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 June 30, 2004
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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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DATASCENSION 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)
6330 McLeod Drive, Suite 1, Las Vegas, NV 89120
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(Address of principal executive offices) (zip code)
702-262-2061 (Telephone) 702-262-0033 (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 [X] No [ ]
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 153,526,790 shares of Common stock outstanding, par value
$.001 per share as of June 30, 2004. The Registrant has 505,900 shares of
Preferred Stock Series B issued and outstanding as of June 30, 2004.
Traditional Small Business Disclosure Format (check one) Yes [ ] No [X]
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements................................. 3
Balance Sheet (unaudited)............................ 3-4
Statements of Operations (unaudited)................. 5
Statements of Cash Flows (unaudited)................. 6
Notes to Financial Statements........................ 7-13
Item 2. Management's Discussion and Analysis of Plan
of Operation........................................ 13
Item 3. Controls and Procedures............................... 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................... 19
Item 2. Changes in Securities and Use of Proceeds............ 19
Item 3. Defaults upon Senior Securities...................... 19
Item 4. Submission of Matters to a Vote
of Security Holders................................. 19
Item 5. Other Information..................................... 19
Item 6. Exhibits and Reports on Form 8-K...................... 20
Signatures...................................................... 21
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS AND EXHIBITS
The unaudited financial statements of registrant for the three months ended
June 30, 2004, follow. As prescribed by item 310 of Regulation S-B, the
independent auditor has reviewed these unaudited interim financial statements
of the registrant for the three months ended June 30, 2004. 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.
DATASCENSION, INC.
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2004 AND DECEMBER 31, 2003
ASSETS
As of As of
6/30/04 12/31/03
CURRENT ASSETS:
Cash $ 73,121 $ 122,891
Accounts receivable 1,433,442 1,087,694
Inventory 226,105 227,997
Accrued income 11,200 11,200
Prepaid expenses 134,915 194,623
Note receivable, related party - 1,250
Current portion of notes receivable 341,054 451,054
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TOTAL CURRENT ASSETS $2,219,837 $2,096,709
Property and Equipment, net of accumulated
depreciation 1,846,281 3,374,421
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OTHER ASSETS:
Notes receivable, net of current portion 1,146,134 5,800
Patent rights acquired, net of amortization 561,262 561,262
Long-term investment 8,000 8,000
Website assets, net of amortization 29,590 29,340
Customer lists, net of amortization 43,611 43,611
Patterns/designs, net of amortization 44,583 44,583
Packaging design/artwork, net of amortization 86,512 86,512
Deposits 28,400 51,892
Goodwill 1,692,782 1,692,782
Trademarks 8,000 8,000
Licensing fees 50,000 50,000
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TOTAL OTHER ASSETS 3,698,874 2,581,782
TOTAL ASSETS $7,764,992 $8,052,912
========== ==========
3
LIABILITIES AND STOCKHOLDERS' EQUITY
6/30/04 12/31/03
CURRENT LIABILITIES:
Accounts payable $190,233 $278,022
Accrued expenses 225,758 182,377
Line of credit 372,778 449,650
Accrued contingent liabilities 180,000 338,461
Notes payable, related party 140,819 328,540
Current portion of long-term notes payable 63,337 102,033
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TOTAL CURRENT LIABILITIES $1,172,925 $1,679,083
LONG-TERM DEBT
Long-term notes payable, net of current portion 294,661 16,565
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TOTAL LONG-TERM DEBT 294,661 16,565
TOTAL LIABILITIES 1,467,586 1,695,648
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STOCKHOLDERS' EQUITY:
Common stock:
Common stock, $0.001 par value, 200,000,000
shares authorized; 154,027,069 shares issued,
153,068,736 outstanding at June 30, 2004 153,529 150,554
Additional paid-in capital-common stock 10,944,083 10,802,058
Preferred stock Series B:
Preferred stock, $0.001 par value, 10,000,000
shares authorized; 508,500 Series B shares
issued and outstanding at June 30, 2004 506 509
Additional paid-in capital-preferred Series B 481,994 507,992
Noncontrolling interest in subsidiary of Nutek Oil, Inc. - 311,137
Subscriptions receivable (153,750) (153,750)
Treasury stock, at cost; 958,333 at June 30, 2004 (134,388) (134,388)
Accumulated deficit (4,994,568) (5,126,848)
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TOTAL STOCKHOLDERS' EQUITY 6,297,406 6,357,264
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,764,992 $8,052,912
========== ==========
The accompanying notes to financial statements are an
integral part of these financial statements.
