SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
For Quarter Ended June 30, 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
----------------------------------------------------------
(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
----- -----
As of June 30, 2002, there were 122,692,063 shares of $0.00001 par value common
stock outstanding.
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Financial Statements (Unaudited)
For the Six Months Ended June 30, 2002
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Balance Sheet (Unaudited)
As of June 30, 2002
ASSETS
June 30 December 31,
2002 2001
-------------------------------
Current Assets
Cash $ 1,259 130,815
Accounts Receivable
--------------------------------------------------------------------------------------------------
Total current assets 1,259 130,815
Fixed Assets
Computer and office equipment 12,464 11,281
Accumulated depreciation (7,942) (6,662)
--------------------------------------------------------------------------------------------------
Total fixed assets 4,522 4,619
--------------------------------------------------------------------------------------------------
Total Assets $ 5,781 135,434
==================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable $ 174,398 232,886
Notes payable 34,000 30,000
Accrued payroll liabilities 711,537 746,361
Accrued income tax 2,400 2,400
Convertible notes payable - 178,000
Current portion long term liabilities 372 700
--------------------------------------------------------------------------------------------------
Total current liabilities 922,707 1,190,347
Long Term Liabilities 670 842
Stockholders' Equity
Common stock 1,227 998
Accounts receivable subscribed (212,563) (185,697)
Additional paid in capital 3,452,188 2,736,043
Accumulated deficit - during development stage (4,158,448) (3,607,099)
--------------------------------------------------------------------------------------------------
Total stockholders' equity (917,596) (1,055,755)
--------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 5,781 135,434
==================================================================================================
F-1
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Statement of Operations (Unaudited)
For the Six Months Ended June 30, 2002
Cumulative from
June 30, 1998
(Inception of the
Development
Three Months Three Months Six Months Six Months Stage) to
Ended Ended Ended Ended June 30,
June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001 2002
--------------------------------------------------------------------------
Revenues
- - - -
Sales $ 4,888 - $ 9,469 - $ 9,469
- ----------------------------------------------------------------------------------------------------------
Total Revenue 4,888 - 9,469 - 9,469
Research and Development - - - - 5,059
Administrative and Selling Expenses
Consulting 64,300 (131,750) 138,050 191,500 964,560
Depreciation and amortization 640 680 1,280 1,363 7,942
Legal and professional 57,230 3,250 57,230 75,800 376,786
License fees - - - - 373,000
Marketing and promotion 27,495 6,680 127,904 8,772 245,857
Office expense 4,931 13,826 14,709 22,958 103,702
Other administrative expenses 13,184 28,535 55,824 51,175 634,498
Rent 2,593 4,480 5,305 6,558 27,501
Salaries 72,123 171,056 166,063 342,045 1,445,855
- ----------------------------------------------------------------------------------------------------------
Total Administrative Expense 242,496 96,757 566,365 700,171 4,179,701
- ----------------------------------------------------------------------------------------------------------
Net Loss from Operations (237,608) (96,757) (556,896) (700,171) (4,175,291)
Other Income
Interest income (2,014) (13,104) (5,706) (27,106) (20,403)
Interest expense 0 74 159 (9,031) 360
- ----------------------------------------------------------------------------------------------------------
Total Other (Income) Expense (2,014) (13,030) (5,547) (36,137) (20,043)
Income Taxes - - - - 3,200
- ----------------------------------------------------------------------------------------------------------
Net loss $ (235,594) (83,727) (551,349) (664,034) (4,158,448)
==========================================================================================================
F-2
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Statement of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2002
June 30, 1998
(Inception of the
Development
Six Months Six Months Stage) to
Ended Ended June 30,
June 30, 2002 June 30, 2001 2002
--------------- ---------------- ----------------
Cash Flows From Operating Activities
Net loss $ (551,349) (664,034) $ (4,158,448)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,280 1,363 7,942
Stock issued for services 247,550 341,050 1,743,220
Changes in:
Prepaid expense 0 14,750 0
Accounts payable (58,488) (64,629) 174,398
Accrued interest (9,105) 0
Accrued payroll liabilities (34,824) 206,189 711,537
State tax payable 0 2,400
- ------------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (395,831) (174,416) (1,518,951)
Cash Flows From Investing Activities
Accrued interest related parties (5,706) (27,106) (20,403)
Computer and equipment purchases (1,183) - (12,464)
Note receivable (payments) 45,126 -
- ------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (6,889) 18,020 (32,867)
Cash Flows From Financing Activities
Notes payable 4,000 (106,000) 43,200
