SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended March 31, 1998
|_| 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, Vancouver, B.C. V6C 1N5
(Address of Principal Executive Offices)
(604) 685-1529
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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: 8,283,115 shares of Common
Stock, par value $0.01 per share as of April 30, 1998.
<PAGE>
POWERTRADER, INC.
Quarterly Report to the Securities and Exchange Commission
For the Quarter Ended
March 31, 1998
PART I - Financial Information
Page
----
ITEM 1. Financial Statements
Unaudited Consolidated Balance Sheet as of March 31, 1998
Unaudited Consolidated Interim Statement of Loss and Deficit
For the Nine and Three Months Ended March 31, 1998 and 1997
Unaudited Consolidated Interim Statement of Cash Flow For
the Nine and Three Months Ended March 31, 1998 and 1997
Notes to the Unaudited Consolidated Financial Statements
ITEM 2. Management's Discussion and Analysis
PART II - Other Information
ITEM 2. Changes in Securities and Use of Proceeds
ITEM 6. Exhibits and Reports on Form 8-K
SIGNATURE PAGE
EXHIBIT INDEX
<PAGE>
Unaudited Consolidated Balance Sheet
March 31, 1998
March 31, June 30,
1998 1997
Assets --------- --------
Current
Cash $ 7,401 $ 99,986
Accounts Receivable 18,574 -
Deposits and prepaids 32,749 12,883
----------- -------------
58,724 112,869
Fixed assets 703,953 754,741
=========== =============
$ 762,677 $ 867,610
=========== =============
Liabilities
Current
Accounts payable and accrued
liabilities $ 315,086 $ 362,520
Current portion of capital lease
obligations, note 5 3,414 5,894
----------- -------------
318,500 368,414
Notes payable - 74,248
Capital lease obligations - 2,555
----------- -------------
318,500 445,217
----------- -------------
Shareholders' Equity (Deficit)
Share capital 992,530 986,030
Capital surplus 2,258,578 1,389,693
Accumulated deficit during
development stage (2,806,931) (1,953,330)
444,177 (422,393)
----------- -------------
$ 762,677 $ 867,610
=========== =============
<PAGE>
<TABLE>
Unaudited Consolidated Interim Statement of Loss and Deficit
For the Nine and Three Months
Ended March 31, 1998 and 1997
(Expressed in US Dollars)
<CAPTION>
December 29,
Nine Months Nine Months Three Months Three Months 1988 to
Ended Ended Ended Ended March 31, 1998
March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997 (Cumulative)
Unaudited Unaudited Unaudited Unaudited Unaudited
-------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Revenue $ 40,852 $ 37,430 $ 20,503 $ 9,952 $ 188,116
Cost of Sales 16,461 15,855 0 0 95,599
--------- ----------- ----------- ----------- -----------
24,391 21,575 20,503 9,952 92,517
Selling, general and
administrative costs 642,653 499,895 180,639 241,953 2,087,939
Development costs 235,339 185,955 43,050 32,284 811,509
--------- ----------- ----------- ------------ -----------
Net loss $ (853,601) $ (664,275) $ (203,186) $ (264,285) $ (2,806,931)
Deficit Beginning of
Period (1,953,330) (1,050,333) (2,603,745) (1,450,323) -
=========== ============ =========== ============ ============
Deficit End of Period (2,806,931) (1,714,608) (2,806,931) (1,714,608) (2,806,931)
=========== ============ =========== ============ ============
Loss per share $ (0.11) $ (0.26) $ (0.03) $ (0.08)
----------- ------------ ----------- ------------
Weighted average shares
of outstanding common
stock and equivalents 7,908,948 2,594,184 8,016,448 3,203,515
</TABLE>
<PAGE>
<TABLE>
Unaudited Consolidated Interim Statement of Cash Flow
For the Nine and Three Months Ended March 31, 1998 and 1997
(Expressed in U.S. Dollars)
<CAPTION>
December 29,
1988
Nine Months Nine Months Three Months Three Months (inception) to
Ended Ended Ended Ended March 31, 1998
March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997 (cumulative)
--------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Cash provided (used) by:
Operating activities
Operations
Net loss $ (853,601) $ (669,275) $ (203,186) $ (264,285) $ (2,806,931)
Item not involving cash 79,440 27,892 10,672 166,075
Amortization 7,184
Deferred compensation expense 23,203 23,203
Increase (decrease) from changes
in:
Deposits and prepaids (19,866) (21,437) 30,910 (12,748) (32,749)
Accounts Receivable (18,574) - (11,008) - (18,574)
Accounts payable and accrued (47,434) (18,836) 58,693 315,085
liabilities 50,041
---------- --------- ----------- ----------- ------------
(860,035) (653,453) (126,059) (184,465) (2,377,094)
---------- --------- ----------- ----------- ------------
Financing activities
