FORM 10-QSB
___________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: Commission File Number:
June 30, 2000 033-26344
e*machinery.net, inc.
_____________________
Formerly known as Harvard Financial Services Corp.
(Exact name of registrant as specified in its charter)
Delaware 75-2254748
________________________ ____________________________________
(State of Incorporation) (I.R.S. Employer Identification No.)
1400 Medford Plaza
Route 70 & Hartford Road
Medford, New Jersey 08055
(Address of principal executive office)
Telephone Number: (609) 953-7985
Indicate by check mark 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 filing
requirements for the past 90 days.
X Yes No
_____ _____
The number of shares outstanding of the registrant's common
stock as of the date of the filing of this report: 16,070,632
shares.
<PAGE>
FORM 10-QSB
PART 1 - FINANCIAL INFORMATION
______________________________
Item 1. Financial Statements
_____________________________
E*MACHINERY.NET, INC.
CONSOLIDATED BALANCE SHEETS
_________________________________
ASSETS
______
June 30,
2000 December 31,
(Unaudited) 1999
___________ ___________
Current Assets
Cash $ 516,567 $ 200,861
Inventory at cost 719,500 -
Employee advances 124,658 -
___________ __________
Total current assets $1,360,725 $ 200,861
Developed software 490,373 446,500
Deferred income taxes 86,985 13,785
Property and equipment, net 16,843 -
Other assets 4,814 -
_________ __________
Total assets $1,959,740 $ 661,146
========== ==========
See Accompanying Notes
<PAGE>
FORM 10-QSB
E*MACHINERY.NET, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30,
2000 December 31,
(Unaudited) 1999
___________ ____________
Liabilities:
Accounts payable $ 72,990 $ 521,500
Accrued liabilities 65,180 -
___________ _________
Total Liabilities 138,170 521,500
Stockholders' Equity:
Common stock, $.0001 par value,
50,000,000 shares authorized;
issued and outstanding
16,070,632 and 8,800,000,
respectively 1,607 880
Notes receivable for capital stock (2,437,500) -
Additional paid-in capital 5,607,817 200,120
Accumulated deficit (1,350,354) (61,354)
___________ _________
Total Stockholders' Equity 1,821,570 139,646
___________ _________
Total Liabilities and
Stockholders' Equity $1,959,740 $661,146
=========== =========
See Accompanying Notes
<PAGE>
FORM 10-QSB
E*MACHINERY.NET, INC.
CONSOLIDATED STATEMENT OF INCOME
The following Consolidated Statement of Income for the three-month
and six-month periods ended June 30, 2000, is unaudited, but the
Company believes that all adjustments (which consist only of
normal recurring accruals) necessary for a fair presentation of
the results of operations for the respective period have been
included. Quarterly results of operations are not necessarily
indicative of results for the full year. There is no comparison
to previous year due to the fact that operations commenced in
fiscal 2000.
