<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] 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 0-25433
G.P. Properties, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 88-0377059
- --------------------------------- ------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2155 Newcastle Avenue, Cardiff, California 92007
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(Address of principal executive offices)
(760) 943-7829
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(Issuer's telephone number)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 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 _____
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As of November 22, 1999, the Company had 9,910,000 shares of its $.001 par
value common stock issued and outstanding.
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PART 1 - FINANCIAL INFORMATION
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<CAPTION>
ITEM 1. Financial Statements PAGE
<S> <C>
Balance Sheet at September 30, 1999 (unaudited) and December 31, 1998........................................ 2
Unaudited Statements of Operations for the three month
and nine month periods ended September 30, 1999 and 1998 and cumulative
from inception (October 9, 1997) to September 30, 1999..................................................... 3
Unaudited Condensed Consolidated Statements of Cash Flows for the
nine month periods ended September 30, 1999 and 1998 and cumulative
from inception (October 9, 1997) to September 30, 1999..................................................... 4
Notes to Condensed Consolidated Financial Statements......................................................... 5
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G.P. PROPERTIES, INC.
(A Development Stage Company)
Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
ASSETS September 30, 1999 December 31, 1998
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Unaudited Unaudited
<S> <C> <C>
Current assets:
Cash $ 446,401 $ 24,286
Other 3,137 2,419
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Total current assets 449,538 26,704
Equipment 18,849 12,212
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$ 468,387 $ 38,917
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,166 $ 9,137
Deferred revenue -- 25,000
Due to shareholder 20,000 --
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Total current liabilities 26,166 34,137
Commitments and contingencies -- --
Shareholders' equity:
Common stock 10 1
Additional paid-in capital 714,411 182,031
Common stock subscriptions receivable -- (77,600)
Deficit accumulated during the development stage (272,200) (99,652)
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Total shareholders' equity 442,221 4,780
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$ 468,387 $ 38,917
========= ==========
</TABLE>
See Notes to financial statements.
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G.P. PROPERTIES, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Cumulative from
----------------------------- ----------------------------- Inception
September 30, September 30, September 30, September 30, (October 9, 1997) to
1999 1998 1999 1998 September 30, 1999
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<S> <C> <C> <C> <C> <C>
Revenue 10,508 -- $ 39,351 $ -- $ 41,141
Expenses:
Research and development 18,861 17,281 79,651 52,026 167,295
General and administrative 88,562 3,236 132,249 7,282 146,046
------------- ------------- ------------ ------------- ------------------
Total Expenses 107,423 20,517 211,900 59,308 313,341
------------- ------------- ------------ ------------- ------------------
Net loss $ (96,915) $ (20,517) $ (172,549) $ (59,308) $ (272,200)
============= ============= ============ ============= ==================
Basic and diluted net loss per share $ (.01) $ (.003) $ (0.03) $ (0.01)
============= ============= ============ =============
Basic and diluted weighted average number
of common shares outstanding (1) 6,931,967 6,000,000 6,375,248 5,640,000
============= ============= ============ =============
</TABLE>
(1) Basic and diluted weighted average number of common shares outstanding have
been retroactively restated to give effect to the reverse merger.
See Notes to financial statements.
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G.P. PROPERTIES, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Cumulative from
Inception
Nine Months Ended (October 9, 1997) to
--------------------------------------------
September 30, 1999 September 30, 1998 September 30, 1999
------------------- -------------------- ----------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (172,548) $ (59,308) $ (272,200)
Adjustments to reconcile net loss to net
used by operating activities:
Depreciation 2,108 1,501 3,349
Compensation expense contributed to capital 32,400 41,977 94,432
Increase in prepaid franchise tax - (800) (800)
(Increase) decrease in due from shareholder (18) (1,833) (1,636)
(Increase) decrease in deposits (700) - (700)
(Decrease) increase in accounts payable (2,983) 4,510 6,153
Increase in deferred revenue (25,000) - -
------------------- -------------------- ----------------------
Net cash provided by operating activities (166,741) (13,953) (171,402)
Cash flows from investing activities:
Purchases of equipment (8,744) (7,452) (22,197)
Advance from shareholder 20,000 - 20,000
Cash flows from financing activities:
Issuance of common stock 500,000 - 521,000
Payment of subscriptions receivable 77,600 21,400 99,000
------------------- -------------------- ----------------------
Net increase (decrease) in cash 422,115 (5) 446,401
Cash, beginning of period 24,286 8,797 -
------------------- -------------------- ----------------------
Cash, end of period $ 446,401 $ 8,792 $ 446,401
=================== ==================== ======================
Non-cash investing and financing activities:
Issuance of common stock for
subscriptions receivable $ - $ 75,000 $ 99,000
=================== ==================== ======================
</TABLE>
See Notes to financial statements.
