<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>doc1.txt
<TEXT>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(D) of The Securities Act of 1934
For the quarterly period ended: September 30, 2003
Commission file number: 000-27189
VICTORIA INDUSTRIES, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 98-0230423
(State or other jurisdiction of (IRS Employee Identification No.)
incorporation or organization)
551 Fifth Avenue, Suite 601, New York, NY 10017.
(Address of principal executive offices)
(212) 973-0063
(Issuer's telephone number)
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 and Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--------- ---------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $0.001 par value 586,850
(Class) (Outstanding as of November 6, 2003)
<PAGE>
VICTORIA INDUSTRIES, INC.
FORM 10-QSB
INDEX
Page
----
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . .F-1
Consolidated Statements of Changes in Stockholders' Equity
(Capital Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .F-2
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . .F-3
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . .F-4
Notes to the Consolidated Financial Statements. . . . . . . . . . . . . . . .F-5
Item 2 Management's Discussion and Analysis or Plan of Operation. . . . . . .3
Item 3 Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . . .11
Part II OTHER INFORMATION
Item 1 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . .11
Item 2 Changes in Securities. . . . . . . . . . . . . . . . . . . . . . . . .11
Item 3 Default upon Senior Securities . . . . . . . . . . . . . . . . . . . .11
Item 4 Submission of Matters to a Vote of Security Holders. . . . . . . . . .11
Item 5 Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . .12
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . .12
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
Certifications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
2
<PAGE>
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE-MONTH PERIODS ENDED
SEPTEMBER 30, 2003 AND 2002
(UNAUDITED - EXPRESSED IN US DOLLARS)
<PAGE>
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE-MONTH PERIODS ENDED
SEPTEMBER 30, 2003 AND 2002
(UNAUDITED - EXPRESSED IN US DOLLARS)
--------------------------------------------------------------------------------
CONTENTS
Consolidated Financial Statements
-----------------------------------
Balance Sheets
Statements of Changes in Stockholders' Equity (Capital Deficit)
Statements of Operations
Statements of Cash Flows
Notes to the Financial Statements
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
(EXPRESSED IN US DOLLARS)
SEPTEMBER 30 December 31
2003 2002
-------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (UNAUDITED)
CURRENT
Cash $ 256,592 $ 14
Short-term investments 44,184 -
Receivables 8,628 -
-----------------------------
309,404 14
PROPERTY AND EQUIPMENT, net of depreciation - 3,486
-----------------------------
TOTAL ASSETS $ 309,404 $ 3,500
===========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
Liabilities
-----------
CURRENT
Accounts payable and accrued liabilities (Note 5) $ 20,600 $ 104,885
Due to related parties (Note 5) 205,824 100,000
-----------------------------
226,424 204,885
Convertible notes payable (Net of unamortized discounts of
$337,000 and $Nil) (Note 7) - -
-----------------------------
226,424 204,885
-----------------------------
Stockholders' Equity (Capital Deficit)
--------------------------------------
Share Capital (Note 9)
Authorized
75,000,000 common shares with a par value of
$0.001 per share
Issued and outstanding
586,850 common shares 587 587
Additional paid-in capital 896,919 559,919
Deficit accumulated during the development stage (814,526) (761,891)
-----------------------------
Total stockholders' equity (capital deficit) 82,980 (201,385)
-----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (CAPITAL DEFICIT) $ 309,404 $ 3,500
===========================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================================
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (CAPITAL DEFICIT)
(UNAUDITED - EXPRESSED IN US DOLLARS)
-----------------------------------------------------------------------------------------------------------------------------
Deficit Total
Accumulated Stockholders'
Common Stock Additional During the Equity
------------------- Paid-in Development (Capital
Shares Amount Capital Stage Deficit)
-------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Shares issued for cash on Inception 400,000 $ 400 $ 14,600 $ - 15,000
Shares issued for cash in July 2000, net of share
issuance costs of $36,500 152,750 153 116,097 - 116,250
Imputed interest on loan and amount due to related parties - - 1,218 - 1,218
Net loss for the period - - - (56,232) (56,232)
-------------------------------------------------------
BALANCE, DECEMBER 31, 2000 552,750 553 131,915 (56,232) 76,236
Shares issued for services at $1.00 per share on:
- April 2001 14,100 14 14,086 - 14,100
- November 2001 20,000 20 19,980 - 20,000
Imputed interest on amount due to related parties - - 738 - 738
Net loss for the year - - - (105,666) (105,666)
-------------------------------------------------------
BALANCE, DECEMBER 31, 2001 586,850 587 166,719 (161,898) 5,408
Shares issued for a license at $1.10 per share in April 2002 100,000 100 109,900 - 110,000
Shares cancelled in connection with termination and return of
license in July 2002 (100,000) (100) (109,900) - (110,000)
Stock option compensation - - 393,200 - 393,200
Net loss for the year - - - (599,993) (599,993)
-------------------------------------------------------
BALANCE, DECEMBER 31, 2002 586,850 587 559,919 (761,891) (201,385)
Value of beneficial conversion feature on convertible notes (Note 7) - - 337,000 - 337,000
Net loss for the period - - - (52,635) (52,635)
-------------------------------------------------------
BALANCE, SEPTEMBER 30, 2003 586,850 $ 587 $ 896,919 $(814,526) $ 82,980
=============================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================================
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(UNAUDITED - EXPRESSED IN US DOLLARS)
-------------------------------------
Period from
For the three-month For the nine-month January 25
periods ended periods ended 2000
September 30 September 30 (inception) to
--------------------------------------------------------------------- September 30
2003 2002 2003 2002 2003
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXPENSES
Depreciation $ - $ 255 $ 782 $ 763 $ 2,843
Equipment rental - related parties - - - - 8,650
Compensation 1,171 71,357 1,171 260,650 419,271
Office and miscellaneous 485 1,477 485 5,120 19,574
Professional fees 36,443 5,237 40,734 67,589 145,443
Rent - - - 5,506 19,636
Transfer, filing and listing 1,076 680 1,150 2,024 10,279
Travel and promotion - 1,569 - 1,569 24,073
