**SECURITIES AND EXCHANGE COMMISSION**

 

**WASHINGTON, D.C.  20549**

 

**FORM 10-KSB**

 
| **ý** |   | **ANNUAL REPORT PURSUANT TO SECTION  13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|--------|-------------------------------------------------------------------------------------------|

 

**For the fiscal year ended December 31, 2002**

** **

**or**

 
| **o** |   | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|--------|-----------------------------------------------------------------------------------------------|

 

**Forthe transition periodfrom                    to                    **

 

**Commission filenumber:               **

 

**NUCOTEC, INC.**

(Name of Small Business Issuer as specific in 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) 3568111**

 

Securities registered pursuant to Section 12(b) of the Act:  **None**

 

Securities registered pursuant to Section 12(g) of the Act:

 
| **Common Stock, $.001  par value** |
|------------------------------------|
| (Title of Class)                   |

 

Indicate bycheck mark whether the issuer (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter periods that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  Yes ý  No o

 

Indicate bycheck mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained herein, tothe best of registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-KSB or anyamendment to this Form 10-KSB. Yes ý  No o

 

For the fiscalyear ended December 31, 2002, the Company’s revenue was $6,068.

 

As of March 28, 2003, the number of shares of Common Stock outstandingwas 6,076,000.  The aggregate marketvalue of the Company’s Common Stock held by non-affiliates as of March 28, 2003was $-0- as the Company’s Common Stock is not presently quoted or trading onany quotation system or exchange.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

The following documents are incorporated herein by reference:Registration Statement on Form SB-2, filed on September 11, 2002, as amended(Registration No. 333-99443) is incorporated in Part IV, Item 13(a).

 

 

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**TABLE OF CONTENTS**

 
| ITEM 1     | DESCRIPTION OF BUSINESS                                                                                          |
|------------|------------------------------------------------------------------------------------------------------------------|
|       |                                                                                                             |
| ITEM 2     | PROPERTIES                                                                                                       |
|       |                                                                                                             |
| ITEM 3     | LEGAL PROCEEDINGS                                                                                                |
|       |                                                                                                             |
| ITEM 4     | SUBMISSION OF MATTERS TO A VOTE OF SECURITY  HOLDERS                                                             |
|       |                                                                                                             |
| ITEM 5     | MARKET FOR THE REGISTRANT’S COMMON EQUITY  AND RELATED STOCKHOLDER MATTTERS                                 |
|       |                                                                                                             |
| ITEM 6     | MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS                      |
|       |                                                                                                             |
| ITEM 7     | FINANCIAL STATEMENTS                                                                                             |
|       |                                                                                                             |
| ITEM 8     | CHANGES IN AND DISAGREEMENTS WITH  ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                            |
|       |                                                                                                             |
| ITEM 9     | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS  AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT |
|       |                                                                                                             |
| ITEM 10    | EXECUTIVE COMPENSATION                                                                                           |
|       |                                                                                                             |
| ITEM 11    | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS AND MANAGEMENT                                                  |
|       |                                                                                                             |
| ITEM 12    | CERTAIN RELATIONSHIPS AND RELATED  TRANSACTIONS                                                                  |
|       |                                                                                                             |
| ITEM 13    | EXHIBITS AND REPORTS ON FORM 8K                                                                                  |
|       |                                                                                                             |
| ITEM 14    | CONTROLS AND PROCEDURES                                                                                          |
|       |                                                                                                             |
| SIGNATURES |

 

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**PART I**

 

**ITEM 1.     DESCRIPTIONOF BUSINESS.**

 

Nucotec, Inc.was incorporated in Nevada on October 8, 2001 in order to serve as a holdingcompany for Salty’s Warehouse, Inc.  Nucotecowns 80% of Salty’s Warehouse.  Otherthan its ownership of Salty’s Warehouse, Nucotec has no other businessoperations.

 

## **Salty’s Warehouse**

 

Salty’s Warehouse, Inc. was incorporated in Florida on July 16, 1998and is engaged in selling name brand consumer products over the Internet.  Salty’s Warehouse focuses on sellingconsumer electronics and audio-video equipment such as speakers, amplifiers,and tuners, although Salty’s Warehouse also sells assorted other goods such aswatches, sunglasses and sports games. Some of the brand names currently offered by Salty’s Warehouseinclude:  Compaq®, Revo®, MB Quart®,Kicker®, Poly Planar®, Sony®, Panasonic®, Harman Kardon®, Panamax®, Seiko® andMovado®.

 

On May 10, 2002, two of the Salty’s Warehouse founders , Steve Hudson and Earl Shannon owned 100% ofthe outstanding stock of Salty’s Warehouse and sold 80% of this outstandingstock to Nucotec, through a Plan of Reorganization and Acquisition.  As consideration for their shares, SteveHudson and Earl Shannon each received 456,000 Nucotec shares, representing 15%of the outstanding shares of the company on a fully diluted basis.  The agreement also provided for Steve Hudsonand Earl Shannon to each retain 10% of Salty’s outstanding shares.

 

In addition to serving as our President and as one of our directors,Earl Shannon is the President, Secretary, Treasurer and sole director ofSalty’s.  Steve Hudson is our Secretaryand one of our directors.

** **

**Marketing and Distribution**

 

Salty’s Warehouse sells its products over the Internet.  Salty’s Warehouse is hosted by Yahoo!®Store.

 

With the exception of its inclusion on the Yahoo Shopping directory,Salty’s does not spend money on advertising, but instead relies on customerreferrals and Internet search engine search results.

 

Our management believes that satisfied customers may refer newcustomers to Salty’s through direct referral or by posting on messageboards.  Additionally, our managementbelieves that Salty’s five star rating with Yahoo Stores may be attractive tonew customers.

 

At no cost to Salty’s Warehouse, the Salty’s Warehouse  web site is listed by a number of theInternet search engines and directories, including Yahoo, Yahoo Store, YahooShopping, Google, Hotbot, Altavista, Dogpile, Overture, and Fastsearch.

 

Salty’s Warehouse does not own or store the items listed for sale onits web site in inventory. Rather, all items are held in stock from thesuppliers we purchase them from.  Whenwe receive an order for a product, we fax it to the supplier that is providingthis product on our behalf. This supplier ships the product directly to theordering customer and invoices us at the time of shipment with 30 dayterms.  We obtain products throughrelationships with suppliers or we seek suppliers based on customer inquiriesregarding specific products.

 

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The hosting of our website by Yahoo!® Store is subject to an ongoingmonth-to-month merchant service agreement between Salty’s Warehouse and Yahoo!Store.  This agreement requires Salty’sWarehouse to pay Yahoo!® Store a hosting fee in the amount of $49.95 per month,a monthly insertion fee in the amount of $0.10 for every product we makeavailable for sale, a monthly transaction fee equal to 0.5% of total revenuegenerated and a monthly revenue share fee equal to 3.5% of revenue generatedfrom any transactions stemming from traffic coming from the Yahoo!® Shoppingdirectory on the www.yahoo.com web site.

 

In addition to the consumer goods, Salty’s Warehouse, in cooperationwith International Yacht Collection, may offer yachts for sale on its web site.International Yacht Collection is the selling broker of these yachts and in theevent that it sells through Salty’s Warehouse, Salty’s Warehouse will receive1.25% of the selling price.  In thefuture, Salty’s may offer for sale on its web site other  yachts and products of International YachtCollection on a similar basis through a written agreement which is terminableupon 30 days’ prior notice by either party. International Yacht Collection is a yacht brokerage company owned byHarris W. Hudson, who is one of our stockholders and the father of ourSecretary and director, Steven W. Hudson. Also, Steven W. Hudson’s parents are the owners of the yacht currentlylisted for sale on the Salty’s website. See “Certain Relationships and Related Transactions.”

** **

**Security Measures**

 

Salty’s Warehouse has not implemented any technical measures on its website to safeguard the data of its customers other than those provided by YahooStores as part of its hosting service for the Salty’s Warehouse website.

