U.S. Securities and Exchange Commission
Washington, D.C. 20549
<P>
Form 10-QSB
<P>
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
<P>
For the quarterly period ended December 31, 2000.
<P>
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
<P>
For the transition period from to
<P>
Commission file number 000-30291
<P>
Hipstyle.com, Inc.
(Exact name of small business issuer
as specified in its charter)
Florida 65-0928369
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
<P>
1221 Brickell Avenue, Suite 900, Miami, FL 33131
(Address of principal executive offices)
<P>
(305) 539-0900
(Issuer's telephone number)
<P>
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
<P>
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
<P>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
<P>
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
<P>
APPLICABLE ONLY TO CORPORATE ISSUERS
Transitional Small Business Disclosure Format
(Check one):
Yes No
<P>
The number of shares of common stock $.001 par value, of
the Registrant issued and outstanding as of February 14,
2001 was 4,600,000.
<P>
HIPSTYLE.COM, INC.
<P>
FORM 10QSB
<P>
PERIOD ENDED DECEMBER 31, 2000
<P>
PART 1
<P>
ITEM 1. FINANCIAL STATEMENTS - HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE
COMPANY) FOR THE SIX MONTHS ENDED -
DECEMBER 31, 2000
<P>
(A DEVELOPMENT STAGE COMPANY)
<P>
FINANCIAL STATEMENTS
<P>
FOR THE SIX MONTHS ENDED DECEMBER 31, 2000
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE ENTITY)
<P>
TABLE OF CONTENTS
Page
<P>
BALANCE SHEETS
<P>
STATEMENTS OF OPERATIONS 2
<P>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) 3 - 4
<P>
STATEMENTS OF CASH FLOWS 5 - 6
<P>
NOTES TO FINANCIAL STATEMENTS 7 - 19
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
BALANCE SHEETS
ASSETS December 31, 2000
(Unaudited) June 30, 2000
---------------------------------------
CURRENT ASSETS:
<P>
Cash $ 18,736 $ 55
Prepaid expenses 2,000 0
---------------------------------------
Total Current assets 20,736 55
<P>
WEBSITE, net of accumulated amortization
$3,164 and $450 23,971 26,685
---------------------------------------
TOTAL ASSETS $ 44,707 $ 26,740
=======================================
<P>
LIABILITIES AND STOCKHOLDERS' EQUITY
<P>
CURRENT LIABILITIES:
<P>
Accounts payable & accrued expenses $ 14,242 $ 73,137
---------------------------------------
Total Current liabilities 14,242 73,137
<P>
STOCKHOLDERS' EQUITY (DEFICIT):
<P>
Common Stock, par value $.0001 per share;
100,000,000 shares authorized;
4,600,000 and 4,050,000 shares issued and
outstanding respectively 460 405
Additional paid-in capital 119,740 9,795
Deficit accumulated during the
development stage (89,735) (56,597)
---------------------------------------
Total Stockholders' equity (30,465) (46,397)
---------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 44,707 $ 26,740
=======================================
<P>
The accompanying notes are an integral part of these financial statements.
