U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF
THE EXCHANGE ACT
For the transition period from to
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Commission File No. 0-26951
i-Incubator.com, Inc.
-----------------------------------
(Name of small Business Issuer in Its Charter)
Florida 59-3442557
-------------------------------------------------------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
701 Brickell Avenue, Suite 3120, Miami, Florida 33131
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(Address of Principal Executive Offices) (Zip code)
(Issuer's Telephone Number, Including Area code): (305) 358-3678
Master Communications Corp
- --------------------------
(Former name)
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: As of March 31, 2000, the Company had
16,580,000 shares of Common Stock outstanding, $0.0001 par value.
<PAGE>
i-Incubator.com, Inc.
Form 10-QSB Quarterly Report
For the Period Ended March 31, 2000
INDEX
Part I - Financial Information
Item 1 - Financial Statements (unaudited)
Consolidated Financial Statements for the Period May 5, 1997
(Inception) Through March 31, 2000
Item 2 - Management's Discussion and Analysis of Financial
Conditions and Results of Operations
Part II - Other Information
Item 3 - Submission of Matters to a Vote of Security Holders
<PAGE>
FORM 10-QSB
i-Incubator.com, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The Company's Consolidated Financial Statements and Notes to Financial
Statements referred to in the Index appear elsewhere in this Form 10-QSB.
Item 2. Management's Discussion and Analysis of Financial Conditions.
The following discussion and analysis should by read in conjunction with the
financial statements of the Company and the accompanying notes appearing
subsequently under the caption "Financial Statements."
The following discussion and analysis contains forward-looking statements, which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results, expectations and plans discussed in these
forward-looking statements.
During the past two years, the Company, has spent considerable time and capital
resources defining and developing its strategic plan for delivering and
operating on-line sales and auction technology.
The Company, as discussed in note one of the financial statements, has formed
several subsidiaries all of which are in the development stage. There has been
limited activity in these subsidiaries to date. The Company has incurred
substantial development stage losses in connection with developing its web-site
and the acquisition of various domain names, as well as, developing auction
technology and securing portal agreements. Because of uncertainties surrounding
the development and completion of its auction technology, the Company
anticipates incurring significant development stage losses in the foreseeable
future. The ability of the Company to achieve its business objectives is
contingent upon its success in raising additional capital until adequate
revenues are realized from operations.
Quarter Ended March 31, 2000 Compared with Quarter Ended March 31, 1999.
Development stage expenses during the Quarter Ended March 31, 2000 were
significantly greater than during the comparable Quarter Ended March 31, 1999,
increasing from $20,340 to $200,153 or a 884% increase. This was in part the
result of the addition of officer's salaries, consulting (including the
compensation expense resulting from shares of the Company's stock issued to new
and on-going management) professional fees necessitated by operating in a public
environment, the acquisition of Domain names (from Michael D. Farkas and Rebeca
Brock both or which are related parties to the Company) and an agreement between
the Company and Atlas Equity Group, Inc. (Owned by Michael D. Farkas, a related
party) for shared office and rent expenses. On-going increases to development
stage expenses are anticipated during Year 2000.
<PAGE>
Liquidity and Capital Resources
Despite Capital Contributions and both related party and third party loan
commitments, the Company from time to time experienced, and continues to
experience cash flow shortages that have slowed the Company's growth. During the
Quarter Ended March 31, 2000 the consequence of those cash flow shortages has
been an increase of $520 in accounts payable and an increase of $(1,431) in
accrued expenses bringing those figures to $13,526 and $29,500 respectively at
March 31, 2000 in comparison to Quarter Ended March 31, 1999.
The Company has primarily financed its activities from sales of capital stock of
the Company and from loans from related and third parties. A significant portion
of the funds raised from the sale of capital stock has been used to cover
working capital needs such as salaries, office expense and various consulting
fees.
The Company continues to experience cash flow shortages, and anticipates this
continuing through the foreseeable future. Management believes that additional
funding will be necessary in order for it to continue as a going concern. The
Company is investigating several forms of private debt and/or equity financing,
although there can be no assurances that the Company will be successful in
procuring such financing or that it will be available on terms acceptable to the
Company.
The Company has committed itself to pay Michael D. Farkas (a related party)
$250,000 for the acquisition of various domain names over a period of 24 months
commencing in January, 2000. No payments have been made to date.
The Company has committed itself to pay Rebeca Brock (a related party) $120,000
for the acquisition of a domain name over a period of 12 months commencing in
January, 2000. No payments have been made to date.
