SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
____________________
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from _____________ to _____________
Commission File Number: 1-12765
XPEDIAN, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida 59-2720096
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6230 Fairview Road, Suite 102, Charlotte, North Carolina 28210
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code: (704) 364-2066
Indicate by check [ ] whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such requirements for the past 90 days.
[X] [ ]
Yes No
The Registrant had 36,424,979 shares of Common Stock,
par value $.0001, issued and outstanding
as of close of business on March 31, 2000
<PAGE>
XPEDIAN, INC.
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
CONTENTS
PAGE
----
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets (unaudited) F-1
Consolidated Statements of Loss (unaudited) F-2
Consolidated Statements of Stockholders'
Equity (Deficiency) in Assets (unaudited) F-3
Consolidated Statements of Cash Flows (unaudited) F-4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-5
<PAGE>
XPEDIAN, INC.
Balance Sheet - Unaudited
March 31, 2000
ASSETS
CURRENT ASSETS
Cash in Bank $ 582,166
Common Stock Held In Escrow 30
Prepaid Rent 7,976
------------
TOTAL CURRENT ASSETS 590,172
PROPERTY & EQUIPMENT
Automobile 14,990
OTHER ASSETS
Software Licensing Agreement 10,561,800
------------
TOTAL ASSETS $ 11,166,962
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 27,725
Taxes Payable 3,318
Loan from Related Party 65,136
------------
TOTAL CURRENT LIABILITIES 96,179
SHAREHOLDERS' EQUITY
Common Stock, $.0001 par value, 100,000,000
shares authorized and 36,424,979 shares
issued and outstanding 3,642
Additional paid-in capital 23,154,751
Accumulated Deficit (12,087,550)
Treasury Stock, at cost (60)
Stock Subscription Receivable, less
valuation allowance of $435,571 -
------------
TOTAL STOCKHOLDERS' EQUITY 11,070,783
------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 11,166,962
============
(The accompanying notes are an integral part of this financial statement)
<PAGE> F-1
XPEDIAN, INC.
Statements of Loss - Unaudited
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
March March March March
31, 2000 31, 1999 31, 2000 31, 1999
------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
EXPENSES
Consulting, Professional and
Administrative Fees $ (2,626,575) $ (417,974) $ (1,431,807) $ (16,334)
General and Administrative (67,766) (103,506) (36,271) (1,031)
Travel & Entertainment (11,653) (1,290) (9,953) (815)
------------ ----------- ------------ ------------
TOTAL EXPENSES (2,705,994) (522,770) (1,478,031) (18,180)
INTEREST INCOME - 52,707 - 17,715
------------ ----------- ------------ ------------
INCOME (LOSS) FROM CONTINUING
OPERATIONS, BEFORE INCOME
TAX BENEFIT (2,705,994) (470,063) (1,478,031) (465)
Income Tax Benefit - - - -
------------ ----------- ------------ ------------
LOSS FROM CONTINUING OPERATIONS,
NET OF INCOME TAX BENEFIT (2,705,994) (470,063) (1,478,031) (465)
DISCONTINUED OPERATIONS
Gain (Loss) from operations of
discontinued subsidiary - (26,409) - 90,265
------------ ----------- ------------ ------------
Income Tax Benefit - - - -
------------ ----------- ------------ ------------
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS, NET OF INCOME TAX
BENEFIT - (26,409) - 90,265
------------ ----------- ------------ ------------
Net Income ( Loss) $ (2,705,994) $ (496,472) $ (1,478,031) $ 89,800
============ =========== ============ ============
Basic and Diluted Weighted
Average Shares Outstanding 29,557,016 8,082,630 32,925,089 8,214,017
Basic Net Income (Loss) Per Share,
Basic and Diluted From Continuing
Operations $ (0.09) $ (0.06) $ (0.04) $ (0.00)
Basic Net Income (Loss) Per Share,
Basic and Diluted From
Discontinued Operations $ - $ (0.00) $ - $ 0.01
Basic Net Income (Loss) Per Share,
Basic and Diluted $ (0.09) $ (0.06) $ (0.04) $ 0.01
</TABLE>
(The accompanying notes are an integral part of this financial statement.)
<PAGE> F-2
XPEDIAN, INC.
