<PAGE>
U.S. SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
( ) TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarter Ended: Commission File Number:
September 30, 2000 0-25963
INFORETECH WIRELESS TECHNOLOGY INC.
--------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NEVADA 88-0350120
------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
Suite 214, 5500 - 152nd Street
Surrey, British Columbia V35-8E7
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(604) 576-7442
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to filing requirements
for the past 90 days.
Yes X No
--- ---
The number of shares of Common Stock, par value $ .001 per share, outstanding as
of September 30, 2000 is 10,989,522
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
1
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
INDEX TO FORM 10-QSB
September 30, 2000
<TABLE>
<CAPTION>
PART I. Financial Information Page #
<S> <C> <C>
Item 1 Financial Statements -
Consolidated Balance Sheets (Unaudited) for September
30, 2000 and December 31, 1999 3
Consolidated Statement of Operations and Deficit for
the three months ended September 30, 2000 and 1999;
nine months ended September 30, 2000 and 1999 and
Inception to September 30, 2000 4
Consolidated Statement of Stockholders' Equity
(Unaudited) for the nine months ended September 30,
2000 5
Consolidated Statement of Cash Flows (Unaudited) for
the three months ended September 30, 2000 and 1999;
nine months ended September 30, 2000 and 1999 and
Inception to June 30, 2000 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation 11
PART II. Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities and Use of Proceeds 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(a development stage company)
(unaudited)
CONSOLIDATED BALANCE SHEETS
(U.S.$)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 629,092 $ -
Amounts receivable 48,970 83,507
Deposits and prepaid expenses 176,047 47,786
---------------------------------------------------------------------------------------------------------------------------------
854,109 131,293
PROPERTY AND EQUIPMENT, net 266,735 204,068
---------------------------------------------------------------------------------------------------------------------------------
$ 1,120,844 $ 335,361
=================================================================================================================================
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness $ - $ 4,214
Accounts payable and accrued liabilities 871,777 526,261
Loans payable 300,000 1,500,000
Convertible promissory notes - Series A - 100,000
- others 274,898 834,759
Promissory notes payable, related parties 698,968 869,746
---------------------------------------------------------------------------------------------------------------------------------
2,145,643 3,834,980
---------------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT
8% Series A Convertible Note - due August 4, 2003 663,116 -
8% Convertible debenture - due August 4, 2005 655,190 -
---------------------------------------------------------------------------------------------------------------------------------
1,318,306 -
---------------------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 222,223 shares subscribed and unissued on September 30, 2000 222 -
Common stock, $.001 par value.
Authorized 100,000,000 Class A, voting, participating shares;
Issued: 2000-11,076,522;1999-6,156,000 11,076 2,174
Special voting stock, $.001 par value.
Authorized 10,000,000 Class B, voting, convertible, non-participating shares;
Issued: 2000-7,002,030; 1999-NIL 7,002 7,096
Additional paid-in capital 9,883,191 1,737,732
Deficit accumulated during development stage (12,244,596) (5,246,621)
---------------------------------------------------------------------------------------------------------------------------------
(2,343,105) (3,499,619)
---------------------------------------------------------------------------------------------------------------------------------
$ 1,120,844 $ 335,361
=================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(a development stage company)
(unaudited)
CONSOLIDATED STATEMENT OF OPERATIONS AND DEFICIT
(U.S.$)
<TABLE>
<CAPTION>
Total from
For the 3 months ended For the 9 months ended inception to
September 30, September 30, September 30, September 30, September 30,
2000 1999 2000 1999 2000
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
EXPENSES
Administration $ 744,461 $ 237,258 $ 1,582,170 $ 579,315 $ 2,707,778
Depreciation 16,291 16,347 44,200 22,128 77,026
Finance costs 853,603 135,836 1,269,181 293,196 1,824,415
Marketing 814,064 165,073 1,352,537 352,055 1,903,140
Research and development 1,029,767 407,343 2,583,220 875,476 4,510,452
---------------------------------------------------------------------------------------------------------------------------------
NET LOSS AND COMPREHENSIVE LOSS (3,458,186) (961,857) (6,831,308) (2,122,170) (11,022,811)
DEFICIT, BEGINNING (8,619,743) (3,197,563) (5,246,621) (2,037,250) -
Deficiency on acquisition of subsidiary
company acquired in a related party
transaction (1,055,118)