** **

**Privacy Policy**

 

Salty’s Warehouse has adopted a privacy policy, posted on its web site,that it will not share personal information collected from its customers withoutside parties except to the extent necessary to complete an order.

** **

**Principal Suppliers**

 

Our principalsuppliers are Sawgrass Distributors, Inc., Esha, Inc., and U.S. ImagingSolutions.  We do not have any writtenagreements with them.  These suppliersship products purchased on our web site directly to our purchasers.

 

**IntellectualProperty**

 

On April 2,2002, Salty’s Warehouse filed a trademark application for “Salty’s Warehouse,”Serial Number 76234037, with the U.S. Patent and Trademark Office but there isno guarantee that this trademark will be registered with the U.S. Patent andTrademark Office.  At this time, neitherNucotec nor Salty’s Warehouse has any other trademark, copyright or patentprotection.  In the event Salty’sWarehouse is unable to acquire the trademark, “Salty’s Warehouse,’ Salty’sWarehouse  will find it difficult toenforce any claim to exclusive use of this term and making it possible forcompetitors to use it.

 

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**Competition**

 

Although Salty’sWarehouse faces intense competition from numerous other Internet retailers, webelieve that Salty’s Warehouse can compete on the basis of quality of serviceand providing products at low prices.

 

We believethat Salty’s Warehouse can compete on the basis of quality service by havingits suppliers timely ship ordered products, by quickly and courteouslyresponding to any customer inquiries or complaints, and by selling productswith which customers will be satisfied. Salty’s Warehouse enjoys a five star customerservice rating with Yahoo!®.  This meansthat Salty’s Warehouse participates in the Yahoo!® Customer Rating Program, andthat customers who have ordered from Salty’s Warehouse have given it highratings.

 

We believethat Salty’s Warehouse can compete on the basis of price by keeping priceslow.  Because Salty’s Warehouse does notmaintain an inventory and has its suppliers ship products directly tocustomers, Salty’s Warehouse has a low overhead relative to many other stores.

 

However, manyof Salty’s Warehouse’s competitors are substantially larger, better financedand have superior resources compared to Salty’s Warehouse.  Therefore, there is no guarantee thatSalty’s Warehouse will be able to successfully compete with them.

 

Salty’sWarehouse has numerous competitors. Some of Salty’s Warehouse’s competitors are sizeable companies selling alarge variety of products, including products that compete with Salty’sWarehouse both on the Internet and through “bricks and mortar” stores.Competitors in this category include Costco, Target, Kmart, Sears and Walmart.

 

Salty’sWarehouse also faces competition from companies specializing in sellingconsumer electronic products, both on the Internet and through bricks andmortars stores. Competitors in this category include Radio Shack, Circuit Cityand Best Buy.

 

Anothercategory of competitors is companies that sell competing products only online,such as Overstock.com, Amazon.com, and Audio Direct.

 

## **Employees**

 

As of the date hereof, we had a total of three employees and Salty’sWarehouse had a total of two employees. If necessary, we hire seasonal workers on an as-needed basis.  We do not anticipating hiring any additionalemployees during calendar year 2003.  The Company hires independent contractors on an “as needed” basisonly.  The Company has no collectivebargaining agreements with its employees. The Company believes that itsemployee relationships are satisfactory.

 

**ITEM 2.     PROPERTIES**

 

Our offices as well as the offices andstorage space of Salty’s Warehouse encompass 800 square feet located in adowntown Ft. Lauderdale, Florida in a building owned by Hudson CapitalGroup.  Our management believes thesepremises are in good condition.  HudsonCapital Group

 

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allows us to use this space free ofcharge.  Although the Hudson CapitalGroup can revoke our right to use this space at any time, we have been informedby its principal, Steven Hudson, that the Hudson Capital Group intends to allow us to continue using the spacefree of charge for the foreseeable future. However, should we be evicted from the space, we would need to relocateto new facilities and may lack the funds to do this.

 

**ITEM 3.     LEGALPROCEEDINGS**

 

To the bestknowledge of management, there are no litigation matters pending or threatenedagainst us or Salty’s Warehouse.

 

**ITEM4.     SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS**

 

None.

 

**PART II**

** **

**ITEM5.****     MARKET FOR THE REGISTRANT’SCOMMON EQUITY AND RELATED STOCKHOLDER MATTERS.**

 

The Company’s Common Stock is not currently quoted or traded on anypublic securities quotation system or exchange.

** **

**Holders**

 

As of March28, 2003, there were 35 shareholders holding certificated securities.  The Company’s transfer agent is TransferOnline, 227 S.W. Pine, Suite 300, Portland, OR 97204.

** **

**Dividends**

 

The Companyhas not paid any dividends on its Common Stock since its inception and does notanticipate or contemplate paying cash dividends in the foreseeable future.

** **

**ITEM6.****     MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF****OPERATIONS.**

 

Thefollowing discussion and analysis should be read in conjunction with theCompany’s financial statements, including the notes thereto, appearingelsewhere in this Report.

 

THE FOLLOWINGINFORMATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS OF MANAGEMENT OF THECOMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT ESTIMATE THE HAPPENINGOF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACT.  FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIEDBY THE USE OF FORWARD-LOOKING TERMINOLOGY, SUCH AS “MAY,” “COULD,” “EXPECT,”“ESTIMATE,” “ANTICIPATE,” “PLAN,” “PREDICT,” “PROBABLE,” “POSSIBLE,” “SHOULD,”“CONTINUE,” OR SIMILAR TERMS.  THEFORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN COMPILEDBY OUR MANAGEMENT ON

 

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THE BASIS OFASSUMPTIONS MADE BY MANAGEMENT AND CONSIDERED BY MANAGEMENT TO BEREASONABLE.  OUR FUTURE OPERATINGRESULTS, HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, ORWARRANTY IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.

 

**Overview**

 

Nucotec, Incwas incorporated in Nevada on October 8, 2001 in order to serve as a holdingcompany for Salty’s Warehouse, Inc., which sells consumer electronics productsand other name brand consumer products over the Internet.

 

On May 10,2002, Nucotec entered into a Plan of Reorganization, whereby, Nucotec acquired80% of the outstanding common stock of Salty’s Warehouse (see a discussion of this transaction under“Business”).  This business combinationhas been accounted for in a manner similar to pooling of interest, whereby thecarrying value of the net assets of Salty’s Warehouse was transferred toNucotec, pursuant to FASB 141 — *“BusinessCombinations.” *The accompanying consolidated financial statementshave been restated to present the financial information of the combinedentities as of the beginning of the earliest period presented.  All significant intercompany accounts andtransactions have been eliminated in consolidation.

 

## **Results of Operations**

 

**Resultsof Operations for the Year Ended December 31, 2002 Compared To The Year EndedDecember 31, 2001 (Audited).**

 

**Revenue.**

 

Our netrevenue was $6,068 for the year ended December 31, 2002 compared to $14,834 forthe year ended December 31, 2001.  Allrevenues were from the sale of products on the Salty’s Warehouse web site.  This drastic decrease in our revenues isprimarily the result of a slowing economy and the competitive environment thatwe operate in.  While we believe thatrevenues will eventually increase, there can be absolutely no assurance that wewill achieve profitability or any other results expressed or implied in anyforward looking statements.  Our net revenueis net of the wholesale price and shipping charges paid by Salty’s Warehouse toits suppliers for products sold on the web site.  In the beginning of 2002, Yahoo! Started charging Salty’sWarehouse a half percent transaction based fee for every product sold over theweb site, further increasing these costs netted against revenues.

 

**OperatingExpenses.**

 

Our totaloperating expenses for the year ended December 31, 2002 were $42,481 comparedto $10,425 for the year ended December 31, 2001.  Expenses consisted primarily of general operating expenses andprofessional fees.  The increase ingeneral operating expenses from 2001 to 2002 is mostly due to legal andaccounting fees incurred in 2002 in connection with our Registration Statementon Form SB-2.

