SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended August 31, 1999
E-PAWN.COM, INC
(Exact Name of Registrant as Specified in Its Charter)
NEVADA 87-0435741 3-2533-LA
State or Other Jurisdiction I.R.S. Employer Commission File Number
of Incorporation
Merrill Lynch Tower 2855
University Drive, Suite 200
Coral Springs, Florida 33065
Tel. 954-575-7296
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(Address of Principal Executive Offices)
WASATCH INTERNATIONAL CORP.
1301 N. Congress Avenue, Suite 135, Boynton Beach, Florida 33426
(Former Name and Address)
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Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to section 12(g) of the Act: Common Stock, par
value $.001 per share
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act 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 such filing requirements for
the past 90 days. Yes No X
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 38,433,820 (August 31, 1999)
Transitional Small Business Disclosure Format : Yes X No : Model B of
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Form 1-A.
ii
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Part I
Item 1. Financial Statements.
E-PAWN.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
Consolidated Balance Sheet F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Cash Flows F-4
Notes to Financial Statements F-5 - F13
F-1
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E-PAWN.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
C0NSOLIDATED BALANCE SHEET
AUGUST 31, 1999
ASSETS
OTHER ASSETS
Investment in Carribean Holdings $ 493,029
Investment in Ethnic Broadcasting 1
Investment in Edwards / Wasatch LLC 1
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TOTAL OTHER ASSETS 493,031
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$ 493,031
==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 554,405
Due to affiliate 437,851
Note payable 160,000
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TOTAL CURRENT LIABILITIES 1,152,256
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STOCKHOLDERS' DEFICIT:
Preferred stock, $10 par value;
10,000,000 shares authorized;
no shares issued and outstanding -
Common stock, $.001 par value;
50,000,000 shares authorized;
38,433,820 shares issued and outstanding 38,434
Additional paid-in capital 7,491,198
Accumulated deficit (8,188,857)
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TOTAL STOCKHOLDERS' DEFICIT (659,225)
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$ 493,031
==========
See Notes to financial statements.
F-2
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E-PAWN.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31,
-----------------------------
1999 1998
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EXPENSES:
Selling, general, and administrative $ 42,498 90,000
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TOTAL EXPENSES 42,498 90,000
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Net loss applicable to common stock $ (42,498) $ (90,000)
============ ==============
Net loss per common share-basic
and diluted $ (0.00) $ (0.00)
============ ==============
Weighted average common shares
outstanding 38,433,820 38,249,037
============ ==============
See notes to financial statements.
F-3
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E-PAWN.COM, INC. AND SUBSIDIARY
(A Development Stage Company)
CONSOLDIATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31,
----------------------------
1999 1998
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CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (42,498) $ (90,000)
Change in assets and liabilities
Accounts payable and accrued expenses 42,498 40,000
Due to affiliate 15,000 15,000
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 15,000 (35,000)
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CASH FLOWS USED IN INVESTING ACTIVITIES
Advances to affiliates (15,000) (15,000)
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NET CASH USED IN INVESTING ACTIVITIES (15,000) (15,000)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Change in additional paid in capital - 49,000
Proceeds from issuance of common stock - 1,000
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NET CASH PROVIDED BY FINANCING ACTIVITIES - 50 000
------------- --------------
NET DECREASE IN CASH - -
CASH - Beginning of period - -
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CASH - end of period $ - $ -
============= ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
============= ===============
Income taxes $ - $ -
============= ===============
See notes to financial statements.
F-5
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E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
The consolidated balance sheet at August 31, 1999 and the consolidated
statements of operations and cash flows for the three months ended August 31,
1999 are unaudited but include all adjustments which in the opinion of
management, are necessary to the fair presentation of the financial position and
results of operations for the periods then ended. All such adjustments are of
normal recurring nature. The results of the operations for any interim period
are not necessarily indicative of results for a full fiscal year.
