FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Third Quarter ended April 30, 2000
Commission File Number: 0-28767
Editworks, Ltd.
(Exact name of Registrant as specified in its charter)
Nevada 88-0403070
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
24843 Del Prado Suite 326 Dana Point CA 92629
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (949) 488-0736
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 7,312,200
Yes [X] No [ ] (Indicate by check mark whether the Registrant (1) has filed
all report 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.)
As of April 30, 2000, the number of shares outstanding of the Registrant's
Common Stock was 7,312,200.
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PART I: FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS.
Attached hereto and incorporated herein by this reference are consolidated
unaudited financial statements (under cover of Exhibit F3Q-2000) for the nine
months ended April 30, 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
(A) PLAN OF OPERATION. We have launched our current business and established a
computer aided, post-production editing service for various media businesses,
using 3-D capable computer equipment developed by the Avid 9000 Digital Editing
System. The Avid 9000 is the only disk-based digital nonlinear video workstation
to feature real-time, full-motion alpha keys for two independent 3-D video
channels, the equivalent of four video channels. We have had only two contract
customers to date. We have one current contract customer, namely Reliant
Interactive Media Corp. We are accordingly highly dependent at present on the
good will of a single principal customer. While we have no present plans to
engage in Reverse Acquisition transactions, such transactions are possible in
the forseeable future. At the end of our contract with Reliant, depending upon
certain elections of Reliant whether or not to exercise its options to purchase
our equipment, then, we must decide whether to acquire new equipment and
continue our operations, or not. It will depend upon whether we are able to
attract other customers and other business. Our present business is profitable
for the present term, as further explained in this Report.
(1) PLAN OF OPERATION FOR THE NEXT TWELVE MONTHS. We will continue to
service the existing contract with Reliant Interactive Media Corp. We may seek
additional customers at some indefinite future time, but its present resources
do not permit extensive advertising or promotion. It is accordingly dependent
upon word of mouth and favorable referrals from its existing and previous
customers and from such other business acquaintances as may provide such
referrals. We have no plans to pursue any Reverse Acquisition at any time, but
as a practical matter we could not do so before obtaining quote-ability on the
OTCBB. It is not foreseeable that we might begin to plan along these lines at
any time before November of 2000, and then only if our present business activity
does not appear to provide indications of future profitability at that time.
Briefly summarized here, and reported in detail in previous reports, it is
material that the agreement has an initial one-year term, but may be extended
for two additional terms for a total of three years. It is an open question
whether, at the end of the term, Reliant will choose to purchase the
Registrant's equipment, pursuant to agreement, or whether Registrant will retain
it. Thus, the Registrant may be in continuous operation for the next three years
or may have an election to make at the end of the first year of the contract,
whether to purchase new equipment and continue in its present business, or
whether then to seek an acquisition, most likely, a reverse acquisition
transaction.
CASH REQUIREMENTS AND NEED FOR ADDITIONAL FUNDS, TWELVE MONTHS. We have no
immediate or forseeable need for additional funding, from sources outside of its
circle of shareholders, if at all, during the next twelve months. We expect our
revenues to fund current operations adequately, and may exceed them
substantially; although there can be no guaranties about future results. This
optimistic statement must be qualified by the reality that its revenues to date
from Reliant are receivables unpaid, and that the timing of payment of accrued
receivables from Reliant may depend to some degree on the monthly liquidity of
Reliant, in terms of its collection of its receivables. Reliant Interactive
Media Corp. is a public reporting corporation. Its reports and financial
statements are accessible by the public as public information from standard
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sources including EDGAR. Short-term advances by the principal shareholder may be
made in the case that realization of receivables fall short of current expenses,
in the short term.
It would follow that the Registrant would require revenues to exceed
$100,000.00 annually to approach substantial profitability. While such a goal is
believed to be achievable in the next twelve months, a cautionary consideration
is appropriate. Increased business activity may engender increased costs. There
is no assurance, therefore, that this Registrant will achieve substantial
profitability in the next twelve months.
