UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 30549
FORM 10-QSB
(MarkOne)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
of 1934
For the quarterly period ended June 30, 2002
[ ] TRANSACTION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
---------- ------------
Commission file number: 0-28363
-------
SBS Interactive Co.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 59-28363
------------------------------ -------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
37 Prince Arthur Avenue, Suite 300, Toronto, Ontario, M5R 1E2, Canada
---------------------------------------------------------------------
(Address of principal executive offices)
(416) 961-1409
---------------------------
(Issuer's telephone number)
Inet Commerce Conduit Corporation
615 Mount Pleasant Road, Suite 318, Toronto, Ontario, Canada M453C5
(416) 216-4623
-------------------------------------------------------------------
(Former name, former address and former fiscal year
(if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a Court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of each of the issuer's classes of common
equity, as of August 5, 2002 was 7,017,200 shares of common stock.
Transitional Small Business Disclosure Format (Check one): Yes [X] No [ ]
INDEX
Page
Number
------
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets as of June 30, 2002
and December 31, 2001 3
Condensed Statements of Loss for Three Months
Ended June 30, 2002 and June 30, 2001,
Six Months Ended June 30, 2002 and June 30, 2001
and Since Inception 4
Condensed Statements of Cash Flows for Six
Months Ended June 30, 2002 and June 30, 2001
and Since Inception 5
Notes to Condensed Financial Statements 6
Item 2. Plan of Operation 10
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults in Senior Securities 12
Item 4. Submission of Matters to a Vote of Securities Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
-2-
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- -----------------------------
Inet Commerce Conduit Corp.
Condensed Balance Sheets
(A Development Stage Company)
(Unaudited)
06/30/2002 12/31/2001
---------- ----------
ASSETS
Cash $ 75,222 $ 107,721
Deposits 6,974 6,974
---------- ----------
TOTAL ASSETS $ $82,196 $ 114,695
========== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts Payable $ 294 $ 8,723
---------- ----------
TOTAL LIABILITIES $ 294 $ 8,723
STOCKHOLDERS' EQUITY
Common stock - par value $.001,
authorized 50,000,000 shares;
issued and outstanding
7,017,200 shares. 7,017 7,017
Additional Paid-in Capital 4,183,143 4,183,143
Accumulated Deficit (4,108,258) (4,084,188)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 81,902 105,972
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 82,196 $ 114,695
========== ==========
-3-
Inet Commerce Conduit Corp.
Condensed Statements of Loss
(A Development Stage Company)
(Unaudited)
-------------------------------------------------------------------------
Three Months Six Months Since
Inception
-------------------------------------------------------------------------
6/30/02 6/30/01 6/30/02 6/30/01
REVENUES:
INTEREST INCOME $ 2,238
--------- --------- --------- --------- -----------
TOTAL REVENUES $ 0 $ 0 $ 0 $ 0 $ 2,238
EXPENSES
DEVELOPMENT STAGE EXPENSES (7,972) (11,759) (24,070) (26,050) (4,110,496)
--------- --------- --------- --------- -----------
NET LOSS $ (7,972) $ (11,759) $ (24,070) $ (26,050) $(4,108,258)
========= ========= ========= ========= ===========
Loss per common share:
Basic Earnings per share $ (.01) $ (.01) $ (.01) $ (.01)
========= ========= ========= =========
Weighted average shares
Outstanding 7,017,200 6,517,200 7,017,200 6,517,200
========= ========= ========= =========
-4-
Inet Commerce Conduit Corp.
Condensed Statements of Cash Flows
(A Development Stage Company)
(Unaudited)
----------------------------- -----------
Since
For the Six Months Ended Inception
----------------------------- -----------
6/30/2002 6/30/2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Interest Received $ 2,238
Cash Paid for Operating Expenditures $(32,499) $(26,950) (234,204)
NET CASH UTILIZED BY -------- -------- ----------
OPERATING ACTIVITIES: (32,499) (26,950) (231,966)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock - - 315,160
NET CASH PROVIDED BY -------- -------- ----------
FINANCING ACTIVITIES: - - 315,160
NET INCREASE (DECREASE) IN CASH (32,499) (26,950) 83,194
CASH & EQUIVALENTS AT JANUARY 1, 107,721 166,689 -
-------- -------- ----------
CASH & EQUIVALENTS AT JUNE 30, $ 75,222 $139,739 $ 83,194
======== ======== ==========
Reconciliation of excess revenues over expenses
to net cash provided (used) by operating activities:
Net Loss (24,070) (26,050) (4,108,258)
Adjustments to reconcile excess revenues
over expenses to net cash provided (used)
by operating activities:
Stock issued for services 3,875,000
Deposits (6,974)
Accounts Payable (8,429) (900) 294
-------- -------- ----------
Net Cash Provided (Utilized) by
Operating Activities $(32,499) $(26,950) $ (239,938)
======== ======== ==========
Non-cash transactions
Stock issued for services 11-30-2001 0 0 3,875,000
======== ======== ==========
-5-
Inet Commerce Conduit Corp.
