, 2003, a decrease of $374,042. DSEN had a total stockholders'
equity of $6,339,365 on September 30, 2004 compared to $6,357,264 on December
31, 2003, a decrease of $17,899.
All assets are booked at historical purchase price and there is no variance
between book value and the purchase price.
On September 30, 2004 DSEN had Property and Equipment (net of depreciation) of
$1,769,148 compared to $3,374,421 on December 31, 2003, or a decrease of
$1,605,273 which is a result of the spin out of Nutek Oil, Inc.
For the nine months ended September 30, 2004, DSEN has increased its working
capital position by $680,656 from $417,626 at December 31, 2003 to $1,098,282
at September 30, 2004. The increase is mainly attributable to a decrease in
contingent liabilities and notes payable to a related party.
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.
As an on going concern, if DSEN 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
DSEN will be reduced, stockholders may experience additional dilution and such
securities may have rights, preferences or privileges senior to those of DSEN's
Common Stock. DSEN does not currently have any contractual restrictions on its
ability to incur debt and, accordingly, DSEN could incur significant amounts of
indebtedness to finance its operations. Any such indebtedness could contain
covenants, which would restrict DSEN's operations.
DSEN currently has five hundred and fifty one (551) employees of which six (6)
are Officers of DSEN as of September 30, 2004. Of the 551 employees, 25 are
full-time*. As DSEN continues to grow and offer additional services and
retain additional clients, it will need to add both full-time and part-time
employees.
22
* There is no official International Labour Organization (ILO) definition of
full-time work, largely because it varies from economy to economy. Due to the
fact that we have workers in several countries, the demarcation point between
full and part time is based on weekly hours usually or actually worked.
Therefore, for the purposes of identifying part-time and full-time employees,
people who work, 40 hours or more per week are considered "full-time workers",
and those working less than 40 hours "part-time workers".
DSEN's consolidated financial statements have been prepared on the assumption
DSEN will continue as a going concern. Management believes that current
operations will continue to provide sufficient revenues to meet operating costs
and expansion.
Earnings Per Share - DSEN 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.
Year Ended December 31, 2003 versus Year Ended December 31, 2002
On December 31, 2003 DSEN had assets of $8,052,912 compared to $7,939,173 on
December 31, 2002, an increase of $113,739. DSEN had a total stockholders'
equity of $6,357,264 on December 31, 2003 compared to $6,298,415 on December
31, 2002, an increase of $58,849.
All assets are booked at historical purchase price and there is no variance
between book value and the purchase price.
On December 31, 2003 DSEN had Property and Equipment (net of depreciation) of
$3,374,421 compared to $2,953,336 on December 31, 2002, or an increase of
$421,085 which is a result of the purchase of equipment in Costa Rica and the
new Dominican Republic facility.
For the calendar year ended December 31, 2003, DSEN has decreased its working
capital position by $622,497 from $1,040,123 at December 31, 2002 to $417,626
at December 31, 2003. The decrease is due to the expected maturity of debt
during the next 12 months, although management feels the refinance of such debt
and renewal of the respective lines of credits are likely.
Going Concern - DSEN's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount of liabilities that might result should DSEN be unable to
continue as a going concern.
DSEN's consolidated financial statements have been prepared on the assumption
DSEN 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,
DSEN has elected to present an unclassified balance sheet.
Loss Per Share - DSEN 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.
Operating Leases
The address of the principal office is: 6330 McLeod Drive, Suite 1, Las Vegas,
Nevada 89120. This office is approximately 2,080 square feet and leases a
separate warehouse location with an aggregate monthly rental of $2,895.
Additionally, DSEN leases 5,102 square feet of office space at 145 S. State
College Blvd, Suite 350 Brea California 92821 with aggregate monthly rent of
approximately $8,724. Combined rent recorded during 2003 and 2002 respectfully
was $165,894 and $308,889.
23
Contingent Liabilities
None
Inflation
We believe our operations and financial condition have suffered no adverse
material effect due to inflation.
OTHER EVENTS:
Bylaw Amendment
On October 19, 2004, pursuant to N.R.S. 78.060, 78.120, DSEN's Board of
Directors unanimously voted to amend the corporate bylaws to no longer require
the issuance DSEN's common stock in beneficial holder name.
This amendment to the bylaws will allow shares to be issued in the name of CEDE
& Co. and be traded through the Depository Trust & Clearing Corporation (DTC).
The reason for the bylaw change is DSEN had been in discussions with several
funding sources to obtain financing for additional expansion and growth of
operations; however, these sources have indicated they would be unwilling to
provide financing to DSEN until such time as DSEN's shares trade and clear
through the depository trust.
Proposed Spin Off
On October 22, 2004, DSEN announced that the Board of Directors was considering
a spin-off of its wholly-owned subsidiary, Datascension International, Inc.
("the subsidiary"), with operations in California, Costa Rica and the Dominican
Republic. Management stated that the initiation, timing, and completion of the
proposed spin off would be subject to market and other conditions, including
receipt by DSEN of a favorable private letter ruling from the Internal Revenue
Service as to the tax free nature of the contemplated spin-off.
DSEN proposes to eventually distribute 83.59% of the issued and outstanding
shares of it's subsidiary's common stock, pro rata, to all of DSEN's
stockholders of record. Initially, each stockholder will receive one share of
the subsidiary's common stock for each 60 shares of common stock of
Datascension, Inc. owned; this initial dividend will be 55.56% of the issued
and outstanding shares of the subsidiary. The record date for this initial
dividend will be November 15, 2004. A subsequent dividend of an additional
28.03% may be distributed simultaneously with the effectiveness of a
Registration Statement to be filed at a future date with the Securities and
Exchange Commission. The second distribution will be given pro rata to the
shareholders holding shares of DSEN on the date of the effectiveness of the
Registration Statement. The remaining 16.41% would be retained by DSEN.
24
OUR BUSINESS
HISTORY
DSEN was incorporated under the laws of the State of Nevada, on August 23,
1991, under the name Swiss Technique, Inc. The original Articles of DSEN
authorized the issuance of fifty million (50,000,000) shares of common stock
with a par value of $0.001. On or about August 23, 1991, pursuant to Section
78.486, Nevada Revised Statutes as amended, DSEN filed with the Nevada
Secretary of State Articles of Merger, whereby DSEN merged with Sun
Investments, Inc., a Utah corporation. On or about April 10, 1992, the Issuer,
with majority shareholder vote filed an Amendment to the Articles of
Incorporation with the Nevada Secretary of State, authorizing five million
(5,000,000) shares of Preferred Stock each have a par value of $0.001, with
such rights, preferences and designations and to be issued in such series as
determined by the Board of Directors of the Corporation. DSEN in accordance
with Section 78.250 of the Nevada Revised Statues and as a result of the
majority consent of shareholders executed on or about March 3, 1995 changed the
name of DSEN from Swiss Technique, Inc., to Nutek, Inc. DSEN filed an Amendment
to the Articles of Incorporation with the Nevada Secretary of State to change
its name. On or about September 20, 1997, DSEN filed with the Nevada Secretary
of State a Plan of Reorganization and Agreement between itself and
International Licensing Group, Inc., a Delaware Corporation.
On or about December 24, 2003, 63.34% of the votes entitled to be cast at a
meeting of DSEN's shareholders consented in writing to change the name of the
corporation from Nutek Inc. to Datascension Inc. The Board of Directors of
Nutek, Inc. at a meeting duly convened, held on the 5th day of January, 2004,
adopted a resolution to amend the original articles of incorporation for the
name change.
PRESENT BUSINESS
Datascension, Inc. ("DSEN") is engaged in multiple business activities, which
include the following:
(A) Datascension International Inc. conducts telephone market research and
provides data entry services for third parties;
(B) Century Innovations Inc. 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. produces plastic coverings for metal rails.
Nutek Oil Inc. which owned the rights to oil leases in Texas, was spun off from
DSEN in 2001 and is no longer a subsidiary of DSEN.
DSEN's mailing address is: 6330 McLeod Drive, Suite 1, Las Vegas, Nevada 89120,
phone number: 702-262-2061. DSEN's websites can be found at:
www.datascension.com and www.tekplate.com.
PRINCIPAL PRODUCTS, SERVICES AND PRINCIPAL MARKETS.
(A) Datascension Inc.
On July 2, 2001, the Registrant acquired 100% of the issued and outstanding
stock of Datascension International. Datascension International is a data
solutions company. Its expertise is in the collection, storage, processing and
interpretation of data. Datascension International's management team has over
30 years of experience in developing and implementing client solutions.
Datascension International services a variety of industries and customers
(including the hospitality, entertainment, and automotive sectors) with
emphasis and commitment to customer service, quality assurance and on-time
project management.
Services
Telephone Interviewing (CATI or Paper): Currently, Datascension's CATI
telephone facility employs approximately 551 part and full-time telephone
interviewers, many of whom are bilingual in Spanish and English. Datascension
has found that streamlining their systems with integrated CATI and automatic
dialing capabilities resulted in quicker turnaround, lower costs and increased
field capacity for phone research projects.
25
Internet Data Collection
Datascension has a full-time programming staff experienced in designing all
types of web surveys, web panels, and data collection sites.
Database Engineering
Datascension has the expertise to create databases from very small to the most
complex fully relational database. Its database software allows the end-user to
connect to Datascension's system via the Internet and run reports and pull data
with relatively no training.
Data Storage
Datascension employs large disk storage hardware for short and long-term
document and file archive and retrieval.
Document Processing
Datascension has developed an expertise in data value ensuring the greatest
care in document processing services including clerical handling of documents,
coding, data entry, scanning and storage.
Data Reporting & Mining
Datascension staff can program banners using the latest version of Quantum
(SPSS) tabulation software. They have extensive experience in handling most
types of data including ASCII, flat file, CSV, XML and many other formats.
In-bound Customer Service
Datascension's expertise in handling customer service calls covers a wide
spectrum of industries from the automotives to the garbage disposal industry.
Activities include on-line order booking to technical support for client
products and services.
Bilingual Interviewing
At Datascension, we recognize the need to provide an accurate representation of
the audiences we are surveying and are committed to ensuring that our
interviewers are able to deliver. To that end, we employ a number of bilingual
interviewers who are skilled in conducting research in both Spanish and
English.
(B) Century Innovations Inc.
Century Clocks, Inc. (a Nevada Corporation) was incorporated on January 15,
1999 by DSEN. On April 30, 1999, clock molds valued at $257,800.00 were
acquired. 1,315,000 shares of common stock, with a fair market value of $.12
totaling $157,800.00, plus notes payable in the amount of $100,000 was given in
exchange for the clock molds. The name of this subsidiary has been changed to
Century Innovations.
Some of the products it has acquired include the following:
(i) TekPlate
An Electrostatic Switch Cover plate providing automatic illumination in the
event of a power failure.
DSEN purchased the worldwide rights and launched the Tekplate product in the
market under patent numbers US5473517, US5713655 and US6010228. Additionally,
the TekPlate is ETL approved.
TekPlate is a specialty line of patented switch plate covers and outlet plate
covers specifically designed to light up automatically when the power fails.
Blackouts can be experienced if an electric utility can't generate enough power
during peak demand. Or electricity could fail during a fire, a thunderstorm, or
an ice storm. No matter what the cause of failure, TekPlate will automatically
illuminate in the event of power loss.
(ii) Handi-Plate
Nutek's FULL SERVICE(tm) handi-plate is a unique, dish washer safe, versatile
plastic buffet plate which has a multitude of uses including social gatherings
such as back yard barbecues, buffets, picnics, tailgate and parties of any
kind.
The FULL SERVICE(tm) system is a unique newly patented versatile product for
holding food and beverage together on one plate with one hand. This product
incorporates both the plate and cup into one unit thus offering the convenience
of carrying any meal and a beverage with one hand, while leaving the other hand
free. Additionally, the FULL SERVICE(tm) system suited for sales
promotions, utilizing logo identification of brand products and companies.
26
(iii) Promotional Clocks
DSEN markets the clocks in various ways; the principle method is targeted at
the premium promotional clock market through members of the Advertising
Specialties Institute. These are companies that offer advertising and
promotional items to companies. Century Clocks is registered supplier to the
Advertising Industry Institute and is identified as supplier asi/44459.
(C) SRC International Inc.
