UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 2004
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 28541
QUINTEK TECHNOLOGIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 77-0505346
--------------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
17951 Lyons Circle
Huntington Beach, CA 92647
----------------------------------------
(Address of principal executive offices)
Registrant's telephone number: 714-848-7741
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 after
the distribution of securities under a plan confirmed by a court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
At February 11, 2005, a total of 79,890,552 shares of registrant's Common Stock
were outstanding.
Transitional Small Business Disclosure Format: Yes [ ] No [X]
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
Statement of Operations
Statements of Cash flows
Notes to Financial Statements
Item 2. Management's Discussion and Analysis
Item 3. Controls and Procedures
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
Signatures
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
2
Index
PART I FINANCIAL INFORMATION ........................4
Item 1 Financial Statements ................................................. 4
Item 2 Management's Discussion and Analysis .................................24
Item 3 Disclosure Controls and Procedures ...................................25
PART II OTHER INFORMATION .........................25
Item 1 Legal Proceedings ....................................................25
Item 2 Changes in Securities ................................................25
Item 3 Defaults Upon Senior Securities ......................................27
Item 4 Submission of Matters to a Vote of Security Holders ..................27
Item 5 Other Information ....................................................27
Item 6 Exhibits and Reports on Form 8-K .....................................27
Signatures ..................................................................28
3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
QUINTEK TECHNOLOGIES, INC.
BALANCE SHEET
DECEMBER 31, 2004
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 4,052
Accounts receivable, net of allowance for doubtful accounts of $13,929 202,906
Investment in marketable securities 156,718
Prepaid expenses 13,095
------------
Total current assets 376,771
Property and equipment, net 253,227
Other assets:
Deposits 38,434
Restricted cash 250,000
Other assets 883
------------
289,317
------------
Total assets $ 919,315
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 539,207
Note payable 250,000
Factoring payable 136,722
Payroll and payroll taxes payable 79,069
Payroll taxes assumed in merger 96,661
Advances from lenders 125,000
Loans payable - stockholders 32,300
Current portion of long-term debt 90,742
Convertible bonds 62,495
Convertible debentures 200,000
Convertible notes 500,000
Deferred revenue 138,863
Dividend payable 7,879
------------
Total current liabilities 2,258,938
Long-term debt, net of current portion 200,563
Convertible debentures 225,000
Commitments and contingencies
Stockholders' deficit:
Preferred stock, convertible, no par value, 50,000,000 shares authorized,
4,683,334 shares issued and outstanding $ 0
Common stock, $0.01 par value, 200,000,000 shares authorized,
79,101,177 shares issued and outstanding 791,012
Additional paid-in capital 26,286,828
Shares to be issued 25,000
Unamortized consulting fees (23,580)
Investments held in escrow (156,718)
Accumulated deficit (28,687,728)
------------
Total stockholders' deficit (1,765,186)
------------
Total liabilities and stockholders' deficit $ 919,315
============
The accompanying notes are an integral part
of these unaudited condensed financial statements.
4
QUINTEK TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three month periods ended Six month periods ended
December 31, December 31,
2004 2003 2004 2003
------------ -------------- ------------ ------------
Net revenue $ 322,413 $ 77,248 $ 436,679 $ 185,425
Cost of revenue 271,773 60,673 356,253 113,583
------------ ------------ ------------ ------------
Gross margin 50,640 16,575 80,426 71,842
Operating expenses:
Selling, general and administrative 1,381,023 246,560 2,221,132 412,458
Permanent decline on value of marketable securities 2,346,564 -- 2,346,564 --
Stock-based compensation 46,549 15,000 408,549 15,000
------------ ------------ ------------ ------------
Total operating expenses 3,774,136 261,560 4,976,245 427,458
------------ ------------ ------------ ------------
Loss from operations (3,723,496) (244,985) (4,895,819) (355,616)
Non-operating income (expense):
Other income 2,853 2,864 6,178 5,846
Loss on conversion of debt (667,570) (667,570)
Interest expense (35,330) (10,768) (60,773) (16,828)
------------ ------------ ------------ ------------
Total non-operating income (expense) (700,047) (7,904) (722,164) (10,982)
------------ ------------ ------------ ------------
Loss before provision for income taxes (4,423,543) (252,889) (5,617,984) (366,598)
Provision for income taxes -- -- 800 --
------------ ------------ ------------ ------------
Net loss (4,423,543) (252,889) (5,618,784) (366,598)
Dividend requirement for preferred stock 5,066 -- 7,879 --
------------ ------------ ------------ ------------
Net loss applicable to common shareholders (4,428,609) (252,889) (5,626,663) (366,598)
Other comprehensive (loss)/gain: -- -- -- --
------------ ------------ ------------ ------------
Comprehensive loss $ (4,428,609) $ (252,889) $ (5,626,663) $ (366,598)
============ ============ ============ ============
Basic and diluted net loss per share $ (0.06) $ (0.01) $ (0.08) $ (0.01)
Basic and diluted net loss per share for dividend
for preferred stock 0.00 0.00 0.00 0.00
Basic and diluted net loss per share applicable to
------------ ------------ ------------ ------------
common shareholders $ (0.06) $ (0.01) $ (0.08) $ (0.01)
============ ============ ============ ============
Basic and diluted weighted average
shares outstanding 74,506,311 47,758,001 66,423,928 47,758,001
============ ============ ============ ============
The accompanying notes are an integral part
of these unaudited condensed financial statements.