Statements of Stockholders' Equity (Deficiency) in Assets
<TABLE>
<CAPTION>
Total
Stockholders'
Common Additional Stock Equity
Number Stock Paid-in Accumulated Treasury Subscription (Deficiency)
of Shares Amount Capital Deficit Stock Receivable in Assets
---------- -------- ----------- ------------ ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance - June 30, 1998 - Audited 6,600,331 $ 660 $ 8,761,242 $ (8,424,820) $ (60) $ (414,156) $ (77,134)
Issuance of common stock for services 1,500,000 150 449,850 - - - 450,000
Payments received on stock for
subscription receivable - - - - - 50,000 50,000
Issuance of common stock 350,000 35 24,965 - - - 25,000
Accrued interest on subscriptions
receivable - - - - - (71,415) (71,415)
Allowance for stock subscriptions
receivable - - - - - 435,571 435,571
Net Loss for the year ended June 30, 1999 - - - (956,736) - - (956,736)
---------- -------- ----------- ------------- ------- ----------- ----------
Balance - June 30, 1999 - Audited 8,450,331 $ 845 $ 9,236,057 $ (9,381,556) $ (60) $ - $ (144,714)
Issuance of common stock for services 1,650,000 165 824,835 - - - 825,000
Issuance of common stock for license
agreement 21,000,000 2,100 10,544,700 - - - 10,546,800
Issuance of common stock for services 1,110,000 111 322,389 - - - 322,500
Issuance of common stock for services 3,095,531 309 1,386,882 - - - 1,387,191
Issuance of common stock 1,119,117 112 839,888 - - - 840,000
Net Loss for the nine months ended
March 31, 2000 - Unaudited - - - (2,705,994) - - (2,705,994)
---------- -------- ----------- ------------- ------- ----------- ----------
Balance - March 31, 2000 - Unaudited 36,424,979 $ 3,642 $23,154,751 $ (12,087,550) $ (60) $ - $11,070,783
========== ======== =========== ============= ======= =========== ===========
</TABLE>
(The accompanying notes are an integral part of this financial statement.)
<PAGE> F-3
XPEDIAN, INC.
Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Nine Months
Ended Ended
March March
31, 2000 31, 1999
(Unaudited) (Unaudited)
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (2,705,994) $ (496,472)
Adjustments to reconcile net loss to
net cash provided
(used) by operating activities:
Common Stock Issued for Services 2,534,691 450,000
Increase in Prepaid Rent (7,976) -
Decrease in Accounts Payable (54,605) (576)
Decrease in Net Curretnt Assets of
Discontinued Operations - 57,821
Decrease in Net Curretnt Liabilities
of Discontinued Operations - (34,913)
Increase in Receivables - (8,500)
Increase in Loans - 1,000
------------ ------------
Net Cash used by operating activities (233,884) (31,640)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 840,000 25,000
Loan from related party 90,667 -
Loan payback to related party (86,531) -
Payments on Stock Subscription Receivable - (2,707)
------------ ------------
Net cash provided by financing activities 844,136 22,293
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Software License Agreement (15,000) -
Acquisition of Fixed Assets (14,990) -
------------ ------------
Net cash provided by financing activities (29,990) -
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 580,262 (9,347)
CASH AND EQUIVALENTS - BEGINNING 1,904 9,899
------------ ------------
CASH AND EQUIVALENTS - ENDING $ 582,166 $ 552
============ ============
SUPPLEMENTAL DISCLOSURES:
Common stock issued for Software License
Agreement $ 10,546,800 $ -
============ ============
Common stock issued for services rendered $ 2,534,691 $ 450,000
============ ============
</TABLE>
(The accompanying notes are an integral part of this financial statement.)
<PAGE> F-4
XPEDIAN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000 and 1999
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information, the instructions to Form 10-QSB and Item 310
(b) of Regulation SB. 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 accruals) considered necessary for fair
presentation have been included. 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 June 30, 1999 as filed with the
Securities and Exchange Commission.
NOTE B - LOSS PER SHARE
Basic and diluted net loss per share was computed based on the
weighted average number of shares of common stock outstanding during
the period.
NOTE C - RECENT DEVELOPMENTS
On August 2, 1999, the Company consummated a licensing arrangement
(the "License") with Commerce Capital Group, L.L.C., a South Carolina limited
liability company ("CCG") to market and sell CCG's proprietary "Personal
Estate Plan T" (the "PEP") which allows professional and individual users to
conduct estate planning and financial planning through use of the Internet.
