UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended September 30, 2003
Commission File Number 000-30237
VICTOR INDUSTRIES, INC.
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(Exact name of registrant as specified in charter)
Idaho 91-078484114
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4810 North Wornath, Missoula, Montana 59804
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (406) 549-2261
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d)of the Exchange Act during the past 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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of September 30, 2003 the Company
had outstanding 151,221,692 shares of its common stock, par value $0.0001.
TABLE OF CONTENTS
ITEM NUMBER AND CAPTION PAGE
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PART I
ITEM 1. FINANCIAL STATEMENTS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND PLAN OF OPERATIONS 12
ITEM 3. QUANTATIVE DISCUSSION ON MARKET RISK 19
ITEM 4. CONTROLS AND PROCEDURES 20
PART II
ITEM 1. LEGAL PROCEEDINGS 21
ITEM 2. CHANGES IN SECURITIES 21
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 21
ITEM 5. OTHER INFORMATION 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
2
PART I
ITEM 1. FINANCIAL STATEMENTS
VICTOR INDUSTRIES, INC.
CONSOLIDATED COMPARATIVE BALANCE SHEETS
AS OF SEPTEMBER 30, 2003 and DECEMBER 31, 2002
Unaudited Audited
As of As of
September 30, December 31,
2003 2002
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ASSETS
Current Assets:
Cash and Cash Equivalents $ 8,432 $ 1,190
Note Receivable - Related Party -- 26,558
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Total Current Assets 8,432 27,748
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Other Assets:
Property and Equipment, net 20,443 8,223
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TOTAL ASSETS $ 28,875 $ 35,971
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LIABILITIES AND SHAREHOLDERS' DEFICIT
LIABILITIES
Current Liabilities:
Accounts Payable and Accrued Expenses $ 79,185 $ 70,759
Notes Payable - Related Parties 123,385 26,634
Payroll Taxes & Accrued Wages 13,325 --
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Total Current Liabilities 215,895 97,393
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Long-term Liabilities:
Notes Payable 75,981 --
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TOTAL LIABILITIES 291,876 97,393
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SHAREHOLDERS' DEFICIT
Common Stock, $0.0001 Par Value,
1,000,000,000 Shares Authorized and
151,221,692 Shares Issued at September
30, 2003 and 121,721,169 Shares Issued
at December 31, 2002 15,122 12,272
Common Stock Unissued 90,000 --
Subscription Receivable (54,200) (65,000)
Additional Paid-in Capital 4,374,934 4,062,428
Retained Deficit (4,688,857) (4,071,122)
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TOTAL SHAREHOLDERS' DEFICIT (263,001) (61,422)
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TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 28,875 $ 35,971
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See accompanying notes to Interim Financial Statements.
3
VICTOR INDUSTRIES, INC.
CONSOLIDATED COMPARATIVE STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2003 and SEPTEMBER 30, 2002
Unaudited Unaudited
Three Months Three Months
Ended Ended
September 30, September 30,
2003 2002
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REVENUE
Revenue $ 9,697 $ --
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Total Revenue -- --
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COSTS AND EXPENSES
Selling and Administrative 171,108 249,287
Goodwill Impairment 165,000 --
Depreciation and Amortization 1,557 --
Interest and Other Expense 1,379 447
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Total Costs and Expenses (339,044) 249,734
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Loss from Operations (329,347) (249,734)
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NET LOSS (329,347) (249,734)
Retained Deficit at Beginning of Period (4,359,510) (3,774,139)
Retained Deficit at End of Period $ (4,688,857) $ (4,023,874)
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Loss Per Common Share $ (0.00) $ (0.00)
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Weighted Average Shares Outstanding 128,159,192 78,792,692
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See accompanying notes to Interim Financial Statements.
4
VICTOR INDUSTRIES, INC.
CONSOLIDATED COMPARATIVE STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 and SEPTEMBER 30, 2002
Unaudited Unaudited
Nine Months Nine Months
Ended Ended
September 30, September 30,
2003 2002
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REVENUE
Revenue $ 17,287 $ --
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Total Revenue 17,287 --
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COSTS AND EXPENSES
Selling and Administrative 432,677 534,995
Goodwill Impairment 165,000 --
Depreciation and Amortization 4,637 --
Bad Debt Expense-Related Party 30,358 --
Interest & Other expenses 2,350 1,674
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Total Costs and Expenses 635,022 536,670
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Loss from Operations (617,735) (536,670)
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NET LOSS (617,735) (536,670)
Retained Deficit at Beginning of Period (4,071,122) (3,487,204)
Retained Deficit at End of Period $ (4,688,857) $ (4,023,874)
============= =============
Loss Per Common Share $ (0.00) $ (0.00)
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Weighted Average Shares Outstanding 128,159,192 78,792,692
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See accompanying notes to Interim Financial Statements.
5
VICTOR INDUSTRIES, INC.