5
QUINTEK TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months periods ended
December 31,
2004 2003
----------- -----------
OPERATING ACTIVITIES
Net loss $(5,618,784) $ (366,598)
Adjustments to reconcile net loss to net cash used in operations:
Issuance of shares for consulting services 550,758 15,000
Loss on conversion of debt 667,570 --
Stock based compensation 170,000 --
Issuance of shares for officer compensation 427,500 --
Permanent decline on value of marketable securities 2,346,564
Stock options granted 1,500 --
Warrants granted to consultant 589,602 --
Depreciation and amortization 72,026 23,252
Changes in current assets and liabilities:
(Increase) decrease in accounts receivable (174,170) 51,694
(Increase) decrease in inventory -- (7,098)
(Increase) decrease in other current assets (37,849) 3,843
Increase in accounts payable 120,395 10,422
Increase in payroll payables -- 75,359
Increase in dividend payable 7,879 --
Increase in other liabilities 51,823 78,995
----------- -----------
Net cash used in operating activities (825,185) (115,131)
----------- -----------
INVESTING ACTIVITIES
Acquisition of equipment (178,181) (13,585)
(Increase) in employer receivables -- (2,127)
----------- -----------
Net cash used in investing activies (178,181) (15,712)
----------- -----------
FINANCING ACTIVITIES
Factoring payable (93,492) (126,890)
Proceeds from notes payable - stockholders -- 100,000
Proceeds from line of credit 250,000 --
Proceeds from issuance of debentures 425,000 --
Proceeds from convertible notes 170,000 10,800
Cash received for shares to be issued 25,000 --
Proceeds from issuance of common stock and warrants 229,967 109,000
Proceeds (Payment) of notes payable (14,657) 19,420
----------- -----------
Net cash provided by financing activities 991,818 112,330
----------- -----------
Net decrease in cash and cash equivalents (11,548) (18,513)
Cash and cash equivalents, beginning balance 15,600 21,162
----------- -----------
Cash and cash equivalents, ending balance $ 4,052 $ 2,649
=========== ===========
The accompanying notes are an integral part
of these unaudited condensed financial statements.
6
QUINTEK TECHNOLOGIES, INC.
NOTES TO THE FINANCIAL STATEMENTS
(Unaudited)
1. Description of business
The Company was originally incorporated under the laws of the State of
California on April 16, 1993, as Quintek Electronics, Inc. On January 14, 1999,
the Company merged with Pacific Diagnostic Technologies, Inc. in a business
combination accounted for as a purchase. The acquisition took place under a plan
of reorganization. Quintek Electronics, Inc. ("QEI") became public when it was
acquired by Pacific Diagnostic Technologies, Inc. ("PDX") through a reverse
merger and Chapter 11 Plan of Reorganization. Under the plan, all assets of QEI
were sold to PDX, all PDX management resigned once the Plan was confirmed, and
QEI's management and operating plan were adopted by the new operating entity.
Shortly after the confirmation of the plan, the name of the reorganized debtor
was changed to Quintek Technologies, Inc. ("QTI"). QTI assumed the assets,
liabilities, technology and public position of both QEI and PDX. At the time of
the merger, PDX was a non operating public entity and QTI has no intention of
carrying on the former operations of PDX.
The plan was structured to compensate all related parties with common stock and
units. Each unit consisted of one share of common stock, one Class A warrant,
one Class B warrant, one Class C warrant and one Class D warrant. PDX
shareholders received unrestricted units at a ratio of one QTI unit for 25
shares of PDX stock, resulting in a distribution of 310,535 units. PDX creditors
received unrestricted QTI units at a ratio of one QTI unit for $3 of previous
PDX debt, resulting in a net distribution of 885,549 units. Chapter 11
administrators and consultants received approximately 610,000 unrestricted QTI
shares, attorneys received 220,000 unrestricted units and market-makers received
200,000 unrestricted units. QEI shareholders received 11,096,167 shares of
restricted common stock.
On February 24, 2000, the Company acquired all of the outstanding common stock
of Juniper Acquisition Corporation ("Juniper"). For accounting purposes, the
acquisition has been treated as a capitalization of the Company with the Company
as the acquirer (reverse acquisition). The historical financial statements prior
to February 24, 2000 are those of the Company.
Quintek provides business process outsourcing services to Fortune 500, Russell
2000 companies and public sector organizations. The Company's business process
outsourcing services range from the digitizing, indexing, and uploading of
source documents through simple customer-specific, rules-based decision making.
The Company sells hardware, software and services for printing large-format
drawings such as blueprints and computer-aided design (CAD) files directly to
the microfilm format off aperture cards. The Company is the only manufacturer of
a patented, chemical-free desktop microfilm printer for aperture cards.
2. Basis of Presentation
The accompanying unaudited financial statements of Quintek have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission for the presentation of interim financial information, but do not
include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, the accompanying unaudited financial statements of the Company
include all adjustments (consisting only of normal recurring adjustments)
7
considered necessary to present fairly its financial position as of December 31,
2004, the results of operations for the six months ended December 31, 2004 and
2003, and cash flows for the six months ended December 31, 2004 and 2003. The
operating results for the six month period ended December 31, 2004 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 2005. The audited financial statements for the year ended June 30, 2004
were filed on October 1, 2004 with the Securities and Exchange Commission and is
hereby referenced. The information included in this Form 10-QSB should be read
in conjunction with Management's Discussion and Analysis and financial
statements and notes thereto included in the Company's 2004 Form 10-KSB.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Research and development
Research and development costs are charged to operations when incurred and are
included in operating expenses. The amount charged to operations for the six
months ended December 31, 2004 and 2003 was $37,384 and $25,022, respectively.
Marketable securities and realized loss due to decline in market value
On July 29, 2004, the Company entered into an Agreement with LANGLEY PARK
INVESTMENTS PLC, a London Investment Company to issue 14,000,000 shares of the
Company's common stock to Langley in return for 1,145,595 shares of Langley.
Fifty percent of Langley shares issued to the Company under this agreement is to
be held in escrow for two years. The Company recorded realized loss of $
2,346,564 due to permanent decline based on the market value of shares on
December 31, 2004 which is reflected as realized loss on marketable securities
in the operating expenses in the accompanying financials statements. At the end
of two years if the market price for the Company's common stock is at or greater
than the Initial Closing Price, the escrow agent will release the full amount.
In the event that the market price for the Company's common stock is less than
the Initial Closing Price the amount released will be adjusted.
Langley attained listing with the United Kingdom Listing Authority. The
Company's shares are to be held by Langley for a period of at least two years.
Langley shares issued to the Company are to be free trading.
The Company's marketable securities (Langley's shares) are classified as
available-for-sale and, as such, are carried at fair value. Securities
classified as available-for-sale may be sold in response to changes in interest
rates, liquidity needs, and for other purposes. The investment in marketable
securities represents less than twenty percent (20%) of the outstanding common
stock and stock equivalents of the investee. As such, the investment is
accounted for in accordance with the provisions of SFAS No. 115.