Advances from Parent - - - (311,900) -
Share Subscriptions - - - (307,049) -
Notes payable received - - - 74,248
Notes payable financing repaid (74,248) - - - (74,248)
Lease financing received - - - - 18,790
Repayment of obligations (5,035) (4,027) (1,303) (15,375)
under capital lease (1,358)
Shareholders' advances - - - - 646,222
Issuance of share capital 875,385 621,335 71,025 621,335 1,915,632
---------- ----------- ----------- ----------- ------------
796,102 617,308 (69,667) 1,083 2,565,269
---------- ----------- ----------- ----------- ------------
Investing activity
Assets acquired on reverse - - - - 314,274
acquisition
Investment in fixed assets (28,652) (82,362) - (10,829) (495,048)
---------- ------------ ----------- ----------- ------------
(28,652) (82,362) - (10,829) (180,774)
---------- ------------ ----------- ----------- ------------
Increase (decrease) in cash (92,585) (118,507) (56,392) (194,211) 7,401
Cash, beginning of period 99,986 127,077 63,793 202,781 -
========== ============ =========== =========== ============
Cash, end of period $ 7,401 $ 8,570 $ 7,401 $ 8,570 $ 7,401
========== ============ =========== =========== ============
</TABLE>
<PAGE>
PowerTrader, Inc.
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
(Expressed in U.S. Dollars)
March 31, 1998
- - -------------------------------------------------------------------------------
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 and six months ended December 31, 1997
and December 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.
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 June 30, 1997 included
in the Company's report in Form 10K-SB 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.
Note C
The Company records revenue from the sale of computer software upon
shipment.
Note D
Exchange Rates
Exchange Rates between the United States dollar and the Canadian dollar
for the periods reported in these financial statements are as follows:
1998 1997
---- ----
Average 1.4304 1.3585
As of March 31 1998 1.4163 1.3718
<PAGE>
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" and "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 Michael C. Withrow. In January 1997, PowerTrader consummated a
transaction with the shareholders of PSI pursuant to which PowerTrader became
the holder of all the issued and outstanding shares of PSI's capital stock,
issued an aggregate of 4,174,597 to the former shareholders of PSI (including
1,467,696 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.
As a result of a joint business venture with a Toronto-based television
production company, the Company is exploring other business opportunities such
as, developing and marketing a financial Internet web site that is integrated
and fully interactive with a traditional television broadcast (the "Joint
Venture"). The Company has been involved in such venture since November 1997 and
intends on focusing a portion of its resources, including research and
development to such venture.
During the third quarter of fiscal 1998, the Company sought out
additional business opportunities. As a result, the Company had discussions with
a New York-based print financial magazine regarding the possibility of combining
the Company's web site technology with the information and print medium provided
by such magazine (the "Combination"). The Company believes it will focus
additional resources, including time and effort, to develop its relationship
with the magazine.
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.
<PAGE>
Results of Operations
Sales.
Sales increased 9.14% during the nine months ended 31 March 1998 from
the same period in 1997 and increased 106.02% for the three months ended 31
March 1998 from the same period in 1997. 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. Additionally, sales in the second quarter of fiscal 1998 were
hampered by management's decision to shift resources towards developing products
to capitalize on opportunities the Company believes will result from its
participation in the Joint Venture. Moreover, the Company devoted much time and
effort towards exploring the potential benefits of the Combination.
Cost of Sales.
Cost of sales increased by $606 (or 3.82%) from $15,855 to $16,461 (or
40.29% of sales) in the nine-month period ended 31 March 1998. Cost of sales
were minimal and did not increase quarter of quarter for the three month periods
ended 31 March 1998 and 31 March 1997. The increase in cost of sales resulted
primarily from the slight increase in revenues.
Selling, General and Administrative Costs.
