U.S. 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 December 31, 2004
|_| 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 0-14869
REWARD ENTERPRISES, INC.
(Exact Name of Registrant as specified in its charter)
NEVADA 87-0631750
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
202 N. CURRY STREET, CARSON CITY, NEVADA 89701-4124
(Address of Principal Executive Offices) (Zip Code)
(713) 937-1117 Registrant's telephone number, including area code
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 a registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes |X| No |_|
State the number of shares outstanding of the issuer's common equity:
$0.001 par value, as of December 31, 2004, was 493,166,224.
Transitional Small Business Disclosure Format. Yes |_| No |X|
Report on Form 10-QSB
For the Quarter Ended December 31, 2004
INDEX
PART I - FINANCIAL INFORMATION............................................... 1
Item 1. Management's Discussion and Analysis of Financial
Condition or Plan of Operations.............................. 6
Item 3. Controls and Procedures......................................... 7
PART II - OTHER INFORMATION.................................................. 8
Item 1. Legal Proceedings............................................... 8
Item 2. Changes in Securities........................................... 8
Item 3. Defaults Upon Senior Securities................................. 8
Item 4. Submission of Matters to a Vote of Security Holders............. 8
Item 5. Other Information............................................... 8
Item 6. Exhibits and Reports on Form 8-K................................ 8
SIGNATURES................................................................ 9
EXHIBIT 31.2................................................................. 1
EXHIBIT 32.2................................................................. 2
REWARD ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND JUNE 30, 2004
REWARD ENTERPRISES, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
December 31, June 30,
2004 2004
----------- -----------
(Unaudited)
CURRENT ASSETS
Cash $ -- $ --
Total Current Assets -- --
TOTAL ASSETS $ -- $ --
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 59,989 $ 68,057
Accounts payable - related parties 60,079 --
Interest payable -- 21,342
Notes payable, net of discount -- 81,500
----------- -----------
Total Current Liabilities 120,068 170,899
----------- -----------
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: 500,000,000 shares authorized of
$0.001 par value, 493,166,224 and 4,412,200 shares
issued and outstanding, respectively 493,166 4,412
Additional paid-in capital 2,934,643 3,314,643
Accumulated deficit prior to development stage (3,434,726) (3,434,726)
Accumulated deficit during the development stage (113,151) (55,228)
----------- -----------
Total Stockholders' Equity (Deficit) (120,068) (170,899)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT) $ -- $ --
=========== ===========
The accompanying condensed notes are an integral part of the financial
statements.
1
REWARD ENTERPRISES, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
From
Inception
Development
Stage
On January 1,
For the Six Months Ended For the Three Months Ended 2004 Through
December 31, December 31, December 31,
2004 2003 2004 2003 2004
------------- ------------- ------------- ------------- -------------
REVENUES $ -- $ -- $ -- $ -- $ --
------------- ------------- ------------- ------------- -------------
EXPENSES
General and administrative 52,011 -- 40,558 -- 101,635
------------- ------------- ------------- ------------- -------------
Total Expenses 52,011 -- 40,558 -- 101,635
------------- ------------- ------------- ------------- -------------
LOSS FROM OPERATIONS (52,011) -- (40,558) -- (101,635)
------------- ------------- ------------- ------------- -------------
OTHER (EXPENSES)
Interest expense (5,912) -- -- -- (11,516)
------------- ------------- ------------- ------------- -------------
Total Other (Expense) (5,912) -- -- -- (11,516)
------------- ------------- ------------- ------------- -------------
LOSS BEFORE DISCONTINUED
OPERATIONS (57,923) -- (40,558) -- (113,151)
------------- ------------- ------------- ------------- -------------
NET LOSS FROM DISCONTINUED
OPERATIONS -- (120,641) -- (52,944) --
------------- ------------- ------------- ------------- -------------
NET LOSS $ (57,923) $ (120,641) $ (40,558) $ (52,944) $ (113,151)
============= ============= ============= ============= =============
BASIC LOSS PER SHARE OF
COMMON STOCK $ (0.00) $ (0.03) $ (0.00) $ (0.01)
============= ============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 248,789,212 4,412,000 493,166,224 4,412,200
============= ============= ============= ============= =============
The accompanying condensed notes are an integral part of the financial
statements.
2
REWARD ENTERPRISES, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
From
Inception of
Development
Stage
For the Six Months Ended On January 1,
December 31, 2004 Through
---------------------------- December 31,
2004 2003 2004
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (57,923) $(120,641) $(113,151)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Discontinued operations -- 120,641 --
Changes in operating assets and liabilities:
Increase in accounts payable-related parties 60,079 -- 60,079
Increase (decrease) in accounts payable and accrued liabilities (2,156) -- 53,072
Net Cash Provided (Used) by Operating Activities -- -- --
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES -- -- --
CASH FLOWS FROM FINANCING ACTIVITIES -- -- --
A. NET INCREASE (DECREASE) IN CASH -- -- --
--------- --------- ---------
CASH AT BEGINNING OF PERIOD -- -- --
--------- --------- ---------
CASH AT END OF PERIOD $ -- $ -- $ --
========= ========= =========
CASH PAID FOR:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
The accompanying condensed notes are an integral part of the financial
statements.
