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 31 March 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 No X
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 7,378,115 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
MARCH 31, 1997
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements Page
--------------------
Unaudited Consolidated Balance Sheet as of March 31, 1997 3
Unaudited Consolidated Statements of Loss and Deficit for the 4
three and nine months ended March 31, 1997 and 1996
Unaudited Consolidated Statements of Cash Flows for the three 5
and nine months ended March 31, 1997 and 1996
Notes to Unaudited Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis 8
------------------------------------
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 11
--------------------------------
SIGNATURE PAGE 12
EXHIBIT INDEX 13
2
<PAGE>
UNAUDITED CONSOLIDATED BALANCE SHEET
March 31, 1997
March 31,
1997
Assets
Current Assets:
Cash $ 8,570
Deposits and prepaids 23,829
-----------
Total Current Assets 32,399
Fixed assets 111,719
-----------
Total Assets $ 144,118
===========
Liabilities:
Current Liabilities:
Account payable and accrued liabilities $ 149,819
Current portion of capital lease obligations 6,711
-----------
Total current liabilities 156,530
Share subscriptions -
Capital lease obligations 3,238
-----------
159,768
-----------
Shareholders' deficit:
Share capital 1,100,529
Capital Surplus 839,509
Deferred Compensation expense (241,080)
Deficit accumulated during development stage (1,714,608)
------------
(15,650)
------------
Total Liabilities $ 144,118
===========
3
<PAGE>
<TABLE>
UNAUDITED
INTERIM STATEMENT OF LOSS AND DEFICIT
For The Three and Nine Months Ended March 31, 1997 and 1996
(Expressed in U.S. Dollars)
<CAPTION>
December 29,
Nine Nine Three Three 1988
Months Months Months Months (inception) to
Ended Ended Ended Ended March 31,
March 31, March 31, March 31, March 31, 1997
1997 1996 1997 1996 (cumulative)
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue $ 37,430 $ 53,874 $ 9,952 $ 17,154 $ 132,427
Cost of sales 15,855 33,932 - 6,096 74,176
------------- ----------- - ------------ -------------
21,575 19,942 9,952 11,058 58,251
Selling, general and
administrative costs 499,895 257,938 241,953 140,359 1,274,904
Development costs 185,955 149,846 32,284 25,313 497,955
------------- ----------- ------------- ----------- -------------
Net loss (664,275) (387,842) (264,285) (154,614) (1,714,608)
Deficit, beginning of period (1,050,333) (451,362) 1,450,323) (684,590) -
------------ ---------- ------------ ---------- -
Deficit, end of period $ (1,714,608) $ (839,204) $ (1,714,608) $ (839,204) $ (1,714,608)
Loss per share $ (0.26) $ (0.20) $ (0.08) $ (0.07)
Weighted average of shares
outstanding 2,594,184 2,289,517 3,203,515 2,289,517
</TABLE>
4
<PAGE>
<TABLE>
UNAUDITED
INTERIM STATEMENT OF CASH FLOW
For The Three and Nine Months Ended March 31, 1997 and 1996
(Expressed in U.S. Dollars)
<CAPTION>
December 29,
Nine Nine Three Three 1988
Months Months Months Months (inception) to
Ended Ended Ended Ended March 31,
March 31, March 31, March 31, March 31, 1997
1997 1996 1997 1996 (cumulative)
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Cash provided (used) by:
Operating activities
Operations
Net loss for the period $ (664,275) $ (387,842) $ (264,285) $ (154,614) $ (1,714,608)
Items not involving cash
Amortization 27,892 41,139 10,672 27,844 69,738
Deferred compensation expense 23,203 - 23,203 - 23,203
Increase (decrease) in:
Deposits and prepaids (21,437) (620) (12,748) 3,314 (23,829)
Accounts payable and accrued
liabilities (18,836) (33,006) 58,693 (117,147) 149,819
----------- ---------- ------------ ----------- ------------
(653,453) (380,329) (184,465) (240,603) (1,495,677)
Financing activities
Advances from parent - - (311,900) - -
Share subscriptions - 150,491 (307,049) 99,171 -
Lease financing received - - - - 18,790
Repayment of obligations under capital
lease (4,027) (2,488) (1,303) (1,244) (8,841)
Shareholders' advances - (392,305) - (442,115) -
Issuance of share capital (621,335) 646,222 621,335 587,486 1,675,755
----------- ----------- ------------ ------------ -----------
617,308 401,902 1,083 243,298 1,685,704
Investing activity
Investment in fixed assets (82,362) (30,426) (10,829) (11,065) (181,457)
----------- ----------- ----------- ----------- ------------
Increase (decrease) in cash (118,507) (8,835) (194,211) (8,370) 8,570
Cash, beginning of period 127,077 2,424 202,781 1,959 -
----------- ------------- ------------- ------------ -
Cash, end of period $ 8,570 $ (6,411) $ 8,570 $ (6,411) $ 8,570
</TABLE>
5
<PAGE>
POWERTRADER, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
March 31, 1997
NOTE A: 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 March 31, 1997 and March 31,
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,
Inc. accounts are included in these financial statements from January
2, 1997, the date it was acquired by PowerTrader Software Inc. See
Consolidation, Note B.
In the opinion of management, all adjustments considered necessary for
a fair presentation of the results of the interim periods have been
included. Operating results for any interim period are not necessarily
indicative of the results that may be expected for the entire fiscal
year. These statements should be read in conjunction with the
financial statements and notes thereto for the year ended December 31,
1996 included in the Company's registration statement on Form SB-2 as
filed with the Securities and Exchange Commission.
