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 June 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 ROAD, MISSOULA, MONTANA 59804
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(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 June 30, 2003 the Company had
outstanding 135,721,692 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 11
ITEM 3. CONTROLS AND PROCEDURES 19
PART II
ITEM 1. LEGAL PROCEEDINGS 20
ITEM 2. CHANGES IN SECURITIES 20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 20
ITEM 5. OTHER INFORMATION 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 20
2
PART I
ITEM 1. FINANCIAL STATEMENTS
VICTOR INDUSTRIES, INC.
CONSOLIDATED COMPARATIVE BALANCE SHEETS
AS OF JUNE 30, 2003 AND DECEMBER 31, 2002
Unaudited Audited
As of As of
June 30, December 31,
2003 2002
------------ ------------
ASSETS
Current Assets:
Cash and Cash Equivalents $ 0 $ 1,190
Accounts Receivable 3,248 --
Note Receivable - Related Party -- 26,558
Prepaid rent 18,000 --
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Total Current Assets 21,248 27,748
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Other Assets:
Property and Equipment 25,966 8,223
Intangible Assets
Goodwill 165,000 --
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TOTAL ASSETS $ 212,214 $ 35,971
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Bank Overdraft $ 62 0
Accounts Payable and Accrued Expenses 45,808 $ 70,759
Note Payable - Related Party 93,998 26,634
Payroll Taxes & accrued wages 10,531 --
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Total Current Liabilities 150,399 97,393
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Long-term Liabilities:
Notes Payable to Shareholders 165,603 --
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TOTAL LIABILITIES 316,002 194,786
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SHAREHOLDER'S EQUITY
Common Stock, $0.0001 Par Value,
1,000,000,000 Shares Authorized and
135,721,692 Shares Issued at June 30,
2003 And 121,721,169 Shares Issued at
December 31, 2002 13,572 12,272
Subscription Receivable (54,200) (65,000)
Additional Paid-in Capital 4,296,887 4,062,528
Accumulated Deficit (4,360,047) (4,071,122)
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TOTAL SHAREHOLDERS' EQUITY (103,788) (61,422)
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 212,214 $ 35,971
============ ============
See accompanying notes to Interim Financial Statements.
3
VICTOR INDUSTRIES, INC.
CONSOLIDATED COMPARATIVE STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002
Unaudited Unaudited
Three Months Three Months
Ended Ended
June 30, 2003 June 30, 2002
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REVENUE
Revenue $ 6,025 $ --
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Total Revenue -- --
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COSTS AND EXPENSES
Selling and Administrative 74,966 158,546
Depreciation and Amortization -- --
Interest --
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Total Costs and Expenses 74,966 158,546
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NET LOSS (68,941) (158,546)
Retained Deficit at Beginning of Period (4,291,106) (3,615,593)
Retained Deficit at End of Period $ (4,360,047) $ (3,774,139)
============= =============
Loss Per Common Share $ (0.00) $ (0.00)
============= =============
See accompanying notes to Interim Financial Statements.
4
VICTOR INDUSTRIES, INC.
CONSOLIDATED COMPARATIVE STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002
Unaudited Unaudited
Six Months Six Months
Ended Ended
June 30, 2003 June 30, 2002
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REVENUE
Revenue $ 12,771 $ --
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Total Revenue 12,771 --
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COSTS AND EXPENSES
Selling and Administrative 209,682 239,073
Depreciation and Amortization -- --
Interest & Other expenses 31,329 201
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Total Costs and Expenses 241,011 239,274
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NET LOSS (228,240) (239,274)
Retained Deficit at Beginning of Period (4,131,807) (3,534,865)
Retained Deficit at End of Period $ (4,360,047) $ (3,774,139)
============= =============
Loss Per Common Share $ (0.00) $ (0.00)
============= =============
See accompanying notes to Interim Financial Statements.
5
VICTOR INDUSTRIES, INC.
