SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
For the period ended September 30, 2000
QUINTEK TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
California 000-29719 77-0505346
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization File Number) Identification No.)
537 Constitution Ave., Suite B
Camarillo, California 93012
(Address of principal executive office)
Issuer's telephone number: 805-383-3904
The issuer (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
On September 30, 2000, 17,398,819 shares of the issuer's common stock were
outstanding.
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of Class)
<PAGE>
Table of Contents
Part I. Financial Information............................................2
Item 1. Financial Statements..........................................2
Item 2. Management's Discussion and Analysis..........................8
Part II. Other Information................................................9
Item 3. Changes in Securities and Use of Proceeds.....................9
Item 4. Exhibits and Reports on Form 8-K.............................10
Exhibits.................................................................10
Reports on Form 8-K......................................................10
Signatures...............................................................11
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Part I. Financial Information
Item 1. Financial Statements
QUINTEK TECHNOLOGIES, INC.
Balance Sheet
September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Assets
<S> <C> <C>
Current Assets:
Accounts receivable
(net of allowance for
doubtful accounts of $0) $ 44,016
Inventory 237,923
Other current assets 27,729
-------------
Total current assets 309,668
Property and Equipment, at Cost:
Equipment $ 138,881
Computer and office equipment 70,895
Furniture and fixtures 32,536
-----------
242,312
Less - Accumulated depreciation (170,705)
-----------
71,607
Leased property under capital
lease - net of accumulated amortization 5,558 77,165
-----------
Other Assets:
Deposits 9,663
Intangible assets (net of accumulated
amortization of $20,467) 115,600
Employee receivables, net 22,965
Idle property 98l,019 246,247
----------- -----------
$ 633,080
===========
</TABLE>
The accompanying notes are an integral part of these financial statements
2
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Liabilities and Stockholders' Deficit
<TABLE>
<CAPTION>
<S> <C> <C>
Current Liabilities:
Bank overdraft $ 5,194
Accounts payable 556,216
Payroll and payroll taxes payable 120,184
Payroll taxes assumed in merger 179,385
Accrued interest payable 73,554
Obligations under capital lease 8,336
Other current liabilities 44,278
Convertible bonds 206,041
Unearned revenue 39,944
Note payable - related party 30,000
-----------
Total current liabilities 1,263,132
Stockholders' Deficit:
Common stock - par value $.01
Authorized - 50,000,000 shares
Issued and outstanding - 18,660,312
shares $ 186,603
Additional paid-in capital 18,813,576
Retained deficit (19,580,231)
-------------
(580,052)
Less subscriptions receivable 50,000
-------------
Total stockholder's deficit (630,052)
------------
$ 633,080
===========
</TABLE>
The accompanying notes are an integral part of these financial statements
3
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QUINTEK TECHNOLOGIES, INC.
Statements of Operations
For the Three Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
<S> <C> <C>
2000 1999
------------ ------------
(Unaudited) (Unaudited)
SALES $ 34,638 $ 120,063
COST OF SALES 39,191 75,413
------------ ------------
Gross margin (4,553) 44,650
OPERATING EXPENSES 441,267 1,141,780
------------ ------------
Loss from operations (445,820) (1,097,130)
------------ ------------
OTHER INCOME (EXPENSE)
Other income 7,807 2,844
Interest expense (7,489) (19,327)
------------ ------------
318 (16,483)
------------ ------------
Net loss before taxes (445,502) (1,113,613)
PROVISION FOR INCOME TAXES 800 800
------------ ------------
Net loss $ (446,302) $(1,114,413)
============ ============
NET LOSS PER SHARE:
Basic and diluted $ (0.02) $ (0.08)
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
4
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QUINTEK TECHNOLOGIES, INC.
Statements of Cash Flows
For the Three Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------
<S> <C> <C>
2000 1999
------------ ------------
(Unaudited) (Unaudited)
Net Cash Used in Operating Activities $ (154,369) $ (19,165)
Net Cash Used In Investing Activities (6,532) (18,871)
Net Cash Provided by Financing Activities 146,352 1,467
----------- -----------
Net Decrease in Cash (14,549) (36,569)
Cash, Beginning of Period 9,355 39,064
----------- -----------
Cash (Bank Overdraft), End of Period $ (5,194) $ 2,495
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements
5
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Quintek Technologies, Inc.
