<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............. to ..............
Commission File Number 000-27223
CETEK TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 84-0925366
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19 Commerce Street
Poughkeepsie, NY 12603
(Address and telephone number, including area code, of
registrant's principal executive office)
(914) 452-3510
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At November 7, 2000, there were 47,538,842 shares of Common Stock, no
par value, outstanding.
<PAGE>
PURCHASE POINT MEDIA CORPORATION
INDEX
Page
----
Part I. Financial Information 1
Item 1. Financial Statements
Balance Sheets as of September 30,
2000 (unaudited) and December 31, 1999 2
Statements of Operations and Comprehensive
(Loss) for the Nine and Three Months
Ended September 30, 2000 and 1999 (unaudited) 3 - 4
Statements of Cash Flows for the Nine
Months Ended September 30, 2000 and
1999 (unaudited) 5 - 6
Notes to Financial Statements (unaudited) 7 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
or Plan of Operations 9 - 12
Part II. Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Report on Form 8-K 13
Signatures 14
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
--------------------
Certain information and footnote disclosures required under
generally accepted accounting principles have been condensed or omitted from the
following financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. It is suggested that the following
consolidated financial statements be read in conjunction with the year-end
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1999.
The results of operations for the nine months ended
September 30, 2000, are not necessarily indicative of the results to be expected
for the entire fiscal year or for any other period.
1
<PAGE>
CETEK TECHNOLOGIES, INC. AND SUBSIDIARY
BALANCE SHEETS
ASSETS
September 30, December 31,
2000 1999
----------- -----------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 272,498 $ 377,673
Marketable securities 54,694 --
Certificate of deposit 288,883 --
Accounts receivable 47,032 30,693
Inventory 32,365 32,296
Prepaid expenses 11,586 102,236
----------- -----------
Total Current Assets 707,058 542,898
Property and equipment - net 648,959 474,200
Other assets 2,658 4,575
----------- -----------
TOTAL ASSETS $ 1,358,675 $ 1,021,673
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Short-term debt $ 73,000 $ 138,000
Current portion of long-term debt 72,211 69,284
Current maturities of capitalized
lease obligations 146,436 145,804
Accounts payable 64,854 46,975
Accrued expenses 246,425 222,696
----------- -----------
Total Current Liabilities 602,926 622,759
Long term capital lease obligations 29,550 36,680
Long-term debt 782,481 59,066
Note payable to officer 247,401 237,801
----------- -----------
Total Liabilities 1,662,358 956,306
----------- -----------
Stockholders' Deficiency:
Preferred stock; par value $.001
per share - authorized 1,000,000
shares; none issued -- --
Common stock, par value $.001 per
share - authorized, 50,000,000
shares; outstanding 47,538,842
and 46,977,516 shares 47,539 46,978
Paid in capital 2,364,217 2,021,515
Cumulative other comprehensive income 4,718 --
(Deficit) (2,720,157) (2,003,126)
----------- -----------
Total Stockholders' Equity
(Deficiency) (303,683) 65,367
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $ 1,358,675 $ 1,021,673
=========== ===========
-2-
<PAGE>
CETEK TECHNOLOGIES, INC AND SUBSIDIARY
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales-net $ 204,894 $ 265,977 $ 25,236 $ 102,037
------------ ------------ ------------ ------------
Costs and Expenses:
Cost of sales 315,157 403,501 93,262 219,913
Selling, general and
administrative expenses 138,080 143,736 58,611 56,561
Research and development 422,319 37,698 159,193 7,790
Interest expense 106,679 367,325 25,916 216,873
Dividend and interest income 15,310 14,186 7,057 7,179
Realized gain on investment 45,000 -- 45,000 --
------------ ------------ ------------ ------------
921,925 938,074 284,925 493,958
------------ ------------ ------------ ------------
Net loss $ (717,031) $ (672,097) $ (259,689) $ (391,921)
============ ============ ============ ============
Loss per common share - basic
and diluted $ .02 $ (.02) $ (.01) $ (.01)
============ ============ ============ ============
Weighted average number of
common shares outstanding - basic
and diluted 47,486,554 37,198,783 47,486,554 37,198,783
============ ============ ============ ============
</TABLE>
(Continued)
See notes to consolidated financial statements.
