UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED March 31, 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: 000-29645
GRAFFITI-X, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 33-0821967
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
619 Serrano Lane, Chula Vista, California 91910
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(Address and Zip Code of principal executive offices)
(619) 482-7177
(Issuer's Telephone Number)
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 ____
On May 1, 2000, there were 9,310,000 shares of the Registrant's Common Stock,
par value $.0001 per share, outstanding.
GRAFFITI-X, INC.
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2000
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Balance Sheets - March 31, 2000 (Unaudited) and Dec. 31, 1999 3
Statements of Operations -- Three Month Period Ended
March 31, 2000 and March 31, 1999, (Unaudited) 4
Statements of Cash Flows -- Three Months Ended
March 31, 2000 and March 31, 1999 (Unaudited) 5
Notes to Financial Statements 6,7,8
Item 2. Management's Discussion and Analysis of Operations 8,9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - NONE
Item 2. Changes in Securities - NONE
Item 3. Defaults Upon Senior Securities - NONE
Item 4. Submission of Matters to a Vote of Security-Holders - NONE
Item 5. Other Information - CHANGE OF ADDRESS 10
Item 6. Exhibits and Reports on Form 8-K - NONE
SIGNATURE 10
1. Financial Statements
GRAFFITI-X, INC.
Balance Sheets
March 31,
2000
December 31,
1999
ASSETS
Cash
$ 3,667
$ 3,697
Inventory
820
976
TOTAL ASSETS
$ 4,487
$ 4,673
LIABILITIES
Accounts Payable
$ 0
$ 0
TOTAL LIABILITIES
0
0
STOCKHOLDERS EQUITY
Common Stock, $.0001 par value,
40,000,000 shares authorized;
9,310,000 issued and outstanding
931
931
Additional paid-in capital
5,872
5,872
Accumulated deficit
(2,316)
(2,130)
TOTAL STOCKHOLDERS EQUITY
4,487
4,673
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
$ 4,487
$ 4,673
See Notes to Financial Statements
GRAFFITI-X, INC.
Statements of Operations
(Unaudited)
Three Months Ended
March 31,
2000
March 31,
1999
Net Sales
$ 0
$ 0
Costs of Sales
0
0
Gross Profit
0
0
Operating Expenses
General and Administrative
186
322
Total Operating Expenses
186
322
Net Income (Loss)
(186)
(322)
Income Taxes (Note C)
0
0
Net Income
$ (186)
$ (322)
Earnings per Share
$ (.00002)
$ (.00023)
Weighted Average
Shares Outstanding
9,310,000
1,385,000
See Notes to Financial Statements
GRAFFITI-X, INC.
Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
2000
March 31,
1999
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)
(186)
(322)
Adjustments to reconcile Net
Income to net cash used in
Operating Activities
Decrease in Inventory
156
292
NET CASH USED IN OPERATING ACTIVITIES
(30)
(30)
CASH FLOWS FROM INVESTING ACTIVITIES
0
0
CASH FLOWS FROM FINANCING ACTIVITIES
0
0
PROCEEDS FROM ISSUANCE OF STOCK
0
0
NET INCREASE (DECREASE) IN CASH
(30)
(30)
CASH BEGINNING
3,697
3,817
CASH ENDING
3,667
3,787
See Notes to Financial Statements
GRAFFITI-X, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
As of March 31, 2000 and for the Three Months Periods Ended
March 31, 2000 and March 31, 1999
The accompanying interim financial statements should be read in
conjunction with the annual financial statements and notes thereto included in
Graffiti-X, Inc.'s Annual Report and Form 10-SB. The Balance Sheet as of March
31, 2000 and the related Statements of Operations and Statements of Cash Flows
for the quarters ended March 31, 2000 and March 31, 1999 are unaudited, but in
the opinion of management include all normal and recurring adjustments
necessary for a fair statement of the results for such interim periods.
Organization
Graffiti-X, Inc., (The Company) was incorporated under the laws of the
State of Delaware on July 29, 1998. The Company was formed to manufacture and
sell two chemical products designed to remove graffiti from a variety of
surfaces. The Company has not engaged in any significant operations since
inception other than product demonstration, the search for a manufacturing
facility, corporate maintenance activities, acquisition of capital, and
preparation for filing of its Registration Statement Form 10-SB. No operating
revenues have been realized by the Company since inception.
