UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(D)
OF THE EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________TO______________
COMMISSION FILE NUMBER 0-14869
REWARD ENTERPRISES, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER)
NEVADA 87-0631750
-------------------------------- -------------------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification Number)
of Incorporation or Organization)
2033 MAIN STREET, SUITE 500, SARASOTA, FLORIDA 34237
----------------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code (941) 928-7934
--------------
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [_]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as to the latest practicable date:
Class Outstanding shares at November 15, 2004
------------------------------- ---------------------------------------
COMMON EQUITY: $0.001 PAR VALUE 113,170,534 (post-reverse split)
Report on Form 10-QSB
For the Quarter Ended September 30, 2004
INDEX
Page
----
PART I - FINANCIAL INFORMATION.....................................................................1
Item 1. Financial Statements...................................................................1
Balance Sheet................................................................................3
Statements of Operations.....................................................................4
Statements of Cash Flows.....................................................................5
Condensed Notes to the Financial Statements..................................................6
Item 2. Management's Discussion and Analysis of
Financial Condition or Plan of Operation................. ...................................8
Item 3. Controls and Procedures................................................................9
PART II - OTHER INFORMATION.......................................................................10
Item 1. Legal Proceedings.....................................................................10
Item 2. Changes in Securities.................................................................10
Item 3. Defaults Upon Senior Securities.......................................................10
Item 4. Submission of Matters to a Vote of Security Holders...................................10
Item 5. Other Information.....................................................................10
Item 6. Exhibits and Reports on Form 8-K......................................................10
SIGNATURES.....................................................................................12
i
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The accompanying balance sheets of Reward Enterprises, Inc. (the
"Company") at September 30, 2004 and June 30, 2004, related statements of
operations and cash flows for the three months ended September 30, 2004 and
2003, have been prepared by our management in conformity with accounting
principles generally accepted in the United States of America. In the opinion of
management, all adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and all such
adjustments are of a normal recurring nature. Operating results for the quarter
ended September 30, 2004, are not necessarily indicative of the results that can
be expected for the fiscal year ending June 30, 2005.
1
REWARD ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND JUNE 30, 2004
2
REWARD ENTERPRISES, INC.
(A Development Stage Company)
Balance Sheets
(unaudited)
ASSETS
SEPTEMBER 30, JUNE 30,
2004 2004
----------- -----------
CURRENT ASSETS
Cash $ -- $ --
----------- -----------
Total Current Assets -- --
----------- -----------
TOTAL ASSETS $ -- $ --
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 74,742 $ 68,057
Accounts payable - related parties 4,768 --
Interest payable 27,254 21,342
Notes payable, net of discount 81,500 81,500
----------- -----------
Total Current Liabilities 188,264 170,899
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock: 10,000,000 shares authorized of
$0.001 par value, no shares issued and outstanding -- --
Common stock: 100,000,000 shares authorized of
$0.001 par value, 4,412,200 shares issued and outstanding 4,412 4,412
Additional paid-in capital 3,314,643 3,314,643
Accumulated deficit prior to development stage (3,434,726) (3,434,726)
Accumulated deficit during the development stage (72,593) (55,228)
----------- -----------
Total Stockholders' Equity (Deficit) (188,264) (170,899)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ -- $ --
=========== ===========
See Condensed Notes to the Financial Statements
3
REWARD ENTERPRISES, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
FROM INCEPTION OF
FOR THE THREE MONTHS ENDED DEVELOPMENT STAGE ON
SEPTEMBER 30, JANUARY 1, 2004
----------------------------- THROUGH SEPTEMBER 30,
2004 2003 2004
----------- -------------- --------------------
REVENUES $ -- $ -- $ --
----------- -------------- --------------------
EXPENSES
General and administrative 11,453 -- 61,077
----------- -------------- --------------------
Total Expenses 11,453 -- 61,077
----------- -------------- --------------------
