Saturday, May 14, 2005 8:46:44 PM
Quarterly report out yesterday. Not much new yet other than filings getting filed on time with Warner on board.
MBYTF -- Moving Bytes Inc.
Com (No Par)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2005
[ ]
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: 0-30058
MOVING BYTES INC.
_______________________________________________________________________________
(Name of Small Business Issuer as specified in its charter)
Canada
52-2267986
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
4340 Redwood Hwy., Suite F222, San Rafael, Ca 94903
_______________________________________________________________________________
(Address of Principal Executive Offices)
(415) 446-5546
________________________________________________________________________________
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [ X ]
Check 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 past 12 months (or shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past 90 days: Yes [ X ] No [ ]
State the shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date: May 10, 2005 there were 175,450,042 Common Shares outstanding.
MOVING BYTES INC.
FORM 10-QSB
TABLE OF CONTENTS
PART I.
INTERIM FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Balance Sheets
March 31, 2005 (Unaudited) and December 31, 2004
Condensed Consolidated Statement of Operations and Accumulated Deficit (Unaudited)
Three Months Ended march 31, 2005 and 2004 and period from Inception of Development Stage on February 27, 2004 to March 31, 2005
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2005 and 2004 and period from Inception of Development Stage on February 27, 2004 to March 31, 2005
Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2.
Management’s Discussion and Analysis or Plan of Operation
Item 3.
Controls and Procedures
PART II.
OTHER INFORMATION
Item 1.
Legal Proceedings
Item 2.
Unregistered Sales of Equity 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
Signatures
Condensed Consolidated Financial Statements
(Expressed in United States dollars)
MOVING BYTES INC.
Three months ended March 31, 2005 and 2004
Period from inception of development stage on February 27, 2004
to March 31, 2005
(Unaudited)
MOVING BYTES INC.
(A Development Stage Enterprise)
Condensed Consolidated Balance Sheets
(Expressed in United States dollars)
March 31,
2005
(Unaudited)
December 31,
2004
(audited)
Assets
Current assets:
Cash and cash equivalents
$ 38,715
$ 5,218
Accounts receivable, less allowance for doubtful accounts
of $16,782 (December 31, 2004 – ($0)
697
2,847
Prepaid expenses
-
-
$ 37,412
$ 8,065
Liabilities and Stockholders’ Equity (Deficiency)
Current liabilities:
Accounts payable
$ 72,421
$ 54,395
Accrued liabilities
167,550
144,018
Note Payable - Investor
-
37,500
Current liabilities from discontinued operations
81,441
86,898
Current portion of obligation under capital lease
-
47,885
321,412
370,696
Stockholders’ equity (deficiency):
Capital stock (no par value; unlimited authorized; 175,450,042 and 31,703,977 shares issued and outstanding, respectively)
6,531,683
6,531,683
Additional paid-in capital
777,448
668,469
Deficit accumulated during development stage
(204,755)
(176,406)
Deficit Accumulated prior to 2/27/04
(7,386,376)
(7,386,377)
Stockholders’ Equity (deficiency)
(282,000)
(362,631)
$ 39,412
$ 8,065
See accompanying notes to condensed consolidated financial statements.
MOVING BYTES INC.
(A Development Stage Enterprise)
Condensed Consolidated Statements of Operations and Deficit
(Unaudited)
(Expressed in United States dollars)
Three months ended
March 31,
2005
(unaudited)
March 31,
2004
(unaudited)
Period from Inception of development stage on February 27, 2004 to March 31, 2005
(unaudited)
Revenue
$ nil
$ 60,629
$ nil
Cost of goods sold:
Transmission and services
-
23,760
(9,892)
Commissions
-
-
-
Other
-
(127)
-
-
23,633
(9,892)
Gross profit
nil
36,996
9,892
General and Administrative Expenses
27,589
321,991
179,967
Loss from continuing operations before other income (expenses)
(27,589)
(284,995)
(170,075)
Other income (expense):
Interest income
-
10
7
Interest expense
(760)
(2,307)
(3,602)
Other income (expense)
-
8,679
(6,184)
Loss from continuing operations before income taxes
(28,349)
(278,613)
(9,779)
Provision for income taxes
-
-
-
Loss from continuing operations
(28,349)
(278,613)
(179,854)
Loss from discontinued operations of Business Communication
Services segment
-
-
(24,901)
Loss for the period, carried forward
(28,349)
(278,613)
(204,755)
Accumulated deficit, beginning of period
(7,562,782)
(7,129,136)
-
Accumulated deficit, end of period
$ (7,591,131)
$ (7,407,749)
$ (204,755)
Earnings (loss) per share:
Continuing operations, basic and diluted
$ (0.01)
$ (0.02)
Discontinued operations, basic and diluted
-
-
Loss, basic and diluted
(0.01)
(0.02)
Weighted average number of shares outstanding, basic and diluted
67,640,493
14,739,691
See accompanying notes to condensed consolidated financial statements.
MOVING BYTES INC.
(A Development Stage Enterprise)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in United States dollars)
Three months ended
March 31,
2005
(unaudited)
March 31,
2004
(unaudited)
Period from Inception of development stage on February 27, 2004 to March 31, 2005
(unaudited)
Cash flow from Operating activities:
Loss from Continuing Operations
$ (28,349)
$ (278,613)
$ (204,755)
Adjustment for loss from discontinued operations
-
-
24,903
Items not involving cash:
Amortization and depreciation
-
15,000
4,000
Gain on disposal of operating sublease
-
-
(36,736)
Stock issued for consulting services
-
-
14,875
Change in operating assets and liabilities:
Accounts receivable
2,151
26,038
(8,035)
Other receivables
-
-
11,879
Prepaid expenses
-
(33,462)
36,389
Accounts payable
(8,825)
36,007
(45,297)
Accrued liabilities
25,011
99,285
29,796
Settlement Agreement payable
-
(11,565)
(20,567)
Cash flow provided by (used in) continuing operations
(10,012)
(147,310)
(193,548)
Cash flow provided by discontinued operations
-
-
36,371
Cash flows (used in) operating activities
(10,012)
(147,310)
(157,177)
Cash flow from financing activities:
Additional Paid In Capital
70,000
-
117,500
Lease payments
(26,491)
(9,434)
(31,097)
Note Payable
-
-
37,500
Cash flow provided by (used in) financing activities
43,509
(9,434)
123,903
Increase (decrease) in cash and cash equivalents
33,497
(156,744)
(33,274)
Cash and cash equivalents, beginning of period
5,218
204,399
71,989
Cash and cash equivalents, end of period
$ 38,715
$ 47,655
$ 38,715
Supplementary information:
Interest received
$ -
$ 10
$ 7
Interest paid
760
-
2,082
Income taxes paid
-
-
-
Non-cash financing and investing activities:
Transfer of fixed assets to settle agreement payable
-
-
15,000
Consulting agreement
-
-
14,000
Finder’s fee
-
-
875
Conversion of accrued liabilities to equity
-
-
10,000
Conversion of note payable and accrued interest
38,979
-
38,979
See accompanying notes to condensed consolidated financial statements.