We may be forced to effect some advances from its Principal Shareholder,
for costs involved in maintenance of corporate franchise and filing reports as
may be required. No agreement by the Principal shareholder to make such advances
is in place, and no guarantee can presently be given that additional funds, if
needed, will be available. It is by far more likely that advances will take the
form of providing services on a deferred compensation basis. Should further
auditing be required, such services by the Independent Auditor may not be the
subject of deferred compensation. The expenses of independent Audit cannot be
deferred or compensated in stock or notes, or otherwise than direct payment of
invoices in cash.
We do not anticipate any contingency upon which we would voluntarily cease
filing reports with the SEC, even though we may cease to be required to do so.
It is in our compelling interest to report its affairs quarterly, annually and
currently, as the case may be, generally to provide accessible public
information to interested parties, and also specifically to maintain its
qualification for the OTCBB, if and when the Registrant's intended application
for submission may become effective.
SUMMARY OF PRODUCT RESEARCH AND DEVELOPMENT. None. We are not engaged in
research and development.
EXPECTED PURCHASE OR SALE OF PLANT AND SIGNIFICANT EQUIPMENT. None.
However, as previously disclosed, Reliance has the option to purchase our
equipment on or after September 30, 2000.
EXPECTED SIGNIFICANT CHANGE IN THE NUMBER OF EMPLOYEES. None. It is
possible, however that a significant increase in the business of its sole
customer would result in the increase of our editing staff from its present
single employee.
(B) DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
OPERATIONS AND RESULTS FOR THE PAST TWO FISCAL YEARS. None. We were
incorporated on August 20, 1998, for the purpose of establishing a computer
aided, post-production editing service for various media businesses, using 3-D
capable computer equipment developed by the Avid 9000 Digital Editing System. We
had some limited operations during its first fiscal year ended July 31, 1999.
From inception on August 20, 1998 through July 31, 1999, our first fiscal year,
we enjoyed revenues of $72,663, with first-year general and administrative and
total expenses of $169,213, for a net loss of $96,550 ($0.014 per share) for its
first fiscal year.
More recently, for the nine months ended April 30, 2000, revenues were
$34,200, and total expenses were $117,731, for a net loss of $125,631.
Its current arrangement with Reliant Interactive Media Corp. is presently
productive, but may impose interim limitations on our ability to expand current
operations. Pursuant to this arrangement, we have placed substantially all of
our equipment in Florida, in facilities provided by Reliant, and have stationed
our employee at that location. Reliant is the producer of infomercial marketing
audio-visual products, principally infomercial video programs to be aired on
commercial television. For these services, we are to receive a monthly fee of
$10,000.00 of which $2,500.00 monthly is an accumulating investment by Reliant
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in our equipment. We also accrue a royalty of one quarter of one percent of
Reliant's gross sales, less shipping, handling, returns and taxes on all
infomercials for which we provide services.
FUTURE PROSPECTS. We are unable to predict the ultimate direction of its
future prospects. It is to be hoped that its arrangement with Reliant would
generate introductions and referrals of new business for our editing services.
The extent to which we can project ourself as a true going concern for the
future, beyond the scope of our single-customer base, will depend upon this
eventuality.
(C) REVERSE ACQUISITION CANDIDATE. A mature and businesslike evaluation of our
affairs requires the consideration of certain possible eventualities which,
although uncertain and which may not occur, are none the less the kind of events
we must be consider. It is possible that we will attract sufficient referrals
from its service arrangement with Reliant to provide an incentive to continue
with our present business plan, to acquire additional equipment and possibly
establish a new and different location for its operations. It is also reasonable
to consider that a continuing relationship with Reliant would result in
Reliant's becoming the substantial owner of all or most all of our equipment,
and that we may not acquire additional equipment and continue to seek customers
for it services as presently described. In that case we would continue to own
the diminishing assets of royalties from Reliant, but would not be engaged in
generating new revenues.
The logical outcome of the second eventuality would be to seek a profitable
business opportunity. The acquisition of such an opportunity could and likely
would result in some change in control of our corporation at such time. This
would likely take the form of a reverse acquisition. That means that we would
likely acquire businesses and assets for stock in an amount that would
effectively transfer control to the acquisition target company or ownership
group. It is called a reverse-acquisition because it would be an acquisition by
us in form, but would be an acquisition of us in substance. Capital formation
issues for the future would arise only when targeted businesses or assets have
been identified. Until such time, we have no basis upon which to propose any
substantial infusion of capital from sources outside of our circle of
affiliates.
