UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Amendment #1
to
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 13, 2001 (September
4, 2001)
KIK TECHNOLOGY INTERNATIONAL, INC.
-----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 000-1109664 91-2021602
- -------------------------------- ------------------- --------------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) file number) Identification No.)
590 Airport Road
Oceanside, CA 92054
- --------------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (760) 967-2777
n/a
------------------------------------------------
(Former name or former address,
if changes since last report)
827 State Street, Suite 26,
Santa Barbara, CA 93101
Copy of Communications to:
Mintmire & Associates
Donald F. Mintmire, Esq.
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
This Form 8-K/A amends the Form 8-K filed September 19, 2001. The purpose
of this filing is to provide financial statements for KIK Technology, Inc., a
California corporation and the pro forma financial information for the Company,
as required by Item 7 of Form 8-K.
The Company manufactures and markets an extensive and high quality line of
off-highway Microcellular Polyurethane ("MCP") tires for the healthcare, light
industrial, lawn and garden and recreational industries.
KIK Technology Inc., a California company, is a wholly-owned subsidiary of
the Company, and operates from its manufacturing plant and marketing offices
located at Oceanside, CA.
The current KIK production processes, formulations, manufacturing
equipment, and line of some 250 products are the result of over ten years of
research and development, funded by over C$9 million of invested capital, and
protected by trade secrets and patents.
An R&D company in its formative years, KIK developed new and tougher
varieties of urethane formulations; tooled new products; and added extensive new
production capacity. The Company introduced broadly-based marketing programs a
few years ago resulting in 1999 revenues of C$4.3 million and $5.5 million in
2000. Revenues are generated through direct sales to the medical market segment
(primarily wheelchair tires) and through an extensive network of third party
marketing distributors. KIK now intends to implement ambitious marketing
strategies, directly and through carefully selected new strategic partners. The
manufacturing infrastructure sufficient to meet projected demand through the
first two years is in place.
Polyurethane tires are manufactured by blending hydrocarbon-based quality
isocyanate intermediates with glycol-based polyols and other chemicals. The
resulting compound makes a light, tough tire which the Company believes will set
an evolutionary trend in the tire industry.
KIK tires are environmentally friendly, puncture and leak proof and
maintenance free. They ride like a pneumatic tire but last much longer life due
to their tough polymer construction.
THE MARKETS
The Company has grouped the worldwide market for off-highway tires into
four major market segments, each possessing identifiable business
characteristics requiring separate sales strategies.
HEALTHCARE: The Company's immediate focus is penetration of the existing
wheelchair and power scooter pneumatic tire business, with emphasis at the OEM
level. This has been the "prototype" industry around which the Company has
developed and perfected its MCP tire technology. Through trade shows, trade
magazine advertising, distributors and direct sales contacts, an excellent base
has been established to facilitate future growth in this sector.
INDUSTRIAL: KIK markets light, off-highway industrial and utility tires through
its strategic alliance with ARNCO, A Los Angeles based producer of pneumatic
tire sealants and foam-fill compounds. ARNCO, the world leader in their field,
has a North American distribution network in place providing an immediate and
natural sales outlet for KIK products. KIK private-labels tires for ARNCO under
the "Carefree Tire" registered trademark, and for selected high volume
customers.
RECREATIONAL: Although the Company has products for recreational devices such as
golf carts and skate boards, this market is dominated by bicycles. KIK will
likely manufacture bicycle tires outside of North America initially, through
selected strategic (joint venture) partners in countries such as China active in
export markets, and where users are reliant on the bicycle as basic
transportation. There are an estimated 500 million bicycles in China. 90 million
more are manufactured each year, with 40 million remaining in China, and the
balance exported.
LAWN & GARDEN: KIK will attack the international lawn and garden OEM market
directly and through established distributors. Most of Carefree Tire's North
American downstream tire distribution network services this industry parallel to
the industrial market. Initial results indicate that users embrace this new
technology enthusiastically for such applications as wheelbarrows, powered lawn
mowers, snow blowers, and farm carts, etc. ARNCO believes their Carefree Tire
distributors can reach most of the 30,000 retail tire dealers in North America.
OEMs are also being aggressively pursued in the United States, Canada and
Europe.
MANAGEMENT
The names and positions of the directors and executive officers of the
Company are as follows:
Donald P. Dean, P. Eng. Donald P. Dean serves as Secretary, Chairman of the
Board and Director of KIK Tire Technologies Inc. He has been with the Company
since 1987. From 1984 to 1987, he served as President of Jade Marble Crafts
Ltd., a manufacturer of polyester resin-based plastic products and Twin Top
Industries Ltd. Twin Top was a manufacturer of polyurethane foam insulated
fiberglass well-head shelters and buildings. During the 1960's Mr. Dean worked
as an engineer, distribution supervisor and plant manager of the Toronto
Marketing and Chemical Distribution Terminal for Shell Canada Limited.
