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EX-32.1 - SECTION 906 CERTIFICATION - Northtech Industries Inc. | exhibit32-1.htm |
EX-31.1 - SECTION 302 CERTIFICATION - Northtech Industries Inc. | exhibit31-1.htm |
EX-31.2 - SECTION 302 CERTIFICATION - Northtech Industries Inc. | exhibit31-2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q/A
(Mark One)
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2010
OR
[ ] 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: 000-53884
NORTHTECH INDUSTRIES
INC.
(Exact name of registrant as specified in its
charter)
Nevada | 20-8594354 |
(State of other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
6363 7th Ave So. #220, Seattle, WA
98108
(Address of principal executive offices)
(206) 632-2839
(Registrants telephone number,
including area code)
N/A
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ x ] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posed on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [ ] Yes [ ] No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] | Accelerated filer [ ] | |
Non-accelerated filer [ ] | (Do not check if a smaller reporting company) | Smaller reporting company [ x ] |
i
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [ x ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by court. [ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the numbers of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date. 15,078,500 shares of Class A Common Stock, and 500,000 shares of Class B Common Stock, issued and outstanding as of August 31, 2010
ii
PART I FINANCIAL INFORMATION
Item 1. | Financial Statements. |
TABLE OF CONTENTS
PAGE | |
CONSOLIDATED FINANCIAL STATEMENTS: | |
Balance sheets | 2 |
Statements of operations - detailed | 3 |
Statements of cash flows | 4 |
Notes to financial statements | 5-9 |
1
NORTHTECH INDUSTRIES, INC. AND SUBSIDIARY |
Consolidated Balance Sheets |
As of | As of | |||||
June 30, | September 30, | |||||
2010 | 2009 | |||||
(Unaudited) | (Audited) | |||||
ASSETS | ||||||
CURRENT ASSETS: | ||||||
Cash | $ | 7,446 | $ | 23,974 | ||
Accounts receivable | 241,048 | 364,450 | ||||
Prepaid expenses - deposits | 17,455 | 17,086 | ||||
TOTAL CURRENT ASSETS | 265,949 | 405,510 | ||||
OTHER ASSETS: | ||||||
Vehicles and equipment | 28,214 | 27,715 | ||||
Accumulated depreciation | (19,940 | ) | (13,980 | ) | ||
Goodwill | 485,100 | 485,100 | ||||
TOTAL OTHER ASSETS | 493,374 | 498,835 | ||||
TOTAL ASSETS | $ | 759,323 | $ | 904,345 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||
CURRENT LIABILITIES: | ||||||
Accounts payable | $ | 353,783 | $ | 343,466 | ||
Accrued expenses | 178,832 | 75,173 | ||||
Line of credit | 114,469 | 141,722 | ||||
Short term debt and factored receivables | 125,119 | 100,612 | ||||
TOTAL CURRENT LIABILITIES | 772,203 | 660,973 | ||||
LONG-TERM DEBT, net of current portion | - | 463 | ||||
TOTAL LIABILITIES | 772,203 | 661,436 | ||||
STOCKHOLDERS' EQUITY: | ||||||
Class A Common Stock, $0.001 par value, 85,000,000
shares authorized: 14,200,000 at September 30, 2009 and 15,078,500 at June 30, 2010 shares issued and outstanding, respectively |
15,079 |
14,200 |
||||
Class B Common Stock, $0.001 par
value, 5,000,000 shares authorized; 500,000 shares issued and outstanding |
500 |
500 |
||||
Class A Preferred Stock, $0.001 par value, 5,000,000
shares authorized; no shares issued and outstanding |
- |
- |
||||
Class B Preferred Stock, $0.001
par value, 5,000,000 shares authorized no shares issued and outstanding |
- |
- |
||||
Additional paid-in capital | 919,943 | 828,722 | ||||
Accumulated deficit | (948,403 | ) | (600,513 | ) | ||
(12,881 | ) | 242,909 | ||||
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY | $ | 759,323 | $ | 904,345 |
See Notes to Financial Statements
2
NORTHTECH INDUSTRIES, INC. AND SUBSIDIARY |
Statements of Operations - Detailed |
For the | For the Nine | |||||||||||
Three Months Ended | Months Ended | |||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||
2010 | 2009 | 2010 | 2009 | |||||||||
REVENUES | $ | 533,103 | $ | 853,189 | $ | 1,584,710 | $ | 1,580,358 | ||||
COST OF REVENUES: | ||||||||||||
Direct labor and benefits | 164,130 | 257,855 | 558,889 | 467,470 | ||||||||
Subcontractors | 107,846 | 250,328 | 273,616 | 459,267 | ||||||||
Tools and materials | 143,714 | 167,373 | 473,756 | 304,274 | ||||||||
Equipment rental | (258 | ) | 609 | 5,562 | 953 | |||||||
Other | 2,207 | 6,486 | 13,758 | 15,560 | ||||||||
TOTAL COST OF REVENUES | 417,639 | 682,651 | 1,325,581 | 1,247,524 | ||||||||
GROSS PROFIT | 115,464 | 170,538 | 259,129 | 332,834 | ||||||||
GENERAL & ADMINISTRATIVE EXPENSES: | ||||||||||||
Wages and benefits | 110,838 | 86,264 | 333,615 | 193,519 | ||||||||
Travel and entertainment | 1,724 | 3,402 | 16,090 | 6,481 | ||||||||
Consultants | 3,543 | 25,758 | 28,945 | 43,968 | ||||||||
Office and equipment | 13,160 | 12,208 | 46,807 | 25,019 | ||||||||
Insurance expense | 8,278 | 10,304 | 15,983 | 20,879 | ||||||||
Advertising | 8,147 | 8,052 | 26,216 | 10,719 | ||||||||
Finance fees and interest expense | 31,391 | 20,510 | 88,934 | 43,844 | ||||||||
Other expense | 20,279 | 1,485 | 50,429 | 24,274 | ||||||||
TOTAL GENERAL & ADMINISTRATIVE EXPENSES | 197,360 | 167,983 | 607,019 | 368,703 | ||||||||
NET INCOME (LOSS) | $ | (81,896 | ) | $ | 2,555 | $ | (347,890 | ) | $ | (35,869 | ) | |
BASIC EARNINGS (LOSS) PER SHARE | $ | (0.01 | ) | $ | 0.00 | $ | (0.02 | ) | $ | (0.00 | ) | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARE OUTSTANDING |
15,078,500 |
14,650,000 |
15,310,889 |
12,200,000 |
See Notes to Financial Statements
3
NORTHTECH INDUSTRIES, INC. AND SUBSIDIARY |
Statements of Cash Flows |
For the | For the Nine | |||||||||||
Three Months Ended | Months Ended | |||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||
2010 | 2009 | 2010 | 2009 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||
Net income (loss) | $ | (81,896 | ) | $ | 2,555 | $ | (347,890 | ) | $ | (35,869 | ) | |
ADJUSTMENT TO RECONCILE NET INCOME (LOSS) TO NET CASH USED BY OPERATING ACTIVITIES: | ||||||||||||
Depreciation | 1,065 | 8,898 | 5,961 | 9,702 | ||||||||
(INCREASE) DECREASE IN: | ||||||||||||
Accounts receivable | (95,465 | ) | (193,185 | ) | 123,402 | (380,123 | ) | |||||
Prepaid expenses - deposits | (1,577 | ) | 14,493 | (369 | ) | (1,291 | ) | |||||
INCREASE (DECREASE) IN: | ||||||||||||
Accounts payable | 65,327 | 108,836 | 10,316 | 308,762 | ||||||||
Checks in excess of bank balance | - | 23,840 | - | 25,052 | ||||||||
Advances from related parties | - | (17,500 | ) | - | (17,500 | ) | ||||||
Accrued expenses | 17,417 | 46,438 | 103,659 | 50,019 | ||||||||