Year 2000 Impact Statement
The Company believes that it has analyzed it information technology systems to
determine the existence of any effect, if any, of year 2000 issues. The Company
has entered into hardware and software support agreements in the normal course
of its business and believes those arrangements are sufficient to handle any
minor issues that may arise as a result of the year 2000, if any. The Company
also intends to create hard copy of all year-end accounting and management
reports, in the ordinary course of business, which will serve as a back up of
such data if needed. Further, because the Company's Internet plan is still under
development, it is not currently dependent on the Internet for either
e-commerce, the dissemination of information, or data management, and therefore
does not anticipate any material impact from year 2000 issues that may affect
the Internet.
<PAGE>
FORM 10-QSB
i-Incubator.com, Inc.
PART II - OTHER INFORMATION
Item 3. Submission of Matters to a Vote of Security Holders.
On March 14, 2000 by written consent the majority of the shareholders elected
Michael Farkas, Matthew Sher and Scott Mager to serve as directors of the
Registrant. Jamee Freeman has served as the Registrant's President, Secretary
and Treasurer, and continues to serve as such.
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed in its
behalf by the undersigned, hereunto duly authorized, on May 11, 2000.
i-Incubator.com, Inc.
(Registrant)
Date: May 11, 2000 s/s Jamee Freeman
---------------------------
Jamee Freeman
President, Secretary
and Treasurer
<PAGE>
I-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
<PAGE>
I-INCUBATOR.COM, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
CONSOLIDATED BALANCE SHEETS................................................1
CONSOLIDATED STATEMENTS OF OPERATIONS......................................3
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)................................4
CONSOLIDATED STATEMENTS OF CASH FLOWS......................................8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................................10
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS UNAUDITED AUDITED
MARCH 31, DECEMBER 31,
2000 1999
--------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 10,912 $ 16,384
Prepaid expenses 0 5,000
Notes receivable - related party 0 37,500
Accrued interest receivable -
related party 0 713
--------- -------
Total Current Assets 10,912 59,597
--------- -------
PROPERTY AND EQUIPMENT
Property and equipment net of,
less accumulated depreciation of $220 6,367 0
OTHER ASSETS:
Organizational costs, net of
accumulated amortization of $109 0 3,645
Investments in unconsolidated
affiliated companies 2,000 2,000
Investment in OnLine Foods, Inc. 50,000 0
Due from affiliates 150 0
--------- -------
Total Other Assets 52,150 5,645
--------- -------
TOTAL ASSETS $ 69,429 $ 65,242
========= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
UNAUDITED AUDITED
MARCH 31, DECEMBER 31,
2000 1999
---------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Non-interest bearing related
party notes payable, net of unamortized
discounts - current portion 236,489 $ 237,576
Notes payable - current portion 125,000 95,000
Note payable - related party 120,000 0
Lease payable - current portion 1,557 0
Accounts payable 18,627 5,101
Accrued expenses payable 44,500 15,000
Accrued interest payable 6,853 2,250
Payroll taxes payable 6,682 1,412
Shareholders' loans 0 700
---------- -----------
Total Current Liabilities 559,708 357,039
---------- -----------
LONG-TERM LIABILITIES
Non-interest bearing
Note payable - related party 110,126 112,805
Lease payable - net of equipment portion 4,636 0
---------- -----------
Total Long-Term Liabilities 114,762 112,805
STOCKHOLDERS' EQUITY:
Common Stock, $.0001 par value,
50,000,000 shares authorized,
16,580,000 shares and 2,175,000 post
split shares issued and outstanding
respectively 1,658 1,658
Additional paid-in capital 85,642 85,642
Deficit accumulated during
the development stage (722,159) (522,386)
---------- -----------
(634,859) (435,086)
Minority interest in subsidiary 29,818 30,484
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Total Stockholders' Equity (Deficit) (605,041) (404,602)
---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 69,429 $ 65,242
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
AUDITED
FOR THE PERIOD
MAY 5, 1997
UNAUDITED AUDITED (INCEPTION)
MARCH 31, 2000 MARCH 31, 1999 TO MARCH 31, 2000
------------------- ---------------- ----------------
<S> <C> <C> <C>
DEVELOPNMENT STAGE REVENUES $ 0 $ 0 $ 0
------------------- ---------------- ----------------
DEVELOPMENT STAGE EXPENSES:
Accounting 4,500 0 4,500
Amortization 0 0 109
Bank charges 257 40 555
Business promotion 517 0 4,677
Consulting fees 82,246 4,000 106,406
Courier 546 0 1,499
Depreciation 220 0 220
Dues and subscriptions 0 0 297
Domain names 0 0 338,579
Insurance expense 1,277 0 1,277
Interest expense 12,917 0 15,167
Licenses and taxes 2,096 731 9,983
Management fees 0 0 4,000
Office expenses 14,220 3,000 33,628
Office supplies 5,392 69 5,392
Officer salaries 37,230 9,109 81,569
On-line services 0 0 140
Payroll taxes 3,770 1,051 7,551
Printing 86 12 588
Professional fees 29,871 1,950 93,423
