SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 2000 Commission File No. 0-12746
HART INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Nevada 33-0661675
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
4695 MacArthur Court, Suite 1450, Newport Beach, CA 92660
(Address of principal executive offices) (Zip Code)
(949) 833-2094
(Registrant's telephone number, including area code)
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 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 16, 2000, there were 180,200 shares of the Registrant's
$.01 par value common stock issued and outstanding.
<PAGE>
HART INDUSTRIES, INC.
INDEX
Page
PART I
Item 1. Financial Statements
Balance Sheet - September 30, 2000 (unaudited)..................... 1
Statements of Operations - Three and Nine Months Ended
September 30, 2000 and 1999 (unaudited) and the
period from October 29, 1982 (inception) to
September 30, 2000 (unaudited).................................. 2
Statements of Cash Flows - Nine Months Ended
September 30, 2000 and 1999 (unaudited) and the
period from October 29, 1982 (inception) to
September 30, 2000 (unaudited).................................. 3
Notes to Financial Statements....................................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....................... 7
PART II
Item 1. Legal Proceedings................................................... 9
Item 2. Changes In Securities............................................... 9
Item 3. Defaults Upon Senior Securities..................................... 9
Item 4. Submission of Matters to a Vote of Security Holders................. 9
Item 5. Other Information................................................... 9
Item 6. Exhibits and Reports on Form 8-K.................................... 9
Signatures......................................................... 10
I
<PAGE>
HART INDUSTRIES, INC.
(A Development-Stage Company)
Balance Sheet
As of September 30, 2000
(Unaudited)
<TABLE>
<S> <C>
ASSETS
Current assets -
Cash $ 27,017
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 4,927
Income taxes payable 8,280
Total current liabilities 13,207
Due to affiliates 58,313
Total liabilities 71,520
Stockholders' deficit:
Common stock, $.01 par value; 50,000,000
shares authorized; 180,199 shares
issued and outstanding 1,802
Additional paid-in capital 6,781,216
Deficit accumulated during development stage (6,827,521)
Total stockholders' deficit (44,503)
$ 27,017
</TABLE>
See accompanying notes to these financial statements.
1
<PAGE>
HART INDUSTRIES, INC.
(A Development-Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended (Inception)
to
September 30, September 30, September 30, 2000
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
Net revenues $ - $ - $ - $ - $ -
Cost of revenues - - - - -
- - - - -
Costs and expenses:
General and
administrative expenses 157,882 25,545 215,475 76,731 1,131,779
Provision for write-down
of property and equipment - - - - 251,564
Impairment of
Dishwasher Assets - - - - 2,500,000
Total costs and expenses 157,882 25,545 215,475 76,731 3,883,343
Operating loss (157,882) (25,545) (215,475) (76,731) (3,883,343)
Other income (expense):
Interest income - - - - 96,750
Gain on sale of assets - - - - 10,800
Loss on sale of assets - - - - (500,000)
Impairment of investments - - - - (750,000)
Total other income
(expense) - - - - (1,142,450)
Loss from continuing
operations (157,882) (25,545) (215,475) (76,731) (5,025,793)
Loss from discontinued
operations, net
of tax of $0 - - - - (1,801,727)
Net loss $ (157,882) $ (25,545) $ (215,475) $ (76,731) $(6,827,520)
Basic and diluted
loss per share:
Continuing operations $ (1.27) $ (.37) $ (2.46) $ (1.11)
Discontinued operations - - - -
Net loss $ (1.27) $ (.37) $ (2.46) $ (1.11)
Weighted average common
shares outstanding 124,719 69,239 87,733 69,239
</TABLE>
See accompanying notes to these financial statements.
2
<PAGE>
HART INDUSTRIES, INC.
