U.S. 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
EXCHANGE ACT
For the transition period from ______________ to ______________
Commission file number 0-27953
COLUMBUS NETWORKS CORPORATION
(Exact name of small business issuer as specified in its charter)
NEVADA 98-0187538
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
#100- 1295 STEVENS ROAD, KELOWNA, BRITISH COLUMBIA, CANADA V1Z 2S9
(Address of principal executive offices)
(250) 769-8099
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the last practicable date:
20,859,323 SHARES OF COMMON STOCK, $.001 PAR VALUE, AS OF
MARCH 31, 2001
Transitional Small Business Disclosure Format (check one); Yes No X
----- -----
CONSOLIDATED FINANCIAL STATEMENTS OF
COLUMBUS NETWORKS CORPORATION
(A DEVELOPMENT STAGE ENTERPRISE)
NINE MONTH PERIOD ENDED MARCH 31, 2001
2
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
Consolidated Balance Sheets
March 31, 2001 and June 30, 2000
$ United States
===================================================================================================================
March 31, June 30,
2001 2000
(Unaudited - prepared
by Management)
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash $ 54,823 $ 31,986
Accounts receivable 14,263 7,239
Receivable from directors (note 4) 25,743 -
Prepaid expenses and deposits 26,781 5,825
- -------------------------------------------------------------------------------------------------------------------
121,610 45,050
Fixed assets 116,992 51,271
Website development 41,211 19,790
- -------------------------------------------------------------------------------------------------------------------
$ 279,813 $ 116,111
===================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities
Accounts payable and accrued liabilities $ 224,804 $ 34,459
Unearned revenue 40,585 25,115
Debt (note 5) 79,382 -
Loans payable (note 6) 30,451 -
Payable to directors - 825
- -------------------------------------------------------------------------------------------------------------------
375,222 60,399
Stockholders' Equity (Deficiency)
Capital stock (note 7)
1,000,000 preferred shares with a par value of $0.01 per share authorized
50,000,000 common shares with a par value of $0.001 per share authorized,
20,859,323 issued (June 30, 2000 - 10,556,773) 20,859 293,178
Additional paid in capital 641,033 -
Subscription for shares (note 7(g)) 250,000 1,689
Deficit accumulated during the development stage (1,011,778) (241,191)
Accumulated other comprehensive income:
Cumulative translation adjustment 4,477 2,036
- -------------------------------------------------------------------------------------------------------------------
(95,409) 55,712
Subsequent events (note 8)
- -------------------------------------------------------------------------------------------------------------------
$ 279,813 $ 116,111
===================================================================================================================
Approved by the Board:
, Director
- --------------------------------
, Director
- --------------------------------
3
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
Consolidated Statements of Operations
Nine month periods ended March 31, 2001 and 2000 (Unaudited - prepared
by Management)
$ United States
=====================================================================================================================
Nine months ended
March 31, 2000
----------------------------------
| Predecessor
| Business
| (note 2 (a))
Period from |----------------
From Inception Nine months December 1, | Period from
(March 3, 1999) ended 1999 to | July 1, 1999 to
to March 31, March 31, March 31, | December 15,
2001 2001 2000 | 1999
- ---------------------------------------------------------------------------------------------------------------------
|
Fee revenue $ 128,327 $ 90,176 $ 20,508 | $ 53,850
Interest and other income 2,123 327 538 | -
- ---------------------------------------------------------------------------------------------------------------------
130,450 90,503 21,046 | 53,850
|
Expenses |
Advertising and promotion 46,710 29,430 14,584 | 893
Amortization - fixed assets 23,433 18,225 2,141 | 1,071
Amortization - website development 8,625 8,139 - | -
Automotive 35,007 25,199 2,827 | 5,727
Bank charges 2,706 1,940 170 | 125
Consulting 59,209 59,209 - | -
Conferences 64,036 56,130 2,515 | -
Exchange gain (969) (969) - | -
Inducement fee 18,996 - - | -
Insurance 1,542 318 1,156 | -
Interest 29,500 29,500 - | -
Internet fees 37,380 22,142 3,790 | 884
Licences, fees and dues 3,884 835 3,049 | -
Office 42,451 33,807 5,258 | 2,039
Professional fees 130,296 111,438 23,013 | 733
Rent 34,341 21,871 6,236 | 2,088
Repairs and maintenance 8,644 7,032 910 | -
Telephone 22,148 17,099 3,404 | 2.697
Training 1,022 - - | -
Travel 72,156 58,290 7,055 | 2,090
Wages and benefits 498,553 361,455 71,038 | -
