<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[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 of 1934
For the transition period from _________ to _________
Commission file number: 0-25963
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INFORETECH WIRELESS TECHNOLOGY INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Nevada 88-0350120
- ------------------------------------ -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
Suite 214, 5500 - 152nd Street
Surrey, British Columbia V35-8E7
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(Address of principal executive offices, including zip code)
Issuer's telephone number, including area code: (604) 576-7442
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Class A Common
Equity Voting Stock, par value $.001 per share
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of March 31, 2000, the issuer had 10,889,522 shares of Common Stock issued
and outstanding.
Transitional Small Business Disclosure Format: Yes[ ] No [X]
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) - March 31, 2000 and
December 31, 1999
Consolidated Statements of Operation (Unaudited) - Three Months
Ended March 31, 2000 and 1999 and Inception to March 31, 2000
Consolidated Statements of Stockholders' Equity (Unaudited)
Consolidated Statements of Cash Flows (Unaudited) - Three Months
Ended March 31, 2000 and 1999 and Inception to March 31, 2000
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis or Plan of Operation
PART II. OTHER INFORMATION
Item 1. Litigation
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
2
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INFORETECH WIRELESS TECHNOLOGY INC.
(a development stage company)
(unaudited)
CONSOLIDATED BALANCE SHEETS
(U.S.$)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 257,235 $ -
Accounts receivable 64,001 83,507
Inventory 72,629 -
Deposits and prepaid expenses 377,147 47,786
- ------------------------------------------------------------------------------------------------------------------------------------
771,012 131,293
PROPERTY AND EQUIPMENT, net 238,204 204,068
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$ 1,009,216 $ 335,361
====================================================================================================================================
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness $ - $ 4,214
Accounts payable and accrued liabilities 439,068 526,261
Loans payable - 1,500,000
Convertible Promissory notes - Series A 100,000 100,000
- others 284,936 834,759
Promissory notes payable, related parties 763,833 869,746
- ------------------------------------------------------------------------------------------------------------------------------------
1,587,837 3,834,980
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STOCKHOLDERS' EQUITY
Common stock, $.001 par value.
Authorized 100,000,000 Class A, voting, participating shares;
Issued: 2000-10,889,522; 1999-6,156,000 10,890 6,156
Special voting stock, $.001 par value.
Authorized 100,000,000 Class B, voting, convertible, non-participating shares;
Issued: 2000-6,902,030; 1999-NIL 6,902 -
Additional paid-in capital 6,119,183 1,740,846
Accumulated deficit (6,715,596) (5,246,621)
- ------------------------------------------------------------------------------------------------------------------------------------
(578,621) (3,499,619)
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$ 1,009,216 $ 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
inception to
March 31,
FOR THE THREE MONTHS ENDED MARCH 31, 2000 1999 2000
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
EXPENSES
Administration $ 456,080 $ 108,097 $ 1,581,688
Depreciation 20,554 2,891 53,380
Finance costs 477,297 66,316 1,032,531
Marketing 100,096 65,651 650,699
Research and development 414,948 270,729 2,342,180
- ------------------------------------------------------------------------------------------------------------------------------------
NET LOSS (1,468,975) (513,684) (5,660,478)
DEFICIT, BEGINNING (5,246,621) (2,037,248) -
Deficiency on acquisition of subsidiary company acquired in
a related party transaction - - (1,055,118)
- ------------------------------------------------------------------------------------------------------------------------------------
DEFICIT, ENDING $ (6,715,596) $ (2,550,932) $ (6,715,596)
====================================================================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 9,922,984 3,308,582
====================================================================================================================================
LOSS PER COMMON SHARE $ (0.15) $ (0.16)
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(a development stage company)
(unaudited)
STATEMENT OF STOCKHOLDERS' EQUITY
(U.S.$)
<TABLE>
<CAPTION>
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FOR THE THREE MONTHS ENDED MARCH 31, 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Common stock Special voting stock
------------------- --------------------- Additional Total
Number Number paid-in Accumulated stockholders'
of shares Amount of shares Amount capital deficit equity
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<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 6,156,000 $ 6,156 - $ - $ (1,154) $ (12,502) $ (7,500)
Elimination of deficit at date
of acquisition - - - - - 12,502 12,502
Common stock issued for shares of
InForetech Golf Technology 2000 Inc. 3,134,249 3,134 7,095,750 7,096 2,081,770 (5,246,621) (3,154,621)
Common stock issued for cash 775,000 775 - - 3,151,225 - 3,152,000
Common stock issued for services 436,833 437 - - 693,816 - 694,253
Common stock issued on conversion
of Class B shares 193,720 194 (193,720) (194) - - -
Common stock issued to settle debt 193,720 194 - - 193,526 - 193,720
Net loss - - - - - (1,468,975) (1,468,975)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2000 10,889,522 $10,890 6,902,030 $6,902 $6,119,183 $(6,715,596) $ (578,621)
====================================================================================================================================
</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
<TABLE>
<CAPTION>
Total from inception
FOR THE THREE MONTHS ENDED MARCH 31, 2000 1999 to March 31, 2000
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<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (1,468,975) $ (513,684) $ (5,660,478)
Adjustment to reconcile net loss to cash used
in operating activities:
Depreciation 20,554 2,891 53,380
Expenses paid by issuance of stock 694,253 - 764,657
Changes in operating assets and liabilities:
Accounts receivable 19,506 (5,472) (64,001)
Deposits and prepaid expenses (329,361) (3,325) (377,147)
Inventory (72,629) - (72,629)
Accounts payable (87,193) 121,168 439,067
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(1,223,845) (398,422) (4,917,151)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (54,690) (22,908) (291,584)
Deficiency on acquisition of subsidiary company - - (1,055,118)
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(54,690) (22,908) (1,346,702)
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CASH FLOWS FROM FINANCING ACTIVITIES
Common stock issued for cash 3,152,000 - 3,803,599
Loan proceeds - - 2,200,000
Loan repayments (1,500,000) - (1,600,000)
Promissory notes (112,016) 435,654 2,117,489
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1,539,984 435,654 6,521,088
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INCREASE IN CASH 261,449 14,324 257,235
CASH (DEFICIENCY), BEGINNING (4,214) (76,167) -
- ------------------------------------------------------------------------------------------------------------------------------------
CASH (DEFICIENCY), ENDING $ 257,235 $ (61,843) $ 257,235
====================================================================================================================================
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 694,253 - 734,657
Common stock issued on conversion of Class B shares 193,720 - 193,720
- ------------------------------------------------------------------------------------------------------------------------------------
$ 1,431,693 $ - $ 2,527,097
====================================================================================================================================
</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.$)
- --------------------------------------------------------------------------------
MARCH 31, 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 three months ended March 31, 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 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 as contained in the Company's Form 10-KSB for its year ended
December 31, 1999. 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 three month
period ended March 31, 2000, together with net operating loss carryforwards,
and has decided to forego 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 Financial Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133) which established accounting and reporting
standards for derivative instruments and hedging activities. Effective for
all fiscal quarters in years beginning after June 15, 2000, SFAS 133
requires the Company to recognize all derivative instruments as either
assets or liabilities in the statement of financial position and measure
those instruments as fair value on an on-going basis. The Company is
considering the effect of adopting SFAS 133 on its financial statements and
has
7
<PAGE>
INFORETECH WIRELESS TECHNOLOGY INC.
(a development stage company)
(unaudited)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(U.S.$)
- -------------------------------------------------------------------------------
MARCH 31, 2000
preliminarily determined that it will have no effect on the Company's
financial condition or results of operations. The Company plans to adopt the
statement on July 1, 2000.
4. RECLASSIFICATION
Certain reclassifications of prior year balances have been made to conform
to current year classifications.
5. REVERSE TAKEOVER - SHARE EXCHANGE AGREEMENT
During the quarter ended March 31, 2000, the Company completed its
acquisition of InForetech Golf Technology 2000 Inc. ("IGT") pursuant to the
terms of a Share Exchange and Finance agreement dated December 16, 1999. The
Company issued 3,134,249 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 of 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.
6. PRIVATE PLACEMENTS
During the quarter ended March 31, 2000, the Company completed two private
placements totalling 775,000 common shares. Proceeds from these placements
totalled $3,152,000. $1,500,000 of the proceeds were used to repay a loan
from Mercer Capital Corp.
See Part II "Other Information", Item 2 - Changes in Securities and Use of
Proceeds.
8
<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.
("Inforetech Golf") 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.
During the quarter ended March 31, 2000, the Company completed its acquisition
of InForetech Golf Technology 2000 Inc. ("IGT") pursuant to the terms of a Share
Exchange and Finance agreement dated December 16, 1999. The Company issued
3,134,249 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 of 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, Inforetech Golf has been engaged in research and development of
the InFormer 2000 system. During the latter half of 1999, Inforetech Golf
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 company 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 continue into the third
quarter of 2000 and intends to commercialize the system following their
successful completion.
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.
Under the terms of the Share Exchange and Finance Agreement dated December 16,
1999 between the Company, Inforetech Golf, its Founding Shareholders and Mercer
Capital Corp it was agreed that the Company would create a stock option plan for
its directors, officers and employees. Currently this plan is being formalized
but is not complete.
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.
9
<PAGE>
Results of Operations:
Three month periods Ended March 31, 2000 and 1999.
The Company had no revenue for the quarter ended March 31, 2000 or the quarter
ended March 31, 1999.
The net loss for the three months ended March 31, 2000 was $1,468,975 compared
with a net loss of $513,684 for the three months ended March 31, 1999.
Administration expenses for the three months ended March 31, 2000 were $456,080
compared to $108,097 for the same period in 1999. The increase was primarily
due to a substantial increase in the amount of legal, audit and consulting fees
incurred. In addition, administrative salaries increased year over year as the
Company added to its administrative staff. For the three months ended March 31,
2000, the CEO and Founder, Mr. Bob Silzer Sr., was paid a salary. For the three
months ended March 31, 1999, Mr. Bob Silzer, Sr. was not paid a salary.
