<PAGE> 1
FORM 10-QSB
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For Quarter Ended: MARCH 31, 2000
Commission File Number: 0-28685
SCIENTIFIC FUEL TECHNOLOGY, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 88-0434606
(State of Incorporation) (IRS Employer ID No)
636 WILSHIRE BLVD., LOS ANGELES, CA 90048
(Address of principal executive office)
1850 EAST FLAMINGO RD #111, LAS VEGAS, NV 89119
(Former address of principal executive office)
(323) 658-4205
(Issuer's telephone number)
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 .
The number of shares outstanding of registrant's common stock, par value $.001
per share, as of March 31, 2000 was 10,000,000 shares, held by approximately 1
shareholder.
Transitional Small Business Disclosure Format (Check one): Yes No X.
<PAGE> 2
SCIENTIFIC FUEL TECHNOLOGY, INC.
INDEX
<TABLE>
<CAPTION>
Page
No.
Part I. Financial Information
<S> <C>
Item 1. Balance Sheet - March 31, 2000 (unaudited) and December 31, 1999 (audited) 3
Statement of Operations - 4
Three Months Ended March 31, 2000 and 1999 and October 29, 1996 (inception) to
March 31, 2000
Statement of Stockholders' Deficit - 5
Three Months Ended March 31, 2000
Statements of Cash Flows - 6
Three Months Ended March 31, 2000 and 1999 and October 29, 1996 (inception) to
March 31, 2000
Notes to Financial Statements - 7-8
Three Months Ended March 31, 2000 and 1999
Item 2. Managements Discussion and Analysis or Plan of Operation 9-10
Part II. Other Information 11
</TABLE>
2
<PAGE> 3
SCIENTIFIC FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited) (Audited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 200 $ 200
-------- --------
Total current assets 200 200
Other assets -- --
-------- --------
Total assets $ 200 $ 200
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Officer advances $ 1,000 $ 1,000
-------- --------
Total current liabilities 1,000 1,000
STOCKHOLDER'S DEFICIT
Common stock, $.001 par value. Authorized 20,000,000 shares; issued and 10,000 10,000
outstanding 10,000,000 shares
Retained earnings (deficit) (10,800) (10,800)
-------- --------
Total stockholder's deficit (800) (800)
-------- --------
$ 200 $ 200
======== ========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 4
SCIENTIFIC FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
OCTOBER 29, 1996 (INCEPTION) TO MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
OCT. 29,
1996
THREE MONTHS ENDED (INCEPTION)
MARCH 31, TO MAR. 31,
2000 1999 2000
<S> <C> <C> <C>
SALES AND REVENUES $ -- $ -- $ --
COST OF SALES -- -- --
---------- ---------- ------------
GROSS PROFIT -- -- --
OTHER EXPENSE
General and administrative expense -- -- 10,800
---------- ---------- ------------
-- -- 10,800
---------- ---------- ------------
EARNINGS (LOSS) BEFORE INCOME TAXES -- -- (10,800)
INCOME TAXES -- -- --
---------- ---------- ------------
NET EARNINGS (LOSS) -- -- (10,800)
========== ========== ============
NET EARNINGS (LOSS) PER SHARE $ -- $ -- $ (0.001)
========== ========== ============
WEIGHTED AVERAGE SHARES OUTSTANDING 10,000,000 10,000,000 10,000,000
========== ========== ============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
SCIENTIFIC FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDER'S DEFICIT
THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Common Stock Accumulated
Shares Par Value Deficit Total
<S> <C> <C> <C> <C>
BALANCE, December 31, 1999 10,000,000 $ 10,000 $ (10,800) $ (800)
Net income (loss) -- --
---------- ---------- ---------- ----------
BALANCE, March 31, 2000 10,000,000 $ 10,000 $ (10,800) $ (800)
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
SCIENTIFIC FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
OCTOBER 29, 1996 (INCEPTION) TO MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
OCT. 29,
1996
(INCEPTION)
THREE MONTHS ENDED MARCH 31, TO MAR. 31,
2000 1999 2000
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net earnings (loss) $ -- $ -- $(10,800)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities:
Stock issued for services -- -- 10,000
Increase in officers advances -- -- 1,000
-------- -------- --------
Net cash provided by (used in) operating activities -- -- 200
-------- -------- --------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES
-- -- --
-------- -------- --------
Net cash provided by (used in) investing activities -- -- --
-------- -------- --------
CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES
-- -- --
-------- -------- --------
Net cash provided by (used in) financing activities -- -- --
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS -- -- 200
CASH AND CASH EQUIVALENTS, beginning of period 200 -- --
-------- -------- --------
CASH AND CASH EQUIVALENTS, end of period $ 200 $ -- $ 200
======== ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes are as follows:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
</TABLE>
See accompanying notes to consolidated financial statements.