LOSS FROM OPERATIONS (11,453) -- (61,077)
----------- -------------- --------------------
OTHER (EXPENSES)
Interest expense 5,192 -- (11,516)
Total Other (Expense) (5,192) -- (11,516)
LOSS BEFORE DISCONTINUED OPERATIONS (17,365) -- (72,593)
NET LOSS FROM DISCONTINUED OPERATIONS -- -- (67,697)
=========== ============== ====================
NET LOSS (17,365) $ (67,697) $ (72,593)
=========== ============== ====================
BASIC LOSS PER SHARE OF COMMON STOCK $ (0.00) $ (0.02)
=========== ==============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 4,412,200 4,481,750
=========== ==============
See Condensed Notes to the Financial Statements
4
REWARD ENTERPRISES, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
FOR THE THREE FROM INCEPTION
MONTHS ENDED OF DEVELOPMENT STAGE
SEPTEMBER 30, ON JANUARY 1, 2004
-------------------- THROUGH SEPTEMBER 30,
2004 2003 2004
-------- -------- ---------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(17,365) $(67,697) $ (72,593)
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Discontinued operations -- 67,697 --
Changes in operating assets and liabilities:
Increase in accounts payable-related parties 4,768 -- 4,768
Increase (decrease) in accounts payable and
accrued liabilities 12,597 -- 67,825
-------- -------- ---------------------
Net Cash Provided (Used) by Operating Activities -- -- --
-------- -------- ---------------------
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
CASH FLOWS FROM FINANCING ACTIVITIES -- -- --
CASH AT BEGINNING OF PERIOD -- -- --
-------- -------- ---------------------
CASH AT END OF PERIOD $ -- $ -- $ --
======== ======== =====================
CASH PAID FOR:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
-------- -------- ---------------------
See Condensed Notes to the Financial Statements
5
REWARD ENTERPRISES, INC.
(A Development Stage Company)
Condensed Notes to the Financial Statements
September 30, 2004 and June 30, 2004
NOTE 1 - BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted in accordance with such rules and regulations. The
information furnished in the interim condensed financial statements include
normal recurring adjustments and reflects all adjustments, which, in the opinion
of management, are necessary for a fair presentation of such financial
statements. Although management believes the disclosures and information
presented are adequate to make the information not misleading, it is suggested
that these interim condensed financial statements be read in conjunction with
the Company's most recent audited financial statements and notes thereto
included in its June 30, 2004 Annual Report on Form 10-KSB. Operating results
for the three months ended September 30, 2004 are not necessarily indicative of
the results that may be expected for the year ending June 30, 2005.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using accounting
principles generally accepted in the United States of America applicable to a
going concern which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. The Company has not yet
established an ongoing source of revenues sufficient to cover its operating
costs and allow it to continue as a going concern. The ability of the Company to
continue as a going concern is dependent on the Company obtaining adequate
capital to fund operating losses until it becomes profitable. If the Company is
unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, develop a reliable source of
revenues, and achieve a profitable level of operations the Company will need,
among other things, additional capital resources. Management's plans to continue
as a going concern include raising additional capital through sales of common
stock. However, management cannot provide any assurances that the Company will
be successful in accomplishing any of its plans.
The ability of the Company to continue as a going concern is dependent
upon its ability to successfully accomplish the plans described in the preceding
paragraph and eventually secure other sources of financing and attain profitable
operations. The accompanying financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 - RELATED PARTY TRANSACTIONS
As of September 30, 2004, the Company owed related parties $4,768 for
amounts advanced to the Company to cover operating expenses.
6
REWARD ENTERPRISES, INC.
(A Development Stage Company)
Notes to the Financial Statements
September 30, 2004 and June 30, 2004
NOTE 4 - COMMON STOCK
The Company has recently entered into a letter of intent dated October 4,
2004 with Consumers Choice Financial Services, Inc. of Houston, TX ("CCF")
whereby the Company would acquire the operations of CCF in exchange for shares
of the Company. On October 5, 2004, the Company issued 300,000,000 post-reverse
split shares of its common stock to acquire CCF, which is currently being held
in escrow pending closing. On November 5, 2004, the Company issued an additional
80,000,000 post-reverse split shares of its common stock to acquire CCF, which
is also currently being held in escrow pending closing.
