As filed with the Securities and Exchange Commission on August 14, 2000
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the Quarterly Period Ended June 30, 2000
Commission file number 001-15627
eieiHome.com Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 13-4103407
(State of Incorporation) (IRS. Employer ID No.)
67 Wall Street
Suite 2411, New York, NY 10005
(Address of Principal Executive Offices)
(212) 344-0351
('Issuer's Telephone No. including area code)
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 __
The number of shares outstanding of each of the Registrant's class of common
equity, as of August 11, 2000 are as follows:
Class of Securities Shares Outstanding
------------------- ------------------
Common Stock, $.001 par value 16,698,770
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<PAGE>
eieiHome.com Inc.
INDEX
PART I Financial Information
Item 1. Financial Statements (unaudited)
Balance Sheet..............................................3
Statements of Operations and Comprehensive (Loss)..........4
Statements of Cash Flows...................................5
Notes to Financial Statements..............................6
Item 2. Management's Discussion and Analysis or Plan of Operation.....9
PART II. Other Information
Item 1. Legal Proceedings............................................15
Item 2. Change in Securities and Use of Proceeds.....................15
Item 3. Defaults Upon Senior Securities..............................15
Item 4. Submission of Matters to a Vote of Security Holders..........15
Item 5. Other Information............................................15
Item 6. Exhibits and Reports on Form 8-K.............................15
A) Exhibit Schedule
B) Reports Filed on Form 8-K
Signatures............................................................. 17
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
eieiHome.com Inc.
Balance Sheet
June 30, 2000
ASSETS
Current Assets:
<S> <C>
Note receivable $718,850
Marketable securities 400,520
----------------------------------------------------------------------------------------------
Total current assets 1,119,370
----------------------------------------------------------------------------------------------
TOTAL ASSETS $1,119,370
----------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Accounts payable $ 39,704
Accrued expenses - other 11,939
Accrued expenses - legal 187,678
Accrued expenses - interest 178,723
Due to related parties 65,791
----------------------------------------------------------------------------------------------
Total current liabilities 483,835
Long term debt:
Convertible debenture 2,000,000
Senior subordinated convertible debenture 1,709,450
----------------------------------------------------------------------------------------------
Total liabilities 4,193,285
Stockholders' (deficit)
Common stock, $.001 par value, 75,000,000 shares authorized,
16,698,770 shares, issued and outstanding at June 30, 2000. 16,699
Preferred stock, $100 par value, 8%, non-voting, convertible, -
redeemable, 2,000 shares authorized, No shares issued and outstanding
at June 30, 2000.
Additional paid-in capital (including excess consideration from the
sale of Canadian subsidiary - note 2) 1,264,446
Accumulated deficit (4,275,580)
Accumulated other comprehensive income (loss) (79,480)
----------------------------------------------------------------------------------------------
Total stockholders' (deficit) (3,073,915)
----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $1,119,370
----------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
eieiHome.com Inc.
Statements of Operations and Comprehensive (Loss)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
Expenses:
<S> <C> <C> <C> <C>
Interest $85,612 - $148,030 -
Loss from Canadian subsidiary operations (note 2) 504,062 153,191 784,199 169,108
-----------------------------------------------------------------------------------------------------------------------
Net loss $589,674 $153,191 $932,229 $169,108
Basic and diluted net loss per share of common stock $(0.03) $(0.01) $(0.05) $(0.01)
-----------------------------------------------------------------------------------------------------------------------
Weighted average number of common shares outstanding 18,448,770 18,198,770 18,323,770 18,198,770
-----------------------------------------------------------------------------------------------------------------------
Comprehensive
Loss
Net loss $(589,674) $(153,191) $(932,229) $(169,108)
Other comprehensive loss:
Unrealized holding (loss) on marketable securities (398,480) - (79,480) -
-----------------------------------------------------------------------------------------------------------------------
Comprehensive (loss) $(988,154) $(153,191) $(1,011,709) $(169,108)
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
eieiHome.com Inc.
