UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE EXCHANGE ACT
For the transition period from ___________ to _________
Commission File Number: 0-30565
KNOWLEDGE NETWORKS, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 91-2014670
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
24843 Del Prado, Suite 318, Dana Point, CA 92629
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 248-1765
As of May 21, 2001, the number of shares outstanding of issuers common stock
were 16,757,767.
Transitional Small Business Disclosure Format (check one): yes [ ] no [X]
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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 Remainder of this Page is Intentionally left Blank
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KNOWLEDGE NETWORKS, INC.
BALANCE SHEET (UNAUDITED)
March 31, December 31,
2001 2000
----------- --------------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $ 120 $ 161
Notes Receivable - Officer . . . . . . . . . . . . . . 63,993 63,993
Notes Receivable . . . . . . . . . . . . . . . . . . . 771,809 366,040
----------- --------------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . 835,922 430,194
----------- --------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . $ 835,922 $ 430,194
=========== ==============
LIABILITIES & STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . $ 276,578 $ 14,009
Notes payable. . . . . . . . . . . . . . . . . . . . . 778,920 366,040
----------- --------------
Total Liabilities. . . . . . . . . . . . . . . . . . . 1,055,498 380,049
----------- --------------
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value; authorized 100,000,000
shares; issued and outstanding, 16,757,767 shares
and 34,257,767 shares respectively. . . . . . . . . 16,758 34,258
Additional Paid-In Capital . . . . . . . . . . . . . . 161,748 144,248
Accumulated Equity (Deficit) . . . . . . . . . . . . . (398,082) (128,361)
Total Stockholders' Equity . . . . . . . . . . . . . . (219,576) 50,145
----------- --------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY . . . . . . . $ 835,922 $ 430,194
=========== ==============
The accompanying notes are an integral part of these financial statements.
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KNOWLEDGE NETWORKS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
For the periods ended March 31, 2000 nad 2001
From
Inception on
From January From January December 16,
1, 2001 to. 1, 2000 to 1998 through
March 31, . March 31, March 31,
2001 2000 2001
-------------- -------------- --------------
Revenues. . . . . . . . . . $ 0 $ 17,500 $ 99,683
-------------- -------------- --------------
Bad debt. . . . . . . . . . 11,154
Consulting fees . . . . . . 28,785 19,500 209,804
General and Administrative. 240,936 251 276,807
-------------- -------------- --------------
Total Expenses. . . . . . . 269,721 19,751 497,765
Net Loss from Operations. . (269,721) (2,251) (398,082)
Net Income (Loss) . . . . . ($269,721) ($2,251) ($398,082)
============== ============== ==============
Loss per Share. . . . . . . $ (0.01302) $ (0.00022) $ (0.02319)
============== ============== ==============
Weighted Average
Shares Outstanding. . . 20,713,450 10,361,750 17,163,743
============== ============== ==============
The accompanying notes are an integral part of these financial statements.
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KNOWLEDGE NETWORKS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)(UNAUDITED)
For the period from inception of the Corporation
On December 16, 1998, through December 31, 1998
For the years ended December 31, 1999 and 2000
And the period ended March 31, 2001
Additional Accumulated Total Stock-
Common Par Paid-In Equity holders' Equity
Stock Value Capital (Deficit) (Deficit)
------------ ------------- -------------- ----------- -----------------
Common Stock issued at inception . . . . 10,690,660 $ 10,691 ($2,671) $ 0 $ 8,020
Sale of Common Stock
at $0.01 per share . . . . . . . . . 1,306,340 1,306 8,494 0 0
Distribution to shareholders in spin off 0 0 6,844 0 0
Loss during the period from December 16,
through December 31, 1998. . . . . . 0 0 0 (11,209) 0
------------ ------------- -------------- ----------- -----------------
Balance at December 31, 1998 . . . . . . 11,997,000 $ 11,997 $ 12,666 ($11,209) $ 13,454
Sale of Common Stock
at $0.10 per share . . . . . . . . . 1,379,655 1,380 102,120 0 0
Issuance of Common Stock for
services at $0.10 per share. . . . . 332,250 332 24,595 0 0
Issuance of Common Stock
at par for services rendered . . . . 103,308 103 (25) 0 0
Loss during the period from January 1
through December 31, 1999. . . . . . 0 0 0 (72,381) 0
------------ ------------- -------------- ----------- -----------------
Balance at December 31, 1999 . . . . . . 13,812,213 13,812 139,356 (83,590) 69,579
Issuance of Common Stock
at par for services rendered . . . . 33,775,554 33,776 (8,438) 0 0
------------------------------------------------------------------------------
Cancellation of shares at $.001. . . . . (13,330,000) (13,330) 13,330 0 0
Loss during the period from January 1
through December 31, 2000. . . . . . 0 0 0 (44,771) 0
------------------------------------------------------------------------------
Balance at December 31, 2000 . . . . . . 34,257,767 $ 34,258 $ 144,248 ($128,361) $ 50,145
Cancellation of shares at $.001. . . . . (17,500,000) (17,500) 17,500 0 0
Loss during the period from January 1
through March 31, 2001 . . . . . . . 0 0 0 (269,721) 0
------------------------------------------------------------------------------
Balance at March 31, 2001. . . . . . . . 16,757,767 $ 16,758 $ 161,748 ($398,082) ($219,576)
The accompanying notes are an integral part of these financial statements.
