UNITED STATES
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 September 30, 2005
[ ] 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: 000-26415
EVOLVE ONE, INC.
----------------
(Exact name of small business issuer as specified in its charter)
Delaware 13-3876100
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P.O. BOX 859 TALLEVAST, FL 34270
----------------------------------------
(Address of principal executive offices)
(561) 988-0819
--------------
(Issuer's telephone number)
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 [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act. Yes [X] No [ ].
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
stock as of the latest practicable date: 49,536,836 shares of common stock as of
November 16, 2005.
EVOLVE ONE, INC.
Form 10-QSB for the period ended September 30, 2005
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this quarterly report on Form 10-QSB contain or
may contain forward-looking statements that are subject to known and unknown
risks, uncertainties and other factors which may cause actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. These forward-looking statements were based on various factors and
were derived utilizing numerous assumptions and other factors that could cause
our actual results to differ materially from those in the forward-looking
statements. These factors include, but are not limited to, economic, political
and market conditions and fluctuations, government and industry regulation,
interest rate risk, U.S. and global competition, and other factors. Most of
these factors are difficult to predict accurately and are generally beyond our
control. You should consider the areas of risk described in connection with any
forward-looking statements that may be made herein. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date of this report. Readers should carefully review this quarterly report
in its entirety, including but not limited to our financial statements and the
notes thereto. Except for our ongoing obligations to disclose material
information under the Federal securities laws, we undertake no obligation to
release publicly any revisions to any forward-looking statements, to report
events or to report the occurrence of unanticipated events. For any
forward-looking statements contained in any document, we claim the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
When used in this quarterly report, the terms "Evolve One," " we,"
"our," and "us" refers to Evolve One, Inc. a Delaware corporation, and our
subsidiaries.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements..................................................1
Condensed Consolidated Balance Sheet as of September 30, 2005 (unaudited)......1
Condensed Consolidated Statements of Operations for the Three Months and
Nine Months ended September 30, 2005 and 2004 (unaudited)......................2
Condensed Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 2005 and 2004 (unaudited)......................3
Notes to Condensed Consolidated Financial Statements (unaudited) ..............5
Item 2. Management's Discussion and Analysis or Plan of Operation............13
Item 3. Controls and Procedures .............................................19
Part II. OTHER INFORMATION
Item 1. Legal Proceedings....................................................19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..........19
Item 3. Defaults Upon Senior Securities......................................20
Item 4. Submission of Matters to a Vote of Security Holders..................20
Item 5. Other Information....................................................20
Item 6. Exhibits.............................................................20
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EVOLVE ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2005
------------------------
(UNAUDITED)
ASSETS
------
CURRENT ASSETS
Cash and cash equivalents ..................................... $ 3,165
Marketable equity securities, net ............................. 1,500
Inventory ..................................................... 61,824
-----------
Total Current Assets ...................................... 66,489
PROPERTY AND EQUIPMENT, NET ..................................... 6,695
OTHER ASSETS
Other assets .................................................. 3,991
-----------
Total Other Assets ........................................ 3,991
-----------
TOTAL ASSETS .................................................... $ 77,175
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Bank overdraft ................................................ $ 1,425
Accounts payable .............................................. 57,784
-----------
Total Current Liabilities ................................. 59,209
-----------
COMMITMENTS AND CONTINGENCIES ................................... -
STOCKHOLDERS' EQUITY
Cumulative convertible preferred stock, $0.0001 par value,
10,000,000 shares authorized, none issued and outstanding .... -
Common stock, $0.00001 par value, 1,000,000,000 shares
authorized, 48,382,432 shares issued and outstanding ......... 484
Additional paid in capital .................................... 7,956,264
Accumulated deficit ........................................... (7,933,832)
Accumulated other comprehensive loss .......................... (4,950)
-----------
Total Stockholders' Equity ................................ 17,966
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ...................... $ 77,175
===========
See accompanying notes to condensed consolidated financial statements.
1
EVOLVE ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
-----------------------------------------------
(UNAUDITED)
For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
------------- ------------- ------------- -------------
SALES AND REVENUE .............................. $ - $ - $ - $ -
COST OF SALES .................................. - - - -
------------ ------------ ------------ ------------
GROSS PROFIT ................................... - - - -
------------ ------------ ------------ ------------
OPERATING EXPENSES
Selling, general and administrative expenses .. 228,010 273,584 365,440 971,128
------------ ------------ ------------ ------------
Total Operating Expenses ................. 228,010 273,584 365,440 971,128
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Loss from sale of marketable equities ......... - (5,024) - (54,074)
Investment income ............................. - 1 - 13,664
Unrealized gain (loss) on marketable securities - (793) - (1,487)
------------ ------------ ------------ ------------
Total Other Income (Expense) ............. - (5,816) - (41,897)
------------ ------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS ................ (228,010) (279,400) (365,440) (1,013,025)
------------ ------------ ------------ ------------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS ..... (105,385) - (742,325) 170,487
------------ ------------ ------------ ------------
NET LOSS ....................................... $ (333,395) $ (279,400) $ (1,107,765) $ (842,538)
-------- ============ ============ ============ ============
LOSS PER COMMON SHARE - BASIC AND DILUTED
Loss from continuing operations ............... $ - $ (0.01) $ (0.01) $ (0.04)
Income (loss) from discontinued operations .... - - (0.02) 0.01
------------ ------------ ------------ ------------
Net loss per share ............................ $ - $ (0.01) $ (0.03) $ (0.03)
============ ============ ============ ============
Weighted average number of shares outstanding
during the period - basic and diluted ........ 48,382,432 24,770,432 35,442,681 24,770,432
============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
2
EVOLVE ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
2005 2004
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations ....................................... $ (365,440) $(1,013,025)
Net income (loss) from discontinued operations ............................ (742,325) 170,487
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization ........................................... 35,081 72,290