DSEN purchased the rights and assets to produce this product from SRC
International, located in Lombard, IL. SRC International Inc., manufacturers
the Super Glide, a patented product for the dry cleaning garment industry.
Super Glide is a rail covering made of a durable, slick polymer designed to
reduce friction between rails and hangers in the dry cleaning and garment
industry. Super Glide's lack of friction prevents finished garments from being
crushed as they move across the Super Glide rail. Super Glide negates the
need for sprays and waxes in use currently, and eliminates rust and dirt
and keeps operator's hands and fingers clean. The glides are available for
a variety of both flat and round rails. This product is unique and patented
and is already selling in the dry-cleaning and garment industries.
Nutek Oil Inc.
Nutek Oil Inc. was acquired by DSEN in 2000. DSEN spun off Nutek as a separate
entity in 2001 maintaining a small investment in Nutek. On January 8, 2004,
DSEN disposed of its entire interest in Nutek Oil via a stock dividend to
Datascension shareholders at a ratio of 1 share of Nutek Oil common stock for
every 500 shares of common stock of DSEN, which was owned.
Below is a history of DSEN's involvement in Nutek Oil, Inc.
NUTEK OIL INC, (NUTEK) was incorporated under the laws of the State of Texas on
December 3, 1998 and was not operational until February 22, 2000. At inception
NUTEK's Articles of Incorporation Authorized 50,000,000 Common Shares at $.001
Par Value and 5,000,000 preferred shares at $.001 Par Value.
On February 22, 2000, Nutek Oil, Inc., issued to DSEN (the parent
company) 4,500,000 unregistered shares of its $.001 par value common stock for
selected assets, at their fair market value of $1,279,896. Nutek, Inc. had
acquired these selected assets from the Clipper Operating Company.
On or about May 10, 2001, the domicile of the Corporation was changed from
Texas to Nevada and was incorporated in the State of Nevada on that date.
On August 1, 2001 a dividend of approximately 509,604 shares of the common
stock of Nutek Oil, Inc, was distributed pro rata to DSEN., shareholders on
the basis of a ratio of one (1) share of Nutek Oil, Inc for each one hundred
(100) outstanding shares of DSEN held.
On September 17, 2002, NUTEK began trading its Common Shares on the Pink Sheets
Electronic Quotation Service, under the symbol NUTO.
On January 8, 2004 DSEN distributed a further dividend of shares of the common
stock of Nutek Oil, Inc. This distribution was distributed pro rata to DSEN,
shareholders on the basis of a ratio of one (1) share of Nutek Oil, Inc for
each five hundred (500) outstanding shares of DSEN.
The dividend was in the form of a dividend certificate representing restricted
common stock, and was distributed to DSEN's beneficial stockholders of
record as of the record date, which was January 8, 2004.
Description of Property:
The address of the principal office is: 6330 McLeod Drive, Suite 1, Las Vegas,
Nevada 89120. This office is approximately 2,080 square feet and leases a
separate warehouse location with an aggregate monthly rental of $2,895.
Additionally, DSEN leases 5,102 square feet of office space at 145 S. State
College Blvd, Suite 350 Brea California 92821 with aggregate monthly rent of
approximately $8,724. Combined rent recorded during 2003 and 2002
respectfully was $165,894 and $308,889.
27
DSEN is committed under several non-cancelable lease agreements for office
space with various termination dates through 2011.
At December 31, 2003, aggregate future minimum payments under these leases
are as follows:
2004 $ 139,601
2005 141,341
2006 104,693
2007 104,693
2008 107,142
Thereafter 201,529
-----------
Total minimum lease payments $ 2,051,274
Competition
The major competitors are as follows:
Datascension International's two largest competitors are both private
companies. The first is "Western Wats" and the second is "OAC" (Opinion Access
Research).
Western Wats:
Western Wats was founded in 1987. Western Wats states that their goal is to
keep their facility small in order to maintain their desired quality and
flexibility. Western Wats has 850 Web-enabled CATI stations in 11 interviewing
facilities throughout the Intermountain West. Western Wats is the largest
privately owned data collection outfit in the United States. The company's
website is `http://www.westernwats.com'.
OAC (Opinion Access Research):
Opinion Access Research is located in Long Island City, New York. The company
provides telephone interviewing, tabulating, coding, data entry and printing
services to companies performing market research activities. OAC states their
strongest asset is their use of Computer Assisted Telephone Interviewing
(CATI), predictive dialing, and their ability for remote monitoring. On an
annual basis OAC completes over 500,000 telephone interviews. The company's
website is `http://www.opinionaccess.com'.
The TekPlate product is protected under patent #'s US5473517, US5713655 and
US6010228.
Research and Development Plan
None
Employees
DSEN currently has five hundred and fifty one (551) employees of which six (6)
are Officers of DSEN as of September 30, 2004. Of the 551 employees, 25 are
full-time*. As DSEN continues to grow and offer additional services and
retain additional clients, it will need to add both full-time and part-time
employees.
* There is no official International Labour Organization (ILO) definition of
full-time work, largely because it varies from economy to economy. Due to the
fact that we have workers in several countries, the demarcation point between
full and part time is based on weekly hours usually or actually worked.
Therefore, for the purposes of identifying part-time and full-time employees,
people who work, 40 hours or more per week are considered "full-time workers",
and those working less than 40 hours "part-time workers".
MANAGEMENT
The following table sets forth the names, ages and all positions with DSEN
currently held by each person who may be deemed an executive officer of DSEN.
Executive officers serve at the discretion of the Board of directors. Unless
otherwise noted, all references to DSEN include all its wholly owned
subsidiaries:
28
The following table sets forth the directors and executive officers of
the DSEN:
Name Age Position with Company Since
Murray N. Conradie 38 President, CEO and Director April 1999
David Scott Kincer 38 COO and Director October 2001
Jason F. Griffith 27 CFO and Director June 2002
Joseph Harmon 37 VP Datascension and Director October 2001
Murray N. Conradie
Mr. Conradie has several years of experience in creating and developing start-
up enterprises. He was educated in South Africa, where from 1983-1985, he
attended the University of Natal in Durban, studying for a B.A., in Business
Law and then from 1985-1988, at the Technikon Natal in Durban, where he studied
Accounting specializing in Auditing.
2001 Received City of Henderson Economic Development Award.
2002 Honored by Governor of Nevada and received Industry Appreciation Award.
David Scott Kincer
Currently Datascension's president, Scott Kincer joined Datascension as COO and
Director in September 2001, Scott Kincer has over twenty years experience in
collecting, storing an analyzing consumer data. He also has fifteen years of
experience managing data collection centers, including seven years of
experience in Costa Rica. He co-founded Datascension International in 1999 and
became COO of Datascension with the successful acquisition of Datascension
International in 2001. Mr. Kincer oversees the operations of Datascension
International from its main facility in Brea, California.
Jason F. Griffith
In June of 2002, Jason Griffith took over as the CFO and corporate secretary of
Datascension Inc. He has previously worked for Arthur Andersen and was
previously the lead auditor for Datascension's 2001 audit. He received his
undergraduate degree from Rhodes College in Memphis, Tennessee in economics and
business administration, along with receiving his Masters in Accounting from
their graduate school. Mr. Griffith is a licensed CPA in both the state of
Nevada and Tennessee and is also a licensed Certified Management Accountant.
Professionally, Mr. Griffith is a member of the American Institute of
Certified Public Accountants, Association of Certified Fraud Examiners, and
The Institute of Management Accountants, along with being a member of
the Nevada and Tennessee State Society of CPAs. He heads the entire
accounting department for Datascension and its subsidiaries.
Joseph Harmon
After attending California State University, Mr. Harmon started his career in
1992 at The Verity Group, a full service market research company in Fullerton,
CA. At the Verity Group, Mr. Harmon worked his way up to Director of Operations
and managed a 300-employee operation. He helped grow the company to a 12
million dollar business and was a key player in the acquisition to The Polk
Company in 1997. He then went to Diagnostic Research where he managed Telephone
Research. In 1998 The Polk Company brought Mr. Harmon back in as a Sales
Manager to help increase sales in the Market Research division. After Polk, Mr.
Harmon helped start Datascension and became Vice President.
Compensation of Directors
There were no arrangements pursuant to which any director of DSEN was
compensated through December 31, 2003 for any service provided as a director.
In addition, no such arrangement is contemplated for the foreseeable future, as
DSEN's only directors are its current executive officers. Should independent
directors be added to DSEN's board of directors, it may be necessary to
purchase Director's and Officer's liability insurance, along with compensate
the director accordingly.
Each director holds office for a 3 year term or until his successor has been
elected and qualified at the annual meeting of DSEN's shareholders. The members
of the Board of Directors serve without remuneration for service on the board.
Corporate officers are appointed by the Board of Directors and serve at the
discretion of the Board.
DSEN has no standing audit, nominating or compensation committee. During the
period from January 1, 2003 to December 31, 2003, DSEN held approximately 12
Board meetings. From January 1, 2004 through September 30, 2004 there have
been approximately 12 Board meetings.
29
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires DSEN's directors
and executive officers, and persons who own more than 10% of a registered class
of the Company's equity securities to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors
and greater than 10% shareholders are required by SEC regulations to furnish
the Company with copies of all Section 16(a) forms they file. Reporting
persons are required by the Commission regulations to furnish us with copies of
all Section 16(a) forms they file.
EXECUTIVE COMPENSATION
The following table sets forth certain summary information regarding
compensation paid by DSEN for services rendered during the fiscal years ended
December 31, 2004, 2003 and 2002, respectively, to DSEN's officers.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS PAYOUTS
NAME AND PRINCIPAl
POSITION YEAR SALARY BONUS Restricted Stock Securities Underlying All Other
Award(s) Options(#) Compensation
Murray Conradie 2004 $150,000 0 100,000 (1) 540,000 (2) 0
President, CEO 2003 $150,000 0 0 0 0
2002 $ 75,000 0 0 0 0
David Scott Kincer 2004 $150,000 0 100,000 (1) 540,000 (2) 0
COO 2003 $150,000 0 0 0 0
2002 $ 75,000 0 0 0 0
Jason F. Griffith 2004 $ 75,000 0 50,000 (1) 270,000 (2) 0
CFO 2003 $ 61,250 0 0 0 0
2002 $ 35,000 0 12,292 (3) 50,000 (4) 0
(1)DSEN granted an initial signing award to the Executive as of the
Effective Date of his renewed Employment Agreement of restricted shares
of the Company's common stock under and subject to the terms and
conditions of the Stock Compensation Plan (the "Stock Plan"). The
Executive shall vest in 50% of such shares on the 90th day following the
Effective Date and 50% on the six month anniversary of the Effective
Date.
(2)DSEN granted an option award to the Executive under the Stock Plan within
90 days of the Effective Date of his renewed Employment Agreement of a
nonqualified option to purchase shares of DSEN's common stock at a per
share price equal to the fair market value of the common stock on the
grant date (which will be the Effective Date) and an exercise period
equal to five (5) years (the "Initial Option").
(3)Executive received 12,292 shares for unpaid salary which was converted to
common stock restricted stock.
(4)Executive granted an option award of 50,000 shares per paragraph 3.b of
Employment Agreement date June 2002.
EMPLOYMENT AGREEMENTS
Executive Officers Employment Agreements.
Effective January 1, 2004, we entered into separate renewed employment
agreements with our Chief Executive Officer, Murray N. Conradie; our Chief
Operating Officer and President of Datascension International, Inc (subsidiary)
David S. Kincer; our Chief Financial Officer, Jason F. Griffith and our Vice
President of Datascension International, Inc (subsidiary) Joseph Harmon. The
four employment agreements are substantially similar and each provides for the
following:
30
* employment as one of our executives;
* an annual base salary of $150,000 with eligibility to receive
annual increases as determined in the sole discretion of the Board of
Directors for Mr. Conradie and Mr. Kincer;
* an annual base salary of $75,000 and $76,500 with eligibility to
receive annual increases as determined in the sole discretion of the Board
of Directors for Mr. Griffith and Mr. Harmon respectively;
* an annual cash bonus, which will be awarded upon the achievement
of specified pre-tax operating income;
* participation in all welfare, benefit and incentive plans
(including equity based compensation plans) offered to senior management;
* a term of employment which commenced on January 1, 2004 and
continues through the fifth anniversary thereof. The agreement provides
that, in the event of termination by us "without cause" or by the executive for
"good reason" (which includes a "Change of Control"), the executive will be
entitled to receive from us:
(i) The Executive shall be entitled to a lump sum payment, within 60
days following termination of his employment, of (A) two times his then current
Base Salary, plus (B) two times the average annual Incentive Bonus paid to or
earned by the Executive (whichever is larger) during the three previous fiscal
years during the Agreement Term or, if there have not been three previous
fiscal years during the Agreement Term, such fewer number of fiscal years as
shall have occurred during the Agreement Term;
Employed 5 years or more, then 100% of (i)
Employed 4 years or more, but less than 5 years; then 75% of (i)
Employed 3 years or more, but less than 4 years; then 50% of (i)
Employed 2 years or more, but less than 3 years; then 25% of (i)
Employed 1 year or more, but less than 2 years; then 10% of (i)
Employed less than 1 year, only what is currently due
The terms of Sections (ii), (iii) and (iv) will not be affected by length of
employment of Executive. Employment with DSEN will be defined as the period
Executive has been employed by DSEN or its subsidiaries.
