- --------------------------------------------------------------------------------
GARY S. SAUNDERS
CHAIRMAN & CEO
EKNOWLEDGE GROUP, INC. & SUBSIDIARY
1520 WEST 6TH STREET, SUITE 101
CORONA, CALIFORNIA 92882
(NAME AND ADDRESS OF PERSON AUTHORIZED TO RECEIVE NOTICES
AND COMMUNICATIONS ON BEHALF OF THE PERSON FILING STATEMENT)
- --------------------------------------------------------------------------------
WITH A COPY TO:
KARL E. RODRIGUEZ, ESQ
34700 PACIFIC COAST HIGHWAY, SUITE 303
CAPISTRANO BEACH, CA 92624
(949) 248-9561
FAX (949) 248-1688
- --------------------------------------------------------------------------------
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER: 000-28881
EKNOWLEDGE GROUP, INC. & SUBSIDIARY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 76-0430898
(JURISDICTION OF INCORPORATION) (I.R.S.EMPLOYER IDENTIFICATION NO.)
1520 W. 6TH STREET, SUITE 101, CORONA, CALIFORNIA 92882
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (909) 372-2800
AS OF MARCH 31, 2001, THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S
COMMON STOCK WAS 19555,556.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES [ ] NO [X]
1
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
THE FINANCIAL STATEMENTS, FOR THE THREE MONTHS ENDED MARCH 31, 2001,
INCLUDED HEREIN HAVE BEEN PREPARED BY THE COMPANY, WITHOUT AUDIT PURSUANT TO
THE RULES AND REGULATIONS OF THE SECURITIES AND EXCHANGE COMMISSION. CERTAIN
INFORMATION AND FOOTNOTES DISCLOSURE NORMALLY INCLUDED IN FINANCIAL STATEMENTS
PREPARED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES HAVE BEEN
CONDENSED OR OMITTED PURSUANT TO SUCH RULES AND REGULATIONS, ALTHOUGH THE
COMPANY BELIEVES THAT THE DISCLOSURES ARE ADEQUATE TO MAKE THE
INFORMATION NOT MISLEADING.
THE REST OF THE PAGE INTENTIONALLY LEFT BLANK
2
EKNOWLEDGE GROUP, INC. AND SUBSIDIARY
BALANCE SHEET
AS OF MARCH 31, 2001 AND 2000 AND
YEAR ENDED DECEMBER 31, 2000
(unaudited)
March 31, 2001
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents 5,498
Accounts Receivable 4,450
Employee Receivable 3,293
Inventory. . . . . . . . . . . . . . . . . . 5,722
Prepaid Expenses . . . . . . . . . . . . . . 1,875
-----------
TOTAL CURRENT ASSETS . . . . . . . . . . . . 20,838
PROPERTY AND EQUIPMENT
Furniture and Equipment. . . . . . . . . . . 79,358
Less: Accumulated Depreciation . . . . . . . (12,511)
-----------
PROPERTY AND EQUIPMENT, NET. . . . . . . . . 66,847
OTHER ASSETS
Deposits - Rent. . . . . . . . . . . . . . . 7,637
Intangible Assets. . . . . . . . . . . . . . 106,505
Less: Accumulated Amortization . . . . . . . (25,291)
-----------
TOTAL OTHER ASSETS . . . . . . . . . . . . . 88,851
-----------
TOTAL ASSETS . . . . . . . . . . . . . . . . 176,536
===========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts Payable . . . . . . . . . . . . . . 130,113
Accrued Expenses . . . . . . . . . . . . . . 109,202
Notes Payable. . . . . . . . . . . . . . . . 7,500
Deposits Payable . . . . . . . . . . . . . . 1,200
-----------
TOTAL CURRENT LIABILITIES. . . . . . . . . . 248,015
LONG-TERM LIABILITIES
Note Payable . . . . . . . . . . . . . . . . 100,422
Other Liabilities. . . . . . . . . . . . . . 4,865
Loans from Shareholders. . . . . . . . . . . 304,992
-----------
TOTAL LONG-TERM LIABILITIES. . . . . . . . . 410,279
-----------
TOTAL LIABILITIES. . . . . . . . . . . . . . 658,294
STOCKHOLDER'S EQUITY
Common Stock . . . . . . . . . . . . . . . . 19,556
Additional Paid-in Capital . . . . . . . . . 990,237
Accumulated Deficit. . . . . . . . . . . . . (1,491,552)
-----------
TOTAL STOCKHOLDER'S EQUITY . . . . . . . . . (481,759)
-----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY 176,536
===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
EKNOWLEDGE GROUP, INC. AND SUBSIDIARY
