SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) Quarterly Report pursuant to Section 13 or l5 (d) of the Securities
Exchange Act of 1934 For the quarterly period ended September 30,2000
OR
( ) Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from April 6, 2000 to September 30, 2000
Commission File Number: 0-28514
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YAPALOT COMMUNICATIONS HOLDINGS INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
DELAWARE 98-0160284
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(State or Other Jurisdiction (I.R.S. Employer
Incorporation or Organization) Identification Number)
4884 DUFFERIN STREET, UNIT 1, TORONTO, ONTARIO M3H 5S8
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(Address of Principal Executive Offices)
Issuer's Telephone Number, Including Area Code: 416-736-8882
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N/A
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 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: 16,000,000 shares of Common Stock,
par value $0.001 per share were outstanding as of September 30, 2000.
1.
<PAGE>
INDEX
PAGE
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Consolidated Balance Sheet as at September 30,2000 4
Interim Consolidated Statement of Changes in Shareholders'
Equity for the period ended September 30,2000 5
Interim Consolidated Statement of Operations for the period
ended September 30,2000 6
Interim Consolidated Statement of Cash Flows for the period
ended September 30,2000 7
Notes to Interim Consolidated Financial Statements 8 - 9
Item 2. Management's Discussion and Analysis or Plan of Operation 11 - 12
PART II. OTHER INFORMATION 12
Item 3. Certain Relationships and Related Transactions 12
Item 4. Description of Securities 12
Item 5. Changes in Auditors' 12
2.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
3.
<PAGE>
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(Stated in U.S. Dollars)
================================================================================
(Unaudited)
A S S E T S
CURRENT
Cash $ 605,277
Accounts receivable 1,433
Sales taxes receivable 26,176
Prepaid and deposits 7,427
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$ 640,313
CAPITAL ASSETS (Note 3) 624,446
INCORPORATION COSTS 3,845
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$ 1,268,604
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L I A B I L I T I E S
CURRENT
Accounts payable $ 310,326
Employee withholdings payable 4,189
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$ 314,515
SHAREHOLDERS' ADVANCES (Note 4) 471,587
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$ 786,102
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SHAREHOLDERS' EQUITY
SHARE CAPITAL (Note 5) $ 1,016,000
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE (421,823)
CUMULATIVE TRANSLATION ADJUSTMENT (111,675)
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$ 482,502
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$ 1,268,604
===========
See accompanying notes.
4.
<PAGE>
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FROM DATE OF INCORPORATION, APRIL 6, 2000,
TO SEPTEMBER 30, 2000
(Stated in U.S. Dollars)
<TABLE>
<CAPTION>
===================================================================================================================================
(Unaudited)
Deficit
Accumulated Accumulated
During Other
Common Shares Development Comprehensive Comprehensive
Number Amount Stage Loss Total Loss
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ISSUE OF COMMON SHARES 16,000,000 $ 1,016,000 $ - $ - $ 1,016,000 -
COMPREHENSIVE LOSS
NET LOSS - - (421,823) - (421,823) $ (421,823)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENTS - - - (111,675) (111,675) (111,675)
-----------
COMPREHENSIVE LOSS $ $ (533,498)
===========
--------------------------------------------------------------------------
BALANCE - End of period 16,000,000 $ 1,016,000 $ (421,823) $ (111,675) $ 482,502
==========================================================================
</TABLE>
See accompanying notes.
5.
<PAGE>
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
FROM DATE OF INCORPORATION, APRIL 6, 2000,
TO SEPTEMBER 30, 2000
(Stated in U.S. Dollars)
================================================================================
(Unaudited)
REVENUE $ 17,523
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EXPENSES
Advertising and promotion $ 144,485
Bank charges and interest 16,463
General and office 28,828
Professional fees 72,499
Rent 16,201
Telephone and communication 54,189
Travel 8,003
Wages 82,003
Loss on foreign exchange 21,540
Amortization 34,909
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$ 457,580
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NET LOSS $ (421,823)
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LOSS PER COMMON SHARE (Note 6) $ (0.03)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 16,179,774
============
See accompanying notes.
6.
<PAGE>
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
FROM DATE OF INCORPORATION, APRIL 6, 2000,
TO SEPTEMBER 30, 2000
(Stated in U.S. Dollars)
================================================================================
(Unaudited)
CASH FROM (USED IN) OPERATIONS
Net loss $ (421,823)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Amortization 34,909
Changes in assets and liabilities relating to operations
Increase in accounts payable and accrued liabilities 288,337
Increase in prepaid and sundry assets (7,427)
-----------
NET CASH FROM OPERATIONS $ (106,004)
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CASH USED IN INVESTING ACTIVITIES
Purchase of capital assets $ (659,355)
Incorporation costs paid (3,845)
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NET CASH USED IN INVESTING ACTIVITIES $ (663,200)
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CASH FROM FINANCING ACTIVITIES
Advances from shareholders $ 471,587
Capital shares issued 1,016,000
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NET CASH USED IN FINANCING ACTIVITIES $ 1,487,587
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EFFECT OF EXCHANGE RATE CHANGES ON CASH $ (111,675)
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NET INCREASE IN CASH DURING THE PERIOD $ 606,708
CASH - Beginning of period -
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CASH - End of period $ 605,277
===========
See accompanying notes.