CONSOLIDATED COMPARATIVE STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 and SEPTEMBER 30, 2002
Unaudited Unaudited
Nine Months Nine Months
Ended Ended
September 30, September 30,
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (617,735) $ (536,670
Common Stock Issued for Debt 65,000 --
Common Stock Issued for Expenses 199,106 410,101
Goodwill Impairment 165,000 --
Depreciation 4,637 --
Bad Debt Expense-Related Party 30,358 --
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Cash Used in Operating Activities (153,634) (100,769)
Increase (decrease) in Assets and Liabilities
Demand loan receivable (3,800) 25,000
Other Receivables 18,421 --
Deposits 18,000 --
Prepaid Expenses -- 800
Accounts Payable & Accrued liabilities 20,831 (25)
Demand Loan Payable -- (93,574)
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Cash provided (Used) by Operating Activities 53,452 (93,599)
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Provided (Used) by Investing Activities:
Investment in Fixed Assets (1,108) (1,309)
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Net Cash Used by Investing Activities (1,108) (1,309)
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Provided (Used) by Financing Activities:
Proceeds Stock Subscription 10,800 40,000
Proceeds from Notes Payable 97,732 --
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Net Cash Provided by Financing Activities 108,532 40,000
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Net Increase (Decrease) in Cash 7,242 (155,677)
Cash (Overdraft) at Beginning of Period 1,190 166,409
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Cash (Overdraft)at End of Period $ 8,432 $ 10,732
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Supplemental Disclosures:
Interest Paid 2,055 447
Taxes Paid 0 0
Noncash Investing and Financing:
Stock issued for expenses $ 199,106 0
Stock issued for debt $ 65,000 0
Acquisition of New Wave Media
Fair Value of Assets Acquired $ 165,920 0
Less: Liabilities Assumed $ (920) 0
Issuance of Note Payable $ (75,000) 0
Value of Common Stock $ (90,000) 0
See accompanying notes to Interim Financial Statements.
6
VICTOR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2003
(Unaudited)
1. ACCOUNTING POLICIES AND OPERATIONS
Organization and Business Combination
Victor Industries, Inc., was incorporated on January 19, 1926 as Omo Mines
Corporation under the Laws of the State of Idaho. On November 14, 1936, the name
was changed to Kaslo Mines Corporation. On December 24, 1977, the name was
changed to Victor Industries, Inc. The Company's fiscal year ends on December
31st.
The company was originally organized to purchase and develop mining properties.
On December 31, 1988, the Company sold assets, net of liabilities, and the
Company became inactive. In 1993, the Company began zeolite mining and marketing
operations. Zeolite is an ammonia absorbent, air purifier and hazardous waste
absorbent. The Company is presently developing a product using zeolite which can
be used in fertilizer to reduce pollution of streams and rivers. A patent has
been applied for on a preliminary basis. The Company extracts zeolite by
utilizing independent contractors at a property in Owhyee County, Idaho. Private
contractors do the milling, manufacturing and packaging. The Company does not
own any mining or manufacturing equipment or facilities and has realized no
revenues for the year 2001.The Company owns mineral claims, as evidenced by
right of title with the Bureau of Land Management, two of which are located in
Pershing County, Nevada, which have not been developed and two zeolite claims in
Owhyee County, Idaho.
On March 5, 2003 the Company signed an agreement to acquire 100% of the issued
and outstanding stock of New Wave Media Corporation, a Nevada corporation ("New
Wave Media"). The agreement calls for the issuance of a $75,000 note for the
assumption of debt and 15,000,000 shares of the Company's common stock. Based on
The Company's closing stock price of $0.06 per common share on March 5, 2003,
the purchase price was $165,000 including the issued debt. New Wave Media
operates The Heat 100.3. com radio station, utilizing a Time Brokerage
Agreement. As of the date of this report the stock has not been issued as a
result of the Company's right to rescind the agreement within the first two
years if the Time Brokerage agreement is lost or cancelled. Subsequent to
quarter end Flinn Broadcasting turned the power off at The Heat 100.3
in Great Falls, MT. The Heat 100.3 is New Wave Media Corporations ( a wholly
owned subsidiary of Victor Industries ) first radio station. See Note 5
Subsequent Events.
The Time Brokerage Agreement calls for New Wave Media to purchase time on KFLL
(FM) radio in Great Falls, Montana, under the authority granted by the Federal
Communications Commission, Washington, D.C. The agreement is for 96 months and
calls for monthly payments ranging from $6,000 to $8,000 per month, through
February 1, 2011. In addition to the monthly payments, New Wave Media is
required to reimburse the licensee for certain operating expenses, incurred in
operating KFLL. These expenses would include the studio site lease, general
manager, contracts for the engineers and utilities.
In July the licensee of the time brokerage agreement shut down the radio station
claiming non-payment of the required fees. Management of the Company pursued a
temporary restraining order and a permanent injunction against this action. On
August 20, 2003 the Montana Eighth Judicial District Court awarded New Wave
Media a permanent injunction. The Company has filed litigation against Flinn
Broadcasting for monetary damages. The outcome of this case is still in question
so no adjustment has been proposed.
