UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended June 30, 2000
Commission File Number 000-30237
VICTOR INDUSTRIES, INC.
(Exact name of registrant as specified in charter)
Idaho 91-078484114
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4810 NORTH WORNATH ROAD, MISSOULA, MONTANA 59804
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (406) 251-8501
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No __
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of August 12, 2000, the Company
had outstanding 45,161,827 shares of its common stock, par value $0.05.
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
VICTOR INDUSTRIES, INC.
BALANCE SHEETS
<TABLE>
Unaudited Audited
June 30 December 31
2000 1999
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ASSETS
<S> <C> <C>
Current Assets:
Cash ($1,080) $9
Accounts receivable 2,858 0
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Total Current Assets 1,778 9
Fixed Assets:
Furniture and equipment 12,049 0
Less accumulated depreciation 0 0
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Total Fixed Assets 12,049 0
Other Assets:
Notes receivable 915,000 0
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Total Other Assets 915,000 0
Total Assets $928,827 $9
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable - trade $33,061 $9,572
Payroll and payroll taxes payable 3,798 0
Accounts payable - related parties 13,350 31,043
Notes payable - related parties 12,289 9,597
Accrued interest 2,030 1,877
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Total Current Liabilities 64,528 52,089
Stockholders' Equity
Common stock, $0.05 par value,
49,000,000 shares authorized,
33,511,820 and 13,639,967
respectively issued and outstanding 1,675,591 681,998
Additional paid-in capital 1,883,311 1,883,311
Retained earnings (deficit) (2,694,603) (2,617,389)
---------- ----------
864,299 (52,080)
Total Liabilities and
Stockholders' Equity $928,827 $9
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
VICTOR INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
<TABLE>
Unaudited
3 Months ended 6 Months ended
June 30 June 30
2000 2000
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<S> <C> <C>
Revenues:
Revenues 0 $1,772
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Cost of Sales:
Cost of sales 0 1,054
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Gross Profit 0 718
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Operating Expenses:
Selling, general and administrative 57,175 59,731
Wages and benefits 17,670 17,670
Interest expense 378 531
Total expenses 75,223 77,932
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Net Income (Loss) Before Income Tax (75,223) (77,214)
Income Tax Expense 0 0
---------- ----------
Net Income (Loss) ($75,223) ($77,214)
========== ==========
Loss per common share ($0.01) ($0.00)
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
VICTOR INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
<TABLE>
Unaudited
Six Months Ended
June 30
2000
----------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (77,214)
Adjustments to Reconcile Cash Flow:
Depreciation and amortization
Decrease (Increase) in Current Assets
Accounts Receivable (2,858)
Increase (Decrease) in Current Liabilities
Accounts payable - trade 23,489
Payroll and taxes payable 3,798
Accounts payable - related parties (17,693)
Notes payable - related parties 2,692
Accrued interest 153
Total Adjustments 9,581
----------
Cash Provided (Used) By Operations (67,633)
Cash Flow From Investing Activities
Sales (purchases) of assets:
Furniture and equipment (12,049)
----------
Cash Provided (Used) by Investing (12,049)
Cash Flow From Financing Activities
Cash (Used) or Provided by: 0
Issuance of common stock 993,593
Increase in notes receivable (915,000)
----------
Cash Provided (Used) by Financing 78,593
Net Increase (Decrease) in Cash (1,089)
Cash at Beginning of Period 9
Cash at End of Period ($1,080)
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
VICTOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(Unaudited)
1. GENERAL
The accompanying unaudited financial statements have been prepared in conformity
with the accounting principles stated in the audited financial statements for
the year ended December 31, 1999 and reflect all adjustments which are, in the
opinion of management, necessary for a fair statement of the financial position
as of June 30, 2000 and the results of operations for the periods presented.
These statements have not been audited or reviewed by the Company's independent
certified public accountants. The operating results for the interim periods are
not necessarily indicative of results for the full fiscal year.