Sale of common stock 447,664 386,050 1,518,035
Repayment of notes (500) (625) (8,158)
Convertible notes (178,000) (136,000) 0
- ------------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities 273,164 143,425 1,553,077
Net Decrease in Cash (129,556) (12,971) 1,259
Cash, beginning of the year 130,815 17,343 0
- ------------------------------------------------------------------------------------------------------------
Cash, June 30, 2002 $ 1,259 4,372 $ 1,259
============================================================================================================
F-3
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Unaudited)
For the Six Months Ended June 30, 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)
Balance March 31, 2002 - - 115,004,285 1,150 3,293,465 (210,549) (3,922,854) (838,788)
====================================================================================================================================
Stock issued for cash 997,778 $ 10 $ 24,990 $ 25,000
Stock issued for current services 6,690,000 $ 67 $ 133,733 $ 133,800
Interest on notes - $ - $ - $ (2,014) $ (2,014)
Net loss $ (235,594) $ (235,594)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance June 30, 2002 - - 122,692,063 1,227 3,452,188 (212,563) (4,158,448) (917,596)
====================================================================================================================================
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 June 30, 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 six months ended June 30, 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
The Company operates under an agreement with the International Lottery in
Liechtenstein Foundation (ILLF). As part of this agreement, ILLF is responsible
for collecting payment, and allocating prize payouts, charity fund allocations
and affiliate fees. The Company receives a percentage of the net revenue from
these transactions.
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
hosting agreement.
Gross receipts for the quarters ended March 31, 2002 and June 30, 2002 were
$30,943 and $32,523 respectively. Total payouts and expenses were $26,362 for
the quarter ended March 31, 2002 and $27,635 for the quarter ended June 30,
2002.
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.
F-5
INTERSPACE ENTERPRISES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
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.
NOTE 5 - NON-MONETARY TRANSACTIONS
The Company issued 9,865,000 shares during the six month period ending June 30,
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 600,000 of these shares relate to services to be
provided to the Company over the remainder of the fiscal year. Also,
approximately 765,000 of these shares related to services provided in past
fiscal periods. The Company valued these transactions at what they believed to
be the fair market value of the services provided. 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 JUNE 30, 2002 COMPARED TO
THE SAME PERIOD IN 2001.
During the quarter ended June 30, 2002, the company focused on improving
marketing initiatives through a series of promotional campaigns designed to
increase player retention and attract additional international players. The
company also pursued several strategic alliance and joint venture opportunities
in order to maximize exposure with minimal direct costs. Net revenues for the
quarter ended June 30, 2002 were $4,888. The Company incurred operating expenses
for the three month period of $242,496 in 2002 compared to $96,757 in the same
period in 2001. The Company recorded a net operating loss of ($235,594) for the
2002 period as compared to ($83,727) for the same period in fiscal year 2001.
The Company losses will continue until business and profitable operations are
achieved. While the Company is seeking capital sources for investment, there is
no assurance that capital sources can be found. The loss per share was ($.01)
for both the 2002 and 2001 fiscal quarters.
RESULTS OF OPERATIONS FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2002 COMPARED TO
THE SAME PERIOD IN 2001.
The Company introduced its flagship product in the first quarter with the
Company 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 six months ended June 30, 2002 were $9,469.
The Company incurred operating expenses for the six-month period of $566,365 in
2002 compared to $700,171 in the same period in 2001. The Company recorded a net
operating loss of ($551,349) for the 2002 period as compared to ($664,034) for
the same period in fiscal year 2001. The Company losses will continue until
business and profitable operations are achieved. While the Company is seeking
capital sources for investment, there is no assurance that capital sources can
be found. The loss per share was ($.01) for both the 2002 and 2001 fiscal
periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company had cash capital of $1,259 and $4,522 in fixed assets for total
tangible assets of $5,781 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.
At June 30, 2002, the Company has current liabilities of $922,707 which
exceed current assets by approximately $921,448.
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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned thereunto duly authorized.
Dated: August 19, 2002 INTERSPACE ENTERPRISES, INC.
By: /s/ Daniel Murphy
------------------------------------
Daniel Murphy, President