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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2000
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TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 000-26899
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E-FINANCIAL DEPOT.COM, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 33-0809711
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 - 1875 CENTURY PARK EAST
CENTURY CITY, CALIFORNIA 90067
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(Address of principal executive offices)
(877) 739-3812
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(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
13,040,000 common shares issued and outstanding as of April 28, 2000
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Transitional Small Business Disclosure Format (Check one): Yes No [X]
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
e-financial depot.com, Inc.'s (the "Company") financial statements are stated in
United States Dollars (US$) and are prepared in accordance with United States
Generally Accepted Accounting Principles.
The financial statements are attached to this Quarterly Report (see Part II,
Item 6).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes, included in Part II, Item 6 of this
Quarterly Report.
Description of Company
The Company is an internet financial portal, offering a full spectrum of
financial services and investment information on the World Wide Web. The
Company is developing a proprietary information system consisting of integrated
financial web pages and featuring an online investment-related community through
its talk-stock.com. website (the "Talk Stock Website").
Unlike many dot.com businesses which take a single point and develop around one
idea, the Company is a comprehensive financial services portal incorporating
four principle revenue engines:
(a) Global markets - trading both hosted and online.
(b) Specialty financial services - mortgages, insurance, foreign
exchange, commodities
(c) News, media & communication with our on line community "TALK
STOCK".
(d) Education and Investor preparedness focusing on Risk Analysis,
Investment and trading techniques.
Forward Looking Statements
This Quarterly Report contains certain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. All statements
included herein that address activities, events or developments that
the Company expects, believes, estimates, plans, intends, projects or
anticipates will or may occur in the future, are forward-looking statements.
Actual events may differ materially from those anticipated in the
forward-looking statements. Important risks that may cause such a difference
include: general domestic and international economic business conditions,
increased competition in the Company's markets and products. Other factors may
include, availability and terms of capital, and/or increases in operating and
supply costs. Market acceptance of existing and new products, rapid
technological changes, availability of qualified personnel also could be
factors. Changes in the Company's business strategies and development plans and
changes in government regulation could adversely affect the Company. Although
the Company believes that the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate. There can be no assurance that the forward-looking statements
included in this filing will prove to be accurate. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company that the objectives and expectations of the Company would be achieved.
Revenue
For the three months ended March 31, 2000, revenue from continuing operations,
which are comprised exclusively of client fee income, was $15,200. Total
revenues from continuing operations decreased by $155,050, or 91%, from $170,250
for the period ended March 31, 1999. The decrease in the Company's revenues
during the period ended March 31, 2000 compared to March 31, 1999 was due to the
Company's management changing its focus to providing investors information on
equity issues. The Company reported net loss from continuing operations for the
three months ended March 31, 2000 of $647,701 compared to net income of $
125,426 for the three months ended March 31, 1999. The decrease in net income
is due to the increased costs associated with the startup of the Company's
internet financial portal and a change in the focus of the Company from an
investor relations services provider to a provider of comprehensive financial
information.
Costs and Expenses
The Company's expenses from operations for the three months ended March 31, 2000
increased $637,116 or 1,240% to $688,490 from $51,374 during the same period in
1999. Selling, general and administrative expenses increased $612,936, or 1,193%
to $ 664,310 during the first 3 months of 2000 from $ 51,374 in the first 3
months of 1999. The increase was due to the Company incurring start up costs in
connection with establishing its world wide web information site and an increase
in personnel costs.
The Company recognized a net gain from the sale of securities available for sale
in the first 3 months of 2000 in the amount of $7,938 as compared to a net gain
of $6,550 in the first 3 months of 1999. The Company periodically receives
securities from clients in exchange for services. It is the Company's policy to
liquidate the securities when it is in the best interest of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Three Months Ended March 2000
As of March 31, 2000, the Company had a deficit in working capital of $86,451
compared to available working capital of $55,742 at March 31, 1999, a decrease
in working capital of $142,193. The decrease in working capital was
substantially due to the decrease in client accounts receivable and an increase
in loans from shareholders at March 31, 2000 as compared to 1999.
The Company's negative cash flow from operations was $536,718 for the three
months ended March 31, 2000 . The negative cash flow from operating activities
for the three months ended March 31, 2000 is primarily attributable to the
Company's $603,091 loss from operations, adjusted for $13,889 of amortization
and a $43,625 provision for uncollectible accounts receivable.
Cash flows used in investing activities was $1,966,563 during the three months
ended March 31, 2000. The Company advanced $2,000,000 in funds to TradeFast,
Inc. during the three months ended March 31,2000. The advance is in the form of
a note receivable at March 31, 2000.
Cash flows provided from financing activities $2,516,093 during the three months
ended March 31, 2000. The principal source of financing during the period was
the proceeds of $2,350,000 of convertible debentures, net of placement costs.
The debenture pays the holders 6%, payable annually redeemable at the option of
the Company after one year of issuance and once the average daily closing price
of the Company's common stock is $10.00 per share for twenty (20) consecutive
trading days. The convertible debenture is in convertible at the option of the
holder of such debenture at any time after March 2, 2000 at a price per share
equal to the lesser of (i) 80% of the average closing bid price of the Company's
common stock for five days proceeding the date of conversion notice is tendered,
or (ii) five ($5.00) dollars per share. In no event shall the conversion price
be lower than $3.00 per share. Subsequent to March 31,2000, the Company received
notice from the convertible debenture holders exercise their rights to convert
the convertible debentures to the Company's common stock. See Part II, Item 2
for further details.
While the Company has raised capital to meet its working capital requirements,
additional financing is required in order to complete the acquisition of related
businesses. The Company is seeking financing in the form of equity and debt in
order to provide for these acquisitions and for working capital. There are no
assurances the Company will be successful in raising the funds required.
In prior periods, the Company has borrowed funds from significant shareholders
of the Company in the past to satisfy certain obligations.
As the Company continues to expand, the Company will incur additional costs for
personnel. In order for the Company to attract and retain quality personnel,
the Company anticipates it will continue to offer competitive salaries and grant
Company stock options to current and future employees.
The effect of inflation on the Company's revenue and operating results was not
significant The Company's operations are in the southeastern United States and
there are no seasonal aspects that would have a material effect on the Company's
financial condition or results of operations.
GENERAL
The Company is an internet financial portal, which offers a full spectrum of
financial services and investment information on the World Wide Web through its
website "www.efinancialdepot.com" (the "Website"). The Company is currently
developing a proprietary information system consisting of integrated financial
web pages and featuring an online investment-related community through the
Talk Stock Website. The Website and the Talk Stock Website are collectively
referred to in this Quarterly Report as the "Websites".
The Company's goal is to use the Websites to disseminate information available
over the internet to service the growing need for a centralized source of
information and services for the rapidly increasing number of online investors,
brokers, and investment students. Unlike many of its competitors, who first
build a website and then attempt to drive traffic to it, the Company has already
created the Talk Stock Website. The Company's target market includes individual
investors of all sophistication levels, professional investors such as brokers,
analysts and money managers, and general online enthusiasts looking for
investment information, education and professional financial services.
The Company intends to provide an easily navigable, consumer friendly,
vertically integrated destination website offering a wide variety of financial
products and services, including:
- - extensive investor education;
- - unbiased streaming news;
- - full service investment support, on-line trading, estate planning, life
insurance and mortgage banking; and
- - commentary on-line radio.
