U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: January 31, 2001
Commission file no.: 000-28907
ImagineNet Corp.
-----------------------------------------
(Name of Small Business Issuer in its Charter)
Nevada 65-0878035
- ------------------------------------ ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 Lakeview Ave., # 160-142
West Palm Beach, FL 33401 33401
- ------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 832-5696
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
- ----------------------------------- -----------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value per share
--------------------------------------------------------
(Title of class)
Indicate by 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
--- ---
As of January 31, 2001, there are 7,240,000 shares of voting stock of
the registrant issued and outstanding.
PART I
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
Balance Sheet................................................................F-2
Statements of Operations.....................................................F-3
Statements of Changes in Stockholders' Equity................................F-4
Statements of Cash Flows.....................................................F-5
Notes to Financial Statement.................................................F-6
ImagineNet Corp.
(A Development Stage Enterprise)
Balance Sheet
January 31, 2001 October 31, 2000
-------------------- ------------------
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 1,512 $ 37,085
Loans to related parties 39,429 0
-------------------- ------------------
Total current assets 40,941 37,085
-------------------- ------------------
Total Assets $ 40,941 $ 37,085
==================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable
Trade $ 0 $ 572
Related party note payable 8,087 0
-------------------- ------------------
Total current liabilities 8,087 572
---------------------------------------
Total Liabilities 8,087 572
-------------------- ------------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.001 par value, authorized 10,000,000
shares, 0 issued and outstanding 0 0
Common stock, $0.001 par value, authorized 50,000,000
shares; 7,240,000 issued and outstanding 7,240 7,240
Additional paid-in capital 48,760 48,760
Deficit accumulated during the development stage (23,146) (19,487)
-------------------- ------------------
Total stockholders' equity 32,854 36,513
-------------------- ------------------
Total Liabilities and Stockholders' Equity $ 40,941 $ 37,085
==================== ==================
The accompanying notes are an integral part of the financial statements
F-2
ImagineNet Corp.
(A Development Stage Enterprise)
Statements of Operations
Three Months Ended January 31,
(Unaudited)
Period from
November 24, 1998
(Inception)
Through
2001 2000 January 31, 2001
------------------- ----------------- ---------------------
Revenues $ 0 $ 0 $ 0
------------------- ----------------- ---------------------
General and administrative expenses 4,000 1,435 13,487
Legal fees - related party 0 1,235 4,000
Services - related party 0 0 6,000
------------------- ----------------- ---------------------
Total expenses 4,000 2,670 23,487
------------------- ----------------- ---------------------
Other Income (Expense)
Interest income 429 0 429
Interest expense (88) 0 (88)
------------------- ----------------- ---------------------
Total other income (expense) 341 0 341
------------------- ----------------- ---------------------
Net loss $ (3,659) $ (2,670)$ (23,146)
=================== ================= =====================
Loss per weighted average common share $ (0.001) (0.001)
=================== =================
Number of weighted average common shares outstanding 7,240,000 7,240,000
=================== =================
The accompanying notes are an integral part of the financial statements
F-3
ImagineNet Corp.
(A Development Stage Enterprise)
Statement of Changes in
Stockholders' Equity Period from November
24, 1998 (Inception) through January 31, 2001
Deficit
Accumulated
Additional During the Total
Number of Common Paid-In Development Stockholders'
Shares Stock Capital Stage Equity
--------------- -------------- --------------- ---------------- ---------------
BEGINNING BALANCE,
November 24, 1998 (Inception) 0 $ 0 $ 0 $ 0 $ 0
11/98 - founders' shares ($0.001/sh.) 6,000,000 6,000 0 0 6,000
11/98 - cash ($0.01/sh.) 40,000 40 360 0 400
12/98 - cash ($0.01/sh.) 260,000 260 2,340 0 2,600
4/99 - cash ($0.05/sh.) 940,000 940 46,060 0 47,000
Net loss 0 0 0 (13,880) (13,880)
--------------- -------------- --------------- ---------------- ---------------
BALANCE, October 31, 1999 7,240,000 7,240 48,760 (13,880) 42,120
Net loss 0 0 0 (5,607) (5,607)
--------------- -------------- --------------- ---------------- ---------------
BALANCE, October 31, 2000 7,240,000 7,240 48,760 (19,487) 36,513
Net loss 0 0 0 (3,659) (3,659)
--------------- -------------- --------------- ---------------- ---------------
ENDING BALANCE, January 31, 2001
(unaudited) 7,240,000 $ 7,240 $ 48,760 $ (23,146)$ 32,854
=============== ============== =============== ================ ===============
The accompanying notes are an integral part of the financial statements
F-4
ImagineNet Corp.