Website development 2,558 - 2,192 | 16,488
----------------------------------------------------------------------------------------------------------------
|
1,142,228 861,090 149,338 | 34,835
- ---------------------------------------------------------------------------------------------------------------------
(Loss) net income $ (1,011,778) $ (770,587) $ (128,292) | $ 19,015
=====================================================================================================================
Weighted average number of shares,
basic and diluted 8,109,737 15,252,518 3,622,438 7,867,514
Loss per share, basic and diluted $ (0.12) $ (0.05) $ (0.04) $ (0.00)
=====================================================================================================================
4
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
Consolidated Statements of Operations
Three month periods ended March 31, 2001 and 2000 (Unaudited - prepared
by Management)
$ United States
================================================================================
2001 2000
- --------------------------------------------------------------------------------
Fee revenue $ 37,956 $ 11,217
Interest and other income - 308
- --------------------------------------------------------------------------------
37,956 11,525
Expenses
Advertising and promotion 13,092 13,603
Amortization - fixed assets 7,169 1,838
Amortization - website development 4,151 -
Automotive 3,700 2,827
Bank charges 770 140
Consulting 33,145 -
Conferences 29,975 2,515
Exchange gain (969) -
Insurance 247 1,156
Interest 29,500 -
Internet fees 6,946 3,790
Licences, fees and dues 466 3,049
Office 8,503 4,228
Professional fees 23,487 17,105
Rent 8,836 5,058
Repairs and maintenance 2,913 910
Telephone 11,088 2,664
Travel 33,477 6,559
Wages and benefits 150,041 55,497
Website development - 2,192
---------------------------------------------------------------------------
366,537 123,131
- --------------------------------------------------------------------------------
Loss $ (328,581) $ (111,606)
================================================================================
Weighted average number of shares,
basic and diluted 20,859,323 9,650,084
Loss per share, basic and diluted $ (0.02) $ (0.01)
================================================================================
5
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
Consolidated Statement of Stockholders' Equity (Deficiency)
and Comprehensive Income
Nine month period ended March 31, 2001
(Unaudited - prepared by Management)
$ United States
==================================================================================================================================
Deficit
Capital stock Accumulated Accumulated Total
Additional During the Other Stockholders'
Common shares Paid in Subscription Development Comprehensive Equity
Number Amount Capital for shares Stage Income (Deficiency)
- ----------------------------------------------------------------------------------------------------------------------------------
Shares issued for
acquisition of assets
on December 15, 1999 7,867,514 $ 2 $ - $ - $ - $ - $ 2
Shares issued for cash
on January 28, 2000 2,574,822 303,930 - - - - 303,930
Shares issued for cash
on June 16, 2000 114,437 13,508 - - - - 13,508
Subscription for shares - - - 1,689 - - 1,689
Share issue costs - (24,262) - - - - (24,262)
- ----------------------------------------------------------------------------------------------------------------------------------
10,556,773 293,178 - 1,689 - - 294,867
Comprehensive income
Loss - - - - (241,191) - (241,191)
Foreign currency
translation adjustment - - - - - 2,036 2,036
- ----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income
(loss) - - - - (241,191) 2,036 (239,155)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2000 10,556,773 293,178 - 1,689 (241,191) 2,036 55,712
Shares issued for acquisition
of assets (note 7 (a)) 143,046 16,821 - - - - 16,821
Shares issued upon conversion
of share subscriptions
(note 7 (b)) 14,305 1,689 - (1,689) - - -
Shares issued for cash
(note 7 (c)) 812,214 95,507 - - - - 95,507
Shares issued for services
(note 7 (d)) 429,137 50,464 - - - - 50,464
Shares issued for services
(note 7 (e)) 3,000,000 352,784 - - - - 352,784
Share issue costs - (360,107) - - - - (360,107)
- ----------------------------------------------------------------------------------------------------------------------------------
14,955,475 450,336 - - (241,191) 2,036 211,181
Shares held by Golden River
shareholders prior to
recapitalization transaction
(note 3) 5,903,848 182,056 - - - - 182,056
Reallocate capital stock to
equal par value of outstanding
common shares - (611,533) 611,533 - - - -
Subscription for shares
(note 7(g)) - - - 250,000 - - 250,000
Warrants issued as discount
on loans payable (note 6) - - 29,500 - - - 29,500
