FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 2002
OR
[ ] 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 0-31949
INNOFONE.COM, INC.
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(Exact name of registrant as specified in its charter)
Nevada 98-0202313
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3470 Olney-Laytonsville Rd., Suite 118, Olney, MD 20832
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(Address of principal executive office) (Zip Code)
(301) 774-8294
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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The number of shares outstanding of each of Issuer's classes of common equity as
of December 31, 2002.
Common Stock at Par Value $0.001 123,880,331
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Title of Class Number of Shares
Transitional Small Business Disclosure Format yes no X
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This document is made up of 14 pages.
INNOFONE.COM, INC.
Index
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Page
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Part I
Item 1. Financial Statements
Condensed Balance Sheet................................. 4
Condensed Statements of Operations...................... 5
Statements of Shareholders' Deficiency and Comprehensive
Loss.................................................... 6
Statement of Changes in Financial Position.............. 7
Notes to Condensed Financial Statements................. 8
Item 2. Management's Discussion and Analysis or Plan of
Operation.............................................. 11
Part II
Items 1-6. Other Information....................................... 13
Signatures.............................................. 14
2
(Stated in United States dollars)
I N N O F O N E . C O M ,
I N C O R P O R A T E D
For the quarter ended DECEMBER 31, 2002
(Unaudited)
3
INNOFONE.COM, INCORPORATED
(Stated in United States dollars)
December 31, 2002 with comparative figures as at June 30, 2002
========================================================================================
December 31, 2002 June 30,2002
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(unaudited) (audited)
Assets
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Current assets:
Prepaid expenses and deposits $ 25,000 $ -
-----------------------------------------------------------------------------------
25,000
Investment in 908651 Alberta Ltd. 210,000 210,000
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$ 235,000 $ 210,000
========================================================================================
Liabilities and Shareholders' Deficiency
----------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 220,272 $ 212,572
Due to officers and directors 104,000 104,000
Convertible debt 500,000 500,000
Note payable 150,000 150,000
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974,272 966,572
Shareholders' deficiency:
Share capital (note 2):
Common shares 4,854,522 4,841,522
Preferred shares 1,250 1,250
Additional paid-in capital 7,841,593 7,719,593
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12,697,365 12,562,365
Deficit (13,436,637) (13,318,937)
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(739,272) (756,572)
Future operations (note 1(a))
Subsequent event (note 5)
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$ 235,000 $ 210,000
========================================================================================
See accompanying notes to financial statements.
4
INNOFONE.COM, INCORPORATED
(Stated in United States dollars)
For the three months ended December 31, 2002 with comparative figures for the
three months ended December 31, 2001 and the year ended June 30, 2002
==============================================================================================================
Three months ended Year ended
December 31, 2002 December 31, 2001 June 30,2002
--------------------------------------------------------------------------------------------------------------
(unaudited) (unaudited) (audited)
Sales $ - $ (note 4) $ -
Cost of sales - - -
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Gross profit - - -
Forgiveness of debt - (294,908)
Selling, general and administrative expenses 21,170 - 101,968
Net gain on sale of Digital Micro Distribution
Canada Incorporated - - (143,000)
--------------------------------------------------------------------------------------------------------------
21,170 - 335,940
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Net income (loss) (21,170) - 335,940
==============================================================================================================
Basic net loss per share $ nil $ nil $ nil
==============================================================================================================
Weighted average number of common
shares outstanding 114,788,000 31,689,000 79,738,604
==============================================================================================================
See accompanying notes to financial statements.
