United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB/A
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from to
------------- ----------------------
Commission File Number: 0-29285
-------
ONLINE INNOVATION, INC.
(Name of Small Business Issuer in its charter)
Delaware 52-2058364
-------- ----------
(state or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
1118 Homer Street, #218, Vancouver, British Columbia V6B 6L5
------------------------------------------------------------
(Address of principal executive offices)
(604) 669-7564
--------------
Issuer's telephone number
----------------------------------------------------------------------------
Former name, former address, and former fiscal year, if changed since last
report
Check whether the registrant (1) filed all reports required to be filed by
sections 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 past 90 days.
Yes [ ] No [X]
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 [ ] N/A
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:
As of May 15, 2000 the registrant's outstanding common stock consisted of
13,255,000 shares.
Transitional Small Business Disclosure Format (Check one): YES [ ] NO [X]
<PAGE>
ONLINE INNOVATION, INC.
INDEX TO FORM 10QSB
PART I - FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Item 2. Management Discussion and Analysis
or Plan of Operation
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 Securities Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
EXHIBITS
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements
Attached are the registrant's unaudited financial statements for the nine month
period ended March 31, 2000, with comparative figures for the nine month period
ended March 31, 1999, and the Independent Accountant's Report thereon.
<PAGE>
MOEN AND COMPANY
CHARTERED ACCOUNTANTS
PO Box 10129
1400 IBM Tower
701 West Georgia Street Telephone: (604)662-8899
Vancouver, BC V7Y 1C6 Fax: (604)662-8809
INDEPENDENT ACCOUNTANTS' REPORT
To the Directors and Shareholders of
Online Innovation, Inc. (A Delaware Corporation)
(formerly Sinaloa Gold Corp.)
(A Development Stage Company)
We have reviewed the accompanying Balance Sheets of Online Innovation, Inc. (A
Delaware Corporation) (formerly Sinaloa Gold Corp.) (A Development Stage
Company) as of March 31, 2000 and March 31, 1999, and the Statements of Profit
and loss, Retained Earnings (Deficit), Cash Flows and Stockholders' Equity for
the nine month periods then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for them to be in conformity
with generally accepted accounting principles.
"Moen and Company"
Chartered Accountants
Vancouver, British Columbia, Canada
May 12, 2000
<PAGE>
ONLINE INNOVATION, INC.
(formerly Sinaloa Gold Corp.)
(A Delaware Corporation)
(A Development Stage Company)
Balance Sheet
March 31, 2000
(In U.S. Dollars)
(Unaudited)
(With Comparative Figures at March 31, 1999)
ASSETS 2000 1999
---- ----
Current Assets
Cash $ 195,037 $ 1,035
Prepaid expense 3,358 -
-------- ---------
198,395 1,035
Deferred tax asset (Note 13d(ii) and 14) 52,500 -
Fixed assets
Computer equipment (Note 5) 93,106 -
Computer software development (Note 6(b))
Application development stage costs 400,000 -
-------- ---------
$ 744,001 $ 1,035
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 18,160 $ 14,417
Loans, unsecured, non interest bearing and
with no specific terms of repayment - 32,358
Due to related parties (Notes 3 and 4) - 40,000
Agreement payable - Stratford Internet
Technologies (Note 6(b)) 125,000 -
-------- ---------
143,160 86,775
-------- ---------
Stockholders' Equity
Capital Stock (Note 3)
Authorized:
75,000,000 common shares at $0.001 par value
Issued and outstanding - 13,255,000 common shares
(1999 - 10,585,000 common shares) 13,255 10,585
Paid in capital in excess of par value of stock 1,559,745 77,415
Deficit accumulated during development stage
(note 1) (971,647) (173,740)
Cumulative translation (512) -
-------- --------
600,841 (85,740)
-------- ---------
$ 744,001 $ 1,035
======== =========
Approved on Behalf of the Board
/s/ Chad D. Lee , Director
-----------------------
/s/ Marlene C. Schluter, Director
-----------------------
See Accompanying Notes and Independent Accountants' Report
<PAGE>
ONLINE INNOVATION, INC.
(formerly Sinaloa Gold Corp.)