Subsequently, he was President of a subsidiary of Trimac Limited providing
worldwide transportation and logistics planning, and management consulting
services to government and industry. Mr. Dean is a registered professional
engineer. He received a B.Sc. in civil engineering from the University of
Saskatchewan in 1960.
William M. Knooihuizen, PE., William M. Knooihuizen serves as President and
Director. He has been an Officer with the Company since 1987.. He joined KIK
Technology Inc. as plant manager in May, 1993, and was appointed President and
CEO of that company in 1996. He has over 25 years experience in urethane
processing technology, where he has held the positions of V.P./General Manager
for Dam Industries, Inc., United Foam Corporation and Evanite Permaglass. He
received a degree in Chemical Engineering from Penn State University in 1966.
Kuldip C. Baid, CA., Kuldip C. Baid has served as Chief Financial Officer
and Director since September 1987. Mr. Baid is a chartered accountant who from
1981 to 1986 was Manager of Tax with Turbo Resources Ltd. Previous work
experience includes public accounting practice with Deloitte & Touche;
employment as a financial analyst for Oxford Development Group Ltd.; and Manager
of Accounting for Carma Developers Ltd.. Mr. Baid received a B. Commerce degree
from the University of Alberta in 1976 and completed his certification as a
Chartered Accountant in 1979.
A. Rene Dervaes, Jr., Mr. Dervaes has served as an Officer and Director
since January 2001. He was the co-founder and then Chairman of the A.R. Dervaes
Company, Inc. from 1961 to 1982, a 125 employee manufacturer and supplier of
equipment to heavy industry. From 1982 to 1985 he was the President of Khonbu
Industries, a designer and nationwide distributor of exclusive consumer
products. From 1978 to 1986 he was the Chairman and CEO of Eagle Rock
Corporation. From 1986 to 1990 he was the Chairman and CEO of Vantage
Industries, an international marketing firm. From 1991 to the present he has
served as the Chairman and CEO of Secured Retirement International, Inc.,
specializing in the design and marketing of proprietary U.S. Treasury and
municipal bond mutual funds. Mr. Dervaes also co-invented a unique finance
product that pays increasing distributions through a patented method for pooling
and distributing bond income.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
Pursuant to the requirements of Regulation S-X 210.3.05(b), the following
are audited financial statements of KIK Technology, Inc., a California
corporation. The registrant acquired all of the outstanding capital stock of
such entity on September 19, 2001.
KIK TECHNOLOGY, INC.
FINANCIAL STATEMENTS
YEARS ENDED JANUARY 31, 2001 AND 2000,
SIX MONTHS ENDED JULY, (UNAUDITED), AND
SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
CONTENTS
Page
Independent auditors' report F-1
Financial statements:
Balance sheets F-2
Statements of operations F-3
Statements of shareholder's equity F-4
Statements of cash flows F-5
Notes to financial statements F-6
Pro Forma
Balance sheets F-14
Statements of operations F-15
Notes to financial statements F-17
INDEPENDENT AUDITORS' REPORT
The Board of Directors
KIK Technology, Inc.
We have audited the accompanying balance sheet of KIK Technology, Inc. as of
January 31, 2001, and the related statements of operations, shareholder's equity
and cash flows for each of the years in the two year period ended January 31,
2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of KIK Technology, Inc. as of
January 31, 2001, and the results of its operations and its cash flows for each
of the years in the two year period ended January 31, 2001, in conformity with
accounting principles generally accepted in the United States of America.
/s/Horwath Gelfond Hochstadt Pangburn, P.C.
HORWATH GELFOND HOCHSTADT PANGBURN, P.C.
Denver, Colorado
December 4, 2001
KIK TECHNOLOGY, INC.
