SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the transition period from __________________
to __________________
Commission File Number 0-23532
HUNNO TECHNOLOGIES, INC.
(ExactName of small business issuer as
specified in its charter)
SKINTEK LABS, INC.
(former name)
Delaware 65-0636277
(State or other Jurisdiction of I.R.S. Employer Identi-
Incorporation or Organization fication No.)
353 Sacramento Street, 9th Floor, San Francisco, California 94111
(Address of Principal Executive Offices) (Zip Code)
(415) 788-1168
(Issuer's Telephone Number, including Area Code)
Indicate by check mark whether the Registrant (i) has filed all reports
required to be filed by Section 13, or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (ii) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Common Stock, $.001 par value 18,374,102
- ---------------------------------- ----------------------
Title of Class Number of Shares outstanding
at September 30, 2002
Transitional Small Business Format Yes No X
No exhibits included.
HUNNO TECHNOLOGIES, INC.
BALANCE SHEETS
September 30, December 31,
2002 2001
ASSETS
Current Assets:
Cash and cash equivalents 105,975 171,241
Bank savings accounts 32,579 112,360
Short-term fund investments -- 112,221
Trade receivables 4,104,700 3,173,412
Less allowance for doubtful accounts (41,047) (31,734)
Net trade receivables 4,063,653 3,141,678
Inventories
Merchandise -- --
Finished goods 2,339,434 2,198,827
Raw materials 556,733 511,392
Total inventory 2,896,167 2,710,219
Other current assets 1,316,757 224,930
Total current assets 8,415,131 6,471,649
Long-term investments
Investment in stock (available-for-sale) 202,885 187,846
Investment in bonds (held-to-maturity) 10,588 9,803
Long-term Loans 59,933 56,564
Security deposits 525,705 492,392
Total long-term investments 799,172 746,605
Property, plant and equipment
Machinery and equipment 48,241 44,665
Vehicle and transportation equipment 32,580 30,765
Office equipment 800,361 710,601
Furniture and Fixtures 149,950 135,592
Less accumulated depreciation (735,776) (545,945)
Total property, plant and equipment 295,356 375,018
Intangible Assets
Industrial property 20,447 18,932
TOTAL ASSETS 9,530,106 7,612,264
Continued;
HUNNO TECHNOLOGIES, INC.
BALANCE SHEETS - Continued
September 30, December 31,
2002 2001
Liabilities and stockholders' equity
Current liabilities:
Trade accounts payable 1,114,639 24,885
Other accounts payable 571,219 21,564
Accrued expenses 22,181 13,934
Short term Borrowings 2,836,505 1,937,000
Current portion of long-term debts 5,730 21,492
Other current liabilities 120,724 11,077
Total current liabilities 4,670,997 2,030,343
Noncurrent liabilities:
Convertible bond 5,538,361 5,703,111
Long-term borrowings 217,869 201,719
Severance Retirement Benefits 148,957 104,754
Total long-term liabilities 5,905,187 6,009,584
Total liabilities 10,576,184 8,039,927
Stockholders' equity
Preferred Stock, $.001 Par Value, Non-Voting, 1,000,000
Shares Authorized;
None Issued and Outstanding
Common Stock, $.001 Par Value; 50,000,000 Shares Authorized -- --
18,374,102 Shares Issued and Outstanding at 2002 and
14,850,000 Shares at 2001 18,374 14,850
Additional paid-in capital -- --
Additional paid-in capital from
Paid-in capital in excess of par value 4,117,913 3,814,826
Stock options outstanding 65,288 60,448
Less deferred compensation cost (40,980) (37,942)
Total additional paid-in capital 4,142,221 3,837,332
Retained earnings (Accumulated deficit) (5,206,628) (4,279,804)
Total stockholders' equity (1,046,033) (427,622)
Less treasury stock at cost (45) (41)
Total liabilities and stockholders' equity 9,530,106 7,612,264
HUNNO TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
2002 2001 2002 2001
Sales 1,056,847 2,010,150 2,603,902 5,105,819
Cost of Sales 747,403 986,635 1,773,406 2,418,822
Gross profit 309,445 1,013,515 830,496 2,686,997
Operating expenses
Selling and administrative expenses 546,508 863,619 1,631,928 2,242,662
Operating income (loss) (237,063) 149,896 (801,432) 444,335
Other revenues and gains
Interest income 143 6,165 10,734 21,726
Rental income -- -- -- --
Realized gain on sale of available-for-sale securities -- 953,290 953,290 --
Realized gain on foreign currency transaction -- -- -- --
Unrealized gain on foreign currency transaction -- -- -- --
Miscellaneous 41 41,405 47 9,896
Total other revenues and gains 185 10,570 964,071 31,622
