UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: March 31, 2005 Commission File Number 0-32353
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EASYWEB, INC.
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(Exact name of small business issuer as specified in its charter)
COLORADO 84-1475642
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6025 South Quebec Street, Suite 135, Englewood, Colorado 80111
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(Address of principal executive offices)
(720) 493-0303
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(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Common stock, no par value 6,176,200
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Class Number of shares outstanding at April 30, 2005
Transitional Small Business Disclosure Format: Yes No X
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FORM 10-QSB
1ST QUARTER
INDEX
Page
----
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheet, March 31, 2005 (unaudited) ................ 3
Condensed statements of operations, three months
ended March 31, 2005 (unaudited) and 2004 (unaudited) ........... 4
Condensed statement of changes in shareholders' deficit,
three months ended March 31, 2005 (unaudited) ................... 5
Condensed statements of cash flows, three months ended
March 31, 2005 (unaudited) and 2004 (unaudited) ................. 6
Notes to unaudited condensed financial statements .................. 7
Item 2. Management's Discussion and Analysis or Plan of Operation . 10
Item 3. Controls and Procedures ................................... 11
PART 2 - OTHER INFORMATION
Item 1. Legal Proceedings ......................................... 12
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 12
Item 3. Defaults Upon Senior Securities ........................... 12
Item 4. Submission of Matters to a Vote of Security Holders ....... 12
Item 5. Other Information ......................................... 12
Item 6. Exhibits .................................................. 12
Signatures .............................................................. 13
2
EASYWEB, INC.
CONDENSED BALANCE SHEET
(UNAUDITED)
MARCH 31, 2005
ASSETS
Current Assets:
Cash ....................................................... $ 93
=========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued liabilities ................... $ 10,461
Due to officer (Note 2) .................................... 1,300
Due to affiliate (Note 2) .................................. 5,842
---------
Total current liabilities..................... 17,603
---------
Shareholders' deficit (Note 4):
Common stock - 6,176,200 shares issued and outstanding...... 169,250
Additional paid-in capital ................................. 114,048
Retained deficit ........................................... (300,808)
---------
Total shareholders' deficit .................. (17,510)
---------
$ 93
=========
See accompanying notes to condensed financial statements
3
EASYWEB, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
--------------------------
2005 2004
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Operating expenses:
Contributed rent (Note 2) .............. $ 1,500 $ 1,500
Contributed administrative
support (Note 2) .................... 2,340 3,000
Administrative support (Note 2) ........ 660 --
Professional fees ...................... 8,608 1,828
Web site consulting and maintenance .... 30 60
Dues and subscriptions ................. 1,250 --
Other .................................. 937 253
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Total operating expenses 15,325 6,641
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Loss before income taxes (15,325) (6,641)
Income tax provision (Note 3) .............. -- --
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Net loss ............... $ (15,325) $ (6,641)
=========== ===========
Basic and diluted loss per share ........... $ (0.00) $ (0.00)
=========== ===========
Basic and diluted weighted average
common shares outstanding .............. 6,176,200 4,786,200
=========== ===========
See accompanying notes to condensed financial statements
4
EASYWEB, INC.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
(UNAUDITED)
COMMON STOCK ADDITIONAL
--------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- --------- --------- --------- ---------
Balance at January 1, 2005 ................ 5,746,200 $ 156,050 $ 108,408 $(285,483) $ (21,025)
January 2005, sale of common stock
($.03/share) (Note 4) ................. 430,000 13,200 -- -- 13,200
January 2005, common stock option
granted for cash (Note 4) ............. -- -- 1,800 -- 1,800
Office space and administrative support
contributed by an affiliate (Note 2) .. -- -- 3,840 -- 3,840
Net loss, three months ended March 31, 2005 -- -- -- (15,325) (15,325)
--------- --------- --------- --------- ---------
Balance at March 31, 2005 ................. 6,176,200 $ 169,250 $ 114,048 $(300,808) $ (17,510)
========= ========= ========= ========= =========
See accompanying notes to condensed financial statements
5
EASYWEB, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
--------------------
2005 2004
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Net cash used in
operating activities ...... $(14,928) $ (1,408)
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Cash flows from financing activities:
Proceeds from granting of stock option (Note 4) 1,800 --
Proceeds from the sale of common stock (Note 4) 13,200 6,000
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Net cash provided by
financing activities ...... 15,000 6,000
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Net change in cash ........ 72 4,592
Cash, beginning of period .......................... 21 33
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Cash, end of period ................................ $ 93 $ 4,625
======== ========
Supplemental disclosure of cash flow information:
Cash paid for income taxes ..................... $ -- $ --
======== ========
Cash paid for interest ......................... $ -- $ --
======== ========
See accompanying notes to condensed financial statements
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EASYWEB, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The financial statements presented herein have been prepared by the Company in
accordance with the accounting policies in its Form 10-KSB dated December 31,
2004, and should be read in conjunction with the notes thereto.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) which are necessary to provide a fair presentation of
operating results for the interim period presented have been made. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for the year.
