UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended: SEPTEMBER 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from________________ to ________________
649.COM, INC.
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Texas 0-30381 760495640
- -------------------------------- ----------------- ---------------------------
(State or other jurisdiction of (Commission File (IRS Employer
incorporation or organization) Number) Identification No.)
Suite 206, 388 Drake Street
Vancouver, British Columbia, Canada V6B 6A8
- -------------------------------------------- ----------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (604) 648-2090
(including area code)
-----
Suite 212, 1166 Alberni Street
Vancouver, British Columbia, Canada V6E 3Z3
- -------------------------------------------- ----------------------------
(Former name, former address and former (Zip Code)
fiscal year, if changed since last report)
- --------------------------------------------------------------------------------
Page 1
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Not applicable.
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. 475,206 COMMON SHARES AS AT NOVEMBER
2, 2005.
Confirm outstanding shares with Transfer Agent
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
(Check one)
- --------------------------------------------------------------------------------
Page 2
649.COM INC.
(A Development Stage Company)
FORM 10-QSB
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Operations. . . . . . . . . . . . . . . . . . . F-6
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . . F-7
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . F-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION . . . . 15
ITEM 3. CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS . . . 17
ITEM 3. DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . . . . . . . . . 17
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . 17
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . . . . . . 17
- --------------------------------------------------------------------------------
Page 3
649.com, Inc.
(A Development Stage Company)
Consolidated Financial Statements
September 30, 2005
(Expressed in U.S. Dollars)
(Unaudited)
Index
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Statements of Operations. . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . . F-3
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . F-4
- --------------------------------------------------------------------------------
Page 4
649.com, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in U.S. Dollars)
September 30, December 31,
2005 2004
$ $
(unaudited) (audited)
=======================================================================================
ASSETS
Current Assets
Cash 7,522 2,870
Prepaid 100 -
- ---------------------------------------------------------------------------------------
Total Assets 7,622 2,870
=======================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable (Note 3) 123,685 147,298
Accrued liabilities 2,000 3,000
Due to stockholders (Note 4) 8,242 8,242
Due to non-related parties (Note 5) 460,436 436,556
- ---------------------------------------------------------------------------------------
Total Current Liabilities 594,363 595,096
- ---------------------------------------------------------------------------------------
Stockholders' Deficit
Preferred stock:
Authorized: 5,000,000 with a par value of $0.001 - -
Issued and outstanding: None
Common stock:
Authorized: 50,000,000 with a par value of $0.001
Issued and outstanding: 475,206 common shares 475 475
Additional Paid-in Capital 1,577,603 1,577,603
Donated Capital (Notes 4 and 5) 528,265 481,199
Deficit Accumulated During the Development Stage (2,693,084) (2,651,503)
- ---------------------------------------------------------------------------------------
Total Stockholders' Deficit (586,741) (592,226)
- ---------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Deficit 7,622 2,870
=======================================================================================
(The Accompanying Notes are an Integral Part of These Financial Statements)
F-5
649.com, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in U.S. Dollars)
(Unaudited)
Accumulated from
June 13, 1990
Three Months Ended Nine Months Ended (Date of Inception)
September 30, September 30, September 30, September 30, to September 30,
2005 2004 2005 2004 2005
$ $ $ $ $
Revenue - - - - 45,500
- ---------------------------------------------------------------------------------------------------------------------------
Expenses
Asset written-off - - - - 90,188
Consulting fees - - - - 140,000
Depreciation and amortization - - - - 4,111
General and administrative 3,390 12,315 8,125 34,216 639,365
Internet and web hosting fees - - - - 85,000
Research and development - - - - 124,650
Stock-based compensation - - - - 1,434,822
- ---------------------------------------------------------------------------------------------------------------------------
Total Expenses 3,390 12,315 8,125 34,216 2,518,136
- ---------------------------------------------------------------------------------------------------------------------------
Net Loss from Operations (3,390) (12,315) (8,125) (34,216) (2,472,636)
Other (income) Expense
Debt settlement - - (20,000) - (179,512)
Interest expense (Note 4 and 5) 18,031 16,420 53,456 48,854 399,960
