UNITED STATES 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 November 30, 1999.
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required) for the transition period from _____ to ______.
Commission file number: 000026965
Replacement Financial, Inc.
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(Name of Small Business Issuer in Its Charter)
Nevada 88-0408426
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7432 South Carling Circle, Salt Lake City, Utah 84121
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(Address of Principal Executive Offices)(Zip Code)
801-944-0701
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(Issuer's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Exchange Act:
Title of Each Class: None
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Name of each exchange on which registered: N/A
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Securities to be registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value
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(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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. [X] Yes [ ] No
The number of shares outstanding of the Company's common stock ($0.001
par value), as of January 4, 2000 was 22,000,000 shares.
Total of Sequentially Numbered Pages: 16
Index to Exhibits on Page: 6
TABLE OF CONTENTS
PART I
ITEM 1. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION. . . . . . . . . . . . . . . . . . . . . . . . 3
PART II
ITEM 5. OTHER INFORMATION . . . . . . . .. . . . . . . . . . . . . . . . 4
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 5
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2
PART I
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ITEM 1. FINANCIAL STATEMENTS
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The Company's unaudited financial statements, which are attached hereto
as pages F-7 through F-12, include: a) Balance Sheet - November 30, 1999; b)
Statements of Operations - Six Months Ended November 30, 1999 and 1998, and
Inception to November 30, 1999; c) Statements of Stockholders' Equity
Inception to November 30, 1999; d) Statements of Cash Flows - Six Months Ended
November 30, 1999 and 1998, and Inception to November 30, 1999; e) Notes to
Consolidated Financial Statements.
In the opinion of management, the accompanying unaudited financial
statements included in this Form 10-QSB reflect all adjustments (consisting
only of normal recurring accruals) necessary for a fair presentation of the
results of operations for the periods presented. The results of operations
for the periods presented are not necessarily indicative of the results to be
expected for the full year.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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Results of Operations
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Six Month periods Ended November 30, 1999 and 1998
The Company had no revenue from continuing operations for the six-month
periods ended November 30, 1999 and 1998.
General and administrative expenses for the six month period ended
November 30, 1999, consisted of general corporate administration, legal and
professional expenses, and accounting and auditing costs. These expenses were
$7,570 for the six-month period ended November 30, 1999. There were no such
costs for the comparable period in 1998.
Interest expense in the six-month period ended November 30, 1999, was
$333 on a note payable to a third party in the principal amount of $5,000 due
March 31, 2000. There was no interest expense during the comparable period in
1998.
As a result of the foregoing factors, the Company realized a net loss of
$7,903 for the six months ended November 30, 1999, as compared to no gain or
loss for the same period in 1998.
Liquidity and Capital Resources
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At November 30, 1999, the Company had a working capital deficit of
$8,158. The Company's cash in the amount of $7,175 resulted from two loans
from a third party, which bear interest at the rate of 10% per annum. The
loans in the amount of $5,000 and $10,000 are due March 31, 2000 and January
1, 2001 respectively. The funds were loaned to the Company to fund its
revival and finance its becoming a reporting company under the Securities
Exchange Act of 1934. Management believes that the Company has sufficient
cash to meet its anticipated needs through at least the first calendar quarter
3
of 2000. However, there can be no assurances to that effect, as the Company
has no revenues and its need for capital may change dramatically if it
acquires an interest in a business opportunity during that period. The
Company's current operating plan is to (i) handle the administrative and
reporting requirements of a public company; and (ii) search for potential
businesses, products, technologies and companies for acquisition. At present,
the Company has no understandings, commitments or agreements with respect to
the acquisition of any business, product, technology or company and there can
be no assurance that the Company will identify any such business, product,
technology or company suitable for acquisition in the future. Further, there
can be no assurance that the Company would be successful in consummating any
acquisition on favorable terms or that it will be able to profitably manage
the business, product, technology or company it acquires. If the Company is
unable to participate in a business venture, it may require additional capital
to continue its search for a business venture and avoid dissolution. In this
event, it is anticipated that the Company will seek extension of its note
payable, as well as additional debt financing. The holder of the note payable
has verbally committed to provide these considerations for a term of at least
twenty-four (24) months from May 31, 1999, or until the Company acquires or
establishes active business operations.
PART II
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ITEM 5. OTHER INFORMATION
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On November 11, 1999 the Company received a cash infusion of $10,000
from a third party. In connection with this cash infusion, the Company
executed a note to the third party in consideration of the $10,000 loan. The
note is due in full on January 1, 2001 and accrues interest at 10% per annum.
Under the terms of the note, interest does not begin accruing until January
2000.
