UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2000
--------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 000-26899
---------
E-FINANCIAL DEPOT.COM, INC.
---------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 33-0809711
-------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
150 - 1875 CENTURY PARK EAST
CENTURY CITY, CALIFORNIA 90067
-------------------------------
(Address of principal executive offices)
(877) 739-3812
--------------
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
19,556,880 common shares issued and outstanding as of November 10, 2000
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
E FINANCIAL DEPOT.COM, INC.
Quarterly Report on Form 10-QSB for the
Quarterly Period Ending September 30, 2000
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets:
September 30, 2000 and December 31, 1999
Consolidated Statements of Losses and Comprehensive Losses:
Three Months Ended September 30, 2000 and 1999
Nine Months Ended September 30, 2000 and 1999
Consolidated Statements of Cash Flows:
Three Months Ended September 30, 2000 and 1999
Nine Months Ended September 30, 2000 and 1999
Notes to Consolidated Financial Statements:
September 30, 2000
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
EXHIBITS
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 10.8
Exhibit 27
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. (unaudited):
<TABLE>
<CAPTION>
E FINANCIAL DEPOT.COM, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30,2000
ASSETS (UNAUDITED) DECEMBER 31, 1999
-------------------------------------------------------------------------- ------------------- -------------------
<S> <C> <C>
Current assets:
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,903 $ 11,859
Accounts receivable , less allowance for
doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 572,474 119,610
Marketable securities available for sale . . . . . . . . . . . . . . . . . 17,938 51,836
Accrued tax benefit. . . . . . . . . . . . . . . . . . . . . . . . . . . . - 17,980
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 35,005
------------------- -------------------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . 599,315 236,290
Property and equipment - at cost, less accumulated depreciation . . . . . 578,511 31,156
Other assets:
Note receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000 -
Financing charges net of amortization. . . . . . . . . . . . . . . . . . . 253,926 -
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,334 -
Goodwill and other intangible assets, net. . . . . . . . . . . . . . . . . 16,983,368 -
------------------- -------------------
$ 19,454,454 $ 267,446
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
--------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . . . $ 2,909,226 $ 105,188
Unearned revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,463 30,750
Notes payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,179,391 -
Deferred income tax expense. . . . . . . . . . . . . . . . . . . . . . . . 985 44,610
------------------- -------------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 4,129,065 180,548
Convertible debenture. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,100,000 -
Stockholders' equity:
Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,246 12,500
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 18,172,403 -
Retained earnings (deficiency) . . . . . . . . . . . . . . . . . . . . . . (5,936,248) 96,907
Unrealized gain or (loss) on securities available-for-sale . . . . . . . . (30,012) (22,509)
------------------- -------------------
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . 12,225,389 86,898
------------------- -------------------
$ 19,454,454 $ 267,446
=================== ===================
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
E FINANCIAL DEPOT.COM, INC.
CONSOLIDATED STATEMENTS OF INCOME ( LOSSES) AND
COMPREHENSIVE INCOME (LOSSES)
(UNAUDITED)
For the Three For the Three For the Nine
Months Ended Months Ended Months Ended
September 30 September 30 September 30
2000 1999 2000
--------------- --------------- --------------
<S> <C> <C> <C>
Fee income, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,290,243 $ 288,207 $ 1,755,068
Costs and expenses:
Selling, general and
administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,816,775 303,255 7,592,361
Interest expense, net. . . . . . . . . . . . . . . . . . . . . . . . . . . 110,485 - 152,696
--------------- --------------- --------------
2,927,260 303,255 7,745,057
--------------- --------------- --------------
Operating income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . (1,637,017) (15,048) (5,989,989)
Realized gain or (loss)
on securities available
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,912) 9,525 (43,166)
--------------- --------------- --------------
Net income (loss) before
provision for income tax . . . . . . . . . . . . . . . . . . . . . . . . . (1,676,929) (5,523) (6,033,155)
Income tax (benefit) or
expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - -
--------------- --------------- --------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,676,929) $ (5,523) $ (6,033,155)
=============== =============== ==============
Other comprehensive
income (loss), net of tax
Unrealized holding gains
(losses) on securities
available-for-sale arising
during the period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,582) - (7,503)
--------------- --------------- --------------
Comprehensive income
(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (1,683,511) $ ( 5,523) $ ( 6,040,658)
=============== =============== ==============
Net income (loss) per
common share (basic
and assuming dilution) . . . . . . . . . . . . . . . . . . . . . . . . . . $ (.09) $ ( .00) $ (.37)
=============== =============== ==============
Weighted average
common shares
outstanding* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,237,004 12,500,000 16,335,803
*Restated to reflect re-capitalization in September, 1999
The accompanying notes are an integral part of these financial statements
E FINANCIAL DEPOT.COM, INC.
CONSOLIDATED STATEMENTS OF INCOME ( LOSSES) AND
COMPREHENSIVE INCOME (LOSSES)
(UNAUDITED)
For the Nine
Months Ended
September 30
1999
--------------
<S> <C>
Fee income, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 880,182
Costs and expenses:
Selling, general and
administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438,523
Interest expense, net. . . . . . . . . . . . . . . . . . . . . . . . . . . -
--------------
438,523
--------------
Operating income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . 441,659
Realized gain or (loss)
on securities available
for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,667
--------------
Net income (loss) before
provision for income tax . . . . . . . . . . . . . . . . . . . . . . . . . 470,326
Income tax (benefit) or
expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (122,097)
--------------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 348,229
==============
Other comprehensive
income (loss), net of tax
Unrealized holding gains
(losses) on securities
available-for-sale arising
during the period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
--------------
Comprehensive income
(loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 348,229
==============
Net income (loss) per
common share (basic
and assuming dilution) . . . . . . . . . . . . . . . . . . . . . . . . . . $ .03
==============
Weighted average
common shares
outstanding* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500,000
*Restated to reflect re-capitalization in September, 1999
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
E FINANCIAL DEPOT.COM, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Nine Months For the Nine Months
Ended September Ended September
--------------------- ---------------------
30,2000 30,1999
--------------------- ---------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) from operating activities . . . . . . . . . . . . . $ (6,033,155) $ 348,229
Adjustments to reconcile net income to net cash:
Realized loss (gain) on securities available for sale. . . . . . 43,166 (28,667)
Depreciation and amortization. . . . . . . . . . . . . . . . . . 232,836 1,600
Common stock issued in exchange for services . . . . . . . . . . 3,669,706 -
Provision for uncollectible receivables. . . . . . . . . . . . . 158,964 -
(Increase) decrease in:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . (452,864) (233,110)
Other assets and adjustments, net. . . . . . . . . . . . . . . . 188,349 (99,323)
Increase (decrease) in:
Accounts payable and accrued expenses. . . . . . . . . . . . . . 2,804,038 (924)
--------------------- ---------------------
Net cash (used in)/ provided by operating activities . . . . . . . . . . . 611,040 (12,195)
Cash flows used in investing activities:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . (563,939) (7,462)
Capitalized software and development. . . . . . . . . . . . . . . . . (2,206,307) -
Note receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,000,000) -
--------------------- ---------------------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . (3,770,246) (7,462)
Cash flows (used in)/provided by financing activities:
Proceeds from loans . . . . . . . . . . . . . . . . . . . . . . . . . - 19,866
Proceeds from convertible debentures. . . . . . . . . . . . . . . . . 3,100,000 -
Proceeds from sale of common stock. . . . . . . . . . . . . . . . . . 56,250 -
--------------------- ---------------------
Net cash flows from financing activities . . . . . . . . . . . . . . . . . 3,156,250 19,866
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . (2,956) 209
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . 11,859 -
--------------------- ---------------------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . $ 8,903 $ 209
===================== =====================
Supplemental Information:
Interest paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,327 $ -
Taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Common stock issued in exchange for services . . . . . . . . . . . . . . . 3,669,706 -
Common stock issued in exchange for acquisitions . . . . . . . . . . . . . 13,913,724 -
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
E FINANCIAL DEPOT.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE A - SUMMARY OF ACCOUNTING POLICIES
General
-------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-QSB, and therefore, do not
include all the information necessary for a fair presentation of financial
position, results of operations and cash flows in conformity with generally
accepted accounting principles.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine month period ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
March 31, 2001. The unaudited condensed consolidated financial statements should
be read in conjunction with the consolidated financial statements and footnotes
thereto included in the Company's December 31, 1999 annual report included in
SEC Form 10-KSB
Basis of Presentation
-----------------------
The consolidated financial statements include the accounts of the Company, and
its wholly owned subsidiaries, FDPO Insurance (USA), Inc. and Trade-Fast, Inc.
