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 ended March 31, 2001.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from to .
------------ --------------
Commission file number: 0-31417
-------
CYBERGATE, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 88-0356047
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
268 West 400 South, Suite 300, Salt Lake City, Utah 84101
---------------------------------------------------------
(Address of principal executive office) (Zip Code)
(801) 575-8073
--------------
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 XX No
------ --------
The number of outstanding shares of the issuer's common stock, $0.001 par value
(the only class of voting stock), as of May 11, 2001 was 20,042,000.
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS..................................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.............4
PART II
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES...............................4
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K......................................4
SIGNATURES.....................................................................6
INDEX TO EXHIBITS..............................................................7
[THIS SPACE HAS BEEN INTENTIONALLY LEFT BLANK]
2
PART I
ITEM 1. FINANCIAL STATEMENTS
As used herein, the term "Company" refers to Cybergate, Inc., a Nevada
corporation, unless otherwise indicated. Unaudited, condensed interim financial
statements including a balance sheet for the Company as of the quarter ended
March 31, 2001 and statements of operations, and statements of cash flows for
the interim period up to the date of such balance sheet and the comparable
period of the preceding year and cumulative amounts are attached hereto as Pages
F-1 through F-5 and are incorporated herein by this reference.
[THIS SPACE HAS BEEN LEFT BLANK INTENTIONALLY]
3
INDEX TO FINANCIAL STATEMENTS
Unaudited Balance Sheet as of March 31, 2001.................................F-2
Unaudited Statement of Operations for the three months ended March 31, 2001
and 2000 and December 15, 1999 (Date of Inception) to March 31, 2001.........F-3
Unaudited Statement of Cash Flows for the three months ended March 31, 2001
and 2000 and December 15, 1999 (Date of Inception) to March 31, 2001.........F-4
Notes to Condensed Financial Statements......................................F-5
F-1
CYBERGATE, INC.
(A Development Stage Company)
Balance Sheet for period ending
March 31, 2001
March 31, 2001
(Unaudited)
---------------
Assets
Cash & cash equivalents $ 8,488
---------------
Total Current Assets 8,488
---------------
Total Assets $ 8,488
===============
Liabilities and Stockholders' Equity
Current liabilities - accounts payable $ 2,836
---------------
Total Current Liabilities 2,836
---------------
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized,
no shares issued and outstanding -
Common stock, $.001 par value, 100,000,000 shares
authorized, 5,542,000 shares issued and outstanding 5,542
Additional paid-in capital 30,878
Accumulated deficit (30,768)
---------------
Total stockholders' equity 5,652
---------------
Total liabilities and stockholders' equity $ 8,488
===============
See accompanying notes to Financial Statements
F-2
CYBERGATE, INC.
(A Development Stage Company)
Unaudited Statement of Operations
Three months ended March 31, 2001 and 2000, and
December 15, 1999 (Date of Inception) to March 31, 2001
Three months Three months
ended ended Inception to
March 31, March 31, March 31,
2001 2000 2001
---------------- ---------------- -----------------
Revenues - interest income $ 64 $ - $ 128
General and administrative costs 4,139 3,516 29,896
---------------- ---------------- -----------------
Income / (Loss) before income taxes (4,075) (3,516) (29,768)
Provision for income taxes - - -
---------------- ---------------- -----------------
Net Income / (Loss) $ (4,075) $ (3,516) $ (29,768)
================ ================ =================
Income / (Loss) per common share - basic and diluted $ (0.00) $ (0.00) $ (0.01)
================ ================ =================
Weighted average common shares - basic and diluted 5,542,000 5,542,000 5,403,000
================ ================ =================
See accompanying notes to Financial Statements
F-3
CYBERGATE, INC.