The acquisition was accounted for as a purchase transaction and accordingly the
purchase price was allocated to assets and liabilities based on the estimated
fair value as of the date of acquisition. The excess of the consideration paid
over the estimated fair value of net assets acquired in the amount of $165,000
has been recorded as Goodwill. The results of operations of New Wave Media have
been consolidated into the Company from the date of acquisition, March 5, 2003
through September 30, 2003. As a result of the uncertainty regarding the
ultimate closure of the radio station, the Company management recorded a
$165,000 write-down of Goodwill.
7
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The amounts of assets and liabilities in the financial statements
do not purport to represent realizable or settlement values. However, the
company has incurred continuing operating losses and has an accumulated deficit
of $4,688,857 and negative working capital as of September 30, 2003. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty. The company has met its
historical working capital requirements from sale of capital shares and loans
from shareholders. However, there can be no assurance that such financial
support shall be ongoing or available on terms or conditions acceptable to the
Company.
Unaudited Interim Financial Information
The accompanying consolidated financial statements of Victor Industries have
been prepared in accordance with accounting principals generally accepted in the
United States for interim financial information and in accordance with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include certain footnotes and financial presentations normally required
under accounting principles generally accepted in the United States for complete
financial reporting. The interim financial information is unaudited, but
reflects all normal adjustments and accruals, which are in the opinion of
management, considered necessary to provide a fair presentation for the interim
periods presented. The accompanying consolidated financial statements should be
read in conjunction with the audited statements included in the Company's Annual
Report on Form 10K for the year ended December 31, 2002.
The results of operation for the three and nine months ended September 30, 2003
are not necessarily indicative of the results to be expected for the entire year
ending December 31, 2003.
Consolidation
The accompanying consolidated financial statements include the accounts of
Victor Industries, Inc. and its wholly owned subsidiary, New Wave Media
(collectively, The Company). All inter-company accounts and transactions have
been eliminated.
8
Use of Estimates
In preparing financial statements in conformity with accounting principles
generally accepted in the United States, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenue and expenses during the reported period.
Actual results could differ from those estimates. Significant estimates made by
management are among others realization of long lived assets, deferred taxes and
royalties.
Loss Per Common Share
Statement of Financial Accounting Standard No. 128 provides a different method
of calculating earnings per share than currently used in accordance with ABP 15,
Earnings Per Share. Basic earnings per share includes no dilution and is
computed by dividing income available to common shareholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution of securities that could share in the
earnings of the entity, similar to fully diluted earnings per share.
Issuance of Stock for Services
Shares of the Company's common stock issued for services are recorded in
accordance with Statement of Financial Accounting Standards No. 123 "Accounting
for Stock Based Compensation", at the fair market value of the stock issued or
the fair market value of the services provided, whichever is the more clearly
evident.
Accounting Pronouncements
The Company has adopted SFAS No. 142 "Goodwill and Other Intangible Assets".
SFAS 141 requires all business combinations initiated after June 30, 2001, to be
accounted for under the purchase method. For all business combinations for which
the date of acquisition is after June 30, 2001, SFAS 141 establishes specific
criteria for the recognition of intangible assets separately from goodwill and
requires unallocated negative goodwill to be written off immediately as an
extraordinary gain, rather than deferred and amortized. SFAS 142 changes the
accounting for goodwill and other intangible assets after an acquisition. The
most significant changes made by SFAS 142 are: 1) goodwill and intangible assets
with indefinite lives will no longer be amortized; 2) goodwill and intangible
assets with definitive lives must be tested for impairment at least annually;
and 3) the amortization period for intangible assets with finite lives will no
longer be limited to forty years. Due to the closure of Heat 100.3, the Company
made an evaluation and recorded a $165,000 write-down of Goodwill.
In December 2002, the FASB issued SFAS No.148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." This statement amends SFAS No.123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value-based method of accounting
for stock-based employee compensation. Pursuant to SFAS No.123, the Company will
continue to report pro forma expense amounts for the fair market value of stock
options newly granted to employees.
9
In May 2003, FASB issued Statement of Financial Accounting Standards No. 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity ("SFAS 150"). SFAS 150 establishes standards for how an
issuer classify and measures certain financial instruments with characteristics
of both debt and equity and requires an issuer to classify the following
instruments as liabilities in its balance sheet:
o a financial instrument issued in the form of shares that is
mandatorily redeemable and embodies an unconditional obligation
that requires the issuer to redeem it by transferring its assets
at a specific or determinable date or upon an event that is
certain to occur;
o a financial instrument, other than an outstanding share, that
embodies an obligation to repurchase the issuer's equity shares,
or is indexed to such an obligation, and requires the issuer to
settle the obligation by transferring assets; and
o a financial instrument that embodies an unconditional obligation
that the issuer must settle by issuing a variable number of its
equity shares if the monetary value of the obligation is based
solely or predominately on (1) a fixed monetary amount, (2)
variations in something other than the fair value of the
issuer's equity shares, or (3) variations inversely related to
changes in the fair value of the issuers equity shares.