--------------------------------------------------------------------------------------
(29,175) (80,593) (44,322) (343,221) (649,769)
OTHER INCOME (EXPENSE)
Interest income - - - 44 4,333
Interest expense and other (Note 4) (36) (4,352) (4,188) (7,797) (17,877)
Foreign exchange loss (25) (15) (1,421) (190) (1,421)
Writedown of capital assets - - (2,704) - (2,704)
--------------------------------------------------------------------------------------
NET LOSS FROM CONTINUING OPERATIONS (39,236) (84,960) (52,635) (351,164) (667,438)
LOSS FROM DISCONTINUED OPERATIONS
(Note 2) - (2,428) - (124,088) (147,088)
--------------------------------------------------------------------------------------
NET LOSS FOR THE PERIOD $ (39,236) $ (87,388) $ (52,635) $ (475,252) $ (814,526)
=================================================================================================================================
LOSS PER SHARE - basic and diluted
From continuing operations $ (0.07) $ (0.15) $ (0.09) $ (0.57) $ (1,38)
Discontinued operations (0.00) (0.00) (0.00) (0.20) (0.30)
--------------------------------------------------------------------------------------
AFTER DISCONTINUED OPERATIONS $ (0.07) $ (0.15) $ (0.09) $ (0.77) $ (1.68)
=================================================================================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 586,850 590,111 586,850 620,183 483,328
=================================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
--------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(UNAUDITED - AMOUNTS EXPRESSED IN US DOLLARS)
---------------------------------------------
Period from
January 25
Nine-month periods ended 2000
September 30 (inception) to
----------------------------------- September 30
2003 2002 2003
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH USED IN OPERATING ACTIVITIES
--------------------------------------------------------
Net loss from continuing operations for the period $ (52,635) $ (351,164) $ (667,438)
Adjustments to reconcile net loss from continuing
operations to net cash in operating activities:
Depreciation 782 763 2,843
Interest expense - - 1,956
Shares issued for services - - 34,100
Stock option compensation - 224,650 314,100
Writedown of capital assets 2,704 - 2,704
Changes in assets and liabilities
Increase in accounts receivable (8,628) - (8,628)
Decrease in prepaid expenses and deposits - 945 -
Increase in short-term investments (44,184) - (44,184)
Increase (decrease) in accounts payable and
accrued liabilities (31,376) 79,830 73,509
---------------------------------------------------
(133,337) (44,976) (291,038)
---------------------------------------------------
Loss from discontinued operations - (124,088) (147,088)
Adjustment for non-cash expenses
Stock option compensation - discontinued - 56,100 79,100
---------------------------------------------------
- (67,988) (67,988)
---------------------------------------------------
(133,337) (112,964) (359,026)
---------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES
Shares issued for cash, net of issuance costs - - 131,250
Proceeds on loans from related parties 152,915 100,000 282,915
Repayment of a loan to a related party (100,000) - (130,000)
Proceeds on convertible notes payable 337,000 - 337,000
---------------------------------------------------
389,915 100,000 621,165
---------------------------------------------------
CASH USED IN INVESTING ACTIVITY
Purchase of property and equipment - - (5,547)
---------------------------------------------------
INCREASE (DECREASE) IN CASH 256,578 (12,964) 256,592
CASH, beginning of period 14 12,991 -
---------------------------------------------------
CASH, end of period $ 256,592 $ 27 $ 256,592
=============================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION (Note 8)
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
================================================================================
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - EXPRESSED IN US DOLLARS)
SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND ABILITY TO CONTINUE OPERATIONS
The Company was incorporated on January 25, 2000 under the laws of the
State of Nevada. The Company was initially involved in the identification
and acquisition of marketing licenses for high technology manufactured
products. In February 2001, the Company terminated its involvement in this
business and sought new business opportunities. On March 13, 2002, the
Company acquired certain property and equipment and a license to certain
intellectual property to produce salmon caviar and salmon caviar-related
products. The processing and sale of caviar and caviar-related products was
the Company's primary business from late March 2002 until June 2002. The
Company terminated its involvement in the caviar business, returned
remaining assets and settled liabilities of the caviar business, became
inactive and was searching for new business opportunities. The results of
operations for the caviar business are presented in these financial
statements as discontinued operations (Note 2).
In September 2002, the Company established a wholly-owned subsidiary
(Victoria Resources, Inc. ("VRI")) in the State of New York for the purpose
of pursuing opportunities in the lumber resource sector. VRI controls two
Russian entities which it plans to operate in the commercial lumber
industry in the Tomsk region of Western Siberia. Victoria Lumber is a
wholly-owned Russian subsidiary of VRI established for the purpose of
trading in forestry products in Russia. VRI also entered into an agreement
with a Russian company whereby VRI owns a 51% interest in Victoria Siberian
Wood. At September 30, 2003, the Company has not yet commenced operations
in Russia.
Upon consolidation, all intercompany transactions and balances were
eliminated. Monetary balances denominated in foreign currencies were
translated to US dollars using the rate in effect at the balance sheet
date. The effect of any change in exchange rate from that in effect on the
transaction date is charged to the Consolidated Statement of Operations.
The interim financial statements included herein, presented in accordance
with United States generally accepted accounting principles and stated in
US dollars, have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading.
These financial statements reflect all adjustments, consisting of normal
recurring adjustments, which in the opinion of management, are necessary
for fair presentation of the information contained therein. It is suggested
that these interim financial statements be read in conjunction with the
audited financial statements of the Company for the years ended December
31, 2002 and 2001 included in the Company's 10-KSB Annual Report. The
Company follows the same accounting policies in the preparation of interim
reports.
Results of operations for the interim periods are not indicative of annual
results.
