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: November 30, 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 January 25, 2000, the Registrant had 11,903,438 shares of Common Stock
issued and 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>
INDEX
Part I Financial Information
Item 1 Financial Statements
Balance Sheets as of May 31, 1999 and November 30, 1999
Statement of Operations (for the three months and six months ended
November 30, 1998 and November 30, 1999)
Statement of Cash Flows (for the three months and six months ended
November 30, 1998 and November 30, 1999)
Item 2 Management Discussion and Analysis
Part II Other Information
Item 1 Legal Proceedings: None
Item 2 Changes in Securities
Item 3 Default upon Senior Securities: None
Item 4 Submission of Matters to a Vote of Security Holders: None
Item 5 Exhibits and Reports on Form 8-K: Exhibit 27: Financial Data Schedule
<PAGE>
<TABLE>
<CAPTION>
Part I Financial Information
==============================
Item 1 Financial Statements
- -----------------------------
ELGRANDE.COM INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
6 months ended Fiscal year
Nov 30, ended
1999 May 31, 1999
(unaudited)
- -------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash $ (40,805) $ 371,266
Employee expense advances 57,433 18,920
GST tax refundable 39,771 9,657
Prepaid expenses - 51,401
TOTAL CURRENT ASSETS 56,399 451,244
------------- -------------
PROPERTY AND EQUIPMENT
Computer hardware 96,762 82,292
Furniture and fixtures 79,742 53,497
Database and software 545,645 408,370
Less accumulated depreciation and amortization (74,226) (19,522)
------------- -------------
TOTAL PROPERTY AND EQUIPMENT 647,923 524,637
------------- -------------
OTHER ASSETS
Deposits 29,491 43,460
Investments Note 3 60,000 -
------------- -------------
TOTAL OTHER ASSETS 89,491 43,460
------------- -------------
TOTAL ASSETS $ 793,813 $ 1,019,341
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 804,215 $ 29,976
Accounts payable, related party - 25,000
Accrued liabilities 64,005 8,450
Accrued interest - 5,811
Stock over-subscription payable - 112,000
Current portion of long-term debt - 7,257
Revenue Clearing (12,323) -
Loans Payable 30,000 -
------------- -------------
TOTAL CURRENT LIABILITIES 885,896 188,494
------------- -------------
LONG-TERM DEBT
Lease, net of current portion 37,501 17,516
Note payable, net of current portion - 39,543
------------- -------------
TOTAL LONG-TERM LIABILITIES 37,501 57,059
------------- -------------
TOTAL LIABILITIES 923,397 245,553
------------- -------------
COMMITMENTS AND CONTINGENCIES - -
------------- -------------
STOCKHOLDERS' EQUITY
Common stock, 200,000,000 shares authorized,
$.001 par value; 11,903,438 and 10,793,800 shares
outstanding, respectively Note 4 11,766 11,119
Additional paid-in capital 3,198,850 1,952,671
Subscriptions receivable - -
Deficit accumulated during development stage (3,362,400) (1,208,160)
Accumulated other comprehensive income 22,200 18,158
------------- -------------
TOTAL STOCKHOLDERS' EQUITY (129,584) 773,788
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 793,813 $ 1,019,341
============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
ELGRANDE.COM INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
3 months 6 months 3 months 6 months
ended ended ended ended
November 30, November 30, November 30, Novmber 30,
1999 1999 1998 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R E V E N U E S $ 253 253 $ 57 57
------------- ------------- ----------- ------------
E X P E N S E S
Consulting fees 131,421 269,964 93,542 93,542
Marketing and public relations 636,790 847,164 17,809 18,071
Legal and professional fees 118,054 154,519 (52,926) (44,687)
Office and administration 279,737 561,422 16,670 22,518
Software and internet services 111,682 266,651 (60,513) (60,513)
Depreciation and amortization 25,394 54,773 7,445 7,445
Production and programming - - - -
------------- ------------- ----------- ------------
TOTAL OPERATING EXPENSES 1,303,078 2,154,493 22,029 36,378