(A Development Stage Enterprise)
Statements of Cash Flows
Three Months Ended January 31,
(Unaudited)
Period from
November 24, 1998
(Inception)
Through
2001 2000 January 31, 2001
------------------- ------------------ ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,659) $ (2,670) $ (23,146)
Adjustments to reconcile net loss to net cash used
by operating activities:
Stock issued for services 0 0 6,000
Changes in operating assets and liabilities
(Increase) in interest receivable (429) 0 (429)
Increase (decrease) in accounts payable - trade (572) (4,812) 0
Increase (decrease) in accounts payable - related party 0 (2,764) 0
Increase in interest payable 87 0 87
------------------- ------------------ ---------------------
Net cash used by operating activities (4,573) (10,246) (17,488)
------------------- ------------------ ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans to related parties (39,000) 0 (39,000)
------------------- ------------------ ---------------------
Net cash used by investing activities (39,000) 0 (39,000)
------------------- ------------------ ---------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 0 50,000
Proceeds from loan from related party 8,000 0 8,000
------------------- ------------------ ---------------------
Net cash provided by financing activities 8,000 0 58,000
------------------- ------------------ ---------------------
Net increase (decrease) in cash (35,573) (10,246) 1,512
CASH, beginning of period 37,085 49,696 0
------------------- ------------------ ---------------------
CASH, end of period $ 1,512 $ 39,450 $ 1,512
=================== ================== =====================
The accompanying notes are an integral part of the financial statements
F-5
ImagineNet Corp.
(A Development Stage Enterprise)
Notes to Financial Statements
(Unaudited)
(1) The Company ImagineNet Corp. (the Company) is a Nevada chartered development
stage corporation which conducts business from its headquarters in West
Palm Beach, Florida. The Company was incorporated on November 24, 1998.
The Company has not yet engaged in its expected operations. The
Company's future operations include plans to sell and distribute
musical and related instruments and devices via the Internet. Current
activities include raising additional capital and negotiating with
potential key personnel and facilities. There is no assurance that any
benefit will result from such activities. The Company will not receive
any operating revenues until the commencement of operations, but will
nevertheless continue to incur expenses until then.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Use of estimates The financial statements have been prepared in
conformity with generally accepted accounting principles. In preparing
the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
as of the date of the statements of financial condition and revenues
and expenses for the year then ended. Actual results may differ
significantly from those estimates.
b) Start-Up costs Costs of start-up activities, including organization
costs, are expensed as incurred, in accordance with Statement of
Position (SOP) 98-5.
c) Net loss per share Basic loss per weighted average common share is
computed by dividing the net loss by the weighted average number of
common shares outstanding during the period.
d) Stock compensation for services rendered The Company issues shares
of common stock in exchange for services rendered. The costs of the
services are valued according to generally accepted accounting
principles and have been charged to operations.
e) Interim financial information The financial statements for the three
months ended January 31, 2001 and 2000 are unaudited and include all
adjustments which in the opinion of management are necessary for fair
presentation, and such adjustments are of a normal and recurring
nature. The results for the three months are not indicative of a full
year results.