NET CASH USED BY OPERATING ACTIVITIES | (95,129 | ) | (5,625 | ) | (104,921 | ) | (41,248 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||
Purchase of fixed assets | (500 | ) | (18,985 | ) | (500 | ) | (18,985 | ) | ||||
NET CASH USED BY INVESTING ACTIVITIES | (500 | ) | (18,985 | ) | (500 | ) | (18,985 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||
Proceeds (repayment) from short term notes payable & | ||||||||||||
factored receivables | 83,451 | 55,869 | 24,507 | 76,891 | ||||||||
Proceeds (repayment) from line of credit | 14,479 | - | (27,253 | ) | - | |||||||
Proceeds (repayment) of long-term debt | - | 4,812 | (463 | ) | 4,812 | |||||||
Issuance of common stock | - | - | 879 | - | ||||||||
Additional paid-in capital | (750 | ) | (34,895 | ) | 91,222 | (34,895 | ) | |||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 97,180 | 25,786 | 88,892 | 46,808 | ||||||||
NET INCREASE (DECREASE) IN CASH | 1,550 | 1,176 | (16,528 | ) | (13,425 | ) | ||||||
CASH, BEGINNING OF PERIOD | 5,896 | - | 23,974 | 14,601 | ||||||||
CASH, END OF PERIOD | $ | 7,446 | $ | 1,176 | $ | 7,446 | $ | 1,176 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW | ||||||||||||
INFORMATION: | ||||||||||||
Cash paid for interest | $ | 31,391 | $ | 20,510 | $ | 88,934 | $ | 43,844 | ||||
Income taxes | $ | - | $ | - | $ | - | $ | - | ||||
SUPPLEMENTAL DISCLOSURES OF NON-CASH ITEMS: | ||||||||||||
Acquisition of Goodwill | $ | - | $ | (485,100 | ) | $ | - | $ | (485,100 | ) | ||
Issuance of common stock | $ | - | $ | 4,900 | $ | - | $ | 4,900 | ||||
Additional paid-in capital | $ | - | $ | 480,200 | $ | - | $ | 480,200 |
See Notes to Financial Statements
4
NORTHTECH INDUSTRIES INC. AND SUBSIDIARY |
Notes to Consolidated Financial Statements |
June 30, 2010 and 2009 |
1. |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
This summary of significant accounting policies of Northtech Industries, Inc. and Subsidiary is presented to assist the reader in the evaluation of the Company's financial statements. The financial statements and notes are representations of the Company's management, who is responsible for the integrity and objectivity of the financial statements. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. | |
Description of Business | |
Northtech Industries, Inc. ("Northtech" or the "Company") is a holding corporation incorporated in the state of Nevada. It operates in the residential construction services industry through its wholly owned subsidiary Millwork Pro, Inc. ("Millwork Pro" or "Subsidiary"), a Washington State corporation. On April 8, 2009, the Company effected a merger agreement with The Finish Company Painting and Carpentry, Inc, ("The Finish Company"); The Finish Company merged with and into Millwork Pro. The Company issued 4,900,000 shares of its Class "A" common stock to the shareholders of The Finish Company in exchange for cancellation of their shares of common stock in the Finish Company and The Finish Company merging with and into Millwork Pro. The Company's business model is to acquire existing operators in selective niches of residential and commercial construction services and build a profitable and growing company. The Company services remodel, commercial and residential builders in key growth markets in the Pacific Northwest. Pursuant to the April 8, 2009 merger, the Company's subsidiary operates utilizing The Finish Company business name. | |
The Company's consolidated revenues were derived entirely from providing paint, tile, millwork installation, and carpet installation products and services for single and multiple family residential homebuilders. The projects are short-term in nature and are billed by the Company when completed. | |
On September 14, 2009, Northtech Industries changed the fiscal year end from December 31, to September 30. The financial statements for the period ended September 30, 2009 reflect the operations from January 1, 2009 through September 30, 2009. | |
Basis of Consolidation | |
The consolidated financial statements include the account of Northtech Industries, Inc. and its wholly-owned subsidiary, Millwork Pro, Inc., dba The Finish Company. All material intercompany transactions between the Company and its Subsidiary have been eliminated in consolidation. | |
Cash and Cash Equivalents | |
For purposes of the statement of cash flows, the Company considers all short-term, highly liquid investments with original maturities of three months or less to be cash equivalents. | |
Accounts Receivable | |
Certain accounts receivable were factored with recourse as of June 30, 2010. Accounts receivable were recorded net of an allowance for doubtful accounts for the quarter ended June 30, 2010 and the year ended September 30, 2009. All accounts were considered fully collectible; therefore, no allowance was established as of June 30, 2010 and September 30, 2009, respectively. If amounts become uncollectible, they will be charged to operations when that determination is made. | |
Advertising | |
The Company expenses advertising costs as they are incurred. Advertising expense for the three months ended June 30, 2010 and June 30, 2009 were $8,147 and $8,052 respectively. |
5
NORTHTECH INDUSTRIES INC. AND SUBSIDIARY |
Notes to Consolidated Financial Statements |
June 30, 2010 and 2009 |
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Revenue Recognition |
|
The Company recognizes revenues on the completed-contract method. The completed-contract method is used because the typical contract is completed in one month or less, and financial position and results of operations do not vary significantly from those that would result using the percentage-of-completion method. A contract is considered substantially complete at the time of departure from the job site. |
|
Concentrations of Credit Risk |
|
Millwork Pro had three major customers, Build Urban, JAS Design, and Olive Tree, from whom 9%, 10%, and 9% of revenues, respectively, were earned for the three months ended June 30, 2010. Millwork Pro had one major customer, Charter Construction, from whom approximately 23% of revenues were earned for the three months ended June 30, 2009. |
|
Stock Based Compensation |
|
The Company uses the fair value based method of accounting prescribed by Statement of Financial Accounting Standards No, 123, Accounting for Stock-Based Compensation, for its non-employee stock compensation plan. Under Statement No. 123, compensation expense is determined based on the fair value of the services received. |
|
Vehicles and Equipment |
|
Vehicles and equipment are stated at cost. Gains or losses on dispositions of equipment are included in operation in the year of disposal. |
