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 September 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 September 30, 1999.
Title of Each Class Number of Shares Outstanding
Common Stock, $.001 par value per share 2,806,327
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
stereoscape.com, inc. AND SUBSIDIARY
(FORMERLY ALLIANCE TECHNOLOGIES, INC.)
CONSOLIDATED BALANCE SHEET (UNAUDITED)
September 30, 1999
ASSETS
Current Assets:
Cash $ 1,067
Charge card receivables 17,018
Inventories 217,411
Other current assets 11,243
--------
Total Current Assets 246,739
Property and Equipment - Net 15,356
--------
TOTAL ASSETS $ 262,095
========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
LIABILITIES
Current Liabilities:
Accounts payable and accrued expenses $ 314,446
Customer deposits and other advances 193,798
Payroll and sales tax payable 96,649
--------
Total Current Liabilities $ 604,893
Commitments and Contingencies
STOCKHOLDERS' DEFICIENCY
Common Stock
Par value $.001 - 10,000,000 shares authorized,
2,806,327 shares issued and outstanding 2,806
Additional paid in capital 156,585
Deficit (502,173)
--------
Total Stockholders' Deficency (342,798)
--------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 262,095
========
See notes to the consolidated financial statements (unaudited).
2
stereoscape.com, inc. AND SUBSIDIARY
(FORMERLY ALLIANCE TECHNOLOGIES, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
1999 1998 1999 1998
-----------------------------------------------
Sales $ 974,428 $ 795,143 $ 3,060,171 $ 1,847,142
Cost of sales 698,706 594,870 2,295,026 1,469,666
-----------------------------------------------
Gross profit 275,722 200,273 765,145 377,476
Selling, General and
Administrative 269,550 161,383 753,953 454,150
-----------------------------------------------
Net Earnings (loss) $ 6,172 $ 38,890 $ 11,192 $ (76,674)
===============================================
LOSS PER COMMON SHARE
BASIC AND DILUTED
Net Earnings (loss) $ 0.00 $ 0.02 $ 0.00 $ (0.03)
Weighted average number of
shares used in computation 2,806,327 2,585,176 2,772,856 2,488,033
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 Nine Months Ended
September 30,
1999 1998
-----------------------------
Cash flows from operating activities:
Net earnings (loss) $ 11,192 $ (76,674)
Adjustments to reconcile net loss to net
cash used in operations:
Depreciation and amortization 1,188 2,977
(Increase) decrease in operating assets:
Charge card receivables 903 34,373
Inventories (14,024) (36,217)
Other current assets (7,495) 7,035
Increase (decrease) in operating liabilities:
Accounts payable 68,239 37,598
Customer deposits and advances (207,918) 55,378
Payroll and sales taxes payable 75,226 (4,377)
Accrued expenses - (2,203)
----------------------------
Net cash used in operating activities (72,689) 17,890
----------------------------
Cash flow from investing activities:
Purchase of fixed assets (4,262) (5,818)
----------------------------
Net cash used in investing activities (4,262) (5,818)
----------------------------
Cash flow from financing activities:
Issuance of capital stock 82,527 25,000
Proceeds from (repayment of) loan payable (8,117) (32,337)
----------------------------
Net cash provided by financing activities 74,410 (7,337)
----------------------------
(Decrease) increase in cash (2,541) 4,735
Cash at beginning of period 3,608 24,907
----------------------------
Cash at end of period $ 1,067 $ 29,642
============================
Supplemental disclosure of cash flow information:
Interest paid $ 1,854 $ 5,242
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
September 30, 1999.
NOTE 2 -- CUSTOMER DEPOSITS AND OTHER ADVANCES
At September 30, 1999 the Company had $119,141 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, 1999 the Company had $74,657 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 September 30, 1999:
Furniture and fixtures $ 11,034
Hardware and software costs 14,687
-----------
25,721
Less-accumulated depreciation ( 9,929)
-----------
Property and equipment-Net $ 15,792
===========
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 September 30, 1999 and
1998.
Net sales for the three months ended September 30, 1999 increased 23% to
$974,428 from $795,143 for the three months ended September 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 September 30, 1999 increased to $275,722
from $200,273 for the quarter ended September 30, 1998. As a percentage of net
sales, gross profit increased to 28% in the 1999 period compared to 25% in the
1998 period. The increase was the result of increased inventory and cost control
measures.
Selling, general and administrative expenses for quarter ended September
30, 1999 increased to $269,550 from $161,383 for the quarter ended September 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 quarter ended September 30, 1999 decreased to $6,172
from of $38,890 for the quarter ended September 30, 1998. This reduction in
earnings is due to an increase in selling, general and administrative expense
necessary to provide for the infrastructure to control the projected growth.
Results of Operations for the Nine Months Ended September 30, 1999 and
1998.
Net sales for the Nine months ended September 30, 1999 increased 66% to
$3,060,171 from $1,847,142 for the nine months ended September 30, 1998. The
increase was the result of significant sales staff and infrastructure changes as
well as increased advertising.
Gross profit for the nine months ended September 30, 1999 increased to
$765,145 from $377,476 for the nine months ended September 30, 1998. As a
percentage of net sales, gross profit increased to 25% in the 1999 period
compared to 20% in the 1998 period. The increase was the result of increased
inventory and cost control measures.
Selling, general and administrative expenses for nine months ended
September 30, 1999 increased to $753,953 from $454,150 for the nine months ended
September 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 nine months ended September 30, 1999 increased to
$11,192 from a loss of ($76,674) for the nine months ended September 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 September 30, 1999 and September 30, 1998 the Company had negative
equity of ($342,798) and ($349,957), 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.
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.
7
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.
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.
8
Part II - OTHER INFORMATION
Item 6. Exhibit and reports on Form 8-K
(a) Exhibits
None
(b) Reports filed on Form 8K
None
9
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 November 15, 1999
----------------
Steven Wise
President (Principal Executive Officer)
Director
By: /s/ Bernard F. Lillis, Jr. November 15, 1999
---------------------------
Bernard F. Lillis, Jr.
Chief Financial Officer (Principal Accounting Officer)
Director
By: /s/ Scott G. Halperin November 15, 1999
----------------------
Scott G. Halperin
Chairman of the Board of Directors
10