10-Q 1 network020899_10q.txt NETWORK CAPITAL, INC. FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ___X___ Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the quarterly period ended DECEMBER 31, 2001 Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 (No Fee Required) For the transition period from __________________ to __________________ Commission file number ------------------------------------------------ NETWORK CAPITAL, INC. --------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) Minnesota 41-0829057 ------------------------------- ---------------------- (State or Other Jurisdiction of (IRS Employer ID Number) Incorporation or Organization) 5805 West 61st Street, Edina, MN 55436 -------------------------------------- (Address of Principal Executive Offices) 612-927-8033 ------------ (Issuer's Telephone Number Including Area Code) --------------------------------------------------------------------- (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 Securities 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 _______ Number of shares outstanding as of February 14, 2002: 4,220,000 Documents incorporated by reference: None. INDEX NETWORK CAPITAL, INC. PART I. FINANCIAL INFORMATION Page ---- Item 1. Financial Statements (Unaudited). Condensed balance sheets as of December 31, 2001 and March 31, 2001 2 Condensed statements of operations for the three months and nine months ended December 31, 2001 and 2000 3 Condensed statements of cash flow for the nine months ended December 31, 2001 and 2000 4 Notes to condensed financial statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 9 Item 6. Exhibits and Reports on Form 8-K 9 SIGNATURES Item 1. Financial Statements (Unaudited) NETWORK CAPITAL, INC. (A Development Stage Company) BALANCE SHEETS (Unaudited)

See notes to financial statements. NETWORK CAPITAL, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS (Unaudited)

See notes to financial statements. NETWORK CAPITAL, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS Increase (Decrease) In Cash (Unaudited)

See notes to financial statements. NETWORK CAPITAL, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions 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 nine-month period ended December 31, 2001 are not necessarily indicative of the results that may be expected for the year ended March 31, 2002. For further information, refer to the financial statements and footnotes thereto included in the Company's summary report for the period ended March 31, 2001. Nature of Business The Company was incorporated on May 19, 1959, under the laws of the State of Minnesota. On January 23, 1997, the Company changed its name to Network Capital, Inc. Formerly the Company was known as Eagle Holdings, Inc. In September 1991, the Company transferred its operations into Iowa Dirt Farms Ltd. Partnership of Minnesota (Iowa Dirt Farms) for a 37.5% general partner interest in this partnership. After that date the Company operated as a holding company. With Iowa Dirt Farms filing of a voluntary bankruptcy petition on October 23, 1993 under Chapter 7 of the U.S. Bankruptcy Code and its ultimate liquidation on February 22, 1995, the Company ceased to have operations. Effective April 1, 1995 the Company was deemed to have reentered the development stage. In 1999, the Company attempted to merge with an operating company. The operating company did not comply with terms of the merger agreement and the merger was terminated. In 2000, the Company had preliminary negotiations with an operating entity, but these negotiations did not result in an agreement to merge. The Company currently has no operations. The Company continues to search for an appropriate merger candidate. (Continued) NETWORK CAPITAL, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Risks, Estimates and Uncertainties Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Earnings Per Share The Company implemented FASB 128: Earnings Per Share. FASB 128 replaces the presentation of primary EPS with basic EPS. Basic EPS excludes dilution and is computed by dividing net income by the weighted-average number of common shares outstanding for the year. Diluted EPS reflects the potential dilution from stock options and warrants and is computed using the treasury stock method. Under the treasury stock method stock options are assumed to have been exercised at the beginning of the period if the exercise price exceeds the average market price during the period. The computation of diluted EPS does not assume conversion or exercise of securities that would have an antidilutive effect on earnings per share. Stock-Based Consideration The Company has applied the fair value-based method of accounting for employee and nonemployee stock-based consideration and/or compensation in accordance with FASB Statement 123. Income Taxes The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" which requires the use of the "liability method" of accounting for income taxes. (Continued) NETWORK CAPITAL, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes (Continued) The Company's net operating loss carryforwards are fully allowed for due to questions regarding the Company's ability to utilize these losses before they expire. Deferred tax asset relating to net operating loss carryforwards $ 78,000 Valuation allowance (78,000) ----------- Net deferred tax asset $ -- =========== At December 31, 2000, the Company has carryforwards as follows: Federal State ----------- ----------- 2006 $ 42,000 $ 42,000 2007 179,000 151,000 2008 44,000 -- 2009 30,000 -- 2010 85,000 85,000 2011 -- -- 2012 4,000 4,000 2013 -- -- 2014 -- -- 2015 5,000 5,000 ----------- ----------- $ 389,000 $ 287,000 =========== =========== (Continued) NETWORK CAPITAL, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) NOTE 2 - DEVELOPMENT STAGE COMPANY On April 1, 1995, the Company was deemed to have reentered the development stage. Since that date the Company has devoted the majority of its efforts to: maintenance of the corporate status; raising capital; and the search for a merger candidate. The Company is fully dependent upon the support of certain stockholder(s) for the maintenance of its corporate status and to provide all working capital support for the Company. These stockholder(s) intend to continue to fund necessary expenses to sustain the Company. The Company is presently seeking a merger candidate and feels it will be successful in finding such a candidate. Failure of the Company to find a merger candidate and achieve profitable operations or the failure of its stockholder(s) to fund necessary expenses of the Company could result in the Company being unable to continue as a going concern. No estimate can be made of the range of loss that is reasonably possible should the Company be unsuccessful. (Continued) NETWORK CAPITAL, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Business Overview: The ultimate success of the Company is now dependent on the success of management finding and executing a merger with an entity that is successful in its subsequent operations. Liquidity and Capital Resources: To date the Company has been fully dependent upon the support of certain stockholders for the maintenance of the corporate status, development efforts and working capital support. These stockholders have indicated an intent to continue to fund expenses to sustain the Company. It is almost certain that the Company will be required to raise additional debt or equity financing to maintain the Company until profitable operations can be achieved. (Continued) NETWORK CAPITAL, INC. PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not involved in any legal proceedings. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K There are no exhibits and the Company did not file any reports on Form 8-K for the three months ended December 31, 2001. 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. SPIDERBOY INTERNATIONAL, INC. By: /s/ Bruce A. Cairney ------------------------- Bruce A. Cairney Dated February 19, 2002

NETWORK CAPITAL INC 10-Q