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, 2003
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, 2003.
Common Stock at Par Value $0.001 6,920,270
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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, 2003
(Unaudited)
3
INNOFONE.COM, INCORPORATED
(Stated in United States dollars)
December 31, 2003 with comparative figures as at June 30, 2003
========================================================================================
December 31, 2003 June 30,2003
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(unaudited) (audited)
Assets
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Current assets: $ 0 $ 0
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0
Investment in 908651 Alberta Ltd. 210,000 210,000
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$ 210,000 $ 210,000
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Liabilities and Shareholders' Deficiency
-----------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 316,572 $ 316,572
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316,572 316,572
Shareholders' deficiency:
Share capital (note 2):
Common shares 4,877,319 4,870,700
Preferred shares 1,250 1,250
Additional paid-in capital 8,941,183 8,550,112
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13,819,752 13,422,062
Deficit (13,926,564) (13,528,634)
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(106,572) (106,572)
Future operations (note 1(a))
Subsequent event (note 5)
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$ 210,000 $ 210,000
========================================================================================
See accompanying notes to financial statements.
4
INNOFONE.COM, INCORPORATED
(Stated in United States dollars)
For the three months ended December 31, 2003 with comparative figures for the
three months ended December 30, 2002 and the year ended June 30, 2003
========================================================================================================
Three months ended Year ended
December 31, 2003 December 31, 2002 June 30, 2003
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(unaudited) (unaudited) (audited)
Sales $ - $ - $ -
Cost of sales - - -
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Gross profit - - -
Selling, general and administrative expenses 395,000 21,170 -
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395,000 21,170 209,697
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Net income (loss) (395,000) (21,170) (209,697)
========================================================================================================
Basic net loss per share $ .08 $ nil $ 1.37
========================================================================================================
Weighted average number of common
shares outstanding 4,955,891 114,788,000 152,682
========================================================================================================
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 30, 2003 with comparative figures for the year ended
June 30, 2003
===================================================================================================================================
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)
Stock issued for debt conversations 2,300 647,700 65,000
Stock issued for legal services 500 1,887 2,387
Stock issued for consulting 26,378 180,932
Net Loss (209,697) (209,697)
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Balance, June 30, 2003 4,870,788 1,250 8,550,112 - (13,528,634) - (106,592)
Shares issued for consulting 2,690 2,690
Net Loss (2,690) (2,690)
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Balance, September 30, 2003 4,873,390 $ 1,250 $ 8,550,112 $ - $ (13,531,564) $ - $ (106,572)
Stock issued for consulting 1,429 143,571 145,000
Stock issued to Director 2,500 247,500 250,000
Net Loss (395,000) (395,000)
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4,877,319 1,250 8,941,183 (13,926,564) (106,572)
====================================================================================================================================
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, 2003 with comparative figures for the nine
months then ended December 31, 2002
=========================================================================================
December 31, 2003 December 31, 2002
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(unaudited) (audited)
Cash flows provided by (used in):
Operations:
Net earnings (loss) $ (395,000) $ (21,170)
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(395,000) (21,170)
Financing:
Issuance of capital stock 395,000 21,170
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395,000 21,170
- -
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- -
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, 2003 and December 31, 2002
was $0 and $0 respectively.
See accompanying notes to financial statements
7
INNOFONE.COM, INCORPORATED
Notes to the Financial Statements
December 31, 2003
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1. BASIS OF PRESENTATION
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Going Concern Issue
-------------------
These financial statements have been prepared on a going concern basis and
do not include any adjustments to the measurement and classification of the
recorded asset amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The
company has experienced several continuous years of operating losses. The
Company's ability to realize its assets and discharge its liabilities in
the normal course of business is dependent upon continued support. The
Company is also dependent on an infusion of equity from potential
shareholders. The Company is currently attempting to obtain additional
financing from its existing shareholders and other strategic investors to
continue its operations. However, there can be no assurance that the
Company will obtain sufficient additional funds from these sources.
The conditions cause substantial doubt about the Company's ability to
continue as a going concern. A failure to continue, as a going concern
would require that stated amounts of assets and liabilities be reflected on
a liquidation basis that could differ from the going concern basis.
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 National Association of Securities Dealings over-the-counter
Bulletin Board.
2. SIGNIFICANT ACCOUNTING POLICIES
-------------------------------
These financial statements have been prepared by management in accordance
with accounting principles generally accepted in the United States, the
more significant of which are outlined below.
Use of Estimates
----------------
The preparation of financial statements in conformity with United States
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the year. Actual results could differ from those estimates.
8
INNOFONE.COM, INCORPORATED
Notes to Financial Statements
(Stated in United States Dollars)
December 31, 2003
================================================================================
Foreign Currency Translation
----------------------------
The Company's reporting currency is the United States dollar because the
Company is a United States corporation and it is trading publicly in the
United States. The statements of operations are translated into United
States dollars using the average exchange rate for the year. The balance
sheets are translated into United States dollars using the year-end
exchange rate.
