U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2001
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 0001058307
YSEEK, INC.
(Exact Name of Small Business Issuer in Its Charter)
Florida 65-078-3722
(State or other jurisdiction of (I.R.S. Employer Identi-
incorporation or organization) fication No.)
412 East Madison Street, Suite 1000, Tampa, Florida 33602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 221-4429
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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
The number of shares of the registrant's common stock, par value $.0001 per
share, outstanding as of August 13, 2001 was 22,315,100.
Table of Contents to Form 10QSB
Part I - Financial Information Page
Item 1. Financial Statements (unaudited)
Balance Sheet June 30, 2001..........................................2
Statements of Operations - six Months
Ended June 30, 2001 and 2000 .......................................3
Statements of Cash Flows - six Months
Ended June 30, 2001 and 2000.........................................4
Notes to Financial Statements........................................6
Item 2. Management's Discussion and Analysis or Plan of Operation............8
Part II - Other Information
Item 2. Changes in Securities and Use of Proceeds..........................None
Item 3. Reports on 8-K.................................................... None
Item 6. Exhibits and Reports on Form 8-K...................................None
YSEEK, INC.
BALANCE SHEET
June 30, 2001
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(unaudited)
ASSETS
Current assets
Cash $ 5,348
Prepaid expenses 1,565,321
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Total current assets 1,570,669
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Property and equipment, net 615,855
Other assets
Shareholder loan receivable 136,955
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Total Assets $ 2,323,479
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 11,781
Current maturities of notes payable 44,579
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Total current liabilities 56,360
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Long-term debt, less current portion 8,790
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Stockholders' equity
Common stock; $.0001 par value; 50,000,000 shares
authorized; 22,315,100 shares issued and outstanding 2,231
Paid in capital 8,152,562
Accumulated deficit (5,896,464)
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Total stockholders equity 2,258,329
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Total Liabilities and Stockholders' Equity 2,323,479
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The accompany notes are an integral part of the financial statements.
YSEEK, INC.
STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30 June 30,
2001 2000 2001 2000
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues $ 171 $ - $ 171 $ -
----------- ---------- --------- -----------
Expenses
Selling, general and administrative 827,415 485,696 1,837,764 686,011
----------- ---------- --------- -----------
Total expenses 827,415 485,696 1,837,764 686,011
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Other income (expense)
Interest income 2,888 2,180 6,103 2,217
Interest expense (1,608) (660) (2,170) (660)
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Total other income (expense) 1,280 1,520 3,933 1,557
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Loss from continuing operations (825,964) (484,176) (1,833,660) (684,454)
Discontinued operations
Income (loss) from discontinued carwash and
quick-lube operations - 629 - (55,796)
Loss on disposal of property, equipment and
related assets - - - (350,000)
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Loss from discontinued operations - 629 - (405,796)
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Net Loss $ (825,964) $ (483,547) $ (1,833,660) $ (1,090,250)
=============== ================ =============== ================
Loss per common share
From continuing operations $ (.03) $ (.04) $ (.07) $ (.06)
Discontinued operations:
Loss from operations - - - (.01)
Loss on disposal - - - (.03)
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Total loss per share $ (.03) $ (.04) $ (.07) $ (.10)
=============== ================ =============== ================
Weighted average common shares outstanding 24,715,100 11,742,956 24,896,295 11,378,152
The accompany notes are an integral part of the financial statements.
YSEEK, INC.
STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2001 2000
(unaudited) (unaudited)
Cash flows from operating activities
Net loss $ (1,833,660) $ (1,090,250)
Adjustments to reconcile net loss to
net cash used in operating activities:
Stock issued for services 104,688 273,540
Contributed services 8,750 23,750
Depreciation and amortization 50,341 247,806
Loss from disposal of assets from discontinued operations - 350,000
Loss from disposal of equipment 13,566 -
Writedown of property and equipment due to impairment 129,773 -
Recovery of amortization expense due to stock recision (324,187) -
Decrease in prepaid expenses 1,784,148 7,030
Increase in interest receivable (7,577) -
Increase (decrease) in accounts payable and accrued expenses (20,494) 30,928
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Total adjustments 1,739,008 933,054
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Net cash used in operating activities (94,652) (157,196)
Cash flows from investing activities
Acquisition of property and equipment - (5,187)
Decrease in deposits and other assets 30,000 2,600
Net proceeds from sale of discontinued business segment - 223,071
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Net cash provided by investing activities 30,000 220,484
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Cash flows from financing activities
Payments on notes payable (1,934) (15,363)
Net proceeds from issuance of stock - 34,524
Net proceeds from issuance of note payable 40,000 -
Net advances from stockholder 30,884 62,275
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Net cash provided by financing activities 68,950 81,436
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Net increase in cash and cash equivalents 4,298 144,724
Cash and cash equivalents, beginning of period 1,050 37,626
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Cash and cash equivalents, end of period $ 5,348 $ 182,350
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The accompany notes are an integral part of the financial statements.
