SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 2001
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________ to __________
Global Online India, Inc.
(Exact name of registrant as specified in charter)
Delaware
(State or other jurisdiction of incorporation or organization)
000-11225
(Commission File Number)
84-0899587
(IRS Employer Identification Number)
351 Whispering Hills Road, Boone, NC 28607
(Business address and zip code)
(828) 264-2793
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), Yes [X] No [ ] and (2) has been subject to
such filing requirements for the past 90 days, Yes [X] No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date.
Class Outstanding as of June 30, 2000
- ------------------------ -----------------------------------
Common Stock, $0.01 par value 50,005,655
Index
Part I: Financial Information
Item 1. Financials Statements
Consolidated Balance Sheet
Consolidated Statements of Operations
Consolidated Statements of Changes in Shareholders' Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
Results of Operations
Subsequent Events
Plan of Operations
Part II: Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
2
PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
Global Online India, Inc.
(A Majority Owned Subsidiary of USA Global Link, Inc.)
Consolidated Balance Sheet
June 30, 2001 (Unaudited)
Assets
Current assets:
Cash $ 1,711
Accounts receivable 321,211
Total current assets 322,922
Property and equipment, net of accumulated depreciation 53,860
Other assets:
Software development costs, net of accumulated amortization 60,991
Internet domain names 5,166
Investments 5
Deposit 2,733
Total other assets 68,895
$ 445,677
Liabilities and Stockholders' Deficit
Current liabilities:
Current portion of obligations under capital lease $ 50,172
Accrued expenses 518
Total current liabilities 50,690
Long-term liabilities:
Payable to USA Global Link, Inc. 750,644
Stockholders' deficit:
Preferred stock; $1.00 par value; 10,000,000 shares
authorized; no shares issued or outstanding
Common stock; $.01 par value; 80,000,000 shares
authorized; 50,005,655 shares issued and outstanding 500,057
Additional paid-in capital 162,919
Accumulated deficit (1,018,633)
Total stockholders' deficit (355,657)
$ 445,677
The accompanying Notes are an integral part of the consolidated
financial statements.
3
Global Online India, Inc.
(A Majority Owned Subsidiary of USA Global Link, Inc.)
Consolidated Statements of Operations
(Unaudited)
Period
Three Six April 21, 2000
Months Months (Date of
Ended Ended Inception) to
June 30, June 30, June 30,
2001 2001 2000
Revenues $ 9,410 $ 159,700
Cost of revenues 7,652 139,692
Gross loss 1,758 20,008
Operating expense:
General and administrative 132,663 235,325 $ 187,986
Net loss from operations (130,905) (215,317) (187,986)
Other income (expense):
Interest expense (1,752) (3,454)
Interest income 36
Net loss $ (132,657) $ (218,771) $ (187,950)
Net loss per common share $ (.00) $ (.00) $ (.01)
Weighted average common shares outstanding 50,005,655 50,005,655 15,750,000
The accompanying Notes are an integral part of the consolidated
financial statements.
4
Global Online India, Inc.
(A Majority Owned Subsidiary of USA Global Link, Inc.)
Consolidated Statement of Changes in Stockholders' Deficit
Six Months Ended June 30, 2001
(Unaudited)
Common Stock
Shares Additional
Issued and Par Paid-In Accumulated
Outstanding Value Capital Deficit Total
Balance, December 31, 2000 50,005,655 $ 500,057 $ 162,919 $ (799,862) $ (136,886)
Net loss for the period (218,771) (218,771)
Balance, June 30, 2001 50,005,655 $ 500,057 $ 162,919 $(1,018,633) $ (355,657)
The accompanying Notes are an integral part of the consolidated
financial statements.
5
Global Online India, Inc.
(A Majority Owned Subsidiary of USA Global Link, Inc.)
Consolidated Statement of Cash Flows
(Unaudited)
Period
April 21,
Six Months 2000) Date of
Ended Inception) to
June 30, June 30,
2001 2000
Operating activities
Net loss $ (218,771) $ (187,950)
Adjustments to reconcile net loss to net cash
(used) provided by operating activities:
Depreciation and amortization 44,931 4,833
Expenses paid by parent in exchange for
common stock 183,153
(Increase) decrease in:
Accounts receivable 97,577
Internet domain names (80)
Accrued expenses (2,952)
Total adjustments 139,476 187,986
Net cash (used) provided by operating activities (79,295) 36
Investing activities
Deposit (2,733)
Financing activities
Increase in payable to USA Global Link, Inc. 72,184
Issuance of common stock for cash 9,998
Payments on capital lease obligation (12,458)
Net cash provided by financing activities 59,726 9,998
Net (decrease) increase in cash (22,302) 10,034
Cash at beginning of period 24,013
Cash at end of period $ 1,711 $ 10,034
Supplemental disclosures of cash flow information and
noncash financing activities:
Common stock was issued for the following noncash
considerations during May 2000:
Fixed asset $ 15,178
Assets under capital lease 101,468
Obligations under capital lease (83,571)
Capitalized software development costs 90,887
Internet domain names 7,135
Common stock of Parent 5
$ 131,102
The accompanying Notes are an integral part of the consolidated
financial statements.