MOVING BYTES INC.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Expressed in United States dollars)
GENERAL
1. Basis of Presentation
(a)
The information contained herein with respect to the three month period ended March 31, 2005 has been reviewed by the independent auditors and was prepared in conformity with generally accepted accounting principles for interim financial information and instructions for Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, the condensed consolidated financial statements do not include information and footnotes required by generally accepted accounting principles. Included are the adjustments, which, in the opinion of management, are necessary for a fair presentation of the financial information for the three-month period ended March 31, 2005 and 2004. The results are not necessarily indicative of results to be expected for the year.
(b)
Net earnings (loss) per share has been calculated using the weighted average number of shares outstanding during the period. Diluted earnings (loss) per common share are computed similar to basic earnings (loss) per share except that the weighted average number of common shares outstanding is increased to include additional common shares from the assumed exercise of options and warrants, if dilutive. Dilutive loss per share is the same as basic loss per share in all periods, since the impact of outstanding options and warrants is dilutive. The following securities could potentially dilute basic earnings per share in the future:
March 31,
2005
March 31,
2004
Options
470,000
3,810,000
Warrants
-
1,000,000
(c)
New accounting pronouncements:
On December 16, 2004, the Financial Accounting Standards Board (“FASB”) published Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment (“SFAS 123R”). SFAS 123R requires that compensation cost related to share-based payment transactions be recognized in the financial statements. Share-based payment transactions within the scope of SFAS 123R include stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee share purchase plans. The provisions of SFAS 123R, as amended, are effective for small business issuers beginning as of the next fiscal year after December 15, 2005. Accordingly, the Company will implement the revised standard in the first quarter of fiscal year 2006. Currently, the Company accounts for its share-based payment transactions under the provisions of APB 25, which does not necessarily require the recognition of compensation cost in the financial statements (note 4). Management is assessing the implications of this revised standard, which may materially impact the Company’s results of operations in the first quarter of fiscal year 2006 and thereafter.
(d)
Development stage company:
The Company is considered to be in the development stage as defined in Statement of Financial Accounting Standards (SFAS) No. 7, “Accounting and Reporting by Development Stage Enterprises.” The Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital.
(e)
Foreign currency translation:
The functional currency of the Company and its subsidiaries is considered to be the US dollar as substantially all operating, financing and investing transactions are made in that currency. Accordingly, monetary assets and liabilities and non-monetary items carried at market values which are denominated in Canadian dollars, have been translated into US dollars using exchange rates in effect at the balance sheet date. Statement of operations items are translated at weighted average exchange rates. Exchange gains or losses are included in the determination of net earnings (loss) for the year.
2.
Operations:
Moving Bytes Inc. (the “Company” or “Moving Bytes” or “Registrant”) is incorporated under the Canada Business Corporations Act and is listed on the National Association of Securities Dealers over-the-counter Bulletin Board under the symbol “MBYTF”. The Company does not have any subsidiaries and has no business operations as of the date of this report.
3.
Going concern:
These condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its obligations in the normal course of business. The auditors’ report on the Company’s audited financial statements for the year ended December 31, 2004, includes an additional explanatory paragraph that states that due to recurring losses from operations and cash flows used in operating activities, substantial doubt exists about the Company’s ability to continue as a going concern. The audited financial statements include a going concern note that provides further information with respect to this uncertainty and management’s plans.
The Company had an accumulated deficit at March 31, 2005 of $7,591,131 and a working capital deficit of $282,000. The Company has significant cash requirements and no ability to generate cash flows from operations. The Company has insufficient funds to meet its financial obligations as they become due. The Company believes that its working capital will not be sufficient to fund its cash requirements through the year ended December 31, 2005. Although the Company will continue to seek additional cash resources through equity issuances in order to position the Company for possible future opportunities, there can be no assurance that funds will be available on an economic basis to the Company. Unless the Company can raise financing, management does not believe that the Company can continue as a going concern and believes that the Company will not be able to maintain its listing on the National Association of Securities Dealer over the counter bulletin board.
The condensed consolidated financial statements of the Company include the accounts of its former subsidiary Moving Bytes, Inc. (“MBI”), which was wound up and dissolved on June 30, 2004, consisting of accounts payable and accrued liabilities. In the event that MBI’s creditors are successful in enforcing any judgments they may receive against MBI, or the Company, the Company could be forced into a bankruptcy proceeding. In such event the there will be substantial doubt that the Company will have the ability to carry on as a going concern. The Company will continue to consolidate the liability balances and transactions of MBI on an ongoing basis until the liabilities of MBI have been forgiven, discharged or the Company receives an opinion of its legal counsel that there is only a remote possibility of the Company becoming obligated for the liabilities of MBI. There can be no guarantee that the Company will be able to have the liabilities forgiven or discharged or receive such an opinion from its counsel.
4.
Significant accounting policies:
The Company has adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"). The provisions of SFAS 123 allow companies to either expense the estimated value of stock options or to continue to follow the intrinsic value method set forth in Accounting Principles Bulletin Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), but disclose the pro forma effects on net income (loss) had the fair value of the options been expensed. The Company has elected to continue to apply APB 25 in accounting for its employee stock option incentive plans. Under APB 25, where the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation is recognized.
If compensation expense for the Company's stock-based compensation plans had been determined consistent with SFAS 123, the Company's net income per share including pro forma results would have been the amounts indicated below:
Three months ended
March 31,
2005
(unaudited)
March 31,
2004
(unaudited)
Period from Inception of development stage on February 27, 2004 to March 31, 2005
(unaudited)
Loss for the period, as reported
$ (28,349)
$ (278,613)
$ (204,755)
Add: Employee stock-based compensation expense, as reported
-
-
-
Deduct: Employee stock-based compensation Expense determined under the fair value method
(6,900)
-
(6,900)
Pro forma loss for the period
$ (35,249)
$ (278,613)
$ (211,655)
Pro forma – basic and diluted loss per share
$ (0.01)
$ (0.02)
$ (0.01)
Item 2.
Management’s Discussion and Analysis
SUMMARY FINANCIAL DATA
The following table sets forth selected financial data regarding the Company’s consolidated operating results and financial position. The data has been derived from the Company’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) in United States dollars. Unless noted otherwise the presentation represents the consolidated financial results of the Company and MBI.
The following selected financial data is qualified in its entirety by, and should be read in conjunction with, the condensed consolidated financial statements and notes thereto included elsewhere this quarterly report. The selected financial data and the Company’s consolidated financial statements are expressed in U.S. dollars. As of the date of this report the Company does not have any business operations. The financial information contained in this report and the Company’s financial statements should not be considered indicative of future operations. Period to period results are expected to vary in future periods.
Three Month Period Ended March 31,
2005
2004
Revenue
$ Nil
$ 60,629
General & Administrative Expenses
$ 27,589
$ 321,991
Net Income (Loss) from Continuing Operations
$ (28,349)
$ (278,613)
Net Income (Loss) for the Period
$ (28,349)
$ (278,613)
Net Income (Loss) per Share
$ (0.01)
$ (0.02)
Three Month Period Ended
Year Ended
March 31, 2005
(unaudited)
December 31, 2004
(audited)
Working capital
$ (282,000)
$ (362,631)
Total assets
$ 39,412
$ 8,065
Total liabilities
$ 321,412
$ 370,696
Share Holder’s Equity
$ (282,000)
$ (362,631)
Long Term Obligations
$ Nil
$ Nil
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Report contains statements that may contain forward-looking statements, concerning the Registrant’s future operations and planned future acquisitions and other matters and the Registrant intends that such forward-looking statements be subject to the safe harbors for such statements. Any statements that involve discussions with respect to predictions, expectations, belief, plans, projections, objectives, assumptions or future events or performance (often, but not always, using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, could”, “might”, or “will” be taken to occur or be achieved) are not statements of historical fact and may be “forward looking statements”. These forward-looking statements, include statements relating to, among other things, the ability of the Registrant to continue as a going concern.
