SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended September 30, 2005
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
for the transition period from __________ to __________.
Commission File Number: 000-31451
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CYBERADS, INC.
--------------
(Exact name of small business issuer as specified in its charter)
Nevada 65-1000634
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
370 Amapola Ave. # 202, Torrance, California 90501
--------------------------------------------------------
(Address of principal executive office) (Zip Code)
1-800-288-3099
----------------
(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 XX No
-------- --------
As of November 16, 2005, the number of outstanding shares of the issuer's common
stock, $.001 par value, was 100,751,777 shares.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT: Yes [ ] No [X]
1
TABLE OF CONTENTS
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS ............................................... 3
Consolidated Unaudited Balance Sheets for the periods ended
September 30, 2005 and December 31, 2004..................... 3
Consolidated Unaudited Statements of Operations for the Three Months
and Nine Months ended September 30, 2004 and 2005............. 4
Consolidated Unaudited Statement of Cash Flows for the
for the Three Months and Nine Months ended
September 30, 2004 and 2005.................................. 5
Notes to Consolidated Financial Statements.......................... 6
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS .............................................. 11
ITEM 3. CONTROLS AND PROCEDURES............................................. 12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS............................................................ 13
SIGNATURES................................................................... 13
2
CYBERADS, INC.
Consolidated Unaudited Balance Sheets
For the periods ended September 30, 2005 and December 31, 2004
September 30, December 31,
2005 2004
----------------- -----------------
Assets
Current asset -
Cash $ 198 $ -
Property and equipment, net 14,171 14,171
Marketing rights 210,000 -
Deposits 8,585 8,585
-------------- --------------
$ 232,954 $ 22,756
============== ==============
Liabilities and Net Capital Deficiency
Current liabilities:
Note payable $ 294,192 $ 294,192
Accounts payable 804,220 829,222
Accrued payroll and payroll related liabilities 614,143 614,143
Accrued liabilities 39,793 38,993
Payable to related parties 786,555 786,555
Loans payable - convertible debentures 60,000 60,000
-------------- --------------
Total current liabilities 2,598,903 2,623,105
Deferred net revenue 142,472 -
Payable to stockholder 191,609 -
Net Capital Deficiency:
Preferred stock; $.001 par value; authorized 500,000,000 shares, of which
1,000,000 shares has been designated as Series A Convertible, shares
issued and outstanding 835,660 836 836
Common stock; $.001 par value; shares authorized 50,000,000; shares
issued and outstanding 96,781,777 in 2005 (23,225,777 in 2004) 96,782 23,226
Common stock to be issued 40,050 440,050
Additional paid in capital 22,584,648 16,170,085
Retained deficit (25,422,346) (19,234,546)
-------------- --------------
Net capital deficiency (2,700,030) (2,600,349)
-------------- --------------
$ 232,954 $ 22,756
See accompanying notes.
3
CYBERADS, INC.
Consolidated Unaudited Statements of Operations
for the three months and nine months ended September 30, 2004 and 2005
Three months ended Nine months ended
September 30 September 30
------------------------------ ------------------------------
2005 2004 2005 2004
--------------- ------------- --------------- -------------
Revenues $ - $ - $ - $ 303,120
Cost of revenues - - - -
------------- ----------- ------------- -----------
Gross profit - - - 303,120
Operating expenses:
Selling 3,692 - 730,406 -
General and administrative 1,632,190 231,482 5,451,092 755,824
------------- ----------- ------------- -----------
Total operating expenses 1,635,882 231,482 6,181,498 755,824
------------- ----------- ------------- -----------
Net loss from operations (1,635,882) (231,482) (6,181,498) (452,704)
Other income (expenses):
Other income - - - 4,847
Interest expense and
financing costs, net (5,502) (9,663) (5,502) (15,663)
------------- ----------- ------------- -----------
Total other expenses (5,502) (9,663) (5,502) (10,816)
------------- ----------- ------------- -----------
Net loss before provision for
income taxes (1,641,384) (241,145) (6,187,000) (463,520)
Provision for income taxes - - 800 -
------------- ----------- ------------- -----------
Net loss $ (1,641,384) $ (241,145) $ (6,187,800) $ (463,520)
============= =========== ============= ===========
Net loss per common share $ (.029) $ (.012) $ (.154) $ (.024)
============= =========== ============= ===========
See accompanying notes.
