UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB Amendment 1
EZ TALK, INC.
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(Name of Small Business Issuer in its Charter)
Florida 65-0867538
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(State or other jurisdiction of (I.R.S. Employer Identification no.)
incorporation or organization)
222 Lakeview Avenue, Suite 160-217
West Palm Beach, FL 33401
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 832-5699
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered Each class to be registered
None None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value per share
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(Title of class)
Copies of Communications Sent to:
Donald F. Mintmire
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
Tel: (561) 832-5696 - Fax: (561) 659-5371
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Part I
Item 1. Description of Business.
(a) Business Development.
EZ Talk, Inc. (hereinafter referred to as the "Company" or "EZT") was
organized under the laws of the State of Florida on June 10, 1998. The Company
was organized by A. Rene Dervaes, Jr., (hereinafter "Dervaes"), the President
and director of the Company, for the purpose of engaging in the business of
selling/marketing a universal, hands-free mobile speaker for mobile phones. In
this regard, the Company retained the services of Ms. Johanna Bonnier,
(hereinafter "Bonnier"). It is anticipated that the Company will benefit from
the synergy expected to result from the combination of the specialized working
experience and expertise of Mr. Dervaes and Ms. Bonnier's marketing and sales
experience. Mr. Dervaes intends to rely upon his national and international
contacts in the distribution sectors of various countries. These contacts were
developed in his prior activities in the heavy equipment and consumer product
business. (See "Executive Officers and Directors".). These distribution networks
and contacts will be natural conduits for the sale and distribution of EZT
products. Currently universal speakers for mobile phones exist and no decision
has been made regarding a EZT speaker under its own label. EZT intends to
explore marketing rights to foreign manufactured and imported speakers in its
initial contract program. EZT will contract with local repair service facilities
if necessary for repair and service of products. Manufacturer of products with
existing service facilities will be required to make such service facilities
available to consumers if EZT markets such products. EZT does not presently
intend to engage in the service business. The Company's executive offices are
presently located at 222 Lakeview Avenue, Suite 160, West Palm Beach, 33401-
6145.
The Company is filing this Form 10-SB on a voluntary basis so that the
public will have access to the required periodic reports on the Company's
current status and financial condition. The Company will file periodic reports
in the event its obligation to file such reports is suspended under the
Securities and Exchange Act of 1934 (the "Exchange Act").
The Company generally has been inactive, having conducted no business
operations except organizational and fund raising activities since its
inception. EZT received gross proceeds in the amount of $60,000 from the sale of
1,050,000 shares of common stock, $.0001 par value per share (the "Common
Stock"), in two(2) offerings conducted pursuant to Section 3(b) of the
Securities Act of 1933, as amended (the "Act"), and Rule 504 of Regulation D
promulgated thereunder ("Rule 504"). These offerings were made in the State of
New York and Florida. The Company undertook its first offering of shares of
Common Stock pursuant to Rule 504 on June 15, 1998 and its second offering of
shares of Common Stock pursuant to Rule 504 on September 15, 1998. A
Confidential Offering Circular was used in connection with these offerings, and
a summary of the business plan of the Company was included with each Offering
Circular.
There are no preliminary agreements or understandings between the Company
and its officers and directors or affiliates or lending institutions with
respect to any loan agreements or arrangements.
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The Company intends to offer securities under Rule 506 of Regulation D
under the Act ("Rule 506) to fund its short and medium term expansion plans.
(See Part I, Item 1. "Description of Business - (b) Business of Issuer.")
See (b) "Business of Issuer" immediately below for a description of the
Company's proposed business. As of the date hereof, the Company has no temporary
staff or clients for placement of the Company's product and services.
(b) Business of Issuer.
General
Since its inception, the Company has conducted no business operations
except for organizational activities and an offering of Common Stock pursuant to
which it has received gross offering proceeds in the amount of $60,000. Further,
the Company has had no employees since its organization. It is anticipated that
the Company's sole executive officer and director, will receive a reasonable
salary for services as the sole executive officer at such time as the Company
commences business operations. (See Part I, Item 6. "Executive Compensation.")
This individual will devote such time and effort as may be necessary to
participate in the day-to-day management of the Company. (See Part I, Item 5.
"Directors, Executive Officers, Promoters and Control Persons - Executive
Officers and Directors.") The Company proposes to engage in the business of
selling and marketing a hands-free mobile speaker for portable phones.
The following discussion of the portable phone accessory market, as it
relates to the Company's medium and long term business objectives, is of course
pertinent only if the Company is successful in obtaining sufficient debt and/or
equity financing to commence operations as a product marketer and, in addition
thereto, is able to generate sufficient profits from operations (which are not
expected in the foreseeable future) and/or additional financing to continue in
business and/or fund the anticipated growth, assuming EZT's proposed business is
successful. There can be no assurance such financing can be obtained or that the
Company's proposed business will be successful.
Dervaes decided to pursue the distribution and sale of a hands-free speaker
for portable phone business via the Company because of the belief that his many
years of business experience, when combined with Bonnier's experience in the
marketing and sales of consumer products, will allow them to develop a
successful marketing and distribution company which will have the advantages of,
among other things, greater availability of capital and potential for growth
through the vehicle of a public company as compared to a privately-held company.
The time required to be devoted by Dervaes and Bonnier, to manage the day-to-day
affairs of the Company is presently estimated to be approximately five to ten
hours per week. This time commitment is expected to increase at such time, if
ever, as EZT obtains sufficient funding with which to commence the search for a
corporate headquarters. (See Part I, Item 1. "Description of Business," (b)
"Business of Issuer - Risk Factors.")
The Company will be dependent upon management and their marketing
expertise, to develop a client base which may purchase their product. Dervaes
and Bonnier have extensive experience in international marketing as well as
finance. The Company plans to use to its advantage Dervaes' international
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reputation and Bonnier's expertise in designing marketing and sales strategies
for consumer products. Nevertheless, while both Dervaes and Bonnier have been
successful in the past, there can be no assurance that they will be successful
in building the client base necessary for the successful operation of the
Company. (See Part I, Item 1. "Description of Business" (b) "Business of Issuer
- - Risk Factors", "Dependence on Management.")
The Company intends to sell and distribute a hands-free mobile speaker
phone technology, initially in the Palm Beach County, Florida area, then
enlarging to the entire State of Florida and thereafter in selected areas
world-wide.
In its initial phase, the Company will operate out of the facility provided
by Dervaes. Dervaes and Bonnier will then design a marketing and sales plan to
find clients for the Company's product. In the event the Company requires
additional capital during this phase, Dervaes has committed to fund the
operation until such time as additional capital is available.
Due to the limited capital available to the Company, the principal risks
during this phase are that the Company is solely dependent upon Dervaes' and
Bonnier's efforts and that the Company will not be able to establish a
sufficiently large and profitable client base to establish the company's
business. (See Part I, Item 1. "Description of Business," (b) "Business of
Issuer - Risk Factors", "Dependence on Management")
In the event such placement is successful, the Company believes that it
will have sufficient operating capital to meet its initial expansion goals and
operating costs for a period of six (6) months. In the event the Company is not
successful in raising such funds, the Company believes that it will not be able
to continue operations past a period of six(6) to nine (9) months.
Even if the Company is successful at raising this additional money, there
can be no assurance that the implementation of the expansion of the initial plan
will increase the number of potential clients. By expanding, the Company may
face unforeseen costs associated with entry into the portable phone accessories
market. The Company still will be largely dependent upon Dervaes and Bonnier to
find suitable clients on a profitable and timely basis. Additionally, Dervaes
and Bonnier may have a conflict between the time demands of an expanding
business and the time requirements of their existing employment positions.
Although the Company believes $100,000 is sufficient to cover operations for the
projected period, there can be no assurance that such funding can cover the
additional risks associated with expansion. (See Part I, Item 1. "Description of
Business," (b) "Business of Issuer Risk Factors", "Conflict of Interest.")
If the Company is able to generate enough revenue during the initial phase
to support the business in Palm Beach County, in the medium term, the Company
plans to expand its distribution to one (1) additional geographic center each
quarter until such time as it has four (4) geographic marketing centers. The
Company intends to open the first expansion territory outside of Palm Beach,
County and in the Northeastern United States, with New York City, specifically,
as the base city in this Northeastern geographic territory since Bonnier is
familiar with the business environment there. The Company anticipates that it
will require an additional $125,000 to fund one (1) year of operations at this
second location, acquisition of office space, equipment and wages for clerical
staff. The Company also believes that Dervaes will be capable of managing
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the Palm Beach County operation at this time, while Bonnier will oversee New
York City. If the Company is not successful in raising additional funds, the
Company believes that it will not be able to operate a second location without
creating a financial drain on the first location. Even if it is successful,
there can be no assurance that the Company will achieve any acceptance in the
Palm Beach County marketplace and may not establish a sufficient client base to
make the venture viable.
During the first quarter in which the New York City office is operating,
the Company intends to seek funding through an additional Rule 506 offering,
seeking an additional $300,000. Such funds will be utilized to open a third and
fourth geographic territory during the following two quarters. While office
space, clerical help, equipment costs and operations for a one (1) year period
are not anticipated to exceed $100,000, the Company believes that both Mr.