Note 1 - ORGANIZATION
E-Pawn.com, Inc. (the "Company") was incorporated in the State of
Nevada on November 4, 1985 as Java, Inc. The Company changed its name to Wasatch
International Corporation on September 27, 1995 and on February 28, 2000 changed
its name to E-Pawn.com, Inc. The Company's principal business activity is to
seek potential business ventures and assets, which may warrant investment or
purchase. Therefore, the Company has been a business development stage company
from inception.
On November 7, 1986, the Company issued shares of its common stock to
acquire Quazon Communications, Inc. In 1989, the Company ceased operations along
with the operations of its wholly owned subsidiary. On November 12, 1995, the
Company acquired all of the issued and outstanding common stock of Graffiti
Removal Systems, Inc. ("Graffiti"). Graffiti was incorporated on November 8,
1995 in the State of Utah. Graffiti's principal business is that of graffiti
removal and consulting. The Company has sold its subsidiary to its former
President in exchange for the recovery of expenses.
Effective September 25, 1996, the Company acquired all of the issued
and outstanding common stock of Caribbean Holdings International Corporation
("Caribbean") in exchange for 25,000,000 share of the Company's common stock.
Caribbean was incorporated in the State of Florida on December 27, 1995.
Caribbean was a partner in a joint venture engaged in the development and sale
of recreational property in the Bahamas. The acquisition of Caribbean has been
accounted for as a purchase, because a shareholder of Caribbean controlled the
Company after the acquisition. Accordingly, Caribbean has been treated as the
acquiring entity. There was no adjustment to the carrying value of the assets or
liabilities of the Company as a result of the acquisition.
On January 18, 2000, the majority stockholder of record consented to
amend the Articles of Incorporation to provide that the authorized share capital
shall be increased to a total of 500,000,000 shares of common stock at $0.001
par value and the creation of 100,000,000 shares of Class A Preferred Stock par
value $0.10 per share. Each share of Class A Preferred shall have 100 votes per
share.
On January 20, 2000, the Company's Board of Directors approved the
distribution of a stock dividend of shares of Caribbean on a share for share
basis. This action will cause the company to have no assets and limited
liabilities. On January 20, 2000, the Company's Board of Directors approved the
purchase of E-Pawn, Inc., a Florida corporation. The Company has agreed to pay
two hundred million dollars, payable entirely in stock of the Company. The
Company has agreed to value the common shares at one dollar per share and to
issue one hundred million shares of Common Stock and one hundred million share
of Class A Preferred Stock. The purchase price is subject to an appraisal as to
the value of E-Pawn, Inc. that will be acceptable to the Board of Directors.
F-5
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E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
Development Stage and Continued Existence
As of August 31, 1999, the activities of the Company and its
subsidiaries have had no revenues from operations. Accordingly, the Company is
considered to be in the development stage. In addition, the accompanying
consolidated financial statements have been prepared assuming the Company will
continue as a going concern. The Company has incurred only losses from
operations, which creates reservations about the Company's ability to continue
as a going concern. The recovery of assets and continuation of future operations
are dependent upon the Company's ability to obtain additional debt or equity
financing and its ability to generate revenues sufficient to continue pursuing
its business purposes. The Company is actively pursuing equity and debt
financing and acquisitions and investments to fund future operations and
acquisitions.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Principles of Consolidation- The accompanying consolidated financial
statements include the Company and its wholly owned subsidiary, Caribbean On
February 29, 2000 the Company distributed shares of Caribbean as a dividend to
its shareholders of record on February 28, 2000.
B. Earnings (Loss) Per Share - In February 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 128
("SFAS 128")" Earnings Per Share", which became effective for both interim and
annual financial statements for period ending after December 15, 1997. SFAS 128
requires a presentation of "Basic" and, where applicable, "Diluted" earnings per
share. Generally, Basic earnings per share is computed on only the weighted
average number of common shares actually outstanding during the period, and the
Diluted computation considers potential shares issuable upon exercise or
conversion of other outstanding instruments where dilution would result.