The Registrant cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Such forward-looking statements are based on the beliefs and estimates of the Registrant’s management as well as on assumptions made by and information currently available to the Registrant at the time such statements were made. Forward looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward looking statements, including, without limitation, the failure to obtain adequate financing on a timely basis. Actual results could differ materially from those projected in the forward-looking statements, either as a result of the matters set forth or incorporated in this Report generally and certain economic and business factors, some of which may be beyond the control of the Registrant. Additional risks and uncertainties that may affect forward-looking statements about the Registrant’s business and prospects include adverse economic conditions, inadequate capital, unexpected costs, and other factors set forth under “Risk Factors” in its Annual Report on Form 10-KSB for the period ended December 31, 2004, which could have an immediate and material adverse effect. The Registrant disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
This following discussion and analysis of the results of operations and financial condition of the Company should be read in conjunction with the audited financial statements and the related notes, contained in the Company’s Annual Report on Form 10-KSB for the period ended December 31, 2004 and in conjunction with the unaudited financial statements and notes thereto appearing elsewhere in this Form 10-QSB.
Three Months Ended March 31, 2005 and March 31, 2004.
Revenues, Expenses and Net Income.
Revenue . Revenue for the three month period ended March 31, 2005 (“Q1 2005”) was nil compared to $60,629 for the three month period ended March 31, 2004 (“Q1 2004”). During Q1 2005 the Company had no revenue generating operations. Revenue during Q1 2004 was from MBI’s Electronic Media Services operations which were closed on February 27, 2004. The Company has no other sources of revenue and does not anticipate that it will generate any revenue until the Company implements a new business strategy and plan and is no longer in development stage, if ever. There can be no assurance that the Company will raise sufficient capital to pursue new business opportunities or to implement a business plan.
General and Administrative Expenses. General and Administrative expenses of $27,589 in Q1 2005 consisted primarily of consulting services and other fees associated with the preparation and filing of the Company’s current and periodic reports with the U.S. Securities and Exchange commission and associated compliance activities. General and Administrative expenses of $321,991 in Q1 2004 consisted of charges and expenses related to ongoing public company activities and the winding down of MBI’s business operations.
Net Loss . Net loss in Q1 2005 was $28,349 as compared to a net loss of $278,613 in Q1 2004. The Company believes that it will continue to have net losses for the foreseeable future.
Net Loss per Share . Net loss per share was $0.01 in Q1 2005 as compared to a loss of $0.02 in Q1 2004. The number of shares issued and outstanding increased from 14,739,691 at March 31, 2004 to 175,450,042 at March 31, 2005.
Period from Inception of Development Stage .
Subsequent to February 27, 2004 the Company has no business operations and is considered ‘development stage’. Development stage presentation recognizes this and sets forth activity during the period associated with development stage activities.
At March 31, 2005 and December 31, 2004.
Liquidity and Capital Resources - Assets.
At March 31, 2005 the Company had a working capital deficit of $282,000 including cash and equivalent balances of $38,715, down from a working capital deficit of $362,631 at December 31, 2004 including cash and equivalent balances of $5,218. The change in working capital, and cash and equivalent balances, was primarily affected by $70,000 in cash received in a common stock private placement, the exchange of $38,979 in debt and interest payable for common stock and the forgiving of $22,500 in accounts payable by a former officer of the Company.
During Q1 2005 the Company used $10,012 in cash from Continuing Operations as compared to using $147,310 in cash from Continuing Operations during Q1 2004.
Liquidity and Capital Resources - Liabilities.
Accounts payable increased from $54,395 at December 31, 2004 to $72,421 primarily due to the reclassification of the current portion of obligations under capital lease in the amount of $47,885 to accounts payable. This was partially offset by the forgiving of $22,500 in accounts payable by a former officer of the Company.
Accrued liabilities increased from $144,018 at December 31, 2004 to $167,550 at March 31, 2005, primarily due to the accrual of amounts due under consulting agreements.
The Company has no long-term debt or other long-term liabilities.
Liquidity and Capital Resources – Capital Stock and Equivalents.
The Company received $108,979 through the issuance of capital stock during the Q1 2005 consisting of $70,000 in a common stock private placement and $38,979 on the extinguishments of debt and interest payable.
The Company has not entered into any derivative financial instrument arrangements during Q1 2005.
The Company currently has no external sources of liquidity.
Contractual Obligations.
The Company consolidated with MBI has contractual obligations of approximately $200,000 on which it has defaulted and which it has recorded as current liabilities on the consolidated balance sheet. These obligations are in addition to general and administrative expenses and other creditor obligations. The Company has no additional contractual obligations
Sufficiency of Working Capital.
As of March 31, 2005, the Company had net working capital deficit of $282,000. Although, on March 15, 2005 the Company raised $70,000 in equity financing, it believes that it still has inadequate financial resources to sustain its business activities or to maintain its SEC reports or its listing on the National Association of Securities Dealer over the counter bulletin board.
The Company estimates that it will need to raise approximately $500,000 during the next 12 months to meet its minimum capital requirements. There is substantial doubt that the Company will be able to continue as a going concern, absent raising additional financing. The Company has no ability to generate cash flows from operations.
Auditors Report.
The auditors’ report on the Company’s audited financial statements for the year ended December 31, 2004, includes an additional explanatory paragraph that states that due to recurring losses from operations and cash flows used in operating activities, substantial doubt exists about the Company’s ability to continue as a going concern. The audited financial statements include a future operations and going concern note that provides further information with respect to this uncertainty and management’s plans.
Long Term Debt.
The Company currently has no long-term debt obligations.
Off Balance Sheet Arrangements.
The Company has no off balance sheet financing arrangements.
Item 3. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures .
The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within the required time periods. Our Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report. He has concluded that, as of that date, our disclosure controls and procedures were effective at ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.
(b)
Changes in Internal Control over Financial Reporting .
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings.
DCA Judgment.
Effective September 9, 2003 MBI entered into a promissory note with DCA for $12,500 against payment of the final costs under MBI’s billing agreement with DCA. On September 21, 2004 DCA received a default judgment against MBI in the Superior Court, County of Sonoma, State of California to enforce the unpaid District Court of Oklahoma judgment plus reimbursement of filings fees in the amount of $296 and interest in the amount of $76. The Company has accrued $15,759 in liabilities from discontinued operations at December 31, 2004 related to DCA.
To the best of its knowledge, the Company is not subject to any other active or pending legal proceedings or claims against it or any of its properties. However, from time to time, the Company may become subject to claims and litigation generally associated with any business venture.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Innerloop Debt Cancellation Agreement.
On October 22, 2004, the Company became obligated to repay Innerloop Mobile Communications, A.S. (“Innerloop”) US$37,500 under the terms of a Convertible Note (the “Note”). On March 15, 2005 Innerloop entered into an agreement with Moving Bytes wherein Innerloop cancelled the Note, forgave the Note principal in the amount of $37,500 and all accrued interest thereon in the amount of $1,479.45 in exchange for 4,500,000 shares of restricted common stock.
