U.S. 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 September 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT
For the transition period from to
Commission File No. 0-32033
I-TELECO.COM, INC.
(Name of Small Business Issuer in Its Charter)
Florida
(State of Other Jurisdiction of
Incorporation or Organization)
65-0928369
(I.R.S. Employer
Identification No.)
1221 Brickell Avenue, Suite 900, Miami, Florida 33131
(Address of Principal Executive Offices) (Zip Code)
(305) 358-3678
(Issuer's Telephone Number, Including Area Code)
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: As of December 12, 2001 the Company
had 20,014,161 shares of Common Stock outstanding, $0.0001 par value.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BASIS OF PRESENTATION
The accompanying unaudited financial statements are presented in accordance with
generally accepted accounting principles for interim financial information and
the instructions to Form 10-QSB and item 310 under subpart A of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The accompanying statements should be read in conjunction with the audited
financial statements for the year ended December 31, 2000. In the opinion of
management, all adjustments (consisting only of normal occurring accruals)
considered necessary in order to make the financial statements not misleading,
have been included. Operating results for the nine months ended September 30,
2001 are not necessarily indicative of results that may be expected for the year
ending December 31, 2001. The financial statements are presented on the accrual
basis.
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
I-TELECO.COM, INC.
(A Development Stage Entity)
TABLE OF CONTENTS
Balance Sheets 2
Statements of Operations 3
Statements of Stockholders' Equity (Deficit) 4
Statements of Cash Flows 5-6
Notes to Financial Statements 7-13
Item 2. Management's Discussion and Analysis of Financial
Conditions 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
On July 15, 2001 a majority of the shareholders of the Company removed Joshua
Lurie as director of the Company. No shareholder meeting was held.
Item 5. Other Information
Signatures
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
AND 2000 AND FOR THE PERIOD DECEMBER 16, 1998
(DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2001
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
TABLE OF CONTENTS Page
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT 1
AS OF SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
AND 2000 AND FOR THE PERIOD DECEMBER 16, 1998
(DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2001
Balance sheets 2
Statements of operations 3
Statements of stockholders' equity (deficit) 4
Statements of cash flows 5-6
Notes to financial statements 7-13
INDEPENDENT AUDITORS' REPORT
To the Stockholders and
Board of Directors
I-Teleco.com, Inc.
(A Development Stage Company)
Miami, Florida
We have audited the accompanying balance sheet of I-Teleco.com, Inc. (a
development stage company) as of December 31, 2000 and the related statement of
operations, change in stockholders' equity and cash flow for the year ended
December 31, 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe the audit provides a reasonable
basis for our opinion.
In our opinion, the financial statement referred to above present fairly, in all
material respects, the financial position of I-Teleco.com, Inc. as of December
31, 2000, and the result of its operations and its cash flow for the year ended
December 31, 2000 in conformity with accounting principles generally accepted in
the United States of America.
The accompanying financial statement has been prepared assuming the Company will
continue as a going concern. As discussed in Note 4 to the financial statement,
the Company is a development stage company. The realization of a major portion
of its assets is dependent upon its ability to meet its future financing
requirements, and the success of future operations. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statement does not include any adjustments that might result from
this uncertainty.
Salibello & Broder LLP
New York, NY
April 4, 2001
-1-
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
- -------------------------------------------------------------------------------
(UNAUDITED)
SEPTEMBER 30, 2001 DECEMBER 31, 2000
------------------ -----------------
ASSETS
CURRENT ASSETS:
Cash $ 246 $ 49
Prepaid expenses 0 425
------------------ -----------------
Total current assets 246 474
TOTAL ASSETS $ 246 $ 474
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 97,137 $ 49,268
Due to shareholder 0 50,000
Note payable-related parties 95,650 35,350
Loans and advances payable-related party 0 102,365
------------------ -----------------
Total current liabilities 192,787 236,983
STOCKHOLDERS' EQUITY:
Common Stock, par value $.001 per share; 50,000,000 shares
authorized; 20,014,161 & 19,000,000 shares issued and
outstanding at September 30, 2001 & December 31, 2000, respectively 20,014 19,000
Additional paid-in capital (18,914) (18,900)
Deficit accumulated during the development stage (193,641) (236,609)
------------------ -----------------
Total stockholders' equity (192,541) (236,509)
------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 246 $ 474
================== =================
The accompanying notes are an integral part of
these financial statements.