 

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**NetIncome (Loss).**

 

We had a netloss of $36,413 or basic and diluted net loss per common share of $0.01 for theyear ended December 31, 2002 compared to a net income of $4,409 or basic anddiluted net income per common share of $0.00 for the year ended December 31,2001.

 

## **Liquidity And CapitalResources.**

 

As of December31, 2002, we had a net working capital deficit of $9,838 as compared withpositive working capital of $26,575 at December 31, 2001.  In the fourth quarter of 2002, we borrowed$15,000 from our management, pursuant to promissory notes requiring us to repaythe principal and interest accrued at the rate of 10% on October 18, 2003.  (See “Certain Relationships and RelatedTransactions.”)  In the fourth quarterof 2001, we raised $16,000 by selling 64,000 shares of our common stock to 30accredited investors.

 

Net cash usedprovided by operating activities was $34,857 for the year ended December 31,2002 compared to net cash provided by operating activities of $4,342 for theyear ended December 31, 2001.

 

Salty’sWarehouse generally does not hold the products we sell in inventory (see“Business”).  Net revenue as an agentfrom the sale of products (consisting primarily of automobile electronicequipment, home electronics, computer accessories and supplies) is recognizedwhen title to the products are transferred to the customer (product shipment)and only when no further contingencies or material performance obligations arewarranted and, thereby, have earned the right to receive and retain reasonablyassured payments.  At the time acustomer orders a product on our web site, the customer pays for the product bycredit card.  If the credit card is Visaor Mastercard we usually receive the funds within twenty-four hours.  However if the credit card is AmericanExpress or Discover, we receive the funds as part of an aggregated payment fromthe respective credit card company once a month.  The supplier invoices us when the product is actually shipped onterms requiring us to pay within 30 days. So in most transactions, we will have already received payment from thecustomer before we must pay the supplier for the product that this customer hasordered.  Therefore, we do not have anysignificant requirements for capital to fund replenishing inventory.

 

Our onlyinternal sources of liquidity are our bank accounts and the future revenues wemay receive from the sale of products on our web site.  Our only external source of liquidity isloans from our management.  We do nothave any material commitments for capital expenditures.

 

Due tonumerous economic and competitive risks, any or all of which may have amaterial adverse impact upon our operations, there can be no assurance that wewill be able to successfully generate significant revenues or achieve a levelof profits which will permit us to stay in business.  However, we believe cash generated from net revenues, togetherwith the $15,000 loaned to us by management, will be sufficient to fund all orour general and administrative expenses for the next twelve months.

 

## **Fluctuations inOperating Results; Seasonality**

 

Annual andquarterly fluctuations in our results of operations may be caused by the timingand

 

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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 believethat our revenue and results of operations have not been significantly impactedby inflation since we began operations.

 

**ITEM 7.****               FINANCIALSTATEMENTS.**

 

The financial statements required to be filed pursuant to this Item 7begin on page F-1 of this report.

** **

**ITEM8.****               CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL****DISCLOSURE.**

 

None.

 

**PART III**

 

**ITEM 9****.****               DIRECTORS, EXECUTIVE OFFICERS, PROMOTERSAND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.**

 

The directors and executive officers of the Company are as follows:

** **

| **Name**             |   | **Age** |   | **Position**                       |
|----------------------|--------|---------|--------|------------------------------------|
| Earl T.  Shannon     |   | 35      |   | President,  Director               |
| Steven W.  Hudson    |   | 33      |   | Secretary,  Director               |
| Scott W.  Bodenweber |   | 31      |   | Chief  Financial Officer, Director |

 

**EarlT. Shannon, President, Director. ** Mr. Shannon has been an Officer and Directorof both Nucotec and Salty’s Warehouse since the inception of each company.   Additionally, Mr. Shannon was an Officerand Director of PageActive Holdings, Inc. from June 8, 1999 to July 11, 2001,during which time PageActive Holdings, Inc. was a “blank check company”- adevelopment stage company that has no specific business plan or purpose or hasindicated its business plan is to engage in a merger or acquisition with anunidentified company or companies.  FromJanuary 1997 and continuing through the present, Mr. Shannon has been thePresident of Winthrop Venture Management, Inc., an investment managementcompany based in Fort Lauderdale, Florida. Winthrop Venture Management, Inc.currently owns approximately 37.8% of our outstanding common stock. WinthropVenture Management, Inc. is also the General Partner of the Winthrop VentureFund, Ltd., a private investment fund.

 

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**StevenW. Hudson, Secretary, Director. ** Mr. Hudson has been an Officer and Directorof Nucotec since its inception.  Mr.Hudson has served as Vice President of Salty’s Warehouse since March 15, 1999.  Additionally, Mr. Hudson has served asPresident and CEO of International Yacht Collection since May 1999.  International Yacht Construction specializesin new construction, brokerage, charter, crew placement and yacht managementfor vessels 80 feet long and over.  SinceJune 1997, Mr. Hudson also has served as President and CEO of Hudson CapitalGroup, a private investment firm.  FromAugust 1995 through May 1999, Mr. Hudson served as Division Vice President forRepublic Services, Inc., a leading provider of environmental services forcommercial, industrial, municipal and residential customers.  From September 1991 through August 1995, Mr.Hudson held various positions with Hudson Management Corp, a holding companyfor several solid waste services companies located in Florida.  Mr. Hudson graduated from Southern MethodistUniversity with a Bachelor of Arts degree in Business Economics.

 

**ScottW. Bodenweber, Chief Financial Officer, Director. **Mr. Bodenweber has been an Officer andDirector of Nucotec since its inception. From June 1997 and continuing through the present, Mr. Bodenweber hasbeen the Controller of Hudson Capital Group, an investment firm in FortLauderdale, FL.  From February 1995through May 1997, he was employed with Keefe, McCullough & Co., a CPA firm inFt Lauderdale, FL.  Mr. Bodenwebergraduated from Florida State University in 1994 with Bachelor of ScienceDegrees in both Accounting and Finance. He is a licensed Certified Public Accountant in the State of Florida.

 

Each of our officers and directors spendapproximately five to ten hours on an as-needed basis handling our businessoperations. Each officer and director is responsible for attending a weeklysales meeting lasting one to two hours.

 

### Directors serve until the next annual meetingor until their successors are qualified and elected.  Officers serve at the discretion of the Board of Directors.

** **

**Compliancewith Section 16(a) of the Exchange Act**

 

Section 16(a)of the Securities Exchange Act of 1934 requires directors and certain officersof the Company, as well as persons who own more than 10% of a registered classof the Company’s equity securities, (“Reporting Persons”) to file reports ofownership and changes in ownership on Forms 3, 4 and 5 with the Securities andExchange Commission.  The Companybelieves that all Reporting Persons have complied on a timely basis with allfiling requirements applicable to them.

 

**ITEM 10.****        EXECUTIVE COMPENSATION.**

** **

**SummaryCompensation Table**

 

The followingtable sets forth the total compensation earned by or paid to our ChiefExecutive Officer and our other most highly compensated executive officers forthe fiscal years ended December 31, 2002 and December 31, 2001.