Dervaes and Ms. Bonnier should be placed on an annual salary and that
advertising and promotional costs must be increased in order to increase the
accessability to a broader range of potential clients. Also, in order to be
competitive with other portable phone accessory provider companies, the Company
must implement an employee benefit program. The Company plans to open its third
office in Los Angeles, California, since it is the Company's belief that this
geographic territory will provide it very high company recognition in addition
to the Company's belief that this area may have the greatest concentration of
population and portable phone usage in the entire United States. The Company
believes that by covering these geographic territories, that it will have access
to a broader range of potential clients. Further, it believes that operations in
the above mentioned geographic territories will lead to economies of scale which
will increase the potential profitability of the Company. Specific financial
areas in which the Company believes it will have the benefit of the greatest
economies of scale are advertising and expenses in addition to the availability
of a larger portable phone usage market which may lead directly to a higher
dollar volume of portable phone accessory product sales.
The principal risks of these expanded operations would be unforeseen costs
associated with entry into the expanded market, increased costs associated with
a larger geographic area of coverage, and additional clerical employee related
claims associated with a larger support staff, inability to establish a presence
in the expanded market place, increased competition and increased risk
associated with the lapse between sales and the receipt of the stream of cash
flows related to each sale. Should the Company incur any large liabilities
because of its operations, which risk increases as the Company's geographic
coverage expands, such liabilities could have a substantially detrimental effect
upon the Company's financial condition. Further, should the Company be unable to
secure the financing required for the additional expansion, the anticipated
revenues from a reduced operation, while potentially able to meet the operating
needs of the Company, would impede the likelihood of incremental revenue
increases necessary for the long term financial success of the Company. (See
Part I, Item 1. "Description of Business - (b) Business of Issuer - Risk
Factors", "Lack of Working Capital Funding Source.")
The Company plans to monitor closely its medium term operations for
approximately one (1) year. (See Part I, Item 1. "Description of Business - (b)
Business of Issuer - "Business Strategy.") If it has been successful in securing
the necessary financing and if each geographic territory is capable of
sustaining itself, the Company intends to seek additional financing through the
offering of additional equity securities pursuant to Rule 506, conventional bank
financing, small business administration financing, venture capital or the
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private placement of corporate debt for a total of approximately $1,000,000.
There can be no assurance that any of these financing sources will be available
to the Company. If the Company plan to seek additional financing is successful,
the Company intends to open additional offices which compliment the Southern
Florida, Northeastern and Far West operations, beginning in the Midwest and,
then expanding into the Southeast. In addition, the Company foresees the need to
add a marketing manager to oversee these additional operations. The Company
believes that such expansion will achieve similar economies of scale as those
which are anticipated by the Palm Beach County and Northeastern expansion.
Further, the Company believes that such expansion will place the Company in a
position to be a major force in the portable phone accessory product market. If
such further expansion is implemented, Dervaes and Bonnier believe that they
will be able to oversee the operation with the addition of a marketing manager.
The Company has not sought, as of yet, any debt financing since it believes
that any qualified venture capital firm will not loan any funds to the Company
until such time as it is fully reporting and has completed at least two years of
profitable operations. Once it has met their criteria, the Company intends to
seek out funds from licensed venture capital firms and to negotiate terms which
will fit the financial capabilities of the Company. Since the Company does not
intend to seek debt financing until such time as it has several locations
operating successfully, it believes that it can negotiate appropriate placement
and repayment terms for such borrowing. However, there can be no assurance that
such funds will be available to it or that suitable terms which are most
advantageous to the Company can be negotiated. In addition, the Company does
not, at this time, anticipate that it will require substantial leverage to fund
the expanded operations. However, in the event the Company did receive debt
financing and in the event the Company is not successful in sustaining
operations or meeting such debt and defaulted in its payments on the debt, then
such debt financing would result in foreclosure upon the Company's assets to the
detriment of its shareholders.
Although the Company is authorized to borrow funds, as discussed, it does
not intend to do so until such time as it has been operating for a given period
of time. At such time as the Company seeks borrowed funds, it does not intend to
use the proceeds to make payments to the Company's promoters(if any), management
(except as reasonable salaries, benefits and out of pocket expenses) or their
respective affiliates or associates, if any. The Company has no present
intention of acquiring any assets or other property owned by any promoter,
management or their respective affiliates or associates or acquiring or merging
with a business or company in which the Company's promoters, management or their
respective affiliates or associates directly or indirectly have an ownership
interest. Existing conflict of interest provisions are set forth in the Articles
of Incorporation for the Company. Management is not aware of any circumstances
under which this policy, through their own initiative, may be changed. Although
there is no present potential for a related party transaction, in the event that
any payments are to be made to promoters and management such will be disclosed
to the security holders and no such payments will be made in breach of the
fiduciary duty such related persons have to the Company.
There are no arrangements, agreements or understandings between
non-management shareholders and management under which non-management
shareholders may directly or indirectly participate in or influence the
management of the Company's affairs. There are no arrangements, agreements or
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understandings under which non-management shareholders will exercise their
voting rights to continue to elect the current directors to the Company's Board
of Directors.
In the event the Company is successful in securing the additional financing
for its long term expansion, it plans to seek acquisitions of qualified
companies which the Company believes will compliment its overall strategy inside
and outside of the State of Florida. The Company will seek acquisitions of
related companies and expand its operations to eventually encompass the entire
United States. At such time as the Company enters the portable phone accessory
product market outside the State of Florida, the Company will be required to
comply with applicable state regulations regarding such entities. (See Part I,
Item 1. "Description of Business," (b) "Business of Issuer - Industry
Regulations - ;and (b) "Business of Issuer - Risk Factors", Governmental
Regulation and Litigation")
Such increased expansion may increase greatly the risks associated with the
Company's operations. The Company will continue to be dependent upon obtaining a
sufficient client base which may support a high volume of cellular phone
accessory product sales. Increased operations and expansion into other
geographic areas expose the Company to the potential of unfavorable
interpretation of government regulations. In addition, the larger the geographic
market, the greater the chance of increased support staff costs. Furthermore,
expansion will expose the Company to competition from larger and more
established portable phone accessory type firms, many of whom have greater
resources than the Company. The Company anticipates that revenues from such
expanded operations may result in greater revenue fluctuations as a result of
seasonal variations in consumer consumption patterns and the Company's support
staffing needs. Also, the Company will be required to pay wages to a larger
support staff while still experiencing possible delays in direct payments
received from time payment receivables. In addition, with expansion and
implementation of an employee benefit plan which is necessary in order to be
competitive for qualified employees, in the event such plan were to be
disallowed, loss of qualified status could have an adverse effect upon the
Company. Finally, as a larger Company, it could face possible adverse effects
from fluctuations in the general economy and business of its clients. (See Part
I, Item 1. "Description of Business," (b) "Business of Issuer - Risk Factors",
"Competition", "Sensitivity to Interest Rates.")
Another avenue available to the Company to aid its ability to expand is to
seek a reverse merger with a larger, public company. While the Company has no
present intention to seek such a merger, in the event that an appropriate
vehicle were to become known to the Company, the Board of EZT would evaluate the
relative risks and merits of such a merger to the overall plans for the Company.
The Company may also seek to expand by acquisitions of unrelated companies which
engage in related services such as consumer electronic manufacturers and
distributors, cellular phone accessories manufacturers and distributors as well
as other related companies.
As a reporting company, the Company is required to file quarterly reports
on Form 10-QSB and annually on Form 10-KSB and in each case, is required to
provide the financial and other information specified in such forms. In
addition, the Company would be required to file on Form 8-K in the event there
was a change of control, if the Company acquires or disposes of assets, if there
is a bankruptcy or receivership, if the Company changes its certified
accountants, upon the occurrence of other events which may be pertinent to the
security holders, and after certain resignations of directors. Being subject to
such reporting requirements reduces the pool of potential acquisitions or merger
candidates for the Company since such transactions require that certified
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financials must be provided for the acquiring, acquired or merging candidate
within a specified period of time. That is why the Company intends to expand
through internal operations through the short and medium term. At such time as
the Company will seek acquisitions or mergers, it will limit itself to companies
which either already have certified financial statements or companies whose
operations lend themselves to review for a certified audit within the required
time.
Business Strategy
The Company's business strategy, which is dependent upon its obtaining
sufficient financing with which to implement its business plan (of which there
is no assurance), is to acquire the rights to sell, under its own private label
or under the label of a manufacturer, a hands-free mobile speaker for portable
phones. The Company's primary revenues will be based upon its ability to market
and distribute the aforementioned product. The Company's secondary revenue
source will be based upon the income earned from the interest charged to
purchasers who are directly financed by the Company. The Company's revenues are
dependent upon: (i) its ability to acquire the rights to market and distribute a
hands-free mobile speaker for portable phones(of which there is no assurance);
(ii) on the number of clients which purchase its product, (iii) the contracts it
chooses to finance; (iv) the percentage of non-performing receivables and the
Company's ability to sell these receivables to public and/or private investors.
