SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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 30 September 1997
[ ] Transition report under Section 13 or 15 (d) of The Securities
Exchange Act of 1934
For the transition period from _____________ to _______________
Commission file number: 000-22329
PowerTrader, Inc.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 98-0163116
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
885 Dunsmuir Street, Suite 591 V6C 1N5
(Address of Principal Executive Offices)
(604) 685-1529
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 7,883,115 shares
outstanding of Common Stock, par value $0.01 per share
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
POWERTRADER, INC.
QUARTERLY REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE QUARTER ENDED
September 30, 1997
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements Page
Unaudited Consolidated Balance Sheet as of September 30, 1997
Unaudited Consolidated Interim Statement of Loss and Deficit
for the Three months ended September 30, 1997 and September
30, 1996
Unaudited Consolidated Interim Statement of Cash Flow for the
Three months ended September 30, 1997 and 1996
Notes to Unaudited Consolidated Financial Statements
ITEM 2. Management's Discussion and Analysis
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURE PAGE
EXHIBIT INDEX
<PAGE>
<TABLE>
UNAUDITED CONSOLIDATED BALANCE SHEET
September 30, 1997
<CAPTION>
Septmber 30, 1997 June 30, 1997
----------------- -------------
<S> <C> <C>
Assets:
Current assets:
Cash $ 362,368 $ 99,986
Accounts receivable 696 -
Deposits and prepaids 54,479 12,883
------------ ----------
Total current assets 417,543 112,869
Fixed assets 770,757 754,741
------------ -----------
Total assets $1,188,300 $1,867,610
============ ==========
Liabilities:
Current liabilities:
Accounts payable and accrued liabilities $ 277,855 $ 362,520
Current portion of capital lease obligations 5,084 5,894
------------- -----------
Total current liabilities 282,939 368,414
Note payable 36,203 74,248
Capital lease obligations 1,485 2,555
------------- ------------
Total liabilities $ 320,627 $ 445,217
------------ -----------
Shareholders' equity:
Share capital 988,530 986,030
Capital surplus 2,191,553 1,389,693
Deficit accumulated during development stage (2,312,410) (1,953,330)
------------- ------------
Total shareholders' equity 867,673 422,393
------------ -------------
Total liabilities and shareholders' equity $ 1,188,300 $ 2,867,610
============ =============
</TABLE>
<PAGE>
<TABLE>
UNAUDITED
CONSOLIDATED INTERIM STATEMENT OF LOSS AND DEFICIT For the Three
Months Ended September 30, 1997 and 1996
(Expressed in U.S. Dollars)
<CAPTION>
December 29,
Three Three 1988
Months Months (inception) to
Ended Ended September 30,
September 30, September 30, 1997
1997 1996 (cumulative)
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Revenue $ 7,999 $ 10,219 $ 147,369
Cost of sales - 14,900 86,576
------------- ------------- -------------
7,999 (4,681) 60,793
Selling, general and administrative costs 260,449 108,373 1,689,270
Development costs 106,630 59,015 683,933
------------- ------------- -------------
Net loss (359,080) (172,069) (2,312,410)
Deficit, beginning of period (1,953,330) (1,050,333) -
------------- ------------- -------------
Deficit, end of period $ (2,312,410) $ (1,222,402) $ (2,312,410)
------------- ------------- -------------
Loss per share (0.05) (0.04)
Weighted average shares of outstanding
common stock and equivalents 7,633,115 4,174,597
</TABLE>
<PAGE>
<TABLE>
UNAUDITED
CONSOLIDATED INTERIM STATEMENT OF CASH FLOW For The
Three Months Ended September 30, 1997 and 1996
(Expressed in U.S. Dollars)
<CAPTION>
December 29, 1988
Three Months Three Months (inception) to
Ended Ended September 30, 1997
September 30, 1997 September 30, 1996 (cumulative)
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Cash provided (used) by:
Operating activities
Net loss for the period $ (359,080) $ (172,097) $ (2,312,410)
Items not involving cash
Amortization 13,167 5,740 97,223
Increase (decrease) in: (41,595) (6,577) (54,479)
Deposits and prepaids (696) - (696)
Accounts receivable (84,666) (127,916) 277,854
----------- ----------- ------------
Accounts payable and accrued
liabilities (472,870) (300,822) (1,992,508)
----------- ----------- ------------
Financing activities
Note payable financing received - - 74,248
Note payable financing repaid (38,045) - (38,045)
Lease financing received - - 18,790
Repayment of obligations under
capital lease (1,880) (1,201) (12,220)
Shareholders' advances - - 646,222
Issuance of share capital and
subscriptions 804,360 274,034 1,844,607
---------- ---------- -----------
764,435 272,833 2,533,602
---------- ---------- -----------
Investing activities
Net assets acquired on Reverse
Acquisition - - 314,254
Investment in fixed assets (29,183) (22,062) (492,980)
---------- ---------- -----------
(29,183) (22,062) (178,726)
---------- ---------- -----------
Increase (decrease) in cash 262,382 (50,051) 362,368
Cash, beginning of period 99,986 127,077 -
---------- ---------- ---------
Cash, end of period $ 362,368 $ 77,026 $362,368
</TABLE>
<PAGE>
POWERTRADER, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
September 30, 1997
The accompanying unaudited consolidated financial statements of
PowerTrader, Inc. and its wholly-owned subsidiary PowerTrader Software, Inc. as
of and for the three months ended September 30, 1997 and September 30, 1996,
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission and do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. PowerTrader Software Inc. accounts are included in these
financial statements from January 2, 1997, the date PowerTrader Inc. acquired
PowerTrader Software Inc. See Consolidation.