(ii) The Executive and his eligible dependents shall be entitled to
continued participation, at no cost to the Executive or his eligible
dependents, in all medical, dental, vision and hospitalization insurance
coverage, until the earlier of 18 months following termination of employment or
the date on which he receives equivalent coverage and benefits from a
subsequent employer. The time period described in this Section shall run
concurrently with the COBRA rights of the Executive and his eligible
dependents.
(iii) All outstanding unvested stock options granted to the Executive
prior to his termination of employment shall vest, become immediately
exercisable and shall expire, if not exercised, at the earlier of the third
anniversary of such termination of employment or the "expiration date" set
forth in the applicable stock option agreement.
(iv) All outstanding unvested restricted shares of the DSEN's stock
awarded to the Executive prior to his termination of employment shall vest
immediately upon the Executive's termination of employment.
The Executives have also been granted the following initial restricted stock
and initial option awards as part of their Employment Agreements.
(a) Initial Restricted Stock Award. DSEN shall make an initial signing award to
the Executive as of the Effective Date of restricted shares of DSEN's common
stock under and subject to the terms and conditions of the Stock Compensation
Plan (the "Stock Plan"). The Executive shall vest in 50% of such shares on the
90th day following the Effective Date and 50% on the six month anniversary of
the Effective Date. The amounts granted under this initial restricted award are
as follows:
Murray N. Conradie 100,000 shares
David S. Kincer 100,000 shares
Joseph Harmon 50,000 shares
Jason F. Griffith 50,000 shares
31
(b) Initial Option Award. DSEN shall make an award to the Executive under the
Stock Plan within 90 days of the Effective Date of a nonqualified option to
purchase shares of DSEN's common stock at a per share price equal to the fair
market value of the common stock on the grant date (which will be the Effective
Date) and an exercise period equal to five (5) years (the "Initial Option").
The amounts granted under this initial option award are as follows:
Murray N. Conradie 540,000 shares
David S. Kincer 540,000 shares
Jason F. Griffith 270,000 shares
Joseph Harmon 135,000 shares
OPTIONS GRANTED IN LAST FISCAL YEAR
No options to purchase Common Stock of DSEN have been granted to the executive
officers other than those described above in the section titled Employment
Agreements.
FISCAL YEAR-END OPTION EXERCISES AND OPTION VALUES
No options to purchase Common Stock of DSEN have been granted to the executive
officers other than those described above in the section titled Employment
Agreements.
EMPLOYEE COMPENSATION
We do not yet have a compensation committee that approves or offers
recommendations on compensation for our employees.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known DSEN with respect to
the beneficial ownership DSEN's common stock as of September 30, 2004 by (i)
each person who is known by DSEN to own beneficially more than 5% of DSEN's
common stock, (ii) each of DSEN's directors and executive officers, and (iii)
all officers and directors of DSEN as a group. Except as otherwise listed
below, the address of each person is c/o Datascension, Inc. 6330 McLeod Drive,
Suite 1, Las Vegas, Nevada 89120.
Name and Address
Class of Beneficial Owner Number of Shares Percent Owned (1)
- ------ ------------------------- ---------------- -----------------
Common Murray N. Conradie 2,450,469* 15.3%
Common David Scott Kincer 2,127,697* 13.3%
Common Jason F. Griffith 62,292* .004%
Common Joseph Harmon 200,556* 1.2%
-------
Common Directors as a group 29.8%
Common Edward Dale Tschiggfrie 1,004,962* 6.3%
* Post split
(1) Except as pursuant to applicable community property laws, the persons
named in the table have sole voting and investment power with respect to all
shares of common stock beneficially owned. The total number of issued and post
split outstanding shares of 15,944,790 and the total number of shares owned by
each person is calculated as of September 30, 2004.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
From 1987 through 1994, Murray N. Conradie, current President/CEO of Nutek,
held the position of President and Director of Century Clocks in South Africa.
In 1999, as President of Nutek, Inc., he negotiated a purchase agreement with
Century Clocks of South Africa, where he received 1,050,000 common shares of
restricted stock from Nutek, Inc.
32
Through a Board Resolution, DSEN hired the professional services of Gary V.
Campbell, CPA, Ltd., to perform audited financials for DSEN. Gary V. Campbell,
CPA, Ltd. owns no stock in DSEN. DSEN has no formal contracts with its
accountants; they are paid on a fee for service basis. The fees paid to date
were paid in cash.
DESCRIPTION OF SECURITIES
A. Common Stock
Authorized stock. 200,000,000 shares authorized; 15,944,790 post split shares
issued, 15,848,956 post split outstanding at September 30, 2004.
(1) Description of Rights and Liabilities of Common Stockholders
i. Dividend Rights - The holders of outstanding shares of common stock are
entitled to receive dividends out of assets legally available therefore at such
times and in such amounts as the board of directors of DSEN may from time to
time determine.
ii. Voting Rights - Each holder of DSEN's common stock are entitled to one vote
for each share held of record on all matters submitted to the vote of
stockholders, including the election of directors. All voting is non-
cumulative, which means that the holder of fifty percent (50%) of the shares
voting for the election of the directors can elect all the directors. The
board of directors may issue shares for consideration of previously authorized
but unissued common stock without future stockholder action.
iii. Liquidation Rights - Upon liquidation, the holders of the common stock are
entitled to receive pro rata all of the assets of available for distribution
to such holders.
iv. Preemptive Rights - Holders of common stock are not entitled to preemptive
rights.
v. Conversion Rights - No shares of common stock are currently subject to
outstanding options, warrants, or other convertible securities.
vi. Redemption rights - no redemption rights exist for shares of common stock.
vii. Sinking Fund Provisions - No sinking fund provisions exist.
viii. Further Liability For Calls - No shares of common stock are subject to
further call or assessment by the issuer. DSEN has not issued stock options as
of the date of this Registration Statement.
(2) Potential Liabilities of Common Stockholders to State and Local Authorities
No material potential liabilities are anticipated to be imposed on stockholders
under state statues. Certain Nevada regulations, however, require regulation of
beneficial owners of more than 5% of the voting securities. Stockholders that
fall into this category, therefore, may be subject to fines in circumstances
where non-compliance with these regulations are established.
B. Preferred Stock Series B
Preferred stock, $0.001 par value, 20,000,000 shares authorized; 505,900 Series
B shares issued and outstanding at September 30, 2004
(1) Description of Rights and Liabilities of Preferred Stockholders
i. Dividend Rights - The holders of outstanding shares of Preferred stock are
entitled to receive dividends out of assets legally available therefore at such
times and in such amounts as the board of directors of DSEN may from time to
time determine. Series B shares have annual dividends of $.15 a share payable
quarterly. All of the shares outstanding were to be redeemed at $1.00 a share
(pre reverse) 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.
ii. Voting Rights - The holders of record of said shares of Series B Preferred
Stock shall be entitled to one vote per share at all meetings of, shareholders
of the Corporation. The holders of record shares of the Series B Preferred
Stock shall vote such shares together with the holders of the Corporation's
Common Stock, and not as a separate class. The board of directors may issue
shares for consideration of previously authorized but unissued preferred stock
without future stockholder action.
33
iii. Liquidation Rights - In case of the dissolution, liquidation or winding-up
of the Corporation, whether voluntary or involuntary or in any instance, the
holders of record of shares of the Series B Preferred Stock then outstanding
shall be entitled to participate in the distributions, either in cash or in
kind, of the assets of the corporation on a priority basis but only to, the
extent of outstanding shares of Preferred Stock multiplied by its par value per
share. Series B shares have priority over the common shares in the event of a
DSEN liquidation.
iv. Preemptive Rights - The holders of the shares of Series B Preferred Stock
will have no preemptive, redemption or other rights other that as established
by applicable corporate law.
v. Conversion Rights - The Preferred shares can be converted after a holding
period of one year at the rate of 10 shares of Common Stock for each share of
Preferred Stock converted. They are convertible to common shares on a one for
one basis at the holders' option.
vi. Sinking Fund Provisions - No sinking fund provisions exist.
vii. Further Liability For Calls - No shares of Preferred stock are subject to
further call or assessment by the issuer. DSEN has not issued stock options as
of the date of this Registration Statement with the exception of those
disclosed on page 31 of this document..
Treasury stock
There are 95,833 post split shares of treasury stock at September 30, 2004.
WARRANTS AND OPTIONS:
None at September 30, 2004 other than those disclosed in the Employment
Agreement section.
PENNY STOCK DISCLOSURE REQUIREMENTS:
See discussion in risk factor section, page 16, with the heading "DSEN's common
stock is subject to the "Penny Stock" rules of the SEC and the trading market
in DSEN's securities is limited, which makes transactions in DSEN's stock
cumbersome and may reduce the value of an investment in DSEN's stock."
SELLING SHAREHOLDERS
SHARES ELIGIBLE FOR FUTURE SALE
On the date of this offering, DSEN has issued 28,944,790 shares of Common
Stock. Sales of a substantial number of shares of DSEN's Common Stock in the
public market following this offering could adversely affect the market price
of the Common Stock. DSEN is registering with this document 13,000,000 shares
of Common Stock for resale, all of which will be freely tradable without
restriction or further registration under the Securities Act. 9,875,000 of the
underlying common shares that are being registered through this document
pertain to a $350,000 Convertible Debenture issued to Alpha Capital
Aktiengesellschaft, a $775,000 Convertible Debenture issued to theLongview Fund
LP, a $525,000 Convertible Debenture issued to the Longview Equity Fund, LP,
and a $225,000 Convertible Debenture issued to the Longview International
Equity Fund LP.
This statement also includes the registration of 3,125,000 warrants with an
exercise price of $0.30 per share. These shares are related to the convertible
debentures issued above.
The Shares being offered for resale by our Selling Stockholders are issuable in
accordance with {section} 4(2) and Rule 506 under the Securities Act of 1933,
as amended (the "Securities Act"),
RECENT FINANCING
On November 17, 2004, DSEN issued an aggregate of $1,875,000 in Convertible
Debentures, pursuant to a Securities Purchase Agreement (the "Agreement") to
the following: $350,000 Convertible Debenture to Alpha Capital
Aktiengesellschaft, $525,000 Convertible Debenture to the Longview Equity Fund
LP, $775,000 Convertible Debenture to the Longview Fund LP., and $225,000
Convertible Debenture to the Longview International Equity Fund, LP. DSEN
shall reduce the principal amount of the note by 1/32nd per month starting 120
days after the closing, payable in cash or registered stock as described below.
If such amortization is in cash, the payment will be at 104% of the monthly
principal amortization amount.
34
The note holders and DSEN must convert the principal amortization and interest
payments through common stock if the market price for the stock at the time of
payment is 15% above the fixed conversion price of $.30 per share.
If the market price of the stock is 1) at or below 15% above the fixed
Conversion Price or 2) below the fixed $.30 fixed conversion price at the time
of payment, then DSEN may elect to pay the principal amortization in stock at a
price equal to 85% of the average of the five (5) lowest closing bid prices of
the stock over the previous twenty (20) trading days.