(A Development Stage Company)
Unaudited Statement of Cash Flows
Three months ended March 31, 2001 and 2000 and
December 15, 1999 (Date of Inception) to March 31, 2001
Three Months ended
March 31,
Inception to
March 31,
2001 2000 2001
------------ ----------- ---------------
Cash flows from operating activities:
Net loss $ (4,075) $ (3,516) $ (29,768)
Adjustments to reconcile net loss to net cash
(used) in operating activities:
Stock compensation expense - - 20,060
Increase in accounts payable 1,413 1,505 2,836
------------ ------------ ---------------
Net cash (used) in operating activities (2,662) (2,011) (6,872)
------------ ------------ ---------------
Cash flows from investing activities - - -
------------ ------------ ---------------
Cash flows from financing activities
Decrease in stock subscription receivable - 15,360 15,360
------------ ------------ ---------------
Net cash provided by investing activities - 15,360 15,360
------------ ------------ ---------------
Net increase in cash (2,662) 13,349 8,488
Cash, beginning of period 11,150 - -
------------ ------------ ---------------
Cash, end of period $ 8,488 $ 13,349 $ 8,488
============ ============ ===============
See accompanying notes to Financial Statements
F-4
CYBERGATE, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
1. Organization
The Company was organized under the laws of the State of Nevada on February 15,
1996 and had no significant operations or activity until December 15, 1999 (date
of inception). As of March 31, 2001 the Company proposed to seek business
ventures which would allow for long-term growth. As of March 31, 2001 the
Company was considered a development stage company as defined in SFAS No. 7 and
had not, as of that date, commenced operations. The Company acquired 100%
ownership of Home Mortgage and Loan, Inc. subsequent to the period as set forth
in the 8-K filed on April 12, 2001.
2. Unaudited Financial Statements
The unaudited financial statements include the accounts of the Company and
include all adjustments (consisting of normal recurring items), which are, in
the opinion of management, necessary to present fairly the financial position as
of March 31, 2001 and the results of operations and cash flows for the three
months ended March 31, 2001. The results of operations for the three months
ended March 31, 2001, are not necessarily indicative of the results to be
expected for the entire year.
3. Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared by
management in accordance with the instructions in Form 10-QSB and, therefore, do
not include all information and footnotes required by generally accepted
accounting principles and should, therefore, be read in conjunction with the
Company's Form 10-KSB, filed with the Securities and Exchange Commission. These
statements do include all normal recurring adjustments which the Company
believes necessary for a fair presentation of the statements. The interim
operations results are not necessarily indicative of the results for the full
year ended December 31, 2001.
4. Additional footnotes included by reference
Except as indicated in Notes above, there have been no other material changes in
the information disclosed in the notes to the financial statements included in
the Company's Form 10-KSB, filed with the Securities and Exchange Commission.
Therefore, those footnotes are included herein by reference.
F-5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Plan of Operations
The Company's intended plan of operation for the coming year was to identify and
acquire a favorable business opportunity. As reported in an 8-K filing on April
12, 2001, incorporated herein by reference, the Company acquired 100% ownership
of Home Mortgage and Loan, Inc. for 16,500,000 shares of the Company's common
stock. Home Mortgage and Loan, Inc. will be the primary operations for the
Company. Funding for the next twelve months will come from the cash generated
from the operations of Home Mortgage and Loan, Inc. Additional funding as
required may be sought from the sale of securities in both private placements
and registrations, operating loans from a financial institution or loans from
its primary shareholder. It is anticipate that these sources of funds will be
sufficient for the Company to meet its operating expenses through the end of
2001.
Home Mortgage and Loan, Inc. will operate as a subsidiary of the Company. Home
Mortgage and Loan, Inc. was formed in December 18, 1998 for the purpose of
retail origination and funding of residential mortgages. Home Mortgage and Loan,
Inc. can be characterized as an independent mortgage company engaged in
originating, processing, and funding mortgage loans on single and multiple
family residences.
PART II
ITEM 2. RECENT SALES OF UNREGISTERED SECURITIES
On April 11, 2001 the Company agreed to issue to Sandra Jorgensen 16,500,000
shares of common stock in exchange for her transfer of 100% of the outstanding
common stock of Home Mortgage and Loan, Inc., a Utah corporation. Through this
purchase the Company acquired all of the operations and management of Home
Mortgage and Loan, Inc. These shares were issued pursuant to the exemption from
registration provided by Section 4(2) of the Securities Act of 1933. The Company
made this offering based on the following factors: (1) the issuance was an
isolated private transaction by the Company which did not involve a public
offering; (2) there was only one offeree who was issued stock for cash
consideration; (3) the offeree stated an intention not to resell the stock and
has continued to hold it since it was acquired; (4) there were no subsequent or
contemporaneous public offerings of the stock; (5) the stock was not broken down
into smaller denominations; and (6) the negotiations for the sale of the stock
took place directly between the offeree and the Company.
