SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[ ] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934.
[X] Transition report under section 13 or 15(d) of the Exchange Act for the
transition period from August 1, 2002 to April 30, 2003
Commission File Number
000-31160
UgoMedia Interactive Corp.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Nevada 88-0470239
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
300 Center Street, Bay City, MI 48708
(Address of Principal Executive Offices)
(877) 99SCIAX
(Issuer's Telephone Number, Including Area Code)
1020 N. Johnson, Bay City, MI 48708
(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 X
-----
APPLICABLE ONLY TO CORPORATE ISSUERS
As of August 21, 2003, the Company had 26,855,627 shares of common stock issued
and outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
----
UGOMEDIA INTERACTIVE CORP.
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET -
APRIL 30, 2003 (UNAUDITED)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED) - THREE MONTHS AND NINE MONTHS
ENDED APRIL 30, 2003 AND APRIL 30, 2002.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) - NINE MONTHS ENDED APRIL 30,
2003 AND APRIL 30, 2002.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 3. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULT UPON SENIOR SECURITIES
ITEM 4. OTHER INFORMATION
ITEM 5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
THIS QUARTERLY REPORT ON FORM 10-QSB, INCLUDING EXHIBITS THERETO, CONTAINS
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. THESE FORWARD-LOOKING STATEMENTS ARE TYPICALLY IDENTIFIED BY THE
WORDS "ANTICIPATES", "BELIEVES", "EXPECTS", "INTENDS", "FORECASTS", "PLANS",
"FUTURE", "STRATEGY", OR WORDS OF SIMILAR MEANING. VARIOUS FACTORS COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING
STATEMENTS. THE COMPANY ASSUMES NO OBLIGATIONS TO UPDATE THESE FORWARD-LOOKING
STATEMENTS TO REFLECT ACTUAL RESULTS, CHANGES IN ASSUMPTIONS, OR CHANGES IN
OTHER FACTORS, EXCEPT AS REQUIRED BY LAW.
ITEM 1. FINANCIAL STATEMENTS
UgoMedia Interactive Corporation and Subsidiaries
Consolidated Balance Sheet
April 30, 2003
(Unaudited)
ASSETS
Current Assets:
Accounts Receivable $ 46,326
Inventory 18,894
Prepaid Expenses 231,004
-----------
Total Current Assets 296,224
Property and Equipment, net 22,137
-----------
$ 318,361
===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current Liabilities:
Cash Overdraft $ 5,706
Line of Credit Payable 122,078
Current Portion of Debt 12,540
Accounts Payable and Accrued Expenses 344,557
Notes Payable - Shareholders and Former Officers 350,000
-----------
Total Current Liabilities 834,881
Long-Term Portion of Debt 23,247
Due to Shareholders 159,176
-----------
Total Liabilities 1,017,304
-----------
Shareholders' Deficiency:
Preferred stock, $0.001 par value, 5,000,000 shares authorized;
4,703,036 issued and outstanding 4,703
Common Stock, $0.001 par value, 50,000,000 shares authorized;
12,818,166 shares issued, 9,108,498 shares outstanding 9,109
Additional Paid In Capital 461,252
Accumulated Deficit (764,923)
Cumulative Other Comprehensive Loss (59,084)
-----------
(348,943)
Less: Treasury Stock, 3,709,668 shares at cost (350,000)
-----------
Total Shareholders' Deficiency (698,943)
-----------
$ 318,361
===========
See Notes to Consolidated Financial Statements.
