U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission file number: 000-29087
Datascension, Inc.
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(Name of small business issuer in its charter)
Nevada 87-0374623
- ------------------------ --------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
145 S. State College Blvd, Suite 350, Brea, CA 92821
- ----------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
714-482-9750 (Telephone) 714-482-9751 (Fax)
--------------------------------------------
(Issuer's telephone number)
6330 McLeod Drive, Suite 1, Las Vegas, NV 89120
----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes [X] No [
]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The Registrant has 17,232,290 outstanding, par value $.001 per share as of May
15, 2005. The Registrant has 505,900 shares of Preferred Stock Series B issued
and outstanding as of May 15, 2005.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
2
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements...................................... 4
Balance Sheet (unaudited)................................. F1
Statements of Operations (unaudited)...................... F2
Statements of Cash Flows (unaudited)...................... F3
Notes to Financial Statements............................. F4-F7
Item 2. Management's Discussion and Analysis of Plan
of Operation............................................. 5
Item 3. Controls and Procedures..................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................... 8
Item 2. Unregistered Sales of Equity and Use of Proceeds.......... 8
Item 3. Defaults upon Senior Securities........................... 10
Item 4. Submission of Matters to a Vote of Security Holders....... 10
Item 5. Other Information.......................................... 10
Item 6. Exhibits and Reports on Form 8-K........................... 10
Signatures........................................................... 11
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
The condensed financial statements of Datascension, Inc., ("DSEN")
included herein have been prepared in accordance with the instructions to
quarterly reports on Form 10-QSB pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote data
necessary for fair presentation of financial position and results of operations
in conformity with accounting principles generally accepted in the United
States of America have been condensed or omitted. It is therefore suggested
that these financial statements be read in conjunction with the summary of
significant accounting policies and notes to financial statements included in
DSEN's Annual Report on Form 10-KSB for the year ended December 31, 2004.
In the opinion of management, all adjustments necessary in order to make
the financial position, results of operations and changes in financial position
at March 31, 2005, and for all periods presented not misleading have been made.
The results of operations for the period ended March 31, 2005 are not
necessarily an indication of operating results to be expected for the full year
ending December 31, 2005.
4
DATASCENSION, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
3/31/05 12/31/04
Current Assets:
Cash 223,846 556,593
Accounts receivable 1,536,806 1,533,969
Prepaid expenses 131,671 192,185
Investment in Century Innovations 108,469 108,469
---------- ----------
Total current assets 2,000,792 2,391,216
Property and Equipment, net of accumulated
depreciation 961,120 681,346
Other Assets:
Discount on debt issuance (see notes) 1,895,312 2,077,604
Asset held for sale (see notes) - 1,015,014
Website assets, net of amortization 4,520 4,520
Deposits 21,649 25,399
Goodwill 1,692,782 1,692,782
---------- ----------
Total other assets 3,614,263 4,815,319
---------- ----------
Total Assets 6,576,175 7,887,881
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
3/31/05 12/31/04
Current Liabilities:
Accounts payable 133,158 135,533
Accrued expenses 1,081,290 1,390,880
Notes payable, related party 52,704 60,038
Short term notes payable 111,417 121,742
Current portion of long-term notes payable 105,264 116,207
---------- ----------
Total current liabilities 1,483,833 1,824,400
Long-Term Debt
Convertible debt, net of current portion 1,938,275 1,893,750
Long-term notes payable, net of current portion 385,700 103,548
---------- ----------
Total long-term debt 2,323,975 1,997,298
---------- ----------
Total Liabilities 3,807,808 3,821,698
Stockholders' Equity:
Common stock:
Common stock, $0.001 par value, 200,000,000
shares authorized; 17,207,290 shares issued,
17,111,457 outstanding at March 31, 2005 160,825 159,875
Additional paid-in capital-common stock 14,803,345 14,329,295
Preferred stock Series B:
Preferred stock, $0.001 par value, 10,000,000
shares authorized; 508,500 Series B shares
issued and outstanding at March 31, 2005 506 506
Additional paid-in capital-preferred Series B 481,994 481,994
Subscriptions receivable (480,000) (119,063)
Treasury stock, at cost; 95,833 shares at March 31, 2005 (134,388) (134,388)
Accumulated deficit (12,063,915) (10,652,036)
---------- ----------