|
Depreciation |
|
Depreciation is computed on the straight-line method over the estimated useful lives of the assets. Depreciation expense for the three months ending June 30, 2010 was $1,063. Depreciation expense for the three months ending June 30, 2009 was $8,898. |
|
Estimates |
|
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. Such estimates and assumptions affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
|
Goodwill | |
The
Company uses the income approach as prescribed by Statement of Financial
Accounting Standards No. 157 (ASC 820) in measuring the value of its Goodwill
on an annual basis, at minimum. Measurement is based on the value indicated
by current market expectations about future amounts, which is then discounted
to a single present value amount. Recovery of the Company's Goodwill is
dependent upon its ability to attain profitable operations. The Company's
Management believes that it will generate positive cash flows beginning
in March 2011; however, due to the current economic recession, demand
for home and commercial improvements and the availability of financing,
it may result in the postponement of when the company will generate positive
cash flows. As of June 30, 2010, the Company's Management believes that
a more reasonable calculation of goodwill impairment will result from
the reporting of operations for the year ended September 30, 2010. |
|
2. | GOING CONCERN |
The Company has incurred substantial net losses for the quarter and nine months ended June 30, 2010, and the years ended September 30, 2009, December 31, 2008 and 2007. This raises doubt about the Company's ability to continue as a going concern. |
|
The Company's future success is dependent upon its ability to raise additional capital to fund its business plan and ultimately to attain profitable operations. There is no guarantee that the Company will be able to raise enough capital or generate sufficient revenues to sustain its operation. Management believes they can raise the appropriate funds needed to support their business plan. |
6
NORTHTECH INDUSTRIES INC. AND SUBSIDIARY |
Notes to Consolidated Financial Statements |
June 30, 2010 and 2009 |
2. | GOING CONCERN (continued) |
The financial statements do not include any adjustments relating to the recoverability or classification or recorded assets and liabilities that might result should the Company be unable to continue as a going concern. During the period from July 31, 2006 (Inception) through June 30, 2010, the Company has a loss of $932,774. |
|
3. | PREPAID EXPENSES - DEPOSITS |
The Company had $17,455 of prepaid expenses - deposits for the quarter ending June 30, 2010 and $17,086 of prepaid expenses - deposits for the year ending September 30, 2009, which is comprised of retainage deposits from customers, funds received from customers that are to be deposited, and employee advances. |
|
4. | PROMISSORY LOAN AGREEMENT |
On May 5, 2010, the Company entered into a 90 day Promissory Loan Agreement with Steve Lowden. The principal of the loan is $15,000, at a 5.00% interest rate, which matures on August 10, 2010, at which point full payment of the loan is due to the lender. As of the date of this report, the parties have agreed in principle to repayment by way of issuing Class A Common Stock pending the drafting and signing of approved paperwork. |
|
5. | LOANS FROM FACTORED RECEIVABLES, SHORT TERM LOANS |
The Company entered into a factoring and security Agreement with Associated Marketing Consultants, Inc. dba AMCI finance to obtain short-term working capital by factoring, selling, and assigning to AMCI acceptable accounts receivable at a 2% discount below face value. |
|
The loan from the sale of the receivables is with recourse and is fully secured by the receivables. The loan has a 20% reserve requirement. The loan balance outstanding as of June 30, 2010 and September 30, 2009 was $91,683 and $96,065 respectively. |
|
On November 7, 2008, the Company entered into a Business Loan Agreement with Cowlitz Bank, dba Bay Bank, for a $135,000 credit facility, at a prime plus 4.75% interest rate, which matures on May 1, 2009. The loan is personally guaranteed by Michael Grabham, President, and secured by a Third Deed of Trust against his personal residence. |
|
On June 16, 2009, the Company extended its Business Loan Agreement with Cowlitz Bank, dba Bay Bank, with a maturity date of July 1, 2009, at a prime plus 5.00% interest rate. On July 8, 2009, the Company again extended the Business Loan Agreement with Bay Bank, with a maturity date of August 1, 2009, at a prime plus 6.00% interest rate. On August 31, 2009, the Company again extended the Business Loan Agreement with Bay Bank, with a maturity date of February 1, 2010, at a prime plus 4.75% interest rate. On March 11, 2010, the Company extended its Business Loan Agreement with Cowlitz Bank, dba Bay Bank, with a maturity date of September 1, 2010, at a prime plus 6.00% interest rate. On June 30, 2010, $102,041 was outstanding. On September 30, 2009, $124,030 was outstanding. |
|
7
NORTHTECH INDUSTRIES INC. AND SUBSIDIARY |
Notes to Consolidated Financial Statements |
June 30, 2010 and 2009 |
6. |
INCOME TAXES |
The Company has a total federal net operating loss carry forward of $586,103 that is available to offset future taxable income of which $56,047 will expire in 2026, $225,662 will expire in 2027, $89,929 will expire in 2028, and $214,465 will expire in 2029. The Company also has start-up costs of $14,410 related to consolidation activities that can be amortized and offset against future taxable income for a period of five years. No income tax expense or corresponding liability has been recorded for the three months ended June 30, 2010 or the year ended September 30, 2009. The Company made no cash payments for federal income taxes in the three and nine months ended June 30, 2010 and the three and six months ended June 30, 2009. |
As of September | |||
30, 2009 | |||
Deferred tax assets: | |||
Net operating tax carry forwards | $ | 586,103 | |
Tax rate | 34% | ||
Gross deferred tax assets | 199,275 | ||
Valuation allowance | (199,275 | ) | |
Net deferred tax assets | $ | - |
Deferred income taxes are provided for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities. As the achievement of required future taxable income is uncertain, the Company recorded a valuation allowance. | |
The Company's Subsidiary is incorporated and conducts all business activities in the state of Washington. The Company, therefore, is not subject to state income tax and, accordingly, no provision has been made in the financial statements. | |
7. |