Loss on marketable equity securities .................................... - 54,074
Unrealized loss on marketable equity securities ......................... - 1,487
Provision for uncollectible accounts receivable ......................... 940 -
Provision for uncollectible note receivable ............................. 10,000 -
Loss on impairment of property and equipment ............................ 130,776 -
Stock issued for services ............................................... 377,000 -
Changes in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable .................................................... - 19,086
Inventory .............................................................. 24,885 241,471
Other assets ........................................................... 20,150 (1,059)
Increase (decrease) in:
Accounts payable ....................................................... (6,951) (46,614)
Other accrued liabilities .............................................. - (1,816)
Accrued salaries ....................................................... - 192,449
----------- -----------
Net Cash Used In Operating Activities ............................... (515,884) (311,170)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ...................................................... - (23,673)
Intangibles ............................................................... - (6,500)
Loan receivable - Onspan Networking, Inc., Net ............................ - 675,000
Interest receivable - Onspan Networking, Inc. ............................. - 17,940
Proceeds from sale of marketable equity securities ........................ - 4,926
----------- -----------
Net Cash Provided By Investing Activities ........................... - 667,693
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft ............................................................ 1,425 -
Exercise of stock options ................................................. 20,700 -
Proceeds from sale of common stock ........................................ 220,000 -
Proceeds from loan payable ................................................ 100,000 -
----------- -----------
Net Cash Provided By Financing Activities ........................... 342,125 -
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ....................... (173,759) 356,523
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........................... 176,924 118,912
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ................................. $ 3,165 $ 475,435
=========== ===========
See accompanying notes to condensed consolidated financial statements.
3
EVOLVE ONE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
2005 2004
------------ ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
-------------------------------------------------
Cash paid for income taxes ................................................. $ - $ -
=========== ===========
Cash paid for interest expense ............................................. $ - $ -
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
-----------------------------------------------------------------------
During 2005, a stockholder converted $100,000 in loans payable to common stock.
See accompanying notes to condensed consolidated financial statements.
4
EVOLVE ONE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2005
------------------------
(UNAUDITED)
NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) ORGANIZATION
Evolve One, Inc. (the "Company" or "EONE") is a diversified holding
company that develops and operates Internet and direct retail marketing
companies. The Company's operating subsidiaries have all been
classified as discontinued operations. These include
A1DiscountProducts.com, StogiesOnline.com, Inc. ("Stogies")
(www.CigarCigar.com), an online distributor of brand name premium
cigars and accessories, AuctionStore.com Inc. ("Auctionstore")
(www.Auctionstore.com), is an eBay(R) Trading Assistant and
Interent-basded seller of consigned merchandise whose primary medium of
sales is through eBay(R), AuctionStore Franchise Corp. ("Franchise"), a
recently formed subsidiary that will market and service AuctionStore
franchises and International Internet Venture I, LLC (Ventures") which
from time to time has owned an equity interest in several companies,
some of which are classified as trading securities and some of which
are classified as available-for-sale securities. EONE was incorporated
in Delaware on June 21, 1994 (See Note 9).
The financial statements included in this report have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission for interim reporting and include all adjustments
(consisting only of normal recurring adjustments) that are, in the
opinion of management, necessary for a fair presentation. These
financial statements have not been audited.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such
rules and regulations for interim reporting. The Company believes that
the disclosures contained herein are adequate to make the information
presented not misleading. However, these financial statements should be
read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report for the year ended December 31,
2004, which is included in the Company's Form 10-KSB for the year ended
December 31, 2004. The financial data for the interim periods presented
may not necessarily reflect the results to be anticipated for the
complete year. Certain reclassifications of the amounts presented for
the comparative period have been made to conform to the current
presentation.
(B) ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
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 reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
5
EVOLVE ONE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2005
------------------------
(UNAUDITED)
(C) NET EARNINGS (LOSS) PER SHARE
Basic net earnings (loss) per share is computed by dividing net
earnings (loss) by the weighted-average number of shares outstanding.
Diluted net earnings (loss) per share includes the dilutive effect of
stock options. The calculation of diluted weighted average shares
outstanding for the quarters ending September 30, 2005 and 2004
excludes 98,096,000 and 24,000 common shares respectively, issuable
pursuant to outstanding options. These shares were excluded because
their effect was anti-dilutive.
(D) STOCK-BASED COMPENSATION
The Company granted stock options to directors and employees that are
more fully described in Note 5. The Company accounts for its stock
options using the intrinsic value method under Accounting Principles
Board Opinion ("APB") No. 25, "Accounting For Stock Issued To
Employees."
(E) PRINCIPLES OF CONSOLIDATION
The accompanying condensed consolidated financial statements include
the accounts of EONE, Inc, and its subsidiaries. All significant
inter-company transactions and balances have been eliminated in
consolidation.
(F) REVENUE RECOGNITION
Revenue from sales of cigars, perfume and cologne and auction items
over the Internet is recognized upon shipment. Provision is made at the
time the related revenue is recognized for estimated product returns.
NOTE 2 MARKETABLE EQUITY SECURITIES
SFAS No. 115 "Accounting for Certain Investments in Debt and Equity
Securities," requires that all applicable investments be classified as
trading securities, available-for-sale securities or held-to-maturity
securities. The Company has classified certain of its investments as
trading securities which are reported at fair value, which is defined
to be the last closing price for the listed securities. The unrealized
gains and losses which the Company recognizes from its trading
securities are included in earnings. The Company also has investments
classified as available-for-sale, which are also required to be
reported at fair value, with unrealized gains and losses excluded from
earnings and reported as a separate component of stockholders' equity
(net of the effect of income taxes). Fair value is also defined to be
the last closing price for the listed security. Due to the size of
certain of the Company's investments and their limited trading volume,
there can be no assurance that the Company will realize the value which
is required to be used by SFAS No. 115.