7.
<PAGE>
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(Unaudited)
(Stated in U.S. Dollars)
================================================================================
The financial information for the period ended September 30,2000 presented in
this Form 10-QSB has been prepared from accounting records of Yapalot
Communications Holdings Inc. (the "Company") without audit. The information
furnished reflects all adjustments which are, in the opinion of management,
necessary for a fair statement of the results of this interim period. The
results of operations for the period ended September 30,2000 are not necessarily
indicative of the results to be expected for a full year.
1. NATURE OF OPERATIONS
Yapalot Communications Holdings Inc. a development stage company, was
incorporated under the laws of the State of Delaware on April 6,2000 and has
adopted a fiscal year end of December 31. The company's development
activities consist of the deployment of Voice Over Internet Protocol (VoIP)
network services around the world as well as developing different
communications solutions utilizing VoIP technology.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Consolidation
These interim consolidated financial statements present the combination
of the interim financial statements of Yapalot Communications Holdings
Inc., a United States company, and its wholly-owned subsidiary, Yapalot
Communications Inc., a company incorporated under the laws of the
Province of Ontario, Canada on March 8,2000.
b) Basis of Financial Statements
These interim consolidated financial statements are stated in United
States dollars, the "reporting currency". The consolidated transactions
of Yapalot Communications Holdings Inc. have been recorded in Canadian
dollars, the "functional currency", and have been restated into United
States dollars at the period end exchange rates for balance sheet items
and the average exchange rate for the period for revenues, expenses,
gains and losses. Translation adjustments to the reporting currency are
included in equity.
c) Capital Assets and Amortization
Capital assets are carried at acquisition cost less accumulated
amortization. Amortization is provided annually by the company at rates
intended to amortize the assets over their estimated useful lives as
follows:
Computer equipment - 30% Declining balance basis
Computer software - 100% Declining balance basis
Furniture and fixtures - 20% Declining balance basis
Leasehold improvements - 20% of cost
Network communications equipment - 20% Declining balances basis
Where the company determines that circumstances indicate that the
carrying value of certain capital assets may not be recoverable, the
company's policy is to write the asset down to an estimate of the future
cash flows expected to result from the use of the asset and its eventual
disposition. Such an impairment loss will be charged to operations in
the current year.
d) Revenue Recognition
The Company recognizes revenue as the service is used and becomes
billable.
8.
<PAGE>
YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,2000
(Unaudited)
(Stated in U.S. Dollars)
================================================================================
e) Estimates
The preparation of financial statements in conformity with generally
accepted accounting princiles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and revenues and expenses during the reporting period. Actual results
could differ from those estimates.
f) Start-up and Other Pre-operating Expenses
Start-up and pre-operating expenses incurred by the Company are expensed
as incurred.
g) Comprehensive Income
In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income", which was adopted by the
Company. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in an entity's financial
statements. Comprehensive income as defined includes all changes in
equity (net assets) during a period from non-owner sources.
h) Earnings (Loss) Per Share
Earnings (loss) per common share is based on the weighted average number
of common shares outstanding during the period.
i) General
These financial statements have been prepared in accordance with Unites
States generally accepted accounting principles (GAAP), as they relate
to these financial statements.
3. CAPITAL ASSETS
ACCUMULATED NET
COST AMORTIZATION 2000
------------------------------------------
Computer equipment $ 123,897 $ 9,292 $ 114,605
Computer software 27,760 6,940 20,820
Furniture and fixtures 67,247 630 66,617
Leasehold improvements 65,618 822 64,796
Network communication equipment 374,833 17,225 357,608
------------------------------------------
$ 659,355 $ 34,909 $ 624,446
==========================================
4. SHAREHOLDERS' ADVANCES
The balances due to shareholders are non-interest bearing , however in
accordance with generally accepted accounting policies, an interest rate of
7% was imputed in this non arms length arrangement. The imputed interest is
charged to operations and credited to shareholders' advances.
9.
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YAPALOT COMMUNICATIONS HOLDINGS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30,2000
(Unaudited)
(Stated in U.S. Dollars)
================================================================================
5. SHARE CAPITAL
Authorized
50,000,000 Common shares at $.001 par value
Issued
20,000,000 Common shares $ 1,016,000
==============
6. LOSS PER COMMON SHARE
Loss per common share is calculated as the loss for the period divided by
the weighted average number of the Company's common stock outstanding.
Diluted loss per share does not differ from basic loss per share.
10.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The information contained in this Item 2, Management's Discussion and
Analysis or Plan of Operation, contains "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Actual results may materially differ from
those projected in the forward looking statements as a result of certain
risks and uncertainties set forth in this report. Although management
believes that the assumptions made and expectations reflected in the forward
looking statements are reasonable, there is no assurance that the underlying
assumptions will, in fact, prove to be correct or that actual future results
will not be different from the expectations expressed in this report.