Significant intercompany transactions have been eliminated in consolidation.
Acquisitions
------------
Trade-fast, Inc.
-----------------
On June 8, 2000 the Company acquired in an exchange for 5,000,000 shares of the
Company's unregistered common stock Trade-fast, Inc. in a transaction accounted
for using the purchase method of accounting. The total purchase price and
carrying value of the net assets acquired and liabilities assumed of Trade-Fast,
Inc. were as follows:
Stock issued $ 13,005,000
Excess of liabilities assumed over assets acquired 419,931
-------------
Total consideration paid $ 13,424,931
===========
The Company has recorded the carryover basis of the net assets acquired, which
did not differ materially from their fair value. The results of operations
subsequent to the date of acquisition are included in the Company's consolidated
statement of operations. The estimated fair value of the assets acquired and the
liabilities assumed relating to the Trade-Fast, Inc. acquisition may be subject
to further refinement, based upon the completion of further valuation studies.
The excess costs of the over the fair value of the assets acquired of
$13,424,931 is being amortized over a twenty year period, using the straight
line method subject to impairment write-offs determined by underlying cash
flows.
Westcor Mortgage, Inc.
------------------------
<PAGE>
On July 6, 2000 the Company completed the acquisition of Westcor Mortgage, Inc.
in an exchange for promissory notes totaling $592,636, a retainage holdback of $
7,364 and 295,520 newly issued exchangeable shares of the Company's unregistered
common stock in a transaction accounted for using the purchase method of
accounting. The exchangeable shares are exchangeable into the Company's common
stock on a one for one basis. The total purchase price and carrying value of the
net assets acquired and liabilities assumed of Westcor Mortgage, Inc. were as
follows:
Stock issued $ 908,724
Notes payable issued 592,636
Retainage payable 7,364
Excess of liabilities assumed over assets acquired 71,427
---------
Total consideration paid $ 1,580,151
==========
The Company has recorded the carryover basis of the net assets acquired, which
did not differ materially from their fair value. The results of operations
subsequent to the date of acquisition are included in the Company's consolidated
statement of losses. The estimated fair value of the assets acquired and the
liabilities assumed relating to the Trade-Fast, Inc. acquisition may be subject
to further refinement, based upon the completion of further valuation studies.
The excess costs of the over the fair value of the assets acquired of $1,580,151
is being amortized over a twenty year period, using the straight line method
subject to impairment write-offs determined by underlying cash flows.
Reclassification
----------------
Certain reclassifications have been made to conform to prior periods' data to
the current presentation. These reclassifications had no effect on reported
losses.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, included elsewhere within
this Report.
Description of Company
------------------------
The Company is an Internet financial portal, offering a full spectrum of
financial services and investment information on the World Wide Web. The Company
is developing a proprietary information system consisting of integrated
financial web pages and featuring an online investment-related community through
Talk-stock.com, online trading services through Trade-Fast, Inc., mortgage
services through Westcor Mortgage, Inc. and commercial insurance brokerage
services through Eznow Insurance, Inc.
Forward Looking Statements
----------------------------
This Form 10-QSB contains certain forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. All statements included
Herein that address activities, events or developments that the Corporation
expects, believes, estimates, plans, intends, projects or anticipates will or
may occur in the future, are forward-looking statements. Actual events may
differ materially from those anticipated in the forward-looking statements.
Important risks that may cause such a
<PAGE>
difference include: general domestic and international economic business
conditions, increased competition in the Corporation's markets and products.
Other factors may include, availability and terms of capital, and/or increases
in operating and supply costs. Market acceptance of existing and new products,
rapid technological changes, availability of qualified personnel also could be
factors. Changes in the Corporation's business strategies and development plans
and changes in government regulation could adversely affect the Company.
Although the Corporation believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate. There can be no assurance that the
forward-looking statements included in this filing will prove to be accurate. In
light of the significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be
regarded as a representation by the Corporation that the objectives and
expectations of the Corporation would be achieved.
Three Months Ended September 30, 2000 and 1999
-----------------------------------------------------
Revenue
-------
The Company's revenues increased $1,002,036, or 348% to $ 1,290,243 during the
third quarter of 2000 as compared to $ 288,207 of revenues during the same
period in 1999. In order to be more competitive in the market place, the Company
revised its pricing for services provided by Talk Stock With Me. Com to its
clients during 2000 and as a result, net fee revenues decreased significantly
during the three months ended September 30, 2000 as compared to similar period
in 1999. The Company offset this decrease with revenues generated by its
Trade-Fast and Westcor subsidiaries. Trade-Fast, which was purchased in June ,
2000, generated approximately $ 1,130,000 of revenues and Westcor Mortgage,
which was acquired in July, 2000 generated approximately $ 138,000 of revenues
during the three months ended September 30, 2000, respectively.
Costs and Expenses
--------------------
The Company's costs and expenses increased from $ 303,255 during the quarter
ended September 30, 1999 to $ 2,927,260 during the third quarter of 2000.
Selling, general and administrative expenses increased $ 2,513,520. In addition
to incurring costs associated with implementing the Company's business plan
(e.g., travel, transportation, professional fees, and consulting fees) during
the three months ended September 30, 2000, the Company issued common stock to
consultants and employees in lieu of compensation. The value of the Company's
common stock issued was $ 572,666, which approximated the market value of the
stock at the time the services were rendered. The Company also incurred the
costs associated with the operation of its two newly acquired
subsidiaries-Trade-Fast and Westcor Mortgage. Selling, general and
administrative expenses associated with operating Trade-Fast and Westcor
Mortgage during the three months ended September 30, 2000 approximated $
1,733,000 and $ 154,000, respectively.
