U.S. Securities and Exchange Commission
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 quarter ended September 30, 2000
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
Commission file number 0-25037
stereoscape.com, inc.
(Name of small business issuer in its charter)
Nevada 06-1469654
(State or other jurisdiction
of incorporation or organization) (IRS Employer identification no.)
3440 Highway 9 South, Freehold, New Jersey 07728
(Address of principal executive offices)
(732) 462-7767
(Issuer's telephone number)
---------------------------------
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.........
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS
Check whether the registrant 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 ....... N/A
APPLICABLE ONLY TO CORPORATE ISSUERS
Number of shares outstanding of each of the issuer's classes of common
equity as of September 30, 2000.
Title of Each Class Number of Shares Outstanding
Common Stock, $.001 par value per share 102,728,620
stereoscape.com, inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, 2000
ASSETS
Current Assets:
Cash $ 439,751
Inventories 149,312
Note receivable 84,374
----------
Total Current Assets 673,437
Property and Equipment - Net 8,734
Other assets 250,000
TOTAL ASSETS $ 932,171
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 196,198
Customer deposits and other advances 186,685
Note payable 9,500
Payroll and sales tax payable 57,358
----------
Total Current Liabilities $ 449,741
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Common Stock
Par value $.001 - 200,000,000 shares authorized,
102,728,620 shares issued and outstanding 102,729
Additional paid in capital 1,445,711
Deficit (1,066,010)
-----------
Total Stockholders' Equity 482,430
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 932,171
===========
See notes to the consolidated financial statements (unaudited).
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stereoscape.com, inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
2000 1999 2000 1999
-------------------------------------------
Sales $441,702 $974,428 $1,743,639 $3,060,171
Cost of sales 434,494 698,706 1,472,911 2,295,026
-------------------------------------------
Gross profit (loss) 7,208 275,722 270,728 765,145
Selling, General and Administrative 114,999 269,550 586,087 753,953
-------------------------------------------
Net Earnings (loss) $(107,791) $6,172 $(315,359) $11,192
===========================================
LOSS PER COMMON SHARE
BASIC AND DILUTED
Net Earnings (loss) $0.00 $0.00 $0.00 $0.00
Weighted average number of
shares used in computation 82,872,585 42,094,905 63,103,875 41,592,840
See notes to the consolidated financial statements (unaudited).
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stereoscape.com, inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended
September 30,
2000 1999
-------------------------------------
Cash flows from operating activities:
Net earnings (loss) $ (315,359) $ 11,192
Adjustments to reconcile net loss to net
cash used in operations:
Depreciation and amortization 2,839 1,188
(Increase) decrease in operating assets:
Charge card receivables 10,965 903
Inventories 103,867 (14,024)
Notes receivable (84,374) 0
Other current assets 42,256 (7,495)
Increase (decrease) in operating liabilities:
Accounts payable (315,711) 68,239
Customer deposits and advances (179,212) (207,918)
Payroll and sales taxes payable 57,358 75,226
Net cash used in operating activities (677,371) (72,689)
-------------------------------------
Cash flow from investing activities:
Acquisition of intellectual properties (250,000) 0
Purchase of fixed assets 0 (4,262)
-------------------------------------
Net cash used in investing activities (250,000) (4,262)
-------------------------------------
Cash flow from financing activities:
Issuance of capital stock 1,354,065 82,527
Proceeds from (repayment of) loan payable 9,500 (8,117)
-------------------------------------
Net cash provided by financing activities 1,363,565 74,410
-------------------------------------
(Decrease) increase in cash 436,194 (2,541)
Cash at beginning of period 3,557 3,608
-------------------------------------
Cash at end of period $ 439,751 $ 1,067
=====================================
Supplemental disclosure of cash flow information:
Interest paid $ 7,557 $ 1,854
See notes to the consolidated financial statements (unaudited).
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stereoscape.com, inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
stereoscape.com, inc. (the "Company") was established in 1988 under the
name Alliance Health Enterprises, Inc. In December of 1998 the Company's Board
of Directors approved a change in the Company's name from Alliance Technologies,
Inc. and prior to that, in April 1997 the name was changed to Alliance
Technologies, Inc. at which time the Company acquired American Buyers Club
International, Inc. ("ABC"). In April, 1997 ABC formed Alpha Sound and Vision,
Inc. as a wholly owned subsidiary. In August 2000 the Company entered into an
agreement to purchase the stock of epiggybank.com, inc., a financial and
educational web sight that instructs kids.
PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. All material intercompany balances are
eliminated.
INVENTORIES
Inventories are stated at the lower of cost or market as determined by the
first-in, first-out method.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization is computed utilizing the straight-line
method over the estimated useful lives of the related assets, which range
between three and fifteen years. The Company will access the recoverability of
fixed assets and intangible assets based on existing facts and circumstances.
They will project undiscounted cash flows generated by such fixed assets. Should
the Company assessment indicate impairment, an appropriate write down will be
recorded on a discounted cash flow basis.
REVENUE RECOGNITION
Revenues are realized upon shipment of product.
