U.S. 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
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[ ] Transition Report under Section 13 or 15(d)of the Exchange Act For the
Transition Period from ________ to ___________
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Commission File Number: 0-29087
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NUTEK, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 87-0374623
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1110 Mary Crest Road, Henderson, NV 89014
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(Address of principal executive offices) (zip code)
702-567-2613 (Telephone) 702-567-2617 (Fax)
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Issuer's Telephone Number
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [ ] No [X]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
1
The Registrant has 91,549,651 shares of Common stock issued and outstanding,
par value $.001 per share as of September 30, 2001. The Registrant has
793,500 Preferred Stock issued and outstanding as of September 30, 2001.
Traditional Small Business Disclosure Format (check one) Yes [ ] No [X]
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................. 4
Balance Sheet (unaudited)............................ 5-6
Statements of Operations (unaudited)................. 7
Statements of Cash Flows (unaudited)................. 8
Notes to Financial Statements........................ 9-13
Item 2. Management's Discussion and Analysis of Plan
of Operation........................................ 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 20
Item 2. Changes in Securities and Use of Proceeds............ 20
Item 3. Defaults upon Senior Securities...................... 20
Item 4. Submission of Matters to a Vote
of Security Holders................................. 21
Item 5. Other Information..................................... 21
Item 6. Exhibits and Reports on Form 8-K...................... 21
Signatures...................................................... 22
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
The unaudited financial statements of registrant for the nine months ended
September 30, 2001, follow. The financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented.
4
Nutek, Inc.
CONSOLIDATED
BALANCE SHEET
AS AT
December 31, 2000 and September 30, 2001
BALANCE SHEET
ASSETS
September 30 December 31
2001 2000
CURRENT ASSETS
Cash 140,941.00 48,071.00
Accounts Receivable 482,280.00 60,396.00
Marketable Securities 72,000.00 72,000.00
Inventory 195,846.00 170,095.00
Accrued Income 11,200.00 11,200.00
Prepaid Expenses 43,229.00 2,891.00
---------- ---------
Total Current Assets 945,496.00 364,653.00
PROPERTY AND EQUIPMENT
Property and Equipment
(net of depreciation) 3,201,659.00 2,774,036.00
------------ ------------
Total Property and Equipment 3,201,659.00 2,774,036.00
OTHER ASSETS
Patent Rights Acquired
(net of amortization) 578,796.00 1,196,708.00
Long Term Investment 0.00 284,116.00
Website Assets 40,675.00 42,154.00
Packaging Design/Artwork 68,801.00 7,534.00
Deposits 51,686.00 3,455.00
Prepaid Expenses 190,000.00 0.00
Investments, Oil Wells 8,000.00 0.00
Investment, Electrostatic Solutions 180,000.00 0.00
Goodwill 1,431,407.00 0.00
Other Assets 154,495.00 110,538.00
(net of amortization)
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Total Other Assets 2,703,860.00 1,644,505.00
------------ ------------
TOTAL ASSETS 6,851,015.00 4,783,194.00
============ ============
See accompanying notes to financial statements
5
Nutek, Inc.
CONSOLIDATED
BALANCE SHEET
AS AT
December 31, 2000 and September 30, 2001
BALANCE SHEET
LIABILITIES & EQUITY
September 30 December 31
2001 2000
CURRENT LIABILITIES
Accounts Payable 199,523.00 51,639.00
Short Term Notes Payable 615,480.00 702,435.00
Payroll and Other Taxes Payable 160.00 0.00
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Total Current Liabilities 815,163.00 754,074.00
OTHER LIABILITIES
Long Term Notes Payable 0.00 32,000.00
Clipper Asset Purchase 489,948.00 639,948.00
Patent Rights Acquired Liability 0.00 670,000.00
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Total Other Liabilities 489,948.00 1,341,948.00
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TOTAL LIABILITIES 1,305,111.00 2,096,022.00
EQUITY
Common Stock 91,550.00 45,186.00
Common Stock, $0.001 par value,
authorized 200,000,000; shares issued
and outstanding at September 30, 2001
91,549,651 common shares; issued and
outstanding at December 31, 2000,
45,186,132 common shares
Additional Paid in Capital 10,358,535.00 7,237,329.00
Preferred Stock, $.001 par
value, authorized
20,000,000 shares 794.00 794.00
issued and outstanding at
September 30, 2001 and December 31
2000, 793,500 preferred shares
Royalty Investors 10,000.00 30,000.00
Treasury Stock (49,263.00) (49,263.00)
Retained (Deficit) (4,865,712.00) (4,576,874.00)
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Total Stockholders' Equity 5,545,904.00 2,687,172.00
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TOTAL LIABILITIES AND OWNERS EQUITY 6,851,015.00 4,783,194.00
============ ============
See accompanying notes to financial statements
6
Nutek, Inc.
