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 January 31, 2008
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.
(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
(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: 38,838,869 shares of Common Stock
with par value of $0.005 were outstanding as of January 31, 2008.
Part I. FINANCIAL INFORMATION
INDEX TO FINANCIAL INFORMATION
Period Ended January 31, 2008
PAGE
Item 1. Financial Statements 3
Balance Sheets 3
Statements of Changes in Shareholders' Equity 4
Statements of Income and Comprehensive 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 10
Item 4. Submission of Matters to a Vote of Security-Holders 10
Item 5. Other Information 10
Item 6. Exhibits 11
Signatures 12
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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ORBIT E-COMMERCE, INC.
Balance Sheets
January 31 July 31
2008 2007
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(Unaudited)
Assets
Current
Cash $ 93 $ --
----------------------------
Total assets $ 93 $ --
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Liabilities and Shareholders' Deficit
Current
Bank indebtedness $ -- $ 263
Accounts payable 71,057 66,861
Accrued liabilities 9,962 16,421
Due to shareholders 366,095 387,444
----------------------------
447,114 470,989
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Shareholders' Deficit
Common stock ($0.005 par value)
Authorized: 98,000,000 shares;
Issued: 38,838,869 shares at January 31, 2008
(38,538,869 shares at July 31, 2007) 194,195 192,695
Capital in excess of par value 10,002,408 9,934,919
Accumulated other comprehensive loss (229,823) (207,328)
Accumulated deficit (10,413,801) (10,391,275)
----------------------------
(447,021) (470,989)
----------------------------
Total liabilities and shareholders' deficit $ 93 $ --
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3
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Orbit E-Commerce, Inc.
Statement of Changes in Shareholders' Equity
July 31, 2007 (Unaudited January 31, 2008)
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Accumulated
Capital in Other
Exchangeable Common Paid up Excess of Accumulated Comprehensive
Shares Shares Amount Par Value Deficit Loss Total
------------------------------------------------------------------------------------------------
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)
------------------------------------------------------------------------------------------------
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)
------------------------------------------------------------------------------------------------
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 January 31, 2008
Shares issued for cash 300,000 1,500 67,489 68,989
Foreign currency translation
adjustment -- -- -- -- -- (22,495) (22,495)
Loss for the period ended
January 31, 2008 -- -- -- -- (22,526) -- (22,526)
------------------------------------------------------------------------------------------------
Balance, January 31, 2008 269,597 38,838,869 $ 194,195 $10,002,408 $(10,413,801) $(229,823) $(447,021)
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4
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ORBIT E-COMMERCE, INC.
Statement of Income and Comprehensive Income
(Unaudited)
For the Three For the Three For the Six For the Six
Months Ended Months Ended Months Ended Months Ended
January 31 January 31 January 31 January 31
2008 2007 2008 2007
- ----------------------------------------------------------------------------------------------------------------
Revenue $ -- $ -- $ -- $ --
Expenses
Selling, general and administrative 7,636 64,251 22,474 82,211
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7,636 64,251 22,474 82,211
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Loss from operations (7,636) (64,251) (22,474) (82,211)
Interest expense (52) 8,431 (52) (15,576)
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Net loss $ (7,688) $ (55,820) $ (22,526) $ (97,787)
Foreign currency translation 15,080 11,380 (22,495) 11,380
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Net comprehensive income (loss) $ 7,392 $ (44,440) $ (45,021) $ (86,407)
================================================================================================================
Net income per common share $ -- $ -- $ -- $ --
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Weighted average number of shares
Basic and fully diluted 38,825,826 38,538,869 38,682,347 38,538,869
================================================================================================================
5
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ORBIT E-COMMERCE, INC.
Statement of Cash Flows
(Unaudited)
For the Six For the Six
Months Ended Months Ended
January 31 January 31
2008 2007
- -------------------------------------------------------------------------------------------
Cash provided by (used in):
Operating activities
Net loss for the period $(22,526) $(97,787)
Adjustments to reconcile net income to net cash used by
operating activities:
Imputed interest on related party notes -- 15,576
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities (2,263) (8,972)
-------------------------
(24,789) (91,183)
-------------------------
Financing activities
Advances from shareholders (21,349) 67,933
Capital shares issued 68,989 --
Advances from related parties -- 13,881
Bank indebtedness (263) --
-------------------------
47,377 81,814
-------------------------
Effect of exchange rate changes on cash (22,495) 11,380
-------------------------
Net change in cash during the period 93 2,011
Cash, beginning of period -- 268
-------------------------
Cash, end of period $ 93 $ 2,279
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Supplemental Cash Flow Information
Cash paid for interest $ 52 $ --
Cash paid for Income taxes $ -- $ --
Non-cash transactions
Common stock issued for debt $ -- $ --
===========================================================================================
6
ORBIT E-COMMERCE, INC.
Notes to Financial Statements
July 31, 2005
(Unaudited)
================================================================================
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
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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
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 and six
months ended January 31, 2008 and 2007. 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 TelNet LLC, a Delaware limited
liability company ("Phoenix") resulting from the agreements entered into
with GAN & Associates, Inc. ("GAN"), a privately held company. On October
1, 2002, agreements were signed between the Company and GAN to form and
operate 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 January 31, 2008, the Company has a net loss
from operations of approximately $7,700 primarily due to administrative
expenses and for the six months ended January 31, 2008 the Company had a
net loss from operations of approximately $23,000 due primarily to the
administrative expenses.
Liquidity and Capital Resources
On January 31, 2008, the Company had approximately $90 in cash and a
working capital deficit of approximately $447,000. Net cash used by
operating activities was approximately $25,000 for the six months ended
January 31, 2008 which was a result of a net loss for the period of
approximately $23,000 offset by a reduction in accounts payable and
accrued liabilities of approximately $2,000.
For the six months ended January 31, 2008 financing activities from
advances to shareholders amounted to approximately $21,000 and cash from
capital shares issued was approximately $69,000. The effect of exchange
rate changes on cash for the period was approximately negative $22,000.
At January 31, 2008, the amount due to shareholders and related parties
was approximately $366,000 compared to approximately $363,000 for the same
period in the previous year.
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.
8
PureNet Acquisition
On December 28, 2004, the Company entered into an Asset Acquisition
Agreement (the "PureNet Agreement") with PureNet.TV Canada Inc., an
Ontario corporation ("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 January 31, 2008, 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 January 31, 2008, no Exchangeable Shares
were exchanged for shares of the Company's Common Stock. As of January 31,
2008, 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.
During fiscal year 2008, the Company issued 300,000 Common Shares to one
person for cash consideration of approximately $69,000
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".
Item 3. Default Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
None.
Item 5. Other Information.
None.
10
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: March 19, 2008 By: /s/ Douglas C. Lloyd
-------------- -----------------------------
Douglas C. Lloyd,
President and Chief Executive
Officer (Principal Executive
Officer and Principal
Accounting and Financial Officer)
12