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
----------------------------------------------------
Revenue
-------
The Company's revenues for the nine months ended September 30, 2000 increased
$ 874,886, or 99.3 %, to $ 1,755,068 as compared to $ 880,182 during the first
nine months of 1999. In order to be more competitive in the market place, the
Company revised its pricing for services provided by Talk Stock With Me. Com to
its clients during 2000 and as a result, fee revenues decreased approximately
$ 784,000 during the first nine months of 2000 as compared to similar period in
1999. The Company offset this decrease with revenues generated by its Trade-Fast
and Westcor subsidiaries. Trade-Fast, which was purchased in June , 2000,
generated approximately $ 1,520,000 of revenues, and Westcor Mortgage, which was
acquired in July, 2000 generated approximately $ 138,000 of revenues during the
nine months ended September 30, 2000, respectively.
Costs and Expenses
--------------------
The Company's costs and expenses increased from $ 438,523 during the nine months
ended September 30, 1999 to $ 7,745,057 during the same period in 2000.
Selling, general and administrative expenses increased $ 7,153,838. In
connection with the implementation of its business plan, the Company incurred
the following significant costs during the nine months ended September 30, 2000
which were not incurred in 1999:
Common stock issued to consultants and Employees in lieu of cash $ 3,669,706
Management and consulting fees 1,516,365
During the nine months ended September 30, 2000, the Company incurred $ 152,696
of interest expense, net of interest income, as a result of placing $ 3,100,000
of interest bearing convertible debt during the first quarter of 2000.
LIQUIDITY AND CAPITAL RESOURCES
<PAGE>
As of September 30, 2000, the Company had a deficit in working capital of
$ 3,529,750 compared to available working capital of $ 55,742 at December 31,
1999, a decrease in working capital of $ 3,474,008. The decrease in working
capital was substantially due to the increase in obligations to vendors at
September 30, 2000 as compared to December 31, 1999.
As a result of the Company's operating loss of $ 6,033,135 during the nine
months ended September 30, 2000, the Company generated cash flow of $ 611,040
from operating activities, adjusted principally for depreciation and
amortization of $ 232,836, a provision for uncollectible accounts receivable of
$ 158,964, and increase in accounts payable and accrued expenses of $ 2,804,038,
and the value of common stock issued to consultants and employees for services
in the amount of $ 3,669,706. The Company invested $ 500,000 in furniture,
equipment, software, and leasehold improvements utilized in the operations of
the Trade-Fast subsidiary and advanced in the form of a note receivable
$ 1,000,000 to an entity controlled by the former owners of Trade-Fast. The
Company also acquired software and related web-based technology for $ 2,206,307.
The Company met its cash requirements during the first nine months of 2000
through the private placement of $ 3,100,000 of convertible debentures net of
placement costs. In addition, the Company sold shares of its common stock for
$ 56,250 during the nine months ended September 30, 2000.
While the Company has raised capital to meet its working capital requirements,
additional financing is required in order to complete the acquisition of related
businesses. The Company is seeking financing in the form of equity and debt in
order to provide for these acquisitions and for working capital. There are no
assurances the Company will be successful in raising the funds required.
In prior periods, the Company has borrowed funds from significant shareholders
of the Company in the past to satisfy certain obligations.
As the Company continues to expand, the Company will incur additional costs for
personnel. In order for the Company to attract and retain quality personnel,
the Company anticipates it will continue to offer competitive salaries, issue
common stock to consultants and employees, and grant Company stock options to
current and future employees
The effect of inflation on the Company's revenue and operating results was not
significant The Company's operations are located primarily in North America and
there are no seasonal aspects that would have a material effect on the Company's
financial condition or results of operations
GENERAL
-------
The Company is an internet financial portal, which will offer a full spectrum of
financial services and investment information on the World Wide Web through its
website "www.efinancialdepot.com" (the "Website"). The Company is currently
developing a proprietary information system consisting of integrated financial
web pages and featuring an online investment-related community through the Talk
Stock Website. The Website and the Talk Stock Website are collectively referred
to in this Quarterly Report as the "Websites".
The Company's goal is to use the Websites to disseminate information available
over the internet to service the growing need for a centralized source of
information and services for the rapidly increasing number of online investors,
brokers, and investment students. Unlike many of its competitors, who first
build a website and then attempt to drive traffic to it, the Company has already
created the Talk Stock Website. The Company's target market includes individual
investors of all sophistication levels, professional investors such as brokers,
analysts and money managers, and general online enthusiasts looking for
investment information, education and professional financial services.
The Company intends to provide an easily navigable, consumer friendly,
vertically integrated destination website offering a wide variety of financial
products and services, including:
- unbiased streaming news;
<PAGE>
- full service investment support, on-line trading, estate planning, life
insurance and mortgage banking;
- commentary on-line radio; and
- extensive investor education.
Another area of growth among Internet use is the online community, which has
brought users together to communicate with one another and share information.
This particular Internet medium has personalized the Internet for its users. To
date, a typical internet user's experience has been essentially one-way
searching and viewing websites containing professionally created content on
topics of general interest, such as current events, sports, finance, politics
and weather. While internet search and navigational sites have improved users'
abilities to seek out aggregated Internet content, these sites are not primarily
focused on providing a platform for publishing the rapidly increasing volume of
personalized content created by users with similar interests, or enabling such
users to interact with one another. In contrast, through the Websites, the
Company can offer users aggregated web content aimed directly at their needs,
such as investment information and financial services.
Products & Services
News Media Communications
---------------------------
The Company intends to provide unbiased news and information in a user-friendly
environment which will be available 24 hours a day. Beginning with the launch
of the Website and continuing thereafter, original content is planned to bring
both topical and educational materials to all subscribers. Through the Talk
Stock Website, the Company will host and profile companies actively trading on
the NYSE, AMEX, NASDAQ, as well as the OTC:BB. The Company, through the
Websites, intends to provide:
- hosting and profiling of public companies;
- online radio services;
- hosting of annual meeting, global audience, live streaming audio or video;
- banner advertisements;
- Conference Rooms; and
- original, topical financial and success site content.
Trading Offices/Systems & On Line Financial Services
----------------------------------------------------------
Through TradeFast, the Company's wholly owned subsidiary with management
contracts with New World Securities (an electronic stock brokerage that
leverages direct-access communications with the stock exchanges), the Company
intends to continue the business of trading on the New York Stock Exchange and
NASDAQ markets. Management plans to market its services and anticipates members
opening accounts and utilizing its competitive online discount brokerage firm.
There are currently two TradeFast trading offices; up to seven more trading
offices are currently planned.
Once an account is open and a client is cleared for trading, he or she can come
into one of the Company's investor services offices during market hours and
trade live utilizing TradeFast's licensed software system, TradeCast, which
provides NASDAQ Level II service. Unlike traditional online brokerage trades
where a trade is placed and then enters "cyberspace", with confirmation received
at a later time, at TradeFast, clients can actually see the trade go directly to
the market maker or specialist and get executed. Screens in the offices display
trading ideas through pre-set parameters, such as those stocks that have made
new highs or lows since the previous day's close, those having record volume, or
those hitting a certain number of consecutive buy orders (momentum plays).
<PAGE>
The Company is contemplating the integration of TradeFast into the Website by
branding the online trading operation as the "Financial Depot Trade Station".
Management's plans include strategically locating the "Financial Depot Trade
Stations" in locations with heavy business traffic and visibility. The Company
anticipates that this union of services and visibility will attract customers,
as well as provide a destination for the professional traders to work daily in a
convenient and energetic atmosphere, in addition to allowing them the
opportunity to share their strategies and ideas with fellow traders. Management
anticipates that the Financial Depot Trade Stations will draw new traders, as
well as professional traders and those traders that are currently working
independently from their homes.