4
DATASCENSION INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2004 AND 2003
FOR THE FOR THE
3 MONTHS ENDED 6 MONTHS ENDED
6/30/04 6/30/03 6/30/04 6/30/03
REVENUE $2,245,000 $1,936,083 $4,279,455 $3,501,082
COST OF GOODS SOLD 1,724,903 1,148,589 3,427,221 1,885,490
---------- ---------- ---------- ----------
GROSS PROFIT 520,097 787,494 852,234 1,615,592
EXPENSES:
Selling, general and administrative $464,453 $563,061 $642,689 $1,199,938
Depreciation 85,646 63,808 170,487 128,720
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TOTAL EXPENSES 550,099 626,869 813,176 1,328,658
OPERATING INCOME (30,002) 160,625 39,058 286,934
OTHER INCOME (EXPENSE):
Interest income 62 781 405 1,183
Forgiveness of debt - 15,474 - 39,474
Other income - - 2,185 (671)
Interest expense (18,049) (22,248) (48,068) (37,269)
Other income 2,699 3,000 2,699 6,000
Minority interest, Nutek Oil, Inc. - 919 - (550)
---------- ---------- ---------- ----------
TOTAL OTHER INCOME (15,288) (2,074) (42,779) 8,167
NET ORDINARY INCOME $(45,290) $158,551 $(3,721) $295,101
========== ========== ========== ==========
BASIC WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 153,411,684 91,309,379 152,891,019 90,174,109
DILUTED WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 153,411,684 147,260,179 152,891,019 146,124,909
BASIC NET INCOME PER SHARE $(0.000) $0.002 $0.002 $0.003
DILUTED NET INCOME PER SHARE $(0.000) $0.001 $ - $0.002
The accompanying notes to financial statements are an
integral part of these financial statements.
5
DATASCENSION INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2004 AND 2003
For the 6 months ended
6/30/04 6/30/03
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $(3,721) $295,101
Adjustments to reconcile net income to net
cash provided by operating activities:
Issued for services 44,000 -
Depreciation and amortization 170,486 128,720
Increase in non-controlling interest in subsidiary - 550
Decrease in accounts receivable (359,064) (34,399)
Increase in inventory 1,892 (2,658)
Increase in line of credit fees - (950)
Increase in prepaid expenses 55,935 (156,152)
Increase in deposits 23,492 (16,500)
Decrease in accounts payable (79,293) (434,261)
Decrease in accrued expenses 55,387 101,689
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NET CASH USED BY OPERATING ACTIVITIES $(90,886) $(118,860)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on notes receivable 141,889 102,186
Purchase of property and equipment (4,386) (64,575)
Purchase of intangible assets - (20,236)
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NET CASH USED BY INVESTING ACTIVITIES 137,503 17,375
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in notes payable (178,100) 54,220
Cash in distributed subsidiary 10,661 -
Issuance of common stock 75,000 180,950
Proceeds from line of credit (3,948) 975
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NET CASH PROVIDED BY FINANCING ACTIVITIES (96,387) 236,145
========= =========
NET INCREASE IN CASH (49,770) 134,660
BALANCE, BEGINNING 122,891 44,371
BALANCE, ENDING $73,121 $179,031
INTEREST PAID $48,068 $36,211
TAXES PAID $ - $ -
6
The accompanying notes to financial statements are an
integral part of these financial statements.
DATASCENSION, INC. (FORMERLY KNOWN AS NUTEK, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
Datascension, Inc. (formerly known as Nutek, Inc.) was incorporated in August
1991 under the laws of the State of Nevada as Nutek, Inc. (the "Company") and
is engaged in multiple industries.