On April 6, 2001 the Company purchased from Richard Surber, its former
President, 2,000,000 shares of common stock in exchange for a cash payment of
$6,000. These shares were acquired in a private transaction and the shares are
to be returned to the Company's treasury. The purchase was made to facilitate
the transfer to Ms. Jorgensen and the transfer of Home Mortgage and Loan, Inc.
to the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits Exhibits required to be attached by Item 601 of Regulation S-B
are listed in the Index to Exhibits on page 6 of this Form 10-QSB, and
are incorporated herein by this reference.
4
(b) Reports on Form 8-K. The Company filed one report on Form 8-K
subsequent to the end of the quarter for which this report is filed.
(1) Report filed on April 12, 2001 reporting on the acquisition of
Home Mortgage and Loan Inc., a Utah corporation, in exchange for
16,500,000 shares of the Company's common stock.
5
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, hereunto duly
authorized, this 11th day of May, 2001.
CYBERGATE, INC.
/s/ Sandra Jorgensen
- ---------------------------------
Sandra Jorgensen
President and Director
6
INDEX TO EXHIBITS
EXHIBIT PAGE
NO. NO. DESCRIPTION
3(i) * Articles of Incorporation of the Company (incorporated
herein by reference from Exhibit No. 3(i) of the Company's
Form 10-SB as filed with the Securities and Exchange
Commission on August 30, 2000).
3(ii) * Bylaws of the Company, as amended (incorporated herein by
reference from Exhibit 3(ii) of the Company's Form 10-SB as
filed with the Securities and Exchange Commission on August
30, 2000).
10(i) * Stock Acquisition Agreement (incorporated herein by
reference from the 8-K filed by the Company on April 12,
2001 with the Securities and Exchange Commission) between
Cybergate, Inc. and Sandra Jorgensen, sole shareholder of
Home Mortgage and Loan, Inc.
10(ii) 8 Stock Purchase Agreement, dated April 6, 2001 between the
Company and Richard Surber for the purchase of 2,000,000
shares of the Company's common stock from Mr. Surber in
exchange for a cash payment of $6,000.
* Incorporated herein by reference from the referenced filings previously made
by the Company.
7
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into this 6th
day of April, 2001 by and between Richard D. Surber ("Surber") an individual and
former President of Cybergate, Inc. with a principal office located at 268 West
400 South, Suite 300, Salt Lake City, Utah 84101, and Cybergate, Inc., a Nevada
corporation ("Cybergate") with principal offices located at 3809 South West
Temple, Suite 1B, Salt Lake City, Utah 84115.
WHEREAS, Surber desires to sell to Cybergate Two Million (2,000,000)
shares of the common stock of Cybergate, Inc. ("Shares").
WHEREAS, Cybergate will pay Six Thousand Dollars ($6,000) to Surber in
exchange for delivery of all certificates in negotiable form representing
the Shares.
NOW, THEREFORE with the above being incorporated into and made a part
hereof for the mutual consideration set out herein and, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Exchange. Cybergate will pay $6,000 to Surber or assigns on April 6, 2001
and Surber will:
a. Deliver the Shares with all the necessary executed medallion
stock powers to transfer ownership to Cybergate for delivery
no later than April 16, 2001; and
b. Cybergate will deliver to Surber the sum of $6,000.00.
2. Termination. This Agreement may be terminated at any time prior to the
Closing Date:
A. By Surber or Cybergate:
(1) If there shall be any actual or threatened action or
proceeding by or before any court or any other governmental
body which shall seek to restrain, prohibit, or invalidate the
transactions contemplated by this Agreement and which, in
judgement of such Board of Directors made in good faith and
based upon the advice of legal counsel, makes it inadvisable
to proceed with the transactions contemplated by this
Agreement; or
(2) If the Closing shall have not occurred prior to April16,
2001, or such later date as shall have been approved by
parties hereto, other than for reasons set forth herein.
B. By Cybergate:
(1) If Surber shall fail to comply in any material respect
with any of his covenants or agreements contained in this
Agreement or if any of the representations or warranties of
Surber contained herein shall be inaccurate in any material
respect; or
C. By Surber:
(1) If Cybergate shall fail to comply in any material respect
with any of its covenants or agreements contained in this
Agreement or if any of the representations or warranties of
Cybergate contained herein shall be inaccurate in any material
respect;
8
In the event this Agreement is terminated pursuant to this Paragraph,
this Agreement shall be of no further force or effect, no obligation, right, or
liability shall arise hereunder, and each party shall bear its own costs as well
as the legal, accounting, printing, and other costs incurred in connection with
negotiation, preparation and execution of the Agreement and the transactions
herein contemplated.