Nature of Operations
PowerTrader, Inc. ("the Company") designs, develops, markets and
supports informational and analytical desktop decision support and risk
management systems.
Consolidation
The Company records revenue from the sale of computer software upon
shipment.
On January 2, 1997, the Company, which was incorporated on August 22,
1996, entered into an agreement with the shareholders of PowerTrader Software
Inc. ("Software") whereby it acquired all of the outstanding shares of Software
in exchange for 4,174,597 common shares. The transaction was accounted for as a
reverse acquisition, utilizing historical costs. Software is in the same
business as the Company. The financial position of the Company as of January 2,
1997,
Tangible assets $ 314,468
Liabilities (214)
---------
Shareholders' equity $ 314,254
The following is a summary of pro-forma sales, pro-forma net loss and
pro-forma loss per share for the Company, for the nine months ended March 31,
1997, under the assumption that the acquisition was completed on July 1, 1996.
(unaudited)
Pro-forma sales $ 37,430
Pro-forma net loss (925,307)
Pro-forma loss per share (0.36)
Exchange Rates
Exchange rates between the United States dollar and the Canadian dollar
for the periods reported in these financial statements are as follows:
1997 1996
---- ----
Average 1.3848 1.3701
As of 30 September 1.3811 1.3622
<PAGE>
POWERTRADER, INC.
(A Development Stage Company)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with the Financial
Statements and Notes. When used in this Management's Discussion and Analysis,
the words "believes," "anticipates," "expects" and similar expressions are
intended to identify forward-looking statements. Such statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date hereof.
The Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
Overview
PowerTrader, Inc. ("PowerTrader" or the "Company") was incorporated
under the laws of the State of Delaware on August 22, 1996 for the purpose of
acquiring the business of PowerTrader Software Inc. in a merger, exchange of
shares of other business combination. Its sole director, officer and shareholder
was Mr. Withrow. In January, 1997, PowerTrader consummated a transaction with
the shareholders of PowerTrader Software Inc. ("PSI") pursuant to which
PowerTrader became the holder of all of the issued and outstanding shares of
PSI's common stock, issued an aggregate of 4,174,597 to the former shareholders
of PSI (including 1,467,696 shares to a corporation controlled by Mr. Withrow)
and assumed liabilities to issue an aggregate of 2,289,517 shares and options to
purchase an additional 149,999 shares of common stock to certain creditors of
PSI. Prior to such transactions, the Company had not engaged in any business
activity, other than with respect to organizational matters, and had no
predecessors.
Through its wholly owned subsidiary, PSI, the Company designs,
develops, markets and supports informational and analytical desktop decision
support and risk management systems for both securities professionals (including
securities brokerage firms, investment advisors and trust companies) and
individual investors. Substantially all of the Company's sales have resulted
from the distribution of beta products and product development work continues;
accordingly, the Company remains a development stage company.
Because of the Company's limited operating history, the Company's
results of operations to date are not necessarily indicative of future operating
results. Moreover, the Company believes that its developmental operations to
date render traditional accounting presentations meaningless.
Results of Operations
Sales. Sales decreased 21.7% during the three months ended 30 September
1997 from the same period in 1996. Sales during each of the periods compared
have been significantly impacted by the limited financial resources available to
the Company for allocation to advertising and beta product marketing.
Consequently, the marketing efforts were de-emphasized and greater importance
was placed into developing products to capitalize on these new opportunities
resulting from a new network paradigm.
Cost of sales. Cost of sales decreased by $14,900 (or 100%) from
$14,900 (or 145.8% of sales) in the first quarter of 1996 to $0 (or 0% of sales)
in the first quarter of 1997. The decrease in cost of sales resulted primarily
from improved economies of scale and a continued restriction on resources to
market the Company's products.