6
EVOLVE ONE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2005
------------------------
(UNAUDITED)
The amortized cost of equity securities as shown in the accompanying
balance sheet and their estimated market value at September 30, 2005
are as follows:
Available-for-sale securities:
Cost ............................................. $ 6,450
Unrealized loss .................................. (4,950)
-------
Marketable equity securities classified as current . $ 1,500
=======
Losses from trading securities that were included in earnings for the
nine months ended September 30, 2005 and 2004 were as follows:
2005 2004
--------- ---------
Realized loss ...................... $ - $ (54,074)
========= =========
Unrealized loss .................... $ - $ (1,487)
========= =========
The change in unrealized gains (losses) from available-for-sale
securities included as a component of equity for the nine months ended
September 30, 2005 and 2004 were as follows:
2005 2004
--------- ---------
Net unrealized gain ................ $ - $ 113,335
Decrease in deferred tax asset ..... - 42,600
Allowance deferred taxes ........... - (42,600)
--------- ---------
Unrealized gain .................... $ - $ 113,335
========= =========
On June 19, 2003, Onspan Networking, Inc. granted 67,500 stock options
to Evolve One, Inc. under a revolving note agreement. The options have
an exercise price of $.10 per share. Onspan Networking, Inc. also
granted on June 19, 2003, 607,500 stock options to Evolve One, Inc. in
the same note agreement. These options have an exercise price of $.30
per share. The Company currently has excluded these "options" on common
stock from the assets of the Company, as the underlying stock, due to
market conditions, are not readily convertible to cash. If conditions
are satisfied and the underlying stock becomes marketable, the
"options" would be reclassified as a derivative and recorded at fair
value as an adjustment through current period results of operations.
7
EVOLVE ONE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2005
------------------------
(UNAUDITED)
NOTE 3 OTHER COMPREHENSIVE INCOME (LOSS)
The following represents a reconciliation of other comprehensive loss
for the nine months ended September 30, 2005:
Accumulated other comprehensive loss at December 31, 2004 $(4,950)
Unrealized gain from marketable equity securities ....... -
-------
Net accumulated other comprehensive loss ................ $(4,950)
=======
NOTE 4 LOAN PAYABLE
On March 22, 2005 the Company entered into a subscription agreement
with one of its directors, Robert Sands for the sale of 20 units of
Evolve One, Inc, for an aggregate price of $100,000. Each unit has a
cost of $5,000 and consists of 100,000 shares of Common Stock at $.05,
and one option consisting of 100,000 shares of common stock exercisable
at $.25 cents per share, which will expire in 3 years. The Company
rejected the subscription agreement and recorded the proceeds as a loan
payable at March 31, 2005. The loan is unsecured, non-interest bearing
and due on demand. During June 2005, the loan was converted into common
stock (See Note 5).
NOTE 5 CAPITAL STOCK
On March 15, 2005, Evolve One entered into a Management Agreement with
Diversifax Inc. ("Diversifax"). Irwin Horowitz, a principal shareholder
and Chief Executive officer of Evolve One, is also a principal
shareholder and Chief Executive Officer of Diversifax. Under the terms
of the agreement, Diversifax will make available to Evolve One its
facilities at 39 Stringham Avenue, Valley Stream, New York; the
services on a part-time basis of 7 persons presently employed by
Diversifax for approximately 100 hours per week; equipment, hardware
and software of Diversifax; and related utilities and overhead
functions at that facility. The term of the agreement is for six months
and may be terminated prior to the conclusion of its term on ten days'
prior written notice by either party, or the agreement may be renewed
for a successive six-month term.
In consideration for the management services and facilities provided by
Diversifax during the initial six-month term, Evolve One will issue to
Diversifax 2,900,000 shares of its common stock. In addition, in the
event the market price of the common stock of Evolve One on the
six-month anniversary date is below $0.15 per share, Evolve One will
issue to Diversifax additional shares of its common stock so that the
common shares provided to Diversifax plus such additional shares of
common stock will be equal in value to $435,000. In addition,
Diversifax will receive 10% of the total amount of the monies received
as a result of their efforts with regard to auctions being completed
for accounts they have introduced to AuctionStore.com, Evolve One's
wholly-owned subsidiary.
8
EVOLVE ONE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2005
------------------------
(UNAUDITED)
Payment of the percentage fee will be made in cash or stock as
determined by Diversifax. As of September 30, 2005, the Company
recorded an expense of $377,000.
On June 20, 2005, Evolve One completed subscription arrangements with
four accredited investors and one unaccredited family member of the
chief executive officer of the Company for a total of $320,000.
Pursuant to the subscription arrangements, the Company issued
19,200,000 shares and an equal number of warrants exercisable at $0.15
per share for a term ending in May 2008. Members of management invested
$200,000 of this amount and received 12,000,000 shares and warrants to
purchase 12,000,000 shares. No commissions or fees were paid in
connection with the issuance. Inasmuch as the investors were all
members of management and accredited investors or, in one instance, was
a relative of a member of management, the shares were exempt from
registration under the Securities Act of 1933 by virtue of Section 4(2)
of that Act.