Another area of growth among Internet use is the online community, which has
brought users together to communicate with one another and share information.
This particular Internet medium has personalized the Internet for its users. To
date, a typical internet user's experience has been essentially one-way
searching and viewing websites containing professionally created content on
topics of general interest, such as current events, sports, finance, politics
and weather. While internet search and navigational sites have improved users'
abilities to seek out aggregated Internet content, these sites are not primarily
focused on providing a platform for publishing the rapidly increasing volume of
personalized content created by users with similar interests, or enabling such
users to interact with one another. In contrast, through the Websites, the
Company can offer users aggregated web content aimed directly at their needs,
such as investment information and financial services.
Products & Services
News Media Communications
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The Company intends to provide unbiased news and information in a user-friendly
environment which will be available 24 hours a day. Beginning with the launch
of the Website (scheduled for the end of the Company's second quarter, 2000),
and continuing thereafter, original content is planned to bring both topical and
educational materials to all subscribers. In addition, the Company will provide
public relations activities on behalf of publicly traded companies. The
Company, through the Talk Stock Website, will host and profile companies
actively trading on the NYSE, AMEX, NASDAQ, as well as the OTC:BB. The Company,
through the Websites, intends to provide:
- - hosting and profiling of public companies, paid on a monthly basis;
- - online radio services paid for on a lump sum and monthly basis;
- - hosting of annual meeting, global audience, live streaming audio or video;
- - banner advertisements;
- - attendance fees for Conference Rooms; and
- - original, topical financial and success site content.
Trading Offices/Systems & On Line Financial Services
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Through TradeFast Inc. ("TradeFast"), a holding company with management
contracts with New World Securities (an electronic stock brokerage that
leverages direct-access communications with the stock exchanges), the Company
intends to continue the business of trading on the New York Stock Exchange and
NASDAQ markets. Management plans to market its services and anticipates members
opening accounts and utilizing its competitive online discount brokerage firm.
There are currently two TradeFast trading offices; up to seven more trading
offices are currently planned.
Once an account is open and a client is cleared for trading, he or she can come
into one of the Company's investor services offices during market hours and
trade live utilizing TradeFast's licensed software system, TradeCast, which
provides NASDAQ Level II service. Unlike traditional online brokerage trades
where a trade is placed and then enters "cyberspace", with confirmation received
at a later time, at TradeFast, clients can actually see the trade go directly to
the market maker or specialist and get executed. Screens in the offices display
trading ideas through pre-set parameters, such as those stocks that have made
new highs or lows since the previous day's close, those having record volume, or
those hitting a certain number of consecutive buy orders (momentum plays).
The Company is contemplating the integration of TradeFast into the Website by
branding the online trading operation as the "Financial Depot Trade Station".
Management's plans include strategically locating the "Financial Depot Trade
Stations" in locations with heavy business traffic and visibility. A model
location for the Financial Depot Trade Stations has been selected, and services
available inside a Financial Depot Trade Station may include a cafe, ATM
machine, travel services, insurance services, mortgage banking services, state
of the art trading stations
and discount brokerage and commodities desks. The
Company anticipates that this union of services and visibility will attract
customers, as well as provide a destination for the professional traders to work
daily in a convenient and energetic atmosphere, in addition to allowing them the
opportunity to share their strategies and ideas with fellow traders. Management
anticipates that the Financial Depot Trade Stations will draw new traders, as
well as professional traders and those traders that are currently working
independently from their homes.
In the TradeFast offices, Financial Depot Trade Station banners and screens will
be prominently displayed. On the Websites, Financial Depot Trade Station will
be prominently displayed with banners and buttons. The Company also intends to
feature live newswire service during market hours to initially attract traders
and other uses, and to maintain the attractiveness of the Websites as return
destinations for traders and other users. It is expected that this live news
service will attract quality traffic to the Websites, thereby increasing
advertising rates and expanding e-commerce opportunities.
TradeFast will provide the management holding company for internet-based
trading. The Company intends to offer online brokerage, traditional brokerage
services and possibly fee-based investment advice. To summarize, the Company
intends to provide:
- - online and traditional brokerage;
- - fee-based investment advisory services; and
- - financial planning, including tax planning and tax advantaged investing.
Specialty Financial Services
The Company is currently developing the ability to provide the following
specialty financial services:
- - mortgage banking;
- - real estate services;
- - insurance sales and services;
- - tax preparation
- - full service securities broker, real estate agent, insurance agent,
mortgage banker directories;
- - consulting services, such as information with respect to securities laws
or becoming a public company;
- - e-commerce; and
- - tutorials and investment schools.
Investor Education
In addition to the above services, the Company intends to provide a series of
investor education materials and financial seminars designed to educate the
public on investment topics, such as learning about the markets, equities,
bonds, mutual funds, and the capital markets in general. In addition to
providing education, the Company will offer educational programs for both
professionals and others with general interest in learning more about investing,
investment risks, finance and financial markets.
Need for Additional Financing
Based on its current operating plan, the Company anticipates that it will
require additional financing of approximately $10,000,000 by June 30, 2000 in
order to finance increased promotion and marketing of the Websites and to
complete anticipated acquisitions. The Company does not anticipate that it will
require any further financing between July 1, 2000 and March 31, 2001. The
Company may need to raise additional capital sooner, to fund more rapid
expansion, to develop new or enhanced services or to respond to competitive
pressures. The Company will raise equity through the equity markets of North
America, Europe and Asia.
The Company's ability to continue in business depends significantly upon its
continued ability to obtain financing. There can be no assurance that any such
financing would be available upon terms and conditions acceptable to the
Company, if at all. The inability to obtain additional financing in a
sufficient amount when needed and upon acceptable terms and conditions could
have a material adverse effect upon the Company. Although the Company believes
that it can raise financing sufficient to meet its immediate needs, it will
require funds to finance its development, marketing and operating activities in
the future. There can be no assurance that such funds will be available or
available on terms satisfactory to the Company. If additional funds are raised
by issuing equity securities, further dilution to existing or future
stockholders is likely to result. If adequate funds are not available on
acceptable terms when needed, the Company may be required to delay, scale-back
or eliminate its promotional and marketing campaign, its development programs or
even its operations until such funds become available. Inadequate funding also
could impair the Company's ability to compete in the marketplace and could
result in its dissolution.
Product Research and Development
Over the 12 months ending March 31, 2001, the Company anticipates that it will
carry out certain product research and/or development, including research and
development with respect to internet banking applications, trading platforms,
online security and educational remote delivery devices.
Purchases or Sales (Plant or Equipment)
The Company anticipates that, prior to March 31, 2001, it will purchase hardware
and software to facilitate an 800% increase in the Company's network capacity to
120,000 transactions per minute (2,000 transactions per second). The Company
does not anticipate that it will purchase or sell a plant, or sell any
significant equipment over the 12 months ending March 31, 2001.