SFAS 150 is effective for financial instruments entered into or modified after
May 31, 2003 and is effective for all other financial instruments as of the
first interim period beginning after June 15, 2003. SFAS 150 is to be
implemented by reporting the cumulative effect of a change in accounting
principle. The Company does not expect the adoption of SFAS 150 to have a
material impact on its consolidated financial statements.
3. CAPITAL STRUCTURE
In the second quarter ended June 30, 2002, the Company changed its par value per
share from $0.05 to $0.0001 per share resulting in a $3,380,500 charge to paid
in capital.
During the year 2002, the Company issued 34,175,000 shares of common stock to
various individuals and companies for goods and services rendered at a par value
of $.0001 per share. At December 31, 2002 there were no stock options or
warrants outstanding.
During the year 2002 the Company sold 2,200,000 shares of common stock at $0.01
per share and 2,000,000 shares at $0.004 per share. In addition the Company sold
15,000,000 shares at $0.005 per share carrying the sale as a subscription
receivable. The shareholder is currently making payments on the subscription
receivable and management is expecting the balance to be paid by December 31,
2003.
10
During the first quarter of 2003 the Company issued 13,000,000 shares, at $0.005
per share equaling $65,000, of its common stock as payment of shareholder loans.
During the second quarter, ended June 30, 2003, the Company sold 1,000,000
shares of common stock at $.01 per share.
During the third quarter of 2003 the Company issued 15,500,000 shares of common
stock, at $.01 per share, to pay expenses.
On March 5, 2003 the Company signed an agreement to acquire 100% of the issued
and outstanding stock of New Wave Media Corporation. The acquisition calls for
the issuance of a $75,000 note for the assumption of debt and 15,000,000 shares
of the Company's common stock. New Wave Media Corporation operates The Heat
100.3. com radio station, utilizing a Time Brokerage Agreement.
As of the date of this report the stock has not been issued as a result of the
Company's right to rescind the agreement within the first two years if the Time
Brokerage agreement is lost or cancelled. Flinn Broadcasting has turned the
power off at The Heat 100.3 in Great Falls, MT. The Heat 100.3 is New Wave Media
Corporation's (a wholly owned subsidiary of Victor Industries) first radio
station. See Note 5 Subsequent Events
4. RELATED PARTY TRANSACTIONS
Penny Sperry, former CEO and Director was issued 4,750,000 shares of common
stock in payment of $95,000 of her outstanding loan balance. Forest Mineral
advanced $3,800 to the Company for working capital. It is anticipated that this
amount will be repaid within 2003. Blue Rock Minerals, a related party is
indebted to the Company in the amounts of $27,500 and $2,858. During the second
quarter ended June 30, 2003 the Company wrote off as uncollectible $30,358
representing the demand loan receivable from Blue Rock Minerals, a company owned
by Mr. Ron Pellett, a former officer and director of New Wave Media. Mr. Pellett
currently provides consulting services to the Company.
In addition, during the first quarter of 2003, Penny Sperry was issued
13,000,000 shares, at $0.005 per share equaling $65,000, as payment on her
outstanding loan balance. Also during this same period, she paid legal fees,
equaling $65,000, on behalf of the Company through the issuance of the Company's
common stock held in her name.
As of March 5, 2003, Ms. Penny Sperry resigned as Chairman and CEO of Victor
Industries and Mr. Josh Gager, President of New Wave Media, was elected by the
board of directors as the new Chairman and CEO.
11
5. SUBSEQUENT EVENTS
During October 2003 the Board of Directors of Victor Industries, Inc. reported
that Flinn Broadcasting has turned the power off at The Heat 100.3 in Great
Falls, MT. The Heat 100.3 is New Wave Media Corporations ( a wholly owned
subsidiary of Victor Industries ) first radio station.
The station has been closed and all employees dismissed.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The financial information set forth in the following discussion should be read
in conjunction with, and qualified in its entirety by, the financial statements
of the Company included elsewhere herein.
Business
Victor Industries, Inc.
Victor Industries, Inc. was originally organized under the laws of the State of
Idaho on January 19, 1926 under the name of Omo Mining and Leasing Corporation.
The Company was renamed Omo Mines Corporation on January 19, 1929. The name was
changed again on November 14, 1936 to Kaslo Mines Corporation and finally Victor
Industries, Inc. on December 24, 1977.
We have not recorded any significant revenue for the past two years and there is
substantial doubt about us continuing as a going concern as expressed by our
auditors in their audit report as of December 31, 2002 without funding to
develop assets and profitable operations. As of the date of this report, the
Company is currently concentrating in the following:
Zeolite Products
We intend to be engaged in the sale and distribution of various forms of zeolite
products. Our plan is to contract with independent contractors to mine and
transport zeolite from properties the contractors own or lease to a contract
milling and packaging facility. We plan to then market the packaged and bulk
ordered zeolite through distributors and under distributor's private labels.
