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 2000
[ ] 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.)
5255 Orbitor Drive
Mississauga, Ontario Canada
L4W 4Y8
(Address of Principal Executive Offices)
(905) 629-8000
(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:
Class Number of Shares Outstanding
----- ----------------------------
Common Stock, par value $0.01 22,383,115
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, 2000
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheet as of March 31, 2000
Unaudited Consolidated Interim Statement of Loss and Deficit for the
three and nine months ended March 31, 2000 and March 31, 1999
Unaudited Consolidated Interim Statement of Cash Flow for the three
and nine months ended March 31, 2000 and 1999
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE PAGE
EXHIBIT INDEX
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
POWERTRADER, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
March 31, 2000
(Expressed in U.S. Dollars)
March 31, 2000 June 30, 1999
-------------- -------------
Assets
Current Assets:
Cash $ 31,081 $ 31,058
Due from Related Party 205,050 205,050
Total current assets $ 236,131 $ 236,108
============= =============
Liabilities:
Current Liabilities:
Accounts payable and accrued
liabilities $ 27,000 $ 40,000
Total current liabilities 27,000 40,000
Due to Related Parties 432,184 406,208
Total liabilities 459,184 446,208
Shareholders' equity (Deficit)
Share capital 1,132,530 1,132,530
Capital surplus 2,245,693 2,245,693
Accumulated deficit during
development stage (3,601,277) (3,588,323)
------------- -------------
Total shareholder equity (223,054) (210,100)
------------- -------------
Total liabilities and
shareholder equity $ 236,131 $ 236,108
============= =============
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENT
OF LOSS AND DEFICIT
For the Three Months and Nine Months ended March 31, 2000 and 1999
(Expressed in U.S. Dollars)
Nine Months Nine Months Three Months Three Months
Ended Ended Ended Ended
March 31, March 31, March 31, March 31,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue $ -- $ 141,069 $ -- $ 54,112
Cost of sales -- 22,715 -- 5,330
--------- ---------- ---------- ----------
-- 118,354 -- 48,781
Selling, general and
administrative costs 12,954 361,758 12,954 121,357
Gain on sale of
subsidiary -- (110,077) -- (110,077)
Development costs 0 36,602 0 13,767
-------- --------- ---------- ----------
Net loss $ (12,954) $ (169,929) $ (12,954) $ 23,745
Deficit beginning of
period $ (3,588,323) $ (3,293,050) $ (3,588,323) $ (3,486,723)
Deficit end of period (3,601,277) (3,462,979) (3,601,277) (3,462,979)
Loss per share $ (0.00) $ (0.01) $ (0.00) $ (0.00)
Weighted average shares
of outstanding common
stock and equivalent 22,383,115 15,313,115 22,383,115 16,090,893
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED INTERIM
STATEMENT OF CASH FLOW For the Three
and Nine months ended March 31, 2000 and 1999
Nine months Nine months Three months Three months
ended ended ended ended
March 31, March 31, March 31, March 31,
2000 1999 2000 1999
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Cash provided (used) by
Operating Activities
Net income (loss) for period $ (12,954) $ (169,929) $ (12,954) $ 23,745
Items not involving cash
Amortization -- 152,857 -- 79,780
Gain on sale of subsidiary -- (110,077) -- (110,077)
Increase (decrease) in:
Accounts payable and
accrued liabilities (13,000) (378,592) (13,000) (134,756)
Due from Related Party -- (205,050) -- (205,050)
Due to Related Parties 25,976 426,208 25,976 78,756
------------ ----------- ---------- ---------
23 (284,583) 23 (267,602)
Financing activities
Note payable financing
repaid -- (14,768) -- --
Repayment of obligations
under capital lease -- (744) -- --
Issuance of share capital
and subscription -- 140,000 -- --
------------ ----------- ---------- ---------
-- 124,488 -- --
Investing activities
Proceeds on sale of
PowerTrader Software Inc. -- 205,050 -- 205,050
------------ ----------- ---------- ---------
-- 205,050 -- 205,050
Increase (decrease) in cash 23 44,955 23 (62,552)
Cash, beginning of period 31,058 6,000 31,058 113,507
------------- ------------ ----------- -----------
Cash, end of period $ 31,081 $ 50,955 $ 31,081 $ 50,955
============= ============ =========== ===========
</TABLE>
<PAGE>
POWERTRADER, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
March 31, 2000
NOTE A: The accompanying unaudited consolidated financial statements of
PowerTrader, Inc. as of and for the three months and nine months ended
March 31, 2000 and March 31, 1999 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, 1999 included
in the Company's report in Form 10KSB as filed with the Securities and
Exchange Commission.