Warner Private Placement Agreement.
On March 15, 2005, the Company entered into a Subscription and Financing Agreement with Warner Technology and Investments Corp, a New Jersey corporation related to the offer and sale of restricted common stock of Moving Bytes (the “Warner Private Placement Agreement”). Under the terms of the Warner Private Placement Agreement, Moving Bytes issued 139,246,065 shares of restricted common stock for gross proceeds of $70,000 USD. Proceeds received under the Warner Private Placement Agreement were used meet general obligations of the Company.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 5. Other Information.
Director’s Options.
On March 15, 2005, the Company issued 345,000 common stock options to, and terminated 95,000 common stock option previously issued to, Thomas Wharton a director of the Company.
Securities Compliance Consulting Agreement.
On March 15, 2005, the Company entered into a consulting agreement with Securities Compliance Inc. (“Securities Compliance”), a company controlled by Mark M. Smith (“Smith”), former President and Chief Financial Officer of the Company, pursuant to which the Company would pay Securities Compliance $30,000 USD for Smith to provide certain services to the Company in regard to the preparation of the Company’s annual report on SEC Form 10- KSB for the period ended 12/31/04 (the “2004 10-KSB”). Under the agreement (i) $15,000 USD was paid immediately, (ii) $15,000 USD was paid upon the filing of Company’s Form 10-KSB for the period ended December 31, 2004, (iii) Securities Compliance, Smith and the Company cancelled all prior agreements between Securities Compliance, Smith and the Company and (iv) Securities Compliance and Smith forgave all amounts unpaid, due and owing to them under prior agreements.
Mustad Consulting Termination Agreement.
On March 15, 2005, the Company entered into a consulting termination agreement with J. Erik Mustad (“Mustad”), former Chief Executive Officer of the Company, pursuant to which Mustad and Moving Bytes cancelled all prior agreements between Mustad and Moving Bytes and Mustad forgave $22,500 unpaid, due and owing to him under prior agreements.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Document and Location.
Exhibit No.
Description
3.1
Certificate of Incorporation for Jackpine Mining Co., Inc., dated December 23, 1991. Incorporated by reference to Exhibit 1.1 to Registrant’s Form 20-F dated April 20, 1999.
3.2
Form 1 (Section 5) Company Act Memorandum of Jackpine Mining Co., Inc., dated December 13, 1991. Incorporated by reference to Exhibit 1.2 to Registrant’s Form 20-F dated April 20, 1999.
3.3
Articles of Jackpine Mining Co., Inc. Incorporated by reference to Exhibit 1.3 to Registrant’s Form 20-F dated April 20, 1999.
3.4
Certificate of name change for USV Telemanagement Inc., dated July 10, 1996. Incorporated by reference to Exhibit 1.4 to Registrant’s Form 20-F dated April 20, 1999.
3.5
Province of British Columbia Form 21 (Section 371) Company Act Special Resolution filed July 10, 1996. Incorporated by reference to Exhibit 1.5 to Registrant’s Form 20-F dated April 20, 1999.
3.6
By-Laws of Registrant, as amended March 15, 2005. Incorporated by reference to Registrant’s Form 8K dated March 21, 2005.
10.01
USV Telemanagement Inc. Stock Option Plan (1999). Incorporated by reference to Exhibit 4.1 to Registrant’s Form S-8 dated September 8, 1999.
10.02
USV Telemanagement Inc. Amended and Restated Stock Option Plan (2000). Incorporated by reference to Exhibit 4.7 to Registrant’s Form S-8 dated May 31, 2000.
10.03
E*Comnetrix Inc. Amended and Restated Stock Option Plan (2000). Incorporated by reference to Exhibit 4.12 to Registrant’s Form S-8 dated November 16, 2000.
10.04
Innerloop Mobile Communications A.S. Convertible Note Agreement dated October 22, 2004. Incorporated by reference to Exhibit 10.63 to Registrant’s Form 10-QSB dated November 22, 2004.
10.05
J. Erik Mustad Stock Option Termination Agreement dated September 30, 2004. Incorporated by reference to Exhibit 10.64 to Registrant’s Form 10-QSB dated November 22, 2004.
10.06
Securities Compliance Consulting Agreement dated October 1, 2004. Incorporated by reference to Exhibit 10.65 to Registrant’s Form 10-QSB dated November 22, 2004.
10.07
Warner Technology and Investment Corp. Private Placement Agreement dated March 15, 2005. Incorporated by reference to Exhibit 10.63 to Registrant’s Form 8-K dated March 21, 2005.
10.08
Innerloop Mobile Communications A.S. Debt Cancellation Agreement dated march 15, 2005. Incorporated by reference to Exhibit 10.64 to Registrant’s Form 8-K dated March 21, 2005.
10.09
J. Erik Mustad Consulting Termination Agreement dated March 15, 2005. Previously reported in Registrant’s Form 8-K dated March 21, 2005.
10.10
Securities Compliance Consulting Agreement dated March 15, 2005. Previously reported in Registrant’s Form 8-K dated March 21, 2005
14.1
Code of Ethics effective March 15, 2005. Incorporated by reference to Exhibit 14.1 to Registrant’s Form 8-K dated March 21, 2005.
16.1
Letter dated March 23, 2005 from KPMG LLP, Chartered Accountants. Incorporated by reference to Exhibit 16.1 to Registrant’s Form 8-K/A dated March 24, 2005.
31.1
Certification of CEO and CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a).
32.1
Certification of CEO and CFO pursuant to 18 U.S.C. §1350 as adopted pursuant to §906 of the Sarbanes-Oxley Act of 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.
MOVING BYTES INC.
Date: May 13, 2005
/s/ Huakang Zhou
Huakang Zhou, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report to be signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Huakang Zhou
Huakang Zhou
Chief Executive Officer, Chief Financial Officer (principal financing officer) and Director
May 13, 2005
/s/ John Leo
John Leo
Director
May 13, 2005
/s/ Ming Liu
Ming Liu
Director
May 13, 2005
/s/ Thomas Wharton
Thomas Wharton
Director
May 13, 2005
Exhibit 31.1
SECTION 302 CERTIFICATION
I, Huakang Zhou, certify that:
1.
I have reviewed this quarterly report on Form 10-QSB of Moving Bytes Inc.;
2.
Based on my knowledge, this 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 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 of the small business issuer as of, and for, the periods presented in this report;
4.
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
(a)
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and
5.
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.
Date: May 13, 2005
/s/ Huakang Zhou
Huakang Zhou
Chief Executive Officer and Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CEO AND CFO PURSUANT TO
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
§ 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Form 10-QSB of Moving Bytes Inc., a company duly formed under the Canada Business Corporation Act (the “Company”), for the quarter ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Huakang Zhou, Chief Executive Officer and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his/her knowledge, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Huakang Zhou
Huakang Zhou
Chief Executive Officer
Chief Financial Officer
May 13, 2005
This certification accompanies this Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of § 18 of the Securities Exchange Act of 1934, as amended.
MBYTF -- Moving Bytes Inc.
Com (No Par)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2005
[ ]
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: 0-30058
MOVING BYTES INC.
