UNITED STATES
SECURITIES EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
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[X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended May 31, 2002
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CORSPAN INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-4047693
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Birchwood House, Chadwick Park
Warrington
Cheshire, UK WA3 6AE
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number +44 (0)1925 846700
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Check here whether the issuer (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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_______
As of July 12, 2002, the following shares of the Registrant's
common stock were issued and outstanding:
15,190,000 shares of voting common stock
<page>
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
STATEMENT OF CASH FLOWS
Note 1. NATURE OF BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES
Note 2. RECENT ACCOUNTING PRONOUNCMENTS
Note 3. BASIS OF PRESENTATION
Note 4. REALIZATION OF ASSETS
Note 5. ACQUISITION
Note 6. DISPOSAL
Item 2. Management's Discussion And Analysis or Plan of
Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of
Security Holders
Item 5. Other information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CORSPAN INC.
CONSOLIDATED BALANCE SHEETS
<table>
As Of As Of
May 31, 2002 February 28, 2002
(Unaudited) (Audited)
-----------------------------
<s> <c> <c>
ASSETS
Current Assets
Accounts receivable,
net of allowance for doubtful
accounts of $0 and $30,872 $ 481,371 $ 81,864
Inventories 1,721 1,811
Other current assets 43,342 16,591
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Total Current Assets 526,434 100,266
Goodwill 634,047 0
Property and equipment - net 3,786 207,503
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TOTAL ASSETS $1,164,267 $ 307,769
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities
Bank overdraft $ 76,281 $ 37,719
Short term debt 388,101 149,202
Deferred income 271,192 0
Accounts Payable 333,532 115,417
Factored receivables 408,042 501,728
Accrued Expenses 294,793 642,046
Current maturities of obligations
under capital leases 0 10,804
----------- -----------
Total Current Liabilities 1,771,941 1,456,916
Long term debt 32,350 3,438,698
Long term maturities of
obligations under capital leases 0 64,160
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Total Liabilities 1,804,291 4,959,774
Stockholders' Deficit
Common Stock, $.001 par value,
Authorized 50,000.000 Shares;
Issued and Outstanding
15,190,000 and 15,000,000 15,190 15,000
Additional Paid in Capital 1,053,880 484,067
Accumulated Deficit (1,716,683) (5,342,883)
Accumulated other comprehensive
Income 7,589 191,811
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Total Stockholders' Deficit (640,024) (4,652,005)
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' DEFICIT $1,164,267 $307,769
=========== ===========
</table>
The accompanying notes are an integral part of these financial
statements.
<page>
CORSPAN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<table>
For the 3 For the 3
months ended months ended
May 31, 2002 May 31, 2001
(Unaudited) (Unaudited)
-----------------------------
<s> <c> <c>
Net Sales $ 200,020 $ 1,077,136
Cost of goods sold 38,011 936,263
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Gross Profit 162,009 140,873
Operating Expenses
Sales and Marketing 83,675 83,810
General and Administrative 489,834 365,484
Depreciation and amortization 15,869 19,446
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Total Operating Expenses 589,378 468,740
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Operating loss from
continuing operations (494,845) 0
Operating profit/(loss) from
discontinued operations 67,476 (327,867)
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Operating Loss (427,369) (327,867)
Gain on disposal of subsidiary 4,112,975 0
Interest Expense (59,405) (83,097)
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Net Profit/(Loss) $ 3,626,201 $ (410,964)
=========== ===========
Net Profit/(Loss) attributable
to common shares $ 3,626,201 $ (410,964)
=========== ===========
Net Profit/(Loss) per common share
Basic and diluted $ 0.24 $ (0.03)
=========== ===========
Continuing Net Loss per common share
Basic and diluted $ (0.03) $ 0.00
=========== ===========
Weighted average
common shares outstanding 15,190,000 15,000,000
=========== ===========
</table>
The accompanying notes are an integral part of these financial
statements.
