UNITED STATES
SECURITIES AND EXCHANGE COMMISION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended December 31, 2001
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[] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
For the transition period from to
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Commission file number 1-14072
THE AMANDA COMPANY,INC.
(Exact name of small business issuer as specified in its charter)
UTAH 87-0430260
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(State or other jurisdiction of (I.R.S. Employer Identification No)
incorporation or organization)
13765 ALTON PARKWAY, SUITE F, IRVINE, CA
92618 (Address of Principal Executive
Offices) (Zip Code)
(949) 859-6279
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(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
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 .
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No .
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APPLICABLE ONLY TO CORPORATE ISSUERS
As of December 31, 2001 the issuer had 321,760,040 shares of its common
stock, par value $0.01 per share, issued and outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X .
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1
FORM 10-QSB
THE AMANDA COMPANY, INC.
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Financial Information 3
Balance Sheets at December 31, 2001
(unaudited) and September 30, 2001 (unaudited) 4-5
Statements of Operations for the three months
ended December 31, 2001 and 2000 (unaudited) 6
Statements of Cash Flows for the three months
ended December 31, 2001 and 2000 (unaudited) 7
Notes to Condensed Financial Statements (unaudited) 8-10
Item 2 Management's Discussion and Analysis or
Plan of Operation 10-12
PART II - OTHER INFORMATION
Item 1 Legal Proceedings 12
Item 2 Changes in the Securities and Use of Proceeds 12
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security Holders 12
Item 5 Other Information 13
Item 6(a). Exhibits 13
Item 6(b). Reports on Form 8-K 14
Signatures 13
2
THE AMANDA COMPANY, INC.
PART I
FINANCIAL INFORMATION
ITEM 1. INTERIM CONDENSED FINANCIAL STATEMENTS
On October 1, 2001, the registrant, formally known as Pen Interconnect,
Inc., merged with The Automatic Answer, Inc. ("tAA") and changed its name
to The Amanda Company, Inc. The transaction was accounted for as a reverse
merger with tAA as the surviving entity. Pen Interconnect, Inc., prior to
the merger, was a shell company with no operations.
The Amanda Company, Inc. (the "Company"), has included the unaudited
condensed balance sheet of the Company as of December 31, 2001 and
unaudited balance sheet as of September 30, 2001 (the Company's most recent
fiscal year), unaudited condensed statements of operations for the three
months ended December 31, 2001 and 2000, and unaudited condensed statements
of cash flows for the three months ended December 31, 2001 and 2000,
together with unaudited condensed notes thereto. In the opinion of
management of the Company, the financial statements reflect all
adjustments, all of which are normal recurring adjustments, considered
necessary to fairly present the financial condition, results of operations
and cash flows of the Company for the interim periods presented. The
financial statements included in this report on Form 10-QSB should be read
in conjunction with the audited financial statements of the Company and the
notes thereto included in the annual report of the Company on Form 10-KSB
for the year ended September 30, 2001. The results of operations for the
three months ended December 31, 2001 may not be indicative of the results
that may be expected for the year ending September 30, 2002.
3
THE AMANDA COMPANY, INC.
BALANCE SHEETS
ASSETS
December 31 September 30
2001 2001
-------------- --------------
(unaudited) (unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 69,247 $ 36,394
Accounts receivable, net 153,607 84,069
Other receivable 10,000 -
Inventory 168,396 172,617
Prepaid and other current assets 124,044 51,880
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Total current assets 525,294 344,960
PROPERTY AND EQUIPMENT, NET 24,608 33,020
SECURITY AND OTHER DEPOSITS 36,474 29,436
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Total assets $ 586,376 $ 407,416
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The accompanying notes are an integral part of these statements.
4
THE AMANDA COMPANY, INC.
BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' DEFICIT
December 31 September 30
2001 2001
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(unaudited) (unaudited)
CURRENT LIABILITIES
Accounts payable $ 1,093,766 $ 778,986
Accrued liabilities 510,636 1,198,496
Leasing financing payable 22,750 22,750
Notes payable 463,000 573,000
Deferred revenue 27,161 15,448
Convertible debentures 900,000 800,000
Accrued dividends payable 503,537 480,324
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Total current liabilities 3,520,850 3,869,004
LONG-TERM LIABILITIES
Lease financing payable 61,586 72,320
Convertible promissory notes 470,000 -
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Total long-term liabilities 531,586 72,320
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Total liabilities 4,052,436 3,941,324
STOCKHOLDERS' DEFICIT
Convertible Preferred stock, $0.01 par value
authorized 5,000,000 shares, Series A; issued
and outstanding 61 shares at December 31, 2001
and 91 shares at September 30, 2001. 1 1
Series B; issued and outstanding 746 shares
at December 31, 2001 and 926 shares at
September 30, 2001 7 9
Common stock, $.001 par value, issued and
outstanding 703,519,273 shares at December
31, 2001 and 687,789,599 shares at September
30, 2001 703,519 687,789
Accumulated deficit (4,169,588) (4,221,707)
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Total stockholders' deficit (3,466,061) (3,533,908)
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Total liabilities and stockholders' deficit $ 586,375 $ 407,416
============== ==============
The accompanying notes are an integral part of these statements.
5
THE AMANDA COMPANY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
December 31,
2001 2000
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Net sales $ 900,377 $ 1,086,227
Cost of sales 488,694 676,173
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Gross profit 411,683 410,054
Selling, general and administrative expenses 556,940 956,100
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Operating loss (145,257) (546,046)
Other income (expense)
Interest expense (37,860) (71,494)
Miscellaneous income, net 45,236 82,641
Loss on impairment - (63,000)
Loss from discontinued operations - (39,323)
Extinguishment of debt - 11,119
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Loss before extraordinary items (137,881) (626,103)
Merger costs (876,000) -
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Net loss before income taxes (1,013,881) (626,103)
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Income taxes - -
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Net loss $ (1,013,881) $ (626,103)
============== ==============
The accompanying notes are an integral part of these statements.
6
THE AMANDA COMPANY, INC.
STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,013,881) $ (626,103)
Adjustments to reconcile net cash provided
(used) in operating activities
Depreciation 8,412 27,194
Allowance for notes receivable - 63,000
Warrant/option compensation expense - 42,513
Common stock issued for compensation 1,081,729 50,022
Effect on cash of changes in operating
assets and liabilities:
Decrease (increase) in accounts receivable, net (69,538) 115,323
Decrease (increase) in other receiables (10,000) (37,020)
Decrease (increase) in inventory 4,221 (13,291)
Decrease (increase) in prepaid and
other current assets (72,164) 32,240
Decrease (increase) in security deposits (7,038) (4,492)
Increase (decrease) in accounts payable (300,442) (48,951)
Increase (decrease) in accrued expenses (9,424) 119,440
Increase (decrease) in advances payable (40,000) -
Increase (decrease) in deferred revenue 11,713 28,595
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Net cash provided (used) in operating activities (416,412) (251,530)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to perFORMplace - (63,000)
Issuance of notes receivable - (37,020)
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Net cash provided (used) in investing activities - (100,020)
CASH FLOWS FROM FINANCING ACTIVITITES:
Payments of notes payable (110,000) -
Payments of equipment financing (10,735) -
Proceeds from equipment financing - 97,591
Proceeds from notes payable - 240,698
Proceeds from convertible debenture 100,000 -
Proceeds from convertible promissory notes 470,000 -
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Net cash providec (used) in financing activities 449,265 338,289
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Net increase (decrease) in cash and cash equivalents 32,853 (13,261)
Cash and cash equivalents at beginning of period 36,394 48,783
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Cash and cash equivalents at end of period $ 69,247 $ 35,522
============== ==============
The accompanying notes are an intergral part of these statements.
7
The accompanying notes are an integral part of these statements.
Non-cash investing and financing activities
During the first quarter of FY2002 Series A preferred shareholders
converted 30 preferred shares into 2,941,176 common shares at an average
conversion price of $0.0102 per common share. Series B preferred
shareholders converted 150 preferred shares into 15,730,674 common shares
at an average conversion price of $0.0095 per common share. Under the
conversion terms of the convertible preferred shares, a holder has the
right to convert preferred shares into common shares at eighty-five (85%)
percent of the average of the two lowest closing bid prices during the last
twenty-two (22) consecutive trading days prior to conversion. As part of
the merger, the Company issued 50,000,000 shares of common stock with a
value of $876,000.
