EXHIBIT 2
DISTECH LIMITED AND SUBSIDIARY
UNAUDITED INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
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DISTECH LIMITED AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
DECEMBER 31, 2000 AND 1999
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2000 1999
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ASSETS
CURRENT ASSETS
Cash $ 87,533 $ 18,125
Accounts receivable 73,652 8,808
Inventories 322,711 229,283
Related party advances 133,841 52,380
Other current assets 65,702 11,443
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683,439 320,039
PLANT AND EQUIPMENT, NET 61,296 90,333
INVESTMENT IN UNCONSOLIDATED CLOSELY HELD COMPANY 14,829 -
INTANGIBLE ASSETS, NET 224,988 265,822
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$ 984,552 $ 676,194
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 164,095 $ 863,959
Capital lease obligation, current portion 6,758 13,177
Due to related party 620,000 -
Due to stockholders 177,612 1,095,161
Deposits - 397,917
Other loans - 104,400
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968,465 2,474,614
CAPITAL LEASE OBLIGATION, NET OF CURRENT PORTION 5,318 20,548
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, no par value; 5,105,292 and 3,221,900
shares issued and outstanding at December 31, 2000
and 1999, respectively 5,587,857 2,632,642
Accumulated deficit (5,855,266) (4,495,492)
Accumulated other comprehensive income 278,178 43,882
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10,769 (1,818,968)
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$ 984,552 $ 676,194
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PAGE 2 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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DISTECH LIMITED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
(UNAUDITED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
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2000 1999
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NET SALES $ 126,144 $ 20,661
COST OF SALES 169,622 151,388
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GROSS MARGIN (43,478) (130,727)
OPERATING EXPENSES 802,519 510,468
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LOSS FROM OPERATIONS (845,997) (641,195)
OTHER INCOME (EXPENSE)
Interest income 25,145 946
Interest expense (30,093) (56,443)
Loss from investment impairment (78,816) --
Other 16,737 18
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(67,027) (55,479)
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NET LOSS (913,024) (696,674)
OTHER COMPREHENSIVE INCOME
Foreign currency translation 154,231 31,616
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COMPREHENSIVE LOSS $ (758,793) $ (665,058)
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BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.21) $ (0.22)
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BASIC AND DILUTED COMPREHENSIVE LOSS PER COMMON SHARE $ (0.18) $ (0.21)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING DURING
THE YEAR 4,321,072 3,221,900
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PAGE 3 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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DISTECH LIMITED AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
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2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (913,024) $ (696,674)
Adjustments to reconcile net loss to net cash used in operating
activities
Depreciation and amortization 27,903 31,002
Loss on disposal of asset -- 1,249
Write-down of investment 78,817 --
Interest credited to shareholder advances 52,563 --
Stock issued for services 167,035 --
Stock issued for interest 10,440 --
Services capitalized to share application account 744,121 --
Changes in operating assets and liabilities
Accounts receivable (66,445) (8,758)
Inventories (145,308) --
Other assets (146,619) 2,799
Accounts payable and accrued expenses (773,150) 26,193
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NET CASH USED IN OPERATING ACTIVITIES (963,667) (644,189)
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in closely held company (93,658) 105
Advances (8,329) --
Expenditures relating to patents (14,690) (15,853)
Acquisitions of plant and equipment (3,793) --
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NET CASH USED IN INVESTING ACTIVITIES (120,470) (15,748)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans 546,137 --
Advances from stockholders -- 667,170
Repayment of stockholder advances (584,881) --
Principal payments on capital lease obligation (14,665) --
Net proceeds from issuance of common stock 1,187,488 --
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NET CASH PROVIDED BY FINANCING ACTIVITIES 1,134,079 667,170
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NET INCREASE IN CASH 49,942 7,233
CASH - beginning of period 37,591 10,892
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CASH - end of period $ 87,533 $ 18,125
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PAGE 4 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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DISTECH LIMITED AND SUBSIDIARY
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
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1. BASIS OF PRESENTATION
Distech Limited and Subsidiary (the "Company") has prepared its condensed
consolidated financial statements for the nine months ended December 31, 2000
and 1999 without audit by the Company's independent auditors. In the opinion of
management, all adjustments necessary to present fairly the financial position,
results of operations, and cash flows of the Company as of December 31, 2000 and
for the nine months ended December 31, 2000 and 1999 have been made. Such
adjustments consist only of normal recurring adjustments.
Certain note disclosures normally included in the Company's annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted. These condensed
consolidated financial statements and notes should be read in conjunction with
the accompanying March 31, 2000 and 1999 audited financial statements within
this Form 8-K filed with the Securities and Exchange Commission.
The Company's financial position and results of operations are measured using
the Company's local currency, the New Zealand dollar, as the functional
currency. Revenues and expenses have been translated into U.S. dollars at
average exchange rates prevailing during the periods. Assets and liabilities
have been translated at the rates of exchange on the balance sheet dates. The
resulting translation gain and loss adjustments are recorded directly as a
separate component of stockholders' equity (deficit).
The results of operations for the nine months ended December 31, 2000 and 1999
are not necessarily indicative of the results to be expected for the full year.
2. DUE TO RELATED PARTY
In connection with the acquisition of the Company, as described in Note 3 below,
Liquitek Enterprises, Inc. ("Liquitek") made certain advances to the Company.
Advances totaling $620,000 at December 31, 2000 are due on demand and are
non-interest bearing.
3. ACQUISITION
On November 30, 2000, Liquitek acquired approximately 71% of the Company's
equity securities in exchange for a total of approximately 11,400,000 shares and
warrants of Liquitek, as further discussed in Note 13 to the accompanying March
31, 2000 and 1999 audited financial statements contained herein in Form 8-K. In
accordance with New Zealand law, Liquitek subsequently made a successful tender
offer for the remaining 1.6 million Company equity securities in exchange for a
total of approximately 4.8 million Liquitek shares, options and warrants.
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PAGE 5
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DISTECH LIMITED AND SUBSIDIARY
NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
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3. ACQUISITION (continued)
All tax net operating loss carryforwards were eliminated by operation of tax law
as a result of the Company's acquisition by Liquitek.
4. ISSUANCE OF COMMON STOCK, WARRANTS, AND OPTIONS
As further discussed in Note 13 to the accompanying March 31, 2000 and 1999
audited financial statements contained herein in Form 8-K, the Company issued
options and warrants to certain stockholders during October 2000.
5. LOSS PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share," basic loss per share is computed by dividing the loss
attributable to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted loss per share reflects the amount
that would have resulted if certain dilutive potential common stock had been
issued. Because the Company has experienced losses from inception, certain
issuances of options and warrants are antidilutive.
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