-2
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
- -------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
(UNAUDITED) (UNAUDITED) (UNAUDITED)
NINE MONTHS ENDED THREE MONTHS ENDED FOR THE PERIOD
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 16, 1998
(DATE OF INCEPTION) TO
2001 2000 2001 2000 SEPTEMBER 30, 2001
---- ---- ---- ---- ------------------
DEVELOPMENT STAGE REVENUES $ 0 $ 0 $ 0 $ 0 $ 0
------------ ------------ ------------ ------------ ------------
DEVELOPMENT STAGE EXPENSES:
Amortization 0 0 0 0 100
Accounting 14,127 2,500 5,958 2,500 22,127
Bank charges 147 160 45 56 455
Consulting fees 2,669 268 819 188 9,383
Equpiment- rental 0 799 0 320 1,599
On-line services 225 0 75 0 350
Dues and subscriptions 0 175 0 0 175
Domain names 0 50,000 0 50,000 50,000
Insurance expense 3,106 3,827 460 1,700 7,783
Legal fees 6,852 6,414 275 2,815 15,561
Corporate fees 5,008 1,364 527 0 5,008
Office general 0 843 0 13 868
Wages 65,384 80,701 2,884 28,846 179,738
Seminars and conferences 0 2,115 0 0 2,115
Payroll taxes 5,392 6,292 221 1,928 12,172
Telephone 370 3,517 (58) 992 4,790
Travel 566 8,045 0 462 8,954
Website development 0 18,538 0 18,538 18,538
Miscellaneous 0 18 0 8 230
Printing 315 0 0 0 315
------------ ------------ ------------ ------------ ------------
TOTAL DEVELOPMENT STAGE EXPENSES 104,161 185,576 11,206 108,366 340,261
------------ ------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (104,161) (185,576) (11,206) (108,366) (340,261)
GAIN ON CANCELLATION OF INDEBT 152,365 0 50,000 0 152,365
INTEREST EXPENSE (5,236) (21) (1,453) (21) (5,745)
------------ ------------ ------------ ------------ ------------
NET GAIN / (LOSS) $ 42,968 $ (185,597) $ 37,341 $ (108,387) $ (193,641)
============ ============ ============ ============ ============
LOSS PER COMMON SHARE
Basic & diluted $ 0.00 $ (0.01) $ 0.00 $ (0.01)
============ ============ ============ ============
Weighted-average number of common
shares outstanding 19,491,698 19,000,000 20,014,120 19,000,000
============ ============ ============ ============
The accompanying notes are an integral part of these financial statements
-3-
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)
- -------------------------------------------------------------------------------
ADDITIONAL
COMMON STOCK PAID-IN
SHARES AMOUNT CAPITAL
------ ------ -------
Balance, December 16, 1998 (date of inception) 0 $ 0 $ 0
Common stock issued to related party for management services 19,000,000 19,000 (18,900)
Loss during the development stage for the period
December 16, 1998 (date of inception) through December 31, 1998 0 0 0
---------- ---------- ----------
Balance, December 31, 1998 19,000,000 19,000 (18,900)
Loss during the development stage for the year
ended December 31, 1999 0 0 0
---------- ---------- ----------
Balance, December 31, 1999 19,000,000 19,000 (18,900)
Loss during the development stage for the year ended
December 31, 2000 0 0 0
---------- ---------- ----------
Balance, December 31, 2000 19,000,000 19,000 (18,900)
Increase in common stock issued resulting from agreement and
plan of distribution ("spin-off") 14,120 14 (14)
Shares issued for services rendered by Josh Lurie 1,000,000 1,000 0
Gain during the development stage for the nine months ended
September 30, 2001 0 0 0
---------- ---------- ----------
Balance, September 30, 2001 20,014,120 $ 20,014 $ (18,914)
========== ========== ==========
DEFICIT
ACCUMULATED
DURING THE
DEVELOPMENT
STAGE TOTAL
----- -----
Balance, December 16, 1998 (date of inception) $ 0 $ 0
Common stock issued to related party for management services 0 100
Loss during the development stage for the period
December 16, 1998 (date of inception) through December 31, 1998 (100) (100)
---------- ----------
Balance, December 31, 1998 (100) 0
Loss during the development stage for the year
ended December 31, 1999 (7,549) (7,549)
---------- ----------
Balance, December 31, 1999 (7,649) (7,549)
Loss during the development stage for the year ended
December 31, 2000 (228,960) (228,960)
---------- ----------
Balance, December 31, 2000 (236,609) (236,509)
Increase in common stock issued resulting from agreement and
plan of distribution ("spin-off") 0 0
Shares issued for services rendered by Josh Lurie 0 0
Gain during the development stage for the nine months ended
September 30, 2001 42,968 42,968
---------- ----------
Balance, September 30, 2001 $ (193,641) $ (193,541)
========== ==========
The accompanying notes are an integral part of
these financial statements.
