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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 September 30, 2001
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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: 0-30536
_______________________________
FoneCash, Inc.
(Exact name of registrant as specified in its charter)
_______________________________
Delaware 22-3530573
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
90 Park Avenue, 1700, New York, New York 10016-1301
(Address of principal executive offices) (Zip-Code)
Registrant's telephone number, including area code: (212) 984-0641
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
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12,13,or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No
--- ---
The number of outstanding shares of the registrant's Common Stock, par
value $.001 per share, was 9,039,348 on September 30, 2001.
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Fonecash, Inc.
Quarterly Report on Form 10-QSB
For the Quarter Ended on September30, 2001
Table of Contents
Part I. FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements (Unaudited)
Balance Sheets as of September 30, 2001 and December 31, 2000
Statement of Operations for Nine Month Period Ending September 30, 2001
Statement of Cash Flow for Nine Month Period Ending September 30, 2001
Notes to Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Part II OTHER INFORMATION
Incorporated by reference in the Company's Form 10-SB, Amendment 3
registration statement, along with all exhibits, submitted on May ,
2000
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FONECASH, INC
(A Development Stage Company)
Balance Sheets
ASSETS
------
September 30 December 31
2001 2000
----------- -----------
Current assets:
Cash $ 2,298 $ 1,822
Accounts receivable 15,660 --
Inventory 201,476 35,000
Prepaid expenses 25,000 25,000
----------- -----------
244,434 61,822
----------- -----------
Property and equipment, net 67,010 103,700
----------- -----------
Other assets:
Patent rights, net 2,500 3,000
Other 80 116
----------- -----------
2,580 3,116
----------- -----------
$ 314,024 $ 168,638
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current liabilities:
Accounts payable $ 168,263 $ 83,513
Due to an officer/stockholder 140,391 683
Note payable 122,951 122,953
431,605 207,149
Stockholders' equity(deficit): (Note 2)
Preferred stock; $.0001 par value; authorized -
5,000,000 shares; issued - none -- --
Common stock; $.0001 par value; authorized -
20,000,000 shares; issued and outstanding -
6,651,372 shares in 2001 and 5,951,372 in 2000 904 595
Additional paid-in capital 2,647,434 1,801,743
Treasury stock, 500 shares at cost (1,500) (1,500)
Deficit accumulated during the development stage (2,764,419) (1,839,349)
----------- -----------
Total stockholders' equity (117,581) (38,511)
----------- -----------
$ 314,024 $ 168,638
=========== ===========
See accompanying notes and accountant's review report
3
FONECASH, INC.
(A Development Stage Company)
Statements of Operation
Nine Nine Aug.7,1997
Months Ended Months Ended (Inception) to
September 30, September 30, September 30,
2001 2000 2001
----------- ----------- -----------
Revenue:
Sales $ 15,660 -- $ 15,660
Cost of sales 8,524 -- 8,524
----------- ----------- -----------
Gross profit 7,136 -- 7,136
Interest Income 7 4,154 5,200
----------- ----------- -----------
Total revenue 7,143 4,154 12,336
----------- ----------- -----------
----------- ----------- -----------
Cost and expenses
Depreciation $ 36,690 $ 22,464 $ 153,615
Amortization 537 536 2,789
Research and development, related party 9,700 24,090 383,756
Officer's compensation 1,200 28,129 271,429
Impairment of investment in related party 50,000
Impairment of investment in subsidiaries 450,000 450,000
General and administrative 434,086 115,734 1,465,166
----------- ----------- -----------
932,213 190,953 2,776,755
----------- ----------- -----------
Net loss $ (925,070) $ (186,799) $(2,764,419)
=========== =========== ===========
Basic and diluted loss per common share $ (.13) $ (.05) $ (.70)
=========== =========== ===========
Weighted average common shares outstanding $ 6,919,720 $ 3,836,338 $ 3,953,276
=========== =========== ===========
See accompanying notes and accountant's review report
4
FONECASH, INC.