In the TradeFast offices, Financial Depot Trade Station banners and screens will
be prominently displayed. On the Websites, Financial Depot Trade Station will
be prominently displayed with banners and buttons. The Company also intends to
feature live newswire service during market hours to initially attract traders
and other uses, and to maintain the attractiveness of the Websites as return
destinations for traders and other users. It is expected that this live news
service will attract quality traffic to the Websites, thereby increasing
advertising rates and expanding e-commerce opportunities.
TradeFast will provide the management holding company for internet-based
trading. The Company intends to offer online brokerage, traditional brokerage
services and possibly fee-based investment advice. To summarize, the Company
intends to provide:
- online and traditional brokerage;
- fee-based investment advisory services; and
- financial planning, including tax planning and tax advantaged investing.
Specialty Financial Services
The Company is currently developing the ability to provide the following
specialty financial services:
- mortgage banking ;
- real estate services;
- insurance sales and services;
- tax preparation;
- full service securities broker, real estate agent, insurance agent,
mortgage banker directories;
- consulting services, such as information with respect to securities laws
or becoming a public company;
- e-commerce; and
- tutorials and investment schools.
Investor Education
In addition to the above services, the Company intends to provide a series of
investor education materials and financial seminars designed to educate the
public on investment topics, such as learning about the markets, equities,
bonds, mutual funds, and the capital markets in general. In addition to
providing education, the Company will offer educational programs for both
professionals and others with general interest in learning more about investing,
investment risks, finance and financial markets.
<PAGE>
Need for Additional Financing
Based on its current operating plan, the Company anticipates that it will
require additional financing of approximately $10,000,000 by December 31, 2000,
in order to finance increased promotion and marketing of the Websites and to
complete anticipated acquisitions. Beyond that, the Company does not anticipate
that it will require further financing between January 1, 2001 and December 31,
2001. The Company may need to raise additional capital sooner, to fund more
rapid expansion, to develop new or enhanced services or to respond to
competitive pressures. The Company anticipates that it will raise equity
through the equity markets of North America, Europe and Asia.
The Company's ability to continue in business depends significantly upon its
operating profits and continued ability to obtain financing. There can be no
assurance that any such financing will be available upon terms and conditions
acceptable to the Company, if at all. The inability to obtain additional
financing in a sufficient amount when needed and upon acceptable terms and
conditions could have a materially adverse effect upon the Company. Although
the Company believes that it can raise financing sufficient to meet its
immediate needs, it will require funds to finance its development, marketing and
operating activities in the future. There can be no assurance that such funds
will be available or available on terms satisfactory to the Company. If
additional funds are raised by issuing equity securities, further dilution to
existing or future stockholders is likely to result. If adequate funds are not
available on acceptable terms when needed, the Company may be required to delay,
scale-back or eliminate its promotional and marketing campaign, its development
programs or even its operations until such funds become available. Inadequate
funding also could impair the Company's ability to compete in the marketplace
and could result in its dissolution.
Product Research and Development
Over the 12 months ending September 30, 2001, the Company anticipates that it
will carry out certain product research and/or development, including research
and development with respect to internet banking applications, trading
platforms, online security and educational remote delivery devices.
Purchases or Sales (Plant or Equipment)
The Company anticipates that, prior to September 30, 2001, it will purchase
hardware and software to facilitate an 800% increase in the Company's network
capacity to 120,000 transactions per minute (2,000 transactions per second),
which is scheduled as part of the hard site launch in December of 2000. The
Company does not anticipate that it will purchase a plant, or sell any
significant equipment over the 12 months ending September 30, 2001.
Changes in Employees
The Company anticipates a significant change in its current number of employees
over the 12 months ending September 30, 2001, due to growth of the Company
through acquisitions previously announced, and acquisitions currently under
consideration by the Company. The Company anticipates that it will hire 6
management personnel for its Trading division, 24 marketing and sales personnel
for its Mortgage Banking division, 12 marketing and sales personnel for its
Insurance division, a total of 6 management personnel and educators for its
Education division, and 4 senior managers for its Corporate division.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Forward Looking Statements
When included in this Quarterly Report on Form 10-QSB, the words "expects,"
"intends," "plans," "projects," and "estimates," and analogous or similar
expressions are intended to identify forward-looking statements. Such
statements are inherently subject to a variety of risks and uncertainties that
could cause actual results to differ materially from those reflected in such
forward-looking statements. These forward-looking statements speak only as of
the date of this Quarterly Report on Form 10-QSB. The Company expressly
disclaims any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statement contained herein to reflect
<PAGE>
any change in the Company's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
Penny Stock Rules
The Company's common shares are subject to rules promulgated by the SEC relating
to "penny stocks," which apply to companies whose shares are not traded on a
national stock exchange or on the NASDAQ system, trade at less than $5.00 per
share, or who do not meet certain other financial requirements specified by the
SEC. These rules require brokers who sell "penny stocks" to persons other than
established customers and "accredited investors" to complete certain
documentation, make suitability inquiries of investors, and provide investors
with certain information concerning the risks of trading in the such penny
stocks. These rules may discourage or restrict the ability of brokers to sell
the Company's common shares and may affect the secondary market for the
Company's common shares. These rules could also hamper the Company's ability to
raise funds in the primary market for the Company's common shares.
Uncertainty of and Inability to Generate Significant Revenues
The Company's ability to generate significant revenues is uncertain. The
Company's short and long-term prospects depend upon it ability to:
- develop a base of users of the Websites;
- continue its global growth in the online trading business;
- facilitate transactions of businesses listing products and services for
sale on the Websites;
- continue its growth in the specialty financial services sectors;
- develop and operate the Websites;
- develop high value internet banking applications;
- develop a base of businesses who will pay to advertise their products and
services on the Websites;
- continue the development of high value content for the Websites; and
- develop a base of users and businesses who will pay to use banner ads and
page sponsorships on the Websites.
The Company has projected that a significant portion of its revenues will be
generated from relationships with Website users and advertisers, and the
activities that result from those relationships. Accordingly, the Company's
success is highly dependent on such relationships and activities and the Company
may never generate significant revenues if it does not establish such
relationships and activities. As its business evolves, the Company expects to
introduce a number of new products and services. With respect to both current
and future product and service offerings, the Company expects to significantly
increase its marketing and operating expenses in an effort to increase its user
base, enhance the image of the Websites and support its infrastructure. In
order for the Company to make a profit, its revenues will need to increase
significantly to cover these and other future costs. Even if it becomes
profitable, the Company may not sustain or increase its profits on a quarterly
or annual basis in the future.
Unpredictability of Future Revenues
As a result of the Company's limited operating history and the emerging nature
of the markets in which it competes, the Company is unable to accurately
forecast its revenues. The Company's current and future expense levels are
based largely on its investment plans and estimates of future revenues and are
to a large extent fixed.
<PAGE>
Sales and operating results generally depend on the Company's ability to develop
a base of users and businesses who will pay to utilize the Websites or to
advertise their products and services on the Websites. The Company may be
unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in estimated revenues
in relation to the Company's planned expenditures would have an immediate,
adverse effect on the Company's business, prospects, financial condition and
results of operations.
Further, as a strategic response to changes in the competitive environment, the
Company may from time to time make certain pricing, service or marketing
decisions that could have a materially adverse effect on its business and
financial condition and results of operations.