A Development Stage Company)
Notes to the Condensed Financial Statements
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with Article 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. All adjustments which,
in the opinion of management, are considered necessary for a fair presentation
of the results of operations for the periods shown are of a normal recurring
nature and have been reflected in the unaudited condensed financial statements.
The results of operations for the periods presented are not necessarily
indicative of the results expected for the full fiscal year or for any future
period. The information included in these unaudited condensed financial
statements should be read in conjunction with Plan of Operation and Results of
Operations contained in this report and the financial statements and
accompanying notes included in the Inet Commerce Conduit Corp. (the "Company")
Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
BUSINESS AND ORGANIZATION
Inet Commerce Conduit Corp. (the "Company"), a development stage company, was
incorporated in the State of Florida on September 20, 1996 as Cosmetics
Consultants Corp. for the purpose of marketing sales and support services to
retailers of cosmetic companies. In November of 1999 the Company changed its
activities to acting as a consultant to internet related enterprises that are
seeking capital.
On November 25, 1996, Cosmetics Consultants Corp. changed its name to Lomillo
Consultants Corp.
On July 17, 1997, the Company amended and restated its articles of incorporation
and changed its name to Inet Commerce Conduit Corp.
On July 30, 2002, the Company amended and restated its articles of incorporation
and changed its name to SBS Interactive, Co. (See Note 9 - SUBSEQUENT EVENTS)
DEVELOPMENT STAGE
The Company has operated as a development stage enterprise since its inception
by devoting substantially all its efforts to the ongoing development of the
Company.
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a calendar year end of December 31.
LOSS PER SHARE
The computation of loss per share of common stock is based upon the weighted
average common shares outstanding during each period.
-6-
NOTE 2 - DEPOSITS
This represents an amount deposited on November 15, 1999 (and subsequent
interest earned) with a bank for a secured corporate credit card with a credit
limit of $5,000. The deposit can be returned at any time provided the request is
made in writing and there is no balance outstanding on the account. Should any
balance be outstanding, the deposit would be applied against the balance due and
the remainder would be refunded to the Company. As of June 30, 2002 and 2001 the
balance due on the card was $0.
NOTE 3 - STOCKHOLDER'S EQUITY
The Company had the following classes of capital stock as of June 30, 2002 and
December 31, 2001:
Common stock, $0.001 par value; authorized 50,000,000 shares; issued and
outstanding 7,017,200 shares at June 30, 2002 and December 31, 2001.
NOTE 4 - ADVERTISING
The Company conducts nondirect response advertising for the promotion of its
products. These costs are expensed as incurred. Advertising costs for the
periods ended June 30, 2002 and 2001 were $1,825 and $0 respectively.
NOTE 5 - GOING CONCERN
The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has no current source of revenue. Without
realization of additional capital, it would be unlikely for the Company to
continue as a going concern. It is management's intention to seek additional
capital through a merger with an existing operating company and raising capital.
(See Note 9 - SUBSEQUENT EVENTS)
NOTE 6 - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At June 30, 2002, the
Company had federal net operating losses (NOL) of approximately $4,108,258. The
NOL expires during the years 2016 through 2021. In the event of a change in
ownership of the Company, the utilization of the NOL carryforward will be
subject to limitation under certain provisions of the Internal Revenue Code.
Realization of any portion of the approximate $1,396,808 deferred federal tax
asset at June 30, 2002, resulting from the utilization of the NOL, is considered
more likely than not by management; accordingly, a valuation of allowance has
been established for the full amount of such asset.
The reconciliation of income tax benefit computed at the United States federal
tax rate of 34% to income tax benefit is as follows:
Six Months ended June 30, 2002 2001
Tax benefit at the United States
Statutory rate $ 3,998 $ 8,857
State income tax benefit, net (200) (443)
Valuation allowance adjustment (3,798) (8,414)
------- -------
Income tax benefit $ 0 $ 0
======= =======
-7-
Significant components of the Company's deferred tax liabilities and assets at
June 30, 2002 and 2001 are as follows:
Deferred tax assets:
Net operating loss carryforwards $ 1,396,808 $ 57,438
Valuation allowance for deferred
Tax assets (1,396,808) (57,438)
----------- --------
Income tax benefit $ 0 $ 0
=========== ========
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company neither owns or leases any real property. Fees totaling $4000 and
$1,950 have been paid to officers and companies owned by shareholders during the
periods ended June 30, 2002 and 2001 for administrative fees, consulting
services rendered and, expenses paid on behalf of the Company. The officers and
directors of the Company are involved in other business activities and may, in
the future, become involved in other business opportunities.
