SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO 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 SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from _________ to _________
Commission File Number 000-27239
EDUVERSE.COM
(Exact Name of Small Business Issuer as Specified in its Charter)
Nevada 88-0277072
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1135 Terminal Way
Suite 209
Reno, Nevada 89502-2168
(Address of Principal Executive Offices)
(775) 332-3325
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer has (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 14,347,434 shares of common stock
outstanding as of November 1, 2000.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets at September 30, 2000 and December 31, 1999.
Consolidated Statements of Operations for the three and nine months ended September
30, 2000 and 1999.
Consolidated Statements of Cash Flows for the three and 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 and Use of Proceeds
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
SIGNATURES
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PART 1. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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CONSOLIDATED BALANCE SHEETS
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(Expressed in U.S. dollars)
30-Sep 31-Dec
2000 1999
$ $
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ASSETS Unaudited
Current
Cash 6,466 43,584
Accounts receivable net of allowances 9,512 8,826
Inventory - 17,296
Other receivable 20,192 10,123
Prepaid expenses and other 58,369 15,360
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Total current assets 94,539 95,189
Capital assets, net 40,770 53,096
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Total assets 135,309 148,285
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current
Accounts payable 146,300 106,824
Accrued expenses 4,754 19,585
Loans payable [note 5] 130,750 10,000
Current portion of royalty payable - 104,400
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Total current liabilities 281,804 240,809
Royalty payable - 48,900
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281,804 289,709
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Commitment and Contingencies
Shareholders deficit
Share capital [note 4]
Common stock - $0.001 par value
Authorized shares: 50,000,000
Issued and outstanding: 14,347,434 shares at Sept. 30,2000
and 13,185,809 shares at December 31, 1999 14,347 13,185
Preferred stock - $0.001 par value
Authorized shares: 5,000,000
Issued and outstanding: nil - -
Shares to be issued 5,000 3,078
Additional paid in capital 2,348,707 1,384,683
Accumulated deficit (2,516,222) (1,544,043)
Accumulated other comprehensive income 1,673 1,673
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Total shareholders' deficit (146,495) (141,424)
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Total liabilities and shareholders' deficit 135,309 148,285
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See accompanying notes
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(Expressed in U.S. dollars)
Three Months Ended (unaudited) Nine Months Ended (unaudited)
30-Sep 30-Sep 30-Sep 30-Sep
2000 1999 2000 1999
$ $ $ $
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REVENUE
Software sales 3,054 5,371 14,861 100,520
Distribution royalties - - - 40,644
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Total revenues 3,054 5,371 14,861 141,164
Cost of goods sold (1,903) (17,445) (2,632) (53,328)
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Gross profit 1,151 (12,074) 12,229 87,836
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EXPENSES
Amortization of deferred charge - 15,960 - 47,860
Foreign currency transaction loss (2,409) - (27,243) -
Depreciation 5,277 5,147 15,461 12,463
General and administrative 114,913 93,556 404,921 304,766
Marketing 262,361 83,502 485,149 216,053
Research and development 81,727 86,090 254,685 222,221
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461,869 284,255 1,132,973 803,363
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Operating loss (460,718) (296,329) (1,120,744) (715,527)
Other income 7,665 1,614 8,738 98,854
Gain on disposal of in subsidiary 139,827 - 139,827 -
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Net loss and comprehensive loss for the period (313,226) (294,715) (972,179) (616,673)
==============================================================================================================
Net loss per common share:
Basic and diluted (0.02) (0.02) (0.07) (0.05)
==============================================================================================================
Weighted average number of common shares:
Basic and diluted 14,278,963 12,753,246 13,887,601 12,493,756
==============================================================================================================
See accompanying notes
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Expressed in U.S. dollars)
Nine Months Ended (unaudited)
30-Sep 30-Sep
2000 1999
$ $
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Unaudited
OPERATING ACTIVITIES
Loss for the period (972,179) (616,736)
Adjustment to reconcile net loss to net cash used in
operating activities:
Common shares issued for services rendered 188,905 42,294
Common shares issued in lieu of interest expense 7,000 -
Write down and amortization of deferred charge - 47,860
Depreciation 15,461 12,463
Non-cash gain on disposal of subsidiary (139,827) -
Changes in non-cash working capital items:
Accounts receivable (14,159) (32,727)
Finished goods inventory 17,296 28,529
Other receivables (10,069) -
Prepaid expenses and other 24,991 5,651
Accounts payable 39,476 (45,609)
Accrued expenses (14,831) -
Unearned revenue - (20,138)
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Net cash used in operating activities (857,936) (578,413)