Notes to the Financial Statements
September 30, 2000
(Unaudited)
(1) Basis of Presentation
In the opinion of management, the accompanying unaudited financial
statements of Quintek Technologies, Inc. (the Company) include all
adjustments (consisting only of normal recurring adjustments) considered
necessary to present fairly its financial position as of September 30,
2000, the results of operations for the three months ended
September 30, 2000 and 1999, and cash flows for the three months ended
September 30, 2000 and 1999. The results of operations for the three
months ended September 30, 2000 and 1999 are not necessarily indicative
of the results to be expected for the full year or for any future
period.
(2) Going Concern
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern; however, the Company has
sustained substantial operating losses. In view of this matter,
realization of a major portion of the assets in the accompanying balance
sheet is dependent upon continued operations of the Company, which in
turn is dependent upon the Company's ability to meet its financing
requirements, and the success of its future operations.
Management believes that actions presently being taken to revise the
Company's operating and financial requirements provide the opportunity
for the Company to continue as a going concern. The Company believes
that the receipt of net proceeds from the sale of the common stock and
the exercise of common stock warrants plus cash generated internally
from sales will be sufficient to satisfy future operation, working
capital and other cash requirements for the remainder of the fiscal
year. The Company believes that they have sufficient internal and
external resources to fund current operations, develop new or enhanced
products and/or services, and to respond to competitive pressures and
acquire complementary products, businesses or technologies.
On July 11, 2000 the Company announced a strategic alliance with Imation
Corp ("Imation"), a former competitor and a supplier of data storage and
information management, color management, and imaging solutions.
The Company's distribution and marketing agreement allows Imation to
sell, install and service the Q4300 Aperture Card Imaging System under a
worldwide distribution program. It is possible that Imation's market
leadership, global distribution network, and customer service
capabilities could enhance the Company's market presence and
provide customers with worldwide access to the Q4300 technology.
Imation has an extensive installed base of clients currently using wet
film technology for producing aperture cards. Imation plans to market
the Q4300 system to these clients as a replacement for this chemical-
based equipment. The Company expects to generate significant earnings
from sales of equipment, software, and spare parts to Imation clients.
Since the alliance was formed, Imation has purchased a Q4300 demo
system, combined it with their own system, initiated manufacturing of
Q4300 aperture card media, and initiated an aggressive road show program
to demonstrate the products in eight major cities throughout the USA,
with an estimated audience of over 800 clients total. If the program is
successful, the Company anticipates that Imation may launch future
marketing programs of this nature.
6
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Quintek Technologies, Inc.
Notes to the Financial Statements
September 30, 2000
(Unaudited)
(Continued)
(2) Going Concern (Continued)
The arrangement with Imation is non-exclusive, which allows the Company
to also sell the Q4300 productline through existing distribution
channels (e.g. direct sales agents, VARs, system integrators, government
procurement vehicles, etc.).
(3) Net Loss per Share
Basic net loss per share is based on the weighted average number of
common shares outstanding of 18,099,888 and 14,378,512 for the three
month periods ended September 30, 2000 and 1999, respectively. The
basic and diluted earnings per share calculations are the same because
potential dilutive securities would have had an antidilutive effect.
Securities that were not included in the earnings per share calculation
because they were antidilutive consist of the convertible bonds and
warrants.
(4) Inventory
Inventory consists of aperture cards, parts and supplies, and completed
machines, and is stated at the lower of cost or market. Cost is
determined on a FIFO (first-in, first-out) basis.
Inventories are summarized as follows at September 30, 2000:
Machines $ 103,768
Parts and supplies 381,799
------------
485,567
Reserve for obsolescence (247,644)
------------
$ 237,923
============
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Item 2. Management's Discussion and Analysis
1.1 Results of operations
Our revenues totaled $34,638 and $120,063 for the three months ended September
30, 2000 and 1999, respectively, a decrease of $85,425 (71%) in 2000 due
primarily to a decrease in equipment sales. We sold no Q4300 Aperture Card
Imaging Systems in the quarter ended September 30, 2000, compared to sales of
one system in the same quarter for 1999.
For the three months ended September 30, 2000 and 1999, cost of sales was
$39,191 and $75,413, respectively, a decrease of $36,222 (48%). Our cost of
sales for both periods consisted mostly of labor and production costs. Cost of
sales and gross margin in 1999 were greatly affected by a reserve for
obsolescent inventory that was established in that year.
