SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____to ______.
Commission file number: 333-52040
e.Deal.Net, Inc.
----------------
(Exact name of registrant as specified in its charter)
Nevada 98-0195748
------ ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1628 West 1st Ave., Suite 214
Vancouver, British Columbia, Canada V6J 1G1
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(Address of principal executive offices (zip code))
(604) 659-5024
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the last 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
APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding
of each of the issuer's classes of common equity, as of the latest practicable
date.
Class
Common Stock, par value $0.0001
Outstanding at December 31, 2001
7,840,000
e.DEAL.NET, INC.
FORM 10-QSB
FOR THE QUARTER ENDED DECEMBER 31, 2001
TABLE OF CONTENTS
PAGE
NO.
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PART 1 FINANCIAL INFORMATION
ITEM 1 Condensed Financial Statements:
Balance Sheets as of December 31, 2001 (Unaudited) and
March 30, 2001 2
Unaudited Statements of Operations for the Three months
and Nine months Ended December 31, 2001 and 2000
and for the period from November 6, 1998 (Date of 3
Inception) to December 31, 2001
Unaudited Statements of Cash Flows for the Nine months
Ended December 31, 2001 and 2000 and for the period
from November 6, 1998 (Date of Inception) to December 4
31, 2001
Notes to Financial Statements 5-7
ITEM 2 Management's discussion and analysis of financial condition 8-10
And results of operations
PART II OTHER INFORMATION
(NONE)
Signature Page 11
e.DEAL.NET, INC
(A DEVELOPMENT STAGE COMPANY)
CONDENSED BALANCE SHEETS
December 31, March 31,
2001 2001
---- ----
(Unaudited)
ASSETS
Current Assets:
Cash $ 215,133 $ 10,447
Prepaid expenses
0 2,681
Total current assets
215,133 13,128
Property and Equipment
2,215 2,711
Other Assets 0
2,631
TOTAL ASSETS $ 217,348 $ 18,470
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current Liabilities:
Accounts payable $ 2,870 $ 8,553
Accrued expenses 89,209
75,365
Notes payable, related party
110,000 40,000
Total current liabilities
202,079 123,918
STOCKHOLDERS EQUITY (DEFICIENCY):
Common stock: $0.001 Par Value
7,840 5,340
Additional paid-in-capital
332,160 84,660
Deficit accumulated during the development stage
(324,731) (195,448)
Total Stockholders' Equity (Deficiency) 15,269 (105,448)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
$ 217,348 $ 18,470
See notes to condensed financial statements.
2
e.DEAL.NET, INC
(A DEVELOPMEN STAGE COMPANY)
CONDENSED STATEMENT OPERATIONS
(Unaudited)
For the For the For the For the For the Period
Three Months Three Months Nine Months Nine Months November 6, 1998
Ended Ended Ended Ended (Inception) To
Dec. 31, 2001 Dec. 31, 2000 Dec. 31, 2001 Dec. 31, 2000 Dec.31, 2001
------------- ------------- ------------- ------------- ------------
DEVELOPMENT STAGE REVENUE $ 0 $ 0 $ 0 $ 0 $ 0
DEVELOPMENT STAGE EXPENSES:
Professional fees 3,075 24,947 41,136 25,648 123,007
Payroll and payroll related expenses 0 19,563 37,586 19,563 85,536
Management fees 8,000 24,000 24,000 24,000 70,418
Rent 0 2,682 13,407 2,682 24,131
Depreciation and amortization 165 164 495 410 1,849
Other development stage expenses 892 7,505 6,028 20,243
2,722
Total Development Stage expenses 12,132 124,129 78,331 325,184
74,078
Loss from operations (12,132) (124,129) (78,331) (325,184)
(74,078)
OTHER INCOME (EXPENSE):
Interest income 496 393 496 2,453 6,468
Interest expense (5,650)
(1,994) 0 0 (6,015)
(5,154) 2,453 453
(1,498) 393
NET LOSS (13,630) (73,685) (129,283) (75,878) (324,731)
NET LOSS PER COMMON SHARE -
BASIC AND DILUTED $ (0.00) $ (0.01) $ (0.02) $ (0.01) $ (0.06)
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 7,478,889 5,340,000 6,052,963 5,340,000 5,490,704
See notes to condensed financial statements.
3
e.DEAL.NET, INC.