CONSOLIDATED
STATEMENT OF OPERATIONS
FOR 3 AND 9 MONTHS ENDED
September 30, 2000 and September 30, 2001
Unaudited Audited
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Three months ended Nine months ended Jan 1
September 30 September 30 2000,
to Dec. 31
2001 2000 2001 2000 2000
------- ------ ------- ------ ----------
Revenues 1,032,077 396,174 1,644,633 1,083,532 1,250,627
COSTS AND EXPENSES
Cost of Goods Sold 590,087 93,763 816,012 273,423 88,787
Selling, General and
Administrative 502,010 117,408 853,141 346,996 706,693
Depreciation Expense 52,954 51,691 124,951 130,785 141,901
Interest Expense 36,752 3,460 51,752 7,078 15,817
Amortization of
Intangibles 8,386 18,433 46,633 56,014 72,262
Amortization (Reversal) (16,752) 0 (16,752) 0 0
--------- ------- ------- ------ -------
Total Costs and Expenses 583,350 284,755 1,059,725 814,296 1,025,460
--------- ------- ------- ------ -------
Net Ordinary Income or
(Loss) before taxes (141,360) 111,419 (231,104) 269,236 225,167
Other Income/Expense 718 0 (1,670) 0 0
Income Tax Expense 0 31,633 0 44,806 0
Benefit due to loss
Carryforward 0 (31,633) 0 (44,806) 0
Net Income or (Loss) (140,642) 111,419 (232,774) 269,236 225,167
======== ======= ======== ======= =======
Basic weighted average
number of common
shares outstanding 73,884,444 41,774,159 73,884,444 41,774,159 41,757,088
Basic Net Loss
Per Share (0.002) 0.003 (0.003) 0.007 0.01
See accompanying notes to financial statements
7
Nutek, Inc.
CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR 9 MONTHS ENDED
September 30, 2000 and September 30, 2001
STATEMENT OF CASH FLOWS
January 1, 2001 January 1, 2000
to September 30, to September 30,
2001 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net Profit(loss) from operations (232,774.00) 269,236.00
Services Received for stock 465,590.00 0.00
Depreciation Expense 124,951.00 130,785.00
Amortized Interest Expense 0.00 7,078.00
Amortization of Intangibles 46,633.00 56,014.00
Reversal of Amortization
on patent written down (16,752.00) 0.00
(Increase)/Decrease in
accounts receivable (421,884.00) (54,235.00)
(Increase)/Decrease in
Marketable Securities 0.00 (72,000.00)
(Increase)/Decrease in
inventory (25,751.00) (160,989.00)
Increase/(Decrease) in Accounts
Payable 148,044.00 (10,626.00)
Increase in prepaid expenses, current (40,338.00) 0.00
Increase in prepaid expenses, L/T (190,000.00) 0.00
Increase in Deposits (48,231.00) 0.00
Increase in Investments (188,000.00) 0.00
Increase in Goodwill (1,431,407.00) 0.00
Net Increase/Decrease other assets 98,402.00 0.00
Net cash flow provided by operating
Activities (1,711,517.00) 165,263.00
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Fixed Assets (570,736.00) 412,607.00
Net cash used by investing
activities 570,736.00 (412,607.00)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Capital Stock 2,526,272.00 400,760.00
Write off of expended assets 18,162.00 0.00
Write off Long Term Asset (284,116.00) 0.00
Prior Period Adjustment (26,038.00) 0.00
Increase/(Decrease) in Notes
payable 342,843.00 (186,513.00)
Increase/(Decrease) in Royalty
Investments (20,000.00) 0.00
Increase/(Decrease) in Long Term
Debt (852,000.00) 0.00
Write Down of Patent 670,000.00 0.00
Net cash provided by financing
activities 1,804,387.00 214,247.00
Balance at beginning of
period 48,071.00 81,404.00
Net increase (decrease) in cash 92,870.00 (33,097.00)
Balance as at end of
period 140,941.00 48,307.00
See accompanying notes to financial statements
8
Nutek, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30, 2001
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was incorporated in August of 1991 (Date of Inception) under the
laws of the State of Nevada, as Nutek, Inc. (The Company) and is engaged
primarily in the oil and gas industry.
SRC International, Inc. was incorporated June 20, 1997 in Illinois. SRC
International Inc. manufactures "Super Glide" a rail covering made of an
extremely durable, super-slick, space age polymer designed to reduce friction
between rails and hangers in the dry cleaning and garment industries.
Vac-U-Lift Production Company was incorporated in the state of Texas in March
of 1995 and is in the oil extracting industry on leases in Texas. The Company
remained inactive until it was acquired in June of 1996 by Nutek. Nutek
determined at the end of Fiscal 2000 to shut down this operation through
bankruptcy. This company had no significant assets but had accounts payable of
approximately $19,000.00, which were discharged as a result of the bankruptcy.
Century Clocks Inc is a Nevada corporation formed by Nutek, Inc. and doing
business in California. Century Clocks has a joint venture agreement with the
Department of Veterans Industries, produces clocks assembled and packaged by
U.S. veterans.
Elite Fitness Systems Inc. is a Nevada corporation doing business in
California. Elite Fitness Systems Inc. markets a proven fitness system that
has kept the world's finest fighting force in supreme physical condition.
Nutek determined at the end of Fiscal 2000 to return Elite Fitness Systems Inc.
to Mr. Helvenston in exchange for the 125,000 shares of Nutek Restricted stock
that were originally issued for the purchase of this corporation. Accordingly
Elite Fitness Systems, Inc.'s results of operations, assets, liabilities and
other financial activities are not included in Nutek's Consolidated Statements
for year end 2000.