<PAGE>
================================================================================
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - EXPRESSED IN US DOLLARS)
SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------
1. NATURE OF BUSINESS AND ABILITY TO CONTINUE OPERATIONS - CONTINUED
These accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business. As at September 30, 2003, the Company has recognized no revenue
and has accumulated operating losses of $814,526 since its inception. The
continuation of the Company is dependent upon the continuing financial
support of creditors and stockholders, actively pursuing the Company's new
business, obtaining long-term financing as well as achieving a profitable
level of operations. Management plans to raise equity capital to finance
the current cash requirements of the Company. Capital raised will be used
to further the new business venture. While the Company is expending its
best efforts to achieve the above plans, there is no assurance that any
such activity will generate funds that will be available for operations.
These conditions raise substantial doubt about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded
asset amounts or amounts and classification of liabilities that might arise
from this uncertainty.
--------------------------------------------------------------------------------
2. DISCONTINUED OPERATIONS
On March 13, 2002, the Company (through its newly-incorporated wholly-owned
subsidiary, Golden Caviar Corp.) acquired certain property and equipment
and a license to certain intellectual property to produce salmon caviar and
salmon caviar products. The license was a world-wide and exclusive license
to use certain intellectual property that is subject to a number of Russian
patents as well as other intellectual property (including certain
proprietary recipes) with respect to the production of salmon caviar and
salmon caviar products.
In exchange for the licence (having no specified expiry), the Company
issued (on April 3, 2002) 100,000, fully-vested, non-forfeitable,
restricted shares of the Company to the Licensor. The value assigned to the
common stock and license of $110,000 was based upon the trading price of
the Company's common stock around the time the terms were agreed to.
In June 2002, the Company decided to discontinue its caviar business over
an unresolvable dispute with the licensor. On July 3, 2002, the Company
signed an agreement with the licensor to terminate the above-noted
acquisition. The termination of the agreement resulted in the return or
cancellation of the above-mentioned property and equipment, license,
unsecured note payable, the 100,000 issued common shares of the Company
(returned and cancelled in July 2002), employment agreement with the
licensor, the stock options issued to the licensor, and all the
commitments.
<PAGE>
================================================================================
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - EXPRESSED IN US DOLLARS)
SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------
2. DISCONTINUED OPERATIONS - CONTINUED
The financial results of the caviar business have been segregated and
presented as discontinued operations in the Statements of Operations. There
were no net assets of the discontinued operation remaining at September 30,
2003 or December 31, 2002. The loss from discontinued operations presented
on the Statement of Operations consists of expenses incurred in the caviar
business from April 1, 2002 until September 30, 2002. No revenue was earned
from the caviar business. There was no gain or loss on disposal of the
caviar business. The trading value of the Company's common stock exceeded
the value of the returned assets at the date of cancellation.
--------------------------------------------------------------------------------
3. STOCK-BASED COMPENSATION
The Company applies Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations in
accounting for stock option grants to employees. Under APB 25, compensation
cost is recognized for stock options granted to employees at prices below
the market price of the underlying common stock on the date of grant.
SFAS No. 123, "Accounting for Stock-Based Compensation", requires the
Company to provide pro-forma information regarding net income as if
compensation cost for the Company's stock options had been determined in
accordance with the fair value based method prescribed in SFAS No. 123. The
value of stock options granted to consultants is recognized in these
consolidated financial statements as compensation expense using the
Black-Scholes option pricing model.
Compensation expense is remeasured on a quarterly basis until fully vested
for options not vested on the grant date.
The Company does not plan to adopt the fair value method of accounting for
stock-based compensation awarded to employees. There was no compensation
expense recognized during the nine months ended September 30, 2003 and 2002
or required to be disclosed on a pro-forma basis.
--------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
Related party transactions with two of the Company's former directors not
disclosed elsewhere in these consolidated financial statements are as
follows:
Nine-months ended
September 30
2003 2002
---------------------------
Compensation $ - $ 36,600
Interest expense 4,152 7,797
---------------------------
$ 4,152 $ 44,397
===========================
<PAGE>
================================================================================
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - EXPRESSED IN US DOLLARS)
SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------
4. RELATED PARTY TRANSACTIONS
Related party transactions are recorded at the exchange amount, being the
amount established and agreed to by the related parties.
--------------------------------------------------------------------------------
5. DUE TO RELATED PARTIES
a) During 2002, the Company obtained loans from the two former directors
totaling $100,000, bearing interest at 15% per annum and repayable on
demand. The loans, by way of promissory notes, were collateralized by
a security interest over all the Company's present and after-acquired
property. In June 2003, in connection with a change in control, the
Company obtained loans from the incoming stockholders, through an
intermediary to repay in full the loans from the former directors and
certain other amounts owed to them.
b) Certain other amounts due to these former directors in respect of
expenses requiring reimbursement and unpaid management fees were
unsecured, non-interest bearing and repayable on demand. In June 2003,
the former directors assigned other amounts payable totaling $52,914
(December 31, 2002 - $50,015) to the new controlling stockholders in
connection with the change of control (Note 5(c)).
c) In respect of the above noted change of control, a promissory note in
the amount of $205,824 has been issued, by the Company, comprised as
follows:
<TABLE>
<CAPTION>
SEPTEMBER 30 December 31
2003 2002
---------------------------------
<S> <C> <C>
Advances to the Company on change of control $ 142,910 $ -
Assignment of related party accounts payable 52,914 -
Other advances 10,000 -
Loans receivable (a) - 100,000
---------------------------------
$ 205,824 $ 100,000
=================================
</TABLE>
The Company issued to the new controlling stockholder a promissory note
which is due on demand and bears no interest.
The Company bears no indebtedness to the former controlling stockholders at
September 30, 2003.
<PAGE>
================================================================================
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - EXPRESSED IN US DOLLARS)
SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------
6. STOCK OPTIONS
During 2001, the Company established its 2001 Stock Option Plan, covering
100,000 shares of common stock. The Plan provides stock-based compensation
to consultants, directors and other advisors of the Company. The term of
the options granted under the Plan must not be more than ten years from the
date of grant.