Registration fees 0 0 3,627
Telephone 1,187 377 2,616
Transfer agent fees 0 0 3,348
Travel 3,822 0 4,100
--------------------- ------------ ----------------
TOTAL DEVELOPMENT STAGE EXPENSES 200,153 20,340 723,250
--------------------- ------------ ----------------
LOSS BEFORE OTHER INCOME (200,153) (20,340) (723,250)
INTEREST INCOME 378 0 1,091
--------------------- ------------ ----------------
LOSS BEFORE MINORITY INTEREST (199,775) (20,340) (722,159)
MINORITY INTEREST DEVELOPMENT STAGE LOSS (664) 0 (682)
--------------------- ------------ ----------------
NET DEVELOPMENT STAGE LOSS $ (200,439) $(20,340) $ (722,841)
===================== ============ ================
LOSS PER SHARE:
Basic $(0.0121) $(0.0016) $(0.1030)
===================== ================ ================
Diluted N/A N/A N/A
===================== ================ ================
Weighted-average of common
shares outstanding 16,580,000 13,080,000 7,017,516
===================== ================ ================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD MAY 5, 1997 (INCEPTION) THROUGH MARCH 31, 2000
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
--------------------------- PAID-IN- DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
--------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance, May 5, 1997
(inception) 0 $ 0 $ 0 $ 0 $ 0
Common stock issued to related
parties for consulting fees 300,000 30 3,970 0 4,000
Common stock issued to related parties 1,125,000 112 14,888 0 15,000
Common stock issued to
third parties 750,000 75 9,925 0 10,000
Deficit accumulated during the
development stage for the
period May 5, 1997(inception)
through December 31, 1997 0 0 0 (9,747) (9,747)
------------ ------- --------- ---------- ---------
Balance, December 31, 1997 2,175,000 217 28,783 (9,747) 19,253
Deficit accumulated during the
development stage for the year
ended December 31, 1998 0 0 0 (11,111) (11,111)
------------ ------- --------- ---------- ---------
Balance, December 31, 1998 2,175,000 $ 217 $ 28,783 $ (20,858) $ 8,142
------------ ------- --------- ---------- ---------
</TABLE>
The accompanying notes are integral part of these financial statements.
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD MAY 5, 1997 (INCEPTION) THROUGH MARCH 31, 2000 (CONT'D)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
------------------------- PAID-IN- DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
---------- ------ -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1998 2,175,000 $ 217 $ 28,783 $ (20,858) $ 8,142
Common stock issued to
related parties - private offering 9,000,000 900 (600) 0 300
Common stock issued to
a related party for
managerial services 150,000 15 485 0 500
Common stock issued for
legal services 150,000 15 485 0 500
Common stock issued to
related party 15,000 2 498 0 500
Common stock issued to
third parties 1,590,000 158 52,841 0 53,000
Common stock issued to
related parties in connection with
the acquisition of i-Auction.com, Inc. 2,000,000 200 1800 0 2,000
---------- -------- -------- ---------- --------
Subtotal balance forward 15,080,000 $ 1,507 $ 84,292 $ (20,858) $ 64,942
---------- -------- -------- ---------- --------
</TABLE>
The accompanying notes are integral part of these financial statements.
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD MAY 5, 1997 (INCEPTION) THROUGH MARCH 31, 2000 (CONT'D)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
------------------------ PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
---------- ------ -------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance forward 15,080,000 $ 1,507 $ 84,292 $ (20,858) $ 64,942
Common stock issued to Quentin Road
Productions, Inc. (a related party)
pursuant to a one-for-one stock exchange
agreement dated December 1, 1999 for
1,500,000 common shares of Wealthhound,
Inc. (a related party) 1,500,000 150 1,350 0 1,500
Minority interest equity 0 300 30,200 0 30,500
Deficit accumulated during the
development stage for the year
ended December 31, 1999 0 0 0 (501,528) (501,528)
Minority interest loss during the
year ended December 31, 1999 0 0 0 (16) (16)
---------- ------ -------- ----------- -------
Balance, December 31, 1999 16,580,000 $ 1,957 $ 115,842 $ (522,402) $ (404,602)
========== ====== ======== =========== =======
</TABLE>
The accompanying notes are integral part of these financial statements.
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD MAY 5, 1997 (INCEPTION) THROUGH MARCH 31, 2000 (CONT'D)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
COMMON STOCK ADDITIONAL DURING THE
----------------------- PAID-IN DEVELOPMENT
SHARES AMOUNT CAPITAL STAGE TOTAL
-------- -------- ----------- ------------ -------
<S> <C> <C> <C> <C> <C>
Balance forward 16,580,000 1,957 115,842 (522,402) (404,602)
Deficit accumulated during the
development stage for the quarter
ended March 31, 2000 0 0 0 (199,775) (199,775)
Minority interest loss during the
quarter ended March 31, 2000 0 0 0 (664) (664)
-------- -------- ----------- ------------ --------
Balance, December 31, 1999 16,580,000 $ 1,957 $ 115,842 $ (722,841) $ (605,041)
======== ======== =========== ============ ========
</TABLE>
The accompanying notes are integral part of these financial statements.