-3-
<PAGE>
CETEK TECHNOLOGIES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited) (continued)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
September 30, September 30,
---------------------- ----------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net loss $(717,031) $(672,097) $(259,689) $(391,921)
Other comprehensive income (expense), net of income taxes:
Unrealized gain (loss) on
marketable securities 4,718 -- (12,050) --
--------- --------- --------- ---------
Comprehensive loss $ 712,313 $(672,097) $(271,739) $(391,921)
========= ========= ========= =========
</TABLE>
-4-
<PAGE>
CETEK TECHNOLOGIES, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
Nine Months Ended
September 30,
----------------------------
2000 1999
----------- -----------
(Unaudited)
Cash flows from operating activities:
Net (loss) $ (717,031) $ (672,097)
Adjustments to reconcile
net (loss) to net cash
provided by operating
activities:
Depreciation 101,614 73,953
Non cash expenses 75,000 75,000
Non cash interest expense 60,226 279,000
Unrealized gain on marketable
securities 4,756 --
Changes in operating assets 33,767 (17,838)
----------- -----------
Net Cash (Used in )
Operating Activities (441,668) (261,982)
----------- -----------
Cash flows from investing activities:
Purchase of equipment (276,373) (256,840)
Purchase of marketable securities
and certificates of deposit (343,577) (463,905)
----------- -----------
Net Cash (Used in) Investing
Activities (619,950) (720,745)
----------- -----------
Cash flows from financing activities:
Proceeds from sale of
common stock -- 451,759
Proceeds from sale of convertible
debentures -- 600,000
Proceeds from loan 750,000
Contribution from officer 250,000 5,000
Repayment of borrowings (53,157) (40,950)
Proceeds from officer 9,600 --
----------- -----------
Net Cash Provided by
Financing Activities 956,443 1,015,809
----------- -----------
-5-
<PAGE>
CETEK TECHNOLOGIES, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS (continued)
Nine Months Ended
September 30,
--------------------------
2000 1999
--------- ---------
(Unaudited)
Net increase (decrease)
in Cash (105,175) 33,082
Cash - beginning of period 377,673 17,350
--------- ---------
Cash - end of period $ 272,498 $ 50,432
========= =========
Changes in operating assets
and liabilities net of effect from
purchase of C.W., inc. consist of:
(Increase) decrease in accounts
receivable (16,339) 22,858
(Increase) decrease in inventory (69) (20,616)
(Increase) decrease in prepaid
expenses 6,650 (14,175)
Decrease in other assets 1,917 1,916
Increase (decrease) in accounts
payable 17,879 6,784
Increase in accrued expenses 23,729 (14,605)
--------- ---------
$ 33,767 $ (17,838)
========= =========
Supplementary Information:
Cash paid during the year for:
Interest $ 13,420 $ 15,890
========= =========
Income taxes $ 2,578 $ 1,537
========= =========
Non-cash financing activities:
Conversion of debt to common
stock $ 42,000 $ 587,000
========= =========
Fair value of rent contributed
by officer $ 37,500 $ 37,500
========= =========
Forgiveness of officers salary $ 37,500 $ 37,500
========= =========
Unrealized gain on marketable
securities $ 4,718 $ 20,622
========= =========
Capitalized lease obligation $ -- $ 50,000
========= =========
-6-
<PAGE>
CETEK TECHNOLOGIES, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of September 30, 2000, and the
consolidated statements of operations and comprehensive (loss) and cash flows
for the periods presented herein have been prepared by the Company and are
unaudited. In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and comprehensive income and cash flows for all
periods presented have been made. The information for December 31, 1999 was
derived from audited financial statements.
2. Nature of Business and Liquidity
The Company's financial statements for the nine months ended
September 30, 2000 have been prepared on a going concern basis which
contemplates the realization of assets and the settlement of liabilities and
commitments in the normal course of business.
