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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 June 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 June 30, 2000, there were 47,538,842 shares of Common Stock, no par
value, outstanding.
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PURCHASE POINT MEDIA CORPORATION
INDEX
Page
Part I. Financial Information 1
Item 1. Financial Statements
Balance Sheets as of June 30, 2000
(unaudited) and December 31, 1999 2
Statements of Operations and for the
Three and Six Months Ended June 30, 2000
and 1999 (unaudited) 3
Statements of Cash Flows for the and Six
Months Ended June 30, 2000 and 1999 (unaudited) 4 - 5
Notes to Financial Statements (unaudited) 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
or Plan of Operations 8 - 10
Part II. Other Information
Item 1. Legal Proceedings 11
Item 6. Exhibits and Report on Form 8-K 11
Signatures 12
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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 Report on Form
10-SB dated September 2, 1999.
The results of operations for the six months ended June 30,
2000, are not necessarily indicative of the results to be expected for the
entire fiscal year or for any other period.
1
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CETEK TECHNOLOGIES, INC. AND SUBSIDIARY
BALANCE SHEETS
ASSETS
June 30, December 31,
2000 1999
------------- --------
(Unaudited)
Current Assets:
Cash and cash equivalents $ 283,082 $ 377,673
Marketable securities 266,768 -
Certificate of deposit 383,670 -
Accounts receivable 53,813 30,693
Inventory 35,582 32,296
Prepaid expenses 27,642 102,236
---------- ---------
Total Current Assets 1,050,557 542,898
Property and equipment - net 488,304 474,200
Other assets 3,297 4,575
---------- ---------
TOTAL ASSETS $ 1,542,158 $1,021,673
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Short-term debt $ 75,000 $ 138,000
Current portion of long-term debt 74,428 69,284
Current maturities of capitalized
lease obligations 171,923 145,804
Accounts payable 42,466 46,975
Accrued expenses 231,574 222,696
---------- ----------
Total Current Liabilities 595,391 622,759
Long term capital lease obligations 6,259 36,680
Long-term debt 789,334 59,066
Note payable to officer 237,801 237,801
---------- ----------
Total Liabilities 1,628,785 956,306
---------- ----------
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 2,309,534 2,021,515
Cumulative other comprehensive income 16,768 --
(Deficit) (2,460,468) (2,003,126)
---------- ----------
Total Stockholders' Equity
(Deficiency) (86,627) 65,367
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY) $ 1,542,158 $ 1,021,673
========== ==========
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CETEK TECHNOLOGIES, INC AND SUBSIDIARY
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------ ------------------------
2000 1999 2000 1999
------ ------ ---- ----
<S> <C> <C> <C> <C>
Sales-net $ 179,658 $ 163,940 $ 108,379 $ 97,677
----------- ------------- ----------- ---------
Costs and Expenses:
Cost of sales 221,895 83,588 112,029 56,316
Selling, general and
administrative expenses 79,469 87,175 35,794 33,743
Research and development 263,126 29,908 189,171 28,386
Interest expense 80,763 150,452 42,330 14,610
Dividend and interest income 8,253 7,007 5,238 7,007
----------- ---------- ----------- -----------
637,000 444,116 374,086 126,048
----------- ---------- ----------- -----------
Net earnings (loss) $ (457,342) $ (280,176) $ (265,707) $ (28,371)
=========== ========== =========== ============
(Loss) per common share - basic
and diluted $ .01 $(.01) $(.01) $ --
==== ==== ==== ===========
Weighted average number of
common shares outstanding - basic
and diluted 47,486,554 28,020,192 47,486,554 28,020,192
========== ========== ========== ============
</TABLE>
(Continued)
See notes to consolidated financial statements.