The Company paid CCG a license fee of 21 million shares of the Company's
unregistered common stock. Pursuant to the License, the Company was given:
(i) a right to market the PEP system to accountants, stock brokers, insurance
companies and brokers, lawyers, investment advisors, financial planners
and human resource departments (the "Customers"); (ii) a non-exclusive right
to use the logos and names related to the PEP system which will be provided by
CCG to the Company, including Personal Estate Plan T, Estate Legal Services T,
and ELS T; (iii) the right to obtain any current and future amendments, of
sales, usage, limited technical, instructional and similar documentation and
literature relating to the PEP T system; and (iv) the right to receive any
income generated from Customers who sigh up and use the PEP T system. Under
the License, the Company's initial geographic territory is limited to Florida,
although the Company has the option to expand its territory Alabama, Georgia,
Mississippi, and Tennessee by paying additional license fees in the form of
shares of the Company's common stock.
On August 2, 1999, the Company changed its corporate headquarters to
6230 Fairview Road, Suite 102, Charlotte, North Carolina 28210 and changed its
telephone number to 704-364-2066. At the same time, the following officers
and directors were appointed: (i) Laurence F. Spears, as Chairman of the
Company's Board of Directors; (ii) Dale K. Chapman, as President, Secretary,
Treasurer and Director; and (iii) Eric F. Heintschel, as Director. Gary N.
Dixon, Sr., who was the immediately preceding Chairman and a director, resigned
in both capacities and was appointed to serve on a newly established advisory
committee for the Company. Laurence F. Spears resigned as Chairman of the
Company's Board of Directors for personal and professional reasons on October
11, 1999 and James H. Feeney was appointed as a director on October 18, 1999.
James R. Kelly was appointed as Director on February 11, 2000.
On September 22, 1999, the Company announced its intent to begin doing
business under the name "Xpedian.com, Inc." On January 25, 2000 the Company
received the approval of the majority shareholder to formally change the
name of the Company to Xpedian, Inc. After verifying with legal counsel that
all required procedures had been followed, the Company formally announced the
<PAGE> 1
changing of the Company name to Xpedian, Inc., and initiated processes
necessary to change the Company's ticker symbol to XPDN.
On November 21, 1999 the Company completed a marketing agreement
(the "Agreement) with MCC Companies, a Florida based insurance wholesaler
("MCC"). According to the Agreement, MCC will vigorously promote the
Company's estate planning products to its national distribution network of
over 18,000 independent insurance brokers and financial and estate planners.
MCC will be responsible for all costs associated with their sales efforts,
in exchange for which the Company will pay MCC a commission on sales to MCC
customers.
In February 2000 the Company announced its intent to expand the
Company's stock market listings to include one of the major European Markets.
On February 18, 2000 the Company signed agreements with a European Financial
Markets consultant to facilitate the listing of the Company's stock on a major
European stock exchange, and to analyze, translate and present the Company's
business plans to the European markets. The Company's application for listing
was accepted by the Hamburg Exchange on April 10, 2000, with formal
announcement of the listing following later that day.
On March 28, 2000 the Company signed agreements with MCC, to purchase
SE MCC of Orlando, Inc. SE MCC of Orlando, Inc. is a full-line health, life
and disability insurance wholesale brokerage office, which was established
in 1999 to service Orlando and surrounding region. During their first year of
operation, this office generated over $5,000,000 in gross commissions. In
support of the Orlando office's continuing sales growth, and as part of the
contract to purchase this office, Xpedian, Inc. negotiated commission
increases, which will improve profitability for future sales. The Orlando
office will also receive all wholesale life insurance commissions from MCC
policies that are generated by, or associated with products sold through
Xpedian's Insurance Trust and Estate Planning operations. Any income, revenues
and assets from the purchase of SE MCC of Orlando, will be recorded in fourth
quarter ending June 30, 2000.
During March 2000 the Company received $590,000 in funding, through
the direct sale of restricted equity stock, to several qualified private
investors. According to the agreements, the Company issued restricted shares
at a 25% discount off of the average share price for the seven days preceding
the completion of the agreement. The investors also received guarantees from
the Company, that the issued shares would be given full piggy-back
registration rights when the Company conducts its next registration.
