UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 November 30, 2000
( ) For the transition period from __________ to __________
Commission file number: ________________
ROMPUS INTERACTIVE CORP.
(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0750004
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
2200 Yonge Street, Suite 1220
Toronto, Ontario, Canada M4S 2C6
(416) 544-8495 -telephone
(905) 896-7069 - facsimile
(Address of principal executive offices)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
---------- ------
The issuer had 9,101,573 shares of its $.0001 par value Common Stock issued and
outstanding as of January 23, 2000.
Transitional Small Business Disclosure Format (check one)
Yes No X
----------- ------
ROMPUS INTERACTIVE CORP.
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
Item 1. Financial Statements
Condensed Consolidated Statement of Operations for
the Three Months Ended November 30, 2000 and for
November 30, 1999
Condensed Consolidated Balance Sheets as of
November 30, 2000 and August 31, 2000
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended November 30, 2000, and for
November 30, 1999
Notes to the Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(b) Reports on Form 8-K
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Operations
for the Three Months Ended November 30, 2000 and
for November 30, 1999
Condensed Consolidated Balance Sheets as of
November 30, 2000 and August 31, 2000
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended November 30, 2000, and
for November 30, 1999
Notes to the Condensed Consolidated Financial
Statements
3
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ROMPUS INTERACTIVE CORP.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(Expressed in U.S. Dollars)
Three Months Ended November 30 2000 1999
- --------------------------------------------------------------------------------
Sales $ 565,628 $ 139,181
Cost of sales 412,990 69,436
----------- -----------
Gross margin 152,638 69,745
----------- -----------
Expenses
Selling, general and administrative 423,434 706,322
Depreciation and amortization 15,951 3,765
Compensation and professional
services (Note 2) -- 3,788,000
Interest on related party loans 3,325 --
Foreign exchange loss (gain) 1,759 945
----------- -----------
444,469 4,499,032
----------- -----------
Loss before other income (291,831) (4,429,287)
Other income 192 19,620
----------- -----------
Net loss $ (291,639) $(4,409,667)
=========== ===========
- --------------------------------------------------------------------------------
Net loss per share, basic
and diluted (Note 1) $ (0.04) $ (0.58)
=========== ===========
- --------------------------------------------------------------------------------
See accompanying notes to the condensed consolidated financial statements.
4
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ROMPUS INTERACTIVE CORP.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Expressed in U.S. Dollars)
NOVEMBER 30 August 31
2000 2000
- --------------------------------------------------------------------------------
ASSETS
Current
Cash $ 138,587 $ 258,038
Accounts receivable (net of allowance -
$29,316, August 2000 - $12,263) 257,604 548,072
Inventory 59,937 30,438
Prepaids 16,710 13,444
----------- -----------
472,838 849,992
Capital assets 162,926 101,327
Other assets 26,098 22,907
----------- -----------
$ 661,862 $ 974,226
=========== ===========
- --------------------------------------------------------------------------------
LIABILITIES
Current
Accounts payable and accrued liabilities $ 276,764 $ 294,010
Due to related parties (Note 4) 159,488 166,390
----------- -----------
436,252 460,400
----------- -----------
SHAREHOLDERS' DEFICIENCY
Preferred stock (Note 3) 900 900
Common stock (Note 3) 910 910
Contributed surplus 8,838,516 8,835,191
Deficit (8,614,716) (8,323,175)
----------- -----------
225,610 513,826
----------- -----------
$ 661,862 $ 974,226
=========== ===========
- --------------------------------------------------------------------------------
See accompanying notes to the condensed consolidated financial statements.
5
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ROMPUS INTERACTIVE CORP.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(Expressed in U.S. Dollars)
Three Months Ended November 30 2000 1999
- --------------------------------------------------------------------------------
Cash flows from (applied to)
OPERATING
Net loss $ (291,639) $(4,409,667)
Accrued compensation and professional
services expense -- 3,788,000
Depreciation and amortization 15,951 3,765
Imputed interest 3,325 --
----------- -----------
(272,363) (617,902)
Changes in
Receivables 290,468 (88,173)
Inventory (29,499) (50)
Prepaid expenses (3,266) (23,318)
Accounts payable and accrued liabilities (17,246) 104,814
Refundable investment tax credits -- 4,646
----------- -----------
(31,906) (619,983)
----------- -----------
FINANCING
Decrease in subscription receivable -- 1,388,010
Advances from related parties (6,902) 711
----------- -----------
(6,902) 1,388,721
----------- -----------
INVESTING
Purchase of other assets (3,940) (1,245)
Purchase of capital assets (76,703) (39,520)
----------- -----------
(80,643) (40,765)
----------- -----------
Net increase (decrease) in cash and cash equivalents
during the year (119,451) 727,973
Cash and cash equivalents, beginning of period 258,038 494,614
----------- -----------
Cash and cash equivalents, end of period $ 138,587 $ 1,222,587
- --------------------------------------------------------------------------------
See accompanying notes to the condensed consolidated financial statements.