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FINANCING ACTIVITIES
Cash proceeds of loans payable
Advances(repayments) of loans 120,750 (73,685)
Payments under capital lease obligations - (10,168)
Issuance of common stock 611,078 755,998
Cash received on common stock to be issued 5,000 -
Disgorgement proceeds 87,125 -
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Net cash provided by financing activities 823,953 672,145
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INVESTING ACTIVITIES
Purchase of capital assets (3,135) (31,748)
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Net cash used in investing activities (3,135) (31,748)
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Effect of foreign exchange rate changes on cash - (2,930)
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Net increase in cash (37,118) 59,054
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Cash, beginning of period 43,584 37,757
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Cash, end of period 6,466 96,811
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Significant Non-Cash Transactions:
During the period shares were issued for prepaid services $ 68,000
During the period shares were issued for services rendered $187,852
See accompanying notes
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1. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Description of business
The Company is a technology-based company focused on developing and marketing
interactive multimedia educational software products. At September 30, 2000, the
Company's principal markets include Canada and U.S.A. The Company has generated
its revenues from the retail sale of its English language tutorial software
products ENGLISH PRO. In late 1998, the Company started pioneering a new
e-commerce educational delivery model that provides users with free access to
online education. The Company expects to generate the majority of its future
revenues from advertising revenues by including an advertiser's message as part
of the ENGLISH PRO tutorial. To date the Company has recognized no advertising
revenues.
In October, 2000 the Company announced a change in its strategic business model.
The Company is a software development company specializing in Internet delivery
platforms for e-Education and the development of quality education content. The
Company is focused on five market areas; Subscription-based Internet Education,
Corporate Workplace Initiatives, Ministry of Education Initiatives, Third Party
Licensing of the Company's e-Education Delivery Platform and Retail
distribution.
2. BASIS OF PRESENTATION
Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB of Regulation S-B. They do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. However, except as
disclosed herein, there has been no material change in the information disclosed
in the notes to the financial statements for the year ended December 31, 1999
included in the Company's Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission. The interim unaudited financial statements should be
read in conjunction with those financial statements included in the Form 10-KSB.
In the opinion of Management, all adjustments considered necessary for a fair
presentation, consisting solely of normal recurring adjustments, have been made.
Operating results for the nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
Going concern
The Company's financial statements for the period ended September 30, 2000 have
been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of
business for the foreseeable future. The company incurred losses of $313,226 and
$972,179 for the three-and nine-months periods respectively ended September 30,
2000, and as of September 30, 2000 had a working capital deficiency of $187,265.
Management recognizes that the Company must obtain additional financial
resources by raising capital from shareholders or other sources or consider a
reduction in operating costs to enable it to continue operations with available
resources. However, no assurances can be given that the Company will be
successful in raising additional capital. Further, there can be no assurance,
assuming the Company successfully raises additional funds, that the Company will
achieve positive cash flow. If the Company is unable to obtain adequate
additional financing, management will be required to sharply curtail the
Company's operating expenses. Accordingly, the Company's continuation as a going
concern is in substantial doubt.
These financial statements do not include any adjustments to the carrying values
and classification of assets and liabilities, which may be necessary, if the
company is unable to continue its operations.
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3. MAJOR CUSTOMERS
For the nine-month period ended September 30, 2000, 87% of software sales were
derived from two customers. At September 30, 2000, the aggregate accounts
receivable balance relating to these customers was $8,048.
For the same period in 1999 72% of software sales were derived from one
customer. At September 30, 1999, the aggregate accounts receivable balance
relating to this customer was $56,985.
4. SHARE CAPITAL
[a] Authorized
The authorized capital of the Company consists of 50,000,000 voting common
shares with $0.001 par value and 5,000,000 non-voting preferred shares with
$.001 par value.
[b] Stock options
During the three- month period ended September 30, 2000 the Company issued
75,000 options for payment of services at a gross value of $49,215. The vesting
period is over 10 months. The amount expensed during the quarter was $19,686. In
addition, the Company cancelled 150,000 employee stock options and issued 40,000
in new employee stock options. The Company also re-priced 1,350,000 employee
stock options from $0.57 to $0.51 per share.