CAPITAL STOCK |
Each holder of Class "A" Common Stock shall be entitled to one vote for each share of Class "A" Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Company. | |
Each holder of Class "B" Common Stock shall be entitled to one hundred votes for each share of Class "B" Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of stockholders of the Company. | |
The holders of Class "A" Common Stock shall be entitled to receive, share for share, with the holders of shares of Class "B" Common Stock, such dividends if, as, and when declared from time to time by the Board of Directors. In the event that such dividend is paid in the form of shares of Common Stock, holders of Class "A" Common Stock shall receive Class "A" Common Stock and holders of Class "B" Common Stock shall receive Class "B" Common Stock. | |
In the event of voluntary or involuntary liquidation, dissolution, distribution of assets or winding-up of the Company, the holders of Class "A" Common Stock shall be entitled to receive, share for share with holders of Class "B" Common Stock, all the assets of the Company of whatever kind available for distribution to stockholders, after the rights of the holders of the Preferred Stock have been satisfied. | |
Each share of Class "B" Common Stock shall be convertible into one fully paid and non-assessable share of Class "A" Common Stock at the option of the holder thereof at any time. | |
The powers, designations, preferences, rights and qualification of the Class "A" and Class "B" preferred shares shall be set by a resolution of the Board of Directors. |
8
NORTHTECH INDUSTRIES INC. AND SUBSIDIARY |
Notes to Consolidated Financial Statements |
June 30, 2010 and 2009 |
8. |
REGULATION A OFFERING |
2009 Regulation A Offering | |
As of December 31, 2009, the Company had sold 325,000 shares to three purchasers, at a purchase price of $0.10 per share, for gross proceeds of $32,500, pursuant to its offering under Regulation A. | |
The net proceeds from the offering under Regulation A, following the payment of offering-related expenses, will be used by us largely to fund the hiring of two staff members (sales, estimator), start the marketing program, upgrade accounting and operations information systems, and for working capital and other general corporate purposes. | |
The Company has agreed, pursuant to the terms of the subscription agreement with the investors, to provide "piggyback" registration rights. | |
February 2010 Regulation A Offering | |
As of February 5, 2010, the Company had sold an additional 603,500 shares of Class A Common Stock to 32 purchasers at a purchase price of $0.10 per share, for gross proceeds of $60,350. As of February 5, 2010, the Company had sold a total of 928,500 shares of Class A Common Stock to 35 purchasers at a purchase price of $0.10 per share, for gross proceeds of $92,850. | |
9. |
LICENSE AGREEMENT WITH MICROBLEND |
On May 28, 2010, the Company entered into a 72 month capital lease with MicroBlend to lease an automated paint machine and various other equipment associated with the machine. The lease contains a bargain purchase option of $1 at the end of the lease term. Nothing is due on the lease for the first twelve months; $2,066.79 is due per month for months 13 - 72. The equipment is designed to be used with certain consumable materials and components which the Company had agreed to purchase exclusively from MicroBlend during the term of this lease contract under a material consignment and purchase contract. Simultaneously, the Company entered into a Software Licensing Agreement whereby MicroBlend grants the Company a license to use the MicroBlend IP solely in combination with the equipment. |
****
9
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
FORWARD-LOOKING STATEMENTS
Except for statements of historical fact, some information in this quarterly report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these forward-looking statements by words such as anticipate, believe, could, estimate, expect, intend, may, should, will, would or similar words. The statements that contain these or similar words should be read carefully because these statements discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able accurately to predict or control. Further, we urge you to be cautious of the forward-looking statements which are contained in this quarterly report because they involve risks, uncertainties and other factors affecting our operations, our ability to effectively integrate acquired businesses into our operations, market growth, service, products and licenses. Events in the future may cause our actual results and achievements, whether expressed or implied, to differ materially from the expectations we describe in our forward-looking statements. The occurrence of any future events could have a material adverse effect on our business, results of operations and financial position.
Description of Business
Northtech Industries, Inc., (Northtech), a Nevada corporation, is a holding company operating in the commercial and residential construction services industry. Its primary focus is to acquire existing operators in selective niches of the construction services industry, build economies of scale, and institute best practices to drive profits.
Northtech maintains its corporate headquarters at 6363 7th Ave So., #220, Seattle Washington 98108. The telephone number is (206) 632-2839.
Northtech Industries was formed in October 2006. Its first acquisition was Millwork Pro, Inc., a millwork installation business, in October of 2006. The acquisition of Millwork Pro was accomplished by a cashless share exchange. Pursuant to the terms of the Share Exchange Agreement Northtech issued 2,840,000 common shares to the shareholders of Millwork Pro in exchange for 100% of the outstanding shares. At the time of the acquisition, the shareholders of Millwork Pro were Loren Perrigo and Mark Jensen owning 60% and 40% of the issued and outstanding shares respectively. Mr. Perrigo received 1,704,000 common shares, and Mr. Jensen received 1,136,000 common shares completing the acquisition. Northtech Industries was represented by CEO Mark Jensen who was also a director of Millwork Pro at the time of the acquisition. Millwork Pro was represented by President Loren Perrigo who is also the president of PCS Millwork. There were no third parties involved in the negotiations and agreement nor were there any fees paid. Millwork Pro acquired the operations of a millwork installation division from PCS Millwork, Inc. The operations consisted of, contracts for future work, approximately 20 employees, tools, and a van that had been fully depreciated.