YSEEK, INC.
STATEMENTS OF CASH FLOWS
(Continued)
Supplemental disclosures of noncash investing and financing activities:
In June 2001, 3,000,000 shares of common stock were returned to the Company
related to goodwill originally valued at $2,562,500.
The Company issued 1,235,000 shares of stock for goodwill and capitalized
software valued at $1,206,250 during the six months ended June 30, 2000.
The Company issued 297,000 shares of stock for contributed services valued at
$273,540 during the six months ended June 30, 2000.
Supplemental disclosure of cash flow information:
The Company paid approximately $1,087 in interest for the six months ended
June 30, 2001 and $33,000 in interest for the six months ended June 30, 2000.
The accompany notes are an integral part of the financial statements.
YSEEK, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
The information presented herein as of June 30, 2001, and for the three and six
-months ended June 30, 2001 and 2000, is unaudited.
(1) Basis of Presentation:
The accompanying financial statements of Yseek, Inc. (the Company) have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and item 310(b)
of Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal required adjustments) considered necessary for a fair presentation
have been included.
Operating results for the six month period ended June 30, 2001, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001. For further information, refer to the financial statements
and footnotes included in the Company's annual report of Form 10-KSB for the
year ended December'31, 2000.
Net loss per common share is computed in accordance with the requirements of
Statement of Financial Accounting Standards No. 128 (SFAS 128). SFAS 128
requires net loss per share information to be computed using a simple weighted
average of common shares outstanding during the periods presented. In computing
diluted loss per share, warrants exercisable into common shares were excluded
because the effect is antidilutive.
(2) Reformation Agreement and Loss From Impairment of Assets:
In December 1999, the Company purchased all the outstanding stock of
Rankstreet.com, Inc. The total purchase price of $2,763,510 (including the value
of contingent shares issued in May, 2000 and February, 2001) was classified as
goodwill. The goodwill was being amortized over five years and as of
December 31, 2000, accumulated amortization totaled $525,082.
Additionally, during 2000 the Company contracted with consultants to develop a
web site for Rankstreet. The web site was capitalized with a value of $206,250
and was being amortized over three years. Accumulated amortization as of
December 31, 2000 was $59,289.
In April 2001, the existing management and Board of Directors of the Company
resigned and were replaced by individuals with experience with internet based
businesses. The new Board of Directors evaluated the website and the goodwill
that was acquired in the purchase of Rankstreet.com, Inc. and deemed it to be
impaired and of no future value to the Company. Therefore the assets were
written down to zero resulting in a loss from impairment of $2,368,201. This
loss was reflected in the March 2001 statement of operations as selling, general
and administrative expenses.
Upon further investigation by the Company's new management it was determined
that certain contingencies in the original acquisition agreement had not been
met. In June 2001, the original stockholders of Rankstreet.com, Inc. entered
into a reformation agreement with the Company. This agreement concluded that the
3,000,000 shares issued in December 1999 and May 2000 would be returned since
the contingencies related to these shares had not been met. Those shares were
returned to the Company in June 2001. This reformation results in a reduction in
goodwill related to the Rankstreet acquisition of $2,562,500, the original value
of the shares issued. This results in the elimination of the impairment related
to goodwill and the recovery of amortization in the amount of $324,187. The
impairment loss due to the Rankstreet website remains unchanged. The March 31,
2001 financial statements have been restated to reflect this agreement.
(3) Stock Transactions:
During January and February of 2001, the Company issued 150,000 shares of common
stock to individuals and other entities for services performed during the first
quarter of 2001. The Company recognized an expense of $31,250, the market value
of the shares less a 50% discount because the shares are unregistered and the
Company stock is not easily marketable.