5. LOANS PAYABLE
Stockholder loans outstanding as of September 30, 2000 were $130,750. The
outstanding loan balances are due to three stockholders of the Company who are
also employees of the Company. One is also an officer of the Company.
The Stockholder loans outstanding as September 30, 2000 bear interest at 10%
with interest due semi-annually. These loans are unsecured, due in one year. The
Company will also pay a bonus in common shares to the lenders in a number equal
to 20% of the principal. The lender has the right to convert part or all the
value of the principal of the loan and interest into common shares of the
Company at the prospectus price.
6. GAIN ON DISPOSAL OF SUBSIDIARY
On August 15, 2000 the Company sold its entire interest of ESL Pro Systems Inc.
in consideration of $1 to Savoy Capital Limited. As a result of this transaction
the company realized a gain on disposal of $139,827.
7. SUBSEQUENT EVENTS
(a) The Company entered into a three-year lease for new premises commencing on
October 1, 2000 and expiring on September 30, 2003. The rent is
approximately $2,500 per month.
(b) The Company issued 150,000 stock options at $0.49 for payment of service
valued at $73,500. These stock options vested immediately.
(c) The Company cancelled 300,000 employee stock options and issued 500,000 new
employee stock options for $0.30 and 250,000 new employee stock options for
$0.49.
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8. Recent Pronouncements for SAB 101 and FIN No. 44 as follows:
In December 1999 the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101, "Revenue Recognition in Financial Statements" (SAB 101), which
provides guidance on the recognition, presentation and disclosure of revenue in
financial statements of all public registrants. The provisions of SAB 101 are
effective for transactions beginning in the Company's year ended December 31,
2000. The Company has not completed its assessment of the impact of SAB 101 and
has not determined its effect, if any, on its future reported results of
operations.
On March 31, 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions involving Stock
Compensation" ("FIN 44"). This statement is effective for certain transactions
from December 15, 1998 and is to be applied commencing July 1, 2000. The Company
has not completed its assessment of the impact of FIN 44 and has not determined
its effect, if any, on its future reported results of operations.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion contains forward-looking statements that
involve risks and uncertainties. The Company's actual results could differ
materially from those discussed in these forward-looking statements as a result
of various factor. The following discussion should be read in conjunction with
the financial statements and notes thereto included elsewhere in this Quarterly
Report.
Forward- looking Statements
Except for statements of historical fact, certain information contained
herein constitutes "forward-looking statements," including without limitation
statements containing the words "believes," "anticipates," "intends," "expects"
and words of similar import, as well as all projections of future results. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results or achievements of the Company
to be materially different from any future results or achievements of the
Company expressed or implied by such forward-looking statements. Such factors
include, but are not limited to the following: the Company's limited operating
history, competition, management of growth and integration, risks of
technological change, the Company's dependence on key personnel, marketing
relationships and the other risks and uncertainties described under "Description
of Business - Risk Factors"described in the Company's Annual Report form 10-QSB
for the year ended December 31, 1999. Certain of the forward-looking statements
contained in this Quarterly Report may be identified with cross-references to
this section.
GENERAL
The Company is a software development company specializing in Internet
delivery platforms for e-education. During fiscal year 1999, the Company focused
primarily on the research, development and design of a new e-commerce
educational delivery model that provides users with free access to online
education. As of the date of this Quarterly Report, the Company is focused on
five market areas: (i) subscription-based Internet education, (ii) corporate
workplace initiatives, (iii) Ministry of Education initiatives, (iv) third-party
licensing of the Company's e-education delivery platform, and (v) retail
distribution.
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As of the date of this Quarterly Report, the Company derives its
revenues principally from the retail marketing and sale of its e-education
delivery platforms (the "E-Education Software") to customers generally in the
retail software distribution. During the nine-month period ended September 30,
2000, sales of the E-Education Software to the Company's customers accounted for
100% of total gross revenues, with 87% of such sales derived from two customers.
Although the Company intends to expand its marketing of the E-Education Software
and related products in other industries, such as subscription-based Internet
education, corporate workplace and third-party licensing, management of the
Company believes that sales of the E-Education Software to customers in the
corporate and retail distribution networks will continue to be an important line
of business for the Company for the next several years. Moreover, the Company
expects to generate the majority of its future revenues from advertising
revenues generated by inclusion of the advertiser's message on the Company's
E-Education Software.
