FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the six month period ended: May 31,
1999
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to
Commission file number: 0-253335
EL GRANDE.COM, INC.
(Exact name of registrant as specified in its charter)
NEVADA 88-0409024
(State of incorporation) (IRS Employer ID No.)
1040 Hamilton Street, Suite 308
Vancouver, B.C., CANADA V6B 2R9
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (604) 689 0808
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
As of July 15, 1999, the Registrant had 11,118,800 shares of Common Stock
outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN THE GENERAL INSTRUCTIONS AND IS
THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
<PAGE>
Part I Financial Information
ELGRANDE.COM INC.
( A Development Stage Company)
FINANCIAL STATEMENTS
Unaudited - See Notes to Financial Statements
MAY 31, 1999
<PAGE>
- --------------------------------------------------------------------------------
ELGRANDE.COM INC.
BALANCE SHEET
See Notes to Financials
(unaudited)
6 Mos Ending Period ending
May 31 November 30
1999 1998
- --------------------------------------------------------------------------------
ASSETS
Current Assets
Cash $ 361,263 236,350
Amounts receivable and prepaid expenses 89,981 -
----------------------------
451,244 236,350
PROPERTY AND EQUIPMENT
Computer Hardware 82,292 38,407
Furniture and fixtures 27,223 20,878
Database and software 408,370 296,408
----------------------------
517,885 355,693
Less: Accumulated depreciation (12,434) (2,160)
----------------------------
505,451 353,533
OTHER ASSETS
Deposits 43,460 3,600
Organization costs, net of amortization - 100,715
----------------------------
43,460 104,315
----------------------------
TOTAL ASSETS $ 1,000,155 694,198
================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 34,679 234,189
Accrued interest 529 529
Short term loans payable 112,000 90,000
----------------------------
147,208 324,718
----------------------------
Long Term Liabilities
Note Payable 39,543 39,543
----------------------------
TOTAL LIABILITIES 186,751 364,261
----------------------------
Stockholders' Equity
Common stock - $.001 par value
200,000,000 shares authorized
11,118,800 shares issued 11,119 10,794
Additional paid in capital 1,952,671 1,027,996
Subscriptions receivable (538,050)
Accumulated deficit during the development (1,150,386) (170,803)
----------------------------
Total Stockholders' Equity 813,404 329,937
----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,000,155 694,198
================================================================================
See accompanying notes to financial statements
<PAGE>
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ELGRANDE.COM INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
See Notes to Financials
(Unaudited)
6 Mos Ending Period Ending
May 31 November 30
1999 1998
- --------------------------------------------------------------------------------
INCOME $ - -
----------------------------
EXPENSES
Consulting and Professional fees 549,586 107,028
Marketing and public relations 156,718 18,217
Rent 27,800 9,965
Communication and internet fees 49,969 14,237
Office and administration 41,191 8,403
Salaries 59,374 -
Travel and entertainment 104,156 5,224
Interest - 529
Foreign currency translation (gain) loss (14,100) -
Depreciation and amortization 4,889 7,200
----------------------------
979,583 170,803
----------------------------
NET LOSS (979,583) (170,803)
ACCUMULATED DEFICIT, BEGINNING BALANCE (170,803) -
----------------------------
ACCUMULATED DEFICIT, ENDING BALANCE $ (1,150,386) (170,803)
============================
NET LOSS PER COMMON SHARE $ (0.0881) (0.0181)
============================
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 11,118,800 9,436,725
============================
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
<PAGE>
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ELGRANDE.COM INC.
STATEMENT OF CASH FLOWS
See Notes to Financials
(unaudited)
6 Mos Ending Period Ending
May 31 November 30
1999 1998
- ------------------------------------------------------------------------------
CASH FLOWS PROVIDED (USED) IN OPERATIONS
Net Income (loss) $ (979,583) (170,803)
Depreciation and amortization 4,889 7,445
Net change in:
Accounts and loans payable (199,510) 59,989
Amounts receivable and prepaid expenses (89,981)
Loans payable 90,000
Over-subscriptions payable 22,000
Accrued interest 0 529
----------------------------
Net cash used in operating activities (1,242,185) (12,840)
----------------------------
Cash Flows from investing activities:
Purchase of property and equipment (50,130) (141,950)
Deposit on leased property and other (39,860) (3,600)
Additions to database (111,962)
Writeoff, (payment) on organizational costs 106,000 (106,000)
----------------------------
(95,952) (251,550)
----------------------------
Cash flows from financing activities
Issuance of stock 1,463,050 500,740
----------------------------
Net Increase (decrease) in cash 124,913 236,350
Cash, beginning of period 236,350 -
----------------------------
Cash, end of period $ 361,263 236,350
============================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest $ - -
Income taxes $ - -
NON-CASH INVESTING ACTIVITIES
Note issued for purchase of property
and equipment $ 39,543 39,543
Purchase commitment for database - 174,200
----------------------------
$ 39,543 213,743
============================
- --------------------------------------------------------------------------------
See accompanying notes to financial statements
<PAGE>
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ELGRANDE.COM INC.