- ----------------------------------------------------------------------------------------------------------------------------------
20,859,323 20,859 641,033 250,000 (241,191) 2,036 672,737
Comprehensive income
Loss for the period - - - - (770,587) - (770,587)
Foreign currency translation
adjustment - - - - - 2,441 2,441
- ----------------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) - - - - (770,587) 2,441 (768,146)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, March, 31, 2001 20,859,323 $ 20,859 $ 641,033 $ 250,000 $(1,011,778) $ 4,477 $ (95,409)
==================================================================================================================================
6
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
Nine month periods ended March 31, 2001 and 2000
(Unaudited - prepared by Management)
$ United States
==========================================================================================================================
Nine months ended
March 31, 2000
----------------------------------
| Predecessor
| Business
| (note 2 (a))
Period from |----------------
From Inception Nine months December 1, | Period from
(March 3, 1999) ended 1999 to | July 1, 1999 to
to March 31, March 31, March 31, | December 15,
2001 2001 2000 | 1999
- --------------------------------------------------------------------------------------------------------------------------
|
Cash provided by (used in): |
Operating activities: |
Cash receipts from customers $ 135,652 $ 91,383 $ 15,425 | $ 48,894
Cash receipts from interest and |
other income 2,123 327 538 |
Cash paid to suppliers and employees (941,159) (706,107) (127,906) | (34,059)
- --------------------------------------------------------------------------------------------------------------------------
(803,384) (614,397) (111,943) | 14,835
Financing activities: |
Increase (decrease) in payable to |
directors - (825) 1,648 | -
Issuance of common shares 302,115 88,184 214,372 | -
Business combination (note 3) 362,632 362,632 - | -
Subscriptions for shares 330,934 250,000 79,245 | -
Increase in debt 19,032 19,032 - | -
Increase in loans payable 30,451 30,451 - | -
Partners' draws - - - | (4,614)
Bank indebtedness - - - | (364)
- --------------------------------------------------------------------------------------------------------------------------
1,045,164 749,474 295,265 | (4,978)
Investing activities: |
Increase in receivable from directors (25,743) (25,743) - | -
Purchase of fixed assets (132,676) (76,199) (52,177) | (9,857)
Website development costs capitalized (33,015) (12,739) (5,833) | -
- --------------------------------------------------------------------------------------------------------------------------
(191,434) (114,681) (58,010) | (9,857)
|
Foreign currency translation adjustment 4,477 2,441 2,605 | -
- --------------------------------------------------------------------------------------------------------------------------
Increase in cash 54,823 22,837 127,917 | -
|
Cash, beginning of period - 31,986 - | -
|
- --------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 54,823 $ 54,823 $ 127,917 | $ -
==========================================================================================================================
Supplementary Information:
Interest paid $ - $ - $ - $ -
Income taxes paid - - - -
Non-cash financing and investing activities:
Common shares issued for fixed assets 2 - 2 -
Common shares issued for acquisition
of assets 16,821 16,821 - -
Common shares issued on conversion
of share subscriptions 80,934 1,689 - -
Common shares issued for services to be received 50,464 50,464 - -
Common shares issued for services 352,784 352,784 - -
Share issue costs paid by issuance of common shares (352,784) (352,784) - -
Common shares issued for business combination (180,576) (180,576) - -
Warrants issued as discount on loans payable 29,500 29,500 - -
==========================================================================================================================
7
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Nine month period ended March 31, 2001
(Unaudited - prepared by Management)
$ United States
================================================================================
1. NATURE OF OPERATIONS:
Columbus Networks Corporation ("the Company"), formerly known as Golden
River Resources Inc., was incorporated on June 17, 1997 under the laws of
the State of Nevada and its principal business activity is developing
electronic recruitment websites including educationcanada.com,
educationamerica.net and globalesl.net. The Company earns subscription fees
paid by the employers that use the websites to recruit teaching
professionals. Prior to the Company's business combination effective
November 30, 2000 with Columbus Networks Corporation ("Columbus B.C."), a
British Columbia company, the Company was a shell company that was actively
pursuing an operating company.
