UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDEDSEPTEMBER 30, 2004
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________TO __________
COMMISSION FILE NUMBER:000-31639
HDL CAPITAL CORP.
(Exact name of small business issuer as specified in its charter)
| NEVADA | 331001725 |
| (State or other jurisdiction of incorporation or | (IRS Employer Identification No.) |
| organization) |
Suite 2602 – 1111 Beach Ave.
Vancouver, British Columbia Canada V6E 1T9
(Address of principal executive offices)
(604) 608-4226
(Registrant’s telephone number)
No former address or fiscal year
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:None
Securities registered pursuant to Section 12(g) of the Act:Common Stock, $0.001 Par Value
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 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 ¨
As of September 30, 2004, the Registrant had 90,000 shares of common stock issued and
outstanding of which 52,000 were held by non-affiliates of the Registrant.
Transitional Small Business Disclosure Format (check one) Yes ¨ No x
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HDL CAPITAL CORP.
INDEX
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PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
HDL CAPITAL CORP.
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 2004
(Unaudited)
| BALANCE SHEETS |
| INTERIM STATEMENTS OF OPERATIONS |
| STATEMENT OF STOCKHOLDER’S EQUITY |
| INTERIM STATEMENTS OF CASH FLOWS |
| NOTES TO INTERIM FINANCIAL STATEMENTS |
F-1
HDL CAPITAL CORP.
(A Development Stage Company)
BALANCE SHEETS
| September 30, | December 31, | |||||
| 2004 | 2003 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| CURRENT ASSETS | ||||||
| Cash | $ | 13 | $ | 407 | ||
| $ | 13 | $ | 407 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (CAPITAL DEFICIENCY) | ||||||
| CURRENT LIABILITIES | ||||||
| Accounts payable and accrued liabilities | $ | 2,335 | $ | 1,000 | ||
| Due to related parties (Note 4) | 9,881 | 7,200 | ||||
| 12,216 | 8,200 | |||||
| GOING CONCERN CONTINGENCY(Note 1) | ||||||
| STOCKHOLDERS’ EQUITY (CAPITAL DEFICIENCY) | ||||||
| Capital stock (Note 3) | ||||||
| Authorized | ||||||
| Common stock, $0.001 par value, 100,000,000 shares | ||||||
| Issued and outstanding | ||||||
| 90,000 shares of common stock | 90 | 90 | ||||
| Deficit accumulated during development stage | (12,293 | ) | (7,883 | ) | ||
| (12,203 | ) | (7,793 | ) | |||
| $ | 13 | $ | 407 | |||
The accompanying notes are an integral part of these interim financial statements
F-2
HDL CAPITAL CORP.
(A Development Stage Company)
INTERIM STATEMENTS OF OPERATIONS
(Unaudited)
| Three | Nine | Three | Nine | April 25, 2002 | |||||||||||
| Months | Months | Months | Months | (Inception) to | |||||||||||
| Ended | Ended | Ended | Ended | September 30, | |||||||||||
| September | September | September | September | 2004 | |||||||||||
| 30, 2004 | 30, 2004 | 30, 2003 | 30, 2003 | ||||||||||||
| EXPENSES | |||||||||||||||
| Office and general | $ | 569 | $ | 1,696 | $ | 210 | $ | 1,131 | $ | 4,158 | |||||
| Professional fees | 1,000 | 2,714 | 850 | 2,596 | 8,135 | ||||||||||
| NET LOSS FOR THE PERIOD | $ | (1,569 | ) | $ | (4,410 | ) | $ | (1,060 | ) | $ | (3,727 | ) | $ | (12,293 | ) |
| BASIC NET LOSS PER SHARE | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.01 | ) | $ | (0.04 | ) | |||
| WEIGHTED AVERAGE NUMBER OF COMMON | 90,000 | 90,000 | 90,000 | 90,000 | |||||||||||
| SHARES OUTSTANDING |
The accompanying notes are an integral part of these interim financial statements
F-3
HDL CAPITAL CORP.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE PERIOD FROM APRIL 25, 2002 (INCEPTION) TO SEPTEMBER 30, 2004
(Unaudited)
| Deficit | ||||||||||||
| Common Stock | Accumulated | |||||||||||
| During | Stockholders’ | |||||||||||
| Number | Development | Equity | ||||||||||
| of shares | Amount | Stage | (Capital | |||||||||
| Deficiency) | ||||||||||||
| Common stock issued for cash at $0.001 per share | ||||||||||||
| September 6, 2002 | 90,000 | $ | 90 | $ | - | $ | 90 | |||||
| Net loss for the period April 25, 2002 | ||||||||||||
| (inception) to December 31, 2002 | - | - | (2,975 | ) | (2,975 | ) | ||||||
| Balance, December 31, 2002 | 90,000 | 90 | (2,975 | ) | (2,885 | ) | ||||||
| Net loss for the year ended December 31, 2003 | - | - | (4,908 | ) | (4,908 | ) | ||||||
| Balance, December 31, 2003 | 90,000 | 90 | (7,883 | ) | (7,793 | ) | ||||||
| Net loss for the nine months ended September 30, 2004 | - | - | (4,410 | ) | (4,410 | ) | ||||||
| Balance, September 30, 2004 | 90,000 | $ | 90 | $ | (12,293 | ) | $ | (12,203 | ) | |||
The accompanying notes are an integral part of these interim financial statements
F-4
HDL CAPITAL CORP.
