U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the quarterly period ended October 31, 2000
( ) Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from _______ to _______
Commission file number 0-8155
NANO WORLD PROJECTS CORPORATION
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(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 73-0977756
-------- (I.R.S. Employer
(State or Other Jurisdiction of Identification No.)
Incorporation or Organization)
767 THIRD AVENUE, 21ST FLOOR
NEW YORK, NEW YORK 10017
(Address of Principal (Zip Code)
Executive Offices)
(646) 735-0188
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
------------------------------------------------
------------------------------------------------
(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 _____
-
As of October 31 , 2000, the issuer had outstanding 18,378,206 shares of Common
Stock, par value $.0001 per share.
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Table of Contents
Part I
FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) Page
----
Index to Financial Statements F-1
Review Engagement Report F-2
Consolidated Interim Financial Statements
Consolidated Interim Balance Sheet F-3
Consolidated Interim Statement of Deficit F-4
Consolidated Interim Statement of Operations F-5
Consolidated Interim Statement of Cash Flows F-6
Summary of Significant Accounting Policies F-7
Notes to Consolidated Interim Financial Statements F-10
Item 2. Management's Discussion and Analysis Of Financial
Condition and Results of Operations 1
Part II
OTHER INFORMATION
Item 1. Legal Proceedings 6
Item 2. Changes in Securities and Use of Proceeds 6
Item 3. Defaults upon Senior Securities 6
Item 4. Submission of Matters to a Vote of Security Holders 6
Item 5. Other Information 6
Item 6. Exhibits and Reports on Form 8-K 7
SIGNATURES
PART I. FINANCIAL INFORMATION.
Item 1. FINANCIAL STATEMENTS.
Unaudited Consolidated Financial Statements
Quarter ended October 31, 2000 and year ended April 30, 2000.
The consolidated financial statements for the six months ended October 31, 2000
and 1999 include, in the opinion of management, all adjustments (which consist
only of normal recurring adjustments) necessary to present fairly the results of
operations for such periods. Results of operations for the six months ended
October 31, 2000, are not necessarily indicative of results of operations which
will be realized for the Company's fiscal year ending April 30, 2001.
Nano World Projects Corporation
(a development stage company)
Consolidated Interim Financial Statements
For the six months ended October 31, 2000
(Unaudited)
Contents
================================================================================
Review Engagement Report F-2
Consolidated Interim Financial Statements
Consolidated Interim Balance Sheet F-3
Consolidated Interim Statement of Deficit F-4
Consolidated Interim Statement of Operations F-5
Consolidated Interim Statement of Cash Flows F-6
Summary of Significant Accounting Policies F-7
Notes to Consolidated Interim Financial Statements F-10
================================================================================
Review Engagement Report
- --------------------------------------------------------------------------------
To the Shareholders of
Nano World Projects Corporation
(a development stage company)
We have reviewed the consolidated interim balance sheet of Nano World Projects
Corporation (a development stage company) as at October 31, 2000 and the
consolidated interim statements of deficit, operations and cash flows for the
six months then ended. Our review was made in accordance with generally accepted
standards for review engagements and accordingly consisted primarily of enquiry,
analytical procedures and discussion related to information supplied to us by
the Company.
A review does not constitute an audit and consequently we do not express an
audit opinion on these consolidated interim financial statements.
Based on our review, nothing has come to our attention that causes us to believe
that these consolidated interim financial statements are not, in all material
respects, in accordance with generally accepted accounting principles.
"BDO Dunwoody LLP"
Chartered Accountants
Edmonton, Canada
December 6, 2000
F-2
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Nano World Projects Corporation
(a development stage company)
Consolidated Interim Balance Sheet
(Expressed in U.S. $)
(Unaudited)
October 31 2000 1999
- --------------------------------------------------------------------------------
Assets
Current
Cash (Note 2) $ 49,272 $ 8,166
Accounts receivable 43,933 -
Advances to a director 74,142 -
Prepaid expenses and deposits 90,693 -
---------------------------------
258,040 8,166
Capital assets (Note 3) 166,664 -
---------------------------------
$ 424,704 $ 8,166
================================================================================
Liabilities and Shareholders' Deficiency
Current
Accounts payable and accrued liabilities
(Note 4) $ 446,582 $ 4,590
Short-term loan (Note 7) 19,736 29,995
-----------------------------
466,318 34,585
-----------------------------
Shareholders' deficiency
Share capital (Note 5) 5,523,937 285,165
Deficit
Accumulated during the development stage (5,034,982) -
Other (530,569) (311,584)
-----------------------------
(41,614) (26,419)
-----------------------------
$ 424,704 $ 8,166
================================================================================
On behalf of the Board:
"Giorgio Marinoni" Director
- --------------------------------------------
"Andrew Cochrane" Director
- --------------------------------------------
The accompanying summary of significant accounting policies and notes are an
intergral part of these consolidated interim financial statements.