2. ACCOUNTING POLICIES:
(a) Going concern
These financial statements have been prepared on the going concern
basis, which assumes the realization of assets and liquidation of
liabilities and commitment in the normal course of business. Certain
conditions, discussed below, currently exist which raise substantial
doubt about the validity of this assumption. The financial statements
do not include any adjustments that might result from the outcome of
this uncertainty. As shown in the consolidated financial statements,
the Company has incurred a loss for the period since inception of
$1,011,778, and at March 31, 2001 has a net stockholders' deficiency
of $95,409 and a working capital deficiency of $253,612. Management
plans to pursue debt (note 8) and equity financings to support
operations until the renewal period for educationcanada.com
subscribers and the commencement of billing for subscribers of
educationamerica.net.
(b) Basis of presentation:
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant
intercompany balances and transactions have been eliminated.
Effective November 30, 2000, the Company acquired 100% of the
outstanding common shares of Columbus B.C. As the shareholders of
Columbus B.C. obtained control of the Company through the exchange of
their shares of Columbus B.C. for shares of the Company, the
acquisition of Columbus B.C has been accounted for in these
consolidated financial statements as a recapitalization of Columbus
B.C. effectively representing an issuance of shares by Columbus B.C.
for the net assets of the Company. Consequently, the consolidated
statements of operations, stockholders' equity (deficiency) and
comprehensive income and cash flows reflect the results from
operations and cash flows of Columbus B.C, the legal subsidiary, for
the period from incorporation on March 3, 1999 to March 31, 2001
combined with those of the Company, the legal parent, from November
30, 2000, in accordance with accounting principles generally accepted
in the United States of America.
In accordance with the rules and regulations of the Securities and
Exchange Commission, a predecessor entity's financial statements are
required to be presented in specified U.S. Securities filing
documents. Accordingly, the amounts presented for the period July 1,
1999 to December 15, 1999 in the statements of operations and cash
flows are those of a predecessor partnership. The financial
information presented as at March 31, 2001, for the nine months ended
March 31, 2001 and 2000, for the three months ended March 31, 2001
and 2000 and for the period from inception (March 3, 1999) to March
31, 2001 is unaudited, however, in the opinion of management, all
adjustments (consisting solely of normal recurring items) necessary
for the fair presentation of these unaudited amounts in conformity
with accounting principles generally accepted in the United States of
America have been made.
8
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Nine month period ended March 31, 2001
(Unaudited - prepared by Management)
$ United States
================================================================================
2. ACCOUNTING POLICIES (CONTINUED):
(b) Basis of presentation (continued):
The continuity of the number of common shares of Columbus B.C. and
its predecessor entity have been adjusted to reflect the conversion
of the shares into shares of the Company as if the acquisition
occurred on July 1, 1999.
(c) Translation of financial statements:
The Company's functional currency is the United States dollar. The
Company's subsidiary, Columbus B.C., operates in Canada and its
operations are conducted in Canadian currency. However, its
functional currency has been determined to be United States dollars
as Columbus B.C. is a direct and integral component of the Company's
operations. The method applied to translate Columbus B.C. is as
follows:
i) Assets and liabilities are translated at the rate of exchange
in effect at the balance sheet date, being U.S. $1.00 per Cdn.
$1.5763 (June 30, 2000, US $1.00 per CDN $1.4806).
ii) Non-monetary assets and liabilities are translated at the rate
of exchange in effect at the date the transaction occurred.
iii) Revenue and expenses are translated at the exchange rate in
effect at the transaction date.
iv) The net adjustment arising from the translation is included in
the consolidated statement of operations.
To December 31, 2000, the functional currency of Columbus B.C.
was the Canadian dollar. Accordingly, the net adjustment to
December 31, 2000 arising from the translation was recorded in
a separate component of stockholders' equity (deficiency)
called "cumulative translation adjustment" which is included in
"accumulated other comprehensive income".
3. BUSINESS RECAPITALIZATION:
Effective November 30, 2000, the Company, and Columbus B.C., executed their
share exchange agreement. The Company issued 14,955,475 common shares to
the shareholders of Columbus B.C. in consideration for all of the issued
and outstanding common shares of Columbus B.C. on the basis of 1.4305
common shares of the Company for each common share of Columbus B.C. Prior
to its acquisition of Columbus B.C., the Company had no substantial
operations. As the former shareholders of Columbus B.C. obtained control of
the Company through the share exchange, this transaction was accounted for
in these financial statements as a recapitalization of Columbus B.C.
effectively representing an issuance of shares by Columbus B.C. for the net
tangible assets of the Company. The historical financial statements reflect
the results of operations of Columbus B.C. from the date of its
incorporation on March 3, 1999, consolidated with those of the Company from
November 30, 2000.