_______________________________________________________________________________
(Name of Small Business Issuer as specified in its charter)
Canada
52-2267986
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
4340 Redwood Hwy., Suite F222, San Rafael, Ca 94903
_______________________________________________________________________________
(Address of Principal Executive Offices)
(415) 446-5546
________________________________________________________________________________
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [ X ]
Check 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 past 12 months (or shorter period that the registrant was required to file such report) and (2) has been subject to such filing requirements for the past 90 days: Yes [ X ] No [ ]
State the shares outstanding of each of the Registrant’s classes of common equity, as of the latest practicable date: May 10, 2005 there were 175,450,042 Common Shares outstanding.
MOVING BYTES INC.
FORM 10-QSB
TABLE OF CONTENTS
PART I.
INTERIM FINANCIAL INFORMATION
Item 1.
Condensed Consolidated Balance Sheets
March 31, 2005 (Unaudited) and December 31, 2004
Condensed Consolidated Statement of Operations and Accumulated Deficit (Unaudited)
Three Months Ended march 31, 2005 and 2004 and period from Inception of Development Stage on February 27, 2004 to March 31, 2005
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, 2005 and 2004 and period from Inception of Development Stage on February 27, 2004 to March 31, 2005
Notes to Condensed Consolidated Financial Statements (Unaudited)
Item 2.
Management’s Discussion and Analysis or Plan of Operation
Item 3.
Controls and Procedures
PART II.
OTHER INFORMATION
Item 1.
Legal Proceedings
Item 2.
Unregistered Sales of Equity 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
Signatures
Condensed Consolidated Financial Statements
(Expressed in United States dollars)
MOVING BYTES INC.
Three months ended March 31, 2005 and 2004
Period from inception of development stage on February 27, 2004
to March 31, 2005
(Unaudited)
MOVING BYTES INC.
(A Development Stage Enterprise)
Condensed Consolidated Balance Sheets
(Expressed in United States dollars)
March 31,
2005
(Unaudited)
December 31,
2004
(audited)
Assets
Current assets:
Cash and cash equivalents
$ 38,715
$ 5,218
Accounts receivable, less allowance for doubtful accounts
of $16,782 (December 31, 2004 – ($0)
697
2,847
Prepaid expenses
-
-
$ 37,412
$ 8,065
Liabilities and Stockholders’ Equity (Deficiency)
Current liabilities:
Accounts payable
$ 72,421
$ 54,395
Accrued liabilities
167,550
144,018
Note Payable - Investor
-
37,500
Current liabilities from discontinued operations
81,441
86,898
Current portion of obligation under capital lease
-
47,885
321,412
370,696
Stockholders’ equity (deficiency):
Capital stock (no par value; unlimited authorized; 175,450,042 and 31,703,977 shares issued and outstanding, respectively)
6,531,683
6,531,683
Additional paid-in capital
777,448
668,469
Deficit accumulated during development stage
(204,755)
(176,406)
Deficit Accumulated prior to 2/27/04
(7,386,376)
(7,386,377)
Stockholders’ Equity (deficiency)
(282,000)
(362,631)
$ 39,412
$ 8,065
See accompanying notes to condensed consolidated financial statements.
MOVING BYTES INC.
(A Development Stage Enterprise)
Condensed Consolidated Statements of Operations and Deficit
(Unaudited)
(Expressed in United States dollars)
Three months ended
March 31,
2005
(unaudited)
March 31,
2004
(unaudited)
Period from Inception of development stage on February 27, 2004 to March 31, 2005
(unaudited)
Revenue
$ nil
$ 60,629
$ nil
Cost of goods sold:
Transmission and services
-
23,760
(9,892)
Commissions
-
-
-
Other
-
(127)
-
-
23,633
(9,892)
Gross profit
nil
36,996
9,892
General and Administrative Expenses
27,589
321,991
179,967
Loss from continuing operations before other income (expenses)
(27,589)
(284,995)
(170,075)
Other income (expense):
Interest income
-
10
7
Interest expense
(760)
(2,307)
(3,602)
Other income (expense)
-
8,679
(6,184)
Loss from continuing operations before income taxes
(28,349)
(278,613)
(9,779)
Provision for income taxes
-
-
-
Loss from continuing operations
(28,349)
(278,613)
(179,854)
Loss from discontinued operations of Business Communication
Services segment
-
-
(24,901)
Loss for the period, carried forward
(28,349)
(278,613)
(204,755)
Accumulated deficit, beginning of period
(7,562,782)
(7,129,136)
-
Accumulated deficit, end of period
$ (7,591,131)
$ (7,407,749)
$ (204,755)
Earnings (loss) per share:
Continuing operations, basic and diluted
$ (0.01)
$ (0.02)
Discontinued operations, basic and diluted
-
-
Loss, basic and diluted
(0.01)
(0.02)
Weighted average number of shares outstanding, basic and diluted
67,640,493
14,739,691
See accompanying notes to condensed consolidated financial statements.
MOVING BYTES INC.
(A Development Stage Enterprise)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in United States dollars)
Three months ended
March 31,
2005
(unaudited)
March 31,
2004
(unaudited)
Period from Inception of development stage on February 27, 2004 to March 31, 2005
(unaudited)
Cash flow from Operating activities:
Loss from Continuing Operations
$ (28,349)
$ (278,613)
$ (204,755)
Adjustment for loss from discontinued operations
-
-
24,903
Items not involving cash:
Amortization and depreciation
-
15,000
4,000
Gain on disposal of operating sublease
-
-
(36,736)
Stock issued for consulting services
-
-
14,875
Change in operating assets and liabilities:
Accounts receivable
2,151
26,038
(8,035)
Other receivables
-
-
11,879
Prepaid expenses
-
(33,462)
36,389
Accounts payable
(8,825)
36,007
(45,297)
Accrued liabilities
25,011
99,285
29,796
Settlement Agreement payable
-
(11,565)
(20,567)
Cash flow provided by (used in) continuing operations
(10,012)
(147,310)
(193,548)
Cash flow provided by discontinued operations
-
-
36,371
Cash flows (used in) operating activities
(10,012)
(147,310)
(157,177)
Cash flow from financing activities:
Additional Paid In Capital
70,000
-
117,500
Lease payments
(26,491)
(9,434)
(31,097)
Note Payable
-
-
37,500
Cash flow provided by (used in) financing activities
43,509
(9,434)
123,903
Increase (decrease) in cash and cash equivalents
33,497
(156,744)
(33,274)
Cash and cash equivalents, beginning of period
5,218
204,399
71,989
Cash and cash equivalents, end of period
$ 38,715
$ 47,655
$ 38,715
Supplementary information:
Interest received
$ -
$ 10
$ 7
Interest paid
760
-
2,082
Income taxes paid
-
-
-
Non-cash financing and investing activities:
Transfer of fixed assets to settle agreement payable
-
-
15,000
Consulting agreement
-
-
14,000
Finder’s fee
-
-
875
Conversion of accrued liabilities to equity
-
-
10,000
Conversion of note payable and accrued interest
38,979
-
38,979
See accompanying notes to condensed consolidated financial statements.
MOVING BYTES INC.
(A Development Stage Company)
Notes to Condensed Consolidated Financial Statements
(Expressed in United States dollars)
GENERAL
1. Basis of Presentation
(a)
The information contained herein with respect to the three month period ended March 31, 2005 has been reviewed by the independent auditors and was prepared in conformity with generally accepted accounting principles for interim financial information and instructions for Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, the condensed consolidated financial statements do not include information and footnotes required by generally accepted accounting principles. Included are the adjustments, which, in the opinion of management, are necessary for a fair presentation of the financial information for the three-month period ended March 31, 2005 and 2004. The results are not necessarily indicative of results to be expected for the year.
