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 December 1999
[ ] 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
M4W 4Y8
(Address of Principal Executive Offices)
(905) 629-8000
(Issuer's Telephone Number, Including Area Code)
885 Dunsmuir Street, Suite 591
Vancouver, British Columbia V6C 1N5
(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:
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
December 31, 1999
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheet as of December 31, 1999
Unaudited Consolidated Interim Statement of Loss and Deficit
for the Six and Three months ended December 31, 1999 and
December 31, 1998
Unaudited Consolidated Interim Statement of Cash Flow for the
Six and Three months ended December 31, 1999 and 1998
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
December 31, 1999
(Expressed in U.S. Dollars)
December 31, 1999 June 30, 1999
----------------- -------------
Assets
Current Assets:
Cash $ 31,058 $ 31,058
Due from Financial Models 205,050 205,050
--------- --------
Total current assets $ 236,108 $ 236,108
Fixed assets $ -- $ --
--------- --------
Total assets $ 236,108 $ 236,108
Liabilities:
Current Liabilities:
Accounts payable and accrued liabilities $ 40,000 $ 40,000
---------- ---------
Total current liabilities $ 40,000 $ 40,000
Due to Financial Models Company Inc. $ 406,208 406,208
Capital lease obligation $ --- ---
---------- ---------
Total liabilities $ 446,208 $ 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 (3,588,323) (3,588,323)
------------ -----------
Total shareholder equity $ (210,100) $ (210,100)
Total liabilities and shareholder
equity $ 236,108 $ 236,108
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED STATEMENT
OF LOSS AND DEFICIT
For the Three Months and Six Months ended December 31, 1999 and 1998
(Expressed in U.S. Dollars)
Six Months Six Months Three Months Three Months
Ended Ended Ended Ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Revenue $ -- $ 86,958 $ -- $ 86,548
Cost of sales -- 17,385 -- 7,261
-------- -------- --------- ---------
$ -- $ 69,573 $ -- $ 79,287
Selling, general and
administrative costs $ -- $ 85,186 $ -- $ 50,477
Development costs -- 196,321 -- 103,928
-------- -------- --------- --------
Net loss $ -- $ (211,935) $ -- $ (75,118)
Deficit beginning of
period $(3,588,323) $ (3,293,050) $(3,588,323) $(3,429,868)
Deficit end of period $(3,588,323) $ (3,504,985) $(3,588,323) $(3,504,986)
Loss per share $ 0.00 $ (0.02) $ 0.00 $ (0.01)
Weighted average
shares of outstanding
common stock and
equivalent 22,283,115 12,979,782 22,283,115 12,979,782
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED INTERIM
STATEMENT OF CASH FLOW For the
Three and Six months ended December 31, 1999 and 1998
Six months Six months Three months Three months
ended ended ended ended
December 31, December 31, December 31, December 31,
1999 1998 1999 1998
----------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
Cash provided (used) by
Operating Activities
Net loss for period $ -- $ (211,935) $ -- $ (75,118)
Items not involving cash
Amortization $ -- $ 173,477 $ -- $ 86,738
Increase (decrease) in:
Accounts payable and
accrued liabilities $ -- (325,662) -- (378,059)
--------- ----------- ----------- ------------
$ -- $ (364,121) $ -- $ (366,438)
Financing activities
Note payable financing
repaid $ -- $ (15,000) $ -- $ (15,000)
Lease financing received -- (823) -- --
Shareholders' advances -- 347,452 -- 347,452
Issuance of share capital
and subscription -- 140,000 -- 140,000
--------- ----------
$ -- $ 471,629 $ -- $ 472,452
Investing activities
Investment in fixed assets -- -- -- --
---------- ---------- ---------- -------------
$ -- $ -- $ -- $ --
Increase (decrease) in cash $ -- $ 107,507 $ -- $ 106,013
Cash, beginning of period 31,058 6,000 31,058 7,494
--------- ---------- ---------- -------------
Cash, end of period 31,058 113,507 31,058 113,507
</TABLE>
<PAGE>
POWERTRADER, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
December 31, 1998
NOTE A: The accompanying unaudited consolidated financial statements of
PowerTrader, Inc. as of and for the three months and six months
ended December 31, 1998 and December 31, 1997 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, 1998 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 dealing 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:
1999 1998
---- ----
Average 1.4733 1.5252
As of December 30, 1998 1.4433 1.5305
<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 which 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 advisers, trust companies and individual investors.
