U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: June 30, 2000
Commission file no.: 000-22151
Incubate This! Inc.
------------------------------------------------
(Name of Small Business Issuer in its Charter)
Colorado 93-0969365
-------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480 33480
------------------------------- -----------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (561) 832-5696
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
None None
------------------------------ -----------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock, $.0001 par value per share
--------------------------------------------------------
(Title of class)
Copies to:
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
(561) 832-5696
<PAGE>
Indicate by 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
--- --
State the number of shares outstanding of each of the issuer's classes
of common equity as of August 10, 2000 is 5,207,602.
Transitional Small Business Disclosure Format (check one); X
---- ----
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
<TABLE>
<CAPTION>
Incubate This! Inc.
Form 10-QSB Quarterly Report
For the Period Ended June 30, 2000
<S> <C>
Page
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
Unaudited Balance Sheet at June 30, 2000 and December 31, 1999 F-2
Unaudited Statements of Operations for the Six and Three Months Ended
June 30, 2000 and From Inception (December 8, 1981) through June 30, 2000 F-4
Unaudited Statements of Cash Flows for the Six Months Ended June 30, 2000
and 1999 and From Inception (December 8, 1981) to March 31, 2000 F-6
Statement of Stockholders' Equity (Deficit) F-7
Notes to Financial Statments F-8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
INCUBATE THIS! INC.
(A Development Stage Company)
BALANCE SHEET
ASSETS
(UNAUDITED) (AUDITED)
June 30, 2000 December 31, 1999
---------------- -----------------
<S> <C> <C>
CURRENT ASSETS
Cash in checking $ 2,668,458 $ 712
Accrued interest 2,981 180
Demand note - Esteem Solutions, Inc. _ 85,000 85,000
---------------- ---------------
TOTAL CURRENT ASSETS 2,756,439 85,892
----------------- ---------------
OTHER ASSETS
Investment - OrganiTech Ltd. 1,000,000 0
Investment - Europe Investor
Direct.com, Limited 250,000 0
Investment - LP Records, Inc. 7,500 0
----------------- ---------------
TOTAL OTHER ASSETS 1,257,500 0
---------------- ---------------
TOTAL ASSETS $ 4,013,939 $ 85,892
================= ===============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-2
<PAGE>
<TABLE>
<CAPTION>
INCUBATE THIS! INC.
(A Development Stage Company)
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED) (AUDITED)
June 30, 2000 December 31, 1999
---------------- -----------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 2,950 $ 1,350
Accrued interest 0 25,433
Investment agreement - OrganiTech Ltd. 1,000,000 0
Demand note - Giuseppe Coniglione 0 112,000
Demand note - Jagerton Research Ltd. 0 127,300
---------------- ---------------
TOTAL CURRENT LIABILITIES 1,002,950 266,083
---------------- ---------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock, $.10 par value,
100,000,000 shares authorized
none issued 0 0
Common Stock Class A no par value,
800,000,000 shares authorized,
5,207,602 and 11,527 issued
and outstanding, respectively 4,600,13 243,834
Stock subscription receivable (449,000) 0
Deficit accumulated during
development stage (1,140,145) (424,025)
---------------- ---------------
TOTAL STOCKHOLDERS' DEFICIT 3,010,989 (180,191)
---------------- ---------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $ 4,013,939 $ 85,892
================= ===============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
<TABLE>
<CAPTION>
INCUBATE THIS! INC.
(A Development Stage Company)
STATEMENTS OF OPERATION
Six Months Ended Three Months Ended For the Period
June 30, June 30, December 8, 1981
(Inception) to
2000 1999 2000 1999 June 30, 2000
-------- -------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES $ 0 $ 0 $ 0 $ 0 $ 0
--------- --------- ---------- --------- -----------
OPERATING EXPENSES
Consulting Fees 677,375 0 545,000 0 724,375
Depreciation Expense 0 0 0 0 1,443
File & transfer fees 0 0 0 0 14,901
Legal, accounting
and professional 51,973 5,805 39,618 5,211 170,452
Management services 0 0 0 0 133,000
Office and printing 543 189 524 174 5,562
Public relations 0 0 0 0 14,414
Taxes, Franchise 0 0 0 0 905
Travel expense 14,463 0 14,462 0 14,996
Other expense 0 0 0 0 35,168
--------- ---------- --------- --------- --------
TOTAL OPERATING
EXPENSES 744,354 5,994 599,604 5,385 1,115,216
--------- ---------- --------- --------- ----------
NET (LOSS) BEFORE
OTHER INCOME
AND (EXPENSE) (744,354) (5,994) (599,604) (5,385) (1,115,216)
---------- ----------- ---------- --------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
INCUBATE THIS! INC.