(A Delaware Corporation)
(A Development Stage Company)
Statement of Profit and Loss
(In U.S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Cumulative From
Inception Date
of Aug 1, 1997 Quarter Ended Nine Months Ended
to March 31, March 31, March 31,
---------------------------------------------------------------
2000 2000 1999 2000 1999
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Administration Costs
Depreciation $ 12,839 $ 7,946 $ - $ 12,762 $ -
Compensation on stock option 150,000 30,000 - 30,000 -
Filing and transfer agent fees 12,062 3,274 356 6,872 1,256
Financing costs 22,550 - - - 3,300
Management and consulting fees 281,525 20,000 - 116,000 3,500
Office expenses, net 67,681 18,395 5,419 42,376 17,208
Option payment, mineral properties 30,000
Professional fees 63,784 24,331 - 31,834 2,651
Promotion, investor relations,
and investor communications 82,749 43,111 - 68,819 1,650
Computer technology and
software development preliminary
development stage costs 227,325 1 - 7,203 -
Website marketing/Banner
advertising costs 61,104 29,313 - 38,345 -
Travel expenses 12,528 950 - 5,264 -
------------ ----------- ----------- ----------- -----------
(1,024,147) (177,321) (5,775) (359,475) (29,565)
Deferred income taxes 52,500 10,500 - 10,500 -
------------ ----------- ----------- ----------- -----------
Net loss for the period $ (971,647) $ (166,821) $ (5,775) $ (348,975) $ (29,565)
============ =========== =========== =========== ===========
Net loss per share,
basic and diluted $ (0.02) $ (0.00) $ (0.03) $ 0.00
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes and Independent Accountants' Report
ONLINE INNOVATION, INC.
(formerly Sinaloa Gold Corp.)
(A Delaware Corporation)
(A Development Stage Company)
Statement of Cash Flows
(In U.S. Dollars)
(Unaudited)
Quarter Ended Nine Months Ended
March 31, March 31,
---------------------------- ----------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
Cash Provided by
(Used for)
Operating Activities
Net loss for
the period $ (166,821) $ (5,775) $ (348,975) $ (29,565)
Item not requiring
use of cash:
Depreciation 7,946 - 12,762 -
Compensation on
stock options 30,000 - 30,000 -
Cumulative
translation - - 543 -
Changes in non-
cash working
capital items
Deferred income
tax (10,500) - (10,500) -
Prepaid expense
(increase) (1,987) 12,667 (3,358) -
Accounts payable
(decrease) 15,660 - (5,948) 12,667
Agreement payable - - 125,000 -
---------- ---------- ---------- ----------
(125,702) 6,892 (200,476) (16,898)
---------- ---------- ---------- ----------
Investing Activities
Computer software
development
Application
development
stage costs - - (400,000) -
Fixed assets
purchased (42,092) - (105,434) -
---------- ---------- ---------- ----------
(42,092) - (505,434) -
---------- ---------- ---------- ----------
Financing
Activities
Due to related
parties - (21,667) (31,689) -
Capital stock
subscribed 50,000 - 275,000 -
---------- ---------- ---------- ----------
50,000 (21,667) 243,311 -
---------- ---------- ---------- ----------
(Decrease) in Cash
during the period (117,794) (14,775) (462,599) (16,898)
Cash, Beginning
of period 312,831 15,810 657,636 17,933
---------- ---------- ---------- ----------
Cash, End of period $ 195,037 $ 1,035 $ 195,037 $ 1,035
========== ========== ========== ==========
See Accompanying Notes and Independent Accountants' Report
<PAGE>
ONLINE INNOVATION, INC.
(formerly Sinaloa Gold Corp.)
(A Delaware Corporation)
(A Development Stage Company)
Statement of Retained Earnings (Deficit)
March 31, 2000
(In U.S. Dollars)
(Unaudited)
Cumulative From
Inception Date
of Aug 1, 1997 Quarter Ended Nine Months Ended
to March 31, March 31, March 31,
------------------------------------------------
2000 2000 1999 2000 1999
-----------------------------------------------------------------
Balance
(deficit),
beginning $ - $ (804,826) $ (167,965) $ (622,672) $ (144,175)
Net loss for
the period (971,647) (166,821) (5,775) (348,975) (29,565)
---------- ---------- ---------- ---------- ----------
Balance
(deficit),
end of
period $ (971,647) $ (971,647) $ (173,740) $ (971,647) $ (173,740)
========== ========== ========== ========== ==========
See Accompanying Notes and Independent Accountants' Report
<PAGE>
ONLINE INNOVATION, INC.
(formerly Sinaloa Gold Corp.)