Financial data presented herein are unaudited.
NOTE 2: RELATED PARTY TRANSACTIONS
Rent
----
Summit Financial Relations, Inc. ("Summit"), an affiliate under common control,
contributed office space to the Company during the three months ended March 31,
2005. The Company's management has estimated the fair market value of the office
space at $500 per month, which is included in the accompanying condensed
financial statements as Contributed Rent with an offsetting credit to Additional
Paid-in Capital.
Administrative support
----------------------
Summit contributed administrative services to the Company during the three
months ended March 31, 2005. The Company's management has estimated the fair
market value of the services at $1,000 per month, which is included in the
accompanying condensed financial statements as Contributed Administrative
Support with an offsetting credit to Additional Paid-in Capital. During the
three months ended March 31, 2005, the Company paid $660 for services, which
reduced the amount of contributed services for the period from $3,000 to $2,340.
Indebtedness to related parties
-------------------------------
At December 31, 2004, the Company owed Summit $12,268 for professional fees and
other administrative expenses paid on behalf of the Company. During the three
months ended March 31, 2005, Summit paid additional expenses totaling $574 on
behalf of the Company. On February 4, 2005, the Company repaid Summit $7,000. As
of March 31, 2005, the Company owed Summit $5,842, which is included in the
accompanying condensed financial statements as "Due to affiliate".
In August and December 2004, an officer loaned us a total of $1,300 for working
capital. The loans carry no interest rate and are due on demand. Management
plans to settle these liabilities with cash or stock. The $1,300 is included in
the accompanying financial statements as "Due to officer".
Service agreements
------------------
On December 9, 2004, the Company entered into an employment agreement with its
president/CEO. Under the terms of the agreement, the Company has agreed to pay
its president/CEO a one-time fee of $100,000 if and when the Company completes a
merger, acquisition, reverse merger, financing, or any other related transaction
non-detrimental to the immediate future of the Company, that leaves the Company
in a position and direction better than it was prior to the transaction.
On December 10, 2004, the Company entered into a management consulting services
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agreement with a director. Under the terms of the agreement, the Company has
agreed to pay the director a one-time fee of $10,000 plus expenses, upon the
closing of any transaction leaving the Company with a positive business
directive and available finances, non-detrimental to the survival of the
Company.
On December 10, 2004, the Company entered into a consulting services agreement
whereby Summit will provide services including, but not limited to:
a. Mergers and acquisition;
b. Due diligence studies, reorganizations, divestitures;
c. Capital structures, banking methods and systems;
d. Periodic reporting as to the developments concerning the general
financial markets and public securities markets and industry which may
be relevant or of interest or concern to the Company or the Company's
business;
e. Guidance and assistance in available alternatives for accounts
receivable financing and/or other asset financing; and
f. Conclude business and transactions necessary to keep the Company
current in all public filings, a-float and in business until an
aforementioned business transaction is closed, to include lending
funds to the Company when absolutely necessary as has been done over
the prior three years at no charge, allowing the Company to survive.
Under the terms of the agreement, the Company has agreed to pay Summit a
one-time fee of $120,000 on the date of closing of any transaction leaving the
Company with a positive business directive and available finances,
non-detrimental to the survival of the Company.
NOTE 3: INCOME TAXES
The Company records its income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". The Company incurred net operating losses during
all periods presented resulting in a deferred tax asset, which was fully allowed
for; therefore, the net benefit and expense resulted in $-0- income taxes.
NOTE 4: SHAREHOLDER'S DEFICIT
Common stock
------------
During January 2005, the Company sold 430,000 shares of its common stock to
unrelated investors for $13,200, or $.03 per share.
Common stock options
--------------------
On January 18, 2005, the Company sold a common stock option to an unrelated
third party for $1,800. Under terms of the option agreement, the holder may
purchase, for an additional $1,000, 1% of the Company's outstanding common stock
as of the exercise date. As of March 31, 2005, 1% of the Company's outstanding
common stock totaled 61,762 shares. The option expires on June 7, 2005.
