SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
|X| Quarterly Report pursuant to Section 13 or l5 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended October 31, 2007
OR
|_| Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from ______ to ______
Commission File Number: 001-03323
ORBIT E-COMMERCE, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
NEVADA 91-1978600
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
14845 Yonge Street, Aurora, Ontario, Canada L4G 6H8
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(Address of Principal Executive Offices)
Issuer's Telephone Number, Including Area Code: 905-751-1499
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 |X| No |_|
Indicate by check mark whether the issuer is a shell company (as defined by Rule
12b-2 of the Exchange Act):
Yes |X| No |_|
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 38,538,869 shares of Common Stock
with par value of $0.005 were outstanding as of October 31, 2007.
Part I. FINANCIAL INFORMATION
INDEX TO FINANCIAL INFORMATION
Period Ended October 31, 2007
PAGE
Item 1. Financial Statements 3
Balance Sheets 3
Statements of Changes in Shareholders' Equity 4
Statements of Income 5
Statements of Cash Flows 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 8 - 9
Item 3. Controls and Procedures 9
Part II. OTHER INFORMATION 10
Item 1. Legal Proceedings 10
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 10
Item 3. Default Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security-Holders 11
Item 5. Other Information 11
Item 6. Exhibits 11
Signature 12
2.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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ORBIT E-COMMERCE, INC.
Balance Sheets
October 31, July 31
2007 2007
- -------------------------------------------------------------------------------------
(Unaudited)
Assets
Current
Cash and cash equivalents $ 53,073 $ --
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Total assets $ 53,073 $ --
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Liabilities and Shareholders' Deficit
Current
Bank indebtedness $ -- $ 263
Accounts payable 68,924 66,861
Accrued liabilities 34,410 16,421
Due to shareholders 473,141 387,444
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576,475 470,989
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Shareholders' Deficit
Common stock ($0.005 par value): Authorized:
98,000,000 shares Issued: 38,538,869 at
October 31, 2007 (38,538,869 at July 31, 2007) 192,695 192,695
Capital in excess of par value 9,934,919 9,934,919
Accumulated translation adjustment (244,903) (207,328)
Accumulative deficit (10,406,113) (10,391,275)
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(523,402) (470,989)
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Total liabilities and shareholders' deficit $ 53,073 $ --
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See accompanying notes
3.
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ORBIT E-COMMERCE, INC.
Statements of Changes in Shareholders' Deficit
July 31, 2007 (Unaudited October 31, 2007)
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Capital in Other
Exchangeable Common Paid up Excess of Accumulated Comprehensive
Shares Shares Amount Par value Deficit Loss Total
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Balance, July 31,2005 269,597 37,739,324 $ 188,697 $9,830,392 $(10,164,330) $ (194,250) $ (339,491)
For the year from August 1, 2005
to July 31, 2006
Shares issued for legal and
accounting services -- 799,545 3,998 82,452 -- -- 86,450
Imputed interest on related
party notes -- -- -- 22,075 -- -- 22,075
Foreign currency translation
adjustment -- -- -- -- -- (462) (462)
Loss for the year ended
July 31, 2006 -- -- -- -- (130,400) -- (130,400)
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Balance, July 31, 2006 269,597 38,538,869 $ 192,695 $9,934,919 $(10,294,730) $ (194,712) $ (361,828)
For the year from August 1, 2006
to July 31, 2007
Foreign currency translation
adjustment -- (12,616) (12,616)
Loss for the year ended
July 31, 2007 (96,545) -- (96,545)
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Balance, July 31, 2007 269,597 38,538,869 $ 192,695 $9,934,919 $(10,391,275) $ (207,328) $ (470,989)
For the period from August 1, 2007
to October 31, 2007
Foreign currency translation
adjustment -- -- -- -- -- (37,575) (37,575)
Loss for the period ended
October 31, 2007 -- -- -- -- (14,838) -- (14,838)
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Balance, October 31, 2007 269,597 38,538,869 192,695 9,934,919 (10,406,113) (244,903) (523,402)
==============================================================================================
See accompanying notes
4.
