FORM 10-QSB - QUARTERLY REPORT
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] 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 0-18184
SK Technologies Corporation
(Exact name of small business issuer as specified in its charter)
Delaware 52-1507455
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
500 Fairway Drive, Suite 104, Deerfield Beach, FL 33441
(Address of principal executive offices)
(954) 418-0101
(Issuer's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities
Exchange Act during the past 12 months (or for such
shorter periods that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the
issuer's classes of common equity as of the latest
practicable date.
Common Stock, $.001 Par Value = 19,077,827 shares as of
July 31, 2000.
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SK TECHNOLOGIES CORPORATION
INDEX
FORM 10-QSB
THREE MONTHS ENDED JUNE 30,2000
PART I. FINANCIAL INFORMATION Page
Consolidated Condensed Balance Sheet. . . 1-2
Consolidated Condensed Statements of
Operations. . . . . . . . . . . . . . . 3-4
Consolidated Condensed Statements of
Cash Flows . . . . . . . . . . . . . . 5
Notes to the Consolidated Condensed
Financial Statements. . . . . . . . . . 6-7
Item 1. Management's Discussion and Analysis of
Financial Condition and Results
of Operations . . . . . . . . . . . . . 8-10
Item 2. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure. . . . . . . . . . 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . 11
Item 2. Changes in Securities . . . . . . . . . . 11
Item 3. Defaults Upon Senior Securities . . . . . 11
Item 4. Submission of Matters to a Vote
of Security Holders . . . . . . . . . . 11
Item 5. Other Information . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K. . . . . 11
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 12
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SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
June 30, 2000
ASSETS
Current Assets:
Cash $ 56,987
Trade accounts receivable, net of
allowance for doubtful accounts
of $38,537 4,753
Inventories 21,661
Other current assets 1,833
---------
Total Current Assets 85,234
Property and Equipment, Net 53,618
Other Assets:
Software development costs,
net of accumulated amortization
of $216,672 409,535
Other, net 20,265
---------
Total Other Assets 429,800
---------
$ 568,652
=========
(Continued on following page)
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SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET (CONT'D)
June 30,2000
LIABILITIES AND CAPITAL DEFICIENCY
Current Liabilities:
Accounts payable $ 31,753
Accrued expenses 82,731
Due to shareholders/officers/directors 793,375
Current portion of notes payable to
shareholder 12,000
Current portion of capital lease
obligations 8,723
Deferred income 34,900
-----------
Total Current Liabilities 963,482
Notes payable to shareholder, less current portion 373,000
Capital lease obligations, less current portion 8,551
Capital Deficiency:
Preferred Stock, $.001 par value,
5,000,000 shares authorized
1,000,000 shares designated as
convertible Series B Preferred
Stock, 396,066 shares issued
and outstanding 396
3,000 shares designated as Series D
Preferred Stock, 793 shares issued
and outstanding 1
Common Stock, $.001 par value,
25,000,000 shares authorized,
19,077,827 shares issued and
outstanding 19,078
Additional paid-in capital 13,671,303
Accumulated deficit (14,467,159)
-----------
Capital Deficiency (776,381)
-----------
$ 568,652
===========
See accompanying notes.
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SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
Revenues:
Equipment, software sales and
Support $ 217,612 $ 242,681
Cost of Revenues:
Cost of equipment sold 63,950 19,778
Amortization of software development
Costs 30,716 46,720
Research and development expenses 3,161 6,849
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97,827 73,347
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Gross Profit 119,785 169,334
Selling, General and Administrative
Expenses:
Compensation and payroll taxes 212,435 234,466
Other selling, general and
administrative expenses 81,390 94,157
------------ ------------
293,825 328,623
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Operating Loss (174,040) (159,289)
Other Income (Expenses):
Gross profit on installment sale - 12,034
Interest expense (10,302) (118,777)
Other, net 391 1,260
------------ ------------
Total Other Income (Expenses) (9,911) (105,483)
------------ ------------
Loss Before Income Taxes and
and Extraordinary Item (183,951) (264,772)
Income tax benefit - 105,909
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Loss Before Extraordinary Item (183,951) (158,863)
(Continued on following page)
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SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (CONT'D)
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
Extraordinary Item: Gain from
restructuring of debt (net
of income taxes of $2,196,542) - 3,294,813
Benefit from utilization of net
operating loss carryforwards - 2,090,633
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Net Income (Loss) $ (183,951) $ 5,226,583
============= ============
Basic Earnings (Loss) Per
Common Share
Loss before extraordinary item $ (.01) $ (.02)
Extraordinary income (net,
plus tax benefit) - .77
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Net Income (Loss) Per Common Share $ (.01) $ .75
============= ============
Diluted Earnings (Loss) Per
Common Share
Loss before extraordinary item $ (.01) $ (.02)
Extraordinary income (net, plus
tax benefit) - .77
------------- ------------
Net Income (Loss) Per Common Share $ (.01) $ .75
============= ============
Weighted Average Number of
Common Shares Outstanding 18,286,618 6,956,418
============= ============
See accompanying notes.