F-3
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Nano World Projects Corporation
(a development stage company)
Consolidated Interim Statement of Deficit
(Expressed in U.S. $)
(Unaudited)
For the six months ended October 31 2000 1999
- -------------------------------------------------------------------------------
Deficit, beginning of period $ (3,815,456) $ (291,796)
Net loss for the period (1,750,095) (19,788)
--------------------------------------
Deficit, end of period $ (5,565,551) $ (311,584)
================================================================================
The Accompanying summary of significant policies and notes are an integral part
of these consolidated interim financial statements.
F-4
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Nano World Projects Corporation
(a development stage company)
Consolidated Interim Statement of Operations
(Expressed in U.S. $)
(Unaudited)
For the six months ended October 31 2000 1999
- -------------------------------------------------------------------------------
Expenses
Amortization of capital assets $ 29,300 $ -
Franchise taxes 280,000 -
General and administrative 1,172,855 19,788
Research and development 300,000 -
---------------------------------
1,782,155 19,788
---------------------------------
Loss before the undernoted (1,782,155) (19,788)
---------------------------------
Other income (expense)
Interest income 42,060 -
Imputed interest on promissory note (10,000) -
---------------------------------
32,060 -
---------------------------------
Net loss for the period $ (1,750,095) $ (19,788)
===============================================================================
Loss per share (Note 8) $ (0.116) $ (0.002)
===============================================================================
The accompanying summary of significant accounting policies and notes are an
integral part of these consolidated interim financial statements.
F-5
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Nano World Projects Corporation
(a development stage company)
Consolidated Interim Statement of Cash Flows
(Expressed in U.S. $)
(Unaudited)
For the six months ended October 31 2000 1999
- ---------------------------------------------------------------------------
Cash provided by (used in)
Operating activities
Net loss for the period $ (1,750,095) $ (19,788)
Adjustments to reconcile net
loss to net cash
Amortization of capital assets 29,300 -
Imputed interest on promissory note 10,000 -
Changes in assets and liabilities
Accounts receivable (43,933) -
Advances to a director (74,142) -
Prepaid expenses and deposits (63,194)
Accounts payable and accrued liabilities 237,637 27,695
---------------------------
(1,654,427) 7,907
---------------------------
Investing activity
Purchase of capital assets (165,216) -
---------------------------
Financing activities
Subscriptions payable (311,757) -
Repayment of promissory note (500,000) -
---------------------------
(811,757) -
---------------------------
Increase (decrease) in cash (2,631,400) 7,907
during the period
Cash, beginning of period 2,680,672 259
---------------------------
Cash, end of period $ 49,272 $ 8,166
===========================================================================
The accompanying summary of significant accounting policies and
notes are an integral part of these consolidated interim financial statements.
F-6
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Nano World Projects Corporation
(a development stage company)
Summary of Significant Accounting Policies
(Expressed in U.S. $)
(Unaudited)
October 31, 2000
- -------------------------------------------------------------------------------
Significant Accounting Policies These consolidated interim financial
statements have been prepared in conformity
with generally accepted accounting principles
in the United States. The following are the
significant accounting policies of the
Company.
Nature of Business Breccia International Minerals Inc. was
incorporated under the laws of the State of
Delaware on April 25, 1975 and was renewed on
March 18, 1994. The Company changed its name
to Nano World Projects Corporation on
February 18, 2000 by resolution of the Board
of Directors in accordance with the
provisions of Section 242 of the General
Corporation Law of the State of Delaware. The
resolution was approved by the requisite
number of shares of the Company's $0.0001 par
value common stock entitled to vote pursuant
to Section 228 of the General Corporation Law
of the State of Delaware.
The Company owns the technology known as the
Dynamic Thin Laminar Flow which makes it
possible to produce monolayers of particles
of either organic or inorganic materials and
apply them to either solid or liquid
surfaces. A patent on the Dynamic Thin
Laminar Flow method was obtained in 1997 in
Italy and subsequent patent applications have
been filed in the United States and other
countries. The Company is engaged solely in
the research and development of the Dynamic
Thin Laminar Flow technology and is not
currently engaged in any commercial
production or licensing of the technology.
The Company's future operations are dependent
upon successfully developing the technology,
obtaining the necessary financing to complete
the development and ultimately marketing the
technology (Note 1).
Basis of Presentation These consolidated interim financial
statements include the accounts of the
Company and its wholly-owned subsidiary
companies. All significant intercompany
transactions and accounts have been
eliminated.
Financial Instruments The Company as part of its operations carries
a number of financial instruments. Unless
otherwise noted, it is management's opinion
that the Company is not exposed to
significant interest, currency or credit
risks arising from these financial
instruments.
The fair values of these financial
instruments approximate their carrying
values, unless otherwise noted.