 

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|                        |   |     |   |                     |   |          |   |                                   |   | **LONG TERM  COMPENSATION**       |   |                                          |   |
|-----------------------------|--------|----------|--------|--------------------------|--------|---------------|--------|----------------------------------------|--------|-----------------------------------|--------|-----------------------------------------------|--------|
|                        |   |     |   | **ANNUAL  COMPENSATION** |   | **Awards**    |   | **Payouts**                            |   |                              |   |
|                        |   | **Year** |   | **Salary ($)**           |   | **Bonus ($)** |   | **Other  Annual  Compen-  sation ($)** |   | **Restricted  Stock  Awards ($)** |   | **Securities  Underlying  Options/SARs  (#)** |   | **LTIP  Payouts ($)** |   | **All  Other  Compen-  sation ($)** |   |
| Earl T. Shannon, President  |   | 2002     |   | $                        | 0      |          | $      | 0                                      |   | $                                 | 0      |                                          | $      | 0 |   | 0 |   | $ | 0 |   | $ | 0 |   |
|                        |   | 2001     |   | $                        | 0      |          | $      | 0                                      |   | $                                 | 0      |                                          | $      | 0 |   | 0 |   | $ | 0 |   | $ | 0 |   |
| Steven W. Hudson, Secretary |   | 2002     |   | $                        | 0      |          | $      | 0                                      |   | $                                 | 0      |                                          | $      | 0 |   | 0 |   | $ | 0 |   | $ | 0 |   |
|                        |   | 2001     |   | $                        | 0      |          | $      | 0                                      |   | $                                 | 0      |                                          | $      | 0 |   | 0 |   | $ | 0 |   | $ | 0 |   |
| Scott W. Bodenweber, CFO    |   | 2002     |   | $                        | 0      |          | $      | 0                                      |   | $                                 | 0      |                                          | $      | 0 |   | 0 |   | $ | 0 |   | $ | 0 |   |
|                        |   | 2001     |   | $                        | 0      |          | $      | 0                                      |   | $                                 | 0      |                                          | $      | 0 |   | 0 |   | $ | 0 |   | $ | 0 |   |
|                             |        |          |        |                          |        |               |        |                                        |        |                                   |        |                                               |        |  |  |  |  |  |  |  |  |  |  |  |

 

None of ourofficers or directors is currently receiving any compensation for theirservices.  We have not issued anyoptions or SAR grants since our inception.

 

**Compensationof Directors**

 

Directors ofthe Company do not receive any cash compensation, but are entitled toreimbursement of their reasonable expenses incurred in attending directors’meetings.

 

**ITEM11.****        SECURITY OWNERSHIP OFCERTAIN BENEFICIAL OWNERS AND MANAGEMENT.**

 

The followingtable sets forth certain information regarding the shares of the Company’soutstanding Common Stock beneficially owned as of the date hereof by (i) eachof the Company’s directors and executive officers, (ii) all directors andexecutive officers as a group, and (iii) each other person who is known by theCompany to own beneficially more than 5% of the Company’s Common Stock basedupon 6,076,0002 issued common shares.

 
| **Name and Address of  Beneficial Owners(1)**                    |   | **Amount and Nature of  Beneficial Ownership(2)** |       | **Percent Ownership** |       |
|------------------------------------------------------------------|--------|---------------------------------------------------|------------|-----------------------|------------|
|                                                             |   |                                              | ** ** |                  | ** ** |
| Earl T. Shannon,  President, Director                            |   | 2,759,000                                         | (3)        | 45.4                  | %          |
| Steven W. Hudson,  Secretary, Director                           |   | 2,759,000                                         | (4)        | 45.4                  | %          |
| Scott W. Bodenweber,  Chief Financial Officer, Director          |   | 516,000                                           | (5)        | 8.5                   | %          |
| All directors and executive officers as a  group (3 individuals) |   | 6,034,000                                         |       | 99.3                  | %          |

 

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(1)  C/o the Company’s addressunless otherwise noted.

(2)  Except as otherwiseindicated, we believe that the beneficial owners of Common Stock listed above,based on information furnished by such owners, have sole investment and votingpower with respect to such shares, subject to community property laws whereapplicable.  Beneficial ownership isdetermined in accordance with the rules of the SEC and generally includesvoting or investment power with respect to securities.  Shares of Common Stock subject to options orwarrants currently exercisable, or exercisable within 60 days, are deemedoutstanding for purposes of computing the percentage of the person holding suchoptions or warrants, but are not deemed outstanding for purposes of computingthe percentage of any other person.

(3)  Includes shares held in thename of Winthrop Venture Management, Inc., Alpine Mercantile, Inc., ESHA, Inc.,and Don Marcos Trading Company.

(4)  Includes shares held in thename of Lady Jean Charters, Inc., Briland Properties, Inc., Mustang Properties,Inc., and Dunmore Properties, Ltd.

(5)  Includes shares held in thename of Briland Properties, Inc., Mustang Properties, Inc., and DunmoreProperties, Ltd.

 

9

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**ITEM 12.****        CERTAIN RELATIONSHIPS ANDRELATED TRANSACTIONS.**

 

On May 1, 2002, Salty’s Warehouse bought back 10 shares of Salty’sWarehouse each from Mark Shannon and Ronald Shannon for $30 per share, counting$290 in paid-in capital by each of them. At the time of this transaction, theseshares represented 20% of the outstanding shares of Salty’s Warehouse.  These shares were cancelled by Salty’sWarehouse.

 

Earl T.Shannon, Steven W. Hudson, Mark R. Shannon, Ronald J. Shannon are promoters ofSalty’s Warehouse as defined by the Securities and Exchange Commission.  The only items of value received by themfrom Salty’s Warehouse is the stock they were issued by Salty’s and anyconsideration they have received from sales of this stock.  On July 16, 1998, Earl T. Shannon, Mark R.Shannon and Ronald Shannon each received 33.333 shares, representing in theaggregate 100% of Salty’s Warehouse at par value for services rendered.  The determination of the value of theirservices was made by Earl T. Shannon, Mark R. Shannon and Ronald Shannon as theshareholders of Salty’s Warehouse.  OnMarch 15, 1999, they redistributed this stock such that Earl T. Shannon andSteven W. Hudson each received 40 shares and Mark R. Shannon and Ronald J.Shannon each received 10 shares. Subsequently Mark R. Shannon and Ronald J. Shannon each sold all oftheir shares back to Salty’s Warehouse for $30 per share and Earl T. Shannonand Steven W. Hudson sold 80% of their shares to Nucotec in return for 456,000Nucotec shares, representing 15% of the outstanding shares of Nucotec on afully diluted basis

 

On May 10, 2002, we acquired an 80% interest in Salty’s Warehouse fromEarl T. Shannon and Steven W. Hudson. In return, Earl T. Shannon and Steven W.Hudson each received 456,000 shares our common stock, which in the aggregatewas equal to 15% of our outstanding shares on a fully diluted basis.  See a discussion of this transaction under“Business.”  Earl T. Shannon is ourPresident and one of our directors. Steven W. Hudson is our Secretary and oneof our directors.

 

10

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Steven W. Hudson is a principal of Hudson Capital Group, whichfurnishes us with office space and storage space on a rent-free basis.

 

On October 18, 2002, we borrowed $15,000 from Earl T. Shannon andSteven W. Hudson, pursuant to promissory notes requiring us to repay theprincipal and interest accrued at the rate of 10% on October 18, 2003.

 

On its web site, Salty’s Warehouse currently advertises for sale a$7,800,000 yacht. International Yacht Collection, a yacht brokerage company, isthe listing broker of this yacht. If the yacht sells through Salty’s Warehouse,Salty’s Warehouse will receive 1.25% of the selling price and InternationalYacht Collection will receive between 1%-6% of the selling price, dependentupon whether the yacht is sold by an International Yacht Collection agent, inwhich case International Yacht Collection will receive 3%-6% or by anotherunaffiliated agent, in which case International Yacht Collection will receive1%-3%.  In the future, Salty’s Warehousemay offer for sale other products of International Yacht Collection on asimilar basis.  International YachtCollection is owned by Harris W. Hudson, who is one of our stockholders as wellas the father of our Secretary and director, Steven W. Hudson.  The yacht is owned by Steven W. Hudson’sparents.  Additionally, Steven W. Hudsonis the President and CEO of International Yacht Collection.  Steven W. Hudson has advised the Companythat he will not be personally receiving any commission from the sale of theyacht.