(A Development Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months | Nine Months | April 25, | |||||||
| Ended | Ended | 2002 | |||||||
| September 30, | September 30, | (inception) to | |||||||
| 2004 | 2003 | September 30, | |||||||
| 2004 | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||
| Net loss for the period | $ | (4,410 | ) | $ | (3,727 | ) | $ | (12,293 | ) |
| Adjustments to reconcile net loss | |||||||||
| to net cash from operating activities: | |||||||||
| - accounts payable | 1,335 | (300 | ) | 2,335 | |||||
| NET CASH USED IN OPERATING ACTIVITIES | (3,075 | ) | (4,027 | ) | (9,958 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||
| Proceeds on sale of common stock | - | - | 90 | ||||||
| Advances from related parties | 2,681 | 4,085 | 9,881 | ||||||
| NET CASH FLOWS FROM FINANCING ACTIVITIES | 2,681 | 4,085 | 9,971 | ||||||
| INCREASE (DECREASE) IN CASH | (394 | ) | 58 | 13 | |||||
| CASH, BEGINNING OF PERIOD | 407 | 330 | - | ||||||
| CASH, END OF PERIOD | $ | 13 | $ | 388 | $ | 13 | |||
| SUPPLEMENTAL DISCLOSURES: | |||||||||
| Interest paid | $ | - | $ | - | $ | - | |||
| Taxes paid | $ | - | $ | - | $ | - |
The accompanying notes are an integral part of these interim financial statements
F-5
| HDL CAPITAL CORP. |
| (A Development Stage Company) |
| NOTES TO INTERIM FINANCIAL STATEMENTS |
| (Unaudited) |
| SEPTEMBER 30, 2004 |
| NOTE 1 – NATURE OF OPERATIONS AND BASIS OF PRESENTATION |
The Company is in the initial development stage and has incurred losses since inception totalling $12,293. To date the Company has had no business operations and was organized for the purpose of creating a corporate vehicle to locate and acquire an operating or development stage business (refer to Note 6). The ability of the Company to continue as a going concern is dependent on raising capital to acquire a business venture and ultimately to attain profitable operations. Accordingly, these factors raise substantial doubt as to the Company’s ability to continue as a going concern. The Company anticipates funding its operations for the next 12 months through advances from directors as required.
The Company completed a Form 10-SB registration with the United States Securities and Exchange Commission and as a result is subject to the regulations governing reporting issuers in the United States.
Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulation S-B. They do not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material changes in the information disclosed in the notes to the financial statements for the year ended December 31, 2003 included in the Company’s Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the nine months ended September 30, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004.
| NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Organization
The Company was incorporated on April 25, 2002 in the State of Nevada. The Company’s fiscal year end is December 31 with its initial period being from April 25, 2002 (inception) to December 31, 2002.
Basis of presentation
These financial statements are presented in United States dollars and have been prepared in accordance with United States generally accepted accounting principles.
Use of Estimates and Assumptions
Preparation of the Company’s financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all liquid investments, with an original maturity of three months or less when purchased, to be cash equivalents.
Fair Value of Financial Instruments
In accordance with the requirements of SFAS No. 107, the Company has determined the estimated fair value of financial instruments using available market information and appropriate valuation methodologies. The fair value of financial instruments classified as current assets or liabilities approximate carrying value due to the short-term maturity of the instruments.