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE IN CASH)
<TABLE>
<CAPTION>
AUDITED
FOR THE PERIOD
MAY 5, 1997
UNAUDITED AUDITED (INCEPTION)
MARCH 31, 2000 MARCH 31, 1999 TO MARCH 31, 2000
-------------- -------------- -----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Deficit accumulated during the
development stage $ (200,439) $ (18,908) $ (722,841)
Adjustments to reconcile net loss to
net cash used by operations:
Amortization of loan discount 8,034 0 8,034
Depreciation 220 0 220
Write off of organizational costs 3,645 0 3,645
Common stock issued for legal services 0 0 500
Common stock issued for consulting (related party) 0 0 4,500
(Increase) Decrease in prepaid expenses 5,000 0 0
(Increase) Decrease in interest receivable 713 0 0
Decrease in advance receivable 0 0 0
Increase (Decrease) in accrued interest expense 4,603 0 6,853
Increase (Decrease)in accounts payable 13,526 520 18,627
Increase (Decease) in payroll taxes payable 5,270 341 6,682
Increase (Decrease) in accrued expenses 29,500 (1,431) 44,500
------- -------------- ------------
Net Cash Used by
Operating Activities (129,928) (19,478) (629,280)
------- -------------- ------------
INVESTING ACTIVITIES:
Acquisition of office equipment (6,587) 0 (6,587)
Investments (50,000) 0 (52,000)
Due from affiliates (150) 0 (150)
------- -------------- ------------
Net Cash Used for
Investing Activities (56,737) 0 (58,737)
------- -------------- ------------
FINANCING ACTIVITIES:
Proceeds from sale of common stock 0 10,500 108,500
Proceeds from the issance of common stock
to related parties 0 0 300
Repayment of shareholders' loan (700) 0 125,000
Proceeds from note payable 30,000 0 0
Proceeds from note receivable - related party 37,500 0 0
Proceeds from note payable - related parties 110,000 0 458,936
Proceeds from lease obligation 6,587 0 6,587
Repayment of note payable - related party (1,800) 0 0
Payments on lease obligation (394) 0 (394)
------- -------------- ------------
Net Cash Provided by
Financing Activities 181,193 10,500 698,929
------- -------------- ------------
INCREASE IN CASH (5,472) (8,978) 10,912
CASH, BEGINNING OF PERIOD 16,384 11,135 0
------- -------------- ------------
CASH, END OF PERIOD $ 10,912 $ 2,157 $ 10,912
======= ============== ============
</TABLE>
The accompanying notes are integral part of these financial statements.
<PAGE>
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTER ENDED MARCH 31, 2000 AND 1999 AND FOR THE
CUMMULATIVE PERIOD MAY 5, 1997 (INCEPTION) TO MARCH 31, 1999
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
During the quarter ended March 31, 2000 and for the cumulative period May 5,
1997 (inception) to March 31, 2000, the Company paid $299 interest.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
The Company entered into the following non-cash transactions:
During the year ended December 31, 1999, the Company issued 1,500,000 shares of
common stock in connection with a stock for stock exchange agreement with
Quentin Road Productions, Inc. (a related party) for common shares of
WealthHound.com, Inc. dated December 8, 1999. The exchange was valued at $1,500.
During the year ended December 31, 1999, the Company issued 2,000,000 shares of
common stock in connection with a common stock share and exchange agreement
dated December 1, 1999 with i-Auction.com, Inc. The exchange was valued at
$2,000.
During the year ended December 31, 1999, the Company issued 150,000 shares of
common stock in consideration for legal services. This transaction was valued at
$500.
During the year ended December 31, 1999, the Company issued 150,000 shares of
common stock in consideration of managerial services to a related party. This
transaction was valued at $500.
During the period May 5, 1997 (inception) through December 31, 1998 the Company
issued 300,000 shares of common stock in consideration for management services
provided by the then acting President of the Company, James Lee. This
transaction was valued at $4,000.
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ORGANIZATION
i-Incubator.com, Inc.("the Company"), formerly Master Communications
Corp., was incorporated on May 5, 1997 under the laws of the State of
Florida. The Company's primary objective is to position itself as an
internet incubator. Similar to other incubators, it will provide
venture capital, technical expertise and marketing assistance to
development stage companies. The Company's ticker symbol changed on
December 7, 1999 to "INQU" to better reflect its name change and
direction.
On November 22, 1999 the Company formed i-RealtyAuction.com, Inc.
