SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended June 30, 2001
Commission File Number 0-25853
SCIENTIFIC ENERGY, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 87-0570975
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
630 North 400 West 84103
Salt Lake City, Utah
(Address of principal executive offices) (Zip Code)
(801) 359-2410
(Issuer's telephone number)
Quazon Corp., 135 West 900 South, Salt Lake City, Utah 84101
(Former name, former address and former fiscal year, if changed since last
report)
Check mark whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or
for such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes
[x] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date. As of June 30, 2001, issuer had
27,000,000 shares of issued and outstanding common stock, par value $0.001.
Transitional Small Business Disclosure Format: Yes [ ] No [x]
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEPENDENT ACCOUNTANT'S REPORT
Scientific Energy, Inc. (Formerly Quazon Corp.)
(A Development Stage Company)
We have reviewed the accompanying consolidated balance sheet of
Scientific Energy, Inc. (Formerly Quazon Corp.) (a development stage company) as
of June 30, 2001, and the related consolidated statements of operations and cash
flows for the period from May 30, 2001 (Inception) to June 30, 2001. These
financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statement taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements for them to
be in conformity with accounting principles generally accepted in the United
States of America.
Respectfully submitted
/s/ ROBISON, HILL & CO.
Certified Public Accountants
Salt Lake City, Utah
August 7, 2001
SCIENTIFIC ENERGY, INC. (FORMERLY QUAZON CORP.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
June 30,
2001
---------------
ASSETS
Current Assets:
Cash & Cash Equivalents $ -
---------------
Other Assets:
Intangibles 250,040
$ Total Assets 250,040
LIABILITIES
Current Liabilities:
Accounts Payable & Accrued Expenses $ 31,495
Bank Overdraft 7,672
Note Payable Shareholder 22,837
---------------
Total Current Liabilities 62,004
---------------
STOCKHOLDERS' EQUITY
Common Stock, Par value $.001
Authorized 100,000,000 shares,
Issued 27,000,000 Shares
at June 30, 2001 27,000
Paid-In Capital 223,472
Deficit Accumulated During the
Development Stage, Since May 30, 2001 (62,436)
---------------
Total Stockholders' Equity 188,036
---------------
Total Liabilities and
$ Stockholders' Equity 250,040
===============
See accompanying notes and accountants' report.
SCIENTIFIC ENERGY, INC. (FORMERLY QUAZON CORP.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
Cumulative
since
May 30,
For the Period 2001
May 30, 2001 Inception
to
of
June 30, Development
2001 Stage
-------------- --------------
Revenues: $ - $ -
-------------- --------------
Expenses:
Research & Development 30,830 30,830
General & Administrative 31,524 26,524
-------------- --------------
Loss from Operations (62,354) (62,354)
-------------- --------------
Other Income (Expense)
Interest, Net (82) (82)
-------------- --------------
Net Loss $ (62,436) $ (62,436)
============== ==============
Basic & Diluted Loss
Per Share $ -
==============
See accompanying notes and accountants' report.
SCIENTIFIC ENERGY, INC. (FORMERLY QUAZON CORP.)
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cumulative
since
For the Period May 30,
May 30, 2001 2001
to Inception of
June 30, Development
2001 Stage
--------------- ---------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (62,436) $ (62,436)
Increase (Decrease) in Accounts Payable 31,495 31,495
Increase (Decrease) in Bank Overdraft 7,671 7,671
Increase (Decrease) in Accrued Interest 82 82
--------------- ---------------
Net Cash Used in operating activities (23,188) (23,188)
--------------- ---------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Net cash provided by investing activities - -
--------------- ---------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash Acquired in Merger 432 432
Note Payable Shareholder 22,756 22,756
--------------- ---------------
Net Cash Provided by Financing Activities 23,188 23,188
--------------- ---------------
Net (Decrease) Increase in
Cash and Cash Equivalents - -
Cash and Cash Equivalents
at Beginning of Period - -
--------------- ---------------
Cash and Cash Equivalents
at End of Period $ - $ -
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
Income taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES: None
Common Stock Exchanged for Technology 250,040 250,040
See accompanying notes and accountants' report.