Selling, General and Administrative Costs. Selling, General and
Administrative Costs ("SGA") increased by $152,0786 (or 140.3%) from $108,373
(or 1060.5% of sales) in the quarter ending 30 September 1996 to $260,448 (or
3,256% of sales) in the same period ended 30 September 1997. Such expenses were
<PAGE>
incurred to develop the necessary organizational infrastructure to support the
implementation of the Company's business plan, and as a result of expenses
incurred in relation to the Company's subsequently withdrawn public offering.
SGA includes salaries and benefits for corporate management, administrative and
sales personnel, as well as rent expense for PSI's offices. Because the level of
SGA which is required to maintain adequate corporate infrastructure is
relatively fixed in nature, management anticipates that such expenses as a
percentage of sales will decline as total sales levels increase.
Development Costs. Development Costs increased by $47,615 (or 80.7%)
from $59,015 (or 577.5% of sales) in the quarter ending 30 September 1996 to
$106,630 (or 1,333% of sales) for the same period ended 30 September 1997. Such
increases in development expense were primarily attributable to costs incurred
to support modifications and error corrections discovered during beta product
testing of the PowerTrader suite of products and the development of a new series
of Internet based applications.
Net Loss. As a result of the foregoing, the Company experienced net
losses of $359,080 (or 4,489% of sales), and $172,069 (or 1,683.8% of sales) for
the quarter ending 30 September 1997 and 1996, respectively. Such losses may be
offset in part by the use of net loss tax carry forwards in future years.
Because of additional research and development expenses and the additional
personnel expenses which the Company believes will be necessary to establish its
competitive and market position and build the organizational infrastructure
required to support implementation of the Company's growth strategy, the Company
expects to incur further losses in the future. Such losses will likely have a
negative impact on the Company's results of operation, particularly if sales of
the Company's current products fall below expectation.
Liquidity and Capital Resources
The principal source of funds to the Company and PSI since their
respective formation has been derived from the net proceeds of certain private
and public offerings of securities which, together with the proceeds of sales,
have been used to fund continued research and development expenses as well as
necessary SGA costs. The inability of the Company to obtain additional
financing, if necessary, on acceptable terms, could have a material adverse
effect on the Company's business, financial condition and results of operations.
If additional funds were raised by the issuance of equity securities, dilution
to existing stockholders could result.
The Company's limited capital resources have caused the Company's
independent accountants to issue a report which indicates that substantial doubt
exists as to the Company's ability to continue as a going concern. The Company
believes that the potential success in securing any development contracts for
work currently in progress and tenders under negotiation will significantly
improve the capital resources of the Company and thereby address certain of the
going concern reservations. Accordingly, the Company considers the conditions
which resulted in questions about the Company's ability to continue as a going
concern will be substantially alleviated through this process.
Income Taxes
The Company did not have any material current or deferred income tax
liabilities at June 30, 1997, 1996 and 1995. However, the Company did have
available tax benefits of loss carry-forwards for 1997 totaling $1,999,300
including a total in 1996 of $1,119,700. The Company did not record these tax
benefits in the Financial Statements because the Company believes that it is
more likely than not that the tax benefits would not be realized. Accordingly,
the tax benefits have been reduced by a valuation allowance of $758,000 in 1997
and $495,500 in 1996.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibit and Reports on Form 8-K
(A) See Exhibit Index
(B) A report on Form 8-K was filed with the Commission dated July
21, 1997, disclosing the sale of 250,000 units, each unit
consisting of one share of common stock and two warrants, each
warrant to purchase one additional share of Common Stock. The
sale was made in reliance upon Regulation S.
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
27.1 Financial Data Schedule
<PAGE>
POWERTRADER, INC.
SIGNATURES
Pursuant to the requirements 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.
POWERTRADER, INC.
Date: November 14, 1997 By: /s/ David C. Furlonger
David C. Furlonger
Secretary, Chief Financial Officer, and
Director
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-1-1997
<PERIOD-END> SEP-30-1997
<CASH> 362,368
<SECURITIES> 0
<RECEIVABLES> 55,175
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 417,543
<PP&E> 866,839
<DEPRECIATION> (96,082)
<TOTAL-ASSETS> 1,188,303
<CURRENT-LIABILITIES> 282,939
<BONDS> 30,203
0
0
<COMMON> 3,180,083
<OTHER-SE> (2,312,410)
<TOTAL-LIABILITY-AND-EQUITY> 1,188,300
<SALES> 7,999
<TOTAL-REVENUES> 7,999
<CGS> 0
<TOTAL-COSTS> 260,449
<OTHER-EXPENSES> 106,630
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (359,080)
<INCOME-TAX> 0
<INCOME-CONTINUING> (359,080)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (359,080)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
