10-Q 1 dkm55.txt FORM 10-Q F/Q/E MARCH 31, 2001 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter Ended March 31, 2001 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-28097 EONNET MEDIA, INC. (Exact name of small business issuer as specified in its charter) STATE OF FLORIDA 59-3569844 ---------------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 6925 112th Circle North, Suite 101, Largo, Florida 33773 -------------------------------------------------------- (Address of principal executive offices) (Zip Code) Issuer's telephone number, including area code: (727) 546-6476 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 period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No The number of shares outstanding of the Issuer's common stock at $.01 par value as of August 13, 2001 was 2,795,679. PART I - FINANCIAL INFORMATION Item 1. CONSOLIDATED FINANCIAL STATEMENTS. EONNET MEDIA, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS March 31, December 31, 2001 2000 (unaudited) -------------------- -------------------- Current assets Cash $ 332,291 $ 136,459 Due from affiliate 50,000 Other current assets 11,256 39,998 -------------------- -------------------- Total current assets 343,547 226,457 Property and equipment (net) 120,921 114,623 Other assets 2,458 2,458 -------------------- -------------------- Total Assets $ 466,926 $ 343,538 ==================== ==================== 2 LIABILITIES

Please read accompanying notes. 3 EONNET MEDIA, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

4 EONNET MEDIA, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

6 EONNET MEDIA, INC. (A Development Stage Company) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) PERIOD FROM MAY 14, 1999 (DATE OF INCEPTION) TO MARCH 31, 2001 NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS Eonnet Media, Inc. (the "Company") was incorporated to provide a premier Internet web site for doctors that is dedicated to doctor education, communication, and information exchange using state-of-the-art technology, security, doctor authentication, and a combination of Internet protocols. The Company activated its web site during the first quarter of 2000. The Company's fiscal year-end is December 31. During 1999, the Company filed a registration statement on Form SB-2 for the issuance of 25,000,000 shares of common stock. On March 7, 2000, the registration statement was declared effective by the Securities and Exchange Commission (the "SEC") in select states. In January 2000, Eonnet Media created EMC911 ("EMC") to develop and market an emergency medical card. Through its website EMC collects and stores medical information provided by subscribers. Using the EMC card, medical personnel can access information they need such as blood type, allergies, primary physician and insurance carrier. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instruction to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to the financial statements and footnotes included in the Company's Form 10-KSB for the period from May 14, 1999 (date of inception) to December 31, 2000. Basis of Presentation - The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As reflected in the financial statements, the Company is a development stage enterprise, which has yet to generate revenues to support further operations. In order to fund operations to date, the Company has relied on funding raised from sales of the Company's equity securities. The Company's operating losses since inception raises substantial doubt about its ability to continue as a going concern. 7 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The Company's success is dependent upon its ability to raise additional, sufficient investment capital to support the design and implementation of viable Internet web sites, thereby generating revenues to continue to fund operations. Management is considering raising capital through a public offering. The Company is subject to the risks and difficulties experienced by any new Internet-based business, such as limited operating history, competition, potential inability to locate Internet service providers and possible changes in domestic and foreign government regulation which may affect the acceptability of the Company's product by customers. Ultimately, the attainment of profitable operations is dependent upon future events including achieving a level of sales to support the Company's cost structure. Principles of Consolidation - The consolidated financial statements include the accounts of Eonnet Media Inc and its wholly owned subsidiary, EMC911, Inc., collectively referred to as the "Company." All significant intercompany accounts and transactions have been eliminated in consolidation Income Taxes - The Company has adopted Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"), Accounting for Income Taxes. Under SFAS No. 109, the Company uses the asset and liability method which recognizes the amount of current and deferred taxes payable or refundable at the date of the financial statements as a result of all events that have been recognized in the financial statements and as measured by the provisions of enacted tax laws. Loss per Common Share - The Company has adopted SFAS No. 128, Earnings Per Share. Basic loss per common share is computed by dividing the loss available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted loss per common share reflects the potential dilution of securities that could share in the loss. The 750,000 shares of common stock subject to the recission offer have been excluded from both the basic and diluted loss per common share computations because the Company treats these shares as a liability. Derivative Financial Instruments - In June 1998, the FASB issued SFAS No. 133 ("SFAS No. 133"), Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133 establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives), and 8 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) for hedging activities. The standard requires recognition of all derivatives as either assets or liabilities in the balance sheet and measurement of these instruments at fair value. The accounting for changes in the fair value of a derivative (that is, gains and losses) depends upon the intended use of the derivative and resulting designation if used as a hedge. SFAS No. 133, as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The Company does not use derivatives or engage in hedging activities therefor the adoption of SFAS No. 133 will not have an effect