------------- ------------- ----------- ------------
NET LOSS FROM OPERATIONS (1,302,825) (2,154,240) (21,972) (36,321)
OTHER INCOME AND (EXPENSES)
Interest expense - - - -
------------- ------------- ----------- ------------
NET LOSS (1,302,825) (2,154,240) (21,972) (36,321)
------------- ------------- ----------- ------------
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain (20,302) 4,042 515 515
------------- ------------- ----------- ------------
COMPREHENSIVE LOSS $(1,323,127) (2,150,198) $ (21,457) (35,806)
============= ============= =========== ============
NET LOSS PER COMMON SHARE $ (0.1193) $ (0.0026)
============= ===========
WEIGHTED AVERAGE NUMBER OF
COMMON STOCK SHARES OUTSTANDING 10,919,155 8,586,725
============= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
ELGRANDE.COM INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
3 months 6 months 3 months 6 months
ended ended ended ended
November 30, November 30, November 30, Novmber 30,
1999 1999 1998 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $(1,302,825) (2,154,240) $ (21,972) (36,320)
Adjustments to reconcile net loss
to net cash used by operating activities:
Depreciation and amortization 25,394 54,773 -
Services paid by issuance of common stock -
Increase in:
Other Receivables 38,863 21,287 (4,477) (8,954)
Other assets 19,702 13,969
Accured liabilities 54,741 55,555
Accrued interest (5,282) (5,811)
Decrease in:
Accounts payable (31,068) 653,098 1,442 2,884
Employee advance receivable (20,677) (38,511) -
Accounts payable, related party (25,000) (25,000) 40,000 80,000
------------- ------------- ----------- ------------
Net cash provided (used) in operating activities (1,246,152) (1,424,880) 14,993 37,610
------------- ------------- ----------- ------------
Cash flows from investing activities:
Purchase of property and equipment (1,904) (178,060) (2,098) (4,196)
JV Investment - (60,000)
Deposit on leased property -
Payment on organizational costs -
------------- ------------- ----------- ------------
Net cash used in investing activities (1,904) (238,060) (2,098) (4,196)
------------- ------------- ----------- ------------
Cash flows from financing activities:
Over-subscriptions payable -
Issuance of stock 1,246,825 1,246,825
------------- ------------- ----------- ------------
1,246,825 1,246,825 - -
Net increase in cash (1,231) (416,115) 12,895 33,414
Foreign currency translation gain (20,301) 4,043 - -
Cash, beginning of period (19,273) 371,266 229,437 208,918
------------- ------------- ----------- ------------
Cash, end of period $ (40,805) (40,805) $ 242,332 242,332
============= ============= =========== ============
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest and income taxes:
Interest 628 $ -
============= ===========
Income taxes $ - $ -
NON-CASH INVESTING AND FINANCING ACTIVITIES
Financing lease for equipment $ - $ -
Note issued for purchase of property and equipment $ - $ -
Purchase commitment for database $ - $ -
Services paid by issuance of stock $ - $ -
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
ELGRANDE.COM INC.
(A Development Stage Company)
Notes to the Unaudited Consolidated Financial Statements
For the Six Month Period Ending November 30, 1999
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Elgrande.com Inc. is a Nevada corporation formed in April 1998. The Company is
in the development stage and as of November 30, 1999 had not realized any
significant revenues from its planned operations.
NOTE 2 - UNAUDITED FINANCIAL STATEMENTS
These unaudited financial statements and notes are representations of the
Company's management that 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 unaudited financial statements contain all adjustments which
in the opinion of management are necessary in order to make the financial
statements not misleading.
NOTE 3 - OTHER ASSETS
During the quarter ending August 31, 1999, the Company invested $60,000 in a
joint venture with Hydrogen Media for the development of a joint sales and
marketing program for products in both companies.