Liquidity and Capital Resources
While the Company has, in the past, raised capital to meet its working capital
requirements, additional financing is required in order to complete the
acquisition of related businesses. The Company continues to seek financing in
the form of equity and debt in order to provide for these acquisitions and for
working capital. There are no assurances the Company will be successful in
raising the funds required. In the past, the Company has borrowed funds from an
entity related to a significant shareholder of the Company share's to satisfy
certain obligations.
Limited Operating History
The Company recently initiated the Website, and as a result, it has only a
limited operating history. The Company's prospects must be considered in light
of the risks, uncertainties, expenses and difficulties frequently encountered by
companies in their early stages of development, particularly companies in new
and rapidly evolving markets like the one faced by the Company. Some of these
risks and uncertainties relate to the Company's ability to attract and maintain
a large base of users, develop and introduce desirable services and original
content to users, establish and maintain relationships with advertisers and
advertising agencies, respond effectively to competitive and technological
developments, and build an infrastructure to support the Company's business.
The Company cannot be sure that it will be successful in addressing these risks
and uncertainties and its failure to do so could have a material adverse effect
on its financial condition.
Potential Fluctuations in Quarterly Operating Results
The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside the Company's control. Factors that may adversely affect the Company's
quarterly operating results include but are not limited to:
- the Company's ability to retain existing users of the Websites, attract
new users at a steady rate and maintain user satisfaction;
- the Company's ability to develop a base of businesses willing to pay to
advertise their products and services on the Websites;
- the Company's ability to develop a base of businesses willing to utilize
the Websites to conduct transactions;
- the announcement or introduction of new services and products by the
Company and its competitors;
- the continued use of the Internet and online services and increasing
consumer acceptance of the Internet and other online services for the purchase
of consumer products and services such as those offered by the Company;
- the Company's ability to upgrade and develop its systems and
infrastructure in connection with the Website and attract new personnel in a
timely and effective manner;
- the level of traffic on the Websites;
- technical difficulties, system downtime or Internet outages;
<PAGE>
- the amount and timing of operating costs and capital expenditures relating
to expansion of the Company's business, operations and infrastructure;
- governmental regulation;
- general economic conditions; and
- economic conditions specific to the Internet and online commerce.
Seasonality
The Company expects that it will experience seasonality in its business,
reflecting a combination of seasonal fluctuations in Internet usage and
traditional retail seasonality patterns. Due to the foregoing factors, one or
more future quarters the Company's operating results may fall below the
expectations of securities analysts and investors. In such event, the financial
performance of the Company would likely be materially adversely affected.
Capacity Constraints
A key element of the Company's strategy is to generate a high volume of traffic
on, and use of, the Websites. Accordingly, the satisfactory performance,
reliability and availability of the Websites, transaction processing systems and
network infrastructure are critical to the Company's reputation and its ability
to attract and retain users and maintain adequate user service levels.
The Company's revenues depend on the number of users who visit and purchase
goods and services through the Websites and the number of businesses who utilize
the Websites to advertise and sell their products and services. Any system
interruptions that result in the unavailability of the Websites or reduced order
fulfilment performance would reduce the volume of goods sold and the
attractiveness of the Company's product and service offerings.
Any substantial increase in the volume of traffic on the Websites or the number
of businesses utilizing the Websites will require the Company to expand and
upgrade further its technology, transaction-processing systems and network
infrastructure. There can be no assurance that the Company will be able to
accurately project the rate or timing of increases, if any, in the use of the
Websites or timely expand and upgrade its systems and infrastructure to
accommodate such increases.
Marketing
The Company has not incurred significant advertising, sales and marketing
expenses to date. To increase awareness for the Websites, the Company expects
to spend significantly more on advertising, sales and marketing in the future.
If the Company's marketing strategy is unsuccessful, it may not be able to
recover these expenses or even generate any revenues. The Company will be
required to develop a marketing and sales campaign that will effectively
demonstrate the advantages of the Websites, services and products. To date, the
Company's experience with respect to marketing the Websites is very limited.
The Company may also elect to enter into agreements or relationships with third
parties regarding the promotion or marketing of the Websites, and the products
and services available through the Websites. There can be no assurance that the
Company will be able to establish adequate sales and marketing capabilities,
that it will be able to enter into marketing agreements or relationships with
third parties on financially acceptable terms, or that any third parties with
whom it enters into such arrangements will be successful in marketing and
promoting the Websites, and the products and services offered on the Websites.
Dependence on Continued Growth of Online Commerce
The Company's future revenues and its ability to generate profits in the future
are substantially dependent upon the widespread acceptance and use of the
Internet and other online services as an effective medium of commerce. The
rapid growth surrounding the Internet and online services is a relatively recent
phenomenon.
<PAGE>
There can be no assurance that acceptance and use of the Internet will continue
to develop or that a sufficiently broad base of consumers will continue to use
the Internet and other online services as a medium of commerce. Demand and
market acceptance for recently introduced services and products over the
Internet are subject to a high level of uncertainty and relatively few proven
services and products exist.
The Company relies on consumers who have historically used traditional means of
commerce to purchase merchandise. For the Company to be successful, these
consumers must accept and utilize novel ways of conducting business and
exchanging information. In addition, the Internet and other online services may
not be accepted as viable commercial marketplaces for a number of reasons,
including potentially inadequate development of the necessary network
infrastructure or delayed development of enabling technologies and performance
improvements.
In addition, the Internet or other online services could lose their viability
due to delays in the development or adoption of new standards and protocols
required for handling of increased levels of Internet activity. Another factor
which must be considered is the possibility of increased governmental
regulation.
Changes in or insufficient availability of telecommunications services to
support the Internet or other online services also could result in slower
response times and adversely affect usage of the Internet and other online
services generally and the Company in particular. The Company's business,
prospects, financial condition and results of operations could be materially
adversely affected if:
- use of the Internet and other online services does not continue to grow or
grows more slowly than expected;
- the infrastructure for the Internet and other online services does not
effectively support growth that may occur; or
- the Internet and other online services do not become viable commercial
marketplaces for the products and services offered or intended to be offered
through the Websites.
Online Commerce Security Risks
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. The Company
relies on encryption and authentication technology licensed from third parties
to provide the security and authentication necessary to effect secure
transmission of confidential information, such as customer credit card numbers.
There can be no assurance that advances in computer capabilities, new
discoveries in the field of cryptography, or other events or developments will
not result in a compromise or breach of the algorithms used by the Company to
protect customer transaction data.
If any such compromise of the Company's security were to occur, it could have a
materially adverse effect on the Company's reputation, business, prospects,
financial condition and results of operations. A party who is able to
circumvent the Company's security measures could misappropriate proprietary
information or cause interruptions in the Company's operations. The Company may
be required to expend significant capital and other resources to protect against
such security breaches or to alleviate problems caused by such breaches.
Concerns over the security of the Internet and other online transactions, and
the privacy of users may also inhibit the growth of the Internet and other
online services generally, and the Internet in particular, especially as a means
of conducting commercial transactions. To the extent that activities of the
Company or third-party contractors involve the storage and transmission of
proprietary information, such as credit card numbers, security breaches could
damage the Company's reputation and expose the Company to a risk of loss or
litigation and possible liability. There can be no assurance that the Company's
security measures will prevent security breaches or that failure to prevent such
security breaches will not have a materially adverse effect on the Company's
business, prospects, financial condition and results of operations.