(A Development-Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
Period
From October
29, 1982
Nine Months Ended September 30, (Inception) to
September 30,
2000 1999 2000
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (215,475) $ (76,731) $(6,827,520)
Adjustments to reconcile
net loss to net cash
used in operating
activities:
Depreciation and
amortization - - 224,503
Loss from return
of defective products - - 241,996
Loss on sale of assets - - 500,000
Gain on sale of assets - - (10,800)
Interest expense on
note payable to affiliate - - 229,724
Capital contributed
for services - - 103,500
Common stock issued
for services 125,000 - 178,750
Gain on liquidation
of subsidiary - - (108,861)
Impairment of Dishwasher
Assets - - 2,500,000
Provision for write-down
of property and equipment - - 251,564
Impairment of investments - - 750,000
Changes in operating assets
and liabilities:
(Decrease) increase in
accounts payable (6,413) (11,189) 4,926
Increase in income
taxes payable - - 8,280
Net cash used in
operating activities (96,888) (87,920) (1,953,938)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment - - (858,592)
Acquisition of patents
and trademarks - - (122,778)
Disposal of assets - - 112,647
Net cash used in
investing activities - - (868,723)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances (repayments)of
due to affiliates (162,976) 87,789 465,813
Net proceeds from issuance
of common stock 286,660 - 466,776
Net borrowings on
note payable - - 1,848,489
Contribution from
shareholder - - 68,600
Net cash provided by
financing activities 123,684 87,789 2,849,678
Net increase (decrease)
in cash 26,796 (131) 27,017
Cash at beginning
of period 221 197 -
Cash at end of period $ 27,017 $ 66 $ 27,017
</TABLE>
See accompanying notes to these financial statements.
3
<PAGE>
HART INDUSTRIES, INC.
(A Development-Stage Company)
Statements of Cash Flows
(Continued)
<TABLE>
<CAPTION>
Period
From October 29,
1982
Nine Months Ended September 30, (Inception) to
September 30,
2000 1999 2000
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF
NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Acquisition of
Transmeridian Gas and
Oil Company in exchange
for common stock $ 679,139
Acquisition of Hart (UK)
in exchange for common stock $ 46,100
Common stock issued in dissolution
of subsidiary $ 6,868
Common stock issued for assets $ 2,266,474
Common stock issued
for services $ 125,000 $ 178,750
Common stock issued
for satisfaction of notes
payable to affiliates $ 407,500 $ 2,742,525
Common stock issued for
forgiveness of long-term
note payable $ 656,250
Equipment acquired by long-term
note payable and capital leases $ 1,969,817
Long-term liabilities assumed on
liquidation of subsidiary $ 944,016
Assets acquired on liquidation
of subsidiary $ 1,374,853
Assets issued for payments of
note payable $ 469,042
</TABLE>
See accompanying notes to these financial statements.
4
<PAGE>
HART INDUSTRIES, INC.
(A Development-Stage Company)
NOTES TO FINANCIAL STATEMENTS
September 30,2000
(Unaudited)
NOTE 1. ORGANIZATION AND HISTORY
Organization
Hart Industries, Inc. (the "Company") was originally incorporated on
October 29, 1982 ("Inception") in the state of Utah. The Company was involved in
certain research and development activities from Inception through September
1990. From 1983 to 1986, the Company was involved in the development of a
non-electric, water-powered dishwasher ("Dishwasher Assets"). The Dishwasher
Assets did not develop beyond the prototype stage and, in 1993, they were sold.
In 1988, the Company pursued operations of an Underground Storage Tank Leak
Detection System ("Detection System") for use in petroleum storage applications
through its newly created Environmental Services Division ("ESD"). The ESD was
also involved in sludge de-watering through its Transportable Treatment Unit
("TTU"), which the Company obtained in 1990. The TTU commenced operations in
1990, however, poor market conditions forced the cessation of its operations
later that year. In July 1992, the Company acquired all the outstanding stock of
Medilife Holdings Limited ("Medilife"), which owned nursing homes in the United
Kingdom. In July 1993, upon ensuing litigation, the Company assigned its
contractual rights to the shares of Medilife and the underlying assets and
certain causes of action against the Medilife shareholders to a third party in
exchange for investment securities. In 1993, the Company acquired sign
fabrication assets and commenced equipment leasing activities. Difficulties in
securing viable leases terminated these activities and in 1995, the assets were
sold. Beginning December 1992, the Company has had no operations and,
accordingly, is a company in the development stage. Management has been pursuing
business opportunities in the equipment leasing industry and other industries.
Reorganization
Effective March 8, 1994, the Company reorganized via a merger with a newly
formed Nevada corporation whose name became Hart Industries, Inc. at the
effective date. The merger agreement was approved by the Company's stockholders
at the annual meeting held on January 18, 1994. Under the merger agreement each
shareholder received one (1) share in the Nevada corporation for every 20 shares
held in the Company. As a result of the merger, the number of authorized shares
of common stock increased from 10,000,000 to 50,000,000 while retaining the same
$.01 par value. All share and per share amounts have been restated to give
effect to the merger. The merger was accounted for at historical bases in a
manner similar to a pooling-of-interests.