NOTE A - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company had a loss of
$1,013,881 for the quarter ended December 31, 2001, a deficit of $3,466,061
in stockholders' equity and negative working capital of $2,934,474 for the
period ended December 31, 2001. The Company intends to continue to raise
additional funds in the capital markets for working capital purposes. The
Company must raise additional capital in order to continue as a going
concern.
NOTE B - ACQUISITIONS/DISPOSITIONS
The Company completed its merger with the Automatic Answer Company (tAA) in
the quarter ended December 31, 2001. The merger was accounted for as a
reverse merger. The recapitalization of tAA, the surviving entity, resulted
in a reduction of $2,119,979 in stockholder's equity; $876,000 of which was
attributable to merger expenses and $1,243,979 resulting from the
assumption of the net deficit of the registrant.
NOTE C - OPTIONS TO PURCHASE COMMON STOCK
No options were exercised in the first quarter.
NOTE D - WARRANTS TO PURCHASE COMMON STOCK
No warrants were exercised in the first quarter.
NOTE E - OPTIONS/WARRANTS TO PURCHASE COMMON STOCK
No options or warrants were issued in the first quarter/
NOTE F - ACCRUED PREFERRED STOCK DIVIDENDS
The Company accrued $23,214 for dividends payable to preferred shareholders
during the quarter.
NOTE G - PREFERRED STOCK
The Company has issued two series of Preferred Stock. Series A was issued
in February 1999 consisting of 1,800 shares, par value $0.01 per share,
8
for $1,000 per share. Series B was issued in April 1999 at the same price
and par value but only 1,000 shares were issued. Both series of Preferred
Stock carry a 16 percent dividend rate, which is paid quarterly. If and
when the Company's stock is listed again on NASDAQ the dividend rate will
drop to 8 percent.
Both issuances of Preferred Stock are convertible into shares of the
Company's Common Stock. Each share of Series A Preferred Stock is
convertible into an amount of shares of Pen Common Stock equal to $1,000
divided by the average of the two lowest closing bid prices for Pen Common
Stock during the period of 22 consecutive trading days ending with the last
trading day before the date of conversion, after discounting that market
price by 15 percent (the "Conversion Price"). The maximum Conversion Price
for the Series A Preferred Stock is $1.17 per share. The shares of Series B
Preferred Stock are convertible into Common Stock at the same Conversion
Price as the Series A Preferred Stock except for a maximum Conversion Price
of $0.79 per share. Warrants to acquire 320,000 shares of Common Stock at
prices ranging from $0.86 to $1.28 per share were also issued to the
purchasers of the Series A and Series B Preferred Stock. The Warrants
expire three years from date the Preferred Stock and warrants were
initially issued.
NOTE H - CONVERTIBLE DEBENTURE
In the first quarter ended December 31, 2001 the Company issued $100,000 in
one year convertible debentures with interest at eight (8) percent, payable
quarterly. These debentures are convertible into the Company's common stock
at the lower of $.04 or 70% of the average of the three lowest closing
prices during the 30 days prior to the conversion. These debentures are due
one year from the date of the issuance.
NOTE I - CONVERTIBLE PROMISSORY NOTE
In the first quarter ended December 31, 2001 the Company issued a
convertible promissory note totaling $450,000 at an interest rate of eight
(8) percent per annum. These notes are convertible into the Company's
common stock at $.01 per share and a 8,055,853 warrant exercisable for
common stock at $.02 per share and 1,500,000 warrants at $.01 per share.
Note J - EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per common share is computed by dividing net earnings
(loss) available to common shareholders by the weighted average number of
common shares outstanding during each period. Diluted earnings (loss) per
common share are similarly calculated, except that the weighted average
number of common shares outstanding includes common shares that may be
issued subject to existing rights with dilutive potential except for
periods when such calculations would be anti-dilutive.