Reliance on Internally Developed Systems & System Development Risks
<PAGE>
Wherever possible, the Company will use off-the-shelf products for the Websites,
search engines and substantially all aspects of transaction processing,
including order management, cash and credit card processing, purchasing,
inventory management and shipping. The Company does, however, expect that it
will have to develop some custom software to support its requirements. Further,
the Company's inability to:
- add additional software and hardware;
- develop and upgrade further its existing technology and transaction
processing systems;
- network infrastructure to accommodate increased traffic on the Websites;
and/or
- increase sales volume through its transaction processing systems;
may cause:
- unanticipated system disruptions;
- slower response times;
- degradation in levels of customer service;
- impaired quality and speed of order fulfilment; and
- delays in reporting accurate financial information.
In addition, although the Company works to prevent unauthorized access to
Company data, it is impossible to completely eliminate this risk. There can be
no assurance that the Company will be able to effectively upgrade and expand its
transaction-processing system or to integrate smoothly any newly developed or
purchased modules with its existing systems in a timely manner. Any inability
to do so could have a materially adverse effect on the Company's business,
prospects, financial condition and results of operations.
System Failure
The Company's success, and in particular its ability to successfully receive
orders and provide high-quality customer service for its users, largely depends
on the efficient and uninterrupted operation of its computer and communications
hardware systems. The Company's systems and operations are vulnerable to damage
or interruption from fire, flood, power loss, telecommunications failure,
break-ins, earthquake and similar events.
The Company does not presently have redundant systems or a formal disaster
recovery plan and does not carry sufficient business interruption insurance to
compensate it for losses that may occur. Despite the implementation of network
security measures by the Company, its servers are vulnerable to computer
viruses, physical or electronic break-ins and similar disruptions, which could
lead to interruptions, delays, loss of data or the inability to accept and
fulfil customer orders. The occurrence of any of the foregoing risks could have
a materially adverse effect on the Company's business, prospects, financial
condition and results of operations.
Rapid Technological Change
To remain competitive, the Company must continue to enhance and improve the
responsiveness, functionality and features of the Company's online services.
The Internet and the online commerce industry are characterized by factors such
as rapid technological change, changes in user and customer requirements and
preferences, frequent new product and service introductions embodying new
technologies and the emergence of new industry standards and practices. These
changes could render the Websites as they currently exist, and proprietary
technology and systems, obsolete.
<PAGE>
The Company's success will depend, in part, on its ability to license leading
technologies useful to its business, enhance its existing services, develop new
services and technology to address the increasingly sophisticated and varied
needs of its prospective customers, and respond to technological advances and
emerging industry standards and practices on a cost-effective and timely basis.
The development of the Websites and other proprietary technology entails
significant technical and business risks. There can be no assurance that the
Company will successfully use new technologies effectively or adapt the
Websites, proprietary technology and transaction processing systems to customer
requirements or new emerging industry standards.
If the Company is unable to adapt in a timely manner to technical, legal,
financial changing market conditions or customer requirements, its business,
prospects, financial condition and results of operations could be materially
adversely affected.
Risks Associated with Entry into New Business Areas
The Company may choose to expand its operations by improving the Websites or
even developing new websites, promoting new or complementary products or sales
formats, expanding the breadth and dept of products and services offered on the
Websites or expanding its market presence through relationships with third
parties. In addition, the Company may pursue the acquisition of new or
complementary businesses, products or technologies, although it has no present
understandings, commitments or agreements with respect to any material
acquisitions or investments. There can be no assurance that the Company would
be able to expand its efforts and operations in a cost-effective or timely
manner or that any such efforts would increase overall market acceptance.
Expansion of the Company's operations in this manner would also require
significant additional expenses and development, operations and editorial
resources and may strain the Company's management, financial and operational
resources. The lack of market acceptance of such efforts or the Company's
inability to generate satisfactory revenues from such expanded services or
products to offset their cost could have a materially adverse effect on the
Company's business, prospects, financial condition and results of operations.
Uncertain Ability to Manage Growth
The Company's ability to achieve its planned growth is dependent upon a number
of factors including, but not limited to, its ability to hire, train and
assimilate management and other employees, the adequacy of the Company's
financial resources, the Company's ability to identify and efficiently provide
such new products and perform services as the Company's customers may require in
the future, and its ability to adapt its own systems to accommodate its expanded
operations. In addition, there can be no assurance that the Company will be
able to achieve its planned expansion or that it will be able to successfully
manage such expanded operations. Failure to manage anticipated growth
effectively and efficiently could have a materially adverse effect on the
Company.
Dependence Upon Key Personnel
The Company's future success depends in large part on the continued services of
its key product development, technical, marketing, sales and management
personnel, and its ability to continue to attract, motivate and retain highly
qualified employees. Although the Company's management personnel serve at the
pleasure of the Board of Directors, there can be no assurance that such
arrangements will continue in the future. Competition for such employees is
intense, and the process of locating key technical, product development and
management personnel with the combination of skills and attributes required to
execute the Company's strategy is often lengthy. Accordingly, the loss of
services of key personnel or an inability to attract additional personnel as
needed could have a material adverse effect upon the Company.
The success of the Company is therefore dependent to a large degree upon its
ability to identify, hire and retain additional qualified personnel, for whose
services the Company will be in competition with other prospective employers,
many of which may have significantly greater resources than the Company.
Additionally, demand for qualified personnel conversant with certain
technologies is intense and may outstrip supply as new and additional
<PAGE>
skills are required to keep pace with evolving telecommunications technology.
There can be no assurance that the Company will be able to hire and, if so,
retain such additional qualified personnel. Failure to attract and retain such
personnel could have a materially adverse effect upon the Company.
Government Regulation
Although there are few laws and regulations directly applicable to the Internet,
it is likely that new laws and regulations will be adopted in the United States
and elsewhere, to govern issues such as music licensing, broadcast license fees,
copyrights, privacy, pricing, sales taxes and characteristics and quality of
Internet services. It is possible that governments will enact legislation that
may be applicable to the Company in areas such as content, network security,
encryption and the use of key escrow, data and privacy protection, electronic
authentication or "digital" signatures, illegal and harmful content, access
charges and retransmission activities.
The adoption of restrictive laws or regulations could slow Internet growth. The
application of existing laws and regulations governing Internet issues such as
property ownership, libel, defamation, content, taxation and personal privacy is
also uncertain. The majority of such laws were adopted before the widespread
use and commercialization of the Internet and, as a result, do not contemplate
or address the unique issues of the Internet and related technologies.
Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could decrease demand for the Websites and
services provided by the Company, increase its cost of doing business or
otherwise have a materially adverse effect on its success and continued
operations. Laws and regulations may be adopted in the future that address
Internet-related issues, including online content, user privacy, pricing and
quality of products and services. The growing popularity and use of the
Internet has burdened the existing telecommunications infrastructure in many
areas, as a result of which local exchange carriers have petitioned the FCC to
regulate Internet service providers in a manner similar to long distance
telephone carriers and to impose access fees on the Internet service providers.
The Company cannot guarantee that the United States, Canada or foreign nations
will not adopt legislation aimed at protecting Internet users' privacy. Any
such legislation could negatively affect the Company's business. Moreover, it
may take years to determine the extent to which existing laws governing issues
such as property ownership, libel, negligence and personal privacy are
applicable to the Internet.