Furthermore, SFAS 128 requires the restatement of prior earnings per share to
conform to the new standard. The per share presentations in the accompanying
financial statements reflect the provisions of SFAS 128. Diluted earnings per
share is not being shown due to the fact that the years ended May 31, 1999, 1998
and 1997 show a net loss and the conversion of the preferred stock and common
stock outstanding during those years would be anti-dilutive.
C. Accounting Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles 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 revenues and expenses
during the reporting period.
Actual results could differ from those estimates.
D. Cash and Cash Equivalents - Cash equivalents consist of money market accounts
and commercial paper with an initial term of fewer than three months. For the
purposes of the statement of cash flows, the Company considers highly liquid
debt instruments with original maturities of three months or less to be cash
equivalents.
The Company considers all highly liquid investments with maturity of three
months or less when purchased to be cash equivalents.
F-6
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E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
E. Income Taxes - Pursuant to Statement of Financial Accounting Standards No.
109 ("SFAS 109") "Accounting for Income Taxes, the Company accounts for income
taxes under the liability method. Under the liability method, a deferred tax
asset or liability is determined based upon the tax effect of the differences
between the financial statement and tax basis of assets and liabilities as
measured by the enacted rates which will be in effect when these differences
reverse.
Through August 31, 1999, the Company and its subsidiaries have sustained
operating losses totaling approximately $8,188,857 that may be offset against
future taxable income through the year 2013. No tax benefit has been reported in
the consolidated financial statements since their realization cannot be assured.
A substantial amount of the carry forwards are subject to annual limitations
pursuant to the Internal Revenue Code which become effective when an "ownership
change," such as a change of control occurs. To the extent that such net
operating losses are not utilized in a particular year, such amounts become
available in increase the following year's limitation.
F. Property and Equipment - Property and equipment is carried at cost.
Depreciation is computed using the straight -line method over the useful lives
of the various assets.
NOTE 3 - RECEIVABLE
In July 1996, the Company submitted a bid proposal to the U.S.
Bankruptcy Court in Florida in an effort to purchase all the assets of Palm
Beach Cruise Lines, Inc. ("Palm Beach"). As part of that acquisition proposal,
the Company advanced $312,000 to Palm Beach as Debtor-in-Possession financing.
The Company was unsuccessful in its bid proposal. As part of the plan of
reorganization of the ultimate buyer of Palm Beach, the U.S. Bankruptcy Court in
Florida ordered that the Company be repaid the $312,000 no later than scheduled
closing of the plan of reorganization, January 18, 1997. In February 1997, the
Company sold its interest in the $312,000 receivable for $200,000 and the
forgiveness of $100,000 owed to an affiliate of the Company's principal
shareholder. The Company collected the $200,000. Accordingly, the accompanying
consolidated financial statements thus reflect collection of the receivable. The
offset against contributions of an affiliate of the Company's primary
shareholder, and the $12,000 differential has been treated as a loss on
disposition of an asset on the current financial statement.
NOTE 4 - INVESTMENT IN KIWI
The Company advanced funds in the form Debtor In Possession ("DIP")
financing to Kiwi International Airlines of Newark, N.J. ("Kiwi"), an air
carrier that had filed for reorganization pursuant to Chapter 11 of the
Bankruptcy Code. The Company, in October of 1996, agreed to provide a total of
$1,000,000 in DIP financing to Kiwi. In November of 1996, the Company along with
a Baltimore individual, (hereinafter referred to as "Edwards") agreed to form a
Partnership Edwards-Wasatch Enterprises (hereinafter "EWE") to which the Company
assigned its right to provide Kiwi the DIP financing. Pursuant to the agreement
(the "EWE Agreement"), Edwards agreed to loan up to $1,000,000 as required to
fund Kiwi operations, and the Company agreed to provide up to an additional
$1,000,000. (As of the date of the EWE Agreement, the Company had provided Kiwi
with $100,000 of the DIP financing.) The Company's assignment of its right to
provide the DIP financing to Kiwi was approved by the Bankruptcy Court and on
that date the Company was in default of its financing obligations to Kiwi, which
default the Court waived in the order. Two orders were entered by the Bankruptcy
Court at
F-7
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E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
subsequent hearings which resulted in an increase in the DIP financing to a
total of $9,500,000 consisting of $6,000,000 in cash and $3,500,000 million in
the form of letters of credit.