Also during March 2000 the Company received $250,000 in equity funding
when warrants issued previously in the year were exercised by the warrant
holder. The warrant entitled the holder to acquire 250,000 shares of the
Companies common stock at a price of one dollar ($1.00) per share.
On April 5, 2000 the company announced the launch and initial
registration for its first product InsTrust.com. InsTrust is the first of
several Business-to-Business websites and services that the company plans to
launch as part of their business plan to empower financial services
professionals to offer their clients total financial planning solutions.
InsTrust.com is a private production site through which financial
professionals can provide a quick, reliable, low-cost way to provide
Insurance Trust development and documentation services directly to their
clients, without having to bring in a third party. On May 2, 2000, the
Company announced that the InsTrust.com site was opened for full registration.
On April 21, 2000 the Company announced the debut of EstatePlanet.com,
it's premier B2B Estate Planning information portal. EstatePlanet is intended
to provide a needed resource for information covering all aspects of Estate
Planning, while also providing information and links to Xpedian's products.
EstatePlanet.com is a continually expanding information site that currently
includes detailed explanations and demonstrations of a complete array of
Estate Planning techniques, case sensitive benefit scenarios based upon various
consumer profiles, glossaries of Estate Planning terminology, Financial
Calculators, and access to Federal and State Tax Codes and printable forms.
On May 2, 2000 the Company announced both the hiring of several
experienced advertising consultants, and announced the kick-off of the
companies first print advertising campaign. The consultants have thus far
<PAGE> 2
designed two advertising campaigns/concepts for the Company. The initial
campaign is directly focused at the largest group of potential "immediate
users" of the InsTrust product, Insurance Agents and Estate Planners.
The full-page insert advertisements were placed in major trade journals for
those groups. These advertisements will continue through several phases as
the Company fine tunes its marketing programs. The second campaign has been
designed to appeal to a broader audience consisting of both financial
professionals and their clients. The use of the broader campaign is intended
to coincide with the expansion of the Company's product lines.
On May 15, 2000 the Company announced that the Board of Directors had
approved for the Company's management to pursue further implementation of the
Company's long-term business plan, by seeking the acquisition of a Federally
Chartered Bank. When acquired, the Company plans to operate the bank as a
"Net-Bank", offering on-line bank services to their customers. On-line bank
services will compliment the Company's current and future Estate Planning
and Insurance products, and will allow the Company to greatly expand the range
of services that they can provide financial professionals and their clients.
NOTE D - LICENSE VALUATION
The amounts expended in connection with the acquisition of the License
has been capitalized and will be amortized over its estimated useful life.
The Company acquired the License in exchange for 21,000,000 shares of
its common stock. For purposes of presentation in these financial statements
and notes thereto, the value assigned to the License was based on the average
per-share closing price of the Company's stock during the 30 days immediately
preceding the effective date of the License. Management will re-evaluate this
valuation prior to the end of the current fiscal year and, if necessary, adjust
its carrying value.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Forward - Looking Statements
This Quarterly Report on Form 10-QSB (the "Report") contains
forward-looking statements concerning, among other things, the Company's
expected future revenues, operations and expenditures, competitors or potential
competitors, and licensing and distribution activity. These forward-looking
statements are identified by the use of terms and phrases such as "anticipate,"
"believe," "could," "estimate," "expect," "intent," "may," "will," "plan,"
"predict," "predict," "potential," and similar terms and phrases, including
references to assumptions. These statements are contained in each part of
this report and in the documents incorporated by reference herein. These
forward-looking statements represent the expectations of the Company's
actual results could differ materially from those anticipated by the
forward-looking statements due to a number of factors, including; (I) limited
operating history; (ii) need for financing; (iii) dependence upon single
employee; (iv) reliance on single license; (v) compliance with law;
(vi) lack of sales; (vii) reliance of revenue growth upon economic conditions;
(viii) competition; (ix) control by majority shareholder; (x) absence of
dividends; (xi) changes in federal estate tax; (xii) government regulation
of the Internet; and the other risks and uncertainties described elsewhere
herein and in the Company's Annual Report on Form 10-KSB for the fiscal
year ended June 30, 1999 under the caption, "Factors Affecting Future Operating
Results" under Item 2. - "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The Company is under no obligation to revise or publicly release the
results of any revision to these forward-looking statements. Readers should
carefully review the risk factors described in other documents the Company
files from time to time with the Securities and Exchange Commission ("SEC").