F-7
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Nano World Projects Corporation
(a development stage company)
Summary of Significant Accounting Policies
(Expressed in U.S. $)
(Unaudited)
October 31, 2000
- --------------------------------------------------------------------------------
Capital Assets Capital assets are stated at cost less
accumulated amortization. Amortization based
on the estimated useful life of the asset is
calculated on the declining balance basis at
a rate of 30% per annum.
In March 1998, the Accounting Standards
Executive Committee issued Statement of
Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1"). SOP 98-1 requires
all costs related to the development of
internal use software other than those
incurred during the application software
development stage to be expensed as incurred.
Costs incurred during the application
development stage are required to be
capitalized and amortized over the estimated
useful life of the software. Accordingly,
direct external costs associated with the
development of the web page have been
capitalized and are being amortized over the
estimated useful life.
Use of Estimates The preparation of financial statements
requires management to make estimates and
assumptions that affect the reported amounts
of assets and liabilities, revenue and
expenses and other reported amounts in these
consolidated interim financial statements and
the related notes. Actual results may differ
from those estimates.
Long-Lived Assets The Company reviews the carrying value of
long-lived assets when events or changes in
circumstances indicate that the carrying
amount of the assets may not be recoverable
through the estimated undiscounted future
cash flows resulting from these assets. An
impairment would be for the amount by which
the carrying amount of the assets exceeds the
fair value of the assets.
Income Taxes The Company accounts for income taxes under
the asset and liability method as required by
SFAS No. 109, "Accounting for Income Taxes".
Under this method, deferred income taxes are
recognized for the tax consequences of
temporary differences by applying enacted tax
rates applicable to future years to
differences between the consolidated interim
financial statements' carrying amounts and
the tax bases of existing assets and
liabilities. When tax credits are available,
they are recognized as reductions of current
year's tax expense.
F-8
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Nano World Projects Corporation
(a development stage company)
Summary of Significant Accounting Policies
(Expressed in U.S. $)
(Unaudited)
October 31, 2000
- --------------------------------------------------------------------------------
Foreign Currency Translation The Company has determined that the U.S.
dollar is the functional currency for its
subsidiary companies. Translation gains and
losses are included in income in the period
in which they are incurred.
Earnings per Share Loss per share has been computed by dividing
loss applicable to common shareholders by the
weighted average number of shares of common
stock outstanding during the respective
years.
Recently Issued Standards SFAS No. 133, "Accounting for Derivatives
Instruments and Hedging Activities" requires
companies to record derivatives on the
balance sheet as assets or liabilities,
measured at fair market value. Gains or
losses resulting from changes in the values
of those derivatives are accounted for
depending on the use of the derivative and
whether it qualifies for hedge accounting.
The key criterion for hedge accounting is
that the hedging relationship must be highly
effective in achieving offsetting changes in
fair value or cash flows. SFAS No. 133 is
effective for fiscal years beginning after
June 15, 2000. Management believes that the
adoption of SFAS No. 133 will have no
material effect on its consolidated interim
financial statements.
F-9
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Nano World Projects Corporation
(a development stage company)
Notes to Consolidated Interim Financial Statements
(Expressed in U.S. $)
(Unaudited)
October 31, 2000
- --------------------------------------------------------------------------------
1. Future Operations
Since April 1999, the Company's efforts have been devoted to identifying
potential investments and raising capital to finance the acquisition of
the same. In January 2000, the Company, through its wholly-owned
subsidiary company, acquired the patent on the technology known as the
Dynamic Thin Laminar Flow. Currently, the Company is engaged solely in
the research and development of the Dynamic Thin Laminar Flow technology
and is not currently engaged in any commercial production or licensing of
the technology. As a result, the Company has no revenue and expects to
incur losses during the foreseeable future.
The Dynamic Thin Laminar Flow technology and the Company's ability to
commence commercial exploitation of the patent are subject to additional
proof of process research and development. During the current period, the
Company established a research and development facility in Quebec, Canada
and has also entered into an agreement with an Italian company to
collaborate on research and development of nanotechnology. The Company is
in the process of constructing an automated prototype that is expected to
produce films applicable to the filter industry. Management expects to
incur substantial additional costs and expenses during the foreseeable
future in connection with research and development and construction of
prototype commercial equipment.