On November 15, 1999, the Company's board of directors approved: 1) a
10-for-1 forward stock split on the Company's $0.001 par value authorized
common stock; and 2) a 10-for-1 forward stock split on the Company's issued
and outstanding common stock, $0.001 par value, with any fractional shares
rounded up to the nearest whole number ("forward stock split"). The forward
stock split became effective January 10, 2000, the date that the Certificate
of Amendment of Articles of Incorporation of the Company was filed with the
Secretary of State, State of Nevada. As a result of the forward stock split,
instead of the Company having 25,000,000 shares of common stock authorized and
2,200,000 shares of common stock issued and outstanding, it now has
200,000,000 shares of common stock authorized and 22,000,000 shares of common
stock issued and outstanding. Each share of common stock held of record as of
the Record Date, November 15, 1999, shall automatically be increased to ten
shares of the same class. The Board of Directors and officers of the Company
are taking all actions necessary to effectuate the 10-for-1 forward stock
split, including the issuance of additional stock certificates to all
shareholders of record as of the Record Date.
4
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits. Exhibits required to be attached by Item 601 of Regulation
S-B are listed in the Index to Exhibits of this Form 10-QSB, which is
incorporated herein by reference. Included only with the electronic
filing of this report is the Financial Data Schedule for the six-month
period ended November 30, 1999 (Exhibit Ref. No. 27).
(b) Reports on Form 8-K. No reports on Form 8-K have been filed during the
last quarter of the period covered by this report.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed by the undersigned, thereunto duly
authorized, this 12th day of January, 2000.
Replacement Financial, Inc.
/s/ Kari Cunningham
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Kari Cunningham, President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dated indicated.
/s/ Kari Cunningham Date: January 12, 2000
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Kari Cunningham, President, Secretary, Treasurer and Director
/s/ Brian Ortega Date: January 12, 2000
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Brian Ortega, Director
5
INDEX TO EXHIBITS
SEC Ref Page
No. No. Description
- ------- ---- -----------
3(i)(a) * Articles of Incorporation of the Company, filed with
the State of Nevada on June 25, 1996.
3(i)(b) * Certificate of Amendment of Articles of Incorporation,
filed with the State of Nevada on April 26, 1999.
3(i)(c) * Certificate of Amendment of Articles of Incorporation,
filed with the State of Nevada on August 19, 1999.
3(i)(d) 13 Certificate of Amendment of Articles of Incorporation,
filed with the State of Nevada on January 10, 2000.
3(ii) * Bylaws of the Company.
10(a) 15 Promissory Note dated April 1, 1999 executed by the
Company.
10(b) 16 Promissory Note dated January 1, 2000 executed by the
Company.
27 ** Financial Data Schedule for the six-month period ended
November 30, 1999.
* The listed exhibits are incorporated herein by this reference to the
Registration Statement on Form 10-SB filed by the Company with the
Securities and Exchange Commission on August 6, 1999.
** The Financial Data Schedule is presented only in the electronic filing
with the Securities and Exchange Commission.
6
REPLACEMENT FINANCIAL, INC.
(A Development Stage Company)
Unaudited Balance Sheet
ASSETS
--------
November 30,
1999
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CURRENT ASSETS
Cash $ 7,175
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Total Current Assets 7,175
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TOTAL ASSETS $ 7,175
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
Note payable - (Note 5) $ 15,000
Accrued interest - (Note 5) $ 333
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Total Current Liabilities 15,333
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STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.001 par value,
5,000,000 shares authorized, -0- shares
issued and outstanding --
Common stock, $0.001 par value,
25,000,000 shares authorized, 2,200,000
issued and outstanding 2,200
Deficit accumulated during the development stage (10,358)
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Total Stockholders' equity (Deficit) (8,158)
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 7,175
===========
The accompanying notes are an integral part of these financial statements.
F-7
REPLACEMENT FINANCIAL, INC.
(A Development Stage Company)
Unaudited Statements of Operations
From
Inception on
For the June 25,
Six Months Ended 1996 Through
November 30, November 30,
1999 1998 1999
---------- ---------- ----------
NET SALES $ -- $ -- $ --
---------- ---------- ----------
COST OF SALES -- -- --
---------- ---------- ----------
GROSS MARGIN -- -- --
---------- ---------- ----------
EXPENSES
General and administrative 7,570 -- 10,025
---------- ---------- ----------
Interest expense 333 -- 333
---------- ---------- ----------
Total Expenses 7,903 -- 10,358
---------- ---------- ----------
LOSS FROM OPERATIONS $ (7,903) $ -- $(10,358)
---------- ---------- ----------
NET LOSS $ (7,903) $ -- $(10,358)
========== ========== ==========
BASIC LOSS PER SHARE (0.00) (0.00)
========== ==========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 2,200,000 2,200,000
========== ==========
The accompanying notes are an integral part of these financial statements.
F-8
REPLACEMENT FINANCIAL, INC.