Kristi & Co. was incorporated on September 13, 1999, is a Nevada corporation
doing business in California marketing woman's resort wear clothing designs and
design groups was purchased by the company 01/06/2000.
Nutek Oil, Inc. was incorporated December 3, 1998, purchased selected equipment
and assets on 02/23/2000 from Clipper Operating Company and is in the oil
producing business.
Datascension Inc, was purchased July 2, 2001 for $2,200,000 with company
shares at fair market value. Datascension is a premier data solutions
company representing a unique expertise in the collecting, storage,
processing and interpretation of data.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
The accompanying consolidated financial statements include the accounts of
Nutek Inc., and its different business segments, SRC International, Inc.,
Century Clocks Inc., Kristi & Co., Nutek Oil, Inc. and Datascension Inc. All
significant inter-company balances and transactions have been eliminated.
Accounting policies and procedures have not been determined except as follows:
1. The Company uses the accrual method of accounting.
2. Inventories are stated at the lower of cost or market, cost being
determined on the first in, first out (FIFO) basis.
3. Basic earnings per share is computed using the weighted average number of
shares of common stock outstanding. Diluted earnings per share were not
included as the inclusion of convertible notes, convertible preferred stock and
warrants would be anti-dilutive and all contingencies for conversion have not
occurred.
4. The Company has not yet adopted any policy regarding payment of dividends.
The Company has authorized 20,000,000 shares of Series B preferred stock with a
par value of $0.001 (one tenth of one cent). All of the shares which have been
issued were issued for cash at $1.00 a share. Series B shares have the same
voting rights as the common shares but have priority in the event of Company
liquidation. All of the shares outstanding were to be redeemed at $1.00 a
share plus all accrued dividends prior to December 31, 1993. This has been
extended by mutual agreement. Series B shares have annual dividends of $.15 a
share payable quarterly. They are convertible to common shares on a one for
one basis at the holders' option.
9
Nutek, Inc.
NOTES TO FINANCIAL STATEMENTS
5. The Company experienced a profit from the last fiscal year reported. The
Company will review its need for a provision for federal income tax after each
operating quarter. The Company has adopted FASB 109. The Company's marginal
tax rate is 15%. Its effective tax rate is zero. It has net operating losses
of $4,865,712.00. These losses begin to expire in 2004. The estimated tax
benefit of these losses is $724,261.00. The Company had a loss of $140,642.00
for the third quarter of 2001. The company's effective tax rate is 0%
6. The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions which affect the reported amounts of assets and liabilities as at
the date of the financial statements and revenues and expenses for the period
reported. Actual results may differ from these estimates.
7. The cost of equipment is depreciated over the estimated useful life of the
equipment utilizing the straight line method of deprecation. Depreciation
recorded during 1999 was $110,626.00. Depreciation recorded during 2000 was
$141,901.00. Depreciation recorded during the first nine months of 2001 was
$124,951.00.
8. The Company has adopted December 31 as its fiscal year end.
9. The Company expenses its research and development in the period it's
incurred.
10. All non cash exchanges of stock for services rendered or other purposes
were recorded at the market value of the stock exchanged.
11. The Company's Statement of Cash Flows is reported utilizing cash
(currency on hand and demand deposits) and cash equivalents (short-term, highly
liquid investments with a maturity of less than 90 days).
Assets and leases of the Clipper Operating Company were acquired on 02/23/2000
with 2,064,348 shares of Nutek stock at the current market price of $0.31
representing $639,948.00 a note for $639,948.00 was issued for the balance of
the purchase price.
Kristi and Co was acquired 01/06/2000 for 250,000 shares of the Company's stock
in exchange for the outstanding common stock of Kristi and Co at the current
market price of $0.20, and a note for $50,000.00 with annual interest of 7% was
issued for the balance of the purchase price, payable within 18 months.
Datascension Inc., was acquired 07/02/2001 for $2,2 million in shares of
the company's stock at fair market value.
12. The Company has adopted SOP 98-5. Start-up costs and reorganization
costs were expensed when SOP 98-5 was adopted.
13. Oil well leases are depleted over the units of production, or 12 years,
whichever is shorter.
10
Nutek, Inc.
NOTES TO FINANCIAL STATEMENTS
14. Identifiable intangibles including patents are amortized over five years.
The amount of amortization recorded in 1999 was $62,367.00. The amount of
amortization recorded in 2000 was $72,262.00. Amortization recorded for the
first nine months of 2001 was $46,633.00. Amortization was reversed by an
amount of $16,752.00 due to the right down of the Electrostatic Patent,
resulting in a net amortization for the first nine months of 2001 of $29,881.00
15. Investments are recorded at the lower of cost or market. Any reductions
in market value below cost are shown as unrealized losses in the consolidated
statement of operations.
16. The Company has adopted FASB 121. Management determined that the major
intangible asset, the electric light switch patent acquired from Electrostatic
Solutions, had a significant reduction in the usefulness of the asset at of
September 30, 2001 and was written down. The Company has however, purchased
the exclusive worldwide rights to a similar patent from The Mirianna Group,
which is far superior to the Electrostatic patent.
17. The company has adopted FASB 123 and will account for stock issued for
services and stock options under the fair value method.
18. The Company has adopted FASB 115. Its equity securities are classified
as available for sale and reported at fair value.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of manufacturing equipment, oil leases and
equipment, office equipment, furniture and fixtures and molds.