SCIENTIFIC ENERGY, INC. (FORMERLY QUAZON CORP.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM MAY 30, 2001 (INCEPTION) TO JUNE 30, 2001
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of accounting policies for Scientific Energy, Inc.
(Formerly Quazon Corp.) (a development stage company) is presented to assist in
understanding the Company's financial statements. The accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Interim Reporting
The unaudited financial statements as of June 30, 2001, in the opinion
of management, all adjustments (which include only normal recurring adjustments)
necessary to fairly state the financial position and results of operations for
the six months. Operating results for interim periods are not necessarily
indicative of the results which can be expected for full years.
Organization and Basis of Presentation
The Company was originally incorporated under the laws of the State of
Utah on May 30, 2001, under the name of Scientific Energy, Inc. As of December
31, 2001, the Company is in the development stage and has not begun planned
principal operations.
Acquisition of Subsidiary
On June 6, 2001, Scientific Energy, Inc and Quazon, Corp (A Nevada
Corporation) entered into an agreement and plan of reorganization. Pursuant to
the agreement, Scientific Energy, Inc acquired 20,000,000 shares of Quazon's
shares in exchange for 100% of the issued and outstanding shares of Scientific
Energy.
Principles of Consolidation
The consolidated financial statements include the accounts of Scientific
Energy, Inc. (formerly Quazon, Corp.) a Nevada corporation and its wholly-owned
subsidiary Scientific Energy, Inc., a Utah corporation.
The results of subsidiaries acquired during the year are consolidated
from their effective dates of acquisition.
All significant inter-company accounts and transactions have been
eliminated.
SCIENTIFIC ENERGY, INC. (FORMERLY QUAZON CORP.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM MAY 30, 2001 (INCEPTION) TO JUNE 30, 2001
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Nature of Business
The Company develops small electricity generation devices to be
incorporated into existing portable electronic devices including portable laptop
computers, handheld devices, cellular phones, and a variety of other electronic
devices. In addition, the Company is developing technology that will assist both
industrial concerns and consumers in a variety of applications to significantly
reduce energy consumption.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents to the extent the funds are not being held for investment
purposes.
Pervasiveness of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Loss per Share
The reconciliations of the numerators and denominators of the basic loss
per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ------
(Numerator) (Denominator)
For the Period From May 30, 2001 (inception) to June 30, 2001
-------------------------------------------------------------
Basic Loss per Share
Loss to common shareholders $ (62,436) 25,460,000 $ -
=============== =============== ==============
SCIENTIFIC ENERGY, INC. (FORMERLY QUAZON CORP.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM MAY 30, 2001 (INCEPTION) TO JUNE 30, 2001
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Concentration of Credit Risk
The Company has no significant off-balance-sheet concentrations of
credit risk such as foreign exchange contracts, options contracts or other
foreign hedging arrangements.
NOTE 2 - INCOME TAXES
As of June 30, 2001, the Company had a net operating loss carryforward
for income tax reporting purposes of approximately $62,000 that may be offset
against future taxable income through 2021. Current tax laws limit the amount of
loss available to be offset against future taxable income when a substantial
change in ownership occurs. Therefore, the amount available to offset future
taxable income may be limited. No tax benefit has been reported in the financial
statements, because the Company believes there is a 50% or greater chance the
carry-forwards will expire unused. Accordingly, the potential tax benefits of
the loss carry-forwards are offset by a valuation allowance of the same amount.
NOTE 3 - DEVELOPMENT STAGE COMPANY
The Company has not begun principal operations and as is common with a
development stage company, the Company has had recurring losses during its
development stage. The Company's financial statements are prepared using
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. However, the Company does not have significant cash
or other material assets, nor does it have an established source of revenues
sufficient to cover its operating costs and to allow it to continue as a going
concern. In the interim, shareholders of the Company have committed to meeting
its minimal operating expenses.