12
Our current product plans center on products related to the use of the mineral
known as zeolite. Zeolites have the unique distinction of being nature's only
negatively charged mineral. Zeolites are useful for metal and toxic chemical
absorbents, water softeners, gas absorbents, radiation absorbents and soil and
fertilizer amendments. Clinoptilolite, one type of natural zeolite, is our
primary focus. Clinoptilolite's absorption capabilities of ammonia provide a
number of applications in the agricultural industry. We are primarily focusing
on two zeolite compounds in order to produce revenue. We believe that the two
primary sources of nitrate and phosphate pollution are fertilizers and large
animal feeding operations.
Our first product will utilize zeolite for slow released fertilizer. We have
filed a patent application for a new zeolite proprietary fertilizer compound
called ENVIROLIZER. We have not received any comments from the U.S. Patent
Office as of the date of this filing. This compound is formulated around a
demand driven release of nutrients.
We intend to market our proprietary compound solutions to the golf course and
horticulture industries. We cannot give any assurance that we will be able to
compete or generate sales in these markets.
ENVIROLIZER was formulated around the use of zeolite to absorb the ammonia that
is released by animal discharge from large animal feeding operations. We will
then utilize the nutrients from the absorption process and turn it into a slow
demand release fertilizer. We believe that wide spread use of our absorption
process will significantly reduce pollution from these feeding operations while
reducing the leaching of nitrates and phosphates into the ground water. Because
of the absorption capabilities of zeolite, we believe that our fertilizer
compound will work effectively for up to three years, depending on the type of
crop or plants being fertilized, thereby reducing the need for multiple
fertilizer applications every year. The ENVIROLIZER fertilizer compound is
expected to absorb up to 45% of its weight in water and slowly release it when
the soil begins to dry thus reducing the irrigation cycle. We cannot give any
assurances that we will be successful in receiving a patent for our compound or
that we will be able to produce a marketable or profitable product.
Presently, The Lawn & Garden Performance Group has contacted large retailers,
distributors, television marketing organizations, and other marketing
organizations. Marketing a new product is a lengthy process with significant
risks, there can be no assurance that the Company will be successful in its
efforts. The Company plans a series of new products to enhance its product line.
It is easier to add to a product line once a distribution channel has
successfully been established.
New Wave Media Corporation
On March 5, 2003 the Company signed an agreement to acquire 100% of the issued
and outstanding stock of New Wave Media Corporation, a Nevada corporation. The
acquisition calls for the issuance of a $75,000 note for the assumption of debt
and 15,000,000 shares of the Company's common stock. New Wave Media Corporation
operates The Heat 100.3. com radio station, utilizing a Time Brokerage
Agreement. As of the date of this report the stock has not been issued as a
result of the Company's right to rescind the agreement within the first two
years if the Time Brokerage agreement is lost or cancelled. Flinn Broadcasting
has once again turned the power off at The Heat 100.3 in Great Falls, MT. The
Heat 100.3 is New Wave Media Corporations ( a wholly owned subsidiary of Victor
Industries ) first radio station. See Note 5 Subsequent Events.
13
The Time Brokerage Agreement calls for New Wave Media to purchase time on KFLL
(FM) radio in Great Falls, Montana, under the authority granted by the Federal
Communications Commission, Washington, D.C. The agreement is for 96 months and
calls for monthly payments starting at $6,000 per month.
The acquisition was recorded as a purchase with a recording of $165,000 to
Goodwill and the Issuance of a $75,000 note and the assumption of debt. The note
is due in one year and accrues interest at the rate of 3% per annum. The results
of operations of New Wave Media have been consolidated into the Company from the
date of acquisition, March 5, 2003 through September 30, 2003.
In July the licensee of the time brokerage agreement shut down the radio station
claiming non-payment of the required fees. Management of the Company pursued a
temporary restraining order and a permanent injunction against this action. On
August 20, 2003 the Montana Eighth Judicial District Court awarded New Wave
Media a permanent injunction. The Company has filed litigation against Flinn
Broadcasting for monetary damages. The outcome of this case is still in question
so no adjustment has been proposed. Subsequent to September 30, 2003, Flinn
Broadcasting has turned the power off at The Heat 100.3 in Great Falls, MT. The
Heat 100.3 is New Wave Media Corporation's (a wholly owned subsidiary of Victor
Industries) first radio station. We have made the decision not to attempt to
gain another injunction and instead exercise our legal rights in court. With the
reputation we have gained in the market our plans are to acquire another
station. There can be no assurance that we will be successful in accomplishing
our goal.
The station has been closed and all employees dismissed.