The Company was in default at September 30, 2000 on its loan agreements
and its capitalization lease obligations. Additionally, the Company has incurred
net losses of $717,000 for the nine months ended September 30, 2000 and $854,000
for the year ended December 31, 1999. The Company has a stockholders' deficiency
of $303,700 as of September 30, 2000. Management recognizes that the Company's
continued existence is dependent upon its ability to increase its sales
sufficiently to cover its costs and expenses. In April 2000 the Company borrowed
$750,000 from third parties and the Company's principal shareholder advanced the
Company $250,000. Additionally, in an effort to increase its sales and
profitability, management is aggressively seeking new business. Management's
plans include possible strategic alliances and mergers or acquisitions with
other companies that may be compatible with the Company.
However, there is no assurance that mergers or acquisitions will take
place or the increase in sales will materialize. These uncertainties raise
substantial doubt about the ability of the Company to continue as a going
concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classifications of liabilities that might be necessary should the Company be
unable to continue as a going concern.
3. Loss Per Common Share
Basic loss per common share are computed by dividing net loss by the
weighted average number of common shares outstanding during the period. Diluted
loss per common share are computed using the weighted average number of common
shares and potential common shares outstanding during the period. Potential
common shares used in computing diluted earnings per share relate to stock
options, warrants and convertible debt, which, if exercised, would have a
dilutive effect on earnings per share. During the nine and three months ended
September 30, 2000 and 1999, potential common shares were not used in the
computation of diluted loss per common share, as their effect would be
antidilutive.
-7-
<PAGE>
4. Sale of Common Stock and Common Stock Warrants
In March 1999, the Company completed a private placement of its
securities by issuing 2% Series A Senior Subordinated Convertible Debentures in
the amount of $600,000. As of March 31, 2000 all the debentures were converted
to common stock. The Company issued 16,678,745 shares of common stock with a
conversion price for the debentures at 75% of the closing bid price upon
conversion. The Company recorded $200,000 of additional interest to reflect the
conversion of the debentures below fair market value of the Company's common
stock at the date of the conversion of which $14,000 and $116,000 is included in
the statement of operations for the three months ended March 31, 2000 and 1999,
respectively.
5. Long-Term Debt
In April 2000, the Company borrowed $750,000 from various individuals,
with interest at 3% per year, due July 2001. Interest expense has been recorded
charged at 12% per year with the imputed interest recorded as additional paid in
capital.
6. Related Party Transactions
In April 2000 the Company's chief executive officer contributed
$250,000. The Company recorded the advance as a contribution to paid-in-capital.
7. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB)issued
Statement of Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities"(SFAS 133). This standard was amended by
Statement of Financial Accounting Standards No. 137 "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133" and changed the effective date for SFAS 133 to all fiscal
quarters of fiscal years beginning after June 15, 2000.In June 2000, the FASB
issued SFAS 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities, ("SFAS 133"). SFAS 133 and 138 requires that all derivative
instruments be recorded on the balance sheet at their respective fair values.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on the designation of the
hedge transaction. For fair value hedge transactions in which the Company is
hedging changes in the fair value of assets or liabilities, changes in the fair
value of the derivative instrument will generally be offset by changes in the
hedged item's fair value. For cash flow hedge transactions in which the Company
is hedging the variability of cash flows related to a variable rate asset,
liability or forecasted transaction, changes in the fair value of the derivative
instrument will be reported in other comprehensive income. The gains and losses
on the derivative instrument that are reported in other comprehensive income
will be recognized in earnings in the periods in which earnings are impacted by
the variability of the cash flows of the hedged item. The Company will adopt
SFAS 133 and 138 in the first quarter of 2001 and does not expect such adoption
to have a material effect on the Company's consolidated results of operations,
financial position or cash flows.
-8-
<PAGE>
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company adopted the provisions of SAB 101 during the fourth quarter ending
December 31, 2000 and it is not expected to have a material impact on the
Company's consolidated results of operations, financial position or cash flows.
