SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
[ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
------------ ----------------
Commission File Number 333-32304
INDEXONLY TECHNOLOGIES, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Nevada 98-0223452
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
3823 Henning Drive, Suite 217
Burnaby, British Columbia V5C 6P3 CANADA
(604) 419-4401
(Address and Telephone Number of Principal Executive Offices)
Check whether the issuer
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and
(2) has been subject to such filing requirements for the last 90 days.
Yes [ ] No [X]
As at November 8, 2000 the number of common shares outstanding was 22,314,733.
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE>
TABLE OF CONTENTS
Page No.
--------
PART I- FINANCIAL INFORMATION
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
<PAGE>
Page 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE>
Page 3
Interim Consolidated Financial Statements of
INDEXONLY TECHNOLOGIES, INC.
(Expressed in U.S. Dollars)
For the nine month period ended September 30, 2000
(Unaudited)
<PAGE>
Page 4
INDEXONLY TECHNOLOGIES, INC.
Interim Consolidated Balance Sheet
(Expressed in U.S. Dollars)
September 30 December 31
2000 1999
---- ----
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 13,678 $ 95,175
Short-term investments 13,302 7,600
Accounts receivable 240,499 9,237
Subscriptions receivable - 189,000
Prepaid expenses 233 13,041
---------- ---------
Total current assets 267,712 314,053
Property and equipment (note 3) 234,047 184,542
Intangible assets (note 4) 76,545 107,309
Agreements receivable (note 5) 137,500 -
---------- ---------
$ 715,804 $ 605,904
========== =========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 546,339 $ 69,573
Shareholder loans (note 6) 449,633 247,059
---------- ---------
Total current liabilities 995,972 316,632
Deferred revenue (note 5) 137,500 -
Stockholders' equity (deficit) (note 7):
Common stock, $0.001 par value,
authorized 100,000,000 shares;
issued 22,226,733 shares (20,748,733
in 1999) 22,227 20,749
Preferred stock, $0.001 par value,
authorized 50,000,000 shares;
no shares issued
Additional paid-in capital 4,672,654 3,552,502
Share subscriptions (note 9) 24,649 386,500
Deficit (5,148,888) (3,667,347)
Accumulated other comprehensive income:
Cumulative translation adjustment 11,690 (3,132)
---------- ---------
Total stockholders' equity (deficit) (417,668) 289,272
---------- ---------
Commitments and contingencies (note 8)
$ 715,804 $ 605,904
========== =========
See accompanying notes to interim consolidated financial statements.
<PAGE>
Page 5
INDEXONLY TECHNOLOGIES, INC.
Interim Consolidated Statement of Operations
(Expressed in U.S. Dollars)
Three months Nine months
ended ended
September 30, September 30,
2000 2000
------ ------
(unaudited) (unaudited)
Revenue $ 339,350 $ 768,737
Cost of services 53,197 211,438
---------- ---------
Gross profit 286,153 557,299
---------- ---------
Operating expenses:
Marketing and promotion 232,269 728,089
Technical and development 118,935 347,116
General and administration 170,387 462,034
Depreciation and amortization 30,932 92,299
Share compensation expense 213,300 395,630
---------- ---------
Total operating expenses 765,823 2,025,168
Interest expense, net 7,015 13,672
---------- ---------
772,838 2,038,840
---------- ---------
Loss for the period (486,685) (1,481,541)
Opening deficit (4,662,203) (3,667,347)
---------- ---------
Ending deficit $(5,148,888) $(5,148,888)
========== ==========
Net loss per common share, basic and diluted $ (0.02) $ (0.07)
========== ==========
Weighted average common shares outstanding,
basic and diluted 22,226,733 21,930,054
========== ==========
Comprehensive loss:
Loss for the period $ (486,685) $(1,481,541)
Cumulative translation adjustment 7,003 14,915
---------- ---------
$ (479,682) $(1,466,626)
========== ==========
See accompanying notes to interim consolidated financial statements.
<PAGE>
Page 6
INDEXONLY TECHNOLOGIES, INC.