<page>
CORSPAN INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<table>
For the 3 For the 3
months ended months ended
May 31, 2002 May 31, 2001
(Unaudited) (Unaudited)
-----------------------------
<s> <c> <c>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Profit/(Loss) $ 3,626,200 $ (410,964)
Adjustments to Reconcile Net Loss
to Net Cash Used in operating
Activities:
Depreciation and amortization 15,869 19,470
Profit on sale of property
and equipment (14,991) (24,162)
Gain on disposal of subsidiary (4,112,975) 0
Changes in Operating Assets
and Liabilities
Accounts Receivable (755,501) 1,390,443
Inventories 84 286,367
Other Current Assets (36,876) 94,709
Deferred Income 271,192 9,196
Accounts Payable 1,268,930 274,079
Accrued Expenses (235,775) (676,609)
----------- -----------
Total Adjustments (3,600,043) 1,373,493
----------- -----------
Net Cash provided by Operating
Activities 26,157 962,529
CASH FLOWS FROM INVESTING
ACTIVITIES:
Sale of property and equipment 73,367 96,202
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Net cash provided
by investing activities 73,367 96,202
CASH FLOWS FROM FINANCING
ACTIVITIES:
Bank Overdraft 55,100 (17,077)
Payments on obligations under
capital leases (74,964) (92,440)
Net Receipts from Group loan 0 (5,453)
Net Receipts on factored receivables (79,660) (943,761)
----------- -----------
Net Cash Utilized
by Financing Activities (99,524) (1,058,731)
Net Change in Cash 0 0
Cash at Beginning of Period 0 0
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Cash at End of Period $ 0 $ 0
=========== ===========
Supplemental Disclosure of
Cash Flow Information
Cash Paid During the Period for
Interest Expense $83,097 $ 59,405
Shares issued for acquisition $ 570,000 $ 0
=========== ===========
</table>
The accompanying notes are an integral part of these financial
statements.
<page>
NOTES TO FINANCIAL STATEMENTS
May 31, 2002
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Business
During the quarter to 31 May 2002, Corspan Inc. ("the Company")
conducted its operations through its wholly owned subsidiaries ,
Total Print Solutions Limited ("TPS"), New Media North Limited
("NMN"), Corspan Limited, and ICM Resource Limited ("ICM") which
was disposed of on 30 May 2002. All of the subsidiaries are
located in the United Kingdom.
Prior to 1 March 2002, the Company conducted its operations
entirely through ICM Recource Limited.
B. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, ICM, TPS, NMN and
Corspan Limited.
On March 1, 2002, the Company, a non-operating company acquired
100% of the outstanding common stock of TPS, a print broker
company incorporated under the laws of the United Kingdom ("the
Acquisition").
The basic structure and terms of the Acquisition, together with
the applicable effects were that the Company acquired all of the
outstanding shares of common stock of TPS in exchange for 190,000
shares of newly issued common stock of the Company.
Under accounting principles generally accepted in the United
States of America, the Acquisition is considered to be a business
combination. That is, the results of TPS have been included in
the consolidated financial statements since the acquisition.
Goodwill arising on the acquisition is recorded at the fair value
of the newly issued common stock of the Company less the fair
value of the net assets acquired.
On May 30, 2002, the Company, disposed of 100% of the outstanding
common stock of ICM, the subsidiary of the company acquired on
March 16, 2001, to a third party ("the Disposal").
The basic structure and terms of the Disposal, together with the
applicable effects were that the Company disposed of all of the
outstanding shares of common stock of ICM in exchange for $1. The
profit on the Disposal has been included within the Statement of
Operations for the period. This profit has been calculated as
the consideration received of $1 together with the fair value of
the net liabilities disposed of at the date of the Disposal.
C. Revenue Recognition
The Company recognizes income when products are shipped.
D. Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management of the Company to make estimates and
assumptions affecting the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements, as well as revenues and
expenses during the reporting period. The amounts estimated
could differ from actual results. Significant estimates in the
financial statements include the assumption that the Company will
continue as a going concern (Note B).
NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS
On June 29, 2001, the Financial Accounting Standards Board (FASB)
approved for issuance Statement of Financial Accounting Standards
(SFAS) 141, Business Combinations, and SFAS 142, Goodwill and
Intangible Assets. Major provisions of these Statements are as
follows: all business combinations initiated after June 30, 2001
must use the purchase method of accounting; the pooling of
interest method of accounting is prohibited except for
transactions initiated before July 1, 2001; intangible assets
acquired in a business combination must recorded separately from
goodwill if they arise from contractual or other legal rights or
are separable from the acquired entity and can be sold,
transferred, licensed, rented or exchanged, either individually
or as part of a related contract, asset or liability; goodwill
and intangible assets with indefinite lives are not amortized but
are tested for impairment annually, except in certain
circumstances, and whenever there is an impairment indicator; all
acquired goodwill must be assigned to reporting units for
purposes of impairment testing and segment reporting; effective
January 1, 2002, goodwill will no longer be subject to
amortization.