3
REWARD ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 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 and six months
ended December 31, 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 may not 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. SHARE EXCHANGE
On November 23, 2004, the Company and the shareholders of Consumer Choice
Financial Services, Inc., (CCF) a Nevada corporation, completed a share exchange
whereby CCF shareholders delivered 100% ownership interest in CCF in exchange
for 380,000,000 restricted shares in the Company. The acquisition of CCF
resulted in the shareholders of CCF becoming the controlling shareholders of the
Company. CCF is a newly formed corporation with no assets, liabilities or
operations, and accordingly the acquisition of CCF was recorded at the
predecessor cost to its shareholders which is approximately nothing. This
acquisition is being accounted for as a merger whereby the operating company,
Reward Enterprises, Inc. is the continuing entity for all accounting purposes.
This transfer resulted in a reclassification of $380,000 from prior additional
paid in capital to common stock for accounting purposes. (See Note 6)
4
REWARD ENTERPRISES, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND JUNE 30, 2004
NOTE 4. CK SPLIT
Effective October 13, 2004 the Company enacted a 1-for-10 reverse split of its
issued and outstanding shares and its authorized shares of common stock which
changed the issued and outstanding shares to 113,170,534 shares and its
authorized shares of common stock 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.
NOTE 5. ELATED PARTY TRANSACTIONS
As of December 31, 2004, the Company owed related parties $60,079 for amounts
advanced to the Company to cover operating expenses.
NOTE 6. COMMON STOCK
On November 23, 2004 the Company and the shareholders of Consumer Choice
Financial Services, Inc. (CCF) a Nevada corporation, completed a share exchange
whereby CCF shareholders delivered 100% ownership interest in CCF in exchange
for 380,000,000 restricted shares in the Company valued at par of $0.001. (See
Note 3)
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 at
a par value of $0.001 per share.
NOTE 7. SUBSEQUENT EVENTS
On February 22, 2005 the Company entered into a joint venture to begin
operations of a consumer debt buying operation to be named Consumers Solutions,
Inc. The Company shall create a majority owned subsidiary and retain 70% of the
subsidiary. Bennet Blow, who will operate the subsidiary will retain a 30%
ownership of the subsidiary.
Terms of the agreement call for Mr. Blow to provide offices, personnel and
equipment for operating the business and for the Company to provide funds to
purchase debt parcels.
5
PART I - FINANCIAL INFORMATION
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, or
our industry'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, our
future results, levels of activity, performance or achievements may be different
from these statements.
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 may not 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
BUSINESS OVERVIEW
The Company's goal is 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
completed a share exchange transaction with Consumers Choice Financial Services,
Inc. of Houston, TX ("CCF") that is expected to 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 intends to 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 it's application for a limited services
credit card bank to the State of South Dakota banking commission for approval at
the commission's May 10, 2005 regularly scheduled meeting. With charter
approval, CCF would market a banded MasterCard/VISA credit card to its targeted
customers.
The Company has entered into a joint venture to begin operations of a
consumer debt purchasing operation. The Company shall create a majority owned
subsidiary, and retain 70% of the subsidiary. Bennet Blow, who will operate the
subsidiary, will retain 30% of the subsidiary.
6
We expect that we need approximately $150,000 over the next 12 month
period. Without adequate funding the planned product will not become available.
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 may not be able to secure the funding.
RESULTS OF OPERATIONS
Net losses for the quarter ended December 31, 2004 were $40,558, as
compared to $52,944 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 $0.01 per share
for the same period in 2003. Our expenses in 2004 were primarily 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.
Net losses for the six months ended December 31, 2004 were $57,923, as
compared to $120,641 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 $0.03 per share
for the same period in 2003. Our expenses in 2004 were primarily 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 six month
period.
LIQUIDITY AND CAPITAL RESOURCES
We had no cash on hand at December 31, 2004 compared to $-0- at June 30,
2004. We used approximately $-0- of cash for operations during the six months
ended September 30, 2004 compared to $-0- for the same period of 2003.
We had no investing or financing for the six month periods ending December
31, 2004 or 2003.
Several of our shareholders have advanced funds and paid expenses on our
behalf during the six months ended December 31, 2004 in the amount of $60,079.
We expect that the shareholders will continue to make such advances until CCF
has sufficient operating capital to pay its own costs.
We estimate that existing sources of liquidity and the funds provided by
anticipated capital activity will not satisfy our projected working capital
requirements through fiscal 2004. Our ability to maintain sufficient liquidity
through fiscal 2004 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 December 31, 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.
7
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
On October 31, 2004, the Company enacted a 1-for-10 reverse split of its
issued and outstanding, and authorized shares of common stock. As a result, the
Company's authorized shares were reduced from Five Billion (5,000,000,000) to
Five Hundred Million (500,000,000) and the issued and outstanding shares of
common stock were reduced from 1,131,705,340 to 113,179,534.
On November 23, 2004 the Company and the shareholders of Consumer Choice
Financial Services, Inc. (CCF) a Nevada corporation, completed a share exchange
whereby CCF shareholders delivered 100% ownership interest in CCF in exchange
for 380,000,000 restricted shares in the Company valued at par of $0.001.
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 at
a par value of $0.001 per share.
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
EXHIBIT NO. DESCRIPTION
--------------------------------------------------------------------------------
Exhibit 31.1 Certification of C.E.O. Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Exhibit 31.2 Certification of Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Certification of C.E.O. and Principal Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
(b) Report on Form 8-K
A current report on Form 8-K was filed o February 15, 2005 relating to the
consummation of the share exchange agreement between the Company and CCF.
8
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.
Date: February 22, 2005 REWARD ENTERPRISES, INC.
/s/ Jeff Fisher
---------------------------------------------
President, Chief Executive Officer
Principal Financial Officer and Sole Director
9