U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________ TO __________
COMMISSION FILE NUMBER: 000-31639
HDL CAPITAL CORP.
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(Exact name of small business issuer as specified in its charter)
NEVADA 331001725
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Suite 2602 - 1111 Beach Ave
Vancouver, British Columbia Canada
V6E 1T9
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(Address of principal executive offices)
(604) 608-4226
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(Registrant's telephone number)
No former address or fiscal year
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(Former name, former address and former fiscal year, if changed since last
report)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001
Par Value
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or 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
As of December 31, 2002, the Registrant had 90,000 shares of common stock issued
and outstanding of which 52,000 were held by non-affiliates of the Registrant.
Transitional Small Business Disclosure Format (check one) Yes [] No [x]
PAGE 1 OF 13
HDL CAPITAL CORP.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET AS OF
MARCH 31, 2003 F-1
INTERIM CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 F-2
INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWS THE THREE MONTHS ENDED MARCH 31, 2003 F-3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 4
Part II - OTHER INFORMATION 5
PAGE 2 OF 13
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
HDL CAPITAL CORP.
(A Development Stage Company)
INTERIM FINANCIAL STATEMENTS
MARCH 31, 2003
(unaudited)
BALANCE SHEETS
INTERIM STATEMENTS OF OPERATIONS
INTERIM STATEMENTS OF CASH FLOWS
NOTES TO INTERIM FINANCIAL STATEMENTS
F-1
HDL CAPITAL CORP.
(A Development Stage Company)
BALANCE SHEETS
March 31, December 31,
2003 2002
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(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 1,976 $ 330
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$ 1,976 $ 330
==============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 1,472 $ 1,000
Due to related parties (Note 4) 4,686 2,215
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6,158 3,215
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CONTINGENCIES (Note 1)
STOCKHOLDERS' EQUITY (CAPITAL DEFICIENCY)
Capital stock (Note 3)
Authorized
Common stock, $0.001 par value,
100,000,000 shares
Issued and outstanding
90,000 shares of common stock 90 90
Deficit accumulated during development stage (4,272) (2,975)
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(4,182) (2,885)
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$ 1,976 $ 330
===============================================================================
The accompanying notes are an integral part of these interim financial
statements
F-1
HDL CAPITAL CORP.
(A Development Stage Company)
INTERIM STATEMENTS OF OPERATIONS
(unaudited)
Three Months April 25, 2002
Ended (inception) to
March 31, 2003 March 31, 2003
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GENERAL AND ADMINISTRATIVE
EXPENSES
Office and general $ 579 $ 1,671
Professional fees 718 2,601
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NET LOSS FOR THE PERIOD $ (1,297) $ (4,272)
==============================================================================
BASIC NET LOSS PER SHARE $ (0.01)
===============================================================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 90,000
==============================================================
The accompanying notes are an integral part of these interim financial
statements
F-2
HDL CAPITAL CORP.
(A Development Stage Company)
INTERIM STATEMENTS OF CASH FLOWS
(unaudited)
Three Months April 25, 2002
Ended (inception) to
March 31, 2003 March 31, 2003
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CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss for the period $ (1,297) $ (4,272)
Adjusted for item not involving cash:
- accounts payable 472 1,472
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NET CASH USED IN OPERATING
ACTIVITIES (825) (2,800)
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CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds on sale of common stock - 90
Advances from related parties 2,471 4,686
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NET CASH FLOWS FROM FINANCING
ACTIVITIES 2,471 4,776
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INCREASE IN CASH 1,646 1,976
CASH, BEGINNING OF PERIOD 330 -
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CASH, END OF PERIOD $ 1,976 $ 1,976
=============================================================================
The accompanying notes are an integral part of these interim financial
statements
F-3
HDL CAPITAL CORP.
(A Development Stage Company)
NOTES TO INTERIM FINANCIAL STATEMENTS
(unaudited)
MARCH 31, 2003
NOTE 1 - NATURE OF OPERATIONS AND BASIS OF PRESENTATION
- -------------------------------------------------------
The Company is in the initial development stage and has incurred losses since
inception totalling $4,272. To date the Company has had no business operations
and was organized for the purpose of creating a corporate vehicle to locate and
acquire an operating business. The ability of the Company to continue as a
going concern is dependent on raising capital to acquire a business venture and
ultimately to attain profitable operations. Accordingly, these factors raise
substantial doubt as to the Company's ability to continue as a going concern.
On October 31, 2002, the Company completed a Form 10SB registration with the
United States Securities and Exchange Commission and as a result is subject to
the regulations governing reporting issuers in the United States.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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Organization
The Company was incorporated on April 25, 2002 in the State of Nevada. The
Company's fiscal year end is December 31 with its initial period being from
April 25, 2002 (inception) to December 31, 2002.
Basis of presentation
These financial statements are presented in United States dollars and have
been prepared in accordance with United States generally accepted accounting
principles.