Other expenses and losses
Interest expense 325,307 69,233 746,622 279,345
Other amortization expense -- -- -- --
Realized impairment loss on available-for-sale securities -- -- -- --
Loss on disposition of marketable securities -- -- 55 --
Commission on engagement of investment -- -- -- --
Realized loss on foreign currency transaction -- -- -- --
Unrealized loss on foreign currency transaction -- -- -- --
Miscellaneous 0 76 136 2,354
Total other expenses and losses 325,307 69,309 746,814 281,699
Loss from continuing operations before tax (562,185) 91,157 (584,174) 194,258
Income tax expense -- -- -- --
Net loss (562,185) 91,157 (584,174) 194,258
Net income (loss) per share:
$ (.04) $ .01 $ (.04) .01
- --
Shares used in computing net income (loss) per common share:
16,024,707 14,850,000 15,211,506 14,850,000
HUNNO TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
1. Net Income (Loss) (584,174) 194,258
2. Addition of expenses not involving cash outflows
Bad debt expense 41,047 28,689
Investment securities impairment loss -- --
Loss on disposition of investment assets -- --
Depreciation 115,063 287,022
Amortization of intangible assets -- --
Other bad debt expense -- --
Interest payable on long-term -- --
Retirement allowance 62,778 51,993
Others -- 352,378
218,888 720,082
3. Deduction of revenues not involving cash inflows
Gain on foreign currency translation -- --
Gain on disposition of marketable securities 953,290 --
(953,290) --
4. Changes in assets and liabilities resulting from operations
Decrease (Increase) in trade receivables (677,218) (1848,638)
Decrease (Increase_ in inventories 52,360 173,666
Decrease (Increase) in other current assets (76,750) (110,986)
Increase (Decrease) in trade payables 1,087,761 --
Increase (Decrease) in other payables 547,928 (704,979)
Increase (Decrease) in accrued expenses 7,898 3,315
Payment of retirement pay -- --
Increase (Decrease) in other current liabilities 28,463 (239)
970,442 (2,487,861)
Total (1+2+3+4) (348,134) (1,573,521)
Continued:
HUNNO TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS, Continued
For the Nine Months Ended
September 30,
2002 2001
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease (Increase) in short-term financial instrument 88,435 (3,369)
Decrease (Increase) in short-term loans (250,105) (875,884)
Decrease (Increase) in marketable securities 121,623 --
Decrease (Increase) in investment securities 733,018 (77,414)
Decrease (Increase) in guarantee deposits -- (291,082)
Decrease (Increase) in long-term loans 1,100 (168,829)
Decrease (Increase) in machinery and equipment -- (367)
Decrease (Increase) in industrial property (298,240) (934,594)
Decrease (Increase) in office installation -- --
Decrease (Increase) in office equipment (32,868) (355,484)
362,963 (2,707,023)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in short-term borrowings (93,805) 527,711
Increase (Decrease) in long-term borrowings -- --
Increase (Decrease) in dividend payable -- --
Increase (Decrease) in debenture -- --
Increase (Decrease) in bond with warrants -- 3,819,418
Increase (Decrease) in stock issue costs -- --
Increase (Decrease) of capital stock by payment in cash -- --
(93,805) 4,347,129
INCREASE (DECREASE) IN CASH (78,976) 66,585
CASH AT BEGINNING OF YEAR 184,951 95,725
CASH AT END OF YEAR 105,975 162,310
Cash payment for interest and income tax
Cash paid (refunded) for income tax: (4,810) (5,443)
Cash paid for interest 746,622 279,345
HUNNO TECHNOLOGIES, INC.
Notes to Consolidated Financial Statements
September 30, 2002
1. Interim Financial Statements
Hunno Technologies, Inc., formerly Skintek Labs, Inc. (the
"Registrant") is engaged, through its majority-owned subsidiary Hunno
Technologies, Inc. (incorporated under the laws of the republic of
Korea) ("Hunno Korea"). The Company is a venture company for the
business of fingerprint identification technology among Biometrics
industry. The Company's key developments are in its unique fingerprint
identification algorithm and the state-of-the-art optical-based
fingerprint identification module together with the first chip-based
fingerprint module in the world. The Company is currently engaged in
providing PC security devices, access control systems and home security
products based on its unique fingerprint identification technology
developed by the Company.