The following discussion and analysis provides information which the
Company's management believes is relevant to an assessment and understanding
of the Company's results of operations and financial condition.
<PAGE> 3
This discussion should be read in conjunction with financial statements and
notes thereto appearing elsewhere herein.
Liquidity and Capital Resources
As of March 31, 2000, cash and cash equivalents were $ 582,166 as
compared with $ 121 at December 31, 1999 and $552 at March 31, 1999. The
Company reported losses for the quarter ended March 31, 2000 of $1,478,031.
Even though the Company began generating revenue in April 2000, it may
continue to incur operating losses until it has fully launched all of its
Internet estate planning businesses. The Company had working capital of
$ 485,987 at March 31, 2000 as compared to $(248,183) at December 31,
1999 and ($109.843) at March 31, 1999.
The Company has experienced significant losses from past operations.
The Company anticipates that it's websites and insurance activities will
begin producing revenue during the fiscal quarter ended June 30, 2000,
however it may continue to experience losses during the fiscal quarter ended
June 30, 2000 as it continues to develop and implement sales and advertising
strategies promoting the Company's financial services products. Management
anticipates that losses should decrease as time passes due to product sales
and resulting revenues. During the quarter ended March 31, 2000 the Company
acquired $ 8,000 in short-term loans from its principle officer, to finance
operations until arrangements for more substantial financing were completed
in March 2000.
The Company is funding its current expansion into domestic
business-to-business Internet businesses from funds that it derived from equity
financing with outside sources. As the Company begins to generate revenues,
it intends to use both operating revenues and external sources to fund future
expansion. However, there can be no assurance that outside financing will be
available or that future revenues will be generated in sufficient amounts or
that additional funds will not be required for the continued expansion of
operations. The Company intends to meet its short-term and long-term liquidity
needs through additional financing from outside sources. There can be no
assurance that the Company will achieve profitability or positive cash flow.
If the Company is not successful in raising sufficient funds, it may be
required to limit the scope of its proposed expansion into domestic business-
to-business internet services.
GENERAL
Near the end of fiscal year 1998, the Company changed its focus from
owning and operating casinos and related activities, to focus on domestic
opportunities in the Internet. Subsequently, in 1998 and 1999, the company
discontinued its operations in the casino and related activities, and began
an active search for domestic Internet opportunities. The Company sold its
final remaining casino operation in February 1999. On August 2, 1999 the
Company completed negotiations with Commerce Capital Group ("CCG") for the
rights to market and sell CCG's emerging line of Internet based financial
services products. On March 28, 2000 the Company completed agreements to
acquire a Wholesale Insurance Brokerage firm located in Orlando, Florda.
During the first two months of 1999 the Company had both operating
revenues and operating businesses. Thus the financial statements for the
quarter ended March 31, 1999 contain the revenues, gains and losses incurred
as a result of those operations and their subsequent sale during that quarter.
During the quarter ended March 31, 2000 the Company did not have
revenues from operations. As the result of the license agreement with CCG,
from January 1, 2000 to March 31, 2000 the company focused upon website
development, reorganization, audits, completing SEC filings on a timely basis,
acquiring financing, developing marketing and sales strategies, developing
the distribution pipelines necessary to successfully market its products,
and acquiring businesses that are a good fit with current products and the
long-term direction of the Company.
<PAGE> 4
RESULTS OF OPERATIONS
Quarter Ended March 31, 2000 Compared to Quarter Ended March 31, 1999
Net Revenues for both quarters remained at zero. Revenue collected
during the quarter ended March 31, 1999 was credited to the subsidiaries that
generated the revenue. When consolidated for the Company's financial
reporting, these revenues were offset by losses posted due to discontinued
casino operations.
Expenses for the quarter ended March 31, 2000 increased significantly.
The Company reported $18,180 in expenses during the quarter ended March 31,
1999 and reported expenses of $1,478,031 for the quarter ended March 31, 2000.
This increase is primarily the result of consulting fees, which were paid
with 2,080,000 shares of company stock in a disbursement made via an S-8
registration dated February 23, 2000. The majority of the Company's consulting
agreements are "long-term" agreements from which the company will accrue
benefit during both the current the current and following fiscal years.
