FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to _______________________
Commission File Number 0-31949
INNOFONE.COM, INC.
------------------
(Exact name of registrant as specified in its charter)
Nevada 98-0202313
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
130 Centennial Parkway North, Hamilton, Ontario, Canada L8E 1H9
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(Address of principal executive office) (Zip Code)
(905) 560-9547
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(Registrant's telephone number, including area code)
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 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
----- -----
The number of shares outstanding of each of Issuer's classes of common equity as
of September 30, 2002.
Common Stock at Par Value $0.001 113,022,505
-------------------------------- -----------------------
Title of Class Number of Shares
Transitional Small Business Disclosure Format yes no X
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This document is made up of 15 pages.
1
INNOFONE.COM, INC.
Index
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Part I
Page
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Item 1. Financial Statements
Condensed Balance Sheet as of September 30, 2002 with
comparative figures as at June 30, 2002................. 4
Condensed Statements of Operations for the three months
ended September 30, 2002 with comparative figures for
the three months ended September 30, 2001 and the year
ended June 30, 2002..................................... 5
Statements of Shareholders' Deficiency and Comprehensive
Loss for the three months ended September 30, 2002 with
comparative figures for the year ended June 30, 2002.... 6
Statement of Changes in Financial Position for the
quarter ended September 30, 2002 with comparative
figures for the year ended June 30, 2002................ 7
Notes to Condensed Financial Statements................. 8
Item 2. Management's Discussion and Analysis or Plan of
Operation.............................................. 11
Part II
Items 1-6. Other Information....................................... 13
Signatures.............................................. 15
2
(Stated in United States dollars)
I N N O F O N E . C O M ,
I N C O R P O R A T E D
For the quarter ended September 30, 2002
(Unaudited)
3
I N N O F O N E . C O M , I N C O R P O R A T E D
(Stated in United States dollars)
September 30, 2002 with comparative figures as at June 30, 2002
======================================================================================
September 30, 2002 June 30,2002
--------------------------------------------------------------------------------------
(unaudited) (audited)
Assets
------
Current assets:
Prepaid expenses and deposits $ 25,000 $ -
---------------------------------------------------------------------------------
25,000
Investment in 908651 Alberta Ltd. 210,000 210,000
--------------------------------------------------------------------------------------
$ 235,000 $ 210,000
======================================================================================
Liabilities and Shareholders' Deficiency
----------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 220,272 $ 212,572
Due to officers and directors 104,000 104,000
Convertible debt 500,000 500,000
Note payable 150,000 150,000
--------------------------------------------------------------------------------------
974,272 966,572
Shareholders' deficiency:
Share capital (note 2):
Common shares 4,854,522 4,841,522
Preferred shares 1,250 1,250
Additional paid-in capital 7,841,593 7,719,593
---------------------------------------------------------------------------------
12,697,365 12,562,365
Deficit (13,436,637) (13,318,937)
---------------------------------------------------------------------------------
(739,272) (756,572)
Future operations (note 1(a))
Subsequent event (note 5)
--------------------------------------------------------------------------------------
$ 235,000 $ 210,000
======================================================================================
See accompanying notes to financial statements.
4
I N N O F O N E . C O M , I N C O R P O R A T E D
(Stated in United States dollars)
For the three months ended September 30, 2002 with comparative figures for the
three months ended September 30, 2001 and the year ended June 30, 2002
===========================================================================================================
Three months ended Year ended
September 30, 2002 September 30, 2001 June 30,2002
-----------------------------------------------------------------------------------------------------------
(unaudited) (unaudited) (audited)
Sales $ - $ (note 4) $ -
Cost of sales - - -
-----------------------------------------------------------------------------------------------------------
Gross profit - - -
Forgiveness of debt - (294,908)
Selling, general and administrative expenses 117,700 - 101,968
Net gain on sale of Digital Micro Distribution
Canada Incorporated - - (143,000)
-----------------------------------------------------------------------------------------------------------
117,700 - 335,940
-----------------------------------------------------------------------------------------------------------
Net income (loss) (117,700) - 335,940
===========================================================================================================
Basic net loss per share $ nil $ nil $ nil
===========================================================================================================
Weighted average number of common
shares outstanding 106,381,201 31,689,000 79,738,604
===========================================================================================================
See accompanying notes to financial statements.