4
CYBERADS, INC.
Consolidated Unaudited Statements of Cash Flows
for the Three Months and Nine Months ended September 30, 2004 and 2005
Three months ended Nine months ended
September 30 September 30
------------------------------ ------------------------------
2005 2004 2005 2004
--------------- ------------- --------------- -------------
Cash flows from operating activities:
Net loss $ (1,641,384) $ (241,145) $ (6,187,800) $ (463,520)
Adjustment to reconcile net loss to net cash
provided by (used in) operating activities:
Deferred net revenue 6,330 - 142,472 -
Common stock issued in exchange for services 1,614,840 250,000 6,088,119 439,500
Common stock issued in exchange for interest - 9,663 - 9,663
Changes in assets and liabilities:
Receivables - - - 20,380
Outstanding checks in excess of cash in
bank - - - 13,567
Accounts payable - (18,518) (25,002) (190,531)
Accrued liabilities - - 800 69,941
------------- ----------- ------------- -----------
(20,214) - 18,589 (101,000)
Cash flows from investing activities -
Purchase of marketing rights - - (210,000) -
Cash flows from financing activities:
Principal repayments of note payable - - - (11,000)
Advances received from stockholder, net 5,945 - 191,609 47,000
Proceeds from stock options
exercised - - - 65,000
------------- ----------- ------------- -----------
5,945 - 191,609 101,000
------------- ----------- ------------- -----------
Net change in cash (14,269) - 198 -
Cash at beginning of period 14,467 - - -
------------- ----------- ------------- -----------
Cash at end of period $ 198 $ - $ 198 $ -
============= =========== ============= ===========
Three months ended Nine months ended
September 30 September 30
------------------------------ ------------------------------
2005 2004 2005 2004
--------------- ------------- --------------- -------------
Supplemental discourse of cash flow information -
Cash paid for interest $ 5,502 $ - $ 5,502 $ -
============= =========== ============= ===========
Supplemental disclosure of non-cash investing & financing activities:
Common stock issued in exchange for payable to
stockholder $ - $ 204,634 $ - $ 204,634
============= =========== ============= ===========
Accounts payable converted to note payable $ - $ 185,192 $ - $ 185,192
============= =========== ============= ===========
See accompanying notes.
5
CYBERADS, INC.
Notes to Consolidated Financial Statements
September 30, 2005
1. Summary of significant accounting policies
------------------------------------------
Business: CyberAds, Inc. ("CyberAds") was incorporated in the state of
Florida on April 12, 2000. In 2004, the Company earned commissions from
selling approved contracts to subscribers for cellular telephone
service. In 2005, management of the Company has devoted their attention
toward seeking profitable products.
Principles of consolidation: The accompanying consolidated financial
statements include the accounts of CyberAds and it's wholly owned
subsidiary IDS. All significant intercompany balances have been
eliminated in consolidation. The operations of IDS are currently
dormant.
Interim reporting: The Company's year-end for accounting and tax
purposes is December 31. In the opinion of Management, the accompanying
consolidated financial statements as of September 30, 2005 and 2004 and
for the three and nine months then ended, consisting of only normal
recurring adjustments, except as noted elsewhere in the notes to the
consolidated financial statements, necessary to present fairly its
financial position, results of its operations and cash flows. The
results of operations for the three and nine months ended September 30,
2005 and 2004 are not necessarily indicative of the results to be
expected for the full year.
Property and equipment: Property and equipment are stated at cost less
accumulated depreciation. Depreciation is provided for over the
estimated useful life of the assets of five to seven years. Leasehold
improvements are amortized over the lesser of the original term of the
related lease or their estimated useful life.