CONSOLIDATED COMPARATIVE STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND JUNE 30, 2002
Unaudited Unaudited
Six Months Six Months
Ended Ended
June 30, 2003 June 30, 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (228,240) $ (239,274)
Depreciation 1,617 --
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Cash Used in Operating Activities (226,623) (239,274)
Increase (decrease) in Liabilities
Accounts Receivable (3,248) 25,000
Demand loan receivable 30,358 --
Prepaid expenses (18,000) (500)
Accounts Payable & accrued liabilities (10,885) 8,395
Demand loans payable 86,399 --
Payroll liability 10,531 --
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Cash applied to Operating Activities (131,469) (206,379)
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Provided (Used) by Investing Activities:
Equipment Additions (19,361) (1,596)
Goodwill (165,000) --
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Net Cash Used by Investing Activities (184,361) (1,596)
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Provided (Used) by Financing Activities:
Issuance of Common Stock for cash 10,000 163,100
Issuance of common stock for expenses 1,300 --
Proceeds (Repayments) from notes 165,603 (121,300)
Increase in Paid in capital 139,103 --
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Net Cash Provided (Used) by
Investing Activities 316,007 (41,800)
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Net Increase (Decrease) in Cash 177 (166,175)
Cash at Beginning of Period (239) 166,409
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Cash at End of Period $ (62) $ 234
============= =============
See accompanying notes to Interim Financial Statements.
6
VICTOR INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2003
(Unaudited)
1. ACCOUNTING POLICIES AND OPERATIONS
Organization
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.
Nature of Business
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.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GOING CONCERN
The accompanying 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 $4,217,813 and
negative working capital as of December 31, 2002. These factors raises
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.
7
Unaudited Interim Financial Information
The accompanying interim balance sheet as of June 30, 2003 and the statements of
operations and cash flow for the three-month period ended June 30, 2003,
together with the related notes are unaudited and, in the opinion of management,
include all normal recurring adjustments that the Company considers necessary.
Certain information and note disclosures normally included in the financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America have been omitted. A more complete description
of accounting policies and disclosures is included in the Company's annual
report on Form 10-KSB.
Consolidation
The accompanying consolidated financial statements include the accounts of
Global Golf Holdings, Inc. and its wholly owned subsidiary. All inter-company
accounts and transactions have been eliminated.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles management is required to make estimates and assumptions
that effect 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.
Cash and Equivalents
For purposes of the cash flow statements the company considers all highly liquid
investments with original maturities of three months or less at the time of
purchase to be cash equivalents.
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 of 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. SFAS 128 is effective for
fiscal years and interim periods after December 15, 1997.
8
Income Taxes
The Company utilizes Statement of Financial Accounting Standards ("SFAS") No.
109, "Accounting for Income Taxes," which requires the recognition of deferred
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under this
method, deferred tax assets and liabilities are determined based on the
difference between the tax basis of assets and liabilities and their financial
reporting amounts at each period end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized.
Stock-Based Compensation
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," establishes and encourages the use of the fair value
based method of accounting for stock-based compensation arrangements under which
compensation cost is determined using the fair value of stock-based compensation
determined as of the date of grant and is recognized over the periods in which
the related services are rendered. The statement also permits companies to elect
to continue using the current implicit value accounting method specified in
Accounting Principles Bulletin ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," to account for stock-based compensation.
The Company determined that it will not change to the fair value method and will
continue to use the implicit value based method for stock options issued to
employees and has disclosed the pro forma effect of using the fair value based
method to account for its stock-based compensation.
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.
3. CAPITAL STRUCTURE
In the second quarter 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 an 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.
9
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 $.0001 per share.
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.
The Time Brokerage agreement calls for New Wave Media to operate the radio for a
period of 96 months with monthly payments starting at $6,000 per month.
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.
In addition, in the six-month period ending June 30, 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.
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.
As of the date of the acquisition of New Wave Media, 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.
5. SUBSEQUENT EVENTS
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 Judical 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.
10
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, 2002 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.
11
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. The fourth
quarter ending December 31, 2002 marked the first quarter of revenue for Victor
Industries, Inc. The distributors responsible for the sales in the fourth
quarter failed to produce an acceptable amount of sales in the opinion of
management. Despite advertising on KFI-AM in Los Angeles there was no revenue
produced during the winter months. This prompted the management to locate The
Lawn & Garden Performance Group and engage Rick Pontz to market ENVIROLIZERtm
throughout North America. [GRAPHIC OMITTED] 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.
In the Fourth Quarter of 2002, the Company investigated acquiring businesses
outside of the Company's stated business focus. Throughout the third and fourth
calendar quarters of 2002, the Company was contacted by various parties
("Acquisition Candidates") that were interested in being acquired by Victor
Industries, Inc. In November of 2002, the Company management decided to begin
discussions with a number of the aforementioned Acquisition Candidates that had
expressed an interest in being acquired by Victor Industries, Inc. As of
December 31, 2002, the Company had not reached in definitive agreements with any
of the Acquisition Candidates.