(A Development Stage Company)
Statements of Change in Stockholders' Equity
For the period August 7,1997 (Inception) to September 30, 2001
Deficit
Additional Treasury Stock Accumulated
Common Stock Paid-in ---------- ---------- from
Shares Amount Capital Stock Amount Inception
---------- ---------- ---------- ---------- ---------- ----------
Balances, August 7,1997 (Inception) $ $
Common stock issued for services
And costs advanced, valued at $.0001
Per share 2,000,000 200 -- --
Common stock issued for services
Valued at $.15 per share 200,000 20 29,980
Net loss for the period -- -- -- (61,404)
---------- ---------- ---------- ---------- ---------- ----------
Balances, December 31,1997 2,200,000 220 29,980 (61,404)
Sale of common stock ($.4156 per share) 204,500 20 84,965 --
Net Loss -- -- -- (95,211)
---------- ---------- ---------- ---------- ---------- ----------
Balances, December 31,1998 2,404,500 240 114,945 (156,615)
Sale of common stock($.7622 per share) 1,098,505 110 837,160 --
Capital contributed for services -- -- 60,000 --
Common stock issued for services
333,333 33 269,967
Valued at $.81 per share
Net loss -- -- (785,366)
---------- ---------- ---------- ---------- ---------- ----------
Balances, December 31, 1999 3,836,338 383 1,282,072 (941,981)
Sale of common stock ($1.25 per 25,000 3 31,247
share)
Common stock issued for services 623,367 62 331,071
valued at $.5312 per share
Purchase of treasury stock 500 (1,500)
Net Loss for the period (897,368)
---------- ---------- ---------- ---------- ---------- ----------
Balances, December 31,2000 5,951,372 595 1,801,743 500 (1,500) (1,839,349)
---------- ---------- ---------- ---------- ---------- ----------
Common stock issued for services 700,000 70 265.930
valued at $.38 per share
---------- ---------- ---------- ---------- ---------- ----------
Sale of common stock($.035 per share) 287,976 29 9,971
---------- ---------- ---------- ---------- ---------- ----------
Common stock issued for services,
valued at $.10 per share 1,200,000 120 119,880
---------- ---------- ---------- ---------- ---------- ----------
Common stock issued in acquisition
of subsidiaries, valued at $.50/share 900,000 90 449,910
---------- ---------- ---------- ---------- ---------- ----------
Net loss for the period (925,070)
---------- ---------- ---------- ---------- ---------- ----------
Balances, September 30, 2001 9,039,348 $ 904 $2,647,434 500 $ (1,500) $(2,764,419)
========== ========== ========== ========== ========== ===========
See accompanying notes and accountant's review report.
5
FONECASH, INC
(A Development Stage Company)
Statements of Cash Flow
Nine Nine Aug. 7,1997
Months Ended Months Ended (Inception) to
September 30, September 30, September 30,
2001 2000 2001
----------- ----------- -----------
Cash flows from operating activities
Net loss $ (925,070) $ (186,799) $(2,764,419)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 36,690 22,464 153,615
Amortization 537 536 2,789
Cash surrender value of life insurance -- 6,838 --
Common stock issued for services 386,000 -- 1,234,833
Common stock issued in acquisition of subsidiaries 450,000 -- 450,000
Changes in assets and liabilities:
(Increase in accounts receivable (15,660) -- (15,660)
(Increase) in inventory (166,476) (28,311) (201,476)
(Increase) in prepaid expenses -- (25,000)
Increase (decrease) in accounts payable 84,750 (1,306) 168,263
----------- ----------- -----------
Net cash used in operating activities (149,229) (186,578) (997,055)
----------- ----------- -----------
Cash flows from investing activities:
Organization costs -- -- (368)
Purchase of property and equipment -- (9,788) (220,625)
Acquisition of patent rights -- -- (5,000)
----------- ----------- -----------
Net cash used in investing activities -- (9,788) (225,993)
----------- ----------- -----------
Cash flow from financing activities:
Proceeds from short-term debt 15,972 42,500 163,146
Repayment of short term debt (15,974) (4,956) (40,196)
Increase (decrease) in amounts due to
officer/stockholder 139.707 (5,660) 140,391
Purchase of treasury stock -- -- (1,500)
Proceeds from sale of common stock 10,000 -- 963,505
----------- ----------- -----------
Net cash provided by financing activities 149,705 31,884 1,225,346
----------- ----------- -----------
Net increase (decrease) in cash 476 (164,482) 2,298
Cash at beginning of period 1,822 208.702 --
----------- ----------- -----------
Cash at end of period $ 2,298 $ 44,220 $ 2,298
=========== =========== ==========
See accompanying notes and accountant's review report.
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FONECASH, INC AND SUBSIDIARIES
(A Development Stage Company)
Form 1OQSB
Quarter Ended September 30, 2001
Notes to Consolidated Financial Statements
Note 1 -- Condensed Consolidated Financial Statements
Basis of Presentation
---------------------
The accompanying interim unaudited consolidated financial statements include the
accounts of FoneCash, Inc. and its subsidiaries which are hereafter referred to
as (the "Company"). All intercompany accounts and transactions have been
eliminated in consolidation. These financial statements have been prepared in
accordance with accounting principles generally accepted in the United States
for interim financial information and with the instructions to Form 10-QSB of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States for complete financial statements. In the opinion of management, such
interim statements reflect all adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position and the results of
operations and cash flows for the interim periods presented. The results of
operations for these interim periods are not necessarily indicative of the
results to be expected for the year ending December 31, 2001. These financial
statements should be read in conjunction with the audited financial statements
and footnotes included in the Company's report on Form 10-KSB for the year ended
December 31, 2000.