---------------------------------------------------------------------------------------------------------------------------------
DEFICIT, ENDING $(12,077,929) $(4,159,420) $(12,077,929) $(4,159,420) $(12,077,929)
=================================================================================================================================
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 11,033,022 3,308,582 10,630,964 3,308,582
---------------------------------------------------------------------------------------------------------------------------------
LOSS PER COMMON SHARE $ (0.31) $ (0.29) $ (0.64) $ (0.64)
=================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(a development stage company)
(unaudited)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(U.S.$)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
--------------------------------------------------------------------------------------------
Common stock Special voting stock
---------------------- ---------------------
Number Number
of shares Amount of shares Amount
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Deemed common shares issued to founders
for cash - $ - 1 $ -
Deemed common shares issued for purchase
of InForetech Golf Technology Inc. - - 5,250,000 5,250
Deemed common shares issued for services 404,250 404 - -
Deemed common shares issued for cash 225,000 225 1,845,749 1,846
Deemed common shares issued on conversion
of convertible promissory notes 300,000 300 - -
Deemed common shares issued for service 40,000 40 - -
Deemed common shares issued for cash 399,667 400 - -
Deemed common shares issued on exercise
of stock purchase warrants 50,000 50 - -
Deemed common shares issued on conversion
of promissory notes 125,000 125 - -
Deemed common shares issued to settle debt 600,000 600 - -
Deemed common shares issued for interest 30,000 30 - -
Net loss - - - -
--------------------------------------------------------------------------------------------
Balance, December 31, 1999 2,173,917 2,174 7,095,750 7,096
Deemed common shares issued for services 174,333 174 - -
Deemed common shares issued to settle debt 960,332 960 - -
--------------------------------------------------------------------------------------------
Deemed outstanding as at February 2, 2000 3,308,582 3,308 7,095,750 7,096
Acquisition of InForetech Wireless
Technology Inc. by InForetech Golf
Technology 2000 Inc. 6,156,000 6,156 - -
Common stock issued for cash 775,000 775 - -
Common stock issued for services 349,500 349 - -
Common stock issued on conversion of
Class B shares 193,720 194 (193,720) (194)
Common stock issued to settle debt 193,720 194 - -
Common stock issued on exercise
of stock options 100,000 100 - -
Compensation related to stock options - - - -
Conversion benefit related to convertible
loans - - - -
Finance costs related to warrants
and options - - - -
Class B shares issued on conversion
of Series A promissory note - - 100,000 100
Net loss - - - -
--------------------------------------------------------------------------------------------
Issued and outstanding 11,076,522 $11,076 7,002,030 $7,002
Subscribed and unissued
common stock subscribed for
cash at $4.50 per share 222,223 222 - -
--------------------------------------------------------------------------------------------
Balance, September 30, 2000 11,298,745 $11,298 7,002,030 $7,002
============================================================================================
<CAPTION>
Additional Total
paid-in Accumulated stockholders'
capital deficit equity
-------------- ------------- ---------------
<S> <C> <C> <C>
Deemed common shares issued to founders
for cash $ 1 $ - $ 1
Deemed common shares issued for purchase
of InForetech Golf Technology Inc. (5,249) (1,055,118) (1,055,117)
Deemed common shares issued for services - - 404
Deemed common shares issued for cash 224,774 - 226,845
Deemed common shares issued on conversion
of convertible promissory notes 299,702 - 300,002
Deemed common shares issued for service 39,960 - 40,000
Deemed common shares issued for cash 324,350 - 324,750
Deemed common shares issued on exercise
of stock purchase warrants 99,950 - 100,000
Deemed common shares issued on conversion
of promissory notes 124,874 - 124,999
Deemed common shares issued to settle debt 599,400 - 600,000
Deemed common shares issued for interest 29,970 - 30,000
Net loss - (4,191,503) (4,191,503)
----------------------------------------------------------------------------------------------------
Balance, December 31, 1999 1,737,732 (5,246,621) (3,499,619)
Deemed common shares issued for services 69,076 - 69,250
Deemed common shares issued to settle debt 349,040 - 350,000
----------------------------------------------------------------------------------------------------
Deemed outstanding as at February 2, 2000 2,155,848 (5,246,621) (3,080,369)
Acquisition of InForetech Wireless
Technology Inc. by InForetech Golf
Technology 2000 Inc. (6,156) - -
Common stock issued for cash 3,101,225 - 3,102,000
Common stock issued for services 801,464 - 801,813
Common stock issued on conversion of
Class B shares - -
Common stock issued to settle debt 193,526 - 193,720
Common stock issued on exercise
of stock options 99,900 - 100,000