(2) Stockholders' Equity The Company has authorized 50,000,000 shares of
$0.001 par value common stock, and 10,000,000 shares of $0.001 par
value preferred stock. Rights and privileges of the preferred stock are
to be determined by the Board of Directors prior to issuance. The
Company had 7,240,000 shares of common stock issued and outstanding at
January 31, 2001. The Company had issued none of its shares of
preferred stock at January 31, 2001. On November 24, 1998, the Company
issued 6,000,000 shares of common stock to its founder and President
for services rendered in connection with the organization of the
Company. During the period ended April 1999, the Company issued
1,240,000 shares of common stock for $50,000 in cash.
F-6
ImagineNet Corp.
(A Development Stage Enterprise)
Notes to Financial Statements
(Unaudited)
(3) Income Taxes Deferred income taxes (benefits) are provided for certain
income and expenses which are recognized in different periods for tax
and financial reporting purposes. The Company had net operating loss
carry- forwards for income tax purposes of approximately $23,146
expiring at October 31, 2021. The amount recorded as deferred tax asset
as of January 31, 2001 is approximately $3,500, which represents the
amount of tax benefit of the loss carry-forward. The Company has
established a 100% valuation allowance against this deferred tax asset,
as the Company has no history of profitable operations.
(4) Loans Receivable from Related Parties In December 2000, the Company
made two demand loans to related parties amounting to $35,000 and
$4,000. Accrued interest amounted to $385 and $44 at January 31, 2001.
(5) Loan Payable to Related Party In December 2000, the Company borrowed
$8,000 as a demand loan from a related party. Accrued interest amounted
to $87 at January 31, 2001
(6) Related Parties See Note (2) for shares issued for services. See Notes
(4) and (5) for loans to and from related parties.
During the period ended October 31, 1999, a shareholder and general
counsel for the Company performed legal services in the amount of
$2,764 on behalf of the Company. This amount was paid in the first
quarter of fiscal 2000.
(7) Going Concern The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The
Company's financial position and operating results raise substantial
doubt about the Company's ability to continue as a going concern, as
reflected by the net loss of $23,146 accumulated from November 24, 1998
(Inception) through January 31, 2001. The ability of the Company to
continue as a going concern is dependent upon commencing operations,
developing sales and obtaining additional capital and financing. The
financial statements do not include any adjustments that might be
necessary if the Company is unable to continue as a going concern. The
Company is currently seeking additional capital to allow it to begin
its planned operations.
F-7
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operations
Since its inception, the Company has conducted minimal business
operations except for organizational and capital raising activities. For the
period from inception (November 24, 1998) through January 31, 2001, the Company
had no revenue from operations and accumulated operating expenses amounted to
$23,487. The Company proposes to aggressively compete in the musical and related
instruments and devices via the internet for sale to the general public.
If the Company is unable to generate sufficient revenue from operations
to implement its plans, management intends to explore all available alternatives
for debt and/or equity financing, including but not limited to private and
public securities offerings. Accordingly, management expects that it will be
necessary for IMAG to raise additional funds in the event that the Company is
unable to generate any revenue from operations and if only a minimal level of
revenue is generated in accordance with management's expectations.
Mr. Ragsdale, at least initially, will be solely responsible for
developing IMAG's business. However, at such time, if ever, as sufficient
operating capital becomes available, he expects to employ additional staffing.
In addition, the Company expects to continuously engage in market research in
order to monitor new market trends and other critical information deemed
relevant to IMAG's business.
Financial Condition, Capital Resources and Liquidity
At January 31, 2001, the Company had assets totaling $40,941 and
liabilities of $8,087.00 attributable to accrued legal expenses and professional
fees. Since the Company's inception, it has received $50,000 in cash contributed
as consideration for the issuance of shares of Common Stock.