BALANCE SHEETS
ASSETS
January 31, 2001 July 31, 2001
------------------ ------------------
(Unaudited)
Current assets:
Cash and cash equivalents (Note 4) $ 241,331 $ 243,366
Accounts receivable, net of allowance for doubtful accounts of
$27,000 at January 31, 2001 and at July 31, 2001 281,281 278,699
Inventories 370,677 485,200
Prepaid expenses and deposits 37,943 39,577
------------------ ------------------
Total current assets 931,232 1,046,842
------------------ ------------------
Property and equipment, net (Note 3) 137,527 135,331
------------------ ------------------
Total assets $ 1,068,759 $ 1,182,173
================== ==================
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 329,279 $ 411,826
Accrued expenses 40,756 28,410
Note payable (Note 4) 50,000 99,980
Total liabilities 420,035 540,216
------------------ ------------------
Commitments (Notes 7 and 8)
Shareholder's equity:
Common stock, no par value,
20,000,000 shares authorized;
5,690,000 shares issued and outstanding 25,490 25,490
Additional paid-in capital 4,956,966 4,956,966
Accumulated deficit (4,333,732) (4,340,499)
------------------ -------------------
Total shareholder's equity 648,724 641,957
Total liabilities and shareholder's equity $ 1,068,759 $ 1,182,173
================== ===================
See notes to financial statements. F-2
KIK TECHNOLOGY, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED JANUARY 31, 2001 AND 2000,
SIX MONTHS ENDED JULY 31, 2001 (UNAUDITED), AND
SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
Years ended January 31, Six months ended July 31,
---------------------------------- --------------------------------------
2001 2000 2001 2000
---------------- --------------- ----------------- ------------------
(Unaudited) (Unaudited)
Net sales $ 3,715,483 $ 2,845,281 $ 1,266,824 $ 2,490,930
Cost of sales 3,159,029 2,425,858 1,057,996 2,004,855
---------------- --------------- ----------------- ------------------
Gross profit 556,454 419,423 208,828 486,075
General and administrative expenses 528,403 295,408 218,659 168,777
---------------- --------------- ----------------- ------------------
Income (loss) from operations 28,051 124,015 (9,831) 317,298
Interest and other income (expense) 7,355 (210) 3,064 947
---------------- --------------- ----------------- ------------------
Net income (loss) $ 35,406 $ 123,805 $ (6,767) $ 318,245
================ =============== ================= ==================
See notes to financial statements. F-3
KIK TECHNOLOGY, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED JANUARY 31, 2001 AND 2000, AND
SIX MONTHS ENDED JULY 31, 2001 (UNAUDITED)
Common stock
-----------------------------
Additional Accumulated
Shares Amount paid-in capital deficit Total
------------- -------------- ---------------- ----------------- ---------------
Balances, February 1, 1999 5,690,000 $ 25,490 $ 4,632,053 $ (4,492,943) $ 164,600
Net income for the year ended
January 31, 2000 123,805 123,805
Capital contributions from parent company 102,232 102,232
------------- -------------- ---------------- ----------------- ---------------
Balances, January 31, 2000 5,690,000 25,490 4,734,285 (4,369,138) 390,637
Net income for the year ended
January 31, 2001 35,406 35,406
Capital contributions from parent company 222,681 222,681
------------- -------------- ---------------- ----------------- ---------------
Balances, January 31, 2001 5,690,000 25,490 4,956,966 (4,333,732) 648,724
Net loss for the six months ended
July 31, 2001 (unaudited) (6,767) (6,767)
------------- -------------- ---------------- ----------------- ---------------
Balances, July 31, 2001 (unaudited) 5,690,000 $ 25,490 $ 4,956,966 $ (4,340,499) $ 641,957
============= ============== ================ ================= ===============
See notes to financial statements. F-4
KIK TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 2001 AND 2000,
SIX MONTHS ENDED JULY 31, 2001 (UNAUDITED), AND
SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
Years ended January 31, Six months ended July 31,
----------------------------- ---------------------------------
2001 2000 2001 2000
------------- ------------- -------------- ------------
(Unaudited) (Unaudited)
Cash flows from operating activities:
Net income (loss) $ 35,406 $ 123,805 $ (6,767) $ 318,245
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Provision for doubtful accounts 111,830
Depreciation and amortization 67,283 58,338 21,421 33,077
Decrease (increase) in accounts receivable 35,167 (13,999) 2,582 (15,214)
Increase in inventories (86,700) (39,065) (114,523) (216,266)
Decrease (increase) in
prepaid expenses and deposits (25,189) 19,846 (1,634) (15,591)
Increase (decrease) in accounts payable (95,746) (296,568) 82,547 4,763
Increase (decrease) in accrued expenses 12,088 3,903 (12,346) 2,252
Net cash provided by (used in) operating activities 54,139 (143,740) (28,720) 111,266
------------- ------------- ---------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (88,718) (7,247) (19,225) (34,500)
Net cash used in investing activities (88,718) (7,247) (19,225) (34,500)
------------- ------------- ---------------- ----------------
Cash flows from financing activities:
Borrowings under line of credit 50,000 49,980
Capital contributions from parent company 222,681 102,232 222,681
Net cashed provided by financing activities 272,681 102,232 49,980 222,681
------------- ------------- ---------------- ----------------
Increase (decrease) in cash and cash equivalents 238,102 (48,755) 2,035 299,447
Cash and cash equivalents, beginning of period 3,229 51,984 241,331 3,229
Cash and cash equivalents, end of period $ 241,331 $ 3,229 $ 243,366 $ 302,676
============= ============= ================ ================
Supplemental disclosure of cash flow information:
Cash paid for interest $ 1,240 $ 191 $ 2,526 $ -
============= ============= ================ ================
See notes to financial statements. F-5
KIK TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED JANUARY 31, 2001 AND 2000,
THE SIX MONTHS ENDED JULY 31, 2001 (UNAUDITED), AND
THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
1. Organization and basis of presentation:
KIK Technology, Inc. (the "Company") is a California corporation formed on
June 7, 1988. The Company is a wholly-owned United States subsidiary of KIK
Tire Technologies, Inc. (KTTI), a Canadian public company trading on the
Canadian Venture Exchange.