All assets are booked at historical purchase price and there is no variance
between book value and the purchase price.
NOTE 4 - OTHER ASSETS
Other assets consists of patents, the purchase of Kristi and Co, Inc for
$100,000, design and artwork and website development for software and coding.
These assets were valued at the existing market value of Nutek stock at the
time of purchase, when stock was used to purchase the asset.
Goodwill of $1,431,407.00 is recorded from the purchase of Datascension
Inc on 07/02/2001.
11
Nutek, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
Note payable to Clipper Company for assets purchased $489,948.00
All other notes payable are non interest bearing. Interest on notes payable
which are non interest bearing have been imputed at the rate of 9% per annum.
Short Term Notes Payable $615,480.00
NOTE 6 - INCOME TAXES
Nutek, Inc. and its business segments available net operating loss carry
forwards to offset future federal taxable income of approximately
4,865,712.00. The carry forwards start expiring in 2004. The Company has
deemed it less than likely that this benefit will be utilized. Therefore
Company recognized no income tax benefit from the losses generated during the
quarter ended September 30, 2001. The Company has adopted the Statement of
Financial Accounting Standards No. 109 - "Accounting for Income Taxes."
Deferred tax asset
Net operating loss carry forwards $ 4,865,712.00
Valuation allowance (4,865,712.00)
---------------
Net deferred tax asset -0-
12
Nutek, Inc.
NOTES TO FINANCIAL STATEMENT
NOTE 7 - CONTINGENCIES AND COMMITMENTS
1. Office Lease
As of September 30, 2001 the Company leased office and warehouse space in
Henderson, NV with aggregate monthly rent of approximately $10,218.00. Rent
recorded during 1999 and 2000 respectfully was $21,218.25 and $34,272.00.
2. Handi-Plate royalty
As part of acquiring the patents for this product, Nutek Inc. to provide the
inventor a 2.5% royalty interest on the gross sales of this product.
3. Clock royalty
As part of the acquisition of Century Clocks SA clock molds, a 7.5% royalty
interest was given. The royalty owners advanced $55,000.00 to Nutek, Inc.
Murray Conradie has the option of converting the loan which he made to Nutek
Inc. in the amount of $57,000.00 to a royalty interest and becoming a
participant in the 7.5% royalty interest.
NOTE 8 - ACQUISITIONS
All assets are booked at historical purchase price and there is no variance
between book value and the purchase price.
Patent rights for an electro static light switch were acquired August 27, 1999
for the fair market price of $1,000,000 from a non-related party. Payment was
made by issuing 600,000 shares of Restricted Common Stock valued at $.30 per
share. Another $150,000.00 was to be paid in cash with the balance of $670,000
to be paid by increasing the royalty payment from seven to ten percent until
the balance is paid off. As at December 31, 2000, the Company only owes the
$670,000.00 royalty portion as the $150,000.00 cash portion was paid. As of
March 31, 2001 the balance is $670,000.00.
Nutek Oil Inc., some of the assets and leases of the Clipper Operating Company
were acquired on 02/23/2000 with 2,064,348 shares of Nutek stock at the current
market price of $0.31 representing $639,948.00 a note for $639,948.00 was
issued for the balance of the purchase price. The purchase price of $1,279,896
was made up of (mineral acreage for $454,959; equipment at market value
$788,217; and gas pipeline at market value $36,720),
Vac-U-Lift Production Company, Inc. In June of 1996, the company exchanged
100,000 shares of its common stock and a certain amount of cash to acquire all
of the outstanding common shares of Vac-U-Lift Production Company, Inc., a
Texas corporation. The business combination was been accounted for under the
purchase method of accounting. There was no goodwill or intangible assets
recorded for this acquisition. Nutek determined at the end of Fiscal 2000 to
shut down this operation through bankruptcy. This company had no significant
assets but had accounts payable of approximately $19,000.00, which were
discharged as a result of the bankruptcy.
SRC International Inc. was acquired for 1,000,000 shares of the Company's
common stock for all the outstanding stock of SRC International, Inc. in a
transaction consummated on 04/01/1998. SRC International Inc. manufactures
"Super Glide" a rail covering made of an extremely durable, super-slick, space
age polymer designed to reduce friction between rails and hangers in the dry
cleaning and garment industries. The business combination has been accounted
for under the pooling of interest method.
Elite Fitness was acquired 04/07/1999 for 125,000 shares of the Company's stock
in exchange for the outstanding common stock of Elite Fitness. The business
combination has been accounted for under the pooling of interest method. Elite
Fitness Systems Inc. markets a proven fitness system that has kept the world's
finest fighting force in supreme physical condition. Nutek determined at the
end of Fiscal 2000 to return Elite Fitness Systems Inc. to Mr. Helvenston in
exchange for the 125,000 shares of Nutek Restricted stock that were originally
issued for the purchase of this corporation.
Century Clocks, Inc. (a Nevada Corporation) was incorporated on January 15,
1999 by Nutek, Inc. On April 30, 1999, clock molds valued at $257,800.00 were
acquired. Shares in the amount of 1,315,000 with a fair market value of $.12
totaling $157,800.00 plus notes payable in the amount of $100,000 was given in
exchange for the clock molds.
