U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period ended December 31, 2000
Commission file number 000-26899
E FINANCIAL DEPOT.COM, INC.
(Name of Small Business Issuer in Its Charter)
Delaware 33-0809711
(State of Incorporation) (IRS Employer Identification No.)
1875 Century Park East Suite 150 Los Angeles, CA 90067
(Address of Principal Executive Offices)
(877) 739-3812
Issuer's Telephone Number
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: 23,741,760 shares of Common Stock
($.001 par value) as of December 31, 2000.
Transitional small business disclosure format: Yes [ ] No [X]
E FINANCIAL DEPOT.COM, INC.
Quarterly Report on Form 10-QSB for the
Quarterly Period Ending December 31, 2000
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet:
December 31, 2000
Consolidated Statements of Losses and Comprehensive Losses:
Three Months Ended December 31, 2000 and 1999
Nine Months Ended December 31, 2000 and 1999
Consolidated Statements of Cash Flows:
Nine Months Ended December 31, 2000 and 1999
Notes to Consolidated Financial Statements:
December 31, 2000
Item 2. Management's Discussion and Analysis of Financial Condition
and Results 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
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
December 31
2000
-------------
ASSETS (unaudited)
------ -------------
Current assets:
Cash and equivalents $ 94,935
Accounts receivable, less allowance for
doubtful accounts 808,452
Marketable securities available for sale 99,055
-------------
Total current assets 1,002,442
Property and equipment - at cost,
less accumulated depreciation 192,555
Other assets:
Note receivable 1,000,000
Goodwill and other intangible assets, net 17,028,732
Deposits and other assets 41,734
-------------
$ 19,265,463
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 1,526,388
Notes payable 761,636
-------------
Total current liabilities 2,288,024
Convertible debenture 3,120,885
Stockholders' equity:
Preferred stock -
Common stock 23,742
Additional paid-in capital 21,750,083
Retained earnings (deficiency) (7,862,044)
Unrealized gain or (loss) on securities
available-for-sale (55,227)
-------------
Total stockholders' equity 13,856,554
-------------
$ 19,265,463
=============
The accompanying notes are an integral part of these financial statements.
E FINANCIAL DEPOT.COM, INC. CONSOLIDATED STATEMENTS
OF LOSSES AND COMPREHENSIVE LOSSES
(UNAUDITED)
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
December 31, 2000 December 31, 1999 December 31, 2000 December 31, 1999
----------------- ----------------- ----------------- -----------------
Fee income, net $ 1,175,322 $ 317,631 $ 2,915,190 $ 1,027,563
Costs and expenses:
Selling, general and
administrative 3,644,513 584,832 10,758,909 971,981
Interest expense, net 75,555 - 204,071 -
Depreciation and amortization 186,435 3,520 419,181 3,520
----------------- ----------------- ----------------- -----------------
3,906,503 588,352 11,382,161 975,501
Operating income (loss) (2,731,181) (270,721) (8,466,971) 52,062
Realized gain or (loss) on
securities available for
sale, net - (60,870) 7,938 (38,753)
----------------- ----------------- ----------------- -----------------
Net (loss) before provision
for income tax (2,731,181) (331,591) (8,459,033) 13,309
Income tax (benefit) or
expense - (46,847) - 32,350
----------------- ----------------- ----------------- -----------------
Net Loss (2,731,181) (284,744) (8,459,033) (19,041)
================= ================= ================= =================
Other comprehensive income
(loss), net of tax:
Unrealized holding gains
(losses) on securities
available-for-sale arising
during the period, net - (27,095) (7,503) (27,095)
----------------- ----------------- ----------------- -----------------
Comprehensive Loss $ (2,731,181) $ (311,835) $ (8,466,536) $ (46,136)
================= ================= ================= =================
Net loss per common share
(basic and assuming dilution) $ (.13) $ (.02) $ (.47) $ (.00)
================= ================= ================= =================
Weighted average common
shares outstanding* 20,659,179 12,500,000 18,162,775 12,500,000
*Restated to reflect re-capitalization in September, 1999
The accompanying notes are an integral part of these financial statements.