Statements of Cash Flows
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
-------------------------------------------------------------------------------------------------------------------
Net cash used in operations
<S> <C> <C> <C> <C>
Net loss $(589,674) (153,191) $(932,229) (169,108)
Adjustments to reconcile net loss
to net cash provided by (used in) operating
activities:
Depreciation and amortization 6,441 - 11,184 -
Changes in:
Accounts receivable - - -
Other current assets - (144,364) - (144,364)
Accounts payable 95,926 - (116,960) -
Accrued expenses - other - 6,649 - (6,832)
Accrued expenses - legal 110,064 - 111,953 -
Accrued expenses - interest 136,604 - 199,022 -
Deferred revenue - - - -
Due to related parties 65,791 294,961 (194,304) 328,438
-------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (174,848) 4,055 (921,334) 8,134
-------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of marketable securities - - (480,000) -
Purchase of fixed assets (24,442) - (46,304) -
-------------------------------------------------------------------------------------------------------------------
Net cash (used in) investing activities (24,442) - (526,304) -
-------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
(Repayment) of notes payable - shareholder (200,000) - (500,000) -
Proceeds on issuance of senior subordinated
convertible debentures 320,450 - 1,945,450 -
-------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities: 120,450 - 1,445,450 -
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
Increase in cash (78,840) 4,055 (2,188) 8,134
-------------------------------------------------------------------------------------------------------------------
Cash, beginning of period 78,840 4,378 2,188 299
-------------------------------------------------------------------------------------------------------------------
Cash, end of period - 8,433 - 8,433
-------------------------------------------------------------------------------------------------------------------
</TABLE>
Non cash investing and financing activities:
During the quarter ended June 30, 2000 the Company sold its Canadian
subsidiary which had a net asset deficit of $13,508 for: (1) $366,799 in a
reduction in senior subordinated convertible debentures; (2) $718,850 of notes
receivable; and (3) the return of 2,250,000 shares of the Company's common
stock. The difference between the net assets sold and the consideration received
amounted to $1,099,157 and has been shown as contribution to capital.
See accompanying notes to financial statements.
5
<PAGE>
eieiHome.com Inc.
Notes to Financial Statements
June 30, 2000
Note 1 - Basis of Presentation
The accompanying unaudited financial statements of eieiHome.com Inc.
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-QSB and
Item 310(b) of Regulation S-B. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management of eieiHome.com
Inc., all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
six months ended June 30, 2000, are not necessarily indicative of the results
that may be expected for the year ending December 31, 2000. For further
information, refer to the financial statements and footnotes thereto included in
the Company's annual report on Form 10-KSB for the year ended December 31, 1999
Note 2 - Summary of significant accounting policies
Nature of business
The Company's principal business, operated through eieiHome.com Inc.,
an Ontario Corporation and wholly owned subsidiary of the Company (the "Canadian
Subsidiary"), which operated an Internet service, information and e-commerce web
site, was sold effective June 26, 2000. With the disposal of the operating
entity, management is investigating alternative businesses and hopes to announce
the nature of the new business shortly.
Recent developments - Sale of Subsidiary
Effective June 26, 2000, the Company entered into a Share Purchase
Agreement with the Canadian Subsidiary and 1412531 Ontario Inc. (the
"Purchaser") dated as of June 26, 2000, pursuant to which the Company sold all
of the shares of the Canadian Subsidiary to the Purchaser for an aggregate
purchase price of US$1,065,350 plus the surrender of 2,250,0000 shares of the
Company's common stock. The US$1,065,350 portion of the purchase price was
satisfied by the surrender for cancellation of US$346,500 of 8% Senior
Subordinated Convertible Debentures of the Company and by the issuance of a
promissory note issued by the Purchaser in the principal amount of US $718,850
plus interest at a rate of 24% per annum calculated and payable monthly (the
"Promissory Note"). Two principals of the Purchaser were former owners of the
Canadian subsidiary and current shareholders of the Company and provided limited
guarantees for the outstanding amount of the Promissory Note and pledged in the
aggregate 200,000 common shares of Simmonds Capital Limited (a related entity)
and 500,000 shares of the Company's common stock as security for the performance
of their guarantee. The Canadian Subsidiary provided an unlimited guarantee for
the outstanding amount and granted a security interest in all of its personal
property as security for the performance of its guarantee.
6
<PAGE>
The Promissory Note provided that an initial payment of US$65,350 was
due and payable on or before 3 p.m. on July 21, 2000 with the balance due on or
before 3 p.m. on November 10, 2000. Of such balance, up to US$153,500 could be
satisfied by the surrender for cancellation of 8% Senior Subordinated
Convertible Debentures. On July 21, 2000, the Company was advised that the
Purchaser would be unable to make its initial payment on that date but that the
purchaser would provide such payment on July 25, 2000. The Company had no reason
to believe that such payment would not be made on July 25, 2000. The Promissory
Note provides that in the event that the Purchaser fails to pay any amount under
the Promissory Note when due and such default is not cured within two business
days that the Company may declare all indebtedness under the Promissory Note
immediately due and payable.
