10QSB 1 mindset_10q-093002.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 30, 2002 Commission File No: _________________ MINDSET INTERACTIVE CORP. (f.k.a. - Ecklan Corporation) Nevada 91-1906973 (Jurisdiction of Incorporation) (I.R.S. Employer Identification No.) 9th Floor, 555 Burrard Street, Box 273 Two Bentall Centre Vancouver, British Columbia, Canada, V7X 1M8 Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (604) 893-7062 Ecklan Corporation, 24843 Del Prado, #318, Dana Point CA 92629 (Former name and address) As of November 12, 2002, 12,153,072 shares of Common Stock were issued and outstanding Transitional Small Business Disclosure Format (check one): yes [ ] no [X] Mindset Interactive Corp. Table of Contents PART I - Financial Information Item 1 Condensed Consolidated Balance Sheet Condensed Consolidated Statements of Operations Condensed Consolidated Statement of Changes in Stockholders' Equity Condensed Consolidated Statements of Cash Flow Notes to Condensed Consolidated Financial Statements Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations PART II - Other Information Item 1. Legal Proceedings Item 2. Changes in Securities and Use of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Item 7. Signatures MINDSET INTERACTIVE CORP. CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2002 ASSETS Total assets $ - ================ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT Accounts Payable........................................... $ 24,160 Stock Payable.............................................. 518,661 Note Payable............................................... 550,000 ---------------- Total Current Liabilities.................................. 1,092,821 ---------------- STOCKHOLDERS' EQUITY (DEFICIT) Common Stock............................................... 12,153 Additional Paid in Capital................................. 128,092 Accumulated Deficit........................................ (1,233,066) ---------------- Total Stockholders' Equity (Deficit)....................... (1,092,821) ---------------- Total Liabilities and Equity Stockholders' (Deficit)....... $ - ================ MINDSET INTERACTIVE CORP. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
3 Months Ended 9 Months Ended 9/30/02 9/30/01 9/30/02 9/30/01 --------------- --------------- --------------- --------------- REVENUE Sales $ - $ - $ - $ - Cost of Sales - - - - --------------- --------------- --------------- -------------- Gross Profit - - - - --------------- --------------- --------------- -------------- OPERATING EXPENSES General and Administrative 20,160 - 24,160 - --------------- -------------- -------------- --------------- Total Operating Expense 20,160 - 24,160 - --------------- -------------- -------------- --------------- Net Loss before discontinued operations (20,160) - (24,160) - Loss from discontinued operations of Mindset Interactive, Inc. subsidiary - (247,088) (193,269) (710,174) --------------- -------------- -------------- --------------- Net loss $ (20,160) $ (247,088) $ (217,429) $ (710,174) =============== =============== =============== =============== Basic and diluted loss Per common shares $ (0.01) $ (0.01) $ (0.01) $ (0.04) =============== =============== =============== =============== Weighted average of Common Shares Outstanding 12,153,072 18,233,735 16,191,129 17,888,682 =============== =============== =============== ===============
MINDSET INTERACTIVE CORP. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Common Common Accum. Total Stock Shares Stock $ APIC Deficit Equity ------------ ------------ ------------ ------------ ------------ Balance at December 31, 2001 18,637,717 $ 18,609 $ 9,945,196 $(1,015,637) $ 8,948,168 Recapitalization (6,484,645) (6,456) (9,817,104) -- (9,823,560) Net Loss for Period -- -- -- (217,429) (217,429) ------------ ------------ ------------ ------------ ------------ Balance at September 30, 2002 12,153,072 $ 12,153 $ 128,092 $(1,233,066) $(1,092,821) ============ ============ ============ ============ ============
MINDSET INTERACTIVE CORP. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW FOR THE PERIOD ENDING SEPTEMBER 30, 2002
Nine Months Ended ------------------------------- September 30, September 30, 2002 2001 ------------ ------------ Cash Flow from operating activities: Net Loss $ (217,429) $ (710,174) Adjustments to reconcile net loss to net cash used for operating activities: 193,269 (710,174) Loss on discontinued operations Changes in operating assets and liabilities 24,160 -- ------------ ------------ Net Cash used for operating activities -- -- ------------ ------------ Net Change in Cash -- -- ------------ ------------ Cash at Beginning of Period -- -- ------------ ------------ Cash at End of Period $ -- $ -- ------------ ------------
Supplemental Disclosure of Non-cash investing and financing activities During the nine month period ended September 30, 2002, Mindset Interactive Corp, ("Parent") assumed a note payable liability of Mindset Interactive, Inc. ("Subsidiary") for $550,000, which was treated as a capital contribution by the Parent. During the nine month period ended September 30, 2002, Mindset Interactive Corp. disposed of its only operating subsidiary, Mindset Interactive, Inc. in an exchange of shares. The former principal owners of Mindset Interactive, Inc. exchanged 6,484,645 shares of Mindset Interactive Corp. for all the outstanding shares of Mindset Interactive, Inc. The exchange was treated as a recapitalization transaction for $9,823,560. MINDSET INTERACTIVE CORP. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2002 NOTE 1 - COMPANY OVERVIEW AND BASIS OF PRESENTATION COMPANY OVERVIEW Mindset Interactive, Inc. was acquired by Mindset Interactive Corp. ("Company"), formerly Ecklan Corporation effective March 31, 2001, as a wholly-owned subsidiary, for the issuance of 7,000,145 new post split shares of common stock. The transaction, which closed March 31, 2001, was accounted for as a reverse merger whereby Mindset Interactive, Inc. was the acquirer for accounting purposes. Concurrently, 11,382,900 shares of stock were cancelled. In July 2000, Mindset Interactive, Inc. ("MII") entered into an investment banking agreement pursuant to which the investment banker was to provide funding to MII in the amount of $2,500,000 in consideration for the issuance of shares to the investment banker representing 60% of the outstanding common stock of MII. In March 2001, our Company acquired all of the outstanding shares of MII from the shareholders of MII (the "Shareholders") pursuant to the terms of a stock purchase agreement. The investment banker raised a portion of the funds it committed to raise in the investment banking agreement. At such time the investment banker acknowledged their inability to raise further capital to fulfill its original obligation. Consequently past management did not believe that our Company could continue to grow and meet our strategic objectives or achieve profitability. In April 2002, the Shareholders offered to acquire MII in exchange for the cancellation of approximately 6,484,645 shares of our common stock, essentially reversing the original stock purchase agreement. On April 9, 2002, our Board of Directors approved the terms of the Corporate Separation Agreement. The Board of Directors believes the separation is a more favorable alternative for our Company and our shareholders than a possible reorganization or bankruptcy. The proposed exchange of the MII Shares was submitted and approved by written consent of holders of our common stock holding a majority of our Company's voting stock, in compliance with the requirements of Nevada law. On June 18, 2002, the corporate separation became effective. Consequently, our Company no longer has any revenue generating assets or operations but is free to seek new acquisition or business opportunities under new management. The Shareholders are the sole owners of MII and have resigned from all positions as officers and directors of our Company. Our Company is currently seeking funding opportunities in conjunction with the acquisition of a project of merit. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements and related notes as of September 30, 2002 and for the three and nine month periods ended September 30, 2002 have been prepared in accordance with accounting principals generally accepted in the United States of America ("US GAAP") for interim financial information and with the instructions to Form 10-QSB. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The statements include all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of financial position and results of operations for the interim period. The results of operations for the three and nine month periods ended September 30, 2002 are not necessarily indicative of the operating results to be expected for the full fiscal year. The information included in this report should be read in conjunction with the Company's Form 10-KSB annual report for the year ended December 31, 2001. As Mindset Interactive Corp. (parent) is the surviving legal entity after the disposition of Mindset Interactive, Inc. (subsidiary), the historical accounting presented herein includes the balances of the parent only. NOTE 2 - STOCK PAYABLE The Company raised a total of $1,420,853 through its Private Placement stock offering in the prior year. As the Company only received subscription agreements from investors for $902,192, only 902,192 certificates of common stock have been issued to the investors. The remaining 518,661 shares are pending certification as accredited investors, upon which the certificates will be issued. Therefore, the $518,661 is reflected as a stock payable at September 30, 2002. NOTE 3 - NOTE PAYABLE Non-interest bearing convertible note payable without a due date $ 550,000 =========== The outstanding obligations are due to a third party investment banking group. The parent assumed the liability from the subsidiary, which was treated as a capital transaction. NOTE 4 - RELATED PARTY TRANSACTIONS Through June 18, 2002, Mindset Interactive, Inc. conducted business with a vendor National Data Services ("NDS") which was a related party through common ownership. A significant shareholder, who was an officer and board member of the Company, owns a controlling interest in NDS. For the nine months ended September 30, 2002, Mindset Interactive, Inc. recognized revenue of $409,385 through a revenue licensing sharing agreement with NDS. Our Company has engaged the consulting services of iO Corporate Services Ltd. ("iO Corporate") in the amount of $4,000 per month. The services commenced on June 1, 2002 and are performed on a month to month basis. One of the current appointed directors owns an interest in iO Corporate. Included in accounts payable at September 30, 2002 is $16,000 due to iO Corporate. Part I Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All statements in this discussion that are not historical are forward looking statements within the meaning of section 21E of the Securities and Exchange Act of 1934. These forward looking statements include but are not limited to "expectations", "beliefs", "hopes", "will", "may", "should", "project" and like expressions. Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by such forward looking statements. Such factors include but are not limited to: the Company's limited operating history, dependence on large contracts and relative concentration of customers and other risks and uncertainties detailed in the Company's Security and Exchange Commission filings, including the Company's Annual Report on Form 10KSB for the year ended December 31, 2001. RESULTS OF OPERATIONS Since the effective date, June 18, 2002, of the Separation Agreement, our Company has no operations or revenue generating assets. Currently, management is actively seeking both funding opportunities and the acquisition of a project of merit. LOSS FROM OPERATIONS OF DISCONTINUED SUBSIDIARY During the nine month period ended September 30, 2002, Mindset Interactive Corp. disposed of its only operating subsidiary, Mindset Interactive Inc., in exchange of shares. The former principal owners of Mindset Interactive Inc. exchanged 6,484,645 shares of Mindset Interactive Corp. for all the outstanding shares of Mindset Interactive Inc. The Exchange was treated as a recapitalization transaction for $9,823,560 reversing the effects of the March 31, 2001 acquisition of Mindset Interactive, Inc. which was accounted for as a reverse merger. LIQUIDITY AND CAPITAL RESOURCES Currently, our Company is without any revenue generating assets. However, we are actively seeking funding opportunities. Pursuant to the Separation Agreement, our Company assumed the liability of MII under the terms of two promissory notes for an aggregate principal amount of $550,000. This is owed to an unrelated third party. GOING CONCERN The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. However, as noted, management entered into a separation agreement to sell the Company's only operating subsidiary, Mindset Interactive, Inc., which has left the Company with no revenue producing assets or operations. The Company will need to locate another company or assets that can provide for the future operations of the Company and arrange for any necessary financing. There can be no guarantee that the Company can acquire such operations or obtain the necessary financing on terms agreeable to the shareholders, which raises substantial doubt about its ability to continue as a going concern. Part I Item 3 CONTROLS AND PROCEDURES We maintain a system of internal controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. Within the 90-day period prior to the date of this report, under the supervision and with the participation of the Company's management, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934 (the "1934 Act"). Based upon that evaluation, we concluded that our disclosure controls and procedures are effective in timely alerting us to material information relating to the Company required to be included in the Company's periodic filings under the 1934 Act. There have been no significant changes in our internal controls or in other factors, which could significantly affect internal controls subsequent to the date that we carried out our evaluation. PART II Item 1. LEGAL PROCEEDINGS - None Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - 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 Item 6. EXHIBITS AND REPORTS ON FORM 8-K EXHIBITS 99.1 Certification of Chief Executive Officer and Chief Financial Officer Form 8-K - None SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: Mindset Interactive Corp. By: /S/ Michael Minder ----------------------------------- Michael Minder CEO, President and Director
/S/ Michael Minder Chief Executive Officer, President and Director November 13, 2002 ---------------------- Michael Minder /S/ Marion McGrath Secretary, Treasurer and Director November 13, 2002 ----------------------- Marion McGrath
The following pages include the Signatures page for this Form 10-QSB, Certifications of our CEO and CFO, and (at Exhibits 99.1 and 99.2 of this report) a further Certification by our CEO and CFO. The form of Certification immediately following the Signatures page is required by Rule 15d-14 under the Securities Exchange Act of 1934 in accord with Section 302 of the Sarbanes-Oxley Act of 2002 (the "Section 302 Certification"). The Section 302 Certification includes references to an evaluation of the effectiveness of the design and operation of the Company's "disclosure controls and procedures" and its "internal controls and procedures for financial reporting". Item 3 of Part I of this quarterly report presents the conclusions of the CEO and CFO about the effectiveness of such controls based on and as of the date of such evaluation (relating to Item 4 of the Section 302 Certification), and contains additional information concerning disclosures to our audit committee and independent auditors with regard to deficiencies in internal controls and fraud (Item 5 of the Section 302 Certification) and related matters (Item 6 of the Section 302 Certification). The second form of Certification (set forth at Exhibit 99.1 and 99.2) is required by section 1350 of chapter 63 of title 18 of the United States Code. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MINDSET INTERACTIVE, CORP. DATED: November 13, 2002 By: /s/ Michael Minder ----------------------- Michael Minder Chief Executive Officer DATED: November 13, 2002 By: /s/ Marion McGrath ----------------------- Marion McGrath Chief Financial Officer CERTIFICATION I, Michael Minder, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Mindset Interactive, Corp.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's certifying officers are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's certifying officers have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's certifying officers have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ Michael Minder ----------------------- Michael Minder Chief Executive Officer CERTIFICATION I, Marion McGrath, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Mindset Interactive, Corp.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's certifying officers are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's certifying officers have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's certifying officers have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 13, 2002 /s/ Marion McGrath ----------------------- Marion McGrath Chief Financial Officer