UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: September 30, 2002 Commission File Number 0-32353
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EASYWEB, INC.
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(Exact name of registrant as specified in its charter)
COLORADO 84-1475642
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6025 South Quebec Street, Suite 150, Englewood, Colorado 80111
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(Address of principal executive offices) (Zip code)
(720) 489-8873
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(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check 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 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock, no par value 4,506,200
Class Number of shares outstanding at
November 13, 2002
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This document is comprised of 12 pages.
FORM 10-QSB
3RD QUARTER
INDEX
Page
----
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheet, September 30, 2002 (unaudited) ........... 3
Condensed statements of operations, three and nine months ended
September 30, 2002 (unaudited) and 2001 (unaudited), and
September 24, 1998 (inception) through September 30, 2002
(unaudited) ..................................................... 4
Condensed statements of cash flows, nine months ended September 30,
2002 (unaudited) and 2001 (unaudited), and September 24, 1998
(inception) through September 30, 2002 (unaudited) .............. 5
Notes to unaudited condensed financial statements .................... 6
Item 2. Plan of Operation ........................................... 8
PART 2 - OTHER INFORMATION
Item 1. Legal Information ........................................... 9
Item 2. Changes in Securities ....................................... 9
Item 3. Defaults Upon Senior Securities ............................. 9
Item 4. Submission of Matters to a Vote of Security Holders ......... 9
Item 5. Other Information ........................................... 9
Item 6. Exhibits and Reports on Form 8-K ............................ 9
Signatures ........................................................... 10
2
EASYWEB, INC.
(A Development Stage Company)
Condensed Balance Sheet
(Unaudited)
September 30, 2002
Assets
Cash ............................................................. $ 33
Computer software and web site development costs, net ............ 700
---------
$ 733
=========
Liabilities and Shareholders' Deficit
Liabilities:
Accounts payable and accrued liabilities .................... $ 4,670
Indebtedness to related parties (Note B) .................... 7,053
---------
Total liabilities .. 11,723
---------
Shareholders' deficit (Note D):
Common stock ................................................ 120,050
Outstanding stock options ................................... 20,600
Additional paid-in capital .................................. 48,066
Deficit accumulated during development stage ................ (199,706)
---------
Total shareholders' deficit .. (10,990)
---------
$ 733
=========
See accompanying notes to condensed financial statements
3
EASYWEB, INC.
(A Development Stage Company)
Condensed Statements of Operations
(Unaudited)
September 24,
1998
Three Months Ended Nine Months Ended (Inception)
September 30, September 30, through
-------------------------- -------------------------- September 30,
2002 2001 2002 2001 2002
----------- ----------- ----------- ----------- -----------
Revenue:
Commissions, related party ............. $ -- $ -- $ -- $ -- $ 4,000
Commissions, other ..................... -- 543 2,570 1,456 5,547
----------- ----------- ----------- ----------- -----------
Total revenue -- 543 2,570 1,456 9,547
----------- ----------- ----------- ----------- -----------
Operating expenses:
Stock-based compensation ............... -- -- -- -- 26,600
Rent (Note B) .......................... -- 1,000 1,000 2,000 6,333
Contributed rent (Note B) .............. 1,500 500 3,500 2,500 14,167
Administrative support (Note B) ........ 375 375 885 864 7,101
Contributed administrative support
(Note B) ............................ 2,625 2,625 8,115 8,136 33,899
Salaries and payroll taxes ............. -- -- -- -- 20,729
Professional fees ...................... 689 2,134 14,742 15,667 55,105
Web site consulting and maintenance .... 320 409 570 1,115 13,329
Information technology agreement ....... -- -- -- -- 8,269
Advertising ............................ -- -- -- -- 12,034
Depreciation and amortization .......... 210 188 585 563 2,024
Other .................................. 832 240 2,345 2,724 9,663
----------- ----------- ----------- ----------- -----------
Total operating expenses (6,551) (7,471) (31,742) (33,569) (209,253)
----------- ----------- ----------- ----------- -----------
Operating loss (6,551) (6,928) (29,172) (32,113) (199,706)
Income taxes (Note C) ....................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net Loss $ (6,551) $ (6,928) $ (29,172) $ (32,113) $ (199,706)
=========== =========== =========== =========== ===========
Basic and diluted loss per common share ..... $ (0.00) $ (0.00) $ (0.01) $ (0.01)
=========== =========== =========== ===========
Basic and diluted weighted average
common shares outstanding .............. 4,506,200 3,590,200 4,497,667 3,590,200
=========== =========== =========== ===========
See accompanying notes to condensed financial statements
4
EASYWEB, INC.