Total stockholders' equity 2,768,367 4,066,183
---------- ----------
Total Liabilities and Stockholders' Equity 6,576,175 7,887,881
========== ==========
See accompanying notes to the financial statements
F-1
DATASCENSION, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the For the
3 months ended 3 months ended
3/31/05 3/31/04
Revenue 2,055,024 2,034,455
Cost of Goods Sold 1,649,348 1,702,318
----------- -----------
Gross Profit 405,676 332,137
Expenses:
Selling, general and administrative 479,593 178,236
Depreciation 41,266 84,841
----------- -----------
Total expenses 520,859 263,077
Operating Income (115,183) 69,060
Other Income (Expense):
Interest income 220 343
Forgiveness of debt 2,962 -
Other income - 2,185
Beneficial conversion feature on debt discount (182,292) -
Interest expense (113,755) (30,019)
----------- -----------
Total other income (292,865) (27,491)
Net Income (loss) (408,048) 41,569
Basic weighted average number
of common shares outstanding 16,267,846 152,364,569
Diluted weighted average number
of common shares outstanding 16,267,846 152,364,569
Basic Net Income Per Share (0.03) 0.00
Diluted Net Income Per Share (0.03) 0.00
See accompanying notes to the financial statements
F-2
DATASCENSION, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
For the
3 months 3 months
ended ended
Cash Flows From Operating Activities: 3/31/05 3/31/04
Net income (408,048) 41,569
Adjustments to reconcile net income to net
cash provided by operating activities:
Issued for services - 6,250
Noncash expenses associated with convertible debt 155,171
Depreciation and amortization 41,266 84,840
Forgiveness of debt (2,962)
(Increase) Decrease in accounts receivable (2,837) (260,507)
Increase in inventory - 1,304
Increase in prepaid expenses 60,514 56,612
Increase in deposits 3,750 23,492
Decrease in accounts payable (2,375) (18,634)
Decrease in accrued expenses (309,590) 37,929
--------- --------
Net cash used by operating activities (465,111) (27,145)
Cash Flows From Investing Activities:
(Increase) Decrease in notes receivable - 115,675
Purchase of property and equipment (279,774) -
--------- --------
Net cash used by investing activities (279,774) 115,675
Cash Flows From Financing Activities:
Increase in notes payable 260,884 (194,454)
Increase (Decrease) in related party payable (7,334) 10,661
Increase (Decrease) in convertible debt 44,525 -
Change in stock subscriptions 114,063 -
Sale of common stock - 75,000
(Decrease) Increase in line of credit - (3,798)
--------- --------
Net cash provided by financing activities 412,138 (112,591)
--------- --------
Net Increase in Cash (332,747) (24,061)
Balance, Beginning 556,593 122,891
Balance, Ending 223,846 98,830
Interest Paid 113,755 33,672
Taxes Paid - -
See accompanying notes to the financial statements
F-3
DATASCENSION, 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 the market research industry.
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.
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.
Consolidation Policy
The accompanying consolidated financial statements include the accounts of
Datascension, Inc. and Datascension International, Inc. All significant inter-
company balances and transactions have been eliminated.
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.
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.
F-4
Recently Issued Accounting Pronouncements
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs an
amendment of ARB No. 43, Chapter 4." This Statement clarifies the accounting
for abnormal amounts of idle facility expense, freight, handling costs, and
wasted materials. This Statement is effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. Management does
not believe this pronouncement will have a material effect on the financial
statements of the company.
In December 2004, the FASB issued SFAS No. 152, "Accounting for Real Estate
Time-Sharing Transactions - an amendment of FASB Statements No. 66 and 67."
This Statement references the financial accounting and reporting guidance for
real estate time-sharing transactions that is provided in AICPA
Statement of Position 04-2, "Accounting for Real Estate Time-Sharing
Transactions." This Statement also states that the guidance for incidental
operations and costs incurred to sell real estate projects does not apply to
real estate time-sharing transactions. This Statement is effective for
financial statements for fiscal years beginning after June 15, 2005. Management
does not believe this pronouncement will have a material effect on the
financial statements of the company.
In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets - an amendment of APB Opinion No. 29." This Statement eliminates the
exception for nonmonetary exchanges of similar productive assets and
replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. A nonmonetary exchange has
commercial substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. This Statement is effective
for onmonetary asset exchanges occurring in fiscal periods beginning after June
15, 2005. The Company does not expect application of SFAS No. 153 to have a
material affect on its financial statements.