(A DEVELOPMET STAGE COMPANY)
CONDENSED STATEMNTS OF CASH FLOWS
(Unaudited)
For the For the For the Period
Nine Months Nine Months November 6, 1998
Ended Ended (Inception) To
Dec. 31, 2001 Dec. 31, 2000 Dec. 31, 2001
------------- ------------- -------------
Cash Flows from Operating Activities:
Net loss $ (129,283) $ (75,878) $ (324,731)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 495 410
1,070
Common stock issued for management services 5,000
0 0
Changes in operating assets and liabilities:
Decrease (increase) in prepaid expenses (2,944) 0
2,681
Decrease in security deposits 2,631 0 0
Increase in accounts payable & accrued expenses 8,162 44,288 92,080
Net cash used in operating activities (226,581)
(115,314) (34,124)
Cash Flows from Investing Activities:
Purchase of property and equipment (3,286) (3,286)
0
Net cash used in investing (3,286) (3,286)
activities 0
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 335,000
250,000 0
Proceeds from loans from related parties 70,000 110,000
0
Net cash provided by financing activities 320,000 445,000
0
Net Increase (Decrease) in Cash 204,686 215,133
(37,410)
Cash, Beginning 10,447 80,738
0
Cash, Ending $ 215,133 $ 43,328 $ 215,133
SUPPLEMENTAL DISCLOSURE:
Interest paid during the period $ 0 $ 0 $ 0
Income taxes paid during the period $ 0 $ 0 $ 0
See notes to condensed financial statements
4
e.DEAL.NET, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM FINANCIAL STATEMENTS
December 31, 2001
NOTE 1 - BASIS OF PRESENTATION
The condensed balance sheet as of December 31, 2001, the condensed
statements of operations for the three months and nine months ended
December 31, 2001 and 2000 and the period from November 6, 1998 (date of
inception) to December 31, 2001, and the condensed statements of cash flows
for the nine months ended December 31, 2001 and 2000 and the period from
November 6, 1998 (date of inception) to December 31, 2001 have been
prepared by the Company. In the opinion of management, all adjustments
(which include reclassifications and normal recurring adjustments)
necessary to present fairly the financial position, results of operations
and cash flows at December 31, 2001 and for all periods presented, have
been made.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these financial statements be read in conjunction with the Company's
financial statements and notes thereto included in the Company's March 31,
2001 Form SB-2. The results of operations for the three months and nine
months periods ended December 31, 2001 are not necessarily indicative of
the operating results for the full year.
Certain reclassifications were made to the statements of operations for the
three months and nine months ended December 31, 2001 and the period from
November 6, 1998 (date of inception) to December 31, 2001 to conform to the
December 30, 2001 presentation.
NOTE 2 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN MATTERS
e.Deal's initial activities have been devoted to developing a business
plan, negotiating contracts and raising capital for future operations and
administrative functions. During the nine months ended December 31, 2001,
the Company has focused its efforts in the development of its online auto
auction site at www.edeal.net, and to locate and acquire additional working
capital. The ability of e.Deal to achieve its business objectives is
contingent upon its success in raising additional capital until such time
as adequate revenues are realized from operations.The accompanying
financial statements have been presented in accordance with generally
accepted accounting principles, which assume the continuity of e.Deal as a
going concern.
5
NOTE 2 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN MATTERS (Continued)
As shown in the financial statements, development stage losses from
November 6, 1998 (date of inception) to December 31, 2001 amounted to
$324,731. e.Deal's cash flow requirements during this period have been
primarily met by contributions of capital and debt financing. No assurance
can be given that these sources of financing will continue to be available.
If e.Deal is unable to generate profits, or unable to obtain additional
funds for its working capital needs, it may have to cease operations.
e.Deal intends to meet its long-term liquidity needs through available cash
as well as through additional financing from outside sources. During the
nine months ended December 31, 2001, the Company borrowed $70,000 from its
President and CEO. On July 25, 2001, the Company's SB-2 registration
statement, as filed with the Securities and Exchange Commission, became
effective. The Company expected to raise up to $500,000 from a public
offering and was able to raise the minimum amount of $250,000 in October
2001. Management will seek to raise additional capital to meet its sales
and marketing objectives as set forth in the SB-2 filing.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary
should e.Deal be unable to continue as a going concern. e.Deal's
continuation as a going concern is dependent upon its ability to generate
sufficient cash flow to meet its obligations on a timely basis, to retain
additional paid-in capital, and to ultimately attain profitability.
NOTE 3 - NOTE PAYABLE - RELATED PARTY
On February 14, 2001, e.Deal executed a $40,000 note payable to Herdev S.