6
Global Online India, Inc.
(A Majority Owned Subsidiary of USA Global Link, Inc.)
Notes to Consolidated Financial Statements
Three and Six Months Ended June 30, 2001 (Unaudited) and
Period April 21, 2000 (Date of Inception) to June 30, 2000
(Unaudited)
1. Consolidated Financial Statements
In the opinion of management, all adjustments consisting only of
normal recurring adjustments necessary for a fair statement of
(a) the results of operations for the three- and six-month
periods ended June 30, 2001 and the period April 21, 2000 to June
30, 2000, (b) the financial position at June 30, 2001, and (c)
cash flows for the six-month period ended June 30, 2001 and the
period April 21, 2000 to June 30, 2000, have been made.
The unaudited consolidated financial statements and notes are
presented as permitted by
Form 10-QSB. Accordingly, certain information and note
disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted
accounting principles have been omitted. The accompanying
consolidated financial statements and notes should be read in
conjunction with the audited consolidated financial statements
and notes of the Company for the fiscal year ended December 31,
2000. The results of operations for the six-month period ended
June 30, 2001 are not necessarily indicative of those to be
expected for the entire year.
Prior to January 1, 2001, the Company's activities were
principally the development of
e-commerce and telephony services, Internet access, and network
services to residential and business customers in India and
abroad. The Company had been relying on the borrowing of funds
from USA Global Link, Inc. rather than recurring revenues for its
primary source of cash flow. Accordingly, the Company's
consolidated financial statements for all periods prior to
January 1, 2001 were presented as a development stage enterprise,
as prescribed by Statement of Financial Accounting Standards No.
7, "Accounting and Reporting by Development Stage Enterprises."
During the six months ended June 30, 2001, the Company began to
generate recurring revenues and, as a result, has exited the
development stage.
2. Going Concern
The accompanying consolidated financial statements have been
prepared assuming the Company will continue as a going concern.
Although the Company has positive working capital of
approximately $272,000 at June 30, 2001, it has sustained losses
since inception and its liabilities exceed its assets by
approximately $356,000 as of June 30, 2001. In addition, the
Company received notice on May 2, 2001 that USA Global Link,
Inc., the Company's majority stockholder, will no longer fund the
Company's operations. Previous to May 2, 2001, the Company had
been dependent on USA Global Link, Inc. for its operating funds.
These factors raise substantial doubt about the Company's ability
to continue as a going concern. The consolidated financial
statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary
in the event the Company cannot continue in existence.
7
The Company's continued existence is dependent on its ability to
immediately obtain capital to meet cash flow requirements.
Management is presently exploring business opportunities, such as
a merger with or acquisition by another business entity, but
there can be no guarantee that these will be successful.
3. Contingencies
On January 26, 2001, the Company was served notice of a complaint
filed in the Third Judicial District Court in Salt Lake County by
Robert Gosman and Double B Investments regarding certain claims
made against the Company. As more fully described in Note 3 of
the consolidated financial statements filed with the Company's
March 31, 2001 Form 10-QSB, legal counsel for the guarantors
under this Agreement has informed the Company that they have
reached an agreement with the Plaintiffs for the settlement of
this lawsuit without cost to the Company.
4. Subsequent Events
Pursuant to the Agreement and Plan of Reorganization signed
between the Registrant and USA Global Link, Inc. on June 12, 2000
(the "Agreement"), USA Global Link instructed the Registrant's
transfer agent on July 26, 2001 to transfer 24,097,500 shares of
USA Global Link's common stock (51% of the shares USA Global Link
received in the Agreement) to Maharishi Education Corporation
Private Limited ("MECPL"), a New Delhi company and majority owner
of GOL India ISP Private Limited, to be exchanged for 51% of the
stock of GOL India ISP Private Limited, a New Delhi company,
which is 49% owned by the Registrant. This transfer fully
extinguishes USA Global Link's obligation to GOL India.com, Inc.
and does not modify or dilute the rights of the Registrant's
securities holders. Prakash Srivastava, Vice Chairman and
Director of the Registrant, is also a director of MECPL.