(A Delaware Corporation)
(A Development Stage Company)
Statement of Stockholders' Equity
From Date of Inception on August 1, 1997 to March 31, 2000
(in U.S. Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Number of Additional Total Retained Total
Common par Paid-in Capital Earnings Cumulative Stockholders'
Shares Value Capital Stock (Deficit) Translation Equity
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss for eleven
month period ended
June 30, 1998 $(144,175) $(144,175)
Issued for cash,
@$0.01 1,500,000 $ 1,500 13,500 $ 15,000 15,000
Issued for cash,
@$0.001 500,000 500 500 500
Issued for
assignment of
option on
mineral properties,
@$0.0035 8,500,000 8,500 21,500 30,000 30,000
----------------------------------------------------------------------------------------------------
10,500,000 10,500 35,000 45,500 (144,175) (98,675)
Shares subscribed and
fully paid but
unissued (issued
2/16/99), @$0.50 85,000 85 42,415 42,500 42,500
----------------------------------------------------------------------------------------------------
Balance, June 30, 1998 10,585,000 10,585 77,415 88,000 (144,175) (56,175)
Net loss for year
ended June 30, 1999 (478,497) (478,497)
Compensation on stock
options 120,000 120,000 120,000
Cumulative translation (1,055) (1,055)
2/16/99 issued for
cash, @$0.50 20,000 20 9,980 10,000 10,000
4/20/99 issued for
cash, @$0.50 100,000 100 49,900 50,000 50,000
6/2/99 issued for
private business
(note 7), @$0.50 400,000 400 199,600 200,000 200,000
6/22/99 issued for
cash (note 14),
@$0.50 1,600,000 1,600 798,400 800,000 800,000
----------------------------------------------------------------------------------------------------
Balance, June 30, 1999 12,705,000 12,705 1,255,295 1,268,000 (622,672) (1,055) 644,273
Cumulative translation 543 543
Shares subscribed
and fully paid, @$0.50 450,000 450 224,550 225,000 225,000
Net loss for nine
months ended March
31, 2000 (348,975) (348,975)
Cumulative translation
Issued for exercised
of option @ $0.50 100,000 100 49,900 50,000 50,000
Compensation on
stock options 30,000 30,000 30,000
----------------------------------------------------------------------------------------------------
Balance, March 31,
2000 13,255,000 13,255 1,559,745 1,573,000 (971,647) (512) 600,841
====================================================================================================
</TABLE>
See Accompanying Notes and Independent Accountant's Report
<PAGE>
ONLINE INNOVATION, INC.
(A Delaware Corporation)
(formerly Sinaloa Gold Corp.)
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
(in U.S. Dollars)
(Unaudited)
Note 1. BUSINESS OPERATIONS
a) The Company was incorporated on May 7, 1997 under the Company Act of
the State of Delaware, U.S.A. and commenced inception of business on
August 1, 1997. The Company changed it's name from Micro
Millennium, Inc. to Sinaloa Gold Corp. on October 16, 1997 and
subsequently changed it's name from Sinaloa Gold Corp. to Online
Innovation, Inc. on April 8, 1999.
b) The Company is in its development stage in the internet/e-commerce
industry and was previously in the mining resource industry and has
not generated any revenues from its planned operations. The deficit
to March 31, 2000 has been accumulated during the development stage.
Note 2. SIGNIFICANT ACCOUNTING POLICIES
a) Administration Costs
Administration costs are written off to operations when incurred.
b) Translation of Foreign Currency
The functional currency of the Company is the Canadian Dollar and
the reporting currency is the United States Dollar.
The assets, liabilities, and operations of the Company are expressed
in the functional currency of the Company, the Canadian Dollar, in
conformity with US GAAP, before they are translated into the
reporting currency, the United States Dollar.
Monetary assets and liabilities are translated at the current rate
of exchange.
The weighted average exchange rate for the period is used to
translate revenue, expenses, and gains or losses from the functional
currency to the reporting currency.
The gain or loss on translation is reported as a separate component
of stockholders' equity and not recognized in net income. Gains or
losses on remeasurement are recognized in current net income.
Gains or losses from foreign currency transactions are recognized in
current net income.
Fixed assets are measured at historical exchange rates that existed
at the time of the transaction.
<PAGE>
ONLINE INNOVATION, INC.
(A Delaware Corporation)
(formerly Sinaloa Gold Corp.)
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
(in U.S. Dollars)
(Unaudited)
Note 2. SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Depreciation is remeasured at historical exchange rates that existed
at the time the underlying related asset was acquired.
An analysis of the changes in the cumulative translation adjustment
as disclosed as part of stockholders' equity, is as follows:
Nine Months Year Ended
Ended March 31, June 30,
--------------------- -----------------
2000 1999 1999 1998
-------- -------- -------- -------
Beginning balance $ (512) $ (1,055) $ -- $ --
Changes during the period -- 543 (1,055) --
-------- -------- -------- -------
Ending balance $ (512) (512) (1,055) --
======== ======== ======== =======
Capital accounts are translated at their historical exchange rates
when the capital stock was issued.