5
INNOFONE.COM, INCORPORATED
Statements of Shareholders' Deficiency and Comprehensive Loss
(Stated in United States dollars)
Three months ended December 31, 2002 with comparative figures for the year ended
June 30, 2002
===================================================================================================================================
Common Accumulated
Additional share other
Common Preferred paid-in purchase comprehensive
shares shares capital warrants Deficit income Total
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Balance June 30, 2001 4,772,715 1,250 7,098,052 - (13,654,877) - (1,782,860)
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Convertible notes converted to stock 520 415,480 - - - 416,000
Stock options exercised 475 - (427 - - - 48
Issuance of stock for equipment 146 - 7,154 - - - 7,300
Issuance of stock for Digital Micro
Distribution Canada Inc. 67,000 - - - - - 67,000
Convertible notes converted to stock 666 199,334 200,000
Net earnings 335,940
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Balance, June 30, 2002 4,841,522 1,250 7,719,593 - (13,318,937) - (756,572)
Net loss for the three months ended
December 31, 2002 (117,700) (117,700)
Stock issued for consulting services 7,500 72,500 80,000
Stock issued for legal services 500 4,500 5,000
Stock issued for investor relation services 5,000 45,000 50,000
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Balance, December 31, 2002 4,854,522 1,250 $ 7,841,593 $ - $ (13,436,637) $ - $ (739,272)
===================================================================================================================================
See accompanying notes to financial statements.
6
INNOFONE.COM, INCORPORATED
Statement of Changes in Financial Position
(Stated in United States dollars)
For the quarter ended December 31, 2002 with comparative figures for the year
ended June 30, 2002
===========================================================================================
December 31, 2002 June 30,2002
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(unaudited) (audited)
Cash flows provided by (used in):
Operations:
Net earnings (loss) $ (21,170) $ 335,940
Change in non-cash operating working capital
Prepaid expenses and deposits - 225
Accounts payable and accrued liabilities - (19,938)
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(21,170) 316,227
Financing:
Increase(decrease) in bank indebtedness - (546)
Due to officers and directors - (180,470)
Issuance of capital stock 21,170 690,348
Convertible debt (616,000)
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21,170 (106,668)
Investments:
Investment in 908651 Alberta Ltd. - (210,000)
Capital assets - 441
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- (209,559)
Effect of exchange rate changes on cash - -
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Increase (decrease) in cash and cash equivalents nil nil
Cash and cash equivalents, beginning of period nil nil
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Cash and cash equivalents, end of period $ nil $ nil
===========================================================================================
Cash interest paid for the quarter ended December 31, 2002 and the year ended
June 30, 2002 was $0 and $0 respectively.
See accompanying notes to financial statements
7
INNOFONE.COM, INCORPORATED
Notes to Financial Statements
(Stated in United States dollars)
(Unaudited)
For the quarter ended December 31, 2002
================================================================================
Innofone.com, Incorporated (the "Company") is incorporated under the laws of the
State of Nevada. Effective October 15, 2001, the Company acquired Digital Micro
Distribution Canada Inc. ("DMD Canada") which operated in Canada as a reseller
of used computer related products. DMD Canada, the Company's legal subsidiary
was sold pursuant to an agreement of purchase and sale dated June 11, 2002. The
Company is currently working on a strategy to raise capital in order to survive.
1. Basis of presentation:
(a) Going concern Issue:
The Company currently has a going concern issue as there are
insufficient assets or prospective cash flows to fund its liabilities.
The effect of this on the Company being able to meet its current or
future obligations cannot be determined.
(b) Bulletin Board Listing:
In January 2001, the Company completed a Registration Statement that
has been filed with the United States Securities and Exchange
Commission in order for the Company's shares to be eligible for
trading in the United States on the NASD over-the- counter Bulletin
Board.
(c) Acquisition and Disposition of Digital Micro Distribution Canada Inc.:
On October 15, 2001, the directors of the Company approved a share
exchange takeover bid whereby, all of the common shares of Digital
Micro Distribution Canada Inc. ("DMD Canada") were acquired in
exchange for 67,000,000 shares of its common stock. The exchanged
shares would be "restricted securities" as defined under Rule 144(A)
under the Securities Act of 1993, as amended. The result of this
transaction is that the former shareholders of DMD Canada would hold
67% of the outstanding common shares of the Company.
