UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2001
--------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______________ to _________________
Commission file number 0-27635
---------------------
BASIC TECHNOLOGIES, INC.
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-1446622
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1026 WEST MAIN STREET, SUITE 104, LEWISVILLE, TEXAS 75067
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(Address of principal executive offices)
972-436-3789
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(Issuer's telephone number)
1026 WEST MAIN STREET, SUITE 104, LEWISVILLE, TEXAS 75067
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(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section l2, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ] NOT APPLICABLE
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 7,867,055 common stock
as of November 14, 2001.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [x]
Indicate, by check mark, whether the registrant (1) 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 (2) has been
subject to such filing requirements for the past 90 days.
(1) Yes [x] No[ ] (2) Yes [x] No [ ]
BASIC TECHNOLOGIES, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION...........................................3
Item 1. Financial Statements
Consolidated Balance Sheets
September 30, 2001 and September 30, 2000 (Unaudited)..........F1
Consolidated Statements of Income (Loss)
Three Months Ended September 30, 2001, and
September 30, 2000 (Unaudited).................................F3
Consolidated Statements of Changes in
Stockholders' Equity (Deficit) September 30, 2001, and
September 30, 2000 (Unaudited).................................F4
Consolidated Statements of Cash Flows
Three months Ended September 30, 2001, and
Septebmber 30, 2000 (Unaudited)................................F5
Notes & Schedules to Consolidated Financial statements
(Unaudited).....................................................F6
Item 2. Management's Discussion and Analysis or Plan of Operation
(a) Plan of Operation For The Next Twelve Months....................3
(b) Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................7
PART II OTHER INFORMATION
Item 1. Legal Proceedings .............................................11
Item 2. Changes in Securities .........................................12
Item 3. Default by the Company on its Senior Securities................13
Item 4. Submission of Matters to a Vote of Securities Holdings.........13
Item 5. Other Information..............................................13
Item 6. Exhibits and Reports on Form 8-K ..............................14
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Selected information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. However, in the opinion of management, all
adjustments (which include only normal recurring accruals) necessary to
present fairly the financial position and results of operations for the
periods presented have been made. These financial statements should be
read in conjunction with the accompanying notes, and with the historical
financial information of the Company.
BASIC TECHNOLOGIES, INC.
Consolidated Balance Sheets
September 30, September 30,
2001 2000
------------- -------------
ASSETS
CURRENT ASSETS
Cash $ 0 $ 25,893
Accounts Receivable-Net 41,237 102,077
Inventories 46,224 70,903
Prepaid Expenses 689 6,650
Deferred Tax Asset 134,354 290,993
----------- -----------
TOTAL CURRENT ASSETS $ 222,504 $ 496,516
FIXED ASSETS
Equipment $ 424,728 $ 1,404,838
Land and Buildings 9,974 9,974
----------- -----------
434,702 1,414,812
Less: Accumulated Depreciation $ (101,332) $ (153,867)
----------- -----------
TOTAL FIXED ASSETS $ 333,370 $ 1,260,945
OTHER ASSETS
Certificate of Deposit $ 113,461 $ 0
Capitalized Loan Fees 28,219 0
Deposits 760 3,376
Organization Costs-Net 599 1,050
Proved Developed Oil Reserves 3,711,000 3,711,000
Acquisition Goodwill-Net 825,742 870,984
Deferred Tax Asset 360,215 0
----------- -----------
TOTAL OTHER ASSETS $ 5,039,996 $ 4,586,410
----------- -----------
TOTAL ASSETS $ 5,595,870 $ 6,343,871
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-1
BASIC TECHNOLOGIES, INC.
Consolidated Balance Sheets
September 30, September 30,
2001 2000
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Cash Deficit $ 8,316 $ 0
Short Term Notes Payable 116,697 401,259
Accounts Payable 252,124 227,886
Accrued Taxes and Interest Payable 152,094 58,360
Current Portion of Long Term Debt 45,390 68,998
----------- -----------
TOTAL CURRENT LIABILITIES $ 574,621 $ 756,503
LONG TERM LIABILITIES
Accrued Interest Payable $ 33,264 $ 0
Deferred Tax Liability 223,069 223,069
Payables-Shareholders 585,374 463,104
Capital Lease Payable 32,871 32,871
Long Term Notes and Obligations 679,353 305,203
Less: Current Maturities (45,390) (68,998)
----------- -----------
TOTAL LONG TERM LIABILITIES $ 1,508,541 $ 955,249
----------- -----------
TOTAL LIABILITIES $ 2,083,162 $ 1,711,752
STOCKHOLDERS' EQUITY
Common Stock, $.00001 par value, 100,000,000 shares
authorized and 7,860,805 issued and outstanding $ 78 $ 77
Preferred Stock, $.00001 par value, 10,000,000 shares
authorized and no shares issued and outstanding 0 0
Paid in Capital 5,263,355 5,162,408
Paid Stock Subscriptions 27,500 34,500
Treasury Stock (850,000) (768,150) 0
Retained Earnings (Deficit) (1,010,075) (564,866)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY $ 5,595,870 $ 4,632,119
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,110,747 $ 6,343,871
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-2
BASIC TECHNOLOGIES, INC.
Consolidated Statements of Income
For the Three Months Ended
September 30, September 30,
2001 2000
------------- -------------
REVENUES $ 93,924 $ 105,262
COST OF SALES 2,175 779
----------- ---------
GROSS PROFIT $ 91,749 $ 104,483
OPERATING EXPENSES
Selling, General and Administrative Expenses 185,691 211,943
Interest 24,408 13,761
Amortization 11,423 11,423
Depreciation 12,016 28,383
Bad Debt Expense 1,958 0
----------- ---------
TOTAL EXPENSES $ 235,496 $ 265,510
NET INCOME (LOSS) FROM OPERATIONS $ (143,747) $(161,027)
OTHER INCOME (EXPENSE)
(Gain)- Debt Settlement $ 5,062 $ 1,818
Interest (Income) 1,262 133
----------- ---------
TOTAL OTHER INCOME (EXPENSE) 6,324 1,951
----------- ---------
NET INCOME (LOSS) BEFORE TAXES $ (137,423) $(159,076)
DEFERRED TAX BENEFIT 46,724 54,086
----------- ---------
NET INCOME (LOSS) $ (90,699) $(104,990)
Beginning Retained Earnings (Deficit) (919,376) (459,876)
----------- ---------
ENDING RETAINED EARNINGS (DEFICIT) $(1,010,075) $(564,866)
=========== =========
EARNINGS PER SHARE
Income (Loss) for Common Stockholders $ (0.01) $ (0.01)
========= =========
The accompanying notes are an integral part of these financial statements.
F-3
BASIC TECHNOLOGIES, INC.