E FINANCIAL DEPOT.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Nine For the Nine
Months Ended Months Ended
December 31, 2000 December 31, 1999
----------------- -----------------
Cash flows from operating activities:
Net income (loss) from operating activities $ (8,459,033) $ (19,041)
Adjustments to reconcile net income to net cash:
Realized loss (gain) on securities available for sale 7,938 -
Depreciation and amortization 419,181 3,520
Common stock issued in exchange for services 5,697,445
Common stock issued in exchange for debt 2,146,392
(Increase) decrease in:
Current assets, net (691,499) -
Increase (decrease) in:
Current liabilities, net 2,517,510 34,127
----------------- -----------------
Net cash (used in)/ provided by operating activities 1,637,934 18,606
Cash flows used in investing activities:
Capital expenditures (177,613) (35,176)
Capitalized software and development (2,206,307) -
Note receivable - -
----------------- -----------------
Net cash used in investing activities (2,383,920) (35,176)
Cash flows (used in)/provided by financing activities:
Proceeds from loans , net - 28,220
Proceeds from convertible debentures, net 750,000 -
Proceeds from sale of common stock, net 66,250 -
----------------- -----------------
Net cash flows from financing activities 816,250 28,220
----------------- -----------------
Net increase (decrease) in cash and cash equivalents 70,264 11,650
Cash and cash equivalents at beginning of period 24,671 209
----------------- -----------------
Cash and cash equivalents at end of period $ 94,935 $ 11,859
================= =================
Supplemental Information:
Interest paid $ 8,733 $ -
Taxes paid - -
Common stock issued in exchange for services 5,697,445 -
Common stock issued in exchange for acquisitions 13,913,724 -
Common stock issued in exchange for debt 2,146,392
The accompanying notes are an integral part of these financial statements.
E FINANCIAL DEPOT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
- -------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB, and therefore, do not
include all the information necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. As
disclosed by the Registrant in SEC Form 8-K dated May 23, 2000, the Company
changed its fiscal year end from December 31, to March 31. The Company's Form
10QSB for the quarter ended March 31, 2000, which was filed on May 15, 2000,
covered the transition period.
Accordingly the operating results for the nine month period ended December 31,
2000 are not necessarily indicative of the results that may be expected for the
year ended March 31, 2001. The unaudited condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto included in the Company's December 31, 1999
annual report included in SEC Form 10-KSB
Basis of Presentation
- ---------------------
The consolidated financial statements include the accounts of the Company, and
its wholly owned subsidiaries, FDPO Insurance (USA), Inc. and Trade-Fast, Inc.
Significant intercompany transactions have been eliminated in consolidation.
Acquisitions
- ------------
Trade-fast, Inc.
- ----------------
On June 8, 2000 the Company acquired in an exchange for 5,000,000 shares of the
Company's unregistered common stock Trade-fast, Inc. in a transaction accounted
for using the purchase method of accounting. The total purchase price and
carrying value of the net assets acquired and liabilities assumed of Trade-Fast,
Inc. were as follows:
Stock issued $ 13,005,000
Excess of liabilities assumed over assets acquired 419,931
-------------
Total consideration paid $ 13,424,931
=============
The Company has recorded the carryover basis of the net assets acquired, which
did not differ materially from their fair value. The results of operations
subsequent to the date of acquisition are included in the Company's consolidated
statement of operations. The estimated fair value of the assets acquired and the
liabilities assumed relating to the Trade-Fast, Inc. acquisition may be subject
to further refinement, based upon the completion of further valuation studies.
The excess costs of the over the fair value of the assets acquired of $
13,424,931 is being amortized over a twenty year period, using the straight line
method subject to impairment write-offs determined by underlying cash flows.
Westcor Mortgage, Inc.
- ----------------------
On July 6, 2000 the Company completed the acquisition of Westcor Mortgage, Inc.
in an exchange for promissory notes totaling $ 592,636 , a retainage holdback of
$ 7,364 and 295,520 newly issued exchangeable shares of the Company's
unregistered common stock in a transaction accounted for using the purchase
method of accounting. The exchangeable shares are exchangeable into the
Company's common stock on a one for one basis. The total purchase price and
carrying value of the net assets acquired and liabilities assumed of Westcor
Mortgage, Inc. were as follows:
Stock issued $ 908,724
Notes payable issued 592,636
Retainage payable 7,364
Excess of liabilities assumed over assets acquired 71,427
------------
Total consideration paid $ 1,580,151
============
The Company has recorded the carryover basis of the net assets acquired, which
did not differ materially from their fair value. The results of operations
subsequent to the date of acquisition are included in the Company's consolidated
statement of losses. The estimated fair value of the assets acquired and the
liabilities assumed relating to the Trade-Fast, Inc. acquisition may be subject
to further refinement, based upon the completion of further valuation studies.
The excess costs of the over the fair value of the assets acquired of $
1,580,151 is being amortized over a twenty year period, using the straight line
method subject to impairment write-offs determined by underlying cash flows.
Reclassification
- ----------------
Certain reclassifications have been made to conform to prior periods' data to
the current presentation. These reclassifications had no effect on reported
losses.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere within
this Report.
Description of Company
- ----------------------
The Company is an Internet financial portal, offering a full spectrum of
financial services and investment information on the World Wide Web. The Company
is developing a proprietary information system consisting of integrated
financial web pages and featuring an online investment-related community through
Talk-stock.com, online trading services through Trade-Fast, Inc., mortgage
services through Westcor Mortgage, Inc. and commercial insurance brokerage
services through Eznow Insurance, Inc.