Changes in Employees
The Company anticipates a significant change in its current number of employees
over the 12 months ending March 31, 2001, due to growth of the Company through
acquisitions previously announced, and acquisitions currently under
consideration by the Company. The Company anticipates that it will hire 6
management personnel for its Trading division, 14 marketing and sales personnel
for its Mortgage Banking division, 6 marketing and sales personnel for its
Insurance division, a total of 4 management personnel and educators for its
Education division, and 2 senior managers for its Corporate division.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Forward Looking Statements
When included in this Quarterly Report on Form 10-QSB, the words "expects,"
"intends," "plans," "projects," and "estimates," and analogous or similar
expressions are intended to identify forward-looking statements. Such
statements are inherently subject to a variety of risks and uncertainties that
could cause actual results to differ materially from those reflected in such
forward-looking statements. These forward-looking statements speak only as of
the date of this Quarterly Report on Form 10-QSB. The Company expressly
disclaims any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statement contained herein to reflect any
change in the Company's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
Penny Stock Rules
The Company's common shares are subject to rules promulgated by the SEC relating
to "penny stocks," which apply to companies whose shares are not traded on a
national stock exchange or on the NASDAQ system, trade at less than $5.00 per
share, or who do not meet certain other financial requirements specified by the
SEC. These rules require brokers who sell "penny stocks" to persons other than
established customers and "accredited investors" to complete certain
documentation, make suitability inquiries of investors, and provide investors
with certain information concerning the risks of trading in the such penny
stocks. These rules may discourage or restrict the ability of brokers to sell
the Company's common shares and may affect the secondary market for the
Company's common shares. These rules could also hamper the Company's ability to
raise funds in the primary market for the Company's common shares.
Uncertainty of and Inability to Generate Significant Revenues
The Company's ability to generate significant revenues is uncertain. The
Company's short and long-term prospects depend upon it ability to:
- - develop a base of users of the Websites;
- - continue its global growth in the online trading business;
- - facilitate transactions of businesses listing products and services for
sale on the Websites;
- - continue its growth in the specialty financial services sectors;
- - develop and operate the Websites;
- - develop high value internet banking applications;
- - develop a base of businesses who will pay to advertise their products and
services on the Websites;
- - continue the development of high value content for the Websites; and
- - develop a base of users and businesses who will pay to use banner ads and
page sponsorships on the Websites.
The Company has projected that a significant portion of its revenues will be
generated from such relationships and activities. Accordingly, the Company's
success is highly dependent on such relationships and activities and the Company
may never generate significant revenues if it does not establish such
relationships and activities. As its business evolves, the Company expects to
introduce a number of new products and services. With respect to both current
and future product and service offerings, the Company expects to significantly
increase its marketing and operating expenses in an effort to increase its user
base, enhance the image of the Websites and support its infrastructure. In
order for the Company to make a profit, its revenues will need to increase
significantly to cover these and other future costs. Even if it becomes
profitable, the Company may not sustain or increase its profits on a
quarterly or annual basis in the future.
Unpredictability of Future Revenues
As a result of the Company's limited operating history and the emerging nature
of the markets in which it competes, the Company is unable to accurately
forecast its revenues. The Company's current and future expense levels are
based largely on its investment plans and estimates of future revenues and are
to a large extent fixed.
Sales and operating results generally depend on the Company's ability to develop
a base of users and businesses who will pay to utilize the Websites or to
advertise their products and services on the Websites. The Company may
be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in
estimated revenues in relation to the Company's planned expenditures would
have an immediate adverse effect on the Company's business, prospects,
financial condition and results of operations.
Further, as a strategic response to changes in the competitive environment, the
Company may from time to time make certain pricing, service or marketing
decisions that could have a materially adverse effect on its business and
financial condition and results of operations.
Liquidity and Capital Resources
While the Company has, in the past, raised capital to meet its working capital
requirements, additional financing is required in order to complete the
acquisition of related businesses. The Company continues to seek financing in
the form of equity and debt in order to provide for these acquisitions and for
working capital. There are no assurances the Company will be successful in
raising the funds required. In the past, the Company has borrowed funds from an
entity related to a significant Company shareholder of the Company in the past
to satisfy certain obligations.
Limited Operating History
The Company recently initiated the Website, and as a result, it only has a
limited operating history. The Company's prospects must be considered in light
of the risks, uncertainties, expenses and difficulties frequently encountered by
companies in their early stages of development, particularly companies in new
and rapidly evolving markets like the one faced by the Company. Some of these
risks and uncertainties relate to the Company's ability to attract and maintain
a large base of users, develop and introduce desirable services and original
content to users, establish and maintain relationships with advertisers and
advertising agencies, respond effectively to competitive and technological
developments, and build an infrastructure to support the Company's business.
The Company cannot be sure that it will be successful in addressing these risks
and uncertainties and its failure to do so could have a material adverse effect
on its financial condition.
Potential Fluctuations in Quarterly Operating Results
The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside the Company's control. Factors that may adversely affect the Company's
quarterly operating results include but are not limited to:
- - the Company's ability to retain existing users of the Websites, attract
new users at a steady rate and maintain user satisfaction;
- - the Company's ability to develop a base of businesses willing to pay to
advertise their products and services on the Websites;
- - the Company's ability to develop a base of businesses willing to utilize
the Websites to conduct transactions;
- - the announcement or introduction of new services and products by the
Company and its competitors;
- - the continued use of the Internet and online services and increasing
consumer acceptance of the Internet and other online services for the
purchase of consumer products and services such as those offered
by the Company;
- - the Company's ability to upgrade and develop its systems and
infrastructure in connection with the Website and attract new personnel
in a timely and effective manner;
- - the level of traffic on the Websites;
- - technical difficulties, system downtime or Internet outages;
- - the amount and timing of operating costs and capital expenditures relating
to expansion of the Company's business, operations and infrastructure;
- - governmental regulation;
- - general economic conditions; and
- - economic conditions specific to the Internet and online commerce.
Seasonality
The Company expects that it will experience seasonality in its business,
reflecting a combination of seasonal fluctuations in Internet usage and
traditional retail seasonality patterns. Due to the foregoing factors, one or
more future quarters the Company's operating results may fall below the
expectations of securities analysts and investors. In such event, the financial
performance of the Company would likely be materially adversely affected.
Capacity Constraints
A key element of the Company's strategy is to generate a high volume of traffic
on, and use of, the Websites. Accordingly, the satisfactory performance,
reliability and availability of the Websites, transaction processing systems and
network infrastructure are critical to the Company's reputation and its ability
to attract and retain users and maintain adequate user service levels.
The Company's revenues depend on the number of users who visit and purchase
goods and services through the Websites and the number of businesses who utilize
the Websites to advertise and sell their products and services. Any system
interruptions that result in the unavailability of the Websites or reduced order
fulfilment performance would reduce the volume of goods sold and the
attractiveness of the Company's product and service offerings.
Any substantial increase in the volume of traffic on the Websites or the number
of businesses utilizing the Websites will require the Company to expand and
upgrade further its technology, transaction-processing systems and network
infrastructure. There can be no assurance that the Company will be able to
accurately project the rate or timing of increases, if any, in the use of the
Websites or timely expand and upgrade its systems and infrastructure to
accommodate such increases.
Marketing
The Company has not incurred significant advertising, sales and marketing
expenses to date. To increase awareness for the Websites, the Company expects
to spend significantly more on advertising, sales and marketing in the future.