On October 25, 2004, the Note Payable of $81,500 and the related accrued
interest were converted into 108,754,016 shares of the Company's common stock.
Effective October 13, 2004 the Company enacted a 1-for-10 reverse split of
its issued and outstanding shares and its authorized shares which changed the
issued and outstanding shares to 113,170,534 shares and its authorized shares
from five billion (5,000,000,000) to five hundred million (500,000,000). All
references to shares outstanding and per share amounts have been adjusted to
reflect the reverse split on a retroactive basis.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF
OPERATIONS
The following information should be read in conjunction with the financial
statements and notes thereto appearing elsewhere in this Form 10-QSB.
FORWARD-LOOKING AND CAUTIONARY STATEMENTS
This report contains certain forward-looking statements. These statements
relate to future events or our future financial performance and involve known
and unknown risks and uncertainties. These factors may cause our company's
actual results, levels of activity, performance or achievements to be materially
different from those expressed or implied by the forward-looking statements. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will" "should," "expects," "intends," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," "continue," or the negative of
these terms or other comparable terminology.
These statements are only predictions. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements.
BUSINESS OVERVIEW
The Company currently has no operations. The Company has recently entered
into a letter of intent with Consumers Choice Financial Services, Inc. of
Houston, Texas ("CCF").
Upon closing of the transaction with CCF the Company's goal will be to
become a nationwide provider of consumer financial services focused on sub-prime
lending to consumers for auto loans, mortgages, insurance products, branded
MasterCard and Visa credit cards and debit cards and various other consumer
financial services. The Company has proposed a merger with CCF that would
provide an entry into the consumer financial services business. Through the
acquisition of CCF, the Company could potentially offer a broad range of
integrated consumer loans to sub-prime consumers. CCF has systems in place that
identify targeted sub-prime consumers that maintain good earning power but have
items on their credit reports that have caused their credit scores to drop into
the sub-prime category. With associations currently in place, CCF would market
consumer loan products to these targeted customers and contract with other
financial institutions that would service the subsequent loans that were made.
In addition, CCF plans to submit its application for a limited services
credit card bank to the State of South Dakota banking commission for approval at
the commission's January, 2005 regularly scheduled meeting. With charter
approval, CCF would market a branded MasterCard/VISA credit card to its targeted
customers.
CCF is currently a start-up operation with no revenues. Therefore, a
pro-forma financial statement incorporating the operations of CCF with those of
the Company assuming that a merger was completed successfully are not being
presented in this filing as the resulting pro-forma financial statement would
not differ materially from the Company's audited financial statements presented
herein.
The goal of the Company is to complete a merger with CCF by the end of
November 2004. If the Company is unsuccessful in this goal, it will continue to
seek out other operating companies that might provide an entry into the consumer
financial services industry or other industries. The Company signed a
non-binding Letter of Intent with CCF dated October 11, 2004 to explore the
possibility of a merger with CCF.
We expect that we need approximately $150,000 over the next 12 month
period. Without adequate funding the product will not progress. Obtaining
financing depends on current market conditions, the willingness of the
investment community to make investments into a consumer financial services
business, the timing of key developments of the banking license and other
similar factors. We cannot provide any assurances that we will be able to secure
the funding.
8
RESULTS OF OPERATIONS
Net losses for the quarter ended September 30, 2004 were $17,365, as
compared to $67,697 for the same period in 2003. The net loss for 2004
translates into a loss of $0.00 per share compared to a loss of $0.02 per share
for the same period in 2003. The increase in the net loss was primarily
attributed to professional fees incurred in bringing our securities filings
current from the inception of the development stage, which began in January
2004. The expenses in 2003, were related to our discontinued operations. We had
no revenues in the quarter.
