U.S. 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 October 31, 2001
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
Commission File No. 0-26351
ORGANIK TECHNOLOGIES, INC.
--------------------------------------------------------
(Name of Small Business Issuer in its Charter)
Washington 81-0440517
- -------------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization Identification No.)
35 Austin Lane, Alamo, California 94507
-----------------------------------------------------------------------------
Address of principal executive office
(925) 837-5262
----------------------------------
Issuer's telephone number
Check whether the issuer has (1) filed all reports required by Section 13 or
5(d) of the Exchange Act during the past 12 months, and (2) been subject to such
filing requirements for the past ninety (90) days. Yes ( ) No (X)
As of October 31,2001, 17,717,920 shares of Common Stock were outstanding.
ORGANIK TECHNOLOGIES, INC., and SuBSIDIARIES
1
ORGANIK TECHNOLOGIES, INC. AND SUBSIDIARIES
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
INDEX
Pages
PART I: FINANCIAL INFORMATION
ITEM 1 - Financial Statements
Consolidated Balance Sheets (Unaudited) 4
As of October 31,2001 and (Audited) as of July 31, 2001
Consolidated Statements of Operations (Unaudited) 5
For the nine months ended October 31, 2001 and 2000
and from Inception through October 31, 2001
Consolidated Statements of Stockholders' Equity (Deficit) 6-7
Through October 31, 2001
Consolidated Statements of Cash Flows (Unaudited) 8-9
For the nine months ended October 31, 2001 and 2000
and from Inception through October 31, 2001
Notes to Consolidated Financial Statements 10-11
ITEM 2 - Management's Discussion and Analysis of Financial 12-13
Condition and Results of Operations
2
ORGANIK TECHNOLOGIES, INC.
AND SUBSIDIARIES
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
October 31, 2001 and July 31, 2001
ORGANIK TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
------
October 31, July 31,
2001 2000
----------------- ------------------
(Unaudited)
CURRENT ASSETS
Cash $ 4,950 $ -
------------ ------------
Total Current Assets - -
------------ ------------
TOTAL ASSETS $ 4,950 $ -
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
CURRENT LIABILITIES
Accounts payable $ 73,552 $ 87,583
Accrued dividends payable 63,250 60,375
------------ ------------
Total Current Liabilities 136,802 147,958
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, no par value,
10,000,000 shares authorized;
11,500 shares issued and outstanding 100,318 100,318
Common stock, no par value,
50,000,000 shares authorized;
17,717,920 shares issued and outstanding 16,852,304 16,812,304
Accumulated deficit prior to the
development stage (16,367,929) (16,367,929)
Accumulated deficit since the inception
of the development
stage (716,545) (692,651)
------------ ------------
Total Stockholders' Equity (Deficit) (131,852) (147,958)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 4,950 $ -
============ ============
4
The accompanying notes are an integral part of these
consolidated financial statements.
ORGANIK TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
From
Inception of
Development
For the Three Months Ended Stage on
October 31, August 1, 1996
-------------------------------------- Through
2001 2000 October 31,2001
------------------ ------------------ ------------------
REVENUES $ - $ - $ -
------------------ ------------------ ------------------
OPERATING EXPENSES
General and administrative 11,550 1,157 924,991
Legal and professional 32,000 - 95,109
------------------ ------------------ ------------------
Total Operating Expenses 43,550 1,157 1,020,100
------------------ ------------------ ------------------
OPERATING LOSS (43,550) (1,157) (1,020,100)
------------------ ------------------ ------------------
LOSS BEFORE EXTRAORDINARY ITEM (43,550) (1,157) (1,020,100)
------------------ ------------------ ------------------
EXTRAORDINARY GAIN (Note 4) 22,531 - 363,930
------------------ ------------------ ------------------
NET LOSS (21,019) (1,157) (656,170)
------------------ ------------------ ------------------
PREFERRED STOCK DIVIDENDS (2,875) (2,875) (60,375)
------------------ ------------------ ------------------
LOSS ATTRIBUTABLE TO
STOCKHOLDERS $ (23,894) $ (4,032) $ (7,16,545)
================== ================== ==================
BASIC AND DILUTED LOSS
PER SHARE (Note 1)
Income from operations $ (0.00) $ (0.00)
Preferred stock dividends (0.00) (0.00)
------------------ ------------------
Income (loss) Per Share $ (0.00) $ (0.00)
================== ==================
5
The accompanying notes are an integral part of these
consolidated financial statements.