Consolidated Statements of Changes in Stockholders' Equity
For the periods ended September 30, 2001 and September 30, 2000
September 30 September 30
2001 2000
COMMON STOCK
Balance at Beginning of Year $ 78 $ 77
Issuance of 5,250 shares of stock for expenses 1 0
-------------- --------------
Balance at End of Year $ 78 $ 77
STOCK SUBSCRIPTIONS
Balance at Beginning of Year $ 500 $ 28,500
Subscriptions Received (For expenses payments) 27,000 6,000
-------------- --------------
Balance at End of Year $ 27,500 $ 34,500
PAID IN CAPITAL
Balance at Beginning of Year $ 5,258,105 $ 5,162,408
Proceeds in Excess of Par Value of Common
Stock Issued for Expenses 5,250 0
-------------- --------------
Balance at End of Year $ 5,258,105 $ 5,162,408
TREASURY STOCK
Balance at Beginning of Year (850,000 shares) $ (768,150) $ 0
--------------- --------------
Balance at End of Year $ (768,150) $ 0
RETAINED EARNINGS (DEFICIT)
Balance at Beginning of Year $ (919,376) $ (459,876)
Net Loss ( 90,699) (104,990)
-------------- --------------
Balance at End of Year $ (1,010,075) $ (654,866)
TOTAL STOCKHOLDERS' EQUITY $ 3,512,708 $ 4,632,119
============== ==============
The accompanying notes are an integral part of these financial statements.
F-4
BASIC TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
For the three months ended
September 30, September 30,
2001 2000
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (90,699) $(104,990)
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain - Debt Settlement (5,062) 0
Depreciation and Amortization 23,439 39,806
Changes in Accounts Receivable (9,861) 6,805
Changes in Inventories 0 0
Changes in Deferred Tax Asset (net) (46,724) (54,086)
Changes in Accounts Payable
and Accrued Liabilities 49,551 3,908
Changes in Prepaid Expenses (689) (6,650)
Increase in Bad Debt Reserve 1,958 0
--------- ---------
NET CASH USED BY
OPERATING ACTIVITIES $ (78,087) $(115,207)
NET CASH USED BY INVESTING ACTIVITIES
Purchase of Equipment (3,426) 0
--------- ---------
NET CASH USED BY
INVESTING ACTIVITIES $ (3,426) $ 0
CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments on Bank and Other Notes 4,242 (22,466)
Proceeds of Notes Payable 0 115,000
Proceeds of Shareholder Loans 66,273 26,224
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES $ 70,515 $ 118,758
--------- ---------
NET INCREASE IN CASH $ (10,998) $ 3,551
CASH AT BEGINNING
OF PERIODS 2,682 22,342
--------- ---------
CASH AT END
OF PERIODS $ (8,316) $ 25,893
========= =========
The accompanying notes are an integral part of these financial statements.
F-5
BASIC TECHNOLOGIES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2001 and September 30, 2000
NOTE 1 - NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities and Basis of Accounting
The Company, a Corporation, is engaged in the diversified operations
of environmental remediation and recovery of oil and gas properties
in Texas and Oklahoma, and development of oil and gas ventures and
related interests, and as an internet service provider and e-business
consultant in Hawaii, with its corporate headquarters located in
Lewisville, Texas. The Company incorporated in the state of Colorado
on January 21, 1998 and its fiscal year end is June 30.
The accompanying financial statements have been prepared on the
accrual basis of accounting in accordance with generally accepted
accounting principles.
Consolidation
The Company was formed as a parent holding company to operate through
subsidiaries. The financial statements consolidate the activities of
the parent along with:
Yankee Development Corp., a Texas corporation
P & A Remediation, LLC, a Texas limited liability company
Simpco, Inc., a Texas corporation
P & A Remediation, LLC, an Oklahoma limited liability company
Cyber Cities Technologies, Inc., an Hawaii corporation
All significant intercompany transactions and balances have been
eliminated.
Cash
For purposes of the statement of cash flows, the Company considers
all short term securities purchased with a maturity of three months
or less to be cash equivalents. There are no restrictions on any
balances.
Accounts Receivable
Bad debt expense is recognized by use of the allowance method, with
additions to the allowance and expense for this period, and total bad
debt expense of $1958. There were no additions or bad debt expense in
the prior year's same period. There are no significant concentra-
tions of credit risk.
Inventories
Inventories are shown at cost, using the first-in, first-out method.
In addition to direct purchases, inventory is acquired through the
performance of services (See note about revenues).
Pipe inventory, in the form of a 35-mile long abandoned oil gathering
pipeline, was acquired for $35,000. The Company plans to dig up the
pipeline and prepare it for sale, once survey problems are resolved.
Fixed Assets
These assets are carried at acquisition cost. Depreciation is
provided using the straight-line method over the estimated economic
lives of the assets, which range from 40 years for buildings to 3 to
15 years for all other assets.
The Company rebuilt and upgraded certain newly acquired used operating
equipment prior to placing the equipment in the field. All upgrade
costs, including related payroll costs, were capitalized.
Intangibles
Amortization of Organization Costs is calculated over 60 months.
Goodwill, created from the purchase of Cyber Cities Technologies,
Inc. is being amortized over 20 years.
Capitalized Loan Fees
$32,750 in fees were paid to certain shareholders to extend repayment
terms, through the issuance or subscription for common stock. Fees
are amortized over the loan terms.
Income Taxes
Income from the corporation is taxed at regular corporate rates per
the Internal Revenue Code. There are no provisions for current taxes
due to net available operating losses.
Deferred Tax Liability
The Company purchased Cyber Cities Technologies, Inc. and accounted
for the transaction using the "purchase" method of accounting. This
requires the acquisition to be accounted for at the fair value of the
assets received or given up, whichever is more readily available.
Further, this transaction caused a Deferred Tax Liability to be
booked, due to the difference between the book basis and tax basis of
the assets received. The offset to this entry increased Goodwill.
Common Stock
The Company's common stock is stated at par value ($.00001) and the
paid in capital represents the difference between the fair value of
the assets received and the common stock at par value. There are
no provisions for stock options, stock compensation, conversion
rights, redemption requirements or unusual voting rights.
There are 850,000 shares of common stock held in treasury for resale
by the Company.
Revenues
Services
The Company sells services as an Internet service provider and
consultant in Hawaii.
Services for oil well plugging are provided using two types of
contracts: cash and salvage. Under the salvage type, the Company
receives as its compensation specified types of used oil well
equipment or pipe. Revenue is recognized and the items taken into
inventory based upon the relevant wholesale market prices, or the
prices at which the Company could buy the items for resale on the
open market. No such services were performed during the period.
Sales
Inventory, whether acquired by purchase or through services, is
resold to oil and construction customers.
No revenues have been earned from oil and gas production during the
fiscal period and $1,345 was earned for the prior fiscal period.
