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 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 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:
Class Number of Shares Outstanding
----- ----------------------------
Common Stock, par value $0.01 8,283,115
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
September 30, 1998
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Consolidated Balance Sheet as of September 30, 1998
Unaudited Consolidated Interim Statement of Loss and Deficit for
the Three months ended September 30, 1998 and September 30, 1997
Unaudited Consolidated Interim Statement of Cash Flow for the
Three months ended September 30, 1998 and 1997
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 3. Defaults Upon Senior Securities
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
September 30, 1998
(Expressed in U.S. Dollars)
September 30, 1998 June 30, 1998
------------------ -------------
Assets
Current Assets:
Cash $ 7,494 $ 6,000
Accounts Receivable -- --
Deposits and Prepaids -- --
--------- --------
Total current assets $ 7,494 $ 6,000
Fixed assets $ 386,671 $ 464,183
--------- --------
Total assets $ 394,165 $ 470,183
Liabilities:
Current Liabilities:
Accounts payable and accrued
liabilities $ 559,749 $ 507,352
Notes payable 15,000 15,000
Current portion of capital lease
obligations 1,834 2,657
-------- --------
Total current liabilities $576,583 $ 525,009
Capital lease obligation $ -- $ --
Share subscriptions -- --
-------- --------
Total liabilities $576,583 $525,009
Shareholders' equity (Deficit)
Share capital $ 992,530 $ 992,530
Capital surplus 2,245,693 2,245,693
Accumulated deficit during
development stage (3,420,642) (3,293,050)
---------- ----------
Total shareholder equity $ (182,419) $ (54,827)
Total liabilities and
shareholder equity 394,165 $ 470,183
<PAGE>
UNAUDITED CONSOLIDATED STATEMENT
OF LOSS AND DEFICIT
For the Three Months ended September 30, 1998 and 1997
(Expressed in U.S. Dollars)
Three Months Ended Three Months Ended
September 30, 1998 September 30, 1997
(Unaudited) (Unaudited)
----------------- ------------------
Revenue $ 410 $ 7,999
Cost of sales 10,124 --
------------ ------------
$ ( 9,714) $ 7,999
Selling, general and
administrative costs $ 34,710 $ 260,449
Development costs 83,165 106,630
------------ ------------
Net loss $ (127,592) $ (359,080)
Deficit beginning of period $ (3,293,868) $ (1,953,300)
Deficit end of period (3,420,642) $ (2,312,410)
Loss per share $ (0.02) $ (0.05)
Weighted average shares
of outstanding
common stock and equivalent 8,283,115 7,633,115
<PAGE>
UNAUDITED CONSOLIDATED INTERIM
STATEMENT OF CASH FLOW
For the Three months ended September 30, 1998 and 1997
(Expressed in U.S. Dollars)
Three months ended Three months ended
September 30 1998 September 30, 1997
------------------ ------------------
Cash provided (used) by $ --- $ ---
Operating Activities
Net loss for period $ (127,592) $ (359,080)
Items not involving cash
Amortization $ 77,512 $ 13,167
Increase (decrease) in:
Deposits and prepaids $ --- $ (41,595)
Accounts receivable --- (696)
Accounts payable and
accrued liabilities $ 52,397 (84,666)
---------- -----------
$ (2,317) $ (472,870)
Financing activities
Notes payable financing received $ --- $ ---
Note payable financing repaid --- (38,045)
Lease financing received --- ---
Repayment of obligations
under capital lease (823) (1,880)
Shareholders' advances --- ---
Issuance of share capital
and subscription $ --- $ 804,360
---------- -----------
$ (823) $ 746,435
Investing activities
Net assets acquired on
Reverse Acquisition $ --- $ ---
Investment in fixed assets --- (29,183)
---------- -----------
--- $ (29,183)
Increase (decrease) in cash
Cash, beginning of period $ 1,494 $ 262,382
Cash, end of period 6,000 99,986
---------- -----------
$ 7,494 $ 362,368
<PAGE>
POWERTRADER, INC.
(A Development Stage Company)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in U.S. Dollars)
September 30, 1998
NOTE A: The accompanying unaudited consolidated financial statements of
PowerTrader, Inc. (the "Company") and its wholly-owned subsidiary
PowerTrader Software Inc., as of and for the three months ended
September 30, 1998 and September 30, 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. The Company's 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: The Company designs, develops, markets and supports informational
and analytical dealing decision support 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 period reported in these financial statements are as
follows:
1998 1997
---- ----
Average 1.5359 1.3848
As of September 30, 1998 1.5259 1.3811
<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, 1998.
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
PowerTrader, Inc. (the "Company"), through its subsidiary PowerTrader
Software Inc., designs, develops, markets and supports informational and
analytical decision support systems for securities brokerage firms, investment
advisers, trust companies and individual investors. Revenues have resulted from
the distribution of Beta products and product development work continued during
fiscal 1998; however, the Company remains a development stage company.
In an effort to generate additional revenue, the Company continued to
look to other business opportunities to either supplement or replace the
Company's business. During the third and fourth quarters of fiscal 1998, the
Company allocated a significant amount of its resources to pursue the
possibility of the development and marketing of a financial Internet web site
integrated and interactive with a traditional television broadcast (the "Joint
Venture") and to pursue the viability of combining the Company's web site
technology with the information and print medium provided by a New York-based
print financial magazine (the "Combination").