<P>
-2-
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
STATEMENTS OF OPERATIONS
FOR THE THREE FOR THE SIX MONTH FROM THE PERIOD
MONTH PERIOD ENDED JUNE 22, 1999
DECEMBER 31, DECEMBER 31, (DATE OF INCEPTION)
2000 1999 2000 1999 TO DECEMBER 31, 2000
--------------------------------------------------------------
DEVELOPMENT STAGE REVENUES $ 0 $ 0 $ 0 $ $
--------------------------------------------------------------
DEVELOPMENT STAGE EXPENSES:
Accounting fees 4,000 0 8,000 0 21,000
Amortization 1,357 0 2,714 0 3,164
Bank charges 0 45 90 45 235
Consulting fees 0 0 0 0 10,200
Dues & subscriptions 0 0 55 0 293
Licenses and taxes 444 0 444 488 1,369
Office expenses 6,315 0 12,315 0 12,315
Postage 98 0 179 0 179
Legal and professional
fees 6,697 3,880 7,435 3,880 11,916
Research and development 0 0 0 0 27,157
On-Line services 135 0 225 0 225
Travel 1,401 0 1,681 0 1,682
---------------------------------------------------------------
TOTAL DEVELOPMENT STAGE
EXPENSES 20,447 3,925 33,138 4,413 89,735
<P>
LOSS FOR THE PERIOD (20,447) (3,925) (33,138) (4,413) (89,735)
===============================================================
NET LOSS PER COMMON SHARE $ (0.0044) $ (0.0010) $(0.0077) $ (0.0011)
===============================================================
Weighted-average common
share outstanding 4,600,000 4,000,000 4,299,703 4,000,000
================================================
<P>
The accompanying notes are an integral part of these financial statements
<P>
-2-
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<P>
FOR THE PERIOD JUNE 22, 1999 (INCEPTION) THROUGH DECEMBER 31, 2000
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
COMMON STOCK PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
------------------------------------------------------------------
Balance,
June 22, 1999
(inception) 0 $ 0 $ 0 $ 0 $ 0
<P>
Restricted common stock
issued to related
parties for
consulting fees 4,000,000 400 (200) 0 200
<P>
Deficit accumulated
during development
stage for the period
June 22, 1999
(inception) through
June 30, 1999 0 0 0 (200) (200)
------------------------------------------------------------------
Balance,
June 30, 1999 4,000,000 400 (200) (200) 0
<P>
The accompanying notes are an integral part of these financial statements.
<P>
-3-
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<P>
FOR THE PERIOD JUNE 22, 1999 (INCEPTION) THROUGH DECEMBER 31, 2000 CONT'D)
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
COMMON STOCK PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
------------------------------------------------------------------
Balance,
June 30, 1999 4,000,000 $ 400 $ (200) $ (200) $ 0
<P>
Restricted common stock
issued to related
party for
consulting services 50,000 5 9,995 0 10,000
<P>
Deficit accumulated
during development
stage for the year
ended June 30, 2000 0 0 0 (56,397) (56,397)
-------------------------------------------------------------------
Balance,
June 30, 2000 4,050,000 405 9,795 (56,597) (46,397)
<P>
Common stock issued
to third parties
in private
offering 550,000 55 109,945 0 110,000
<P>
Deficit accumulated
during development
stage for the six
months ended
December 31, 2000 0 0 0 (33,138) (33,138)
---------------------------------------------------------------------
Balance,
December 31, 2000 4,600,000 $ 460 $ 119,740 $ (89,735) $ 30,465
=====================================================================
<P>
The accompanying notes are an integral part of these financial statements.
<P>
-4-
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
STATEMENTS OF CASH FLOWS
FOR THE PERIOD
SIX MONTHS ENDED JUNE 22, 1999
DECEMBER 31, (INCEPTION) TO
2000 1999 DECEMBER 31, 2000
------------------------------------------------
OPERATING ACTIVITIES:
Deficit accumulated during
the development stage $ (33,138) $ (4,413) $ (89,735)
Amortization 2,714 0 3,164
<P>
Adjustments to reconcile
net loss to net cash
used by operations:
Changes in assets and liabilities:
(Increase) Decrease in
prepaid expenses (2,000) 0 (2,000)
Increase (Decrease) in
accounts payable and
Accrued expenses (56,907) 3,500 13,742
------------------------------------------------
Net Cash Used by Operating Activities (89,331) (913) (74,829)
------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of intangible assets 0 0 (27,135)
------------------------------------------------
Net Cash provided by Investing Activities 0 0 (27,135)
------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance
of common stock 55 0 460
Proceeds from Additional
Paid in Capital 109,945 0 119,740
Loans from shareholders (1,988) 988 500
------------------------------------------------
Net Cash Provided By
Financing Activities 108,012 988 120,700
------------------------------------------------
Increase (decrease) in cash 18,681 75 18,736
------------------------------------------------
Cash, Beginning of quarter 55 0 0
------------------------------------------------
Cash, End of quarter $ 18,736 $ 75 $ 18,736
================================================
<P>
The accompanying notes are an integral part of these financial statements.
<P>
-5-
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
STATEMENT OF CASH FLOWS
<P>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<P>
During the six-month periods ended December 31, 2000 and
1999, and for the cumulative period June 22, 1999
(inception) through December 31, 2000, the Company did not
pay or accrue any interest or taxes.