The Company, where possible, will re-sell in the secondary market via a
public and/or private offering or through the sale to a public and/or private
institution or individual buyer, its receivables in order to make available
otherwise committed capital. This reselling of receivables will enable the
Company to re-use its cash which it will re-commit to finance the purchase of
additional product and to replenish its working capital.
The Company's primary direct costs will be (i) salaries to Dervaes and
Bonnier(payroll cost), (ii) marketing and sales related costs, (iii) employment
related taxes and (iv) health benefits. (See Part I, Item 1, "Description of
Business,") Employment related taxes consist of the employer's portion of
payroll taxes required under the Federal Income Contribution Act ("FICA"), which
includes Social Security and Medicare, and federal and state unemployment taxes.
The federal tax rates are defined by the appropriate federal regulations. State
of Florida unemployment tax rates are effected by claims experience, of which
the Company has none at this time. Health benefits are comprised primarily of
medical insurance costs, but also include costs of other employee benefits such
as prescription coverage, vision care, disability insurance and employee
assistance plans.
The Company's gross profit margin will be determined in part by its ability
to minimize and control operating costs; to minimize the discounts provided to
prospective bulk purchasers as an incentive to purchase the Company's product;
and, how successful the Company will be in re-selling its receivables to public
and/or private investors. The Company will attempt to minimize the discounts it
provides to bulk purchasers; however, it will not have many direct costs over
which it can minimize much further with the exception of marketing and sales
related costs.
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The Company's objective is to become a dominant market leader in the sales
of hands-free portable phone speaker systems, beginning in Palm Beach County,
Florida,(the Southeastern United States), expanding to New York City (the
Northeastern United States), and then to Los Angeles(Far West United States)
and, eventually throughout the entire United States, thereafter into selected
geographical territories world-wide. To achieve this objective, and assuming
that sufficient operating capital becomes available, the Company intends to: (i)
provide a comprehensive hands-free portable phone speaker packages with
associated financing programs to both individuals and bulk purchasers and, (ii)
focus initially on Palm Beach County (the Southeastern) and New York
City(Northeastern) United States markets which have high growth opportunities.
Management expects, in the event EZT achieves commercial success initially,
to increase the Company's market penetration through aggressive expansion and,
thereafter, through selected acquisitions. Such acquisitions could include other
cellular phone accessory distributors and suppliers and/or the forming of joint
venture/co-marketing agreement. Management believes that in the current market,
expansion into markets beyond the State of Florida and the Southeastern United
States could be especially attractive because it is believed that the internal
structuring of a successful operation in Florida and the Southeastern United
States can be replicated in other selected geographic areas with high growth
opportunities. However, such expansion presents certain challenges and risks.
There is no assurance that EZT, even if it is successful in establishing a
presence in its targeted markets, will be able to profitably penetrate these
additional geographic territories.
Proposed Company Staffing and Services
Under Dervaes and Bonnier's direction, the Company plans to offer an
attractive hands-free portable phone speaker package with associated financing
programs to both individuals and bulk purchasers. It is anticipated, and subject
to the availability of additional funding, that the Company will employ a
marketing manager, additional clerical support and an accountant as its business
and geographical territories expand.
The Company intends to rely in part on the reputation of Dervaes and the
marketing expertise of Bonnier. They will visit clients and prospective clients
on a regular schedule to allow for the necessary lead time to permit the
development of strong client relationships and sales. To insure client
satisfaction, Dervaes and Bonnier will pursue a pro-active approach with
prospective and existing clients. This pro-active approach will include the
providing of customized marketing information illustrating the Company's product
and various financing program alternatives which may be used to close a sale
with a customer.
Management is unable at this time to forecast with any degree of certainty
the acceptance of the Company's product and financing programs or the expenses
of doing business; however, EZT intends to market its programs competitively in
the Company's target markets.
Sales and Marketing
The Company plans to market its cellular phone hands-free speaker products
through a combination of marketing channels including direct sales, franchises
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and strategic alliances. This approach will allow the Company to quickly access
a large consumer base, develop regional awareness in the market and ultimately
lead to becoming a market leader. Of the three marketing channels intended to be
employed by the Company, direct sales is widely recognized as the most common in
the industry due to the nature of the consuming public; furthermore, strategic
alliances have often been used to provide strong brand name recognition.
Franchising is an alternative means whereby the Company can further expand its
revenue stream not only in obtaining additional outlets for its products but
also by the receipt of franchise revenues. In addition, another benefit to
franchising has been the ability to provide further recognition of a company's
brand-name in the marketplace by consumers. However, there can be no assurance
that any of these techniques will be used or that they will prove to be
successful. The Company intends to compete, assuming that it is successful in
obtaining sufficient financing, with other companies in its target markets who
are currently providing cellular phone accessory product and financing programs.
The Company anticipates that its initial marketing efforts will be in the
area of direct sales. Good quality presentations and professional follow-up with
the clients will be essential to the Company's success. Initially, both Dervaes
and Bonnier will secure the Company's client base. However, the Company
anticipates that it will retain qualified sales personnel either as employees
and/or as independent contractors to establish new customer accounts. The
Company believes that by employing qualified independent contractors and
commission based compensated sales personnel it will be able to penetrate
additional markets at minimal costs. This commission based compensation program
will also reduce overhead costs to the Company.
The Company's ability to obtain the right to sell a cellular phone
hands-free speaker product and, eventually its sales force is, of course
dependent upon management's ability to obtain necessary financing, of which
there can be no assurance. Assuming the availability of adequate funding, EZT
intends to stay abreast of changes in the marketplace by ensuring that it remain
in the field where clients and competitors can be observed firsthand. EZT does
not anticipate obtaining long-term written contracts with clients since such
contracts are not common in the sale of consumer products on an individual
basis; however, management believes that it will be able to obtain medium term
distribution contracts for periods of 2 to 5 years with independent distributors
located in strategic geographic territories.
The Company will attempt to maintain geographic diversity within its
territorial distribution in order to decrease its exposure to downturns or
volatility in any particular distribution area. As part of this territorial
selection strategy, the Company intends to offer its products in those areas
which have a high percentage of cellular phone users per capita as well as a
sufficiently large cellular phone usage population base.
Competition
Many large manufacturers and distributors of cellular phone accessory
equipment, some of which have substantially greater financial resources than
EZT, will compete with EZT's portable phone hands-free speaker systems
equipment. EZT will attempt to focus on specific specialized fields within the
marketplace that require sophisticated technology and support services. EZT
plans to compete principally on the basis of product quality and service.
There are numerous manufacturers of cellular phone accessories that supply
their equipment to United States government agencies and friendly foreign
governments. There is substantial competition within the market and the Company
is not a major competitor. Due to fixed-price contracts and pre-defined contract
specifications prevalent within this market, the Company competes primarily on
the basis of its ability to provide state-of-the-art solutions in this
technologically demanding marketplace while maintaining its competitive pricing.
Industry Regulation
Environment
The Company engages in activities to comply with various federal, state and
local laws and regulations involving the protection of the environment.
Compliance with such laws and regulations does not currently have a significant
effect on the Company's capital expenditures, earnings, or competitive position.
In addition, the Company has no knowledge of any environmental condition that
might individually or in the aggregate have a material adverse effect on the
Company's financial condition.
Regulation
The Company is not directly regulated by any governmental agency in the
United States. However, most of the telecommunications industry generally, are
subject to regulation by the Federal Communications Commission (the "FCC"). The
FCC controls the allocation of transmission frequencies and the performance
characteristics of cellular phone products. As a result of these controls, EZT's
hands-free speaker design specifications must be conformed on an ongoing basis
to meet FCC requirements. The Company believes that this regulation will not
adversely effect EZT's operations.
Outside of the United States, where EZT believes may exist a substantial
amount of future business, many of EZT's customers are government owned and
operated entities, where changes in government economic policy and
communications regulation may be expected to affect in the future, EZT's non-
U.S. business. However, the effect of regulation in countries other than the
U.S., in which EZT does not conduct business, will not be detrimental to EZT's
operations.
As an employer, the Company is subject to all federal, state and local
statutes and regulations governing its relationship with its employees and
affecting businesses generally.
Seasonality
Due to variability of shipments under large contracts, consumer's seasonal
buying patterns , potential variations in the Company's product mix and the
profitability of individual orders, the Company can experience wide quarterly
fluctuations in net sales and income. Consequently, the Company believes it is
more meaningful to focus on annual rather than interim results.
Employees and Consultants
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The Company has had no employees since its organization. In addition,
Dervaes and Bonnier, have served in their positions without compensation through
the date hereof. Dervaes was compensated, in the form of company common stock
for specialized services, including the organization of the company. Bonnier was
compensated, in the form of company common stock, for specialized services
relating to the formation of the Company and for consulting services.
The Company will be dependent upon Dervaes and Bonnier to develop the
client base to buy the Company's product. Dervaes has many years of
international experience as a designer of exclusive consumer products. and was
the co-founder and then Chairman of the A.R. Dervaes Company, Inc. from 1961 to
1982, a 125 employee manufacturer and supplier of equipment to heavy industry.
