SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-2
(X) Quarterly Report pursuant to Section 13 or l5 (d) of the Securities
Exchange Act of 1934 For the quarterly period ended September 30, 2000
OR
( ) Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from April 6, 2000 to September 30, 2000
Commission File Number: 0-28514
YAPALOT COMMUNICATIONS HOLDINGS INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 98-0160284
(State or Other Jurisdiction (I.R.S. Employer
Incorporation or Organization) Identification Number)
4884 Dufferin Street, Unit 1, Toronto, Ontario M3H 5S8
(Address of Principal Executive Offices)
Issuer's Telephone Number, Including Area Code: 416-736-8882
N/A
- --------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
--- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 20,000,000 shares of Common Stock,
par value $0.001 per share were outstanding as of September 30, 2000.
1.
INDEX
PAGE
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Consolidated Balance Sheet as at September 30, 2000 4
Interim Consolidated Statement of Changes in Shareholders' Equity for the period since inception to
September 30, 2000 5
Interim Consolidated Statement of Operations for the period ended September 30, 2000 and cumulative from
date of inception to September 30, 2000 6
Interim Consolidated Statement of Cash Flows for the period ended September 30, 2000 and cumulative from
date of inception to September 30, 2000 7
Notes to Interim Consolidated Financial Statements 8 - 9
Item 2. Management's Discussion and Analysis or Plan of Operation 11 - 12
PART II. OTHER INFORMATION 14
Item 3. Certain Relationships and Related Transactions 14
Item 4. Description of Securities 14
Item 5. Changes in Auditors' 14
2.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
3.
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
- --------------------------------------------------------------------------------
A S S E T S
CURRENT
Cash $ 605,277
Accounts receivable 1,433
Sales taxes receivable 26,176
Prepaid and deposits 7,427
-----------------
$ 640,313
CAPITAL ASSETS (Note 3) 624,446
-----------------
$ 1,264,759
==================
L I A B I L I T I E S
CURRENT
Accounts payable and accrued liabilities $ 314,514
SHAREHOLDERS' ADVANCES (Note 4) 471,587
-----------------
$ 786,101
-----------------
SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 5) $ 1,016,000
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE (447,653)
CUMULATIVE TRANSLATION ADJUSTMENT (89,689)
-----------------
$ 478,658
-----------------
$ 1,264,759
=================
See accompanying notes.
4.
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FROM DATE OF INCORPORATION, APRIL 6, 2000,
TO SEPTEMBER 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
- ------------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated Accumulated
During Other
Common Shares Development Comprehensive Comprehensive
Number Amount Stage Loss Total Loss
-------------------------------------------------------------------------------------
ISSUE OF COMMON SHARES
Founder shares issued at inception 16,000,000 $ 16,000 $ - $ - $ 16,000 -
Shares issued in current fiscal quarter 4,000,000 1,000,000 - - 1,000,000 -
COMPREHENSIVE LOSS
Net Loss - - (447,653) - (447,653) $ (447,653)
Foreign Currency Translation Adjustments - - - (89,689) (89,689) (89,689)
COMPREHENSIVE LOSS $ (537,342)
-------------------------------------------------------------------- ===============
BALANCE - End of period 20,000,000 $1,016,000 $ (447,653) $ (89,689) $ 478,658
====================================================================
See accompanying notes.
5.
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
FROM DATE OF INCORPORATION, APRIL 6, 2000,
TO SEPTEMBER 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
For the Period Ended
September 30 September 30
2000 2000
- -----------------------------------------------------------------------------------------
(3 Months) (Cumulative
to Date)
REVENUE $ 17,523 $ 17,523
------------ ------------
EXPENSES
Advertising and promotion $ 144,485 $ 144,485
Bank charges and interest 13,040 16,463
General and office 18,253 32,579
Professional fees 41,777 76,344
Rent 7,668 16,201
Telephone and communication 24,167 54,189
Travel 6,948 8,003
Wages 68,089 82,003
Amortization 24,839 34,909
------------ ------------
$ 349,266 $ 465,176
------------ ------------
NET LOSS $ (331,743) $ (447,653)
============ ============
LOSS PER COMMON SHARE (Note 6) $ (0.02) $ (0.03)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 17,304,348 16,677,966
============ ============
See accompanying notes.
6.
