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 quarterly ended June 30, 1999
[ ] 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 (IRS Employer identification no.)
incorporation or organization)
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 June 30, 1999.
Title of Each Class Number of Shares Outstanding
Common Stock, $.001 par value per share 2,821,893
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
stereoscape.com, inc. AND SUBSIDIARY
(FORMERLY ALLIANCE TECHNOLOGIES, INC.)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 1999
ASSETS
Current Assets:
Cash $ 940
Charge card receivables 35,553
Inventories 240,077
Other current assets 6,866
------------------
Total Current Assets 283,436
------------------
Property and Equipment - Net 14,564
------------------
TOTAL ASSETS $ 298,000
==================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 337,380
Customer deposits and other advances 302,723
Payroll and sales tax payable 5,019
------------------
Total Current Liabilities $ 645,122
------------------
Commitments and Contingencies
STOCKHOLDERS' DEFICIENCY
Common Stock
Par value $.001 - 10,000,000 shares authorized,
2,821,893 shares issued and outstanding 2,822
Additional paid in capital 156,553
Deficit (506,497)
------------------
Total Stockholders' Deficency (347,122)
------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 298,000
==================
See notes to the consolidated financial statements (unaudited).
2
stereoscape.com, inc. AND SUBSIDIARY
(FORMERLY ALLIANCE TECHNOLOGIES, INC.)
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
-----------------------------------------------
Sales 886,351 $ 457,448 $ 2,085,743 $ 1,051,999
Cost of sales 678,349 447,016 1,596,320 874,796
-----------------------------------------------
Gross profit 208,002 10,432 489,423 177,203
Selling, General and Administrative 231,039 224,149 484,403 429,879
Impairment of Asset - - - -
-----------------------------------------------
Net Earnings (loss) $ (23,037) $(213,717) $ 5,020 $ (252,676)
===============================================
LOSS PER COMMON SHARE
BASIC AND DILUTED
Net Earnings (loss) $ (0.01) $ (0.09) $ 0.00 $ (0.10)
Weighted average number of
shares used in computation 2,800,409 2,464,078 2,755,843 2,451,838
See notes to the consolidated financial statements (unaudited).
3
stereoscape.com, inc. AND SUBSIDIARY
(FORMERLY ALLIANCE TECHNOLOGIES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Six Months Ended
June 30,
1999 1998
-----------------------------
Cash flows from operating activities:
Net earnings (loss) $ 5,020 $ (252,676)
Adjustments to reconcile net loss to net cash
used in operations:
Depreciation and amortization 792 1,425
Impairment of Asset - -
(Increase) decrease in operating assets:
Charge card receivables (17,632) 5,308
Inventories (36,690) 26,412
Other current assets (3,118) (1,275)
Increase (decrease) in operating liabilities:
Accounts payable 91,173 72,466
Customer deposits and advances (98,993) 64,816
Payroll and sales taxes payable (16,404) 3,646
Accrued expenses - (203)
-----------------------------
Net cash used in operating activities (75,852) (80,081)
-----------------------------
Cash flow from investing activities:
Purchase of fixed assets (3,074) (318)
-----------------------------
Net cash used in investing activities (3,074) (318)
-----------------------------
Cash flow from financing activities:
Issuance of capital stock 84,375 62,861
Proceeds from (repayment of) loan payable (8,117) (6,583)
-----------------------------
Net cash provided by financing activities 76,258 56,278
-----------------------------
(Decrease) increase in cash (2,668) (24,121)
Cash at beginning of period 3,608 24,907
-----------------------------
Cash at end of period $ 940 $ 786
=============================
Supplemental disclosure of cash flow information:
Interest paid $ 1,069 $ 2,621
See notes to the consolidated financial statements (unaudited).
4
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
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. The Company is located in Freehold, New
Jersey and sells high quality home entertainment equipment. Substantially all
business is obtained through advertising in trade magazines and via the
Internet.
The unaudited consolidated financial statements included herein have been
prepared by the Company in accordance with the same accounting principles
followed in the presentation of the Company's Form 10-KSB Annual Report for the
year ended December 31, 1998.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiary. In consolidation all material inter company
balances are eliminated.
Income taxes for the interim period are based on the estimated effective
rate expected to be applicable for the full fiscal year. The Company has
recorded a full valuation allowance related to the deferred tax asset at June
30, 1999.
NOTE 2 -- CUSTOMER DEPOSITS AND OTHER ADVANCES
At June 30, 1999 the Company had $150,113 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 June 30,
1999 the Company had $152,610 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 as from 5 to 10
years.
Fixed assets consists of the following at June 30, 1999:
Furniture and fixtures $ 9,410
Hardware and software costs 14,687
----------
24,097
Less-accumulated depreciation (9,533)
Property and equipment-Net $ 14,564
==========
5
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.