If the Company's marketing strategy is unsuccessful, it may not be able to
recover these expenses or even generate any revenues. The Company will be
required to develop a marketing and sales campaign that will effectively
demonstrate the advantages of the Websites, services and products. To date, the
Company's experience with respect to marketing the Websites is very limited.
The Company may also elect to enter into agreements or relationships with third
parties regarding the promotion or marketing of the Websites, and the products
and services available through the Websites. There can be no assurance that the
Company will be able to establish adequate sales and marketing capabilities,
that it will be able to enter into marketing agreements or relationships with
third parties on financially acceptable terms, or that any third parties with
whom it enters into such arrangements will be successful in marketing and
promoting the Websites, and the products and services offered on the Websites.
Dependence on Continued Growth of Online Commerce
The Company's future revenues and its ability to generate profits in the future
are substantially dependent upon the widespread acceptance and use of the
Internet and other online services as an effective medium of commerce. The
rapid growth surrounding the Internet and online services is a recent
phenomenon.
There can be no assurance that acceptance and use of the Internet will continue
to develop or that a sufficiently broad base of consumers will continue to use
the Internet and other online services as a medium of commerce. Demand and
market acceptance for recently introduced services and products over the
Internet are subject to a high level of uncertainty and relatively few proven
services and products exist.
The Company relies on consumers who have historically used traditional means of
commerce to purchase merchandise. For the Company to be successful, these
consumers must accept and utilize novel ways of conducting business and
exchanging information. In addition, the Internet and other online services may
not be accepted as viable commercial marketplaces for a number of reasons,
including potentially inadequate development of the necessary network
infrastructure or delayed development of enabling technologies and performance
improvements.
In addition, the Internet or other online services could lose their viability
due to delays in the development or adoption of new standards and protocols
required for handling of increased levels of Internet activity. Another factor
to consider is increased governmental regulation.
Changes in or insufficient availability of telecommunications services to
support the Internet or other online services also could result in slower
response times and adversely affect usage of the Internet and other online
services generally and the Company in particular. The Company's business,
prospects, financial condition and results of operations could be materially
adversely affected if:
- - use of the Internet and other online services does not continue to grow or
grows more slowly than expected;
- - the infrastructure for the Internet and other online services does not
effectively support growth that may occur; or
- - the Internet and other online services do not become viable commercial
marketplaces for the products and services offered or intended to be
offered through the Websites.
Online Commerce Security Risks
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. The Company
relies on encryption and authentication technology licensed from third parties
to provide the security and authentication necessary to effect secure
transmission of confidential information, such as customer credit card numbers.
There can be no assurance that advances in computer capabilities, new
discoveries in the field of cryptography, or other events or developments will
not result in a compromise or breach of the algorithms used by the Company to
protect customer transaction data.
If any such compromise of the Company's security were to occur, it could have a
materially adverse effect on the Company's reputation, business, prospects,
financial condition and results of operations. A party who is able to
circumvent the Company's security measures could misappropriate proprietary
information or cause interruptions in the Company's operations. The Company may
be required to expend significant capital and other resources to protect against
such security breaches or to alleviate problems caused by such breaches.
Concerns over the security of the Internet and other online transactions, and
the privacy of users may also inhibit the growth of the Internet and other
online services generally, and the Internet in particular, especially as a means
of conducting commercial transactions. To the extent that activities of the
Company or third-party contractors involve
the storage and transmission of proprietary information, such as credit card
numbers, security breaches could damage the Company's reputation and expose the
Company to a risk of loss or litigation and possible liability. There can be no
assurance that the Company's security measures will prevent security breaches or
that failure to prevent such security breaches will not have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations.
Reliance on Internally Developed Systems & System Development Risks
Wherever possible, the Company will use off-the-shelf products for the Websites,
search engine and substantially all aspects of transaction processing, including
order management, cash and credit card processing, purchasing, inventory
management and shipping. The Company does, however, expect that it will have to
develop some custom software to support its requirements. Further, the
Company's inability to:
- - add additional software and hardware;
- - develop and upgrade further its existing technology and transaction
processing systems;
- - network infrastructure to accommodate increased traffic on its web site;
and/or
- - increase sales volume through its transaction processing systems;
may cause:
- - unanticipated system disruptions;
- - slower response times;
- - degradation in levels of customer service;
- - impaired quality and speed of order fulfilment; and
- - delays in reporting accurate financial information.
In addition, although the Company works to prevent unauthorized access to
Company data, it is impossible to completely eliminate this risk. There can be
no assurance that the Company will be able to effectively upgrade and expand its
transaction-processing system or to integrate smoothly any newly developed or
purchased modules with its existing systems in a timely manner. Any inability
to do so could have a materially adverse effect on the Company's business,
prospects, financial condition and results of operations.
System Failure
The Company's success, in particular its ability to successfully receive orders
and provide high-quality customer service for its users, largely depends on the
efficient and uninterrupted operation of its computer and communications
hardware systems. The Company's systems and operations are vulnerable to damage
or interruption from fire, flood, power loss, telecommunications failure,
break-ins, earthquake and similar events.
The Company does not presently have redundant systems or a formal disaster
recovery plan and does not carry sufficient business interruption insurance to
compensate it for losses that may occur. Despite the implementation of network
security measures by the Company, its servers are vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions, which could
lead to interruptions, delays, loss of data or the inability to accept and
fulfil customer orders. The occurrence of any of the foregoing risks could have
a materially adverse effect on the Company's business, prospects, financial
condition and results of operations.
Rapid Technological Change
To remain competitive, the Company must continue to enhance and improve the
responsiveness, functionality and features of the Company's online services.
The Internet and the online commerce industry are characterized by factors such
as rapid technological change, changes in user and customer requirements and
preferences, frequent new product and service introductions embodying new
technologies and the emergence of new industry standards and practices. These
changes could render the Websites as they currently exist, and proprietary
technology and systems, obsolete.
The Company's success will depend, in part, on its ability to license leading
technologies useful in its business, enhance its existing services, develop new
services and technology to address the increasingly sophisticated and varied
needs of its prospective customers, and respond to technological advances and
emerging industry standards and practices on a cost-effective and timely basis.
The development of the Websites and other proprietary technology entails
significant technical and business risks. There can be no assurance that the
Company will successfully use new technologies effectively or adapt the
Websites, proprietary technology and transaction processing systems to customer
requirements or new emerging industry standards.
If the Company is unable to adapt in a timely manner to technical, legal,
financial changing market conditions or customer requirements, its business,
prospects, financial condition and results of operations could be materially
adversely affected.
Risks Associated with Entry into New Business Areas
The Company may choose to expand its operations by improving the Websites or
even developing new websites, promoting new or complementary products or sales
formats, expanding the breadth and dept of products and services offered on the
Websites or expanding its market presence through relationships with third
parties. In addition, the Company may pursue the acquisition of new or
complementary businesses, products or technologies, although it has no present
understandings, commitments or agreements with respect to any material
acquisitions or investments. There can be no assurance that the Company would
be able to expand its efforts and operations in a cost-effective or timely
manner or that any such efforts would increase overall market acceptance.