Selling, General and Administrative Costs ("SGA") increased by $142,758
(or 28.56%) to $642,653 (or 1,573.12% of sales) in the nine month period ended
31 March 1998 compared to $499,895 (or 1,335.55% of sales) in the same period
ended 31 March 1997. SGA decreased by $61,314 (or 25.34%) to $180,639 (or
881.04% of sales) in the three-month period ended 31 March 1998 compared to
$241,953 (or 2,431.2% of sales) in the same period ended 31 March 1997. Such
expenses were incurred to develop the necessary organizational infrastructure to
support the implementation of the Company's business plan and to cover the
continuing operational costs associated with a public company and the cost of
listing the Company's Common Stock on the NASDAQ Bulletin Board. SGA includes
salaries and benefits for corporate management, administrative and sales
personnel, as well as rent expense for PSI's offices. The Company believes that
the level of SGA which is required to maintain the current corporate
infrastructure should be relatively fixed in nature; accordingly, management
anticipates that such expenses as a percentage of sales will decline as total
sales levels increase.
Development Costs.
Development Costs increased by $49,384 (or 26.56%) to $235,339 (or
576.08% of sales) for the period ended 31 March 1998 compared to $185,955 (or
496.81% of sales) in the nine months ended 31 March 1997. However, Development
Costs increased by $10,766 (or 33.35%) to $43,050 (or 210% of sales) for the
period ended 31 March 1998 compared to $32,284 (or 324.40% of sales) in the
three months ended 31 March 1997. The nine month comparative increase in
development expense was primarily attributable to costs incurred to support the
development and completion of products attributable to the release of the
Investorstv.com Internet site and associated television program, both of which
resulted from the Joint Venture.
Net Loss.
As a result of the foregoing, the Company experienced net losses of
$853,601 (or 2,089% of sales), and $203,186 (or 991% of sales) for the nine
months and quarter ending 31 March 1998 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.
<PAGE>
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 Company believes that its current cash position will be
insufficient to fund its continued operations and planned capital expenditures
for the next twelve months. Accordingly, the Company is currently attempting to
secure additional necessary financing from a future offering or future offerings
of securities, an infusion of capital from a lender or by increasing its sales.
The inability of the Company to obtain additional financing on acceptable terms
will have a material adverse effect on the Company's business, financial
condition and results of operations. Moreover, if additional funds are raised by
the issuance of equity securities, further dilution to existing stockholders
could result. Additionally, financing from a lender would cause the Company to
incur additional debt. Although the Company has now developed products that are
market-ready and available for sale, there can be no assurance that the Company
will not require additional financing prior to the collection of revenue to fund
its operations from this point and in the future.
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, if it is successful in securing any development contracts for
work currently in progress and tenders under negotiation, the capital resources
of the Company may improve and thereby address certain of the going concern
reservations.
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.
Year 2000
Many existing information systems were designed and developed without
consideration of the impact of the next millennium and accordingly, may not be
capable of accurately processing dates which include the year 2000 or any
subsequent year ("Year 2000 Issue"). Based on an internal assessment of its
existing information system, the Company has determined that its system is
capable of accurately processing such dates. For this reason, the Company does
not expect the Year 2000 Issue to materially affect the Company's future
financial results.
<PAGE>
PART I - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On February 26, 1998, the Company issued 400,000 shares of the
Company's Common Stock to an accredited investor for a total
offering price of US$50,000 which amount was paid in cash.
Such transaction was effected under the exemptive provisions
of Regulation D of the Securities Act of 1933, as amended.
Item 6. Exhibit and Reports on Form 8-K
(a) See Exhibit Index.
(b) No reports on Form 8-K were filed with the Commission
during the third quarter of fiscal 1998.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
POWERTRADER, INC.
Date: May 15, 1998 By: /s/ David C. Furlonger
David C. Furlonger
Chief Financial Officer, Secretary and
Director
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 7,401
<SECURITIES> 0
<RECEIVABLES> 18,574
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 58,724
<PP&E> 864,556
<DEPRECIATION> 160,603
<TOTAL-ASSETS> 762,677
<CURRENT-LIABILITIES> 318,500
<BONDS> 0
0
0
<COMMON> 3,251,108
<OTHER-SE> (2,806,931)
<TOTAL-LIABILITY-AND-EQUITY> 762,677
<SALES> 40,852
<TOTAL-REVENUES> 40,852
<CGS> 16,461
<TOTAL-COSTS> 642,653
<OTHER-EXPENSES> 235,339
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (853,601)
<INCOME-TAX> 0
<INCOME-CONTINUING> (853,601)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (853,601)
<EPS-PRIMARY> (0.11)
<EPS-DILUTED> (0.11)
</TABLE>