Corporate governance
--------------------
On February 28, 2005, the Company's shareholders approved the following
proposals:
a. Reincorporate the Company in the State of Delaware;
b. Authorize the Board of Directors to implement a reverse stock split at
a ratio no greater than 40:1;
8
c. Increase the Company's authorized capital by 250,000,000 shares (from
30,000,000 to 280,000,000);
As of the date of this report, the Company's re-incorporation in the State of
Delaware had not yet been finalized and no reverse stock split had yet been
implemented.
NOTE 5: COMMITMENT
On October 1, 2004, the Company entered into a management consulting services
agreement whereby the consultant will provide services including, but not
limited to:
a. Mergers and acquisition;
b. Due diligence studies, reorganizations, divestitures;
c. Capital structures, banking methods and systems;
d. Periodic reporting as to the developments concerning the general
financial markets and public securities markets and industry which may
be relevant or of interest or concern to the Company or the Company's
business;
e. Guidance and assistance in available alternatives for accounts
receivable financing and/or other asset financing; and
f. Structural recommendations to assist the Company's capability to
finance.
Under the terms of the agreement, the Company has agreed to pay the consultant a
one-time fee of $120,000 on the date of closing of any of the above business
transactions or any transaction giving the Company a valid financial direction.
NOTE 6: SUBSEQUENT EVENTS
Term Sheet
----------
On May 6, 2005, the Company signed a term sheet with Zephyr Sciences, Inc.
("Zephyr"), which outlines the conditions of a proposed merger between the two
parties.
Under the structure of the term sheet, the Company will form a wholly-owned
Delaware subsidiary, which will merge into Zephyr and Zephyr will be the
surviving entity. Zephyr's shareholders will then exchange their shares of
common stock for common stock in the Company, which will result in Zephyr
becoming the Company's wholly-owned subsidiary. The transaction will result in a
change in control, whereby the Company's directors will resign and the directors
of Zephyr will become the directors of the Company.
Conditions to closing:
1. Zephyr shall have completed a private sale of its securities for gross
proceeds in excess of $5 million;
2. Compliance with all securities laws, regulations and requirements,
receipt of all consents, compliance with all covenants, no
injunctions, etc.;
3. Completion of due diligence by all parties;
4. Opinion of Zephyr's counsel to Zephyr's shareholders that states the
transaction qualifies a tax-free reorganization for the Zephyr
shareholders;
5. Opinion of Zephyr's counsel to Zephyr's shareholders that states the
transaction is exempt from the registration requirements of Section 5
of the Securities Act of 1933, as amended, and relevant state
securities laws, along with any other opinion's reasonably requested
by Zephyr's shareholders;
6. Receipt by both parties of all other necessary consents and
authorizations;
7. The Company will have received shareholder approval to authorize an
increase in its authorized shares of common stock in an amount
acceptable to all parties and to conduct a reverse stock split;
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8. The Company will receive a cash payment of $425,000 upon final closing
to be used to satisfy all outstanding indebtedness.
EASYWEB, INC.
PART I. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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PLAN OF OPERATION
-----------------
EasyWeb's business plan is to design, market, sell and maintain customized and
template, turnkey sites on the Internet, hosted by third parties. Our business
plan is prepared based upon the popularity of the Internet and the growing
number of businesses interested in advertising and marketing online. We have
incurred a retained deficit of $300,808 through March 31, 2005. We have not
performed any services or earned any revenue since 2002.
On May 6, 2005, the Company signed a term sheet with Zephyr Sciences, Inc.
("Zephyr"), which outlines the conditions of a proposed merger between the two
parties. Under the structure of the term sheet, the Company will form a
wholly-owned Delaware subsidiary, which will merge into Zephyr and Zephyr will
be the surviving entity. Zephyr's shareholders will then exchange their shares
of common stock for common stock in the Company, which will result in Zephyr
becoming the Company's wholly-owned subsidiary. The transaction will result in a
change in control, whereby the Company's directors will resign and the directors
of Zephyr will become the directors of the Company.
Our future success is currently dependent upon our ability to close the proposed
merger agreement with Zephyr. There is no assurance that we will be successful
in closing the merger or, if the merger is closed, that we will attain
profitability.
We are experiencing capital shortages and are currently dependent upon an
affiliate, Summit Financial Relations, Inc. ("Summit"), which has paid expenses
on our behalf, in order to maintain our limited operations. There is no
assurance that Summit will continue to pay our expenses in the future. On
February 4, 2005, we repaid Summit $7,000. As of March 31, 2005, we still owed
Summit $5,842 for expenses paid on our behalf. In addition, an officer advanced
us $1,300 for working capital during the year ended December 31, 2004. This
advance remained unpaid at March 31, 2005.