("RealtyAuction"). In connection therewith, it received 700,000 common
shares, representing a 70% ownership interest. The shares were issued
in consideration for services rendered relating to RealtyAuction's
formation. Global Realty Management Group, Inc. ("Global") (a related
company) was issued 300,000 common shares of RealtyAuction,
representing a 30% interest. The shares were issued in exchange for
$30,000 and 500,000 common shares of Global. RealtyAuction has the
authority to issue 100,000,000 shares of common stock at .001 par
value. RealtyAuction is a development stage company that has had
limited activity.
On December 1, 1999 the Company entered into a stock exchange agreement
with i-AuctionTech.com, Inc. ("AuctionTech") (Note 10). The agreement
provides for the acquisition of 100% of the outstanding shares of
AuctionTech. In connection therewith, the Company issued 2,000,000
restricted common shares to AuctionTech's shareholders.
AuctionTech was incorporated on November 3, 1999 under the laws of the
state of Delaware and has the authority to issue 50,000,000 shares of
common stock. AuctionTech intends to develop internet auction
technology.
10
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT'D)
On December 17, 1998 the Company formed i-Teleco.com, Inc. ("Teleco"),
formerly Mastertel Communications Corp., under the laws of the state of
Florida. Teleco has the authority to issue 50,000,000 shares of common
stock and intends to position itself to take advantage of opportunities
available in the telecommunications industry. Teleco is a development
stage company that has had limited activity.
On December 23, 1999 the company formed i-Aerobids.com, Inc.
("Aerobids") under the laws of the state of Delaware. Aerobids has the
authority to issue 50,000,000 shares of common stock and intends to
develop an auction website devoted entirely to aviation related parts
and accessories. Aerobids is a development stage company that has had
limited activity.
On December 23, 1999 the Company formed i-CarAuction.com, Inc.
("CarAuction") under the laws of the state of Delaware. CarAuction has
the authority to issue 50,000,000 shares of common stock and intends to
develop an auction website devoted entirely to automobiles and related
accessories. CarAuction is a development stage company that has had
limited activity.
On December 23, 1999 the company formed i-AntiqueAuction.com, Inc.
("AntiqueAuction") under the laws of the state of Delaware.
AntiqueAuction has the authority to issue 50,000,000 shares of common
stock and intends to develop an auction website devoted entirely to
antiques and related accessories. AntiqueAuction is a development stage
company that has had limited activity.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts
of the Company and its majority owned subsidiaries. All significant
inter-company accounts have been eliminated.
11
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT'D)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as of
the date of the financial statements and reporting period. Accordingly,
actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all highly
liquid investments purchased with an original maturity of three months
or less to be cash equivalents.
CARRYING VALUES
The Company reviews the carrying values of its long-lived and
identifiable intangible assets for possible impairment. Whenever events
or changes in circumstances indicate that the carrying amount of assets
may not be recoverable, the Company will reduce the carrying value of
the assets and charge operations in the period the impairment occurs.
PROPERTY AND EQUIPMENT/DEPRECIATION
Property and equipment are recorded at cost. Minor additions and
renewals are expensed in the year incurred. Major additions and
renewals are capitalized and depreciated over their estimated useful
lives. Depreciation is calculated using the straight-line method. Total
depreciation for the quarter ended March 31, 2000, was $200.
12
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT'D)
INCOME TAXES
The Company utilizes Statement of Financial Standards SFAS No. 109,
"Accounting for Income Taxes", which requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in financial statements
or tax returns. Under this method, deferred income taxes are recognized
for the tax consequences in future years of differences between the tax
bases of assets and liabilities and their financial reporting amounts
at each period end based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized. The accompanying financial statements have no provisions for
deferred tax assets or liabilities because the deferred tax allowance
offsets the deferred tax asset in its entirety.
NET LOSS PER SHARE
The Company has adopted SFAS No. 128 "Earnings Per Share". Basic loss
per share is computed by dividing the loss available to common
shareholders by the weighted-average number of common shares
outstanding. Diluted loss per share is computed in a manner similar to
the basic loss per share, except that the weighted-average number of
shares outstanding is increased to include all common shares, including
those with the potential to be issued by virtue of warrants, options,
convertible debt and other such convertible instruments. Diluted
earnings per share contemplates a complete conversion to common shares
of all convertible instruments, only if they are dilutive in nature
with regards to earnings per share. Since the Company has incurred net
losses for all periods, and since there are no convertible instruments,
basic loss per share and diluted loss per share are the same.
13
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 1 - NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (CONT'D)
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures about Fair Value of Financial Instruments"
requires the disclosure of the fair value of financial instruments. The
Company's management, using available market information and other
valuation methods, has determined the estimated fair value amounts.
However, considerable judgment is required to interpret market data in
developing estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts the
Company could realize in a current market exchange.
NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June, 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income". This statement requires
companies to classify items of other comprehensive income by their
nature in a financial statement and display the accumulated balance of
other comprehensive income separately from retained earnings and
additional paid-in capital in the equity section of a statement of
financial position. SFAS No. 130 is effective for financial statements
issued for fiscal years beginning after December 15, 1997. Management
believes that SFAS No. 130 has no material effect on the Company's
financial statements.
In June, 1997, FASB issued SFAS No. 131, "Disclosure About Segments of
an Enterprise and Related Information". This statement establishes
additional standards for segment reporting in financial statements and
is effective for financial statements issued for fiscal years beginning
after December 15, 1997. Management believes that SFAS No. 131 does not
have a material effect on the Company's financial statements.
14
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 2 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONT'D)
In April, 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-5, "Reporting for Costs of Start-Up
Activities", ("SOP 98-5"). The Company is required to expense all
start-up costs related to new operations as incurred. In addition, all
start-up costs that were capitalized in the past must be written off
when SOP 98-5 is adopted. The Company's adoption did not have a
material impact on the Company's financial position or results of
operations.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities", is effective for financial statements issued for fiscal
years beginning after June 15, 1999. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts,
and for hedging activities. Management does not believe that SFAS No.
133 will have a material effect on its financial position or results of
operations.
SFAS No. 134, "Accounting for Mortgage-Backed Securities Retained after
the Securitization of Mortgage Loans Held for Sale by Mortgage Banking
Enterprises", is effective for financial statements issued in the first
fiscal quarter beginning after December 15, 1998. This statement is not
applicable to the Company.
SFAS No. 135, "Rescission of FASB Statement No. 75 and Technical
Corrections", is effective for financial statements issued for fiscal
years beginning February, 1999. This statement is not applicable
to the Company.
NOTE 3 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN MATTERS
The Company's initial activities have been devoted to developing a
business plan, negotiating contracts and raising capital for future
operations and administrative functions.
15
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 3 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN MATTERS
(CONT'D)
The ability of the Company to achieve its business objectives is
contingent upon its success in raising additional capital until such
time as adequate revenues are realized from operations.
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown
in the financial statements, development stage losses from May 5, 1997
(inception) to March 31, 2000 amounted to $722,159. The Company's cash
flow requirements during this period have been met by contributions of
capital and debt financing. No assurance can be given that these
sources of financing will continue to be available. If the Company is
unable to generate profits, or unable to obtain additional funds for
its working capital needs, it may have to cease operations.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on a
timely basis, to retain additional paid-in capital, and to ultimately
attain profitability.
NOTE 4 - NOTES RECEIVABLE RELATED PARTY
During the year ended December 31, 1999, the Company made loans to
WealthHound.com, Inc. ("WealthHound") (a related party). The terms of
the loan are as follows:
16
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 4 - NOTES RECEIVABLE RELATED PARTY (CONT'D)
Date Rate Per Annum Maturity 12/31/99 Principal 3/31/00 Principal
-------- -------------- ----------- ------------------ -----------------
10/15/99 8 1/4% 4/15/00 $ 12,500 $ 0
10/15/99 8 1/4% 4/15/00 5,000 0
10/8/99 8 1/4% 4/8/00 20,000 0
--------------- -------------
Total Notes Receivable $ 37,500 $ 0
================ ==============
Accrued interest amounted to $6,853 through March 31, 2000.
NOTE 5 - OTHER ASSETS
On December 8, 1999, the Company entered into an agreement with Quentin
Road Productions, Inc. ("Quentin") (a related company) for the exchange
of 1,500,000 restricted common shares of WealthHound that were owned by
Quentin for 1,500,000 restricted common shares of the Company's common
shares. The shares acquired in the exchange represent an approximate 3%
interest in WealthHound (Note 10).
Management intends to hold WealthHound on a long-term basis and is
carrying the investment on the equity method. Management estimated the
value of this transaction by using available market information and
applying discounts that account for the restricted nature of the
shares, lack of marketability and its low trading volume. However,
considerable judgment is required to interpret market data in
developing fair value. Accordingly, the estimates presented herein are
not necessarily indicative of amounts the Company could realize in a
current market exchange.
17
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 6 - DEFERRED INCOME TAXES
As of December 31, 1999, the Company has a carryforward loss for income
tax purposes of $183,819 that may be offset against future taxable
income. The Company incurred $338,581 of expenses for the purchases of
various domain names from related parties. Pursuant to Internal Revenue
Code 267(a)(2) these expenses may not be deducted by the Company until
the related parties recognize the income and accordingly, have not been
included in the carryforward loss. The carryforward loss expires at
various years through 2019. Due to the uncertainty regarding the
success of future operations, management has recognize any future
income tax benefits that may arise from the utilization of the loss
carryforward.