(A Development Stage Company)
Unaudited Statements of Stockholders' Equity (Deficit)
From Inception on June 25, 1996 through November 30, 1999
Deficit
Accumulated
Preferred Stock Common Stock During the
----------------- ----------------- Development
Shares Amount Shares Amount Stage
---------- ------ ----------- ------------- -----------
Balance, at inception
on June 25, 1996 -- -- -- -- --
Issuance of common
stock for services at
$0.001 per share -- -- 2,200,000 2,200 --
Net loss from
Inception on June 25,
1996 through May 31,
1997 -- -- -- -- (2,200)
---------- ------ ----------- ------------- -----------
Balance, May 31,
1997 -- -- 2,200,000 2,200 (2,200)
Net loss for the year
ended May 31, 1998 -- -- -- -- (2,200)
---------- ------ ----------- ------------- -----------
Balance, May 31,
1998 -- -- 2,200,000 2,200 (2,200)
Net loss for the year
ended May 31, 1999 -- -- -- -- (255)
---------- ------ ----------- ------------- -----------
Balance, May 31,
1999 -- -- 2,200,000 2,200 (2,455)
Net loss for the
six months ended
November 30, 1999 -- -- -- -- (7,903)
---------- ------ ----------- ------------- -----------
Balance, November 30,
1999 -- -- 2,200,000 2,200 (10,358)
========== ====== =========== ============= ===========
The accompanying notes are an integral part of these financial statements.
F-9
REPLACEMENT FINANCIAL, INC.
(A Development Stage Company)
Unaudited Statements of Cash Flows
From
Inception on
For the June 25,
Six Months Ended 1996 Through
November 30, November 30,
1999 1998 1999
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (7,903) $ -- $ (10,358)
Adjustments to reconcile net loss
to net cash used by operating
activities:
Common stock issued for services -- -- 2,200
Accrued Interest 333 333
---------- ---------- ----------
Net Cash Used by Operating
Activities (7,570) (7,825)
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CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
---------- ---------- ----------
CASH FLOWS FORM FINANCING ACTIVITIES
Proceeds from note payable 10,000 -- 15,000
---------- ---------- ----------
Net Cash Provided by Financing
Activities 10,000 -- 15,000
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH 2,430 -- 7,175
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 4,745 -- --
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 7,175 $ -- $ 7,175
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ -- $ -- $ --
Income taxes paid $ -- $ -- $ --
SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
Common stock issued for services $ -- $ -- $ 2,200
The accompanying notes are an integral part of these financial statements.
F-10
REPLACEMENT FINANCIAL, INC.
(A Development Stage Company)
Notes to the Unaudited Financial Statements
November 30, 1999
NOTE 1 - NATURE OF ORGANIZATION
The financial statements presented are those of Replacement
Financial, Inc. (the "Company"). The Company was organized under the
laws of the State of Nevada on June 25, 1996. The Company was
organized for the purpose of seeking potential business ventures.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Accounting Method
The financial statements are prepared using the accrual method of
accounting. The Company has elected a May 31 year end.
b. Provision for Taxes
At November 30, 1999, the Company has net operating loss carry forwards
of approximately $10,358 that may be offset against future taxable
income through 2015. No tax benefit has been reported in the financial
statements because the Company believes there is a 50% or greater
chance the carry forwards will expire unused. Accordingly, the
potential tax benefits of the loss carry forwards are offset by a
valuation allowance of the same amount.
c. 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 disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
d. Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
e. Basic Loss Per Share
The computation of basic loss per share of common stock is based on
the weighted average number of shares outstanding during the period
of the financial statements.
F-11
REPLACEMENT FINANCIAL, INC.
(A Development Stage Company)
Notes to the Unaudited Financial Statements
November 30, 1999
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities
in the normal course of business. However, the Company does not have
significant cash or other material assets, nor does it have an
established source of revenues sufficient to cover its operating
costs and to allow it to continue as a going concern. In the event
that the Company needs additional cash for operational expenses, the
Company will seek an extension of its note payable to a third party.
The third party has indicated his willingness to provide these
considerations until the Company combines with a viable operating
business.
NOTE 4 - FORWARD STOCK SPLIT
On March 10, 1999, the Company approved a 100-for-1 forward stock split
on its $.001 par value authorized and outstanding common shares. The
forward stock split is reflected on a retroactive basis.
On November 15, 1999, the Company's board of directors approved a
10-for-1 forward stock split on its $.001 par value authorized and
outstanding common shares. The forward stock split became effective
January >>, 2000 and resulted that instead of having 2,200,000 shares
outstanding, it now has 200,000,000 and 22,000,000 common shares
authorized and outstanding respectively. As no fractional shares have
been issued, no provision has been made for fractional shares. Each
share held of record as of the Record Date, November 15, 1999, shall
automatically be increased to ten shares of the same class. The Board
has instructed the Company's officers to take all actions necessary to
effectuate this ten-for-one forward stock split, including the issuance
of additional stock certificates to all shareholders of record as of the
Record Date.
NOTE 5 - NOTE PAYABLE - RELATED PARTY
On April 1, 1999 the Company executed a promissory note to a third party
in consideration of a $5,000 loan. The note is due in full on March 31,
2000 and accrues interest at 10% per annum. As of November 30, 1999, the
Company owed principal of $5,000 plus accrued interest of $333.33.
On November 11, 1999 the Company received a cash infusion of $10,000
from the same third party mentioned above. In connection with this cash
infusion, the Company executed a promissory note to the third party in
consideration of the $10,000 loan. The note is due in full on January 1,
2001 and accrues interest at 10% per annum. Under terms of the note,
interest does not begin accruing until January 2000.
F-12