Other Income for the quarter ended March 31, 2000 decreased by 100%,
from $17,715 to zero. This decrease is due to the previously mentioned lack
of operating revenues and a corresponding decrease in interest income. The
Other Income for the quarter ended March 31, 1999 was made up entirely of
interest income.
Losses posted due to Continuing Operations for the quarter ended
March 31, 2000 increased significantly. In the quarter ended March 31, 1999
the Company posted Interest Income of $17,715 and expenses of $18,180. In
the quarter ended March 31, 2000 the Company posted $1,478,031 in expenses and
had no income. Just like expenses, the primary reason for the increase in
Losses posted due to Continuing Operations is primarily attributable to the
consulting fees posted during the quarter.
Gains posted due to Discontinued Operations for the quarter ended
March 31, 2000 decreased by 100%, from $90,265 in the quarter ended
March 31, 1999 to zero in the quarter ended March 31, 2000. The gain
experienced in the quarter ended March 31, 1999 is attributed to the sale of
the Company's remaining Casino operations during that quarter. Per standard
accounting practices, the actual and foreseeable losses due to the decision to
discontinue casino operations were accounted for in the fiscal year in
which the decision was made.
The Company experienced a Net Loss of $1,478,031 for the quarter ended
March 31, 2000. This increase reflects all of the income and loss changes that
occurred between 1999 and 2000.
Net Loss Per Share (Basic and Diluted) increased from $.026 in the
quarter ended December 31, 1999 to $.04 in the quarter ended March 31, 2000.
When compared to the quarter ended March 31, 1999, Net Income (Loss) Per Share
decreased from ($.01) in the quarter ended March 31, 1999 to ($.04) in the
quarter ended March 31, 2000.
As of March 31, 2000, cash and cash equivalents were $ 582,166 as
compared with $ 121 at December 31, 1999 and $552 at March 31, 1999. The
Company reported losses for the quarter ended March 31, 2000 of $1,478,031.
Even though the Company began generating revenue in April 2000, it may
continue to incur operating losses until it has fully launched all of its
Internet estate planning businesses. The Company had working capital of
$ 485,987 at March 31, 2000 as compared to $(248,183) at December 31, 1999 and
($109.843) at March 31, 1999.
The Company is funding its current expansion into domestic
business-to-business Internet businesses from funds that it derived from equity
financing with outside sources. As the Company begins to generate revenues,
it intends to use both operating revenues and external sources to fund future
expansion. However, there can be no assurance that outside financing will be
available or that future revenues will be generated in sufficient amounts or
that additional funds will not be required for the continued expansion of
operations. The Company intends to meet its short-term and long-term liquidity
<PAGE> 5
needs through additional financing from outside sources. There can be no
assurance that the Company will achieve profitability or positive cash flow.
If the Company is not successful in raising sufficient funds, it may be
required to limit the scope of its proposed expansion into domestic
business-to-business internet services.
The rate of inflation was insignificant during the quarter ended
March 31, 2000. The Company's business is not expected to be seasonal.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The Company operates in a rapidly changing environment that involves
numerous risks, some of which are beyond the Company's control. The following
discussion highlights some of these risks.
Limited Operating History
Since the Company changed its strategic focus in 1999 to the
acquisition of Internet-based domestic businesses, the Company has just
recently begun to generate any revenues from operations. The Company has
acquired an additional insurance wholesale business and has begun full-
scale marketing of its first Internet-based estate-planning product (InsTrust)
to insurance agents and financial planners through newly created websites,
print advertising, and direct presentations. The Company will continue to
incur significant marketing expenses, including advertising and promotion
expenses, to gain recognition for it's products within the marketplace. There
can be no assurance that its current and proposed products will be given
sufficient consumer acceptance at their intended price range or any other price
range to enable the Company to operate profitably.
Dependence upon Single Employee
The Company currently employees several consultants under long-term
contracts to provide assistance in areas such as programming, project
management, public relations, investor relations, marketing and sales.
The Company has also hired or acquired 6 direct employees. While additional
employees do mitigate the risk to some degree, the Company's success and
operations still depend upon the continued employment of its single officer
level employee. If the Company loses the services of this employee and does
not find a suitable replacement, the Company's business could be adversely
affected.
