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: May 31, 2001
Commission file no.: 0-29821
essentialsystems.com, Inc.
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(Name of Small Business Issuer in its Charter)
Florida 65-0965465
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(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
222 Lakeview Avenue, PMB 160-183
West Palm Beach 33401
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 659-6530
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value per share
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(Title of class)
Copies of Communications Sent to:
Donald F. Mintmire
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696 - Fax: (561) 659-5371
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
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As of May 31, 2001, there are 6,000,000 shares of voting stock of the
registrant issued and outstanding.
PART I
Item 1. Financial Statements
ESSENTIALSYSTEMS.COM, INC.
FINANCIAL STATEMENTS
AS OF MAY 31, 2001 AND 2000
ESSENTIALSYSTEMS.COM, INC.
TABLE OF CONTENTS
Page
Accountants' Review Report F-1
Balance Sheet F-2
Statement of Operations and Deficit Accumulated
During the Development Stage F-3
Statement of Changes in Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6
Dorra Shaw & Dugan
Certified Public Accountants
ACCOUNTANTS' REVIEW REPORT
The Board of Directors and Stockholders
Essentialsystems.Com, Inc.
Palm Beach, Florida
We have reviewed the accompanying balance sheet of Essentialsystems.Com, Inc. (a
Florida corporation and a development stage company) as of May 31, 2001, and
2000, and the related statements of Operations and Deficit accumulated during
the development stage, changes in stockholders' equity, and Cash Flows for the
three months then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial statements is
the representation of the management of Essentialsystems.Com, Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based upon our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to be
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses since its inception. The Company's financial
position and operating results raise substantial doubt about its ability to
continue as a going concern. Management's plan regarding those matters also are
described in Note D. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Dorra Shaw & Dugan
Certified Public Accountants
July 12, 2001
270 South County Road * Palm Beach, FL 33480
Telephone (561) 822-9955 * Fax (561) 832-7580
Website: dsd-cpa.com
F-1
ESSENTIALSYSTEMS.COM, INC.
(A Development Stage Company)
BALANCE SHEET
May 31, 2001 2000
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ASSETS
Current Assets:
Cash $ 476 $ 1,740
- ---- --------------------------------------------------------------- ------------- -----------------
TOTAL CURRENT ASSETS 476 1,740
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$ 476 $ 1,740
- ---- --------------------------------------------------------------- ------------- -----------------
LIABILITIES
Current Liabilities:
Accrued expenses $ - $ -
- ---- --------------------------------------------------------------- ------------- -----------------
TOTAL CURRENT LIABILITIES - -
- -------------------------------------------------------------------- ------------- -----------------
- -
- ---- --------------------------------------------------------------- ------------- -----------------
STOCKHOLDERS' EQUITY
Common stock - $.0001 par value - 50,000,000 shares authorized 600 600
6,000,000 shares issued and outstanding
Preferred stock - no par value - 10,000,000 shares authorized
No shares issued and outstanding - -
Additional paid-in-capital 25,200 18,000
Deficit accumulated during the developmental stage (25,324) (16,860)
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TOTAL STOCKHOLDERS' EQUITY 476 1,740
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$ 476 $ 1,740
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See Accompanying Notes to Financial Statements
F-2
ESSENTIALSYSTEMS.COM, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND DEFICIT
ACCUMULATED DURING THE DEVELOPMENT STAGE
For the six months ended May 31, 2001 2000
- -------------------------------------------------------------- -------------- --------------
Revenues $ - $ -
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Operating expenses:
Professional fees $ - $ 10,500
Taxes and licenses - 150
Office 95 110
Office space 600 600
Personnel services 3,000 3,000
Bank charges 94 -
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Total operating expenses 3,789 14,360
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Loss before income taxes (3,789) (14,360)
Income taxes - -
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Net loss (3,789) (14,360)
Deficit accumulated during the
development stage - beginning of the year (21,535) (2,500)
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Deficit accumulated during the
development stage - end of the year $ (25324)$ (16,860)
- -------------------------------------------------------------- -------------- --------------
Net loss per share (0.000) (0.0024)
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Weighted average shares of common stock 6,000,000 6,000,000
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See Accompanying Notes to Financial Statements
F-3
ESSENTIALSYSTEMS.COM, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Additional
Number of Preferred Common Paid - In Deficit
Shares Stock Stock Capital Accumulated Total
- --- ------------------------------------- ------------ --------------- ----------- ------------- ------------- --------------
Beginning balance:
March 15, 1996 3,000,000 $ - $ 300 $ 1,200 $ - $ 1,500
March 15, 1996 - Services 2,500,000 - 250 750 - 1,000
(Date of Inception)
Issuance of Common Stock:
February 25, 2000 500,000 - 50 12,450 - 12,500
Contributed services
and space - - - 10,800 - 10,800
Deficit accumulated during
the development stage - - - - (25,324) (25,324)
- --- ------------------------------------- ------------ --------------- ----------- ------------- -------------- --------------
Balance - May 31, 2001 6,000,000 $ - $ 600 $ 25,200 $ (25,324) $ 476
- ----------------------------------------- ------------ --------------- ----------- ------------- -------------- --------------
See Accompanying Notes to Financial Statements
F-4
ESSENTIALSYSTEMS.COM, INC.
