SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20459
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: March 31, 2002
Commission File Number: 0-11419
Armitec, Inc.
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(Exact Name of Registrant as specified in its charter)
State or other jurisdiction of incorporation Delaware
(I.R.S. Employer Identification No.) 22-493-5595
--------------------------------------------------------- ---------------------
Address of Principal executive offices of corporation
4479 Atlanta Road Smyrna, Georgia 30080
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Registrants telephone number, including area code
770-432-8140
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 and 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 last 90 days.
YES [X] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as to the latest practical date.
CLASS No. of shares Outstanding on March 31, 2001
Common Stock 37,638,629
Par Value $.00167
Per share
ARMITEC, INC.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS
Part I Financial Information Page
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets
March 31, 2002 (unaudited) and December 31, 2001...................3
Unaudited Consolidated Condensed Statements of Operations for the
three months ended March 31, 2002, and March 31, 2001 and cumulative
from commencement of development stage through March 31, 2002
(unaudited)........................................................4
Unaudited Consolidated Condensed Statements of Cash Flows for the
three months ended March 31, 2002, and March 31, 2001 (unaudited),
and cumulative from commencement of development stage through
March 31, 2002 (unaudited).........................................5
Consolidated Statement of Changes in Stockholders' Equity for the
period from December 31, 1999 to March 31, 2002
(unaudited)........................................................6
Notes to Financial Statements (unaudited)..........................7
Item 2. Plan of operation..................................................7
Part II Other Information Page
Item 1. Legal Proceedings..................................................7
Item 2. Changes in Securities and Use of Proceeds..........................7
Item 3. Defaults Upon Senior Securities....................................7
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K...................................8
2
ARMITEC, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, December 31,
2002 2001
------------ ------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ $ 7,557
Finished goods inventory 70,066 71,189
Prepaid rent 7,775
Deposit 5,000
Miscellaneous receivable 4,500
------------ ------------
Total current assets 79,566 86,521
------------ ------------
Fixed Assets
Furniture,fixtures and equipment, at cost 66,120 66,120
Leasehold improvements 6,302
------------ ------------
Total fixed assets 72,422 66,120
OTHER ASSETS
Lease deposit 15,500 15,500
Advance to Jack Young 49,500 49,400
------------ ------------
Total Other Assets 65,000 65,000
------------ ------------
Total assets $ 216,988 $ 168,141
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 197,747 $ 138,918
Bank overdraft 5,329
Related party obligations 519,355 479,600
Bridge loan 50,000
------------ ------------
Total Current Liabilities 772,431 618,518
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, par value $.00167; 50,000,000
shares authorized; 37,638,629 issued and outstanding 62,856 50,958
Paid-in capital 206,987 170,322
(Deficit) accumulated during the development stage (825,286) (671,657)
------------ ------------
Total Stockholders' Equity (Deficit) (555,443) (450,377)
------------ ------------
$ 216,988 $ 168,141
============ ============
The accompanying notes are an integral part of these financial statements
3
ARMITEC, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Cumulative
from
July 24
2000
(commencement
of
Three Months Three Months development
Ended Ended stage)
March 31, March 31, to
2002 2001 March 31, 2002
-------------- -------------- --------------
REVENUES $ -- -- $ --
-------------- -------------- --------------
EXPENSES
General and administrative 152,249 61,031 783,647
Interest 1,380 1,640 6,672
-------------- -------------- --------------
Total expenses 153,629 62,671 790,319
-------------- -------------- --------------
NET (LOSS) $ (153,629) (62,671) $ (790,319)
============== ============== ==============
NET (LOSS) PER SHARE (*) (*)
============== ==============
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 34,076,129 18,808,632
============== ==============
(*) less than $.01 per share