1
UgoMedia Interactive Corporation and Subsidiaries
Consolidated Statement of Operations
(Unaudited)
Nine Months Ended April 30, Three Months Ended April 30,
--------------------------- ----------------------------
2003 2002 2003 2002
------------ ------------ ------------- -------------
Net Sales $ 243,263 $ 308,772 $ 5,920 $ 28,150
Cost of Goods Sold 99,402 187,032 30,262 37,765
------------ ------------ ------------- -------------
Gross Profit 143,861 121,740 (24,342) (9,615)
------------ ------------ ------------- -------------
Operating Expenses:
Selling, General and Administrative 724,338 228,166 398,820 98,502
Research and Development 23,494 75,222 11,292 15,402
------------ ------------ ------------- -------------
Total Operating Expenses 747,832 303,388 410,113 113,904
------------ ------------ ------------- -------------
Loss from Operations (603,971) (181,648) (434,454) (123,519)
Interest and Other Income 32,990 20,574 645 1,174
Interest and Other Expenses (16,565) (22,174) (7,284) (6,969)
Gain on Sale of Product - 250,456 - -
------------ ------------ ------------- -------------
Net (Loss) Income $ (587,546)$ 67,208 $ (441,093)$ (129,314)
============ ============ ============= =============
Basic Net (Loss) Income Per Common Share $ (0.07)$ 0.01 $ (0.05)$ (0.02)
============ ============ ============= =============
Basic Weighted Average Common Shares 8,510,592 8,487,858 8,557,593 8,487,858
============ ============ ============= =============
See Notes to Consolidated Financial Statements.
2
UgoMedia Interactive Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
Nine Months Ended April 30,
------------------------------------
2003 2002
---------------- ----------------
Cash flows from operating activities:
Net (loss) income $ (587,546) $ 67,208
Adjustments to reconcile net (loss) income to net cash
used in operating activities:
Depreciation 7,123 2,722
Gain on Sale of Product - (250,456)
Amortization of prepaid expense for
consulting services 106,667 -
Changes in assets and Liabilities:
Accounts receivable (14,047) 4,421
Inventory (6,259) 4,638
Prepaid expenses (14,783) 65
Investment tax credit 49,135 -
Accounts payable and accrued expenses 255,520 30,905
---------------- ----------------
Net cash (used in) provided by operating activities (204,190) (140,496)
---------------- ----------------
Cash flows from investing activities:
Expenditures on property and equipment (12,854) (5,447)
Prceeds From Sale of Product - 250,456
---------------- ----------------
Net cash (used in) provided by investing activities (12,854) 245,009
Cash flows from financing activities:
Cash overdraft 5,706 -
Due to Shareholder 37,572 (9,286)
Net proceed (repayments) of line of credit and loan payable 33,309 (19,757)
Proceeds from sale of equity of acquired subsidiary 99,000 -
Proceeds from sale of common stock 56,064 -
---------------- ----------------
Net cash provided by (used in) financing activities 231,651 (29,043)
---------------- ----------------
Effect of exchange rate on cash (67,934) 6,995
---------------- ----------------
(Decrease) increase in cash (53,327) 82,464
Cash - beginning of period 53,327 11,455
---------------- ----------------
Cash - end of period $ - $ 93,919
================ ================
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 14,115 $ 22,174
================ ================
Non-cash financing and investing activities:
Notes payable issued in exchange for common stock $ 350,000 $ -
================ ================
Common stock issued for prepaid employment contracts $ 320,000 $ -
================ ================
See Notes to Consolidated Financial Statements.
3
UGOMEDIA INTERACTIVE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. NATURE OF BUSINESS
UgoMedia Interactive Corporation (the "Company") was incorporated on
August 22, 2000 in Nevada. The Company was engaged in Internet web
design and hosting and network consulting. On October 2, 2002, the
Company had a change in control, disposed of all its property and
equipment and ceased operations. In March 2003 the Company resumed
operations upon completion of its acquisition of a Canadian company
(see Note 4) engaged in the manufacturing and sale of various
industrial and defense security products. In August 2003, the Company
changed its fiscal year to July 31, the fiscal year of the acquired
Canadian subsidiary, commencing August 1, 2002 (see Note 4).
Accordingly, the accompanying financial statements reflect operations
for the nine and three months ended April 30, 2003 and 2002.