As permitted the Company has adopted SFAS 141, therefore the
goodwill generated on the acquisition of TPS will not be
amortized in future periods but tested for impairment annually.
In June 2001, the FASB issued Statement of Financial Accounting
Standards No. 143 "Accounting for Asset Retirement Obligations"
(Statement 143). Statement 143 requires that the fair value of a
liability for an asset retirement obligation be recognized in the
period in which it is incurred if a reasonable estimate of fair
value can be made. We are required to adopt Statement 143, for
the year beginning March 1, 2002. The adoption of Statement 143
did not have a material effect on our consolidated financial
position or results of operations.
The FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets," in August 2001. SFAS No. 144,
which addresses financial accounting and reporting for the
impairment of long-lived assets and for long-lived assets to be
disposed of, supercedes SFAS No. 121 and is effective for fiscal
years beginning after December 15, 2001. The adoption of SFAS
No. 144 on March 1, 2002 did not have a material effect on our
consolidated financial position or results of operations.
NOTE 3 - BASIS OF PRESENTATION
The financial statements included in this Form 10-QSB have been
prepared by us, without audit. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted, although
management believes the disclosures are adequate to make the
information presented not misleading. The results of operations
for any interim period are not necessarily indicative of results
for a full year. These statements should be read in conjunction
with the financial statements and related notes included in the
Company's Annual Report on Form 10-KSB for the period ended
February 28, 2002.
The financial statements presented herein, for the three months
ended May 31, 2002 and 2001 reflect, in the opinion of
management, all material adjustments consisting only of normal
recurring adjustments necessary for a fair presentation of the
financial position, results of operations and cash flow for the
interim periods.
NOTE 4 - REALIZATION OF ASSETS
The financial statements have been prepared on a basis that
contemplates the Group's continuation as a going concern and the
realization of our assets and liquidation of our liabilities in
the ordinary course of business. We have an accumulated deficit
of $1,716,683 at May 31, 2002, and negative working capital of
$1,245,507 at May 31, 2002. These matters, among others, raise
substantial doubt about our ability to remain a going concern for
a reasonable period of time. The financial statements do not
include any adjustments relating to the recoverability or
classification of assets or the amounts and classification of
liabilities that might result from the outcome of this
uncertainty. The Group's continued existence is dependent on its
ability to obtain additional financing sufficient to allow
it to meet its current obligations and to achieve profitable
operations.
NOTE 5 : ACQUISITION
On March 1, 2002, the Company acquired 100% of the outstanding
common shares of TPS. The results of TPS's operations have been
included in the consolidated financial statements since that
date.
The aggregate purchase price was common stock valued at $570,000.
The value of the 190,000 common shares issued was determined
based on the average market price of the Company's common shares
over the 2-day period before and after the terms of the
acquisition were agreed to and announced.
The following table summarizes the estimated fair values of the
net assets acquired and liabilities assumed at the date of
acquisition.
At March 1, 2002
--------------
Current assets $ 51,069
Property, plant and equipment 2,799
_________
Total assets 53,868
Current liabilities (117,915)
_________
Net liabilities acquired (64,047)
Consideration 570,000
_________
Goodwill 634,047
=========
NOTE 6: DISPOSAL
On May 30, 2002, the Company disposed of 100% of the outstanding
common stock of ICM in exchange for consideration of $1. The
results of ICM's operations have been included in the
consolidated financial statements up until this date.
The following table summarizes the values of the net assets and
liabilities of ICM at the disposal date and the gain arising.
At May 30, 2002
--------------
Current assets $ 365,085
Property, plant and equipment 132,271
_________
Total assets 497,356
Total liabilities (4,610,330)
_________
Net liabilities disposed (4,112,974)
Consideration (1)
_________
Gain on disposal 4,112,975
=========
<page>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATIONS
RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10-QSB, including information set
forth under this item 2. "Management's Discussion and Analysis
of Financial Condition and Results of Operations" constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Act"). We desire
to avail ourselves of certain "safe harbor" provisions of the Act
and are therefore including this special note to enable us to do
so. Forward-looking statements included in this Form 10-QSB or
hereafter included in other publicly available documents filed
with the Securities and Exchange Commission, reports to our
stockholders and other publicly available statements issued or
released by us involve unknown risks, uncertainties, and other
factors which could cause our actual results, performance
(financial or operating), or achievements to differ from the
future results, performance (financial or operating), or
achievements expressed or implied by such forward looking
statements. Such future results are based upon our best
estimates based upon current conditions and the most recent
results of operations.