Pursuant to a prior commitment made between USA Global Link and
Christopher W. Hartnett, Founder and Chairman of USA Global Link,
USA Global Link instructed the Registrant's transfer agent on
August 8, 2001 to transfer 11,858,316 shares of USA Global Link's
common stock (51% of the Registrant's shares owned by USA Global
Link on that date) to Christopher W. Hartnett. This transfer
does not modify or dilute the rights of the Registrant's
securities holders.
As a result of the above transfers, MECPL owns 24,097,500 shares,
Christopher W. Hartnett will own 11,871,516 shares, and USA
Global Link will own 11,393,234 shares of the Registrant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The following discussion and analysis should be read in
conjunction with the selected consolidated financial information,
the consolidated financial statements and notes, and the
information contained in Part II, Item 5 "Other Information",
appearing elsewhere in this Form 10-QSB.
8
This Report may contain "forward-looking" statements. The
Registrant is including this cautionary statement for the express
purpose of availing itself of the protections of the safe harbor
provided by the Private Securities Litigation Reform Act of 1995
with respect to all such forward-looking statements. Examples of
forward-looking statements include, but are not limited to: (a)
projections of revenues, capital expenditures, growth, prospects,
dividends, capital structure and other financial matters; (b)
statements of plans and objectives of the Registrant, its
management or Board of Directors; (c) statements of future
economic performance; (d) statements of assumptions underlying
other statements and statements about the Registrant and its
business relating to the future; and (e) any statements using the
words "anticipate," "expect," "may," "project," "intend" or
similar expressions.
The Registrant has an authorized 80,000,000 shares of Common
Stock at a par value of $.01 and 10,000,000 Preferred Stock at a
par value of $1.00.
The Registrant filed with the Securities and Exchange Commission
a Form 8-K on May 2, 2001, informing shareholders that it had
received notice from its majority shareholder, USA Global Link,
Inc., that the majority shareholder is no longer in a financial
position to fund the ongoing operating expenses of the
Registrant. A press release notifying the public of this notice
was also issued by the Registrant on this date. Other important
information related to the Registrant's current operational and
financial status is contained below.
Results of Operations
The Registrant filed a 10-QSB for the period ending June 30, 2000
on August 17, 2000. This quarterly report, filed under the name
ENG Enterprises, Inc., stated that for the reporting period ENG
Enterprises, Inc. "had no assets or capital, with no operations
or income since approximately 1995". We will therefore not
attempt to analyze the Registrant's present performance by
comparing the second quarter 2000 report to performance in the
present reporting period as this would be misleading. Rather, we
will state the results of operations for the current quarter
only.
Balance Sheet
For this reporting period, the Registrant had total assets of
$445,677, including current assets of $1,711 in cash, $321,211 of
accounts receivable, $53,860 of property and equipment, and other
assets consisting of $60,991 of software development costs,
$5,166 of Internet domain names, $5 of investments representing
5,000 shares in common stock of USA Global Link, Inc. with a par
value of $0.01, and $2,733 of deposits.
The Registrant has current and long-term liabilities of $801,334
consisting of an intercompany payable to USA Global Link, Inc. of
$750,644 incurred by the Registrant in operating expenses such as
salaries, consulting fees, and marketing costs, $518 of accrued
expenses for various services, and $50,172 of current portion of
obligations under capital lease for computer equipment.
9
The Registrant has a stockholders' deficit of $335,657 consisting
of $500,057 in common stock (50,005,655 shares at a par value of
$0.01), $162,919 in additional paid-in capital, and $1,018,633 in
current accumulated deficit. Total liabilities and equity equal
$445,677.
Statements of Operations
Revenues in the quarter total $9,410. Cost of revenues was
$7,652 for the same period. Operating expenses were incurred
throughout the quarter and totaled $132,663, with net loss from
operations totaling $130,905. Interest expense totaled $1,752
related to web servers and peripheral computer equipment. Net
loss was $132,657 for the quarter. In the opinion of management,
inflation has not had a material effect on the operations of the
Registrant.
Subsequent Events
See below Part II, Item 2 "Changes in Securities" and Item 5
"Other Information".
Plan of Operations
The following discussion of the Registrant's Plan of Operations
should be read in conjunction with information contained in Part
II, Item 5 "Other Information" appearing elsewhere in this Form
10-QSB.
