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 September 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 = 19,644,494 shares as of
October 31, 2000.
<PAGE>
SK TECHNOLOGIES CORPORATION
INDEX
FORM 10-QSB
SIX MONTHS ENDED SEPTEMBER 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
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
<PAGE>
SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
September 30, 2000
ASSETS
Current Assets:
Cash $ 20,734
Trade accounts receivable, net of
allowance for doubtful accounts
of $36,827 4,207
Inventories 21,111
Other current assets 1,306
---------
Total Current Assets 47,358
Property and Equipment, Net 49,362
Other Assets:
Software development costs,
net of accumulated amortization
of $247,391 423,327
Other, net 20,265
---------
Total Other Assets 443,592
---------
$ 540,312
=========
(Continued on following page)
- 1 -
<PAGE>
SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET (CONT'D)
September 30, 2000
LIABILITIES AND CAPITAL DEFICIENCY
Current Liabilities:
Accounts payable $ 24,073
Accrued expenses 84,732
Due to shareholders/officers/directors 793,350
Current portion of notes payable to
shareholder 12,000
Current portion of capital lease
obligations 7,612
Deferred income 25,233
-----------
Total Current Liabilities 947,000
Notes payable to shareholder, less current portion 370,000
Capital lease obligations, less current portion 6,596
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,
19,644,494 shares issued and
outstanding 19,644
Additional paid-in capital 13,840,737
Accumulated deficit (14,644,062)
-----------
Capital Deficiency (783,284)
-----------
$ 540,312
===========
See accompanying notes.
- 2 -
<PAGE>
<TABLE>
SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues:
Equipment, software sales and
support $ 113,443 $ 184,702 $ 331,055 $ 427,383
Cost of Revenues:
Cost of equipment sold 3,608 15,842 67,558 35,620
Amortization of software development
costs 30,719 22,662 61,435 69,382
Research and development expenses 4,314 7,738 7,475 14,587
----------- ----------- ----------- -----------
38,641 46,242 136,468 119,589
----------- ----------- ----------- -----------
Gross Profit 74,802 138,460 194,587 307,794
Selling, General and Administrative
Expenses:
Compensation and payroll taxes 173,733 220,368 386,168 454,834
Other selling, general and
administrative expenses 67,864 86,491 149,254 180,648
----------- ----------- ----------- -----------
241,597 306,859 535,422 635,482
----------- ----------- ----------- -----------
Operating Loss (166,795) (168,399) (340,835) (327,688)
Other Income (Expenses):
Gross profit on installment sale - 4,011 - 16,045
Interest expense (10,227) (10,402) (20,529) (129,179)
Other, net 119 (1,918) 510 (658)
----------- ----------- ----------- -----------
Total Other Income (Expenses) (10,108) (8,309) (20,019) (113,792)
----------- ----------- ----------- -----------
Loss Before Income Taxes and
Extraordinary Item (176,903) (176,708) (360,854) (441,480)
Income Tax Benefit - - - 176,592
----------- ----------- ----------- -----------
Loss Before Extraordinary Item (176,903) (176,708) (360,854) (264,888)
</TABLE>
(Continued on following page)
- 3 -
<PAGE>
<TABLE>
SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (CONT'D)
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
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 - - - 2,019,950
----------- ----------- ----------- -----------
Net income (loss) $ (176,903) $ (176,708) $ (360,854) $ 5,049,875
=========== =========== =========== ===========
Basic Earnings (Loss) Per
Common Share
Loss before extraordinary item $ (.01) $ (.01) $ (.02) $ (.02)
Extraordinary income (net,
plus tax benefit) - - - .50
----------- ----------- ----------- -----------
Net Income (Loss) Per Common
Share $ (.01) $ (.01) $ (.02) $ .48
=========== =========== =========== ===========
Diluted Earning (Loss) Per
Common Share
Loss before extraordinary item $ (.01) $ (.01) $ (.02) $ (.02)
Extraordinary income (net, plus
tax benefit) - - - .50
----------- ----------- ----------- -----------
Net Income (Loss) Per Common
Share $ (.01) $ (.01) $ (.02) $ .48
=========== =========== =========== ===========
Weighted Average Number of
Common Shares Outstanding 19,083,986 14,162,537 18,583,230 10,621,689
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
- 4 -
<PAGE>
SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
2000 1999
Net cash used in operating activities $ (318,474) $ (298,513)
Cash Flows From Investing Activities:
Additions to software development costs (102,859) (98,651)
Purchases of property and equipment (1,953) (5,616)
Net (increase) decrease in other assets (75) (176)
----------- -----------
Net cash used in investing activities (104,887) (104,443)
Cash Flows From Financing Activities:
Proceeds from loans from
shareholders/directors - 66,000
Principal payments on note payable to
shareholder (6,000) (3,000)
Principal payments on capital
lease obligations (7,436) (8,612)
Proceeds from issuance of Common Stock 410,000 405,000
----------- -----------
Net cash provided by financing
activities 396,564 459,388
----------- -----------
Increase (decrease) in cash (26,797) 56,432
Cash at beginning of period 47,531 29,188
----------- -----------
Cash at end of period $ 20,734 $ 85,620
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES
During the six months ended September 30, 2000, short term loans in
the amount of $410,000 were converted to Common Stock.
