-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OoD8NoJM9cUW0fDzbZ1ngrLf8uuUlWCuYyIO1YQeePrfITtDEELJDyoY0xdXLg4z 4IBNbP7+3EvkYjrpaKYlcQ== 0001050502-02-000929.txt : 20021112 0001050502-02-000929.hdr.sgml : 20021111 20021112142749 ACCESSION NUMBER: 0001050502-02-000929 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020930 FILED AS OF DATE: 20021112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INSTANET INC CENTRAL INDEX KEY: 0001134765 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 841575085 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 333-56250 FILM NUMBER: 02816692 BUSINESS ADDRESS: STREET 1: 26 WEST DRY CREEK CIRCLE SUITE 600 CITY: LITTLEXON STATE: CO ZIP: 80120 BUSINESS PHONE: 3037949450 10QSB 1 instanet902.txt 10QSB FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 2002 Commission file number: 333-56250 INSTANET, INC. (Name of Small Business Issuer in its charter) Nevada 84-1575085 ------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2560 West Main Street, Suite 200 Littleton, Colorado 80120 (Address of principal executive offices) (303) 794-9450 (Issuer's telephone number, including area code) Indicate by check mark whether the Issuer (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 periods 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 ------- ------- APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. Common Stock, $.001 Par Value, 1,508,000 shares as of September 30, 2002. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS This discussion in this quarterly report regarding Instanet, Inc. and our business and operations contains "forward-looking statements." These forward-looking statements use words such as "believes," "intend," "expects," "may," "will," "should," "plan," "projected," "contemplates," "anticipates" or similar statements. These statements are based on our beliefs, as well as assumptions we have used based upon information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties and assumptions. Actual future results may differ significantly from the results discussed in the forward-looking statements. A reader, whether investing in our common stock or not, should not place undue reliance on these forward-looking statements, which apply only as of the date of this report. When used in this quarterly report on Form 10-QSB, "the Company," "we," "our" and "us" refers to Instanet, Inc., a Nevada corporation. 2
PART I. FINANCIAL INFORMATION. Item 1. Financial Statements. INSTANET, INC. (a Development Stage Company) Balance Sheet September 30, December 31, 2002 2001 -------- -------- (Unaudited) Assets Current assets Cash $ 57,027 $ 68,889 -------- -------- Total assets $ 57,027 $ 68,889 ======== ======== Liabilities and Stockholders' Equity Current liabilities Accounts payable $ -- $ 163 -------- -------- Total current liabilities -- 163 -------- -------- Commitments and contingencies Stockholders' equity Preferred stock, authorized 5,000,000 shares, $.001 par value; none issued or outstanding -- -- Common stock, authorized 50,000,000 shares, $.001 par value; 1,508,000 shares issued and outstanding 1,508 1,508 Additional paid-in capital 86,715 86,715 Deficit accumulated deficit during the development stage (31,196) (19,497) -------- -------- Total stockholders' equity 57,027 68,726 -------- -------- Total liabilities and stockholders' equity $ 57,027 $ 68,889 ======== ======== 3 INSTANET, INC. (a Development Stage Company) Unaudited Statements of Operations For the Period from January 9, For the Three Months Ended For the Nine Months Ended 2001 (Inception) September 30, September 30, through -------------------------- -------------------------- September 30, 2002 2001 2002 2001 2002 ----------- ----------- ----------- ----------- ----------- Revenues $ -- $ -- $ -- $ -- $ -- Expenses (3,096) (6,408) (11,699) (8,495) (31,196) ----------- ----------- ----------- ----------- ----------- Net loss $ (3,096) $ (6,408) $ (11,699) $ (8,495) $ (31,196) =========== =========== =========== =========== =========== Earnings (loss) per share - basic and diluted $ -- $ -- $ (.01) $ (.01) $ (.02) =========== =========== =========== =========== =========== Weighted average shares outstanding 1,508,000 1,350,000 1,508,000 1,350,000 1,442,424 =========== =========== =========== =========== =========== 4 INSTANET, INC. (a Development Stage Company) Statement of Stockholders' Equity For the Period from January 9, 2001 (Inception) through September 30, 2002 Deficit Accumulated Common Stock Additional During the Total --------------------- Paid-In Development Stockholders' Shares Amount Capital Stage Equity --------- --------- --------- --------- --------- Balance, January 9, 2001 (Inception) -- $ -- $ -- $ -- $ -- Issuance of stock for cash 1,350,000 1,350 28,650 -- 30,000 Issuance of stock for cash, net of offering costs of $99,777 158,000 158 58,065 -- 58,223 Net loss -- -- -- (19,497) (19,497) --------- --------- --------- --------- --------- Balance, December 31, 2001 1,508,000 1,508 86,715 (19,497) 68,726 Net loss (unaudited) -- -- -- (11,699) (11,699) --------- --------- --------- --------- --------- Balance, September 30, 2002 1,508,000 $ 1,508 $ 86,715 $ (31,196) $ 57,027 ========= ========= ========= ========= ========= 5 INSTANET, INC. (a Development Stage Company) Unaudited Statements of Cash Flows For the Period from January 9, 2001 For the Nine Months Ended (Inception) September 30, through ---------------------- September 30, 2002 2001 2002 --------- --------- --------- Cash flows from operating activities Net loss $ (11,699) $ (8,495) $ (31,196) Changes in operating assets and liabilities Accounts payable (163) 208 -- Accrued interest -- 3,529 -- --------- --------- --------- Net cash used by operating activities (11,862) (4,758) (31,196) --------- --------- --------- Cash flows from financing activities Payments for offering costs -- (99,028) (99,777) Proceeds from note payable -- 78,000 78,000 Payments on notes payable - stockholder -- -- (78,000) Proceeds from issuance of common stock -- 30,000 188,000 --------- --------- --------- Net cash provided by financing activities -- 8,972 88,223 --------- --------- --------- Net (decrease) increase in cash (11,862) 4,214 57,027 Cash, beginning of year 68,889 -- -- --------- --------- --------- Cash, end of period $ 57,027 $ 4,214 $ 57,027 ========= ========= ========= 6
INSTANET, INC. (a Development Stage Company) Notes to Financial Statement Note 1 - Organization and Summary of Significant Accounting Policies - -------------------------------------------------------------------- Instanet, Inc. (the "Company"), a Nevada corporation, was incorporated in January 2001. The Company is organized for the purpose of providing market extensions, including on the Internet, for an electronic cash transmission system developed and owned by an outside company. The Company is a development stage company that has not had any revenue from operations since inception. There is no assurance that the Company will generate revenue or earn profit in the future. The financial statements are unaudited and reflect all adjustments (consisting only of normal recurring adjustments), which are, in the opinion of management, necessary for a fair presentation of the financial position and operating results for the interim periods. The unaudited financial statements contained herein should be read in conjunction with the financial statements and notes thereto contained in the Company's Form 10KSB filing. The results of operations for the interim periods presented are not necessarily indicative of the results for the entire fiscal year ending December 31, 2002. Stock Options/Warrants - ---------------------- The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and related interpretations in accounting for all stock option plans. Under APB 25, no compensation cost has been recognized for stock options granted to employees as the option price equals or exceeds the market price of the underlying common stock on the date of grant. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), requires the Company to provide pro forma information regarding net income as if compensation cost for the Company's stock option plans had been determined in accordance with the fair value based method prescribed in SFAS 123. To provide the required pro forma information, the Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model. Note 2 - Commitments and Contingencies - -------------------------------------- Master Agency Agreement - ----------------------- In February 2001 the Company entered into a Master Agency Agreement with KeyCom, Inc. ("KeyCom"), which developed, and operated under the trade name XTRAN, an electronic system for transferring funds from one location to another. KeyCom has merged with EGX Funds Transfer, Inc. ("EGX") formerly known as Emergent Financial Group, Inc. and operates the prior KeyCom business as a pilot program utilizing the XTRAN trade name. Currently, the Company estimates that XTRAN initiates funds transfer from approximately 20 remittance locations in the United States and electronically transfers the funds to an unknown number of payout locations in Jamaica. 