The effect of exchange rate changes on cash balances is reported in
the statement of cash flows as a separate part of the reconciliation
of change in cash and cash equivalents during the year.
c) Comparative Figures
These unaudited interim financial statements also include
comparative figures for the nine month period ended March 31, 1999.
d) Amortization of Computer Software
Development - Application Development Stage Costs
The company is in the application development stage relating to the
development of computer software, and accordingly, costs are
capitalized. When the company is in the post-implementation /
operation stage costs will be expensed as incurred.
Amortization of computer software costs will commence when the
software service is available to be marketed. The amortization
period is for twenty-six months on a straight-line basis.
<PAGE>
ONLINE INNOVATION, INC.
(A Delaware Corporation)
(formerly Sinaloa Gold Corp.)
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
(in U.S. Dollars)
(Unaudited)
Note 3. CAPITAL STOCK
a) Authorized: 75,000,000 common shares at $0.001 par value.
b) Common shares issued and outstanding are as follows:
Shares $
------------ -----------
Balance, June 30, 1998, and
March 31, 1999 10,585,000 $ 88,000
============ ===========
Balance, June 30, 1999 12,705,000 1,268,000
Issued during the period:
for cash 550,000 275,000
------------ -----------
Balance, March 31, 2000 13,255,000 1,543,000
============ ===========
c) Warrants outstanding
There are 1,050,000 common share purchase warrants outstanding as at
March 31, 2000 to be exercised at $0.50 per common share to April
14, 2000 and thereafter at $0.60 per share to April 14, 2001.
Note 4. RELATED PARTY TRANSACTIONS:
a) Management fees in the total amount of $45,000 are recorded for the
nine months ended March 31, 2000, at $2,500 per month each for Ms.
Marlene Schluter, Director and Officer of the Company and Mr. Chad
Lee, Director and Officer of the Company, or consulting companies
owned by them.
b) Ms. Marlene Schluter and Mr. Chad Lee were reimbursed for travel and
office costs paid on behalf of the Company, of $7,234.40 and
$3,972.27, respectively, during the nine months ended March 31, 2000
<PAGE>
ONLINE INNOVATION, INC.
(A Delaware Corporation)
(formerly Sinaloa Gold Corp.)
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
(in U.S. Dollars)
(Unaudited)
Note 5 FIXED ASSETS - COMPUTER EQUIPMENT
The Company depreciates its computer equipment using the declining-
balance basis at the rate of 30% per annum.
The cost and accumulated depreciation at March 31 are as follows:
March 31,
--------------------------
2000 1999
------- -------
Cost $105,945 $ --
Accumulated depreciation (12,839) --
------- -------
Net balance $ 93,106 $ --
======= =======
Note 6. COMPUTER TECHNOLOGY AND WEBSITE COSTS
a) Acquisition From Online Innovation
i) The Company by resolution dated April 2, 1999 acquired from
Online Innovation, a non-reporting private Canadian
unincorporated entity, 100% interest in all of its proprietary
and intellectual property associated with its business plan and
concepts and its world wide web site domain name:
www.virtuallydating.com.
ii) Consideration for this purchase is the issuance of 400,000
common shares of the Company at a price of $0.50 per share.
These shares were issued on June 2, 1999 and the amount of
$200,000 has been included as an expense of operations for the
year ended June 30, 1999.
iii) Online Innovation has not had any historical revenue or
expenses; it also has no liabilities and the only asset is a
business plan and concepts and the abovementioned world wide
web site domain name.
<PAGE>
ONLINE INNOVATION, INC.
(A Delaware Corporation)
(formerly Sinaloa Gold Corp.)
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
(in U.S. Dollars)
(Unaudited)
Note 6. COMPUTER TECHNOLOGY AND WEBSITE COSTS (cont'd)
b) Agreement with Stratford Internet Technologies.
By agreement dated July 30, 1999 between the Company and Stratford
Internet Technologies ("Stratford"), Stratford has been engaged to
create, maintain, upgrade and supply artwork, computer files, and
coding for a website at www.virtuallydating.com for the amount of
-----------------------
$400,000 US, which is capitalized in these financial statements,
and 300,000 common shares of the Company. The payment schedule is
as follows:
i) a deposit of $275,000 US upon delivery of the contract. This
amount has been paid,
ii) the balance of $125,000 US represents the expenditure for
completion of development of and roll out of the website which
is due upon completion of development of the website and the
Company raising secondary financing. The Company has received
$225,000 US to December 31, 1999 on the exercise of 450,000
share purchase warrants. The obligation to pay $125,000 US to
Stratford is disclosed as a current liability as at March 31,
2000, as it is expected to be paid within the next twelve
months, and the cost is carried as a deferred development
expense until the website is completed.
iii) the issuance of 300,000 common shares, restricted under Rule
144, which will bear a one year tradable restriction upon
contract delivery. The obligation to issue these shares has
not been recorded in these financial statements but is
disclosed as a contingent liability in Note 15.