SRC International, Inc. was incorporated on June 20, 1997 in Illinois. SRC
International, Inc. manufactures "Super Glide," a rail covering made of
extremely durable, super-slick space age polymer, designed to reduce friction
between the rails and hangers in the dry cleaning and garment industries.
Century Innovations, Inc. is a Nevada corporation formed by Datascension, Inc.
(formerly known as Nutek, Inc.). The company produces clocks and markets and
sells the patented product TekPlate(TM).
Kristi & Co., a Nevada corporation, was incorporated on September 13, 1999.
The company purchased clothing designs and design groups on January 6, 2000.
Datascension International, Inc. and related assets were purchased on September
27, 2001 for $2,200,000 using company shares at fair market value.
Datascension International, Inc. is a premier data solutions company
representing a unique expertise in the collecting, storage, processing, and
interpretation of data. During 2002, Datascension International, Inc. expanded
operations into Costa Rica purchasing Sin Fronteras, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Company's policy is to prepare the financial statements on the accrual
basis of accounting. The fiscal year end is December 31.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of highly liquid investments with maturities
of three months or less when purchased.
INVESTMENTS AND MARKETABLE SECURITIES
The Company has adopted FASB No. 115. Equity securities are classified as
available for sale and reported at fair value.
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.
CONSOLIDATION POLICY
The accompanying consolidated financial statements include the accounts of
Datascension, Inc. (formerly known as Nutek, Inc.) and its different business
segments: SRC International, Inc., Century Innovations, Inc., Kristi & Co.,
and Datascension International, Inc. All significant inter-company balances
and transactions have been eliminated.
7
INVENTORY VALUATION
Inventories are stated at the lower of cost or market, cost being determined on
the first in, first out (FIFO) basis.
USE OF ESTIMATES
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 of the date of
the financial statements and revenues and expenses for the period reported.
Actual results may differ from these estimates.
COMPREHENSIVE INCOME
Statements of Financial Accounting Standards No. 130, Reporting Comprehensive
Income (SFAS 130), requires that total comprehensive income be reported in the
financial statements. The Company does not have any items considered to be
other comprehensive income for the three months ended June 30, 2004.
FIXED ASSETS
Fixed assets are stated at cost. Expenditures that materially increase the
life of the assets are capitalized. Ordinary maintenance and repairs are
charged to expense as incurred. When assets are sold or otherwise disposed of,
the cost and the related accumulated depreciation and amortization are removed
from the accounts and any resulting gain or loss is recognized at that time.
Depreciation is computed primarily on the straight-line method for financial
statement purposes over the following estimated useful lives:
Computer equipment 5 years
Factory equipment 7 years
Furniture and fixtures 7 years
Office equipment 5 years
Equipment and machinery 20 years
Molds and tooling 20 years
All assets are booked at historical purchase price and there is no variance
between book value and the purchase price.
REVENUE RECOGNITION
Revenues are considered earned when sales of goods are shipped and contracts
are complete.
8
INTANGIBLE ASSETS
The Company has adopted SFAS No. 142, "Goodwill and Other Intangible Assets",
which requires that goodwill and other indefinite lived intangible assets are
no longer amortized, but reviewed annually, or sooner if deemed necessary, for
impairment. Under guidance from SFAS No. 142, management has determined that
as the major intangible asset, the value of the electric light switch,
purchased late in 1999, has not significantly decreased and there has been no
reduction in the usefulness of the asset as of June 30, 2004.
NET INCOME PER SHARE
Basic net income per share is computed using the weighted average number of
shares of common stock outstanding for the period end. The net income (loss)
for the period end is divided by the weighted average number of shares
outstanding for that period to arrive at net income per share.
Diluted net income per share reflects the potential dilution that could occur
if the securities or other contracts to issue common stock were exercised or
converted into common stock.
COMPENSATED ABSENCES
The Company has made no accrual for vacation or sick pay because the Company
does not provide for these benefits.
ADVERTISING
Advertising costs are expensed when incurred. Advertising for the three months
ended June 30, 2004 amounted to $0.