 

**ITEM 13.****                                              EXHIBITSAND REPORTS ON FORM 8-K.**

 

**(a)Exhibits**

 
| 3.1  |   | Corporate  Charter of Nucotec, Inc., dated October 8, 2001*                                                             |
|------|--------|-------------------------------------------------------------------------------------------------------------------------|
| 3.2  |   | Bylaws of  Nucotec, Inc., dated October 8, 2001*                                                                        |
| 10.1 |   | Plan of  Reorganization and Acquisition, dated May 10, 2002*                                                            |
| 10.2 |   | Yahoo! Store  Merchant Service Agreement*                                                                               |
| 10.3 |   | Promissory  Note for Steven W. Hudson, executed October 18, 2002*                                                       |
| 10.4 |   | Promissory  Note for Earl T. Shannon, executed October 18, 2002*                                                        |
| 10.5 |   | Commission  Agreement with International Yacht Collection, dated May 11, 2000*                                          |
| 21.1 |   | List of  Subsidiaries of Nucotec, Inc.*                                                                                 |
| 23.1 |   | Consent of  Stonefield Josephson, Inc.                                                                                  |
| 99.1 |   | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002 |
| 99.2 |   | Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002 |

 

**(b)Reports on Form 8-K**

 

None.

 

----

*Incorporatedby reference from the Company’s Registration Statement on Form SB-2, filed onSeptember 11, 2002, as amended (Registration No. 333-99443).

 

11

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**ITEM 14****           CONTROLS AND PROCEDURES**

 

Our Chief Executive Officer, President, and Chief Financial Officer(the “Certifying Officers”) are responsible for establishing andmaintaining disclosure controls and procedures for the Company.  The Certifying Officers have designed suchdisclosure controls and procedures to ensure that material information is madeknown to them, particularly during the period in which this report wasprepared.  The Certifying Officers haveevaluated the effectiveness of the Company’s disclosure controls and procedureswithin 90 days of the date of this report and believe that the Company’sdisclosure controls and procedures are effective based on the requiredevaluation.  There have been nosignificant changes in internal controls or in other factors that couldsignificantly affect internal controls subsequent to the date of theirevaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

**SIGNATURES**

 

In accordance with Section 13 or 15(d) of the Exchange Act, theregistrant caused this report to be signed on its behalf by the undersigned,duly authorized.

 
|                   | NUCOTEC,  INC.                                                 |
|------------------------|----------------------------------------------------------------|
|                   |                                                           |
| DATED: March  31, 2003 | By:                                                            | /s/ Earl T.  Shannon |   |
|                   | Earl T. Shannon                                                |
|                   | President, Director                                            |
|                   | (Principal Executive Officer)                                  |
|                   |                                                           |
| DATED: March  31, 2003 | By:                                                            | /s/ Scott W.  Bodenweber |   |
|                   | Scott W. Bodenweber                                            |
|                   | Chief Financial Officer, Director                              |
|                   | (Principal Financial Officer and Principal Accounting Officer) |

 

12

----

 

CERTIFICATION OF PRESIDENTPURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934,RULES 13a-14 AND 15d-14AS ADOPTED PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

In connectionwith the Annual Report of Nucotec, Inc. (the “Company”) on Form 10-KSB for theperiod ending December 31, 2002 as filed with the Securities and ExchangeCommission on the date hereof (the “Report”), I, Earl T. Shannon, President ofthe Company, certify, pursuant to Rules 13a-14 and 15-d14 of the SecuritiesExchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of2002, that:

 

(1)          I have reviewed theReport;

 

(2)          Based upon my knowledge,the Report does not contain any untruestatement of a material fact or omit to state a material fact necessary inorder to make the statements made, in light of the circumstances under whichsuch statements were made, not misleading;

 

(3)          Based upon my knowledge, the financial statements, and otherfinancial information included in the Report, fairly present in all materialrespects the financial condition and results of operations of the Company, as of,and for, the periods presented in the Report;

 

(4)          I and the other certifying officers of the Company:

 

a.               are responsible for establishing andmaintaining disclosure controls and procedures for the Company;

b.              have designed such disclosure controls andprocedures to ensure that material information is made known to us,particularly during the period in which the Report is being prepared;

c.               have evaluated the effectiveness of theCompany’s disclosure controls and procedures within 90 days of the date of theReport; and

d.              have presented in the Report our conclusionsabout the effectiveness of the disclosure controls and procedures based on therequired evaluation.

 

(5)          I and the other certifying officers have disclosed to the Company’sauditors and to the audit committee of the board of directors (or personsfulfilling the equivalent function):

 

a.               all significant deficiencies in the design oroperation of internal controls (a pre-existing term relating to internalcontrols regarding financial reporting) which could adversely affect theCompany’s ability to record, process, summarize and report financial data andhave identified for the Company’s auditors any material weaknesses in internalcontrols; and

b.              any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theCompany’s internal controls.

 

13

----

 

(6)          I and the other certifying officers have indicated in the Report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date oftheir evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

 
| /s/ Earl T. Shannon         |   |   |
|-----------------------------|--------|--------|
| Earl T.  Shannon, President |
| March 31,  2003             |

 

14

----

 

CERTIFICATION OF CHIEF FINANCIAL OFFICERPURSUANT TO THE SECURITIES EXCHANGE ACT OF 1934,RULES 13a-14 AND 15d-14AS ADOPTED PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

In connectionwith the Annual Report of Nucotec, Inc. (the “Company”) on Form 10-KSB for theperiod ending December 31, 2002 as filed with the Securities and ExchangeCommission on the date hereof (the “Report”), I, Scott W. Bodenweber, ChiefFinancial Officer of the Company, certify, pursuant to Rules 13a-14 and 15-d14of the Securities Exchange Act of 1934, as adopted pursuant to §302 of theSarbanes-Oxley Act of 2002, that:

 

(1)          I have reviewed theReport;

 

(2)          Based upon my knowledge,the Report does not contain any untruestatement of a material fact or omit to state a material fact necessary inorder to make the statements made, in light of the circumstances under whichsuch statements were made, not misleading;

 

(3)          Based upon my knowledge, the financial statements, and otherfinancial information included in the Report, fairly present in all materialrespects the financial condition and results of operations of the Company, asof, and for, the periods presented in the Report;

 

(4)          I and the other certifying officers of the Company:

 

a.               are responsible for establishing andmaintaining disclosure controls and procedures for the Company;

b.              have designed such disclosure controls andprocedures to ensure that material information is made known to us,particularly during the period in which the Report is being prepared;

c.               have evaluated the effectiveness of theCompany’s disclosure controls and procedures within 90 days of the date of theReport; and

d.              have presented in the Report our conclusionsabout the effectiveness of the disclosure controls and procedures based on therequired evaluation.

 

(5)          I and the other certifying officers have disclosed to the Company’sauditors and to the audit committee of the board of directors (or personsfulfilling the equivalent function):

 

a.               all significant deficiencies in the design oroperation of internal controls (a pre-existing term relating to internalcontrols regarding financial reporting) which could adversely affect the Company’sability to record, process, summarize and report financial data and haveidentified for the Company’s auditors any material weaknesses in internalcontrols; and

b.              any fraud, whether or not material, thatinvolves management or other employees who have a significant role in theCompany’s internal controls.

 

15

----

 

(6)          I and the other certifying officers have indicated in the Report whetheror not there were significant changes in internal controls or in other factorsthat could significantly affect internal controls subsequent to the date oftheir evaluation, including any corrective actions with regard to significantdeficiencies and material weaknesses.

 

 
| /s/ Scott W.  Bodenweber                      |   |   |
|-----------------------------------------------|--------|--------|
| Scott W.  Bodenweber, Chief Financial Officer |
| March 31,  2003                               |

 

16

----

 

**NUCOTEC, INC. ANDSUBSIDIARY**

**CONSOLIDATEDFINANCIAL STATEMENTS**

**YEARS ENDED DECEMBER31, 2002 AND 2001**

 

 

**CONTENTS**

 
| **Independent Auditors’ Report**                          |
|----------------------------------------------------------------|
|                                                           |
| **Consolidated Financial Statements:**                         |
| Consolidated Balance Sheet                                     |
| Consolidated Statements of Income  (Operations)                |
| Consolidated Statement of Stockholders’  Equity (Deficit) |
| Consolidated Statements of Cash Flows                          |
| Notes to Consolidated Financial Statements                     |

 

----

 

**INDEPENDENT AUDITORS’ REPORT**

 

Board ofDirectors

Nucotec, Inc. andSubsidiary

Fort Lauderdale,Florida

 

We have auditedthe accompanying consolidated balance sheet of Nucotec, Inc. and Subsidiary asof December 31, 2002 and the related consolidated statements of income(operations), stockholders’ equity (deficit) and cash flows for the two yearsin the period then ended.  Theseconsolidated financial statements are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these consolidated financial statements based on ouraudits.