(A Development Stage Company)
STATEMENTS OF OPERATION
OTHER INCOME AND (EXPENSES)
<S> <C> <C> <C> <C> <C>
Write-off of advances on
recision of merger 0 0 0 0 (119,110)
Sale of business plan and asset 0 0 0 0 74,305
Forgiveness of debt 26,696 0 26,696 0 40,362
Interest income (expense) 1,538 (8,587) 1,310 (4,294) (20,486)
--------- ---------- --------- --------- ----------
TOTAL OTHER INCOME
AND (EXPENSES) 28,234 (8,587) 28,006 (4,294) (24,929)
--------- ---------- --------- --------- ----------
NET INCOME
OR (LOSS) $(716,120) $ (14,581) $(571,598) $ (9,679) $(1,140,145)
========== ========== ========== ========= ============
</TABLE>
NET (LOSS) PER
COMMON SHARE (.14) *
----------- ----------
(* less than $.01 net loss per share)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 5,207,602 1,153,027
--------- ---------
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
INCUBATE THIS! INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
For the Six Months Ended For the Period
December 8, 1981
June 30, 2000 June 30, 1999 (Inception) to
(Unaudited) (Unaudited) June 30, 2000
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income (loss) $ (716,120) $ (14,581) $
(1,140,145)
Adjustments to reconcile net (loss) to
net cash used by operating activities:
Amortization 0 0 750
Depreciation 0 0 1,443
Stock issued for
services/expenses 545,000 0 837,225
Change in operating assets
and liabilities:
(Increase) decrease in:
Current assets (2,801) 0 (2,981)
Increase (decrease) in:
Current liabilities (23,833) 20,181 2,950
------------ ------------ ---------------
NET CASH FLOWS FROM
OPERATING ACTIVITIES (197,754) 5,600 (300,758)
------------ ------------ ---------------
CASH PROVIDED (USED) IN
INVESTING ACTIVITIES
Purchases fixed assets 0 0 (1,443)
Purchase of Investments (257,500) 0 (257,500)
Demand note receivable 0 0 (85,000)
Organization costs 0 0 (750)
---------------- ------------- ----------------
NET CASH PROVIDED (USED)
IN INVESTING ACTIVITIES (257,500) 0 (344,693)
---------------- ------------- ----------------
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds form issuance of
common stock 3,123,000 0 3,375,344
Proceeds from issuance of
class B common stock 0 0 10,000
Deferred offering costs 0 0 (71,435)
--------------- -------------- ---------------
NET CASH FLOWS FROM
FINANCING ACTIVITIES 3,123,000 0 3,313,909
--------------- -------------- ---------------
NET INCREASE (DECREASE)
IN CASH 2,667,746 5,600 2,668,458
CASH, BEGINNING OF PERIOD 712 0 0
--------------- -------------- ---------------
CASH, END OF PERIOD $ 2,668,458 $ 5,600 $ 2,668,458
+============== ============== ===============
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
<TABLE>
<CAPTION>
INCUBATE THIS! INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(DEFICIT) For the Six Months Ended June 30, 2000 (UNAUDITED)
DEFICIT TOTAL
NUMBER ACCUMULATED STOCKHOLDERS'
OF DURING EQUITY
SHARES AMOUNT DEVELOPMENT (DEFICIT)
------ ------ ----------- ---------
<S> <C> <C> <C> <C>
Balance,
January 1, 2000 11,527 $ 243,834 $ (424,025) $ (180,191)
Common stock issued
for cash 4,000,000 400,000 400,000
Common stock issued
for cash 805,000 3,172,000 3,172,000
Stock subscription
receivable (449,000)
Stock issued
for services 200,000 20,000 20,000
Stock issued to retire
note payable for
consulting services 131,250 525,000 525,000
Stock issued to retire
note payables 59,825 239,300 239,300
Net loss for the
Six Months Ended
June 30, 2000 (716,120) (716,120)
---------- ----------- ------------- -----------
Balance,
June 30, 2000 5,207,602 $ 4,600,134 $ (1,140,145) $ 3,010,989
---------- =========== ============= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-7
<PAGE>
INCUBATE THIS! INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------
Incubate This!, Inc. (the Company), formerly known as Petheath Systems,
Inc. and Triangle, Inc., is a development stage organization formed under the
laws of the State of Colorado on December 8, 1981. Since inception, the company
has been inactive except for recent organizational and initial financing
efforts. The Company's fiscal year end is December 31.
