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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1 TO FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SEURITIES OF
SMALL BUSINESS ISSUERS Under Section 12(b) or
(g) of the Securities Exchange Act of 1934
NuTek, Inc.
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(Name of Small Business Issuer in its charter)
Nevada 87-0374623
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
15722 Chemical Lane, Huntington Beach, CA 92649
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(Address of principal executive offices) (zip code)
714-799-7266 (Telephone) 714-799-5466 (Fax)
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Issuer's Telephone Number
Securities to be registered under section 12(b) of the Act:
Title of Each Class Name on each exchange on which
to be registered each class is to be registered
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Securities to be registered under section 12(g) of the Act:
Common Stock, $.001 par value per share, 50,000,000 shares authorized,
36,328,044 issued and outstanding as of December 31, 1999. Preferred
Stock, $.001 par value per share, 5,000,000 shares authorized, 793,500
issued and outstanding as of December 31, 1999.
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FORWARD LOOKING STATEMENTS
CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
NuTek, Inc., ("NuTek, Inc.," or "NUTK" or the "Company" or the "Registrant")
cautions readers that certain important factors may affect the Company's
actual results and could cause such results to differ materially from any
forward-looking statements that may be deemed to have been made in this
Document or that are otherwise made by or on behalf of the Company. For
this purpose, any statements contained in the Document that are not statements
of historical fact may be deemed to be forward-looking statements. This
Registration contains statements that constitute "forward-looking
statements." These forward-looking statements can be identified by the use
of predictive, future-tense or forward-looking terminology, such as "believes,"
"anticipates," "expects," "estimates," "plans," "may," "will," or similar
terms. These statements appear in a number of places in this Registration
and include statements regarding the intent, belief or current expectations of
the Company, its directors or its officers with respect to, among other
things: (i) trends affecting the Company's financial condition or results
of operations for its limited history; (ii) the Company's business and
growth strategies; (iii) the Internet and Internet commerce; and, (iv) the
Company's financing plans. Investors are cautioned that any such
forward-looking statements are not guarantees of future performance and
involve significant risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking statements
as a result of various factors. Factors that could adversely affect actual
results and performance include, among others, the Company's limited
operating history, dependence on continued growth in the use of the Internet,
the Company's inexperience with the Internet, potential fluctuations in
quarterly operating results and expenses, security risks of transmitting
information over the Internet, government regulation, technological change
and competition.
The accompanying information contained in this Registration, including,
without limitation, the information set forth under the heading "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business" identifies important additional factors
that could materially adversely affect actual results and performance. All
of these factors should be carefully considered and evaluated. All forward-
looking statements attributable to the Company are expressly qualified in
their entirety by the foregoing cautionary statement. Any forward-looking
statements in this report should be evaluated in light of these important
risk factors. The Company is also subject to other risks detailed herein
or set forth from time to time in the Company's filings with the Securities
and Exchange Commission.
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
Part I ......................................................... 4
Item 1. Description of Business.................................. 4
Item 2. Management's Discussion and Analysis or Plan of
Operation................................................ 29
Item 3. Description of Property.................................. 30
Item 4. Security Ownership of Management and Others and Certain
Security Holders......................................... 31
Item 5. Directors, Executives, Officers and Significant
Employees................................................ 32
Item 6. Remuneration of Directors and Executive
Officers................................................. 36
Item 7. Certain Relationships and Related Transactions........... 37
Part II ......................................................... 38
Item 1. Market Price of and Dividends of the Registrant's
Common Equity and Other Stockholder Matters.............. 38
Item 2. Legal Proceedings........................................ 40
Item 3. Recent Sales of Unregistered Securities.................. 41
Item 4. Description of Securities................................ 41
Item 5. Indemnification of Directors and Officers................ 42
Part F/S ......................................................... 45
Item 1. Financial Statements..................................... 45
Item 2. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure..................... 45
Part III ........................................................ 46
Item 1. Index to Exhibits....................................... 46
Item 2. Description of Exhibits................................. 46
The following Registration Statement is qualified in its entirety by, and
should be read in conjunction with, the more detailed information and the
Financial Statements and Notes related thereto appearing elsewhere in this
Registration. Except where the context otherwise requires, all references
in this Registration to (a) the "Registrant" or the "Company" or "NUTK"
refer to NuTek, Inc., a Nevada corporation, (b) the "Web" refer to the
World Wide Web and (c) the "site" refer to the Company's Web site.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
A. Business Development, Organization and Acquisition Activities
The Company was incorporated under the laws of the State of Nevada, on
August 23, 1991, under the name Swiss Technique, Inc. The original
Articles of the Company authorized the issuance of fifty million
(50,000,000) shares of common stock with a par value of $0.001. On or
about August 23, 1991, pursuant to Section 78.486, Nevada Revised
Statutes as amended, the Company filed with the Nevada Secretary of
State Articles of Merger, whereby the Company merged with Sun
Investments, Inc., a Utah corporation. On or about April 10, 1992, the
Issuer, with majority shareholder vote filed Articles of Amendment to
the Articles of Incorporation with the Secretary of State of Nevada,
authorizing five million (5,000,000) shares of Preferred Stock each have
a par value of $0.001, with such rights, preferences and designations
and to be issued in such series as determined by the Board of Directors
of the Corporation. The Company in accordance with Section 78.250 of
the Nevada Revised Statues and as a result of the majority consent of
shareholders executed on or about March 3, 1995 changed the name of the
Company from Swiss Technique, Inc., to NuTek, Inc. The Company filed
a Certificate of Amendment of Articles of Incorporation with the
Secretary of State of Nevada to change its name. On or about September
20, 1997, the Company filed with the Nevada Secretary of State a Plan
of Reorganization and Agreement between itself and International
Licensing Group, Inc., a Delaware Corporation.
Swiss Technique Inc. was the former name of Nutek Inc, and at the time it
operated under Swiss Technique, the nature of its business according to the
Articles of Incorporation are:
The purpose or purposes for which this corporation is engaged are:
(a) To engage in the specific business of looking for business acquisitions
and related items; also the business of making investments, including
investments in, purchase and ownership of any and all kinds of property,
assets or business, whether alone or in conjunction with others. Also, to
acquire, develop, explore and otherwise deal in and with all kinds of real
and personal property and all related activities, and for any and all other
lawful purposes.
(b) To acquire by purchase, exchange, gift, bequest, subscription, or
otherwise; and to hold, own, mortgage pledge, hypothecate, sell, assign,
transfer, exchange, or otherwise dispose of or deal in or with its own
corporate securities or stock or other securities including, without
limitations, any shares of stock, bonds, debentures, notes, mortgages,
or other obligations, and any certificates, receipts or other instruments
representing rights or interests therein on any property or assets created
or issued and all rights, powers, and privileges in respect thereof.
(C) To do each and everything necessary, suitable, or proper for the
accomplishment of any of the purposes or the attainment of any one or
more of the subjects herein enumerated, or which may, at any time, appear
conducive to or expedient for the protection or benefit of this corporation,
and to do said acts as fully and to the sane extent as natural persons might,
or could do in any part of the world as principals, agents, partners, trustees,
or otherwise, either alone or in conjunction with any other associations or
corporations.
(d) The foregoing clauses shall be construed both as purposes and powers
and shall not be held to limit or restrict in any manner the general powers
of the corporation, and the enjoyment and exercise thereof, as conferred by
the laws of the State of Nevada; and it is the intention that the purposes
and powers specified in each of the paragraphs of this Article III shall be
regarded as independent purposes and powers.
The Company is engaged multiple business activities, which include:
(A) Elite Fitness Systems which markets video "fitness program" tapes
through infomercials;
(B) BuyNet Plaza.com, Internet marketing;
(C) Century Clocks, which plans to produce wall clocks;
(D) Vac-U-Lift Production Company, Inc.
(E) Nutek Oil Inc, which owns the rights to oil leases in Texas;
(F) Other consumer/industrial products which include: a plastic buffet
plate, producing "light switch" covers plates; and, plastic coverings for
metal rails,.
The Company's mailing address is: 15722 Chemical Lane, Huntington Beach,
CA 92649, phone number: 714-799-7266. The Company website can be found
at: www.nutk.com.
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B. Business of Issuer
1) Principal Products, Services and Principal Markets.
(A) Elite Fitness Systems
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Although the Company reported a loss for the year 1999, its Elite Fitness
Systems entity was profitable during calendar 1999. The Company has
identified a product which can be mass marketed through radio, television
and print media. Elite Fitness Systems mission is to provide quality media
and distribution of its products in an efficient, profitable manner. The
Company has developed a series exercise videos originally produced by Mr.
Scott Helvenston, a former Navy Seal. These videos are marketed through
infomercials, and print media, include the "Sky Mall" magazine, found on
many commercial airline flights and various mail order catalogs. The
Company spent approximately $40,000 this past year on advertising this
product.
The infomercials discuss the product attributes, and through testimonials
encourage the consumer to purchase these products, by calling an 800
number. The company contracts with "phone rooms" to take orders for these
products. The company also hires the services of Maximum Coverage Media,
Inc., in San Diego, who purchases block quantities of air time with television
and radio stations. Product fulfillment and order processing is handled
through the offices of Mr. Scott Helvenston.
The highlights of the terms of the agreement which the company has
entered into with Mr. Scott Helvenston includes (See Exhibit 10.3
Purchase Agreement):
a) Mr. Scott Helvenston guarantees to the Company a minimum sales revenue
of Two Hundred Thousand ($200,000.00) per year from existing catalogs and
clients, failing which the "Royalty Payments" will be reduced by Two and
One half (2.5%) percent, effective from date of signing of contract.
b) NuTek agreed to place an additional Twenty Thousand ($20,000.00)
dollars into the current business as a loan account from NuTek to fund
operations. The Company planned to provide a minimum of Three Thousand
Five Hundred ($3,500.00) dollars per month to fund print media advertising.
The revenue sharing is to be increased by five (5%) percent until loan is
paid back from this additional five (5%) Percent. In addition to this, if
media roll out of exercise video campaign returns a rate greater then 2:1,
NuTek will forward additional funding, a minimum of One Hundred Thousand
($100,000) Dollars to Elite Fitness Systems to continue promoting commercial.
Should the media rollout not return a 2:1 return, no further funds will be
spent.
Update: Nutek provided $10,000.00 of the $20,000.00 discussed in section
(ii) and it was decided that Nutek would not provide the $3,500.00 per month
to fund print media, thus the revenue sharing was also not increased by five
(5%) percent. The initial media rollout did not return a 2:1 ratio and thus
there has been no additional funding needed for Elite Fitness Systems Inc.
The Company no longer plans to assist in raising funding for this project, at
this time.
c) NuTek will also attempt to raise additional funding for the construction
of outdoor rock climbing gym and sports area. Should the funding not be
available and Elite Fitness Systems not be profitable, this project will not
take place. If additional funds are needed to be raised, management would
consider a Private Placement pursuant to Regulation "D" Rule 505 or 506. No
decision to do so, has been made at this time. Management needs further
evaluation to determine if it wants to proceed with the construction of a
outdoor rock climbing gym.
d) Nutek Inc will receive from Elite Fitness Systems Inc, 50% of any net
proceeds after all expenses have been paid.
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(i) Risks Associated with Infomercials
The Company is not experienced with other informercial projects or ventures.
The average cost to produce an infomercial can cost as much as $100,000. If
a project is successful, that is, it generates more sales than the cost of
the product and media time, the company can expect to recoup its cost and
make a profit. If the project is not successful, a company loses its entire
investment in the project it undertakes. Generally speaking, very few
informercials are successful in the marketplace.
(ii) Risks Associated in Working with Outside Suppliers
The company must subcontract the purchase of media time. NuTek purchases
their air-time media up-front and does not rely on the Media Company to pay
for and finance the Media directly. Should the Media company finance the
air-time directly, the media company would then generally receive from 51-90%
of net proceeds, as they would be putting up the risk capital.
The Company does not have the capabilities, and infrastructure to produce
its own quality informercials. The Company does not own any production
company, studio, recording equipment or production facility where it can
produce its own infomercials. Therefore, the Company must subcontract
services. This includes: sub-contracting experienced script writers,
actors, producers, camera crews and production facilities. This is very
costly to the Company as compared to the competitive companies, with
broader experienced, larger budgets and production studios can produce a
similar programs for less money.
(B) BuyNetPlaza.com
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The Company plans to seek outside suppliers who would be willing to allow
the Company's e-commerce site, www.BuyNetPlaza.com to merchandise, market
and sell their products through the Company's Internet Web site, whereby the
Company receives a fifteen (15%) percent fee, for products sold through it
Website. These suppliers would be responsible for inventory, billing and
shipping their products to the potential customers generated through the
Company's e-commerce Web site. The company plans to focus, but not limit
itself to retail-type products, e.g., books, videos, health care products,
etc. Additionally, the Company plans to seek advertisers, to advertise
their product(s) on the Company's Web site. For any advertisers on the
Company's Web site, the Company will provide a link to the advertisers' Web
site and charge a customary/nominal fee, for each customer who links to
their advertisers Web site.
Evaluation of the Company, its current business and its prospects can be
based, each of which must be considered in light of the risks, expenses and
problems frequently encountered by all companies engaged in new business
activities, such as e-commerce and particularly by such companies entering
new and rapidly developing markets like the Internet. Such risks include,
without limitation, the lack of broad acceptance of the company's products
and the possibility that the Internet will fail to achieve broad acceptance,
the inability of the Company to generate significant based revenues
from its customers, the company's inability to anticipate and adapt to a
developing market, the failure of the company's network infrastructure
(including its server, hardware and software) to efficiently handle its
Internet traffic, production capabilities, changes in laws that adversely
affect the company's business, the ability of the Company to manage its
operations, including the amount and timing of capital expenditures and
other costs relating to the expansion of the company's operations, the
introduction and development of different or more extensive communities by
direct and indirect competitors of the Company, including those with greater
financial, technical and marketing resources, the inability of the Company
to maintain and increase levels of traffic on its marketing Web site, the
inability of the Company to attract, retain and motivate qualified personnel
and general economic conditions. The Company's prospects must be considered
in light of the risks, uncertainties, expenses and difficulties frequently
encountered by companies in their early stages of new product development,
particularly companies in new and rapidly evolving markets such as online
commerce.
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(i) Anticipated Revenues for the Foreseeable Future
The Company's website has achieved approximately $29,000 in revenues to date,
and the Company anticipates that its e-commerce website will generate minimal
profits in the foreseeable future. The extent of these profit will depend,
in part, on the amount of growth in the Company's revenues from sales of its
products, and possibility advertising revenues on its Web site. The Company
expects that its operating expenses will increase significantly during the next
several years, especially in the areas of sales and marketing, and brand
promotion. Thus, the Company will need to generate increased revenues to
achieve profitability. To the extent that increases in its operating
expenses precede or are not subsequently followed by commensurate increases in
revenues, or that the Company is unable to adjust operating expense levels
accordingly, the Company's business, results of operations and financial
condition would be materially and adversely affected. There can be no
assurances that the Company can achieve or sustain profitability or that
the Company's operating losses will not increase in the future.
(ii) Dependence on Continued Growth and Viability of the Internet
The Company's e-commerce success is substantially dependent upon continued
growth in the use of the Internet. To generate product sales, advertising
sales, e-Commerce service fees for NuTek, Inc., the Internet's recent and
rapid growth must continue, and e-Commerce on the Internet must become
widespread. None of these can be assured. The Internet may prove not to be a
viable commercial marketplace. Additionally, due to the ability of
consumers to easily compare prices of similar products or services on competing
Web sites, gross margins for e-Commerce transactions may narrow in the future
and, accordingly, the Company's revenues from e-Commerce arrangements may be
materially negatively impacted. If use of the Internet does not continue
to grow, the Company's business, results of operations and financial condition
would be materially and adversely affected. Additionally, to the extent
that the Internet continues to experience significant growth in the number of
users and the level of use, there can be no assurance that its technical
infrastructure will continue to be able to support the demands placed upon
it. The necessary technical infrastructure for significant increases in
e-Commerce, such as a reliable network backbone, may not be timely and
adequately developed. In addition, performance improvements, such as
high-speed modems, may not be introduced in a timely fashion. Furthermore,
security and authentication concerns with respect to transmission over the
Internet of confidential information, such as credit cared numbers, may
remain. Issues like these could lead to resistance against the acceptance
of the Internet as a viable commercial marketplace. Also, the Internet could
lose its viability due to delays in the development or adoption of new
standards and protocols required to handle increased levels of activity, or
due to increased governmental regulation. Changes in or insufficient
availability of telecommunications services could result in slower response
times and adversely affect usage of the Internet. Demand and market
acceptance for recently introduced services and products over the
Internet are subject to a high level of uncertainty, and there exist few
proven services and products.
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The Internet may not be commercially viable in the long term for a number
Of reasons, including potentially inadequate development of the necessary
network infrastructure or delayed development of enabling technologies,
performance improvements and security measures. To the extent that the
Internet continues to experience significant growth in the number of users,
their frequency of use or their band width requirement, there can be no
assurance that the infrastructure for the Internet and other online
services will be able to support the demands placed upon them. In addition,
the Internet or other online services could lose their viability due to
delays in the development or adoption of new standards and protocols required
to handle increased levels of Internet or other online service activity, or
due to increased governmental regulation. Changes in or insufficient
availability of telecommunications services to support the Internet or other
online services also could result in slower response times and adversely
affect usage of the Internet and other online services generally and NuTek,
Inc. in particular. If use of the Internet and other online services does
not continue to grow or grows more slowly than expected, if the
infrastructure for the Internet and other online services does not
effectively support growth that may occur, or if the Internet and other
online services do not become a viable commercial marketplace, the
Company's business, results of operations and financial condition would
be adversely affected.
(iii) Risk of System Failures
The Company's ability to facilitate e-commerce trade successfully and provide
high quality customer service, depends on the efficient and uninterrupted
operation of its computer and communications through its designated Internet
Service Provider (ISP). These systems and operations are vulnerable to damage
or interruption from earthquakes, floods, fires, power loss, telecommunication
failures, break-ins, sabotage, intentional acts of vandalism and similar
events. The Company does not have fully redundant systems, a formal disaster
recovery plan or alternative providers of hosting services and does not carry
business interruption insurance to compensate it for losses that may occur.
Despite any precautions taken by, and planned to be taken by the Company, the
occurrence of a natural disaster or other unanticipated problems with its ISP
could result in interruptions in the services provided by the Company.
In addition, the failure by the ISP to provide the data communications
capacity required by the Company, as a result of human error, natural
disasters other operational disruption, could result in interruptions in the
Company's service. Any damage to or failure of the systems of the Company
could result in reductions in, or terminations of, Company service, which
could have a material adverse effect on the Company's business, results of
operations and financial condition. In the case of frequent or frequent or
persistent system failures, the Company's reputation and name brand could be
materially adversely affected. Although the Company has implemented certain
network security measures, the Company and its IPS are also vulnerable to
computer viruses, physical or electronic break-ins and similar disruptions,
which could lead to interruptions, delays, loss of data or the inability to
complete customer auctions. In addition, although the Company works to
prevent unauthorized access to Company data, it is impossible to eliminate
this risk completely. The occurrence of any and all of these events could
have a material adverse effect on the Company's business, results of
operations and financial condition.
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(iv) e-Commerce Competition
The market for consumer products over the Internet is relatively new,
rapidly evolving and intensely competitive, and the Company expects
competition to intensify further in the future. Barriers to entry are
relatively low, and current and new competitors can launch new sites at a
relatively low cost using commercially-available software. The Company
potentially competes with a number of other companies marketing similar
health care products over the Internet. Competitive pressures created by
any of the Company's competitors, could have a material adverse effect on
the Company's business, results of operations and financial condition.
The Company believes that the principal competitive factors in its market
are volume and selection of goods, population of buyers and sellers,
community cohesion and interaction, customer service, reliability of delivery
and payment by users, brand recognition, WEB site convenience and
accessibility, price, quality of search tools and system reliability. Some
of the Company's potential competitors have longer operating histories,
larger customer bases, greater brand recognition and significantly greater
financial, marketing, technical and other resources than the Company. In
addition, other online trading services may be acquired by, receive
investments from or enter into other commercial relationships with larger,
well-established and well-financed companies as use of the Internet and other
online services increases.