-4-
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
- -------------------------------------------------------------------------------
(UNAUDITED) (UNAUDITED)
NINE MONTHS ENDED FOR THE PERIOD
SEPTEMBER 30, DECEMBER 16, 1998
(DATE OF INCEPTION) TO
2001 2000 SEPTEMBER 30, 2001
---- ---- ------------------
OPERATING ACTIVITES
Income (Deficit) accumulated during the development stage $ 42,968 $ (185,597) $ (193,641)
Adjustments to reconcile net loss to net cash used by
operations
Amortization 0 0 100
Stock issued for management services 1,000 0 1,000
Changes in assets and liabilities
(Increase) Decrease in prepaid expenses 425 0 0
Increase (Decrease) in accounts payable and accrued
expenses 47,869 33,743 97,137
----------------- ---------------- ----------------
Net cash provided (used) by operating activities 92,262 (151,854) (95,404)
----------------- ---------------- ----------------
INVESTING ACTIVITIES:
Net cash used for investing activities 0 0 0
----------------- ---------------- ----------------
FINANCING ACTIVITIES
Notes payable - related party 60,300 5,000 95,650
Proceeds from loans and advances-related party (102,365) 96,803 0
Proceeds from short term borrowings-net (50,000) 50,000 0
----------------- ---------------- ----------------
Net cash provided (used) for financing activities (92,065) 151,803 95,650
----------------- ---------------- ----------------
INCREASE (DECREASE) IN CASH $ 197 $ (51) $ 246
================= ================ ================
CASH, BEGINNING OF PERIOD $ 49 $ 51 $ 0
================= ================ ================
CASH, END OF PERIOD $ 246 $ 0 $ 246
================= ================ ================
The accompanying notes are an integral part of
these financial statements.
-5-
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
During the nine months ended September 30, 2001 and for the cumulative
period December 16, 1998 (date of inception) to September 30, 2001, the
Company did not pay any interest.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVIITES
The Company entered into the following non-cash transactions:
During the period ended December 31, 1998, the Company issued
19,000,000, post split, shares of common stock to I-Incubator.Com, Inc.
formerly known as Master Communications, Corp. in consideration of
management services in connection with the formation of the Company.
The transaction was valued at $100 (See note 8).
On January 19, 2001 the Company entered into an agreement and plan of
distribution ("spin-off") with its parent company Incubator.
Shareholders of Incubator received .7810 shares of the Company's common
stock for each share of incubator. The spin-off resulting in 14,120
additional shares issued due to rounding. The transaction was valued at
$14 (See note 8).
On May 22, 2001, the Company issued 1,000,000 shares of common stock in
consideration of management services rendered to the Company. This
transaction was valued at $1,000. (See note 8).
The accompanying notes are an integral part of
these financial statements.
-6-
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. ORGANIZATION
I-Teleco.com, Inc. ("the Company"), formerly Mastertel Communications
Corp., was incorporated on December 16, 1998 under the laws of the State of
Florida. The Company's operations have been devoted primarily to
structuring and positioning itself to provide telecommunication services in
various markets throughout the United States. The Company intends to grow
through internal development, strategic alliances and acquisitions of
existing business. The company has the authority to issue 50,000,000 shares
of common stock. The Company is a development stage company and has had
limited activity.