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CETEK TECHNOLOGIES, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
Six Months Ended
June 30,
2000 1999
------ ------
(Unaudited)
Cash flows from operating activities:
Net (loss) $ (457,342) $ (280,176)
Adjustments to reconcile
net (loss) to net cash
provided by operating
activities:
Depreciation 65,688 45,438
Non cash rent expense 25,000 25,000
Non cash compensation 25,000 116,000
Non cash interest expense 30,580 --
Unrealized gain on marketable
securities 16,768 --
Changes in operating assets (30,165) (52,674)
--------- ---------
Net Cash (Used in )
Operating Activities (324,471) (146,412)
--------- ---------
Cash flows from investing activities:
Purchase of equipment (79,792) (120,732)
Purchase of marketable securities
and certificates of deposit (650,438) (507,007)
--------- ---------
Net Cash (Used in) Investing
Activities (730,230) (627,739)
--------- ---------
Cash flows from financing activities:
Proceeds from sale of
common stock -- 451,757
Proceeds from sale of convertible
debentures -- 600,000
Proceeds from loan 750,000 --
Contribution from officer 250,000 --
Repayment of borrowings (39,890) (28,828)
-------- ---------
Net Cash Provided by
Financing Activities 960,110 1,022,929
--------- ---------
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<PAGE>
CETEK TECHNOLOGIES, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS (continued)
Six Months Ended
June 30,
2000 1999
------ ------
(Unaudited)
Net increase (decrease)
in Cash (94,591) 248,778
Cash - beginning of period 377,673 17,350
-------- --------
Cash - end of period $ 283,082 $ 266,128
======== ========
Changes in operating assets
and liabilities net of effect from
purchase of C.W., inc. consist of:
(Increase) decrease in accounts
receivable (23,120) 31,012
(Increase) decrease in inventory (3,286) (20,616)
(Increase) decrease in prepaid
expenses (9,406) (44,564)
Decrease in other assets 1,278 1,277
Increase (decrease) in accounts
payable (4,509) 22,993
Increase in accrued expenses 8,878 (42,776)
-------- -------
$ (30,165) $ (52,674)
======== ========
Supplementary Information:
Cash paid during the year for:
Interest $ 4,347 $ 8,343
======== ========
Income taxes $ 680 $ 1,537
======== ========
Non-cash financing activities:
Conversion of debt to common
stock $ 42,000 $ 273,000
======== ========
Fair value of rent contributed
by officer $ 25,000 $ 25,000
======== ========
Issuance of warrants in
connection with loan financing $ -- $
======== ========
Forgiveness of officers salary $ 25,000 $ 25,000
======== ========
Unrealized gain (loss) on marketable
securities $ 16,768 $ (5,577)
======== ========
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CETEK TECHNOLOGIES, INC AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet as of June 30, 2000, and the
consolidated statements of operations and comprehensive income 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 six months ended June
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 June 30, 2000 on its loan agreements
and its capitalization lease obligations. Additionally, the Company has incurred
net losses of $457,400 for the six months ended June 30, 2000 and $854,000 for
the year ended December 31, 1999. The Company has a stockholders' deficiency of
$86,600 as of June 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. Earnings Per Share
Basic earnings per common share are computed using the weighted average
number of common shares outstanding during the period. Diluted earnings per
common share are computed using the weighted average number of common shares and
potential common shares outstanding during the period.
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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. 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. In April 2000 the Company's chief executive officer contributed
$250,000. The Company recorded the advance as a contribution to paid-in-
capital.
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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 Form 10-SB dated September 2, 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.
The following discussion and analysis should be read in conjunction
with the Financial Statements and related footnotes.
Plan of Operation
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.
-8-
<PAGE>
Six Months ended June 30, 2000 vs.
Six Months ended June 30, 1999
Net Sales
Net sales increased from $163,940 during the first six months of
1999 to $179,658 during the first six months of 2000. The Company considers the
increase to be immaterial.
Cost of Sales
Cost of sales increased from $183,588 during the first six months
of 1999 to $221,895 during the first six months of 2000. The increase in cost of
sales is due primarily to an increase in the material content of goods being
manufactured.
General and Administrative Expenses
General and administrative expenses decreased from $87,175 during
the first six months of 1999 to $79,469 during the first six months of 2000. The
Company considers the decrease to be immaterial.
Interest Expense
Interest expense decreased from $150,452 for the six months ended June
30, 1999 to $80,763 for the six months ended June 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 six months
ended June 30, 1999.
Research and Development
Research and Development increased from $29,908 for the six months
ended June 30, 1999 to $80,763 for the six months ended June 30, 2000. The
Company attributes the increase primarily to an increase in research for a new
product line.
Liquidity
The Company had a working capital of approximately $455,000 as of June
30, 2000 compared to a working capital of approximately $101,000 as of June 30,
1999. The increase is primarily attributable to increases in additional paid in
capital and notes payable.
Three Months ended June 30, 2000 vs.
Three Months ended June 30, 1999
Net Sales
Net sales increased from $97,677 during the three months ended June
30 1999 to $108,379 during the three months ended June 30, 2000. The Company
considers the increase to be immaterial.
Cost of Sales
Cost of sales increased from $56,316 during the three months ended
June 30, 1999 to $112,029 during the three months ended June 30, 2000. The
Company attributes this increase primarily to the reasons set forth in the six
month analysis.
General and Administrative Expenses
General and administrative expenses increased from $33,743 during
the three months ended June 30, 1999 to $35,794 during the three months ended
June 30, 2000. The Company considers the increase to be immaterial.
Interest Expense
Interest expense increased from $28,366 for the three months ended June
30, 1999 to $42,330 for the three months ended June 30, 2000.
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<PAGE>
Research and Development
Research and Development increased from $14,610 for the three months
ended June 30, 1999 to $189,171 for the three months ended June 30, 2000. The
Company attributes the increase primarily to an increase in research for a new
product line.
Liquidity and Capital Resources
As of June 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.
Prior to August 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.
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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 June 30, 2000.
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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: August 21, 2000
CETEK TECHNOLOGIES, INC
By: /s/ Fayiz Hilal
-------------------------
Fayiz Hilal
President and Chief Executive Officer
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