NOTE 8 - OPERATING LEASE
The Company conducts its operations from leased facilities, under operating
leases on a month-to-month basis, which can be terminated by either party upon
giving notice 30 days in advance.
Lease rent expense for the periods ended June 30, 2002 and 2001 amounted to
$1,950 and $0. At June 30, 2002, future minimum lease payments and rent usage
tax were $0.
NOTE 9 - SUBSEQUENT EVENTS
On July 30, 2002, the Company amended and restated its articles of incorporation
and changed its name to SBS Interactive, Co.
From September of 1999 to the present, the Company initiated and conducted
operations as a consultant to Internet-related entertainments seeking capital.
Due to a lack of any meaningful response to these efforts, the Company concluded
to put these consulting efforts on hold and is in the process of closing its
consulting Internet offices. The Company has entered into arrangements for a
business Combination in which it will acquire 100% ownership of SBS Interactive,
Inc., a Nevada corporation ("Interactive") in exchange for approximately
3,181,000 shares of common stock to be issued to the stockholders of
Interactive. The Company has concluded to concentrate its operations on
attempting to raise capital to fund and operate the business of Interactive as a
consumer electronics company focused on developing, marketing and licensing
products that enable the consumers to use their televisions as an interactive
medium.
On July 16, 2002, Interactive, the Company and SBS Acquisition, Inc., a Nevada
corporation and a wholly owned subsidiary of the Company executed and entered
into a "Merger Agreement". The Merger Agreement, if closed pursuant to its
terms, provides for the Business Combination in which Interactive will become a
wholly owned subsidiary of the Company and the present stockholders of
Interactive will become shareholders of the Company. The Merger Agreement
provides that upon its "Effective Time":
Acquisition will be merged into Interactive which will be the surviving
corporation in the merger;
The 20,676,000 shares of the common stock of Interactive outstanding immediately
prior to the Effective Time shall be cancelled and the holders of that stock
shall become shareholders of the Company with each 6.5 aforementiond shares of
Interactive stock becoming 1 share of the Company's common stock (no fractional
-8-
shares of the Company's shares will be issued and each Interactive shareholder
entitled to a fractional share will be issued a whole share therefor);
Approximately 3,181,000 shares will be issued by the company.
Interactive will 1,000 shares of new common stock to the Company and thus become
a wholly owned subsidiary of the Company.
The Board of Directors and officers of the Company will be reorganized and the
following will constitute its directors and officers:
Name Position(s)
---- -----------
Todd Gotlieb President and Director
Barry Alter Secretary and Director
The Business Combination is designed to constitute a "non-taxable" transaction
under U.S. and Canadian tax laws; however, the parties have not obtained any tax
ruling or opinion on its tax status and the shareholders of Interactive are
advised and cautioned to seek their own tax advice and counsel on this issue;
The stock of the Company being issued to the Interactive shareholders is: (i)
being issued pursuant to exemptions for the registration requirements of the
Securities Act of 1933 ("Securities Act") provided in Rule 506 of Regulation D
and/or Regulation S adopted under the Securities Act; (ii) "restricted
securities" as defined under the Securities Act; and (iii) subject to
restrictions on their future transferability and/or sale.
The Merger Agreement has been approved by the Boards of Directors of the
Company, Interactive and Acquisition and the shareholders of Acquisition and
Interactive. Accordingly it is presently planned that the Business Combination
will be completed approximately 30 days after the mailing of the Disclosure
Statement to the interactive shareholders by the filing of Articles of Merger
with the State of Nevada. Under Nevada law, the shareholders of Interactive have
a right to dissent and receive payment of the "fair value" on the holders'
Interactive stock immediately prior to the Business Combination. The Merger
Agreement provides that if the holders of more than 10% of Interactive's
outstanding common stock dissent from the merger, the Company may terminate the
transaction.
-9-
Item 2. Plan of Operation
- ------- -----------------
SBS Interactive, Co. ("Company" or "Issuer") was formed as a Florida
corporation named "Cosmetics Consultation Corporation" on September 20, 1996.