5
I N N O F O N E . C O M , I N C O R P O R A T E D
Statements of Shareholders' Deficiency and Comprehensive Loss
(Stated in United States dollars)
Three months ended September 30, 2002 with comparative figures for the year
ended June 30, 2002
===================================================================================================================================
Common Accumulated
Additional share other
Common Preferred paid-in purchase comprehensive
shares shares capital warrants Deficit income Total
-----------------------------------------------------------------------------------------------------------------------------------
Balance June 30, 2001 4,772,715 1,250 7,098,052 - (13,654,877) - (1,782,860)
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Convertible notes converted to stock 520 415,480 _ _ 416,000
Stock options exercised 475 _ (427) _ _ _ 48
Issuance of stock for equipment 146 - 7,154 - - - 7,300
Issuance of stock for Digital Micro
Distribution Canada Inc. 67,000 _ - _ _ _ 67,000
Convertible notes converted to stock 666 199,334 200,000
Net earnings 335,940
-----------------------------------------------------------------------------------------------------------------------------------
Balance, June 30, 2002 4,841,522 1,250 7,719,593 _ (13,318,937) _ (756,572)
Net loss for the three months ended September 30, 2002 (117,700) (117,700)
Stock issued for consulting services 7,500 72,500 80,000
Stock issued for legal services 500 4,500 5,000
Stock issued for investor relation
services 5,000 45,000 50,000
-----------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 2002 $ 4,854,522 $ 1,250 $ 7,841,593 $ - $(13,436,637) $ _ $ (739,272)
===================================================================================================================================
See accompanying notes to financial statements.
6
I N N O F O N E . C O M , I N C O R P O R A T E D
Statement of Changes in Financial Position
(Stated in United States dollars)
For the quarter ended September 30, 2002 with comparative figures for the year
ended June 30, 2002
=============================================================================================
September 30, 2002 June 30,2002
---------------------------------------------------------------------------------------------
(unaudited) (audited)
Cash flows provided by (used in):
Operations:
Net earnings (loss) $ (117,700) $ 335,940
Change in non-cash operating working capital
Prepaid expenses and deposits (25,000) 225
Accounts payable and accrued liabilities 7,700 (19,938)
-----------------------------------------------------------------------------------------
(135,000) 316,227
Financing:
Increase(decrease) in bank indebtedness - (546)
Due to officers and directors - (180,470)
Issuance of capital stock 135,000 690,348
Convertible debt (616,000)
-----------------------------------------------------------------------------------------
135,000 (106,668)
Investments:
Investment in 908651 Alberta Ltd. - (210,000)
Capital assets - 441
-----------------------------------------------------------------------------------------
- (209,559)
Effect of exchange rate changes on cash - -
---------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents nil nil
Cash and cash equivalents, beginning of period nil nil
---------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ nil $ nil
=============================================================================================
Cash interest paid for the quarter ended September 30, 2002 and the year ended
June 30, 2002 was $0 and $0 respectively.
See accompanying notes to financial statements
7
I N N O F O N E . C O M , I N C O R P O R A T E D
Notes to Financial Statements
(Stated in United States dollars)
(Unaudited)
For the quarter ended September 30, 2002
================================================================================
Innofone.com, Incorporated (the "Company") is incorporated under the laws of the
State of Nevada. Effective October 15, 2001, the Company acquired Digital Micro
Distribution Canada Inc. ("DMD Canada") which operated in Canada as a reseller
of used computer related products. DMD Canada, the Company's legal subsidiary
was sold pursuant to an agreement of purchase and sale dated June 11, 2002. The
Company is currently working on a strategy to raise capital in order to expand
its business model of reselling used computer equipment internationally.
1. Basis of presentation:
----------------------
(a) Going concern Issue:
The Company currently has a going concern issue as there are
insufficient assets or prospective cash flows to fund its liabilities.
The effect of this on the Company being able to meet its current or
future obligations cannot be determined.
(b) Bulletin Board Listing:
In January 2001, the Company completed a Registration Statement that
has been filed with the United States Securities and Exchange
Commission in order for the Company's shares to be eligible for
trading in the United States on the NASD over-the- counter Bulletin
Board.
(c) Acquisition and Disposition of Digital Micro Distribution Canada Inc.:
On October 15, 2001, the directors of the Company approved a share
exchange takeover bid whereby, all of the common shares of Digital
Micro Distribution Canada Inc. ("DMD Canada") were acquired in
exchange for 67,000,000 shares of its common stock. The exchanged
shares would be "restricted securities" as defined under Rule 144(A)
under the Securities Act of 1993, as amended. The result of this
transaction is that the former shareholders of DMD Canada would hold
67% of the outstanding common shares of the Company.
Pursuant to an agreement dated June 11, 2002 between the Company and
908651 Alberta Ltd. operating as Qvest Management Group ("Qvest"), the
Company disposed of its interest in DMD Canada in exchange for
1,750,000 shares of Qvest. This investment represents approximately a
13.5% interest in Qvest. Qvest has undertaken to amalgamate with
another public company by reverse takeover within 6 months upon
meeting the criteria for a qualifying transaction for a company with
approval from the TSX Venture Exchange. The value of the Company's
investment in Qvest has been recorded at the approximate book value of
DMD Canada as at the date of the transaction.