NOTE B: Prior to March 1, 1999 PowerTrader, Inc. (the "Company") designed,
developed, marketed and supported informational and analytical decision
support systems. Since that date the Company has been pursuing the
development of a new software product known as DataMill.
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 period reported in these financial statements are as follows:
2000 1999
------ ------
Average 1.4535 1.5175
As of March 31 1.4606 1.5092
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended and Section 27A of the
Securities Act of 1933, as amended. For this purpose, any statements contained
herein that are not statements of historical fact may be deemed forward-looking
statements. Without limiting the foregoing, the words "believes", "anticipates",
"plans", "expects" and similar expressions are intended to identify
forward-looking statements. 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 that may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. These forward-looking statements should be read in
conjunction with the Company's disclosures under the heading "Cautionary
Statements - Additional Important Factors to be Considered" in Exhibit 99.1 to
the Company's Form 10-KSB for the fiscal year ended June 30, 1999.
The following should be read in conjunction with the Financial Statements and
Notes thereto. Unless otherwise indicated, all dollar values are expressed in
U.S. dollars.
Overview
Prior to March 1, 1999 PowerTrader, Inc. (the "Company"), through its subsidiary
PowerTrader Software Inc. ("PSI"), designed, developed, marketed and supported
informational and analytical decision support systems for securities brokerage
firms, investment advisors, trust companies and individual investors. The
Company has since concentrated, in conjunction with Financial Models Company
Inc. ("FMC"), its controlling parent, on the development of a new software
product known as DataMill.
On October 16, 1998, in an effort to raise sufficient funds to satisfy immediate
cash needs and protect its significant assets, the Company issued 14,000,000
shares of Common Stock, at US$0.01 per share, the market price of the Company's
Common Stock on such date, to FMC in exchange for US$140,000. FMC also acquired
1,309,696 shares of Common Stock from 458468 B.C. Ltd., a company controlled by
Michael C. Withrow, president and chief executive officer of the Company, at
US$0.01 per share. Upon closing FMC owned approximately 67% of the issued and
outstanding shares of Common Stock of the Company.
FMC was incorporated on February 2, 1976 in the Province of Ontario. In December
1997 FMC became a reporting issuer pursuant to the provisions of the Ontario
Securities Act. In July 1998 FMC became listed on the Toronto Stock Exchange
under the symbol "FMC". FMC is a leading provider of software products, network
services, securities data and related services to the investment management
industry in Canada, the United States, United Kingdom and Europe. The Company's
products are used by more than 500 clients world-wide with total assets under
management in excess of $3 trillion.
From November 1, 1998 to February 28, 1999 the Company provided professional
services to FMC for the design and development of enhancements to the DataMill
software, the source code of which was licensed to FMC for development and
internal use as part of the October 16, 1998 transaction.
On February 28, 1999, as part of the restructuring efforts undertaken by FMC as
the controlling shareholder, the Company executed a Purchase Agreement for the
sale of all its shares in PSI to FMC for a price of Cdn $300,000. As part of the
consideration for the transaction FMC agreed to grant to the Company all right,
title and interest in the source code for DataMill containing the enhancements
made for FMC and FMC undertook to provide to the Company, by December 31, 1999,
a prototype of DataMill ready for beta testing as a commercial product. Upon
completion of the prototype the Company has agreed to grant to FMC certain
marketing rights and to provide all future upgrades to DataMill to FMC without
additional charge. The Company has further undertaken to contract with FMC for
professional services to provide all future enhancements to DataMill. Concurrent
with the transaction, PSI granted to the Company all right, title and interest
in its proprietary software and intellectual property.
In accordance with the aforesaid agreement, FMC delivered to the Company a
commercial version of the DataMill software that has been undergoing beta
testing with FMC's subsidiary Securities Valuation Company Inc., since January
2000. In addition, the Company is investigating the market viability of DataMill
to determine the saleability of DataMill as a stand-alone software product
and/or as an engine for an Internet-based quote and news service that could
include Web-based design, construction and hosting.