For the three ended December 31, 2001, net earnings (loss) attributable to
common shareholders includes accrued dividends at the stated dividend rate
from date of issuance and a non-cash imputed dividend to the preferred
shareholders related to the beneficial conversion feature on the 1999
Series A and B Preferred Stock and related warrants. The beneficial
conversion feature is computed as the difference between the market value
of the common stock into which the Series A and B Preferred Stock can be
converted and the value assigned to the Series A and B Preferred Stock in
9
the private placement. The imputed dividend is a one-time non-cash charge
against the earnings (loss) per common share. The calculation of earnings
(loss) per share is included in Exhibit 11.
NOTE K - INTERIM PERIOD COST OF GOODS SOLD
Inventory costing is based on specific identification. An inventory count
is taken at the end of each quarter.
NOTE L - INCOME TAXES
The future benefits of loss carried forward are fully reserved. There were
no income taxes during the quarter.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS. This report contains certain forward-looking
statements within the meaning of section 27A of the Securities Act of 1933
as amended, and section 21E of the Securities Exchange Act of 1934, as
amended, that involve risks and uncertainties. In addition, the Company may
from time to time make oral forward-looking statements. Actual results are
uncertain and may be impacted by the following factors. In particular,
certain risks and uncertainties that may impact the accuracy of the
forward-looking statements with respect to revenues, expenses and operating
results include without limitation, cycles of customer orders, general
economic and competitive conditions and changing consumer trends,
technological advances and the number and timing of new product
introductions, shipments of products and components from foreign suppliers,
and changes in the mix of products ordered by customers. As a result, the
actual results may differ materially from those projected in the
forward-looking statements.
Because of these and other factors that may affect the Company's operating
results, past financial performance should not be considered an indicator
of future performance, and investors should not use historical trends to
anticipate results or trends in future periods.
The following discussion and analysis provides certain information which
the Company's management believes is relevant to an assessment and
understanding of the Company's results of operations and financial
condition for the three months ended December 31, 2001 and 2000. This
discussion should be read in conjunction with the audited financial
statements of the Company and notes thereto included in the Annual Report
of the Company on Form 10-KSB for the year ended September 30, 2001.
General
There were no sales from continuing operations for the quarter ended
December30, 2000. All operating divisions were disposed of during 1999 and
2000, and all operating activity was reclassified as discontinued
operations. Since March 2, 2000, the Company decided to maintain its'
situation as a reporting public company, and to reduce its' debt in order
to make the Company attractive to private companies that would want to use
10
Pen to go public. This approach would be a major step to possibly help to
maintain some shareholder value in the Company's stock price.
The Company did enter into a Letter of Intent to reverse merge with a small
private .com company, perFORMplace.com, in the entertainment services
business. A definitive agreement was signed in late August 2000 with the
intent to obtain shareholder ratification at the next shareholders'
meeting. However, on November 8, 2000, before the meeting could be held,
perFORMplace.com terminated the merger.
On October 1, 2001, the Company completed a reverse merger with tAA. tAA is
the surviving entity for accounting purposes. The following discussion is
based upon the merged activities of both companies for all periods
presented.
Net sales. Net sales for the Company decreased $185,850 or approximately 17
percent for the three month period ended December 31, 2001, as compared to
the same period in the prior year. The Company believes that the economic
conditions after September 11, 2001 have contributed significantly to the
decline in revenues. Prior to September 11, 2001, the Company was achieving
higher monthly sales revenues.
Cost of sales. Cost of sales as a percentage of net sales decreased to 54%
of net sales as compared to 62% for the same period in the prior year. The
decrease resulted from the increase in the shipment of higher gross profit
margin products; along with a reduction in shipping costs due to improved
inventory control and production processes.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased by $399,160 or approximately 42% from the
three month period ended December 31, 2001 as compared to the same period
in the prior year. The decrease is due (1) the reduction in salaries,
payroll taxes and related employee expenses paid in the current quarter as
compared to the prior year due a reduction in personnel. (2) In June 2001,
the operations of Pen Interconnect were relocated to the offices of the
Automatic Answer, Inc. (tAA). The relocation resulted in the termination of
the remaining Pen employees as salaried employees, along with a reduction
in operating expenses. (3) The Automatic Answer Company moved it offices
from San Juan Capistrano, CA to Irvine, CA thereby reducing monthly rent
expense for the quarter ended December 31, 2001 by approximately $15,000;
and (4) the Company has made a concerted effort to eliminate any on-going
expenses that were not relative to producing revenue or profit for the
Company.