Unrealized holding gains and losses for marketable securities are excluded from
earnings and reported as a separate component of stockholder's equity. Realized
gains and losses for securities classified as available-for-sale are reported in
earnings based upon the adjusted cost of the specific security sold. On December
31, 2004, the investments have been recorded as shown below based upon the fair
value of the marketable securities.
Marketable securities classified as available for sale consisted of the
following as of December 31, 2004:
8
Market Accum. Number of
Investee Name Cost at Value at Unrealized Shares Held at
(Symbol) December 31, 2004 December 31, 2004 Gain (Loss) December 31, 2004
---------------------------------------------------------------------------------------------------------
Marketable securities:
Langley Park Investments, PLC $ 1,330,000 $ 156,718 $ (1,173,282) 572,798
Investments held in escrow:
Langley Park Investments, PLC $ 1,330,000 $ 156,718 $ (1,173,282) 572,798
-------------------------------------------------------------------------
Totals $ 2,660,000 $ 313,436 $ (2,346,564) 1,145,596
=========================================================================
Stock-based compensation
SFAS No. 123 prescribes accounting and reporting standards for all stock-based
compensation plans, including employee stock options, restricted stock, employee
stock purchase plans and stock appreciation rights. SFAS No. 123 requires
compensation expense to be recorded (i) using the new fair value method or (ii)
using the existing accounting rules prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for stock issued to employees" (APB 25) and related
interpretations with pro-forma disclosure of what net income and earnings per
share would have been had the Company adopted the new fair value method. The
Company has chosen to account for stock-based compensation using Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
has adopted the disclosure only provisions of SFAS 123. Accordingly,
compensation cost for stock options is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of the grant over the
amount an employee is required to pay for the stock.
The Company's board of directors authorized a stock award and long-term
incentive plan which includes stock appreciation rights and certain stock
incentive awards. The plan was approved by the shareholders as of June 30, 2004.
Basic and diluted net loss per share
Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share". SFAS No. 128
superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per
share for all periods presented has been restated to reflect the adoption of
SFAS No. 128. Basic net loss per share is based upon the weighted average number
of common shares outstanding. Diluted net loss per share is based on the
assumption that all dilutive convertible shares and stock options were converted
or exercised. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period. Issuance of shares for service
The Company accounts for the issuance of equity instruments to acquire goods and
services based on the fair value of the goods and services or the fair value of
the equity instrument at the time of issuance, whichever is more reliably
measurable.
Reporting segments
Statement of financial accounting standards No. 131, Disclosures about segments
of an enterprise and related information (SFAS No. 131), which superseded
statement of financial accounting standards No. 14, Financial reporting for
9
segments of a business enterprise, establishes standards for the way that public
enterprises report information about operating segments in annual financial
statements and requires reporting of selected information about operating
segments in interim financial statements regarding products and services,
geographic areas and major customers. SFAS No. 131 defines operating segments as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performances. Currently,
SFAS 131 has no effect on the Company's financial statements as substantially
all of the Company's operations are conducted in one industry segment.
Reclassifications
Certain comparative amounts have been reclassified to conform with the current
period presentation.
Recent Pronouncements
In December 2002, the FASB issued SFAS No. 148 "Accounting for Stock Based
Compensation-Transition and Disclosure". SFAS No. 148 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. In addition, this Statement amends the
disclosure requirements of Statement 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used, on reported
results. The Statement is effective for the Companies' interim reporting period
ending January 31, 2003.
In compliance with FAS No. 148, the Company has elected to continue to follow
the intrinsic value method in accounting for its stock-based employee
compensation plan as defined by APB No. 25 and has made the applicable
disclosures below.
Had the Company determined employee stock based compensation cost based on a
fair value model at the grant date for its stock options under SFAS 123, the
Company's net earnings per share would have been adjusted to the pro forma
amounts for the period ended December 31, 2004 and 2003, as follows ($ in
thousands, except per share amounts):
Period ended December 31,
2004 2003
------------- -----------
Net loss - as reported $ (5,626) $ (367)
Stock-Based employee compensation
expense included in reported net
income, net of tax -- --
Total stock-based employee
compensation expense determined
under fair-value-based method for all
rewards, net of tax (362) (15)
------------- -----------
Pro forma net loss $ (5,988) $ (382)
============= ===========
(Loss) per share:
Basic, as reported $ (0.03) $ (0.01)
Diluted, as reported $ (0.03) $ (0.01)
Basic, pro forma $ (0.08) $ (0.01)
Diluted, pro forma $ (0.08) $ (0.01)
10
In December 2004, the FASB issued FASB Statement No. 123R, "Share-Based Payment,
an Amendment of FASB Statement No. 123" ("FAS No. 123R"). FAS No. 123R requires
companies to recognize in the statement of operations the grant- date fair value
of stock options and other equity-based compensation issued to employees. FAS
No. 123R is effective beginning in the Company's second quarter of fiscal 2006.
The Company believes that the adoption of this standard will have no material
impact on its financial statements.
In December 2004, the FASB issued SFAS Statement No. 153, "Exchanges of
Nonmonetary Assets." The Statement is an amendment of APB Opinion No. 29 to
eliminate the exception for nonmonetary exchanges of similar productive assets
and replaces it with a general exception for exchanges of nonmonetary assets
that do not have commercial substance. The Company believes that the adoption of
this standard will have no material impact on its financial statements.
In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on
Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and its
Application to Certain Investments." The EITF reached a consensus about the
criteria that should be used to determine when an investment is considered
impaired, whether that impairment is other-than-temporary, and the measurement
of an impairment loss and how that criteria should be applied to investments
accounted for under SFAS No. 115, "ACCOUNTING IN CERTAIN INVESTMENTS IN DEBT AND
EQUITY SECURITIES." EITF 03-01 also included accounting considerations
subsequent to the recognition of an other-than-temporary impairment and requires
certain disclosures about unrealized losses that have not been recognized as
other-than-temporary impairments. Additionally, EITF 03-01 includes new
disclosure requirements for investments that are deemed to be temporarily
impaired. In September 2004, the Financial Accounting Standards Board (FASB)
delayed the accounting provisions of EITF 03-01; however the disclosure
requirements remain effective for annual reports ending after June 15, 2004. The
Company will evaluate the impact of EITF 03-01 once final guidance is issued.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2004, consists of the following:
Scanning Equipment $ 199,966
Computer and office equipment 113,514
Other depreciable assets 102,880
Software 76,164
Furniture and fixture 35,589
---------
528,113
Accumulated depreciation (274,886)
---------
$ 253,227
=========
4. RESTRICTED CASH
The Company entered into a consulting agreement with GMAC under which they are
required to provide at their own cost a performance bond. Such bond shall be
solely for the protection of the client. The intial bond was drafted in the
amount of $250,000 and will cover 12 months starting October 1st, 2004.