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FROM DATE OF INCORPORATION, APRIL 6, 2000,
TO SEPTEMBER 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
For the Period Ended
September 30 September 30
2000 2000
- -------------------------------------------------------------------------------------------------------------------------
(3 Months) (Cumulative
to Date)
CASH FROM (USED IN) OPERATIONS
Net loss $ (331,743) $ (447,653)
Adjustments to reconcile net loss to net cash provided by operating activities:
Amortization 24,839 34,909
Changes in assets and liabilities relating to operations
Accounts receivable (1,433) (1,433)
Accounts payable and accrued liabilities (84,122) 288,338
Prepaid and sundry assets 95,719 (7,427)
----------- -----------
NET CASH FROM OPERATIONS $ (296,740) $ (133,266)
----------- -----------
CASH USED IN INVESTING ACTIVITIES
Purchase of capital assets $ (195,873) $ (659,355)
----------- -----------
CASH FROM FINANCING ACTIVITIES
Advances from shareholders 167,469 $ 471,587
Capital shares issued 1,000,000 1,016,000
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES $ 1,167,469 $ 1,487,587
----------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH $ (88,321) $ (89,689)
NET INCREASE IN CASH DURING THE PERIOD $ 586,535 $ 605,277
CASH - Beginning of period 18,742 -
----------- -----------
CASH - End of period $ 605,277 $ 605,277
=========== ===========
See accompanying notes.
7.
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
The financial information for the period ended September 30, 2000 presented in
this Form 10-QSB has been prepared from accounting records of Yapalot
Communications Holdings Inc. (the "Company") without audit. The information
furnished reflects all adjustments which are, in the opinion of management,
necessary for a fair statement of the results of this interim period. The
results of operations for the period ended September 30, 2000 are not
necessarily indicative of the results to be expected for a full year.
1. NATURE OF OPERATIONS
Yapalot Communications Holdings Inc. a development stage company, was
incorporated under the laws of the State of Delaware on April 6, 2000 and
has adopted a fiscal year end of December 31. The company's development
activities consist of the deployment of Voice Over Internet Protocol (VoIP)
network services around the world as well as developing different
communications solutions utilizing VoIP technology.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Consolidation
These interim consolidated financial statements present the combination
of the interim financial statements of Yapalot Communications Holdings
Inc., a United States company, and its wholly-owned subsidiary, Yapalot
Communications Inc., a company incorporated under the laws of the
Province of Ontario, Canada on March 8, 2000.
b) Basis of Financial Statements
These interim consolidated financial statements are stated in United
States dollars, the "reporting currency". The consolidated transactions
of Yapalot Communications Holdings Inc. have been recorded in Canadian
dollars, the "functional currency", and have been restated into United
States dollars at the period end exchange rates for balance sheet items
and the average exchange rate for the period for revenues, expenses,
gains and losses. Translation adjustments to the reporting currency are
included in equity.
c) Capital Assets and Amortization
Capital assets are carried at acquisition cost less accumulated
amortization. Amortization is provided annually by the company at rates
intended to amortize the assets over their estimated useful lives as
follows:
Computer equipment - 30% Declining balance basis
Computer software - 100% Declining balance basis
Furniture and fixtures - 20% Declining balance basis
Leasehold improvements - 20% of cost
Network communications equipment - 20% Declining balances basis
Where the company determines that circumstances indicate that the
carrying value of certain capital assets may not be recoverable, the
company's policy is to write the asset down to an estimate of the future
cash flows expected to result from the use of the asset and its eventual
disposition. Such an impairment loss will be charged to operations in
the current year.
d) Revenue Recognition
The Company recognizes revenue as the service is used and becomes
billable.
8.
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
e) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and revenues and expenses during the reporting period. Actual results
could differ from those estimates.
f) Start-up and Other Pre-operating Expenses
Start-up and pre-operating expenses incurred by the Company are expensed
as incurred.
g) Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income", which was adopted by the
Company. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in an entity's financial
statements.. Comprehensive income as defined includes all changes in
equity (net assets) during a period from non-owner sources.
h) Earnings (Loss) Per Share
Earnings (loss) per common share is based on the weighted average number
of common shares outstanding during the period.
i) General
These financial statements have been prepared in accordance with Unites
States generally accepted accounting principles (GAAP), as they relate
to these financial statements.