The EWE Agreement has been amended on two occasions, from November 1996
the partnership was owned 41% by the Company, and the balance Charles Edwards.
The Company had an option to acquire all of EWE by converting the interest into
shares of the stock of the Company which shares were to be convertible into
shares of Kiwi. The conversion was to be based on the value of Wasatch, which
value was to be determined upon reliance on an appraisal of its land in the
Bahamas. During this period, Edwards had advanced approximately $4,280,000 in
cash and $3,159,000 in letters of credit to EWE, while the Company had advanced
approximately $1,450,000 in cash. All of the funds contributed to EWE were used
to finance Kiwi.
The former president of the Company, Joseph Logan Jr., executed an
agreement with EWE and Edwards placing the Company's claim to $1,450,000 in a
subordinated position to that of EWE and as a junior claim behind approximately
$16,000,000 of additional financing provided by Edwards and or EWE, thus
significantly impairing the company's ability to recover the $1,450,000. Upon
the resignation of Joseph Logan, as President and Director, the Company entered
into an agreement with Aviation Holdings, Inc. to exchange the Company's claim
in the sum of approximately $1,450,000 plus an amount of up to $250,000 to which
the Company would be entitled to as a break-up fee in the event that Kiwi was
not acquired by the Company for 333,000 shares of common stock of Aviation
Holdings, Inc., a public Company traded over the counter. To date, the shares of
Aviation Holdings, Inc have not been delivered to the Company despite demand.
Kiwi has received a order for relief under Chapter 7 of Bankruptcy Code, and the
Company is reviewing with its legal counsel its options for recovery of its
damages.
NOTE 5 - JOINT VENTURE NET PROFIT ADVANCES
On July 10, 1996, the Company's wholly owned subsidiary, Caribbean,
entered into a joint venture agreement with two individuals previously
unaffiliated with the Company or any of its subsidiaries to, develop, lease and
sell real estate located in the Bahamas beneficially owned by those individuals.
These individuals are the heirs to an estate, which is in the process of being
probated, that own the real estate. The agreement provides for net profits to be
shared by Caribbean and the two individuals. The agreement also stipulates that
advance payments are to be made to the two individuals toward their share of
future net profits derived from the real estate associated with the joint
venture. Pursuant to the agreement, the two individuals were paid $100,000
initially and $5,000 each month, until the estate has been completely probated.
Through May 31,1997, a total of $154,000 of advances toward joint venture net
profit have been paid to the two individuals. On May 31, 1998, a total of
$404,000 of advances toward joint venture net profit have been paid to the two
individuals. Through May 31, 1999, an additional $60,000 of advances toward
joint venture net profit have been paid to the two individuals. Through August
1999 an additional amount of $15,000 was advanced pursuant to the joint venture
agreement. In September 1999, the Company became aware that the Joint Venture
Partners had entered into agreements with third parties and had accepted
advances from such parties in violation of the
F-8
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E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
agreement. The Company has therefore suspended payment of advances under the
agreement, and the Joint Venture partners have claimed a default by Caribbean of
the agreement. (See Note 10, "Subsequent Events" for further explanation).
NOTE 6 - DUE TO AFFILIATE
Its majority stockholder, LaSalle Group, Ltd.("LaSalle"), has
financially supported the Company, and the aggregate debt of the Company to
LaSalle through May 31, 1999 is $422,851 and $437,851 through August 31, 1999.