3/31/00 12/31/99
----------------- -----------------
Deferred tax assets arising
from net operating losses $ 69,000 $ 33,000
----------------- -----------------
Less valuation allowance (69,000) (33,000)
----------------- -----------------
Net Deferred Tax Assets $ 0 $ 0
================= =================
NOTE 7 - ACCRUED EXPENSES
Accrued expenses at December 31, 1999 are as follows:
3/31/00 12/31/99
------- --------
Accrued accounting fees $ 4,500 $ 15,000
====== ========
NOTE 8 - NOTES PAYABLE
Notes payable as of December 31, 1999 were as follows:
3/31/00 12/31/99
------- ---------
Note payable to Atlas Equity
Group, Inc. (a related party),
12% per annum dated December 22, 1999,
unsecured. Due on demand no later
than June 22, 2000. $10,000 $10,000
18
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 8 - NOTES PAYABLE (CONT'D)
3/31/00 12/31/99
------- --------
Note payable to the Farkas Group,
Inc. (a related party), 12% per
annum dated November 19, 1999,
unsecured. Due on demand no
later than December 19, 2000. $ 0 $ 1,800
Note payable to Sharei Chesed,
11 1/2% per annum, dated December 30,
1999, unsecured. Due on demand
no later than December 29, 2000. 30,000 30,000
Note payable to SeaBank Corporation,
12% per annum, dated August 2,
1999, unsecured. Due on demand no
later than February 2, 2000. The note
has been renegotiated and has been
extended to February 7, 2001. 20,000 20,000
Note payable to SeaBank Corporation,
12% per annum, dated October 15, 1999,
unsecured. Due on demand no later
than April 15, 2000. 20,000 20,000
Note payable to SeaBank Corporation,
12% per annum, dated October 5, 1999,
unsecured. Due on demand no later
than April 15, 2000. 25,000 25,000
Non-interest bearing note dated
December 7, 1999 to Rebecca Brock
("Brock") (a related party)in
connection with the acquisition of a
domain name. $10,000 due monthly for
10 months. The note has been
discounted based on an imputed
interest rate of 10%. 120,000 120,00
Less discount (3,637) (6,255)
19
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 8 - NOTES PAYABLE (CONT'D)
3/31/00 12/31/99
------- --------
Non-interest bearing note dated
December 28, 1999 to Michael D.
Farkas ("Farkas) (a related
party) in connection with the
acquisition of domain names.
$10,000 due monthly for 24
months. The note has been
discounted based on an imputed
interest rate of 10%. 250,000 250,000
Less discount (19,748) (25,165)
Note payable to Chasdai Yitzchok,
111/2per annum, dated January 14,
2000, unsecured. Due on demand
no later than January 13, 2001. 30,000 0
Note payable to Scott Cohen,
8% per annum, dated January 31,
2000, unsecured. Due on demand
no later than January 30, 2001. 50,000 0
Note payable Romano LTD, 10% per
annum, dated March 24, 2000,
unsecured. Due on demand no later
than March 23, 2001 60,000 0
------- -------
Current portion- related parties (227,657) (227,657)
Current portion - unrelated parties (95,000) (95,000)
------- -------
Long-term portion - related parties $112,805 $112,805
======= =======
20
<PAGE>
NOTE 9 - CAPITAL LEASE NOTE
The Company is a lessee under a capital lease agreement for computer
equipment from Dell Corp., expiring on January 16, 2003. The lease
agreement calls for 36 equal monthly payments of $274.58, with a final
fixed purchase price of $1 at the end of the lease. This asset is being
depreciated over its estimated useful life of 5 years. Depreciation of
$220 was included in depreciation expense for the quarter ended March
31, 2000.
The future minimum lease payments due under capital lease is as follows
at March 31, 2000:
Total capital lease payable $ 6,193
Less current portion (1,557)
---------
Total capital lease payable $ 4,636
========
Aggregate maturities under this capital lease for the three year
subsequent to March 31, 2000 are as follows:
2000 $ 1,163
2001 2,024
2002 2,738
2003 268
----------
Total capital lease payable $ 6,193
==========
NOTE 10 - COMMITMENTS AND CONTINGENCIES
On November 24, 1999 the Company agreed to engage Kulat Communications,
Inc., ("Kulat") on a month-to-month basis. Kulat provides public
relations consultation and various marketing programs. Through December
31, 1999 the Company has incurred fees of approximately $4,100 in
connection with this arrangement.
NOTE 11 - STOCKHOLDERS' EQUITY
On November 11, 1999 the Board of Directors approved a 3:1 forward
stock split. The statement of changes in stockholders' equity and the
following notes have been adjusted to give affect to the split. In
addition, due to change in the marital status of certain shareholders,
prior transactions deemed to have been unrelated have become related
party transactions. The statement of changes in stockholders' equity
has been adjusted to affect these changes.