Three-Months Ended Six-Months Ended
June 30, 2000 June 30, 2000
------------- ----------------
(Unaudited) (Unaudited)
Revenues $ - $ -
Cost of sales - -
---------- ----------
Gross profit - -
Expenses
Selling 260 -
General and administrative 1,332,869 1,384,305
--------- ---------
Total expenses 1,333,129 1,384,565
Other income/(expense)
Interest income 17,985 22,365
Other (410) -
--------- ---------
Total other income 17,575 22,365
Loss before income taxes (1,315,554) (1,362,200)
Income taxes (benefit) (65,000) (73,200)
--------- ---------
Net loss $(1,250,554) $(1,289,000)
========== ==========
Basic net loss per common
share $ (.091) $ (.111)
========== ==========
Weighted average:
Average common shares
outstanding(Basic) 13,700,700 11,577,200
========== ==========
See Accompanying Notes
<PAGE>
FORM 10-QSB
E*MACHINERY.NET, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTHS ENDED JUNE 30, 2000
June 30,
2000
---------
Cash flows from operating activities
Net loss $(1,289,000)
Adjustments to reconcile net loss to
net cash used in operating activities
Stock issued for services and compensation 1,646,500
Changes in operating assets and liabilities
Increase in employee advances (124,658)
Increase in inventory (719,500)
Increase in deferred income taxes (73,200)
Increase in other assets (4,814)
Decrease in accounts payable and
accrued liabilities (383,330)
---------
Net cash used in operating activities (948,002)
Investing activities
Capital expenditures (60,716)
---------
Net cash used in investing activities (60,716)
Cash flows provided by financing activities
Proceeds from issuance of common stock, net 1,324,424
---------
Net cash provided by financing activities 1,324,424
Net increase in cash 315,706
Cash, beginning 200,861
---------
Cash, ending $ 516,567
=========
See Accompanying Notes
<PAGE>
FORM 10-QSB
e*machinery.net, inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Nature of Operations
--------------------
Subsequent to the year ended December 31, 1999, Harvard
Financial Services Corp. amended its Certificate of Incorporation
to change its name to e*machinery.net, inc. (The "Company"). The
Company was formerly in the business of purchasing installment
loans from vocational schools and higher educational
institutions. During 1999, the Company ceased all operations in
the area of installment loan purchasing due to the inability to
obtain new financing. The Company was not actively involved in
any business operations during 1999, except for the collection of
existing loans receivable.
On March 27, 2000, the Company acquired e*machinery, inc.
through an exchange of stock at a 1 for 10 ratio whereas
e*machinery.net, inc. issued stock to the shareholders of
e*machinery, inc. in exchange for shares representing 100% of the
outstanding shares of e*machinery, inc. e*machinery.net, inc. is
currently traded on the Over-The-Counter Bulletin Board under the
stock symbol "EMAC". Pursuant to the transaction, the directors
and officers of e*machinery.net, inc. resigned in favor of the
directors and officers of e*machinery, inc.
Immediately after the transaction, the stock ownership of
e*machinery.net, inc. was as follows:
Shares Percent
Original Shareholders
(including public owners) 1,200,000 9%
Former shareholders of
e*machinery, inc. 11,935,000 91%
---------- ----
Total 13,135,000 100%
========== ====
Because the former owners of the stock of e*machinery, inc.
maintain control of e*machinery.net, inc., the transaction would
normally be considered a purchase by e*machinery, inc. for
accounting purposes. However, e*machinery.net, inc. did not have
any ongoing business operations at the date of the transaction.
Since e*machinery.net, inc. had no business, the transaction is
not being treated as a business combination. Instead, the
transaction is being treated for accounting purposes as a
recapitalization of e*machinery, inc. and as an issuance of stock
by e*machinery, inc. (represented by the outstanding shares of
e*machinery.net, inc.) for the assets and liabilities of
e*machinery, inc. e*machinery.net, inc. had liabilities of
$200,000 with no assets based upon historical book value at March
27, 2000. The recording of the liabilities resulted in a charge
to additional paid in capital.
<PAGE>
The future business plan is focused on the continued
development of an internet based portal specializing in business
to business e-commerce in the construction and mining industries,
as well as the purchase, rebuild and sale of Caterpillar(R) used
construction and mining machinery through Caterpillar(R) dealers
and end users around the world.
The Company is in the process of developing an internet
based distribution business for heavy machinery used primarily in
the construction and mining industries. Software development of
a web site began in 1999 and is ongoing. The intention is to
develop a vertically integrated portal which will provide
interplay between buyers and sellers of used Caterpillar(R)
machinery, major manufacturers, distributors, and providers of
supportive goods and services to the heavy machinery industry.
Anticipated sources of revenue include fees related to access to
the information maintained on the web site along with revenues
related to distribution of heavy machinery.
U.S. Machinery Corp. (USMC) is a wholly owned subsidiary of
e*machinery, inc. that is focused on the rebuilding and marketing
of construction and mining machinery. Utilizing relationships
with Caterpillar dealers, USMC offers like new machinery with a
warranty at a fraction of the cost of new. This is a tremendous
advantage for contractors and mining companies. They can upgrade
their fleets at a lower cost without the risk of buying used
machines without a warranty.