Rayat (Mr. "Rayat"), president and related party. The note bears interest
at a rate of 7.25% per annum. The entire principal and related accrued
interest is due and payable on demand.
On April 24, 2001, e.Deal executed a note payable to Mr. Rayat in the
principal sum of $40,000 at a rate of 7.25% per annum. The entire principal
amount and accrued interest is due and payable on demand.
On June 8, 2001, eDeal executed a note payable to Mr. Rayat in the
principal sum of $20,000 at a rate of 7.25% per annum. The entire principal
amount and accrued interest is due and payable on demand.
On July 27 2001, eDeal executed a note payable to Mr. Rayat in the
principal sum of $10,000 at a rate of 7.25% per annum. The entire principal
amount and accrued interest is due and payable on demand.
Accrued interest amounted to $1,994 as of December 31, 2001.
6
NOTE 4 - SALE OF COMMON STOCK
In October 2001, the Company sold 2,500,000 shares of common stock at $0.10
per share in a public offering, for net proceeds of $250,000. Each share
came with a warrant to purchase one common share at $0.20 per share. The
warrants are exercisable for a period of 36 months from the date of
issuance.
NOTE 5 - NET INCOME (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and diluted net
loss per common share for the three months and nine months ended December
31, 2001 and 2000, and for the period from November 6, 1998 (date of
inception) to December 31, 2001.
For The Nine For The Nine From November 6, 1998
Months Ended Months Ended (Period of Inception)
Dec. 31, 2001 Dec. 31, 2000 To Dec. 31, 2001
------------- ------------- ----------------
Numerator for basic and diluted Income
(loss) per share - Net
Income (loss) $ (129,283) $ (75,878) $ (324,731)
Denominator for basic and diluted Income
(Loss) per Share -
Weighted average shares 6,052,963 5,340,000 5,490,704
Basic and diluted net income (loss)
per common share $ (0.02) $ (0,01) $ (0.06)
For The Three For The Three
Months Ended Months Ended
Dec. 31, 2001 Dec. 31, 2000
------------- -------------
Numerator for basic and diluted Income
(loss) per share - Net
Income (loss) $ (13,630) $ (73,685)
Denominator for basic and diluted Income
(Loss) per Share -
Weighted average shares 7,478,889 5,340,000
Basic and diluted net income (loss)
per common share $ (0.00) $ (0,01)
7
ITEM 2. MANAGEMENT'S DUSCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
When used in this discussion, the words "believe", "anticipates", "expects" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, which could cause
actual results to differ materially from those projected. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as of the date hereof. Actual results, performance or achievements could
differ materially from those anticipated in such forward-looking statements as a
result of numerous factors, including but not limited to the Company's ability
to continually expand its auto auction subscriber base and opt-in email lists,
market its services to potential clients and advertisers, the regulatory
environment in which the Company operates, future acceptance of its services and
other factors described in the Company's filings with Securities and Exchange
Commission. The Company undertakes no obligation to republish revised
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of the unanticipated events. Readers are
also urged to carefully review and consider the various disclosures made by the
Company which attempt to advise interested parties of the factors which affect
the Company's business, in this report, as well as the Company's periodic
reports as filed with the Securities and Exchange Commission.
Overview
- --------
We are developing an on-line auto auction web site, www.edeal.net, to connect
buyers and sellers of cars and trucks. We will provide useful information to
both buyer and seller on how to prepare a vehicle for sale, how to buy the right
vehicle, used vehicle reviews, recall notices, new vehicle reviews, road test
results, links to manufacturers and to information sources, on-line maintenance
records, email alerts for service, educational forums, insurance and financing
sources, shipping sources, appraisal sources, repair sources, parts finder
service and many other automotive related ancillary services.
We expect to generate revenues primarily through listing fees and percentage of
the selling price of each vehicle. The Company will also establish an affiliate
marketing plan by offering incentives to its affiliates who refer clients who
transact business through our web site. The Company also expects to generate
minimal revenues through advertising on its web site.
The Company has been engaged in the development of its on-line auto auction
site, www.edeal.net, which is expected to be operational during the second
quarter of 2002, and in raising capital through an offering of securities under
a registration statement under form SB-2 declared effective July 25, 2001. In
October, 2001, the Company raised $250,000, which will be used for web site
development costs, working capital, office and staffing costs, legal and
consulting, and marketing. The Company expects to raise additional capital in
order to further develop its business.
8
Results of Operations
- ---------------------
Revenues. The Company has generated zero revenues since inception. To date, the
Company has not relied on revenues for funding. For the next twelve to
twenty-four months, the Company expects to generate minimal, if any, revenues
due to the early stage of its operations.