Each subscriber of convertible debentures (Alpha Capital Aktiengesellschaft,
Longview Equity Fund LP, Longview Fund LP and Longview International Equity
Fund, LP shall not be entitled to convert on a Conversion Date that amount of
the Note in connection with that number of shares of Common Stock which would
be in excess of the sum of (i) the number of shares of common stock
beneficially owned by the Subscriber and its affiliates on a Conversion Date,
and (ii) the number of shares of Common Stock issuable upon the conversion of
the Note with respect to which the determination of this provision is being
made on a Conversion Date, which would result in beneficial ownership by the
Subscriber and its affiliates of more than 4.99% of the outstanding shares of
common stock of DSEN on such Conversion Date. For the purposes of the
provision to the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13d-3 thereunder. The foregoing limitation
shall be calculated as of each Conversion Date. Aggregate Conversions over
time shall not be limited to 4.99%. The Holder may void the Conversion Share
limitation upon 61 days prior notice to the Borrower. The Holder may allocate
which of the equity of the Borrower deemed beneficially owned by the Holder
shall be included in the 4.99% amount described above and which shall be
allocated to the excess above 4.99%.
Further, on November 17, 2004, DSEN issued common stock purchase warrants to
purchase 3,125,000 shares of DSEN common stock to the above note holders, at an
exercise price of $.30 per share.
SELLING SHAREHOLDER TABLE
The table below sets forth information concerning the resale of shares of
Common Stock by the Selling Stockholder. We will not receive any proceeds from
the resale of the Common Stock by the Selling Stockholder nor will we receive
proceeds from the exercise of the warrants.
Assuming the Selling Stockholder sells all the shares registered below, the
Selling Stockholder will no longer continue to own any shares of our Common
Stock.
The following table also sets forth the name of the person who is offering
shares of common stock by this prospectus, the number of shares of common stock
beneficially owned by such person, the number of shares of common stock that
may be sold in this offering and the number of shares of common stock such
person will own after the offering, assuming he sells all of the shares
offered.
Selling Stockholder Shares Beneficially Owned Shares Offered Shares Beneficially Owned After Offering If All
Prior to the Offering For Sale (6) Offered Shares Are Sold
Number of Percentage Number of Shares Percentage
Shares (5)
Alpha Capital Aktiengesellschaft 2,426,666 8.3% 2,426,666 0 0%
(1)
Longview Fund LP (2) 5,373,334 18.6% 5,373,334 0 0%
Longview Equity Fund, LP (3) 3,640,000 11.9% 3,640,000 0 0%
Longview International Equity 1,560,000 5.4% 1,560,000 0 0%
Fund, LP (4)
35
* The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rule, beneficial ownership includes any shares as to which
the selling stockholder has sole or shared voting power or investment power and
also any shares, which the selling stockholder has the right to acquire within
60 days. The actual number of shares of common stock issuable upon the
conversion of the debentures and exercise of the debenture warrants is subject
to adjustment depending on, among other factors, the future market price of the
common stock, and could be materially less or more than the number estimated in
the table.
The above investors do not hold any position or office, nor has had any
material relationship with us or any of our affiliates within the past three
years
The selling shareholders are not a broker-dealers or affiliates of a
broker-dealer.
(1) Alpha Capital Aktiengesellschaft: In accordance with Rule 13d-3
under the Securities Exchange Act of 1934, Konard Ackerman may be deemed
the control person of the shares owned by such entity. ALPHA Capital AG
is a private investment fund that is owned by all its investors and
managed by Mr. Ackerman. Mr. Ackerman disclaims beneficial ownership of
the shares of common stock being registered hereto.
(2) Longview Fund, L.P. is a private investment fund that is in the business
of investing publicly-traded securities for their own accounts and is
structured as a limited liability company whose members are the investors
in the fund. The General Partner of the fund is Viking Asset Management,
LLC, a California limited liability company which manages the operations
of the fund. Peter T. Benz is the managing member of Viking Asset
Management, LLC. As the control person of the shares owned by Longview
Fund, LP, Peter T. Benz may be viewed as the beneficial owner of such
shares pursuant to Rule 13d-3 under the Securities Exchange Act of 1934.
(3) Longview Equity Fund, L.P. is a private investment fund that is in the
business of investing publicly-traded securities for their own accounts
and is structured as a limited liability company whose members are the
investors in the fund. The General Partner of the fund is Viking Asset
Management, LLC, a California limited liability company which manages the
operations of the fund. Peter T. Benz is the managing member of Viking
Asset Management, LLC. As the control person of the shares owned
by Longview Equity Fund, LP, Peter T. Benz may be viewed as the
beneficial owner of such shares pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934.
(4) Longview International Equity Fund, L.P. is a private investment fund
that is in the business of investing publicly-traded securities for their
own accounts and is structured as a limited liability company whose
members are the investors in the fund. The General Partner of the fund
is Viking Asset Management, LLC, a California limited liability company
which manages the operations of the fund. Peter T. Benz is the managing
member of Viking Asset Management, LLC. As the control person of the
shares owned by Longview International Equity Fund, LP, Peter T. Benz may
be viewed as the beneficial owner of such shares pursuant to Rule 13d-3
under the Securities Exchange Act of 1934.
(5) Percentages are based on 28,944,790 shares of our common stock issued as
of September 30, 2004.
(6) This column represents the total number of shares of common stock that
each selling security holder intends to sell based on the current market
price at the time the registration statement was first filed.
PLAN OF DISTRIBUTION
Each selling stockholders will most likely sell their shares on the open
market. Our stock is quoted on the OTCBB under the symbol DSEN.
Therefore, the selling stockholders may, from time to time, sell any or all of
their shares of common stock on any stock exchange, market, or trading facility
on which the shares are traded or in private transactions. These sales may be
at fixed or negotiated prices. There is no assurance that the selling
stockholders will sell any or all of the common stock in this offering. The
selling stockholders may use any one or more of the following methods when
selling shares:
36
- Ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers.
- Block trades in which the broker-dealer will attempt to sell
the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction.
- Purchases by a broker-dealer as principal and resale by the
broker-dealer for its own account.
- An exchange distribution following the rules of the applicable
exchange
- Privately negotiated transactions
- Short sales or sales of shares not previously owned by the
seller
- Broker-dealers may agree with the selling stockholders to sell
a specified number of such shares at a stipulated price per share
- A combination of any such methods of sale any other lawful
method
The selling stockholders may also engage in
- Short selling against the box, which is making a short sale
when the seller already owns the shares.
- Other transactions in our securities or in derivatives of our
securities and the subsequent sale or delivery of shares by the
stockholder.
- Pledging shares to their brokers under the margin provisions
of customer agreements. If a selling stockholder defaults on a
margin loan, the broker may, from time to time, offer to sell the
pledged shares.
Broker-dealers engaged by the selling stockholders may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from selling stockholders in amounts to be negotiated.
If any broker-dealer acts as agent for the purchaser of shares, the broker-
dealer may receive commission from the purchaser in amounts to be negotiated.
The selling stockholders do not expect these commissions and discounts to
exceed what is customary in the types of transactions involved.
The selling stockholders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a selling stockholders defaults on
a margin loan, the broker may, from time to time, offer and sell the pledged
shares. The selling stockholders and any other persons participating in the
sale or distribution of the shares will be subject to applicable provisions of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
under such act, including, without limitation, Regulation M. These provisions
may restrict certain activities of, and limit the timing of purchases and sales
of any of the shares by, the selling stockholders or any other such person. In
the event that the selling stockholders are deemed affiliated purchasers or
distribution participants within the meaning of Regulation M, then the selling
stockholders will not be permitted to engage in short sales of common stock.
Furthermore, under Regulation M, persons engaged in a distribution of
securities are prohibited from simultaneously engaging in market making and
certain other activities with respect to such securities for a specified period
of time prior to the commencement of such distributions, subject to specified
exceptions or exemptions. In regards to short sells, the selling stockholder
can only cover its short position with the securities they receive from us upon
conversion. In addition, if such short sale is deemed to be a stabilizing
activity, then the selling stockholder will not be permitted to engage in a
short sale of our common stock. All of these limitations may affect the
marketability of the shares.
The selling stockholders and any broker-dealers or agents that are involved in
selling the shares may be considered to be "underwriters" within the meaning of
the Securities Act for such sales. An underwriter is a person who has
purchased shares from an issuer with a view towards distributing the shares to
the public. In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares purchased by them may be
considered to be underwriting commissions or discounts under the Securities
Act.
Because the following selling shareholder is an "underwriter" within the
meaning of Section 2(a)(11) of the Securities Act, they will be subject to the
prospectus delivery requirements:
- Alpha Capital Aktiengesellschaft
- Longview Fund LP
- Longview Equity Fund LP
- Longview International Equity Fund, LP
37
We are required to pay all fees and expenses incident to the registration of
the shares in this offering. However, we will not pay any commissions or any
other fees in connection with the resale of the common stock in this offering.
We have agreed to indemnify the selling shareholders and their officers,
directors, employees and agents, and each person who controls any selling
shareholder, in certain circumstances against certain liabilities, including
liabilities arising under the Securities Act. Each selling shareholder has
agreed to indemnify DSEN and its directors and officers in certain
circumstances against certain liabilities, including liabilities arising under
the Securities Act.
If the selling stockholder notifies us that they have a material arrangement
with a broker-dealer for the resale of the common stock, then we would be
required to amend the registration statement of which this prospectus is a
part, and file a prospectus supplement to describe the agreements between the
selling stockholder and the broker-dealer.
LEGAL PROCEEDINGS
Prior Landlord Lawsuit - 2003: 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.
This judgment has subsequently been settled.
EXPERTS
The financial statements of DSEN at December 31, 2003, appearing in this
Prospectus and Registration Statement have been audited by Gary V. Campbell,
CPA, Ltd., Certified Public Accountants, our independent auditors, as set forth
in their report thereon appearing elsewhere herein, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
Legal matters concerning the issuance of shares of common stock offered in this
registration statement will be passed upon by Naccarato & Associates, Owen
Naccarato, Esq.
OTHER AVAILABLE INFORMATION
We are subject to the reporting requirements of the Securities and Exchange
Commission (the "Commission"). We file periodic reports, proxy statements and
other information with the Commission under the Securities Exchange Act of
1934. We will provide without charge to each person who receives a copy of
this prospectus, upon written or oral request, a copy of any information that
is incorporated by reference in this Prospectus (not including exhibits to the
information that is incorporated by reference unless the exhibits are
themselves specifically incorporated by reference). Requests should be directed
to: Murray Conradie, Chairmen and Chief Executive Officer
We have filed a registration statement on Form SB-2 under the Securities Act of
1933 Act with the Commission in connection with the securities offered by this
Prospectus. This Prospectus does not contain all of the information that is the
registration statement; you may inspect without charge, and copy our filings,
at the public reference room maintained by the Commission at 450 Fifth Street,
N.W. Washington, D.C. 20549. Copies of this material may also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.
Washington, D.C. 20549, at prescribe rates.
Information about the public reference room is available from the commission by
calling 1-800-SEC-0330.
The commission maintains a web site on the Internet that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the commission. The address of the site is
www.sec.gov. Visitors to the site may access such information by searching the
EDGAR archives on this web site.
We have not authorized anyone to provide you with any information that is
different.
38
The selling security holders are offering to sell, and seeking offers to buy,
shares of common stock only in jurisdictions where such offers and sales are
permitted.
The information contained in this Prospectus is accurate as of the date of this
prospectus. We will keep this prospectus up to date and accurate.
FINANCIAL STATEMENTS
OUR FINANCIAL STATEMENTS BEGIN ON PAGE F-1
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
39
NUTEK, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED
DECEMBER 31, 2003 AND 2002
NUTEK, INC.
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT F1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets F2 - F3
Consolidated Statements of Income F4
Consolidated Statement of Changes in Stockholders' Equity F5 - F6
Consolidated Statements of Cash Flows F7 - F8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F9 - F17
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Nutek, Inc.
Las Vegas, Nevada
We have audited the accompanying consolidated balance sheets of Nutek, Inc., (a
Nevada corporation), as of December 31, 2003 and 2002 (adjusted), and
the related consolidated statements of income, changes in stockholders' equity,
and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Nutek, Inc., as of December
31, 2003 and 2002 (adjusted), and the results of its operations and cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
Gary V. Campbell, CPA, Ltd.
Las Vegas, Nevada
March 30, 2004
F1
NUTEK INC.