The Company's ability to continue as a going concern is contingent upon
its ability to raise capital, to develop a viable technology or
application, to market any such technology or application and to achieve
profitable operations. The Company can give no assurance as to the
ability of the Company to continue as a going concern. These consolidated
interim financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
- --------------------------------------------------------------------------------
2. Cash
Cash (cheques issued in excess of bank balance) held by the Company is
denominated as follows:
2000 1999
-------------------------------------
Canadian dollars $ 38,785 $ -
Italian Lira 27,558 -
US dollars (17,017) 8,166
-------------------------------------
$ 49,272 $ 8,166
=====================================
- --------------------------------------------------------------------------------
F-10
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Nano World Projects Corporation
(a development stage company)
Notes to Consolidated Interim Financial Statements
(Expressed in U.S. $)
(Unaudited)
October 31, 2000
- ------------------------------------------------------------------------------------------------------------------
3. Capital Assets
2000 1999
--------------------------------------------------------------------------
Accumulated Net Book Net Book
Cost Amortization Value Value
Web page $ 46,022 $ 13,800 $ 32,222 $ -
Computer equipment 104,857 19,996 84,861 -
Leasehold improvements 13,333 2,000 11,333 -
Other equipment 44,948 6,700 38,248 -
--------------------------------------------------------------------------
$ 209,160 $ 42,496 $ 166,664 $ -
==========================================================================
The estimated useful lives of the above assets range from three to five years.
- -------------------------------------------------------------------------------------------------------------------
4. Accounts Payable and Accrued Liabilities
2000 1999
-------------------------------------
Trade accounts payable $ 76,600 $ 4,590
Accrued liabilities 89,982 -
Franchise taxes payable 280,000 -
-------------------------------------
$ 446,582 $ 4,590
=====================================
- ------------------------------------------------------------------------------------------------------------------
5. Share Capital
Authorized
Seventy-five million (75,000,000) $0.0001 par value common shares
Issued
Additional
Number of Par Paid in Total
Shares Value Capital Consideration
--------------------------------------------------------------------------
Balance, April 30, 2000 8,128,206 $ 813 $ 523,124 $ 523,937
Issued during the period 10,250,000 1,000 4,999,000 5,000,000
--------------------------------------------------------------------------
Balance, October 31, 2000 18,378,206 $ 1,813 $ 5,522,124 $ 5,523,937
==========================================================================
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F-11
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Nano World Projects Corporation
(a development stage company)
Notes to Consolidated Interim Financial Statements
(Expressed in U.S. $)
(Unaudited)
October 31, 2000
- --------------------------------------------------------------------------------
6. Acquisition
On January 31, 2000, the Company entered into an agreement to acquire all
of the issued and outstanding shares of Nano World Project Colloid &
Coating LLC for a total consideration of $2,980,000. The Company's
interest in the underlying net assets acquired at assigned values are as
follows:
Cash $ 500
Acquired in process research and development 2,979,500
---------------
$ 2,980,000
===============
Consideration consists of:
Promissory note, at net present value $ 480,000
5,000,000 common shares 2,500,000
---------------
$ 2,980,000
===============
Nano World Project Colloid & Coating LLC holds the patent (Note 1). To
date, this company has not earned any revenue, nor incurred any expenses.
Pursuant to the purchase and sale agreement dated January 31, 2000, the
Company acquired 100% of the shares of Nano World Project Colloid &
Coating LLC. Under the terms of the agreement, a promissory note was
issued to the vendors in the amount of $500,000. The note was repaid in
the current period.
- --------------------------------------------------------------------------------
7. Related Party Transactions
The Company was charged consulting fees of $16,600 (1999 - $nil) by
directors of the Company, either directly or indirectly. These amounts
were incurred in the normal course of business and are included in
general and administrative expenses.
The short-term loan is due to a company controlled by a former director
as a result of reimbursement of expenses paid by this company.
- --------------------------------------------------------------------------------
8. Loss per Share
Loss per share is calculated on the basis of the weighted average number
of common shares outstanding during the period. The weighted average
number of common shares amounted to 15,039,891 (1999 - 8,128,206).
- --------------------------------------------------------------------------------
F-12
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Nano World Projects Corporation
(a development stage company)
Notes to Consolidated Interim Financial Statements
(Expressed in U.S. $)
(Unaudited)
October 31, 2000
- --------------------------------------------------------------------------------
9. Income Taxes
A reconciliation between the Company's effective tax rate and the U.S.
statutory rate is as follows:
2000 1999
-------------------------------
U.S. statutory rate applied to pre-tax income 34.0% 34.0%
Differential arising from:
Increase in valuation adjustment
for current period's losses (34.0)% (34.0)%
-------------------------------
0.0% 0.0%
===============================
Deferred income taxes consists of the following:
2000 1999
-------------------------------
Benefit of loss carryforwards $ 890,800 $ 317,700
Less valuation adjustment (890,800) (317,700)
-------------------------------
$ - $ -
===============================
F-13
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Nano World Projects Corporation
(a development stage company)
Notes to Consolidated Interim Financial Statements
(Expressed in U.S. $)
(Unaudited)
October 31, 2000
- --------------------------------------------------------------------------------
9. Income Taxes (continued)
The Company has non-capital losses available for income tax purposes
totaling $2,620,000. This amount can be used to reduce taxable income of
future years. The potential tax benefit that may result from application
of these losses against future taxable income has not been recognized in
these consolidated interim financial statements. These losses expire as
follows:
Year Amount
2001 $ 119,000
2002 23,000
2003 23,000
2004 22,000
2005 22,000
2006 22,000
2007 22,000
2008 46,000
2009 25,000
2010 39,000
2011 97,000
2012 93,000
2015 317,000
2016 1,750,000
--------------
$ 2,620,000
==============
- --------------------------------------------------------------------------------
10. Commitments
The Company has entered into a collaboration agreement with Centro
Richerche Fiat, an Italian company, whereby the parties agree to
collaborate on research and development of nanotechnology. Under this
agreement, the Company is committed to spending $300,000 per quarter to
June 30, 2001 and thereafter $250,000 per quarter for the next two years.