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SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
2000 1999
Net cash used in operating activities $ (164,758) $ (85,734)
Cash Flows From Investing Activities:
Additions to software development costs (58,348) (50,535)
Purchases of property and equipment (795) (709)
Net (increase) decrease in other assets 75 (176)
----------- -----------
Net cash used in investing activities (59,068) (51,420)
Cash Flows From Financing Activities:
Proceeds from loans from
shareholders/directors - 66,000
Principal payments on note payable to
shareholder (3,000) -
Principal payments on capital
lease obligations (3,718) (6,170)
Proceeds from issuance of Common Stock 240,000 140,000
----------- -----------
Net cash provided by financing
activities 233,282 199,830
----------- -----------
Increase in cash 9,456 62,676
Cash at beginning of period 47,531 29,188
----------- -----------
Cash at end of period $ 56,987 $ 91,864
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SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
During the three months ended June 30, 2000, short term loans in the
amount of $240,000 were converted to Common Stock.
See accompanying notes.
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SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2000
Note 1 - DEFERRED INCOME AND REVENUE RECOGNITION
Deferred income consists of $34,900 from support contracts to
be recognized ratably over the terms of the contracts.
NOTE 2 - STOCKHOLDERS' EQUITY
Common Stock
During the three months ended June 30, 2000, one
shareholder/director of the Company provided funding to the
Company in the amount of $240,000. This shareholder/director
received 800,000 shares of Common Stock for funding of $240,000
at $.30 per share. The $240,000 was allocated in Stockholders'
Equity as 800,000 shares of Common Stock at par value $.001
equaling $800 and the remaining amount of $239,200 allocated
towards additional paid-in capital. This shareholder/director
agreed to fund any additional cash deficiencies through March 31,
2001, for shares of the Company's Common Stock at $.30 per share.
NOTE 3 - INCOME TAXES
For the year ended March 31, 2000 no provision or (credit)
for income taxes has been provided for in the accompanying
consolidated financial statements because realization of such
income tax benefits cannot be reasonably assured. The Company
will recognize the benefit from such carryforward losses in the
future, if and when they are realized, in accordance with
applicable provisions of accounting principles for income taxes.
At March 31, 2000 the Company had net operating loss
carryforwards of approximately $13 million that can be used to
offset future taxable income, that expire in the years 2004
through 2014. In fiscal 1995, the Company had ownership changes
as defined under Internal Revenue Code Section 382 (Section 382).
As such, the availability to utilize the net operating losses
that existed as of this ownership change is limited.
NOTE 4 - GOING CONCERN CONSIDERATION
The Company had a net loss of $183,951 for the three months
ended June 30, 2000 and has a net capital deficiency of $776,381
as of June 30, 2000. The Company has experienced losses from
operations in the past and continues to experience losses. Based
on these conditions, doubt exists about the ability of the
Company to continue as a going concern.
The financial statements for the three months ended June 30,
2000 do not include adjustments relating to the recoverability
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SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
THREE MONTHS ENDED JUNE 30, 2000
and classification of the recorded carrying value of the assets
or the amounts or classification of liabilities that might be
necessary should the Company be unable to continue as a going
concern.
During the first three months of fiscal 2001 a majority
shareholder/director provided funding to the Company in the
amount of $240,000 based on the Company's cash deficiencies from
operations. In order to continue operations this majority
shareholder/director of the Company has committed to provide
funding to the Company in the amount of $400,000, based on the
Company's projected cash deficiencies for the fiscal 2001, for
shares of the Company's Common Stock. If actual cash
deficiencies exceed the projected amount, this
shareholder/director agreed to fund any additional cash
deficiencies through March 31, 2001, with the terms of the
additional funding to be determined at such time.
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ITEM 1. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS:
General
The Company is a developer of retail store management
software for the specialty retail industry. The Company's
StoreKare product family is a modular system of information
technology products, which offers retailers an affordable,
scalable, feature rich application that runs in both Windows and
DOS environments. The goal of the Company has been to offer such
a product that a retail store owner with limited computer
experience could learn and use without extensive training and
support. With the advancement of the hardware technology
(computers and cash registers) and extensive reduction in cost,
the small retailer can now afford a complete business management
system.
The Company is also developing and marketing application
specific business intelligence solutions software using
interactive data mining techniques to explore transaction trends,
patterns, comparisons and exceptions. The Company currently
markets Loss Prevention MAX and Sales and Profit MAX business
intelligence solutions for the retail industry.