 

We conducted ouraudits in accordance with auditing standards generally accepted in the UnitedStates of America. Those standards require that we plan and perform the auditsto obtain reasonable assurance about whether the financial statements are freeof material misstatement.  An auditincludes examining, on a test basis, evidence supporting the amounts anddisclosures in the consolidated financial statements.  An audit also includes assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overallconsolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion,the consolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Nucotec, Inc. andSubsidiary as of December 31, 2002, and the consolidated results of itsoperations and its cash flows for the two years in the period then ended inconformity with accounting principles generally accepted in the United Statesof America.

 

Theaccompanying financial statements have been prepared assuming that the Companywill continue as a going concern.  Asdiscussed in Note 1 to the accompanying consolidated financial statements, theCompany has no established source of material revenue, has incurred a net lossof $36,413 in 2002, and has a negative working capital and net capital deficitof $9,838, all of which raise a substantial doubt about its ability to continueas a going concern. Management’s plan in regard to these matters is alsodiscussed in Note 1. These financial statements do not include any adjustmentsthat might result from the outcome of this uncertainty.

 

 
| /s/ Stonefield Josephson,  Inc. |   |
|---------------------------------|--------|
| CERTIFIED  PUBLIC ACCOUNTANTS   |

 

Santa Monica,CaliforniaMarch 24, 2003

 

F-1

----

 

**NUCOTEC, INC. AND SUBSIDIARY**

 

**CONSOLIDATEDBALANCE SHEET****- DECEMBER 31, 2002**

 
| **ASSETS**                                                                                            |   |    |   |   | ** ** |
|-------------------------------------------------------------------------------------------------------|--------|---------|--------|--------|------------|
| **Current assets:**                                                                                   |   |    |   |   |       |
| Cash                                                                                                  |   | $       | 10,113 |   |       |   |
| Accounts receivable                                                                                   |   | 58      |   |   |       |
| Other current assets                                                                                  |   | 202     |   |   |       |
|                                                                                                  |   |    |   |   |       |
| Total current assets                                                                                  |   |    |   | $      | 10,373     |   |
|                                                                                                  |   |    |   |   |       |
| **LIABILITIES AND STOCKHOLDERS’ DEFICIT**                                                        |   |    |   |   | ** ** |
| **Current liabilities:**                                                                              |   |    |   |   |       |
| Accounts payable and accrued expenses                                                                 |   | $       | 5,211  |   |       |   |
| 10% Notes payable, related parties, due on October  18, 2003                                          |   | 15,000  |   |   |       |
|                                                                                                  |   |    |   |   |       |
| Total current liabilities                                                                             |   |    |   | $      | 20,211     |   |
|                                                                                                  |   |    |   |   |       |
| **Stockholders’ deficit:**                                                                       |   |    |   |   |       |
| Common stock; $.001 par value; 10,000,000 shares  authorized; 6,076,000 shares issued and outstanding |   | 6,076   |   |   |       |
| Additional paid-in capital                                                                            |   | 17,424  |   |   |       |
| Accumulated deficit                                                                                   |   | (33,338 | )      |   |       |
|                                                                                                  |   |    |   |   |       |
| Total stockholders’ deficit                                                                      |   |    |   | (9,838 | )          |
|                                                                                                  |   |    |   |   |       |
|                                                                                                  |   |    |   | $      | 10,373     |   |

 

The accompanying notes form an integral part of these consolidatedfinancial statements.

 

F-2

----

 

**NUCOTEC, INC. AND SUBSIDIARY**

 

**CONSOLIDATED STATEMENTS OF INCOME (OPERATIONS)**

** **
|                                                                          |   | **Year ended  December 31, 2002** |    | **Year ended  December 31, 2001** |   |
|-------------------------------------------------------------------------------|--------|-----------------------------------|---------|-----------------------------------|--------|
|                                                                          |   |                              |    |                              |   |
| **Net revenue**                                                               |   | $                                 | 6,068   |                              | $      | 14,834 |   |
|                                                                          |   |                              |    |                              |   |
| **Operating expenses**                                                        |   | 42,481                            |    | 10,425                            |   |
|                                                                          |   |                              |    |                              |   |
| **Net income (loss)**                                                         |   | $                                 | (36,413 | )                                 | $      | 4,409 |   |
|                                                                          |   |                              |    |                              |   |
| **Weighted average number of common  shares outstanding - basic and diluted** |   | 6,076,000                         |    | 2,219,000                         |   |
|                                                                          |   |                              |    |                              |   |
| **Net income (loss) per share -  basic and diluted**                          |   | $                                 | (0.01   | )                                 | $      | 0.00 |   |

 

The accompanying notes form an integral part of these consolidatedfinancial statements.

 

F-3

----

 

**NUCOTEC, INC. AND SUBSIDIARY**

 

**CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY(DEFICIT)**

 

**YEARS ENDED DECEMBER 31, 2002 AND 2001**

 
|                                                       |   |       |   |   |   | **Additional  paid-in  capital** |   | **Retained  earnings/  accumulated  deficit** |   | **Total  stockholders’  equity (deficit)** |    |
|------------------------------------------------------------|--------|------------|--------|--------|--------|----------------------------------|--------|-----------------------------------------------|--------|-------------------------------------------------|---------|
|                                                       |   |       |
| **Common  Stock**                                          |
| **Shares**                                                 |   | **Amount** |
|                                                       |   |       |   |   |   |                             |   |                                          |   |                                            |    |
| Balance at January 1, 2001                                 |   | 912,000    |   | $      | 912    |                             | $      | 1,488                                         |   | $                                               | (1,334  | ) | $ | 1,066 |   |
|                                                       |   |       |   |   |   |                             |   |                                          |   |                                            |    |
| Issuance of shares to founders of Nucotec                  |   | 5,100,000  |   | 5,100  |   | —                           |   | —                                        |   | 5,100                                           |    |
|                                                       |   |       |   |   |   |                             |   |                                          |   |                                            |    |
| Issuance of shares from private placement of  common stock |   | 64,000     |   | 64     |   | 15,936                           |   | —                                        |   | 16,000                                          |    |
|                                                       |   |       |   |   |   |                             |   |                                          |   |                                            |    |
| Net income for the year ended December 31, 2001            |   |       |   |   |   |                             |   | 4,409                                         |   | 4,409                                           |    |
|                                                       |   |       |   |   |   |                             |   |                                          |   |                                            |    |
| Balance at December 31, 2001                               |   | 6,076,000  |   | 6,076  |   | 17,424                           |   | 3,075                                         |   | 26,575                                          |    |
|                                                       |   |       |   |   |   |                             |   |                                          |   |                                            |    |
| Net loss for the year ended December 31, 2002              |   |       |   |   |   |                             |   | (36,413                                       | )      | (36,413                                         | )       |
|                                                       |   |       |   |   |   |                             |   |                                          |   |                                            |    |
| Balance at December 31, 2002                               |   | 6,076,000  |   | $      | 6,076  |                             | $      | 17,424                                        |   | $                                               | (33,338 | ) | $ | (9,838 | ) |

 

The accompanying notes form an integral part of these consolidatedfinancial statements.