9
RESEARCH AND DEVELOPMENT
The Company expenses its research and development in the periods incurred.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment are made up of the following as of June 30, 2004:
Factory equipment $ 1,381
Equipment and machinery 502,168
Molds and tooling 758,065
Office equipment 1,255,534
Trade show booths 6,150
Leasehold improvements 14,159
Accumulated depreciation (691,176)
-----------
$ 1,846,281
NOTE 4 - STOCKHOLDERS' EQUITY
During the three months ended June 30, 2004, the Company issued 350,000 shares
of common stock for services to $31,500.
The Company also issued 125,000 shares of common stock for services during the
three months ended June 30, 2004 valued at $6,250.
NOTE 5 - LONG-TERM NOTE PAYABLE
The Company has entered into agreements for long-term notes payable. Long-term
notes payable consists of the following at June 30, 2004:
Note payable to a vendor, no specific repayments terms
and no stated interest rate. Secured by assets. $ 40,000
Note payable to a vendor, no specific repayments terms
and no stated interest rate. 55,000
Note payable to a vendor, no specific repayments terms
and no stated interest rate. 50,244
Note payable to a vendor, monthly payments of $348
inclusive of 7% annual interest through September 2006,
secured by equipment. 8,337
Note payable to a vendor, monthly payments of $169
inclusive of 23.99% annual interest through March 2006,
secured by equipment. 3,748
Note payable to a vendor, monthly payments
of $7,375 inclusive of 10.83% annual interest through
December 2006, secured by equipment. 185,670
Note payable to a vendor, monthly payments of $906,
inclusive of 12% annual interest through February 2006.
Secured by equipment. 15,000
357,998
Less current portion (63,337)
---------
$ 294,661
10
Principal maturities are as follows:
Twelve months ended June 30,
2005 $ 136,260
2006 92,871
2007 65,530
-----------
$ 294,661
NOTE 6 - INCOME TAXES
Deferred income taxes result from timing differences in the recognition of
expense for tax and financial statement purposes. Statements of Financial
Accounting Standards No. 109 "Accounting for Income Taxes", (SFAS 109) requires
deferred tax liabilities or assets at the end of each period to be determined
using the tax rate expected to be in effect when taxes are actually paid or
recovered. The sources of those timing differences and the current tax effect
of each were as follows:
3 MONTHS
ENDED
JUNE 30, 2004
Depreciation and amortization $ 7,768
Net operating loss carryforward 6,365
Valuation allowance (14,133)
---------
$ -
The components of the net deferred tax asset at June 30, 2004 under SFAS 109
are as follows:
Depreciation and amortization $ 1,000,531
Net operating loss carryforward (1,288,138)
Valuation allowance 287,607
------------
$ -
NOTE 6 - INCOME TAXES
Reconciliations between the actual tax expense and the amount computed by
applying the U.S. Federal Income Tax rate to income before taxes are as
follows:
3 MONTHS PERCENT OF
ENDED PRETAX
JUNE 30, 2004 INCOME
Expected $ 14,133 34%
Valuation allowance (14,133) (34%)
Actual expense $ - 0%
11
NOTE 7 - LINE OF CREDIT
The Company has a line of credit agreement with a financial institution which
provides maximum borrowing of $375,000. Interest on outstanding balances
accrues at 7% and is payable monthly. The line has no specific expiration date
and is secured through personal guarantees from Murray Conradie and Scott
Kincer, the CEO and COO of the Company, respectively.
NOTE 8 - RELATED PARTY TRANSACTIONS
The Company holds a note payable to a shareholder, in the amount of $49,500,
inclusive of accrued interest. This agreement has no specific repayment terms,
and 3% interest annually through June 2004. This loan is unsecured.
The Company holds a note payable to a shareholder, in the amount of $55,000.
This agreement has no specific repayment terms, no annual interest, and no
defined maturity date. This loan is unsecured.
The Company has an outstanding note payable to Murray Conradie, the Company's
CEO, in the amount of $42,615. This payable accrues interest at 1% monthly due
on the first day of each month.
The Company has an outstanding note payable to Scott Kincer, the Company's COO,
in the amount of $36,000. This payable accrues interest at 1% monthly due on
the first day of each month.
The Company has an outstanding note payable to Jason Griffith, the Company's
CFO, in the amount of $10,724. This payable accrues interest at 1% monthly due
on the first day of each month.