Note 2 -- Business Combination
On April 10, 2001, pursuant to an agreement with Richwoodland Profits
Corporation ("RPC") and Universal Venture Limited "UVL"), each a British Virgin
Island holding company, the Company has acquired all of the voting stock of four
foreign companies that were wholly-owned by RPC and UVL in return for 900,000
shares of common stock of the Company, valued at $.50 per share. The companies
acquired are start-up companies that have no assets, liabilities, revenue,
expenses and results of operations. The investment in the companies has been
reported entirely as goodwill, as there is no value in the companies.
The four acquired companies are Universal Information Technology, (Hong Kong)
Limited, a company which has developed a video compression technology for
Internet and wireless app1ications Firstech Ventures (Hong Kong) Limited, a
company that locates engineering services for
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FONECASH, INC. AND SUBSIDIARIES
(A Development Stage Company)
Form 1OQSB
Quarter Ended September 30, 2001
Notes to Consolidated Financial Statements
environmental projects in China, especially land fill projects, waste water and
waste oil treatment facilities, and waste liner projects, Tech Unity Technology,
(Hong Kong) Limited, which engages in gathering information and research about
business opportunities in China for dissemination among U.S. and Australian
bidders, and Fonecash.com (Hong Kong) Limited, a company engaged in the wireless
processing of credit and debit cards for the mobile merchants.
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated or completed after June 30, 2001. Statement 141 also specifies
criteria intangible assets acquired in a purchase business combination must meet
to be recognized and reported apart from goodwill. The Company has adopted the
provisions of Statement 141 in reporting the business combination.
Statement 142 will require that goodwill and intangible assets with indefinite
useful lives no longer be amortized, but instead tested for impairment at least
annually. Statement 142 will also require that intangible assets with definite
useful lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with
Statement 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of Furthermore, any goodwill and any intangible
asset determined to have an indefinite useful life that are acquired in a
purchase business combination completed after June 30, 2001 will not be
amortized, but will continue to be evaluated for impairment in accordance with
the appropriate pre-Statement 142 accounting literature. The Company has adopted
the provisions of Statement 142 and has written the goodwill associated with the
business combination down to zero, as no future benefit can be determined. An
impairment loss of $450,000 has been reflected in the consolidated statements of
operations.
Note 2 -- Stockholders' Equity (Deficit)
Common Stock
------------
Since December 3 1, 2000, the Company has issued 1,900,000 shares of common
stock for consulting services, of which 700,000 shares were valued at $0.38 per
share and 1,200,000 were valued at $0.10 per share. The Company has also sold
287,976 shares of common stock at $0.035 per share. The Company has issued
900,000 of
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FONECASH, INC. AND SUBSIDIARIES
(A Development Stage Company)
Form 1OQSB
Quarter Ended September 30, 2001
Notes to Consolidated Financial Statements
common stock valued at $0.50 per share in exchange for four foreign companies,
as previously discussed.
Stock Options
-------------
At June 30, 2001 the Company has granted 800,000 shares of common stock for
issuance in compensation for business services to Reginald Clarke at the price
of $0.50 per share.
Loss Per Common Share
---------------------
Loss per common share is computed by dividing the net loss by the weighted
average shares outstanding during the period.
**********************____________*******************__________*****************
9
Item 2. Management's Discussion and Analysis
This Quarterly Report on Form 10-QSB, including the information incorporated by
reference herein, includes "forward looking statement" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Act") and Section
21E of the Securities Act of 1934, as amended ("Act of 34"). All of the
statements contained in this Quarterly Report on Form 10-QSB, other than
statements of historical fact, should be considered forward looking statements,
including, but not limited to, those concerning the Company's strategies,
objectives and plans for expansion of its operation, products and services and
growth in demand for it's products and services. There can be no assurances that
these expectations will prove to have been correct. Certain important factors
that could cause actual results to differ materially from the Company's
expectations (the "Cautionary Statements") are disclosed in this Quarterly
report on Form 10-QSB. All subsequent written and oral forward looking
statements by or attributable to the Company or persons acting on behalf are
expressly qualified in their entirety by such Cautionary Statements. Investors
are cautioned not to place undue reliance on these forward looking statements
which speak only as of the date hereof and are not intended to give any
assurance as to future results. The Company undertakes no obligation to publicly
release any revisions to these forward-looking statements to reflect events or
reflect the occurrence of unanticipated events.