The Company anticipates incurring increased expenses in the current year
as a result of costs associated with registration under the Securities Exchange
Act of 1934. However the Company also expects to generate its first revenues
from sales before August 31, 2000. The Company's marketing efforts indicate
that it should be able to sell its products at a price that is approximately
400% of manufacturing cost. Management therefore expects that it will be able
to offset the higher operating cost associated with registration under the
Securities Exchange Act with profits from product sales. Management expects
sales to begin in the third quarter and increase in the fourth quarter of the
year 2000.
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,
disclosure of contingent assets and liabilities, and reported amounts of
revenues and expenses. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all investments with a maturity of three months or
less to be cash equivalents.
Earnings Per Share
Earnings per share is provided in accordance with Accounting Principles
board opinion No. 15 (APB No. 15) "Earnings Per Share". Due to the Company's
simple capital structure, only one earnings per share calculation is presented.
Earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding during
the period.
Income Taxes
Income taxes are provided in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS No. 109), "Accounting for Income Taxes." A
deferred tax asset or liability is recorded for all temporary differences
between financial and tax reporting and net operating loss carry forwards.
Deferred tax expense (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on
the date of enactment. No deferred taxes have been recorded as an asset or
liability.
The Company's provision for income taxes for the years ended December 31,
1998 and 1999 is $0. Due to the Company's operating loss, there is no tax
expense recognized for 1998 or 1999.
Stockholders' Equity:
The Company is authorized to issue 40,000,000 shares of common stock,
par value $0.0001 per share, of which 9,310,000 shares are issued and
outstanding.
On August 4, 1998 the company issued 950,000 shares of common stock to
its President, Amin Hassan, in exchange for the rights to formulations of the
Graffiti XL products and an inventory of chemicals for the manufacture of these
products costing $1,367. Also on that date the Company issued 50,000 shares of
common stock to Daniel Masters in exchange for his services in incorporating
the Company.
On August 4, 1998 the Company filed a Form-D with the U.S. Securities
and Exchange Commission. Between August 4, 1998 and September 30, 1998 the
Company sold 385,000 shares of common stock at $0.01 per share to 37
individuals for a total proceeds of $3,850. The offers and sales were made
pursuant to Rule 504 of Regulation D under the Securities Act of 1933 as
amended.
On May 10, 1999 the shareholders of the Company agreed to a stock split
on the basis of six new shares for one old share. Therefore, as of that date
the Company had 8,310,000 shares of common stock issued and outstanding.
On July 1, 1999 the Company issued 1,000,000 shares of common stock to
its President, Amin Hassan, in exchange for an inventory of chemicals used in
the manufacture of Graffiti XL products costing $1,461. Consequently, at March
31, 2000, the Company had 9,310,000 shares of common stock issued and
outstanding.
Need for Additional Financing
The company believes that its existing capital will be sufficient to
meet the Company's cash needs through the inception of manufacturing and sale.
The Company believes that profits from sales will generate sufficient cash for
its operating needs by the end of the third quarter, and the Company believes
it has sufficient resources to see it through to that time and beyond if
necessary. The Company therefore does not foresee the need for additional
financing in the year ahead.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
Liquidity and Capital Resources
The Company is in the development stage. The Company's capital consists of
chemicals supplied by the Company's founder and President, Amin Hassan and
funds provided by investors. The opening chemical inventory had a cost basis
to Mr. Hassan (and therefore to the Company) of $1,367. Mr Hassan subsequently
contributed an additional chemical inventory which had a cost basis to him of
$1,461 for a total inventory contribution of $2,828. Approximately seventy-one
percent (71%) of the chemicals have been expended in the course of
demonstrating the Company's products, however approximately twenty-nine
percent (29%) remain available. Of the $3,850 raised in the Company's private
placement $3,667 remains available. The Company's capital is sufficient to
allow it to continue to finance operating activities in this manner for one to
two years to come.
When the Company commences manufacturing it will accept orders only with a
down payment of twenty-five percent (25%) of the total sales price. This down
payment will be sufficient to provide the necessary working capital to produce
and deliver the product.