11
The Company opened a certificate of deposit for one year, for $ 250,000.
5. EMPLOYEE RECEIVABLES
Notes receivable from employees, unsecured,
due on June 30, 2019, interest at 4% $ 262,904
Interest receivable in connection with
above notes receivable 21,014
---------
283,918
Valuation allowance (278,408)
---------
$ 5,510
=========
6. FACTORING PAYABLE
The Company has entered into an agreement with a factoring company ("the
Factor") to factor purchase orders with recourse. The Factor funds 97% or 90%
based upon the status of the purchase order. The Factor has agreed to purchase
up to $4,800,000 of qualified purchase orders over the term of the agreement;
however, the Factor does not have to purchase more than $200,000 in any given
month. The agreement term is from June 2, 2003 to June 2, 2005. The Company will
pay a late fee of 3% for payments not made within 30 days and 5% for those not
made in 60 days. At the option of the Factor, the late fees may be paid with
Company stock. If paid by Company stock, the stock bid price will be discounted
50% in computing the shares to be issued in payment of the late fee.
The Company has agreed to issue the Factor 1,500,000 warrants purchasing the
Company's stock as a fee for the factoring agreement. The stock issued under the
warrants can be purchased at the average closing price of the Company's stock
for the 90 days prior to the factoring agreement.
The Company has also issued the Factor bonus warrants. The Factor will receive
two (2) bonus warrants for each dollar of purchase orders purchased. The bonus
warrants will be exercisable at the average closing price of the Company's
common stock for the 90 days prior to the purchase order transactions they
represent or a 50% discount to the closing price of the Company's stock at the
time exercised at the option of the Factor. Both warrants are for a five year
period.
At December 31, 2004, the Company had a factoring payable balance of $136,722.
7. PAYROLL TAXES-ASSUMED IN MERGER
The Company assumed $205,618 of payroll tax liabilities in the merger with
Pacific Diagnostic Technologies, Inc. The balance was $96,661 at December 31,
2004. The Company is delinquent on payments of these payroll tax liabilities.
8. LONG TERM PAYABLES
Leases payable, interest at 7.9% to 20%, due various dates $ 249,338
in 2005 to 2008
Note payable, DFS, interest at 15.99%, due Jun & Jul 2006 2,482
Notes payable, AP conversion, interest at 8%, due 2006 36,654
Note payable - Vendor, monthly installments $404, July 2005 2,831
--------
291,305
Current portion (90,742)
---------
$ 200,563
12
The future maturity of the long-term payables is as follows:
2005 $ 90,742
2006 110,699
2007 89,864
-------
Total $ 291,305
=========
9. CONVERTIBLE BONDS
Bonds payable with interest at 9%, due on various dates in 2001 and 2002,
convertible to shares of common stock in
increments of $1,000 or more. $ 21,354
Bonds payable with interest at 12%, due July 2002, convertible to shares of
common stock in increments
of $500 or more. 41,141
--------
$ 62,495
=========
Certain of the outstanding convertible bonds have matured as of December 31,
2002. The holders of the matured bonds do not wish to renew the bonds and have
asked for payment; however, the Company does not have the cash to repay these
bonds.
Bondholders have been asked to exchange their bonds for preferred stock. As of
December 31, 2004, holders of $198,000 of the bonds including accrued interest
had acted on this. The Company issued Series A Preferred shares in amount of $
36,000 and Series B Preferred shares in the amount of $162,000 as of December
31, 2004.
10. CONVERTIBLE DEBENTURES
During the period ended December 31, 2004, the Company raised capital through
the issuance of convertible debentures in the amount of $425,000.
One debenture in the amount of $300,000 pays interest at 5 3/4% interests and
includes 3,000,000 warrants to purchase common stock for a period of three years
at $1.00. The "Conversion Price" shall be equal to the lesser of (i) $0.50, or
(ii) 80% of the average of the 5 lowest Volume Weighted Average Prices during
the 20 Trading Days prior to Holder's election to convert, or (iii) 80% of the
Volume Weighted Average Price on the Trading Day prior to Holder's election to
convert market price of the Company's common stock prior to conversion. Upon
conversion of the debenture, the fund is obligated to simultaneously exercise
the $1.00 warrants providing added funding to the company. The Warrant must be
exercised concurrently with the conversion of this Debenture in an amount equal
to ten times the dollar amount of the Debenture conversion. Upon execution of
the securities purchase agreement, $225,000 of the purchase price was due and
paid to the Company. The remaining $75,000 is due the Company upon declaration
from the Securities and Exchange Commission that the Registration Statement for
the conversion shares and warrants is effective.
A second agreement consists of two convertible debentures each for $100,000
which bears simple interest at 10%. The initial Debenture for $100,000 was
purchased during August 2004. The second Debenture for $100,000 was purchased on
November 11, 2004. Debentures are convertible into the Common stock of the
Company. Conversion Price per share shall be the lower of (i) $0.10 ("Maximum
Base Price"); or (ii) in the event the Borrower enters into an agreement
subsequent to execution of the Securities Purchase Agreement to sell Common
13
Stock or a convertible instrument that converts into Common Stock prior to
conversion of this Debenture at a price less than the Conversion Price of this
Debenture, then the Conversion Price of this Debenture shall be immediately
reset to a lower Conversion Price equal to that described in the subsequent
agreement. Warrants are exercisable at $0.12 per share into the Common Stock of
the Company and expire on August 17, 2007.
The conversion right of the debenture holder with respect to the individual
debentures shall only exist upon the Company's registration statement
registering the Shares underlying the debentures and other Securities being
declared effective by the Securities and Exchange Commission. As of December 31,
2004, the criteria to convert the debentures to common stock were not met.
The total interest on these convertible debentures for the period ended December
31, 2004 amounted to $5,881.
