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 September 30, 2002
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: 0-25097
YSEEK, INC.
(Exact Name of Small Business Issuer in Its Charter)
Florida 65-0783722
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7732 N. Mobley Drive, Odessa, Florida 33556
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (813) 926-3298
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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 November 14, 2002 was 24,201,765.
Table of Contents to Form 10QSB
Part I - Financial Information Page
Item 1. Financial Statements (unaudited)
YSEEK, INC.
FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
September 30,
2002
(unaudited)
ASSETS
Current assets
Cash $ 22,103
Software license, net 534,104
Other assets
Shareholder loan receivable, net 7,224
________________
Total Assets $ 563,431
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 38,461
Current maturities of long-term debt 59,749
_______________
Total current liabilities 98,210
_______________
Long-term debt, less current maturities 1,529
_______________
Commitments and contingencies
Stockholders' equity
Common stock; $.0001 par value; 50,000,000 shares
authorized; 24,201,765 shares issued and outstanding
(excluding 5,720 shares held in the treasury) 2,420
Paid in capital 8,267,873
Accumulated deficit (7,796,101)
_______________
474,192
Less: Subscriptions receivable (10,500)
_______________
Total stockholders' equity 463,692
_______________
Total Liabilities and Stockholders' Equity $ 563,431
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YSEEK, INC.
STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
___________________________ ___________________________
2002 2001 2002 2001
___________________________ ___________________________
(unaudited) (unaudited) (unaudited) (unaudited)
Revenues $ - $ 214 $ 254 $ 385
____________ ____________ ______________ ___________
Expenses
Selling, general and administrative 23,840 997,689 94,229 2,835,453
____________ ___________ ______________ ___________
Total expenses 23,840 997,689 94,229 2,835,453
____________ ___________ ______________ ___________
Other income (expense)
Interest income - 583 - 6,686
Interest expense 6,002 (2,348) (2,853) (4,518)
____________ ____________ ______________ ___________
Total other income (expense) 6,002 (1,765) (2,853) 2,168
____________ ____________ _______________ ___________
Net loss $ (17,838) $ (999,240) $ (96,828) $(2,832,900)
____________ ____________ _______________ ____________
Net loss per common share $ - $ (.04) $ - $ (.12)
____________ ____________ _______________ ____________
Weighted average common shares
outstanding 24,051,989 22,315,100 22,894,063 23,947,203
============ ============ =============== ============
YSEEK, INC.
STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30,
____________________________________
2002 2001
_________________ _______________
(unaudited) (unaudited)
Cash flows from operating activities
Net loss $ (96,828) $ (2,832,900)
_________________ ______________
Adjustments to reconcile net loss to
net cash used in operating activities:
Contributed services - 8,750
Stock issued for services - 104,688
Amortization 49,050 66,691
Write down of property and equipment
due to impairment - 129,773
Recovery of amortization expense due to
stock recision - (324,187)
Loss from disposal of equipment - 13,566
Decrease (increase) in other receivables 2,025 (3,075)
Increase in interest receivable - (8,249)
Decrease in prepaid expenses - 2,732,933
Increase (decrease) in accounts payable and accrued expenses 3,564 (18,639)
________________ _______________
Total adjustments 54,639 2,702,251
________________ _______________
Net cash used in operating activities (42,189) (130,649)
________________ _______________
Cash flows from investing activities
Decrease in deposits and other assets - 30,000
________________ _______________
Cash flows from financing activities
Proceeds from sale of common stock 105,000 -
Payments on notes payable (68,201) (3,130)
Proceeds from issuance of loans payable 23,314 70,200
Net advances from a stockholder 3,941 32,540
_________________ _______________
Net cash provided by financing activities 64,054 99,610
_________________ _______________
Net increase (decrease) in cash 21,865 (1,039)
Cash, beginning of period 238 1,050
Cash, end of period $ 22,103 $ 11
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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.
In September 2002, the Company received a stock subscription for 700,000 common
shares in exchange for a future cash payment of $10,500.
Supplemental disclosure of cash flow information:
The Company paid approximately $2,853 and $1,572 in interest for the nine months
ended September 30, 2002 and 2001, respectively.
The information presented herein as of September 30, 2002, and for the three and
nine months ended September 30, 2002 and 2001, 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 nine-month period ended September 30, 2002, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2002. 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, 2001.
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. In the transaction accounted for as a purchase, 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 website 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
business. 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.