Note 7. LEASE OBLIGATIONS
a) Computer Lease
On June 1, 1999, the Company entered into a 36 month lease with
Leasing Solution (Canada) Inc. for computer equipment to be used by
the Company. Lease payments are expensed as they are incurred.
Lease obligations are as follows:
2000 CAD$ 1,503
2001 CAD$ 1,604
2002 CAD$ 1,337
<PAGE>
ONLINE INNOVATION, INC.
(A Delaware Corporation)
(formerly Sinaloa Gold Corp.)
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
(in U.S. Dollars)
(Unaudited)
Note 7. LEASE OBLIGATIONS (cont'd)
b) Lease of Premises
The Company entered into a lease for offices on April 1, 1998 with
535424 BC Ltd. for three years for monthly rent and costs of CAD
$827.63 plus GST. This agreement was terminated on October 31,
1999.
c) Lease of Premises
The Company entered into a lease for offices on November 1, 1999
with 570679 BC Ltd. for three years for monthly rent and costs of
CAD$1,987.50.
The first and the last months rent of CAD$3,975.00 (CAD$1,987.50 X
2) is due at the time of signing. This amount has been paid and CAD
$3,975 (US$3,358.19) is recorded as prepaid expense as at March 31,
2000.
Note 8 COMPENSATION/STOCK OPTION/DEFERRED COMPENSATION ARRANGEMENT
a) The Company does not have a stock option plan or deferred
compensation plan as at March 31, 2000.
b) No liability for potential pension costs has been recorded at March
31, 2000.
Note 9 NET LOSS PER SHARE
Net loss per common share is computed by dividing net loss by the
weighted average of shares outstanding during the period.
Note 10 INCOME TAXES
The Company has losses carried forward to future years of $952,147. The
potential tax benefit has not been recorded, as an equivalent reserve
has been provided due to unlikely application of the loss.
Note 11 FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, prepaid expense,
accounts payable and agreement payable. It is management's opinion that
the Company is not exposed to significant interest, currency or credit
risks arising from these financial instruments. The fair value of these
financial statements approximates their carrying values.
<PAGE>
ONLINE INNOVATION, INC.
(A Delaware Corporation)
(formerly Sinaloa Gold Corp.)
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
(in U.S. Dollars)
(Unaudited)
Note 12 PRIVATE PLACEMENT
a) By resolution dated April 15, 1999, the directors determined to
effect a private placement to total 3.2 million common shares of the
Company at a price of $0.50 per share with one share purchase
warrant entitling the buyer to purchase one additional common share
of the Company at a purchase price of $0.50 per common share at any
time prior to the first anniversary of the date of acceptance on
April 15, 1999 or at a purchase price of $0.60 per common share at
any time after the first anniversary but prior to the second
anniversary of the acceptance.
b) Of the above placement, the Company received subscriptions for
1,600,000 common shares and received $800,000. An Issuance
Resolution covering the issuance of these shares was approved by the
Company on June 22, 1999. There are 1,050,000 common share purchase
warrants outstanding at March 31, 2000.
Note 13 CONSULTING AGREEMENTS
a) Fortune Capital Management (USA) Inc.
By agreement dated March 31, 1999, the Company agreed to retain
Fortune Capital Management (USA) Inc. as a consultant to provide
corporate finance services and related office administration
services to the Company for a consultant fee of $6,000 per month,
for a period of one year commencing on the date of this agreement.
The term of this agreement may only be extended by the written
agreement of the Company and the consultant. The Company may
terminate the agreement at its option upon the breach by the
consultant of its obligations pursuant to the agreement provided
that the Company has given written notice of default to the
consultant and the consultant has failed to remedy the default
within 30 days of receipt of written notice from the Company. The
consultant may terminate the agreement at any time upon thirty days
written notice to the Company. The agreement may not be assigned by
the consultant without the prior written consent of the Company.
b) The Pinnacle Group
i) By agreement dated April 14, 1999, the Company appointed The
Pinnacle Group as the company's financial public relations
advisor for a period of six months commencing May 1, 1999 for
$3,500 per month to develop and execute an investor relations/
financial communications program. This agreement was cancelled
in July 1999.
<PAGE>
ONLINE INNOVATION, INC.
(A Delaware Corporation)
(formerly Sinaloa Gold Corp.)
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
(in U.S. Dollars)
(Unaudited)
Note 13 CONSULTING AGREEMENTS (cont'd)
c) 535424 BC Ltd.
The Company has engaged 535424 BC Ltd. to provide the Company with
professional marketing, research and developmental services at a
total cost of $2,500 per month plus GST of $175.
d) National Financial Communications Corp.