(A Development Stage Company)
Statement of Cash Flows
For the six months ended May 31, 2001 2000
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Operating Activities:
Net loss $ (3,789) $ (14,360)
Adjustments to reconcile net loss to net cash
used by operating activities:
Increase in:
Issuance of common stock for services 3,600 3,600
- -------- --- --- ---------------------------------------- ------------ --------------
Net cash used by operating activities (189) (10,760)
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Financing Activities:
Issuance of Common Stock - 12,500
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Net cash provided by financing activities - 12,500
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Net increase (decrease) in cash (189) 1,740
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Cash - Beginning of the year 665 -
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Cash - End of the year $ 476 $ 1,740
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See Accompanying Notes to Financial Statements
F-5
ESSENTIALSYSTEMS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
Note A - Summary of Significant Accounting Policies:
Organization
Essentialsystems.Com, Inc. (a development stage company) is a Florida
Corporation organized to distribute and sell at wholesale and retail
sophisticated electronic surveillance equipment and devices for security and
other purposes. The Company failed in its attempt to successfully develop its
initial business plan and during December 1996 abandoned its efforts. The
Company was inactive and there were no transactions from August 1996 to the date
of reinstatement by the State of Florida on December 14, 1999 that affect the
balances reflected in the financial statements as of December 1, 1999.
The Company has a new business plan, which was adopted on or about December 15,
1999, which is to engage in seeking potential operating businesses and business
opportunities with the intent to acquire or merge with such businesses. The
assets of the Company will be used for its expenses of operation to implement
this plan.
Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a November 30 year-end.
Start - Up Costs
Start - up and organization costs are being expensed as incurred.
Loss Per Share
The computation of loss per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Interim Financial Statements
The May 31, 2001 interim financial statements include all adjustments, which in
the opinion of management are necessary in order to make the financial
statements not misleading.
Note B - Stockholders' Equity:
On March 15, 1996, the Company issued 5,500,000 shares of common stock for
$1,500 cash and the fair market value of services, valued at $1,000, rendered by
its initial stockholders.
F-6
ESSENTIALSYSTEMS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
Note B - Stockholders' Equity (cont'd):
On February 25, 2000 the company issued a total 500,000 additional shares of
common stock for the sum of $12,500.
At May 31, 2001, the Company had authorized 50,000,000 shares of $.0001 par
value common stock and had 6,000,000 shares of common stock issued and
outstanding. In addition, the Company authorized 10,000,000 shares of preferred
stock with the specific terms; conditions, limitations and preferences to be
determined by the Board of Directors. None of the preferred stock was issued and
outstanding as of May 31, 2001.
The Company utilizes its legal counsel's office at no charge and the Company's
president is not currently compensated. The Company records the fair value of
these services as an expense and contributed capital at the rate of $100 per
month for office space, and $500 per month for personnel services respectively.
Note C - Income Taxes:
The Company has a net operating loss carry forward of $22,824 that may be offset
against future taxable income. If not used, the carry forward will expire in
2021.
The amount recorded as deferred tax assets, cumulative as of May 31, 2001 is
$3,400, which represents the amounts of tax benefits of loss carry-forwards. The
Company has established a valuation allowance for this deferred tax asset of
$3,400, as the Company has no history of profitable operations.
Note D - Going Concern:
The Company's financial statements are prepared using generally accepted
accounting principles applied to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred losses from its inception through May 31,
2001. It has not established revenues sufficient to cover operating costs and to
allow it to continue as a going concern.
Management plans currently provide for experts to secure a successful
acquisition or merger partner so that it will be able to continue as a going
concern. In the event such efforts are unsuccessful, contingent plans have been
arranged to provide that the current Director of the Company is to fund required
future filings under the 34 Act, and existing shareholders have expressed an
interest in additional funding if necessary to continue the Company as a going
concern.