In January 2000, the Company issued ten million shares to compensate the
stockholder for its advances to the Company, thereby discharging all of the
Company's debt and obligations to LaSalle as of January 31, 2000.
NOTE 7 - STOCKHOLDERS' EQUITY
A. Common Stock-The Company amended its Articles of Incorporation on January
18, 2000 to increase the authorized common stock from 50,000,000 authorized
to 500,000,000 authorized, $0.001 par value.
B. Preferred Stock-The Company was authorized to issue a maximum of 10,000,000
preferred shares, $10 par value.
Class A, Preferred Stock-January 18, 2000, the Company was authorized to
issue a maximum of 100,000,000 shares of Class A, Preferred Stock, par
value of $0.10 per share. Each share of Class A Preferred Stock shall have
100 votes per share and be entitled to preference over the common stock
holders in the event of a liquidation of the Company.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
On October 1, 1996, the Company entered into an employment agreement
with its President, Joseph Logan, for a period of five years. The agreement
provides for annual compensation of $250,000 with annual increases of $10,000.
On his resignation in 1997, Mr. Logan and the Company settled all claims for
compensation by agreeing to issue 250,000 shares of the company's common stock
in lieu of compensation. These shares were never issued because Mr. Logan made a
commitment to an third party shareholder to deliver the shares to the third
party, which Joe Logan failed to timely perform, and the Company's majority
stockholder undertook to deliver the shares directly to the third party on
Joseph Logan's behalf. In January 2000, LaSalle waived claim to the 250,000
shares in connection with the settlement of all claims against the Company.
Effective January 1, 1997, the Company entered into an employment
agreement with Mr. Eli Leibowitz to serve as Chief Financial Officer for a
period of five years. The agreement provides for annual compensation of $150,000
with annual increases of $10,000 and other benefits and bonuses.. Mr. Leibowitz
agreed to postpone payment of his salary until the Company has obtained
sufficient operational funding. Upon resignation of Mr. Joseph Logan in October
1997, Mr. Leibowitz became the President of the Company. During January 2000,
Mr. Leibowitz agreed to accept 1,500,000 shares of common stock in lieu of all
compensation owed to him through January 31, 2000.
In October 1996, in connection with the Wasatch International
Corporation Stock Plan and the
F-9
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E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
filing of the related registration statement, the Company entered into various
consulting agreements with officers, directors and consultants wherein those
individuals are to provide services to the Company for a period of one year with
the shares of common stock issued as sole compensation.
As discussed in Notes 1 and 8, the Company issued 25,000,000 share of
common stock to acquire all of the issued and outstanding common stock of
Caribbean. On February 29, 2000, the Company distributed to shareholders of
record all of the shares of Caribbean held by the Company in the form of a stock
dividend of one share of Caribbean for each share of the Company held on the
record date. As of February 29, 2000, the Company no longer has any investment
or interest in Caribbean.
Massachusetts Asset Financing Corp. ("MAFC"), a Massachusetts
Corporation, obtained a default judgement against the Company in the sum of
approximately $10,000 together with $287.70 in interest and $126.00 in costs
arising from a claim for fees for due diligence work allegedly performed by MAFC
for a loan of $500,000 which MAFC represented it would provide to the Company.
The Company believes that this claim has been satisfied as the result of the
garnishment of $13,000 from the bank account of John Frohling, legal counsel to
the Company. The Company has been unable to obtain written release and
satisfaction of judgement from the judgment creditor. The Company may have to
resort to legal action to remove the judgement from the Court Record. The
Company does not consider this matter to be one that will have a material effect
on the Company.
The Company has settled a lawsuit brought by an individual in the
Orlando District Court seeking $70,000 for the purchase price and approximately
$200,000 in damages in connection with the proposed purchase of a start up
Internet advertising company made in November 1996. The Company had previously
filed an answer and defended the action; however, in the interest of resolving
all outstanding litigation and avoiding the cost of defense, the Company agreed
to settle the action in March 2000 for 100,000 shares of restricted common
stock, in exchange for a dismissal of the claim, release of all liability and
delivery to the Company of certain computer equipment that the Company will use
in its newly acquired Internet businesses.
