UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[ X] Quarterly Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2001
[ ] Transition Report pursuant to 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period to .
------------ -----------
Commission File Number 000-27621
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PETAPEER HOLDINGS INC.
-----------------------------------------------------------
(Exact name of small Business Issuer as specified in its charter)
Florida 95-4720231
------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2300 W. Sahara, Ave., Suite 500
Las Vegas, Nevada 89102
------------------------------- -------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 514-830-4474
-------------------
-------------------------------------------------
(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 Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the issuer was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days [X ] Yes [ ] No
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 9,668,224 Shares of
Common Stock outstanding as of August 13, 2001.
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and Item 310
(b) of Regulation S-B, and, therefore, do not include all
information and footnotes necessary for a complete presentation
of financial position, results of operations, cash flows,
and stockholders' equity in conformity with generally accepted
accounting principles. In the opinion of management, all adjustments
considered necessary for a fair presentation of the results of
operations and financial position have been included and all such
adjustments are of a normal recurring nature. Operating results for
the three months and for the six months ended June 30, 2001 are not
necessarily indicative of the results that can be expected for the
year ending December 31, 2001.
2
PETAPEER HOLDINGS, INC.
(Formerly EBUX, Inc.)
(A Development Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2001
(Stated in U.S. Dollars)
PETAPEER HOLDINGS, INC.
(Formerly EBUX, Inc.)
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
(Stated in U.S. Dollars)
--------------------------------------------------------------------------
JUNE 30 DECEMBER 31
2001 2000
ASSETS
Current
Cash $ 12,859 $ -
Subscriptions receivable 1,333 1,333
Accounts receivable 653 -
Prepaid expenses 10,000 -
---------- ----------
24,845 1,333
Capital Assets, net of depreciation
(Note 4) 3,496 -
Technology Costs, net of amortization 33,879 -
---------- ----------
$ 62,220 $ 1,333
==========================================================================
LIABILITIES
Current
Accounts payable and accrued liabilities $ 186,750 $ 3,384
Note payable 79,222 -
Due to related company 8,366 -
---------- ----------
274,338 3,384
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common Stock
50,000,000 shares authorized at $0.001
par value
9,668,224 shares issued and
outstanding (Note 7(a)) 8,500 8,500
Paid-In Capital (Deficiency) (7,167) (7,167)
Common Stock Subscribed (Note 7(b)) 221,731 -
Deficit Accumulated During The
Development Stage (435,182) (3,384)
---------- ----------
(212,118) (2,051)
Total Stockholders' Equity (Deficiency) (212,118) (2,051)
---------- ----------
$ 62,220 $ 1,333
==========================================================================
PETAPEER HOLDINGS, INC.
(Formerly EBUX, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
(Stated in U.S. Dollars)
--------------------------------------------------------------------------
PERIOD FROM
THREE SIX INCEPTION
MONTHS MONTHS NOVEMBER 30
ENDED ENDED 2000 TO
JUNE 30 JUNE 30 JUNE 30
2001 2001 2001
--------------------------------------------------------------------------
Revenues $ - $ - $ -
Expenses
Accounting $ 3,393 $ 7,172 $ 7,172
Amortization 5,182 6,876 6,876
Legal 74,928 114,381 115,028
Travel 9,183 24,462 27,181
Marketing 5,734 18,297 18,297
Computer expense 31,711 35,775 35,775
Office and sundry 7,407 10,491 10,509
Interest expense 1,580 1,580 1,580
Salaries and benefits 65,840 65,840 65,840
Bank charges and foreign
exchange 3,672 3,672 3,672
Advertising expense 2,000 2,000 2,000
Investor relations 13,675 13,675 13,675
------------------------------------------
Net Loss $ 224,305 $ 304,221 $ 307,605
==========================================================================
Net Loss Per Share $ 0.03 $ 0.04
=========================================================
Weighted Average Number Of
Shares Outstanding 8,500,000 8,500,000
=========================================================
PETAPEER HOLDINGS, INC.