On March 18, 2002, the Company granted 60,000 stock options to various
employees, directors and consultants having an exercise price of $5.10 per
option and expiring in five or ten years. Such options vest in accordance
with the Company's 2001 Stock Option Plan, depending on the type of
optionee. Pursuant to the settlement agreement with the licensor (Note 2),
10,000 options were cancelled in July 2002. A further 6,000 options were
cancelled in December 2002. At December 31, 2002, 44,000 stock options
remained outstanding, all of which were exercisable. During the nine-month
period ended September 30, 2003, all outstanding options were cancelled as
a result of the change of control (Note 5). As at September 30, 2003, no
new options have been issued.
--------------------------------------------------------------------------------
7. CONVERTIBLE NOTES PAYABLE
On September 30, 2003, the Company issued $337,000 of Convertible Notes due
September 30, 2005 and bearing interest at 10% per annum payable quarterly.
The convertible notes are unsecured.
The notes are immediately convertible at the option of the holders into
shares of common stock of the Company at a conversion price of $0.10. The
convertible notes payable are accounted for under Emerging Issues Task
Force Release No. 00-27 which requires a beneficial conversion feature to
be calculated. As a result of the issuance of convertible notes, a
beneficial conversion feature of $337,000 was recorded as a discount to the
convertible notes in the period ended September 30, 2003.
The value ascribed to the beneficial conversion feature are recorded as a
debt discount and will be amortized to interest expense over the term of
the related debt using the effective interest rate method. Upon conversion
of the underlying debt into common stock, a pro-rata share of the
unamortized debt discount will be recorded as interest expense. No
amortization was recorded during the period ended September 30, 2003.
The convertible notes payable are summarized as follows:
<TABLE>
<CAPTION>
Face Carrying
Amount Discount Value
----------------------------
<S> <C> <C> <C>
Balance at, and issued on, September 30, 2003 $337,000 $ 337,000 $ -
============================
</TABLE>
Subsequent to September 30, 2003, the Company received additional proceeds
of $495,000 in connection with a financing which is expected to have the
same terms and conditions as the convertible notes issued on September 30,
2003.
<PAGE>
================================================================================
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - EXPRESSED IN US DOLLARS)
SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
8. SUPPLEMENTAL CASH FLOW INFORMATION
Cumulative
from
January 25
2000
Nine-month periods ended (inception) to
September 30 September 30
-----------------------------------------------------------------------------------------------
2003 2002 2003
<S> <C> <C> <C>
Interest and taxes paid $ - $ - $ -
Non-cash operating, investing and financing
activities
Assignment of accounts payable $ 52,914 $ - $ 52,914
Shares issued in exchange for services $ - $ - $ 34,100
Purchase of property and equipment in
exchange for note payable $ - $ 249,000 $ 249,000
Cancellation of note payable for
purchase of property and equipment $ - $ (249,000) $ (249,000)
Purchase of license in exchange for
common shares $ - $ 110,000 $ 110,000
Cancellation of license and common
shares $ - $ (110,000) $ (110,000)
Stock option compensation $ - $ 280,750 $ 393,200
Beneficial conversion feature on
convertible notes $ 337,000 $ - $ 337,000
</TABLE>
--------------------------------------------------------------------------------
9. SUBSEQUENT EVENT
In October 2003, the Company effected a 10:1 reverse stock split. The
effect of this reverse stock split has been reflected in these financial
statements and the comparative figures have been retroactively adjusted in
this regard.
<PAGE>
================================================================================
VICTORIA INDUSTRIES, INC.
(FORMERLY ROLLTECH, INC.)
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED - EXPRESSED IN US DOLLARS)
SEPTEMBER 30, 2003 AND 2002
--------------------------------------------------------------------------------
10. NEW ACCOUNTING PRONOUNCEMENT
On May 15, 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 150, "Accounting
for Certain Financial Instruments with Characteristics of both Liabilities
and Equity". SFAS No. 150 changes the accounting for certain financial
instruments that, under previous guidance, could be classified as equity
(or assets in some circumstances) in the statement of financial position.
Further, SFAS No. 150 requires disclosure regarding the terms of those
instruments and settlement alternatives. SFAS No. 150 affects an entity's
classification of the following freestanding instruments: a) Mandatorily
redeemable instruments b) financial instruments to repurchase an entity's
own equity instruments c) financial instruments embodying obligations that
the issuer must or could choose to settle by issuing a variable number of
its shares or other equity instruments based solely on (i) a fixed monetary
amount known at inception or (ii) something other than changes in its own
equity instruments (d) SFAS No. 150 does not apply to features embedded in
a financial instrument that is not a derivative in its entirety. The
guidance in SFAS No. 150 is generally effective for all financial
instruments entered into or modified after May 31, 2003, and it is
otherwise effective at the beginning of the first interim period beginning
after June 15, 2003.
The adoption of these new standards did not have a material effect on the
Company's financial statements.
--------------------------------------------------------------------------------
11. COMPARATIVE AMOUNTS
Certain comparative amounts have been reclassified to conform with the
current period's presentation.
F-10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
FORWARD-LOOKING STATEMENTS
This quarterly report contains forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as "may",
"will", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors", that may cause our or our industry's actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Except as required by applicable law,
including the securities laws of the United States, we do not intend to update
any of the forward-looking statements to conform these statements to actual
results.
As used in this quarterly report, the terms "we", "us", "our", and "Victoria"
mean Victoria Industries, Inc., unless otherwise indicated.
All dollar amounts refer to US dollars unless otherwise indicated.
The following discussion should be read in conjunction with our financial
statements and the related notes that appear elsewhere in this quarterly report.
The following discussion contains forward-looking statements that reflect our
plans, estimates and beliefs. Our actual results could differ materially from
those discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below and elsewhere in this quarterly report, particularly in the section
entitled "Risk Factors".