Accounting Method
-----------------
The Company records income and expenses on the accrual method.
Organization Costs
------------------
Costs incurred in organizing the Company were amortized over a sixty-month
period.
Deferred Offering Costs
-----------------------
The Company incurred costs in connection with its public offering. When
the offering of the Company's stock was successful in April of 1989, these costs
were charged as a reduction of the proceeds of the offering.
NOTE 2 - RELATED PARTY TRANSACTIONS
-----------------------------------
During the quarter ended June 30, 2000 the Company entered into an
agreement with its president to pay the president for services rendered. The
Company agreed to record a note payable in the amount of $525,000 for such
services. During the same quarter, the note was retired by conversion to 131,250
shares at $4.00 per share of the Company's common stock.
Also during the quarter ended June 30, 2000 the Company retired
$239,300 in note payables, mentioned below, by the conversion of these note into
59,825 shares of stock. The interest accrued on these notes was forgiven by the
note holders. This conversion was accomplished in coordination with the
Company's Private Offering Memorandum dated May 12, 2000.
On March 26, 1999, the Company's president advanced funds in the form
of a promissory note for $112,000. The note includes accruing interest at 7% per
annum.
In 1997, the Company accrued $10,000 per month for financial consulting
and general administrative support services which were provided to the Company
by Ameristar Group Incorporated. Such agreement was not negotiated at arm's
length due to the relationship between the Company and Mr. Saposnick and Mr.
Messina, former directors and record of beneficial shareholders' of the Company.
F-8
<PAGE>
INCUBATE THIS! INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - CONTINUED
------------------
In 1997, the Company also received advances of monies for its operating
expenses from Ameristar Group Incorporated, in accordance with an agreement
between the two companies.
On September 25, 1998, a promissory note was signed for $127,300 for
monies due Ameristar Group Incorporated with interest accruing at 12% per annum.
Subsequently, this note was paid for by Jagerton Research Limited in December of
1998, and the Company now owes the liability of $127,300 to Jagerton Research
Limited with interest accruing at 12%.
The Company issued 490,000 shares of common stock on October 6, 1997 for
consideration of consulting services performed for the Company. The 490,000
shares were issued to related parties of the Company at a value equal to the
average bid and ask price for the common stock as reported for the five business
days prior to October 6, 1997. The Company issued 400,000 of the 490,000 shares
under the 1997 Stock Award Plan. On December 11, 1997, 40,000 shares were issued
for consideration of consulting services performed for the Company.
NOTE 3 - CAPITALIZATION
-----------------------
In May of 2000, the Company issued a Private Offering memorandum under
Regulation - D 506. The offering is valid for a 180 day period. As of June 30,
2000, the Company has issued 805,000 shares for $3,172,000 in cash and stock
subscriptions.
In February of 2000, the Company undertook a Regulation - D 506
offering, whereby it sold 4,000,000 shares of common stock, no par value, to the
Company's president for an aggregate of $400,000.
In October of 1999, the Company authorized a reverse stock split. The
Company issued 1 share of the Company's common stock for each 100 share blocks
of the Company's issued and outstanding shares.