The Company has an outstanding receivable from a shareholder, in the amount of
$341,053. This receivable has no stated interest rate due in full on or before
April 30, 2005.
NOTE 9 - CONTINGENCIES AND COMMITMENTS
LEASES
The Company is committed under several non-cancelable lease agreements for
office space with various termination dates through 2011.
At June 30, 2004, aggregate future minimum payments under these leases, are as
follows:
Twelve months ended June 30,
2005 $ 152,141
2006 133,259
2007 105,773
2008 105,773
2009 -
Thereafter -
--------
Total minimum lease payments $ 496,946
12
NOTE 10 - WARRANTS AND OPTIONS
The Company does not currently have any stock options issued. The Company has
adopted FASB No. 123 and will account for stock issued for services and stock
options under the fair value method.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
The following is a discussion of certain factors affecting Registrant's results
of operations, liquidity and capital resources. You should read the following
discussion and analysis in conjunction with the Registrant's consolidated
financial statements and related notes that are included herein under Item 1
above.
CAUTIONARY STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995.
The statements contained in the section captioned Management's Discussion and
Analysis of Financial Condition and Results of Operations which are historical
are "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. These forward-looking statements represent the
Registrant's present expectations or beliefs concerning future events. The
Registrant cautions that such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Registrant to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among other
things, the uncertainty as to the Registrant's future profitability; the
uncertainty as to the demand for Registrant's services; increasing competition
in the markets that Registrant conducts business; the Registrant's ability to
hire, train and retain sufficient qualified personnel; the Registrant's ability
to obtain financing on acceptable terms to finance its growth strategy; and the
Registrant's ability to develop and implement operational and financial systems
to manage its growth.
13
1) Plan of Operation
The Company is engaged in multiple business activities, which currently
include:
(A) Datascension International Inc., which conducts telephone market research
and provides data entry services for third parties;
(B) Century Innovations Inc., which markets a patented safety product that
replaces standard light switch cover plates that automatically provide
illumination in the event of a power failure; a patented plastic buffet plate
that allows the user to hold both a plate and cup in one hand and the
productions of plastic wall clocks;
(C) SRC International Inc., which produces plastic coverings for metal rails.
The Company's mailing address is: 6330 McLeod Drive, Suite 1, Las Vegas, Nevada
89120, phone number: 702-262-2061. The Company's websites can be found at:
www.tekplate.com and www.datascension.com
(i) Short-term Objectives:
- Continue the expansion of Datascension.
- Make acquisitions of strategic competitors.
- Develop strategic Joint Venture relationships.
Datascension anticipates these actions will reduce operating expenses and at
the same time have a significant impact on increasing revenue and profits.
Additionally, the company is potentially seeking a listing on a larger
exchange.
(ii) Long-term Objectives:
- Secure additional business opportunities for Datascension International.
- Grow the Datascension International operations extensively through
acquisitions of smaller call center operations which stand to benefit from the
work being shifted overseas.
- Expand Datascension International's Costa Rica and Dominican Republic
operations.
Our aggressive expansion into the Dominican Republican market and further
expansion in our Costa Rica facility, has resulted in an increase of 47.6% or
193 employees. While our consolidated net income has produced a loss for the
quarter, these initial hiring and training costs involved in the short term,
are allowing us to expand our dual research platform client base, along with
tremendous expansion in our inbound market research services.
14
There is a planned sale of the equipment and assets of Kristi & Co., Inc, and
SRC International Inc. Since the TekPlate product has been put into the
Century Innovations subsidiary, that company is expected to be spun off and
function as a separate entity.
Excluding any potential acquisition, the Company's Costa Rica and Dominican
Republic work force is expected to increase at a rate equal to actual increases
of our business operations. Through technological advancements (such as
predictive phone dialers), the expansion of our business should be able to grow
at a rate slightly faster than required employee and payroll increases.
Management is of the opinion that sufficient working capital will be available
from internal operations and from outside sources during the next twelve months
thereby enabling Datascension to meet its obligations and commitments as they
become payable. Historically, Datascension has been successful in its efforts
to secure working capital from private placements of common stock securities,
bank debt, and loans from private investors. Currently, Mr. Conradie and Mr.