Use of Estimates and Assumptions
Preparation of the Company's financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all liquid investments, with an original maturity of three
months or less when purchased, to be cash equivalents.
Fair Value of Financial Instruments
In accordance with the requirements of SFAS No. 107, the Company has determined
the estimated fair value of financial instruments using available market
information and appropriate valuation methodologies. The fair value of
financial instruments classified as current assets or liabilities approximate
carrying value due to the short-term maturity of the instruments.
Net Loss per Common Share
Basic earnings per share includes no dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Dilutive earnings per share reflects the potential
dilution of securities that could share in the earnings of the Company. Because
the Company does not have any potentially dilutive securities, the accompanying
presentation is only of basic loss per share.
Income taxes
The Company follows the liability method of accounting for income taxes. Under
this method, future tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
balances. Future tax assets and liabilities are
measured using enacted or
substantially enacted tax rates expected to apply to the taxable income in the
years in which those differences are expected to be recovered or settled. The
effect on future tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the date of enactment or
substantive enactment. As at March 31, 2003 the Company had net operating loss
carryforwards; however, due to the uncertainty of realization the Company has
provided a full valuation allowance for the deferred tax assets resulting from
these loss carryforwards.
Stock-based Compensation
In December 2002, the Financial Accounting Standards Board issued Financial
Accounting Standard No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure" ("SFAS No. 148"), an amendment of Financial
Accounting Standard No. 123 "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The purpose of SFAS No. 148 is to: (1) provide alternative methods of
transition for an entity that voluntarily changes to the fair value based method
of accounting for stock-based employee compensation, (2) amend the disclosure
provisions to require prominent disclosure about the effects on reported net
income of an entity's accounting policy decisions with respect to stock-based
employee compensation, and (3) to require disclosure of those effects in interim
financial information. The disclosure provisions of SFAS No. 148 were effective
for the Company for the year ended December 31, 2002.
The Company has elected to continue to account for stock options granted to
employees and officers using the intrinsic value based method in accordance
with the provisions of Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", ("APB No. 25") and comply with the disclosure
provisions of SFAS No. 123 as amended by SFAS No. 148 as described above. Under
APB No. 25, compensation expense is recognized based on the difference, if any,
on the date of grant between the estimated fair value of the Company's stock and
the amount an employee must pay to acquire the stock. Compensation expense is
recognized immediately for past services and pro-rata for future services over
the option-vesting period. In addition, with respect to stock options granted
to employees, the Company provides pro-forma information as required by SFAS No.
123 showing the results of applying the fair value method using the Black-
Scholes option pricing model. In accordance with SFAS No. 123, the Company
applies the fair value method using the Black-Scholes option-pricing model in
accounting for options granted to consultants.
The Company accounts for equity instruments issued in exchange for the receipt
of goods or services from other than employees in accordance with SFAS No. 123
and the conclusions reached by the Emerging Issues Task Force in Issue No. 96-
18. Costs are measured at the estimated fair market value of the consideration
received or the estimated fair value of the equity instruments issued, whichever
is more reliably measurable. The value of equity instruments issued for
consideration other than employee services is determined on the earliest of a
performance commitment or completion of performance by the provider of goods or
services as defined by EITF 96-18.
The Company has also adopted the provisions of the Financial Accounting
Standards Board Interpretation No.44, Accounting for Certain Transactions
Involving Stock Compensation - An Interpretation of APB Opinion No. 25 ("FIN
44"), which provides guidance as to certain applications of APB 25. FIN 44 is
generally effective July 1, 2000 with the exception of certain events occurring
after December 15, 1998.
NOTE 3 - CAPITAL STOCK
- ----------------------
The Company's capitalization is 100,000,000 common shares with a par value of
$0.001 per share.
To March 31, 2003 the Company has not granted any stock options and has not
recorded any stock-based compensation.
NOTE 4 - RELATED PARTY TRANSACTIONS
- -----------------------------------
During the period certain directors made cash advances to the Company totalling
$2,471 leaving $4,686 due as at March 31, 2003. Amounts due to related parties
are unsecured, non-interest bearing and have no specific terms of repayment.
NOTE 5 - INCOME TAXES
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The Company has net operating loss carry-forwards of approximately $4,300 which
may be available to offset future taxable income. Due to the uncertainty of
realization of these loss carry-forwards, a full valuation allowance has been
provided for this deferred tax asset.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Results of Operations
- ---------------------
Since incorporation in the state of Nevada on April 25, 2002, the Company
has had no business operations and was organized for the purpose of creating
a corporate vehicle to locate and acquire an operating business entity.
On October 31, 2002 the Company completed a Form 10SB registration with the
United States Securities and Exchange Commission. As such the Company is
subject to the regulations governing reporting issuers in the United States.
For the three-month period ended March 31, 2003 the Company incurred general and
administrative expenses of $1,297 of which $718 represented professional fees.
