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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-8104
NATEC RESOURCES, INC.
(Exact name of Registrant as specified in its Charter)
UTAH 36-6059098
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1177 WEST LOOP SOUTH, HOUSTON, TEXAS 77027
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (713) 552-2552
Indicate by check mark whether the Registrant (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
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
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The Registrant had 26,880,136 shares of common stock, no par value, outstanding
as of May 12, 1995.
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NATEC RESOURCES, INC. AND SUBSIDIARIES
FORM 10-Q
MARCH 31, 1995
INDEX
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PAGE
NUMBER
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statement
Consolidated Statement of Net Assets in Liquidation-
March 31, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statement . . . . . . . . . . . . . . 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . 5
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 3. Defaults upon Senior Securities . . . . . . . . . . . . . . . . . . . 6
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . 6
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 6
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NATEC RESOURCES, INC.
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
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March 31, December 31,
1995 1994
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(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 314,014 $ 506,852
Accounts receivable 210,087 315,584
Property, plant and equipment 50,988 50,988
Investment in joint venture 9,085,078 9,085,078
Other assets 94,977 94,977
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9,755,144 10,053,479
LIABILITIES
Accounts payable 37,447 160,814
Accrued expenses 227,470 225,454
Amounts payable to related party 7,202,722 7,033,215
Note payable 66,278 82,351
Estimated costs during period of liquidation 319,582 650,000
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7,853,499 8,151,834
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NET ASSETS IN LIQUIDATION (DUE TO PREFERRED SHAREHOLDERS) $1,901,645 $1,901,645
========== ==========
See Notes to Consolidated Financial Statement
</TABLE>
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NATEC RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying Consolidated Financial Statement includes the accounts of
NaTec Resources, Inc. and its majority-owned subsidiaries, herein referred to
as the "Company." In the opinion of Management, the accompanying unaudited
consolidated financial statement contains all adjustments necessary to present
fairly the financial position of NaTec Resources, Inc. and subsidiaries
("Company") as of March 31, 1995. All adjustments are of a normal recurring
nature.
The accounting policies followed by the Company are set forth in Note 1 to the
Company's Consolidated Financial Statements in the Company's 1994 Annual Report
on Form 10-K ("Annual Report"). These quarterly financial statements should be
read in conjunction with the financial statements and notes contained in the
Annual Report.
Basis of presentation
Subject to shareholder approval, on April 6, 1995 the Board of Directors of the
Company approved the liquidation of the Company. As a result, the Company
adopted the liquidation basis of accounting in accordance with generally
accepted accounting principles as of December 31, 1994. Assets have been
valued at estimated net realizable value and liabilities are reflected at their
estimated settlement amounts, including estimated costs to be incurred during
the period of liquidation. The valuations of the assets and liabilities are
based on management estimates and assumptions as of the date of the financial
statements; actual realization of the assets and settlement of liabilities
could be higher or lower than the amounts indicated. It is unlikely that there
will be sufficient assets upon liquidation for any distributions to be made to
holders of common stock of the Company.
NOTE 2: RELATED PARTY
Effective April 14, 1995, CRSS Inc. ("CRSS") converted a portion of its Series
A Cumulative Convertible Exchangeable Preferred Stock ("Preferred Stock") and
all of its Series B and Series C Cumulative Convertible Exchangeable Preferred
Stock into 1,402,749 shares of common stock. Following the conversion, CRSS
holds approximately 50.2% of the outstanding shares of NaTec common stock and
100% of the 44,380 shares of NaTec Preferred Stock outstanding.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
As a result of the unfavorable near-term outlook for the flue-gas
desulfurization market, limited revenues, and limited cash flows, the Company
likely will not be able to continue its operations as a going concern. The
Company's primary source of cash since November 1992 has been the payments on
the note receivable from North American Chemical Company ("NACC"). However, as
discussed in the Annual Report, collections on the note receivable have been
deferred due to the current dispute with NACC, and any efforts to resolve such
dispute would result in additional expense which would have a further negative
impact on capital resources. Additionally, the Company's major creditor, CRSS,
has indicated that it will not infuse any additional cash into the Company and
management does not believe financing can be obtained from any other sources.
In April 1995, the Company entered into an agreement in principle (the
"Acquisition Agreement") to sell its stock in NaTec Minerals, Inc. ("NMI") and
Oldexaer, Inc. ("OXA"), and its sodium bicarbonate supply agreements and
purchase orders, to NACC. NMI and OXA own the Company's 50% interest in White
River Nahcolite Minerals, Limited Liability Company ("White River") through
their respective ownership interests of 49.75% and 0.25%. The only other
assets and liabilities of NMI and OXA are the note receivable from NACC and the
potential capital call obligation described above. The Company will be
required to release any claims it has against NACC upon closing of the sale
contemplated by the Acquisition Agreement (other than claims arising under the
Acquisition Agreement), including claims on the note receivable from NACC.
Under the terms of the Acquisition Agreement, which is subject to various
conditions, including approval by the shareholders of the Company, the Company
will receive $10,000,000, payable $6,000,000 at closing with the balance to be
paid with a non-interest bearing note payable in quarterly installments
according to a formula based on sales of White River's production of sodium
bicarbonate, over a period of five years. The purchase price is estimated to
have a discounted value of approximately $9,085,000 which reflects the discount
to present value of the $4,000,000 non-interest bearing note. The note is
secured by the assets of White River.
Subject to shareholder approval, the Board of Directors of the Company has also
approved the liquidation of the Company. Proceeds from the sale of the
Company's investment in White River will be used to satisfy the claims of
creditors and CRSS as the holder of the Company's preferred stock. It is
unlikely that there will be sufficient assets upon liquidation for any
distribution to be made to holders of common stock of the Company.
As discussed in the Company's Annual Report, the Company adopted the
liquidation basis of accounting as of December 31, 1994. Therefore, the assets
have been valued at estimated realizable value and liabilities have been
reflected at their estimated settlement amounts, including costs to be incurred
during the period of liquidation. The valuation of the assets and liabilities
are based on management assumptions as of the date of the financial statements;
actual realization of the assets and settlements of liabilities could be higher
or lower than the amounts indicated.
During the first quarter of 1995, the Company continued supplying its existing
customers with sodium bicarbonate through its 50% ownership in White River.
Revenues for the three months ended March 31, 1995 from sales of sodium
bicarbonate were $250,000; gross profit from these sales was $17,000. On May
3, 1995, the White River plant experienced a major disruption in production and
all shipments have been suspended until futher notice. It is anticipated that
such suspension will continue for at least four to eight weeks.
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Other costs incurred during the three months ended March 31, 1995 of $185,000
consisted primarily of salary and benefits, legal, insurance, and rent and
other office expenses.
The Consolidated Statement of Net Assets in Liquidation at March 31, 1995
reflects cash and cash equivalents of $314,000 compared to $507,000 at March
31, 1995. The decrease is attributable to the funding of existing operations
of $178,000 and payments on the bank note payable of $15,000. Amounts payable
to related party increased $170,000, which primarily reflects additional
accrued interest payable to CRSS on outstanding notes payable of $6,268,000.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
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
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
6
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, NaTec Resources, Inc. has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NaTec Resources, Inc.
/s/ JOHN T. MCCORMACK
-------------------------
John T. McCormack
President
(Chief Executive Officer)
Date: May 12, 1995
7
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