<P>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
ACTIVIITES
<P>
The Company entered into the following non-cash
transactions:
<P>
On June 22, 1999 (inception) the Company issued 4,000,000
post-split (see note 6) restricted shares of common stock in
consideration for consulting services provided by
Intelilabs.com, Inc. formerly known as Quentin Road
Productions, Inc., the founder of the Company (see note 1).
This transaction was valued at $200.
<P>
On May 30, 2000 the Company issued 50,000 restricted shares
of the Company's common stock in exchange for consulting
services to the Vice President of the Company. This
transaction was valued at $10,000 (see note 6).
<P>
-6-
<P>
HIPSTYLE.COM, INC
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
NOTE 1 - NATURE OF ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
<P
ORGANIZATION
- -------------
<P>
Hipstyle.com, Inc. ("the Company") was incorporated on
June 22, 1999 under the laws of the State of Florida and is
licensed to do business in the state of New York. The
Company is in the process of designing a website dedicated
to bringing together designers of high fashion and beauty
products with a targeted client base. The Company's goal is
to provide links to established e-commerce and catalog
retail sites featuring designer apparel and accessories, as
well as fashion related services and content to its viewers.
Some of these include: a search engine, fashion news, chat
and e-mail response, research tools, video runways and
interviews, sale and special event postings, major fashion
magazine archives, and vintage resources. Revenue will be
generated primarily though charging a click through rate for
each link, revenue sharing on purchases made at partner e-
commerce sites, advertising sales and auction commissions.
<P>
To accomplish its goal as a fashion infomediary over
time, viewers will be offered an exclusive membership in the
Company that will give them special access and privileges.
In return viewers will be asked to fill out some personal
information that will be aggregated into a database and used
to attract future partners and advertisers.
<P>
The Company was a wholly owned subsidiary of
Intellilabs.com, Inc. ("Intellilabs"), formerly known as
Quentin Road productions, Inc., a publicly trade company
listed on the OTC Electronic Bulletin Board (OTCBB:QRPI)
from inception until March 1, 2000. It was spun-off by
Intellilabs on March 1, 2000. Upon such spin-off,
shareholders of Intellilabs received 1.31 shares of the
Company for each share of Intellilabs owned as of March 1,
2000. As a result of the spin-off, Atlas Equity Group,
Inc., a related party, beneficial owner of which is Michael
D. Farkas, became a majority shareholder in the company
owning approximately 57% of the outstanding shares. Its
principal office is located at 1221 Brickell Avenue, Suite
900, Miami, FL 33131.
<P>
-7-
<P>
HIPSTYLE.COM, INC
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
NOTE 1 - NATURE OF ORGANIZATIONS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
- ------------------------------------------------------
<P>
MANAGEMENT DECISION NOT TO CONSOLIDATE
- ---------------------------------------
<P>
Statement of Financial Accounting Standards ("SFAS")
No. 94, "Consolidation of All Majority Owned Subsidiaries,"
encourages the use of consolidated financial statements
between a parent company and its subsidiaries unless:
a) Control is likely to be temporary,
b) Control does not rest with the majority owner(s), or
c) Minority stockholders have certain approval or veto
rights that allow them to exercise significant
control over major management decisions in the
ordinary course of business.
<P>
The management of Atlas Equity Group, Inc., a related party,
in which Michael D. Farkas is a beneficial owner, believes
that its control is temporary. Therefore, management
believes that separate financial statements are appropriate
and properly reflect the Company's current operating
results.
<P>
USE OF ESTIMATES
- ----------------
<P>
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities as of the date of the
financial statements. Accordingly, actual results could
differ from those estimates.
<P>
CASH AND CASH EQUIVALENTS
- -------------------------
<P>
For purposes of reporting cash flows, the company
considers all highly liquid investments purchased with an
original maturity of three months or less to be cash
equivalents.
<P>
INTANGIBLE ASSET WEBSITE
- --------------------------
<P>
Website costs have been capitalized pursuant to EITE
00-2. The website is being amortized on the straight-line
basis over a period of 60 months. The planning and
maintenance costs associated with the website have been
expensed as incurred (see note 4).