The Company has been and remains a development stage company. Because of the
Company's limited operating history, the 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
There was no revenue from sales during the nine month period ended March 31,
2000, as compared to $141,069 for the same period in 1999. Similarly, there was
no revenue during the three month period ended March 31, 2000, as compared to
$54,112 during the comparable period in 1999. All revenues during fiscal 1999,
after acquisition of control of the Company by FMC, had been generated from the
sale of a source code license for DataMill to FMC and from the provision of
professional services to FMC for design and development of DataMill for and on
behalf of FMC. With the acquisition of PSI by FMC, effective March 1, 1999, all
employees of PSI supplying professional services to FMC became employees of FMC.
FMC delivered a commercial beta version of the DataMill software at the end of
the second quarter of the current fiscal year and the beta testing of that
commercial version continues.
Cost of Sales
No Cost of Sales was recorded for either the nine month or the three month
period ended March 31, 2000 as compared to $22,715 and $5,330 for the same
periods, respectively, in 1999. Again, with the acquisition of PSI by FMC, all
costs became the responsibility of FMC on and after March 1, 1999. Future Cost
of Sales will not be incurred until marketing of the DataMill software is
undertaken.
Selling, General and Administrative Costs
Selling, General and Administrative Costs ("SGA") of $12,954 were recorded for
both the nine month and the three month period ended March 31, 2000, compared to
$361,758 and $121,357, respectively, in the same nine month and three month
period in 1999. SGA include salaries and benefits for corporate management,
administrative and sales personnel, as well as rent expense for the Company's
office premises. With the acquisition of PSI by FMC, after March 1, 1999 most of
the expenses recorded as SGA Costs were assumed by FMC. The SGA Costs incurred
for the period represent professional fees paid for accounting and legal
services in connection with the completion of the Company's filings.
Development Costs
No Development Costs were recorded for the nine months and the three months
ended March 31, 2000, compared to $36,602 and $13,767 for the same nine and
three month periods in 1999. Under the terms of the acquisition of PSI by FMC,
FMC agreed to continue development of DataMill with a view to providing the
Company with a prototype version for commercial beta testing by December 31,
1999. The costs of such development are being borne by FMC. The Company is not
incurring further development costs at this time, pending results of its
marketing investigation (see Overview, above).
Net Loss
As a result of the foregoing, the Company experienced net losses for the quarter
ending March 31, 2000 of $12,954, as compared to a net gain of $23,745 for the
comparable period in 1999. The gain was attributable to the sale of PowerTrader
Software Inc. to FMC. The aggregate net loss for the first nine months, ending
March 31, 2000 is $12,954, as compared to $169,929 for the same period in 1999.
With the receipt of the prototype version of DataMill and the Company's
investigation of the potential market for DataMill, the Company believes
additional research and development expense may be incurred in the future to
establish a competitive market position. Such expenses will likely result in
losses to the Company until revenue from sales is achieved. Such losses will
likely have a negative impact on the Company's results of operation if sales are
delayed or fail to materialize.
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 development, selling, general and administrative costs. The source of
funds for the past fiscal year was primarily monies advanced by FMC, totaling in
the aggregate $432,184, which have been used to retire outstanding indebtedness
owed to the Company's suppliers, fund ongoing research and development and pay
legal and accounting fees to complete the Company's financial statements and
filings. Revenue generated from agreements for the maintenance and ongoing
operation of beta site licenses previously sold by the Company is no longer a
source of funds because these contracts have expired or been cancelled. The
Company believes that additional financing for the next twelve months will
continue to be provided by FMC. In the event FMC does not provide such financing
the Company may be unable to obtain satisfactory alternate financing on
acceptable terms and this could 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, dilution to existing
stockholders could result. Financing from a lender will cause the Company to
incur additional debt.
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.
Income Taxes
As of June 30, 1999, the Company had no income tax carry-forwards available to
reduce future taxable income. Tax losses of approximately $2,950,000 were sold
as part of the sale of PSI to FMC.
Year 2000 Readiness Disclosure
The Company has not experienced any Year 2000 problems with its current
products, or its suppliers, in the ability to accurately process dates which
include the Year 2000 or the leap year calculations associated with February 29,
2000.
PART II
OTHER INFORMATION
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 first quarter of fiscal 2000.
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.
Dated: May 15, 2000 By: /s/ Stamos D. Katotakis
-------------------------------
Stamos D. Katotakis
President, Chief Executive
Officer and Principal
Financial Officer
<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-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 31,081
<SECURITIES> 0
<RECEIVABLES> 205,050
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 236,131
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 236,131
<CURRENT-LIABILITIES> 459,184
<BONDS> 0
0
0
<COMMON> 3,378,223
<OTHER-SE> (3,601,277)
<TOTAL-LIABILITY-AND-EQUITY> 236,131
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