Compensation related to stock options 448,439 - 448,439
Conversion benefit related to convertible
loans 888,800 - 888,800
Finance costs related to warrants
and options 933,800 - 933,800
Class B shares issued on conversion
of Series A promissory note 99,900 - 100,000
Net loss - (6,831,308) (6,831,308)
----------------------------------------------------------------------------------------------------
Issued and outstanding $8,716,746 $(12,077,929) $ 3,343,105)
Subscribed and unissued
common stock subscribed for
cash at $4.50 per share 999,778 - 1,000,000
----------------------------------------------------------------------------------------------------
Balance, September 30, 2000 $9,716,524 $(12,077,929) $(2,343,105)
====================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(a development stage company)
(unaudited)
CONSOLIDATED STATEMENT OF CASH FLOWS
(U.S.$)
<TABLE>
<CAPTION>
Total from
For the 3 months ended For the 9 months ended inception to
September 30, September 30, September 30, September 30, September 30,
2000 1999 2000 1999 2000
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,458,186) $ (961,857) $(6,831,308) $(2,122,170) $(11,022,811)
Adjustment to reconcile net loss to
cash used in operating activities:
Compensation related to stock options 67,266 - 448,439 - 448,439
Conversion benefit related to
convertible debt 500,000 - 888,800 - 888,800
Finance costs related to warrants
and options 252,106 - 252,106 - 252,106
Depreciation 16,291 16,347 44,200 22,128 77,026
Expenses paid by issuance of stock 576,810 871,063 - 941,467
Changes in operating assets and
liabilities:
Amounts receivable (11,865) 5,999 34,537 (6,557) (48,970)
Deposits and prepaid expenses (119,679) 4,143 (128,261) (2,902) (176,047)
Accounts payable 170,023 99,110 345,516 246,118 871,776
------------------------------------------------------------------------------------------------------------------------------------
(2,007,234) (836,258) (4,074,908) (1,863,383) (7,768,214)
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (27,040) (74,693) (106,867) (118,130) (343,761)
Advances to related company - - - - (1,055,118)
------------------------------------------------------------------------------------------------------------------------------------
(27,040) (74,693) (106,867) (118,130) (1,398,879)
------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash 1,000,000 70,000 4,202,000 547,251 4,853,599
Loan proceeds 2,000,000 - 2,300,000 500,000 4,500,000
Loan repayments - - (1,500,000) - (1,600,000)
Borrowings under line of credit (212,580) (69,628) (4,214) (76,167) -
Promissory notes (124,054) 929,871 (186,919) 1,029,721 2,042,586
------------------------------------------------------------------------------------------------------------------------------------
2,663,366 930,243 4,810,867 2,000,805 9,796,185
------------------------------------------------------------------------------------------------------------------------------------
INCREASE IN CASH 629,092 19,292 629,092 19,292 629,092
CASH, BEGINNING - - - - -
------------------------------------------------------------------------------------------------------------------------------------
CASH, ENDING $ 629,092 $ 19,292 $ 629,092 $ 19,292 $ 629,092
====================================================================================================================================
NON-CASH FINANCING AND INVESTING
ACTIVITIES
Common stock issued to settle debt $ - $ - $ - $ - $ 600,000
Common stock issued on conversion of
convertible notes - - 543,720 - 968,720
Common stock issued for interest - - - - 30,000
Common stock issued for services 576,810 - 871,063 - 941,467
Common stock issued on conversion of
Class B shares - - 193,720 - 193,720
Class B, special voting stock issued on
conversion of convertible note 100,000 - 100,000 - 100,000
------------------------------------------------------------------------------------------------------------------------------------
$ 676,810 $ - $ 1,708,503 $ - $ 2,833,907
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(a development stage company)
(unaudited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S.$)
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000
1. UNAUDITED FINANCIAL STATEMENTS
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with instructions for Form 10-QSB and Item 310 of
Regulation S-B. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation of results of operations have been included in the financial
statements. Results of operations for the nine months ended September 30,
2000 are not necessarily indicative of the results that may be expected for
the fiscal year ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from audited
financial statements of InForetech Golf Technology 2000 Inc. at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. A summary
of the Company's significant accounting policies and other information
necessary to understand the consolidated financial statements is included in
the Company's audited financial statements for the year ended December 31,
1999 and 1998. Such financial statements should be read in connection with
these financial statements.
