U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission File No. 33-55254-39
PERIPHERAL CONNECTIONS, INC.
(Exact name of Small Business Issuer as specified in its charter)
NEVADA 87-0485315
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
176 John Street Toronto, Ontario, Canada M5T1X5
(Address of principal executive offices)
Issuer's telephone number, including area code (416) 593-0859
Check whether the issuer: (1) has 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
stock, as of the latest practicable date: 14,600,000 shares of $.001 par value
class A common stock outstanding as of June 30, 1998.
Transitional Small Business Disclosure Format (check one): Yes No X
1
<PAGE>
PERIPHERAL CONNECTIONS, INC.
FORM 10-QSB FOR QUARTER ENDED
June 30, 1998
INDEX
PART I - FINANCIAL INFORMATION Page No.
Item 1 Financial Statements
Balance Sheets as of
June 30, 1998 and December 31, 1997 4
Statements of Operations for the
six month periods ended
June 30, 1998 and 1997 5
Statements of Cash Flows for the
six month periods ended
June 30, 1998 and 1997. 6
Item 2 Management's Discussion and Analysis
and Plan of Operations 7
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 8
------
Item 2 Changes in Securities 8
------
Item 3 Defaults Upon Senior Securities 8
------
Item 4 Submission of Matters to a Vote of
Security Holders 8
Item 5 Other Information 8
------
Item 6 Exhibits and Reports on Form 8-K 8
------
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
In the opinion of the management of Peripheral Connections, Inc. (the
Company) the accompanying unaudited financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the financial position as of June 30, 1998, the results of operations for the
six month periods ended June 30, 1998 and 1997, and the cash flows for the six
month periods ended June 30, 1998 and 1997.
While the Company believes that the disclosures presented are adequate
to make the information not misleading, it is suggested that these condensed
financial statements be read in conjunction with the financial statements and
the notes included in the Company's latest annual report on Form 10-KSB.
The statement of operations includes the activities of NetKing Limited
for all of 1998. NetKing Limited was acquired as a wholly-owned subsidiary on
April 9, 1998.
3
<PAGE>
PERIPHERAL CONNECTIONS, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, Dec. 31,
1998 1997
(Unaudited) (Audited)
----------------- -----------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash (overdraft) $ (25,698) $ 10,965
Accounts receivable 52,314 0
Inventory 273,299 0
Prepaid expenses 34,629 0
----------------- -----------------
Total Current Assets 334,544 10,965
OTHER ASSETS
Equipment and software 2,287,461 0
Licenses and brand names 4,291,958 0
----------------- -----------------
6,579,419 0
----------------- -----------------
TOTAL ASSETS $ 6,913,963 $ 10,965
================= =================
LIABILITIES & EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 121,643 $ 0
Accrued expenses 125,487 0
Loans payable 129,804 0
----------------- -----------------
Total Current Liabilities 376,934 0
Loans payable 7,266,000 0
----------------- -----------------
Total Liabilities 7,642,934 0
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock $0.001 par value
Authorized - 25,000,000 shares
Issued and outstanding 14,600,000 shares 14,600 3,850
Additional paid-in capital 421,403 282,150
Deficit accumulated during the development stage (1,159,234) (275,035)
Foreign currency adjustment (5,740) 0
----------------- -----------------
Total Stockholders' Equity (Deficit) (728,971) 10,965
----------------- -----------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 6,913,963 $ 10,965
================= =================
</TABLE>
4
<PAGE>
PERIPHERAL CONNECTIONS, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales $ 49,875 $ 0 $ 64,531 $ 0
Cost of sales 60,026 0 80,101 0
------------- -------------- ------------- -------------
GROSS LOSS (10,151) 0 (15,570) 0
Interest income 69 0 174 0
Expenses
Administrative 421,511 2,788 504,700 10,553
Depreciation 159,268 0 214,103 0
Net Interest Expense 0 2,340 0 4,671
------------- -------------- ------------- -------------
580,779 5,128 718,803 15,224
------------- -------------- ------------- -------------
Net loss before other (590,861) (5,128) (734,199) (15,224)
Finder's fee related to subsidiary
acquisition (150,000) 0 (150,000) 0
------------- -------------- ------------- -------------
Net Loss for Period (740,861) (5,128) (884,199) (15,224)
Deficit - beginning of Period (418,373) (22,868) (275,035) (12,772)
------------- -------------- ------------- -------------
Deficit - end of Period (1,159,234) (27,996) (1,159,234) (27,996)
Net Loss per Share (.05) (.01) (.10) (.03)
Average shares outstanding used to
calculate net loss per share 14,600,000 1,000,000 9,225,000 1,000,000
</TABLE>
5
<PAGE>
PERIPHERAL CONNECTIONS, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the
Six Months Ended
June 30,
1998 1997
----------------- -----------------
<S> <C> <C>
Cash flows from Operating Activities $ (884,199) $ (15,224)
Adjustments to reconcile net loss to cash used by operating activities:
Foreign currency adjustment (5,740) 0
Depreciation 214,103 0
Stock issued for expenses 150,000 0
Changes in assets and liabilities:
Accounts receivable (52,314) 0
Inventory 29,102 0
Prepaid expenses (34,629) 0
Accounts payable and accrued expenses 247,132 11,500
----------------- -----------------
Net cash used by operating activities (336,545) (3,724)
Investing Activities
Loans to related party and accrued interest 0 (39,870)
Purchase of fixed assets (375,922) 0
----------------- -----------------
Net cash used by investing activities (375,922) (39,870)
Financing Activities
Loan proceeds 675,804 0
----------------- -----------------
Net cash provided by financing activities 675,804 0
----------------- -----------------
Decrease in cash (36,663) (43,594)
Cash - beginning of period 10,965 163,476
----------------- -----------------
Cash - end of period $ (25,698) $ 119,882
================= =================
</TABLE>
SUPPLEMENTAL INFORMATION
During the six months ended June 30, 1998, the Company issued 10,000,000 shares
of Regulation S stock to acquire a subsidiary. The Company also issued 750,000
shares of Regulation S stock as a finder's fee valued at $150,000. The Company's
subsidiary acquired assets of $6,720,000 during the period by incurring loans
payable in the same amount.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.