In February 1997, the Company delivered 4,000,000 shares of common
stock to Dr. Charles Edwards as partial consideration for his agreement to merge
Wasatch Edwards LLC into the Company. Dr. Edwards elected not to conclude the
merger and wholly failed to perform, which caused the Company significant
damages. The Company has demanded the return of all shares, and the Company has
issued a stop transfer order to the transfer agent. The Company may commence
litigation against Dr. Edwards and others in order to cancel the shares and to
recover damages suffered by the Company. In addition, the Company issued 500,000
shares to Dr. Charles Edwards under a consulting contract under which he was to
perform certain services. No work was ever performed, and the Company may seek
recovery of the shares or damages.
In June 1998, the Company settled a $500,000 judgment held by Hans
Kooring in exchange for issuing 500,000 additional shares of its common stock to
Hans Kooring and 500,000 shares to attorney Jay Salyer. The claim arose from a
dispute in connection with $500,000 Regulation S stock purchase undertaken in
December 1996 with the Company in which the company issued 500,000 shares to
Hans Kooring. At the conclusion of the transactions, Hans Kooring received a
total of 1,000,000 shares and Jay Salyer received 500,000 shares.
The Company has been subject of civil litigation arising from a loan
advanced to the Company in
F-10
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E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
April 1997 by two individuals. This claim has been settled in February 2000 in
exchange for a cash payment of approximately $20,000 and delivery of 200,000
shares of common stock of the Company by a third party.
The Company has settled a claim from an investor who purchased
restricted common stock of the Company from a third party. The settlement
agreement provides for the Company to deliver to the claimant, Solar Lane
Productions Inc. 70,000 shares of restricted common stock of Caribbean Holdings
International Corp. and 90,000 shares of restricted common stock of the Company
by no later than March 3, 2000, and failing which the claimant will be entitled
to obtain judgement against the Company in the sum of $300,000 plus costs. The
Company anticipates no difficulty in delivering the shares required in terms of
the settlement agreement by the stipulated date of March 3, 2000, and the claim
of Solar Lane Productions, Inc. will be extinguished in full and final
settlement. On March 8, 2000, a motion to dismiss was filed in this action.
NOTE 9 - SUBSEQUENT EVENTS
On January 18, 2000, LaSalle Group Ltd. acquired ten million common
shares from the Company in exchange for the forgiveness of debt plus interest
which LaSalle had provided to finance the Kiwi Airlines transaction which has
been written off because of the bankruptcy of Kiwi Airlines. In addition,
LaSalle covered the ongoing expenses of the Company through January 2000. This
issuance of stock resulted in LaSalle controlling approximately 52% of the total
issued and outstanding common stock.
On January 20, 2000, the LaSalle, a Cayman Island company, advised the
Company that it had rescinded a Stock Purchase Agreement by which LaSalle had
agreed to sell ten million shares of common stock to Aviation Holding Inc., a
Florida Company affiliated with Mr. Joe Logan the Company's former President.
On January 20, 2000, the board of directors approved the acquisition of
E-Pawn, Inc., a Florida corporation, from two companies, namely, Swiss Arctic
Traders Ltd, a Bahamian company and affiliate of the Company's majority
stockholder, LaSalle, and Fortuna Holdings Limited, a Bahamian company. E- Pawn,
Inc. is multi-faceted Internet portal, website designer, and software developer
which operates the "e-pawn.com" and "ubuynetwork" websites. The terms of the
transaction are provided in the Acquisition Agreement dated on January 27, 2000,
and the transaction will be effective on February 28, 2000. A copy of the
Acquisition Agreement is attached as an exhibit to the Form 8-K filed on April
18, 2000.
