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 September 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 November 1, 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.
COMPARATIVE BALANCE SHEETS
<TABLE>
Unaudited Audited
September 30, December 31,
2000 1999
------------- ------------
ASSETS
<S> <C> <C>
Current Assets:
Cash $ (231) $ 9
Accounts receivable 30,358 -
---------- ----------
Total Current Assets 30,127 9
Fixed Assets:
Fixtures and equipment 12,049 -
Less: accumulated depreciation - -
---------- ----------
Total Fixed Assets 12,049 -
Other Assets:
Notes receivable 793,500 -
---------- ----------
Total Other Assets 793,500 -
Total Assets $ 835,676 $ 9
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable - trade $ 35,414 $ 9,572
Payroll and payroll taxes payable 21,468 -
Contested liability 28,500 -
Accounts payable - related parties 13,350 31,043
Notes payable - related parties 27,089 9,597
Accrued interest 2,030 1,877
---------- ----------
Total Current Liabilities 127,851 52,089
Stockholders' Equity
Common stock, $0.05 par value,
49,000,000 shares authorized,
45,161,827 shares issued at
September 30, 2000 and 13,639,967
shares issued at December 31, 1999 1,675,591 681,998
Additional paid-in capital 1,883,311 1,883,311
Retained earnings (deficit) (2,851,076) (2,617,389)
---------- ----------
Total Stockholders' Equity 707,826 (52,080)
Total Liabilities and
Stockholders' Equity $ 835,676 $ 9
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
VICTOR INDUSTRIES, INC.
COMPARATIVE STATEMENTS OF OPERATIONS
<TABLE>
Unaudited
3 Months Ended 9 Months Ended
September 30, September 30,
2000 2000
-------------- ---------------
<S> <C> <C>
Revenues:
Revenues $ - $ 1,772
---------- ----------
Cost of Sales:
Cost of sales - 1,054
---------- ----------
Gross Profit - 718
---------- ----------
Operating Expenses:
Selling, general and administrative 143,192 202,923
Wages and benefits 17,670 35,340
Interest expense 51 582
---------- ----------
Total Expenses 160,913 238,845
---------- ----------
Net Income (Loss) Before Income Tax (160,913) (238,127)
Income Tax Expense - -
---------- ----------
Net Income (Loss) $ (160,913) $ (238,127)
========== ==========
Loss per Common Share $ (0.00) $ (0.01)
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
VICTOR INDUSTRIES, INC.
STATEMENT OF CASH FLOWS
<TABLE>
Unaudited
Nine Months Ended
September 30,
2000
----------------
<S> <C>
Cash Flows from Operating Activities:
Net Income (Loss) $ (238,127)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Changes in operating assets and liabilities:
Accounts receivable (30,358)
Accounts payable - trade 25,842
Payroll and payroll taxes payable 21,468
Contested liabilities 28,500
Accounts payable - related parties (17,693)
Notes payable - related parties 17,492
Other 4,439
Accrued interest 153
----------
Total Adjustments 49,843
Cash Provided (Used) By Operations (188,284)
Cash flows used in investing activities:
Purchases of furniture and equipment (12,049)
----------
Net Cash provided by investing activities (12,049)
Net cash provided (used) by financing activities
Issuance of common stock 993,593
Decrease (Increase) in notes receivable (793,500)
----------
Net Cash provided by financing activities 200,093
Net Increase (Decrease) in Cash (240)
Cash at Beginning of Period 9
----------
Cash at End of Period (231)
==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
VICTOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 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 September 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 19, 1926 under the name of Omo Mining and Leasing Corporation. The
Company was renamed Omo Mines Corporation on January 19, 1929. The name was
changed again on November 14, 1936 to Kaslo Mines Corporation and finally Victor
Industries, Inc. on December 24, 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. Sales efforts have been continuously
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 has refocused on the business of sales
and distribution of zeolite.
<PAGE>
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 and 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 primary focus. Clinoptilolite's absorption
capabilities of ammonia provide a number of
applications in the agricultural industry.
CURRENT DEVELOPMENTS
Fiscal year 2000 has brought many changes at Victor Industries, Inc. The new
management team intends to transform the Company from an inactive shell to a
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 $793,500 at September 30, 2000. The Company received $121,500 as
payments on these notes during the current quarter. 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. contracted with 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. Management intends to market this product to other types of livestock
operations. 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 resignation of the prior President of Victor
Industries, Inc. The position of President continues to be unfilled 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.
<PAGE>
Prior to the current quarter, 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. During the current quarter, the Company loaned Bluerock Minerals, Inc.
an additional $27,500 which Bluerock will utilize in continuing its mine
development activities.
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 nine
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 $161 thousand for the quarter and $239
thousand year to date. The primary areas 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.
During the quarter ended September 30, the primary areas for expense increases
were consulting fees of $96,000 and promotion expenses of $31,000. The
consulting fees were incurred for assistance in general business development.
The promotion expenses include $28,500 incurred for advertising. Management is
protesting this expense as the advertising company ran the ad without receiving
final approval from the Company. As of the date of this filing this issue has
not been resolved.
The Company incurred a net loss for the current quarter of $161 thousand as
compared to a net loss of $238 thousand for the nine-month period ended
September 30, 2000. Management continues to closely monitor expenses and seek
on-going marketing opportunities.
Operating Losses
The Company has accumulated approximately $2.8 million of net operating loss
carryforwards as of September 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 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 entire
offering. In addition, the Company obtained a loan from a shareholder in the
amount of $14,800 during the current quarter in order to fund continuing
operations.
The Company had negative working capital of $97 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.
<PAGE>
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.
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
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 November 6, 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 November 6, 2000
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
27.1 Financial Data Schedule