The Company has capitalized $545,645, of which $408,370 is the contractual cost
of data base software purchased from an independent software supplier. No
portion of this software--acquired at May 31, 1999--was internally developed
and, accordingly, there are no internal costs associated with this software
which were charged to research and development. The balance represents purchased
software and licensing fees. Consistent with SOP 98-1, the costs of this
software--which was purchased solely for internal use and will not be marketed
externally--have been capitalized.
NOTE 4 - COMMON STOCK AND WARRANTS
On April 8, 1998, 4,000,000 shares of common stock were distributed at $.001 per
share to the board of directors for $4,000. The second share issuance was for
5,000,000 common shares at $.01 per share for $50,000. In the period ending
November 30, 1998, the Company issued 850,000 common stock shares for the
services of consultants. The Company valued these services at $50,000. The
shares issued include negotiation rights and began to vest in April, 1999 with
20% of shares vesting every six months until the consultants are fully vested in
their shares. Also in November, 1998, 943,800 shares of common stock were issued
at $1.00 per share for cash and subscriptions.
<PAGE>
A May 1, 1999 issuance to an single accredited investor was for 300,000 units
each consisting of one share of common stock and three common stock purchase
warrants (Class A, Class B and Class C) at $3.00 per unit. These subscriptions
are pursuant to Regulation D, Rule 504. Each Class A warrant entitles the holder
to acquire an additional share of common stock for $7.50 per share at any time
prior to May 31, 2006. Each Class B warrant entitles the holder to acquire an
additional share of common stock for $15.00 per share at any time prior to May
31, 2006 and each Class C warrant entitles the holder to acquire an additional
share of common stock for $25.00 per share at any time prior to May 31, 2006.
The warrants have no assigned value according to the Black-Scholes Option Price
Calculation.
At August 31, 1999, 25,000 shares of common stock were granted to Randal Palach,
the Company's former President for his services, however certificates for these
shares were not issued until November 1999. The Company valued these services at
$25,000.
At November 11, 1999, the Board also approved the following debt conversions
into common stock:
- - $765,000 of a previously reported subscription agreement dated July 1, 1999
for the purchase of 200,000 units of the Company's stock at $5.00 per unit
which had been recorded as short term debt. Pursuant to an amendment to the
subscription agreement executed by the investor in December 1999, the debt
was converted into 153,000 shares of restricted common stock. Certificates
for these shares were issued subsequent to November 30, 1999 but are shown
as issued and outstanding shares in the financial statements;
- - A note payable to a company partially owned by the step-father of one of
the directors in the amount of $44,825 was converted into 48,198 shares of
restricted stock at US$0.93. Certificates for these shares were issued
subsequent to November 30, 1999 but are shown as issued and outstanding
shares in the financial statements.
- - A short term loan in the approximate amount of $11,200 from shareholder was
converted at November 11, 1999 into 120,430 restricted common stock at
US$0.93. Certificates for these shares were issued subsequent to November
30, 1999 but are shown as issued and outstanding shares in the financial
statements.
NOTE 5--STOCK OPTIONS
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 the authorization of the Company's Board of
Directors. The fair value of each option granted is estimated on the grant date
using the Black-Scholes Option Price Calculation. The following assumptions were
made in estimating fair value. Risk-free interest rate is 5% and expected life
is 5 years.
In May, 1999, the Board of Directors approved an option to acquire 200,000
shares at $1.00 per share to Randal Palach, the Company's former President for
his services under the Elgrande.com Inc. 1998 Directors and Officers Stock
Option Plan.
<PAGE>
On June 11, 1999, the Board of Directors approved the Elgrande.com, Inc., 1999
Stock Option Plan. This plan allows the Company to distribute up to 5,000,000
shares of common stock to officers, directors, employees and consultants through
the authorization of the Company's Board of Directors. The Board of Directors
also granted options to acquire 4,445,000 common stock that may be exercised at
any time before June 11, 2004 at $3.00 per share of which 4,150,000 options were
granted to the Company's executive officers and directors.. The strike price of
these options exceeds the options' minimum value calculated using the
Black-Scholes model therefore, no compensation costs have been recognized
pursuant to Financial Accounting Standard No.123.