on the Company's financial statements. NOTE 3 - LONG-TERM OBLIGATIONS As of March 31, 2001 the Company was in default under the capital lease and the lessor has the right to repossess the equipment or accelerate the lease payments. Therefore the remaining balance has been classified as current. The Company is attempting to negotiate a buy out of the lease In July 2000 the Company issued convertible demand notes to five investors totaling $225,000. Interest at 8% per annum is payable quarterly beginning November 1, 2000. At the lender's option the notes may be converted into share of Doctorsurf common stock at a rate of one share for every dollar converted. NOTE 4 - INCOME TAXES The Company has a gross deferred tax asset as of December 31, 2000 of approximately $443,000. This asset is comprised of the potential future tax benefit of its operating losses to date. The Company has net operating loss carry forwards for tax purposes of approximately $2,082,000 available to offset future taxable income. These loss carry forwards expire in 2019 and 2020. Management has evaluated the available evidence regarding the future taxable income and other possible sources of realization of deferred tax assets and determined it is more likely than not that the deferred tax asset will not be realized. Therefore a 100 percent valuation allowance has been established against the gross deferred tax asset. For the periods ending December 31, 2000 the valuation allowance increased by 311,000. 3. NOTE 5 - SUBSEQUENT EVENTS In January 2001, the Company entered into a merger agreement with Eonnet Technologies, Inc. In connection with the merger, which became effective on April 9, 2001, the Company completed an 18 to 1 reverse stock split and then issued an additional 1,000,000 shares of common stock to shareholders of Eonnet Technologies Inc. As part of the merger, Doctorsurf.com changed its name to Eonnet Media, Inc. In addition, the Company will enter into a three-year employment agreement with the majority shareholder of Eonnet Technologies to serve as Chief Executive Officer of the merged company for an annual salary of $120,000. 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview The Company was in development stage and had only generated revenues of $3,816 during the first quarter of 2001. In April of 2001, the Company merged with Eonnet Technologies, Inc., a network and web solutions company located in Pittsburgh, PA to add to its wide offering of tools and services to physicians. Eonnet Technologies, Inc. was merged in a stock deal for one million post-split shares of Eonnet Media in April of 2001. Upon the merger, the Company changed its name to Eonnet Media, Inc. Sales consist primarily of revenues from network system implementation and support services. Additional sales consist of fees from pharmaceutical study review services provided to customers, commissions from web application development, server co-location and advertisements on the Company's web site. Operating expenses include payroll, advertising and promotional costs, payroll and related taxes, web site expense, legal and professional fees, other operating expenses and depreciation expense. Other income (expense) consists of interest income associated with cash maintained in a money market fund and interest expense associated with borrowings to finance capital equipment expenditures and other working capital needs. Results of Operations THREE MONTHS ENDING MARCH 31, 2001 AS COMPARED TO THREE MONTHS ENDING MARCH 31, 2000 (Consolidated) Sales. Sales were $3,816 for the three months ending March 31, 2001 as compared to $1,370 for the three months ending March 31, 2000 Payroll, contract labor, benefits and related taxes. Payroll, contract labor, benefits and related taxes were $39,403 for the three months ending March 31, 2001 as compared to $202,992 for the three months ending March 31, 2000. Web site expenses. Web site expenses were $7,982 for the three months ending March 31, 2001 as compared to $11,159 for the three months ending March 31, 2000. Legal and professional fees. Legal and professional fees were $224 for the three months ending March 31, 2001 as compared to $71,815 for the three months ending March 31, 2000. 10 Advertising, promotional, selling, general and other operational expenses. Advertising, promotional, selling, general and other operational expenses were $700 for the three months ending March 31, 2001 as compared to $67,921 for the three months ending March 31, 2000. Interest income (expense), net. Interest expense, net of interest income was $1,266 for the three months ending March 31, 2001 as compared to $7,405 for the three months ending March 31, 2000. Income taxes. The Company has no income tax provision for the period presented due to its net operating loss. The net operating loss may be carried forward for up to 20 years. As such, the Company does not anticipate any liability for income taxes for the year ended December 31, 2001. Management believes that there was no material effect on operations or the financial condition of the Company as a result of inflation for the period from January 1, 2001 to March 31, 2001. Liquidity and Capital Resources In the first quarter of 2001, the Company has financed its operations through the cash available from the sale of equity securities issued by the Company, available, loans from within the Company and cash provided from operations. During the second quarter of 2001, management expects to see revenues through increased sales of network and web solutions, advertising and sponsorships, and fees and commissions on transactions and sales occurring through its web site. The Company had a loss of $74,179 for the three-month period ending March 31, 2001 compared to $419,896 for the three-month period ending March 31, 2000. The Company estimates that it will need additional funds for on-going web site development, marketing, promotions, and for general working capital purposes over the next 12 months, including the Company's plans to hire additional full time management personnel and acquire additional office space. Net cash used in operating activities was $95,207 during the three-month period ending March 31, 2001. During the three-month period ending March 31, 2001, the Company was in its development stage and only generated revenues of $3,816. During the second quarter of 2001, management expects that the Company will generate revenues through networking solutions, advertising and sponsorships, and fees and commissions on transactions and sales occurring through its web site, which will have future positive cash effects in its operating activities. Net cash used in investing activities was $100,625 during the three-month period ending March 31, 2001 representing the purchase of property and equipment. Net cash provided by financing activities was $ 0 during the three-month period ending March 31, 2001. 