Equity financing was raised by the Company prior to November 30, 2000 in
anticipation of the recapitalization transaction. $200,000 of the proceeds
from this financing was advanced to Columbus B.C. prior to the
recapitalization transaction. The advance was eliminated upon consolidation
of the companies.
9
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Nine month period ended March 31, 2001
(Unaudited - prepared by Management)
$ United States
================================================================================
3. BUSINESS RECAPITALIZATION (CONTINUED):
The acquisition details are as follows:
Net assets acquired
Cash $ 162,632
Prepaid expenses 2,732
Due from Columbus B.C. 200,000
Fixed assets 7,747
Accounts payable and accrued liabilities (130,705)
Debt (60,350)
---------------------------------------------------------------------------
$ 182,056
===========================================================================
Consideration given for net assets acquired
14,955,475 common shares issued $ 182,056
================================================================================
4. RECEIVABLE FROM DIRECTORS:
The receivable from directors does not bear interest, is unsecured and is
repayable on demand.
5. DEBT:
The debt represents advances made to the Company by shareholders who,
individually, own less than 5% of the outstanding shares of the Company.
The advances do not bear interest, have no fixed terms of repayment, are
unsecured and are not pursuant to a written agreement.
6. LOANS PAYABLE:
The loans payable bear interest at 10% on the outstanding balance, are
unsecured and are due on June 26, 2001. Monthly interest of 10% of the
outstanding balance is due for each 30 day period or portion thereof that
the loans remain outstanding subsequent to June 26, 2001.
As further consideration for advancing the loans, the Company granted
150,000 common share purchase warrants which expire on March 28, 2003.
75,000 of the common share purchase warrants entitle the holder of each
common share purchase warrant to purchase one share of common stock of the
Company at a price of $0.40 per share. The remaining 75,000 common share
purchase warrants entitle the holder, of each common share purchase
warrant, to purchase one share of common stock of the Company at a price of
$0.60 per share.
Accordingly, interest expense of $29,500, being the fair value of the
warrants granted, has been included in the determination of the loss for
the period. The fair value of the warrants granted was determined using the
Black Scholes method using the two year life of the warrants, volatility
factor of 198%, risk free rate of 5.5% and no assumed dividend rate.
10
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Nine month period ended March 31, 2001
(Unaudited - prepared by Management)
$ United States
================================================================================
7. CAPITAL STOCK:
(a) During the nine months ended March 31, 2001 Columbus B.C. issued
143,046 (100,000 prior to the business combination) Class A common
shares in exchange for the ownership of a website and associated
domain names. The fair value of the shares issued, aggregating
$16,821, approximated the fair value of the assets acquired.
(b) During the nine months ended March 31, 2001 Columbus B.C. issued
14,305 (10,000 prior to the business combination) Class A common
shares for stock subscriptions of $1,689 received prior to June 30,
2000.
(c) During the nine months ended March 31, 2001 Columbus B.C. issued
812,214 (567,800 at Cdn $0.25 (US $0.17) prior to the business
combination) Class A common shares for aggregate cash proceeds of
$95,507.
(d) During the nine months ended March 31, 2001, Columbus B.C. issued
429,137 (300,000 prior to the business combination) Class A common
shares for services to be performed. The fair value of the shares
issued, aggregating $50,464, approximates the fair value of the
services to be received.
(e) During the nine months ended March 31, 2001, Columbus B.C. issued
3,000,000 (2,097,232 prior to the business combination) Class A
common shares for brokerage fees related to the business combination
described in note 3. The fair value of the shares issued,
aggregating $352,784, approximating the fair value of the brokerage
services received, has been recorded as a charge to capital stock.
(f) On February 2, 2001, the directors approved a private placement to
sell up to 3,000,000 units at $0.25 per unit. Each unit consists of
one share of common stock and one common share purchase warrant.
Each two common share purchase warrants entitles the holder to
purchase one share of common stock at a price of $0.50 per share for
a period of six months from the date of issuance.
(g) During February 2001, the Company received $250,000 for
subscriptions for 1,000,000 units as disclosed in note 7(f).