Interest
Interest expensed for the period is $24,408 and $13,761 for the prior
fiscal period. No interest has been capitalized.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
NOTE 2 - INVESTMENTS IN WHOLLY OWNED SUBSIDIARIES
On April 23, 1998, the Company issued 5,305,625 restricted common shares
in exchange for 100% of Yankee Development Corporation. Upon consummation
of the transaction, the former owners of Yankee Development Corporation
controlled approximately 90% of the issued and outstanding shares of Basic
Technologies, Inc. and Yankee Development Corporation became a wholly
owned subsidiary of Basic Technologies, Inc.
The transaction was consummated as a purchase of assets, rather than a
pooling of interests. The valuation assigned to the purchase of Yankee
Development Corporation is based on the underlying net assets, which
consist of working interests in proven oil and gas reserves discounted
to net present value of net revenues less development and operating costs.
The discount applied was 10%. The oil and gas reserves are the only
substantial assets in the subsidiary company.
Cost of Acquiring Yankee Development Shares $3,711,000
The valuation of the oil and gas reserves is based on the market price of
oil. At the time of the valuation, the price used was $15/bbl. The price
of oil at the balance sheet date was $23.25 per barrel, and the current
price of oil is $17.75; however, the reserves are not to be revalued in
excess of their original valuation.
In October 1998, the Company formed a Limited Liability Company (P & A
Remediation, LLC) with Simpco, Inc. (a wholly owned subsidiary) with the
intention of developing environmental remediation in oil and gas fields.
The Company owns 99% of the stock of P & A Remediation, LLC, and Simpco,
Inc. owns 1%. See also Note 5.
In January, 1999, the Company issued debt and 850,000 shares of its auth-
orized but previously unissued shares of voting common stock in exchange
for all of the outstanding common stock of Simpco, Inc., a Texas corpor-
ation. That corporation, now a wholly owned subsidiary, is intended to
be the owner and lessor of the consolidated entities' operating equipment.
The transaction was accounted for under the purchase method.
On November 24, 1999, P&A Remediation LLC, an Oklahoma Limited Liability
Company, was formed for the purpose of beginning remediation and sales
operations in Oklahoma. See also Note 5.
Effective January 1, 2000, the Company issued 979,232 shares of its
authorized but unissued shares of voting common stock in exchange for
all of the assets and operations, subject to certain liabilities, of
Cyber City Honolulu, Inc., a Hawaii corporation. Included in the
exchange was the acquisition of all intangibles including all trade names,
customer lists, goodwill and other intangibles. The assets and
liabilities were then transferred into a newly formed, wholly owned Hawaii
corporation, Cyber Cities Technologies, Inc. The acquisition was
accounted for using the "purchase" method of accounting. The predecessor
and successor companies are a regional Internet service provider and
Internet web page hosting service. The Company recognized goodwill in
the amount of $681,848. A related deferred tax liability of $223,069 was
recognized, which increased the acquisition goodwill to $904,917.
NOTE 3 - EMPLOYEE BENEFITS
There are currently no qualified or non-qualified employee pensions,
profit sharing, stock option or other plans authorized for any class of
employees. Group health insurance is provided to employees in Hawaii.
NOTE 4 - LEASES
Capital Leases
There is one equipment lease, the terms of which mandate accounting as
a capital lease. The leased assets are depreciated with interest im-
puted.
Amortization of capitalized lease costs is included with depreciation.
Payment on this lease has been suspended pending the results of
negotiation on terms. Total remaining obligations are $32,871.
Operating Leases
One subsidiary, which operates as an Internet service provider, leased
certain computer/communication equipment. Rental payments due under
existing leases are $3,850 for balance of the year ended June 30, 2002.
There are no contingent rentals, subleases or related party leases of
equipment.
Leases for some physical facilities are on a month-to-month basis. Two
facilities are occupied under long-term leases. Future lease commit-
tments are:
Years Ending
June 30 Amount
2002 $ 14,850
2003 10,000
--------
Total $ 24,850
--------
Total equipment rental expense for the period was $2,420 and $11,563
for the prior fiscal period.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
There are a few small lawsuits over disputed open commercial accounts.
The full potential cost is included in accounts payable.
NOTE 6 - PROVEN DEVELOPED OIL RESERVES
The Company owns, through a subsidiary, proven developed oil reserves on
2300 acres in west Texas. Valuation at the time of acquisition was
based upon the discounted net present value of net revenues, after
development and operating costs. The applied discount rate was 10%, and
the oil price used was $15.00 per barrel. The price of oil at the
statement date was $23.25 per barrel, and the current price of oil is
$17.75 per barrel, but the reserves are not to be revalued. Recoverable
oil reserves are estimated to be 880,000 barrels. See also Note 2 above.
NOTE 7 - INCOME TAXES
Starting in 1998, the Company has adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes ("SFAS No. 109),
which requires the use of the liability method in the computation of
income tax expense and the current and deferred income taxes payable.
Under SFAS No. 109, income tax expense consists of taxes payable for the
year and the changes during the year in deferred assets and liabilities.
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases and financial reporting bases
of assets and liabilities. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized.
As there is a net operating loss in the current fiscal year, the Company
has calculated a deferred tax asset (benefit) as follows:
Fiscal Period September 30, 2001 $ 46,724
Prior Years 447,875
--------
Gross deferred tax asset $494,569
========
The deferred tax benefit has been allocated between current and long term
assets.
The Company has also recorded a deferred tax liability for the difference
between book bases and tax bases for the acquisition of Cyber Cities
Technologies, Inc.
Deferred tax liability $223,069
NOTE 8 - SEGMENT REPORTING
The Company has adopted SFAS No. 131, and uses the Management approach
to determine and disclose reportable segment information.
The Company's four reportable business segments are based upon distinctive
types of activities or services: environmental remediation; equipment
leasing; oil and gas production; and Internet and e-business services.
A full description of these segments is included in Note 1. All segments
operate within the United States. The equipment leasing segment provides
service only to the environmental segment.
The accounting policies of the segments are the same as those described in
the summary of significant policies. Inter-segment services are recorded
using internal transfer prices set by the Company.
NOTE 9 - EARNINGS PER SHARE
Basic earnings (loss) per share are computed by dividing the net loss by
the weighted average number of common shares outstanding during the period.
There are no provisions or contracts that would create dilutive potential
common stock.
NOTE 10 - ACCRUALS
Local and federal taxes, as well as interest on notes and other payables
have been accrued.
No accrual of vacation time is made, because no employee met eligibility
requirements at the statement date.
NOTE 11 - LONG-TERM DEBT
In March, 1999, the Company issued $50,000 in notes payable, due in
March 2003 for working capital. These were refinanced in March 2001,
with additional funding. The new notes totaled $52,979, with payoff in
February 2005. Principal and interest accrued at 10% are payable
monthly, and the notes are secured by equipment.