(b)
Net earnings (loss) per share has been calculated using the weighted average number of shares outstanding during the period. Diluted earnings (loss) per common share are computed similar to basic earnings (loss) per share except that the weighted average number of common shares outstanding is increased to include additional common shares from the assumed exercise of options and warrants, if dilutive. Dilutive loss per share is the same as basic loss per share in all periods, since the impact of outstanding options and warrants is dilutive. The following securities could potentially dilute basic earnings per share in the future:
March 31,
2005
March 31,
2004
Options
470,000
3,810,000
Warrants
-
1,000,000
(c)
New accounting pronouncements:
On December 16, 2004, the Financial Accounting Standards Board (“FASB”) published Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment (“SFAS 123R”). SFAS 123R requires that compensation cost related to share-based payment transactions be recognized in the financial statements. Share-based payment transactions within the scope of SFAS 123R include stock options, restricted stock plans, performance-based awards, stock appreciation rights, and employee share purchase plans. The provisions of SFAS 123R, as amended, are effective for small business issuers beginning as of the next fiscal year after December 15, 2005. Accordingly, the Company will implement the revised standard in the first quarter of fiscal year 2006. Currently, the Company accounts for its share-based payment transactions under the provisions of APB 25, which does not necessarily require the recognition of compensation cost in the financial statements (note 4). Management is assessing the implications of this revised standard, which may materially impact the Company’s results of operations in the first quarter of fiscal year 2006 and thereafter.
(d)
Development stage company:
The Company is considered to be in the development stage as defined in Statement of Financial Accounting Standards (SFAS) No. 7, “Accounting and Reporting by Development Stage Enterprises.” The Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, and raising capital.
(e)
Foreign currency translation:
The functional currency of the Company and its subsidiaries is considered to be the US dollar as substantially all operating, financing and investing transactions are made in that currency. Accordingly, monetary assets and liabilities and non-monetary items carried at market values which are denominated in Canadian dollars, have been translated into US dollars using exchange rates in effect at the balance sheet date. Statement of operations items are translated at weighted average exchange rates. Exchange gains or losses are included in the determination of net earnings (loss) for the year.
2.
Operations:
Moving Bytes Inc. (the “Company” or “Moving Bytes” or “Registrant”) is incorporated under the Canada Business Corporations Act and is listed on the National Association of Securities Dealers over-the-counter Bulletin Board under the symbol “MBYTF”. The Company does not have any subsidiaries and has no business operations as of the date of this report.
3.
Going concern:
These condensed consolidated financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its obligations in the normal course of business. The auditors’ report on the Company’s audited financial statements for the year ended December 31, 2004, includes an additional explanatory paragraph that states that due to recurring losses from operations and cash flows used in operating activities, substantial doubt exists about the Company’s ability to continue as a going concern. The audited financial statements include a going concern note that provides further information with respect to this uncertainty and management’s plans.
The Company had an accumulated deficit at March 31, 2005 of $7,591,131 and a working capital deficit of $282,000. The Company has significant cash requirements and no ability to generate cash flows from operations. The Company has insufficient funds to meet its financial obligations as they become due. The Company believes that its working capital will not be sufficient to fund its cash requirements through the year ended December 31, 2005. Although the Company will continue to seek additional cash resources through equity issuances in order to position the Company for possible future opportunities, there can be no assurance that funds will be available on an economic basis to the Company. Unless the Company can raise financing, management does not believe that the Company can continue as a going concern and believes that the Company will not be able to maintain its listing on the National Association of Securities Dealer over the counter bulletin board.
The condensed consolidated financial statements of the Company include the accounts of its former subsidiary Moving Bytes, Inc. (“MBI”), which was wound up and dissolved on June 30, 2004, consisting of accounts payable and accrued liabilities. In the event that MBI’s creditors are successful in enforcing any judgments they may receive against MBI, or the Company, the Company could be forced into a bankruptcy proceeding. In such event the there will be substantial doubt that the Company will have the ability to carry on as a going concern. The Company will continue to consolidate the liability balances and transactions of MBI on an ongoing basis until the liabilities of MBI have been forgiven, discharged or the Company receives an opinion of its legal counsel that there is only a remote possibility of the Company becoming obligated for the liabilities of MBI. There can be no guarantee that the Company will be able to have the liabilities forgiven or discharged or receive such an opinion from its counsel.
4.
Significant accounting policies:
The Company has adopted Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"). The provisions of SFAS 123 allow companies to either expense the estimated value of stock options or to continue to follow the intrinsic value method set forth in Accounting Principles Bulletin Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), but disclose the pro forma effects on net income (loss) had the fair value of the options been expensed. The Company has elected to continue to apply APB 25 in accounting for its employee stock option incentive plans. Under APB 25, where the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation is recognized.
If compensation expense for the Company's stock-based compensation plans had been determined consistent with SFAS 123, the Company's net income per share including pro forma results would have been the amounts indicated below:
Three months ended
March 31,
2005
(unaudited)
March 31,
2004
(unaudited)
Period from Inception of development stage on February 27, 2004 to March 31, 2005
(unaudited)
Loss for the period, as reported
$ (28,349)
$ (278,613)
$ (204,755)
Add: Employee stock-based compensation expense, as reported
-
-
-
Deduct: Employee stock-based compensation Expense determined under the fair value method
(6,900)
-
(6,900)
Pro forma loss for the period
$ (35,249)
$ (278,613)
$ (211,655)
Pro forma – basic and diluted loss per share
$ (0.01)
$ (0.02)
$ (0.01)
Item 2.
Management’s Discussion and Analysis
SUMMARY FINANCIAL DATA
The following table sets forth selected financial data regarding the Company’s consolidated operating results and financial position. The data has been derived from the Company’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) in United States dollars. Unless noted otherwise the presentation represents the consolidated financial results of the Company and MBI.
The following selected financial data is qualified in its entirety by, and should be read in conjunction with, the condensed consolidated financial statements and notes thereto included elsewhere this quarterly report. The selected financial data and the Company’s consolidated financial statements are expressed in U.S. dollars. As of the date of this report the Company does not have any business operations. The financial information contained in this report and the Company’s financial statements should not be considered indicative of future operations. Period to period results are expected to vary in future periods.
Three Month Period Ended March 31,
2005
2004
Revenue
$ Nil
$ 60,629
General & Administrative Expenses
$ 27,589
$ 321,991
Net Income (Loss) from Continuing Operations
$ (28,349)
$ (278,613)
Net Income (Loss) for the Period
$ (28,349)
$ (278,613)
Net Income (Loss) per Share
$ (0.01)
$ (0.02)
Three Month Period Ended
Year Ended
March 31, 2005
(unaudited)
December 31, 2004
(audited)
Working capital
$ (282,000)
$ (362,631)
Total assets
$ 39,412
$ 8,065
Total liabilities
$ 321,412
$ 370,696
Share Holder’s Equity
$ (282,000)
$ (362,631)
Long Term Obligations
$ Nil
$ Nil
MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Report contains statements that may contain forward-looking statements, concerning the Registrant’s future operations and planned future acquisitions and other matters and the Registrant intends that such forward-looking statements be subject to the safe harbors for such statements. Any statements that involve discussions with respect to predictions, expectations, belief, plans, projections, objectives, assumptions or future events or performance (often, but not always, using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “estimates” or “intends”, or stating that certain actions, events or results “may”, could”, “might”, or “will” be taken to occur or be achieved) are not statements of historical fact and may be “forward looking statements”. These forward-looking statements, include statements relating to, among other things, the ability of the Registrant to continue as a going concern.