8. SUBSEQUENT EVENTS:
On April 26 and 27, 2001 the Company received cash aggregating $179,280 in
exchange for convertible promissory notes. The notes are unsecured,
non-interest bearing and repayable on or before December 31, 2001. The
notes will bear interest at 10% per annum commencing January 1, 2002 if
unpaid. At the option of the holders, the notes can be converted to common
stock of the Company at a price of $0.50 per share. The notes do not
contain a beneficial conversion feature as they are convertible at a price
greater than the market price of the Company's common stock at the date of
issuance.
11
COLUMBUS NETWORKS CORPORATION
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
Nine month period ended March 31, 2001
(Unaudited - prepared by Management)
$ United States
================================================================================
9. STATEMENTS OF CASH FLOWS:
Cash flows from operating activities prepared under the indirect method
are as follows:
------------------------------------------------------------------------------------------------------------------
Nine months ended
March 31, 2000
------------------------------------
| Predecessor
| Business
| (note 2 (a))
| ---------------
From Inception Nine Months Period from | Period from
(March 3, 1999) ended December 1, 1999 | July 1, 1999 to
to March 31, March 31, to March 31, | December 15,
2001 2001 2000 | 1999
------------------------------------------------------------------------------------------------------------------
(Loss) net income $ (1,011,778) $ (770,587) $ (128,292) | $ 19,015
Non-cash items: |
Amortization 32,058 26,364 2,141 | 1,071
Interest - warrants issued as |
discount on loans payable 29,500 29,500 - | -
|
Accounts receivable (14,263) (7,024) (16,186) | 4,545
Prepaid expenses and deposits 26,415 32,240 (3,793) | -
Accounts payable and accrued liabilities 94,099 59,640 23,084 | (295)
Unearned revenue 40,585 15,470 11,103 | (9,501)
|
------------------------------------------------------------------------------------------------------------------
$ (803,384) $ (614,397) $ (111,943) | $ 14,835
==================================================================================================================
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Effective November 30, 2000, the Company and Columbus Networks Corporation, a
British Columbia company ("Columbus B.C."), executed their share exchange
agreement. The Company issued 14,955,475 common shares to the shareholders of
Columbus B.C. in consideration for all of the issued and outstanding common
shares of Columbus B.C. on the basis of 1.4305 common shares of the Company for
each common share of Columbus B.C. The former shareholders of Columbus B.C.
obtained control of the Company through the share exchange. The principal
business activity of Columbus B.C. is developing electronic recruitment websites
including educationcanada.com, educationamerica.net and globalesl.net.
The Company is currently engaged in a private placement of its common stock
pursuant to which the Company is offering for sale up to 3,000,000 units at
$0.25 per unit to raise up to $750,000 in gross proceeds. Each Unit consists of
one share of Common stock and one Warrant. Each two Warrants entitles the holder
to purchase one share of Common stock at a price of $0.50 per share for a period
of six months from the date of issuance. The proceeds are expected to be used
for the Company's marketing efforts and working capital needs. To date $250,000
has been raised pursuant to this private placement.
RESULTS OF OPERATIONS
The Company's level of activity was much greater during the nine months ended
March 31, 2001 as compared to the same period in the prior year primarily
because the Company commenced operations on December 1, 1999.
During the past nine months, the Company has focused its efforts on developing
and marketing its electronic recruitment websites including educationcanada.com,
educationamerica.net and globalesl.net. In September 2000 educationamerica.net
was launched and the Company hired several marketing and customer service staff
to secure memberships to this website from school districts and related
education entities. The Company is offering the first year's membership free for
a limited time to quickly establish a base of job postings from school districts
and private employers and a base of resumes from educators. In February 2001
globalesl.net was launched.
During the nine months ended March 31, 2001, the Company incurred a loss of
$770,587 due primarily to professional fees and aggressive marketing activities.
The costs related to the marketing activities are included in wages and benefits
($361,455) consulting ($59,209), conferences ($56,130) and travel ($58,290).
During the same period in 2000 very little activity occurred as operations did
not commence until December 1, 1999.
Advertising and promotion, consulting, conferences and travel have increased
significantly in 2001 over 2000 as the Company carried out aggressive marketing
activities in 2001. Amortization expense has increased by $24,223 in 2001 over
2000 as the Company acquired a significant amount of fixed assets and
capitalized website development during 2001. Internet fees have increased by
$18,352 in 2001 over 2000 as the Company has three websites operating now versus
only one in 2000. Professional fees have increased by $88,425 in 2001 over 2000
due to services in connection with the recapitalization transaction and
reporting requirements of the Company. Wages and benefits have increased by
$290,417 in 2001 over 2000 due to hiring a large number of customer
representatives in 2001 and having employees for nine months in 2001 versus four
months in 2000.