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G.P. PROPERTIES, INC.
(A Development Stage Company)
Notes to Financial Statements
(Unaudited)
1. Organization and summary of significant accounting policies
- --------------------------------------------------------------
Organization
G.P. Properties, Inc., a Nevada corporation (the "Company"), was formed on
October 7, 1997 to engage in the business of designing and marketing its
proprietary software products that allow on-line users to create their own
websites using their own browsers. The Company is classified as a development
stage company because its principal activities involve obtaining capital and
rights to certain technology, and conducting product development activities.
Principles of consolidation
The accompanying consolidated financial statements include the amounts of the
Company and its wholly owned subsidiary Kwik Web, Inc., a California
corporation. All significant intercompany transactions and balances have been
eliminated in consolidation.
Interim periods
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB and do not include all of the
information required by generally accepted accounting principles for complete
financial statements. In the opinion of the Company's management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the three
months and nine months ended September 30, 1999 are not necessarily indicative
of results for any future period. These statements should be read in conjunction
with the consolidated financial statements and notes thereto for the year ended
December 31, 1998 included in the Company's Form 10-KSB for the fiscal year
ended June 30, 1999.
2. Merger Agreement
- -------------------
In August 1999, the Company and Kwik Web agreed to merge under a Securities
Purchase Agreement and Plan of Reorganization whereby the Company issued
6,000,000 shares of common stock in exchange for all of the outstanding common
shares of Kwik Web, the Company retained its 3,510,000 shares of common stock,
had no assets, liabilities or operations and the principal of Kwik Web assumed
control of the merged entity. Accordingly, Kwik Web was deemed the accounting
acquirer of the Company in this reverse merger. Subsequent to the reverse
merger, the Company issued 400,000 shares of stock for $500,000.
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ITEM 2. Management's Discussion and Analysis
The Company is engaged in the business of designing and marketing its
proprietary software products that allow on-line users to create websites using
their own browsers. The Company was formed in October 1997 and to date has
focused its efforts on the development of its software products.
Kwik Web Reorganization.
Pursuant to a Securities Purchase Agreement and Plan of Reorganization
dated August 6, 1999 ("Reorganization Agreement") by and among the Company, and
the shareholders of Kwik Web, Inc., a California corporation ("Kwik Web
Shareholders"), on August 26, 1999 the Company consummated a series of
transactions (the "Reorganization") which resulted in a change of control of the
Company. Pursuant to the Reorganization Agreement, the Company issued 6,000,000
shares of its common stock in exchange for all of the outstanding capital shares
of Kwik Web. At the completion of the Reorganization, the Company had
approximately 9,510,000 shares of its common stock outstanding, approximately
63% of which were held by the former Kwik Web Shareholders. Upon the completion
of the Reorganization, Richard Kaestner and Alex Tsakaris, the former directors
of Kwik Web, were appointed as directors of the Company.
Since the Kwik Web Shareholders owned approximately 63% of the outstanding
shares of the common stock of the Company after giving effect to the
Reorganization, Kwik Web was deemed the accounting acquirer and the Company's
acquisition of Kwik Web has been accounted for as a reverse merger under the
purchase method. Accordingly, from an accounting standpoint, Kwik Web's equity
is carried forward as the equity of the combined entity.
Liquidity and Financial Condition.
As of the date of this report, the Company has conducted limited marketing
of its software products and, consequently, from the inception of operations in
October 1997 through September 30, 1999, the Company generated only $41,141 of
gross revenue from sales of its products.
The Company has financed its activities to date from the sale of its
securities. In September 1999, the Company sold 400,000 shares of Common Stock,
at a price of $1.25 per share, for the gross proceeds of $500,000 to one private
investor. The Company intends to continue to fund its operations from the sale
of its securities until such time as it can operate on a profitable basis.
As of September 30, 1999, the Company had working capital of $423,372 and
stockholders' equity of $442,221. The Company's plan of operations over the
next 12 months includes establishing strategic partnerships with Internet
service providers, telecommunications companies, content providers and other
Internet portals and communities that intend to offer website building services
to their members. In addition to its working capital on hand as of the date of
this report, the Company believes that it will require, at least, an additional
$1,000,000 of capital over the next 12 months in order to fund the marketing of
its software products and to finance the continuing losses from operations as
the Company endeavors to build revenue and reach profitable operations. There
can be no assurance that the Company will be able to obtain sufficient
additional capital in order to fund the Company's working capital requirements
in a timely manner.