Accounts Receivable
Accounts receivable are stated at the amount management expects to collect from
outstanding balances. Management provides for probable uncollectible amounts
through a charge to earnings and a credit to a valuation allowance based on its
assessment of the current status of individual accounts. Balances outstanding
after management has used reasonable collection efforts are written off through
a charge to the valuation allowance and a credit to trade accounts receivable.
Changes in the valuation allowance have not been material to the financial
statements.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are made up of the following as of March 31, 2005:
Equipment and machinery $ 472,500
Office equipment 943,096
Leasehold improvements 9,959
Accumulated depreciation (464,435)
-------------
$ 961,120
NOTE 4 - RECEIVABLE FROM NUTEK OIL - ASSET HELD FOR SALE
On April 14, 2005, DSEN filed a Current Report on Form 8-K, relating to the
conversion of the South Texas Oil Company asset held for sale into shares in
South Texas Oil Company (formerly known as Nutek Oil) and will be distributing
its ownership interest in South Texas Oil Company to shareholders of DSEN.
F-5
The dividend will take the form of a dividend certificate representing
restricted common stock, which will be distributed to DSEN's beneficial
stockholders of record as of the record date of April 27, 2005.
The stock dividend will be distributed to owners of DSEN's common stock
as of the record date in a ratio of one share of South Texas Oil Company, for
approximately every 18 shares of common stock held in DSEN.
As of March 31, 2005, this amount has been removed from the books of DSEN.
NOTE 5 - STOCKHOLDERS' EQUITY
During the three months ended March 31, 2005, 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:
On March 31, 2005, 500,000 shares of restricted common stock valued at
$.50 per share were issued pursuant to a consulting agreement in connection
with which we are to receive certain investor relations services. The shares
have been issued for a two year contract which can be cancelled after the first
year and 50% of the shares returned. The issuance of these securities was in a
transaction deemed to be exempt under Section 4(2) of the Securities Act of
1933 as a sale of securities not involving a public offering. We made a
determination that the consultant was a sophisticated investors with enough
knowledge and experience in business to evaluate the risks and merits of the
investment.
On March 31, 2005, 300,000 shares of restricted common stock valued at
$.50 per share were issued pursuant to a consulting agreement in connection
with which we are to receive certain investor relations services. The shares
have been issued for a two year contract which can be cancelled after the first
year and 50% of the shares returned. The issuance of these securities was in a
transaction deemed to be exempt under Section 4(2) of the Securities Act of
1933 as a sale of securities not involving a public offering. We made a
determination that the consultant was a sophisticated investors with enough
knowledge and experience in business to evaluate the risks and merits of the
investment.
On March 31, 2005, DSEN issued a $125,000 Convertible Debenture, pursuant
to a Securities Purchase Agreement (the "Agreement") to the Longview Fund LP.
In addition, DSEN issued a common stock purchase warrant to purchase 300,000
post reverse shares of DSEN common stock at an exercise price of $.50 per
share. The issuance of these securities was in a transaction deemed to be
exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities
not involving a public offering. We made a determination that the investors
were sophisticated investors with enough knowledge and experience in business
to evaluate the risks and merits of the investment as well as accredited
investors.
F-6
On March 31, 2005, 50,000 shares of restricted common stock valued at
$.50 per share were issued pursuant to a consulting agreement in connection
with which we are to receive certain investor relations services. The issuance
of these securities was in a transaction deemed to be exempt under Section 4(2)
of the Securities Act of 1933 as a sale of securities not involving a public
offering. We made a determination that the consultant was a sophisticated
investors with enough knowledge and experience in business to evaluate the
risks and merits of the investment.
On March 31, 2005, 100,000 shares of restricted common stock valued at
$.50 per share were issued pursuant to an employee in connection with his
employment agreement which offered the executive a 100,000 share signing bonus.
The issuance of these securities was in a transaction deemed to be exempt under
Section 4(2) of the Securities Act of 1933 as a sale of securities not
involving a public offering. We made a determination that the consultant was a
sophisticated investors with enough knowledge and experience in business to
evaluate the risks and merits of the investment.
All of these transactions were exempt from the registration requirements
of the Securities Act of 1933, as amended, by virtue of the exemptions provided
under section 4(2) was available because:
- The transfer or issuance did not involve underwriters, underwriting
discounts or commissions;
- The shares were purchased for investment purposes without a view to
distribution;
- A restriction on transfer legend was placed on all certificates issued;
- The distributions did not involve general solicitation or advertising; and,
- The distributions were made only to insiders, accredited investors or
investors who were sophisticated enough to evaluate the risks of the
investment. Each
shareholder was given access to all information about our business and the
opportunity to ask questions and receive answers about our business from
our management prior to making any investment decision.