The Company has since concentrated on the development, 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 $0.01 U.S. per share, the market price of
the Company's Common Stock on such date, to FMC in exchange for U.S.$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 $0.01 U.S. 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 200 clients world-wide with total
assets under management in excess of $2 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.
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 six month period ended
December 31, 1999, as compared to $86,958 for the same period in 1998.
Similarly, there was no revenue during the three month period ended December 31,
1999, as compared to $86,548 during the comparable period in 1998. 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. The Company has not yet begun to market its DataMill
software, although it expects that this product will be the primary source of
future revenues.
Cost of Sales
No Cost of Sales was recorded for either the six month or the three
month period ended December 31, 1999 as compared to $17,385 and $7,261 for the
same periods, respectively, in 1998. 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
No Selling, General and Administrative Costs ("SGA") were recorded for
the six month or the three month period ended December 31, 1999, compared to
$85,186 and $50,477, respectively, in the same six month and three month period
in 1998. 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 all SGA
were the responsibility of FMC.
Development Costs
No Development Costs were recorded for the six months or the three
months ended December 31, 1999, compared to $196,321 and $103,928 for the same
six and three month periods in 1998. 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. It is expected the
Company will incur further development costs commencing in the third quarter of
the current fiscal year 2000 when ongoing research and development of DataMill
will be provided, pursuant to the agreements aforesaid, by FMC's staff.
Net Loss
As a result of the foregoing, the Company experienced no net losses for
the quarter ending December 31, 1999, as compared to $75,118 for the comparable
period in 1998. Similarly there was no aggregate net loss for the first six
months, ending December 31, 1999, as compared to $211,935 for the same period in
1998. Subsequent to receipt of the prototype version of DataMill the Company
believes additional research and development expense will be incurred to
complete a commercial version of DataMill and 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 of the Company's DataMill product
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, in the amount of $406,208, which funds have been used to retire outstanding
indebtedness owed to the Company's suppliers. 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
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"). The risks to the Company and the Company's
Year 2000 Action Plan and related mitigation efforts have been described in the
Company's most recent quarterly report on Form 10-QSB for the quarter ended
September 30, 1999. The Company completed its Year 2000 Action Plan prior to the
arrival of the year 2000, including receiving reassurances from FMC that it was
prepared for the Year 2000 Issue. The Company and FMC did not experience, and
through January of 2000 has not experienced, any material problems related to
the processing of date data related to the change from 1999 to 2000 by its own
proprietary software or any other software or systems that the Company uses. The
Company's total costs related to the Year 2000 Issue were not material.
Based on the lack of problems experienced by the Company in connection
with the arrival of the year 2000, the Company currently does not expect any
significant disruptions in the future as a result of the Year 2000 Issue or the
fact that 2000 is a leap year. However, because the Company's continued Y2K
compliance in calendar 2000 is largely dependent on the continued Year 2000
compliance of third parties such as FMC, there can be no assurance that the
Company's efforts alone have resolved all Year 2000 Issues or that key third
parties will not experience Year 2000 compliance failures as calendar 2000
progresses. The Company will continue to monitor the Company's own systems and
the preparedness of third parties throughout calendar 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: March 22 , 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> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 31,058
<SECURITIES> 0
<RECEIVABLES> 205,050
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 236,108
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 236,108
<CURRENT-LIABILITIES> 446,208
<BONDS> 0
0
0
<COMMON> 3,378,223
<OTHER-SE> (3,588,323)
<TOTAL-LIABILITY-AND-EQUITY> 236,108
<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>