11 In May 1999, 22,500,000 pre-split shares of common stock of the Company were sold to accredited investors at $.01 per share, for gross proceeds of $225,000. Proceeds were used for web site development and general working capital purposes. From June through August 1999, 750,000 pre-split shares of common stock of the Company were sold to accredited investors at $1.00 per share, for gross proceeds of $750,000. Proceeds were used for general working capital purposes. The shares were sold to a limited number of investors in a private placement that was not registered under the federal securities laws. For federal securities law purposes, however, the private placement and the free share offering may be considered a single offering. If considered a single offering, the exemption from registration that the Company relied on in making the private placement would not be available and the private placement would not be exempt from registration under the federal securities laws. Because of that possibility, the Company has offered to each investor in the private placement the right to resell their shares to the Company and receive a refund of the price paid by them of $1 per share. The private placement investors' right to sell their shares to the Company began on August 14, 1999 and expired on August 25, 2000. As of June 30, 2000, two investors accepted the Company's offer to resell their 35,000 pre-split shares and received total refund of the $35,000 purchase price. As of the expiration date of August 25, 2000, eleven additional investors with a total of 135,000 pre-split shares had opted to rescind for a total amount of $135,000. The Company is not in a position to pay cash to these investors and has therefore issued promissory notes payable in the aggregate amount of $135,000, which bear interest at a rate of 8% per annum. These notes are payable when the Company completes it next debt or equity financing with proceeds of at least $500,000. These notes are recorded as a liability under the caption due to purchasers of common stock. In July 2000, the Company issued an aggregate of $225,000 in convertible demand notes payable, to accredited investors in a private placement exempt from registration under Rule 506 of Regulation D of the Securities Act of 1933. Interest on the notes is payable quarterly, commencing November 1, 2000, at a rate of 8% per annum. Principal on the notes is payable on demand, but the notes are subordinated to all future debt to any lending institution. The notes are convertible into common stock of the Company at a conversion rate of $1.00 per share (pre-split shares). The notes are convertible at the option of the note holders. There are no prepayment penalties on the notes. In December 2000, the Company issued an aggregate of 2,466,667 (pre-split) shares of common stock of the Company to various shareholders of EMC, in exchange for the purchase of 740,000 shares of their stock in EMC. In addition, the Company issued loans payable to previous investors in EMC in the aggregate amount of $131,750, for the Company's purchase of EMC shares from these investors. The Company has also recorded a liability under the caption loans payable in the aggregate amount of $50,625 for amounts due to previous EMC investors for the Company's purchase of EMC shares from these investors. These investors are to be paid in cash upon receipt by the Company of the original EMC stock certificate issued. On December 31, 2000, the Company issued 3,075,000 (pre-split) shares of common stock of the Company to certain existing shareholders of the Company at $.017 per share in exchange for subscriptions receivable totaling $52,275. 12 On December 31, 2000, the Company issued 3,005,000 (pre-split) shares of common stock of the Company to various individuals and companies as compensation for services performed. The aggregate value of these services was $51,085. The Company's financial statements have been prepared assuming that it will continue as a going concern. The Company's losses from operations since its inception raise substantial doubt as to its ability to continue as a going concern. In addition, the Company may need to raise additional capital to fund operations. Management believes that cash expected to be generated from operations, current cash reserves, and existing financial arrangements will not be sufficient for the Company to meet its capital expenditures and working capital needs for its operations as presently conducted. The Company's future liquidity and cash requirements will depend on a wide range of factors, including expected results from operations as revenues are generated. In particular, as the Company does not expect cash flows from operations to be sufficient in the next twelve months, the Company is considering raising capital either through a private placement or an initial public offering. There can be no assurance that such capital would be raised in sufficient amounts to meet the Company's financial need in the next twelve months. PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. From time to time, the Company may become involved in litigation arising in the ordinary course of its business. The Company is not presently subject to any material legal proceedings. Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. None. 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. Not applicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. The following exhibits are filed with this report: None 13 (b) Reports on Form 8-K. During the three months ended March 31, 2001, the Company filed one report on Form 8-K on February 26, 2001 stating that on February 20, 2001, the Company engaged Brimmer, Burek & Keelan LLP as the Company's auditors for the year ended December 31, 2000, replacing the firmof Deloitte & Touche LLP, which served as the Company's independent auditors for the period from May 14, 1999 (date of inception) to December 31, 1999. 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. EONNET MEDIA, INC. Date: August 13, 2001 By: /s/ Vikrant Sharma --------------------- Dr. Vikrant Sharma CEO and Director 14

EONNET MEDIA INC 10-Q