F-7
Item 6. Management's Discussion and Analysis or Plan of Operation
Management's Discussion and Analysis or Plan of Operation
The Company is considered a development stage company with limited assets
or capital, and with no operations or income since 1996. The costs and expenses
associated with the preparation and filing of this registration statement and
other operations of the Company have been paid for by a shareholder,
specifically Kevin L. Bell. Mr. Bell has agreed to pay future costs associated
with filing future reports under Exchange Act of 1934 if the Company is unable
to do so. It is anticipated that the Company will require only nominal capital
to maintain the corporate viability of the Company and any additional needed
funds will most likely be provided by the Company's existing shareholders or its
sole officer and director in the immediate future. Current shareholders have not
agreed upon the terms and conditions of future financing and such undertaking
will be subject to future negotiations, except for the express commitment of Mr.
Bell to fund required 34 Act filings. Repayment of any such funding will also be
subject to such negotiations. However, unless the Company is able to facilitate
an acquisition of or merger with an operating business or is able to obtain
significant outside financing, there is substantial doubt about its ability to
continue as a going concern.
In the opinion of management, inflation has not and will not have a
material effect on the operations of the Company until such time as the Company
successfully completes an acquisition or merger. At that time, management will
evaluate the possible effects of inflation on the Company as it relates to its
business and operations following a successful acquisition or merger.
Management plans may but do not currently provide for experts to secure a
successful acquisition or merger partner so that it will be able to continue as
a going concern. In the event such efforts are unsuccessful, contingent plans
have been arranged to provide that the current Director of the Company is to
fund required future filings under the 34 Act, and existing shareholders have
expressed an interest in additional funding if necessary to continue the Company
as a going concern.
Plan of Operation
During the next twelve months, the Company will actively seek out and
investigate possible business opportunities with the intent to acquire or merge
with one or more business ventures. In its search for business opportunities,
management will follow the procedures outlined in Item 1 above. Because the
Company has limited funds, it may be necessary for the sole officer and director
to either advance funds to the Company or to accrue expenses until such time as
a successful business consolidation can be made. The Company will not make it a
condition that the target company must repay funds advanced by its officers and
directors. Management intends to hold expenses to a minimum and to obtain
services on a contingency basis when possible. Further, the Company's directors
will defer any compensation until such time as an acquisition or merger can be
accomplished and will strive to have the business opportunity provide their
remuneration. However, if the Company engages outside advisors or consultants in
its search for business opportunities, it may be necessary for the Company to
attempt to raise additional funds. As of the date hereof, the Company has not
made any arrangements or definitive agreements to use outside advisors or
consultants or to raise any capital. In the event the Company does need to raise
capital most likely the only method available to the Company would be the
private sale of its securities. Because of the nature of the Company as a
development stage company, it is unlikely that it could
12
make a public sale of securities or be able to borrow any significant sum from
either a commercial or private lender. There can be no assurance that the
Company will able to obtain additional funding when and if needed, or that such
funding, if available, can be obtained on terms acceptable to the Company.
The Company does not intend to use any employees, with the possible
exception of part-time clerical assistance on an as-needed basis. Outside
advisors or consultants will be used only if they can be obtained for minimal
cost or on a deferred payment basis. Management is convinced that it will be
able to operate in this manner and to continue its search for business
opportunities during the next twelve months.
Year 2000 Compliance
The Company has confirmed that its systems are Year 2000 Compliant. It has
experienced no Y2K problems to date.
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.
13
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 May 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
None
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 Eye Spy Surveillance Systems Plus, Inc.(1)
3(i).2 Articles of Amendment to Articles of Incorporation of Eye Spy Surveillance Systems
Plus, Inc.(1)
3(ii).1 By-laws of essentialsystems.com, Inc.(1)
- -------------------------
(1) Incorporated herein by reference to the Company's Registration Statement on
Form 10-SB.
(b) No Reports on Form 8-K were filed during the quarter ended May 31,
2001.
14
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,
there unto duly authorized.
essentialsystems.com, Inc.
(Registrant)
Date: July 18, 2001 BY: /s/ Kevin L. Bell
------------------------------------
Kevin L. Bell, 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
July 18, 2001 By: /s/ Kevin L. Bell President, Secretary,
---------------------------- Treasurer, Director
Kevin L. Bell
15