SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
For Quarter Ended March 31, 2002
Commission file number: 0-28465
CIK No. 0001098331
INTERSPACE ENTERPRISES, INC.
(Exact name of registrant as specified in this charter)
Colorado 84-1283938
- ------------------------------- --------------------
(State of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
7825 Fay Avenue, #200, La Jolla, California 92037
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(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (858) 456-3539
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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 the filing
requirements for at least the past 90 days.
YES X NO
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As of March 31, 2002, there were 115,004,285 shares of $0.00001 par value common
stock outstanding.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
----
Item 1 Financial Statements F-1 - F-6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 4
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 5
Item 2 Changes in Securities 5
Item 3 Default Upon Senior Securities 5
Item 4 Submission of Matters to a Vote of Security Holders 5
Item 5 Other Information 5
Item 6 Exhibits and Reports on Form 8-K 5
PART III
Signature 6
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Financial Statements (Unaudited)
For the Three Months Ended March 31, 2002
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Balance Sheet (Unaudited)
As of March 31, 2002
ASSETS
March 31, December 31,
2002 2001
-------------------------------
Current Assets
Cash $ 17,862 130,815
Accounts Receivable 768
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Total current assets 18,630 130,815
Fixed Assets
Computer and office equipment 12,464 11,281
Accumulated depreciation (7,302) (6,662)
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Total fixed assets 5,162 4,619
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Total Assets $ 23,792 135,434
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 172,745 232,886
Notes payable 15,000 30,000
Accrued payroll liabilities 671,393 746,361
Accrued income tax 2,400 2,400
Convertible notes payable - 178,000
Current portion long term liabilities 372 700
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Total current liabilities 861,910 1,190,347
Long Term Liabilities 670 842
Stockholders' Equity
Common stock 1,150 998
Accounts receivable subscribed (210,549) (185,697)
Additional paid in capital 3,293,465 2,736,043
Accumulated deficit - during development stage (3,922,854) (3,607,099)
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Total stockholders' equity (838,788) (1,055,755)
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Total Liabilities and Stockholders' Equity $ 23,792 135,434
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F-1
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Statement of Operations (Unaudited)
For the Three Months Ended March 31, 2002
Cumulative from
June 30, 1998
(Inception of the
Development
Three Months Three Months Stage) to
Ended Ended March 31,
March 31, 2002 March 31, 2001 2002
-------------------------------------------------------
Revenues
- -
Sales $ 4,581 - $ 4,581
- -------------------------------------------------------------------------------------------------------
Total Revenue 4,581 - 4,581
Research and Development - - 5,059
Administrative and Selling Expenses
Consulting 73,750 323,250 900,260
Depreciation and amortization 640 683 7,302
Legal and professional - 72,550 319,556
License fees - - 373,000
Marketing and promotion 100,409 2,092 218,362
Office expense 9,778 9,132 98,771
Other administrative expenses 42,640 22,640 621,314
Rent 2,712 2,078 24,908
Salaries 93,940 170,989 1,373,732
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Total Administrative Expense 323,869 603,414 3,937,205
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Net Loss from Operations (319,288) (603,414) (3,937,683)
Other Income
Interest income (3,692) (14,002) (18,389)
Interest expense 159 (9,105) 360
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Total Other (Income) Expense (3,533) (23,107) (18,029)
Income Taxes - - 3,200
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Net loss $ (315,755) (580,307) (3,922,854)
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F-2
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Statement of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2002
June 30, 1998
(Inception of the
Development
Three Months Three Months Stage) to
Ended Ended March 31,
March 31, 2002 March 31, 2001 2002
------------------------------------------------------
Cash Flows From Operating Activities
Net loss $ (315,755) (580,307) $ (3,922,854)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 640 683 7,302
Stock issued for services 113,750 339,525 1,609,420
Changes in:
Accounts receivable (768) 0 (768)
Prepaid expense 0 14,750 0
Accounts payable (60,141) (1,642) 172,745
Accrued interest 0 (9,105) 0
Accrued payroll liabilities (74,968) 110,633 671,393
State tax payable - - 2,400
- ------------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (337,242) (125,463) (1,460,362)
Cash Flows From Investing Activities
Accrued interest related parties (3,692) (14,002) (18,389)
Computer and equipment purchases (1,183) - (12,464)
Note receivable (payments) - 41,112 -
- ------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (4,875) 27,110 (30,853)
Cash Flows From Financing Activities
Notes payable (15,000) 29,000 24,200
Sale of common stock 422,664 199,150 1,493,035
Repayment of notes (500) (400) (8,158)
Convertible notes (178,000) (136,000) 0
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Net Cash Used in Financing Activities 229,164 91,750 1,509,077
Net Decrease in Cash (112,953) (6,603) 17,862
Cash, beginning of the year 130,815 17,343 0
- ------------------------------------------------------------------------------------------------------------
Cash, March 31, 2002 $ 17,862 10,740 $ 17,862
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F-3
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Unaudited)
For the Three Months Ended March 31, 2002
Preferred Stock Common Stock Additional Paid Accounts Rec Accumulated
Description Shares Dollars Shares Dollars in Capital Subscribed Deficit Total
- ------------------------------------------------------------------------------------------------------------------------------------
Balance December 31, 2001 - - 99,887,230 $ 998 $2,736,042 $ (185,697) $(3,607,099) $(1,055,756)
Conversion of notes payable 10,923,991 $ 109 $ 295,251 $ 295,360
Conversion of other payables 1,018,064 $ 11 $ 103,454 $ 103,465
Stock issued for current services 3,175,000 $ 32 $ 158,718 $ (45,000) $ 113,750
Interest on notes - $ - $ - $ (3,691) $ (3,691)
Due from shareholder - $ - $ - $ 23,839 $ 23,839
Net loss $ (315,755) $ (315,755)
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Balance March 31, 2002 - - 115,004,285 1,150 3,293,465 (210,549) (3,922,854) (838,788)
====================================================================================================================================
F-4
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements include the accounts of
InterSpace Enterprises, Inc. (the "Company"). The financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles.