The Registrant cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Such forward-looking statements are based on the beliefs and estimates of the Registrant’s management as well as on assumptions made by and information currently available to the Registrant at the time such statements were made. Forward looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward looking statements, including, without limitation, the failure to obtain adequate financing on a timely basis. Actual results could differ materially from those projected in the forward-looking statements, either as a result of the matters set forth or incorporated in this Report generally and certain economic and business factors, some of which may be beyond the control of the Registrant. Additional risks and uncertainties that may affect forward-looking statements about the Registrant’s business and prospects include adverse economic conditions, inadequate capital, unexpected costs, and other factors set forth under “Risk Factors” in its Annual Report on Form 10-KSB for the period ended December 31, 2004, which could have an immediate and material adverse effect. The Registrant disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
This following discussion and analysis of the results of operations and financial condition of the Company should be read in conjunction with the audited financial statements and the related notes, contained in the Company’s Annual Report on Form 10-KSB for the period ended December 31, 2004 and in conjunction with the unaudited financial statements and notes thereto appearing elsewhere in this Form 10-QSB.
Three Months Ended March 31, 2005 and March 31, 2004.
Revenues, Expenses and Net Income.
Revenue . Revenue for the three month period ended March 31, 2005 (“Q1 2005”) was nil compared to $60,629 for the three month period ended March 31, 2004 (“Q1 2004”). During Q1 2005 the Company had no revenue generating operations. Revenue during Q1 2004 was from MBI’s Electronic Media Services operations which were closed on February 27, 2004. The Company has no other sources of revenue and does not anticipate that it will generate any revenue until the Company implements a new business strategy and plan and is no longer in development stage, if ever. There can be no assurance that the Company will raise sufficient capital to pursue new business opportunities or to implement a business plan.
General and Administrative Expenses. General and Administrative expenses of $27,589 in Q1 2005 consisted primarily of consulting services and other fees associated with the preparation and filing of the Company’s current and periodic reports with the U.S. Securities and Exchange commission and associated compliance activities. General and Administrative expenses of $321,991 in Q1 2004 consisted of charges and expenses related to ongoing public company activities and the winding down of MBI’s business operations.
Net Loss . Net loss in Q1 2005 was $28,349 as compared to a net loss of $278,613 in Q1 2004. The Company believes that it will continue to have net losses for the foreseeable future.
Net Loss per Share . Net loss per share was $0.01 in Q1 2005 as compared to a loss of $0.02 in Q1 2004. The number of shares issued and outstanding increased from 14,739,691 at March 31, 2004 to 175,450,042 at March 31, 2005.
Period from Inception of Development Stage .
Subsequent to February 27, 2004 the Company has no business operations and is considered ‘development stage’. Development stage presentation recognizes this and sets forth activity during the period associated with development stage activities.
At March 31, 2005 and December 31, 2004.
Liquidity and Capital Resources - Assets.
At March 31, 2005 the Company had a working capital deficit of $282,000 including cash and equivalent balances of $38,715, down from a working capital deficit of $362,631 at December 31, 2004 including cash and equivalent balances of $5,218. The change in working capital, and cash and equivalent balances, was primarily affected by $70,000 in cash received in a common stock private placement, the exchange of $38,979 in debt and interest payable for common stock and the forgiving of $22,500 in accounts payable by a former officer of the Company.
During Q1 2005 the Company used $10,012 in cash from Continuing Operations as compared to using $147,310 in cash from Continuing Operations during Q1 2004.
Liquidity and Capital Resources - Liabilities.
Accounts payable increased from $54,395 at December 31, 2004 to $72,421 primarily due to the reclassification of the current portion of obligations under capital lease in the amount of $47,885 to accounts payable. This was partially offset by the forgiving of $22,500 in accounts payable by a former officer of the Company.
Accrued liabilities increased from $144,018 at December 31, 2004 to $167,550 at March 31, 2005, primarily due to the accrual of amounts due under consulting agreements.
The Company has no long-term debt or other long-term liabilities.
Liquidity and Capital Resources – Capital Stock and Equivalents.
The Company received $108,979 through the issuance of capital stock during the Q1 2005 consisting of $70,000 in a common stock private placement and $38,979 on the extinguishments of debt and interest payable.
The Company has not entered into any derivative financial instrument arrangements during Q1 2005.
The Company currently has no external sources of liquidity.
Contractual Obligations.
The Company consolidated with MBI has contractual obligations of approximately $200,000 on which it has defaulted and which it has recorded as current liabilities on the consolidated balance sheet. These obligations are in addition to general and administrative expenses and other creditor obligations. The Company has no additional contractual obligations
Sufficiency of Working Capital.
As of March 31, 2005, the Company had net working capital deficit of $282,000. Although, on March 15, 2005 the Company raised $70,000 in equity financing, it believes that it still has inadequate financial resources to sustain its business activities or to maintain its SEC reports or its listing on the National Association of Securities Dealer over the counter bulletin board.
The Company estimates that it will need to raise approximately $500,000 during the next 12 months to meet its minimum capital requirements. There is substantial doubt that the Company will be able to continue as a going concern, absent raising additional financing. The Company has no ability to generate cash flows from operations.
Auditors Report.
The auditors’ report on the Company’s audited financial statements for the year ended December 31, 2004, includes an additional explanatory paragraph that states that due to recurring losses from operations and cash flows used in operating activities, substantial doubt exists about the Company’s ability to continue as a going concern. The audited financial statements include a future operations and going concern note that provides further information with respect to this uncertainty and management’s plans.
Long Term Debt.
The Company currently has no long-term debt obligations.
Off Balance Sheet Arrangements.
The Company has no off balance sheet financing arrangements.
Item 3. Controls and Procedures.
(a)
Evaluation of Disclosure Controls and Procedures .
The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within the required time periods. Our Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this quarterly report. He has concluded that, as of that date, our disclosure controls and procedures were effective at ensuring that required information will be disclosed on a timely basis in our reports filed under the Exchange Act.
(b)
Changes in Internal Control over Financial Reporting .
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Part II. Other Information
Item 1. Legal Proceedings.
DCA Judgment.
Effective September 9, 2003 MBI entered into a promissory note with DCA for $12,500 against payment of the final costs under MBI’s billing agreement with DCA. On September 21, 2004 DCA received a default judgment against MBI in the Superior Court, County of Sonoma, State of California to enforce the unpaid District Court of Oklahoma judgment plus reimbursement of filings fees in the amount of $296 and interest in the amount of $76. The Company has accrued $15,759 in liabilities from discontinued operations at December 31, 2004 related to DCA.
To the best of its knowledge, the Company is not subject to any other active or pending legal proceedings or claims against it or any of its properties. However, from time to time, the Company may become subject to claims and litigation generally associated with any business venture.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Innerloop Debt Cancellation Agreement.
On October 22, 2004, the Company became obligated to repay Innerloop Mobile Communications, A.S. (“Innerloop”) US$37,500 under the terms of a Convertible Note (the “Note”). On March 15, 2005 Innerloop entered into an agreement with Moving Bytes wherein Innerloop cancelled the Note, forgave the Note principal in the amount of $37,500 and all accrued interest thereon in the amount of $1,479.45 in exchange for 4,500,000 shares of restricted common stock.
