UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
-----------------------------------------
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: 33-28417
SITEK, Incorporated (formerly known as Dentmart Group, Inc.
and Elgin Corporation)
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4585824
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(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1817 West 4th Street, Tempe, Arizona 85281
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(Address of principal executive offices) (Zip Code)
(602) 921-8555
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(Registrant's telephone number, including area code)
Dentmart Group, Inc., 192 Searidge Court, Shell Beach, California 93449
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(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 [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
12,230,813 shares of common stock outstanding as of October 31, 1998
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TABLE OF CONTENTS
Part I. Financial Information
Item 1. Financial Statements
Statements of Financial Position
September 30, 1998 and March 31, 1998............................1
Statements of Operations
Six Months ended September 30, 1998 and 1997
and Period from April 5, 1989 (Inception)
through June 30, 1998............................................2
Statements of Cash Flows
Six Months ended September 30, 1998 and 1997
and Period from April 5, 1989 (Inception)
through September 30, 1998.......................................3
Notes to Financial Statements....................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................7
Part II. Other Information
Item 5. Exhibits and Reports on Form 8-K............................9
i
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SITEK, INCORPORATED
STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
September 30, 1998 March 31, 1998
------------------ --------------
ASSETS
CURRENT ASSETS
Checking/Savings
M & I T-Bird Checking $ 48,214.75 $ 0
Money Market 166.97 0
Total Checking/Savings 48,381.72 0
Accounts Receivable
Accounts Receivable 97,000.00 0
Total Accounts Receivable 97,000.00 0
Other Current Assets
Inventory 13,000.00 0
Total Other Current Assets 13,000.00 0
TOTAL CURRENT ASSETS $ 158,381.72 $ 0
------------ --------
FIXED ASSETS
Machine & Equipment 335,468.32 0
Leasehold Improvement 57,939.14 0
TOTAL FIXED ASSETS $ 393,407.46 $ 0
OTHER ASSETS
Deposits 3,500.00 0
Organization Cost 63,395.98 0
Prepaid Expenses 3,598.30 0
------------ --------
TOTAL OTHER ASSETS 70,494.28 0
------------ --------
TOTAL ASSETS $ 622,283.46 $ 0
============ ========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable
Accounts Payable $ 137,541.76 $ 0
Total Accounts Payable 137,541.76 0
Other Current Liabilities
Due to GST 853.33 0
Employee Tax Liabilities (678.42) 0
Loan from GST 152,627.76 0
------------ --------
Total Other Current Liabilities 152,802.67 0
TOTAL CURRENT LIABILITIES $ 290,344.43 $ 0
------------ --------
LONG TERM LIABILITIES
Loan Payable $ 523,190.70 $ 0
Total Long Term Liabilities 523,190.70 0
TOTAL LIABILITIES $ 813,535.13 $ 0
------------ --------
STOCKHOLDERS' EQUITY
Common stock: Par value $.005; 4,999,983
shares authorized; 4,999,983 shares at
March 31, 1998 and 12,230,813 shares at
September 30, 1998, were issued and
outstanding $ 1,000.03 $ 30,000
Accumulated deficit during
development stage (192,251.70) (30,000)
------------ --------
TOTAL STOCKHOLDERS' EQUITY $(191,251.67) $ 0
------------ --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 622,283.46 $ 0
============ ========
SEE NOTES TO FINANCIAL STATEMENTS
1
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SITEK, INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
PERIOD FROM