Item 2. Management's Discussion and Analysis of Plans of Operations
The Company's quarterly and annual operating results are affected by a
wide variety of factors that could materially and adversely affect revenues and
profitability, (a) the risk that it may be unable to respond adequately to
rapidly changing technological developments in its industry, (b) the highly
competitive nature of the Company's industry and the impact that competitors'
new products and pricing may have upon the Company, (c) the likelihood that
revenues may vary significantly from one accounting period to another accounting
period due to a variety of factors, including customers' buying decisions, the
Company's product mix and general market and economic conditions, (d) the
Company's reliance on certain substantial customers, and (e) risks associated
with the Company's ability to manufacture and deliver products in a manner that
is responsive to its customers' needs. As a result of these and other factors,
the Company may experience material fluctuations in future operating results on
a quarterly or annual basis, which could materially and adversely affect its
business, financial condition, operating results, and stock prices. Furthermore,
this document and other documents filed by the Company with the Securities and
Exchange Commission (the "SEC") contain certain forward-looking statements under
the Private Securities Litigation Reform Act of 1995 with respect to the
business of the Company. These forward-looking statements are subject to certain
risks and uncertainties, including those mentioned above, and those detailed in
Item 1 of the Company's Annual Report on Form 10-KSB for the year ended December
31, 1999, which could cause actual results to differ materially from these
forward-looking statements. The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements which
may be necessary to reflect events or circumstances after the date hereof or to
reflect the occurrence of unanticipated events. An investment in the Company
involves various risks, including those mentioned above and those which are
detailed from time to time in the Company's SEC filings.
-9-
<PAGE>
The following discussion and analysis should be read in conjunction
with the Financial Statements and related footnotes.
Plan of Operations
The Company has incurred losses since inception. The Company has
completed the development of its Cetek Process for commercial purposes. During
2000, the Company will seek to change the emphasis of its business operations
from contract manufacturing work to its ceramic operations. The Company is
satisfied that it is ready to market products utilizing the Cetek Process. Its
main focus during the year 2000 will be to explore the marketability of product
manufactured through the Cetek Process. The Company has held discussions with
several potential customers and supplied these potential customers with samples.
If it obtains sufficient customer interest it will seek financing of its ceramic
operation necessary to purchase any needed equipment and for operating expenses.
The Company will also hire additional employees for production and marketing of
its product. The Company also intends to pursue contract manufacturing operation
but will allocate more of its resources to its ceramic operations if the ceramic
operations increase.
Nine Months ended September 30, 2000 vs.
Nine Months ended September 30, 1999
----------------------------------------
Net Sales
Net sales decreased from $265,977 during the first nine months of 1999
to $204,894 during the first nine months of 2000. The Company considers the
decrease to be immaterial.
Cost of Sales
Cost of sales decreased from $403,501 during the first nine months of
1999 to $315,157 during the first nine months of 2000. The decrease in cost of
sales is due primarily to an decrease in the material content of goods being
manufactured.
General and Administrative Expenses
General and administrative expenses decreased from $143,736 during the
first nine months of 1999 to $138,080 during the first nine months of 2000. The
Company considers the decrease to be immaterial.
Interest Expense
Interest expense decreased from $367,325 for the nine months ended
September 30, 1999 to $106,679 for the nine months ended September 30, 2000. The
Company attributes the decrease primarily to the valuation of common stock
warrants in connection with the sale of the Company's common stock during the
nine months ended September 30, 1999.
Research and Development
Research and Development increased from $37,698 for the nine months
ended September 30, 1999 to $422,319 for the nine months ended September 30,
2000. The Company attributes the increase primarily to an increase in research
for a new product line.
-10-
<PAGE>
Three Months ended September 30, 2000 vs.
Three Months ended September 30, 1999
-----------------------------------------
Net Sales
Net sales decreased from $102,037 during the three months ended
September 30, 1999 to $25,236 during the three months ended September 30, 2000.
The Company considers the decrease to be immaterial.
Cost of Sales
Cost of sales decreased from $219,913 during the three months ended
September 30, 1999 to $93,262 during the three months ended September 30, 2000.
The Company attributes this decrease primarily to the reasons set forth in the
nine month analysis.
General and Administrative Expenses
General and administrative expenses increased from $56,561 during the
three months ended September 30, 1999 to $58,611 during the three months ended
September 30, 2000. The Company considers the increase to be immaterial.
Interest Expense
Interest expense decreased from $216,873 for the three months ended
September 30, 1999 to $25,916 for the three months ended September 30, 2000. The
Company attributes this decrease primarily to the reasons set forth in the nine
month analysis.