STATEMENT OF STOCKHOLDERS' EQUITY
May 31, 1999
(unaudited)
6 Mos Ending
May 31
1999
- --------------------------------------------------------------------------------
Additional Total
Common Stock Paid -In Accumulated Stockholders
Shares Amount Capital Deficit Equity
----------------------------------------------------------
Opening balance 10,793,800 $ 10,794 $ 1,027,996$ (170,803) 867,987
Issuance of common
stock-Dec '98 for
services at $1.00
per share 25,000 25 24,975 25,000
Issuance of common
stock May '99
For cash and
subscription at
$1.00 per share,
less expense of 300,000 300 899,700 900,000
Loss for period
to May 31, 1999 (979,583) -979,583
----------------------------------------------------------
11,118,800 11,119 1,952,671 (1,150,386) 813,404
========== ====== ========= ========== =======
<PAGE>
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ELGRANDE.COM INC.
NOTES TO THE FINANCIAL STATEMENTS
May 31, 1999
See Notes to Financials
(unaudited)
- --------------------------------------------------------------------------------
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
Elgrande.com Inc., formerly Intellicom Internet Corp (hereinafter "the
Company") was incorporated in April 1998 under the laws of the State of
Nevada primarily for the purpose of developing and marketing internet
applications, specifically for books, software, audio and video media and
computer games. The name change to Elgrande. com Inc was effective on
September 19, 1998. The Company maintains an operations office in Vancouver,
British Columbia. The head office and registered office of the Company is
Las Vegas Nevada.
The Company is in development stage, and as of May 31, 1999 had not realized
any significant revenues from its planned operations.
----------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Elgrande.com Inc is
presented to assist in understanding the Company's financial statements. The
financial statements and notes are representations of theCompany's
management which is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the financial
statements. These statements include all adjustments which in the opinion of
management are necessary in order that the financial statements not be
misleading. This statement is the results for the second quarter ending May
31, 1999. The company intends to change its fiscal year end to May 31, in
order to reflect its business cycle.
Development Stage Activities
---------------------------------
The Company has been in development stage since its formation on April 8,
1998. It is primarily engaged in developing and marketing internet
applications.
Going Concern
-------------------
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
As shown in the accompanying financial statements, the Company incurred a
net loss of $979,583 for the six month period ending May 31 1999. At May
31, 1999, the working capital position amounted to $304,036. The Company,
being a development stage enterprise, is currently putting technology in
place which will, if successful, mitigate these factors which raise
substantial doubt about the Company's ability to continue as a going
concern. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded assets, or the amounts
and classification of liabilities that might be necessary in the event the
Company cannot continue in existence.
Management has established plans designed to increase sales of the
Company's products. Management intends to seek new capital from new equity
securities issuances that will provide funds needed to increase liquidity,
fund internal growth and fully implement its business plan.
Accounting Method
---------------------
The Company's financial statements are prepared using the accrual method of
accounting.
Loss Per Share
-------------------
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number
of shares was calculated by taking the number of shares outstanding and
weighing them by the amount of time they were outstanding.
<PAGE>
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ELGRANDE.COM INC.
NOTES TO THE FINANCIAL STATEMENTS
May 31, 1999
See Notes to Financials
(unaudited)
- --------------------------------------------------------------------------------
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Provision for Taxes
---------------------------------
At May 31, 1999, the Company had net operating loss of approximately
$979,583. This brings the accumulated deficit to $1,150,386.No provision for
taxes or tax benefit has been reported in the financial statements, as there
is not a measurable means of assessing future profits or losses.
Use of Estimates
-------------------
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the
date of the financial statements. Accordingly, upon settlement, actual
results may differ from estimated amounts.
- --------------------------------------------------------------------------------
3. PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
provided using the straight line method over the estimated useful lives of
the assets. The useful lives of property, plant and equipment for purposes
of computing depreciation and amortization are five and seven years. The
following is a summary of property, equipment and accumulated depreciation
and amortization.