Forward Looking Statements
- --------------------------
This Form 10-QSB contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. All statements included
Herein that address activities, events or developments that the Corporation
expects, believes, estimates, plans, intends, projects or anticipates will or
may occur in the future, are forward-looking statements. Actual events may
differ materially from those anticipated in the forward-looking statements.
Important risks that may cause such a difference include: general domestic and
international economic business conditions, increased competition in the
Corporation's markets and products. Other factors may include, availability and
terms of capital, and/or increases in operating and supply costs. Market
acceptance of existing and new products, rapid technological changes,
availability of qualified personnel also could be factors. Changes in the
Corporation's business strategies and development plans and changes in
government regulation could adversely affect the Company. Although the
Corporation believes that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate. There can be no assurance that the forward-looking statements
included in this filing will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Corporation that the objectives and expectations of the Corporation would be
achieved.
THREE MONTHS ENDED DECEMBER 31, 2000 AND 1999
- ---------------------------------------------
Revenue
- -------
The Company's revenues increased $ 857,691, or 270% to $ 1,175,322 during the
third quarter of fiscal 2001 as compared to $ 317,631 of revenues during the
same period in fiscal 2000. In order to be more competitive in the market place,
the Company revised its pricing for services provided by Talk Stock With Me. Com
to its clients during 2001 and as a result, net fee revenues decreased
significantly during the three months ended December 31, 2000 as compared to
similar period in 1999. The Company offset this decrease with revenues generated
by its Trade-Fast and Westcor subsidiaries. Trade-Fast, which was purchased in
June , 2000, generated approximately $ 1,100,000 of revenues and Westcor
Mortgage, which was acquired in July, 2000 generated approximately $ 141,000 of
revenues during the three months ended December 31, 2000, respectively.
Costs and Expenses
- ------------------
The Company's costs and expenses increased from $ 588,352 during the quarter
ended December 31, 1999 to $ 3,906,503 during the third quarter of fiscal 2001.
Selling, general and administrative expenses increased $ 3,059,681. In addition
to incurring costs associated with implementing the Company's business plan
(e.g., travel, transportation, professional fees, and consulting fees) during
the three months ended December 31, 2000, the Company issued common stock to
consultants and employees in lieu of compensation. The value of the Company's
common stock issued was $ 2,027,739, which approximated the market value of the
stock at the time the services were rendered. The Company also incurred the
costs associated with the operation of its two newly acquired
subsidiaries-Trade-Fast and Westcor Mortgage. Selling, general and
administrative expenses associated with operating Trade-Fast and Westcor
Mortgage during the three months ended December 31, 2000 approximated $
2,910,000 and $ 357,000, respectively.
NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999
- --------------------------------------------
Revenue
- -------
The Company's revenues for the nine months ended December 31, 2000 increased $
1,887,627, or 183.7 %, to $2,915,190 as compared to $ 1,027,563 during the first
nine months of fiscal 2000. In order to be more competitive in the market place,
the Company revised its pricing for services provided by Talk Stock With Me. Com
to its clients during 2000 and as a result, fee revenues decreased significantly
during the first nine months of fiscal 2001 as compared to similar period in
fiscal 2000. The Company offset this decrease with revenues generated by its
Trade-Fast and Westcor subsidiaries. Trade-Fast, which was purchased in June ,
2000, generated approximately $ 2,621,000 of revenues, and Westcor Mortgage,
which was acquired in July, 2000 generated approximately $ 279,000 of revenues
during the nine months ended December 31, 2000, respectively.
Costs and Expenses
- ------------------
The Company's costs and expenses increased from $ 975,501 during the nine months
ended December 31, 2000 to $ 11,382,161 during the same period in 1999. Selling,
general and administrative expenses increased $ 9,786,928. In connection with
the implementation of its business plan, the Company incurred the following
significant costs during the nine months ended December 31, 2000 which were not
incurred in 1999:
Common stock issued to consultants and Employees
in lieu of cash $ 5,697,445
Management and consulting fees 1,505,267
During the nine months ended December 31, 2000, the Company incurred $ 204,071
of interest expense, net of interest income, as a result of placing $ 3,100,000
of interest bearing convertible debt during the first quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of December 31, 2000, the Company had a deficit in working capital of $
1,285,582.The deficit in working capital was substantially due to the increase
in obligations to vendors at December 31, 2000.
As a result of the Company's operating loss of $ 8,459,033 during the nine
months ended December 31, 2000, the Company generated cash flow of $1,637,934
from operating activities, adjusted principally for depreciation and
amortization of $ 419,181, an increase in accounts payable, accrued expenses and
other current liabilities of $ 2,517,510, the value of common stock issued in
exchange for vendor debt of $2,146,392 and the value of common stock issued to
consultants and employees for services in the amount of $ 5,697,445. The Company
invested $ 177,613 in furniture, equipment and, software. The Company also
acquired software and related we-based technology for $ 2,206,307. The Company
met its cash requirements during the first nine months of 2000 through the
private placement of $ 750,000 of convertible debentures net of placement costs.