Research and Development
Research and Development increased from $7,790 for the three months
ended September 30, 1999 to $159,193 for the three months ended September 30,
2000. The Company attributes the increase primarily to an increase in research
for a new product line.
Liquidity and Capital Resources
As of September 30, 2000 the Company currently has sufficient working
capital to sustain its current levels of operations but not sufficient working
capital to commence operation in the ceramic industry. During 2000 and 1999 the
Company has been unable to pay its indebtedness on a timely basis. It has
defaulted on several obligations including a loan from Dutchess County Economic
Development Corp. and amounts due on equipment leases. In addition it has been
unable to pay its lease payments for its facility or pay its chief executive
officer salary. These payments have been waived and have been recorded as a
capital contribution.
In March 1999, the Company completed a private placement of its
securities by issuing 2% Series A Senior Subordinated Convertible Debentures.
Through such placement, the Company raised $600,000. During 1999, the Company
also obtained additional funds of $400,000 from the sale of equity.
In April 2000 the Company borrowed $750,000 from third parties and the
Company's principal shareholder advanced the Company $250,000.
The Company's present liquidity problem stems from the funding
requirements necessary to develop the Cetek Process. The Company utilized the
funds to produce samples of its product which it either had tested by
independent laboratories or provided to potential customers. It also acquired
and converted funds to commercial operations in order, among other things to
purchase additional equipment estimated to cost approximately $450,000.
-11-
<PAGE>
Prior to October 2000, the Company has not introduced its process or
has it manufactured product on a commercial basis. It has produced samples of
its product, had such sample tested by independent laboratories at the Company's
expenses has provided samples to potential customers and has acquired and
converted equipment for use for its process. The Company has estimated it needs
additional funds to commence commercial operations in order, among other things,
to purchase additional equipment estimated to cost approximately $450,000. It
has received small orders for the commercial orders but these orders are for
demonstration of the products.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB)issued
Statement of Financial Accounting Standards No. 133 "Accounting for Derivative
Instruments and Hedging Activities"(SFAS 133). This standard was amended by
Statement of Financial Accounting Standards No. 137 "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133" and changed the effective date for SFAS 133 to all fiscal
quarters of fiscal years beginning after June 15, 2000.In June 2000, the FASB
issued SFAS 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities, ("SFAS 133"). SFAS 133 and 138 requires that all derivative
instruments be recorded on the balance sheet at their respective fair values.
Changes in the fair value of derivatives are recorded each period in current
earnings or other comprehensive income, depending on the designation of the
hedge transaction. For fair value hedge transactions in which the Company is
hedging changes in the fair value of assets or liabilities, changes in the fair
value of the derivative instrument will generally be offset by changes in the
hedged item's fair value. For cash flow hedge transactions in which the Company
is hedging the variability of cash flows related to a variable rate asset,
liability or forecasted transaction, changes in the fair value of the derivative
instrument will be reported in other comprehensive income. The gains and losses
on the derivative instrument that are reported in other comprehensive income
will be recognized in earnings in the periods in which earnings are impacted by
the variability of the cash flows of the hedged item. The Company will adopt
SFAS 133 and 138 in the first quarter of 2001 and does not expect such adoption
to have a material effect on the Company's consolidated results of operations,
financial position or cash flows.
In December 1999, the Securities and Exchange Commission (SEC) issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company adopted the provisions of SAB 101 during the fourth quarter ending
December 31, 2000 and it is not expected to have a material impact on the
Company's consolidated results of operations, financial position or cash flows.
-12-
<PAGE>
PART II. Other Information
Item 1. Legal Proceedings
-----------------
Management of the Company is not aware of any legal
proceedings, threatened legal proceedings to which the Company
is a party or to which the property of the Company is subject
as a defendant.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
27.1 Financial Data Schedule
(b) There were no Current Reports on Form 8-K filed by
the registrant during the quarter ended September 30,
2000.
-13-
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated: November 14, 2000
CETEK TECHNOLOGIES, INC
By: /s/ Fayiz Hilal
-------------------------------
Fayiz Hilal
President, Financial Officer
and Chief Executive Officer
-14-