<P>
-8-
<P>
HIPSTYLE.COM, INC
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
INTANGIBLE ASSET WEBSITE (CONT'D)
- ------------------------------------
<P>
The Company reviews assets for impairment whenever
events or changes in circumstances indicate the carrying
value of the asset may not be recoverable. A determination
of impairment, if any, is made based on estimates of
undiscounted future cash flows. For the six month period
ended December 31, 2000 and year ended June 30, 2000, there
have been no asset impairments.
<P>
CARRYING VALUES
- ---------------
<P>
The Company reviews the carrying values of its long-
lived and identifiable intangible assets for possible
impairment. Whenever events or changes in circumstances
indicate that the carrying amount of assets may not be
recoverable, the Company will reduce the carrying value of
the assets and charge operations in the period the
impairment occurs.
<P>
INCOME TAXES
- -------------
<P>
The Company utilizes Statement of Financial Standards
("SFAS") No. 109, "Accounting for Income Taxes", which
requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of
events that have been included in financial statements or
tax returns. Under this method, deferred income taxes are
recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities
and their financial reporting amounts at each period end
based on enacted tax laws and statutory tax rates applicable
to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount
expected to be realized. The accompanying financial
statements have no provisions for deferred tax assets or
liabilities because the deferred tax allowance offsets
deferred tax assets in their entirety.
<P>
STOCK COMPENSATION
- ------------------
<P>
The Company has adopted SFAS No. 123 "Accounting for
Stock-Based Compensation." SFAS No. 123 encourages the use
of the fair market method to account for transactions
involving stock base compensation that are entered into
fiscal years beginning after December 15, 1995. Under the
fair value method, the issuance of equity instruments to
non-employees in exchange for goods or services, should be
accounted for based on the fair value of the goods or
services received or the fair value of the income
instruments issued, whichever is more reliably measured.
<P>
-9-
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
NOTE 1 - NATURE OF ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
- -----------------------------------------------------
<P>
NET LOSS PER SHARE
- -------------------
<P>
The Company has adopted SFAS No. 128 "Earnings Per
Share". Basic loss per share is computed by dividing the
loss available to common shareholders by the weighted-
average number of common shares outstanding. Diluted loss
per share is computed in a manner similar to the basic loss
per share, except that the weighted-average number of shares
outstanding is increased to include all common shares,
including those with the potential to be issued by virtue of
warrants, options, convertible debt and other such
convertible instruments. Diluted earnings per share
contemplates a complete conversion to common shares of all
convertible instruments only if they are dilutive in nature
with regards to earnings per share. Since the Company has
incurred losses for all periods, and since there are no
convertible instruments, basic loss per share and diluted
loss per share are the same.
<P>
FAIR VALUE OF FINANCIAL INSTRUMENTS
- -----------------------------------
<P>
SFAS No. 107 "Disclosures about Fair Value of Financial
Instruments" requires the disclosure of the fair value of
financial instruments. The Company's management, using
available market information and other valuation methods,
has determined the estimated fair value amounts. However,
considerable judgment is required to interpret market data
in developing estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of
the amounts the Company could realize in a current market
exchange.
<P>
SEGMENTS
- ---------
<P>
The Company has adopted the provisions of SFAS No. 131,
Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 establishes standards for
companies to report information about operating segments in
annual financial statements. It also establishes standards
for related disclosures about products and services,
geographic areas and major customers. Since the Company did
not have any revenues and or segments during the periods
ended December 31, 2000 and June 30, 2000 the provisions of
SFAS No. 131 does not have a material effect on these
financial statements.
<P>
-10-
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
- ------------------------------------------------------
<P>
In June 1997, the Financial Accounting Standards Board
("FASB") issued SFAS No. 130, "Reporting Comprehensive
Income". This statement requires companies to classify
items of other comprehensive income by their nature in
financial statements and to display the accumulated balance
of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity
section of a statement of financial position. SFAS No. 130
is effective for financial statements issued for fiscal
years beginning after December 15, 1997. Management
believes that SFAS No. 130 has no material effect on the
Company's financial statements because it has no elements of
comprehensive income other than net operating losses.