Expansion of the Company's operations in this manner would also require
significant additional expenses and development, operations and editorial
resources and may strain the Company's management, financial and operational
resources. The lack of market acceptance of such efforts or the Company's
inability to generate satisfactory revenues from such expanded services or
products to offset their cost could have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
Uncertain Ability to Manage Growth
The Company's ability to achieve its planned growth is dependent upon a number
of factors including, but not limited to, its ability to hire, train and
assimilate management and other employees, the adequacy of the Company's
financial resources, the Company's ability to identify and efficiently provide
and perform such new products and services as the Company's customers may
require in the future and its ability to adapt its own systems to accommodate
its expanded operations. In addition, there can be no assurance that the
Company will be able to achieve its planned expansion or that it will be able to
manage successfully such expanded operations. Failure to manage anticipated
growth effectively and efficiently could have a material adverse effect on the
Company.
Dependence Upon Key Personnel
The Company's future success depends in large part on the continued services of
its key product development, technical, marketing, sales and management
personnel, and its ability to continue to attract, motivate and retain highly
qualified employees. Although the Company's management personnel serve at the
pleasure of the Board of Directors, there can be no assurance that such
arrangements will continue in the future. Competition for such employees is
intense, and the process of locating key technical, product development and
management personnel with the combination of skills and attributes required to
execute the Company's strategy is often lengthy. Accordingly, the loss
of services of key personnel or an inability to attract additional personnel
as needed could have a material adverse effect upon the Company.
The success of the Company is therefore dependent upon its ability to identify,
hire and retain additional qualified personnel, for whose services the Company
will be in competition with other prospective employers, many of which may have
significantly greater resources than the Company. Additionally, demand for
qualified personnel conversant with certain technologies is intense and may
outstrip supply as new and additional skills are required to
keep pace with evolving telecommunications technology. There can be no
assurance that the Company will be able to hire and, if so, retain such
additional qualified personnel. Failure to attract and retain such personnel
could have a materially adverse effect upon the Company.
Government Regulation
Although there are few laws and regulations directly applicable to the Internet,
it is likely that new laws and regulations will be adopted in the United States
and elsewhere governing issues such as music licensing, broadcast license fees,
copyrights, privacy, pricing, sales taxes and characteristics and quality of
Internet services. It is possible that governments will enact legislation that
may be applicable to the Company in areas such as content, network security,
encryption and the use of key escrow, data and privacy protection, electronic
authentication or "digital" signatures, illegal and harmful content, access
charges and retransmission activities.
The adoption of restrictive laws or regulations could slow Internet growth. The
application of existing laws and regulations governing Internet issues such as
property ownership, libel, defamation, content, taxation and personal privacy is
also uncertain. The majority of such laws were adopted before the widespread
use and commercialization of the Internet and, as a result, do not contemplate
or address the unique issues of the Internet and related technologies.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could decrease demand for the Website and
services, increase its cost of doing business or otherwise have a materially
adverse effect on its success and continued operations. Laws and regulations
may be adopted in the future that address Internet-related issues, including
online content, user privacy, pricing and quality of products and services. The
growing popularity and use of the Internet has burdened the existing
telecommunications infrastructure in many areas, as a result of which local
exchange carriers have petitioned the FCC to regulate Internet service providers
in a manner similar to long distance telephone carriers and to impose access
fees on the Internet service providers. The Company cannot guarantee that the
United States, Canada or foreign nations will not adopt legislation aimed at
protecting Internet users' privacy. Any such legislation could negatively
affect the Company's business. Moreover, it may take years to determine the
extent to which existing laws governing issues like property ownership, libel,
negligence and personal privacy are applicable to the Internet.
Liability for Website Information
The Company may be subjected to claims for negligence, copyright, patent,
trademark, defamation, indecency and other legal theories based on the nature
and content of the materials that it broadcasts. Such claims have been brought,
and sometimes successfully litigated, against Internet content distributors. In
addition, the Company could be exposed to liability with respect to the content
or unauthorized duplication or broadcast of content. Any imposition of
liability that is not covered by insurance, is in excess of insurance coverage
or is not covered by an indemnification by a content provider could adversely
affect our business.
Market for the Company's Securities and Possible Volatility of Share Prices
The trading price of the Company's common shares has been and may continue to be
subject to wide fluctuations. Trading prices of the common shares may fluctuate
in response to a number of factors, many of which are beyond the Company's
control. In addition, the stock market in general, and the market for
Internet-related and technology companies in particular, has experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of such companies. The trading prices of many
technology companies' stocks are at or near historical highs and reflect price
earnings ratios substantially above historical levels. There can be no
assurance that these trading prices and price earnings ratios will be sustained.
These broad market and industry factors may adversely affect the market price
of the common shares, regardless of the Company's operating performance.
In the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been instituted. Such
litigation, if instituted, could result in substantial costs for the Company and
a diversion of management's attention and resources.
Dilution and Dividend Policy
The grant and exercise of warrants of creditors or otherwise or stock options
would likely result in a dilution of the value of the Company's common shares.
Moreover, the Company may seek authorization to increase the number of its
authorized shares and to sell additional securities and/or rights to purchase
such securities at any time in the future. Dilution of the value of the common
shares would likely result from such sales.
Anti-Takeover Provisions
At the present time, the Company's Board of Directors has not adopted any
shareholder rights plan or any anti-takeover provisions in its Articles.
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company knows of no material, active or pending legal proceedings against
it, nor is the Company involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any director, officer or
affiliate of the Company, or any registered or beneficial shareholder is an
adverse party of has a material interest adverse to the Company.
ITEM 2. CHANGES IN SECURITIES.
Recent Sales of Unregistered Securities
(a) On January 28, 2000, the Company issued 10,000 common shares to Patricia
Kirkham, pursuant to a Letter of Intent dated January 19, 2000 between the
Company and Westcor Mortgage (the "Westcor Letter of Intent). The Company
issued the shares to Ms. Kirkham relying upon Regulation S of the Securities Act
of 1933. These shares are being held in trust as a deposit in connection with
the acquisition of Westcor Mortgage. Further information with respect to the
Westcor Letter of Intent can be found in the Company's Form 10-KSB Annual
Report, filed on April 14, 2000.
(b) On January 28, 2000, the Company issued 500,000 common shares to Oxford
Capital Corporation ("Oxford"), which shares are held in escrow pursuant to an
agreement dated February 2, 2000. The shares secure the obligations of the
Company in respect of the Debentures (see paragraph (c) below for the definition
of the "Debentures"). The agreement between the Company and Oxford, and its
terms, are described in the following paragraph (c).
(c) On January 31, 2000, the Company entered into a funding agreement (the
"Funding Agreement") with Oxford, which funding was completed on February 24,
2000 (the "Closing Date"). Pursuant to the Funding Agreement and relying on
Regulation S of the Securities Act of 1933, the Company issued to Oxford 6%
Convertible Debentures (the "Debentures") and a two year warrant to purchase
250,000 shares of common stock in the capital of the Company at US$5.00 per
share (the "Warrants"), in exchange for funding in the amount of $2,500,000.
The Debentures are due January 31, 2003 and bear interest at the rate of 6% per
year, payable upon conversion, redemption or maturity, whichever occurs first.