NOTE 6 STOCK OPTIONS
In November 1999, the Board of Directors approved the establishment of
Evolve One, Inc. Stock Option Plan (the "Plan") to provide incentives
to attract future employees and retain existing key employees with the
Company. The Company has reserved 100,000 shares of common stock for
the grant of qualified incentive options or non-qualified options to
employees and directors of the Company or its parents or subsidiaries,
and to non-employee directors, consultants and advisors and other
persons who may perform significant services for or on behalf of the
Company under the Plan. These options were granted in accordance with
employment agreements. Prices for incentive stock options must provide
for an exercise price of not less than 100% of the fair market value of
the common stock on the date the options are granted unless the
eligible employee owns more than 10% of the Company's common stock for
which the exercise price must be at least 110% of such fair market
value. Non-statutory options must provide for an exercise price of not
less than 85% of the fair market value. The Plan was approved by the
shareholders at a meeting on November 11, 1999.
The Company applied Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for the incentive stock options
granted to employees under its stock option plan in its statements of
operations. During 2005, the Company amended its stock option Plan to
increase the number of shares covered by the Plan from 8,000,000 to
100,000,000 shares of common stock.
A summary of the status of the Company's stock options as of September
30, 2005 and the changes during the nine months ended September 30,
2005 and the year ended December 31, 2004 is presented below:
9
EVOLVE ONE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2005
------------------------
(UNAUDITED)
Weighted
Shares Average Price
----------- -------------
Beginning Balance, January 1, 2004 ..... 128,000 $.0005
Options granted ....................... 2,920,000 .0549
Options exercised ..................... - -
Options cancelled ..................... - -
----------- ------
Ending Balance, December 31, 2004 ...... 3,048,000 .0554
----------- ------
Options granted ....................... 76,000,000 .30
Options exercised ..................... (152,000) .14
Options cancelled ..................... - -
----------- ------
Ending Balance, September 30, 2005 ..... 78,896,000 $.29
=========== ======
Options exercisable at period end ...... 78,896,000
===========
Weighted average fair value of options
granted to employees during the year ... .30 .131
=========== ======
During the nine months ended September 30, 2005, the Company granted
76,000,000 stock options to employees. The Company granted 2,920,000
stock options to certain employees during the year ended December 31,
2004. The Company applies APB Opinion No. 25 and related
interpretations in accounting for stock options issued to employees.
Had compensation cost been determined based on the fair market value at
the grant date, consistent with SFAS 123, the Company's net income
(loss) would have changed to the pro-forma amounts indicated below.
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
2005 2004
------------- -------------
Net loss available to
common stockholders As Reported $ (1,107,765) $(842,538)
Pro Forma $(14,574,436) $(842,538)
Basic and diluted
loss per share As Reported (0.03) (0.02)
Pro Forma (0.41) (0.02)
10
EVOLVE ONE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2005
------------------------
(UNAUDITED)
Weighted
Number Average Weighted Number Weighted
Outstanding at Remaining Average Exercisable Average
Range of September 30, Contractual Exercise at September Exercise
Exercise Price 2005 Life Price 30, 2005 Price
---------------- -------------- ----------- -------- ------------ --------
$.000125 - .5625 78,896,000 7.5 .29 76,896,000 .29
Weighted
Number Average Weighted Number Weighted
Outstanding at Remaining Average Exercisable Average
Range of December 31, Contractual Exercise at December Exercise
Exercise Price 2004 Life Price 31, 2004 Price
---------------- -------------- ----------- -------- ------------ --------
$.000125 - .5625 3,048,000 4.93 .0526 3,048,000 .05
NOTE 7 COMMITMENTS AND CONTINGENCIES
During 2005, Messrs. Schultheis and Tabin entered into separate
Separation and Severance Agreements with the Company pursuant to which
they provided their resignations and also agreed to the termination of
their prior employment agreements with the Company. Both of them
received options to purchase 10,000,000 shares of common stock at an
exercise price of $0.30 per share expiring January 26, 2013, and both
were paid the sum of $6,144 to defray health insurance premiums for the
ensuing six months.
On January 26, 2005, Irwin Horowitz, a director of the Company was
elected as President and Chief Executive Officer of Evolve One. Mr.
Horowitz has entered into an employment agreement with the Company
pursuant to which he will receive an annual salary of $12,000 per year,
reimbursement of his expenses, including travel and lodging costs until
such as time as he relocates his principal residence to the location of
the Company's offices, and an automobile allowance of up to $1,500 on a
monthly basis. In addition, the Company granted to Mr. Horowitz an
option to purchase up to 50,000,000 shares of common stock exercisable
at $0.30 per share and expiring January 26, 2013.
During April 2005, the Company entered into an employment agreement
with an individual as the Director of Franchising. The agreement calls
for the individual to receive a salary of $ 52,000, 3,000,000 stock
options exercisable at $0.075 for a period of three years and 3,000,000
stock options exercisable at $0.15 for a period of three years.
NOTE 8 RELATED PARTY TRANSACTIONS
See Notes 4, 5, 6 and 7.
11
EVOLVE ONE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF SEPTEMBER 30, 2005
------------------------
(UNAUDITED)
NOTE 9 DISCONTINUED OPERATIONS
During October 2005, the Company determined that its business model was
unprofitable and decided to discontinue its operations. Discontinued
operations for the nine month periods ended September 30, 2005 and 2004
are as follows:
2005 2004
--------- ---------
Sales ........................................ $ 114,904 $ 494,953
Cost of goods sold ........................... (81,192) (324,466)
Operating expenses ........................... (776,037) -
--------- ---------
Net income (loss) from discontinued operations $(742,325) $ 170,487
========= =========
NOTE 10 GOING CONCERN
As reflected in the accompanying consolidated financial statements, the
Company has ceased its continuing operations, incurred losses since its
inception, used cash in operations during the nine months ended
September 30, 2005 of $515,884 and has an accumulated deficit of
$7,933,832. This raises substantial doubt about its ability to continue
as a going concern. The ability of the Company to continue as a going
concern is dependent on the Company's ability to raise additional
capital and implement its business plan. The financial statements do
not include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
Management believes that actions presently being taken to obtain
additional funding and implement its business plan provide the
opportunity for the Company to continue as a going concern.