Marketing rights: Marketing rights are stated at cost and will be
amortized over 10 years, the term of the rights.
Revenue recognition: In 2004, the Company recorded revenue on a "net"
basis when contracts were submitted to master dealers. The phones were
shipped from the dealers to the subscriber and the Company did not bear
the risk of loss on the cellular phone.
Share based payments: The Company uses a fair value based method of
accounting for stock based compensation to employees. The Company also
accounts for stock options and warrants issued to non-employees for
services under the fair value method of accounting.
Net income (loss) per common share: Net income (loss) per common share
is computed by dividing net income (loss) by the weighted average
number of common shares outstanding during the period. The weighted
average number of common stock shares outstanding was 56,048,712 for
the three months ended September 30, 2005 (20,208,386 for the three
months ended September 30, 2004) and 40,163,794 for the nine months
ended September 30, 2005 (19,115,193 for the nine months ended
September 30, 2004).
6
CYBERADS, INC.
Notes to Consolidated Financial Statements
September 30, 2005
1. Summary of significant accounting policies (continued)
------------------------------------------------------
Net income (loss) per common share (continued): Convertible debentures,
convertible preferred stock, common stock options, and common stock to
be issued are considered common stock equivalents. Common stock
equivalents have not been included in the computation of diluted loss
per share as the effect on net loss per common share would be
anti-dilutive.
Use of Estimates: The process of preparing financial statements in
conformity with accounting principles generally accepted in the United
States of America requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues and expenses.
Accordingly, upon settlement, actual results may differ from estimated
amounts.
2. Operations
----------
During the nine months ended September 30, 2005, management of the
Company negotiated to purchase rights to market the Xboard(TM), a
jet-powered personal watercraft. The Company, in turn, has been
reselling those rights to distributors of water sports products. During
the nine months ended September 30, 2005, the Company collected
$171,450 from the resale of those rights.
Management also plans to continue restructuring debt, seeking
profitable products, reducing operating expenses, and seeking
additional capital and debt financing until operations achieve
profitability. Management of the Company believes the above actions,
along with other plans, will allow them to continue operations and
ultimately achieve profitability. Until then, the Company is dependent
upon its ability to obtain additional capital and debt financing. The
consolidated financial statements as of September 30, 2005 do not
reflect adjustments relating to the recorded asset amounts, or the
amounts of liabilities that would be necessary should the Company not
be able to continue in existence.
3. Marketing rights
----------------
In March 2005, the Company committed to purchase rights to market the
Xboard(TM), a jet-powered personal watercraft, from Aqua Xtremes, Inc.
aggregating $5,000,000. The term of the rights are for 10 years from
the time the Xboard(TM) is available for market. During the nine months
ended September 30, 2005, the Company paid $210,000 toward the purchase
agreement.
4. Note payable
------------
The note payable was due in installments of $5,000 on January 15, 2004
and February 15, 2004, plus interest at the rate of 10% per annum.
Final payment was due March 15, 2004. The note is secured by all of the
Company's accounts receivable, inventories, and computer hardware and
software and is guaranteed by two former officers of the Company. The
Company is currently in default with respect to the agreement.
7
CYBERADS, INC.