The Company was a wholly owned subsidiary of I-Incubator.com, Inc.
("Incubator"), formerly known as Master Communication, Inc., a publicly
traded company listed on the OTC Electronic Bulletin Board (OTCBB:INQU). On
January 19, 2001, the Company entered into an agreement and plan of
distribution ("spin-off") with Incubator. Upon spin-off, the shareholders
of I-Incubator received 0.7810 shares of the Company's common stock for
each share of Incubator owned as of February 13, 2001, totaling 19,014,120
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 3,999,985 shares, representing approximately 21%
of the Company's outstanding common stock, The Farkas Group, Inc., in which
Michael D. Farkas is a beneficial owner, received 2,577,300 shares
representing approximately 13.5% of the Company's common stock and GSM
Communications, Inc. in which Michael D. Farkas is a beneficial owner,
received 2,153,217 shares representing approximately 11.3% of the Company.
Also, as a result of the spin off I-Incubator agreed to cancel the debt
owed by the Company of $102,365.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
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 and reporting period. Accordingly, actual results
could differ from those estimates.
CASH AND CASH EQUIVALENTS
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.
-7-
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
CARRYING VALUES
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.
INCOME TAXES
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.
NET LOSS PER SHARE
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 net losses for all periods, and since there are no convertible
instruments, basic loss per share and diluted loss per share are the same.
-8-
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS
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.
STOCK COMPENSATION
Stock-based compensation is recognized using the intrinsic value method
prescribed in Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations.
Accordingly, compensation expense for stock options is measured as the
excess, if any, of the fair value of the Company's'stock at the date of the
grant over the amount an employee must pay to acquire the stock and is
amortized over the vesting period. The Company has adopted the disclosure
provisions of SFAS No. 123, Accounting for Stock-Based Compensation, which
requires the Company to disclose the pro forma effects on earnings and
earnings per share as if SFAS No. 123 had been adopted.
3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
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.
In June 2000, the Financial Accounting Standards Board issued SFAS No. 138,
"Accounting for Derivative Instruments and Hedging Activities - An
Amendment of FASB Statement No. 133." SFAS 138 amends the accounting and
reporting standards for certain derivatives and hedging activities such as
net settlement contracts, foreign currency transactions and inter company
derivatives. The Company does not currently hold derivative instruments or
engage in hedging activities. The requirements of SFAS 138 does not have a
material effect on our financial statements and related disclosures.
-9-
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN MATTERS
The Company's initial activities have been devoted to developing a business
plan, structuring and positioning itself to take advantage of opportunities
available in the internet industry and raising capital for future
operations and administrative functions.
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.
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 December 16, 1998 (date of
inception) to September 30, 2001 aggregated $193,641. The Company's cash
flow requirements during this period have been met by contributions of
capital and debt financing. No assurance can be given that these sources of
financing will 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.
The financial statements do not include any adjustments relating to the
recoverability and classification of assets or liabilities that might be
necessary should the Company be unable to continue as a going concern.
5. INCOME TAXES
No provisions for income taxes have been made because the Company has
sustained cumulative losses since the commencement of operations. As of
September 30, 2001 and December 31, 2000, the Company had net operating
loss carryforwards ("NOL's") of $193,641 and $236,609, respectively, which
will be available to reduce future taxable income and expense in the year
ending December 31, 2015 and 2014, respectively.
In accordance with SFAS No. 109 the Company has computed the components or
deferred income taxes as follows.
September 30, December 31,
2001 2000
---- ----
Deferred tax assets $ 76,488 $ 93,461
Valuation allowance (76,488) (93,461)
------------ -------------
Deferred tax asset, net $ - $ -
============ =============
-10-
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
At September 30, 2001 and December 31, 2000, a valuation allowance has
provided and realization of the deferred tax benefit is not likely.