ORGANIK TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
Preferred Stock Common Stock
--------------------------- ---------------------------- Accumulated
Shares Amount Shares Amount Deficit
------------ ------------- ------------- ------------- -------------
Balance, July 31, 1995 11,500 $ 100,318 5,180,523 $ 12,363,989 $(11,016,660)
Exercise of class A and B
warrants, net - - 1,470,175 3,540,315 -
Series A 10% preferred stock
dividend for year ended
July 31, 1996 - - - - (11,500)
Net loss for the year ended
July 31, 1996 - - - - (5,339,769)
------------ ------------- ------------- ------------- ------------
Balance, July 31, 1996 11,500 100,318 6,650,698 15,904,304 (16,367,929)
Common stock issued for
acquisition of Emerald Apparel
at $0.4375 per share - - 2,000,000 875,000 -
Cancelled 32,778 shares of
no par value common stock - - (32,778) - -
Series A 10% preferred stock
dividend for year ended
July 31, 1997 - - - - (11,500)
Net loss for the year ended
July 31, 1997 - - - - (879,630)
------------ ------------- ------------- ------------- ------------
Balance, July 31, 1997 11,500 100,318 8,617,920 16,779,304 (17,259,059)
Common stock issued for
cash at $0.03 per share - - 1,000,000 30,000 -
Common stock issued to shareholder
for services at $0.03 per share - - 100,000 3,000 -
Series A 10% preferred stock dividend
for year ended July 31, 1998 - - - - (11,500)
Net loss for the year ended
July 31, 1998 - - - - (83,029)
------------ ------------- ------------- ------------- ------------
Balance, July 31, 1998 11,500 $ 100,318 9,717,920 $ 16,812,304 $(17,353,588)
------------ ------------- ------------- ------------- ------------
6
The accompanying notes are an integral part of these
consolidated financial statements.
ORGANIK TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
Preferred Stock Common Stock
--------------------------- ---------------------------- Accumulated
Shares Amount Shares Amount Deficit
------------ ------------- ------------- ------------- -------------
Balance, July 31, 1998 11,500 $ 100,318 9,717,920 $ 16,812,304 $(17,353,588)
Series A 10% preferred stock
dividend for year ended
July 31, 1999 - - - - (11,500)
Net loss for the year ended
July 31, 1999 - - - - (4,630)
------------ ------------- ------------- ------------- ------------
Balance, July 31, 1999 11,500 100,318 9,717,920 16,812,304 (17,369,718)
Series A 10% preferred stock
dividend for year ended
July 31, 2000 - - - - (11,500)
Net loss for the year ended
July 31, 2000 - - - - (4,630)
------------ ------------- ------------- ------------- ------------
Balance, July 31, 2000 11,500 100,318 9,717,920 16,812,304 (17,385,848)
Series A 10% preferred stock
dividend for year ended
July 31, 2001 - - - - (11,500)
Net income for the year ended
July 31, 2001 - - - - 336,768
------------ ------------- ------------- ------------- -------------
Balance, July 31, 2001 11,500 100,318 9,717,920 16,812,304 (17,060,580)
Common stock issued for
cash at $0.005 per share
(unaudited) - - 8,000,000 40,000 -
Series A 10% preferred stock
dividend for the three months ended
October 31, 2001 (unaudited) - - - - (2,875)
Net loss for the three months ended
October 31, 2001 (unaudited) - - - - (21,019)
------------ ------------- ------------- ------------- -------------
Balance, October 31, 2001
(unaudited) 11,500 $ 100,318 17,717,920 $ 16,852,304 $ (17,084,474)
============ ============= ============= ============= =============
7
The accompanying notes are an integral part of these
consolidated financial statements.