NOTE 4 - COMMITMENTS
As of June 30, 2001 all activities of the Company have been conducted by
corporate officers from their business offices. Currently, there are no
outstanding debts owed by the company for the use of these facilities and there
are no commitments for future use of the facilities.
The Company leases office space for a research lab in New Mexico. The
lease is month to month with payments of $2,000 per month.
SCIENTIFIC ENERGY, INC. (FORMERLY QUAZON CORP.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM MAY 30, 2001 (INCEPTION) TO JUNE 30, 2001
(Continued)
NOTE 5 - EMPLOYMENT CONTRACTS / ROYALTY AGREEMENT
The Company signed a royalty agreement and employment contracts with
Paul Thomas, Daryl Conley, David Sanders and Otis H. Sanders. The royalty
agreement provides for a royalty of 5% of the gross manufacturing cost of the
product invented by such inventor. Payment of royalties is due on or before the
30th day after each calendar quarter for the previous quarter's manufacturing
costs. The royalty agreement also provides for advances against future
royalties. The annual salaries and royalty advances resulting from these
agreements for each of these individuals are as follows:
Annual Annual
Name Salaries Advances
- ------------------------------------------------------ -------------------------------
Paul Thomas $ 8,000 $ 15,996
Daryl Conley $ 14,000 $ 27,996
David Sanders $ 8,000 $ 15,996
Otis H. Sanders $ 20,000 $ 39,966
-------------------------------
Total $ 50,000 $ 99,954
=============== ===============
NOTE 6- INTANGIBLE ASSETS
On May 30, 2001, the Company acquired intangible assets including
technology, trade secrets, and patent applications for design and process and
potential patents on either design or process on their technology of $250,040.
This technology consists of energy cell technology that is believed to provide a
reliable energy source that can be used in portable electronic devices and will
increase the life of existing batteries significantly.
NOTE 7 - LINE OF CREDIT / NOTE PAYABLE - SHAREHOLDER
On August15, 2001, the president of the Company has given the Company an
unsecured line of credit for up to $350,000. The Line carries interest at Prime.
As of June 30, 2001 the Company has borrowed $22,837 against this line of credit
and has been reported along with accrued interest in the accompanying financial
statements as "Note Payable Shareholder".
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
Form 10-QSB/A
Introduction
Scientific Energy, Inc. (formerly known as Quazon Corp.) (the "Company")
is a development stage company that has not engaged in material operations or
realized revenues for several years. An officer of the Company has, in the past,
advanced funds for payment of certain expenses incurred by the Company. A
portion of these advances has been subject to a note payable, and the Company
has issued shares of Company common stock for other advances.
For the immediate future, necessary funds, including funds for expenses
related to the Company's reporting obligations under the Securities Exchange Act
of 1934, will be provided by Todd Crosland, president, director and principal
stockholder of the Company, under a $350,000 loan agreement. Until the Company
is able to generate revenues or is able to obtain significant outside financing,
there is substantial doubt about its ability to continue as a going concern.
At June 30, 2001, the Company had total assets consisting of technology
of $250,040. The technology was acquired by the Company as part of a plan of
reorganization with Scientific Energy, Inc., a Utah Corporation ("Scientific").
Pursuant to the agreement, the Company issued 20,000,000 shares in exchange for
100% of the issued and outstanding shares of Scientific. The technology is the
sole asset of Scientific. Total liabilities at June 30, 2001, were $62,004,
consisting of accounts payable and accrued expenses of $31,495, a bank overdraft
of $7,671, and note payable shareholder of $22,837.
Results of Operations
For the period ended June 30, 2001, general and administrative expenses
were $31,524 and research and development expenses were $30,830. General and
administrative expenses are primarily for legal and accounting services.
The Company does not anticipate any material revenues during the
succeeding 12 months. During this interim period, the Company anticipates that
its expenses will be stable.
In the opinion of management, inflation has not and will not have a
material effect on the operations of the Company.
