U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10QSB
Quarterly Report Under Section 13 or 15 (d) of the Securities Exchange Act
of 1934 for the Quarterly Period Ended June 30, 2002
Commission File Number: 000-28481
Iconet, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 86-0891931
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8 Gaucho Hills Drive, Rolling Hills Estates, California 90274
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(Address of Principal Executive Offices) (Zip Code)
(416) 682-9255
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(Issuer's telephone number)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed be
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
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
There are 32,757,115 shares of common stock outstanding
as of June 30, 2002. The shares are traded on the
OTC Bulletin Board, under the symbol "ICON".
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Item 2. Management's Discussion of Operations and Financial Condition
PART II - OTHER INFORMATION
Signatures
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
ICONET, INC.
(A Company in the Development Stage)
BALANCE SHEETS
ASSETS
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June 30, 2002 December
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Current Assets (Unaudited) 31, 2001
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Cash $ 199 $ 1,068
Prepaid expenses - 81,250
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Total current assets 199 82,318
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Deferred tax asset (net) - -
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Total Assets $ 199 $ 82,318
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LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current Liabilities
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Accounts payable $ 355,644 $ 363,679
Bank overdraft payable 30,519 30,519
Related party payable 498,565 522,164
Officer advances 10,600 -
Related party line of credit 117,924 22,574
Interest payable 148,347 143,644
Accrued expenses 24,727 57,132
Wages payable 68,327 68,327
Payroll tax payable 16,338 16,338
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Total current and total liabilities 1,270,991 1,224,377
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Commitments and Contingencies
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Stockholders' Deficit
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Common stock, $.001 par value, 100,000,000
shares authorized, 32,757,115 and
31,257,115 shares issued and outstanding
at June 30, 2002 and December 31, 2001 32,757 31,257
Additional paid-in capital 2,295,406 2,221,906
Deferred compensation costs (340,000) (380,000)
Deficit accumulated during the development
stage (3,258,955) (3,015,222)
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Total Stockholders' Equity (1,270,792) (1,142,059)
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Total liabilities and stockholders' equity $ 199 $ 82,318
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See Notes to the Interim Financial Statements
ICONET, INC.
(A Company in the Development Stage)
STATEMENT OF OPERATIONS
-----------------------
(Unaudited)
Cumulative
From
Inception Six Six Three Three
(August 1997) Months Months Months Months
Through Ended Ended Ended Ended
June June June June June
30, 2002 30, 2002 30, 2001 30, 2002 30, 2001
------------ ----------- ----------- ----------- -----------
Revenue
-------
Operating Costs
and Expenses
---------------
Consulting $ (1,608,396) $ (158,915) $ (41,250) $ (70,165) $ -
Research and
development (179,027) - - - -
Marketing expense (159,394) - (20,000) - -
Labor expense (60,000) (40,000) - (20,000) -
Legal and accounting (349,034) (24,451) (42,563) (17,451) -
Operating and
administrative
expenses (674,198) (9,863) (1,671) (2,517) -
Rent expense (83,835) (5,800) (600) (5,800) (600)
Depreciation expense (5,562) - - - -
Amortization expense (16,500) - - - -
------------ ----------- ----------- ----------- -----------
Total operating
costs and
expenses (3,135,946) (239,029) (106,084) (115,933) (600)
------------ ----------- ----------- ----------- -----------
Non-operating Income
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Dividend income 1,212 - - - -
Gain on cancellation
of contracts 90,604 - - - -
Loss on disposal of
assets (59,641) - (59,641) - (59,641)
------------ ----------- ----------- ----------- -----------
Total non-
operating income 32,175 - (59,641) - (59,641)
------------ ----------- ----------- ----------- -----------
Interest expense (155,184) (4,704) (43,523) (3,471) (22,675)
---------------- ------------ ----------- ----------- ----------- -----------
Net loss before
income taxes (3,258,955) (243,733) (209,248) (119,404) (82,916)
------------ ----------- ----------- ----------- -----------
Provision for
income taxes - - - - -
------------ ----------- ----------- ----------- -----------
Net loss $ (3,258,955) $ (243,733) $ (209,248) $ (119,404) $ (82,916)
============ =========== =========== =========== ===========
See Notes to Interim Financial Statements
ICONET, INC.