6
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ROMPUS INTERACTIVE CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in U.S. Dollars)
November 30, 2000
- --------------------------------------------------------------------------------
1. GENERAL
The unaudited condensed consolidated financial statements have been prepared on
the same basis as the audited consolidated financial statements and, in the
opinion of management, reflect all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation for each of the periods
presented. The results of operations for interim periods are not necessarily
indicative of results to be achieved for full fiscal years.
As contemplated by the Securities and Exchange Commission (SEC) under Rule 10-01
of Regulation S-X, the accompanying consolidated financial statements and
related footnotes have been condensed and do not contain certain information
that will be included in the Company's annual consolidated financial statements
and footnotes thereto. For further information, refer to the consolidated
financial statements and related footnotes for the year ended August 31, 2000
included in the Company's Annual Report on Form 10-KSB.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Rompus and its
wholly owned subsidiary, Rompus CD-ROM Production Ltd. (Rompus-ON). Significant
inter-company transactions have been eliminated in consolidation.
On July 30, 1999, Rompus, a non-operating public company with 16,601,573 Common
shares outstanding and immaterial net assets, acquired 100% of the outstanding
common stock of Rompus-ON from various shareholders (the Acquisition). The
Acquisition resulted in the owners and management of Rompus-ON having effective
control of the combined entity.
Under generally accepted accounting principles, the Acquisition is considered to
be a capital transaction in substance, rather than a business combination. That
is, the Acquisition is equivalent to the issuance of stock by Rompus-ON for the
net monetary assets of Rompus, accompanied by a recapitalization, and is
accounted for as a change in capital structure. Accordingly, the accounting for
the Acquisition is identical to that resulting from a reverse acquisition,
except that no goodwill is recorded. Under reverse takeover accounting, the post
reverse-acquisition comparative historical financial statements of the "legal
acquirer" (Rompus), are those of the "legal acquiree" (Rompus-ON) (i.e. the
accounting acquirer).
Accordingly, these consolidated financial statements of Rompus are the
historical financial statements of Rompus-ON for the periods presented adjusted
for the following transactions contained in the Share Exchange Agreement
executed at the consummation of the Acquisition. The basic structure and terms
of the Acquisition, together with the applicable accounting effects, is as
follows:
7
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ROMPUS INTERACTIVE CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in U.S. Dollars)
November 30, 2000
- --------------------------------------------------------------------------------
1. GENERAL (CONTINUED)
- - Rompus acquired all of the outstanding shares of Common stock of Rompus-ON
from various shareholders in exchange for 4,500,000 shares of newly issued
Common stock of Rompus and 9,000,000 shares of newly issued Preferred stock
of Rompus. The 9,000,000 Preferred shares will eventually be cancelled as
the outstanding Exchangeable shares of Rompus-ON are exchanged for Common
shares of Rompus. The Common stock and Preferred stock exchange, in
addition to the existing Rompus shares outstanding, collectively resulted
in the recapitalization of the Company. Loss per share calculations include
the Company's change in capital structure for all periods presented.
- - The Company incurred $168,917 of costs related to the acquisition. These
costs were recorded as reductions in shareholders' equity in connection
with the reclassification of equity resulting from the recapitalization.
INCOME TAXES
Income taxes for the interim periods were computed using the effective tax rate
estimated to be applicable for the full fiscal year, which is subject to ongoing
review and evaluation by management.
LOSS PER SHARE
The Company reports earnings per share in accordance with the provisions of SFAS
No. 128, EARNINGS PER SHARE. SFAS No. 128 requires presentation of basic and
diluted earnings per share in conjunction with the disclosure of the methodology
used in computing such earnings per share. Basic earnings per share excludes
dilution and is computed by dividing income available to common shares by the
weighted average common shares outstanding during the period. Diluted earnings
per share takes into account the potential dilution that could occur if
securities or other contracts to issue common stock were exercised and converted
into common stock.