SIX MONTHS ENDED APRIL 5, 1989
SEPTEMBER 30 (INCEPTION)
-------------------- THROUGH
1998 1997 JUNE 30, 1998
---- ---- -------------
ORDINARY INCOME/EXPENSE
INCOME
Engineering Program Revenue $ 0 $ 0 $ 0
Resale Income 75,000.00 0 0
---------- --- ---
TOTAL INCOME 75,000.00 0 0
Cost of Goods Sold 52,498.02 0 0
---------- --- ---
TOTAL COST OF GOODS SOLD 52,498.02 0 0
GROSS PROFIT $22,501.98 $ 0 $ 0
---------- --- ---
EXPENSE
Automobile Expense 396.05 0 0
Bank Service Charge 36.00 0 0
Consulting Expense 3,250.00 0 0
Equipment Rental 361.54 0 0
Filing Fees 2,323.72 0 0
Other Insurances 22,188.30 0 0
Health Insurance 113.35 0 0
Office Supplies 536.71 0 0
Payroll Processing Fee 138.45 0 0
Postage and Delivery 6,455.70 0 0
Printing and Reproduction 1,922.99 0 0
Professional Fees 28,221.08 0 0
Rent 5,406.30 0 0
Repairs and Maintenance 125.00 0 0
Salaries & Wages 36,165.51 0 0
Taxes 1,306.43 0 0
Telephone 3,405.76 0 0
Travel & Entertainment 8,287.29 0 0
Utilities 2,063.54 0 0
TOTAL EXPENSE 122,703.72 0 30,000.00
------------ --- -----------
Net Ordinary Income (100,201.74) 0 (30,000.00)
Other Income/Expense
Other Income
Interest Income 33.55 0 0
Rent Income 0 0 0
TOTAL OTHER INCOME 33.55 0 0
Net Other Income 33.55 0 0
------------ --- -----------
NET INCOME $(100,168.19) $ 0 $(30,000.00)
============ === ===========
SEE NOTES TO FINANCIAL STATEMENTS
2
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SITEK, INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
PERIOD FROM
APRIL 5, 1989
SIX MONTHS ENDED (INCEPTION)
SEPTEMBER 30 THROUGH
---------------- SEPTEMBER 30,
1998 1997 1998
---- ---- -------------
CASH FLOWS FROM OPERATING AND
NON-OPERATING ACTIVITIES:
Net Income (Loss), September 98 $(157,553.98) $ 0 $(30,000.00)
ADJUSTMENTS TO RECONCILE OPERATING
INCOME TO NET CASH USED FOR
OPERATING ACTIVITIES:
Decrease (Increase) in Accounts
Receivable (97,000.00) 0 0
Decrease (Increase) in Other Current
Assets (13,000.00) 0 0
Decrease (Increase) in Other
Assets (70,351.28) 0 0
Increase (Decrease) in Accounts
Payable 137,398.76 0 0
Increase (Decrease) in Other Current
Liabilities 106,913.47 0 (30,000.00)
------------ --- -----------
Net Change in Working Capital 63,960.95 0 (30,000.00)
CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:
Decrease (Increase) in Fixed Assets (71,215.95) 0 0
Increase (Decrease) in Long Term
Liabilities 138,190.70 0 0
Cash Provided by (used in) Capital
Financing Activities 66,974.75 0 30,000.00
Beginning Cash 75,000.00 0 0
------------ --- -----------
ENDING CASH, SEPTEMBER 30, 1998 $ 48,381.72 $ 0 $ 0
============ === ===========
SEE NOTES TO FINANCIAL STATEMENTS
3
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SITEK, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
1. FINANCIAL STATEMENT PRESENTATION
The financial statements have been prepared in accordance with
generally accepted accounting principles and include the accounts of SITEK,
Incorporated (the "Company").
The statements of financial position as of September 30, 1998 and the
statements of operations and cash flows for the three-month periods ended
September 30, 1998 and 1997 have been prepared by the Company without audit. In
the opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position at September 30,
1998 and the results of operations and cash flows for the three-month periods
ended September 30, 1998 and 1997 have been made. The results of operations for
the interim periods are not necessarily indicative of the results to be expected
for the complete fiscal year. The statement of financial position for the fiscal
year ended March 31, 1998 is derived from the Company's audited financial
statements included in the Company's Annual Report on Form 10-K for the year
ended March 31, 1998. These financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's most
recent Form 10-K.