21
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 11 - STOCKHOLDERS' EQUITY (CONT'D)
The Company issued 300,000 common shares to James F. Lee, former
President, and the Company's sole officer and director, in
consideration for management services valued at $4,000. In addition, it
issued 600,000 common shares to GSM Communications, Inc. ("GSM")in
exchange for $8,000. GSM is owned by Farkas and is deemed to be a
related party. These individuals are deemed to be founders and
affiliates of the Company. Concurrently, the Company entered into a
private offering of securities pursuant to regulation D, Rule 504,
promulgated under the Securities Act of 1933. Common Shares were
offered to non-accredited investors for cash consideration of 1.334
cents per share. 1,125,000 shares were issued to related parties and
750,000 shares issued to unrelated parties.
On March 20, 1998, Mr. Lee sold his ownership interest in the Company
to the Farkas Group, Inc. in a private transaction subject to Section
4(2) of the Securities Act of 1933. The Farkas Group, Inc. is a
privately held company owned by Farkas.
In January, 1999 the Company issued 3,000,000 post split common shares
each to The Farkas Group, Inc., Atlas Equity Group, Inc., and GSM, all
of which are owned by Farkas and are deemed to be related parties.
These common shares were issued for a cash consideration of $300.
In January, 1999 the Company engaged legal counsel for services
relating to SEC filings and related documentation. In connection
therewith, the Company issued 150,000 post split shares of common stock
(valued at $500) as additional payment for the services performed.
22
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 11 - STOCKHOLDERS' EQUITY (CONT'D)
In January 1999, the Company issued 150,000 post split shares of common
stock to Jamee Freeman, President, in consideration for managerial
services rendered valued at $500.
On December 1, 1999, the Company entered into a stock exchange
agreement with AuctionTech (Note 1). The agreement provided for the
acquisition of all of the outstanding shares of AuctionTech. In
connection therewith, the Company issued 2,000,000 restricted common
shares to AuctionTech's shareholders. Management estimated the value of
this transaction to be $2,000.
On December 8, 1999 the Company entered into a stock exchange agreement
with Quentin (a related company) to transfer 1,500,000 of restricted
common shares of WealthHound owned by Quentin for 1,500,000 restricted
shares of the Company's common stock (Note 5). The common shares
exchanged represent approximately 3% interest in WealthHound.
Management valued the estimated the fair market value of this
transaction to be $1,500.
NOTE 12 - OFFICERS AND BOARD OF DIRECTORS
EMPLOYMENT AGREEMENT
The Company agreed in principle to an employment agreement for its
President. The term of the agreement is one year, automatically
renewable for a period of one year for each consecutive year
thereafter, unless prior notice is given by either the Company or Ms.
Freeman 90 days prior to the expiration of the contract term. Initial
compensation will be at an annual rate of approximately $45,000.
NOTE 13 - RELATED PARTY TRANSACTIONS
In January, 1999 the Company agreed to reimburse Atlas Equity Group,
Inc., a related party, $1,000 per month (on a month- to-month basis)
for operating and administrative expenses.
23
<PAGE>
i-INCUBATOR.COM, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
NOTE 13 - RELATED PARTY TRANSACTIONS (CONT'D)
Atlas Equity Group, Inc. is owned by Farkas. On November 30, 1999 the
Company agreed to increase the reimbursements to $6,000 per month,
commencing December, 1999.
The Company paid the Farkas Group, Inc. $5,000 for assisting in
creating a private placement offering document. The Farkas Group, Inc.
owns 3,300,000 shares of the Company and is deemed to be a related
party. The Farkas Group, Inc. is owned by Farkas.
The Company engaged Berger and Associates for various consulting
services. Berger & Associates is owned by a family member of Farkas and
is deemed to be a related party.
On December 28, 1999, the Company entered into an agreement with
Farkas. In connection therewith, the Company agreed to pay $250,000 to
Farkas, $10,000 upon the execution of the agreement and $10,000 per
month for a period of 24 months commencing January 1, 2000. No payments
have been made as of the date of this filing. The note was discounted
pursuant to APB 21 "Interest on Receivables and Payables" which
requires the imputation of interest on non-interest bearing
obligations. The imputed interest rate used for this purpose was 10%.
On December 7, 1999, the Company entered into an agreement with Brock.
In connection therewith, the Company agreed to pay $120,000 to Brock,
$20,000 upon the execution of the agreement and $10,000 per month for a
period of 10 months commencing January 1, 2000. No payments have been
made as of the date of this filing. The note was discounted on the same
basis as the Farkas note.
On December 6, 1999 AuctionTech paid $5,000 to Scott Mager (a
shareholder and related party) for consulting services.
On January 6, 2000 the Company paid Scott Mager (a related party)
$50,000 for consulting services rendered to AuctionTech.
On January 6, 2000 the Company agreed to pay Matthew Sher (a related
party) $25,000 for consulting services rendered to AuctionTech.
24