See accompanying notes
- 5 -
<PAGE>
SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED SEPTEMBER 30, 2000
Note 1 - DEFERRED INCOME AND REVENUE RECOGNITION
Deferred income consists of $25,233 from support contracts to
be recognized ratably over the terms of the contracts.
NOTE 2 - STOCKHOLDERS' EQUITY
Common Stock
During the six months ended September 30, 2000, one
shareholder/director of the Company provided funding to the
Company in the amount of $410,000. This shareholder/director
received 1,366,667 shares of Common Stock for funding of $410,000
at $.30 per share. The $410,000 was allocated in Stockholders'
Equity as 1,366,667 shares of Common Stock at par value $.001
equaling $1,366 and the remaining amount of $408,634 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 $360,854 for the six months
ended September 30, 2000 and has a net capital deficiency of
$783,284 as of September 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 six months ended September
30, 2000 do not include adjustments relating to the
- 6 -
<PAGE>
SK TECHNOLOGIES CORPORATION AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED SEPTEMBER 30, 2000
recoverability 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 six months of fiscal 2001 a majority
shareholder/director provided funding to the Company in the
amount of $410,000 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.
- 7 -
<PAGE>
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 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 is currently
marketing Loss Prevention 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 $176,903 and $360,854, and $176,708 and
$441,480, for the three and six months ended September 30, 2000 and
1999, respectively. For the six months ended September 30, 1999,
the Company had an extraordinary gain of $5,491,355 from
restructuring debt, which resulted in net income of $5,049,875 for
the six 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 six months ended September 30, 2000, one
shareholder/director of the Company provided funding to the
Company in the amount of $410,000 for 1,366,667 shares of Common
Stock.
- 8 -
<PAGE>
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 and six months ended September 30, 2000 and
1999, the Company capitalized $44,511 and $102,859, and $48,116
and $98,651, respectively, of development costs. Amortization of
development cost was $30,719 and $61,435, and $22,662 and
$69,382, for the three and six months ended September 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 $176,903 and $360,854, and $176,708 and
$441,480, for the three and six months ended September 30, 2000 and
1999, respectively. For the six months ended September 30, 1999,
the Company had an extraordinary gain of $5,491,355 from
restructuring debt, which resulted in net income of $5,049,875 for
the six months then ended. Revenues for the three and six months
ended September 30, 2000 and 1999 were $113,443 and $331,055, and
$184,702 and $427,383, respectively, from equipment and software
sales and support.
Amortization of software development costs was $30,719 and
$61,435, and $22,662 and $69,382 for the three and six months ended
September 30, 2000 and 1999, respectively. In addition the Company
incurred and expensed, research and development costs of $4,314 and
$7,475, and $7,738 and $14,587, during the three and six months
ended September 30, 2000 and 1999, respectively, to maintain and
improve the existing versions of the StoreKare products.
Total selling, general and administrative expenses for the six
months ended September 30, 2000 decreased 16% to $535,422 for the
six months ended September 30, 2000 from $635,482 for the six
months ended September 30, 1999. The Company anticipates that
total selling general and administrative costs for the remainder of
fiscal 2001 will increase slightly from the first six months of
fiscal 2001, as the Company expands its sales staff.
The Company incurred interest expense of $10,227 and $20,529,
and $10,402 and $129,179 during the three and six months ended
- 9 -
<PAGE>
September 30, 2000 and 1999, respectively. Interest expense was
incurred on loans from shareholders/directors and their related
entities, of $0 and $0, and $0 and $107,333 during the three and
six months ended September 30, 2000 and 1999, respectively. Since
these loans were converted to Common and Preferred Stock in June
1999, interest was accrued through June 21, 1999 only.
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.
- 10 -
<PAGE>
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 six months ended
September 30, 2000
b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the three months ended September 30, 2000.
- 11 -
<PAGE>
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: November 13, 2000 /s/ Calvin S. Shoemaker
President, Chief Executive Officer
Date: November 13, 2000 /s/ Melvin T. Goldberger
Treasurer, Principal Accounting Officer
- 12 -
