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, 1999 Commission File No. 0-15148
SCIENTIFIC NRG, INCORPORATED
(Exact name of registrant as specified in its charter)
Minnesota 41-1457271
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) Number)
4695 MacArthur Court, Suite 530, 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 12, 1999, there were 32,023,897 shares of the Registrant's
no par value common stock issued and outstanding.
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SCIENTIFIC NRG, INCORPORATED
INDEX
Page
PART I
Item 1. Financial Statements
Balance Sheet - September 30, 1999...................................1
Statements of Operations - Three Months Ended
September 30, 1999 and 1998.......................................2
Statements of Stockholders Equity (Deficit) - Three Months Ended
September 30, 1999................................................3
Statements of Cash Flows - Three Months Ended
September 30, 1999 and 1998.......................................4
Notes to Financial Statements........................................5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................8
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
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SCIENTIFIC NRG, INCORPORATED
Balance Sheet
As of September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 22,772
Marketable securities 971,578
Current portion of receivables from affiliates 200,000
Note receivable 50,000
Other current assets 28,601
Total current assets 1,272,951
Receivables from affiliates, net of allowance of $382,896
net of current portion 73,779
Other receivables, net of allowance of $20,304 20,304
Investments, at cost 519,674
Investment in NuOasis Resorts, Inc.
Convertible Preferred Stock, at cost 8,000,000
Property and equipment, net 31,363
$ 9,918,071
</TABLE>
LIABILITIES AND STOCKHOLDERS EQUITY
<TABLE>
<S> <C>
Current liabilities:
Accounts payable $ 27,419
Accrued professional fees 37,153
Other current liabilities 16,847
Total current liabilities 81,419
Stockholders equity:
Common stock, no par value; 40,000,000 shares authorized;
32,023,897 shares issued and outstanding 14,083,393
Additional paid-in capital 27,025
Unrealized loss on marketable securities (164,978)
Accumulated deficit (4,108,788)
Total stockholders equity 9,836,652
$ 9,918,071
</TABLE>
See accompanying notes to these financial statements
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SCIENTIFIC NRG, INCORPORATED
Statements of Operations
For the Three Months Ended
September 30, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
1999 1998
(Unaudited) (Unaudited)
<S> <C> <C>
Net Sales $ - $ 70,652
Cost of Sales - 33,468
Gross Profit $ - $ 37,184
Costs and expenses:
General and administrative $ 86,341 $ 63,280
Totals 86,341 63,280
Net income (loss) (86,341) $ (26,096)
Net income (loss) per common share $ (.00) $ (.01)
Weighted average common
shares outstanding 32,023,897 5,586,163
</TABLE>
See accompanying notes to these financial statements
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SCIENTIFIC NRG, INCORPORATED
STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Unrealized
Common Stock Additional Loss on Stockholders
----------------------- Paid-in Marketable Accumulated Equity
Shares Amount Capital Securities Deficit (Deficit)
---------- ----------- ---------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances, June 30, 1999 31,723,897 $14,065,393 $ 27,025 - $(4,022,447) $10,069,971
Common stock issued in
connection with services
rendered 300,000 18,000 - - - 18,000
Unrealized loss on
marketable securities - - - (164,978) - (164,978)
Net loss - - - - (86,341) (86,341)
Balances, September 30, 1999 32,023,897 $14,083,393 $ 27,025 $ (164,978) $(4,108,788) $ 9,836,652
</TABLE>
See accompanying notes to financial statements
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SCIENTIFIC NRG, INCORPORATED
Statements of Cash Flows
For the Three Months Ended September 30, 1999 and 1998 (Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended September 30,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (86,341) $ (26,296)
Adjustments to reconcile net loss to net cash
Provided by operating activities:
Depreciation - 465
Common stock issued for services rendered 18,000 77,613
Changes in operating assets and liabilities:
(Increase) in inventories - (15,639)
Decrease in other assets 7,649
Increase (decrease) in accounts payable and
accrued expenses 8,125 (23,602)
Increase (decrease) in other liabilities 81,329 -
Net cash provided by (used in) operating activities 21,113 20,190
Net increase in cash 21,113 20,190
Cash at beginning of period $ 1,659 $ 14,367
Cash at end of period $ 22,772 $ 34,557
Non-cash investing and financing activities:
Common stock issued for services rendered $ 18,000 $ 77,613
</TABLE>
See accompanying notes to these financial statements
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SCIENTIFIC NRG, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 1. ORGANIZATION AND HISTORY
Business and Organization
Scientific NRG, Incorporated, dba Scientific Component Systems (the "Company"),
was incorporated in the state of Minnesota in 1983. The Company historically
designed, manufactured and marketed custom energy efficient lighting products
utilizing compact fluorescent lamp technology primarily within the United
States. The principal products were energy efficient, compact fluorescent
downlight fixtures primarily for the downlight canister retrofit market.