In March, 1999, the Company issued a $11,500 mortgage payable, due in
March 2004 for the purchase of real estate. Principal and interest
accrued at 10% are payable monthly and the mortgage is secured by real
estate.
In February, 1999, the Company assumed $71,700 in unsecured notes payable,
due March 2004 for the purchase of inventory. A $35,000 note has been
cancelled in a lawsuit settlement. Interest accrued at 7%, as well as
the entire principal balance, is due at maturity.
From November, 1998 through May 1999, the Company issued six notes for a
total of $73,975 in notes payable for vehicle and equipment purchases, due
from August 2000 through March 2004. Principal and interest accrued at
rates from 7.85% to 16.5% are payable monthly and the notes are secured by
vehicles and equipment.
In August, 1999, the Company issued $19,000 in unsecured notes maturing
in August 2003 for working capital. Principal and interest accrued at
11.5% are payable monthly.
In November, 1999, the Company issued a note for a total of $18,300 for a
vehicle purchase, due from December 1999 through November 2003. Principal
and interest accrued at 17.5% is payable monthly and the note is secured by
a vehicle.
In December, 2000, the Company renewed and extended a short-term note of
$100,000 to mature in November, 2002. Accrued interest of 10% is payable
at maturity, and the accrued interest is classified as a long-term
liability.
In December, 2000, the Company issued a promissory note for $110,298 to
acquire a certificate of deposit maturing in January, 2002. The note bears
interest of 10%, and both principal and interest are payable at maturity
in December, 2003.
Certain installment notes payable for equipment purchases are non-interest
bearing. On these notes, interest has been imputed at 9%, the related
asset has been discounted, and the imputed/discounted interest is included
in interest expense.
There are no restrictive or subordinate covenants other than standard liens.
Certain debts have the option to be converted to common stock at a price of
$1.00 per share.
Maturities of long term debt are as follows:
Year Ending
June 30 Amount
2002 $ 40,029
2003 299,114
2004 330,362
2005 9,848
---------
Total $ 679,353
=========
Short Term Notes Payable
Between November, 1999 and June, 2001, the Company issued promissory notes
totaling $ 409,291 for short term working capital needs.
Interest rates varied from 10% to 12%, payable monthly on some notes, and at
maturity on others. Some notes were secured by equipment and contract pro-
ceeds. Maturities varied, and renewal and extension provisions were avail-
able.
Certain short-term notes were converted to long-term maturities.
NOTE 12 - RELATED PARTY TRANSACTIONS
Open account cash advances have been made by various shareholders. As of
the financials statement date, no promissory notes, interest rates or
repayment schedules have been set. The balances are classified as long
term obligations.
NOTE 13 - SUPPLEMENTAL DISCLOSURES-STATEMENT OF CASH FLOWS
Operating activities reflect interest paid of $ for the current
period and $ for the prior fiscal year's period. Debt of $41,000
was retired through the issuance of 41,000 shares of common stock.
NOTE 14 - COMPREHENSIVE INCOME
The Company had no elements of comprehensive income during the period.
F-6
BASIC TECHNOLOGIES, INC.
Table of Reportable Segments
For the three months ended September 30, 2001
Oil & Gas Environmental Equipment Internet &
Production Remediation Leasing E-Business Eliminations Consolidated
---------- ------------- --------- ---------- ------------ ------------
Sales to Unaffiliated Customers $ 0 $ 0 $ 0 $ 93,924 $ $ 93,924
Inter-Segment Sales 0 0
---------- ------- --------- -------- -------- -----------
Total Sales $ 0 0 0 103,917 0 93,924
========== ======= ========= ======== ======== ===========
Operating Income (Loss) $ 0 (9,453) (10,664) (59,363) (79,480)
========== ======= ========= ======== ========
Corporate Expenses (64,267)
-----------
Total Operating Income (Loss) (143,747)
===========
Depreciation & Amortization $ 0 231 7,828 12,001 0 20,060
========== ======= ========= ======== ========
Corporate Expenses 3,379
-----------
Total Depreciation & Amortization 23,439
===========
Interest Revenue (Not Allocated to Segments) 1,262
===========
Interest Expense $ 0 5,341 2,822 1,124 0 9,287
========== ======= ========= ======== ========
Corporate Expenses 15,121
-----------
Total Interest Expense 24,408
===========
0
Segment Assets $3,711,000 249,328 252,207 742,174 (218,522) 4,736,187
========== ======= ========= ======== ========
General Corporate Assets 859,683
-----------
Total Assets 5,595,870
===========
Expenditures for Segment Assets $ $ 0 $ 0 $ 3,426 $ 0 $ 3,426
========== ======= ========= ======== ======== ===========
The accompanying notes are an integral part of these financial statements.
F-7
Item 2. Management's Discussion and Analysis or Plan of Operation.
(a) Plan of Operation For The Next Twelve Months
The Company serves as a holding company for three wholly-owned corporate
subsidiaries, Yankee Development Corporation (hereafter Yankee); Simpco,
Inc. (hereafter Simpco); and Cyber Cities Technologies, Inc. (hereafter
CCTech) and two limited liability companies, P & A Remediation, LLC, a
Texas limited liability company (hereafter PAR Texas); and P & A
Remediation, LLC, an Oklahoma limited liability company (hereafter
PAR Oklahoma). PAR Texas and PAR Oklahoma are collectively 'P & A
Remediation'. Yankee owns a working interest in proven, developed oil
reserves on 2,300 acres in Tom Green County, Texas. The assets owned by
Yankee are held by production of other leases, and thus do not require
annual bonus or delay rental payments, and have no legal commitments of
any kind to maintain the legal integrity of the assets. Through P & A
Remediation, the Company has performed environmental remediation and sal-
vage operations for the oil industry, and markets and sells construction
materials, pipe, steel tubulars and used oil field equipment obtained
from salvage operations or acquired for resale on the secondary market.
Simpco owns certain reconditioned oil field equipment and vehicles that
are leased to P & A Remediation for use in conducting oil field plugging,
remediation and salvage activities. CCTech provides high speed internet
access for residential and business customers in the state of Hawaii.
CCTech also has the capability to host commercial websites world wide.
Simpco, Inc., and Yankee Development Corporation own assets, but do not
do business with any source outside of the Company. With skeleton staffing,
P & A Remediation has done limited business with any source outside of the
Company.