RESULTS OF OPERATIONS
Nine-Month Period Ended September 30, 2000 Compared to Nine-Month Period Ended
September 30, 1999
The Company's net losses during the nine-month period ended September
30, 2000 were approximately $972,179 compared to a net loss of approximately
$616,673 (an increase of 58%) during the nine-month period ended September 30,
1999.
Net revenues during the nine-month period ended September 30, 2000 and
1999 were $14,861 and $100,520, respectively. Net revenues decreased by
approximately $85,659 for the nine-month period ended September 30, 2000 as
compared to the nine-month period ended September 30, 1999. The decrease in net
revenues during the nine-month period ended September 30, 2000 was primarily due
to the Company's decision to discontinue retail sales of its English Pro 6.2
product. The Company anticipates that future net revenues will increase based on
the retail distribution of its English Pro 7.0. The Company has entered into
various agreements with certain entities regarding corporate workplace
initiatives, subscription-based Internet education and third party licensing of
the Company's E-Education Software.
Gross profit during the nine-month period ended September 30, 2000 and
1999 amounted to $12,229 and $87,836, respectively. Cost of goods sold during
the nine-month period ended September 30, 2000 and 1999 were $2,632 and $53,328,
respectively. The decrease in cost of goods sold expenses during the nine-month
period ended September 30, 2000 was primarily due to the Company's decision to
discontinue retail sales of its English Pro 6.2. Cost of goods sold expenses
generally consist of expense associated with the physical production of the
"boxed" software packages that are sold in the retail market.
General and administrative expenses for the nine-month period ended
September 30, 2000 and 1999 were $404,921 and $304,766, respectively (an
increase of $100,155 or 33%). The increase in general and administrative
expenses for the nine-month period ended September 30, 2000 were primarily due
to increases in expenses related to hiring of personnel, travel, and legal and
accounting expenses associated with the filing requirements of a fully reporting
company. The Company anticipates that general and administrative expenses will
increase significantly during fiscal year 2001 due to the implementation of its
Internet/Intranet enabled software initiatives in South East Asia and South
America. General and administrative expenses generally include corporate
overhead, administrative salaries, shipping costs, selling expenses, consulting
costs and professional fees.
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Marketing expenses for the nine-month period ended September 30, 2000
and 1999 were $485,149 and $216,053 respectively (an increase of $269,096 or
125%). The increase in marketing expenses for the nine-month period ended
September 30, 2000 were primarily due to the Company's launch of its Ministry of
Education initiative in Thailand beginning in July 2000, promotion of the
Company's Internet-enabled software products in South East Asia, South America,
and the reallocation of administrative personnel to marketing. The Company
anticipates that marketing expenses will increase significantly during fiscal
year 2001 as a result of its current initiatives in Thailand and China and the
Company's anticipated growth throughout Asia and Latin America.
During the nine-month period ended September 30, 2000, the Company
realized net gain on disposal of investments of $139,827. This gain resulted
from the sale, on August 15, 2000, of the Company's entire interest in ESL Pro
Systems Inc. to Savoy Capital Limited.
As discussed above, the increase in net loss during the nine-month
period ended September 30, 2000 as compared to the nine-month period ended
September 30, 1999 is attributable primarily to a substantial increase in
marketing expenses and in general and administrative expenses, and to the loss
realized on the Company's sale of its interest in ESL Pro Systems Inc.. The
Company's net earnings (losses) during the nine-month period ended September 30,
2000 were approximately ($972,179) or ($0.07) per common share compared to a net
loss of approximately ($616,673) or ($0.05) per common share (an increase of
58%) during the nine-month period ended September 30, 1999. The weighted average
of common shares outstanding were 13,887,601 for the nine-month period ended
September 30, 2000 compared to 12,493,756 for the nine-month period ended
September 30, 1999.
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 2000 COMPARED WITH THREE-MONTH PERIOD
ENDED SEPTEMBER 30, 1999
The Company's net losses during the three-month period ended September
30, 2000 were approximately $313,226 compared to a net loss of approximately
$294,715 (an increase of 7%) during the three-month period ended September 30,
1999. Net revenues during the three-month period ended September 30, 2000 and
1999 were $3,054 and $5,371, respectively. Net revenues decreased by
approximately $2,317 for the three-month period ended September 30, 2000 as
compared to the three-month period ended September 30, 1999. The decrease in net
revenues during the three-month period ended September 30, 2000 was primarily
due to the continuing repercussions from the discontinued retail sales of the
English Pro 6.2 product.