11. CONVERTIBLE NOTES
During the period ended December 31, 2004, the Company raised capital through
the issuance of convertible promissory notes in the amount of $500,000. All the
notes are for a one year period and bear simple interest at the rate of 10%. The
due dates of these notes are from November 26, 2004 through June 4, 2005.
The notes plus any accrued interest through the date of conversion are
convertible to the common stock of the Company at $0.06. Additionally, the
holder will receive one bonus warrant for each conversion share. Each bonus
warrant will be exercisable for a period of 5 years from the date of issuance
into one share of common stock at a price of $0.10.
The conversion right of the note holder with respect to the individual notes
shall only exist upon: (i) the approval of a proxy statement to be filed with
the Securities and Exchange Commission and approval of an amendment by the
Company's shareholders to authorize to 200,000,000 the number of shares of
common stock and (ii) the Company's registration statement registering the
Shares underlying the notes and other Securities has been declared effective by
the Securities and Exchange Commission. As of December 31, 2004, the criteria to
convert the notes to common stock were not met.
The total interest on these convertible notes for the period December 31, 2004
amounted to $25,000.
12. LOANS PAYABLE - STOCKHOLDERS
The Company has a loan payable balance of $32,300 to the stockholders at
December 31, 2004. These loans are interest free, unsecured and due on demand.
13. STOCKHOLDERS' EQUITY
a. Common Stock and Warrants
The Company has authorized 200 million shares of common stock with a par value
of $0.01 per share. Each share entitles the holder to one vote. There are no
dividend or liquidation preferences, participation rights, call prices or rates,
sinking fund requirements, or unusual voting rights associated with these
shares. During the year ended June 30, 2003, the Company established the Class L
warrants and initiated the process of establishing the Class A Preferred Stock
which underlies these warrants.
During the six months period ended December 31, 2004, 2,725,652 Common Shares
were issued for services valued at $367,040 and 4,628,572 Common Shares were
issued for conversion of loans from shareholders bond valued at $211,756.
14
During the six months period ended December 31, 2004, $70,000 of outstanding
notes was converted to 700,000 shares of Common Stock. In connection with this
transaction, $28,297 of beneficial conversion feature expense was recorded.
During the six month period ended December 31, 2004, 2,467,824 shares of common
stock were issued towards the exercise of the options. The Company received $
24,967 towards the exercise of the option.
During the six month period ended December 31, 2004, 558,984 shares of Series B
Preferred shares were converted to 2,794,920 Common Shares valued at $111,797.
During the six month period ended December 31, 2004, the Company issued
2,500,000 shares of common stock for cash for $205,000.
During the six month period ended December 31, 2004, 2,200 shares of Series C
Preferred shares were converted to 44,000 Common Shares valued at $2,200.
On July 29, 2004, the Company entered into an Agreement with LANGLEY PARK
INVESTMENTS PLC, a London Investment Company to issue 14,000,000 shares of the
Company's common stock to Langley in return for 1,145,595 shares of Langley.
Fifty percent of Langley shares issued to the Company under this agreement is to
be held in escrow for two years
During the six month period ending December 31, 2004, the Company issued to
490,215 shares to employees valued at $ 85,750.
The Company agreed to provide with respect to the Common Stock as well as the
Common Stock issuable upon exercise of the Warrants certain registration rights
under the Securities Act;
Upon surrender of either a Class J or L warrant, the holder is entitled to
purchase one share of the Company's stock at the designated exercise price. For
each warrant class, the number of warrants outstanding, the exercise price, the
type of underlying stock, and the expiration dates are defined as follows:
Class L - warrants were established in March 2003, with an exercise price of
$0.25 per share, an expiration date of January 14, 2005 and Series A Preferred
as underlying stock. As of June 30, 2004, holders of Class J exchanged their
warrants for 3,063,432 Class L Warrants.
During the year ended June 30, 2004, 200,000 shares of warrants were issued for
consulting services for three years beginning February 2004, valued at $41,572.
$32,334 was amortized during the six month period ended December 31, 2004. On
October 19, 2004, the Company granted 5,000,000 warrants to a third party upon
exercising their rights to advance $250,000 to the Company. The amount advanced
was for a period of six months bearing an annual interest at 5-3/4%. The Company
recorded $ 589,602 as expense for the cost of the issuance of such warrants
during the period ended December 31, 2004. The fair value of the warrants is
estimated on the grant date using the Black-Scholes Model. The following
assumptions were made in estimating fair value.
Annual rate of quarterly dividends 0.00%
Discount rate - Bond Equivalent Yield 3.40%
Expected life 3 years
Expected volatility 90%
15
b. Common Stock Reserved
At December 31, 2004, common stock was reserved for the following reasons:
Outstanding convertible bond 151,919 shares
Exercise of Class L warrants 3,063,432 shares
Number
of
Warrants
Warrants ---------
Outstanding June 30, 2004 4,263,432
Issued during the period 5,500,000
Exercised 2,775,297
---------
Outstanding December 31, 2004 6,988,135
=========
c. Stock Option Agreements
The Company granted 50,000 stock options to one employee and recorded $1,500 as
compensation expense during the six months period ended December 31, 2004.
The number and weighted average exercise prices of options granted by the
Company are as follows:
Number
of
Options
Options --------
Outstanding June 30, 2004 2,215,000
Granted during the period 50,000
Exercised 0
Expired/forfeited 0
---------
Outstanding December 31, 2004 2,265,000
=========
d. Stock transactions approved by the shareholders
At the Annual Meeting of the shareholders held June 30, 2004, the shareholders
approved by a majority vote to increase to 200,000,000 shares, $0.01 par value
common stock, and 50,000,000 shares no par value, preferred stock which the
corporation shall have authority to issue. The board of directors is authorized
to divide the preferred stock into any number of classes or series, fix the
designation and number of shares of each such series or class and alter or
determine the rights, preferences, privileges and restrictions of each or series
of preferred stock
Series A Preferred Stock
The general terms of the Series A Preferred Stock is as follows: No par value;
Liquidation Preference - $0.25 per share plus any unpaid accumulated dividends;
Dividends - cumulative annual rate of $0.005 per share when and as declared by
the Board of Directors; Conversion Rights - convertible to common stock at a 1:1
ratio ; Redemption Rights - the Company has the right to redeem part or all of
the stock upon 30 days written notice at a rate of $0.25 per share plus all
16
accumulated and unpaid dividends thereon at the dividend rate of $0.005 annually
per share; Voting Rights - one vote per share on all matters requiring
shareholder vote. At December 31, 2004, the Company had issued 3,982,931 shares
of Series A Preferred Stock . These shares were used to pay for officer
compensation valued at $ 427,500, payroll expenses valued at $ 191,502 and for
bond conversion valued at $ 36,203. The Company recorded loss on conversion of
debt in amount of $ 101,372 in the accompanying financials from Series A
preferred stock. The Company has recorded a cumulative dividend of $7,792 for
the preferred stockholders for the six month period ended December 31, 2004, in
the accompanying financial statements.