Therefore, certain of the Company's competitors with other revenue sources
may be able to devote greater resources to marketing and promotional
campaigns, adopt more aggressive pricing policies and devote substantially
more resources to Web site and systems development than the Company or may
try to attract traffic by offering services for free. Increased competition
may result in reduced operating margins, loss of market share and diminished
value in the Company's brands. There can be no assurance that the Company
will be able to compete successfully against current and future competitors.
Further, as a strategic response to changes in the competitive environment,
the Company may, from time to time, make certain pricing, service or
marketing decisions or acquisitions that could have a material adverse effect
on its business, results of operations and financial condition. New
technologies and the expansion of existing technologies may increase the
competitive pressures on the Company by enabling the Company's competitors to
offer a lower-cost service. Certain Web-based applications that direct
Internet traffic to certain Web sites may channel users to trading services
that compete with the Company. Although the Company plans to establish
arrangements with online services and search engine companies, there can be
no assurance that these arrangements will be renewed on commercially
reasonable terms or that they will otherwise bring traffic to the
the Company's WEB site. In addition, companies that control access to
transactions through network access or Web browsers could promote the
Company's competitors or charge the Company substantial fees for inclusion.
Any and all of these events could have a material adverse effect on the
Company's business, results of operations and financial condition.
(v) Risk Of Capacity Constraints And Systems Failures
A key element of the Company's strategy is to generate a volume of user
traffic to its Web site. The Company's ability to attract customers and to
achieve market acceptance of its products depends significantly upon the
performance of the Company and its network infrastructure (including its
server, hardware and software). Any system failure that causes interruption
or slower response time of the Company's products and services could result
in less traffic to the Company's Web site and, if sustained or repeated,
could reduce the attractiveness of the Company's products. An increase in
the volume of user traffic could strain the capacity of the Company's
technical infrastructure, which could lead to slower response time or system
failures, and could adversely affect the delivery of the number of impressions
that are owed to advertisers and thus the Company's advertising revenues. In
addition, as the number of Web pages on and users of BuyNetPlaza.com increase,
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there can be no assurance that the Company and its technical infrastructure
will be able to grow accordingly, and the Company faces risks related to its
ability to scale up to its expected customer levels while maintaining superior
performance. Any failure of the Company's server and networking systems to
handle current or higher volumes of traffic would have a material adverse
effect on the Company's business, results of operations and financial
condition. The Company is also dependent upon third parties to provide
potential users with Web browsers and Internet and online services necessary
for access to the site. In the past, users have occasionally experienced
difficulties with Internet and online services due to system failures,
including failures unrelated to the Company's systems. Any disruption in
Internet access provided by third parties could have a material adverse
effect on the Company's business, results of operations and financial
condition. Furthermore, the Company is dependent on hardware suppliers for
prompt delivery, installation and service of equipment used to deliver the
Company's products and services. The Company's operations are dependent in
part upon its ability to protect its operating systems against damage from
human error, fire, floods, power loss, telecommunications failures,
break-ins and similar events. The Company does not presently have redundant,
multiple-site capacity in the event of any such occurrence. The Company's
servers are also vulnerable to computer viruses, break-ins and similar
disruptions from unauthorized tampering with the Company's computer systems.
The occurrence of any of these events could result in the interruption, which
could have a material adverse effect on the Company's business, results of
operations and financial condition. In addition, the Company's reputation
could be materially and adversely affected.
(vi) Online Commerce Security Risks
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. NuTek, Inc.
plans to accept credit cards for purchases of its products. The Company will
rely on encryption and authentication technology licensed from third parties
to provide the security and authentication technology to effect secure
transmission of confidential information, including customer credit card
numbers. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography, or other events or developments
will not result in a compromise or breach of the technology used by the
Company to protect customer transaction data.
If any such compromise of the Company's security were to occur, it could have
a material adverse effect on the Company's reputation and, therefore, on its
business, results of operations and financial condition. Furthermore, a
party who is able to circumvent the Company's security measures could
misappropriate proprietary information or cause interruptions in the
Company's operations. The Company does not have the resources or dollars
which may be required to protect against such security breaches or to
alleviate problems caused by such breaches. Since the company does not
have the resources, to address any major compromises, as the Company is
operating at a loss, this could result in severe security breaches which
could lead to the ultimate closure of its online venture.
services
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(vii) Risks Associated With International Operations
A component of the Company's strategy is to offer its e-commerce products
online to international customers. Expansion into the international markets
will require management attention and resources. The Company has limited
experience in localizing its service, and the Company believes that many of
its competitors are also undertaking expansion into foreign markets. There
can be no assurance that the Company will be successful in expanding into
international markets. In addition to the uncertainty regarding the
Company's ability to generate revenues from foreign operations and expand
its international presence, there are certain risks inherent in doing
business on an international basis, including, among others, regulatory
requirements, legal uncertainty regarding liability, tariffs, and other
trade barriers, difficulties in staffing and managing foreign operations,
longer payment cycles, different accounting practices, problems in collecting
accounts receivable, political instability, seasonal reductions in business
activity and potentially adverse tax consequences, any of which could
adversely affect the success of the Company's international operations.
To the extent the Company expands its international operations and has
additional portions of its international revenues denominated in foreign
currencies, the Company could become subject to increased risks relating to
foreign currency exchange rate fluctuations. There can be no assurance that
one or more of the factors discussed above will not have a material adverse
effect on the Company's future international operations and, consequently, on
the Company's business, results of operations and financial condition.
(viii) Distribution Methods of the Products and Services
The Company will be significantly dependent on a number of third-party
relationships to supply product(s), to ship product(s), and increase traffic
to BuyNetPlaza.com. The Company is generally dependent on other Web site
operators that provide links to BuyNetPlaza.com.
The Company does not have an agreement in place with another website operator to
to provide reciprocal links that provide links to BuyNetPlaza.com, and, if the
Company can established such links the other Web site operators may
terminate such links at any time without notice to the Company. There can be
no assurance that third parties will regard their relationship with the Company
as important to their own respective businesses and operations.
There can be no assurance that the Company will ever develop any additional
relationships with third parties that supply the Company with links to their
Web site. In particular, the elimination of a pre-installed bookmark on a Web
browser that directs traffic to the Company's Web site could significantly
reduce traffic on the Company's Web site, which would have a material adverse
effect on the Company's business, results of operations and financial
condition.
(ix) Industry Background
Global commerce and the online exchange of information is new and evolving,
it is difficult to predict with any assurance whether the Web will prove to
be a viable commercial marketplace in the long term. The Web has
experienced, and is expected to continue to experience, significant growth in
the numbers of users and amount of traffic. To the extent that the Web
continues to experience increased numbers of users, frequency of use or
increased bandwidth requirements of users, there can be no assurance that the
Web infrastructure will continue to be able to support the demands placed on
it by this continued growth or that the performance or reliability of the Web
will not be adversely affected.
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Industry estimates that spending on Internet advertising in the United States
will grow from $940 million in 1997 to $7.7 billion in 2002. The Internet has
become a compelling advertising vehicle that provides advertisers with
targeting tools not available from traditional advertising media. The
interactive nature of the Internet and the development of "click-through"
advertising banners and other feedback tools enable advertisers to measure
impression levels, establish a dialogue with users and receive "real-time"
direct feedback from their target markets.
Such feedback provides advertisers with an effective means to measure the
attractiveness of their offerings among targeted audiences and make
modifications to their advertising campaigns on short notice. Community sites
are generally able to provide advertisers significantly more information
regarding consumers than other Web sites because they collect detailed
demographic data and facilitate the development of user-created affinity
groups. The ability to target advertisements to broad audiences, specific
regional populations, affinity groups or individuals makes community Web site
advertising a highly versatile and effective tool for delivering customized
and cost-effective messages. One indicator of the Internet's popularity as
an advertising medium is the growing number and diversity of Internet
advertisers.
Furthermore, the Web has experienced a variety of outages and other delays
as a result of damage to portions of its infrastructure, and could face such
outages and delays in the future, including outages and delays resulting from
the inability of certain computers or software to distinguish dates in the
21st century from dates in the 20th century. These outages and delays could
adversely affect the level of Web usage and also the level of traffic for
NuTek, Inc. In addition, the Web could lose its viability due to delays in
the development or adoption of new development or adoption of new standards
and protocols to handle increased levels of activity or due to increased
governmental regulation.
The Internet allows marketers to collect meaningful demographic information
and feedback from consumers, and to rapidly respond to this information with
new messages. This offers a significant new opportunity for businesses to
increase the effectiveness of their direct marketing campaigns. In
traditional media, a significant portion of all advertising budgets are spent
on direct marketing because of its effectiveness. However, the effectiveness
of direct marketing campaigns is dependent upon the quality of consumer data
used to develop and place complementary products, services or facilities
are developed and the Web becomes a viable commercial marketplace in the long
term, the Company might be required to incur substantial expenditures in
order to adapt its products to changing Web technologies, which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
(x) E-Commerce and Direct Marketing.
The Internet has become a significant marketplace for buying and selling
goods and services. Industry estimates that the amount of goods or services
purchased in online consumer transactions will grow from approximately $2.6
billion in 1997 to approximately $37.5 billion in 2002. Improvements in
security, interface design and transaction-processing technologies have
facilitated an increase in online consumer transactions. Early adopters of
such improvements include online merchants offering broad product catalogs
(such as books, music CDs and toys), those seeking distribution efficiencies
(such as PCs, flowers and groceries) and those offering products and services
with negotiable pricing (such as automobiles and mortgages). The Company
believes that as the volume of online transactions increases, traditional
retailers will offer a wide variety of products and services online. The
Company believes that online companies provide businesses an opportunity
to link Internet customers with like interests. The Internet allows marketers
to collect meaningful demographic information.
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The Company's business strategy relies on advertising by and agreements with
other companies. Any significant deterioration in general economic conditions
that adversely affected these companies could also have a material adverse
effect on the Company's business, results of operations and financial
condition.
(C) Century Clocks Inc.
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Nutek Inc., on May 24, 1999 formed a Strategic Alliance with the Department
of Veterans Industries, the Company plans through its subsidiary Century
clocks Inc. to produces wall clocks assembled and packaged by US Veterans.
(See Exhibit 10.7, Transitional Employer Agreement.)
Mr. Conradie over the years has analyzed the clock market. Mr. Conradie,
President and CEO of the Company founded Century Clocks S.A. (in South Africa)
13 years ago. His experience in the clock industry has determined that certain
models are required in order to offer a complete range that can be offered for
retail sales as well as promotional sales worldwide. Clocks are universally
purchased and utilized throughout the world. There are a number of households,
and office settings have more than one wall clock.
Mr. Conradie, over the years, has conducted market research, and analyzed
buying patterns. Through this analysis they believe they have determined
consumer likes and dislikes in a clock design, designing clock faces and
colors for the clocks that could complement many tastes and decor styles.
Clock royalty
As part of the acquisition of Century Clocks SA clock molds, a 7.5% royalty
interest was given. The royalty owners advanced $55,000.00 to Nutek, Inc.
Murray Conradie has the option of converting the loan which he made to Nutek,
Inc. in the amount of $57,000.00 to a royalty interest and becoming a
participant in the 7.5% royalty interest. (See Note - 7 (3)- from Financial
Statements.)
A strategic alliance has been formed between the National Department of
Veteran Affairs and NuTek Inc., whereby Century Clocks will be using both able
and disabled Veterans in most of the assembly, production and packaging of
the clocks. This alliance employs the Long Beach, California, Veterans
Rehabilitation Center as a pilot program. Century Clocks plans to offer the
veterans jobs and teach them skills in order for them to go back into the
workforce or continue their employment with NuTek Inc. NuTek Inc. has
negotiated to start the assembly and production at the VA's Long Beach
facility. Century Clocks plans to increase its veterans workforce and
teaching these Veterans job skills at the same time as they produce
products for the Company.
Nutek under the program does not have a predetermined number of employees
they need to employ. How it will work is that as Nutek or its subsidaries
need employees, they will be provided by the Dept. of Veterans. The company
anticipates starting with about 5 employees once production gets underway,
and should production increase further use will be made of the Veterans.
There is no time frame either in which to employ the Veteran's nor does the
company have a specific period for employment.
The main marketing policy of Century Clocks is to offer a product, with through
a contract sales force and offer satisfactory customer service. The Company
plans to offer immediate shipment on all lines. The Company plans on
maintaining adequate inventory levels to be to dispatch clocks as soon as
orders are placed for those clients who require immediate shipment. In terms
of promotional clocks, there are very few clock manufacturers' that customize
clocks in the way Century Clocks proposes to do. A promotional clock allows
the client to display his sales message. With the experience and knowledge
Century Clocks has gained and implemented over the years in design and
manufacture of promotional clocks, management feels confident they will be
able to identify consumer needs.
(i) Anticipated Losses for the Foreseeable Future
Century Clocks has not achieved profitability to date, and the Company
anticipates that Century Clocks will continue to incur net losses for the
foreseeable future. The extent of these losses will depend, in part, on the
amount of growth in the Company's revenues from sales of its products,
meeting production capability, and identifying a customer base. The Company
expects that its operating expenses will increase significantly during the
next several years, especially in the areas of sales and marketing, product
development/design, and brand promotion. Thus, the Company will need to
generate increased revenues to achieve profitability. To the extent that
increases in its operating expenses precede or are not subsequently followed
by commensurate increases in revenues, or that the Company is unable to
adjust operating expense levels accordingly, the Company's business, results
of operations and financial condition would be materially and adversely
affected. There can be no assurances that the Company can achieve or sustain
profitability or that the Company's operating losses will not increase in the
future.
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(ii) Industry
According the Department of Commerce, National Census, 1994, the total clock
market size in the United States is approximately $2 billion annually. U. S.
made competition is limited, in that, clock manufacturing is a specialized
field which requires a great deal of knowledge about timepieces, and the
designing of timepieces. The startup and tooling costs prohibit the entrance
of competition as it requires large capital expenditures.
The competition is extensive in the market place, as it includes, but is not
limited to: Ingraham Clocks, Sunbeam Clocks, Elgin Clocks, Heirloom Clocks,
Spartus Clocks. These Companies together generate annual sales approximately
$200 million. Other clock manufactures include: Westclox, Kienzle Clocks, and
Jan Bell Marketing, who sells imported clocks only. These Companies generate
annual sales of approximately $500 million.
There are five (5) major manufacturers of clocks in the United States:
1. Spartus - $68 million annual sales
2. Gemini Display - $20 million annual sales
3. Salton Time - unknown
4. Faraday Inc - $500 million annual sales
5. Howard Miller Clock Co - $1 billion annual sales
The major importers and distributors of clocks can be broken down into
these major companies:
1. Timex Clocks - $850 million annual sales
2. Jan Bell Marketing - $272 million annual sales
3. General Time - $59 million annual sales
4. Ingraham - $40 million annual sales
5. Sunbeam - $37 million annual sales
The above data was collected from the National Census figures under SIC code
5094-12 which is been revised under the North American Industry classification
(NAICS) under code 421940 to provide new comparability in statistics about
business activity across North America.
(iii) Competition
The competition that does exist comes from products either manufactured outside
of the United States or are repackaged on arrival in the United States.
Century wants to offer a totally American made product, and with the systems
they have created over the years , they hope to establish an
advantage when it comes to competing against the other clock manufacturers.
Approximately seventy (70%) percent of all clocks sold in the United States
contain some imported product. When the imported product is the mechanism as
is the case in most instances, this means 45% of the clocks costs comprise of
an imported product.
This data was also collected in from the National Census figures under SIC
code 5094-12 which is been revised under the North American Industry
classification (NAICS) under code 421940 to provide new comparability in
statistics about business activity across North America.
(iv) Marketing Strategy
Mr. Conradie as the previous President and owner of Century Clocks S.A, has
over the years studied consumer likes and dislikes in a clock design,
designer clock faces and colors for the clocks that could complement various
tastes and decor styles.
Although, there has been the emergence of digital technology, the market
remains firm for the analog timepieces within the home and work environment.
Management believes this form of display makes it far easier to estimate time
by hours or minutes to, or remaining from a predetermined time. This form of
display is still the principle choice for educating children on ways to tell
time. Management believes this form of display makes telling time a lot easier
from a distance as one can recognize the layout that the clock hands.
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The Company plans to market these clocks in various ways, the principle method
will be targeted at the major department stores throughout the United States.
The premium promotional clocks will be sold by in-house marketing staff should
Century clocks have the resources to establish this in-house program . The
Company also plans to offer them to members of the Advertising Specialties
Institute. These are companies that offer advertising and promotional items
to companies.
The Company plans to utilize a variety of methods to market its clocks, this
includes but is not limited to the following:
(a) Additionally, should Century Clocks have the available funding to employ
an in-house Marketing Director, then in conjunction with Mr. Conradie,
President and CEO, this Director would establish and contract Manufacturers'
Agents that are already trading and providing products to the department
stores. These agents will be evaluated on the product lines they carry as
well as their past performances. The Manufacturers agents will have a
commission for sales negotiated with them and depending on the service
regions in which they operate, a commission structure will be established.
This will vary in percentage from 5% to about 10%. These agents will be
responsible for collecting orders from the department stores on a regular
basis, as well as all merchandising functions. All the Manufacturers Agents
will report directly to a Marketing Director on a weekly basis. The
Marketing Director will then report his findings at the weekly management
meetings. The Marketing Director will oversee all sales on a nation
counts those accounts that fall within the immediate geographic region that
Century is operating in.
(b) Century will also arrange for meetings with the Head Buyers of the various
department stores to present their lines of clocks.
(c) Century's marketing and customer service plans to offer a minimum of a
5 year warranty, on its Clocks.
(d) For the Promotional clocks Century plans to produce its own full color
clocks. The Marketing Director will oversee all sales on a national level,
with those accounts that fall within the immediate geographic region that
Century is operating in.
(b) Century will also arrange for meetings with the Head Buyers of the various
department stores to present their lines of clocks.
(c) Century's marketing and customer service plans to offer a minimum of a
5 year warranty, on its Clocks.
(d) For the Promotional clocks Century plans to produce its own full color
display catalog to be sent to Advertising Specialty companies for their use.
Promotional clocks obtain a higher margin of profit than the regular
clocks.
Management experience has seen that the wholesale clock market tends to offer
peak periods from August to November when all Christmas orders are being
processed. The premium market is fairly constant year round.
(v) Manufacturing Plan
The Company plans to assemble and package its clocks in Huntington Beach,
California.
The equipment that will be needed within the factory will be basically tables
that are waist height and placed in long lines for the assembly to take place.
A caged off area will contain the movements and an adjacent caged off area
will contain all finished products either waiting for dispatch or placed in
storage. The factory does not require any specialized equipment or mechanized
conveyors, as the assembly process has been found to be more effective with
simple manual assembly.
As production increases, Century plans to introduce its own screen printing
equipment into the factory to handle the printing in-house. At an
implementation cost of approximately $10,000.00, Century plans to invest in
once production has reached the limits for the printing to be carried out
in-house feasibly. In the meantime, the Company plans to subcontract these
services through one of the several available Screen Printers in the Orange
County, CA area.
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(vi) Production and Factory Personnel
The manufacturing process consists of the following steps:
1. The components are injection molded at an outside production facility,
who operate and maintain the molds belonging to Century Cocks. These
components are then delivered to Century Clocks where they will be checked for,
quality and counted, and entered into stock. Century Clocks uses Advanced
Plastics Inc, in San Diego, CA to mold the components. Century Clocks has
no formal written contract for this molding, but is a merely a client of
Advance Plastics. In order to produce the components, the clock molds are
stored and maintained by Advance Plastics as part of the component production
costs. When components are required, a purchase order is presented to Advance
Plastics, who then produces the components in their Injection company's molds.
Century then pays 30 days after invoice.
2. Production for the day is always predetermined weekly, and the allocated
mechanisms for each day are signed out of locked storage and at the end of
the days production this is again totaled to audit the mechanisms. If the
mechanisms are kept under strict control, this provides total control of
clock production and shortages.
3. The orders for components will be placed by the Production Manager,
and these will be authorized and signed off by the senior management. The
molder will be responsible for delivering components to Century. The
estimated turnaround once orders are placed on the molder till received at
Century, will be an average of 14 days.