Gross profit during the three-month period ended September 30, 2000 and
1999 amounted to $1,151 and ($12,074), respectively. Cost of goods sold during
the three-month period ended September 30, 2000 and 1999 were $1,903 and
$17,445, respectively. The substantial decrease in cost of goods sold expenses
during the three-month period ended September 30, 2000 was primarily due to the
software packages being returned during that period.
General and administrative expenses for the three-month period ended
September 30, 2000 and 1999 were $114,913 and $93,556, respectively (an increase
of $21,357 or 23%). Marketing expenses for the three-month period ended
September 30, 2000 and 1999 were $262,361 and $83,502 respectively (an increase
of $178,859 or 214%).
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As discussed above, the increase in net loss during the three-month
period ended September 30, 2000 as compared to the three-month period ended
September 30, 1999 is attributable primarily to a substantial increase in
marketing expenses and in general and administrative expenses. The Company's net
earnings (losses) during the three-month period ended September 30, 2000 were
approximately ($313,226 ) or ($0.02) per common share compared to a net loss of
approximately ($294,715) or ($0.02) per common share (an increase of 7%) during
the three-month period ended September 30, 1999. The weighted average of common
shares outstanding were 14,278,963 for the three-month period ended September
30, 2000 compared to 12,753,246 for the three-month period ended September 30,
1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company is currently experiencing a liquidity crisis and must raise
additional capital. Further, the Company has not generated sufficient cash flow
to fund its operations and activities. Historically, the Company has relied upon
internally generated funds, funds from the sale of shares of stock and loans
from its shareholders and private investors to finance its operations and
growth. The Company's future success and viability are entirely dependent upon
the Company's management to successfully market its products and to raise
additional capital through further public or private offerings of its stock or
loans from private investors. Management is optimistic that the Company will be
successful in its future generation of revenues from its subscription-based
Internet education, corporate workplace initiatives, Ministry of Education
initiatives, third-party licensing of the Company's e-Education Delivery
Platform and retail distribution of the English Pro 7.0. Management is further
optimistic that the Company will be successful in raising additional capital.
However, there is no assurance that the Company will be able to successfully
market its products and raise additional capital. The Company's failure to
successfully market its products and to raise additional capital will have a
material and adverse affect upon the Company and its shareholders. The Company's
financial statements have been prepared assuming that it will continue as a
going concern, and accordingly, do not include adjustments relating to the
recoverability and realization of assets and classification of liabilities that
might be necessary should the Company be unable to continue in operations.
As of September 30, 2000, the Company's current assets were $94,539 and
its current liabilities were $281,804, which resulted in a working capital
deficit of $187,265. The Company's current assets consist primarily of prepaid
expenses in the amount of $58,369, accounts receivable of $9,512, other
receivables of $20,192 and cash in the amount of $6,466. On September 22, 2000,
an amount of $87,125.11 was deposited into the Company's cash account, which
resulted from a return of such funds to the Company by the ex-president, Marc E.
Bruk. In accordance with Section 16 of the Securities Exchange Act of 1934, as
amended, the funds were classified as a "disgorgement of profit" relating
purchase and sale by Mr. Bruk of the Company's shares of common stock. The funds
were recorded as additional paid-in capital in shareholders' equity. The
Company's current liabilities consist primarily of accounts payable in the
amount of $146,300 and loans payable in the amount of $130,750. As of September
30, 2000, the Company's stockholders' deficit increased from $141,424 at
December 31, 1999 to $146,495 at September 30, 2000.
The Company has not yet generated positive cashflows from operating
activities. For the nine-month period ended September 30, 2000, net cash used in
operating activities was $857,936 compared to $578,413 for the nine-month period
ended September 30, 1999 (an increase of $279,523 or 48%). As noted above, the
main increase was comprised of a net loss of $972,179 for the nine-month period
ended September 30, 2000 compared to a net loss of $616,673 for the nine-month
period ended September 30, 1999 (an increase of $355,506). Stock issued in
payment for services increased to $188,905 for the nine-month period ended
September 30, 2000 compared to $-0- for the nine-month period ended September
30, 1999. Prepaid expenses increased to $58,369 for the nine-month period ended
September 30, 2000 compared to $5,651 for the nine-month period ended September
30, 1999. The Company does not expect to generate positive cash from operations
for the fiscal year ending December 31, 2000.