In the opinion of management, the unaudited interim financial statements for the
period ended March 31, 2002 are presented on a basis consistent with the audited
financial statements and reflect all adjustments, consisting only of normal
recurring accruals, necessary for fair presentation of the results of such
period.
The results for the three months ended March 31, 2002 are not necessarily
indicative of the results of operations for the full year. These financial
statements and related footnotes should be read in conjunction with the
financial statements and footnotes thereto included in the Company's financial
statements of the period ended December 31, 2001.
NOTE 2 - NET REVENUE
Net revenue represents the residual amount earned by the Company from its weekly
lottery draw ticket sales and scratchcards after deducting payouts, insurance,
charity allocations, affiliate promotions and partnership fees as set out in the
joint activities agreement with the International Lottery in Liechtenstein
Foundation.
NOTE 3 - CONVERSION OF NOTES PAYABLE
In February 2002, the Company converted $291,100 of convertible promissory notes
into common stock resulting in the issuance of 10,673,991 shares. In addition, a
note payable from the Company in the amount of $15,000 was converted into
250,000 shares of common stock.
NOTE 4 - CONVERSION OF OTHER LIABILITIES
In February 2002, the Company settled $88,465 of payroll liabilities to various
former employees and $15,000 of trade liabilities via the issuance of 1,018,064
shares.
F-5
NOTE 5 - NON-MONETARY TRANSACTIONS
The Company issued 3,175,000 shares during the three month period ending March
31, 2002, for certain consulting and advisory services provided to the Company,
as well as services related to the development of the Company's internet
infrastructure. Approximately 900,000 of these shares were issued in connection
with services to be provided to the Company over the remainder of the fiscal
year. The Company valued these transactions at what they believed to be the fair
market value of the services. The value for these services also approximates
what management believes to be the value of the stock.
NOTE 6 - INTEREST INCOME/EXPENSE
Interest income represents accrued interest on promissory notes to the Company
from certain officers incurred as a result of options previously exercised.
F-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2002 COMPARED
TO THE SAME PERIOD IN 2001.
The Company introduced its initial product in the first quarter which is
beginning to see its first revenues. Revenues are derived under the Company's
partnership agreement with Zabadoo.com AG. The Company receives a percentage of
all ticket sales for the weekly lottery draw as well as instant scratchcards.
Net revenues for the quarter ended March 31, 2002 were $4,581. Net revenue is
calculated as the remainder of proceeds from sales after deducting prize
payouts, charity allocations, insurance, affiliate program incentives and
partnership revenue sharing. The Company incurred operating expenses for the
three month period of $323,869 in 2002 compared to $603,414 in the same period
in 2001. The Company recorded a net operating loss of ($315,755) for the 2002
period as compared to ($580,307) for the same period in fiscal year 2001. The
Company losses will continue until business and profitable operations are
achieved. While the Company is seeking capital sources for investment, there is
no assurance that capital sources can be found. The loss per share was ($.01)
for both the 2002 and 2001 fiscal quarters.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash capital of $17,862, as well as $768 in accounts
receivable and $5,162 in fixed assets for total tangible assets of $23,792 at
the end of the period. The Company will be forced to make private placements of
stock in order to fund operations continuance. No assurance exists as to the
ability to make private placements of stock.
During the quarter ended March 31, 2002, the Company's current assets decreased
by $111,642 while current liabilities decreased by $328,437. At March 31, 2002,
the Company has current liabilities of $861,910 which exceed current assets by
approximately $837,938.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings - None.
Item 2. Changes in securities - None.
Item 3. Defaults upon senior securities - None.
Item 4. Submission of matters to a vote of security holders - None.
Item 5. Other information - None.
SIGNATURE
In accordance with the requirements of the Securities and Exchange Act
of 1934, as amended, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
INTERSPACE ENTERPRISES, INC.
Dated: May 17, 2002 By: /s/ Daniel Murphy
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Daniel Murphy, President