4. Movements will be purchased either locally from two (2) suppliers or
an overseas supplier that can provide the volume Century will be requiring,
as well as having dealt with Century for 8 years, Century has built up a
reputation with them. The fact that two of the suppliers are local, does
away with many delays and problems by ordering movements ex stock and reduces
lead times for ordering of this major component of the clocks.
5. Production will be planned on a monthly basis, with the most popular
styles and colors kept at a level of approximately 500 per color of each
model, and at 6 colors per model this translates into 3,000 pieces per
style, and at an average cost of $3.00 this is $9,000.00 per model. This
means all dispatching is made directly from inventory, and daily
production thus goes into inventory to be stored for dispatching. All
stock is signed in and out of the storage facility, and thus month end
stocktaking is also much simpler as totals are already known by the
production manager.
6. The anticipated employees needed will be as follows:
1- inserting movements into base of clock
2- applying faces to base of clock
2- applying hands to clock face
2- applying lens onto base of clocks
3- packaging and boxing clocks, and applying bar coding
2- applying labels for shipping and storage to inventory
1- production manager to oversee all production, the issuing of movements
daily as well as components for production. This manager will also
handle all receiving and dispatching. He will be
responsible for the storage facilities of both
movements and finished goods, and will be responsible for
monthly stock take figures.
Of the thirteen (13) factory employees, only the Production Manager needs to
be skilled in administration as well as production planning techniques. The
remainder of the staff can be unskilled laborers that can be trained in about
two (2) weeks to assemble the clocks.
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(vii) Special Retail Risk Considerations
The Company's retail operations require expertise in the areas of sourcing,
merchandising, selling, personnel, training, systems and accounting. The
Company must establish a customer base, for expansion. The retail market is
particularly subject to the level of consumer discretionary income and the
subsequent impact on the type and value of goods purchased. The opening and
success of retail distribution of the Company's products, will depend on
various factors, including general economic and business conditions affecting
consumer spending, the performance of the Company's retail operations, the
acceptance by consumers of the Company's retail programs and concepts, and the
ability of the Company to manage the locations and future expansion and hire
and train personnel. Please refer "Forward-Looking Statements and Cautionary
Notice Regarding Forward Looking Statements."
(D) Vac-U-Lift Production Company Inc.
- --------------------------------------
The company owns Vac-U-Lift Production Company, Inc. in Jordanton Texas,
which had been non-operational for over two years resulting in the loss of
most of the interests in the oil leases. The company has no assets and
Management is in the process of determining if closing down this company
would be in the best interests of the company and its shareholders, as there
are currently no further operations in Vac-U-Lift Production company, nor do
we foresee operations in the future.
(E) NUTEK OIL, INC.
- -------------------
The Registrant, on or about November 1, 1999, signed a Letter of Intent to
purchase the mineral acres, equipment, and part of the corporate assets which
operates the production of twenty (20) oil leases, consisting of ninety-four
(94) oil wells, in Texas, one geographic area, in the continental United
States from Clipper Operating Co., Inc. The Company acquired these assets
of the Clipper Operating Co. on February 22, 2000 through a newly established
subsidiary, NuTek Oil Inc. The Clipper Operating Co. had been managing and
operating two oil wells belonging to Vac-U-Lift Product some of the fixed
assets valued at approximately $1.3 million, as well as, some leases,
farm-outs and mineral interests of Clipper Operating Co. (See Exhibit 10.9,
Letter of Intent - Mineral Acres.)
NuTek Oil, acquired a 100 percent working interest in all property
held by Clipper Operating Co. in the Big Foot and Koyote fields of Frio and
Atascosa Counties, Texas. These wells had been shut down for the past two (2)
years, and had generated no income during that time. They had started
generating nominal income as of August, 1999.
The highlights of the purchase agreement of Clipper Operating Co., Inc.,
within the Letter of Intent includes the following terms:
A. Purchase part of the corporate assets of Clipper Operating Co.,
Inc. for a price of seventeen thousand three hundred thirty
dollars ($17,330.00) paid to the sole shareholder, P R. Maupin.
B. Purchase of all mineral acreage at a price of one hundred dollars
($100.00)per acre. Total price will be four hundred fifty four thousand
nine hundred and fifty nine dollars ($454,959.00).
C. Purchase of all equipment will be at market value. Total price
will be seven hundred ninety three thousand three hundred and sixty six and
no/100 dollars ($793,366.00).
D. Purchase of pipeline will be at market value. Total price will
be thirty six thousand seven hundred twenty and no/100 dollars
($36,720.00).
E. Method of payment will be one-half in the stock of NuTek, Inc.
and one-half in cash. Half of this was paid for by issuing Nutek
Restricted stock for the traded value on 02/22/00 being $0.31. The
balance of the purchase price will be paid for in cash from profits
realized from the oil operations. Nutek Oil Inc. will be run by Mr. Pete
Maupin as President, the former President of Clipper, and should there be
no profitability from Nutek Oil operations, the balance of the purchase
price will not be able to be paid.
(i) General Business - Oil Producing Activities, Acreage, Productive Wells
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In view of the current economic conditions within the industry in which the
Registrant participates, the Registrant anticipates that cash flow from
operations for fiscal 2000 will be insufficient to satisfy all of its
general working capital requirements, necessitating additional capital
infusions either from affiliates or from sales of assets, borrowed funds,
equity participations. The Registrant does not believe its future oil
production activities will be subject to any significant seasonal
fluctuations.
(ii) Competition and Markets
There are many companies and individuals engaged in the oil business. Some
are very large and well established with substantial capabilities and long
earnings records. The Registrant is at a competitive disadvantage with some
other firms and individuals in acquiring and disposing of oil properties
since they have greater financial resources and larger technical staffs than
the Registrant. In addition, in recent years a number of small companies
have been formed which have objectives similar to those of the Registrant and
which present substantial competition to the Registrant.
A number of factors, beyond the Registrant's control and the effect of which
cannot be accurately predicted, affect the production and marketing of
oil. These factors include crude oil imports, actions by foreign oil producing
nations, the availability of adequate pipeline and other transportation
facilities, the marketing of competitive fuels and other matters affecting the
availability of a ready market, such as fluctuating supply and demand.
The Registrant plans to sell a its oil production to Texas oil refineries.
The Registrant has no written contracts with purchasers. The Registrant has
not been successful in the past with its oil operations and can offer no
indications that it will be able to produce or even sell the oil should it
be successful in producing oil.
(iii) NuTek's Oil Employees
The Registrant currently coordinates all oil field maintenance and
supervision activities using contract labor. P. R. Maupin, the former
president of Clipper Operating Co., heads NuTek Oil's operations. The
Registrant plans to retain consultants with respect to current and proposed
properties and operations. The Registrant from time to time retains
independent engineering and geological consultants and the services of
lease brokers and geophysicists in connection with its operations.
(iv) Properties - Oil Reserves
(See General Business - Oil Producing Activities, Acreage, Productive Wells).
Title to Properties
As is customary in the oil industry, the Registrant conducts only a
perfunctory title examination prior to acquisition of properties believed
to be suitable for drilling operations. Prior to the commencement of actual
drilling operations, a thorough title examination is usually conducted and
significant defects remedied before proceeding with operations. A thorough
title examination has been performed by the Registrant or its predecessor in
interests with respect to substantially all of the Registrant's producing
properties and the Registrant believes that the title to its properties is
generally acceptable to third parties. The Registrant's properties are
subject to royalty, over-riding royalty and other interests customary in the
industry, liens incident to operating agreements, current taxes and other
burdens, minor encumbrances, and easement restrictions. The Registrant does
not believe that any of these burdens materially detract from the value of
the properties or will materially interfere with their use. Oil leases
generally provide that properties are subject to reversion for
non-production.
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(v) Risks and Uncertainties Related to the Oil and Gas Business in General
The Registrant's operations are subject to all of the risks normally
incident to the exploration for and production of oil and gas, including
blow-outs, cratering, pollution, fires, and theft of equipment. Each of
these incidents could result in damage to or destruction of oil and gas wells
or formations of production facilities or injury to persons, or damage to or
loss of property. As is common in the oil and gas industry, the Registrant
is not fully insured against these risks either because insurance is not
available or because the Registrant has elected not to insure due to
prohibitive premium costs.
The Registrant's oil activities have in the past involved exploratory
drilling, which carries a significant risk that no commercial oil production
will be found. The cost of drilling, completing and operating wells is often
uncertain. Further, drilling may be curtailed or delayed as a result of
many factors, including title problems, weather conditions, delivery delays,
shortages of pipe and equipment, and the availability of drilling rigs. The
Registrant has not been successful in the past with its oil operations and
can offer no indications that it will be able to produce or even sell the
oil should it be successful in producing oil.
(vi) Other Risk Factors
The oil business is further subject to many other contingencies which
are beyond the control of the Registrant. Wells may have to be shut-in
because they have become uneconomical to operate due to changes in the price
of oil, depletion of reserves, or deterioration of equipment. Changes in the
price of imported oil, the discovery of new oil and gas fields and the
development of alternative energy sources have had and will continue to have a
dramatic effect on the Registrant's business.
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(F) OTHER PRODUCTS
- ------------------
Management's strategy is to source other growth opportunities and potential
acquisitions of businesses and/or the acquisition of exclusive proprietary
rights in consumer/commercial products similar or complementary to that of
the Company, but there can be no assurance that such opportunities will
arise or will be profitable to the Company. The pursuit of any such growth
opportunities will require a significant investment of funds and management
attention.
There are a number of risk factors with the establishment of a new product
or service, including competition, lack of sufficient customer demand,
unavailability of experienced management, unforeseen complications, delays
and cost increases. The Company may incur costs in connection with
pursuing new growth opportunities that it cannot recover, and the Company
may be required to expense certain of these costs, which may negatively
impact the Company's reported operating performance for the periods during
which such costs are incurred. Please refer "Forward-Looking Statements
and Cautionary Notice Regarding Forward Looking Statements."
Some of the products it has acquired includes the following:
(i) Handi-Plate
NuTek's FULL SERVICE(tm) handi-plate is a unique, dish washer safe, versatile
plastic buffet plate which has a multitude of uses including social gatherings
such as back yard barbecues, buffets, picnics, tailgate and parties of any
kind.
The FULL SERVICE(tm) system is a unique newly patented versatile product for
holding food and beverage on one plate. This product incorporates both plate
and cup into one unit, making it easy to hold with one hand. This unique
plate offer the convenience of carrying any meal and a beverage with one hand,
while leaving the other hand free. Additionally, the FULL SERVICE(tm) system
is suited for sales promotions, utilizing logo identification of brand
products and companies.
This product was acquired in September 1997 for (300,000) shares of Nutek
common stock and an additional One hundred and Thirty Five Thousand dollars
($135,000.00) was spent producing the molds to produce the product. This
was also paid for by issuing the mold manufacturer One million one hundred
thousand (1,100,000) shares of Nutek common stock at $0.123 per share.
Handi-Plate royalty
As part of acquiring the patents for this product, Nutek Inc. to provide
the inventor a 2.5% royalty interest on the gross sales of this product.
(See Financial Note 7 - "Contingencies and Commitments.")
(ii) Electro Static Switch Cover Plate
The Company has purchased the U.S. Patent to produce and market the Electro
Static Switch Cover Plate. Switch Cover Plate Providing Automatic Emergency
Lighting Patent #5833350. (See Exhibit 10.4, Purchase Agreement.)
The Company on August 27, 1999 purchased a Patent for a Switch Cover Plate
which provides emergency lighting. The product is currently in its prototype
stage. The molds and tooling to manufacture the product are not in existence,
neither are the tooling to manufacture the packaging for the product. NuTek,
Inc. has purchased all rights, title and interest to the product. This product
offers the potential as a safety device for every home, office, hotel and
hospital. In the event of a power failure, the electro static switch cover
plate immediately activates the light diodes in the cover which are strong
enough to emit light into a 30x30 room for up to 16 hours. This device runs
on AAA batteries just like a smoke detector. Nearly all light switches are
located at an entry way, and therefore, white or amber lights will be used
for internal light covers and red for exit way covers. All that is required
is to unscrew the existing light switch cover and screw the new safety cover
plate on. There is no special wiring required.
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(iii) Super Glide
Super Glide, a product for the dry cleaning garment industry, is a rail
covering made of durable, slick polymer designed to reduce friction between
rails and hangers in the dry cleaning and garment industry. Its lack of
friction prevents finished garments from not being crushed as they across
the Super Glide rail. Super glide negates the need for sprays and waxes in
use currently, and eliminates rust and dirt and keeps operator's hands and
fingers clean. The glides will be available for a variety of both flat and
round rails.
The Company has purchased the rights to produce this product from SRC
International, Lombard, IL. (See Exhibit 10.6, "Plan of Purchase and
Agreement.") The Company is in the process of moving the production
facilities to manufacture this product from Lombard, IL to California.
Until this move is completed, the Company will be unable to produce this
product.
iv) Competition
The retailing industry is highly competitive. The Company's competitors include
foreign and domestic suppliers, and competitive companies that have established
their products with national and regional chains, department stores, catalog
showrooms, discounters, direct mail suppliers, televised home shopping
networks, manufacturers, distributors and large wholesalers and importers,
some of whom have greater resources than the Company. The Company believes
that competition in its markets is based primarily on price, design, product
quality and service.
v) Risks Associated With New Services, Features and Functions
There can be no assurance that the Company would be able to expand its
operations in a cost-effective or timely manner or that any such efforts
would maintain or increase overall market acceptance. Furthermore, any new
business launched by the Company that is not favorably received by consumers
could damage the Company's reputation and diminish the value of its brand
name. Expansion of the Company's operations in this manner would also
require significant additional expenses and development, operations train the
Company's management, financial and operational resources. The lack of
market acceptance of the Company's products would result in the Company's
inability to generate satisfactory revenues and its inability to offset their
costs could have a material adverse effect on the Company's business, results
of operations and financial condition.
vi) Risks Associated with Acquisitions
If appropriate opportunities present themselves, the Company would acquire
businesses, technologies, services or product(s) that the Company believes
are strategic.
There can be no assurance that the Company will be able to identify, negotiate
or finance future acquisitions successfully, or to integrate such acquisitions
with its current business. The process of integrating an acquired business,
technology, service or product(s) into the Company may result in unforeseen
operating difficulties and expenditures and may absorb significant management
attention that would otherwise be available for ongoing development of the
Company's business. Moreover, there can be no assurance that the anticipated
benefits of any acquisition will be realized. Future acquisitions could result
in potentially dilutive issuances of equity securities, the incurrence of debt,
contingent liabilities and/or amortization expenses related to goodwill and
other intangible assets, which could materially adversely affect the Company's
business, results of operations and financial condition. Any future
acquisitions of other businesses, technologies, services or product(s) might
require the Company to obtain additional equity or debt financing, which might
not be available on terms favorable to the Company, or at all, and such
financing, if available, might be dilutive.
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GENERAL
- -------
1) Raw Materials and Suppliers
The Company does not use any raw materials or have any principal suppliers
of raw materials, with the exception of its leased oil fields.
2) Customers
The Company believes that establishing and maintaining brand identity is a
critical aspect of its efforts to attract new customers. In order to attract
new customers, advertisers and commerce vendors, and in response to competitive
pressures, the Company intends to make a commitment to the creation and
maintenance of brand loyalty among these groups. The Company plans to
accomplish this, although not exclusively, through advertising its products
through its Web site through the various search engines, through other Web
sites, marketing its site to businesses/customers through e-mail, online media,
and other marketing and promotional efforts.
There can be no assurance that brand promotion activities will yield
increased revenues or that any such revenues would offset the expenses
incurred by the Company in building its brands. Further, there can be no
assurance that any new users attracted to BuyNetPlaza.com will conduct
transactions over BuyNetPlaza.com on a regular basis. If the Company fails
to promote and maintain its brand or incurs substantial expenses in an
attempt to promote and maintain its brand or if the Company's existing or
future strategic relationships fail to promote the Company's brand or
increase brand awareness, the Company's business, results of operations
and financial condition would be materially adversely affected.
3) Potential Fluctuations in Operating Results; Quarterly Fluctuations
The Company's operating results may fluctuate significantly in the future
as a result of a variety of factors, many of which are outside the Company's
control. As a strategic response to changes in the competitive environment,
the Company may from time to time make certain pricing, marketing decisions
or acquisitions that could have a material short-term or long-term adverse
effect on the Company's business, results of operations and financial
condition.
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In particular, in order to accelerate the promotion of its e-commerce web site,
the Company intends to heavily market its Web site. The Company believes that
it may experience seasonality in its business, with use of its e-commerce site
being somewhat lower during the summer vacation and year-end holiday periods.
Advertising impressions (and therefore revenues) may be expected to decline
accordingly in those periods. Additionally, seasonality may affect
significantly any potential advertising revenues during the first
and third calendar quarters, as advertisers historically spend less during
these periods.
There can be no assurance that such patterns will not have a material adverse
effect on the Company's business, results of operations and financial
condition. In addition to selling its brands, it is the Company's strategy
is to generate additional revenues through e-Commerce arrangements including
for other companies to advertise on the company's Web site. There can be no
assurance that the Company will receive any material amount of revenue
under these agreements in the future. The foregoing factors, in some future
quarters, may lead the Company's operating results to fall below the
expectations.
4) Patents, Trademarks, Licenses, Franchises, Concessions, Royalty
Agreements, or Labor Contracts
The Company entered into an agreement to purchased Patent # 5833350
from Electro Static Solutions, LLC, of Irvine, CA on August 27, 1999 for the
fair market price of $1,000,000 from a non-related party. Payment was made
by issuing 600,000 shares of Restricted Common Stock valued at $.30 per share.
Another $150,000.00 was to be paid in cash with the balance of $670,000 to be
paid by increasing the royalty payment from seven to ten percent until the
balance is paid off. As at December 31, 1999, the Company still owes
$770,000.00 as only a portion of the $150,000.00 was paid. (See Financial
Note - 8 "Acquistions")
The product is the Switch Cover Plate Providing Emergency Lighting. The
Product is currently in its prototype stage. The molds and tooling to
manufacture the product are not in existence, neither are the tooling to
manufacture the packaging for the product. NuTek Inc. purchased all rights,
title and interest to the product.
The Company regards substantial elements of its future Web site and
underlying infrastructure and technology as proprietary and attempts to
protect them by relying on trademark, service mark, copyright and trade
secret laws and restrictions on disclosure and transferring title and other
methods. The Company plans to enter into confidentiality agreements with its
future employees, future suppliers and future consultants and in connection
with its license agreements with third parties and generally seeks to control
access to and distribution of its technology, documentation and other
proprietary information. Despite these precautions, it may be possible for a
third party to copy or otherwise obtain and use the Company's proprietary
information without authorization or to develop similar technology
independently.
With regards to the Company's future oil production, the Registrant does not
hold any patents, trademarks, licenses, etc., with respect to, nor are patents
significant in regard to, the Registrant's oil production activities (for a
discussion of the sources and availability of the Registrant's oil reserves,
see "Properties").
Legal standards relating to the validity, enforceability and scope of
protection of certain proprietary rights in Internet-related businesses are
uncertain and still evolving, and no assurance can be given as to the future
viability or value of any of the Company's proprietary rights. There can be
no assurance that the steps taken by the Company will prevent misappropriation
or infringement of its proprietary information, which could have a material
adverse effect on the Company's business, results of operations and financial
condition. Litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets or to
determine the validity and scope of the proprietary rights of others. Such
litigation might result in substantial costs and diversion of resources and
management attention. Furthermore, there can be no assurance that the
Company's business activities will not infringe upon the proprietary
rights of others, or that other parties will not assert infringement claims
against the Company, including claims that by directly or indirectly providing
hyperlink text links to Web sites operated by third parties. Moreover,
from time to time, the Company may be subject to claims of alleged
infringement by the Company or service marks and other intellectual property
rights of third parties. Such claims and any resultant litigation, should it
occur, might subject the Company to significant liability for damages, might
result in invalidation of the Company's proprietary rights and, even if not
meritorious, could result in substantial costs and diversion of resources and
management attention and could have a material adverse effect on the Company's
business, results of operations and financial condition.