- ---------------------------------------------------------------------------------------------------------------------------
Net Loss for the Period (21,421) (28,735) (41,581) (83,070) (2,693,084)
===========================================================================================================================
Basic and Diluted loss per share (0.05) (0.06) (0.09) (0.17)
===========================================================================================================================
Weighted average number of
common shares outstanding 475,206 475,206 475,206 475,206
===========================================================================================================================
(The Accompanying Notes are an Integral Part of These Financial Statements)
F-6
649.com, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited)
Accumulated from
June 13, 1990
Nine Months Ended (Date of Inception)
September 30, September 30, to September 30,
2005 2004 2005
$ $ $
============================================================================================================================
Cash Flows To Operating Activities
Net loss (41,581) (83,070) (2,693,084)
Adjustments to reconcile net loss to cash
Stock-based compensation - - 1,434,822
Depreciation and amortization - - 4,111
Imputed interest 47,066 48,750 393,265
Gain on settlement of debt (20,000) - (179,512)
Write off of assets - - 90,188
Proceeds of equipment and software for consulting services - - 3,838
Shares issued for domain name - - 25,000
Donated consulting services - - 135,000
Changes in operating assets and liabilities
Decrease in prepaid expenses and other current assets (100) 19 (26,000)
(Decrease) Increase in accounts payable and accrued liabilities (4,613) 24,790 305,197
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Used In Operating Activities (19,228) (9,511) (507,275)
- ----------------------------------------------------------------------------------------------------------------------------
Cash Flows To Investing Activities
Acquisition of equipment and software - - (55,295)
Cash acquired in acquisition - - (7,296)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities - - (62,591)
- ----------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Common stock issued for cash - - 239,000
Advances from related parties - - 8,242
Advances from non-related parties 43,724 4,553 460,807
Repayments of non-related party loans (19,844) 9,104 (130,661)
- ----------------------------------------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities 23,880 13,657 577,388
- ----------------------------------------------------------------------------------------------------------------------------
Cash Flows To Investing Activities
Increase (Decrease) in Cash 4,652 4,146 7,522
Cash - Beginning of Period 2,870 81 -
- ----------------------------------------------------------------------------------------------------------------------------
Cash - End of Period 7,522 4,227 7,522
============================================================================================================================
Non-Cash Financing Activities
During the year ended December 31, 1999, the Company issued
6,500,000 shares of its common stock, acquired assets of
155,722, and assumed liabilities of $276,155 in connection with
its acquisition of 649.com, Inc. - - (220,383)
Shares issued for stock compensation to officers - - 1,434,822
Shares issued for domain name - - 25,000
Shares issued for settlement of debt 98,600
============================================================================================================================
Supplemental Disclosures
Interest paid - - -
Income taxes paid - - -
============================================================================================================================
(The Accompanying Notes are an Integral Part of These Financial Statements)
F-7
649.com, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
1. Nature of Operations and Continuance of Business
649.com, Inc. (formerly, Market Formulation and Research Corp.) (a
Development Stage Company) (the "Company") was originally incorporated
under the laws of the State of Nevada on June 13, 1990 as MMM-Hunter
Associates, Inc. The Company was re-incorporated in Texas on March 1, 1996
under the name Market Formulation and Research Corp., for the purpose of
providing market formulation and research services. On May 12, 1999, the
Company amended its articles of incorporation, changed the name of the
Company to 649.com, Inc., and effected a 5-for-1 forward stock split.
On September 15, 1999, the Company entered into a Plan of Reorganization
and Acquisition (the "Acquisition Agreement") with 649.com, Inc., a private
company based in Alberta, Canada ("649"). Under the terms of the
Acquisition Agreement, the Company was required to issue 6,500,000 shares
of its common stock and $100,000 cash to the sole stockholder of 649, Bay
Cove Investments Limited, in exchange for all of the outstanding common
shares of 649. The total purchase price was $100,000. As of December 31,
1999, the cash portion of the acquisition price had not yet been paid, and
accordingly, such amount is included in due to stockholders (Note 5). No
amount was recorded for the issuance of 6,500,000 shares. The debt to the
stockholder was settled on November 15, 2002.