On August 15, 1998, the Companys Board of Directors approved the sale of the
Companys downlight business, which constitutes substantially all of the Companys
assets and operations. On June 29, 1999, the Company completed the sale of its
downlight business which included substantially all of the Companys assets and
operations.
Effective June 30, 1999, the Company consummated an asset purchase agreement
with NuVen Capital L.P. (NuVen), which resulted in the Company acquiring certain
assets of NuVen, in exchange for 22,344,652 shares of the Companys common stock
valued at $10,090,793, based the estimated fair value of the underlying assets
acquired. No liabilities were assumed in this transaction. The assets obtained
by the Company consisted of Series D Convertible Preferred Stock of NuOasis
Resorts, Inc., totaling $8,000,000; certain receivables, primarily from
affiliates, with a net carrying value of $403,200; marketable securities in
affiliates totaling $1,136,556; and other non-current assets totaling $551,037.
As a result of this transaction, NuVen obtained approximately 70% control of the
Company. The assets acquired were accounted for at historical bases similar to a
recapitalization.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
At September 30, 1999, the Companys operation consisted of managing certain
investments and seeking business opportunities. The Companys plan is to
liquidate or exchange its interests to acquire interests in other ventures and
new opportunities. Management believes that its working capital is sufficient to
meet its working capital requirements for a period of 12 months from the balance
sheet date.
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 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.
Property and Equipment
The values reflected in its Annual Report on Form 10 KSB for the Companys fiscal
year ended June 30, 1999, are carried forward here at $31,363. Depreciation for
the current year will be taken into consideration at year end.
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SCIENTIFIC NRG, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings (Loss) Per Common Share
Net income (loss) per common share is calculated by dividing net income (loss)
by the weighted average number of shares outstanding during the period. Common
stock equivalents were not considered in the loss per share calculations as the
effect would have been anti dilutive.
Issuance of Common Stock for Services
On July 14, 1999, the Company issued 300,000 shares of common stock for services
to be rendered in connection with a retainer agreement which commenced on July
1, 1999 and expiring on June 30, 2000. Such shares were registered by management
of the Company with the Securities and Exchange Commission pursuant to Form S-8.
NOTE 3. MARKETABLE SECURITIES
In connection with the asset purchase agreement with NuVen, the Company obtained
shares of common stock in affiliated companies of NuVen. Each investment
represents less than 10% of the outstanding common stock of the investee and
each security is nationally quoted on the OTC: Bulletin Board of the National
Association of Securities Dealers. As such, each investment is accounted for in
accordance with the provisions of SFAS No. 115.
Management has classified these investments as available-for-sale based on its
intent to liquidate, or exchange these equity securities for other interests or
operating businesses. In accordance with the provisions of SFAS No. 115, these
equity securities are presented in the accompanying balance sheet as current
assets at their estimated fair values. Management has determined the fair market
value of these investments in accordance with the provisions of SFAS No. 115.
The fair market value at September 30, 1999, of the Marketable Securities was
$971,578 and the Companys carrying value was $1,136,556. The fair market value
at November 10, 1999, of these Securities was $1,074,070. In the opinion of
management, the difference of $164,978 at September 30, 1999, is not considered
material when compared to Total Stockholders Equity of $10,001,630.
NOTE 4. RECEIVABLES FROM AFFILIATES
Receivables From Affiliates
Receivables from affiliates represent non-interest bearing amounts in the amount
of $656,675. Of this amount, $631,675 is due from certain affiliated companies
and approximately $25,000 is due from an officer of the Company. As of September
30, 1999, management had deemed the collectable portion of the receivables to be
approximately $273,779, as such, the accompanying financial statements include
an allowance for doubtful accounts.