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The Company bears certain risks in purchasing parallel marketed goods which
includes certain products. Parallel-marketed goods are products to which
trademarks are legitimately applied but which were not necessarily
intended by their foreign manufacturers to be imported and sold in the
United States. The laws and regulations governing transactions involving
such goods lack clarity in significant respects. From time to time, trademark
or copyright holders and their licensees initiate private suits or
administrative agency proceedings seeking damages or injunctive relief based
on alleged trademark or copyright infringement by purchasers and sellers of
parallel-marketed goods. While the Company believes that its practices and
procedures with respect to the purchase of goods lessen the risk
of significant litigation or liability, the Company from time to time may
be involved in such proceedings and there can be no assurance that claims or
suits will not be initiated against the Company or any of its affiliates, and
there can be no assurances regarding the results of any pending or future
claims or suits. Further, legislation has been introduced in Congress from
time to time regarding parallel marketed goods. Certain legislative or
regulatory proposals, if enacted, could materially limit the Company's ability
to sell parallel marketed goods in the United States. There can be
no assurances as to whether or when any such proposals might be acted
upon by Congress or that future judicial, legislative or administrative
agency action will restrict or eliminate these sources of supply. Please
refer "Forward-Looking Statements and Cautionary Notice Regarding Forward
Looking Statements."
5) Regulation
The law relating to the liability of online companies is currently unsettled.
It is possible that claims could be made against online e-Commerce companies
under both United States and foreign law for defamation, libel, invasion of
privacy, negligence, copyright or trademark infringement, or other theories
based on the nature and content of the materials disseminated through their
Web site. Several private lawsuits seeking to impose such liability upon
other online companies are currently pending.
The Company's operations are affected by numerous federal and state laws that
impose disclosure and other requirements upon the origination, servicing and
enforcement of credit accounts and limitations on the maximum amount of
finance charges that may be charged by a credit provider. In addition to the
Company's acceptance of credit cards through its Internet site, credit to the
Company's customers is provided primarily through bank cards such as
Visa/registered trademark/, Mastercard/registered trademark/ and
Discover/registered trademark/, without recourse to the Company based upon a
customer's failure to pay. Any change in the regulation of credit which
would materially limit the availability of credit to the Company's traditional
customer base could adversely affect the Company's results of operations or
financial condition. Please refer "Forward-Looking Statements and Cautionary
Notice Regarding Forward Looking Statements."
The Registrant's oil production activities are, and any drilling
operations of the Registrant would be, subject to extensive regulation by
numerous federal, state and local governmental authorities, including state
conservation agencies, the Department of Energy and the Department of the
Interior (including the Bureau of Indian Affairs and Bureau of Land
Management). Regulation of the Registrant's production, transportation
and sale of oil or gas have a significant effect on the Registrant and
its operating results.
State Regulation - The current production operations of the Registrant
are, and any drilling operations of the Registrant would be, subject to
regulation by state conservation commissions which have authority to
issue permits prior to the commencement of drilling activities, establish
allowable rates of production, control spacing of wells, prevent waste
and protect correlative rights, and aid in the conservation of natural
gas and oil. Typical state regulations require permits to drill and
produce oil, protection of fresh water horizons, and confirmation that
wells have been properly plugged and abandoned.
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6) Effect of Existing or Probable Government Regulations
Government legislation has been proposed that imposes liability for or
prohibits the transmission over the Internet of certain types of information.
The imposition upon the Company and other online providers of potential
liability for information carried on or disseminated through their services
could require the Company to implement measures to reduce its exposure to
such liability, which may require the Company to expend substantial
resources and/or to discontinue certain service offerings. In addition,
the increased attention focused upon liability issues as a result of these
lawsuits and legislative proposals could impact the growth of Internet use.
The Company does not believe that such regulations, which were adopted
prior to the advent of the Internet, govern the operations of the Company's
business nor have any claims been filed by any state implying that the
Company is subject to such legislation. There can be no assurance,
however, that State government will not attempt to impose these regulations
upon the Company in the future or that such imposition will not have a
material adverse effect on the Company's business, results of operations and
financial condition. Several States have also proposed legislation that
would limit the uses of personal user information gathered online or require
online services to establish privacy policies. The Federal Trade Commission
has also recently settled a proceeding with one online service regarding the
manner in which personal information is collected from users and provided to
third parties. Changes to existing laws or the passage of new legislation,
could create uncertainty in the marketplace that could reduce demand for
the services of the Company or increase the cost of doing business as a
result of litigation costs or increased service delivery costs, or could in
some other manner have a material adverse effect on the Company's business,
results of operations and financial condition. In addition, because the
Company's services are accessible worldwide, and the Company may facilitate
sales of goods to users worldwide, other jurisdictions may claim that the
Company is required to qualify to do business as foreign corporation in
particular state or foreign country.
Due to the increasing popularity and use of the Internet and other online
services, it is possible that a number of laws and regulations may be
adopted with respect to the Internet or other online services covering issues
such as user privacy, freedom of expression, pricing, content and quality of
products and services, taxation, advertising, intellectual property rights and
information security. Although sections of the Communications Decency
Act of 1996 (the "CDA") that, among other things, proposed to impose criminal
penalties on anyone distributing "indecent" material to minors over the
Internet, were held to be unconstitutional by the U.S. Supreme Court,
there can be no assurance that similar laws will not be proposed and adopted.
Certain members of Congress have recently discussed proposing legislation
that would regulate the distribution of "indecent" material over the
Internet in a manner that they believe would withstand challenge on
constitution law.
Any new legislation or regulation, or the application of laws or regulations
from jurisdictions whose laws do not currently apply to the Company's
business, for third-party activities and jurisdiction. The adoption of
new laws or the application of existing laws may decrease the growth in the
use of the Internet, which could in turn decrease the demand for the
Company's services, increase the Company's cost of doing business or
otherwise have a material adverse effect on the Company's business, results
of operations and financial condition.
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The Company does not believe that such regulations, which were adopted
prior to the advent of the Internet, govern the operations of the Company's
business nor have any claims been filed by any state implying that the
Company is subject to such legislation. There can be no assurance,
however, that State government will not attempt to impose these regulations
upon the Company in the future or that such imposition will not have a
material adverse effect on the Company's business, results of operations and
financial condition.
7) Research and Development Activities
The Company, among other things, plans to develop and market its Web
site, enhance its brands, implement and execute its business and marketing
strategy successfully, continue to develop and upgrade its technology and
information-processing systems, meet the needs of a changing market,
provide superior customer service, respond to competitive developments
and attract, integrate, and motivate qualified personnel provided
the company can generate sales and profit.
The Company also needs to develop and identify products that achieve
market acceptance by its users and e-Commerce customers. There can be no
assurance that any Internet company, including NUTK, will achieve
market acceptance. Accordingly, no assurance can be given that the
Company's business model will be successful or that it can sustain
revenue growth or be profitable. The market for Internet products is new,
rapidly developing and characterized by an increasing number of market
entrants. As is typical of any new and rapidly evolving market, demand
and market acceptance for recently introduced products are subject to a
high level of uncertainty and risk. Moreover, because this market is
new and rapidly evolving, it is difficult to predict its future growth
rate, if any, and its ultimate size. If the market fails to develop,
develops more slowly than expected or becomes saturated with competitors,
or if the Company's products do not achieve or sustain market acceptance,
the Company's business, results of operation may be materially and
adversely affected.
There can be no assurances the Company will be successful in accomplishing
any or all of its plans, and the failure to do so could have a material
adverse effect on the company's business, results of operations and
financial condition.
8) Impact of Environmental Laws
Environmental Matters - Various federal and state authorities have
authority to regulate the exploration and development of oil and gas and
mineral properties with respect to environmental matters. Such laws and
regulations, presently in effect or as hereafter promulgated, may
significantly affect the cost of its current oil production and any
exploration and development activities undertaken by the Registrant and
could result in loss or liability to the Registrant in the event that
any such operations are subsequently deemed inadequate for purposes of
any such law or regulation.
The Company is not aware of any federal, state or local environmental
laws which would effect its other operations.
9) Employees
The Company currently has thirteen (13) employees of which three (3) are
Officers of the Company. As the Company begins to develop its other
product lines it will need to add employees.
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(i) The Company's performance is substantially dependent on the performance
of its President and CEO, Murray N. Conradie. In particular, the Company's
success depends on his ability to identify, develop, acquire, design and
market the company's products.
(ii) The Company does not carry key person life insurance on any of its
personnel. The loss of the services of any of its executive officers or
other key employees could have a material adverse effect on the business,
results of operations and financial condition of the Company. The Company's
future success also depends on its ability to retain and attract highly
qualified technical and managerial personnel.
(iii) There can be no assurance that the Company will be able to retain
its key managerial and technical personnel or that it will be able to attract
and retain additional highly qualified technical and managerial personnel in
the future. The inability to attract and retain the technical and
managerial personnel necessary to support the growth of the Company's business,
due to, among other things, a large increase in the wages demanded by such
personnel, could have a material adverse effect upon the Company's business,
results of operations and financial condition.
10) Year 2000 Implications
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in Year
2000, these date code fields will need to accept four digit entries in order
to distinguish 21/st century dates. All of the Company's computers comply
with "Year 2000" requirements. However, there can be no assurance that
other companies with which the Company transacts business will be corrected
on a timely basis, or that failure by such third party entities to correct
a Year 2000 problem, or a correction which is incompatible with the Company's
informatin systems, would not a material adverse effect on the
Company's business, results of operations and financial condition.
14) The Industry & Potential Effect on the Company's Plan of Operations
The rapid adoption of the Internet as a means to gather information,
communicate, interact and be entertained, combined with the vast
proliferation of Web sites, has made the Internet an important new mass
medium. Industry estimates that the number of Web users exceeded 68
million in 1997, and will grow to over 319 million by 2002. The Internet
enables advertisers to target advertising campaigns utilizing sophisticated
databases of information on the users of various sites. As a result, the
Internet has become a compelling means to advertise and market products
and services. With the volume of sites and vast abundance of information
available on the Internet, users are increasingly seeking an online home
where they can interact with others with similar interests and quickly
find information, products and services related to a particular interest
or need.
The Company plans to market its products through the retail channels of
distribution, the Internet, and utilizing contract sales representatives.
Failure by the Company to adapt to changing market conditions could have
a material adverse effect on the Company's business, results of operations
and financial condition.
11) Risk Factor that the Company has no contractual restrictions to incur debt.
The Company does not currently have any contractual restrictions on its ability
to incur debt and, accordingly, the Company could incur significant amounts
of indebtedness to finance its operations. Any such indebtedness could
contain covenants which would restrict the Company's operations. There
can be no assurance that additional financing will be available on terms
favorable to the Company, or at all. If adequate funds are not available
or are not available on acceptable terms, the Company may not be able to
continue in business, or to a lessor extent not be able to take advantage
of acquisition opportunities, develop or enhance services or products or
respond to competitive pressures. Specifically, this is the case with
Cheschire Trading L.L.C. in the form of a 6% convertible note made to the
Company. (See Item 2. Management's Plan of Operation.)
12) Sale of common stock and Market price
When the Registration Statement becomes effective and the Company's
securities become registered, the stock will likely have a trading price
of less than $5.00 per share and will not be traded on any exchanges.
Therefore, the Company's stock will become subject to the penny stock
rules and investors may find it more difficult to sell their securities,
should they desire to do so.
27
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All statements, trend analysis and other information contained in this
Registration relative to markets for the Company's products and trends in
revenues, gross margin and anticipated expense levels, as well as other
statements including words such as "believe," "anticipate," "expect,"
"estimate," "plan" and "intend" and other similar expressions, constitute
forward-looking statements. Those forward-looking statements are subject
to business and economic risks, and the Company's actual results of
operations may differ from those contained in the forward-looking statements.
The following discussion of the financial condition and results of
Operations of the Company should also be read in conjunction with the
Financial Statements and Notes related thereto included elsewhere in this
Registration.
ITEM 2. MANANAGEMENTS'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
A. Management's Plan of Operation
1) During calendar year ended December 31, 1999 the Company incurred a
net loss of $296,799 from operations against revenues of $238,039 as
compared to a net loss from operations of $497,161 against revenues of
$12,501 for calendar year ending December 31, 1998.
As of December 31, 1999, the Company has thirty-six million three hundred
twenty-eight thousand forty-four (36,328,044) shares of its $0.001 par
value common voting stock issued and outstanding which are held by
approximately four hundred thirty-seven (437) shareholders of record.
The Company also has seven hundred ninety-three thousand five hundred
(793,500) shares of its $0.001 par value Preferred Stock issued and
outstanding, as of December 31, 1999. All Preferred shares which have
been issued were issued for cash at $1.00 a share. Series B Preferred
shares have the same voting rights as the common shares but have priority
in the event of Company liquidation. All of the shares outstanding were
to be redeemed at $1.00 a share plus all accrued dividends prior to
December 31, 1993. This has been extended by mutual agreement. Series B
shares have annual dividends of $.15 a share payable quarterly. They are
convertible to common shares on a one for one basis at the holders' option.
This preferred stock was extended by mutual agreement to either convert to
restricted stock at the current bid price on day of conversion and to
include unpaid annual dividends. Some investors have not converted nor
have they received their dividends which continue to accrue.
In December, 1999, the Company raised one hundred thousand ($100,000) dollars
through one Cheschire Trading L.L.C. in the form of a 6% convertible note.
The stock was issued to a third party escrow agent to be held until
conversion by Cheschire Trading L.L.C. The exemption that was relied upon
was 51-3.13 of the Colorado Division of Securities which were promulgated
under Section3(b) and 4(2) of the 33 Act. The cash was received 01/20/00,
and the stock was then transferred from Escrow to convert the note.
The Company was not scheduled to receive the proceeds from this transaction
until January, 2000. ("See Financial Statements and Notes: Statement of
Changes in Shareholders' Equity, Contingencies and Commitments, Subscription
Receivable.")
A. Pursuant to SEC Regulation A
The changes made to SEC Regulation A promulgated under Section 3(b) of the 33
Act, effective August 13, 1992 are effective in Colorado under this rule,
provided as follows:
1. Any solicitation of interest document, as described in Rule 254 of
Regulation A, to be published or delivered to any person in this state
under Regulation A must be filed with the Commissioner no later than the
time of its first publication or delivery in this state. Such filing is a
condition to the use of this exemption.
2. Any solicitation of interest document, as described in Rule 254 of
Regulation A, published or delivered to any person in this state must
contain, in addition to the other statements required in Rule 254 of
Regulation A, the additional statement in prominent form:
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This information is distributed under SEC Regulation A and has been filed
with the SEC and the Colorado Securities Division. Neither the SEC nor the
Securities Division has reviewed or approved its form or content.
3. A copy of the offering statement, as described in Rule 252 of
Regulation A, filed with the SEC must be filed simultaneously with the
Commissioner together with a notice of exemption in the form prescribed
by the Commissioner and the prescribed fee, as provided in Rule 51-3.7.
4. A copy of the offering statement qualified by the SEC must be filed
with the Commissioner no later than five (5) days after the first sale is
made in this state.
B. Pursuant to Rule 504 of SEC Regulation D
The changes made to SEC Regulation D promulgated under Sections 3(b) and 4(2)
of the 33 Act, effective August 13, 1992, are effective in Colorado under
this rule, provided as follows:
1. In connection with offers and sales of securities made in reliance on
Rule 504 of Regulation D, unless the securities are first registered with
the Commissioner or sold in the manner described in subsections 2. and 3.
below, neither the issuer nor any person acting on behalf of the issuer
shall offer or sell the securities by any form of general solicitation or
advertising, including, but not limited to, the following:
a. Any advertisement, article, notice or other communication published in
any newspaper, magazine, or similar media or broadcast over television or
radio; and
b. Any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising.
2. Offers and sales of securities may be made in reliance on Rule 504 of
Regulation D in this state by means of general solicitation and advertising
without benefit of securities registration with the Commissioner, after the
first general solicitation or advertising, if the securities are sold only
to "accredited investors" as that term is defined in Rule 501 of Regulation D.
As conditions of the exemption provided by this subsection 2. of this rule,
a. any document published or delivered in connection with such general
solicitation or advertising must state prominently that:
This information is distributed pursuant to an exemption for small offerings
under the rules of the Colorado Securities Division. The Securities Division
has neither reviewed nor approved its form or content. The securities
described may only be purchased by "accredited investors" as defined by
Rule 501 of SEC Regulation D and the rules of the Colorado Securities
Division. and
b. the issuer must maintain written records for a period of at least two
(2) years following the date of sale establishing the accredited status of
each purchaser.
The Company currently anticipates that it has enough available funds to
meet its anticipated needs for working capital, capital expenditures and
business expansion for the next 12 months. The Company expects that it will
continue to experience a small operating cash flow for the foreseeable future
as a result of significant new product development, advertising and
infrastructure.
As an On Going concern, if the Company needs to raise additional funds in
order to fund expansion, develop new or enhanced services or products,
respond to competitive pressures or acquire complementary products,
businesses or technologies, any additional funds raised through the issuance
of equity or convertible debt securities, the percentage ownership of the
stockholders of the Company will be reduced, stockholders may experience
additional dilution and such securities may have rights, preferences or
privileges senior to those of the Company's Common Stock. The Company
does not currently have any contractual restrictions on its ability to
incur debt and, accordingly, the Company could incur significant amounts
of indebtedness to finance its operations. Any such indebtedness could
contain covenants which would restrict the Company's operations. There
can be no assurance that additional financing will be available on terms
favorable to the Company, or at all. If adequate funds are not available
or are not available on acceptable terms, the Company may not be able to
continue in business, or to a lessor extent not be able to take advantage
of acquisition opportunities, develop or enhance services or products or
respond to competitive pressures.
2) No engineering, management or similar report has been prepared or
provided for external use by the Company in connection with the offer of
its securities to the public.
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3) Management believes that the Company's future growth and success will
depend on its ability to find products and suppliers, and to find
customers for these products. The Company expects to continually evaluate
its potential products to determine what additional products or enhancements
are required by the marketplace. The Company does not plan to develop
products internally, but find suppliers and businesses who would be willing
to sell, market or license their products/business through the Company.
This can help avoid the time and expense involved in developing actual
products.
4) The Company currently owns its own equipment, office furniture,
computers, oil equipment.
B. Segment Data
As of December 31, 1999, the Company generated $238,039 in revenues
as compared to $12,501, for calendar year ending December 31, 1998.
Accordingly, the Statement of Operations expresses the financial information
as consolidated and no table showing percentage breakdown of revenue by
business segment or product line is included.
ITEM 3. DESCRIPTION OF PROPERTY
A. Description of Property
The address of the principal office is: 15722 Chemical Lane, Huntington
Beach, CA 92649. The Company is leasing approximately 6,600 square feet
at this property. The Company leases office space in California on a month-to-
month basis with aggregate monthly rent of approximately $2856.00. Rent
recorded during 1998 and 1998 respectfully was $22,643.50 and $21,218.25.
(See Financial Note 7 "Contingencies and Commitments." See Exhibit 10.8,
Lease.) The Company has a Strategic Alliance with the Department of
Veterans Affairs whereby the company hires the manpower at the V.A., to
package and assemble products. (See Exhibit 10.7, Transitional Employer
Agreement.)
Management believes that this is currently suitable for the Company's
needs for the next twenty-four (24) months.
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ITEM 4. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS
A. Security Ownership of Management and Certain Beneficial Owners
The following table sets forth information as of the date of this
Registration Statement certain information with respect to the beneficial
ownership of the Common Stock of the Company concerning stock ownership
by (i) each director, (ii) each executive officer, (iii) the directors and
officers of the Company as a group, (iv) and each person known by the
Company to own beneficially more than five (5%) of the Common Stock.
Unless otherwise indicated, the owners have sole voting and investment
power with respect to their respective shares.
<PAGE>
<TABLE>
<CAPTION>
Title Name & Address Amount of Percent
of of Beneficial shares of
Class Owner of Shares Position held by Owner Class
- ------ --------------- -------- ------------- -------
<S> <C> <C> <C> <C>
Common Murray N. Conradie (1) President/ 1,200,561 3.02%
CEO
None Kristi Hough(2) VP/Director 250,000 0.62%
None Pamela Horick Secretary/ 0 0.00%
Director
- ----------------------------------------------------------------------
All Executive Officers and
Directors as a Group (3 persons) 1,450,561 3.64%
</TABLE>
Company address for all Officers is c/o NuTek, Inc. 15722 Chemical Lane,
Huntington Beach, CA 92649
(1) Murray N. Conradie, received 1,050,000 shares of common stock for
the Century Clock Mold purchase. He also received 150,861 shares as
outstanding compensation for 1999. These shares were issued to him in
January, 2000. Exhibit 10.5 covers the price of the stock for the
1,050,000 shares to pay for the clock molds. This stock was priced at
$0.35 per share totaling $367,500.00 Mr. Conradie took this value of $0.35
even though the stock had traded no higher than $0.09. Mr. Conradie used
this price to avoid dilution of the Nutek stock. The compensation of
150,861 was for addition to the $5,000.00 per month compensation for April 1,
1999 through December 31, 1999. The stock each month was calculated by taking
the close of each trading day and dividing it by the number of days to get the
average. The stock for both transactions was issued January 6, 2000.