This acquisition was essentially a recapitalization of the Company and a
reverse takeover by 649. Pursuant to reverse takeover accounting, goodwill
and other intangible assets were not recorded. The acquisition was
accounted for using the purchase method of accounting for reverse takeovers
whereby the historical financial statements are those of 649. The purchase
price was allocated based on the net book value of the net assets of 649 on
the date of acquisition and cash consideration of $100,000 and liabilities
assumed of $120,383 were treated as a reduction of paid in capital in
accordance with rules of accounting for reverse takeovers.
The Company is considered a development stage company in accordance with
Statement of Financial Accounting Standards (SFAS) No. 7. These
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States, on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business. As at September 30, 2005, the Company has not recognized any
revenue, has a working capital deficit of $586,741, and has accumulated
operating losses of $2,693,084 since its inception. The continuation of the
Company is dependent upon the continuing financial support of creditors and
stockholders and obtaining long-term financing, the completion of product
development and achieving profitability. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. These
financial statements do not include any adjustments that might arise from
this uncertainty.
2. Significant Accounting Principles
a) Basis of Accounting
These consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States of America and are presented in United States dollars.
b) Consolidation
These consolidated financial statements include the accounts of the
Company and its wholly-owned Canadian subsidiary, 649.com, Inc.
c) Year End
The Company's fiscal year end is December 31.
Page F-8
649.com, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
2. Significant Accounting Principles (continued)
d) Cash and Cash Equivalents
The Company considers all highly liquid instruments with a maturity of
three months or less at the time of issuance to be cash equivalents.
e) Foreign Currency Transactions/Balances
The Company's functional currency is the United States dollar.
Occasional transactions occur in Canadian currency, and management has
adopted SFAS No. 52, "Foreign Currency Translation". Monetary assets
and liabilities denominated in foreign currencies are translated into
United States dollars at rates of exchange in effect at the balance
sheet date. Non-monetary assets, liabilities and items recorded in
income arising from transactions denominated in foreign currencies are
translated at rates of exchange in effect at the date of the
transaction.
f) Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America
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 revenues and expenses during
the reporting periods. Actual results could differ from those
estimates.
g) Revenue Recognition
The Company will sell licenses derived from its Internet based 6/49
lottery game once the beta testing is complete.
The Company will recognize revenue in accordance with Securities and
Exchange Commission Staff Accounting Bulletin No. 104 ("SAB 104"),
"Revenue Recognition in Financial Statements." Revenue will be
recognized only when the price is fixed or determinable, persuasive
evidence of an arrangement exists, the service is performed, and
collectibility is reasonably assured.
The Company will account for the licensing fees on a gross basis
pursuant to the requirements of Emerging Issues Task Force No. 99-19
(EITF 99-19). The Company is the primary obligor to transactions, has
full pricing latitude, can modify the product specifications as it
sees fit, will perform part of the service to the end customer,
carries sole risk of physical inventory loss, realizes full credit
risk, and commission income, is not fixed.
In determining the terms of our licensing agreement we examined the
terms that were standard in the industry at the time. Our main pricing
is structured on a licensing basis. The Company anticipates the
license fee will be $250,000 for each license sold and an ongoing
royalty of 5% of the licensees gross ticket sales.
h) Long-Lived Assets
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" establishes a single accounting model for long-lived assets to
be disposed of by sale including discontinued operations. SFAS 144
requires that these long-lived assets be measured at the lower of the
carrying amount or fair value less cost to sell, whether reported in
continuing operations or discontinued operations.
i) Concentration of Credit Risk
Financial instruments that potentially subject the Company to credit
risk consist of cash, accounts payable, accrued liabilities, and
amounts due to stockholders and non-related parties. Cash was
deposited with a high credit quality institution.