Fee revenue of $90,176 was earned in the nine months ended March 31, 2001 and a
further $40,585 of unearned revenue will be recognized as revenue over the next
three months ended June 30, 2001. Fee revenue has risen to $90,176 in the nine
months ended March 31, 2001 from $20,508 in the same period ended March 31, 2000
primarily due to having customers for nine months in the current year versus
only four months in prior year and also due to expanding the customer base with
aggressive marketing.
FINANCIAL CONDITION
Since inception, the Company has financed its operations through the sale of
equity, cash acquired in the recapitalization transaction effective November 30,
2000, membership fees received and short term financing. Since inception, the
Company has raised $633,049, net of share issuance costs, from the sale of its
common stock. Cash in the amount of $362,632 was acquired in the
recapitalization transaction discussed above and $135,652 of membership fees and
short term loan proceeds of $49,483 have been received since inception.
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In April 2001 the Company began its billing cycle for membership renewals
beginning in July, 2001. Varying discounts are being offered for early payment
to generate cash flow to meet working capital needs.
At March 31, 2001 the Company had a working capital deficiency of $253,612 as
compared to a working capital deficiency of $15,349 at June 30, 2000. The
increased deficiency is due primarily to the assumption of liabilities of
$191,055 in the recapitalization transaction, many of which remain unpaid at
March 31, 2001.
PLAN OF OPERATION
Of the current liabilities at December 31, 2000, $224,804 represents trade and
other obligations, $79,382 represents debt that does not have a fixed date for
repayment and $30,451 represents short term loans that are repayable in June
2001. The unearned revenue of $40,585 represents membership fees received that
pertain to the period from April 1, 2001 to June 30, 2001.
At March 31, 2001 the Company had $54,823 cash on hand. Management intends to
advance the timing of the billing cycle for renewals of member ships for
educationcanada.com and begin the billing cycle for memberships for
educationamerica.net during the quarter ending June 30, 2001.
Subsequent to March 31, 2001 the Company raised debt financing in the amount of
$179,280 in the form of convertible promissory notes. The advances are
non-interest bearing, unsecured and repayable on or before December 31, 2001
after which the advances will bear interest at 10% per annum. At the option of
the holders, the notes can be converted to common stock of the Company at a
price of $0.50 per share.
FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-QSB and the Company's
Annual Report on Form 10-KSB for its fiscal year ended June 30, 2000, as well as
statements made by the Company in periodic press releases, oral statements made
by the Company's officials to analysts and shareholders in the course of
presentations about the Company, constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by the forward looking statements. Such
factors include, among other things, (1) general economic and business
conditions; (2) interest rate changes; (3) the relative stability of the debt
and equity markets; (4) competition; (5) demographic changes; (6) government
regulations particularly those related to Internet commerce; (7) required
accounting changes; (8) equipment failures, power outages, or other events that
may interrupt Internet communications; (9) disputes or claims regarding the
Company's proprietary rights to its software and intellectual property; and (10)
other factors over which the Company has little or no control.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
During the quarter ended March 31, 2001, the registrant received
$250,000 for subscriptions for 1,000,000 units, each unit consisting of
one share of common stock and one common share purchase warrant. Each
two common share purchase warrants entitle the holder to purchase one
share of common stock at a price of $0.50 per share for a period of six
months from the date of issuance.
The registrant relied upon the exemption from registration contained in
Section 4(2) of the Securities Act of 1933, as there was only one
subscriber. The subscriber is deemed to be sophisticated with respect
to the investment in the securities due to its financial condition and
involvement in the registrant's business. Restrictive legends will be
placed on the stock certificates evidencing the shares and warrants.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS: None.
B) REPORTS ON FORM 8-K:
On January 16, 2001, the registrant filed an amendment to its
report on Form 8-K, dated December 8, 2000, reporting under Items 1, 2, and 5
the business combination with Columbus Networks Corporation. The unaudited
historical financial statements of Columbus Networks Corporation were filed,
with the audited historical financial statements of Columbus Networks
Corporation and pro forma financial information having been filed previously.
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.
COLUMBUS NETWORKS CORPORATION
(Registrant)
Date: May 16, 2001 By: /s/ Scott McLean
----------------------------------------
Scott McLean, Vice President and
Chief Financial Officer
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