8
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ROMPUS INTERACTIVE CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in U.S. Dollars)
November 30, 2000
- --------------------------------------------------------------------------------
1. GENERAL (CONTINUED)
The following are the basic and diluted earnings per share calculations for
the periods presented:
NOVEMBER 30 November 30,
2000 1999
---- ----
Net loss $ (291,639) $(4,409,667)
Weighted average shares outstanding 7,848,148 7,601,573
Basic and diluted loss per Common share $ (0.04) $ (.58)
On September 24, 1999 the Company issued 1,100,000 options under its stock
option plan (Note 2). These options were not included in the computation of
diluted earnings per share because to do so would be antidilutive.
- --------------------------------------------------------------------------------
2. COMPENSATION AND PROFESSIONAL SERVICES EXPENSE AND STOCK OPTIONS
The Company has a stock option plan accounted for under SFAS No. 123 "Accounting
for Stock-Based Compensation". The plan allows the Company to grant options to
non-employees for consideration for services rendered up to an aggregate of
400,000 common shares. The options, which have a term expiring September 30,
2002, vest October 15, 1999. The exercise price for each option is $0.80 per
share. The standard contains a fair value based method for valuing stock-based
compensation that entities may use, and measures compensation cost at the grant
date based on the fair value of the award. Compensation is then recognized over
the service period, which is usually the vesting period.
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes options pricing model with the following weighted average
assumptions used for grants. Expected volatility of 0%; risk free interest rate
of 5.75% and 6.10%; and expected lives of 3 years. The estimated fair value of
each option was determined to be $2.32.
On September 24, 1999 the company issued 400,000 of these options. These options
were recorded as compensation and professional services expense of $2.32 per
option for a total of $928,000.
9
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ROMPUS INTERACTIVE CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in U.S. Dollars)
November 30, 2000
- --------------------------------------------------------------------------------
2. COMPENSATION AND PROFESSIONAL SERVICES EXPENSE AND STOCK OPTIONS (CONTINUED)
A summary of the status of the Company's option plans as of November 30, 2000
and changes during the period ending on that date is represented below:
Weighted Avg.
Shares Exercise Price
------ --------------
Outstanding, beginning of period 1,100,000 $ 0.80
Granted -
Exercised -
---------
Outstanding, end of period 1,100,000 $ 0.80
=========
Options exercisable at period-end 1,100,000
=========
Weighted average fair value of options
granted during the period $ 2.32
=========
The following table summarizes information about options outstanding and
exercisable at November 30, 2000:
Range of Number Weighted Avg.
Exercise Outstanding Remaining Weighted Avg.
Prices and Exercisable Contractual Life Exercise Price
- ------ --------------- ---------------- --------------
$0.80 1,100,000 2.00 years $ 0.80
- --------------------------------------------------------------------------------
3. CAPITAL STOCK NOVEMBER 30 August 31
2000 2000
---- ----
Authorized
80,000,000 Common shares with a par value of $0.0001
20,000,000 Preferred shares with a par value of $0.0001
(of which 9,000,000 are Series A Special Voting
Preferred shares).
Issued
9,000,000 Series A Special Voting Preferred shares $ 900 $ 900
9,101,573 Common shares (August 31, 2000 - 9,101,573) 910 910
------------ ------------
$ 1,810 $ 1,810
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ROMPUS INTERACTIVE CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Expressed in U.S. Dollars)
November 30, 2000
- --------------------------------------------------------------------------------
4. DUE TO RELATED PARTIES NOVEMBER 30 August 31
2000 2000
---- ----
Due to shareholders $ 159,488 $ 166,909
The due to related parties are unsecured, non-interest bearing and have no fixed
terms of repayment.
5. INDUSTRY SEGMENT AND FOREIGN SALES INFORMATION
Management has determined that it operates in one industry segment.
For the three months ended November 30, 2000, the company's sales were
distributed as follows:
Canada $ 309,093 (1999 - $109,311)
United States $ 254,028 (1999 - $28,270)
United Kingdom $ 2,507 (1999 - $Nil)
Puerto Rico $ Nil (1999 - $1,600)
10
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PART I - FINANCIAL INFORMATION (CONTINUED)
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion contains figures relating to plans,
expectations, future results, performance, events or other matters that are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended. When used in the Plan of Operations (see section
below), words such as "estimate", "project", "intend", "expect", "anticipate"
and similar expressions are intended to identify forward-looking statements.