(i) By agreement dated February 1, 2000, the company engaged
National Financial Communications Corp., an arm's length
company, to render public relations and communication services
for a period of one year commencing February 1, 2000 and
terminating February 1, 2001, at $10,000 per month. The
amount of $20,000 has been incurred to March 31, 2000. By
mutual agreement the services were suspended in April 2000
until the company becomes fully reporting. As part of the
agreement, National Financial Communications Corp. is granted
the following options on February 1, 2000 to purchase shares
of the company, exercisable, commencing February 1, 2000, and
expiring January 31, 2003. February 1, 2000 is the
measurement date and the vesting date. There are five options
for 50,000 shares each at prices of $2.00, 3.00, 4.00, 5.00,
7.00 per share, respectively.
(ii) The compensation of $30,000 is expensed in these financial
statements. The options are nonforfeitable.
Option price of 50,000 shares at $2.00 per share $ 100,000
Market price at date of issuance of option -
50,000 shares at $2.60 130,000
Compensation added to paid-in capital $ 30,000
-----------
Deferred income tax - 35% of $30,000 $ 10,500
===========
Note 14 STOCK OPTIONS
a) As at February 2, 1999 the Company granted to Fordee Management
Company with stock options to purchase 400,000 common share of the
Company at a price of $0.20 per share with the expiry date of
October 3, 2002. These options are outstanding as at March 31,
2000.
b) Fordee Management Company is an unrelated third party
<PAGE>
ONLINE INNOVATION, INC.
(A Delaware Corporation)
(formerly Sinaloa Gold Corp.)
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
(in U.S. Dollars)
(Unaudited)
Note 14 STOCK OPTIONS (cont'd)
c) The compensation of $120,000 applicable to issuance of this option
was expensed in the year ended June 30, 1999, and was added to paid-
in capital, computed as follows:
Option price of 400,000 shares at $0.20 per share $ 80,000
Market price at date of issuance of option 400,000
shares at $0.50 per share 200,000
----------
Compensation added to paid-in capital $ 120,000
==========
Deferred income tax - 35% of $120,000 $ 42,000
==========
Note 15 CONTINGENT LIABILITIES
a) Liability to issue common shares
By agreement dated July 30, 1999 as outlined in Note 6(b), above,
the Company engaged Stratford Internet Technologies to design and
maintain an e-commerce website for the Company. An additional
obligation of the Company, in this agreement, is the obligation to
issue 300,000 common shares upon completion of the website. As the
website had not been completed by March 31, 2000, these shares are
not recorded as at that date and no paid up cost or value related
thereto has been recorded in these financial statements.
b) Terminated Mexican property option agreement
The Company held the option to acquire an interest in subsurface
mineral rights on four mineral properties located in the State of
Sinaloa, Mexico. The interest was acquired by way of assignment of
all rights under an option agreement between CL Communications
Group, (an unincorporated entity wholly owned by the president of
the Company) and the owner of the interest in the mineral properties
[see note 2(a) and note 4(d)]. The option agreement was entered
into on September 30, 1997. The rights under the option agreement
were assigned to the Company by CL Communications Group on the
same day. The owner of the mineral properties is an unrelated
third party. The terms of the option agreement were set out in part
in a written agreement. Some of the terms were agreed upon verbally
between the parties. The option agreement required the Company to
pay a total of $900,000 in staged payments over three years, to
incur exploration and development expenditures on the properties of
$4,500,000 and to issue 3,000,000 shares to the property owner upon
signing of a formal joint venture agreement between the parties.
Other than an initial cash payment of $30,000 (which was made by CL
Communications Group and for which the Company issued 8,500,000
shares to CL Communications Group), the cash and share payments and
exploration expenditures were to be made solely at the Company's
discretion. If the Company chose not to make further payments, it
<PAGE>
ONLINE INNOVATION, INC.
(A Delaware Corporation)
(formerly Sinaloa Gold Corp.)
(A Development Stage Company)
Notes to Financial Statements
March 31, 2000
(in U.S. Dollars)
(Unaudited)
Note 15 b) Terminated Mexican property option agreement (cont'd)
would earn no interest in the properties. Management determined
that, under the economic conditions prevailing at the time,
development of the mineral properties was not economically feasible.
As a result, the Company chose not to make further payments and,
therefore, earned no interest in the properties. The Company has
been advised by its counsel that the written agreement could be
construed as an agreement of purchase and sale, in which case the
Company could be held liable to make full payment and incur the
required exploration and development expenditures as set out above.
Management of the Company is of the opinion that the likelihood of
such an assertion being made and upheld is remote. Management is,
therefore, of the view that it has no further obligations relating
to the option agreement and, accordingly, no liabilities are
recorded in these financial statements relating to this matter.