For the past six (6) years Dervaes has served as the CEO and Chairman of Secured
Retirement International, Inc., specializing in the design and marketing of
proprietary mutual funds. The Company plans to use to its advantage Dervaes'
reputation and extensive business experience. Nevertheless, while Dervaes has
been successful in the past, there can be no assurance that he will be
successful in building the client base and client solicitation program necessary
for the successful operation of the Company.
In addition, the Company plans to use to its advantage the marketing and
sales experience of Ms. Bonnier who has been in charge of the U.S. marketing and
sales for a New York based French cosmetics company.
Facilities
The Company maintains its office at 222 Lakeview Avenue, Suite 160, West
Palm Beach, Florida 33401. Its telephone number is (561) 832-5699. The Company
anticipates that it will have continued use of this location on a rent-free
basis for the foreseeable future and that this arrangement will be adequate for
the Company's needs while it is in the development stage. Assuming that EZT
obtains the necessary additional financing and is successful in implementing its
business plan, no assurance of which can be made, the Company will require its
own offices in Palm Beach County. In such event, management believes that EZT
would be able to locate adequate facilities at reasonable rental rates in Palm
Beach County, suitable for its future needs.
Risk Factors
Before making an investment decision, prospective investors in the
Company's Common Stock should carefully consider, along with other matters
referred to herein, the following risk factors inherent in and affecting the
business of the Company.
1. Development Stage Company. EZT was only recently organized on June 10,
1998, and accordingly, is in the early form of development stage and must be
considered promotional. There are numerous competitors in Palm Beach County,
Florida, New York, New York and nationwide, several of which are large public
companies, which are already positioned in the business and which are better
financed than the Company. There can be no assurance that the Company, with its
very limited capitalization, will be able to compete with these companies and
achieve profitability. (See Part I, Item 1. "Description of Business.")
<PAGE>
2. Minimal Assets, Working Capital and Net Worth. As of May 31, 1999, the
Company's total assets in the amount of $58,242, consisted, principally, of
paid-in capital of $59,895 less accrued expenses. As a result of its minimal
assets, as of May 31, 1999, the Company has very minimal net worth presently.
Further, EZT's working capital is presently minimal and there can be no
assurance that the Company's financial condition will improve. The Company is
not expected to continue in operation without an infusion of capital. In order
to obtain additional equity financing, management may be required to dilute the
interest of existing shareholders. (See Part I, Item 1. "Description of
Business")
3. Need for Additional Capital: Going Concern Qualification Expressed by
Auditor. Without an infusion of capital or profits from operations, the Company
is not expected to continue in operation after the expiration of the period of
six (6)to nine(9)months from the date hereof. Accordingly, the Company is not
expected to become a viable business entity unless additional equity and/or debt
financing is obtained. EZT's independent certified public accountant has
expressed this as a "going concern" qualification to the opinion of Durland and
Company, CPAs P.A. on the Company's financial statements. The Company does not
anticipate the receipt of operating revenues until management successfully
implements its business plan, which is not assured. Further, EZT may incur
significant unanticipated expenditures which deplete its capital at a more rapid
rate because of among other things, the development stage of its business, its
limited personnel and other resources, its lack of an existing contract to sell
cellular phone hands free speakers and its lack of clients and market
recognition. Because of these and other factors, management is presently unable
to predict what additional costs might be incurred by the Company beyond those
currently contemplated to obtain additional financing and achieve market
penetration on a commercial scale in its proposed line of business, i.e.
cellular phone accessory sales. EZT has no identified sources of funds, and
there can be no assurance that resources will be available to the Company when
needed.
4. No Existing Product or Customer Base. While EZT intends to engage in the
sale of a hands free cellular phone speaker product, the Company currently has
not obtained the right to sell and distribute, under its own label and/or under
a manufacturer's label, a hands free cellular phone speaker product.
Furthermore, the Company presently has no customers.
5. Governmental Regulation and Litigation. The Company's business is
subject to federal, state and local regulation and supervision. Such regulation,
among other things, requires the Company's potential products to meet certain
FCC standards applied to cellular phones and related equipment, fees and other
charges related to doing business in the cellular phone industry. Such
regulations exist primarily for the benefit of consumers, rather than for the
protection of dealers of accessory cellular phone products and could limit the
Company's discretion in operating its business. Noncompliance with any
applicable statutes or regulations could result in the suspension or revocation
of any license at issue, as well as the imposition of civil fines and criminal
penalties.(See: "Potential for Unfavorable Interpretation of Government
Regulations" and Part I, Item 1. "Description of Business" (b) "Business of
Issuer-Industry Regulation)
6. Competition. The cellular phone accessory product sales market is highly
competitive. The Company's competitors include local, regional and national
companies, many of which are larger and have greater financial and marketing
<PAGE>
resources than the Company. Historically, cellular phone providers supply a wide
array of accessory products, many of these cellular phone companies have
significantly greater resources than the Company. To the extent that such
companies expand their accessory products to include hands-free speaker phone
accessories, the Company's financial condition, results of operations or cash
flows could be materially and adversely affected. All of the Company's
competitors have significantly greater name recognition and have greater
marketing, financial and other resources than the Company. The Company expects
that there will be significant consolidation in the cellular phone accessory
product business, resulting in increased competition from larger national and
regional companies. There can be no assurance that the Company will be able to
compete effectively against such competitors in the future. (See Part I. Item 1.
"Description of Business," (b) "Business
7. Competition. The cellular phone accessory product sales market is highly
competitive. The Company's competitors include local, regional and national
companies, many of which are larger and have greater financial and marketing
resources than the Company. Historically, cellular phone providers supply a wide
array of accessory products, many of these cellular phone companies have
significantly greater resources than the Company. To the extent that such
companies expand their accessory products to include hands-free speaker phone
accessories, the Company's financial condition, results of operations or cash
flows could be materially and adversely affected. All of the Company's
competitors have significantly greater name recognition and have greater
marketing, financial and other resources than the Company. The Company expects
that there will be significant consolidation in the cellular phone accessory
product business, resulting in increased competition from larger national and
regional companies. There can be no assurance that the Company will be able to
compete effectively against such competitors in the future. (See Part I. Item 1.
"Description of Business," (b) "Business of Issuer-Competition.")
8. Lack of Working Capital Funding Source. The Company expects to receive
payments on the financed hands-free cellular phone speaker receivables on a
timely basis. However, the nature of the market will require that the Company
plan for a reserve to be held for non-performing receivables. In the event that
such reserve for non-performing receivables increases substantially the
Company's working capital will be negatively impacted directly impairing
operations. In addition, as new expansion efforts are undertaken in other
geographic territories, or as the existing office is expanded, there will be
increasing requirements for cash to fund the Company's plans for expansion. The
Company has no current source of working capital funds, and should the Company
be unable to secure additional financing on acceptable terms, its business,
financial condition, results of operations and liquidity would be materially
adversely affected.
9. Absence of Public Market for Shares. The Company's shares of Common
Stock are not registered with the U.S. Securities and Exchange Commission under
the Act. There is no public market for the shares of Common Stock and no
assurance that one will develop. Of such shares, 1,050,000 thereof are
"free-trading" because of their issuance to persons unaffiliated with EZT
pursuant to an exemption from registration provided by Rule 504 of Regulation D
promulgated under Section 3(b) of the Act and, the balance of 1,000,000 of such
shares are "restricted securities." Rule 144 of the Act provides, in essence,
that holders of restricted securities, for a period of one year after the
acquisition thereof from the Company or an affiliate of the Company, may, every
three months, sell to a market maker or in ordinary brokerage transactions an
amount equal to one percent of the Company's then outstanding securities.
Non-affiliates of the Company who hold restricted securities for a period of two
<PAGE>
years may sell their securities without regard to volume limitations or other
restrictions. Resales of the free-trading shares of Common Stock by "affiliates,
control persons and/or underwriters" of EZT, as those terms are defined in the
Act, will be subject to the volume limitations, described in paragraph (e) of
Rule 144. Any transfer or resale of the shares of EZT's Common Stock will be
subject, in addition to the Federal securities laws, to the "blue sky" laws of
each state in which such transfer or resale occurs. A total of 1,000,000 shares
of the Company's Common Stock will be available for resale under Rule 144
commencing on June 10, 1999. Sales of shares of Common Stock under Rule 144 may
have a depressive effect on the market price of the Company's Common Stock,
should a public market develop for such stock. Such sales also might impede
future financing by the Company. (See Part I, Item 4. "Security Ownership of
Certain Beneficial Owners and Managers.")