Accumulated Depreciation
Cost or Amortization
------------ ------------------------
Computer Hardware $ 82,292 $ 10,232
Furniture and fixtures 27,223 2,202
Database and software 408,370 -
--------------- --------------
$ 517,885 $ 12,434
=============== ==============
The database was completed May 31, 1999 and the company was ready to
commence business June 2, 1999. Depreciation will commence in the fiscal
year commencing June 1, 1999.
- --------------------------------------------------------------------------------
4. INTANGIBLE ASSETS
During the period ending November 30, 1998, the Company incurred
organizational costs of $106,000. Since that date, policy regarding the
capitalization of organization costs have changed, and the balance has been
written off.
<PAGE>
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ELGRANDE.COM INC.
NOTES TO THE FINANCIAL STATEMENTS
May 31, 1999
(unaudited)
5. COMMON STOCK
Upon incorporation, 4,000,000 shares of common stock were distributed at
$0.001 per share to the board of directors for $4,000. The second share
issuance was for 5,000,000 common shares at $0.01 per share for $50,000.
Under Regulation D, Rule 504, 943,800 shares of common stock were issued at
$1.00 per share for cash and subscriptions.
In September 1998, the Company adopted the Elgrande.com Inc 1998 Directors
and Officers Stock Option Plan, a non-qualified plan. This plan allows the
Company to distribute up to 1,000,000 shares of common stock to officers,
directors, employees and consultants through authorization of the Company's
Board of Directors.
As of May 31, 1999, no options have been issued.
In December 1998, 25,000 common shares were issued for services. In May,
1999 a private placement of 300,000 common shares at $3.00 per share was
completed. These shares have warrants attached allowing for conversion into
common shares at: 300,000 at $7.50, 300,000 at $15.00 and $300,000 at $25.00
per share. No warrants have been exercised at May 31, 1999.
- --------------------------------------------------------------------------------
6. RELATED PARTIES
Certain consultants which received common stock as part of the 850,000
issued to consultants, are related to the Company's directors and
stockholders. A total of 187,500 common shares were issued to family members
who provided services to the Company.
- --------------------------------------------------------------------------------
7. COMMITMENTS AND CONTINGENCIES
Lease Commitments
-------------------
The Company leases office space in Vancouver, B.C. Canada from Yaletown
Centre Investment Ltd for $6,000 per month. The lease is effective from
September 1, 1998 to August 31, 2001. The terms of the lease required the
Company to give the lessor a $3,600 refundable security deposit.
Future minimum rental commitments under the operating lease are as follows;
Year Ending May 31, 2000 $ 96,000
Year Ending May 31, 2001 96,000
Year Ending May 31, 2002 96,000
---------
$ 288,000
=========
DATABASE DEVELOPMENT
The Company's purchase commitment for services to develop a database totaled
$408,370 plus expenses. The balance owing at May 31, 1999 amounted to
$57,000 and the vendor has agreed to defer payment until June 1999. This
will be paid either in cash or in common stock.
<PAGE>
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ELGRANDE.COM INC.
NOTES TO THE FINANCIAL STATEMENTS
May 31, 1999
(unaudited)
8. TRANSLATION OF FOREIGN CURRENCY
The Company has adopted Financial Accounting Standard No 52. The Canadian
foreign exchange rate has remained approximately the same since inception
therefore, there are no material exchange rate transaction gains or losses.
In the future, the Company will record such transactions in the Statement of
Stockholders' Equity.
- --------------------------------------------------------------------------------
9. CONCENTRATION OF CREDIT RISK FOR CASH HELD AT BANKS
The Company maintains cash balances at two banks. Accounts at each
institution are insured by Federal Deposit Insurance Corp up to $100,000. No
institution is currently holding cash in excess of insurance coverage.
- --------------------------------------------------------------------------------
10 LONG-TERM DEBT
The Company's long-term debt consists of a note secured by furniture and
computers for $47,000. The terms of this agreement call for a balloon
payment of all principle on November 30, 2000. The Company's management
expects to pay this amount by the due date of the loan, which does not
contain a stipulated rate of interest. Upon origination the estimated
current value of this debt was $39,543. Imputed interest accrued at 8% per
annum from September 15, 1998 to November 30, 1998 was $529. This was not
adjusted for May 31, 1999.
<PAGE>
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<PAGE>
Item 2 - Management's Discussion and Analysis or Plan of Operation.
THE FOLLOWING ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION OF
THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, OF THE COMPANY CONTAINED ELSEWHERE IN
THE FORM 10-QSB
OVERVIEW
Elgrande.com Inc. (the "Company") was incorporated in April 1998 to create a
group of technologies that will collectively be known as the Shop Engine(TM).