U.S. Machinery Corp. has contracted with Darr Equipment
Company to rebuild the cores or preowned machines purchased by
USMC and then USMC would then sell the rebuilt machines at target
average sales prices ranging from $500,000 to $700,000 per
machine. USMC also intends to purchase and sell machines that do
not have to be rebuilt, but merely cleaned and serviced. USMC
has successfully acquired and sold one D10R crawler tractor. In
addition, USMC has acquired at least four other machines which
are presently being rebuilt and refurbished by Darr Equipment
Company. Darr Equipment Company is one of the largest
Caterpillar(R) dealers in the world.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts
of the Company and its wholly owned subsidiary. All significant
intercompany accounts and transactions are eliminated in
consolidation.
Use of 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 period.
Actual results could differ from those estimates.
<PAGE>
Software Development
--------------------
The Company accounts for software development costs related to
development of the web site in accordance with AICPA Statement of
Position (SOP) 98-1 which provides guidance on accounting for the
costs of computer software developed or obtained for internal use.
SOP 98-1 requires computer software costs which are incurred in
the preliminary project stage to be expensed as incurred. The
preliminary project stage relates to the planning of the project
through the formulation, evaluation, and final selection of
alternatives. SOP 98-1 requires capitalization of costs incurred
during the application development phase when the preliminary
project stage is completed, management commits to funding the
project, and it is probable that the project will be completed and
the software will be used for the function intended. The
application development stage relates to the design, coding,
installation, and testing of the software. The Company incurred
an expense of $75,000 during the preliminary project stage (fiscal
1999) and capitalized costs of $490,373 related to application
development through the end of the second quarter of Fiscal 2000.
Property and Equipment
----------------------
Property and equipment are recorded at cost less accumulated
depreciation. Depreciation is computed by the straight line
method over the estimated useful lives of the respective assets.
Expenditures for maintenance and repairs are charged against
income as incurred. When assets are sold or retired, the cost and
accumulated depreciation are removed from the accounts and any
gain or loss is included in income.
Property and equipment consisted of the following at June 30:
2000
----
Equipment $13,843
Furniture 3,000
-------
Less accumulated depreciation -
-------
Net property and equipment $16,843
=======
Income Taxes
------------
The Company accounts for income taxes under the provisions
of SFAS No 109, Accounting For Income Taxes, which requires an
asset and liability approach for financial accounting and
reporting of income taxes. Under this approach, deferred income
taxes are recognized for the estimated taxes ultimately payable
or recoverable based on enacted tax law. Changes in enacted tax
law will be reflected in the tax provision as they occur.
<PAGE>
Earnings Per Share
------------------
The earnings per share computation have been made in
accordance with Statement of Financial Accounting Standards No.
128. Basic earnings (loss) per common share is computed using the
weighted average number of common shares outstanding during the
period. Diluted earnings per common share is computed using the
combination of dilutive common share equivalents and the weighted
average number of common shares outstanding during the period.
2. Income Taxes/(Benefit)
No income tax expense was incurred during the quarter ended
June 30, 2000. An income tax benefit of $65,000 was recognized
for the period from a deferred tax asset described below.
Deferred income taxes reflect the net tax effects of (a)
temporary differences between carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes, and (b) net operating loss carryforwards.
The Company did not have a net operating loss carryforward at
June 30, 2000.
3. Related Party Transactions
The Company contracted with Canterbury Information
Technology, Inc. ("CITI") to obtain software development services
for its web site. Total costs incurred to date amounted to
$565,373 which included capitalized costs of $490,373 and an
expense of $75,000 (fiscal 1999) as described in Footnote 1.
Certain stockholders, officers, and directors of CITI own
substantial number of shares of the Company. During the quarter,
the Company issued 278,133 shares of its common stock as payment
for these services.