Year 2000 Issue
The Year 2000 issue is the result of computer programs, microprocessors,
and embedded date reliant systems using two digits rather than four to define
the applicable year. If such programs are not corrected, date data concerning
the Year 2000 could cause many systems to fail, lock up or generate erroneous
results. The Company considers a product to be "Year 2000 compliant" if the
product's performance and functionality are unaffected by processing of dates
prior to, during and after the Year 2000, but only if all products (for example
hardware, software and firmware) used with the product properly exchange
accurate date data with it.
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The Company believes that its software products, internal systems,
equipment and processes are Year 2000 compliant. A formal budget has not been
established, and the cost to the Company of achieving Year 2000 compliance is
evolving; however, it is not currently expected to have a material effect on the
Company's financial condition or results of operations.
Nevertheless, the Company believes that it may be possible that litigation
may be brought against vendors, including the Company, of all component products
of systems that are unable to properly manage data related to the Year 2000. The
Company's agreements with customers and end users typically contain provisions
designed to limit the Company's liability for such claims. It is possible,
however, that these measures will not provide protection from liability claims,
as a result of existing or future federal, state or local laws or ordinances or
unfavorable judicial decisions. Any such claims, with or without merit, could
result in a material adverse effect on the Company's business, financial
condition and results of operations, customer satisfaction issues and potential
lawsuits.
Forward Looking Statements
This report contains forward-looking statements that are based on the
Company's beliefs as well as assumptions made by and information currently
available to the Company. When used in this report, the words "believe,"
"expect," "anticipate," "estimate" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties and assumptions set forth in the Company's Annual report on
Form 10-KSB for the fiscal year ended June 30, 1999, including, without
limitation, the Company's recent commencement of commercial operations and the
risks and uncertainties concerning the acceptance of its services and products
by its potential customers; the Company's present financial condition and the
risks and uncertainties concerning the availability of additional capital as and
when required; technological changes; increased competition; and general
economic conditions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those anticipated, estimated, or projected. The Company
cautions potential investors not to place undue reliance on any such forward-
looking statements, all of which speak only as of the date made.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
Inapplicable.
Item 2. Changes in Securities.
---------------------
Inapplicable.
Item 3. Defaults Upon Senior Securities.
-------------------------------
Inapplicable.
Item 4. Submission of Matters to a Vote of Security Holders.
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Inapplicable.
Item 5. Other Information.
-----------------
Inapplicable.
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Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
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2.1 Securities Purchase Agreement and Plan of
Reorganization dated August 6, 1999 between the Company and Kwik Web, Inc.
(Filed as an exhibit to the Company's Current report on Form 8-K dated September
16, 1999 (File No. 0-25433) incorporated herein by reference).
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
The Company filed a Current Report on Form 8-K dated August 26, 1999 to
disclose the terms of its reorganization with Kwik Web. On November 19, 1999,
the Company filed an amendment to its Form 8-K which included both the
historical and pro forma financial statements of Kwik Web. The financial
statements included in the amendment to the Form 8-K included the following:
. audited financial statements of Kwik Web as of December 31, 1998, for
each of the two fiscal years ended December 31, 1998 and cumulative
from inception (October 9, 1997) to December 31, 1998.
. interim unaudited financial statements of Kwik Web, Inc. as of
September 30, 1999, for the nine month period ended September 30, 1999
and cumulative from inception (October 9, 1997) to September 30, 1999;
and
. unaudited pro forma condensed statements of operations for the nine
months ended September 30, 1999 and the year ended December 31, 1998.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
G.P. Properties, Inc.
(Registrant)
Dated: November 22, 1999 By: /s/ RICHARD KAESTNER
--------------------------------
RICHARD KAESTNER,
President
-8-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 446,401
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 449,358
<PP&E> 18,849
<DEPRECIATION> 0
<TOTAL-ASSETS> 468,387
<CURRENT-LIABILITIES> 26,166
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 714,411
<TOTAL-LIABILITY-AND-EQUITY> 468,387
<SALES> 39,351
<TOTAL-REVENUES> 39,350
<CGS> 0
<TOTAL-COSTS> 211,900
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (172,549)
<INCOME-TAX> 0
<INCOME-CONTINUING> (172,549)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (172,549)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
