** **

**SECURITIES AND EXCHANGE COMMISSION**

 

**WASHINGTON, D.C.  20549**

 

**FORM 10-QSB**

 
| **ý**                                                                                                                                                                                                                                                                                                                                             |   | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                               |
| **For the quarterly period  ended September 30, 2003**                                                                                                                                                                                                                                                                                            |
|                                                                                                                                                                                                                                                                                                                                                   |
| **or**                                                                                                                                                                                                                                                                                                                                                 |
|                                                                                                                                                                                                                                                                                                                                                   |   |                                                                                               |
| **o**                                                                                                                                                                                                                                                                                                                                                  |   | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                                                                                                                                                   |
| **For the transition period  from                             to                          ** |
|                                                                                                                                                                                                                                                                                                                                                   |
| **Commission file number: 000-50146**                                                                                                                                                                                                                                                                                                                  |

 

**NUCOTEC, INC.**

(Name of Small Business Issuer as specificin its Charter)

 

| **Nevada**                                                                          |   | **94-3409645**                         |
|-------------------------------------------------------------------------------------|--------|----------------------------------------|
| (State or Other Jurisdiction of  Incorporation or Organization)                     |   | (I.R.S. Employer   Identification No.) |
|                                                                                |   |                                   |
| **1080 S.E. 3rd  Avenue, Ft. Lauderdale, Florida**                                  |   | **33316**                              |
| (Address of Principal Executive Offices)                                            |   | (Zip Code)                             |
|                                                                                |   |                                   |
| Issuer’s telephone number, including area  code:  **(954) 356 8111**      |
|                                                                                |   |                                   |
| **N/A**                                                                             |
| (Former  name, former address and former fiscal year, if changed since last report) |

 

Indicate by check mark whether the issuer (1) hasfiled all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter periods that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.  Yes ý No o

 

As of November 13, 2003, the number of sharesof Common Stock outstanding was 6,076,000.

 

Transitional Small BusinessDisclosure Format (check one): Yes o No ý

 

 

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TABLE OF CONTENTS

 
| **PART I – FINANCIAL  INFORMATION**                                                                         |   |
|------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                             |   |
| ITEM 1 CONSOLIDATED  FINANCIAL STATEMENTS                                                                        |   |
|                                                                                                             |   |
| ITEM  2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION  AND RESULTS OF OPERATIONS |   |
|                                                                                                             |   |
| ITEM 3 CONTROLS AND  PROCEDURES                                                                                  |   |
|                                                                                                             |   |
| **PART II – OTHER INFORMATION**                                                                             |   |
|                                                                                                             |   |
| ITEM  1 LEGAL PROCEEDINGS                                                                                        |   |
|                                                                                                             |   |
| ITEM  2 CHANGES IN SECURITIES                                                                                    |   |
|                                                                                                             |   |
| ITEM  3 DEFAULTS UPON SENIOR SECURITIES                                                                          |   |
|                                                                                                             |   |
| ITEM  4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                      |   |
|                                                                                                             |   |
| ITEM  5 OTHER INFORMATION                                                                                        |   |
|                                                                                                             |   |
| ITEM  6 EXHIBITS AND REPORTS ON FORM 8-K                                                                         |   |
|                                                                                                             |   |
| SIGNATURES                                                                                                       |   |

 

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**PART I – FINANCIALINFORMATION**

 

#### **NUCOTEC, INC. AND SUBSIDIARY**

####  

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

 

#### **NINE MONTHS ENDEDSEPTEMBER 30, 2003 AND 2002**

####  

**(1)****                                ****Summary of Significant AccountingPolicies:**

 

**Business Activity:**

 

Nucotec, Inc. and its subsidiary, Salty’sWarehouse, Inc. (collectively, the “Company”) sell various home and automobileelectronic equipment, computer accessories and supplies to the general publicthrough its website – http://www.saltyswarehouse.com.

 

**Organization:**

 

Nucotec, Inc. was incorporated in the State ofNevada on October 8, 2001.