<P>
In April, 1998, the American Institute of Certified
Public Accountants issued Statement of Position No. 98-5,
"Reporting for Costs of Start-Up Activities", ("SOP 98-5").
The Company is required to expense all start-up costs
related to new operations as incurred. In addition, all
start-up costs that were capitalized in the past must be
written off when SOP 98-5 is adopted. The Company's
adoption did not have a material impact on the Company's
financial position or results of operations.
<P>
SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities", is effective for financial statements
issued for fiscal years beginning after June 15, 1999. SFAS
No. 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging
activities. Management does not believe that SFAS No. 133
will have a material effect on its financial position or
results of operations.
<P>
-11-
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
NOTE 2 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
(CONT'D)
- -------------------------------------------------------
<P>
SFAS No. 134, "Accounting for Mortgage-Backed Securities
Retained after The Securitization of Mortgage Loans Held for
Sale by Mortgage Banking Enterprises", is effective for
financial statements issued in the first fiscal quarter
beginning after December 15, 1998. This statement is not
applicable to the Company.
<P>
SFAS No. 135, "Rescission of FASB Statement No. 75 and
Technical Corrections", is effective for financial
statements issued for fiscal years beginning February 1999.
This statement is not applicable to the Company.
<P>
On December 3, 1999 the Securities and Exchange
Commission ("SEC") staff issued Staff Accounting Bulletin
No. 101 (SAB 101) "Revenue Recognition in Financial
Statements" which reflects the basic principles of revenue
recognition in existing generally accepted accounting
principles. SAB 101 discusses such revenue recognition
issues as (1) Transfer of Title, (2) Substantial Performance
and Acceptance, (3) Nonrefundable Payments, (4) Accounting
for Certain Costs of Revenues, (5) Refundable Fees for
Services, (6) Estimates and Change in Estimates, (7) Fixed
or Determinable Fees and, (8) Implementing the Guidance on
SAB 101 because the Company has not realized any revenues
and is in the development stage, management does not believe
that SAB 101 has a material effect on the financial
statements.
<P>
In January 2000, the Emerging Issues Task Force issued
EITF 99-17 "Accounting for Advertising Barter Transactions"
establishes accounting and reporting requirements for such
transactions. Generally, the Task Force reached a consensus
that revenue and expenses from an advertising barter
transaction should be recognized at fair value of the
advertising surrendered. Although the Company is currently
seeking these kinds of barter arrangements, it is still in
the development stage and has not yet commenced operations.
As a result, management does not believe that EITF 99-17 has
a material effect on the financial statements.
<P>
-12-
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
(CONT'D)
- ------------------------------------------------------
<P>
On March 16, 2000 the Emerging Issues Task Force issued
EITF 99-19 "Recording Revenue as a Principal versus Net as
an Agent" which addresses the issue of how and when revenues
should be recognized on a Gross or Net method as the title
implies. How revenues are recognized have become
increasingly important because some investors may value
companies that primarily sell products on the Internet based
on a multiple of revenues rather than a multiple of gross
profits or earnings. The emerging Issues Task Force has not
reached a consensus but sites SEC Staff Accounting Bulletin
101.
<P>
The SEC considers the following factors:
<P>
1. Does the Company act as a principal in the
transaction?
2. Does the Company take title to the product?
3. Does the Company assume the risk of ownership?
4. Does the Company act as an agent or a broker?
<P>
On March 16, 2000 the Emerging Issues Task Force issued EITF
00-2 "Accounting for Web Site Development Costs" which
establishes accounting and reporting requirements for
website development costs including those costs associated
with planning, developing and operating a website.
Generally, costs associated with planning and operating a
website should be expensed while those costs associated in
developing should be capitalized (see note 4).
<P>
On July 20, 2000 the Emerging Issues Task Force issued EITF
00-14 "Accounting For Certain Sales Incentives" which
establishes accounting and reporting requirements for sales
incentives such as discounts, coupons, rebates and free
products or services. Generally, reductions in or refunds
of a selling price should be classified as a reduction in
revenue. For SEC registrants the implementation date is the
beginning of the fourth quarter after the registrant's
fiscal year end December 15, 1999. Management does not
believe that EITF 00-14 will have a material effect on the
financial statements.