Fonecash, Inc. (the "Company") was incorporated under the laws of the State of
Delaware on August 7,1997 and is in its development stage. The first sale of its
products was made in during this period.
The Company incurred operating losses of $2,764,419 from Inception to September
30, 2001. The Company expects its accumulated deficit to grow for the
foreseeable future as total costs and expenses increases due principally to
increased marketing expenses associated with its plans to undertake trials of
its products and services. There can be no assurances that the Company will
complete successful trials of its products and services, nor that sufficient
revenues will be generated from the possible sales of such products and services
to allow the Company to operate profitably.
General
The Company has developed, under an exclusive license agreement with a holder of
a U.S. Patent, a system of processing credit cards for an under served community
of low volume merchants and in-home salespersons consisting of a terminal and a
system of computers, utilizing established communications networks, both wired
and wireless, for processing the data from credit and debit cards.
Terminals are electronic collectors of credit and debit data from the magnetic
stripe on cards. In the case of debit and credit cards the Fonecash system
collects the data from the magnetic stripe when a merchant accepts the card for
payment of goods or services. This data is transmitted to processors where the
validity of the card number is confirmed and the amount of the purchase is
authorized to the cardholder's account. Settlement occurs when the collected and
stored data is sent to the card issuing bank which charges the customer's
account and electronically deposits payment in the merchant's bank account,
usually within 24 - 48 hours.
10
The Company intends to market a product line and a complete processing system
that is high quality and simple to operate, because the Company, and not the
individual merchant, takes the responsibility for closing the day's receipts and
uploading the data to a third party payment processor, such as Paymenttech,
Visanet, or First Data Resources, for settlement which results in payments being
deposited in the merchants' bank account within 48 hours. Because the Company,
not only provides a terminal, but also, provides a service that facilitates the
collection of daily payment receipts, and transmits these electronic receipts
for payment and deposit of funds to each merchant, the Company believes that it
will be able to compete with the current makers of terminals, who only sell
terminals, but also, able to compete with payment processors who only support
terminals which transmit credit card data to their computers after the merchant
has manually closed out the day's electronic receipts and transmitted the totals
to the payment processor.
The Company intends to establish up to three master distributors in the United
States with the most likely candidates being current Independent Sales
Organizations (ISO's) who are already engaged in the business of distributing
automated credit card processing terminals to established merchants who have
been approved by their sponsoring banks. These ISO's have trained commissioned
sales persons and have an interest in placement of any terminal in the market
regardless of manufacturer.
The Company has never operated under any other name, nor has it ever been
involved with any bankruptcy, receivership or similar proceeding or engaged in
any material reclassification, merger, consolidation, or purchase or sale of
assets.
Results of Operation
General and administrative expenses during the nine months ending September 30,
2001 were $932,213 as compared to $190,953 for the same period in 2000,
representing an increase of $741,260. The increase during the nine month period
ending September 30, 2001 was primarily due to an expansion of the general
operations of the Company, including legal, accounting and printing associated
with the filing of various documents with the Securities and Exchange
Commission, as well as cost associated with the manufacture, shipping and
storage of products for sale.
Compensation and related benefits during this nine months was $1,200 and
represented compensation to its president; this compares with compensation to
its president of $28,129 for the nine months ended September 30, 2000.
Balance Sheet Data
The Company's combined cash and cash equivalents totaled $7,143 for the period
ending September 30, 2001. This is an increase of $2,989 from $4,154 for the
period ending September 30, 2000
The Company does not expect to generate a positive internal cash flow for at
least the next nine months due to expected increase in spending for salaries and
the expected costs of marketing and sales activtiies.
11
Property and equipment was valued at $67,010 for the period ending September 30,
2001 and this represents an increase of $36,690 for purchases of additional
molds used the manufacturing of its products in Taiwan. The molds have a useful
life of 3 years and are depreciated on a straight-line basis.
Part II Other Information
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Items 3 Defaults upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and reports on Form 8-K
a. Exhibit Index
b. Reports of Form 8-K
The Company did not file any reports on Form 8-K during the
quarter ended September 30, 2001.
Signatures
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned who is duly authorized
to sign as an officer and as the principal officer of the Company.
Fonecash, Inc
By: /s/ Daniel E. Charboneau
---------------------------------------------------------
Daniel E. Charboneau, Chairman/CEO
Date: November 14, 2001
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