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
September 24,
1998
Nine Months Ended (Inception)
September 30, through
------------------------- September 30,
2002 2001 2002
--------- --------- ---------
Net cash (used in) operating activities ................... $ (13,655) $ (25,883) $(111,896)
--------- --------- ---------
Cash flows from investing activities:
Equipment purchase ................................... (316) -- (716)
Payments for intangible assets ....................... -- -- (2,458)
--------- --------- ---------
Net cash (used in) investing activities (316) -- (3,174)
--------- --------- ---------
Cash flows from financing activities:
Proceeds on advances from related parties ............ 2,553 -- 12,553
Repayment of advances from related parties ........... (5,500) -- (5,500)
Proceeds from the sale of common stock ............... 16,500 -- 122,050
Payments for offering costs .......................... -- -- (14,000)
--------- --------- ---------
Net cash provided by financing activities 13,553 -- 115,103
--------- --------- ---------
Net change in cash ........................................ (418) (25,883) 33
Cash, beginning of period ................................. 451 26,707 --
--------- --------- ---------
Cash, end of period $ 33 $ 824 $ 33
========= ========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest .......................................... $ -- $ -- $ --
========= ========= =========
Income taxes ...................................... $ -- $ -- $ --
========= ========= =========
Non-cash financing activity:
Stock issued for satisfaction of debt ............. $ -- $ -- $ 6,000
========= ========= =========
See accompanying notes to condensed financial statements
5
EASYWEB, INC.
(A Development Stage Company)
Notes to Unaudited Condensed Financial Statements
Note A: Basis of presentation
The financial statements presented herein have been prepared by the Company in
accordance with the accounting policies in its Form 10-KSB dated December 31,
2001, and should be read in conjunction with the notes thereto.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
The Company is in the development stage in accordance with Statements of
Financial Accounting Standards (SFAS) No. 7 "Accounting and Reporting by
Development Stage Enterprises". As of September 30, 2002, the Company has
devoted substantially all of its efforts to financial planning, raising capital
and developing markets.
Financial data presented herein are unaudited.
Note B: Related party transactions
Rent
----
The Company paid an affiliate $4,000 in April 2001 to rent office space for the
period from April 1, 2001 through March 31, 2002. As of March 31, 2002, all
$4,000 was expensed as rent expense including $1,000 for the nine months ended
September 30, 2002 in the accompanying condensed unaudited financial statements.
The Company's management has estimated the fair market value of the office space
at $500 per month. Therefore, an additional $3,500 was expensed as rent during
the nine months ended September 30, 2002, with an offsetting credit to
additional paid-in capital.
Administrative support
----------------------
An affiliate charged the Company $1,000 per month for administrative support.
The Company paid the affiliate $885 during the nine months ended September 30,
2002. The remaining balance of $8,115 is recorded as contributed services. The
contribution is reflected as a credit to additional paid-in capital in the
accompanying condensed financial statements.
Indebtedness to related parties
-------------------------------
The Company owed an affiliate $6,403 for administrative expenses paid on behalf
of the Company at September 30, 2002. The Company also owed an officer $650 for
working capital advances made during the nine months ended September 30, 2002.