In December of 1981, the Company authorized 50,000 shares of no par value
common stock. In March of 1988, the Company amended and restated its certificate
of incorporation to authorize 800,000,000 shares of no par value common stock
and 100,000,000 shares of $.10 par value preferred stock. No preferred stock is
issued or outstanding as of September 30,1997.
NOTE 4 - INCENTIVE STOCK OPTION PLAN
------------------------------------
Effective May 3, 2000 the Company registered with the Securities and
Exchange Commission 1,000,000 shares of the Company's common stock, no par
value, to be sold pursuant to the Company's Consultant/Employee Stock
Compensation Plan.
F-9
<PAGE>
INCUBATE THIS! INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - CONTINUED
------------------
Effective March 3, 1988, the Company adopted an incentive stock option
plan for company executives and key employees. The Company has reserved
10,000,000 common shares for issuance pursuant to the plan. The plan provides
that no option may be granted at an exercise price less than the fair market
value of the common shares of the Company on the date of grant and no option can
have a term in excess of ten years. To date, no options have been granted
pursuant to the plan.
NOTE 5 - MERGER AND RELATED RECISION
------------------------------------
In August of 1989, the Company consummated an exchange transaction
pursuant to which Triangle acquired all of the outstanding shares of Enterprise
Car Rental, Ltd. d.b.a. Wheels International Rent A Car ("Wheels") in exchange
for 326,500,800 shares of no par value common stock. In conjunction with the
merger, Triangle advanced $119,110 to Wheels. Effective September 30, 1989,
Triangle and Wheels consummated a Compromise and Settlement Agreement pursuant
to which the merger was reversed. Wheel's shareholders returned all but
10,000,000 common shares to Triangle in exchange for their original shares of
Wheels to indemnify and hold harmless Triangle from actions by third parties to
Wheels and to secure performance of obligations of Wheels to cooperate in any
legal actions undertaken by Triangle against third parties of Wheels.
The stockholders' (deficit) in the accompanying financial statements
has been reported as if the merger had not taken place. The 10,000,000 common
shares not returned are recorded as issued in October of 1989 for no
consideration. The advances to Wheels of $119,110 were written off at December
31, 1989. Management does not anticipate any further contingencies associated
with this failed merger, however, there is no assurance that there will be no
further contingencies.
NOTE 6 - MERGER AND RECISION WITH PETCARE, INC.
-----------------------------------------------
On January 29, 1997, an Agreement and Plan of Share Exchange
("Agreement") was entered into by and between the Company and (i)PetCare, Inc.,
a Delaware corporation and (ii) the PetCare shareholders. Under the terms of
this Agreement, Triangle, Inc. acquired all of the 3,000,000 issued and
outstanding shares of common stock of PetCare, Inc. in exchange for 600,000,000
shares of the common stock of Triangle, Inc. It was intended that this
transaction shall be a tax-free exchange of shares.
F-10
<PAGE>
INCUBATE THIS! INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 6 - CONTINUED
------------------
The Company was unable to raise the capital required to implement the
PetCare, Inc, business plan (acquisition of operating veterinarian hospitals and
consolidation of operations thereof). Therefore, as of July 7, 1997,
PetHealth Systems, Inc.and the former principal shareholders of PetCare
Inc., have agreed to the cancellation of the Agreement and Plan of Share
Exchange.
Upon the cancellation of the original agreement, 2,700,000 of the
3,000,000 shares of the common stock (which the Company originally had issued to
the five principal shareholders of PetCare, Inc.) were returned to the company
for cancellation. No consideration was provided by the company, or any third
party, in connection with such return of shares. The remaining 300,000 shares of
common stock which had been originally issued to minority shareholders of
PetCare, Inc. for services provided to PetCare, Inc. prior to its acquisition by
the registrant, will not be returned to the registrant for cancellation.
NOTE 7 - INVESTMENT AGREEMENT
--------------------
On June 20, 2000, the Company entered into an Investment Agreement
("Agreement") with OrganiTech Ltd. ("OrganiTech"), an Israeli private company
existing under the laws of Israel, and located in Nesher, Israel. The Company
agreed to invest a total of$1,000,000 for 12,460 Series A Preferred Shares of
OrganiTech at a price per Preferred Share of $80.25USD, representing a 10%
interest on a fully diluted basis. Subsequent to June 30, 2000, the Company
completed its responsibility with regard to the Agreement. In addition,
OrganiTech is obligated to issue to the Company Preferred Shares Warrants
labeled "Warrant A", "Warrant B", "Warrant C", "Warrant D", and "Warrant E".