2. BASIS OF PRESENTATION AND GOING CONCERN
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial statements and with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and
disclosures required for annual financial statements. These
consolidated financial statements should be read in conjunction with
the consolidated financial statements and related footnotes included in
the Company's annual report on Form 10-KSB for the year ended December
31, 2002.
In the opinion of the Company's management, all adjustments (consisting
of normal recurring accruals) necessary to present fairly the Company's
consolidated financial position as of April 30, 2003 and the results of
consolidated operations and cash flows for the nine and three month
periods ended April 30, 2003 and April 30, 2002 have been included.
The results of operations for the nine-month periods ended April 30,
2003, are not necessarily indicative of the results to be expected for
the full year ended July 31, 2003.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company
incurred losses from operations of $603,971 and $181,648 for the nine
months ended April 30, 2003 and 2002, respectively. Additionally, the
Company has working capital and stockholders' deficiencies of $538,657
and $698,943 at April 30, 2003. These conditions raise substantial
doubt about the Company's ability to continue as a going concern.
Management's plans with respect to these matters include restructuring
its existing debt and raising additional capital through equity and/or
debt financings. The accompanying consolidated financial statements do
not include any adjustments that might be necessary should the Company
be unable to continue as a going concern.
4
3. RECENT ACCOUNTING PRONOUNCEMENTS
- In December 2002, the Financial Accounting Standards Board,
"FASB" issued Statement of Financial Accounting Standards,
("SFAS") No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure - an amendment of FASB Statement No.
123." SFAS No. 148 amends SFAS No. 123, "Accounting for
Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of
accounting for stock-based employee compensation and the
effect of the method used on reported results. The disclosure
requirements apply to all companies for fiscal years ending
after December 15, 2002. The adoption of SFAS No. 148 is not
expected to have a material impact on the Company's
consolidated financial statements.
- In May 2003, the FASB issued SFAS No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity." SFAS No. 150 establishes standards on
the classification and measurement of financial instruments
with characteristics of both liabilities and equity. SFAS No.
150 will become effective for financial instruments entered
into or modified after May 31, 2003. The Company is in the
process of assessing the effect of SFAS No. 150 and does not
expect the implementation of the pronouncement to have a
material effect on its financial condition or results of
operations.
4. EQUITY
- In October 2002 the Company increased the number of authorized
common shares to 50,000,000.
- In February 2003 the Company designated 4,703,036 shares of
Preferred Stock. Each share of the Preferred Stock shall be
entitled to four votes per share. Each preferred share,
together with four exchangeable shares (see Note 4) are
convertible into four shares of common stock. The maximum
number of conversions can be no greater than 4% of the shares,
of the Company's common stock issued and outstanding as of the
end of the previous year.
- Prior to the Company's acquisition of Sciax Technology, Inc.,
("Sciax"), a Canadian Corporation, Sciax sold 318,000 shares
of Sciax's no-par value common stock for $99,000 to employees
of Sciax.
- In April 2003 the Company sold 620,640 shares of their common
stock at $0.10 per share, and incurred expenses of $6,000 on
these shares.
5
5. ACQUISITION
On March 19, 2003, The Company completed its acquisition of Sciax.
After the acquisition, the former shareholders of Sciax controlled
approximately 77% of the Company. Although the Company is the legal
acquirer in the merger, and remains the registrant with the Securities
and Exchange Commission, under accounting principles generally accepted
in the United States of America, the merger was accounted for as a
reverse acquisition, whereby Sciax is considered the "acquirer" of the
Company for financial reporting purposes as Sciax's shareholders then
controlled more than 50% of the post merger combined entity. Among
other matters, this requires the Company to present in all financial
statements and other public information filings from the date of
completion of the merger prior historical financial statements and
information of Sciax. It also requires a retroactive restatement of
Sciax's historical stockholders' equity to reflect the equivalent
number of shares of common stock received in the merger. Substantially
all the assets and liabilities of the Company were acquired from Sciax.