Reverse Stock Split
On October 2, 2000, the Board of Directors approved a 25 for 1 reverse
stock split. All shares and per share amounts have been restated for the effect
of the reverse stock split.
5
<PAGE>
HART INDUSTRIES, INC.
(A Development-Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
September 30, 2000
(Unaudited)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has incurred net losses
from operating activities since Inception. This is a direct result of the
Company having no operating revenues to cover fees for professional services and
other overhead that the Company has incurred. Such conditions raise substantial
doubt about the Company's ability to continue as a going concern. The Company
has received financial support from NuVen Advisors, Inc. ("NuVen") and NewBridge
Capital, Inc. ("NewBridge"), an affiliate as discussed in Note 3, since. The
Company's plan is to continue searching for additional sources of equity and
working capital and new operating opportunities. In the interim, the Company's
existence is dependent upon continuing financial support from NewBridge for at
least the next 12 months.
Unaudited Interim Financial Statements
The interim financial data as of September 30, 2000, and for the three
months and nine months ended September 30, 2000 and 1999, is unaudited; however,
in the opinion of management, the interim data includes all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly and
Company's financial position as of September 30, 2000, and the results of its
operations and cash flows for the three months and nine months ended September
30, 2000 and 1999.
NOTE 3. RELATED PARTY AND OTHER TRANSACTIONS
Effective October 1, 1999, as amended, the Company had a advisory and
management agreement with NuVen to perform administrative, human resource and
merger/acquisition services. Pursuant to such agreement, the Company agreed to
pay NuVen $42,000 annually, payable monthly in $3,500 increments in arrears, and
granted NuVen an option to purchase 10,000 shares of the Company's common stock
exercisable at $2.50 per share and 20,000 exercisable at $12.50 per share. These
options were exercised in August 2000 for aggregate proceeds of $275,000. On
April 1, 2000, the advisory agreement was assigned to NewBridge, an entity
related to NuVen. The Company expensed $10,500 and $27,000 during the nine-month
periods ended September 30, 2000 and 1999, respectively. During the quarter
ended September 30, 2000, the Company paid NuVen $247,516 for payments due under
this agreement and other advances by NuVen. As of September 30, 2000, no amounts
were due to NuVen.
Effective April 1, 2000, the advisory and management agreement with NuVen
was assumed by NewBridge. The Company expensed $21,000 during the nine-month
period ended September 30, 2000, and had $21,000 due to NewBridge as of
September 30, 2000.
In January 1995, the Company entered into an employment agreement with Mr.
Luke, pursuant to which Mr. Luke is to hold the office of President through
December 2000. Pursuant to the agreement, the Company agreed to pay Mr. Luke
$54,000 per annum in cash or in the Company's common stock payable monthly in
arrears, and granted him an option to purchase 40,000 shares of the Company's
common stock at an exercise price per share of $.25. In August 2000, Mr. Luke
elected to exercise these options and the underlying shares were subsequently
assigned to Newbridge.
6
<PAGE>
HART INDUSTRIES, INC.
(A Development-Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
September 30, 2000
(Unaudited)
Since the Company failed to resume trading of its stock until September
2000, it did not have the working capital to compensate Mr. Luke through August
2000. No cash payments were made to Mr. Luke by the Company during the
nine-month periods ended September 30, 2000 and 1999. In January 2000, Mr. Luke
notified the Company that he would be resigning as an officer and proposed a
settlement of accrued compensation. In August 2000, 10,800 shares of common
stock were issued in settlement of the $310,500 of accrued but unpaid
compensation due to Mr. Luke. The Company expensed $40,500 during the nine-
month periods ended September 30, 2000 and 1999, each, and had no remaining
amount was due to Mr. Luke as of September 30, 2000. On October 1, 2000, the
Company and Mr. Luke mutually agreed to termination of Mr. Luke's Employment
Agreement. Mr. Luke has agreed to continue on as a director of the Company.