Interim Consolidated Statements of Stockholders' Equity (Deficit)
(Expressed in U.S. Dollars)
Nine months ended September 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Other
Comprehensive
Income:
Share and Other Cumulative Total
Common Stock Subscriptions Paid-In Translation Stockholders'
----------------------
Shares Amount Unit Amount Capital Deficit Adjustment Equity Deficit)
---------- ---------- ------------- -------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 20,748,733 $ 20,749 $ 386,500 $3,552,502 $(3,667,347) $ (3,132) $ 289,272
Common stock issued for
share subscriptions,
February 24, 2000 at
$0.50 per share 773,000 773 (386,500) 385,727 - - -
Common stock issued for cash,
February 24, 2000
at $0.50 per share (net of
costs of $13,000) 705,000 705 - 338,795 - - 339,500
Common stock subscriptions
at $2.00 per share 24,649 24,649
Amortization of option
compensation cost - - - 395,630 - - 395,630
Loss for the period - - - - (1,481,541) - (1,481,541)
Cumulative translation
adjustment - - - - - 14,822 14,822
---------- --------- ----------- --------- ---------- ------------- -------------
22,226,733 22,227 $ 24,649 $4,672,654 $(5,148,888) $ 11,690 $ (417,668)
========== ========= =========== ========= ========== ============= =============
</TABLE>
See accompanying notes to interim consolidated financial statements.
<PAGE>
Page 7
INDEXONLY TECHNOLOGIES, INC.
Interim Consolidated Statement of Cash Flows
(Expressed in U.S. Dollars)
Nine months
ended
September
30, 2000
------------
Cash flows from operating activities:
Loss for the period $ (1,481,541)
Items not affecting cash:
Depreciation and amortization 92,299
Amortization of option compensation cost 395,630
Cumulative translation adjustment 14,822
Changes in operating assets and liabilities:
Accounts receivable (231,262)
Prepaid expenses 12,808
Accounts payable and accrued liabilities 476,766
Agreement receivable, long term portion (137,500)
-
------------
Deferred revenue 137,500
------------
Net cash used in operating activities (720,478)
------------
Cash flows from investing activities:
Purchase of short-term investment (5,702)
Purchase of property and equipment (111,040)
------------
Net cash used in investing activities (116,742)
------------
Cash flows from financing activities:
Net proceeds from issuance of shareholder loans 449,633
Net proceeds from (repayment) of shareholder loans (247,059)
Net proceeds from common stock subscriptions 213,649
Net proceeds from issuance of common stock 94,000
Net proceeds from issuance of units 245,500
------------
Net cash provided by financing activities 755,723
------------
Net increase in cash and cash equivalents (81,497)
Cash and cash equivalents at beginning of period 95,175
------------
Cash and cash equivalents at end of period $ 13,678
============
Supplemental disclosure of non-cash financing and investing activities:
Debt issued to acquire net assets on acquisition $ -
Income taxes paid -
Interest paid 13,672
See accompanying notes to interim consolidated financial statements.
<PAGE>
Page 8
INDEXONLY TECHNOLOGIES, INC.
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
Nine months ended September 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
1. Nature of operations:
The Company is currently in the business of operating an internet commercial
search directory, which allows users to locate specific information relevant
to geographical areas. The Company's primary sources of revenue result from
the sale of regional and district licenses to authorized agents and through
advertising sold to businesses on its directory.
These interim consolidated financial statements have been prepared on a
going concern basis in accordance with United States generally accepted
accounting principles. The going concern basis of presentation assumes the
Company will continue in operation for the foreseeable future and will be
able to realize its assets and discharge its liabilities and commitments in
the normal course of business. Certain conditions, discussed below,
currently exist which raise substantial doubt about the validity of this
assumption. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The Company's future operations are dependent upon the market's acceptance
of its license and advertising products and services. There can be no
assurance that the Company's products and services will be able to secure
market acceptance. Operations have primarily been financed through the
issuance of common stock and other equity instruments. The Company does not
have sufficient working capital to sustain operations until the end of the
year ended December 31, 2000. Additional debt or equity financing will be
required and may not be available or may not be available on reasonable
terms. Management plans to raise funds within the next six months through a
public sale of its common stock however if they are unable to raise
sufficient funds or obtain alternate financing, they may have to revise,
delay or abandon their plans for expansion and may not meet their working
capital requirements.
2. Significant accounting policies:
(a) Basis of presentation:
On August 31, 1999, Classic Golf Corporation issued 20,150,000 common
shares in exchange for 100% of the issued and outstanding shares of
Indexonly Technologies USA Inc., a company incorporated in the State of
Nevada on June 28, 1999. At the time of the acquisition, Classic Golf
Corporation had no substantive operations and changed its name to
Indexonly Technologies, Inc. (the "Company"). The acquisition was
accounted for as a recapitalization of Indexonly Technologies USA Inc.
and an issuance of shares by Indexonly Technologies USA Inc. for the net
assets of the Company.