Such forward-looking statements involve numerous risks and uncertainties
pertaining to technology, development of the Company's products, and markets for
such products, timing and level of customer orders, competitive products and
pricing, changes in economic conditions and markets for the Company's products
and other risks and uncertainties. Actual results, performance and events are
likely to differ and may differ materially and adversely. Investors are
cautioned not to place undue reliance on these forward-looking statements which
speak only as to the date of the Plan of Operations, being August 31, 2000, the
date of the Company's last-completed fiscal year. The Company undertakes no
obligation to release or deliver to investors revisions to these forward-looking
statements to reflect events or circumstances after the date of the Plan of
Operations, the occurrence of unanticipated events or other matters.
(a) GENERAL
The Company began operations in February 1998 for the purpose of
developing its multimedia proprietary product: the i.d.rom. The Company has a
limited operating history on which to evaluate its prospects. The risks,
expense, and difficulties encountered by startup companies must be considered
when evaluating the Company's prospects. The Company's plan of operations for
the next twelve months is to broaden its products and services offerings while
seeking strategic alliances with marketing, CRM and media companies in order to
demonstrate its technology to companies and consumers. The Company believes that
its existing funds in combination with funds raised in private offerings and the
revenues generated by its operations will be sufficient to fund its operations
for the next twelve months. However, there is no guarantee that the Company will
be able to raise sufficient capital. Additionally, the Company's estimates of
the costs to advertise and market its product might be low. The operating
expenses of the Company cannot be predicted with certainty. They will depend on
several factors, including the amount of marketing expenses, the acceptance of
the Company's products in the market, and competition for such product.
Management may be able to control the timing of development expenses in part by
speeding up or slowing down marketing development and distribution activities
A select portion of the money raised in future private placements of
the Company's securities will be used to launch its products through a variety
of sales channels as well as to create a provocative advertising and public
relations campaign.
(b) FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of the Company's
financial condition and results of operations. Detailed information is contained
in the financials included with this document. This section contains
forward-looking statements that involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations and intentions. The
cautionary statements made in this document should be read as being applicable
to all related forward-looking statements wherever they appear in this document.
Since inception, the Company has funded its capital requirements by
financing activities, substantially through the sale of its equity securities.
The Company anticipates that revenues generated should be sufficient to fund the
Company's operations over the next 12 months.
11
The Company's products and services were launched in September 1999 and
with the limited history it is difficult to forecast future growth figures.
Sales of Rompus' products have been moderate to date, with a substantial number
of proposals and activity related to sales opportunities currently being
negotiated.
The current sales activity is quite high but has occurred only
recently. The Company is actively seeking additional financing to sustain its
rate of growth of personnel and related infrastructure. The degree of success
and timing of same will dictate whether the Company continues to grow or must
reduce operations in order to live within cash availability and cash generated
by sales. Until this is resolved, management is trying to defer major expenses
while focusing on generating cash through sales.
Sales expectations are excellent and all indicators show that the
forecasted Revenues for the year ending August 31, 2001 should be met and
exceeded. However, the selling cycle has been much longer than anticipated and
the next few months will be critical to the Company's success.
In the meantime, concerted efforts are underway to obtain a financing
commitment, which appears to be forthcoming during the months of January and
February 2001. Until then, the Company continues to operate as conservatively as
possible.
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
John Drewry, former Executive Vice-President and acting Chief Financial
Officer, left the employ of the Company in May 2000. Mr. Drewry has filed a
Statement of Claim against the Company alleging breach of his employment
contract and seeking U.S. $175,000 in compensation and seeking a declaratory
judgment concerning certain options and shares of the Company to which Mr.
Drewry believes he is entitled. The Company is currently preparing a Statement
of Defence to Mr. Drewry's claim.
The Company terminated the employment of Jay Weiner, a former sales
representative of the Company. Ontario legal counsel for Mr. Weiner sent a
letter dated June 22, 2000, to the Company alleging that Mr. Weiner was
wrongfully dismissed and offering to settle the matter for CDN. $35,000. At this
date, management is not aware of any litigation having been commenced by Mr.
Weiner.
To the best knowledge of management, there are no other litigation
matters pending or threatened against the Company which are not in the ordinary
course of business.
Item 2. Changes in Securities and Use of Proceeds
None.
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:
None.
(b) Reports on Form 8-K
None.
13
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.
ROMPUS INTERACTIVE CORP.
Date: January 23, 2000 /s/ Shawn Smith
------------------------------------
Shawn Smith, Chief Executive Officer
and Chief Financial Officer