(A Company in the Development Stage)
STATEMENT OF OPERATIONS
-----------------------
(Unaudited)
Cumulative
From
Inception Six Six Three Three
(August 1997) Months Months Months Months
Through Ended Ended Ended Ended
June June June June June
30, 2002 30, 2002 30, 2001 30, 2002 30, 2001
------------ ----------- ----------- ----------- -----------
Loss per common
share - basic $ (0.52) $ (0.01) $ (1.95) $ (0.00) $ (0.32)
============ =========== =========== =========== ===========
Weighted average
common shares
- basic 6,212,391 31,257,115 107,115 31,257,115 257,115
============ =========== =========== =========== ===========
Loss per common
shares - diluted $ (0.46) $ (0.01) $ (0.05) $ (0.00) $ (0.01)
============ =========== =========== =========== ===========
Weighted average
common shares -
diluted 7,049,348 32,094,072 4,561,660 31,668,880 9,257,115
============ =========== =========== =========== ===========
See Notes to the Interim Financial Statements
ICONET, INC.
(A Company in the Development Stage)
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
Cumulative From
Inception (August Six Months Six Months
1997) through Ended June Ended June
June 30, 2002 30, 2002 30, 2001
------------ ------------ ------------
Cash Flows from Operating Activities
------------------------------------
Net loss $(3,258,955) $ (243,733) $ (209,248)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization and depreciation expenses 22,062 - -
Deferred compensation expense 60,000 40,000 -
Gain on cancellation of amortization (16,500) - -
Loss on disposal of assets 59,641 - 59,641
Decrease in deposits 14,925 - 600
Deposit paid (14,925) - -
Increase in deferred tax asset (1,135,670) (82,870) (74,543)
Increase (decrease) in accounts payable 419,619 (8,035) (105,360)
Increase (decrease) in related party
payable 498,565 (23,599) 67,500
Increase in wages payable 68,327 - -
Increase in interest payable 148,347 4,703 43,523
Increase in deferred tax valuation
allowance 1,135,670 82,870 74,543
Increase (decrease) in accrued expenses 116,065 42,595 -
Expenses paid by issuance of common stock 736,628 81,250 -
------------ ------------ ------------
Net cash used in operating activities (1,146,201) (106,819) (143,344)
------------ ------------ ------------
Cash Flows from Investing Activities
------------------------------------
Purchase of fixed assets (65,203) - -
------------ ------------ ------------
Net cash used in investing activities (65,203) - -
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See Notes to the Interim Financial Statements
ICONET, INC.
(A Company in the Development Stage)
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
Cumulative From
Inception (August Six Months Six Months
1997) through Ended June Ended June
June 30, 2002 30, 2002 30, 2001
------------ ------------ ------------
Cash Flows from Financing Activities
------------------------------------
Proceeds received from issuance of stock 204,635 - -
Proceeds received from officer advances 16,074 10,600 -
Proceeds from bank overdraft 30,519 - -
Payment of officer advances (5,474) - -
Proceeds received from line of credit 847,925 - 143,344
Proceeds received from related party line
of credit 117,924 95,350 -
------------ ------------ ------------
Net cash provided by financing activities 1,211,603 105,950 143,344
------------ ------------ ------------
Net increase in cash 199 (869) -
Cash and cash equivalents at
June 30, 2002 and 2001 - 1,068 -
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Cash and cash equivalents at
June 30, 2002 and 2001 $ 199 $ 199 $ -
============ ============ ============
Supplementary Information
-------------------------
During the six months ended June 30, 2002 and 2001, no amounts were actually paid for
either interest or income taxes.
In June 2002 the Company issued 1,500,000 shares of its common stock for consulting
services valued at $75,000.
See Notes to the Interim Financial Statements
ICONET, INC.
(A Company in the Development Stage)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
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June 30, 2002
1. BASIS OF PRESENTATION
---------------------
The accompanying unaudited interim financial statements of Iconet, Inc.
(the "Company") have been prepared by the Company in accordance with
accounting principles generally accepted in the United States of
America, pursuant to the Securities and Exchange Commission rules and
regulations. In management's opinion all adjustments necessary for a
fair presentation of the results for the interim periods have been
reflected in the interim financial statements. The results of operations
for any interim period are not necessarily indicative of the results for
a full year. All adjustments to the financial statements are of a normal
recurring nature.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Such disclosures
are those that would substantially duplicate information contained in
the most recent audited financial statements of the Company, such as
significant accounting policies and stock options. Management presumes
that users of the interim statements have read or have access to the
audited financial statements and notes thereto included in the Company's
most recent annual report on Form 10-KSB.
New Pronouncements
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In May 2002 the Financial Accounting Standards Board ('FASB') issued
Statement of Financial Accounting Standards ('SFAS') 145 "Rescission of
FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections". This pronouncement requires that gains or
losses arising from early extinguishments of debt that are part of a
company's recurring operations (i.e., a risk management strategy) would
not be reported as extraordinary items. The statement also provides that
modifications to a capital lease that make it an operating lease be
accounted for as a sale-leaseback. Management feels that the early
adoption of SFAS No. 145 has not had a material effect on the financial
results.