Kristi and Co was acquired 01/06/2000 for 250,000 shares of the Company's stock
in exchange for the outstanding common stock of Kristi and Co and a note
payable in the amount of $50,000.00 payable within 18 months at an interest
rate of 7% per annum. Kristi and Co. has the rights to certain woman's resort
wear clothing designs and design groups. Kristi and Co. plans to market these
items and to continue creating new designs. Kristi and Co. was incorporated
September 13, 1999. Kristi and Co. reported the rights and assets purchased
from Kristi Hough at their historical cost of zero in a manner similar to a
pooling of interest due to the common control of management, per APB Opinion
16. When Nutek, Inc. purchased Kristi and Co., the acquisition was booked at
the estimated fair market value of those rights and assets which Kristi and Co.
owned under the purchase method of accounting for business combinations per APB
16 as there was not a common control issue for this transaction. Accordingly,
these designs and client lists were restated at their estimated fair market
values per the best judgment of management. Management based its evaluation on
the fact that these customer lists, designs and patterns had previously
generated revenues of approximately $1,500,000 for a company in a similar line
of business over a period of approximately 18 months. Nutek, Inc. estimated
the customer list at $30,000.00 and the designs and patterns at $70,000.00
Current sales and cash flows of Kristi and Co.'s line indicate that the
valuation was accurate.
Datascension Inc., was acquired 07/02/2001 for $2,2 million in shares of
the company's stock at fair market value. Datascension is a premier data
solutions company representing a unique expertise in the collecting, storage,
processing and interpretation of data. The business combination has been
accounted for under the purchase method.
13
Nutek, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE 9 - RELATED PARTY TRANSACTIONS
As of September 30, 2001, Murray Conradie, President of Nutek Inc., has loaned
the Company $302,787.00, which includes $57,000.00 as a result of his brokering
the purchase of clock molds from South Africa. Mr. Conradie was formerly an
officer and manager of Century Clocks SA. He negotiated a purchase of clock
molds from South Africa. This was a three party transaction which involved Mr.
Conradie purchasing the molds in South Africa and then transferring the clock
molds to Century Clocks, Inc., a company wholly owned by Nutek, Inc. and formed
to pursue this business opportunity. The clock molds were recorded at Mr.
Conradie's, the transferor's, historical cost and book value. There were no
inventories involved in these transactions. Mr. Conradie also received
1,050,000 shares of the Company's common stock valued at $126,000.00, December
30, 1999 the day the stock was authorized and recorded in the Company's
minutes.
As of September 30, 2001, Kristi Conradie, vice president of Nutek Inc., has
loaned the Company $157,755.00. Kristi Conradie, vice president, received
250,000 shares of Nutek Inc's common restricted stock and a note payable in the
amount of $50,000.00 for the outstanding stock of Kristi and Co., Inc.
Murray Conradie and Kristi Conradie have also loaned the company an additional
$104,209.00 through their personal lines of credit, which is included in the
short term notes payable.
The total amount owed by the company to Murray and Kristi Conradie as of
September 30, 2001 is $564,751.00.
As of September 30, 2001, Donald Hejmanowski, vice president - finance of Nutek
Inc., has loaned the Company $26,809.00.
NOTE 10 - GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The financial statements do not include any adjustments relating to
the recoverability and classification of asset carrying amounts or the amount
of liabilities that might result should the Company be unable to continue as a
going concern. The Company's consolidated financial statements have been
prepared on the assumption the Company will continue as a going concern.
The Company previously reported as a Development Stage Company, however the
Company has generated significant revenues from its planned principal
operations for the year ending December 31, 2000 and is no longer considered a
Development Stage Company. Management believes that current operations will
continue to provide sufficient profits to meet operating costs and expansion.
NOTE 11 - YEAR 2000 ISSUE
The Company experienced no disruption in business to customers or vendors or
had a material adverse effect on the company's business, financial condition or
results of operations related to the year 2000.
NOTE 12. - LITIGATION
After numerous delays by the manufacturer of the tooling to provide Nutek the
final finished product for the Handi-Plate product in order to fulfill orders
received, Nutek lost over $5 million in sales of this product. In December
2000, the Company prepared a lawsuit which it has served on Advance plastics,
et al, of San Diego, California claiming more than $5 million in damages. These
revenues had made up a significant part of Nutek's growth strategy for 2000 and
were a significant setback to meeting the sales objectives for the year.
The company has determined it is in the best interests of the shareholders to
not pursue further legal action against Advanced Plastics of San Diego as
Advance Plastics has agreed to return the Handi-plate mold to the company.
14
Nutek, Inc.
NOTES TO FINANCIAL STATEMENTS
NOTE 13 - SUBSEQUENT EVENTS
In February 2001, the company increased the preferred shares to 20,000,000
authorized and the common shares to 200,000,000 authorized.
As previously announced, Nutek Inc is completing the spin-off of Nutek Oil Inc.
A dividend of 500,000 shares of the common stock of Nutek Oil, Inc, to be
distributed pro rata to Nutek Inc., shareholders on the basis of a ratio of one
share of Nutek Oil, Inc for each 100 outstanding shares of Nutek, Inc
(See Exhibit 8-K filed July 31, 2001)
The registrant has engaged Healey & Shron, Certified Public Accounts as its
principal accountant to replace its former principal accountant, James E.