The Company manufacturers and markets directly and through distributors
urethane products, primarily puncture-proof microcellular polyurethane
tires designed for a wide variety of consumer products and off-highway
applications. Principle industries served include lawn and garden, health
and wellness, industrial, and sports and recreation. The Company's products
are sold primarily in the United States.
2. Summary of significant accounting policies:
Unaudited financial statements:
The balance sheet as of July 31, 2001, the statement of shareholder's
equity for the six-months ended July 31, 2001, and the statements of
operations and cash flows for the six-months ended July 31, 2001 and July
31, 2000, have been prepared by the Company without audit. In the opinion
of management, all adjustments (which include normal recurring adjustments)
necessary to present fairly the financial position, results of operations
and cash flows for the six-months ended July 31, 2001 and July 31, 2000,
have been made. The results of operations for the six-months ended July 31,
2001 are not necessarily indicative of the operating results for the full
year.
Basis of presentation:
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America.
Cash and cash equivalents:
Cash and cash equivalents include cash and other highly liquid investments
with maturities of three months or less at the date of acquisition. Cash
equivalents are stated at cost, which approximates market value.
Inventories:
Inventories are valued at the lower of cost or market. Cost is determined
principally on the average cost method. Inventories consist of raw
materials of $151,430 and $177,181 (unaudited) and finished goods of
$219,247 and $308,019 (unaudited) at January 31, 2001 and July 31, 2001,
respectively.
F-6
KIK TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED JANUARY 31, 2001 AND 2000,
THE SIX MONTHS ENDED JULY 31, 2001 (UNAUDITED), AND
THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
2. Summary of significant accounting policies (continued):
Property and equipment:
Property and equipment is stated at cost and depreciated using the
straight-line method over the following estimated useful lives:
Machinery and equipment 7 years
Furniture and fixtures 5 years
Vehicles 5 years
Leasehold improvements 2 years
Impairment:
The Company assesses the carrying values of its long-lived and other assets
for impairment when circumstances indicate such amounts may not be
recoverable from future operations. Generally, assets to be held and used
in operations are considered impaired if the sum of expected undiscounted
future cash flows is less than the assets' carrying values. If impairment
is indicated, the loss is measured based on the amounts by which the
assets' carrying values exceed their fair values. Based on its review,
management does not believe any impairment has occurred as of January 31,
2001 and July 31, 2001 (unaudited).
Revenue recognition:
Revenues associated with the sale of tires and accessories are recognized,
upon shipment to, or receipt by customers, depending upon contractual
terms.
Use of estimates:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. Management
makes these estimates using the best information available at the time the
estimates are made; however, actual results could differ from those
estimates.
F-7
KIK TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED JANUARY 31, 2001 AND 2000,
THE SIX MONTHS ENDED JULY 31, 2001 (UNAUDITED), AND
THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
2. Summary of significant accounting policies (continued):
Income taxes:
The Company has adopted the provision of Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes. SFAS No. 109
requires recognition of deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Under this method, the deferred tax
liabilities and assets are determined based on the difference between
financial statement and tax basis of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
Comprehensive income:
SFAS No. 130, Reporting Comprehensive Income, requires disclosure of
comprehensive income, which includes certain items previously not reported
in the financial statement of income, including unrealized gains and losses
on available-for-sale securities and foreign currency translation
adjustments. During the years ended January 31, 2001 and 2000, and during
the unaudited six-month periods ended July 31, 2001 and 2000, the Company
did not have any components of comprehensive income to report.