Page F-9
649.com, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
2. Significant Accounting Principles (continued)
j) Software Development Costs
Costs incurred in the research and development of software products
are charged to operations as incurred until technological feasibility
has been established. After technological feasibility is established,
any additional costs are to be capitalized in accordance with SFAS No.
86, "Accounting for the Cost of Computer Software to be Sold, Leased
or Otherwise Marketed". The establishment of technological feasibility
and the ongoing assessment of recoverability of capitalized software
development costs require considerable judgment by management with
respect to certain external factors such as anticipated future
revenues, estimated economic life and changes in software and hardware
technologies. No software development costs have been capitalized as
of September 30, 2005.
k) Stock-based Compensation
Options are granted for services provided to the Company. Statement of
Financial Accounting Standards No. 123 ("SFAS123") requires that an
enterprise recognize, or at its option, disclose the impact of the
fair value of stock options and other forms of stock based
compensation in the determination of income. The Company has elected
under SFAS 123 to continue to measure compensation costs on the
intrinsic value basis set out in APB option No. 25. As stock options
are granted at exercise prices based on the market price of the
Company's shares at the date of grant, no compensation cost is
recognized. However, under SFAS 123, the impact on net income and
income per share of the fair value of stock options must be measured
and disclosed on a fair value based method on a pro forma basis. As
performance stock for non-employees is issued for services rendered,
the fair value of the shares issued is recorded as compensation cost,
at the date the shares are issued, based on a discounted average
trading price of the Company's stock as quoted on the Pink Sheets. The
fair value of the employees purchase rights, pursuant to stock
options, under SFAS 123, will be estimated using the Black-Scholes
model.
l) Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with
SFAS No. 128, "Earnings per Share" (SFAS 128). SFAS 128 requires
presentation of both basic and diluted earnings per share (EPS) on the
face of the income statement. Basic EPS is computed by dividing net
income (loss) available to common shareholders (numerator) by the
weighted average number of common shares outstanding (denominator)
during the period. Diluted EPS gives effect to all dilutive potential
common shares outstanding during the period including stock options,
using the treasury stock method, and convertible preferred stock,
using the if-converted method. In computing diluted EPS, the average
stock price for the period is used in determining the number of shares
assumed to be purchased from the exercise of stock options or
warrants. Diluted EPS excludes all dilutive potential common shares if
their effect is anti-dilutive. Loss per share information does not
include the effect of any potential common shares, as their effect
would be anti-dilutive.
m) Comprehensive Loss
SFAS No. 130, "Reporting Comprehensive Income," establishes standards
for the reporting and display of comprehensive loss and its components
in the financial statements. As at September 30, 2005 and 2004, the
Company has no items that represent comprehensive loss and, therefore,
has not included a schedule of comprehensive loss in the financial
statements.
Page F-10
649.com, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
2. Significant Accounting Principles (continued)
n) Financial Instruments
The Company's financial instruments consist of cash, prepaid expenses,
accounts payable, accrued liabilities, notes payable and advances from
related and non-related parties. Unless otherwise noted, it is
management's opinion that the Company is not exposed to significant
interest, currency or credit risks arising from these financial
instruments. The fair value of cash, accounts payable and accrued
liabilities, advances from related and non-related parties
approximates their carrying value due to the immediate or short-term
maturity of these financial instruments.
o) New Accounting Pronouncements
In May 2005, the Financial Accounting Standards Board (FASB) issued
SFAS No. 154, "Accounting Changes and Error Corrections - A
Replacement of APB Opinion No. 20 and SFAS No. 3". SFAS 154 changes
the requirements for the accounting for and reporting of a change in
accounting principle and applies to all voluntary changes in
accounting principle. It also applies to changes required by an
accounting pronouncement in the unusual instance that the
pronouncement does not include specific transition provisions. SFAS
154 requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless it is
impracticable to determine either the period-specific effects or the
cumulative effect of the change. The provisions of SFAS No. 154 are
effective for accounting changes and correction of errors made in
fiscal years beginning after December 15, 2005. The adoption of this
standard is not expected to have a material effect on the Company's
results of operations or financial position.