General and Administrative Expenses. During the three month period ended
December 31, 2001 and 2000, the Company incurred $12,132 and $74,078 in general
and administrative expenses, respectively. This decrease of $61,946 is primarily
a result of decreased expenses incurred for rent, management fees and other
expenses as a result of the Company reducing its staff and closing one location
during the quarter. For the nine months period ended December 31, 2001 and 2000,
the Company incurred $124,129 and $78,331 in general and administrative
expenses, respectively. This increase of $45,798 is primarily a result of
increased expenses incurred for professional fees, payroll fees and other
operational expenses.
Interest Income. Interest income was $496 and $393 for the three-month period
ended December 31, 2001 and 2000, respectively, and $496 and $2,453 for the
nine-month period ended December 31, 2001 and 2000, respectively. Interest
earned in the future will be dependent on Company funding cycles and prevailing
interest rates.
Provision for Income Taxes. As of December 31, 2001, the Company's accumulated
deficit was $324,731 and as a result, there has been no provision for income
taxes to date.
Liquidity and Capital Resources
- -------------------------------
As at December 31, 2001, the Company had a cash balance of $215,133, compared to
$43,328 as at December 31, 2000.
Net cash used by operating activities was $115,314 for the nine-month period
ending December 31, 2001, compared to net cash used of $34,124 for the same
period in 2000.The increase in net cash used in operating activities is
primarily due to our web site development, office rent and expenses, support
personnel and professional fees.
We had no cash flows from investing activities in the nine months ended December
31, 2001, as compared to $3,286 of cash used in investing activities in the nine
months ended December 31, 2000 in connection with the purchase of equipment.
Net cash provided by financing activities amounted to $70,000 during the nine
months ended December 31, 2001, as compared to zero during the nine months ended
December 31, 2000. This loan was provided by the Company's President and CEO.
As of December 31, 2001, cash provided by financing activities came from loans
from our President and CEO of $110,000 and proceeds from issuance of common
stock of $335,000.
9
Plan of Operation
- -----------------
For the next two quarters, the Company plans to continue developing its website,
www.edeal.net to connect buyers and sellers of cars and trucks along with
providing useful information on how to buy and sell their vehicles. The company
does not expect to purchase any significant equipment, hire any additional
employees, or incur significant research and development expenses. The Company
has sufficient cash requirements to satisfy its cash needs over the next twelve
months. However, the Company's future funding requirements will depend on
numerous factors. These factors include the Company's ability to operate its
business profitably in the future, recruit and train qualified management,
technical and sales personnel, and the ability to compete against other, better
capitalized corporations who offer similar web based services. The Company may
raise additional funds through private or public equity investment in order to
expand the range and scope of its business operations. The Company may seek
access to the private or public equity but there is no assurance that such
additional funds will be available for the Company to finance its operations on
acceptable terms, if at all.
Recent Accounting Pronouncements
- --------------------------------
The Financial Accounting Standards Board ("FASB") issued the following SFAS's,
none of which are expected to have a significant effect on the financial
statements:
SFAS No. 138, an amendment to SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and for hedging activities, effective for
fiscal years beginning after June 15, 2000.
SFAS No. 141, "Business combinations," which requires all business combinations
initiated after June 30, 2001, to be accounted for under the purchase method of
accounting for which the date of acquisition is July 1, 2001 or later.
SFAS No. 142, "Goodwill and Other Intangible Assets," which addresses how
intangible assets that are acquired individually or with a group of other assets
(but not those acquired in a business combination) should be accounted for in
financial statements upon their acquisition. This statement also addresses how
goodwill and other intangible assets should be accounted for after they have
been initially recognized in the financial statements. This statement is
required to be applies starting with fiscal years beginning after December 15,
2001.
SFAS No. 143, "Accounting for Asset Retirement Obligations," which discusses the
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs, effective for financial statements issued for fiscal years beginning
after June 15, 2002.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets"
which supersedes SFAS No. 121. This statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and is effective
for financial statements issued for fiscal years beginning after December 15,
2001, and interim periods within those fiscal years.
10
Signature Page
Pursuant to the requirements of section 13 or 15(d) 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.
e.Deal.net, Inc.
/s/ Herdev S. Rayat
---------------------------
Herdev S. Rayat
CEO and President
/s/ Arian Soheili
---------------------------
Arian Soheili
Secretary, Treasurer and
Director
/s/ Harv Dhaliwal
---------------------------
Harv Dhaliwal
Director
11