Liability for Website Information
The Company may be subjected to claims for negligence, copyright, patent,
trademark, defamation, indecency and other legal theories based on the nature
and content of the materials that it broadcasts. Such claims have been brought,
and sometimes successfully litigated, against Internet content distributors. In
addition, the Company could be exposed to liability with respect to the content
or unauthorized duplication or broadcast of content. Any imposition of
liability that is not covered by insurance, is in excess of insurance coverage
or is not covered by an indemnification by a content provider could adversely
affect the Company's business.
Market for the Company's Securities and Possible Volatility of Share Prices
The trading price of the Company's common shares (the "Common Shares") has been
and may continue to be subject to wide fluctuations. Trading prices of the
Common Shares may fluctuate in response to a number of factors, many of which
are beyond the Company's control. In addition, the stock market in general, and
the market for Internet-related and technology companies in particular, has
experienced extreme price and volume fluctuations that have often been unrelated
or disproportionate to the operating performance of such companies. The trading
prices of many technology companies' stocks are at or near historical highs and
reflect price earnings ratios substantially above historical levels. There can
be no assurance that these trading prices and price earnings ratios will be
sustained. These broad market and industry factors may adversely affect the
market price of the Common Shares, regardless of the Company's operating
performance.
<PAGE>
In the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has sometimes been instituted.
Such litigation, if instituted, could result in substantial costs for the
Company and a diversion of management's attention and resources.
Dilution and Dividend Policy
The grant and exercise of warrants of creditors or otherwise or stock options
would likely result in a dilution of the value of the Common Shares. Moreover,
the Company may seek authorization to increase the number of its authorized
shares and to sell additional securities and/or rights to purchase such
securities at any time in the future. Dilution of the value of the Common
Shares would likely result from such sales.
Anti-Takeover Provisions
At the present time, the Company's Board of Directors has not adopted any
shareholder rights plan or any anti-takeover provisions in its Articles.
PART II- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company knows of no material, active or pending legal proceedings against
it, nor is the Company involved as a plaintiff in any material proceedings or
pending litigation. There are no proceedings in which any director, officer or
affiliate of the Company, or any registered or beneficial shareholder is an
adverse party of has a material interest adverse to the Company.
ITEM 2. CHANGES IN SECURITIES.
Recent Sales of Unregistered Securities
(a) On July 18, the Company issued 1,000,000 common shares to Alan Gail
Associates Inc., pursuant to a share purchase agreement dated November 30, 1999,
as amended by an amending agreement dated June 8, 2000, among the Company and
the two shareholders of Trade-Fast Inc, Alan Cohen, and Winford Holdings Group
Limited ("Winford") and upon a letter of direction from Alan Cohen to the
Company directing that the shares be issued to Alan Gail Associates Inc. The
Company issued the shares to Alan Gail Associates Inc. relying on section 4(2)
of the Securities Act of 1933.
(b) On July 18, the Company issued 4,000,000 common shares to Winford,
pursuant to a share purchase agreement dated November 30, 1999, as amended by an
amending agreement dated June 8, 2000), among the Company and the two
shareholders of Trade-Fast Inc., Alan Cohen, and Winford. The Company issued
the shares to Winford relying on Regulation S of the Securities Act of 1933.
(c) On July 20, 2000 the Company issued 10,000 common shares to John
Coleridge. The Company issued the shares to Mr. Coleridge pursuant to the
Company's 1999 Stock Option Plan (the "Plan") which was registered pursuant to
the Registration Statement on Form S-8 filed with the United States Securities
and Exchange Commission on March 28, 2000.
(d) On July 24, 2000, the Company issued 25,000 common shares to Christi
Mottola Ent Inc., pursuant to a Letter of Engagement, dated December 14, 1999,
between the Company and Coffin, Mottola Communications and Letter of Direction,
dated June 28, 2000, to Clark, Wilson from Coffin, Mottola Communications. The
Company issued the shares to Christi Mottola Ent Inc. relying on Section 4(2) of
the Securities Act of 1933.
(e) On October 5, 2000, the Company issued 7,200 common shares to Don G.
Merriman, pursuant to a consulting agreement, dated March 17, 2000, between the
Company and e-DGM Consulting B.V. ("e-DGM") and upon a letter of direction,
dated June 20, 2000, from e-DGM to the Company, directing the
<PAGE>
Company to issue shares to Don G. Merriman. The Company issued the shares to Mr.
Merriman relying on Regulation S of the Securities Act of 1933.
(f) On October 5, 2000, the Company issued 25,500 common shares to Stephen
Koltai, pursuant to a consulting agreement, dated March 28, 2000, between the
Company and Cobra Capital Limited ("Cobra Capital") and upon a letter of
direction, dated June 20, 2000, from Cobra Capital to the Company, directing the
Company to issue shares to Stephen Koltai. The Company issued the shares to Mr.
Koltai relying on Regulation S of the Securities Act of 1933.
(g) On October 5, 2000 the Company issued 8,000 common shares to John
Coleridge. The Company issued the shares to Mr. Coleridge pursuant to the Plan.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Effective January 1, 2000, the Company entered a Letter of Engagement (the
"Coffin Agreement") with Coffin, Mottola Communications ("Coffin Mottola")
pursuant to which commencing January 1, 2000, Coffin Mottola agreed to provide
investor relations activities (the "Services") on behalf of the Company.
Pursuant to the Coffin Agreement, the Company agreed to pay Coffin Mottola
$6,000.00 per month and 25,000 common shares (the "Coffin Shares") of the
Company for the provision of the Services for a 12 month period. Pursuant to a
letter of direction, dated June 28, 2000, from Coffin Mottola to the Company,
the Company issued the Coffin Shares to Christi Mottola Ent. IncOn July 8, 2000
Coffin Mottola terminated the Coffin Agreement effective August 8, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
Reports of Form 8-K
On July 6, 2000, the Company filed a Current Report on Form 8-K announcing that
on June 22, 2000 the Registrant entered into an agreement (the "Share Purchase
Agreement") with Westcor Mortgage Inc. ("Westcor") and Patricia Kirkham and
Dennis Petersen, both business persons of Calgary, Alberta (the "Vendors")
pursuant to which the Registrant acquired all of the issued common shares of
Westcor (the "Vendors Shares"). Westcor is a private Alberta company which
carries on the mortgage brokerage business. The assets of Westcor are primarily
goodwill in the form of an operating brokerage which received commissions for
placing approximately US$97 million in mortgages in 1999. The direct
consideration for the purchase of the Vendors Shares (the "Transaction") was the
payment of US$600,000 by the issue of two promissory notes totaling US$592,636
and a holdback retained by the Registrant of US$7,364. The promissory notes are
secured by a pledge of the Vendors Shares in an agreement between the Vendors
and the Registrant dated for reference February 29, 2000.
Prior to the acquisition of the Vendors Shares, Westcor issued to the Vendors
295,520 Exchangeable shares of Westcor which are exchangeable into an equal
number of common shares of the Registrant at a deemed price of US$4.25 per
share. In addition, the Registrant issued 73,880 common shares of the Registrant
at the same deemed price to a financial intermediary, Oxford Capital Corp.