2. INCOME TAXES
The Company has reviewed its net deferred tax asset for the nine month period
ended September 30, 2000, together with net operating loss carryforwards, and
accordingly has not given recognition of potential tax benefits arising
therefrom. In making this determination, the Company has considered the
Company's history of tax losses incurred since inception and the fact that
the Company is still within the development stage. As a result, the Company's
net deferred tax has been fully reserved.
3. NEW ACCOUNTING STANDARD
In June 1998, the U.S. Financial Accounting Standards Board issued its
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities and in June 2000 the companion
statement No. 138 (collectively "SFAS 133"). SFAS 133, which will become
effective for all fiscal quarters for all fiscal years beginning after June
15, 2000, establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments on the balance sheet as
either assets or liabilities with measurement at fair value. Changes in the
fair value of derivatives are recorded each period in the current earnings or
other comprehensive income, depending on the intent and nature of the
derivative instrument. There are many complexities to this new standard and
the Company is currently evaluating the impact that SFAS 133 will have on its
financial statements. The effects of adopting the new standard are not
reasonably determinable at this time, nor has the Company determined how it
will account for the transition provisions contained in SFAS 133. The
Company will adopt SFAS 133 on or before January 1, 2001.
4. RECLASSIFICATION
Certain reclassifications of prior year balances have been made to conform to
current year classifications.
5. REVERSE ACQUISITION OF INFORETECH GOLF TECHNOLOGY 2000 INC.
On February 2, 2000, the shareholders of InForetech Golf Technology 2000 Inc.
("IGT") sold their 100% interest in IGT to the Company in consideration for
3,308,582 Class A common shares and 7,095,750 units consisting of Class B
preference shares of InForetech Holdings Ltd. and Class B special voting
shares of the Company pursuant to a share exchange and finance agreement
dated December 16, 1999. As a result of the transaction, the former
shareholders of IGT held the majority of the shares of the Company.
Accordingly, this transaction is considered an acquisition of the Company
(the accounting subsidiary/legal parent) by IGT (the accounting parent/legal
subsidiary) and has been accounted for as a purchase of the net assets of the
Company by IGT in these consolidated financial statements because the Company
had no business operations at the time of the acquisition. The costs of
recapitalization have been recorded as additional paid-in capital.
These consolidated financial statements are issued under the name of the
Company, but are a continuation of the financial statements of the accounting
acquirer, IGT. IGT's assets and liabilities are included in the consolidated
financial statements at their historical carrying amounts. The comparative
figures presented in the consolidated financial statements are those of IGT.
7
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(a development stage company)
(unaudited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S.$)
--------------------------------------------------------------------------------
SEPTEMBER 30, 2000
6. FINANCINGS
During the quarter, the Company entered into a securities purchase agreement
with Augustine Funds, L.P. relating to the sale of $1,000,000 in principal
amount of Series A 8% convertible Notes due August 4, 2003 and warrants to
purchase up to 100,000 shares of Class A common stock. The notes are
convertible (plus related interest expense) into Class A common stock at the
lessor of (i) $5.25 or (ii) 75% of the average closing bid price of the
Company's common shares for the five days immediately preceding the
conversion date.
During the quarter, the Company entered into a securities purchase agreement
with The Shaar Fund Ltd. relating to the sale of $1,000,000 in principal
amount of 8% Convertible Debenture due August 4, 2005 and warrants to
purchase up to 100,000 shares of Class A common stock. The debenture is
convertible (plus related interest expense) into Class A common stock at the
lessor of (i) $5.25 or (ii) 75% of the average of the lowest three closing
bid prices of the Company's common shares during the ten trading days
immediately preceding the conversion date.