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ORBIT E-COMMERCE, INC.
Statements of Operations and Changes in
Comprehensive Loss
(Unaudited)
For the Three For the Three
Months Ended Months Ended
October 31, October 31,
2007 2006
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Expenses
Selling, general and administrative 14,838 17,960
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Loss from operations (14,838) (17,960)
Interest expense -- (7,145)
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Net loss (14,838) (25,105)
Other comprehensive loss
Foreign currency translation adjustment (37,575) --
-----------------------------
Net comprehensive loss (52,413) (25,105)
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Net loss per common share $ 0.00 $ 0.00
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Weighted average number of shares
Basic and fully diluted 38,538,869 38,538,869
================================================================================
See accompanying notes
5.
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ORBIT E-COMMERCE, INC.
Statements of Cash Flows
(Unaudited)
For the Three For the Three
Months Ended Months Ended
October 31, October 31,
2007 2006
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Cash provided by (used in):
Operating activities
Net loss for the period $ (14,838) $ (25,105)
Adjustments to reconcile net loss to net cash
used in operating activities:
Imputed interest -- 7,145
Changes in:
Accounts payable and accrued liabilities 20,052 1,888
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5,214 (16,072)
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Financing activities
Advances from shareholders 85,697 15,572
Bank indebtedness repayment (263) --
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85,434 15,572
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Effect of exchange rate changes on cash (37,575) 886
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Increase in cash 53,073 386
Cash, beginning of period -- 268
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Cash, end of period $ 53,073 $ 654
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Supplemental Cash Flow Information
Cash paid during the year for:
Interest $ -- $ --
Income taxes $ -- $ --
================================================================================
See accompanying notes
6.
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ORBIT E-COMMERCE, INC.
Notes to Financial Statements
October 31, 2007
(Unaudited)
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Item 1. Basis of Presentation.
The accompanying unaudited interim financial statements of Orbit
E-Commerce, Inc. ("Orbit") have been prepared by management in accordance
with the accounting principles generally accepted in the United States of
America and the rules of the Securities and Exchange Commission ("SEC"),
and should be read in conjunction with the audited financial statements
and notes thereto contained in Orbit's Annual Report filed with the SEC on
10-KSB. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of
financial position and the results of operations for the interim periods
presented have been reflected herein. The results of operations for the
interim periods are not necessarily indicative of the results to be
expected for the full year. Notes to the financial statements which would
substantially duplicate the disclosure contained in the audited financial
statements for 2007 as reported in the 10-KSB have been omitted.
7.
Item 2. Management's Discussion and Analysis or Plan of Operation
The following discussion should be read in conjunction with the Financial
Information and Notes thereto included in this report and is qualified in
its entirety by the foregoing.
Forward-Looking Statements
This report contains certain forward-looking statements and information
relating to the Company that are based on the beliefs and assumptions made
by the Company's management as well as information currently available to
the management. When used in this document, the words "anticipate",
"believe", "estimate", and "expect" and similar expressions, are intended
to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events and are subject
to certain risks, uncertainties and assumptions. Should one or more of
these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described
herein as anticipated, believed, estimated or expected. Certain of these
risks and uncertainties are discussed under the caption "Uncertainties and
Risk Factors" in Part I, Item 1 "Description of Business" of the Company's
Annual Report on Form 10-KSB for the year ended July 31, 2007. The Company
does not intend to update these forward- looking statements.