ORGANIK TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
From
Inception of
Development
For the Three Months Ended Stage on
October 31, August 1, 1996
---------------------------------- Through
2001 2000 October 31,2001
--------------- ---------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES
(loss) $ (21,019) $ (1,157) $ (656,170)
Adjustments to reconcile net loss to net cash
used by operating activities:
Common stock issued for acquisition - - 875,000
Common stock issued for services - - 3,000
Gain on extinguishment of accounts payable (22,531) - (363,930)
Changes in operating assets and liabilities:
Increase in accounts payable 8,500 1,157 77,050
--------------- ---------------- ----------------
Net Cash Used by Operating Activities (35,050) - (65,050)
--------------- ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES - - -
--------------- ---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock 40,000 - 70,000
Dividends declared (2,875) (2,875) (60,375)
Increase in accrued dividends payable 2,875 2,875 60,375
--------------- ---------------- ----------------
Net Cash Provided by Financing Activities 40,000 - 70,000
--------------- ---------------- ----------------
NET INCREASE IN CASH AND CASH EQUIVALENTS - - -
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD - - -
--------------- ---------------- ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,950 $ - $ 4,950
=============== ================ ================
8
The accompanying notes are an integral part of these
consolidated financial statements.
ORGANIK TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
From
Inception of
Development
For the Three Months Ended Stage on
October 31, August 1, 1996
---------------------------------- Through
2001 2000 October 31,2001
--------------- ---------------- ------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
CASH PAID FOR:
Income taxes $ - $ - $ -
Interest $ - $ - $ -
NON-CASH FINANCING ACTIVITIES
Stock issued for acquisition $ - $ - $ 875,000
Stock issued for services $ - $ - $ 3,000
9
ORGANIK TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
October 31, 2001 and July 31, 2001
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared by the Company pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted in
accordance with such rules and regulations. The information
furnished in the interim condensed consolidated financial
statements include normal recurring adjustments and reflects all
adjustments, which, in the opinion of management, are necessary
for a fair presentation of such financial statements. Although
management believes the disclosures and information presented are
adequate to make the information not misleading, it is suggested
that these interim condensed consolidated financial statements and
notes thereto included in its July 31, 2001 Annual Report on Form
10-KSB. Operating results for the three months ended October 31,
2001 are not necessarily indicative of the results that may be
expected for the year ending July 31, 2002.
NOTE 2 - BASIC AND DILUTED LOSS PER SHARE
For the Three Months Ended
October 31,
---------------------------------------
2001 2000
------------------ ------------------
Basic loss per share from operations:
Loss - numerator $ (21,019) $ (1,157)
Shares - denominator 15,978,790 9,717,920
------------------ ------------------
Per share amount $ (0.00) $ (0.00)
================== ==================
Basic loss per share attributable to preferred stock dividend:
Loss - numerator $ (2,875) $ (2,875)
Shares - denominator 15,978,790 9,717,920
------------------ ------------------
Per share amount $ (0.00) $ (0.00)
================== ==================
The basic and diluted loss per share of common stock is based on
the weighted average number of shares issued and outstanding
during the period of the financial statements. Potential shares
that could be issued from the conversion of preferred stock
10
ORGANIK TECHNOLOGIES, INC. AND SUBSIDIARIES
(A Development Stage Company)
Notes to the Consolidated Financial Statements
October 31, 2001 and July 31, 2001
NOTE 2 - BASIC AND DILUTED LOSS PER SHARE (Continued)
(11,500 shares issued and outstanding at October 31, 2001 and
2000) are excluded from the computation of diluted net loss for
the three months ended October 31, 2001 and 2000 because they
would have an antidilutive effect on the net loss per common
share. As a result, basic and diluted loss per share amounts are
the same for the year ended October 31, 2001 and 2000.
NOTE 3 - GOING CONCERN
The Company's consolidated financial statements have been prepared
using generally accepting accounting principles applicable to a
going concern which contemplates the realization of assets and
liquidation of liabilities in the normal course of business. The
Company, however, does not have sufficient cash or other current
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. The Company intends to develop a
telecommunications business that could generate revenues within
the next twelve months through the acquisition of an existing
company.
NOTE 4 - EXTRAORDINARY GAIN
During the first quarter of the year ended July 31, 2002, the
Company recognized an extraordinary gain due to the extinguishment
of accounts payable. The accounts payable, totaling $22,531 was
forgiven by a creditor.
