UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934:
For the Quarterly Period ended September 30, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________ to __________________
Commission file number 0-26919
CYBER MARK INTERNATIONAL CORP.
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(Name of Small Business Issuer in Its Charter)
Delaware N/A
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(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
359 Enford Road, Unit 1
Richmond Hill, Ontario, Canada L4C 3G2
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(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number: (905) 770-4602
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. YES X NO ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES ____ NO. ____
APPLICABLE ONLY TO CORPORATE ISSUERS
As of September 30, 2000, 13,008,600 shares of the Issuer's Common Stock were
outstanding.
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CYBER MARK INTERNATIONAL CORP.
PART I. FINANCIAL INFORMATION Page No.
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets as of September 30,
2000 (Unaudited) and December 31, 1999 3
Consolidated Statements of Operations and Deficit
(Unaudited)for the Three and Nine Months Ended
September, 2000 and 1999 4
Consolidated Statements of Cash Flows (Unaudited)
for the Nine Months Ended September 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation 8
PART II. OTHER - INFORMATION
Item 3 - Default on Senior Indebtedness 10
Item 4 - Submission of Matters to a Vote of Security Holders 10
Item 6 - Exhibits and Reports on Form 8-K 10
2
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Cyber Mark International Corp.
Consolidated Balance Sheets
As at September 30, 2000 (Unaudited) and December 31, 1999
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ASSETS September 30, December 31,
2000 1999
(Unaudited)
Current
Cash and cash equivalents $ - $ 1,521
Investment tax credits receivable 45,050 163,208
Accounts receivable - 9,281
Inventory 24,479 24,479
Prepaid expenses 9,930 5,004
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Total current assets 79,459 203,493
Property and equipment - net 112,334 142,334
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Total assets $ 191,793 $ 345,827
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current
Bank indebtedness $ 32,404 $ 48,503
Accounts payable and accrued liabilities 86,753 126,619
Long-term debt - current portion 148,188 151,098
Advances from shareholder 70,125 77,641
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Total current liabilities 337,470 403,861
Long-term debt 200,000 -
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Total liabilities 537,470 403,861
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STOCKHOLDERS' DEFICIT
Capital stock 1,300 610
Additional paid in capital 760,367 740,367
Cumulative translation adjustment 82,731 (41,217)
Deficit (1,190,075) (757,794)
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Total stockholders' deficit ( 345,677) (58,034)
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Total liabilities and stockholders' deficit $ 191,793 $ 345,827
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements
Page 3
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Cyber Mark International Corp.
Consolidated Statements of Operations and Deficit
(Unaudited)
Three months ended Nine months ended
September 30 September 30
2000 1999 2000 1999
Revenue
Sales $ - $ 175,657 $ - $ 214,629
Other 1,401 131,678 3,676 154,578
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1,401 307,335 3,676 369,207
Cost of sales - 111,008 - 137,797
--------- --------- --------- ---------
Gross profit 1,401 196,327 3,676 231,410
--------- --------- --------- ---------
Expenses
Marketing 5,731 36,026 50,629 67,782
Research and development 21,396 15,189 88,281 27,859
Wages and benefits 39,306 78,294 110,050 108,416
Rent and occupancy 4,911 27,249 18,333 43,649
Professional fees 36,650 16,583 76,030 35,557
Interest 10,787 12,224 28,517 20,434
Office and general 7,326 20,864 18,345 45,994
Telephone 1,960 4,518 9,097 7,308
Insurance 2,025 9,999 6,025 13,299
Depreciation and
amortization 10,000 17,383 30,000 27,973
--------- --------- --------- ---------
140,092 238,329 435,307 398,271
--------- --------- --------- ---------
Net loss $(138,691) $ (42,002) $(431,631) $(166,861)
--------- --------- --------- ---------
Deficit, beginning of period (1,050,734) (511,311) (757,794) (386,452)
Less: dividends (650) - (650) -
--------- --------- --------- ---------
Deficit, end of period $(1,190,075) $ (553,313)$(1,190,075) $(553,313)
========= ========= ========= =========
Loss per share $ (0.04) $ (0.02) $ (0.14) $ (0.06)
========= ========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements
Page 4
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Cyber Mark International Corp.