Risk considerations:
The Company is subject to risks and uncertainties common to manufacturing
companies, including technological change, dependence on principal
products, new product introductions and other activities of competitors,
and dependence on key personnel.
The Company is also exposed to credit risk with respect to uncertainties as
to timing and amount of collectibility of accounts receivable.
The Company's ability to continue operations in the normal course of
business is dependent on raising additional capital to meet its present and
future commitments, and in the long-term, the Company's ability to maintain
a profitable level of operations.
Financial instruments:
The carrying amounts of accounts receivable, accounts payable, accrued
expenses, and note payable approximate fair values primarily because of the
short-term maturities of these instruments.
F-8
KIK TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED JANUARY 31, 2001 AND 2000,
THE SIX MONTHS ENDED JULY 31, 2001 (UNAUDITED), AND
THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
2. Summary of significant accounting policies (continued):
Recently issued accounting pronouncements:
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. This
statement, as amended, is effective for fiscal years beginning after June
15, 2000. Currently the Company does not have any derivative financial
instruments and does not participate in hedging activities. Therefore, SFAS
No. 133 does not impact the Company's financial statements.
In December 1999, the staff of the Securities and Exchange Commission
issued Staff Accounting Bulletin ("SAB") No. 101, Revenue Recognition in
Financial Statements. SAB No. 101, as amended by SAB No. 101A and SAB No.
101B, was effective no later than the fourth fiscal quarter of fiscal years
beginning after December 15, 1999. SAB No. 101 provides the Staff's views
in applying generally accepted accounting principles to selected revenue
recognition issues. Management believes that its accounting policies comply
with the accounting and disclosure described in SAB No. 101. Therefore,
management believes that SAB No. 101 does not impact the Company's
financial statements.
In July 2001, The FASB issued SFAS No. 141, Business Combinations, and SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that
the purchase method of accounting be used for all business combinations
initiated after June 30, 2001. Use of the pooling-of-interests method will
be prohibited after that date. SFAS No. 142 changes the accounting for
goodwill and intangible assets with indefinite lives from an amortization
method to an impairment-only approach and requires intangible assets with
finite lives to be amortized over their useful lives. Thus, amortization of
goodwill and intangible assets with indefinite lives will cease upon
adoption of the statement. SFAS No. 142 is required to be applied in fiscal
years beginning after December 15, 2001. The Company is currently assessing
the impact, if any, that SFAS No. 141 and SFAS No. 142 may have on its
financial condition or results of operations.
InAugust 2001, the FASB issued SFAS No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets, which addresses accounting and financial
reporting for the impairment or disposal of lone-lived assets. This
statement is effective for the Company on April 1, 2002. The Company is
currently evaluating the impact the SFAS No. 144 will have on its financial
condition and results of operations.
F-9
KIK TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED JANUARY 31, 2001 AND 2000,
THE SIX MONTHS ENDED JULY 31, 2001 (UNAUDITED), AND
THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
3. Property and equipment:
Property and equipment is summarized by major classifications as follows:
January 31, 2001 July 31, 2001
---------------- --------------
(Unaudited)
Machinery and equipment $ 449,170 $ 466,620
Furniture and fixtures 21,509 23,284
Leasehold improvements 14,180 14,180
Vehicles 9,279 9,279
---------------- --------------
494,138 513,363
(356,611) (378,032)
---------------- --------------
$ 137,527 $ 135,331
================ ==============
4. Note payable:
The Company has an operating line of credit with a bank with a borrowing
limit of $100,000 which is collateralized by an assignment of two
certificate of deposit accounts with an approximate combined balance of
$100,000. The line of credit is repayable on demand and bears interest at
the bank's index rate, which was 9.00%, and 6.75%, at January 31, 2001 and
July 31, 2001, respectively.
5. Income taxes:
Temporary differences and carry forwards that give rise to deferred tax
assets as of January 31, 2001 and July 31, 2001 (unaudited) are as follows:
January 31, 2001 July 31, 2001
---------------- --------------
(Unaudited)
Operating loss carry forward $ 1,590,000 $ 1,588,000
Deferred tax assets valuation allowance (1,590,000) (1,588,000)
---------------- --------------
- -
================ ==============
F-10
KIK TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED JANUARY 31, 2001 AND 2000,
THE SIX MONTHS ENDED JULY 31, 2001 (UNAUDITED), AND
THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
5. Income taxes (continued):
The Company has net operating loss carry forwards of approximately
$3,975,000 and $3,969,000 at January 31, 2001 and July 31, 2001
(unaudited), respectively. At January 31, 2001, the Company's $3,975,000 of
net operating loss carryforwards will expire as follows:
Year ended
January 31,
-----------
2002 $ -
2003 -
2004 -
2005 350,000
2006 462,000
2007-2013 1,163,000
-----------
Total $ 3,975,000
===========
As of January 31, 2001 and July 31, 2001 (unaudited), the Company has
provided a 100% valuation allowance for the deferred tax assets because it
could not be determined that it was more likely than not that the deferred
tax assets would be realized through future earnings. The Company has other
deferred tax items which are not significant.