On April 8, 2009 Northtech Industries merged with and into The Finish Company Painting and Carpentry, a Washington corporation, with Millwork Pro, Inc. to create Millwork Pro, Inc., doing business as The Finish Company (Millwork Pro DBA The Finish Company or The Finish Company). The primary purpose of the acquisition of The Finish Company was to round out the current products offered by Millwork Pro to include Painting, Tile, Carpentry, and Finish Work. Control was obtained by Northtech Industries acquiring 100% ownership of The Finish Company and it is now a wholly-owned subsidiary of Northtech. The Finish Company had revenues of approximately $1.64 million in 2008. Michael Grabham held 90 shares of The Finish Company Painting and Carpentry common stock. Michael Grabham received 4,410,000 shares of Class A Common Stock of Northtech Industries, Inc. Andy Sewrey held 10 shares of The Finish Company Painting and Carpentry common stock. Andy Sewrey received 490,000 shares of Class A Common Stock of Northtech Industries, Inc. The merger shares issuable to The Finish Company Security Holders represented approximately 33% of the Northtech Industries Fully-Diluted Common Stock as at the effective time of the merger.
Company Overview
Through the Companys subsidiary, Millwork Pro DBA The Finish Company, 31 people are employed in production and management and as many as 20 carpenters are subcontracted. It typically operates fifteen to twenty jobsites on any given day.
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The Finish Company services single and multi-family homebuilders and commercial builders in key growth markets in the Pacific Northwest. It actively services thirty such customers. Marketing targets 600 key companies in the Greater Seattle area. As the homebuilder market has slowed we have increased marketing efforts to the commercial builders. New projects in the commercial building sector have been completed.
Services
Northtech Industries offers a diversified group of services reaching a broad market. We service both commercial and residential markets. We offer services for new construction, tenant improvements and remodeling. Our primary services are painting, carpentry/millwork, flooring and tile.
Painting
The Companys primary service is residential and commercial painting. The Finish Company offers residential and commercial painting services for interior and exterior applications. Clients include new home builders, property managers, retailers, realtors, contractors, and homeowners. As a Residential Painting Specialist, the Company offers the following residential painting services: Interior Painting, Exterior Painting, Minor Repairs, Waterproofing, Popcorn Ceilings, Pressure Cleaning, Renovations, Touch-up, Expert Trim Detail and Color Consulting. As a Commercial Painting Specialist, the Company offers the following commercial painting services: Interior and exterior painting and staining, ceilings, walls, doors and floors, all forms of paint / stain grade trim and molding, wallpaper and other coverings, and installation of signs and fixtures. In an effort to provide a turn key solution to our customers, we also supply the paint for approximately 80% of all paint jobs. We purchase the paint from various vendors, mainly, Rodda Paints, Sherwin Williams and Kelly Moore. With the lease signed with Microblend we are now able to make our own paint with a lower cost basis. This ability gives us a competitive advantage to other painting companies.
There are several targeted locations for our painting services. We actively market to clients with the following property types:
- Commercial Property
- Office Buildings, Suites and Complexes
- Hospitals, Clinics, Medical Buildings and Laboratories
- City, State Government and Municipalities
- Retail Stores and Shopping Malls
- Hotels, Motels and Resorts
- Restaurants and Commercial Kitchens
- Health Clubs, Fitness and Day Spas
- Churches and Places of Worship
- Movie Theaters and Entertainment Complexes
- Schools, Colleges and Universities
- Heavy Commercial
- Industrial Buildings
- Homeowners
Carpentry / Millwork
On a buildings exterior, we complete the projects requirements for wood siding, decorative finishes, window trims, and decks. For the interior, we perform custom cabinets, interior woodwork for baseboards, crown molding, custom doors, wood paneling, sloped ceiling inlays, ceiling medallions and windows. We provide the raw materials for approximately 20% of all carpentry jobs. Our primary suppliers are Western Pacific and Alexandria Molding.
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Below is a list of some of the finish carpentry services we provide:
º | Setting Cabinets | º | Custom Entertainment Centers |
º | Staircase Installation | º | Closet Shelving Installation |
º | Interior Door Hanging | º | Custom Beam Work |
º | Interior Door Casing | º | Window Seats |
º | Window Casing | º | Toy Boxes |
º | Crown Molding | º | Raised Panel Walls |
º | Chair Rails | º | Custom Pillars or Posts |
º | Wainscotings | º | Custom Bent Curved Hand railing |
º | Custom Mantles | º | Bidding for New Home Plans |
We work for commercial general contractors, remodelers, single family and multi-family home builders to install cabinets, doors and moldings as part of the building process. We install paint grade and stain grade. We offer a turnkey package where materials and installation services are included in one estimate.
Millwork installation services include:
- Interior doors
- Exterior doors
- Moldings
- Cabinets
- Stair systems
- Window trim
Tile
The Company specializes in all kinds of tile: large tiles or detailed mosaic tiles, slate, granite, porcelain and limestone. We install tile or stone for a huge building, or a new shower for your master bathroom. The company focuses on interior residential tiling in dining areas, kitchens, bedrooms and bathrooms. In outdoor areas we tile decks, patios, entertaining areas, around pools, driveways, front entrances, steps & pathways. For commercial or residential projects we provide natural and engineered stone countertops. We provide the raw materials for approximately 50% of all tile jobs. Our primary suppliers are Oregon Tile and Marble, Pental Tile, and Dal Tile.
Flooring
We provide carpet, vinyl and hardwood flooring for residential and general contractors. We also refinish all types of hardwood floors. We provide the hardwood, carpet or vinyl on 90% of our projects. Our primary supplier is Hardwood Distributors of Seattle and Shaw Carpets.
Results of Operations
Three and nine months ended June 30, 2010 and 2009
The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended June 30, 2010 which are included herein.