 

**Plan ofReorganization:**

 

During May 2002, Nucotec, Inc. (“Nucotec”)entered into a plan of reorganization, whereby, Nucotec issued 912,000 sharesof its common stock in exchange (the “Exchange”) for 80% of the outstandingcommon stock of Salty’s Warehouse, Inc. (“Salty’s), a Florida Corporation.  The two principal shareholders of Nucotecimmediately prior to the Exchange, were Winthrop Venture Management, Inc. andLady Jean Charters, Inc.  These twoprincipal shareholders also had majority management and voting control of Salty’s,by virtue of common ownership, prior to the Exchange.  After the Exchange, the majority shareholders of Winthrop VentureManagement, Inc. and Lady Jean Charters, Inc. maintained significant control ofthe combined entities.  As such, thisbusiness combination has been accounted for as a reorganization of companiesunder common control in a manner similar to a pooling of interest, whereby thecarrying value of the net assets of Salty’s was transferred to Nucotec,pursuant to Statement of Financial Accounting Standards No. 141 – *“Business Combinations.”*

 

The accompanying consolidated financial statementspresent the financial information of the combined entities as of the beginningof the earliest period presented.  Allsignificant intercompany accounts and transactions have been eliminated inconsolidation.

 

**Interim Financial Statements:**

 

The accompanying consolidated financial statementsinclude all adjustments (consisting of only normal recurring accruals), whichare, in the opinion of management, necessary for a fair presentation of theresults of operations for the periods presented. Interim results are notnecessarily indicative of the results to be expected for the full year endingDecember 31, 2003. The financial statements should be read in conjunctionwith the audited financial statements included in the annual report of Nucotec,Inc. and Subsidiary. (the “Company”) on Form 10-KSB for the year endedDecember 31, 2002.

 

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**Going Concern:**

####  

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern.  However, the Company has no established source of material revenue, has incurred a net loss of $31,531 in 2002 and $74,349 for the nine months ended September 30, 2003. As of September 30, 2003, the Company had negative working capital of $84,187 and net capital deficit of $107,687.  These matters raise substantial doubts about the Company’s ability to continue as a going concern. These consolidated 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 plans to take the following steps that it believes will be sufficient to provide the Company with the ability to continue in existence:

 

•                  Management intends to continue to raise additional financing through private equity financing, loans from officer-stockholders or other means and interests that it deems necessary, with a view to moving forward and sustaining a prolonged growth in its strategy phases.

 

•                  The Company plans to raise additional operating funds through equity or debt financings.  The Company’s common stock is now quoted on the Over-the-Counter Bulletin Board maintained by the National Association of Securities Dealers, Inc. The Company believes that this will improve its chances of raising funds through either equity or debt financings.  The Company may not be able to arrange for loans or other forms of financings on favorable terms.  The Company intends to raise working capital from a variety of sources, including from investors who are associates of the Company’s management, or by waiting until a public market develops for shares of the Company’s common stock. There is no assurance that the Company will be able to arrange for financing and has not, to date, had any substantive discussions with any third parties regarding such financing.

 

**Revenue Recognition:**

 

The Company accounts forrevenues pursuant to SAB 101 – “Revenue Recognition” and EITF 99-19 –“Reporting Revenue Gross as a Principal versus Net as an Agent.”  Net revenue as an agent from the sale of products(consisting primarily of automobile electronic equipment, home electronics,computer accessories and supplies) are recognized when title to the productsare transferred to the customer (product shipment) and only when no further contingencies or material performanceobligations are warranted and, thereby, have earned the right to receive andretain reasonably 

assured payments.

 

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####  

**Use of Estimates:**

 

The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesof America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.

 

**Other Comprehensive Income:**

 

Statement of Financial Accounting Standards No.130, “Reporting Comprehensive Income” (“SFAS 130”), established new rules forthe reporting and display of comprehensive loss and its components, whichrequires unrealized gains or losses on the Company’s available for salesecurities, currency translation adjustments and minimum pension liability tobe included in other comprehensive income. Other comprehensive income consisted only of net income (loss).

 

**Net Loss Per Share:**

 

Net loss per share has been computed using theweighted average number of common shares outstanding during 2003 and 2002.  There were no common stock equivalents.

 

**Incentive and Stock Nonqualified Option Plan:**

 

Pro forma information regarding the effect on operationsas required by SFAS 123 and SFAS 148, has been determined as if the Company hadaccounted for its employee stock options under the fair value method of thatstatement. Pro forma information, using the Black-Scholes method at the date ofgrant, is based on the following assumptions:

 

| Expected life           |   | 10 Years |   |
|-------------------------|--------|----------|--------|
| Risk-free interest rate |   | 5.5      | %      |
| Dividend yield          |   | —   |   |
| Volatility              |   | 50       | %      |

 

This option valuation model requires input ofhighly subjective assumptions. Because the Company’s employee stock optionshave characteristics significantly different from those of traded options, andbecause changes in the subjective input assumptions can materially affect thefair value estimate, in management’s opinion, the existing model does notnecessarily provide a reliable single measure of fair value of its employeestock options.