Liquidity
To date, we have incurred significant net operating losses. We
anticipate that we may continue to incur significant operating
losses for some time in the event that our current business plan
does not meet expectations. We have an accumulated deficit of
$1,716,683 at May 31,2002, and negative working capital of
$1,245,507 at May 31,2002. These matters, among others, raise
substantial doubt about our ability to remain a going concern.
We must immediately raise significant capital to enable us to
meet our current obligations and to fund our current operations
until we are to become profitable. Profitability is dependent
upon our ability to generate sufficient sales from
second-generation services. Our existence is dependent on our
ability to obtain the necessary financing.
The financial statements do not include any adjustments relating
to the recoverability or classification of assets or the amounts
and classification of liabilities that might result from the
outcome of this uncertainty.
The company is currently seeking financing through private
placements and has received approval to trade it's shares by
the NASD. The company hopes to raise significant proceeds
through this medium, which will be used to fund future
acquisitions and operating expenses. The Company is actively
reviewing various avenues to raise capital and we are currently
visiting with and meeting a number of potential investors.
The company, through a wholly owned subsidiary, New Media North
Ltd., has entered into an agreement to sell, on an on-going
basis, certain receivables subject to the terms of the agreement.
As the credit risk of these receivables remain with the company,
this arrangement is accounted for as a loan securitized. The
company is permitted to receive advances of up to 60% of the
receivables sold to the lender.
We have insufficient relevant operating history upon which an
evaluation of our performance and prospects can be made. We are
still subject to all of the business risks associated with a new
enterprise, including, but not limited to, risks of current and
unforeseen capital requirements, lack of fully-developed
products, failure of market acceptance, failure to establish
business relationships, reliance on outside contractors for the
manufacture and distribution, and competitive disadvantages
against larger and more established companies. The likelihood of
our success must be considered in light of the development cycles
of new products and technologies and the competitive environment
in which we operate.
Corspan Inc. is engaged in the business of developing and
marketing a bottom-up print-solutions operation, layering
additional services over acquired profitable businesses, creating
new efficiencies and enhanced profitability.
We intend to seek out and acquire companies who fulfill our
acquisition requirements in each of our chosen industry sectors
in the UK. Through this strategy, we aim to increase market
share, consolidate our industry share whilst increasing our
competitive advantage.
The marketplace is currently extremely fragmented, which gives
Corspan a wide-open opportunity to acquire at low cost a broad
portfolio of solutions, products and services that we can unify
under one footprint.
There is currently no dominant, unified provider servicing the
$130 billion marketing communications marketplace where Corspan
currently operates.
Acquisition of Total Print Solutions Ltd.
On March 1, 2002 Corspan Inc., acquired the total outstanding
share capital of Total Print Solutions Ltd. "TPS". TPS are a UK
print broker. Key personnel are remaining as employees of TPS and
TPS will continue to operate autonomously maintaining its
existing supplier relationships and customer base.
Incorporation of New Media North Ltd.
On March 1, 2002 the New Media operations of the company began
trading as a wholly owned incorporated subsidiary company of
Corspan Inc. This reflects the expansion that has taken place in
this distinct area of the company's operations. New Media North
Ltd. (NMN) is currently trading at a profit.
Disposal of interest in ICM Resource Ltd.
On May 30th 2002 Corspan Inc. disposed of its interest in
ICM Resource Ltd. to Rob Scott Systems Inc.(RSS) a US
Corporation which has acquired the total outstanding share
capital of ICM Resource Ltd. in order to acquire, develop and
bring to market the ICM "Eazyprint" quick print solution which is
no longer core to Corspan's development strategy.
There has been significant doubts as to the continuation of ICM
as a print management company. Bad debts incurred from the demise
of Tiny Computers Ltd., a former client of ICM Resource Ltd., the
UK computer retailer, created increasing cashflow shortfalls.
The Directors are of the opinion that the disposal of this
interest was required to progress the Corspan Inc. strategic plan
and remove day to day operational pressures from the executives
of the company allowing them to focus on the development of the
acquisition growth strategy of Corspan Inc.
The company will maintain its existing product and
service offerings through other trading divisions and/or
wholly owned subsidiaries within the group. This sale has
no material effects on the business strategy of the
company. As such any future looking statements within
this document refers to Corspan Inc as a group through
any or all of its existing or future trading divisions
and or subsidiaries.