- --------------------------------------------------------------------------------
F-14
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Nano World Projects Corporation
(a development stage company)
Notes to Consolidated Interim Financial Statements
(Expressed in U.S. $)
(Unaudited)
October 31, 2000
- --------------------------------------------------------------------------------
11. Subsequent Event
Subsequent to October 31, 2000, the Company entered into an agreement to
buy all of the outstanding shares of an Italian company engaged in the
production of high quality thick film screen printing inks for total
consideration of $3,500,000 with a closing date of March 1, 2001. Of this
amount, one half is to be paid through the issuance of 175,000 shares of
the Company at $10 per share and the other half is to be paid in cash. In
the event that the shares have a market value of less than $10 on March
1, 2001, the share allotment is to be increased by the difference. There
is no assurance at this time that the Company will be successful in
acquiring acquisition financing.
This agreement also includes certain minimum performance measures until
2003. If these measures are not met, the following debt obligations will
occur in each year of the agreement:
Year Amount
2001 $ 415,650
2002 487,950
2003 596,400
-------------
$ 1,500,000
=============
- --------------------------------------------------------------------------------
12. Comparative Figures
The comparative figures were not subject to review procedures.
- --------------------------------------------------------------------------------
F-15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following description of the Company's financial condition and results of
operations should be read in conjunction with the unaudited financial statements
of the Company and the Notes thereto, included in this report. The description
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ significantly from the results discussed
in the forward-looking statements as a result of the risk factors set forth in
this report.
GENERAL
The Company's current business is research and development of applications
utilizing the Company's patented Dynamic Thin Laminar Flow Method ("DTLF
Method"). The DTLF Method was invented in 1997 with the goal of rendering
monolayer preparations compatible with industrial standards. A patent on the
DTLF method was granted in 1997 in Italy and subsequent patent applications have
been filed in the United States and other countries. The Company's sole
significant asset is the DTLF Method patent. The Company is currently engaged
solely in research and development of the DTLF Method technology, however, the
Company plans to expand operations into other nanotechnology businesses. The
Company is not currently engaged in any commercial production or licensing of
the DTLF Method technology. As a result, the Company has no revenue and expects
to incur losses during the foreseeable future. The DTLF Method technology is
subject to on-going proof-of-process research and development with respect to
the Company's ability to commence commercial exploitation of the patent. Given
the foregoing status of the Company's operations, the Company should be
considered a high-risk startup technology concern in a very early stage of
development.
The Company has advised its shareholders and prospective shareholders that it is
a high-risk venture with limited ability to ensure the establishment of
significant revenue streams or enhancement of shareholder value during the
foreseeable future.
The Company is currently pursuing a two-prong business strategy:
. Research, development and expansion of existing DTLF Method Technology;
. Identification of potential acquisition partners, joint ventures and/or
licensee relationships.
On December 12, 2000, the Company appointed Mr. Robert Papalia, Chairman of the
Board of Directors, as CEO of the corporation. In such capacity, Mr. Papalia
will receive an annual salary of $50,000. The Company is continuing its efforts
to engage qualified persons to serve on the Company's senior management roster.
During the fiscal second quarter, the Company moved its corporate headquarters
to New York City.
To date, the Company has formed three subsidiaries: Nano World (Canada)
Incorporated, a Canadian Federal Company, Centre de Recherche en Assemblage Nano
Mechanique Ltd. ("Nano Mechanique"), a Company incorporated in the province of
Quebec and Nano World Projects Europe S.p.a. ("Nano Europe"). Additionally the
Company has made a commitment to acquire a wholly owned subsidiary through the
acquisition of Euroinks s.r.l., a company incorporated in Italy. The effective
date of the acquisition is expected to be March 2001, as discussed in further
-1-
detail below. On December 8, 2000, the Board of Directors determined that it
would be in the best interests of the Company to discontinue the operations of
Nano Mechanique and shift substantially all of the Company's research and
development activities to Nano Europe. Through the Nano Europe subsidiary, the
Company plans to continue to research potential applications of the DTLF Method
in electronics, optics, and health industries and to seek out other avenues of
exploitation for the Company's technology.