7 INSTANET, INC. (a Development Stage Company) Notes to Financial Statement Note 2 - Commitments and Contingencies (continued) - -------------------------------------------------- Master Agency Agreement (continued) - ----------------------------------- Under the Master Agency Agreement with KeyCom, the Company obtained the exclusive right to originate funds transfers from the Company's Web site to any payout location, which accepts XTRAN funds transfers. Currently the Company believes that XTRAN has payout locations only in Jamaica. Under the agreement the Company will receive a fee of 15% of the fee charged the customer by XTRAN to complete the funds transfer. The Master Agency Agreement also entitles the Company to obtain remittance locations for XTRAN anywhere in the world on a non-exclusive basis. In such event, the Company is entitled to 9% of the fee charged by XTRAN for payouts outside the U.S. and 5% of XTRAN's fee for payouts within the U.S. The Company is also entitled to a fixed fee of $225 for each remittance location established on behalf of XTRAN, and a $3,000 monthly fee, cancelable by KeyCom on 30 days notice, to assist KeyCom in developing new Florida remittance locations. To date, the Company has not received any payments relating to XTRAN. At this time the Company has been unable to verify the number of payout and remittance locations that XTRAN has actively maintained. Further, the Company has been unable to verify the status of the payout locations that are serving XTRAN. A remittance location is any retail store or business that is authorized to accept consumer funds for transfer by the sender. A payout location is any retail store or business that is authorized to pay out transferred funds to the recipient. Subsequent to the acquisition of KeyCom by EGX, EGX's ability to perform under the Master Agency Agreement may be questionable and therefore the Company has postponed expending further amounts on completion of its Web site. Although the Company anticipates that it may continue its relationship with EGX, there can be no assurance that EGX will be able or willing to comply with the Master Agency Agreement. Accordingly, the Company has entered into discussions with alternative sources of non-bank funds transfer business and is reviewing other alternatives to developing its non-bank funds transfer business. 8 INSTANET, INC. (a Development Stage Company) Notes to Financial Statement Note 3 - Stock Option Plan - -------------------------- In February 2001, the Company adopted the 2001 Stock Option Plan (the "Plan"), which provides for the grant to employees, officers, directors and consultants of options to purchase up to an aggregate of 250,000 shares of common stock, consisting of both incentive stock options and non-qualified options. For options granted to an employee owning shares of common stock possessing more than 10% of the total combined voting power of all classes of the Company's common stock, the option price shall not be less than 110% of the fair market value of the common stock, on the date of grant. The incentive stock options granted under the Plan cannot be exercised more than ten years from the date of grant except that incentive stock options issued to 10% or greater stockholders are limited to five-year terms. The Plan provides for a three-year vesting period. The Company has granted 100,000 options under the Plan to an executive officer, and 25,000 options to an employee, exercisable at $.25 per share. No compensation expense was recognized in the financial statements as the exercise price was in excess of the fair market value of the Company's stock on the date of grant. Summarized information relating to stock options is as follows: Weighted Average Exercise Price Options of Options ------- ---------- Outstanding and exercisable - January 9, 2001 (Inception) -- Granted 125,000 $ 0.25 Exercised -- ------- Outstanding September 30, 2002 125,000 $ 0.25 ======= The weighted average remaining contractual life for all options outstanding as of September 30, 2002 is 3.34 years. Had compensation cost for stock-based compensation been determined based on the fair value or the grant date consistent with the method of SFAS 123, the Company's net income and earnings per share would not have been reduced due to the fair value of grants to employees had no fair value based upon calculating the fair value utilizing the Black-Scholes option pricing model with the following assumptions: expected life of 5 years, 0% volatility, risk free interest rate of 5.5%, and a 0% dividend yield. 