Pending Acquisitions by Corspan Inc.
We are currently in discussions with several companies
with regard to possible acquisition within the next 12
months. This includes print manufacturing and traditional
media companies.
The company's immediate viability as a going concern is dependent
upon raising the necessary capital and ultimately generating
cash. Our limited operating history, including our losses,
primarily reflects the operations of an early stage enterprise.
Any additional financing may not, however, be available to us
when needed on commercially reasonable terms, or at all. If this
were to occur, our business and operations would be materially
and adversely affected.
Overview
The company is currently operating through two wholly owned
subsidiaries, New Media North Ltd. (NMN) and Total Print
Solutions Ltd. (TPS)
On March 1, 2002 the New Media operations of the company began
trading as a wholly owned incorporated subsidiary company of
Corspan Inc. This reflects the expansion that has taken place in
this distinct area of the company's operations. New Media North
Ltd. (NMN) is currently trading at a profit.
On March 1, 2002 Corspan Inc., acquired the total outstanding
share capital of Total Print Solutions Ltd. "TPS". TPS are a UK
print broker. Key personnel are remaining as employees of TPS and
TPS will continue to operate autonomously maintaining its
existing supplier relationships and customer base.
Our losses from trading operations have stabilized in quarter
ending May 31, 2002 compared to the previous 3 months.
Management believes that further acquisitions scheduled over the
next 12 months with return the company to a profitable trading
position. Our focus on higher margin sales has been supported by
the acquisition of TPS who operate as a broker and can therefore
deliver significantly higher margins and NMN who are operating in
an industry sector that attracts significantly higher gross
margins than our recent operating history has been able to
provide.
Sales
Our revenues were derived from print procurement brokerage and
resale, the management of print production, design and layout,
reprographics and mailing services and the design and application
of internet enabled content.
Total sales revenues for the quarter ending the May 31 2002 were
$200,020 compared to sales revenues of $1,077,136 for quarter
ending May 31 2001. The decline in sales of ICM Resource Ltd.
has, in the short term, effected initial sales revenues although
gross profit increased by over $20,000.
TPS experiences the least sales activity in this quarter, in
particular April and May, and increased levels of sales revenues
are anticipated for the remainder of the year.
Gross Profit
Our gross profit for the quarter ending May 31 2002 was 81%
of sales revenues compared to quarter ending May 31, 2001 gross
margin of 13%. This is an increase of gross profit of $21,136 on
a lower level of sales. It is felt that these increased gross
margin results are a continued reflection of our focus on higher
quality sales over the last quarter and that these increased
gross margin figures can be maintained as we re-establish sales
activity, introduce our second generation services over the next
12 months and continue our growth.
Selling Expenses
During quarter ending May 31 2002 we incurred $83,675 in
advertising, promotion, marketing program and sales expenses.
This is almost identical figure to the same period ending May 31
2001 of $83,810. We have stabilized this cost and do not see a
dramatic increase over the next 12 months.
General & Administrative Expenses
During quarter ending May 31 2002 we incurred $489,834 in
general and administrative expenses compared to $365,484 in
quarter ending May 31 2001.
Operating Loss
The reported operating loss has increased by $99,502 from
$327,867 in the period to 31 May 2001 to $427,369 in the period
to 31 May 2002.
Net Loss
The reported net profit in the period to 31 May 2002 was
$3,626,201 (or $23.9 per share basic and undiluted) after a
one-time gain of $4,112,975 on the disposal of ICM, compared with
a net loss of $410,964 or $0.03 loss per share basic and
undiluted in the quarter to 31 May 2001.
<Page>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The directors are not aware of any further pending legal
proceedings against the Company.
Item 2. Changes in Securities
There has been no change in the Company's securities since the
filing of its Form 10KSB.
Item 3. Defaults upon Senior Securities
There has been no default in the payment of principal, interest,
sinking or purchase fund installment.
Item 4. Submission of Matters to a Vote of Security Holders
No matter has been submitted to a vote of security holders during
the period covered by this report.
Item 5. Other information
There is no other information to report which is material to the
Company's financial condition not previously reported.
Item 6. Exhibits and Reports on Form 8-K
There are no Exhibits or reports on Form 8-K attached hereto.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
CORSPAN, INC.
- -----------------------------------
(Registrant)
Date: July 18, 2002
By: /s/ Ian Warwick
---------------
President