During the Company's fiscal second quarter, the Company entered into an
agreement with Centro Ricerche Fiat S.c.p.A. of Turin, Italy ("CRF") for the
purpose of collaborating with respect to experimentation, application and
exploitation of the DTLF Method and related technology, particularly in the
fields of optics, electro-optics, and photonics. CRF is the principal research
and development facility for the FIAT group of companies. CRF is one of the most
important private research organizations in Italy with over 850 professional
researchers among its staff. The CRF mission is to make significant
contributions to the level of competitiveness of both the FIAT Group and small
and medium enterprises by designing new products, processes and innovative
methodologies. As part of its "value creation" policy, CRF also develops
innovative methodologies with organizational, managerial, and technical aspects.
These value creation enhancements include numerical simulation and technologies
for the optimization of products and processes, the evaluation of skills, new
methods of cost management, and global sourcing. The Company's subsidiary Nano
Europe is expected to service the Company's operational requirements of the
collaboration with CRF. The Company expects that the Collaboration Agreement
with CRF has the potential to expand and accelerate research, product
development and commercial exploitation of the DTLF Method as well as other
nanotechnologies. The collaboration is expected to provide the Company with
immediate access to the significant resources and personnel of the CRF world-
renowned research facility in Italy.
The CRF collaboration agreement has a three year term and consists of three
phases: an experimentation phase, an application phase and an exploitation
phase. The principal purpose of the experimentation phase is to establish an
inspection technique to confirm the validity and reliability of the DTLF Method
with respect to industrial applications. During the application phase, CRF will
assist the Company in establishing a program directed at developing applications
derived from the DTLF Method. Finally, once applications are produced, the
parties will co-operate to exploit and bring the results to market. All
nanotechnology related to the DTLF method at CRF shall be the exclusive property
of the Company. CRF has been granted a non-exclusive worldwide license to use
nanotechnology related to the DTLF method for product development and
experimentation in vehicle applications and lighting. However, pursuant to the
agreement, CRF is precluded from transferring, commercializing, assigning or
sub-licensing such technology without the consent of the Company. Under the CRF
agreement, the Company is obligated to pay CRF $300,000 per quarter to June 30,
2001 and thereafter $250,000 per quarter for the next two years.
On November 22, 2000 the Company signed a binding letter of intent to acquire
Euroinks s.r.l. ("Euroinks"). Euroinks is engaged in the production of high-
quality thick film screen printing inks. Euroinks produces powders, pastes and
liquid gold for industrial use in numerous production sectors, collaborating
with firms all over the world. Euroinks currently has four divisions: (1)
Photovoltaic (pastes for solar cells); (2) Automotive Glass (silver pastes and
ceramic enamels); (3) Liquid gold (decorative applications for porcelain, glass
and ceramic tiles); and (4) Electronics (precious metal powders and pastes with
various conductive qualities). The Company believes that the Euroinks
acquisition will provide a strong technology base for the further development of
the DTLF
-2-
Method and related nanoparticle applications, as well as provide a steady source
of revenues, however there can be no assurance in this regard.
The Euroinks purchase price is US$3.5 million, of which one-half will be paid in
shares of common stock of the Company and one-half in cash on the closing date.
The portion of the purchase price to be paid in shares of the Company's common
stock is guaranteed to have a fair market value of not less than $10.00 per
share on March 31, 2001. In the event that the fair market value of the shares
to be issued in connection with the purchase price is less than $10.00 per share
at the closing date, such share issuance will be increased to reflect the
difference in the value per share. The contract also includes performance-based
payments of up to an aggregate of $1,500,000 to be paid over three years if
Euroinks achieves certain performance milestones. The closing of the Company's
acquisition of Euroinks is expected to occur in March 2001, subject to
negotiation and execution of definitive acquisition documentation.
In November 2000 the Company entered into a research agreement with the
Orientationally Ordered Media (OOM) Lab, a joint project of IOFRAN (the General
Physics Institute of the Russian Academy of Science's theoretical department),
NIOPIK (several laboratories of the State Scientific Center of the Russian
Federation) and Politecnico of Torino's physics department and the Optics and
Photonics departments of Centro Ricerche Fiat. Founded in 1997, OOM was the
first initiative by Centro Ricerche Fiat in the field of nanotechnology. With
input and assistance expected from its joint participants, OOM is intended to
investigate the structure and properties of orientationally ordered media,
including liquid crystals, surfactants, chiral dopants, dyes, spin-ordered
media, and Langmuir-Blodgett film. The coordinated research activities are
expected to increase understanding of the processes of structure formation and
the inter-relationship between structure and media. The research agreement with
OOM Lab will require the Company to pay a cash contribution of $50,000 per year.