(2) Joanne L. Hough, mother to Kristi Hough, beneficially owns 75,000
shares of restricted stock. Lorraine and Prescott Earle, grandparents to
Kristi Hough, beneficially own 100,000 shares of restricted stock. Kristi
Hough, has entered into a preliminary agreement with the Company to
purchase Kristi & Co., Inc. She is President/CEO and Director of Kristi &
Co., Inc., a women's resort clothing line. Upon consummation of the
agreement, Kristi received 250,000 restricted shares for the purchase of
Kristi and Company. (See Exhibit 10.1 Purchase agreement) These shares were
not scheduled to be issued until January, 2000. Nutek issued the 250,000
shares for $0.20 on January 6, 2000. This stock was issued at the close
price of 12/31/99. (See, Item 7 -- Interest of Management and Others in
Certain Transactions.)
31
<PAGE>
B. Persons Sharing Ownership of Control of Shares
No person owns or shares the power to vote ten percent (10%) or more of
the Company's securities.
C. Non-voting Securities and Principal Holders Thereof
The Company has not issued any non-voting securities.
D. Options, Warrants and Rights
There are no options, warrants or rights to purchase securities of the
Company.
E. Parents of Issuer
Under the definition of parent, as including any person or business entity
who controls substantially all (more than 80%) of the issuers of common
stock, the Company has no parents.
F. Other
By Corporate Resolution, the Company purchased clock molds from Century
Clock Company of South Africa. Murray N. Conradie, President and CEO of
The Company was the former President and a major stockholder of Century
Clocks in South Africa. The date of transaction was 27 April 1999, the
valuation of the molds was done by getting quotations from US manufacturers
to make the molds. This was found to be in excess of $1,200,000.00 and would
need to be funded with cash or financing to be provided by an outside source.
The funding could not be obtained to have molds produced, and the Board of
Directors decided that the alternative to purchase the molds from South
Africa at a discounted price, without having to lay out large quanties of
money. Although, the stock was trading at $0.185 when the deal was made,
Mr. Conradie managed to negotiate with the sellers to be compensated with
Restricted Stock. Mr. Conradie himself to avoid dilution of Nutek stock had
this stock issued at an effective price of $0.35 instead of issuing twice the
amount of stock. A risk he assumed. (See, Item 7 -- Interest of Management
and and Others in Certain Transactions.)
ITEM 5. DIRECTORS, EXECUTIVES, OFFICERS AND SIGNIFICANT EMPLOYEES
The names, ages and positions of the Company's directors and executive
officers are as follows:
<TABLE>
<CAPTION>
Name Age Position
- -------- ------ ----------
<S> <C> <C>
Murray N. Conradie 35 President, CEO and Director
Kristi Hough 36 Vice President and Director
Pamela Horick 35 Secretary and Director
</TABLE>
B. Family relationships
Murray N. Conradie and Kristi Hough are married to each other.
32
<PAGE>
C. Work Experience
Murray N. Conradie
April 1999 - Present, NuTek Inc.
President/CEO, Director and Chairman of the Board.
1998 - Dec, 1999, NuTek, Inc.
CFO, Director
1997 - 1999, WorldTek Corporation.
President/CEO and Director.
Internet startup company which hosted and designed websites.
1996 - 1999, Global Entertainment Network Inc.
President/CEO Director.
Started this company which is an Internet based crossword puzzle game
which he developed and patented, and now currently in negotiations for
the sale of this company.
1994 - 1996, Authentic Apparel
Screen printing company for clothing. Started this company which he sold
after securing several major national contracts, including the
"Clinnochio" line of clothing.
1992-1994, Quantum Time
President of this company he founded for the manufacture of wooden wall
clocks.
1989 - 1992, M.C. Clothing.
Co-owner of woman's clothing manufacturing company doing in excess of $2
million sales a year. Sold this company to concentrate on the Century
Clocks.
1987 - 1994, Century Clocks.
President and Director
Started company which bought out major competitor Smith's clocks 18
months later. Went to $1.8 million in sales the first year and averaged
$5 million in sales thereafter. Sold this company, and currently
negotiated to purchase some of the molds and tooling for US operation.
EDUCATION:
1983-1985, University of Natal at Durban, South Africa. B.A., Studied
Business Law for 2 1/2 years
1985-1988, Technikon Natal at Durban, South Africa. Accounting Degree
specializing in Auditing.
1999 Selected for Strathmore's Who's Who in Finance
1999 Selected for Marquis Who's Who in Finance Millennium Edition
33
<PAGE>
Kristi L. Hough
1999 - Present, NuTek Inc.
Vice-President and Director.
1999 - Present, Kristi & Co., Inc., President/CEO Director and designer.
Women's resort clothing line. Started company with a vision to help
veterans by employing them and helping with their goals through work.
1998 - Present, Opportunities Unlimited
Owner of push carts that sell Haagen Dazs Ice-Cream
This company Hires and supports veterans. The carts are independently
operated by Veterans and I support their rehabilitation efforts by
integrating work skills with their treatment goals. Intention here is
to have several carts operated by vets.
1995 - Present, KHLA, Inc.
President and Director
Founder, and designer of a women's resort clothing line.
Started company with a vision to help veterans by employing them and
helping with their goals through work. Responsible for taking the company
from a start up and no recognition to its' current status of sales of
one million, selling across the country to specialty antiques, department
stores, starting our own stores in resort areas, and selling overseas.
Intention with this company is to hire and train veterans in all aspects
of the production (cuffing, sewing, quality control) to shipping,
receiving, and marketing together with integrating their treatment goals
with their job goals.
1992 - 1996, Veterans Administration Medical Center, Long Beach, CA.
Aftercare Coordinator/Substance Abuse Counselor
Responsible for coordinating patients aftercare treatment. Integrated the
Veterans treatment needs with work placement, out-patient treatment and
community involvement. Worked closely with the community developing new
programs, and enhancing follow-up care. Designed, implemented and taught
classes on all aspects of relapse prevention, substance abuse recovery,
family roles and cocaine addiction. Created and ran a Relapse track of
treatment. Experienced in: dual diagnosis, relapse prevention, 12 core
functions, 12-Step programs, group & individual therapy, family therapy
and education.
1990-1991, Vertex Design Systems, San Francisco, CA.
Sales Support & Marketing Coordinator
Created, implemented and managed several training, internal operations
and marketing programs, including staffing, production and performance
tracking. Instrumental in determining marketing strategy and knowing
which marketing materials were successful. Result: 100% increase in sales
for this company which was also a start-up computer company.
1989 (May -Dec), Arizona Bar & Bistro, Sydney, Australia
Promotions/Marketing Representative
Instrumental in the design and implementation of marketing programs for a
new "image" restaurant in Australia. Hired to take a new restaurant
concept for Australia and make it mainstream. Worked on everything from
restaurant design, menu selections, wine selections, promotional programs,
marketing materials, advertising, and hiring. Result: Restaurant opened on
time and enjoyed immediate and sustained success.
1988-1989, Melveny & Myers, Los Angeles, CA.
Support Services Coordinator - Legal Services
Managed all aspects of document handling, including sensitive legal
materials. Provided support services, which included proofreading &
word processing. Trained new employees and handled communications between
attorneys and clients.
34
<PAGE>
1986-1988, Delphi Information Systems, Westlake Village, CA.
Regional Area Supervisor - Customer Service
Responsible for maintaining a team of technical support employees to
service the customer base for a computer design and installation company.
Wrote technical manuals and taught procedural classes on how to use the
software. Handled customer needs that ranged from computer programming,
database problems, hardware problems and processing glitches. Made sure
problem was resolved efficiently and timely. Always won the employee of
the month award for handling the most calls/crisis' and most efficient.
EDUCATION:
University of California at Los Angeles, March 1986, B.A., Psychology and
Computer Science with concentration in Business Administration
California Paramedical and Technical College, Long Beach, CA, April 1992
C.A.D.C. (Certified Alcohol and Drug Counselor)
N.A.ID.C. (National Alcohol and Drug Counselor)
Pamela Horick
1999-Present, NuTek Inc., Secretary and Director
1996-Present, Edventure Partners
Pamela Horick is Vice President at Edventure Partners, a privately-owned
college marketing company, where she is responsible for marketing, sales,
and account management. During her tenure over the past three years, the
company has grown from 19 to 30+ employees and from serving one client to
multiple clients, including Wells Fargo, Clairol and Time Magazine.
1988-1996, American Express
Prior to Edventure Partners, Pamela worked for American Express for eight
years in sales and human resources. In these positions, she interacted
with a variety of individuals from wide range of companies, including Levi
Strauss & Co., American President Lines and Clorox.
EDUCATION:
Pamela received a Masters of Business Administration from the Haas School
of Business, University of California at Berkeley and a Bachelor of Arts
degree in Political Science, from the University of California at Los
Angeles.
OTHER:
Pamela has been active in her community and currently serves on two
boards. First she is a Director for the Haas Alumni Network Board, which
is responsible for increasing participation of Haas alumni in contributing
funds and attending events. She is also on the Board of Big Brothers Big
Sisters of Marin, where she is responsible for initiating and managing an
all-volunteer marketing committee. This committee is responsible for all
aspects of marketing the non-profit agency, including public relations,
research, a speakers bureau and recruiting big brothers and sisters.
In her mid-twenties, Pamela was one of the founding members of a grass-
roots youth focused non-profit agency, San Francisco Youth at Risk. She
devoted 10+ hours per week to develop a management organization, recruit
volunteers, and fund raise to deliver an intensive camp and mentor program
for 26 highly at-risk youth. She personally raised $5,000 by running the
San Francisco marathon.
35
<PAGE>
D. Conflicts of Interest
Kristi Hough (VP & Director) and Pamela Horick (Secretary & Director)
are associated with other firms involved in a range of business activities.
Consequently, there are potential inherent conflicts of interest in their
acting as officers and directors of the Company. Insofar as the officers and
directors are engaged in other business activities, management anticipates
they will devote a minimal amount of time to the Company's affairs.
The officers and directors of the Company are now and may in the
future become shareholders, officers or directors of other companies which may
be engaged in business activities similar to those conducted by the Company.
Accordingly, additional direct conflicts of interest may arise in the future
with respect to such individuals acting on behalf of the Company or other
entities. Moreover, additional conflicts of interest may arise with respect to
opportunities which come to the attention of such individuals in the
performance of their duties or otherwise. The Company does not currently have
a right of first refusal pertaining to opportunities that come to management's
attention insofar as such opportunities may relate to the Company's proposed
business operations.
The officers and directors are, so long as they are officers or
directors of the Company, subject to the restriction that all opportunities
contemplated by the Company's plan of operation which come to their attention,
either in the performance of their duties or in any other manner, will be
considered opportunities of, and be made available to the Company and the
companies that they are affiliated with on an equal basis. A breach of this
requirement will be a breach of the fiduciary duties of the officer or
director. If the Company or the companies in which the officers and directors
are affiliated with both desire to take advantage of an opportunity, then said
officers and directors would abstain from negotiating and voting upon the
opportunity. However, all directors may still individually take advantage of
opportunities if the Company should decline to do so. Except as set forth
above, the Company has not adopted any other conflict of interest policy with
respect to such transactions.
ITEM 6. REMUNERATION OF DIRECTORS AND EXECUTIVE OFFICERS
(1) Compensation of Executive Officers
<TABLE>
<CAPTION>
Compensation of Executive Officer
Name Title Salary Bonus Common Stock
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Murray Conradie President/CEO $60,000(1)(2) None 150,861(1)(3)
Kristi Hough VP/Director None(2) None None(3)
Pamela Horick Sec/Director None(2) None None(3)
All Executive Officers as a Group (3 persons)
</TABLE>
(1) Per a Board Resolution, since April 1, 1999, Murray N. Conradie,
President, CEO and Director has received remuneration of $60,000 per year
plus $2,500 of restricted common stock each month (based on the mean average
price of the stock for each month), this amounts to 150,861 shares through
December 31, 1999. He has no options nor warrants. The other Officers have
not received any compensation during calendar year 1999.
(2) Effective January 1, 2000, the Company entered into Compensation Plan
(See Exhibit 10.10--"Compensation Plan"). The key terms of the agreement
include:
"4.1 No employee shall receive Total Direct Compensation for any year of
employment greater than twenty-five (25) times the wages paid to the lowest
paid full time employee, using the lowest hourly wage rate for a 40-hour week
for a 52-week year. Example: The lowest paid full time employee earns $6.72
per hour. For a 40-hour week, that is $268.80, which for a 52-week year is
$13,977.60. The limitation for Total Direct Compensation is $349,440,
calculated as 25 times $13,977.60.
4.2 No employee who receives fixed-base compensation in excess of twelve
and one-half (12.5) times the hourly wage rate paid to the lowest paid full
time employee shall also receive commission-based compensation in an amount
which, when combined with the fixed-base compensation, exceeds the restriction
under 4.1 above.
36
<PAGE>
4.3 Except as provided in 4.2 above, there shall be no limitation on
commission-based compensation payable to any employee of NuTek, Inc.
provided that the variable basis selected to measure the employee's performance
is reasonably related to such employee's responsibilities (ability to affect
such basis) and the commission calculation reasonably reflects such employee's
contribution to the basis, and the commission rate is commercially reasonable.
4.4 The limitations imposed by Paragraphs 4.1 and 4.2 shall be increased
for non-U.S. based employees to the extent that the cost-of-living at the
non-U.S. base exceeds the equivalent cost in the United states." (See
Exhibit 10.1 "--Compensation Plan.")
(3) The Company has also adopted a "Key Employee Stock Option Plan, the key
terms of this Plan state:
"6. Price. The purchase price per share of Common Stock purchasable
under options granted pursuant to the Plan shall not be less than 100 percent
of the fair market value at the time the options are granted. The purchase
price per share of Common Stock purchasable under options granted pursuant
to this Plan to a person who owns more than ten percent (10%) of the voting
power of the Corporation's vesting stock shall not be less than 110 percent
of the fair market value of such shares, at the time the options are granted."
(See Exhibit 10.11 "--Key Employee Stock Option Plan.")
(4) Compensation of Directors
There were no arrangements pursuant to which any director of the Company
was compensated through December 31, 1999 for any service provided as a
director. In addition, no such arrangement is contemplated for the
foreseeable future as the Company's only directors are its current
executive officers.
ITEM 7. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
>From 1987 through 1994, Murray N. Conradie, current President/CEO of
NuTek, held the position of President and Director of Century Clocks in
South Africa. In 1999, as President of NuTek, Inc., he negotiated a
purchase agreement with Century Clocks of South Africa, where he received
1,050,000 common shares of restricted stock from NuTek, Inc. As of
December 31, 1999, Murray Conradie, loaned the Company $57,000 ("See
Note 5 and Note 9 in Financial Statements.") Mr. Conradie purchased molds
from Century Clocks South Africa to the value of $57,000.00 with his own
funds as Nutek and Century Clocks did not have the funding at the time.
There is no loan repayment agreement, and should Century Clocks fail to be
profitable, the only security Mr. Conradie has is the value of the molds he
purchased which he has retained a security interest in for his loan. There
is also no interest payable on this loan.
Kristi Hough, VP and Director of the Company, has entered into a
Preliminary agreement with the Company to purchase Kristi & Co., Inc. She
is President/CEO and Director of Kristi & Co., Inc., a women's resort
clothing line. Upon consummation of this agreement, she will receive
250,000 restricted shares for the purchase of Kristi and Company. These
shares are not scheduled to be issued until January, 2000.
The Company has number notes payable to certain stockholders. This includes:
E. Grant ($25,000); J. Frank, ($55,000); Roger Wheeler ($75,000); Velma Shaw
Myers ($13,400); Dudley Frank ($70,000); Roger Garrity, ($203,806); Murray
Conradie ($57,000); John L. Rainaldi ($200,00). ("See Note 5 in Financial
Statements.")
a.) Ethel Grant - loan to company for operations, payable on demand, 24 %
p.a. interest. This was Mr. Garrity, the former CEO's mother
b.) J. Frank - loan for operations, no repayment date.
c.) Roger Wheeler - loan for operations, no repayment date.
d.) Velma Shaw Meyers - loan for operations, no repayment date.
e.) Dudley Frank - loan for operations, no interest or repayment date,
but secured with 200,000 shares of Nutek stock as collateral.
f.) Roger Garrity - unpaid compensation and money loaned for operations, no
repayment date or interest.
g.) Murray Conradie - same loan as mentioned for clock molds.
h.) John L. Rainaldi - loan for operations. The balance is being repaid
at the rate of $10,000.00 per month. Should the company not be able
to generate sufficient revenues or raise additional funding, this loan
will not be able to be repaid.
Through a Board Resolution, the Company hired the professional services
of James E. Slayton, Certified Public Accountant, to perform audited
financials for the Company. Mr. Slayton owns no stock in the Company. The
company has no formal contracts with its accountant, he is paid on a fee
for service basis. The fees paid to date were $10,298.00 and this was paid
in cash.
37
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS OF THE REGISTRANT'S COMMON EQUITY
AND OTHER STOCKHOLDER MATTERS
A. Market Information
(1) The Company's common stock was listed and trading on the NASDAQ Over
The Counter Bulletin Board under trading symbol NUTK, it is now listed on
the "Pink Sheet," quoted through the National Quotation Bureau.
CERTAIN MARKET INFORMATION
The Company's Common Stock was traded on the OTC Bulletin Board under the
symbol "NUTK." It is now trading on the "Pink Sheets" as reported through
the National Quotation Bureau. The following table sets forth the high and
low bid quotations for the Common Stock for the periods indicated. These
quotations reflect prices between dealers, do not include retail mark-ups,
mark-downs, and commissions and may not necessarily represent actual
transactions. These bid quotations have not been adjusted retroactively
by any stock split.
<TABLE>
<CAPTION>
Common Stock
PERIOD HIGH LOW
- ------ ---- ---
<S> <C> <C>
Calendar Year 1997
- ------------------
First Quarter ended 3/31/97 $1.187 $0.500
Second Quarter ended 6/30/97 $0.625 $0.062
Third Quarter ended 9/30/97 $0.281 $0.062
Fourth Quarter ended 12/31/97 $0.375 $0.125
Calendar Year 1998
- ------------------
First Quarter ended 3/31/98 $0.26 $0.10
Second Quarter ended 6/30/98 $0.50 $0.11
Third Quarter ended 9/30/98 $0.19 $0.06
Fourth Quarter ended 12/31/98 $0.20 $0.05
Calendar Year 1999
- ------------------
First Quarter ended 3/31/99 $0.12 $0.035
Second Quarter ended 6/30/99 $0.22 $0.05
Third Quarter ended 9/30/99 $0.35 $0.08
Fourth Quarter ended 12/31/99 $0.73 $0.20
</TABLE>
(2)(i) There is currently no Common Stock which is subject to
outstanding options or warrants to purchase, or securities convertible
into, the Company's Common Stock.
(ii) There are approximately 8,016,250 shares restricted common Stock of
the Company, of which approximately 2,848,469 restricted shares which are
more than two years old that could be sold under Rule 144 under the
Securities Act of 1933, as amended. Additionally, there are approximately
5,346,584 restricted shares out of the approximately 8,016,250 restricted
shares which are more than one year old.
38
<PAGE>
(iii) There is currently no common equity that is being or is proposed to
be publicly offered by the registrant, the offering of which could have a
material effect on the market price of the issuer's common equity.