 

For purposes of SFAS 123pro forma disclosures, the estimated fair value of the options is amortized toexpense over the option’s vesting period. No expense was recognized under APB25. The Company’s pro-forma information is as follows:

 

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|                                          |   | **September 30,  2003** |       | **September30,  2002** |       |
|-----------------------------------------------|--------|------------------------------|------------|------------------------|------------|
|                                          |   |                         | ** ** |                   | ** ** |
| Net loss,  as reported                        |   | $                            | (74,349    | )                      | $          | (31,531 | ) |
|                                          |   |                         |       |                   |       |
| Stock  compensation calculated under SFAS 123 |   | $                            | (425,000   | )                      | $          | — |   |
|                                          |   |                         |       |                   |       |
| Pro-forma  net loss                           |   | $                            | (499,349   | )                      | $          | (31,531 | ) |
|                                          |   |                         |       |                   |       |
| Basic and  diluted historical loss per share  |   | $                            | (0.01      | )                      | $          | (0.00 | ) |
|                                          |   |                         |       |                   |       |
| Pro-forma  basic and diluted loss per share   |   | $                            | (0.08      | )                      | $          | (0.00 | ) |

 

**(2)****                                ****NetRevenue:**

 

A summary of net revenue by product category, forthe nine months ended September 30, 2003 and 2002, are as follows:

 
|                               |   | **2003** |   | **2002** |   |
|------------------------------------|--------|----------|--------|----------|--------|
|                               |   |     |   |     |   |
| Home electronics                   |   | $        | 20,311 |     | $      | 9,059 |   |
| Automobile electronics             |   | 18,112   |   | 21,530   |   |
| Computer supplies and  accessories |   | 3,514    |   | 3,168    |   |
|                               |   |     |   |     |   |
|                               |   | 41,937   |   | 33,757   |   |
| Less cost of revenue               |   | 37,319   |   | 28,813   |   |
|                               |   |     |   |     |   |
| Net revenue as an agent            |   | $        | 4,618  |     | $      | 4,944 |   |

 

**(3)****                                ****SubsequentEvent:**

 

OnNovember 12, 2003, the Company received $7,500 from and issued apromissory note for $7,500 to one of its officers.  The note is due on November 12, 2004 with principal andinterest at 10% per annum payable upon maturity.

 

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**ITEM 2.****                             ****MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.**

 

The following discussion andanalysis should be read in conjunction with the Company’s financial statements,including the notes thereto, appearing elsewhere in this Report.

 

THE FOLLOWING INFORMATION CONTAINS CERTAINFORWARD-LOOKING STATEMENTS OF MANAGEMENT OF THE COMPANY. FORWARD-LOOKINGSTATEMENTS ARE STATEMENTS THAT ESTIMATE THE HAPPENING OF FUTURE EVENTS AND ARENOT BASED ON HISTORICAL FACT. FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OFFORWARD-LOOKING TERMINOLOGY, SUCH AS “MAY,” “COULD,” “EXPECT,” “ESTIMATE,”“BELIEVE,” “ANTICIPATE,” “PLAN,” “PREDICT,” “PROBABLE,” “POSSIBLE,” “SHOULD,”“CONTINUE,” OR SIMILAR TERMS.  THEFORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEENCOMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT ANDCONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NOREPRESENTATION, GUARANTY, OR WARRANTY IS TO BE INFERRED FROM THOSEFORWARD-LOOKING STATEMENTS.

 

**Critical Accounting Policies andEstimates**

 

Management’s Discussion andAnalysis of the Consolidated Financial Condition and Results of Operationsdiscusses the Company’s consolidated financial statements, which have beenprepared in accordance with accounting principles generally accepted in theUnited States of America.  Thepreparation of these consolidated financial statements requires management tomake estimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amounts ofrevenues and expenses during the reporting period.  On an on-going basis, management evaluates its estimates andjudgments, including those related to financing operations, and contingenciesand litigation.  Management bases itsestimates and judgments on historical experience and on various other factorsthat are believed to be reasonable under the circumstances, the results ofwhich form the basis for making judgments about the carrying value of assetsand liabilities that are not readily apparent from other sources.  Actual results may differ from theseestimates under different assumptions or conditions.  The most significant accounting estimates inherent in thepreparation of the Company’s consolidated financial statements includeestimates as to the appropriate carrying value of certain assets andliabilities which are not readily apparent from other sources, primarilyaccruals for operating costs, and the classification of net operating loss andtax credit carryforwards.  Theseaccounting policies are fully described at relevant sections in the discussionand analysis and in the notes to the financial statements included in our Form10-KSB report for the year ended December 31, 2002 filed on March 28,2003.