7. CONVERTIBLE LOAN AGREEMENT
Pursuant to a Convertible Loan Agreement dated May 9, 2000, the Company
borrowed $300,000. The loan is secured by a general security agreement over
the Company's assets and a promissory note. The loan bears interest at 12%
and matures November 8, 2000.
The lender has the right, at any time prior to the maturity date, to convert
any or all of the balance outstanding into Units of the Company at $5.00 per
unit. Each unit is comprised of one Class A common share and one share
purchase warrant to purchase a Class A share at a price of $5.00 per share.
The warrants expire May 9, 2002.
8. STOCKHOLDERS' EQUITY
During the quarter ended September 30, 2000, the Company issued 87,000 Class
A common shares to a consultant for services. The shares were valued at their
trading value on the date of issue resulting in a charge to marketing of
$576,810 and a corresponding increase to the paid-in capital of the Company.
A beneficial conversion feature in the amount of $500,000 was recorded as a
financing cost during the quarter reflecting the cost of the conversion
feature attached to the 8% Series A convertible note and the 8% convertible
debenture. Each of these debts are convertible into Class A common shares of
the Company at a discount to the market price of the common shares at the
date of conversion.
Additional financing costs totalling $933,800 were recorded during the
quarter to recognize the cost of warrants and options issued by the Company.
The 8% Series A convertible note and the 8% convertible debenture each have
warrants to purchase 100,000 Class A common shares attached to them. The
Company also issued an additional 40,000 warrants under a separate finders
fee agreement and granted an option to acquire 60,000 Class A common shares
to a company as consideration for a loan.
The warrants and options were valued using the Black-Scholes method under
which the values ranged from $1.62 to $3.57.
Stock based compensation expense for the quarter totalled $67,266 and
accretion of the debt discount totalled $31,706.
Total non-cash operating charges and increases in paid-in capital relating to
the above amounted to $2,109,582.
8
<PAGE>
9. STOCK OPTION PLAN
Pursuant to the terms of the December 16, 1999 Share Exchange and Finance
Agreement the Company has created a stock option plan to allow key employees,
directors, advisors and representatives of the Company to acquire Company
common stock. The Company has allocated a total of 4,000,000 options under
this plan.
Stock options outstanding under this plan are summarized as follows:
Option price Stock options
per share outstanding
-------------------------------------------------------------------------------
$1.00 1,710,000
$3.00 250,000
$5.00 110,000
$7.00 285,000
-------------------------------------------------------------------------------
$1.00 - $7.00 2,355,000
===============================================================================
The stock options vest over the next 1 to 3 years and the stock option plan
expires on February 2, 2010. 110,000 options were issued during the quarter.
9
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(a development stage company)
(unaudited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S.$)
-------------------------------------------------------------------------------
SEPTEMBER 30, 2000
10. STOCK PURCHASE WARRANTS
At September 30, 2000, Class A share purchase warrants were outstanding as
follows:
Number of Class A Exercise Month
Shares Issuable Price of Expiry
--------------------------------------------------------------------------------
75,000 $2.00 January 2001
150,000 2.00 February 2001
150,000 2.00 March 2001
100,000 2.00 May 2001
125,000 2.00 June 2001
40,000 6.25 August 2001
200,000 2.00 September 2001
120,000 2.00 October 2001
530,000 2.00 December 2001
274,000 2.00 January 2002
62,500 4.00 January 2002
100,000 6.25 August 2005
100,000 * August 2005
--------------------------------------------------------------------------------
2,026,500
================================================================================
No warrants were exercised during the quarter.
* See Note 6
11. AMALGAMATION OF SUBSIDIARY COMPANIES
Effective June 30, 2000, the Company's subsidiaries, InForetech Golf
Technology 2000 Inc., InForetech Golf Technology, Inc. and InForetech
Holdings Inc. were amalgamated into one company which continues under the
name InForetech Golf Technology 2000 Inc.
12. ACQUISITION OF PROSHOT GOLF, INC.
On August 21, 2000, the Company signed a binding letter of intent to acquire
a 100% equity interest in ProShot Golf, Inc. in a share exchange
transaction. The definitive purchase agreement was signed on November 7,
2000, with finalization of the transaction being subject to completion of
the due diligence.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
------------------------------------------------------------------
Overview:
---------
Inforetech Wireless Technology Inc. (the "Company") is a development stage
company, which through its subsidiary Inforetech Golf Technology 2000 Inc.