<PAGE>
Item 2 - Management Discussion and Analysis or Plan of Operation
General
Online Innovation, Inc. (the "Company") is a website development company. The
Company is currently developing a website designed to facilitate social
interaction between single adults, with an emphasis on entertainment and
matchmaking. The Company's business will be conducted almost exclusively
through its website, www.virtuallydating.com. The website is currently
operational on beta test basis only, which was uploaded on the world wide web on
January 19, 2000. Management expects that the website will be fully operational
by the end of June 2000. The Company is currently devoting most of its time and
energy to the development of the website. This involves supervising the website
development consultants retained by the Company, providing creative input,
ensuring that the website is operational within the time currently scheduled and
ensuring that the components function in a manner and at a level acceptable to
the Company's management.
The Company has also begun to focus on marketing activities. Membership drives
and other marketing activities will be the primary component of the Company's
activities once the website is fully functioning. It is anticipated that
marketing expenses will be the Company's most significant expenses in the 12
months after the launch of the website.
Forward Looking Statements
All statements, other than statements of historical facts, included in this
report that address activities, events or developments that the Company expects,
believes, intends or anticipates will or may occur in the future, are
forward-looking statements. Forward-looking statements are inherently subject
to risks and uncertainties, many of which cannot be predicted with accuracy and
some of which might not even be anticipated. Future events and actual results,
financial and otherwise, could differ materially from those set forth in or
contemplated by the forward-looking statements herein. These risks and
uncertainties include, but are not limited to, the Company's reliance on
current revenues; the uncertainties associated with the introduction of new
products/services; management of growth, including the ability to attract
and retain qualified employees; the ability to integrate acquisitions made by
the Company and the costs associated with such acquisitions; dependence on its
chief executive officer; substantial competition from larger companies with
greater financial and other resources than the Company; the success of its
marketing strategy; its dependence on suppliers for some of its products;
currency fluctuations and other risks associated with foreign sales and
foreign operations; quarterly fluctuations in revenues, income and overhead
expense; and potential product liability risk associated with its existing
and future products. Readers are cautioned not to put undue reliance on
forward-looking statements. The Company disclaims any intent or obligation to
update publicly these forward-looking statements, whether as a result of
new information, future events or otherwise.
Marketing Strategies
Management believes that marketing will be the key to the Company's success in
the short term and in the long term. As a result, management intends to focus
much of its energies in the 12 month period following launch of the website on
marketing activities. The Company intends to advertise online, through print
media and possibly, depending on the resources available, through television,
<PAGE>
radio and billboards. The goal is to capture, at a minimum, 50,000 subscribing
members in each of the three years following the launch of the website, for a
total of 150,000 members within three years of launch. The target market for
the Company's service is single adults, aged 18-49, with basic computer skills
and access to the internet. The Company intends to focus on the North American
market in the short term and consider other markets at a later date.
Online Advertising
Online advertising can take a number of different forms. Banner advertising is
the most common form. Banner advertisements are small banners which appear on
the perimeter of another Company's website and provide information about the
advertising company. Generally, a link to the advertising company's website
will be provided. The Company intends to place banner advertisements on those
websites which management believes will enable the Company to most effectively
reach its target market.
Affiliations with other websites also provide an avenue for marketing for
internet companies. Companies with similar markets can form various types of
strategic alliances to promote one another's products and services. The key
component is usually a link to the affiliate company's website. By forging
strategic partnerships with key industry players, the Company hopes to be able
to increase traffic on its website.
Another form of online advertising being considered by the Company involves
sponsoring e-mails or newsletters sent by other internet companies. Through
payment of a sponsorship fee, the Company would be shown as the sponsor of a
particular e-mail or newsletter sent by an entity to its members. By selecting
an entity with a large membership, the Company can reach large target markets.
A message identifying the sponsor and a link to the sponsor's website are
provided.
Management intends to explore the various forms of online advertising available
and to focus its initial energy on this sector because of the relatively low
cost and the ability to reach its target market (i.e. personal computer users)
effectively. It will, however, assess other marketing tools and utilize those
which it feels will enable it to reach its target market in the most efficient
and cost effective manner.
Print Media, T.V., Radio and Billboards
While management is of the view that online advertising will initially be the
most cost-effective marketing tool, it also believes that other, more
traditional methods of marketing will be effective and must be developed to the
fullest extent possible. It envisions placing advertisements in the personals
sections of major newspapers and in high circulation magazines with general
readership to brand the VirtuallyDating name and to expose the Company to a
wider audience. Determination as to whether these types of advertisements will
be placed will depend on funds available after the launch of the website. In
addition, advertisements on television, radio and on billboards will be
considered and utilized if the Company has the capital available to purchase
advertising space/time from these sources.