<PAGE>
Page 9
INDEXONLY TECHNOLOGIES, INC.
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
Nine months ended September 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(a) Basis of presentation (continued):
The Company's historical financial statements reflect the financial
position, results of operations and cash flows of Indexonly Technologies
USA Inc. from the date of its incorporation on June 28, 1999 under the
laws of the State of Nevada. The historical stockholders' equity gives
effect to the shares issued to the stockholders of Indexonly
Technologies USA Inc. The results of operations of Classic Golf
Corporation are included from the date of acquisition, August 31, 1999.
These interim consolidated financial statements have been prepared using
generally accepted accounting principles in the United States. The
interim financial statements include the accounts of the Company's
wholly owned subsidiaries, Indexonly Technologies USA Inc. and Indexonly
Canada Inc. and all adjustments, consisting solely of normal recurring
adjustments, which in management's opinion are necessary for a fair
presentation of the financial results for the interim period. The
financial statements have been prepared consistent with the accounting
policies described in the Company's Registration Statement in Form SB-2
filed with the Securities and Exchange Commission for the period from
June 28, 1999 (inception) to December 31, 1999, and should be read in
conjunction therewith.
(b) Use of estimates:
The preparation of interim consolidated financial statements in
accordance with United States generally accepted accounting principles
requires management to make estimates and assumptions that affect the
amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial
statements and reported revenues and expenses for the reporting periods.
Significant areas requiring the use of estimates include the valuation
of long-lived assets, estimating the fair market value of equity
instruments and the valuation of deferred tax assets. Actual results may
significantly differ from these estimates.
(c) Revenue recognition:
Revenue consists of license fee revenue from the sale of regional and
district agent licenses and revenue from advertising sales. District
license fees are apportioned between the Company and the related
regional agent in accordance with contractual agreements. Fee revenue
is recognized when all material services or conditions relating to the
sale have been substantively performed or satisfied by the Company.
This policy complies with Financial Accounting Standards No. 45
"Accounting for Franchise Fee Revenue" because the Company, acting as
the franchisor, has no remaining obligation or intent to repay the
license fees, has performed substantially all of the initial services as
required by the license agreement, and no other material conditions or
obligations related to the determination of substantial performance
exist.
<PAGE>
Page 10
INDEXONLY TECHNOLOGIES, INC.
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
Nine months ended September 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(d) Foreign currency:
The functional currency of the Company and its U.S. subsidiary is the
United States dollar. The functional currency of its Canadian
subsidiary is the Canadian dollar, the applicable local currency. The
translation of the applicable foreign currency into the parent company's
functional currency is performed for assets and liabilities using
exchange rates in effect at the balance sheet date. Revenue and expense
transactions are translated using average exchange rates prevailing
during the period. Exchange gains and losses arising on the translation
of the applicable foreign operations into the Company's functional
currency are excluded from the determination of income and reported as
the cumulative translation adjustment in stockholders' equity. Foreign
exchange gains of the parent or U.S. subsidiary relating to the
transactions denominated in foreign currency are included in the
determination of net income.
(e) Cash and cash equivalents:
The Company considers all short-term investments with a maturity date at
purchase of three months or less to be cash equivalents.
(f) Short term investments:
The short term investments consist of term deposits with terms to
maturity of longer than 3 months, but less than one year. The short
term investments are stated at cost, which approximates market value.
(g) Property and equipment:
Property and equipment are stated at cost and are depreciated using the
straight-line method over their estimated useful lives as follows:
Computer equipment and software 3 years
Furniture and office equipment 5 years
Leasehold improvements Over lease term
(h) Intangible assets:
Intangible assets, including Trademarks, Website development costs and
World Wide Web domain names are amortized on a straight-line basis over
three years. The Company periodically evaluates the recoverability of
intangible assets and recognizes an impairment loss if the projected
undiscounted future cash flows are less than the carrying amount. The
assessment of the recoverability of intangible assets will be impacted
if estimated future operations cash flows differ from those activities.
<PAGE>
Page 11
INDEXONLY TECHNOLOGIES, INC.