Results of Operations for the Three Months Ended June 30, 1999 and 1998
Net sales for the three months ended June 30, 1999 increased 94% to
$886,351 from $457,448 for the three months ended June 30, 1998. The increase
was the result of significant sales staff and infrastructure changes as well as
increased advertising.
Gross profit for the quarter ended June 30, 1999 increased to $208,002 from
$10,432 for the quarter ended June 30, 1998. As a percentage of net sales, gross
profit increased to 23.5% in the 1999 period compared to 2.3% in the 1998
period. The increase was the result of increased inventory and cost control
measures.
Selling, general and administrative expenses for quarter ended June 30,
1999 increased to $231,039 from $224,149 for the quarter ended June 30, 1998.
The increase in selling, general and administrative expenses consisted primarily
of added administrative staff, computerization of accounting functions, and
installation of internal control systems which are in the process of being put
in place to enable the Company to grow.
Net Losses for the quarter ended June 30, 1999 decreased to ($23,037) from
a loss of ($213,717) for the quarter ended June 30, 1998. This reduction in loss
is due to increased volume as well as cost control measures, increased
advertising and infrastructure changes.
Results of Operations for the Six Months Ended June 30, 1999 and 1998
Net sales for the Six months ended June 30, 1999 increased 98.3% to
$2,085,743 from $1,051,999 for the six months ended June 30, 1998. The increase
was the result of significant sales staff and infrastructure changes as well as
increased advertising.
Gross profit for the six months ended June 30, 1999 increased to $489,423
from $177,203 for the six months ended June 30, 1998. As a percentage of net
sales, gross profit increased to 23.5% in the 1999 period compared to 16.8% in
the 1998 period. The increase was the result of increased inventory and cost
control measures.
Selling, general and administrative expenses for six months ended June 30,
1999 increased to $484,403 from $429,879 for the six months ended June 30, 1998.
The increase in selling, general and administrative expenses consisted primarily
of added administrative staff, computerization of accounting functions, and
installation of internal control systems which are in the process of being put
in place to enable the Company to grow.
Net Earnings for the six months ended June 30, 1999 increased to $5,020
from a loss of ($252,676) for the six months ended June 30, 1998. The increase
in earnings is due to increased volume as well as cost control measures,
increased advertising and infrastructure changes.
6
Liquidity and Capital Resources
At June 30, 1999 and June 30, 1998 the Company had negative equity of
($347,122) and ($388,847), respectively.
The Company has historically financed its business through cash flow from
operations and borrowings from executives, which may be utilized from time to
time.
The Company expects to require additional capital and at the present time
has no definitive plans but is exploring various opportunities. There can be no
assurance of the ability of the Company to raise such capital. The Company has
no agreements or commitments with any person or entity to raise such capital.
While no specific acquisitions are presently under consideration, the
Company is actively seeking 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.
Anticipated Future Growth
Management believes that the future growth of the Company will be the
result of four efforts; (1) acquisition of other companies in the internet and
home theater related industries, (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.
7
Year 2000 Readiness
This disclosure is a year 2000 ("Year 2000") Readiness Disclosure within
the meaning of the Year 2000 Information and Readiness Disclosure Act of 1988 to
the extent that the disclosure relates to the Year 2000 processing of the
Company.
The Company has implemented a program to assess, mitigate and remediate the
potential impact of the Year 2000 problem throughout the Company. A Year 2000
problem will occur where date-sensitive software uses two digit date fields,
sorting the Year 2000 ("00") before the year 1999 ("99"). The Year 2000 problem
can arise in hardware, software, or any other equipment or process that uses
embedded software or other technology. The failure of such systems to properly
recognize dates after December 31, 1999 could result in data corruption and
processing errors.
Management has reviewed the possible effects of the Year 2000 problem in so
far as it relates to the Company; and has determined that the Company is
currently utilizing Year 2000 compatible equipment and software. The Year 2000
problem is not expected to have a material adverse effect on the operations of
the Company.
In addition, the Company has implemented a program to determine the Year
2000 compliance status of its material vendors, suppliers, service providers and
customers, and based on currently available information does not anticipate any
material impact to the Company based on the failure of such third parties to be
Year 2000 compliant. However, the process of evaluating the Year 2000 compliance
status of material third parties is continually ongoing and, therefore, no
guaranty or warranty can be made as to such third parties' future compliance
status and its potential effect on the Company. The Company believes there
exists a sufficient number of suppliers of raw material for its business so that
if any supplier is unable to deliver raw materials due to Year 2000 problems,
alternate sources will be available and that any supply interruption will not be
material to the Company's operations. There can be no assurances, however, that
the Company would be able to obtain all of its supply requirements from such
alternate sources in a timely way or on terms comparable with that of its
current suppliers.
The information set forth in the preceding three paragraphs constitutes a
"Year 2000 Readiness Disclosure" pursuant to the Year 2000 Information and
Readiness Disclosure Act. (P.L. 105-271, signed into law October 19, 1998).