Slayton, CPA. (See Exhibit 8-K filed August 7, 2001) Murray Conradie and
Kristi Conradie converted their outstanding loans in the company to the
company's common restricted stock on 10/12/2001 and will be accounted for in
the 2001 year end audited 10K financials.
NOTE 14 - SEGMENT INFORMATION
The Company has adopted FASB 131. The adoption of FASB 131 did not affect
results of the companies statement of operations or financial position, but did
affect the disclosure of segment information. The Company operates within two
segments, retail sales and exploration and production of oil and gas. Retail
sales includes Kristi and Co, SuperGlide, Electrostatic light switch and
Century Clocks.
15
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
All statements, trend analysis and other information contained in this Report
relative to markets for the Company's products and trends in revenues, gross
margin and anticipated expense levels, as well as other statements including
words such as "believe," "anticipate," "expect," "estimate," "plan" and
"intend" and other similar expressions, constitute forward-looking statements.
Those forward-looking statements are subject to business and economic risks,
and the Company's actual results of operations may differ from those contained
in the forward-looking statements. The following discussion of the financial
condition and results of Operations of the Company should also be read in
conjunction with the Financial Statements and Notes related thereto-included
elsewhere in this Report.
The Company was incorporated under the laws of the State of Nevada, on August
23, 1991, under the name Swiss Technique, Inc. The original Articles of the
Company authorized the issuance of fifty million (50,000,000) shares of common
stock with a par value of $0.001. On or about August 23, 1991, pursuant to
Section 78.486, Nevada Revised Statutes as amended, the Company filed with the
Nevada Secretary of State Articles of Merger, whereby the Company merged with
Sun Investments, Inc., a Utah corporation. On or about April 10, 1992, the
Issuer, with majority shareholder vote filed Articles of Amendment to the
Articles of Incorporation with the Secretary of State of Nevada, authorizing
five million (5,000,000) shares of Preferred Stock each have a par value of
$0.001, with such rights, preferences and designations and to be issued in
such series as determined by the Board of Directors of the Corporation. The
Company in accordance with Section 78.250 of the Nevada Revised Statues and
as a result of the majority consent of shareholders executed on or about
March 3, 1995 changed the name of the Company from Swiss Technique, Inc.,
to NuTek, Inc. The Company filed a Certificate of Amendment of Articles of
Incorporation with the Secretary of State of Nevada to change its name. On
or about September 20, 1997, the Company filed with the Nevada Secretary of
State a Plan of Reorganization and Agreement between itself and International
Licensing Group, Inc., a Delaware Corporation.
The Company is engaged in multiple business activities, which include but
are not limited to:
a) Elite Fitness Systems Inc. which markets video "fitness program" tapes
through infomercials;
(Update: Management determined at the end of Fiscal 2000 to return Elite
Fitness Systems Inc. to Mr. Helvenston in exchange for the 125,000 shares of
Nutek Restricted stock that were originally issued for the purchase of this
corporation.)
b) Century Clocks Inc., which produces plastic wall clocks;
c) Vac-U-Lift Production Company Inc., which owns the rights to oil leases in
Texas;
(Update: Management determined at the end of Fiscal 2000 to shut down this
operation through bankruptcy. This company had no significant assets but had
accounts payable of approximately $19,000.00, which were written off.)
d) Kristi & Co. Inc., designs and markets woman's resort wear clothing.
e) Nutek Oil Inc., was incorporated in the State of Texas and acquired
some of the assets of Clipper Operating Company and is involved in oil
production.
f) Internet marketing;
g) Datascension Inc., is a premier data solutions company representing a
unique expertise in the collecting, storage, processing and interpretation
of data.
h) Other consumer/industrial products which include: a plastic buffet
plate, producing "light switch" covers plates; and, plastic coverings
for metal rails,.
The Company's website can be found at: www.nutk.com.
The TekPlate product website can be found at www.tekplate.com
The Datascension website can be found at www.datascension.com
16
The Company had a loss $140,941 for the Quarter ended September 30, 2001,
based on revenues of $1,032,077. As of September 30, 2001, the Company had an
accumulated retained deficit of $4,865,712. The Company expects that its
operating expenses will continue to increase during the next several months,
especially in the areas of sales and marketing, and brand promotion. Thus, the
Company will need to generate increased revenues to attain profitability. To
the extent that increases in its operating expenses precede or are not
subsequently followed by commensurate increases in revenues, or that the
Company is unable to adjust operating expense levels accordingly, the Company's
business, results of operations and financial condition would be materially and
adversely affected. There can be no assurances that the Company can obtain
profitability or that the Company's operating losses will not increase in the
future.
Going Concern - The Company's financial statements are prepared using the
generally accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount of liabilities that might result should the Company be
unable to continue as a going concern.
The Company's consolidated financial statements have been prepared on the
assumption the Company will continue as a going concern. The Company
previously reported as a Development Stage Company, how ever the company has
for the fiscal year 2000 generated significant revenues from its planned
principal operations and is no longer considered a Development Stage Company.
Unclassified Balance Sheet - In accordance with the provisions of SFAS No. 53,
the Company has elected to present an unclassified balance sheet.