Subject to securing the necessary equity infusion or long term financing,
Company management hopes to re-establish currently suspended day to day
operation in its Olney, Texas, yard location and to potentially acquire
and reinstitute the Nowata, Oklahoma, location. The Texas yard would
house the Company's threading equipment, there to establish a pipe thread-
ing and testing facility complementary to the facilities in the to be
acquired Nowata, Oklahoma location. Both locations will have large
capacity pipe threading, straightening, and testing facilities that are
not readily available in the Texas and Oklahoma markets. Company
management is of the opinion that a significant portion of the enhanced
(due to the increase in the price of oil) pipe testing market may be
immediately available to the Company. The implementation of this plan
will require the Company securing skilled employees, contractual
consultants, or joint venture partners, to establish the day to day
operations. The consultants and / or venture partners could be existing
competitors in the pipe market. Based upon industry knowledge, Company
management believes that the oil & gas operators, steel tubular and pipe
dealers, and re-sale equipment marketers are candidates for operations of
the Company's pipe threading and testing facilities. Further, Company
management believes they number in the thousands as of the date hereof,
and that the pipe threading and testing facility may have an effective
life of many years to come based upon the lack of available services in
the market today. However, there can be no assurance that this pipe
testing and threading market phenomenon will continue, that the Company
can establish complementary and efficient day to day operations in its
facilities, that the Company will have the resources to complete the work
under any such operations, or that the Company after establishing
operations, will be able to operate profitably.
Subject to securing the equity infusion or long term financing necessary
to finance the implementation and operation of the re-establishment of
operations of PAR Oklahoma, Company management hopes to re-establish day
to day operations in the to be acquired Nowata, Oklahoma, location. It
is management's plan to use the to be acquired location's operations to
complement the reorganized Texas yard and it's to be established pipe
threading and testing facility. In addition to the Oklahoma pipe
threading and testing, Company management hopes to re-establish a base
for oil & gas well plugging and environmental remediation operations out
of the Oklahoma yard. Based upon EPA reports on the Lake Oologah project
(that the Company successfully bid and won the first eight one (81)
well phase), Company management believes that the abandoned and inactive
wells that are candidates for this EPA project number in the thousands
as of the date hereof, and that the project may have an effective life
of five years and potentially as much as $16 million in revenue available.
Re-established operations will not include previous PAR and Simpco mid-
level management and should involve the operations of three separate
crews and sets of remediation equipment, rather than the one set and one
crew used by PAR Oklahoma in the initial eighty one (81) well phase of
the Simpco contracted project.
The re-establishment of day to day operations in Nowata, Oklahoma, will
require the Company securing skilled employees, contractual consultants,
or joint venture partners, to work locally in northeast Oklahoma. The
consultants and / or venture partners referred could be competitors in
the oil well plugging market. Negotiations with the same are currently
in the beginning phases with Company management. There can be no
assurance that the Company can successfully negotiate with consultants or
skilled employees to the Company's benefit, that the EPA project will
continue, that the Company will win any of the contracts for the project,
that the Company will have the resources to complete the work under any
such contracts, or that the Company, if it receives any such contracts,
will be able to complete them profitably.
Company management is currently seeking negotiations with outside finan-
cial partners for a joint venture, or private placement, to raise suf-
ficient capital for Yankee to cause the proper drilling and completion
of a sufficient number of wells to prove or disprove the Yankee Unit
field's engineering and reserves study. This program under consideration
and negotiation could possibly mean the drilling of up to sixteen (16)
initial wells, at a total cost of up to $2,400,000 to the financial
partners. The results of drilling such wells can never be determined in
advance. The industry has a history of unprofitable efforts resulting
from dry holes, or commercial wells which fail to produce in quantities
sufficient to provide an economic return. Yankee Development, since
inception, has generated no revenues from the production of oil. No
assurance can be given that Yankee Development will successfully
negotiate the funding of its development program, generate any revenues,
or achieve profitability from the production of the proven developed
reserves owned as of the date hereof, or from oil and/or gas properties,
if any, acquired in the future.
The Company intends to develop a plan for internal growth of the
existing markets of its internet subsidiary, CCTech, which services the
consumers of the State of Hawaii with high speed Internet Access for
residence and business uses. Currently doing business and maintaining
offices on the islands of Oahu and Maui, CCTech has the capability to
provide computer and internet commerce consultation services to
businesses nationwide. The development of a nationwide marketing plan
of a 'business to business' division is being planned. It is contingent
upon the Company securing financing necessary to re-align and reorganize
Company infrastructure to expand its core business to the islands of
Kauai and the Big Island of Hawaii. This expansion will allow CCTech
to be the only regional statewide ISP in the market. Once in place and
operating, a long term plan for nationwide internet service will be
implemented. A review of market opportunities available to the Company
is currently in process by Company management. There can be no assurance
that the Company can successfully secure financing necessary to make the
expansion to state-wide operations, that the market available for the
core business will continue, that the Company will be able to get new
customers in newly opened markets, that the Company will have the
resources to provide services if such markets are opened, and if it will
be able to operate them profitably.
The Company plans to diversify its operations through the acquisition of
companies engaged in businesses unrelated to the oil and gas business.
The Company is presently engaged in negotiations for the acquisition of
companies operating in industries related and unrelated to the Company's
core business.
The activities of the Company in all subsidiaries to date have been
primarily focused on securing long term financing or equity infusion;
evaluating and forming mid-level management teams; researching and testing
actual project operations and profitability; and developing and identifying
market opportunities that can be taken advantage of by the Company's
positions in its various subsidiaries. Accordingly, management does not
consider the historical results of operations to be representative of future
results of operation of the Company. This Form 10-QSB should be read in
conjunction with previous filings filed by the Company.
The Company expects to meet our capital needs for the next 3 months with
operating cash flow and current cash and receivables balances. Operating
beyond 3 months, or to make any significant expansion, will require the
proceeds from the sale or issuance of capital stock, lease financing,
or additional debt. Other than any extraordinary legal expenses caused
by settled litigation with former mid-level management of P & A
Remediation, or unforseen additional filing fees and legal expenses
related to the registration and approval of a second issue of capital
stock to be made available for public purchase, we do not anticipate
any out of budget operational shortfalls in the coming fiscal year.
We regularly examine financing alternatives based on prevailing market
conditions and expect to access the capital markets from time to time
based on our current and anticipated cash needs and market opportunities.
Over the longer term, we will be dependent upon obtaining the long term
equity infusion or financing necessary to implement our upgraded operations
in both the environmental remediation subsidiaries and in the internet
subsidiaries. Each subsidiary will be then be dependent upon positive
operating cash flow and, to the extent cash flow is not sufficient, the
availability of additional financing, to meet our debt service obligations.
Insufficient funding may require us to delay or abandon some of our planned
future expansion or expenditures, which could have a material adverse effect
on our growth and ability to realize economies of scale.
Our business strategy has required, and is expected to continue to require,
substantial capital to fund acquisitions, working capital, capital
expenditures, and interest expense.
As of September 30, 2001, the Company had approximately $105,100 in cash and
certificates of deposit and $41,200 in current receivables.
The Company also has significant debt service requirements. At September 30,
2001, our interest-bearing liabilities were $836,000 and the expected
annual interest expense associated with it is approximately $92,000. The
interest expense and principal repayment obligations associated with
our debt could have a significant effect on our future operations.