GENERAL
Our company was incorporated on January 25, 2000 under the laws of the State of
Nevada. We were initially focused on the identification and acquisition of
marketing licenses for high technology manufactured products. We planned to
develop a business-to-business manufacturing technology interactive website to
facilitate the marketing of any products that we succeeded in licensing. In
February, 2000, as an initial marketing project, we entered into a marketing
license agreement pursuant to which we were granted an exclusive license to
market a proprietary solid-state graphite-based lubricant. As a result of
difficulties experienced in marketing the lubricant, high costs and poor market
conditions, we were unable to obtain adequate financing to proceed with the
execution of our plans, including the development and launch of our
business-to-business website. Effective February 1, 2001, we terminated our
marketing license agreement for
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<PAGE>
the lubricant, and refocused on efforts in seeking new business opportunities,
operating as a "blank check" company.
On March 13, 2002, acting through our wholly-owned subsidiary, Golden Caviar
Corp., we entered into an arm's length agreement with Dr. Vyacheslav Sova and
Sea Technology Enterprise, LLC, a Washington limited liability company
controlled by Dr. Sova, pursuant to which Golden Caviar Corp. agreed to purchase
certain assets from Sea Technology and to acquire an exclusive license to
certain intellectual property from Dr. Sova. The transactions contemplated in
this Agreement closed on March 13, 2002. The assets that Golden Caviar Corp.
purchased from Sea Technology consisted of equipment that would have, together
with the technology licensed by Dr. Sova, permitted Golden Caviar Corp. to
produce salmon caviar and salmon caviar products. The license that Dr. Sova
granted to Golden Caviar Corp. was a worldwide and exclusive license to use
certain intellectual property that is the subject of a number of Russian
patents, as well as other intellectual property (including certain proprietary
recipes) with respect to the production of salmon caviar and salmon caviar
products. Since the closing of the transactions with Dr. Sova and Sea
Technology Enterprise, LLC, we were working towards establishing our
infrastructure and entering into key supply relationships with the view to
commencing primary processing of salmon caviar in June 2002.
On June 27, 2002, we filed a report on Form 8-K announcing that on June 27,
2002, Golden Caviar Corp., our wholly-owned subsidiary, discontinued proposed
business operations with Dr. Vyacheslav Sova, Sea Technology Enterprise, LLC, a
limited liability company formed under the laws of the State of Washington and
controlled by Dr. Sova. (Detailed report on Form 8-K filed on June 27, 2002). On
July 3, 2002, Rolltech and our wholly-owned subsidiary, Golden Caviar, entered
into Agreement with Dr. Sova and Sea Technology to release from any and all
claims which could arise from any of the agreements or relationships by and
between Golden Caviar, Rolltech, Sova and Sea Technology. Concurrently, Rolltech
and its wholly-owned subsidiary, Golden Caviar entered into to Agreement with
Oleg Ordinartsev and the Law Office of Oleg Ordinartsev PLLC forever discharge
each other of any and all claims, demands, and causes of action of whatsoever
kind, nature or description, whether past, present or future.
Effective June 27, 2002 we have begun to refocus our efforts in seeking new
business opportunities.
In the financial statements for the nine months ended September 30, 2003, the
caviar business has been segregated and presented as a "discontinued operation".
The agreements reached on July 3, 2002 resulted in the return or cancellation of
the property and equipment purchased, the license, the unsecured note payable,
the 1 million (pre-consolidation) common shares previously issued to Dr. Sova,
the employment agreement with Dr. Sova, stock options granted to Dr. Sova and
all commitments previously entered into by our company. No revenue was
recognized from the caviar business during the period of time we operated it.
On June 11, 2003, the Company entered into a Stock Purchase Agreement with
Michael Scheglov and sold the Company's subsidiary, Golden Caviar, to Mr.
Scheglov for consideration of $1.00 (one dollar). At the time of sale, Golden
Caviar had no assets or liabilities and was inactive.
4
<PAGE>
On September 9, 2003, the Company filed a Preliminary Information Statement
pursuant to Section 14(c) of the Act reporting on the following actions taken
pursuant to the Nevada Revised Statutes Chapter 78, without a meeting of
shareholders:
1. Amend the Company's Certificate of Incorporation to change the
Company's name to "Victoria Industries, Inc"
2. To effectuate a 10-1 reverse stock split for all the Company's
outstanding shares, effective October 14, 2003
On September 10, 2003, the Company filed a current report on Form 8-K under Item
5, Other Events and Regulation FD Disclosure announcing the formation of a
wholly owned subsidiary, Victoria Resources, Inc. in the State of New York for
the purpose of carrying on business in the resource sector.
On September 19, 2003, the Company filed a Definitive Information Statement
pursuant to Section 14(c) of the Act in substantially the same form as the
Preliminary Statement.
During September 2003, the Company also established two Russian subsidiaries.
Victoria Siberian Wood (Victoria Sibwood) is 51% owned by the Company's
subsidiary, Victoria Resources, Inc. and 49% owned by a Russian partner -
Tomlesprominvest. Tomlesprominvest has a significant presence in the Tomsk
region and has access to logging companies and processing facilities.
Victoria Siberian Wood's subscribed capital amounts to $1 million. During the
Quarter under review, Victoria Resources contributed $200,000 into Victoria
Sibwood. The total subscribed capital of Victoria Sibwood amounts to the Russian
Ruble equivalent of $1,000,000. In accordance with the articles of
incorporation, Victoria Resources shall contribute a total of $510,000 into
Victoria Sibwood. In accordance with the articles of incorporation,
Tomlesprominvest shall contribute $490,000 into Victoria Sibwood by February
15th, 2004. The funds contributed by Victoria Resources shall be used to finance
Victoria Sibwood's working capital.
Victoria Lumber is a wholly owned subsidiary of Victoria Resources, Inc.
Victoria Siberian Wood is based in Novosibirsk, Russia, and was established for
the purpose of trading in forestry products in Russia. Victoria Lumber was also
established for the same purpose, but will operate as a wholly owned subsidiary
rather than a partnership. The company intends to source the forestry products
from the Tomsk region in Western Siberia.