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PART II: OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
EXHIBIT INDEX
FINANCIAL STATEMENTS AND DOCUMENTS
FURNISHED AS A PART OF THIS REGISTRATION STATEMENT
Exhibit F3Q-00: Financial Statements (Un-Audited) April 30, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-Q Report for the Third Quarter ended April 30, 2000, has been signed
below by the following person on behalf of the Registrant and in the capacity
and on the date indicated.
EDITWORKS, LTD.
Dated: April 30, 2000
by
/s/ /s/
J. Dan Sifford Jena M. Harry
president/director secretary/director
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EXHIBIT F3Q-2000
UN-AUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED APRIL 30, 2000
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EDITWORKS, LTD.
BALANCE SHEET
For the fiscal year ended July 31, 1999
And the nine months ended April 30, 2000
<TABLE>
<CAPTION>
<S> <C> <C>
April 30, July 31,
2000 1999
----------- ----------
CURRENT ASSETS
Cash $ 1,285 $ 165
Accounts receivable 85,885 37,886
----------- ----------
TOTAL CURRENT ASSETS 87,170 38,051
OTHER ASSETS
Organizational Costs 4,913
Editing equipment 176,722 176,372
Depreciation (50,416) (22,831)
----------- ----------
TOTAL OTHER ASSETS 126,306 158,454
TOTAL ASSETS 213,476 196,505
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable 138,115 21,513
----------- ----------
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value; authorized 50,000,000
shares; issued and outstanding, 7,104,200 shares
and 7,312,200 shares respectively 7,312 7,104
Additional Paid-In Capital 290,230 264,438
Accumulated Equity (Deficit) (222,181) (96,550)
Total Stockholders' Equity 75,361 174,992
----------- ----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 213,476 196,505
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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EDITWORKS, LTD.
STATEMENTS OF LOSS AND ACCULATED DEFICIT (UNAUDITED)
For the fiscal year ended July 31, 1999
And the nine months ended April 30, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C>
From inception on
August 20,1998
through
April 30, July 31, April 30,
2000 1999 2000
---------- ---------- ------------------
Revenues 34,200 72,663 106,863
General and administrative expenses 159,831 169,213 329,044
Net Loss from Operations (125,631) (96,550) (222,181)
Net Income (Loss) (125,631) (96,550) (222,181)
========== ========== ==================
Loss per Share (0.01755) (0.01449) (0.03215)
========== ========== ==================
Weighted Average
shares outstading 7,158,200 6,661,700 6,909,950
========== ========== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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EDITWORKS, LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)(UNAUDITED)
For the period from inception of the Development Stage
On August 20, 1998, through July 31, 1999
And the nine months ended April 30, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Additional Accumulated Total Stock-
Common Par Paid-In Equity holders' Equity
Stock Value Capital (Deficit) (Deficit)
--------- ------ ----------- ------------- -----------------
Common Stock issued at inception 6,042,200 $6,042 $ 0 $ 0 $ 6,042
Sale of Common Stock 1,062,000 1,062 264,438 0 0
Net (loss) during period 0 0 0 (96,550) 0
Balance at July 31, 1999 7,104,200 $7,104 $ 264,438 ($96,550) $ 174,992
Sale of Common Stock 208,000 208 25,792 0 0
Net (loss) during period 0 $ 0 $ 0 ($125,631) $ 0
Balance at April 30, 2000 7,312,200 $7,312 $ 290,230 ($222,181) $ 75,361
</TABLE>
The accompanying notes are an integral part of these financial statements.
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EDITWORKS, LTD.
