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, 2002
Commission File Number 000-30237
____________________________________________________________________
VICTOR INDUSTRIES, INC.
(Exact name of registrant as specified in charter)
Idaho 91-0784114
______________________ ____________________
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4810 NORTH WORNATH ROAD, MISSOULA, MONTANA 59804
_____________________________________________ ___________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (406) 251-8501
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 November 13, 2002 the Company
had outstanding 111,596,692 shares of its common stock, par value $0.0001.
TABLE OF CONTENTS
ITEM NUMBER AND CAPTION PAGE
-------------------------- ----
PART I
ITEM 1. FINANCIAL STATEMENTS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND PLAN OF OPERATIONS 8
PART II
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 2. CHANGES IN SECURITIES 12
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
ITEM 1. FINANCIAL STATEMENTS
Victor Industries, Inc.
Comparitive Balance Sheets
As of September 30, 2002
Unaudited Unaudited
As of As of
September 30, December 31,
2002 2002
ASSETS ------------- -------------
Current Assets:
Cash and Cash Equivalents $ 10,501 $ 166,409
Accounts Receiveable 65,000 -
Accounts - Related Party 2,858 2,858
Note Receivable - Related Party 27,500 27,500
Stock Subscription Receivable - 25,000
Prepaid Expense 2,650 800
Computer Equipment and Software 10,640 -
Supply Inventory 7,734 -
----------- -----------
Total Current Assets $ 126,883 $ 222,567
Other Assets:
Property Plant and Equipment - 9,043
----------- -----------
TOTAL ASSETS 126,883 231,610
=========== ===========
LIABILITIES AND SHAREHOLDER'S
EQUITY AND LIABILITIES
Current Liabilities:
Accounts Payable 47,758 40,719
Note Payable - Related Party - 3,800
Accrued Payroll 19,516 -
Shareholder Note Payable 23,926 -
Total Current Liabilities 91,200 44,519
----------- ----------
Long-term Liabilities
Notes Payable to Shareholders - 117,500
----------- ----------
TOTAL LIABILITIES 91,200 162,019
=========== ==========
SHAREHOLDER'S EQUITY (DEFICIT)
Common Stock, $0.0001 Par Value
200,000,000 Shares Authorized and
112,596,692 Shares Issued at September 30, 2002
and 70,938,692 Shares Issued at December 31,2001 11,260 3,546,935
Additional Paid in Capital 4,048,297 57,521
Accumulated Deficit (4,023,874) (3,534,865)
----------- ----------
TOTAL SHAREHOLDER'S EQUITY (DEFICIT) 35,683 69,591
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY 126,883 231,610
=========== ==========
See notes to Financial Statements
VICTOR INDUSTRIES, INC.
COMPARATIVE STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2002
Unaudited Unaudited
Three Months Three Months
Ended Ended
September 30, 2002 September 30, 2001
REVENUE
Revenue - -
------------ ------------
Total Revenue - -
============ ============
COSTS AND EXPENSES
Selling and Administrative 249,287 22,725
Depreciation and Amortization - -
Interest 447 -
------------ ------------
249,734 22,725
------------ ------------
Net Loss (249,734) (22,725)
Retained Deficit at Beginning of Period (3,774,139) (3,053,589)
Retained Deficit at End of Period (4,023,874) (3,076,314)
============= =============
Loss per Common Share (.0022) (0.001)
------------- -------------
VICTOR INDUSTRIES, INC.
COMPARATIVE STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001
Unaudited Unaudited
Nine Months Nine Months
Ended Ended
September 30, 2002 September 30, 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (249,734) (41,870)
Provided (Used) by Operating Activities
Depreciation and Amortization - -
Accounts Receivable (65,000) (2,858)
Accounts Payable 10,425 (5,961)
Notes Payable 23,926
Prepaid Expenses (1,350)
---------- ----------
Net Cash Used by Operating Activities (281,733) (50,689)
Provided (Used) by Investing Activities
Equipment Additions - (7,992)
---------- ----------
Net Cash Used by Investing Activities - (7,992)
Provided (Used) by Financing Activities
Issuance of Common Stock 2,695 209,036
Stockholder Equity: Additional Paid In Capital 289,305 209,036
Proceeds (Repayments) from Shareholder Loans - (153,797)
---------- ----------
Net Cash Provided (Used) by Financing Activities 292,000 264,275
Net Increase (Decrease) in Cash 10,267 205,594
Cash at Beginning of Period 234 3,944
Cash at End of Period 10,501 209,538
========== ==========
VICTOR INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2002
(Unaudited)
1. GENERAL
The accompanying unaudited financial statements have been prepared in
conformity with the accounting principles stated in the audited financial
statements for the year ended December 31, 2001 and reflect all adjustments
which are, in the opinion of management, necessary for a fair statement of the
financial position as of September 30, 2002 and the results of operations for
the periods presented. The operating results for the interim periods are not
necessarily indicative of results for the full fiscal year.
The notes to the financial statements appearing in the Company's Annual
Report on form 10KSB for the year ended December 31, 2001 as filed with the
Securities Exchange Commission should be read in conjunction with this Quarterly
Report on Form 10-QSB. There have been no significant changes in the information
in those notes other than from normal business activities of the Company.
2. COMMON STOCK
During the quarter ended September 30, 2002, the Company issued
the following shares of common stock for services rendered:
a. Issued 700,000 shares valued at $0.01 per share pursuant to a
restricted stock sale of the Company's $.001 par value common stock to Covenant
Group International LLC.
b. Issued 1.75 million shares valued at $0.02 per share for a total of
a $34,825 non-cash charge to professional legal fees.
c. Issued 8,000,000 shares valued at $0.02 per share for a total of a
$159,200 non-cash charge to consulting fees.
d. Issued 500,000 shares valued at $0.01 per share pursuant to a
restricted stock sale of the Company's $.001 par value common stock to Covenant
Group International LLC.
e. Issued 1,000,000 shares valued at $0.02 per share pursuant to a
restricted stock sale of the Company's $.001 par value common stock to Steve
Purdy, an individual.