 

**Overview**

 

Nucotec, Inc was incorporatedin Nevada on October 8, 2001 in order to serve as a holding company forSalty’s Warehouse, Inc., which sells consumer electronics products and othername brand consumer products over the Internet.

 

On May 10, 2002, Nucotec entered into a Planof Reorganization, whereby, Nucotec acquired 80% of the outstanding commonstock of Salty’s Warehouse (seea discussion of this transaction under “Business”).  This business combination has been accounted for in a mannersimilar to pooling of interest, whereby the carrying value of the net assets ofSalty’s Warehouse was transferred to Nucotec, pursuant to FASB 141 – *“Business Combinations.” *The accompanying consolidated

 

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financial statements have been restated to presentthe financial information of the combined entities as of the beginning of theearliest period presented.  Allsignificant intercompany accounts and transactions have been eliminated inconsolidation.

 

**Results of Operations for the Nineand Three Months Ended September 30, 2003 Compared To The Nine and ThreeMonths Ended September 30, 2002 (unaudited)**

 

**Revenue**

 

Our net revenue was $4,618 forthe nine months ended September 30, 2003 compared to $4,944 for the ninemonths ended September 30, 2002. All revenues were from the sale of products on the Salty’s Warehouse website.  Our low revenues are the resultof a sluggish economy and the competitive environment in which we operate.  While we believe that revenues willeventually increase, there can be absolutely no assurance that we will achieveprofitability or any other results expressed or implied in any forward lookingstatements.  Our net revenue is net ofthe wholesale price and shipping charges paid by Salty’s Warehouse to itssuppliers for products sold on the web site. Yahoo! started charging Salty’s Warehouse a one half percent transactionbased fee for every product sold over the web site, further increasing thesecosts netted against revenues.

 

Our net revenue was $1,281 forthe three months ended September 30, 2003 compared to $4,703 for the threemonths ended September 30, 2002. All revenues were from the sale of products on the Salty’s Warehouse website.  We believe our low revenues arethe result of a sluggish economy and the competitive environment in which weoperate.

 

**Operating Expenses**

 

Our operating expenses for the nine months endedSeptember 30, 2003 were $78,967 compared to $36,475 for the nine monthsended September 30, 2002.  Expensesconsisted primarily of general operating expenses and professional fees.  The increase in general operating expensesfrom 2002 to 2003 is mostly due to legal and accounting fees incurred in early2003 in connection with our Annual Report on Form 10-KSB.

 

Our operating expenses for the three months endedSeptember 30, 2003 were $21,346 compared to $25,550 for the three monthsended September 30, 2002.  Expensesconsisted primarily of general operating expenses and professional fees.  The increase in general operating expensesfrom 2002 to 2003 is mostly due to legal and accounting fees incurred in early2003 in connection with our Annual Report on Form 10-KSB.

 

**Net Loss**

 

We had a net loss of $74,349 or basic and dilutednet loss per common share of $0.01 for the nine months ended September 30,2003 compared to a net loss of $31,531 or basic and diluted net loss per commonshare of $0.01 for the nine months ended September 30, 2002.

 

We had a net loss of $20,065 or basic and dilutednet loss per common share of $0.00 for the three months endedSeptember 30, 2003 compared to a net loss of $20,847 or basic and dilutednet loss per common share of $0.00 for the three months endedSeptember 30, 2002.

 

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**Liquidity And Capital Resources**

 

As of September 30, 2003, we had a net workingcapital deficit of $84,187 as compared with a net working capital deficit of$4,956 at September 30, 2002.

 

Net cash used for operating activities was $59,834for the nine months ended September 30, 2003 compared to $28,533 for thenine months ended September 30, 2002.

 

Salty’s Warehouse generally does not hold theproducts we sell in inventory.  Netrevenue as an agent from the sale of products (consisting primarily ofautomobile electronic equipment, home electronics, computer accessories andsupplies) is recognized when title to the products are transferred to thecustomer (product shipment) and only when no further contingencies or materialperformance obligations are warranted and, thereby, have earned the right toreceive and retain reasonably assured payments.  At the time a customer orders a product on our web site, thecustomer pays for the product by credit card. If the credit card is Visa or Mastercard we usually receive the fundswithin twenty-four hours.  However ifthe credit card is American Express or Discover, we receive the funds as partof an aggregated payment from the respective credit card company once a month.  The supplier invoices us when the product isactually shipped on terms requiring us to pay within 30 days.  So in most transactions, we will havealready received payment from the customer before we must pay the supplier forthe product that this customer has ordered. Therefore, we do not have any significant capital requirements toreplenishing inventory.