F-6
| HDL CAPITAL CORP. |
| (A Development Stage Company) |
| NOTES TO INTERIM FINANCIAL STATEMENTS |
| (Unaudited) |
| SEPTEMBER 30, 2004 |
| NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Net Loss per Common Share
Basic earnings per share includes no dilution and is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Dilutive earnings per share reflects the potential dilution of securities that could share in the earnings of the Company. Because the Company does not have any potentially dilutive securities, the accompanying presentation is only of basic loss per share.
Income taxes
The Company follows the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax balances. Deferred tax assets and liabilities are measured using enacted or substantially enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the date of enactment or substantive enactment. As at September 30, 2004 the Company had net operating loss carryforwards; however, due to the uncertainty of realization the Company has provided a full valuation allowance for the deferred tax assets resulting from these loss carryforwards.
Stock-based Compensation
In December 2002, the Financial Accounting Standards Board issued Financial Accounting Standard No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (“SFAS No. 148”), an amendment of Financial Accounting Standard No. 123 “Accounting for Stock-Based Compensation” (“SFAS No. 123”). The purpose of SFAS No. 148 is to: (1) provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation, (2) amend the disclosure provisions to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decisions with respect to stock-based employee compensation, and (3) to require disclosure of those effects in interim financial information. The disclosure provisions of SFAS No. 148 were effective for the Company for the period ended December 31, 2002.
The Company has elected to continue to account for stock options granted to employees and officers using the intrinsic value based method in accordance with the provisions of Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees”, (“APB No. 25”) and comply with the disclosure provisions of SFAS No. 123 as amended by SFAS No. 148 as described above. Under APB No. 25, compensation expense is recognized based on the difference, if any, on the date of grant between the estimated fair value of the Company’s stock and the amount an employee must pay to acquire the stock. Compensation expense is recognized immediately for past services and pro-rata for future services over the option-vesting period. In addition, with respect to stock options granted to employees, the Company provides pro-forma information as required by SFAS No. 123 showing the results of applying the fair value method using the Black-Scholes option pricing model. In accordance with SFAS No. 123, the Company applies the fair value method using the Black-Scholes option-pricing model in accounting for options granted to consultants.
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with SFAS No. 123 and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-18. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services as defined by EITF 96-18.
The Company has also adopted the provisions of the Financial Accounting Standards Board Interpretation No.44, Accounting for Certain Transactions Involving Stock Compensation – An Interpretation of APB Opinion No. 25 (“FIN 44”), which provides guidance as to certain applications of APB 25. FIN 44 is generally effective July 1, 2000 with the exception of certain events occurring after December 15, 1998.
F-7
| HDL CAPITAL CORP. |
| (A Development Stage Company) |
| NOTES TO INTERIM FINANCIAL STATEMENTS |
| (Unaudited) |
| SEPTEMBER 30, 2004 |
| NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) |
Recent accounting pronouncements
In December 2004, the FASB issued SFAS No. 123 (Revised 2004), Share-Based Payment ("SFAS 123(R)"), which requires the compensation cost related to share-based payments, such as stock options and employee stock purchase plans, be recognized in the financial statements based on the grant-date fair value of the award. SFAS 123(R) is effective for all interim periods beginning after December 15, 2005. Management does not believe that the adoption of this standard will have a material impact on the Company’s financial condition or results of operations.
In December 2004, the FASB issued SFAS No. 153, Exchanges of Non-monetary Assets, an amendment of APB Opinion No. 29, Accounting for Non-monetary Transactions (“SFAS 153”) SFAS 153 requires that exchanges of non-monetary assets are to be measured based on fair value and eliminates the exception for exchanges of non-monetary, similar productive assets, and adds an exemption for non-monetary exchanges that do not have commercial substance. SFAS 153 will be effective for fiscal periods beginning after June 15, 2005. Management does not believe that the adoption of this standard will have a material impact on the Company’s financial condition or results of operations.
| NOTE 3 – CAPITAL STOCK |
The Company’s capitalization is 100,000,000 common shares with a par value of $0.001 per share.