Depreciation expenses for the three months ended March 31, 2000 were $20,554
compared to $2,891 for the same period in 1999. The increase in depreciation
was a result of (1) an increase in the fixed asset base and (2) fixed assets
are depreciated at half the depreciation rate in the year of acquisition,
compared to the full year's depreciation in subsequent years.
Financing costs for the three months ended March 31, 2000 were $477,297 compared
to $66,316 for the same period in 1999. The primary reason for the increase in
financing costs was the placement and finders' fees associated with the private
placement of $3,152,000.
Marketing costs for the three months ended March 31, 2000 were $100,096 compared
to $65,651 for the same period in 1999. The primary reason for the increase in
marketing costs was an increase in both salaries and trade show expenses.
Research and development expenses for the three months ended March 31, 2000 were
$414,948 compared to $270,729 for the same period in 1999. The primary reasons
for the increase are (1) acceleration of the completion of the first stage of
development (2) bringing in house of a substantial part of the work that was
formerly undertaken by sub-contractors and (3) an increase in payroll costs as
the Company undertook a major hiring program of engineers and other technical
staff.
Liquidity and Capital Resources:
At March 31, 2000, the Company had cash of $257,235 compared to bank
indebtedness of $4,214 at December 31, 1999.
For the three months ended March 31, 2000, operating activities used cash of
$1,223,845 compared to $398,422 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 develop departments.
For the three months ended March 31, 2000 the Company purchased fixed assets of
$54,690 compared to $22,908 for the same period in 1999.
Financing activities provided cash of $ 1,539,984. The Company raised through a
private placement of common stock $3,152,000 from which loans and promissory
notes of $1,612,016 were repaid.
10
<PAGE>
During the three months ended March 31, 2000, $543,720 of convertible notes were
converted to common stock. During the same period, $694,253 of common stock
were issued for services.
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. 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.
11
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
In January 2000, the Company issued 375,000 shares to two accredited investors
for an aggregate of $1,500,000 in connection with a private placement pursuant
to Section 4(2) of the Securities Act, as amended.
In January 2000, the Company issued 400,000 shares to two accredited investors
for an aggregate of $1,652,000 in connection with a private placement pursuant
to Section 4(2) of the Securities Act.
As consideration for a placement fee in connection with the private placements
listed above, the Company issued 100,000 shares of its Class A Common Equity
Voting Stock pursuant to Section 4(2) of the Securities Act and paid $50,000 to
one accredited investor pursuant to Section 4(2) of the Securities Act.
In March 2000, the Company issued 193,720 shares of its Class A Common Equity
Voting Stock to one accredited investor to settle the $193,720 debt owed by
InForetech Golf Technology Inc. pursuant to Section 4(2) of the Securities Act.
In March 2000, the Company issued 162,500 shares of its Class A Common Equity
Voting Stock to two accredited investors as consideration for legal fees
pursuant to Section 4(2) of the Securities Act.
In February 2000, the Company issued 174,333 shares of its Class A Common Equity
Voting Stock to one accredited investor as consideration for services rendered
pursuant to Section 4(2) of the Securities Act.
In February 2000, the Company allotted and issued 3,134,249 shares of its Class
A Common Equity Voting Stock to 21 accredited investors and 7,095,750 units
consisting of Class A and Class B preference shares of InForetech Holdings Ltd.
and Class B special voting shares of the Company to six accredited investors
pursuant to Section 4(2) of the Securities Act. On or about February 2, 2000,
the majority of such shares were delivered to the founding shareholders of
InForetech Golf Technology 2000 Inc. in exchange for their Class A shares of
such company. The Company also made an Exchange Offer to the balance of the
shareholders of InForetech Golf Technology 2000 Inc. and as such other
sharehoders execute and return the Exchange Offer and transmittal documents to
the Company, the Company delivers shares to them. To date the majority of the
non-founding shareholders have exchanged their InForetech Golf Technology 2000
Inc. shares for shares of the Company. The Company anticipates that the few
remaining shareholders of InForetech Golf Technology 2000 Inc. will exchange
their shares in the immediate future.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
12
<PAGE>
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
13
<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.
INFORETECH WIRELESS TECHNOLOGY INC.
-----------------------------------
(Registrant)
Date: May 15, 2000 By: /s/ ROBERT C. SILZER, SR.
---------------------------
Robert C. Silzer, Sr.
Chief Executive Officer
(Duly authorized officer)
Date: May 15, 2000 By: /s/ ROBERT C. SILZER, JR.
-------------------------
Robert C. Silzer, Jr.
President, Secretary and Treasurer
(Principal financial officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 257,235
<SECURITIES> 0
<RECEIVABLES> 64,001
<ALLOWANCES> 0
<INVENTORY> 142,629
<CURRENT-ASSETS> 841,012
<PP&E> 292,029
<DEPRECIATION> (53,825)
<TOTAL-ASSETS> 1,079,216
<CURRENT-LIABILITIES> 1,587,837
<BONDS> 0
0
0
<COMMON> 6,130,073
<OTHER-SE> (6,645,596)
<TOTAL-LIABILITY-AND-EQUITY> 1,079,216
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,398,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,398,975)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,398,975)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,398,975)
<EPS-BASIC> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
