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 September 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 September 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 September 30, 2001, and the related consolidated statements of operations and
cash flows for the period from May 30, 2001(Inception) to September 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
November 12, 2001
SCIENTIFIC ENERGY, INC. (FORMERLY QUAZON CORP.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
September 30,
2001
---------
ASSETS
Current Assets:
Cash & Cash Equivalents $ 622
Prepaid Expenses 43,475
---------
Total Current Assets 44,097
---------
Other Assets:
Intangibles 250,040
Total Assets $ 294,137
=========
LIABILITIES
Current Liabilities:
Accounts Payable $ 46,482
Accrued Payroll Liabilities 4,432
Note Payable Shareholder 103,905
---------
Total Current Liabilities 154,819
---------
STOCKHOLDERS' EQUITY
Common Stock, Par value $.001
Authorized 100,000,000 shares,
Issued 27,000,000 Shares
at September 30, 2001 27,000
Paid-In Capital 223,472
Deficit Accumulated During the
Development Stage, Since May 30, 2001 (111,154)
---------
Total Stockholders' Equity 139,318
---------
Total Liabilities and
Stockholders' Equity $ 294,137
=========
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
For the Three May 30, 2001 Inception
Months Ended to of
September 30, September 30, Development
2001 2001 Stage
--------------------- --------------------- --------------------
Revenues: $ - $ - $ -
--------------------- --------------------- --------------------
Expenses:
Research & Development 29,201 29,201 29,201
General & Administrative 18,398 80,752 80,752
--------------------- --------------------- --------------------
Loss from Operations (47,599) (109,953) (109,953)
Other Income (Expense)
Interest, Net (1,119) (1,201) (1,201)
--------------------- --------------------- --------------------
Net Loss $ (48,718) $ (111,154) $ (111,154)
===================== ===================== ====================
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
September 30, Development
2001 Stage
--------------------- ---------------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $ (111,154) $ (111,154)
(Increase) Decrease in Prepaid Expenses (43,475) (43,475)
Increase (Decrease) in Accounts Payable 50,914 50,914
Increase (Decrease) in Bank Overdraft - -
Increase (Decrease) in Accrued Interest 932 932
--------------------- ---------------------
Net Cash Used in operating activities (102,783) (102,783)
--------------------- ---------------------
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 102,973 102,973
--------------------- ---------------------
Net Cash Provided by Financing Activities 103,405 103,405
--------------------- ---------------------
Net (Decrease) Increase in
Cash and Cash Equivalents 622 622
Cash and Cash Equivalents
at Beginning of Period - -
--------------------- ---------------------
Cash and Cash Equivalents
at End of Period $ 622 $ 622
===================== =====================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 268 $ 268
Income taxes $ - $ -
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
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 SEPTEMBER 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 September 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 nine 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 SEPTEMBER 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 September 30, 2001
------------------------------------------------------------------
Basic Loss per Share
Loss to common shareholders $ (111,154) 26,580,000 $ --
========== ========== ==========
SCIENTIFIC ENERGY, INC. (FORMERLY QUAZON CORP.)
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM MAY 30, 2001 (INCEPTION) TO SEPTEMBER 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 September 30, 2001, the Company had a net operating loss
carryforward for income tax reporting purposes of approximately $111,000 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 September 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 SEPTEMBER 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 September 30, 2001 the Company has borrowed $103,905 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. As of
September 30, 2001, the Company owes $103,905 on this note. 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 September 30, 2001, the Company had total assets of $294,137,
consisting primarily 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
September 30, 2001, were $154,819, consisting of accounts payable and accrued
expenses of $50,914 and note payable shareholder of $103,905.
Results of Operations
For the period from May 30, 2001 (inception) to September 30, 2001,
general and administrative expenses were $80,752 and research and development
expenses were $29,201. 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 September 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 September 30, 2001 the Company has borrowed
$103,905 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 September 30, 2001, the Company had a net operating loss
carry-forward for income tax reporting purposes of approximately $111,000 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
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
--------
SEC
Exhibit Reference
Number Number Title of Document Location
- --------- --------- ------------------------------------------------------------------------------ -----------------------
Item 2. Plan of Acquisition, Reorganization, Arrangement, Liquidation or
Succession
2.01 2 Agreement and Plan of Reorganization among Quazon Corp., Incorporated by
Scientific Energy, Inc., and the stockholders of Scientific Energy, Inc. reference(1)
dated June 6, 2001
Item 3 3 Articles of Incorporation and Bylaws
- --------- --------- ------------------------------------------------------------------------------ -----------------------
3.01 3 Amendment to Articles of Incorporation to change the name of the Incorporated by
Company to Scientific Energy, Inc. reference(2)
Item 10. Material Contracts
- --------- --------- ------------------------------------------------------------------------------ -----------------------
10.01 10 Royalty Agreement dated May 31, 2001, by and between Otis H. Incorporated by
Sanders, David Sanders, Daryl Conley, Paul Thomas and Scientific reference(2)
Energy, Inc.
10.02 10 Form of Employment Agreement dated May 31, 2001, by and Incorporated by
between Scientific Energy, Inc. and related schedule of employees reference(2)
and compensation
10.03 10 Loan Agreement dated as of June 15, 2001, between Scientific Incorporated by
Energy, Inc. and Todd B. Crosland with related form of Promissory reference(2)
Note
(1) Incorporated by reference from the current report on Form 8-K, June 6,
2001.
(2) Incorporated by reference from the Form 10-QSB, June 30, 2001.
(b) Reports on Form 8-K. The Company did not file any reports on Form 8-K
during the quarter ended September 30, 2001.
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