8
I N N O F O N E . C O M , I N C O R P O R A T E D
Notes to Financial Statements
(Stated in United States dollars)
(Unaudited)
For the quarter ended September 30, 2002
================================================================================
1. Basis of Presentation (continued):
----------------------------------
(d) Interim financial statements:
These unaudited financial statements should be read in conjunction
with the Company's annual audited financial statements which were
completed as of June 30, 2002. In the opinion of management, the
unaudited interim financial statements have been prepared on the same
basis as the audited financial statements and include all adjustments
(consisting only of normal recurring adjustments) necessary for the
fair presentation of the results of such periods. The results of
operations for the interim periods are not necessarily indicative of
the results of operations for the full year.
2. Share Capital:
--------------
The number of outstanding common shares of the Company as at September 30,
2002 is computed as follows:
=========================================================================================
Common Preferred
Shares Shares
-----------------------------------------------------------------------------------------
Existing outstanding shares
as at June 30, 2002 100,022,505 1,250,000
Shares issued for investor relations services 5,000,000
Shares issued for consulting services 5,000,000
Shares issued for consulting services but held in escrow 2,500,000
Shares issued for legal services 500,000
------------------------------------------------------------------------------------
Outstanding shares
as at September 30, 2002 113,022,505 1,250,000
====================================================================================
9
I N N O F O N E . C O M , I N C O R P O R A T E D
Notes to Financial Statements (continued)
(Stated in United States dollars)
(unaudited)
For the quarter ended September 30, 2002
================================================================================
3. Stock options:
--------------
The following table summarizes the stock option activity:
=======================================================================================
Number of Weighted-
average
options exercise price
---------------------------------------------------------------------------------------
Outstanding at June 30, 2001 3,667,000 $ 0.42
Exercised (475,000) 0.0001
Expired or forfeited (3,032,000) 0.47
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Outstanding (held by 3 optionees) at June 30, 2002
and September 30, 2002 160,000 $ 0.40
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4. Comparative figures:
--------------------
The 2001 quarterly statements of operation and cash flows have not been
presented in these financial statements as the 2001 figures represented the
consolidated operations and cash flows of the Company and its subsidiary.
As the subsidiary was sold as described in Note 1(c), the comparative
figures would not be meaningful to the readers of these financial
statements.
5. Subsequent event:
-----------------
Effective October 24, 2002, the Company entered into a non-binding letter
of intent to acquire a majority interest in Universal Life Holding
Corporation ("Universal") of Illinois. Completion of the transaction is
subject to the negotiation of a stock purchase agreement whereby the
Company will acquire approximately 90% of Universal in exchange for
approximately 130,000,000 shares of the Company, and is conditional upon
completion of due diligence, third party consents and regulatory body
approval.
10
Management's Discussion and Analysis
For the Quarter ended September 30, 2002
Forward-Looking Statements
--------------------------
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements and Notes thereto for the year ended June 30, 2002 filed
with the SEC on October 15, 2002. This quarterly report includes forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934. Words such as "may," "plans," "expects," "anticipates," "approximates,"
"believes," "estimates," "intends," "hopes," "potential," or "continue", and
variations of such words and similar expressions, are intended to identify such
forward-looking statements. The Company intends such forward-looking statements,
all of which are qualified by this statement, to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Litigation
Securities Reform Act of 1995, and is including this statement for purposes of
complying with these safe harbor provisions. The Company has based these
statements on its current expectations and projections about future events.
These forward-looking statements are not guarantees of future performance, and
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected in these statements. Forward-looking statements
include, but are not limited to:
our expectations regarding the amount of our receivable from Innofone Canada
that we expect to recover; and
Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's views only as of the date hereof. The
Company is not obligated to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this Quarterly Report on Form 10-QSB might not occur.
Readers should carefully review the risk factors described in the previously
filed Form 10-KSB and in any other documents the Company files from time to time
with the Securities and Exchange Commission, including any future Annual Reports
on Form 10-KSB and Quarterly Reports on Form 10-QSB.
Overview
--------
Innofone.com Inc. currently operates out of the offices of 130 Centennial
Parkway North, Hamilton, Ontario, Canada.
11
The Company currently does not have sufficient funds with which to sustain its
operations. It is still negotiating with ePhone and the note holder to convert
their notes to common stock and the company is still waiting to see whether or
not it will receive a dividend from the bankruptcy of its previously owned
subsidiary, Innofone Canada.