In addition, the Company sold shares of its common stock for $ 66,250 during the
nine months ended December 31, 2000.
While the Company has raised capital to meet its working capital requirements,
additional financing is required in order to complete the acquisition of related
businesses. The Company is seeking financing in the form of equity and debt in
order to provide for these acquisitions and for working capital. There are no
assurances the Company will be successful in raising the funds required.
In prior periods, the Company has borrowed funds from significant shareholders
of the Company in the past to satisfy certain obligations.
As the Company continues to expand, the Company will incur additional costs for
personnel. In order for the Company to attract and retain quality personnel, the
Company anticipates it will continue to offer competitive salaries, issue common
stock to consultants and employees, and grant Company stock options to current
and future employees
The effect of inflation on the Company's revenue and operating results was not
significant The Company's operations are located primarily in North America and
there are no seasonal aspects that would have a material effect on the Company's
financial condition or results of operations.
Trends, Risks and Uncertainties
- -------------------------------
The Company has sought to identify what it believes to be the most significant
risks to its business, but cannot predict whether or to what extent any of such
risks may be realized nor can there be any assurances that the Company has
identified all possible risks that might arise. Investors should carefully
consider all of such risk factors before making an investment decision with
respect to the Company's stock.
Limited operating history; Anticipated Losses; Uncertainly of Future Results.
- -----------------------------------------------------------------------------
eFinancial Depot.Com, Inc. has only a limited operating history upon which an
evaluation of the Company and its prospects can be based. The Company's
prospects must be evaluated particularly in light of the uncertainties relating
to the new and evolving distribution methods with which the Company intends to
operate and the acceptance of the Company's business model. The Company will be
incurring costs to develop, introduce and enhance its interactive website, to
establish marketing relationships, to acquire and develop products that will
compliment each other and to build an administrative organization. To the extent
that such expenses are not subsequently followed by commensurate revenues, the
Company's business, results of operations and financial condition will be
materially adversely affected. There can be no assurance that the Company will
be able to generate sufficient revenues from the sale of their services and
products. If cash generated by operations is insufficient to satisfy the
Company's liquidity requirements, the Company may be required to sell additional
equity or debt securities. The sale of additional equity or convertible debt
securities would result in additional dilution to the Company's stockholders.
Potential fluctuations in quarterly operating results
- -----------------------------------------------------
The Company's quarterly operating results may fluctuate significantly in the
future as a result of a variety of factors, most of which are outside the
Company's control, including: the level of use of the Internet; the demand for
high-tech services and products; seasonal trends in both Internet use, the
amount and timing of capital expenditures and other costs relating to the
expansion of the Company's Internet operations; price competition or pricing
changes in the industry; technical difficulties or system downtime; general
economic conditions, and economic conditions specific to the Internet and
Financial Services Industry. The Company's quarterly results may also be
significantly impacted by the impact of the accounting treatment of
acquisitions, financing transactions or other matters. Particularly at the
Company's early stage of development, such accounting treatment can have a
material impact on the results for any quarter. Due to the foregoing factors,
among others, it is likely that the Company's operating results will fall below
the expectations of the Company or investors in some future quarter.
Limited public market, possible volatility of share price
- ---------------------------------------------------------
The Company's Common Stock is currently quoted on the NASD OTC Bulletin Board
under the ticker symbol FDPO.OB. As of December 31, 2000, there were
approximately 23,741,760 shares of Common Stock outstanding. There can be no
assurance that a trading market will be sustained in the future. Factors such
as, but not limited to, technological innovations, new products, acquisitions or
strategic alliances entered into by the Company or its competitors, failure to
meet security analysts' expectations, government regulatory action, patent or
proprietary rights developments, and market conditions for technology stocks in
general could have a material effect on the volatility of the Company's stock
price.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
There are no legal proceedings against the Company and the
Company is unaware of proceedings contemplated against it.
Item 2. Changes in Securities and Use of Proceeds
(a) None
(b) None
(c) During the reporting period the Company issued
4,495,580 of restricted common stock for a total of $
4,184,131 for cash, payment of services and
conversion of debt to equity. All such restricted
securities were issued in reliance upon the exemption
from registration under section 4(2) of the
Securities Act of 1933.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to the security holders for a vote.
Item 5. Other Information
There is no other information deemed material by management
for disclosure herein.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
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.
E FINANCIAL DEPOT.COM, INC.
Registrant
February 19, 2001 By: /s/ John Huguet
- ----------------- --------------------------------------
Date John Huguet
Chairman of the Board and
Chief Executive Officer