There are no comparable expenses for this period in the previous year, as the
company was not incorporated until April 25, 2003.
For the three-month period ended March 31, 2003 the Company had a net loss of
$1,297 or $0.01 cents per share. During the period April 25, 2002 (inception)
to March 31, 2003 the Company had a net loss of $4,272.
Liquidity and Capital Resources
- -------------------------------
For the three-month period ended March 31, 2003 the Company used $825 in cash
from operating activities. During this period the Company received $2,471 in
advances from related parties. During the period April 25, 2002 (inception) to
March 31, 2003 the Company used $2,800 in cash from operating activities and
received $90 from proceeds on the sale of common stock and $4,686 in advances
from related parties. As at March 31, 2003 the Company had $1,976 cash in the
bank.
The Company does not currently engage in any business activities that provide
any cash flow. The Company is dependent on raising capital or receiving
advances from related parties in order to meet the costs of identifying,
investigating and analyzing business opportunities and for general corporate
needs.
The Company's plan of operations for the next 12 months is to continue to
locate and acquire an operating business entity. To the extent that this
search and the Company's limited ongoing operations create cash requirements,
it is anticipated that the Company's directors and officers will lend required
funds to the Company or purchase additional equity. No product research or
development have been, or are at this time planned to be, undertaken. No
purchases or sales of plant and significant equipment have been, or at this
time are planned to be, undertaken. No employees have been hired and there
are no planned hirings at this time.
Controls and Procedures
- -----------------------
HDL has established and currently maintains disclosure controls and other
procedures designed to ensure that material information required to be
disclosed in its reports filed under the Securities Exchange Act of 1934
is recorded, processed, summarized and reported, within the time periods
specified by the Securities and Exchange Commission. In conjunction with
the close of each fiscal quarter, HDL conducts a review and evaluation of
the effectiveness of HDL's disclosure controls and procedures. It is the
opinion of HDL's principal accounting officer and President, based upon an
evaluation completed within 90 days prior to the filing of this report, that
HDL's disclosure controls and procedures are effective and ensure that any
material information relating to HDL is recorded, processed, summarized and
reported to its principal officers to allow timely decisions regarding
required disclosures. There have been no significant changes in HDL's
internal controls or in other factors that could significantly affect
internal controls subsequent to December 31, 2002
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Registrant is not a party to any material pending legal proceedings and, to
the best of its knowledge, no such action by or against the Registrant has been
threatened.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT INDEX
Number Exhibit Description
3.1 Articles of Incorporation (incorporated by reference to Exhibit 3 of the
Registration Statement on Form 10-SB filed on October 31, 2002).
3.2 ByLaws (incorporated by reference to Exhibit 3.3 of the Form 10-QSB filed
on October 31, 2002)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HDL CAPITAL CORP.
Dated: May 6, 2003 By: /s/ Philip Cassis
Philip Cassis, President and Director
By: /s/ William J. Little
William J. Little, Treasurer, Director,
Chief Accounting Officer and Chief
Financial Officer
By: /s/ Christopher D. Farber
Christopher D. Farber, Secretary and
Director
FORM OF OFFICER'S CERTIFICATE
PURSUANT TO SECTION 302
______________________________
The undersigned directors and officers of HDL Capital Corp. hereby each
certifies that:
1. he has reviewed this quarterly report on Form 10-QSB;
2. based on his knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a material fact
necessary in order 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 his 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 issuer as of, and for, the periods presented in this quarterly
report;
4. he and the other certifying officers:
a. are responsible for establishing and maintaining "disclosure
controls and procedures" (a newly-defined term reflecting the concept of
controls and procedures related to disclosure embodied in Section 302(a)(4) of
the Act) for the issuer;
b. have designed such disclosure controls and procedures to
ensure that material information is made known to them, particularly during the
period in which this quarterly report is being prepared;
c. have evaluated the effectiveness of the issuer's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report; and
d. have presented in this quarterly report their conclusions
about the effectiveness of the disclosure controls and procedures based on
the required evaluation as of that date;
5. he and the other certifying officers have disclosed to the issuer's
auditors and to the audit committee of the board of directors (or persons
fulfilling the equivalent function):
a. all significant deficiencies in the design or operation of
internal controls (a pre-existing term relating to internal controls regarding
financial reporting) which could adversely affect the issuer's ability to
record, process, summarize and report financial data and have identified for the
issuer'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 issuer's internal
controls; and
6. he and the other certifying officers 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 their evaluation, including any corrective actions
with regard to significant deficiencies and material weaknesses.
/s/ Philip Cassis /s/ William J. Little /s/ Christopher D. Farber
---------------------- --------------------- ------------------------
Philip Cassis William J. Little Christopher D. Farber
President and Treasurer, Director and Secretary and Director
Director Chief Accounting Officer/
Chief Financial Officer
PAGE 13 OF 13
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