Kincer have both provided significant personal collateral to the Company's
bankers in return for a line of credit.
1) During the Second Quarter ended June 30, 2004 the Company had a net loss of
$45,290 from operations against revenues of $2,245,000 as compared to a net
profit from operations of $158,551 against revenues of $1,936,083 for the same
quarter last year. The Company has decreased its selling, general and
administration costs from $563,061 for the same period last year to $464,453
for the Second Quarter this year. Depreciation costs for the second Quarter
this year were $85,646 as compared to $63,808 for the same period last year.
As of June 30, 2004, the Company has one hundred fifty three million five
hundred twenty six thousand seven hundred ninety (153,526,790) shares of its
$0.001 par value common voting stock outstanding which are held by
approximately two thousand one hundred fifty (2,150) shareholders of record.
The Company also has five hundred and eight thousand five hundred (508,500)
shares of its $0.001 par value Preferred Stock Series B issued and outstanding,
as of June 30, 2004. All Series B 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.
15
2) Results of Operations
For the Second Quarter, ended June 30, 2004, the Company has generated
$2,245,000 in revenues and generated a loss of $45,290 for the same period.
This compares to revenues of $1,936,083 and a profit of $158,551 for the same
period last year. The Company has increased its working capital position by
$629,286 from a positive $417,626 at December 31, 2003 to a positive $1,046,912
on June 30, 2004.
The majority of the Company's expenses for the quarter included payroll and
administrative costs.
Ending this Second quarter of 2004, the company made significant investments in
the hiring and training of management and employees for the dual platform
software and expansion of our inbound call operations, which will enhance the
ability for further revenue generation.
We are proud of the dramatic increase in our revenues and attribute it to both
the installation of our predictive dialers and expansions in our Costa Rica and
Dominican Republic facilities. The associated costs with such expansion
increased the payroll expenses and depreciation costs, but we anticipate this
expansion to bring a large benefit to us in the future.
The TekPlate brand is now being exclusively run by Mr. Silverman and has
developed some promising leads. The new packaging and literature created has
drawn attention from some retailers which we hope to close a strategic
relationship with in the short term.
3) Liquidity and Capital Resources
Management is of the opinion that sufficient working capital will be available
from internal operations and from outside sources during the next twelve months
thereby enabling Datascension to meet its obligations and commitments as they
become payable. Historically, Datascension has been successful in its efforts
to secure working capital from private placements of common stock securities,
bank debt, and loans from private investors. Currently, Mr. Conradie and Mr.
Kincer have both provided significant personal collateral to the Company's
bankers in return for a substantial line of credit and the commitment to fund
purchase orders for the Tekplate product from major wholesalers.
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.
16
The Company currently has approximately six hundred thirty five (635) employees
of which six (6) are Officers of the Company. As the Company continues to grow
and offer additional services and retain additional clients, it will need to
add employees.
The Company's consolidated financial statements have been prepared on the
assumption the Company will continue as a going concern. Management believes
that current operations will continue to provide sufficient revenues to meet
operating costs and expansion.
Earnings 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.
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.
17
This Form 10-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.
Item 3. Controls and Procedures
Within 90 days prior to the date of this quarterly report on Form 10-QSB for
the second quarter ended June 30, 2004, the Company carried out an evaluation,
under the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act
of 1934. Based upon that evaluation, these principal executive officers and
principal financial officer concluded that the Company's disclosure controls
and procedures are effective in timely alerting them to material information
relating to the Company, including its consolidated subsidiaries, required to
be included in the Company's periodic SEC filings. There have been no
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most
recent evaluation.
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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 in litigation with two separate lawsuits during 2004. They
were:
The previous facility leased by Registrant in Henderson Nevada was leased for
the purpose of consolidating all the operations into one location. A prior
tenant of the premises had vacated the premises leaving fixtures that occupied
approximately 50% of the floor space in the warehouse. The landlord had agreed
to have this equipment removed within 90 days. This did not occur and after 14
months, when the equipment had not been removed from the premises; a decision
was made to find alternate premises and terminate the lease for cause. This
court case went to trial during January of 2004 and the courts found in favor
of the prior landlord for the amount owed to them through the time necessary to
re-let the premises to a new tenant. The Registrant had recorded this as a
contingency and expensed this in 2003.