Through its wholly-owned subsidiary, Yapalot Communications Inc., the
Company is creating and marketing a global Internet Protocol
telecommunications network. By the end of fiscal year 2000, the company
anticipates completing the launch of ten initial gateways, plus beginning
the launch of an additional 22 gateways. The ten initial gateways were
financed using the private funds of our founding shareholders. The Company
believes that it will generate sufficient positive cash flow from operations
to meet operating requirements and the purchase of the 22 gateways over the
next 12 months. If the Company does not generate sufficient positive cash
flow to meet cash requirements, it may, from time to time, seek to raise
capital from additional sources, including setting up lines of credit,
project specific financings and public or private debt or equity financings.
However, there can be no assurance that the Company will be able to obtain
any sort of financing on commercially acceptable terms, if at all. To
achieve the Company's business plan, it has built a customer service team of
12 full time employees and 20 full time employees in the areas of
administration, marketing and sales.
The Company is a holding company and has no independent operating history
other than Yapalot Communications. Inc. Expenses for the period ended
September 30,2000 represent consolidated costs since inception.
COMPARISON OF THE PERIOD ENDED SEPTEMBER 30,2000 TO THE PERIOD ENDED JUNE
30,2000.
During the period ended September 30,2000 the Company completed contract
negotiations with its major Network equipment supplier, Clarent Corporation,
based in Redwood City, California. The company also took delivery of
hardware for the Montreal, Vancouver, Toronto, Hong Kong and Israel, New
York City, Miami, Italy, and Greece gateways. Under terms of the supplier
agreement, initial deposits of 25% were paid to Clarent Corporation, with a
portion of the balance due in each of February 2000. This financial
information reflects the initial deposits paid on these two latter gateways.
During this period the Company also completed most of the renovations of its
offices and the acquisition of furniture and equipment workstations for the
Company's employees.
RESULTS OF OPERATIONS
During this quarter ended September 30,2000 the Company commenced generating
revenues, as reflected in these financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity for the Company are funds generated by
loans from the founding shareholders. Additional information on the loan
agreement is described in note 4 to the Company's Interim Consolidated
Financial Statements set forth in Part II hereto.
Current assets totaled $640,313 at September 30,2000 compared to $602,799 at
June 30,2000. The increase is attributable to additional hardware equipment
purchased for the New York and Miami gateways, as well as additional prepaid
Canadian Goods and Services Taxes refundable to the corporation. At
September 30,2000 the Company had cash but no short-term deposits. As
operating activities had just begun, there were only a small amount of
Accounts Receivable on hand at September 30, 2000.
11.
<PAGE>
As at September 30,2000, current liabilities totaled $314,515 compared to
$396,113 at June 30,2000. The decrease is attributable to the payments
having begun against current supplier balances, under initial financing
terms on the gateway hardware received by the company.
The Company's operations are carried out in Canadian dollars. The company's
reporting currency is in Unites States dollars. As indicated in the notes to
this financial information, any translation adjustment to the reporting
currency would be included in equity.
During the period ended September 30,2000 the company conducted an offering
pursuant to Regulation D, Rule 504 of the Securities Act of 1933, as
amended, of 4,000,000 shares of common stock at $0.25 to raise $1,000,000
for working capital.
PART II
OTHER INFORMATION
ITEM 3. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Yapalot Communications Inc. currently has two outstanding loans to its two
founders: Yuval Barzakay $168,000 and Marilyn Benlolo $303,000. Both loans
are interest free and the funds were used to finance Yapalot Communications
Inc. since its inception in March 2000. Both loans are for a term of no less
than one year and are payable after one year or when revenues reach a level
in which the loans can be repaid. They are non-interesting bearing loans.
ITEM 4. DESCRIPTION OF SECURITIES
The Company has authorized 50,000,000 shares of common stock, $.001 par
value per share. As of September 30,2000, there were 16,000,000 shares
issued and outstanding. All shares are of the same class and have the same
rights, preferences and limitations. Holders of shares are entitled to
receive dividends in cash, property or shares when and if dividends are
declared by the Board of Directors out of funds legally available therefore.
The By-Laws impose no limitations on the payment of dividends. A quorum for
any meeting of shareholders is a majority of shares then issued and
outstanding and entitled to be voted at the meeting. Holders of shares are
entitled to one vote per share. Upon liquidation, dissolution or winding up
of the business of the Company, any assets will be distributed to the
holders of shares after payment or provision for payment of all debts,
obligations or liabilities of the Company. There are no preemptive rights,
subscription rights, or redemption provisions relating to the shares and
none of the shares carries any liability for further calls.
ITEM 5. CHANGES IN AUDITORS
During the period ended September 30,2000 the Company retained the firm of
Weisbrod Goldmacher, LLP., Chartered Accountants as its new auditors. All
figures in this financial information has been reviewed by Weisbrod
Goldmacher, LLP., in anticipation of their Auditors' Report to be expressed
on the Company's financial statements for the fiscal year ended December
31,2000.
12.
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SIGNATURES
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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.
YAPALOT COMMUNICATIONS HOLDINGS INC.
Dated: November 13, 2000 By /s/ Yuval Barzakay
-------------------------------
Yuval Barzakay, Chairman and
Chief Executive Officer
13.