4. Supplemental Cash Flow Information
Capitalized software development costs of $29,588 are
included in accounts payable at June 30, 2000. Also during the
quarter, the Company issued 278,133 shares of its common stock in
satisfaction of a $521,500 payable to CITI related to development
of its web site.
No cash payments were made during the period for interest or
taxes.
5. Equity Transactions
During fiscal 2000, CITI also assisted in raising capital as
part of the initial seed capital for the Company. For these
services, 250,000 shares of e*machinery.net, inc. restricted
common stock were issued to Canterbury Information Technology,
Inc. during the second quarter. The net value of these shares
was charged against shareholder's equity.
<PAGE>
In June, 2000 the Board of Directors voted to allow
officers, directors, certain advisors and individuals valuable to
e*machinery.net, inc. the opportunity to increase their equity
positions in the Company, as an incentive to continue and
increase their efforts on behalf of the Company. A total of
2,375,000 shares of restricted common stock were purchased with
an interest bearing, non-recourse note to the Company. The notes
and accrued interest are collateralized by the shares being
issued. Each recipient also has granted a 15-day right of first
refusal, in any sales of these shares. 1,500,000 of these shares
were sold to certain officers at a price of $.75 per share, which
represents a 50% discount from the current price. Interest on
these notes accrue at the Prime rate. Based on the discounted
sale of these shares, a non-cash charge to expense of $1,125,000
was made during the second quarter. The remaining 875,000 shares
were sold at market and the notes for these purchases accrue
interest at 6.6% per annum. No charge to expense was made on
these 875,000 shares.
Item 2. Management Discussion of Financial Condition and Results
_________________________________________________________________
of Operations
_____________
Liquidity and Capital Resources
Working capital at June 30, 2000 was $1,223,000. This was
an increase of $1,544,000 over December 31, 1999. The Company
finalized its seed capital funding by raising an additional
$1,324,000 in fiscal 2000.
The Company's wholly owned subsidiary, U.S. Machinery Corp.
also began operations during March, 2000 and as of June 30, 2000
had purchased over $700,000 of Caterpillar used heavy equipment.
It is anticipated that these cores would be refurbished and would
be sold during the third quarter of this year. The first sale
occurred in early August, 2000.
The Company is also in the process of searching for a
revolving line of credit against its inventory. This would allow
for more rapid expansion of the business, and would free up
additional operating capital to allow for increased hiring of
sales and support personnel.
Results of Operations
Revenues
________
There were no revenues recorded during the first six months
of fiscal 2000. The first sale of equipment occurred in August,
2000. It is anticipated that several more machines will be sold
during this quarter.
<PAGE>
Costs and Expenses
__________________
Costs and expenses for the quarter ended June 30, 2000
increased significantly over the first quarter of fiscal 2000.
The primary reason was a charge of $1,125,000 for the sale of
stock to certain officers at a discount against market. The
other reason for the increase was that salaries to employees were
paid for the full three months of the quarter. In the first
quarter, the salaries began to be paid in March, 2000.
PART II - OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults Upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule (in electronic format only)
(b) Reports on Form 8-K:
The Company filed Form 8-K/A on May 26, 2000
amending Form 8-K filed on March 29,2000, to set forth audited
financials of e*machinery, inc., a Texas corporation, which was
acquired on March 27, 2000 by the Registrant.
The Company filed Form 8-K on August 8, 2000 announcing the
sale of its first machine by its wholly owned subsidiary U.S. Machinery
Corp., which signified the Company's emergence from development
stage status to that of an active operating company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
e*machinery.net, inc.
(Registrant)
By/s/ Arthur A. O'Shea, III
Arthur A. O'Shea, III
President, Director
(Chief Executive Officer and duly
authorized signer)
By/s/ Kevin J. McAndrew
Kevin J. McAndrew, C.P.A.
Secretary, Director
(Chief Financial Officer and duly
authorized signer)
August 14, 2000