There are seven species of trees in the Tomsk region that are considered
commercial species including five softwood conifer species and two hardwood
species. The conifer species are fir (Abics sibirica), spruce (Picea obovata),
larch (larix sibirica), Scots Pine (Pinus sylvesteris) and Kedr or (Cedar)
(Pinus sibirica). The US equivalent for Cedar is a five-needle white pine
comparable to the white fir and spruce grown in the United States. The larch
species also grows in the US and has properties similar to Douglas fir. The
hardwood species, birch (Betula
5
<PAGE>
pendula) and aspen (Populus tremula), which are also similar to the white birch,
that grow in the United States. The actual productive forestland of the Tomsk
resource region is 43.25 million acres (17.5 million) hectares or approximately
56% of the gross land area.
The Company has identified a number of export opportunities for forestry
products originating from Russia. The main destinations of such exports include
the United States, Japan, South Korea and Western Europe. The Company is
conducting preliminary negotiations with potential buyers of the products in the
key target countries. No assurance can be given as to if and when such
preliminary negotiations may materialize into specific indications of interest
and contracts.
Initially, the Company shall not have its own manufacturing capacities. The
Company will seek orders from domestic and local customers and source the
products from the suppliers in Tomsk region. At the initial period the main
operating costs incurred by the Company will consist of purchasing costs,
in-land transportation expenses if products are delivered on FOB basis and
commissions.
The Company, including its subsidiaries, currently has a staff of four. As our
operations expand we may need to recruit additional staff.
PLAN OF OPERATION
-------------------
During the Quarter we made a decision to pursue the forestry business in Siberia
known as the source of premium timber highly sought in the West. We have
identified strategic investors who contributed funds to the Company to finance
our new business at its initial stages. On September 30, 2003, the Company
raised $337,000 in financing for the operations of Victoria Siberian Wood via
the issuance of 10% Convertible notes payable due on September 30, 2005. The
financing was contributed by High Peaks Corporation in the amount of $90,000,
Stockwell, Inc. in the amount of 97,000, Inverness, Inc. in the amount of
$80,000 and Mr. Victor Kislinskii in the amount of $70,000. All of the above
parties are significant shareholders in the Company. Subsequent to September
30, 2003, we raised a further $495,000 under similar terms. The Convertible
notes are immediately convertible into common stock of our company at a ratio
$0.10 per share. The Company intends to use these proceeds to commence
development of the business of lumber brokering in Russia through Victoria
Sibwood and to develop the business of Victoria Lumber in Russia. The operations
of the Company have previously been financed through private placements and
loans. Initially, the Company plans to purchase logs, lumber and other forestry
products from the local suppliers directly and through the local partner -
Tomlesprominvest. Initially, the company will not be engaged in any processing
and will operate as an intermediary either as a broker or as a dealer by taking
title to the goods. However, there can be no assurance that the Company will be
able to generate such sales.
Neither the Company nor its subsidiaries currently own or lease any timberlands,
the Company may, in the future, consider the possibility of taking out a license
on certain timberlands. The Company does not currently own any lumber processing
facilities and may subcontract the processing to other companies. The Company
may, in the future, consider the possibility of acquiring a stake in an existing
or establishing a new processing facility. No assurance can be
6
<PAGE>
given that the Company will eventually own or lease timberlands or processing
capacities. No specific timing has been assigned to such possible transactions.
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
---------------------------------------------------
Results of Operations
-----------------------
During the nine-month period ended September 30, 2003, the Company incurred
expenses of $52,635, largely consisting of professional fees in maintaining the
Company's public company status on the NASD Over the Counter Bulletin Board and
in changes made to the corporate structure.
Cash Requirements
------------------
The Company anticipates it will require $1,000,000 to sustain operations and
develop its subsidiaries over the next twelve months. The Company believes it
will be able to raise these funds through equity and debt financing, however,
there is no guarantee that funds will be raised. If additional funds are raised
by the issuance of debt or other equity instruments, we may be subject to
certain limitations in our operations, and issuance of such securities may have
rights senior to those of the then existing holders of common stock. If adequate
funds are not available or not available on acceptable terms, we may be unable
to finance our proposed business ventures in Russia.
Liquidity And Capital Resources
-------------------------------
Since inception, the Company has financed its operations from private financing.
The Company suffered operating losses of $52,635 during the nine months ended
September 30, 2003 as discussed above. The Company anticipates continuing
losses in the near future while its subsidiaries (Victoria Siberian Wood and
Victoria Lumber) establish operations in Russia.
As of September 30, 2003 the Company had total current assets of $309,404 and
total current liabilities of $226,424 (including $205,824 due to 5 significant
stockholders of our company) for working capital of $82,980 as compared to a
working capital deficiency of $204,871 at December 31, 2002. The substantial
reason for the change was the receipt on September 30, 2003 of $337,000 on
issuance of 10% convertible notes payable (terms discussed above). The amount
due to the significant stockholders is unsecured, non-interest bearing without
specified terms of repayment.
Financing
---------
The Company's capital requirements will be significant as it launches operations
as discussed above.
The Company has raised $337,000 from related parties during the quarter through
debt private placement subscription agreements. A further $495,000 was raised
under similar terms subsequent to September 30, 2003.
7
<PAGE>
Because the conversion price on these notes was less than market on the issuance
date, the beneficial conversion feature has been calculated and recorded in our
consolidated financial statements as a discount to the face value of the
convertible note liability. The entire face value of the note was assigned to
the beneficial conversion feature such that the net liability appearing in our
financial statements at September 30, 2003 was Nil. This discount will be
amortized to income over the two-year term of the notes as additional interest
expense.
Going Concern
--------------
These financial statements have been prepared on a going concern basis which
assumes that adequate sources of financing will be obtained as required and that
our assets will be realized and liabilities settled in the ordinary course of
business. Accordingly, these consolidated financial statements do not include
any adjustments related to the recoverability of assets and classification of
assets and liabilities that might be necessary should we be unable to continue
as a going concern. In order for us to continue as a going concern, we require
additional financing. There can be no assurance that additional financing will
be available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to continue as a going
concern, we would likely be unable to realize the carrying value of our assets
reflected in the balances set out in the preparation of financial statements.