ADVERTISING COSTS
The Company expenses production costs of print, radio and television
advertisements as of the first date the advertisements take place. All other
advertising costs are expensed as incurred.
EARNINGS PER COMMON SHARE
In accordance with SFAS 128 basic earnings per share has been computed
based upon the weighted number of common shares outstanding during the period.
Diluted earnings per share do not reflect the potential dilution that could
occur if securities or other contracts to issue common shares were exercised or
converted into common shares or resulted in the issuance of common shares as the
impact of such would be antidilutive, given the net losses incurred. The
financial statements reflect share amounts after giving effect to a forward
stock split of fifteen for one, effective on September 29, 2000.
5
stereoscape.com, inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
CASH EQUIVALENTS
For purposes of statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less when
purchased to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than a forced sale or liquidation. Significant differences can arise
between the fair value and carrying amount of financial instruments that are
recognized at historical cost amounts.
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 the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
WARRANTY
The Company sells its products with the manufacturer's factory or Alpha's
company warranty. In addition, the Company offers extended warranties, at an
additional cost. The extended warranties are underwritten by a third party, for
which the Company pays a fixed fee.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities ("SFAS No. 133"). SFAS No. 133 applies to all entities
and to all types of derivatives, and is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The adoption of SFAS No. 133 in not
expected to materially affect the financial position or results of operations of
the Company.
Effective in 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS No. 130"). The Company,
at this time, has no items of comprehensive income other than net income.
The Company adopted Statement Financial Accounting Standard No.131,
Disclosures about Segments of an Enterprise and Related Information (SFAS 131),
in 1998. The Company's chief operating decision maker is the Chief Executive
Officer. There is currently only one operating segment in the Company, therefore
there is no segment information to report.
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stereoscape.com, inc. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2 -- CUSTOMER DEPOSITS AND OTHER ADVANCES
At September 30, 2000 the Company had $64,285 in customer deposits, which
represent payments made to the Company by credit card or check for the
merchandise that had not been shipped as of that date. In addition, at September
30, 2000 the Company had $122,400 in customers refunds payable, respectively,
which represents an amount owed to customers for returned merchandise or
cancelled orders.
NOTE 3 - FIXED ASSETS, at cost
Depreciation and amortization is computed utilizing the straight-line
method over the estimated useful lives of the related assets, which range
between three and five years.
Fixed assets consists of the following at September 30, 2000:
Furniture and fixtures $ 9,410
Hardware and software costs 14,687
----------
24,097
Less-accumulated depreciation (15,362)
----------
$ 8,734
==========
Note 4 - RECENT SALE OF UNREGISTERED SECURITIES
On February 18, 2000, the Company sold 120,000 unregistered shares of the
Company's common stock. The shares were sold to an accredited investor at $0.50
per share. Total net proceeds were $60,000 for which no commission or broker fee
was paid.
On March 28, 2000, the Company sold 12,500 unregistered shares of the
Company's common stock. The shares were sold to an accredited investor at $2.00
per share. Total net proceeds were $25,000 for which no commission or broker fee
was paid.
The Company intended that the shares should be exempt from registration
under the Securities Act by virtue of Section 4(2) and/or Section 4(6) of the
Securities Act and the provisions of Regulation D promulgated thereunder.
Note 5 - ACQUISITION OF OTHER ASSETS
On August 23, 2000, pursuant to an agreement, the Company purchased the
stock of Epiggybank.com, inc., a financial web sight. In exchange for 500,000
shares of the Company's common stock they will receive the rights, trademarks
and development of epiggybank.com, inc.
Note 6 - SUBSEQUENT EVENTS
The Company has entered into an agreement, in principle, to acquire Marx
Toys, Inc., once one of the largest toy manufacturers in the world. The
transaction is subject to the execution of a definitive agreement.
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Item 2. Management's Discussion and Analysis or Plan of Operation
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the Consolidated Unaudited
Financial Statements and related notes which are contained in Item 1 herein.
Results of operations for stereoscape.com, inc. and subsidiary are being
presented on a consolidated basis.
Quarter Ended September 30, 2000 Compared to Quarter Ended September 30,
1999
Net sales for the quarter ended September 30, 2000 decreased
54.7% to $441,702 from $974,428 for the quarter ended September 30, 1999.
The decrease was the result of the restructuring, by new management, to
eliminate lower margin sales and markdown of old inventory. In addition, sales
decreased due to a slowdown in the economy, which effected the sale of high
priced, discretionary items.
Gross profit (loss) for the quarter ended September 30, 2000 decreased
97.4% to $7,208 from $275,722 for the quarter ended September 30, 1999. As a
percentage of net sales, gross profit decreased to 1.6% in the 2000 period
compared to 28.3% in the 1999 period. The decrease was primarily the result of
liquidation of inventory and the decrease in sales.
Selling, general and administrative expenses for quarter ended September
30, 2000 decreased 57.3% to $114,999 from $269,550 for the quarter ended
September 30, 1999. The decrease in selling, general and administrative expenses
consisted primarily of cost cutting measures initiated by new senior management.