BALANCE SHEETS
AS OF DECEMBER 31, 2003 AND 2002 (Adjusted)
ASSETS
2003 2002
CURRENT ASSETS:
Cash $122,891 $44,371
Accounts receivable 1,087,694 1,293,722
Inventory 227,997 222,890
Accrued income 11,200 11,200
Prepaid expenses 194,623 119,408
Note receivable, related party 1,250 7,500
Current portion of notes receivable 451,054 753,206
--------- ---------
2,096,709 2,452,297
Property and Equipment, net of
accumulated depreciation 3,374,421 2,953,336
OTHER ASSETS:
Notes receivable, net of current portion 5,800 5,800
Patent rights acquired, net of amortization 561,262 561,262
Long-term investment 8,000 8,000
Website assets, net of amortization 29,340 19,654
Customer lists, net of amortization 43,611 43,583
Patterns-designs, net of amortization 44,583 44,488
Packaging design-artwork, net of amortization 86,512 69,687
Deposits 51,892 30,284
Goodwill 1,692,782 1,692,782
Trademarks 8,000 8,000
Licensing fees 50,000 50,000
--------- ---------
2,581,782 2,533,540
TOTAL ASSETS $8,052,912 $7,939,173
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
2003 2002
CURRENT LIABILITIES:
Accounts payable $ 278,022 $ 591,723
Accrued expenses 182,377 153,233
Accrued lawsuit liability 338,461 -
Line of credit 449,650 373,800
Notes payable, related party 328,540 170,000
Current portion of long-term notes payable 102,033 123,418
--------- ---------
TOTAL CURRENT LIABILITIES 1,679,083 1,412,174
Long-term notes payable, net of
current portion 16,565 58,173
Bonds Payable - 170,411
--------- ---------
Total long-term debt 16,565 228,584
--------- ---------
TOTAL LIABILITIES 1,695,648 1,640,758
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock:
Common stock, $0.001 par value, 200,000,000
shares authorized; 151,510,402 shares issued,
150,552,069 and 88,973,910 outstanding at
December 31, 2003 and 2002, respectively. 150,554 88,974
Preferred stock Series A:
Preferred stock, $0.001 par value, 10,000,000
shares authorized; 0 and 559,500
Series A shares issued and outstanding at
December 31, 2003 and 2002, respectively. - 560
Preferred stock Series B:
Preferred stock, $0.001 par value, 10,000,000
shares authorized; 508,500
Series B shares issued and outstanding at
December 31, 2003 and 2002, respectively. 509 509
Additional paid-in capital-common stock 10,802,058 7,555,558
Additional paid-in capital-preferred Series A - 3,021,131
Additional paid-in capital-preferred Series B 507,992 507,992
Noncontrolling interest in subsidiary
of Nutek Oil, Inc. 311,137 355,782
Subscriptions receivable (153,750) (153,750)
Treasury stock, at cost; 958,333 shares at
December 31, 2003 and 2002, respectively. (134,388) (134,388)
Accumulated deficit (5,126,848) (4,943,953)
--------- ---------
Total stockholders' equity 6,357,264 6,298,415
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $8,052,912 $7,939,173
========== ==========
The accompanying notes to the financial statements are
an integral part of these financial statements.
NUTEK INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003 AND 2002 (Adjusted)
2003 2002
Revenues $7,057,087 $6,594,154
COST OF GOODS SOLD 4,039,344 2,561,803
---------- ---------
GROSS PROFIT 3,017,743 4,032,351
EXPENSES:
General and Administrative 2,633,934 3,437,699
Depreciation and Amortization 276,593 224,042
--------- ---------
Total Expenses 2,910,527 3,661,741
--------- ---------
Operating Income 107,216 370,610
Other Income (Expense)
Interest income 1,898 1,729
Forgiveness of debt 99,274 140,227
Interest expense (97,728) (73,890)
Other income 17,352 3,634
Minority interest, Nutek Oil 26,593 16,818
Gain on Disposition of asset - (715)
---------- ---------
Total Other Income (Expense) 47,389 87,803
---------- ---------
Net Income before Contingencies $ 154,605 $458,413
Contingency Accruals $(292,500) -
Lawsuit Liability (45,000) -
---------- ---------
Net Income after Contingencies $(182,895) $458,413
========== =========
Basic weighted average number of
common shares outstanding 96,172,507 81,317,756
Diluted weighted average number of
common shares outstanding 96,172,507 141,427,000
Basic Net Income (loss) per share $(0.02) $0.006
Diluted Net Income (loss) per share $(0.02) $0.004
The accompanying notes to the financial statements are
an integral part of these financial statements.
Nutek Inc.
Statement of Changes in Stockholder's Equity
For the Years ended
December 31, 2003 and 2002 (Adjusted)
Common Common Additional Preferred Preferred Preferred - A Preferred
Stock Stock Paid-in Stock Shares Stock Add. Paid Stock Shares
Shares Amount Capital Series A Series A In Capital Series B
Balances at
December 31, 2001 71,392,535 71,392 10,505,593 596,408 596 - 793,500
Issuance of
common
stock for 850,000 850 - - - - -
settlement of
lawsuit
Cancellation of - - 285 - - - (285,000)
Preferred Shares
Forgiveness of 53,535 54 1,284 - - - -
Debt
Stock Issued for 913,533 914 24,298 - - - -
Services
Prior period - - (108,850) - - - -
adjustment
Reversal of - - (180,000) - - - -
Electrostatic
Purch.
Purchase of Sin 13,517,240 13,517 966,483 - - - -
Fronteras
Reclassification
of Prepaid
Expense to - - - - -
Subscribed Stock
Stock Issued to 297,915 298 7,202 - - - -
Employees
Purchase of - - - - - - -
Treasury Stock
Sale of Stock 1,949,152 1,949 68,350 - - - -
Allocate APIC to - - (3,729,087) - - 3,221,095 -
Preferred Shares
Retirement of - - - (36,900) (37) (199,963.10) -
Preferred
Exchange of
Subsidiary Stock
for Note Payable - - - - - - -
Allocation of
Minority Interest
In Subsidiary - - - - - - -
Earnings
Net Profit (Loss)
for Year
Ended December - - - - - - -
31, 2002
Balance at 88,973,910 88,974 7,555,559 559,508 560 3,021,132 508,500
December 31, 2002
Sale of Stock 3,638,889 3,629 113,408 - - - -
Issuance for settlement
of bonds 1,683,741 1,684 106,507 - - - -
Stock Issued for 5,504,729 5,505 192,055 - - - -
Services
Retirement of - - - (52,000) (52) (136,357) -
Preferred
Preferred Shares
Converted 50,750,800 50,752 2,834,532 (507,508) (508) (2,884,774) -
Allocation of
Minority Interest
In Subsidiary - - - - - - -
Earnings
Net Profit (Loss)
for Year
Ended December - - - - - - -
31, 2003
Balance at 150,552,069 $150,554 10,802,058 - - - -
December 31, 2003
The accompanying notes to the financial statements are an integral part of these financial statements.
- F5 -
Nutek Inc.
Statement of Changes in Stockholder's Equity (cont.)
For the Years ended
December 31, 2003 and 2002
Preferred Preferred Non-Controlling
- B
Stock Add. Paid Treasury Subscribed Interest In Income Total
Series B In Capital Stock Stock Subsidiary Deficit Equity
Balances at
December 31, 2001 794 - (52,388) - - (5,205,454) 5,320,534
Issuance of
common
stock for - - - - - - 850
settlement of
lawsuit
Cancellation of (285) - - - - - -
Preferred Shares
Forgiveness of - - - - - - 1,338
Debt
Stock Issued for - - - (3,750) - (11,162) 10,300
Services
Prior period - - - - - (185,750) (294,600)
adjustment
Reversal of - - - - - - (180,000)
Electrostatic
Purch.
Purchase of Sin - - - - - - 980,000
Fronteras
Reclassification
of Prepaid
Expense to - - - (150,000) - - (150,000)
Subscribed Stock
Stock Issued to - - - - - - 7,500
Employees
Purchase of - - (82,000) - - - (82,000)
Treasury Stock
Sale of Stock - - - - - - 70,299
Allocate APIC to - 507,991 - - - -
Preferred Shares
Retirement of - - - - - - (200,000)
Preferred
Exchange of
Subsidiary Stock
for Note Payable - - - - - 372,601 372,601
Allocation of
Minority Interest
In Subsidiary - - - - - (16,819) (16,819)
Earnings
Net Profit (Loss)
for Year
Ended December - - - - - 458,413 458,413
31, 2002
Balance at 509 507,992 (134,388) (153,750) 55,782 $(4,943,953) $6,298,415
December 31, 2002
Sale of Stock - - - - - - $ 117,047
Issuance for settlement
of bonds - - - - - - 108,191
Stock Issued for - - - - - - 197,560
Services
Retirement of - - - - - - (136,409)
Preferred
Preferred Shares
Converted - - - - - - -
Allocation of
Minority Interest
In Subsidiary - - - - (26,593) - -
Earnings
Change in Nutek Oil
Ownership - - - - (18,052) - -
Net Profit (Loss)
for Year
Ended December - - - - - (182,895) (182,895)
31, 2003
Balance at 509 $507,992 $134,388 $(153,750) $311,137 $(5,126,848) $6,357,264
December 31, 2003
The accompanying notes to the financial statements are
an integral part of these financial statements.
NUTEK INC.
STATEMENT OF CASH FLOWS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2003 AND 2002 (Adjusted)
2003 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income from operations $(182,895) $458,413
Adjustments to reconcile net income to net
cash provided by operating activities:
Non-controlling interest in subsidiary (44,645) -
Services received for stock 61,153 (138,850)
Depreciation and amortization 276,593 224,042
Loss on disposal of assets - 715
Forgiveness of debt (62,217) -
Bad debt expense - 2,500
(Increase) decrease in accounts receivable 206,027 (632,219)
(Increase) decrease in inventory (5,108) (59,884)
Increase in prepaid expenses (75,216) (101,800)
Increase in deposits (21,608) (16,569)
Increase in accounts payable (313,704) 195,104
Increase (decrease) in accrued expenses 29,024 (111,111)
--------- ---------
Net cash provided (used) by operating (132,596) (179,659)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on notes receivable 308,402 29,494
Purchase of property and equipment (90,290) (163,538)
Purchase of intangible assets (23,897) (9,870)
--------- ---------
Net cash provided (used) by investing 194,215 (143,914)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of capital stock 117,045 70,300
Retirement of preferred stock - (50,000)
Increase (decrease) in notes payable (175,992) (86,766)
Proceeds from line of credit 75,850 373,800
--------- ---------
Net cash provided (used) by financing 16,901 307,334
BALANCE, BEGINNING 44,371 60,610
NET INCREASE (DECREASE) IN CASH 78,520 (16,239)
BALANCE, ENDING $ 122,891 $ 44,371
INTEREST PAID $ 97,728 $ 73,890
TAXES PAID $ - $ -
SUMMARY OF NON-CASH TRANSACTIONS
The Company acquired $82,000 in treasury stock in exchange for marketable
securities with a fair market value of $72,000 and legal expense in the
amount of $10,000 in 2002.
During the year ended December 31, 2002 the Company issued subscribed stock
in exchange for prepaid expenses in the amount of $150,000.
Sin Fronteras, Inc. was acquired on May 13, 2002 in exchange for outstanding
common stock. The Company recorded goodwill in the amount of $230,000 and a
note receivable in the amount of $750,000 in connection with the acquisition.
During the year ended December 31,2002 the Company reversed the Electrostatic
Solutions, Inc. purchase, reducing long-term investments and additional paid
in capital by $180,000.
Bonds payable in the amount of $170,411 were converted into $5,505 of common
stock and $192,055 of additional paid in capital during 2003.
559,500 shares of series A preferred stock were converted to $50,752 of
common stock and $2,234,530 of additional paid in capital.
Office equipment in the amount of $610,000 was acquired during 2003 through
the use of long-term notes payable.
NUTEK, INC.
NOTES TO 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 Innovations, Inc. is a Nevada Corporation formed by Nutek, Inc. The
company markets the backup light switch cover called "TekPlate".
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.
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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The accompanying financial statements have been prepared on the accrual
basis of accounting whereby revenue is recognized when earned and expenses
are recognized when incurred. The Company operates on a December 31 year
end.
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 sales and report 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 Innovations, Inc., Kristi & Co., Datascension, Inc., and Nutek Oil,
Inc. All significant inter-company balances and transactions have been
eliminated.