<P>
Management anticipates generating revenues by entering into
strategic partnerships and/or acquisitions of other
electronic shopping sites, developing and selling there own
products and licensing agreements of various types, click
through fees, revenue sharing from sales, advertising sales
and auction fees. Since the Company has not generated any
revenues to date, management will evaluate its revenue
sources when realized and apply SAB 101 and EITF 99-19
accordingly.
<P>
-13-
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
(CONT'D)
- ------------------------------------------------------
<P>
In March, 2000 the FASB issued Interpretation No. 44,
"Accounting for Certain Transactions Involving Stock
Compensation, Interpretation of APB Opinion No. 25."
Interpretation No. 44 clarifies the application of
Accounting Principle Board Opinion No. 25 to certain issues
including: (1) the definition of employee for purposes of
applying APB No. 25, (2) the criteria for determining
whether a plan qualifies as a non-compensatory plan, (3) the
accounting consequences of various modifications to the
terms of a previously fixed stock option or award, and (4)
the accounting for an exchange of stock compensation awards
in business combinations. Management adopted the
application of the fair value method under FASB Statement
123 and, therefore, this Interpretation does not have a
material effect on the financial statements.
<P>
NOTE 3 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN
MATTERS
<P>
The Company's initial activities have been devoted to
developing a business plan, negotiating contracts and
raising capital for future operations and administrative
functions.
<P>
The accompanying financial statements have been
prepared on a going concern basis, which contemplates the
realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the financial
statements, development stage losses from June 22, 1999
(inception) to December 31, 2000, were $89,735. The
Company's cash flow requirements have been met by
contributions of capital and accounts payable.
<P>
The possibility exists that these sources of financing will
not continue to be available. If the company is unable to
generate profits, or unable to obtain additional funds for
its working capital needs, it may have to cease operations.
<P>
The Company intends to meet its long-term liquidity needs
through available cash as well as through additional
financing from outside sources. Management believes that
the existing working capital in combination with additional
paid-in capital will be sufficient to fund operations at
least through July 1, 2001 (see note 7).
<P>
The financial statements do not include any adjustments
relating to the recoverability and classification of
liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company'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.
<P>
-14-
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
NOTE 4 - INTANGIBLE ASSET WEBSITE
- ---------------------------------------
<P>
The website and related amortization consisted of the
following as of December 31, 2000 and June 30, 2000:
December 31, 2000 June 30, 2000
Website $ 27,135 $ 27,135
Less: Accumulated amortization (3,164) (450)
-------------------------------------
Total Website $ 23,971 $ 26,685
=====================================
<P>
Amortization expense for the six month period
ended December 31, 2000 and the year ended June 30, 2000 was
$2,714 and $450 respectively.
<P>
NOTE 5 - INCOME TAXES
- --------------------------
<P>
No provisions for income taxes have been made because
the Company has sustained cumulative losses since the
commencement of operations. For the six month period ended
December 31, 2000 and year ended June 30, 2000, the Company
had net operating loss carryforwards ("NOL's") of $89,735
and $56,597, respectively, which will be available to reduce
future taxable income and expense in the year ending
December 31 and June 30, 2015 respectively.
<P>
In accordance with SFAS No. 109 the Company has
computed the components or deferred income taxes as follows.
<P>
December 31, June 30,
2000 2000
----------------------------------
Deferred tax assets $ 17,498 $ 11,036
Valuation allowance (17,498) (11,036)
----------------------------------
Deferred tax asset, net $ - $ -
==================================
<P>
At December 31, 2000 and June 30, 2000, a valuation
allowance has been provided and realization of the
deferred tax benefit is not likely.