STATEMENT OF OPERATIONS
FOR QUARTERS ENDED MARCH 31, 2001 AND 2000 AND
YEAR ENDED DECEMBER 31, 2000
(UNAUDITED) (UNAUDITED)
MARCH 31, 2001 MARCH 31, 2000
---------------- ----------------
Sales. . . . . . . . . . . . . . . . . . . . $ 21,703 $ 7,720
Cost of sales. . . . . . . . . . . . . . . . 94,990 6,595
---------------- ----------------
Gross profit . . . . . . . . . . . . . . . . (73,287) 1,125
Selling, general and administrative expenses 267,499 45,299
---------------- ----------------
Loss before other income & provision
of taxes . . . . . . . . . . . . . . . . . . (340,786) (44,174)
Interest expense . . . . . . . . . . . . . . (86) 0
Interest income. . . . . . . . . . . . . . . 55 1
Other income . . . . . . . . . . . . . . . . 0 2,049
---------------- ----------------
Loss before provision for income taxes . . . (340,818) (42,125)
Provision for income taxes . . . . . . . . . 0 0
---------------- ----------------
Net loss . . . . . . . . . . . . . . . . . . (340,818) (42,125)
================ ================
Weighted average shares outstanding. . . . . 19,555,556 15,155,556
================ ================
Loss per share, basic & diluted. . . . . . . (0.02) (0.00)
================ ================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
4
EKNOWLEDGE GROUP, INC. AND SUBSIDIARY
STATEMENT OF CASH FLOWS
FOR QUARTERS ENDED MARCH 31, 2001 AND 2000 AND
YEAR ENDED DECEMBER 31, 2000
(unaudited) (unaudited)
March 31, 2001 March 31, 2000
---------------- ----------------
CASH FLOWS FROM OPERATION ACTIVITIES
Net loss . . . . . . . . . . . . . . . . . . . . $ (340,818) $ (42,125)
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization. . . . . . . . . . 12,917 411
Stock Compensation . . . . . . . . . . . . . . . 0 0
Consulting Services for Stock. . . . . . . . . . 0 0
Accounts Receivable. . . . . . . . . . . . . . . (4,450) 0
Employee Receivable. . . . . . . . . . . . . . . 0 0
Inventory. . . . . . . . . . . . . . . . . . . . 916 0
Prepaid Expenses . . . . . . . . . . . . . . . . 1,875 0
Deposits - Rent. . . . . . . . . . . . . . . . . 0 (762)
Accounts Payable . . . . . . . . . . . . . . . . (23,365) 0
Accrued Expenses . . . . . . . . . . . . . . . . 16,203 0
Deposits Payable . . . . . . . . . . . . . . . . 0 1,400
Deferred Liab. . . . . . . . . . . . . . . . . . (651)
NET CASH PROVIDED BY OPERATIONS. . . . . . . . . (337,372) (41,076)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Furniture and Equipment. . . . . . . . . . . . . (1,913) (2,057)
Intangible Assets. . . . . . . . . . . . . . . . 0 0
Cash acquired through acquisition. . . . . . . . 0 0
---------------- ----------------
NET CASH PROVIDED BY INVESTING . . . . . . . . . (1,913) (2,057)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Notes Payable. . . . . . . . . . . . . . . . . . 24,427 0
Loans from Shareholders. . . . . . . . . . . . . 210,992 0
Issuance of common stock and contributed capital 75,475 150,900
Consulting Services for Stock. . . . . . . . . . 0 0
NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . 310,894 150,900
---------------- ----------------
NET INCREASE IN CASH . . . . . . . . . . . . . . $ (28,391) $ 107,767
================ ================
CASH BALANCE AT BEGINNING OF PERIOD. . . . . . . 33,889 0
---------------- ----------------
CASH BALANCE AT END OF PERIOD. . . . . . . . . . 5,498 107,767
================ ================
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
5
EKNOWLEDGE GROUP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' (DEFICIT) EQUITY
FOR QUARTERS ENDED MARCH 31, 2001 AND 2000 AND
AS OF MARCH 31, 2001
ADDITIONAL TOTAL
PAID-IN ACCUMULATED STOCKHOLDERS'
DESCRIPTION . . . . . . . . . . . . . . . . SHARES AMOUNT CAPITAL DEFICIT EQUITY