On July 21, 2000 the Company notified the Purchaser that unless the
initial payment was made on or before 3 p.m. on July 25, 2000, the Company would
declare the entire $718,850 plus interest immediately due and payable. The
Purchaser did not timely make such payment and the Company thereafter declared
the entire $718,850 plus interest immediately due and payable.
On August 10, 2000 the Company and the Purchasers entered into a
settlement agreement which extended the term of the Promissory Note to December
31, 2000, provided that outstanding interest in the amount of $7,500 be paid by
August 10, 2000 and all remaining interest to be paid on August 26, 2000. The
Purchaser also agreed to a monthly forbearance fee of 1.5% of the total
outstanding indebtedness as of the 1st day of each month, payable on the 26th of
each month, beginning September 26, 2000, until the principal and interest is
paid in full. The forbearance fee for August will be $11,500, with such amount
added to the principal amount of the Promissory Note effective August 1, 2000.
In addition, the 200,000 shares of common stock of Simmonds Capital Limited and
500,000 shares of common stock of the Company which served as security under the
Promissory Note are currently being held by the Company pending liquidation,
with the proceeds of such liquidation to be applied to reduce the principal
amount of the Promissory Note. Management is of the opinion that the security
under the Promissory Note is sufficient to ensure full recovery of the amount of
the Promissory Note and therefore does not require a bad debt provision.
Subject to the completion of the sale of the Canadian Subsidiary and
the repayment of the Promissory Note, the Company had proposed to acquire
certain wireless assets from Simmonds Capital Limited (a related entity). The
Company issued a press release on July 12, 2000 to announce the proposed
acquisition by the Company of wireless assets from Simmonds Capital Limited.
A summary of the accounting for this disposition is as follows:
Net asset deficit disposed of $ (13,508)
Assignment of senior subordinated
convertible debentures (principal plus interest) (366,799)
Note receivable (718,850)
------------
Excess of consideration received over net
assets disposed - reflected as an adjustment
to stockholders deficit $(1,099,157)
============
7
<PAGE>
On July 10, 2000, Angelo MacDonald, resigned as the Company's president
and Chief Executive Officer and the Board of Directors appointed John Simmonds
to serve in his place. The Company issued a press release on July 11, 2000
concerning the resignation and appointment.
Canadian Subsidiary Operations
The operations of the Company's Canadian subsidiary, as discussed
above, which have been aggregated and reflected as a one line item in the
accompanying statement of operations, are summarized as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues $ 15,627 $ 20,913 $ 39,413 $ 25,709
------ ------ ------ ------
Expenses
General and administrative 486,297 150,362 774,392 169,431
Occupancy 26,950 23,742 41,677 25,386
Depreciation 6,442 - 7,541 -
-------- --------- -------- --------
519,689 174,104 823,610 194,817
-------- --------- -------- --------
Net loss $504,062 $153,191 $784,199 $169,108
-------- --------- -------- -------
</TABLE>
Use of estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the period. Actual results could differ from these estimates, and such
differences could be material.
Marketable securities
During the quarter ended March 31, 2000, the Company purchased 160,000
shares of common stock of a publicly traded entity for $480,000. These
securities are considered "available for sale" and, accordingly, are recorded at
market value with unrealized gains or losses to be recorded as a separate
component of shareholders' equity (deficit). During the second quarter the share
price of securities fell from $5.875 on March 31, 2000 to $2.945 on June 30,
2000, and after applying a 15% discount due the share trading restrictions on
the shares, the Company recorded an unrealized holding loss of $398,480.
Net loss per share
Net loss per share has been computed using the net loss for the period
divided by the weighted average shares outstanding. Diluted loss per share is
not presented as the effects of convertible debentures, warrants and options are
anti-dilutive.
8
<PAGE>
Note 3 - Senior subordinated convertible debentures
The senior subordinated convertible debentures earn interest at 8% per
annum. Each $0.25 of principal amount is convertible into one common share and
one three year warrant to purchase an additional share of the Company at $0.50
per share. During the quarter the Company raised $320,450 through the issuance
of new senior subordinated convertible debentures and cancelled $346,500 of
existing debentures as a result of the disposal of the Canadian subsidiary.