<P>
-15-
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
NOTE 5 - INCOME TAXES (CONT'D)
- ----------------------------------
<P>
The effective tax rate varies from the U.S. Federal
statutory tax rate for both the six-month periods ended
December 31, 2000 and year ended June 30, 2000, principally
due to the following:
<P>
U.S. statutory tax rate 15%
State and local taxes 4.5
Valuation (19.5)
-----------
Effective rate - %
===========
<P>
NOTE 6 - ACCOUNTS PAYABLE & ACCRUED EXPENSES
- ------------------------------------------------
<P>
Accounts payable and accrued expenses at December
31, 2000 & June 30, 2000 respectively consisted of the
following:
December 31, June 30,
2000 2000
---------------------------------
Accounts payable $ 2,067 $ 54,697
Shareholder loans 500 2,488
Accrued expenses 11,675 15,952
<P>
$ 14,242 $ 73,137
====================================
<P>
NOTE 7 - STOCKHOLDERS' EQUITY
- -----------------------------------
<P>
The Company issued 4,000,000 post-split common shares
upon incorporation to Intellilabs in exchange for consulting
services pertaining to the formation of the Company valued
at $200. This investor is deemed to be a founder and
affiliate of the Company. These shares have been adjusted
to give retroactive effect to a 2,000 to 1 stock split that
occurred on January 15, 2000.
<P>
-16-
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT) (CONT'D)
- ----------------------------------------------------
<P>
On January 4, 2000, the Board of Directors amended the
Articles of Incorporation. The number of authorized shares
of common stock was increased to 100,000,000. The par value
was changed to $0.0001 per share of common stock. The
financial statements have been retroactively adjusted to
reflect the effect of this change.
<P>
On January 15, 2000, the Board of Directors authorized
a 2,000 to 1 forward split of the Company's common stock,
par value $0.0001. Subsequent to the split there were
4,000,000 issued and outstanding. This transaction has been
given retroactive effect as if it occurred at inception
(June 22, 1999).
<P>
On March 1, 2000, the Company entered into an agreement
and plan of distribution ("spin-off") with Intellilabs.
Upon spin-off, the shareholders of Intellilabs received 1.31
shares of the Company's common stock for each share of
Intellilabs owned as of March 1, 2000, totaling 4,000,000
common shares. As a result of this spin-off and share
distribution Atlas Equity Group, Inc., a related party, in
which Michael D. Farkas is a beneficial owner, received
2,620,000 shares, representing approximately 56% of the
Company's outstanding common stock and Rebecca J. Farkas
(f/k/a Brock) received 655,000 shares representing
approximately 16% of the Company's common stock.
<P>
On May 30, 2000, the Board of Directors authorized the
issuance of 50,000 restricted shares of the Company's common
stock in exchange for consulting services rendered by the
Vice President. These shares were valued at $0.20 per share
due to their restrictive nature and are subject to Rule 144
of the SEC Act of 1933 as amended. This transaction was
valued at $10,000.
<P>
In June 2000, the Company entered into a private
offering of securities pursuant to Regulation D, Rule 504,
promulgated under the Securities Act of 1933 as amended.
Common shares were offered to non-accredited and
unaffiliated investors for cash consideration of $0.20 per
share. For the six month period ended December 31, 2000,
550,000 unrestricted common shares were issued to 22 non-
accredited and unaffiliated investors for cash consideration
totaling $110,000.
<P>
-17-
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
NOTE 7 - STOCKHOLDERS' EQUITY (DEFICIT) (CONT'D)
- ---------------------------------------------------
<P>
The proceeds from the sale of these securities were received
in July 2000 and have been recorded in the statement of
changes in stockholders' equity (deficit). Although the
Company has not gone through the administrative procedures
of issuing these shares, for purposes of these financial
statements, they are deemed to have been issued and
outstanding. The offering is now closed.
<P>
NOTE 8 - RELATED PARTY TRANSACTIONS
- ----------------------------------------
<P>
The Company issued 4,000,000 post-split common shares
upon incorporation to Intellilabs, the parent company, in
exchange for consulting services valued at $200. These
shares were subsequently distributed to the shareholders of
Intellilabs. Pursuant to an agreement and plan of
distribution.
<P>
On May 30, 2000 the Company issued 50,000 restricted
shares of the Company's common stock in exchange for
consulting services to Michelle Brock, a related party, and
Vice President of the Company. This transaction was valued
at $10,000.
<P>
Michael D. Farkas and Rebecca J. Farkas, his wife, an
officer and director, and a related party loaned the Company
$2,488 which covered the cost of the license fees to the
State of New York and the reservation costs associated with
reserving the desired internet address and other operating
expenses. No interest has been charged on these loans and
were paid on August 31, 2000.