For the years ended January 31, 2001 and 2000, and for the unaudited
six-month period ended July 31, 2000, the Company had no provisions for
income taxes due to utilization of net operating losses incurred in prior
years. For the six-month period ended July 31, 2001, the Company had no
provision for income taxes due to the Company's net loss during that
period. Based on statutory rates, the Company's expected tax benefit
arising from the net loss for the unaudited six-month period ended July 31,
2001 would be approximately $625, and the Company's expected tax expense
for the years ended January 31, 2001 and 2000, and the unaudited six-month
period ended July 31, 2000 would be approximately $29,000, $57,000, and
$130,000, respectively. The difference between the expected tax expense or
benefit and non-recognition of a tax provision during the periods is the
result of applying net operating loss carry forwards.
F-11
KIK TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED JANUARY 31, 2001 AND 2000,
THE SIX MONTHS ENDED JULY 31, 2001 (UNAUDITED), AND
THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
6. Segment information:
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, establishes standards for the reporting and disclosure of
information about operating segments in annual and interim financial
statements. Operating segments are defined as components of an enterprise
for which separate financial information is available that is evaluated
regularly by the chief operating decision maker(s) in deciding how to
allocate resources and in assessing performance. SFAS No. 131 also requires
disclosures about products and services, geographic areas and major
customers.
Management has determined that the Company operates in one dominant,
operating segment that manufactures polyurethane tires for distribution in
the United States and internationally. Substantially all of the Company's
assets and employees are located in the United States.
The Company has one customer, which is also a distributor, which accounted
for approximately 78% and 68% of sales, for the years ended January 31,
2001 and 2000, respectively. This customer accounted for approximately 65%
and 82% of sales, for the unaudited six-month periods ended July 31, 2001
and 2000, respectively.
7. Commitments:
The Company leases its facilities under a non-cancelable operating lease,
which expires in May 2002.
Future minimum lease payments having a remaining term in excess of twelve
months are as follows:
Year ended
January 31,
-----------
2002 $ 92,912
2003 31,372
---------------
---------------
$ 124,284
===============
Rent expense incurred under this operating lease was approximately $89,000
and $84,000 for the years ended January 31, 2001 and 2000, and was
approximately $46,000 and $44,000 for the unaudited six-month periods ended
July 31, 2001 and July 31, 2000.
8. Subsequent events:
Business combination:
On September 4, 2001, the Company and its principal shareholders agreed to
sell to Russian-Imports.com (a development stage company) ("RIC") all of
their shares of the Company in exchange for 16,700,000 newly issued shares
of voting common stock of RIC.
F-12
KIK TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
THE YEARS ENDED JANUARY 31, 2001 AND 2000,
THE SIX MONTHS ENDED JULY 31, 2001 (UNAUDITED), AND
THE SIX MONTHS ENDED JULY 31, 2000 (UNAUDITED)
8. Subsequent events (continued):
Business combination (continued):
The foregoing transaction will be accounted for as a reverse acquisition of
RIC by the Company, since the shareholder of the Company owns approximately
73.6% of the post acquisition common shares of the consolidated entity
immediately after the completion of the transaction. Under reverse
acquisition accounting, the Company has been identified as the acquirer for
accounting purposes, the consolidated entity is considered to be a
continuation of the Company with RIC consolidated from the date of
completion of the transaction, and the pre-transaction financial position,
results of operations and cash flows of the consolidated entity are those
of the Company.
RIC, a company incorporated under the laws of the State of California, is a
development stage company, and, at July 31, 2001, contains no assets or
liabilities.
In conjunction with the reverse acquisition, the name of the Company has
been changed to KIK Technology International, Inc.
Letter of intent:
On November 6, 2001, the Company signed a non-binding letter of intent to
enter into an agreement with an investment banker whereby the investment
banker would act as exclusive dealer-manager in a proposed private
placement of securities to be issued by the Company pursuant to Regulation
D of the Securities Act of 1933.
It is contemplated that the investment banker will place convertible debt
securities of the Company for gross proceeds of up to $600,000, with an
option to increase the offering by an additional $400,000.