NOTE 11 SUBSEQUENT EVENT
On November 9, 2005, the Board of Directors issued 1,154,404 shares for
services provided by Diversifax subsequent to the termination of the
agreement on September 15, 2005 (See Note 5). As of September 30, 2005,
two weeks had been accrued for services rendered for the period then
ended, and will be subsequently adjusted to reflect the value of the
shares issued.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion and analysis of our financial condition and
results of operations should be read with the unaudited condensed consolidated
financial statements and related notes contained in this report.
Results of Operations
---------------------
During fiscal 2005 our operations have consisted of two Internet based
businesses within the United States, Stogies and AuctionStore. Stogies was an
online distributor and retailer of brand name premium cigars. AuctionStore, was
an eBay(R) Trading Assistant and Internet-based seller of consigned merchandise
whose primary medium of sales is eBay(R). Stogies became operational in November
1998, and AuctionStore became operational in December 2004. Our Stogies segment
generated revenues from the sale of cigars and cigar accessories. Our
AuctionStore.com segment, which was formed during the third quarter of fiscal
2004, generated revenues from selling items that are generated from individuals,
charity fund donation drives and business liquidations. In May 2005 we formed a
new subsidiary, AuctionStore Franchise Corp., to market and service franchises
of AuctionStore.com., and we engaged an expert in franchise development and
marketing. Effective December 31, 2004, we discontinued operations of our
A1Discount Perfume operating line of business as discussed in Note 1 of the
Notes to Condensed Consolidated Financial Statements (unaudited) appearing
elsewhere in this report. While we reported sales from these operations of
$114,904 for the nine months ended September 30, 2005, as a result of
competition in the marketplace and a lack of sufficient working capital, during
October 2005 we determined that our business model was unprofitable and decided
to discontinue the balance of our operations. Because this decision to
discontinue our operations was made prior to the filing of this quarterly
report, our financial statements contained in this report give accounting effect
to the discontinued operations even though the decision was made after September
30, 2005. As a result, our net income (loss) from these discontinued operations,
which includes all revenues during the periods presented less the costs of goods
sold and operating expenses attributable to those revenues, is reported on our
income statement under Income (Loss) from Discontinued Operations. Accordingly,
we did not report any revenues for the three and nine months ended September 30,
2005 or 2004 on the Condensed Consolidated Statement of Operations (unaudited)
appearing elsewhere herein. See Note 9 to the Condensed Consolidated Financial
Statements (unaudited) appearing elsewhere herein. Subsequent to September 30,
2005 we are continuing to sell our remaining inventory. The proceeds from such
sales, as well as the costs of the goods sold and operating expenses related to
these discontinued operations, will be reported in future periods as Income
(Loss) from Discontinued Operations.
For the nine months ended September 30, 2005, we had a loss from
continuing operations of $365,440 as compared to $1,013,025 for the nine months
ended September 30, 2004. The losses from continuing operations for these
periods represent expenses associated with the ongoing administration of our
company, the majority of which are non-cash expenses which represent the value
of stock issued to an affiliate of our CEO through which management services and
facilities are provided to us.
As a result of the discontinuation of our operations we intend to seek
to acquire assets or shares of an entity actively engaged in business which
generates revenues, in exchange for our securities. Our purpose is to seek,
investigate and, if such investigation warrants, acquire an interest in business
opportunities presented to it by persons or firms who or which desire to seek
the perceived advantages our company may offer. We will not restrict our search
to any specific business, industry, or geographical location and we may
participate in a business venture of virtually any kind or nature. This
discussion of the proposed business is purposefully general and is not meant to
13
be restrictive of our virtually unlimited discretion to search for and enter
into potential business opportunities. Management anticipates that it may be
able to participate in only one potential business venture because we have
nominal assets and limited financial resources. This lack of diversification
should be considered a substantial risk to our stockholders because it will not
permit us to offset potential losses from one venture against gains from
another.
We may seek a business opportunity with entities which have recently
commenced operations, or which wish to utilize the public marketplace in order
to raise additional capital in order to expand into new products or markets, to
develop a new product or service, or for other corporate purposes. We may
acquire assets and establish wholly-owned subsidiaries in various businesses or
acquire existing businesses as subsidiaries. We anticipate that the selection of
a business opportunity in which to participate will be complex and extremely
risky. Due to general economic conditions, rapid technological advances being
made in some industries and shortages of available capital, management believes
that there are numerous firms seeking the perceived benefits of a publicly
registered corporation. These perceived benefits may include facilitating or
improving the terms on which additional equity financing may be sought,
providing liquidity for incentive stock options or similar benefits to key
employees, providing liquidity (subject to restrictions of applicable statutes),
for all stockholders and other factors. Potentially, available business
opportunities may occur in many different industries and at various stages of
development, all of which will make the task of comparative investigation and
analysis of such business opportunities extremely difficult and complex.
The analysis of new business opportunities will be undertaken by, or
under the supervision of, Dr. Horowitz our CEO, who may not be considered a
professional business analyst. Dr. Horowitz will be the key person in the
search, review and negotiation with potential acquisition or merger candidates.