3. Representations and Warranties of Surber. Surber hereby represents and
warrants that effective this date and the Closing Date, the following
representations are true and correct:
A. Authority. Surber has the full power and authority to enter this
Agreement and to carry out the transactions contemplated by this
Agreement.
B. No Conflict With Other Instruments. The execution of this
Agreement will not violate or breach any document, instrument,
agreement, contract, or commitment material to the business of
Surber to which Surber is a party and has been duly authorized by
all appropriate and necessary action.
C. Deliverance of Shares. As of the Closing Date, the shares to be
delivered to Cybergate will be restricted and constitute valid
and legally issued shares of Cybergate, fully paid and non-
assessable and equivalent in all respects to all other issued and
outstanding shares of Cybergate restricted stock.
D. No Conflict with Other Instrument. The execution of this
agreement will not violate or breach any document, instrument,
agreement, contract or commitment material to Surber.
4. Representations and Warranties of Cybergate.
Cybergate hereby represents and warrants that, effective this date and
the Closing Date, the representations and warranties listed below are true and
correct.
A. Corporate Authority. Cybergate has the full corporate power and
authority to enter this Agreement and to carry out the
transactions contemplated by this Agreement. The Board of
Directors of Cybergate has duly authorized the execution,
delivery, and performance of this Agreement.
B. No Conflict With Other Instruments. The execution of this
Agreement will not violate or breach any document, instrument,
agreement, contract, or commitment material to the business of
Cybergate to which Cybergate is a party and has been duly
authorized by all appropriate and necessary action.
C. No Conflict with Other Instrument. The execution of this
agreement will not violate or breach any document, instrument,
agreement, contract or commitment material to Cybergate.
5. Closing. The Closing as herein referred to shall occur upon such date as
the parties hereto may mutually agree upon, but is expected to be on or
before April 16, 2001.
At closing Cybergate will deliver $6,000 to Surber, and Surber will
deliver the Shares to Cybergate.
6. Conditions Precedent of Cyber Equestrian to Effect Closing. All obligations
of Cybergate under this Agreement are subject to fulfillment prior to or as
of the Closing Date, as follows:
9
A. The representations and warranties by or on behalf of Cybergate
contained in this Agreement or in any certificate or documents
delivered to Cybergate pursuant to the provisions hereof shall be
true in all material respects as of the time of Closing as though
such representations and warranties were made at and as of such
time.
B. Cybergate shall have performed and complied with all covenants,
agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
C. All instruments and documents delivered to Cybergate pursuant to
the provisions hereof shall be reasonably satisfactory to
Cybergate's legal counsel.
7. Conditions Precedent of Surber to Effect Closing. All obligations of Surber
under this Agreement are subject to fulfillment prior to or as of the date
of Closing, as follows:
A. The representations and warranties by or on behalf of Surber
contained in this Agreement or in any certificate or documents
delivered to Surber pursuant to the provisions hereof shall be
true in all material respects as of the time of Closing as though
such representations and warranties were made at and as of such
time.
B. Surber shall have performed and complied with all covenants,
agreements and conditions required by this Agreement to be
performed or complied with by it prior to or at the Closing.
C. All instruments and documents delivered to Surber pursuant to the
provisions hereof shall be reasonably satisfactory to Surber's
legal counsel.
8. Damages and Limit of Liability. Each party shall be liable, for any
material breach of the representations, warranties, and covenants contained
herein which results in a failure to perform any obligation under this
Agreement, only to the extent of the expenses incurred in connection with
such breach or failure to perform Agreement.
9. Nature and Survival of Representations and Warranties. All representations,
warranties and covenants made by any party in this Agreement shall survive
the Closing hereunder. All of the parties hereto are executing and carrying
out the provisions of this Agreement in reliance solely on the
representations, warranties and covenants and agreements contained in this
Agreement or at the Closing of the transactions herein provided for and not
upon any investigation upon which it might have made or any
representations, warranty, agreement, promise, or information, written or
oral, made by the other party or any other person other than as
specifically set forth herein.