As compensation, the investment banker will receive a commission equal to
10% of the gross proceeds, an expense allowance equal to 4% of the gross
proceeds, plus for every $500,000 raised, 150,000 shares of the Company's
common stock. In addition, the investment banker will have the option to
nominate one person to the Company's Board of Directors if at least
$2,000,000 is raised.
F-13
KIK Technology International, Inc.
(Formerly Russian-Imports.com)
Unaudited Pro Forma Condensed Consolidated Balance Sheet
July 31, 2001
Historical
-------------------------------------
Russian- KIK Pro forma
Imports.com Technology, Inc. adjustments Pro forma
--------------- ------------------- ---------------- -----------------
ASSETS:
Current assets:
Cash and cash equivalents $ 243,366 $ 243,366
Accounts receivable, net 278,699 278,699
Inventories 485,200 485,200
Prepaid expenses and deposits 39,577 39,577
Total current assets 1,046,842 1,046,842
Property and equipment, net 135,331 135,331
Total assets $ $ 1,182,173 $ 1,182,173
=============== =================== ================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 411,826 $ 411,826
Accrued expenses 28,410 28,410
Note payable 99,980 99,980
Total liabilities 540,216 540,216
--------------- ------------------- ---------------- -----------------
Shareholders' equity:
Common stock 13,012 25,490 A (7,012) 22,700
B (8,790)
Additional paid-in capital 2,127,000 4,956,966 A (1,192,988) 4,959,756
B 8,790
B (940,012)
Stock subscriptions (1,200,000) A 1,200,000 -
Accumulated deficit (940,012) (4,340,499) B 940,012 (4,340,499)
Total shareholders' equity 641,957 641,957
--------------- ------------------- ---------------- -----------------
Total liabilities and shareholders' equity $ $ 1,182,173 $ $ 1,182,173
=============== =================== ================ =================
See notes to unaudited pro forma condensed consolidated financial statements.
F-14
KIK Technology International, Inc.
(Formerly Russian-Imports.com)
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended January 31, 2001
Historical
----------------------------------------
Russian- KIK Technology, Pro forma
Imports.com Inc. adjustments Pro forma
------------------ -------------------- ------------------ ------------------
Net sales $ 3,715,483 $ 3,715,483
Cost of sales 3,159,029 3,159,029
Gross profit 556,454 556,454
General and administrative expenses $ 64,012 528,403 C $ (64,012) 528,403
------------------ -------------------- ------------------ ------------------
Income (loss) from operations (64,012) 28,051 64,012 28,051
Interest and other income 7,355 7,355
Net income (loss) $ (64,012) $ 35,406 $ 64,012 $ 35,406
================== ==================== ================== ==================
Net income (loss) per share $ (0.02) $ *
================== ==================
Weighted average number of
common shares outstanding 2,759,788 D 22,700,000
================== ==================
* Less than $.01 per share
See notes to unaudited pro forma condensed consolidated financial statements.
F-15
KIK Technology International, Inc.
(Formerly Russian-Imports.com)
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six Months Ended July 31, 2001
Historical
----------------------------------------
Russian- KIK Technology, Pro forma
Imports.com Inc. adjustments Pro forma
------------------ ------------------- ------------------ ------------------
Net sales $ 1,266,824 $ 1,266,824
Cost of sales 1,057,996 1,057,996
Gross profit 208,828 208,828
------------------ ---------------- ------------------ ------------------
General and administrative expenses $ 876,000 218,659 C $ (876,000) 218,659
------------------ ---------------- ------------------ ------------------
Loss from operations (876,000) (9,831) 876,000 (9,831)
Interest and other income 3,064 3,064
Net loss $ (876,000) $ (6,767) $ 876,000 $ (6,767)
================== ================ ================== ==================
Net loss per share $ (0.08) $ *
================== ==================
Weighted average number of
common shares outstanding 10,815,920 D 22,700,000
================== ==================
* Less than $.01 per share
See notes to unaudited pro forma condensed consolidated financial statements.
F-16
KIK TECHNOLOGY
INTERNATIONAL, INC.
(FORMERLY RUSSIAN-IMPORTS.COM)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JULY 31, 2001 AND
FOR THE YEAR ENDED JANUARY 31, 2001
Effective September 4, 2001, Russian-Imports.com ("the Company"):
a) Cancelled 7,011,500 of its common stock.
b) Entered into a share exchange agreement ("the Agreement") with KIK
Technology, Inc. (KIK), and KIK Tire Technologies, Inc. (KTTI), which owned
100% of the issued and outstanding shares of KIK. KIK was incorporated
under the laws of the State of California on June 1, 1988 and manufactures
and markets directly and through distributors urethane products, primarily
puncture-proof microcellular polyurethane tires designed for a wide variety
of consumer products and off-highway applications.
c) Changed its name to KIK Technology International, Inc.