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KNOWLEDGE NETWORKS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
For the periods ended March 31, 2000 and 2001
From
Inception on
From January From January December 16,
1, 2001 to . . . . . . . . . . . . . . . . 1, 2000 to 1998 through
March 31,. . . . . . . . . . . . . . . . . March 31, March 31,
2001 2000 2001
------------- ------------- -------------
Operating Activities
Net Income (Loss). . . . . . . . . . . . . . ($269,721) ($2,251) ($398,082)
Adjustments to reconcile net loss to
net cash provided by operations
Increase in accounts payable . . . . . . . . 262,569 0 276,578
Bad debt . . . . . . . . . . . . . . . . 0 0 11,154
Issuance of stock for services . . . . . 0 0 50,342
------------- ------------- -------------
Net cash flows used Operations . . . . . . . (7,152) (2,251) (60,008)
Cash flows used in Investment Activities
Cash payments for notes receivable . . . . . (405,769) 0 (469,762)
------------- ------------- -------------
Net Cash used in Investment Activities . . . (405,769) 0 (469,762)
Cash Flows from Financing Activities
Cash received from notes payable . . . . . . 412,880 0 412,880
Cash received from subscriptions receivable. 0 0 9,800
Cash received from spin-off. . . . . . . . . 0 0 3,710
Issuance of stock for cash . . . . . . . . . 0 0 103,500
------------- ------------- -------------
Net Cash Flows from Financing Activities . . 412,880 0 529,890
Net increase (decrease) in cash. . . . . . . (41) (2,251) 120
Cash, beginning of period. . . . . . . . . . 161 5,585 0
------------- ------------- -------------
Cash, end of period. . . . . . . . . . . . . 120 3,334 120
============= ============= =============
The accompanying notes are an integral part of these financial statements.
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KNOWLEDGE NETWORKS, INC.
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2001
NOTES TO FINANCIAL STATEMENTS
Knowledge Networks, Inc. ("the Company") has elected to omit substantially all
footnotes to the financial statements for the three months ended March 31, 2001,
since there have been no material changes (other than indicated in other
footnotes) to the information previously reported by the Company in their Annual
Report filed on Form 10-KSB for the Fiscal year ended December 31, 2000.
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.
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ITEM 2. DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
(A) PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS.
(1) CASH REQUIREMENTS AND OF NEED FOR ADDITIONAL FUNDS, TWELVE MONTHS.
Our deficit for this year of $xxxx, combined with our lack of cash, suggests
that we would require a minimum of $50,000 to $60,000 in new funds just to
maintain our current level of operations.
On or about October 30, 2000, MPower granted us a Master Distributor
License Agreement (a perpetual master license to utilize UWAP/WOW for the
purposes of preparing, developing, manufacturing, publishing, marketing, hosting
and distributing new products and applications based upon revisions,
modifications and translations of, and derivative works based upon, UWAP/WOW).
As consideration for the license, we were assigned a note receivable of 11
Europacific Corporation from MPower of $291,040, in exchange for our note
payable to that corporation in the same amount. The notes payable and receivable
are payable on demand. If that corporation demands payment on our note, and we
demand payment on the note receivable from MPower, the license agreement
terminates by its terms, but we can retain the license for an offset of $66,700
from the amounts due from MPower. Under the Terms of the Master Distributor
License Agreement, Knowledge Networks has retained legal title to all source
code for the UWAP/WOW technologies, due to Mpower's discontinued development of
the software. However, in order to make use of the license, we require
developmental funding in the estimated amount of $1,250,000 to $1,500,000 in the
next twelve months.
We do not have enough cash to fund our operations optimally for the next twelve
months at our current ratio of revenues to expenses. We must increase our
revenues by increasing our customer base and/or borrow from our circle of
shareholders or seek additional investment from them.
(2) SUMMARY OF PRODUCT RESEARCH AND DEVELOPMENT. None
(3) EXPECTED PURCHASE OR SALE OF PLANT AND SIGNIFICANT EQUIPMENT. None
(4) EXPECTED SIGNIFICANT CHANGE IN THE NUMBER OF EMPLOYEES. None
(B) DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
There has been substantial change in our financial condition and operations
in the past year. The financial statements provide quarterly comparisons from
our last two quarters. First revenues are increasing, but the changes are barely
substantial.
Mpower Technologies was unable to secure the necessary financing to
maintain its day-to-day business operations, which resulted in a material change
to Mpower's business. This material change to Mpower's business and a
significant drop in the Company's stock price lead Management to determine that
the acquisition was not economically feasible under the terms and conditions of
the acquisition proposal. Management of Mpower and Knowledge Networks discussed
changes to the acquisition proposal but were unable to reach an agreement.
On April 30th, an extra ordinary meeting of Board of Directors was held to
discuss a go-forward strategy.
The Company's majority shareholder voted against the go-forward strategy,
and as a result, the Company was unable to acquire the private placement funds
held in escrow. All funds were subsequently returned to their respective
investors.
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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEDINGS. None
ITEM 2. CHANGES IN SECURITIES. None
ITEM 3. DEFAULTS ON SENIOR SECURITIES. None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS. None
ITEM 5. OTHER INFORMATION. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-Q Report for the Quarter ended March 31, 2001, has been signed below by
the following person on behalf of the Registrant and in the capacity and on the
date indicated.
KNOWLEDGE NETWORKS, INC.
Dated: May 21, 2001 by
/s/Jay Roberge /s/Jeffrey A. Harry
Jay Roberge Jeffrey A. Harry
President CEO/Director Chief Financial Officer
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