Nature of Operations and Acquisition
NOTE B: PowerTrader, Inc. (the "Company") designs, develops, markets and
supports informational and analytical desktop decision support and
risk management systems.
Consolidation
NOTE A: The Company records revenue from the sale of computer software upon
shipment.
Exchange Rates
Exchange rates between the United States dollar and the Canadian dollar for the
periods reported in these financial statements are as follows:
1996
Average 1.3597 1.3602
As of 31 March 1.3844 1.3591
6
<PAGE>
NOTE B: 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 was as
follows:
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)
7
<PAGE>
POWERTRADER, INC.
(A Development Stage Company)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
When used in this Report, 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. ("PSI") in a merger,
exchange of shares or other business combination. Its sole director, officer and
shareholder was Mr. Withrow. In January, 1997, PowerTrader consummated a
transaction with the shareholders of PSI pursuant to which PowerTrader became
the holder of all of the issued and outstanding shares of PSI's capital stock,
issued an aggregate of 4,174,597 to the former shareholders of PSI (including
1,857,969 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 PSI's sales have resulted from the
distribution of Beta Products and product development work continues;
accordingly, PSI 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 41.9% during the three months ended March 31,
1997 from the same period in 1996. Sales decreased 30.5% during the nine months
ended March 31, 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 PSI for allocation to advertising and Beta Product
marketing. Sales in the first nine months of fiscal 1997 decreased primarily due
to management's decision to modify its products in response to data obtained
from its Beta Product testing program.
Cost of Sales. Cost of sales decreased by $6,096 (or 6096%) from $6,096
(or 36% of sales) in the third quarter of fiscal 1996 to $0 (or 0% of sales) in
the third quarter of fiscal 1997. Cost of sales also decreased by $18,077 (or
53.3%) in the nine months ended March 31, 1997 to $15,855 (or 42.3% of sales)
from $33,932 (or 62.9% of sales) for the nine months ended March 31, 1996. The
foregoing decreases in cost of sales resulted primarily from corresponding
decreases in the level of sales.
8
<PAGE>
Selling, General and Administrative Costs. Selling, General and
Administrative Costs ("SGA") increased by $101,594 (or 72.4%) from $140,359 (or
818.2% of sales) in the third quarter ending March 31, 1996 to $241,953 (or
2431.2% of sales) in the same period ended March 31, 1997. SGA similarly
increased $241,957 (or 93.8%) from $257,938 (or 478.8% of sales) in the nine
month period ending March 31, 1996 to $499,895 (or 1335% of sales) in the same
period 1997. Such expenses were 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 proposed 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 $6,971 (or 28%) from
$25,313 (or 147.5% of sales) in the third quarter of fiscal 1996 to $32,284 (or
324.4% of sales) for the same period ended March 31, 1997. Similarly,
development costs increased $36,109 (or 24.1%) from $149,846 (or 278% of sales)
in the nine months ended March 31, 1996 to $185,955 (or 497% of sales) for the
same period ended March 31, 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.
Net Loss. As a result of the foregoing, PSI experienced net losses of
$264,285 (or 2,655.6% of sales) and $154,614 (or 901.3% of sales) for the three
months ended March 31, 1997 and 1996, respectively. For the nine months ended
March 31, 1997 and March 31, 1996, PSI experienced net losses of $664,275 (or
1,774.7% of sales) and $387,842 (or 719.9% of sales), 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
PSI'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
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. Although the Company believes that the proceeds of this offering and,
to a lesser extent, cash generated from operations, will be sufficient to fund
its operations and planned capital expenditures for at least the next twelve
months, there can be no assurance that the Company will not require additional
financing during that time or thereafter. The Company has no plans to secure any
such additional financing. 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, further
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 net proceeds of this offering will significantly improve the
capital resources of the Company and thereby address certain of the going
concern conditions. 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 offering.
9
<PAGE>
Income Taxes
PSI did not have any material current or deferred income tax
liabilities at June 30, 1996 and June 30, 1995. However, PSI did have available
tax benefits of loss carry-forwards for 1996 and 1995 totaling $1,052,800 and
tax benefits related to depreciation for 1996 and 1995 totaling $41,900. 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 $281,900 in 1996 and $210,300 in 1995.
10
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibit and Reports on Form 8-K
(A) See Exhibit Index
(B) No current reports on Form 8-K have been filed during the
three months ended March 31, 1997
11
<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: May 19, 1997 By: /s/ David C. Furlonger
------------------------------
David C. Furlonger
Secretary, Chief Financial Officer,
and Director
12
<PAGE>
EXHIBIT INDEX
Exhibit Number Description
- -------------- -----------
27.1 Financial Data Schedule
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> AUG-22-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 8,570
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 32,399
<PP&E> 179,714
<DEPRECIATION> 67,995
<TOTAL-ASSETS> 144,118
<CURRENT-LIABILITIES> 156,530
<BONDS> 0
0
0
<COMMON> 1,100,529
<OTHER-SE> 598,429
<TOTAL-LIABILITY-AND-EQUITY> 144,118
<SALES> 37,430
<TOTAL-REVENUES> 37,430
<CGS> 15,855
<TOTAL-COSTS> 15,855
<OTHER-EXPENSES> 685,850
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (664,275)
<INCOME-TAX> 0
<INCOME-CONTINUING> (664,275)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (664,275)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
