U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Quarterly
Period Ended January 31, 2003
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Commission file number: 000-49896
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DOWNSIDE UP, INC.
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(Exact name of small business issuer as specified in its charter)
Colorado 84-1493157
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10077 E. County Line Rd., Longmont, Colorado 80501
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(Address of principal executive offices) (Zip Code)
303-772-3316
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(Issuer's telephone number)
7899 West Frost Drive, Littleton, Colorado 80128
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(Former name, former address and former fiscal year,
if changed since last report)
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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State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
As of January 31, 2003, 1,230,000 shares of common stock, no par value, were
outstanding.
DOWNSIDE UP, INC.
Index
Page
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheet, January 31, 2003 (Unaudited) ........... 3
Condensed statements of operations (Unaudited) - three
and nine months ended January 31, 2003 and 2002, and
for the period from April 9, 1998 (inception) through
January 31, 2003 ............................................. 4
Condensed statements of cash flows (Unaudited) - nine
months ended January 31, 2003 and 2002, and for the
period from April 9, 1998 (inception) through
January 31, 2003 ............................................. 5
Notes to condensed financial statements (Unaudited) ............. 6
Item 2. Plan of Operation ....................................... 7
Part II OTHER INFORMATION ............................................... 8
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 ...................................................... 9
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Part 1. Item 1. Financial Information
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DOWNSIDE UP, INC.
(A Development Stage Company)
Condensed Balance Sheet
January 31, 2003
(Unaudited)
Assets
Current assets:
Cash .................................................. $ 50
========
Liabilities and Shareholders' Deficit
Current liabilities:
Accounts payable and accrued liabilities .............. $ 275
Due to related party (Note 2) ......................... 1,596
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Total liabilities ....................... 1,871
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Shareholders' deficit:
Common stock .......................................... 2,800
Additional paid-in capital ............................ 5,672
Deficit accumulated during development stage .......... (10,293)
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Total shareholders' deficit ............. (1,821)
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$ 50
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See accompanying notes to condensed financial statements
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DOWNSIDE UP, INC.
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
April 9, 1998
Three Months Ended Nine Months Ended (inception)
January 31, January 31, Through
-------------------------- -------------------------- January 31,
2003 2002 2003 2002 2003
----------- ----------- ----------- ----------- -----------
Costs and expenses:
Stock-based compensation (Note 2):
Organization costs .................. $ -- $ -- $ -- $ -- $ 500
Contributed rent (Note 2) .............. 300 300 900 900 5,800
Other general and administrative costs . 509 -- 2,097 -- 4,109
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809 300 2,997 900 10,409
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Loss before income taxes and interest income (809) (300) (2,997) (900) (10,409)
Interest income ........................ -- -- -- -- 116
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Loss before
income taxes ......... (809) (300) (2,997) (900) (10,293)
Income tax provision (Note 3) .......... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net loss ................ $ (809) $ (300) $ (2,997) $ (900) $ (10,293)
=========== =========== =========== =========== ===========
Basic and diluted loss per share ........... $ (0.00) $ (0.00) $ (0.00) $ (0.00)
=========== =========== =========== ===========
Weighted average common shares outstanding . 1,230,000 1,230,000 1,230,000 1,230,000
=========== =========== =========== ===========
See accompanying notes to condensed financial statements
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DOWNSIDE UP, INC.
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
April 9, 1998
Nine Months Ended (inception)
January 31, Through
------------------- January 31,
2003 2002 2003
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Net cash used in operating activities ............. $(3,206) $ -- $(5,379)
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Cash flows from financing activities:
Advances from affiliate, net (Note 2) ......... 3,256 -- 3,256
Proceeds from sale of common .................. -- -- 2,300
Payments for offering costs ................... -- -- (127)
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Net cash provided by
financing activities ..... 3,256 -- 5,429
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Net change in cash and
cash equivalents ......... 50 -- 50
Cash:
Beginning of period ........................... -- -- --
------- -------- -------
End of period ................................. $ 50 $ -- $ 50
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Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes ............................... $ 50 $ -- $ 50
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Interest ................................... $ 50 $ -- $ 50
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See accompanying notes to condensed financial statements
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DOWNSIDE UP, INC.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note 1: Basis of Presentation
The financial statements presented herein have been prepared by the Company in
accordance with the accounting policies in its audited financial statements for
the year ended April 30, 2002 as filed in its Form 10-KSB and should be read in
conjunction with the notes thereto. The Company entered the development stage in
accordance with Statement of Financial Accounting Standard ("SFAS") No. 7 on
April 9, 1998 and its purpose is to evaluate, structure, and complete a merger
with, or acquisition of, a privately owned corporation.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim periods presented have been made. The results
of operations for the period presented are not necessarily indicative of the
results to be expected for the year.