Stock Option Plans
------------------
The Company applies the fair value based method of accounting prescribed by
SFAS No. 123, Accounting for Stock-Based Compensation in accounting for its
stock options granted to both employees and non-employees. As such,
compensation expense is recorded on the date of grant based on the fair
value of the award and is recognized over the service period.
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of
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The Company accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed of. This statement requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs to
sell.
3. CAPITAL STOCK
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The number of outstanding shares of the Company as at December 31, 2003 is
computed as follows:
9
INNOFONE.COM, INCORPORATED
Notes to Financial Statements
(Stated in United States Dollars)
December 31, 2003
================================================================================
Common Preferred
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Outstanding Shares as at June 30, 2000 20,750,000 2,500,000
Shares issued in exchange for legal fees 1,403,333 -
Options exercised in exchange for marketing costs 30,000
Options exercised 430,000 -
Promissory notes converted to common stock 3,851,500 -
Common stock subscribed 1,000,004 -
Preferred stock to be converted to common stock 3,750,000 (1,250,000)
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Outstanding Shares as at June 30, 2001 31,214,837 1,250,000
Shares issued in exchange for equipment 146,000
Options exercised 475,000
Shares issued to DMD CANADA shareholders 67,000,000
Shares issued on conversion of debt 1,186,668
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Outstanding Shares as at June 30, 2002 100,022,505 1,250,000
Shares issued in exchange for consulting fees 23,357,826
Shares issued in exchange for legal fees 500,000
Reverse stock split: 175 shares for one share (123,172,444)
Share issuance on conversion of debt 2,300,000
Share issuance on exchange for consulting fees 3,021,800
Reverse stock split: 20 shares for one share (5,728,203)
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Outstanding shares as at June 30, 2003 301,484 1,250,000
Share issuance for consulting fees 2,690,028
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Outstanding shares as at September 30, 2003 2,991,512 1,250,000
Share issuance for consulting fees 1,428,758
Share issuance for Director 2,500,000
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Outstanding shares as at December 31, 2003 6,920,270 1,250,000
=======================================================================================
The Company's authorized capital stock consists of 950,000,000 shares of
common stock and 25,000,000 shares of preferred stock each with a par value
of $0.001 per share. The Company is in the process of increasing the
authorized capital for its common shares. The 1,250,000 shares of issued
preferred stock are voting, convertible as described further below to
shares of common stock on a 3 for 1 basis at the option of the holder based
on certain revenue targets being met and participate equally as to
dividends with each share of common stock. If after five years the
performance criteria have not been met, the remaining shares of preferred
stock are convertible into one half of a share of common stock. Any
dividends declared and paid by the Company would be declared and paid in
United States dollars.
10
INNOFONE.COM, INCORPORATED
Notes to Financial Statements
(Stated in United States Dollars)
December 31, 2003
================================================================================
3. CAPITAL STOCK (continued)
-------------------------
The remaining 1,250,000 shares of preferred stock can be converted into
3,750,000 shares of common stock when the Company reaches $7,000,000
Canadian in cumulative revenue. For accounting purposes, the conversion of
the shares of preferred stock includes both a non-performance element
(equal to one half of the share of preferred stock converted) and a
performance element (equal to the balance). If and when additional shares
of common stock are issued based upon meeting the performance criteria, the
fair value of any such additional shares of common stock will be recognized
as a deemed distribution against equity in the period when the performance
criteria is met. Until these targets are met, the shares of preferred stock
remain outstanding with all rights and restrictions continuing.
11
Management's Discussion and Analysis
For the Quarter ended December 31, 2003
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 quarter ended December 31, 2003,
filed with the SEC on February 13, 2004. 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
--------
Innofone.com Inc. currently operates out of Maryland with mailing address of
3470 Olney-Laytonsville Rd., Suite 118, Olney, MD 20832.
12
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 has relocated 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, Mr
Richardson 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 company does not currently conduct any operations.
The company has paid off old debt holders with stock pursuant to the terms of a
2001 agreement. The current officers and directors are covering all expenses of
the company via short-term loans and advances which have been and will continue
to be paid off in stock until the company has the cash flow to cover these
expenses. These 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.
13
PART II- OTHER INFORMATION.
---------------------------
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 3,928,758 shares in the second quarter in
exchange for consulting services and directors' fees.
Item 3. Defaults Upon Senior Securities.
----------------------------------------
There was no material default in payments of any Senior Securities it has all
been paid in full with stock.
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.
--------------------------
The company has paid off old debt pursuant to the terms of 2001 agreement. The
company continues to pay officers and directors in stock. The company is looking
for a viable acquisition and is in discussions with several candidates.
14
SIGNATURES
----------
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 13, 2004 By: /s/ Frederic Richardson
---------------------------------
Frederic Richardson, President
15