Warrent A remains in effect fo a period of 70 days from the date of the
Agreement, Warrent B remains in effect for a period of 100 days from the date of
the Agreement, Warrant C remains in effect for a period of 130 days from the
date of the Agreement, Warrant Dremains in effect for a period of 160 days from
the date of the Agreement and Warrant E remains in effect 24 months from the
date of the Agreement or the occurrence of other specified conditions. Exercise
of Warrant A, Warrant B, Warrant C and Warrant D requires the payment of an
additional $1,000,000 USD per Warrant (or a maximum of $4,000,000) for which the
Company acquires an additional 5% interest in OrganiTech for each Warrant
exercised, or a total of an additional 20% if all warrants are timely and
effectively exercised. In addition, warrant E calls for a payment to OrganiTech
of $5,000,000 USD and would entitle the Company to an additional 7.07% interest
in OrganiTech. In the event the Company exercises all of the Warrants the
interest of the Company in OrganiTech at that time would equal 37.07% after an
investment by the Company of a total of $10,000,000 USD.
F-11
<PAGE>
INCUBATE THIS! INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - INVESTMENT AGREEMENT PAYABLE
---------------------
As NOTED IN FOOTNOTE 7, The Company entered into an investment
agreement whereby $1,000,000 became due and payable to OrganiTech. Subsequent to
June 30, 2000 the amount due and payable was paid to OrganiTech pursuant to the
Agreement.
NOTE 9 - NAME CHANGED
---------------------
During the first quarter of the year 2000, the Company changed its name
from Pethealth Systems, Inc. To Incubate This! Inc.
The corporate name has been changed from Triangle, Inc. to PetHealth
Systems, Inc. effective February 10, 1997.
F-12
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Conditions and Results
of Operations.
Business Objective
The Company is implementing its new business plan and the current
objective of the Company is to operate as a provider of professional advisory
and managment services to its investee companies ("portfolio companies")and
provide early stage venture capital to private and publicly held companies
targeting a wide range of emerging growth opportunities. (See "Part II, Item 5.
Other Information").
Sale of Shares
Between May 30, 2000, through June 30, 2000, the Company raised and
received funds totaling $2,723,000.00, and from July 1, 2000 through August 10,
2000 received an additional $449,000.00, for total funds received of
$3,172,000.00. Total subscriptions from 14 foreign investors totaled
$3,220,000.00 leaving a balance of $48,000.00 in subscribed funds due the
Company. The private placement offers 1,250,000 shares of the common stock of
the Company at $4.00 per share, is self underwritten, there were no discounts or
commissions offered or paid, and the offering was made pursuant to Section 4(2)
and Regulation D, Section 506. Proceeds are for use as working capital including
general and administrative expenses.
In June 2000 three (3) Promissory Notes evidencing indebtedness of the
Company were converted to equity at the rate of $4.00 per share of common stock,
or a total of 191,075 shares. The conversion of the Notes to equity satisfied in
full total company indebtedness in the amount of $764,300.00. The exchange was
made pursuant to Section 4(2) and Regulation D, Section 506.
Personnel Acquisitions
The Company has entered into a number of agreements designed to make
available services to the Company to enable it to operate efficiently and
effectively. The details of these agreements are as follows:
1. In May 2000 the Company entered into a Consulting Agreement
effective July 1, 2000 with Darin S. Ruebel providing for general consulting
services commencing July 1, 2000 through July 1, 2001, in exchange for
compensation of 100,000 shares of the common stock of the Company and payment of
expenses.
2. In May 2000 the Company entered into a Consulting Agreement with
William H. Luckman providing for payment for general consulting services in
exchange for compensation of 200,000 shares of the common stock of the Company
and payment of expenses.