Item 2. Management's Discussion and Analysis or Plan of Operation.
Overview
During the three month period ended June 30, 2000 management made the
decision to change the business direction of the Company. This decision was made
after the receipt of disappointing results of the relaunch of the eieiHome
business in the Canadian marketplace during the month of April/May were known.
Management was of the opinion that ensuring the success of the eieiHome business
would require significantly more capital than initially projected. In addition,
capital market conditions, subsequent to the end of the first quarter, for most
Internet related stocks were such that raising capital to offset operating
losses was going to be significantly more difficult. Faced with the prospect of
indefinite losses for the foreseeable future, management felt it would be
prudent to dispose of the eieiHome Canada business. Management was of the
opinion that it was necessary to act quickly to eliminate the continuing cash
operating losses. The only interested buyers who had intimate knowledge of the
business were the original founders and they were willing to close in an
extremely short period of time.
Effective June 26, 2000 and closing on July 10, 2000, the Company sold
all of the shares of its wholly owned Canadian subsidiary eieiHome.com Inc.,
("eieiHome Canada") to 1412531 Ontario Inc. for an aggregate purchase price of
US$1,065,350 plus the surrender of 2,250,0000 shares of the Company's common
stock. The US$1,065,350 portion of the purchase price was satisfied by the
surrender for cancellation of US$346,500 of 8% Senior Subordinated Convertible
Debentures of the Company and by the issuance of a promissory note issued by the
purchaser in the principal amount of US $718,850 plus interest at a rate of 24%
per annum calculated and payable monthly (the "Promissory Note"). Two principals
of the purchaser were the former owners of the Canadian subsidiary and current
shareholders of the Company and provided limited guarantees for the outstanding
amount of the Promissory Note and pledged in the aggregate 200,000 common shares
of Simmonds Capital Limited and 500,000 shares of the Company's common stock as
security for the performance of their guarantee. eieiHome Canada provided an
unlimited guarantee for the outstanding amount and granted a security interest
in all of its personal property as security for the performance of its
guarantee.
The Promissory Note provided that an initial payment of US$65,350 was
due and payable on July 21, 2000 with the balance due on or before November 10,
2000. Up to US$153,500 could be satisfied by the surrender for cancellation of
8% Senior Subordinated Convertible Debentures. On July 21, 2000, the purchaser
was unable to make its initial payment but agreed to make such payment on July
25, 2000. The Company had no reason to believe that the payment would not be
made on July 25, 2000. The Promissory Note provided that in the event that the
purchaser fails to pay any amount under the Promissory Note when due and the
default is not cured within two business days that the Company may declare all
indebtedness under the Promissory Note immediately due and payable.
9
<PAGE>
On July 21, 2000 the Company notified the Purchaser that unless the
initial payment was made on July 25, 2000 that the Company would declare the
entire $718,850 plus interest immediately due and payable. On July 25, 2000 the
Company still had not received payment and has since that time been taking the
necessary steps under the relevant laws of the province of Ontario to realize on
its security. Under Canadian bankruptcy law, a secured party is required to
provide a debtor with ten days notice before such secured party may realize on
all or substantially all of such debtor's assets. On July 26, 2000, the Company
served the purchaser, eieiHome Canada and the two principals with a demand for
the $718,850 plus interest and the appropriate notices under Canadian bankruptcy
law and expected to be able to take its next steps in the enforcement of its
security on or after August 8, 2000.
On August 8, 2000 the Company extended the term of the Promissory Note
to December 31, 2000, requested that outstanding interest in the amount of
$7,500 be paid by August 10, 2000 and all remaining interest to be paid on
August 26, 2000. The Purchaser also agreed to a monthly forbearance fee of 1.5%
of the total outstanding indebtedness as of the 1st day of each month, payable
on the 26th of each month until the principal and interest is paid in full. In
addition, the 200,000 shares of common stock of Simmonds Capital Limited and
500,000 shares of common stock of the Company which served as security under the
Promissory Note are currently being held by the Company pending liquidation,
with the proceeds of such liquidation to be applied to reduce the principal
amount of the Promissory Note.
The interest payment due on August 10, 2000 was received.