Pursuant to an agreement dated June 11, 2002 between the Company and
908651 Alberta Ltd. operating as Qvest Management Group ("Qvest"), the
Company disposed of its interest in DMD Canada in exchange for
1,750,000 shares of Qvest. This investment represents approximately a
13.5% interest in Qvest. Qvest has undertaken to amalgamate with
another public company by reverse takeover within 6 months upon
meeting the criteria for a qualifying transaction for a company with
approval from the TSX Venture Exchange. The value of the Company's
investment in Qvest has been recorded at the approximate book value of
DMD Canada as at the date of the transaction.
8
INNOFONE.COM, INCORPORATED
Notes to Financial Statements
(Stated in United States dollars)
(Unaudited)
For the quarter ended December 31, 2002
================================================================================
1. Basis of Presentation (continued):
(d) Interim financial statements:
These unaudited financial statements should be read in conjunction
with the Company's annual audited financial statements which were
completed as of June 30, 2002. In the opinion of management, the
unaudited interim financial statements have been prepared on the same
basis as the audited financial statements and include all adjustments
(consisting only of normal recurring adjustments) necessary for the
fair presentation of the results of such periods. The results of
operations for the interim periods are not necessarily indicative of
the results of operations for the full year.
2. Share Capital:
The number of outstanding common shares of the Company as at December 31, 2002
is computed as follows:
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Common Preferred
Shares Shares
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Existing outstanding shares
as at September 30, 2002 113,022,505 1,250,000
Shares issued for debt conversion 10,857,826
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Outstanding shares
as at December 31, 2002 123,880,331 1,250,000
=====================================================================================
9
INNOFONE.COM, INCORPORATED
Notes to Financial Statements (continued)
(Stated in United States dollars)
(unaudited)
For the quarter ended December 31, 2002
================================================================================
3. Stock options :
The following table summarizes the stock option activity:
=========================================================================
Number of Weighted-
average
options exercise price
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Outstanding at June 30, 2001 3,667,000 $ 0.42
Exercised (475,000) 0.0001
Expired or forfeited (3,032,000) 0.47
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Outstanding (held by 3 optionees) at June 30,
2002 and December 31, 2002 160,000 $ 0.40
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4. Comparative figures:
The 2001 quarterly statements of operation and cash flows have not been
presented in these financial statements as the 2001 figures represented the
consolidated operations and cash flows of the Company and its subsidiary.
As the subsidiary was sold as described in Note 1(c), the comparative
figures would not be meaningful to the readers of these financial
statements.
5. Subsequent event:
Effective November 7, 2002, the Company entered into a non-binding letter
of intent to acquire a majority interest in Universal Life Holding
Corporation ("Universal") of Illinois. Completion of the transaction is
subject to the negotiation of a stock purchase agreement whereby the
Company will acquire approximately 90% of Universal in exchange for
approximately 130,000,000 shares of the Company, and is conditional upon
completion of due diligence, third party consents and regulatory body
approval. The parties agreed to cancel the agreement with no future action
required by either party.
10
Management's Discussion and Analysis
For the Quarter ended December 31st, 2002
Forward-Looking Statements
--------------------------
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations and the Consolidated
Financial Statements and Notes thereto for the year ended June 30, 2002 filed
with the SEC on October 15, 2002. This quarterly report includes forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934. Words such as "may," "plans," "expects," "anticipates," "approximates,"
"believes," "estimates," "intends," "hopes," "potential," or "continue", and
variations of such words and similar expressions, are intended to identify such
forward-looking statements. The Company intends such forward-looking statements,
all of which are qualified by this statement, to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Litigation
Securities Reform Act of 1995, and is including this statement for purposes of
complying with these safe harbor provisions. The Company has based these
statements on its current expectations and projections about future events.
These forward-looking statements are not guarantees of future performance, and
are subject to risks and uncertainties that could cause actual results to differ
materially from those projected in these statements. Forward-looking statements
include, but are not limited to:
Our expectations regarding collectable receivables from Innofone Canada is low.
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Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's views only as of the date hereof. The
Company is not obligated to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this Quarterly Report on Form 10-QSB might not occur.
Readers should carefully review the risk factors described in the previously
filed Form 10-KSB and in any other documents the Company files from time to time
with the Securities and Exchange Commission, including any future Annual Reports
on Form 10-KSB and Quarterly Reports on Form 10-QSB.