Operating expenses totaled $441,265 for the three-month period ended September
30, 2000 as compared to $1,141,780 for the prior three-month period. The
$700,515 (61%) decrease in operating expenses is due primarily to a $379,264
decrease in fundraising expenses, and a $385,001 decrease in bankruptcy
expenses, which more than offsets the increases in several various expenses.
On July 11, 2000 we announced a strategic alliance with Imation Corp, a
supplier of data storage and information management, color management, and
imaging solutions. Imation, which prior to July 2000 distributed the
equipment made by Wicks and Wilson, one of our primary competitors, was a
spin-off of Minnesota Mining and Manufacturing (3M). Imation was formed in
June 1996, keeping the original 3M film and engineering products/services and
leaving the parent company with a variety of products related to bonding and
coating. Imation Corp had revenues of $1.4 billion and employed approximately
4,850 people as of Dec. 31, 1999.
Our distribution and marketing agreement allows Imation to sell, install and
service Quintek's Q4300 Aperture Card Imaging System under a worldwide
distribution program. It is probable that Imation's market leadership, global
distribution network, and customer service capabilities can dramatically
enhance our market presence and provide customers with worldwide access to the
Q4300 technology. Imation has an installed base of clients, estimated at over
5,000 companies, currently using wet film technology for producing aperture
cards. Imation plans to market the Q4300 system to these clients as a
replacement for this chemical-based equipment.
Since the alliance was formed, Imation has initiated manufacturing of Q4300
aperture card media, purchased a Q4300 demo system, combined the Q4300 with
their own system, and initiated an aggressive traveling demonstration program.
Subsequent to September 30, 2000, Imation purchased three additional Q4300
systems for resell to near term clients. We believe that a significant number
of additional orders will follow as a result of these sales and marketing
efforts.
The arrangement with Imation is non-exclusive, which allows us to also sell
the Q4300 productline through existing distribution channels (e.g. direct
sales agents, VARs, system integrators, government procurement vehicles,
etc.). In the quarter ended September 30, we closed our sales office in the
Washington, D.C., area, and transferred all or our company's sales functions
to our executive office in Camarillo, California.
1.2 Liquidity and capital resources
Our financial statements contain a "going concern" qualification because of
our history of financial losses. For the near term, these losses likely will
continue. We cannot predict when, if ever, we will generate revenues in
excess or our operating costs. We have historically financed operations from
the sale of common stock and the conversion of common stock Warrants. It will
be necessary to raise additional cash from the sale of securities in order to
continue our operations, and we cannot be sure that we will be able to sell
enough securities to sustain our need for operating capital. At September 30,
2000, we had a bank overdraft of $5,194 and working capital of $(945,128) as
compared to cash on hand of $2,495 and working capital of $(982,548) at
quarter-end, September 30, 1999. We have eliminated the overdraft problem
recorded on September 30, 2000 and currently maintain a positive cash position
from sales of securities and products. We have received new orders for seven
(7) additional Q4300 systems since June 30, 2000 and expect to deliver these
products and record the sales in the current quarter.
8
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Net cash used in operating activities of $154,369 for the three months ended
September 30, 2000, is attributable primarily to operating losses as adjusted
for stock issued for services of $208,309, warrants issued for services of
$106,768, and depreciation of $8,462.
Net cash used in investing activities of $6,532 for the three months ended
September 30, 2000 consists of purchases of fixed assets and shareholder
borrowings on notes receivable.
Net cash provided by financing activities of $146,352 for the three months
ended September 30, 2000 represents cash received from the issuance of common
stock of $109,500, borrowing on convertible bonds of $35,000, and other
miscellaneous adjustments.
We believe that the receipt of net proceeds from the sale of the common stock
and the exercise of common stock Warrants plus cash generated internally from
sales will be sufficient to satisfy our future operation, working capital and
other cash requirements for the remainder of the fiscal year. We believe that
we have sufficient internal and external resources to fund current operations,
develop new or enhanced products and/or services, and to respond to
competitive pressures and acquire complementary products, businesses or
technologies. However, we have yet to operate at a profit and do not know
when we may do so. Accordingly, we will require continued funding from sales
of our securities, and we cannot be sure that we will be able to raise
sufficient funds to continue operations. Our audit for the years ended June
30, 2000 and 1999, contained a going concern qualification.