The accompanying notes are an integral part of these financial statements
4
ARMITEC, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Cumulative
from
July 24
2000
(commencement
of
Three Months development
Ended stage)
March 31, to
2002 March 31, 2002
-------------- --------------
OPERATING ACTIVITIES
Net (loss) $ (153,629) $ (790,319)
Adjustments to reconcile net loss to
net cash used by operating activities:
Issuance of common stock for services 11,063 67,135
Changes in:
Accounts payable 58,829 197,747
Inventory 1,123 (70,066)
Prepaid rent 7,775 --
Related Party transactions 39,755 519,355
--------------
Net Cash (Used) by Operating Activities (35,084) (76,148)
--------------
INVESTING ACTIVITIES
Deferred offering costs (21,251)
Increase in other receivables (54,000) (54,000)
Increase in leasehold improvements (6,302) (6,302)
Increase in deposit - auto (5,000) (5,000)
Increase in lease deposit (15,500)
Increase in furniture, fixtures and equipment (66,120)
--------------
Net Cash to financing activities (65,302) (168,173)
--------------
FINANCING ACTIVITIES
Increase in paid-in capital 36,665 36,665
Increase in common stock 835 152,327
Bridge loan 50,000 50,000
--------------
Net Cash to financing activities 87,500 238,992
--------------
NET (DECREASE) IN CASH (12,886) (5,329)
CASH AT BEGINNING OF PERIOD, 7,557 --
--------------
BANK OVERDRAFT AT END OF PERIOD $ (5,329) $ (5,329)
==============
SUPPLEMENTAL INFORMATION
Interest paid $ 1,640 $ 6,672
==============
NON-CASH ACTIVITIES
Deferred offering costs applied to common stock
subscriptions received $ 21,251 $ 21,251
==============
The accompanying notes are an integral part of these financial statements
5
ARMITEC, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Accumulated
(Deficit)
Common Stock During
-------------------------- Paid-In Development
Shares Amount Capital Stage Total
----------- ----------- ----------- ----------- -----------
Balances, at Inception 15,947,542 $ 25,516 $ $ (34,967) $ (9,451)
Shares issued for
compensation to employees
@ $.01 per share, June
10, 2000 1,027,100 1,643 8,628 10,271
Shares issued to settle
debt at $.01 per share,
June 10, 2000 18,000 29 151 180
Shares issued for
consulting services
@ $.01 per share 1,815,990 2,906 15,254 18,160
Net(loss)for the period (222,746) (222,746)
----------- ----------- ----------- ----------- -----------
Balances,December31,2000 18,808,632 30,094 24,033 (251,713) (203,586)
Issuance of common stock
February 12, 2001, net of
offering costs of $21,251
at $.15 per share 849,997 1,360 105,381 106,741
Issuance of common stock
for consulting services
on April 10, 2001 at par 720,000 1,152 1,152
Proceeds from sale of
common stock, July 15,2001
at $.15 per share 35,000 56 4,944 5,000
Common stock issued for
consulting services
July 1, 2001, at par 7,350,000 11,760 11,760
Common stock issued for
consulting services
November 8, 2001, at
$.01 per share 2,500,000 4,000 21,000 25,000
Proceeds from sale of
common stock November 8,
2001, at $.15 per share 50,000 80 7,420 7,500
Proceeds from exercise of
stock purchase warrants
on December 27, 2001, at
$.05 per share 200,000 320 9,680 10,000
Change in par value to
..000167 per share 2,136 (2,136) --
Net (loss) for the year (413,944) (413,944)
----------- ----------- ----------- ----------- -----------
Balances,December31,2001 30, 513,629 $ 50,985 $ 170,322 $ (671,657) $ (450,377)
Common stock issued for
consulting services
February 4, 2002, at
$.01 per share 2,225,000 3,715 3,715
Proceeds from exercise
of stock purchase
warrants on February 14,
2002, at $.075 per share 500,000 835 36,665 37,500
Common stock issued for
consulting services
March 4, 2002, at
$.01 per share 4,400,000 7,348 7,348
Net (loss) for period (153,629) (153,629)
----------- ----------- ----------- ----------- -----------
Balances,March 31,2002 37,638,629 $ 60,720 $ 209,123 $ (825,286) $ (555,443)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements
6
ARMITEC, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Three Months Ended March 31, 2002
NOTE 1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated
condensed financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and footnotes required by U.S. generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of the Company's financial position as of March 31, 2002 and
the results of its operations and cash flows for the three months ended March
31, 2002. Operating results for the three months ended March 31, 2002 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2002.
These condensed financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Company's Form 10-KSB
for the year ended December 31, 2001.