Expenses of the acquisition were approximately $135,000 and were
charged to operations during the quarter ended April 30, 2003.
The terms of the acquisition included:
- The Company formed a new Canadian Company, 4137639 Canada,
Inc. ("4137639 Canada"). The majority shareholder of Sciax
("Major Shareholder") surrendered his Sciax common shares to
4137639 Canada, where upon he received from Sciax 18,812,144
of their exchangeable shares ("exchangeable shares"). In
addition, the Major Shareholder received 4,703,036 shares of
the Company's Preferred Stock (see Note 3).
- The remaining former shareholders of Sciax ("remaining
shareholders") received 287,858 shares of the Company's common
shares in exchange for their respective shares of Sciax common
stock. The remaining shareholders' common shares are in
proportion to the common shares to be received by the Major
Shareholder.
- In addition, the Company entered into two consulting
agreements, with one officer and one then principal
shareholder of the Company. Each received 1,000,000 shares of
the Company's common stock. The terms of the consulting
agreements are for one year, commencing January 8, 2003. The
common shares issued were valued at $0.16 per share. The
Company has recorded a prepaid asset for the value of the
shares issued, to be amortized over the life of the
agreements. As of April 30, 2003, the Company has
approximately $213,000 of a prepaid asset related to these
consulting agreements. During the nine months ended April 30,
2003, the Company amortized approximately $107,000 of these
prepaid consulting agreements.
6
- Prior to the completion of the merger, the Company purchased a
total of 3,709,668 shares of its common stock in exchange for
two promissory notes payable, each for $175,000. These notes
bear interest at 6% per annum, and are repayable at the first
anniversary of the closing of the merger. The notes are
convertible, all or in part, into shares of the Company common
stock at the rate of $0.20 per share. If the Company should
default on these notes, the holders can convert their notes
into the Company's common stock at the lower of $0.20 per
share, or the average trading price of the Company for 20 days
immediately prior to the holders converting their notes.
6. SUBSEQUENT EVENT
Subsequent to April 30, 2003, and prior to August 14, 2003, the Company
sold 6,732,158 shares of common stock at $0.10 per share, and issued
78,945 shares of common stock as fees on certain of these sales.
Subsequent to April 30, 2003, and prior to August 14, 2003, the Company
issued 9,838,305 shares of common stock for services provided to the
Company.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OVERVIEW
The following discussion of our financial condition, changes in financial
condition and results of operations for the three months and nine months ended
April 30, 2003 and 2002 should be read in conjunction with our most recent
audited annual financial statements for the financial year ended December 31,
2002, our recently filed form 8-K/A, and the unaudited interim financial
statements attached hereto, and, in each case, the notes thereto.
Our consolidated financial statements are stated in United States Dollars and
are prepared in accordance with United States Generally Accepted Accounting
Principles (GAAP).
On March 19, 2003, all the deliveries necessary to conclude the transaction
between us, Sciax Technology, Inc., a Canadian corporation ("Sciax") and 4137639
Canada, Inc.("Sub"), a Canadian corporation wholly-owned by us were completed.
The transaction originally closed in escrow on February 28,2003 pending the
delivery of final executed documents. The result of the closing of this
transaction was that we acquired all the outstanding stock of Sciax which is now
a wholly-owned subsidiary of ours. We had previously reported, in a Current
Report on Form 8-K, dated January 8, 2003, entering into an agreement
("Agreement") with such parties and outlined in such Current Report the
principal terms of the Agreement. The closing was substantially on the terms
previously disclosed except as specifically set forth below:
A. The number of our shares received by each former shareholder of Sciax for
each such share of Sciax was changed to 0.90521327.
B. Kenneth Smart (founder and the principal shareholder of Sciax) received
18,812,144 Exchangeable Shares of Sub and 4,703,036 of our Preferred Shares in
lieu of his entitlement under A. above.