In December 2004, FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets - An Amendment of APB Opinion No. 29". The guidance in APB
Opinion No. 29, "Accounting for Nonmonetary Transactions", is based on
the principle that exchanges of nonmonetary assets should be measured
based on the fair value of the assets exchanged. The guidance in that
Opinion, however, included certain exceptions to that principle. SFAS
No. 153 amends Opinion No. 29 to eliminate the exception for
nonmonetary exchanges of similar productive assets and replaces it
with a general exception for exchanges of nonmonetary assets that do
not have commercial substance. A nonmonetary exchange has commercial
substance if the future cash flows of the entity are expected to
change significantly as a result of the exchange. The provisions of
SFAS No. 153 are effective for nonmonetary asset exchanges occurring
in fiscal periods beginning after June 15, 2005. Early application is
permitted and companies must apply the standard prospectively. The
adoption of this standard is not expected to have a material effect on
the Company's results of operations or financial position.
In December 2004, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 123R,
"Share Based Payment". SFAS 123R is a revision of SFAS No. 123
"Accounting for Stock-Based Compensation", and supersedes APB Opinion
No. 25, "Accounting for Stock Issued to Employees" and its related
implementation guidance. SFAS 123R establishes standards for the
accounting for transactions in which an entity exchanges its equity
instruments for goods or services. It also addresses transactions in
which an entity incurs liabilities in exchange for goods or services
that are based on the fair value of the entity's equity instruments or
that may be settled by the issuance of those equity instruments. SFAS
123R focuses primarily on accounting for transactions in which an
entity obtains employee services in share-based payment transactions.
SFAS 123R does not change the accounting guidance for share-based
payment transactions with parties other than employees provided in
SFAS 123 as originally issued and Emerging Issues Task Force Issue No.
96-18, "Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services". SFAS 123R does not address the accounting for employee
share ownership plans, which are subject to AICPA Statement of
Position 93-6, "Employers' Accounting for Employee Stock Ownership
Plans". SFAS 123R requires a public entity to
Page F-11
649.com, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
2. Significant Accounting Principles (continued)
o) New Accounting Pronouncements (continued)
measure the cost of employee services received in exchange for an
award of equity instruments based on the grant-date fair value of the
award (with limited exceptions). That cost will be recognized over the
period during which an employee is required to provide service in
exchange for the award - the requisite service period (usually the
vesting period). SFAS 123R requires that the compensation cost
relating to share-based payment transactions be recognized in
financial statements. That cost will be measured based on the fair
value of the equity or liability instruments issued. The scope of SFAS
123R includes a wide range of share-based compensation arrangements
including share options, restricted share plans, performance-based
awards, share appreciation rights, and employee share purchase plans.
Public entities (other than those filing as small business issuers)
will be required to apply SFAS 123R as of the first interim or annual
reporting period that begins after June 15, 2005. Public entities that
file as small business issuers will be required to apply SFAS 123R in
the first interim or annual reporting period that begins after
December 15, 2005.
For nonpublic entities, SFAS 123R must be applied as of the beginning
of the first annual reporting period beginning after December 15,
2005. The adoption of this standard is not expected to have a material
effect on the Company's results of operations or financial position.
In March 2005, the SEC staff issued Staff Accounting Bulletin No. 107
("SAB No. 107") to give guidance on the implementation of SFAS 123R.
The Company will consider SAB No. 107 during implementation of SFAS
123R.
p) Reclassifications
Certain comparative figures have been reclassified to ensure
comparability with those of the current period.
q) Interim Financial Statements
These interim unaudited financial statements have been prepared on the
same basis as the annual financial statements and in the opinion of
management, reflect all adjustments, which include only normal
recurring adjustments, necessary to present fairly the Company's
financial position, results of operations and cash flows for the
periods shown. The results of operations for such periods are not
necessarily indicative of the results expected for a full year or for
any future period.