NOTE 6 - RELATED PARTY TRANSACTIONS
As of March 31, 2005, the Company has an outstanding note payable to Scott
Kincer, the Company's COO, in the amount of $23,000. This payable accrues
interest at 1% monthly due on the first day of each month.
F-7
NOTE 7 - SUBSEQUENT EVENTS
Effective April 1, 2005, Scott Kincer, the Company's current Chief Operating
Officer was appointed the Chief Executive Officer and Chairman of the
Board. It is not anticipated that Mr. Kincer's employment contract will be
altered or materially affected with this change.
As of April 1, 2005, the Company's corporate head office are located at 145 S.
State College Blvd, Suite 350, Brea CA 92821. The new company phone number
will be 714-482-9750 and 714-482-9751 (fax). This address and contact
information is the current location for the Datascension International
California office.
NOTE 8 - FOREIGN OPERATIONS
The company currently operates out of the United States, Costa Rica and the
Dominican Republic. The future plans of the company involve the slowing growth
at the Dominican Republic facility while focusing on the potential and
available growth in Costa Rica. Management does not feel there is a currency
risk or need to assess a foreign currency translation adjustment or other
comprehensive income item as income and expense items are negotiated in the US
dollar. The Company maintains their accountings records in U.S. dollars and
all payments are made in US dollars. All debts and assets on the books of the
company are valued based on US dollars and are not translated from a foreign
currency amount. The Company currently coordinates all foreign operations, and
supervision activities using part time employees, consultants and contract
labor. Approximately 85% of the company's workforce is outside of the United
States. Currently 100% of the company's clients are US based companies. Any
resulting foreign exchange fluctuations do not affect the payment of employees,
contract labor or off shore operations.
F-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following is a discussion of certain factors affecting DSEN's results
of operations, liquidity and capital resources. You should read the following
discussion and analysis in conjunction with the Registrant's consolidated
financial statements and related notes that are included herein under Item 1
above.
Overview
Datascension Inc, ("DSEN") through its sole subsidiary Datascension
International, Inc, is engaged in data gathering and conducting outsourced
market research. Its expertise is in the collection, storage, and processing of
data. Datascension International's management team has over 30 years of
experience in working with clients to gather the information they need to make
changes or advancements to their operations. 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.
Critical Accounting Policies and Estimates
Our discussion and analysis of financial condition and results of
operations is based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates. We base our
estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances. These estimates and
assumptions provide a basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions, and these differences may be material.
We believe the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.
Foreign Currency
DSEN maintains its accounting records in U.S. dollars and all payments
are made in US dollars. Any resulting foreign exchange fluctuations do not
affect the payment of employees, contract labor or off shore operations.
Revenue Recognition.
We recognize revenues when survey data is delivered to the client in
accordance with the terms of our agreements. Research products are delivered
within a short period, generally ranging from a few days to approximately eight
weeks. An appropriate deferral is made for direct costs related to contracts in
process, and no revenue is recognized until delivery of the data has taken
place. Billings rendered in advance of services being performed, as well as
customer deposits received in advance, are recorded as a current liability
included in deferred revenue. We are required to estimate contract losses, if
any, and provide for such losses in the period they are determined and
estimable. We do not believe that there are realistic alternatives to our
revenue recognition policy given the short period of service delivery and the
requirement to deliver completed surveys to our
5
customers. We do not believe there is significant risk of recognizing revenue
prematurely since our contracts are standardized, the earnings process is short
and no single project accounts for a significant portion of our revenue.
DSEN's website address is http://www.datascension.com.
Results of Operations
Analysis of the quarter ended March 31, 2005 compared to the quarter
ended March 31, 2004.
For the three-months, ended March 31, 2005, DSEN has generated $2,055,024 in
revenues compared to $2,034,455 in revenues for the three-months ended March
31, 2004, for an increase of $20,569. The increase in revenue is a result of
an increase in new clients, along with an increase in our hourly billing rates.
Cost of goods sold for the three-months ended March 31, 2005 was $1,649,348
compared to $1,702,318 for the three-months ended March 31, 2004 or a decrease
of $52,970. This decrease was a result of the predictive dialers previously
installed which contributed to the reduced cost per revenue hour.