Interest is payable, at Oxford's option, in cash or in shares of the Company's
common stock (the "Common Stock"). Pursuant to the Funding Agreement,
the Debentures are convertible into shares of Common Stock from time to time,
in amounts specified by, any time after the Closing Date, as follows:
The lower of:
(i) 80% (not lower than a floor price of US$3.00) of the average
closing bid price of the Common Stock for the five (5) trading days preceding
the Conversion Date; or
(ii) US$5.00.
In addition, the Debentures are subject to a forced conversion into Common Stock
when the share price has traded above US$10.00 for 20 consecutive trading days
and the liquidity covenants have not been broken. The underlying warrants will
be acquired and paid for within 30 trading days after forced conversion.
The Debentures are exempt from the registration requirements of the Securities
Act of 1933, as amended, pursuant to SEC Regulation S. The Company must prepare
and file, within 60 days of January 31, 2000, a Registration Statement covering
200% of the shares the Debentures are currently convertible into, and all of the
shares underlying the Warrants. The Company will attempt to ensure that the
Registration Statement is declared effective within 120 days. In the event that
the Registration Statement is not filed within 60 days or declared effective
within 120 days, the Company will pay damages to Oxford of 2% of the principal
value of the Debentures or equity outstanding every 30 day period, or a pro rata
portion thereof. If at any time following the 120 day period after the Closing
Date, the market value of the volume of stock trades less than $100,000 in value
for 20 consecutive trading days, Oxford has the right to return the unconverted
Debentures to the Company at a premium of 30% of the principal outstanding.
Following the end of the first quarter, on May 5, 2000, the Company received a
notice for the conversion of 2.5 million debentures into common shares.
Pursuant to the Agreement, the Debentures, the Warrants and the Common Stock
underlying the Debentures and Warrants have been delivered to Oxford Capital
Corporation, Calgary (the "Escrow Holder"). As security for the Debentures, the
Company deposited 500,000 shares of restricted common stock with the Escrow
Holder, which shares will be released upon conversion of the Debentures or in
the event that the Company defaults on the Debentures. In addition and upon
funding, the Company paid 10% of the gross amount of the Debentures to Oxford
Capital Corporation, Calgary (the "Placement Agent"), and issued a one year
warrant to purchase 50,000 shares of Common Stock at US$5.00 per share.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
On March 27, 2000, the Company entered into an agreement with JAWS Technologies
Inc. ("JAWS"), a provider of secure information management solutions. The
Company expects that JAWS will play an integral role in the launch of the
Website, and in the Company's business generally thereafter.
On March 30, 2000, Robert J. Kubbernus joined the Company's Advisory Board. Mr.
Kubbernus has 16 years of financial and management experience with
high-technology firms in North America and Europe, and also sits on the boards
of Electronic Substrate Systems, YourNet FutureLink, Unity Wireless and JAWS (of
which he is also the Chairman and CEO), and is a principal of Oxford Capital
Corporation. Between 1992 and 1997, Mr. Kubbernus was the President and CEO of
Bankton Financial Corporation. Prior to 1992, he was the CFO and Chief
Development Officer of Bankers Capital Group.
On April 27, 2000, the Company signed a Letter of Agreement (the "Letter of
Agreement") with Dan Kovatch as owner of eZnow Insurance.com ("eZnow"), pursuant
to which the Company agreed to acquire eZnow. eZnow is a webpage, located at
www.eznowinsurance.com, that offers a wide range of insurance services,
including life, home, rental, commercial, auto, boat, casualty and health
policies. At the eZnow website, customers can request free quotes, access
customer service, submit claims, pay premiums or change contact or policy
information. eZnow is the online customer interface for Kovatch Insurance
Systems Inc. ("Kovatch Insurance"), which has its headquarters in Los Angeles,
CA, and is licenced as an insurance broker in California, Arizona, Colorado and
Florida. Kovatch Insurance expects to achieve licencing in all 50 states within
the next few months.
The Letter of Agreement provides for a purchase price of 50,000 restricted
shares of the Company's stock, and has provisions for a share in revenues
between Kovatch Insurance and the Company, based on new business generated by
the eZnow website. Kovatch Insurance will continue to operate independently as
an insurance brokerage, while Dan Kovatch will become an exclusive employee of
the newly formed insurance entity, which will be a subsidiary of the Company.
On March 30, 2000, the Company and CobraTech Industries Inc. ("CobraTech")
entered into an agreement (the "CobraTech Agreement"), pursuant to which
CobraTech agreed to assist the Company in pursuing a relationship with
China.com,so as to integrate the Company's securities trading platform into
China.com's website (the "Project"). CobraTech also agreed to assist the
Company in its pursuit of relationships similar in form to the Project in
connection with other websites, targeting other parts of the Austral-Asia region
(the "Secondary Projects"). As compensation for the services rendered by
CobraTech with respect to the Project, the Company agreed to:
1. issue to CobraTech 200,000 common shares (the "Common Shares") in the
capital stock of the Company, said shares being issued subject to the resale
restrictions set out in Rule 144 as promulgated under the Securities Act of
1933 ("Rule 144");
2. issue to CobraTech a further 800,000 Common Shares provided that it is
acknowledged that 800,000 of such Common Shares (the "Escrow Shares") shall be
held in escrow and shall only be released to CobraTech upon successful
completion of the Project as evidenced by an executed agreement between the
Company and China.com and, in circumstances where the Escrow Shares have not
been released by June 30, 2000, the Escrow Shares shall be returned to the
Company for cancellation;
3. issue to CobraTech a further 1,000,000 Common Shares at such time as
200,000 securities transactions per month have been effected through the
China.com web site utilizing the Company's securities trading platform for 3
consecutive months.
As compensation for services rendered by CobraTech pursuant to the CobraTech
Agreement in connection with the Secondary Projects, the Company agreed to
compensate CobraTech in a manner equivalent to 2 and 3 above, taking into
consideration factors such as the relative size of the market which is the
subject of any Secondary Project and the price of the Common Shares at the time
of successful completion of any Secondary Project relative to their current
price.
On March 28, 2000, the Company and Cobra Capital Limited ("Cobra") entered into
an agreement (the "Cobra Capital Agreement"), pursuant to which Cobra agreed to
assist the Company in the areas of strategic development, mergers and
acquisitions, and corporate finance, with particular emphasis on Asia. As
compensation for services rendered pursuant to the Cobra Capital Agreement, the
Company agreed to:
1. issue to Cobra, or as directed by Cobra, a warrant (the "Warrant")
entitling the holder to acquire 300,000 common shares in the capital stock of
the Company, at a price of $5.00 per share, said Warrant having a term of 5
years; and
2. issue to Cobra, or as directed by Cobra, 8,500 common shares in the
capital of the Company per month, as at the last day of each and every month
during the term of the Cobra Capital Agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Reports of Form 8-K
On February 25, 2000, the Company filed a current report on Form 8-K announcing
that it had engaged Stefanou & Company, LLP Certified Public Accountants as its
independent accountants to audit its financial statements. The Company's Board
of Directors approved the change of accountants to Stefanou & Company, LLP
Certified Public Accountants on February 21, 2000. During the Company's two
most recent fiscal years, and any subsequent interim periods preceding the
change in accountants, there were no disagreements with Gregory M. Montagna,
CPA, P.C.