Our anticipated expenditures are inherently uncertain and will vary
widely based on many factors, including operating performance and working
capital requirements, the cost of additional acquisitions and
investments, the requirements for capital equipment to operate our
business and our ability to raise additional funds. Accordingly, we may
need significant amounts of cash in excess of our plan, and no assurance
can be given as to the actual amounts of our future expenditures. We will
have to increase revenue without a commensurate increase in costs to
generate sufficient cash to enable us to meet our debt service
obligations. There can be no assurance that we will have sufficient
financial resources if operating losses increase or additional
acquisition or other investment opportunities become available.
The Company is not in the business of producing any item that would
require product research and development, other than the continual market
analysis by Company and subsidiary management.
Other than, and subject to, securing the required financing necessary to
implement upgraded operations in its environmental and internet
subsidiaries, and the implementation of the same, there is (1) no
expected purchase or sale of plant and significant equipment; or (2) no
expected significant changes in the number of employees, relative to the
size of previous year's operations.
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains certain forward-looking
statements regarding future financial condition and results of operations
and the company's business operations. We have based these statements on
our expectations about future events. The words "may," "intend," "will,"
"expect," "anticipate," "objective," "projection," "forecast," "position"
or negatives of those terms or other variations of them or by comparable
terminology are intended to identify forward-looking statements. We have
based these statements on our current expectations about future events.
Although we believe that our expectations reflected in or suggested by
our forward-looking statements are reasonable, we cannot assure you that
these expectations will be achieved. Our actual results may differ
materially from what we currently expect. Important factors which could
cause our actual results to differ materially from the forward-looking
statements include, without limitation (1) general economic and business
conditions, (2) ability to cost effectively integrate multiple
technologies, (3) effect of future competition, and (4) failure to raise
needed capital.
The Company serves as a holding company for three wholly-owned corporate
subsidiaries and two wholly owned limited liability companies: Yankee;
Simpco; CCTech; PAR Texas; and PAR Oklahoma. PAR Texas and PAR
Oklahoma are collectively 'P & A Remediation'.
In Texas, the Company created PAR Texas in October 1998 to take advantage
of the environmental remediation opportunities available in central west
Texas (Railroad Commission District 7B & 7C) and in north Texas
(Railroad Commission District 9). PAR Texas' environmental remediation
and salvage business involved the plugging of oil wells and the
remediation and clean-up of oil fields in accordance with government
rules and regulations applicable to the environment, and the salvage or
purchase for resale on the secondary market of construction materials,
pipe, steel tubulars and used and reconditioned oil field equipment. To
the extent practicable, PAR Texas performed its services, including
testing, threading and reworking of steel pipe recovered from the field,
at the oil field salvage yards leased by the Company in Ballinger and
Olney, Texas. Although PAR Texas desired to expand its customer base to
include governmental agencies such as the State of Texas' Railroad
Commission, the Company's customers were limited to private and publicly-
held oil and/or gas companies which are operators of oil wells and fields
requiring PAR Texas's plugging, remediation and/or salvage services. The
company's operations were limited to the north central and central west
regions of Texas. Since the commencement of active plugging business
operations by PAR Texas in April 1999, through June 30, 2000 the
company's plugging activities (approximately 131 wells) have generated
gross revenues from services approximating $391,470. In addition,
aggregate gross revenues approximating $113,892 generated during the
period from the date of the company's inception in October 1998 through
March 2000, were attributable to resales by the company of used and
reconditioned oil field equipment purchased for resale.
Since March 2000, PAR Texas' active well plugging and pipe sales
operations in Texas have been suspended. All personnel of the Ballinger,
Texas, yard have been dismissed for cause and the yard is no longer
rented. Other than storage of equipment at three locations, there is no
Company activity in Ballinger, Texas. In October 1999, Company
management decided to shift the operating focus of PAR Texas' Olney,
Texas, yard from day to day local Texas operations to move forward to
build necessary equipment to operate and to establish operations in
Oklahoma. Since March of 2000, PAR Texas has maintained operations of
the Olney yard with a skeleton crew, there only to maintain legal
integrity of lease space and to protect company assets. A large amount
had been removed by mid-level management to storage locations in Texas
and / or transported to Nowata, Oklahoma, to establish operations there
with PAR Oklahoma.
In Oklahoma, the Company created PAR Oklahoma in October 1999 to take
advantage of the environmental remediation opportunities available with
the January 2000 implementation of the Lake Oologah oilwell plugging and
environmental remediation project. The scope of the overall EPA project
could span more than five (5) years, and include the plugging of more
than six thousand (6,000) shallow oil wells in the project area. With
the scope consciously in mind, the then mid-level management of PAR
Oklahoma went forward with the intent of taking steps necessary to be
the absolute lowest bidder to insure a base position in the overall
development of the EPA project. With the OCC bid contract in hand, PAR
Oklahoma, with its then mid-level management, went forward with what was
anticipated would be a sixty (60) to ninety (90) day project. The
economic and engineering estimates of the then mid-level management had
serious short comings, and such caused the delay of the initial phase of
plugging eighty one (81) oil wells for a period in excess of ninety (90)
days.
PAR Oklahoma desired to expand its customer base to include private and
publicly-held oil and/or gas companies which are operators of oil wells
and fields requiring PAR Oklahoma's plugging, remediation and/or salvage
services, throughout the state of Oklahoma. The company's operations were
limited to the northeast region of Oklahoma. Since the commencement
of business operations by PAR Oklahoma in November, 1999, and the award
of the first phase of the EPA project in January 2000, the company's
activities included the plugging of all eighty-one wells, and earned
$72,900 on the first awarded contract.
Since the end of June 2000, the Company's well plugging operations in
Oklahoma have been suspended pending reorganization of equipment and em-
ployees, and the acquisition of additional equipment and required local
management to efficiently operate in the EPA project.
The continued suspension of active operations of PAR Texas and PAR
Oklahoma are a result of multiple factors. These include management's
overall review of staffing and a reorganization of equipment and
employees to efficiently serve the available markets of the Olney, Texas,
location and the proposed Nowata, Oklahoma, location; the financing
requirements of doing the same reorganization; and the now settled
litigation between the former mid-level management of PAR Texas and PAR
Oklahoma. There can be no assurance if, or as to when, operations will
resume.