To September 30, 2004 the Company has not granted any stock options and has not recorded any stock-based compensation.
| NOTE 4 – RELATED PARTY TRANSACTIONS |
During the nine months ended September 30, 2004, certain directors made cash advances to the Company totalling $2,681 leaving $9,881 due as at September 30, 2004 (December 31, 2003 - $7,200). Amounts due to related parties are unsecured, non-interest bearing and have no specific terms of repayment.
| NOTE 5 – INCOME TAXES |
The Company has net operating loss carry-forwards of approximately $12,300 which may be available to offset future taxable income. Due to the uncertainty of realization of these loss carry-forwards, a full valuation allowance has been provided for this deferred tax asset.
| NOTE 6 – SUBSEQUENT EVENTS |
Effective September 20, 2005, the Company entered into a Memorandum of Understanding (“MOU”) with Nurv Technologies Incorporated (“NTI”), a private communications technology development company federally incorporated in Canada. The sole common shareholder of NTI has agreed to sell the Company a 60% interest in the common stock of NTI for nominal consideration. In connection with this acquisition, the Company intends to complete a financing and file a Form SB-2 Registration Statement. The proceeds of the financing will be used to fund NTI and for general working capital purposes. The Company and NTI will continue to seek out new business opportunities. The completion of this transaction is subject to the Company and NTI completing due diligence procedures and the preparation and execution of a definitive agreement.
F-8
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the Company’s financial statements and the notes thereto. The discussion of results, causes and trends should not be construed to imply any conclusion that such results or trends will necessarily continue in the future.
The statements contained herein, other than historical information, are or may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended, and involve factors, risks and uncertainties that may cause the Company’s actual results to differ materially from such statements. These factors, risks and uncertainties, include the relatively short operating history of the Company; market acceptance and availability of products and services; the impact of competitive products, services and pricing; possible delays in the shipment of new products; and the availability of sufficient financial resources to enable the Company to expand its operations.
Critical Accounting Policies
We believe that the estimates, assumptions and judgments involved in the accounting policies described in the notes to our financial statements have the greatest impact on our financial statements, so we consider these to be our critical accounting policies. Because of the uncertainty inherent in these matters, actual results could differ from the estimates we used in applying the critical accounting policies. Within the context of these critical accounting policies, we are not currently aware of any reasonably likely event that would result in materially different amounts being reported.
Results of Operations
For the nine-month period ended September 30, 2004 the Company incurred general and administrative expenses of $4,410 including professional fees of $2,714. For the nine-month period ended September 30, 2003 the Company incurred general and administrative expenses of $3,727 including professional fees of $2,596.
For the nine-month period ended September 30 2004 the Company had a net loss of $4,410 or $0.05 cents per share. For the nine-month period ended September 30, 2003 the Company had a net loss of $3,727 or $0.04 cents per share.
Liquidity and Capital Resources
For the nine-month period ended September 30, 2004 the Company used $3,075 cash in operating activities and received $2,681 in advances from related parties. For the nine-month period ended September 30, 2003 the Company used $4,027 cash in operating activities and received $4,085 in advances from related parties. As at September 30, 2004 the Company had $13 cash in the bank. As at September 30, 2003 the Company had $388 cash in the bank.
Inflation
Management does not believe that inflation had a material adverse effect on the financial statements for the periods presented.
ITEM 3: CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
3
Our management, including our chief executive officer, have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2004, pursuant to Exchange Act Rules 13a-15(e) and 15(d)-15(e). Based upon that evaluation, our chief executive officer have concluded that as of such date, our disclosure controls and procedures in place are adequate to ensure material information and other information requiring disclosure is identified and communicated on a timely basis.
Changes in internal controls
During the period covered by this report, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Registrant is not a party to any material pending legal proceedings and, to the best of its knowledge, no such action by or against the Registrant has been threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There have been no reports on Form 8-K filed during the quarter ended September 30, 2004 by the Registrant.
EXHIBIT INDEX
| Number | Exhibit Description |
| 3.1 | Articles of Incorporation (incorporated by reference to Exhibit 3 of the Registration Statement on Form 10-SB filed on October 31, 2002). |
| 3.2 | ByLaws (incorporated by reference to Exhibit 3.3 of the Form 10-QSB filed on October 31, 2002) |
| 31.1 | |
| 31.2 | |
| 32.1 | |
| 32.2 | Certification Section 906 of The Sarbanes-Oxley Act of 2002 - CFO |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HDL CAPITAL CORP. | |
| Dated: November 8, 2005 | By: /s/ Philip Cassis |
| Philip Cassis, President and Director | |
| By: /s/ William J. Little | |
| William J. Little, Treasurer, Director, | |
| Chief Accounting Officer and Chief | |
| Financial Officer | |
| By: /s/ Christopher D. Farber | |
| Christopher D. Farber, Secretary and | |
| Director |
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