The notes to the financial statements appearing in the Company's Annual Report
on form 10SB12G for the year ended December 31, 1999 as filed with the
Securities Exchange Commission should be read in conjunction with this Quarterly
Report on Form 10-QSB. There have been no significant changes in the information
in those notes other than from normal business activities of the Company.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
The financial information set forth in the following discussion should be read
in conjunction with, and qualified in its entirety by, the financial statements
of the Company included elsewhere herein.
BUSINESS
Victor Industries, Inc., an Idaho corporation ( "Victor Industries" or the
"Company"), is engaged in the sales and distribution of zeolite. The Company
contracts with independent contractors to mine and transport zeolite from
properties the contractors own or lease to a contract milling and packaging
facility. The Company markets the packaged and bulk ordered zeolite through
distributors and under distributor's private labels. This structure eliminates
the need for the Company to own any equipment or properties.
The Company was originally organized under the laws of the State of Idaho on
January 19th, 1926 under the name of Omo Mining and Leasing Corporation. The
Company was renamed Omo Mines Corporation on January 19th 1929. The name was
changed again on November 14th, 1936 to Kaslo Mines Corporation and finally
Victor Industries, Inc.on December 24th, 1977.
The Company has not recorded any significant revenue for the past two years and
there is substantial doubt about the Company continuing as a going concern as
expressed by the Company's auditors in their audit report as of December 31,
1999 without funding to develop assets and profitable operations.
BUSINESS OF THE ISSUER
The Company was engaged in the exploration of precious mineral mining properties
from 1977 until 1996 without notable success. The low precious mineral prices
induced the Company to refocus its efforts on zeolite upon discovery of a
significant zeolite deposit in 1996. Initial sales efforts were hampered by
inadequate funding. The Company had sales of approximately $6,000 annually in
1997 through 1999. The poor health of the management prompted the Board of
Directors and the largest shareholders to sell a majority of their personal
Victor Industries common stock holdings to a new management team in December of
1999. The new management team intends to restart the business of sales and
distribution of zeolite.
THE PRODUCT
Zeolites have the unique distinction of being natures only negatively charged
mineral. The angstrom sized micropore structure of zeolites and ion exchange
capacity allow zeolites to act as molecular sieves, which make them useful for
metal and toxic chemical absorbents, water softeners, gas adsorbents, radiation
absorbents, soil and fertilizer amendments. There are approximately fifty
different types of zeolite in existence. Many of these are synthetic zeolites
designed as specific molecular sieves. Clinoptilolite, one type of natural
zeolites, is the Company's focus. Clinoptilolite's absorption capabilities of
ammonia provide a number of applications in the agricultural industry.
CURRENT DEVELOPMENTS
<PAGE>
The second quarter of 2000 brought many changes at Victor Industries, Inc. The
Company has begun its metamorphosis from an inactive shell to a vibrant and
profitable operating entity. There can be no assurances given that the Company
will attain profitability in the foreseeable future.
The new management team has enabled the Company to obtain financing through
the issuance of a series of convertible notes totaling $950,000 (a Section 504
offering) at a price of five cents per share, or the par value of the common
stock. The offering was completed utilizing convertible notes resulting in a
receivable of $915,000 at June 30, 2000. The Company will issue up to 19,000,000
common shares assuming that all notes are paid in full and elect to convert into
common stock. If all notes are converted there will be a substantial dilution to
current shareholders. These notes if converted will represent approximately 57%
of the issued and outstanding shares of the Company and will be able to exert
considerable control over the operations of the Company.