2. ORGANIZATION AND BUSINESS
The Company is the successor to Elgin Corporation. Elgin Corporation
was incorporated under the laws of the State of Delaware on April 5, 1989. On
February 6, 1991, Elgin Corporation merged with Home Indemnity, Incorporated, a
Nevada corporation, the assets of which consisted of a portfolio of securities
and a wholly-owned subsidiary, Dentmart Incorporated. On February 8, 1991, Elgin
Corporation amended its Articles of Incorporation to change its name to Dentmart
Group, Inc.
On February 15, 1991, Dentmart Group, Inc. (the successor Delaware
corporation to Elgin Corporation) merged with Dentmart Group, Inc. (a Colorado
corporation). The Colorado corporation is the successor entity.
As of June 30, 1998, the Company was not engaged in any business
activity, and had been dormant since 1992.
The Company completed an acquisition of CMP Solutions, Inc., an Arizona
corporation ("CMP Solutions") on July 31, 1998 pursuant to a Stock Purchase and
Exchange Agreement dated as of July 14, 1998. The terms of the acquisition are
more fully described in the Company's Report on Form 8-K filed on August 17,
1998, which is incorporated herein by reference.
4
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In July 1998 the Company formed a wholly owned subsidiary, Advanced
Technology Services, Inc., an Arizona corporation ("ATSI"). ATSI buys and sells
pre-owned semiconductor manufacturing equipment. Sales revenues for the Company
generated in the quarter ending September 30, 1998 were generated by ATSI.
Effective March 31, 1998, the Company changed its year end for both
accounting and tax purposes from a calendar year ending December 31st to a
fiscal year ending March 31st.
3. COMMITMENTS AND CONTINGENCIES
The Company has no outstanding commitments or obligations, nor is it a
party to any litigation. The Company presently shares office space with a
shareholder for which it pays nominal rent.
As of September 30, 1998, the Company has outstanding debt obligations
of $152,627 to Global Semiconductor Technologies LLC, an Arizona limited
liability company ("GST"), for expenses incurred on behalf of the Company for
management, technical and administrative services provided to the Company
between June and September 1998. The Company is considering the acquisition of
GST. As of September 30, 1998, the Company owed one of its shareholders $340,000
that was utilized to purchase processing equipment for CMP Solutions in July
1998. The Company also owed the president of ATSI $108,190, which was utilized
for startup expenses for CMP Solutions and the Company. The Company sold a
convertible debenture to a relative of one of the principals of the Company for
$75,000 in September 1998. This debenture is shown as long term debt on the
Company's balance sheet.
4. INCOME TAXES
The Company owes no federal income taxes. Operating loss carry-forwards
have been disallowed due to the change in majority ownership of the Company
during 1994 and 1995.
5. SHAREHOLDERS' EQUITY
On April 7, 1989, Elgin Corporation issued 3,500,000 shares of common
stock to its officers and directors for a consideration of $3,500. On June 21,
1989, 1,500,000 shares of common stock were issued for a consideration of
$1,500.
On December 8, 1990, 250,000 shares were issued pursuant to a Public
Offering at ta purchase price of $.10 per share for a total amount of $25,000.
On February 6, 1991, Elgin corporation amended its Articles of
Incorporation to authorize a stock split of five shares for one of Common Stock.
This increased the number of issued and outstanding shares of common stock in
Elgin Corporation to 26,250,000.
5
<PAGE>
On February 6, 1991, Elgin Corporation entered into a merger agreement
with Home Indemnity, Incorporated (a Nevada corporation). The agreement provided
for the conversion of one share of Home Indemnity, Incorporated stock into four
shares of Elgin Corporation. A total of 20,000,000 shares were issued due to the
merger.
On February 7, 1991, the then two majority shareholders each
surrendered 6235,000 shares of common stock.