- --------------------------------------------------- ---------- ------------ --------------- ------------ ------------
BALANCE, 6/1/99 (INCEPTION) . . . . . . . . . . . . 0 $ 0 $ 0 $ 0 $ 0
Issuance of common stock, 6/1/99. . . . . . . . . . 1,000,000 1,000 25,618 0 26,618
Net (loss) at 12/31/99. . . . . . . . . . . . . . . 0 0 0 (19,449) (19,449)
BALANCE , 12/31/99. . . . . . . . . . . . . . . . . 1,000,000 1,000 25,618 (19,449) 7,169
Stock Split, 3/31/00. . . . . . . . . . . . . . . . 14,155,556 14,156 (14,156) 0 0
Acquisition of public shell corporation, 4/17/00. . 4,400,000 4,400 495,600 0 500,000
Shares transferred by shareholder for services. . . 0 0 190,434 0 190,434
Shares transferred by shareholder for compensation. 0 0 39,875 0 39,875
Shares transferred by shareholder for consulting. . 0 0 10,000 0 10,000
Acquisition of eKnowledge.com, 8/19/00. . . . . . . 0 0 64,675 0 64,675
Shares issued in European placement . . . . . . . . 0 0 102,716 0 102,716
Net (loss) for period ended 12/31/00. . . . . . . . 0 0 0 (1,131,285) (1,131,285)
BALANCE , 12/31/00. . . . . . . . . . . . . . . . . 19,555,556 19,556 914,762 (1,150,734) (216,416)
Shares issued in European placement . . . . . . . . 0 0 75,475 0 75,475
Net (loss) for period ended 3/31/01 . . . . . . . . 0 0 0 (340,818) (340,818)
BALANCE, 3/31/01. . . . . . . . . . . . . . . . . . 19,555,556 19,556 990,237 (1,491,552) (481,759)
========== ============ =============== ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
6
EKNOWLEDGE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR QUARTERS ENDED MARCH 31, 2001 AND 2000 AND
YEAR ENDED DECEMBER 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
eKnowledge Group, Inc. (the "Company") provides educational training courses
over the internet and through other media sources. The Company was incorporated
in the State of Nevada on June 1, 1999 and conducts its operations from
facilities located in Corona, California.
Basis of Presentation
On April 17, 2000, Richmond Services, Inc. ("Richmond") and eKnowledge Group,
Inc. ("eKnowledge") executed an Acquisition Agreement (the "Agreement"), that
provided for Richmond acquiring all of the issued and outstanding common stock
of eKnowledge and changing its name to eKnowledge Group, Inc. eKnowledge
changed its name to eKnowledge Research Division, Inc. ("eKnowledge Research").
In connection with the transaction, the shareholders of eKnowledge received
15,155,556 shares of Richmond common stock for their 15,155,556 shares of
eKnowledge which represented 77.5% of the Company. As a result of this
transaction, the former shareholders of eKnowledge acquired or exercised control
over a majority of the shares of Richmond. Accordingly, the transaction has
been treated for accounting purposes as a recapitalization of eKnowledge and,
therefore, these financial statements represent a continuation of the accounting
acquirer, eKnowledge, not Richmond, the legal acquirer. In accounting for the
transaction:
i) eKnowledge is deemed to be the purchaser and surviving company for
accounting purposes. Accordingly, its net assets are included in the balance
sheet at their historical book values.
ii) Control of the net assets and business of Richmond was acquired
effective April 17, 2000 (the "Effective Date"). This transaction has been
accounted for as a purchase of the assets and liabilities of Richmond by
eKnowledge. At the Effective Date, Richmond had cash of approximately $500,000
and some liabilities in the form of accounts payable. These payables were paid
prior to the effective date under the terms of the transaction agreement.
iii) The consolidated statements of operations and cash flows include
eKnowledge's results of operations and cash flows from June 1, 1999 (date of
inception) and Richmond's results of operations from the Effective Date.