Both amounts are included in the accompanying condensed financial statements as
"indebtedness to related parties".
In January 2002, the Company repaid two directors a total of $5,500 for working
capital advances received in prior periods.
6
EASYWEB, INC.
(A Development Stage Company)
Notes to Unaudited Condensed Financial Statements
Note C: Income taxes
The Company records its income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". The Company incurred net operating losses during
the nine months ended September 30, 2002 resulting in a deferred tax asset,
which was fully allowed for; therefore, the net benefit and expense resulted in
$-0- income taxes.
Note D: Shareholder's deficit
Following is a schedule of changes in shareholders' deficit for the nine months
ended September 30, 2002:
Deficit
Accumulated
Common stock Outstanding Additional During
--------------------- Stock Paid-In Development
Shares Amount Options Capital Stage Total
--------- --------- --------- --------- --------- ---------
Balance, January 1, 2002 ............. 3,940,200 $ 99,550 $ 20,600 $ 36,451 $(170,534) $ (13,933)
January 2002, sale of common
stock at $.03 per share ....... 500,000 15,000 -- -- -- 15,000
January 2002, sale of common
stock to officers at $.03 per
share ......................... 50,000 1,500 -- -- -- 1,500
April 2002, conclusion of
Arizona rescission offer ...... 16,000 4,000 -- -- -- 4,000
Office space and administrative
support contributed by an
affiliate ..................... -- -- -- 11,615 -- 11,615
Net loss for the six months
ended June 30, 2002 ........... -- -- -- -- (29,172) (29,172)
--------- --------- --------- --------- --------- ---------
Balance, June 30, 2002 4,506,200 $ 120,050 $ 20,600 $ 48,066 $(199,706) $ (10,990)
========= ========= ========= ========= ========= =========
7
During January 2002, the Company sold 550,000 shares of its common stock for
$16,500, or $.03 per share. Of the 550,000 shares sold, 50,000 shares were sold
to officers of the Company and 500,000 shares were sold to unrelated third
parties.
Rescission offer
On July 5, 2000, the Company notified the State of Arizona that it had collected
proceeds from a common stock offering prior to meeting all Blue Sky laws
required by that State. The Company sold 16,000 shares of its no par value
common stock to three Arizona residents for $4,000 through the private stock
offering. To remedy this situation, the Company undertook a voluntary rescission
offering pursuant to R14-4-101 of the Regulations of the Arizona Corporation
Commission, Title 14, Chapter 4, as amended, which was approved by the Arizona
Corporation Commission, Securities Division on April 10, 2002. The Rescission
Offer was subsequently submitted to the Arizona investors, all of whom declined
to rescind their shares.
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Part I. Item 2. Plan of operation
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EASYWEB, INC.
(A Development Stage Company)
PLAN OF OPERATION
-----------------
The Company plans to continue to design, market, sell and maintain customized
and turnkey web sites on the Internet that are hosted by third parties. To date,
revenues from these services have been minimal. The Company intends to generate
increased revenue through the expenditure of additional funds for marketing,
advertising and promotion. The Company believes that the revenue generated from
operations may not be sufficient to finance future activities and that it may be
necessary to raise additional funds through equity and/or debt financing in the
next twelve months. There is no assurance that the Company will be able to
generate additional capital for marketing, advertising and promotion and/or
other purposes. In the event that only limited additional financing is received,
the Company expects its opportunities in the design, marketing, and sale of
Internet web sites to be limited.
Furthermore, if we are unable to raise additional capital to support our future
operations, we may begin exploring business opportunities for possible
investments and/or business combinations with companies that may be outside of
our original business plan. As of the date of this filing, we have had no
discussions and no agreements have been reached with any third parties regarding
such an investment or business combination.
The Company does not intend to hire any additional employees in the foreseeable
future. The Company does not intend to make significant equipment purchases or
conduct any research and development within the next twelve months.