The Company has a significant capital investment in PAR Texas, PAR
Oklahoma, and Simpco. In addition to third party acquisition costs, and
costs to manufacture, refurbish and upgrade the acquired equipment of
Simpco, the Company issued stock and debt instruments for the equity of
the previous owners of Simpco in equipment. Since the creation of PAR
Texas and PAR Oklahoma, the Company has used its operations and
experience from its initial entry into the field to develop what Company
management believes is a successful plan for continued operations. The
Company entered the market undercapitalized and under supplied, relative
to the needs of the then target industry. Upon industry entry, Company
management had contemplated a significant investment and negative cash
flow for the initial two years of operations while building a solid basis
for expansion in the future. The negative cash flow from operations of
PAR Texas and PAR Oklahoma for the past two years has exceeded Company
management's expectations and capital budgets, and though there is a
corresponding increase in equity of the Company, the operating cash
budget had significant shortfalls in the estimation of cash reserves
necessary for the refurbishment of equipment acquired in the Simpco
transaction. Company management is of the opinion that this was due to
an understatement of equipment refurbishment budget figures provided by
mid-management. Revenues from sales of pipe, tubulars, and equipment
were also over estimated by the same mid-level management. Though the
operating cash loss had an immediate negative effect on Company equity
position, these two year's operations have established a physical and
potential base of operations in both north Texas and northeast Oklahoma
that will potentially allow PAR Texas and PAR Oklahoma to generate
significant revenue in the pipe threading / testing industry and in the
environmental remediation business. This revenue figure assumes
successfully meeting the expansion funding requirements and operations
are re-instituted as planned by Company management.
With regard to the subsidiaries (collectively P & A Remediation and
Simpco), there are no known trends, events or uncertainties that have
or are reasonably likely to have a material impact on our short-term
or long-term liquidity, or on our internal and external sources of
liquidity. Likewise, there are no material commitments for capital
expenditures. There are no known trends, events or uncertainties that
have had or that are reasonably expected to have a material impact on
the net sales or revenues or income from continuing suspended plugging
and remediation operations. There are no unforeseen significant ele-
ments of income or loss that may arise from the Company's continuing
suspended operations. Any material changes from period to period in
one or more line items of the our financial statements could be caused
only by an unforeseen outcome to settlement with the former owners
of Simpco. There are no seasonal aspects that may have a material
effect on the financial condition or results of suspended operations.
There has been no activity with the Company's proven oil & gas reserves
in Yankee. There is a significant uncertainty inherent to the oil & gas
production and development industry. The worldwide trend of increasing
crude oil and natural gas prices prompted Company management to
investigate numerous possible financing vehicles that may be required to
secure the equity infusion or long term financing necessary to develop
Yankee's assets. With the worldwide increase in the price of oil, there
has been renewed drilling and production activity in the areas of Texas
where the company has interests. This renewal of activity may create
unforeseen delays in the availability of subcontractors for all phases
of an oil & gas well drilling and development program. This delay could
cause financial difficulty and shortage of cash flow budgets that are
relied upon to profitably and efficiently develop the Company's asset.
Other than other historical industry and public information, Company
management is not aware of any known trends, events or uncertainties that
have or are reasonably likely to have a material impact on the Company's
short-term or long-term liquidity, or on our internal and external
sources of liquidity. We have no material commitments for capital
expenditures in Yankee. Other than historical and public information,
there are no known trends, events or uncertainties that have had or that
are reasonably expected to have a material impact on the net sales or
revenues or income from continuing operations without development of the
Company's oil & gas reserves. Should the Company be successful in
securing the financing necessary to fund the development of the oil & gas
reserves, there could be a significant element of income or loss that
could arise from our continuing operations. This significant element
would be a result of the Company being able to successfully develop to
production its proven oil & gas reserves, or disproving the reserves and
engineering premise of such with the drilling of dry holes that result in
no oil & gas production. The cause for such material changes from
period to period in one or more line items of our financial statements
would be the results of the Company's development drilling program.
Though the Texas seasons create moderate difficulty with any outside
operations, there are limited seasonal aspects that might have a material
effect on the financial condition or results of operation of the
development drilling program. No assurance can be given that Yankee
Development will successfully negotiate the funding of its development
program, generate any revenues, or achieve profitability from the
production of the proven developed reserves owned as of the date hereof,
or from oil and/or gas properties, if any, acquired in the future.
The Company has a significant stock investment in its internet
subsidiary, CCTech, and intends to develop a plan for internal growth
of its existing markets. With an effective January 1, 2000, acquisition
by the Company, the subsidiary has a stated purpose to provide services
to the consumers of the State of Hawaii with high speed Internet Access
for residence and business uses. With operations currently on the
islands of Oahu and Maui, CCTech has operated at a relative breakeven
position in comparison to its fiscal operations prior to acquisition by
the Company. Company management has made the decision to increase the
payroll burden on operations by providing for the payment of executive
salaries of the Honolulu office. This increase in operating expenses has
kept revenue from operations at a relatively flat growth curve. The
development of a nationwide marketing plan of a 'business to business'
division, and the expansion of the current operations to include
statewide operations and expanded broadband capabilities to handle DSL
customers is considered critical to continued success in the regional
internet service provider's operations. This expansion is contingent
upon the Company securing financing necessary to re-align and reorganize
Company infrastructure to expand its core business to the islands of
Kauai and the Big Island of Hawaii. There can be no assurance that the
Company can successfully secure financing necessary to make the expansion
to state-wide operations, that the market available for the core business
will continue, that the Company will be able to get new customers in newly
opened markets, that the Company will have the resources to provide
services if such markets are opened, and if it will be able to operate
them profitably.
The expansion of the Company's core business of dialup and DSL service to
previously un-served markets may have a profound effect on the internet
subsidiary's bottom line. A significant market share and volume increase
in operating revenue could require only incremental increases in
operating costs of the core infrastructure of the subsidiary's Honolulu
based main operations center. The reconfiguring and re-allocation of the
subsidiary's infrastructure will allow the expansion of the nationwide
'business to business' portal and to allow the expansion of local
business broad band development.
There are significant uncertainties inherent to the internet. However, in
the core business of the regional ISP operations of CCTech, there are no
known trends that have or are reasonably likely to have a material impact
on the small business issuer's short-term or long-term liquidity, or on
our internal and external sources of liquidity. Other than the need for
expansion for profitable operations, there are no known material
commitments for capital expenditures, or known trends, events or
uncertainties that have had or that are reasonably expected to have a
material impact on the net sales or revenues or income from continuing
operations. There are no known significant elements of income or loss
that do not arise from our continuing operations, and there are no
seasonal aspects that had a material effect on the financial condition
or results of operation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Company management does not know of any legal proceedings to which the
Company or its subsidiaries are parties or to which the property of any
of such companies is the subject which are pending, threatened or
contemplated, or of any unsatisfied judgments against the Company or its
subsidiaries except as described below.
PAR Texas with current trade accounts payable of approximately $101,000
is involved in some disputes on open accounts, a number of which have
resulted in suits on sworn account being filed in four counties in the
State of Texas. In each matter, PAR Texas has responded to the action
by the Movant with denial of their statements and claims against the
company and made other contacts to attempt a negotiated resolution.