Victor Industries, Inc. has engaged an independent company to conduct tests to
determine the efficacy of zeolite in reducing the amount of nitrates that the
"super-dairies" produce. These nitrates have the potential of polluting the
groundwater as the ammonia breaks down and seeps into the reservoirs. Management
believes that mixing zeolite with the manure at an approximate seven percent
zeolite ratio with the manure will result in several benefits for the
"super-dairies". First, the zeolite will fix a percentage of the ammonia
compounds by preventing the bacteria from breaking down the ammonia into
nitrates resulting in less pollution to the groundwater. Second, the malodor
(offensive odors) will be reduced. Third, the operators of the "super-dairies"
spend an inordinate amount of their productive hours trying to control the
spread of the manure. Zeolite is hydroscopic, absorbing nine times its weight in
water. The drier manure will result in a more stable manure pile saving the
super dairy operator time and labor. Fourth, the composted manure is sold to
plant nursery operators who normally add zeolite to their soils. The
zeolite-enhanced manure may bring a better sale price to the dairy operator.
There can be no assurances that these tests will produce a marketable or
profitable product.
Victor Industries has contacted a company near the zeolite deposit who has the
capabilities to mine, crush and deliver the zeolite to the end user. Currently,
the Company is verifying the permit status of the property with the Bureau of
Land Management. When the testing is complete, assuming satisfactory results,
the zeolite will, initially, be marketed to the super-dairies in four western
states through an association (estimated at over one thousand active members) of
super-dairies. Successful implementation of the marketing in the first
association should enable marketing in additional dairy associations. The
problems that confront the dairy operators also pertain to chicken farms and pig
farms. Marketing efforts to other types of livestock operations appear to be a
natural extension from the dairy industry. Such marketing efforts may not have
the desired effect of substantially increasing revenues.
The completion of the transition from the old management to the new management
team was accomplished with the replacement of the prior President of Victor
Industries, Inc. The position of President will be left open while the search
for an appropriate candidate continues.
In order to secure their position and in recognition of their efforts to turn
the Company into an operating entity the Board of Directors approved the
issuance of 5,750,000 shares of Common stock to Penny Sperry, Treasurer, and a
like amount to Forest Minerals, Inc. These amounts may be returned to the
treasury or used for general corporate purposes in the future.
Victor Industries, Inc. loaned a related company, Bluerock Minerals, Inc.
approximately $3,000 in exchange for up to 2,500,000 common shares of Bluerock
Minerals. Bluerock used the funds to obtain a letter of intent to develop a
potential tantalite mine in the Republic of Ghana. It is the intention of the
Company to distribute these shares to the shareholders of Victor Industries,
Inc. Although Bluerock Minerals is a private corporation at present it is the
intent of their management to establish Bluerock as a publicly traded company.
Bluerock may not be successful in obtaining public trading status.
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION
The following analysis of historical financial condition and results of
operations are not necessarily reflective of the on-going operations of the
Company.
Overall Operating Results
The Company had no gross profit for the current quarter as there were no
revenues or cost of goods sold generated during the period. The first six months
of the fiscal year 2000 had a gross profit of $781 based on sales of $1,772 and
cost of sales of $1,054. The Company anticipates that increased marketing
efforts in the future will generate the required revenues to sustain the
anticipated growth of the Company. There can be no assurances that such sales
will occur. Operating expenses were $75 thousand for the quarter and $77
thousand year to date. The primary area where expenses increased was in
professional fees as they relate to fees incurred in registering the Company's
securities in connection with the filing of SEC form 10SB12G as well as expenses
incurred for licenses and travel associated with creating new marketing outlets.
<PAGE>
The Company incurred a net loss for the current quarter of $74 thousand as
compared to a net loss of $77 thousand for the six month period ended June 30,
2000. Management continues to closely monitor expenses.
Operating Losses
The Company has accumulated approximately $2.7 million of net operating loss
carryforwards as of June 30, 2000, that may be offset against future taxable
income. There will be limitations on the amount of net operating loss
carryforwards that can be used due to the change in the control of the
management of the Company. No tax benefit has been reported in the financial
statements, because the Company believes there is a 50% or greater chance the
carryforwards will expire unused. Accordingly, the potential tax benefits of the
loss carryforwards is offset by valuation allowance of the same amount.
LIQUIDITY AND CAPITAL RESOURCES
The Company has been financed through related parties as there has been no
substantial revenue generated to date. The current convertible note offering
will assist towards capitalizing the strategic growth model under
implementation. There can be no assurances that the Company will be successful
in completing this offering.