The following are the Options granted the to Company's Officers and Directors
Name Date Granted Date Expires # Shares under Ex. Price
Option
- -------------------------------------------------------------------------------
R. Palach 05/15/1999 05/11/2004 200,000 $1.00
R. Palach 06/11/1999 06/11/2004 800,000 $3.00
J. West 06/11/1999 06/11/2004 1,000,000 $3.00
M. Page 06/11/1999 06/11/2004 1,000,000 $3.00
C. Parfitt 06/11/1999 06/11/2004 1,000,000 $3.00
M. Girt 06/11/1999 06/11/2004 200,000 $3.00
D. Brovarone 06/11/1999 06/11/2004 150,000 $3.00
NOTE 6 - RELATED PARTIES
Certain consultants that received common stock in November 1998 are related to
the Company's directors and stockholders. Of the 850,000 shares issued to
consultants, 187,500 shares were issued to family members of directors who
provided services to the Company.
The Company paid $66,000 for legal and consulting services to a company
partially owned by the step-father of one of the directors of Elgrande.com, Inc
in the fiscal period ending May 31, 1999. There have been no such payments in
the 6 month period ending November 30, 1999.
During the 6 month period ended November 30, 1999, the Company paid its officers
and directors $199,844 in consulting fees. In the fiscal period ending May 31,
1999 the company paid its officers and directors $249,000 in consulting fees.
<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
This section contains forward-looking statements that involve risks and
uncertainties. These forward-looking statements are not guarantees of our future
performance. They are subject to risks and uncertainties related to business
operations, some of which are beyond our control. Our actual results may differ
materially from those anticipated in these forward-looking statements.
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. Elgrande.com Inc. is a Nevada corporation,
and through a wholly owned subsidiary, Yaletown Marketing Corp, maintains its
development and administrative operations and web site development in Vancouver,
B.C.
RESULTS OF OPERATIONS
There are no revenues as of November 30, 1999, nor was there any revenue as at
May 31, 1999. The Company activated its web site for test purposes in June 1999
and is fully operational as of January 1, 2000.
A summary of expenses for the quarter ending November, 1999 is as follows:
1999 1998
------- -------
Consulting 131,421 93,542
Marketing and public relations 636,790 17,809
Software and internet fees 111,682 (60,513)
Administration and other 397,791 (36,256)
Depreciation and amortization 25,394 7,445
----------- -----------
1,303,078 22,029
Marketing charges include payments to an unaffiliated company hired to handle
all advertising, design and implementation of marketing program. These payments
amount to $643,159 to November 30, 1999. For the 3 month period ended November
30, 1999, payments totaled $543,751 versus $0 for the same period in 1998.
Software costs include database development costs incurred of $803,138 to
November 30, 1999. Elgrande began operating under its own developed database in
January 2000, thereby eliminating ongoing expenses incurred through Macdonald
Harris & Associates accruing in the approximate
<PAGE>
amount of $10,000 per month. While the company continues to develop this
database site, it is currently identifying and sourcing technology partners to
assist in the growth of its database technology.
Administration costs include payroll costs of $229,358 and general office
expenses, including rent of $332,064 to November 30, 1999 compared to $281,685
for the six month period ended November 30, 1998.
The Company budgeted its cash requirements in order to develop the web based
contact management system, and the central database that holds product data. To
date, costs have been within the established budget. The site was activated on
June 2, 1999 for test purposes.
The Company currently employs 9 people, and 3 consultants under contract,
providing various services. In May 1999, the company employed 12 people and 6
consultants. Randal Palach, contracted as CEO in April 1999, stepped down on
November 11, 1999 as President and CEO, but remains on the Board of Directors.
Other reductions in staff reduced the Company's payroll expense by approximately
$21,500 per month.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently has insufficient cash to finance its operations, but is
actively securing additional financing to meet its growth plans. An estimated $3
million is believed necessary to fully execute the Company's plan of operations.