3. In May 2000 the Company entered into a Consulting Agreement
effective July 1, 2000 with Dr. Ron Daisy retaining his services as a member of
the Advisory Board, commencing July 1, 2000 through July 1, 2001 in exchange for
compensation of 25,000 shares of the common stock of the Company and payment of
expenses.
<PAGE>
4.In May 2000 the Company entered into a Consulting Agreement effective
July 1, 2000 with Richard I. Anslow retaining his services as a member of the
Advisory Board, commencing July 1, 2000 through July 1, 2001 in exchange for
compensation of 25,000 shares of the common stock of the Company and payment of
expenses.
5. In May 2000 the Company entered into a Consulting Agreement
effective July 1, 2000 with Roni Greenbaum retaining his services as a Director
and Secretary of the Company, commencing July 1, 2000 through July 1, 2001 in
exchange for compensation of 150,000 shares of the common stock of the Company
and payment of expenses.
6. In May 2000 the Company entered into a Retainer Agreement effective
July 1, 2000 with Donald F. Mintmire for legal advisory services commencing July
1, 2000 through July 1, 2001, in exchange for compensation of 25,000 shares of
the common stock of the Company and payment of expenses.
Asset Acquisitions
On June 20, 2000, the Company entered into an Investment Agreement
("Agreement") with OrganiTech Ltd. ("OrganiTech"), an Israeli private company
existing under the laws of Israel, and located in Nesher, Israel. The Company
invested a total of $1,000,000.00 and acquired a total of 12,460 Series A
Preferred Shares of OrganiTech at a price per Preferred Share of $80.257 USD,
representing a 10% interest on a fully diluted basis. In addition OrganiTech is
obligated to issue to the Company Preferred Shares Warrants labeled "Warrant A",
"Warrant B", "Warrant C", "Warrant D", and "Warrant E". Warrant A remains in
effect for a period of 70 days from the date of the Agreement, Warrant B remains
in effect for a period of 100 days from the date of the Agreement, Warrant C
remains in effect for a period of 130 days from the date of the Agreement,
Warrant D remains in effect for a period of 160 days from the date of the
Agreement and Warrant E remains in effect 24 months from the date of the
Agreement or the occurrence of other specified conditions. Exercise of Warrant
A, Warrant B, Warrant C and Warrant D requires the payment of an additional
$1,000,000.00 USD per Warrant (or a maximum of $4,000,000.00) for which the
Company acquires an additional 5% interest in OrganiTech for each Warrant
exercised, or a total of a additional 20% if all Warrants are timely and
effectively exercised. In addition, Warrant E calls for a payment to OrganiTech
of $5,000,000.00 USD and would entitle the Company to an additional 7.07%
interest in OrganiTech. In the event the Company exercises all of the Warrants
the interest of the Company in OrganiTech at that time would equal 37.07% after
an investment by the Company of a total of $10,000,000.00 USD.
OrganiTech is an Israeli start-up company, and is entering the last
stage of development of a self-contained, automatic growing machine that can
automatically seed, transplant and harvest commercial quantities of fresh,
clean, insecticide-free and pesticide-free , hydroponic produce on a daily
basis. These stackable machine units permit the creation of a hydroponic farm of
any size growing ready-to-eat produce on a very small area in any part of the
world not depending on weather or climate conditions. The mission of OrganiTech
is to revolutionize the manner in which vegetables are planted, grown or
harvested, by developing an effective system that produces high quality,
pesticide-free crops, requiring minimal space and supervision. Currently
OrganiTech has no known direct competitors. There is no other known industrial
system commercially available that produces fresh, clean, ready-to-eat, organic
and hydroponic vegetables at a consistently reasonable cost.
<PAGE>
Plan of Operation
The Registrant is currently developing and planning the execution of a
business plan aimed at developing the Company into a technology incubator. The
registrant intends to continuing raising funds from a private offering of its
securities under Rule 506 of Regulation D in order to execute this plan. There
is no assurance however that the registrant will obtain additional equity
funding.
During the second quarter of 2000 the Company's general and
administrative expenses were paid through funds raised by the sale of equity. In
1999, the registrant's first quarter general and administrative expenses were
funded primarily by advances from Jagerton Research Limited.