Total general and administrative expenses increased to $479,593 for the three-
months ended March 31, 2005 from $178,236 for the three-months ended March 31,
2004, a net increase of $301,357. This increase relates to the increased
management costs of $72,881, increased training costs for upcoming projects of
$187,333, increase cost of insurance of $22,483, along with the professional
fees involved during the winding down of operations in our Nevada office.
Depreciation expense for the three-months ended March 31, 2005 was $41,266
compared to $84,841 for the three-months ended March 31, 2004, a decrease of
$43,575. The decrease resulted from the disposal and write down of assets in
the fourth quarter of 2004.
Interest expense for the three-months ended March 31, 2005 was $296,047
compared to $30,019 for the three-months ended March 31, 2004 an increase of
$266,028. This increase includes $182,292 of non-cash interest expense
associated with the beneficial conversion feature from the financing completed
in November 2004, along with the balance of the increase including the
amortization of the financing costs and additional interest cost related to the
purchase of predictive dialers during the previous year.
Datascension generated a net loss of $408,048 for the three months ended March
31, 2005, versus net income of $41,569 for the same period in 2004. The
increase in losses of $449,617is a result of the increased costs related to the
amortization of financing and discount costs of $266,028, along with the
increased general and administrative costs of $301,357, coupled with minor
increases in the Other Income account of $777 and a decrease of $123in interest
income. For the three months ended March 31, 2005, DSEN has decreased its
working capital position by a net amount of $49,857 from positive $566,816 as
of December 31, 2004 to $516,959 as of March 31, 2005. This is due to a
decrease in cash of $332,747 and a decrease in prepaid expenses of $60,514,
an increase in accounts receivable of $2,837, while there was also a decrease
in current liabilities of $340,567.
Significant Subsequent Events occurring after March 31, 2005:
On May 3, 2005, DSEN filed a Current Report on Form 8-K, relating to the
appointment of Mr. Robert Sandelman to the Board of Directors of DSEN.
6
Capital Resources and Liquidity
On March 31, 2005 DSEN had total assets of $6,576,175 compared to
$7,887,881 on March 31, 2004, a decrease of $1,311,706. The reason for the
decrease in assets is a result of the amortization of the discount on debt
issuance of $182,292, along with the distribution of the assets held for sale
of $1,015,014,along with a decrease in current assets of $390,424and a decrease
in deposits of $3,750. DSEN had a total stockholders' equity of $2,768,367 on
March 31, 2005 compared to $4,066,183 on March 31, 2004, a decrease in equity
of $1,297,816, which is in part due to the $1,015,014 distribution of the
assets held for sale,along with a net change in stock subscriptions of $360,937
related to the stock for services issued on March 31, 2005, plus the net loss
for the three months ended March 31, 2005 of $408,048.
All assets are booked at historical purchase price and there is no
variance between book value and the purchase price.
On March 31, 2005 DSEN had Property and Equipment of $961,120 compared to
$681,346 on March 31, 2004, or an increase of $279,774 which is a result of the
purchase of predictive dialers for Datascension's call center operations.
As discussed above DSEN intends to meet its financial needs for
operations through the collection of accounts receivable and servicing of
current contracts.
DSEN's capital resources are comprised primarily of private investors,
who are either existing contacts of the Registrant's management or who come to
the attention of the Registrant through brokers, financial institutions and
other intermediaries. The Registrant's access to capital is always dependent
upon general financial market conditions. The Registrant's capital resources
are not anticipated to change materially in 2005.
DSEN has financed operations through the collections of accounts
receivable, servicing of existing contracts and the sale of common stock and
through financing from financial institutions. In order to sustain operations
in the near term, it is anticipated that DSEN has sufficient working capital
due to the fact that on November 17, 2004, we issued $1,875,000 in convertible
notes, receiving net proceeds of $1,657,500.
DSEN's future capital requirements will depend on numerous factors,
including the profitability of our research projects and our ability to control
costs. We believe that our current assets will be sufficient to meet our
operating expenses and capital expenditures. However, we cannot predict when
and if any additional capital contributions may be needed and we may need to
seek one or more substantial new investors. New investors could cause
substantial dilution to existing stockholders.
There can be no assurances that DSEN will be successful in raising
additional capital via debt or equity funding, or that any such transactions,
if consummated, will be on terms favorable to DSEN. In the event that
additional capital is not obtained from other sources, it may become necessary
to alter development plans or otherwise abandon certain ventures.