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
2000 1999
Cash flows from operating activities
Net loss $(431,631) $(166,861)
Adjustments to reconcile net loss to
net cash used by operating activities
Depreciation and amortization 30,000 27,973
Changes in assets and liabilities
Investment tax credits receivable 118,158 17,964
Accounts receivable 9,281 6,654
Inventory - (5,616)
Prepaid expenses (4,926) (16,352)
Accounts payable and accrued liabilities (39,866) 66,729
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Net cash used by operating activities (318,984) (69,509)
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Cash flows from financing activities
Bank indebtedness (16,099) 8,057
Long-term debt 197,090 (25,083)
Advances from shareholder (7,516) (4,839)
Issuance of capital stock 20,040 -
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Net cash provided by financing activities 193,515 (21,865)
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Cash flows from investing activities
Purchase of property and equipment - (8,246)
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Effect of exchange rate changes on cash 123,948 (7,245)
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Increase (decrease) in cash and cash equivalents (1,521) (106,865)
Cash and cash equivalents, beginning of period 1,521 106,865
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Cash and cash equivalents, end of period $ - $ -
========= =========
Supplementary information:
Interest paid $ 28,517 $ 20,434
========= =========
Income taxes paid $ - $ -
========= =========
The accompanying notes are an integral part of these consolidated financial
statements
Page 5
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Cyber Mark International Corp.
Notes to Consolidated Financial Statements
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
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1. The financial information included herein is unaudited; however, such
information reflects all adjustments, consisting solely of normal recurring
adjustments which are, in the opinion of management, necessary for a fair
presentation of the periods indicated. Certain information and footnote
disclosures normally included in financial statements prepared in
conformity with generally accepted accounting principles have been
condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. These condensed financial statements
should be read in conjunction with the consolidated financial statements
and related notes contained in the Company's Annual Report for the twelve
months ended December 31, 1999.
The following is a summary of the significant accounting policies followed
by the Company:
Basis of Presentation
The accompanying consolidated financial statements include the accounts of
the company and its wholly-owned subsidiary. All significant intercompany
transactions and balances have been eliminated in consolidation.
Cash and cash equivalents
The company considers all highly liquid investments with a maturity of
three months or less from time of purchase to be cash equivalents.
Inventory
Inventory is valued at lower of cost or market. Cost is determined on the
first-in-first-out basis.
Property and equipment
Property and equipment are stated at cost. Depreciation is provided on a
straight-line basis over the estimated useful life of the assets, usually
five years. For leasehold improvements, depreciation is provided on
straight-line basis over five years.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates and assumptions.
Page 6
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Cyber Mark International Corp.
Notes to Consolidated Financial Statements
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
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Financial instruments
The company considers the fair value of all financial instruments to be not
materially different from their carrying value at year end.
Translation of foreign currencies
The company uses the local currency as the functional currency and
translates all assets and liabilities at year-end exchange rates, all
income and expense accounts at average rates and records adjustments
resulting from the translation in a separate component of common
shareholders' equity.
Loss per common share
Loss per common share is based on the weighted average number of common
shares (2000 - 12,594,000, 1999 - 12,128,600) outstanding during each
period. Loss per common share is the same for both basic and dilutive since
stock options would be antidilutive and therefore not included in the
calculation.
During the 3 month period ended September 30, 2000 the company issued
100,000 additional common shares as a fee for the arrangement of the
convertible debenture, further described in Item 2.
On July 14, 2000 the company declared a stock dividend of one share of
Common Stock at $.0001 par value for every one share of Common Stock of the
company outstanding, payable on August 7, 2000 to holders of record of the
Common Stock of the company at the close of business on July 21, 2000.
Page 7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
Overview
Because we continue to develop our products and services, we are still
in the earlier stages of development. Therefore, selected financial data
would not be meaningful. Reference is made to the financial statements
elsewhere in this document. Included in this document are the unaudited
financial statements for the nine months ended September 30, 2000 and 1999.