C. The terms of the promissory notes ("Notes") issued to Aldo Rotondi and
Stephen Brock were changed to provide as follows: The Notes shall be repaid on
February 28, 2004, subject to prepayment in whole or in part at any time without
premium or penalty. The Notes are secured by the guarantee of Sciax. Holders of
the Notes shall have the option, at any time prior to the due date, so long as
there is no default, to convert all unpaid principal and accrued interest into
common shares of stock of UgoMedia ("UgoMedia Common Stock") at the rate of
US$0.20 per share. This option may be exercised in whole or in part at any time
prior to repayment of the Notes. If there is a default in the Notes, then
holders of the Notes shall have the option, at any time the Notes are in
default, to convert all unpaid principal and accrued interest into shares of
stock of UgoMedia at the lower of (i) US$0.20 per share; and (ii) the average
trading price of the UgoMedia Common Stock for the twenty (20) day period
immediately prior to the date of receipt of the option exercise notice from the
holders. Further, to the extent any shares are acquired under this option, the
owners of these shares, if the option is exercised collectively, shall have a
one time right to require that UgoMedia register the shares for
8
resale within 90 days of such request on a registration statement filed with the
Securities and Exchange Commission ("SEC"), such registration statement to be
kept effective until all such shares are resold, all at UgoMedia's expense.
D. We entered into an Option Agreement with Kenneth Smart under which Mr. Smart
may be entitled to a return of all of Sciax's intellectual property under
certain circumstances.
E. The number of shares returned at the completion of the transaction by Aldo
Rotondi was changed to 2,267,343 and the number of shares returned by Stephen
Brock was changed to 1,442,325. Accordingly, the number of our common shares
outstanding at the completion of the transaction was changed to 6,200,000.
F. The terms of the Exchangeable Shares were changed to add that the maximum
number of shares that may be sold (not sought to be exchanged) each year was set
at 4% of our issued and outstanding shares as of the preceding year end.
Sciax, which had been privately held since 1996, is in the business of
developing, marketing and selling certain security-related scopes and remote
visual inspection systems. Its primary product, SeCam, is a durable, modular,
video-based distance viewing system which enables users to obtain and manipulate
high resolution images of items at significant distances - thus enabling, for
example, law enforcement officers to view the interior of a dwelling prior to
making an arrest or border officials to detect the presence of contraband
without a dangerous initial physical inspection. Sciax's primary customers have
been law enforcement and other governmental agencies.
The financials statements included herein reflect the operations of Sciax for
"Stub 2003", as defined herein.
RESULTS OF OPERATIONS
As mentioned above, we completed the acquisition
of Sciax in March 2003. This acquisition has been accounted for as a reverse
merger in which Sciax is the acquirer for accounting purposes and UgoMedia
Interactive Corp. is the acquired entity. Accordingly, the following results of
operations are those of the consolidated company, inclusive of Sciax for the
entirety of all periods presented.
THREE MONTHS ENDED APRIL 30, 2003 AND APRIL 30, 2002
REVENUES
Net sales for the three months ended April 30, 2003 decreased to $5,920 from
$28,150 for the three months ended April 30, 2002. This decrease in revenue
reflects the change in our focus and operations from a company in the web design
and hosting industry (during the three months ended April 30, 2002) to one in
the security products business (during the three months ended April 30, 2003).
Sales were below normal for this period as management's focus was on
reorganizing the company following the Sciax acquisition and on recruiting sales
personnel.
9
We expect sales of our security products to continue to increase in the near
future as a result of growing industry awareness of our products and the growing
climate for security products following the events of September 11, 2001 and the
recent military actions in Afghanistan and Iraq. However, it is difficult to
predict just how much such sales will increase, and the exact timing of the
increase, if any, since our products will continue to face competition from
other systems manufactured by our competitors. While we will continue in our
efforts to aggressively pursue opportunities to market and sell our products, we
anticipate that we will continue to face significant competition in this segment
from other manufacturers. Historically, the gross margins on Sciax's product
sales have on average exceeded 50%.