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.
7
Off-Balance Sheet Arrangements.
DSEN currently does not have any off-balance sheet arrangements.
Forward-Looking Information
This quarterly report contains forward-looking statements. The forward-
looking statements include all statements that are not statements of historical
fact. The forward-looking statements are often identifiable by their use of
words such as "may," "expect," "believe," "anticipate," "intend," "could,"
"estimate," or "continue," "Plans" or the negative or other variations of those
or comparable terms. Our actual results could differ materially from the
anticipated results described in the forward-looking statements. Factors that
could affect our results include, but are not limited to, those discussed in
Item 2, "Management's Discussion and Analysis or Plan of Operation" and
included elsewhere in this report. DSEN makes no commitment to update any
forward-looking statement or to disclose any facts, events, or circumstances
after the date hereof that may affect the accuracy of any forward-looking
statement.
Item 3. Controls and Procedures.
(a) Our Chief Executive Officer (CEO) and Principal Financial Officer
evaluated the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934, as amended) as of the end of the period covered by this report. Based
upon the evaluation, concluded that the disclosure controls and procedures are
effective in ensuring all required information relating to DSEN is included in
this quarterly report.
We also maintain a system of internal control over financial reporting
(as defined in Rules 13a-15(f) and 15d-15(f)) designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with accounting
principles generally accepted in the United States of America.
(b) Changes in internal controls. During our most recent fiscal
quarter, there have been no changes in our internal control over financial
reporting that occurred that have materially affected or are reasonably likely
to materially affect our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
DSEN is not a party to any pending material legal proceeding. To the
knowledge of management, no federal, state or local governmental agency is
presently contemplating any proceeding against DSEN. To the knowledge of
management, no director, executive officer or affiliate of DSEN, any owner of
record or beneficially of more than 5% of DSEN's common stock is a party
adverse to DSEN or has a material interest adverse to DSEN in any proceeding.
Item 2. Unregistered Sales of Equity Security and Use of Proceeds.
During the three months ended March 31, 2005, 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:
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On March 31, 2005, 500,000 shares of restricted common stock valued at
$.50 per share were issued pursuant to a consulting agreement in connection
with which we are to receive certain investor relations services. The shares
have been issued for a two year contract which can be cancelled after the first
year and 50% of the shares returned. The issuance of these securities was in a
transaction deemed to be exempt under Section 4(2) of the Securities Act of
1933 as a sale of securities not involving a public offering. We made a
determination that the consultant was a sophisticated investors with enough
knowledge and experience in business to evaluate the risks and merits of the
investment.
On March 31, 2005, 300,000 shares of restricted common stock valued at
$.50 per share were issued pursuant to a consulting agreement in connection
with which we are to receive certain investor relations services. The shares
have been issued for a two year contract which can be cancelled after the first
year and 50% of the shares returned. The issuance of these securities was in a
transaction deemed to be exempt under Section 4(2) of the Securities Act of
1933 as a sale of securities not involving a public offering. We made a
determination that the consultant was a sophisticated investors with enough
knowledge and experience in business to evaluate the risks and merits of the
investment.
On March 31, 2005, DSEN issued a $125,000 Convertible Debenture, pursuant
to a Securities Purchase Agreement (the "Agreement") to the Longview Fund LP.
In addition, DSEN issued a common stock purchase warrant to purchase 300,000
post reverse shares of DSEN common stock at an exercise price of $.50 per
share. The issuance of these securities was in a transaction deemed to be
exempt under Section 4(2) of the Securities Act of 1933 as a sale of securities
not involving a public offering. We made a determination that the investors
were sophisticated investors with enough knowledge and experience in business
to evaluate the risks and merits of the investment as well as accredited
investors.
On March 31, 2005, 50,000 shares of restricted common stock valued at
$.50 per share were issued pursuant to a consulting agreement in connection
with which we are to receive certain investor relations services. The issuance
of these securities was in a transaction deemed to be exempt under Section 4(2)
of the Securities Act of 1933 as a sale of securities not involving a public
offering. We made a determination that the consultant was a sophisticated
investors with enough knowledge and experience in business to evaluate the
risks and merits of the investment.
On March 31, 2005, 100,000 shares of restricted common stock valued at
$.50 per share were issued pursuant to an employee in connection with his
employment agreement which offered the executive a 100,000 share signing bonus.