Part II. Other Information
Item 3. Changes in Securities and Use of Proceeds
Recent Sales of Unregistered Securities
From June 30, 2000, to September 30, 2000, we issued 989,054 shares of our
common stock in transactions that were not registered under the Securities Act
of 1933. The following securities were issued, as described below, in a
series of privately negotiated transactions in reliance on the exemption from
registration requirements contained in Section 4(2) of the Securities Act of
1933.
(a) In September 2000, we issued a convertible bond with a face value of
$15,000, interest rate of 9% per annum, and conversion rate of 40 cents per
share to one private investor. A total of 37,500 shares of underlying
restricted common stock are held in reserve to facilitate the conversion
option.
(b) In September 2000, we issued convertible bonds with a face value of
$25,000, interest rate of 9% per annum, and conversion rate of 38 cents per
share to two individuals. A total of 65,790 shares of underlying restricted
common stock are held in reserve to facilitate the conversion option.
(c) In September 2000, we issued 100,000 shares of common stock to one
individual after he executed his option to convert a convertible bond into
stock. The bond had a conversion rate of 30 cents per share and a face value
of $30,000.
(d) In July and August 2000, we issued 220,000 Class J warrants to three
different companies as compensation for investor relation services.
(e) In July 2000, we issued a total of 16,000 Class J warrants to three
individuals as incentive for extending loan agreements totaling $40,000.
(f) In July, August and September 2000, we issued a total of 477,000 shares of
restricted stock with a market value of $129,218 to three individuals and two
companies as compensation for consulting, corporate promotion, and investor
relation services.
(g) In September 2000, we sold 4,688 shares of common stock to one individual
at a price of 32 cents per share.
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(h) In September 2000, we sold a total of 40,000 shares of common stock to two
individuals at a price of 40 cents per share.
(i) In July and September 2000, we issued 75,000 shares of common stock with a
market value of $19,010 to one company as compensation for consulting services
and generating a research report on our company.
(j) In September 2000, we issued 42,000 shares of common stock, with a market
value of $15,750, to one individual as compensation for efforts relating to
sales and marketing of our products.
(k) In July 2000, we issued 6,000 shares of common stock, with a market value
of $ 4,125, to two individuals as incentive for extending loan agreements.
Between June 30, 2000, and September 30, 2000, Quintek issued the following
shares to warrant holders pursuant to the exercise of warrants that had been
issued as part of the confirmed plan of reorganization of Quintek's
predecessor, Pacific Diagnostic Technologies, Inc., under Chapter 11 of the
U.S. Bankruptcy Code. The shares of stock that were issued on exercise of the
warrants were exempt from the registration requirements of the Securities Act
of 1933 under Section 1145 of the Bankruptcy Code.
(l) In September 2000, we issued 30,000 shares of common stock to one
individual upon exercise of his Class B warrants under a special agreement.
The agreement allowed reduction of the strike price to 40 cents per share
under the condition that the individual must purchase an equal number of
shares of restricted common stock, if requested by Quintek, within 6 months at
the price of 25 cents per share. Cash was received as consideration for this
transaction.
(m) In September 2000, we issued 50,000 shares of common stock to one
individual upon exercise of his Class B warrants under a special agreement.
The agreement allowed reduction of the strike price to 40 cents per share
under the condition that the individual purchase an equal number of shares of
restricted common stock, if requested by Quintek, within 6 months at the price
of 25 cents per share. A secured note was received as consideration for this
transaction.
(n) In September 2000, we issued 150,000 shares of common stock to one
individual upon exercise of his Class B warrants under a special agreement.
The agreement allowed reduction of the strike price to 30 cents per share
under the condition that the individual purchase an equal number of shares of
restricted common stock, if requested by Quintek, within 6 months at the price
of 20 cents per share. A secured note was received as consideration for this
transaction.
Item 4. Exhibits and Reports on Form 8-K
Exhibits
27.1 Financial Data Schedule
Reports on Form 8-K
We filed no reports on Form 8K during the three month period ended September
30, 2000.
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Signatures
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 hereunto duly authorized.
QUINTEK TECHNOLOGIES, INC.
Date: November 21, 2000 /s/ Thomas W. Sims
----------------------------------
Thomas W. Sims, President
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