The Company had negative working capital of $63 thousand at the end of the
quarter as compared to a negative working capital of $52 thousand at the end of
the prior fiscal year end, December 31, 1999. This increase in negative working
capital is primarily the result of the funding of operations to date.
NEW ACCOUNTING PRONOUNCEMENTS
The Company has adopted FASB Statement 128. It is not expected that the Company
will be impacted by other recently issued standards. FASB Statement 128 presents
new standards for computing and presenting earnings per share (EPS). The
Statement is effective for financial statements for both interim and annual
periods ending after December 15, 1997.
FASB Statement 131 presents news standards for disclosures about segment
reporting. The Company does not believe that this accounting standard applies to
the Company as all operations of the Company are integrated for financial
reporting and decision-making purposes.
YEAR 2000 PREPAREDNESS
The Company recognizes that computer systems and all forms of electronic
technologies, information technologies and non-information technologies, could
be adversely affected by the year 2000 date. This is because many systems and
technology components use a two-digit field to represent the year in dates
(e.g., "98" rather than "1998"). With the advent of year 2000, systems and
programs may fail or produce incorrect data believing it is the year 1900,
causing not just information technology problems but also business and
operations problems.
The Company continues to evaluate its information technology infrastructure for
Year 2000 compliance. The Company currently does not expect that the cost of its
Year 2000 compliance program will be material to its financial condition or
results of operations or that its business will be adversely affected by the
Year 2000 issue in any material respect. Nevertheless, achieving Year 2000
compliance is dependent on many factors, some of which are not completely within
the Company's control. Should either the Company's internal systems or the
internal systems of one or more significant vendors or suppliers fail to achieve
Year 2000 compliance, the Company's business and its results of operations could
be adversely affected.
The Company has not been materially affected with Y2K problems since June 30,
2000 to the date of this filing.
INFLATION
The Company's results of operations have not been affected by inflation and
management does not expect inflation to have a significant effect on its
operations in the future.
FORWARD-LOOKING INFORMATION
From time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filings made by the Company with the Securities and Exchange Commission.
Words or phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project or projected", or similar expressions are
<PAGE>
intended to identify "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). The Company
wishes to ensure that such statements are accompanied by meaningful cautionary
statements, so as to maximize to the fullest extent possible the protections of
the safe harbor established in the Reform Act. Accordingly, such statements are
qualified in their entirety by reference to and are accompanied by the following
discussion of certain important factors that could cause actual results to
differ materially from such forward-looking statements.
Management is currently unaware of any trends or conditions other than those
previously mentioned in this management's discussion and analysis that could
have a material adverse effect on the Company's financial position, future
results of operations, or liquidity. However, investors should also be aware of
factors that could have a negative impact on the Company's prospects and the
consistency of progress in the areas of revenue generation, liquidity, and
generation of capital resources. These include: (i) variations in revenue, (ii)
possible inability to attract investors for its equity securities or otherwise
raise adequate funds from any source should the Company seek to do so, (iii)
increased governmental regulation, (iv) increased competition, (v) unfavorable
outcomes to litigation involving the Company or to which the Company may become
a party in the future and, (vi) a very competitive and rapidly changing
operating environment.
The risks identified here are not all inclusive. New risk factors emerge from
time to time and it is not possible for management to predict all of such risk
factors, nor can it assess the impact of all such risk factors on the Company's
business or the extent to which any factor or combination of factors may cause
actual results to differ materially from those contained in any forward-looking
statements. Accordingly, forward-looking statements should not be relied upon as
a prediction of actual results.
<PAGE>
PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
b. Reports on Form 8-K
None
<PAGE>
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
(Registrant) VICTOR INDUSTRIES, INC.
By /s/ Penny Sperry
Penny Sperry, Treasurer
Date August 11, 2000
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Penny Sperry
Penny Sperry, Treasurer
Date August 11, 2000
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
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27.1 Financial Data Schedule