Cash Requirements
The Company currently has sufficient working capital to meet its operating
requirements until June 30, 2000. Management will be seeking to arrange
<PAGE>
additional equity financing for the Company in the upcoming months. Any
additional funds raised will likely be utilized for marketing, website
development and maintenance and for general and administrative expenses. The
quantity of funds to be raised and the terms of any equity financing to be
undertaken will be negotiated by the Company's management as opportunities to
raise funds arise. The Company will be required to incur an additional $125,000
in expenditures to complete the development of and roll out its website. This
represents the balance of the fees which the Company is required to pay to its
website development consultants in connection with the development of the
Company's website. This amount is payable upon completion of development of the
website and, if necessary, upon completion of appropriate financing by the
Company. Specific plans related to marketing and any additional website
development which may occur after the website becomes operational will be
devised once financing has been completed and management knows what funds will
be available for these purposes. If additional financing is unavailable, the
Company will, to the extent possible, rely on revenue generated from memberships
and other sources identified above to meet its financial needs. There is no
guarantee, however, that revenues from ongoing operations will be sufficient to
meet the Company's working capital requirements on an ongoing basis.
Additional Website Development
Once the website is launched, the Company intends to continue to develop new
features which will make the website more attractive to prospective members.
Proposed features may include the development of live video chat functions for
members whose personal computers have the capacity to perform video
conferencing/interaction. In addition, the Company intends to create a webpage
entitled "Hey Bartender" which would provide recipes for alcoholic cocktails.
Members would be invited to post their own favorite recipes on the page.
Another section entitled "Postcards From Stanley" may be created. This section
would feature travel reviews of destinations geared towards singles.
Purchase of Equipment
At this time, the Company does not anticipate the purchase of any significant
equipment.
Employees
The Company currently has no full or part time employees. The Company retains
consultants to provide it with services related to the administration,
management and development of the Company. At this time, the Company does not
anticipate any significant changes in staffing.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There are no legal proceedings reportable pursuant to this section. As of the
date of this report, the Company has not been served with notice of any legal
proceedings and does not contemplate undertaking any legal proceedings.
<PAGE>
Item 2 -Change in Securities
No instruments defining the rights of the holders of any class of registered
securities were modified during the period covered by this report. No rights
evidenced by any class of registered securities were materially limited or
qualified by the issuance or modification of any other class of securities
during the period covered by this report.
On April 15, 1999, the Company completed a sale of 1,600,000 units at a price of
$0.50 per unit. Each unit consisted of one share of the Company's common stock
and one share purchase warrant. Each share purchase warrant was exercisable for
a term of 2 years and entitled the holder to purchase one share of the Company's
common stock at a price of $0.50 until April 15, 2000 or at a price of $0.60 any
time after April 15, 2000 but before April 15, 2001. The offering was made
without registration under the Securities Act in reliance on the exemption from
registration provided by sections 4(2) and 3(b) of the Securities Act and by
Regulation D promulgated thereunder.
On January 4, 2000, a total of 450,000 shares were issued by the Company
pursuant to the exercise of share purchase warrants issued in conjunction with
the unit offering. On March 13, 2000, a total of 100,000 shares were issued by
the Company pursuant to the exercise of share purchase warrants issued in
conjunction with the unit offering.
Item 3 - Defaults Upon Senior Securities
There have been no material defaults in the payment of principal, interest,
sinking or purchase fund installments or any other material defaults with
respect to indebtedness of the Company exceeding 5% of the total assets of the
Company.
Item 4 - Submission of Matters to a Vote of Security Holders
No matters have been submitted to a vote of security holders during the period
covered by this report, through the solicitation of proxies or otherwise.
Item 5 - Other Information
There is no information reportable pursuant to this section.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
15 Letter on Unaudited Financial Information
27 Financial Data Schedule
(b) No reports on form 8-K were filed during the period covered by this
report.
<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.
Date: September 21, 2000 ONLINE INNOVATION, INC.
---------------------- (Registrant)
By: /s/ Chad Lee
--------------------------
Chad D. Lee, President
<PAGE>
May 15, 2000
Securities and Exchange Commission
450 Fifth Street
Washington, D.C. 20549
Commissioners:
We consent to the inclusion of our report dated May 12, 2000 on our review of
interim financial information of Online Innovation, Inc. for the nine months
ended March 31, 2000 in Online Innovation, Inc.'s quarterly report on Form 10QSB
for the quarter then ended.
Signed /s/ Moen and Company
Vancouver, British Columbia, Canada
<PAGE>