10
As a result of our inability to generate significant revenue, together with
sizeable continuing operating expenses, access to capital may be unavailable in
the future except from affiliated persons. If we are able to obtain access to
outside capital in the future, it is expected to be costly because of high rates
of interest and fees. Through March 31, 2005, in addition to the expenses paid
by Summit and advances from Mr. Olson, we have been funded through the sale of
our common stock for gross proceeds in the amount of $149,250 including proceeds
of $13,200 through the sale of 430,000 shares of our common stock ($.03 per
share) during January 2005. In addition, during January 2005, we sold for
$1,800, an option to purchase 1% of our outstanding common shares pursuant to an
option agreement. Under terms of the option agreement, the holder may purchase,
for an additional $1,000, 1% of the Company's outstanding common stock as of the
exercise date. As of March 31, 2005, 1% of the Company's outstanding common
stock totaled 61,762 shares. The option expires on June 7, 2005.
While our independent auditor has presented our financial statements on the
basis that we are a going concern, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business over a
reasonable length of time, they have noted that our significant operating losses
and net capital deficit raise a substantial doubt about our ability to continue
as a going concern.
We do not intend to hire any additional employees in the foreseeable future. We
do not intend to make significant equipment purchases or conduct any research
and development within the next twelve months.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
-------------------------------------------------
This report contains forward-looking statements within the meaning of federal
securities laws. These statements plan for or anticipate the future.
Forward-looking statements include statements about our future business plans
and strategies, statements about our need for working capital, future revenues,
results of operations and most other statements that are not historical in
nature. In this Report, forward-looking statements are generally identified by
the words "intend", "plan", "believe", "expect", "estimate", and the like.
Investors are cautioned not to put undue reliance on forward-looking statements.
Except as otherwise required by applicable securities statues or regulations,
the Company disclaims any intent or obligation to update publicly these
forward-looking statements, whether as a result of new information, future
events or otherwise. Because forward-looking statements involve future risks and
uncertainties, these are factors that could cause actual results to differ
materially from those expressed or implied.
PART I. ITEM 3. CONTROLS AND PROCEDURES
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We maintain a system of controls and procedures designed to provide reasonable
assurance as to the reliability of the financial statements and other
disclosures included in this report. As of March 31, 2005, under the supervision
and with the participation of our Principal Executive Officer and Principal
Financial Officer, management has evaluated the effectiveness of the design and
operation of our disclosure controls and procedures. Based on that evaluation,
the Principal Executive Officer and the Principal Financial Officer concluded
that our disclosure controls and procedures were effective in timely alerting
them to required information to be included in our periodic filings with the
Securities and Exchange Commission. No significant changes were made to internal
controls or other factors that could significantly affect those controls
subsequent to the date of their evaluation.
CHANGES IN INTERNAL CONTROLS
----------------------------
There have been no changes in internal controls or in other factors that could
significantly affect those controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
11
PART II. OTHER INFORMATION
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Item 1 - Legal Proceedings.
No response required.
Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds.
During January 2005, the Company sold 430,000 shares of its common
stock to unrelated investors for $13,200, or $.03 per share.
Item 3 - Defaults Upon Senior Securities.
No response required.
Item 4 - Submission of Matters to a Vote of Security Holders.
On February 28, 2005, the Company's shareholders approved the
following proposals:
a. Reincorporate the Company in the State of Delaware;
b. Authorize the Board of Directors to implement a reverse stock split
at a ratio no greater than 40:1; c. Increase the Company's
authorized capital by 250,000,000 shares (from 30,000,000 to
280,000,000);
As of the date of this report, the Company's re-incorporation in the
State of Delaware had not yet been finalized and no reverse stock
split had yet been implemented.
Item 5 - Other Information.
No response required.
Item 6 - Exhibits.
31. Certification of Principal Executive Officer and
Principal Financial Officer pursuant to Rule
13a-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32. Certification of Principal Executive Officer and
Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
12
SIGNATURES
The financial information furnished herein has not been audited by an
independent accountant; however, in the opinion of management, all adjustments
(only consisting of normal recurring accruals) necessary for a fair presentation
of the results of operations for the three months ended March 31, 2005 have been
included.
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.
EASYWEB, INC.
(Registrant)
DATE: May 10, 2005 BY: /s/ David C. Olson
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David C. Olson
President and CEO
13