Net losses for the quarter ended September 30, 2000 increased to a loss of
($107,791) compared to earnings of $6,172 for the quarter ended September 30,
1999. This was due to a decrease in sales and the markdown of merchandise.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended
September 30, 1999
Net sales for the nine months ended September 30, 2000 decreased 43.0% to
$1,743,639 from $3,060,171 for the nine months ended September 30, 1999. The
decrease was the result of restructuring, by new management, to eliminate lower
margin sales. In addition, there was a slowdown in the economy, which effected
the sale of high priced, discretionary items.
Gross profit for the nine months ended September 30, 2000 decreased 64.6%
to $270,728 from $765,145 for the nine months ended September 30, 1999. As a
percentage of net sales, gross profit decreased to 15.5% in the 2000 period
compared to 28.3% in the 1999 period. The decrease was primarily the result of
liquidation of excess inventory and the decrease in sales.
8
Selling, general and administrative expenses for nine months ended
September 30, 2000 decreased 22.3% to $586,087 from $753,953 for the nine months
ended September 30, 1999. The decrease in selling, general and administrative
expenses consisted primarily of cost cutting measures initiated by new senior
management.
Net losses for the nine months ended September 30, 2000 increased to a loss
of ($315,359) compared to earnings of $11,192 for the nine months ended
September 30, 1999. This was due to a decrease in sales and the markdown of
merchandise.
Liquidity and Capital Resources
At September 30, 2000 the Company had stockholders' equity of $482,430,
whereas, at September 30, 1999 they had an equity deficit of ($342,798).
The Company has historically financed its business through cash flow from
operations and sale of stock, which may be utilized from time to time.
The Company expects to require additional capital, which they expect to
raise from the sale of additional stock. There can be no assurance of the
ability of the Company to raise such capital. Therefore, management is pursuing
other avenues for acquisition of funds. The Company has no agreements or
commitments with any person or entity to raise such capital.
The Company is actively seeking other acquisitions, and anticipates it may
require additional capital in order to fund any acquisitions or substantial
growth in its current business. To this end, the Company plans to pursue both
debt and equity financing from both private institutions and the public markets
to finance acquisitions as required. No assurance can be given that sufficient
capital will be available when needed.
For the nine months ended September 30, 2000 the Company received $ from
the exercise of employee stock options.
9
Anticipated Future Growth
Management believes that the future growth of the Company will be the
result of four efforts; (1) acquisition of other companies, not only in the
internet and home theater related industries, but also in the toy industry (2)
increasing sales via the internet through an E-Commerce Web Site, (3) obtaining
new customers in the existing markets, developing new markets via current
marketing channels and the internet, and (4) controlling and containing
operating and administrative costs.
Year 2000 Assessment
The Company began assessing the possible impact of the Year 2000 ("Y2K")
issues on its business operations in 1999. The issue arose because of
information technology ("IT") which utilized a two-digit date field. Y2K
introduced the potential for errors and miscalculations related to IT and non-IT
systems which were not designed to accommodate a date of year 2000 and beyond.
As of November 15, 2000, the Company had encountered no significant Y2K related
problems.
The Company successfully implemented a program to assess, mitigate and
remediate the potential impact of the Year 2000 problem throughout the Company.
The cost of remediation efforts were immaterial, and as such the Year 2000
problem did not have a material effect on the financial position of the Company,
nor the results of its operations.
Forward Looking Statements
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains information regarding management's planned growth, financing
and prospective business acquisitions and opportunities. These statements are
forward looking statements that involve risks and uncertainties. The following
is a list of factors, among others, that could cause actual results to differ
materially from the forward looking statements: business conditions and growth
in the Company's market and industry and in the general economy; competitive
factors including increased competition and price pressures; availability of raw
materials and purchased products at competitive prices; and inadequate or
unsatisfactory financing sources.
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Part II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On February 18, 2000, the Company sold 120,000 unregistered shares of the
Company's common stock. The shares were sold to an accredited investor at $0.50
per share. Total net proceeds were $60,000 for which no commission or broker fee
was paid.
On March 28, 2000, the Company sold 12,500 unregistered shares of the
Company's common stock. The shares were sold to an accredited investor at $2.00
per share. Total net proceeds were $25,000 for which no commission or broker fee
was paid.
The Company intended that the shares should be exempt from registration
under the Securities Act by virtue of Section 4(2) and/or Section 4(6) of the
Securities Act and the provisions of Regulation D promulgated thereunder.
The proceeds from the above placements are being used as additional working
capital.
Item 6. Exhibit and reports on Form 8-K
(a) Exhibits
None
(b) Reports filed on Form 8K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf the
undersigned duly authorized
stereoscape.com, inc.
By: /s/ Mario Bassani November 17, 2000
Mario Bassani
Chief Executive Officer (Principal Executive Officer)
Chairman of the Board
By: /s/ Steve Wise November 17, 2000
Steve Wise
Director
By: /s/ Gary B. Hyman November 17, 2000
Gary B. Hyman
Chief Financial Officer
Director
12