Effective April 24, 1996, the Company entered into a consulting agreement
with Mr. Steven Dong, pursuant to which Mr. Dong is to perform accounting
services and to hold the office of Chief Financial Officer. Effective July 1,
1997, Mr. Dong resigned as Chief Financial Officer. In August 2000, 1,600 shares
of common stock were issued to Mr. Dong, which satisfied the entire $40,000
amount payable to Mr. Dong. No cash payments were made to Mr. Dong by the
Company during the nine-month periods ended September 30, 2000 and 1999 and no
remaining amount was due to Mr. Dong as of September 30, 2000.
On January 1, 1997, the Company entered into a consulting agreement with
Mr. J.L. Lawver, pursuant to which Mr. Lawver is to perform advisory services.
Pursuant to the agreement the Company agreed to pay Mr. Lawver $12,000 per year
in cash or in the Company's common stock payable in arrears, and granted him an
option to purchase 6,640 shares of the Company's common stock at an exercise
price of $.25 per share. This option was exercised in August 2000 for proceeds
of $1,660. Also in August 2000, 1,920 shares of common stock were issued to Mr.
Lawver, which satisfied the entire $57,000 of the outstanding amount payable to
Mr. Lawver. The Company expensed $9,000 during the nine-month periods ended
September 30, 2000 and 1999, each, and had no remaining amount due to Mr. Lawver
as of September 30, 2000.
In September 2000, the Company issued 500,000 shares of its common stock to
consultants of the Company for legal, accounting and financial services
rendered. The shares issued were valued at $125,000.
At the time of the settlement with Messrs. Luke, Dong and Lawver, the
common shares of the Company were not trading. The difference between the
amounts due to Messrs. Luke, Dong and Lawver and the estimated fair value of the
common stock was treated as additional paid-in capital.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended September 30, 2000 Compared to Three Months Ended
September 30, 1999
There were no operating revenues recorded during the three months ended
September 30, 2000 or 1999.
7
<PAGE>
HART INDUSTRIES, INC.
(A Development-Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
September 30, 2000
(Unaudited)
The Registrant's general and administrative expenses were $157,882 for the
three months ended September 30, 2000, as compared to $25,545 for the same
period last year. The change is primarily attributable stock issued for services
provided by professional consultants and other advisors.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended
September 30, 1999
The Registrant had no revenues for the nine months ended September 30, 2000
or 1999.
The Registrant's total general and administrative expenses were $215,475
for the nine months ended September 30, 2000, as compared to $76,731 for the
same period last year. The change is primarily attributable to stock issued for
services valued at $125,000, provided by professional consultants and other
advisors.
Liquidity and Capital Resources
The Registrant has continued to incur net losses and negative cash flows
from operating activities. The Registrant had minimal cash and cash equivalents
at September 30, 2000 and had working capital of $13,810 as of September 30,
2000. The limited working capital is a direct result of the Registrant incurring
expenses for professional, consulting and advisory services and other overhead
during the periods. As of the date of this Report, the Registrant has no
material commitments for capital expenditures and no commitments for additional
equity or debt financing.
During the quarter ended September 30, 2000, $286,660 of cash was received
upon exercise of stock options. Additionally, during the quarter the Company
incurred charges from affiliates of $40,500 and paid $257,153 to affiliates. At
September 30, 2000, the Company owed its affiliates $58,313. The Company's
advisors will not be paid until financial resources are available. In the event
such financial resources are unavailable, such liability may be satisfied
through the issuance of the Company's common stock.
Going Concern
As a result of the Registrant having no revenue producing activities, the
Registrant has limited cash and cash equivalents remaining as of September 30,
2000, to finance future operations. Such conditions raise substantial doubt
about the Registrant's ability to continue as a going concern. The Registrant
has received financial support from NuVen and NewBridge and is dependent upon
NewBridge for future working capital. The Registrant's plan is to continue
searching for additional sources of equity and working capital and new operating
opportunities. In the interim, the Registrant's existence is dependent upon
continuing financial support from NuVen for the remainder of fiscal year 2000.
8
<PAGE>
HART INDUSTRIES, INC.
(A Development-Stage Company)
NOTES TO FINANCIAL STATEMENTS
(continued)
September 30, 2000
(Unaudited)
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes In Securities
On October 2, 2000 the Board of Directors approved a 25 for 1
share reverse stock split.
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 - None
(b) Form 8-K - None
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
HART INDUSTRIES, INC.
(Registrant)
Date: November 20, 2000 By:/s/ Jon L. Lawver
Jon L. Lawver
Secretary and Director
10