To date, the Company has financed its development stage by the sale of common
stock. At November 30, 1999, the Company had 11,583,800 shares outstanding and
had raised approximately $3,210,615. These funds were used mainly to develop the
database site, and purchase computer equipment and software. The Company had an
overdraft of $40,805 at November 30, 1999. The issuance of an additional 321,628
shares in conversion of $821,025 of short term debt has been approved by the
Company's Board of Directors. Certificates for these shares were issued
subsequent to November 30, 1999 but are shown as issued and outstanding shares
in the financial statements.
<PAGE>
Part II - Other Information
============================
Item 1 - Legal Proceedings: There are no proceedings to report.
- ---------------------------------------------------------------
Item 2. - Changes in Securities:
- -------------------------------
On October 20, 1999 the Company issued 138,000 shares of its restricted common
stock to MHA and Associates in consideration of its contract with MHA and
Associates for the development of the Company's software. The Company relied
upon the exemption from the registration requirements of the Securities Act of
1933 provided by section 4(2) being a transaction by an issuer not involving a
public offering.
On November 19, 1999 the Company issued 25,000 shares of its restricted common
stock to Randal Palach, in consideration of Mr. Palach's services as President
of the Company. The Company relied upon the exemption from the registration
requirements of the Securities Act of 1933 provided by section 4(2) being a
transaction by an issuer not involving a public offering.
On November 19, 1999 the Company also issued 300,000 shares of its restricted
common stock to a single accredited investor pursuant to a subscription
agreement dated November 11, 1999 for 300,000 Units each consisting of one (1)
Share of Common Stock and two (2) Common Stock Purchase Warrants, designated
Class J and K. Each Warrant entitles the holder to acquire an additional share
of common stock as follows: Class J: $3.00 per share; Class K: $5.00 per share.
The Warrants may be exercised at any time up to 5:00 PM Pacific Time, December
31, 2004 The Company relied upon the exemption from the registration
requirements of the Securities Act of 1933 provided by section 4(2) being a
transaction by an issuer not involving a public offering. The Company relied
upon the safe harbor exemption from the registration requirements of the
Securities Act of 1933 provided by Regulation S.
On November 11, 1999, the Board approved the following debt conversions into
common stock:
- - $765,000 of a previously reported subscription agreement dated July 1, 1999
for the purchase of 200,000 units of the Company's stock at $5.00 per unit
which had been recorded as short term debt. Pursuant to an amendment to the
subscription agreement executed by the investor in November 1999, the debt
was converted into 153,000 shares of restricted common stock.
- - A note payable to a company partially owned by the step-father of one of
the directors of the Company and its accrued interest in the amount of
$44,825 was converted into 48,198 shares of restricted stock at US$0.93.
- - A short term loan in the approximate amount of $11,200 from shareholder was
converted at November 11, 1999 into 120,430 restricted common stock at
US$0.93.
The Company relied upon the exemption from the registration requirements of the
Securities Act of 1933 provided by section 4(2) being a transaction by an issuer
not involving a public offering for these conversions.
<PAGE>
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: Exhibit 27: Financial Data Schedule
- --------------------------------------------------------------------------------
<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: January 24, 2000
/s/ MICHAEL PAGE
- -------------------------------------------------
Michael Page, President, Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> SEP-1-1999
<PERIOD-END> NOV-30-1999
<CASH> (40,805)
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 56,399
<PP&E> 647,923
<DEPRECIATION> 74,226
<TOTAL-ASSETS> 885,896
<CURRENT-LIABILITIES> 885,896
<BONDS> 0
0
0
<COMMON> 11,766
<OTHER-SE> 3,198,850
<TOTAL-LIABILITY-AND-EQUITY> 793,813
<SALES> 0
<TOTAL-REVENUES> 253
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,303,078
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,302,825)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,302,825)
<EPS-DILUTED> (0.01)
<EPS-BASIC> (0.01)
</TABLE>