The preceding Year 2000 discussion contains various forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934 and the Section 27A Securities Act of 1933. These forward-looking
statements represent the Company's beliefs or expectations regarding future
events. When used in the Year 2000 discussion, the words "believes," "expects,"
"estimates" and similar expressions are intended to identify forward-looking
statements. Forward-looking statements include, without limitation the Company's
belief that its internal systems are Year 2000 compliant. All forward-looking
statements involve a number of risks and uncertainties that could cause the
actual results to differ materially from the projected results. Factors that may
cause these differences include, but are not limited to, the availability of
qualified personnel and other information technology resources; the ability to
identify and remediate all date-sensitive lines of computer code or to replace
embedded computer chips in affected systems or equipment; and the actions of
governmental agencies or other third parties with respect to Year 2000 problems.
8
Forward Looking Statements
The matters discussed in this Item 2 may contain forward-looking statements
that involve risk and uncertainties. The forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially due to a variety of
factors, including without limitation the presence of competitors with broader
product lines and greater financial resources; intellectual property rights and
litigation, needs of liquidity; and the other risks detailed from time to time
in the Company's reports filed with the Securities and Exchange Commission.
9
Part II - OTHER INFORMATION
Item 6. Exhibit and reports on Form 8-K
(a) Exhibits
None
(b) Reports filed on Form 8K
June 8, 1999 - Item 4 - Change in Certifying Accountants
Effective April 20, 1999, stereoscape.com, inc. (the
"Company") dismissed its certifying accountants,
Weinbaum & Yalamanchi Certified Public Accountants
("WY") and retained its prior certifying accountants,
Ehrenkrantz, Sterling & Co., LLC Certified Public
Accountants and Consultants ("ESC"). WY did not
issue a report on stereoscape's financial
statements. The decision to change accountants was
approved by the Audit Committee and the Board of
Directors of the Company. As required by applicable
rules of the Securities and Exchange Commission,
the Company notified WY that during the two most
recent fiscal years and the interim period from
December 31, 1998 through April 20,1999 the Company
was unaware of any disputes between the Company and
WY as to matters of accounting principles or
practices, financial statement disclosure, or audit
scope or procedure, which disagreements, if not
resolved to the satisfaction of WY, would have
caused it to make a reference to the subject
matter of the disagreements in connection with its
reports.
Effective April 20, 1999, the Company engaged ESC
as its principle accountants. During the most recent
fiscal year end and the subsequent interim periods
to the date hereof, the Company did not consult ESC
regarding any of the matters or events set forth in
item 304 (a) (2) and (i) and (ii) of Regulation S-B,
except those matters involving prior audits by ESC.
July 28, 1999 - Amended - Item 4 - Change in Certifying Accountants
Effective April 20, 1999, stereoscape.com, inc. (the
"Company") dismissed its certifying accountants,
Weinbaum & Yalamanchi Certified Public Accountants
("WY") and retained its prior certifying
accountants, Ehrenkrantz, Sterling & Co., LLC
Certified Public Accountants and Consultants ("ESC").
WY did not issue a report on stereoscape's financial
statements. The decision to change accountants was
approved by the Audit Committee and the Board of
Directors of the Company. As required by applicable
rules of the Securities and Exchange Commission, the
Company notified WY that during the two most recent
fiscal years and the interim period from December 31,
1998 through April 20, 1999 the Company was unaware
of any disputes between the Company and WY as to
matters of accounting principles or practices,
financial statement disclosure, or audit scope or
procedure, which disagreements, if not resolved to
the satisfaction of WY, would have caused it to make
a reference to the subject matter of the
disagreements in connection with its reports. (See
"Revised Information" below)
Effective April 20, 1999, the Company engaged ESC
as its principle accountants. During the most recent
fiscal year end and the subsequent interim periods to
the date hereof, the Company did not consult ESC
regarding any of the matters or events set forth in
item 304 (a) (2) and (i) and (ii) of Regulation S-B,
except those matters involving prior audits by ESC.
Revised Information Subsequent to the filing of the
8-K on June 8, 1999, on June 15, 1999, W&Y issued
a letter in which they objected to certain
disclosures in the original 8-K filing and
enumerating various reasons they felt that
stereoscape.com, inc.("The Company") is unauditable.
The Company addressed W & Y's letter of June 15,
1999, in detail, in this amended filing.
10
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/ Steven Wise August 20, 1999
---------------
Steven Wise
President (Principal Executive Officer)
Director
By: /s/ Bernard F. Lillis, Jr. August 20, 1999
--------------------------
Bernard F. Lillis, Jr.
Chief Financial Officer (Principal Accounting Officer)
Director
By: /s/ Scott G. Halperin August 20, 1999
---------------------
Scott G. Halperin
Chairman of the Board of Directors
11