Series B Preferred Stock
The general terms of the Series B Preferred Stock is as follows: No par Value;
Liquidation Preference - $0.25 per share plus any unpaid accumulated dividends;
Dividends - cumulative annual rate of $0.0005 per share when and as declared by
the Board of Directors; Conversion Rights - convertible to common stock at a 1:5
ratio (i.e. 1 share of Series B Preferred stock is convertible into 5 shares of
common stock) ; Redemption Rights - the Company has the right to redeem part or
all of the stock upon 30 days written notice at a rate of $0.25 per share plus
all accumulated and unpaid dividends thereon at the dividend rate of $0.0005
annually per share; Voting Rights - one vote per share on all matters requiring
shareholder vote. At December 31, 2004, the Company had issued 680,255 shares of
Series B Preferred Stock valued at $ 162,063.. . The Company recorded loss on
conversion of debt in amount of $ 484,179 in the accompanying financials from
Series B preferred stock The Company has recorded a cumulative dividend of $84
for the preferred stockholders for the six month period ended December 31, 2004,
in the accompanying financial statements.
Series C Preferred Stock
The general terms of the Series C Preferred Stock is as follows: No par value;
Liquidation Preference - $1.00 per share plus any unpaid accumulated dividends;
Dividends - cumulative annual rate of $0.0005 per share when as declared by the
Board of Directors; Conversion Rights - 1:20 ratio (i.e. 1 share of Preferred
Series C stock is convertible into 20 shares of common stock); Redemption Rights
- the Company has the right to redeem part or all of the stock upon 30 days
written notice at the rate of $1.00 per share plus all accumulated and unpaid
dividends thereon at the dividend rate of $.0005 annually per share.; Voting
Rights - one vote per share on all matters requiring shareholder vote. At
December 31, 2004, the Company had issued 20,148 shares of Series C Preferred
Stock valued at $ 20,139. The Company recorded loss on conversion of debt in
amount of $ 56,423 in the accompanying financials from Series C preferred stock
The Company has recorded a cumulative dividend of $3 for the preferred
stockholders for the six month period ended December 31, 2004, in the
accompanying financial statements.
The Company has recorded a cumulative dividend of $7,879 for the preferred
stockholders for the six month period ended December 31, 2004, in the
accompanying financial statements. The Company has entered into agreements with
various vendors and employees to convert their liabilities into the preferred
series of stock pending approval of same.
14. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The Company prepares its statements of cash flows using the indirect method as
defined under the Financial Accounting Standard No. 95.
The Company paid $0 for income tax during the period ended December 31, 2004.
The Company paid $14,837 interest during the period ended December 31, 2004.
17
15. COMMITMENTS AND CONTINGENCIES
a) Operating Leases Effective July 1, 2004 the Company relocated its executive
offices to Huntington Beach, California and entered into a four year lease
agreement. The agreement contains a base rent escalation clause. The Company
leases its Idaho office facility under a month-to-month rental agreement at
$1,384 per month. For the period ended December 31, 2004 rent expense for these
operating leases totaled $53,218.
The future minimum lease payments under non-cancelable leases are as follows:
2005 $ 80,507
2006 82,202
2007 83,897
2008 42,372
---------
$ 288,978
=========
b) Securities and Exchange Commission Inquiry
On September 17, 2002, the Company was advised by the staff of the U.S.
Securities and Exchange Commission that they will recommend that the Commission
file civil injunctive
Lawsuits against the Company and its president, Thomas W. Sims. The suits would
allege that the Company violated Section 17(a) of the Securities Act of 1933 and
Sections 10(b) and 13(a) of the Securities Exchange Act of 1934 and Rules 10b-5,
13a-1, and 13a-13, based on false and misleading statements in press releases
disseminated by the Company on October 22, 2001 and October 25, 2001, regarding
the Company's investment in PanaMed Corp. and the press releases disseminated on
January 8, 2002 and March 20, 2002, and failure to timely file annual and
quarterly reports with the Commission. On March 25, 2003, the Company signed,
without admitting or denying the allegations, a proposed settlement agreement
with the U.S. Securities and Exchange Commission, which permanently restrains
and enjoins the Company from engaging in acts which would constitute violations
of these regulations in the future. On August 6, 2003, a final judgment was
entered by the U.S. District Court, Central District of California, against the
Company which permanently enjoined the Company from violating Section 10(b) of
the Exchange Act and Rule 10b-5 promulgated thereunder by using any means or
instrumentality of interstate commerce, or of the mails, or of any national
securities exchange: (A) to employ any device, scheme or artifice to defraud;
(B) to make any untrue statement of a material fact or omitting to state a
material fact necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading; or (C) to engage
in any act, practice, or course of business which operates or would operate as a
fraud or deceit upon any person, in connection with the purchase or sale of any
security. Further, the final judgment permanently enjoined the Company from
violating Section 13(a) of the Exchange Act and Rules 13a-1 and 13a-13
promulgated thereunder, by failing to file with the Commission in accordance
with Commission rules and regulations, information and documents required by the
Commission to keep current information and documents required in or with an
application or registration statement filed pursuant to Section 12 of the
Exchange Act or annual or quarterly reports as the Commission has prescribed.
c) Litigation
On April 16, 2004, a creditor of the Company filed suit against the Company for
$22,662 for goods provided. The Company filed a counterclaim against the
creditor on August 23, 2004. On January 18, 2005, the Court granted Judgment for
the sum of $21,000 in favor of the creditor. The amount of Judgment of $21,000
is included in accounts payable and accrued expenses in the accompanying
financial statements as of December 31, 2004.