Special note regarding forward-looking statements
-------------------------------------------------
This report contains forward-looking statements within the meaning of federal
securities laws. These statements plan for or anticipate the future.
Forward-looking statements include statements about our future business plans
and strategies, statements about our need for working capital, future revenues,
results of operations and most other statements that are not historical in
nature. In this Report, forward-looking statements are generally identified by
the words "intend", "plan", "believe", "expect", "estimate", and the like.
Investors are cautioned not to put undue reliance on forward-looking statements.
Except as otherwise required by applicable securities statues or regulations,
the Company disclaims any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information, future
events or otherwise. Because forward-looking statements involve future risks and
uncertainties, these are factors that could cause actual results to differ
materially from those expressed or implied.
9
Part 2. Other Information
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EASYWEB, INC.
(A Development Stage Company)
Item 1 - Legal Information.
No response required.
Item 2 - Changes in Securities.
During January 2002, the Company sold 550,000 shares of its common
stock for $16,500, or $.03 per share. Of the 550,000 shares sold,
50,000 shares were sold to officers of the Company and 500,000 shares
were sold to unrelated third parties. The shares were sold to seven
persons pursuant to the exemption from the registration requirements
of the Securities Exchange Act of 1933 (the "Act"), as amended,
provided by Section 4(2) of the Act for transactions by an issuer not
involving any public offering.
Item 3 - Defaults Upon Senior Securities.
No response required.
Item 4 - Submission of Matters to a Vote of Security Holders.
No response required.
Item 5 - Other Information.
Dispute with Consultant. The Company is currently in dispute with a
consultant whom the Company was heavily dependent upon for certain
previous business and technical development. While engaged by the
Company, the consultant developed proprietary information that is
essential for the Company to perform certain aspects of its business.
The Company believes that this proprietary information has been paid
for and is the property of the Company. The Company is currently
exploring its options as to the approach it plans to take with the
consultant to retrieve this proprietary information.
SEC Investigation. We are informed that the Securities and Exchange
Commission has commenced a formal inquiry regarding trading in the
stock of a non-affiliated entity for which David Olson and Summit
Financial Relations, Inc., a company that Mr. Olson is affiliated
with, acted as public and investor relations firm.
The SEC staff has notified Summit and Mr. Olson that they intend to
recommend that the SEC bring a civil injunctive action against Summit
and Mr. Olson, alleging that Summit and Mr. Olson violated section
17(a) of the Securities Act of 1933 and Section 10(b) of the
Securities and Exchange Act of 1934 (and SEC Rule 10b-5 under the 1934
Act). The SEC staff also has indicated that they may recommend that
the SEC action seek disgorgement of profits and civil penalties from
Summit and Mr. Olson.
Summit and Mr. Olson have indicated they intend to contest the SEC
staff position as being wholly without merit, and intend to make a
submission to the SEC in opposition to the SEC staff recommendation to
the SEC.
10
To date, the SEC has not brought an action against Summit or Mr.
Olson, and it is possible that the SEC will not bring an action
against Summit or Mr. Olson.
The ultimate outcome of the SEC staff investigation and recommendation to the
SEC (and resulting impact to Summit and Mr. Olson) cannot be currently
determined with any degree of certainty.Item 6 - Exhibits and Reports on Form
8-K.
(a) Exhibits:
1. 99.1: Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
- CEO
2. 99.2: Certification Pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
- CFO
(b) Reports on Form 8-K:
None.
11
SIGNATURES
The financial information furnished herein has not been audited by an
independent accountant; however, in the opinion of management, all adjustments
(only consisting of normal recurring accruals) necessary for a fair presentation
of the results of operations for the three and nine months ended September 30,
2002 have been included.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EASYWEB, INC.
(Registrant)
DATE: November 13, 2002 BY: /s/ David C. Olson
----------------- --------------------------------
David C. Olson
President
12