9 Item 2. Management's Discussion And Analysis or Plan of Operation. Results of Operations. Three Months Ended September 30, 2002, vs. Three Months Ended September 30, 2001. No operating revenues were generated during the three months ended September 30, 2002 and 2001. Operating expenses decreased by $3,312 to $3,096 for the three months ended September 30, 2002, compared to $6,408 for the three months ended September 30, 2001. The decrease in operating expenses resulted from professional fees paid in 2002 as compared to 2001 as the Company was in the process of updating its periodic filings. The Company's net loss decreased to $3,096 for the three months ended September 30, 2002, compared to $6,408 for the three months ended September 30, 2001. Nine Months Ended September 30, 2002, vs. Nine Months Ended September 30, 2001. No operating revenues were generated during the nine months ended September 30, 2002 and 2001. Operating expenses increased by $3,204 to $11,699 for the nine months ended September 30, 2002, compared to $8,495 for the nine months ended September 30, 2001. The increase in operating expenses resulted from additional professional fees paid in 2002 as compared to 2001 as the Company was in the process of completing its periodic filings. The Company's net loss increased to $11,699 for the nine months ended September 30, 2002, compared to $8,495 for the nine months ended September 30, 2001. 10 The Company has suspended developing its Web site based upon the XTRAN funds transfer system and may utilize part of its limited cash resources to determine if KeyCom, Inc. or its successor, EGX Funds Transfer, Inc., can perform pursuant to the Master Agency Agreement originally between KeyCom, Inc. and the Company. If the Company determines to utilize an alternative system to the XTRAN system, of which there can be no assurance, it anticipates expanding additional amounts of its cash resources to develop a Web site similar to that it has been developing for use with XTRAN. Liquidity and Capital Resources. As of September 30, 2002, the Company had working capital of $57,027. We expect to need additional funds to finance the further development of our funds transfer business. However, there can be no assurance that such funds will be available to us or that adequate funds for our operations, whether from debt or equity financings, will be available when needed or on terms satisfactory to us. Our failure to obtain adequate additional financing may require us to delay or curtail some or all of our business efforts. Any additional equity financing may involve substantial dilution to our then-existing stockholders. Item 3. Controls and Procedures. Within the 90 days prior to the date of this quarterly report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer/Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer/Chief Financial Officer concluded that our disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be included in our periodic SEC filings. There were no significant changes in our internal controls or other factors that could significantly affect these controls subsequent to the date of their evaluation and there were no corrective actions with regard to significant deficiencies or material weaknesses. 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. 11 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibit 99.1-Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) During the three months covered by this report, the Company filed no reports on Form 8-K. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. Date: November 8, 2002 INSTANET, INC. (Registrant) /s/ Earnest Mathis --------------------------------------- Earnest Mathis Chief Executive Officer, Chief Financial Officer (Principal Accounting Officer) and Director 12 CERTIFICATIONS I, Earnest Mathis, Chief Executive Officer and Chief Financial Officer of Instanet, Inc., certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Instanet, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a 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 other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-4 and 15d-14) for the registrant and we 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 quarterly 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 other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): 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 other certifying officers and I 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 8, 2002 /s/ Earnest Mathis ------------------ Earnest Mathis Chief Executive Officer and Chief Financial Officer EX-99.1 3 instanet99-1.txt CERTIFICATION Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly report of Instanet, Inc. (the "Company") on Form 10-QSB for the period ending June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Earnest Mathis, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Earnest Mathis ---------------------------------- Earnest Mathis Chief Executive Officer and Chief Financial Officer November 8, 2002 -----END PRIVACY-ENHANCED MESSAGE-----