Our operating results for the three and nine months ended June 30, 2010 and 2009 are summarized as follows:
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For the | For the Nine | |||||||||||
Three Months Ended | Months Ended | |||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||
2010 | 2009 | 2010 | 2009 | |||||||||
REVENUES | $ | 533,103 | $ | 853,189 | $ | 1,584,710 | $ | 1,580,358 | ||||
TOTAL COST OF REVENUES | 417,639 | 682,651 | 1,325,581 | 1,247,524 | ||||||||
GROSS PROFIT | 115,464 | 170,538 | 259,129 | 332,834 | ||||||||
TOTAL GENERAL & ADMINISTRATIVE EXPENSES | 197,360 | 167,983 | 607,019 | 368,703 | ||||||||
NET INCOME (LOSS) | $ | (81,896 | ) | $ | 2,555 | $ | (347,890 | ) | $ | (35,869 | ) |
Revenues
For the three months ended June 30, 2010, the Company recognized revenues of $533,103 (June 30, 2009 - $853,189) (Nine months ended June 30, 2010 and 2009- $1,584,710, and $1,580,358 respectively). Installation services for the three month period represent approximately 43% ($230,095) of revenues (nine months ended June 30, 2010 -45% $705,647), paint services represent 41% ($219,180) (nine months ended June 30, 2010 - 38% $609,145), and tile services represent 16% ($83,828) (nine months ended June 30, 2010 - 17% $269,918). With the acquisition of The Finish Company we added painting and tiling to our service offering. We are able to offer one customer more services and increase our revenue opportunity. Moving forward our plan is to focus on residential and commercial painting because it offers greater margin opportunities. We will seek to increase our product and service offerings through acquisitions. Counter tops, flooring, windows and roofing are other areas we may add to the product offering.
Cost of Revenues Earned
Costs of Revenues Earned, as reflected in the Companys statement of operations, consists of direct labor costs, subcontractors, tools and materials, equipment rental and other expenses. As a percentage of total revenue, our gross profit for the three months ended June 30, 2010 was 21.65% as compared to 19.9% for the three months ended June 30, 2009. We intend to achieve a goal of between 20% to 24% margins within the fiscal year 2010. We intend to achieve this by targeting higher margin opportunities such as residential and commercial painting. Painting projects can reach 40%-50% gross margin in the residential sectors.. With the addition of our Automated Paint Machine we will be able to lower our average cost for the paint we provide by 25-40%. This competitive advantage allows us to successfully bid for jobs that might be seen as lower margin by other competitors. Another high margin opportunity is residential remodels. We are implementing improved management programs to reduce labor costs. We will be using new software to manage the labor hours. Our highest project cost is labor. By managing hours better and reducing labor costs we improve our gross margin. We intend to create a retail location that will allow us to purchase many of our materials direct from distributors. This move will allow us to save an additional 15-20% on materials we are currently purchasing. We are expanding our Internet marketing to get higher-margin clients. Our Internet marketing tends to create sales cycles that have higher margins. People who contact us by the Internet dont tend to shop for competitive bids as much. We arent competing for the project with many contractors so we dont have to decrease our margins to win the business.
General and Administrative Expenses
General and Administrative expenses increased 64% from the nine months ended June 30, 2010 as compared to the same period in 2009, which contributed materially to our net loss for the nine months ended June 30, 2010. Revenues in early 2010 were significantly lower historically. For the three months ended June 30, 2010, the Company recognized revenues of $533,103 as compared to $853,189 in June 30, 2009. We believe our market continued to be affected by the recession and we were also affected by seasonality. January through June in Seattle, Washington is a period of high rainfall. There may be fewer building projects during this period of time versus the summer and fall months. We hadn’t been affected by seasonality until winter and spring of 2010. During the period of lower revenues a base level of staff were still employed which requires wages, benefits and administration. The cost of hiring and training an employee to deliver quality work is several thousand dollars. We felt it was better to maintain our employee level during the period of lower revenues rather than lay off too many people and be short-handed later in the year. This caused a significant increase in G&A expenses as a percentage of revenue. In addition, we hired our first dedicated sales person and a part time administration person in Jan of 2010. These additional people were needed to assist with a greater amount of consumer projects. Consumer projects traditionally require more hands-on customer assistance because of product selection and a need for greater quality. The dedicated sales person has helped increase our customer base in the consumer market as well as builder markets. The additional staff contributed to the additional operating wage/benefits costs from 3rd Q 2009 to 2010.
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Net Loss
For the three months ended June 30, 2010, the Company recognized a net loss of $81,896 compared to a net income for the three months ended June 30, 2009 of $2,555. Management has been working diligently to implement and develop procedures and processes to streamline the business operations, increase the efficiency of our bidding process, effect scalability, control labor costs, and our ability to better predict market conditions.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations primarily through a line of credit based on receivables from AMCI Finance, a bank loan from Bay Bank and the sale of equity securities. Overall, our liquidity and access to capital is very limited; we have not received any commitment for additional financing and given the size of our Company we may be limited to (i) additional loans from Bay Bank (ii) the sale of the Companys Common Stock, or (iii) other debt instruments.
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. During the three months ended June 30, 2010 and 2009 cash used in our operating activities was $(81,896) and $2,555 respectively. (Nine months ended June 30, 2010 and 2009 - ($347,890) and (35,869) respectively. We funded our operating activities with cash reserves in addition to the following net resources:
AMCI
Bay Bank Note
List Investors and Funds
Received
Our primary source of liquidity is our cash flows from operations. Millwork Pro sells clients on our ability to provide construction services. For every dollar in revenue we spend approximately 25% on materials, 45% on labor and 25% on fixed overhead. We finance operations primarily through a line of credit based on receivables from AMCI Finance. We are able to factor our receivables for completed projects and receive income immediately upon submitting invoices. This greatly improves our cash flow.
On March 11, 2010, the Company renewed and changed the terms of its Business Loan Agreement with Cowlitz Bank, d/b/a Bay Bank. Descriptions of the material changes in terms to the original loan are as follows:
- Change from a Term Loan to a Revolving Line of Credit.
- Change in payment structure from monthly payments of principal plus interest to monthly interest only plus weekly principal payments of $750.00 beginning on April 1, 2010.
- The Company is to provide Borrowing Base Certificates with each advance request but not less than weekly, which will be supported by a listing of all Receivables, Payables, Jobs in Progress and estimated costs.
- The Advance Ratio is not to exceed 80% of eligible Accounts.
- The Maturity Date has extended from February 1, 2010 to September 1, 2010.