On completion of the proposed acquisition, a change of control will
take place because the two acquiring companies, Swiss Arctic Traders, Ltd. and
Fortuna Holdings Limited., will each acquire, respectively, fifty million
(50,000,000) shares of restricted series A preferred stock which grants the
holders the power to elect a majority of the directors to the board. The one
hundred million shares of series A preferred issued under the Acquisition
Agreement represents all of the authorized series A preferred stock. The Company
will also issue fifty million (50,000,000) shares of the Company's restricted
common stock to each of the companies that is transferring together all of the
E-Pawn, Inc. stock, and the aggregate of the shares issued in connection with
the acquisition will represent over two-thirds of the issued and outstanding
shares of common stock of the Company. The stock was issued at a value of $1.00
per share giving the transaction a value of $200 million.
F-11
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
The closing of the E-Pawn, Inc. stock purchase transaction is subject
to receipt of an independent appraisal of the value of E-Pawn, Inc. and its
business and assets compared to similar companies, acceptable to the Board of
Directors and the auditors of the Company for the purpose of carrying the assets
on the balance sheet of the Company.
On January 28, 2000, the Company approved the distribution to all of
the Company's shareholders of record on January 28, 2000 (extended to February
28, 2000 pursuant to NASD rules) of a stock dividend of one share of Caribbean,
a wholly owned subsidiary of the Company, for each share of the Company held as
of the record date. Caribbean assumed liabilities in the sum of approximately
$160,000 plus interest due to DBLA Associates. The Company has been released of
its obligations and guarantees to DBLA Associates, and the Company has no
further liability to DBLA Associates in connection with this debt. Caribbean has
claims through its joint venture with Merrill and Raymond MacDonald to an
interest in approximately 15,000 acres of land in the Bahamas. The rights of
Caribbean were retained by it in full when the stock of this company was
distributed to the shareholders of the Company pursuant to the stock dividend.
On January 30, 2000, the majority stockholder by written action taken,
also consented to an amendment to the articles of incorporation to reverse split
the common stock of the company on a one for 200 share basis effective January
30, 2000. Subject to the ten-day notice Rule of NASDAQ the effected date of the
stock split may be adjusted to be a date as set by the NASDAQ Bulletin Board.
This date was extended to February 28, 2000. On February 27, 2000, the Company
announced that its Board had rescinded a previously announced 200 for 1 reverse
stock split because this change in the capital structure would not be conducive
to an orderly market in view of the market changes which arose after the
announcement of the acquisition of E-Pawn, Inc., an Internet portal involving
e-commerce and online auction sites. The consent further provided for an
amendment to the Articles of Incorporation to change the capital structure of
the Company to provide that "the Corporation shall have the authority to issue
500,000,000 shares of common stock $0.001 par value and 100,000,000 shares of
Class A Preferred Stock, par value $0.10 per share. Each share of Class A
Preferred stock shall have 100 votes per share. And shall be entitled to
preference over the common stock holders in the event of a liquidation of the
company. Fully paid stock of this corporation shall not be liable for further
call or assessment."
The name of the Company was also changed by majority consent to
E-Pawn.com Inc. and a certified copy of the amendment to the Company's Articles
of Incorporation, as filed with the Secretary of State for the State of Nevada
is attached as an exhibit to the Form 8-K filed on April 18, 2000. On February
29, 2000, the Company announced the change of its name to E-Pawn.com, Inc., and
the designation of a new trading symbol "EPWN."
On February 24, 2000, the Company issued a press release announcing the
global expansion of E-Pawn.com, Inc. by granting an exclusive development and
marketing rights license for its online auction and barter website software to
Exchequer Investments Ltd., a privately held UK company, which will develop and
operate E-Pawn.com and Ubuynetwork programs under the Company's Global Partner
Program. Exchequer Investments will open the market for E-Pawn.com programs,
products, and systems in several European market places as a strategic local
partner that will provide working capital for the launch, local expertise and
management. The initial launch will be in the United Kingdom under the domain
name E-Pawn.co.uk, and the company shall be E-Pawn.co.uk PLC.