Results of Operations
The Company did not have any operating income during the quarterly
period ended June 30, 2000, and has not had any operating income since its
inception. For this quarterly period, the registrant recognized a net loss of
$716,120.00 compared to a net loss of $14,581.00 for the quarterly period ended
June 30, 1999. The increase in this quarterly loss is primarily due to an
increase in consulting fees, legal and accounting expenses. General and
administrative expenses during the current period were funded by the sale of
equity for cash in the amount of $272,300.00 to the Company's sole officer and
director.
Liquidity and Capital Resources
On June 30, 2000 the Company had cash resources in the amount of
$2,668,458.00 and will rely on such funds and additional cash to be received
from the Private Placement to fund administrative expenses. The registrant
intends to raise additional funds from its private offering of securities under
Rule 506 of Regulation D in order to execute its business plan.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities. Between May 30, 2000, through June 30, 2000, the
Company raised and received funds totaling $2,723,000.00, and from July 1, 2000
through August 10, 2000 received an additional $449,000.00, for total funds
received of $3,172,000.00. Total subscriptions from 14 foreign investors totaled
$3,220,000.00 leaving a balance of $48,000.00 in subscribed funds due the
Company. The private placement offers 1,250,000 shares of the common stock of
the Company at $4.00 per share, is self underwritten, there were no discounts or
commissions offered or paid, and the offering was made pursuant to Section 4(2)
and Regulation D, Section 506. Proceeds are for use as working capital including
general and administrative expenses.
In June 2000 three (3) Promissory Notes evidencing indebtedness of the
Company were converted to equity at the rate of $4.00 per share of common stock,
or a total of 191,075 shares. The conversion of the Notes to equity satisfied in
full total company indebtedness in the amount of $764,300.00. The exchange was
made pursuant to Section 4(2) and Regulation D, Section 506.
<PAGE>
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
On August 4, 2000, the Company replaced its existing Transfer Agent.
The new Transfer Agent approved is Interwest Transfer Co., Inc., 1981 East
Murray Holiday Road, Suite 100, Salt Lake City, UT 84117.
<PAGE>
Item 6. Exhibits
<TABLE>
<S> <C>
Exhibit Description
--------- ----------------------
2.1 Agreement and Plan of Share Exchange(1)
2.2 Stock Purchase Agreement(3)
3.1 Amendments to Articles of Incorporation(2)
3.2 Certificate of Name Change to Incubate This! Inc.
3.3 EID Stock Certificate Representing 1,010,000 shares to Company
10.1 1997 Stock Award Plan(2)
10.2 Incentive Stock Option Plan(2)
10.3 Purchase Agreement dated January 21, 2000, between LP Records and Company.
10.4 Company Letter of Application for Shares.
10.5 * Advisory Board Agreement between Incubate This! Inc., and Dr. Ron Daisy.
10.6 * Advisory Board Agreement between Incubate This! Inc., and Roni Greenbaum
10.7 * Director and Officer Agreement between Incubate This! Inc., and Richard I. Anslow,
Esq
10.8 * Agreement for Consulting Services between Incubate This! Inc., and Darin Ruebel
10.9 * Agreement between Incubate This! Inc., and William H. Luckman
10.10 * Retainer Agreement between Incubate This! Inc., and Donald F. Mintmire
10.11 * Organitech Investment Agreement
27 * Financial Date Schedule
</TABLE>
-----------------------
(1) Incorporated by reference from exhibits filed with the Form 8-K, which
was filed with the Commission on February 19, 1997.
(2) Incorporated by reference from exhibits filed with the registrant's
Registration Statement on Form S-8, filed February 21, 1997,
registration number 333-22203.
(3) Incorporated by reference from exhibits filed with the Form 8-K, which
was filed with the Commission on November 2, 1999.
(* Filed Herewith)
<PAGE>
SIGNATURES
-----------------------
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
there unto duly authorized.
Incubate This! Inc.
(Registrant)
Date: August 17, 2000 By: /s/ Sharone Perlstein
-----------------------------
Sharone Perlstein, President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Date Signature Title
August 17, 2000
By: /s/ Sharone Perlstein
---------------------------- President, acting CFO,
Sharone Perlstein Treasurer, and Director