18
16. BASIC AND DILUTED NET LOSS PER SHARE
Net loss per share is calculated in accordance with the Statement of financial
accounting standards No. 128 (SFAS No. 128), "Earnings per share." Basic net
loss per share is based upon the weighted average number of common shares
outstanding. Diluted net loss per share is based on the assumption that all
dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the period.
Weighted average number of shares used to compute basic and diluted loss per
share for the period ended December 31, 2004 and 2003 are the same since the
effect of dilutive securities is anti-dilutive.
17. GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. This basis of accounting contemplates the recovery
of the Company's assets and the satisfaction of its liabilities in the normal
course of business. Through December 31, 2004, the Company had incurred
cumulative losses of $28,687,728 including net losses of $5,626,663 and $366,598
for the periods ended December 31, 2004 and 2003 respectively. In view of the
matters described in the preceding paragraph, recoverability of a major portion
of the recorded asset amounts shown in the accompanying balance sheet is
dependent upon continued operations of the Company, which in turn is dependent
upon the Company's ability to raise additional capital, obtain financing and to
succeed in its future operations. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
Management has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. Management devoted considerable effort
during the period ended December 31, 2004, towards (i) obtaining additional
equity financing and (ii) evaluation of its distribution and marketing methods.
18. SUBSEQUENT EVENTS
On January 10, 2005, 328,000 Common Shares were issued to an investor pursuant
to the investor's conversion of Series A Preferred stock.
On January 12, 2005, 250,000 Common shares were issued to an investor in regards
to stock purchase on October 12, 2004.
19
On January 14, 2005, Quintek Technologies, Inc. entered into an agreement with a
consultant to provide consulting services. In consideration of 12 months of
consulting services, consultant shall receive 1,800,000 shares of Common Stock
in Quintek Technologies, Inc. The 1,800,000 shares will be issueable under rule
144 (restricted stock) and shall have a one year restriction before the sale of
any shares, and after two years shall be unrestricted under rule 144k.
On February 1, 2005, Quintek entered into an addendum to Convertible Debenture
and Warrant to Purchase Common Stock by and between Quintek Technologies, Inc.
and Golden Gate Investors. Under this agreement, Quintek received $100,000 as a
prepayment towards the exercise of Warrant Shares under the Warrant.
On February 2, 2005, in consideration of investor relations services, Quintek
issued 6,250,000 Warrants to purchase Common Stock in Quintek Technologies, Inc.
at $0.18. The Warrants shall become exercisable as follows: (a) 3,125,000
Warrants are vested and fully exercisable; and (b) 3,125,000 Warrants shall vest
and become exercisable on July 1, 2005. The Warrants shall expire on February 1,
2008.
On February 8, 2005, Quintek entered into a Master Lease Agreement with Vencore
Solutions LLC whereby Quintek has been approved for $500,000 in equipment
leasing from Vencore Soutions LLC. The term of the lease is 28 months for leased
hardware with monthly lease payments of 4.3% of the leased value amount.
Item 2. Management's Discussion and Analysis
2.1 Results of Operations
Our revenues totaled $322,413 and $77,248 for the three months ended December
31, 2004 and 2003, and $436,679 and $185,425 for the six months ended December
31, 2004 and 2003 respectively, an increase of $245,165 for the three months and
$251,254 for the six months ended December 31, 2004, primarily due to changing
the company's sales focus to the services business. Revenues in the previous
period resulted primarily from sales of equipment, aperture card media, and
maintenance services. Revenues in this period included $272,277 from the
business optimization services.
For the three months ended December 31, 2004 and 2003, cost of sales was
$271,773 and $60,673, respectively, an increase of $211,100 in 2004. For the six
months ended December 31, 2004 and 2003, cost of sales was $356,254 and
$113,583, respectively, an increase of $242,671 in 2004. Cost of sales during
2004 consisted primarily of labor, facility and equipment lease costs whereas
cost of sales during 2003 consisted primarily of labor and production costs.
Operating expenses totaled $3,774,136 and $4,976,245 for the three month and six
month period ended December 31, 2004 as compared to $261,560 and $427,458 for
the same period in 2003, a $3,512,576 and $4,548,787 increase in 2004, primarily
due to a decline of $2,346,564 in value of marketable securities, increase in
sales related expenses and stock-based compensation for consulting services.
Non-operating expenses totaled $700,047 and $722,164 for the three and six month
period ended December 31, 2004 as compared to $7,904 and $10,982 for the same
period in 2003, a $692,143 and $711,082 increase in 2004 primarily due to loss
of conversion of debt to equity.
During the three months ended December 31, 2004, the Company billed on five (5)
contracts for document services, 18 maintenance contacts, two (2) network
upgrades and 12,000 aperture cards compared to the three months ended September
30, 2004, the Company billed on 3 contracts for document services, (19)
maintenance contracts, (1) network upgrades, and 18,000 aperture cards.
20
2.2 Liquidity and capital resources
The Company has historically financed operations from the issuance of debt, the
sale of common stock and the conversion of common stock warrants. On December
31, 2004, the Company had cash on hand of $4,052 and working capital deficit of
$1,882,166 as compared to cash on hand of $15,600 and working capital deficit of
$2,127,980 on June 30, 2004.
Net cash used in operating activities of $825,185 and $115,131 for six months
ended December 31, 2004 and 2003, respectively, is attributed primarily to
decline in market value of marketable securities, loss on conversion of debt to
equity, an increase in stock-based compensation, issuance of stock for
consulting services and accounts payable and other liabilities.
Net cash used in investing activities of $178,181 and $15,712 for the six months
ended December 31, 2004 and 2003 is primarily related to purchase of equipment
made during the periods.
Net cash provided by financing activities of $991,818 and $112,330 for the six
months ended December 31, 2004 and 2003 is based primarily on proceeds from
issuance of commons stock and warrants, proceeds from line of credit and
issuance of debentures, offset by payments of factoring payable. The Company
assumed certain payroll tax liabilities as the result of the merger with Pacific
Diagnostic Technologies, Inc., on January 14, 1999. The Company has negotiated a
payment plan with the Internal Revenue Service to pay the payroll taxes assumed
in the merger.