The effective tax rate varies from the U.S. Federal statutory tax rate for
both the periods ended September 30, 2001 and December 31, 2000,
principally due to the following
U.S. statutory tax rate 34%
State and local taxes 5.5
Valuation allowance (39.5)
Effective rate - %
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses as of September 30, 2001 and December
31, 2000 consisted of the following:
September 30, December 31,
2001 2000
Accounts payable $ 86,992 $ 44,759
Accrued expenses 4,400 4,000
Accrued interest 5,745 509
-------------- --------------
Total accounts payable and accrued expenses $ 97,137 $ 49,268
============== ==============
7. NOTE PAYABLE
As of September 30, 2001 and December 31, 2000, notes payable consist of
twenty nine and ten individual notes aggregating a total of $95,650 and
$35,350, respectively. These notes are short-term borrowings with
maturities of less then or equal to one year with an interest rate ranging
from 8.25% to 11%.
-11-
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
8. STOCKHOLDERS' EQUITY
On December 16, 1998 the Company issued 1,000 restricted common shares to
I-Incubator.com, Inc. ("Incubator"), formerly known as Master Communication
Corp. in consideration for services rendered in formation of the company
valued at $100.
On May 18, 2000, the Company authorized a forward split of 19,000 to 1 on
its common stock. Immediately following the split Incubator owned
19,000,000 restricted common shares.
On January 19, 2001 the Company entered into an agreement and plan of
distribution ("spin-off") with its parent company Incubator. Shareholders
of Incubator received .7810 shares of the Company's common stock for each
share of incubator. The spin-off resulting in 14,120 additional shares
issued due to rounding. This transaction was valued at $14.
On May 22, 2001 the Company authorized the issuance of 1,000,000 shares of
restricted common stock to Josh Lurie for services rendered to the Company.
This transaction was valued at $1,000.
9. RELATED PARTY TRANSACTIONS
The Company has received funds from Incubator to meet various working
capital requirements. As of December 31, 2000, these advances totaled
$102,365 and are non-interest bearing and due on demand. In January 2001,
the total amount of debt was cancelled due to a spin off agreement with
Incubator.
On March 1, 2000, the Company agreed to reimburse Atlas Equity Group, Inc.,
a related party, $160 per month (on a month-to-month basis) for the use of
a laptop computer. Atlas Equity Group, Inc. is owned by Michael D. Farkas.
The contract was cancelled by the end of 2000.
On September 1, 2000, the Company entered into an agreement with Michael D.
Farkas, the director of Incubator and a related party, to purchase a domain
name, I-Teleco.com, for $50,000. On August 24, 2001, the Company and
Michael D. Farkas entered into an agreement to cancel this transaction.
Accordingly, the $50,000 due to Michael D. Farkas under the original
agreement was cancelled by Mr. Farkas in consideration for the return of
the Company's domain names. The $50,000 is reflected as cancellation of
debt in the accompanying financial statements.
-12-
I-TELECO.COM, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
On October 5, 2000, the Company entered into an agreement with Envitro.com,
Inc., a related party, to design and construct a Website for $18,538.
Envitro .com, Inc. is a subsidiary of WealthHound.com, Inc., in which
Michael D. Farkas is a beneficial owner.
Between October 2000 and September 30, 2001, the Company issued to Atlas
Equity Group, Inc. twenty one promissory notes aggregating $64,300. The
promissory notes bear interest of 10% per annum and were due and payable on
dates ranging from January 2001 through June 2002. Michael Farkas is a
beneficial owner of Atlas Equity.
Between September 2000 and September 30, 2001, the Company issued to
Ostonian Securities Limited seven promissory notes aggregating $27,750. The
promissory notes bear interest of 8.25% per annum and are due and payable
on dates ranging from September 2001 through December 2001. Atlas Equity
Group, Inc., in which Michael Farkas is a beneficial owner, acts as an
advisor and consultant to Ostonian.
10. SUBSEQUENT EVENT
In October 25, 2001, the Company issued a promissory note to Atlas Equity
Group, Inc., a related party in which Michael D. Farkas is a beneficial
owner, for an amount of $100 at a rate of 10% per annum. The promissory
note principal amount and accrued interest are due and payable on October
24, 2002.