The Company has no operational history and has yet to engage in
business of any kind other than through its subsidiary. All risks inherent in a
new and inexperienced enterprise are inherent in the Company's business. The
Company is continuing the operations of a subsidiary which was acquired on April
9, 1998.
On April 9, 1998, the Company beneficially acquired all of the stock of
Netking Limited, an English private limited company ("Netking") from Tomas
George Wilmot ("Seller"), who beneficially owned all of the stock of Netking.
The title holders of Netking were Local Protectors Limited and SNH Cooper, who
held the shares as nominees for Seller. The purchase price paid for the
purchased stock was 10,000,000 newly issued shares of the common stock of the
Company, which is approximately 68.5% of all of the outstanding stock of the
Company after such issuance. Tomas George Wilmot, individually, is the title
holder of all of the 10,000,000 newly issued shares of the Company. There are no
arrangements or understandings among members of both the former and new control
person or their associates with respect to election of directors or other
matters.
On April 9, 1998, the Company beneficially acquired all of the stock of
Netking from Seller, who beneficially owned all of the stock of Netking. There
are two shares of Netking outstanding. Because English law requires two
shareholders, the Company holds title to one share of stock of Netking and the
Company and Tomas Wilmot, as nominee for the Company, jointly hold title to the
other share. Netking is the beneficial owner of Skynet 2001 Limited (formerly
Keymore Limited), an English private limited company ("Skynet"). Skynet owns
intellectual property pertaining to all aspects of the Skynet 2000 in-vehicle
system. The Skynet 2000 system uses communications and security technology
coupled with proprietary software that provides in- vehicle protection, security
and information services using mobile cellular telecommunications. The Skynet
2000 system provides 24 hour monitoring of vehicle security, personal distress
alarm, and impact sensor and information services, as well as normal cellular
telephone capability. The purchase price paid for the purchased stock was
10,000,000 shares of newly issued common stock of the Company, which is
approximately 68.5% of all of the outstanding stock of the Company after such
issuance. The consideration was determined by arm's length negotiations between
the Company and Seller. Prior to the acquisition, there was no material
relationship between the Seller and the Company or any of its affiliates, any
director or officer of the Company, or any associate of any such director or
officer.
A portion of the business of Skynet and Netking acquired by the Company
constitutes equipment and other physical property previously used in the
business of the Seller. The Company intends to continue to use such equipment
and physical property for the same purposes.
The discussions below highlight certain of the more material changes in
results of operations and changes in financial condition for the fiscal six
month period ended June 30, 1998.
Results of Operations.
During the first two quarters of fiscal 1998 the Company incurred
expenses related to general expense as well as normal operating expenses. The
Company had a loss from operations of $734,199 and a finder's fee in the amount
of $150,000. The finder's fee was paid with Regulation S stock, which was
later registered on Form S-8 which was filed on May 12, 1998.
Financial Condition.
There were no significant changes to the net financial condition of the
Company in the six month period ended June 30, 1998. Cash decreased by $25,698
mainly as a result of operating
7
<PAGE>
expenses. The Company continues to believe it has the support of its major
stockholders and that financing is available to meet all requirements.
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: None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K
A report on Form 8-K was filed on April 21, 1998
which disclosed the items discussed in Item 2 about
the acquisition of assets and announced the election
of Tomas G. Wilmot as President.
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act,
the registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PERIPHERAL CONNECTIONS, INC.
Dated: 7 August 1998
Tomas George Wilmot, President
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from Peripheral Connections, Inc. June 30, 1998 financial
statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000894557
<NAME> Peripheral Connections, Inc.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> (25,698)
<SECURITIES> 0
<RECEIVABLES> 52,314
<ALLOWANCES> 0
<INVENTORY> 273,299
<CURRENT-ASSETS> 334,544
<PP&E> 2,501,564
<DEPRECIATION> (214,103)
<TOTAL-ASSETS> 6,913,963
<CURRENT-LIABILITIES> 376,934
<BONDS> 0
0
0
<COMMON> 14,600
<OTHER-SE> (743,571)
<TOTAL-LIABILITY-AND-EQUITY> 6,913,963
<SALES> 64,531
<TOTAL-REVENUES> 64,531
<CGS> 80,101
<TOTAL-COSTS> 80,101
<OTHER-EXPENSES> 718,803
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (884,199)
<INCOME-TAX> 0
<INCOME-CONTINUING> (734,199)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (884,199)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