On February 8, 1991, Elgin Corporation changed its name to Dentmart
Group, Inc. On February 15, 1991 a merger took place between Dentmart Group,
Inc. (Delaware) and Dentmart Group, Inc. (Colorado). The shareholders were given
one share of Dentmart Group, Inc. (Colorado) for every ten shares of Dentmart
Group, Inc. (Delaware), resulting in the net issued and outstanding shares of
Dentmart Group, Inc. (Colorado) amounting to 4,500,000.
On April 2, 1991, the Company issued new common stock to reflect a
reverse stock split of 1 for 5 shares resulting in a total of 900,000 issued and
outstanding shares.
In September 1991, the Company traded its marketable securities
obtained in the Home Indemnity, Incorporated merger in exchange for the purchase
of 300,000 shares of the company's own common stock which were subsequently
canceled by the Company. To complete this transaction an additional 21,360
shares were canceled during March 1997.
During the period February 14, 1994 to February 25, 1995, the shares
previously owned by the majority shareholders, and therefore, control of the
Company, were acquired by a new group of investors.
Effective November 19, 1997, the current majority shareholder reduced
his holdings in the company by surrendering 315,483 shares of the Company's
common stock.
Effective November 26, 1997, there was a forward stock split of 19 for
1 common shares, resulting in a total of 4,999,983 shares begin issued and
outstanding.
Effective July 14, 1998, there was a reverse stock split of 1 for 1.65
shares resulting in a total of 3,030,813 issued and outstanding shares.
In connection with the merger with CMP Solutions in July 1998, the
Company issued 9,200,000 restricted common shares to the shareholders of CMP
Solutions in exchange for all the capital stock of CMP Solutions. As a result,
the Company had 12,230,813 common shares issued and outstanding as of October
31, 1998.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion of significant factors that
affected the Company's interim financial condition and results of operations.
This should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations included in the Company's Annual
Report on Form 10-K for the year ended March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company had recently completed its
acquisition of CMP Solutions, Inc., an Arizona corporation ("CMP Solutions") and
the creation of Advanced Technology Services, Inc., an Arizona corporation
("ATSI"). As of September 30, the net stockholders equity was ($191,252) due to
the loans to the Company. The Company commenced efforts to acquire additional
equity funding through a private placement in August, 1998, however, no
additional equity had been obtained by September 30, 1998. Consequently, the
Company's Statement of Financial Position for the three months ended September
30, 1998 reflects a total asset value of $622,283, which is an increase from the
three months ended September 30, 1997 of $622,283.
The Company completed an acquisition of CMP Solutions on July 31, 1998
pursuant to a Stock Purchase and Exchange Agreement dated as of July 14, 1998.
The terms of the acquisition are more fully described in the Company's Report on
Form 8-K filed on August 17, 1998, which is incorporated herein by reference.
The effect of this acquisition on the Company's financial position is that the
Company incurred $63,396 of costs related to the acquisition. Further, the
Company believes that CMP Solutions will begin generating revenue in the quarter
ending March 31, 1999.
RESULTS OF OPERATIONS
The Company commenced operations on August 1, 1998 with two operating
subsidiaries, CMP Solutions and ATSI, both located in Tempe, Arizona. ATSI
commenced its marketing efforts with sales revenues coming mostly from sales to
one customer. ATSI located equipment for installation in the CMP Solutions
facility. However, the Company does not consider such inter-company transfers as
revenues. During the quarter ending September 30, 1998, CMP Solutions was in the
development phase and made efforts in initial marketing and in creating its
silicon wafer processing facility. Therefore, CMP Solutions had no revenues
during this quarter.
For the current fiscal year, the Company anticipates incurring a loss
as a result of expenses associated with resumption of reporting under the
Securities Exchange Act of 1934, expenses associated with locating and
evaluating acquisition candidates and expenses associated with the acquisition
7
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of CMP Solutions. The Company anticipates increasing revenues for ATSI during
the remainder of this fiscal year. The Company believes that CMP Solutions will
begin generating revenue after January 1, 1999, when it completes its silicon
wafer processing facility and begins field service operations. The Company
expects that continued costs of developing the business of ATSI and CMP
Solutions, along with possible creation or acquisition of new operating
subsidiaries, will exceed its revenues for the remainder of this fiscal year and
next fiscal year.