The Company expects to obtain material research and development benefits from
its partnership with the OOM Lab.
During the fiscal second quarter the Company entered into arrangements with
various public relations and investor relations consultants with a view to
increase awareness of the Company's activities. The Company is currently re-
evaluating the benefits of such arrangements and expects to revise its public
relations and investor relations programs during the near future. The Company
has not issued any equity securities with respect to any such public relations
and investor relations arrangements, however, the Company may issue restricted
securities in connection with such arrangements in the future.
The Company and its officers and directors have been the subject of numerous
defamatory attacks on internet chatrooms, which the Company believes have
unfairly harmed the Company's reputation. The Company intends to respond to
these attacks in an appropriate fashion in the near future.
RESULTS OF OPERATIONS
Assets. At October 31, 2000, the Company had cash of $49,272, accounts
receivable of $43,933, prepaid expenses of $90,693 and an advance to a director
of $74,142 for purposes of capitalizing a yet-to-be formed Italian subsidiary of
the Company, compared to $8,166 in cash, no accounts receivable, no prepaid
expenses and no advances to directors at October 31, 1999. The Company's capital
assets were valued at $166,664 at October 31, 2000 compared to no capital assets
at October 31, 1999. On November 23, 2000 the sum of $74,142 previously advanced
to the director was credited to the account of the Company's new Italian
subsidiary, established in November 2000, which amount stands as an
inter-company loan.
Liabilities and Shareholders' Equity (Deficiency). At October 31, 2000, the
Company had current accounts payable and accrued liabilities of $446,582,
compared to $4,590 at October 31, 1999. At October 31, 2000, the Company had a
short-term loan of $19,736, as compared to $29,995 at October 31, 1999. The
Company repaid a promissory note prior to October 31, 2000 for $500,000. At
October 31, 2000 the deficit accumulated during the
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development stage was ($5,034,982) as compared to no deficit at October 31,
1999. Other deficit at October 31, 2000 was ($530,569), as compared to
($311,584) at October 31, 1999.
Deficit. The Company's deficit for the six months ended October 31, 2000 was
($5,565,551), as compared to ($311,584) for the six months ended October 31,
1999. The Company's net loss for the six months ended October 31, 2000 was
($1,750,095) as compared to ($19,788) for the six months ended October 31, 1999.
Operations. The Company's amortization of capital assets for the six months
ended October 31, 2000 was $29,300, as compared to no amortization for the six
months ended October 31, 1999. For the six months ended October 31, 2000, the
Company's general and administrative expenses were $1,172,855, as compared to
$19,788 for the six months ended October 31, 1999. The Company's interest income
for the six months ended October 31, 2000, was $42,060 as compared to no
interest income for the six months ended October 31, 1999. The Company had
imputed interest on the promissory note in the amount of ($10,000) for the six
months ended October 31, 2000, as compared to no imputed interest on the
promissory note for the six months ended October 31, 1999. The Company's net
loss for the six months ended October 31, 2000 was ($1,750,095) as compared to
($19,788) for the six months ended October 31, 1999.
Cash Flows. For the six months ended October 31, 2000, the net loss was
($1,750,095) as compared to ($19,788) for the six months ended October 31, 1999.
For the six months ended October 31, 2000, the Company's amortization of capital
assets amounted to $29,300, as compared to no amortization of capital assets for
the six months ended October 31, 1999. The Company had imputed interest on the
promissory note for the six months ended October 31, 2000 in the amount of
$10,000, as compared to no imputed interest on the promissory note for the six
months ended October 31, 1999. For the six months ended October 31, 2000, the
Company had accounts receivable in the amount of ($43,933), as compared to no
accounts receivable for the six months ended October 31, 1999. For the six
months ended October 31, 2000, the Company had an advance to a director in the
amount of ($74,142) as compared to no advances to directors for the six months
ended October 31, 1999. The Company's prepaid expenses for the six months ended
October 31, 2000 amounted to ($63,194) as compared to no prepaid expenses for
the six months ended October 31, 1999. The Company's accounts payable and
accrued liabilities for the six months ended October 31, 2000 amounted to
$237,637, as compared to $27,695 for the six months ended October 31, 1999. The
total cash used in the six months ended October 31, 2000 was ($1,654,427), as
compared to cash provided $7,907 for the six months ended October 31, 1999. The
Company's purchase of capital assets for the six months ended October 31, 2000
amounted to ($165,216), as compared to no purchase of capital assets for the six
months ended October 31, 1999. The Company's subscriptions payable for the six
months ended October 31, 2000 amounted to ($311,757) reflecting refunds due to
subscribers of a private placement, as compared to no subscriptions payable for
the six months ended October 31, 1999. The total cash flow for the six months
ended October 31, 2000 amounted to ($2,631,400), as compared to $7,907 for the
six months ended October 31, 1999.