B. Holders
As of December 31, 1999, the Company has approximately four hundred Thirty
Seven (437) stockholders of record. Penny Stock Regulation Broker-dealer
practices in connection with transactions in "Penny Stocks" are regulated
by certain penny stock rules adopted by the Securities and Exchange
Commission. Penny stocks generally are equity securities with a price of
less than $5.00 (other than securities registered on certain national
securities exchanges or quoted on the NASDAQ system). The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock
not otherwise exempt from the rules, to deliver a standardized risk
disclosure document that provides information about penny stocks and the
risk associated with the penny stock market. The broker-dealer must also
provide the customer with current bid and offer quotations for the penny
stock, the compensation of the broker-dealer and its salesperson in the
transaction, and monthly account statements showing the market value of
each penny stock held in the customer's account. In addition, the penny
stock rules generally require that prior to a transaction in a penny
stock, the broker-dealer must make a written determination that the penny
stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure
requirements may have the effect of reducing the level of trading activity
in the secondary market for a stock that becomes subject to the penny
stock rules. When the Registration Statement becomes effective and the
Company's securities become registered, the stock will likely have a
trading price of less than $5.00 per share and will not be traded on
any exchanges. Therefore, the Company's stock will become subject to
the penny stock rules and investors may find it more difficult to sell
their securities, should they desire to do so.
C. Dividend Policy
The Company has not paid any dividends to date. In addition, it does not
anticipate paying dividends in the immediate foreseeable future. The
Board of Directors of the Company will review its dividend policy from
time to time to determine the desirability and feasibility of paying
dividends after giving consideration to the Company's earnings, financial
condition, capital requirements and such other factors as the board may
deem relevant.
D. Reports to Shareholders
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and such other periodic reports
as the Company may determine to be appropriate or as may be required by
law. Upon the effectiveness of this Registration Statement, the Company
will be required to comply with periodic reporting, proxy solicitation and
certain other requirements by the Securities Exchange Act of 1934.
E. Transfer Agent and Registrar
The Transfer Agent for the shares of common voting stock of the Company
is Colonial Stock Transfer, 455 East 400 South, Suite 100, Salt Lake City,
UT 84111.
F. RISK FACTOR IN SELLING COMPANY STOCK
Since the Company's common stock is no longer listed the NASDAQ Over
The Counter Bulletin Board, and it is currently being traded through
the "Pink Sheets," which is a daily quotation service offered by the
National Quotation Bureau, investors may find it more difficult to sell
their securities, should they desire to do so.
39
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
The Company is from time to time involved in litigation incident to the
conduct of its business. Certain litigation with third parties and
present and former employees of the Company is routine and incidental, such
litigation can result in large monetary awards for compensatory or punitive
damages.
The Company is currently in litigation with two separate lawsuits. They
are:
A former employee at Vau-u-lift, herein referred to as the Plaintiff,
slipped and fell on wet grass outside the offices, in Jourdanton, TX, and
subsequently alleged that she twisted her knee. She file a complaint against
the company for various health conditions, and $500,000. Their attorney filed
two separate suits, of which the company was unable to properly Respond to the
first suit, and subsequently the Plaintiff received Summary judgment against
NuTek. Since Plaintiff did not follow specific legal procedures against NuTek,
which is considered a foreign corporation where the suit was filed in Texas,
the Company has initiated a restricted appeal to have the ruling reversed.
The second suit was answered, in July, 1999, and since it is tied to the
first suit, nothing has happened since. The Company plans to concurrently
file a counter suit for $150,000 in damages.
The other case pending in the court system involves an individual who
represented himself to the company to be an attorney. It was later
discovered that this individual misrepresented himself and was not an
attorney. This individual offered to find purchasers of the Company's common
stock, in order to enhance the capitalization for the Company, so that it
could pursue other projects. The Company issued the transfer company, which
is controlled by this individual 1,000,000 shares of common stock to sell
for the Company in order to enable this individual to raise money for the
company. No sales took place, nor was any of these shares sold for NUTK. The
individual in question, has refused to return these common shares to the
Company. The company has initiated a lawsuit to recover the stock, and under
court Jurisdiction, this block of stock was interpleaded with the Court.
Both lawsuits are still pending. The company has filed the appeal for the
injury lawsuit and have a trial date in September 2000 for the second lawsuit.
40
<PAGE>
ITEM 3. RECENT SALES OF UNREGISTERED SECURITIES
Since April 27, 1999, the Company has sold the unregistered securities
listed below. These issuances were deemed exempt from registration
under the Securities Act in reliance on either (a) Section 4(2) of
the Securities Act, as transaction not involving a public offering, or (b)
Rule 701 promulgated under the Securities Act. No commissions were
paid to any placement agent or underwriter for any of these issuances.
<TABLE>
<CAPTION>
Date of Amount
Purchase Title Sold Purchasers Consideration
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
4/99(1) Common Stock 65,000 Brett Peattie Clock Molds
4/99(1) Common Stock 200,000 Edward Shaw Clock Molds
4/99(1) Common Stock 1,050,000 Murray Conradie Clock Molds
8/99(2) Common Stock 600,000 Electro Static Patent #5833350
Solutions, LLC
10/99(3) Common Stock 125,000 Elite Fitness Video Rights
Systems, Inc.
01/00(4) Common Stock 250,000 Kristi Hough Patterns/Equip
01/00(5) Common Stock 150,861 Murray Conradie Compensation
02/00(6) Common Stock 2,064,348 Clipper Operating Equip/Leases
</TABLE>
(1) See Purchase Agreement, Exhibit 10.4
(2) See Purchase Agreement, Exhibit 10.5
(3) See Purchase Agreement, Exhibit 10.3
(4) See Purchase Agreement, Exhibit 10.1
(6) See Purchase Agreement, Exhibit 10.9
(1) Brett Peattie 65,000 shares at $0.185 per share $12,000.00
(1) Edward Shaw 200,000 shares at $0.20 per share $40,000.00
(1) Murray Conradie 1,050,000 shares $0.35 per share $367,500.00
(2) Electro Static Solutions 600,000 shares at $0.30 per share $180,000.00
(3) Elite Fitness Systems 125,000 shares at $0.20 per share $25,000.00
(4) Kristi Hough 250,000 shares at $0.20 per share $50,000.00
(5) Murray Conradie 150,861 shares to represent $22,500.00
(6) Clipper Operating Co 2,064,348 shares at $0.31 per share $639,948.00
The Company finalized the purchase agreement February 22, 2000 for part of
the assets of the Clipper Operating Co., Inc. The terms of the Agreement
includes cash and Company stock for oil mineral rights. The aggregate cost
to acquire Clipper was $1,279,896.00. Half of this was paid for by issuing
2,064,348 shares of Nutek Restricted stock for the traded value on 02/22/00
being $0.31. The balance of the purchase price will be paid for in cash
($639,948) from profits realized from the oil operations.
ITEM 4. DESCRIPTION OF SECURITIES
A. Common Stock
Authorized stock 50,000,000 shares, current common stock issued and
outstanding as of March 24, 2000 is 40,964,159 shares.
(1) Description of Rights and Liabilities of Common Stockholders
i. Dividend Rights - The holders of outstanding shares of common stock
are entitled to receive dividends out of assets legally available therefore
at such times and in such amounts as the board of directors of the Company
may from time to time determine.
ii. Voting Rights - Each holder of the Company's common stock are
entitled to one vote for each share held of record on all matters submitted
to the vote of stockholders, including the election of directors. All voting
is noncumulative, which means that the holder of fifty percent (50%) of the
shares voting for the election of the directors can elect all the directors.
The board of directors may issue shares for consideration of previously
authorized but unissued common stock without future stockholder action.
41
<PAGE>
iii. Liquidation Rights - Upon liquidation, the holders of the common
stock are entitled to receive pro rata all of the assets of the Company
available for distribution to such holders.
iv. Preemptive Rights - Holders of common stock are not entitled to
preemptive rights.
v. Conversion Rights - No shares of common stock are currently subject to
outstanding options, warrants, or other convertible securities.
vi. Redemption rights - no redemption rights exist for shares of common
stock.
vii. Sinking Fund Provisions - No sinking fund provisions exist.
viii. Further Liability For Calls - No shares of common stock are subject
to further call or assessment by the issuer. The Company has not issued
stock options as of the date of this Registration Statement.
(2) Potential Liabilities of Common Stockholders to State and Local
Authorities
No material potential liabilities are anticipated to be imposed on
stockholders under state statues. Certain Nevada regulations, however,
require regulation of beneficial owners of more than 5% of the voting
securities. Stockholders that fall into this category, therefore, may be
subject to fines in circumstances where non-compliance with these
regulations are established.
B. Preferred Stock
Preferred Stock, $.001 par value per share, 5,000,000 shares authorized,
current preferred stock issued and outstanding as of March 24, 2000 is
793,500 shares.
(1) Description of Rights and Liabilities of Preferred Stockholders
i. Dividend Rights - The holders of outstanding shares of Preferred stock
are entitled to receive dividends out of assets legally available therefore
at such times and in such amounts as the board of directors of the Company
may from time to time determine. Series B shares have annual dividends of
$.15 a share payable quarterly. All of the shares outstanding were to be
redeemed at $1.00 a share plus all accrued dividends prior to December 31,
1993. This has been extended by mutual agreement. Series B shares have
annual dividends of $.15 a share payable quarterly. They are convertible to
common shares on a one for one basis at the holders' option. (See Financial
Footnote Number 2.)
ii. Voting Rights - The holders of record of said shares of Series B
Preferred Stock shall be entitled to one vote per share at all meetings of,
shareholders of the Corporation. The holders of record shares of the Series
B Preferred Stock shall vote such shares together with the holders of the
Corporation's Common Stock, and not as a separate class. The board of
directors may issue shares for consideration of previously authorized but
unissued preferred stock without future stockholder action.
iii. Liquidation Rights - In case of the dissolution, liquidation or
winding-up of the Corporation, whether voluntary or involuntary or in
any instance, the holders of record of shares of the Series B Preferred
Stock then outstanding shall be entitled to participate in the distributions,
either in cash or in kind, of the assets of the corporation on a priority
basis but only to, the extent of outstanding shares of Preferred Stock
multiplied by its par value per share. Series B shares have priority
over the common shares in the event of Company liquidation.
iv. Preemptive Rights - The holders of the shares of Series B Preferred
Stock will have no preemptive, redemption or other rights other that as
established by applicable corporate law.
v. Conversion Rights - The Preferred shares can be converted after a holding
period of one year at the rate of 10 shares of Common Stock for each share
of Preferred Stock converted. They are convertible to common shares on a one
for one basis at the holders' option.
vi. Sinking Fund Provisions - No sinking fund provisions exist.
vii. Further Liability For Calls - No shares of Preferred stock are subject
to further call or assessment by the issuer. The Company has not issued
stock options as of the date of this Registration Statement.
C. Debt Securities
The Company has issued convertible debt in the amount of $34,000.00 with
an interest rate of 10%. This can be converted at the rate of $1.00
of debt per share of Common Stock issued.
D. Other Securities To Be Registered
The Company is not registering any security other than its Common Stock
and Preferred Stock.
Item 5. Indemnification of Directors and Officers
Article XI of the Company's Articles of Incorporation for the Company
do contain provisions for indemnification of the officers and directors;
in addition, Section 78.751 of the Nevada General Corporation Laws
provides as follows: 78.751 Indemnification of officers, directors,
employees and agents; advance of expenses.
1) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation,
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorney's fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in
connection with the action, suitor proceeding if he acted in good faith
and in a manner which he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
42
<PAGE>
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be
in or not opposed to the best interests of the corporation, and that, with
respect to any criminal action or proceeding, he had reasonable cause to
believe that his conduct was unlawful.
2. A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses, including amounts paid in settlement and attorneys' fees actually
and reasonably incurred by him in connection with the defense or settlement
of the action or suit if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification may not be made for any claim, issue or matter
as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to
the corporation or for amounts paid in settlement to the corporation, unless
and only to the extent that the court in which the action or suit was brought
or other court of competent jurisdiction determines upon application that
in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
3. To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections 1 and 2, or in
defense of any claim, issue or matter therein, he must be indemnified by
the corporation against expenses, including attorneys' fees, actually and
reasonably incurred by him n connection with the defense.
4. Any indemnification under subsections 1 and 2, unless ordered by a
court or advanced pursuant to subsection 5, must be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances. The determination must be made: (a) By the stockholders:
(b) By the board of directors by majority vote of a quorum consisting of
directors who were not parties to act, suit or proceeding; (c) If a majority
vote of a quorum consisting of directors who were not parties to the act, suit
or proceeding so orders, by independent legal counsel in a written opinion;
or (d) If a quorum consisting of directors who were not parties to the act,
suit or proceeding cannot to obtained, by independent legal counsel in a
written opinion; or
5. The articles of incorporation, the bylaws or an agreement made by the
corporation may provide that the expenses of officers and directors
incurred in defending a civil or criminal, suit or proceeding must be paid
by the corporation as they are incurred and in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director or officer to repay the amount
if it is ultimately determined by a court of competent jurisdiction that
he is not entitled to be indemnified by corporation. The provisions of this
subsection do not affect any rights to advancement of expenses to which
corporate personnel other than the directors or officers may be entitled
under any contract or otherwise by law.
43
<PAGE>
6. The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to this section: (a) Does not exclude any
other rights to which a person seeking indemnification or advancement of
expenses may be entitled under the articles of incorporation or any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise,
for either an action in his official capacity or an action in another
capacity while holding his office, except that indemnification, unless
ordered by a court pursuant to subsection 2 or for the advancement of
expenses made pursuant to subsection 5, may not be made to or on behalf
of any director or officer if a final adjudication establishes that his
act or omissions involved intentional misconduct, fraud or a knowing
violation of the law and was material to the cause of action. (b) Continues
for a person who has ceased to be a director, officer, employee or agent
and endures to the benefit of the heirs, executors and administrators
of such a person.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
44
<PAGE>
PART F/S
Item 1. Financial Statements
The following documents are filed as part of this report:
a) NuTek, Inc.
Report of James E. Slayton, CPA
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page Number
<S> <C>
ACCOUNTANT'S REPORT of James E. Slayton, CPA 1
Balance Sheet 2
Statement of Operations and Deficit
Accumulated During the Development Stage 3
Statement of Changes in Stockholder's Equity 4
Statement of Cash Flows 5
Notes to the Financial Statements 6
</TABLE>
b) Interim Financial Statements are not provided at this time as they
are not applicable at this time.
c) Financial Statements of Businesses Acquired are included in:
Exhibit: 29.1 - Financial Statement - Kristi and Co., Inc.
Exhibit: 29.2 - Financial Statement - Elite Systems, Inc.
.
d) Exhibit 29.3 - Consolidated Pro Forma Financial Information. Nutek Oil
and Century Clocks were formed by Nutek Inc. they were not corporate
acquisitions. The purchase from Clipper Operating included assets and not
the company itself; therefore, there it was not a business combination and
therefore not included in the proforma or financials.
Item 2. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
None--Not Applicable
45
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT....................................... F-1
BALANCE SHEET..................................................... F-2-3
STATEMENT OF OPERATIONS............................................ F-4
STATEMENT OF STOCKHOLDERS' EQUITY.................................. F-5
STATEMENT OF CASH FLOWS............................................ F-6
NOTES TO FINANCIAL STATEMENTS...................................... F-7-11
</TABLE>
<PAGE>
James E. Slayton, CPA
3867 West Market Street
Suite 208
Akron, Ohio 44333
INDEPENDENT AUDITORS' REPORT
Board of Directors
January 12, 2000
Nutek, Inc. (The Company)
Las Vegas, Nevada 89104
I have audited the Consolidated Balance Sheet of Nutek, Inc., as of
December 31, 1998 and December 31, 1999, and the related Consolidated
Statements of Operations, Stockholders' Equity and Cash Flows for the
years ending December 31, 1998 and December 31, 1999. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements
based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis evidence supporting the amounts and disclosures in the
financial statement presentation. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for
my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Nutek, Inc., at December 31, 1998 and December 31, 1999, and the
results of its operations and cash flows for the years ending December
31, 1998 and December 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. As discussed
in Note 3 to the financial statements, The Company has had limited
operations and has not established a long term source of revenue. The
Company has had operating losses for the two operating periods
reported. This raises substantial doubt about its ability to continue
as a going concern. Management's plan in regard to these matters are
also described in Note 10. The financial statements do not include
any adjustments that might result from the outcome of this
uncertainty.
James E. Slayton, CPA
Ohio License ID# 04-1-15582
F-1
<PAGE>
Nutek, Inc.
CONSOLIDATED
BALANCE SHEET
AS AT
December 31, 1998 and December 31, 1999
<TABLE>
<CAPTION>
ASSETS
December 31 December 31
1999 1998
CURRENT ASSETS
<S> <C> <C>
Cash 81,404.00 11,250.00
Accounts Receivable 75,706.00 0.00
Inventory 40,463.00 10,100.00
Prepaid Expenses 0.00 0.00
Total Current Assets 197,573.00 21,350.00
PROPERTY AND EQUIPMENT
Property and Equipment
(net of depreciation) 1,368,035.00 701,636.00
Total Property and Equipment 1,368,035.00 701,636.00
OTHER ASSETS
Patent Rights Acquired
(net of amortization) 1,259,692.00 14,644.00
Long Term Investments 234,000.00 0.00
Goodwill (net of amortization) 0.00 0.00
Deposit 3,310.00 0.00
Total Other Assets 1,497,002.00 14,644.00
TOTAL ASSETS 3,062,610.00 737,630.00
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
Nutek, Inc.
CONSOLIDATED
BALANCE SHEET
AS AT
December 31, 1998 and December 31, 1999
<TABLE>
<CAPTION>
LIABILITIES & EQUITY
December 31 December 31
1999 1998
CURRENT LIABILITIES
<S> <C> <C>
Accounts Payable 30,392.00 33,149.00
Short Term Notes Payable 464,511.00 55,872.00
Total Current Liabilities 494,903.00 89,021.00
OTHER LIABILITIES
Long Term Notes Payable 262,000.00 1,004,704.00
Unamortized Interest 13,424.00
Accrued Bond Interest 28,000.00 0.00
Bonds Payable 142,000.00 142,000.00
Deposits Received 15,000.00 5,000.00
Patent Rights Acquired Liability 770,000.00 0.00
Total Other Liabilities 1,230,424.00 1,151,704.00
TOTAL LIABILITIES 1,725,327.00 1,240,725.00
EQUITY
Common Stock 36,329.00 23,798.00
Common Stock, $0.001 par value,
authorized 50,000,000 shares issued
and outstanding at December 31, 1999
36,328,100 common shares; issued and
outstanding at December 31, 1998,
23,798,292 common shares
Additional Paid in Capital 6,149,638.00 3,977,324.00
Preferred Stock 794.00 794.00
Preferred Stock, $.001 par value,
authorized 5,000,000 shares
issued and outstanding at
December 31, 1998 and 1999,
793,500 preferred shares
Royalty Investors 55,000.00 0.00
Treasury Stock (45,448.00) (45,448.00)
Retained (Deficit) (4,759,029.00) (4,459,563.00)
Common Stock Subscribed (100,000.00) 0.00
Total Stockholders' Equity 1,337,283.00 (503,095.00)
TOTAL LIABILITIES AND OWNERS EQUITY 3,062,610.00 737,630.00
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
Nutek, Inc.
CONSOLIDATED
STATEMENT OF OPERATIONS
FOR YEARS ENDED
December 31, 1998 and December 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
January 1 January 1
to to
December 31 December 31
1999 1998
REVENUE
<S> <C> <C>
Revenues 238,039.00 12,501.00
COSTS AND EXPENSES
Costs of Goods Sold 30,267.00 2,500.00
Selling, General and Administrative 306,498.00 380,150.00
Depreciation Expense 135,706.00 116,837.00
Amortization of Intangibles 62,367.00 10,175.00
Interest Expense 2,667.00
Total Costs and Expenses 537,505.00 509,662.00
Net Ordinary Income or (Loss) (299,466.00) (497,161.00)
Basic weighted average
number of common 30,214,222 18,213,340
shares outstanding
Basic Net Loss per Share (0.01) (0.03)
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
Nutek, Inc.
CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR YEARS ENDED
December 31, 1998 and December 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Common Preferred paid-in Treasury Total
Stock Stock Capital Stock Royalty Deficit Equity
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances 11,549 794 3,152,667 (3,962,402) (797,392)
as at
December 31,
1997
Issuance of
Common Stock
For cash 4,869 0 329,235 334,104
Issuance of
Common Stock
for services 7,380 0 495,422 502,802
Treasury
Stock (45,448) (45,448)
Net Loss for
year ended
12/31/1998 (497,161) (497,161)
- ------------------------------------------------------------------------------
Balances at
December 31,
1998 $23,798 $794 $3,977,324 ($45,448) (4,459,563) ($503,095)
Issuance of
Common Stock
for cash 7,205 1,244,060 1,251,265
Issuance of
Common Stock
for services 5,325 928,254 933,579
Royalty
Investors 55,000 55,000
Subscriptions
Receivable (100,000)
Net Loss for
year ended
Dec 31, 1999 ($299,466) (299,466)
- ------------------------------------------------------------------------------
$36,328 $794 $6,149,638 ($45,448) 55,000 ($4,759,029) $1,337,283
==============================================================================
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
Nutek, Inc.
CONSOLIDATED
STATEMENT OF CASH FLOWS
FOR YEARS ENDED
December 31, 1998 and December 31, 1999
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
January 1 January 1
to to
December 31 December 31
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net(loss) from Operations (299,466.00) (497,161.00)
Adjustments to reconcile net income
to net cash provided
Items not requiring cash
Imputed Interest 2667
Depreciation Expense 135,706.00 116,837.00
Amortization of Intangibles 62,367.00 10,175.00
(Increase)/Decrease in accounts receivable (61,456.00) 14,250.00
(Increase)/Decrease in inventory (30,363.00) 63,430.00
(Increase)/Decrease in Deposits (3,310.00) 0.00
Increase/(Decrease) in Accounts payable (2,757.00) 2,130.00
Net Cash flow provided by operating
activities (196,612.00) (290,339.00)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Century Clock Molds 43,000.00 0.00
Net cash used by investing activities (43,000.00) 0.00
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Capital Stock 627,839.00 439,044.00
Increase/(Decrease) in Notes payable (318,073.00) (101,130.00)
Treasury Stock 0.00 (45,448.00)
Net Cash provided by financing activities 309,766.00 292,466.00
Balance as at beginning of period 11,250.00 9,123.00
Net increase (decrease) in cash 70,154.00 2,127.00
Balance as at end of period 81,404.00 11,250.00
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was incorporated in August of 1991 (Date of Inception)
under the laws of the State of Nevada, as Nutek, Inc. (The Company)
and is engaged primarily in the oil and gas industry.
SRC International, Inc. was incorporated 06/20/1997 in Illinois. SRC
International Inc. manufactures "Super Glide" a rail covering made of
an extremely durable, super-slick, space age polymer designed to reduce
friction between rails and hangers in the dry cleaning and garment
industries.
Vac-U-Lift Production Company was incorporated in the state of Texas in
March of 1995 and is in the oil extracting industry on leases in Texas.
The Company remained inactive until it was acquired in June of 1996 by
Nutek..
Century Clocks Inc. with it's joint venture with the Department of
Veterans Industries, produces clocks assembled and packaged by U.S.
veterans.
Elite Fitness Systems Inc. markets a proven fitness system that has
kept the world's finest fighting force in supreme physical condition.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
The accompanying consolidated financial statements include the accounts
of Nutek, Inc., and its wholly-owned subsidiaries, SRC International,
Inc., Vac-U-Lift Production Company, Inc., Century Clocks Inc., and
Elite Fitness Systems Inc. All significant intercompany balances and
transactions have been eliminated.
Accounting polices and procedures have not been determined except as follows:
1. The Company uses the accrual method of accounting.
2. Inventories are stated at the lower of cost or market, cost being
determined on the first in, first out (FIFO) basis.
3. Basic earnings per share is computed using the weighted average number of
shares of common stock outstanding. Diluted earnings per share were not
included as the inclusion of convertible notes, convertible preferred stock and
warrants would be anti-dilutive and all contingencies for conversion have not
occurred.
4. The Company has not yet adopted any policy regarding payment of dividends.
The Company has authorized 5,000,000 shares of Series B preferred stock with a
par value of $0.001 (one tenth of one cent). All of the shares which have been
issued were issued for cash at $1.00 a share. Series B shares have the same
voting rights as the common shares but have priority in the event of Company
liquidation. All of the shares outstanding were to be redeemed at $1.00 a
share plus all accrued dividends prior to December 31, 1993. This has been
extended by mutual agreement. Series B shares have annual dividends of $.15 a
share payable quarterly. They are convertible to common shares on a one for
one basis at the holders' option.
5. The Company experienced losses during the past two fiscal tax years
reported. The Company will review its need for a provision for federal
income tax after each operating quarter. The Company has adopted FASB
109. The Company's marginal tax rate is 15%. Its effective tax rate
is zero. It has net operating losses of $4,759,029.00. These
losses begin to expire in 2004. The estimated tax benefit of these losses is
$713,854.00. Due to the Company's going concern doubts, management deemed it
less than likely that these benefits would be utilized and there were no
deferred tax benefits recorded.
F-7
<PAGE>
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS
6. The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions which affect the reported amounts of assets and liabilities as
at the date of the financial statements and revenues and expenses for the
period reported. Actual results may differ from these estimates.
7. The cost of equipment is depreciated over the estimated useful life of
the equipment utilizing the straight line method of deprecation.
Depreciation recorded during 1998 was $116,837.00. Depreciation recorded
during 1999 was $135,706.00.
8. The Company has adopted December 31 as its fiscal year end.
9. The Company expenses its research and development in the period it's
incurred.
10. All exchanges of stock for services rendered were recorded at the market
value of the stock exchanged.
11. The Company's Statement of Cash Flows is reported utilizing cash
(currency on hand and demand deposits) and cash equivalents (short-term,
highly liquid investments expected to be held less than three months).
Schedule of non cash financing activities
1999 1998
Common stock issued for services $924,719.00 $506,427.00
Notes issued for purchase of patent $770,000.00
Total $1,694,719.00 $506,427.00
12. The Company is reporting business combinations and acquisitions using the
pooling-of-interest method of accounting.
13. The Company has adopted SOP 98-5. Start-up costs and reorganization
costs occurring prior to December, 1998 are being amortized using the
straight-line method over a period of 5 years.
14. Oil well leases are depleted over the units of production, or 12 years,
whichever is shorter.
15. Identifiable intangibles including patents are amortized over five
years. The amount of amortization recorded in 1998 was $10,175. The amount
of amortization record in 1999 was $62,367.00.
16. Investments are recorded at the lower of cost or market. Any reductions
in market value below cost are shown as unrealized losses in the consolidated
statement of operations.
17. The Company has adopted FASB 121. Management determined that as the
major intangible asset, the electric light switch, was purchased late in
1999 there had not be a significant reduction in the usefulness of the asset
at December 31, 1999.
18. The Company does not currently have any stock options issued. The
company has adopted FASB 123 and will account for stock issued for services
and stock options under the fair value method .
19. The Company has adopted FASB 131. Currently there isn't any
geographical or major customer segmentation. The Company entered into two
product lines, Elite Fitness and Century Clocks, Inc. which management
expects will meet the criteria presented in FASB 131 in the future.
Management became aware of these product lines and after evaluating the
expected benefits, entered into agreements to purchase the assets or
equipment necessary to operate. At this time management has not separated
either product, financial records, therefore, the Company does not have any
measurement differences in either segment reporting or any changes of
measurement from period to period.
F-8
<PAGE>
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS
20. The Company has adopted FASB 115. Its equity securities are classified
as available for sale and reported at fair value.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consists of manufacturing equipment and clock molds.
Estimated Useful Life
Property and equipment $847,035.00 5-7 Years
Clock Molds $521,000.00 10-15 Years
NOTE 4 - OTHER ASSETS
Other assets consists patents, design, artwork, and bailer pump technology.
These assets were valued at the existing market value of Nutek stock at the
time of purchase.
NOTE 5 - LONG-TERM DEBT
Long-term debt consists of the following:
Note payable to Dudley Frank, due on demand, $70,000.00
secured by 200,000 shares of Nutek common
stock
Notes payable to John L. Rainaldi, a stockholder, $192,000.00
payments based upon the terms of the related
Loan agreements, secured by certain
stockholders of the Company
-------------
$ 262,000.00
=============
Principal payments over the next five years approximate the following:
Year ending December 31,
2000 $ 147,365
2001 45,236
2002 16,718
2003 18,332
2004 13,137
Thereafter 21,212
----------
$ 262,000
==========
NOTE 6 - INCOME TAXES
Nutek, Inc. and its subsidiaries available net operating loss carry
forwards to offset future federal taxable income of approximately
$4,756,362.00. The carry forwards expire through 2014. The Company
has deemed it less than likely that this benefits will be utilized.
The Company has adopted the Statement of Financial Accounting Standards
No. 109 - "Accounting for Income Taxes."
F-9
<PAGE>
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 7 - CONTINGENCIES AND COMMITMENTS
1. Office Lease
The Company leases office space in California on a month-to-month basis
with aggregate monthly rent of approximately $2856.00. Rent recorded
during 1998 and 1998 respectfully was $22,643.50 and $21,218.25.
2. Handi-Plate royalty
As part of acquiring the patents for this product, Nutek Inc. to
provide the inventor a 2.5% royalty interest on the gross sales of
this product.
3. Clock royalty
As part of the acquisition of Century Clocks SA clock molds, a 7.5%
royalty interest was given. The royalty owners advanced $55,000.00 to
Nutek, Inc. Murray Conradie has the option of converting the loan
which he made to Nutek, Inc. in the amount of $57,000.00 to a royalty
interest and becoming a participant in the 7.5% royalty interest.
4. Subscriptions receivable
The Company has received common stock subscriptions in the amount of
$100,000.00. The Company reported this as part of shareholder's
equity. The Company received the payment for the subscriptions in the
year 2000.
NOTE 8 - ACQUISITIONS
Patent rights for an electro static light switch were acquired August
27, 1999 for the fair market price of $1,000,000 from a non-related
party. Payment was made by issuing 600,000 shares of Restricted
Common Stock valued at $.30 per share. Another $150,000.00 was to be
paid in cash with the balance of $670,000 to be paid by increasing the
royalty payment from seven to ten percent until the balance is paid
off. As at December 31, 1999, the Company still owes $770,000.00 as
only a portion of the $150,000.00 was paid.
Vac-U-Lift Production Company, Inc.
In June of 1996, the company exchanged 100,000 shares of its common
stock and a certain amount of cash to acquire all of the outstanding
common shares of Vac-U-Lift Production Company, Inc., a Texas
corporation. The business combination was been accounted for under
the purchase method of accounting. SRC International Inc. was
acquired for stock 04/01/1998. The business combination has been
accounted for under the pooling of interest method. Elite Fitness was
acquired 10/04/1999. The business combination has been accounted for
as under the pooling of interest method.
NOTE 9 - RELATED PARTY TRANSACTIONS
As of December 31, 1999, Murray Conradie, President of Nutek, Inc., has
loaned the Company $57,000.00 as a result of his brokering the
purchase of clock molds from South Afica. Mr. Conradie was formerly an
officer and manager of Century Clocks SA. He negotiated a purchase of
clock molds from South Africa. This was a three party transaction
which involved Mr. Conradie purchasing the molds in South Africa and
then transferring the clock molds to Century Clocks, Inc., a company
wholly owned by Nutek, Inc. and formed to pursue this business
opportunity. The clock molds were recorded at Mr. Conradie's, the
transferor's, historical cost and book value. There were no
inventories involved in these transactions. This note has been
recorded per ASB 21.
F-10
<PAGE>
NUTEK, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 10 - GOING CONCERN
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company has a minimal
source of revenue. Without realization of additional capital, it
would be unlikely for the Company to continue as a going concern. It
is management's plan to seek additional capital through a private
placement memorandum.
NOTE 11 - YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems
may recognize the year 2000 as 1900 or some other date, resulting in
errors when information using year 2000 dates is processed. In
addition, similar problems may arise in systems which use certain
dates in 1999 to represent something other than a date. The effects
of the Year 2000 issue may be experienced before on, or after January
1, 2000 and if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure
which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the
Year 2000 issue affecting the entity, including those related to the
efforts of customers, suppliers, or other third parties will be fully
resolved.
NOTE 12. - LITIGATION
The Company was involved to two separate legal actions as at December
31, 1999. A former employee sued the Company for damages as a result
of a personal injury were the employee slipped and fell on Company
property. This case was settled on appeal.
The second lawsuit was initiated by the Company to recover 1,000,000
shares of its common stock which was issued to an individual for
services which were not received. This case goes to trial in
September of 2000.
F-11
<PAGE>
FINANCIAL STATEMENTS - KRISTI AND COMPANY, INC.
Kristi and Co, Inc.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
December 31, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT.....................F-1
BALANCE SHEET....................................F-2
STATEMENT OF OPERATIONS..........................F-3
STATEMENT OF STOCKHOLDERS' EQUITY................F-4
STATEMENT OF CASH FLOWS..........................F-5
NOTES TO FINANCIAL STATEMENTS....................F-6-7
</TABLE>
<PAGE>
James E. Slayton, CPA
2858 WEST MARKET STREET
SUITE C
FAIRLAWN, OHIO 44333
1-330-864-3553
INDEPENDENT AUDITORS' REPORT
Board of Directors May 4, 2000
Kristi and Co, Inc. (the Company)
Las Vegas, Nevada 89102
I have audited the Balance Sheet of Kristi and Co, Inc. (A Development Stage
Company), as of December 31, 1999, and the related Statements of Operations,
Stockholders' Equity and Cash Flows for the period September 13, 1999 (Date of
Inception) to December 31, 1999 and the year ending December 31, 1999. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement presentation.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis
for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Kristi and Co, Inc., (A
Development Stage Company), as of December 31, 1999, and the results of its
operations and cash flows for the period September 13, 1999 (Date of Inception)
to December 31, 1999, and year ending December 31, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has had limited operations and have not commenced
planned principal operations. This raises substantial doubt about its ability
to continue as a going concern. Management's plan in regard to these matters
are also described in Note 3. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/ James E. Slayton
- ----------------------------
James E. Slayton, CPA
Ohio License ID# 04-1-15582
F-1
<PAGE>
Kristi and Co, Inc.
(A Development Stage Company)
BALANCE SHEET
AS AT
December 31, 1999
<TABLE>
<CAPTION>
BALANCE SHEET
December 31, 1999
ASSETS
<S> <C>
CURRENT ASSETS
Cash 0.00
------------
Total Current Assets 0.00
PROPERTY AND EQUIPMENT
Property & Equipment 0.00
------------
Total Property and Equipment 0.00
OTHER ASSETS
Other Assets 0.00
-----------
TOTAL ASSETS 0.00
===========
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts Payable 0.00
-----------
Total Current Liabilities 0.00
OTHER LIABILITIES
Other liabilities 0.00
-------------
Total Other Liabilities 0.00
-------------
Total Liabilities 0.00
EQUITY
Capital Stock 0.00
Additional Paid in Capital 0.00
Donated Capital 125.00
Retained Earnings or (Deficit
accumulated during development stage) (125.00)
-----------
Total Stockholders' Equity 0.00
TOTAL LIABILITIES & OWNER'S EQUITY 0.00
==========
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
Kristi and Co, Inc.
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR PERIOD
September 13, 1999 (Date of Inception) to December 31, 1999
and the year ending December 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
September 13, 1999
Year Ending (Date of Inception)
Dec. 31, 1999 to December 31, 1999
REVENUE
<S> <C> <C>
Services 0.00 0
COSTS AND EXPENSES
Selling, General and Administrative 0.00 0.00
Expense of Organization Costs 125.00 125.00
-------------- -------------
Total Costs and Expenses 125.00 125.00
-------------- -------------
Net Ordinary Income or (Loss) (125.00) (125.00)
============== =============
Weighted average
number of common
shares outstanding 0 0
Net Loss
Per Share 0.000 0.000
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
Kristi and Co, Inc.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR PERIOD
September 13, 1999 (Date of Inception) to December 31, 1999
and the year ending December 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Deficit
Accumulated
Additional During Total
Common Stock paid-in Donated Development Stockholder's
Shares Amount Capital Capital Stage Equity
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
September 13,
1999 Donated
Capital from
Stockholders 125.00 125.00
Net loss
September 13,
1999 (Inception)
to December 31,
1999 (125.00) (125.00)
------------------------------------------------------
Balances as at
December 31, 1999 0 $0.00 $0.00 $125.00 ($125.00) $0.00
========================================================================
</TABLE>
See accompanying notes to financial statements
F-4
Kristi and Co, Inc.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
FOR PERIOD
September 13, 1999 (Date of Inception) to December 31, 1999
and the year ending December 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
September 13,
1999
Year (date of Inception)
Ending to
Dec. 31, 1999 Dec. 31, 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income or (loss) from operations (125.00) (125.00)
Adjustments to reconcile net income
to net cash provided
Amortization of organization costs 0.00 0.00
Services in exchange for stock 0.00 0.00
Decrease (Increase) in current assets 0.00 0.00
-----------------------------------------
Net Cash provided by Operating Activities (125.00) (125.00)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of land 0.00 0.00
---------------------------------
Net Cash used by investing activities 0.00 0.00
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Capital Stock 0.00 0.00
Advances from Shareholders 125.00 125.00
---------------------------------
Net cash provided by financing activities 125.00 125.00
Balance at beginning of period 0.00 0.00
Net increase (decrease) in cash 0.00 0.00
Balance as at end of period 0.00 0.00
</TABLE>
See accompanying notes to financial statements
F-5
Kristi and Co, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized September 13, 1999 (Date of Inception) under the laws
of the State of Nevada, Kristi and Co, Inc. The Company has no operations and
in accordance with SFAS #7, the Company is considered a development stage
company.
On September 13, 1999, the company donated capital in the amount of $125.00.
No stock was issued in 1999.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as follows:
1. The Company uses the accrual method of accounting.
2. The cost of organization, $125.00, was expensed when incurred.
3. Basic earnings per share is computed using the weighted average number of
shares of common stock outstanding.
4. The Company has not yet adopted any policy regarding payment of dividends.
No dividends have been paid since inception.
5. The cost of equipment is depreciated over the estimated useful life of
the equipment utilizing the straight line method of depreciation. There has
been no equipment through December 31, 1999.
6. The Company has adopted FASB 109 and reports tax expense and deferrals
as incurred for each period an income statement is issued. There was zero
income tax expense for the year ended 1999.
7. The Company's Statement of Cash Flows is reported utilizing cash (currency
on hand and demand deposits) and cash equivalents (short-term, highly liquid
investments).
8. The Company did not have any cash equivalents at the balance sheet dates
or during the period, September 13, 1999 (Date of Inception) to December 31,
1999.
9. The company reports its property and equipment at historical cost. The
Company has adopted FASB 121 in the accounting for the impairment of Long-
Lived Assets. The Company evaluates whether a review of impairment for
recoverable costs on long-lived assets, each operating period.
F-6
Kristi and Co, Inc.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has not commenced its planned principal
operations. Without the realization of additional capital, it would be
unlikely for the Company to continue as a going concern. It is management's
plan to seek additional capital through a private offering of its securities.
NOTE 4 - RELATED PARTY TRANSACTION
The Company neither owns or leases any real or personal property. The officers
and directors of the Company are involved in other business activities and may,
in the future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
NOTE 5 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares of
common stock.
NOTE 6 - SUBSEQUENT EVENTS
The company was purchased January 6, 2000, by Nutek, Inc. The purchase was a
stock for stock transfer.
F-7
<PAGE>
FINANCIAL STATEMENT - ELITE FITNESS SYSTEMS, INC.
Elite Fitness Systems, Inc
FINANCIAL STATEMENTS
December 31, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT.....................F-1
BALANCE SHEET................................ F-2
STATEMENT OF OPERATIONS..........................F-3
STATEMENT OF STOCKHOLDERS' EQUITY................F-4
STATEMENT OF CASH FLOWS..........................F-5
NOTES TO FINANCIAL STATEMENTS....................F-6
<PAGE>
James E. Slayton, CPA
2858 WEST MARKET STREET
SUITE C
FAIRLAWN, OHIO 44333
1-330-864-3553
INDEPENDENT AUDITORS' REPORT
Board of Directors May 4, 2000
Elite Fitness Systems, Inc (the Company)
Las Vegas, Nevada 89102
I have audited the Balance Sheet of Elite Fitness Systems, Inc., as of
December 31, 1998, and the related Statements of Operations, Stockholders'
Equity and Cash Flows for the year ending December 31, 1998. These financial
statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement presentation.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a
reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Elite Fitness Systems, Inc., as of
December 31, 1998, and the results of its operations and cash flows for the
year ending December 31, 1998, in conformity with generally accepted accounting
principles.