(Formerly EBUX, Inc.)
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Stated in U.S. Dollars)
--------------------------------------------------------------------------
PERIOD FROM
THREE SIX INCEPTION
MONTHS MONTHS NOVEMBER 30
ENDED ENDED 2000 TO
JUNE 30 JUNE 30 JUNE 30
2001 2001 2001
--------------------------------------------------------------------------
Cash Flows From
Operating Activities
Net loss for the period $ (224,305) $ (304,221) $ (307,605)
Adjustment To Reconcile Loss To
Net Cash Used By Operating
Activities
Amortization 5,182 6,876 6,876
Increase in due to related
company (77,510) 8,366 8,366
Increase in subscriptions
receivable - - (1,333)
Increase in accounts payable
and accrued liabilities 101,497 133,943 138,395
Increase in accounts
receivable (653) (653) (653)
Increase in prepaid expenses (10,000) (10,000) (10,000)
------------------------------------------
(205,789) (165,689) (165,954)
------------------------------------------
Cash Flows From Investing
Activities
Technology costs - (40,655) (40,655)
Capital assets (3,596) (3,596) (3,596)
------------------------------------------
(3,596) (44,251) (44,251)
------------------------------------------
Cash Flows From Financing
Activities
Share capital - - 1,333
Share subscription
221,731 221,731 221,731
------------------------------------------
221,731 221,731 223,064
------------------------------------------
Increase In Cash 12,346 11,791 12,859
Cash, Beginning Of Period 513 1,068 -
------------------------------------------
Cash, End Of Period $ 12,859 $ 12,859 $ 12,859
==========================================================================
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING AND INVESTING ACTIVITIES:
During the period, the Company issued 1,168,224 common shares in
satisfaction of debt totalling $1,000,000 to its subsidiary.
PETAPEER HOLDINGS, INC.
(Formerly Ebux, Inc.)
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' DEFICIENCY
JUNE 30, 2001
(Stated in U.S. Dollars)
INVESTMENT
COMMON STOCK IN
------------------------------- COMMON
NUMBER ADDITIONAL STOCK OF
OF PAID-IN PARENT BY
SHARES AMOUNT CAPITAL SUBSCRIBED SUBSIDIARY DEFICIT TOTAL
----------------------------------------------------------------------
Issuance
of
common
stock 20,000,000 $ 1,333 $ - $ - $ - $ - $ 1,333
Net
loss
from
date
of
incorporation,
November
30,
2000
to
December
31,
2000 - - - - - (3,384) (3,384)
----------------------------------------------------------------------
Balance,
December
31,
2000 20,000,000 1,333 - - - (3,384) (2,051)
Adjust-
ment
to
number
of
shares
issued
and
out-
standing
as a
result
of the
reverse
take-
over
trans-
action
3838421
Canada
Inc. (20,000,000)(1,333) - - - - (1,333)
EBUX,
Inc. 8,500,000 8,500 (7,167) - - - 1,333
Net
asset
deficiency
of
EBUX,
Inc.
at date
of
reverse
take-
over
trans-
action - - - - - (127,577) (127,577)
Net
loss
for
the
period - - - - - (79,916) (79,916)
----------------------------------------------------------------------
Balance,
March
31,
2001 8,500,000 8,500 (7,167) - - (210,877) (209,544)
Common
stock
sub-
scribed - - - 221,731 - - 221,731
Net
loss
for
the
period - - - - - (224,305) (224,305)
---------------------------------------------------------------------
Balance,
June 30,
2001 9,668,224 $9,668 $ 991,665 $221,731 $ (1,000,000)$(435,182)$(212,118)
==============================================================================
PETAPEER HOLDINGS, INC.