<PAGE>
The Company's investing activities have consisted of capital
expenditures totaling $3,148 for the nine-month period ended September 30, 2000
compared to $31,748 for the nine-month period ended September 30, 1999. The
capital expenditures related primarily to the acquisition of computer hardware
used to support the Company's growing employee base.
Net cash provided by financing activities was $823,953 for the
nine-month period ended September 30, 2000 compared to $672,145 for the
nine-month period ended September 30, 1999. Net cash provided by financing
activities resulted primarily from issuance of capital stock, which was
partially offset by principal payments on capital leases and notes payable.
The Company does foresee an increase in operating expenses in order to
implement its Internet/Intranet enabled applications in Thailand, China and
Malaysia and to continue the upgrade of its software application. In addition,
the Company intends to launch its Subscription-based Internet Education site and
begin Third Party Licensing of its e-Education Delivery Platform. Further, the
Company expects to sign additional Ministries of Education and begin
implementations early in 2001. The Company expects to fund these initiatives
with further issuance of common stock of the Company and from revenues from its
current initiatives that are expected to begin in the fourth quarter of 2000.
The Company believes that anticipated private placements of equity
capital and debt financing, along with anticipated operating revenues will be
adequate to fund the Company's operations over the next three months.
Thereafter, the Company expects it will need to raise additional capital to meet
its long-term operating requirements. The Company may encounter business
initiatives that require significant cash commitments or unanticipated problems
or expenses that could result in a requirement for additional cash before that
time. If the Company raises additional funds through the issuance of equity or
convertible debt securities other than to current shareholders, the percentage
ownership of its current shareholders would be reduced, and such securities
might have rights, preferences or privileges senior to its common stock.
Additional financing may not be available upon acceptable terms, or at all. If
adequate funds are not available or are not available on acceptable terms, the
Company's ability to fund its expansion, take advantage of business
opportunities, develop or enhance its products or otherwise respond to
competitive pressures would be significantly limited, which could significantly
restrict the Company's operations.
Foreign Currency Translation and Hedging
Foreign exchange gains (losses) have not been significant to date and
the Company does not, at this time, engage in forward exchange contracts for the
purpose of hedging against fluctuations in the exchange rate between United
States and Canadian dollars.
During the fourth quarter of 2000 and throughout 2001, the Company
intends to engage in activities in foreign countries, namely Thailand, China,
Malaysia, Columbia, Hong Kong and Taiwan. These activities will likely result in
development expenses related to the installation, support and maintenance of
English Pro Network Edition on educational networks and sales and marketing
expenses related to generating advertising revenues in these regions. The
Company has no immediate plans for hedging against fluctuations in these
currencies.
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a party to, and none of the Company's property is
subject to, any material pending or threatened legal proceeding.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
o On August 4, 2000, the Company entered into a settlement
agreement with a creditor whereby the Company agreed to issue
150,000 shares of its restricted common stock at the rate of
$0.51 per share to settle an aggregate debt of $76,500 for
services rendered. Under the terms of the settlement
agreement, the creditor agreed to accept the issuance of
shares of common stock as payment for the debt owed to such
creditor. The Company issued the shares in reliance upon
Regulation S of the Securities Act of 1933, as amended (the
"Securities Act"). The creditor represented to the Company
that it acquired the shares for its own account, and not with
a view to distribution, and that the Company made available
all material information concerning the Company.
o On September 29, 2000, the Company entered into a settlement
agreement with a creditor whereby the Company agreed to issue
4,052 shares of its restricted common stock at the rate of
$0.50 per share to settle an aggregate debt of $2,026 for
services rendered. Under the terms of the settlement
agreement, the creditor agreed to accept the issuance of
shares of common stock as payment for the debt owed to such
creditor. The Company issued the shares in reliance upon
Regulation S of the Securities Act. The creditor represented
to the Company that he acquired the shares for his own
account, and not with a view to distribution, and that the
Company made available all material information concerning the
Company.
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
No report required.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No report required.
ITEM 5 OTHER INFORMATION
No report required.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit
Number Description
27 Financial Data Schedule
(b) Form 8-K
The registrant filed a report on Form 8-K on October 10, 2000 and on November
13, 2000.
(a) Exhibits
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EDUVERSE.COM, INC.
Date: November 14, 2000 By: /s/ MARC CRIMENI
--------------------------------
Marc Crimeni
President