The issuance of these securities was in a transaction deemed to be exempt under
Section 4(2) of the Securities Act of 1933 as a sale of securities not
involving a public offering. We made a determination that the consultant was a
sophisticated investors with enough knowledge and experience in business to
evaluate the risks and merits of the investment.
All of these transactions were exempt from the registration requirements
of the Securities Act of 1933, as amended, by virtue of the exemptions provided
under section 4(2) was available because:
- The transfer or issuance did not involve underwriters, underwriting
discounts or commissions;
- The shares were purchased for investment purposes without a view to
distribution;
- A restriction on transfer legend was placed on all certificates issued;
- The distributions did not involve general solicitation or advertising; and,
- The distributions were made only to insiders, accredited investors or
investors who were sophisticated enough to evaluate the risks of the
investment. Each
9
shareholder was given access to all information about our business and the
opportunity to ask questions and receive answers about our business from
our management prior to making any investment decision.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
(a) Exhibit 31. Certifications required by Rule 13a-14(a) or Rule 15d-
14(a)
31.1 Certification of Chief Executive Officer and Principal Financial
Officer pursuant to 18 U.S.C.ss.1850 as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(b) Exhibit 32. Certifications required by Rule 13a-14(b) or Rule 15d-
14(b) and section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
32.1 Certification of Chief Executive Officer and Principal Financial
Officer pursuant to 18 U.S.C.ss.1850 as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
Reports on Form 8-K
(a) Report on Form 8-K filed January 6, 2005, item 9.01.
On January 6, 2005, DSEN filed a Current Report on Form 8-K, pursuant to
Regulation FD relating to a press release issued on January 6, 2005.
(b) Report on Form 8-K filed March 3, 2005, item 8.01.
On March 3, 2005, DSEN filed a Current Report on Form 8-K, relating to
changes to the Board of Directors of Century Innovations, Inc. a former
subsidiary of DSEN.
(c) Report on Form 8-K filed March 8, 2005, items 5.02, 8.01 and 9.01.
On March 8, 2005, DSEN filed a Current Report on Form 8-K, relating to
the resignation of DSEN's Chief Executive Officer and Chairman of the Board,
Murray Conradie and the Chief Financial Officer, Jason Griffith. DSEN
additionally reported that Scott Kincer would be the Chief Executive Officer
and Chairman of the Board effective April 1, 2005 including a change in DSEN's
corporate address to 145 S. State College Blvd, Suite 350, Brea CA 92821.
Pursuant to Regulation FD, the Current Report referenced a press release
issued on March 3, 2005.
10
(d) Report on Form 8-K filed April 14, 2005, items 8.01 and 9.01.
On April 14, 2005, DSEN filed a Current Report on Form 8-K, relating to
the
conversion of the South Texas Oil Company asset held for sale into shares in
South Texas Oil Company (formerly known as Nutek Oil) and will be distributing
its ownership interest in South Texas Oil Company to shareholders of DSEN.
The dividend will take the form of a dividend certificate representing
restricted common stock, which will be distributed to DSEN's beneficial
stockholders of record as of the record date of April 27, 2005.
The stock dividend will be distributed to owners of DSEN's common stock
as of the record date in a ratio of one share of South Texas Oil Company, for
approximately every 18 shares of common stock held in DSEN.
(e) Report on Form 8-K filed April 15, 2005, items 8.01 and 9.01.
On April 15, 2005, DSEN filed a Current Report on Form 8-K, pursuant to
Regulation FD relating to a press release issued on April 14, 2005.
(f) Report on Form 8-K filed April 28, 2005, item 9.01.
On April 28, 2005, DSEN filed a Current Report on Form 8-K, pursuant to
Regulation FD relating to a press release issued on April 26, 2005.
(g) Report on Form 8-K filed May 3, 2005, item 5.02.
On May 3, 2005, DSEN filed a Current Report on Form 8-K, relating to the
appointment of Mr. Robert Sandelman to the Board of Directors of DSEN.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Datascension, Inc.
/s/ Scott Kincer
----------------------
Scott Kincer
President, Chairman and Director
(Principal Executive Officer)
/s/ Scott Kincer
-------------------
Scott Kincer
(Principal Financial Officer)
Date: May 15, 2005
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
/s/ Scott Kincer
----------------------
Scott Kincer
President, Chairman and Director
(Principal Executive Officer)
11
/s/ Scott Kincer
-------------------
Scott Kincer
(Principal Financial Officer)
Date: May 15, 2005
12