EXPENSES
Operating expenses increased to $398,820 for the three months ended April 30,
2003 from $98,502 for the three months ended April 30, 2002 primarily due to
increased expenses resulting from or related to the acquisition of Sciax. It is
not anticipated that these expenses will be recurring. Research and development
expenses decreased to $11,292 for the three months ended April 30, 2003 from
$15,402 for the three months ended April 30, 2002, also as a result of the
change in corporate focus.
NINE MONTHS ENDED APRIL 30, 2003 AND APRIL 30, 2002
REVENUES
Net sales for the nine months ended April 30, 2003 decreased to $243,263 from
$308,772 for the nine months ended April 30, 2002. This decrease in revenue
reflects the change in our focus and operations from a company in the web design
and hosting industry (during the nine months ended April 30, 2002) to one in the
security products business (during the nine months ended April 30, 2003). Sales
were below normal for this period as management's focus was on reorganizing the
company following the Sciax acquisition and on recruiting sales personnel. We
expect sales of our security products to continue to increase in the near future
as outlined above.
EXPENSES
Operating expenses increased significantly to $724,338 for the nine months ended
April 30, 2003 from $228,166 for the nine months ended April 30, 2002 primarily
due to increased expenses resulting from or related to the acquisition of Sciax
and payments made to professionals, consultants and others. It is anticipated
that many of these expenses will not be recurring.
LIQUIDITY AND CAPITAL RESOURCES
CURRENT POSITION
We have continued to finance our activities primarily through the issuance and
sale of securities. We have incurred losses from operations in each year since
inception, and our
10
current liabilities exceed our current assets. Our net loss
for the nine months ended April 30, 2003 was $587,546 compared to a gain of
$67,208 for the same period in 2002. As of April 30, 2003, our stockholders'
deficiency was $698,943 and we had a working capital deficiency of $538,657.
Our cash position at April 30, 2003 was $0 as compared to $83,779 at December
31, 2002. This decrease was primarily due to the net loss from our operating
activities described above. We recently conducted a private placement of our
securities from which we received net proceeds of approximately $670,000. The
private placement consisted of sales of shares of our common stock at a price of
$0.10 each. The net proceeds realized by us from this transaction are
anticipated to be used primarily for working capital.
FUTURE OPERATIONS
Presently, our revenues are not sufficient to meet operating and capital
expenses. We have incurred operating losses since inception, and this is likely
to continue for the foreseeable future. Our management projects that we will
require an additional $1,000,000 to $1,500,000 to fund our ongoing operating
expenses and working capital requirements for the next six months,
Our working capital requirements are affected by our inventory requirements. Our
inventory needs will be dictated in part by market acceptance of our new
products, which is extremely difficult to predict. Therefore, any increase in
sales of our products will be accompanied not only by an increase in revenues,
but also by an increase in our working capital requirements.
There is doubt about our ability to continue as a going concern as the
continuation of our business is dependent upon obtaining further financing,
successful and sufficient market acceptance of our current products and any new
products that we may introduce, the continuing successful development of our
products and related technologies, and, most significantly, achieving a
profitable level of operations. The issuance of additional equity securities by
us could result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
There are no assurances that we will be able to obtain further funds required
for our continued operations. We are pursuing various financing alternatives to
meet our immediate and long-term financial requirements. There can be no
assurance that additional financing will be available to us when needed or, if
available, that it can be obtained on commercially reasonable terms.
APPLICATION OF ACCOUNTING POLICIES
Preparing financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. We believe that understanding the basis and
nature of the estimates and assumptions involved with the following aspects of
our consolidated financial statements is important to an understanding of our
financials.