On March 5, 2000, the Company announced that it would distribute
common stock of its
F-12
<PAGE>
E-PAWN.COM, INC. AND SUBSIDIARY
(FORMERLY-WASATCH INTERNATIONAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
THREE MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
subsidiary, Ubuynetwork.com, Inc., as a special dividend to shareholders of
record as of April 18, 2000, on a 2 shares of Ubuynetwork.com Inc. for each
share of the Company held on the record date.
On March 9, 2000, the Company announced that it had entered into an
agreement to acquire Home Realty, a Florida full service real estate company,
established in 1994.
On March 14, 2000, the Company announced that it had formed a strategic
alliance with CeleXx Corporation (OTCBB: CLXX) under the terms of which CeleXx
will provide management services, IT engineering and support service, website
design and website hosting services on a fee basis. In addition, the agreement
provides that the Company shall purchase one million shares of CeleXx common
stock at $5 per share. On March 19, 2000, the Company announced that CeleXx
Corporation through a subsidiary, Computer Marketplace, Inc., will administer
and host the Company's Internet based business sites.
On March 15, 2000, the Company announced that it will distribute shares
of its subsidiary, Ubuyhomes.com, Inc., as a special dividend to the Company's
shareholders of record as of May 1, 2000. The shareholders of the Company on the
record date will receive two shares of Ubuyhomes.com, Inc. for each E-Pawn.com,
Inc common share held.
On March 19, 2000, the Company announced that it had entered into a
letter of intent to acquire a 15 year old, jewelry manufacturer, O'Con
Enterprise, Inc. of Hollywood, Florida.
On March 29, 2000, the Company announced it had reached an agreement to
form a joint venture with Silverhawk Development Company and Yunan Tobacco
Company to market timeshares under the Sun Vacation Club brand name via the
Internet using the UBUYTIMESHARE.COM systems. The joint venture will initially
market 65 hotel properties located in China and owned by Yunan Tobacco Company.
F-13
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
The Private Securities Reform Act of 1995 provides a "safe harbor" for
forward-looking statements. Certain information included in this report on Form
10-QSB contains statements that are forward looking, such as those relating to
consummation of the transaction, anticipated future revenues of the company and
success of current product offerings. Such forward looking information involves
important risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may differ materially from
those expressed in, any forward looking statements.
As of August 31, 1999, the Company has had no revenues from operations.
Accordingly, the Company is considered to be in the development stage. In
addition, the accompanying consolidated financial statements have been prepared
assuming the Company will continue as a going concern. The Company has incurred
losses from operations, which creates reservations about the Company's ability
to continue as a going concern. The recovery of assets and continuation of
future operations are dependent upon the Company's ability to obtain additional
debt or equity financing and its ability to generate revenues sufficient to
continue pursuing its business purposes. The Company is actively pursuing equity
and debt financing and acquisitions and investments to fund future operations
and acquisitions.
Part II
Item 1. Legal Proceedings.
Not Applicable.
Item 2. Changes in Securities.
Not Applicable.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security-Holders.
1
<PAGE>
Not Applicable.
Item 5. Other Information.
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
No Form 8-K was filed during the last quarter covered by this Report.
However, the Company filed a report on Form 8-K on April 19, 2000 which covered
matters included in this Report and included Exhibits which relate to matters
covered by this Report on Form 10-QSB.
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.
E-PAWN.COM, INC.
(Formerly Wasatch International Corporation)
Date April 24, 2000 By /s/Eli Leibowitz
-------------- ----------------------------------------
Eli Leibowitz, President, Director and
Chief Financial Officer
Date April 24, 2000 By /s/Clinton Greyling
-------------- ----------------------------------------
Clinton Greyling, Vice President and
Director
2
<PAGE>
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