(Formerly EBUX, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
(Stated in U.S. Dollars)
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements as of June 30,
2001 included herein have been prepared without audit pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with United States generally accepted accounting
principles have been condensed or omitted pursuant to such
rules and regulations. In the opinion of management, all
adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been
included. It is suggested that these consolidated financial
statements be read in conjunction with the December 31, 2000
audited consolidated financial statements and notes thereto.
2. SIGNIFICANT ACCOUNTING POLICIES
a) Consolidation
These financial statements include the accounts of the
Company, incorporated in Florida, and NetworthEurope.com
S.A., incorporated in Luxembourg, and 3838421 Canada Inc., a
company incorporated in Canada (Note 3).
b) Foreign Currency Translation
The Company's principal operations are located in Canada and
its functional currency is the Canadian dollar. The
financial statements of the Canadian subsidiary have been
translated at the period end exchange rate, capital accounts
at the historical exchange rate, and revenues and expenses
at the average exchange rate for the period. Adjustments
arising from the translation of the Company's subsidiary's
financial statements are included as a separate component of
shareholders' equity.
c) Capital Assets
Capital assets are comprised of computer software and
computer hardware which are recorded at cost and depreciated
over their estimated useful lives as follows: computer
software - three years; computer hardware - three years.
PETAPEER HOLDINGS, INC.
(Formerly EBUX, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
(Stated in U.S. Dollars)
2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
d) Capitalized Costs
Costs for developing computer software are capitalized when
technological feasibility has been established for the
computer software product. Capitalization of computer
software costs will be discontinued when the product is
available for general release to customers and such costs
are amortized on a straight line basis over two years. At
each balance sheet date, the unamortized capitalized costs
of a computer software product shall be compared to the net
realizable value of that product. The amount by which the
unamortized capitalized costs of a computer software product
exceed the net realizable value of that asset shall be
written off.
The costs incurred in the design, configuration, coding,
installation and testing of the Company's website up to its
initial implementation are capitalized and amortized on a
straight line basis over two years.
Ongoing website post-implementation costs of operation,
including training and application maintenance, will be
charged to expense as incurred.
e) Revenue Recognition
The Company will generate revenue from registration fees for
users who wish to upgrade or obtain additional
functionalities made available by the Company on an ongoing
basis. Revenue will be recognized as received.
f) Loss Per Share
The loss per share is calculated using the weighted average
number of common shares outstanding during the period.
Diluted earnings per share is not shown as the effect is
anti-dilutive.
3. ACQUISITION
Effective February 22, 2001, the Company:
i) acquired the worldwide rights to a software application
(known as Gnotella) for consideration of $1,000,000 payable
to the vendor, 3838421 Canada Inc. (Note 7(a));
PETAPEER HOLDINGS, INC.
(Formerly EBUX, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
(Stated in U.S. Dollars)
3. ACQUISITION (Continued)
ii) granted warrants to 3838421 Canada Inc. to acquire 13,
300,000 common voting shares of the Company. The warrants
have no expiry date and are exercisable at a price of $1.625
per share. At June 30, 2001, no warrants have been
exercised;
iii) granted warrants to the shareholders of 3838421 Canada
Inc. to acquire 6,700,000 common voting shares of EBUX, Inc.
(the "Company"). Effective the same date, a director of
3838421 Canada Inc. was appointed as sole director of the
Company. At June 30, 2001, no warrants have been exercised.
Since the above transactions and the board appointment result
in the shareholders of 3838421 Canada Inc. acquiring control
of EBUX, Inc., the transaction, which is referred to as a
"reverse take-over", has been treated for accounting purposes
as an acquisition by 3838421 Canada Inc. of the net assets and
liabilities of EBUX, Inc. Under this purchase method of
accounting, the results of operations of EBUX, Inc. are
included in the combined financial statements from February
22, 2001.
The reverse acquisition was a reorganization and
recapitalization of a private operating company with a public
shell in which no goodwill or other intangibles were recorded
as part of the transaction. At February 22, 2001, EBUX, Inc.
had a net asset deficiency of $127,577, therefore, on the
granting of the warrants to acquire 13,300,000 common shares
of EBUX, Inc., the net asset deficiency of $127,577 was
charged to deficit. 3838421 Canada Inc. is deemed to be the
purchaser for accounting purposes.