 

F-4

----

 

**NUCOTEC, INC. AND SUBSIDIARY**

 

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

 
|                                                            |   | **Year ended  December 31, 2002** |    | **Year ended  December 31, 2002** |   |
|-----------------------------------------------------------------|--------|-----------------------------------|---------|-----------------------------------|--------|
|                                                            |   |                              |    |                              |   |
| **Cash flows provided by (used for)  operating activities:**    |   |                              |    |                              |   |
| Net income (loss)                                               |   | $                                 | (36,413 | )                                 | $      | 4,409 |   |
|                                                            |   |                              |    |                              |   |
| **Changes in assets and  liabilities:**                         |   |                              |    |                              |   |
| **(Increase) decrease in assets:**                              |   |                              |    |                              |   |
| Accounts receivable                                             |   | 467                               |    | (525                              | )      |
| Inventory                                                       |   | (202                              | )       | —                            |   |
|                                                            |   |                              |    |                              |   |
| **Increase (decrease) in  liabilities -**                       |   |                              |    |                              |   |
| accounts payable and accrued expenses                           |   | 1,291                             |    | 458                               |   |
|                                                            |   |                              |    |                              |   |
| Total adjustments                                               |   | 1,556                             |    | (67                               | )      |
|                                                            |   |                              |    |                              |   |
| Net cash provided by (used for) operating  activities           |   | (34,857                           | )       | 4,342                             |   |
|                                                            |   |                              |    |                              |   |
| **Cash flows provided by financing  activities:**               |   |                              |    |                              |   |
| Proceeds from notes payable,  officer’s-stockholder’s |   | 15,000                            |    | —                            |   |
| Issuance of common stock                                        |   | —                            |    | 21,100                            |   |
|                                                            |   |                              |    |                              |   |
| Net cash provided by financing activities                       |   | 15,000                            |    | 21,100                            |   |
|                                                            |   |                              |    |                              |   |
| **Net increase (decrease) in cash**                             |   | (19,857                           | )       | 25,442                            |   |
| **Cash**, beginning of year                                     |   | 29,970                            |    | 4,528                             |   |
|                                                            |   |                              |    |                              |   |
| **Cash,** end of year                                           |   | $                                 | 10,113  |                              | $      | 29,970 |   |
|                                                            |   |                              |    |                              |   |
| **Supplemental disclosure of cash  flow activities:**           |   |                              |    |                              |   |
| Income taxes paid                                               |   | $                                 | —  |                              | $      | — |   |
| Interest paid                                                   |   | $                                 | —  |                              | $      | — |   |

 

The accompanying notes form an integral part of these consolidatedfinancial statements.

 

F-5

----

 

**NUCOTEC, INC. AND SUBSIDIARY**

 

**NOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

#### ** **

#### **YEARS ENDED DECEMBER 31,2002 AND 2001**

#### ** **

**(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 Stateof Nevada on October 8, 2001.

 

**Plan ofReorganization:**

 

During May 2002,Nucotec, Inc. (“Nucotec”) entered into a plan of reorganization, whereby,Nucotec issued 912,000 shares of its common stock in exchange (the “Exchange”)for 80% of the outstanding common stock of Salty’s Warehouse, Inc. (“Salty’s),a Florida Corporation.  The twoprincipal shareholders of Nucotec immediately prior to the Exchange, wereWinthrop Venture Management, Inc. and Lady Jean Charters, Inc.  These two principal shareholders also hadmajority management and voting control of Salty’s, by virtue of commonownership, prior to the Exchange.  Afterthe Exchange, the majority shareholders of Winthrop Venture Management, Inc.and Lady Jean Charters, Inc. maintained significant control of the combinedentities.  As such, this business combinationhas been accounted for as a reorganization of companies under common control ina manner similar to a pooling of interest, whereby the carrying value of thenet assets of Salty’s was transferred to Nucotec, pursuant to Statement ofFinancial Accounting Standards No. 141 — *“BusinessCombinations.”*

 

The accompanyingconsolidated financial statements have been restated to present the financialinformation of the combined entities as of the beginning of the earliest periodpresented.  All significant intercompanyaccounts and transactions have been eliminated in consolidation.

 

#### **Going Concern:**

 

Theaccompanying consolidated financial statements have been prepared in conformitywith accounting principles generally accepted in the United States of America,which contemplate continuation of the Company as a going concern. However, theCompany has no established source of material revenue, has incurred a net lossof $36,413 in 2002, and has a negative working capital and net capital deficitof $9,838.  These matters raisesubstantial doubts about the Company’s ability to continue as a going concern.These consolidated financial statements do not include any adjustments relatingto the recoverability and classification of recorded asset amounts, or amountsand classification of liabilities that might be necessary should the Company beunable to continue as a going concern.

 

F-6

----

 

Managementplans to take the following steps that it believes will be sufficient to providethe Company with the ability to continue in existence:

 

•                  Management intends to continue to raiseadditional financing through private equity financing, loans fromofficer-stockholders or other means and interests that it deems necessary, witha view to moving forward and sustain a prolonged growth in its strategy phases.

 

•                  The Company plans to raise additionaloperating funds through equity or debt financings.  The Company plans on applying to have its securities quoted onthe Over-the-Counter Bulletin Board maintained by the National Association ofSecurities Dealers, Inc. The Company believes that should it be successful incausing its securities to be so quoted, it will improve its chances of raisingfunds through either equity or debt financings.  The Company may not be able to arrange for loans or other formsof financings on favorable terms.  TheCompany intends to raise working capital from a variety of sources, includingfrom investors who are associates of the Company’s management, or by waitinguntil a public market develops for shares of the Company’s common stock. Thereis no assurance that the Company will be able to arrange for financing and hasnot, to date, had any substantive discussions with any third parties regardingsuch financing.

 

**Use of Estimates:**

 

The preparationof financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period.  Actual results coulddiffer from those estimates.

 

**Revenue Recognition:**

 

The Company accounts forrevenues pursuant to SAB 101 –“Revenue Recognition” and EITF 99-19 –“ReportingRevenue 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.

 

F-7

----

 

**Cash:**

 

For purposes ofthe statement of cash flows, cash equivalents include all highly liquid debtinstruments with original maturities of three months or less which are notsecuring any corporate obligations.

 

**Other ComprehensiveIncome:**

 

Statement ofFinancial Accounting Standards No. 130, “Reporting Comprehensive Income” (“SFAS130”), established new rules for the reporting and display of comprehensiveloss and its components, which requires unrealized gains or losses on theCompany’s available for sale securities, currency translation adjustments andminimum pension liability to be included in other comprehensive income.  Other comprehensive income consisted only ofnet income (loss).

 

**Net Income (Loss) Per Share:**

 

Net income (loss)per share has been computed using the weighted average number of common sharesoutstanding during 2002 and 2001.  Therewere no common stock equivalents.

 

**Income Taxes:**

 

The Company usesthe asset and liability approach to measure temporary differences in accountingfor income taxes.  Temporary differencesarise from differences in the timing of revenue and expense recognition for financialreporting and income tax return purposes and are measured using the currentlyenacted tax rates and laws.  Theprincipal temporary difference as of December 31, 2002 is the federal netoperating loss carryforward of $36,000, which if not utilized, will start to expirein 2022.  A deferred asset has beenincluded in the balance sheet as of December 31, 2002 provided and offset by avaluation allowance account, because its utilization does not appear to bereasonably assured.

 

**Recent AccountingPronouncements:**

 

In July 2001, theFASB issued SFAS No. 141 “Business Combinations.”  SFAS No. 141 supersedes Accounting Principles Board (“APB”) No.16 and requires that any business combinations initiated after June 30, 2001 beaccounted for as a purchase; therefore, eliminating the pooling-of-interestmethod defined in APB 16.  The statementis effective for any business combination initiated after June 30, 2001 andshall apply to all business combinations accounted for by the purchase methodfor which the date of acquisition is July 1, 2001 or later.