 

Our only internal sources of liquidity are our bankaccounts and the future revenues we may receive from the sale of products onour web site.  Our only external sourceof liquidity is loans from our management. We do not have any material commitments for capital expenditures.

 

Due to numerous economic and competitive risks, anyor all of which may have a material adverse impact upon our operations, therecan be no assurance that we will be able to successfully generate significantrevenues or achieve a level of profits which will permit us to stay inbusiness.  However, we believe cashgenerated from net revenues, together with the $25,000 loaned to us by managementin April 2003, $30,000 loaned to us by management in August 2003, and$7,500 loaned to us by management in November 2003 will be sufficient tofund all our general and administrative expenses for the next three months.

 

**Fluctuationsin Operating Results; Seasonality**

 

Annual and quarterly fluctuations in ourconsolidated results of operations may be caused by the timing and quantity oforders from our customers.  Our futureresults also may be affected by a number of factors, including our ability tooffer our products at competitive prices and to anticipate customerdemands.  Our results may also beaffected by economic conditions in the geographical areas in which weoperate.  All of the foregoing mayresult in substantial unanticipated quarterly earnings shortfalls orlosses.  Due to all of the foregoing, webelieve that period-to-period comparisons of our results of operations are notnecessarily meaningful and should not be relied upon as indicative of futureperformance.

 

## **Inflation**

 

We believe that our revenue and consolidatedresults of operations have not been significantly impacted by inflation sincewe began operations.

 

**ITEM 3.****    ****CONTROLS AND PROCEDURES**

 

Our President and Chief Financial Officer (the“Certifying Officers”) are responsible for establishing 

 

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and maintainingdisclosure controls and procedures for the Company.  The Certifying Officers have designed such disclosure controlsand procedures to ensure that material information is made known to them,particularly during the period in which this report was prepared.  The Certifying Officers have evaluated theeffectiveness of the Company’s disclosure controls and procedures as of the endof the period covered by of this report and believe that the Company’sdisclosure controls and procedures are effective based on the requiredevaluation.  During the period coveredby this report, there were no changes in internal controls that materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrol over financial reporting.

 

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**PART II – OTHER INFORMATION**

 

**ITEM 1.****                  LEGAL PROCEEDINGS**

 

To the best knowledge of management, there are nolitigation matters pending or threatened against us or Salty’s Warehouse.

 

**ITEM 2.****                  CHANGES IN SECURITIES**

 

None.

 

**ITEM 3.****                  DEFAULTS UPON SENIOR****SECURITIES**

 

None.

 

**ITEM4****.                  SUBMISSION OF MATTERS TO AVOTE OF SECURITY HOLDERS**

 

None.

 

**ITEM 5.****                  OTHERINFORMATION**

 

None.

 

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**ITEM 6****.                  EXHIBITSAND REPORTS ON FORM 8-K**

 

**(a)           Exhibits**

 
| 10.1 |   | Promissory Note from Earl T. Shannon, dated  November 12, 2003                                                                                                                             |
|------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1 |   | Certification of President Pursuant to the  Securities Exchange Act of 1934, Rules 13a-14 and 15d-14, as adopted pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002                |
| 31.2 |   | Certification  of Chief Financial Officer Pursuant to the Securities Exchange Act of 1934,  Rules 13a-14 and 15d-14, as adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002 |
| 32   |   | Certification Pursuant to 18 U.S.C.  Section 1350, as Adopted Pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002                                                              |

 

**(b)****                                 ****Reportson Form 8-K**

 

None.

 

10

 

**SIGNATURES**

 

In accordance with the requirements of the ExchangeAct, the registrant caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 
|                          | NUCOTEC, INC. |
|-------------------------------|---------------|
|                          |          |   |
|                          |          |   |
| DATED: November 13, 2003 | By:           | /s/ Earl T. Shannon |   |
|                          |          | Earl T. Shannon  President, Director  (Principal Executive Officer) |
|                          |          |   |
|                          |          |   |
| DATED: November 13, 2003 | By:           | /s/ Scott W. Bodenweber |   |
|                          |          | Scott W. Bodenweber  Chief Financial Officer, Director  (Principal Financial Officer and Principal Accounting Officer) |

 

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