Accordingly, its net assets are included in the balance sheet
at their previously recorded amounts. The acquisition is
summarized as follows:
Current Assets
Cash $ 512
---------
Current Liabilities
Accounts payable 48,867
Note payable 79,222
---------
128,089
---------
Net Asset Deficiency $(127,577)
All inter-company balances and transactions have been
eliminated on consolidation, including the transfer of the
software license rights referred to in (i) above.
PETAPEER HOLDINGS, INC.
(Formerly EBUX, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
(Stated in U.S. Dollars)
4. CAPITAL ASSETS (Continued)
JUNE 30 DECEMBER 31
2001 2000
----------------------------------------- -------------
Accumulated Net Book Net Book
Cost Depreciation Value Value
Computer
software $ 2,883 $ 80 $ 2,803 $ -
Computer
hardware 713 20 693 -
----------------------------------------- -------------
$ 3,596 $ 100 $ 3,496 $ -
5. COMMITMENTS
i) Pursuant to the acquisition to acquire the software rights
(Note 3), the Company will enter into employment contracts with
certain directors and officers.
ii) Pursuant to the acquisition agreement, the Company may issue
1,000,000 common shares to certain minority shareholders of
companies affiliated with the vendor in exchange for their
shareholdings in those companies.
iii) The Company is required to pay a license fee equivalent to 20%
of revenue earned from the Gnotella software, plus 10% of
financing proceeds to a company with directors in common with
the Company and 3838421 Canada Inc. The amount is payable on
a quarterly basis.
6. SHARE PURCHASE WARRANTS
The Company issued 6,700,000 share purchase warrants to
certain directors and officers of 3838421 Canada Inc. at a
price of $1.625 per share. The warrants have no expiry date.
No compensation expense has been recorded on the granting of
these warrants as the exercise price of each warrant equals
the fair value of the underlying common stock as of the grant
date (A.P.B. Opinion No. 25).
If compensation expense had been recorded as calculated in
accordance with F.A.S. No. 123, the Company's loss and loss
per share for the six month period to June 30, 2001 would have
been increased as indicated below.
Loss $ (3,949,409)
Loss per share $ (0.42)
PETAPEER HOLDINGS, INC.
(Formerly EBUX, Inc.)
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2001
(Stated in U.S. Dollars)
6. SHARE PURCHASE WARRANTS (Continued)
The calculation is based upon the Black-Scholes pricing model
with the following assumptions; dividend yield, Nil percent
for all years; expected volatility of 152%; risk free interest
rate of 5.25%, and expected life of two years.
7. SHARE CAPITAL
a) On April 16, 2001, the Company issued 1,168,224 common
shares at a price of $0.856 per share to 3838441 Canada
Inc., the Company's subsidiary, in satisfaction of the debt
of $1,000,000 (Note 3(i)). This transaction was subsequently
eliminated at consolidation.
b) By a private offering memorandum, dated April 16, 2001, the
Company intends to raise up to $2,000,000 by way of private
placement. The Company will issue up to 2,851,604 common
shares at a price of $0.70136 per share, and warrants
entitling the holder to purchase one common share for each
warrant held at a price of $0.70136 per share for a one year
period.
As at June 30, 2001, $221,731 has been received by way of
subscriptions.
8. RELATED PARTY TRANSACTIONS
a) Amounts due to a company related by way of common directors
are interest free, unsecured and have no specified terms of
repayment.
b) 3838421 Canada Inc. entered into a technology licence
agreement, dated November 30, 2000, with a private company
with common directors, whereby it acquired the rights to the
technology subsequently transferred and assigned to EBUX,
Inc. on February 22, 2001.