Except for historical information contained herein, certain
matters set forth in this Form 10-QSB are forward looking and
involve a number of risks and uncertainties that could cause
future results to differ materially from these statements and
trends. Such factors include but are not limited to, significant
changes in economic conditions, competition in the Company's
markets, changes in technology and the continued availability of
funding from third parties.
Liquidity and Capital Resources
The Company had a net loss, before income taxes and
extraordinary items, of $183,951 and $264,772 for the three months
ended June 30, 2000 and 1999, respectively. For the three months
ended June 30, 1999, the Company had an extraordinary gain of
$5,491,355 from restructuring debt, which resulted in net income of
$5,226,583 for the three months then ended. The debt restructuring
was due to two shareholders/directors of the Company and their
related entities converting short term loans totaling $4,789,500 to
Common and Preferred Stock. Interest on these loans in the amount
of $1,234,789 was forgiven.
During the three months ended June 30, 2000, one
shareholder/director of the Company provided funding to the
Company in the amount of $240,000 for 800,000 shares of Common
Stock.
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On June 13, 2000, one shareholder/director of the Company
committed to provide funding to the Company in the amount of
$400,000, based on the Company's projected cash deficiencies for
the remainder of fiscal 2001, for shares of the Company's Common
Stock at $.30 per share. If actual cash deficiencies exceed the
projected amount, this shareholder/director agreed to fund any
additional cash deficiencies through March 31, 2001, with the
terms of the additional funding to be determined at such time.
During the three months ended June 30, 2000 and 1999, the
Company's capitalized expenditures for development were $58,348
and $50,535, respectively; accumulated amortization was $30,716
and $46,720, for the three months ended June 30, 2000 and 1999,
respectively. The Company anticipates incurring a comparable
amount of development costs for fiscal 2001 as compared to fiscal
2000 as the Company continues its efforts for Loss Prevention
MAX, Sales and Profit MAX and possibly other business
intelligence solutions.
Results of Operations
The Company had a net loss, before income taxes and
extraordinary items, of $183,951 and $264,772 for the three months
ended June 30, 2000 and 1999, respectively. For the three months
ended June 30, 1999, the Company had an extraordinary gain of
$5,491,355 from restructuring debt, which resulted in net income of
$5,226,583 for the three months then ended. Revenues for the three
months ended June 30, 2000 and 1999 were $217,612 and $242,681,
respectively, from equipment and software sales and support.
Amortization of software development costs was $30,716 and
$46,720 for the three months ended June 30, 2000 and 1999,
respectively. In addition the Company incurred and expensed,
research and development costs of $3,161 and $6,849 during the
three months ended June 30, 2000 and 1999, respectively, to
maintain and improve the existing versions of the StoreKare
products.
Total selling, general and administrative expenses for the
three months ended June 30, 2000 decreased 11% to $293,825 for the
three months ended June 30, 2000 from $328,623 for the three months
ended June 30, 1999. The Company anticipates that total selling
general and administrative costs for the remainder of fiscal 2001
will increase slightly from the first three months of fiscal 2001,
as the Company expands its sales staff.
The Company incurred interest expense of $10,302 and $118,777
during the three months ended June 30, 2000 and 1999, respectively.
Interest expense was incurred on loans from shareholders/directors
and their related entities, of $0 and $107,333 during the three
months ended June 30, 2000 and 1999. Since these loans were
converted to Common and Preferred Stock in June 1999, interest was
accrued through June 21, 1999 only.
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Seasonality
The Company believes that seasonality has not historically had
any material impact on its business. However, during the winter
holiday season retail businesses typically delay the installation
and/or purchase of any capital assets such as our StoreKare
product.
ITEM 2. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Pursuant to a written consent dated April 26, 2000, the
Board of Directors of the Company approved the engagement of
Berkovits & Company, P.A. as its independent auditors for the
fiscal year ended March 31, 2000 to replace the firm of Infante,
Lago & Company, who were dismissed as auditors of the Company
effective immediately.
The report of Infante, Lago & Company on the Company's
financial statements for the fiscal year ended March 31, 1999 did
not contain an adverse opinion or a disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or
accounting principles.
In connection with the audit of the Company's financial
statements for the fiscal year ended March 31, 1999, and in the
subsequent interim period, there were no disagreements with
Infante, Lago & Company on any matters of accounting principles
or practices, financial statement disclosure, or auditing scope
and procedures which, if not resolved to the satisfaction of
Infante, Lago & Company would have caused Infante, Lago & Company
to make reference to the matter in their report.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27. Financial Data Schedule for the three months ended
June 30, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, SK Technologies Corporation has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SK Technologies Corporation
(Registrant)
Date: August 11, 2000 /s/ Calvin S. Shoemaker
President, Chief Executive Officer
Date: August 11, 2000 /s/ Melvin T. Goldberger
Treasurer, Principal Accounting Officer
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