We intend to concentrate on identifying preliminary prospective business
opportunities which may be brought to our attention through present associations
of our officers and directors, or by our stockholders. In analyzing prospective
business opportunities, we will consider such matters as the available
technical, financial and managerial resources; working capital and other
financial requirements; history of operations, if any; prospects for the future;
nature of present and expected competition; the quality and experience of
management services which may be available and the depth of that management; the
potential for further research, development, or exploration; specific risk
factors not now foreseeable but which then may be anticipated to impact our
proposed activities; the potential for growth or expansion; the potential for
profit; the perceived public recognition of acceptance of products, services, or
trades; name identification; and other relevant factors. We will not acquire or
merge with any company for which audited financial statements cannot be obtained
within the time period prescribed by applicable rules of the Securities and
Exchange Commission which is presently four business days from the closing date
of the transaction. This requirement for readily available audited financial
statement may require us to preclude a transaction with a potential candidate
which might otherwise be beneficial to our stockholders.
We will not restrict our search for any specific kind of company, but
may acquire a venture which is in its preliminary or development stage, which is
already in operation, or in essentially any stage of its corporate life. It is
impossible to predict at this time the status of any business in which we may
become engaged, in that such business may need to seek additional capital, may
desire to have its shares publicly traded, or may seek other perceived
advantages which we may offer. However, we do not intend to obtain funds in one
or more private placements to finance the operation of any acquired business
opportunity until such time as we have successfully consummated such a merger or
acquisition.
14
We anticipate that we will incur nominal expenses in the implementation
of our business plan described herein. Because we have no capital with which to
pay these anticipated expenses, these expenses will be paid by Dr. Horowitz with
his personal funds as interest-free loans. However, the only opportunity to have
these loans repaid will be from a prospective merger or acquisition candidate.
Repayment of any loans made on our behalf will not impede, or be made
conditional in any manner, to consummation of a proposed transaction.
In implementing a structure for a particular business acquisition, we
may become a party to a merger, consolidation, reorganization, joint venture, or
licensing agreement with another corporation or entity. We may also acquire
stock or assets of an existing business. On the consummation of a transaction,
it is probable that our present management and stockholders will no longer be in
control of our company. In addition, our directors may, as part of the terms of
the acquisition transaction, resign and be replaced by new directors without a
vote of our stockholders or may sell their stock. Any terms of sale of the
shares presently held by officers and/or directors will be also afforded to all
other stockholders on similar terms and conditions. Any and all such sales will
only be made in compliance with federal and applicable state securities laws.
We anticipate that any securities issued in any such reorganization
would be issued in reliance upon exemption from registration under applicable
federal and state securities laws. In some circumstances, however, as a
negotiated element of a transaction, we may agree to register all or a part of
such securities immediately after the transaction is consummated or at specified
times thereafter. If such registration occurs, of which there can be no
assurance, it will be undertaken by the surviving entity after we have
successfully consummated a merger or acquisition and we are no longer considered
a "shell" company. Until such time as this occurs, we will not attempt to
register any additional securities. The issuance of substantial additional
securities and their potential sale into any trading market which may develop in
our securities may have a depressive effect on the value of our securities in
the future, if such a market develops, of which there is no assurance.
While the actual terms of a transaction to which we may be a party
cannot be predicted, it may be expected that the parties to the business
transaction will find it desirable to avoid the creation of a taxable event and
thereby structure the acquisition in a so-called "tax-free" reorganization under
Sections 368(a)(1) or 351 of the Internal Revenue Code. In order to obtain
tax-free treatment, it may be necessary for the owners of the acquired business
to own 80% or more of the voting stock of the surviving entity. In such event,
our stockholders, would retain less than 20% of the issued and outstanding
shares of the surviving entity, which would result in significant dilution in
the equity of such stockholders.
We will participate in a business opportunity only after the
negotiation and execution of appropriate written agreements. Although the terms
of such agreements cannot be predicted, generally such agreements will require
some specific representations and warranties by all of the parties thereto, will
specify certain events of default, will detail the terms of closing and the
conditions which must be satisfied by each of the parties prior to and after
such closing, will outline the manner of bearing costs, including costs
associated with our attorneys and accountants, will set forth remedies on
default and will include miscellaneous other terms.
We do not intend to make any loans to any prospective acquisition or
merger candidates or to unaffiliated third parties. We do not intend to provide
our stockholders with any complete disclosure documents, including audited
financial statements, concerning an acquisition or merger candidate and its
business prior to the consummation of any acquisition or merger transaction, so
stockholders will be dependent upon the judgment of Dr. Horowitz and our Board
of Directors regarding the fairness of any transaction.
15
Liquidity and Capital Resources
-------------------------------
Liquidity is the ability of a company to generate funds to support its
current and future operations, satisfy its obligations and otherwise operate on
an ongoing basis. We had working capital of $7,280 at September 30, 2005, a
decrease of $200,537 from December 31, 2004. The working capital change consists
primarily of a decrease of $(173,759) in cash and a decrease in inventory of
$(24,885).
Net cash used in operating activities for the nine months ended
September 30, 2005 was $515,884 as compared to $311,170 for the nine months
ended September 30, 2004. This increase of $204,714, or approximately 66%, is
primarily attributable to:
o a decrease in our net loss from continuing operations of $647,585
which was offset by an increase in our net loss from discontinued
operations of $912,812,
o an increase of $10,940 in provisions for uncollectible accounts
receivable and note receivable,
o an increase of $130,776 in loss on impairment of property and
equipment related to a one-time write down of certain computer
equipment, and
o an increase of $377,000 in stock-based compensation representing the
current portion of the value of the shares of our common stock
issued to a company controlled by our CEO as compensation for
management services and the provision of facilities to us,
which were primarily offset by:
o a decrease of $37,209 in depreciation and amortization,
o a decrease of $55,561 in losses on marketable equity securities,
o a decrease of $19,086 in accounts receivable,
o a decrease of $216,586 in inventory,
o a decrease of $21,209 in other assets,
o a decrease of $39,663 in accounts payable,
o a decrease of $1,816 in other accrued liabilities, and
o a decrease of $192,449 in accrued salaries.