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. 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, 2001 without funding to
develop assets and profitable operations.
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.
Our current product plans center on products related to the use of the
mineral known as zeolite. Zeolites have the unique distinction of being natures
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.
Victor Industries ended the third quarter on the brink of sales. Sales
actually began in October. Although the sales are small, management expects
sales to increase over time. Management is seeking sales agreements with other
companies with established distributors in place.
Carson Coleman, CEO of the Company attended the California Nurserymen's
Association's trade show in Las Vegas during October. The feeling he came away
with was that with sufficient education distributors understand that
ENVIROLIZERtm is the first new product introduced to the fertilizer industry in
a long time. The pricing is below products with "water retention crystals" which
degrade over time while ENVIROLIZERtm does not. Environmental aspects aside, the
convenience of watering and fertilizing less frequently is a major sales factor
as well as using less fertilizer and water.
The Company believes that educating distributors is key to sales. Once the
distributors understand ENVIROLIZERtm they can educate their customers.
In our second quarter report we mentioned that the Company was going to
sell shares to continue funding the sales and development of ENVIROLIZERtm and
that current shareholders would face "substantial dilution". To date, the
Company has sold $97,000 worth of restricted shares to accredited investors at
prices ranging from $0.005 to $0.01. A large portion, $60,000.00. is on a note
collateralized by the shares, thus explaining the $60,000 in receivables on the
balance sheet and the increase in the number of shares.
The gross margins on ENVIROLIZERtm are substantial and should result in a
large percentage of gross operating profit from sales. However, a new product
will have to be advertised so shareholders should begin to watch the advertising
expense begin to rise as a percentage of sales.
The Company plans a series of new products to enhance its product line. It
is easier to add to a product line once your foot is in the door. Consequently
we will add ENVIROLIZER O, an organic version of ENVIROLIZERtm , and a pre-mixed
version with potting soil.
Property
We do not presently own any real property. We currently pay $500 per
month rent to our current Treasurer. The Company currently holds four mining
claims. The cost of holding these claims is approximately $400 per year. None of
these claims are currently in operation. If we begin operating these claims we
will be renting space at the claim site.
Employees
We currently have 3 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.
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,
2002 or September 30, 2001.
Operating expenses were $249,287 for the current quarter as compared to
$22,725 for the prior year quarter. Due to our lack of adequate capital most of
these expenses were funded through the issuance of common stock for services
provided (See "Notes to Financial Statement"). We issued stock valued at
$159,200 for marketing consulting. We also issued stock valued at $34,825 for
legal fees incurred.
We incurred a net loss for the current quarter of $249,734 as compared
to a net loss of $22,725 for the comparable prior year quarter. These losses
were attributable to the aforementioned operating expenses.
Operating Losses
We have accumulated approximately $3.0 million of accumulated deficit
as of September 30, 2002, some of which 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 related parties and a convertible note
offering as there has been no substantial revenue generated to date.
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.
We are in the process of marketing a restricted common stock offering
in order to raise adequate capital to fund our operations. The current low price
of our common stock will cause substantial dilution to the current shareholders
if we are successful in selling any stock in the offering. To help facilitate
the offering, Ms. Penny Sperry, our former President and CEO has converted
$100,000 of notes payable due her into our common stock and gifted the shares to
her children (See "Notes to Financial Statements"). We believe that a
substantially debt free balance sheet will be more attractive to new
shareholders. We can give no assurances that the offering will be successful or
that we will be able to locate any other sources of funding for our operations.
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"). The
company does not believe that the adoption of these statements will have a
material effect on its financial position, results of operations or cash flows.
In June 2001, the FASB also approved for issuance SFAS 143 "Asset
Retirement Obligations." The company will adopt the statement effective no later
than January 1, 2003, as required. At this time, the company does not believe
that the adoption of this statement will effect its financial position, results
of operations or cash flows.
In October 2001, the FASB also approved SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 replaces SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The provisions of Statement 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001, and,
generally, are to be applied prospectively. At this time, the company cannot
estimate the effect of this statement on its financial position, results of
operations or cash flows.
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.
We are currently unaware of any trends or conditions other than those
previously mentioned in this management's discussion and analysis that could
have a material adverse effect on our consolidated financial position, future
results of operations, or liquidity. However, investors should also be aware of
factors that could have a negative impact on our 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 we seek to do so, (iii) increased
governmental regulation, (iv) increased competition, (v) unfavorable outcomes to
litigation involving us or to which we 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 us to predict all of such
risk factors, nor can we assess the impact of all such risk factors on our
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.
PART II
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
On April 15, 2002 the Board of Directors approved the following resolution:
RESOLVED, that Victor Industries, Inc. will change the par value of Victor
Industries, Inc., common stock from .05 cents to .0001 cents.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
b. Reports on Form 8-K: None
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Victor Industries, Inc. on Form
10-QSB for the period ended September 30, 2002 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"), each of the undersigned,
in the capacities and on the dates indicated below, hereby certifies pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that to the best of his knowledge:
1. The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operation of the
Company.
/s/Carson Coleman
---------------------------------
Carson Coleman, President and CEO
November 12, 2002
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.
By:/s/ Carson Coleman
---------------------------------
Carson Coleman, President and CEO
Date: September 30, 2002
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By:/s/ Carson Coleman
---------------------------------
Carson Coleman, President and CEO
Date: September 30, 2002