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
Nine months ended September 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(i) Impairment of long-lived assets and long-lived assets to be disposed of:
The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of. The Company reviews
property and equipment for impairment whenever events or changes in
circumstances indicate the carrying value may not be recoverable. If
the sum of future cash flows expected to result from the use of the
asset and its eventual disposition is less than the carrying amount, an
impairment loss is recognized for the excess of the carrying amount of
the asset over the fair value of the asset.
(j) Income taxes:
The Company follows the asset and liability method of accounting for
income taxes. Under this method, current taxes are recognized for the
estimated income taxes payable for the current period.
Deferred income taxes are provided based on the estimated future tax
effects of temporary differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases as well
as the benefit of losses available to be carried forward to future years
for tax purposes.
Deferred tax assets and liabilities are measured using enacted tax rates
that are expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in operations in the period that includes the substantive
enactment date. A valuation allowance is recorded for deferred tax
assets when it is more likely than not that such deferred tax assets
will not be realized.
(k) Research and development:
Research and development costs are expensed when incurred. Equipment
used in research and development is capitalized only if it has an
alternative future use.
(l) Website development costs
Website development costs are expensed as incurred unless they meet the
criteria for deferral under generally accepted accounting principles.
Planning, content and operating costs are expensed as incurred. The
costs eligible for capitalization, totaling $118,996 are incurred in the
application and development stage and to develop graphics. These assets
are being amortized over their estimated useful life of three years. On
an ongoing basis, management reviews the valuation and amortization of
development costs, based on future estimated operating income and taking
into consideration any events and circumstances which might have
impaired their value.
<PAGE>
Page 12
INDEXONLY TECHNOLOGIES, INC.
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
Nine months ended September 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
2. Significant accounting policies (continued):
(m) Net loss per share:
A basic earnings per share is computed using the weighted average number
of common shares outstanding during the periods. Diluted loss per share
is computed using the weighted average number of common and potentially
dilutive common shares outstanding during the period. As the Company has
a net loss in the period presented, basic and diluted net loss per share
is the same.
(n) Stock-based compensation:
The Company accounts for its stock-based compensation arrangements in
accordance with provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense under fixed plans would
be recorded on the date of grant only if the fair value of the
underlying stock at the date of grant exceeded the exercise price. The
Company recognizes compensation expense for stock options, common shares
and other equity instruments issued to non-employees for services
received based upon the fair value of the services or equity instruments
issued, whichever is more reliably determined. This information is
presented in note 7(a).
3. Property and equipment:
Property and equipment consists of the following:
Computer equipment $ 204,729
Computer software 63,065
Furniture and office equipment 36,669
Leasehold improvements 10,675
-----------
315,138
Less accumulated depreciation (81,091)
-----------
$ 234,047
===========
<PAGE>
Page 13
INDEXONLY TECHNOLOGIES, INC.
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
Nine months ended September 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
4. Intangible assets:
Intangible assets are recorded net of accumulated amortization of $45,944.
5. Agreements receivable
Amounts due under license sales agreements that are due after fiscal year
2001 are shown as agreements receivable and recognition of related revenue
is deferred. Amounts due before the end of fiscal 2001 are included in
accounts receivable.
6. Shareholder loans:
Loans from shareholders are denominated in Canadian dollars, bear interest
at 10% per annum, are unsecured and repayable on demand.
7. Stockholders' equity (deficit):
(a) Stock option plan:
The Company has reserved 15,000,000 common shares for issuance under its
1999 stock option plan. The plan provides for the granting of stock
options to directors, officers, eligible employees and contractors at
the fair market value of the Company's stock at the grant date.
The options granted in the period ended September 30, 2000 vest at
various terms up to four years.
The Board of Directors determines the terms of the options granted including
the number of options granted the exercise price and the vesting schedule.
<PAGE>
Page 14
INDEXONLY TECHNOLOGIES, INC.
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
Nine months ended September 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
7. Stockholders' equity (deficit) (continued):
(a) Stock option plan (continued):
Nine months ended
September 30, 2000
-----------------------
Weighted
Average
Number of Exercise
Shares Price
---------- ---------
Outstanding, December 31, 1999 5,943,000 $ 1.00
Granted 1 6,899,834 1.00
Exercised - -
Cancelled (320,000) -
---------- --------
Outstanding, September 30, 2000 12,522,834 1.00
========== ========
Exercisable, September 30, 2000 Nil Nil
========== ========
Weighted-average fair value of options granted
during the periods 0.00
========
1 A total of 3,571,500 stock options were treated as issued when the Company
received Securities and Exchange Commission reporting status on August 4, 2000.