STATEMENTS OF CASH FLOW (UNAUDITED)
For the fiscal year ended July 31, 1999
And the nine months ended April 30, 2000
<TABLE>
<CAPTION>
<S> <C> <C> <C>
From inception on
August 20,1998
through
April 30, July 31, April 30,
2000 1999 2000
----------- ---------- -------------------
Operating Activities
Net Income (Loss) ($125,631) ($96,550) ($222,181)
Less items not effecting cash (amortization) 26,456 23,960 50,416
Less items not effecting cash
(organizational expense) 4,913 4,913
----------- ----------- -------------------
Net Cash from Operations (94,263) (72,590) (166,853)
Cash Increase (Decrease) Sale of Stock 26,000 265,500 291,500
Cash Increase (Decrease) Investment in
computerized editing equipment (350) (176,372) (176,722)
Cash Increase (Decrease) Accounts payable 118,061 21,513 139,574
Cash Increase Accounts receivable (47,999) (37,886) (85,885)
----------- ---------- -------------------
Beginning Cash 165 -0- -0-
Ending Cash $ 1,285 $ 165 $ 1,285
=========== ========== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
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EDITWORKS, LTD.
NOTES TO FINANCIAL STATEMENTS
for the fiscal year ended July 31, 1999
and for the nine months ended April 30, 2000
1-FORMATION AND OPERATIONS OF THE COMPANY
EditWorks, Ltd. (the Company) was incorporated in the state of Nevada on
August 20, 1998. The Company operates a computer aided, post-production editing
service for the TV, video and movie business using 3D capable computer equipment
developed by the AVID Digital Editing System.The Company is authorized to issue
50,000,000 Common Shares each with a par value of $0.001. During the fiscal
year ended July 31, 1999 the Board of Directors and Shareholders of the Company
authorized the issuance of a minimum of 900,000, and a maximum of 1,200,000 of
its Common Shares in a Regulation D, 504 offering. As of the date of these
statements 1,062,000 shares have been sold pursuant to that offering. During
the period ended April 30, 2000 the Company sold 208,000 of its Common Shares.
2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF ACCOUNTING
Accounting records of the Company and financial statements are maintained
and prepared on an accrual basis.
(b) FISCAL YEAR
The Company's proposed fiscal year end for accounting and tax purposes is
July 31.
(c) ORGANIZATION COSTS
The Company incurred $6,042 of organization costs in 1998. These costs,
which were paid by shareholders of the Company and which were exchanged for
6,042,200 shares of common stock having a par value of $6,042, were being
amortized on a straight line method over a 60 month period through the end of
the fiscal year ended July 31, 1999. The remaining organization costs in the
amount of $4,913 were expensed in the fiscal year beginning August 1, 1999 due
to a change in accounting principals which became effective on January 1, 1999.
(d) CASH EQUIVALENTS
For Financial Accounting Standards purposes, the Statement of Cash Flows,
Cash Equivalents include time deposits, certificates of deposit, and all highly
liquid debt instruments with original maturities of three months or less.
Whatever cash amount included on the Company's Statements of Cash Flow, however,
will be comprised exclusively of cash.
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EditWorks, Ltd.
Notes to Financial Statements
for the fiscal year ended July 31, 1999
and for the nine months ended April 30, 2000
continued
3-PROPERTY AND EXECUTIVE COMPENSATION
(a) PROPERTY:
The Company's offices and all of its records are located at 24843 Del
Prado, Suite 318, Dana Point, California 92629.
(b) EXECUTIVE COMPENSATION:
From inception through February 1999, the Company paid no cash compensation
to its officers or directors. Officers of the Company were reimbursed for
out-of-pocket expenses. Beginning in October 1999, and continuing to the date
of these financial statements, the Company's President has been receiving
compensation in the amount of $5,000 per month. In addition, other Officers may
receive compensation for services performed on behalf of the Company. The terms
of any such compensation will be determined on the basis of the nature and
extent of the services which may be required and will be no less favorable to
the Company than the charges for similar services made by independent third
parties who are similarly qualified. No officer or director, other than the
President, is required to make any specific amount or percentage of his business
time available to the Company.
5-STOCKHOLDERS' EQUITY.
The Company is authorized to issue 50,000,000 shares of common stock having a
par value of $0.001. In August 1998, 6,042,200 shares of Common Stock, were
issued in exchange for organizational costs which were valued by management at a
total of $6,042. In January 1999, 1,062,000 shares of Common Stock, were issued
in exchange for $265,500 in cash. In November and December 1999, 208,000 shares
of Common Stock, were issued in exchange for $26,000 in cash.
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