Plan of Operation
As of June 30, 2001, the president of the Company has agreed to loan to
the Company up to $350,000. The loan is repayable on demand with interest at
prime rate. As of June 30, 2001 the Company has borrowed $22,837 against this
line of credit and has been reported along with accrued interest in the
accompanying financial statements as "Note Payable Shareholder". The Company
estimates that this loan agreement will provide sufficient cash for its
operating needs for general and administrative expenses, research and
development, minimum royalty payments and marketing efforts for the next 12
months.
Because the Company lacks funds, it may be necessary for the officers
and directors either to advance additional funds to the Company or to accrue
expenses until such time as revenues are generated sufficient to cover the
expenses of the Company. Management intends to hold expenses to a minimum and to
obtain services on a contingency basis when possible. Further, the Company's
directors will defer any compensation until such time as revenues are generated
sufficient to cover the expenses of the Company. However, if the Company engages
outside advisors or consultants in its development of the business, it may be
necessary for the Company to attempt to raise additional funds. As of the date
hereof, the Company has not made any arrangements or definitive agreements to
use outside advisors or consultants or to raise any capital.
In the event the Company needs additional capital, most likely the only
method available will be the private sale of its securities. Because of the
nature of the Company as a development stage company, it is unlikely that it
could make a public sale of securities or be able to borrow any significant sum
from either a commercial or private lender. There can be no assurance that the
Company will be able to obtain additional funding when and if needed, or that
such funding, if available, can be obtained on terms acceptable to the Company.
The Company does not expect to purchase or sell any plant or significant
equipment and does not expect significant changes in the number of employees in
the next 12 months.
Net Operating Loss
As of June 30, 2001, the Company had a net operating loss carry-forward
for income tax reporting purposes of approximately $62,000 that may be offset
against future taxable income through 2021. Current tax laws limit the amount of
loss available to be offset against future taxable income when a substantial
change in ownership occurs. Therefore, the amount available to offset future
taxable income may be limited. No tax benefit has been reported in the financial
statements, because the Company believes there is a 50% or greater chance the
carry-forwards will expire unused. Accordingly, the potential tax benefits of
the loss carry-forwards are offset by a valuation allowance of the same amount.
Forward-Looking Information
This report includes forward-looking statements because we believe it
may be helpful to investors to communicate our plans and expectations.
Forward-looking statements about what may happen in the future are based on
management's beliefs, assumptions and plans for the future, information
currently available to management, and other statements that are not historical
in nature. Forward-looking statements include statements in which words such as
"expect," "anticipate," "intend," "plan," "believe," estimate," "consider" or
similar expressions are used. These forward-looking statements are not
guarantees of future performance and involve risks, uncertainties and
assumptions, including among others:
* We may not be able to develop commercially viable products based on
our technologies.
* We have not obtained any third-party independent verification of our
test results or of the efficacy of our product designs.
* We cannot assure that our intellectual properties do not infringe on
the intellectual properties of others.
* We may not be able to prevent others from infringing on our
intellectual properties.
* We may not be able to obtain required additional capital.
* Our technologies may not lead to commercial products that can be
manufactured readily or economically in large numbers that will
operate efficiently or economically.
* We may not be able to market any products we develop.
Although we believe our plans and expectations stated, reflected in or
suggested by our forward- looking statements are reasonable, our future results
and stockholder values may differ materially from those expressed in these
forward-looking statements. Many of the factors that will determine these
results and values are beyond our ability to control or predict. These
statements reflect management's current view of our future events and are
subject to certain risks, uncertainties, assumptions and risks. Any of the
factors noted above or elsewhere in this document, as well as in other materials
filed with the Securities and Exchange Commission, should be considered before
any investor decides to purchase or retain any of our securities. Any of such
factors could have a material adverse effect on our business and financial
condition and prospects, results of operations and trading price for our common
stock.
Our forward-looking statements speak only as of the date they are made and
should not be relied upon as representing our plans and expectations as of any
subsequent date. We do not undertake to update, correct or revise any
forward-looking statements, even if our plans and expectations change. However,
from time to time, we may voluntarily update, correct or revise our previous
forward- looking statements.