Information regarding the stock options outstanding at September 30, 2000 is
summarized below:
Options Outstanding Options Exercisable
--------------------------------------- ---------------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Shares Remaining Exercise Shares Exercise
Prices Outstanding Contractual Life Price Exercisable Price
------- ----------- ---------------- -------- ----------- --------
$1.00 12,522,834 2.3 years $1.00 0 $0.00
========== ========= ===== = =====
The options outstanding at September 30, 2000 expire on various dates from
October 1, 2002 to May 29, 2005.
<PAGE>
Page 15
INDEXONLY TECHNOLOGIES, INC.
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
Nine months ended September 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
7. Stockholders' equity (deficit) (continued):
(a) Stock option plan (continued):
The Company adopted only the disclosure provisions of Statement of
Financial Accounting Standards No. 123 ("FAS 123"), Accounting for Stock
Based Compensation, to account for grants to employees under the
Company's existing stock based compensation plan. Compensation cost has
been recognized for any options that were granted with an exercise price
less than the market value of the stock on the date of the grant.
The fair value of each option grant is estimated on the date of the
grant using the Black-Scholes option-pricing model with the following
assumptions:
September 30, 2000
------------------
Expected dividend yield 0.0%
Expected stock price volatility 0.0%
Risk-free interest rate 6.0%
Expected life of options 1.3 to 3.0 years
The Black-Scholes option valuation model was developed for use in
estimating the fair value of options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single measure
of the fair value of its employee stock options.
(b) Stock-based compensation:
During the period, the Company recorded non-cash compensation expense of
$395,630 related to the issuance of stock options to purchase common
shares to certain contractors and stockholders of the Company. The fair
value of the stock options was estimated at between $0.06 and $1.30
based on a stock option exercise price of $1.00 and estimated market
value of stock between $0.50 and $2.00 at the time of the transaction.
<PAGE>
Page 16
INDEXONLY TECHNOLOGIES, INC.
Notes to Interim Consolidated Financial Statements
(Expressed in U.S. Dollars)
Nine months ended September 30, 2000
(Unaudited)
--------------------------------------------------------------------------------
7. Stockholders' equity (deficit) (continued):
(c) Share purchase warrants:
During the period, the Company issued 515,000 units for net proceeds of
$245,500. Each unit, upon exercise, entitles the holder to receive one
common share and one common share purchase warrant. Each share purchase
warrant entitles the holder to purchase one common share at $0.50 per
share, any time after March 31, 2000, until March 31, 2001.
8. Operating leases:
The Company leases office facilities in British Columbia under an operating
lease agreement that expires August 31, 2004. Minimum lease payments under
this operating lease are as follows:
2000 $ 41,100
2001 41,100
2002 41,100
2003 41,100
2004 27,400
Rent expense totaled $30,825 for the period ended September 30, 2000.
9. Financial instruments:
(a) Fair values:
The Company regularly invests funds in excess of its immediate needs in
guaranteed investment certificates. The fair value of cash and cash
equivalents, accounts receivable, accounts payable and accrued
liabilities approximates their financial statement carrying amounts due
to the short-term maturities of these instruments. The carrying amount
of shareholder loans approximates fair value since they have a short-
term to maturity.
(b) Foreign currency risk:
The Company operates internationally which gives rise to the risk that
cash flows may be adversely impacted by exchange rate fluctuations.
10. Subsequent event
Subsequent to the period end, the Company issued 88,000 common shares at a
price of $2.00 per share for total proceeds of $176,000 of which $24,649 was
received before September 30, 2000 and shown as Share subscriptions.
<PAGE>
Page 17
Item 2. Management's Discussion and Analysis
Results of Operations
For the three month period ended September 30, 2000, revenue totaled $339,350,
cost of services was $53,197 and total expenses were $772,838, resulting in a
loss for the period of $486,685. For the nine month period ended September 30,
2000, revenue totaled $768,737, cost of services was $211,438 and total expenses
were $2,038,840, resulting in a loss for the period of $1,481,541.
Approximately 83% of year to date revenues related to sales of international,
regional and district licenses and the balance related to advertising and other
revenue. The licenses are fees charged for exclusive rights to operate as a
sales agent in a region or district. The district fees are apportioned between
Indexonly.com and the related regional agent in accordance with contractual
arrangements. Fee revenue is recognized when all material services or conditions
relating to the sale have been substantially performed or satisfied. The rights
or license agreements provide for additional fees payable to Indexonly based on
future operating or license sales performance.