The Joint Venture and the Combination never materialized and all
discussions had ended the end of first quarter of fiscal 1999. During the first
quarter of fiscal 1999, the Company continued to suffer from an inability to
generate significant levels of revenue due, in part, to the allocation of
resources to the Joint Venture and Combination. In addition, the Company
defaulted on a note payable to a creditor of the Company, which note was secured
by the Company's DataMill Software. As a result of the default, the creditor
took possession of DataMill, a significant asset of the Company (see Part II
Item 3 "Defaults Upon Senior Securities"). For these reasons, the Company had
begun to actively explore alternate methods of raising capital to continue
operations, including the merger with a financially stable complimentary
business, issuance of debt or equity or attracting venture capital.
Alternatively, management began reviewing the possibility of a sale of all the
assets of the Company or placing the Company into bankruptcy (see "Liquidity and
Capital Resources").
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 from $7,999 to $410 during the three months ended 30
September 1998 from the same period in 1997. Revenues during each of the periods
compared were significantly adversely impacted by the limited financial
resources available to the Company for allocation to marketing and product
development. In addition, the shifting of resources away from developed products
and to both the Joint Venture and the Combination further adversely impacted the
Company's available resources to generate further sales and continue product
development.
Cost of Sales
Cost of sales increased from to $10,124 in the three month period ended
September 30, 1998 as compared to the same period in 1997. The increase reflects
a reclassification of costs from the same period in 1997 to include the costs
associated with the purchase of data for which revenue was now received by the
Company attendant upon subscriptions for the Financial Wire products and
services. Data costs were previously classified as part of Development Costs for
the quarter ending September 30, 1997.
<PAGE>
Selling, General and Administrative Costs
Selling, General and Administrative Costs ("SGA") decreased by 87% from
$260,449 to $34,697 in the comparable period in 1998. Such decrease was the
result of the reduction in the number of employees as a result of the lack of
financial resources available to the Company to maintain operations. SGA
includes salaries and benefits for corporate management, administrative and
sales personnel, as well as rent expense for the Company's office premises.
Development Costs
Development costs decreased by 13% from $106,630 in the three months
ended September 30, 1997 to $92,393 in the comparable period in 1998. Charges to
Development Costs include approximately $87,000 of depreciation of fixed assets,
including the DataMill software, with the balance of approximately $7,400
representing wages and benefits paid to staff engaged in development work on the
Company's software. Due to the Company's limited financial resources during the
first quarter, only one employee engaged in development work remained in the
Company's employ as at September 30, 1998.
Net Loss
As a result of the foregoing, the Company experienced net losses of
$136,805 for the quarter ending 30 September, 1998. Such losses may be offset in
part by the use of net loss tax carry forwards in future years. The Company
believes that additional research and development expense and additional
personnel expense will be necessary to reorganize and attempt to establish a
competitive market position and build the organizational infrastructure required
to implement the Company's future growth strategy. Such losses will likely have
a negative impact on the Company's results of operation, particularly if sales
of the Company's current products 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 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
either secure additional necessary financing from third party lenders or to sell
equity or to merge or sell the Company's assets. 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
dilution to existing stockholders could result. Financing from a lender will
cause the Company to incur additional debt. In view of the Company's limited
success in marketing its Beta products there can be no assurance that the
Company will not require additional financing prior to the collection of revenue
from sales in order 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.
Income Taxes
The Company did not have any material current or deferred income tax
liabilities at June 30, 1998, 1997 and 1996. However, the Company did have
available tax benefits of loss carry-forwards for 1998 totaling $3,239,050,
including a total in 1997 of $1,953,330. 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 $1,368,000 in
1998 and $899,300 in 1997.
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"). Based on an initial and preliminary
internal assessment of its current information system and product offerings, the
Company believes that its current products and computer system are 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.
However, the Company will formulate a Year 2000 Action Plan to fully consider
all issues related to the Year 2000.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
As at September 30, 1998 the Company's wholly owned subsidiary
PowerTrader Software Inc. was a defendant in an action commenced October, 1997
in the Supreme Court of British Columbia by Digidyne Inc., claiming judgment for
an unpaid account for supply of computer equipment in the amount of Cdn
$34,748.42, plus interest and costs. The Company has initiated a counterclaim
for damages against Hewlett-Packard as the supplier of the computer equipment.
Item 3. Defaults Upon Senior Securities
On August 7, 1998, the Company failed to pay the amount owing under a
promissory note, with an initial principle balance of Cdn $235,000 upon its
maturity. As a result, on September 17, 1998 West Coast Title Search Limited,
the holder of the note, which was secured by a Software Security Agreement on
certain of the Company's software, known as DataMill, took possession of the
source code and all development code to the DataMill software.
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 1999.
<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.
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-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,494
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,494
<PP&E> 386,671
<DEPRECIATION> 0
<TOTAL-ASSETS> 394,165
<CURRENT-LIABILITIES> 576,583
<BONDS> 0
0
0
<COMMON> 3,238,223
<OTHER-SE> (3,420,642)
<TOTAL-LIABILITY-AND-EQUITY> 394,165
<SALES> 410
<TOTAL-REVENUES> 410
<CGS> 10,124
<TOTAL-COSTS> 10,124
<OTHER-EXPENSES> 117,878
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (127,592)
<INCOME-TAX> 0
<INCOME-CONTINUING> (127,592)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (127,592)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