Net cash provided by investing activities was $0 for the nine months
ended September 30, 2005 as compared to $667,693 for the nine months ended
September 30, 2004. Net cash provided by financing activities for the nine
months ended September 30, 2005 was $342,125 as compared to $0 for the nine
months ended September 30, 2004. The increase in the 2005 period represents
$1,425 benefit from the cash overdraft, $20,700 received from the exercise of
stock options and $100,000 received as a loan from one of our directors as
further described in Note 4 of the Notes to Condensed Consolidated Financial
Statements (unaudited) appearing elsewhere herein and $220,000 in net proceeds
from the sale of our equity securities as described in Note 5 of the Notes to
Condensed Consolidated Financial Statements (unaudited) appearing elsewhere
herein.
At September 30, 2005 we had cash and cash equivalents of $3,165 and an
accumulated deficit of $7,933,832. The report from our independent registered
public accounting firm on our audited financial statements at December 31, 2004
contains an explanatory paragraph regarding doubt as to our ability to continue
as a going concern as a result of our significant recurring losses from
operations since inception. As discussed earlier in this report, in October 2005
we discontinued our operations and are now seeking to acquire assets or shares
of an entity actively engaged in business which generates revenues, in exchange
for our securities. We cannot predict when, if ever, we will be successful in
this venture and, accordingly, we may be required to cease operations at any
16
time. We do not have sufficient working capital to pay our operating costs for
the next 12 months. As described later in this report under Part II, Item 5.
Other Events, an entity affiliated with our CEO and principal stockholder is
providing management services and facilities to us under an oral agreement and
we will pay for these services and facilities through the issuance of shares of
our common stock. We entered into this arrangement to preserve what cash is
currently available to us. We will, however, require additional funds to pay our
legal, accounting and other fees associated with our company and its filing
obligations under federal securities laws, as well as to pay our other accounts
payable generated in the ordinary course of our business. We have no commitments
from any party to provide such funds to us and are dependent upon proceeds we
may receive from the sale of our inventory to generate cash. If such sales do
not generate sufficient cash to satisfy these obligations, or we are unable to
obtain additional capital as necessary until such time as we are able to
conclude a business combination, we will be unable to satisfy our obligations
and otherwise continue to meet our reporting obligations under federal
securities laws. In that event, our stock would no longer be quoted on the OTC
Bulletin Board and our ability to consummate a business combination with upon
terms and conditions which would be beneficial to our existing stockholders
would be adversely affected.
Critical Accounting Policies
----------------------------
We have identified the policies outlined below as critical to our
business operations and an understanding of our results of operations. The
listing is not intended to be a comprehensive list of all of our accounting
policies. In many cases, the accounting treatment of a particular transaction is
specifically dictated by accounting principles generally accepted in the United
States, with no need for management's judgment in their application. The impact
and any associated risks related to these policies on our business operations is
discussed throughout Management's Discussion and Analysis or Plan of Operations
where such policies affect our reported and expected financial results. For a
detailed discussion on the application of these and other accounting policies,
see the Notes to Condensed Consolidated Financial Statements appearing elsewhere
herein. Our preparation of the financial statements requires us to make
estimates and assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the date of our
financial statements, and the reported amounts of revenue and expenses during
the reporting period. There can be no assurance that actual results will not
differ from those estimates.
New Accounting Standards
------------------------
In March 2004, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 03-01, "The Meaning of Other-Than-Temporary Impairment
and Its Application to Certain Investments." EITF 03-01 provides guidance on
other-than-temporary impairment models for marketable debt and equity securities
accounted for under SFAS No. 115, "Accounting for Certain Investments in Debt
and Equity Securities," and SFAS No. 124, "Accounting for Certain Investments
Held by Not-for-Profit Organizations," and non-marketable equity securities
accounted for under the cost method. The EITF developed a basic three-step model
to evaluate whether an investment is other-than-temporarily impaired. In
September 2004, the FASB issued FASB Staff Position EITF 03-01-1, which delays
the effective date until additional guidance is issued for the application of
the recognition and measurement provisions of EITF 03-01 to investments in
securities that are impaired; however, the disclosure requirements are effective
for annual periods ending after June 15, 2004. The adoption of the disclosure
provisions of EITF 03-01 did not have a material effect on our results of
operations or financial condition.
17
In November 2004, the Financial Accounting Standards Board ("FASB")
issued SFAS 151, Inventory Costs--An Amendment Of ARB No. 43, Chapter 4. The
Statement Amends The Guidance Of ARB No. 43, Chapter 4, Inventory Pricing, by
clarifying that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) should be recognized as current-period
charges and by requiring the allocation of fixed production overheads to
inventory based on the normal capacity of the production facilities. It does not
appear that this Statement will have a material effect on our financial
position, operations or cash flows when it becomes effective in 2006.
In December 2004, the FASB issued SFAS No. 123R "Share-Based Payment"
("SFAS 123R"), a revision to SFAS No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123"), and superseding APB Opinion No. 25 "Accounting for
Stock Issued to Employees" and its related implementation guidance. SFAS 123R
establishes standards for the accounting for transactions in which an entity
exchanges its equity instruments for goods or services, including obtaining
employee services in share-based payment transactions. SFAS 123R applies to all
awards granted after the required effective date and to awards modified,
repurchased, or cancelled after that date. Adoption of the provisions of SFAS
123R were effective as of the beginning of the first interim or annual reporting
period that began after December 15, 2005. We are currently in the process of
evaluating the potential impact that the adoption of SFAS 123R will have on our
consolidated financial position and results of operations.