Hunno Korea was organized in 1997. Effective July 31, 2002, the
Registrant acquired Hunno Korea pursuant to an Exchange Agreement. The
Registrant acquired approximately 90% of the outstanding shares of
Hunno, in exchange for 14,850,000 shares of the Registrant's common
stock. Immediately prior to the acquisition, there were outstanding
12,024,102 shares of Registrant common stock, of which 8,500,000 shares
were cancelled, resulting in 3,524,102 shares held by pre-Exchange
holders of common stock, and a total of 18,374,102 shares outstanding
following consummation of the Exchange.
The stockholders of Hunno Korea, after the acquisition, owned the
majority of the combined company. Accordingly, the combination has been
accounted for as a reverse acquisition whereby, for accounting
purposes, Hunno Korea is the accounting acquirer and the Registrant is
the accounting acquiree. Registrant and Hunno Korea are collectively
referred to as the "Company"). The Company has adopted a December 31
year end. The financial statements from inception through July 31, 2002
are those of Hunno Korea, the accounting acquirer. Subsequent to July
31, 2002, the financial statements reflect the consolidated position
and operations of the Registrant and Hunno Korea.
The accompanying financial statements are unaudited, but in the opinion
of the management of the Company, contain all adjustments, consisting
of only normal recurring accruals, necessary to present fairly the
financial position at September 30, 2002, the results of operations for
the three and nine months ended September 30, 2002 and 2001, and the
cash flows for the nine months ended September 30, 2002 and 2001.
Reference is made to the Company's Form 10-KSB for the year ended
December 31, 2001 and the Current Report on Form 8-K dated July 31,
2002 in which the audited financial statements for Hunno Korea were
filed. The results of operations for the three and nine months ended
September 30, 2002 are not necessarily indicative of the results of
operations to be expected for the full fiscal year ending December 31,
2002.
Hunno Korea maintains its legal books of accounts in accordance with
accounting principles generally accepted in the Republic of Korea
("Korean GAAP"). However, the financial statements have been prepared
in a manner, and reflect the adjustments which management believes are
necessary, to conform them with accounting principles generally
accepted in the United States of America ("US GAAP").
Basis of Translating Financial Statements The financial statements are
expressed in Korean Won and, solely for the convenience of the reader,
have been translated into U.S. dollars are the rate of W 1,326.1 and W
1,227.8 to US $1, the basic exchange rate on December 31, 2001 and
September 30, 2002, respectively. These translations should not be
construed as a representation that any or all of the amounts shown
could be converted into US dollars at this or any other rate.
Foreign Currency Transactions Monetary assets and liabilities denominated in
foreign currencies are translated into Korean Won at the balance sheet date,
with the resulting gains and losses recognized in current results of operations.
Monetary assets and liabilities denominated in foreign currencies are translated
into Korean Won at W1,326.1 and W1,227.8 to US $1, the rate of exchange on
December 31, 2001 and September 30, 2002, respectively, that is permitted by the
Financial Accounting Standards.
Risks and uncertainties. Beginning in 1997, Korea and other countries in
the Asia Pacific region experienced a severe contraction in substantially al
aspects of their economies. Through early 1999, it was widely accepted that the
economic situation had stabilized, but not fully recovered from the crisis. The
Korean economy is currently experiencing additional difficulties in delay of
restructuring and reforming the industry. These risks and uncertainties may
affect the financial position of the Company and its business. The accompanying
financial statements do not reflect the impacts from such uncertainties.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Nine Months ended September 30, 2002 compared to Nine Months Ended September 30,
2001
Sales for the 2002 period were down 49% compared to 2001 because the
domestic housing & construction market has weakened. Sales of our fingerprint
products are gradually increasing. In the 2001 period sales of other products
and our finger print products were approximately equal, but in 2002 sales of
other products only represented 10% of our sales. Gross profit as a percentage
of sales decreased from 52.6% in 2002 to 31.8% in 2001 because of increases in
raw materials and manufacturing costs. The Company decreased its general and
administrative expenses by 27% in the 2002 period compared to 2001 because of
cost cutting measures introduced as and by reductions in depreciation and
research & development costs. We benefited in the 2002 period from the sale of
marketable securities, for a gain of 953,290. Interest expense increased from
$279,345 to $746,622 because of a sharp increase in debt occasioned by the
purchase of marketable securities in January, 2002. The net result was a net
loss of $91,157 for the nine months ended September 30, 2002 compared to net
income of $194,258 for the nine months ended September 30, 2001.