3. Accounts Payable
a) On February 2, 2005, the Company reached an agreement with an
unrelated party to have administrative fees owing waived. The services
were provided to the Company during the period from May 2002 to
December 2002. The value of these fees of $20,000 was treated as a
gain on debt settlement.
b) On December 15, 2004, the Company reached an agreement to have rental
fees for office space owing waived for the period from May 2002 to
December 2004. The value of these fees of $16,000 was treated as a
gain on debt settlement.
c) On December 15, 2004, the Company reached an agreement to have fees
for administrative services owing waived for the period from January
2003 to December 2004. The value of these fees of $60,000 was treated
as a gain on debt settlement.
Page F-12
649.com, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
4. Related Party Transactions/Balances
As of September 30, 2005, the Company owes a significant stockholder,
Intrepid, $8,242 (2004: $8,242). The amount owing is non-interest bearing,
unsecured and due upon demand. During the nine-month period ended September
30, 2005 imputed interest of $927 (2004: $927) was charged to operations
and treated as donated capital.
5. Due to Non-Related Parties
Non-interest bearing amounts owing to non-related parties of $460,436 as of
September 30, 2005 (2004: $435,071) are due on demand and are unsecured.
During the nine-month period ended September 30, 2005 imputed interest of
$46,139 (2004: $47,927) was charged to operations and treated as donated
capital.
Interest bearing notes are owing to non-related parties of $45,000 as
follows:
a) On July 2, 2004, the Company received $5,000 from Hokley Limited
("Hokley"). The promissory note is unsecured, bears interest at 8% per
annum along with a loan fee of 10%. Repayment of the principal,
accrued interest and loan fee is payable by the Company on July 2,
2006.
b) On September 24, 2004, the Company received $4,000 from Hokley. The
promissory note is unsecured, bears interest at 10% per annum along
with a loan fee of 10%. Repayment of the principal, accrued interest
and loan fee is payable by the Company on September 24, 2006.
c) On February 1, 2005, the Company received $5,000 from Hokley. The
promissory note is unsecured, bears interest at 10% per annum along
with a loan fee of 10%. Repayment of the principal, accrued interest
and loan fee is payable by the Company on August 1, 2006.
d) On February 17, 2005, the Company received $21,000 from Hokley. The
promissory note is unsecured, bears interest at 10% per annum along
with a loan fee of 10%. Repayment of the principal, accrued interest
and loan fee is payable by the Company on August 17, 2006.
e) On August 3, 2005, the Company received $10,000 from Hokley. The
promissory note is unsecured, bears interest at 10% per annum along
with a loan fee of 10%. Repayment of the principal, accrued interest
and loan fee is payable by the Company on August 3, 2006.
6. Common Stock
a) The Company has a Stock Option Plan approved and registered. Pursuant
to this plan, the Company can issue up to 10% of the outstanding
common shares on December 1 of each year to certain key directors and
employees. As at September 30, 2005 and December 31, 2004 there were
no outstanding stock options.
b) On September 27, 2004 a resolution was passed by the shareholders of
the Company to authorize a reverse split of the issued and outstanding
common shares of the Company to a maximum of 1 new share of every 100
old shares held. Following the reverse split, the Company's authorized
capital was increased back to 50,000,000 common shares. These
consolidated financial statements have been retroactively restated to
reflect the changes to the issued and authorized common stock.
Page F-13
649.com, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
7. Subsequent Event
On October 2, 2005, the Company's wholly owned subsidiary, 649.com, Inc.
("the subsidiary"), was dissolved and struck from the Alberta Corporate
Registration System. The subsidiary was dormant and had no material assets
or liabilities.
Page F-14
649.COM INC. (SIXN.PK)
(A Development Stage Company)
QUARTERLY REPORT (SEC FORM 10-QSB)
OVERVIEW
We have developed a proprietary instant on-line lottery software program that we
intend to license to legally operated lottery organizations, which are typically
land based government operated agencies. The game which is played on-line is
similar to the well-known land based lottery game known as "PowerBall" in the
USA and 'lotto 649' in Canada, the United Kingdom, Spain, France, Holland and
Germany.