In November 14, 2001, the Company issued a promissory note to Atlas Equity
Group, Inc., a related party in which Michael D. Farkas is a beneficial
owner, for an amount of $350 at a rate of 10% per annum. The promissory
note principal amount and accrued interest are due and payable on November
13, 2002.
On November 29, 2001, the Company entered into a non-binding Memorandum of
Understanding ("MOU") with an unrelated company with respect to a possible
transaction between the parties. In connection with the MOU, the unrelated
company loaned the Company $25,000 (the "Loan"). The Loan was due and
payable by December 14, 2001, if a transaction as contemplated by the MOU
was not executed by such date. The Loan bears interest at the rate of one
and one half percent (1.5%) per month on the unpaid portion of the Loan or
the highest interest allowed by the laws and regulations of the State of
New York, whichever is the higher, compounded monthly. On December 11,
2001, the Company agreed to the assignment of the MOU, and the Loan
thereunder, to another unrelated entity. Also on December 11, 2001, the
assignee of the MOU and the Company amended the MOU by extending the Loan
repayment date to January 20, 2002.
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Item 2. Management's Discussion and Analysis
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The following plan of operation provides information which management believes
is relevant to an assessment and understanding of our results of operations and
financial condition. The discussion should be read along with our financial
statements and notes thereto. I-Teleco.com, Inc., is a development - stage
company. Because the Company has not generated any revenue, it intends to report
its plan of operation below.
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.
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.
PERIOD FROM DECEMBER 16, 1998 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 2001
Our cumulative net losses since the inception are attributable to the fact that
we have not derived any revenue from operations to offset out business
development expenses.
Operating expenses since inception have amounted to $193,641, primarily
consisting of accounting ($22,127), legal ($15,561), salary ($179,738), the
purchase of the Company's domain name ($50,000) and website development fees
($18,538). The Company also had other income resulting from the cancellation of
debt owed to the parent Company I-Incubator.com, Inc. ($102,365) and an
agreement made between the Company and Michael Farkas to return ownership of its
domain names in return for the cancellation of debt owed to Mr. Farkas ($5,000).
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000
Development stage income during the nine months ended September 30, 2001 was
$42,968 as compared to expenses of $185,597 for the nine months ended September
30, 2000.
Expenses for the nine months ended September 30, 2001 were primarily salary
($65,384) accounting ($14,127), legal ($6,852), and corporate fees ($5,008).
These fees are related to the Company's form 10 annual and quarterly regulatory
filings along with the expenses incurred as a result of the spin-off from
I-Incubator. The Company also had other income resulting from the cancellation
of debt owed to the parent Company I-Incubator.com, Inc. ($102,365) and an
agreement made between the Company and Michael Farkas to return ownership of its
domain names in return for the cancellation of debt owed to Mr. Farkas ($5,000).
Item 2. Management's Discussion and Analysis (cont.)
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Expenses for the nine months ended September 30, 2000 were primarily the
purchase of the Company's domain names ($50,000), development of its Website
($18,538) along with salary (80,701).
THREE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000
Development stage income during the three months ended September 30, 2001 was
$37,341 as compared to $108,387 for the period ended September 30, 2000.
Expenses for the three months ended September 30, 2001 were primarily salary
($2,884) along with accounting ($5,958) and legal fee ($274) in connection with
quarterly regulatory filings. The Company also had other income from the
cancellation of debt owed to Michael Farkas in return for the return of Mr.
Jarkas' rights to the Company's domain name.
Expenses for the three months ended September 30, 2000 were primarily the
purchase of the Company's domain names ($50,000), development of its Website
($18,538) along with salary ($28,846).
Liquidity and Capital Resources
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.
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.
For the nine months ended September 30, 2001, we had a net income of $42,968.
Our accumulated deficit since inception is $193,641. Such accumulated losses
have resulted primarily from costs incurred in the development of website,
salary and various professional fees.
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None
Item 3. Defaults Upon Senior Securities. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports of Form 8-K. None
SIGNATURES
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 in its
behalf by the undersigned, thereunto duly authorized, on December 12, 2001.
I-Teleco.com, Inc.
(Registrant)
Date: December 12, 2001 /s/ Jamee Kalimi
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President