Three Months ended September 30, 2002 compared to Three Months Ended September
30, 2001
Sales for the 2002 period were down 47% compared to 2001 because the
domestic housing & construction market has weakened. Sales of our fingerprint
products are gradually increasing. In the 2001 period sales of other products
and our finger print products were approximately equal, but in 2002 sales of
other products only represented 10% of our sales. Gross profit as a percentage
of sales decreased from 50.4% in 2002 to 29.3% in 2001 because of increases in
raw materials and manufacturing costs. The Company decreased its general and
administrative expenses by 37% in the 2002 period compared to 2001 because of
cost cutting measures introduced as and by reductions in depreciation and
research & development costs. Interest expense increased from $69,233 to
$325,307 because of increase in debt compared to September 30, 2001. The net
result was a net loss of $91,157 for the nine months ended September 30, 2002
compared to net income of $194,258 for the nine months ended September 30, 2001.
As of September 30, 2002 we had backlog of approximately
$ 2.5 million. As of September 30, 2002 we had outstanding convertible bond in
the amount of $5.5 million ($1.46 million which matures on December 31, 2002.)
We anticipate that we will need approximately $ 3.0 million in cash (other than
that forecast to be provided by sales) over the next 12 months to fill order
backlog, pay principal and interest on debt obligations and, etc. We intend to
effect a placement of equity or debt securities to meet this need. Management
believes that it will be able to obtain the cash we need.
Included in this Management's Discussion and Analysis of Financial Condition and
Results of Operations are certain forward looking financial and other
information including, without limitation, matters relating to "Risks". It
should be recognized that such information are projections, estimates or
forecasts based on various assumptions including, without limitation, meeting
its assumptions regarding sales levels, the rate of technological changes
expected operating performance and other matters specifically set forth, as well
as the expected performance of the economy as it impacts the Company's business,
government and regulatory actions and approvals, and the risk factors and
cautionary statements set forth in reports filed by the Company with the
Securities and Exchange Commission. As a result, such information is subject to
uncertainties, risks and inaccuracies, which could be material.
Item 3. Controls and Procedures.
(a) Evaluation of disclosure controls and procedures. The Company's
principal executive officer and its principal financial officer, based on their
evaluation of the Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14(c) and 15d -14 (c) as of a date within 90 days prior
to the filing of this Quarterly Report on Form 10QSB, have concluded that the
Company's disclosure controls and procedures are adequate and effective for the
purposes set forth in the definition in Exchange Act rules.
(b) Changes in internal controls. There were no significant changes in the
Company's internal controls or in other factors that could significantly affect
the Company's internal controls subsequent to the date of their evaluation.
7
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS - None
Item 2. CHANGES IN SECURITIES - On July 31, 2002 we issued 14,850,000 shares of
common stock to 18 persons resident in the Republic of Korea, in exchange for
their shares in Hunno Technologies, Inc., a Korea corporation. No underwriter
was involved. The transaction is exempt from registration under Section 4(2) of
the Securities Act of 1933 as not involving a public offering, and also exempt
because all the recipients are non-U.S. persons.
tem 3. DEFAULTS UPON SENIOR
SECURITIES - None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS -
None
Item 5. OTHER INFORMATION - None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits -- None
Reports on Form 8-K -- A Current Report on Form 8-K dated July 31, 2002 reported
the acquisition of Hunno Technologies, Inc., a corporation organized under the
laws of the Republic of Korea, and the attendant change of control.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HUNNO TECHNOLOGIES, INC.
Date: November 7, 2002 By:/s/ Seo Bo Kun
--------------
Seo Bo Kun, Chief Financial Officer (chief financial officer and accounting
officer and duly authorized officer)
CERTIFICATIONS
I, Kim, Sang-Gyun, certify that:
1.I have reviewed this quarterly report on Form 10-QSB of Hunno
Technologies, Inc.;
2.Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or
operation of internal controls which could adversely
affect the registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 7, 2002
/s/ Kim, Sang-Gyun
Kim, Sang-Gyun Chairman and Chief Executive Officer
CERTIFICATIONS
I, So, Bo Kun, certify that:
1.I have reviewed this quarterly report on Form 10-QSB of Hunno
Technologies, Inc.;
2.Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3.Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the
registrant's disclosure controls and procedures as of a
date within 90 days prior to the filing date of this quarterly report
(the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the
design or operation of internal controls which could
adversely affect the registrant's ability to record, process, summarize and
report financial data and have identified for the registrant's auditors any
material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 7, 2002
/s/ So, Bo Kun
So, Bo Kun Chief Financial Officer