Notes to Consolidated Financial Statements
September 30, 2005
5. Accrued liabilities
-------------------
Accrued expenses consisted of the following at:
September 30, December 31,
2005 2004
------------------ ----------------
Interest $ 3,993 $ 3,993
California franchise taxes 800 -
Professional fees 35,000 35,000
---------- ----------
$ 39,793 $ 38,993
========== ==========
6. Payable to related parties
--------------------------
Payable to related parties consisted of the following at:
September 30, December 31,
2005 2004
------------------ ----------------
Advance due to a corporation owned by a former officer of the
Company, bearing interest at 10% per annum, due on demand
and unsecured $ 54,000 $ 54,000
Advance due to a former officer of the Company, bearing
interest at 10% per annum, due on demand and unsecured 732,555 732,555
---------- ----------
$ 786,555 $ 786,555
========== ==========
7. Loans payable - convertible debentures
--------------------------------------
Loans payable - convertible debentures consists of unsecured loans from
two individuals whereby the principal of the note is convertible into
the Company's common stock at the option of the holder. Interest on
borrowings is payable quarterly at a rate of 20% per annum. The notes
were due in installments of $15,000 on November 13, 2003, $13,750 on
December 13, 2003 and January 13, 2004, with final payment due February
13, 2004. The Company is currently in default with respect to the
agreements. The notes are convertible into the Company's common stock
at a conversion rate of 75% of the closing bid price of the Company's
common stock one trading day prior to conversion.
8. Payable to stockholder
----------------------
The payable to stockholder consists of advances from Novanet Media,
Inc. for working capital purposes. The advances are unsecured,
non-interest bearing and due on demand; however, Novanet Media, Inc.
has agreed not to demand repayment of the advances before November 2006
and unless cash is available from a merger, capital stock exchange,
asset acquisition, or other business combination, or from operations.
8
CYBERADS, INC.
Consolidated Notes to Financial Statements
September 30, 2005
9. Contingencies
-------------
The Company is non-compliant with respect to certain federal and state
payroll related taxes. Included in accrued payroll and payroll related
liabilities for 2005 and 2004 is approximately $540,800 of unpaid
payroll taxes.
10. Common stock transactions
-------------------------
Effective August 19, 2005, the Board of Directors of the Company
approved to increase the authorized common stock from 50,000,000 shares
to 500,000,000.
During the nine months ended September 30, 2005, the Company issued an
aggregate of 73,556,000 shares of its common stock in exchange for
marketing, management, and consulting services. The share based
payments were valued at the fair value of the services received.
Management estimated the fair value based on the closing bid price of
the Company's common stock on the date of issuance, the historical
trend of the trading prices for its common stock, and the volume of
shares traded. The Company recorded expenses aggregating $6,088,119 as
a result of the share based payments.
11. Stock options
-------------
The Company's stock option activity for options granted to employees
and non-employees is summarized as follows for the nine months ended
September 30, 2005:
Fixed Plan
-----------------------------------------------------------
Weighted Weighted
average average
exercise Shares exercise
Shares price exercisable price
--------------- ----------- --------------- -----------
Outstanding at January 1, 2005 1,900,000 $ .513 1,900,000 $.513
===== ============ ====
Expired (950,000) $ .053
------------ =====
Outstanding at
September 30, 2005 950,000 $ .460 950,000 $.460
============ ===== ============ ====
9
CYBERADS, INC.
Consolidated Notes to Financial Statements
September 30, 2005
11. Stock options (continued)
-------------------------
The Company's stock option outstanding and exercisable at September 30,
2005 is summarized as follows:
Fixed Plan
------------------------------------------------------------------------------------------------
Options outstanding Options exercisable
------------------------------------------------------------- ---------------------------------
Weighted average Weighted
-----------------------------
Range remaining exercise average
of prices Shares life price Shares exercise price
------------- --------------- -------------- ------------- --------------- ---------------
$.04 - $.50 700,000 8 mo. $ .267 700,000 $ .267
=========== ===== ====== ======
$1.00 250,000 1 yr. $ 1.00 250,000 $ 1.00
===== ---------- ===== ==== ---------- ====
$.04 - $1.00 950,000 9 mo. $ .460 980,000 $ .460
============ ======= ===== ====== ======= ======
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's discussion and analysis contains various forward-looking statements
within the meaning of the Securities and Exchange Act of 1934. These statements
consist of any statement other than a recitation of historical fact and can be
identified by the use of forward looking terminology such as "may", "expect",
"anticipate", "estimates", or "continue" or use of negative or other variations
of comparable terminology. We caution that these statements are further
qualified by important factors that could cause actual results to differ
materially from those contained in our forward looking statements, that these
forward looking statements are necessarily speculative, and there are certain
risks and uncertainties that could cause actual events or results to differ
materially from those referred to in our forward looking statements.