INVENTORY VALUATION
Inventories are stated at the lower of cost or market, cost being determined
on the first in, first out (FIFO) basis.
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
DIVIDEND POLICY
The Company has not yet adopted any policy regarding payment of dividends.
The Company has authorized 20,000,000 shares of preferred stock with a par
value of $0.001. 508,500 shares have been issued as Series B shares for
cash at $1.00 a share at December 31, 2003 and 2002, respectively.
Preferred shares have the same voting rights as the common shares but have
priority in the event of company liquidation. All of the series B shares
outstanding were to be redeemed at $1.00 a share plus all accrued dividends
prior to December 31, 1993. This has been extended by mutual agreement.
Series B shares have annual dividends of $.15 per share that are payable
quarterly. They are convertible to common shares on a one-for-one basis at
the stockholders' option.
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 years ended December 31,
2003 and 2002.
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
Office equipment 5 years
Factory equipment 7 years
Furniture and fixtures 7 years
Drilling equipment 20 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.
REVENUE RECOGNITION
Revenues are considered earned when sales of goods are shipped and contracts
are complete. Revenues from Nutek Oil, Inc. are recorded using the sales
method.
F10
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ACCOUNTS RECEIVABLE
The Company considers accounts receivable to be fully collectible; and
accordingly, no allowance for doubtful accounts is required. If amounts
become uncollectible, they will be charged to operations when that
determination is made.
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 December
31, 2003.
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 December
31, 2003: 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 earnings 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.
CONCENTRATIONS OF CREDIT RISK
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as contracted.
Concentrations of credit risk (whether on or off balance sheet) that arise
from financial instruments exist for groups of customers or counter parties
when they have similar economic characteristics that would cause their
ability to meet contractual obligations to be similarly affected by changes
in economic or other conditions described below.
One of the Company's segments, Nutek Oil, Inc., operates in one segment, the
oil and gas industry. The segment's customers are located within the United
States of America. Financial instruments that subject the segment to credit
risk consist principally of oil and gas sales which are based solely on a
short-term purchase contracts from Shell Trading (US) Company with related
accounts receivable subject to credit risk.
During the years ended December 31, 2003 and 2002 Shell Trading (US) Company
accounted for 100% of the Company's oil revenues.
CONCENTRATIONS OF CREDIT RISK (CONTINUED)
Management does not believe the loss of Shell Trading (US) Company would
materially affect the ability to sell the oil.
F11
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. Advertising expense was
$7,590 and $24,871 for 2003 and 2002, respectively.
RESEARCH AND DEVELOPMENT
The Company expenses its research and development in the periods incurred.
RECLASSIFICATIONS
Certain reclassifications have been made to the December 31, 2002 amounts to
conform to the December 31, 2003 financial statement presentation. The
reclassifications had no effect on net income.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment is made up of the following:
2003 2002
Drilling equipment $ 138,220 $ 138,220
Factory equipment 1,381 1,381
Equipment and machinery 1,780,955 1,779,144
Molds and tooling 758,064 758,065
Office equipment 1,014,828 380,800
Trade show booths 6,150 6,150
Leasehold improvements 553,241 488,789
Accumulated depreciation (878,418) (599,213)
---------- ----------
$ 3,374,421 $2,953,336
NOTE 4 - LONG-TERM NOTES PAYABLE
The Company entered into agreements for long-term notes payable. Long-term
notes payable consists of the following terms at December 31, 2003:
Note payable to a vendor, no specific repayment
terms, interest at 12% annually through February
2005. The loan is secured by stock in Nutek Oil, Inc. $ 53,445
Note payable to a vendor, no specific repayment
terms and no stated interest rate. Secured by assets
through 2004. 40,000
Note payable to a vendor, monthly payments
of $348, inclusive of 7% annual interest through
September 2006, secured by equipment. 10,153
Note payable to a vendor, monthly payments
of $906, inclusive of 12% annual interest through
February 2006. Secured by equipment. 15,000
118,598
Less current portion (102,033)
-------------
$ 16,565
Principal maturities at December 31 are as follows:
2004 $ 102,033
2005 13,847
2006 2,718
2007 -
2008 -
---------
$ 118,598
NOTE 5 - 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 of recovered. The sources of those timing differences and the
current tax effect of each were as follows:
2003 2002
Depreciation and amortization $ (599,991) $ (863,833)
Net operating loss carryforward 813,496 1,041,913
Valuation allowance (213,505) (178,080)
---------- ---------
$ - $ -
The components of the net deferred tax asset at December 31, 2003 and 2002
under SFAS 109 are as follows:
2003 2002
Depreciation and amortization $ (599,991) $ (863,833)
Net operating loss carryforward 813,496 1,041,913
Valuation allowance (213,505) (178,080)
---------- ---------
$ - $ -
F13
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - INCOME TAXES (CONTINUED)
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 Percent of
Pretax Pretax
Amount Income Amount Income
Expected $ 72,591 34% $(248,869) (34%)
Valuation allowance (72,591) (34%) 248,869 34%
Actual expense $ - 0% $ - 0%
The net operating loss will begin to expire in 2021.
NOTE 7 - LINES 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 the personal guarantee of Murray Comradie
and Scott Kincer.
The Company has a line of credit agreement with a financial institution
which provides maximum borrowing of $75,000. Interest on outstanding
balances accrues at prime plus 2% and is payable monthly. The current
interest rate at December 31, 2003 was 6%. The line must be renewed each
year.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company holds a note payable to a shareholder, in the amount of $48,375.
This agreement has no specific repayment terms, and accrues 3% interest
annually through June 2004. Accrued interest at December 31, 2003 is
$3,375. 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 accrued 10% interest
annually through June 2004. This loan is unsecured. The accrued interest
on this loan as of December 31, 2003 is $5,500.
The Company holds a note payable to a shareholder in the amount of $20,000.
This agreement has no specific repayment terms, and accrues 10% interest
annually through June 2006. This loan is unsecured. The accrued interest
on this loan as of December 31, 2003 is $1,500.
The Company holds an outstanding note payable to a shareholder, in the
amount of $50,000. This payable accrues interest at 10% annually through
June 2006. All principal and interest is due in full on January 24, 2004.
Subsequent to the balance sheet date, this note has been extended through
January 2005.
F14
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - RELATED PARTY TRANSACTIONS (CONTINUED)
The Company has an outstanding note payable to Murray Conradie, an officer,
in the amount of $49,690. This payable has no stated interest rate and no
specific repayment terms.
The Company has an outstanding note payable to Scott Kincer, an officer, in
the amount of $51,000. This payable has no stated interest rate and no
specific repayment terms.
The Company has an outstanding note payable to Jason Griffith, an officer,
in the amount of $4,475. This payable has no stated interest rate and no
specific repayment terms.
The Company has an outstanding note receivable from a shareholder, in the
amount of $451,054. This receivable has no stated interest rate due in full
on or before April 30, 2004. This receivable is secured by company stock.
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 December 31, 2003, aggregate future minimum payments under these leases
are as follows:
2004 $ 139,601
2005 141,341
2006 104,693
2007 104,693
2008 107,142
Thereafter 201,529
-----------
Total minimum lease payments $ 2,051,274
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.
F16
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 - ACQUISITIONS (CONTINUED)
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 has been
accounted for under the pooling of interest method.
CENTURY INNOVATIONS, 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 of $50,000 which has been paid in full
as of December 31, 2002. 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.
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.
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 - ACQUISITIONS (CONTINUED)
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 $26,593. This amount represents the 21.15% interest owned by
various individuals other then Nutek, Inc.
NOTE 13 - SUBSEQUENT EVENTS
On January 26, 2004, Nutek, Inc. issued a press release announcing that the
Company would be changing the Corporation name to Datascension, Inc., and
required a mandatory share exchange. The Amended Bylaws of the Corporation
additionally required all shares to include the name of the beneficial owner
of the shares.
NOTE 14 - ARBITRATION AWARDS AND CONTINGENCIES
During 2003, a suit was filed against the Company by a former employee
which, subsequent to the balance sheet date, the district court awarded
judgment in the amount of $81,700, including attorney fees. There is a
verbal agreement for settlement for a reduced amount of $45,000.
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.
During 2003, there was a dispute with the Company and another company for
services previously rendered which, as of the balance sheet date, a refund
for the services was made and the contract was cancelled in the amount of
$112,500. Subsequent to the balance sheet date, this contingency has been
settled for the amount which was accrued. No further work is being done
with this client.
NOTE 15 - ENVIRONMENTAL MATTERS
Various federal and state authorities have authority to regulate the
exploration and developments of oil and gas and mineral properties with
respect to environmental matters. Such laws and regulations, presently in
effect or as a hereafter promulgated, may significantly affect the cost of
its current oil production and any exploration and development activities
undertaken by the Company and could result in loss or liability to the
Company in the event that any such operations are subsequently deemed
inadequate for purposes of any such law or regulation.
NOTE 16 - 2002 ADJUSTED INFORMATION
The financial statements as of and for the year ended December 31, 2002 were
adjusted for an error in the calculation of allowance for doubtful accounts
in the amount of $273,554. As a result net income, retained earnings and
current assets have been reduced by that amount.
F17
DATASCENSION, INC.
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
ASSETS
9/30/04 12/31/03
CURRENT ASSETS:
Cash $134,301 $122,891
Accounts receivable 1,286,471 1,087,694
Inventory 226,051 227,997
Accrued income 11,200 11,200
Prepaid expenses 237,176 194,623
Note receivable, related party - 1,250
Current portion of notes receivable 341,054 451,054
---------- ---------
TOTAL CURRENT ASSETS $2,236,253 $2,096,709
Property and Equipment, net of accumulated
depreciation 1,769,148 3,374,421
OTHER ASSETS:
Notes receivable, net of current portion 1,120,729 5,800
Patent rights acquired, net of amortization 561,262 561,262
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
---------- ---------
TOTAL OTHER ASSETS 3,673,469 2,581,782
TOTAL ASSETS $7,678,870 $8,052,912
========= ==========
9/30/04 12/31/03
CURRENT LIABILITIES:
Accounts payable $219,931 $278,022
Accrued expenses 231,000 182,377
Line of credit 372,778 449,650
Accrued contingent liabilities 125,000 338,461
Notes payable, related party 116,774 328,540
Current portion of long-term notes payable 72,488 102,033
--------- ---------
TOTAL CURRENT LIABILITIES $1,137,971 $1,679,083
LONG-TERM DEBT
Long-term notes payable, net of current portion 201,534 16,565
--------- ---------
TOTAL LONG-TERM DEBT 201,534 16,565
TOTAL LIABILITIES 1,339,505 1,695,648
--------- ---------
STOCKHOLDERS' EQUITY:
Common stock:
Common stock, $0.001 par value, 200,000,000
shares authorized; 159,447,902 shares issued,
158,489,569 outstanding at September 30, 2004 159,450 150,554
Additional paid-in capital-common stock 10,963,470 10,802,058
Preferred stock Series B:
Preferred stock, $0.001 par value, 10,000,000
shares authorized; 505,900 Series B shares
issued and outstanding at September 30, 2004 506 509
Additional paid-in capital-preferred Series B 481,994 507,992
Noncontrolling interest in subsidiary of Nutek Oil, Inc. 0 311,137
Subscriptions receivable (153,750) (153,750)
Treasury stock, at cost; 958,333 at September 30, 2004 (134,388) (134,388)
Accumulated deficit (4,977,917) (5,126,848)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 6,339,365 6,357,264
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,678,870 $8,052,912
========= ==========
DATASCENSION INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
FOR THE FOR THE FOR THE FOR THE
3 MONTHS ENDED 3 MONTHS ENDED 9 MONTHS ENDED 9 MONTHS ENDED
9/30/04 9/30/03 9/30/04 9/30/03
REVENUE $ 2,101,033 $1,712,748 $ 6,380,487 $ 5,213,830
COST OF GOODS SOLD 1,663,996 992,334 5,091,217 2,877,824
--------- --------- --------- ---------
GROSS PROFIT 437,037 720,414 1,289,271 2,336,006
EXPENSES:
Selling, general and administrative $ 371,393 $ 627,912 $ 1,014,082 $ 1,827,849
Depreciation 85,646 64,554 256,133 193,274
--------- --------- --------- ---------
TOTAL EXPENSES 457,039 692,466 1,270,215 2,021,123
OPERATING INCOME (20,002) 27,948 19,056 314,883
OTHER INCOME (EXPENSE):
Interest income 61 450 466 1,633
Forgiveness of debt 54,039 (39,381) 54,039 93
Other income 3,250 671 5,435 -
Interest expense (20,697) (23,289) (68,765) (60,558)
Other income - 153,487 2,699 159,487
Minority interest, Nutek Oil, Inc. - 2,784 - 2,233
--------- --------- --------- ---------
TOTAL OTHER INCOME 36,653 94,722 (6,126) 102,888
NET ORDINARY INCOME $ 16,651 $ 122,670 $ 12,930 $ 417,771
BASIC WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 159,447,902 95,656,175 155,100,664 92,369,448
DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 159,447,902 148,106,975 155,100,664 144,820,248
BASIC NET INCOME PER SHARE $0.00 $0.00 $0.00 $0.00
DILUTED NET INCOME PER SHARE $0.00 $0.00 $0.00 $0.00
DATASCENSION INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003
9 MONTHS ENDED 9 MONTHS ENDED
9/30/04 9/30/03
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $12,930 $417,771
Adjustments to reconcile net income to net
cash provided by operating activities:
Issued for services 44,000 -
Depreciation and amortization 256,132 193,274
Increase in non-controlling interest in subsidiary - (2,234)
Decrease in accounts receivable (212,093) 223,691
Increase in inventory 1,946 (5,739)
Increase in line of credit fees - (475)
Increase in prepaid expenses (46,326) (141,210)
Increase in deposits 23,492 (243,750)
Decrease in accounts payable (49,595) (504,489)
Decrease in accrued expenses 60,629 130,793
--------- ----------
NET CASH USED BY OPERATING ACTIVITIES $91,115 $67,632
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on notes receivable 167,294 235,309
Purchase of property and equipment (12,897) (78,280)
Purchase of intangible assets - (23,898)
--------- ----------
NET CASH USED BY INVESTING ACTIVITIES 154,397 133,131
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable (341,121) (169,368)
Cash in distributed subsidiary 10,661 16,098
Issuance of common stock 100,306 17,654
Proceeds from line of credit (3,948) 975
--------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (234,102) (134,641)
--------- ----------
NET INCREASE IN CASH 11,410 66,122
--------- ----------
BALANCE, BEGINNING 122,891 44,371
BALANCE, ENDING $134,301 $110,493
========= ==========
INTEREST PAID $68,765 $36,211
TAXES PAID $ - $ -
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.). The company produces clocks and markets and
sells the patented product TekPlateTM.