Results of Operations
The Company's balance sheet for the period ending December 31, 1999, the
Company's first full year of operation, reflects a cash asset of $3,697 and
inventory of $976 for a total asset value of $4,673. On July 1, 1999 the
Company's President sold an inventory of chemicals with a cost basis of $1,461
to the Company in exchange for 1,000,000 shares of common stock. Thus the
total inventory for the year was $2,225 and the ending inventory of $976
reflected a decrease of $1,249 (56%). Cash decreased by $120 (3%), and total
assets decreased by $1,369 (23%) during the year.
The Company's balance sheet for the period ending March 31, 2000, the
Company's first quarter of the current year, reflects a cash asset of $3,667
and inventory of $820 for a total asset value of $4,487. Thus the inventory of
$820 reflected a decrease of $156. Cash decreased by $30, and total assets
decreased by $186 during the quarter.
The Company cannot predict to what extent its liquidity and capital resources
will be diminished prior to commencement of manufacturing and sales, however
management believes that the Company's present capital is sufficient to
commence those activities, given the Company's plan to accept orders only with
a partial payment approximately equal to the cost of goods sold.
The Company has not engaged in any significant operations since inception
other than product demonstration, the search for a manufacturing facility,
corporate maintenance activities, acquisition of capital, and preparation for
filing of its Registration Statement on Form 10-SB. No operating revenues
have been realized by the Company since inception.
The Company anticipates incurring increased expenses in the current year as a
result of costs associated with registration under the Securities Exchange Act
of 1934. However the Company also expects to generate its first revenues from
sales before September 1, 2000. The Company's marketing efforts indicate that
it should be able to sell its products at a price that is approximately 400%
of manufacturing cost. Management therefore expects that it will be able to
offset the higher operating costs associated with registration under the
Securities Exchange Act with profits from product sales. Sales, which are
expected to begin in the third quarter, should increase in the fourth quarter.
Need for Additional Financing
The Company believes that its existing capital will be sufficient to meet the
Company's cash needs through the inception of manufacturing and sales. The
Company believes that profits from sales will generate sufficient cash for its
operating needs by the end of the third quarter. The Company therefore does
not foresee the need for additional financing in the year ahead.
"CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Except for historical
matters, the matters discussed in this Form 10-SB are forward-looking
statements based on current expectations, and involve risks and uncertainties.
Forward-looking statements include, but are not limited to, statements under
the following heading: "Managements Discussion And Analysis Or Plan Of
Operations" - the timing and expected profitable results of manufacturing and
sales and the need for no additional financing.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
The Issuer has had a change of address.
The former address was:
289 Church Avenue # 105
Chula Vista, California 91910
The Issuers current address is:
619 Serrano Lane
Chula Vista, California 91910
The Issuer shares office space with a Director of the Company and the space is
provided by the Director at no cost to the Company.
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GRAFFITI-X, INC.
(Registrant)
Date: May 9, 2000 By: /s/ Daniel Masters
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Daniel Masters
Director and Acting Financial Officer
FINANCIAL DATA SCHEDULE:
PERIOD TYPE: 3-MOS
FISCAL YEAR END: DEC-31-1999
PERIOD END: MAR-31-2000
CASH: 3,667
SECURITIES: 0
RECEIVABLES: 0
ALLOWANCES: 0
INVENTORY: 820
CURRENT ASSETS: 4,487
PP&E: 0
DEPRECIATION: 0
TOTAL ASSETS: 4,487
CURRENT LIABILITIES: 0
BONDS: 0
PREFERRED MANDATORY: 0
PREFERRED: 0
COMMON: 4,487
OTHER SE: 0
TOTAL LIABILITY AND EQUITY: 4,487
SALES: 0
TOTAL REVENUES: 0
CGS: 0
TOTAL COSTS: 0
OTHER EXPENSES: 186
LOSS PROVISION: 0
INTEREST EXPENSE: 0
INCOME PRETAX: (186)
INCOME TAX: 0
INCOME CONTINUING: (186)
DISCONTINUED: 0
EXTRAORDINARY: 0
CHANGES: 0
NET INCOME: (186)
EPS BASIC: (0.00002)
EPS DILUTED: (0.00002)
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