Richmond had no operations subsequent to the effective date.
The consolidated financial statements include the accounts of eKnowledge Group,
Inc. and its wholely owned subsidiary eKnowledge Research. All significant
intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the period presented.
Actual results could differ from those estimates.
7
EKNOWLEDGE GROUP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR QUARTERS ENDED MARCH 31, 2001 AND 2000 AND
YEAR ENDED DECEMBER 31, 2000
Revenue and Expense Recognition
Revenues are recognized from the sale of course publications as products are
shipped. Other revenues are recognized as earned or over the service period.
Cost of sales includes the cost of production and development of related course
materials. Such costs include professional consultation, printing, copying, and
related promotional materials and costs.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
Concentration of Credit Risk
The Company places its cash in what it believes to be credit-worthy financial
institutions. However, cash balances may exceed FDIC insured levels at various
times during the year.
NOTE 2 - LOANS PAYABLE - SHAREHOLDER
The Company is obligated to a shareholder pursuant to a loan agreement bearing
interest at the current 5 year treasury bill rate plus 2% (6.75% of December 31,
2000). Terms of the loan provide for no payments until January 2002. The loan
will then be repaid monthly over 5 years, with annual principal payments of
$15,200.
Additionally, the Company is further obligated to other shareholders who have
advanced amounts to the Company. The terms of these loans are pay upon demand
and provide no stated interest rate.
NOTE 3 - CAPITAL STOCK
On April 17, 2000, Richmond issued 15,155,556 shares of stock for all the stock
- - 15,155,556 shares - of eKnowledge. Before the transaction, there were
4,400,000 shares of Richmond outstanding. After the transaction the ownership
of Richmond was as follows:
Shares Percent
----------------------------------------------------------
Original shareholders
(including public owners) 4,400,000 22.5
Former owners of eKnowledge 15,155,556 77.5
----------------------------------------------------------
Total 19,555,556 100.0
==========================================================
Because the former owners of eKnowledge obtain control of Richmond, the
transaction would normally be considered a purchase by eKnowledge. However,
since Richmond is not a business, the transaction is accounted for as a
recapitalization of eKnowledge and the issuance of stock by eKnowledge
(represented by the outstanding shares of Richmond) for the assets and
liabilities of Richmond. The value of the net assets of Richmond is the same as
their historical book value. As part of this recapitalization, Richmond
shareholders agreed to pay all liabilities existing prior to the date of the
transaction. Richmond's liabilities prior to the transaction were immaterial.
For the recapitalization, the Company's equity accounts are restated to reflect
the 4,400,000 shares of the original shareholders of Richmond and the 15,155,556
shares issued based on the ratio of the exchange of 15,155,556 Richmond shares
for 15,155,556 of eKnowledge shares. Currently, the Company is authorized to
issue up to 50,000,000 shares of the common stock with a par value of $.001 per
share.
8
The Company has entered into various agreements with third parties to market
shares of its common stock and to obtain financing. In connection with these
agreements, the Company issued a total of 13,800,000 shares in the names of
itself and the investment bankers. The shares were either to be held as
collateral or sold to investors. As of March 31, 2001, none of the shares have
been sold and no financing has been obtained. The six million shares held in
the names of third parties are being returned and canceled. None of these
shares are reflected as issued and outstanding in the financial statements.
NOTE 4 - NON-CASH FINANCIAL ACTIVITIES
During the quarter ended March 31, 2001, the Company had the following
non-cash activities:
- - The Company's principal shareholder returned 80,000 of his shares, valued
at $87,400 to the Company, for no consideration, to be held as treasury stock
for future resale. These shares were sold for net proceeds of $75,475.
NOTE 65- ADVANCES FROM SHAREHOLDERS
The Company had advances from 2 shareholders aggregating $210,992 during the
quarter ended March 31, 2001. These advances bear no interest and are repayable
upon demand.