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are presently no material pending legal proceedings to which the
Company or any of its subsidiaries is a party or to which any of its property is
subject and, to the best of its knowledge, no such actions against the Company
are contemplated or threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 6, 2001, Scientific Energy, Inc and Quazon, Corp (A Nevada
Corporation) entered into an agreement and plan of reorganization. Pursuant to
the agreement, Scientific Energy, Inc acquired 20,000,000 shares of Quazon's
shares in exchange for 100% of the issued and outstanding shares of Scientific
Energy.
The securities were sold by executive officers of the Company, without the
participation of any underwriter. Both of the investors were accredited
investors who negotiated the purchase of the securities through personal,
face-to-face discussions with executive officers of the Company. The
acquisitions were made pursuant to a written agreement in which the Company
provided detailed representations and warranties, with related disclosure
schedules, respecting the business and financial condition of the Company.
Copies of the Company's periodic reports previously filed with the Securities
and Exchange Commission were provided. Each investor signed an agreement
verifying such investor's status as an accredited investor, that the securities
were being acquired for investment without a view toward their distribution,
acknowledging that the certificates representing the securities would bear a
restrictive legend, and providing additional investor suitability
representations and acknowledgements. Certificates representing the shares
issued bear a notation conspicuously on their face that they constitute
"restricted securities."
The securities were issued in the foregoing offering in reliance on Section
4(2) of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By majority written consent of holders of 21,658,820 shares, or 93.93%, of
the issued and outstanding stock, the stockholders of the company approved a
corporate name change from Quazon Corp. to Scientific Energy, Inc. effective
July 12, 2001.
ITEM 5. OTHER INFORMATION
Financial Statements of Acquired Subsidiary
The financial statements of the Scientific are included beginning
immediately following the signature page to this report as follows:
Page
Independent Auditor's Report...............................................................F-1
Balance Sheet
May 31, 2001.............................................................................F-2
Statements of Operations
Period from May 30, 2001 (inception) to May 31, 2001.....................................F-3
Statement of Stockholders' Equity for the
Period from May 30, 2001 (inception) to May 31, 2001.....................................F-4
Statements of Cash Flows
Period from May 30, 2001 (inception) to May 31, 2001.....................................F-5
Notes to Financial Statements..............................................................F-6
Pro Forma Financial Statements
The pro forma financial statements have been omitted because there is no
material change from the financial statements as of June 30, 2001 contained in
this Form 10-QSB/A
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
--------
SEC
Exhibit Reference
Number Number Title of Document Location
- ----------------------------------------------------------------------------- ----------------
Item 2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession
2.012 Agreement and Plan of Reorganization among Quazon Corp., 1
Scientific Energy, Inc., and the stockholders of Scientific Energy, Inc.
dated June 6, 2001
Item 33 Articles of Incorporation and Bylaws
- ----------------------------------------------------------------------------- ----------------
3.013 Amendment to Articles of Incorporation to change the name of th2
Company to Scientific Energy, Inc.
Item 10. Material Contracts
- ----------------------------------------------------------------------------- ----------------
10.0110 Royalty Agreement dated May 31, 2001, by and between Otis H. 2
Sanders, David Sanders, Daryl Conley, Paul Thomas and Scientific
Energy, Inc.
10.02 10 Form of Employment Agreement dated May 31, 2001, by and 2
between Scientific Energy, Inc. and related schedule of employees
and compensation
10.03 10 Loan Agreement dated as of June 15, 2001, between Scientific 2
Energy, Inc. and Todd B. Crosland with related form of Promissory
Note
1 Incorporated by reference from the current report on Form 8-K, June 6,
2001.
2 Incorporated by reference from the originally Form 10-QSB, June 30, 2001,
dated August 17, 2001
(b) Reports on Form 8-K. During the quarter ended June 30, 2001, the
Company filed the following items on Form 8-K:
Date of Event Reported Item Reported
June 6, 2001 Item 1. Changes In Control Of Registrant
Item 2. Acquisition or Disposition of Assets
Item 5. Other Events
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SCIENTIFIC ENERGY, INC.
Date: May 3, 2002 By /S/
Todd B. Crosland
President and Chief Financial Officer