As of June 30, 2000 the Company recorded the excess of the
consideration received over the net assets disposed of as a credit to the
shareholders deficit:
Issuance of note receivable $ 718,850
Convertible debentures returned
for cancellation (principal
and interest) 366,799
----------
Consideration received $ 1,085,649
Net asset deficit disposed of 13,508
-----------
Excess $ 1,099,157
Subject to the completion of the sale of the Canadian Subsidiary and
the repayment of the Promissory Note, the Company had proposed to acquire
certain wireless assets from Simmonds Capital Limited. The Company issued a
press release on July 12, 2000 to announce the proposed acquisition by the
Company of wireless assets from Simmonds Capital Limited.
On July 10,2000, Angelo MacDonald, resigned as the Company's president
and Chief Executive Officer and the Board of Directors appointed John Simmonds
to serve in his place.
Results of operations
For the three month period ended June 30, 2000
Overall the Company recorded a loss of $589,674 ($0.03 per share)
during the three
10
<PAGE>
month period ended June 30, 2000 compared to a loss of $153,191 ($0.01 per
share) during the comparative period a year ago. Operating results have been
segregated into the loss attributable to eieiHome Canada, which has been
disposed of, and expenses (interest on convertible debentures) attributable to
the continuing operations of the Company.
Operating loss from Canadian Subsidiary:
eieiHome Canada the Company's Canadian subsidiary experienced a loss of
$504,062 during the three month period ended June 30, 2000, compared to a loss
of $153,191 in the comparative period in the prior year.
Revenues during the three month period ended June 30, 2000 were $15,627
representing a 25% decline from the comparative period a year ago and a 34%
decline from the prior quarter.
National advertising revenues were $7,753 during the three month period
ended June 30, 2000 compared to $20,913 in the three month period ended June 30,
1999. The reason for the decline was the Company's inability to provide
perceived value for national account advertisers. Local service provider
revenues were $7,874 for the quarter as compared to zero in the prior year. The
increase is attributable to the launch of radio advertising in certain Canadian
markets.
Operating expenses attributable to eieiHome Canada were $519,689 during
the three month period ended June 30, 2000 compared to $174,104 during the three
month period ended June 30, 1999. The increase was the result of significantly
higher legal, advertising and employment related costs. General and
administrative expenses were $486,297 during the three month period ended June
30, 2000 as compared to $150,362 in the comparative period a year ago. Occupancy
costs were $26,950 during this quarter compared to $23,742 a year ago.
Depreciation expense on capital assets was $6,442 during the quarter and zero a
year ago.
Interest Expense on Continuing Operations
The only expenses not directly attributable to the Canadian subsidiary
was interest expense on the Company's convertible debt of $85,612 during the
three month period ended June 30, 2000 (zero in the prior year).
For the six month period ended June 30, 2000
Overall the Company recorded a loss of $932,229 ($0.05 per share)
during the six month period ended June 30, 2000 compared to a loss of $169,108
($0.01 per share) during the comparative period a year ago. The increase is
attributable to significantly higher losses in eieiHome Canada.
Operating loss from Canadian Subsidiary
eieiHome Canada experienced a loss of $784,199 during the six
month period ended June 30, 2000, compared to a loss of $169,108 in the
comparative period in the prior year.
Revenues during the six month period ended June 30, 2000 were $39,413
compared to
11
<PAGE>
$25,709 in the comparative period a year ago.
National advertising revenues were $21,466 during the six month period
ended June 30, 2000 compared to $25,709 in the six month period ended June 30,
1999. The reason for the decline was the Company's inability to provide
perceived value for national account advertisers. Local service provider
revenues were $14,187 for the six month period ended June 30, 2000 as compared
to zero in the prior year. The increase is attributable to the launch of radio
advertising in certain Canadian markets. The Company also earned $3,760 in
website design revenue during the six month period ended June 30, 2000, zero in
the prior year.
Operating expenses attributable to eieiHome Canada were $823,610 during
the six month period ended June 30, 2000 compared to $194,817 during the six
month period ended June 30, 1999. The increase was the result of significantly
higher advertising costs in 2000 and additional employment related costs.
General and administrative expenses were $774,392 during the six month period
ended June 30, 2000 as compared to $169,431 in the comparative period a year
ago. Occupancy costs were $41,677 during the six month period ended June 30,
2000 compared to $25,386 a year ago. Depreciation expense on capital assets was
$7,541 during the six month period ended June 30, 2000 and zero in the prior
year.
Interest Expense on Continuing Operations
Interest expense on the Company's convertible debt amounted to $148,030
during the six month period ended June 30, 2000 (zero in the prior year).