Loss Per Share - The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share" that established
standards for the computation, presentation and disclosure of earnings per
share ("EPS"), replacing the presentation of Primary EPS with a presentation
of Basic EPS. It also requires dual presentation of Basic EPS and Diluted EPS
on the face of the income statement for entities with complex capital
structures. The Company did not present Diluted EPS since it has a simple
capital structure.
The Company has not pursued or explored any opportunities for an acquisition
or merger. This does not preclude that the Company may not explore any
opportunities in the future.
Results of Operations
For the Third Quarter, ended September 30, 2001, the Company has generated
$1,032,077 in revenues and generated a loss of $140,642 for the same
period. This compares to revenues of $396,174 and a profit of $111,419 for the
same period last year. Through January 1, 2001 to September 30, 2001, the
Company has increased its working capital position by $519,754 from a
negative $389,421 at December 31, 2000 to a positive $130,333.
A contributing factor to the loss during this third quarter is the
expensing of the oil well drilled on the Davis lease in the amount of
$118,669. This well failed to produce any significant production and it
was decided to plug this well and expense the well costs in the third
quarter.
The company has also written down the Electrostatic Solutions Patent in
the amount of $670,000.00 during the third quarter, as it acquired the
exclusive world wide licensing rights to a far superior patent from The
Mirianna Group. As the company will exclusively market the product
under the Mirianna Group patent, capital costs associated with
developing the Electrostatic Solutions patent have also been expensed
during the third quarter.
Plan of Operation
1) During Third Quarter ended September 30, 2001 the Company incurred a
net loss of $140,642 from operations against revenues of $1,032,077 as
compared to a net profit from operations of $111,419 against revenues
of $396,174 for the same Quarter last year. The Company has increased its
selling, general and administration costs from $117,408 for the same
period last year to $502,010 for the third quarter this year. Depreciation
costs for the third quarter this year were $52,954, as compared to $51,691
for the same period last year.
As of September 30, 2001, the Company has ninety one million five hundred
and forty-nine thousand six hundred and fifty one (91,549,651) shares of
its $0.001 par value common voting stock issued and outstanding which are
held by approximately five hundred and nine (509) shareholders of record.
The Company also has seven hundred ninety-three thousand five hundred
(793,500) shares of its $0.001 par value Preferred Stock issued and
outstanding, as of September 30, 2001. All Preferred shares which have
been issued were issued for cash at $1.00 a share. Series B Preferred
shares have the same voting rights as the common shares but have priority
in the event of Company liquidation. All of the shares outstanding were
to be redeemed at $1.00 a share plus all accrued dividends prior to
December 31, 1993. This has been extended by mutual agreement. Series B
shares have annual dividends of $.15 a share payable quarterly. They are
convertible to common shares on a one for one basis at the holders' option.
17
Liquidity and Capital Resources
The Company signed a Letter of Intent with Clipper Operating Co., Inc.
in November, 1999. The terms of the Agreement include cash and Company
stock for oil mineral rights including some fixed assets of Clipper Operating
Co. This deal was finalized on February 22, 2000. (See "Letter of Intent,"
Exhibit 10.9, filed in the Company's Registration Statement 10SB12G)
The Company currently anticipates that it has enough available funds to
meet its anticipated needs for working capital, capital expenditures and
business expansion for the next 12 months. The Company expects that it will
continue to experience a small operating cash flow for the foreseeable future
as a result of significant new product development, advertising and
infrastructure.
As an On Going concern, if the Company needs to raise additional funds in
order to fund expansion, develop new or enhanced services or products,
respond to competitive pressures or acquire complementary products,
businesses or technologies, any additional funds raised through the issuance
of equity or convertible debt securities, the percentage ownership of the
stockholders of the Company will be reduced, stockholders may experience
additional dilution and such securities may have rights, preferences or
privileges senior to those of the Company's Common Stock. The Company
does not currently have any contractual restrictions on its ability to
incur debt and, accordingly, the Company could incur significant amounts
of indebtedness to finance its operations. Any such indebtedness could
contain covenants which would restrict the Company's operations. There
can be no assurance that additional financing will be available on terms
favorable to the Company, or at all. If adequate funds are not available
or are not available on acceptable terms, the Company may not be able to
continue in business, or to a lesser extent not be able to take advantage
of acquisition opportunities, develop or enhance services or products or
respond to competitive pressures.
The Company currently has two hundred and thirty two (232) employees of which
five (5) are Officers of the Company. As the Company begins to develop its
other product lines and expands Datascension, it will need to add additional
employees.
The Company has no material commitments for capital expenditures nor does
it foresee the need for such expenditures over the next year.
18
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-QSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), finding
suitable merger or acquisition candidates, expansion and growth of the Company's
business and operations, and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual results
or developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
This Form10-QSB contains statements that constitute "forward-looking
statements." These forward-looking statements can be identified by the use of
predictive, future-tense or forward-looking terminology, such as "believes,"
"anticipates," "expects," "estimates," "plans," "may," "will," or similar
terms. These statements appear in a number of places in this Registration and
include statements regarding the intent, belief or current expectations of
the Company, its directors or its officers with respect to, among other
things: (i) trends affecting the Company's financial condition or results of
operations for its limited history; (ii) the Company's business and growth
strategies; (iii) the Internet and Internet commerce; and, (iv) the Company's
financing plans. Investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve significant
risks and uncertainties, and that actual results may differ materially from
those projected in the forward-looking statements as a result of various
factors. Factors that could adversely affect actual results and performance
include, among others, the Company's limited operating history, dependence
on continued growth in the use of the Internet, the Company's inexperience
with the Internet, potential fluctuations in quarterly operating results and
expenses, security risks of transmitting information over the Internet,
government regulation, technological change and competition.