3. CAPITAL ASSETS
ACCUMULATED NET
COST AMORTIZATION 2000
-------------------------------------
Computer equipment $ 123,897 $ 9,292 $ 114,605
Computer software 27,760 6,940 20,820
Furniture and fixtures 67,247 630 66,617
Leasehold improvements 65,618 822 64,796
Network communication equipment 374,833 17,225 357,608
-------------------------------------
$ 659,355 $ 34,909 $ 624,446
======================================
4. SHAREHOLDERS' ADVANCES
The balances due to shareholders are non-interest bearing, however in
accordance with generally accepted accounting policies, an interest rate of
7% was imputed in this non arms length arrangement. The imputed interest is
charged to operations and credited to shareholders' advances. The individual
shareholder advance amounts are as follows:
Yuval Barzakay $ 168,794
Marilyn Benlolo 302,793
-----------
$ 471,587
===========
9
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
- --------------------------------------------------------------------------------
5. SHARE CAPITAL
Authorized
50,000,000 Common shares at $.001 par value
Issued
20,000,000 Common shares $ 1,016,000
==============
During the period the Company raised $1,000,000 by issuing 4,000,000 common
shares at $.25 per share.
6. LOSS PER COMMON SHARE
Loss per common share is calculated as the loss for the period divided by
the weighted average number of the Company's common stock outstanding.
Diluted loss per share does not differ from basic loss per share.
10.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Through its wholly-owned subsidiary, Yapalot Communications Inc., the
Company is creating and marketing a global Internet Protocol
telecommunications network. By the end of fiscal year 2000, the company
anticipates completing the launch of ten initial gateways at a cost of
approximately $1,000,000, plus beginning the launch of an additional 22
gateways, at a further cost of approximately $2,500,000. The ten initial
gateways were financed using the private funds of our founding shareholders.
The Company believes that it will generate sufficient positive cash flow
from operations to meet operating requirements and the purchase of the 22
gateways over the next 12 months. This belief is founded on our current
customer base growth of approximately 450 new customers per month, coupled
by stronger purchasing power to purchase Gateways from Clarent at reduced
prices and favorable installment payment terms on each Gateway. In addition,
the Company is also working on Approved Agent Agreements which we anticipate
will be completed early in the new year. Management has also put plans into
effect to significantly build the current monthly customer acquisition base
from 450 to approximately 700 new customers per month. This latter growth is
expected to be accomplished through a planned increase in advertising
expenditures and the hiring of additional sales staff early in the new year.
If the Company does not generate sufficient positive cash flow to meet cash
requirements, it may, from time to time, seek to raise capital from
additional sources, including setting up lines of credit, project specific
financings and public or private debt or equity financings. However, there
can be no assurance that the Company will be able to obtain any sort of
financing on commercially acceptable terms, if at all.
To achieve the Company's business plan to date, it has hired a total of 32
full time employees comprised of a customer service team of 12 employees and
20 employees in the areas of administration, marketing and sales.
The Company is a holding company and has no independent operating history
other than Yapalot Communications. Inc. Expenses for the period ended
September 30, 2000 represent consolidated costs since inception.
COMPARISON OF THE PERIOD ENDED SEPTEMBER 30, 2000 TO THE PERIOD ENDED
JUNE 30, 2000.
During the current quarter ended September 30, 2000 the Company completed
contract negotiations with its major equipment suppliers. The company also
took delivery and installed gateways for Montreal, Vancouver, Toronto, Hong
Kong and Israel, New York City, Miami, Italy, and Greece. Under terms of its
supplier agreements, the company has paid initial deposits of 25% of the
equipment cost, with installment payments for the balance paid over the
following three fiscal quarters. This financial information reflects the
initial deposits paid on these two latter gateways. During this period the
Company also completed most of the renovations of its offices and the
acquisition of furniture and equipment workstations for the Company's
employees.
RESULTS OF OPERATIONS
For the 3 months ended September 30, 2000
During this quarter ended September 30, 2000 the Company commenced
generating revenues, as reflected in these financial statements, from its
initial marketing effort. The Company's resulting loss for this period of
$331,743 reflects a significant increase in various corporate expenses in
the period compared with the prior periods, as operations begin to roll out.
This period's loss is largely a result of anticipated costs from the initial
advertising program, which cost the Company $144,485 in this quarter. In
addition, the Company also developed a significant proportion of its planned
staffing level this quarter.
11.
This resulted in administration and sales wages paid out this quarter by the
Company representing over 80% of the total accumulated wages cost to date.
The net loss for the current quarter was also affected by the cost of
professional legal, accounting and other services during the period, which
grew out of the Company's ongoing organizational development to ensure it
meets the needs of its current and projected operations. Amortization of
capital assets also represents a significant cost, due to the increased
installation cost of the Company's gateways. Most other expenses have
developed rather normally during this period, considering the increased
infrastructure requirements of the Company as it continues to develop its
client base and resulting operating costs.