Each of the matters has either been brought to judgment or is being
negotiated for a settlement as of the date hereof. The disputed account
balances total less than $20,000 and management does not believe the
disputes are likely to have a material adverse effect on the Company's
financial condition. The Company has accrued what it believes to be
amounts sufficient to properly reflect its liabilities in these cases.
In August of 2000, three lawsuits were filed in Federal and state courts
in Texas and Oklahoma, with the Company opposing ther former owners of
Simpco, as well as former employees. All three matters were resolved in
a mediated global settlement agreement in August of 2001. The agreement
called for a return of the bulk of the assets acquired in the Simpco
transaction; certain post-Simpco acquisition acquired and improved assets;
and the release of an undetermined portion of the accounts receivable due
from the State of Oklahoma, in return for the return to treasury of the
originally issued 850,000 shares of Common Stock, as well as the cancel-
lation of $145,000 in promissory notes. A loss of $77,378 was incurred
in this agreement, and reflected in the June 30, 2001 financial state-
ments under the contingency provisions of generally accepted accounting
principles.
Item 2. Changes in Securities.
(a) There have been no material modifications to the instruments
defining the rights of the holders of any class of registered securities.
(b) There have been no material limitations or qualifications on the
rights evidenced by any class of registered securities by the issuance or
modification of any other class of securities.
(c) The Company continued a private placement offering for additional
funding. At the balance sheet date, $500 in funds had been received for
additional stock, but the shares have not been issued, pending receipt
of certain documents. The amounts received are included in stockholders'
equity.
(d) During July of 2001, the Company issued 5,250 shares of restricted
common stock for the payment of certain fees and authorized the future
issuance of 27,000 shares of restricted common stock for the payment of
certain fees.
(e) During October of 2001, the Company issued 6,250 shares of restrict-
ed common stock for the payment of certain fees and authorized the future
issuance of 14,250 shares of restricted common stock for the payment of
certain fees.
(f) During October of 2001, for the year ending June 30, 1999, the Comp-
any authorized stock options exercizable at $.10 per share, totalling
60,000 shares as consideration for the services of Bryan L. Walker acting
as Chief Executive Officer of the Company. For the year ending June 30,
1999, the Company authorized stock options exercizable at $.10 per share,
totalling 30,000 shares as consideration for the services of Richard C.
Smith acting as Chief Financial Officer of the Company. For each of the
years ending June 30, 2000, and June 30, 2001, the Company authorized
stock options exercizable at $.10 per share, totalling 100,000 shares,
per year, as additional consideration for the services of Bryan L. Walker
acting as Chief Executive Officer of the Company. For each of the years
ending June 30, 2000, and June 30, 2001, the Company authorized stock
options exercizable at $.10 per share, totalling 75,000 shares, per year,
as consideration for the services of Richard C. Smith acting as Chief Fin-
ancial Officer of the Company. For the year ending June 30, 2002, the
Company authorized stock options exercizable at $.10 per share propor-
tionate to the amount of time served in office, totalling 100,000 and
75,000 shares respectively to Bryan L. Walker and Richard C. Smith as
consideration for their services acting as Chief Executive and Chief Fin-
ancial Officers of the Company.
(g) During October of 2001, for the years ending June 30, 1999; June 30,
2000; June 30, 2001; and June 30, 2002; the Company authorized stock op-
tions exercizable at $.10 per share proportionate to the amount of time
served in office, totalling 10,000 shares per fiscal year, to the non-
salaried members of the Board of Directors, as consideration for their
services acting as Directors of the Company. Michael Bacon is the only
Director that has been paid an executive salary.
(h) During October of 2001, the Company established a Qualified Employee
Medical Reimbursement Program for certain qualified employees and officers
of the Company.
Item 3. Defaults Upon Senior Securities
(a) There has been no material default in the payment of principal,
interest, a sinking or purchase fund installment, or any other material
default not cured within 30 days, with respect to any indebtedness of
the small business issuer exceeding 5 percent of the total assets of the
issuer.
(b) There is no material arrearage in the payment of dividends and there
has been no other material delinquency not cured within 30 days, with
respect to any class of preferred stock of the registrant which is
registered or which ranks prior to any class of registered securities,
or with respect to any class of preferred stock of any significant
subsidiary of the registrant.
Item 4. Submission of Matters to a Vote of Security Holders.
There were no items submitted to a Vote of Security Holders during the
reporting period.
Item 5. Other Information.
As of September 30, 2001, according to the register of Corporate Stock
Transfer, our Transfer Agent, supplemented with the quarter's stock is-
suances, we had approximately 172 shareholders of record of our
7,867,055 outstanding shares of common stock.
(a) On September 6, 2000, the Board of Directors authorized the
corporation to initiate discussions with Sierra Brokerage Services,
Inc., of Columbus, Ohio, to enlist their sponsorship of the Com-
pany's application to list and trade its common stock on trading
mechanisms of NASD. Such application was made and approved for
listing on the OTC Bulletin Board by NASD staff on March 23, 2001.
Our common stock commenced trading on the electronic Bulletin Board
under the symbol "BTEC" on March 26, 2001. Under NASD rules, there
were no high and low closing bid quotations in the over-the-counter
market for the common stock, as reported by the single sponsoring
market maker during the period from March 23 through the first 30
days. Quotations would represent inter-dealer quotations, without
adjustment for retail markups, mark-downs or commissions, and may
not necessarily represent actual transactions. The Company has made
no public announcements regarding the availability of its common
stock in public markets.
(b) On September 20, 2000, the Company executed a contract with Neil
Rand d/b/a Corporate Imaging, 5800 West Glenn Drive, Suite 250,
Glendale, Arizona 85301, to be provided business management, public
and investor relations and other related corporate advisory services.
As compensation for his services, Neil Rand was to receive an initial
payment of fifty thousand (50,000) shares of common stock in the
Company, and a monthly payment of five thousand (5,000) shares for
his services. The monthly payment of shares were to start upon NASD
approval of the listing of the Company's stock on a NASD venue. The
Company voided the contract based upon non-performance and misrepre-
sentations on the part of Neil Rand. Demand for the return of the
securities has been made with no response from Neil Rand.
(c) On May 24, 2001, the Company signed a 'memorandum of understand-
ing to set forth the terms of the acquisition of two corporations in
the business as a local internet service provider in the state of
Hawaii, collectively doing business as Inter-Pacific Network Services.
This understanding was agreed to be unpublicized and subject to the
Company being able to secure financing sufficient to acquire and pro-
vide operating capital for its combined internet operations. The
Company is currently negotiating the terms of finanancing the business
acquisitions.
Item 6. Exhibits and Reports on Form 8-K.
There were no reports of Form 8-K filed during the fiscal year covered by
this filing.
There are no exhibits submitted with the filing of this Form 10KSB.
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.
BASIC TECHNOLOGIES, INC.
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(Registrant)
Date November 19, 2001 By: /S/ BRYAN L. WALKER
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Bryan L. Walker
President & CEO