It is anticipated revenue will be earned from the sale of licenses and from
royalty fees generated from the gross revenue of the Licensee's lottery
operation.
649.com proposes to sell licenses to operate an on-line lottery game for
approximately $250,000 and expects to earn an on going royalty fee of 5% of the
licensees' ticket sales. We do not propose to sell a License to any company
that is not operating under government license or in a jurisdiction that
disallows on-line gaming. We propose to sell Licenses to government lottery
agencies around the world and to foreign-based corporations in jurisdictions
that support Internet gaming including Australia, England, South Africa, Isle of
Man, Liechtenstein, St Kitts and others.
We entered into an Agreement with Syntec Software on July15th, 2002 whereby
Syntec agreed to update and redevelop the 649.com software program game client
interface in flash and to provide a full management suite and tracking system as
well as the integration of a cashier system. Syntec also agreed to move the
database from Oracle and create a database in MYSQL.
Under the terms of the Agreement, Syntec had undertaken to complete the play for
fun model by December 30th 2002 and the pay-for-play model by April 2003. Syntec
has completed both models, which are ready for launch.
We have requested Syntec Software to further develop a new software program,
similar to a conventional lottery game, which will enable a land based lottery
organization to sell millions of tickets on-line, for a specific draw date, as
an alternative to the instant draw. They have agreed to provide this new
software as soon as we have raised working capital to pay them.
In October 2003, we amended our original Agreement with Syntec who agreed to
waive the fees for the period dating February 1st to October 1st 2003 and not
charge any additional fees, until such time that the software has been launched.
We had requested J. Alexander Securities to act as a market maker for 649.com.
Their mandate was to file a Form 211 Application with the NASD under SEC Rule
15c2-11, in order for 649.com to be reinstated on the OTC.BB.
In July 2004, we decided to terminate our business relationship with J.
Alexander Securities, as they were unable to achieve the mandate. We have,
subsequently, requested that Pennaluna & Company act as a market maker for
649.com.
On September 27, 2004 a resolution was passed by the Shareholder's and,
subsequently, the Director's of the Company, to authorize a rollback of
47,520,650 common shares, being the issued and outstanding shares of the Company
to a maximum of 100:1. Following the rollback, the Company's issued and
outstanding shares were 475,206 and the authorized capital was increased back to
50,000,000 shares.
- --------------------------------------------------------------------------------
Page 15
The President of the Company was given authority to take the necessary actions
and subsequently the CUSIP and trading symbol have changed to 830028 20 5 and
SIXN, respectively. This change was effective as of October 15, 2004. The
Company is currently trading on the Pink Sheets under the trading symbol,
SIXN.PK.
ITEM 2. MANAGEMENTS' DISCUSSION AND ANLAYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
PLAN OF OPERATIONS
The following discussion contains certain forward-looking statements that are
subject to business and economic risks and uncertainties, and our actual results
could differ materially from those forward-looking statements. The following
discussion regarding our financial statements should be read in conjunction with
the financial statements and notes thereto.
We are a development stage company. In a development stage company, management
devotes most of its activities to establishing a new business. Planned principal
activities have not yet generated any revenue and the Company has suffered
recurring losses from inception, totaling $2,693,084 and has a working capital
deficit of $586,741. These factors raise substantial doubt about the Company's
ability to continue as a going concern.
We do not currently generate any revenue from operations and do not expect to
report any revenue from operations, at least until after the sale of a license.
Even after the sale of a license, there can be no assurance that we will
generate positive cash flow and there can be no assurances as to the level of
revenues, if any, that we may actually achieve from the on-line lottery game.
However, management has the expertise to market the Lottery licenses and expects
to sell one or more licenses within six months of being reinstated on the
OTC.BB. Each License will be sold for approximately $250,000 and will also
generate an ongoing royalty fee of 5% of tickets sold by the Licensee. We also
expect to earn revenue from selling banner advertising on our web site as soon
as the software program has been launched, although with the decrease in
advertising rates and the lack of advertisers, we may find difficulty in
generating any significant revenue from this source. We will also earn revenue
from sending players to other gaming sites. This is typically achieved through
an affiliate program that is offered by a gaming site who would pay as much as
$100 per referral.