List Investors and Funds Received - As of June 30, 2010, the Company had sold 928,500 shares to 35 purchasers, at a purchase price of $0.10 per share, for gross proceeds of $92,850, pursuant to its offering under Regulation A. On May 5, 2010, the Company entered into a 90 day Promissory Loan Agreement with Steve Lowden. The principal of the loan is $15,000, at a 5.00% interest rate, which matures on August 10, 2010, at which point full payment of the loan is due to the lender. As of the date of this report, the parties have agreed in principal to repayment by way of issuing Class A Common Stock pending the drafting and signing of approved paperwork.
At June 30, 2010, we had a cash balance of $7,446 compared to $23,974 at September 30, 2009, a decrease of $16,528. At June 30, 2010, our working capital was $(12,880) as compared to $243,372 at September 30, 2009, a change of $256,252. Our current assets, other than cash, consist of 241,048 in accounts receivable, and 17,455 in prepaid expenses - deposits.
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Our current liabilities consisted of $353,783 in accounts payable, Short term debt and factored receivables due to AMCI Finance of $125,119 and Line of Credit to Bay Bank of $114,469 and $178,832 in accrued expenses.
The acquisition of The Finish Company has created negative cash flows. The primary reasons for the negative cash flows are lower revenues due to the economy, small gross margins due to competition and fixed costs that dont decrease in proportion to the decrease in revenues.
The economy has greatly affected our revenues and our ability to obtain new clients. For the three months ended June 30, 2010, the Company recognized revenues of $533,103 as compared to the same period in June 30, 2009 with $853,189 in revenue. The construction industry is driven primarily by the residential construction market, which is in turn dependent upon a number of factors, including demographic trends, interest rates, employment levels, supply and demand for housing stock, availability of credit, foreclosure rates, consumer confidence and the economy in general. The homebuilding industry is undergoing a significant and sustained downturn due to negative trends in many of the factors listed above. Many homebuilders have significantly decreased their starts because of lower demand and an excess of both existing and new home inventory. The weakness in the homebuilding industry has resulted in a substantial reduction in the demand for construction services such as painting, tile, carpentry and millwork.
We work to expand our customer base beyond homebuilders and focus on the consumer market for residential services such as painting and remodeling. We also work with the commercial markets such as retail and office buildings. We believe the residential home building market isnt going to significantly improve until 2012. By expanding our customer base and continually entering new markets we can lessen the impact of the residential home market.
We believe that our current cash and cash equivalents will be sufficient to meet our anticipated working capital requirements and capital expenditures for 12 months following the date of this report. Our business is subject to seasonality and our cash flow from operations improves significantly from June through October every year. Nevertheless, we may require additional sources of liquidity in the event of changes in business conditions or other future developments. Factors affecting our sources of liquidity include our sales performance and our ability to control material costs and labor. Any changes in the significant factors affecting our revenues may cause material fluctuations in our cash generated from operations. Changes in working capital, including any significant shortening or lengthening of our accounts receivable cycle, may also cause fluctuations in our cash generated from operations. If our sources of liquidity are insufficient to satisfy our cash requirements, we may seek to sell additional equity or securities to meet our cash needs.
If we are to implement our business plan, we will need to raise significant amounts of additional capital during the year ending September 30, 2010. We have not received any commitment that any such additional financing would be forthcoming. Accordingly, there can be no assurance that the Company will be successful in selling equity or securing debt financing, or that any combination thereof will be sufficient to meet our capital needs or, if it could be obtained, that it can be obtained on reasonable terms in light of our circumstances at that time. In addition, if any financing should be obtained, existing shareholders will likely incur substantial, immediate, and permanent dilution of their existing investment.
Critical Accounting Policies and Estimates
Basis of Consolidation
The consolidated financial
statements include the account of Northtech Industries, Inc. and its
wholly-owned subsidiary, Millwork Pro, Inc., dba The Finish Company. All
material intercompany transactions between the Company and its Subsidiary have
been eliminated in consolidation.
Cash and Cash Equivalents
For purposes of the
statement of cash flows, the Company considers all short-term, highly liquid
investments with original maturities of three months or less to be cash
equivalents.
Accounts Receivable
Certain accounts receivable were
factored with recourse as of June 30, 2010. Accounts receivable were recorded
net of an allowance for doubtful accounts for the quarter ended June 30, 2010
and the year ended September 30, 2009. All accounts were considered fully
collectible; therefore, no allowance was established as of June 30, 2010 and
September 30, 2009, respectively. If amounts become uncollectible, they will be
charged to operations when that determination is made.
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Advertising
The Company expenses advertising costs as
they are incurred. Advertising expense for the three months ended June 30, 2010
and June 30, 2009 were $8,147 and $8,052 respectively.
Revenue Recognition
The Company recognizes revenues
on the completed-contract method. The completed-contract method is used because
the typical contract is completed in one month or less, and financial position
and results of operations do not vary significantly from those that would result
using the percentage-of-completion method. A contract is considered
substantially complete at the time of departure from the job site.
Concentrations of Credit Risk
Millwork Pro had three
major customers, Build Urban, JAS Design, and Olive Tree, from whom 9%, 10%, and
9% of revenues, respectively, were earned for the three months ended June 30,
2010. Millwork Pro had one major customer, Charter Construction, from whom
approximately 23% of revenues were earned for the three months ended June 30,
2009.
Stock Based Compensation
The Company uses the fair
value based method of accounting prescribed by Statement of Financial Accounting
Standards No, 123, Accounting for Stock-Based Compensation, for its non-employee
stock compensation plan. Under Statement No. 123, compensation expense is
determined based on the fair value of the services received.
Vehicles and Equipment
Vehicles and equipment are
stated at cost. Gains or losses on dispositions of equipment are included in
operation in the year of disposal.
Depreciation
Depreciation is computed on the
straight-line method over the estimated useful lives of the assets. Depreciation
expense for the three months ending June 30, 2010 was $1,063. Depreciation
expense for the three months ending June 30, 2009 was $8,898.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions.
Such estimates and assumptions affect the reported amount of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial
statements, and affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Goodwill
The Company
uses the income approach as prescribed by Statement of Financial Accounting
Standards No. 157 (ASC 820) in measuring the value of its Goodwill on an annual
basis, at minimum. Measurement is based on the value indicated by current market
expectations about future amounts, which is then discounted to a single present
value amount. Recovery of the Company's Goodwill is dependent upon its ability
to attain profitable operations. The Company's Management believes that it will
generate positive cash flows beginning in March 2011; however, due to the current
economic recession, demand for home and commercial improvements and the availability
of financing, it may result in the postponement of when the company will generate
positive cash flows. As of June 30, 2010, the Company's Management believes
that a more reasonable calculation of goodwill impairment will result from the
reporting of operations for the year ended September 30, 2010.
