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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 JUNE 30, 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 (l) 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
--- ---
The Registrant had 26,880,136 shares of common stock, no par value, outstanding
as of August 14, 1995.
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NATEC RESOURCES, INC. AND SUBSIDIARIES
FORM 10-Q
JUNE 30, 1995
INDEX
<TABLE>
<CAPTION>
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-
June 30, 1995 and December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Changes in Net Assets in Liquidation-
For the Six Months Ended June 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
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NATEC RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 118,254 $ 506,852
Accounts receivable 161,767 315,584
Property, plant and equipment 50,988 50,988
Investment in joint venture 9,478,581 9,085,078
Other assets 94,977 94,977
---------- ----------
9,904,567 10,053,479
LIABILITIES
Accounts payable 159,245 160,814
Accrued expenses 184,112 225,454
Amounts payable to related party 7,958,346 7,033,215
Note payable 58,547 82,351
Estimated costs during period of liquidation 200,000 650,000
---------- ----------
8,560,250 8,151,834
---------- ----------
NET ASSETS IN LIQUIDATION (DUE TO PREFERRED SHAREHOLDERS) $1,344,317 $1,901,645
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</TABLE>
See Notes to Consolidated Financial Statements
NATEC RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES OF NET ASSETS IN LIQUIDATION
(UNAUDITED)
<TABLE>
<S> <C>
Net assets in liquidation as of December 31, 1994 $1,901,645
Cumulative preferred stock dividends accrued (524,698)
Change in estimate of costs during period of liquidation (426,133)
Increase in estimated 393,503
----------
Net assets in liquidation as of June 30, 1995 $1,344,317
==========
</TABLE>
See Notes to Consolidated Financial Statements
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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 June 30, 1995. All adjustments are of a normal recurring
nature.
The accounting policies followed by the Company are set forth in Note l 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.
The Acquisition Agreement was amended on July 31, 1995. Under the terms of the
Acquisition Agreement as amended, which is subject to various conditions,
including approval by the shareholders of the Company, the Company will receive
$10,500,000: $500,000 payable in cash at closing, a non-interest bearing note
from White River for $6,000,000 payable on January 15, 1996, and a $4,000,000
non-interest bearing note payable from NACC in quarterly installments according
to a formula based on sales of White River's production of sodium bicarbonate,
over a period of three years. The purchase price is estimated to have a
discounted value of approximately $9,479,000 which reflects the discount to
present value of the non-interest bearing notes. The notes will be secured by a
security interest and lien on substantially all of 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 half of 1995, the Company continued supplying its existing
customers with sodium bicarbonate through its 50% ownership in White River.
Revenues for the three and six months ended June 30, 1995 from sales of sodium
bicarbonate were $205,000 and $455,000; gross loss from these sales for the
three and six months ended June 30, 1995 was $22,000 and $5,000, respectively.
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Other costs incurred during the three and six months ended June 30, 1995 of
$354,000 and $539,000, respectively, consisted primarily of salary and
benefits, legal, insurance, and rent and other office expenses.
The Consolidated Statement of Net Assets in Liquidation at June 30, 1995
reflects cash and cash equivalents of $118,000 compared to $507,000 at December
31, 1994. The decrease is attributable to the funding of existing operations
of $178,000 and payments on the bank note payable of $24,000.
Amounts payable to related party increased $925,000, which primarily reflects
additional accrued preferred stock dividends of $525,000 and additional
$339,000 accrued interest payable to CRSS on outstanding notes payable of
$6,268,000.
The investment in joint venture was stated at $9,085,000 at December 31, 1994
which reflected the terms of the Acquisition Agreement prior to the amendment
(discounted value of the $10,000,000 purchase price payable $6,000,000 at
closing with a non-interest bearing note payable over a five-year period). The
investment in joint venture has been restated as of June 30, 1995 to $9,479,000
in accordance with the amendment of the Acquisition Agreement as discussed
above.
When the Company adopted the liquidation basis of accounting, costs to be
incurred during the period of liquidation were estimated to be $650,000. This
estimate was based on the liquidation of the Company being finalized by June
30, 1995. The Company currently anticipates that the liquidation will be
completed by September 1, 1995. The estimated costs to be incurred during the
period of liquidation has been revised to reflect the extended period.
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
Notice has been given to security holders of the Company that an
annual meeting will be held on August 24, 1995. The purpose of the
meeting will be: (1) to elect two directors to serve on the Board
of Directors, (2) to consider and vote upon a proposal to approve
the sale of substantially all of the Company's business and assets
to North American Chemical Company, and (3) to consider and vote
upon a proposal to approve the complete and voluntary liquidation
and dissolution of the Company conditioned upon the approval by
stockholders and consummation of the proposed sale of assets to
North American Chemical Company.
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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
The Company filed a Form 8-K on August 1, 1995 reporting the
amendment to the acquisition agreement between the Company and
North American Chemical Company.
The Company filed a Form 8-K on August 8, 1995 reporting that the
Company was delisted from the NASDAQ SmallCap Market System for
insufficient bid price at the close of business on that date,
however the Company will be eligible for trading on the OTC
Bulletin Board.
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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
Chairman of the Board
Date: August 14, 1995
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27.1 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 118
<SECURITIES> 0
<RECEIVABLES> 162
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,904
<PP&E> 51
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,904
<CURRENT-LIABILITIES> 8,560
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,344
<TOTAL-LIABILITY-AND-EQUITY> 9,904
<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-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