Pursuant to the Agreement, KTTI agreed to exchange all of its shares of KIK for
16,700,000 shares of the Company's common stock. This transaction represents a
reverse acquisition of the Company by KIK, since KTTI owns approximately 73.6%
of the post acquisition common shares of the consolidated entity immediately
after the completion of the transaction. For accounting purposes, the
acquisition has been treated as an acquisition of the Company by KIK and as a
recapitalization of KIK.
The accompanying unaudited pro forma condensed consolidated balance sheet gives
effect to the cancellation of common stock and the Agreement as if they had been
consummated on July 31, 2001. The accompanying unaudited pro forma condensed
consolidated statement of operations for the six months ended July 31, 2001
gives effect to the transactions as if they had been consummated on February 1,
2001. The accompanying unaudited pro forma condensed consolidated statement of
operations for the year ended January 31, 2001 gives effect to the transactions
as if they had been consummated on February 1, 2000. The unaudited pro forma
condensed consolidated financial statements should be read in conjunction with
the historical financial statements of KIK Technology, Inc., as well as those of
KIK Technology International, Inc. (formerly Russian-Imports.com). The unaudited
pro forma condensed consolidated financial statements do not purport to be
indicative of the financial position that actually would have resulted had the
transactions been consummated on July 31, 2001, or to be indicative of the
results of operations that would have occurred had the transactions been
consummated on February 1, 2001 or February 1, 2000.
F-16
KIK TECHNOLOGY
INTERNATIONAL, INC.
(FORMERLY RUSSIAN-IMPORTS.COM)
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
AS OF AND FOR THE SIX MONTHS ENDED JULY 31, 2001 AND
FOR THE YEAR ENDED JANUARY 31, 2001
1. Description of the transaction:
Effective September 4, 2001, Russian-Imports.com ("the Company"): a). Cancelled
7,011,500 of its common stock. b). Entered into a share exchange agreement ("the
Agreement") with KIK Technology, Inc. (KIK), and KIK Tire Technologies, Inc.
(KTTI), which owned 100% of the issued and outstanding shares of KIK. c).
Changed its name to KIK Technology International, Inc.
Pursuant to the Agreement, KTTI agreed to exchange all of its shares of KIK for
16,700,000 shares of the Company's common stock. This transaction represents a
reverse acquisition of the Company by KIK, since KTTI owns approximately 73.6%
of the post acquisition common shares of the consolidated entity immediately
after the completion of the transaction. For accounting purposes, the
acquisition has been treated as an acquisition of the Company by KIK and as a
recapitalization of KIK.
The historical shareholders' equity of KIK, prior to the transaction, is
retroactively restated for the equivalent number of shares exchanged in the
transaction after giving effect to any difference in the par value of the
Company's and KIK's common stock, with an offset to additional paid-in capital.
2. Description of the pro forma adjustments:
(A) To reflect the cancellation of 7,011,500 of the Company's common stock
resulting in a reclassification between common stock, stock subscriptions
and additional paid-in capital.
(B) To reflect the acquisition of all (5,690,000 shares) of the outstanding
common stock of KIK in exchange for 16,700,000 shares of the Company's
common stock. The transaction is recorded as a reverse acquisition. The
historical shareholder's equity of KIK prior to the merger is retroactively
restated (a recapitalization) for the equivalent number of shares exchanged
in the merger after giving effect to any difference in the par value of the
Company's and KIK's common stock, with an offset to additional paid-in
capital. The accumulated deficit of KIK is carried forward after the
acquisition.
(C) To eliminate the expenses of Russian-Imports.com, as these expenses do not
relate to the ongoing operations.
(D) To reflect weighted average shares for the cancellation and issuance of
shares in connection with the acquisition transaction, resulting in
22,700,000 shares being outstanding immediately after the transaction.
F-17
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
KIK TECHNOLOGY INTERNATIONAL, INC.
(Registrant)
Date: December 13, 2001 By: /s/ Donald P. Dean
------------------------------------------------
Donald P. Dean, Chairman and Secretary
By: /s/ Kuldip C. Baid
------------------------------------------------
Kuldip C. Baid, Chief Financial Officer and Director
By: /s/ A. Rene Dervaes, Jr.
----------------------------------------------
A. Rene Dervaes, Jr., Director