Overview
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Innofone.com Inc. currently operates out of the offices of 3470
Olney-Laytonsville Rd Olney, MD 2082.
11
The Company currently does not have sufficient funds with which to sustain its
operations. The company plans to issue restricted 144 stock to try and raise
operating capital for the company. There is no assurance that this can be done.
There is little chance that the company will receive a dividend from the
bankruptcy of its previously owned subsidiary, Innofone Canada.
The Company is currently reviewing and implementing new disclosure controls and
procedures to ensure that they fully comply with the new Securities Exchange Act
Rules 13a-15 and 15d-15.
(a) Plan of Operations
(b) Acquisitions
(c) Future
The company plans to look for new acquisitions and will not invest or operate
any current or previously owned subsidiaries.
The company plans to relocate to Maryland and may change it's offices again if
the company is successful in finding a new acquisition.
The Company currently has a going concern issue, as there are insufficient
assets or prospective cash flows to fund its liabilities. While the Company is
hopeful that it can raise money through the sail of stock, there are no
assurances that this can be achieved, it cannot be determined if the company
will be able to meet its current or future obligations.
Due to the going concern issues and lack of sufficient operating funds, the new
Board is currently funding operations.
(b) Results of Operations
As reflected in the company's statement of operations the company has recorded
no sales for the year and the comparative information has been deleted due to
the disposition of DMD Canada. The company does not currently conduct any
operations.
The company has been increasing its trade debts since year-end June 30th 2002
and is currently not paying any wages. The current officers and directors are
covering all expenses of the company via short-term loans and advances. The
company has paid for consulting and legal expenses with the issuance of common
shares and will continue to do so. The services include the preparation of
company filings, the search of acquisition targets and legal expenses.
Liquidity and Capital Resources
As previously mentioned, the company has a going concern issue, as there are
insufficient assets or prospective cash flows to fund its liabilities. The
effect of this on the company is grave and the future of the company is in great
peril.
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PART II- OTHER INFORMATION.
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Item 1. Legal Proceedings.
--------------------------
There are currently no legal proceedings against the company at this time.
Item 2. Change in Securities.
-----------------------------
The company issued an additional Ten Million Eight Hundred Fifty Seven Thousand
Eight Hundred and Twenty Six Common Shares as per a debt conversion. No
additional shares were issued during the quarter ended December 31, 2002.
Item 3. Defaults Upon Senior Securities.
----------------------------------------
There was no material default in payments of any Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
------------------------------------------------------------
There were no matters requiring a vote of security holders during this period.
Item 5. Other Information.
--------------------------
Subsequent event, the company entered into a non-binding letter of intent with
Universal Life Holding Corporation (Universal) in October 2002. Under the terms
of the agreement, the Company will acquire approximately 5,500,000 shares of
common stock of Universal in exchange for 130,000,000 common stock of
Innofone.com Inc. If a definitive agreement were reached, this action would
effectively change the control of the Company. The companies have agreed to
cancel this agreement and are looking at future opportunities together. There is
no assurance that any thing will be consummated.
The Company authorize the sale of a controlling interest in it's newly formed
subsidiary, Compubec, in order to for Compubec to raise the required investment
capital it needed to survive, and as set by the government of Quebec and its
agencies. Due to the past and current trading price of the companies' common
stock, the sale of a convertible note, or the sale of securities is and
unfavorable to shareholders at this time. In addition no accredited investor was
willing to help fund the company to provide the needed funds for this
subsidiary.
Resignation of a former officer and director occurred in November of 2002
without dispute. A new Board was app le the vacancies. Mr. Frederic Richardson
has accepted the position of Chairman and President. Ed Huyta has accepted the
position of Director and Treasurer and Richard Swartzman has accepted the
position of Secretary and Director. Mr. Jamie Lobo is still our CFO.
13
SIGNATURES
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Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INNOFONE.COM, INC.
Date: February 6, 2003 By: /s/ Frederic Richardson
---------------------------------
Frederic Richardson, President
14