The Company, along with a number of individual shareholders, filed a federal
lawsuit on March 21, 2003 in the United States District Court, District of
Nevada, against Ameritrade Holding Corp., E*Trade Group Inc., Fidelity
Brokerage Services LLC, Maxim Group LLC and Charles Schwab & Company Inc., for
securities fraud, breach of contract, and negligence, among other claims. The
plaintiff group is also demanding declaratory and injunctive relief, including
asking for general, special and punitive financial damages; and that the matter
be taken up for jury trial in the jurisdiction of the United States District
Court's Nevada District. The plaintiffs filed an amended complaint alleging
securities fraud; common law fraud; conversion; negligence; breach of contract;
breach of covenant of good faith and fair dealing; negligence based on
knowledge of specific problems in the securities industry; bad faith conduct;
deceptive trade practice; racketeering; interference with contracts;
interference with prospective economic advantages; conversion; conspiracy;
declaratory relief and injunctive relief. The amended complaint also added (a)
fifteen (15) additional plaintiffs, bringing the total number of plaintiffs to
twenty-five (25), and (b) thirty (30) additional defendants, including twenty
two (22) named individuals from the securities industry. The twenty-five (25)
plaintiff shareholders have collectively purchased in excess of 4,827,981
shares of Nutek Inc., for which physical delivery has been demanded. In
addition to delivery of their physical share certificates, the plaintiffs are
each seeking $10 million in general damages and $10 million in punitive
damages, to be tripled under the RICO Act for the failed delivery of their
shares and other misconduct.
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ITEM 2. Changes in Securities and Use of Proceeds
None.
ITEM 3. Defaults upon Senior Securities
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. Exhibits and Reports on Form 8-K
There was one Form 8-K filed during the second quarter of 2004. They were:
- Exh. 99-1 Form 8-K, dated June 18, 2004
Exh. 99-1
FORM 8-K
CURRENT REPORT
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
The Registrant has appointed Larry O'Donnell, CPA, P.C., as the Registrant's
independent accountants for the year ending December 31, 2004. The selection of
accountants was approved by the Registrant's Board of Directors. Larry
O'Donnell, CPA, P.C. was engaged by the Registrant on June 18, 2004. During
the most recent two fiscal years and during the portion of 2004 preceding the
Board's decision, neither the Company nor anyone engaged on its behalf has
consulted with Larry O'Donnell, CPA, P.C. regarding: (i) either the application
of accounting principles to a specified transaction, either completed or
proposed; or the type of audit opinion that might be rendered on the Company's
financial statements; or (ii) any matter that was either the subject of a
disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K) or a
reportable event(as described in Item 304(a)(1)(v)of Regulation S-K).
The audit reports issued by Gary V. Campbell, CPA, Ltd. with respect to the
Registrant's financial statements for December 31, 2003 and 2002 did not
contain an adverse opinion or disclaimer of opinion, and were not qualified or
modified as to uncertainty, audit scope or accounting principles. From
December 12, 2002 through June 15, 2004, there were no disagreements between
the Registrant and Gary V. Campbell, CPA, Ltd. on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Gary V.
Campbell, CPA, Ltd., would have caused it to make a reference to the subject
matter of the disagreement in connection with its audit report.
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EXHIBITS
16 Letter from Gary V. Campbell, CPA, Ltd. regarding change is certifying
accountant.
Date: June 18, 2004
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 hereunto duly authorized.
Date: August 16, 2004
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.
Datascension Inc.
------------
(Registrant)
/s/ Murray N. Conradie
- -----------------------------------
Murray N. Conradie, President and Chairman of the Board
Date: August 16, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following person(s) on behalf of the
registrant and in the capacities and on the dates indicated.
Datascension Inc.
/s/ Jason F. Griffith, CPA
- -----------------------------------
Jason F. Griffith, CFO and Corporate Secretary
Date: August 16, 2004
21