11
GOING CONCERN
Our consolidated financial statements have been prepared on the going concern
basis, which assumes that adequate sources of financing will be obtained as
required and that our assets will be realized, and liabilities settled in the
ordinary course of business. Accordingly, the consolidated financial statements
do not include any adjustments related to the recoverability of assets and
classification of assets and liabilities that might be necessary should we be
unable to continue as a going concern. REVENUE RECOGNITION We recognize revenue
when goods are shipped, title passes, there is persuasive evidence of a sales
arrangement, collection is probable, and the fee is fixed or determinable.
Customer acceptance is used as the criterion for revenue recognition when the
product sold does not have an established sales history to allow management to
reasonably estimate returns and future provisions. Customer acceptance is
determined by reference to contractually defined performance criteria or by
notification from the customer that the goods perform as required, as
appropriate in the circumstances.
ITEM 3. CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Exchange Act, within the 90 days prior to
the filing date of this quarterly report, we have carried out an evaluation of
the effectiveness of the design and operation of our company's disclosure
controls and procedures. This evaluation was carried out under the supervision
and with the participation of our company's management, including our Chief
Executive Officer and Chief Financial Officer. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our company's
disclosure controls and procedures are effective. There have been no significant
changes in our company's internal controls or in other factors, which could
significantly affect internal controls subsequent to the date we carried out our
evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than as set forth below, we do not know of any material, active or pending
legal proceedings against us, nor are we involved as a plaintiff in any material
proceedings or pending litigation. There are no proceedings in which any of our
directors, officers, affiliates, or shareholder are an adverse party or has a
material interest adverse to us.
Sciax is a defendant in a suit instituted in the Ontario Superior Court of
Justice on November 1, 2002 by Baitella AG, a Swiss corporation, seeking the
Canadian dollar equivalent of 150,975 Swiss francs (approximately $111,000). US.
Sciax has, in turn, cross-claimed against Linvatec Corporation for
indemnification on any prospective liability to Baitella AG. The claim is in the
initial stages of litigation, but Sciax does not expect any materially adverse
outcome in this suit.
12
ITEM 2. CHANGES IN SECURITIES
The following changes in our securities occurred during the nine months ended
April 30, 2003 (and thereafter):
o Significant changes to our securities were made in connection with our
acquisition of Sciax. See "Management's Discussion and Analysis - Overview"
above.
o As of August 14, 2003, we had sold an aggregate of 6,732,158 shares at a
price of $0.10 per share in a transaction exempt from registration under
the Securities Act of 1933. In addition, we issued an aggregate of
9,838,305 shares for services rendered to us by various consultants for
legal, public relations, crisis management and other services. None of such
consultants is an "affiliate" of ours.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
ITEM 4. OTHER INFORMATION
Effective April 9, 2003 Aldo Rotondi resigned as a director of the Company. ITEM
5. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBIT:
99.1 Certification of Nitin Amersey pursuant to 18 U.S.C. ss.1350, as
adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002
B. REPORTS ON FORM 8-K - THREE MONTHS ENDED APRIL 30, 2003
Current Report on Form 8-K dated as of February 28, 2003
Current Report on Form 8-K dated as of March 28, 2003
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SIGNATURES
In accordance with the requirements for the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UGOMEDIA INTERACTIVE CORP.
/s/ Nitin M. Amersey
- --------------------------------
Nitin M. Amersey
Chairman
(On behalf of the Registrant and as both Principal Executive Officer
and Principal Financial Officer)
Date: August 22, 2003
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CERTIFICATION PURSUANT TO
18 U.S.C. ss.1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Nitin M. Amersey, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of UgoMedia Interactive
Corp.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. I am solely responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and I have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report my conclusions about the
effectiveness of the disclosure controls and procedures based on
my evaluation as of the Evaluation Date;
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5. I have disclosed, based on my most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: August 22, 2003
/S/ Nitin M. Amersey
- ---------------------------------
Nitin M. Amersey
Chairman
(Principal Executive Officer and Principal Financial Officer)
16