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SCIENTIFIC NRG, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 5. INVESTMENTS AT COST
In connection with the asset purchase agreement, the Company acquired certain
investments in affiliated companies. Included in these investments is an
investment in the Yes license at a cost to NuVen of $389,481.
In accordance with generally accepted accounting principles, the acquisition of
the Yes license was recorded at predecessor basis. The Company also has an
interest in 3.5 million shares of common stock of Yes valued at approximately
$0.03 per share for a total investment at fair market value of $91,382. The
Company intends to carry this investment at cost due to the relatively
immaterial amount of the investment.
Also included in investments at cost are investments in the common stock of Hart
and Diversified. The Company acquired 750,000 and 474,085 shares of common stock
of Hart and Diversified, respectively. Currently, there is no market for these
shares and thus, the fair market price per share is not readily determinable. As
such, these investments are recorded in the accompanying financial statements as
of September 30, 1999 at predecessor basis of $7,500 and $31,311 for Hart and
Diversified, respectively.
NOTE 6. INVESTMENT IN NuOASIS RESORTS, INC.
In connection with the asset purchase agreement with NuVen, the Company acquired
19,200,000 shares of NuOasis Resort, Inc., Series D Preferred on June 30, 1999
with a carrying value of $8,000,000. The Company obtained an independent
appraisal of the Series D Preferred at a fair market value of approximately
$10.9 million. Since the Company is required to record the asset using the
predecessors basis, the Company recorded the investment at $8,000,000.
In accordance with generally accepted accounting principles, the Series D
Preferred is accounted for under the cost method, since the Company does not
share in the earnings and losses of NuOasis Resorts, Inc., since participation
in earnings and losses is based on the shares of common stock held by an
investor without recognition of securities of the investee which are designated
as common stock equivalents.
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Going Concern
The Company has experienced recurring net losses and management's intent is
to continue searching for additional business opportunities. The Company
intends to utilize its asset base as a source of operating capital while
continuing to operate with minimal overhead and key administrative
functions provided by consultants who are compensated in the form of the
Company's common stock. Accordingly, the accompanying financial statements
have been presented under the assumption the Company will continue as a
going concern.
Results of Operations
Quarter Ended September 30, 1999 Compared to Quarter Ended September 30,
1998
There were no operations during the quarter ended September 30, 1999 and as
such, there were no revenues or cost of revenues recorded during the
current quarter. In the quarter ended September 30, 1998, the Company was
operating at minimum levels and the decision was made during this 1999
period by the Board of Directors to seek other opportunities.
General and administrative expenses was $68,341 in the current quarter
compared to $63,280 in the comparable period last year. The change is
attributable to continued services provided by professional consultants and
other advisors.
Liquidity and Capital Resources
As of September 30, 1999, the Company had working capital of $1,356,510 an
increase of $12,988 from June 30, 1998.
The Company had cash balances of approximately $22,772 and $34,557 at
September 30, 1999 and 1998, respectively. The limited cash balance in 1999
is a direct result of the Company having no operations during the quarter.
The Companys plan is to keep searching for additional sources of capital
and new operating opportunities. In the interim, the Company will utilize
its asset base as a source of funds to sustain operations.
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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 - None
(b) On July 28, 1999, the Company filed a Form 8-K reporting a change in
the Registrants Certified Accountants from Corbin & Wertz to McKennon, Wilson &
Morgan, LLP, effective July 21, 1999. On August 23, 1999, the Company filed a
Form 8-K/A amending the July 28, 1999, report to provide further particulars
regarding the change in Certified Accountants.
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9
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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.
SCIENTIFIC NRG, INCORPORATED
(Registrant)
Date: November 15, 1999 By:/s/ Fred G. Luke
Fred G. Luke,
President and Principal Accounting Person
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 22,772
<SECURITIES> 971,578
<RECEIVABLES> 697,283
<ALLOWANCES> 403,200
<INVENTORY> 0
<CURRENT-ASSETS> 1,272,951
<PP&E> 31,363
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,918,071
<CURRENT-LIABILITIES> 81,419
<BONDS> 0
0
0
<COMMON> 14,083,393
<OTHER-SE> (4,246,741)
<TOTAL-LIABILITY-AND-EQUITY> 9,918,071
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 86,341
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (86,341)
<INCOME-TAX> 0
<INCOME-CONTINUING> (86,341)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (86,341)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