Results of Operations
The Company reported no revenue from operations for the three months ended
October 31, 2007 and 2006. This lack of revenue was primarily due to the
Company suspending operations in Canada and the start-up nature of the
activities performed by Phoenix resulting from the agreements entered into
with GAN. On October 1, 2002, agreements were signed between the Company
and GAN & Associates, Inc. ("GAN"), a privately held company, to form and
operate an American based company called Phoenix TelNet, LLC, a Delaware
limited liability company ("Phoenix") to offer VoIP and other data and
long distance services in the United States and Canada (the "Phoenix
Business"). Pursuant to the Operating Agreement of Phoenix dated October
1, 2002, the Company received a 49% ownership interest in Phoenix and GAN
received a 51% ownership interest. In October 2003, the Company entered
into a letter of intent that expired in January 2004 with GAN whereby
either (i) the principal assets of Phoenix would be transferred to the
Company, (ii) or the 51% ownership interest in Phoenix held by GAN would
be transferred to the Company, (iii) or a similar transaction would be
consummated which would result in the business of Phoenix being held or
owned by the Company, in consideration for shares of Common Stock of the
Company. Prior to the expiration of the letter of intent, there was no
definitive agreement which was signed and the Company and GAN terminated
all discussions with regard to any possible transaction. To the Company's
knowledge, Phoenix is not currently carrying on any business and the
Company places no value on its 49% interest in Phoenix and has decided to
abandon its interest in Phoenix.
For the three months ended October 31, 2007, the Company has a net loss
from operations of $14,838 primarily due to administrative expenses and
for the three months ended October 31, 2006 the Company had a net loss
from operations of approximately $25,105 due primarily to the
administrative expenses and imputed interest on shareholder loans.
Liquidity and Capital Resources
On October 31, 2007, the Company had $53,073 in cash and a working capital
deficit of $523,402. Net cash generated from operating activities was
$5,214 for the three months ended October 31, 2007 which was a result of a
net loss for the period of approximately $15,000 offset by an increase in
accounts payable and accrued liabilities of approximately $20,000.
For the three months ended October 31, 2007 financing activities from
advances from shareholder loans amounted to approximately $86,000. The
effect of exchange rate changes on cash for the period was approximately
negative $37,000.
8.
At October 31, 2007, the amount due to shareholders was $473,141 compared
to $387,444 for the same period in the previous year.
Subsequent to the end of fiscal quarter ended October 31, 2007, an
existing shareholder had purchased 300,000 additional shares of the
company for total consideration of approximately $69,000.
The Company's independent auditors had issued a "going concern" opinion in
its report to the Company's financial statements for the year ended July
31, 2007, citing accumulating net losses since inception and the
deficiency in working capital at July 31, 2007.
PureNet Acquisition
On December 28, 2004, the Company entered into an Asset Acquisition
Agreement (the "PureNet Agreement") with PureNet, to acquire all of
PureNet's assets in connection with its IPTV business. Subsequently, on
January 3, 2005, the Company completed the transactions contemplated by
the PureNet Agreement, whereby the Company acquired all of the aforesaid
assets of PureNet. IPTV enables a wide range of television programming,
low-cost video-conferencing, video-on-demand and other services all in
digital broadcast quality levels. With IPTV, video services are delivered
directly to subscribers' television sets over DSL networks. The
acquisition of PureNet's assets included all technical schematics covering
a patented IPTV video/internet system, implementation capabilities,
strategic partnerships with major equipment and video content suppliers,
software developers, product and services.
Pursuant to the terms of the PureNet Agreement, the Company acquired the
assets in exchange for 15,000,000 newly issued restricted shares of common
stock. Douglas C. Lloyd, the Company's President, Chief Executive Officer
and director, is the President, a director and shareholder of PureNet.
Such shares were issued in reliance upon the exemption from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended, for
"transactions by the issuer not involving any public offering".
Subsequently, on January 19, 2005, the Company announced it had accepted
an offer from its major shareholder, PureNet, for PureNet to acquire the
balance of the outstanding capital stock of the Company not held by
PureNet. PureNet has made an offer to acquire the remaining capital stock
in an exchange on a one for one basis for PureNet common shares. It is
expected that such transaction will be effected pursuant to a merger.
Item 3. Controls and Procedures.