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope procedure. The report on the financial statements
prepared by Gregory M. Montagna, CPA, P.C. for either of the last two years did
not contain an adverse opinion or a disclaimer of opinion (except that his
report for the fiscal year ended December 31, 1998 contained an explanatory
paragraph regarding the substantial doubt about the Company's ability to
continue as a going concern), nor was it qualified or modified as to
uncertainty, audit scope or accounting principals. Gregory M. Montagna, CPA,
P.C. provided the Company with a letter addressed to the SEC stating that he
agreed with the statements made in the Form 8-K. The Company has engaged the
firm of Stefanou & Company, LLP Certified Public Accountants as of February 21,
2000. Stefanou & Company, LLP Certified Public Accountants was not consulted on
any matter relating to accounting principles to a specific transaction, either
completed or proposed or the type of audit opinion that might be rendered on the
Company's financial statements.
Following the end of the Company's first quarter, on April 28, 2000 the Company
filed a current report on Form 8-K announcing that on January 31, 2000, the
Company entered into the Funding Agreement with Oxford. Pursuant to the Funding
Agreement, and relying on Regulation S of the Securities Act of 1933, the
Company issued the Debentures to Oxford, and a two year warrant to purchase the
Warrants, in exchange for funding in the amount of $2,500,000. The Debentures
are due January 31, 2003 and bear interest at the rate of 6% per year, payable
upon conversion, redemption or maturity, whichever occurs first. Interest is
payable, at Oxford's option, in cash or Common Stock. Pursuant to the Funding
Agreement, the Debentures are convertible into shares of Common Stock from time
to time, in amounts specified by Oxford, any time after the Closing Date, as
follows:
The lower of:
(i) 80% (not lower than a floor price of US$3.00) of the average
closing bid price of the Common Stock for the five (5) trading days preceding
the Conversion Date; or
(ii) US$5.00.
In addition, the Debentures are subject to a forced conversion into Common Stock
when the share price has traded above US$10.00 for 20 consecutive trading days
and the liquidity covenants have not been broken. The underlying warrants will
be acquired and paid for within 30 trading days after forced conversion.
The Debentures are exempt from the registration requirements of the Securities
Act of 1933, as amended, pursuant to SEC Regulation S. The Company must prepare
and file, within 60 days of January 31, 2000, a Registration Statement covering
200% of the shares the Debentures are currently convertible into, and all of the
shares underlying the Warrants. The Company will ensure that the Registration
Statement is declared effective within 120 days. In the event that the
Registration Statement is not filed within 60 days or declared effective within
120 days, the Company will pay damages to Oxford of 2% of the principal value of
the Debentures outstanding every 30 day period, or a pro rata portion thereof.
If at any time following the 120 day period after the Closing Date, the market
value of the volume of stock trades less than $100,000 in value for 20
consecutive trading days, Oxford has the right to return the unconverted
Debentures to the Company at a premium of 30% of the principal outstanding.
Pursuant to the Funding Agreement, the Debentures, the Warrants and the Common
Stock underlying the Debentures and Warrants have been delivered to the Escrow
Holder. As security for the Debentures, the Company deposited 500,000 shares of
restricted common stock with the Escrow Holder, which shares will be released
upon conversion of the Debentures or in the event that the Company defaults on
the Debentures. In addition and upon funding, the Company paid 10% of the
gross amount of the Debentures to the Placement Agent, and issued a one year
warrant to purchase 50,000 shares of Common Stock at US$5.00 per share.
Financial Statements Filed as a Part of the Quarterly Report
The Company's unaudited financial statements include:
Consolidated Balance Sheets (March 31, 2000 and December 31, 1999)
Consolidated Statements of Operations (Three Months Ended March 31, 2000
and 1999)
Consolidated Statements of Cash Flows (Three Months Ended March 31, 2000
and 1999)
Notes to Consolidated Financial Statements (March 31, 2000)
E FINANCIAL DEPOT.COM, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS March 31, 2000 December 31,
1999
Current assets:
Cash and equivalents . . . . . . . . . . . . . . . . . . . $ 24,671 $ 11,859
Accounts receivable, less allowance for
doubtful accounts of $401,935 and $358,310
on March 31, 2000 and December 31, 1999 respectively. 26,835 119,610
Marketable securities available for sale . . . . . . . . . 165,239 51,836
Accrued tax benefit. . . . . . . . . . . . . . . . . . . . - 17,980
Prepaid expenses and deposits. . . . . . . . . . . . . . . 23,934 35,005
Current portion of note receivable . . . . . . . . . . . . - -
----------- ---------
240,679 236,290
Property and equipment - at cost:
Office equipment . . . . . . . . . . . . . . . . . . . . . 39,740 35,176
Less accumulated depreciation. . . . . . . . . . . . . . . 4,020 4,020
----------- ---------
35,720 31,156
Other assets:
Note receivable. . . . . . . . . . . . . . . . . . . . . . 2,000,000
Financing charges net of amortization of $13,889
at March 31, 2000 . . . . . . . . . . . . . . . . . . 236,111
-----------
2,236,111 -
----------- ---------
$2,512,510 $267,446
=========== =========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses. . . . . . . . . . . $ 85,834 $ 36,898
Unearned revenues. . . . . . . . . . . . . . . . . . . . . 30,750 30,750
Notes payable related parties. . . . . . . . . . . . . . . 169,313 28,220
Income tax payable . . . . . . . . . . . . . . . . . . . . 40,070 40,070
Deferred income tax expense. . . . . . . . . . . . . . . . 1,163 44,610
----------- ---------
327,130 180,548
Convertible debenture. . . . . . . . . . . . . . . . . . . 2,600,000 -
Stockholders' equity:
Preferred stock, par value, $.001 per share;
10,000,000 shares authorized; none issued at
March 31, 2000 or December 31, 1999
Common stock, par value, $.001 per share;
20,000,000 shares authorized; 12,520,000
and 12,500,000 issued at March 31, 2000
and December 31, 1999, respectively . . . . . . . . . 12,520 12,500
Additional paid-in capital . . . . . . . . . . . . . . . . 24,980 -
Retained earnings. . . . . . . . . . . . . . . . . . . . . (506,184) 96,907
Unrealized gain or (loss) on securities available-for-sale 54,064 (22,509)
----------- ---------
(414,620) 86,898
----------- ---------
$2,512,510 $267,446
=========== =========
The accompanying notes are an integral part of these financial statements.
E FINANCIAL DEPOT.COM, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE 3 MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
March 31, 2000 March 31, 1999
---------------- ---------------
Fee net income . . . . . . . . . . . . . . . . . . $ 15,200 $ 170,250
Costs and expenses:
Selling, general and administrative. . . . . . . . 664,310 51,374
Interest expense . . . . . . . . . . . . . . . . . 24,180 -
---------------- ---------------
688,490 51,374
---------------- ---------------
Operating loss . . . . . . . . . . . . . . . . . . (673,290) 118,876
Interest income. . . . . . . . . . . . . . . . . . 17,651 -
Realized gain or (loss) on securities
available for sale. . . . . . . . . . . . . . 7,938 6,550
---------------- ---------------
Net loss before provision for income tax . . . . . (647,701) 125,426
Income tax (benefit) or expense. . . . . . . . . . 44,610 43,000
---------------- ---------------
Net income . . . . . . . . . . . . . . . . . . . . $ (603,091) $ 82,426
Other comprehensive income, net of tax:
Unrealized holding gains on securities
available-for-sale arising during the period. 76,573 4,586
---------------- ---------------
Comprehensive income . . . . . . . . . . . . . . . $ (526,518) $ 87,012
================ ===============
Net income (loss) per common share
(basic and assuming dilution). . . . . . . . . . . $ (.05) $ .01
================ ===============
Weighted average common shares outstanding . . . . 12,510,000 12,500,000
The accompanying notes are an integral part of these financial statements.