UNAUDITED INFORMATION
THE INFORMATION FURNISHED HEREIN WAS TAKEN FROM THE BOOKS AND RECORDS OF THE
COMPANY WITHOUT AUDIT. HOWEVER, SUCH INFORMATION REFLECTS ALL ADJUSTMENTS WHICH
ARE, IN THE OPINION OF MANAGEMENT, NECESSARY TO PROPERLY REFLECT THE RESULTS OF
THE PERIOD PRESENTED. THE INFORMATION PRESENTED IS NOT NECESSARILY INDICATIVE
OF THE RESULTS FROM OPERATIONS EXPECTED FOR THE FULL FISCAL YEAR.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations
should be read in conjunction with our Condensed Consolidated Financial
Statements and related Notes thereto included elsewhere in this Report. The
discussion in this report contains forward-looking statements that involve risks
and uncertainties. Our actual results may differ significantly from the results
discussed in the forward-looking statements.
OVERVIEW
EKNOWLEDGE IS A LEADING PROVIDER OF E-LEARNING SERVICES AND PRODUCTS, delivering
interactive multimedia training and education programs over the Internet or on
CD-ROM. The company sits on the cutting edge of technology by incorporating
streaming video into many eKnowledge designed programs.
THE EKNOWLEDGE SERVICES consist of taking other organizations' training,
education, marketing, and other programs and custom building them for delivery
over the Internet or on CD-ROM. By determining the organization's objectives
and how the program will be accessed, eKnowledge custom designs the program to
include the features which will achieve the program objectives while providing
the users with the best available method of delivery.
9
As one of the few providers of custom designed programs featuring
video-streaming, eKnowledge handles all aspects of development which the client
requires, from video production through hosting of the final product.
eKnowledge is renowned for delivering effective video based solutions to all
users, regardless of their Internet connection speed. eKnowledge programs
effectively supplement or replace existing live training, while offering the
organization with the ability to track user participation and performance.
eKnowledge offers services to corporations in the areas of employee training,
product training, computer applications training, customer service, and
marketing and sales. In addition, eKnowledge develops the programs of
consultants, publishers, universities, and professional and trade associations.
THE EKNOWLEDGE PRODUCTS consist of e-learning programs which are available for
purchase by organizations or individuals. Products are created by either the
eKnowledge content development department, or in a joint venture with other
organizations that have subject matter experts. Joint venture products are
resold by organizations on a revenue share basis. The eKnowledge products are
in the areas of Corporate and Professional Training, Academic Programs, and
Standardized Test Preparations.
The services and products of eKnowledge are supported by a professional team of
experts in technical course design, custom content development, strategic
consulting, and systems integration.
REVENUES are derived from contracts for services and product sales. FEES ON
CONTRACTS FOR SERVICES are determined by the length of the program being
developed, the complexity of the program features, the level of participation in
the design and content development, and any continuing service or support to be
provided. Revenues on contracts for services are generally recognized in
periodic scheduled payments spanning the life of the project. REVENUES FROM
PRODUCT SALES are currently recognized in their entirety upon the sale for all
products developed by the eKnowledge content development team. Joint venture
product sales where e-commerce is managed by eKnowledge, revenues are recognized
immediately. For joint venture product sales where commerce is managed by the
other organization, eKnowledge revenue will be recognized upon a scheduled
accounting of sales.
eKnowledge incurred net losses of $1,131,285 in 2000, and $340,818 in the three
months ending March 31, 2001, and has yet to achieve operating income or net
income. In the fourth quarter of 2000, eKnowledge shifted the business model to
the current model of services and products. Limited operating history under the
services and products business model, combined with the emerging nature of the
e-learning market, among other factors, make the prediction of our future
operating results relatively difficult.
Until the second quarter of 2000, eKnowledge was engaged in a business plan
geared at providing an array of e-learning products to six target markets, four
of which were academic in nature. Starting the third quarter of 2000, drawn by
market demands, the focus began to shift toward providing corporate e-learning
solutions as a primary objective, with the education market as a secondary point
of focus. In the forth quarter of 2000, the business model was formally shifted
to the current model of services and products. While current business and
prospects under this model are demonstrating great promise, there is little
operating history on which to evaluate our performance.
eKnowledge has experienced growth in its client base, in the amount of
intellectual property owned by the company, and in the number of joint venture
products expected to produce significant revenues. However, the company must
invest in infrastructure growth, intellectual property development, and
continued marketing, among other things. As a result, the company expects to
continue to incur annual operating losses through 2001. Profitability is
projected for August 2002, but there can be no assurance that eKnowledge will
achieve profitability or, if profitability is achieved, that it will be
sustained.