Other income and expenses. The net decrease in other income and expenses
for the quarter ended December 31, 2001 amounted to $87,433. In the same
period in the prior year the Company incurred a loss on impairment of
$63,000 and a loss from discontinued operations of $39,323. There were no
comparable losses in the current quarter.
Extraordinary costs. The Company recorded costs of $876,000 for the quarter
ended December 31, 2001. These costs are associated with the merger between
Pen Interconnect, Inc. and the Automatic Answer, Inc. (tAA).
11
Net earnings (loss) and earnings (loss) per share. Net loss for the first
fiscal quarter ended December 31, 2001 totaled ($1,013,881) or ($0.00) per
share, compared with losses of ($626,103) or ($0.00) per share for the
first fiscal quarter of FY 2000.
Liquidity and Capital Resources
During the first three months of FY 2001 the Company sustained losses of
$1,013,881. As a result of these losses the Company raised additional
working capital through the issuance of Convertible Debentures ($100,000)
and Convertible Promissory Notes ($450,000).
Inflation and Seasonality
The Company does not believe that it is significantly impacted by inflation
or seasonally.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time the Company has been a party to various legal
proceedings arising in the ordinary course of business
1. On October 28, 1999 Color Savvy Systems, Ltd., filed suit to
recover $165,750 in past due uncontested vendor obligations.
On February 16, 2000, Color Savvy obtained a judgment against
the Company for $165,750.
2. On February 15, 2000, Amistar Corporation filed suit against
the Company to recover $95,733 in uncontested past due vendor
obligations. As of this writing, Amistar has accepted the
Company's stock for debt offer.
3. On March 21, 2000, Interworks Computer Products, Inc., filed
suit to recover $35,771 in past due uncontested vendor
obligations. Settled in January 2001.
4. On July 22, 2000, Force Electronics filed suit to recover
$68,816 in past due uncontested vendor obligations, and
obtained a judgment on September 15, 2000. Settled in January
2001.
5. Control Design Supply/Nedco filed suit to recover $6,788 in
past due uncontested vendor obligations. Settled in January
2001.
6. On March 20, 2000, DHL Airways Inc. obtained a judgment in the
amount of $3,868 for past due uncontested vendor obligation.
7. In January 2001 Fidelity Leasing, Inc. filed suit to recover
$26,608.91 and obtained a judgment for uncontested past due
lease obligations. Settled in February 2001.
12
On November 15, 1999, Alan L. Weaver, former CEO of Pen Interconnect, Inc.,
obtained a judgment against the Company in the amount of $135,300 for
breach of a settlement agreement relative to Mr. Weavers' employment
agreement with the Company. The Company has reserved $135,300 as a
contingent liability as of September 30, 2000 for this agreement.
Item 2. Changes in the Securities and Use of Proceeds.
Item 4. Submission of Matters to a Vote of Security Holders.
None during the quarter.
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
Reports on Form 8-K were filed by the company during the three months Ended
December 31, 2001.
A. Exhibits
11 Calculation of earnings (loss) per share.
27 Financial Data Schedule.
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.
THE AMANDA COMPANY, INC..
February 14, 2002 By: /s/ Jose M. Candia
-----------------------
Jose M. Candia,
CEO and President
13
THE AMANDA COMPANY, INC.
CALCULATION OF EARNINGS (LOSS) PER SHARE
FOR THE THREE MONTHS ENDED
DECEMBER 31, 2001 AND 2000
2001 2000
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Loss attributable to common shareholders $ (1,036,595) $ (668,334)
Basic EPS
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Common shares outstanding entire period 687,788,599 607,531,220
Weighted average common shares issued
during the period 4,419,576 1,478,291
--------------- --------------
Weighted average common shares outstanding
during the period 692,208,175 609,009,511
Loss per common share - basic $ 0.00 $ 0.00
=============== ==============
14