The Company is currently reviewing and implementing new disclosure controls and
procedures to ensure that they fully comply with the new Securities Exchange Act
Rules 13a-15 and 15d-15.
(a) Plan of Operations
The company is in discussions with an investor to raise $1,500,000 US in
exchange for a convertible note and/or common shares. $1,000,000 CAD of these
funds will be loaned to the Company's newly formed subsidiary Compubec. Compbec
has been having negotiations with the government of the province of Quebec to
obtain loans and grants totaling $5,000,000CDN. The portion of grants and loans
is yet to be determined. The Company is also negotiating a wages subsidy and
tax-free operations for a period of five and ten years respectively. The company
would move its head office to Quebec and would build a 40,000 to 50,000 square
foot warehouse from which it would run its operations.
The company projects that the building would cost $800,000 and will be
operational within 3 months of relocating to Quebec. Assuming the company can
raise the initial $1,500,000US and Compubec can successfully negotiate the
Quebec government grants and loans, the Company expects to have approximately
$6,000,000 CAD in Startup capital to launch its new operations.
Compubec expects to hire up to seventy-five employees during the first year of
operations. The Company is currently negotiating training subsidies for up to
fifty percent of the labour costs of employees hired from the local area.
The Company currently has a going concern issue, as there are insufficient
assets or prospective cash flows to fund its liabilities. While the Company is
hopeful that the capital and loan requirements can be achieved, there can be no
assurance that they will be and consequently, it cannot be determined if the
company will be able to meet its current or future obligations.
The Company's CEO Janne Vilhunen is currently staying in Canada on a Work Visa
that expires in October of 2002. Due to the going concern of not having
sufficient operating funds, Mr. Vilhunen is planning to return to Finland at the
end of October 2002. Mr. Jamie Lobo has already assumed most of his functions.
(b) Results of Operations
12
As reflected in the company's statement of operations the company has recorded
no sales for the year and the comparative information has been deleted due to
the disposition of DMD Canada. The company does not currently conduct any
operations.
The company has been increasing its trade debts since year-end June 30th 2002
and is currently not paying any wages. The current officers and directors are
covering all expenses of the company via short-term loans and advances. The
company has paid for consulting and legal expenses with the issuance of common
shares. The services include the preparation of company filings and the search
of acquisition targets.
Liquidity and Capital Resources
As previously mentioned, the company has a going concern issue, as there are
insufficient assets or prospective cash flows to fund its liabilities. The
effect of this on the company being able to meet its current or future
obligations cannot be determined at this time.
PART II - OTHER INFORMATION.
-----------------------------
Item 1. Legal Proceedings.
---------------------------
There are currently no legal proceedings against the company at this time.
Item 2. Change in Securities.
------------------------------
The company issued a total of 13,000,000 shares of its common stock during the
three months ended September 30th 2002. Of the 13,000,000 shares issued,
5,000,000 common shares were not registered securities under the Securities Act
of 1934. These shares were issued in exchange for professional services rendered
to the company.
Item 3. Defaults Upon Senior Securities
----------------------------------------
There was no material default in payments of any Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------
There were no matters requiring a vote of security holders during this period.
Item 5. Other Information.
---------------------------
Subsequent event, the company entered into a non-binding letter of intent with
Universal Life Holding Corporation (Universal) in October 2002. Under the terms
of the agreement, the Company will acquire approximately 5,500,000 shares of
13
common stock of Universal in exchange for 130,000,000 common stock of
Innofone.com Inc. If a definitive agreement is reached, this action would
effectively change the control of the Company.
The company was not in a financial position to pay the prior years auditor's
fees, and consequently, they refused to provide any further audit services. The
company retained the services of Danziger and Hochman chartered accountants to
perform the previous years audit. There were no changes in or disagreements with
either the current or the prior years auditors relating to financial disclosure
issues. The change of auditors was reported in the 8-K dated August 12, 2002.
The Company may authorize the sale of a controlling interest in it's newly
formed subsidiary, Compubec, in order to raise the required investment capital,
set by the government of Quebec and its agencies. Due to the current trading
price of the companies' common stock, the sale of a convertible note, or the
sale of securities is unfavorable to shareholders at this time.
The company's former CEO Janne Vilhunen resigned as an officer and director in
October of 2002. Mr. Vilhunen has returned to his native Finland as required
with the expiration of his working visa. The company's Chief Financial Officer
has assumed all of his duties.
14
SIGNATURES
----------
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.
INNOFONE.COM, INC.
Date: November 13, 2002 By: /s/ Sumit Majumdar
---------------------------------
Sumit Majumdar, President
15