12
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 the acquisition of New Wave, Ms Penny Sperry resigned as
Chairman and CEO of Victor Industries and Mr. Josh Gager, President of New Wave
Media Corporation, was elected by the board of directors as the new Chairman and
CEO.
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 obtains
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.
Competition and Difficulties in Marketing Products.
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.
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.
13
Government Regulation
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.
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.
Property
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.
Employees
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.
14
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.
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 June 30, 2003 or June
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 $12,770 of sales revenue for the period ended June 30,
2003. This represents sales of advertising to the local market.
Operating expenses were $74,966 for the current quarter. These expenses were
incurred primarily for the following reasons:
o $29,564 of Payroll expense for New Wave Media
o Office and studio rent of $27,540
o Business consulting fees of $3,422.
o Advertising, promotion and related travel expenses of $4,343.
Expenses incurred for the prior year quarter were $158,546 and were incurred
primarily for consulting fees reversed through the cancellation of the Company's
common stock issued for consulting services in 2001 and subsequently cancelled,
which equaled $129,600. We incurred a net loss for the current quarter of
$100,270 as compared to a net loss of $158,546 for the comparable prior year
quarter. These losses were attributable to the aforementioned operating
expenses.
15
Operating Losses
We have accumulated approximately $4.3 million of net operating loss
carry-forwards as of June 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 June 30, 2003 the Company received $44,434 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.
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 Judical 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 financial statement adjustment has been proposed.
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. 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.
16
In June 2001, the FASB also approved for issuance SFAS 143 "Asset Retirement
Obligations." SFAS 143 establishes accounting requirements for retirement
obligations associated with intangible long-lived assets, including 1) the
timing of the liability recognition, 2) initial measurement of the liability, 3)
allocation of asset retirement cost to expense, 4) subsequent measurement of the
liability and 5) financial statement disclosures. SFAS 143 requires that an
asset retirement cost should be capitalized as part of the cost of the related
long-lived asset and subsequently allocated to expense using the systematic and
rational method. The Company will adopt the statement effective no later than
January 1, 2003, as required. The transition adjustment resulting from the
adoption of SFAS 143 will be reported as a cumulative effect of a change in
accounting principle. 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 new accounting model for long-lived assets to be disposed of by sale
applies to all long-lived assets, including discontinued operations, and
replaces the provisions of APB Opinion No. 30, "Reporting Results of Operations
- Reporting the Effects of Disposal of a Segment of a Business'" for the
disposal of segments of a business. Statement 144 requires that those long-lived
assets be measured at the lower of carrying amount or fair value less cost to
sell, whether reported in continuing operations or in discontinued operations.
Therefore, discontinued operations will no longer be measured at net realizable
value or include amounts for operating losses that have not yet occurred.
Statement 144 also broadens the reporting of discontinued operations to include
all components of an entity with operations that can be distinguished from the
rest of the entity and that will be eliminated from the ongoing operations of
the entity in a disposal transaction. 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.
On April 30, 2002, the FASB issued Statement 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." FASB 145 rescinds Statement 4, which required all gains and losses
from extinguishments of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. Early application of the
provisions of FASB 145 may be as of the beginning of the fiscal year or as of
the beginning of the interim period in which FASB 145 is issued. The Company has
elected to adopt FASB 145, but it will not have a material effect on the
December 31, 2002 financial statements.
17
In July 2002, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 146 ("SFAS 146"), "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS 146 requires that a liability
for costs associated with an exit or disposal activity be recognized and
measured initially at fair value only when the liability is incurred. SFAS 146
is effective for exit or disposal activities that are initiated after December
31, 2002. Management is evaluating the effect of this statement on the Company's
results of operations and financial position.
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.
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.
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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.
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.
ITEM 3. 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 timely 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 June 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 effected by 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 June 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.
ITEM 2. CHANGES IN SECURITIES
None
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
a. Exhibits
31.1 Certification of the Chief Executive Officer pursuant to Rule
13a-14(a) (Section 302 of the Sarbanes-Oxley Act of 2002)
31.2 Certification of the Chief Financial Officer pursuant to Rule
13a-14(a) ( Section 302 of the Sarbanes-Oxley Act of 2002)
32.1 Certification of the Chief Executive Officer pursuant to 18
U.S.C.ss.1350 (Section 906 of the Sarbanes-Oxley Act of 2002)
32.2 Certification of the Chief Financial Officer pursuant to 18
U.S.C.ss.1350 (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)
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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 15, 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: August 27, 2003 By: /s/ Josh Gager
-------------------------
Josh Gager, President and CEO
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