Product Liability Insurance
We carry no direct product liability insurance, relying instead on the coverage
maintained by our distributors and manufacturing sources from whom we obtain
product. There is no assurance that this insurance will adequately cover any
liability claims brought against us. There also can be no assurance that we will
be able to obtain our own liability insurance (should we seek to do so) on
economically feasible terms. Our failure to maintain our own liability insurance
could materially adversely affect our ability to sell our products in the
future. Although no product liability claims have been brought against us to
date, if there were any such claims brought against us, the cost of defending
against such claims and any damages paid by us in connection with such claims
could have a materially adverse impact upon us, including our financial
position, results of operations and cash flows.
14
Competition and Difficulties in Marketing Products
Victor Industries, Inc.
There is tremendous competition in the home and garden fertilizer business. Many
of the leading companies have well established brands that consumers are
familiar with, and which consumers have successfully used in the past. Many of
our competitors are large, well financed organizations that have significant
distribution channels already in place. It is very challenging for the Company
to establish a new distribution channel for a new product and it is equally
difficult to market a new product to consumers who have never used the product.
We may not be successful in establishing a market for our product.
New Wave Media Corp.
There are currently 14 radio stations broadcasting to the Great Falls area and
The Heat 100.3 is the only station offering contemporary, top 40, music on a
full time basis. There is one station that offers a similar programming
selection, but only on a part time basis.
Research and Development
The Company is currently not conducting any research programs on its products.
There are no plans to engage in further research of ENVIROLIZER's uses and
benefits.
Government Regulation
Victor Industries, Inc.
We do not currently hold any patents, trademarks, licenses, franchises,
concessions or royalty agreements. There are no labor contracts and no union
agreements. We have filed a patent application for our fertilizer product but
have not received any comments from the patent office.
We do not anticipate significant delays in government approval to operate.
Zeolite has received a GRAS (generally regarded as safe) rating from the federal
government. The zeolite mines that we contract with are fully permitted and have
operated in each of the last five years. If government approval was withheld
from one of the sources of raw material we believe we could access supplies from
other operators.
If funding becomes available to the Company, we may develop our own zeolite mine
and install the milling and bagging equipment necessary to operate
independently. We cannot assure you that such funding will materialize.
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The costs and effects of compliance with environmental laws (federal, state and
local) are not born directly by us but through the costs imposed on the contract
miners. Increased costs to the mines will result in higher costs of the raw
material we purchase.
New Wave Media Corp.
New Wave Media to purchased time on KFLL (FM) radio in Great Falls, Montana,
under the authority granted by the Federal Communications Commission,
Washington, D.C.
Property
Victor Industries, Inc.
We do not presently own any real property.
We currently pay $1,200 per month rent the space for the radio station and
Company office space. The lease on the subject space has expired and the Company
currently occupies the space on a month to month basis.
The Company holds four mining claims. The cost of holding these claims is
approximately $400 per year. Two of the mining claims are potential gold claims,
however, no work has been undertaken by the Company to determine their value.
The two remaining mining claims are zeolite claims. Substantial work has been
done by the previous claimant, Allied Chemical, on these claims. Although
Company management believes the reserves in its mining claims are substantial
(based on work done on these claims by Allied Chemical) and in spite of the fact
that the Company has been given a mining permit for the property; however, given
the price of zeolite in the current market, and the Company does not intend to
invest capital to mine its claims.
New Wave Media Corp.
New Wave Media Corporation operates The Heat 100.3.com radio station, utilizing
a Time Brokerage Agreement, which calls for the Company to purchase time on KFLL
(FM) radio in Great Falls, Montana, under the authority granted by the Federal
Communications Commission, Washington, D.C. The agreement is for 96 months and
calls for monthly payments starting at $6,000 per month.
Employees
Victor Industries, Inc.
We currently have no full time employees. We rely on independent contractors to
handle the mining operations. We intend to employ independent distributors for
sales efforts, as well as mining, milling and packaging. Our directors have no
contract with the Company and are receiving no pay at the present. The directors
have agreed to work for no pay until we have achieved positive cash flow from
operations. There is no deferment or liability being accrued by us under this
arrangement.
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Our directors have no contract with the Company and are receiving no pay at the
present. The directors have agreed to work for no pay until we have achieved
positive cash flow from operations. There is no deferment of compensation or
liability being accrued by the Company under this arrangement.
New Wave Media Corp.
As of September 30, 2003 the Company had 10 full time employees. These employees
operate as engineers, radio personalities, administrative staff and executives.
The Company also utilizes independent contractors to handle some of the
administrative functions. In October 2003 as a result of Flinn turning off the
radio signal, management dismissed all employees and is reviewing their current
options of legal recovery and the possibility of acquiring a new station.
FINANCIAL CONDITION AND CHANGES IN FINANCIAL CONDITION
The following analysis of historical financial condition and results of
operations are not necessarily reflective of the on-going operations of the
Company.
Overall Operating Results
We did not have any zeolite sales for the quarters ended September 30, 2003 or
September 30, 2002. We anticipate that increased marketing efforts and the
successful approval of our patent for the fertilizer compound in the future will
generate the required revenues to sustain our anticipated growth. There can be
no assurances that such sales will occur or that our patent application will be
approved.