Interim financial data presented herein are unaudited.
Note 2: Related Party Transactions
Corporate Management Services ("CMS") organized the Company in exchange for
1,000,000 shares of the Company's common stock. The common stock was valued at
$500 by the Company's Board of Directors. CMS may, from time to time, advance to
the Company any additional funds that the Company needs for operating capital
and for costs in connection with searching for or completing an acquisition or
merger.
CMS provides office space at no charge to the Company, on an as needed basis,
for all periods presented in the accompanying financial statements. The
Company's Board of Directors has valued this service at approximately $100 per
month, based on prevailing local market rates. The accompanying financial
statements include a charge to rent expense and a credit to paid-in capital of
$900, $900, and $5,800, respectively, for the nine months ended January 31, 2003
and 2002, and the period from April 9, 1998 (inception) through January 31,
2003.
CMS paid certain administrative costs on behalf of the Company, on an as needed
basis, for all periods presented in the accompanying financial statements. The
costs, consisting of legal, accounting and filing fees, are necessary for the
Company to maintain its reporting status in conformity with the provisions
Securities and Exchange Act of 1934, as amended. At April 30, 2002 the CMS owed
the Company $1,660 for the remaining balance of net proceeds from the Company's
common stock offering and accrued interest. During the nine months ended January
31, 2003, CMS paid an additional $3,256 in legal, accounting, and general and
administrative costs on behalf of the Company, which resulted in a payable to
CMS at January 31, 2003 of $1,596 (see Note 4). This receivable is referred to
as due from related party in the accompanying condensed financial statements.
Note 3: Income Taxes
The Company records its income taxes in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes". The Company incurred
net operating losses during the periods shown on the condensed financial
statements resulting in a deferred tax asset, which was fully allowed for,
therefore the net benefit and expense result in $-0- income taxes.
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DOWNSIDE UP, INC.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note 4: Subsequent Event
On February 21, 2003, the Company, CMS and Mr. James Wiegand executed a common
stock purchase agreement (the "Agreement"). Mr. Wiegand purchased 750,000 shares
of the Company's common stock, previously owned by CMS, and effectively took
over control of the Company. On February 21, 2003, pursuant to the Agreement,
CMS forgave the $1,596 owed by the Company. The debt forgiveness was considered
a contribution to additional paid-in capital in February 2003.
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Part I-- Item 2. Plan of Operation
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The Company's plan of operation is to seek out, investigate, and pursue a
merger, acquisition, or other business combination with an entity desiring the
perceived benefits offered by the Company as a result of its having a class of
securities registered under the Exchange Act. There have been no revenues from
operations since formation, and none are anticipated prior to completing a
business combination. The Company has no full time employees, incurs nominal
rent and administrative expenses of $100 per month, and has no other recurring
operational expenses except professional fees incurred as necessary. The
Company's president devotes approximately ten (10) hours per month, without
compensation, to the affairs of the Company. The Company does not anticipate
raising any additional funds in the next twelve (12) months, and has no present
plans to acquire any assets or make any investments prior to completing a
business combination.
To date, the Company has not identified a suitable target entity for any type of
business combination, and management has no particular type of merger,
acquisition, or business opportunity in mind. No restrictions have been placed
on management's discretion to seek out and participate in an appropriate
business opportunity. Due to limited financial resources it is anticipated that
only a single potential business venture will be pursued.
Selection of an appropriate business opportunity is complex and risky due to the
Company's limited financial resources, the speculative nature of operations,
management's limited time commitment to the Company, management's potential
conflicts of interest, the burdens of being a reporting company, lack of market
research, and competition in the marketplace. The Company's success is dependent
upon locating and consummating a business combination, and there are no
assurances that this will occur.
Part II - Other Information
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Items 1 through 5
No response required.
Item 6: Exhibits and Reports on Form 8-K
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(a). Exhibits:
1. 99.1: Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 - CEO
2. 99.2: Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 - CFO
(b) Reports on Form 8-K
On March 7, 2003, we filed a Report on Form 8K to report a change
in control of Registrant. Our report on Form 8K is hereby incorporated
by reference.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Downside Up, Inc.
Date: March 12, 2003 By: /s/ James B. Wiegand
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James B. Wiegand, President/Secretary
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