6
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SCIENTIFIC FUEL TECHNOLOGY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) ORGANIZATION AND BUSINESS OPERATIONS - Scientific Fuel Technology,
Inc. (a development stage company) (the "Company") was organized
October 29, 1996, under the laws of the State of Nevada. The
Company has no operations and in accordance with SFAS #7 is
considered a development stage company. The Company was formed to
serve as a vehicle to effect a merger, exchange of capital stock,
asset acquisition or other business combination with a domestic or
foreign private business.
The Company's ability to commence operations is contingent upon
its ability to identify a prospective target business and raise
the capital it will require through the issuance of equity
securities, debt securities, bank borrowings or a combination
thereof.
On October 29, 1996, the Company issued 10,000,000 shares of
its $0.001 par value common stock for services in the amount
of $10,000.
(2) USE OF ESTIMATES - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
(3) CASH AND CASH EQUIVALENTS - For purposes of the statement of cash
flows, the Company considers all highly liquid investments
purchased with an original maturity of three months or less to be
cash equivalents.
(4) GENERAL - The financial statements included in this report have
been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission for interim reporting
and include all adjustments (consisting only of normal recurring
adjustments) that are, in the opinion of management, necessary for
a fair presentation. These financial statements have not been
audited.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations for interim reporting. The
Company believes that the disclosures contained herein are
adequate to make the information presented not misleading.
However, these financial statements should be read in conjunction
with the financial statements and notes thereto included in the
Company's Annual Report for the year ended December 31, 1999,
which is included in the Company's Form 10-KSB for the year ended
December 31, 1999. The financial data for the interim periods
presented may not necessarily reflect the results to be
anticipated for the complete year. Certain reclassifications of
the amounts presented for the comparative period have been made to
conform to the current presentation.
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(5) INCOME TAXES - Deferred income taxes are recognized for income and
expense items that are reported for financial purposes in
different years than for income tax purposes.
(6) NET EARNINGS PER SHARE - Net earnings per share amounts are
computed using the weighted average number of shares outstanding
during the period. Fully diluted earnings per share is presented
if the assumed conversion of common stock equivalents results in
material dilution.
B. 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. However, the Company has no current
source of revenue. Without realization of additional capital, it would
be unlikely for the Company to continue as a going concern. It is
management's plan to seek additional capital through a merger with an
existing operating company.
C. STOCKHOLDER'S EQUITY
The Company has 20,000,000 shares of its $0.001 par value common stock
authorized and 10,000,000 shares issued. There are no warrants or
options outstanding.
D. RELATED PARTY TRANSACTIONS
The Company neither owns or leases any real or personal property.
Office services are provided without charge by the director. Such costs
are immaterial to the financial statements and, accordingly, have not
been reflected therein. The officer and director of the Company are
involved in other business activities and may, in the future, become
involved in other business opportunities. If a specific business
opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The
Company has not formulated a policy for the resolution of such
conflicts.
While the Company is seeking additional capital through a merger with
an existing operating company, the officer and director of the Company
has advanced funds, on an interest free basis, on behalf of the Company
to pay for any costs incurred by it.
E. SUBSEQUENT EVENT
Pursuant to an Agreement and Plan of Reorganization dated as of April
6, 2000 by and between Vertical Computer Systems, Inc., a Delaware
corporation ("VCSY") and Anthony DeMint ("DeMint"), a resident of the
state of Nevada. VCSY acquired from DeMint on April 6, 2000, 10,000,000
common shares of the Company in exchange for 2,000,000 newly issued
common shares of VCSY. The 10,000,000 common shares of the Company
represent 100% of the issued and outstanding shares of the Company.