The Registrant began operations of its online e-commerce services
for Indian residential and business customers and for the Indian
expatriate population at its web site "www.GOLIndia.com" in
August 2000. The economic environment in which the Registrant
began operations was a difficult one, with many Internet-related
companies in financial distress or going out of business. In
that milieu, domestic and international financial markets became
increasingly constrained, and many companies had difficulty
raising the funds needed to maintain their businesses, forcing
them into bankruptcy. The Registrant has not been immune to
these overwhelming and pervasive industry trends.
Moreover, as stated above, the Registrant received notice on May
2, 2001 from its majority shareholder, USA Global Link, Inc.,
that the majority shareholder was no longer in a financial
position to support or fund the ongoing operating expenses of the
Registrant. As a result of this action, the positions of the
Registrant's three employees, whose salaries were being paid by
USA Global Link, were canceled and other cost saving measures
were immediately implemented. Little or no revenue has been
generated since that date, and all business activities other than
those described below and those related to maintaining the
Registrant's public compliance have ceased.
USA Global Link had funded the operations of the Registrant since
July 14, 2000, and the Registrant has been fully dependent on its
majority shareholder for all its operating funds and
administrative support. As stated in the Registrant's previous
Form 10-QSB filed on May 15, 2001, the Registrant needed an
immediate infusion of capital to continue its business. As a
result of being unable to secure such funding, the Registrant
cannot execute its business plan, implement any contract or
network expansion, or continue operations.
10
The only alternative available to the Registrant for continuing
in business is the possible, but highly unlikely, participation
in some form of business combination within the next 90 days. If
such a business combination is unattainable for any reason, the
Registrant will be forced to cease business entirely. The
Registrant's Board of Directors and officers are expected to
resign prior to or at that time.
Management will not restrict its search for a business
opportunity to any particular industry or geographical area and
may, therefore, seek an opportunity in an unrelated business or
industry. Management has unrestricted discretion in seeking and
participating in a business opportunity, subject to the
availability of such opportunities, economic conditions, and
other factors.
The selection of a business opportunity in which to participate
is complex and risky. Additionally, as the Registrant has only
limited time and resources, it may be difficult to find worthy or
acceptable opportunities. There can be no assurance, therefore,
that the Registrant will be able to identify and participate in
any business opportunity which would ultimately prove beneficial
to its shareholders. The Registrant will select a potential
business opportunity based on management's due diligence and
business judgement.
The activities of the Registrant are subject to several
significant risks, which arise primarily from the fact that the
Registrant now has no specific business and may participate in a
business opportunity based on the decision of management which
could act without the consent, vote, or approval of the
Registrant's shareholders. Because the Registrant has few assets
and a limited recent operating history, in the event the
Registrant is successfully acquired or merged with another
business entity, it is possible that the Registrant's present
shareholders will experience substantial dilution and likely
there will be a change in control of the Registrant.
The Registrant is required to file with the Securities and
Exchange Commission certain interim and periodic reports and
forms, including an annual report containing audited financial
statements. Any acquisition or merger candidate will become
subject to the same reporting requirements as the Registrant upon
consummation of any such business combination. Thus, in the
event that the Registrant successfully completes a business
combination with another entity, the resulting combined business
must provide audited financial statements for at least the two
most recent fiscal years. In the event that the combined
operating business has been in business less than two years,
audited financial statements will be required from the period of
inception of the acquisition or merger candidate.
The Registrant has already explored a wide range of potential
business opportunities, including investment banks, venture
capitalists and others who have presented management with
unsolicited or solicited proposals. Management will continue to
investigate such proposals, but cannot predict at this time the
status or nature of any venture in which the Registrant may
participate. The Registrant will provide its shareholders with
information regarding the definitive terms of any proposed
acquisition or merger as may be required for approval of the
transaction(s). The investigation of specific business
opportunities and the negotiation, drafting, and execution of
relevant agreements, disclosure documents, and other instruments
will require management time and attention, and will require the
Registrant to incur costs for payment of accountants, attorneys,
and others.