 

F-8

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In July 2001, theFASB issued SFAS No. 142, “Goodwill and Other Intangibles.”  SFAS No. 142 addresses the initialrecognition, measurement and amortization of intangible assets acquiredindividually or with a group of other assets (but not those acquired in abusiness combination) and addresses the amortization provisions for excess costover fair value of net assets acquired or intangibles acquired in a businesscombination.  The statement is effectivefor fiscal years beginning after December 15, 2001, and is effective July 1,2001 for any intangibles acquired in a business combination initiated afterJune 30, 2001.  The Company isevaluating the accounting effect, if any, arising from the recently issued SFASNo. 142, “Goodwill and Other Intangibles” on the Company’s financial positionor results of operations.

 

In October 2001,the FASB recently issued SFAS No. 143, “Accounting for Asset RetirementObligations,” which requires companies to record the fair value of a liabilityfor asset retirement obligations in the period in which they are incurred.  The statement applies to a company’s legalobligations associated with the retirement of a tangible long-lived asset thatresults from the acquisition, construction, and development or through thenormal operation of a long-lived asset. When a liability is initially recorded, the company would capitalize thecost, thereby increasing the carrying amount of the related asset.  The capitalized asset retirement cost isdepreciated over the life of the respective asset while the liability isaccreted to its present value.  Uponsettlement of the liability, the obligation is settled at its recorded amountor the company incurs a gain or loss. The statement is effective for fiscalyears beginning after June 30, 2002. The Company does not expect the adoption of SFAS No. 143 to have amaterial impact on the Company’s financial position or results of operations.

 

In October 2001,the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal ofLong-Lived Assets”.  Statement 144addresses the accounting and reporting for the impairment or disposal oflong-lived assets. The statement provides a single accounting model forlong-lived assets to be disposed of. New criteria must be met to classify the asset as an assetheld-for-sale. This statement also focuses on reporting the effects of adisposal of a segment of a business. This statement is effective for fiscal years beginning after December15, 2001.  The Company does not expectthe adoption of SFAS No. 144 to have a material impact on the Company’sfinancial position or results of operations.

 

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In April 2002, the FASB issued Statement No. 145, “Rescission of FASBStatements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and TechnicalCorrections.”* *This Statement rescinds FASB Statement No. 4,“Reporting Gains and Losses from Extinguishment of Debt”, and an amendment ofthat Statement, FASB Statement No. 64, “Extinguishments of Debt Made to SatisfySinking-Fund Requirements” and FASB Statement No. 44, “Accounting forIntangible Assets of Motor Carriers”. This Statement amends FASB Statement No.13, “Accounting for Leases”, to eliminate an inconsistency between the requiredaccounting for sale-leaseback transactions and the required accounting forcertain lease modifications that have economic effects that are similar tosale-leaseback transactions. The Company does not expect the adoption of SFASNo. 145 to have a material impact on the Company’s financial position orresults of operations.

 

In June 2002, the FASB issued Statement No. 146, “Accounting for CostsAssociated with Exit or Disposal Activities.” This Statement addressesfinancial accounting and reporting for costs associated with exit or disposalactivities and nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3,“Liability Recognition for Certain Employee Termination Benefits and OtherCosts to Exit an Activity (including Certain Costs Incurred in aRestructuring).” The provisions of this Statement are effective for exit ordisposal activities that are initiated after December 31, 2002, with earlyapplication encouraged. The Company does not expect the adoption to have amaterial impact to the Company’s financial position or results of operations.

 

In October 2002, the FASB issued Statement No. 147, “Acquisitions ofCertain Financial Institutions-an amendment of FASB Statements No. 72 and 144and FASB Interpretation No. 9”, which removes acquisitions of financialinstitutions from the scope of both Statement 72 and Interpretation 9 andrequires that those transactions be accounted for in accordance with StatementsNo. 141, Business Combinations, and No. 142, Goodwill and Other IntangibleAssets.  In addition, this Statementamends SFAS No. 144, Accounting for the Impairment or Disposal of Long-LivedAssets, to include in its scope long-term customer-relationship intangibleassets of financial institutions such as depositor- and borrower-relationshipintangible assets and credit cardholder intangible assets.  The requirements relating to acquisitions offinancial institutions is effective for acquisitions for which the date ofacquisition is on or after October 1, 2002. The provisions related toaccounting for the impairment or disposal of certain long-termcustomer-relationship intangible assets are effective on October 1, 2002.  The adoption of this Statement did not havea material impact to the Company’s financial position or results of operationsas the Company has not engaged in either of these activities.

 

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In December 2002, the FASB issued Statement No. 148, “Accounting forStock-Based Compensation-Transition and Disclosure”, which amends FASBStatement No. 123, Accounting for Stock-Based Compensation, to providealternative methods of transition for a voluntary change to the fair valuebased method of accounting for stock-based employee compensation. In addition,this Statement amends the disclosure requirements of Statement 123 to requireprominent disclosures in both annual and interim financial statements about themethod of accounting for stock-based employee compensation and the effect ofthe method used on reported results. The transition guidance and annual disclosure provisions of Statement148 are effective for fiscal years ending after December 15, 2002, with earlierapplication permitted in certain circumstances. The interim disclosure provisionsare effective for financial reports containing financial statements for interimperiods beginning after December 15, 2002. The adoption of this statement did not have a material impact on theCompany’s financial position or results of operations as the Company has notelected to change to the fair value based method of accounting for stock-basedemployee compensation.

 

In January 2003, the FASB issued Interpretation No. 46, “Consolidationof Variable Interest Entities.” Interpretation 46 changes the criteria by whichone company includes another entity in its consolidated financialstatements.  Previously, the criteriawere based on control through voting interest. Interpretation 46 requires a variable interest entity to be consolidatedby a company if that company is subject to a majority of the risk of loss fromthe variable interest entity’s activities or entitled to receive a majority ofthe entity’s residual returns or both. A company that consolidates a variableinterest entity is called the primary beneficiary of that entity. Theconsolidation requirements of Interpretation 46 apply immediately to variableinterest entities created after January 31, 2003. The consolidationrequirements apply to older entities in the first fiscal year or interim periodbeginning after June 15, 2003. Certain of the disclosure requirements apply inall financial statements issued after January 31, 2003, regardless of when thevariable interest entity was established. The Company does not expect theadoption to have a material impact to the Company’s financial position orresults of operations.

 

**(2)****                                ****Stockholders’Deficit:**

 

On October 8,2001, Nucotec issued 5,100,000 shares at the Company’s common stock to threefounding shareholders of Nucotec, Inc. and has presented in the financialstatements as if it had occurred at the beginning of the earliest periodpresented.

 

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Private Placement:

 

On October 28,2001, the Company initiated a private placement offering (the “PrivatePlacement”) of 64,000 shares of the Company’s common stock at an offering priceof $0.25 per share.  The PrivatePlacement was exempt from the registration provisions of the Securities andExchange Commission Act of 1933 and Rule 504 of Regulation D.  Net proceeds amounted to $16,000.

 

Plan ofReorganization:

 

During May 2002,Nucotec, Inc. (“Nucotec”) entered into a plan of reorganization, wherebyNucotec issued 912,000 shares of its common stock in exchange (the “Exchange”)for 80% of the outstanding common stock of Salty’s Warehouse, Inc., (“Salty’s”)a Florida Corporation.

 

There were noother equity-related securities issuable or issued, granted or outstanding.

 

**(3)****                                ****NetRevenue:**

 

A summary of net revenue by product category, for the years endedDecember 31, are as follows:

 
|                              |   | **2002** |   | **2001** |   |
|-----------------------------------|--------|----------|--------|----------|--------|
|                              |   |     |   |     |   |
| Home electronics                  |   | $        | 12,500 |     | $      | 58,780 |   |
| Automobile electronics            |   | 12,143   |   | 23,068   |   |
| Computer supplies and accessories |   | 25,766   |   | 5,363    |   |
|                              |   |     |   |     |   |
|                              |   | 50,409   |   | 87,211   |   |
| Less cost of revenue              |   | 44,341   |   | 72,377   |   |
|                              |   |     |   |     |   |
| Net revenue as an agent           |   | $        | 6,068  |     | $      | 14,834 |   |

 

 

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