There is substantial doubt about our ability to continue as a going concern as
we are just commencing operations in Russia and have incurred recurring
operating losses since our inception. Accordingly, our independent auditors
included an explanatory paragraph in their report on the December 31, 2002
financial statements regarding concerns about our ability to continue as a going
concern. Our financial statements contain additional note disclosures
describing the circumstances that lead to this disclosure by our independent
auditors
Use of Estimates
------------------
The preparation of financial statements in accordance with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could materially differ from these estimates.
New Accounting Pronouncement
On May 15, 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity". SFAS No. 150 changes the accounting for certain financial instruments
that, under previous guidance, could be classified as equity or "mezzanine"
equity, by now requiring those instruments to be classified as liabilities (or
assets in some circumstances) in the statement of financial position. Further,
SFAS No. 150 requires disclosure regarding the terms of those instruments and
settlement alternatives. SFAS
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<PAGE>
No. 150 affects an entity's classification of the following freestanding
instruments: a) Mandatorily redeemable instruments b) Financial instruments to
repurchase an entity's own equity instruments c) Financial instruments embodying
obligations that the issuer must or could choose to settle by issuing a variable
number of its shares or other equity instruments based solely on (i) a fixed
monetary amount known at inception or (ii) something other than changes in its
own equity instruments d) SFAS No. 150 does not apply to features embedded in a
financial instrument that is not a derivative in its entirety. The guidance in
SFAS No. 150 is generally effective for all financial instruments entered into
or modified after May 31, 2003, and is otherwise effective at the beginning of
the first interim period beginning after June 15, 2003. The implementation of
these new standards did not have a material effect on our consolidated financial
statements.
RISK FACTORS
-------------
Much of the information included in this registration statement includes or is
based upon estimates, projections or other "forward looking statements". Such
forward looking statements include any projections or estimates made by us and
our management in connection with our business operations. While these
forward-looking statements, and any assumptions upon which they are based, are
made in good faith and reflect our current judgment regarding the direction of
our business, actual results will almost always vary, sometimes materially, from
any estimates, predictions, projections, assumptions or other future performance
suggested herein.
Such estimates, projections or other "forward looking statements" involve
various risks and uncertainties as outlined below. We caution the reader that
important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other "forward
looking statements".
Our common shares are considered speculative during the initial expansion of our
new forestry business. Prospective investors should consider carefully the risk
factors set out below.
Limited operating history; anticipated losses; uncertainly of future results.
The Company has a limited operating history upon which an evaluation of its
prospects can be made. There can be no assurance that the Company will
effectively execute its business plan or manage any growth of the business, or
that the Company's future operating and financial forecast will be met. Future
development and operating results will depend on many factors, including access
to adequate capital, the demand for the Company's products, the level of product
and price competition, the Company's success in setting up and expanding
distribution channels, and whether the Company can control costs. Many of these
factors are beyond the control of the Company. In addition, the Company's
future prospects must be considered in light of the risks, expenses, and
difficulties frequently encountered in establishing a new business in the
forestry products industry, which is characterized by intense competition, rapid
technological change, highly litigious competitors and significant regulation.
Limited public market, possible volatility of share price.
9
<PAGE>
The Company's Common Stock is currently quoted on the NASD OTC Bulletin Board
under the ticker symbol VIIN. As of November 11, 2003, there were approximately
586,850 shares of Common Stock outstanding. There can be no assurance that a
trading market will be sustained in the future. Factors such as, but not
limited to, technological innovations, new products, acquisitions or strategic
alliances entered into by the Company or its competitors, failure to meet
security analysts' expectations, government regulatory action, proprietary
rights developments, and market conditions for lumber products in general could
have a material effect on the volatility of the Company's stock price.
Political Risks
Russia is one of the world's leading commodity exporters. Since 2000 foreign
direct investment in Russia has been steadily increasing as a result of lower
taxation and improved transparency, with the commodity sector being the
recipient of a major part of this investment. Nevertheless, the Russian market
and political environment is currently in the state of flux. The government may
impose taxes, duties, quotas or restrictions at any time which would make
operations unprofitable and infeasible and cause a write-off of capital
investment in Russian lumber opportunities.
A number of factors, beyond the Company's control and the effect of which cannot
be accurately predicted may affect the marketing of the Company's lumber
operations. These factors include political policy on foreign ownership,
continued readiness to extend acceptable terms to foreign investors, and
political policy on lumber exports.
Risks Associated with International Markets
The Company's future business will be substantially operated within Russia.
However, the future success of the Company will depend in part on its ability to
generate sales on international markets. There can be no assurance, however,
that the Company will be successful in generating these sales. In addition,
these will be subject to a number of risks, including: foreign currency risk;
the risks that agreements may be difficult or impossible to enforce and
receivables difficult to collect through a foreign country's legal system;
foreign customers may have longer payment cycles; or foreign countries could
impose withholding taxes or otherwise tax the Company's foreign income, impose
tariffs, embargoes, or exchange controls, or adopt other restrictions on foreign
trade. In addition, the laws of certain countries do not protect the Company's
offerings to the same extent as the laws of the United States. The Company has
taken steps to mitigate these risks through joint ventures with domestic Russian
companies, but there can be no assurance in the adequacy of these protection
measures.
Key Personnel
Although none of our present officers or directors are key to our continuing
operations, we rely upon the continued service and performance of these officers
and directors, and our future success depends on the retention of these people,
whose knowledge of our business and whose technical expertise would be difficult
to replace. At this time, none of our officers or directors are
10
<PAGE>
bound by employment agreements, and as a result, any of them could leave with
little or no prior notice.
Competition for qualified individuals is likely to be intense, and we may not be
able to attract, assimilate, or retain additional highly qualified personnel in
the future. The failure to attract, integrate, motivate and retain these
employees could harm our business.
Lack of Diversification
The Company is currently exclusively in the business of trading in forest
products. This lack of diversification into a number of areas may subject us to
economic fluctuations within the forest products industry, thereby increasing
the risks associated with our operations.