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 September 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 September 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 resulted in the
recovery of amortization in the amount of $324,069. The Company recognized an
impairment loss due to the Rankstreet website of $129,773. The 2001 financial
statements reflect this agreement.
(3) Common Stock Transactions:
During the third quarter of 2002, the Company sold 7,606,665 shares of common
stock for cash of $105,000 and a stock subscription receivable of $10,500.
In 2000, the Company issued 5,720,000 shares of common stock under two traffic
promotion agreements, with two companies related to then officers or directors
of Yseek. These agreements expired one year later. The Company recognized an
expense of $1,287,000 related to these agreements. In September 2002, the two
companies returned the entire 5,720,000 common shares. Yseek and the companies
executed mutual releases from any future claims, losses or rights. The shares
received by the Company have been reflected as treasury shares and were recorded
at cost, which was zero.
Item 2. Management's Discussion and Analysis or Plan 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. 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. In September 2002 these officers and directors elected new officers
and directors and then resigned. The new officers and directors have been
involved with the company since its inception, except for the period from April
2001 to September 2002.
In late 2000, the Company acquired a ten-year software license for the use of a
keyword biddable search engine and related domain names. The Company entered
into two traffic promotion agreements whereby each promoter provided 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.
The stock issued under the traffic promotion agreements was returned in
September 2002. New management is determining the future plans for the search
engine.
The Company's plans include acquiring profitable business ventures. The Company
is currently actively exploring several possible acquisitions however there are
no pending letters of intent, active negotiations or other plans.
The Companies plans to acquire other profitable business ventures will require
additional funds. During September and October of 2002, the Company received
$115,500 from sales of common stock, of which $35,000 was from one of the new
officers who is a major stockholder. This initial funding was used primarily to
pay off debts. The Company plans to fund the operations of the company through
additional sales of common stock. Acquistions will be funded through a
combination of cash, stock and debt. The Company believes that in the current
marketplace they are an attractive merger partner due to their public company
status.
As of September 30, 2002 the Company had cash available of approximately
$22,000. However, the Company's operations are currently minimal and the cash
outflows have been substantially reduced.
Additionally the Company's officers and board members have agreed to fund the
Company's operations if necessary.
In October, 2002 the Company entered into employment agreements with its vice
president and treasurer. The employment agreements are for the period
October 1, 2002 through September 30, 2003. Compensation under both agreements
will be 4,500,000 common shares valued at $.01 per share.
Part II.
Item. 2. Changes in Securities
From September 9, 2002, to September 25, 2002, Registrant sold a total of
6,966,665 common shares for a cash purchase price of $.015 per share as
follows:
Name Number Common Shares Purchased Date
Rachel L. Steele 2,300,000 09-10-02
Gary H. Anderson 1,000,000 09-25-02
Barbara B. Reschly 1,000,000 09-09-02
Alvin L. Ferrer 333,333 09-10-02
Jainarine Leonard 66,666 09-19-02
Frances Best-Ferrer 266,666 09-18-02
Timothy C. Minnehan 2,000,000 09-09-02
All sales were made pursuant to Section 4(2) of the 1933 Act. The proceeds
of the sale of these securities were used to pay $53,439.05 due to 2D&H, Inc.
a corporation controlled by David G. Marshlack and Charles Bruce Hammil,
$80,000 to David G. Marshlack, Dan Marshlack, and Charles Bruce
Hammil, and to provide operating capital.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
Exhibit Description Number
(2) Plan of Acquisition, Reorganization,
Arrangement, Liquidation or Succession................................None
(4) Instruments defining the rights of holders, including Indentures None
(10) Material contracts ...................................................None
(10.1) Employment Agreement with Rachel L. Steele dated October 1, 2002....*
(10.2) Employment Agreement with Tanya Ostrowski dated October 1, 2002.. ..*
(11) Statement re: computation of per share earnings..................Note 1 to
Financial
Statements
(15) Letter re: Unaudited Interim Financial Information....................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
99.1 Certification of CEO and CFO........................................*
* Filed herewith
(b) REPORTS ON FORM 8-K:
Report on Form 8-K filed September 11, 2002, reporting Item 1
and Item 6.
Amended Report on Form 8-K filed September 25, 2002, amending the
Report on Form 8-K filed September 11, 2002.
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: November 14, 2002 By: /s/ David Weintraub
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David Weintraub
Chief Executive Officer
Chief Financial Officer