Consequently, all of the forward-looking statements made in this Form 10-QSB
are qualified by these cautionary statements and there can be no assurance that
the actual results or developments anticipated by the Company will be realized
or, even if substantially realized, that they will have the expected consequence
to or effects on the Company or its business or operations. The Company assumes
no obligations to update any such forward-looking statements.
19
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is from time to time involved in litigation incident to the
conduct of its business. Certain litigation with third parties and present
and former employees of the Company is routine and incidental, such litigation
can result in large monetary awards for compensatory or punitive damages.
The Company was recently in litigation with several separate lawsuits. They
were:
A former employee at Vac-u-lift, herein referred to as the Plaintiff,
slipped and fell on wet grass outside the offices, in Jourdanton, TX, and
subsequently alleged that she twisted her knee. She filed a complaint against
the company for various health conditions, and $500,000. Their attorney filed
two separate suits, of which the company was unable to properly Respond to the
first suit, and subsequently the Plaintiff received Summary judgment against
NuTek. Since Plaintiff did not follow specific legal procedures against NuTek,
which is considered a foreign corporation where the suit was filed in Texas,
the Company has initiated a restricted appeal to have the ruling reversed.
The second suit was answered, in July, 1999, and since it is tied to the
first suit, nothing has happened since. The Company plans to concurrently
file a counter suit for $150,000 in damages. The company successfully
overturned this judgment. This former employee is attempting to re-file
a complaint against the company. The company is in discussions with
corporate counsel to determine which course of action would be in the
company's best interests.
After numerous delays by the manufacturer of the tooling to provide Nutek the
final finished product for the Handi-Plate product in order to fulfill orders
received, Nutek lost over $5 million in sales of this product. In December
2000, the Company prepared a lawsuit which it has served on Advance plastics,
et al, of San Diego, California claiming more than $5 million in damages. These
revenues had made up a significant part of Nutek's growth strategy for 2000 and
were a significant setback to meeting the sales objectives for the year.
The company has determined it is in the best interests of the shareholders to
not pursue further legal action against Advanced Plastics of San Diego as
Advance Plastics has agreed to return the Handi-plate mold to the company.
In anticipation of patent infringement by third parties relating to the
production, sale and marketing of the TekPlate product, Nutek has
secured $1,5 million in patent protection insurance. In addition, Nutek
has $2 million in product liability insurance for this product.
ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults upon Senior Securities
None.
20
ITEM 4. Submission of Matters to a Vote of Security Holders
During the quarter ended March 31, 2001, the following matters were submitted
to the Company's security holders. The increase of the preferred stock from
5,000,000 authorized to 20,000,000 and the increase of the common stock from
50,000,000 authorized to 200,000,000 authorized.
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Reference is made to Registrant's Current Report on Form 8-K, dated July 27,
2001, disclosing the spin-off of Nutek Oil Inc. A dividend of 500,000 shares of
the common stock of Nutek Oil, Inc, to be distributed pro rata to Nutek Inc.,
shareholders on the basis of a ratio of one share of Nutek Oil, Inc for each
100 outstanding shares of Nutek, Inc. Twenty-five percent (25%) of such
shares will be freely tradable and seventy-five percent thereof will not be
tradable ("restricted") until after August 1, 2002 ("one year") (See Exhibit
8-K filed July 31, 2001)
Reference is made to Registrant's Current Report on Form 8-K, dated August 7,
2001, disclosing the registrant has engaged Healey & Shron, Certified Public
Accounts as its principal accountant to replace its former principal
accountant, James E. Slayton, CPA. (See Exhibit 8-K filed August 7, 2001)
(B) Reports on Form 8-K
On July 27, 2001, Registrant filed a Current Report on Form 8-K, relating to
the spin-off of Nutek Oil Inc. A dividend of 500,000 shares of the common stock
of Nutek Oil, Inc, to be distributed pro rata to Nutek Inc., shareholders on
the basis of a ratio of one share of Nutek Oil, Inc for each 100 outstanding
shares of Nutek, Inc. Twenty-five percent (25%) of such shares will be freely
tradable and seventy-five percent thereof will not be tradable ("restricted")
until after August 1, 2002 ("one year") (See Exhibit 8-K filed July 31, 2001)
On July 27, 2001, Registrant filed a Current Report on Form 8-K, relating to
the engagement of Healey & Shron, Certified Public Accounts as its principal
accountant to replace its former principal accountant, James E. Slayton, CPA.
(See Exhibit 8-K filed August 7, 2001)
21
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Nutek, Inc.
-------------
(Registrant)
/s/ Murray N. Conradie
- -------------------
Murray N. Conradie,
President, Chairman and CEO
Date: November 16, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Nutek, Inc.
/s/ Donald Hejmanowski
- -----------------------------------
Donald Hejmanowski, Corporate Secretary
Date: November 16, 2001
22