Reliance Upon Single License
The Company's proposed Internet-based estate-planning product is based
upon proprietary software, which the licensor has granted to the Company under
a non-exclusive license. The license grants the Company the right to market
the software in a specific territory, which may be expanded in the future to
specific groups of potential customers. There can be no assurance that the
proprietary nature of the software will not be infringed upon or that others
will not try to reproduce the software. Furthermore, there can be so assurance
that the license will afford protection against possible competitors who
might seek to market their products in the same territory and to the same
customers. In the event that licensor terminates the Company's license, the
termination could have a material adverse effect on the Company's business.
Marketing; Sales
The Company has targeted potential customer groups for its proposed
Internet-based estate-planning products including certified public
accountants, insurance agents, stock brokers, financial planners, lawyers and
professionals in human resources. There can be no assurance that the Company
will be successful in marketing and selling its proposed products to such
potential customers or in generating revenues from such sales. Furthermore
there can be no assurance that the Company's proposed products will achieve
significant market acceptance or will generate significant revenue.
Additional products that the Company plans to directly or indirectly market in
the future are in various stages of development.
<PAGE> 6
Revenue Growth and Economic Conditions
The revenue growth and profitability of the Company's current and
proposed Internet-based estate-planning products depends on the overall demand
for estate-planning services. Because the Company's potential customers are
primarily professional and financial services advisers, the Company's business
also depends on general economic conditions. A softening of the demand for
estate-planning advice from professional and financial services advisers
caused by a weakening of the economy may result in lack of revenues or
lack of growth.
Competition
Although the Company is not aware of any direct competitors to its
current and proposed Internet-based estate-planning products, there can be no
assurance that providers of financial services including certified public
accountants, insurance agents, stock brokers, financial planners, lawyers and
professionals in human resources and related industries will not seek to
develop similar products.
Control by Majority Shareholder
The licensor of the Company's Internet-based estate-planning product,
Commerce Capital Group, L.L.C. ("CCG"), owns a majority of the Company's
common stock. Although the Company had stated that no CCG representative
will be employed as an officer or director, there can be no assurance that
CCG, based upon its majority ownership, would not seek to elect all of the
Company's directors and to determine the results of all matters submitted to
the stockholders for action including fundamental corporate transactions.
Absence of Dividends
The Company does not expect to declare or pay any dividends in the
foreseeable future, but instead intends to retain earnings, if any, to expand
the Company's operations.
Failure of Computer Systems to Recognize Year 2000
Many currently installed computer systems are not capable of
distinguishing 21st century dates from 20th century dates because they were
programmed using two digits rather than four digits to define the applicable
year. As a result, at the turn of this century, computer systems and
software used by many companies and organizations in a wide variety of
industries may experience operating difficulties unless they are adequately
modified or upgraded to process information related to the century change.
This could result in a system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary
inability to process transactions, collect revenues or engage in similar
normal business activities.
The Company recognizes the need to ensure that its operations will not
be adversely impacted by Year 2000 software failures. The Company therefore
believes it has identified all significant international information
technology systems ("IT Systems"). Internal and external resources were
utilized to make the required modifications and to test Year 2000 compliance
for the IT Systems and well as the non-IT Systems (i.e., telephone, security,
etc.). The Company believes that it has achieved Year 2000 compliance
readiness for its IT Systems and non-IT Systems.
In addition, the Company has communicated with others with whom it
does significant business, primarily banks and suppliers of electricity, to
determine their Year 2000 compliance readiness and the extent to which the
Company is vulnerable to any third party Year 2000 issues.
There can be no assurance that the systems of other companies on
which the Company relies will be timely converted or that a failure to convert
by another company would not have a material adverse effect on the Company.
<PAGE> 7
Based upon the results of its review of Year 2000 issues to date, the
Company does not believe that a contingency plan to handle the Year 2000 issue
is necessary at this time and has not developed such a plan. The Company will,
however, continue to monitor its Year 2000 compliance program and evaluate the
need for a contingency plan to handle the most reasonably likely worst case
Year 2000 scenario which might include: (i) a key material vendor or service
provider experiencing problems with delivery of materials, components or
services; (ii) the failure of infrastructure services provided by government
agencies and other third parties (e.g., electricity, telephone,
transportation, Internet services, etc. ).
<PAGE> 8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statement of Cash Flows and Notes thereto
incorporated in this Form 10QSB and is qualified in its entirety by refernce to
such financial statments.
</LEGEND>
<S> <C>
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