10. Potential Anti-Takeover and Other Effects of Issuance of Preferred
Stock May Be Detrimental to Common Shareholders. The Company is authorized to
issue up to 10,000,000 shares of preferred stock. $.0001 par value per share
(hereinafter referred to as the "Preferred Stock"); none of which shares has
been issued. The issuance of Preferred Stock does not require approval by the
shareholders of the Company's Common Stock. The Board of Directors, in its sole
discretion, has the power to issue shares of Preferred Stock in one or more
series and to establish the dividend rates and preferences, liquidation
preferences, voting rights, redemption and conversion terms and conditions and
any other relative rights and preferences with respect to any series of
Preferred Stock. Holders of Preferred Stock may have the right to receive
dividends, certain preferences in liquidation and conversion and other rights;
any of which rights and preferences may operate to the detriment of the
shareholders of the Company's Common Stock. Further, the issuance of any shares
of Preferred Stock having rights superior to those of the Company's Common Stock
may result in a decrease in the value of market price of the Common Stock
provided a market exists, and additionally, could be used by the Board of
Directors as an anti-takeover measure or device to prevent a change in control
of the Company.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operations
Since its inception, the Company has conducted minimal business operations
except for organizational and capital raising activities. The Company has not
realized any revenues since its inception due to the fact that its executives,
Dervaes and Bonnier have been primarily engaged in organizational and
promotional activities on behalf of the Company. As a result, from inception
(June 10, 1998) through May 31, 1999, the Company had $0.00 revenue. Total
Company operations and operating expenses as of May 31, 1999 were $8,743. The
Company proposes to engage in the business of manufacturing and sale of cellular
phone accessory products.
Dervaes and Bonnier agreed to develop the business of manufacturing and
sale of cellular phone accessory products for the Company for the following,
among other, reasons: (i) because of their belief that a public company could
exploit its talents, services and business reputation to commercial advantage
and (ii) to observe directly whether the perceived advantages of a public
company, including, among others, greater ease in raising capital, liquidity of
securities holdings and availability of current public information, would
<PAGE>
translate into greater profitability for a public, as compared to a
locally-owned cellular phone accessory products company.
If the Company is unable to generate sufficient revenue from operations to
implement its expansion plans, management intends to explore all available
alternatives for debt and/or equity financing, including but not limited to
private and public securities offerings. Depending upon the amount of revenue,
if any, generated by the Company, management anticipates that it will be able to
satisfy its cash requirements for the next approximately six (6) to nine (9)
months without raising funds via debt and/or equity financing or from third
party funding sources. Accordingly, management expects that it will be necessary
for EZT to raise additional funds in the next six(6) months, if only a minimal
level of revenue is generated in accordance with management's expectations.
Dervaes and Bonnier, at least initially, will be solely responsible for
developing EZT's cellular phone accessory product business. However, at such
time, if ever, as sufficient operating capital becomes available, management
expects to employ additional staffing and sales personnel. In addition, the
Company expects to continuously engage in market research in order to monitor
new market trends, seasonality factors and other critical information deemed
relevant to EZT's business.
In addition, at least initially, the Company intends to operate out of the
West Palm Beach office. EZT may in the future establish its own facilities
and/or acquire computer equipment if the necessary capital becomes available;
however, the Company's financial condition does not permit management to
consider the acquisition of office space or equipment at this time.
Financial Condition, Capital Resources and Liquidity
At May 31, 1999, the Company had assets totaling $58,242 and an accumulated
deficit of $8743 attributable to accrued legal expenses, organization expenses
and professional fees. Since the Company's inception, it has received $60,000 in
cash contributed as consideration for the issuance of shares of Common Stock.
EZT will require normal office equipment (desks, chairs, phones, fax) to
transact its business. In addition an inventory based upon a contract for such
inventory, must be acquired. Personnel to staff such office and sell such
inventory will be required.
EZT's working capital is presently minimal and there can be no assurance
that the Company's financial condition will improve. The Company is expected to
continue to have minimal working capital or a working capital deficit as a
result of current liabilities. The Company, at inception, issued 1,000,000
shares of the Company's Common Stock to Mr. A. Rene Dervaes (850,000 shares),
President and Director of EZT, for the fair value of services rendered valued at
$85.00, and Ms. Johanna Bonnier (150,000 shares), Secretary and Treasurer of
EZT, for the fair value of services rendered valued at $15.00. During June,
1998, and July, 1998 the Company issued and sold an aggregate of 1,000,000
shares of Common Stock to New York, Florida and the Country of France residents
for cash consideration totaling $10,000. No underwriter was employed in
connection with the offering and sale of the shares. The Company claimed the
exemption from registration in connection with each of the offerings provided
under Section 3(b) of the Act and Rule 504 of Regulation D promulgated
<PAGE>
thereunder, Section 359-(f)(2) of the New York Statutes and Section 517.061(11)
of the Florida Code. On or about September 15, 1998, the Company issued and sold
50,000 shares of unrestricted Common Stock to five(5) French nationals for cash
consideration totaling $50,000 at $1.00 per share.
The Company claimed the exemption from registration in connection with each
of the offerings provided under Section 3(b) of the Act and Rule 504 of
Regulation D promulgated thereunder, and Section 517.061(11) of the Florida
Code. Even though management believes, without assurance, that it will obtain
sufficient capital with which to implement its business plan on a limited scale,
the Company is not expected to continue in operation without an infusion of
capital. In order to obtain additional equity financing, management may be
required to dilute the interest of existing shareholders or forego a substantial
interest of its revenues, if any. (See Part I, Item 1. "Description of
Business"; See Part I, Item 4. "Security Ownership of Certain Beneficial Owners
and Managers" and Part I, Item 7. "Certain Relationships and Related
Transactions.")
The Company has no potential capital resources from any outside sources at
the current time. In its initial phase, the Company will operate out of an
office provided by Dervaes. Dervaes and Bonnier will begin by finding customers
for the Company's hands-free portable phone product. To attract products from
manufacturers and distributors, Dervaes and Bonnier will place strategic ads in
heavily traveled locations so that cellular phone users in cars can see the
features and benefits of purchasing a hands-free cellular phone speaker from
EZT. The Company will place advertising in local area newspapers in Palm Beach
County to directly solicit prospective purchasers. In the event the Company
requires additional capital during this phase, Dervaes has committed to fund the
operation until such time as additional capital is available. The Company
believes that it will require six (6) to nine (9) months in order to determine
the market demand potential.
The ability of the Company to continue as a going concern is dependent upon
its ability to obtain the right to distribute and sell a cellular phone hand
free speaker product and/or products and clients who will purchase the Company's
products. Even if the Company can obtain the rights to a cellular phone hands
free speaker product and/or products, there is no assurance that the Company can
attract an adequate number of distributors to sell the Company's product. The
Company believes that in order to be able to expand its initial operations, it
must rent offices in Palm Beach County, hire clerical staff and acquire through
purchase or lease computer and office equipment to maintain accurate financial
accounting and client data. The Company believes that there is adequate and
affordable rental space available in Palm Beach County and sufficiently trained
personnel to provide such clerical services at affordable rates. Further, the
Company believes that the type of equipment necessary for the operation is
readily accessible at competitive rates.
The Company has the ability to continue at its current level of limited
operations for in excess of one (1) year. If, however, the Company is unable to
obtain financing to enter into its projected operations after one (1) year it
will evaluate its options.
Net Operating Losses
The Company has net operating loss carry-forwards of $8,643 expiring at
February 28, 2019. The company has a $1,700 deferred tax asset resulting from
the loss carry-forwards, for which it has established a 100% valuation
<PAGE>
allowance. The Company may not be able to utilize such carry-forwards as the
Company has no history of profitable operations.
Year 2000 Compliance
The Company is currently in the process of evaluating information
technology for its future Year 2000 compliance. Such compliance will only be
required in the event EZT implements its business plan. The Company does not
expect that such cost to be Year 2000 compliant will be material to its
financial condition or results of operations. The Company does not anticipate
any material disruption in its operations as a result of any failure by the
Company to be in compliance.
Forward-Looking Statements
This Form 10-SB includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-SB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), business
strategy, expansion and growth of the Company's business and operations, and
other such matters are forward-looking statements. These statements are based on
certain assumptions and analyses made by the Company in light of its experience
and its perception of historical trends, current conditions and expected future
developments as well as other factors it believes are appropriate in the
circumstances. However, whether actual results or developments will conform with
the Company's expectations and predictions is subject to a number of risks and
uncertainties, general economic market and business conditions; the business
opportunities (or lack thereof) that may be presented to and pursued by the
Company; changes in laws or regulation; and other factors, most of which are
beyond the control of the Company. Consequently, all of the forward-looking
statements made in this Form 10-SB are qualified by these cautionary statements
and there can be no assurance that the actual results or developments
anticipated by the Company will be realized or, even if substantially realized,
that they will have the expected consequence to or effects on the Company or its
business or operations. The Company assumes no obligations to update any such
forward-looking statements.
Item 3. Description of Property:
The Company's offices are located at 222 Lakeview Avenue, Suite 160, West
Palm Beach, Florida 33401. Mr. Dervaes is furnishing, at his own expense, the
facilities until additional funding is obtained. Its telephone number is (561)
832-5699. The Company owns no real or personal property.
Item 4. Security Ownership of Certain Beneficial Owners and Managers
The following table sets forth information as of August 10, 1999, regarding
the ownership of the Company's Common Stock by each shareholder known by the
Company to be the beneficial owner of more than five per cent (5%) of its
outstanding shares of Common Stock, each director and all executive officers and
directors as a group. Except as otherwise indicated, each of the shareholders
<PAGE>
has sole voting and investment power with respect to the shares of Common Stock
beneficially owned.