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Company is currently seeking to engage in a merger with or
acquisition of an unidentified foreign or domestic company that desires
to become a reporting ("public") company whose securities are qualified
for trading in the United States secondary market. The Company meets
the definition of a "blank check" company contained in Section (7) (b)
(3) of the Securities Act of 1933, as amended. The Company has been in
the developmental stage since inception and has no operations to date.
Other than issuing shares to its original stockholders, the Company has
not commenced any operational activities.
Management is actively engaged in seeking a qualified company as a
candidate for a business combination. The Company is authorized to
enter into a definitive agreement with a wide variety of businesses
without limitation as to their industry or revenues. It is not possible
at this time to predict with which company, if any, the Company will
enter into a definitive agreement or what will be the industry,
operating history, revenue, future prospects or other characteristics
of that company.
The Company will not acquire or merge with any entity that cannot
provide audited financial statements at or within a reasonable period
of time after closing of the proposed transaction. The Company is
subject to all the reporting requirements included in the Exchange Act.
Included in these requirements is the duty of the Company to file
audited financial statements as part of its Form 8-K to be filed with
the Securities and Exchange Commission upon consummation of a merger or
acquisition, as well as the Company's audited financial statements
included in its annual report on Form 10-KSB. If such audited financial
statements are not available at closing, or within time parameters
necessary to insure the Company's compliance with the requirements of
the Exchange Act, or if the audited financial statements provided do
not conform to the representations made by the target business, the
closing documents may provide that the proposed transaction will be
voidable at the discretion of the present management of the Company.
The Company will not restrict its search for any specific kind of
business, but may acquire a business that is in its preliminary or
development stage, which is already in operation, or in essentially any
stage of its business life. It is impossible to predict at this time
the status of any business in which the Company may become engaged, in
that such business may need to seek additional capital, may desire to
have its shares publicly traded, or may seek other perceived advantages
which the Company may offer.
A business combination with a target business will normally involve the
transfer to the target business of the majority of common stock of the
Company, and the substitution by the target business of its own
management and board of directors.
The Company has, and will continue to have, no capital with which to
provide the owners of business opportunities with any cash or other
assets. However, management believes the Company will be able to offer
owners of acquisition candidates the opportunity to acquire a
controlling ownership interest in a publicly registered company without
incurring the cost and time required to conduct an initial public
offering. The officer and director of the Company has not conducted
market research and is not aware of statistical data to support the
perceived benefits of a merger or acquisition transaction for the
owners of a business opportunity.
The Company's stockholders have agreed that they will advance to the
Company any additional funds that the Company needs for operating
capital and for costs in connection with searching for or completing an
acquisition or merger. Such advances will be made without expectation
or repayment unless the owners of the business which the Company
acquires or merges with agree to repay all or portion of such advances.
There is no minimum or maximum amount such
9
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shareholder will advance to the Company. The Company will not borrow
any funds for the purpose of repaying advances made by such
stockholder, and the Company will not borrow any funds to make any
payments to the Company's promoters, management or their affiliates or
associates.
The Board of Directors has passed a resolution which contains a policy
that the Company will not seek an acquisition or merger with any entity
in which the Company's officer, director, stockholder or their
affiliates or associates serve as officer or director or hold more than
a 10% ownership interest.
10
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PART II - OTHER INFORMATION
Items 1 through 5 of Part II have been omitted as not required, not
significant, or because the information has been previously reported.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - Not applicable
(b) Reports on Form 8-K - None during the current quarter.
SIGNATURE
Pursuant to the requirements 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.
SCIENTIFIC FUEL TECHNOLOGY, INC.
Date: April 20, 2000 By: /s/ Richard Wade
------------------------------
Richard Wade, President and
Principal Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AS OF MARCH 31, 2000 AND FOR THE THREE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-QSB FOR THE THREE MONTHS
ENDED MARCH 31, 2000.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 200
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 200
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 200
<CURRENT-LIABILITIES> 1,000
<BONDS> 0
0
0
<COMMON> 10,000,000
<OTHER-SE> (800)
<TOTAL-LIABILITY-AND-EQUITY> 200
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
</TABLE>