The "Shop Engine" is a group of software programs that, when made available to
consumers through a network like the world wide web, enables retail consumers to
purchase products directly from distributors and manufacturers without the
necessity for a retail storefront.
In August, 1998, the Company commenced the creation of a web based contact
management system, which will enable the Company to manage contacts, clients,
and customers located anywhere in the world, through the use of the Internet.
This included the development and deployment of a central data base system,
which will allow the Company to display on its site descriptive web pages of
products available through its distributor, Baker & Taylor.
Effective June 2, 1999, the company commenced operation of its web site on a
test mode basis. The Company anticipates a full launch of its site in September
1999.
Elgrande.com Inc is a U.S. corporation, and through a wholly owned subsidiary,
maintains it's operations and web site development in Vancouver, B.C.
RESULTS OF OPERATIONS
There are no revenues as of May 31, 1999 as the Company has not as yet activated
its web site. The Company activated its web site for test purposes in June 1999
and expects to have a full launch of its web site by September 15, 1999.
A summary of expenses to May 31, 1999 is as follows:
Consulting and Professional fees 549,586
Marketing and public relations 156,718
Communication and internet fees 49,969
Administration and other 223,310
-------
$979,583
========
The Company budgeted its cash requirements in order to develop the web based
contact management system, and the central data- base that holds product data.
To date, costs have been within the established budget, and the company has
sufficient funds to proceed to activation of its web site. The site was
activated on June 2, 1999 for test purposes.
The contract with McDonald & Harris, for the customization of the data-base, is
now complete and McDonald & Harris have agreed to settlement of the balance of
their contract in June, 1999, either by payment of cash, or the equivalent in
common shares. While the initial data base construction is complete, it is, in
reality, an ongoing project.
The Company currently employees 16 people, and has 8 consultants under contract,
providing various services.
The Company intends to change its fiscal year end to May 31, to more properly
reflect its business cycle. Accordingly, the Company will be filing a 10K report
within the time period allowed for filing re a May 31, 1999 year-end. The
previous year-end was November 30.
LIQUIDITY AND CAPITAL RESOURCES
To date, the Company has financed its development stage by the sale of common
stock. At May 31, 1999, the Company had 11,118,800 shares outstanding and had
raised approximately $2,000,000. These funds were used mainly to develop the
data-base site, and purchase computer equipment and software. The Company has
$361,000 on hand at May 31, 1999 and expects to continue to raise funds by
private placement.
The Company maintains cash equivalents with a large Canadian financial
institution and a large U.S. financial institution. Excess cash will be invested
in highly liquid investments that are readily convertible into cash.
The Company has sufficient cash to finance its operations. While staff
requirements will continue to grow, the Company does not anticipate any problems
in the financing of this growth.
The inventory data-base developed to date is in excess of 2,500,000 products,
being books, music, video and software titles.
YEAR 2000 COMPUTER SOFTWARE CONVERSION
All computer equipment owned by the Company has been acquired in the past 12
months. Because this equipment is not considered to be a problem for Year 2000
concern; the same assurance cannot be given for third party equipment for which
the Company has no control.
While the Company is confident that its systems will be compatible, no assurance
can be given that this will not impact the Company's results of operations.
Part II - Other Information
Item 1 - Legal Proceedings: There are no proceedings to report.
Item 2. - Changes in Securities: None
Item 3. - Default Upon Senior Securities: There are no defaults to report.
Item 4. - Submission of Matters to a Vote of Security Holders: None.
Item 5. - Other Information: None
Item 6. - Exhibits and Reports on Form 8-K: none
<PAGE>
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.
EL GRANDE.COM, INC.
Dated: July 14, 1999
/s/ RANDAL PALACH
- ------------------
Randal Palach, President, Chief Executive Officer
/s/ CARLTON J. PARFITT
- ----------------------
Carlton J. Parfitt, Chief Financial Officer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1998
<PERIOD-END> MAY-31-1999
<CASH> 361,263
<SECURITIES> 0
<RECEIVABLES> 89,981
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 451,244
<PP&E> 517,885
<DEPRECIATION> (12,434)
<TOTAL-ASSETS> 1,000,155
<CURRENT-LIABILITIES> 147,208
<BONDS> 39,543
0
0
<COMMON> 11,119
<OTHER-SE> 1,952,671
<TOTAL-LIABILITY-AND-EQUITY> 1,000,155
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 979,583
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (979,583)
<EPS-BASIC> 0
<EPS-DILUTED> (0.0881)
</TABLE>