Amount
Name and Address of Beneficially Percent of
Beneficial Owner Owned Class (1)
---------------- ----- ---------
A. Rene Dervaes, Jr. 850,000 41.46%
222 Lakeview Ave., Ste.160
West Palm Beach, FL 33401
Johanna Bonnier 150,000 7.32%
222 Lakeview Ave., Ste. 160
West Palm Beach, FL 33401
All Executive Officers, Directors 1,000,000 48.78%
- -------------------
(1) Based upon 2,050,000 shares of the Company's Common
Stock issued and outstanding as of February 28, 1999.
Item 5. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(a) of the Exchange Act.
Executive Officers and Directors
Set forth below are the names, ages, positions with the Company and
business experiences of the executive officers and directors of the Company.
Name Age Position(s) with Company
- - ---- --- ------------------------
A. Rene Dervaes, Jr.(2) 61 President & Director
Johanna Bonnier(2) 27 Secretary & Treasurer
- ------------------------
(2) The above-named person may be deemed to be "promoters" and "parents" of
the Company, as those terms are defined under the Rules and Regulations
promulgated under the Act.
All directors hold office until the next annual meeting of the Company's
shareholders and until their successors have been elected and qualify. Officers
serve at the pleasure of the Board of Director. Dervaes and Bonnier will devote
such time and effort to the business and affairs of the Company as may be
<PAGE>
necessary to perform their responsibilities as executive officers and/or
directors of the Company.
Aside from the above officer and director, there are no other persons whose
activities will be material to the operations of the Company at this time.
Dervaes and Bonnier are the sole "promoters" of the Company as such term is
defined under the Act.
Family Relationships
There are no family relationships between or among the executive officers
and director of the Company.
Business Experience
A. Rene Dervaes has served as the President and Director of the Company
since its inception(June 10, 1998).
Mr Dervaes has served as the President and Director of the Company since
its inception on June 10, 1998. As such he acts as the CEO. Mr. Dervaes was the
co-founder and then Chairman of the A.R. Dervaes Company, Inc. from 1961 to
1982, a 125 employee manufacturer and supplier of equipment to heavy industry.
Mr. Dervaes terminated his employment at A.R. Dervaes Company when control of
the company was acquired by third parties. From 1982 to 1985 he was the
President of Khonbu Industries, a designer and nationwide distributor of
exclusive consumer products. From 1978 to 1986 he was the Chairman and CEO of
Eagle Rock Corporation. From 1986 to 1990 he was the Chairman and CEO of Vantage
Industries, an international marketing firm. From 1991 to the present he has
served as the Chairman and CEO of Secured Retirement International, Inc.,
specializing in the design and marketing of proprietary U.S. Treasury and
municipal bond mutual funds. Mr. Dervaes also co-invented a unique finance
product that pays increasing distributions through a patented method for pooling
and distributing bond income. Mr. Dervaes also currently serves as a consultant
for developing businesses in fields that his prior experience qualifies him for.
Ms. Johanna Bonnier has served since the Company's inception (June 10,
1998) as the Company's Secretary and Treasurer.
Ms. Bonnier has served as the Secretary and Treasurer of the Company since
its inception on June 10, 1998. As such she acts as the CFO. Ms. Bonnier
graduated from Cap Sante in Paris, France, where she majored in Marketing and
Business Science, and has been working in various sales capacities. Since
September 1996 Ms. Bonnier has been a sales representative for COSMECO, a French
cosmetics company. She left COSMECO in August, 1998 to work as the Marketing and
Sales Director for the U.S. operations of DMI, another French cosmetics company.
Ms. Bonnier brings valuable marketing and sales knowledge to the Company.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
<PAGE>
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors and persons who own more than 10%
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission (hereinafter referred to as the "Commission")
initial statements of beneficial ownership, reports of changes in ownership and
annual reports concerning their ownership, of Common Stock and other equity
securities of the Company on Forms 3, 4 and 5, respectively. Executive officers,
directors and greater than 10% shareholders are required by Commission
regulations to furnish the Company with copies of all Section 16(a) reports they
file. To the Company's knowledge, Mr. Dervaes comprises all of the Company's
executive officers, directors and greater than 10% beneficial owners of its
common Stock, and has complied with Section 16(a) filing requirements applicable
to him during the Company's fiscal year ended February 28, 1998.
Item 6. Executive Compensation:
The Company, in consideration for various services performed for the
Company, issued to Mr. Rene Dervaes, Jr., the Company's President and Director
850,000 shares of restricted common stock. The Company issued 150,000 shares of
restricted common stock to Ms. Johanna Bonnier for various services performed
for the Company. Except for the above-described compensation, it is not
anticipated that any executive officer of the Company will receive any cash or
non-cash compensation for his or her services in all capacities to the Company
until such time as the Company commences business operations. At such time as
EZT commences operations, it is expected that the Board of Directors will
approve the payment of salaries in a reasonable amount to each of its officers
for their services in the positions of President/Treasurer, Executive Vice
President and Secretary respectively, of the Company. At such time, the Board of
Directors may, in its discretion, approve the payment of additional cash or
non-cash compensation to the foregoing for their services to the Company.
The Company does not provide officers with pension, stock appreciation
rights, long-term incentive or other plans but has the intention of implementing
such plans in the future.
Compensation of Directors
The Company has no standard arrangements for compensating the directors of
the Company for their attendance at meetings of the Board of Directors.
Item 7. Certain Relationships and Related Transactions:
On June 10, 1998, at inception, the Company issued 850,000 shares of
restricted Common Stock to Mr. A. Rene Dervaes, the President and Director of
the Company and record and beneficial owner of approximately 41.46% of the
Company's outstanding Common Stock, in consideration and exchange therefore for
services in connection with the organization of EZT performed for the Company by
him.
On June 10, 1998, at inception, the Company issued 150,000 shares of
restricted Common Stock to Ms. Johanna Bonnier, the Secretary and Treasurer of
the Company and record and beneficial owner of approximately 7.32% of the
<PAGE>
Company's outstanding Common Stock, in exchange for services for the Company in
connection with the organization of EZT.
At the current time, the Company has no provision to issue any additional
securities to management, promoters or their respective affiliates or
associates. At such time as the Board of Directors adopts an employee stock
option or pension plan, any issuance would be in accordance with the terms
thereof and proper approval. Although the Company has a very large amount of
authorized but unissued Common Stock and Preferred Stock which may be issued
without further shareholder approval or notice, the Company intends to reserve
such stock for the Rule 506 offerings contemplated to implement continued
expansion, for acquisitions and for properly approved employee compensation at
such time as such plan is adopted. (See Part I, Item 1. "Description of Business
- - (b) Business of Issuer.")
Item 8. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
PART II
Item 9. Market for Common Equity and Related Stockholder Matters.
No matter was submitted during the Fourth Quarter of the fiscal year ended
May 31, 1999, covered by this report to a vote of the Company's shareholders,
through the solicitation of proxies or otherwise.
(a) Market Information.
There has been no established public trading market for the Common Stock
since the Company's inception on June 10, 1998.
(b) Holders.
As of August 10, 1999, the Company had 36 shareholders of record of its
2,050,000 outstanding shares of Common Stock.
(c) Dividends.
The Company has never paid or declared any dividends on its Common Stock
and does not anticipate paying cash dividends in the foreseeable future.
Item 10. Recent Sales of Unregistered Securities
On June 10, 1998, at inception, the Company issued 850,000 shares of
restricted Common Stock to Mr. A. Rene Dervaes, the President and Director of
<PAGE>
the Company and record and beneficial owner of approximately 41.46% of the
Company's outstanding Common Stock, in consideration and exchange therefore for
services in connection with the organization of EZT performed for the Company by
him.
On June 10, 1998, at inception, the Company issued 150,000 shares of
restricted Common Stock to Ms. Johanna Bonnier, the Secretary and Treasurer of
the Company and record and beneficial owner of approximately 7.32% of the
Company's outstanding Common Stock, in exchange for services for the Company in
connection with the organization of EZT.
On or about June 15, 1998, and on or about July 15, 1998 the Company issued
and sold 1,000,000 shares of Common Stock to New York, Florida and French
residents for cash consideration totaling $10,000 (873,000 shares) to thirty(30)
New York residents at $.01 per share, (30,000 shares) to one(1) Florida resident
at $.01 per share, and (97,000 shares) to three(3) French residents at $.01 per
share).
On or about September 15, 1998, the Company issued and sold 50,000 shares
of unrestricted Common Stock to five(5) French nationals for cash consideration
totaling $50,000 at $1.00 per share.
The facts relied upon the by the Company to make the federal exemption
available include the following: (i) the aggregate offering price for the
offering of the shares of Common Stock did not exceed $1,000,000, less the
aggregate offering price for all securities sold within the twelve months before
the start of and during the offering of the shares in reliance on any exemption
under Section 3(b) of, or in violation of Section 5(a) of, the Act; (ii) no
general solicitation or advertising was conducted by the Company in connection
with the offering of any of the shares; (iii) the fact that the Company has not
been since its inception (a) subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended; (b) an "investment
Company" within the meaning of the Investment Company Act of 1940, as amended;
or (c) a development stage Company that either has no specific business plan or
purpose or has indicated that its business plan is to engage in a merger or
acquisition with an unidentified company or companies, or other entity or
person; and (iv) the required number of manually executed originals and true
copies of Form D were duly and timely filed with the U.S. Securities and
Exchange Commission.