In December 2004, the FASB issued SFAS 153, "Exchanges of Non-monetary
Assets, an amendment of APB 29, Accounting for Non-monetary Transactions." The
amendments made by SFAS 153 are based on the principle that exchanges of
non-monetary assets should be measured based on the fair value of the assets
exchanged. Further, the amendments eliminate the narrow exception for
non-monetary exchanges of similar productive assets and replace it with a
broader exception for exchanges of non-monetary assets that do not have
commercial substance. Previously, APB 29 required that the accounting for an
exchange of a productive asset for a similar productive asset or an equivalent
interest in the same or similar productive asset should be based on the recorded
amount of the asset relinquished. APB 29 provided an exception to its basic
measurement principle (fair value) for exchanges of similar productive assets.
The FASB believes that exception required that some non-monetary exchanges,
although commercially substantive, be recorded on a carryover basis. By focusing
the exception on exchanges that lack commercial substance, the FASB believes
SFAS 153 produces financial reporting that more faithfully represents the
economics of the transactions. SFAS 153 was effective for non-monetary asset
exchanges occurring in fiscal periods beginning after June 15, 2005. Earlier
application is permitted for non-monetary asset exchanges occurring in fiscal
period beginning after the date of issuance. The provisions of this Statement
shall be applied prospectively. We do not believe that SFAS 153 will have a
material impact on our consolidated financial statements.
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are recorded at cost and are depreciated
on a straight-line basis over the estimated useful lives of such assets. Changes
in circumstances such as technological advances, changes to our business model
or changes in our capital strategy could result in the actual useful lives
differing from our estimates. In those cases where the we determine that the
useful life of property, plant and equipment should be shortened, we will
depreciate the net book value in excess of the estimated salvage value over its
revised remaining useful life.
18
Deferred Tax Assets
-------------------
We record a valuation allowance to reduce the carrying value of our
deferred tax assets to an amount that is more likely than not to be realized.
While we have considered future taxable income and prudent and feasible tax
planning strategies in assessing the need for the valuation allowance, should we
determine that we would not be able to realize all or part of our net deferred
tax assets in the future, an adjustment to the carrying value of the deferred
tax assets would be charged to income in the period in which such determination
was made.
Investments
-----------
Investments are classified as either available-for-sale or trading
securities and are held for resale in anticipation of short-term market
movements or until such securities are registered or are otherwise unrestricted.
At September 30, 2005, investments consisted of common stock and options to
acquire common stock held for resale.
Trading account assets, consisting of marketable equity securities, are
stated at fair value. Unrealized gains or losses on trading securities are
recognized in the statement of operations on a monthly basis based on changes in
the fair value of the security as quoted on national or inter-dealer stock
exchanges.
Available-for-sale assets, which are also required to be reported at
fair value, with unrealized gains and losses excluded from earnings, are
reported as a separate component of stockholders' equity (net of the effect of
income taxes).
ITEM 3. CONTROLS AND PROCEDURES
Our management, which includes our CEO who is our sole officer, has
conducted an evaluation of the effectiveness of our disclosure controls and
procedures (as defined in Rule 13a-14(c) promulgated under the Securities and
Exchange Act of 1934, as amended) as of a date (the "Evaluation Date") as of the
end of the period covered by this report. Based upon that evaluation, our CEO
has concluded that our disclosure controls and procedures are effective for
timely gathering, analyzing and disclosing the information we are required to
disclose in our reports filed under the Securities Exchange Act of 1934, as
amended. There have been no significant changes made in our internal controls or
in other factors that could significantly affect our internal controls
subsequent to the end of the period covered by this report based on such
evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On November 9, 2005 we issued Diversifax 1,154,404 shares of our common
stock to Diversifax Inc. as compensation for its management services and
facility usage from the period of September 16, 2005 through September 30, 2005
under the terms of an oral agreement described below under Item 5. The
securities were issued in a transaction exempt from registration under the
Securities Act of 1933 in reliance on Section 4(2) of that act and the recipient
was an accredited investor.
19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On March 15, 2005, we entered into a six month Management Agreement
with Diversifax Inc. to provide us management services and facilities. Dr. Irwin
Horowitz, a principal shareholder and Chief Executive officer of our company, is
also a principal shareholder and Chief Executive Officer of Diversifax. As
consideration we issued Diversifax 2,900,000 shares of our common stock. In
addition, in the event the market price of our common stock on the six-month
anniversary date was below $0.15 per share, we agreed to issue Diversifax
additional shares of our common stock so that the common shares provided to
Diversifax plus such additional shares of common stock would be equal in value
to $435,000. The agreement terminated on September 15, 2005 under its terms and
as the market price of our common stock exceeded $0.15 per share we were not
obligated to issue Diversifax any additional shares of our common stock.
Diversifax has continued to provide services to us after September 15, 2005
under an oral agreement and, as set forth in Item 1 above, we issued Diversifax
an additional 1,154,404 shares of our common stock as compensation for these
services from period of September 16, 2005 through September 30, 2005. We will
continue to utilize these services under an oral agreement for the foreseeable
future and will compensate Diversifax for these services in an amount of shares
of our common stock equal to $72,500 per month based upon the fair market value
of our stock on the date of issuance.
ITEM 6. EXHIBITS
Exhibit No. Description
31.1 Rule 13a-14(a)/15d-14(a) certification of President
31.2 Rule 13a-14(a)/15d-14(a) certification of principal accounting officer
32.1 Section 1350 certification
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned as
duly authorized.
EVOLVE ONE, INC.
By: /s/ Irwin Horowitz
Irwin Horowitz, President and CEO,
principal executive officer and
principal accounting officer
Dated: November 16, 2005
20