ICONET, INC.
(A Company in the Development Stage)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
-------------------------------------------
June 30, 2002
1. BASIS OF PRESENTATION (CONTINUED)
---------------------------------
STATEMENT PRESENTATION
----------------------
The June 30, 2001, Financial Statements have been reclassified to
conform to the June 30, 2002, presentation. Rent expense and loss on
disposal of assets have been stated separately from operating and
administrative expense.
GOING CONCERN
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These financial statements have been prepared assuming that the Company
will continue as a going concern. The Company is currently in the
development stage, and existing cash, other material assets, and
available credit are insufficient to fund the Company's cash flow needs
for the next year. In October 2001 a related party extended the Company
a line of credit for $100,000 (see Note 2). Management is attempting to
raise additional capital.
2. RELATED PARTY LINE OF CREDIT
----------------------------
In October 2001 the Company obtained an unsecured line of credit from a
shareholder for $150,000 at 12% per annum. The line of credit is due on
demand on or after December 31, 2002. At June 30, 2002, the outstanding
balance on this line of credit was $ 117,924.
3. COMMITMENTS AND CONTINGENCIES
-----------------------------
There are various claims and lawsuits pending against the Company
arising in the normal course of the Company's business. Although the
amount of liability at June 30, 2002, cannot be ascertained, management
is of the opinion that any resulting liability will not materially
affect the Company's financial position.
Merrill Lynch Canada Inc., has filed suit against the Company regarding
a dispute related to the sale of its restricted common stock by an
unrelated third party to Merrill Lynch. The case is still in its early
stages and the Company is trying to reach a settlement with Merrill
Lynch. At this time the Company does not know if it will sustain a loss,
or the amount of the loss.
ICONET, INC.
(A Company in the Development Stage)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
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June 30, 2002
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
-----------------------------------------
The Company is a defendant in an action by a bank regarding an
overdraft. The bank is seeking to recover $30, 519, which has been
accrued by the Company.
4. CAPITAL STOCK
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In June 2002 the Company issued 1,500,000 shares of common stock to an
unrelated third party for consulting. The value of the consulting
received was $75,000.
5. SUBSEQUENT EVENTS
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In June 2002 the Company entered into an option to purchase 21 mining
claims in Ontario, Canada with Sea Emerald Development Corp. (Sea
Emerald) in exchange for payment of a nominal sum. A total of 10,000,000
shares of restricted common stock to be issued in 2,000,000 share
increments every six months is due for a 100% interest in the mining
claims. In July 2002 the Company issued the first 2,000,000 shares to
Sea Emerald. The full 10,000,000 shares must be issued in order for the
Company to obtain any interest in the mining claims. The Company is also
obligated to pay 5% of net smelter returns from production as a royalty
to Sea Emerald.
In July 2002 the Company issued 1,000,000 shares in a private placement
to an unrelated third party at $0.25 per share.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
Since the end of the last quarter the company has put its Internet kiosk
business into an inactive status, pending further business developments.
The Company, through its new personnel and resources, has reviewed, and
continues to review, its corporate files, books and records, and based
thereon, it has not been able to conclusively identify a basis for a
certain undetermined amount of its current Accounts Payable and for the
Related Parties payable to previous management. We have been unable, at
this point, to locate back up documentation or back up invoices for some
of such payables. Our review continues in this regard.
The Company has withdrawn its registration statement that was previously
filed on Form SB-2.
The Company has acquired the option to buy 21 mining claims in The
Porcupine Mining Division in the Northern Ontario, Canada. The Claims
are in the Shaw Dome region in the Timmins, Canada area. This area has
a history of producing major mining activity. We are looking forward to
exploration and drilling of this property to try and achieve greater
shareholder value. During July 2002, the Company raised US $250,000.00
through a private placement to accredited investors and issued 1,000,000
shares of its restricted common stock, at a price of US $0.25 per share.
The proceeds from this offering are currently being used to do
exploration work on our newly-acquired claims and for general working
capital.
The Company has also adopted an Option Plan for Directors, Officers and
Employees, subject to shareholder approval.
PART II. OTHER INFORMATION
Item 7. Signatures
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ICONET, INC.
August 12, 2002 /S/ Randy Miller
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Randy Miller
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY OF 2002
In connection with the Quarterly Report of Iconet, Inc. on Form 10-QSB for
the period ended June 30, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), each of the undersigned, in the
capacities and on the dates indicated below, hereby certifies pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbannes-
Oxley Act of 2002, that to the best of his knowledge:
1. The Report fully complies with the requirements of Section 13 (a) pr
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the
Company.
August 12, 2002 /S/ Randy Miller
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Randy Miller
Chairman and CEO