("IGT") has created a wireless pace of play information system for golf courses
under the name "Informer 2000". The Informer 2000 system uses data from global
positioning satellites (GPS) managed and communicated through a variety of
advanced technologies.
In February, 2000, the Company completed its acquisition of IGT. Pursuant to the
terms of a Share Exchange and Finance agreement dated December 16, 1999, the
Company issued 3,308,582 Class A common shares and 7,095,750 units consisting of
Class B preference shares of Inforetech Holdings Ltd. and Class B special voting
shares of the Company, in exchange for all the issued and outstanding shares of
IGT. As a result of this transaction, the former shareholders of IGT held the
majority of the shares of the Company and accordingly, the business combination
has been accounted for as a reverse takeover with IGT as the deemed acquiror.
These consolidated financial statements reflect the acquisition of IGT by the
Company and are deemed to be a continuation of IGT. As a consequence, the
comparative figures presented in the consolidated financial statements are those
of IGT.
Since inception IGT has been engaged in research and development of the Informer
2000 system. During the latter half of 1999, IGT brought in house a considerable
portion of the research and development that it had formerly sub-contracted.
This strategic decision enabled the Company to better monitor the integration of
the various technologies and to position itself for the transition from
prototype to commercial production. This decision also resulted in a sharp
increase in payroll costs as employees replaced sub-contractors.
The Company is currently conducting product evaluations. Early results from
these evaluations indicate that the product is performing well in a number of
respects; the results also indicate the need for further modifications in order
to meet the Company's product performance expectations. The Company anticipates
that its product evaluations and modifications will be completed by the end of
the fourth quarter of 2000 with product introduction to the world market at the
PGA show in Orlando in January 2001.
On August 21, 2000 the Company signed a binding letter of intent to acquire
ProShot Golf Inc. ("ProShot") in a share exchange transaction. On November 7,
2000 the Company signed a definitive purchase agreement. Completion of the
transaction is subject to the completion of among other things an audit and
review of ProShot financial statements and the delivery of a fairness opinion
from the Company's investment banker.
Over the next twelve months, the Company is projecting a substantial increase in
its workforce as the development of the first product reaches completion and the
product is commercialized.
11
<PAGE>
The forward looking statements in this Item 2 reflect assumptions made by
management and management's beliefs based on information currently available to
it. The Company's future operations, liquidity and capital resources will be
impacted by the Company's ability to timely and successfully complete product
development and testing, the outcome of end-user product evaluations, the
available supply of units to meet anticipated market demand and obtaining
additional financial resources.
Results of Operations:
Nine-month periods Ended September 30, 2000 and 1999.
The Company had no revenue for the nine months ended September 30, 2000 or nine
months ended September, 1999.
The net loss for the 9 months ended September 30, 2000 was $6,831,308 compared
with a net loss of $2,122,170 for the 9 months ended September 30, 1999.
Administration expenses for the nine months ended September 30, 2000 were
$1,582,170 compared to $579,315 for the same period in 1999. The increase was
primarily due to a substantial increase in the amount of legal, audit, tax,
public relations and consulting fees incurred. In addition, administrative
salaries increased period over period as the Company added to its administrative
staff.
Depreciation expense for the 9 months ended September 30, 2000 was $44,200,
compared to $22,128 for the same period in 1999. The increase was a result of an
increase in the property and equipment asset base.
Financing costs for the 9 months ended September 30, 2000 were $1,269,181
compared to $293,196 for the same period in 1999. The increase was primarily due
to a charge of $ 888,800 with respect to the beneficial conversion features
relating to a loan, the 8% Series A convertible note and the 8% convertible
debenture and $ 220,400 related to warrants and options.
Marketing costs for the 9 months ended September 30, 2000 were $1,352,537
compared to $352,055 for the same period in 1999. The increase was primarily due
to a charge of $ 576,810 with respect to 87,000 shares of common stock issued
in 2000 for services provided in prior years and $ 386,664 of compensation
relating to stock options issued to consultants.
