U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the Quarterly Period Ended July 31, 2002
Commission file number 000-49896
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DOWNSIDE UP, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1493159
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7899 West Frost Drive, Littleton, Colorado 80128
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(Address of principal executive offices) (Zip Code)
303-979-3224
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(Issuer's telephone number)
Not applicable
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(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
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
As of July 31, 2002, 1,230,000 shares of common stock, no par value, were
outstanding.
INDEX
Page
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PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheet, July 31, 2002 (Unaudited)...................3
Condensed statements of operations (Unaudited) - Three months ended
July 31, 2002 and 2001, and for the period from April 9, 1998
(inception) through July 31, 2002..................................4
Condensed statements of cash flows (Unaudited) - Three months ended
July 31, 2002 and 2001, and for the period from April 9, 1998
(inception) through July 31, 2002..................................5
Notes to condensed financial statements (Unaudited)..................6
Item 2. Plan of operation...........................................7
PART II--OTHER INFORMATION................................................7
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
Signatures...........................................................8
Certifications.......................................................8
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DOWNSIDE UP, INC.
(A Development Stage Company)
Condensed Balance Sheet
July 31, 2002
(unaudited)
Assets
Current assets:
Cash..........................................................$ 185
Due from related party (Note 2)............................... 1,425
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$ 1,610
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Liabilities and Shareholders' Deficit
Accounts payable and accrued liabilities......................$ 1,987
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Total liabilities................................... 1,987
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Shareholders' deficit:
Common stock.................................................. 2,800
Additional paid-in capital.................................... 5,072
Retained earnings/accumulated deficit......................... (8,249)
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Total shareholders' deficit......................... (377)
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$ 1,610
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See accompanying notes to condensed financial statements
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DOWNSIDE UP, INC.
(A Development Stage Company)
Condensed Statements of Operations
(unaudited)
April 9, 1998
Three Months Ended (inception)
July 31, Through
------------------------------ July 31,
2002 2001 2002
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Costs and expenses:
Stock-based compensation
(Note 2):
Organization costs...........$ - $ - $ 500
Contributed rent (Note 2)...... 300 300 5,200
Other general and
administrative costs......... 653 - 2,665
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953 300 8,365
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Loss before income taxes and
interest income................ (953) (300) (8,365)
Interest income................ - - 116
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Loss before income
taxes................ (953) (300) (8,249)
Income tax provision (Note 3).... - - -
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Net loss...............$ (953) $ (300) $ (8,249)
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Basic and diluted loss per share.$ (0.00) $ (0.00)
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Weighted average common shares
outstanding.................... 1,230,000 1,230,000
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See accompanying notes to condensed financial statements
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DOWNSIDE UP, INC.
(A Development Stage Company)
Condensed Statements of Cash flows
(unaudited)
April 9, 1998
Three Months Ended (inception)
July 31, Through
------------------------------ July 31,
2002 2001 2002
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Net cash used in operating
activities.....................$ (351) $ - $ (3,598)
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Cash flows from financing
activities:
Advances from affiliate, net
(Note 2)..................... 351 - 1,425
Proceeds from sale of common... - - 2,300
Payments for offering costs.... - - (127)
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Net cash provided by
financing activities. 351 - 3,598
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Net change in cash and
cash equivalents..... - - -
Cash:
Beginning of period............ - - -
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End of period..................$ - $ - $ -
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes.................$ - $ - $ -
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Interest.....................$ - $ - $ -
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See accompanying notes to condensed financial statements
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DOWNSIDE UP, INC.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note 1: Basis of Presentation
The financial statements presented herein have been prepared by the Company in
accordance with the accounting policies in its audited financial statements
for the year ended April 30, 2002 as filed in its Form 10-KSB and should be
read in conjunction with the notes thereto. The Company entered the
development stage in accordance with Statement of Financial Accounting
Standard ("SFAS") No. 7 on April 9, 1998 and its purpose is to evaluate,
structure, and complete a merger with, or acquisition of, a privately owned
corporation.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim periods presented have been made. The
results of operations for the period presented are not necessarily indicative
of the results to be expected for the year.
Interim financial data presented herein are unaudited.
Note 2: Related Party Transactions
Corporate Management Services ("CMS") organized the Company in exchange for
1,000,000 shares of the Company's common stock. The common stock was valued
at $500 by the Company's Board of Directors. CMS may, from time to time,
advance to the Company any additional funds that the Company needs for
operating capital and for costs in connection with searching for or completing
an acquisition or merger.
CMS provides office space at no charge to the Company, on an as needed basis,
for all periods presented in the accompanying financial statements. The
Company's Board of Directors has valued this service at approximately $100 per
month, based on prevailing local market rates. The accompanying financial
statements include a charge to rent expense and a credit to paid-in capital of
$300, $300, and $5,200, respectively, for the three months ended July 31, 2002
and 2001, and the period from April 8, 1998 (inception) through July 31, 2002.
CMS paid certain administrative costs on behalf of the Company, on an as
needed basis, for all periods presented in the accompanying financial
statements. The costs, consisting of legal, accounting and filing fees, are
necessary for the Company to maintain its reporting status in conformity with
the provisions Securities and Exchange Act of 1934, as amended. At April 30,
2002 the CMS owed the Company $1,660 for the remaining balance of net proceeds
from the Company's common stock offering and accrued interest. During the
three months ended July 31, 2002 CMS paid an additional $351 in legal,
accounting, and general and administrative costs on behalf of the Company,
which resulted in a receivable from CMS at July 31, 2002 of $1,425. This
receivable is referred to as due from related party in the accompanying
condensed financial statements.
Note 3: Income Taxes
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". The Company
incurred net operating losses during the periods shown on the condensed
financial statements resulting in a deferred tax asset, which was fully
allowed for, therefore the net benefit and expense result in $-0- income
taxes.
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Part I--Item 2. Plan of Operation
The Company's plan of operation is to seek out, investigate, and pursue a
merger, acquisition, or other business combination with an entity desiring the
perceived benefits offered by the Company as a result of its having a class of
securities registered under the Exchange Act. There have been no revenues
from operations since formation, and none are anticipated prior to completing
a business combination. The Company has no full time employees,
incurs nominal rent and administrative expenses of $100 per month, and has no
other recurring operational expenses except professional fees incurred as
necessary. The Company's president continues to devote approximately ten (10)
hours per month, without compensation, to the affairs of the Company. The
Company does not anticipate raising any additional funds in the next twelve
(12) months, and has no present plans to acquire any assets or make any
investments prior to completing a business combination.
Part II--Other Information
Items 1 through 5
No response required.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
(b) Reports on Form 8-K
None
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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.
Downside Up, Inc.
Date: September 13, 2002 By: /s/ George G. Andrews
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George G. Andrews, President
CERTIFICATIONS
I, George G. Andrews, President and Chief Accounting Officer of Downside
Up, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Downside Up,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
Date: September 13, 2002
/s/ George G. Andrews
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George G. Andrews
President and Chief Accounting Officer
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