New Wave Media recognized $9,697 of sales revenue for the three-month period
ended September 30, 2003. This represents sales of advertising to the local
market.
Selling and administrative expenses were $177,108 for the current quarter. These
expenses were incurred primarily for the following reasons:
o $21,783 of payroll expense for New Wave Media
o Office and studio rent of $24,967
o Business consulting fees of $106,675.
o Advertising, promotion and related travel expenses of $2,019.
We incurred a net loss for the current quarter of $329,347 as compared to a net
loss of $249,734 for the comparable prior year quarter. These losses were
attributable to the aforementioned operating expenses.
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Operating Losses
We have accumulated approximately $4.69 million of net operating loss
carry-forwards as of September 30, 2003, that may be offset against future
taxable income. There will be limitations on the amount of net operating loss
carry-forwards that can be used due to the change in the control of the
management of the Company. No tax benefit has been reported in the financial
statements, because we believe there is a 50% or greater chance the
carry-forwards will expire unused.
Accordingly, the potential tax benefits of the loss carry-forwards are offset by
valuation allowance of the same amount.
Liquidity and Capital Resources
We have been financed through stock sales, related parties and a convertible
note offering, as there has been no substantial revenue generated to date.
During the quarter ended September 30, 2003 the Company received $36,283 in
loans from related parties.
We will need additional financing in order to implement our business plan and
continue as a going concern. We do not currently have a source for any
additional financing and we cannot give any assurances that we will be able to
secure any financing.
Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statements of Financial Accounting Standards No. 141 "Business Combinations"
("SFAS 141") and No. 142 "Goodwill and Other Intangible Assets ("SFAS 142").
SFAS 141 requires all business combinations initiated after June 30, 2001, to be
accounted for under the purchase method. For all business combinations for which
the date of acquisition is after June 30, 2001, SFAS 141 establishes specific
criteria for the recognition of intangible assets separately from goodwill and
requires unallocated negative goodwill to be written off immediately as an
extraordinary gain, rather than deferred and amortized. SFAS 142 changes the
accounting for goodwill and other intangible assets after an acquisition. The
most significant changes made by SFAS 142 are: 1) goodwill and intangible assets
with indefinite lives will no longer be amortized; 2) goodwill and intangible
assets with definitive lives must be tested for impairment at least annually;
and 3) the amortization period for intangible assets with finite lives will no
longer be limited to forty years. As a result of the uncertainty regarding the
ultimate closure of the radio station, the Company recorded a $165,000 Goodwill
write-down.
In December 2002, the FASB issued SFAS No.148, "Accounting for Stock-Based
Compensation - Transition and Disclosure." This statement amends SFAS No.123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value-based method of accounting
for stock-based employee compensation. Pursuant to SFAS No.123, the Company will
continue to report pro forma expense amounts for the fair market value of stock
options newly granted to employees. In October 2003 as a result of Flinn turning
off the radio signal, management is reviewing the stock reserved to acquire New
Wave Media Corporation.
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Inflation
Our results of operations have not been affected by inflation and we do not
expect inflation to have a significant effect on its operations in the future.
Forward-Looking Information
From time to time, we or our representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filings made by us with the Securities and Exchange Commission. Words or
phrases "will likely result", "are expected to", "will continue", "is
anticipated", "estimate", "project or projected", or similar expressions are
intended to identify "forward-looking statements". Such statements are qualified
in their entirety by reference to and are accompanied by the above discussion of
certain important factors that could cause actual results to differ materially
from such forward-looking statements. Management is currently unaware of any
trends or conditions other than those previously mentioned in the management's
discussion and analysis that could have a material adverse effect on the
Company's consolidated financial position, future results of operations, or
liquidity. However, investors should also be aware of factors that could have a
negative impact on the Company's prospects and the consistency of progress in
the areas of revenue generation, liquidity, and generation of capital resources.
These include: (i) variations in revenue, (ii) possible inability to attract
investors for its equity securities or otherwise raise adequate funds from any
source should the Company seek to do so, (iii) increased governmental
regulation, (iv) increased competition, (v) unfavorable outcomes to litigation
involving the Company or to which the Company may become a party in the future
and, (vi) a very competitive and rapidly changing operating environment.
The risks identified here are not all inclusive. New risk factors emerge from
time to time and it is not possible for management to predict all such risk
factors, nor can it assess the impact of all such risk factors on the Company's
business or the extent to which any factor or combination of factors may cause
actual results to differ materially from those contained in any forward-looking
statements. Accordingly, forward-looking statements should not be relied upon as
a prediction of actual results.