Under the terms of the agreement dated November 30, 2000,
3838421 Canada Inc. undertook to pay as consideration, 20%
of revenue and 10% of financing receipts to the private
company (excluding the financing proceeds referred to in the
agreement of February 22, 2000).
Item 2. Management's Discussion and Analysis or Plan of Operations
Plan of Operations
Our principal asset is a license to use and commercialise the
client software known as "Gnotella" ("Gnotella"). Our business
plan calls for the continued development of upgrades to Gnotella
and the establishment of a broad user base for the software.
Gnotella version 0.9.9 was released on March 2, 2001. Gnotella
version 1.0 was released on July 26, 2001. Between its release
date and the release date of version 1.0, version 0.9.9 was
downloaded 2,626,674 times. From its release date on July 26,
2001, through July 31, 2001, version 1.0 was downloaded 224,432
times. Since the time of its inception in mid-2000, there have
been approximately 4 million downloads of Gnotella. There were
1,760,493 page views of the http://Gnotella.com website during
July, 2001. Gnotella is currently in the top 15 on Cnet's
Download.com "Most Popular" list, and has been on the chart for
14 weeks.
All of the foregoing figures exclude the numbers compiled by
other mirror Web sites providing downloads of the software
external to http://Gnotella.com. There are at least 15 mirror
Web sites from which Gnotella can be obtained. As the exact
number of such mirror sites is unknown, the number of downloads
from these sites cannot be ascertained. There are at this time
more than 30 Web sites devoted to peer-to-peer computing which
refer or point to http://Gnotella.com. There have been downloads
of Gnotella from users on five continents, in at least 130
countries of which we are aware at this time, with a strong
interest in Europe and South America.
To date, we have provided the software free of charge.
Management believes that providing Gnotella free of charge is
instrumental in developing a committed user base. Once our user
base is in place to the satisfaction of management, we will begin
charging for Gnotella upgrades and deluxe features. Given the
significant volume of traffic to our site, management also
believes our site will be attractive to outside advertisers. The
first third party advertisements were posted to our site on July
26, 2001.
Though operating revenues commenced with the initiation of
advertising revenues on July 26, 2001, and charges for software
upgrades and deluxe features will commence sometime in the
future, it is impossible at this time to predict when operating
revenues will become significant when compared to the operating
expenses of the Company. In the mean time, funds obtained
through the sale of equity capital are being used to fund the day
to day operations of the Company. At the present time the
Company has a subscription receivable from the sale of equity
capital in the amount of $1,778,269. Management expects that
this receivable will fund the operations of the Company for the
next 12 months. While management believes the subscriptions will
be paid as agreed, there can be no guarantee the funding will be
received. We have three employees at the present time. We
expect to hire two to four more employees over the next 12
months.
3
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
From time to time, the Company will make written and oral
forward-looking statements about matters that involve risk and
uncertainties that could cause actual results to differ
materially from projected results. Important factors that could
cause actual results to differ materially include, among others:
- The Company will obtain funding sufficient to execute its
business plan.
- The Company will eventually achieve revenues from upgrades
to the client software known as "Gnotella" sufficient to
sustain the operations of the Company.
- Internet service providers will continue to support peer-to-
peer initiatives.
- Bandwidth cost to its users will not increase to such extent
that Gnotella loses commercial viability.
- The Company will be successful competing in a competitive
market.
- The Company will be able to respond in an adequate manner to
any unforeseen technological changes.
- The Company's key personnel will remain with the Company.
- The use of Gnotella will not be unduly restrained by
governmental or legal action.
Many of these factors are beyond the Company's ability to control
and predict. Investors are cautioned not to place undue reliance
on forward-looking statements. The Company disclaims any intent
or obligation to update its forward-looking statements, whether
as a result of receiving new information, the occurrence of
future events, or otherwise.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
4
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with 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 authorised.
PETAPEER HOLDINGS INC.
Date: August 14, 2001
By: /S/ Stephane Chouinard
------------------------
Stephane Chouinard, CEO
5