IMAG's working capital is presently minimal and there can be no
assurance that the Company's financial condition will improve. The Company is
expected to continue to have minimal working capital or a working capital
deficit as a result of current liabilities. The Company, at inception, issued
6,000,000 shares of the Company's Common Stock to Mr. Ragsdale, the sole
executive officer and director of IMAG, as founders shares. From October through
December, 1998 IMAG received gross proceeds of $50,000 from the sale of a total
of 1,240,000 shares of common stock, $.01 per value per share (the "Common
Stock"), in an offering conducted pursuant to Section 3(b) of the Act, as
amended (the "Act"), and Rule 504 of Regulation D promulgated thereunder ("Rule
504"). These offerings were made in the State of Georgia and Florida. Even
though management believes, without assurance, that it will obtain sufficient
capital with which to implement its business plan on a limited scale, the
Company is not expected to continue in operation without an infusion of capital.
In order to obtain additional equity financing, management may be required to
dilute the interest of existing shareholders or forego a substantial interest of
its revenues, if any.
The Company has no potential capital resources from any outside sources
at the current time. In its initial phase, the Company will operate out of the
facility provided by Mr. Ragsdale. In the event the Company requires additional
capital during this phase, Mr. Ragsdale has committed to fund the operation
until such time as additional capital is available.
9
To implement such plan, also during this initial phase, the Company
intends to initiate a self- directed private placement under Rule 506 in order
to raise an additional $100,000. In the event such placement is successful, the
Company believes that it will have sufficient operating capital to meet the
initial expansion goals and operating costs for a period of one (1) year.
Net Operating Losses
The Company has net operating loss carry-forwards of $23,146 expiring
at October 31, 2021. The company has a $3,500 deferred tax asset resulting from
the loss carry-forwards, for which it has established a 100% valuation
allowance. Until the Company's current operations begin to produce earnings, it
is unclear as to the ability of the Company to utilize such carry-forwards.
Forward-Looking Statements
This Form 10-QSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. All statements, other
than statements of historical facts, included or incorporated by reference in
this Form 10-QSB which address activities, events or developments which the
Company expects or anticipates will or may occur in the future, including such
things as future capital expenditures (including the amount and nature thereof),
finding suitable merger or acquisition candidates, expansion and growth of the
Company's business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses made
by the Company in light of its experience and its perception of historical
trends, current conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances. However, whether
actual results or developments will conform with the Company's expectations and
predictions is subject to a number of risks and uncertainties, general economic
market and business conditions; the business opportunities (or lack thereof)
that may be presented to and pursued by the Company; changes in laws or
regulation; and other factors, most of which are beyond the control of the
Company. Consequently, all of the forward-looking statements made in this Form
10-QSB are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company
will be realized or, even if substantially realized, that they will have the
expected consequence to or effects on the Company or its business or operations.
The Company assumes no obligations to update any such forward-looking
statements.
PART II
Item 1. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
10
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending January 31, 2001,
covered by this report to a vote of the Company's shareholders, through the
solicitation of proxies or otherwise.
Item 5. Other Information
The Company filed an SB-1 Registration Statement on November 21, 2001
for the purpose of selling at a minimum 100,000 and a maximum of 1,000,000
shares at an offering price of $1.00 per share. Selling Shareholders may also
sell up to 1,240,00 additional shares. The Company will delay the effective date
of this Registration Statement until it becomes effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine. Proceeds from the sale of
shares from this offering by the Company are expected to be used to continue
business operations and expand the scope of the business.
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation S-B,
as described in the following index of exhibits, are incorporated herein by
reference, as follows:
Exhibit No. Description
- ----------- -----------------------------------------------------------
3(i).1 Articles of Incorporation of ImagineNet Corp. filed November 24, 1998 (1)
3(ii).1 Bylaws (1)
- ------------------
(1) Incorporated herein by reference to the Company's Registration Statement on
Form 10-SB.
* Filed herewith
(b) No Reports on Form 8-K were filed during the quarter ended January 31, 2001
11
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ImagineNet Corp.
(Registrant)
Date: March 16, 2001 By: /s/ William H. Ragsdale
-----------------------------------------
William H. Ragsdale, 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 dates indicated.
Date Signature Title
- ---- --------- -----
March 16, 2001 By: /s/ William H. Ragsdale
-------------------------------
William H. Ragsdale President and Director
12