NOTE 5 - SUBSEQUENT EVENTS
On November 16, 2001, the Company and Telemax Global
Communications, Inc. (Telemax) entered into a Plan and Agreement
of Reorganization (the "Agreement"). In accordance with the
Agreement, the Company agreed to authorize a 20-for-1 reverse
stock split immediately prior to execution of the final agreement.
In the agreement, the Company will acquire all of the issued and
outstanding common stock of Telemax in exchange for 9,000,000 post
split shares of common stock. Upon the close of the transaction,
which is expected to occur by the end of January 2002, Telemax
will own approximately 95% of the Company's issued and outstanding
common stock. There is no assurance that this transaction will
close at the end of January 2002 or at any other time.
On December 4, 2001, the Company entered into agreements with all
of the individual owners of the Company's 11,500 shares of
outstanding preferred stock to convert those shares into a total
of 57,500 shares of post split shares upon execution of the
Telemax transaction.
11
ORGANIK TECHNOLOGIES, INC.
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OOPERATIONS
The information included in this discussion contains forward-looking statements
that are based on current expectations and beliefs and involve numerous risks
and uncertainties that could cause actual results to differ materially. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof.
Corporate History
Organik was incorporated on November 5, 1991 (as Big Sky Tacoma, Inc.), under
the laws of the State of Washington. The Company and its two wholly-owned
subsidiaries, Organik Honduras, Inc., and O.T. Fabrics, Inc. (collectively the
"Company"), were primarily engaged in the design, manufacture and marketing of
high-quality casual clothing made from all-natural, shrink-free, 100% cotton
knit fabric. The Company subsequently ceased its original business activity on
July 31, 1996.
The Company never recommenced operating activity, and thereafter primarily
investigated and sought new business opportunities.
Plan of Operation
On November 16, 2001, the Company and Telemax Global Communications, Inc.
("TGC") entered into a Plan and Agreement of Reorganization (the "Agreement").
In accordance with the Agreement, the Company will acquire all of the issued and
outstanding Common Stock of TGC in exchange for nine million (9,000,000) shares
of the Company's Common Stock. The transaction contemplated by the Agreement is
intended to be a "tax-free" exchange pursuant to the provisions of Sections 351
and 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended.
Upon the close of the transaction, which is expected to occur by the end of
December 2001, the five shareholders of TGC will own approximately ninety-one
percent (91%) of the Company's then-outstanding Common Stock and therefore will
control the Company's future activities and business. the closing of the
transaction is subject to certain covenants and representations, completion of
audited statements, various due diligence requirements and shareholder approval.
There is no assurance that the transaction will close at the end of December
2001 or at any other time.
Shareholders of TGC currently own approximately forty-one percent (41%) of the
issued and outstanding Common Stock of the Company.
12
Results of Operations
From August 1996 through October 31, 2000, there have been no reportable
operations in that the Company has not engaged in any material business activity
and has not generated any revenues. It is not possible for the Company to
predict any financial uncertainties or the impact of inflation in that it has
not entered into any sales at this time.
An examination of the Financial Statements of the Company will disclose that for
the three months ended October 31, 2001 expenses were $43,550 compared to $1,157
for the three months ended October 31, 2000. The increase is attributable
primarily to legal and accounting fees relating to the proposed Telemax
acquisition. The accounts payable decreased at October 31, 2001 to $73,552 from
$87,583 at July 31, 2001. Also during the first quarter, the Company recognized
an extraordinary gain due to the extinguishment of accounts payable totaling
$22,531.
Subsequent Events
In November 2001, the Company sold 8,000,000 shares to Telemax Global
Communications, Inc. for $40,000. The $40,000 is being used by the Company to
pay legal, accounting, transfer agent, filing fees and other expenses relating
to the acquisition of Telemax by Organik.
On January 30, 2002, the Company issued 1,150,000 shares of its Common Stock in
exchange for cancellation of the Company's 11,500 shares of outstanding
Preferred Stock and the dividends of approximately $66,000 owed thereon.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 8, 2002 ORGANIK TECHNOLOGIES, INC.
By: /s/ A.J. SALOMON
---------------------------------
A.J. SALOMON, PRESIDENT
13