Financial Condition
Since inception, the Company has supported operations through the
issuance of common stock and convertible debt and other securities. During
fiscal 2000, the Company decided to discontinue current business operations,
thereby eliminating further losses from eieiHome Canada.
During the three month period ended March 31, 2000, the Company made an
investment in 160,000 common shares of Vianet Technologies Inc. at $3.00 per
share. Vianet common shares trade under the symbol "VNTK" on the OTCBB. The
Company also received 240,000 warrants to purchase common shares of Vianet
Technologies at $4.50 at any time over the next three years. The Company made
the investment based on the compression technology held by Vianet, which could
be used in ecommerce applications of eieiHome Canada . During the quarter the
share price of securities fell from $5.875 on March 31, 2000 to $2.945 on June
30, 2000, and after applying a 15% discount due the share trading restrictions
on the shares, the Company recorded an unrealized holding loss of $398,480.
Liquidity and Capital Resources
As of June 30, 2000, the Company had an investment in marketable
securities of $400,520. For the three month period ended June 30, 2000, cash
used by operating activities amounted to $174,848 primarily as a result of
operating losses for the period. Cash used in investing activities during the
three month period ended June 30, 2000 amounted to $24,442 and was for the
purchase
12
<PAGE>
of capital equipment. Cash provided by financing activities during the three
month period ended June 30, 2000 amounted to $120,450 resulting from the
issuance of convertible debentures totaling $320,450 partially offset by
$200,000 used to repay a shareholder note payable.
The Company has sold the eieiHome Canada business and is reviewing new
business opportunities. It is anticipated that the new business venture will be
initially financed through the liquidation of the Company's investment in Vianet
Technologies common shares and the cash provided from the collection of the
notes receivable. Depending upon the business venture chosen additional debt or
equity financing may be required. Although there can be no assurance that
outstanding in the money warrants will in fact be exercised, management is
hopeful that this will provide future financing for the Company.
Forward Looking Comments
Certain matters discussed in this Quarterly Report may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 and as such may involve risks and uncertainties.
These forward-looking statements relate to, among other things, expectations of
the business environment in which the Company operates, projections of future
performance, perceived opportunities in the market and statements regarding the
Company's goals. The Company's actual results, performance, or achievements
expressed or implied in such forward-looking statements may differ.
13
<PAGE>
PART II. Other Information
Item 1. Legal Proceedings.
The Company does not believe that it is presently a party to any
pending litigation or any proceeding contemplated by a government authority the
outcome of which could reasonably be expected to have a material adverse effect
on its financial condition or results of operations.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company will seek the required stockholder approval to consider and
ratify the sale of the Canadian subsidiary shortly.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 4.1 Share Purchase Agreement by and among the Company, the
Canadian Subsidiary and 1412531 Ontario Inc., an Ontario
corporation, dated as of June 26, 2000 (filed as Exhibit 10.1
to the Company's Report on Form 8-K filed on August 4, 2000
and hereby incorporated by reference).
Exhibit 4.2 Promissory Note given by the Purchaser to the Company in the
principal amount of $718,850.00 (filed as Exhibit 10.2 to the
Company's Report on Form 8-K filed on August 4, 2000 and
hereby incorporated by reference).
Exhibit 4.3 Guarantee of Paul Dutton, Max Hahne and the Canadian
Subsidiary dated as of June 26,2000 (filed as Exhibit 10.3 to
the Company's Report on Form 8-K filed on August 4, 2000 and
hereby incorporated by reference).
Exhibit 4.4 General Security Agreement issued by the Canadian Subsidiary
dated as of June 26, 2000 (filed as Exhibit 10.4 to the
Company's Report on Form 8-K filed on August 4, 2000 and
hereby incorporated by reference).
Exhibit 27* Financial Data Schedule
--------------------------
* Filed herewith
14
<PAGE>
(b) Reports Filed on Form 8-K
On August 4, 2000, the Company filed a Report on Form 8-K dated August
3, 2000 describing the disposition of the Canadian Subsidiary and other
recent developments.
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<PAGE>
SIGNATURES
Pursuant to the registration requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereto duly authorized.
DATE: AUGUST 14, 2000 BY: /s/ John G. Simmonds
----------------------------
John G. Simmonds
CEO / Director
(principal executive officer)
DATE: AUGUST 14, 2000 BY: /s/ Gary N. Hokkanen
----------------------------
Gary N. Hokkanen
Chief Financial Officer,
(principal financial officer)
16