Total expenses include marketing and promotion, technical and development,
general and administrative, depreciation and amortization, share compensation
expense and interest expense. Marketing and promotion expense was $232,269 for
the three months and $728,089 for the nine months ended September 30, 2000 with
approximately 91% of this related to advertising, promotion and marketing to
attract international and regional agents. Technical and development expense
totaled $118,935 for the three months and $347,116 for the nine months ended
September 30, 2000 with the majority being spent on programming and data base
management. General and administration expenses amounted to $170,387 for the
three months and $462,034 for the nine months ended September 30, 2000 and
included expenditures on staff, rent, professional advisors and regulatory fees.
Depreciation and amortization totaled $30,932 for the three months and $92,299
for the nine months ended September 30, 2000. Share compensation expense
amounted to $213,300 for the three months and $395,630 for the nine months ended
September 30, 2000. This expense related to the issuance of stock options to
certain contractors and stockholders of the Company. Interest expense totaled
$7,015 for the three months and $13,672 for the nine months ended September 30,
2000 and relates to amounts paid on the shareholder loans.
Liquidity and Capital Resources
At September 30, 2000, we had cash and cash equivalents of $13,678 as compared
to $95,175 as at December 31, 1999. The net cash provided by our financing
activities during the nine month period ended September 30, 2000 was $755,723
including the receipt of $189,000 in share subscriptions receivable. In
addition, we received net proceeds of $245,500 from the sale of 515,000 units at
$0.50 each. Unit holders received one common share and one warrant entitling
them to receive one further common share at $0.50 per share, any time after
March 31, 2000 until March 31, 2001. We sold a further 190,000 common shares at
$0.50 per share for net proceeds of $94,000. We have received $24,649 of share
subscriptions for the purchase of 88,000 shares at $2.00. The balance of the
funds were received subsequent to period end and the shares were issued once all
funds had been received. During the period, we repaid our shareholder loans of
$247,059 and subsequently received new shareholder loans of $449,633. The
shareholder loans are denominated in Canadian dollars, with interest at 10% per
annum, are unsecured and are repayable on demand. The net cash used in our
operating activities was $720,478 and included net receipt of $260,000 for an
option to purchase an International license. This option is included in accounts
payable and is for a six month period to November 9, 2000, renewable for another
six month period by mutual agreement. Net cash used in our investing activities
was $116,742 for the purchase of property, equipment and short term investments.
Stockholders' deficit totaled $417,668 at September 30, 2000.
On August 4, 2000 the Securities and Exchange Commission declared the Company's
Registration Statement effective. As a result the Company is now subject to the
reporting requirements of the Securities Exchange Act of 1934. Effective August
18, 2000 the Company's common shares were listed for trading on the Over the
Counter Bulletin Board (OTC-BB). Subsequent to the period end, the Company
filed with the SEC a Registration Statement on Form S-8 in connection with the
registration of 15,000,000 common shares issuable under the Company's Stock
Option Plan.
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We maintain our cash balances at one major financial institution located in
Vancouver, British Columbia. Funds not required for the immediate needs may be
invested in certificates of deposit, short-term government obligations, or money
market funds.
We lease our office facility in Burnaby, British Columbia under an operating
lease agreement that expires August 31, 2004. Future minimum rental commitments
pursuant to this lease are $41,100 for fiscal years 2000 through 2003, and
$27,400 for fiscal year 2004. As at September 30, 2000, we have no material
commitments for capital expenditures.
We do not have sufficient working capital to allow us to achieve our expected
expansion goals and demands for our services through the end of the 2000
calendar year. We will therefore need to obtain additional working capital
through the sale of our capital stock, the issuance of debt or other financing
methods. We believe our existing working capital and anticipated cash from
financing activities will be sufficient to allow us to execute our business
plan, including the further development of our business directory and website
and to fund our expansion and marketing plans for the year 2000. Despite this
belief, there is no assurance that our resources will be sufficient.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-B.
None.
(b) Exhibits on Form 8-K.
None.
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SIGNATURES
In accordance with the requirement of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INDEXONLY TECHNOLOGIES, INC.
(Registrant)
Date: November 8, 2000 By: /s/ Cliff Sweeney
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Cliff Sweeney, Chairman and Chief Executive Officer
Date: November 8, 2000 By: /s/ David Manning
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David Manning, Chief Financial Officer
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