NEED FOR ADDITIONAL FINANCING
The Company believes that some additional capital will be required to
meet the Company's cash needs, including the costs of compliance with the
continuing reporting requirements of the Securities Exchange Act of 1934, as
amended, and the integration of the acquisition of CMP Solutions and the
formation of ATSI with the operations of the Company. There is no assurance the
Company will be able to acquire the additional capital or that the funds, if
acquired, will ultimately prove to be adequate to allow it to successfully
integrate the acquisition of CMP and the formation of ATSI with the operations
of the Company.
No commitments to provide additional funds have been made by management
or other stockholders. Accordingly, there can be no assurance that any
additional funds will be available to the Company to allow it to cover its
expenses.
Irrespective of whether the Company's cash assets prove to be
inadequate to meet the Company's operational needs, the Company might seek to
compensate providers of services by issuances of stock in lieu of cash.
INFLATION
The Company has limited experience with respect to the effect of
inflation on its business. However, based on management's understanding of
industry, results of the Company's operations in the future will likely not be
affected by inflation in a material way.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are
coded to accept only two digit entries in the date code field. Beginning in the
year 2000, these date code fields will need to accept four digit entries to
distinguish twenty-first century dates from twentieth century dates. As a
result, in less than two years, the computer system and software used by the
Company will need to be upgraded to comply with such "Year 2000" requirements.
Significant uncertainty exists in the software industry concerning the potential
effects associated with such compliance.
8
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The company has scheduled hardware and software package upgrades to
make the Company's computer systems year 2000 compliant, and the compliance
effort will be borne primarily by internal resources. However, there can be no
assurance that such upgrades will be sufficient to make the Company's computer
systems Year 2000 compliant in a timely manner or that the allocated resources
will be sufficient. A failure to become year 2000 compliant could disrupt the
Company's operating results and financial condition.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the statements contained in this document that are not
historical facts, including, without limitation, statements of future
expectations, projections of results of operations and financial condition,
statements of future economic performance and other forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995, are
subject to known and unknown risks, uncertainties and other factors which may
cause the actual results, performance or achievements of the Company to differ
materially from those contemplated in such forward-looking statements. There can
be no assurances that the forward-looking information will be accurate. In
addition to the specific matters referred to herein, important factors which may
cause actual results to differ from those contemplated in such forward-looking
statements include: the future supply of silicon; the future demand for
semiconductor products; world economic conditions; potential costs and delays in
integrating acquisitions; timing of market introductions; and
higher-than-expected costs of product development.
PART II - OTHER INFORMATION
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
(a) See Exhibit Index following the signature page which is
incorporated herein by reference.
(b) Reports on Form 8-K
On August 17, 1998, the Company filed a Current Report on Form 8-K
dated July 31, 1998 to report in Item 1, a change in control of the Company
effected by the acquisition by the Company of CMP Solutions, Inc. pursuant to a
Stock Purchase and Exchange Agreement dated July 14, 1998.
9
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SIGNATURES
Pursuant to the requirements 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.
SITEK, INCORPORATED
(Registrant)
Date: November 23, 1998 By: /s/ Don M. Jackson, Jr.
-------------------------------------
Don M. Jackson, Jr.
CEO and Principal Financial Officer
10
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SITEK, INCORPORATED
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
Exhibit No. Incorporated by
Filed Herewith Description Reference to:
- -------------- ----------- -------------
3.1 Articles of Incorporation of Form 8-K filed with the SEC
Registrant on August 17, 1998
3.2 Bylaws of Registrant Form 10-K filed with the
SEC on April 17, 1998
27 Financial Data Schedule Filed Herewith
11
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<PERIOD-START> APR-01-1998
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