E FINANCIAL DEPOT.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
2000 1999
------------ ---------
Cash flows from operating activities:
Net income from operating activities. . . . . . . . $ (603,091) $ 82,426
Adjustments to reconcile net income to net cash:
Deferred income taxes. . . . . . . . . . . . . (44,610) 43,000
Realized gain on securities available for sale (7,938) (6,550)
Amortization of financing charges. . . . . . . 13,889 -
Provision for uncollectible receivables. . . . 43,625 -
Securities available-for-sale received
in lieu of cash for services rendered . . (47,750) (56,465)
Change in: Receivables. . . . . . . . . . . . 49,150 (56,500)
Prepaid expenses and other assets . . . . 11,071 -
Accounts payable and accrued expenses . . 48,936 396
------------ ---------
(536,718) 6,307
Cash flows used in investing activities:
Capital expenditures. . . . . . . . . . . . . . . . (4,564) -
Cash loaned to TradeFast, Inc.. . . . . . . . . . . (2,000,000)
Proceeds from sale of securities available-for-sale 38,001 -
------------ ---------
(1,966,563) -
Cash flows (used in)/provided by financing activities:
Proceeds from loans from stockholders . . . . . . . 141,093 -
Repayment of stockholder loans. . . . . . . . . . . (1,000)
Proceeds from convertible debentures. . . . . . . . 2,350,000 -
Proceeds from sale of common stock. . . . . . . . . 25,000 -
------------ ---------
2,516,093 (1,000)
Net increase in cash and cash equivalents. . . . . . . . 12,812 5,307
------------ ---------
Cash and cash equivalents at January 1 . . . . . . . . . 11,859 6,436
Cash and cash equivalents at March 31. . . . . . . . . . $ 24,671 $ 11,743
============ =========
The accompanying notes are an integral part of these financial statements.
E FINANCIAL DEPOT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB, and therefore, do not
include all the information necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. The unaudited condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
footnotes thereto included in the Company's December 31, 1999 annual report
included in SEC Form 10-KSB
Basis of Presentation
On September 20, 1999, RJI Ventures, Inc. , formerly Talk Stock With Me, Inc.
("RJI") completed a merger with Ballynagee Acquisition Corp. ("Ballynagee"), in
a transaction accounted for using the purchase method of accounting. Subsequent
to the merger, Ballynagee was re-named eFinancial Depot.Com, Inc. ("Company").
From its inception, Ballynagee was an inactive corporation with no significant
assets or operations. From its inception in September, 1998, RJI has developed,
marketed and operated an internet web site devoted to the research of U. S. and
Canadian equity issues. Effective with the merger, all previously outstanding
common stock of RJI was exchanged for common stock of Ballynagee , resulting in
the previous security holders of RJI owning approximately 80% of the voting
stock of the Company in an exchange ratio of 1 share of RJI common stock for
2,000 shares of Ballynagee common stock.
In accordance with APB Opinion 16, the consolidated financial statements include
the accounts of RJI as the acquiring entity and Ballynagee Acquisition Corp. as
the wholly owned subsidiary. Significant intercompany transactions have been
eliminated in consolidation.
Exhibits Required by Item 601 of Regulation S-B
Articles of Incorporation and Bylaws
3.1 Certificate of Incorporation of the Company (filed as exhibit 3.1 to the
Company's Registration Statement on Form 10SB (file# 000-26899) on July 30,
1999, and incorporated herein by reference)
3.2 Bylaws of the Company (filed as exhibit 3.2 to Registration Statement on
Form 10-SB (file#000-26899) on July 30, 1999, and incorporated herein by
reference)
3.3 Certificate of Amendment of Certificate of Incorporation dated November
2, 1999 (filed as exhibit 3 (a) to the Company's Quarterly Report on Form 10-QSB
(file # 000-26899) on November 22, 1999, and incorporated herein by reference)
(10) Material Contracts
10.1 Letter of Intent between the Company and Westcor Mortgage Inc.,
dated January 19, 2000 (filed on March 31, 2000 as an exhibit to the Company's
Annual Report on Form 10-KSB, and incorporated herein by reference)
10.2 Consulting Agreement between the Company and Oxford Capital
Corporation, dated January 27, 2000 (filed on March 31, 2000 as an exhibit to
the Company's Annual Report on Form 10-KSB, and incorporated herein by
reference)
10.3 Registration Rights Agreement between the Company and Oxford
Capital Corporation, dated February 2, 2000 (filed on March 31, 2000 as an
exhibit to the Company's Annual Report on Form 10-KSB, and incorporated herein
by reference)
10.4 Debenture Purchase Agreement between the Company and Oxford
Capital Corp., dated February 2, 2000 (filed on April 14, 2000 as an exhibit to
the Company's current report on Form 8-K, and incorporated herein by reference)
10.5 Escrow Agreement between the Company and Oxford Capital Corp.,
dated February 2, 2000 (filed on April 14, 2000 as an exhibit to the Company's
current report on Form 8-K, and incorporated herein by reference)
10.6 Letter of Intent between the Company and Dan Kovatch, dated April
27, 2000
10.7 Agreement between the Company and JAWS Technologies Inc. (undated)
10.8 Agreement between the Company and CobraTech Industries Inc., dated
March 30, 2000
10.9 Agreement between the Company and Cobra Capital Limited, dated
March 28, 2000
(20) Other
20.1 e-financial depot.com, Inc. 6% Convertible Debenture, dated
February 2, 2000 (filed on March 31, 2000 as an exhibit to the Company's Annual
Report on Form 10-KSB, and incorporated herein by reference)
20.2 The Company's Form of Placement Agent Warrant Certificate (filed
on April 14, 2000 as an exhibit to the Company's current report on Form 8-K, and
incorporated herein by reference)
20.3 Placement Agent's Warrant - Oxford Capital Corp., Holder (filed on
April 14, 2000 as an exhibit to the Company's current report on Form 8-K, and
incorporated herein by reference)
20.4 e-financial depot.com, Inc. 6% Convertible Debenture, dated
February 2, 2000 (filed on April 14, 2000 as an exhibit to the Company's current
report on Form 8-K, and incorporated herein by reference)
(21) Subsidiary of the Company
Talk Stock With Me, Inc. is a 100% wholly owned subsidiary of the Company.
(27) Financial Data Schedule
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.
E-FINANCIAL DEPOT.COM, INC.
By: /s/ John Huguet
-----------------
John Huguet, President/Director
Date: May 15, 2000
By: /s/ Christina Cepeliauskas
----------------------------
Christina Cepeliauskas, Chief Financial Officer
Date: May 15, 2000
By: /s/ Randy Doten
-----------------
Randy Doten, Director
Date: May 15, 2000