James E. Slayton, CPA
Ohio License ID# 04-1-15582
F-1
<PAGE>
Elite Fitness Systems, Inc
BALANCE SHEET
AS AT
December 31, 1998
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET
December 31 1998
ASSETS
CURRENT ASSETS
<S> <C>
Cash 3,497.00
Accounts Receivable 32,698.00
Inventory 19,441.00
-----------
Total Current Assets 55,636.00
PROPERTY AND EQUIPMENT
Furniture & Equipment 4603.00
-----------
Total Property and Equipment 4,603.00
OTHER ASSETS
Design and logo 6759.00
Video Dubs 7,265.00
-----------
TOTAL ASSETS 74,263.00
===========
LIABILITIES & EQUITY
CURRENT LIABILITIES
Accounts Payable 0.00
----------
Total Current Liabilities 0.00
OTHER LIABILITIES
Due to Shareholder 0.00
----------
Total Other Liabilities 0.00
----------
Total Liabilities 0.00
EQUITY
Capital Stock 0.00
Additional Paid in Capital 0.00
Donated Capital 0.00
Retained Earnings or (Deficit
accumulated during development stage) 74,263.00
----------
Total Stockholders' Equity 74,263.00
TOTAL LIABILITIES & OWNER'S EQUITY 74,263.00
============
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
Elite Fitness Systems, Inc
STATEMENT OF OPERATIONS
FOR PERIOD
For the year ending December 31, 1998
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
December 31 1998
REVENUE
<S> <C>
Sales 152,939.00
COSTS AND EXPENSES
Selling, General and Administrative 78,676.00
-----------
Total Costs and Expenses 78,676.00
-----------
Net Ordinary Income or (Loss) 74,263.00
============
Weighted average
number of common
shares outstanding 0
Net Loss
Per Share 0.000
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
Elite Fitness Systems, Inc
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR PERIOD
For the year ending December 31, 1998
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Deficit
Accumulated
Additional During Total
Common Stock paid-in Donated Development Stockholder's
Shares Amount Capital Capital Stage Equity
<S> <C> <C> <C> <C> <C> <C>
Net profit
January 1, 1998 to
December 31, 1998 74,263.00 74,263.00
- ---------------------------------------------------------------------
Balances as at
December 31, 1998 0 0.00 0.00 0.00 74,263.00 74,263.00
=====================================================================
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
Elite Fitness Systems, Inc
STATEMENT OF CASH FLOWS
FOR PERIOD
Ending December 31, 1998
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
December 31 1998
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income or (loss) from operations 74,263.00
Adjustments to reconcile net
income to net cash provided
Decrease (Increase) in current assets 0.00
-----------
Net Cash provided by Operating Activities 74,263.00
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of land 0.00
-----------
Net Cash used by investing activities 0.00
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Capital Stock 0.00
Advances from Shareholders 0.00
-----------
Net cash provided by financing activities 0.00
Balance at beginning of period 0.00
Net increase (decrease) in cash 74,263.00
Balance as at end of period 74,263.00
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
Elite Fitness Systems, Inc
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized November 7, 1997 (Date of Inception) under
the laws of the State of Nevada, Elite Fitness Systems, Inc.
The Company has not issued any shares as of December 31, 1998.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except
as follows:
1. The Company uses the accrual method of accounting.
2. The cost of organization, was expensed in 1997.
Basic earnings per share is computed using the weighted average number of
shares of common stock outstanding.
The Company has not yet adopted any policy regarding payment of dividends.
No dividends have been paid since inception.
5. The cost of equipment is depreciated over the estimated useful life of
the equipment utilizing the straight line method of depreciation. There has
been no equipment through December 31, 1998.
6. The Company's Statement of Cash Flows is reported utilizing cash
(currency on hand and demand deposits) and cash equivalents (short-term,
highly liquid investments). The Company did not have any cash equivalents
at the balance sheet dates or during the period, November 7, 1997 (Date of
Inception) to December 31, 1998.
7. The Company has adopted FASB 109 and reports tax expense and deferrals
as incurred for each period an income statement is issued. There was zero
income tax expense for the year ended 1999.
NOTE 3 - RELATED PARTY TRANSACTION
The Company neither owns or leases any real or personal property. The officers
and directors of the Company are involved in other business activities and may,
in the future, become involved in other business opportunities. If a specific
business opportunity becomes available, such persons may face a conflict in
selecting between the Company and their other business interests. The Company
has not formulated a policy for the resolution of such conflicts.
F-6
<PAGE>
Elite Fitness Systems, Inc
NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional shares
of common stock.
NOTE 5 - SUBSEQUENT EVENTS
The company was purchased in 1999 by Nutek, Inc. The purchase was a stock for
stock transfer.
F-7
<PAGE>
Nutek, Inc.
CONSOLIDATED PRO FORMA
FINANCIAL STATEMENTS
for the period ending
December 31, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
INDEPENDENT AUDITORS' REPORT............F-1
BALANCE SHEET.......................... F-2-3
STATEMENT OF OPERATIONS............ F-4
NOTES TO FINANCIAL STATEMENTS......... F-5
</TABLE>
<PAGE>
Nutek, Inc.
15722 Chemical Lane
Huntington beach, California 92649
The following financial statements set forth summary pro forma financial date of
the Company. The Company has prepared pro forma balance sheets and statements
of operations for the periods ending December 31, 1999. The pro forma financial
statements are based on historical financial statements of Nutek, Inc., Elite
Fitness, Inc. and Kristy and Co, Inc. adjusted to give effect to the
combination resulting from the asset purchase agreement of Elite Fitness, Inc.
in April of 1999 and Kristy and Co., Inc. in March of 2000. The pro forma
balance sheet has been prepared based on the assumption that the transactions
occurred on January 1, 1999. The pro forma statements of operation are based
on the assumption that the transaction occurred on January 1, 1998.
F-1
<PAGE>
Nutek, Inc.
CONSOLIDATED PRO FORMA
BALANCE SHEET
AS AT
DECEMBER 31, 1999
<TABLE>
<CAPTION>
BALANCE SHEET - ASSETS
Pro Forma Pro Forma Pro Forma Combined
Nutek, Inc.& Kristi & Co Adjustments Company
Elite Fitness, Inc.
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash 81,404 0 81,404
Accounts Receivable
(Net of Reserves) 75,706 0 75,706
Inventory 40,463 0 40,463
- -------------------------------------------------------------------------
Total Current Assets 197,573 0 0 197,573
PLANT AND EQUIPMENT
Plant and Equipment
(less Depreciation) 1,368,035 0 1,368,035
------------------------------------------------------------------
Total Plant and
Equipment 1,368,035 0 0 1,368,035
OTHER ASSETS
Patent Rights Acquired
(net of amortization) 1,259,692 0 -167,959 1,091,733
Long Term Investments 234,000 0 234,000
Rent Deposit 3,310 0 3,310
- -------------------------------------------------------------------------
Total Other Assets 1,497,002 0 -167,959 1,329,043
TOTAL ASSETS 3,062,610 0 -167,959 2,894,651
====================================================
</TABLE>
See accompanying notes to financial statements
F-2
<PAGE>
Nutek, Inc.
CONSOLIDATED PRO FORMA
BALANCE SHEET
AS AT
December 31, 1999
<TABLE>
<CAPTION>
BALANCE SHEET - LIABILITIES & EQUITY
Pro Forma Pro Forma Pro Forma Combined
Nutek, Inc.& Kristi & Co Adjustments Company
Elite Fitness, Inc.
<S> <C> <C> <C> <C>
LIABILITIES & EQUITY
Current Liabilities 494,903 494,903
Long Term Liabilities
Long Term Liabilities 460,424 460,424
Patent Rights
Acquired Liability 770,000 770,000
--------------------------------------------------------------------
Total Long Term
Liabilities 1,230,424 0 0 1,230,424
EQUITY
Capital Stock 36,328 0 0 36,328
Additional Paid
in Capital 6,149,638 0 6,149,638
Preferred Stock 794 794
Royalty Investors 55,000 55,000
Treasury Stock -45,448 -45,448
Donated Capital 125 125
Common Stock Subscribed -100,000 -100,000
Retained Earnings
or (Deficit) -4,759,029 -125 -167,959 -4,927,113
- -------------------------------------------------------------------------
Total Stockholders'
Equity 1,337,283 0 -167,959 116,9324
TOTAL LIABILITIES &
OWNER'S EQUITY 3,062,610 0 -167,959 2,894,651
==================================================
</TABLE>
See accompanying notes to financial statements
F-3
<PAGE>
Nutek, Inc.
CONSOLIDATED PRO FORMA
STATEMENT OF OPERATIONS
For Year Ended December 31, 1999
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Historical Historical
Nutek & Kristi & Co Pro Forma Combined
Elite Fitness Adjustment Company
REVENUE
<S> <C> <C> <C> <C>
Net Sales 238,039 0 0 238,039
COSTS AND EXPENSES
Cost of Sales 30,267 0 30,267
Selling, General and
Administrative 306,498 0 306,498
Depreciation Expense 135,706 0 135,706
Interest Expense 2,667 0 2,667
Amortization of
Intangible Assets 62,367 0 167,959 230,326
- ----------------------------------------------------------------------------
Total Costs and Expenses 537,505 0 167,959 230,326
- ----------------------------------------------------------------------------
Net Income or (Loss) before
Income Taxes -299,466 0 -167,959 -467,425
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
Nutek, Inc.
NOTES TO CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
NOTE 1 - PRO FORMA FINANCIAL STATEMENTS
The following financial statements set forth summary pro forma financial date of
the Company. The Company has prepared pro forma balance sheets and statements
of operations for the periods ending December 31, 1999. The pro forma financial
statements are based on historical financial statements of Nutek, Inc., Elite
Fitness, Inc. and Kristy and Co., Inc. adjusted to give effect to the
combination resulting from the asset purchase agreement of April of 1999 and
March of 2000, under the following assumptions. The pro forma balance sheet
has been prepared based on the assumption that the transactions occurred on
January 1, 1999. The pro forma statements of operation are based on the
assumption that the transaction occurred on January 1, 1999. The following
adjustments were made to arrive at the combined company.
A. Amortization of Patent Rights - $167,959
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Part III
Item 1. Exhibit Index
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(2) a) Plan of Acquisition, Reorganization, Arrangement, Liquidation, or
Succession.
2.1 Plan and Articles of Merger, filed 8/23/91*
2.2 Plan of Reorganization and Agreement, dated 9/20/97*
(3) Articles of Incorporation & By-Laws
3.1 Articles of Incorporation of the Company Filed August 23, 1991*
3.2 Articles of Amendment filed on April 10, 1992*
3.3 Certificate of Amendment of Articles of Incorporation filed on
3/3/95*
3.4 By-Laws of the Company adopted August 24, 1991*
(4) Instruments Defining the Rights of Security Holders
4.1 Those included in exhibit 3, and sample of Stock Certificate*
4.2 Preferred Stock*
(10) Material Contracts
10.1 Agreement for Internet Sales and Marketing, dated 9/2/99*
(Note: This Agreement (10.1) has subsequently been cancelled.)
10.2 Agreement for Promotion and Revenue Sharing Plan, dated 9/2/99*
(Note: This Agreement (10.2) has subsequently been cancelled.)
10.3 Purchase Agreement - Elite Fitness, dated 10/4/99*
10.4 Purchase Agreement - Patent #5833350, dated 9/15/99*
10.5 Purchase Agreement - Clock Mold, dated 4/30/99*
10.6 Plan of Purchase and Agreement, dated 11/30/97*
10.7 Transitional Employer Agreement*
10.8 Lease, dated October 15, 1999*
10.9 Letter of Intent - Mineral Acres, dated 11/1/99*
10.10 Compensation Plan*
10.11 Key Employees Incentive Stock Option Plan*
10.12 Purchase Agreement - Kristi & Company, dated 1/6/00.
(23) Consent of Experts and Counsel
23.1 Statement from James E. Slayton, CPA*
(27) Financial Data Schedule
27.1 Financial Data Schedule*
* Previously filed as an exhibit to the Company's Form 10-SB, filed January
24, 2000.
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SIGNATURES
Pursuant to the requirements of Section 12 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.
Nutek, Inc.
/s/ Murray N. Conradie
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Murray N. Conradie,
President and Chairman
Chief Financial Officer
Date: May 18, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Nutek, Inc.
/s/ Pamela Horick
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Pamela Horick, SECRETARY
Date: May 18, 2000
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EXHIBIT 10.12 - PURCHASE AGREEMENT - KRISTI AND COMPANY, INC.
Purchase Agreement
Kristi and Co., Inc.
Nutek Inc.
23792 Rockfield Blvd. Suite 140
Lake Forest CA. 92630
Tel: (949) 587-9400 Fax: (949) 587-9534
Table of Contents
Table of Contents 2
Confidentiality Statement 3
Existing Corporation 3
Kristi and Co Purchase Agreement with Nutek Inc. 3
RECITALS 3
1. PAYMENT. 4
2. CONSIDERATIONS. 4
3. CONFIDENTIALITY. 4
4. WARRANTIES. 4
5. INTEGRATION. 5
6. CONSTRUCTION AND JURISDICTION. 5
7. ATTORNEY'S FEES. 5
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Confidentiality Statement
The information embodied in this Purchase Agreement is strictly confidential
and is supplied on the understanding that it will be held confidentially and
not disclosed to third parties without the prior written consent of Nutek,
Inc.
Corporation
Kristi and Co
The Corporation Kristi and Co, Inc. is a Nevada Corporation doing business in
California.
Purchase Agreement with Nutek Inc.
Agreement entered into this 6 day of January 2000 by and between Kristi and Co
Inc. "SELLER" and Kristi Hough (President) hereinafter, referred to as "SELLER"
and Nutek Inc. of 23792 Rockfield Blvd. Suite 140 Lake Forest CA 92630
hereinafter "PURCHASER".
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RECITALS
WHEREAS, PURCHASER is engaged in the business of acquiring, controlling and
managing various companies and corporations, Kristi Hough has created and/or
holds rights to certain clothing designs and design groups..
WHEREAS, PURCHASER and SELLER have agreed to enter into this Agreement whereby
PURCHASER will acquire SELLER by purchasing all issued and/or outstanding shares
of SELLER.
WHEREAS, Kristi Hough has created a woman's resort wear line of clothing,
hereinafter referred to as the "product", and
WHEREAS, PURCHASER seeks to acquire this corporation, Kristi and Co, Inc. which
holds all exclusive rights, title and interest to the product and all future
related products produced by Kristi Hough; and
WHEREAS, PURCHASER has an interest and is in the business of developing,
marketing, and the management, promotion, and financing of companies and
products, and has the management knowledge and expertise to promote and market
the product; and
WHEREAS, PURCHASER is willing provide SELLER, the services of financing,
management, promotion and marketing of Product to date and in the future, in
television and all other mediums pursuant to the following terms and
conditions: Upon execution of this Agreement PURCHASER will acquire SELLER as
a wholly owned subsidiary of Nutek.
NOW, THEREFORE, in consideration of these premises and those other terms and
conditions set forth hereinafter, the parties agree as follows:
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1. PAYMENT.
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1. Kristi Hough, President of SELLER shall receive Fifty Thousand ($50,000.00)
dollars in cash payable at no interest over 12 months
2. Kristi Hough is to receive a "Royalty Payment" of Twenty (2%) percent of
Net Gross revenues on the sales of existing products to existing vendors.
3. Kristi Hough is to receive a "Royalty Payment" of Fifteen (3%) percent of
Net Gross revenues on the sales of products to new vendors.
4. Royalty Payments to be made monthly no later then the 10th day of each
month following the previous months sales.
5. Kristi Hough is to receive Two Hundred and Fifty Thousand (250,000) shares
of Nutek Restricted stock under Rule 144 which is Restricted from sale for a
period of 0ne (1) year from day of issue. This stock is to be issued within
10 days of signing this Agreement, and will be valued at the closing stock
price of 12/31/99 of $0.20.
2. CONSIDERATIONS.
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1. Net Gross Revenues as referred to in this agreement is sales revenues
less returns, and excludes shipping costs.
2. Kristi Hough is to submit all contracts submitted to or issued from SELLER
to PURCHASER for approval.
3. PURCHASER to receive from SELLER Fifty (50%) of all net monthly proceeds
after deduction of salary and royalty payments.
4. PURCHASER is to receive all operating books of account of SELLER and to
be responsible for the day to day administration of Kristi and Co Inc, which
is to include all invoicing, accounts receivable processing and general day
to day management of books of record.
3. CONFIDENTIALITY.
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SELLER and Kristi Hough agrees to hold all information that SELLER and Kristi
Hough obtains as confidential for the purposes of this agreement. SELLER and
Kristi Hough agree not to use or disclose confidential information to any
person or entity, except as necessary under this Agreement. Nothing herein
above written shall prevent the parties from making any disclosure which is
required by law, government regulation, or rule, or which disclosure is ordered
or otherwise required by a court of competent jurisdiction through its subpoena
power or otherwise or by a state or federal regulatory or other governmental
agency.
4. WARRANTIES.
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SELLER hereby represents and warrants to PURCHASER the following:
SELLER is a corporation duly incorporated, validly existing and in good
standing under the laws of the State Nevada.
The execution, delivery and performance of this Agreement is within SELLER's
powers and does not contravene any law or contractual restriction binding on or
affecting SELLER.
This Agreement is a legal, valid and binding obligation of SELLER enforceable
against SELLER in accordance with its respective terms.
SELLER has full right, title and ownership of the Product.
PURCHASER hereby represents and warrants to SELLER the following:
PURCHASER is a corporation duly incorporated, validly existing and in good
standing under the laws of the State Nevada.
The execution, delivery and performance by PURCHASER of this Agreement is within
PURCHASER's corporate powers, has been duly authorized by all necessary
corporate or stockholder action on its part, does not contravene restriction
binding on or affecting PURCHASER or any of its properties, and do not result
in or require the creation of any lien, security interest or other charge or
encumbrance upon or with respect to any of its properties.
This Agreement is a legal, valid and binding obligation of PURCHASER enforceable
against PURCHASER in accordance with its respective terms.
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5. INTEGRATION.
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This Agreement together with all exhibits amendments and supplements represents
the complete and entire Agreement between the parties hereto. This Agreement
either embodies or supersedes all prior, contemporaneous or subsequent oral
agreements, representations, understandings, and all written notations,
memoranda or correspondence of any party hereto, their agents, employees or
other related persons, related to the work contemplated in this Agreement.
6. CONSTRUCTION AND JURISDICTION.
- ---------------------------------
This Agreement shall be construed and enforced pursuant to the laws of the State
of California, USA. By affixing their signatures to this agreement, the parties
hereby submit themselves to the courts of the State of California, for the
judicial resolution of any disputes arising under the terms, interpretation or
performance of this agreement. If any one or more paragraphs in this Agreement
is found to be unenforceable or invalid, the parties agreement on all other
paragraphs shall remain valid. Non enforcement of any section of this Agreement
by either party does not constitute a waiver or consent and both parties
reserve the right to enforce this Agreement at their discretion.
7. ATTORNEY'S FEES.
- -------------------
In the event either party is required to retain counsel to enforce the
provisions of this Agreement or to bring legal action to enforce the provisions
of this Agreement or remedy any breaches of this Agreement, the prevailing
party in such action shall be entitled to its costs and attorney's fees
incurred in such action or procedure, whether or not an action is ultimately
filed in a court of proper agreed jurisdiction.
WHEREFORE, the parties have affixed their signatures to this Agreement the date
first above stated. Furthermore, by signing this Agreement all signature
parties acknowledge they fully understand and agree to all the terms and
conditions of this Agreement.
PURCHASER SELLER
By : /s/ Murray N. Conradie By : /s/ Kristi Hough
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Murray N. Conradie Kristi Hough
President/CEO President
Nutek Inc. Kristi and Co, Inc
Date: 01/06/00 Date: 01/06/00
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