Warner Private Placement Agreement.
On March 15, 2005, the Company entered into a Subscription and Financing Agreement with Warner Technology and Investments Corp, a New Jersey corporation related to the offer and sale of restricted common stock of Moving Bytes (the “Warner Private Placement Agreement”). Under the terms of the Warner Private Placement Agreement, Moving Bytes issued 139,246,065 shares of restricted common stock for gross proceeds of $70,000 USD. Proceeds received under the Warner Private Placement Agreement were used meet general obligations of the Company.
Item 3. Defaults Upon Senior Securities.
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 5. Other Information.
Director’s Options.
On March 15, 2005, the Company issued 345,000 common stock options to, and terminated 95,000 common stock option previously issued to, Thomas Wharton a director of the Company.
Securities Compliance Consulting Agreement.
On March 15, 2005, the Company entered into a consulting agreement with Securities Compliance Inc. (“Securities Compliance”), a company controlled by Mark M. Smith (“Smith”), former President and Chief Financial Officer of the Company, pursuant to which the Company would pay Securities Compliance $30,000 USD for Smith to provide certain services to the Company in regard to the preparation of the Company’s annual report on SEC Form 10- KSB for the period ended 12/31/04 (the “2004 10-KSB”). Under the agreement (i) $15,000 USD was paid immediately, (ii) $15,000 USD was paid upon the filing of Company’s Form 10-KSB for the period ended December 31, 2004, (iii) Securities Compliance, Smith and the Company cancelled all prior agreements between Securities Compliance, Smith and the Company and (iv) Securities Compliance and Smith forgave all amounts unpaid, due and owing to them under prior agreements.
Mustad Consulting Termination Agreement.
On March 15, 2005, the Company entered into a consulting termination agreement with J. Erik Mustad (“Mustad”), former Chief Executive Officer of the Company, pursuant to which Mustad and Moving Bytes cancelled all prior agreements between Mustad and Moving Bytes and Mustad forgave $22,500 unpaid, due and owing to him under prior agreements.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Document and Location.
Exhibit No.
Description
3.1
Certificate of Incorporation for Jackpine Mining Co., Inc., dated December 23, 1991. Incorporated by reference to Exhibit 1.1 to Registrant’s Form 20-F dated April 20, 1999.
3.2
Form 1 (Section 5) Company Act Memorandum of Jackpine Mining Co., Inc., dated December 13, 1991. Incorporated by reference to Exhibit 1.2 to Registrant’s Form 20-F dated April 20, 1999.
3.3
Articles of Jackpine Mining Co., Inc. Incorporated by reference to Exhibit 1.3 to Registrant’s Form 20-F dated April 20, 1999.
3.4
Certificate of name change for USV Telemanagement Inc., dated July 10, 1996. Incorporated by reference to Exhibit 1.4 to Registrant’s Form 20-F dated April 20, 1999.
3.5
Province of British Columbia Form 21 (Section 371) Company Act Special Resolution filed July 10, 1996. Incorporated by reference to Exhibit 1.5 to Registrant’s Form 20-F dated April 20, 1999.
3.6
By-Laws of Registrant, as amended March 15, 2005. Incorporated by reference to Registrant’s Form 8K dated March 21, 2005.
10.01
USV Telemanagement Inc. Stock Option Plan (1999). Incorporated by reference to Exhibit 4.1 to Registrant’s Form S-8 dated September 8, 1999.
10.02
USV Telemanagement Inc. Amended and Restated Stock Option Plan (2000). Incorporated by reference to Exhibit 4.7 to Registrant’s Form S-8 dated May 31, 2000.
10.03
E*Comnetrix Inc. Amended and Restated Stock Option Plan (2000). Incorporated by reference to Exhibit 4.12 to Registrant’s Form S-8 dated November 16, 2000.
10.04
Innerloop Mobile Communications A.S. Convertible Note Agreement dated October 22, 2004. Incorporated by reference to Exhibit 10.63 to Registrant’s Form 10-QSB dated November 22, 2004.
10.05
J. Erik Mustad Stock Option Termination Agreement dated September 30, 2004. Incorporated by reference to Exhibit 10.64 to Registrant’s Form 10-QSB dated November 22, 2004.
10.06
Securities Compliance Consulting Agreement dated October 1, 2004. Incorporated by reference to Exhibit 10.65 to Registrant’s Form 10-QSB dated November 22, 2004.
10.07
Warner Technology and Investment Corp. Private Placement Agreement dated March 15, 2005. Incorporated by reference to Exhibit 10.63 to Registrant’s Form 8-K dated March 21, 2005.
10.08
Innerloop Mobile Communications A.S. Debt Cancellation Agreement dated march 15, 2005. Incorporated by reference to Exhibit 10.64 to Registrant’s Form 8-K dated March 21, 2005.
10.09
J. Erik Mustad Consulting Termination Agreement dated March 15, 2005. Previously reported in Registrant’s Form 8-K dated March 21, 2005.
10.10
Securities Compliance Consulting Agreement dated March 15, 2005. Previously reported in Registrant’s Form 8-K dated March 21, 2005
14.1
Code of Ethics effective March 15, 2005. Incorporated by reference to Exhibit 14.1 to Registrant’s Form 8-K dated March 21, 2005.
16.1
Letter dated March 23, 2005 from KPMG LLP, Chartered Accountants. Incorporated by reference to Exhibit 16.1 to Registrant’s Form 8-K/A dated March 24, 2005.
31.1
Certification of CEO and CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a).
32.1
Certification of CEO and CFO pursuant to 18 U.S.C. §1350 as adopted pursuant to §906 of the Sarbanes-Oxley Act of 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.
MOVING BYTES INC.
Date: May 13, 2005
/s/ Huakang Zhou
Huakang Zhou, Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report to be signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Huakang Zhou
Huakang Zhou
Chief Executive Officer, Chief Financial Officer (principal financing officer) and Director
May 13, 2005
/s/ John Leo
John Leo
Director
May 13, 2005
/s/ Ming Liu
Ming Liu
Director
May 13, 2005
/s/ Thomas Wharton
Thomas Wharton
Director
May 13, 2005
Exhibit 31.1
SECTION 302 CERTIFICATION
I, Huakang Zhou, certify that:
1.
I have reviewed this quarterly report on Form 10-QSB of Moving Bytes Inc.;
2.
Based on my knowledge, this 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 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 of the small business issuer as of, and for, the periods presented in this report;
4.
I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have:
(a)
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and
5.
I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.
Date: May 13, 2005
/s/ Huakang Zhou
Huakang Zhou
Chief Executive Officer and Chief Financial Officer
Exhibit 32.1
CERTIFICATION OF CEO AND CFO PURSUANT TO
18 U.S.C. § 1350,
AS ADOPTED PURSUANT TO
§ 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Form 10-QSB of Moving Bytes Inc., a company duly formed under the Canada Business Corporation Act (the “Company”), for the quarter ended March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Huakang Zhou, Chief Executive Officer and Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of his/her knowledge, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Huakang Zhou
Huakang Zhou
Chief Executive Officer
Chief Financial Officer
May 13, 2005
This certification accompanies this Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of § 18 of the Securities Exchange Act of 1934, as amended.
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