Results of Operations
There were no sales for the nine months ended September 30, 2000
compared to $214,629 for the comparable 1999 period. The company's sales
declined from those in 1999 because it was concentrating on developing new
Windows based software for its games and operational programs. In addition,
the marketing orientation of the company is shifting from sales to revenue
sharing arrangements which has adversely impacted sales and overall
revenues. Because of the lack of sales and shifting marketing focus, cost
of sales and gross profit declined accordingly.
Expenses for the nine months ended September 30, 2000 were $435,307,
an increase of $37,036 from $398,271 for the comparable 1999 period. The
increase was due to an increase in marketing efforts to secure revenue
sharing business and an increase in Research and Development.
The net loss for the period ended September 30, 2000 was $431,631,
compared to $166,861 for the same period in 1999. The net loss per share
increased as a result of lack of sales revenues.
Liquidity and Capital Requirements.
The working capital deficiency of Cyber Mark at September 30, 2000 was
$258,011, compared to a working capital deficiency of $200,368 at December
31, 1999.
The company is in default of certain covenants given to The Business
Development Bank of Canada. The company has not received any notice of
default. Because of the default status, however, this debt is classified as
current.
The company's bank debt was $180,592 at September 30, 2000.
The company has borrowed $200,000 by way of a convertible debenture.
The holder of the note has the right at any time to convert any or all of
the debt into fully paid non-assessable common shares of the company at a
conversion rate equal to one common share for every $.50 of debt. These
funds were received during April to September 2000.
The company has $45,050 worth of Canadian government Investment Tax
Credits, and the company anticipates collecting this amount in the near
term.
We will require additional capital financing to continue to develop
our business and fund sales or revenue sharing arrangements. We will also
need capital to fund operational expenses as well as research and
development and capital expenses. We have determined that the funds needed
for full implementation of our current business plan will be substantial.
If we are unable to raise capital or increase our revenues, we will have to
curtail aspects of our business plan and operations or cease our operations
altogether. We are reviewing our immediate capital requirements and
consulting with investment banking professionals with a view towards
raising additional equity capital. No assurance can be given that the
company will be able to sell its securities or sell them on acceptable
terms.
Page 8
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Forward-Looking Statements
When used in this Form 10-QSB and in future filings by Cyber Mark with
the Securities and Exchange Commission, words or phrases "will likely
result", "management expects", "will continue", "is anticipated", "plans",
"believes", "estimates", "seeks", variation of such words and similar
expressions are intended to identify such forward-looking statements within
the Private Securities Litigation Reform Act of 1995. Readers are cautioned
not to place undue reliance on any such forward-looking statements, each of
which speak only as of the date described below. Actual results may differ
materially from historical earnings and those presently anticipated of
projected. Cyber Mark has no obligation to publicly release the result of
any revisions, which may be made to any forward-looking statements to
reflect anticipated events or circumstances occurring after the date of
such statements.
Page 9
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PART II - OTHER INFORMATION
ITEM 3. DEFAULT ON SENIOR INDEBTEDNESS
The company is in default of its loan from The Business Development Bank of
Canada. The loan amount due is $148,188, interest due is $28,828 and
arrearages are $39,396. The total amount of $148,188 is carried as
long-term debt in current liabilities. The company is in violation of the
payment covenants.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 14, 2000, the company held the annual meeting of stockholders.
At the meeting, one director, Samuel Singal, was elected and the
certificate of amendment was amended to increase the number of authorized
shares of common stock. The results are as follows;
For Against Abstain
--------- ------- -------
Election of Director 4,604,600 - -
Amendment to Certificate
of Incorporation 4,604,600 - 168,000
Item 6. Exhibits and Reports on Form 8-K
Reports on Form 8-K: None
Exhibit No. Exhibit
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(27.1) Financial Data Schedule
Page 10
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Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CYBER MARK INTERNATIONAL CORP.
Dated: October 25, 2000 /s/ Samuel Singal
By: ____________________________________
Name: Samuel Singal
Title: President and Chief Operating
Officer