("Oxford"). Accordingly, the value of shares of the Registrant into which the
Exchangeable shares may be exchanged was approximately US$1,255,960 and the
total effective consideration for the Vendors Shares was US$2,169,950 of which
US$313,990 in the form of common shares of the registrant was received by
Oxford. For further information, please refer to the Company's Current Report
on Form 8-K, as amended filed September 5, 2000.
<PAGE>
On August 21, 2000, the Company filed an amended Current Report on Form 8-K
amending the Current Report on Form 8-K filed on June 23, 2000, to include
Trade-fast audited financial statements, as at March 31, 1999 and 2000 and the
Company's unaudited Proforma financial statements as at December 31, 1999. The
Current Report on 8-K filed on June 23, 2000, reports that effective June 8,
2000, the Company completed the acquisition of all of the issued and outstanding
shares of Trade-Fast, pursuant to a share purchase agreement dated November 30,
1999, as amended by an amending agreement dated June 8, 2000 (together, the
"Agreement"), between the Company and the two shareholders of Trade-Fast (the
"Shareholders), Alan Cohen, a businessperson resident in New York, and Winford
Holdings Group Limited, a closely held corporation ("Winford").
Pursuant to the Agreement, the Company agreed to issue a total of 5,000,000
common shares to the Shareholders, at a deemed price per share of $4.50 per
share, as to 1,000,000 to Alan Cohen and as to 4,000,000 to Winford. The number
of shares issuable to the Shareholders under the Agreement is subject to
adjustment in circumstances where the Company issues shares, other than pursuant
to existing agreements or pursuant to the exercise of bona fide stock options
granted to directors, officers and consultants, at a price of less than $4.50
per share.
The Company also agreed to loan a total of $1,500,000 to Winford, said loan to
bear interest at 6% per annum with a term of three years from the date of
initial advance and to be secured by a pledge of 1,000,000 of the shares
issuable to Winford by the Company, with such shares being the sole recourse of
the Company in the event of default by Winford. To date, the Company has
advanced $1,000,000 of the loan.
The Agreement also requires that the Company invest a total of $3,500,000, in
the development of the business of Trade-Fast during the period ending November
30, 2000. To date, a total of $1,000,000 has been so invested. For further
information, please refer to the Company's Current Report on Form 8-K, as
amended, filed August 21, 2000.
On September 5, 2000, the Company filed and amended Current Report on Form 8-K
amending the Current Report on 8-K filed on July 6, 2000 to include the audited
financial statements of Westcor, as at April 30, 1999 and 2000 and the Company's
unaudited proforma financial statements as at December 31, 1999.
Financial Statements Filed as a Part of the Quarterly Report
The Company's unaudited financial statements include:
Consolidated Balance Sheets (June 30, 2000 and December 31, 1999)
Consolidated Statements of Operations (Six Months Ended June 30, 2000 and
1999)
Consolidated Statements of Cash Flows (Six Months Ended June 30, 2000 and
1999)
Notes to Consolidated Financial Statements (June 30, 2000)
Exhibits Required by Item 601 of Regulation S-B
Plan of Acquisition, reorganization, arrangement, liquidation or succession
2.1 Share Purchase Agreement between the Company and Alan Cohen and
Winford Holdings Group Limited, dated November 30, 1999 (filed as an exhibit to
the Company's Form 8-K filed on June 23, 2000, and incorporated herein by
reference).
2.2 Letter Agreement between the Company and Alan Cohen and Winford
Holdings Group Limited, dated June 8, 2000 (filed as an exhibit to the Company's
Form 8-K filed on June 23, 2000, and incorporated herein by reference).
2.4 Letter of Intent between the Company and Westcor Mortgage Inc.,
dated January 19, 2000 (filed on April 14, 2000, as an exhibit to the Company's
Annual Report on Form 10-KSB, and incorporated herein by reference).
<PAGE>
2.5 Share Purchase Agreement dated February 29, 2000 between Patricia
Kirkham and Dennis Petersen and the Registrant (filed as an exhibit to the
Company's Form 8-K filed on June 23, 2000, and incorporated herein by
reference)
2.6 Support Agreement dated February 29, 2000 between the Registrant
and Westcor Mortgage Inc. (filed as an exhibit to the Company's Form 8-K,
originally filed July 6, 2000 and as amended and filed on September 5, and
incorporated herein by reference)
2.7 Voting Trust and Exchange Agreement dated February 29, 2000 among
the Registrant, Westcor Mortgage Inc., Miller Thomson, Patricia Kirkham and
Dennis Petersen (filed as an exhibit to the Company's Form 8-K originally
filed July 6, 2000 and as amended and filed on September 5, and incorporated
herein by reference)
2.8 Hypothecation Agreement dated February 29, 2000 among Patricia
Kirkham, Dennis Petersen, Westcor Mortgage Inc., Miller Thomson and the
Registrant (filed as an exhibit to the Company's Form 8-K originally filed
July 6, 2000 as amended and filed on September 5, 2000 and incorporated
herein by reference)
2.9 Escrow Agreement dated February 29, 2000 among the Registrant,
Clark, Wilson, Patricia Kirkham, Dennis Petersen, Oxford Capital Corp. and
Westcor Mortgage Inc. (filed as an exhibit to the Company's Form 8-K
originally filed July 6, 2000 as amended and filed on September 5,2000 and
incorporated herein by reference)
Articles of Incorporation and Bylaws
3.1 Certificate of Incorporation of the Company (filed as exhibit 3.1 to the
Company's Registration Statement on Form 10SB (file# 000-26899) on July 30,
1999, and incorporated herein by reference).
3.2 Bylaws of the Company (filed as exhibit 3.2 to Registration Statement on
Form 10-SB (file#000-26899) on July 30, 1999, and incorporated herein by
reference).
3.3 Certificate of Amendment of Certificate of Incorporation dated November
2, 1999 (filed as exhibit 3 (a) to the Company's Quarterly Report on Form 10-QSB
(file # 000-26899) on November 22, 1999, and incorporated herein by reference).
(10) Material Contracts
10.1 1999 Stock Option Plan (filed on March 28, 2000, as an exhibit to
the Company's Registration Statement on Form S-8, and incorporated herein)
10.2 Agreement between the Company and e-DGM Consulting B.V., dated
March 17, 2000 (filed on June 22, 2000, as an exhibit to the Company's
Registration Statement on Form S-8, and incorporated herein by reference).
10.3 Agreement between the Company and Cobra Capital Limited, dated
March 28, 2000 filed on May 15, 2000 as an exhibit to the Company's Quarterly
Report on Form 10-QSB, and incorporated herein by reference).
10.4 Agreement between the Company and Mottola, effective Janaury 1,
2000.
<PAGE>
(21) Subsidiary of the Company
FDPO Insurance (USA), Inc. is a 100% wholly owned subsidiary of the
Company.
RJI Ventures, Inc. (formerly Talk Stock With Me, Inc.) is a 100% wholly
owned subsidiary of the Company.
Trade-Fast, Inc. is a 100% wholly owned subsidiary of the Company.
Westcor Mortgage Inc. is a 100% wholly owned subsidiary of the Company
(27) Financial Data Schedule
<PAGE>
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.
E-FINANCIAL DEPOT.COM, INC.
By: /s/ John Huguet
John Huguet, President/Director
Date: November 20, 2000
By: /s/ Christina Cepeliauskas
Christina Cepeliauskas, Chief Financial Officer
Date: November 20, 2000
By: /s/ Randy Doten
Randy Doten, Director
Date: November 20, 2000