Kristi & Co., a Nevada corporation, was incorporated on September 13, 1999.
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 September 30, 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 September 30, 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 September 30,
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 September 30, 2004 amounted to $2,006.
RESEARCH AND DEVELOPMENT
The Company expenses its research and development in the periods incurred.
DATASCENSION, INC. (FORMERLY KNOWN AS NUTEK, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are made up of the following as of September 30,
2004:
Factory equipment $ 1,381
Equipment and machinery 502,168
Molds and tooling 758,065
Office equipment 1,264,047
Trade show booths 6,150
Leasehold improvements 14,159
Accumulated depreciation (776,822)
-----------
$ 1,769,146
NOTE 4 - STOCKHOLDERS' EQUITY
During the three months ended September 30, 2004, the Company issued 1,745,833
shares of common stock for services valued at $25,083.
The Company issued 225,000 shares of common stock related to a prior sale
during the first quarter that was not issued due to an administrative error.
The Company issued 3,950,000 shares of common stock related to the prior
conversion of preferred stock that was not issued due to an administrative
error.
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 September 30, 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, no specific repayments terms
and no stated interest rate. 59,244
Note payable to a vendor, monthly payments of $348
inclusive of 7% annual interest through September 2006,
secured by equipment. 9,777
Note payable to a vendor, monthly payments of $169
inclusive of 23.99% annual interest through March 2006,
secured by equipment. 3,467
Note payable to a vendor, monthly payments
of $7,375 inclusive of 10.83% annual interest through
December 2006, secured by equipment. 146,534
Note payable to a vendor, monthly payments of $906,
inclusive of 12% annual interest through February 2006.
Secured by equipment. 15,000
----------
274,022
Less current portion (72,488)
----------
$ 201,534
Principal maturities are as follows:
Twelve months ended September 30,
2005 $ 136,260
2006 92,871
2007 65,530
-----------
$ 294,661
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
SEPTEMBER 30, 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 September 30, 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 MONTHS PERCENT OF
ENDED PRETAX
SEPTEMBER 30, 2004 INCOME
Expected $ 14,133 34%
Valuation allowance (14,133) (34%)
Actual expense $ - 0%
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 through personal guarantees from Murray Conradie and Scott
Kincer, the CEO and COO of the Company, respectively.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company holds a note payable to a shareholder, in the amount of $49,500,
inclusive of accrued interest. This agreement has no specific repayment terms,
and 3% interest annually through June 2005. This loan is unsecured.
The Company has an outstanding note payable to Murray Conradie, the Company's
CEO, in the amount of $30,728. This payable accrues interest at 1% monthly due
on the first day of each month.
The Company has an outstanding note payable to Scott Kincer, the Company's COO,
in the amount of $21,418. This payable accrues interest at 1% monthly due on
the first day of each month.
The Company has an outstanding note payable to Jason Griffith, the Company's
CFO, in the amount of $13,178. This payable accrues interest at 1% monthly due
on the first day of each month.
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, 2005.
DATASCENSION, INC. (FORMERLY KNOWN AS NUTEK, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - CONTINGENCIES AND COMMITMENTS
LEASES
The Company is committed under several non-cancelable lease agreements for
office space with various termination dates through 2011.
At September 30, 2004, aggregate future minimum payments under these leases,
are as follows:
Twelve months ended September 30,
2005 $ 152,141
2006 133,259
2007 105,773
2008 105,773
2009 -
Thereafter -
-----------
Total minimum lease payments $ 496,946
NOTE 10 - 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.
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICER
Article XI of the Articles of Incorporation for DSEN do contain provisions for
indemnification of the officers and directors; in addition, Section 78.751 of
the Nevada General Corporation Laws provides as follows: 78.751 Indemnification
of officers, directors, employees and agents; advance of expenses.
Consistent with the overall scope of Section 78.751 of the Nevada Revised
Statutes, Article VI of DSEN's Bylaws, state in general, that any director or
officer of DSEN who is the subject of or a participant in a threatened, pending
or completed legal action by reason of the fact that such individual is or was
a director or officer shall be indemnified and held harmless by DSEN from and
against the consequences of such action if it is determined that he acted in
good faith and reasonably believed (i) his conduct was in DSEN's best interest,
(ii) in all other cases, that his conduct was not opposed to the best interests
of DSEN, and (iii) with respect to criminal proceedings, that he had no
reasonable cause to believe his conduct was unlawful; provided that if it is
determined that such person is liable to DSEN or is found liable on the basis
that personal benefit was improperly received by such person, the
indemnification is limited to reasonable expenses actually incurred by such
person in connection with the legal action and shall not be made in respect of
any legal action in which such person shall have been found liable for willful
or intentional misconduct in the performance of his duty to DSEN. Any
indemnification (unless ordered by a court of competent jurisdiction) shall be
made by DSEN only upon a determination that indemnification of such person is
proper in the circumstances by virtue of the fact that it shall have been
determined that such person has met the applicable standard of conduct.
The Bylaws also provide that reasonable expenses, including court costs
and attorneys' fees, incurred by officers and directors in connection with a
covered legal action shall be paid by DSEN at reasonable intervals in advance
of the final disposition of such action, upon receipt by DSEN of a written
affirmation by such person of his good faith belief that he has met the
standard of conduct necessary for indemnification, and a written undertaking by
or on behalf of such person to repay the amount paid or reimbursed by DSEN if
it is ultimately determined that he is not entitled to be indemnified.
The Board of Directors of DSEN may also authorize DSEN to indemnify
employees or agents of DSEN, and to advance the reasonable expenses of such
persons, to the same extent, following the same determinations and upon the
same conditions as are required for the indemnification of and advancement of
expenses to directors and officers of DSEN. As of the date of this
Registration Statement, the Board of Directors has not extended indemnification
rights to persons other than directors and officers.
The Bylaws also provide that DSEN has the power and authority to purchase
and maintain insurance or other arrangements on behalf of any director,
officer, employee, or agent of DSEN or any affiliate of DSEN on similar terms
as those described in Section 78.752 of the Nevada Revised Statutes. DSEN's
Articles of Incorporation relieve its directors from liability for monetary
damages to the full extent permitted by Nevada law. Sections 78.751 and
78.752 of the General Corporation Law of the State of Nevada authorize a
corporation to indemnify, among others, any officer or director against certain
liabilities under specified circumstances, and to purchase and maintain
insurance on behalf of its officers and directors.
Commission Policy
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or persons controlling DSEN. DSEN has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Act and is therefore unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses related to the securities being registered shall be paid by the
Registrant.
SEC Registration Fee $494.13
Printing and Engraving Expenses $ 5,000.00
Legal Fees and Expenses $20,000.00
Accounting Fees and Expenses $15,000.00
Transfer Agent Fees $ 5,000.00
Blue Sky Fees $ 1,000.00
Miscellaneous $ 5,000.00
-----------
Total $51,494.13
40
RECENT SALES OF UNREGISTERED SECURITIES
DSEN made the following sales of stock without registration using the
exceptions available under the Securities Act of 1933, as amended, including
unregistered sales made pursuant to Section 4(2) of the Securities Act of 1933,
as follows:
During the fiscal year ended December 31, 2002, DSEN issued securities using
the exceptions available under the Securities Act of 1933 including
unregistered sales made pursuant to Section 4(2) of the Securities Act of 1933
as follows:
(1) 13,517,240 pre split shares of common stock were issued to the shareholders
of Sin Fronteras, Inc for the purchase of Sin Fronteras, Inc. These shares
were valued at a fair market value of $0.07 per share using the exceptions
available under the Securities Act of 1933 including unregistered sales made
pursuant to Section 4(2) of the Securities Act of 1933. Fair market value was
determined by the average of the closing bid price of the company's common
stock as traded on the OTCBB for the five (5) trading days preceding the
acceptance of purchase agreement by seller and the company and rounded to the
nearest whole cent. No solicitation was made and no underwriting discounts
were given or paid in connection with this transaction.
(2) 967,068 pre split shares of restricted common stock were issued to various
creditors in satisfaction of amounts owed for services valued at $26,550 or
market value of $.027 per share using the exceptions available under the
Securities Act of 1933 including unregistered sales made pursuant to Section
4(2) of the Securities Act of 1933. No solicitation was made and no
underwriting discounts were given or paid in connection with this transaction.
(3) 297,915 pre split shares of restricted common stock was issued to the
following employees, Kimberly Hunter 175,000 shares and Jason Griffith 122,915
shares in lieu payment of unpaid compensation. The stock was valued at $0.045
per share using the exceptions available under the Securities Act of 1933
including unregistered sales made pursuant to Section 4(2) of the Securities
Act of 1933. No solicitation was made and no underwriting discounts were given
or paid in connection with this transaction.
(4) 850,000 pre split shares of restricted common stock were issued to a former
employee for the settlement of a lawsuit. These shares were valued at par
value ($0.001) and issued using the exceptions available under the Securities
Act of 1933 including unregistered sales made pursuant to Section 4(2) of the
Securities Act of 1933. No solicitation was made and no underwriting discounts
were given or paid in connection with this transaction.
(5) 1,949,152 pre split shares of restricted common stock were sold to
accredited investors as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act of 1933 for $70,299 at market of $.036 per
share. These shares were issued using the exceptions available under the
Securities Act of 1933 including unregistered sales made pursuant to Section
4(2) of the Securities Act of 1933. No solicitation was made and no
underwriting discounts were given or paid in connection with this transaction.
During the fiscal year ended December 31, 2003, DSEN issued securities using
the exceptions available under the Securities Act of 1933 including
unregistered sales made pursuant to Section 4(2) of the Securities Act of 1933
as follows:
(1) 1,683,741 pre split shares of restricted common stock were issued to
various SRC Bondholders for the settlement of bonds payable valued a $0.09 per
share, using the exceptions available under the Securities Act of 1933
including unregistered sales made pursuant to Section 4(2) of the Securities
Act of 1933. No solicitation was made and no underwriting discounts were given
or paid in connection with this transaction.