RESULTS OF CONTINUING OPERATIONS
Nine months ended September 30, 2005 ("2005") compared to the nine months ended
September 30, 2004 ("2004"):
The Company has no revenue for 2005 and 2004. Expenses decreased by $26,091 to
$8,125 in 2005 as compared to $34,216 in 2004. The decrease in expenses is
attributed to the general and administrative fees in 2005 being $8,125 as
compared to $34,216 in 2004. The decrease in these fees is attributed to the
cancellation of administration fees owing in 2005.
The net loss for 2005 was $41,581 as compared to $83,070 in 2004. One of the
contributing factors to the decrease in 649.com's net loss in 2005 were the
agreements the Company entered into to arrange for the cancellation of debt
(please see Note 3 in the Financial Statements for a detailed breakdown of the
agreements the company entered into). Our net loss per share for 2005 was
($0.09) as compared to ($0.17) for 2004.
- --------------------------------------------------------------------------------
Page 16
FINANCIAL CONDITION AND LIQUIDITY
At September 30, 2005 the Company had cash and cash equivalents totaling $7,522
compared to $2,870 at December 31, 2004.
The Company received cash advances of $43,724 from a non-related party, these
amounts are unsecured, non-interest bearing and due on demand. These funds were
used to fund our operating activities. As a result, our cash position has
increased during 2005 to $7,522 and our working capital deficit, as at September
30, 2005, is $586,741.
ITEM 3. CONTROLS AND PROCEDURES
We maintain disclosure controls and procedures that are designed to ensure that
information that is required to be disclosed in the Securities Exchange Act of
1934 reports are recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to our management to allow timely decisions
regarding required disclosure.
Within 90 days prior to the date of this report, our management carried out an
evaluation, under the supervision and with the participation of the management
on the effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon the foregoing, our
President concluded that our disclosure controls and procedures are effective in
connection with the filing of this Quarterly Report on Form 10-QSB for the
period ended September 30, 2005.
There were no significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to the date of their
evaluation, including any significant deficiencies or material weaknesses of
internal controls that would require corrective action.
- --------------------------------------------------------------------------------
Page 17
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On September 27th 2004, the Shareholder's approved, in lieu of a Special
Meeting, a resolution to authorize the rollback of the issued and outstanding
shares of the Company to a maximum of 100:1. Following the rollback, the
Company's authorized capital was to be increased back to 50,000,000 shares.
The Shareholder's further resolved to authorize the Board of Director's to
change the Registrant's name, at a future date, if deemed to be in the best
interest of the Company.
On all of the above matters, the Shareholder's voted THIRTY MILLION, FOUR
HUNDRED & TWENTY-FIVE THOUSAND (30,425,000) shares for the resolution and zero
shares against the resolution. No shareholder's withheld their vote or abstained
from voting on each of the above matters.
The President of the Company was given authority to take the necessary actions
and subsequently the CUSIP and trading symbol have changed to 830028 20 5 and
SIXN, respectively. This change was effective as of October 15, 2004.
The Registrant filed a Form 8-K with the SEC on October 15 2004, which gave a
detailed report of the transpired events.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit Number Description
2.1* Form 8-K filed on August 05 2005 re. financial obligation
31.1 302 Certification for the CEO and CFO
32.1 906 Certification for the CEO and CFO
DOCUMENTS INCORPORATED BY REFERENCE
* Previously filed.
- --------------------------------------------------------------------------------
Page 18
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.
- ------------------------- Date: November 2, 2005
Cary C. Martin /s/ Cary C. Martin
President / Director
In accordance with the Securities Exchange Act this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
- ------------------------- Date: November 2, 2005
Cary C. Martin /s/ Cary C. Martin
President / Director
- --------------------------------------------------------------------------------
Page 19