Under the supervision and with the participation of our management,
including the Principal Executive Officer and Principal Financial Officer,
we have evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the
Exchange Act) as of the end of the period covered by this report. Based on
that evaluation, our Principal Executive Officer and Principal Financial
Officer has concluded that, as of October 31, 2007, these disclosure
controls and procedures were effective to ensure that all information
required to be disclosed by us in the reports that we file or submit under
the Exchange Act is: (i) recorded, processed, summarized and reported,
within the time periods specified in the Commission's rule and forms; and
(ii) accumulated and communicated to our management, including our
Principal Executive Officer and Principal Financial Officer, as
appropriate to allow timely decisions regarding required disclosure.
There have been no significant changes in internal control over financial
reporting that occurred during the fiscal quarter covered by this report
that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting.
9.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to the Company's Form 10-KSB for the year ended July 31,
2007 and the financial statements included therein and in particular to
Part I, Item 3 and Note 7 to the financial statements, the full contents
of which are incorporated by reference herein in accordance with Rule
12b-23 of the General Rules and Regulations under the Securities Exchange
Act of 1934, for information on litigation involving the Company. In
August 2004, management decided it was in the best interest of the Company
to agree with the defendant's proposal to drop all claims under the above
mentioned legal action. No further action has been taken to date.
Other than the foregoing, there are no material pending legal proceedings
to which the Company is a party or to which any of its property is
subject.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Under the share exchange agreement which became effective September 8,
2000, the Company issued 9,668,334 Common Shares in exchange for the same
number of Common Shares issued and outstanding of Orbit Canada Inc.
("Orbit Canada"). Orbit Canada also exchanged its remaining 2,120,497
Common Shares for the same number of non-voting shares ("Exchangeable
Shares"). Each exchangeable share can be exchanged into one Common Share
of the Company. This transaction resulted in a reverse take over, thereby
giving the shareholders of Orbit Canada control of the Company. At the
time of exchange of shares, the existing board of directors resigned and
the directors of Orbit Canada were appointed to the board of the Company.
During the three months ended October 31, 2007, no Exchangeable Shares
were exchanged for shares of the Company's Common Stock. As of October 31,
2007, 1,850,900 Exchangeable Shares had been exchanged for 1,850,900
shares of the Company's Common Stock, leaving 269,597 Exchangeable Shares
issued and outstanding.
During the quarter ended January 31, 2003, the Company negotiated with
certain creditors to settle balances owing to the approximately $1,627,000
by issuing in payment of the debt 3,255,000 restricted shares of its
Common Stock to Orbit Reorganization Facilitator Inc ("Orbit
Reorganization")., an unaffiliated corporation set up solely to hold these
shares in trust for the particular creditors. In connection with such
transaction, all of such debt was transferred and assumed by Orbit
Reorganization. In addition, during fiscal 2003, the Company issued a
total of 590,000 Common Shares to two persons for consulting services
provided to the Company.
During fiscal year 2005, the Company issued 750,000 Common Shares for
consulting services and issued 400,000 Common Shares to eight persons for
an aggregate cash consideration of $48,872.
In addition, during fiscal year 2005, the Company issued 15,000,000 Common
Shares to acquire the assets of PureNet.
During fiscal year 2006, the Company issued 799,545 Common Shares to two
persons for consulting services.
All of the foregoing shares of Common Stock were issued in reliance upon
the exemption from registration pursuant to Section 4(2) of the Securities
Act of 1933, as amended, for "transactions by the issuer not involving any
public offering".
10.
Item 3. Default Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits
Exhibits.
31.1 Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14 and 15d-14
of the Exchange Act)
31.2 Certification of Principal Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (Rules 13a-14
and 15d-14 of the Exchange Act)
32.1 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. 1350)
11.
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.
ORBIT E-COMMERCE, INC.
(Registrant)
Dated: December 19, 2007 By: /s/ Douglas C. Lloyd
--------------------------------
Douglas C. Lloyd,
President and Chief Executive
Officer (Principal Executive
Officer and Principal
Accounting and Financial Officer)
12.