Regulation
Although we will be subject to regulation under the Securities Exchange Act of
1934, management believes that we will not be subject to regulation under the
Investment Company Act of 1940, insofar as we will not be engaged in the
business of investing or trading in securities. In the event that we engage in
business combinations which result in us holding passive investment interests in
a number of entities, we could be subject to regulation under the Investment
Company Act of 1940, meaning that we would be required to register as an
investment company and could be expected to incur significant registration and
compliance costs. We have obtained no formal determination from the Securities
and Exchange Commission as to the status of our company under the Investment
Company Act of 1940 and, consequently, any violation of such act would subject
us to material adverse consequences.
Exposure to Natural Disasters
The forest products industry is subject to natural events such as forest fires,
adverse weather conditions, insect infestation, disease and other natural
disasters. The occurrence of any of these events could adversely affect our
ability to trade in forest products which would result in a material adverse
consequence to the Company
"Penny Stock" Rules May Restrict the Market for the Company's Shares
Our common shares are subject to rules promulgated by the Securities and
Exchange Commission relating to "penny stocks," which apply to companies whose
shares are not traded on a national stock exchange or on the NASDAQ system,
trade at less than $5.00 per share, or who do not meet certain other financial
requirements specified by the Securities and Exchange Commission. These rules
require brokers who sell "penny stocks" to persons other than established
customers and "accredited investors" to complete certain documentation, make
suitability inquiries of investors, and provide investors with certain
information concerning the risks of trading in such penny stocks. These rules
may discourage or restrict the ability of brokers to sell our common shares and
may affect the secondary market for our common shares. These rules could also
hamper our ability to raise funds in the primary market for our common shares.
11
<PAGE>
Possible Volatility of Share Prices
Our common shares are currently publicly traded on the Over-the-Counter Bulletin
Board service of the National Association of Securities Dealers, Inc. The
trading price of our common shares has been subject to wide fluctuations.
Trading prices of our common shares may fluctuate in response to a number of
factors, many of which will be beyond our control. The stock market has
generally experienced extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of companies with no
current business operation. There can be no assurance that trading prices and
price earnings ratios previously experienced by our common shares will be
matched or maintained. These broad market and industry factors may adversely
affect the market price of our common shares, regardless of our operating
performance.
In the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been instituted. Such
litigation, if instituted, could result in substantial costs for us and a
diversion of management's attention and resources.
Indemnification of Directors, Officers and Others
------------------------------------------------------
Our by-laws contain provisions with respect to the indemnification of our
officers and directors against all expenses (including, without limitation,
attorneys' fees, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with any proceeding arising by reason of the
fact that the person is one of our officers or directors) incurred by an officer
or director in defending any such proceeding to the maximum extent permitted by
Nevada law.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of our
company under Nevada law or otherwise, we have been advised the opinion of the
Securities and Exchange Commission is that such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable.
Future Dilution
----------------
Our constating documents authorize the issuance of 75,000,000 common shares,
each with a par value of $0.001. In the event that we are required to issue any
additional shares or enter into private placements to raise financing through
the sale of equity securities, investors' interests in our company will be
diluted and investors may suffer dilution in their net book value per share
depending on the price at which such securities are sold. If we issue any such
additional shares, such issuances also will cause a reduction in the
proportionate ownership and voting power of all other shareholders. Further, any
such issuance may result in a change in our control.
Anti-Takeover Provisions
-------------------------
We do not currently have a shareholder rights plan or any anti-takeover
provisions in our By-laws. Without any anti-takeover provisions, there is no
deterrent for a take-over of our company, which may result in a change in our
management and directors.
12
<PAGE>
Reports to Security Holders
------------------------------
Under the securities laws of Nevada, we are not required to deliver an annual
report to our shareholders but we intend to send an annual report to our
shareholders.
ITEM 3. CONTROLS AND PROCEDURES
The registrant's Principal executive officer, based on his evaluation of the
registrant's disclosure controls and procedures (as defined in Rules 13a-14 ( c
) of the Securities Exchange Act of 1934) as of September 30, 2003 has concluded
that the registrants' disclosure controls and procedures are adequate and
effective to ensure that material information relating to the registrant and its
consolidated subsidiaries is recorded, processed, summarized and reported within
the time periods specified by the SEC' s rules and forms, particularly during
the period in which this quarterly report has been prepared.
The registrants' principal executive officer has concluded that there were no
significant changes in the registrants' internal controls or in other factors
that could significantly affect these controls subsequent to September 30, 2003
the date of their most recent evaluation of such controls, and that there was no
significant deficiencies or material weaknesses in the registrant's internal
controls.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
We know of no material, active or pending legal proceedings against us, nor are
we involved as a plaintiff in any material proceedings or pending litigation.
There are no proceedings in which any of our directors, officers or affiliates,
or any registered or beneficial shareholders are an adverse party or have a
material interest adverse to us.
ITEM 2. CHANGES IN SECURITIES.
On September 19, 2003, the Company filed a Definitive Information Statement
pursuant to Section 14(c) of the Act reporting the Company's effecting a 10-1
reverse stock split for all the Company's outstanding shares, effective October
14, 2003. The action was approved by a majority of shareholders in writing but
without a meeting of shareholders pursuant to the Nevada Revised Statutes
Chapter 78. The Company's outstanding shares were 5,868,500 before the reverse
split, and are currently 586,850 as a result of the consolidation becoming
effective.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Registrant*
3.2 By-laws of the Registrant*
31 Certification of Principal Executive and Financial Officer as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32 Certification of Principal Executive and Financial Officer
Pursuant to 18 U.S.C Section 1350 as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
* Previously filed as an exhibit to the Company's Form 10-SB filed
on October 4, 2000
(b) Reports on Form 8-K filed during the three months ended September 30,
2003.
A current report on Form 8K Item 5: Other Event, and Item 6:
Resignation of Registrant's Directors was filed on September 10, 2003.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: November 14, 2003 Victoria Industries, Inc.
/s/ Albert Abdoulline
--------------------------
Albert Abdoulline
President
14
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</TEXT>
</DOCUMENT>