ITEM 3. QUANTATIVE DISCUSSION ON MARKET RISK
We face exposure to fluctuations in the price of our common stock due to the
very limited cash resources we have. For example, the Company has very limited
resources to pay legal and accounting professionals. If we are unable to pay
legal and accounting professionals in order to perform services for the company,
it may be difficult, if not impossible, for the Company to maintain its
reporting status under the '34 Exchange Act. If the Company felt it was likely
that it would not be able to maintain its reporting status, it would make a
disclosure by filing a Form 8-K with the SEC. In any case, if the Company was
not able to maintain its reporting status, it would become "delisted" and this
would potentially cause an investor or an existing shareholder to lose all or
part of his investment.
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ITEM 4. CONTROLS AND PROCEDURES
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in company reports
filed or submitted under the Securities Exchange Act of 1934 (the "Exchange
Act") is recorded, processed, summarized and reported, within the time periods
specified in the Securities and Exchange Commission's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in
company reports filed under the Exchange Act is accumulated and communicated to
management, including the Company's Chief Executive Officer and Chief Financial
Officer (the "Certifying Officers"), as appropriate to allow decisions regarding
required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, the Certifying
Officers carried out an evaluation of the effectiveness of the design and
operation of the Company's disclosure controls and procedures as of September
30, 2003. Their evaluation was carried out with the participation of other
members of the Company's management. Based upon their evaluation, the Certifying
Officers concluded that the Company's disclosure controls and procedures were
effective.
The Company's internal control over financial reporting is a process designed
by, or under the supervision of, the Certifying Officers and the Company's Board
of Directors, management and other personnel, to provide reasonable assurance
regarding the reliability of the Company's financial reporting and the
preparation of the Company's financial statements for external purposes in
accordance with generally accepted accounting principles. Internal control over
financial reporting includes policies and procedures that pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and dispositions of the Company's assets; provide reasonable
assurance that transactions are recorded as necessary to permit preparation of
the Company's financial statements in accordance with generally accepted
accounting principles, and that the Company's receipts and expenditures are
being made only in accordance with the authorization of the Company's Board of
Directors and management; and provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of the
Company's assets that could have a material effect on its financial statements.
There has been no change in the Company's internal control over financial
reporting that occurred in the quarter ended September 30, 2003, that has
materially affected, or is reasonably likely to affect, the Company's internal
control over financial reporting.
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PART II
ITEM 1. LEGAL PROCEEDINGS
February 21, 2002, the U.S. Securities and Exchange Commission filed an action
against the Company, certain shareholders and related parties. This action
claimed certain illegal acts by the shareholders and related parties. A consent
decree was signed to settle the matter and allow the Company to continue its
business operations. Legal counsel for the Company is of the opinion that this
action will have no material financial effect on the Company.
In July the licensee of the time brokerage agreement shut down the radio station
claiming non-payment of the required fees. Management of the Company pursued a
temporary restraining order and a permanent injunction against this action. On
August 20, 2003 the Montana Eighth Judicial District Court awarded New Wave
Media a permanent injunction. The Company has filed litigation against Flinn
Broadcasting for monetary damages. The outcome of this case is still in question
so no adjustment has been proposed.
During October 2003 the Board of Directors of Victor Industries, Inc. reported
that Flinn Broadcasting has once again turned the power off at The Heat 100.3 in
Great Falls, MT. The Heat 100.3 is New Wave Media Corporations ( a wholly owned
subsidiary of Victor Industries ) first radio station. We bounced back from the
first disruption when Flinn turned us off the second time. We have made the
decision not to attempt to gain another injunction and instead exercise our
legal rights in court. With the reputation we have gained in the market our
plans are to acquire another station. There can be no assurance that we will be
successful in accomplishing our goal.
ITEM 2. CHANGES IN SECURITIES
During the third quarter, ended September 30, 2003, the Company issued
15,500,000 shares of common stock, at $.01 per share, to pay expenses.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
31.1 Certification of Chief Executive Officer, pursuant to Rule
13a-14(a) of the Exchange Act, as enacted by Section 302 of
the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer, pursuant to Rule
13a-14(a) of the Exchange Act, as enacted by Section 302 of
the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to 18 United
States Code Section 1350, as enacted by Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18 United
States Code Section 1350, as enacted by Section 906 of the
Sarbanes-Oxley Act of 2002.
99.A4 Acquisition and Stock Exchange Agreement (previously filed as
an exhibit to Form 8-K filed on June 16, 2003)
b. Reports on Form 8-K
On June 16, 2003 we reported on Form 8-K the following acquisition
agreement:
On June 16, 2003, the Registrant (also referred to herein as "Purchaser")
and New Wave Media, Inc. ("Sellers"), a Nevada corporation, closed a
transaction related to a certain Agreement ("Agreement") regarding the
purchase of all of the issued and outstanding shares of the capital stock
of the Sellers. As a result, New Wave Media has become a wholly owned
subsidiary of Victor Industries, Incorporated. This Agreeement was approved
to be entered into by the Victor Industries, Incorporated Board of
Directors on March 5, 2003.
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Signatures
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
(Registrant): VICTOR INDUSTRIES, INC.
Date: December 18, 2003
By: /s/ Josh Gager
-------------------------
Josh Gager, President and CEO
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