For the cumulative 6 months ended September 30, 2000
For the cumulative period from incorporation, April 6, 2000, to September
30, 2000 the company began generating revenues of $17,523 toward the latter
portion of the period. The company's cumulative net loss of $447,653 for
the six months ended September 30, 2000 is largely a result of anticipated
costs of $144,485 from the initial advertising program as well as the
development of a significant proportion of its planned staffing level,
resulting in administration and sales wages paid out during this cumulative
period of $82,003. The net loss for the current cumulative period also
reflects the accumulated cost of professional legal, accounting and other
services required to ensure the Company's ongoing organizational
development meet the needs of its current and projected operations. The
accumulated amortization cost of capital assets of $34,909 also represents
a significant charge against revenues, due to the cumulative installation
cost of the Company's gateways. Most other expenses have developed rather
normally during this period, considering the increased infrastructure
requirements of the Company as it continues to develop its client base and
resulting operating costs.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity for the Company are funds generated by
loans from the founding shareholders. Additional information on the loan
agreement is described in note 4 to the Company's Interim Consolidated
Financial Statements set forth in Part II hereto.
Current assets totaled $640,313 at September 30, 2000 compared to $602,799
at June 30, 2000. The increase is attributable to additional hardware
equipment purchased for the New York and Miami gateways, as well as
additional prepaid Canadian Goods and Services Taxes refundable to the
corporation. At September 30, 2000 the Company had cash but no short-term
deposits. As operating activities had just begun, there were only a small
amount of Accounts Receivable on hand at September 30, 2000.
As at September 30, 2000, current liabilities totaled $314,514 compared to
$396,113 at June 30, 2000. The decrease is attributable to the payments
having begun against current supplier balances, under initial financing
terms on the gateway hardware received by the company.
The Company's operations are carried out in Canadian dollars. The company's
reporting currency is in Unites States dollars. As indicated in the notes to
this financial information, any translation adjustment to the reporting
currency would be included in equity.
During the period ended September 30, 2000 the company conducted an offering
pursuant to Regulation D, Rule 504 of the Securities Act of 1933, as
amended, to accredited investors of 4,000,000 shares of common stock at
$0.25 to raise $1,000,000 for working capital.
FORWARD LOOKING STATEMENTS
Statements that are not historical facts included in this registration
statement are "forward looking statements" and involve risks and
uncertainties that could cause actual to differ from projected results. Such
statements address activities, events or developments that we expect,
believe, project, intend or anticipate will or may occur, including such
matters as future capital, business strategies, expansion and growth of our
operations and future net cash flows. Factors that could cause actual
results to differ materially are described throughout this statement.
Cautionary disclosures include, among others: general economic conditions,
the markets for and market price of our services, the strength and financial
resources of our competitors, our ability to find and retain skilled
personnel, the results of financing efforts and regulatory developments and
compliance. We disclaim any obligation to update or revise any
forward-looking statement to reflect events or circumstances occurring
hereafter or to reflect the occurrence of anticipated or unanticipated
events, other than as required by law.
12.
PART II
OTHER INFORMATION
ITEM 3. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Yapalot Communications Inc. currently has two outstanding loans to its two
founders: Yuval Barzakay $168,794 and Marilyn Benlolo $302,793. Both loans
are interest free and the funds were used to finance Yapalot Communications
Inc. since its inception in March 2000. Both loans are for a term of no less
than one year and are payable after one year or when revenues reach a level
in which the loans can be repaid. They are non-interesting bearing loans.
ITEM 4. DESCRIPTION OF SECURITIES
The Company has authorized 50,000,000 shares of common stock, $.001 par
value per share. As of September 30, 2000, there were 20,000,000 shares
issued and outstanding. All shares are of the same class and have the same
rights, preferences and limitations. Holders of shares are entitled to
receive dividends in cash, property or shares when and if dividends are
declared by the Board of Directors out of funds legally available therefore.
The By-Laws impose no limitations on the payment of dividends. A quorum for
any meeting of shareholders is a majority of shares then issued and
outstanding and entitled to be voted at the meeting. Holders of shares are
entitled to one vote per share. Upon liquidation, dissolution or winding up
of the business of the Company, any assets will be distributed to the
holders of shares after payment or provision for payment of all debts,
obligations or liabilities of the Company. There are no preemptive rights,
subscription rights, or redemption provisions relating to the shares and
none of the shares carries any liability for further calls.
ITEM 5. CHANGES IN AUDITORS
On September 15, 2000 the board of directors retained the firm of Weisbrod
Goldmacher, LLP., Chartered Accountants as its new auditors.
13.
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.
YAPALOT COMMUNICATIONS HOLDINGS INC.
Dated: January 19, 2001 By /s/ Yuval Barzakay
----------------------------------
Yuval Barzakay, Chairman and
Chief Executive Officer
14.