Its name was changed to "Lomillo Consulting Corp." on November 25, 1996 and then
to "Inet Commerce Conduit Corp." on July 17, 1997. On July 30, 2002, the Company
changed its name to "SBS Interactive, Co." in anticipation of the completion of
the Business Combination hereinafter described. From September of 1999 to the
present, the Company initiated and conducted operations as a consultant to
Internet-related entertainments seeking capital. Due to a lack of any meaningful
response to these efforts, the Company concluded to put these consulting efforts
on hold and is in the process of closing its consulting Internet offices. The
Company has entered into arrangements for a business Combination in which it
will acquire 100% ownership of SBS Interactive, Inc., a Nevada corporation
("Interactive") in exchange for approximately 3,190,000 shares of common stock
to be issued to the stockholders of Interactive. The Company has concluded to
concentrate its operations on attempting to raise capital to fund and operate
the business of Interactive as a consumer electronics company focused on
developing, marketing and licensing products that enable the consumers to use
their televisions as an interactive medium.
On July 22, 2002, Interactive, the Company and SBS Acquisition, Inc., a
Nevada corporation and a wholly owned subsidiary of the Company executed and
entered into a "Merger Agreement". The Merger Agreement, if closed pursuant to
its terms, provides for the Business Combination in which Interactive will
become a wholly owned subsidiary of the Company and the present stockholders of
Interactive will become shareholders of the Company. The Merger Agreement
provides that upon its "Effective Time":
o Acquisition will be merged into Interactive which will be the
surviving corporation in the merger;
o The 20,676,000 shares of the common stock of Interactive outstanding
immediately prior to the Effective Time shall be canceled and the
holders of that stock shall become shareholders of the Company with
each 6.5 old shares of Interactive stock becoming 1 share of the
Company's common stock (no fractional shares of the Company's shares
will be issued and each Interactive shareholder entitled to a
fractional share will be issued a whole share therefor). Approximately
3,181,000 shares will be issued by the Company in the transaction;
o Interactive will issue 1,000 shares of the new common stock to the
Company and thus will a wholly-owned subsidiary of the Company;
o The Board of Directors and officers of the Company will be reorganized
and the following will constitute its directors and officers:
Name Position(s)
---- -----------
Todd Gotlieb President and Director
Barry Alter Secretary and Director;
o The Business Combination is designed to constitute a "non-taxable"
transaction under U.S. and Canadian tax laws; however, the parties
have not obtained any tax ruling or opinion on its tax status and the
shareholders of Interactive are advised and cautioned to seek their
own tax advice and counsel on this issue;
-10-
o The stock of the Company being issued to the Interactive shareholders
is: (i) being issued pursuant to exemptions for the registration
requirements of the Securities Act of 1933 ("Securities Act") provided
in Rule 506 of Regulation D and/or Regulation S adopted under the
Securities Act; (ii) "restricted securities" as defined under the
Securities Act; and (iii) subject to restrictions on their future
transferability and/or sale.
The Merger Agreement has been approved by the Boards of Directors of the
Company, Interactive and Acquisition and the shareholders of Acquisition and
Interactive. Accordingly it is presently planned that the Business Combination
will be completed approximately 30 days after the mailing information required
by Nevada law to the Interactive shareholders by the filing of Articles of
Merger with the State of Nevada. Under Nevada law, the shareholders of
Interactive have a right to dissent and receive payment of the "fair value" on
the holders' Interactive stock immediately prior to the Business Combination.
The Merger Agreement provides that if the holders of more than 10% of
Interactive's outstanding common stock dissent from the merger, the Company may
terminate the transaction.
A copy of the Merger Agreement is filed with this Form 10-QSB Report as an
Exhibit 10(a).
If the Business Combination is completed, the Company will endeavor to
acquire a significant amount of additional equity capital to fund the
development and business operations of Interactive. This additional equity
capital would be acquired through the sale of restricted equity securities of
the Company in a "Private Placement" proposed to be made pursuant to an
exemption from the registration requirements of the Securities Act of 1933.
Although the Company and Interactive are aware of some potential investor
interest in the proposed Private Placement, there are no commitments or binding
arrangements for the acquisition of any additional capital nor any assurance
that such will become available to the Company or Interactive.
-11-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS IN SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBIT AND REPORTS ON FORM 8-K
(a) Exhibits:
10(a) Merger Agreement dated July 22, 2002 Between and
Among Inet Commerce Conduit Corporation, SBS
Interactive, Inc. and SBS Acquisition, Inc.
99.1 Certification Pursuant to Section 906 of the Sarbanes-
Oxley Act
(b) Form 8-Ks
No Reports of Form 8-K were filed during the three-month
period ended June 30, 2002.
-12-
SIGNATURES
----------
In accordance with the Exchange Act, the registrant caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
INET COMMERCE CONDUIT CORPORATION
Dated: August 12, 2002 By: /s/ Paul H. Stone
----------------------------------------
Paul H. Stone, President and Principal
Executive, Financial and Accounting
Officer and Sole Director
-13-