Management's discussion and analysis should be read in conjunction with the
financial statements and the notes thereto.
RESULTS OF OPERATIONS
---------------------
Nine months ended September 30, 2005 compared to the nine months ended September
--------------------------------------------------------------------------------
30, 2004 and three months ended September 30, 2005 compared to the three months
--------------------------------------------------------------------------------
ended September 30, 2004:
-------------------------
Nine months ended September 30 Decrease
------------------------------ ------------------------------
2005 2004 Amount Percentage
-------------- -------------- -------------- --------------
Revenue $ - $ 303,120 $ 303,120 -
============== ============== ============== ==============
Revenue for the nine months ended September 30, 2004 resulted from the sale of
cellular telephones. Due to the Company's limited sales resources limited effort
was devoted toward that business.
Nine months ended September 30 Increase
------------------------------ ------------------------------
2005 2004 Amount Percentage
-------------- -------------- -------------- --------------
Selling expenses $ 730,406 $ - $ 303,120 -
============== ============== ============== ==============
Selling expense for the nine months ended September 30, 2005 resulted from the
sale of the X-board dealerships. That business activity began in 2005.
Three months ended September 30 Increase
------------------------------- -------------------------------
2005 2004 Amount Percentage
-------------- -------------- -------------- --------------
General & administrative
expenses $ 1,632,190 $ 231,482 $ 1,400,708 605
============== ============== ============== ==============
Nine months ended September 30 Increase
------------------------------ ------------------------------
2005 2004 Amount Percentage
-------------- -------------- -------------- --------------
General & administrative
expenses $ 5,451,092 $ 755,824 $ 4,695,268 621
============== ============== ============== ==============
11
General and administrative for the three and nine months ended September 30,
2005 increased as a result of additional management and consulting expenses
primarily in an effort to identify additional business opportunities.
FINANCIAL POSITION & LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2005 compared to December 31, 2004:
As of September 30 Increase
------------------------------ ------------------------------
2005 2004 Amount Percentage
-------------- -------------- -------------- --------------
Marketing rights $ 210,000 $ - $ 210,000 -
============== ============== ============== ==============
Marketing rights increased as a result of the Company's purchase of rights to
resale X-Board dealerships to others.
As of September 30 Increase
------------------------------ ------------------------------
2005 2004 Amount Percentage
-------------- -------------- -------------- --------------
Deferred net revenue $ 142,472 $ - $ 142,472 -
============== ============== ============== ==============
Deferred net revenue consisted of the resale of X-Board dealerships, net of
commissions. The X-Board product has not yet come to market. Accordingly, the
Company has not recorded the sales as revenue.
As of September 30 Increase
------------------------------ ------------------------------
2005 2004 Amount Percentage
-------------- -------------- -------------- --------------
Payable to stockholder $ 191,609 $ - $ 191,609 -
============== ============== ============== ==============
Payable to stockholder consisted of advances from a stockholder for working
capital purposes.
ITEM 3. CONTROLS AND PROCEDURES
As of September 30, 2005 the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and President, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures
pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. Based upon that
eva1uation, these principal executive officers and principal financial officer
concluded that the Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the Company, including
its consolidated subsidiaries, required to be included in the Company's periodic
SEC filings. There have been no significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation.
12
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibit
Number Description of Document
3.1 Articles of Incorporation as Amended *
3.2 Bylaws *
31.1 Rule 13a-14(a)/15d-14(a) Certification
31.2 Rule 13a-14(a)/15d-14(a) Certification
32.1 Section 1350 Certification
32.2 Section 1350 Certification
* Filed by reference to a prior filing by Registrant.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this amended report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: January 30, 2006 CYBERADS, INC.
By: /s/ JEFF CRISWELL
--------------------------
Jeff Criswell, President,
Chief Executive Officer
13