The Company believes that the receipt of net proceeds from the issuance of debt,
the sale of the common stock and the exercise of common stock warrants plus cash
generated internally from sales will be sufficient to satisfy our future
operations, working capital and other cash requirements for the remainder of the
fiscal year. However, if the Company is unable to raise sufficient capital, it
may need to sell certain assets, enter into new strategic partnerships,
reorganize the Company, or merge with another company to effectively maintain
operations. The Company's audit for the years ended June 30, 2004 and 2003
contained a going concern qualification.
Item 3. Controls and Procedures
The Company's Chief Executive Officer and Chief Financial Officer (collectively,
the "Certifying Officers") are responsible for establishing and maintaining
disclosure controls and procedures for the Company. Such officers have concluded
(based on their evaluation of these controls and procedures as of a date within
90 days of the filing of this report) that the Company's disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in this report is accumulated and communicated to the Company's
management, including its principal executive officers as appropriate, to allow
timely decisions regarding required disclosure. The Certifying Officers also
have indicated that there were no significant changes in the Company's internal
controls or other factors that could significantly affect such controls
subsequent to the date of their evaluation, and there were no corrective actions
with regard to significant deficiencies and material weaknesses.
21
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
On April 16, 2004, Decision One Corporation filed suit in the County of Bannock,
Idaho against Quintek for $22,661.56 for goods provided. Since 2000, Decision
One (formerly Imation) has been both a vendor to Quintek and a reseller of
Quintek's Q4300 Printers. Quintek filed a counterclaim on August 1, 2004.
Quintek asserts that Decision One used its authority as a dealer of our product
to disparage us, in violation of its dealer agreement with us, and we seek
relief for the hundreds of thousands of dollars in business lost because of it.
On January 11, 2005, the Court granted Judgment for the sum of $21,000 in favor
of the Decision One Corporation. The Court has ruled that Quintek would be
allowed to file the counterclaim under this action, rather than a separate
lawsuit. The Company can appeal the Court's decision and would have until
February 18, 2005 to file the Notice of Appeal. The Company is contemplating its
course of action as of the date of filing of this Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On October 4, 2004, Quintek sold 250,000 shares of common stock to an investor
in consideration of $25,000. The investor was also granted a three-year warrant
to purchase 250,000 shares of common stock at an exercise price of $0.15.
On October 16, 2004, Quintek sold a $250,000 promissory note, 5.75% interest per
annum, to an accredited investor. The note is due six months from the date of
issuance. Additionally, the investor was granted 5,000,000 warrants to purchase
common stock at $0.10, expiring October 16, 2007.
On November 24, 2004, Quintek issued 54,545 shares of common stock to a
consultant for services provided pursuant to a consulting agreement.
On November 24, 2004, Quintek issued 2,794,920 shares of common stock to an
investor pursuant to the investor's conversion of Series B convertible preferred
stock.
On December 3, 2004, Quintek issued 500,000 shares of common stock to Gerald
Hannahs pursuant to an exercise of warrants for $23,000.
On December 13, 2004, Quintek issued 7,500 shares of common stock to a
consultant for services rendered pursuant to a consulting agreement.
On December 13, 2004, Quintek issued 2,000 shares of Series A convertible
preferred stock to three investors in settlement of debt owed to the investors.
On December 22, 2004, Quintek issued 1,967,824 shares of common stock to Andrew
Haag, an officer and director of Quintek, pursuant to an exercise of a warrant
on a cashless basis.
Subsequent Events
On January 10, 2005, 328,000 Common Shares were issued to an investor pursuant
to the investor's conversion of Series A Preferred stock.
On January 12, 2005, 250,000 Common shares were issued to an investor in regards
to stock purchase on October 12, 2004.
On January 14, 2005, Quintek Technologies, Inc. entered into an agreement with a
consultant to provide consulting services. In consideration of 12 months of
consulting services, consultant shall receive 1,800,000 shares of Common Stock
in Quintek Technologies, Inc. The 1,800,000 shares will be issueable under rule
144 (restricted stock) and shall have a one year restriction before the sale of
any shares, and after two years shall be unrestricted under rule 144k.
22
On February 1, 2005, Quintek entered into an addendum to Convertible Debenture
and Warrant to Purchase Common Stock by and between Quintek Technologies, Inc.
and Golden Gate Investors. Under this agreement, Quintek received $100,000 as a
prepayment towards the exercise of Warrant Shares under the Warrant.
On February 2, 2005, in consideration of investor relations services, Quintek
issued 6,250,000 Warrants to purchase Common Stock in Quintek Technologies, Inc.
at $0.18. The Warrants shall become exercisable as follows: (a) 3,125,000
Warrants are vested and fully exercisable; and (b) 3,125,000 Warrants shall vest
and become exercisable on July 1, 2005. The Warrants shall expire on February 1,
2008.
On February 8, 2005, Quintek entered into a Master Lease Agreement with Vencore
Solutions LLC whereby Quintek has been approved for $500,000 in equipment
leasing from Vencore Soutions LLC. The term of the lease is 28 months for leased
hardware with monthly lease payments of 4.3% of the leased value amount.
Unless otherwise noted, the sales set forth above involved no underwriter's
discounts or commissions and are claimed to be exempt from registration with the
Securities and Exchange Commission pursuant to Section 4 (2) of the Securities
Act of 1933, as amended, as transactions by an issuer not involving a public
offering, the issuance and sale by the Company of shares of its common stock to
financially sophisticated individuals who are fully aware of the Company's
activities, as well as its business and financial condition, and who acquired
said securities for investment purposes and understood the ramifications of
same.
Item 3. Defaults Upon Senior Securities
N/A
Item 4. Submission of Matters to a Vote of Security Holders
During the three month period ending December 31, 2004, no matters were
submitted to a vote of security holders.
Item 5. Other Information
N/A
Item 6. Exhibits
(a) Exhibits
31.1 Certification pursuant to Rule 13a-14 of the Securities Exchange Act, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Chief
Executive Officer
31.2 Certification pursuant to Rule 13a-14 of the Securities Exchange Act, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, of the Chief
Financial Officer
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Executive Officer
32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, of the Chief Financial Officer
23
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
QUINTEK TECHNOLOGIES, INC.
Date: February 14, 2005 /s/ ROBERT STEELE
--------------------------------------------
Robert Steele, Chairman
and Chief Executive Officer
Date: February 14, 2005 /s/ ANDREW HAAG
--------------------------------------------
Andrew Haag, Chief Financial Officer
24