10
FUNDING ANALYSIS
On April 22, 2001, eKnowledge entered into an executed agreement with H. Pester
of German concern ICCF, whereby an equity investment of $5,000,000.00 US will be
infused in June of 2001. Additionally, the company has secured an additional
timed investment of $1,000,000 over the next six months through TMG of
Switzerland. This $6 million infusion will sustain eKnowledge through at least
the end of 2003, even in the event of a significant economic downturn.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000.
REVENUE
TOTAL REVENUE increased from $7,720 in the three months ended March 31, 2000 to
$21,703 in the three months ended March 31, 2001.
COST OF SALES
TOTAL COST OF SALES increased from $6,596 in the three months ended March 31,
2000 to $94,990 in the three months ended March 31, 2001. The increases were
attributable the increase in the number and types of products being developed.
SALES AND MARKETING
SALES AND MARKETING EXPENSES consist of sales and marketing personnel costs, as
well as travel, trade shows, public relations, and other marketing literature
and overhead. Sales and marketing expenses were $10,629 in the three months
ended March 31, 2000 and $37,174 in the three months ended March 31, 2001. The
increase was due to the development of sales and marketing departments in-house
and the launch of an aggressive trade show / lead generation campaign, both in
January 2001, compared with relatively little spending in this area over the
same time period in 2000. Sales and marketing expenses are expected to continue
to increase in absolute dollars in the future as we continue to increase our
sales and marketing efforts in both services and products.
GENERAL AND ADMINISTRATIVE
General and administrative expenses consist primarily of salaries and other
personnel-related expenses for our administrative, executive and other
personnel. General and administrative expenses increased from $45,299 for the
three months ended March 31, 2000 to $267,499 in the three months ended March
31, 2001. The increase is due to the increased number of employees and
increased business activities. General and administrative expenses are expected
to increase in absolute dollars in the future.
11
PART II: OTHER INFORMATION
ITEM 5. OTHER INFORMATION. OUR REGISTRATION STATEMENT WAS VOLUNTARILY FILED
PURSUANT TO SECTION 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934, IN ORDER TO
COMPLY WITH THE REQUIREMENTS OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS
FOR QUOTATION ON THE OVER-THE-COUNTER BULLETIN BOARD, OFTEN CALLED ?OTCBB?. THIS
REGISTRANT'S COMMON STOCK IS NOT PRESENTLY QUOTED ON ANY EXCHANGE AT THE PRESENT
TIME. THE REQUIREMENTS OF THE OTCBB ARE THAT THE FINANCIAL STATEMENTS AND
INFORMATION ABOUT THE REGISTRANT BE REPORTED PERIODICALLY TO THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") AND BE AND BECOME INFORMATION THAT THE PUBLIC CAN
ACCESS EASILY. THIS REGISTRANT WISHES TO REPORT AND PROVIDE DISCLOSURE
VOLUNTARILY, AND WILL FILE PERIODIC REPORTS IN THE EVENT THAT ITS OBLIGATION TO
FILE SUCH REPORTS IS SUSPENDED UNDER THE EXCHANGE ACT. OUR 1934 ACT REGISTRATION
BECAME EFFECTIVE AND CLEAR OF COMMENTS BY THE STAFF OF THE SEC ON JANUARY 31,
2001. NOW THAT WE ARE ELIGIBLE FOR CONSIDERATION FOR QUOTATION ON THE OTCBB,
MANAGEMENT HAS SUBMITTED DOCUMENTATION TO ONE OR MORE NASD MEMBERS FOR
PERMISSION TO PUBLISH QUOTES FOR THE PURCHASE AND SALE OF THE SHARES OF THE
COMMON STOCK OF THE REGISTRANT ON THE OTCBB.
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.
/s/Gary Saunders
Gary Saunders
President
12