The facts relied upon to make the New York Exemption available include the
following: (i) the aggregate number of persons purchasing the Company's stock
during the 12 month period ending on the date of issuance did not exceed 40
persons(including offerees who reside outside the State of New York); (ii)
neither the offer nor the sale of any of the shares was accomplished by a public
solicitation or advertisement; (iii) that at the time of filing no offering had
yet been made to any resident of the State of New York, (iv) that the offering
is to be made to personal friends, relatives and business associates and other
principals of the issuer, (v) these common shares have been issued or sold in
reliance of Section 359-f(2) of the New York General Business Law, (vi) each
purchaser executed a statement to the effect that the securities purchased have
been purchased for their own account and not for the resale to any other
persons; (vii) that they have adequate means of providing for their current
needs and possible personal contingencies; and (viii) they do not have a need
for liquidity of this investment.
<PAGE>
The facts relied upon to make the Florida exemption available include the
following: (i) sales of the shares of Common Stock were not made to more than 35
persons; (ii) neither the offer nor the sale of any of the shares was
accomplished by the publication of any advertisement; (iii) all purchasers
either had a preexisting personal or business relationship with one or more of
the executive officers of EZT or, by reason of their business or financial
experience, could be reasonably assumed to have the capacity to protect their
own interests in connection with the transaction; (iv) each purchaser
represented that he was purchasing for his own account and not with a view to or
for sale in connection with any distribution of the shares; and (v) prior to
sale, each purchaser had reasonable access to or was furnished all material
books and records of the Company, all material contracts and documents relating
to the proposed transaction, and had an opportunity to question the executive
officers of the Company. Pursuant to Rule 3E-500.005, in offerings made under
Section 517.061(11) of the Florida Statutes, an memorandum is not required;
however each purchaser (or his representative) must be provided with or given
reasonable access to full and fair disclosure of material information. An issuer
is deemed to be satisfied if such purchaser or his representative has been given
access to all material books and records of the issuer; all material contracts
and documents relating to the proposed transaction; and an opportunity to
question the appropriate executive officer. In the regard, Dervaes and Bonnier
supplied such information and was available for such questioning.
Item 11. Description of Securities.
The Company is authorized to issue 50,000,000 shares of Common Stock,
$0.0001 par value. The issued and outstanding shares of Common Stock being
registered hereby are validly issued, fully paid and non-assessable. The holders
of outstanding shares of Common Stock are entitled to receive dividends out of
assets legally available therefor at such times and in such amounts as the Board
of Directors may from time to time determine.
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, have one vote per share in all matters to be voted upon
by the stockholders. A majority vote is required on all corporate action.
Cumulative voting in the election of directors is not allowed, which means that
the holders of more than 50% of the outstanding shares can elect all the
directors as they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any directors. The shares of Common
Stock have no preemptive, subscription, conversion or redemption rights and can
only be issued as fully paid and non-assessable shares. Upon liquidation,
dissolution or winding-up of the Company, the holders of Common Stock are
entitled to receive a pro rata of the assets of the Company which are legally
available for distribution to stockholders.
Preferred Stock
The Company is authorized to issue 10,000,000 shares of Preferred Stock,
$0.0001 par value. Currently there are no issued and outstanding preferred
shares of the Company.
Transfer Agent
The transfer agent and address for the Company:
<PAGE>
Interwest Transfer Co., Inc.
1981 E. Murray Holiday Road
Suite 100
Salt Lake City, Utah 84117
(801) 272-9294
Certain Provision of Florida Law.
Section 607.0902 of the Florida Business Corporation Act prohibits the
voting of shares in a publicly-held Florida corporation that are acquired in a
"control share acquisition" unless the holders of a majority of the
corporation's voting shares (exclusive of shares held by officers of the
corporation, inside directors or the acquiring party) approve the granting of
voting rights as to the shares acquired in the control share acquisition or
unless the articles of incorporation or bylaws specifically state that this
section does not apply. A "control share acquisition" is defined as an
acquisition that immediately thereafter entitles the acquiring party to vote in
the election of directors within each of the following ranges of voting power:
(i) one-fifth or more, but less than one-third of such voting power: (ii)
one-third or more, but less than a majority of such voting power; and, (iii)
more than a majority of such voting power. The Amended Articles of Incorporation
of the Company specifically state that Section 607.0902 does not apply to
control-share acquisitions of shares of the Company.
Item 12. Indemnification of Directors and Officers.
Article X of the Company's Articles of Incorporation contains provisions
providing for the indemnification of directors and officers of the Company as
follows:
(a) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was otherwise serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, has no reasonable cause to believe his conduct to be unlawful.
The termination of any action, suit or proceeding, by judgment, order,
settlement, conviction upon a plea of nolo contendere or its equivalent, shall
not of itself create a presumption that the person did not act in good faith in
a manner he reasonably believed to be in, or not opposed to, the best interests
of the Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe the action was unlawful.
(b) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action or
suit by or in the right of the Corporation, to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
<PAGE>
fees), actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to whether such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation, unless, and only to the extent that, the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
which such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in Sections (a) and (b) of this Article,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the officer,
director, employee or agent is proper under the circumstances, because he has
met the applicable standard of conduct set forth in Section (a) or (b) of this
Article. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote and represented at a meeting
called for that purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding, as authorized in
Section (d) of this Article, upon receipt of an understanding by or on behalf of
the director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article.
(f) The Board of Directors may exercise the Corporation's power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Articles of Incorporation, the Bylaws, agreements, vote of
the shareholders or disinterested directors, or otherwise, both as to action in
his official capacity and as to action in another capacity while holding such
office and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs and
personal representatives of such a person.
<PAGE>
The Company has no agreements with any of its directors or executive
offices providing for indemnification of any such persons with respect to
liability arising out of their capacity or status as officers and directors.
At present, there is no pending litigation or proceeding involving a
director or executive officer of the Company as to which indemnification is
being sought.
Item 13. Financial Statements.
The Financial Statements of EZ Talk, Inc., and Notes to Financial
Statements together with the Independent Auditor's Report of Durland and
Company, CPA's, P.A., required by this Item 13 commence on page F-1 hereof and
are incorporated herein by this reference. The Financial Statements filed as
part of this Report on Form 10-SB are listed in the Index to Financial
Statements below:
Item 14. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
Because the Company has been generally inactive since its inception, it has
had no independent accountant until the retention in November 1998 of Durland
and Company, CPA's, P.A., 340 Royal Palm Way, Suite 204, Palm Beach, Florida
33480. There has been no change in the Company's independent accountant during
the period commencing with the Company's retention of Durland and Company,
CPA's, P.A. through the date hereof.
PART F/S
The Financial Statements of EZT required by Item 310 of Regulation SB
commence on page F-1 hereof in response to Part F/S of this Registration
Statement on Form 10-SB and are incorporated herein by this reference.
INDEX TO FINANCIAL
STATEMENTS For the period from June 10,
1998 (Inception) through May 31, 1999
Independent Auditors' Report ................................... F-2
Balance Sheet.................................................... F-3
Statement of Operations.......................................... F-4
Statement of Stockholders' Equity................................ F-5
Statement of Cash Flows.......................................... F-6
Notes to Financial Statements................................... F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO: The Board of Directors
EZ Talk, Inc.
Palm Beach, Florida
We have audited the accompanying balance sheet of EZ Talk, Inc., a development
stage enterprise, as of February 28, 1999 and the related statements of loss,
changes in stockholders' equity and cash flows for the period from June 10, 1998
(Inception) through February 28, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of EZ Talk, Inc. as of February
28, 1999 and the results of its operations and its cash flows for the period
from June 10, 1998 (Inception) through February 28, 1999 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company has experienced a loss since inception. The
Company's financial position and operating results raise substantial doubt about
its ability to continue as a going concern. Management's plans in regard to
these matters are also described in Note 4. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Durland & Company
Durland & Company, CPAs, P.A.
Palm Beach, Florida
March 25, 1999
F-2
<PAGE>
EZ TALK, INC.
(A Development Stage Enterprise)
Balance Sheets
<TABLE>
<CAPTION>
May 31, 1999 February 28, 1999
(unaudited)
---------------------- ---------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 58,082 $ 58,242
---------------------- ---------------------
Total Current Assets 58,082 58,242
---------------------- ---------------------
Total Assets $ 58,082 $ 58,242
====================== =====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 6,885 $ 6,885
---------------------- ---------------------
Total Current Liabilities 6,885 6,885
---------------------- ---------------------
Total Liabilities 6,885 6,885
---------------------- ---------------------
STOCKHOLDERS' EQUITY
Preferred stock, $0.0001 par value,
authorized 10,000,000 shares; none issued 0 0
Common stock, $0.0001 par value, authorized
50,000,000 shares; 2,050,000 issued and outstanding 205 205
Additional paid in capital 59,895 59,895
Deficit accumulated during the development stage (8,903) (8,743)
---------------------- ---------------------
Total Stockholders' Equity 51,197 51,357
---------------------- ---------------------
Total Liabilities and Stockholders' Equity $ 58,082 $ 58,242
====================== =====================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
EZ TALK, INC.