During January and February of 2001, the Company issued 200,000 and 125,000
shares of common stock under six month and one year consulting agreements,
respectively. The Company recorded a prepaid expense of $73,438 related to these
agreements, the market value of the shares less a 50% discount because the
shares are unregistered and the stock is not easily marketable. The Company
expensed $61,719 and $30,859 utilizing the straight line method over the life of
the agreements for the six month and three month periods ended June 30, 2001,
respectively. Additionally, options were granted to an individual as part of one
of the agreements. The option agreement allows for the purchase of 75,000 shares
of Company common stock for $.50 per share for a period of three years. The
other consulting agreement included issuance of 500,000 warrants at an exercise
price of $.50 per share.
During February 2001, the Company issued the final contingent 1,000,000 shares
related to the 1999 business acquisition. The Company capitalized goodwill of
$203,100, the market value of the shares less a 50% discount because the shares
are unregistered, are a significant block of stock and the Company stock is not
easily marketable. See Note 2 regarding goodwill and shares rescinded.
(4) Note Payable:
On April 23, 2001, the Company borrowed $40,000 from a relative of a Board
member. The note calls for interest at a rate of 14% per annum. Interest and
principal are due in full on April 22, 2002. The note is uncollateralized.
Item 2. Management's Discussion and analysis of Financial Condition and Results
of Operation
PLAN OF OPERATION
In the fourth quarter of 2000 and the first quarter of 2001, the Company entered
into strategic alliances with companies and individuals with substantial
experience in the Internet industry. The alliances allowed the Company to
acquire management and marketing expertise through consulting agreements.
Additionally, the Company acquired a ten-year software license for the use of a
keyword biddable search engine and related domain names. Lastly, the Company
entered into two traffic promotion agreements whereby each promoter will provide
an aggregate of 45,000,000 hits to the Company web site. The Company issued
stock in exchange for these agreements enabling the Company to move forward on
its plans without the use of any funds.
In April 2001, the Company's officers resigned. Individuals affiliated with the
consultants noted above were elected to the Board of Directors. These
individuals have substantial experience with profitable Internet companies and
web sites.
The Company's plans for the next twelve months include the launching of its
search engine, Yseek.com. With the traffic promotion agreements in place, the
Company believes there will be sufficient traffic to make the site a profitable
internet portal. Additionally the Company's expansion plans include acquiring
and developing other profitable business ventures.
In conjunction with planning the course of action for the next twelve months,
the new Board of Directors investigated the viability of Rankstreet.com.
Rankstreet was to be an all-in-one Web site including a directory, web counter
and business to business Internet advertising agency. The Board determined that
there was no value in pursuing the marketing and enhancement of the Rankstreet
web site and has abandoned any such plans. Additionally, management determined
that the contingencies stated in the acquisition agreement had not been met. In
June, 2001, the former stockholders of Rankstreet.com, Inc. entered into a
reformation agreement and returned 3,000,000 shares for which the contingencies
were not met.
The Companies plans to market the Yseek.com search engine and to acquire and
develop other profitable business ventures which will require additional funds.
During April 2001, the Company received a $40,000 loan from a relative of a
Board member. The loan bears interest at 14% per annum and is due in April 2002.
As of June 30, 2001 the Company had minimal available funds. However, most of
the Company's operations are being conducted within the consulting agreements
entered into in the fourth quarter of 2000 and the cash outflows have been
substantially reduced. Additionally two of the Company's officers and board
members have agreed to fund the Company's operations as they currently exist.
There is currently no expected purchase or sale of plant and equipment or
expected significant changes in the number of employees.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
Exhibit Description Number
(2)Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession............................. ....None
(3)Articles of Incorporation and By-Laws............................. ...None
(11)Statement re: computation of per share earnings......... ......Note 1 to
Financial
Statements
(15)Letter re: Unaduited Interim Financial Information..................None
(16)Letter regarding Changes in Certifying Accountant...................None
(18)Letter on change in accounting principles...........................None
(19)Report Furnished to Security Holders ...............................None
(22)Published report regarding matters submitted to
vote...................................................................None
(23)Consents of Experts and Counsel.....................................None
(24)Power of Attorney...................................................None
(99)Additional Exhibits.................................................None
(b) REPORTS ON FORM 8-K:
NONE
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
YSEEK, INC.
Dated: August 14, 2001 By: /s/ Bruce Hammil
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BRUCE HAMMIL, President