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Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
As a smaller reporting company, as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this Item.
Item 4. | Controls and Procedures. |
Evaluation of Disclosure Controls and Procedures
As of June 30, 2010, management assessed the effectiveness of our internal control over financial reporting. The Company's management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP in the United States of America and includes those policies and procedures that:
In evaluating the effectiveness of our internal control over financial reporting, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework. Based on that evaluation, completed only by Michael Grabham, our President and a Director, who also serves as our principal financial officer and principal accounting officer, Mr. Grabham concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below.
This was due to deficiencies that existed in the design or operation of our internal controls over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.
The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were: (1) lack of a functioning audit committee due to a lack of a majority of independent members and a lack of a majority of outside directors on our board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; (2) inadequate segregation of duties consistent with control objectives; and (3) ineffective controls over period end financial disclosure and reporting processes. The aforementioned material weaknesses were identified by our Chief Executive Officer and a Director, who also serves as our principal financial officer and principal accounting officer, in connection with the review of our financial statements as of June 30, 2010.
Management
believes that the lack of a functioning audit committee and the lack of a majority
of outside directors on our board of directors results in ineffective oversight
in the establishment and monitoring of required internal controls and procedures,
which could result in a material misstatement in our financial statements in
future periods.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. | Legal Proceedings |
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Our operations are subject to federal, state and local laws and regulations. Currently, we are not involved, or the subject of, any pending or existing litigation.
Item 1A. | Risk Factors |
As a smaller reporting company, as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this Item.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
Item 3. | Defaults Upon Senior Securities |
On May 5, 2010, the Company entered into a 90 day Promissory Loan Agreement with Steve Lowden. The principal of the loan is $15,000, at a 5.00% interest rate, which matures on August 10, 2010, at which point full payment of the loan is due to the lender. As of the date of this report, the parties have agreed in principal to repayment by way of issuing Class A Common Stock pending the drafting and signing of approved paperwork.
Item 4 . | (Removed and Reserved) |
Item 5. | Other Information |
None.
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Item 6. | Exhibits |
(a) | Exhibits required by Item 601 of Regulation S-K |
Exhibit No. | Exhibit |
2.1 |
Agreement (regarding share exchange), dated October 23, 2006, by and between Northtech Industries, Inc., a Nevada corporation and Millwork Pro, Inc., a Washington corporation. (Incorporated by reference, previously filed on Form 10, submitted to the Securities and Exchange Commission on May 3, 2010.) |
2.2 |
Agreement and Plan of Merger, dated march 18, 2009, by and among Northtech Industries, Inc., a Nevada corporation, MillworkPro, Inc., a Washington corporation, and The Finish Company Painting and Carpentry, Inc., a Washington corporation. (Incorporated by reference, previously filed on Form 10, submitted to the Securities and Exchange Commission on May 3, 2010.) |
3.1 |
Articles of Incorporation of Northtech Industries Inc., a Nevada corporation. (Incorporated by reference, previously filed on Form 10, submitted to the Securities and Exchange Commission on May 3, 2010.) |
3.2 |
By-laws of Northtech Industries Inc., a Nevada corporation. (Incorporated by reference, previously filed on Form 10, submitted to the Securities and Exchange Commission on May 3, 2010.) |
10.1 |
Factoring and Security Agreement, dated October 28, 2008, by and between Associated Marketing Consultants, Inc. and Millwork Pro, Inc., a Washington corporation (Incorporated by reference, previously filed on Form 10, submitted to the Securities and Exchange Commission on May 3, 2010.) |
10.2 |
Lease Agreement, dated April 27, 2009, by and between Compleat Sportswear, Inc. and The Finish Company (Incorporated by reference, previously filed on Form 10, submitted to the Securities and Exchange Commission on May 3, 2010.) |
10.3 |
Form of Subscription Agreement (Incorporated by reference, previously filed on Form 10, submitted to the Securities and Exchange Commission on May 3, 2010.) |
10.4 |
Business Loan Agreement with Cowlitz Bank, d/b/a Bay Bank (Incorporated by reference, previously filed on Form 10, submitted to the Securities and Exchange Commission on May 3, 2010.) |
10.5 |
Promissory Note between Northtech Industries, Inc. and Steve Lowden (Incorporated by reference, previously filed on Form 10, submitted to the Securities and Exchange Commission on June 30, 2010.) |
10.6 |
Amended Page 1 Lease Agreement, by and between Compleat Sportswear, Inc. and The Finish Company (Incorporated by reference, previously filed on Form 10, submitted to the Securities and Exchange Commission on July 28, 2010.) |
10.7 | Lease Agreement dated May 28, 2010 by and among Millwork Pro Inc. and MicroBlend, Inc. (Incorporated by reference, previously filed on Form 10-Q, submitted to the Securities and Exchange Commission on August 23, 2010.) |
10.8 | Material Consignment and Purchase Contract dated May 28, 2010 by and among Millwork Pro Inc. and MicroBlend, Inc. (Incorporated by reference, previously filed on Form 10-Q, submitted to the Securities and Exchange Commission on August 23, 2010.) |
10.9 | Software Licensing Agreement dated May 28, 2010 by and among Millwork Pro Inc. and MicroBlend, Inc. (Incorporated by reference, previously filed on Form 10-Q, submitted to the Securities and Exchange Commission on August 23, 2010.) |
10.10 | Revised Lease Agreement dated June 29, 2010 by and among Millwork Pro Inc. and MicroBlend, Inc. (Incorporated by reference, previously filed on Form 10-Q, submitted to the Securities and Exchange Commission on August 23, 2010.) |
21.1 |
List of Subsidiaries (Incorporated by reference, previously filed on Form 10, submitted to the Securities and Exchange Commission on July 28, 2010.) |
31.1* | |
31.2* | |
32.1* |
*Filed herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned thereunto duly authorized.
Northtech Industries, Inc. | ||
Date: October 4, 2010 | By: | Michael Grabham |
Michael Grabham | ||
President and CEO |
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