<P>
In June 2000, the Company engaged WealthHound, Inc., a
related party, to develop and design its website. The
Company paid a total of $54,292 to WealthHound, Inc. in
connection with these services.
<P>
-18-
<P>
HIPSTYLE.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
<P>
NOTES TO FINANCIAL STATEMENTS
<P>
DECEMBER 31, 2000
<P>
NOTE 8 - RELATED PARTY TRANSACTIONS (CONT'D)
- ------------------------------------------------
<P>
In July 2000, the Company agreed to reimburse Atlas
Equity Group, Inc., a related party, beneficial owner of
which is Michael D. Farkas, $2,000 per month (on a month-to-
month basis) for rent and other operating expenses. Prior
to July 2000, the Company had been relatively inactive, did
not require and was not occupying any office space. Because
of recent developments and the completion of their business
plan, management now has agreed to occupy space from Atlas
Equity Group, Inc., a related party, beneficial owner of
which is Michael D. Farkas.
<P>
In August 2000, the Company engaged OSRS Communications
a subsidiary of WealthHound.com, Inc., a related party, to
provide web hosting services for $90 per month.
<P>
-19-
<P>
Item 2. Management's Discussion and Analysis
- ---------------------------------------------
<P>
The following discussion and analysis should be read in
conjunction with the financial statements of the Company and
the accompanying notes appearing subsequently under the
caption "Financial Statements."
<P>
The following discussion and analysis contains forward-looking
statements, which involve risks and uncertainties.
The Company's actual results may differ significantly from
the results, expectations and plans discussed in these
forward-looking statements.
<P>
The Company's operations have been devoted primarily to
developing a business plan and raising capital for future
operations and administrative functions. The Company
intends to grow through internal development, strategic
alliances, and acquisitions of existing businesses. Because
of uncertainties surrounding its development, the Company
anticipates incurring development stage losses in the
foreseeable future. The ability of the Company to achieve
its business objectives is contingent upon its success in
raising additional capital until adequate revenues are
realized from operations.
<P>
Development stage expenses during the six months ended
December 31, 2000 were $33,138 as compared to $4,413 for the
period ended December 31, 1999. For the period of June 22,
1999 (Inception) through December 31, 2000 development stage
expenses totaled $89,735. The expenses incurred were
primarily due to various consulting, managerial professional
services in connection with its Form 10 filing and in
connection with its pursuit of the Company's objectives, as
well as professional fees incurred in connection with the
Company's annual and quarterly regulatory filings. On-going
increases to development stage expenses are anticipated.
<P>
Liquidity and Capital Resources
<P>
Despite capital contributions and both related party and
third party loan commitments, the company from time to time
experienced, and continues to experience, cash flow
shortages that have slowed the Company's growth.
<P>
The Company has primarily financed its activities from sales
of capital stock of the Company and from loans from related
and third parties. A significant portion of the funds
raised from the sale of capital stock has been used to cover
working capital needs such as office expenses and various
consulting fees.
<P>
The Company continues to experience cash flow shortages, and
anticipates this continuing through the foreseeable future.
Management believes that additional funding will be
necessary in order for it to continue as a going concern.
The Company is investigating several forms of private debt
and/or equity financing, although there can be no assurances
that the Company will be successful in procuring such
financing or that it will be available on terms acceptable
to the Company.
<P>
PART II. - OTHER INFORMATION
<P>
Item 1. LEGAL PROCEEDINGS
Not applicable
<P>
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
<P>
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
<P>
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY
HOLDERS
Not applicable
<P>
Item 5. OTHER INFORMATION
None
<P>
Item 6. EXHIBITS AND REPORTS OF FORM 8K
None
<P>
SIGNATURES
<P>
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.
<P>
HIPSTYLE.COM, INC.
<P>
/s/Rebecca Brock
----------------------------------
Rebecca Brock
President, Treasurer and
Secretary
<P>
Date: February 20, 2001
<P>
/s/ Michelle Brock
----------------------------------
Michelle Brock
Vice President
<P>
Date: February 20, 2001
<P>