LIQUIDITY AND CAPITAL RESOURCES
We had no cash on hand at September 30, 2004 compared to $-0- at June 30,
2004. We used approximately $-0- of cash for operations during the three months
ended September 30, 2004 compared to $-0- for the same period of 2003.
As of September 30, 2004, the Company had a working capital deficit of
$188,264.
Several of our shareholders have advanced funds and paid expenses on our
behalf during the three months ended September 30, 2004 in the amount of $4,768.
We expect that the shareholders will continue to make such advances until we
complete our acquisition of CCF.
In October 2004, the Company issued 108,750,000 post-split adjusted shares
to the holders of Promissory Notes valued at $108,754 in return for cancellation
of all of the principal and interest due on the Promissory Notes.
We estimate that existing sources of liquidity and the funds provided by
anticipated capital activity will not satisfy our projected working capital
requirements for the next twelve months. Our ability to maintain sufficient
liquidity for the next twelve months is dependent on our raising additional
capital and such capital may not be available on acceptable terms, if at all.
Additional financing may result in substantial and immediate dilution to
existing stockholders. If adequate funds are not available to satisfy either
short or long-term capital requirements, we may be required to curtail
operations significantly or to seek funds through arrangements with strategic
partners, existing investors or other parties.
ITEM 3. CONTROLS AND PROCEDURES
(A) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
As of the end of the period covered by this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's Principal Executive Officer/Principal Financial Officer (one person),
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. The Company's disclosure controls and procedures are
designed to provide a reasonable level of assurance of achieving the Company's
disclosure control objectives. The Company's Principal Executive
Officer/Principal Accounting Officer has concluded that the Company's disclosure
controls and procedures are, in fact, effective at this reasonable assurance
level as of the period covered.
(B) CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING
In connection with the evaluation of the Company's internal controls
during the quarter ended September 30, 2004, the Company's Principal Executive
Officer/Principal Financial Officer has determined that there are no changes to
the Company's internal controls over financial reporting that has materially
affected, or is reasonably likely to materially effect, the Company's internal
controls over financial reporting.
9
PART II - OTHER INFORMATION.
ITEM 1. LEGAL PROCEEDINGS.
We are not aware of any pending claims or assessments, that may have a
material adverse impact on Reward's financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES.
In October 2004, the Company issued 108,750,000 post-split adjusted shares
to holders of Promissory Notes valued at $108,754 in return for cancellation of
all principal and interest due on the Promissory Notes.
Effective October 13, 2004, the Company enacted a 1-for-10 reverse stock
split of its issued and outstanding shares and its authorized shares which
changed the issued and outstanding shares to 113,170,340 and its authorized
shares from five billion (5,000,000,000) to five hundred million (500,000,000).
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
(A) (2)EXHIBITS. The following exhibits are included as part of this
report:
EXHIBIT NUMBER TITLE OF DOCUMENT LOCATION
-------------- ------------------------------------------------------------------ ----------------
31.1 Certification by Chief Executive Officer Pursuant to 15 U.S.C.
Section 7241, as adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 Provided herewith
31.2 Certification by Chief Financial Officer Pursuant to 15 U.S.C.
Section 7241, as adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 Provided herewith
32.1 Certification by Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 Provided herewith
99.1 Letter of Intent Filed as an Exhibit
to the Company's
Form 8-K filed on
October 21, 2004
(b) Report on Form 8-K
On October 21, 2004, the Company filed a Form 8-K stating that on October
12, 2004, Reward Enterprises, Inc. signed a non-binding Letter of Intent to
acquire all of the outstanding shares of common stock of Consumers
10
Choice Financial Services, Inc., in exchange for the issuance of
300,000,000 split-adjusted shares of Reward Enterprises, Inc. common stock to
the current shareholders of Consumers Choice Financial Services, Inc.
11
SIGNATURES
In accordance with the requirements of the Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: November 15, 2004 REWARD ENTERPRISES, INC.
/s/ Earl Ingarfield
-----------------------------------
Earl Ingarfield
President, Chief Executive Officer,
Chief Financial Officer
12