In July 2000 the Company received notice of deficiency from the State of
Delaware with respect to non-payment of State franchise tax fees in the
aggregate amount of approximately $280,000. During the fiscal second quarter
2000, the Company resolved this discrepancy in the Company's favor and
consequently has no continuing liabilities with respect to such assessment.
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LIQUIDITY
The Company has financed its development primarily through the sale of its
common stock. The Company has been dependent on equity financing for
continuation of its development. The Company does not currently have sufficient
cash to satisfy its obligations through the end of December 2000. The Company is
actively seeking additional financing and expects to obtain bridge arrangements
to meet its immediate obligations, however, there can be no assurance in this
regard. Without immediate and significant financing, the Company's ability to
meet its current obligations, to further its development plans and to continue
as a going concern will be at serious risk.
The Company has had nominal revenue since the acquisition of its DTLF technology
consisting entirely of interest on funds held in the Company's accounts. The
Company believes that it may begin to receive meaningful revenues following the
closing of the acquisition of Euroinks, however, there can be no assurances in
this regard. No other revenue sources are expected to come to fruition until
commercial applications of proprietary technology are established, or
acquisitions, joint ventures and/or license agreements can provide revenue
streams for the Company. The Company does not anticipate product development and
sales revenue to be derived from the CRF collaboration or any similar
collaboration during the foreseeable future. As a result, the Company does not
expect revenues to be sufficient to sustain the Company during the foreseeable
future and substantial depletion of capital is anticipated.
The Company has incurred significant operating losses and negative cash flows to
date. Through October 31, 2000, the Company had an accumulated deficit of
approximately ($5,565,551). The Company has no revenues but has significant
outstanding liabilities and obligations. The Company does not expect to generate
positive cash flow sufficient to meet its working capital requirements nor to
become profitable during the foreseeable future. During the quarter ended
October 31, 2000, the Company has incurred net losses of approximately
($1,750,095) and a net loss of ($0.116) per share applicable to the Company's
common stockholders. The Company expects to make significant expenditures in
connection with the development of the DTLF Method and related technologies,
acquisitions, and strategic alliances. The Company expects to have negative cash
flow and expects its losses to continue and increase in the foreseeable future.
The Company intends to raise operating capital through private arrangements to
finance its operations until it can become self-sustaining, however, there can
be no assurance that the Company will be successful in this regard. The Company
has no assurance that future equity or debt financing will be available to it on
acceptable terms. If such financing is not available on satisfactory terms, if
at all, the Company may be unable to continue as a going concern. Any equity
financing may result in substantial dilution to existing stockholders.
The Company's further capital requirements will also depend on numerous factors,
including the progress of its research and development, the cost of filing,
prosecuting, defending and enforcing any patent claims and other intellectual
property rights. In addition, the economic impact of competition, the costs of
implementing and operating a marketing and licensing program could have a
material adverse effect on the Company's business.
Given the early stages of development and limited resources available to the
Company, management functions have been carried out to date and are expected to
continue to be carried out in large measure by the Company's directors as
delegated by the Board. The Board plans to delegate to professional managers and
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assume more of a policy-making role as soon as reasonably possible. Management
recognizes that product development and timely marketing are crucial to the
Company's prospects. The collaboration with CRF and the expected closing of the
Euroinks acquisition are expected to accelerate the Company's viability,
however, there can be no assurance in this regard.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are not currently involved in any pending legal proceedings that are expected
to have a material adverse effect on the Company's business. We may from time to
time become involved in legal proceedings in the ordinary course of the
Company's business.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information.
On October 30, 2000, Dr. Gilles Picard, Ph.D. resigned as Vice-President and
Director of the Company for personal reasons.
On September 21, 2000, Mr. Barry Herman was appointed to the Board of Directors
of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed as a part of, or incorporated by
reference into, this report:
Exhibit No. Description of Exhibit
- ----------- -----------------------
10.6 Nanotechnology Collaboration Agreement between Centro
Ricerche Fiat and Nano World Projects Corporation,
dated September 6, 2000.
27.1 Financial Data Schedule
(b) Information regarding reports filed by Nano World Projects Corporation
on Form 8-K:
(i) Form 8-K, dated October 30, 2000 to report the resignation of
Dr. Gilles Picard, Ph.D. as Vice-President and Director.
(ii) Form 8-K, dated November 28, 2000 to report the acquisition of
Euroinks s.r.l.
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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.
Nano World Projects Corporation
Date: December 14, 2000 By: /s/ Robert Papalia
------------------------
Robert Papalia
CEO and Acting Chief Financial
Officer
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
- ----------- ----------------------
27.1 Financial Data Schedule
10.6 Nanotechnology Collaboration Agreement between
Centro Ricerche Fiat and Nano World Projects
Corporation, dated September 6, 2000.