ITEM 2. PLAN OF OPERATION
For the near term, the Company continues to pursue its business plan, and
the Company is currently seeking another acquisition or in the alternative,
raising additional funds necessary to commence retail and manufacturing
operations. The Company has had no significant revenues or operations since
inception. Although the Company recently raised approximately $300,000 in net
proceeds from the sale of a convertible note, additional capital will be needed
to continue the Company's operations. The Company expects to obtain additional
capital through the private sale of the Company's securities or from borrowings
from private lenders and/or financial institutions. There can be no assurance
that the Company will be successful in obtaining any additional capital which
may be needed.
Part II
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities and Use of Proceeds
The Company entered into a Convertible Note Purchase Agreement dated as of
April 23, 2002, in which the Registrant covenanted that it would not declare or
pay any dividends so long as the Convertible Note remained outstanding. The
Convertible Note matures on April 23, 2004.
In April, 2002, the Registrant entered into a securities purchase agreement
with the Stonestreet Limited Partnership for the issuance of a $350,000 7%
convertible note and 3,500,000 common stock purchase warrants in reliance on
Section 4(2) of the Act and Rule 506. Each warrant entitles the holder to
purchase one share of common stock at an exercise price of $.042. The commission
for the transaction was 10% ($35,000) and a common stock purchase warrant for
3,500,000 shares of our stock at an exercise price per share of $.042. Net
proceeds amounted to $315,000.
Item 3. Defaults Upon Senior Securities
NONE
7
Item 4. Submission of Matters to a Vote of Security Holders
NONE
Item 5. Other Information
During April 2002, the Company entered into a convertible debt financing
agreement with Stonestreet Limited Partnership for an aggregate of $350,000. The
stated interest rate is 7% per annum and the unpaid principal and interest
balance is due in full by April 23, 2004. Net proceeds to the Company amounted
to approximately $315,000, which is net of debt issue costs. The Company issued
3,500,000 warrants to acquire 3,500,000 shares of the Company's common stock at
an exercise price of $.042.
On May 2, 2002, Jack Young Associates, Inc., a wholly-owned subsidiary of
the Company, purchased the assets of Pocono Knits, Inc, a New Jersey
corporation. Pocono Knits, Inc. is a manufacturer of sweaters for the military,
police, postal, fire And security companies. The company has been in business
for over 40 years and services the same customer base as the Company intends to
service. The sale was consummated pursuant to the terms and conditions of an
Asset Purchase Agreement dated as of March 15, 2002, as amended by a First
Amendment to Asset Purchase Agreement dated May 2, 2002 ( The "Asset Purchase
Agreement").
Pursuant to the terms of the Asset Purchase Agreement, Jack Young
Associates, Inc. assumed all of the obligations of Pocono Knits, Inc in the
aggregate amount of approximately $1,900,000. In connection with the Asset
Purchase Agreement, the Company entered into a Stock Pledge Agreement whereby
the Company pledged all of the issued and outstanding shares of Jack Young
Associates, Inc. to Jack Young as security for the performance of certain
obligations of the Company, including the payment of all amounts now due or
coming due at any time thereafter in connection with such obligations.
The purchase price paid in connection with the sale was determined through
arms-length negotiations among the parties to the Asset Purchase Agreement. The
foregoing description is qualified in its entirety by reference to the Asset
Purchase Agreement as amended, and the Stock Pledge Agreement.
The Company will file the required pro forma financial information as soon
as is practical, but not later than 60n days after the date that this report is
required to be filed.
In addition, the Company entered into a Consulting Agreement with the
former president of Pocono Knits, Inc, which pays the consultant $127,200 per
year and 2,000,000 shares of the Company's common stock. The 2,000,000 shares of
the Company's stock is subject to a Put Agreement whereby upon the five year
anniversary of the Put Agreement, the consultant may put the shares back to the
Company for the sum of $550,000. At any time after the two year anniversary of
the Put Agreement, the Company may call the 2,000,000 shares for the sum of
$550,000. If the consultant rejects a call from the Company, the consultant's
put option will terminate. The Company also entered into an Employment Agreement
with the former Vice President of Pocono Knits, Inc with compensation in the
amount of $96,180 per year.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
ARMITEC, INC.
July 3, 2001 /s/ Bruce R. Davis
-----------------------------------------
President, Chief Executive Officer, Chief
Financial and Accounting Officer
8