(A Development Stage Enterprise)
Statements of Loss
<TABLE>
<CAPTION>
From June 10,
1998 (inception)
through
May 31, 1999 February 28, 1999 May 31, 1999
(unaudited) (unaudited)
--------------------- ---------------------- ---------------------
<S> <C> <C> <C>
Revenues $ 0 $ 0 $ 0
--------------------- ---------------------- ---------------------
Expenses
Bank charges 0 43 43
Consulting fees 0 55 55
Consulting fees - related parties 0 100 100
Organization expenses 150 385 535
Professional fees 0 6,500 6,500
Transfer agent fees 10 1,660 1,670
--------------------- ---------------------- ---------------------
Total expenses 160 8,743 8,903
--------------------- ---------------------- ---------------------
Net loss $ (160)$ (8,743)$ (8,903)
===================== ====================== =====================
Net loss per weighted average share, basic $ (.0001) $ (.004) $ (.004)
===================== ====================== =====================
Weighted average number of shares 2,050,000 1,955,513 1,980,000
===================== ====================== =====================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
EZ TALK, INC.
(A Development Stage Enterprise)
Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Deficit
Accumulated
Additional During the Total
Number of Preferred Common Paid-in Development Stockholders'
Shares Stock Stock Capital Stage Equity
-------------- ------------ ---------- ------------ -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
BEGINNING BALANCE, June 10, 1998 (Inception) 0 $ 0 $ 0 $ 0 $ 0 $ 0
June 10, 1998 - services ($0.0001/sh) 1,000,000 0 100 0 0 100
June 15, 1998 - cash ($0.01/sh) 500,000 0 50 4,950 0 5,000
July 15, 1998 - cash ($0.01/sh) 500,000 0 50 4,950 0 5,000
September 15, 1998 - cash ($1.00/sh) 50,000 0 5 49,995 0 50,000
Net loss 0 0 0 0 (8,743) (8,743)
-------------- ------------ ---------- ------------ -------------- -----------------
BALANCE, February 28, 1999 2,050,000 $ 0 $ 205 $ 59,895 $ (8,743) $ 51,357
-------------- ------------ ---------- ------------ -------------- -----------------
Net loss 0 $ 0 $ 0 $ 0 $ (160) $ (160)
-------------- ------------ ---------- ------------ -------------- -----------------
BALANCE, May 31, 1999 (unaudited) $ 2,050,000 $ 0 $ 205 $ 59,895 $ (8,903) $ 51,197
============== ============ ========== ============ ============== =================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
EZ TALK, INC.
(A Development Stage Enterprise)
Statements of Cash Flows
<TABLE>
<CAPTION>
From June 10,
1998 (inception)
through
May 31, 1999 February 28, 1999 May 31, 1999
(unaudited) (unaudited)
-------------------- -------------------- -------------------
<S> <C> <C> <C>
CASH FLOWS FROM DEVELOPMENT ACTIVITIES:
Net loss $ (160) $ (8,743) $ (8,903)
Adjustments to reconcile net loss to net cash used
for development activities
Stock issued in lieu of cash - related parties 0 100 100
Change in assets and liabilities
Increase in accrued expenses 0 6,885 6,885
-------------------- -------------------- ---------------------
Net cash used by development activities (160) (1,758) (1,918)
-------------------- -------------------- ---------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 0 60,000 60,000
-------------------- -------------------- ---------------------
Net cash provided by financing activities 0 60,000 60,000
-------------------- -------------------- ---------------------
Net increase in cash (160) 58,242 58,082
CASH, beginning of period 58,242 0 0
-------------------- -------------------- ---------------------
CASH, end of period $ 58,082 $ 58,242 $ 58,082
==================== ==================== =====================
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
EZ TALK, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
(Information with respect to May 31, 1999 is unaudited)
(1) Summary of Significant Accounting Principles
The Company EZ Talk, Inc. is a Florida chartered development stage
corporation which conducts business from its headquarters in Palm Beach,
Florida. The Company was incorporated on June 10, 1998.
The Company has not yet engaged in its expected operations. The Company's
future operations will be to market a hands-free speaker system for
telephones to various consumer groups. Current activities include raising
additional equity and negotiating with potential key personnel and
facilities.
There is no assurance that any benefit will result from such activities.
The financial statements have been prepared in conformity with generally
accepted accounting principles. The financial statements for the three
months ended May 31, 1999 include all adjustments which in the opinion of
management are necessary for fair presentation. In preparing the financial
statements, management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities as of the date of the
statements of financial condition and operations for the period then ended.
Actual results may differ significantly from those estimates.
The following summarize the more significant accounting and reporting
policies and practices of the Company:
a) Start-up costs Costs of start-up activities, including organization
costs, are expensed as incurred, in accordance with Statement of Position
(SOP) 98-5.
b) Net loss per share Basic is computed by dividing the net loss by the
weighted average number of common shares outstanding during the period.
(2) Stockholders' Equity The Company has authorized 50,000,000 shares of
$0.0001 par value common stock and 10,000,000 shares of $0.0001 par value
preferred stock. The Company had 2,050,000 shares of common stock issued
and outstanding at May 31, 1999. The Company, on June 10, 1998, issued
850,000 founders shares to its president for the value of services rendered
in connection with the organization of the Company. On the same date, the
Company issued 150,000 founders shares to its secretary/treasurer and
director for the value of consulting services rendered in connection with
the organization of the Company. On June 15, 1998, the Company issued
500,000 shares of common stock at $0.01 per share for $5,000 in cash. On
July 15, 1998, the Company issued 500,000 shares of common stock at $0.01
per share for $5,000. On September 15, 1998, the Company issued 50,000
shares of common stock at $1.00 per share for $50,000 in cash.
The Company has no shares of preferred stock issued and outstanding at May
31, 1999.
(3) Income Taxes Deferred income taxes (benefits) are provided for certain
income and expenses which are recognized in different periods for tax and
financial reporting purposes. The Company has net operating loss
carryforwards for income tax purposes of approximately $8,643, expiring at
February 28, 2019.
The amount recorded as deferred tax assets as of February 28, 1999 is
$1,700, which represents the amount of tax benefit of the loss
carryforward. The Company has established a valuation allowance against
this deferred tax asset, as the Company has no history of profitable
operations.
(4) Going Concern As shown in the accompanying financial statements, the
Company incurred a net loss of $8,903 for the period from June 10, 1998
(Inception) through May 31, 1999. The ability of the Company to continue as
a going concern is dependent upon commencing operations and obtaining
additional capital and financing. The financial statements do not include
any adjustments that might be necessary if the Company is unable to
continue as a going concern. The Company is currently seeking financing to
allow it to begin its planned operations.
F-7
<PAGE>
EZ Talk, Inc.
(A Development Stage Enterprise)
Notes to Financial Statements
(5) Related parties During the formation of the Company, the president and
director received 850,000 shares and the secretary/treasurer and director
received 150,000 shares for consulting services valued at $100. A complete
description is included in Note 2.
F-8
<PAGE>
Item 15. Financial Data Schedules and Exhibits and Reports on Form 8-K
Index to Exhibits
Description
3.1 Articles of Incorporation of EZ Talk, Inc. filed June 11, 1998 with an
effective date of June 10, 1998 (filed electronically as Exhibit 3(i).1
with original 10SB filing)
3.2 Bylaws of EZ Talk, Inc. (filed electronically as Exhibit 3(ii)with original
10SB filing)
27.1 Audited Financial Data Schedule from inception, June 10, 1998 through May
31, 1999 fiscal year end
(a) No Reports on Form 8-K were filed during the last quarter of the fiscal
year ended September 30, 1997, covered by this Report on Form 10-SB.
SIGNATURES
--------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
EZ Talk, Inc.
(Registrant)
Date: August 10, 1999 By: /s/ A. Rene Dervaes, Jr.
---------
---------------------------------
A Rene Dervaes, Jr., President
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
Date Signature Title
---- --------- -----
August 10, 1999 By: /s/ A. Rene Dervaes, Jr. President & Director
---------
---------------------------
A. Rene Dervaes, Jr.
August 10, 1999 By: /s/ Johanna Bonnier Secretary & Treasurer
---------
---------------------------
Johanna Bonnier
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001088399
<NAME> EZ Talk, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 11-mos
<FISCAL-YEAR-END> Feb-28-1999
<PERIOD-START> Jun-10-1998
<PERIOD-END> May-31-1999
<EXCHANGE-RATE> 1
<CASH> 58,082
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 58,082
<CURRENT-LIABILITIES> 6,885
<BONDS> 0
0
0
<COMMON> 205
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 58,082
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 8,903
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-BASIC> (.001)
<EPS-DILUTED> 0
</TABLE>