(2) 5,504,729 pre split shares of restricted common stock were issued to
various creditors in satisfaction of amounts owed and legal counsel for
services valued at $197,560 or $.036 per share using the exceptions available
under the Securities Act of 1933 including unregistered sales made pursuant to
Section 4(2) of the Securities Act of 1933. No solicitation was made and no
underwriting discounts were given or paid in connection with this transaction.
(3) 3,638,889 pre split shares of restricted common stock were sold to the
several accredited investors as such term is defined in Rule 501 of Regulation
D promulgated under the Securities Act of 1933 for $117,047 valued at $.032 per
share using the exceptions available under the Securities Act of 1933 including
unregistered sales made pursuant to Section 4(2) of the Securities Act of 1933.
No solicitation was made and no underwriting discounts were given or paid in
connection with this transaction.
41
(4) 50,750,800 pre split shares of common stock were re-issued to Murray
Conradie and David Kincer upon conversion of the Series A Preferred Stock back
to common stock based on the original conversion ratio, using the exceptions
available under the Securities Act of 1933 including unregistered sales made
pursuant to Section 4(2) of the Securities Act of 1933. These shares had
originally been converted from common stock to Series A Preferred stock on
December 27, 2001 at $5.42 per share. No solicitation was made and no
underwriting discounts were given or paid in connection with this transaction.
During the fiscal year beginning January 1, 2004 through today's date, the
Company issued securities using the exceptions available under the
Securities Act of 1933 including unregistered sales made pursuant to Section
4(2) of the Securities Act of 1933 as follows:
(1) 500,000 pre split shares of restricted stock were issued to Stock
Enterprises for services valued at $25,000 or $.05 per share using the
exceptions available under the Securities Act of 1933 including unregistered
sales made pursuant to Section 4(2) of the Securities Act of 1933. No
solicitation was made and no underwriting discounts were given or paid in
connection with this transaction.
(2) 350,000 pre split shares of common stock were issued to the Law Offices of
Michael Morrison and the Law Offices of Neil Beller for legal services valued
at $31,500 or $0.09 per share, using the exceptions available under the
Securities Act of 1933 including unregistered sales made pursuant to Section
4(2) of the Securities Act of 1933. No solicitation was made and no
underwriting discounts were given or paid in connection with this transaction.
(3) 1,000,000 pre split shares of restricted common stock were issued to a note
holder for the settlement of an outstanding note payable valued at $50,000 or
$0.05 per share, using the exceptions available under the Securities Act of
1933 including unregistered sales made pursuant to Section 4(2) of the
Securities Act of 1933. No solicitation was made and no underwriting discounts
were given or paid in connection with this transaction.
(4) 2,970,833 pre split shares of restricted common stock were sold to the
several accredited investors as such term is defined in Rule 501 of Regulation
D promulgated under the Securities Act of 1933 valued at $86,312 or $.03 per
share using the exceptions available under the Securities Act of 1933 including
unregistered sales made pursuant to Section 4(2) of the Securities Act of 1933.
No solicitation was made and no underwriting discounts were given or paid in
connection with this transaction.
(5) On November 17, 2004, DSEN issued an aggregate of $1,875,000 in Convertible
Debentures, pursuant to a Securities Purchase Agreement (the "Agreement") to
the following: $350,000 Convertible Debenture to Alpha Capital
Aktiengesellschaft, $525,000 Convertible Debenture to the Longview Equity Fund
LP, $775,000 Convertible Debenture to the Longview Fund LP., and $225,000
Convertible Debenture to the Longview International Equity Fund, LP. In
addition, issued common stock purchase warrants to purchase 3,125,000 shares of
DSEN common stock to the above note holders, at an exercise price of $.30 per
share.
42
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
The following documents are included or incorporated by reference as exhibits
to this report:
(2) a) Plan of Acquisition, Reorganization, Arrangement, Liquidation, or
Succession.
2.1 Plan and Articles of Merger, filed 8/23/91(1)
2.2 Plan of Reorganization and Agreement, dated 9/20/97(1)
(3) Articles of Incorporation & By-Laws
3.1 Articles of Incorporation of the Company Filed August 23, 1991(1)
3.2 Articles of Amendment filed on April 10, 1992(1)
3.3 Certificate of Amendment of Articles of Incorporation filed on
3/3/95(1)
3.4 By-Laws of the Company adopted August 24, 1991(1)
(4) Instruments Defining the Rights of Security Holders
4.1 Those included in exhibit 3, and sample of Stock Certificate (1)
4.2 Preferred Stock (1)
5.1* Opinion re: Legality
(10) Material Contracts
10.1 Purchase Agreement - Kristi and Co dated 1/6/00 (1)
10.2 Agreement for Promotion and Revenue Sharing Plan, dated 9/2/99 (1)
10.3 Purchase Agreement - Elite Fitness, dated 10/4/99 (1)
10.4 Purchase Agreement - Patent #5833350, dated 9/15/99 (1)
10.5 Purchase Agreement - Clock Mold, dated 4/30/99 (1)
10.6 Plan of Purchase and Agreement, dated 11/30/97 (1)
10.7 Transitional Employer Agreement (1)
10.8 Lease, dated October 15, 1999 (1)
10.9 Letter of Intent - Mineral Acres, dated 11/1/99 (1)
10.10 Compensation Plan (1)
10.11 Key Employees Incentive Stock Option Plan (1)
10.12 Purchase Agreement - Kristi & Company (2)
10.13 Blank
10.14 Purchase Agreement - Printing Equipment (3)
10.15 Blank
10.16 Employment Agreement Murray N. Conradie (4)
10.17 Employment Agreement Donald L. Hejmanowski (4)
10.18 Employment Agreement Kristi L. Conradie (4)
10.19 Purchase Agreement - Datascension Inc. (5)
10.20 Employment Agreement David Scott Kincer (5)
10.21 Certificate of Preference Rights.
10.22 Purchase Agreement - Sin Fronteras Inc
10.23 Press Release dated May 29, 2002
10.24 Subscription Agreement for November 17, 2004 Funding (6)
10.25 Form of Convertible Note - November 17, 2004 Funding (6)
10.26 Form of Warrant - November 17, 2004 Funding (6)
(23) Consent of Experts and Counsel
23.1 Consent of Counsel, Owen Naccarato (included in Exhibit 5.1)
23.2 Consent of Independent Auditor Gary V. Campbell, CPA, Ltd.
(1) Previously filed as an exhibit to the Company's Form 10-SB, filed January
24, 2000.
(2) Previously filed as an exhibit to the Company's Number 1 Amendment to Form
10-SB, filed May 22, 2000.
(3) Previously filed as an exhibit to the company's quarterly report for the
period ended March 31, 2003
(4) Previously filed as an exhibit to the company's quarterly report for the
period ended June 30, 2003
(5) Previously filed as an exhibit to the company's quarterly report for the
period ended September 30, 2003
(6) Previously filed on Form 8-K November 11, 2004, File No. 000-29087
* Filed herewith
43
(b) REPORTS ON FORM 8-K
The Company's report on Form 8-K dated November 23, 2004
Item 7.01. Regulation FD Disclosure
Under Regulation FD Disclosure, the Company is filing the press release from
this morning as an 8-K announced today the appointment of Robert L.
Sandelman., to the board of Datascension International, Inc.
The Company's report on Form 8-K dated November 23, 2004
Item 1.01. Entry into Material Definitive Agreement. On November 17, 2004, the
Registrant received funding from institutional and accredited investors with
Gross proceeds of $1,875,000, with net proceeds to the Company of $1,657,500.
The Company's report on Form 8-K dated November 23, 2004
Item 1.01. Entry into Material Definitive Agreement. In accordance with the
previous vote by shareholders, the Board of Directors has instituted new
employment contracts with the Registrants officers and directors.
The Company's report on Form 8-K dated November 4, 2004
Item 8.01 Other Events. On November 4, 2004, Datascension Inc. announced its
board of directors has authorized a reverse split of the company's common stock
at a ratio of one-for- ten.
The Company's report on Form 8-K dated October 22, 2004
Item 8.01 Other Events. On October 22, 2004, Datascension, Inc., a Nevada
corporation (the "Company"), issued a press release announcing that the
Company was considering a spin-off and registration statement of its
wholly-owned subsidiary, Datascension International Inc., with operations in
California, Costa Rica and the Dominican Republic.
The Company's report on Form 8-K dated June 21, 2004
Item 4. Changes in Registrant's Certifying Accountant. The Registrant has
appointed Larry O'Donnell, CPA, P.C., as the Registrant's independent
accountants for the year ending December 31, 2004.
The Company's report on Form 8-K dated March 24, 2004
Item 5. Other Events. 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 Company's report on Form 8-K dated February 19, 2004
On February 19, 2004, Registrant filed a Current Report on Form 8-K, relating
to a press release issued by the Registrant's subsidiary, Datascension
International, announcing the receipt of a contract from Sandelman & Associates
for $3.5 million.
The Company's report on Form 8-K dated January 26, 2004
On January 26, 2004, Registrant filed a Current Report on Form 8-K relating to
the press release issued announcing the corporation name change from Nutek Inc.
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.
44
The Company's report on Form 8-K dated December 24, 2003
On December 24, 2003, Registrant filed a Current Report on Form 8-K, relating
to the December 8th, 2003 press release announcing the Company would be
distributing its ownership interest in Nutek Oil, Inc. to shareholders.
Nutek Oil Inc. is a majority owned subsidiary which is traded under the stock
symbol NUTO. The dividend will take the form of a dividend certificate
representing restricted common stock, which will be distributed to the
Company's beneficial stockholders of record as of the record date, which is
January 8, 2004. The stock dividend will be distributed to owners of the
Company's common stock as of the record date in a ratio of one share of
dividend stock in the subsidiary to be spun off, for every 500 shares of
common stock owned in Nutek Inc.
The Company's report on Form 8-K dated October 31, 2003
On October 31, 2003, Registrant filed a Current Report on Form 8-K, updating
shareholders on the lawsuit against the securities firms. 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 Company's report on Form 8-K dated October 29, 2003
On October 29, 2003, Registrant filed a Current Report on Form 8-K, relating to
the decision by the Board of Directors to extend the record date of the
dividend of its subsidiary. The new record date will be Friday, November 7,
2003. The reason for the extension was to allow for time to fully explain and
provide the NASD, transfer agent, and shareholders information related to the
dividend.
The Company's report on Form 8-K dated October 20, 2003
On October 20, 2003, Registrant filed a Current Report on Form 8-K, related to
the announcement of the placement of the patented TekPlate product and various
related licenses, marketing agreements, etc., into a subsidiary corporation
that will be spun off from the parent Nutek as a wholly owned subsidiary and
has declared a stock dividend in that company. The dividend will take the form
of a dividend certificate representing common stock, which will be distributed
to the Company's beneficial stockholders of record as of the record date. The
stock dividend will be distributed to owners of the Company's common stock as
of the record date in a ratio of one share of dividend stock in the subsidiary
to be spun off, for every 300 shares of common stock owned in Nutek Inc.
The Company's report on Form 8-K dated March 26, 2003
On March 26, 2003, Registrant filed a Current Report on Form 8-K, relating to
the Company, along with a number of individual shareholders, filing 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.
45
UNDERTAKINGS
The undersigned registrant hereby undertakes that it will:
Undertaking (a)
(1) File, during any period in which it offers or sells securities, a post-
effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities
Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information set forth in the
registration statement; and arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in
the information set forth in the registration statement Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) ('230.424(b) of this chapter) if, in
the aggregate, the changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the "Calculation
of the Registration Fee" table in the effective registration statement.
iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining any liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities offered,
and the offering of the securities at that time to be the initial bona fide
offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Undertaking (b)
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Las
Vegas, NV, 89120.
Datascension Inc.
/s/ Murray N. Conradie
______________________
Murray N. Conradie, President and Chairman of the Board
Date: January 5, 2005
46
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
and on the dates indicated:
Datascension Inc.
/s/ Jason F. Griffith, CPA
_______________________
Jason F. Griffith, CPA, Secretary
Date: January 5, 2005
47