10. Indemnification Procedures. If any claim is made by a party which would
give rise to a right of indemnification under this paragraph, the party
seeking indemnification (Indemnified Party) will promptly cause notice
thereof to be delivered to the party from whom indemnification is sought
(Indemnifying Party). The Indemnified Party will permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting
from the claims. Counsel for the Indemnifying Party which will conduct the
defense must be approved by the Indemnified Party (whose approval will not
be unreasonably withheld), and the Indemnified Party may participate in
such defense at the expense of the Indemnified Party. The Indemnifying
Party will not in the defense of any such claim or litigation, consent to
entry of any judgement or enter into any settlement without the written
consent of the Indemnified Party (which consent will not be unreasonably
withheld). The Indemnified Party will not, in connection with any such
claim or litigation, consent to entry of any judgement or enter into any
settlement without the written consent of the Indemnifying Party (which
consent will not be unreasonably withheld). The Indemnified Party will
10
cooperate fully with the Indemnifying Party and make available to the
Indemnifying Party all pertinent information under its control relating to
any such claim or litigation. If the Indemnifying Party refuses or fails to
conduct the defense as required in this Section, then the Indemnified Party
may conduct such defense at the expense of the Indemnifying Party and the
approval of the Indemnifying Party will not be required for any settlement
or consent or entry of judgement.
11. Default at Closing. Notwithstanding the provisions hereof, if Surber shall
fail or refuse to deliver any of the Shares, or shall fail or refuse to
consummate the transaction described in this Agreement prior to the Closing
Date, such failure or refusal shall constitute a default by Surber and
Cybergate at its option and without prejudice to its rights against such
defaulting party, may either (a) invoke any equitable remedies to enforce
performance hereunder including, without limitation, an action or suit for
specific performance, or (b) terminate all of its obligations hereunder
with respect to Surber.
12. Costs and Expenses. Cybergate and Surber shall bear their own costs and
expenses in the proposed exchange and transfer described in this Agreement.
Cybergate and Surber have been represented by their own attorneys in this
transaction, and shall pay the fees of their attorneys, except as may be
expressly set forth herein to the contrary.
13. Notices. Any notice under this Agreement shall be deemed to have been
sufficiently given if sent by registered or certified mail, postage
prepaid, addressed as follows:
To Surber: To Cybergate:
268 West 400 South, Suite 300 Cybergate, Inc.
Salt Lake City, Utah 84101 3809 South West Temple, Suite 1B
Salt Lake City, Utah 84115
14. Miscellaneous.
A. Further Assurances. At any time and from time to time, after the
effective date, each party will execute such additional
instruments and take such additional steps as may be reasonably
requested by the other party to confirm or perfect title to any
property transferred hereunder or otherwise to carry out the
intent and purposes of this Agreement.
B. Waiver. Any failure on the part of any party hereto to comply
with any of its obligations, agreements, or conditions hereunder
may be waived in writing by the party to whom such compliance is
owed.
C. Brokers. Neither party has employed any brokers or finders with
regard to this Agreement not disclosed herein.
D. Headings. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
E. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the
same instrument.
F. Governing Law. This Agreement was negotiated and is being
contracted for in the State of Utah, and shall be governed by the
laws of the State of Utah, notwithstanding any conflict-of-law
provision to the contrary. Any suit, action or legal proceeding
arising from or related to this Agreement shall be
11
submitted for binding arbitration resolution to the American
Arbitration Association, in Salt Lake City, Utah, pursuant to
their Rules of Procedure or any other mutually agreed upon
arbitrator. The parties agree to abide by decisions rendered as
final and binding, and each party irrevocably and unconditionally
consents to the jurisdiction of such arbitrator and waives any
objection to the laying of venue in, or the jurisdiction of, said
Arbitrator.
G. Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective
heirs, administrators, executors, successors, and assigns.
H. Entire Agreement. The Agreement contains the entire agreement
between the parties hereto and supersedes any and all prior
agreements, arrangements or understandings between the parties
relating to the subject matter hereof. No oral understandings,
statements, promises or inducements contrary to the terms of this
Agreement exist. No representations, warranties covenants, or
conditions express or implied, other than as set forth herein,
have been made by any party.
I. Severability. If any part of this Agreement is deemed to be
unenforceable the balance of the Agreement shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
Surber Cybergate, Inc.,
a Nevada corporation
/s/ Richard D. Surber By:/s/ Sandra Jorgensen
---------------------- --------------------------
Richard D. Surber Name: Sandra Jorgensen
Its: President
12