Research and development expenses for the 9 months ended September 30, 2000 were
$2,583,220 compared to $875,476 for the same period in 1999. The primary reasons
for the increase were (1) acceleration of the completion of the first stage of
development; (2) the bringing in house of a substantial part of the work that
was formerly undertaken by sub-
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contractors; (3) and an increase in payroll costs as the Company undertook a
major hiring program of engineers and other technical staff.
Liquidity and Capital Resources
At September 30, 2000 the Company had cash of $629,092 compared to cash of
$19,293 at September 30, 1999 and $4,214 at December, 31 1999.
For the nine months ended September 30, 2000 operating activities used cash of $
4,074,908 compared to $1,863,383 for the same period in 1999. The principal
reason for the increase in cash usage in the current period was the increase in
the net loss as the Company expanded its administration, marketing and research
and development departments.
During the nine months ended September 30, 2000 the Company purchased property
and equipment of $106,867 compared to $118,130 for the same period in 1999.
For the nine months ended September 30, 2000 financing activities provided cash
of $ 4,810,867. The Company raised $ 3,102,000 of equity through a private
placement of common stock, $1,000,000 of equity through a private placement of
common stock, which was subscribed for at September 30, but issued in October, $
100,000 of equity from the exercise of options, $300,000 from a convertible
loan, $1,000,000 from a convertible note and $1,000,000 from a convertible
debenture from which loans and promissory notes of $1,686.919 were repaid.
For the nine months ended September 30, 1999, financing activities provided cash
of $ 2,000,805.The Company raised $ 547,251 of equity and $1,529,721 in loans
and promissory notes.
The Company has historically relied upon sales of its common stock, debt
instruments and loans from its founder to finance research and development,
marketing and operations. As of September 30, 2000 and the date of this Report,
the Company had a working capital deficit. In view of the Company's limited
amount of cash and cash equivalents and its utilization of cash for its
operations, the Company will only be able to continue in operation for a limited
period of time. Accordingly, additional financing will be required for current
and long-term research and development, marketing and working capital. The
Company continues to pursue opportunities for a private equity offering and/or
debt financing. There can be no assurances that any additional financing will
take place or, if so, the terms thereof. To the extent of any shortfall in
financing, the Company's product development and commercialization programs will
be delayed, curtailed or prevented, and the Company may be required to suspend
or substantially modify its operations.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds.
In August 2000, pursuant to a securities purchase agreement with
Augustine Funds, L.P., the Company sold $1,000,000 in principal amount
of Series A 8% convertible Notes due August 4, 2003 and issued warrants
to purchase up to 100,000 shares of Class A common stock. The notes are
convertible (plus related interest expense) into Class A common stock
at the lessor of (i) $5.25 or (ii) 75% of the average closing bid price
of the Company's common shares for the five days immediately preceding
the conversion date.
In August 2000, pursuant to a securities purchase agreement with The
Shaar Fund Ltd., the Company sold $1,000,000 in principal amount of 8%
Convertible Debenture due August 4, 2005 and warrants to purchase up to
100,000 shares of Class A common stock. The debenture is convertible
(plus related interest expense) into Class A common stock at the lessor
of (i) $5.25 or (ii) 75% of the average of the lowest three closing bid
prices of the Company's common shares during the ten trading days
immediately preceding the conversion date.
In August 2000 the Company issued 87,000 Class A common shares to a
consultant for services. The shares were valued at their trading value
on the date of issue resulting in a $576,810 increase to the paid-in
capital of the Company.
In August 2000 the Company issued 100,000 Class B shares on conversion
of a Series A promissory note.
In September 2000 the Company received $1,000,000 from a director of
the Company in connection with a private placement of 222,223 shares
which, were issued in October 2000
All of the securities were issued pursuant to Section 4(2) of the
Securities Act of 1933, as amended.
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:
Financial Data Schedule
(b) Reports on Form 8-K:
None.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: November 11, 2000
-----------------
INFORETECH WIRELESS TECHNOLOGY INC.
By: /s/ Robert C. Silzer, Sr.
------------------------------------------
Robert C. Silzer, Sr., Chief
Executive Officer
(Duly authorized officer)
By: /s/ Robert C. Silzer, Jr.
-------------------------
Robert C. Silzer, Jr., President,
Secretary and Treasurer (Principal
financial officer)
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