11
Currently, management is not able to determine the time or
resources that will be necessary to complete the participation of
any future business combination. There can be no assurance,
therefore, that the Registrant will be able to successfully
participate in any business combination that may exist or that
any activity of the Registrant, regardless of the completion of
any participation in a business combination, will be either
advantageous or profitable in the future.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Registrant was not engaged in any legal proceeding during
this reporting period other than the following. On January 26,
2001, the Registrant was served notice of a complaint filed in
the Third Judicial District Court in Salt Lake County by Robert
Gosman and Double B Investments regarding certain claims made
against the Registrant. Gosman and Double B Investments allege
that certain promises made by a former Director of ENG
Enterprises, Inc. to certain shareholders at the time they
converted their Preferred B shares have been broken, and that the
present Registrant is in some way liable. The Registrant intends
to contest these allegations forcefully, however the extent of
potential costs to defend this action and/or any adverse
settlements against the Registrant are as yet unknown. The
Agreement and Plan of Reorganization signed on June 12, 2000
between the Registrant and GOL India.com, Inc. indemnifies the
Registrant against such potential actions. Legal counsel for the
guarantors under this Agreement has informed the Registrant that
they have reached an agreement with the Plaintiffs for the
settlement of this lawsuit without cost to the Registrant.
ITEM 2. CHANGES IN SECURITIES
Pursuant to the Agreement and Plan of Reorganization signed
between the Registrant and USA Global Link, Inc. on June 12, 2000
(the "Agreement"), USA Global Link instructed the Registrant's
transfer agent on July 26, 2001 to transfer 24,097,500 shares of
USA Global Link's common stock (51% of the shares USA Global Link
received in the Agreement) to Maharishi Education Corporation
Private Limited ("MECPL"), a New Delhi company and majority owner
of GOL India ISP Private Limited, to be exchanged for 51% of the
stock of GOL India ISP Private Limited, a New Delhi company,
which is 49% owned by the Registrant. This transfer fully
extinguishes USA Global Link's obligation to GOL India.com, Inc.
and does not modify or dilute the rights of the Registrant's
securities holders. Prakash Srivastava, Vice Chairman and
Director of the Registrant, is also a director of MECPL.
Pursuant to a prior commitment made between USA Global Link and
Christopher W. Hartnett, Founder and Chairman of USA Global Link,
USA Global Link instructed the Registrant's transfer agent on
August 8, 2001 to transfer 11,858,316 shares of USA Global Link's
common stock (51% of the Registrant's shares owned by USA Global
Link on that date) to Christopher W. Hartnett. This transfer
does not modify or dilute the rights of the Registrant's
securities holders.
As a result of the above transfers, MECPL owns 24,097,500 shares,
Christopher W. Hartnett will own 11,871,516 shares, and USA
Global Link will own 11,393,234 shares of the Registrant.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
Despite repeated attempts between June 1 and July 30, 2001, Iowa
Telecom, the Registrant's local service provider, has been unable
or unwilling to re-direct the Registrant's primary phone and fax
numbers to a new office location. As a result, existing or
potential customers, investors and suppliers may have had
difficulty contacting the Registrant during this period, despite
the Registrant having multiple operable in-bound lines. As a
result of these difficulties and the anticipated closing of the
Registrant's current office, the Registrant has changed its
primary phone number from 641-472-1550 to 828-264-2793.
The Registrant has changed its business address from 50 North
Third Street, Fairfield, Iowa 52556 to 351 Whispering Hills Road,
Boone, North Carolina 28607.
As a result of personnel changes and network service difficulties
related to Distributed Denial of Service ("DdoS") attacks, the
Registrant's web site and e-mail service have experienced
sporadic, and sometimes extended, outages making it difficult to
interact with existing or potential customers, investors, and
suppliers. Orchestrated DDoS attacks continue to be a problem
for the Registrant's web site, but preventive measures are being
taken.
The Registrant was notified on August 8, 2001, that most of the
officers and directors of USA Global Link, Inc., the Registrant's
former majority shareholder, have resigned their positions.
On July 18, 2001, the Board of Directors of the Registrant
convened. At this meeting officers and directors were slated for
re-election. As a result, director William M. Gruzynski was
replaced by Sam Katz.
This information is being provided in lieu of a separate report
on Form 8-K and will not be filed in a subsequent report on Form
10-QSB.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Registrant filed with the Securities and Exchange Commission
a Form 8-K on May 2, 2001, informing shareholders it had received
notice from its majority shareholder, USA Global Link, Inc., and
that the majority shareholder was no longer in a financial
position to fund the ongoing operating expenses of the
Registrant. This Form 8-K filing is fully incorporated by
reference into this 10-QSB filing. A press release notifying the
public of this notice was also issued by the Registrant on this
date, and is fully incorporated by reference into this 10-QSB
filing.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GLOBAL ONLINE INDIA, INC.
Dated: August 14, 2001
By: /S/ Lee Fergusson, President
14